INTERSTATE GENERAL COMPANY L.P.
222 Smallwood Village Center
St. Charles, Maryland 20602

Dear IGC Unitholder:

As we announced in December 1996, we propose to transfer the principal
real estate operations of Interstate General Company L.P. ("IGC") to American
Community Properties Trust ("ACPT") and to distribute to the partners of IGC,
including IGC Unitholders, all of the common shares of ACPT (the
"Restructuring").

The purpose of the Restructuring is to create an attractive investment
vehicle for the principal real estate assets and operations of IGC that will not
be burdened with the operating losses of American Family Homes, LLC ("AFH") and
the capital needs of Interstate Waste Technologies, Inc. ("IWT"), and Caribe
Waste Technologies, Inc. ("CWT") or with the wetlands litigation. In addition,
ACPT, as a type of business trust whose principal income is dividends from
corporations, should be a more attractive investment for pension funds and
mutual funds than is IGC as a master limited partnership. We expect that ACPT
will have greater access to capital markets than IGC has had.

ACPT will act as a self-managed holding company and will own all of
the outstanding equity interests in American Rental Management Company
("American Management"), American Land Development US, Inc. ("American Land"),
and IGP Group Corp. ("IGP Group") and all of the outstanding common stock of
American Rental Properties Trust ("American Rental"). In the Restructuring,
American Rental, through its subsidiary partnership American Housing Properties
L.P. ("American Housing"), will acquire IGC's partnership interests in United
States investment apartment properties and its land in the United States
presently intended for development as apartment properties. American Rental, a
Maryland real estate investment trust, is expected to be taxed as a real estate
investment trust ("REIT"). American Management, which currently is a wholly-
owned subsidiary of IGC, acquired IGC's United States property management
services operations. It is a Delaware corporation and will be taxed as a
corporation. American Land will acquire IGC's principal United States community
development assets and operations, principally land in St. Charles, Maryland.
American Land is a Maryland corporation and will be taxed as a corporation. IGP
Group will acquire substantially all of IGC's interests in its affiliate
Interstate General Properties Limited Partnership S.E. ("IGP"), which will
continue to hold its interests in Puerto Rico investment apartment properties,
Puerto Rico management services and the rights to income, gains and losses
associated with land in Puerto Rico held by an 80% subsidiary of IGP, Land
Development Associates S.E. ("LDA"), for development as rental properties. A
Class B interest in IGP will be transferred to American Land (the "Class B IGP
Interest"). This interest will represent all of IGP's rights to income, gains
and losses associated with land in Puerto Rico held by LDA that currently is
designated for

development as saleable property. IGP Group intends to qualify as a Puerto Rico
pass-through entity that is expected to be taxed as a corporation for U.S. tax
purposes and will not be taxable at the entity level for Puerto Rico income tax
purposes.

After these asset transfers have been completed, IGC will distribute
all of the outstanding common shares of ACPT to the general and limited partners
(including Unitholders) of IGC pro rata in accordance with their percentage
interest in IGC. IGC Unitholders in the aggregate will receive 99% of ACPT's
common shares on the basis of one ACPT common share for every two IGC Units
held. Based on the number of IGC Units currently outstanding, approximately
5,250,000 ACPT common shares will be distributed. As of December 31, 1996, the
Net Asset Value per common share of ACPT is estimated by IGC to be $20.94, based
on appraisals of land assets and valuations of interests in apartment
properties, management contracts and other assets. ACPT has received
preliminary approval for listing of the common shares on the American Stock
Exchange ("AMEX") and has applied for listing on the Pacific Stock Exchange
("PSE").

Also in connection with the Restructuring, subject to prevailing
market conditions, ACPT will seek to raise up to $35 million in additional
equity capital through a private offering of preferred shares (the "Private
Offering"). Proceeds from the Private Offering would be used to pay down
existing bank debt and for working capital. The terms of the preferred shares
will be negotiated with purchasers, but they may include rights to preferred
distributions, cumulative distributions, and/or liquidation preferences. The
preferred shares also may be convertible into common shares at a negotiated
conversion ratio. The Private Offering, if completed, would result in dilution
of the percentage interest of all ACPT shareholders including the Wilson Family,
whose percentage ownership would likely be reduced below 40%. Regardless of the
outcome of the Private Offering, the Wilson Family intends to take such other
actions as may be necessary to reduce its percentage interest to below 40% in
order to permit American Rental to qualify as a REIT.

After the Restructuring, IGC will continue to own certain assets that
in management's view do not fit ACPT's business plan. These include the Towne
Center land in St. Charles, Maryland, which has been the subject of the wetlands
litigation, certain single family home lots in the Dorchester neighborhood in
St. Charles, 14 acres of commercial land in St. Charles, certain land in
Pomfret, Maryland and St. Mary's County, Maryland, a 50% interest in a
partnership that owns land in Brandywine, Maryland, all of the shares of AFH,
rights to collect the principal balance of a note in the amount of $6.77 million
payable by a subsidiary of ACPT, as well as fractional interests in Chastleton
Apartment Associates, L.P. and Coachman's L.P. Substantially all of the common
stock of IWT and CWT (excluding shares issued as incentive compensation for
employees) will be held in a trust for the benefit of IGC Unitholders (the "CWT
Trust"). Prior to contributing IWT and CWT stock to the CWT Trust, IGC will
capitalize these entities with $1 million cash, certain residential lots in the
Montclair development of Prince William County, Virginia, and a note payable by
a third party in

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the amount of $1.06 million. Our goal is to place AFH, CWT and IWT on a sound
financial footing so that they can be sold or distributed to IGC Unitholders.
The AMEX [and the PSE] have advised that they will continue the listing of IGC
Units following the Restructuring. IGC expects the PSE also to continue listing
the IGC Units following the Restructuring and is currently seeking confirmation
of such continued listing from the PSE.

We have scheduled a special meeting of the IGC Unitholders to vote on
the Restructuring. The special meeting will be held on _______, __________,
1998, at _____ a.m. (local time), at _______________________________
____________________________________________. The record date for IGC
Unitholders entitled to vote at the special meeting is __________, 1998. The
Restructuring cannot be completed without approval of the IGC Unitholders by a
vote of (i) the holders of a majority of the outstanding IGC Units, and (ii) a
majority of the IGC Units not held by the Wilson Family that are present and
voting at the meeting. The Restructuring also is contingent upon the management
of IGC determining that IGC will be classified as a partnership for federal
income tax purposes for 1998.

THE BOARD OF DIRECTORS OF INTERSTATE GENERAL MANAGEMENT CORPORATION,
IGC'S MANAGING GENERAL PARTNER, BY UNANIMOUS VOTE, HAS APPROVED THE
RESTRUCTURING AND RECOMMENDS THAT THE IGC UNITHOLDERS VOTE FOR APPROVING THE
RESTRUCTURING.

Whether or not you plan to attend the special meeting of IGC
Unitholders, please take the time to vote by completing and mailing the enclosed
proxy card to us. If you sign, date and mail your proxy card without indicating
how you want to vote, your proxy will be counted as a vote in favor of the
Restructuring. If you fail to return your card, your Units will not be voted on
the Restructuring proposal.

This Proxy Statement is first being mailed to IGC Unitholders on
__________, 1998. It provides you with detailed information about the proposed
Restructuring. It is a prospectus for the ACPT common shares and also a Proxy
Statement for the special meeting of IGC Unitholders. We encourage you to read
this entire document carefully.

Sincerely,

James J. Wilson
Chairman and Chief
Executive Officer

-iii-

+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++

Subject to completion, , 1998

Proxy Statement/Prospectus

Distribution of up to 5,250,000 Common Shares
of
American Community Properties Trust
to the
Unitholders of Interstate General Company L.P.
________________

This Prospectus relates to a proposal to transfer the principal real
estate assets and operations of Interstate General Company L.P. ("IGC") to
American Community Properties Trust ("ACPT") and to distribute to the partners
of IGC, including holders (the "IGC Unitholders") of Class A Units of IGC ("IGC
Units"), all of the common shares of beneficial interest of ACPT (the "Common
Shares") (the "Restructuring").

The purpose of these transactions is to establish ACPT as an
independent, publicly traded entity whose principal income is dividends from
corporations controlled by ACPT that are engaged principally in real estate
businesses. ACPT will not have any operating income. ACPT was formed as a real
estate investment trust under Article 8 of the Maryland Corporations and
Associations Law (the "Maryland Trust Law") but is expected to be taxed as a
partnership. Under the Maryland Trust Law, at least 75% of the value of ACPT's
assets must be held, directly or indirectly, in real estate assets, mortgages
and mortgage related securities, government securities, and cash and cash
equivalent items. ACPT is expected to be more attractive to investors
generally, and to institutional investors such as pension funds and mutual funds
in particular, than is IGC as a master limited partnership that includes some
non real estate businesses.

IGC will retain the properties in St. Charles, Maryland, that
currently are the subject of wetlands litigation, certain additional residential
and commercial properties in St. Charles, certain parcels of land in Pomfret,
Maryland and in St. Mary's County, Maryland, a 50% interest in a partnership
that owns land in Brandywine, Maryland, and fractional interests in Chastleton
Apartment Associates ("Chastleton") and Coachman's L.P. IGC also will retain
rights to collect the principal balance of a note (the "LDA Note") in the amount
of $6.77 million payable by Land Development Associates, S.E. ("LDA"), ACPT's
affiliate that holds land development assets in Puerto Rico. ACPT will not have
any interest in American Family Homes, LLC ("AFH"), which will continue to be
held by IGC, or in Interstate Waste Technologies, Inc. ("IWT") or Caribe Waste
Technologies, Inc. ("CWT"). Substantially all of the stock of IWT and CWT will
be held in a trust for the benefit of IGC Unitholders (the "CWT Trust").

Prior to contributing IWT and CWT stock to the CWT Trust, IGC will capitalize
these entities with $1 million in cash, certain residential lots in the
Montclair development of Prince William County, Virginia, and a note receivable
in the amount of $1.06 million.

The distribution of Common Shares (the "Distribution") will be
undertaken on or about _______________, 1998, following completion of the
transfer of assets to ACPT (the "Asset Transfers"), to IGC Unitholders of record
on _______________, 1998 (the "Record Date") on the basis of one Common Share
for every two IGC Units held, as well as to the general partners of IGC,
Interstate General Management Corporation ("IGMC") and Interstate Business
Corporation ("IBC"), in accordance with their respective 1/3% and 2/3% general
partnership interests. No consideration will be required to be paid by IGC
Unitholders to receive Common Shares, nor will they be required to surrender or
exchange IGC Units in order to receive Common Shares. ACPT has received
preliminary approval for listing of the Common Shares on the American Stock
Exchange (the "AMEX") and has applied for listing on the Pacific Stock Exchange
(the "PSE"). IGC Units will continue to be listed on AMEX and [the PSE]
following the Restructuring.

This Prospectus is also a Proxy Statement which, together with a Proxy
Card, is being furnished to IGC Unitholders in connection with the solicitation
by IGMC of proxies for the authorization and approval of the Restructuring.

On _______________, 1998, the last reported sale price of the IGC
Units on the AMEX was $_____ per IGC Unit.

The Proxy Statement/Prospectus does not cover resales of ACPT Common
Shares received by IGC Unitholders in the Restructuring, and no person is
authorized to make use of this Proxy Statement/Prospectus in connection with any
such resale.

______________________________

SEE "RISK FACTORS" ON PAGE [__] FOR CERTAIN FACTORS RELEVANT TO THE
RESTRUCTURING AND INVESTMENT IN THE COMMON SHARES, INCLUDING:

. ABSENCE OF DISSENTERS' APPRAISAL RIGHTS; ALL IGC UNITHOLDERS WILL BE
BOUND BY THE VOTE OF THE HOLDERS OF A MAJORITY OF THE OUTSTANDING IGC
UNITS AND A MAJORITY OF THE VOTES CAST BY IGC UNITHOLDERS NOT
AFFILIATED WITH MEMBERS OF THE FAMILY OF JAMES J. WILSON (THE "WILSON
FAMILY").

. MEMBERS OF THE WILSON FAMILY WILL BE ABLE TO EXERT SUBSTANTIAL CONTROL
OVER VOTES ON MATTERS AFFECTING ACPT THROUGH THEIR CONTROL OF CERTAIN
SHAREHOLDERS. IN ADDITION, ACPT IS SUBJECT TO OTHER CONFLICTS OF
INTEREST ARISING OUT OF ITS RELATIONSHIPS WITH CERTAIN SHAREHOLDERS,
MEMBERS OF MANAGEMENT, AND THEIR AFFILIATES. CERTAIN ACTIONS OR

-2-

DECISIONS BY THESE PARTIES MAY HAVE AN ADVERSE EFFECT ON THE INTERESTS
OF SHAREHOLDERS.

. THERE IS NO GUARANTEE THAT A PUBLIC MARKET FOR COMMON SHARES WILL
DEVELOP OR BE SUSTAINED AFTER THE DISTRIBUTION.

. THE AGGREGATE PRICES AT WHICH THE COMMON SHARES AND IGC UNITS TRADE
AFTER THE DISTRIBUTION MAY BE HIGHER OR LOWER THAN THE PRICES AT WHICH
THE IGC UNITS TRADED BEFORE THE DISTRIBUTION. IT ALSO IS LIKELY THAT
THE COMMON SHARES WILL TRADE AT A PRICE SUBSTANTIALLY LOWER THAN THE
$20.94 NET ASSET VALUE PER SHARE AS OF DECEMBER 31, 1996, DETERMINED
BY MANAGEMENT.

. THE RESTRUCTURING IS SUBJECT TO OBTAINING THE APPROVALS OF CERTAIN
GOVERNMENT ENTITIES, INCLUDING HUD, CERTAIN IGC LENDERS, AND CERTAIN
LIMITED PARTNER INVESTORS IN THE U.S. APARTMENT PARTNERSHIPS.

. AS A RESULT OF CERTAIN ASSET TRANSFERS PRIOR TO THE RESTRUCTURING,
APPROXIMATELY [$4.2 MILLION] IN GAIN WILL BE RECOGNIZED BY IGC (AND
THE IGC UNITHOLDERS WILL TAKE INTO ACCOUNT THEIR ALLOCABLE SHARE OF
SUCH GAIN -- APPROXIMATELY [$.40] PER UNIT).

. TAX CONSIDERATIONS RELATED TO THE RESTRUCTURING ARE COMPLEX AND
INVOLVE SUBSTANTIAL RISKS, INCLUDING THE REIT CLASSIFICATION OF
AMERICAN RENTAL, THE PARTNERSHIP CLASSIFICATION OF ACPT, THE
PARTNERSHIP CLASSIFICATION OF IGC, AND THE CLASSIFICATION OF IGP GROUP
FOR U.S. AND PUERTO RICO TAX PURPOSES.

. THE BUSINESS OF ACPT WILL BE SUBJECT TO CERTAIN REAL ESTATE FINANCING
RISKS, INCLUDING RISING INTEREST RATES, DEBT FINANCING RISKS, RISKS
ASSOCIATED WITH FINANCING NEW DEVELOPMENTS THROUGH CONSTRUCTION LOANS,
AND RISKS ASSOCIATED WITH SALE AND FORECLOSURE.

. THE BUSINESS OF ACPT WILL BE SUBJECT TO CERTAIN REAL ESTATE INVESTMENT
RISKS, INCLUDING OPERATING RISKS ASSOCIATED WITH REAL ESTATE,
DEVELOPMENT RISKS, SUCH AS ZONING APPROVALS, THE POTENTIAL APPLICATION
OF FEDERAL AND STATE ENVIRONMENTAL LAWS AND FEDERAL LAWS RELATING TO
DISABLED PERSONS, AND CHANGES IN TAX LAWS AND BUILDING SAFETY
REGULATIONS, AND COMPETITIVE RISKS FROM OTHER ENTITIES.

. ACPT'S U.S. AND PUERTO RICO APARTMENT PROPERTIES, AND ITS DEVELOPMENT
OF FUTURE PROJECTS, COULD BE ADVERSELY AFFECTED BY CHANGES IN
GOVERNMENT REGULATIONS THAT RESTRICT SUBSIDY PROGRAMS FOR NEW
CONSTRUCTION OF LOW AND MODERATE INCOME HOUSING BY DEVELOPERS SUCH AS
ACPT.

-3-

. THE TRANSFERABILITY AND OWNERSHIP OF ACPT COMMON SHARES WILL BE
RESTRICTED INSOFAR AS NO SHAREHOLDER (OTHER THAN CERTAIN CURRENT IGC
UNITHOLDERS) MAY OWN MORE THAN 2% OF THE OUTSTANDING COMMON SHARES.

. OTHER PROVISIONS IN ACPT'S ORGANIZATIONAL DOCUMENTS MAY HAVE THE
EFFECT OF DISCOURAGING A CHANGE IN CONTROL.

____________________________

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 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 date of this Proxy Statement/Prospectus is _______________, 1998.

-4-

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN OR INCORPORATED BY REFERENCE INTO
THIS PROXY STATEMENT/PROSPECTUS IN CONNECTION WITH THE OFFERING OF SECURITIES
MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ACPT OR IGC. NEITHER THE DELIVERY
OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE COMMON SHARES
OFFERED HEREBY SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF ACPT OR IGC SINCE THE DATE HEREOF OR THAT
THE INFORMATION SET FORTH OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF
ANY TIME SUBSEQUENT TO ITS DATE. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY
SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION OF AN OFFER.

AVAILABLE INFORMATION

IGC is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission"). Reports and other information filed by IGC can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
Commission's Regional Offices at Seven World Trade Center, 13th Floor, New York,
New York 10048 and CitiCorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621-2511. Copies of such material can be obtained by mail
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Such reports and other information
may also be obtained from the web site that the Commission maintains at
http://www.sec.gov. In addition, reports and other information concerning IGC
may be inspected at the offices of the American Stock Exchange, Inc., 86 Trinity
Place, New York, New York 10006-1829.

Reports and other information concerning IGC may also be obtained
electronically through a variety of databases, including, among others, the
Commission's Electronic Data Gathering and Retrieval ("EDGAR") program, Knight-
Ridder Information Inc., Federal Filing/Dow Jones and Lexis/Nexis.

ACPT has filed with the Commission a Registration Statement on Form S-
4 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities

-5-

Act"), with respect to the Common Shares to be issued pursuant to the
Restructuring. This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which have
been omitted in accordance with the rules and regulations of the Commission.
For further information, reference is hereby made to the Registration Statement.
Any statements contained herein concerning the provisions of any document filed
as an exhibit to the Registration Statement or otherwise filed with the
Commission are not necessarily complete, and in each instance reference is made
to the copy of such document so filed. Each such statement is qualified in its
entirety by such reference.

-6-

Table of Contents

Page
----

Available Information......................................................... 5

Summary....................................................................... 17
Overview................................................................. 17
Organizational Charts.................................................... 18
Recommendation of the Board of Directors of IGMC......................... 22
The Special Meeting...................................................... 22
Principal Advantages of the Restructuring................................ 23
Broader Market for Common Shares than for IGC Units................. 23
No History of Wetlands Litigation................................... 23
No Adverse Financial Effects from AFH, IWT, and CWT................. 23
Simplified Tax Reporting............................................ 23
Enhanced Financing Opportunities.................................... 24
Election of Trustees by Shareholders................................ 24
Principal Disadvantages of the Restructuring............................. 24
No Cash Distributions to IGC Unitholders............................ 24
Tax Liabilities..................................................... 24
Reduction of Required Distributions................................. 25
Antitakeover Effects................................................ 25
Restrictions on Accumulation of Common Shares....................... 26
Summary Risk Factors..................................................... 26
Mechanics of the Restructuring........................................... 33
The Asset Transfers................................................. 33
The Distribution.................................................... 34
Assets Retained by IGC.............................................. 35
Appraisals............................................................... 35
Properties Retained by IGC.......................................... 35
Properties Transferred to ACPT...................................... 36
Background of the Restructuring; Consideration of Alternatives........... 36
Benefits to Insiders..................................................... 38
The Private Offering..................................................... 39
No Dissenters' Appraisal Rights.......................................... 39
Conflicts of Interest.................................................... 39
Tax Consequences of the Restructuring for U.S. Unitholders and
Shareholders............................................................ 40
Tax Consequences of the Restructuring for Puerto Rico Unitholders and
Shareholders............................................................ 40
Comparison of Operations of ACPT and IGC................................. 40
Comparative Rights of IGC Unitholders and Shareholders................... 41

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Page
----

Summary Combined Historical and Pro Forma Financial and Operating Data... 43

Risk Factors.................................................................. 45
Restructuring Risks...................................................... 45
No Dissenters' Appraisal Rights..................................... 45
Control of ACPT; Conflicts of Interest.............................. 45
Absence of Existing Trading Market for Common Shares................ 46
Change in Value of Securities; Trading Price Less than Net Asset
Value.............................................................. 46
Antitakeover Effects................................................ 46
Ownership Limitation................................................ 47
Potential Effects of Issuance of Additional Shares.................. 47
Dependence on Key Personnel; Withdrawal of James J. Wilson
from Management.................................................... 48
Change in the Rights of IGC Unitholders............................. 48
Possible Adverse Effect of Market Interest Rates on Price of
Common Shares...................................................... 48
Approvals Required to Effect the Restructuring...................... 49
Real Estate Financing Risks.............................................. 49
Rising Interest Rates............................................... 49
Debt Financing and Potential Adverse Effects on Cash Flows and
Distributions...................................................... 49
Construction Loans and Risks Associated with Sale or
Foreclosure........................................................ 50
Changes in Policies Without Shareholder Approval.................... 50
Real Estate Investment Risks............................................. 50
General Risks....................................................... 50
Operating Risks..................................................... 52
Development of St. Charles.......................................... 52
Litigation Involving St. Charles Development........................ 53
Termination of HUD Subsidy Contracts; New Apartment Development..... 53
Competition......................................................... 54
Possible Environmental Liabilities.................................. 55
Effect of Americans with Disabilities Act Compliance on
Cash Flow and Distribution......................................... 56
Change in Tax Laws; Building Safety Regulations..................... 56
Uninsured Loss...................................................... 57
Risks Involved in Property Ownership Through Partnerships,
Limited Liability Companies, and Joint Ventures.................... 57
Risks Associated with Illiquidity of Real Estate.................... 57

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Page
----

Risks Associated with Acquisition, Development and Construction....... 58
Tax Related Risks.......................................................... 59
Asset Transfers....................................................... 59
Classification of IGC as a Partnership................................ 60
Corporate Level Taxes................................................. 62
Classification of American Rental as a REIT........................... 62
Ownership Structure and the Stapled Stock Rules....................... 64
Classification of IGP Group for United States and Puerto Rico
Tax Purposes......................................................... 66
Possible Tax Liabilities in Excess of Cash Distributions.............. 67
Classification of ACPT as a Partnership............................... 68
Foreign Tax Credits................................................... 68
Puerto Rico Statehood................................................. 69
Section 704(c) Allocations and Section 754 Election................... 69
Recent Changes in Law and Legislative Proposals....................... 70

The Special Meeting............................................................. 71
Matters Presented for Vote................................................. 71
Recommendation of the Board of Directors of IGMC........................... 71
IGC Units Eligible to Vote on the Restructuring............................ 72
Required Vote.............................................................. 72
Broker Non-Votes and Abstentions........................................... 72
Proxies.................................................................... 73
Revocation of Proxies...................................................... 73
Solicitations by IGC Management............................................ 73
No Dissenters' Appraisal Rights............................................ 74

The Restructuring............................................................... 74
Reasons for the Restructuring.............................................. 74
The Asset Transfers........................................................ 74
American Rental....................................................... 74
American Management................................................... 75
American Land......................................................... 75
IGP Group............................................................. 76
The Distribution........................................................... 76
Relationship between IGC and ACPT after the Distribution................... 77
No Overlapping Management............................................. 77
Banc One Financing.................................................... 78
NationsBank Letter of Credit.......................................... 78
Assets Retained by IGC..................................................... 79
Approvals Required to Effect the Restructuring............................. 79

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Page
----

Background of the Restructuring; Consideration of Alternatives.............. 79
Disadvantages of Current Structure..................................... 79
Alternatives Considered................................................ 80
The Private Offering........................................................ 83
Principal Advantages of the Restructuring................................... 83
Broader Market for Common Shares than for IGC Units.................... 83
No History of Wetlands Litigation...................................... 84
No Adverse Financial Effects from AFH, IWT and CWT..................... 84
Simplified Tax Reporting............................................... 84
Enhanced Financing Opportunities....................................... 84
Election of Trustees by Shareholders................................... 85
Principal Disadvantages of the Restructuring................................ 85
No Cash Distributions to IGC Unitholders............................... 85
Tax Liabilities........................................................ 85
Reduction of Required Distributions.................................... 86
Antitakeover Effects................................................... 86
Restrictions on Accumulation of Common Shares.......................... 86

ACPT Pro Forma Combined Financial Data........................................... 87

ACPT............................................................................. 92

Distribution Policy.............................................................. 92

Capitalization................................................................... 93

Market Prices and Distributions.................................................. 93

Selected Combined Historical Financial and Operating Data of American
Community Portfolio Properties................................................. 95

Management's Discussion and Analysis of Results of Operations and Financial
Condition...................................................................... 97
General..................................................................... 97
Results of Operations....................................................... 97
For the Years Ended December 31, 1997 and 1996.............................. 97
Community Development Operations....................................... 98
Rental Property Revenues, Net of Operating Expenses.................... 98
Equity in Earnings from Partnerships and Developer Fees................ 98
Management and Other Fees.............................................. 98
Interest Expense....................................................... 98
General and Administrative Expense..................................... 98

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Page
----

For the Years Ended December 31, 1996 and 1995............................. 99
Community Development Operations...................................... 99
Rental Property Revenues Net of Operating Expenses.................... 99
Equity in Earnings from Partnerships and Developer Fees............... 99
Management and Other Fees............................................. 99
Interest Expense...................................................... 100
General and Administrative Expense.................................... 100
Liquidity and Capital Resources............................................ 100
Debt Summary............................................................... 101
Year 2000.................................................................. 102
Forward-Looking Statements................................................. 103

Business and Properties of ACPT................................................. 103
Rental Apartment Properties................................................ 103
United States......................................................... 103
Puerto Rico........................................................... 106
Government Regulation................................................. 108
Competition........................................................... 109
Condominium Conversion..................................................... 109
Puerto Rico........................................................... 109
United States......................................................... 110
Community Development...................................................... 110
St. Charles........................................................... 110
Government Approvals............................................. 112
Competition...................................................... 112
Environmental Impact............................................. 112
Parque Escorial....................................................... 113
Government Approvals............................................. 113
Competition...................................................... 113
Environmental Impact............................................. 114
Commercial Rental Properties............................................... 114
Property Management........................................................ 114
Homebuilding in Puerto Rico................................................ 115
Policies with Respect to Certain Activities................................ 115
Investment Policies................................................... 115
Investment in Real Estate or Interests in Real Estate............ 115
Investment in Real Estate Mortgages.............................. 116
Securities of or Interests in Persons Primarily Engaged in Real
Estate Activities and Other Issuers............................. 116
Affiliate Transaction Policy.......................................... 116
Certain Other Policies................................................ 116

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Page
----

Appraisals...................................................................... 117
Properties Transferred to ACPT............................................. 117
Parque Escorial Planned Community, San Juan/Carolina, Puerto Rico..... 117
Canovanas Property, Canovanas, Puerto Rico............................ 118
Smallwood Village, Westlake Village, Wooded Glen, and Piney Reach of
the St. Charles Planned Unit Development and Surrounding Environs,
St. Charles, MD...................................................... 118
Fairway Village (Residential), St. Charles, MD........................ 119
Fairway Village (Commercial), St. Charles, MD......................... 119
Properties Retained by IGC................................................. 120
Brandywine Village, Brandywine, MD.................................... 120
Southlake at Montclair Subdivisions Section S-4, Dumfries, VA......... 120
Westbury, Phase II Section I, Lexington Park, MD...................... 121
Pomfret Property, Waldorf, MD......................................... 121
Parcels A-3 & A-4, Westlake Village, St Charles, MD................... 122
26 Single Family Lots, Dorchester Village, St. Charles, MD............ 122
General.................................................................... 122

Legal Proceedings............................................................... 123
ACPT....................................................................... 123
IGC........................................................................ 123
Wetlands Litigation................................................... 124
Other Litigation...................................................... 124

IGC Consolidated Financial Data................................................. 125

IGC After the Restructuring..................................................... 132
No Change in Partnership Structure......................................... 132
Management of IGC.......................................................... 132
Description of IGC's Continuing Business................................... 132
Real Estate Development............................................... 133
Brandywine....................................................... 133
Pomfret.......................................................... 133
Westbury......................................................... 133
St. Charles Commercial Land...................................... 133
Dorchester....................................................... 134
Wetlands Properties.............................................. 134
Interstate Waste Technologies; CWT Trust.............................. 134
American Family Homes................................................. 134
Listing of IGC Units....................................................... 134

-12-

Page
----

Creditors Rights.............................................................. 135

Management of ACPT................................................................. 135
ACPT Board of Trustees........................................................ 135
ACPT Trustees and Executive Officers.......................................... 136
Committees of the ACPT Board of Trustees...................................... 139
Audit Committee......................................................... 139
Compensation Committee.................................................. 139
Nominating Committee.................................................... 139
Compensation of ACPT Trustees................................................. 139
Executive Compensation........................................................ 139
Employment Agreements......................................................... 140
Share Incentive Plans......................................................... 141
Employee Plan........................................................... 141
Trustees Plan........................................................... 141
Treatment of IGC Options and Unit Appreciation Rights......................... 142
Retirement Plans.............................................................. 142

Ownership of Common Shares......................................................... 143

Transactions with Related Parties.................................................. 145
Consulting Agreement.......................................................... 145
Banc One Financing............................................................ 145
Joint Litigation with Charles County.......................................... 146
Services of Whitman, Requardt................................................. 146
NationsBank Letter of Credit.................................................. 146
Payments to IBC for Services Provided by J. Michael Wilson.................... 147
Other Transactions............................................................ 147

Income Tax Considerations.......................................................... 147
Federal Income Tax Considerations............................................. 147
Federal Income Tax Classification of IGC................................. 149
Federal Income Tax Classification of ACPT................................ 152
Counsel's Opinion of Federal Income Tax Classification of ACPT...... 155
Federal Income Tax Classification of American Rental..................... 156
REIT Qualification................................................. 157
General REIT Qualification Requirements, Ownership Structure,
and Stapled Stock Rules........................................... 157
Share Ownership, Reporting......................................... 160
Sources of Gross Income............................................ 162
75% Gross Income Test.............................................. 163
95% Gross Income Test.............................................. 164

-13-

Page
----

Failing the 75% or 95% Tests; Reasonable Cause....................... 165
Character of Assets Owned............................................ 165
Annual Distributions to Shareholders................................. 166
Taxation of American Rental as a REIT................................ 168
Failure to Qualify as a REIT......................................... 169
Counsel's Opinion Relating to Qualification of American Rental as
a REIT.............................................................. 169
Federal Income Tax Classification of American Housing and American
Housing Management Company................................................. 172
Federal Income Tax Classification of American Land and American Management... 173
Federal Income Tax Classification of IGP Group............................... 173
Certain Tax Consequences of the Asset Transfers.............................. 173
Federal Income Tax Consequences of the Distribution.......................... 175
Federal Income Taxation of ACPT and Shareholders............................. 176
General.............................................................. 176
Tax Basis of Common Shares........................................... 177
Income and Loss Allocations.......................................... 177
Coordination of Allocations and Distributions....................... 178
Section 704(c) Allocations........................................... 179
Section 754 Election................................................. 179
Passive Loss and Income.............................................. 180
Taxation of Foreign Investors........................................ 180
Taxation of Shareholder Distributions Other than in Liquidation
Foreign Tax Credit................................................. 180
Termination of ACPT for Tax Purposes................................. 182
Backup Withholding................................................... 183
Sale or Exchange of Common Shares.................................... 183
Dissolution of ACPT.................................................. 184
Puerto Rico Shareholders............................................. 185
Certain Federal Income Tax Consequences to Tax Exempt Organizations.. 187
Information Return Filing Requirements............................... 187
Electing Large Partnerships.......................................... 188
Audit of Partnership Tax Returns and Further Proceedings............. 188
Penalty for Substantial Understatement; Deduction of Interest........ 189

Certain State Income Tax and Puerto Rico Income Tax Considerations.................. 190
Certain State Tax Considerations............................................... 190
Certain Puerto Rico Income Tax Considerations.................................. 191
Puerto Rico Income Tax Classification of ACPT and IGP Group............... 191
Puerto Rico Income Taxation of the Distribution........................... 192

-14-

Page
----

United States Shareholders................................................ 192
Puerto Rico Shareholders.................................................. 192
Puerto Rico Income Taxation of ACPT........................................... 193
Puerto Rico Income Taxation of IGP Group...................................... 194
Puerto Rico Counsel's Opinions of Puerto Rico Taxation of ACPT and IGP Group.. 194
Certain Puerto Rico Income Tax Consequences to Shareholders................... 195
United States Shareholders................................................ 195
Puerto Rico Shareholders.................................................. 195

Description of Shares of Beneficial Interest............................................ 196
General............................................................................ 196
Common Shares...................................................................... 196
Preferred Shares................................................................... 197
Transfer Agent..................................................................... 197

Certain Provisions of Maryland Law and of ACPT's Declaration of Trust and Bylaws........ 198
Classification of the Board of Trustees............................................ 198
Independent Trustees............................................................... 199
Removal of Trustees................................................................ 199
Required Minimum Distributions..................................................... 199
Supermajority Voting............................................................... 199
Business Combinations.............................................................. 199
Control Share Acquisitions......................................................... 200
Amendment of Declaration of Trust and Bylaws....................................... 201
Limitation of Liability and Indemnification........................................ 202
Dissolution of ACPT................................................................ 203
Possible Antitakeover Effect of Certain Provisions of Maryland Law and of the
Declaration of Trust and Bylaws................................................... 203
Maryland Asset Requirements........................................................ 203

Comparative Rights of IGC Unitholders and Shareholders.................................. 203
General............................................................................ 203
Management......................................................................... 204
Required Minimum Distributions..................................................... 204
Voting Rights...................................................................... 204
Meetings........................................................................... 205
Amendment of Declaration of Trust, Bylaws and Partnership Agreement................ 205
Limited Liability.................................................................. 206
Dissolution of the Partnership and ACPT............................................ 206
Liquidation Rights................................................................. 206
Limitations of Liability of General Partners and Trustees.......................... 206

-15-

Page
----

Indemnification..................................................................... 207
Ownership Limitations............................................................... 207

Legal Matters............................................................................ 207

Experts.................................................................................. 207

Reports to Shareholders.................................................................. 207

Glossary................................................................................. 209

Financial Statements..................................................................... F-1

-16-

SUMMARY

The following is a summary of certain information contained elsewhere
in this Proxy Statement/Prospectus. Reference is made to, and this Summary is
qualified in its entirety by, the more detailed information contained elsewhere
in this Proxy Statement/Prospectus. As used in this Proxy Statement/Prospectus,
the term "IGC" means Interstate General Company L.P., a Delaware limited
partnership, the term "ACPT" means American Community Properties Trust, a
Maryland investment trust, the term "IGMC" means Interstate General Management
Corporation, a Delaware corporation, and the managing general partner of IGC,
the term "IBC" means Interstate Business Corporation, a Delaware corporation and
a general partner of IGC. Unless otherwise defined herein, capitalized terms
used in this Summary have the meanings ascribed to them elsewhere in this Proxy
Statement/Prospectus. IGC Unitholders are urged to read this Proxy
Statement/Prospectus in its entirety.

OVERVIEW

This Proxy Statement/Prospectus relates to a proposal to transfer the
principal real estate operations and assets of IGC to ACPT and to distribute to
the partners of IGC, including the IGC Unitholders, all of the Common Shares of
ACPT. ACPT was organized in March 1997 for purposes of consummating the
Restructuring and currently is a wholly-owned subsidiary of IGC. Prior to
completion of the Asset Transfers (as described below), ACPT will own no assets.
ACPT was formed as a real estate investment trust under Article 8 of the
Maryland Trust Law but is expected to be taxed as a partnership. Under the
Maryland Trust Law, at least 75% of the value of ACPT's assets must be held,
directly or indirectly, in real estate assets, mortgages and mortgage related
securities, government securities, and cash and cash equivalent items. The
purpose of these transactions is to create an investment vehicle whose principal
income is dividends from corporations engaged principally in real estate
businesses. This should be a more attractive investment for pension funds and
mutual funds than is IGC as a master limited partnership engaged in both real
estate and non real estate businesses. ACPT will not have any operating income.
Management expects that ACPT will have greater access to capital markets than
IGC has had. In addition, ACPT will not be burdened with the operating losses
and capital needs of AFH, the capital needs of IWT and CWT or the IGC wetlands
litigation. See "The Restructuring -- Reasons for the Restructuring." The
contemplated transactions include (i) the transfer to ACPT of substantially all
of IGC's U.S. community development assets, investment apartment property, and
property management services assets, its similar assets in Puerto Rico and its
Puerto Rico homebuilding operations (the "Asset Transfers"), and (ii) the
distribution of all of the Common Shares of ACPT to the partners of IGC,
including the IGC

-17-

Unitholders (the "Distribution"). These transactions are sometimes collectively
referred to herein as the "Restructuring."

In addition, in connection with the Restructuring, and subject to
market conditions, ACPT will seek to raise up to $35 million in additional
equity capital through a private offering of preferred shares (the "Private
Offering"). See "The Restructuring -- The Private Offering."

ORGANIZATIONAL CHARTS.

The following organization charts graphically depict the transactions
constituting the Restructuring.

-18-

IGC PRIOR TO THE RESTRUCTURING

The following chart depicts the organizational structure of IGC and its
subsidiaries immediately prior to the Restructuring. St. Charles Operating Co.
LLC owns the Wetlands Properties, including the Towne Center South land, and IGC
directly holds the Westbury and Montclair land.

[CHART APPEARS HERE AS DESCRIBED BELOW]

IGC owns:

(a) 100%/1/ of IGP, which in turn owns

(i) 50% of Escorial Builders

(ii) 1% of El Monte

(iii) 80% of LDA

(iv) 9 Puerto Rico Apartment Partnerships (in which limited partners
also own interests)

(b) 100% of St. Charles Operating Co. LLC

(d) 100% of Pomfret LLC

(e) 13 US Apartment Partnerships (in which limited partners also own
interests)

(f) .02% of Chastleton

(g) 41.0345% of Maryland Cable

(h) 100% of AFH

(i) 100% of IWT/2/

(j) 100% of St. Charles Community LLC

(k) .01% of Coachman's

[END OF CHART]
_______________________________

/1/ James J. Wilson is a general partner without a percentage interest in IGP
and is entitled to certain preferential distributions therefrom.

/2/ Includes Caribbean business transferred to CWT.

-19-

ACPT FOLLOWING THE RESTRUCTURING

The following chart depicts the organizational structure of ACPT and
its subsidiaries following completion of the Restructuring.

[CHART APPEARS HERE AS DESCRIBED BELOW]

ACPT will own:

(a) 100%/1/ of American Rental (in which 200 preferred shareholders
also will have interests), which in turn will own:

(i) 99% of American Housing, which will own interests in the US
Apartment Partnerships (in which limited partners also will own
interests)

(ii) 100% of American Housing Management Company, which will own 1% of
American Housing

(b) 100% of American Management

(i) 100% of St. Charles Community LLC

(ii) 41.0345% of Maryland Cable

(iii) Class B/2/ interest in IGP

(d) 100% of IGP Group, which will own the Class A/2/ interest in IGP,
which in turn will own:

(i) 80% of LDA

(ii) 1% of El Monte

(iii) 50% of Escorial Builders

(iv) the Puerto Rico Apartment Partnerships (in which limited
partners also will own interests)

[END OF CHART]
__________________________

/1/ ACPT will hold all of the common stock of American Rental.

/2/ The Class A interest represents all of the interests in IGP other than the
Class B interest, which represents all of IGP's rights to income, gains,
and losses associated with land in Puerto Rico held by LDA that is
currently designated for development as saleable property.

-20-

IGC FOLLOWING THE RESTRUCTURING

The following chart depicts the organizational structure of IGC and its
subsidiaries immediately following the Restructuring. St. Charles Operating Co.
LLC will continue to own the Wetlands Properties, including the Towne Center
South land, and IGC will directly hold the Westbury land.

[CHART APPEARS HERE AS DESCRIBED BELOW]

IGC will own:

(a) .01% of Coachman's

(b) .02% of Chastleton

(d) 100% of St. Charles Operating Co. LLC

(e) 100% of AFH

(f) 100% of Pomfret LLC

(g) 100%/1/ of the CWT Trust, which in turn owns IWT and CWT

[END OF CHART]
_____________________

/1/ Held for the benefit of IGC Unitholders. IGC will exercise no management
control over the CWT Trust, CWT, or IWT.

-21-

RECOMMENDATION OF THE BOARD OF DIRECTORS OF IGMC.

The Board of Directors of IGMC, by unanimous vote, has approved the
Restructuring, believes that the terms of the Restructuring are in the best
interests of the IGC Unitholders, and recommends that IGC Unitholders vote for
approving the Restructuring. The Board of Directors of IGMC collectively
beneficially own 785,033 IGC Units, and intend to vote their IGC Units in favor
of the proposed Restructuring. However, the Restructuring is contingent upon
the management of IGC determining that IGC will be classified as a partnership
for federal tax purposes for 1998. See "The Special Meeting -- Recommendation
of the Board of Directors of IGMC."

THE SPECIAL MEETING.

The special meeting IGC Unitholders will be held on _______________,
1998 at _____ _.m. (local time) at _________________________________________,
Maryland. The close of business on _______________, 1998 has been established
as the record date for determining IGC Unitholders entitled to notice of, and to
vote at, the special meeting. On that date there were _____ issued and
outstanding IGC Units. No matters other than the Restructuring (except certain
procedural matters) may be discussed or voted upon at the special meeting. The
presence, in person or by proxy, of IGC Unitholders holding more than 50% of the
total number of outstanding IGC Units will constitute a quorum at the special
meeting. If you beneficially own IGC Units issued to a broker or other nominee
holder, you must instruct such broker or nominee holder how to vote the IGC
Units that you beneficially own. If you do not give such instructions, the
broker or other nominee holder will not vote your IGC Units. For the
Restructuring to take effect, it must be approved by a majority of the
outstanding IGC Units and by a majority of the IGC Units present and voting that
are not beneficially owned by the Wilson Family. The Wilson Family beneficially
owns more than a majority of the outstanding Units.

Proxyholders will vote the eligible IGC Units represented by valid
proxies at the special meeting in accordance with the directions given on the
Proxy Card concerning whether to approve the Restructuring. IF YOU SIGN AND
RETURN A PROXY CARD WITHOUT GIVING ANY DIRECTIONS ON HOW TO VOTE ON THE
RESTRUCTURING, THE PROXYHOLDER WILL VOTE YOUR IGC UNITS FOR THE APPROVAL OF THE
RESTRUCTURING. You may revoke your proxy at any time prior to the proxyholder's
voting of the IGC Units to which your proxy applies by: submitting a later
dated Proxy Card, attending the special meeting and delivering a written
revocation of the proxy, or delivering a written notice of revocation to IGC,
222 Smallwood Village Drive, St. Charles, MD 20602 before the date of the
special meeting. See "The Special Meeting."

-22-

PRINCIPAL ADVANTAGES OF THE RESTRUCTURING.

Broader Market for Common Shares than for IGC Units.
---------------------------------------------------

Limited partnership interests which require holders to recognize trade
or business income and losses from partnership operations are generally not
regarded as attractive investments for institutions such as mutual funds and
pension funds. ACPT, as a holding company, will receive income principally in
the form of dividends and distributions from its subsidiaries, and its Common
Shares should be a more attractive investment for certain investors than IGC
Units even though ACPT is expected to be treated as a partnership for federal
income tax purposes. Enlarging the group of potential investors for ACPT Common
Shares should produce a more liquid market than currently exists for IGC Units.
However, there is no assurance that a trading market will develop or be
substantial.

No History of Wetlands Litigation.
---------------------------------

IGC, which was convicted of federal Clean Water Act violations (which
conviction was reversed but has been remanded for a new trial), will retain the
four parcels of land that were involved in that litigation and the one
additional parcel that was the subject of a civil suit that was dismissed
without prejudice (collectively, the "Wetlands Properties"). None of the land
to be transferred to ACPT was so implicated and ACPT is not a party to such
proceedings. See "Legal Proceedings -- IGC" and "IGC After the Restructuring --
Creditors Rights."

No Adverse Financial Effects from AFH, IWT, and CWT.
---------------------------------------------------

AFH has had operating losses and has capital needs and IWT and CWT
have capital needs that have had adverse effects upon IGC's operating results
and financial condition. These are expected to continue for the foreseeable
future. AFH will remain a subsidiary of IGC, and IWT and CWT will be held by
the CWT Trust for the benefit of IGC Unitholders. Thus, their financial results
will not affect ACPT. See "The Restructuring -- Assets Retained by IGC." ACPT
will have no obligation to provide financial support to AFH, IWT or CWT. See
"IGC After the Restructuring --Description of IGC's Continuing Business."

Simplified Tax Reporting.
------------------------

Because ACPT will derive income principally from dividends from
corporations, the items to be reported for federal tax purposes by ACPT
Shareholders generally will be limited to dividends and Puerto Rico taxes paid
by ACPT with respect to the income of IGP Group in Puerto Rico. Shareholders
will not have to report ordinary income or losses from trade or business
activity as is currently the case with

-23-

IGC. See "Income Tax Considerations -- Federal Income Tax Considerations --
Federal Income Tax Classification of ACPT."

Enhanced Financing Opportunities.
--------------------------------

The removal of the adverse financial effects of AFH, IWT, and CWT and
the absence of involvement in the wetlands litigation should provide ACPT with
opportunities to obtain financing for its operations from banks and other
lenders on terms that generally are more favorable than those currently
available to IGC. See "The Restructuring -- Principal Advantages of
Restructuring."

Election of Trustees by Shareholders.
------------------------------------

ACPT will be managed by its Board of Trustees, the members of which
will be elected by ACPT shareholders. ACPT also will hold annual meetings of
shareholders. See "Comparative Rights of IGC Unitholders and Shareholders."

See "The Restructuring -- Principal Advantages of the Restructuring."

PRINCIPAL DISADVANTAGES OF THE RESTRUCTURING.

No Cash Distributions to IGC Unitholders.
----------------------------------------

Unless IGC ultimately prevails in the wetlands litigation, or the CWT
Trust sells assets and remits proceeds to IGC, the operations and assets
remaining with IGC after the Restructuring may not enable IGC to make quarterly
distributions to the IGC Unitholders. See "IGC After the Restructuring --
Description of IGC's Continuing Business." It is possible that IGC may
recognize taxable income without generating sufficient cash to enable IGC to
make a distribution to the IGC Unitholders in an amount at least equal to the
IGC Unitholders' tax liability arising from their share of IGC taxable income.

Tax Liabilities.
---------------

Gain will be recognized by IGC (and the Unitholders will take into
account their allocable share of such gain) on the transfer of IGC's interests
in the U.S. Apartment Partnerships to American Housing to the extent that the
amount of liabilities assumed (or deemed assumed) by American Housing exceeds
the tax basis of the property contributed to American Housing. IGC has
calculated that approximately [$4.2 million] in gain will be recognized as a
result of the transfer, based on certain estimates and assumptions by IGC,
including IGC's estimates of tax basis and the amount of liabilities at the
time of the transfer. See "Income Tax Considerations -- Federal Income Tax
Considerations -- Federal Income Tax Consequences of the Asset Transfers."

-24-

American Management and American Land will be treated as corporations
for federal and state tax purposes and will be subject to federal and state
income tax (including any applicable alternative minimum tax) on their taxable
income at regular corporate tax rates. Payment of such taxes may reduce the
amounts otherwise available for distribution to ACPT, or by ACPT to the
Shareholders.

As a result of the Asset Transfers, Shareholders will not have a
distributive share of the various items of income, gain, loss, deduction or
credit attributable to the operating businesses conducted by partnerships.
Instead, distributions to ACPT from its subsidiaries American Management,
American Land, IGP Group and American Rental generally will be limited to
dividend income (to the extent of current and accumulated earnings and profits),
and, in the absence of earnings and profits, nontaxable return of capital (to
the extent of ACPT's tax basis in the stock of such corporation) or taxable
capital gain (after ACPT's tax basis has been reduced to zero). Distributions
from American Rental that are specifically designated as capital gain dividends
are treated as long term capital gains. Each Shareholder generally will include
its distributive share of ACPT's income in the Shareholder's taxable income. In
the event that American Rental elects to retain all or a portion of its net
capital gain and pay federal income tax on such undistributed amounts, each
Shareholder generally will include in income its distributive share of the
undistributed capital gains and will be deemed to have paid its distributive
share of the income tax paid by American Rental with respect to such
undistributed capital gains.

Reduction of Required Distributions.
------------------------------------

Under its Partnership Agreement, IGC is required to distribute
annually to IGC Unitholders, in cash and/or property, an amount equal to 55% of
the net taxable income of IGC allocated to IGC Unitholders. The terms of ACPT's
Declaration of Trust require ACPT to distribute annually to Shareholders, in
cash and/or property, an amount equal to 45% of the net taxable income of ACPT
allocated to Shareholders less the amount of taxes paid by ACPT in Puerto Rico
and other foreign countries and certain federal taxes paid by American Rental
with respect to undistributed capital gains.

As is the case with IGC, it is possible that ACPT may recognize
taxable income without generating sufficient cash to enable ACPT to make a
distribution to Shareholders in an amount at least equal to the Shareholders'
tax liability arising from their share of ACPT taxable income.

Antitakeover Effects.
---------------------

-25-

transaction or a change in control of ACPT that might involve a premium price
for holders of Common Shares or otherwise be in their best interest.

Restrictions on Accumulation of Common Shares.
---------------------------------------------

In order to preserve American Rental's qualification as a REIT, ACPT's
Declaration of Trust and Bylaws provide that a person (other than certain
existing IGC Unitholders) may not directly or indirectly own more than 2% of the
outstanding Common Shares. See "Income Tax Considerations -- Federal Income Tax
Classification of American Rental."

See "The Restructuring -- Principal Disadvantages of the
Restructuring."

SUMMARY RISK FACTORS.

Restructuring Risks.
-------------------

. Absence of dissenters' appraisal rights; all IGC Unitholders will be
bound by the vote of the holders of a majority of the outstanding IGC
Units and a majority of the votes cast by IGC Unitholders not
affiliated with the Wilson Family.

. Members of the Wilson Family will be able to exert substantial control
over votes on matters affecting ACPT through their control of certain
of the Shareholders and the Wilson Family beneficially owns a majority
of the IGC Units. Following the Restructuring, ACPT and IGC will
compete for certain land sales to the extent of the Retained Assets,
and the Wilson Family's interests in ACPT and IGC may pose potential
conflicts. ACPT is subject to various other conflicts of interest
arising out of its relationships with certain Shareholders, members of
Management, and their affiliates. Certain actions or decisions by
these parties may have an adverse effect on the interests of
Shareholders.

. There is no guarantee that a public market for Common Shares will
develop or be sustained after the Distribution.

. The aggregate prices at which the Common Shares and IGC Units trade
after the Distribution may be higher or lower than the prices at which
the IGC Units traded before the Distribution. In addition, it is
likely that the Common Shares will trade at a price substantially
lower than the $20.94 net asset value per share, as of December 31,
1996, determined by management based on appraisals of land assets and
valuations of interests in apartment properties, management contracts
and other assets.

-26-

. The transferability and ownership of ACPT Common Shares will be
restricted insofar as no Shareholder (other than certain current IGC
Unitholders) may own more than 2% of the outstanding Common Shares.

. Other provisions in ACPT's organizational documents may have the
effect of discouraging a change in control.

. ACPT is dependent on the efforts of its executive officers, and the
loss of their services could have an adverse effect on the operations
of ACPT.

. Increases in market interest rates may lead prospective purchasers of
the Common Shares to disinvest in ACPT in favor of higher yielding
investments. Such disinvestment may adversely affect the market price
of Common Shares.

. The Restructuring is subject to obtaining the approvals of certain
government entities, including HUD, certain IGC lenders, and certain
limited partner investors in the U.S. Apartment Partnerships.

Real Estate Financing Risks.
---------------------------

. The business of ACPT will be subject to certain real estate financing
risks, including rising interest rates, debt financing risks, and
risks associated with financing new developments through construction
loans.

Real Estate Investment Risks.
----------------------------

. The business of ACPT will be subject to certain real estate investment
risks, including operating risks associated with real estate,
development risks, such as zoning approvals, the potential application
of federal and state environmental laws and federal laws relating to
disabled persons, and changes in tax laws and building safety
regulations, and competitive risks from other entities.

. ACPT's U.S. and Puerto Rico apartment properties, and its development
of future projects, could be adversely affected by changes in
government regulations that restrict subsidy programs for new
construction of low and moderate income housing by developers such as
ACPT.

. ACPT may not be able to obtain insurance coverage with respect to
certain perils, such as hurricanes, wars, and earthquakes. Should an
uninsured loss arise, ACPT could lose both its capital invested in a
property, as well as anticipated future revenue.

-27-

. Risks associated with illiquidity of real estate, and risks associated
with the acquisition, development and construction may adversely
affect ACPT's profitability.

Tax Related Risks.
-----------------

. Gain will be recognized by IGC (and the Unitholders will take into
account their allocable share of such gain) on the transfer of IGC's
interest in the U.S. Apartment Partnerships to American Housing to the
extent that the amount of liabilities assumed (or deemed assumed) by
American Housing exceeds the tax basis of the property contributed to
American Housing. IGC has calculated that approximately [$4.2
million] in gain will be recognized as a result of the transfer.
Additional gain will be recognized if the assets transferred to IGP
Group do not qualify for the exception from gain recognition for
assets used in the active conduct of a trade or business outside of
the United States. In addition, certain asset transfers may result in
the Shareholders taking a lower tax basis in the Common Shares than if
such asset transfers had not occurred. There can be no assurances
that the IRS will not successfully challenge some of the positions
taken by IGC in connection with the transfer of assets prior to the
Distribution.

. If ACPT's subsidiary American Rental fails to qualify as a REIT in any
taxable year, it will be taxed as a corporation and therefore subject
to federal income tax at regular corporate rates on all of its taxable
income (and will not be able to deduct amounts it distributes).
Should this occur, the anticipated tax advantages to ACPT and the
Shareholders would be materially and adversely affected. The rules
governing REITs are highly technical and require ongoing compliance
with a variety of tests that depend, among other things, on future
operating results and beneficial ownership of American Rental. One of
the ownership requirements is that not more than 50% of the Common
Shares may be held, directly or indirectly, applying certain
constructive ownership rules, by five or fewer individuals at any time
during the last half of each of American Rental's taxable years (the
"closely held" test), beginning with the second taxable year for which
American Rental elects to be taxed as a REIT. At the time of the
Distribution, American Rental will not meet the "closely held" test
because of the percentage ownership of the Wilson Family. James J.
Wilson and J. Michael Wilson have advised ACPT that the Wilson Family
intends to take such actions as may be necessary to reduce its
percentage ownership to below 40% before the last half of American
Rental's second taxable year in order to permit American Rental to
qualify as a REIT. However, the Wilson Family is under no obligation
to do so. Thus, no assurance can be given that American Rental will
qualify as a REIT.

-28-

. If the "stapled stock rules" were applied to ACPT, American Rental,
American Land, American Management, and IGP Group: (1) it is likely
that American Rental would fail to qualify as a REIT; and (2) IGP
Group would be treated as a domestic corporation and would be subject
to federal income tax on its world-wide income at rates applicable to
domestic corporations and distributions to ACPT would be taxable as
dividends to the extent of earnings and profits, nontaxable dividends
to the extent of basis, and then as capital gain. The "stapled stock
rules" generally apply to interests in an entity if by reason of form
of ownership, restrictions on transfer or other terms or conditions,
in connection with the transfer of one such interest, the other such
interests are also transferred or required to be transferred. There
are no restrictions, terms or conditions on the stock (or other
beneficial ownership interests) of American Rental, American Land,
American Management or IGP Group that would require the transfer of
any one in connection with the transfer of any other. However, in
light of the lack of existing guidance in this area and the
possibility of legislative and/or administrative activity in this
area, there can be no assurances that the IRS will not seek to apply
the stapled stock rules to ACPT and the entities owned by ACPT, and
that such application would not be upheld by a court.

. The complex structure of ACPT and the entities in which ACPT holds an
interest raises a greater number of interpretative issues, including
those under the REIT qualification rules, and more issues which lack
clear guidance, then generally would be encountered in most other
direct investments in REITs, domestic corporations, or foreign
corporations.

. IGP Group intends to qualify as a "pass-through" entity for Puerto
Rico income tax purposes, whereby all of IGP Group's Puerto Rico
source income will be taxable to ACPT, which will be treated as a
foreign corporation for Puerto Rico tax purposes. See "Income Tax
Considerations -- Certain Puerto Rico Income Tax Consequences." For
United States tax purposes, each Shareholder will be considered to
have paid his allocable share of any Puerto Rico income taxes paid by
ACPT on its Puerto Rico source income. Such taxes may give rise to a
foreign tax credit (subject to applicable limitations) or to a
deduction for United States income tax purposes. If IGP Group fails
to qualify as a special partnership and is treated as a corporation
for Puerto Rico income tax purposes it would be subject to Puerto Rico
income tax on its income, and ACPT and the Shareholders would not be
treated as having paid any taxes to Puerto Rico with respect to the
Puerto Rico source income of IGP Group. Treatment of IGP Group as a
corporation for Puerto Rico tax purposes could have a significant
adverse effect on the value of the Common Shares. IGP Group's
qualification as a "pass-through" entity for

-29-

Puerto Rico tax purposes is based, in part, on private rulings issued
by the Puerto Rico Department of Treasury in connection with IGP.
These rulings are not binding on the Puerto Rico Department of
Treasury and there is no guarantee that their principles will be
followed in evaluating IGP Group's situation. See "Income Tax
Consideration -- Federal Income Tax Considerations -- Federal Income
Taxation of ACPT and Shareholders -- Foreign Tax Credit."

. If ACPT is deemed engaged in trade or business in Puerto Rico it will
be subject to Puerto Rico tax on its income from Puerto Rico sources
and income effectively connected with its Puerto Rico trade or
business. See "Income Tax Considerations - Certain Puerto Rico Income
Tax Consequences."

. ACPT is required to distribute to Shareholders cash and/or property
equal to 45% of taxable income allocable to Shareholders less the
amount of certain taxes paid by ACPT in Puerto Rico and other foreign
countries and certain taxes paid by American Rental. However, there
can be no assurance that ACPT will make distributions in any given
year that provide Shareholders with sufficient cash to meet their
federal income tax liabilities with respect to their share of ACPT's
income. In addition, following the Restructuring it is possible that
IGC may recognize taxable income without receiving sufficient cash to
enable IGC to make a distribution to the IGC Unitholders in an amount
at least equal to the IGC Unitholder's tax liability arising from
their share of IGC taxable income.

. The federal income tax treatment contemplated for ACPT and the
Shareholders will be available only if ACPT is classified as a
"partnership" for federal income tax purposes and not as an
"association" taxable as a corporation. ACPT's status as a
partnership depends upon the continued satisfaction of certain
conditions by ACPT, as described in "Income Tax Considerations --
Federal Income Tax Considerations --Federal Income Tax Classification
of ACPT." There can be no assurance that these conditions will be
met. If ACPT were to be classified as an association taxable as a
corporation for any year, ACPT would be taxable on its profits at the
applicable corporate rate and distributions to the Shareholders
generally would be taxable as dividends. In addition, Shareholders
may not be eligible for foreign tax deductions or credits with respect
to Puerto Rico taxes paid by ACPT. See "Income Tax Considerations --
Federal Income Tax Considerations -- Federal Income Taxation of ACPT
and Shareholders -- Foreign Tax Credit." Treatment of ACPT as an
association taxable as a corporation would result in a material
reduction in the anticipated cash flow to Shareholders and would have
a significant adverse effect on the value of the Common Shares. See

-30-

"Income Tax Considerations -- Federal Income Tax Considerations --
Federal Income Tax Classification of ACPT."

. IGC will be treated as a corporation for federal tax purposes as of
January 1, 1998, unless: (1) at least 90% of IGC's gross income for
1998 constitutes "qualifying income" (including real property rents,
interest, dividends, and gains from the disposition of real property);
(2) IGC elects to be subject to a non-creditable tax equal to 3.5% of
its gross income for the taxable year from the active conduct of a
trade or business; or (3) IGC obtains relief from the IRS by
establishing that failure to meet the "90% qualifying income" test was
inadvertent, that such test will be met in the future, and agrees to
make adjustments (including with respect to Unitholders) or to pay
such amounts as the IRS requires (generally, these adjustments or
payments are intended to represent the potential "corporate" tax
liability for the period that the "90% qualifying income" test was not
met). IGC does not expect that 90% or more of its income for the
first quarter of 1998 will constitute "qualifying income." IGC
expects to take steps that are intended to either increase "qualifying
income" or decrease nonqualifying income in a manner that will allow
IGC to meet the "90% qualifying income" test for 1998. The
Restructuring is contingent upon the management of IGC determining
that IGC will be classified as a partnership for federal tax purposes
for 1998. See "The Special Meeting -- Recommendation of the Board of
Directors of IGMC." However, there can be no assurances that such
efforts will be successful. In addition, such steps may increase the
amount of IGC's net taxable income, and each Unitholders share
thereof. If IGC were treated as a corporation as of January 1, 1998,
it is possible that IGC would recognize gain (and the Unitholders
would recognize their share thereof) to the extent that IGC's
liabilities exceed the tax basis of its assets on such date, and that
the Unitholders would recognize gain to the extent that money is
deemed to be distributed to a Unitholders in excess of the
Unitholders' tax basis in their Units. In addition, the Distribution
would be taxable to IGC to the extent that the fair market value of
the Common Shares exceeds IGC's tax basis in such Common Shares, and
an amount equal to the fair market value of the distributed Common
Shares would be taxable to the Unitholders as a dividend to the extent
of IGC's "earnings and profits," then as a return of capital to the
extent of the Unitholders' tax basis in their IGC Units, and then gain
from the sale or exchange of property.

. ACPT will not make an election under Section 754 of the Code.
Therefore, persons who purchase Common Shares from Shareholders will
not receive a special basis adjustment with respect to their share of
property held by ACPT to reflect the purchase price of such Common

-31-

Shares. If ACPT were to sell its interests in American Land, American
Management, American Rental or IGP Group, the proportionate share of
gain or loss recognized by a Shareholder could vary depending on
whether or not such Shareholder purchased its Common Shares from a
person that originally contributed property to IGC. It is possible
that in certain circumstances, the trading market for Common Shares
could be adversely affected because the Common Shares were not
fungible. See "Income Tax Considerations -- Federal Income Tax
Considerations -- Federal Income Taxation of ACPT and Shareholders --
Section 754 Election."

. There will be "unrealized gain" on certain contributed property held
by ACPT (i.e., the excess of the fair market value of the property at
the time it is contributed to ACPT pursuant to the Asset Transfers
over ACPT's basis in the property). The unrealized gain will be
determined by and allocated to each asset by the Trustees. These
determinations may affect substantially the amount and timing of gain
or loss recognized by Shareholders in the event that ACPT were to sell
its interest in American Land, American Management, American Rental,
or IGP Group. See "Income Tax Considerations -- Federal Income Tax
Considerations --Federal Income Taxation of ACPT and Shareholders --
Section 704(c) Allocations."

. There is no guarantee that IGC will distribute sufficient cash to
allow Unitholders to pay their tax liabilities with respect to the
Unitholders' share of IGC's net taxable income.

. The Shareholders may be subject to limitations on the use of foreign
tax credits arising from the Shareholders' distributive shares of
Puerto Rico taxes paid by ACPT due to differences between the federal
and Puerto Rico tax accounting and entity classification rules. In
addition, no foreign tax credits would be available if Puerto Rico
were granted statehood in the United States as contemplated by
legislative proposals pending in Congress.

. The Taxpayer Relief Act of 1997 (Pub. L. 105-34) (the "1997 Act") made
significant changes to the Code, including changes relating to the
treatment of partnerships and REITs. It may be some time before the
IRS issues regulations or other formal guidance under the 1997 Act.
It is possible that such regulations or other formal guidance could
interpret the relevant law in a manner that is contrary to this
discussion or contrary to the opinion of Counsel, and such
interpretation could be applied retroactively. It is also possible
that there will be further significant changes in the applicable law
in the future.

-32-

. Recent legislation has made significant changes to the treatment of
partnerships and REITs. It may be some time before the IRS issues
regulations or other formal guidance. In addition, there are several
legislative proposals under consideration relating to REITs. One
legislative proposal would add an additional requirement for REIT
qualification that no person can own stock of a REIT possessing more
than 50% of the voting power and value of all classes of stock. If
this requirement were applied in the manner proposed, American Rental
would not qualify as a REIT because ACPT owns more than 50% of the
voting power and value of American Rental's stock.

. American Management and American Land will be treated as corporations
for federal and state tax purposes and will be subject to federal and
state income tax (including any applicable alternative minimum tax) on
their taxable income at regular corporate tax rates. Payment of such
taxes may reduce the amounts otherwise distributable to ACPT, or by
ACPT to the Shareholders.

. As a result of the Asset Transfers, Shareholders will not have a
distributive share of the various items of income, gain, loss,
deduction or credit attributable to the operating businesses conducted
by partnerships. Instead, distributions to ACPT from its subsidiaries
American Management, American Land, IGP Group and American Rental
generally will be limited to dividend income (to the extent of current
and accumulated earnings and profits) and, in the absence of earnings
and profits, nontaxable return of capital (to the extent of ACPT's tax
basis in the stock of such corporation) or taxable capital gain (after
ACPT's tax basis has been reduced to zero). Each Shareholder
generally will include their distributive share of ACPT's income in
the Shareholder's taxable income.

MECHANICS OF THE RESTRUCTURING.

The Asset Transfers.
-------------------

ACPT acts as a self-managed holding company that will own all of the
outstanding equity interests in American Land, American Management, and IGP
Group and all of the common stock of American Rental. Through the Asset
Transfers, IGC will transfer its principal real estate operations and assets to
ACPT and these subsidiary entities. American Rental, through American Housing,
will acquire IGC's partnership interests in United States investment apartment
properties and its land in the United States presently intended for development
as apartment properties. American Rental is expected to be taxed as a REIT.
American Management holds the United States property management services
operations formerly conducted directly by IGC.

-33-

American Management will be taxed as a corporation. American Land will acquire
IGC's principal United States community development assets and operations, IGC's
interest in a partnership that is entitled to receive certain fees resulting
from the 1988 sale of a cable television company, and the Class B IGP Interest
that represents IGP's rights to income, gains and losses associated with land in
Puerto Rico held by LDA and designated for development as saleable property.
American Land is a Maryland corporation and will be taxed as a corporation. IGP
Group will acquire IGC's remaining interests in IGP, which will hold its
partnership interests in Puerto Rico investment apartment properties, and in
Puerto Rico management services and rights to income, gains and losses
associated with land in Puerto Rico held by LDA for development as rental
properties. See "The Restructuring -- Asset Transfers."

IGP Group intends to qualify as a Puerto Rico pass-through entity that
will be taxed as a corporation for U.S. tax purposes and will not be taxable at
the entity level for Puerto Rico income tax purposes. The general partner
interest in IGP currently held by James J. Wilson will be transferred to a
subsidiary of ACPT. As a result, ACPT will own indirectly 100% of the
partnership interests in IGP.

See "The Restructuring -- The Asset Transfers," "Business and
Properties of ACPT," and "Income Tax Considerations -- Federal Income Tax
Considerations -- Federal Income Tax Consequences of the Asset Transfers."

The Distribution.
----------------

Following the Asset Transfers, ACPT will issue to IGC sufficient
Common Shares to enable IGC to make the Distribution. In the Distribution, IGC
will distribute all Common Shares held by it to the IGC Unitholders and its
general partners -- IGMC and IBC -- pro rata in accordance with their
percentage partnership interests in IGC. Each IGC Unitholder will receive one
Common Share for every two IGC Units held. The aggregate of approximately
5,250,000 Common Shares distributed to IGC Unitholders will equal 99% of the
Common Shares outstanding immediately following the Distribution, corresponding
to the IGC Unitholders' aggregate 99% partnership interest in IGC. Common
Shares representing the remaining 1% of such Common Shares will be distributed
to IGMC and IBC in accordance with their respective 1/3% and 2/3% partnership
interests in IGC, with IGMC receiving approximately 17,500 Common Shares and IBC
receiving approximately 34,500 Common Shares. See "The Restructuring -- The
Distribution."

No certificates or scrip representing fractional Units will be issued
to IGC Unitholders as part of the Distribution. The Registrar and Transfer
Company (the "Distribution Agent") will aggregate fractional Units into whole
Units and sell them in the open market at then prevailing prices on behalf of
IGC Unitholders who otherwise would be entitled to receive fractional Unit
interests, and such persons will receive a check in payment for the amount of
their allocable share of the total sale proceeds. See

-34-

"Income Tax Considerations -- Federal Income Tax Considerations -- Federal
Income Tax Consequences of the Distribution." Such sales are expected to be
made as soon as practicable after the Distribution of Common Shares to IGC
Unitholders. ACPT will bear the cost of any commissions incurred in connection
with such sales.

Assets Retained by IGC.
----------------------

After the Restructuring, IGC will continue to own certain assets that
in management's view do not fit ACPT's business plan. These include the
Wetlands Properties, certain parcels of land in Pomfret, Maryland, the Westbury
community in St. Mary's County, Maryland ("Westbury"), certain single family
home lots in the Dorchester neighborhood in St. Charles, 14 acres of commercial
land in St. Charles, a 50% interest in Brandywine Investment Associates L.P.,
which owns land in Brandywine, Maryland, the LDA Note, all of the shares of AFH,
as well as fractional interests in Chastleton, and Coachman's L.P., and
beneficial interest in the CWT Trust (collectively, the "Retained Assets"). See
"The Restructuring -- Assets Retained by IGC." As a result of the wetlands
conviction, the Wetlands Properties were encumbered by an obligation to impose a
conservation easement that would prohibit development. The easement was never
recorded and the wetlands conviction was reversed. However, the matter has been
remanded for a new trial and as a practical matter, the Wetlands Properties will
remain undevelopable until the wetlands litigation is finally resolved. See
"IGC After the Restructuring -- Description of IGC's Continuing Business."

APPRAISALS.

Properties Retained by IGC.
--------------------------

Following the Restructuring, IGC intends to retain certain properties.
IGC, through St. Charles Associates Limited Partnership ("SCA") will retain an
interest in Brandywine Village, a 277-acre tract of land in Brandywine, Maryland
having an appraised present "as is" market value of $8,885,000 as of June 9,
1997. IGC will continue to own Section S-4 of the Southlake at Montclair
Subdivision that consists of 77 townhome lots in Dumfries, Virginia having an
aggregate appraised present "as is" market value of $620,000 as of May 12, 1997;
Westbury, Phase II Section I that comprises 26.992 acres of land in Lexington
Park, Maryland having an appraised present "as is" market value of $348,813 as
of May 20, 1997 based on a proposed 51 lot subdivision; 812.2 acres of land in
Pomfret, Maryland having an appraised present "as is" market value of $3,250,000
as of December 31, 1996; 26 single family home lots in the Dorchester
neighborhood having a gross retail value of $1,296,000 as of December 31, 1996,
and a 14 acre parcel in St. Charles, Maryland having a gross retail value
$4,214,000 as of December 31, 1996. See "Appraisals -- Properties Retained by
IGC."

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Properties Transferred to ACPT.
------------------------------

ACPT, through its indirect ownership of LDA, will acquire
approximately 431 acres of land in the Sabana Llana and San Anton Wards of the
municipalities of San Juan and Carolina, Puerto Rico having an appraised present
"as is" market value of $35,900,000 as of December 1, 1996; 542.92 acres of land
in Canovanas, Puerto Rico having an appraised present "as is" market value of
$6,100,000 as of June 30, 1997. Through American Land ACPT also will acquire
remnant parcels of land, Wooded Glen and Piney Reach, in the St. Charles PUD and
certain surrounding environs having an appraised present "as is" market value of
$40,440,000; 1,287 acres of land in St. Charles, Maryland at Fairway Village
having an appraised present "as is" market value of $19,263,000 as of May 25,
1997; and 38 acres of land in St. Charles, Maryland having an appraised present
"as is" market value of $3,960,000 as of October 31, 1997. See "Appraisals --
Properties Transferred to ACPT."

BACKGROUND OF THE RESTRUCTURING; CONSIDERATION OF ALTERNATIVES.

IGC management began examining various restructuring possibilities
during the Fall of 1996, at which time the REIT was identified by IGC legal
counsel and tax advisors as a possible investment vehicle. In December 1996,
IGC management considered placing IGC's multifamily housing assets into a
publicly-traded REIT and disposing of land development assets to Wilson Family
entities. Certain Puerto Rico tax considerations required dividing IGC's
multifamily housing assets between separate U.S. and Puerto Rico REITs. During
the first quarter of 1997, a special committee consisting of members of the IGMC
Board of Directors other than members of the Wilson Family or employees of IGC
and certain IGC Unitholders expressed concern that two REITs would not have
sufficient assets and income to create a strong trading market for their
securities. Accordingly, the committee directed IGC management to develop an
alternative plan.

In April 1997, IGC management announced a modified plan to convert IGC
into an entity similar to the current proposal for ACPT, but would have excluded
only AFH, IWT and the Wetlands Properties. The proposed entity would retain the
right to receive shares of IWT as soon as IWT contracted to begin a solid waste
disposal facility and an option to purchase the Wetlands Properties at book
value if the wetlands litigation were favorably resolved. The plan also
contemplated making an offer to the limited partners in the Apartment
Partnerships to exchange their partnership interests for interests in a U.S. or
Puerto Rico partnership that would hold the apartment properties (the "Exchange
Offer"). The plan seemed feasible only if the U.S. and Puerto Rico partnership
interests were convertible into a liquid security that was more attractive than
IGC Units.

IGC retained Robert A. Stanger & Co. ("Stanger") on May 8, 1997 to
assist in refining the structure and providing opinions regarding the fairness
of the

-36-

Exchange Offer and asset transfers. On Stanger's recommendation, IGC management
considered the possibility of IGC continuing as a separate publicly traded
partnership with AFH, IWT and the Wetlands Properties, while creating and
distributing to its Unitholders shares of ACPT. IGC management determined that
IGC may require more than AFH, IWT and the Wetlands Properties to remain a
viable publicly traded company, and initiated the Restructuring by organizing
ACPT and separating ownership of the Wetlands Properties and other land
development assets into two limited liability companies owned by IGC and ACPT,
respectively. IGC management also began preparing this Proxy
Statement/Prospectus. On August 15, 1997, IGC announced that it intended to
file with the Commission in September documents describing the ACPT
Distribution.

On November 14, 1997, IGC filed with the Commission preliminary proxy
materials relating to the Restructuring (the "November Filing"). In addition to
seeking approval of the Distribution, the November Filing proposed to seek
approval of IGC Unitholders to liquidate IGC in the event that, as a result of
the Restructuring, IGC Units would be delisted from either the AMEX or PSE. On
December 24, 1997 IGC received a letter from the staff of the Commission's
Division of Corporation Finance commenting on the November Filing. The staff
expressed the view that the Restructuring would constitute a "going private"
transaction unless assurances could be obtained that IGC Units would remain
listed on AMEX and PSE following the Restructuring.

On December 23, 1997 the United States Court of Appeals for the Fourth
Circuit reversed the wetlands convictions of IGC, SCA and James J. Wilson and
remanded the matter for a new trial.

During January 1998, a syndicator of limited partnership interests in
10 of the 22 U.S. and Puerto Rico Apartment Partnerships evaluated the proposed
Restructuring and opined to IGC that the Exchange Offer likely would not be
attractive to a majority of the holders of limited partnership interests in
these partnerships. Accordingly, IGC management determined to discontinue plans
for the Exchange Offer.

Also in January 1998, Jorge Colon Nevares resigned as a director IGMC
and was replaced by Thomas Shafer. Mr. Colon Nevares was one of the members of
the special committee that had been evaluating the Restructuring. With Mr.
Shafer joining, the IGMC Board established a new special committee comprised of
Messrs. Blakeman, Cowan, and Shafer to reevaluate the terms of the
Restructuring. The committee retained independent legal counsel and met three
times during February and March 1998.

-37-

committee examined the management's projected pro forma earnings and cash flows
for ACPT and IGC following the Distribution. Stanger also reviewed the
projected pro forma financial statements. The committee obtained a commitment
of IBC to advance funds to IGC, if needed, to pay wetlands defense costs.

On March 31, 1998 AMEX advised IGC that based on its review of the
projected pro forma financial statements of IGC, IGC management should expect
that the IGC Units would remain listed following the Distribution. See "The
Restructuring --Background of the Restructuring; Consideration of Alternatives."

BENEFITS TO INSIDERS.

Upon completion of the Restructuring, the Board of Trustees of ACPT
will consist of seven persons -- J. Michael Wilson, Edwin L. Kelly, Francisco
Arrivi Cros, Donald G. Blakeman, Thomas Shafer, Thomas B. Wilson and _________ -
- - all of whom currently are directors of IGMC. However, such persons will
resign from their positions at IGMC prior to completion of the Restructuring.
See "Management --Trustees and Executive Officers."

In addition, J. Michael Wilson, Mr. Kelly, Mr. Arrivi, Paul Resnik and
Eduardo Cruz Ocasio, who currently are officers of IGC, will serve as executive
officers of ACPT following the Restructuring, but will resign from their
executive positions at IGC prior to completion of the Restructuring. See
"Management -- Trustees and Executive Officers." J. Michael Wilson will remain
on the payroll of IBC but ACPT will reimburse IBC for one-half of his annual
salary, up to $90,000. See "Management --Executive Compensation" and
"Transactions with Related Parties -- Payments to IBC for Services Provided by
J. Michael Wilson." Messrs. Kelly, Arrivi and Resnik will enter into employment
agreements with American Management to become effective on the date of
Distribution that will provide for annual salaries of $275,000, $275,000 and
$200,000 respectively. Such agreements also will provide for severance benefits
under certain conditions. See "Management -- Employment Agreements." Mr. Cruz
Ocasio will be paid an annual salary of $104,000.

Trustees and officers of ACPT will be entitled to participate in
Common Share incentive plans to be adopted by ACPT to provide incentive
compensation to Trustees, officers and key employees. See "Management -- Share
Incentive Plans." In addition, directors, executives and other employees of IGC
who have been awarded IGC Unit Options and IGC Unit Appreciation Rights prior to
the Distribution will receive corresponding ACPT Options or Rights in connection
with the Restructuring. See "Management -- Treatment of IGC Options and Unit
Appreciation Rights."

IGC will receive no proceeds in connection with the Restructuring and,
consequently, IGMC directors and IGC executive officers and employees will
receive no proceeds in connection with the transactions.

-38-

THE PRIVATE OFFERING.

In connection with the Restructuring, subject to market conditions,
ACPT will seek to raise up to $35 million in additional equity capital through
the Private Offering of Preferred Shares. Proceeds from the Private Offering
would be used to pay down existing bank debt and for working capital. The terms
of the preferred shares will be negotiated with purchasers, but they may include
rights to preferred distributions, cumulative distributions, and/or liquidation
preferences. The preferred shares also may be convertible into Common Shares at
a negotiated conversion ratio. The Private Offering, if completed, would result
in dilution of the percentage interest of all ACPT shareholders including the
Wilson Family, whose percentage ownership would likely be reduced below 40%.
Regardless of the outcome of the Private Offering, James J. Wilson and J.
Michael Wilson have advised ACPT that the Wilson Family intends to take such
other actions as may be necessary to reduce its percentage interest to below 40%
in order to permit American Rental to qualify as a REIT. See "Income Tax
Considerations -- Federal Income Tax Considerations -- Federal Income Tax
Classification of American Rental -- Share Ownership, Reporting" and "The
Restructuring -- The Private Offering."

NO DISSENTERS' APPRAISAL RIGHTS.

Under the Delaware Revised Uniform Limited Partnership Act (the
"Delaware Act") and the Partnership Agreement of IGC, IGC Unitholders who object
to the Restructuring will have no right to seek a judicial appraisal of the fair
value of their IGC Units and to compel IGC to pay such amount in cash in
exchange for their IGC Units as a consequence of the consummation of the
Restructuring, nor will such rights be voluntarily accorded to IGC Unitholders
by IGC. Thus, approval of the Restructuring by the requisite vote of IGC
Unitholders will bind all IGC Unitholders, including those who object. See "The
Restructuring -- No Dissenters' Appraisal Rights."

CONFLICTS OF INTEREST.

Through their control of certain of the Shareholders, members of the
Wilson Family will be able to exert substantial control over votes on matters
affecting ACPT. Members of the Wilson Family also indirectly control IGC
through their control of IGC Unitholders owning a majority of the outstanding
IGC Units. Following the Restructuring, ACPT and IGC will compete for certain
land sales to the extent of the Retained Assets, and the Wilson Family's
interests in ACPT and IGC may pose potential conflicts. See "Risk Factors --
Control of ACPT; Conflicts of Interest" and "Ownership of Common Shares."

In addition, ACPT has entered into transactions with certain
Shareholders and members of Management. See "Transactions with Related
Parties."

-39-

TAX CONSEQUENCES OF THE RESTRUCTURING FOR U.S. UNITHOLDERS AND SHAREHOLDERS.

IGC will recognize approximately [$4.2 million] in gain for federal
tax purposes as a result of the Asset Transfers, and each IGC Unitholder will
recognize that IGC Unitholder's share of such gain (approximately [$.40] per
Unit). A Shareholder will not recognize gain or loss upon receipt of Common
Shares in the Distribution. A Shareholder's initial tax basis in his Common
Shares generally will be equal to the lesser of IGC's tax basis in those Common
Shares or the Shareholder's adjusted tax basis in his or her IGC Units
immediately before the Distribution. Each Shareholder's adjusted tax basis in
his or her IGC Units will be reduced by an amount equal to his or her initial
basis in the Common Shares. IGC will not recognize gain or loss upon the
Distribution. A Shareholder who receives cash in lieu of fractional Common
Shares will recognize gain. The amount of gain recognized will not exceed the
amount of cash received. ACPT will provide Shareholders with information
indicating the amount of any gain which must be recognized on the receipt of
cash in lieu of fractional Common Shares interests. See "Income Tax
Considerations -- Federal Income Tax Consequences of the Distribution."
Following the Distribution, each Shareholder, in general, will take into account
his allocable share of ACPT's taxable income or loss in computing his individual
federal income tax liability. See "Risk Factors -- Tax Related Risks" and
"Income Tax Considerations."

TAX CONSEQUENCES OF THE RESTRUCTURING FOR PUERTO RICO UNITHOLDERS AND
SHAREHOLDERS.

Puerto Rico Shareholders will recognize income upon the receipt of the
Common Shares and cash distributed in lieu of fractional Shares distributed by
IGC. The receipt of the Common Shares and cash will be taxable at ordinary
income tax rates to the extent of earnings and profits of IGC or as non-taxable
returns of capital or as gain from the sale or exchange of property, depending
upon the circumstances of the distribution. See "Income Tax Considerations --
Certain Puerto Rico Income Tax Consequences."

COMPARISON OF OPERATIONS OF ACPT AND IGC.

Following completion of the Restructuring, it is expected that the
operations of ACPT will be substantially similar to the real estate operations
currently conducted by IGC. ACPT will succeed to the principal rental and land
development assets held by IGC and its subsidiaries in the United States and
Puerto Rico as well as the property management operations conducted by IGC's
subsidiary American Management in the United States and by IGP in Puerto Rico.
See "The Restructuring --The Asset Transfers" and "Business and Properties of
ACPT." Management believes that ACPT's business objectives will remain the same
as those pursued by IGC -- to maximize Shareholder value by investing, holding
and developing assets that will generate cash for distribution to Shareholders.
ACPT's policy will be to acquire or

-40-

develop assets in areas that utilize the expertise of management, primarily
community development and commercial and residential rental properties. See
"Business and Properties of ACPT -- Policies with Respect to Certain
Activities."

Immediately following completion of the Restructuring, the Trustees
and principal executive officers of ACPT will be substantially the same as the
current directors of IGMC and officers of IGC, respectively, except that James
J. Wilson, the founder and Chief Executive Officer of IGC, will not be a Trustee
or officer of ACPT. See "Risk Factors -- Dependence on Key Personnel;
Withdrawal of James J. Wilson from Management." However, in order to provide
continuity of management, Mr. Wilson will serve as a consultant to ACPT under a
ten year consulting agreement. See "Transactions with Related Parties --
Consulting Agreement." Because the Trustees of ACPT will be elected by the
Shareholders, management of ACPT may change if the initial Trustees are not re-
elected. See "Management -- Board of Trustees." As is the case with IGC,
Shareholders will not be entitled to obtain a list of program investors.

COMPARATIVE RIGHTS OF IGC UNITHOLDERS AND SHAREHOLDERS.

As a result of the Restructuring, IGC Unitholders will receive Common
Shares of ACPT and will continue to hold IGC Units. ACPT is a Maryland
investment trust, and IGC is a Delaware limited partnership. The following
table compares certain rights of IGC Unitholders currently to rights of holders
of Common Shares if the Restructuring occurs. See "Comparative Rights of IGC
Unitholders and Shareholders." When used in this table, "majority vote" means a
majority of the IGC Units or Common Shares outstanding.

IGC UNITHOLDERS SHAREHOLDERS

RIGHT TO ELECT No right to elect directors of IGMC. Shareholders vote to elect Trustees;
MANAGEMENT IGC Unitholder approval by majority classified Board of Trustees with
vote is required to permit the voluntary staggered three-year terms.
withdrawal of, or admission of a
general partner.

RIGHT TO REMOVE The IGC Unitholders may remove any Shareholders may remove members
MANAGEMENT general partner, with or without cause, of the Board of Trustees for cause by
by majority vote. majority vote and for any reason by
two-thirds vote.

REQUIRED MINIMUM IGC is required to distribute in cash or ACPT is required to distribute in
DISTRIBUTION property 55% of the net taxable income cash or property an amount equal to
allocated to IGC Unitholders. 45% of net taxable income allocated
to Shareholders less the amount of
certain taxes paid by ACPT.

OWNERSHIP LIMITATIONS There is no limitation on the number of No Shareholder (except certain
IGC Units that any Unitholder may existing IGC Unitholders) may own
own. more than 2% of the outstanding
Common Shares.

-41-

GENERAL VOTING RIGHTS IGC Unitholder approval by majority Shareholder approval by majority
REGARDING GOVERNANCE vote is required for (1) sale of all or vote is required for (i) a sale of all or
substantially all of the assets, substantially all of ACPT's assets,
(ii) merger or consolidation, and (ii) merger or consolidation of
(iii) certain amendments to the ACPT, and (iii) removal of a Trustee
Partnership Agreement, including for cause. The Board of Trustees has
certain issuances of additional limited exclusive authority to increase or
partnership interests. IGMC has decrease the aggregate number of
exclusive authority to issue IGC Units Common Shares that ACPT has
without limitation as to amount. authority to issue.

SUPERMAJORITY VOTING Unanimous vote of IGC Unitholders is A two-thirds vote of Shareholders is
RIGHTS required for certain actions, including required to (i) remove Trustees other
actions that would cause loss of limited than for cause, (ii) amend the
liability, treatment of IGC as a Declaration of Trust (including
corporation for tax purposes, or, except required minimum distribution
in the case of merger or dissolution, provisions), and (iii) dissolve ACPT.
delisting of IGC Units from any
national securities exchange. Approval
by two-thirds vote of IGC Unitholders
(excluding general partners and their
affiliates) is required for reduction of
minimum amount of cash flow required
to be distributed to IGC Unitholders.

DISSOLUTION Requires consent of IGC Unitholders Requires approval of Shareholders by
by majority vote, except for two-thirds vote.
involuntary withdrawal of a general
partner.

LIQUIDATION RIGHTS IGC Unitholders share ratably in Shareholders share ratably in any
accordance with percentage interests in assets remaining after satisfaction of
any assets remaining after satisfaction obligations to creditors and any
of obligations to creditors and any liquidation preferences of Preferred
liquidation preferences of preferred Shares.
Units.

These substantive and procedural differences affect the rights of IGC
Unitholders and holders of Common Shares. Specifically, ACPT's policies with
respect to investments, financings, affiliate transactions, and certain other
activities may be amended or revised from time to time at the discretion of the
Board of Trustees.

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AS OF DECEMBER 31, 1996
-----------------------
(UNAUDITED)

Net asset value ("NAV") (6) $ 108,485
Pro forma NAV per share (4,6) 20.94
Pro forma shares outstanding (4,6) 5,180

YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
------ ------ ------

OTHER OPERATING DATA (7):
Rental apartment units managed 8,139 8,139 8,085
Rental apartment units owned 5,291 5,291 6,155
Residential lots sold 231 406 113
Residential lots transferred to company's
rental property operations -- -- 54
Commercial and business park acres sold 17 5(9) 20(9)
Undeveloped acres sold 381(8) -- 2

(1) Reflects the consummation of the Distribution. See "ACPT Pro Forma Combined
Financial Data."
(2) Reflects the historical financial data for the operations, assets and
liabilities proposed to be transferred from IGC to ACPT and subsidiaries,
referred to as American Community Portfolio Properties.
(3) The net income for 1996 includes a $932,000 reduction for an extraordinary
item--early extinguishment of debt.
(4) Pro forma basic earnings per share were based on pro forma shares
outstanding as determined by dividing IGC's weighted average Units outstanding
by the Unitholders' percent ownership, 99%, and dividing the result by two.
(5) Reflects the cash provided by operating, investing and financing activities
as reported on ACPP's audited statement of cash flows excluding cash
distributions to IGC.
(6) Management's determinations based on appraisals of land assets, valuations
of interests in apartment partnerships, management contracts and other assets
net of liabilities, exclusive of accrued income taxes. Such determinations have
been reviewed and considered by Robert A. Stanger & Co. Inc. See "Appraisals."
(7) See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
(8) Includes a sale to an affiliate of 374 acres.
(9) Includes sales to affiliates of 4 acres and 3 acres for the years ended
December 31, 1996 and 1995, respectively.

SUMMARY COMBINED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA

The following table presents summary combined historical financial data
derived from American Community Portfolio Properties ("ACPP" as defined in Note
1 to the Combined Historical Financial Statements) for the three most recent
years ended December 31, 1997 and summary pro forma condensed combined financial
information derived from ACPT's unaudited Pro Forma Combined Financial Data.
ACPP's Historical Combined Financial Statements present the financial position,
results of operations and cash flows of ACPP as if it were a separate company
operating for all the periods presented. Because ACPT has no historical
operations, for purposes of the audited combined historical financial statements
the assets, liabilities and operations that will be transferred to ACPT in the
Restructuring are referred to as "ACPP." The pro forma financial data set forth
below may not necessarily be indicative of the results that would have been
achieved had the transfer and distribution transactions been consummated as of
the date indicated or that may be achieved in the future. The net asset values
set forth below are management's estimate of the fair value of ACPP's net assets
to its beneficial owners. The information in the table should be read in
conjunction with "Selected Combined Historical Financial Data," "Management's
Discussion and Analysis of Financial Condition and Results of Operations," "Pro
Forma Combined Financial Data" and the Combined Historical Financial Statements
of American Community Portfolio Properties included elsewhere herein. ACPP's
fiscal year ends on December 31.

(IN THOUSANDS, EXCEPT FOR PER SHARE, LOT, ACRE AND UNIT AMOUNTS)

YEAR ENDED DECEMBER 31,
-------------------------------------------------------
PRO FORMA (1) HISTORICAL (2)
------------- ---------------------------------------
1997 1997 1996 1995
---- ---- ---- ----
(UNAUDITED)

INCOME STATEMENT DATA:
Revenues $ 28,129 $ 28,129 $ 43,692 $ 27,363
Expenses 25,795 25,665 26,139 21,500
Income taxes 1,377 470 3,424 1,369
Minority interest (439) (439) (306) (511)
Net income (3) 518 1,555 12,891 3,983
Pro forma basic earnings per share (4) 0.10 0.30 2.49 0.77
Pro forma weighted average
shares outstanding (4) 5,196 5,196 5,180 5,179

AS OF DECEMBER 31,
-----------------------------------------------
1997 1997 1996
------------- -------------- --------------
PRO FORMA (1) HISTORICAL (2) HISTORICAL (2)
------------- -------------- --------------
(UNAUDITED)

BALANCE SHEET DATA:
Total assets $ 114,808 $ 114,808 $ 120,262
Recourse debt 40,926 40,926 40,239
Total liabilities 100,675 99,028 100,426
Capital 14,133 15,780 19,836

YEAR ENDED DECEMBER 31,
-----------------------------------------------
HISTORICAL
-----------------------------------------------
1997 1996 1995
----------- -------------- --------------

OTHER FINANCIAL DATA:
Cash flow provided by (used in) -
Operating activities $ 13,545 $ 26,622 $ 9,698
Investing activities (8,372) (11,084) (11,431)
Financing activities (5,189) (16,777) 4,037

Cash available for distribution, additional
investment or debt repayment (5) 5,595 3,589 3,307
Cash available for distribution, additional
investment or debt repayment per share (4, 5) 1.08 0.69 0.64

RISK FACTORS

Prospective investors in Common Shares should consider a number of
factors that may bear on the value of the Common Shares, the amount of cash
distributions to the Shareholders, and other matters affecting an investment in
Common Shares. These factors include the matters described below.

RESTRUCTURING RISKS

NO DISSENTERS' APPRAISAL RIGHTS.

IGC Unitholders who object to the Restructuring will have no
dissenters' appraisal rights (i.e., the right, instead of receiving Common
----
Shares, to seek a judicial determination of the "fair value" of their IGC Units
and to compel IGC to purchase IGC Units for cash in that amount) under Delaware
law or the Partnership Agreement of IGC, nor will such rights be voluntarily
accorded to the IGC Unitholders. All IGC Unitholders will be bound by the vote
of IGC Unitholders owning a majority of the outstanding IGC Units and a majority
of the votes cast by IGC Unitholders not affiliated with the Wilson Family, and
objecting IGC Unitholders will have no alternative to receipt of the Common
Shares in the Restructuring other than selling their IGC Units in the market.
See "The Special Meeting -- No Dissenters' Appraisal Rights."

CONTROL OF ACPT; CONFLICTS OF INTEREST.

Through their control of certain of the Shareholders, members of the
Wilson Family will be able to exert substantial control over votes on matters
affecting ACPT which may result in ACPT taking actions that confer benefits on
the Wilson Family not shared by other Shareholders. The Wilson Family retains a
controlling interest in IBC and Wilson Securities Corporation, which will
beneficially own approximately 1,540,258 and 586,102 ACPT Common Shares,
respectively, after the Restructuring. The combined total of ACPT Common Shares
to be owned by IBC and Wilson Securities Corporation is 2,126,360. However,
members of the Wilson Family collectively will not own a majority interest in
ACPT. The Wilson Family also beneficially owns a majority of the IGC Units.
Following the Restructuring, ACPT and IGC will compete for certain land sales to
the extent of the Retained Assets, and the Wilson Family's interests in ACPT and
IGC may pose potential conflicts. See "The Restructuring -- The Private
Offering" and "Ownership of Common Shares."

ACPT is subject to certain conflicts of interest arising out of its
relationships with certain Shareholders, members of Management, and their
affiliates. See "Transactions with Related Parties." As a result of these
conflicts of interest, certain actions or decisions by these parties may have an
adverse effect on the interests of the Shareholders. ACPT has adopted a policy
that it will not, without the approval of a majority of independent Trustees,
(i) acquire from or sell to any Trustee, officer,

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employee, or Shareholder who owns more than 2% of the Common Shares (an
"Affiliated Shareholder") or any entity in which a Trustee, officer, employee or
Affiliated Shareholder of ACPT beneficially owns more than a 1% interest, or any
affiliate of any of the foregoing, any property or other assets of ACPT, (ii)
make any loan to or borrow from any of the foregoing persons, or (iii) engage in
any other transaction with any of the foregoing persons. See "Business and
Properties of ACPT --Policies with Respect to Certain Activities -- Affiliate
Transaction Policy."

ABSENCE OF EXISTING TRADING MARKET FOR COMMON SHARES.

Prior to the Distribution, there will be no public market for the
Common Shares or any securities of ACPT. ACPT has applied for listing of the
Common Shares on the AMEX and the PSE. However, no assurance can be given that
such listing will occur and, if so, that a trading market will develop following
the Distribution.

CHANGE IN VALUE OF SECURITIES; TRADING PRICE LESS THAN NET ASSET VALUE.

It is possible that the aggregate of the prices at which the Common
Shares and IGC Units trade after the Distribution may be less than the price at
which the IGC Units traded prior to the Distribution. However, management of
IGC and ACPT believe that the combined trading price of the Common Shares and
the IGC Units after the Distribution will exceed the trading price of the IGC
Units prior to the Distribution. See "The Restructuring -- Principal Advantages
of the Restructuring." Management believes that the combined price of the IGC
and ACPT shares will exceed the current value of IGC shares because (i) ACPT
Common Shares will be regarded as a more attractive investment for institutions
such as mutual funds and pensions funds as it will receive income principally in
the form of dividends and distributions from its subsidiaries, (ii) ACPT
Shareholders have voting rights with respect to the election and removal of
members of the ACPT Board of Trustees under the ACPT Declaration of Trust, and
(iii) ACPT's performance will not be burdened by the wetlands litigation and
certain other assets that in management's view do not fit ACPT's business plan.

In addition, it is likely that the Common Shares will trade at a price
substantially lower than the $20.94 net asset value per share, as of December
31, 1996, determined by management based on appraisals of land assets and
valuations of interests in apartment properties, management contracts and other
assets.

ANTITAKEOVER EFFECTS.

The provisions of ACPT's Declaration of Trust on classification of the
Board of Trustees, restrictions on the ownership of Common Shares, the ability
to issue preferred shares, certain control share acquisition and business
combination statutes applicable to ACPT could have the affect of delaying,
deferring or preventing a transaction or a change in control of ACPT that might
involve a premium price for

-46-

holders of Common Shares or otherwise be in their best interest. See "Certain
Provisions of Maryland Law and of ACPT's Declaration of Trust and Bylaws."

OWNERSHIP LIMITATION.

In order to comply with the ownership limitation and certain other
tests that American Rental must meet to qualify as a REIT under the Code,
ACPT's Declaration of Trust, subject to certain exceptions, authorizes the
trustees to take such actions as are necessary and desirable to preserve
American Rental's qualification as a REIT and to limit any person (other than
certain current IGC Unitholders) to direct or indirect ownership of no more than
2% of the outstanding Common Shares (the "Ownership Limit"). See "Income Tax
Considerations -- Federal Income Tax Considerations -- Federal Income Tax
Classification of American Rental -- Share Ownership, Reporting." The foregoing
restrictions on transferability and ownership will continue to apply until (i)
the Board of Trustees determines that it is no longer in the best interests of
ACPT for American Rental to attempt to qualify, or to continue to qualify, as a
REIT and (ii) there is an affirmative vote of two-thirds of the votes entitled
to be cast on such matter at a regular or special meeting of the Shareholders.
The Ownership Limit may have the effect of delaying, deferring or preventing a
transaction or a change in control of ACPT that might involve a premium price
for the Common Shares or otherwise be in the best interest of the Shareholders.
See "Certain Provisions of Maryland Law and of ACPT's Declaration of Trust and
Bylaws."

POTENTIAL EFFECTS OF ISSUANCE OF ADDITIONAL SHARES.

ACPT's Declaration of Trust authorizes the Board of Trustees to (i)
amend the Declaration of Trust, without Shareholder approval, to increase or
decrease the aggregate number of shares of beneficial interest or the number of
shares of beneficial interest of any class, including Common Shares, that ACPT
has the authority to issue, (ii) cause the company to issue additional
authorized but unissued Common or Preferred Shares and (iii) classify or
reclassify any unissued Common Shares and Preferred Shares and to set the
preferences, rights and other terms of such classified or unclassified shares.
ACPT intends to issue in the Private Offering Preferred Shares, the terms of
which will be negotiated with the purchasers but may include rights to
preferential distributions, cumulative distributions and/or liquidation
preferences. See "The Restructuring -- The Private Offering."

Although the Board of Trustees has no such intention to do so at the
present time, it could establish a class or series of shares of beneficial
interest that could, depending on the terms of such series, delay, defer or
prevent a transaction or a change in control of ACPT that might involve a
premium price for the Common Shares or otherwise be in the best interest of the
Shareholders. See "Description of Shares of Beneficial Interest" and "Certain
Provisions of Maryland Law and of ACPT's Declaration of Trust and Bylaws."

-47-

DEPENDENCE ON KEY PERSONNEL; WITHDRAWAL OF JAMES J. WILSON FROM MANAGEMENT.

ACPT is dependent on the efforts of its executive officers,
particularly Messrs. J. Michael Wilson, Edwin L. Kelly, Francisco Arrivi Cros
and Paul Resnik. The loss of their services could have an adverse effect on the
operations of ACPT. Prior to the Restructuring, each of Messrs. Kelly, Arrivi
and Resnik will enter into an employment agreement with ACPT. See
"Management -- Employment Agreements."

In addition, James J. Wilson, the current Chief Executive Officer of
IGC, will not be a Trustee or officer of ACPT. The loss of Mr. Wilson's
management services could have an adverse effect on the operations of ACPT.
However, in order to provide continuity of management Mr. Wilson will enter into
a consulting agreement with ACPT pursuant to which he will provide consulting
services as requested from time to time by the Board of Trustees over a period
of ten years following the Restructuring. See "Transactions with Related
Parties -- Consulting Agreement."

CHANGE IN THE RIGHTS OF IGC UNITHOLDERS.

The rights of Shareholders will differ from the rights of IGC
Unitholders in several material respects. In particular, Common Shareholders
cannot exercise control over ACPT, as they can over IGC, by removing a general
partner by majority vote. However, Shareholders will vote annually to elect
approximately one third of the Trustees and they can remove any Trustee for
cause by a majority vote and for any reason by two-thirds vote. ACPT is
obligated to distribute annually an amount equal to 45% of net taxable income
allocated to Shareholders less the amount of certain taxes paid by ACPT, whereas
IGC is obligated to distribute 55% of net taxable income. In addition, no
Shareholder (except certain existing IGC Unitholders) may own more than 2% of
the outstanding Common Shares. See "Comparative Rights of IGC Unitholders and
Shareholders" and "Certain Provisions of Maryland Law and of ACPT's Declaration
of Trust and Bylaws."

POSSIBLE ADVERSE EFFECT OF MARKET INTEREST RATES ON PRICE OF COMMON SHARES.

One of the factors that will influence the market price of the Common
Shares in public markets will be the annual distribution rate on the Common
Shares. An increase in market interest rates may lead prospective purchasers of
the Common Shares to disinvest in ACPT in favor of higher yielding investments
which may adversely affect the market price of the Common Shares.

-48-

APPROVALS REQUIRED TO EFFECT THE RESTRUCTURING.

In addition to obtaining the approval of the IGC Unitholders, the
consummation of the Restructuring is subject to obtaining the approvals of
certain government entities, including HUD, certain of IGC's lenders, and
certain of the limited partner investors in the U.S. Apartment Partnerships.
Management of IGC expects to obtain all necessary approvals in a timely manner.
However there can be no assurance that such approvals will be obtained on terms
and conditions acceptable to IGC. See "The Restructuring -- Approvals Required
to Effect the Restructuring."

REAL ESTATE FINANCING RISKS

Following the Restructuring, the business of ACPT will be subject to
certain real estate financing risks that currently affect the business of IGC,
including the following:

RISING INTEREST RATES.

ACPT has, and may in the future incur, indebtedness that bears
interest at variable rates. Any increase in variable rates would adversely
affect ACPT's cash flow and the amounts available for distributions to
Shareholders. If lower interest rates can be obtained, ACPT may in the future
refinance existing debt as appropriate and cost effective.

In addition, any increase in interest rates generally may have an
adverse effect on the real estate businesses conducted by ACPT. Higher interest
rates generally increase the cost to customers of both commercial and
residential properties which may make real estate purchases less attractive.
Consequently, ACPT's revenues may decrease significantly in higher interest rate
environments.

DEBT FINANCING AND POTENTIAL ADVERSE EFFECTS ON CASH FLOWS AND DISTRIBUTIONS.

ACPT will be subject to risks normally associated with debt financing,
including the risk that ACPT's cash flow will be insufficient to pay
distributions at expected levels and meet required payments of principal and
interest, and the risk that indebtedness on the apartment properties (which will
not have been fully amortized at maturity in all cases) will not be able to be
refinanced or that the terms of such refinancing will not be as favorable as the
terms of existing indebtedness. Upon consummation of the Restructuring, ACPT
expects to have outstanding indebtedness of approximately $82,000,000 which will
encumber substantially all of its assets. If principal payments due at maturity
cannot be refinanced, extended, or paid with proceeds of other capital
transactions, such as the issuance of Preferred Shares in the Private Offering,
ACPT expects that its cash flow will not be sufficient in all years to pay
distributions at expected levels and to repay all maturing debt. Furthermore,
if

-49-

prevailing interest rates or other factors at the time of refinancing result in
higher interest rates upon refinancing, the interest expense relating to such
refinanced indebtedness would increase, which would adversely affect ACPT's cash
flow and the amounts available for distributions to its Shareholders. If a
property or properties are mortgaged to secure payment of indebtedness and ACPT
is unable to meet mortgage payments, the property could be foreclosed upon by,
or otherwise transferred to, the mortgagee with a consequent loss of income and
asset value to ACPT.

See "Management's Discussion and Analysis of Results of Operations and
Financial Condition -- Liquidity and Capital Resources" for a summary of ACPT's
outstanding debt and the terms thereof.

CONSTRUCTION LOANS AND RISKS ASSOCIATED WITH SALE OR FORECLOSURE.

If new developments are financed through construction loans, there is
a risk that upon completion of construction permanent financing for newly
developed properties may not be available or may be available only on
disadvantageous terms. In the event that ACPT is unable to obtain permanent
financing for a developed property on favorable terms, it could be forced to
sell such property at a loss or the property could be foreclosed upon by the
lender and result in loss of income and asset value to ACPT.

CHANGES IN POLICIES WITHOUT SHAREHOLDER APPROVAL.

The investment, financing, borrowing and distribution policies of ACPT
and its policies with respect to all other activities, including growth,
capitalization and operations, will be determined by the Board of Trustees.
Although ACPT's Board of Trustees has no present intention to do so, these
policies may be amended or revised at any time and from time to time at the
discretion of the Board of Trustees without a vote of the shareholders of ACPT.
A change in these policies could adversely affect ACPT's financial condition,
results of operations or the market price of the Common Shares. See "Business
and Properties of ACPT -- Policies with Respect to Certain Activities," and
"Certain Provisions of Maryland Law and of ACPT's Declaration of Trust and
Bylaws."

REAL ESTATE INVESTMENT RISKS

Following the Restructuring, the business of ACPT will be subject to
certain real estate investment risks that currently affect the business of IGC,
including the following:

GENERAL RISKS.

Real property investments are subject to varying degrees of risk. The
yields available from equity investments in real estate depend in large part on
the amount

-50-

of income generated and expenses incurred. If ACPT's assets do not generate
revenues sufficient to meet operating expenses, including debt service,
development costs, tenant improvements, leasing commissions and other capital
expenditures, ACPT may have to borrow additional amounts to cover fixed costs
and ACPT's cash flow and ability to make distributions to its Shareholders will
be adversely affected.

The community development and homebuilding businesses of ACPT will
continue to be influenced by the risks generally incident to the real estate
business. These include the level of interest rates (which will affect the
availability, cost and terms of both short- and long-term financing for ACPT and
other homebuilders and developers and long-term financing for potential
purchasers of homes and apartment projects) and changes in the national economy
and in the local economies in which ACPT will operate. Although such factors
are generally favorable at present, any sharp rise in interest rates or downturn
in the national or local economy can be expected to decrease the demand for real
estate and therefore to have an adverse effect on ACPT's operations and
profitability. Such factors have tended to be cyclical in nature. The
availability of materials and labor and changes in the costs thereof may also
affect ACPT's business. Any increase in such expenses without a corresponding
increase in revenues would have an adverse impact on ACPT's profitability. In
addition, any decrease in the availability of adequate land for residential
development, curtailments of access to or unavailability of sewer or water
connections due to local moratoria, and the possible adverse effects of
legislative, regulatory, administrative, judicial or enforcement changes or
other actions that may arise in the future at the national, state or local
levels in the areas, among others, involving tax laws, environmental controls
and rent regulations could be expected to decrease demand for real estate and
therefore adversely affect ACPT's business and profitability. These factors
also effect, to some degree, ACPT's management services operations and the value
of its real estate holdings. The business of ACPT also will be affected by
competition from other residential homebuilders and land developers, some of
which have greater experience and resources than ACPT, and from sellers of
existing homes and developed lots, and from condominium conversions.

ACPT's revenues and the value of its rental properties may be
adversely affected by real estate conditions (such as oversupply of, or reduced
demand for, space and changes in market rental rates); the perceptions of
prospective tenants of the safety, convenience and attractiveness of the
properties; the ability of the owner to provide adequate management, maintenance
and insurance; the ability to collect on a timely basis all rent from tenants;
the expense of periodically renovating, repairing and reletting spaces; and
increasing operating costs (including real estate taxes and utilities) which may
not be passed through to tenants. Certain significant expenditures associated
with investments in real estate (such as mortgage payments, real estate taxes,
insurance and maintenance costs) are generally not reduced when circumstances
cause a reduction in rental revenues from the property. In addition, real
estate values and income from properties are also affected by such factors as
compliance with laws, including tax laws, interest rate levels and the
availability of financing. Also, the amount of available net

-51-

rentable square feet of commercial property is often affected by market
conditions and may therefore fluctuate over time.

For its development activities, ACPT must obtain the approval of
numerous governmental authorities, such as zoning approvals, and State and
county permits, and changes in local circumstances or applicable law may
necessitate the application for additional approvals or the modification of
existing approvals.

OPERATING RISKS.

ACPT's rental apartment properties are subject to operating risks
common to rental apartments in general described below, any and all of which may
adversely affect occupancy or rental rates. The apartment properties are
subject to increases in operating expenses such as cleaning, electricity,
heating, ventilation and air conditioning, elevator repair and maintenance,
insurance and administrative costs, and other general costs associated with
security, landscaping, repairs and maintenance. If operating expenses increase,
the local rental market may limit the extent to which rents may be increased to
meet increased expenses without decreasing occupancy rates. While ACPT
implements cost-saving incentive measures at each of its apartment properties,
ACPT's ability to make distributions to Shareholders could be adversely affected
if operating expenses increase without a corresponding increase in revenues.

DEVELOPMENT OF ST. CHARLES.

ACPT's interest in St. Charles, in which more than 4,500 acres of land
remain to be developed, is one of ACPT's most valuable assets. ACPT's success
in large part will be dependent upon the continued successful development of St.
Charles. See "Business and Properties of ACPT -- Community Development." In
addition to the risks generally incident to real estate businesses, there are
particular risks associated with the development of St. Charles. These risks
include (i) the need to obtain additional zoning and other approvals of the
Planning Commission and the County Commissioners of Charles County, Maryland
(the "Planning Commission", the "County Commissioners" and the "County,"
respectively) to permit the full development of St. Charles; (ii) the
possibility that the continued and timely development of St. Charles may be
affected by environmental laws and regulations applicable to "wetlands"; and
(iii) the failure or delay of other residential developers active in the area to
proceed with projects that would be beneficial to ACPT. These projects include
the Chapman's Landing and Kingsview residential developments in Charles County.
Chapman's Landing is scheduled to commence development in 1998 on the first
phase of 576 units and Kingsview currently has 640 lots under development.
Although these projects may compete directly with ACPT for homebuying customers,
management of ACPT believes that increased occupancy and interest in residential
developments in the Charles County area in general will have a beneficial effect
on ACPT's ability to market its residential properties.

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LITIGATION INVOLVING ST. CHARLES DEVELOPMENT.

St. Charles has been zoned as a planned unit development that allows
construction of approximately 24,730 housing units and 1,390 acres of commercial
and industrial development. The County has agreed to provide sufficient water
and sewer connections for all housing units remaining to be developed in St.
Charles. However, IGC, SCA and ACPT are involved in litigation with the County
regarding the cost of water and sewer fees and impact fees previously paid by
IGC and SCA. IGC and SCA claim that the County has failed to conduct an
appropriate water and sewer connection fee study as the basis on which to set
such fees for the St. Charles communities. This matter has been the subject of
extensive previous litigation, and in 1992 the Circuit Court for Charles County
rendered judgment in favor of SCA and IGC requiring the County to conduct an
appropriate study. Litigation filed by SCA and IGC in 1997 seeks to enforce the
prior court orders that requires the County to conduct the appropriate water and
sewer connection fee study, to reduce the connection fees paid prospectively in
the St. Charles communities, and to obtain repayment of excess fees paid in the
past. The matter has not yet been decided by the Circuit Court for Charles
County. See "Legal Proceedings -- IGC -- Other Litigation."

As has been the case in other areas of the country, management of ACPT
internally has raised concerns regarding the future development of land in St.
Charles owned by ACPT and others that may be classified as wetlands. (The U.S.
Army Corps of Engineers (the "Corps") regulations define "wetlands" as areas
saturated by surface or ground water sufficient to support vegetation typically
adapted for life in saturated soil conditions.) However, ACPT obtains
determinations as to whether properties are within the Corps' jurisdiction as
wetlands prior to the development of any properties, and has developed certain
environmental policies and procedures to avoid violations. While ACPT does not
believe that any of the foregoing factors will materially adversely affect the
planned development of St. Charles on a timely basis, no assurance can be made
that this will be the case. See "Business and Properties of ACPT -- Community
Development," and "Legal Proceedings."

TERMINATION OF HUD SUBSIDY CONTRACTS; NEW APARTMENT DEVELOPMENT.

To the extent subsidized units continue to comprise a major portion of
its apartment properties, changes in government regulations could significantly
affect the status of the ACPT's existing U.S. and Puerto Rico apartment
properties and its development of future projects. Of the 2,246 rental units in
the U.S., 993 are subject to subsidies, and all 2,653 units in Puerto Rico are
subject to subsidies. See "Business and Properties of ACPT -- Rental Apartment
Properties." The federal government has virtually eliminated subsidy programs
for new construction of low and moderate income housing by profit-motivated
developers such as ACPT. No new construction of apartment projects is expected
in Puerto Rico and any new apartment properties developed by ACPT in the United
States most likely will offer market rate rents which

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may adversely affect the ability of ACPT to successfully rent such properties.
New rental apartment projects also may be affected by certain newly enacted tax
law changes.

The subsidy contracts for ACPT's existing investment apartment
properties are scheduled to expire between 1997 and 2020. See "Business and
Properties of ACPT -- Rental Apartment Properties," for a summary of the terms
of the applicable subsidy contracts. Under a recently enacted law, such
contracts may be renewed by the United States Department of Housing and Urban
Development ("HUD") on a year to year basis and ACPT intends to seek renewal of
expiring subsidy contracts for its U.S. properties. ACPT currently intends to
convert to condominiums those apartment properties in Puerto Rico for which the
subsidy contracts expire over the next several years. Two such conversions are
currently in progress. Because the Federal tax rules governing REITs would
impose a substantial tax penalty on any conversion of ACPT's U.S. apartment
properties into condominiums, ACPT does not intend to convert any U.S. apartment
properties if the subsidy contracts for such properties are not renewed. ACPT
intends to offer units in such properties for rent at market rates, which may
adversely affect the occupancy rates in such properties. See "Business and
Properties of ACPT -- Condominium Conversions."

COMPETITION.

Real estate development carries risks from competition by other
entities and fluctuations in the housing market. ACPT's apartments in St.
Charles that have market rate rents are impacted by the supply and demand for
competing rental apartments in the area.

Likewise, the local housing market affects performance generally.
When for-sale housing becomes more affordable due to lower mortgage interest
rates or softening home prices, this can adversely impact the performance of
rental apartments. ACPT's land development for home sales also faces
competition. The number of residential building permits issued by Charles
County according to figures released by the county's Department of Planning and
Growth Management has increased yearly from 1993, when 962 permits were issued,
to 1997, when 1,232 permits were issued. In addition, there are approximately
30 subdivisions competing for new home buyers within five miles of St. Charles.
The largest competing housing developments are Kingsview, a 640 unit project
being developed by Miller & Smith, Southwinds, a 367 unit project being
developed by Washington Homes, and Chapman's Landing, a 576 unit project being
developed by Legend Properties. Smaller projects are being developed by more
than 20 other developers. Competition in the San Juan metropolitan area with
ACPT's Parque Escorial planned community for lot sales for residential building
comes primarily from small-scale condominium projects, as Parque Escorial is one
of only two master planned communities currently under development in the area.
See "Business and Properties of ACPT."

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POSSIBLE ENVIRONMENTAL LIABILITIES.

Under various federal, state, and local environmental laws, ordinances
and regulations, a current or previous owner or operator of real property may be
liable for the costs of remediation of hazardous or toxic substances on, under
or in such property. Such laws often impose liability whether or not the owner
or operator knew of, or was responsible for, the presence of such hazardous or
toxic substances. At the federal level, the relevant environmental laws include
the Clean Water Act, which generally prohibits persons from polluting waters of
the United States with substances or materials attributable to sewage,
industrial waste or other waste in amounts that are unsightly, malodorous, a
nuisance or that interfere in any way with the water's designated use; the
Resource Conservation and Recovery Act ("RCRA"), which regulates current
hazardous waste handling and disposal; and the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"), which regulates the
remediation of past environmental contamination. Applicable Maryland
environmental statutes and regulations include the Maryland National Pollutant
Discharge Elimination System implementing the provisions of the federal Clean
Water Act; the Maryland Nontidal Wetlands Protection Act of 1989 and the
Maryland Wetlands Act of 1970, regulating activities in nontidal and tidal
wetlands respectively; and regulatory authority pertaining to non-hazardous
solid waste. Puerto Rico environmental legislation includes the Public Policy
Environmental Act, which creates an Environmental Quality Board (EQB) that has
responsibility for implementing regulations under the Clean Water Act, RCRA,
CERCLA, and other federal environmental legislation. The EQB has promulgated
the Water Quality Standards Regulation, Regulations for the Control of Hazardous
and Non-Hazardous Solid Wastes, and Non-Hazardous Solid Waste Management
Regulation.

In addition, the presence of hazardous or toxic substances, or the
failure to remediate such property properly, may adversely affect the owner's
ability to borrow using such real property as collateral. Persons who arrange
for the disposal or treatment of hazardous or toxic substances may also be
liable for the costs of removal or remediation of hazardous substances at the
disposal or treatment facility, whether or not such facility is or ever was
owned or operated by such person. Certain environmental laws and common law
principles could be used to impose liability for release of and exposure to
hazardous substances, including asbestos-containing materials ("ACMs") into the
air, and third parties may seek recovery from owners or operators of real
properties for personal injury or property damage associated with exposure to
released hazardous substances, including ACMs.

Management of ACPT believes that its properties and operations in St.
Charles will not be materially adversely affected by hazardous or toxic
substances on such properties. Phase I Environmental Site Assessments have been
prepared for substantially all undeveloped parcels in St. Charles which revealed
no significant environmental concerns. Remediation has been completed at three
sites in Parque Escorial and the Puerto Rico Department of Natural Resources has
determined that such

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sites no longer contain environmental hazards. See "Business and Properties of
ACPT --Community Development." In addition, approximately ten acres of land in
Canovanas that is used as a burial ground for horses may not be developed for a
period of five years after burials cease. Environmental assessments prepared
for the remaining undeveloped land in Parque Escorial and Canovanas revealed no
significant environmental concerns. However, the management of IGC can give no
assurance that significant environmental liability will not arise in the future
with respect to the property acquired by ACPT.

EFFECT OF AMERICANS WITH DISABILITIES ACT COMPLIANCE ON CASH FLOW AND
DISTRIBUTION.

Under the Americans with Disabilities Act of 1990 (the "ADA"), all
public accommodations and commercial facilities are required to meet certain
federal requirements related to access and use by disabled persons. Compliance
with the ADA requirements could require removal of access barriers and non-
compliance could result in imposition of fines by the U.S. government or an
award of damages to private litigants. Although ACPT believes that its
properties are substantially in compliance with these requirements, a
determination that ACPT is not in compliance with the ADA could result in the
imposition of fines or an award of damages to private litigants. If ACPT were
required to make unanticipated expenditures to comply with the ADA, ACPT's cash
flow and the amounts available for distributions to its shareholders may be
adversely affected.

CHANGE IN TAX LAWS; BUILDING SAFETY REGULATIONS.

Because increases in income, service or transfer taxes are generally
not passed through to tenants under residential leases, as they would be under
commercial leases, any change to current federal, state or local tax laws which
results in an increase in such taxes may have the effect of reducing the
cashflow from ACPT's existing or future apartment and commercial rental
properties. ACPT's rental properties also are subject to various federal, state
and local regulatory requirements regarding building safety, including fire
safety codes and building materials regulations. Failure to comply with these
requirements could result in the imposition of fines by governmental authorities
or awards of damages to private litigants. ACPT believes that its properties
are currently in compliance with all such regulatory requirements. However,
there can be no assurance that these requirements will not be changed or that
new requirements will not be imposed which would require significant
unanticipated expenditures by ACPT. ACPT currently is not aware of any proposed
changes in tax laws or building safety regulations. However, any increase in
expense due to tax increases or increased costs for regulatory compliance could
adversely impact the cashflows of ACPT and thereby reduce the amount
distributable to Shareholders.

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UNINSURED LOSS.

ACPT will initially carry comprehensive liability, fire, flood, (where
appropriate), extended coverage and rental loss insurance with respect to its
properties with policy specifications and insured limits customarily carried for
similar properties. There are, however, certain types of losses (such as from
hurricanes, wars or earthquakes) that may be either uninsurable, only partially
insurable, or not economically insurable. Should an uninsured loss or a loss in
excess of insured limits occur, ACPT could lose both its capital invested in a
property, as well as the anticipated future revenue from such property, and
would continue to be obligated on any mortgages indebtedness or other
obligations related to the property. Any such loss would adversely affect the
business of ACPT and its financial condition and results of operations.

RISKS INVOLVED IN PROPERTY OWNERSHIP THROUGH PARTNERSHIPS, LIMITED LIABILITY
COMPANIES, AND JOINT VENTURES.

ACPT may in the future acquire either a limited partnership interest
in a property partnership without partnership management responsibility or a
membership interest in a limited liability company without company management
responsibility or a co-venturer interest, membership interest, or co-general
partnership interest in a property partnership or limited liability company with
shared responsibility for managing the affairs of a property partnership,
limited liability company, or joint venture and, therefore, would not be in a
position to exercise sole decision-making authority regarding the property
partnership, limited liability company, or joint venture. Such partnership or
joint venture investments may, under certain circumstances, involve risks not
otherwise present, including the possibility that ACPT's partners, co-members,
or co-venturers might at any time have economic or other business interests or
goals that are inconsistent with the business interests or goals of ACPT, and
that such partners, co-members, or co-venturers may be in a position to take
action contrary to the instructions or the requests of ACPT or contrary to
ACPT's policies or objectives, including ACPT's policy with respect to
maintaining American Rental's qualification as a REIT. ACPT would, however,
seek to maintain sufficient control of such partnerships, limited liability
companies, or joint ventures to permit ACPT's business objectives to be
achieved. There is no limitation under ACPT's organizational documents as to the
amount of available funds that may be invested in partnerships, limited
liability companies, or joint ventures.

RISKS ASSOCIATED WITH ILLIQUIDITY OF REAL ESTATE.

Equity real estate investments are relatively illiquid. Such
illiquidity will tend to limit the ability of ACPT to vary its portfolio
promptly in response to changes in economic or other conditions. ACPT's primary
investment criteria is to invest, hold and develop assets that will generate
cash available for distribution to its Shareholders. ACPT acquires or develops
assets where ACPT believes that opportunities exist for acceptable investment
returns in areas that utilize the expertise of its management,

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primarily community development and commercial and residential rental
properties. In addition, the Code limits the ability of a REIT to sell
properties held for fewer than four years, including converting apartment
properties into condominiums, which may affect American Rental's ability to sell
properties without adversely affecting returns to holders of Common Shares.

RISKS ASSOCIATED WITH ACQUISITION, DEVELOPMENT AND CONSTRUCTION.

ACPT intends to acquire residential properties to the extent that they
can be acquired on advantageous terms and meet ACPT's investment criteria.
ACPT's primary investment criteria is to invest, hold and develop assets that
will generate cash available for distribution to its Shareholders. ACPT
acquires or develops assets where ACPT believes that opportunities exist for
acceptable investment returns in areas that utilize the expertise of its
management, primarily community development and commercial and residential
rental properties. Acquisitions of residential properties entail risks that
investments will fail to perform in accordance with expectations and that
estimates of the costs of improvements to bring an acquired property up to
standards established for the market position intended for that property may
prove inaccurate.

ACPT intends to continue development and construction of residential
buildings. Risks associated with ACPT's development and construction activities
may include: abandonment of development opportunities; construction or
development costs of a property exceeding original estimates, possibly making
the property uneconomical; occupancy rates and rents at a newly renovated or
completed property may not be sufficient to make the property profitable;
financing may not be available on favorable terms for redevelopment or
development of a property; unreliability of the contractor or contractors
selected to develop or construct a project; permanent financing may not be
available on lease-up or a project may not be completed on schedule, resulting
in increased debt service activities. In addition, most development projects,
regardless of whether they are ultimately successful, typically require a
substantial portion of management's time and attention. Development activities
are also subject to risks relating to the inability to obtain, or delays in
obtaining, all necessary zoning, land-use, building, occupancy and other
required governmental permits and authorizations. In addition, there are general
investment risks associated with any new real estate investment. See
"-- General Risks".

If a project undertaken by ACPT is subject to one or more of the
foregoing events, it may result in such project being unprofitable or in losses
for ACPT, which would reduce the amount distributable to Shareholders.

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TAX RELATED RISKS

ASSET TRANSFERS.

Gain will be recognized by IGC on the transfer of certain interests in
the U.S. Apartment Partnerships as a result of American Housing's assumption of
liabilities in excess of the tax basis of the property contributed to American
Housing. IGC has estimated that approximately [$4.2 million] in gain will be
recognized on this transfer. Each IGC Unitholder will recognize their allocable
share of such gain (approximately [$.40] per Unit). See "Income Tax
Considerations -- Certain Tax Consequences of the Asset Transfers" and "--
Possible Tax Liabilities in Excess of Cash Distributions."

Gain generally is recognized when appreciated property is transferred
by a United States person to a foreign corporation in the amount of the excess
of the fair market value over the basis of the transferred property. There is
an exception to this gain recognition rule in the case of property transferred
to a foreign corporation for use by that foreign corporation in the active
conduct of a trade or business outside of the United States. However, this
"active conduct" exception does not apply to certain property, such as certain
intangible property and inventory (and similar property described in Code
Section 1221(1) and (3)). For purposes of applying these rules to a transfer of
a partnership interest, such transfer is generally treated as a transfer of a
pro-rata share of the assets of the partnership represented by such interest.

IGC will transfer property to IGP Group, directly or indirectly
through subsidiary partnerships, that is current used or expected to be used in
a leasing business in Puerto Rico. The determination of whether the transfer of
such assets will qualify for the "active conduct" exception to the general gain
recognition rule is made on the basis of all of the facts and circumstances. In
general, real property will be leased by the Puerto Rico Apartment Partnerships
and management, administrative, and other services will be provided by IGP, the
general partner of such partnerships. IGP will be reimbursed by the Puerto Rico
Apartment Partnerships for certain expenses, including reimbursements for all or
a portion of the wages or salaries of IGP employees providing services with
respect to a particular rental property, plus a fee. The services to be
provided by IGP employees include marketing, customer service, repair and
maintenance, and other substantial operational activities with respect to the
leased properties.

ACPT, IGP Group, and IGP have represented that IGP and its employees
will continue to provide management and operational services for the Puerto Rico
Apartment Partnerships in substantially the same manner as they do at present.
Counsel will not monitor compliance with such representations. Whether the
transfer will qualify for the "active conduct" exception will depend on the
extent and nature of the services to be provided in the future, and on the
application of general rules to a more complex ownership structure than was
anticipated in such rules.

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There can be no assurances that the IRS will not successfully
challenge whether all, or a portion, of the appreciated assets transferred
directly or indirectly to IGP Group will qualify for the "active conduct"
exception and seek to apply the general rule that gain is recognized on such
transfers to the extent that the fair market value of such property exceeds its
adjusted tax basis. For example, the IRS could argue that IGP Group does not
qualify for the "active conduct" exception based on the management and other
services performed by the employees of IGP, either because of the nature of such
services or because of the capacity in which such services were performed.

In addition, there can be no assurances that the IRS will not
successfully challenge whether any of the LDA assets transferred to American
Land indirectly through the Class B interests in IGP will be treated as a
transfer to a foreign corporation that is subject to the recognition of gain to
the extent that the fair market value of such property exceeds its adjusted tax
basis.

As a result of the Asset Transfers and other steps taken by IGC to
maintain its status as a partnership for federal tax purposes, it is likely that
IGC will have a lower tax basis in its assets than if the Asset Transfers and
such other steps had not been taken. This decrease in basis may be reflected in
IGC's basis in the Common Shares. This decrease may also be reflected in the
tax basis that the Shareholders take in their Common Shares because Shareholders
will take a tax basis in their Common Shares equal to the lesser of IGC's tax
basis in the Common Shares or the Shareholders' adjusted tax basis in their IGC
Units immediately before the Distribution. In addition, there can be no
assurances that the positions adopted by IGC in the Asset Transfers and other
steps taken by IGC to reduce its non-qualifying income will not be successfully
challenged by the IRS.

CLASSIFICATION OF IGC AS A PARTNERSHIP.

Even if it satisfies the other requirements to be treated as a
partnership, an organization generally will be taxed as a corporation if it is a
"publicly traded partnership." As discussed below, if the Distribution occurs
at a time when IGC is treated as a corporation for tax purposes, the
Distribution will result in significant adverse tax consequences to IGC and the
Unitholders. It is possible that the determination of whether IGC will be
treated as a corporation as of January 1, 1998, will not be certain until after
the Distribution and it is also possible that the Distribution could adversely
affect the determination of whether IGC will be treated as a corporation as of
January 1, 1998, because the Distribution will remove a potential source of a
significant amount of gross income of the type that would allow IGC to qualify
for an exception from the general rule that publicly traded partnerships are
taxed as corporations.

The general rule that publicly traded partnerships are taxed as
corporations does not apply to a publicly traded partnership for a taxable year
if at least 90% of the

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organization's gross income for such taxable year (and all prior taxable years)
constitutes "qualifying income" (the 90% qualifying income" test). Qualifying
income includes interest, dividends, "real property rents," gain from the sale
or other disposition of real property (including property held for sale and
other property described in Code Section 1221(1)), certain income derived in
connection with certain natural resources, and gain from the sale or disposition
of a capital asset (or property described in Code Section 1231(b) held for the
production of qualifying income). Qualifying income generally includes income
that qualifies under the regulated investment company or REIT qualification
rules.

Current estimates of IGC's income for the first quarter of 1998
indicate that less than 90% of IGC's gross income for that period will
constitute qualifying income. After the Distribution, it is unlikely that IGC
will have sufficient amounts of gross qualifying income to have a significant
effect on this computation. IGC has represented that it will closely monitor
the amount and character of IGC's gross income and will take steps, including
transferring certain assets that generate non-qualifying income to corporate
entities, in order to increase the percentage of IGC's gross income that
constitutes qualifying income. IGC also expects to take steps that will
increase its qualifying income. In addition, the Restructuring is contingent
upon the management of IGC determining that IGC will be classified as a
partnership for federal tax purposes for 1998. See "The Special Meeting --
Recommendation of the Board of Directors of IGMC." However, there can be no
assurances that IGC's efforts will be successful or that IGC will generate
sufficient amounts of qualifying income relative to non-qualifying income to
meet the "90% qualifying income" exemption from the general treatment of
publicly held partnerships as corporations.

If IGC failed to meet the "90% qualifying income" test for 1998 and
did not take any of the actions described above to avoid being treated as a
corporation, the following events would be deemed to occur on January 1, 1998:
(1) IGC would be deemed to transfer all of its assets (subject to its
liabilities) to a newly formed corporation in exchange for the stock of the
corporation, and (2) IGC would be deemed to distribute its stock to its partners
(including Unitholders) in liquidation of their interests in IGC. Such deemed
events generally should not give rise to gain except that (1) gain would be
recognized by IGC (and such gain would be allocated to the Unitholders) to the
extent that the aggregate amount of liabilities deemed to be assumed by the new
corporation exceed the adjusted tax basis of the assets deemed contributed to
the corporation; and (2) gain would be recognized by a Unitholder to the extent
that cash is deemed to be distributed to the Unitholder in excess of such
Unitholder's adjusted tax basis in his or her Units immediately before such
deemed distribution.

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Shares generally would be treated as a distribution to the Unitholders taxable
as a dividend to the extent of IGC's "earnings and profits" (for the period that
it was treated as a corporation), then a return of capital to the extent of the
Unitholder's basis in his or her Units, and then gain from the sale or exchange
of property.

CORPORATE LEVEL TAXES.

Prior to the Restructuring, IGC has had no significant federal tax
obligations because entities treated as partnerships for federal tax purposes
are not subject to income taxes at the entity level. After the Restructuring,
certain activities that were previously conducted through partnership entities
will be contributed to corporations or other entities treated as corporations
for federal tax purposes. Although Management has attempted in the
Restructuring to reduce the "double" taxation that generally occurs when a
corporation distributes its profits to its Shareholders, significant amounts of
corporate-level taxes may be imposed upon American Land and American Management,
and could be imposed upon American Rental if it does not qualify as a REIT and
upon ACPT if it does not qualify as a partnership for federal tax purposes. See
"Income Tax Considerations -- Federal Income Tax Considerations -- Federal
Income Tax Classification of ACPT" and "-- Federal Income Tax Classification of
American Land and American Management."

CLASSIFICATION OF AMERICAN RENTAL AS A REIT.

American Rental intends to elect to be treated as a REIT for federal
tax purposes. Subject to the following paragraphs and the qualifications,
assumptions, and representations set forth under "Income Tax Consequences --
Federal Income Tax Consequences -- Federal Income Tax Classification of American
Rental -- Counsel's Opinion Relating to Qualification of American Rental as a
REIT," Covington & Burling is of the opinion that (i) American Rental will be
organized in conformity with the requirements for qualification as a REIT
beginning with its taxable year ending December 31, 1998, and (ii) its proposed
method of operations described in this Proxy Statement/Prospectus will enable it
to satisfy the requirements for such qualification. See "Income Tax
Considerations -- Federal Income Tax Considerations -- Federal Income Tax
Classification of American Rental -- Counsel's Opinion Relating to Qualification
of American Rental as a REIT."

The rules governing REITs are highly technical and require ongoing
compliance with a variety of tests that depend, among other things, on meeting
certain requirements relating to the sources of its gross income (generally, at
least 75% of its gross income must be from certain sources related to real
estate and at least 95% of its gross income must be from such sources or from
certain passive sources such as interest, dividends, or sales of stock), the
character of its assets (generally, at least 75% of its assets must be real
estate assets, cash and cash items, and U.S. government securities), the amount
of its annual distributions (generally, at least 95% of its taxable income must

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be distributed annually), the organizational structure and the beneficial
ownership of American Rental through Common Shares. Counsel will not monitor
American Rental's compliance with these requirements.

One of the REIT ownership requirements is that not more than 50% of
the Common Shares may be held, directly or indirectly, applying certain
constructive ownership rules, by five or fewer individuals at any time during
the last half of each of American Rental's taxable years (the "closely held"
test), beginning with the second taxable year for which American Rental elects
to be taxed as a REIT. At the time of the Distribution, American Rental will
not meet the "closely held" test because of the percentage ownership of the
Wilson Family. James J. Wilson and J. Michael Wilson have advised ACPT that the
Wilson Family will take such actions as may be necessary to reduce its
percentage ownership to below 40% before the last half of American Rental's
second taxable year in order to permit American Rental to qualify as a REIT.
However, no member of the Wilson Family is under an obligation to do so. Sales
of a significant number of Common Shares by the Wilson Family or others could
affect the market price of Common Shares. See "Income Tax Considerations --
Federal Income Tax Considerations -- Federal Income Taxation of ACPT and
Shareholders -- Section 754 Election."

Counsel's opinion on American Rental's REIT status assumes that the
Wilson Family will reduce their percentage interest in a manner that will permit
American Rental to meet the "closely held" test at all times during and after
the last half of American Rental's second taxable year. However, in light of
the anticipated initial ownership structure and the lack of an enforceable means
by which ACPT or American Rental can achieve compliance with the "closely held"
test, no assurance can be given that American Rental will qualify as a REIT for
any particular year, or that the applicable law will not change and adversely
affect American Rental, ACPT, and its Shareholders.

To maintain REIT status, American Rental generally must distribute to
its shareholders in each taxable year at least 95% of its net ordinary income
(capital gain is not required to be distributed). A REIT may satisfy the 95%
distribution test with dividends paid during the taxable year and with certain
dividends paid after the end of the taxable year. American Rental will be taxed
at regular corporate rates to the extent that it retains any portion of its
taxable income (e.g., if American Rental distributes only the required 95% of
its taxable income, it would be taxed on the retained 5%). Under certain
circumstances, American Rental may not have sufficient cash or other liquid
assets to meet the distribution requirement. This could arise because of
competing demands for American Rental's funds, or because of timing differences
between tax reporting and cash receipts and disbursements (i.e., income may have
to be reported before cash is received, or expenses may have to be paid before a
deduction is allowed). In addition, cash associated with taxable income may be
used to make non-deductible payments of principal on liabilities, resulting in
taxable income without associated funds to make a

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distribution. Although American Rental has represented that it will meet the
95% distribution requirement, no assurance can be given that necessary funds
will be available.

For additional risks relating to American Rental's qualification as a
REIT, see "-- Ownership Structure and Stapled Stock Rules" and "-- Recent
Changes in Law and Legislative Proposals."

If American Rental does not qualify as a REIT, it would be classified
as an association taxable as a corporation, and American Rental would be taxable
on its income (determined without the deduction for distributions generally
applicable to REITs) at the applicable corporate rate and distributions to ACPT
generally would be taxable to the Shareholders as dividends. Treatment of
American Rental as an association taxable as a corporation would result in a
material reduction in the anticipated cash flow to Shareholders and would have a
significant adverse effect on the value of the Common Shares. See "Income Tax
Considerations -- Federal Income Tax Considerations --Federal Income Tax
Classification of American Rental -- Failure to Qualify as a REIT."

OWNERSHIP STRUCTURE AND THE STAPLED STOCK RULES.

Unlike most other REITs in which the public owns direct interests in
the REIT entity, the Shareholders will own Common Shares in ACPT, a Maryland
real estate investment trust that is expected to be treated as a partnership for
federal tax purposes and as a corporation for Puerto Rico tax purposes, which in
turn owns all of the common stock of American Rental (a Maryland real estate
investment trust which will elect to be taxed as a REIT), IGP Group (a Puerto
Rico "hybrid" entity that is expected to be treated as a corporation for federal
tax purposes and a special partnership for Puerto Rico tax purposes), American
Land and American Management (both are domestic corporations). This complex
structure raises a greater number of interpretative issues, including those
under the REIT qualification rules, and more such issues which lack clear
guidance, than generally would be encountered in most other direct investments
in REITs, domestic corporations, or foreign corporations.

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such "stapled entities" were a single entity. If IGP Group and any domestic
corporation were found to be "stapled entities," IGP Group would be treated as a
domestic corporation and would be subject to federal income tax on its world-
wide taxable income at rates applicable to U.S. corporations (the current
highest rate is 35%) and distributions to ACPT would be taxable as dividends to
the extent of earnings and profits, nontaxable dividends to the extent of basis,
and then as capital gain.

It appears that in enacting the "stapled stock rules" with respect to
REIT stock, Congress was primarily concerned that the pairing of the stock of an
active business with that of a REIT would result in the avoidance of corporate
level tax with respect to the real property used in the active business,
particularly when such real property is leased by the REIT to the active
business. In the case of ACPT, American Rental has represented that it (and its
subsidiaries) will not lease any property to American Land, American Management,
IGP Group, or any entity related thereto.

However, the legislative history also suggests that Congress may have
intended to apply the "stapled stock" rules in a broader context, even if there
is no potential for avoidance of corporate-level taxes by the active business.
For example, the legislative history provides that in enacting the REIT
provisions Congress did not intend the "dilution" in the investment of qualified
real estate activities that occurs when small investors buy shares in another
corporation stapled to REIT shares.

Although there is little guidance on the application of the stapled
stock rules to REITs there is legislative activity in this area. Although the
current legislative proposals with respect to "stapled stock" do not directly
address the ACPT structure, these proposals may result in increased legislative
or administrative scrutiny in this area, and could lead to new provisions, or
new guidance on existing provisions, that apply the stapled stock rules to
American Rental and the other corporations owned by ACPT. The current statutory
provisions grant the Treasury Department broad authority to prescribe "such
regulations as may be necessary to prevent avoidance or evasion of Federal
income tax through the use of stapled entities."

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In light of the lack of existing guidance in this area and the
possibility of legislative and/or administrative activity in this area, there
can be no assurances that the IRS would not seek to apply the "stapled stock"
rules to the entities owned by ACPT under current law or under future
legislative proposals, and if so, that such application by the IRS would not be
upheld by a court of competent jurisdiction.

As discussed below under "-- Share Ownership, Reporting" another
legislative proposal included in the "General Explanation of the
Administration's Revenue Proposals" (February 1998) would add an additional
requirement for REIT qualification. It appears that American Rental would not
qualify as a REIT if it were subject to this requirement as proposed, because
under the current ownership structure, ACPT would own more than 50% of the value
and voting rights with respect to American Rental's stock.

CLASSIFICATION OF IGP GROUP FOR UNITED STATES AND PUERTO RICO TAX PURPOSES.

IGP Group will be formed as a Puerto Rico corporation that will be
treated as a corporation for federal tax purposes. IGP Group intends to qualify
as a special partnership that is treated as a "pass-through" entity for Puerto
Rico income tax purposes. As a special partnership for Puerto Rico income tax
purposes, all of IGP Group's Puerto Rico source income will be taxable to its
partner ACPT, which will be treated as a foreign corporation for Puerto Rico tax
purposes. See "Income Tax Considerations --Certain Puerto Rico Income Tax
Consequences." For United States tax purposes, each Shareholder will be
considered to have paid his or her allocable share of any Puerto Rico income
taxes paid by ACPT on its Puerto Rico source income. Such taxes may give rise
to a foreign tax credit (subject to applicable limitations) or to a deduction
for United States income tax purposes. If IGP Group fails to qualify as a
special partnership and is treated as a corporation for Puerto Rico income tax
purposes it would be subject to Puerto Rico income tax on its Puerto Rico source
income, and ACPT and the Shareholders would not be treated as having paid any
taxes to Puerto Rico with respect to the Puerto Rico source income of IGP Group.
Treatment of IGP Group as a corporation for Puerto Rico tax purposes would have
a significant adverse effect on the value of the Common Shares. See "Income Tax
Consideration -- Federal Income Tax Considerations -- Federal Income Taxation of
ACPT and Shareholders -- Foreign Tax Credit."

In order to qualify as a special partnership for Puerto Rico tax
purposes, IGP Group must derive 70% or more of its gross income from Puerto Rico
sources and 70% or more of its gross income must be derived from the sale and/or
lease of buildings and structures to third parties and land development, among
other activities.

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assurance can be given that IGP Group will qualify as a special partnership for
any particular year, or that the applicable laws and regulations will not change
and adversely affect IGP Group, ACPT and its shareholders. IGP Group's
qualification as a "pass-through" entity for Puerto Rico tax purposes is based,
in part, on private rulings issued by the Puerto Rico Department of Treasury in
connection with IGP. These rulings are not binding on the Puerto Rico
Department of Treasury and there is no guarantee that their principles will be
followed in evaluating IGP Group's situation.

If IGP Group and any domestic corporation were found to be "stapled
entities," IGP Group would be treated as a domestic corporation and would be
subject to federal income tax on its world-wide taxable income at rates
applicable to U.S. corporations (the current highest rate is 35%) and
distributions to ACPT would be taxable as dividends to the extent of earnings
and profits, nontaxable dividends to the extent of basis, and then as capital
gain. See "-- Ownership Structure and the Stapled Stock Rules."

POSSIBLE TAX LIABILITIES IN EXCESS OF CASH DISTRIBUTIONS.

A Shareholder generally will be subject to federal income tax on his
or her allocable share of ACPT's taxable income without regard to distributions.
However, for the treatment of certain Puerto Rico Shareholders, see "Income Tax
Considerations --Federal Income Tax Considerations -- Federal Income Taxation of
ACPT and Shareholders -- Puerto Rico Shareholders." ACPT will be required to
distribute annually to Shareholders, in cash and/or property, an amount equal to
45% of the net taxable income of ACPT allocated to Shareholders less the amount
of taxes paid by ACPT in Puerto Rico and other foreign countries and certain
federal taxes paid by American Rental with respect to undistributed capital
gains. If ACPT's income consists largely of cash dividends as expected, it is
likely that ACPT will have sufficient cash to distribute to the shareholders.
However, there can be no assurance that ACPT will make distributions in any
given year that provide Shareholders with sufficient cash to meet their federal
income tax liabilities with respect to their share of ACPT's income. This
discussion assumes that ACPT will be treated as a partnership for federal income
tax purposes. See "Distribution Policy" and "Income Tax Considerations --
Federal Income Tax Considerations -- Federal Income Tax Classification of ACPT."

Although IGC generally is required to distribute at least 55% of its
taxable income to the Unitholders, IGC may satisfy this obligation with a
distribution of property other than cash (such as the Common Shares). If IGC
does not distribute sufficient cash to pay the Unitholder's tax liabilities with
respect to the Unitholder's share of IGC's taxable income, the Unitholder may
have to use funds from other sources or sell the property distributed by IGC,
including Common Shares. Sale of Common Shares may give rise to taxable gain.
See "-- Section 704(c) Allocations and Section 754 Election" and "Income Tax
Considerations -- Federal Income Tax Considerations -- Federal Income Taxation
of ACPT and Shareholders -- Sale or Exchange of Common Shares."

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In addition, following the Restructuring it is possible that IGC may
recognize taxable income without receiving sufficient cash to enable IGC to make
a distribution to the IGC Unitholders in an amount at least equal to the IGC
Unitholder's tax liability arising from their share of IGC taxable income.
Further, it is possible that ACPT or IGC may not make a cash distribution
regardless of whether significant cash is available or regardless of any
obligations to make such a distribution.

CLASSIFICATION OF ACPT AS A PARTNERSHIP.

The federal income tax treatment contemplated for ACPT and the
Shareholders will be available only if ACPT is classified as a "partnership" for
federal income tax purposes and not as an "association" taxable as a
corporation. Subject to the qualifications, assumptions, and representations
set forth in "Income Tax Considerations --Federal Income Tax Considerations --
Federal Income Tax Classification of ACPT --Counsel's Opinion of Federal Income
Tax Classification of ACPT," Covington & Burling is of the opinion that, under
current laws and regulations and interpretations thereof, ACPT will be
classified as a "partnership" for federal income tax purposes. Counsel's
opinion, depends upon the continued satisfaction of certain conditions by ACPT,
as described in "Income Tax Considerations -- Federal Income Tax Considerations
- --Federal Income Tax Classifi cation of ACPT." There can be no assurance that
these conditions will continue to be met.

If ACPT were to be classified as an association taxable as a
corporation for any year, ACPT would be taxable on its profits at the applicable
corporate rate and distributions to the Shareholders generally would be taxable
as dividends. In addition, Shareholders may not be eligible for foreign tax
deductions or credits with respect to Puerto Rico taxes paid by ACPT. See
"Income Tax Considerations -- Federal Income Tax Considerations -- Federal
Income Taxation of ACPT and Shareholders -- Foreign Tax Credit." Treatment of
ACPT as an association taxable as a corporation would result in a material
reduction in the anticipated cash flow to Shareholders and would have a
significant adverse effect on the value of the Common Shares. See "Income Tax
Considerations -- Federal Income Tax Considerations -- Federal Income Tax
Classification of ACPT."

FOREIGN TAX CREDITS.

For United States tax purposes, each Shareholder will be considered to
have paid his allocable share of any Puerto Rico income taxes paid by ACPT.
Shareholders generally may claim a foreign tax credit (subject to applicable
limitations) or a deduction for federal income tax purposes. One of the
limitations on the foreign tax credit is that a Shareholder cannot use foreign
taxes to offset more than the Shareholder's federal tax liability attributable
to foreign source income. The taxes payable to Puerto Rico by ACPT might not be
fully creditable by Shareholders because of this limitation. Taxable income of
ACPT for federal and Puerto Rico tax purposes may differ due to the

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respective tax accounting and entity classification provisions of the
jurisdictions that in some cases are not the same. For example, for Puerto Rico
income tax purposes IGP Group intends to qualify as a special partnership and
the tax items of IGP Group would then flow through to ACPT for Puerto Rico
income tax purposes as a distributive share of income whether or not cash is
distributed. However, for federal tax purposes, IGP Group is treated as a
corporation and none of IGP Group's tax items will flow through to ACPT and ACPT
generally will treat cash distributed from IGP Group as a dividend. See "Income
Tax Considerations -- Federal Income Tax Classifications -- Federal Income
Taxation of ACPT and Shareholders -- Foreign Tax Credit. In addition, Foreign
Tax Credits would not be available to Shareholders if IGP Group is treated as a
corporation for Puerto Rico income tax purposes or if Puerto Rico were to become
a state. See "--Classification of IGP Group for United States and Puerto Rico
Tax Purposes" and "--Puerto Rico Statehood."

The foreign tax credit limitations must also be computed separately
for certain categories or "baskets" of income. For example, separate
computations generally would be made for "passive basket" income such as
dividends and for "general limitations basket" income earned in the active
conduct of a trade or business. A Shareholder's Puerto Rico source income with
respect to his or her ownership of Common Shares likely will consist of the
Shareholder's distributive share of dividends from IGP Group under federal
income tax rules. In contrast, the Shareholder's distributive share of ACPT's
Puerto Rico taxes will have been paid in accordance with applicable Puerto Rico
tax rules with respect to ACPT's distributive share of the rental and other
income earned by IGP and the Puerto Rico Apartment Partnerships. The IRS may
argue that a Shareholder's distributive share of IGP Group dividends constitutes
foreign "passive basket" income and that the Shareholder cannot use his or her
distributive share of ACPT's Puerto Rico taxes under these limitation rules
unless the Shareholder has other foreign source "active basket" income.

PUERTO RICO STATEHOOD.

Foreign tax credits would not be available with respect to taxes paid
to Puerto Rico if it were to become a state. There are pending legislative
proposals in Congress that, if enacted, would permit a referendum in Puerto Rico
on statehood.

SECTION 704(c) ALLOCATIONS AND SECTION 754 ELECTION.

There will be "unrealized gain" on certain contributed property held
by ACPT (i.e., the excess of the fair market value of the property at the time
it is contributed to ACPT pursuant to the Asset Transfers over ACPT's basis in
the property). The unrealized gain will be determined by and allocated to each
asset by the Trustees. These determinations may affect substantially the amount
and timing of gain or loss recognized by Shareholders in the event that ACPT
were to sell its interest in American Land, American Management, American
Rental, or IGP Group. However, ACPT does

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not expect to sell its interests in such entities. See "Income Tax
Considerations -- Federal Income Tax Considerations -- Federal Income Taxation
of ACPT and Shareholders --Section 704(c) Allocations."

ACPT will not make an election under Section 754 of the Code to adjust
the tax basis of its property upon sales and certain other transfers of Common
Shares. Therefore, persons who purchase Common Shares from Shareholders will
not receive a special basis adjustment with respect to their share of property
held by ACPT to reflect the purchase price of such Common Shares. Thus, if ACPT
sells all or a portion of its interests in the lower-tier entities, a
Shareholder who purchases Common Shares after the Distribution will recognize
his or her proportionate share of ACPT's gain or loss regardless of whether such
gain or loss is attributable to appreciation or depreciation in the value of the
interests sold by ACPT that occurred before the Shareholder acquired its Common
Shares. If ACPT were to sell its interests in American Land, American
Management, American Rental, or IGP Group, the proportionate share of the gain
or loss recognized by a Shareholder could vary depending on whether or not such
Shareholder purchased its Common Shares from a person that originally
contributed property to IGC. It is possible that in certain circumstances, the
trading market for the Common Shares could be adversely affected because the
Common Shares were not fungible. See "Income Tax Considerations -- Federal
Income Tax Considerations -- Federal Income Taxation of ACPT and Shareholders --
Section 754 Election."

RECENT CHANGES IN LAW AND LEGISLATIVE PROPOSALS.

The Taxpayer Relief Act of 1997 (Pub. L. 105-34) ("1997 Act") made
significant changes to the Code, including changes relating to the treatment of
partnerships and REITs. It may be some time before the IRS issues regulations
or other formal guidance under the 1997 Act. It is possible that such
regulations or other formal guidance could interpret the relevant law in a
manner that is contrary to this discussion or contrary to the opinion of
Counsel, and such interpretation could be applied retroactively. It is also
possible that there will be further significant changes in the applicable law in
the future.

One of the legislative proposals contained in the "General
Explanations of the Administration's Revenue Proposals" issued by the Department
of the Treasury in February 1998, would add an additional requirement for REIT
qualification that no person can own stock of a REIT possessing more than 50% of
the total combined voting power of all classes of voting stock or more than 50%
of the total value of shares of all classes of stock. Constructive ownership
rules would apply for purposes of determining a person's stock ownership. It
appears that American Rental would not qualify as a REIT if it were subject to
this requirement, as proposed, because ACPT owns more than 50% of the voting
power and total value of American Rental's stock. This new requirement is
proposed to apply to entities electing REIT status for taxable years beginning
on or after the date of first committee action. If legislation based on this

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proposal is enacted, the determination of whether American Rental will qualify
as a REIT may depend on whether American Rental is subject to such legislation
based on the effective date of such legislation as enacted.

A second legislative proposal contained in the Administration's
Revenue Proposals would limit the current exceptions from the "stapled stock"
rules for certain REITs that were in existence prior to the 1984 enactment of
those rules. Bills containing a version of this proposal have been introduced
in both the House of Representatives and the Senate. A third legislative
proposal contained in the Administration's Revenue Proposals would expand the
current prohibition that REITs cannot own more than 10% of the voting interests
of a corporation to also exclude ownership of more than 10% of the value of all
classes of stock of a corporation. Although these proposals in their current
form may not directly affect ACPT or American Rental, they indicate the
possibility that there may be significant legislative and administrative
activity relating to the qualification of an entity as a REIT in the near
future. This activity could have a negative impact on the determination of
whether American Rental qualifies as a REIT.

THE SPECIAL MEETING

MATTERS PRESENTED FOR VOTE.

The special meeting of IGC Unitholders will be held on
_______________, 1998.

This Proxy Statement/Prospectus is being furnished to the holders of
IGC Units in connection with the solicitation by IGMC of proxies from IGC
Unitholders for use at the special meeting.

RECOMMENDATION OF THE BOARD OF DIRECTORS OF IGMC.

The Restructuring is contingent upon management of IGC determining
that IGC will be classified as a partnership for federal income tax purposes for
the year 1998. In making this determination, management of IGC will analyze
IGC's income and seek an opinion of counsel that IGC will be classified as a
partnership for federal income tax purposes. To be classified as a partnership,
at least 90% of IGC's gross income in 1998 must be derived from qualifying
"passive type" sources such as interest, dividends and real property income. As
of March 25, 1998, IGC was not in compliance with the requirement. IGC is in
the process of restructuring certain of its operations to ensure that it will
comply with this 90% test for 1998. However, there is no assurance that

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these measures will be successful. See "Income Tax Considerations -- Federal
Income Tax Considerations -- Federal Income Tax Classification of IGC."

IGC UNITS ELIGIBLE TO VOTE ON THE RESTRUCTURING.

The close of business on _______________, 1998 has been established as
the Record Date for determining IGC Unitholders entitled to notice of, and to
vote at, the special meeting of IGC Unitholders and at any adjournment thereof.
On that date, there were issued and outstanding __________ IGC Units. No
matters other than the Restructuring and certain procedural matters may be
discussed or voted upon at the special meeting of IGC Unitholders.

The presence, in person or by proxy, of IGC Unitholders holding more
than 50% of the total number of outstanding IGC Units will constitute a quorum
at the special meeting of IGC Unitholders.

If you beneficially own IGC Units issued to a broker or other nominee
holder, you must instruct such broker or nominee holder how to vote the IGC
Units that you beneficially own. If you do not give such instructions, the
broker or other nominee holder will not vote your IGC Units. Failure to vote
any IGC Units on the Restructuring will have the same effect as voting against
the proposal because its approval requires a majority of the outstanding IGC
Units eligible to vote in its favor.

REQUIRED VOTE.

The Board of Directors of IGMC unanimously recommends a vote for the
Restructuring. For the Restructuring to take effect, more than 50% of the total
number of outstanding IGC Units eligible to be voted must vote in favor of the
Restructuring at the special meeting. In addition, the Restructuring must be
approved by a majority of the IGC Units present, in person or by proxy, and
voted at the meeting that are not beneficially owned by the Wilson Family. The
Wilson Family beneficially owns more than a majority of the outstanding IGC
Units.

Only record holders are entitled to vote. If you are only the
beneficial owner of IGC Units and you do not hold the IGC Units of record, you
must instruct the record holder of your IGC Units how to vote your IGC Units.
You will have one vote for each IGC Unit you hold. If you vote against the
Restructuring, you will not possess any appraisal rights with respect to your
IGC Units. See "The Restructuring -- No Dissenters' Appraisal Rights."

BROKER NON-VOTES AND ABSTENTIONS.

Under the rules of the American Stock Exchange, brokers holding IGC
Units on behalf of their clients may not vote the respective IGC Units on
whether to

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approve the Restructuring without their clients' authorization. A broker
therefore will not vote any IGC Units on whether to approve the Restructuring
without receiving instructions on how to vote from such broker's client.
Accordingly, there will be no broker non-votes to consider at the special
meeting.

With respect to the Restructuring, abstentions will have the same
effect as a vote against approval because more than 50% of the total number of
outstanding eligible IGC Units must approve the Restructuring, rather than just
a majority of those eligible IGC Units present at the special meeting.

PROXIES.

Proxyholders will vote the eligible IGC units represented by valid
proxies at the special meeting in accordance with the directions given on the
Proxy Card concerning whether to approve the Restructuring. Moreover, the
proxyholders intend to vote such IGC Units on any procedural matters coming
before the special meeting in accordance with their best judgment. Unless
indicated to the contrary thereon, the directions you give on a Proxy Card will
be for all of your eligible IGC Units.

IF YOU SIGN AND RETURN A PROXY CARD WITHOUT GIVING ANY DIRECTIONS ON
HOW TO VOTE ON THE RESTRUCTURING, THE PROXYHOLDER WILL VOTE YOUR ELIGIBLE IGC
UNITS FOR THE APPROVAL OF THE RESTRUCTURING.

REVOCATION OF PROXIES.

You may revoke your proxy at any time prior to the proxyholder's
voting of the IGC Units to which such proxy applies by: (i) submitting a later
dated Proxy Card to the IGC Management proxyholders or someone else who attends
the special meeting; (ii) attending the special meeting and delivering a written
notice of revocation of the proxy to the representatives of IGC Management
present at the special meeting; or (iii) delivering a written notice of
revocation of the proxy to IGC Management at 222 Smallwood Village Drive, St.
Charles, MD 20602, Attention: Edwin L. Kelly, Secretary, which the Secretary
receives before the date of the special meeting.

SOLICITATIONS BY IGC MANAGEMENT.

IGC Management, officers and employees of IGC, and directors of IGMC
may solicit proxies in favor of the Restructuring by mail, personal interview,
telephone, facsimile transmission or other means. They will receive no
additional compensation therefor, but will be reimbursed for any expenses
incurred in connection therewith.

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NO DISSENTERS' APPRAISAL RIGHTS.

IGC Unitholders who object to the Restructuring will have no
dissenters' appraisal rights (i.e., the right, instead of receiving Common
----
Shares, to seek a judicial determination of the "fair value" of their IGC Units
and to compel IGC to purchase IGC Units for cash in that amount) under state law
or the Partnership Agreement, nor will such rights be voluntarily accorded to
the IGC Unitholders, and objecting IGC Unitholders will have no alternative to
receipt of Common Shares in the Restructuring other than selling their IGC Units
in the market. The IGC Units are currently listed on the AMEX and the PSE under
the ticker symbol "IGC."

THE RESTRUCTURING

REASONS FOR THE RESTRUCTURING.

The purpose of the Restructuring is to create an attractive investment
vehicle that will not be burdened with the operating losses and capital needs of
AFH, IWT and CWT and will not be a party to IGC's wetlands litigation. In
addition, ACPT, whose principal income is dividends from corporations, should be
a more attractive investment for pension funds and mutual funds than is IGC as a
master limited partnership. Tax reporting for Shareholders will be simplified
compared to that of IGC Unitholders. Management expects that ACPT will have
greater access to capital markets than IGC has had. However, completion of the
Restructuring may result in certain adverse consequences to holders of Common
Shares, including a reduction in mandatory distributions compared to that of
IGC, recognition of an estimated $4.2 million of taxable gain in connection with
certain of the Asset Transfers, and limitations on ownership of Common Shares.
See "-- Principal Advantages of the Restructuring; -- Principal Disadvantages of
the Restructuring."

THE ASSET TRANSFERS.

ACPT will act as a self-managed holding company and following the
Asset Transfers will own all of the outstanding equity interests in American
Land, American Management and IGP Group and all of the common stock of American
Rental. Through the Asset Transfers, IGC will transfer its principal real
estate operations and assets to ACPT and these subsidiary entities.

American Rental.
---------------

American Rental will acquire IGC's partnership interests in United
States investment apartment properties and its land in the United States
presently intended for development as apartment properties. The partnership
interests in 13 investment apartment properties ("U.S. Apartment Partnerships")
will be held by American Rental indirectly through American Housing, in which
American Rental will have a 99%

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limited partner interest. American Housing Management Company, a wholly owned
subsidiary of American Rental, will have a 1% general partner interest. See
"Business and Properties of ACPT -- Rental Apartment Properties -- United
States" for a description of the United States apartment properties. American
Rental is expected to be taxed as a REIT. In order to maintain its REIT
qualification, American Rental will issue preferred shares to 200 employees of
American Management which in the aggregate will represent a liquidation value of
$200,000 and provide for a 10% cumulative preferred dividend.

American Management.
-------------------

American Management, which currently is a wholly-owned subsidiary of
IGC, in December 1997 acquired IGC's United States property management
operations which provide management services for the United States apartment
properties and for other rental apartments not owned by IGC. Prior to the
formation of American Management, such operations were conducted directly by
IGC. IGC will transfer all of the outstanding stock of American Management to
ACPT prior to the Distribution. American Management is a Delaware corporation
and will be taxed as a corporation.

American Land.
-------------

American Land will acquire IGC's principal United States property
assets. These will include the following:

1) IGC's 100% interest in St. Charles Community LLC which will hold
approximately 4500 acres of land in St. Charles, Maryland. This
constitutes substantially all of the land formerly held by St. Charles
Associates, a partnership in which IGC holds a 99% partnership interest and
IBC holds a 1% partnership interest, except for a 50% interest in
Brandywine Investment Associates L.P., which holds 277 acres of land held
for development in Brandywine, Maryland, that will continue to be held by
St. Charles Associates. IGC also will retain land in Pomfret, Maryland,
the Westbury land, the Wetlands Properties, a 14 acre commercial parcel in
St. Charles, and 26 residential lots in the Dorchester neighborhood in St.
Charles. See "Business and Properties of ACPT -- Community Development".

2) IGC's 41.0346% interest in Maryland Cable Limited Partnership
("Maryland Cable"), which in 1988 sold all of its cable television system
assets in St. Charles. Pursuant to the sales agreement for the cable
assets, Maryland Cable is entitled to receive, until January 2000, a fee
for each residential unit built in St. Charles that becomes available for
installation of cable television. In addition, St. Charles Associates,
which under the sales agreement is entitled to a separate fee for each unit
that becomes available for cable installation, will assign such rights
directly to St. Charles Community LLC.

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3) The Class B IGP Interest that represents IGP's rights to income,
gains and losses associated with land in Puerto Rico held by LDA and
designated for development as saleable property.

American Land is a Maryland corporation and will be taxed as a
corporation.

IGP Group.
---------

IGP Group will acquire the Class A Interest in IGP, which represents IGC's
entire 99% limited partnership interest and 1% general partnership interest in
IGP other than the Class B Interest to be held by American Land. Prior to the
Restructuring, James J. Wilson, who currently is a general partner, without a
percentage interest, of IGP and is entitled to preferential cash distributions
and allocations of certain tax items from the partnerships in which IGP holds
interests, will transfer his interest in IGP to a subsidiary of ACPT. As a
result, ACPT, through American Land and IGP Group, will own indirectly 100% of
IGP. IGP Group intends to qualify as a Puerto Rico special pass-through entity
for Puerto Rico tax purposes and is expected to be taxed as a corporation for
U.S. tax purposes. IGP's assets and operations will include:

1) An 80% interest in LDA, a Puerto Rico special partnership, which
holds approximately 312 acres of land in the planned community of Parque
Escorial and 543 acres in Canovanas, Puerto Rico, presently being held for
future development;

2) a 50% partnership interest in Escorial Builders Associates S.E.
("Escorial Builders"), which is engaged in the construction of condominiums
in the planned community of Parque Escorial;

3) a 1% interest in El Monte Properties S.E., a Puerto Rico special
partnership which owns El Monte Mall Complex, a 169,000 square foot office
and retail complex in San Juan, Puerto Rico; and

4) general partner interests in 9 Puerto Rico apartment partnerships
(the "Puerto Rico Apartment Partnerships"). See "Business and Properties
of ACPT -- Rental Apartment Properties -- Puerto Rico."

THE DISTRIBUTION.

In connection with the Asset Transfers, ACPT will issue to IGC
sufficient Common Shares to enable IGC to make the Distribution. In the
Distribution, IGC will distribute all Common Shares held by it to the IGC
Unitholders and its general partners -- IGMC and IBC -- pro rata in accordance
with each partner's percentage interest in IGC. The aggregate of approximately
5,200,000 Common Shares distributed

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to IGC Unitholders will equal 99% of the Common Shares outstanding immediately
following the Distribution, corresponding to the IGC Unitholders' aggregate 99%
partnership interest in IGC. Common Shares representing the remaining 1% of
such Common Shares will be distributed to IGMC and IBC in accordance with their
respective 1/3% and 2/3% partnership interests in IGC, with IGMC receiving
approximately 17,500 Common Shares and IBC receiving approximately 34,500 Common
Shares.

IGC will effect the Distribution as soon as practicable following
approval of the Restructuring (such date, the "Distribution Date") by delivering
all outstanding Common Shares to Registrar and Transfer Company (the
"Distribution Agent") for distribution to those persons who are holders of
record of IGC Units as of the close of business on the Record Date. The
Distribution will be made on the basis of one ACPT Common Share for every two
IGC Units outstanding on the Record Date. The actual total number of Common
Shares to be distributed will depend on the number of IGC Units outstanding on
the Record Date. Based upon IGC Units outstanding as of the Record Date,
approximately 5,200,000 Common Shares will be distributed to holders of IGC
Units.

No certificates or scrip representing fractional Common Shares will be
issued to IGC Unitholders as part of the Distribution. The Distribution Agent
will aggregate fractional Common Shares into whole Common Shares and sell them
in the open market at then prevailing prices on behalf of IGC Unitholders who
otherwise would be entitled to receive fractional Common Share interests, and
such persons will receive a check in payment for the amount of their allocable
share of the total sale proceeds. Such sales are expected to be made as soon as
practicable after the distribution of Common Share certificates to IGC
Unitholders.

Holders of IGC Units on the Record Date will not be required to pay
cash or other consideration, to surrender or exchange certificates representing
IGC Units or to take any other action in order to receive Common Shares pursuant
to the Distribution. All holders of IGC Units will continue to hold their IGC
Units and, if such holders are holders of record on the Record Date, they will
also receive Common Shares. The Distribution will not otherwise change the
number of, or the rights associated with, the outstanding IGC Units.

RELATIONSHIP BETWEEN IGC AND ACPT AFTER THE DISTRIBUTION.

No Overlapping Management.
-------------------------

Following completion of the Distribution, IGMC will remain the
managing general partner of IGC and no changes will be made to the Partnership
Agreement of IGC. No Trustee, officer or employee of ACPT will also be a
director or officer of

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IGMC or officer or employee of IGC. However, certain Trustees of ACPT will be
Trustees of the CWT Trust.

Banc One Financing.
------------------

On September 19, 1997, IGC refinanced substantially all of its U.S.
land development recourse indebtedness pursuant to a Master Loan Agreement dated
August 1, 1997 by and among IGC, ACPT, St. Charles Community LLC and Banc One
Capital Partners IV, Ltd. ("Banc One"). To date approximately $14 million in
proceeds of this $20 million facility were used as follows: $6.8 million to
satisfy existing indebtedness to NationsBank, $1.7 million to Puerto Rico income
taxes, $2.5 million for various accounts payable, and $3 million to pay in full
the wetlands fine. In addition, the Banc One facility provides for up to $4
million in community development financing for Fairway Village, and $2 million
for payment of IGC's wetlands remediation expenses.

The loan bears interest at prime plus 2.5% and requires semi-annual
principal payments of $1 million during the first year and $1.5 million
thereafter until maturity at the end of the seventh year. The loan is secured
by substantially all of IGC's assets, excluding (with the exception of one 14
acre parcel of land in St. Charles) the assets that will remain in IGC following
the Restructuring. During the first 3 years of the loan Banc One is generally
entitled to receive 50% of the net sales proceeds of any collateral as a
mandatory principal curtailment with the percentages increasing to 60% in years
4 and 5, 70% in year 6, and 80% in year 7. The loan with Banc One requires
additional interest payments on each annual anniversary date. The amount due is
1% of the outstanding balance in 1998 and 1999, and increases 1/2% each year
thereafter, through 2003.

In connection with the loan, IGC granted Banc One an option to
purchase 150,000 IGC Units at an exercise price of $3.0016 per unit (the "Strike
Price"). During any year that the loan remains outstanding, IGC is required to
grant Banc One 75,000 additional options with an exercise price equal to the
lesser of the Strike Price or the market price on the date of grant.

Following the Restructuring, and upon approval of Banc One, ACPT will
assume the obligation to grant options. IGC will remain liable to Banc One for
outstanding indebtedness but will be released from its other covenant
obligations. Pursuant to the Restructuring Agreement, ACPT will indemnify and
hold harmless IGC from any liability under the Banc One loan.

NationsBank Letter of Credit.
----------------------------

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the Chastleton Apartments. IGC's obligations under the letter of credit are
secured by an assignment of certain notes payable by Brandywine Investment
Associates L.P. and by IGP's partnership interests in three Puerto Rico
Apartment Partnerships. Additional collateral has been provided by IBC and IBC
has undertaken to replace the NationsBank letter of credit with a letter of
credit secured only by assets of IBC.

ASSETS RETAINED BY IGC.

After the Restructuring, IGC will continue to own certain assets that
in management's view do not fit ACPT's business plan. These include the
Wetlands Properties, a 15 acre commercial parcel in St. Charles, 26 residential
lots in the Dorchester neighborhood in St. Charles, certain parcels of land in
Pomfret, Maryland, the Westbury community in St. Mary's County, Maryland, a 50%
interest in Brandywine Investment Associates L.P., which owns land in
Brandywine, Maryland, all of the shares of AFH, the LDA Note, as well as
fractional interests in Chastleton and Coachman's L.P. (collectively the
"Retained Assets"). Substantially all of the stock of IWT and CWT (excluding
shares issued as incentive compensation) will be held in the CWT Trust for the
benefit of IGC Unitholders. Prior to contributing IWT and CWT stock to the CWT
Trust, IGC will capitalize these entities with $1 million in cash, certain
residential lots in the Montclair development, and a note in the amount of $1.06
million. As a result of the wetlands conviction, the Wetlands Properties were
encumbered by an obligation to impose a conservation easement that would
prohibit development. This easement was never recorded and the wetlands
conviction was reversed. However, the matter has been remanded for a new trial
and as a practical matter the Wetland Properties remain undevelopable until the
wetlands litigation is fully resolved. See "IGC After the Restructuring --
Description of IGC's Continuing Business."

APPROVALS REQUIRED TO EFFECT THE RESTRUCTURING.

In addition to obtaining approval of the IGC Unitholders, the
consummation of the Restructuring is subject to obtaining approvals of certain
government entities, including HUD, certain of IGC's lenders, including Banc
One, and certain of the limited partner investors in the U.S. Apartment
Partnerships. Management of IGC expects to obtain all necessary approvals in a
timely manner. However there can be no assurance that such approvals will be
obtained on terms and conditions acceptable to IGC.

BACKGROUND OF THE RESTRUCTURING; CONSIDERATION OF ALTERNATIVES.

Disadvantages of Current Structure.
----------------------------------

Though IGC's limited partnership structure yields significant tax
advantages, certain disadvantages of the structure have increasingly affected
the attractiveness of IGC as an investment vehicle. In developing plans for the

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Restructuring, IGC management has sought to minimize disadvantages of the
current structure while preserving many of the tax advantages.

A significant disadvantage of the partnership structure is its
complexity. For example, IGC is managed by its managing general partner, IGMC,
but also has another general partner, IBC, which was necessary initially to
establish IGC as a partnership for federal income tax purposes. Also for
partnership tax reasons, IGC's principal subsidiaries, SCA and IGP, are not
wholly owned by IGC.

As a partnership, IGC also has limited appeal to certain tax-exempt
investors, such as pension funds and many mutual funds. These entities
generally do not invest in limited partnerships because allocations to such
investors of a partnership's active trade or business income are not tax-exempt.
Such tax-exempt investors favor investments in securities that generate only
passive income such as dividends.

In addition, with the expiration on December 31, 1997 of a ten-year
transition period established by the Omnibus Budget Reconciliation Act of 1987,
certain current sources of IGC income (principally management fees) will no
longer be qualifying income for a publicly traded partnership. Thus to remain
classified as a partnership, IGC management recognized the need to restructure
certain of its investments whether or not the Restructuring takes place.

Alternatives Considered.
-----------------------

The structural disadvantages coupled with the 1996 conviction and
sentencing in the wetlands litigation led IGC management to begin examining
various restructuring alternatives.

During the Fall of 1996, IGC management consulted with legal counsel
and tax advisors and identified the REIT as a possible investment vehicle.

In December 1996, IGC management announced that it had determined to
pursue development and implementation of a plan to restructure the publicly
traded partnership by placing IGC's multifamily housing assets into a publicly
traded REIT and disposing of land development assets to Wilson Family entities.
On December 17, 1996, the IGMC Board of Directors unanimously approved a
resolution to proceed with implementing a REIT restructuring plan. The
Directors present at the meeting were James J. Wilson, Donald G. Blakeman, Jorge
Colon-Nevares, Joel H. Cowan, Edwin L. Kelly, Thomas B. Wilson, J. Michael
Wilson, and John E. Hans. With the land transfers the Wilson Family would
receive a reduced ownership in the REIT. The announcement explained that the
plan would be considered by a special committee consisting of members of the
IGMC Board of Directors who are neither members of the Wilson Family nor
employees of IGC and that it would be subject to satisfactory resolution of
various U.S. and Puerto Rico tax and legal issues.

-80-

During the first quarter of 1997 the special committee and certain
Unitholders expressed concern that it might be difficult to establish a fair
value for assets that would be transferred to Wilson Family entities in exchange
for diminished ownership of the REIT. Also, Puerto Rico tax considerations
dictated dividing IGC's multifamily housing assets between separate U.S. and
Puerto Rico REITs. As a result, the committee expressed concern that two REITs
would lack sufficient assets and income to create a strong trading market for
their securities. Accordingly, the special committee directed IGC management to
develop an alternative plan.

In April 1997, after consideration by the special committee, IGC
management announced a modified plan to convert IGC into an entity that would
benefit from rules that govern REITs. The IGMC Board of Directors met on April
9, 1997, and unanimously agreed to proceed with the modified REIT restructuring
plan, subject to review by a committee consisting of Joel Cowan, Jorge Colon-
Nevares, Michael Wilson, and Edwin L. Kelly. The Directors present at the
meeting were James J. Wilson, Donald G. Blakeman, Jorge Colon-Nevares, Joel H.
Cowan, Edwin L. Kelly, Thomas B. Wilson, J. Michael Wilson, and Francisco
Arrivi. The proposed entity would have been similar to the current proposal for
ACPT, except that only AFH, CWT, IWT and the Wetlands Properties would have been
excluded. However, the proposed entity would retain a right to receive shares
of CWT and/or IWT as soon as either or both contracted to begin a solid waste
disposal facility and an option to purchase the Wetlands Properties at book
value if the wetlands litigation were favorably resolved.

The modified plan also contemplated the possibility of making an offer
to the limited partners in the Apartment Partnerships to exchange their
partnership interests for interests in a U.S. or Puerto Rico partnership that
would hold the apartment properties (the "Exchange Offer"). During the first
six months of 1997, IGC management discussed this possibility with the limited
partners' representatives. The plan seemed feasible only if the U.S. and Puerto
Rico partnership interests were convertible into a liquid security that was more
attractive than IGC Units.

On May 8, 1997, IGC retained Stanger to assist in refining the
structure and providing opinions regarding the fairness of the Exchange Offer
and asset transfers. In June 1997, Stanger provided IGC a draft report in
which it proposed that IGC not be converted into ACPT with rights to AFH, CWT,
IWT and the Wetlands Properties. Stanger instead recommended that management
examine the possibility of IGC continuing as a separate publicly traded
partnership with AFH, CWT, IWT and the Wetlands Properties, while creating and
distributing to its Unitholders shares of ACPT.

During the third quarter of 1997, IGC management and the special
committee evaluated Stanger's recommendation and determined that IGC may require
more than AFH, CWT, IWT and the Wetlands Properties to remain a viable publicly
traded company. At the same time, in connection with the Banc One financing,
IGC initiated the Restructuring by organizing ACPT and separating ownership of
the

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Wetlands Properties and other land development assets into two limited liability
companies owned by IGC and ACPT, respectively. The IGMC Board of Directors met
on June 19, 1997, and unanimously approved resolutions authorizing IGC to begin
preparing the disclosure documents related to the proposed Restructuring. The
Directors present at the meeting were James J. Wilson, Donald G. Blakeman, Jorge
Colon-Nevares, Joel H. Cowan, Edwin L. Kelly, Thomas B. Wilson, J. Michael
Wilson, and Francisco Arrivi.

Also during the third quarter, IGC management began preparing this
Proxy Statement/Prospectus. The IGMC Board of Directors met on August 13, 1997.
At that meeting, the Directors discussed the status of the Proxy
Statement/Prospectus. The Directors present at the meeting were James J.
Wilson, Donald G. Blakeman, Jorge Colon-Nevares, Joel H. Cowan, Edwin L. Kelly,
Thomas B. Wilson, J. Michael Wilson, and Francisco Arrivi. Attorneys from
Covington & Burling also were present. On August 15, 1997, IGC announced that
it intended to file with the Commission in September documents describing the
ACPT Distribution. Postponement of the Banc One financing and resolution of the
treatment of certain tax, legal and accounting issues delayed completion of the
initial filing until November 14, 1997.

On December 23, 1997 the United States Court of Appeals for the Fourth
Circuit reversed the wetlands convictions of IGC, SCA and James J. Wilson and
remanded the matter for a new trial.

During January 1998, a syndicator of limited partnership interests in
10 of the 20 U.S. and Puerto Rico Apartment Partnerships evaluated the proposed
Restructuring and opined to IGC that the Exchange Offer likely would not be
attractive to a majority of the holders of limited partnership interests in
these partnerships. Accordingly, IGC management determined to discontinue plans
for the Exchange Offer.

Also in January 1998, Jorge Colon Nevares resigned as a director of
IGMC and was replaced by Thomas Shafer. Mr. Colon Nevares was one of the
members of the special committee that had been evaluating the Restructuring.
With Mr. Shafer joining, the IGMC Board established a new special committee
comprised of

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Messrs. Blakeman, Cowan, and Shafer to reevaluate the terms of the
Restructuring. The committee retained independent legal counsel and met three
times during February and March 1998.

IGC management proposed a reallocation of certain assets between IGC
and ACPT to enhance the prospects for continued listing of IGC Units on the AMEX
and PSE and to provide greater capital resources for the waste technology
business. The committee examined the management's projected pro forma earnings
and cash flows for ACPT and IGC following the Distribution. Stanger also
reviewed the projected pro forma financial statements. The committee obtained a
commitment of IBC to advance funds to IGC, if needed, to pay wetlands defense
costs.

THE PRIVATE OFFERING.

In connection with the Restructuring, subject to market conditions,
ACPT will seek to raise up to $35 million in additional equity capital through
the Private Offering of Preferred Shares. Proceeds from the Private Offering
would be used to pay down existing bank debt and for working capital. The terms
of the Preferred Shares will be negotiated with purchasers, but they may include
rights to preferred distributions, cumulative distributions, and/or liquidation
preferences. The Preferred Shares also may be convertible into Common Shares at
a negotiated conversion ratio. The Private Offering, if completed, would result
in dilution of the percentage interest of all ACPT shareholders including the
Wilson Family, whose percentage ownership would likely be reduced below 40%.
See "Income Tax Considerations -- Federal Income Tax Considerations -- Federal
Income Tax Classification of American Rental -- Share Ownership, Reporting."

PRINCIPAL ADVANTAGES OF THE RESTRUCTURING.

Broader Market for Common Shares than for IGC Units.
---------------------------------------------------

-83-

currently exists for IGC Units. However, there is no assurance that a public
market will develop or be substantial.

No History of Wetlands Litigation.
---------------------------------

No Adverse Financial Effects from AFH, IWT and CWT.
--------------------------------------------------

Simplified Tax Reporting.
------------------------

Because ACPT will derive income principally from dividends from
corporations, the items to be reported for federal tax purposes by ACPT
Shareholders generally will be limited to dividends and credits for withholding
taxes paid by IGP Group in Puerto Rico. Shareholders will not have to report
ordinary income or losses from trade or business activity as is currently the
case with IGC. See "Income Tax Considerations -- Federal Income Tax
Considerations -- Federal Income Tax Classification of ACPT."

Enhanced Financing Opportunities.
--------------------------------

-84-

Election of Trustees by Shareholders.
------------------------------------

PRINCIPAL DISADVANTAGES OF THE RESTRUCTURING.

No Cash Distributions to IGC Unitholders.
----------------------------------------

Tax Liabilities.
---------------

Gain will be recognized by IGC (and the Unitholders will take into
account their allocable share of such gain) on the transfer of IGC's interests
in the U.S. Apartment Partnerships to American Housing to the extent that the
amount of liabilities assumed (or deemed assumed) by American Housing exceeds
the tax basis of the property contributed to American Housing. IGC has
calculated that approximately [$4.2 million] in gain will be recognized as a
result of the transfer, based on certain estimates and assumptions by IGC,
including IGC's estimates of tax basis and the amount of liabilities at the time
of the transfer. See "Income Tax Considerations --Federal Income Tax
Considerations -- Federal Income Tax -- Consequences of the Asset Transfers."

-85-

nontaxable return of capital (to the extent of ACPT's tax basis in the stock of
such corporation) or taxable capital gain (after ACPT's tax basis has been
reduced to zero). Distributions from American Rental that are specifically
designated as capital gain dividends are treated as long term capital gains.
Each Shareholder generally will include its distributive share of ACPT's income
in the Shareholder's taxable income. In the event that American Rental elects
to retain all or a portion of its net capital gain and pay federal income tax on
such undistributed amounts, each Shareholder generally will include in income
its distributive share of the undistributed capital gains and will be deemed to
have paid its distributive share of the income tax paid by American Rental with
respect to such undistributed capital gains.

Reduction of Required Distributions.
-----------------------------------

Antitakeover Effects.
--------------------

The provisions of ACPT's Declaration of Trust on classification of the
Board of Trustees, restrictions on the ownership of Common Shares, the ability
to issue preferred stock, and certain control share acquisition and business
combination statutes applicable to ACPT could have the affect of delaying,
deferring or preventing a transaction or a change in control of ACPT that might
involve a premium price for holders of Common Shares or otherwise be in their
best interest.

Restrictions on Accumulation of Common Shares.
---------------------------------------------

-86-

ACPT PRO FORMA COMBINED FINANCIAL DATA

The unaudited Pro Forma Combined Financial Data of ACPT reflect the following
transactions and adjustments in the case of the Pro Forma Combined Statements of
Operations for the fiscal years ended December 31, 1997 as if such transactions
and adjustments had been completed January 1, 1997 and, in the case of the Pro
Forma Combined Balance Sheet as of December 31, 1997, as if such transactions
and adjustments occurred or such agreements were in effect as of such date:

* Consummation of the distribution of the Common Shares of beneficial
interest of ACPT.
* The future receipt of mitigation draws under the Banc One loan.
* Increased general and administrative costs to operate ACPT on a stand-
alone basis.

The Pro Forma Combined Financial Data of ACPT are unaudited and presented
for informational purposes only and may not reflect ACPT's future results of
operations and financial position or what the results of operations and
financial position of ACPT would have been had such transactions occurred as of
the date indicated. Such pro forma information is based upon the combined
historical balance sheets and statements of income of ACPP. ACPT's unaudited
Pro Forma Combined Financial Data and notes thereto should be read in
conjunction with ACPP's Combined Financial Historical Statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained elsewhere herein.

-87-

AMERICAN COMMUNITY PROPERTIES TRUST ("ACPT")
PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
(Unaudited)

Pro Forma Pro Forma
ACPT Restructure ACPT After
Historical Adjustments Restructure
----------- ------------ ------------

REVENUES
Community development-land sales $13,165 -- $13,165
Equity in earnings from partnerships
and developer fees 1,509 -- 1,509
Rental property revenues 8,737 -- 8,737
Management and other fees, substantially
all from related entities 3,775 -- 3,775
Interest and other income 943 -- 943
------- ----------- -----------
Total revenues 28,129 -- 28,129
------- ----------- -----------
EXPENSES
Cost of land sales 8,494 -- 8,494
Selling and marketing 127 -- 127
General and administrative 6,607 130 (A) 6,737
Interest expense 3,820 -- 3,820
Rental properties operating expense 3,597 -- 3,597
Depreciation and amortization 1,850 -- 1,850
Write-off of deferred project costs 6 -- 6
Spin-off costs 1,164 -- 1,164
------- ----------- -----------
Total expenses 25,665 130 25,795
------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST 2,464 (130) 2,334

PROVISION FOR INCOME TAXES 470 907 (B) 1,377
------- ----------- -----------
INCOME BEFORE MINORITY INTEREST 1,994 (1,037) 957
MINORITY INTEREST (439) -- (439)
------- ----------- -----------
NET INCOME $ 1,555 $(1,037) $ 518
======= =========== ===========
BASIC NET INCOME PER SHARE $.10
===========
WEIGHTED AVERAGE SHARES OUTSTANDING (C) 5,196
===========

The accompanying notes are an integral part of this pro forma combined statement
of income.

-88-

AMERICAN COMMUNITY PROPERTIES TRUST ("ACPT")
PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

ASSETS
------

Pro Forma Pro Forma
ACPT Restructure ACPT After
Historical Adjustments Restructure
---------- ----------- -----------

CASH AND CASH EQUIVALENTS
Unrestricted $ 2,127 -- $ 2,127
Restricted 374 -- 374
-------- ----- --------
2,501 -- 2,501
-------- ----- --------
ASSETS RELATED TO RENTAL PROPERTIES
Operating properties, net 37,829 -- 37,829
Investment in unconsolidated rental
property partnerships 8,657 -- 8,657
Other receivables, net 621 -- 621
-------- ----- --------
47,107 -- 47,107
-------- ----- --------
ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
Puerto Rico 34,268 -- 34,268
St. Charles, Maryland 21,750 -- 21,750
Notes receivable on lot sales and other,
substantially all due from affiliates 5,629 -- 5,629
-------- ----- --------
61,647 -- 61,647
-------- ----- --------
ASSETS RELATED TO HOMEBUILDING
Investment in joint venture 591 -- 591
-------- ----- --------
591 -- 591
-------- ----- --------
OTHER ASSETS
Receivables and other 2,514 -- 2,514
Property, plant and equipment, net 448 -- 448
-------- ----- --------
2,962 -- 2,962
-------- ----- --------
TOTAL ASSETS $114,808 -- $114,808
======== ===== ========

The accompanying notes are an integral part of this pro forma combined balance
sheet.

-89-

AMERICAN COMMUNITY PROPERTIES TRUST ("ACPT")
PRO FORMA COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

LIABILITIES AND CAPITAL
-----------------------

Pro Forma Pro Forma
ACPT Restructure ACPT After
Historical Adjustments Restructure
---------- ----------- -----------

LIABILITIES RELATED TO RENTAL PROPERTIES
Recourse debt $ 969 $ -- $ 969
Non-recourse debt 39,101 -- 39,101
Accounts payable and accrued liabilities 2,701 -- 2,701
------- ------- --------
42,771 -- 42,771
------- ------- --------
LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt 39,784 -- 39,784
Non-recourse debt 2,295 -- 2,295
Accounts payable, accrued liabilities
and deferred income 5,100 -- 5,100
------- ------- --------
47,179 -- 47,179
------- ------- --------
OTHER LIABILITIES
Accounts payable and accrued liabilities 3,246 1,647 (D) 4,893
Notes payable and capital leases 173 -- 173
Accrued income tax liability-current 1,539 -- 1,539
Accrued income tax liability-deferred 4,120 -- 4,120
------- ------- --------
9,078 1,647 10,725
------- ------- --------
TOTAL LIABILITIES 99,028 1,647 100,675
------- ------- --------

CAPITAL (E) $15,780 $(1,647) (D) $ 14,133
------- ------- --------
TOTAL LIABILITIES AND CAPITAL $114,808 $ -- $114,808
======== ======= ========

The accompanying notes are an integral part of this pro forma combined balance
sheet.

-90-

AMERICAN COMMUNITY PROPERTIES TRUST ("ACPT")
NOTES TO PRO FORMA COMBINED FINANCIAL DATA

(A) Reflects the increase in general and administrative expenses to operate
ACPT on a stand-alone basis. Yearly general and administrative expense
increase consists of the following: executive salary, tax compliance
services, and an annual shareholder meeting.

(B) Reflects provision for income taxes for American Management and American
Land. The income tax provision included in these pro forma statements
reflects the income tax provision and temporary differences attributable to
the operations of American Land and American Management on a stand alone
basis assuming combined federal and state tax rates graduating from 22% to
45%. A deferred tax asset for American Management and American Land exists
and relates to SCA land and IGC land as it did in connection with IGC's
original organizational structure. The deferred tax asset consists of
three pieces. The first piece relates to interest capitalized for tax
purposes and expensed for book purposes that will only be realized when the
accompanying land is sold. The second piece relates to deferred profit on
IGC's books and will be realized as the accompanying land is sold to a
third party. The third piece relates to IGC's investment in SCA and will
be realized when the investment is sold. The deferred tax asset has not
been recorded in the accompanying pro forma combined balance sheet as it
has been reduced by a valuation allowance of an equal amount.

(C) The pro forma weighted number of shares outstanding was determined by
dividing IGC's weighted average Units outstanding by the Unitholders'
percent ownership, 99%, and dividing the result by two.

(D) Reflects total future mitigation draws available to IGC under the Banc One
loan. ACPT will assume the repayment responsibility for the amounts drawn
by IGC for remediation purposes.

(E) Capital account consists of investment in and advances from parent.

-91-

ACPT

ACPT was formed under the Maryland Trust Law as a real estate
investment trust but is expected to be taxed as a partnership. The provisions
of the Maryland Trust Law require at least 75% of the value of ACPT's assets to
be held, directly or indirectly, in real estate assets, mortgages or mortgage-
related securities, government securities, cash and cash equivalent items,
including high-grade short term securities and receivables. ACPT was organized
on March 17, 1997, to carry out the Restructuring and, if the Restructuring is
completed, will continue in effect perpetually unless dissolved by action of the
Shareholders. ACPT will be wholly-owned by IGC until completion of the
Distribution. Following the completion of the Restructuring, ACPT will be
engaged in four principal lines of business formerly conducted by IGC: (i)
ownership of rental apartment properties in the United States and Puerto Rico,
(ii) community development in the United States and Puerto Rico, (iii) property
management services in the United States and Puerto Rico, and (iv) development
of commercial rental properties and/or ground leases in Puerto Rico. In
addition, ACPT will be engaged in limited condominium building operations in
Puerto Rico.

The mailing address of ACPT is 222 Smallwood Village Center, St.
Charles, Maryland 20602 and its telephone number is (301) 843-8600.

DISTRIBUTION POLICY

Under the terms of its Declaration of Trust, ACPT is required to make
minimum annual distributions to Shareholders such that the minimum aggregate
amount of all distributions made each year will equal 45% of the net taxable
income allocated to Shareholders in such year, provided that the amount of the
required minimum distribution will be reduced by the amount of taxes paid by
ACPT in Puerto Rico and other foreign countries and certain federal taxes paid
by American Rental with respect to undistributed capital gains. The minimum
distribution may consist of cash dividends and/or distributions of other
property. Any distributions in addition to the required minimum distribution
will be made at the discretion of the Board of Trustees. In making such
determinations, the Board of Trustees will take into account various factors,
including ACPT's anticipated needs for cash for future expansion and
development, current and anticipated expenses, obligations and contingencies,
and other similar working capital considerations.

ACPT and its subsidiaries expect to coordinate the declaration and
payment of dividends and other distributions from such entities in such a manner
that all dividends will be paid by the lower tier entities to ACPT on the same
day that ACPT declares a distribution to Shareholders of record on such date.
Thus, each Shareholder's distribution from ACPT will correspond with its
allocable share of taxable income associated with ACPT's receipt of dividends
from the other entities. See "Income Tax

-92-

Considerations -- Federal Income Tax Considerations -- Federal Income Taxation
of ACPT and Shareholders -- Coordination of Allocations and Distributions."

CAPITALIZATION

The following table sets forth the capitalization of ACPT as of
December 31, 1997, and pro forma capitalization as of December 31, 1997, after
giving effect to the transactions described in the "ACPT Pro Forma Combined
Financial Data." The capitalization of ACPT should be read in conjunction with
ACPP's Combined Historical Financial Statements and the notes thereto, the "ACPT
Pro Forma Combined Financial Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," each contained elsewhere herein.

As of December 31, 1997
------------------------
(In thousands)
Actual Pro Forma (1)
-------- -------------

Recourse debt $40,926 $40,926
Non-recourse debt 41,396 41,396
Capital (2) 15,780 14,133
------- -------
Total capitalization $98,102 $96,455
======= =======

(1) Pro forma for (i) the consummation of the Distribution, (ii) the receipt of
mitigation draws under the Banc One loan and (iii) increased general and
administrative costs to operate ACPT on a stand-alone basis. See "ACPT Pro
Forma Combined Financial Data."

(2) Capital consists of investment in and advances from parent.

MARKET PRICES AND DISTRIBUTIONS

At the date hereof, there is no public trading market for the Common
Shares. ACPT intends to apply for listing of the Common Shares offered hereby
on the AMEX and the PSE.

The IGC Units are listed for trading on the AMEX and the PSE under the
ticker symbol "IGC." The following table sets forth, for the periods indicated,
the closing sale price of the IGC Units as reported on the AMEX in such periods
(and paid in the subsequent period). As of October 1, 1997, the record number
of IGC Unitholders was approximately 300.

-93-

1995 High Low Distribution
- ---- ---- --- ------------

1st Quarter 7-1/2 3-1/4 (1)
2nd Quarter 4-3/8 3-1/4 $ ---
3rd Quarter 4-3/4 3-1/2 $ ---
4th Quarter 4-1/8 2-15/16 $ ---

1996 High Low Distribution
- ---- ---- --- ------------

1st Quarter 4 3 $ ---
2nd Quarter 3-7/8 2-3/4 $ .06
3rd Quarter 3 2-3/8 $ .05
4th Quarter 3-1/2 2-5/16 $ ---

1997 High Low Distribution
- ---- ---- --- ------------

1st Quarter 3-7/8 2-7/8 $ ---
2nd Quarter 3-13/16 2-15/16 $ ---
3rd Quarter 4 2-7/8 $ ---
4th Quarter 5-3/8 3-1/4 $ ---

1998 High Low Distribution
- ---- ---- --- ------------

1st Quarter 5-1/2 4-1/8 $ ---

2nd Quarter to
__________, 1998

_________________

(1) On February 6, 1995, IGC distributed to its Unitholders 5,128,372 Equus
Units, representing in the aggregate beneficial ownership of a 99% limited
partnership interest in Equus Gaming Company L.P.

-94-

SELECTED COMBINED HISTORICAL FINANCIAL AND OPERATING DATA
OF AMERICAN COMMUNITY PORTFOLIO PROPERTIES

The following table sets forth financial and operating information of
ACPP (as defined in Note 1 to the Combined Historical Financial Statements) on a
historical combined basis.

The combined income statement data for 1993 and the combined balance
sheet data for 1994 and 1993 have been derived from unaudited combined financial
statements of ACPP which, in the opinion of management, include all material
adjustments necessary for those periods and were prepared as if ACPP were a
separate entity for all periods presented. The historical combined financial
and operating data is not necessarily indicative of ACPP's future results of
operations or financial condition. The data set forth below should be read in
conjunction with the unaudited Pro Forma Financial Data of ACPT and the notes
thereto; the audited Combined Historical Financial Statements of ACPP and the
notes thereto; and Management's Discussion and Analysis of Financial Condition
and Results of Operations of ACPP included elsewhere in this Proxy
Statement/Prospectus.

Year ended December 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
(Unaudited)
(In thousands)

Income Statement Data

Land sales $13,165 $13,674 $15,441 $21,168 $16,434
Rental property revenues 8,737 7,577 4,642 4,537 2,113
Equity in earnings from partnerships
and developer fees 1,509 16,643 2,693 5,038 3,901
Management and other fees 3,775 4,816 3,894 3,507 4,494
Interest and other income 943 982 693 649 757

Total revenues 28,129 43,692 27,363 34,899 27,699

Cost of land sales 8,494 9,378 7,801 12,934 11,066
Interest expense 3,820 4,433 4,263 4,337 2,042
General and administrative expense 6,607 6,810 6,769 6,619 6,288
Other operating expenses 6,744 5,518 2,667 2,676 2,419

Total expenses 25,665 26,139 21,500 26,566 21,815
Minority interest (439) (306) (511) (680) (122)
Income tax provision
(benefit) 470 3,424 1,369 3,304 (1,120)(2)
Net income (loss) 1,555 12,891 (1) 3,983 4,349 6,882 (2)

-95-

Year Ended December 31,
----------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- ----------- -----------
(Unaudited) (Unaudited)
(In thousands)

Balance Sheet Data

Assets related to rental properties $ 47,107 $ 51,697 $ 35,281 $34,884 $38,746
Assets related to community
development 61,647 63,000 59,309 49,490 55,173
Cash and other assets 6,054 5,565 7,083 7,491 5,716

Total assets 114,808 120,262 101,673 91,865 99,635

Debt related to rental properties
Recourse 969 1,139 1,334 1,559 1,857
Non-recourse 39,101 39,508 22,650 22,771 22,457

Debt related to community
development
Recourse 39,784 38,943 49,941 42,351 47,217
Non-recourse 2,295 2,153 2,034 4,270 14,775
Other liabilities 16,879 18,683 12,781 10,961 9,840
Total liabilities 99,028 100,426 88,740 81,912 96,146

Capital 15,780 19,836 12,933 9,953 3,489

Operating Data

Rental apartment units
managed at end of period 8,139 8,139 8,085 8,085 8,029
Units under construction -- -- 54 -- 56

Community Development
Residential lots sold 231 406 113 101 180
Residential lots transferred
to Company's rental
property operations -- -- 54 -- 56
Commercial and business
park acres sold 17 5 20 76 12
Undeveloped acres sold 381 -- 2 20 27

(1) Includes a $932,000 reduction for an extraordinary item-early
extinguishment of debt.
(2) Includes a $1,371,000 benefit for the cumulative effect of a change in
accounting principle to reflect the adoption of SFAS No. 109,
"Accounting for Income Taxes".

-96-

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

The following discussion should be read in conjunction with the
Selected Combined Historical Financial and Operating Data, Pro Forma Combined
Financial Data of ACPT and the Combined Historical Financial Statements of ACPP
and the related notes included elsewhere in this Proxy Statement/Prospectus.

GENERAL.

ACPT was formed on March 17, 1997 as a new business without prior
operations in order to succeed to the principal real estate assets and
businesses of IGC as a result of the Restructuring and is referred to as
American Community Portfolio Properties ("ACPP"). The following discussion and
analysis of results of operations of ACPP for the years ended December 31, 1997,
1996 and 1995 reflects the actual results of operations for such periods
associated with the assets and businesses of IGC that will be transferred to
ACPT in the Restructuring. This discussion should be read in conjunction with
the Combined Historical Financial Statements of ACPP and accompanying notes
appearing elsewhere in this Proxy Statement/Prospectus. In particular, Note 1
to the Combined Historical Financial Statements of ACPP details the assets and
businesses that are the subject of the following discussion and analysis.

Historically, ACPP's operations and financial results have been
significantly affected by the cyclical nature of the real estate industry.
Accordingly, ACPP's combined historical financial statements may not be
indicative of future results.

RESULTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996.

Community Development Operations.
--------------------------------

Community development land sales revenue decreased 4% to $13,165,000
(of which $3,105,000 were to affiliates) during 1997 compared to $13,674,000 (of
which $10,066,000 were to affiliates) during 1996. This decrease was caused by
a reduction in residential lot sales in Puerto Rico, offset by increases in
residential and commercial lot sales in the U.S. The timing of the various
sales causes fluctuations when comparing annual results. Even though the sales
revenues were down, the gross margin during 1997 increased to 35% compared to
31% in 1996. This increase is primarily due to the mix of sales. During 1997,
23% of the sales revenue was generated by an undeveloped bulk parcel with a low
acquisition cost. There were no similar sales during 1996.

-97-

Rental Property Revenues, Net of Operating Expenses.
---------------------------------------------------

Rental properties revenues, net of operating expenses, increased 19%
to $5,140,000 during 1997 as compared to $4,332,000 during 1996. This increase
is due to the consolidation of four additional partnerships when they became
majority owned through an acquisition of additional limited partnership
interests on April 1, 1996.

Equity in Earnings from Partnerships and Developer Fees.
-------------------------------------------------------

Equity in earnings decreased $15,134,000 to $1,509,000 during 1997
from $16,643,000 during 1996. During March 1996, ACPP completed the sale of
four Puerto Rico apartment projects. The properties, totalling 918 rental
units, were sold under the 1990 Low Income Housing Preservation and Resident
Homeownership Act ("LIHPRHA"). This decrease was primarily due to the
$14,637,000 earned on the LIHPRHA sale during the 1996 period and the
elimination of the equity in earnings in the four partnerships consolidated
during the 1997 period.

Management and Other Fees.
-------------------------

Management and other fees decreased $1,041,000 or 22% during 1997
compared to 1996. This decrease was due primarily to special management fees of
$1,362,000 earned in the first quarter of 1996 from the LIHPRHA transaction and
the elimination of the management fees in the four partnerships consolidated
during 1997, offset in part by fees of $724,000 earned from the refinancing of
two apartment complexes in 1997.

Interest Expense.
----------------

Interest expense decreased $613,000 to $3,820,000 during 1997 compared
to $4,433,000 during 1996. This decrease is primarily attributable to $500,000
of late fees incurred during 1996 and reduced outstanding debt balances during
1997, offset in part by interest attributable to the additional four properties
consolidated April 1, 1996, as discussed above.

General and Administrative Expense.
----------------------------------

General and administrative expenses decreased by $203,000 to
$6,607,000 during 1997 compared to $6,810,000 during 1996 as a result of
management's continued focus on cost efficiency.

-98-

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995.

Community Development Operations.
--------------------------------

Community development land sales decreased in 1996 as compared with
1995 by approximately $1,767,000 due primarily to reduction of commercial lot
sales, offset in part by increased residential lot sales in Puerto Rico. The
U.S. residential lot sales volume has continued to be unfavorably impacted by
competitive market conditions.

The gross profit margins for 1996 and 1995 were 31% and 49%,
respectively. This decrease in gross profit margin was due primarily to the
change in the mix of sales. U.S. commercial sales, which generally have higher
gross margins, as a percent of land sales revenue were 0% in 1996 as compared to
24% in 1995. U.S. commercial land sales produce the highest gross margins since
their sales prices are higher and they require less development than business
park and residential land.

Rental Property Revenues Net of Operating Expenses.
--------------------------------------------------

Rental property revenues, net of operating expenses, increased 47% to
$4,332,000 during 1996 as compared to $2,947,000 during 1995. This increase is
due to the consolidation of four additional partnerships when they became
majority owned through an acquisition of limited partnership interests on April
1, 1996.

Equity in Earnings from Partnerships and Developer Fees.
-------------------------------------------------------

Equity in earnings from partnerships increased to $16,643,000 during
1996 from $2,693,000 during 1995. This increase is attributable to ACPP's share
of a 1996 gain from the LIHPRHA sale. There were no similar transactions in
1995.

Management and Other Fees.
-------------------------

Management and other fees increased 24% to $4,816,000 during 1996 from
$3,894,000 during 1995. This increase was primarily due to $1,362,000 of fees
earned in 1996 from the LIHPRHA sale, offset by the elimination of $153,000 of
management fees earned from the four partnerships consolidated as of April 1,
1996, the negotiated reduction of $100,000 per year effective June 1, 1996 on
one of the management contracts and an additional $197,000 of deferred
management fees that were recognized in 1995.

-99-

Interest Expense.
----------------

Interest expense increased $170,000 to $4,433,000 during 1996 from
$4,263,000 during 1995 primarily due to the consolidation of the four additional
rental properties partnerships, offset in part by the reduction of non-rental
property loan balances.

General and Administrative Expense.
----------------------------------

General and administrative expenses increased less than 1% to
$6,810,000 during 1996 as compared to $6,769,000 in 1995 primarily as a result
of management's continued focus on cost efficiency of these expenses.

LIQUIDITY AND CAPITAL RESOURCES.

Cash and cash equivalents were $2,127,000 and $2,143,000 at December
31, 1997 and 1996, respectively. This increase was attributable to $13,545,000
provided by operating activities offset by $8,372,000 and $5,189,000 used in
investing and financing activities, respectively. The cash flow from operating
activities was primarily attributable to land sales and distributions from
unconsolidated subsidiaries offset by a $900,000 decrease in accounts payable
and accrued liabilities. The cash outflow for investing activities is primarily
attributable to land improvements put in place for future sales and deferred
loan fees associated with the closing of a $20,000,000 financing with Banc One.
Loan proceeds were used to retire debt, pay various obligations and working
capital. The cash outflow for financing activities is primarily attributable to
distributions to IGC offset by the proceeds from the Banc One financing.

ACPP has historically met its liquidity requirements principally from
cash flow generated from land sales, property management fees, distributions
from residential rental partnerships and from bank financing providing funds for
development and working capital.

Over the past several years, cash flows have been constrained because
of the terms of its existing debt agreements and the reluctance of new lending
opportunities as a result of the wetlands litigation (see "Legal Proceedings --
IGC -- Wetlands Litigation"). As a result, substantially all of the cash
generated has been used to pay debt service requirements with existing lenders.
This resulted in limited opportunities for new construction and development.
The recently closed Banc One financing provided funding to commence construction
in Fairway Village, the third village in St. Charles, and will allow ACPP to
retain a greater portion of its U.S. land sales proceeds. ACPP currently has
other development projects in various stages of completion. Substantially all
of the projects under construction have sufficient development loans in place to
complete the construction.

-100-

ACPP's principal demands for liquidity are expected to be the
continued funding of its current debt service and operating cost requirements.
After the Distribution, management expects to obtain additional funding which
can be used to fund new community development projects. Such sources of funding
may include, but are not limited to, excess operating cash flows, secured or
unsecured financings, private or public offerings of debt or equity securities,
extension or refinancings of $11,700,000 of loans that are due in 1998 and
proceeds from sales of properties. However, there are no assurances that these
funds will be generated.

DEBT SUMMARY

Substantially all of ACPP's assets, $115,000,000, are encumbered by
$41,000,000 of recourse debt and $41,000,000 of non-recourse debt; $39,000,000
of the non-recourse debt is attributable to the mortgages of consolidated rental
property partnerships. The significant terms of ACPP's other debt financing
arrangements are shown below (dollars in thousands):

Balance
Maximum Interest Maturity Outstanding
Descriptions Borrowings Rate Date 12/31/97
- ------------ ---------- -------- ------- ---------

Banc One-term loan (a) $11,000 P+2.5% 7/31/04 $ 10,728
Banc One-development loan (a) 4,000 P+2.5% 7/31/04 1,020
Banc One-remediation loan (a) 5,000 P+2.5% 7/31/04 3,306
First Bank-term loan (b) 9,865 P+1.5% 8/31/98 8,399
First Bank-construction loan (b) 5,500 P+1.5% 6/30/98 3,348
IGC (c) 7,908 P+1.5% 8/2/09 6,772
Banco Popular (d) 4,000 P+1.5% 12/5/98 3,000
RG-Premier Bank (e) 1,641 P+1.5% 4/30/99 1,560
Citibank (f) 969 (f) demand 969
Banco Santander (g) 887 P+1% 4/15/98 707
Washington Savings Bank (h) 1,317 9.5% 9/30/99 757
Other Miscellaneous 188 Various Various 188
------- ---------
$52,275 $ 40,754
======= =========

(a) The three notes are cross-collateralized by substantially all of the U.S.
land and the U.S. and Puerto Rico future cash entitlements pursuant to its
ownership interest in the housing partnerships. Interest is paid monthly. The
loan agreement calls for a minimum of $2,000,000 principal curtailments in 1998,
and $3,000,000 in each of the following six years. In addition, ACPT is to
establish a $1,000,000 development reserve during 1998. It is ACPT's intention
to meet the required payments from land sales and proceeds from the refinancing
of a rental property. On each anniversary date, ACPT is to pay an additional
fee, 1% in 1998 and 1999, increasing 1/2% in the following four years, and grant
an option to the lender to purchase an additional 75,000 shares at a strike
price to be determined after the restructure. The loan agreement covenants
include restrictions on additional indebtedness of ACPT and St. Charles
Community LLC. The loan agreement contains a cross default provision for any
amounts in excess of $1,000,000 past due for 45 days after demand notification.

-101-

(b) The two notes are cross collateralized by the Puerto Rico land assets.
The interest is paid monthly from an interest reserve. Principal payments are
funded through the partial release prices of the collateral. ACPT expects to
extend the maturity date of these loans. The loan agreement covenants include
restrictions on distributions by LDA and additional indebtedness of LDA and
cross default provisions for other loan payment defaults.

(c) The interest rate is subject to a 9% ceiling and a 6% floor. Principal
and interest are paid from available cash flow as determined by management.

(d) Collateral for this credit facility includes certain parcels of land
located in Maryland, and an assignment of 80% of the net sales proceeds from the
sale of any U.S. land. Interest is paid monthly, with principal payments due on
December 31, 1997 and 1998 for $1,000,000 and $2,000,000, respectively. The
note was assumed in March 1998 by IBC in connection with the sale of property to
IBC.

(e) The note requires monthly principal payments of $27,000 and is secured by
three mortgage notes receivable totalling $2,717,600. Interest is paid monthly
by advances under the loan agreement.

(f) The note requires monthly payments of interest calculated at 250 basis
points over the cost of funds, 8.406% at December 31, 1997. The note was
secured by a letter of credit that expired in January 1998. Management is
currently renegotiating the terms of this loan.

(g) The loan is collateralized by a pledge of two mortgage notes receivable
totalling $2,760,000. Monthly principal payments of $27,000 are required.
Additional principal is paid from the sale of residential parcels in Phase II of
Parque Escorial.

(h) The note requires monthly payments of interest and is collateralized by
the land under development for 115 townhome lots in St. Charles, Maryland. The
loan is to be repaid from the sale of townhome lots that are currently under an
option contract.

YEAR 2000

ACPP has assessed and continues to assess the impact of the Year 2000
issue on its reporting systems and operations. The Year 2000 issue exists
because many computer systems and applications and other systems using computer
chips currently use two-digit fields to designate a year. As the century date
occurs, date sensitive systems may recognize the year 2000 as 1900 or not at
all. This inability to recognize or properly treat the year 2000 may cause the
systems to process critical financial and operations information incorrectly.

ACPP's reporting systems are Year 2000 compliant with the exception of
one module. The Company has engaged a programmer at a nominal cost to bring
this module into compliance. Management is continuing to review the remaining
operating systems and computer systems that affect the properties ACPP manages.

-102-

FORWARD-LOOKING STATEMENTS.

Certain matters discussed and statements made within this Registration
Statement are forward-looking statements within the meaning of the Private
Litigation Reform Act of 1995 and as such may involve known and unknown risks,
uncertainties, and other factors that may cause the actual results, performance
or achievements of ACPP to be different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Although
ACPP believes the expectations reflected in such forward-looking statements are
based on reasonable assumptions, it can give no assurance that its expectations
will be attained. These risks will be detailed from time to time in ACPP's
filings with the Securities and Exchange Commission or other public statements.

BUSINESS AND PROPERTIES OF ACPT

Following completion of the Restructuring, ACPT will be engaged in
four principal lines of business formerly conducted by IGC: (i) ownership of
rental apartment properties in the United States and Puerto Rico, (ii) community
development in the United States and Puerto Rico, (iii) property management
services in the United States and Puerto Rico, and (iv) development of
commercial rental properties and/or ground leases in Puerto Rico. In addition,
ACPT will be engaged in limited condominium building operations in Puerto Rico.
Set forth below is a brief description of these businesses as they will be owned
and conducted following the Restructuring.

RENTAL APARTMENT PROPERTIES.

United States.
-------------

ACPT, indirectly through its REIT subsidiary American Rental and
American Rental's limited partnership subsidiary American Housing, will hold
interests in 13 U.S. Apartment Partnerships that own and operate apartment
facilities in Maryland and Virginia. The U.S. Apartment Partnerships own a
total of 2,246 rental units. Each of the apartment properties is financed by a
mortgage that is non-recourse to the apartment partnership. As non-recourse
mortgages, the partners are not jointly and severally liable for the debt. HUD
provides rent subsidies to residents of 993 of the apartment units. In
addition, 110 units are leased pursuant to HUD's Low Income Housing Tax Credit
program, and 200 other units are leased under income guidelines set by the
Maryland Community Development Administration. The remaining units are leased
at market rates.

The partnership agreements of the U.S. Apartment Partnerships provide
that American Housing will receive between 50% and 99.9% of distributable
surplus cash from operations, refinancings or dispositions as general partner in
seven of the partnerships. In two of these partnerships, American Housing also
will receive 25.5%

-103-

of the distributable surplus cash from operations as a limited partner. In five
of the partnerships, American Housing will receive 0% to 5% of the distributable
surplus cash from operations as general partner until the limited partners have
received cash distributions equal to their contributed capital. Thereafter,
American Housing as general partner will share in 50% of the distributable cash
flow from operations, refinancings and dispositions. In two of these
partnerships, American Housing also will receive 51% of the cash distributions
as limited partner. Once the limited partners have received cash distributions
equal to their contributions and American Housing's general partner's
distributions increase to 50% and American Housing's limited partnership
distributions will decrease to 25.5%. American Housing directly and indirectly
will receive 100% of the distributable cash flow from operations in one of the
partnerships.

The table below sets forth the name of each U.S. Apartment
Partnership; the number of rental units in the property owned by such
partnership; the project cost; the percentage of such units under lease; and the
expiration date for any subsidy contract:

12/31/97 Expiration
No. of Apt. Project Cost Occupancy at of Subsidy
Units (in thousands) 12/31/97 Contract
----- ------------- -------- -------

Bannister Associates Limited
Partnership (1) 208 $ 5,040 96% 1998 41 units
2017 167 units
Brookside Gardens Limited
Partnership (2) 56 2,687 82% N/A

Crossland Associates Limited
Partnership (3) 96 3,262 91% N/A

Fox Chase Apartments General
Partnership (4) 176 7,886 91% N/A

Headen House Associates Limited
Partnership (5) 136 5,965 99% 2000

Huntington Associates Limited
Partnership (6) 204 10,283 93% 2000

Lakeside Apartments Limited
Partnership (9) 54 4,169 96% N/A

Lancaster Apartment Limited
Partnership (10) 104 4,945 93% N/A

New Forest Apartments General
Partnership (4) 256 13,752 88% N/A

Palmer Apartments Associates
Limited Partnership (11) 152 5,676 92% 2000

-104-

12/31/97 Expiration
No. of Apt. Project Cost Occupancy at of Subsidy
Units (in thousands) 12/31/97 Contract
----- ------------- -------- -------

Wakefield Terrace Associates
Limited Partnership (12) 204 6,326 89% 1998 40 units
2020 164 units
Wakefield Third Age Associates
Limited Partnership (13) 104 3,113 100% 1998 20 units
2019 84 units
Essex Apartments Associates
Limited Partnership (14) 496 19,215 97% 2000
----- ---------
2,246 $ 92,319
===== =========

(1) Receives subsidies under the National Housing Act up to a maximum of
$184,020 per year.
(2) Not subsidized, but all units are set aside for low to moderate income
tenants over 62 years of age under provisions set by the Low Income Housing
Tax Credit ("LIHTC") program.
(3) Not subsidized.
(4) Not subsidized, but 20% of the units are subject to income guidelines set
by Sections 4a and 103b of the Internal Revenue Code of 1954.
(5) Receives subsidies under the National Housing Act up to a maximum of
$1,369,008 per year.
(6) Receives subsidies under the National Housing Act up to a maximum of
$2,066,040 per year.
(9) Not subsidized, but all units are set aside for low to moderate income
tenants over 55 years of age under provisions set by the LIHTC program.
(10) Not subsidized, but 51% of the units are subject to income guidelines set
by the Maryland Community Development Administration ("MCDA").
(11) 56 units are subsidized and receive subsidies under the National Housing
Act up to a maximum of $474,432 per year. 96 units are not subsidized, but
51% of these are subject to income guidelines set by MCDA.
(12) Receives subsidies under the National Housing Act up to a maximum of
$194,220 per year.
(13) Receives subsidies under the National Housing Act up to a maximum of
$90,480 per year.
(14) Receives subsidies under the National Housing Act up to a maximum of
$3,326,592 per year.

-105-

Puerto Rico.
-----------

In addition, ACPT, indirectly through its partnership subsidiary IGP
Group, and IGP Group's partnership subsidiary IGP, will hold interests in 9
Puerto Rico Apartment Partnerships that own and operate a total of 12 apartment
facilities in Puerto Rico. The Puerto Rico Apartment Partnerships own a total
of 2,653 rental units, all of which are subject to rent subsidies from HUD. The
properties held by the Puerto Rico Apartment Partnerships are financed by
mortgages that are non-recourse to the partners.

Two of the partnership agreements of the Puerto Rico Apartment
Partnerships provide that IGP currently receives 50% of the net cash flow from
operations. In the remaining seven partnerships, IGP receives a 0% to 5%
interest in profits, losses and net cash flow from operations until such time as
the limited partners have received cash distributions equal to their capital
contributions. Thereafter, IGP will share in 50% to 60% of cash distributions
from operations, refinancing and disposition. As a result of loans made to six
of the Puerto Rico Apartment Partnerships, IGP also holds notes payable by such
partnerships that are required to be paid prior to the making of other
distributions.

ACPT intends to benefit from certain projected trends in Puerto Rico.
Puerto Rico is estimated to have approximately 3.7 million inhabitants at
present, and its population is projected to grow annually at a rate of between
.56% and .97% between 1995 and 2010, as determined by the Puerto Rico Planning
Board. The typical Puerto Rico family has decreased in size from 3.8 in 1987 to
3.5 in 1996, which has caused the number of families and households to grow at a
faster rate than the population, a trend that is expected to continue and have a
positive effect in demand for housing. Puerto Rico's growing population has
resulted in greater construction activity in the residential sector, and has
shifted construction from single-family homes to multi-family construction such
as walk-up condominiums. Per capita personal income increased to $7,882 in
fiscal year 1996 from $7,374 in 1995 and $7,079 in 1994. The economy of Puerto
Rico registered a real growth of 3.1% during fiscal year 1996 in its gross
product, compared with increases of 3.4% in 1995 and 2.5% in 1994.

-106-

The table below sets forth the name of each apartment property owned
by the Puerto Rico Apartment Partnerships; the number of rental units in the
property owned by such partnership; the project cost; the percentage of such
units under lease; and the expiration date for any subsidy contract:

12/31/97
No. of Project Expiration
Apt. Cost Occupancy of Subsidy
Units (in thousands) at 12/31/97 Contract
----- ------------ ----------- --------

San Anton (1) 184 $ 4,606 100% 1998
Monserrate I (2) 304 11,443 99% 1999
Alturas del Senorial (3) 124 4,669 100% 1999
Jardines de Caparra (4) 198 7,368 100% 2000
Colinas de San Juan (5) 300 12,044 99% 2001
Bayamon Gardens (6) 280 13,593 99% 2011
Vistas del Turabo (7) 96 3,358 100% 2021
Monserrate II (8) (9) 304 12,267 99% 2020
Santa Juana (8)(10) 198 7,476 100% 2020
Torre De Las Cumbres (8) (11) 155 6,582 99% 2020
De Diego (8) (12) 198 7,510 99% 2020
Valle del Sol (13) 312 15,279 99% 2003
----- ---------

2,653 $ 106,195
===== =========

(1) Receives subsidies under the National Housing Act up to a maximum of
$1,339,200 per year.
(2) Receives subsidies under the National Housing Act up to a maximum of
$1,916,464 per year.
(3) Receives subsidies under the National Housing Act up to a maximum of
$570,672 per year.
(4) Receives subsidies under the National Housing Act up to a maximum of
$891,048 per year.
(5) Receives subsidies under the National Housing Act up to a maximum of
$1,339,200 per year.
(6) Receives subsidies under the National Housing Act up to a maximum of
$1,512,144 per year.
(7) Receives subsidies under the National Housing Act up to a maximum of
$477,148 per year.
(8) This property is owned by Carolina Associates L.P., a Maryland limited
partnership in which IGP holds a 50% interest.
(9) Receives subsidies under the National Housing Act up to a maximum of
$1,541,260 per year.
(10) Receives subsidies under the National Housing Act up to a maximum of
$994,032 per year.
(11) Receives subsidies under the National Housing Act up to a maximum of
$813,444 per year.
(12) Receives subsidies under the National Housing Act up to a maximum of
$994,032 per year.
(13) Receives subsidies under the National Housing Act up to a maximum of
$2,196,792 per year.

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Government Regulation.
---------------------

HUD subsidies are provided principally under Sections 8 and 236 of the
National Housing Act. Under Section 8, the government pays to the applicable
apartment partnership the difference between market rental rates (determined in
accordance with government procedures) and the amounts that the government deems
the residents are able to afford. Under Section 236, the government provides
interest subsidies directly to the applicable apartment partnership through a
reduction in the property's mortgage interest rate and with a corresponding
reduction in resident rental rates. In order to comply with the requirements of
Section 8 and Section 236, residents are screened by American Management or IGP
for eligibility under HUD guidelines. Subsidies are provided according to the
terms of long-term contracts between the federal government and the apartment
partnerships.

Cash flow from those projects whose mortgage loans are still insured
by the Federal Housing Authority ("FHA"), or financed through the housing
agencies in Maryland, Virginia, Puerto Rico or Washington, D.C. (the "State
Financing Agencies") are subject to guidelines and limits established by the
apartment partnerships' regulatory agreements with HUD and the State Financing
Agencies. The regulatory agreements also require that if the cash from
operations generated by certain apartment properties has exceeded the allowable
cash distributions, the surplus must be deposited into restricted escrow
accounts held by the mortgagee of the property and controlled by HUD or the
applicable State Financing Agency. Funds in these restricted escrow accounts
may be used for maintenance and capital improvements with the approval of HUD
and/or the State Finance Agency.

The federal government has virtually eliminated subsidy programs for
new construction of low and moderate income housing by profit-motivated
developers such as ACPT. As a result, no new construction of apartment projects
is expected in Puerto Rico and any new apartment properties developed by ACPT in
the U.S. most likely will offer market rate rents.

The subsidy contracts for ACPT's investment apartment properties are
scheduled to expire between 1997 and 2020. In addition, the long term subsidy
contracts for six Puerto Rico properties that are scheduled to expire in 2011,
2020 or 2021 may be cancelled by the applicable Puerto Rico Apartment
Partnership in 2000 (for contracts to expire in 2020) or 2001 (for contracts to
expire in 2011 or 2021) and thereafter every five years until expiration. Under
a recently enacted law, HUD may renew expiring subsidy contracts on a year to
year basis, and ACPT intends to seek the renewal of expiring subsidy contracts
for its U.S. properties. ACPT currently intends to convert to condominiums
those apartment properties in Puerto Rico for which the subsidy contracts expire
over the next several years. Two such conversions are currently in progress.
See "-- Condominium Conversion."

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HUD also is seeking Congressional authority to convert expired
contracts to resident-based vouchers. This would allow residents to choose
where they wish to live. This can potentially impact the income stream of
certain properties. However, ACPT will actively maintain its properties in a
manner designed to preserve their values and retain residents.

HUD also is exploring a program known as "portfolio re-engineering" or
"mark-to-market." This would assist owners of Section 8 and HUD-insured
properties that could not meet loan obligations under the proposed resident-
based voucher system. ACPT will monitor the progress of this proposal and its
impact on the properties in which it holds interests through the apartment
partnerships.

Competition.
-----------

ACPT's investment properties that receive rent subsidies are not
subject to the market conditions that affect occupancy at properties with market
rate rents. These subsidized properties average approximately 99% occupancy
rates year round. ACPT's apartments in St. Charles that have market rate rents
are impacted by the supply and demand for competing rental apartments in the
area, as well as the local housing market. When for sale housing becomes more
affordable due to lower mortgage interest rates or softening home prices, this
can adversely impact the performance of rental apartments. Conversely, when
mortgage interest rates rise or home prices increase, the market for rental
units may benefit.

CONDOMINIUM CONVERSION.

Puerto Rico.
-----------

Most of the apartment properties in Puerto Rico were designed, located
and maintained with the expectation that they might be converted into
condominiums upon the expiration of subsidy contracts 20 to 40 years after
construction. The existing debt on most of the Puerto Rico apartment properties
is low when compared to present values. In addition, the demand for centrally
located residential units within the San Juan metropolitan area, coupled with
the acceptance of the condominium concept in Puerto Rico, make condominium
conversions of the Puerto Rico apartment units an attractive strategy.

ACPT's indirect subsidiary IGP has a record of success in this
conversion procedure, having previously converted 1,800 units in Puerto Rico
owned by IGP and certain affiliates. These were properties which proved to be
unsuccessful as market rent apartments. Their conversion to condominiums
permitted IGP and the affiliates to profit from these properties despite a
relatively high debt structure.

-109-

Currently, IGP is in the process of converting two former apartment
properties, Monte de Oro and New Center, into condominiums. Construction of the
improvements to be made at the properties is expected to commence no later than
May 1998 and is expected to be completed in six months. Interim financing
required to complete the improvements has been obtained. All units at both
properties are targeted to be sold by late 1999.

The subsidy contracts for eight of the properties owned by the Puerto
Rico Apartment Partnerships expire no later than 2003, and the contracts for the
remaining properties may be cancelled by the applicable partnership in either
2000 or 2001 and every five years thereafter. ACPT currently intends to convert
some or all of such properties into condominiums upon the expiration or
cancellation of the contracts.

United States.
-------------

Because of the risk that sales of condominium units by American
Housing would constitute "prohibited transactions" under the rules governing
REITs, which would subject the profits from such sales to a 100% tax, ACPT
currently does not intend to convert any of the properties owned by the U.S.
Apartment Partnerships into condominiums. See "Income Tax Considerations --
Federal Income Tax Considerations -- Federal Income Tax Classification of
American Rental -- Taxation of American Rental as a REIT."

COMMUNITY DEVELOPMENT.

ACPT's community development assets will consist of more than 4,700
acres of developed and undeveloped land located in the master planned
communities of St. Charles, Maryland, and Parque Escorial, in Carolina, Puerto
Rico. The land in both communities will be developed by ACPT and its affiliates
for a variety of residential uses, including single-family homes, townhomes,
condominiums and apartments, and commercial and industrial uses. ACPT may also
develop for residential use certain land adjacent to the site of a planned
commercial development in Canovanas, Puerto Rico.

St. Charles.
-----------

ACPT, indirectly through American Land, will own the more than 4,500
acres remaining for development in the planned community of St. Charles. St.
Charles contains a total of approximately 9,100 acres (approximately 14 square
miles) located in Charles County, Maryland, 23 miles southeast of Washington,
D.C.

Based on figures prepared by the Charles County Department of Planning
and Growth Management ("DPGM"), the current population of Charles County is in
excess of 115,000, up from 101,000 in 1990, and is projected to increase from
123,200 in 2000 to 166,500 in 2015. The real property tax base has increased
from $547 million

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in 1980 to $2.4 billion in 1996, with the residential base accounting for 77% of
the total. The median household buying income in Charles County is estimated at
$48,225, ranking it second in Maryland and seventh in the Baltimore-Washington
area. The DPGM has determined that the number of residential building permits
have increased yearly from 1993, when 962 permits were issued, to 1997, when
1,232 permits were issued.

St. Charles is comprised of five separate villages: Smallwood
Village, completed, Westlake Village, which has been substantially completed,
Fairway Village, currently under construction, and Piney Reach and Wooded Glen.
Each village consists of individually planned neighborhoods, and includes
schools, churches, recreation centers, sports facilities, and a shopping center.
Other amenities include parks, lakes, hiking trails and bicycle paths. St.
Charles also includes an 18-hole public golf course. Each community is planned
for a mix of residential housing, including detached homes, townhomes, multiplex
units and rental apartments. Typical lot sizes for detached homes range from
5,000 to 8,000 square feet.

IGC's development of St. Charles as a planned unit development ("PUD")
began in 1972 when a comprehensive planned unit development for St. Charles was
approved by the County. This master plan contemplates construction of
approximately 24,730 housing units and 1,390 acres of commercial and industrial
development. As of September 30, 1997, there were approximately 11,000
completed housing units in St. Charles, including Carrington Neighborhood which
began prior to 1972 and is not included in the PUD. In addition there are
schools, recreation facilities, commercial, office and retail space in excess of
4.2 million square feet. In St. Charles, ACPT, through outside planners,
engineers, architects and contractors, obtains necessary approvals for land
development, plans individual neighborhoods in accordance with regulatory
requirements, constructs roads, utility facilities and community facilities.
ACPT develops lots for sale for detached homes, townhomes, apartment complexes,
and commercial and industrial development.

The third village, Fairway Village, so named for the existing 18-hole
public golf course which it surrounds, is currently being developed. Its master
plan provides for 3,346 dwelling units consisting of 1,287 acres of land
including an industrial park and 40-acre commercial center.

The last two villages, Wooded Glen and Piney Reach, which include
approximately 3,000 acres, are planned for development after the completion of
Fairway Village. The total number and mix of residential units must be approved
by the County Commissioners before development can begin on these two villages
and there can be no assurances that the total of 24,730 units in the master plan
can be attained.

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Government Approvals

The St. Charles master plan has been incorporated in Charles County's
comprehensive zoning plan. In addition, the Charles County government has
agreed to provide sufficient water and sewer connections for the balance of the
housing units to be developed in St. Charles. Specific development plans for
each village in St. Charles is subject to approval of the County Planning
Commission. Such approvals have previously been received for the villages of
Smallwood, Westlake and Fairway. Approvals have not yet been sought on the
final two villages.

Competition

Competition among residential communities in Charles County is
intense. Currently, there are approximately 30 subdivisions competing for new
home buyers within five miles of St. Charles. The largest competing housing
developments are Kingsview, a 640 unit project being developed by Miller &
Smith, Southwinds, a 367 unit project being developed by Washington Homes, and
Chapman's Landing, a 576 unit project being developed by Legend Properties.
Smaller projects are being developed by more than 20 other developers. This is
the result of several major national and regional homebuilders having been
attracted by the growing marketplace. According to DPGM, Charles County
residential building permits have increased yearly from 1993, with 962 in 1993,
964 in 1994, 965 in 1995, 1,090 in 1996 and 1,232 in 1997. In this very price
sensitive market, IGC attempts to position St. Charles to provide among the
lowest priced building lots and homes while offering more amenities than the
competition. ACPT intends to continue this strategy.

Environmental Impact

Management of ACPT believes that the St. Charles master plan can be
completed with respect to ACPT's properties without material adverse
environmental impact and in compliance with governmental regulations. In
preparation for immediate and future development, Phase I Environmental Site
Assessments have been prepared for substantially all of the undeveloped parcels.
The historical use of the land has been farming and forestry and no significant
environmental concerns were found. Jurisdictional determinations for wetlands
have been approved by the Corps for Sheffield Neighborhood, the next phase of
residential development containing 1,642 dwelling units. Management has
developed an Environmental Policy Manual and has established an Environmental
Review Committee and an Environmental Compliance Officer to anticipate
environmental impacts and avoid regulatory violations. However, development can
be delayed while plans are being reviewed by local, state and federal agencies
for environmentally sensitive areas.

-112-

As a result of the Restructuring, the property held by ACPT in St.
Charles will not be subject to the wetlands litigation of IGC. See "The
Restructuring -- Reasons for the Restructuring."

Parque Escorial.
---------------

ACPT, indirectly through American Land, IGP Group and IGP will hold an
80% interest in LDA, the partnership that in 1989 acquired the 431 acre site of
the former El Comandante Race Track. LDA has developed and sold 119 acres, and
continues to own 312 acres of developed and undeveloped land at this site which
has been established as the planned community of Parque Escorial. Parque
Escorial is located approximately six miles from the central business district
in San Juan, Puerto Rico. The master plan for Parque Escorial was approved in
1992 and contemplates the construction of 2,700 dwelling units of various types
on 312 acres and the development of 120 acres for commercial, office and light
industrial uses.

Development of Parque Escorial began in 1994 with the sale of 61 acres
of commercial land to Wal-Mart, which is now designing the second phase of a
480,000 square foot shopping center on the tract. Wal-Mart and Sam's Club
stores, each consisting of 125,000 square feet, opened in 1995. An additional
12 acres of commercial land have been sold subsequently by LDA for prices up to
$1.1 million per acre. Residential development began in 1996 after contracts
for 516 housing units were settled. The first 216 of these units will be "walk-
up" condominiums built and sold by a joint venture that will be 50% owned by IGP
Group.

Government Approvals

Parque Escorial's master plan has been approved but specific site
plans are subject to planning commission review and approval. LDA has secured
agreements with the Puerto Rico Aqueduct and Sewer Authority to provide for
adequate water and sewer capacity for the first 1400 units, which includes the
commercial space.

Competition

The scarcity of developable land in the San Juan metropolitan area
creates a favorable market for home sales at Parque Escorial. Competition for
home sales is expected primarily from small scale condominium projects in areas
considered to be similar or less desirable than Parque Escorial. Furthermore,
it is one of only two master planned communities currently under development in
the San Juan metropolitan area. The other is the 500-acre Encantada, which is
marketed toward higher income homebuyers. Parque Escorial's home prices appeal
primarily to entry level purchasers. In addition, Encantada's developer is
building all the homes in the community, while Parque Escorial features three
separate homebuilders in its first phase, providing more selections for the
consumer.

-113-

Environmental Impact

Management of IGC believes that the Parque Escorial master plan can be
completed without material adverse environmental impact and in compliance with
government regulations. All of the necessary agencies have endorsed Parque
Escorial's environmental impact statement. Wal-Mart has provided mitigation for
11.87 acres of wetlands impacted by its development of the shopping center site
and other land.

COMMERCIAL RENTAL PROPERTIES.

LDA also owns a parcel of land of approximately 540 acres adjacent to
the El Comandante Race Track in Canovanas, Puerto Rico. At present, LDA is
evaluating the viability of developing and/or leasing the land for a fully
integrated entertainment complex consisting of movie studios, an amphitheater
with a capacity of 20,000, and an amusement park. With respect to land only,
LDA has acquired all necessary zoning approvals, utilities endorsements and
approvals for infrastructure for development of all sites. Approvals for
building construction have not yet been obtained. LDA is currently negotiating
an agreement pursuant to which it would construct and lease movie studio
facilities to an entity specializing in renting such facilities. However, there
is no assurance that an agreement will be reached. Portions of the land may
also be developed for residential use if commercial development or leasing is
not feasible.

PROPERTY MANAGEMENT.

ACPT, indirectly through its subsidiary American Management, will own
and operate the United States property management business currently operated by
IGC. In connection with this business, American Management will earn fees from
the management of 4,176 rental apartment units, including 2,246 units owned by
the U.S. Apartment Partnerships. Management fees for the U.S. apartment
properties are based on a percentage of rents ranging from 2.5% to 10.4%. The
management contracts for these properties have terms of one or two years and are
customarily renewed upon expiration but may be terminated on 30 days notice by
either party. Management fees for other apartment properties range from 2.5% to
4.5% of rents.

In addition, IGP will earn fees from the management of 2,653 rental
apartment units owned by the 9 Puerto Rico Apartment Partnerships. Management
fees for the apartment properties owned by the Puerto Rico Apartment
Partnerships, like those in the U.S., are based on a percentage of rents ranging
from 2.25% to 10.95% and the management contracts for these properties have
terms of one or two years and are customarily renewed upon expiration. IGP also
is entitled to receive up to an aggregate of $192,000 annually in certain
incentive management fees with respect to six properties owned by the Puerto
Rico Apartment Partnerships. Upon the conversion of such units to condominiums,
the number of units under management, and the corresponding

-114-

management fees, will be reduced. However, IGP would receive fees in connection
with managing the conversion process.

IGP currently manages 918 rental apartments owned by a non-profit
entity which acquired the units from IGP in 1996 under the provisions of
LIHPRHA. The management agreements for these properties expire April 1, 2001
but management expects the agreement to be renewed for an additional five year
period. In addition, IGP manages 511 units owned by the Puerto Rico Housing
Finance Agency. These units are expected to be converted to condominiums in
1998 under the management of IGP, which would receive a fee for its services.

HOMEBUILDING IN PUERTO RICO.

ACPT, through IGP Group, holds a 50% interest in Escorial Builders
S.E., a Puerto Rico partnership ("Escorial Builders"), which is a construction
joint venture at Parque Escorial. The remaining interest in the joint venture
is held by an unrelated third party which is the general contractor for the
project. Escorial Builders has acquired lots at Parque Escorial on which it is
building 216 "walk-up" condominium units. Delivery of the units is expected to
occur over an 18 month period that commenced in November 1997. Escorial
Builders is not expected to develop any additional projects. However, IGP
Group, on its own or through joint ventures, may construct additional projects
if an appropriate opportunity arises.

POLICIES WITH RESPECT TO CERTAIN ACTIVITIES.

The following is a discussion of ACPT's policies with respect to
investment in real estate, affiliate transactions and certain other activities.
ACPT's policies with respect to these activities have been established by the
ACPT Board of Trustees and may be amended or revised from time to time at the
discretion of the ACPT Board of Trustees without a vote of the Shareholders. No
assurance can be given that ACPT's investment objectives will be attained or
that the value of ACPT will not decrease.

Investment Policies.
-------------------

Investments in Real Estate or Interests in Real Estate

ACPT's primary business objective is to maximize Shareholder value by
investing, holding and developing assets that will generate cash available for
distribution to its Shareholders. ACPT's policy is to acquire or develop assets
where ACPT believes that opportunities exist for acceptable investment returns
in areas that utilize the expertise of its management, primarily community
development and commercial and residential rental properties.

-115-

ACPT may also participate with other entities in property ownership,
through joint ventures or other types of common ownership. Equity investments
may be subject to existing mortgage financing and other indebtedness which have
priority over the equity interests of ACPT.

Investment in Real Estate Mortgages

While ACPT intends to emphasize equity real estate investments, it
may, in its discretion, invest in mortgages or other real estate interests
consistent with its general business strategy. ACPT may also invest in
participating or convertible mortgages if the ACPT Board concludes that ACPT and
its Shareholders may benefit from the cash flow or any appreciation in the value
of the subject property. Such mortgages are similar to equity participations.
The mortgages in which ACPT may invest may be either first mortgages or junior
mortgages and may or may not be insured by a governmental agency.

Securities of or Interests in Persons Primarily Engaged in Real Estate
Activities and Other Issuers

ACPT also may invest in securities of entities engaged in real estate
activities or securities of other issuers, including for the purpose of
exercising control over such entities.

Affiliate Transaction Policy.
----------------------------

ACPT has adopted a policy that it will not, without the approval of a
majority of independent Trustees, (i) acquire from or sell to any Trustee,
officer, employee, or Shareholder who owns more than 2% of the Common Shares (an
"Affiliated Shareholder") or any entity in which a Trustee, officer, employee or
Affiliated Shareholder of ACPT beneficially owns more than a 5% interest, or any
affiliate of any of the foregoing, any property or other assets of ACPT, (ii)
make any loan to or borrow from any of the foregoing persons, or (iii) engage in
any other transaction with any of the foregoing persons.

Certain Other Policies.
----------------------

ACPT intends to operate in a manner that will not subject it to
regulation under the Investment Company Act of 1940. ACPT does not intend to
(i) invest in the securities of other issuers for the purpose of exercising
control over such issuer, (ii) underwrite securities of other issuers, or (iii)
actively trade in loans or other investments.

ACPT may make investments other than as previously described, although
it does not currently intend to do so. ACPT has authority to purchase or
otherwise reacquire shares Common Shares or any of its other securities in the
open market or

-116-

otherwise and may engage in such activities in the future. The ACPT Board of
Trustees has no present intention of causing ACPT to repurchase any Common
Shares, and any such action would be taken only in conformance with applicable
federal and state laws.

ACPT may in the future make loans to third parties, including, without
limitation, loans to joint ventures in which it participates. ACPT has not
engaged in trading, underwriting or agency distribution or sale of securities of
other issuers, and ACPT does not intend to do so in the future. ACPT's policies
with respect to such activities may be reviewed and modified from time to time
by the ACPT Board of Trustees without the vote of the Shareholders.

APPRAISALS

IGC has obtained appraisals of certain land assets being transferred
to ACPT and certain land assets that will be retained by IGC following the
Restructuring. The appraisal reports (the "Appraisal Reports") prepared for
these properties have been included as exhibits to the Registration Statement of
which this Proxy Statement/Prospectus is a part. The following discussion is
qualified in its entirety by reference to such Appraisal Reports.

PROPERTIES TRANSFERRED TO ACPT.

Parque Escorial Planned Community, San Juan/Carolina, Puerto Rico.
------------------------------------------------------------------

Parque Escorial consists in its entirety of 439.79 cuerdas, or 431
acres, located south of 65th Infantry Avenue and Ramal Este Avenue in the Sabana
Llana and San Anton Wards of the municipalities of San Juan and Carolina, Puerto
Rico. Robert F. McCloskey Associates ("McCloskey Associates") appraised the
value of 204.28 cuerdas, or 198.15 acres, of saleable land of Parque Escorial as
of November 15, 1996, the effective date of the appraisal report, to be worth
$35,900,000 as of December 1, 1996.

McCloskey Associates employed the sales comparison approach, described
above, to determine the "as is" market value of the 198.15 acres of Parque
Escorial property under development. McCloskey Associates assumed the
completion of all infrastructure and facilities planned in connection with the
subject property and all approvals and endorsements for the development.
McCloskey Associates valued the Parque Escorial property based on an existing
five phase construction plan: Phase I -commercial center & service commercial;
Phase II, III and V - residential; and Phase IV - office park/commercial.
McCloskey Associates calculated the "as is" market value of the subject
property, inclusive of development, financing and sales costs, to be $18,400,000
for Phase I and IV and $25,100,000 for Phase II, III, and future development.
Applying the necessary discount for present value considerations,

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McCloskey Associates determined the present "as is" market value of the subject
property to be $35,900,000.

Canovanas Property, Canovanas, Puerto Rico.
------------------------------------------

The Canovanas Property consists of 559.71 cuerdas, or 542.92 acres, of
undeveloped property located south of State Road No. 3 Km. 16.2 in Canovanas,
Puerto Rico. The subject land comprises three contiguous parcels surrounding
the El Comandante racetrack. McCloskey Associates appraised the Canovanas
Property on July 2, 1995 as having a present "as is" value of $6,100,000 as of
June 30, 1995.

McCloskey Associates used the sales comparison approach to calculate
the present "as is" market value of the subject property based on its present R-
I (low density residential) zoning and verified financing terms and sales
conditions of comparable properties, and then adjusted its calculations to
reflect the characteristics of the subject property. McCloskey Associates
assessed the subject property as comprised of three separate parcels. The
adjusted comparable sales of each parcel were then reconciled into a single
value estimate for the entire subject property. The aggregate prospective
market value of the parcels was calculated to be $10,525,000. Discounting the
prospective market value of the subject property to present "as is" market
value, McCloskey Associates, calculated the value of the subject property to be
$6,100,000. McCloskey Associates report does not address the development of
this property as an entertainment complex as presently envisioned.

Smallwood Village, Westlake Village, Wooded Glen, and Piney Reach of the
------------------------------------------------------------------------
St. Charles Planned Unit Development and Surrounding Environs, St. Charles, MD.
- ------------------------------------------------------------------------------

The subject property consists of remnant parcels in two completed
villages and two undeveloped villages, Wooded Glen and Piney Reach, in the St.
Charles PUD, and various surrounding environs including the Middletown Property
that were subsequently sold. The subject property comprises residential land
that includes finished lots, raw recorded lots, and raw acreage; industrial land
that includes finished sites and raw land; and commercial land. Wooded Glen and
Piney Reach total 3,079 acres, for which 10,000 residential units are planned.
Smail Associates, Inc. ("Smail"), appraised the property on February 14, 1997 as
having an "as is" present market value of $40,440,000 as of December 31, 1996.

Smail employed the sales comparison approach to estimate the retail
value of finished single-family and townhouse lots, an apartment site on the
subject property, all raw acreage, and commercial and industrial land parcels.
Smail applied the subdivision analysis method to calculate the "as is" market
value of 60 finished single-family lots in the Dorchester Neighborhood of
Westlake Village, 98 remaining townhouse lots in Huntington Ridge, and finished
industrial and commercial sites on the subject property. The subdivision
analysis approach is a hybrid of the cost, sales

-118-

comparison and income approaches to valuation in which the present value of the
property is estimated by projecting periodic income from the sale of finished
lots, subtracting land development, sales, carrying costs, and profit, and
discounting the resultant periodic cash flows to provide an indication of
present value. For purposes of its appraisal, Smail identified the subject
property according to whether it was residential, industrial or commercial land.

Fairway Village (Residential), St. Charles, MD.
----------------------------------------------

Fairway Village (Residential) consists of approximately 1,287 acres of
land containing a total of 3,346 residential units to be developed in five
stages containing 837 townhouse units, 922 large single-family lots, 499 medium
single-family lots, 252 small single-family lots, and 836 apartment units
located on the east and west sides of St. Charles Parkway near its southern
terminus at White Plains Regional Park in Waldorf, Maryland. James B. Hooper,
P.A. ("Hooper") appraised the property on May 25, 1997 as having an aggregate
"as is" present market value of $19,263,000 as of that date.

Hooper employed the market data approach, a variant of the sales
comparison approach, whereby the appraiser analyses recent sales of similar
properties to estimate the value of the apartment units on the subject property.
The relevant sales are then adjusted for dissimilarities between sale properties
and the subject property to arrive at an indication of value. Using this
approach, Hooper determined the apartment units to have an overall gross retail
value of $7,524,000, which was discounted to present "as is" market value of
$3,014,000. Hooper used the market data approach to calculate the value of the
837 townhouse units on the subject property to be $11,300,000. This figure was
then discounted to an "as is" present market value of $4,888,000 to reflect a
16-year absorption period, sales expenses, and soft costs. Applying the same
methodology, Hooper appraised the gross retail value of the single-family
detached residence units to be $31,308,000, which was then discounted to an "as
is" present market value of $11,361,000. Accordingly, Hooper calculated the
total aggregate "as is" market value of the subject property to be $19,263,000.

Fairway Village (Commercial), St. Charles, MD.
---------------------------------------------

Fairway Village (Commercial) consists of approximately 38 acres of
land, more or less within the Sheffield and Gleneagles Neighborhoods, that has
been designated for commercial, office, and business usage within the Fairway
Village Neighborhood. Hooper appraised the property as having an aggregate "as
is" present market value of $3,960,000 as of October 31, 1997.

Hooper used the market data approach discussed above to determine the
value of the subject property. Relying on sales of comparable properties, and
then adjusting the data to reflect relevant dissimilarities with the subject
property, Hooper

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estimated the gross retail value of the property to be $8,276,000. Hooper then
discounted the gross retail value based on an initial 3-year carrying period and
an anticipated 4-year absorption period once sales commence. Hooper employed a
discount factor of 14% for the 3-year holding period, which, along with a
discount for the absorption period, generated an "as is" market value of
$3,960,000.

PROPERTIES RETAINED BY IGC.

Brandywine Village, Brandywine, MD.
----------------------------------

SCA is the general partner of, and holds a 50% interest in, Brandywine
Investment Associates, L.P., which owns Brandywine Village, a 277 acre tract of
land in Brandywine, Prince George's County, Maryland. The property was acquired
in 1985 and comprises two approved comprehensive design zones that permit
residential, retail commercial, office commercial and light industrial uses.
The Gatewood Company, Inc. ("Gatewood") appraised the property on June 30, 1997
as having a total undiscounted prospective value of $11,900,000, which, when
discounted to present "as is" market value, produced an estimated market value
of $8,885,000 as of June 9, 1997. Pursuant to the terms of the partnership
agreement, SCA is entitled to a recovery of its advances, a priority return and
50% of the remaining cash flow. Accordingly, IGC's indirect interest in the
Brandywine property has an appraised "as is" value of $8,885,000 as of June 9,
1997.

Gatewood employed the sales comparison approach to calculate present
"as is" market value whereby value is determined by comparison of sales of
reasonably similar properties to the subject properties. Gatewood also assumed
that final approvals for the construction of 234 lots and a local access road
would be obtained by developers within one year. Five separate property
components were identified by Gatewood based on applicable zoning restrictions:
8.53 acres commercial; 64.74 acres medium density residential; 7.87 acres high
density residential; and 46 acres office/light industrial. The sales comparison
approach produced an aggregate undiscounted value of $11,900,000, which was then
discounted to a present "as is" market value of $ 8,885,000 to reflect the time
and costs required to support marketability, e.g., local infrastructure, and a
10% discount rate.

Southlake at Montclair Subdivisions Section S-4, Dumfries, VA.
-------------------------------------------------------------

Section S-4 of Southlake at Montclair Subdivision consists of 77 raw,
recorded townhouse lots located along the east side of South Lake Boulevard
north of its intersection with Waterway Drive in the Southlake Montclair planned
community in Dumfries, Virginia. NBValuation Group, Inc. ("NBV") appraised
Section S-4 as having a total undiscounted prospective value of $1,925,000,
which, when discounted to present "as is" market value, produced an estimated
market value of $620,000 as of May 12, 1997.

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NBV employed the developmental or anticipated use method whereby the
present "as is" market value of property is based on an estimate of the gross
sell-out of the subject lots on a finished, retail basis. The total of all
direct and indirect costs necessary to complete the land development required in
order to market the finished lots on a retail basis, in addition to all holding
period expenses that may reasonably be anticipated in connection with the
development and marketing process, are deducted from the estimated sale
proceeds. Further, the methodology takes into account absorption, related
holding period costs and anticipated profit. NBV assumed that Section S-4 would
produce 77 finished townhouse lots.

Westbury, Phase II Section I, Lexington Park, MD.
------------------------------------------------

Westbury, Phase II Section I comprises 26.992 acres of undeveloped
land off the north side of Pegg Road and Westbury Boulevard West in Lexington
Park, Maryland. Brick House Realty, Inc. ("Brick House") appraised the property
on May 30, 1997 as having a total undiscounted prospective market value of
$1,632,000 based on a proposed 51-lot subdivision on the property. Brick House
discounted this figure to a present "as is" market value of $348,813 as of May
20, 1997. Brick House, on request, further appraised the property as recorded
but undeveloped "paper lots" to be worth $678,000, and the value of the subject
property "as is" raw land to be worth $250,000.

Brick House employed the sales comparison approach discussed above to
determine present "as is" market value of the subject property. Brick House
estimated an average of $32,000 per lot for the 51 potential lots determined
from comparison to sales of reasonably similar type properties in the area.
Brick House calculated an aggregate prospective market value of $1,632,000,
which was then discounted to $348,813 to reflect the time expected to sell all
lots, the carrying cost during the sellout period, the marketing expense,
developer's profit, other completion costs, and a 13% discount rate.

Pomfret Property, Waldorf, MD.
-----------------------------

The Pomfret Property comprises 812.2 acres of land designated for
residential low density development located on the southern and northern sides
of Pomfret Road. The total assemblage is broken down into a Northern Section,
which contains 202.79 acres, and the Southern Section, which contains 609.38
acres. Smail appraised the property on February 14, 1997 as having a present
"as is" market value of $3,250,000 as of December 31, 1996.

Smail used the sales comparison approach using the most comparable
date to arrive at a projected "as is" market value estimate per land use for the
Pomfret Property. Under this approach, recent sales of similar properties are
analyzed and each sale adjusted to reflect pertinent dissimilarities with the
subject property, including cash equivalency, market conditions, and other
factors warranting adjustment. Smail then

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calculated the net present value of the projected income stream over the
estimated lot sellout period based on the retail value of finished lots, the
projected absorption of finished lots, and deductions representing the
installation of infrastructure, costs of sales, administrative costs, real
estate taxes and an appropriate entrepreneurial profit. Smail concluded that
development of these parcels was not feasible at that time and that the property
should be held over for future development. Smail, after making the appropriate
adjustments, valued each acre at $4,000 to yield an aggregate "as is" market
value of $3,250,000 for the entire Pomfret Property.

Parcels A-3 & A-4, Westlake Village, St. Charles, MD.
----------------------------------------------------

Parcels A-3 & A-4 consist of 14 acres of commercial land located in
the horseshoe created by Smallwood Drive West and St. Patricks Drive immediately
west of St. Charles Regional Mall. Both parcels abut O'Donnell Lake to the
east. Smail appraised the value of the parcels on February 14, 1997 as having a
gross retail value of $4,214,000 as of December 31, 1996.

26 Single Family Lots, Dorchester Village, St. Charles, MD.
----------------------------------------------------------

Smail appraised the value of these 26 lots on February 16, 1997 as
having a gross retail value of $1,296,000 as of December 31, 1996.

GENERAL.

The appraisers of the properties described above generally made a
number of assumptions, including that the title was marketable and that the
properties were free and clear of all liens and encumbrances (except certain
mortgages thereon), and in compliance with applicable building, environmental,
zoning and similar laws. In preparing their Appraisal Reports, the appraisers
relied upon operating, financial and other information provided by IGC and other
sources.

Care should be exercised in evaluating the conclusions of the
Appraisal Reports. An appraisal is only an estimate of value and should not be
relied upon as a measure of realizable value. As with any appraisal, methods
and assumptions used by the appraisers in preparing the Appraisal Reports were
those that the appraisers, in their professional judgment, concluded were
appropriate. There can be no assurance, however, that such assumptions will
materialize or that other or different methods or assumptions might not be
appropriate. Moreover, the current appraised value of the property is not a
prediction of the value that the property may have at any time in the future.
Future values of property will depend on a variety of factors, including the
economic success of the property, the impact of inflation on property values,
local competitive circumstances and general economic conditions.

-122-

LEGAL PROCEEDINGS

ACPT.

None.

IGC.

Wetlands Litigation.
-------------------

In 1994, the U.S. Attorney for the District of Maryland ("U.S.
Attorney") commenced a federal grand jury investigation regarding actions by IGC
in developing certain parcels in St. Charles, Maryland. The parcels were
identified by the U.S. Army Corps of Engineers (the "Corps") as wetlands within
its regulatory jurisdiction. In October 1995, the grand jury issued an
indictment charging IGC, SCA and IGC's Chairman, James J. Wilson, with four
felony and four misdemeanor counts of violations of Section 404 (wetlands) of
the U.S. Clean Water Act. The charges related to discharge of fill materials
into wetlands within the Corps' regulatory jurisdiction without a permit. The
violations charged were to have occurred on four parcels totaling approximately
50 acres out of the approximately 4,400 acres IGC had developed in St. Charles.
At the same time, the U.S. Attorney filed a civil action charging nine separate
civil violations of the U.S. Clean Water Act with respect to the four parcels
involved in the criminal action and one additional parcel. The civil action was
dismissed without prejudice, and thus may be refiled.

On February 29, 1996, IGC, SCA and Mr. Wilson were convicted in the
U.S. District Court for the District of Maryland (the "District Court") on the
four felony counts. On June 17, 1996, Mr. Wilson was sentenced to 21 months
imprisonment, one year of supervised release and a $1,000,000 fine. IGC and SCA
were fined $2,000,000 and $1,000,000, respectively, placed on probation for five
years and ordered to implement a wetlands restoration and mitigation plan, which
IGC's engineers estimate would cost $2,000,000 to $3,000,000. IGC paid the
aggregate $3,000,000 in fines on behalf of itself and SCA. The Wetlands
Properties subject to this litigation are being retained by IGC which will
remain responsible for restoration and mitigation costs. As a result of the
conviction, the Wetlands Properties were encumbered by an obligation to impose a
conservation easement.

On December 23, 1997 a three judge panel of the U.S. Court of Appeals
for the Fourth Circuit (the "Appeals Court") reversed the convictions of IGC,
SCA and Mr. Wilson and remanded the matter to the District Court for a new
trial. On January 26, 1998 the three-judge panel denied the U.S. Attorney's
petition for rehearing. On February 28, 1998 the government returned the fine
that IGC had paid.

-123-

In reversing the convictions, the Appeals Court voided regulations
that defined "waters of the United States" to include intrastate wetlands that
could affect interstate commerce. However the appellate decision did not
foreclose a determination upon retrial that IGC's Wetlands Properties are
"waters of the United States" because they are "adjacent" to "navigable waters"
within the meaning of the Clean Water Act. Other courts have construed
"adjacent" to mean "reasonably proximate" or "closely related." IGC's Wetlands
Properties are over 9 miles from the nearest "navigable waters."

The ultimate outcome of this litigation remains uncertain.
Representatives of the U.S. Attorney's office have stated publicly that the
government intends to retry the criminal case.

Other Litigation.
----------------

In 1994, SCA and IGC, as its general partner, filed two claims against
Charles County, Maryland and its County Commissioners in the Maryland Tax Court,
a state administrative agency, seeking compensation for school sites that SCA
previously had deeded to the County. The actions seek to enforce an agreement
settling litigation between the parties that was entered into in 1989 as well as
rights under Charles County law. Under the terms of the settlement agreement,
the County agreed to credit SCA for school sites contributed and to repay to SCA
any excess school impact fees paid. IGC and SCA seek $5,500,000, equal to the
fair market value of the school sites. SCA's and IGC's claims have not yet been
decided by the Tax Court. Any recovery will be for the benefit of IGC and not
ACPT.

In a separate proceeding, SCA and IGC, as its general partner, filed
suit in 1997 against Charles County and its County Commissioners in the Circuit
Court for Charles County to enforce another provision of the 1989 settlement
agreement. IGC and SCA claim that the County has failed to conduct an
appropriate water and sewer connection fee study as the basis on which to set
such fees for the St. Charles communities. This matter has been the subject of
extensive previous litigation, and in 1992 the Circuit Court for Charles County
rendered judgment in favor of SCA and IGC requiring the County to conduct an
appropriate study. That decision was affirmed in 1995 by the Court of Special
Appeals of Maryland. The litigation filed by SCA and IGC in 1997 seeks to
enforce the prior court orders that require the County to conduct the
appropriate water and sewer connection fee study, to reduce the connection fees
paid prospectively in the St. Charles communities, and to obtain repayment of
excess fees paid in the past. The matter has not yet been decided by the
Circuit Court for Charles County. SCA has assigned its rights under the
settlement agreement to ACPT. However, any damages awarded in respect of excess
sewer connection fees paid prior to the Distribution would be retained by SCA.

-124-

IGC CONSOLIDATED FINANCIAL DATA

The audited consolidated financial statements of IGC as of December
31, 1997 and 1996 and for the years then ended and the section captioned
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included in IGC's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "IGC 10-K") are incorporated herein by reference. The
IGC 10-K is attached as Annex 1 to this Proxy Statement/Prospectus.

The Selected Financial and Operating Data of IGC have been derived
from the consolidated financial statements of IGC incorporated herein by
reference and should be read in conjunction therewith.

The unaudited Pro Forma Consolidated Financial Data of IGC reflects
IGC and its continuing businesses subsequent to the Restructuring and the
Distribution as of and for the year ended December 31, 1997, as if the
Restructuring and the Distribution had been completed January 1, 1997 and as if
the Restructuring and the Distribution were in effect as of such date. The Pro
Forma Consolidated Financial Data of IGC are unaudited and provided for
informational purposes only and do not purport to be indicative of the results
that actually would have been obtained if the Restructuring and the Distribution
had been effected on the dates indicated or of the results that may be obtained
in the future.

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SELECTED FINANCIAL AND OPERATING DATA OF
INTERSTATE GENERAL COMPANY L.P.

Year Ended December 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
--------- -------- --------- -------- ---------
(In thousands, except per unit amounts)

Income Statement Data

Revenues
Land sales (a) $ 13,357 $ 14,717 $ 14,824 $ 22,296 $ 13,809
Home sales 7,805 9,715 10,826 20,265 21,884
Investment in gaming
properties -- 4 (78) 7,288 2,358
Equity in earnings from
partnerships and
development fees 1,494 16,530 2,647 4,941 3,279
Apartment rental revenues 8,737 7,577 4,642 4,538 2,113
Management and other fees 3,775 4,816 3,894 3,507 4,493
Interest and other income 1,044 1,015 945 687 1,395
-------- -------- -------- -------- --------
Total revenues 36,212 54,374 37,700 63,522 49,331

Provision for wetlands
litigation expenses 1,772 973 4,107 498 --
Other expenses 37,419 39,922 35,108 52,872 42,973
Income taxes 606 3,634 1,452 3,511 (835) (2)
Net income (loss) (3,585) 9,845 (1) (2,967) 6,641 7,193 (2)
Basic net income (loss) per unit (.35) .95 (1) (.29) .65 .71 (2)
Cash distributions per unit -- .11 -- .10 --

(a) Includes sales to affiliates 3,000 9,086 3,233 -- --

Balance Sheet Data

Assets related to
community development $ 82,509 $ 83,085 $ 79,558 $ 70,061 $ 78,876
Assets related to
investment properties 47,291 52,698 36,722 35,608 42,707
Assets related to home
building projects 2,573 2,491 3,819 4,998 7,566
Total assets 145,038 148,568 132,093 123,513 140,314

Debt related to community development
Recourse 35,176 34,077 47,841 36,661 50,137
Non-recourse 2,295 2,153 2,034 4,268 2,762
Debt related to investment properties
Recourse 969 1,139 1,322 1,559 1,857
Non-recourse 39,101 39,508 22,650 22,771 22,457
Debt related to homebuilding
Recourse 159 502 981 2,398 3,320
Total liabilities 101,750 101,974 94,184 82,808 108,069

Partners' equity 43,288 46,594 37,909 40,705 32,245

(1) Includes a $932,000 or $.09 per Unit reduction for the
extraordinary item-early extinguishment of debt.
(2) Includes a $1,500,000 or $.15 per Unit benefit for the cumulative
effect of a change in accounting principle to reflect the adoption
of SFAS No. 109 "Accounting for Income Taxes".

-126-

Year Ended December 31,
--------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands, except per unit amounts)

Operating Data

Community Development
Residential lots sold 250 523 134 228 295
Residential lots used by
Company's homebuilding operations 5 27 25 44 91
Residential lots used in joint
venture operations 21 -- -- -- --
Residential lots transferred to
Company's rental property operations -- -- 54 -- 56
Commercial and business park
acres sold 17 5 20 76 12
Undeveloped acres sold 381 -- 2 20 27

Homebuilding, all locations
Contracts for sale, net of
cancellations 73 67 133 134 232
Number of homes sold 112 156 190 200 216
Backlog at end of period 58 68 92 86 152

Rental apartment units
managed at end of period 8,139 8,139 8,085 8,085 8,029
Units under construction -- -- 54 -- 56

QUARTERLY SUMMARY (UNAUDITED)

IGC's quarterly results are summarized as follows:

Year Ended December 31, 1997
-------------------------------------------------
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter Total
------- -------- --------- --------- --------

Revenues $7,387 $10,809 $ 7,174 $10,842 $36,212
Income (loss) before taxes and minority interest 415 1,763 (246) (4,472) (2,540)
Net income (loss) as previously reported 255 1,798 (808) (4,830) (3,585)
Adjustment for Coachman's Landing (1) -- (576) -- 576 --
Adjustment for spin-off costs (2) -- -- (300) 300 --
Net income (loss) as revised 255 1,222 (1,108) (3,954) (3,585)
Basic earnings per Unit as previously reported:
Net income (loss) .02 .18 (.08) (.47) (.35)
Basic earnings per Unit as revised:
Net income (loss) .02 .12 (.10) (.39) (.35)

(1) Adjustment made in the fourth quarter for Coachman's Landing is to
reverse gain recorded on sale of a portion of IGC's investment in
Coachman's Landing.
(2) Adjustment made in the fourth quarter for spin-off costs is to
expense spin-off costs which were capitalized as start-up costs
during the quarter.

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INTERSTATE GENERAL COMPANY L.P. ("IGC")
PRO FORMA CONSOLIDATED STATEMENT OF (LOSS) INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
(Unaudited)

RECLASSI- PRO
IGC FICATION IGC FORMA
HISTORICAL ENTRIES RECLASSIFIED ACPT (C) IGC (D)
----------- -------------- ------------- -------- --------

REVENUES
Community development-land sales $13,357 $ 105 (A) $13,462 $13,165 $ 297
Homebuilding-home sales 7,805 -- 7,805 -- 7,805
Equity in earnings from partnerships
and developer fees 1,494 -- 1,494 1,509 (15)
Rental property revenues 8,737 -- 8,737 8,737 --
Management and other fees, substantially
all from related entities 3,775 -- 3,775 3,775 --
Interest and other income 1,044 716 (B) 1,760 943 817
------- ------- ------- ------- -------
Total revenues 36,212 821 37,033 28,129 8,904
------- ------- ------- ------- -------

EXPENSES
Cost of land sales 8,881 71 (A) 9,139 8,494 645
187 (B)
Cost of home sales 7,486 (23) (A) 7,463 -- 7,463
Selling and marketing 1,232 -- 1,232 127 1,105
General and administrative 7,034 -- 7,034 6,607 427
Interest expense 3,609 270 (B) 3,879 3,820 59
Rental properties operating expense 3,597 -- 3,597 3,597 --
Depreciation and amortization 2,128 -- 2,128 1,850 278
Wetlands litigation expenses 1,772 -- 1,772 -- 1,772
Write-off of deferred project costs 6 -- 6 6 --
Write-off of goodwill 1,843 -- 1,843 -- 1,843
Spin-off costs 1,164 -- 1,164 1,164 --
------- ------- ------- ------- -------
Total expenses 38,752 505 39,257 25,665 13,592
------- ------- ------- ------- -------

(LOSS) INCOME BEFORE PROVISION FOR
INCOME TAXES AND MINORITY INTEREST (2,540) 316 (2,224) 2,464 (4,688)

PROVISION FOR INCOME TAXES 606 -- 606 470 136
------- ------- ------- ------- -------

(LOSS) INCOME BEFORE MINORITY INTEREST (3,146) 316 (2,830) 1,994 (4,824)
MINORITY INTEREST (439) -- (439) (439) --
------- ------- ------- ------- -------

NET (LOSS) INCOME $(3,585) $ 316 $(3,269) $ 1,555 $(4,824)
======= ======= ======= ======= =======

BASIC NET (LOSS) INCOME
PER SHARE $ (.35) .03 $ (.32) $ .30 $ (.47)
======= ======= ======= ======= =======

WEIGHTED AVERAGE SHARES OUTSTANDING 10,289 10,289 10,289 5,196 10,289
======= ======= ======= ======= =======

The accompanying notes are an integral part of this pro forma consolidated
statement of income.

-128-

INTERSTATE GENERAL COMPANY L.P. ("IGC")
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

ASSETS
------

RECLASSI- PRO
IGC FICATION IGC FORMA
HISTORICAL ENTRIES RECLASSIFIED ACPT (C) IGC (D)
---------- ------------- ------------ --------- --------

CASH AND CASH EQUIVALENTS
Unrestricted $ 2,273 $ -- $ 2,273 $ 2,127 $ 146
Restricted 508 -- 508 374 134
-------- ------- -------- -------- -------
2,781 -- 2,781 2,501 280
-------- ------- -------- -------- -------

ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
Puerto Rico 32,918 1,350 (B) 34,268 34,268 --
St. Charles, Maryland 28,417 -- 28,417 21,750 6,667
Other United States locations 14,698 -- 14,698 -- 14,698
Notes receivable on lot sales and other,
substantially all due from affiliates 6,476 -- 6,476 5,629 847
-------- ------- -------- -------- -------
82,509 1,350 83,859 61,647 22,212
-------- ------- -------- -------- -------

ASSETS RELATED TO RENTAL PROPERTIES
Operating properties, net 37,829 -- 37,829 37,829 --
Investment in unconsolidated rental
property partnerships 8,657 -- 8,657 8,657 --
Other receivables, net 805 -- 805 621 184
-------- ------- -------- -------- -------
47,291 -- 47,291 47,107 184
-------- ------- -------- -------- -------

ASSETS RELATED TO HOMEBUILDING
Homebuilding construction and land 1,914 -- 1,914 -- 1,914
Investment in joint venture 591 -- 591 591 --
Receivables and other 68 -- 68 -- 68
-------- ------- -------- -------- -------
2,573 -- 2,573 591 1,982
-------- ------- -------- -------- -------

OTHER ASSETS
Receivables, deferred costs regarding waste
technology and other projects and other 8,797 6,772 (B) 15,569 2,514 13,055
Property, plant and equipment, net 1,087 -- 1,087 448 639
-------- ------- -------- -------- -------
9,884 6,772 16,656 2,962 13,694
-------- ------- -------- -------- -------
TOTAL ASSETS $145,038 $8,122 $153,160 $114,808 $38,352
======== ======= ======== ======== =======

The accompanying notes are an integral part of this pro forma consolidated
balance sheet.

-129-

INTERSTATE GENERAL COMPANY L.P. ("IGC")
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

RECLASSI- PRO
IGC FICATION IGC FORMA
HISTORICAL ENTRIES RECLASSIFIED ACPT (C) IGC (D)
---------- --------- ------------ -------- --------

LIABILITIES RELATED TO COMMUNITY
DEVELOPMENT
Recourse debt $ 35,176 $6,772 (B) $ 41,948 $ 39,784 $ 2,164
Non-recourse debt 2,295 -- 2,295 2,295 --
Accounts payable, accrued liabilities
and deferred income 5,245 -- 5,245 5,100 145
-------- ------ -------- -------- -------
42,716 6,772 49,488 47,179 2,309
-------- ------ -------- -------- -------

LIABILITIES RELATED TO RENTAL PROPERTIES
Recourse debt 969 -- 969 969 --
Non-recourse debt 39,101 -- 39,101 39,101 --
Accounts payable and accrued liabilities 3,331 -- 3,331 2,701 630
-------- ------ -------- -------- -------
43,401 -- 43,401 42,771 630
-------- ------ -------- -------- -------

LIABILITIES RELATED TO HOMEBUILDING
Recourse debt 159 -- 159 -- 159
Accounts payable, accrued liabilities
and deferred income 2,501 -- 2,501 -- 2,501
-------- ------ -------- -------- -------
2,660 -- 2,660 -- 2,660
-------- ------ -------- -------- -------

OTHER LIABILITIES
Accounts payable and accrued liabilities 6,330 -- 6,330 3,246 3,084
Notes payable and capital leases 615 -- 615 173 442
Accrued income tax liability-current 1,541 -- 1,541 1,539 2
Accrued income tax liability-deferred 4,487 -- 4,487 4,120 367
-------- ------ -------- -------- -------
12,973 -- 12,973 9,078 3,895
-------- ------ -------- -------- -------
TOTAL LIABILITIES 101,750 6,772 108,522 99,028 9,494
-------- ------ -------- -------- -------

PARTNERS' CAPITAL 43,288 1,350 (B) 44,638 15,780 28,858
-------- ------ -------- -------- -------

TOTAL LIABILITIES AND PARTNERS'
CAPITAL $145,038 $8,122 $153,160 $114,808 $38,352
======== ====== ======== ======== =======

The accompanying notes are an integral part of this pro forma consolidated
balance sheet.

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INTERSTATE GENERAL COMPANY L.P.("IGC")
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL DATA

(A) Land sales occurred during the year ended December 31, 1997, as IGC's land
business sold lots to its homebuilding business. Gross profit on these
sales, historically eliminated in consolidation, has been included in IGC
and ACPT's historical results for these periods based upon the estimated
fair market value of the land (based on comparable sales to third parties).

(B) As of and during the year ended December 31, 1997, an intercompany note
receivable and intercompany debt existed between IGC and LDA. Interest
income and expense and the note receivable and payable amounts,
historically eliminated in consolidation, have been included above in IGC's
and ACPT's historical results.

(C) Reflects the registration, initiation of operations, and distribution of
all Common Shares of American Community Properties Trust ("ACPT"). ACPT,
which was formed on March 17, 1997, is expected to carry out the
restructuring of IGC. IGC expects to transfer its principal operations to
ACPT and distribute to the partners of IGC, including its Unitholders, all
the Common Shares of ACPT.

(D) Column balances equal "IGC Reclassified" column balances less "ACPT" column
balances. IGC's remaining operations include the U.S. homebuilding
business, waste technology business, land subject to the wetlands
litigation and certain other parcels of land.

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IGC AFTER THE RESTRUCTURING

NO CHANGE IN PARTNERSHIP STRUCTURE.

After the Restructuring, IGC will remain a publicly-traded limited
partnership under the existing Partnership Agreement. No amendments to the
Partnership Agreement are being made as a part of the Restructuring. IGC's
executive offices are located at 222 Smallwood Village Center, St. Charles,
Maryland 20602.

MANAGEMENT OF IGC.

IGMC will continue as the managing general partner of IGC after the
Restructuring, and James J. Wilson will continue as the Chairman of the Board of
IGMC and the Chief Executive Officer of IGC. However, following the
Distribution, no Trustee or officer of ACPT will serve as a director or officer
of IGMC. Consequently, J. Michael Wilson, Thomas Wilson, Donald Blakeman,
Thomas Shafer, Edwin Kelly, Paul Resnik, Eduardo Cruz Ocasio, Carlos R.
Rodriguez and Francisco Arrivi Cros, who currently are directors and/or officers
of IGMC and who are or will be Trustees and/or officers of ACPT will resign from
their positions at IGC prior to the Distribution. Following the Distribution,
the directors of IGMC, in addition to James Wilson, will be Mark Augenblick,
__________, __________, and __________, and the principal executive officers of
IGC will be _________, __________, and __________.

Following the Restructuring, Mark Augenblick will serve as president
and chief operating officer of IGC, and will continue to serve as a director,
chairman and chief executive officer of AFH, CWT and IWT, and as a director of
IGMC. Mark Augenblick presently serves as a vice chairman of IGC, as well as
chairman and chief executive officer of AFH, CWT and IWT. Mr. Augenblick will
receive an annual base salary of $400,000, annual directors' fees, various
employment-related bonuses, and 70,000 common shares in IWT and CWT subject to
forfeiture in the event of early termination of his employment contract.

DESCRIPTION OF IGC'S CONTINUING BUSINESS.

After the Restructuring, IGC will continue to own the Retained Assets,
which in management's view do not fit ACPT's business plan. These assets
include the Wetlands Properties, the LDA Note, all of the shares of AFH, certain
single family home lots in the Dorchester neighborhood in St. Charles, 14 acres
of commercial land in St. Charles, an indirect 50% interest in Brandywine
Investment Associates L.P., which owns land in Brandywine, Maryland, a 100%
interest in Pomfret LLC, which owns land in Pomfret, Maryland, the Westbury
land, Chastleton and Coachman's L.P. and the beneficial interest in the CWT
Trust. Management of IGC believes that the Retained Assets will enable IGC to
continue significant operations following the Distribution. As a result of the
wetlands conviction, the Wetlands Properties were encumbered by an

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obligation to impose a conservation easement that would prohibit development.
The easement was never recorded and the wetlands conviction was reversed.
However, the matter has been remanded for a new trial and as a practical matter,
the Wetlands Properties remain undevelopable until the wetlands litigation is
finally resolved.

Real Estate Development.
-----------------------

Brandywine

SCA, in which IGC holds a 99% interest, owns a 50% interest in
Brandywine Investment Associates L.P., a Maryland limited partnership.
Brandywine Associates owns Brandywine Village, a 277 acre tract in Prince
George's County, Maryland. The property currently is in the planning,
engineering and approval phase, and consists of two approved comprehensive
design zones that permit residential, retail commercial, office commercial and
light industrial uses. The value of IGC's interest in Brandywine Village has
been appraised at $8,885,000 as of June 9, 1997.

Pomfret

IGC holds a 100% interest in Pomfret LLC, which owns an 812 acre tract
in Charles County, Maryland. The site, which currently is in the planning
phase, is zoned for low density residential use, which would permit 812 one-acre
home sites or up to 1,420 single family detached units with a central sewer
system. The value of IGC's interest in the Pomfret land has been appraised at
$3,250,000 as of December 31, 1996.

Westbury

IGC owns approximately 340 lots for residential use in the master
planned community of Westbury in St. Mary's County, Maryland. IGC's holdings
consist of 38 townhome and 54 single family lots that currently are under
development, plus an additional 250 lots that have been approved for single
family use that IGC anticipates will be developed over the next several years.
The value of IGC's interest in 51 of the Phase II single family lots has been
appraised at $210,000 as of May 20, 1997.

St. Charles Commercial Land

IGC owns an approximately 14 acre parcel adjacent to the St. Charles
Towne Center that is currently zoned for commercial development. The parcel has
been appraised as having a gross retail value of $ 4,214,000 as of December 31,
1996.

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Dorchester

IGC owns 26 single family home lots in the Dorchester neighborhood of
St. Charles. The lots have been appraised at $48,000 per lot as of December 31,
1996.

Wetlands Properties

As a result of the wetlands conviction, the Wetlands Properties were
encumbered by an obligation to impose a conservation easement that would
prohibit development. The easement was never recorded and the wetlands
conviction was reversed. However, pending final resolution of the wetlands
litigation, as a practical matter, the Wetlands Properties may not be developed.
The Wetlands Properties include the Towne Center South land in St. Charles,
which prior to the wetlands litigation was held by IGC for commercial
development.

Interstate Waste Technologies; CWT Trust.
----------------------------------------

Following the Distribution, IGC plans to continue the development and
expansion of the waste treatment facility development business currently
conducted by IWT. All of the outstanding stock of IWT and of CWT will be
contributed to the CWT Trust. Before contributing CWT and IWT to the CWT Trust,
IGC will capitalize these entities with (i) a third party note receivable in the
amount of $1.06 million resulting from the sale by IGC of 53 single family lots
in the Montclair neighborhood of Prince William County, Virginia, (ii) 77
townhome lots in the Montclair neighborhood with an estimated value of $700,000
to $1 million, and (iii) $1 million of cash. IGC's objective is to establish
the waste treatment business in a single viable operating company that can be
sold or spun off as a separate company to IGC Unitholders in the future. CWT
has been invited by the government of the Caribbean nation of St. Maarten to
submit a proposal for the development of a waste treatment facility that would
use IWT's innovative waste disposal and conversion technology.

American Family Homes.
---------------------

Management of IGC intends to seek a buyer, merger candidate or
strategic investing partner for AFH. However, there can be no assurance that
any such transaction will be consummated on terms acceptable to IGC. In the
interim, AFH will continue its homebuilding activities in Virginia, North
Carolina and South Carolina.

LISTING OF IGC UNITS.

Management of IGC believes that the assets retained by IGC after the
Distribution will enable IGC to continue significant operations, and permit the
continued listing of the IGC Units on the AMEX and the PSE. The AMEX has
considered the matter and advised that following the Restructuring it expects
the IGC Units to meet the

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criteria for continued AMEX listing. To increase the post-Restructuring trading
price of IGC Units immediately following the Distribution, IGC will implement a
1 for 5 reverse Unit split.

CREDITORS RIGHTS.

If, in a lawsuit by an unpaid creditor or representative of creditors
of IGC, such as a trustee in bankruptcy, a court were to find that, at the time
IGC made the Distribution, IGC (i) was insolvent, (ii) was rendered insolvent by
reason of the Distribution, (iii) was engaged in a business or transaction for
which IGC's assets constituted unreasonably small capital, or (iv) intended to
incur, or believed that it would incur, obligations beyond its ability to pay
such obligations as they matured, such court could void the Distribution as a
fraudulent transfer or conveyance and require recipients of Common Shares to
return them (or equivalent amounts) to IGC or to a fund for the benefit of its
creditors.

As described below, IGC's management believes that following the
Distribution IGC will be solvent, will have sufficient capital for carrying on
its business and will be able to pay its obligations, including those related to
the wetlands litigation, as they become due. There can be no assurance,
however, that a court would value IGC's assets on the same basis to determine
whether IGC was insolvent at the time of, or after giving effect to, the
Distribution, or that, regardless of the method of valuation, a court would not
determine that IGC was insolvent at such time, that it was engaged in a business
for which its remaining assets constituted unreasonably small capital or that
IGC was generally unable to pay its obligations as they became due.

In addition, the Delaware Act prohibits limited partnerships from
making distributions to limited partners to the extent that, after giving effect
to such distribution, certain liabilities of the partnership exceed the fair
value of its assets. The Delaware Act further provides that recipients of a
distribution who knew at the time of such distribution that such distribution
violated the Delaware Act are liable to the partnership for the amount of the
distribution. However, limited partners receiving an unlawful distribution who
were unaware at the time of such distribution that it was unlawful are not
liable to the partnership. IGC's management believes that after giving effect
to the Distribution, IGC's liabilities will not exceed the fair value of its
assets and therefore that the Distribution will not violate the Delaware Act.

MANAGEMENT OF ACPT

ACPT BOARD OF TRUSTEES.

The business and affairs of ACPT will be managed under the direction
of the Board of Trustees. At the effective time of the Restructuring, the Board
of Trustees will have four members, all of whom will be persons who will be
employees of ACPT

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or a member of the Wilson Family. In addition, [three] other persons who will
not be employees of ACPT or any affiliated company or a member of the Wilson
Family have agreed to serve as Trustees beginning immediately after the
completion of the Restructuring.

Pursuant to the terms of the Declaration of Trust, the Trustees are
divided into three classes. One class will hold office initially for a term
expiring at the annual meeting of Shareholders to be held in 1999, a second
class will hold office initially for a term expiring at the annual meeting of
Shareholders to be held in 2000, and a third class will hold office initially
for a term expiring at the annual meeting of Shareholders to be held in 2001.
At each annual meeting of Shareholders, the successors to the class of Trustees
whose terms expire at that meeting will be elected to hold office for a term
continuing until the annual meeting of Shareholders held in the third year
following the year of their election and the election and qualification of their
successors. See "Certain Provisions of Maryland Law and ACPT's Declaration of
Trust and Bylaws."

ACPT TRUSTEES AND EXECUTIVE OFFICERS.

The following table sets forth certain information with respect to the
persons who will be the Trustees and the executive officers of ACPT at the
effective time of the Restructuring and the persons who have agreed to serve as
Trustees immediately following the completion of the Restructuring. Additional
biographical information follows the table. All executive officers are elected
by the Board of Trustees and may be removed, with or without cause, at the
discretion of the Board of Trustees.

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NAME AGE POSITION TERM EXPIRES
- ---- --- -------- ------------

J. Michael Wilson 32 Trustee, Chairman and
Chief Executive Officer
Edwin L. Kelly 56 Trustee, President and
Chief Operating Officer
Francisco Arrivi Cros 52 Trustee, Executive Vice
President and Treasurer
Donald G. Blakeman 65 Trustee(1)
Thomas Shafer 68 Trustee(1)
Thomas B. Wilson 35 Trustee
Paul A. Resnik 50 Senior Vice President
Eduardo Cruz Ocasio 52 Vice President and
Assistant Secretary

_______________________________

(1) To become Trustees immediately following completion of the Restructuring.

J. MICHAEL WILSON has been a Director of IGMC since December 1996 and
in January 1997 was named its Vice Chairman, Chief Financial Officer and
Secretary, and Chief Financial Officer of IGC. He has been President and Chief
Operating Officer of IBC since 1994 and a Director since 1991. He served as
Vice President of IBC from 1991 to 1994. He has been a director of Wilson
Securities Corporation since 1991, and President since March 1996. He was Vice
President of Wilson Securities Corporation from 1991 to 1996. He has been Vice
President of IWT since 1994. He served as Real Estate Finance Division Loan
Administrator for Chase Manhattan Bank in New York from 1989 to 1991. He
graduated from Manhattan College, New York with a degree in Business Finance in
1989.

EDWIN L. KELLY was named President and Chief Operating Officer of IGMC
and IGC in January 1997. He previously served as Senior Vice President and
Treasurer of IGC and Senior Vice President of IGMC since their formation in
1986. He has served in various executive positions with IGC and its predecessor
companies since 1974, including as a Director of IGMC from 1986 to present.
Prior to joining Interstate, he was a manager in the Consulting Division of
Arthur Andersen & Co.

FRANCISCO ARRIVI CROS was Senior Vice President of IGC from 1990 to
1996 and since 1997 has been Executive Vice President of IGC. He was named as a

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director of IGMC in April 1997. He also has served as President of IGP since
1996. Before joining IGC, he was Vice President of The Chase Manhattan Bank
N.A. in Puerto Rico from 1977 to 1990, and manager of its Real Estate Finance
Division from 1985 to 1990.

DONALD G. BLAKEMAN has been a Director of IGMC since its inception in
1986. He served as Executive Vice President of IGMC and IGC from 1986 to 1996.
He was Secretary of IGMC from 1990 to 1995. He served in various executive
positions with IGC and its predecessor companies from 1968 to 1996. He was
named President of Equus and Equus Management Company ("EMC") in January 1996,
and in connection with those roles he resigned as an officer of IGC in August
1996. He has served as a Director of EMC since its formation in 1994.

THOMAS SHAFER is a registered Professional Engineer specializing in
real estate evaluation and land development. He was a partner of Whitman,
Requardt and Associates, LLP ("Whitman Requardt"), an engineering and
architectural firm, since 1976 and its managing partner since 1989. He retired
from the Whitman, Requardt firm effective December 31, 1997. Mr. Shafer serves
on the Business Advisory Committee of Mayor Kurt Schmoke of Baltimore and as the
President and Chairman of the Board of the Charles Village Community Benefits
District and the Charles Village Community Foundation, Inc. Mr. Shafer is a
member of the Urban Land Institute, the National Society of Professional
Engineers and the American Water Works Association. His firm has provided
engineering services to IGC in connection with the St. Charles development for
thirty years.

PAUL A. RESNIK has been Senior Vice President of IGC since 1993 and
Vice President of IGMC since 1989. He served as Vice President of IGC from 1987
to 1993. From 1986 to 1987 he was Vice President of Multi-Management, Inc., a
property management and real estate development company in Cleveland, Ohio.
From 1978 to 1986 he was General Manager of Naiman Development Company, a
developer of commercial properties and property management company in Cleveland,
Ohio.

EDUARDO CRUZ OCASIO has been Vice President and Assistant Secretary of
IGMC since June of 1997. He has also been Vice President of IGC since 1991 and
Assistant Treasurer since 1987. He has served in various positions with IGC and
its predecessor companies since 1971, including Comptroller of IGP from 1977-
1990.

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COMMITTEES OF THE ACPT BOARD OF TRUSTEES.

Following the Restructuring, the Board of Trustees will have the
following committees:

Audit Committee.
---------------

The Audit Committee will consist of no fewer than two members, each of
whom will be an Independent Trustee. The responsibilities of the Audit
Committee will include making recommendations concerning the engagement of
independent public accountants, reviewing with the independent public
accountants the plans for and results of the annual audit engagement, approval
of any other professional services provided by the independent public
accountants, approval of the fees paid to the independent public accountants for
audit and non-audit services, and periodically reviewing, with the assistance of
the independent public accountants, the adequacy of ACPT's internal accounting
controls.

Compensation Committee.
----------------------

The Compensation Committee will consist of no fewer than two members,
each of whom will be an Independent Trustee. The Compensation Committee will be
responsible for the administration of the Share Incentive Plan and for approving
the compensation of the executive officers of ACPT.

Nominating Committee.
--------------------

The Board of Trustees does not have a standing committee for the
recommendation of nominees for election to the Board of Trustees. This function
is performed by the entire Board of Trustees.

COMPENSATION OF ACPT TRUSTEES.

Trustees that will not receive salaries from ACPT will receive
directors' fees established by the Board of Trustees. Initially, these Trustees
will be compensated at a rate of $5,000 per quarter, $1,400 per meeting and out
of pocket travel reimbursements for meeting attendance. Trustees who are not
employees of ACPT also are eligible to receive Share-based incentive
compensation under the Trustees Share Plan described below.

EXECUTIVE COMPENSATION.

The following table sets forth the estimated annualized base salary
expected to be paid following the Restructuring to each of ACPT's executive
officers:

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NAME POSITION ESTIMATED ANNUAL
BASE SALARY

J. Michael Wilson Chairman, Chief Executive $ 90,000
Officer
Edwin L. Kelly President, Chief $275,000
Operating
Officer
Francisco Arrivi Cros Executive Vice President, $275,000
Treasurer
Paul Resnik Senior Vice President $200,000
Eduardo Cruz Ocasio Vice President $104,000
All Executive Officers
as a Group $944,000

Subsequent to completion of the Restructuring ACPT intends to adopt one or more
incentive plans for its key employees in addition to the Share Incentive Plan
described below.

EMPLOYMENT AGREEMENTS.

Each of Messrs. Kelly, Arrivi and Resnik will enter into an employment
agreement (the "Employment Agreements") with American Management to become
effective on the date of the Distribution. The Employment Agreement of Messrs.
Kelly and Arrivi will replace employment agreements that they currently have
with IGC. Pursuant to the Employment Agreements, Mr. Kelly will serve as
President and Chief Operating Officer and will be paid an annual base salary of
$275,000, Mr. Arrivi will serve as Executive Vice President and will be paid an
annual base salary of $275,000, and Mr. Resnik will serve as Senior Vice
President and will be paid an annual base salary of $200,000. The Employment
Agreements will provide for salary raises at the discretion of the Board of
Trustees. Each of the Employment Agreements is annually renewable by the Board
of Trustees.

Under the terms of the Employment Agreements, if the executive's
employment with American Management is terminated by American Management other
than for "cause" (as defined in the Employment Agreement), or is terminated by
the executive for "good reason" (as defined in the Employment Agreement) the
terminated executive will be entitled to continue to receive his base salary for
months following the date of termination. The Employment Agreement also
provides for payment to the covered executive of severance compensation in an
amount equal to months base salary if within two years of any "change in
control" (as defined in the Employment Agreement) the covered executive is
terminated by American Management for any reason or voluntarily resigns.

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SHARE INCENTIVE PLANS.

ACPT has adopted the 1997 Share Incentive Plan (the "Share Incentive
Plan") and the 1997 Trustee Share Incentive Plan (the "Trustee Share Plan") to
provide for Common Share-based incentive compensation for officers, key
employees and Trustees. The Share Incentive Plan and the Trustee Share Plan
will be substantially similar to the existing plans of IGC. The summaries of
the Share Incentive Plan and Trustee Share Plan set forth below are qualified in
their entirety by reference to the text of the Plans, copies of which have been
filed as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part.

Employee Plan.
-------------

Under the Share Incentive Plan, the Compensation Committee of the
Board of Trustees may grant to key employees the following types of Share-based
incentive compensation awards ("Awards"): (i) options to purchase a specified
number of Common Shares ("ACPT Options"), (ii) forfeitable Common Shares that
vest upon the occurrence of certain vesting criteria ("Restricted Shares"), or
(iii) Share Appreciation Rights ("ACPT Rights") that entitle the holder to
receive upon exercise an amount payable in cash, Common Shares or other property
(or any combination of the foregoing) equal to the difference between the market
value of Common Shares and a base price fixed on the date of grant. A total of
208,000 Common Shares has been reserved for issuance under the Share Incentive
Plan.

The Share Incentive Plan authorizes the Compensation Committee to
determine the exercise price and manner of payment for ACPT Options and the base
price for ACPT Rights. The Compensation Committee also is authorized to
determine the duration and vesting criteria for Awards, including whether
vesting will be accelerated upon a change in control of ACPT.

Rights of key employees under Awards are not transferable other than
to immediate family members or by will or the laws of intestate succession.

Trustees Plan.
-------------

The Trustee Share Plan authorizes the Board of Trustees, in its
discretion, to grant to eligible Trustees Awards of the same types and terms of
Awards as provided under the Share Incentive Plan. Only Trustees who are not
employees of ACPT or any affiliated company are eligible to receive Awards under
the Trustee Share Plan. A total of 52,000 Common Shares have been reserved for
issuance under the Trustee Share Plan.

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TREATMENT OF IGC OPTIONS AND UNIT APPRECIATION RIGHTS.

In connection with the Distribution, holders of options to purchase
IGC Units ("IGC Options") which have been awarded prior to the Distribution
Date, whether or not such IGC Options have vested, will receive ACPT Options to
purchase one Common Share for every two IGC Options. Likewise, holders of IGC
Unit Appreciation Rights ("IGC Rights") awarded prior to the Distribution Date,
whether vested or not, will receive one ACPT Right for every two IGC Rights.
Holders of IGC Rights or Options will not be required to pay any additional
consideration for, and will not be required to surrender or exchange their IGC
Rights or Options to obtain such ACPT Rights or Options. Any ACPT Options or
Rights issued in respect of IGC Options or Rights that have not vested at the
time of the Distribution will vest at the same time as the corresponding IGC
Options or Rights.

Consequently, the following Trustees and officers of ACPT who
currently hold IGC Options or Rights will be issued the following number of ACPT
Options or Rights in connection with the Distribution: Francisco Arrivi Cros --
10,000 ACPT Options and 90,000 ACPT Rights; Paul Resnik -- 50,000 ACPT Rights;
and Edwin L. Kelly -- 40,000 ACPT Rights.

The exercise price for each such ACPT Option, or the base price for
each such ACPT Right, as the case may be, will be equal to (a) the exercise
price of the IGC Options or base price of the IGC Rights in respect of which
such ACPT Options or Rights were issued, multiplied by (b) the percentage
obtained by dividing (i) the average closing price of Common Shares on the AMEX
for the 20 trading days immediately following, but not including, the
Distribution Date (the "ACPT Average") by (ii) the sum of (A) the ACPT Average
and (B) the average closing sale price of IGC Units on the principal exchange on
which they are traded, or, if not traded on an exchange, in the over-the-counter
market, for the 20 trading days immediately following, but not including, the
Distribution Date (the "IGC Average") multiplied by two. In addition, the
exercise price or base price of each such IGC Option or Right will be adjusted
to equal (a) such exercise price or base price, multiplied by (b) the percentage
obtained by dividing (i) two times the IGC Average by (ii) the sum of (A) two
times the IGC Average and (B) the ACPT Average.

The costs associated with the adjusted IGC Rights and Options
following the Distribution will continue to be borne by IGC, and the cost
associated with the ACPT Rights and Options issued will be borne by ACPT.

RETIREMENT PLANS.

In connection with the Restructuring, all of the current employees of
IGC (except employees of AFH, IWT, CWT, Mark Augenblick and James J. Wilson)
will become employees of American Management. American Management will continue
and assume all of IGC's obligations under the retirement savings plan currently
maintained by IGC (the "Retirement Plan"). Employees are generally eligible to
participate when they complete one year of service. The Retirement Plan is a
defined contribution plan

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which provides for contributions by American Management for the accounts of
eligible employees in amounts equal to 4% of base salaries and wages not in
excess of the U.S. Social Security taxable wage base, and 8% of salaries
(limited to $150,000) that exceeded that wage base. Eligible employees also may
make voluntary contributions to their accounts and self-direct the investment of
their account balances in various investment funds that may be selected under
the plan.

OWNERSHIP OF COMMON SHARES

The following table sets forth certain information with regard to the
beneficial ownership of IGC Units as of March 1, 1998 and the projected
beneficial ownership of Common Shares after giving effect to the Restructuring
based on beneficial ownership of IGC Units as of March 1, 1998, by: (i) each
person who beneficially owns more than 5% of the outstanding IGC Units or would
beneficially own more than 5% of the outstanding Common Shares, (ii) each
Trustee and each named executive officer of ACPT, (iii) each director and named
executive officer of IGMC, (iv) all Trustees and executive officers of ACPT as a
group and (v) all directors and executive officers of IGMC as a group. Except
as otherwise indicated, each person named in the table will have sole voting and
sole investment power with respect to all of the Common Shares shown as
beneficially owned by such person.

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Beneficial Ownership (1)
------------------------------------
Number of Number of
Name of Beneficial Owner IGC Units Common Shares Percent
- ------------------------ --------- ------------- ---------

J. Michael Wilson (2) 215,495 107,748 2.08
Edwin L. Kelly 111,214 55,607 1.07
Francisco Arrivi Cros (3) 10,000 5,000 *
Donald G. Blakeman 377,389 188,695 3.64
Thomas Shafer - - *
Thomas B. Wilson 172,795 86,398 1.67
Paul Resnik 10,000 5,000 *
Eduardo Cruz Ocasio - - *
All Trustees and executive officers of ACPT 896,893 448,448 8.62
as a group (8 persons) (2) (3)
Mark Augenblick - - *
James J. Wilson (4) 30,579 15,290 *
Joel H. Cowan 40,256 20,128 *
All Directors and executive officers of IGMC
as a group (11 persons) (2) (3) 967,728 483,866 9.31
Bessemer Interstate Corporation
245 Peachtree Center Avenue #804
Atlanta, GA 30303 522,208 261,104 5.02
Interstate Business Corporation
222 Smallwood Village Center
St. Charles, MD 20602 3,080,515 1,540,258 29.62
Wilson Securities Corporation
222 Smallwood Village Center
St. Charles, MD 20602 1,172,203 586,102 11.27
__________________________

* less than 1%

(1) The beneficial ownership of IGC Units and Common Shares is determined on
the basis of IGC Units directly and indirectly owned by directors and
executive officers of IGMC and Trustees and executive officers of ACPT and
IGC Units to be issued to such persons under options which are exercisable
within the next 60 days. The percentage of ownership is based on the
aggregate number of IGC Units outstanding as of December 31, 1997, plus all
IGC Units issuable upon exercise of options within the next 60 days, for a
total of 10,354,185. At a distribution ratio of one to two, the number of
Common Shares expected to be outstanding immediately following the
Distribution is approximately 5,200,000. The total number of outstanding
ACPT shares does not reflect the results of the Private Offering.

(2) Includes 42,700 IGC Units (.42%) attributable to IGC Units held by the
Wilson Family Limited Partnership, a partnership for which J. Michael
Wilson serves as a general partner.

(3) Includes IGC Units subject to options exercisable under the IGC Employees
Plans of 10,000 for Francisco Arrivi Cros.

(4) Includes 100 IGC Units (0%) held by his wife, Barbara A. Wilson.

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TRANSACTIONS WITH RELATED PARTIES

CONSULTING AGREEMENT.

American Management will enter into a consulting and retirement
compensation agreement with IGC's founder and Chief Executive Officer, James J.
Wilson, to become effective on the date of the Restructuring (the "Consulting
Agreement"). The Consulting Agreement will provide for annual cash payments
during the first two years of $500,000 and annual cash payments for eight years
thereafter of $200,000. However, if Mr. Wilson dies or ACPT is sold during the
term of the Consulting Agreement, the agreement provides for a lump sum payment
equal to the lesser of $400,000 or the aggregate of annual payments then payable
under the agreement. During the Consulting Agreement term, Mr. Wilson will
remain available to provide consulting services requested from time to time by
the Board of Trustees. Pursuant to the Consulting Agreement, American
Management will reimburse the reasonable costs and expenses incurred by Mr.
Wilson in providing requested consulting services. The Consulting Agreement
would remain in effect in the event that Mr. Wilson is convicted of any charges
related to the wetlands litigation. Mr. Wilson is the father of J. Michael
Wilson and Thomas B. Wilson.

BANC ONE FINANCING.

On September 19, 1997, IGC refinanced substantially all of its U.S.
land development recourse indebtedness pursuant to a Master Loan Agreement dated
August 1, 1997 by and among IGC, ACPT, St. Charles Community LLC and Banc One.
To date approximately $14 million in proceeds of this $20 million facility were
used as follows: $6.8 million to satisfy existing indebtedness to NationsBank,
$1.7 million to pay Puerto Rico income tax, $2.5 million for various accounts
payable, and $3 million to pay in full the wetlands fine. In addition, the Banc
One facility provides for up to $4 million in community development financing
for Fairway Village, and $2 million for payment of wetlands remediation
expenses.

The loan bears interest at prime plus 2.5% and requires semi-annual
principal payments of $1 million during the first year and $1.5 million
thereafter until maturity at the end of the seventh year. The loan is secured
by substantially all of IGC's assets, excluding (with the exception of one 14
acre land parcel in St. Charles) the assets that will remain in IGC following
the Restructuring. During the first 3 years of the loan, Banc One is generally
entitled to receive 50% of the net sales proceeds of any collateral as a
mandatory principal curtailment with the percentages increasing to 60% in years
4 and 5, 70% in year 6, and 80% in year 7. The loan with Banc One requires
additional interest payments on each annual anniversary date. The amount due is
1% of the outstanding balance in 1998 and 1999, and increases 1/2% each year
thereafter, through 2003.

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In connection with the loan, IGC granted Banc One an option to
purchase 150,000 IGC Units at an exercise price of $3.0016 per unit. During any
year that the loan remains outstanding, IGC is required to grant Banc One 75,000
additional options with an exercise price equal to the lesser of the Strike
Price or the market price on the date of grant.

Following the Restructuring, and upon approval of Banc One, ACPT will
assume the obligation to grant options. IGC will remain liable to Banc One for
outstanding indebtedness but will be released from its other covenant
obligations. Pursuant to the Service Agreement, ACPT will indemnify and hold
harmless IGC from any liability under the Banc One loan.

JOINT LITIGATION WITH CHARLES COUNTY.

In connection with the land transfers, SCA has assigned to ACPT its
rights under the 1989 settlement agreement with Charles County. However, with
respect to pending litigation to enforce the settlement agreement, SCA has
retained its claim for any monetary damages for excess sewer connection fees and
impact fees paid prior to the Distribution that may be awarded as a result of
such litigation. See "Legal Proceedings -- IGC -- Other Litigation."

SERVICES OF WHITMAN, REQUARDT.

Whitman, Requardt, an engineering and consulting firm of which Thomas
Shafer recently retired as the managing partner, has regularly performed
engineering, surveying, inspection and environmental assessment services for IGC
and its predecessors with respect to the St. Charles land assets for over 30
years and will continue to provide such services for ACPT following the
Restructuring. Mr. Shafer will become a Trustee of ACPT upon completion of the
Distribution. Whitman, Requardt has charged IGC $300,000 for services performed
in 1997, and as of March 15, 1998, IGC owes Whitman, Requardt $137,000 for
services rendered. Following the Distribution ACPT will assume any outstanding
amounts payable to Whitman, Requardt.

NATIONSBANK LETTER OF CREDIT.

NationsBank has issued in the name of IGC a standby letter of credit
in the face amount of $4.2 million which serves as collateral for municipal
bonds in the principal amount of $4.2 million issued by a District of Columbia
agency that finance the Chastleton Apartments. IGC's obligations under the
letter of credit are secured by an assignment of certain notes payable by
Brandywine Investment Associates L.P. and by IGP's partnership interests in
three Puerto Rico Apartment Partnerships. Additional collateral has been
provided by IBC and IBC has undertaken to replace the NationsBank letter of
credit with a letter of credit secured only by assets of IBC.

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PAYMENTS TO IBC FOR SERVICES PROVIDED BY J. MICHAEL WILSON.

J. Michael Wilson, the Chairman of ACPT and President of IBC, will
remain on the payroll of IBC following the Restructuring. ACPT will reimburse
IBC for one half of Mr. Wilson's salary, up to $90,000, plus the amount of
related costs, including FICA and FUTA taxes, incident to such salary.

OTHER TRANSACTIONS.

For a description of other related party transactions involving ACPT,
see Note 9 to the Combined Historical Financial Statements of ACPP.

Management believes that the terms of the transactions described under
the caption "Transactions with Related Parties" are at least as favorable to
ACPT and IGC as those generally available for substantially comparable
transactions between unrelated parties.

INCOME TAX CONSIDERATIONS

FEDERAL INCOME TAX CONSIDERATIONS.

This "Federal Income Tax Considerations" section summarizes the
material federal income tax considerations applicable to the Distribution,
holding and disposition of Common Shares and the possible Liquidation of IGC.
This discussion is not a complete analysis of all the tax considerations and, in
particular, does not address all aspects of taxation that may be relevant to
certain types of Shareholders subject to special treatment under federal income
tax laws (for example, life insurance companies, certain tax exempt
organizations, financial institutions, foreign corporations, and non-resident
alien individuals). This discussion and the discussions that follow relating to
certain State and Puerto Rico tax considerations do not address the tax
considerations applicable to (1) the Asset Transfers, (2) the issuance, holding,
or disposition of American Rental Preferred Shares, (3) the issuance, holding,
or disposition of ACPT Preferred Shares under the Private Offering, or (4) the
exchange of limited partnership interests held by investors in the U.S.
Apartment Partnerships or the Puerto Rico Apartment Partnerships for limited
partnership interests in American Housing or IGP pursuant to the Exchange Offer.
This discussion also does not address foreign tax laws or any United States
federal, state, or Puerto Rico tax laws other than those pertaining to income
tax. This discussion assumes that the Shareholders will hold their Units and
the Common Shares as capital assets within the meaning of Section 1221 of the
Code. Except as noted, the discussion further assumes that Shareholders will
not be Puerto Rico resident individuals, entities organized under the laws of
Puerto Rico, persons engaged in a trade or business in Puerto Rico or trusts
resident in Puerto Rico (a "Puerto Rico Shareholder"). PROSPECTIVE SHAREHOLDERS
ARE STRONGLY URGED TO CONSULT THEIR OWN TAX ADVISERS REGARDING THE TAX
CONSEQUENCES OF THE DISTRIBUTION, HOLDING AND DISPOSITION OF COMMON SHARES.

No rulings have been requested from the IRS with respect to the
matters discussed in this section. Counsel's opinion with respect to federal
income tax matters is

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contained in a letter to ACPT dated ____, 1998 ("Counsel's Tax Opinion") which
is filed as an Exhibit to the Registration Statement of which this Proxy
Statement/Prospectus is a part. All references to Counsel's opinion on any
federal income tax matter expressed in this Proxy Statement/Prospectus is
subject to the qualifications, assumptions, and representations set forth in
Counsel's Tax Opinion, and is expressly conditioned on the representations made
by the Trustees of ACPT in a letter to Counsel dated _______ (the "Trustee
Letter") and the representations made by the general partner of IGC in a letter
to Counsel dated ______ (the "IGC Letter").

All computations, projections, estimates, and forecasts, including all
estimates and computations of the amount and character of income, gain, loss, or
deduction, and any underlying estimation or computation of tax basis and value,
have been furnished to Counsel by IGC. Counsel has not independently reviewed
these computations or the underlying projections, estimates, and forecasts upon
which they are based.

Counsel has assisted in the preparation of, and has reviewed, the
discussion in this "Federal Income Tax Considerations" section. Counsel is of
the opinion that the discussion in this "Federal Income Tax Considerations"
section fairly summarizes the federal income tax considerations that are likely
to be material to a Shareholder. Although the opinion of Counsel represents
Counsel's best judgement as to the matters discussed herein, it does not bind
the IRS or in any way constitute an assurance that the federal income tax
consequences described herein will be followed by the IRS. Counsel expresses no
opinion on the discussion contained in "Income Tax Considerations -- Certain
State Income Tax and Puerto Rico Income Tax Considerations -- Certain State Tax
Considerations" or "Income Tax Considerations -- Certain State Income Tax and
Puerto Rico Income Tax Considerations -- Certain Puerto Rico Income Tax
Considerations."

The summary of federal income tax consequences is based on the
provisions of the Code, the United States Department of the Treasury regulations
(the "Regulations"), published rulings of the IRS and judicial decisions as
currently in effect, all of which are subject to change and could be applied
retroactively at any time. Particularly, the Taxpayer Relief Act of 1997 (Pub.
L. 105-34) ("1997 Act") made significant changes to the Code, including changes
relating to the treatment of partnerships and REITs. It may be some time before
Regulations or other formal guidance is issued under the 1997 Act. Such
Regulations could interpret the relevant law in a manner that is contrary to
this discussion or contrary to the opinion of Counsel and such interpretation
could be applied retroactively. In addition, President Clinton has made several
legislative proposals relating to REITs as part of the revenue provisions
contained in the President's Fiscal Year 1999 Budget Proposal which, as
discussed below, could have a significant negative impact on the proposed
transactions. Bills containing a version of at least one of these REIT
proposals have been introduced in both the House of Representatives and the
Senate. It is possible that issues relating to

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qualification as a REIT will be the subject of significant legislative and
administrative activity in the near future.

All references in this "Federal Income Tax Considerations" section to
Puerto Rico law or the treatment of ACPT and IGP Group under Puerto Rico law,
including, without limitation, references to the treatment for Puerto Rico
income tax purposes, are based on the discussion under "Income Tax
Considerations -- Certain State Income Tax and Puerto Rico Income Tax
Considerations -- Certain Puerto Rico Income Tax Considerations" and the opinion
of Puerto Rico Counsel described therein.

FEDERAL INCOME TAX CLASSIFICATION OF IGC.

IGC is a Delaware limited partnership. The initial public offering of
IGC Units was completed in February 1987. The basic source of criteria for
classification of an entity for federal tax purposes is Sections 301.7701-1
through 301.7701-4 of the Regulations. Under the Regulations, business entities
such as IGC that have been in existence prior to 1997 generally retain the same
classification that they claimed under the former Regulations that were in
effect prior to 1997, unless they elect otherwise. Thus, IGC will retain its
partnership status so long as it does not elect to be treated as an association
taxable as a corporation and so long as it is not a "publicly traded
partnership" that is taxed as a corporation under Code Section 7704. Even if it
satisfies the other requirements to be treated as a partnership, an organization
generally will be taxed as a corporation if it is a "publicly traded
partnership." A partnership is publicly traded if, among other things, its
interests are traded on an established securities market.

As discussed below, if the Distribution occurs at a time when IGC is
treated as a corporation for tax purposes, the Distribution will result in
significant adverse tax consequences to IGC and the Unitholders. It is possible
that the determination of whether IGC will be treated as a corporation as of
January 1, 1998, will not be certain until after the Distribution and it is also
possible that the Distribution could adversely affect the determination of
whether IGC will be treated as a corporation as of January 1, 1998, because the
Distribution will remove a potential source of a significant amount of gross
income of the type that would allow IGC to qualify for an exception from the
general rule that publicly traded partnerships are taxed as corporations.

Entities such as IGC that were publicly traded partnerships on
December 17, 1987 ("Existing Partnerships") were not subject to the general
rules for treatment as a corporation under Code Section 7704 until taxable years
beginning after December 31, 1997. The 1997 Act generally permitted an Existing
Partnership to make an irrevocable election ("Electing Existing Partnership") to
continue to avoid treatment as a corporation (even if it did not qualify for the
exception for partnerships with passive-type income, described below) if the
Electing Existing Partnership consented to, and paid, a tax equal to 3.5% of its
gross income for the taxable year from the active

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conduct of trades or businesses of the Electing Existing Partnership. This tax
generally is treated as an income tax, but no credit is available to any partner
for federal income tax purposes. For purposes of computing the gross income
subject to this tax, the Electing Existing Partnership must include its
distributive share of the gross income of any lower-tier partnership from the
active conduct of trades of businesses of such other partnership.

The general rule that publicly traded partnerships are taxed as
corporations does not apply to a publicly traded partnership for a taxable year
if at least 90% of the organization's gross income for such taxable year (and
all prior taxable years) constitutes "qualifying income." Qualifying income
includes interest, dividends, "real property rents," gain from the sale or other
disposition of real property (including property held for sale and other
property described in Code Section 1221(1)), certain income derived in
connection with certain natural resources, and gain from the sale or disposition
of a capital asset (or property described in Code Section 1231(b) held for the
production of qualifying income). Qualifying income generally includes income
that qualifies under the regulated investment company or REIT qualification
rules (see "-- Federal Income Tax Classification of American Rental -- 95% Gross
Income Test"). However, the term "real property rents" (see "-- Federal Income
Tax Classification of American Rental --75% Gross Income Test") is expanded by
removing the independent contractor requirements for certain services provided
to tenants and limiting the application of certain constructive ownership
provisions by adding a 5% ownership "floor" to certain constructive ownership
rules that generally apply to all partners and their partnerships. Qualifying
income does not include interest derived in the conduct of a financial or
insurance business or any interest that would not constitute qualifying income
for purposes of the REIT qualification rules.

Current estimates of IGC's income for the first quarter of 1998
indicate that less than 90% of IGC's gross income for that period will
constitute qualifying income. After the Distribution, it is unlikely that IGC
will have sufficient amounts of gross qualifying income to have a significant
effect on this computation. IGC has represented that it will closely monitor
the amount and character of IGC's gross income and will take necessary steps,
including transferring certain assets that generate non-qualifying income to
corporate entities, in order to increase the percentage of IGC's gross income
that constitutes qualifying income. In addition, the Restructuring is
contingent upon the management of IGC determining that IGC will be classified as
a partnership for federal tax purposes for 1998. See "the Special Meeting --
Recommendation of the Board of Directors of IGMC." However, there can be no
assurances that these efforts will be successful or that IGC will generate
sufficient amounts of qualifying income relative to non-qualifying income to
meet the "90% qualifying income" exemption from the general treatment of
publicly held partnerships as corporations.

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Some of the steps that IGC has taken or expects to take in order to
reduce its non-qualifying gross income include: (1) transferring an interest in
IGP to IGP Group and amending the partnership agreement of IGP to specially
allocate certain non-qualifying management fee income to IGP Group; (2) further
amending the IGP Partnership Agreement to transfer IGC's interests in certain
Puerto Rico Apartment Partnerships that are generating non-qualifying rents from
personal property to IGP Group; (3) entering into certain sale and leaseback
arrangements with respect to personal property on behalf of certain U.S.
Apartment Partnerships that IGC expects will result in a decrease in non-
qualifying rents from such personal property that will then be subleased to
tenants; and (4) taking other steps to reduce non-qualifying income such as
transferring assets that are generating non-qualifying income, such as IGC's
interest in Housing Development Associates, S.E. ("HDA").

IGC also expects to take steps that will increase its qualifying
income, such as liquidating AFH. The liquidation of AFH is expected to increase
IGC's qualifying income because tax items such as income from the sale of real
property formerly held by AFH would be included in IGC's gross income. However,
such income will likely increase IGC's taxable income and therefore each
Unitholder's distributive share of IGC's taxable income. IGC's taxable income
will also be increased as a result of the Asset Transfers. As discussed below,
IGC may not distribute sufficient cash to allow Unitholders to satisfy their
federal tax liability with respect to the Unitholder's share of IGC's taxable
income. See "-- Federal Income Tax Consequences of the Asset Transfers."

As a result of the Asset Transfers and other steps taken by IGC to
maintain its status as a partnership for federal tax purposes, it is likely that
IGC will have a lower tax basis in its assets than if the Asset Transfers and
such other steps had not been taken. This decrease in basis may be reflected in
IGC's basis in the Common Shares. This decrease may also be reflected in the
tax basis that the Shareholders take in their Common Shares because Shareholders
will take a tax basis in their Common Shares equal to the lesser of IGC's tax
basis in the Common Shares or the Shareholders' adjusted tax basis in their IGC
Units immediately before the Distribution. In addition, there can be no
assurances that the positions adopted by IGC in the Asset Transfers and other
steps taken by IGC either to reduce its non-qualifying income or increase its
qualifying income will not be successfully challenged by the IRS.

If IGC were to fail to meet the "90% qualifying income" test for 1998,
it may be able to seek relief from the IRS whereby it would be treated as if it
met such tests for that period. Such relief would be available only if IGC
could establish to the satisfaction of the IRS that such failure was
inadvertent, if it takes timely steps so that the gross income requirements are
subsequently met, and if it agrees to make such adjustments (including
adjustments with respect to the Unitholders) or pay such amounts as may be
required by the IRS. The amounts of the adjustments or payments are intended to
represent the portion of the tax liability that would be imposed on a

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partnership if it were treated as a corporation during the period of failure to
meet the "90% qualifying income" test.

Alternatively, if IGC failed to meet the "90% qualifying income" test
it could also avoid being treated as a corporation by making the election and
paying the tax as an Electing Eligible Partnership, as described above.

If IGC were treated as a corporation as of January 1, 1998, then the
Distribution would be taxable to IGC to the extent that the fair market value of
the ACPT Common Shares exceed IGC's adjusted tax basis in such Common Shares
immediately before the Distribution and an amount equal to the value of the
Common Shares generally would be treated as a distribution to the Unitholders
taxable as a dividend to the extent of IGC's "earnings and profits" (for the
period that it was treated as a corporation), then a return of capital to the
extent of the Unitholder's basis in his or her Units, and then gain from the
sale or exchange of property.

The following discussion assumes that IGC will be treated as a
partnership for 1998.

FEDERAL INCOME TAX CLASSIFICATION OF ACPT.

ACPT has been organized as an entity that will be treated as a
partnership for tax purposes, in part to avoid the "double" taxation that occurs
when a corporation distributes its profits to its Shareholders and to minimize
the aggregate Puerto Rico and federal income tax imposed on the Puerto Rico
source income of IGP Group and its subsidiaries. Under current law, a
partnership is not a taxable entity and incurs no federal income tax liability.
Instead, each partner is required to take into account in computing such
partner's income tax liability such partner's allocable share of the
partnership's income whether or not the partnership makes a distribution of cash
corresponding to such income. Because American Land and American Management
will

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be classified as corporations for federal income tax purposes, it generally will
not be possible to avoid this "double" federal income taxation with respect to
amounts distributed by American Land or American Management to ACPT. However,
as discussed in greater detail below, so long as American Rental qualifies as a
REIT for federal income tax purposes, ACPT and its Shareholders will be able to
avoid such "double" taxation with respect to amounts distributed by American
Rental to ACPT and, so long as IGP Group will not be subject to federal income
tax and will be treated as a partnership for Puerto Rico tax purposes, ACPT and
its Shareholders effectively may be able to avoid a portion of such "double"
taxation through foreign tax credits (or deductions) with respect to Puerto Rico
taxes paid by ACPT with respect to IGP Group's Puerto Rico source income. See
"-- Federal Income Taxation of American Rental," "--Puerto Rico Income Tax
Classification of IGP Group," and "-- Federal Income Taxation of ACPT and
Shareholders -- Foreign Tax Credit." The achievement of these objectives,
however, depends entirely upon ACPT being classified as a partnership (rather
than being classified as a "corporation" or an "association" taxable as a
corpora tion) for federal tax purposes, American Rental being classified as a
REIT for federal tax purposes, and IGP Group being treated as a partnership for
Puerto Rico tax purposes.

If it were determined that ACPT is taxable as a corporation or that
American Rental does not qualify as a REIT, the anticipated tax advantages to
ACPT and the Shareholders would be materially and adversely affected. If ACPT
were classified as a corporation or as an association taxable as a corporation,
the profits of ACPT would be taxed to ACPT as if it were a corporation at the
rates applicable to corporations (the current highest federal tax rate
applicable to corporations is 35%). In determining its taxable income, ACPT
would be eligible for a dividends received deduction with respect to the
dividends it receives from American Land and American Management (but not
American Rental so long as it qualifies as a REIT). Moreover, distributions to
the Shareholders would be treated as corporate distributions, taxable at
ordinary income tax rates to the extent of earnings and profits, or as non-
taxable returns of capital or distributions taxable at capital gains rates,
depending upon the circumstances of the distribution.

If American Rental did not qualify as a REIT, the taxable income of
American Rental would be determined without regard to the deduction for
distributions applicable to REITs and such taxable income would be subject to
tax at the rates applicable to corporations. Thus, classification of ACPT as a
corporation or the failure of American Rental to qualify as a REIT for federal
income tax purposes would frustrate the objective of eliminating "double"
taxation on American Rental profits that are distributed to ACPT.

Classification of ACPT as a corporation would also preclude
Shareholders from taking into account their allocable share of any Puerto Rico
income taxes paid by ACPT for purposes of the foreign tax credit or an
associated deduction for federal tax

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purposes. See "-- Federal Income Taxation of ACPT and Shareholders -- Foreign
Tax Credit."

The basic source of criteria for classification of an entity for
federal tax purposes is Sections 301.7701-1 through 301.7701-4 of the
Regulations. The Regulations provide that for federal tax purposes, a
partnership is a "business entity" with at least two members that is not treated
as a corporation under Section 301.7701-2(b) of the Regulations. A "business
entity" is any entity recognized for federal tax purposes that is not properly
classified as a trust under Section 301.7701-4 of the Regulations or otherwise
subject to special treatment under the Code. The Regulations clarify that
although some arrangements are called trusts under local law, the term "trusts"
for federal tax purposes generally is limited to arrangements to protect or
conserve property for beneficiaries, and does not include other arrangements,
often known as business or commercial trusts, which are created by the
beneficiaries simply as a device to carry on a profit-making business that
normally would have been carried on though business organizations that are
classified as partnerships or corporations under the Code.

U.S. business entities formed pursuant to a State statute are
classified as corporations under Section 301.7701-2(b) of the Regulations if
such statute describes or refers to the entity as "incorporated" or as a
"corporation," "body corporate," "body politic," "joint stock company," or
"joint stock association." In addition, corporations include all insurance
companies, certain entities conducting banking activities, entities wholly owned
by a State or political subdivision thereof, certain designated foreign
entities, business entities that are specifically taxable as corporations under
another provision of the Code, and certain entities that "elect" under the
Regulations to be treated as associations taxable as corporations for federal
tax purposes.

A business entity that is not classified as a corporation under
Section 301.7701-2(b) generally is treated as an "eligible entity" for purposes
of electing its classification for federal tax purposes under Section 301.7701-
3. Unless it elects otherwise, a domestic eligible entity formed after January
1, 1997, is classified as a partnership if it has two or more members or is
disregarded as an entity separate from its owner if it has a single owner.

Even if it satisfies the other requirements to be treated as a
partnership, an organization generally will be taxed as a corporation if it is a
"publicly traded partnership." A partnership is publicly traded if, among other
things, its interests are traded on an established securities market. The
general rule that publicly traded partnerships are taxed as corporations does
not apply to a publicly traded partnership for a taxable year if at least 90% of
the organization's gross income for such taxable year (and all prior taxable
years) constitutes "qualifying income." Qualifying income includes interest,
dividends and "real property rents."

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ACPT is a Maryland investment trust which has been organized to carry
on a profit-making business. Therefore, ACPT will qualify as a "business
entity" for purposes of the Regulations. Further, ACPT does not come within
those entities classified as corporations under Section 301.7701-2(b) of the
Regulations, and, subject to the discussion below, is not treated as a
corporation under any provision of the Code other than Code Section 7701. Thus,
as a domestic eligible entity with more than one member, it will be classified
as a partnership absent an affirmative election to be treated as a corporation
for tax purposes.

If the Common Shares are traded on AMEX and/or the PSE, ACPT will be
regarded as a publicly traded partnership. Therefore, for ACPT to qualify as a
partnership for federal income tax purposes, at least 90% of ACPT's gross income
must be "qualifying income," which includes dividends, interest, real property
rents and gain from the sale or other disposition of real property. Because
ACPT initially will hold only interests in American Rental, American Land,
American Management and IGP Group, it is anticipated that virtually all of
ACPT's income will be in the form of dividends, including REIT dividends. The
ACPT Board of Trustees has represented that at least 90% of ACPT's income will
consist of "real property rents," interest and dividends.

Counsel's Opinion of Federal Income Tax Classification of ACPT.
--------------------------------------------------------------

Covington & Burling is of the opinion, subject to the following
assumptions and representations, that under the Code, the Regulations, published
rulings of the IRS, and judicial decisions, ACPT will be treated as a
"partnership" for federal income tax purposes. In rendering this opinion,
Counsel has reviewed ACPT's Declaration of Trust, Bylaws, and such other
documents as Counsel has considered necessary for purposes of this opinion.

This opinion is based on the assumption that 90% or more of ACPT's
income will be "qualifying income" within the meaning of Section 7704 of the
Code. Under the current organizational structure, virtually all of ACPT's
income will consist of "qualifying income" in the form of dividends. However,
Counsel has relied on the Trustees' representation that at least 90% of ACPT's
income will continue to consist of dividends and other "qualifying income."
There can be no assurance that the Trustees' representation accurately predicts
the sources of ACPT's income and that at least 90% of ACPT's income will be
qualifying income for any taxable year.

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Act, the Declaration of Trust, and this Proxy Statement/Prospectus, including,
without limitation, compliance with the representations of ACPT herein.
(ii) ACPT shall not make an election to be classified as an association
taxable as a corporation for federal tax purposes.
(iii) ACPT shall take no action that would cause it to be treated other
than as a partnership for federal tax purposes under Treasury Regulations
Sections 301.7701-1 through 301.7701-4.
(iv) At least 90% of ACPT's gross income will constitute "qualifying
income," as that term is defined in Code Section 7704(d).

Counsel's opinion further relies upon the following representations
made by ACPT with respect to IGP Group:
(i) ACPT will cause IGP Group to be operated in accordance with applicable
provisions of its Articles of Incorporation, Bylaws, and this Proxy
Statement/Prospectus, including, without limitation, compliance with the
representations of IGP Group herein.
(ii) IGP Group shall take such actions as may be necessary to obtain and
preserve its status as a special partnership under applicable Puerto Rico law.
(iii) IGP Group shall take such action as may be necessary to obtain and
preserve its classification as a corporation (or an association taxed as a
corporation) for federal tax purposes (including, if necessary, an election on
IRS Form 8832).

Counsel's opinion further relies upon the following representations
made by ACPT with respect to American Land:
(i) ACPT will cause American Land to be operated in accordance with
applicable provisions of its Articles of Incorporation, Bylaws, and as described
in this Proxy Statement/Prospectus, including, without limitation, compliance
with the representations of American Land herein.
(ii) American Land shall take such action as may be necessary to obtain and
preserve its classification as a corporation (or an association taxable as a
corporation) for federal tax purposes.

Counsel's opinion further relies upon the following representations
made by ACPT with respect to American Rental:
(i) ACPT will cause American Rental to be operated in accordance with
applicable provisions of its Articles of Incorporation, Bylaws, and as described
in this Proxy Statement/Prospectus, including, without limitation, compliance
with the representations of American Rental under "Federal Income Tax
Classification of American Rental -- Counsel's Opinion Relating to Qualification
of American Rental as a REIT."

FEDERAL INCOME TAX CLASSIFICATION OF AMERICAN RENTAL.

American Rental will be formed as a Maryland real estate investment
trust and will elect to be treated as a REIT for federal tax purposes for its
taxable year ending

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December 31, 1998, and for each subsequent taxable year. An eligible entity
that files an election under Code Section 856(c)(1) to be treated as a REIT is
treated as having made an election under the Regulations to be classified as an
association taxable as a corporation, effective as of the first day the entity
is treated as a REIT. The following is a summary of the material federal income
tax considerations affecting ACPT and its Shareholders relating to American
Rental's treatment as a REIT for federal tax purposes. See also "-- Federal
Income Taxation of ACPT and Shareholders."

REIT Qualification.
------------------

American Rental may elect to be treated as a REIT if it satisfies
certain detailed requirements imposed by the Code. If American Rental qualifies
for taxation as a REIT, it generally will not be subject to corporate income tax
to the extent American Rental currently distributes its REIT taxable income to
its shareholders. This treatment effectively eliminates the "double" taxation
(i.e., taxation at both the corporate and shareholder levels) imposed on
- -----
investments in most regular corporations. A qualifying REIT, however, may be
subject to certain excise and other taxes, as well as to normal corporate tax on
taxable income that is not currently distributed to its shareholders. See "--
Taxation of American Rental as a REIT." In addition, if American Rental fails
to qualify as a REIT in any taxable year, it will be subject to federal income
tax at regular corporate rates on all of its taxable income. The current
maximum federal tax rate for corporations is 35%.

General REIT Qualification Requirements, Ownership Structure,
-------------------------------------------------------------
and Stapled Stock Rules.
-----------------------

American Rental must be organized as an entity that would, if it does
not maintain its REIT status, be taxable as a domestic corporation. It cannot
be a financial institution or an insurance company, and it must be managed by
one or more trustees or directors. American Rental expects to meet each of
these requirements. Subject to the following discussion, American Rental also
expects to satisfy the requirements that are described below concerning share
ownership and reporting, the nature and amounts of American Rental's gross
income and assets, and the levels of required annual distributions. However,
the ability of American Rental to satisfy these requirements will not always be
within the control of ACPT or American Rental.

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domestic corporations). This complex structure raises a greater number of
interpretative issues, including those under the REIT qualification rules, and
more such issues which lack clear guidance, than generally would be encountered
in most other direct investments in REITs, domestic corporations, or foreign
corporations.

Under the "stapled stock" rules, if a domestic corporation and a
foreign corporation are "stapled entities," the foreign corporation is treated
as a domestic corporation and, for purposes of applying the REIT qualification
rules, all "stapled entities" are treated as a single entity. The term "stapled
entities" means any group of two or more entities if more than 50 percent of the
value of the beneficial interest of such entities consists of "stapled
interests." Two or more interests are "stapled interests" if "by reason of form
of ownership, restrictions on transfer, or other terms or conditions, in
connection with the transfer of one of such interests, the other such interests
are also transferred or required to be transferred." If American Rental and any
other corporations were found to be "stapled entities," it is unlikely that
American Rental would qualify as a REIT because the REIT qualifications rules
(including those relating to sources of gross income, types of assets, and
annual distribution requirements) would be applied as if all such "stapled
entities" were a single entity. If IGP Group and any domestic corporation were
found to be "stapled entities," IGP Group would be treated as a domestic
corporation and would be subject to federal income tax on its world-wide taxable
income at rates applicable to U.S. corporations (the current highest rate is
35%) and distributions to ACPT would be taxable as dividends to the extent of
earnings and profits, nontaxable dividends to the extent of basis, and then as
capital gain.

There are no restrictions, terms, or conditions on the stock (or other
beneficial ownership interests) of American Rental, American Land, American
Management or IGP Group that would require the transfer of any one in connection
with the transfer of any other. Thus, ACPT is free to transfer all or any
portion of the stock of each of American Rental, American Land, American
Management, or IGP Group without regard to the transfer of all or any portion of
the stock of any other of such entities. However, it is possible that the IRS
could argue that such stock comes within the stapled stock rules due to the
common ownership of such stock by ACPT, whereby a transfer of a Common Share
results in the indirect transfer of the beneficial ownership of a portion of the
stock owned by ACPT. It does not appear that Congress intended to apply the
"stapled stock" rules merely because an upper-tier entity owns stock in several
lower-tier entities that are not subject to transfer restrictions. For example,
the legislative history to the enactment of the "stapled stock" rules in 1984
indicates that Congress did not intend to treat stock of a parent corporation as
stapled to the stock of a subsidiary corporation. Although ACPT is expected to
be treated as a partnership and not a corporation, there is no indication that
Congress intended to apply different rules merely because the "parent" is a
publicly traded partnership.

It appears that in enacting the "stapled stock rules" with respect to
REIT stock, Congress was primarily concerned that the pairing of the stock of an
active

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business with that of a REIT would result in the avoidance of corporate level
tax with respect to the real property used in the active business, particularly
when such real property is leased by the REIT to the active business. The
constructive ownership rules which generally prevent rents from related parties
from qualifying as "rents from real property" for REIT qualification purposes
generally do not apply to two corporations whose stock are merely required to be
traded together. See "-- 75% Gross Income Test." In the case of ACPT, American
Rental has represented that it (and its subsidiaries) will not lease any
property to American Land, American Management, IGP Group, or any entity related
thereto. More importantly, any rental income received directly or indirectly by
American Rental from such entities would not qualify as "rents from real
property" such term does not include rents received from an entity in which
American Rental or ACPT directly or indirectly through the constructive
ownership rules owns a 10% or greater interest.

Although there is little guidance on the application of the stapled
stock rules to REITs there is legislative activity in this area. President
Clinton has made several legislative proposals relating to REITs as part of the
revenue provisions contained in the President's Fiscal Year 1999 Budget
Proposal. One legislative proposal, a version of which has been introduced in
both the House of Representatives and the Senate, generally would limit the
protection currently provided to certain REITs that were excepted from the
general application of the stapled stock rules under the Tax Reform Act of 1984
to certain property acquired on or before March 26, 1998. H.R. 3558, 105th
Cong. 2d Sess. (1998); 144 Cong. Rec. E488-89 (daily ed. March 26,
1998)(Statement of Rep. Archer); "General Explanation of the Administration's
Revenue Proposals" (February 1998). Although the current legislative proposals
do not directly address the ACPT structure, these proposals may result in
increased legislative or administrative scrutiny in this area, and could lead to
new provisions, or new guidance on existing provisions, that could result in the
application of the stapled stock rules to American Rental and the other
corporations owned by ACPT. The current statutory provisions grant the Treasury
Department broad authority to prescribe "such regulations as may be necessary to
prevent avoidance or evasion of Federal income tax through the use of stapled
entities."

In light of the lack of existing guidance in this area and the
possibility of legislative and/or administrative activity in this area, there
can be no assurances that the

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IRS would not seek to apply the "stapled stock" rules to the entities owned by
ACPT under current law or under future legislative proposals, and if so, that
such application by the IRS would not be upheld by a court of competent
jurisdiction.

Share Ownership, Reporting.
--------------------------

Beneficial ownership of a REIT must be evidenced by transferable
shares or transferable certificates of beneficial interest, which must be held
by 100 or more persons, determined without reference to any rules of
attribution. The "100 person" test must be met for approximately 92% of the
days in each taxable year. All of the voting common stock of American Rental
will be held by ACPT, and non-voting preferred stock will be issued to 200
employees of American Management. The preferred stock will represent a
liquidation value of $200,000 ($1,000 per share) and will have a 10% cumulative
preferred dividend. Thus, at the time of the Distribution, the stock of
American Rental will be held by more than 100 persons. The preferred stock
cannot be transferred to any person who already owns ACPT preferred shares.

In addition, not more than 50% of the value of the American Rental
stock may be held, directly or indirectly, applying certain constructive
ownership rules, by five or fewer individuals at any time during the last half
of each of American Rental's taxable years (the "closely held" test). At the
time of the Distribution, American Rental would not meet the "closely held" test
because of the percentage ownership of the Wilson Family. American Rental is
not required to satisfy the "100 person" and "closely held" tests until its
second taxable year for which an election is made to be taxed as a REIT. It is
not anticipated that American Rental will meet the "closely held" test for its
taxable year ending December 31, 1998 (the first taxable year for which it will
elect to be a REIT) due to the percentage ownership of the Wilson Family. The
Private Offering, if completed, would result in dilution of the percentage
interest of all ACPT shareholders including the Wilson Family, whose percentage
ownership would likely be reduced below 40%. James J. Wilson and J. Michael
Wilson have advised ACPT that the Wilson Family will take such actions as may be
necessary to reduce its percentage ownership to below 40% before or during the
first half of American Rental's second taxable year in order to permit American
Rental to qualify as a REIT. However, no member of the Wilson Family is under
an obligation to do so. Thus, no assurance can be given that American Rental
will qualify as a REIT. Sales of a significant number of Common Shares by the
Wilson Family or others could affect the market price of

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Common Shares. See "-- Federal Income Taxation of ACPT and Shareholders --
Section 754 Election."

ACPT's Declaration of Trust, subject to certain exceptions, authorizes
the trustees to take such actions as are necessary and desirable to preserve
American Rental's qualification as a REIT and to limit any person (other than
certain current IGC Unitholders) to direct or indirect ownership of no more than
2% of the outstanding Common Shares (the "Ownership Limit"). The foregoing
restrictions on transferability and ownership will continue to apply until (i)
the Board of Trustees determines that it is no longer in the best interests of
ACPT for American Rental to attempt to qualify, or to continue to qualify, as a
REIT and (ii) there is an affirmative vote of two-thirds of the votes entitled
to be cast on such matter at a regular or special meeting of the Shareholders.
See "The Restructuring -- The Private Offering."

To monitor American Rental's compliance with the share ownership
requirements discussed above, American Rental is required to maintain records
disclosing the actual ownership of its stock. To do so, American Rental must
demand written statements each year from the record holders of certain
percentages of its stock in which the record holders are to disclose the actual
owners of the shares (i.e., the persons required to include in gross income the
REIT dividends). ACPT and American Rental will treat Common Shares as if they
were direct stock in American Rental for purposes of these requirements and
therefore will demand such statements from Shareholders as well as from ACPT and
the persons holding the preferred stock in American Rental. A list of those
persons failing or refusing to comply with this demand must be maintained as
part of American Rental's records. Shareholders who fail or refuse to comply
with the demand must submit a statement with their tax returns disclosing the
actual ownership of the shares and certain other information.

The 1997 Act replaced the rule that disqualified a REIT for any year
in which the REIT failed to comply with the above-described Regulations relating
to ascertaining ownership, with a penalty for such failure ($25,000, or $50,000
for intentional violations). Further, the 1997 Act provides that a REIT that
complies with such Regulations to ascertain ownership and which did not know, or
have reason to know, that it failed the "closely held" test will be treated as
having met the "closely held" test.

One of the legislative proposals contained in the "General
Explanations of the Administration's Revenue Proposals" issued by the Department
of the Treasury in February 1998, in connection with President Clinton's 1999
Budget Proposals, would add an additional requirement for REIT qualification
that no person can own stock of a REIT possessing more than 50% of the total
combined voting power of all classes of voting stock or more than 50% of the
total value of shares of all classes of stock. Constructive ownership rules
would apply for purposes of determining a person's stock ownership. It appears
that American Rental would not qualify as a REIT if it were

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subject to this requirement, as proposed, because ACPT owns more than 50% of the
voting power and total value of American Rental's stock. This new requirement
is proposed to apply to entities electing REIT status for taxable years
beginning on or after the date of first committee action. If legislation based
on this proposal is enacted, the determination of whether American Rental will
qualify as a REIT may depend on whether American Rental is subject to such
legislation based on the effective date of such legislation as enacted.

A second legislative proposal contained in the Administration's
Revenue Proposals would limit the current exceptions from the "stapled stock"
rules for certain REITs that were in existence prior to the 1984 enactment of
those rules. Bills containing a version of this proposal have been introduced
in both the House of Representatives and the Senate. See " -- General REIT
Qualification Requirements, Ownership Structure, and the Stapled Stock Rules."
A third legislative proposal contained in the Administration's Revenue Proposals
would expand the current prohibition that REITs cannot own more than 10% of the
voting interests of a corporation to also exclude ownership of more than 10% of
the value of all classes of stock of a corporation. Although these proposals
may not directly affect ACPT or American Rental in their current form, they
indicate the possibility that there may be significant legislative and
administrative activity relating to the qualification of an entity as a REIT in
the near future.

Sources of Gross Income.
-----------------------

In order to qualify as a REIT for a particular year, American Rental
also must meet three tests governing the sources of its income. These tests are
designed to ensure that a REIT derives its income principally from passive real
estate investments. In evaluating a REIT's income, the REIT will be treated as
receiving its proportionate share of the income produced by any partnership in
which the REIT invests, and any such income will retain the character that it
has in the hands of the partnership. American Rental will hold virtually all of
its real property indirectly through American Housing and the U.S. Apartment
Partnerships in which American Housing holds an interest. American Rental owns
a 99% limited partner interest in American Housing and American Housing
Management Company, a Delaware limited liability company that is wholly owned by
American Rental, will have a 1% general partner interest in American Housing.
For federal income tax purposes, all of the properties held by American Housing
(including its interests in the U.S. Apartment Partnerships) will be treated as
if they were held directly by American Rental because both American Housing
Management Company and American Housing are single owner entities that are
disregarded for tax purposes as entities separate from their owners. The Code
allows American Rental to own and operate a number of its properties through
wholly-owned subsidiaries which are "qualified REIT subsidiaries." A qualified
REIT subsidiary is not treated as a separate corporation for federal tax
purposes, and all of its assets, liabilities and items of income, deduction and
credit are treated as assets, liabilities and such items

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of the REIT. American Rental currently does not own any qualified REIT
subsidiaries and has no current plans to own any in the future.

75% Gross Income Test.
---------------------

At least 75% of a REIT's gross income for each taxable year must be
derived from specified classes of income that principally are real estate
related. The permitted categories of principal importance to American Rental
are: (i) rents from real property, (ii) interest on loans secured by real
property, (iii) gain from the sale of real property or loans secured by real
property (excluding gain from the sale of property held primarily for sale to
customers in the ordinary course of American Rental's trade or business,
referred to below as "dealer property"), (iv) income from the operation and gain
from the sale of certain property acquired in connection with the foreclosure of
a mortgage securing that property ("foreclosure property"), (v) distributions
on, or gain from the sale of, shares of other qualifying REITs, (vi) abatements
and refunds of real property taxes, and (vii) "qualified temporary investment
income" (described below). In evaluating American Rental's compliance with the
75% income test (as well as the 95% income test described below), gross income
does not include gross income from "prohibited transactions." A prohibited
transaction is one involving a sale of dealer property, not including
foreclosure property and certain dealer property held by the REIT for at least
four years.

American Rental expects that substantially all of its share of the
operating gross income of American Housing will be considered rent from real
property. Rent from real property is qualifying income for purposes of the 75%
income test only if certain conditions are satisfied. Rent from real property
includes charges for services customarily rendered to tenants and rent
attributable to personal property leased together with the real property as long
as the personal property rent is less than 15% of the total rent. American
Rental does not expect to earn material amounts in these categories. Rent from
real property generally does not include rent based on the income or profits
derived from the property. American Rental and American Housing do not intend
to lease property and receive rentals based on the tenants' net income or
profit. However, rent based on a percentage of gross income is permitted as
rent from real property, and American Rental and American Housing may have
leases where rent is based on a percentage of gross income. Also excluded is
rent received from a person or corporation in which American Rental (or American
Housing or ACPT or any of either entity's 10% or greater owners) directly or
indirectly through the constructive ownership rules contained in Section 318 of
the Code owns a 10% or greater interest.

Also excluded from rent from real property is "impermissible tenant
services income" in excess of a one percent de minimis rule discussed below,
which is not treated as allowable rent from real property for purposes of the
75% income test (as well as the 95% income test described below). Generally,
impermissible tenant service income includes any amounts received directly or
indirectly by a REIT for services

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furnished or rendered by the REIT to its tenants or for managing or operating
the rental property. However, impermissible tenant service income does not
include amounts received by the REIT for services performed by an "independent
contractor" from whom the REIT does not derive any income or any amounts
received by the REIT for any services provided by the REIT that are "usually or
customarily rendered" in connection with the rental of space for occupancy only
and are not considered rendered primarily for the convenience of the tenant
(applying standards that govern in evaluating whether rent from real property
would be unrelated business taxable income when received by a tax-exempt owner
of the property). If the REIT's impermissible tenant services income from a
property exceeds one percent of all amounts received or accrued from such
property, all the amounts received by the REIT from that property fail to
qualify as rent from real property for purposes of the 75% and 95% income tests.

As discussed above, American Rental will hold its interests in the
U.S. Apartment Partnerships indirectly through American Housing and American
Housing Management Company, but will be treated as if it owned such interests
directly for federal tax purposes. Property management services for the U.S.
Apartment Partnerships and for other rental apartments not owned by IGC or ACPT
will be provided by American Management, a Delaware corporation in which ACPT
owns all of the stock. American Rental, American Housing, American Housing
Management, and American Management have represented that the only material
services to be provided by them to tenants will be those services usually or
customarily rendered in connection with the rental of space for occupancy only
and that they will not provide services that might be considered rendered
primarily for the convenience of tenants, such as hotel, health care or
extensive recreational or social services. Counsel has relied upon these
representations (along with other representations) in issuing its opinion on the
qualification of American Rental as a REIT. American Rental believes that
substantially all of its proportionate share of American Housing's rental income
will be qualifying income under the 75% income test, and that the provision of
services by American Rental, American Housing, American Housing Management
Company, or American Management will not cause such rental income to fail to be
included under that test.

Upon American Rental's ultimate sale of properties, any gains realized
also are expected to constitute qualifying income, in the form of gain from the
sale of real property (not involving a prohibited transaction).

95% Gross Income Test.
---------------------

In addition to earning 75% of its gross income from the sources listed
above, at least an additional 20% of American Rental's gross income for each
taxable year must come either from those sources, or from dividends, interest or
gains from the sale or other disposition of stock or other securities that do
not constitute dealer property. The 1997 Act expanded the types of income
qualifying for the 95% test (but not the 75% test) to include income from
certain hedging instruments and gain on the

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disposition of such instruments. The 95% test permits a REIT to earn a
significant portion of its income from traditional "passive" investment sources
that are not necessarily real estate related. The term "interest" (under both
the 75% and 95% tests) does not include amounts that are based on the income or
profits of any person. American Rental believes it will meet the 95% Gross
Income Test on an annual basis.

Failing the 75% or 95% Tests; Reasonable Cause.
----------------------------------------------

As a result of the 75% and 95% tests, REITs generally are not
permitted to earn more than 5% of their gross income from active sources (such
as brokerage commissions or other fees for services rendered). This type of
income will not qualify for the 75% test or 95% test but it is not expected that
American Rental would have a significant amount of such income and other
nonqualifying income is expected to be at all times less than 5% of American
Rental's annual gross income. While American Rental does not anticipate that it
will earn substantial amounts of nonqualifying income, if nonqualifying income
exceeds 5% of American Rental's gross income, American Rental could lose its
status as a REIT.

If American Rental fails to meet either the 75% or 95% income tests
during a taxable year, it may still qualify as a REIT for that year if (i) it
reports the source and nature of each item of its gross income in its federal
income tax return for that year; (ii) the inclusion of any incorrect information
in its return is not due to fraud with intent to evade tax; and (iii) the
failure to meet the tests is due to reasonable cause and not to willful neglect.
However, in that case, American Rental would be subject to a 100% tax based on
the greater of the amount by which it fails either the 75% or 95% income tests
for such year. See "-- Taxation of American Rental as a REIT."

Character of Assets Owned.
-------------------------

On the last day of each calendar quarter, American Rental must meet
two tests concerning the nature of its investments. For these purposes,
American Rental will be deemed to own of American Housing's assets (including
American Housing's proportionate share of the U.S. Apartment Partnerships).
First, at least 75% of the value of the total assets of American Rental
generally must consist of real estate assets, cash, cash items (including
receivables) and government securities. For this purpose, "real estate assets"
include interests in real property, interests in loans secured by mortgages on
real property or by certain interests in real property, shares in other REITs
and certain options, but exclude mineral, oil or gas royalty interests. The
temporary investment of new capital in debt instruments also qualifies under
this 75% asset test, but only for the one-year period beginning on the date
American Rental receives the new capital. Second, although the balance of
American Rental's assets generally may be invested without restriction, American
Rental will not be permitted to own (i) securities of any one non-governmental
issuer that represent more than 5% of the value of American Rental's total
assets or (ii) more than 10% of the outstanding voting securities

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of any single issuer. A REIT, however, may own 100% of the stock of a qualified
REIT subsidiary, in which case the assets, liabilities and items of income,
deduction and credit of the subsidiary are treated as those of the REIT.
American Housing Management Company expects to be a qualified REIT subsidiary
because American Rental will own all of its stock. Thus, all of American
Housing Management Company's assets, including its 1% interest in American
Housing, will be treated as being owned by American Rental.

Generally, a REIT's "total assets" means the gross assets of the REIT
determined in accordance with generally accepted accounting principles. A REIT
generally is required to revalue its assets at the end of a quarter in which it
acquires any security or property other than cash and similar items. However, a
revaluation of assets generally is not required at the end of any quarter during
which there has been no such acquisition. A REIT is required to keep sufficient
records of its investments so as to be able to show that it has complied with
these requirements during the taxable year.

American Rental expects that it will comply with these asset tests.

Annual Distributions to Shareholders.
------------------------------------

To maintain REIT status, American Rental generally must distribute to
its shareholders in each taxable year at least 95% of its net ordinary income
(capital gain is not required to be distributed). More precisely, American
Rental must distribute at least an amount equal to (i) 95% of the sum of (a) its
"REIT Taxable Income" before deduction of dividends paid and excluding any net
capital gain and (b) any net income from foreclosure property less the tax on
such income, minus (ii) certain limited categories of "excess noncash income."
REIT Taxable Income is defined to be the taxable income of the REIT, computed as
if it were an ordinary corporation with certain modifications. For example, the
deduction for dividends paid is allowed, but neither net income from foreclosure
property, nor net income from prohibited transactions, is included. In
addition, the REIT may carry over, but not carry back, a net operating loss for
15 years following the year in which it was incurred.

The 1997 Act permits a REIT to elect to retain and pay income tax on
net long-term capital gains it receives during the tax year. If American Rental
were to make such an election, ACPT and the Shareholders would include in their
income as long-term capital gains their proportionate share of the undistributed
long-term capital gains as designated by American Rental. Generally, the
shareholders of an electing REIT are deemed to have paid their share of the tax
paid by the REIT with respect to the undistributed capital gains. Also, the
basis of the shareholders' shares in the REIT are increased by the amount of the
undistributed capital gains (less the amount of capital gains tax paid by the
REIT) included in the shareholders' long-term capital gains. These new
provisions (in particular, the shareholder credit for taxes paid and the
resulting shareholder basis adjustment) should apply to the Shareholders if
American Rental were

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to make such an election even though the Shareholders hold their interests in
the REIT indirectly through ACPT. However, formal guidance on this issue has
not yet been provided.

A REIT may satisfy the 95% distribution test with dividends paid
during the taxable year and with certain dividends paid after the end of the
taxable year. Dividends paid by American Rental in January that were declared
during the last calendar quarter of the prior year and were payable to
shareholders (including ACPT) on a date during the last calendar quarter of that
prior year are treated as paid on December 31 of the prior year. Other dividends
declared before the due date of American Rental's tax return for the taxable
year (including extensions) also will be treated as paid in the prior year for
American Rental, if they are paid (i) within 12 months of the end of such
taxable year and (ii) no later than American Rental's next regular distribution
payment. Dividends that are paid after the close of a taxable year and do not
qualify under the above-mentioned rule governing payments made in January will
be taxable to ACPT and the Shareholders in the year paid, even through they may
be taken into account by American Rental for a prior year. A nondeductible
excise tax equal to 4% will be imposed on American Rental for each calendar year
to the extent that dividends declared and distributed or deemed distributed
before December 31 are less than the sum of (a) 85% of American Rental's
"ordinary income" for such year, plus (b) 95% of American Rental's capital gain
net income for such year, plus (c) income not distributed in earlier years minus
(d) distributions in excess of income in earlier years.

American Rental will be taxed at regular corporate rates to the extent
that it retains any portion of its taxable income (e.g., if American Rental
distributes only the required 95% of its taxable income, it would be taxed on
the retained 5%). Under certain circumstances, American Rental may not have
sufficient cash or other liquid assets to meet the distribution requirement.
This could arise because of competing demands for American Rental's funds, or
because of timing differences between tax reporting and cash receipts and
disbursements (i.e., income may have to be reported before cash is received, or
expenses may have to be paid before a deduction is allowed). In addition, cash
associated with taxable income may be used to make non-deductible payments of
principal on liabilities, resulting in taxable income without associated funds
to make a distribution. Although this may be alleviated to some extent by
depreciation deductions, such deductions will not be available after property is
fully depreciated for tax purposes (that is, after the applicable cost recovery
period). Although American Rental has represented that it will meet the 95%
distribution requirement, no assurance can be given that necessary funds will be
available.

If American Rental fails to meet the 95% distribution requirement
because of an adjustment to American Rental's taxable income by the IRS,
American Rental may be able to cure the failure retroactively by paying a
"deficiency dividend" (as well as applicable interest and penalties) within a
specified period.

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American Rental is required to make the distributions described above
to its shareholders, including ACPT, in order to retain its status as a REIT.
Although ACPT is required under the terms of ACPT's Declaration of Trust to
distribute annually to Shareholders, in cash and/or property, an amount equal to
45% of the net taxable income of ACPT allocated to Shareholders less the amount
of taxes paid by ACPT in Puerto Rico and other foreign countries and certain
taxes paid by American Rental with respect to undistributed capital gains, there
can be no assurance that each Shareholder will receive sufficient cash
distributions to satisfy such Shareholder's tax liability arising from the
ownership of Common Shares. See "Distribution Policy."

Taxation of American Rental as a REIT.
-------------------------------------

American Rental will adopt the calendar year for federal income tax
purposes and will use the accrual method of accounting. For each taxable year
in which American Rental qualifies as a REIT, it generally will be taxed only on
the portion of its taxable income that it retains (which will include
undistributed net capital gain), because American Rental will be entitled to a
deduction for its dividends paid to shareholders during the taxable year. A
dividend-paid deduction is not available for dividends that are considered
"preferential" within any given class of shares or as between classes. Although
American Rental's preferred and common shares are subject to different
distribution rights for each class of stock, dividends paid by American Rental
will not be disqualified as "preferential" so long as every shareholder is
treated the same as all other shareholders in the same class (common or
preferred) and all distributions are made in accordance with the dividend rights
of each class of stock. Thus, American Rental does not anticipate that it will
pay any such "preferential" dividends.

American Rental would be subject to tax on any income or gain from
foreclosure property at the highest corporate rate (currently 35%). A
confiscatory tax of 100% applies to any net income from prohibited transactions.
In addition, if American Rental fails to meet either the 75% or 95% source of
income tests described above but still qualifies for REIT status under the
reasonable cause exception to those tests, a 100% tax would be imposed equal to
the amount obtained by multiplying (i) the greater of the amount, if any, by
which it failed either the 75% income test or the 95% income test, by (ii) the
ratio of American Rental's REIT Taxable Income to American Rental's gross income
(excluding capital gain and certain other items). American Rental also will be
subject to the minimum tax on items of tax preference (excluding items
specifically allocable to ACPT Shareholders). Finally, under regulations that
are to be promulgated, American Rental also may be taxed at the highest regular
corporate tax rate on any built-in gain (i.e., the excess of value over adjusted
tax basis) attributable to assets that American Rental acquires in certain tax-
free corporate transactions, to the extent the gain is recognized during the
first ten years after American Rental acquires such assets.

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Failure to Qualify as a REIT.
----------------------------

For any taxable year in which American Rental fails to qualify as a
REIT, it would be taxed at the usual corporate rates on all of its taxable
income. Distributions to its shareholders would not be deductible in computing
that taxable income, and distributions would no longer be required. Any
corporate level taxes generally would reduce the amount of cash available to
American Rental for distribution to ACPT and the Shareholders and, because the
shareholders would continue to be taxed on their proportionate share of the
taxable dividends received by ACPT, the net after tax yield to the Shareholders
from their investment in ACPT likely would be reduced substantially. As a
result, American Rental's failure to qualify as a REIT during any taxable year
could have a material adverse effect upon ACPT and its Shareholders. If
American Rental loses its REIT status, unless certain relief provisions apply,
American Rental will not be eligible to elect REIT status again until the fifth
taxable year which begins after the first year for which American Rental's
election was terminated.

If, after forfeiting its REIT status, American Rental later qualifies
and elects to be taxed as a REIT again, American Rental may face significant
adverse tax consequences. Prior to the end of the year in which American Rental
sought to qualify again as a REIT, American Rental would be required to make
distributions sufficient to eliminate any earnings and profits accumulated
during its period of non-REIT status. Moreover, immediately prior to the
effectiveness of the election to return to REIT status, American Rental would be
treated as having disposed of all of its assets in a taxable transaction,
triggering taxable gain with respect to American Rental's appreciated assets.
In that event, however, American Rental would be permitted to elect an
alternative treatment under which those gains would be taken into account only
as and when they actually are recognized upon sales of the appreciated property
occurring within a ten-year period. American Rental would be required to
distribute at least 95% of any such recognized gains, but it would not receive
the benefit of a dividends paid deduction to reduce those taxable gains. Thus,
any such gains on appreciated assets would be subject to "double" taxation
(i.e., at the corporate level as well as the Shareholder level when
distributed).

Counsel's Opinion Relating to Qualification of American Rental as a REIT.
------------------------------------------------------------------------

Subject to the following paragraphs and the qualifications,
assumptions and representations in the Counsel's Tax Opinion and the Trustee's
Letter and the IGC Letter, Counsel is of the opinion that (i) American Rental
will be organized in conformity with the requirements for qualification as a
REIT beginning with its taxable year ending December 31, 1998, and (ii) its
proposed method of operations described in this Proxy Statement/Prospectus will
enable it to satisfy the requirements for such qualification.

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The rules governing REITs are highly technical and require ongoing
compliance with a variety of tests that depend, among other things, on future
operating results and beneficial ownership of American Rental. One of the
ownership requirements is that not more than 50% of the Common Shares may be
held, directly or indirectly, applying certain constructive ownership rules, by
five or fewer individuals at any time during the last half of each of American
Rental's taxable years (the "closely held" test), beginning with the second
taxable year for which American Rental elects to be taxed as a REIT. At the
time of the Distribution, American Rental will not meet the "closely held" test
because of the percentage ownership of the Wilson Family. James J. Wilson and
J. Michael Wilson have advised ACPT that the Wilson Family will take such
actions as may be necessary to reduce its percentage ownership to below 40%
before the last half of American Rental's second taxable year in order to permit
American Rental to qualify as a REIT. However, no member of the Wilson Family
is under an obligation to do so. Subject to the following paragraphs, Counsel's
opinion with respect to American Rental's qualification as a REIT assumes that
the Wilson Family's percentage ownership will be reduced in such a manner that
ACPT meets the "closely held" test at all times during and after American
Rental's second taxable year for which it elects to be taxed as a REIT.
However, the Wilson Family is under no obligation to do so. Thus, no assurance
can be given that American Rental will qualify as a REIT.

Counsel will not monitor American Rental's compliance with the REIT
requirements under the Code including those relating to ownership, types of
gross income, types of assets and annual distributions. While American Rental
expects to satisfy these requirements and will use its best efforts to do so, no
assurance can be given that American Rental will qualify as a REIT for any
particular year, or that the applicable law will not change and adversely affect
American Rental, ACPT, and its Shareholders. See "-- Failure to Qualify as a
REIT."

As discussed above, there are several legislative proposals relating
to REIT qualification, one of which, if it were applied in its current form to
ACPT and American Rental, would prevent American Rental from qualifying as a
REIT because ACPT would own over 50% of American Rental's stock. In addition,
it appears likely that there will be administrative and legislative activity in
areas such as the application of the "stapled stock" rules to REITs. See "--
General REIT Qualification Requirements, Ownership Structure, and Stapled Stock
Rules." Counsel's opinion as to American Rental's qualification as a REIT is
based, in part, on Counsel's view that ACPT's ownership of the common stock of
American Rental, American Land, American Management, and IGP Group will not
cause the "stapled stock" rules to apply to American Rental and the other
corporations owned by ACPT. However, in light of the lack of existing guidance
in this area and the possibility of legislative and administrative activity in
this area, there can be no assurances that the IRS will not seek to apply to
"stapled stock" rules to the entities owned by ACPT under current law or under
future legislative proposals and, if so, that such application by the IRS would
not be upheld by a court of competent jurisdiction.

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Counsel's opinion relies upon the representations made by the Board of
Trustees of ACPT in the Trustee Letter. Counsel's opinion is based on the
assumption that any successor Trustees of ACPT will make and satisfy these
representations. These representations include, but are not limited to, the
following representations:
(i) ACPT will cause American Rental to be operated in accordance with
applicable provisions of its Declaration of Trust and Bylaws, and as described
in this Proxy Statement/Prospectus, including, without limitation, compliance
with the representations of American Rental herein.
(ii) At all times while acting as general partner of American Housing,
American Rental will operate American Housing or cause American Housing to be
operated in accordance with the applicable provisions of applicable law, the
American Housing Partnership Agreement, and as described in this Proxy
Statement/Prospectus, including, without limitation, compliance with the
representations of American Housing herein.
(iii) At all times while acting as a member of American Housing Management
Company, American Rental will operate American Housing Management Company or
cause American Housing Management Company to be operated in accordance with
applicable provisions of applicable law, the Operating Agreement of American
Housing Management Company, and as described in this Proxy Statement/Prospectus,
including, without limitation, compliance with the representations of American
Housing Management Company herein.
(iv) American Rental will make a timely election on IRS Form 8832 to be
classified as an association taxable as a corporation for its first taxable year
and each subsequent taxable year.
(v) American Rental, American Housing, and American Housing Management
Company shall take all actions necessary to maintain American Housing's and
American Housing Management Company's status for federal income tax purposes
either as an entity that is disregarded as an entity separate from its owner or
as a partnership and neither American Housing nor American Housing Management
Company will elect to be treated as an association taxable as a corporation for
federal tax purposes.
(vi) ACPT will cause American Management to be operated in accordance with
the applicable provisions of its Articles of Incorporation and Bylaws and as
described in this Proxy Statement/Prospectus, including, without limitation,
compliance with the representations of American Management herein.
(vii) ACPT, American Rental, American Housing, and American Housing
Management Company will take such actions as is necessary to cause the U.S.
Apartment Partnerships or any other entity in which American Rental or American
Housing own an interest directly or indirectly through one or more other
entities (American Housing, American Housing Management Company, the U.S.
Apartment Partnerships and such other entities hereinafter referred to as the
"REIT Subsidiaries") to comply with the representations of the REIT Subsidiaries
herein.
(viii) American Rental will elect to be treated as a REIT for federal
income tax purposes for its taxable year ending December 31, 1998, and for each
subsequent year.

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(ix) American Rental and the REIT Subsidiaries shall take such actions as
are necessary to preserve American Rental's status as a REIT, including, without
limitation:
(1) Compliance with all of the requirements set forth in Code Section
856(a), including those relating to management, beneficial ownership, and type
of entity;
(2) Compliance with the "95% of Gross Income" requirements set forth
in Code Section 856(c)(2);
(3) Compliance with the "75% of Gross Income" requirements set forth
in Code Section 856(c)(3);
(4) Compliance with the limitations on total assets requirements set
forth in Code Section 856(c)(4);
(5) Compliance with the "95% Distribution" requirements set forth in
Code Section 857(a)(1); and
(6) Compliance with such other requirements as may be necessary in
order to maintain American Rental's status as a REIT for federal tax purposes.
(x) American Rental, American Management, and the REIT Subsidiaries each
represent that all services rendered by such entities or their agents or
employees to tenants of American Rental or the REIT Subsidiaries shall be
limited to those usually or customarily rendered in connection with the rental
of rooms or other space for occupancy only, as those terms are defined for
purposes of applying Code Section 856(d)(2) and Treasury Regulation Section
1.512(b)-1(c)(5).
(xi) American Rental and the Reit Subsidiaries shall not engage in any
"prohibited transactions" as defined in Code Section 857(b)(6)(B)(iii),
involving a sale or other disposition of property described in Code Section
1221(1), which is not "foreclosure property," as defined in Code Section 856(e).
(xii) ACPT, American Management, American Land, American Rental, and the
REIT Subsidiaries shall take no action that would cause or result in any income
constituting rents from interests in real property (or other related amounts
described in paragraphs (B) and (C) of Code Section 856(d)(1)) that is included
in the gross income of American Rental to not qualify as "rents from real
property" for purposes of Code Sections 856(c)(2)(C) and 856(c)(3)(A).

FEDERAL INCOME TAX CLASSIFICATION OF AMERICAN HOUSING AND AMERICAN HOUSING
MANAGEMENT COMPANY.

American Housing is a Delaware limited partnership with American
Rental holding a 99% limited partner interest and American Housing Management
Company holding a 1% general partner interest. American Rental owns all of the
shares of American Housing Management Company, a Delaware corporation.

So long as all of the stock of American Housing Management Company is
owned by American Rental and American Rental qualifies as a REIT, American
Housing Management Company will be disregarded as an entity separate from
American Rental for federal tax purposes and all of the assets of American
Housing Management Company (including its 1% interest in American Housing) will
be treated as assets of

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American Rental. Because all of the limited and general partnership interests
of American Housing will be considered as held by American Rental, American
Housing will also be disregarded as an entity separate from American Rental,
absent an election by American Housing to be taxed as a corporation. So long as
American Rental qualifies as a REIT and owns all of the shares of American
Housing Management Company, there are no other partners in American Housing, and
American Housing and American Rental do not elect the be treated as associations
taxable as corporations, American Housing and American Housing Management
Company will not be recognized for federal tax purposes as entities separate
from American Rental and will instead be treated as branches or divisions of
American Rental for federal tax purposes.

FEDERAL INCOME TAX CLASSIFICATION OF AMERICAN LAND AND AMERICAN MANAGEMENT.

American Land and American Management are Maryland and Delaware
corporations, respectively, which will be treated as corporations for federal
tax purposes. Neither corporation will be eligible to elect to be treated as a
partnership or to be disregarded as a separate entity for federal tax purposes
under the Regulations.

FEDERAL INCOME TAX CLASSIFICATION OF IGP GROUP.

IGP Group is a Puerto Rico corporation that intends to qualify as a
special partnership under the Puerto Rico Code. See "Income Tax Considerations
- -- Certain State Income Tax and Puerto Rico Income Tax Considerations -- Certain
Puerto Rico Income Tax Considerations." As a Puerto Rico corporation, IGP Group
will be classified as a corporation under Section 301.7701-2(b)(8) of the
Regulations, and therefore it will not qualify as an "eligible entity" and
cannot elect to change its classification for federal tax purposes under Section
301.7701-3 of the Regulations (see discussion under "-- Federal Income Tax
Classification of ACPT").

CERTAIN TAX CONSEQUENCES OF THE ASSET TRANSFERS.

Gain will be recognized by IGC on the transfer of certain interests in
the U.S. Apartment Partnerships as a result of American Rental's assumption of
liabilities in excess of the tax basis of the property contributed to American
Rental indirectly through American Housing. IGC has estimated that
approximately [$4.2 million] in gain will be recognized on this transfer. Based
on these estimates, each IGC Unitholder will recognize that IGC Unitholder's
allocable share of such gain (approximately $[.40] per Unit).

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United States. However, this "active conduct" exception does not apply to
certain property, such as certain intangible property and inventory (and similar
property described in Code Section 1221(1) and (3)). For purposes of applying
these rules to a transfer of a partnership interest, such transfer generally is
treated as a transfer of a pro-rata share of the assets of the partnership
represented by such interest.

IGC will transfer property to IGP Group, directly and indirectly
through subsidiary partnerships, that is currently used or is expected to be
used in a rental business in Puerto Rico. Puerto Rico land that will not be
used in the rental business and that is instead held for sale to customers will
not qualify for the "active conduct" exception to the general gain recognition
rule. Such land has been transferred to American Land, a domestic corporation,
indirectly through the Class B interest in IGP.

The determination of whether appreciated assets that are transferred
to a foreign corporation qualify for the "active conduct" exception to the
general gain recognition rule is made on the basis of all of the facts and
circumstances. Property generally will be considered to be used in the "active
conduct" of a leasing business for purposes of this exception if: (1) the
lessor, through its own officers or staff of employees, performs substantial
marketing, customer service, repair and maintenance, and other substantial
operational activities with respect to the leased property; (2) the property is
not used in the United States; and (3) the transferee has need for substantial
investment in assets of that type. ACPT, IGP Group and IGP have represented
that IGP and its employees will continue to provide management and operational
services for the Puerto Rico Apartment Partnerships in substantially the same
manner as they do at present. Counsel will not monitor compliance with such
representations. Whether the transfer will qualify for the "active conduct"
exception will depend on the extent and nature of the services to be provided in
the future, and on the application of general rules to a more complex ownership
structure than was anticipated in such rules. For example, it is clear that in
the case of a transfer of a partnership interest, the "active conduct" test is
applied by "looking through" the partnership to the underlying assets. It is
less clear whether the "look through" approach also applies to the activities
conducted by the employees of the partnership, and how such a rule would apply
in the case of tiered partnerships.

There can be no assurances that the IRS will not successfully
challenge whether all, or a portion, of the appreciated assets transferred
directly or indirectly to IGP Group will qualify for the "active conduct"
exception and seek to apply the general rule that gain is recognized on such
transfers to the extent that the fair market value of such property exceeds its
adjusted tax basis. In addition, there can be no assurances that the IRS will
not successfully challenge whether any of the LDA assets transferred to American
Land indirectly through the Class B interests in IGP will be treated as a
transfer to a foreign corporation that is subject to the recognition of gain to
the extent that the fair market value of such property exceeds its adjusted tax
basis. In either

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event, the amount of gain that would be recognized by IGC would be significant
and each IGC Unitholder would be required to include its share of such gain.

Although IGC generally is required to distribute at least 55% of its
taxable income to the Unitholders, IGC may satisfy this obligation with a
distribution of property other than cash (such as the Common Shares). If IGC
does not distribute sufficient cash to pay the Unitholder's tax liabilities with
respect to the Unitholder's share of IGC's taxable income, the Unitholder may
have to use funds from other sources or sell the property distributed by IGC,
including Common Shares. Sale of Common Shares may give rise to taxable gain.
See "Income Tax Considerations -- Federal Income Tax Considerations -- Federal
Income Taxation of ACPT and Shareholders --Sale or Exchange of Common Shares."

In addition, following the Restructuring it is possible that IGC may
recognize taxable income without receiving sufficient cash to enable IGC to make
a distribution to the IGC Unitholders in an amount at least equal to the IGC
Unitholder's tax liability arising from their share of IGC taxable income.
Further, it is possible that IGC may not make a cash distribution regardless of
whether significant cash is available or regardless of any obligations to make
such a distribution.

FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION.

A Shareholder will not recognize gain or loss upon receipt of Common
Shares in the Distribution. Gain is not recognized on a distribution of
property from a partnership to a partner except to the extent that any money
distributed exceeds the adjusted basis of such partner's interest in the
partnership immediately before the distribution.

Generally, a distribution of a "marketable security" is treated as a
distribution of money equal to the fair market value of such marketable
security, for purposes of determining whether gain is recognized on such
distribution. The amount treated as money upon a distribution of a marketable
security is reduced by the excess of the distributee partner's proportionate
share of (i) net gain that would be recognized if all of the partnership's
marketable securities would have been sold immediately before the distribution,
over (ii) net gain that would be recognized if all of the partnership's
marketable securities would have been sold immediately after the distribution.
However, these provisions do not apply to the distribution of a marketable
security if the security was acquired by the partnership in a nonrecognition
transaction and (1) the value of any marketable securities and money exchanged
by the partnership in the nonrecognition transaction is less than 20% of the
value of all the assets exchanged by the partnership in the nonrecognition
transaction, and (2) the partnership distributed the security within five years
of either the date the security was acquired by the partnership or, if later,
the date the security became marketable. The Common Shares should qualify for
this exception because they were acquired by IGC in nonrecognition transactions
pursuant to the Asset

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Transfers within the applicable five year period and IGC has represented that
the value of money and marketable securities was less than 20% of the value of
all assets exchanged. If so, the Distribution of Common Shares will not be
treated as a distribution of money under these provisions.

A Shareholder's initial tax basis in his or her Common Shares
generally will be equal to IGC's tax basis in those Common Shares. If, however,
IGC's tax basis in those Common Shares exceeds the Shareholder's adjusted tax
basis in his or her IGC Units, the Shareholder's initial tax basis in his Common
Shares generally will be equal to his or her adjusted tax basis in his or her
IGC Units immediately before the Distribution reduced by any money received in
the Distribution. Each Shareholder's adjusted tax basis in his or her IGC Units
will be reduced by an amount equal to his or her initial basis in the Common
Shares.

A Shareholder's holding period for the Common Shares will include
IGC's holding period for those Common Shares. ACPT will provide Shareholders
with information on the holding period of Common Shares received in the
Distribution. IGC will not recognize gain or loss upon the Distribution.

A Shareholder who receives cash in lieu of fractional Common Shares
will recognize gain. The amount of gain recognized will not exceed the amount
of cash received. ACPT will provide Shareholders with information indicating the
amount of any gain which must be recognized on the receipt of cash in lieu of
fractional Common Shares.

FEDERAL INCOME TAXATION OF ACPT AND SHAREHOLDERS.

General.
-------

As a partnership for federal income tax purposes, ACPT is not subject
to federal income tax. ACPT has adopted the accrual method of accounting and
has adopted the calendar year as its taxable year.

Each item of ACPT's income, gain, loss, deduction or credit will flow
through to the Shareholders. Each Shareholder must report his or her allocable
share of these items on his or her individual tax return. Such items are
allocated among the Shareholders in accordance with their interest in ACPT and
for the period for which each Shareholder holds his or her interest. ACPT must
furnish each Shareholder of record, on the form prescribed by the IRS, the
information necessary to prepare the Shareholder's federal income tax returns
with respect to income derived from his or her interest in ACPT.

Each Shareholder is taxed on his or her allocable share of ACPT's
taxable income or loss, without regard to distributions of cash or property from
ACPT to the

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Shareholder. Although ACPT is obligated under its Declaration of Trust to
distribute annually to Shareholders, in cash and/or property, an amount equal to
45% of the net taxable income of ACPT allocated to Shareholders less the amount
of certain taxes paid by ACPT, there can be no assurance that ACPT will
distribute to a Shareholder sufficient cash for the Shareholder to satisfy his
or her federal income tax liability with respect to his or her allocable share.

It is anticipated that ACPT's income will consist almost entirely of
dividends from American Rental, American Land, American Management, and IGP
Group.

Tax Basis of Common Shares.
--------------------------

A Shareholder's initial tax basis in his or her Common Shares
generally will be equal to IGC's tax basis in those Common Shares (unless IGC's
tax basis in the Common Shares exceeds the Shareholder's tax basis in his or her
IGC Units). See "--Federal Income Tax Consequences of the Distribution." The
Shareholder's tax basis will be increased by (i) his or her allocable share of
ACPT's income (including income that is not taxable) and (ii) his or her share
of any increase in non-recourse liabilities incurred by ACPT (i.e., any
liability of ACPT for which no partner has any personal liability). The
Shareholder's tax basis will be reduced (but not below zero) by (i) any cash
distributed to the Shareholder; (ii) ACPT's tax basis in any property
distributed to the Shareholder; (iii) the Shareholder's allocable share of
ACPT's losses; (iv) his or her share of any decrease in non-recourse liabilities
incurred by ACPT; and (v) his or her share of non-deductible expenditures of
ACPT that are not properly chargeable to capital. There may be other special
situations affecting the tax basis.

Income and Loss Allocations.
---------------------------

The manner in which items of ACPT's income, gains, losses, deductions,
credits and other tax items are allocated among the partners (including the
Shareholders) pursuant to the provisions of the Declaration of Trust is
described in detail above. Such allocations are recognized for federal income
tax purposes if (i) they are in accordance with the partners' respective
interests in ACPT or have "substantial economic effect" within the meaning of
the Code and applicable Regulations, and (ii) they are applied without
retroactive effect.

ACPT's allocations to the Shareholders pursuant to the Declaration of
Trust will be recognized for federal income tax purposes to the extent that
such allocations do not result in the Shareholders having deficits in their
capital accounts. It is not anticipated that ACPT will generate, nor is it an
objective of ACPT to generate, losses that could result in deficit capital
accounts. However, it is possible that ACPT could make a distribution that
causes a Shareholder to have a deficit capital account.

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If any allocation of ACPT's items pursuant to the Declaration of Trust
is determined not to be in accordance with the Shareholders' interests in ACPT
(or otherwise not to have "substantial economic effect" under the Code and
Regulations), then ACPT's items would be allocated among the partners in
accordance with their "interests in ACPT" based on all the relevant facts and
circumstances. Such a determination could result in the income, gains, losses,
deductions, or credits allocated under the Declaration of Trust being
reallocated. Such reallocation, however, would not affect distributions under
the Declaration of Trust. Thus, such a reallocation could result in an
increased share of taxable income being allocated to a Shareholder, without any
corresponding increase in cash distributions over those contemplated in the
Declaration of Trust.

The Declaration of Trust authorizes the Board of Trustees to make any
changes in ACPT's allocation provisions determined to be necessary under the
Regulations in order for ACPT's allocation provisions to be respected for
federal income tax purposes. It is possible that such a change in the
allocation provisions could result in additional taxable income being allocated
to existing Shareholders, without any corresponding increase in cash
distributions to such Shareholders. However, no provision may be added that
would require the Shareholders to restore negative capital accounts. In
addition, in implementing any such change, the Board of Trustees is to use its
best efforts to ensure that the underlying economic arrangement intended by the
Declaration of Trust -- that all distributions and allocations be in accordance
with percentage interests in ACPT -- is preserved to the extent practicable.

Coordination of Allocations and Distributions.
----------------------------------------------

ACPT has adopted the daily closing-of-the-books convention in
allocating ACPT's income and loss. In addition, ACPT, American Land, American
Management, American Rental, and IGP Group expect to coordinate the declaration
and payment of dividends and other distributions from such entities in such a
manner that all dividends will be paid by the lower-tier entities to ACPT on the
same day that ACPT declares a dividend to the Shareholders of record on such
date. Thus, each Shareholder's dividend distribution from ACPT will correspond
with their allocable share of ACPT's taxable income associated with the receipt
of dividends from the other entities. If dividends are not so coordinated, it
is possible that if a Shareholder sells or otherwise disposes of his or her
Common Shares prior to a record date, ACPT would make the cash distributions to
the Shareholder's transferee even though the Shareholder would be taxed on the
income.

U.S. Shareholders that own (after application of certain attribution
rules) 10% or more of the Common Shares ("10% Shareholders") may be required to
include in income certain amounts earned by IGP Group even where IGP Group does
not actually distribute these amounts to ACPT. Therefore, 10% Shareholders
should consult

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their own tax advisors regarding the tax consequences of the Distribution,
holding and disposition of Common Shares.

Section 704(c) Allocations.
--------------------------

Under Section 704(c) of the Code, tax items relating to the unrealized
gain (or loss) ("Precontribution Gain (or Loss)") with respect to property
contributed ("Contributed Property") by a partner ("Contributing Partner") to a
Partnership must be allocated to the Contributing Partners when the partnership
sells or otherwise disposes of its interests in the Contributed Property. The
Precontribution Gain (or Loss) is generally equal to the difference between the
fair market value of the Contributed Property at the time of the contribution
and the Contributing Partner's tax basis in the property at that time.

The Board of Trustees will determine the amount of Precontribution
Gain (or Loss) allocable to each asset originally contributed to IGC or
contributed by IGC to ACPT, and each Shareholder's share thereof. These
determinations may affect substantially the amount and timing of gain or loss
recognized by Shareholders in the event that ACPT were to sell its interest in
American Land, American Management, American Rental, or IGP Group.

Section 754 Election.
--------------------

ACPT will not make an election under Section 754 of the Code to adjust
the tax basis of its property upon sales and certain other transfers of Common
Shares (Section 743 of the Code) or in the event of a distribution of property
to the Shareholders (Section 734 of the Code). Therefore, persons who purchase
Common Shares from Shareholders will not receive a special basis adjustment with
respect to their share of property held by ACPT to reflect the purchase price of
such Common Shares. Thus, if ACPT sells all or a portion of its interests in
the lower-tier entities, a Shareholder who purchases Common Shares after the
Distribution will recognize his or her proportionate share of ACPT's gain or
loss regardless of whether such gain or loss is attributable to appreciation or
depreciation in the value of the interests sold by ACPT that occurred before the
Shareholder acquired its Common Shares. If ACPT were to sell its interests in
American Land, American Management, American Rental, or IGP Group, the
proportionate share of the gain or loss recognized by a Shareholder could vary
depending on whether or not such Shareholder purchased its Common Shares from a
person that originally contributed property to IGC. It is possible that in
certain circumstances, the trading market for the Common Shares could be
adversely affected because the Common Shares were not fungible.

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Passive Loss and Income.
-----------------------

It is not anticipated that ACPT will have a taxable loss for any
taxable year. All of ACPT's gross income from dividends (including all
distributions from American Rental) or from the disposition of ACPT's interests
in the lower-tier entities will constitute "portfolio income" and will not be
included in "passive activity gross income" under the rules relating to
restrictions on passive activity losses.

Taxation of Foreign Investors.
-----------------------------

The rules governing federal income taxation of nonresident alien
individuals, foreign corporations, foreign partnerships and other foreign
Shareholders (collectively, "Non-U.S. Shareholders") are complex and no attempt
will be made herein to discuss such rules. Prospective Non-U.S. Shareholders
should consult with their own tax advisers to determine the impact of federal,
state and local income tax laws with regard to an investment in Common Shares,
including any reporting requirements, as well as the tax treatment of such an
investment under the laws of their home country.

Taxation of Shareholder Distributions Other than in Liquidation.
---------------------------------------------------------------

A Shareholder will not recognize taxable income when he or she
receives a cash distribution from ACPT if the amount of the distribution does
not exceed the Shareholder's tax basis in his or her Common Shares. See "-- Tax
Basis of Common Shares." Because of the coordination of the declaration and
payment of dividends and other distributions between ACPT and the entities in
which it holds an interest, each Shareholder's basis in its Common Shares should
be increased by the Shareholder's share of ACPT's taxable income associated with
the receipt of a cash distribution from ACPT. See "-- Coordination of
Allocations and Distributions." Generally, ACPT anticipates that the increase
in basis should be equal to the amount of the cash distribution. However, if
the cash distributed to the Shareholder exceeds the Shareholder's tax basis in
his or her Common Shares, the excess will be taxable to the Shareholder as
though it were gain on the sale or exchange of his or her Common Shares. See "-
- - Sale or Exchange of Common Shares." A Shareholder generally will not
recognize income upon receipt from ACPT of a distribution of property other than
a distribution of money or a disproportionate distribution of marketable
securities. A distribution may reduce the Shareholder's tax basis in his or her
Common Shares. See "-- Tax Basis of Common Shares."

Foreign Tax Credit.
------------------

If IGP Group and the Puerto Rico Apartment Partnerships qualify for
"pass-through" treatment as special partnerships for Puerto Rico income tax
purposes under Puerto Rico law, they will not be subject to income tax in Puerto
Rico. Instead, IGP Group's income (primarily in the form of rental payments
with respect to

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apartments and other real property located in Puerto Rico and including IGP
Group's share of the income of each of the Puerto Rico Apartment Partnerships)
will be taxable to ACPT. ACPT will be treated as a foreign corporation for
Puerto Rico income tax purposes and will be subject to Puerto Rico income tax on
its allocable share of IGP Group's income. See "Certain State Income Tax and
Puerto Rico Income Tax Considerations -- Certain Puerto Rico Income Tax
Considerations." To the extent that ACPT pays Puerto Rico taxes with respect to
its Puerto Rico source income, the Shareholders will be considered to have paid
their allocable share of such Puerto Rico tax which, as discussed below, may
give rise to a foreign tax credit or a deduction for federal income tax
purposes. However, if IGP Group were treated as a corporation for Puerto Rico
tax purposes, it would be subject to Puerto Rico income tax on its Puerto Rico
source income and the Puerto Rico income tax paid by IGP Group would not be
treated as taxes paid by ACPT and would not give rise to foreign tax credits or
deductions to the Shareholders. In addition, such foreign tax credits or
deductions generally would not be available to the Shareholders if ACPT were
treated as a corporation for U.S. tax purposes, regardless of how IGP Group is
treated for Puerto Rico tax purposes.

For United States tax purposes, each Shareholder will be considered to
have paid his or her allocable share of any Puerto Rico income taxes paid by
ACPT. Puerto Rico taxes treated as paid by such Shareholder or allocable to
such Shareholder will be considered foreign income taxes paid by such
Shareholder with respect to which such Shareholder may claim a foreign tax
credit (subject to applicable limitations) or a deduction for United States
federal income tax purposes. The limitation on the foreign tax credit is
designed to ensure that a United States taxpayer cannot use foreign taxes to
offset more of that taxpayer's United States tax liability for a taxable year
than is attributable to foreign source income (e.g., because the effective rate
is higher than United States rates). For certain Shareholders, the marginal
Puerto Rico income tax rate may be higher than the marginal United States tax
rate. Accordingly, for Shareholders whose only source of foreign income is
ACPT, the taxes payable to Puerto Rico by ACPT might not be fully creditable as
a result of this limitation under the Code. Taxable income of ACPT for federal
income tax and Puerto Rico income tax purposes also may differ because each tax
is calculated under the respective tax accounting and entity classification
provisions of the jurisdictions that in some cases are not the same. For
example, for Puerto Rico income tax purposes IGP Group intends to qualify as a
special partnership and the tax items of IGP Group would then flow through to
ACPT for Puerto Rico income tax purposes as a distributive share of income
whether or not cash is distributed. However, for federal tax purposes, IGP
Group is treated as a corporation and none of IGP Group's tax items will flow
through to ACPT and ACPT generally will treat cash distributed from IGP Group as
a dividend.

The foreign tax credit limitations must also be computed separately
for certain categories of income. For example, separate computations generally
would be made for passive income such as dividends and for "active" income
earned in the

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conduct of a trade or business. The basic limitation is that the foreign tax
credit claimed with respect to a particular category of income cannot exceed the
amount of United States taxes imposed with respect to the taxpayer's worldwide
income multiplied by a fraction, the numerator of which is the total foreign
source taxable income in that category and the denominator of which is the total
amount of the taxpayer's worldwide income.

A Shareholder's Puerto Rico source income with respect to his or her
ownership of Common Shares likely will consist of the Shareholder's distributive
share of dividends from IGP Group under federal income tax rules. In contrast,
the Shareholder's distributive share of ACPT's Puerto Rico taxes will have been
paid in accordance with applicable Puerto Rico tax rules with respect to ACPT's
distributive share of the rental and other income earned by IGP Group and the
Puerto Rico Apartment Partnerships. For foreign tax credit limitation purposes,
the amount and category of foreign source income is determined under United
States tax principles even though Puerto Rico taxed the income earned there
according to its own rules. Since the United States recognizes IGP Group as a
corporation and not as a partnership, the Shareholders' foreign source income
from ACPT for foreign tax credit limitation purposes likely will be passive
income in the amount of the Shareholder's distributive share of the dividends
paid to ACPT by IGP Group. The amount of foreign taxes paid with respect to a
particular category of income includes only those foreign taxes related to
income in that category. The IRS will likely associate the Shareholders'
distributive shares of the Puerto Rico taxes paid by ACPT with the Shareholders'
shares of the dividends paid by IGP Group to ACPT. Thus, a Shareholder's
distributive share of Puerto Rico taxes likely will be allocated to the passive
income category for purposes of determining the foreign tax credit limitation.

However, there is a risk that the IRS may instead treat the Puerto
Rico tax as associated with the "general limitations" category (and not the
passive income category) because it is associated with "active" income that
generally would not be subject to tax under United States tax rules (i.e.,
----
because the United States does not generally tax shareholders on the
undistributed income of the corporations in which they invest). In this case,
the Puerto Rico tax would be treated as imposed with respect to "general
limitations" income, but a Shareholder may not be eligible for a foreign tax
credit with respect to this tax unless he or she has other foreign source
taxable "general limitations" income against which to apply the credit.

Termination of ACPT for Tax Purposes.
------------------------------------

If 50% or more of the capital and profits interests in ACPT are sold
or exchanged within a twelve-month period, ACPT will be deemed to have been
terminated for federal income tax purposes. In this regard, however, a Common
Share that changes hands several times during a twelve-month period will be
counted only once for purposes of determining whether a termination has
occurred.

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If ACPT is considered to have terminated, ACPT would be deemed to have
contributed its assets and liabilities to a new partnership in exchange for an
interest in the new partnership, and immediately thereafter the terminated
partnership would be deemed to have distributed the interests in the new
partnership to the Shareholders of record as of the date of the termination.

Generally, a Shareholder would not recognize any taxable gain or loss
as a result of the deemed pro rata distribution of new partnership interests
incident to a constructive termination of ACPT. See "-- Federal Income Tax
Considerations --Federal Income Taxation of ACPT and Shareholders -- Dissolution
of ACPT." If the Shareholder's taxable year were other than the calendar year,
the inclusion of more than one year of ACPT's income in a single taxable year of
the Shareholder could result. Finally, a termination of ACPT could cause ACPT
or its assets to become subject to any unfavorable statutory or regulatory
changes enacted prior to the termination but previously not applicable to ACPT
or its assets because of protective "transitional" rules. There could be other
federal income tax consequences, favorable and unfavorable, resulting from a
termination of ACPT.

Under the 1997 Act, regulatory authority was granted to provide for
gain recognition on a transfer of appreciated property to a partnership in cases
where unrealized gain could be transferred to a foreign partner. It does not
appear that this provision would apply to ACPT or the Shareholders. However, no
regulations have been issued under this provision.

Backup Withholding.
------------------

Distributions to Shareholders whose Common Shares are held on their
behalf by a "broker" may constitute "reportable payments" under the federal
income tax rules regarding "backup withholding." Backup withholding, however,
would apply only if (i) the Shareholder failed to furnish his or her Social
Security number or other taxpayer identification number ("TIN") to the "payor"
(e.g., the "broker"), (ii) the IRS notified the payor that the Shareholder
furnished an incorrect TIN, (iii) there were a "notified payee certification
failure" as described in the Code, or (iv) there were a failure by the
Shareholder to certify that he or she is not subject to backup withholding. If
backup withholding were applicable to a Shareholder, the payor would be required
to withhold 31% of each distribution to such Shareholder and to pay such amount
to the IRS on behalf of such Shareholder. The amount withheld pursuant to
backup withholding is not itself an additional tax. Rather, the tax liability
of the Shareholder subject to backup withholding will be credited with the
amount of tax withheld.

Sale or Exchange of Common Shares.
---------------------------------

A Shareholder will realize gain or loss on a sale or other disposition
of his or her Common Shares based on the difference between the amount realized
on the sale

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and the Shareholder's adjusted tax basis for the Common Shares. The amount
realized includes the Shareholder's share of ACPT's liabilities. A selling
Shareholder's tax basis in the Common Shares will be adjusted for the amount of
income or loss allocable to, and distributions made to, such Shareholder in the
taxable year in which the disposition occurs. See "-- Tax Basis of Common
Shares." To the extent the gain or loss is not treated as ordinary income or
loss under the rules described below, the gain or loss ordinarily will be
treated as capital gain or loss and a long-term capital gain or loss if the
holding period for the Common Shares is more than one year.

The gain or loss may give rise to ordinary income or loss to the
extent it is attributable to "inventory items" or "unrealized receivables" (as
defined in Section 751 of the Code). "Unrealized receivables" include rights to
payment for services rendered or to be rendered, franchises, trademarks, Section
1245 property, Section 1250 property and stock in certain foreign corporations
as described in Section 1248.

Under an IRS ruling, a Shareholder might be required to maintain an
aggregate adjusted tax basis in all of his or her Common Shares even if the
Shareholder acquired Common Shares in separate transactions. If this rule
applies to Shareholders, when a Shareholder disposes of a portion of his or her
Common Shares, the Shareholder would have to allocate his or her aggregate tax
basis between the disposed-of Common Shares and the retained Common Shares by
some equitable apportionment method. In that case, it effectively would
preclude a Shareholder from controlling the timing of the recognition of the
inherent gain or loss in his or her Common Shares by selecting specific Common
Shares for sale. It is unclear how a Shareholder would determine the holding
period of the disposed-of Common Shares in such circumstances. Because of the
uncertainties relating to the holding period and basis, a Shareholder
considering a subsequent purchase of additional Common Shares should consult his
or her own tax advisor as to the possible consequences of the subsequent
purchases.

The trading market for Common Shares could be adversely affected by
the lack of a special basis adjustment for purchasers of Common Shares because
ACPT will not make an election under Code Section 754.

Dissolution of ACPT.
-------------------

Upon the dissolution and liquidation of ACPT, any assets remaining
after payment of, or provision for payment of, ACPT's debts and liabilities will
be distributed to ACPT's partners (including Shareholders) of record first in
proportion to the positive balances in their capital accounts and then pro rata
in accordance with their percentage interests. It is anticipated that the
Shareholders' capital accounts and percentage interests will be in proportion to
the Shareholders' Common Shares and that liquidating distributions will
therefore be pro rata in accordance with Common Shares.

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A Shareholder generally will not recognize gain or loss on a
liquidating distribution. However, a Shareholder will recognize gain to the
extent that the shareholder receives money (including his proportionate share of
any reduction in ACPT's non-recourse liability) in excess of his or her basis in
the Common Shares. The gain will be a capital gain, except to the extent of any
"unrealized receivables" and "inventory items." See "-- Federal Income Tax
Considerations -- Federal Income Taxation of ACPT and Shareholders -- Sale or
Exchange of Common Shares."

A Shareholder may recognize a capital loss on liquidation only if the
Shareholder receives only money, "unrealized receivables," and "inventory
items." The loss may not exceed the difference between (i) the Shareholder's
adjusted tax basis in his or her Common Shares and (ii) the sum of (x) the
amount of money received and (y) his or her tax basis of such unrealized
receivables and inventory items. If the Shareholder also receives any property
other than money, unrealized receivables or inventory items, he or she will not
recognize any loss upon the distribution. He will have a tax basis in the
property received in liquidation equal to his or her adjusted tax basis in his
Common Shares reduced by any money distributed to the Shareholder.

Puerto Rico Shareholders.
------------------------

Individuals who are bona fide residents of Puerto Rico during the
entire taxable year ("Puerto Rico Residents") will be subject to United States
income tax at applicable United States rates with respect to their allocable
share of ACPT's income derived from United States sources. A corporate
Shareholder organized under the laws of Puerto Rico ("Puerto Rico Corporation")
will be subject to United States income tax at applicable United States rates
with respect to its allocable share of ACPT's income that is effectively
connected with the conduct of a United States trade or business. A Puerto Rico
Corporation will generally be subject to a 30% tax on its allocable share of
ACPT's "fixed or determinable annual or periodic gains, profits, and income"
from United States sources. Distributions made by IGP Group to ACPT should not
be United States source income or effectively connected with a United States
trade or business. ACPT generally is required to withhold U.S. tax at the rate
of 30% with respect to a Puerto Rico Resident's or a Puerto Rico Corporation's
allocable share of dividends received from American Land, American Management,
or American Rental.

Under the Foreign Investment in Real Property Tax Act of 1980, as
amended ("FIRPTA"), ACPT must withhold 35% of the amount of a Puerto Rico
Corporation's allocable share of ACPT's gain from the sale of a United States
real property interest ("USRPI"), including a disposition of an interest in
certain entities where over 50 % of the value of such entity's assets consist of
U.S. real property interests. A USRPI generally is an interest in real property
located in the United States or Virgin Islands. An interest in a "domestically-
controlled REIT" is not a USRPI. The term "domestically-controlled REIT" means
a REIT in which at all times during a specified testing period (generally, the
lesser of the 5-year period ending on the date of

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the disposition or the period in which the REIT was in existence) less than 50%
in value of the stock was held directly or indirectly by foreign persons.

Any distribution by a REIT to a non-resident alien individual or
foreign corporation, to the extent attributable to gain from sales or exchanges
by the REIT of USRPI, is treated as gain recognized by such non-resident alien
individual or foreign corporation from the sale or exchange of a USRPI. Puerto
Rico Residents and Puerto Rico Corporations will be subject to withholding on
amounts attributable to capital gains dividends distributed by American Rental.
In certain circumstances, a distribution of a USRPI to the Shareholders could
give rise to a recognition of any unrealized gain (the excess of the fair market
value over basis) of the USRPI distributed, multiplied by the "foreign ownership
percentage". The term "foreign ownership percentage" means that percentage of
the stock of the REIT which was held (directly or indirectly) by foreign persons
at the time during the applicable testing period during which the direct and
indirect ownership of stock by foreign persons was greatest.

The United States Department of the Treasury may promulgate
Regulations reducing the withholding rate to 28%, probably only in the case of
individuals. Future Regulations also may require ACPT to withhold 10% of the
fair market value of any USRPI that is distributed to a foreign person if the
transaction would constitute a taxable distribution under FIRPTA.

A Puerto Rico Resident generally will be subject to United States tax
on the gain or loss resulting from the disposition of a Common Share only to the
extent that the gain or loss is from United States sources. As a general rule,
any gain or loss from the disposition of personal property is not United States
source income if the seller is not a United States resident. For most purposes,
partnership interests are regarded as personal property. However, it is
possible that a disposition of a partnership interest would be considered a
disposition of partnership assets rather than partnership interests. The IRS
has ruled that a partner was subject to United States tax on the gain or loss
resulting from the disposition of a partnership interest to the extent that the
partner's allocable share of the partnership's unrealized gain or loss is
effectively connected with a United States trade or business when the
partnership was engaged in a United States trade or business through a fixed
place of business or a permanent establishment and was not a publicly traded
partnership. The ruling does not indicate whether the same holding would obtain
in the case of a disposition of an interest in a publicly traded partnership or
whether gain or loss on such an interest would be sourced as United States or
foreign, based on the assets and activities of the partnership. If the holding
were to apply, Puerto Rico Residents and Puerto Rico Corporations disposing of
Common Shares could be subject to tax with respect to unrealized gain or loss in
the stock of one or more of the four entities whose stock ACPT controls but only
to the extent that more than 50% of the entity's assets consist of USRPIs.
Generally, the determination of the residence of the seller is made at the
partner level, except as provided in Regulations that have not yet been
promulgated. Legislative history indicates that Regulations may provide that

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the determination will be made at the partnership level in the case of a
publicly traded partnership.

In general, Puerto Rico Corporations that have gain from the sale of
Common Shares are subject to United States taxation at capital gains rates only
if the gain is effectively connected with the conduct of a United States trade
or business. Under FIRPTA, if a Common Share is considered a USRPI, the gain or
loss from the disposition of the Common Share is treated as effectively
connected with a trade or business conducted in the United States. A Common
Share will be considered a USRPI generally if at any time during the five-year
period preceding the disposition (i) the Puerto Rico Corporation owns directly
or by attribution more than 5% of ACPT's Common Shares and (ii) the fair market
value of ACPT's USRPIs was at least 50% of the fair market value of ACPT's
worldwide real property interests and ACPT's other assets used in a trade or
business.

As discussed above, if ACPT becomes engaged in a United States trade
or business through a fixed place of business or a permanent establishment, any
gain or loss recognized by a Puerto Rico Corporation upon the disposition of a
Common Share may be treated as effectively connected with the conduct of a
United States trade or business to the extent that the Shareholder's allocable
share of ACPT's unrealized gain or loss is effectively connected with such
United States trade or business.

Certain Federal Income Tax Consequences to Tax Exempt Organizations.
-------------------------------------------------------------------

Virtually all of ACPT's taxable income will consist of dividends
(including REIT dividends). Therefore, a tax exempt entity that is a
Shareholder generally will not be subject to tax on distributions from ACPT or
gain realized on the sale of Common Shares. However, there are circumstances
where a tax exempt entity may be subject to tax. For example, a tax exempt
entity may be subject to tax to the extent that it has financed the acquisition
of its Common Shares with "acquisition indebtedness" within the meaning of the
Code. Consequently, tax exempt entities should consult their own tax advisors
regarding the Distribution, and the holding and disposition of Common Shares.

Information Return Filing Requirements.
--------------------------------------

A Shareholder who sells or exchanges a Common Share must notify ACPT
of such transaction in writing within 30 days of the transaction (or, if
earlier, by January 15 of the year following the calendar year in which the
transaction occurs). The transferor Shareholder does not have to notify ACPT if
a broker must provide an information return under Section 6045 of the Code. The
transferor Shareholder must provide (i) his name and address and the name and
address of the transferee; (ii) his TIN and, if known, the transferee's TIN; and
(iii) the date of the sale or exchange. If a

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transferor Shareholder fails to notify ACPT, he or she may be subject to a $50
penalty for the failure.

In addition, ACPT must notify the IRS of any sale or exchange of a
Common Share (of which ACPT was notified or had knowledge). ACPT does not have
to notify the IRS if a broker must provide an information return under Section
6045 of the Code. If ACPT knows of a sale or exchange but does not know who is
the beneficial owner of the Common Shares, it may treat the record-holder as the
transferor or the transferee as the case may be. ACPT must report to the IRS
the names, addresses, and TINs of ACPT, the transferee and the transferor, the
date of the transaction, and any additional information required by the
applicable information return or its instructions. ACPT also must provide that
information to the transferor and the transferee. In addition, ACPT must inform
the transferor and the transferee that this information has been given to the
IRS, that a portion of any gain or loss must be treated as ordinary income or
loss and that the transferor is required to attach a statement relating to the
sale or exchange to his or her income tax return.

If ACPT fails to furnish the required information to the transferor or
the transferee, it may be subject to a penalty of $50 per failure up to an
annual maximum of $100,000. If ACPT fails to provide the required information
to the IRS, ACPT would be subject to a penalty of $50 per failure up to an
annual maximum of $100,000. Because ACPT will be a publicly traded partnership,
it is uncertain whether ACPT will be able to comply with these requirements in
every instance.

Electing Large Partnerships.
---------------------------

Partnerships with 100 or more partners generally are permitted to make
an irrevocable election ("Electing Large Partnerships") to be subject to certain
simplified "flow through," reporting, and audit provisions for federal income
tax purposes for partnership tax years beginning after December 31, 1997.
Electing Large Partnerships are subject to special rules for the computation,
treatment, and reporting of certain partnership tax items. In addition,
Electing Large Partnerships are subject to special rules relating to the
administrative and judicial review of adjustments with respect to partnership
tax items, and relating to the liability of partners for the payment or refund
of federal income taxes resulting from such an adjustment. ACPT has no current
plans to make an election to be subject to the rules applicable to Electing
Large Partnerships.

Audit of Partnership Tax Returns and Further Proceedings.
--------------------------------------------------------

Although ACPT is not required to pay any federal income tax, it is
required to file an information tax return for each taxable year setting forth
its income, gains, losses, deductions, credits, tax preference items and its
other applicable tax attributes. The IRS may audit the tax treatment of ACPT's
items of income, loss, deduction, and credit at the partnership level in a
unified administrative proceeding. The

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IRS will make any adjustments it believes to be appropriate. An audit of ACPT
may also result in the audit of a Shareholder's tax return, which may not be
restricted to adjustments to items of ACPT.

The IRS is required to mail a notice at the outset of the
administrative proceeding and at the time of any adjustment to: (i) any
Shareholder who has at least a 1% interest in ACPT's profits, (ii) any
Shareholder designated by a "notice group," and (iii) the "Tax Matters Partner"
of ACPT. A notice group is any group of Shareholders who have an aggregate
profits interest in ACPT of at least 5% and have designated a Shareholder to
receive separate notice on behalf of the group. The Trustee will be ACPT's Tax
Matters Partner. As the Tax Matters Partner, the Trustee will receive notice on
behalf of, and will provide notice to, those Shareholders who have an interest
of less than 1% in ACPT's profits. The Trustee may extend the statutory period
of limitations for assessment of adjustments attributable to "partnership items"
and may enter into a binding settlement with the IRS. The Trustee's settlement
will be binding on a Shareholder unless the Shareholder (i) has at least a 1%
interest in ACPT's profits, (ii) is a member of a notice group, or (iii)
notifies the IRS that the Trustee is not authorized to act on the Shareholder's
behalf.

If the IRS and the Trustee fail to settle an audit proceeding, then
the Trustee may choose to litigate the matter. In that event, the Trustee would
select the court in which such litigation would occur (including a court where
prepayment of the taxes is required). A Shareholder would have the right to
participate in such litigation and would be bound by the outcome of the
litigation even if the Shareholder elected not to participate. Because the
Shareholders would be affected by the outcome of any administrative or judicial
proceedings with respect to ACPT, the Trustee will provide the Shareholders with
appropriate notices of federal income tax proceedings with respect to ACPT.
Shareholders who wish to pursue their own contest are free to do so at their own
expense. Each Shareholder should consult with his or her tax advisor with
respect to the impact of these procedures on his or her particular case.

Penalty for Substantial Understatement; Deduction of Interest.
-------------------------------------------------------------

If there is a "substantial understatement" of his or her tax
liability, a Shareholder may be liable for a penalty equal to 20% of the
underpayment of tax resulting from the substantial understatement. There will
be substantial understatement if the Shareholder fails to report the greater of
$5,000 ($10,000 for certain corporations) or 10% of the tax required to be shown
on the return for the taxable year. In determining whether a Shareholder's tax
liability has been substantially understated, a Shareholder's items of income
and loss arising from ACPT, as well as items of income and loss from other
activities, will be taken into account. For this purpose, the amount of an
understatement does not include any portion of the understatement (i) for which
there existed "substantial authority" for the position of the taxpayer or (ii)
for which the

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taxpayer "adequately disclosed" the relevant facts on his or her return and
there was a "reasonable basis" for the tax treatment.

ACPT anticipates that its tax returns will be prepared in a manner
that will not result in the imposition of the 20% penalty. However, due to the
complexity involved in applying the tax laws to particular transactions and the
fact that the determination of whether a particular Shareholder's tax liability
is substantially understated is dependent on the Shareholder's individual
circumstances, there can be no assurance that the substantial understatement
penalty could not be imposed on a Shareholder with respect to items arising from
ACPT. Any interest imposed on the tax deficiencies of individuals is "personal"
interest that will be nondeductible.

CERTAIN STATE INCOME TAX AND PUERTO RICO INCOME TAX
CONSIDERATIONS

This section discusses certain state income tax and Puerto Rico income
tax considerations applicable to the Distribution, holding and disposition of
Common Shares. The following discussion of taxation is intended only as a
descriptive summary and does not purport to be a complete analysis or listing of
all potential state and Puerto Rico income tax effects. Shareholders may be
subject to Puerto Rico, state or local tax based on their residence or ACPT's
activities. INVESTORS ARE ADVISED TO CONSULT WITH THEIR OWN TAX ADVISORS AS TO
THEIR INDIVIDUAL TAX STATUS WITH RESPECT TO THE COMMON SHARES AND ANY
DISTRIBUTIONS RECEIVED THEREFROM.

CERTAIN STATE TAX CONSIDERATIONS.

ACPT and the Shareholders may be subject to state or local taxation in
various state or local jurisdictions, including those in which ACPT or the
Shareholder transacts business or resides. The state and local tax treatment of
ACPT and the Shareholders may not conform to the federal income tax consequences
discussed above. Consequently, Shareholders should consult their own tax
advisors regarding the effect of state and local tax laws on the Distribution,
and the holding and disposition of Common Shares.

In general, nonresident individuals holding interests in partnerships
whose activities and assets are limited to investments in stocks and similar
assets are not subject to Maryland State income tax merely because investment
and similar decisions are conducted by the partnership from a Maryland location.
If ACPT is found to be "doing business" in Maryland, however, nonresident
Shareholders would be required to pay tax in Maryland on their distributive
shares of ACPT income. Although the tax would be owed by the Shareholder,
Maryland law imposes a withholding tax at the partnership level to ensure
compliance. Any partnership doing business in Maryland generally is

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required to pay a withholding tax equal to the top marginal individual tax rate
(currently 5%) of each item of net income includable in the nonresident
partners' distributive share of income attributable to business carried on in
Maryland.

If ACPT is treated as having income from Maryland sources a
Shareholder may be required to file a Maryland income tax return. ACPT will
advise Shareholders of the amount, if any, of their share of ACPT's income that
is attributable to Maryland sources.

CERTAIN PUERTO RICO INCOME TAX CONSIDERATIONS.

This summary of Puerto Rico income tax consequences is based on the
provisions of the Puerto Rico Internal Revenue Code of 1994 ("Puerto Rico
Code"), as amended, applicable to taxable years after June 30, 1995, Puerto Rico
Department of the Treasury ("Puerto Rico Treasury") regulations, published and
private rulings and judicial decisions as currently in effect. These sources
are all subject to change and such change could be applied retroactively at any
time. In addition, it may be some time before Regulations or other formal
guidance is issued under the Puerto Rico Code. Such Regulations could interpret
the relevant law in a manner that is contrary to this discussion or contrary to
the opinion of Puerto Rico Counsel (defined below) and such interpretation could
be applied retroactively. Insofar as this section of the Proxy
Statement/Prospectus describes Puerto Rico law, it represents the opinion of
Fiddler, Gonzalez & Rodriguez, LLP ("Puerto Rico Counsel").

No rulings have been requested from the Puerto Rico Treasury with
respect to the matters discussed in this section. Puerto Rico Counsel has
assisted in the preparation of, and has reviewed, the discussion in this
section. Although the opinion of Puerto Rico Counsel represents Puerto Rico
Counsel's best judgment as to the matters discussed herein, it does not bind the
Puerto Rico Treasury or in any way constitute an assurance that the Puerto Rico
income tax consequences described herein will be followed by the Puerto Rico
Treasury. Puerto Rico Counsel does not purport to be expert in, or generally
familiar with, the laws of any jurisdiction other than the applicable laws of
the Commonwealth of Puerto Rico and, therefore, expresses no opinion as to
matters not governed by such laws.

Puerto Rico Income Tax Classification of ACPT and IGP Group.
-----------------------------------------------------------

IGP Group has been formed as a corporation under the General
Corporation Law of 1995 of the Commonwealth of Puerto Rico. IGP Group intends
to file an election and to qualify for special partnership status under the
Puerto Rico Code. As a special partnership IGP Group would be treated as a
partnership for Puerto Rico income tax purposes. Under current law, a special
partnership is not a taxable entity and incurs no income tax liability.
Instead, each partner is required to take into account in computing such
partner's income tax liability such partner's allocable share of the

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partnership's income whether or not the partnership makes a distribution
corresponding to such income. Treatment as a special partnership for Puerto
Rico income tax purposes avoids the "double" income taxation that occurs when a
corporation distributes its profits to its shareholders and minimizes the
aggregate Puerto Rico income tax imposed on IGP Group and its subsidiaries.

If it were determined that IGP Group is taxable as a corporation,
however, the anticipated tax advantages to ACPT and the Shareholders would be
materially and adversely affected. If IGP Group were classified as a
corporation, the profits of IGP would be taxed to IGP Group at the applicable
corporate tax rate. Moreover, distributions to ACPT would be treated as
corporate distributions, taxable at ordinary income tax rates to the extent of
earnings and profits, or as non-taxable returns of capital or distributions
taxable at capital gains rates, depending upon the circumstances of the
distribution.

If IGP Group does not qualify as a special partnership, (i) it would
be classified as a corporation under the Puerto Rico Code, (ii) it would be
taxable on its profits at the applicable corporate rate, and (iii) distributions
to ACPT, to the extent they arise from earnings and profits, would be taxable to
the Shareholders as dividends. Treatment of IGP Group as a corporation would
result in a material reduction in the anticipated cash flow to Shareholders and
would have a significant adverse effect on the value of the Common Shares.

Puerto Rico Income Taxation of the Distribution.
-----------------------------------------------

United States Shareholders

Puerto Rico Counsel understands that IGC is not and will not be
engaged in a trade or business in Puerto Rico for Puerto Rico income tax
purposes. Accordingly, a Shareholder who is (i) either an individual resident
of the United States or a corporation or partnership organized under the laws of
a state of the United States, (ii) not engaged in a trade or business in Puerto
Rico (a "United States Shareholder"), and (iii) not a Puerto Rico Shareholder
will not recognize income upon receipt of Common Shares in the Distribution or
cash in lieu of fractional shares.

Puerto Rico Shareholders

A Puerto Rico Shareholders is (i) an individual, estate or trust
resident of Puerto Rico, or a corporation or partnership organized under the
laws of Puerto Rico, or (ii) an individual, estate or trust not a resident of
Puerto Rico and engaged in a trade of business in Puerto Rico, or (iii) a
corporation or partnership not organized under the laws of Puerto Rico and
engaged in a trade or business in Puerto Rico. To a Puerto Rico Shareholders
the distribution of Common Shares and cash in lieu of fractional Share interests
will be treated as a taxable distribution for Puerto Rico income tax purposes.
If

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the value of the Common Shares and cash received in the Distribution is equal to
or less than the current or accumulated earnings and profits of IGC, the value
of the Common Shares and cash received will be treated as a taxable dividend. If
the value of the Common Shares and cash received in the Distribution exceeds the
current or accumulated earnings and profits of IGC, a portion of the value of
the Common Shares and cash received in the Distribution by a Puerto Rico
Shareholder will be treated as a taxable dividend. The value of the Common
Shares and cash received in the Distribution in excess of the amount treated as
a taxable dividend will be treated first as a return of capital to the extent of
the Puerto Rico Shareholder's adjusted tax basis for Puerto Rico income tax
purposes in his or her IGC Units, and then as gain from the sale or exchange of
property.

If IGC's tax basis in ACPT and cash distributed in lieu of Common
Share interests is equal to or less than the current or accumulated earnings and
profits of IGC, then the entire value of the Common Shares and cash received in
the Distribution by a Puerto Rico Shareholder will be treated as a taxable
dividend to the Puerto Rico Shareholder.

Puerto Rico Income Taxation of ACPT.
-----------------------------------

Under the Puerto Rico Code, ACPT is and will be taxable as a foreign
corporation. As such, it will pay Puerto Rico income tax on certain of its
Puerto Rico source income, including its distributive share of IGP Group's net
taxable income. ACPT may seek rulings from the Treasury to establish that under
the Puerto Rico Code (i) it will be considered not to be engaged in a Puerto
Rico trade or business, (ii) the tax rate at which its distributive share of IGP
Group's net income will be taxed (presumably 29%) and (iii) that distributions
by ACPT to United States Shareholders will not be subject to income and
withholding taxes.

Under the Puerto Rico Code ACPT will not be considered to be engaged
in a Puerto Rico trade or business solely by reason of being a partner in IGP
Group, and, accordingly, (i) the tax rate at which its distributive share of IGP
Group's taxable income will be taxed is twenty-nine percent (29%), and (ii) the
distributions by ACPT to United States Shareholders will not be subject to
income and withholding taxes.

If for purposes of the Puerto Rico Code, ACPT were treated as engaged
in a trade or business in Puerto Rico, then ACPT would be subject to Puerto Rico
income tax (and in certain circumstances a branch profits tax) on its
distributive share of income or loss (subject to certain limitations) of IGP
Group (and any other income derived by ACPT from sources within Puerto Rico or
income which is effectively connected with a trade or business in Puerto Rico)
at the regular graduated tax rates. Under certain circumstances, United States
Shareholders would be subject to income and withholding tax on the distribution
by ACPT of its earnings and profits and the redemption of Common Shares.

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Puerto Rico Income Taxation of IGP Group.
----------------------------------------

IGP Group intends to qualify as a special partnership under the Puerto
Rico Code. As a special partnership, IGP Group would not be subject to Puerto
Rico income tax. Instead, IGP Group's partners, including ACPT, would be
subject to taxation on their distributive share of IGP Group's taxable income or
loss. To maintain its status as a special partnership under the Puerto Rico
Code, IGP Group must derive 70% or more of its gross income from Puerto Rico
sources and 70% or more of its gross income must be derived from the sale and/or
lease of buildings and structures to third parties and land development, among
other activities.

Puerto Rico Counsel's Opinions of Puerto Rico Taxation of ACPT and IGP
----------------------------------------------------------------------
Group.
- -----

Puerto Rico Counsel is of the opinion, subject to the following
assumptions and representations, that under the Puerto Rico Code, regulations
promulgated thereunder, applicable private and published rulings, and judicial
decisions, that IGP Group will be treated as a special partnership.

This opinion is based on the following assumptions (i) that IGP Group
duly elects to be treated as a special partnership under the Puerto Rico Code;
(ii) that at least 70% of IGP's income is and will continue to be income from
the source and nature set forth in Section 1330(a) as described in the rulings
issued by the Puerto Rico Treasury on November 7, 1988 and December 11, 1996;
(iii) that IGP Group's sole asset and source of income will be its interests in
IGP; (iv) that IGP Group will be operated in accordance with its Articles of
Incorporation, Bylaws, and this Proxy Statement/Prospectus; and (v) that IGP
Group shall take such actions as may be necessary to preserve its status as a
special partnership under Section 1330(a).

The rules governing special partnerships are highly technical and
require ongoing compliance with a variety of tests that depend among other
things, on the nature of future partnership income. Puerto Rico counsel will
not monitor IGP Group's compliance with these requirements. While IGP Group
intends to satisfy these tests, no assurance can be given that IGP Group will
qualify as a special partnership for any particular year, or that the applicable
laws and regulations will not change and adversely affect IGP Group, ACPT and
its shareholders. IGP Group's qualification as a "pass-through" entity for
Puerto Rico tax purposes is based, in part, on private rulings issued by the
Puerto Rico Department of Treasury in connection with IGP. These rulings are
not binding on the Puerto Rico Department of Treasury and there is no guarantee
that their principles will be followed in evaluating IGP Group's situation.
Puerto Rico Counsel does not purport to be expert on, or generally familiar
with, the laws of any jurisdiction other than the applicable laws of the
Commonwealth of Puerto Rico, and, therefore, expresses no opinion as to matters
not governed by such laws.

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Certain Puerto Rico Income Tax Consequences to Shareholders.
-----------------------------------------------------------

United States Shareholders

The Puerto Rico Code provides that distributions by a foreign
corporation or partnership (i.e. ACPT) which is not engaged in a trade or
----
business in Puerto Rico will not constitute income from sources within Puerto
Rico. Accordingly, under the Puerto Rico Code and provided ACPT is not engaged
in a trade or business in Puerto Rico, distributions to United States
Shareholders will not be subject to income and withholding taxes in Puerto Rico.

Any gain recognized by a United States Shareholder upon a sale or
other disposition of a Common Share will not be subject to Puerto Rico income
tax under the Puerto Rico Code if the sale or exchange takes place outside of
Puerto Rico (all rights title and interest must be transferred outside Puerto
Rico, any exchange must take place outside Puerto Rico). Consequently, any gain
realized by a United States Shareholder from a disposition of a Common Share on
AMEX and/or the PSE will not be subject to Puerto Rico income tax under the
Puerto Rico Code.

Puerto Rico Shareholders

Under the Puerto Rico Code, a Puerto Rico Shareholder will be taxed on
a distribution from ACPT to the extent of the current or accumulated earnings
and profits of ACPT. Distributions in excess of current or accumulated earnings
and profits of ACPT will be treated as a return of capital to the extent of the
Puerto Rico Shareholder's adjusted tax basis in his or her Common Shares, and
then as gain from the sale or exchange of property. Provided that the Common
Share is a capital asset in the hands of a Shareholder, the gain or loss will be
a capital gain or loss and a long-term capital gain or loss if the Common Share
is held for more than six months.

Upon a sale or other disposition of a Common Share, a Puerto Rico
Shareholder generally will recognize gain or loss equal to the difference
between the amount realized and his or her adjusted tax basis in the Common
Share, both computed applying the income tax principles of the Puerto Rico Code.
Provided that the Common Share is a capital asset in the hands of a Puerto Rico
Shareholder, the gain or loss will be a capital gain or loss and a long-term
capital gain or loss if the Common Share is held for more than six months.

Because ACPT will be treated as if it were a corporation for Puerto
Rico income tax purposes, a Puerto Rico Shareholder's tax basis in his or her
Common Shares will not be adjusted as a result of income or loss recognized by
ACPT.

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DESCRIPTION OF SHARES OF BENEFICIAL INTEREST

The following summary of the terms of the shares of beneficial
interest of ACPT does not purport to be complete and is subject to and qualified
in its entirety by reference to the Declaration of Trust and Bylaws of ACPT,
copies of which are exhibits to the Registration Statement of which this
Prospectus is a part. See "Additional Information."

GENERAL.

The Declaration of Trust of ACPT provides that ACPT may issue up to
10,000,000 Common Shares and 10,000,000 Preferred Shares of beneficial interest,
$0.01 par value per share. Upon completion of the Restructuring, 5,200,000
Common Shares will be issued and outstanding. Assuming completion of the
Private Offering, Preferred Shares also will be issued and outstanding following
the Restructuring. As permitted by the Maryland Trust Law, the Declaration of
Trust contains a provision permitting the Board of Trustees, without any action
by the Shareholders, to amend the Declaration of Trust to increase or decrease
the aggregate number of shares of beneficial interest or the number of shares of
any class of shares of beneficial interest that ACPT has authority to issue.
ACPT believes that the power of the Board of Trustees to issue additional shares
of beneficial interest will provide ACPT with increased flexibility in
structuring possible future financings and acquisitions and in meeting other
needs that might arise.

Although the Board of Trustees currently does not intend to do so, the
Declaration of Trust permits it, without the consent of the Shareholders, to
authorize ACPT to issue a class or series that could, depending on the terms of
such class or series, delay, defer or prevent a transaction or a change in
control of ACPT that might involve a premium price for the Common Shares and
might otherwise be in the best interests of the shareholders.

Both the Maryland Trust Law and ACPT's Declaration of Trust provide
that no Shareholder of ACPT will be personally liable for any obligation of ACPT
solely as a result of his status as a Shareholder of ACPT. ACPT's Bylaws
further provide that ACPT shall indemnify each Shareholder against any claim or
liability to which the Shareholder may become subject by reason of his being or
having been a Shareholder or former Shareholder and that ACPT shall pay or
reimburse each Shareholder or former Shareholder for all legal and other
expenses reasonably incurred in connection with any claim or liability.

COMMON SHARES.

All Common Shares offered hereby will be duly authorized, fully paid
and nonassessable. Holders of Common Shares are entitled to receive dividends
on Common

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Shares if, as and when authorized and declared by the Board of Trustees of ACPT
out of assets legally available therefor. Subject to the preferential rights of
any other class or series of shares of beneficial interest, holders of Common
Shares are entitled to share ratably in the assets of ACPT legally available for
distribution to its Shareholders in the event of its liquidation, dissolution or
winding-up after payment of, or adequate provision for, all known debts and
liabilities of ACPT.

Each outstanding Common Share entitles the holder to one vote on all
matters submitted generally to a vote of Shareholders, including the election of
Trustees. Except as may be provided by the Board of Trustees with respect to any
other class or series of shares of beneficial interest, the holders of such
Common Shares possess the exclusive voting power. There is no cumulative voting
in the election of Trustees, which means that the holders of a majority of the
outstanding Common Shares can elect all of the Trustees then standing for
election and the holders of the remaining Common Shares will not be able to
elect any Trustees.

Holders of Common Shares have no preference, conversion, sinking fund,
redemption or appraisal rights and have no preemptive rights to subscribe for
any securities of ACPT. All Common Shares have equal dividend, distribution,
liquidation and other rights.

To ensure that American Rental will not fail to qualify as a REIT
under the Code, the Declaration of Trust also authorizes the Trustees to take
such actions as are necessary and desirable to preserve American Rental's REIT
qualification and to limit any person (other than certain current IGC
Unitholders) to direct or indirect ownership of no more than 2% of the
outstanding Common Shares.

PREFERRED SHARES.

The Declaration of Trust authorizes the Board of Trustees to classify
any unissued Preferred Shares and to reclassify any previously classified but
unissued Preferred Shares of any series from time to time in one or more series.
Prior to issuance of shares of each series, the Board of Trustees is required to
set for each such series the terms, the preferences, conversion or other rights,
voting powers, restrictions, limitations as to dividends or other distributions,
qualifications and terms or conditions of redemption for each such series. ACPT
currently plans to issue Preferred Shares in the Private Offering. See "The
Restructuring -- The Preferred Offering."

TRANSFER AGENT.

The transfer agent and registrar for ACPT's Common Shares and
Preferred Shares is Registrar and Transfer Company.

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CERTAIN PROVISIONS OF MARYLAND LAW
AND OF ACPT'S DECLARATION
OF TRUST AND BYLAWS

The following summary of certain provisions of Maryland laws
applicable to ACPT and of the Declaration of Trust and Bylaws of ACPT is subject
to and qualified in its entirety by reference to such laws and to the
Declaration of Trust and Bylaws of ACPT.

CLASSIFICATION OF THE BOARD OF TRUSTEES.

The Declaration of Trust and Bylaws provide that the number of
Trustees of ACPT may be established by the Board of Trustees but may not be
fewer than three nor more than nine. At the completion of the Restructuring, it
is expected there will be seven Trustees. The Board of Trustees may increase or
decrease the number of Trustees by a vote of at least two-thirds of the members
of the Board of Trustees, provided that the number of Trustees shall never be
less than the number required by law and the Declaration of Trust and that the
tenure of office of a Trustee shall not be affected by any decrease in the
number of Trustees. Any vacancy on the Board of Trustees, including a vacancy
created by an increase in the number of Trustees (but excluding a vacancy caused
by removal of a Trustee by Shareholders), will be filled by vote of a majority
of the remaining Trustees.

Pursuant to the Declaration of Trust, the Board of Trustees is divided
into three classes of Trustees. The initial terms of the first, second and
third class will expire in 1999, 2000 and 2001, respectively. At each
succeeding Annual Meeting of Shareholders beginning in 1999, Shareholders will
elect, by a plurality of all votes entitled to be cast, Trustees for a term of
three years to succeed the Trustees whose terms are expiring. ACPT believes
that classification of the Board of Trustees will help to assure the continuity
and stability of ACPT's business strategies and policies. Holders of Common
Shares will have no right to cumulative voting in the election of Trustees.

The classified board provisions could have the effect of making the
replacement of incumbent trustees more time consuming and difficult. At least
two Annual Meetings of Shareholders, instead of one, will generally be required
to effect a change in a majority of the Board of Trustees. The staggered terms
of Trustees may reduce the possibility of a tender offer or an attempt to change
control of ACPT or other transaction that might involve a premium price for
holders of Common Shares, even though a tender offer, change of control or other
transaction might be in the best interest of the Shareholders.

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INDEPENDENT TRUSTEES.

ACPT's Declaration of Trust requires that no fewer than two of the
members of the Board of Trustees must not be employees of ACPT or any affiliated
company or a member of the Wilson Family.

REMOVAL OF TRUSTEES.

The Declaration of Trust provides that a Trustee may be removed for
cause upon the affirmative vote of a majority, and for any reason upon the
affirmative vote of two-thirds, of the votes entitled to be cast in the election
of Trustees. Any vacancy created by removal of a Trustee will be filled by vote
of the Shareholders.

REQUIRED MINIMUM DISTRIBUTIONS.

Under the Declaration of Trust, ACPT is required to make minimum
annual distributions to Shareholders such that the minimum aggregate amount of
all distributions made each year will equal 45% of the net taxable income
allocated to Shareholders in such year, provided that the amount of the required
minimum distribution will be reduced by the amount of taxes paid by ACPT in
Puerto Rico and other foreign countries and certain federal taxes paid by
American Rental with respect to undistributed capital gains. The minimum
distribution may consist of cash dividends and/or distributions of other
property.

SUPERMAJORITY VOTING.

Generally, a majority of the votes entitled to be cast by Shareholders
is necessary to approve matters submitted to a vote of Shareholders other than
the election of Trustees, which requires a plurality vote. However, ACPT's
Declaration of Trust provides that a vote of two-thirds of all the Shareholder
votes entitled to be cast on the matter is required to approve the following
matters: (a) the revocation of ACPT's election to be taxed as a partnership; (b)
the removal of Trustees other than for cause; (c) the amendment of the
Declaration of Trust; and (d) the dissolution of ACPT. As permitted by the
Maryland Trust Law, the Declaration of Trust contains a provision permitting the
Board of Trustees, without any action by the Shareholders, to amend the
Declaration of Trust to increase or decrease the aggregate number of shares of
beneficial interest or the number of shares of any class of shares of beneficial
interest that ACPT has authority to issue.

BUSINESS COMBINATIONS.

The provisions of the Maryland General Corporation Law (the "MGCL")
governing certain types of business combinations (including a merger,
consolidation, share exchange or, in certain circumstances, an asset transfer or
issuance or

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reclassification of equity securities) (a "Business Combination"), which also
apply to real estate investment trusts formed under the Maryland Trust Law such
as ACPT, prohibits certain Business Combinations between a Maryland investment
trust and either (i) any person who beneficially owns, directly or indirectly,
ten percent or more of the voting power of the trust's shares or is an affiliate
of the trust who beneficially owned ten percent or more of the voting power of
the outstanding trust shares within the two-year period prior to the date in
question (an "Interested Shareholder") or (ii) an affiliate of such an
Interested Shareholder for five years after the most recent date on which the
Interested Shareholder became an Interested Shareholder. Any Business
Combination thereafter must be recommended by the board of trustees of such
trust, and approved by the affirmative vote of at least (a) 80% of the votes
entitled to be cast by outstanding voting shares of the trust and (b) two-thirds
of the voting shares entitled to be cast by holders of voting shares of the
trust other than shares held by the Interested Shareholder or an affiliate of an
Interested Shareholder, who will be a party to the Business Combination. Such
recommendation and approval is not necessary where the trust's common
shareholders receive a minimum price per share (as defined in the MGCL) for
their trust shares and the consideration is received in cash or in the same form
as previously paid by the Interested Shareholder for its shares. These
provisions of the MGCL do not apply, moreover, to Business Combinations that are
approved or exempted by a trust's board of trustees prior to the time that the
Interested Shareholder becomes an Interested Shareholder. The Business
Combination statute permits an investment trust to elect not to be governed by
its provisions. However, ACPT's Board of Trustees does not intend to elect not
to be governed by the Business Combination provisions of the MGCL.

CONTROL SHARE ACQUISITIONS.

The provisions of the MGCL which govern certain acquisitions of
Control Shares (as defined below), which also apply to real estate investment
trusts formed under the Maryland Trust Law such as ACPT, provides that Control
Shares of a Maryland investment trust acquired in a Control Share Acquisition
(as defined below) have no voting rights except to the extent approved by the
affirmative vote of two-thirds of the shares entitled to vote on the matter,
excluding shares of beneficial interest owned by the acquiror, or by officers or
trustees employed by the trust. "Control Shares" are defined by the MGCL as
voting shares of beneficial interest (which, in the case of ACPT would include
Common Shares) that, if aggregated with all other such shares of beneficial
interest previously acquired by the acquiror or in respect of which the acquiror
is able to exercise or direct the exercise of voting power (except solely by
virtue of a revocable proxy), would entitle the acquiror to exercise voting
power in electing trustees within one of the following ranges of voting power:
(i) one-fifth or more but less than one-third of all voting power, (ii) one-
third or more but less than a majority of all voting power, or (iii) a majority
or more of all voting power. Control Shares include shares of the trust only to
the extent that the acquiror is entitled to exercise or direct the exercise

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of voting power. A "Control Share Acquisition" is defined by the MGCL as the
acquisition of Control Shares, subject to certain exceptions.

A person who has made or proposes to make a Control Share Acquisition,
upon satisfaction of certain conditions (including an undertaking to pay
expenses), may compel the Board of Trustees of the trust to call a special
meeting of shareholders to be held within 50 days of the demand to consider the
voting rights of the shares. If no request for a meeting is made, the trust may
itself present the question for consideration at any shareholders meeting.

If voting rights are not approved at the meeting or if the acquiring
person does not deliver an acquiring person statement as required by statute,
then the trust may redeem any or all of the Control Shares (except those for
which voting rights, at its option, previously have been approved) for fair
value determined as of the date of the last Control Share Acquisition by the
acquiror or of a special shareholder meeting held to consider the voting rights
to be accorded such shares, without regard to the absence of voting rights for
the Control Shares. If voting rights for Control Shares are approved at a
shareholders meeting and the acquiror becomes entitled to vote a majority of the
shares entitled to vote, all other shareholders may exercise appraisal rights.
The fair value of the shares as determined for purposes of such appraisal rights
may not be less than the highest price per share paid by the acquiror in the
Control Share Acquisition.

The Control Share statute does not apply (a) to shares acquired in a
merger, consolidation or share exchange if the trust is a party to the
transaction or (b) to acquisitions approved or exempted by the Declaration of
Trust or Bylaws of the trust.

The Control Share statute permits an investment trust to elect not to
be governed by its provisions. However, ACPT's Board of Trustees does not
intend to elect not be governed by the Control Share provisions of the MGCL. In
addition, the restriction on ownership of Common Shares set forth in ACPT's
Declaration of Trust also would restrict the ability of any person to engage in
a Control Share Acquisition with respect to the Common Shares.

AMENDMENT OF DECLARATION OF TRUST AND BYLAWS.

The Declaration of Trust may only be amended upon the affirmative vote
of two-thirds of all of the votes entitled to be cast on any such proposed
amendment. In addition, the Declaration of Trust may be amended by the Board of
Trustees, without Shareholder approval, to conform the Declaration of Trust to
the Maryland Trust Law. ACPT's Bylaws may be amended or altered exclusively by
the Board of Trustees.

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LIMITATION OF LIABILITY AND INDEMNIFICATION.

The Maryland Trust Law permits a Maryland investment trust to include
in its declaration of trust a provision limiting the liability of its trustees
and officers to the trust and its shareholders for money damages except where
(a) it is proved that the person actually received an improper benefit or profit
in money, property or services, or (b) a judgment or other final adjudication
adverse to the person is entered in a proceeding based on a finding material to
the cause of action that the person engaged in active and deliberate dishonesty.
The Declaration of Trust of ACPT contains such a provision that limits liability
to the maximum extent permitted by Maryland law.

The Declaration of Trust and Bylaws of ACPT also obligate it, to the
maximum extent permitted under Maryland law, to indemnify and to pay or
reimburse reasonable expenses in advance of final disposition of a proceeding to
(a) any present or former Trustee or officer who is made a party to the
proceeding by reason of his service in that capacity and (b) any individual who,
while a Trustee of ACPT and at the request of ACPT, serves or has served another
investment trust corporation, partnership, joint venture, trust, employee
benefit plan or any other enterprise as a trustee, director, officer or partner
and who is made party to the proceeding by reason of his service in that
capacity, against any claim or liability to which he may become subject by
reason of such status. The Declaration of Trust and Bylaws also permit ACPT to
indemnify and advance expenses to any person who served a predecessor of ACPT in
any of the capacities described above and to any employee or agent of ACPT or a
predecessor of ACPT. The Bylaws require ACPT to indemnify each Trustee or
officer who has been successful, on the merits or otherwise, in the defense of
any proceeding to which he is made a party by reason of his service in that
capacity.

The Bylaws of ACPT require it, as a condition to advancing expenses,
to obtain (a) a written affirmation by the Trustee or officer of his good faith
belief that he has met the standard of conduct necessary for indemnification by
ACPT as authorized by the Bylaws and (b) a written statement by or on his behalf
to repay the amount paid or reimbursed by ACPT if it shall ultimately be
determined that the standard of conduct was not met.

The Maryland Trust Law permits a Maryland investment trust to
indemnify and advance expenses to its trustees, officers, employees and agents
to the same extent as permitted under the MGCL for directors and officers of
Maryland corporations. The MGCL authorizes a corporation to indemnify its
present and former directors and officers, among others, against judgments,
penalties, fines, settlements and reasonable expenses actually incurred by them
in connection with any proceeding to which they may be made a party by reason of
their service unless it is established that (a) the act or omission was material
to the matter giving rise to the proceeding and (i) was committed in bad faith
or (b) was the result of active and deliberate dishonesty, (b) the director or
officer actually received an improper personal benefit in money, property

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or services or (c) the director or officer in the case of any criminal
proceeding had reasonable cause to believe that the act or omission was
unlawful. A Maryland corporation, however, may not indemnify a director or
officer for an adverse judgment in a suit brought by or on behalf of the
corporation.

DISSOLUTION OF ACPT.

Pursuant to ACPT's Declaration of Trust, ACPT may be dissolved upon
the affirmative vote of two-thirds of all of the votes entitled to be cast on
such matter.

POSSIBLE ANTITAKEOVER EFFECT OF CERTAIN PROVISIONS OF MARYLAND LAW AND OF THE
DECLARATION OF TRUST AND BYLAWS.

The Control Share and Business Combination provisions of the MGCL and
the provisions of ACPT's Declaration of Trust relating to classification of the
Board of Trustees, the removal of Trustees, restrictions on ownership of Common
Shares, and the ability of the Board of Trustees to prescribe the terms of and
issue Preferred Shares could have the affect of delaying, deferring or
preventing a transaction or a change in control of ACPT that might involve a
premium price for holders of Common Shares or otherwise be in their best
interest.

MARYLAND ASSET REQUIREMENTS.

The Maryland Trust Law pursuant to which ACPT was formed requires at
least 75% of the value of ACPT's assets to be held, directly or indirectly, in
real estate assets, mortgages or mortgage related securities, government
securities, cash and cash equivalent items, including high-grade short term
securities and receivables. The Maryland Trust Law also prohibits ACPT from
using or applying land for farming, agricultural, horticultural or similar
purposes.

COMPARATIVE RIGHTS OF IGC UNITHOLDERS AND SHAREHOLDERS

GENERAL.

IGC is a limited partnership formed under the Delaware Act and ACPT is
organized as a real estate investment trust under the Maryland Trust Law that
will be taxable as a partnership. The discussion of the comparative rights of
IGC Unitholders and Shareholders of ACPT set forth below does not purport to be
complete and is subject to and qualified in its entirety by reference to the
Maryland Trust Law, the Delaware Act, the Partnership Agreement of IGC and the
Declaration of Trust and Bylaws of ACPT. Copies of these documents have been
filed as exhibits to the Registration Statement of which this Proxy
Statement/Prospectus is a part.

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MANAGEMENT.

The Partnership Agreement of IGC provides that, with certain limited
exceptions, the Managing General Partner of IGC (which currently is IGMC) has
exclusive discretion to manage and control the business and affairs of IGC. The
Managing General Partner may be removed upon the affirmative vote of more than
fifty percent of the IGC Unitholders. The IGC Unitholders do not have any right
to elect the directors of the Managing General Partner.

The Declaration of Trust of ACPT provides that the management and
control of the business and affairs of ACPT are vested in its Board of Trustees
which is elected by the Shareholders. The Declaration of Trust of ACPT provides
for a classified Board consisting of three classes as nearly equal in number as
possible. At each Annual Meeting of Shareholders, one class of Trustees will be
elected for a term of three years. Trustees may be removed for cause upon a
majority vote, and for any reason by a two-thirds vote, of the Shares entitled
to vote in the election of Trustees. Vacancies created by removal will be
filled by Shareholder vote. Any other vacancy will be filled by a majority of
the Board of Trustees remaining in office.

REQUIRED MINIMUM DISTRIBUTIONS.

Under the Partnership Agreement, IGC generally is required to make
annual distributions in cash or property to IGC Unitholders equal to 55% of the
net taxable income (as defined in the Partnership Agreement) allocated to such
IGC Unitholders for such year.

VOTING RIGHTS.

Under the Partnership Agreement of IGC, IGC Unitholder approval by
majority vote is required for (i) sale of all or substantially all of the assets
of IGC, (ii) merger or consolidation, and (iii) certain amendments to the
Partnership Agreement, including issuances of additional limited partnership
interests. The Managing General Partner has the exclusive authority to issue
IGC Units without limitation as to amount.

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In addition, certain actions including actions that would cause loss
of limited liability, treatment of IGC as a corporation for tax purposes, or,
except in the case of merger or dissolution, delisting of IGC Units from any
national securities exchange require a unanimous vote of IGC Unitholders.

Under the Declaration of Trust of ACPT, Shareholders have voting
rights with respect to (i) termination of partnership tax status, (ii) the
election and removal of Trustees, (iii) amendments of the Declaration of Trust,
(iv) the merger or consolidation of ACPT or the sale of substantially all of
ACPT's assets; and (v) the dissolution of ACPT, and (vi) such other matters with
respect to which the Board of Trustees may deem to require a Shareholder vote.
Each Common Share entitles its holder to cast one vote on all matters presented
generally to the Shareholders.

MEETINGS.

The Partnership Agreement of IGC does not provide for annual meetings
of the IGC Unitholders.

The Declaration of Trust of ACPT and the Maryland Trust Law require
that an Annual Meeting of Shareholders be duly held. The Bylaws of ACPT also
provide for the calling of special meetings under certain circumstances.

AMENDMENT OF DECLARATION OF TRUST, BYLAWS AND PARTNERSHIP AGREEMENT.

Under the Partnership Agreement, holders of IGC Units representing at
least 10% of the outstanding limited partnership interests may propose
amendments to the Partnership Agreement. Any proposed amendments require a
majority vote, except for amendments which (i) would adversely affect in any
material aspect the rights of the IGC Unitholders to exercise any right granted
to the Assignor Limited Partner by the Delaware Act (such as the right to
maintain a derivative action, the right to exercise voting power, and the right
to inspect and photocopy IGC's books and records) and assigned to the IGC
Unitholders, (ii) would result in the loss of limited liability of the Limited
Partners or IGC Unitholders, (iii) would cause IGC to be treated as an
"association" taxable as a corporation for purposes of federal income taxation,
or (iv) would result in the delisting of the IGC Units by any securities
exchange on which the IGC Units are traded; all of which require unanimous
approval. In addition, any amendment that would reduce the minimum cash
distributions that IGC is required to make must be approved by a two-thirds vote
of IGC Unitholders.

The Declaration of Trust of ACPT may only be amended by the
affirmative vote of two-thirds of the outstanding Common Shares. The Bylaws of
ACPT may be amended exclusively by majority vote of the Board of Trustees.

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LIMITED LIABILITY.

Under the Partnership Agreement, unless an IGC Unitholder participates
in the control of the business or in certain other limited circumstances, it
will not be responsible for the liabilities of IGC.

The personal liability of the Shareholders of ACPT is limited to the
fullest extent permitted from time to time by Maryland law. However, certain
jurisdictions may not recognize limitations on personal liability of
Shareholders to the extent such claims are not satisfied by ACPT. The Board of
Trustees believes that any risk of personal liability would generally be limited
to situations in which ACPT's public liability insurance coverage would be
insufficient to satisfy claims.

DISSOLUTION OF THE PARTNERSHIP AND ACPT.

Under the Partnership Agreement, dissolution of IGC requires the
consent of a majority of the IGC Unitholders.

Under the terms of the Declaration of Trust of ACPT, the Shareholders
may compel the dissolution of ACPT by the affirmative vote of two-thirds of the
votes entitled to be cast.

LIQUIDATION RIGHTS.

Under the Partnership Agreement, IGC Unitholders share ratably in
accordance with their percentage interests in any assets remaining after
satisfaction of obligations to creditors and any liquidation preferences of
preferred units.

In the event of liquidation of ACPT, the holders of Common Shares
would be entitled to share ratably in any assets remaining after satisfaction of
obligations to creditors and any liquidation preferences on any series of
Preferred Shares that may then be outstanding.

LIMITATIONS OF LIABILITY OF GENERAL PARTNERS AND TRUSTEES.

The Partnership Agreement of IGC sets certain limits on the liability
of the General Partners and their affiliates to IGC and the IGC Unitholders.

The Declaration of Trust of ACPT provides that Trustees shall not be
liable to ACPT or the Shareholders for losses sustained or liabilities incurred
as a result of any acts or omissions of the Board of Trustees if the conduct of
the applicable person did not constitute active and deliberate dishonesty as
adjudicated by a court of competent jurisdiction, or if the Trustee actually
received an improper benefit or profit in money, property or services.

-206-

INDEMNIFICATION.

The Partnership Agreement of IGC indemnifies the General Partners and
their affiliates under certain circumstances.

The Declaration of Trust and Bylaws of ACPT provides that ACPT will
indemnify present and former Trustees and officers to the maximum extent
permitted by Maryland law.

OWNERSHIP LIMITATIONS.

There is no limitation on the number of IGC Units that any Unitholder
may own. In order to maintain the REIT status of American Rental, no
Shareholder (except certain existing IGC Unitholders) may own more than 2% of
the outstanding Common Shares.

LEGAL MATTERS

The validity of the issuance of the Common Shares being offered hereby
will be passed upon for ACPT by Covington & Burling. The federal income tax
consequences in connection with the Restructuring will be passed upon for ACPT
by Covington & Burling and the Puerto Rico income tax consequences in connection
with the Restructuring will be passed upon for ACPT by Fiddler, Gonzalez &
Rodriguez LLP.

EXPERTS

The combined historical statements of assets and liabilities of ACPP
as of December 31, 1997 and 1996, the related combined historical statements of
operations and cash flows for each of the three years in the period ended
December 31, 1997, included in this Proxy Statement/Prospectus and elsewhere in
the Registration Statement, and the financial statements of IGC incorporated by
reference in this Proxy Statement/Prospectus and elsewhere in the Registration
Statement, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto, and are
included herein in reliance upon the reports of said firm and upon the authority
of said firm as experts in accounting and auditing in giving said reports.

REPORTS TO SHAREHOLDERS

ACPT will furnish to each Shareholder of record, within 90 days of the
close of each fiscal year, an annual report containing information substantially
as submitted by ACPT to the SEC on its annual report on Form 10-K, including a
report of the activities

-207-

of ACPT and a statement showing any cash from operations or proceeds of capital
transactions distributed or to be distributed in respect of such fiscal year.
Such annual report also will contain certain financial statements of ACPT for
such fiscal year, including a balance sheet and statements of income, and
changes in financial position, each of which will be audited by a nationally
recognized firm of independent public accountants. In addition, within 45 days
after the end of each fiscal quarter (except the fourth quarter), ACPT will
furnish to each Shareholder of record a quarterly report containing information
substantially as submitted by ACPT to the SEC on its quarterly report on Form
10-Q, including an unaudited balance sheet and statements of income and changes
in financial position. Each such annual and quarterly report also will include
a statement setting forth (i) any transactions between IGC and ACPT, or any
affiliate of either of them; (ii) the amount of any fees, commissions,
compensation and other remuneration paid or accrued to ACPT; and (iii) a
description of any services rendered to IGC by ACPT, or any affiliate of either
of them. The financial information contained in all such reports will be
prepared on the accrual basis of accounting in accordance with generally
accepted accounting principles and, where appropriate, will include a
reconciliation to information furnished to Shareholders for tax purposes.

Within 75 days after the close of each taxable year, ACPT will furnish to
each Shareholder of record information required for federal and state income tax
reporting purposes. Such information will be furnished in summary form so that
certain complex calculations normally required of partners can be avoided.
ACPT's ability to furnish such summary information may depend on the cooperation
of Shareholders in supplying certain information to ACPT.

-208-

GLOSSARY

The meanings of certain capitalized and specialized terms used in this
Prospectus are set forth below. Terms defined in the singular form shall
similarly refer to the plural and vice versa.

"1997 Act" means the Taxpayer Relief Act of 1997.

"ACM" means asbestos-containing materials.

"ACPP" means American Community Portfolio Properties, which, for
purposes of the audited combined historical financial statements included
herein, refers to the assets, liabilities and operations that will be
transferred to ACPT in the Restructuring.

"ACPT" means American Community Properties Trust, a Maryland real
estate investment trust formed under the Maryland Trust Law.

"ACPT Average" means the average closing price of ACPT Common Shares
on the AMEX for the 20 trading days immediately following, but not including,
the Distribution Date.

"ACPT Options" means options to purchase a ACPT Common Shares under
the Share Incentive Plan.

"ADA" means the Americans with Disabilities Act of 1990.

"Affiliate Shareholder" means any holder of more than 2% of the Common
Shares of ACPT.

"AFH" means American Family Homes, LLC, a Delaware limited liability
company.

"American Housing" means American Housing Properties, L.P., a Maryland
limited partnership.

"American Land" means American Land Development US, Inc., a Maryland
corporation.

"American Management" means American Rental Management Company, a
Delaware corporation and the property manager for the properties owned by
American Rental.

-209-

"American Rental" means American Rental Properties Trust, a Maryland
real estate investment trust.

"AMEX" means the American Stock Exchange.

"Appeals Court" means the U.S. Court of Appeals for the Fourth
Circuit.

"Asset Transfers" means the transfers of IGC's principal real estate
operations and assets to ACPT.

"Banc One" means Banc One Capital Partners IV, Ltd.

"Brick House" means Brick House Realty, Inc.

"Code" means the Internal Revenue Code of 1986, as amended.

"Commission" means the Securities and Exchange Commission.

"Common Shares" means the common shares of beneficial interest of
ACPT.

"Consulting Agreement" means the consulting agreement by and between
American Management and James J. Wilson.

"County" means Charles County, Maryland.

"County Commissioners" means the County Commissioners of Charles
County, Maryland.

"CWT" means Caribe Waste Technologies, Inc.

"CWT Trust" means the trust holding the common stock of IWT and CWT
for the benefit of IGC Unitholders.

"Delaware Act" means the Delaware Revised Uniform Limited Partnership
Act.

"Distribution" means the distribution of all of the Common Shares of
ACPT to the partners of IGC including the IGC Unitholders.

"Distribution Agent" means Registrar and Transfer Company.

"Distribution Date" means the date on which ACPT will issue to IGC
sufficient Common Shares of ACPT to enable IGC to make the Distribution.

-210-

"District Court" means the U.S. District Court for the District of
Maryland.

"EDGAR" means the Commission's Electronic Data Gathering and Retrieval
program.

"EMC" means Equus Management Company.

"Employment Agreements" means the employment agreements by and between
American Management and each of Edwin Kelly, Francisco Arrivi, and Paul Resnick.

"Equus" means Equus Gaming Company L.P., a Virginia limited
partnership.

"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations thereunder.

"Escorial Builders" means Escorial Builders Associates S.E., a Puerto
Rico partnership principally engaged in the construction of condominiums.

"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.

"Exchange Offer" shall have the meaning set forth on page [___] of the
document.

"FHA" means the Federal Housing Administration.

"FIRPTA" means the Foreign Investment in Real Property Tax Act of
1980.

"Gatewood" means the Gatewood Company, Inc.

"Hooper" means James B. Hooper, P.A.

"HUD" means the United States Department of Housing and Urban
Development.

"IBC" means Interstate Business Corporation, a Delaware corporation
and a general partner of IGC.

"IGC" means Interstate General Company, L.P., a Delaware limited
partnership.

-211-

"IGC Average" means the average closing sale price of IGC Units on the
principal exchange on which they are traded, or, if not traded on an exchange,
in the over-the-counter-market, for the 20 trading days immediately following,
but not including, the Distribution Date.

"IGC Options" means options to purchase a ACPT Common Shares under the
Trustee Share Plan.

"IGC Unit" means a Class A unit of beneficial interest in IGC.

"IGC Unitholder" means a holder of IGC Units.

"IGMC" means Interstate General Management Corporation, a Delaware
corporation and the managing general partner of IGC.

"IGP" means Interstate General Properties Limited Partnership, S.E., a
Maryland limited partnership.

"IGP Group" means Interstate General Corp.

"Independent Trustees" means members of the Board of Trustees of ACPT
who are not employees of ACPT or any affiliated company or members of the Wilson
Family.

"IRS" means the Internal Revenue Service.

"IWT" means Interstate Waste Technologies, Inc., a Delaware
corporation.

"LDA" means Land Development Associates S.E., a Puerto Rico
partnership.

"LDA Note" means the $6.77 million note payable by LDA in favor of
IGC.

"LIHPRHA" means the Low Income Housing Preservation and Resident
Homeownership Act of 1990.

"Majority Vote" means the vote or consent of the holders of IGC Units
representing a majority of all issued and outstanding IGC Units entitled to
vote.

"Management" means the management of IGC.

"Maryland Cable" means Maryland Cable Limited Partnership.

-212-

"Maryland Trust Law" means Article 8 of the Maryland Corporations and
Associations Law.

"McClosky Associates" means Robert F. McClosky Associates.

"MGCL" means Maryland General Corporation Law.

"NBV" means the NBValuation Group, Inc.

"Ownership Limit" shall mean 2% of the outstanding Common Shares of
ACPT.

"Parque Escorial" means the planned community of Parque Escorial
located approximately six miles from the central business district in San Juan,
Puerto Rico.

"Plan" means a pension, profit-sharing, employee benefit, or
retirement plan, or individual retirement account under ERISA.

"Plan Asset Regulations" means regulations of the Department of Labor
that define the assets of a Plan under ERISA.

"Planning Commission" means the Charles County Planning Commission.

"Preferred Shares" means preferred shares of beneficial interest in
ACPT.

"Private Offering" shall have the meaning set forth on page [___] of
the document.

"PUD" means planned unit development.

"Puerto Rico Apartment Partnerships" means the 9 Puerto Rico apartment
partnerships in which IGP holds partnership interests.

"Puerto Rico Code" means the Puerto Rico Internal Revenue Code of
1994.

"Puerto Rico Counsel" means the law firm of Fiddler, Gonzalez &
Rodriguez, LLP.

"Record Date" means ____, 1998.

"Registration Statement" means the Form S-4 Registration Statement
filed by ACPT with the Commission.

-213-

"Regulations" means Regulations of the Treasury Department
interpreting the Code.

"REIT" means a real estate investment trust within the meaning of
Section 856 of the Code.

"Restructuring" means the series of transactions constituting the
Asset Transfers and the Distribution.

"Retained Assets" means the Wetlands Properties, the LDA Note, all of
the shares of AFH, 14 acres of commercial land in St. Charles, 26 single family
home lots in the Dorchester neighborhood, an indirect 50% interest in Brandywine
Investment Associates L.P., which owns land in Brandywine, Maryland, a 100%
interest in Pomfret LLC, which owns land in Pomfret, Maryland, the Westbury
land, fractional interests in Chastleton and Coachman's L.P., and the beneficial
interest in the CWT Trust.

"Retirement Plan" means the IGC retirement savings plan currently in
effect.

"SCA" means St. Charles Associates Limited Partnership.

"Securities Act" means the Securities Act of 1933, as amended, and
applicable regulations thereunder.

"Share Incentive Plan" means the 1997 ACPT Share Incentive Plan
providing Common Share-based incentive compensation for ACPT officers and key
employees.

"Smail" means Smail Associates, Inc.

"St. Charles" means the planned community in Charles County, Maryland,
that has been under development by IGC and its predecessors since 1968.

"Stanger" means Robert A. Stanger & Co.

"State Finance Agencies" means the FHA, or housing finance agencies in
Puerto Rico, Washington, D.C., Virginia or Maryland.

"Strike Price" means $3.0016 per IGC Unit.

"Trustee Share Plan" means the 1997 ACPT Trustee Share Incentive Plan
to provide Common Share-based incentive compensation for ACPT Trustees.

-214-

"U.S. Apartment Partnerships" means the 13 investment apartment
properties in which IGC holds partnership interests that will be transferred to
American Rental under the Restructuring.

"U.S. Attorney" means the U.S. Attorney for the District of Maryland.

"Wetlands" means (following the definition in the U.S. Army Corps of
Engineers regulations) areas saturated by surface or ground water sufficient to
support vegetation typically adapted for life in saturated soil conditions.
Wetlands generally include swamps, marshes, bogs and similar areas.

"Wetlands Properties" means those IGC properties that are the subject
of litigation with the federal government concerning violations of the Clean
Water Act.

"Whitman Requardt" means Whitman Requardt Associates LLP.

-215-

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Owners of
American Community Portfolio Properties:

We have audited the accompanying combined historical statements of assets
and liabilities (defined in Note 1 and referred to as "American Community
Portfolio Properties") to be transferred by Interstate General Company L.P. and
subsidiaries to American Community Properties Trust (a newly formed investment
trust that intends to be taxed as a partnership) and subsidiaries as of December
31, 1997 and 1996, and the related combined historical statements of operations
and cash flows for each of the three years in the period ended December 31,
1997. These combined historical financial statements are the responsibility of
the management of American Community Portfolio Properties. Our responsibility
is to express an opinion on these combined historical financial statements based
on our audits.

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

The accompanying combined historical financial statements were prepared for
the purpose of complying with the rules and regulations of the Securities and
Exchange Commission (for inclusion in the registration statement on Form S-4 of
American Community Properties Trust), as described in Note 1, and are not
intended to be a complete presentation of the financial position, results of
operations or cash flows of Interstate General Company L.P. and affiliated
entities or American Community Properties Trust.

In our opinion, the combined historical financial statements referred to
above present fairly, in all material respects, the financial position of the
American Community Portfolio Properties as of December 31, 1997 and 1996, and
the results of its operations and its cash flows for each of the three years in
the period ended December 31, 1997, in conformity with generally accepted
accounting principles.

ARTHUR ANDERSEN LLP
Washington, D.C.
April 6, 1998

F-1

AMERICAN COMMUNITY PORTFOLIO PROPERTIES
COMBINED HISTORICAL STATEMENTS OF OPERATIONS OF ASSETS
AND LIABILITIES TO BE TRANSFERRED TO
AMERICAN COMMUNITY PROPERTIES TRUST AND SUBSIDIARIES
(In thousands)

Year Ended December 31,
--------------------------------
1997 1996 1995
--------- -------- ---------

REVENUES
Community development-land sales
to non-affiliates $10,060 $ 3,608 $11,333
to affiliates 3,105 10,066 4,108
Equity in earnings from partnerships
and developer fees 1,509 16,643 2,693
Rental property revenues 8,737 7,577 4,642
Management and other fees, substantially
all from related entities 3,775 4,816 3,894
Interest and other income 943 982 693
------- ------- -------
Total revenues 28,129 43,692 27,363
------- ------- -------

EXPENSES
Cost of land sales 8,494 9,378 7,801
Selling and marketing 127 226 131
General and administrative 6,607 6,810 6,769
Interest expense 3,820 4,433 4,263
Rental properties operating expense 3,597 3,245 1,695
Depreciation and amortization 1,850 1,726 841
Write-off of deferred project costs 6 321 --
Spin-off costs 1,164 -- --
------- ------- -------
Total expenses 25,665 26,139 21,500
------- ------- -------

INCOME BEFORE PROVISION FOR INCOME
TAXES AND MINORITY INTEREST 2,464 17,553 5,863
PROVISION FOR INCOME TAXES 470 3,424 1,369
------- ------- -------

INCOME BEFORE MINORITY INTEREST 1,994 14,129 4,494
MINORITY INTEREST (439) (306) (511)
------- ------- -------

INCOME BEFORE EXTRAORDINARY ITEM 1,555 13,823 3,983
EXTRAORDINARY ITEM-EARLY
EXTINGUISHMENT OF DEBT -- (932) --
------- ------- -------
NET INCOME $ 1,555 $12,891 $ 3,983
======= ======= =======

The accompanying notes are an integral part of these combined historical
statements.

F-2

AMERICAN COMMUNITY PORTFOLIO PROPERTIES
COMBINED HISTORICAL STATEMENTS OF ASSETS
AND LIABILITIES TO BE TRANSFERRED TO
AMERICAN COMMUNITY PROPERTIES TRUST AND SUBSIDIARIES
(In thousands)

A S S E T S
-----------

December 31,
-----------------------
1997 1996
-------- --------

CASH AND CASH EQUIVALENTS
Unrestricted $ 2,127 $ 2,143
Restricted 374 895
-------- --------
2,501 3,038
-------- --------

ASSETS RELATED TO RENTAL PROPERTIES
Operating properties, net of accumulated
depreciation of $21,392 and $20,658,
as of December 31, 1997 and 1996,
respectively 37,829 39,219
Investment in unconsolidated rental property
partnerships 8,657 11,693
Other receivables, net of reserves of $223 and $52
as of December 31, 1997 and
1996, respectively 621 785
-------- --------
47,107 51,697
-------- --------

ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
Puerto Rico 34,268 35,068
St. Charles, Maryland 21,750 21,043
Other United States locations -- 1,636
Notes receivable on lot sales and other,
substantially all due from affiliates 5,629 5,253
-------- --------
61,647 63,000
-------- --------

ASSETS RELATED TO HOMEBUILDING
Investment in joint venture 591 275
-------- --------

OTHER ASSETS
Receivables and other 2,514 1,765
Property, plant and equipment, less accumulated
depreciation of $1,675 and $1,770 as of
December 31, 1997 and 1996,
respectively 448 487
-------- --------
2,962 2,252
-------- --------
TOTAL ASSETS $114,808 $120,262
======== ========

The accompanying notes are an integral part of these combined historical
statements.

F-3

AMERICAN COMMUNITY PORTFOLIO PROPERTIES
COMBINED HISTORICAL STATEMENTS OF ASSETS
AND LIABILITIES TO BE TRANSFERRED TO
AMERICAN COMMUNITY PROPERTIES TRUST AND SUBSIDIARIES
(In thousands)

LIABILITIES AND CAPITAL
-----------------------

December 31,
-------------------------
1997 1996
------- -------

LIABILITIES RELATED TO RENTAL PROPERTIES
Recourse debt $ 969 $ 1,139
Non-recourse debt 39,101 39,508
Accounts payable and accrued liabilities 2,701 2,155
-------- --------
42,771 42,802
-------- --------

LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt 39,784 38,943
Non-recourse debt 2,295 2,153
Accounts payable, accrued liabilities
and deferred income 5,100 4,678
-------- --------
47,179 45,774
-------- --------

OTHER LIABILITIES
Accounts payable and accrued liabilities 3,246 2,676
Notes payable and capital leases 173 157
Accrued income tax liability - current 1,539 3,976
Accrued income tax liability - deferred 4,120 5,041
-------- --------
9,078 11,850
-------- --------
TOTAL LIABILITIES 99,028 100,426
-------- --------

CAPITAL 15,780 19,836
-------- --------

TOTAL LIABILITIES AND CAPITAL $114,808 $120,262
======== ========

The accompanying notes are an integral part of these combined historical
statements.

F-4

AMERICAN COMMUNITY PORTFOLIO PROPERTIES
COMBINED HISTORICAL STATEMENTS OF CASH FLOWS OF ASSETS
AND LIABILITIES TO BE TRANSFERRED TO
AMERICAN COMMUNITY PROPERTIES TRUST AND SUBSIDIARIES
(In thousands)

Year Ended December 31,
--------------------------------
1997 1996 1995
-------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,555 $ 12,891 $ 3,983
Adjustments to reconcile net income
to net cash provided by
(used by) operating activities:
Extraordinary item -- 932 --
Depreciation and amortization 1,850 1,726 841
Provision for deferred income taxes (920) 419 646
Equity in earnings from unconsolidated
partnerships and developer fees (1,417) (16,718) (2,693)
Distributions from
unconsolidated partnerships 5,155 15,666 1,216
Cost of sales-community development 8,494 9,378 7,801
Equity in loss from homebuilding
joint venture (92) 75 --
Write-off of deferred project cost 6 321 --
Changes in notes and accounts
receivable (186) (3,065) (1,738)
Changes in accounts payable,
accrued liabilities and deferred
income (900) 4,997 (358)
------- -------- --------

Net cash provided by
operating activities 13,545 26,622 9,698
------- -------- --------

CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in land development for future sales (6,764) (10,658) (15,066)
Change in assets related to unconsolidated
rental property partnerships (708) (84) 555
Change in restricted cash 521 1,150 3,588
(Additions to) dispositions of rental
operating properties 141 (1,275) 658
(Acquisitions) dispositions of other assets, net (1,338) (117) (746)
Contributions to homebuilding joint venture (224) (100) (250)
Acquisition of rental property partnership
interests -- -- (170)
------- -------- --------

Net cash used in
investing activities (8,372) (11,084) (11,431)
------- -------- --------

The accompanying notes are an integral part of these combined historical
statements.

F-5

AMERICAN COMMUNITY PORTFOLIO PROPERTIES
COMBINED HISTORICAL STATEMENTS OF CASH FLOWS OF ASSETS
AND LIABILITIES TO BE TRANSFERRED TO
AMERICAN COMMUNITY PROPERTIES TRUST AND SUBSIDIARIES (CONTINUED)
(In thousands)

Year Ended December 31,
-------------------------------
1997 1996 1995
-------- -------- --------

CASH FLOWS FROM FINANCING ACTIVITIES:
Cash proceeds from (payments on) debt
financing, net 422 (10,809) 5,040
Cash distributions to Unitholders -- (1,140) --
Cash from distributions to IGC, net (5,890) (4,828) (1,174)
Issuance of warrants 279 -- --
Exercise of employee IGC Unit options -- -- 171
------- -------- -------

Net cash (used in) provided by
financing activities (5,189) (16,777) 4,037
------- -------- -------

NET (DECREASE) INCREASE IN CASH
AND CASH EQUIVALENTS (16) (1,239) 2,304

CASH AND CASH EQUIVALENTS
BEGINNING OF YEAR 2,143 3,382 1,078
------- -------- -------

CASH AND CASH EQUIVALENTS
END OF YEAR $ 2,127 $ 2,143 $ 3,382
======= ======== =======

The accompanying notes are an integral part of these combined historical
statements.

F-6

AMERICAN COMMUNITY PORTFOLIO PROPERTIES
NOTES TO COMBINED HISTORICAL FINANCIAL STATEMENTS OF ASSETS
AND LIABILITIES TO BE TRANSFERRED TO
AMERICAN COMMUNITY PROPERTIES TRUST AND SUBSIDIARIES

(1) ORGANIZATION AND BASIS OF PRESENTATION

Interstate General Company L.P. ("IGC") was formed as a Delaware limited
partnership in 1986. Directly and through predecessors, IGC has been engaged in
business since 1957. IGC has traded publicly as a master limited partnership
since February 1987 on the American Stock Exchange and Pacific Stock Exchange.
Company Management and the Board of Directors of IGC's Managing General Partner
are presently undertaking steps to restructure IGC.

IGC is a diversified real estate organization specializing in community
development, investment apartment properties, property management services and
homebuilding. IGC owns and participates in these operations directly and
through the following subsidiaries: Interstate General Properties, S.E.
("IGP"); St. Charles Associates Limited Partnership ("SCA"); Land Development
Associates, S.E. ("LDA"); and American Family Homes, Inc. ("AFH"). IGC's assets
and operations are concentrated primarily in the metropolitan areas of
Washington, D.C. and San Juan, Puerto Rico. Additionally, its homebuilding
operations are active in Virginia, North Carolina and South Carolina. Through
its wholly owned subsidiary Interstate Waste Technologies, Inc. ("IWT"), IGC is
involved in the pre-development of municipal waste treatment facilities.

American Community Properties Trust ("ACPT"), American Rental Properties
Trust ("American Rental"), American Rental Management Company ("American
Management"), American Land Development U.S., Inc. ("American Land") and
Interstate General Properties Group, S.E. ("IGP Group") are or will be formed to
carry out the restructuring of IGC. These entities and their subsidiaries
collectively represent American Community Portfolio Properties ("ACPP"). IGC
expects to transfer its principal operations to ACPT and distribute to the
partners of IGC, including its Unitholders, all the common shares of ACPT (the
"Restructuring"). Due to these companies being commonly controlled entities,
the transfers to ACPT will occur at book value.

ACPT is a Maryland real estate investment trust that is expected to be
taxed as a partnership. It is a self-managed holding company that owns all of
the outstanding equity interests in American Management, American Land, and IGP
Group and all of the common stock of American Rental.

American Rental.
- ---------------

IGC expects to transfer to American Rental its partnership interests in
United States investment properties and its land in the United States presently
intended for development as apartment properties. The partnership interests in
13 investment apartment properties ("U.S. Apartment Partnerships") will be held
by American Rental indirectly through American Housing Properties L.P.
("American Housing"), a Maryland partnership, in which American Rental will have
a 99% limited partner interest and American Housing Management Company, a wholly
owned subsidiary of American Rental, will have a 1% general partner interest.

F-7

American Management.
- -------------------

IGC expects to transfer to American Management its United States property
management operations. The United States property management operations provide
management services for the United States apartment properties and for other
rental apartments not owned by IGC.

American Land.
- -------------

IGC expects to transfer to American Land its principal United States
property assets and operations. These will include the following:

1. A 100% interest in St. Charles Community LLC which holds 4,500 acres
of land in St. Charles, Maryland. This constitutes all of the land
formerly held by SCA, a partnership in which IGC holds a 99%
partnership interest and Interstate Business Corporation ("IBC") holds
a 1% partnership interest, except for a 50% interest in Brandywine
Investment Associates L.P., which holds 277 acres of land held for
development in Brandywine, Maryland, that will continue to be held by
SCA. IGC also will retain Parcel A-3 in Dorchester, a neighborhood in
St. Charles, 26 remaining single-family lots in Dorchester and an 800
acre tract held for development in Pomfret, Maryland, 90 acres and 27
acres, respectively, in the communities of Montclair and Westbury and
the Wetlands Properties.

2. A 41.0346% interest in Maryland Cable Limited Partnership which holds
receivables from the 1988 sale of IGC's cable television assets.

3. The Class B IGP interest that represents IGP's rights to income, gains
and losses associated with land in Puerto Rico held by LDA and
designated for development as saleable property.

IGP Group.
- ---------

IGC expects to transfer to IGP Group its entire 99% limited partnership
interest and 1% general partner interest in Interstate General Properties
Limited Partnership S.E., a Maryland partnership ("IGP") other than the Class B
IGP interest to be held by American Land. IGP's assets and operations will
continue to include:

1. an 80% partnership interest in LDA, a Puerto Rico special partnership,
which holds 312 acres of land in the planned community of Parque
Escorial and 543 acres of land in Canovanas;

2. a 50% partnership interest in Escorial Builders Associates S.E.
("Escorial Builders"), which is engaged in the construction of
condominiums in the planned community of Parque Escorial;

3. a 1% interest in El Monte Properties S.E., a Puerto Rico special
partnership which owns El Monte Mall Complex, a 169,000 square foot
office complex in San Juan, Puerto Rico; and

4. general partner interests in 11 Puerto Rico apartment partnerships.

After these asset transfers have been completed, IGC expects to distribute
all of the outstanding common shares of ACPT to the general and limited partners
(including Unitholders) of IGC pro rata in

F-8

accordance with their percentage interest in IGC (the "Distribution").
Unitholders in the aggregate will receive 99% of ACPT's common shares.

BASIS OF PRESENTATION
- ---------------------

The accompanying historical financial statements of ACPP have been
presented on a combined historical cost basis because of affiliated ownership,
common management and because assets and liabilities of IGC are expected to be
transferred to ACPT, a newly formed entity with no prior operations. IGC's
historical basis in the assets and liabilities of ACPP has been carried over to
the combined historical financial statements. Certain assets and liabilities of
IGC will not be contributed to ACPP and, therefore, these financial statements
are not intended to represent the financial positions and results of operations
of IGC or any entity included therein. In management's opinion, these financial
statements include the assets, liabilities, revenues and expenses associated
with the portions of IGC intended to be transferred to ACPT. All significant
intercompany balances and transactions have been eliminated in the presentation.
Changes in the capital account represent the net income of ACPP, the exercise of
employee and director options, asset transfers less cash distributions to
Unitholders and net cash distributions to IGC.

The combined historical financial statements include the accounts of ACPP
and its majority owned partnerships and subsidiaries, after eliminating
intercompany transactions. All of the entities included in the combined
historical financial statements are hereinafter referred to collectively as the
"Company" or "ACPP". As of December 31, 1997, the combined group includes ACPT,
American Rental, American Management, American Land and IGP Group. The
following entities are consolidated with American Rental: Lancaster Apartments
Limited Partnership, New Forest Apartments Partnership, Fox Chase Apartments
General Partnership, Palmer Apartments Associates Limited Partnership, Headen
House Associates Limited Partnership, Wakefield Terrace Associates Limited
Partnership and Wakefield Third Age Associates Limited Partnership.

F-9

An analysis of the activity in the capital account for the three years
ended December 31, 1997 is as follows (in thousands):

Balance, December 31, 1994 $ 9,953

Net income 3,983
Employee and director IGC Unit options exercised 171
Cash (distributions to) contributions from IGC, net (1,174)
-------

Balance, December 31, 1995 $12,933

Net income 12,891
Exchange of assets between Company and Unitholder (20)
Cash distributions to Unitholders (1,140)
Cash (distributions to) contributions from IGC, net (4,828)
-------

Balance, December 31, 1996 $19,836

Net income 1,555
Issuance of warrants 279
Cash (distributions to) contributions from IGC, net (5,890)
-------

Balance, December 31, 1997 $15,780
=======

Certain general and administrative costs of IGC are allocated to ACPP,
principally based on IGC's specific identification of individual cost items and
otherwise based upon estimated levels of effort devoted by its general and
administrative departments to individual entities or relative measures of size
of the entities based on assets or operating profit. Such allocated amounts are
included in general and administrative expenses. In the opinion of management,
the methods for allocating corporate general and administrative expenses and
other direct costs are reasonable. It is not practicable to estimate the costs
that would have been incurred by ACPP if it had been operated on a stand-alone
basis. ACPP has estimated that the general and administrative annual expense
levels would increase approximately $130,000 after the Restructuring.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of the significant accounting policies is as follows:

SALES AND PROFIT RECOGNITION AND COST CAPITALIZATION
----------------------------------------------------

Community development land sales are recognized at closing only when
sufficient down payments have been obtained, possession and other attributes of
ownership have been transferred to the buyer, and ACPP has no significant
continuing involvement.

The costs of acquiring and developing land are allocated to these assets
and charged to cost of sales as the related inventories are sold. ACPP's
interest costs related to land assets are allocated to these assets based on
their development stage and relative book value. The portion of interest
allocated to land during

F-10

the development and construction period is capitalized. Remaining interest
costs are expensed. ACPP carries rental properties, land and development costs
at the lower of cost or net realizable value.

Quarterly, ACPP evaluates the carrying value of its long-lived assets in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." In cases where management
is holding for sale particular properties, ACPP assesses impairment based on
whether the net realizable value (estimated sales price less costs of disposal)
of each individual property to be sold is less than the net book value. A
property is considered to be held for sale when ACPP has made the decision to
dispose of the property. Otherwise, ACPP assesses impairment of its real estate
properties based on whether it is probable that undiscounted future cash flows
from each individual property will be less than its net book value. If a
property is impaired, its basis is adjusted to its fair market value.

SELLING AND MARKETING EXPENSES
------------------------------

Selling and marketing expenses consist primarily of advertising costs,
which include costs of printed materials, signs, displays, and general marketing
costs. These costs are expensed as incurred.

MANAGEMENT FEES
---------------

ACPP records management fees in the period in which services are rendered.

DEPRECIATION AND AMORTIZATION
-----------------------------

Buildings are depreciated over 35 to 40 years using the straight-line
method. Furniture, fixtures and equipment are depreciated over five to seven
years using the straight-line method. Deferred expenses are amortized over the
period of estimated benefit using the straight-line method.

INVESTMENT IN RENTAL PROPERTY PARTNERSHIPS
------------------------------------------

ACPP's investment in rental property partnerships consists of long-term
receivables, nominal capital contributions, working capital loans and ACPP's
share of unconsolidated partnership income and losses. The working capital
loans receive priority distributions from the cash flow generated from the
operations of the partnerships. The long-term receivables represent loans to
the partnerships for payment of construction and development costs in excess of
the project mortgages. Substantially all of the long-term receivables are non-
interest bearing and have been discounted at an effective rate of 14% based on
the projected maturity date which will occur upon the refinancing, sale or other
disposition of the partnerships' properties. The discount, which represents
deferred sponsor and developer fees, is netted in the combined historical
financial statements against the long-term receivables.

Certain partnerships are accumulating cash from operations in excess of the
maximum distribution amounts permitted by U.S. Department of Housing and Urban
Development ("HUD") and other regulatory authorities. This cash, accumulated in
restricted cash accounts, will be available to pay the long-term receivables due
to ACPP and to make cash distributions to ACPP and the limited partners when the
partnerships' projects are refinanced or sold.

Pursuant to the partnership agreements, the general partners of the
unconsolidated partnerships are prohibited from selling or refinancing the
apartment complexes without majority limited partner approval.

F-11

Due to the absence of control and non-majority ownership, these partnerships are
accounted for under the equity method of accounting.

CASH AND CASH EQUIVALENTS
-------------------------

Cash and cash equivalents include cash on hand, unrestricted deposits with
financial institutions and short-term investments with original maturities of
three months or less.

INCOME TAXES
------------

ACPP does not expect to be subject to U.S. income taxes under current law.
Its Unitholders are expected to be taxed directly on their share of ACPP's
income. Subsequent to the completion of the Distribution, American Land and
American Management are expected to be subject to tax at the applicable
corporate rates. American Rental, which expects to qualify as a real estate
investment trust, does not expect to be subject to tax under current law.
Furthermore, IGP is expected to be subject to Puerto Rico income tax on its
Puerto Rico source income.

The combined historical financial statements of ACPP have been presented
without effect for income taxes of American Land, American Management and
American Rental because IGC is not currently subject to U.S. income tax on its
U.S. source income.

USE OF ESTIMATES
----------------

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

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
----------------------------------------------

In February 1997, the Financial Accounting Standards Board issued SFAS No.
128 "Earnings Per Share", which is effective for fiscal years ending after
December 15, 1997, including interim periods. Earlier adoption is not
permitted. However, an entity is permitted to disclose pro forma earnings per
share amounts computed under SFAS No. 128 in the notes to the financial
statements in periods prior to adoption. The statement requires restatement of
all prior-period earnings per share data presented after the effective date.
ACPP adopted SFAS No. 128 in the fourth quarter of 1997 and the impact was not
significant.

During 1997, ACPP adopted the provisions of SFAS No. 129 "Disclosure of
Information about Capital Structure." The adoption of SFAS No. 129 did not have
a material effect on ACPP's financial statements.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130
"Reporting Comprehensive Income", which is effective for fiscal years beginning
after December 15, 1997. The statement establishes standards for reporting and
display of comprehensive income and its components. ACPP plans to adopt SFAS
No. 130 in 1998 and the impact is not expected to be significant.

F-12

In June 1997, the Financial Accounting Standards Board issued SFAS No. 131
"Disclosures about Segments of an Enterprise and Related Information", which is
effective for fiscal years beginning after December 15, 1997. ACPP plans to
adopt SFAS No. 131 in 1998.

(3) FINANCING AND CASH MANAGEMENT MATTERS

ACPP has historically met its liquidity requirements principally from cash
flow generated from home and land sales, property management fees, distributions
from residential rental partnerships and from bank financing providing funds for
development and working capital.

Over the past several years, cash flows have been constrained because of
the terms of its existing debt agreements and the reluctance of new lending
opportunities as a result of the Wetlands litigation (see Note 6). As a result,
substantially all of the cash generated has been used to pay debt service
requirements with existing lenders. This resulted in limited opportunities for
new construction and development. The recently closed Banc One financing
provided funding to commence construction in Fairway Village, the third village
in St. Charles, and will allow ACPP to retain a greater portion of its U.S. land
sales proceeds. ACPP currently has other development projects in various stages
of completion. Substantially all of the projects under construction have
sufficient development loans in place to complete the construction.

ACPP's principal demands for liquidity are expected to be the continued
funding of its current debt service and operating requirements. After the
Distribution, management expects to obtain additional funding which can be used
to fund new community development projects. There is no assurance that
sufficient funding will be obtained to meet its future debt service or other
operating cash flow needs.

F-13

(4) INVESTMENT IN UNCONSOLIDATED PARTNERSHIPS

HOUSING PARTNERSHIPS
--------------------

The following information summarizes financial data and principal
activities of unconsolidated housing partnerships which ACPP accounts for under
the equity method. The information is presented to show the effect of the sale
of four apartment projects in 1996 and the elimination of four apartment
projects that were initially combined on April 1, 1996 and are currently
included in ACPP's combined historical financial statements (in thousands).

SUMMARY OF FINANCIAL POSITION: AS OF DECEMBER 31,
-----------------------
1997 1996
---------- ----------

Total assets $111,974 $113,514
Total non-recourse debt 118,002 109,593
Total other liabilities 10,016 9,751
Total equity (16,043) (5,800)
Company's investment 8,657 11,693

SUMMARY OF OPERATIONS: FOR THE YEAR ENDED
---------------------------------
1997 1996 1995
-------- -------- -------

Total revenue $ 27,913 $ 30,872 $36,858
Net income 328 1,698 2,500
Company's recognition of equity
in earnings and developer fees 1,417 2,081 2,693

SUMMARY OF OPERATING CASH FLOWS: FOR THE YEAR ENDED
---------------------------------
1997 1996 1995
-------- -------- -------

Cash flows from operating activities $ 3,412 $ 7,358 $ 8,613
Company's share of cash flows from
operating activities 1,051 2,868 3,731
Operating cash distributions 10,648 1,620 2,607
Company's share of operating cash
distributions 5,155 501 1,216

SUMMARY OF 1996 SALES TRANSACTION:
Gain on sale $ 39,934
Company's equity and earnings recognition 14,637
Total distribution of sales proceeds 36,235
Company's share of sales proceeds distribution 15,165

F-14

COMPARABLE PARTNERSHIP RESULTS: The unconsolidated rental properties
partnerships as of December 31, 1997 include 17 partnerships owning 4,159 rental
units in 20 apartment complexes. ACPP holds a general partner interest in these
partnerships and generally shares in zero to 5% of profits, losses and cash flow
from operations until such time as the limited partners have received cash
distributions, equal to their capital contributions. Thereafter, ACPP generally
shares in 50% of cash distributions from operations.

Lakeside Apartments was placed in service in 1996. The remaining complexes
owned by Alturas Del Senorial Associates Limited Partnership, Bannister
Associates Limited Partnership, Bayamon Gardens Associates Limited Partnership,
Brookside Gardens, Carolina Associates Limited Partnership, Colinas de San Juan
Associates Limited Partnership, Crossland Associates Limited Partnership, Essex
Apartments Associates, Huntington Associates Limited Partnership, Jardines de
Caparra Associates Limited Partnership, Monserrate Associates Limited
Partnership, Monte de Oro Associates Limited Partnership, New Center Associates
Limited Partnership, San Anton Associates Limited Partnership, Turabo Limited
Dividend Partnership and Valle del Sol Limited Partnership were placed in
service prior to 1995.

ACTIVITY PRIOR TO CONSOLIDATION OF FOUR PARTNERSHIPS: On April 1, 1996,
ACPP acquired a controlling interest in four partnerships owning 596 rental
units, Wakefield Third Age L.P., Wakefield Terrace Associates L.P., Palmer
Apartments L.P. and Headen House Associates L.P. Effective April 1, 1996, the
results of operations and balance sheets of these partnerships are consolidated
in the accompanying combined historial financial statements.

ACTIVITY PRIOR TO SALE OF FOUR APARTMENTS: In March 1996, ACPP completed
the sale of four Puerto Rico apartment properties. The four properties, Las
Americas I, Las Americas II, Las Lomas and Monacillos, totaling 918 units were
purchased by non-profit organizations with financing provided by HUD through
capital grants authorized by the Low Income Housing Preservation and Resident
Homeownership Act ("LIHPRHA"). ACPP retained the management contract for these
properties. Prior to the sale, the properties were accounted for using the
equity method of accounting.

F-15

HOMEBUILDING JOINT VENTURE
--------------------------

ACPP holds a 50% joint venture interest in Escorial Builders S.E. Escorial
Builders was formed in 1995 to purchase lots from ACPP and construct homes for
resale. During 1997 and 1996, it purchased 118 and 98 lots, respectively. The
profit on these lots are deferred until sold by Escorial Builders to a third
party. ACPP's share of the losses and its investment are included with ACPP's
assets related to homebuilding in the accompanying combined historical financial
statements. The table summarizes Escorial Builders' financial information (in
thousands):

SUMMARY OF FINANCIAL POSITION: AS OF DECEMBER 31,
---------------------
1997 1996
--------- ---------

Total assets $13,719 $ 5,586
Total liabilities 12,536 5,047
Total equity 1,183 539
Company's investment 591 275

SUMMARY OF OPERATIONS: FOR THE YEAR ENDED
----------------------------
1997 1996 1995
-------- -------- ------
Total revenue $ 2,491 $ -- $ --
Net income (loss) 183 (151) --
Company's recognition of equity
in earnings 92 (75) --

SUMMARY OF OPERATING CASH FLOWS: FOR THE YEAR ENDED
----------------------------
1997 1996 1995
-------- -------- ------

Cash flows from operating activities $(7,326) $(4,361) $ --
Company's share of cash flows from
operating activities (3,663) (2,181) --
Operating cash distributions -- -- --
Company's share of operating cash
distributions -- -- --

F-16

(5) DEBT AND EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT

DEBT
----

ACPP's outstanding debt is collateralized primarily by land, land
improvements, housing, receivables, investments in partnerships, and rental
properties. In certain cases, there are cross-collateral and cross-default
provisions pursuant to the debt agreements. The following table summarizes the
indebtedness expected to be transferred to ACPP as of December 31, 1997 and 1996
(in thousands):

Outstanding
-----------------
Maturity Interest December 31,
Dates Rates -----------------
From/To From/To 1997 1996
--------- --------- ------- -------

Related to community
development:
Recourse debt Demand/ 9.0%/ $39,784 $38,943
07-31-04 10.0%
Non-recourse debt 08-02-09 P+1.5% 2,295 2,153

Related to rental
properties:
Recourse debt Demand 7.35% 969 1,139
Non-recourse debt 10-01-19/ 6.85%/ 39,101 39,508
10-01-28 8.50%
General:
Notes payable and capital leases 04-30-98/ 7.4%/ 173 157
08-01-02 12.00% ------- -------
Total debt $82,322 $81,900
======= =======

P = Prime lending interest rate.

ACPP's loans contain various financial, cross-default and technical
provisions.

ACPP's weighted average interest rate during 1997 on its variable rate debt
was 10.07%.

As of December 31, 1997, the $39,784,000 of recourse debt related to
community development assets is fully collateralized by substantially all of the
community development assets. Approximately $15,054,000 of this amount is
further secured by investments in apartment rental partnerships.

As of December 31, 1997, recourse investment property debt is secured by a
letter of credit issued to ACPP pursuant to the terms of a sales contract. The
non-recourse investment properties debt is collateralized by apartment projects.
Mortgage notes payable of $7,244,000 have stated interest rates of 7.5% and
7.75%. After deducting interest payments provided by HUD, the effective
interest rate over the life of the loan is 1%.

ACPP's loan with Banc One, obtained during 1997, requires additional
interest payments on each annual anniversary date. The amount due is 1% of the
outstanding balance in 1998 and 1999, and increases 1/2% each year thereafter,
through 2003.

F-17

The stated maturities (assuming no accelerations) of ACPP's indebtedness at
December 31, 1997 are as follows (in thousands):

1998 $19,422
1999 5,511
2000 3,552
2001 3,601
2002 3,681
Thereafter 46,555
-------
$82,322
=======

The interest costs incurred were accounted for as follows (in thousands):

December 31,
-------------------------

1997 1996 1995
------ ------- ------

Expensed $3,820 $ 4,433 $4,263
Capitalized 3,434 4,394 3,665
------ ------- ------
$7,254 $ 8,827 $7,928
====== ======= ======

EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT
-------------------------------------------------

On December 23, 1996, ACPP completed the restructuring of two non-recourse
mortgages that will provide an interest savings of approximately $12,000,000
over the life of the loan. The new mortgage notes payable of $18,700,000 bear
average annual interest rate over the life of the loans at approximately 6.8%
compared to approximately 9.7% for the old loans. Prepayment fees of $932,000
were paid to the prior lender and charged as an extraordinary item in the
accompanying financial statements. The loans are secured by the rental
properties owned by two consolidated partnerships.

(6) OTHER COMMITMENTS AND CONTINGENT LIABILITIES

WETLANDS LITIGATION
-------------------

On February 29, 1996, IGC, SCA and James J. Wilson were convicted on four
felony counts of violations of Section 404 (wetlands) of the U.S. Clean Water
Act relating to discharge without a permit of fill material into wetlands within
the U.S. Army Corps of Engineers' regulatory jurisdiction. The nine civil
violations of the U.S. Clean Water Act filed by the U.S. Attorney were dismissed
without prejudice. On June 17, 1996, IGC and SCA were fined $2,000,000 and
$1,000,000, respectively, placed on probation for five years and ordered to
implement a wetlands restoration and mitigation plan proposed by the government.
Mr. Wilson was fined $1,000,000 and sentenced to 21 months imprisonment and one
year of supervised release. Appeals were filed and Mr. Wilson's sentence was
stayed pending appeal by the Court of Appeals. The wetlands properties subject
to this litigation are being retained by IGC which remain responsible for
restoration and mitigation costs. IGC has paid the aggregate $3,000,000 in
fines on behalf of itself and SCA.

F-18

On December 23, 1997, the United States Court of Appeals for the Fourth
Circuit reversed the 1996 wetlands convictions of IGC, SCA and James J. Wilson,
IGC's Chief Executive Officer. The Court's action eliminates the $3,000,000
fine and remediation obligation that had been imputed as part of IGC's criminal
sentence. On January 26, 1998, the U.S. Attorney's office petitioned for the
Court of Appeals' panel to rehear the case. The Court of Appeals denied their
request. The U.S. Attorney can retry the case or pursue the civil violations
subject to the Court of Appeals published opinions. As a result of the
convictions being reversed by the Court of Appeals, the fine of $3,000,000 which
was previously paid has been refunded to IGC.

In reversing the convictions, the Appeals Court voided regulations that
defined "waters of the United States" to include intrastate wetlands that could
affect interstate commerce. However, the appellate decision did not foreclose a
determination upon retrial that IGC's Wetlands Properties are "waters of the
United States" because they are "adjacent" to "navigable waters" within the
meaning of the Clean Water Act. Other courts have construed "adjacent" to mean
"reasonably proximate" or "closely related." IGC's Wetlands Properties are over
9 miles from the nearest "navigable waters."

In the event that IGC is convicted should there be a retrial, IGC may be
responsible for paying the costs incurred in implementing a restoration and
remediation plan. The terms of the Banc One credit facility provide that IGC
may borrow up to $2,000,000 solely for use to pay remediation costs resulting
from the wetlands litigation. However, ACPP will assume the repayment
responsibility for the amounts drawn by IGC for remediation purposes.
Management of IGC intends to dispose of the retained land or borrow against its
value to the extent necessary to pay remediation costs.

The ultimate outcome of this litigation remains uncertain. Representatives
of the U.S. Attorney's office have stated publicly that the government intends
to retry the criminal case.

OTHER
-----

As of December 31, 1997, ACPP is guarantor of $7,178,000 of letters of
credit and surety bonds for land development completion.

IGP Group has assigned the receivables and cash proceeds from three
apartment properties to serve as collateral for a letter of credit in the amount
of $4,569,000 issued for the benefit of Chastleton Apartment Associates Limited
Partnership, an entity related to IBC and IGC.

ACPP will enter into a consulting and retirement compensation agreement
with IGC's founder and Chief Executive Officer, James J. Wilson, to become
effective on the date of the Restructuring (the "Consulting Agreement"). The
Consulting Agreement will provide for annual cash payments during the first two
years of $500,000 and annual cash payments for eight years thereafter of
$200,000.

In the normal course of business, ACPP is involved in various types of
pending or unasserted claims. In the opinion of management, these will not have
a material impact on the financial condition or future operations of ACPP.

F-19

(7) LEASES

ACPP operates certain property and equipment under leases, some with
purchase options that expire at various dates through 2005. ACPP is also
obligated under several non-cancelable operating leases for office space and
equipment. Future minimum lease payments are as follows (in thousands):

Operating Capitalized
Leases Leases
--------- -----------

1998 $ 413 $ 65
1999 396 54
2000 381 46
2001 298 26
2002 149 15
Thereafter 370 --
------ ----
Total minimum lease payments $2,007 206
Less amount representing interest 33
----
Present value of lease payments $173

Rental expense under noncancelable operating leases was $417,000 in 1997,
$441,000 in 1996 and $393,000 in 1995 and is included in general and
administrative expenses in the accompanying combined historical statements of
operations.

(8) RETIREMENT PLAN

ACPP will continue and assume all of IGC's obligations under the retirement
plan currently maintained by IGC (the "Retirement Plan"). Employees are
generally eligible to participate when they complete one year of service. The
Retirement Plan is a defined contribution plan which provides for contributions
by ACPP for the accounts of eligible employees in amounts equal to 4% of base
salaries and wages not in excess of the U.S. Social Security taxable wage base,
and 8% of salaries (limited to $150,000) that exceeded that wage base. Eligible
employees also may make voluntary contributions to their accounts and self-
direct the investment of their account balances in various investment funds that
may be selected under the plan.

Contributions to the Retirement Plan were $467,000, $407,000 and $349,000
for the years ended December 31, 1997, 1996 and 1995, respectively.

F-20

(9) RELATED PARTY TRANSACTIONS

Certain officers, trustees and one consultant of ACPP, Interstate General
Company L.P. ("IGC") and Interstate Business Corporation ("IBC"), a general
partner of IGC, have ownership interests in various entities that conduct
business with ACPP. The financial impact of the related party transactions on
the accompanying combined historical statements of operations and combined
historical statements of assets and liabilities are reflected below:

STATEMENTS OF OPERATIONS IMPACT: 1997 1996 1995
---------- ------------ ----------

Community Development - Land Sales (A)
- ---------------------
IGC $ 105 $ 980 $ 875
Affiliate of IGC former director (A1) -- 2,984 3,233
Affiliate of IGC former director (A1) -- 2,720 --
IBC, general partner of IGC -- 1,869 --
Affiliate of IBC, general partner of IGC -- 1,513 --
Affiliate of IBC, general partner of IGC and
James Michael Wilson, IGC director (A2) 3,000 -- --
------ ------- ---------
$3,105 $10,066 $4,108
====== ======= =========
Cost of Land Sales
- ------------------
IGC $ 74 $ 686 $ 613
Affiliate of IGC former director -- 1,813 1,539
Affiliate of IGC former director -- 2,310 --
IBC, general partner of IGC -- 586 --
Affiliate of IBC, general partner of IGC -- 680 --
Affiliate of IBC, general partner of IGC and
James Michael Wilson, IGC director (A2) 1,689 -- --
------ ------- ---------
$1,763 $ 6,075 $2,152
====== ======= =========
Management and Other Fees (B)
- -------------------------
Unconsolidated subsidiaries $2,790 $ 3,993 $2,908
Affiliate of IBC, general partner of IGC (B1,2) 343 248 650
Affiliates of James Michael Wilson, trustee and IGC
director, Thomas B. Wilson, trustee and
IGC director, and James J. Wilson, IGC director 148 193 239
Affiliate of James Michael Wilson, trustee and IGC
director, Thomas B. Wilson, trustee and IGC director,
James J. Wilson, IGC director and an affiliate of IBC,
general partner of IGC 68 113 67
IBC, general partner of IGC -- 12 30
------ ------- ---------
$3,349 $ 4,559 $3,894
====== ======= =========
Interest and Other Income
- -------------------------
Unconsolidated subsidiaries $ 49 $ 49 $ 90
Affiliate of IGC former director 263 429 197
Affiliate of IBC, general partner of IGC 120 -- --
IBC, general partner of IGC -- 8 33
Affiliate of Thomas B. Wilson, trustee, IGC director 16 17 18
------ ------- ---------
$ 448 $ 503 $ 338
====== ======= =========
General and Administrative Expense
- ----------------------------------
Affiliate of IBC, general partner of IGC (C1) $ 339 $ 361 $ 369
Reserve additions (reductions) and other write-offs
Affiliate of IGC former director (A1) 388 319 32
Affiliate of IBC, general partner of IGC (B) 117 69 --
Affiliate of Thomas B. Wilson, trustee and IGC director 83 -- --
Unconsolidated subsidiary 213 101 91
------ ------- ---------
$1,140 $ 850 $ 492
====== ======= =========

F-21

Increase Increase
(Decrease) (Decrease)
Balance in Balance in
December 31, Reserves December 31, Reserves
1997 1997 1996 1996
------------ ---------- ------------ ----------

STATEMENTS OF ASSETS AND LIABILITIES:

Assets Related to Rental Properties - Receivables (B) all unsecured and
- ----------------------------------- due on demand

Unconsolidated subsidiaries $ 539 $111 $ 668 $(315)
Affiliates of IBC, general partner of IGC (B1,2) 51 (9) 65 69
Affiliates of James Michael Wilson, trustee and IGC
director and James J. Wilson, IGC director 20 -- 64 --
Affiliate of James J. Wilson, IGC director -- -- -- --
------ ---- ------ ----
$ 610 $102 $ 797 $(246)
====== ==== ====== ====

Assets Related to Community Development
- ---------------------------------------
Notes receivable and accrued interest
Affiliate of IGC former director interest 10% (A1)
secured by land payments per month
$27,000 matures
April 1, 1998 $ 980 $ -- $1,042 $ 222
Affiliate of IGC former director interest 10% (A1)
secured by land payments per month
$27,000, matures
April 1, 1999 2,088 388 2,502 97
Affiliates of IBC, general partner of IGC interest 8% -- -- 1,193 --
secured by land matured December
15, 1997, paid
Affiliate of IBC, general partner of IGC interest P+1.5%
secured by land matures
June 29, 1998 (A2) 2,520 -- -- --
------ ---- ------ -----
$5,588 $388 $4,737 $ 319
====== ==== ====== =====
Other Assets - Receivables
- ------------ all unsecured
IBC, general partner of IGC payable from IGC
distributions (C2) $ 681 $ -- $ 881 $ --
Affiliate of Thomas B. Wilson, trustee, payable from
IGC director surplus cash
matures -- -- 281 --
Affiliates of IBC, general partner of IGC demand (B) 12 -- 79 --
------ ---- ------ ----
$ 693 $ -- $1,241 $ --
====== ==== ====== =====
Liabilities Related to Community Development
- --------------------------------------------
Accounts payable
Whitman Requardt (C3) $ 121 $ -- $ 324 $ --
====== ==== ====== =====

(A) LAND SALES
----------

ACPP sells land to affiliates and non-affiliates with similar terms on a
routine basis. The sales prices to affiliates are based on third party
appraisals, payable in cash or a combination of a 20% cash down payment and a
note for the balance. The notes receivable are secured by deeds of trust on the
land sold, bear an interest rate equal to those charged at that time for land

F-22

sales. The notes mature in one year or mature in five or less years with annual
amortizations. As circumstances dictate, the maturity dates and repayment terms
of the notes receivable due from affiliates or non-affiliates have been
modified. Any sales transactions that vary from these terms are described
below:

(1) The notes receivable due from an affiliate of Jorge Colon-Nevares, a
former director of IGC, did not bear interest until certain
infrastructure improvements were completed. This infrastructure was
delayed and the interest commencement dates modified. These delays
created the additional discounts reflected above.

(2) On June 30, 1997, ACPP sold 374 acres to an affiliate of IBC for
$3,000,000 and recognized a profit of $1,311,000. As payment for this
parcel, ACPP received a 20% down payment and assumption of a note
payable.

(B) MANAGEMENT AND OTHER SERVICES
-----------------------------

ACPP provides management and other support services to its unconsolidated
subsidiaries and other related entities in the normal course of business. These
fees are typically collected on a monthly basis, one month in arrears. These
receivables are unsecured and due upon demand. Certain partnerships
experiencing cash shortfalls have not paid timely. As such, these receivable
balances are reserved until satisfied or the prospects of collectibility
improves. Decreases to the reserves for other than routine cash payments are
discussed below:

(1) On April 1, 1996, IBC transferred its remaining 1.1% limited
partnership interest in four housing partnerships to ACPP for its
market value of $69,000 as partial satisfaction of a note receivable.
The balance of this note receivable and other receivables were
purchased by an affiliate of James Michael Wilson for a cash payment of
$1,279,000. The collection of the majority of these receivables was
uncertain and $390,000 had been reserved. This transaction resulted in
income recognition of these reserves during the second quarter of 1996.

(2) During the second quarter of 1997, an affiliate of IBC purchased the
management fees receivable due from Chastleton, Coachman's, Rolling
Hills, and Village Lake for a cash payment of $190,000. The collection
of these receivables had previously been questionable and they had been
fully reserved. This transaction resulted in income recognition of
$190,000.

Other transactions with related parties are as follows:

(1) ACPP rents executive office space and other property from affiliates
both in the United States and Puerto Rico pursuant to leases that
expire through 2005. In management's opinion, all leases with
affiliated persons are on terms generally available from unaffiliated
persons for comparable property.

(2) During 1996, the sale of four properties in Puerto Rico triggered a
taxable gain, a portion of which is passed through to the predecessor
of IGC that contributed those assets. IGC's partnership agreement
provides for (1) an allocation to that predecessor of the income tax
payable in Puerto Rico on such portion of the gain and (2) a reduction
from its cash distributions in an amount equivalent to the Puerto Rico
income tax specifically allocated to the predecessor. In accordance
with these provisions, ACPP has recorded a receivable from IBC of
$881,000 and will recover the amount from future distributions due to
IBC.

(3) Thomas J. Shafer will become a Trustee of ACPP subsequent to his
retirement from Whitman, Requardt, where he is currently a Senior
Partner. Whitman, Requardt provides engineering services to ACPP. In
management's opinion, services performed are on terms available to
other clients.

(4) James J. Wilson, as a general partner of IGP, is entitled to priority
distributions made by each housing partnership in which IGP is the
general partner. If IGP receives a distribution which represents 1% or
less of a partnership's total distribution, Mr. Wilson receives the
entire distribution. If IGP receives a distribution which represents
more than 1% of a partnership's total distribution, Mr. Wilson receives
the first 1% of such total. Prior to the Restructuring, Mr. Wilson will
transfer his general partner interest in IGP to a subsidiary of ACPP.

F-23

(10) OPTIONS AND APPRECIATION RIGHTS

ACPP expects to adopt a share incentive plan (the "Share Incentive Plan")
and a Trustees share incentive plan (the "Trustee Share Plan") to provide for
Share-based incentive compensation for officers, key employees and Trustees.

Under the Share Incentive Plan, the Compensation Committee of the Board of
Trustees may grant to key employees the following types of share-based incentive
compensation awards ("Awards") (i) options to purchase a specified number of
shares ("Options"), (ii) forfeitable shares that vest upon the occurrence of
certain vesting criteria ("Restricted Shares"), or (iii) Share Appreciation
Rights ("Rights") that entitle the holder to receive upon exercise an amount
payable in cash, shares or other property (or any combination of the foregoing)
equal to the difference between the market value of shares and a base price
fixed on the date of grant. A total of 500,000 shares will be reserved for
issuance under the Share Incentive Plan.

The Share Incentive Plan authorizes the Compensation Committee to determine
the exercise price and manner of payment for Options and the base price for
Rights. The Compensation Committee also is authorized to determine the duration
and vesting criteria for Awards, including whether vesting will be accelerated
upon a change in control of ACPP.

Rights of key employees under Awards are not transferable other than to
immediate family members or by will or the laws of intestate succession.

The Trustee Share Plan authorizes the Board of Trustees, in its discretion,
to grant to eligible Trustees awards of the same types and terms of Awards as
provided under the Share Incentive Plan. Only Trustees who are not employees of
ACPP or any affiliated company are eligible to receive Awards under the Trustee
Share Plan. A total of 100,000 Shares will be reserved for issuance under the
Trustee Share Plan.

Since no Awards have been issued under these Plans, no liability has been
recorded in the accompanying combined historical statements of assets and
liabilities. However, ACPP may be required to recognize compensation expense
under APB Opinion No. 25, "Accounting for Stock Issued to Employees," associated
with Options and Rights issued to holders of IGC Options and Rights. The
primary factor that will determine the amount of compensation expense ACPP may
be required to recognize is ACPT's market price per share subsequent to the
Distribution. Whereas such information cannot be readily determined, no
compensation expense for Options and Rights issued to holders of IGC Options and
Rights has been recorded in the accompanying combined historical statements of
operations.

F-24

(11) INCOME TAXES

As a U.S. Company doing business in Puerto Rico, ACPP is subject to Puerto
Rico income tax on its Puerto Rico based income. The taxes reflected below are
a result of that liability.

The calculation below for the provision for income taxes does not include
the income from U.S. operations which is not subject to income taxes. It does
include the Puerto Rico source income which is subject to income taxes in Puerto
Rico at the statutory rate of 29%. The following table reconciles the effective
rate solely attributable to Puerto Rico source income:

December 31,
------------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
% of % of % of
Amount Income Amount Income Amount Income
------ ------- ------ ------- ------ -------
(In thousands, except amounts in %)

Provision for income taxes at the
statutory income tax rate $470 29% $3,424 29% $1,369 29%
Reduction of provision for partnership
income not taxable to Company -- -- -- -- -- --
Other items -- -- -- -- -- --
---- -- ------ ------ ------ ------
$470 29% $3,424 29% $1,369 29%
==== === ====== ====== ====== ======

The provision for income taxes consists of the following:

YEARS ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------ ------

Currently payable
United States $ -- $ -- $ --
Puerto Rico 1,390 3,005 723
Deferred (920) 419 646
------ ------ ------
$ 470 $3,424 $1,369
====== ====== ======

The components of deferred taxes payable include the following:

AT DECEMBER 31,
-----------------
1997 1996
------- -------

Tax on amortization of deferred income related to long-term
receivables from partnerships operating in Puerto Rico $ 556 $ 499
Tax on equity in earnings of partnerships operating in Puerto Rico 1,232 2,337
Tax on land development costs capitalized for book purposes but
deducted currently for tax purposes 2,465 2,313
Tax on sale to related party deferred for book purposes
but currently taxable (133) (108)
------ ------
$4,120 $5,041
====== ======

F-25

Deferred income taxes reflect the "temporary differences" between amounts of
assets and liabilities for financial reporting purposes as determined in
accordance with SFAS No. 109 and such amounts as measured by tax laws.

The reconciliation between net income per books and net taxable income is as
follows:

December 31,
------------------------------
1997 1996 1995
-------- -------- --------
(In thousands)

Net income
per books $1,555 $12,891 $ 3,983
Built-in gain allocable
to Predecessors:
Current (464) (3,526) (466)
Deferred (529) (415) (364)
Difference in income or
losses from subsidiary
partnerships (429) (826) (20)
Capitalization of general
and administrative
expenses under the
Uniform Capitalization
Rules 49 (246) 315
Differences in deferred
income 175 (1,431) 349
Difference in cost of sales
due to interest related to
the acquisition of land,
deducted for tax purposes 390 513 505
Deferred income taxes (920) 419 646
Losses from restructuring (225) (200) (61)
Other book to tax
reconciling items, none
of which is individually
significant 3,526 (889) (1,269)
------ ------- -------

Net taxable income
per federal return $3,128 $ 6,290 $ 3,618
====== ======= =======

(12) FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying amounts of cash and cash equivalents, receivables and other
current assets approximate fair value due to the short-term nature of these
items. Fair value of long-term debt instruments was determined by discounting
future cash flows using ACPP's current market rates. As of December 31, 1997
and 1996, the fair value of long-term debt instruments was $78,307,000 and
$78,632,000, respectively.

F-26

(13) SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid and income taxes paid were as follows for the years ended
December 31 (in thousands):

1997 1996 1995
------ ------ ------

Interest paid $5,583 $7,004 $5,359
Income taxes paid $3,828 $ 371 $2,227

Significant non-cash financing and investing activities included the
following:

(a) In 1996, ACPP received partnership interests from a Unitholder valued
at $69,000 in satisfaction of $69,000 of notes receivable.

(b) In 1995, ACPP received land in exchange for land sold with a $134,000
book value.

F-27

ANNEX 1

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended DECEMBER 31, 1997 Commission File Number 1-9393

INTERSTATE GENERAL COMPANY L.P.
- ---------------------------------------------------------------------------

(Exact name of registrant as specified in its charter)

Delaware 52-1488756
- ------------------------------- --------------------------
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification Number)

222 Smallwood Village Center
St. Charles, Maryland 20602
- ------------------------------- --------------------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (301) 843-8600
----------------------
Securities registered pursuant to Section 12(b) of the Act:

TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED

Class A Units representing assignment American Stock Exchange
of beneficial ownership of Class A
limited partnership interest Pacific Stock Exchange
and evidenced by beneficial assignment
certificates ("Units")

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

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes [X] No [_]

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

As of March 13, 1998 the aggregate market value of the Units held by non-
affiliates of the registrant based on the closing price reported on the American
Stock Exchange was $21,648,628.

Class A Units Outstanding at March 13, 1998: 10,331,785 Class A Units

DOCUMENTS INCORPORATED BY REFERENCE

Form 10-K
Item
---------
N/A

INTERSTATE GENERAL COMPANY L.P.

1997 FORM 10-K ANNUAL REPORT

TABLE OF CONTENTS

PART I
------

PAGE
----

Item 1. Business 3
Item 2. Properties 16
Item 3. Legal Proceedings 19
Item 4. Submission of Matters to a Vote
of Security Holders 20

PART II
-------
Item 5. Market Prices and Distribution on Units 21
Item 6. Selected Financial and Operating Data 21
Item 7. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 23
Item 8. Financial Statements and Supplementary Data 29
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 76

PART III
--------
Item 10. Directors and Executive Officers
of the Registrant 77
Item 11. Executive Compensation 80
Item 12. Security Ownership of Certain
Unitholders and Management 83
Item 13. Certain Relationships and Related
Transactions 84

PART IV
-------

Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 84

PART I

ITEM 1. BUSINESS

COMPANY PROFILE
---------------

Interstate General Company L.P. (the "Company" or "IGC") was formed as a
Delaware limited partnership in 1986. Directly and through predecessors, the
Company has been engaged in business since 1957. IGC has traded publicly as a
master limited partnership since February 1987 on the American Stock Exchange
and Pacific Stock Exchange. The Company's management and the Board of Directors
of the Company's Managing General Partner are presently undertaking steps to
restructure IGC and spin off the primary real estate operations in a newly
formed trust that will be taxed as a partnership.

IGC is a diversified real estate organization specializing in Community
Development, Investment Apartment Properties, Asset Management Services and
Homebuilding. The Company owns and participates in these operations directly
and through the following subsidiaries: Interstate General Properties, S.E.
("IGP"); St. Charles Associates Limited Partnership ("SCA"); St. Charles
Community, LLC, ("SCC"); Land Development Associates, S.E. ("LDA"); American
Rental Management Company ("ARMC"); and American Family Homes, Inc. ("AFH").
IGC's assets and operations are concentrated primarily in the metropolitan areas
of Washington, D.C. and San Juan, Puerto Rico. Additionally, its homebuilding
operations are active in Virginia, North Carolina and South Carolina. Through
its wholly owned subsidiaries, Interstate Waste Technologies, Inc. ("IWT") and
Caribe Waste Technologies, Inc. ("CWT"), the Company is involved in the pre-
development of municipal waste treatment facilities.

IGC's headquarters are located in St. Charles, Maryland. IGP, its
subsidiary, is based in San Juan, Puerto Rico. AFH has a central office in
Charlotte, North Carolina, and IWT has an office in Malvern, Pennsylvania.

The following summarizes the business operations of IGC and its
subsidiaries:

A. COMMUNITY DEVELOPMENT

IGC has extensive experience in developing master planned communities. The
Company and its predecessors have developed land for more than 13,000 housing
units, principally in its flagship planned community of St. Charles, Maryland.
The Company's successful formula involves actively managing the development
process. Management utilizes established consulting firms, including land
planners, engineers, architects and contractors, to assist in obtaining
necessary government approvals and provide infrastructure requirements.

IGC's master planned communities combine a variety of land uses with a
spectrum of housing styles and types, including single-family homes, townhomes,
condominiums and rental apartments, designed to meet the needs and desires of
the marketplace. Land uses include schools, recreation, shopping, commercial,
industrial, lakes, parks and open space. The Company primarily develops sites
for sale to third-parties, but it also realizes land values through joint
ventures and its own portfolio of rental apartment properties.

The Company currently controls land assets of approximately 7,000 acres,
principally in two planned communities that have the necessary zoning and
infrastructure approvals from local government. This represents approximately
12,000 housing units and some 800 acres designated for retail, commercial,
office and industrial use. Most of these land assets are located in St.
Charles, Maryland, a 9,100-acre planned community which is approximately half-
way to build-out; and Parque Escorial, a 432-acre planned community in
Carolina, Puerto Rico. The Company, either directly or through partnerships in
which it is general partner, also holds approximately 540 acres in Puerto Rico
for mixed use, and 1,600 acres at several locations in the Washington, D.C.
metropolitan area, including Prince William County, Virginia; and Charles
County, Prince George's County and St. Mary's County in Maryland.

ST. CHARLES. Located approximately 20 miles southeast of Washington, D.C.,
St. Charles encompasses approximately 14 square miles in Charles County,
Maryland. The master plan for this comprehensive planned unit development was
originally approved under Docket 90 by Charles County government in 1972 and has
been subsequently amended as needed. The master plan contemplates the
construction of more than 24,000 housing units and the development of 1,300
acres for commercial, office and light industrial use. Today, the community has
approximately 35,000 residents, 12,000 housing units, 6,000 jobs and 4.2 million
square feet of commercial, office and light industrial space. Additionally,
there are eight public schools, six neighborhood recreation centers, 15 lakes
and miles of paved hiking/biking paths. Specific plans for St. Charles
neighborhoods and site plans for business parcels are subject to approval by the
Charles County Planning Commission. The community is divided by U.S. Route 301
and some of its business park land is accessed by Conrail train tracks.

St. Charles is planned for five villages: Smallwood, Westlake, Fairway,
Piney Reach and Wooded Glen. IGC has substantially completed two of the
villages: Smallwood and Westlake. Development on the third--Fairway Village--
commenced in 1997. Fairway surrounds an existing 18-hole public golf course.
The village will include two neighborhoods totaling some 3,300 housing units, or
about a 10-year supply of building lots based on historical build-out rates.
The development of Fairway Village includes the construction of the final
portion of a cross-county connector highway that will bisect the village and
link U.S. Route 301 with State Route 5, a major access road to Southern
Maryland.

St. Charles also contains approximately 200 acres of unsold commercial
property surrounding the St. Charles Towne Center, a one-million-square-foot
regional mall. Opened in 1990, the center's average sales per square foot
consistently ranks among the top 10 percent of all retail centers managed by
Simon DeBartolo, the nation's leading owner/manager of shopping centers. In
1997, the mall attracted approximately 13 million shoppers.

In addition to its proximity to the nation's capital, St. Charles is
strategically situated to benefit from the positive effects on the Southern
Maryland economy due to the relocation of approximately 6,000 jobs to the
Patuxent River Naval Air Warfare Center in Lexington Park, Maryland. Southern
Maryland officials expect this expansion to create a total of 13,000 new jobs
between 1995-2000.

GOVERNMENT APPROVALS. The St. Charles master plan has been incorporated in
Charles County's comprehensive zoning plan. In addition, the Charles County
government has agreed to provide sufficient water and

sewer connections for the balance of the housing units to be developed in St.
Charles. Specific development plans for each village in St. Charles are subject
to approval of the County Planning Commission. Such approvals have previously
been received for the villages of Smallwood, Westlake and Fairway. Approvals
have not yet been sought on the final two villages.

COMPETITION. Competition among residential communities in Charles County
is intense. Currently, there are approximately 30 subdivisions competing for
new home buyers within five miles of St. Charles. This is the result of several
major national and regional homebuilders having been attracted by the growing
marketplace. Charles County residential building permits have increased from
964 in 1994, 965 in 1995, 1,090 in 1996 and 1,232 in 1997. In this very price
sensitive market, IGC management has positioned St. Charles to provide among the
lowest priced building lots and homes while offering more amenities than the
competition. Home sales are traditionally influenced by seasonal factors,
bringing stronger demand during the spring and fall.

ENVIRONMENTAL IMPACT. Management believes that the St. Charles master plan
can be completed without material adverse environmental impact and in
compliance with government regulations. In 1977, a comprehensive environmental
impact statement for the St. Charles master plan was prepared by the federal
government and considered at federal, state and local levels. The Company
believes it has abided by those approved standards (see Item 3. Legal
Proceedings). However, development plans can be delayed while plans are
reviewed by appropriate local, state and federal agencies and delineations of
environmentally sensitive areas are determined.

PARQUE ESCORIAL. This planned community totals 432 acres and is located at
the intersection of two major highways, six miles from the San Juan central
business district. The original master plan was approved in October 1992, and
has been periodically amended. The plan contemplates the construction of 2,900
dwelling units and 120 acres for commercial, light industrial and office use.
Through its Puerto Rico subsidiary, the Company is managing general partner with
an 80 percent interest in the partnership that owns and is developing Parque
Escorial.

Development began in 1994 following the sale of 61 acres of commercial land
to Wal-Mart. In 1995, the retailer completed the first phase of a planned
610,000 square foot shopping center by opening Wal-Mart and Sam's Club stores
totaling 240,000 square feet. The remaining 370,000 square feet are presently
under contract. Since that time, approximately 14 acres of commercial land have
been sold for prices reaching $1 million per acre. There are nine acres of
commercial property remaining to sell and management is seeking approval to
rezone an additional six acres for commercial use.

Residential development began in 1996 after homebuilders settled land
contracts for 784 housing units, 216 of which will be built and sold through a
50/50 joint venture between the Company and a prominent local builder. All of
the units in this first phase will be "walk-up" condominiums, and settlements
commenced during the last quarter of 1997. At present, 400 additional units are
under contract for closing during the second quarter of 1998.

In March 1998, management expects to complete the construction of an
overpass of 65th Infantry Highway, providing easy access to the community from
Highway 3 at the main entrance.

Construction of the site improvements for a 27 acre office park comprising
500,000 square feet began in February 1998. The Company, through an 80%
partnership that owns Parque Escorial, will be minority partner in a Puerto Rico
special partnership that was awarded the construction of a 150,000 square feet
office building for a quasi-governmental agency. The agency will lease the
building for 30 years, after which it can buy the building for one dollar. The
Company will make a capital contribution to said partnership in the form of a
parcel of seven acres which will be the site of the building. In exchange, the
80% owned partnership will receive an annual preferential distribution of
$396,000 plus 30% of the net cash flow generated by the building. Construction
of the building is expected to commence during the second quarter of 1998.

GOVERNMENT APPROVALS. The Community's master plan has approval while
specific site plans are subject to planning commission review and approval.
Management has secured agreements with the Puerto Rico Aqueduct and Sewer
Authority to provide for adequate sewer capacity for the community and adequate
water for the 1,400 residential units or their equivalency in commercial and
office space.

COMPETITION. The scarcity of developable land in the San Juan metropolitan
area creates a favorable market for home sales at Parque Escorial. Competition
for home sales is expected primarily from small-scale condominium projects in
areas considered to be less desirable than Parque Escorial. Furthermore, it is
one of only two master planned communities currently planned or under
development in the San Juan metropolitan area. The other is the 500-acre
Encantada, which is marketed toward higher income homebuyers. Parque Escorial's
home prices appeal primarily to entry level purchasers. Another contrast is
that Encantada's developer is building all the homes in the community, while
Parque Escorial features three separate homebuilders in Phase II, providing more
selections for the consumer.

ENVIRONMENTAL IMPACT. Management believes that the Parque Escorial master
plan can be completed without material adverse environmental impact and in
compliance with government regulations. All of the necessary agencies have
endorsed Parque Escorial's environmental impact statement. Wal-Mart has
provided mitigation for 11.87 acres of wetlands impacted by their development of
the shopping center site and other land.

OTHER COMMUNITIES. In addition to St. Charles and Parque Escorial, the
Company has one site for community development in Puerto Rico and four sites in
the Washington, D.C. metropolitan area.

IGC owns a parcel of residential land consisting of 77 townhome lots in the
planned community of Montclair, located in Prince William County, Virginia,
approximately 28 miles southwest of Washington, D.C.

The Company is developing the 170-acre planned community of Westbury in
Lexington Park, Maryland. The community is located in St. Mary's County, about
one mile from the Patuxent River Naval Air Warfare Center, which is currently
expanding its employment base. In March 1997, the Company entered into a
contract to sell the remaining 52 townhome lots to a third-party homebuilder, of
which 30 remain. Development of the community's final phase, consisting of
approximately 250 single-family home lots, began in March 1997, with 36 lots
currently under contract.

In Prince George's County, Maryland, IGC is the general partner in a
partnership that owns a 277-acre tract approximately 12 miles southeast of
Washington, D.C. This Brandywine property has preliminary plan approval from
the county for approximately 1,000 housing units and approximately 400,000
square feet of commercial and office space.

The Company owns a site in Charles County, Maryland, Pomfret (812 acres),
which is in the planning process.

In Puerto Rico, the partnership that owns Parque Escorial also owns
approximately 540 acres surrounding the El Comandante Race Track in Canovanas,
approximately 12 miles east of San Juan. Management is currently marketing
portions of the land for an entertainment complex.

B. RENTAL APARTMENT PROPERTIES

Since 1959, IGC and its predecessors have developed and owned residential
rental apartment properties, first in Puerto Rico and then in Maryland, Virginia
and Washington, D.C. IGC currently is general partner in 26 partnerships that
own a total of 5,695 apartment units. In addition to a general partnership
interest, IGC holds certain limited partnership interests in six of these
partnerships. In seven of these partnerships (1,132 units), the Company holds
greater than a 50 percent interest, so the accounts and operations are
consolidated with those of the Company. The remaining 19 partnerships (4,563
units) are recorded under the equity method of accounting.

As general partner, IGC typically recognizes zero to 5% of profits and
losses of the partnerships until the limited partners have recovered their
capital investments and the partnerships have accumulated earnings. Thereafter,
IGC generally recognizes its full percentage of the partnerships' profits and
losses.

Typically, IGC manages the development process as follows: locates the
land, conducts a feasibility study, forms a partnership to acquire the land,
arranges for construction and permanent financing, and provides cost and
completion guarantees. For apartment properties developed prior to the 1986 tax
law changes, limited partners were admitted to the partnerships through
syndication at the time the project financings were closed. The apartment
properties completed since that time have admitted a financing partner or
partners as needed.

The apartment partnerships are primarily financed by non-recourse
mortgages. The U.S. Department of Housing and Urban Development ("HUD")
provides rent subsidies for residents in 4,257 of the 5,695 apartment units.
HUD also provides mortgage insurance and, in some cases, interest subsidies to
the partnerships. Additionally, 110 units are leased pursuant to HUD's Low
Income Housing Tax Credit ("LIHTC") program, and other units are subject to
income guidelines set by the Maryland Community Development Administration.

HUD subsidies are provided principally under Sections 8 and 236 of the
National Housing Act. Under Section 8, the government pays to the apartment
partnerships the difference between market rental rates (determined in
accordance with government procedures) and the amounts that the government deems
the residents are able to afford. Under Section 236, the government provides
interest subsidies directly to the apartment partnerships through a reduction in
the properties' mortgage interest rate and with a corresponding reduction in
resident rental rates. In order to

comply with the requirements of Section 8 and Section 236, residents are
screened by IGC for eligibility under HUD guidelines. Subsidies are provided
according to the terms of long-term contracts between the federal government and
the partnerships.

Cash flow from those projects whose mortgage loans are still insured by
HUD, or financed through the housing agencies in Maryland, Virginia, Puerto Rico
or Washington, D.C. (the "State Financing Agencies") are subject to guidelines
and limits established by the apartment partnerships' regulatory agreements with
HUD and the State Financing Agencies. Certain regulatory agreements also
require that if the cash from operations generated by certain apartment
properties has exceeded the allowable cash distributions, the surplus must be
deposited into restricted escrow accounts held by the mortgagee of the property
and controlled by HUD or the applicable State Financing Agency. Funds in these
restricted escrow accounts may be used for maintenance and capital improvements
with the approval of HUD and/or the State Finance Agency.

As the general partner, the Company actively pursues the maximum earning
potential of its rental apartment properties. Management explores various
options, including refinancing, property sale and condominium conversion, in
order to maximize equity value and cash flow. The following are recent examples
of this management in action:

The Company has begun the conversion to condominiums of two apartment
properties in Puerto Rico--Monte de Oro and New Center--totaling 392 units.
Management expects to settle the first sales in 1998 and have all units
sold by late 1999. IGC has a record of success in this conversion
procedure, having previously converted 1,800 units in Puerto Rico.

In January 1998, IGC completed $10,000,000 in refinancings on two
subsidized apartment properties in Puerto Rico. These two properties are
scheduled to undergo conversion to condominiums beginning in 2000. The
refinancings allowed the partnerships to retire the residual receipts funds
and to facilitate the future conversion process. The refinancings provided
funds for the partnerships to pay approximately $2,000,000 in notes and
distributions to the Company in 1998.

The Company's growth strategy is to seek opportunities to develop and build
new apartment properties within its planned communities in St. Charles, where it
owns and/or manages every apartment property (1,976 units). Under the LIHTC
program, the Company built a 56-unit apartment property in 1994 and a 54-unit
building in 1996, both of which are for senior citizens and located in St.
Charles. The Company expects to build approximately 800 apartment units in the
Fairway Village portion of St. Charles as that village is developed over the
next 10 years. The St. Charles zoning charter allows for 25% of all housing
units to be rental apartments.

GOVERNMENT REGULATIONS. Changes in government regulations can
significantly affect the status of the Company's existing U.S. and Puerto Rico
apartment properties and its development of future projects.

The federal government has virtually eliminated subsidy programs for new
construction of low and moderate income housing by profit-motivated developers
such as IGC. As a result, the Company developed only six new

apartment properties between 1981-1993, all of which offer market rate rents.
The Company utilized the LIHTC program to build 110 units in St. Charles from
1994-1996. No new construction of apartment projects is expected in Puerto
Rico.

The subsidiary contract for one of the Puerto Rico properties expired in
1997, and the property is currently being converted to condominiums. The
remaining subsidy contracts for IGC's investment apartment properties are
scheduled to expire between 1998-2021. HUD has stated that it does not plan to
renew subsidy contracts and is seeking Congressional authority to convert
expired contracts to resident-based vouchers. This would allow residents to
choose where they wish to live. This can potentially impact the income stream
of certain properties. IGC actively maintains its properties to preserve their
values and retain residents.

HUD also is exploring a program known as "portfolio re-engineering" or
"mark-to-market." This would assist owners of Section 8 and HUD-insured
properties that could not meet loan obligations under the proposed resident-
based voucher system. IGC will monitor the progress of this proposal and its
impact on the properties in which it owns partnership interests.

Upon the termination or cancellation of any existing subsidy contracts, IGC
may choose to convert apartment units in Puerto Rico for sale as condominiums.
Substantially all of its units were designed for this potential. However,
because of the adverse tax consequences that would result from the conversion of
apartment properties in the U.S. into condominiums, IGC anticipates that its
U.S. apartment properties with subsidy contracts would be offered at market rate
rents upon expiration of the applicable subsidy contracts.

COMPETITION. IGC's rental properties that receive rent subsidies are not
subject to the market conditions that affect occupancy at properties with market
rate rents. These subsidized properties average approximately 99% occupancy
rates year round. The Company's apartments in St. Charles and Washington, D.C.
that have market rate rents are impacted by the supply and demand for competing
rental apartments in the area, as well as the local housing market. When for
sale housing becomes more affordable due to lower mortgage interest rates or
softening home prices, this can adversely impact the performance of rental
apartments. Conversely, when mortgage interest rates rise or home prices
increase, the market for rental units may benefit.

C. ASSET MANAGEMENT SERVICES

IGC earns management fees from management of 8,650 rental apartments,
including 5,695 units owned by partnerships in which IGC is the general partner.
(Fees from 1,132 of these units are eliminated through consolidation in IGC's
financial statements.) IGC manages but does not have an ownership interest in
2,955 apartment units, 590 of which are owned by affiliates of the Company. IGC
also earns fees by managing approximately 200,000 square feet of office and
commercial space, all of which is owned by affiliates of the Company.

For the apartment properties in which IGC is general partner, management
fees are based on a percentage of rents, ranging from 2.25% to 10.41%. These
contracts are for periods of one or two years and are customarily renewed.
Although HUD and State Finance Agencies have the

right to cancel these contracts with or without cause, no IGC contracts have
ever been canceled. Fees for managing other apartment properties range from
2.5% to 8.25% of rents, and fees for managing commercial and industrial
properties are typically 3.5% of gross rents.

D. HOMEBUILDING

American Family Homes, Inc. ("AFH") is a wholly owned subsidiary of IGC
that builds semi-custom homes for homebuyers who own land or who contract to
purchase land from a third-party. AFH's operations are based out of seven
offices in Virginia, North Carolina and South Carolina. In 1997, management
wrote off its remaining unamortized goodwill related to the purchase of AFH, in
conjunction with the Company's reorganization plan.

Historically, the Company has built single-family homes and townhomes on
lots developed within its community development operations. Due to slim profit
margins, IGC has closed its homebuilding activities in the U.S. planned
communities of St. Charles, Montclair and Westbury.

At Parque Escorial in Puerto Rico, the Company has formed a joint venture--
Escorial Builders S.E.--with Metropolitan Builders, and has acquired lots on
which to build 216 "walk-up" condominium units. Twenty-one homes sold in 1997
and an additional 104 are under option contract.

COMPETITION. The housing industry is cyclical and is influenced by various
economic factors and seasonality. These variables include, for example,
consumer confidence, interest rates, property and federal taxes, demographics
and mortgage finance options. As a result, the Company's homebuilding
operations could be affected by unanticipated changes in new home demand
resulting from the above factors.

For AFH, the homebuilding industry is highly competitive in the mid-
Atlantic region. In addition to a wide variety of builders, there is an
abundant supply of resale homes and rental housing. AFH creates its own niche
in the market by offering the convenience and flexibility to build a home in the
location of the customer's choice, usually in a rural area. However, these
buyers represent a modest segment of the market and are generally served by low-
volume local builders, who have lower overhead. In 1997, management wrote off
its remaining unamortized goodwill related to the purchase of AFH, in
conjunction with the Company's reorganization plan.

In the San Juan metropolitan area, there is a steady market for "walk-up"
condominiums in the entry-level price range. There are only two planned
communities with new construction, and Parque Escorial is the only one offering
products priced for first-time buyers. Escorial Builders is one of three
builders addressing this segment of the market in Parque Escorial.

ENVIRONMENTAL IMPACT. Management believes that the Company's homebuilding
operations are in compliance with government regulations.

E. INVESTMENT IN WASTE TECHNOLOGIES

In 1990, IGC formed a wholly owned corporation, Interstate Waste
Technologies, Inc. ("IWT"), to develop innovative solutions for the disposal of
municipal waste and to pursue waste disposal contracts with municipalities.
Three individuals representing IWT have filed for patent protection for a
process which converts sludge into three useful and salable products: methanol,
sulfur and an aggregate material. Issuance of

patents is pending and there is no assurance that patents for this process will
be issued.

Following a Request for Proposals ("RFP") and a thorough screening process,
IWT was selected by the City of Bridgeport, Connecticut in February 1994 as its
preferred vendor for a regional sludge management facility. IWT and Bridgeport
executed a host community agreement in June 1994, affirming the city's
willingness to allow the sludge management facility to be built within the
municipality. Since that time, IWT management has been pursuing long-term
sludge disposal service agreements with other municipalities in the region to
make construction of the facility economically viable. IWT management then will
negotiate a sludge disposal service agreement with Bridgeport's wastewater
authority.

In 1996, a second corporation, Caribe Waste Technologies, Inc. ("CWT"), was
formed in Puerto Rico. CWT is an entity established to perform projects in the
Caribbean.

In December 1997, CWT entered into a host community agreement with the
Municipality of Caguas, Puerto Rico. The agreement describes the basis on which
CWT will contract, develop and construct a 3,300 ton per day solid waste
facility using proprietary gasification technology from Thermoselect S.A. To
provide waste for the facility, CWT management is pursuing long-term solid waste
disposal service agreements with municipalities in Puerto Rico and the Puerto
Rico Solid Waste Management Authority. Other organizations competing to build
facilities for disposal of Puerto Rico's solid waste include Montenay, a
subsidiary of Compagnie Generale des Eaux, Kvaerner, and SEMASS.

In 1996, CWT proposed a solid waste facility to the Island Government of
Saint Maarten, Netherlands Antilles. After an evaluation of proposals from four
companies by the Government and its Dutch technical consultants, the Island
Government entered into a Letter of Intent with CWT in October 1997. The Letter
of Intent calls for CWT to submit a final proposal to the Island Government,
followed by a period of exclusive negotiation for a solid waste disposal service
agreement. CWT submitted its proposal for a 330 ton per day Thermoselect solid
waste gasification facility to the Island Government in March 1998. CWT
management is preparing for negotiations toward a solid waste service agreement.

In November 1997, the Government of the U.S. Virgin Islands ("GVI") issued
a Request for Qualification ("RFQ") for Integrated Comprehensive Solid Waste
Management Services. CWT responded in December 1997. Following an evaluation
of the submittals, the GVI notified CWT in February 1998 that CWT had been named
to the list to receive an RFP. CWT management intends to respond to the RFP.

ENVIRONMENTAL IMPACT. Management believes that the proposed IWT and CWT
facilities can be completed without material adverse environmental impact and in
compliance with government regulations. The approvals and permits required
under the U.S. Clean Air Act, U.S. Clean Water Act, and corresponding foreign
regulations are many and will require substantial time and effort.

GENERAL
-------

EMPLOYEES. IGC had 272 full-time employees as of December 31, 1997,
including 134 based in the United States and 138 in Puerto Rico. Employees
performing non-supervisory services through the Company's property management
operations receive salaries funded by the owner partnerships.

SIGNIFICANT CUSTOMERS. No single customer accounted for more than 10% of
IGC's revenues during the year ended December 31, 1997.

COMPANY RESTRUCTURING
---------------------

A. RESTRUCTURING OBJECTIVES

The Company's operations have been severely restricted due to the Wetlands
Litigation and the terms and conditions of the Company's bank debt. Also, there
are certain investments of the Company, such as AFH, that have operating losses
and capital needs, and investments such as IWT and CWT, that have substantial
current capital needs. In addition, the Company, as a master limited
partnership, is not an attractive investment for most pension funds, retirement
funds and mutual funds, thereby restricting the Company's access to these
substantial sources of capital. In order to address these issues, management is
seeking to implement a restructuring plan to achieve the following objectives:

1. To restructure the Company by transferring IGC's principal real estate
assets and operations to a new Maryland trust, American Community
Properties Trust ("ACPT") and distributing the shares in ACPT to the
Unitholders and general partners of IGC.

2. To eliminate from ACPT's operating results the expenses of the
Wetlands Litigation (see Item 3. Legal Proceedings) and operating and
capital expenses of IWT, CWT and AFH.

3. To capitalize IGC with sufficient assets so that it can meet its
operating needs and remain a viable publicly traded company.

4. To raise approximately $30,000,000 in new capital through a securities
offering by ACPT to pay down community development bank debt and
provide working capital for community development.

5. To make ACPT an attractive investment for pension funds and mutual
funds by structuring ownership of ACPT's underlying assets so that
ACPT's sources of income will be exclusively corporate dividends.

B. PRO FORMA FINANCIAL HIGHLIGHTS OF ACPT (UNAUDITED)

The following represents the pro forma results of ACPT's operations for the
year ended December 31, 1997 and ACPT's pro forma balance sheet as of December
31, 1997 related to management's restructuring plan assuming objectives 1, 2 and
3 above were completed as of January 1, 1997. These results do not include the
costs of any capital markets transaction by ACPT.

AMERICAN COMMUNITY PROPERTIES TRUST
PRO FORMA CONSOLIDATED STATEMENT OF (LOSS) INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
(Unaudited)

Reclass- IGC Less IGC Pro
IGC ification Reclass- Residual Forma
Historical Entries ified (c) ACPT
---------- ---------- -------- --------- --------

Revenues:
Community development-
land sales $13,357 $105 (a) $13,462 $ 297 $13,165
Homebuilding-home sales 7,805 -- 7,805 7,805 --
Revenues from investment
properties
Equity in earnings
from partnerships
and developer fees 1,494 -- 1,494 (15) 1,509
Rental property revenues 8,737 -- 8,737 -- 8,737
Management and other fees 3,775 -- 3,775 -- 3,775
Interest and other income 1,044 716 (b) 1,760 816 944
------- ---- ------- -------- -------
Total revenues 36,212 821 37,033 8,903 28,130
------- ---- ------- -------- -------
Expenses:
Cost of land sales 8,881 258 (a,b) 9,139 646 8,493
Cost of home sales 7,486 (23)(a) 7,463 7,463 --
Selling and marketing 1,232 -- 1,232 1,105 127
General and administrative 7,034 -- 7,034 427 6,607
Interest expense 3,609 270 (b) 3,879 59 3,820
Rental properties operating
expense 3,597 -- 3,597 -- 3,597
Depreciation and amortization 2,128 -- 2,128 278 1,850
Wetlands litigation expenses 1,772 -- 1,772 1,772 --
Write-off of deferred project
costs 6 -- 6 -- 6
Write-off of goodwill 1,843 -- 1,843 1,843 --
Spin-off costs 1,164 -- 1,164 -- 1,164
------- ---- ------- -------- -------
Total expenses 38,752 505 39,257 13,593 25,664
------- ---- ------- -------- -------

(LOSS) INCOME BEFORE PROVISION
FOR INCOME TAXES (2,540) 316 (2,224) (4,690) 2,466
PROVISION FOR INCOME TAXES 606 -- 606 136 470
MINORITY INTEREST (439) -- (439) -- (439)
------- ---- ------- -------- -------
NET (LOSS) INCOME $(3,585) $316 $(3,269) $(4,826) $ 1,557
======= ==== ======= ======== =======

AMERICAN COMMUNITY PROPERTIES TRUST
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

Reclass- IGC Pro
IGC ification Reclass- Less Forma
Historical Entries ified IGC (c) ACPT
---------- --------- -------- -------- --------

CASH AND CASH EQUIVALENTS
Unrestricted $ 2,273 $ -- $ 2,273 $ 146 $ 2,127
Restricted 508 -- 508 134 374
-------- ----- -------- ------- --------
2,781 -- 2,781 280 2,501
-------- ----- -------- ------- --------
ASSETS RELATED TO COMMUNITY
DEVELOPMENT
Land and development costs
Puerto Rico 32,918 1,350 (b) 34,268 -- 34,268
St. Charles, Maryland 28,417 -- 28,417 6,667 21,750
Other United States
locations 14,698 -- 14,698 14,698 --
Notes receivable on lot sales
and other, substantially
all due from affiliates 6,476 -- 6,476 847 5,629
-------- ----- -------- ------- --------
82,509 1,350 83,859 22,212 61,647
-------- ----- -------- ------- --------
ASSETS RELATED TO RENTAL
PROPERTIES
Operating properties, net 37,829 -- 37,829 -- 37,829
Investment in unconsolidated
rental property
partnerships 8,657 -- 8,657 -- 8,657
Other receivables, net 805 -- 805 184 621
-------- ----- -------- ------- --------
47,291 -- 47,291 184 47,107
-------- ----- -------- ------- --------
ASSETS RELATED TO HOMEBUILDING
Homebuilding construction
and land 1,914 -- 1,914 1,914 --
Investment in joint venture 591 -- 591 -- 591
Receivables and other 68 -- 68 68 --
-------- ----- -------- ------- --------
2,573 -- 2,573 1,982 591
-------- ----- -------- ------- --------
OTHER ASSETS
Receivables, deferred costs
regarding waste technology
and other projects and
other 8,797 6,772 (b) 15,569 13,055 2,514
Property, plant and
equipment, net 1,087 -- 1,087 639 448
-------- ----- -------- ------- --------
9,884 6,772 16,656 13,694 2,962
-------- ------ -------- ------- --------
TOTAL ASSETS $145,038 $8,122 $153,160 38,352 $114,808
======== ====== ======== ======= ========

AMERICAN COMMUNITY PROPERTIES TRUST
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

Reclass- IGC Pro
IGC ification Reclass- Less Forma
Historical Entries ified IGC (c) ACPT
---------- ---------- --------- -------- --------

LIABILITIES RELATED TO
COMMUNITY DEVELOPMENT
Recourse debt $ 35,176 $6,772 (b) $ 41,948 $ 2,164 $ 39,784
Non-recourse debt 2,295 -- 2,295 -- 2,295
Accounts payable, accrued
liabilities and deferred
income 5,245 -- 5,245 145 5,100
-------- ----- -------- ------- --------
42,716 6,772 49,488 2,309 47,179
-------- ----- -------- ------- --------
LIABILITIES RELATED TO
RENTAL PROPERTIES
Recourse debt 969 -- 969 -- 969
Non-recourse debt 39,101 -- 39,101 -- 39,101
Accounts payable and
accrued liabilities 3,331 -- 3,331 630 2,701
-------- ----- -------- ------- --------
43,401 -- 43,401 630 42,771
-------- ----- -------- ------- --------
LIABILITIES RELATED TO
HOMEBUILDING
Recourse debt 159 -- 159 159 --
Accounts payable, accrued
liabilities and deferred
income 2,501 -- 2,501 2,501 --
-------- ----- -------- ------- --------
2,660 -- 2,660 2,660 --
-------- ----- -------- ------- --------
OTHER LIABILITIES
Accounts payable and
accrued liabilities 6,330 -- 6,330 3,084 3,246
Notes payable and capital
leases 615 -- 615 442 173
Accrued income tax
liability-current 1,541 -- 1,541 2 1,539
Accrued income tax
liability-deferred 4,487 -- 4,487 367 4,120
-------- ----- -------- ------- --------
12,973 -- 12,973 3,895 9,078
-------- ----- -------- ------- --------
TOTAL LIABILITIES 101,750 6,772 108,522 9,494 99,028
-------- ------ -------- ------- --------
PARTNERS' CAPITAL 43,288 1,350 (b) 44,638 28,858 15,780
-------- ------ -------- ------- --------

TOTAL LIABILITIES AND
PARTNERS' CAPITAL $145,038 $8,122 $153,160 $38,352 $114,808
======== ====== ======== ======= ========

(a) Land sales occurred during 1997 as IGC's land business sold lots to
its homebuilding business. Gross profit on these sales, historically
eliminated in consolidation, has been included in IGC and ACPT's
historical results for these periods based upon the estimated fair
market value of the land (based on comparable sales to third
parties).

(b) As of and during the year ended December 31, 1997, an intercompany
note receivable and intercompany debt existed between IGC and LDA.
Interest income and expense and the note receivable and payable
amounts, historically eliminated in consolidation, have been included
above in IGC's Reclassified historical results.

(c) Reflects the operations remaining in IGC after the restructure.
These operations include those of AFH, IWT, CWT and certain other
land sales and development.

C. RESTRUCTURING APPROVALS

A committee of the outside directors voted to proceed with the distribution
of ACPT and the filing of the preliminary proxy with the SEC. Upon approval of
the proxy materials by the SEC, management intends to submit the plan to
Unitholders for approval. Completion of the plan will be conditioned upon
receiving approval by a majority in interest of the Unitholders and a majority
in interest of the Units not controlled by the Wilson family held by Unitholders
that vote on the transaction. The restructuring also will require approval of
certain creditors and government agencies. In addition, the terms and
conditions of any transaction to raise capital in ACPT will be subject to
uncertainties of the capital markets. Because of the significance of the
approval process and uncertainties of the capital markets, there is no assurance
that the proposed restructuring will be completed or completed under the terms
and conditions presented here. Management, however, is moving forward with this
planned restructuring and hopes to accomplish all or a portion of the objectives
outlined above in the second quarter of 1998.

ITEM 2. PROPERTIES

IGC owns real property located in Charles County, Maryland; Prince George's
County, Maryland; St. Mary's County, Maryland; Prince William County, Virginia;
North Carolina; South Carolina, Virginia and Puerto Rico.

As of December 31, 1997, the Company's community development land holdings
consisted of the following:

CHARLES COUNTY, MARYLAND
Finished inventory-
Residential lots 25
Commercial, office or light industrial acres 788
Under development-
Residential lots 70
Pre-development
Residential lots 3,346
Held for future development acres 3,835

ST. MARY'S COUNTY, MARYLAND
Finished inventory-
Residential lots 30
Pre-development
Residential lots 250

PRINCE GEORGE'S COUNTY, MARYLAND
Held for future development acres 277

PRINCE WILLIAM COUNTY, VIRGINIA
Finished inventory-
Residential lots 87

CAROLINA, PUERTO RICO
Finished inventory-
Residential lots 392
Commercial, office or light industrial acres 10
Under development-
Commercial, office or light industrial acres 20
Pre-development
Residential lots 872
Held for future development acres 133

CANOVANAS, PUERTO RICO
Held for future development acres 539

As of December 31, 1997, the Company's homebuilding inventory consisted of
the following:

VIRGINIA
Homes under construction-customers own lots 8

NORTH CAROLINA
Homes under construction-customers own lots 17

SOUTH CAROLINA
Homes under construction 7

PUERTO RICO-THROUGH A NON-CONSOLIDATED
JOINT VENTURE
Homes under construction 195

The following table lists the apartment projects in which IGC has an
ownership interest ($ in thousands):

Expira-
Year of tion
No. of Completion 12/31/97 Occupancy of
Apt. or Project at Subsidy
Units Acquisition Cost 12/31/97 Contracts
----- ----------- -------- ----------- ---------

Apartment Projects Owned by
Partnerships Accounted
for Under the Equity
Method of Accounting:
Puerto Rico
San Anton (1) 184 1974 $ 4,606 100% 2001
Monte de Oro (1,9) 196 1977 6,519 0% 1997
New Center (1,9) 196 1978 6,602 30% 1998
Monserrate I (1) 304 1979 11,443 99% 1999
Alturas del Senorial (1) 124 1979 4,669 100% 1999
Monserrate II (1) 304 1980 12,267 99% 2020
Torre de las Cumbres (1) 155 1979 6,582 99% 2020
De Diego (1) 198 1980 7,510 99% 2020
Santa Juana (1) 198 1980 7,476 100% 2020
Jardines de Caparra (1) 198 1980 7,368 100% 2000
Colinas de San Juan (1) 300 1981 12,044 99% 2001
Bayamon Gardens (1) 280 1981 13,593 99% 2011
Vistas del Turabo (1) 96 1983 3,358 100% 2021
Valle del Sol (1) 312 1983 15,279 99% 2003

St. Charles, MD
Bannister (1,2) 208 1976 5,040 96% 1998
Crossland (6) 96 1978 3,262 91% N/A
Huntington (1) 204 1980 10,283 93% 2000
Coachman's Landing (6) 104 1989 6,980 94% N/A
Brookside Gardens (7) 56 1994 2,687 82% N/A
Lakeside Apartments (7) 54 1996 4,169 96% N/A

Essex, Richmond, VA (1) 496 1982 19,215 97% 2001
Chastleton, Washington, DC (5) 300 1986 27,153 96% N/A
----- --------
4,563 198,105

Apartment Projects Owned by
Partnerships whose Operations,
Assets and Liabilities are
Consolidated with those of
IGC (St. Charles, MD):
Lancaster (Hunters Run) (3) 104 1985 4,945 93% N/A
Fox Chase (8) 176 1987 7,886 91% N/A
New Forest (8) 256 1988 13,752 88% N/A
Palmer (4) 152 1980 5,676 92% 1999,
2000
Wakefield Third Age
(Brookmont) (1,2) 104 1979 3,113 100% 1998
Wakefield Terrace (1,2) 204 1979 6,326 89% 1998
Headen (1) 136 1980 5,965 99% 2000
----- --------
5,695 $245,768
===== ========

(1) Receives subsidies under Section 8 of the National Housing Act.
(2) Receives interest subsidies under Section 236 of the National Housing
Act.
(3) Not subsidized, but 51% of the units are subject to income guidelines
set by the Maryland Community Development Administration ("MCDA").
(4) 56 units are subsidized and 96 units are not subsidized, but 51% of
the non-subsidized units are subject to income guidelines MCDA.
(5) Not subsidized, but 60 units are set aside for low to moderate income
tenants under provisions set by the District of Columbia Housing
Finance Agency ("DCHFA").
(6) Not subsidized.
(7) Not subsidized, but all units are set aside for low to moderate
income tenants under provisions set by the Low Income Housing Tax
Credit ("LIHTC") program.
(8) Not subsidized, but 20% of the units are subject to income guidelines
set by Sections 4a and 103b of the Internal Revenue Code of 1954.
(9) Project is undergoing conversion to condominiums.

ITEM 3. LEGAL PROCEEDINGS

In 1994, the Company filed two claims against Charles County, Maryland and
its County Commissioners in the Maryland Tax Court, a state administrative
agency, seeking compensation for school sites that it previously had deeded to
the County. The actions seek to enforce an agreement settling litigation
between the parties that was entered into in 1989 as well as rights under
Charles County law. Under the terms of the settlement agreement, the County
agreed to credit the Company for school sites contributed and to repay to the
Company any excess school impact fees paid. The Company seeks $5,500,000, equal
to the fair market value of the school sites. The Tax Court remanded our claims
to the County for a full hearing.

In a separate proceeding, the Company filed suit in 1990 against Charles
County and its County Commissioners in the Circuit Court for Charles County to
enforce another provision of the 1989 settlement agreement. The Company claims
that the County has failed to conduct an appropriate water and sewer connection
fee study as the basis on which to set such fees for the St. Charles
communities. This matter has been the subject of extensive previous litigation
and in 1992 the Circuit Court for Charles County rendered a judgment in favor of
the Company requiring the County to conduct an appropriate study. That decision
was affirmed in 1995 by the Court of Special Appeals of Maryland. The
litigation filed by IGC in 1997 seeks to enforce the prior court orders that
require the County to conduct the appropriate water and sewer connection fee
study, to reduce the connection fees paid prospectively in the St. Charles
communities, and to obtain repayment of excess fees paid in the past. The
matter has not yet been decided by the Circuit Court for Charles County.

counts of violations of Section 404 (wetlands) of the U.S. Clean Water Act. The
charges related to discharge of fill materials into wetlands within the Corps'
regulatory jurisdiction without a permit. The violations were charged to have
occurred on four parcels totaling approximately 50 acres out of the
approximately 4,400 acres IGC had developed in St. Charles. At the same time,
the U.S. Attorney filed a civil action charging nine separate civil violations
of the U.S. Clean Water Act.

On February 29, 1996, IGC, SCA and Mr. Wilson were convicted in the U.S.
District Court for the District of Maryland (the "District Court") on the four
felony counts. On June 17, 1996, Mr. Wilson was sentenced to 21 months
imprisonment, one year of supervised release and a $1,000,000 fine. IGC and SCA
were fined $2,000,000 and $1,000,000, respectively, placed on probation for five
years and ordered to implement a wetlands restoration and mitigation plan, which
IGC's engineers estimate would cost $2,000,000 to $3,000,000. IGC paid the
aggregate $3,000,000 in fines on behalf of itself and SCA and has completed
$325,000 of restoration work. As a result of the conviction, certain land in
St. Charles was encumbered by an obligation to impose a conservation easement.

On December 23, 1997 a three judge panel of the U.S. Court of Appeals for
the Fourth Circuit (the "Appeals Court") reversed the convictions of IGC, SCA
and Mr. Wilson and remanded the matter to the District Court for a new trial.
The U.S. Attorney filed a petition for rehearing with the three judge panel
which was denied. IGC received a full refund of the $3,000,000 in fines and was
relieved of the obligation to impose conservation easements.

In reversing the convictions, the Appeals Court voided regulations that
defined "waters of the United States" to include intrastate wetlands that could
affect interstate commerce. If the U.S. Attorney decides to retry the case, it
is expected that the U.S. Attorney will argue that the subject properties are
"waters of the United States" because they are "adjacent" to "navigable waters"
within the meaning of the Clean Water Act. The courts have construed "adjacent"
to mean "reasonably proximate" or "closely related." The subject portions of
IGC's properties are over nine miles from the nearest "navigable waters."

The ultimate outcome of this litigation remains uncertain. The U.S.
Attorney may seek to retry the criminal case or recommence the civil case that
was previously dismissed.

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

IGC did not submit to its partners or Unitholders any matters for a vote
during the fourth quarter of the year ended December 31, 1997.

PART II

ITEM 5. MARKET PRICES AND DISTRIBUTIONS ON UNITS

The IGC Units are traded on the American and the Pacific Stock Exchanges.
The following table sets forth, for the periods indicated, the high and low
sales prices per IGC Unit as reported in the consolidated transaction reporting
system, and cash distributions paid to unitholders during these periods. IGC
Units commenced public trading on February 19, 1987.

Cash Distributions Price Range of IGC Units
------------------ ------------------------
Total Per Unit High Low
------ --------- ----------- ----------

1997 Quarter:
Fourth $ -- $ -- $ 5-3/8 $ 3-1/4
Third -- -- 4 2-7/8
Second -- -- 3-13/16 2-15/16
First -- -- 3-7/8 2-7/8

1996 Quarter:
Fourth $ -- $ -- $ 3-1/2 $ 2-5/16
Third 514 .05 3 2-3/8
Second 615 .06 3-7/8 2-3/4
First -- -- 4 3

As of the close of business on March 13, 1998, there were 276 Unitholders
of record. As of March 13, 1998, the closing price reported by the American
Stock Exchange was $4.187 per unit.

IGC is required by its Third Amended and Restated Limited Partnership
Agreement, as amended, to make cash distributions to limited partners of not
less than 55% of taxable income calculated for public IGC Unitholders as of the
date of IGC's initial public offering. During the years ended December 31, 1997
and 1996, IGC had taxable income (losses) of $330,000 and ($640,000),
respectively, or $.04 and $(.05), respectively, per unit.

ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

The following tables set forth combined financial data and operating data
for IGC. The following selected income statement and balance sheet data have
been extracted from the audited financial statements of IGC for each of the
years in the five-year period ended December 31, 1997. (See "Management's
Discussion and Analysis of Financial Condition and Results of Operations.")
This information should be read in conjunction with, and is qualified in its
entirety by, the consolidated financial statements and related footnotes.

SELECTED FINANCIAL AND OPERATING DATA

Years Ended December 31,
----------------------------------------------------------------
1997 1996 1995 1994 1993
--------- ------ --------- -------- ---------
(In thousands, except per unit amounts)

Income Statement Data

Revenues
Land sales (a) $ 13,357 $ 14,717 $ 14,824 $ 22,296 $ 13,809
Home sales 7,805 9,715 10,826 20,265 21,884
Investment in gaming
properties -- 4 (78) 7,288 2,358
Equity in earnings from
partnerships and
development fees 1,494 16,530 2,647 4,941 3,279
Apartment rental revenues 8,737 7,577 4,642 4,538 2,113
Management and other fees 3,775 4,816 3,894 3,507 4,493
Interest and other income 1,044 1,015 945 687 1,395
-------- ------ -------- -------- --------
Total revenues 36,212 54,374 37,700 63,522 49,331

Provision for wetlands
litigation expenses 1,772 973 4,107 498 --
Other expenses 37,419 39,922 35,108 52,872 42,973
Income taxes 606 3,634 1,452 3,511 (835) (2)
Net (loss) income (3,585) 9,845 (1) (2,967) 6,641 7,193 (2)
Basic net (loss) income
per unit (.35) .95 (1) (.29) .65 .71 (2)
Cash distributions per unit -- .11 -- .10 --

(a) Includes sales to
affiliates 3,000 9,086 3,233 -- --

Years Ended December 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
Balance Sheet Data (In thousands)

Assets related to
community development $ 82,509 $ 83,085 $ 79,558 $ 70,061 $ 78,876
Assets related to
rental properties 47,291 52,698 36,722 35,608 42,707
Assets related to home
building projects 2,573 2,491 3,819 4,998 7,566
Total assets 145,038 148,568 132,093 123,513 140,314

Debt related to community
development
Recourse 35,176 34,077 47,841 36,661 50,137
Non-recourse 2,295 2,153 2,034 4,268 2,762
Debt related to rental
properties
Recourse 969 1,139 1,322 1,559 1,857
Non-recourse 39,101 39,508 22,650 22,771 22,457
Debt related to homebuilding
Recourse 159 502 981 2,398 3,320
Total liabilities 101,750 101,974 94,184 82,808 108,069

Partners' equity 43,288 46,594 37,909 40,705 32,245

(1) Includes a $932,000 or $.09 per Unit reduction for the extraordinary
item-early extinguishment of debt. See Note 3 of the Company's
consolidated financial statements included in Item 8.
(2) Includes a $1,500,000 or $.15 per Unit benefit for the cumulative
effect of a change in accounting principle to reflect the adoption of
SFAS No. 109 "Accounting for Income Taxes".

Years Ended December 31,
-------------------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- -----

Operating Data

Homebuilding, all locations
Contracts for sale, net of
cancellations 73 67 133 134 232
Number of homes sold 112 156 190 200 216
Backlog at end of period 58 68 92 86 152

Rental apartment units
managed at end of period 8,139 8,139 8,085 8,085 8,029
Units under construction -- -- 54 -- 56

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

GENERAL:

Historically, the Company's financial results have been significantly
affected by the cyclical nature of the real estate industry. Accordingly, the
Company's historical financial statements may not be indicative of future
results.

FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996.
- ----------------------------------------------

COMMUNITY DEVELOPMENT OPERATIONS.

Community development land sales revenue decreased 10% to $13,357,000
during the twelve months ended December 31, 1997, compared to sales of
$14,717,000 during the twelve months ended December 31, 1996. The decrease was
attributable to a decrease in residential lot sales in Puerto Rico. These lots
are sold to homebuilders in bulk, and in 1997 there were fewer sales
transactions. In addition, the U.S. residential lot sales volume has continued
to be unfavorably impacted by the competitive market conditions

and the delay in development of the next village, Fairway. Even though the
sales were down, the gross profit margin during 1997 increased to 34%, as
compared to 28% in the same period of 1996. This increase was due primarily to
the sales mix. During 1997, 23% of the sales revenue was generated by an
undeveloped bulk parcel, which had a low acquisition price. There were no
similar sales during 1996.

HOMEBUILDING OPERATIONS.

Revenues from home sales decreased 20% to $7,805,000 during the twelve
months ended December 31, 1997, as compared to $9,715,000 during the twelve
months ended December 31, 1996. The number of homes sold decreased 31%, to 74
from 107 in the twelve months ended December 31, 1996. These reductions were
primarily due to the phase out of the tract homebuilding operations. The gross
profit margins were 4% in both 1997 and 1996.

RENTAL PROPERTY REVENUES AND OPERATING RESULTS.

Rental property revenues, net of operating expenses, increased 25% to
$5,140,000 in the twelve months ended December 31, 1997, as compared to
$3,883,000 during the same period in 1996. As of April 1, 1996 four additional
partnerships were consolidated when they became majority owned through an
acquisition of additional limited partnership interests.

EQUITY IN EARNINGS FROM PARTNERSHIPS AND DEVELOPER FEES.

During March 1996, IGC completed the sale of four Puerto Rico apartment
projects. The properties, totaling 918 rental units, were sold under the 1990
Low Income Housing Preservation and Resident Homeownership Act ("LIHPRHA").
Equity in earnings decreased $15,036,000, to $1,494,000 during the twelve months
ended December 31, 1997, as compared to $16,530,000 during the twelve months
ended December 31, 1996. This decrease was primarily due to the $14,637,000
earned on the sales of the four properties during 1996, with no similar
transaction in 1997.

MANAGEMENT AND OTHER FEES.

Management and other fees decreased 22% to $3,774,000 in 1997, as compared
to $4,816,000 in 1996. This decrease was due primarily to $1,362,000 of special
management fees earned in 1996 from the LIHPRHA sales and the elimination of the
management fees from four partnerships consolidated during the entire twelve
months ended December 31, 1997, offset in part by fees of $724,000 earned from
the refinancing of two apartment complexes in 1997.

INTEREST EXPENSE.

Interest expense decreased $656,000 to $3,609,000 during 1997, as compared
to $4,265,000 in 1996. The decrease was primarily attributable to $500,000 in
late fees incurred in 1996 and a decrease in the average debt outstanding during
the 1997 period, offset in part by interest attributable to the additional four
properties consolidated April 1, 1996, as discussed above.

GENERAL AND ADMINISTRATIVE EXPENSE.

General and administrative expenses decreased 6% to $7,034,000 during the
twelve months ended December 31, 1997, as compared to $7,338,000 during the same
period of 1996. This decrease was a result of management's continued focus on
cost efficiency and the reduction of expenses. Specifically management
experienced reductions in legal fees of $133,000, and salaries and benefits of
$853,000, for the year ended December 31, 1997. These reductions in spending
were offset by discounts on notes receivable of $801,000. The notes receivable
are due from an affiliate of a former director, and did not bear interest until
certain infrastructure improvements were completed. Delays in those
improvements caused a delay in the commencement of interest charges,
necessitating the additional discounts.

PROVISION FOR WETLANDS LITIGATION EXPENSE.

Expenses related to the environmental legal proceedings discussed in Item 3
increased to $1,772,000 in 1997 from $973,000 in 1996. The Company established
a reserve of $1,500,000 in 1997 to cover additional costs that could be incurred
in the event of a retrial.

WRITE-OFF OF GOODWILL.

In conjunction with the Company's reorganization plan, management wrote off
$1,843,000 of goodwill in 1997 related to the purchase of a homebuilding company
that builds homes on the purchasers' lots.

SPIN-OFF COSTS.

Costs of $1,164,000 related to the restructuring of the Company were
recognized as an expense in 1997.

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995.
- -----------------------------------------------

COMMUNITY DEVELOPMENT OPERATIONS.

Community development land sales remained stable in 1996 and 1995, at
approximately $14,800,000, in each year. The U.S. residential lot sales volume
was unfavorably impacted by competitive market conditions, however, the effect
of this decline was offset by increased 1996 residential lot sales in Puerto
Rico.

The gross profit margins for 1996 and 1995 were 28% and 49%, respectively.
The decline in gross profit margin was due primarily to the change in the mix of
sales. Commercial land sales produce the highest gross margins since their
sales prices are higher and they require less development than the business park
and residential land. Commercial sales as a percentage of land sales revenue
were 44% and 66% in 1996 and 1995, respectively.

HOMEBUILDING OPERATIONS.

Revenues from home sales declined as the Company phased out its tract
homebuilding operations and competition increased. Homebuilding sales decreased
10% to $9,715,000 in 1996, as compared to $10,826,000 in 1995. The average
sales price of the tract homes decreased 20% and the average sales price of the
semi-custom homes increased 4% during 1996 as compared

to 1995. The combined 8% drop in the number of homes sold, 94 units sold in
1996 versus 102 units sold in 1995, contributed to the decline in revenue.

The gross profit margins for 1996 and 1995 were 4% and 9%, respectively.
The decrease was primarily attributable to the decrease in the average sales
price discussed above, and higher construction costs.

RENTAL PROPERTY REVENUES AND OPERATING RESULTS.

Rental property revenues, net of operating expenses, increased 24% to
$3,883,000 as compared to $2,947,000 in 1995. The increase in 1996 was due to
the consolidation of four additional partnerships for the period April 1, 1996
through December 31, 1996. These four partnerships became majority-owned in
April 1996 through acquisitions of additional limited partnership interests.

EQUITY IN EARNINGS FROM PARTNERSHIPS AND DEVELOPER FEES.

Equity in earnings increased $13,883,000, to $16,530,000 in 1996 as
compared to $2,647,000 in the same period of 1995. This increase was
attributable to gains from the four LIHPRHA sales in March 1996.

MANAGEMENT AND OTHER FEES.

Management and other fees increased $922,000, to $4,816,000 in 1996 as
compared to $3,894,000 in 1995. This increase was due primarily to $1,362,000
of special management fees earned in 1996 from the LIHPRHA sales, offset by the
elimination during 1996 of $153,000 of management fees earned from the four
partnerships consolidated as of April 1, 1996, a negotiated reduction of
$100,000 per year effective June 1, 1996 on one of the management contracts, and
an additional $197,000 of deferred management fees recognized in 1995.

INTEREST EXPENSE.

Interest expense decreased 6% to $4,265,000 in 1996, as compared to
$4,522,000 in 1995. The decrease was due to a reduction in non-rental property
loan balances offset in part by the addition of four fully consolidated
partnerships effective April 1, 1996.

GENERAL AND ADMINISTRATIVE EXPENSE.

General and administrative expenses decreased 6% to $7,338,000 in 1996, as
compared to $7,773,000 in 1995, due primarily to management's continued focus on
cost efficiency and the reduction of these expenses.

PROVISION FOR WETLANDS LITIGATION EXPENSES.

Expenses related to the environmental legal proceedings discussed in Item 3
decreased to $973,000 in 1996 from $4,107,000 in 1995. The Company established
a reserve of $2,500,000 in 1995 to cover the anticipated future costs of the
legal proceedings. The reserve was depleted in 1996, with additional costs of
$973,000 incurred during 1996.

LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------

Cash and cash equivalents were $2,273,000 and $2,212,000 at December 31,
1997 and December 31, 1996, respectively. This increase was attributable to
$9,716,000 and $585,000 provided by operating and financing activities,
respectively, offset by $10,240,000 used in investing activities. The cash
inflow from operating activities was primarily attributable to distributions
from unconsolidated partnerships and land sales. The cash provided by financing
activities was attributable to the closing of a $20,000,000 financing with Banc
One. Loan proceeds were used to retire debt, payment of various obligations and
working capital. The cash outflow for investing activities was primarily
attributable to land improvements put in place for future land sales and pre-
construction costs associated with future waste technology plants.

IGC has historically met its liquidity requirements principally from cash
flow generated from home and land sales, property management fees, distributions
from residential rental partnerships and from bank financing providing funds for
development and working capital.

Over the past several years, IGC's cash flows have been constrained because
of the terms of its existing debt agreements and the reluctance of lenders to
provide financing in the U.S. as a result of the Wetlands Litigation (see Item
3. Legal Proceedings). As a result, substantially all of the cash generated has
been used to pay debt service requirements with existing lenders. This resulted
in limited opportunities for new construction and development in the U.S.. The
recently closed Banc One financing provided funding to commence construction in
Fairway Village, the third village in St. Charles, and will allow IGC to retain
a greater portion of its U.S. land sales proceeds. IGC currently has other
development projects in various stages of completion. Substantially all of the
projects under construction have sufficient development loans in place to
complete the construction.

IGC's principal demands for liquidity are expected to be the continued
funding of its current debt service and operating costs, including potential
ongoing legal costs for the Wetlands Litigation as well as capital for its waste
technology investments. After the Restructuring, management expects to obtain
additional funding which can be used by ACPT to fund new community development
projects. Such sources of funding may include, but are not limited to, excess
operating cash flows, secured or unsecured financings, private or public
offerings of debt or equity securities and proceeds from sales of properties.
IGC's anticipated cash provided by operations, new and existing financing
facilities, and extension or refinancing of $12,500,000 of loans that are due in
1998 are expected to satisfy the Company's capital needs in 1998. However,
there are no assurances that these funds will be generated.

DEBT SUMMARY
- ------------

As of December 31, 1997, substantially all of IGC's assets, with a book
value, $146,000,000 were encumbered by $36,000,000 of recourse debt and
$41,000,000 of non-recourse debt; $39,000,000 of the non-recourse debt is
attributable to the mortgages of consolidated rental property partnerships. The
significant terms of IGC's recourse debt financing arrangements are shown below
(dollars in thousands):

Balance
Maximum Interest Maturity Outstanding
Descriptions Borrowings Rate Date 12/31/97
- -------------------------------------------------------------------------------------

Banc One-term loan (a) $11,000 P+2.5% 7/31/04 $10,728
Banc One-development loan (a) 4,000 P+2.5% 7/31/04 1,020
Banc One-remediation loan (a) 5,000 P+2.5% 7/31/04 3,306
First Bank-term loan (b) 9,685 P+1.5% 8/31/98 8,399
First Bank-construction loan (b) 5,500 P+1.5% 6/30/98 3,348
Banco Popular (c) 4,000 P+1.5% 12/5/98 3,000
RG-Premier Bank (d) 1,560 P+1.5% 4/30/99 1,560
Citibank (e) 969 (e) demand 969
Banco Santander (f) 707 P+1% 4/15/98 707
Washington Savings Bank (g) 1,317 9.5% 9/30/99 757
Miscellaneous land and
development loans 2,165 Various Various 2,165
Other miscellaneous 346 Various Various 346
------- -------- ------- -------
$46,249 $36,305
======= =========

(a) The three notes are cross-collateralized by substantially all of the
U.S. land and the U.S. and Puerto Rico future cash entitlements
pursuant to its ownership interest in the housing partnerships.
Interest is paid monthly. The loan agreement calls for a minimum of
$2,000,000 principal curtailments in 1998, and $3,000,000 in each of
the following six years. In addition, IGC is to establish a
$1,000,000 development reserve during 1998. It is IGC's intention to
meet the required payments from land sales and proceeds from the
refinancing of a rental property. On each anniversary date, IGC is
to pay an additional fee, 1% in 1998 and 1999, increasing 1/2% in the
following four years, and grant an option to the lender to purchase
an additional 75,000 shares at a strike price to be determined after
the restructure. The loan agreement covenants include restrictions
on additional indebtedness of IGC and St. Charles Community LLC. The
loan agreement contains a cross default provision for any amounts in
excess of $1,000,000 past due for 45 days after demand notification.

(b) The two notes are cross collateralized by the Puerto Rico land
assets. The interest is paid monthly from an interest reserve.
Principal payments are funded through the partial release prices of
the collateral. IGC expects to extend the maturity date of these
loans. The loan agreement covenants include restrictions on
distributions by LDA and additional indebtedness of LDA and cross
default provisions for other loan payment defaults.

(d) The note requires monthly principal payments of $27,000 and is
secured by three mortgage notes receivable totalling $2,717,600.
Interest is paid monthly by advances under the loan agreement.

(e) The note requires monthly payments of interest calculated at 250
basis points over the cost of funds, 8.406% at December 31, 1997.
The note was secured by a letter of credit that expired in January
1998. Management is currently renegotiating the terms of this loan.

(f) The loan is collateralized by a pledge of two mortgage notes
receivable totalling $2,760,000. Monthly principal payments of
$27,000 are required. Additional principal is paid from the sale of
residential parcels in Phase II of Parque Escorial.

(g) The note requires monthly payments of interest and is collateralized
by the land under development for 115 townhome lots in St. Charles,
Maryland. The loan is to be repaid from the sale of townhome lots
that are currently under an option contract.

YEAR 2000
- ---------

IGC has assessed and continues to assess the impact of the Year 2000 issue
on its reporting systems and operations. The Year 2000 issue exists because
many computer systems and applications and other systems using computer chips
currently use two-digit fields to designate a year. As the century date occurs,
date sensitive systems may recognize the year 2000 as 1900 or not at all. This
inability to recognize or properly treat the year 2000 may cause the systems to
process critical financial and operations information incorrectly.

IGC's reporting systems are Year 2000 compliant with the exception of one
module. The Company has engaged a programmer at a nominal cost to bring this
module into compliance. Management is continuing to review the remaining
operating systems and computer systems that affect the properties the Company
manages.

FORWARD-LOOKING STATEMENTS
- --------------------------

Certain matters discussed and statements made within this Annual Report on
Form 10-K are forward-looking statements within the meaning of the Private
Litigation Reform Act of 1995 and as such may involve known and unknown risks,
uncertainties, and other factors that may cause the actual results, performance
or achievements of the company to be different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Although the Company believes the expectations reflected in such
forward-looking statements are based on reasonable assumptions, it can give no
assurance that its expectations will be attained. These risks are detailed from
time to time in the Company's filings with the Securities and Exchange
Commission or other public statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Partners of
Interstate General Company L.P.:

We have audited the accompanying consolidated balance sheets of Interstate
General Company L.P. (a Delaware limited partnership) and subsidiaries ("the
Company") as of December 31, 1997 and 1996, and the related consolidated
statements of (loss) income, changes in partners' capital and cash flows for
each of the three years ended December 31, 1997. These consolidated financial
statements and the schedule referred to below are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements and schedule based on our audits.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Interstate
General Company L.P. as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years ended December 31,
1997, in conformity with generally accepted accounting principles.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement schedule
included on pages 65 through 75 of the Form 10-K is presented for purposes of
complying with the Securities and Exchange Commission's rules and is not a
required part of the basic financial statements. This schedule has been
subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.

Arthur Andersen LLP
Washington, D.C.
March 25, 1998

INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME
(In thousands, except per Unit amounts)

YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
--------- -------- ---------

REVENUES
Community development-land sales
Non-affiliates $10,357 $ 5,631 $11,591
Affiliates 3,000 9,086 3,233
Homebuilding-home sales 7,805 9,715 10,826
Rental property revenues 8,737 7,577 4,642
Equity in earnings from partnerships
and developer fees 1,494 16,530 2,647
Equity in earnings (losses) from
gaming properties -- 4 (78)
Management and other fees, substantially
all from related entities 3,775 4,816 3,894
Interest and other income 1,044 1,015 945
------- ------- -------
Total revenues 36,212 54,374 37,700
------- ------- -------
EXPENSES
Cost of land sales 8,881 10,610 7,611
Cost of home sales 7,486 9,347 9,829
Selling and marketing 1,232 1,320 1,465
General and administrative 7,034 7,338 7,773
Interest expense 3,609 4,265 4,522
Rental properties operating expense 3,597 3,245 1,695
Depreciation and amortization 2,128 1,997 1,196
Wetlands litigation expenses 1,772 973 4,107
Write-off of deferred project costs 6 562 506
Write-off of goodwill 1,843 -- --
Spin-off costs 1,164 -- --
------- ------- -------
Total expenses 38,752 39,657 38,704
------- ------- -------
(LOSS) INCOME BEFORE PROVISION
FOR INCOME TAXES (2,540) 14,717 (1,004)
PROVISION FOR INCOME TAXES 606 3,634 1,452
------- ------- -------
(LOSS) INCOME BEFORE MINORITY INTEREST (3,146) 11,083 (2,456)
MINORITY INTEREST (439) (306) (511)
------- ------- -------

(LOSS) INCOME BEFORE EXTRAORDINARY ITEM (3,585) 10,777 (2,967)
EXTRAORDINARY ITEM-EARLY
EXTINGUISHMENT OF DEBT -- 932 --
------- ------- -------
NET (LOSS) INCOME $(3,585) $ 9,845 $(2,967)
======= ======= =======

The accompanying notes are an integral part
of these consolidated statements.

INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF (LOSS) INCOME (CONTINUED)
(In thousands, except per Unit amounts)

YEARS ENDED DECEMBER 31,
-------------------------------
1997 1996 1995
-------- -------- ---------

BASIC NET (LOSS) INCOME PER UNIT
(Loss) income before extraordinary
item $ (.35) $ 1.04 $ (.29)
Extraordinary item -- (.09) --
------- ------- -------
Net (loss) income $ (.35) $ .95 $ (.29)
======= ======= =======

NET (LOSS) INCOME
General Partners $ (36) $ 98 $ (30)
Limited Partners (3,549) 9,747 (2,937)
------- ------- -------
$(3,585) $ 9,845 $(2,967)
======= ======= =======

WEIGHTED AVERAGE UNITS OUTSTANDING 10,289 10,257 10,255
======= ======= =======

The accompanying notes are an integral part
of these consolidated statements.

INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(In thousands)

A S S E T S
-----------

DECEMBER 31,
-------------------
1997 1996
-------- --------

CASH AND CASH EQUIVALENTS
Unrestricted $ 2,273 $ 2,212
Restricted 508 988
-------- --------
2,781 3,200
-------- --------
ASSETS RELATED TO COMMUNITY DEVELOPMENT
Land and development costs
Puerto Rico 32,918 34,034
St. Charles, Maryland 28,417 26,980
Other United States locations 14,698 16,256
Notes receivable on lot sales and other 6,476 5,815
-------- --------
82,509 83,085
-------- --------
ASSETS RELATED TO RENTAL PROPERTIES
Operating properties, net of accumulated
depreciation of $21,392 and $20,658, as of
December 31, 1997 and 1996, respectively 37,829 39,219
Investment in unconsolidated rental property
partnerships, net of deferred income of $2,193 and
$2,643 as of December 31, 1997 and 1996, respectively 8,657 11,723
Other receivables, net of reserves of $223 and $121
as of December 31, 1997 and 1996, respectively 805 1,756
-------- --------
47,291 52,698
-------- --------
ASSETS RELATED TO HOMEBUILDING
Homebuilding construction and land 1,914 2,016
Investment in joint venture 591 275
Receivables and other 68 200
-------- --------
2,573 2,491
-------- --------
OTHER ASSETS
Goodwill, less accumulated amortization of $1,039
as of December 31, 1996 -- 1,995
Deferred costs regarding waste technology
and other projects, receivables and other 8,797 3,870
Property, plant and equipment, less accumulated
depreciation of $2,460 and $2,425 as of
December 31, 1997 and 1996, respectively 1,087 1,229
-------- --------
9,884 7,094
-------- --------
TOTAL ASSETS $145,038 $148,568
======== ========

The accompanying notes are an integral part
of these consolidated balance sheets.

INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

LIABILITIES AND PARTNERS' CAPITAL
---------------------------------

DECEMBER 31,
-------------------
1997 1996
-------- --------

LIABILITIES RELATED TO COMMUNITY DEVELOPMENT
Recourse debt $ 35,176 $ 34,077
Non-recourse debt 2,295 2,153
Accounts payable, accrued liabilities
and deferred income 5,245 4,829
-------- --------
42,716 41,059
-------- --------
LIABILITIES RELATED TO RENTAL PROPERTIES
Recourse debt 969 1,139
Non-recourse debt 39,101 39,508
Accounts payable and accrued liabilities 3,331 3,256
-------- --------
43,401 43,903
-------- --------
LIABILITIES RELATED TO HOMEBUILDING
Recourse debt 159 502
Accounts payable and accrued liabilities 2,501 2,544
-------- --------
2,660 3,046
-------- --------
OTHER LIABILITIES
Accounts payable and accrued liabilities 6,330 4,024
Notes payable and capital leases 615 630
Accrued income tax liability - current 1,541 3,979
Accrued income tax liability - deferred 4,487 5,333
-------- --------
12,973 13,966
-------- --------
Total liabilities 101,750 101,974
-------- --------
PARTNERS' CAPITAL
General partners' capital 4,345 4,378
Limited partners' capital-10,332 and 10,257
Units issued and outstanding as
of December 31, 1997 and 1996, respectively 38,943 42,216
-------- --------
Total partners' capital 43,288 46,594
-------- --------
TOTAL LIABILITIES AND PARTNERS' CAPITAL $145,038 $148,568
======== ========

The accompanying notes are an integral part
of these consolidated balance sheets.

INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995
(In thousands)

General Limited
Partners' Partners'
Capital Capital Total
-------- -------- -----

BALANCES, DECEMBER 31, 1994 $4,322 $36,383 $40,705

Net loss for the year (30) (2,937) (2,967)

Employee and director Unit
options exercised -- 171 171
------ ------- -------
BALANCES, DECEMBER 31, 1995 4,292 33,617 37,909

Net income for the year 98 9,747 9,845

Exchange of assets between the
Company and general partner (1) (19) (20)

Cash distributions to partners (11) (1,129) (1,140)
------ ------- -------

BALANCES, DECEMBER 31, 1996 $4,378 $42,216 $46,594

Net loss for the year (36) (3,549) (3,585)

Issuance of warrants 3 276 279
------ ------- -------
BALANCES, DECEMBER 31, 1997 $4,345 $38,943 $43,288
====== ======= =======

The accompanying notes are an integral part
of these consolidated statements.

INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW
(In thousands)

YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
-------- --------- ---------

CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income $ (3,585) $ 9,845 $ (2,967)
Adjustments to reconcile net (loss)
income to net cash provided by
operating activities:
Extraordinary item -- 932 --
Depreciation and amortization 2,128 1,997 1,196
(Benefit) provision for deferred
income taxes (847) 629 729
Equity in earnings from gaming properties -- (4) 78
Equity in earnings from unconsolidated
partnerships and developer fees (1,402) (16,605) (2,647)
Distributions from unconsolidated
partnerships 5,155 15,666 1,216
Cost of sales-community development
and homebuilding 16,367 19,957 17,440
Homebuilding construction expenditures (7,384) (8,109) (8,699)
Equity in loss from homebuilding joint
venture (92) 75 --
Write-off of deferred project cost 6 562 506
Write-off of goodwill 1,843 -- --
Payment of fines (3,212) -- --
Changes in notes and accounts receivable,
due from affiliates changed $27,
$(2,535) and $(3,529) 423 (2,767) (2,624)
Changes in accounts payable, accrued
liabilities and deferred income 316 4,037 2,050
-------- -------- --------
Net cash provided by operating activities 9,716 26,215 6,278
-------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Investment in land improvements for
future sales (7,644) (11,444) (14,004)
Change in assets related to unconsolidated
rental property partnerships (687) (312) 762
Change in restricted cash 480 1,137 3,588
(Additions to) disposals of rental operating
properties, net (308) (1,275) 177
Acquisitions of other assets, net (1,857) (503) (1,402)
Contributions to homebuilding joint venture (224) (100) (250)
Acquisition of rental property partnership
interest -- -- (170)
-------- -------- --------
Net cash used in investing activities (10,240) (12,497) (11,299)
-------- -------- --------

The accompanying notes are an integral part
of these consolidated statements.

INTERSTATE GENERAL COMPANY L.P.
CONSOLIDATED STATEMENTS OF CASH FLOW (CONTINUED)
(In thousands)

YEARS ENDED DECEMBER 31,
---------------------------------
1997 1996 1995
-------- --------- ---------

CASH FLOWS FROM FINANCING ACTIVITIES
Cash proceeds from debt financing 21,206 34,441 34,708
Payment of debt (20,900) (48,283) (27,502)
Distributions to Unitholders -- (1,140) --
Issuance of warrants 279 -- --
Exercise of employee options -- -- 171
-------- -------- --------
Net cash provided by (used in) financing
activities 585 (14,982) 7,377
-------- -------- --------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 61 (1,264) 2,356

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,212 3,476 1,120
-------- -------- --------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 2,273 $ 2,212 $ 3,476
======== ======== ========

SUPPLEMENTAL DISCLOSURES:
Interest paid $ 5,878 $ 4,940 $ 5,936
Income taxes paid 3,828 371 2,250
Non-cash transactions
Land received in exchange for
land sold -- -- 134
Partnership interests received in
satisfaction of accounts and notes
receivable from general partner -- 69 --
Accounts and notes receivable, net
of reserves, satisfied via transfer
of partnership interests from
general partner -- 69 --
Assets transferred to general partner -- 49 --

The accompanying notes are an integral part
of these consolidated statements.

INTERSTATE GENERAL COMPANY L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(1) BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

On September 26, 1986, Interstate General Company L.P. ("IGC" or "the
Company"), a Delaware limited partnership, was formed, and on December 31, 1986,
acquired substantially all of the community development, homebuilding,
investment properties and management services businesses of Interstate General
Business Corporation, Interstate St. Charles, Inc. and a trust for the benefit
of the stockholders of Interstate General Business Corporation. The Company's
1% general partner interest is shared by the managing general partner,
Interstate General Management Corporation, and Interstate Business Corporation
("IGMC" and "IBC", respectively, referred to collectively as the "General
Partner"). The Company is primarily engaged in the business of community
development, ownership, development and management of apartment rental
properties and homebuilding.

CONSOLIDATION AND PRESENTATION
------------------------------

The accompanying consolidated financial statements include the accounts
of Interstate General Company L.P. and its majority owned partnerships and
subsidiaries, after eliminating all intercompany transactions. All of the
entities included in the consolidated financial statements are hereinafter
referred to collectively as the "Company" or "IGC". As of December 31, 1997,
the consolidated group includes Interstate General Company L.P., Interstate
General Properties Limited Partnership S.E., St. Charles Associates Limited
Partnership, Land Development Associates S.E., American Family Homes, Inc., St.
Charles Community LLC, St. Charles Operating LLC, Interstate Waste Technologies
Inc., Caribe Waste Technologies, Inc., Lancaster Apartments Limited Partnership,
New Forest Apartments General Partnership, Fox Chase Apartments General
Partnership, Palmer Apartments Associates Limited Partnership, Headen House
Associates Limited Partnership, Wakefield Terrace Associates Limited
Partnership, Wakefield Third Age Associates Limited Partnership and various
inactive entities. The Company's investments in its non-majority owned
partnerships that it does not control are recorded using the equity method of
accounting. However, the recognition of losses is limited to the amount of
direct or implied financial support.

SALES AND PROFIT RECOGNITION AND COST CAPITALIZATION
----------------------------------------------------

Sales revenues and profits from community development and homebuilding are
recognized at closing only when sufficient down payments have been obtained,
possession and other attributes of ownership have been transferred to the buyer,
and IGC has no significant continuing involvement.

The costs of acquiring and developing land and homebuilding construction
are allocated to these assets and charged to cost of sales as the related
inventories are sold. IGC's interest costs related to homebuilding and land
assets are allocated to these assets based on their development stage and
relative book value. The portion of interest allocated to land, finished
building lots and homebuilding construction during the development and
construction period is capitalized. Remaining interest costs are expensed. IGC
carries rental properties, land, development and homebuilding costs at the lower
of cost or net realizable value.

Quarterly, IGC evaluates the carrying value of its long-lived assets in
accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of." In cases where management
is holding for sale particular properties, the Company assesses impairment based
on whether the net realizable value (estimated sales price less costs of
disposal) of each individual property to be sold is less than the net book
value. A property is considered to be held for sale when the Company has made
the decision to dispose of the property. Otherwise, the Company assesses
impairment of its real estate properties based on whether it is probable that
undiscounted future cash flows from each individual property will be less than
its net book value. If a property is impaired, its basis is adjusted to its
fair market value.

SELLING AND MARKETING EXPENSES
------------------------------

Selling and marketing expenses consist primarily of advertising costs,
which include costs of printed materials, signs, displays, general marketing
costs and costs associated with model homes. Advertising costs are expensed as
incurred except for capitalized model home costs which are depreciated over
their estimated useful lives.

MANAGEMENT FEES
---------------

IGC records management fees in the period in which services are rendered.

DEFERRED PROJECT COSTS
----------------------

Pre-construction costs are capitalized. Upon completion of construction,
the deferred charges are amortized as a component of the buildings depreciation
charge. Deferred project costs determined to be unrecoverable are written off.

DEPRECIATION AND AMORTIZATION
-----------------------------

CASH AND CASH EQUIVALENTS
-------------------------

Cash and cash equivalents include cash on hand, unrestricted deposits with
financial institutions and short-term investments with original maturities of
three months or less.

INCOME TAXES
------------

IGC is not subject to U.S. income taxes under current law. Its partners
are taxed directly on their share of IGC's income without regard to
distributions, and the partners may generally deduct their share of losses. The
corporate subsidiaries of IGC are subject to tax at the applicable corporate
rates. Furthermore, IGC is subject to Puerto Rico income tax on its Puerto Rico
source income and District of Columbia income tax on its District of Columbia
source income.

USE OF ESTIMATES
----------------

STOCK-BASED COMPENSATION
------------------------

The Company adopted Statement of Financial Accounting Standard ("SFAS") No.
123, "Accounting for Stock-Based Compensation" during 1996. The Company has
elected to continue to measure compensation costs using Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" and therefore
the adoption of this statement did not have any effect on the financial results
of the Company (see Note 7).

Compensation expense related to Unit options issued to directors and
employees is recognized at the time the options are granted, in an amount equal
to the excess of the currently calculated trading value of the Units over the
option exercise price. Compensation expense related to Unit Appreciation Rights
is recognized quarterly, on a cumulative basis since the issuance of the Rights,
based on changes in Unit prices as compared to the "strike" price of the Rights.

EARNINGS PER UNIT
-----------------

In the fourth quarter of 1997, IGC adopted Statement of Financial
Accounting Standard ("SFAS") No. 128, "Earnings per Share." This statement
requires the computation and reporting of both "basic" and "diluted" earnings
per unit.

"Basic earnings per unit" is computed as net income multiplied by the
limited partner ownership interest, 99%, divided by the weighted average units
outstanding.

The following table provides a reconciliation between weighted average
units outstanding-basic and weighted average units outstanding-diluted.

Year Ended
December 31,
------------------------
1997 1996 1995
------ ------ ------

Weighted average units outstanding-basic 10,289 10,257 10,255
Effect of dilutive equivalent units N/A 17 N/A
------ ------ ------
Weighted average units outstanding-diluted 10,289 10,274 10,255
====== ====== ======

The effect of dilutive equivalent units is not applicable in 1997 and 1995
because the Company showed a net loss for those years. Potentially dilutive
options and warrants are described in Note 7.

IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
----------------------------------------------

During 1997, IGC adopted the provisions of SFAS No. 129 "Disclosure of
Information about Capital Structure." The adoption of SFAS No. 129 did not have
a material effect on IGC's financial statements.

In June 1997, the Financial Accounting Standards Board issued SFAS No. 130
"Reporting Comprehensive Income", which is effective for fiscal years beginning
after December 15, 1997. The statement establishes standards for reporting and
display of comprehensive income and its components. IGC plans to adopt SFAS No.
130 in 1998 and the impact is not expected to be significant.

RECLASSIFICATIONS
-----------------

Certain amounts presented for 1996 in the Consolidated Balance Sheet and
for 1996 and 1995 in the Consolidated Statements of Income and Cash Flows have
been reclassified to conform with the 1997 presentation.

(2) INVESTMENT IN UNCONSOLIDATED PARTNERSHIPS

HOUSING PARTNERSHIPS
--------------------

The following information summarizes financial data and principal
activities of unconsolidated housing partnerships which the Company accounts for
under the equity method (in thousands).

SUMMARY OF FINANCIAL POSITION: AS OF DECEMBER 31,
-----------------------
1997 1996
---------- ----------

Total assets $138,782 $141,107
Total non-recourse debt 144,595 136,468
Total other liabilities 24,917 23,678
Total equity (30,730) (19,039)
Company's investment 8,657 11,723

SUMMARY OF OPERATIONS: FOR THE YEAR ENDED
---------------------------------
1997 1996 1995
-------- -------- --------

Total revenue $ 32,063 $ 34,912 $40,836
Net (loss) income (1,120) 60 946
Company's recognition of equity
in earnings and developer fees 1,402 1,968 2,647

SUMMARY OF OPERATING CASH FLOWS: FOR THE YEAR ENDED
----------------------------
1997 1996 1995
-------- ------- -------

Cash flows from operating activities $ 3,746 $7,494 $8,939
Company's share of cash flows from
operating activities 1,099 2,915 3,771
Operating cash distributions 10,648 1,620 2,607
Company's share of operating cash
distributions 5,155 501 1,216

SUMMARY OF 1996 SALES TRANSACTION:
Gain on sale $39,934
Company's equity and earnings recognition 14,637
Total distribution of sales proceeds 36,235
Company's share of sales proceeds distribution 15,165

The unconsolidated rental properties partnerships as of December 31, 1997
include 19 partnerships owning 4,563 rental units in 22 apartment complexes.
The Company holds a general partner interest in these partnerships and generally
shares in zero to 5% of profits, losses and cash flow from operations until such
time as the limited partners have received cash distributions equal to their
capital contributions. Thereafter, IGC generally shares in 50% of cash
distributions from operations. Pursuant to the partnership agreements, the
general partners of the unconsolidated partnerships are prohibited from selling
or refinancing the apartment complexes without majority limited partner
approval. Due to the absence of control and non-majority ownership, these
partnerships are accounted for under the equity method of accounting.

Lakeside Apartments was placed in service in 1996. The remaining complexes
owned by Alturas Del Senorial Associates Limited Partnership, Bannister
Associates Limited Partnership, Bayamon Gardens Associates Limited Partnership,
Brookside Gardens Limited Partnership, Carolina Associates Limited Partnership,
Chastleton Apartments Associates, Coachman's Limited Partnership, Colinas de San
Juan Associates Limited Partnership, Crossland Associates Limited Partnership,
Essex Apartments Associates Limited Partnership, Huntington Associates Limited
Partnership, Jardines de Caparra Associates Limited Partnership, Monserrate
Associates Limited Partnership, Monte de Oro Associates Limited Partnership, New
Center Associates Limited Partnership, San Anton Associates Limited Partnership,
Turabo Limited Dividend Partnership and Valle del Sol Limited Partnership were
placed in service prior to 1995.

During 1997, the rental complexes owned by Monte de Oro and New Center were
refinanced to provide distributions to their partners and funds to convert the
rental units into condominiums. Rental revenues significantly decreased during
1997 as the units were vacated in preparation for conversion. As a result, the
combined net income for 1997 was $1,239,000 less than the 1996 net income and
the cash flow from operations was $2,789,000 less in 1997 than the 1996 cash
flow from operations.

On April 1, 1996, the Company acquired a controlling interest in four
partnerships owning 596 rental units, Wakefield Third Age L.P., Wakefield
Terrace Associates L.P., Palmer Apartments L.P. and Headen House Associates L.P.
Effective April 1, 1996, the results of operations and balance sheets

of these partnerships are consolidated in the accompanying financial statements.
Prior to that time, they were accounted for under the equity method of
accounting and as such their operating results are included above for the
applicable periods.

In March 1996, the Company completed the sale of four Puerto Rico apartment
properties. The four properties, Las Americas I, Las Americas II, Las Lomas and
Monacillos, totaling 918 units were purchased by non-profit organizations with
financing provided by HUD through capital grants authorized by the Low Income
Housing Preservation and Resident Homeownership Act ("LIHPRHA"). The Company
retained the management contract for these properties. The results of the sales
transaction are identified separate from operations in the table above. Prior
to the sale, the properties were accounted for using the equity method of
accounting and as such their results of operations are included above for the
applicable periods.

HOMEBUILDING JOINT VENTURE
--------------------------

The Company holds a 50% joint venture interest in Escorial Builders S.E.
Escorial Builders was formed in 1995 to purchase lots from the Company and
construct homes for resale. It purchased land to construct 118 units in 1997
and land to construct 98 units in 1996. The profit on these lots are deferred
until sold by Escorial Builders to a third party. The following tables
summarize Escorial Builders' financial information (in thousands):

SUMMARY OF FINANCIAL POSITION: AS OF DECEMBER 31,
--------------------
1997 1996
-------- -------

Total assets $13,719 $ 5,586
Total liabilities 12,536 5,047
Total equity 1,183 539
Company's investment 591 275

SUMMARY OF OPERATIONS: FOR THE YEAR ENDED
---------------------------
1997 1996 1995
------- ------- ------

Total revenue $ 2,491 $ -- $ --
Net income (loss) 183 (151) --
Company's recognition of equity
in earnings 92 (75) --

SUMMARY OF OPERATING CASH FLOWS: FOR THE YEAR ENDED
--------------------------
1997 1996 1995
------- ------- -------

(3) DEBT AND EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT

DEBT
----

The Company's outstanding debt is collateralized primarily by land, land
improvements, housing, receivables, investments in partnerships, and rental
properties. The following table summarizes the indebtedness of IGC at December
31, 1997 and 1996 (in thousands):

Outstanding
Maturity Interest December 31,
Dates Rates* ----------------------
From/To From/To 1997 1996
----------- --------- --------- ----------

Related to community development:
Recourse debt Demand/ P+2.5%/ $35,176 $34,077
07-31-04 10.0%
Non-recourse debt 08-02-09 P+1.5% 2,295 2,153

Related to investment properties:
Recourse debt Demand 7.35% 969 1,139
Non-recourse debt 10-01-19/ 6.85%/ 39,101 39,508
10-01-28 8.5%

Related to homebuilding projects:
Recourse debt Demand P+1% 159 502

General:
Recourse debt 12-31-96/ P+1.25%/ 615 630
08-01-02 12% ------- ------
Total debt $78,315 $78,009
======= =======

*P = Prime lending interest rate.

As of December 31, 1997, the $35,176,000 of recourse debt related to
community development assets is fully collateralized by substantially all of the
community development assets. Approximately $15,054,000 of this amount is
further secured by investments in apartment rental partnerships.

The Company's loan with Banc One, obtained during 1997, requires additional
interest payments on each annual anniversary date. The amount due is 1% of the
outstanding balance in 1998 and 1999, and increases 1/2% each year thereafter,
through 2003.

As of December 31, 1997, recourse investment property debt is secured by a
letter of credit issued to the Company pursuant to the terms of a sales
contract. The non-recourse investment properties debt is collateralized by
apartment projects and secured by FHA or the Maryland Housing Fund. Mortgage
notes payable of $7,244,000 have stated interest rates of 7.5% and 7.75%;
however, after deducting interest subsidies provided by HUD, the effective
interest rate over the life of the loans is 1%.

The homebuilding debt is secured by substantially all of the homebuilding
assets.

The Company's loans contain various financial, cross-default and technical
provisions of which the Company is currently in compliance. IGC's weighted
average interest rate during 1997 on its variable rate debt was 10.06%.

The stated maturities (assuming no accelerations) of the Company's
indebtedness at December 31, 1997 are as follows (in thousands):

1998 $21,235
1999 6,264
2000 3,752
2001 3,601
2002 3,681
Thereafter 39,782
-------
$78,315
=======

The interest costs incurred during 1997, 1996 and 1995 were accounted
for as follows (in thousands):

1997 1996 1995
------ ------- ------

Expensed $3,685 $ 4,269 $4,620
Capitalized 2,931 3,930 3,213
------ ------- ------
$6,616 $ 8,199 $7,833
====== ======= ======

EXTRAORDINARY ITEM - EARLY EXTINGUISHMENT OF DEBT
-------------------------------------------------

On December 23, 1996, the Company completed the restructuring of two non-
recourse mortgages that will provide an interest savings of approximately
$12,000,000 over the life of the loans. The new mortgage notes payable of
$18,700,000 bear an average annual interest rate over the life of the loans at
approximately 6.8% compared to approximately 9.7% for the old loans. Prepayment
fees of $932,000 were paid to the prior lender and charged as an extraordinary
item in the accompanying financial statements. The loans are secured by the
rental properties owned by two consolidated partnerships.

(4) COMMITMENTS AND CONTINGENT LIABILITIES

WETLANDS LITIGATION
-------------------

On February 29, 1996, IGC, SCA and James J. Wilson were convicted on four
felony counts of violations of Section 404 of the U.S. Clean Water Act relating
to discharge without a permit of fill material into wetlands within the U.S.
Army Corps of Engineers' regulatory jurisdiction. The nine civil violations of
the U.S. Clean Water Act filed by the U.S. Attorney were dismissed without
prejudice. The Company was fined $3,000,000, placed on probation for five years
and ordered to implement a wetlands restoration and mitigation plan proposed by
the government. Mr. Wilson was fined $1,000,000 and sentenced to 21 months
imprisonment and one year of supervised release. Appeals were filed and Mr.
Wilson's sentence was stayed pending appeal by the Court of Appeals. On
December 23, 1997, the United States Court of Appeals for the Fourth Circuit
reversed the lower court's decision and remanded the matter back to the lower
court for

retrial. The Court of Appeals denied the United States Attorney's Petition for
Rehearing by the Court of Appeals, and IGC has received a full refund of the
$3,000,000 fines paid. The U.S. Attorney may seek to retry the criminal case or
recommence the civil case that was previously dismissed. The Company
established a $1,500,000 reserve for future legal expenses that may arise if the
case is retried.

GUARANTEES
----------

The Company is guarantor of $8,794,000 of letters of credit and surety
bonds for land development completion and homebuilding warranties. IGC is a
guarantor of a $4,569,000 letter of credit securing bonds issued on behalf of
Chastleton Apartments Associates. This letter of credit is collateralized by
certain assets owned by IBC, IBC affiliates and the Company. The Company's
assets included in the collateral consist of rights to distributions from three
Puerto Rico housing partnerships and a $4,636,000 note receivable from
Brandywine Investment Associates Limited Partnership.

In addition to the letters of credit, IGC shares the general partner
interests in two rental partnerships with IBC, one of which is currently
experiencing negative cash flow. Under the terms of the partnership agree ment,
IBC is the primary obligor for funding operating advances. However, should IBC
fail to fulfill its funding obligations, IGC is obligated as a general partner
to provide financial support. This obligation involves varying degrees of
financial exposure in excess of amounts recognized in the consolidated financial
statements.

During 1997, two substantially debt free complexes owned by two
unconsolidated partnerships were refinanced to provide condominium conversion
construction funds and distributions to their owners. The Company guaranteed
these loans, which cannot exceed $23,200,000. In January 1998, two additional
residential rental properties, owned by separate unconsolidated partnerships,
were refinanced with Firstbank of Puerto Rico. The Company guaranteed these
loans which amount to $10,000,000. The new mortgage loans mature concurrently
with the housing assistance payment contracts, at which time the Company expects
to refinance the outstanding balance of the debt, to provide condominium
conversion construction funds and distributions to their respective owners.

IGC entered into an agreement with IBC in 1995, whereby IGC transferred its
remaining interests in and control over Equus Management Company ("EMC"), and
Equus Gaming Company L.P. ("Equus") to IBC. The agreement was amended in
December 1997 to allow IGC to withdraw as a general partner of Equus provided it
granted a guarantee to EMC. IGC agreed to guarantee $20,000,000 of EMC's
liabilities in excess of assets should Equus or EMC become insolvent.

LIQUIDITY
---------

Litigation. As a result, substantially all of the cash generated has been used
to pay debt service requirements with existing lenders. This resulted in
limited opportunities for new construction and development in the U.S. The
recently closed Banc One financing provided funding to commence construction in
Fairway Village, the third village in St. Charles, and will allow IGC to retain
a greater portion of its U.S. land sales proceeds. IGC currently has other
development projects in various stages of completion. Substantially all of the
projects under construction have sufficient development loans in place to
complete the construction.

IGC's principal demands for liquidity are expected to be the continued
funding of its current debt service and operating costs, including potential
ongoing legal costs for the Wetlands Litigation as well as capital for its waste
technology investments. After the Restructuring, management expects to obtain
additional funding which can be used by ACPT to fund new community development
projects. Such sources of funding may include, but are not limited to, excess
operating cash flows, secured or unsecured financings, private or public
offerings of debt or equity securities and proceeds from sales of properties.
IGC's anticipated cash provided by operations, new and existing debt financing
facilities and extension or modification of $12,500,000 of loans that are due in
1998, are expected to satisfy the Company's capital needs. However, there are
no assurances that these funds will be generated.

OTHER
-----

In the normal course of business, the Company is involved in various types
of pending or unasserted claims. In the opinion of management, these will not
have a material impact on the financial condition or future operations of the
Company.

(5) RELATED PARTY TRANSACTIONS

Certain officers, directors and a general partner, IBC, of the Company have
ownership interests in various entities that conducted business with IGC during
the last three years. The financial impact of the related party transactions on
the accompanying financial statements are reflected below:

1997 1996 1995
------ ------- -------

INCOME STATEMENT IMPACT

Community Development - Land Sales
- ----------------------------------------------------
Affiliate of a former director Cash and note sale (A1) $ -- $2,984 $3,233
Affiliate of a former director Cash sale (A1) -- 2,720 --
IBC, general partner of IGC Cash sale -- 1,869 --
Affiliate of IBC, general partner of IGC Cash and note sale -- 1,513 --
Affiliate of IBC, general partner of IGC,
and James Michael Wilson, director Cash and note sale (A2) 3,000 -- --
------ ------ ------
$3,000 $9,086 $3,233
====== ====== ======
Cost of Land Sales
- ----------------------------------------------------
Affiliate of a former director $ -- $1,759 $1,539
Affiliate of a former director -- 2,276 --
IBC, general partner of IGC -- 586 --
Affiliate of IBC, general partner of IGC -- 680 --
Affiliate of IBC, general partner of IGC,
and James Michael Wilson, director (A2) 1,689 -- --
------ ------ ------
$1,689 $5,301 $1,539
====== ====== ======
Management and Other Fees
- ----------------------------------------------------
Unconsolidated subsidiaries $2,790 $3,993 $2,908
Affiliate of IBC, general partner of IGC (B1,2) 343 248 650
Affiliate of James Michael Wilson, director,
Thomas B. Wilson, director, and James
J. Wilson, director 148 193 239
Affiliate of James Michael Wilson, director,
Thomas B. Wilson, director, James J. Wilson,
director, and an Affiliate of IBC, general
partner of IGC 68 113 67
IBC, general partner of IGC -- 12 30
------ ------ ------
$3,349 $4,559 $3,894
====== ====== ======
Interest and Other Income
- ----------------------------------------------------
Unconsolidated subsidiaries $ 49 $ 55 $ 336
Affiliate of a former director 263 429 197
Affiliate of IBC, general partner of IGC 120 -- --
IBC, general partner of IGC -- 8 33
Affiliate of Thomas B. Wilson, director 16 17 18
------ ------ ------
$ 448 $ 509 $ 584
====== ====== ======
General and Administrative Expense
- ----------------------------------------------------
Affiliate of IBC, general partner of IGC (D1) $ 339 $ 361 $ 369
Reserve additions and other write-offs-
Affiliate of a former director (A1) 388 319 32
Affiliate of IBC, general partner of IGC 117 69 --
Unconsolidated subsidiaries 213 84 108
Affiliate of Thomas B. Wilson, director 83 -- --
Reimbursement of administrative costs-
Affiliate of IBC, general partner of IGC, and
Thomas B. Wilson, director (C) -- (116) (273)
------ ------ ------
$1,140 $ 717 $ 236
====== ====== ======

Increase Increase
Balance (Decrease) Balance (Decrease)
December 31, in Reserves December 31, in Reserves
1997 1997 1996 1996
------------- ------------ ------------- ------------

BALANCE SHEET IMPACT:

Assets Related to Rental Properties
- -----------------------------------
Receivables, all unsecured and due on demand-
Unconsolidated subsidiaries $ 552 $ 111 $ 783 $(314)
Affiliate of IBC, general partner
of IGC (B1,2) 51 (9) 65 69
Affiliate of James Michael Wilson,
director and James J. Wilson,
director 20 -- 64 --
------------ ----------- ------------ -----------
$ 623 $ 102 $ 912 $(245)
============ =========== ============ ===========

Assets Related to Community Development
- ---------------------------------------
Notes receivable and accrued interest-
Affiliate of a former director, Interest 10%
secured by land payments per month
$27,000, matures
April 1, 1998 (A1) $ 980 $ -- $1,042 $ 222
Affiliate of a former director, Interest 10%
secured by land payments per month
$27,000, matures
April 1, 1999 (A1) 2,088 388 2,502 97
Affiliate of IBC, general partner Interest 8%
of IGC, secured by land matured December
15, 1997, paid -- -- 1,193 --
Affiliate of IBC, general partner Interest P+1.5%
of IGC, secured by land matures
June 29, 1998 (A2) 2,520 -- --
------------ ----------- ------------ -----------
$5,588 $ 388 $4,737 $ 319
============ =========== ============ ===========

Other Assets
- ------------
Receivables - All unsecured
IBC, general partner of IGC Payable from IGC
distributions (D2) $ 681 $ -- $ 881 $ --
Affiliate of Thomas B. Wilson, Payable from
director surplus cash -- -- 281 --
Affiliate of IBC, general partner demand
of IGC, and Thomas B. Wilson,
director 12 -- 495 --
IBC, general partner of IGC demand (39) -- (33) --
Affiliate of James Michael Wilson,
director, and Thomas B. Wilson,
director -- -- (39) --
------------ ----------- ------------ -----------
$ 654 $ -- $1,585 $ --
============ =========== ============ ===========

Liabilities Related to Community Development
- --------------------------------------------
Accounts payable
Whitman, Requardt (D3) $ 121 $ -- $ 324 $ --
============ =========== ============ ===========

(A) LAND SALES
----------

IGC sells land to affiliates and non-affiliates with similar terms. The
sales prices to affiliates are based on third party appraisals, payable in cash
or a combination of a 20% cash down payment and a note for the balance. The
notes receivable are secured by deeds of trust on the land sold, and bear an
interest rate equal to those charged at that time for land sales. The notes
mature in one year or mature in five or less years with annual amortizations.
As circumstances dictate, the maturity dates and repayment terms of the notes
receivable due from affiliates or non-affiliates have been modified. Any sales
transactions that vary from these terms are described below:

(1) The notes receivable due from an affiliate of a former director did not
bear interest until certain infrastructure improvements were completed.
This infrastructure was delayed and the interest commencement dates
modified. These delays created the additional discounts reflected
above.

(2) On June 30, 1997, IGC sold 374 acres to an affiliate of IBC for
$3,000,000 and recognized a profit of $1,311,000. As payment for this
parcel, IGC received a 20% down payment and assumption of a note
payable.

(B) MANAGEMENT AND OTHER SERVICES
-----------------------------

IGC provides management and other support services to its unconsolidated
subsidiaries and other related entities in the normal course of business. These
fees are typically collected on a monthly basis, one month in arrears. These
receivables are unsecured and due upon demand. Certain partnerships
experiencing cash shortfalls have not paid timely. As such, these receivable
balances are reserved until satisfied or the prospects of collectibility
improves. Decreases to the reserves for other than routine cash payments are
discussed below:

(1) On April 1, 1996, IBC transferred its remaining 1.1% limited
partnership interest in four housing partnerships to IGC for its market
value of $69,000 as partial satisfaction of a note receivable. The
balance of this note receivable and other receivables were purchased by
an affiliate of James Michael Wilson for a cash payment of $1,279,000.
The collection of the majority of these receivables was uncertain and
$413,000 had been reserved. This transaction resulted in income
recognition of these reserves during the second quarter of 1996.

(2) During the second quarter of 1997, an affiliate of IBC purchased the
management fees receivable of $190,000 due from Chastleton, Coachman's,
Rolling Hills, and Village Lake for a cash payment of $190,000. The
collection of these receivables had previously been questionable and
they had been fully reserved. This transaction resulted in income
recognition of $190,000.

(3) During the second quarter of 1997, IGC sold to IBC its 49% limited
partner interest and 99% of its 1% general partner interest in
Coachman's Limited Partnership. This transaction had no financial
effect on the Company's 1997 annual results of operation.

The Company's 99% limited partnership interest in Equus was distributed to
its unitholders in February 1995 (the "Equus Distribution"). Since that time
through April 1996, the Company continued to manage and provided certain
reimbursable administrative services and support to Equus pursuant to a Master
Support and Services Agreement.

Pursuant to the Transfer Control Agreement effective December 31, 1996 (the
"Transfer Agreement"), IGC transferred its remaining interests in and control
over EMC and Equus (subject to NASDAQ's approval) to IBC. In addition, the
Transfer Agreement called for IGC to issue 75,000 IGC Units to Equus to satisfy
the outstanding employee option and incentive rights for the employees who were
transferred to EMC. The Transfer Agreement was

amended in December 1997 to allow IGC to withdraw as a general partner of Equus
provided it granted a guarantee to EMC. IGC agreed to guarantee $20,000,000 of
EMC's liabilities in excess of assets should Equus or EMC become insolvent.

(D) OTHER
-----

Other transactions with related parties are as follows:

(1) IGC rents executive office space and other property from affiliates
both in the United States and Puerto Rico pursuant to leases that
expire through 2005. In management's opinion, all leases with
affiliated persons are on terms generally available from unaffiliated
persons for comparable property.

(2) During 1996, the sale of four properties in Puerto Rico triggered a
taxable gain, a portion of which is passed through to the predecessor
of IGC that contributed those assets. IGC's partnership agreement
provides for (1) an allocation to that predecessor of the income tax
payable in Puerto Rico on such portion of the gain and (2) a reduction
from its cash distributions in an amount equivalent to the Puerto Rico
income tax specifically allocated to the predecessor. In accordance
with these provisions, IGC recorded a receivable from IBC of $881,000
and will recover the amount from future distributions due to IBC.

(3) Thomas J. Shafer became a director of IGMC in 1998 after his retirement
from Whitman, Requardt, where he was a Senior Partner. Whitman,
Requardt provides engineering services to IGC. In management's
opinion, services performed are on terms available to other clients.

(6) INVESTMENT IN WASTE TECHNOLOGIES

management has been pursuing long-term sludge disposal service agreements with
other municipalities in the region to make construction of the facility
economically viable. IWT management then will negotiate a sludge disposal
service agreement with Bridgeport's wastewater authority.

In 1996, a second corporation, Caribe Waste Technologies, Inc. ("CWT"), was
formed in Puerto Rico. CWT is an entity established to perform projects in the
Caribbean.

In 1996, CWT proposed to build a solid waste facility to the Island
Government of Saint Maarten, Netherlands Antilles. After an evaluation of
proposals from four companies by the Government and its Dutch technical
consultants, the Island Government entered into a Letter of Intent with CWT in
October 1997. The Letter of Intent calls for CWT to submit a final proposal to
the Island Government, followed by a period of exclusive negotiation for a solid
waste disposal service agreement. CWT submitted its proposal for a 330 ton per
day Thermoselect solid waste gasification facility to the Island Government in
March 1998. CWT management is preparing for negotiations toward a solid waste
service agreement.

At December 31, 1997 and 1996, deferred costs regarding waste technology,
net of reserves were $3,024,000 and $2,315,000, respectively.

(7) OPTIONS, APPRECIATION RIGHTS AND WARRANTS

IGC maintains Unit incentive plans for directors (the "Directors Plan") and
employees (the "Employees Plan"). These plans were amended in 1994 and 1995 to
allow for the issuance of Unit Appreciation Rights and other incentive awards.
The Directors Plan is for directors of the managing general partner who are not
officers or employees of the Company or of any General Partner or affiliate of
the Company. The Employees Plan is for employees of IGC, including employees
who are Directors of any general partner of IGC or of any affiliate of IGC.
Under the terms of the plans, directors and employees may be granted options,
incentive rights or other Unit based awards as determined by a committee of the
Directors of the managing general partner, which excludes directors who are
eligible to participate in that particular plan ("Committee"). As of December
31, 1997, 155,000 IGC Units are reserved for issuance under the Director's Plan
and 995,025 Units are reserved for issuance under the Employees' Plan.

OPTIONS
-------

As of December 31, 1997, all outstanding options are fully vested and
exercisable. Activity during 1997, 1996 and 1995 is summarized below:

Directors Employees
--------- -------------------------
Plan Plan
Exercise Exercise
Weighted Plan Price $4 Price $2.49
Average Exercise Expiring Expiring
Price Price $4 8-1-01 1-1-99 (1)
--------- --------- --------- -----------

Options outstanding,
December 31, 1995 $3.61 -- 36,000 12,600
Cancelled 3.64 -- (20,000) (6,200)
--------- --------- -----------
Options outstanding,
December 31, 1996 3.57 -- 16,000 6,400
--------- --------- -----------
Options outstanding,
December 31, 1997 3.57 -- 16,000 6,400
========= ========= ===========

(1) As a result of the Equus Distribution, as further discussed in Note
5, the exercise price of options outstanding under the Directors and
Employees Plans which were exercisable, but not exercised, prior to
January 22, 1995 was reduced from $4.00 to $2.49. Such reduction was
calculated based on the percentage decrease between the average
closing price of the Company's Units as reported by the American
Stock Exchange for the twenty trading days immediately preceding the
ex-dividend date of February 7, 1995, and the twenty trading days
immediately following the distribution date of February 6, 1995. The
exercise price of options that were not exercisable until after
January 22, 1995 was not adjusted. However, upon exercise, the
holders of such options will receive one Equus Unit for every two IGC
Units.

APPRECIATION RIGHTS
-------------------

Under the terms of the plans, directors and employees may be granted "Unit
Appreciation Rights" which entitle the holder to receive upon exercise, an
amount payable in cash, Class A Units of the Company, other property or some
combination thereof, as determined by the Committee. The amount received upon
exercise on or after January 20, 1995, is determined based on the excess of the
fair market value of the Company's Units on the exercise date, plus 50% of the
fair market value of Equus Units on the exercise date, over the base price of
the Unit Appreciation Right specified in the individual rights agreements. Fair
market value is defined in each individual rights agreement but is generally the
average of the closing prices of Units on the principal exchange on which they
are traded for the 20 trading days beginning ten trading days before the
exercise date and ending on the ninth day after the exercise date. No
adjustment was made for Unit Appreciation Rights exercised prior to January 20,
1995, since prior to such date, the Company's market price still reflected the
value of the Company's interest in Equus.

During 1995, 2,000 rights were exercised, 140,000 rights were repriced, and
none were cancelled. During 1996, 2,000 rights were exercised, 10,000 rights
were awarded, and 250,300 were cancelled. During 1997, 27,740 rights were
exercised, 115,000 rights were awarded and 5,160 rights were cancelled.
Compensation expense recognized by the Company in connection with such awards
totalled approximately $76,000 in 1997. In 1996 and 1995, however, $94,000 and
$164,000, respectively, of prior expense was recovered due to a decline in the
market price of the Units. No Unit Appreciation Rights have been issued in
connection with the Director's Unit Incentive Plan.

As of December 31, 1997, the dates that the 201,600 outstanding Unit
Appreciation Rights become exercisable and their expiration dates are as
follows:

Rights Expiring
---------------------------------------------
May 15, October 18, June 19, August 13,
Rights Exercisable at: 2004 2004 2007 2007
- --------------------- ------- ----------- -------- ----------

December 31, 1997 51,360
May 15, 1998 17,120
June 19, 1998 13,000
August 13, 1998 10,000
October 18, 1998 1,000
May 15, 1999 17,120
June 19, 1999 13,000
August 13, 1999 10,000
June 19, 2000 13,000
August 13, 2000 10,000
June 19, 2001 13,000
August 13, 2001 10,000
June 19, 2002 13,000
August 13, 2002 10,000
------ ----------- -------- ----------
85,600 1,000 65,000 50,000
====== =========== ======== ==========

WARRANTS
- --------

In 1993, warrants to purchase 100,000 limited partnership Units were issued
to an investment banking firm in connection with a "highly confident letter"
relating to proposed Virginia race track financing. The warrants had an
exercise price of $5.30 per warrant and expire on September 30, 2003. The
warrants were valued at $75,000 and such amounts were expensed in 1995.
Subsequent to the Equus Distribution, the $5.30 exercise price of the warrants
was reduced to $3.98, and the warrant holders were granted 50,000 limited
partnership purchase warrants for Equus Units with an exercise price of $2.68.

Warrants to purchase 150,000 Class A Units of IGC were issued to Banc One
in 1997 as additional consideration for making their loan to the Company in
August 1997. These warrants have an exercise price of $3.0016 per warrant.
These warrants were valued at $279,000, and such amount was reserved during
1997, to be amortized over the term of the loan. Additionally, for each year
the loan remains outstanding, Banc One may purchase an additional 75,000 Class A
Units of IGC or any successor, or in the event of the proposed restructuring,
75,000 Common Shares of the new

company. These future warrants will be exercised at the lesser of $3.0016 or
the average price of the issued shares during the twenty trading days
immediately preceding the grant date. All warrants expire at the later of five
years after grant or four years after the loan has been paid in full.

(8) RETIREMENT AND PROFIT SHARING PLANS

IGC established a retirement plan (the "Retirement Plan") effective January
1, 1988 for non-union employees of IGC. In 1992, the union employees were added
to the plan. Employees are eligible to participate in the Retirement Plan when
they have completed a minimum employment period of generally one year. IGC's
contributions to the Retirement Plan and U.S. Social Security Plan for eligible
employees were equal to 11.65% of basic salaries and wages for 1997, 1996 and
1995 that were not in excess of the U.S. Social Security taxable wage base, plus
8% of salaries which exceeded the U.S. Social Security taxable wage base.
Employees' salaries in excess of $150,000 for 1997, 1996 and 1995 were excluded
from the calculation of contributions. Payments are also made to the Retirement
Plan from IGC contributions to a profit sharing plan, as described below, and
from voluntary contributions by employees. Contributions to the Retirement Plan
were $467,000, $407,000 and $349,000 for the years ended December 31, 1997, 1996
and 1995, respectively.

In 1987, IGC established an incentive compensation plan (the "Profit
Sharing Plan") based on net income of the Company. No contributions were made
for 1997, 1996 or 1995.

(9) INCOME TAXES

As a U.S. Company doing business in Puerto Rico, IGC is subject to Puerto
Rico income tax on its Puerto Rico based income. The taxes reflected below are
a result of that liability.

The Company is not subject to U.S. taxes as a partnership. Therefore, the
calculation below for the provision for income taxes does not include the income
from U.S. operations which is not subject to income taxes. It does include the
Puerto Rico source income which is subject to income taxes in Puerto Rico at the
statutory rate of 29%. The following table reconciles the effective rate solely
attributable to Puerto Rico source income:

December 31,
-----------------------------------------------------
1997 1996 1995
---------------- -------------- --------------
% of % of % of
Amount Income Amount Income Amount Income
------ ------ ------ ------ ------ ------
(In thousands, except amounts in %)

Provision for income
taxes at the statutory
income tax rate $ 606 29% $3,634 29% $1,452 29%
Reduction of provision
for partnership income
not taxable to Company -- -- -- -- -- --
Other items -- -- -- -- -- --
------ ------ ------ ------ ------- ---
$ 606 29% $3,634 29% $1,452 29%
====== ====== ====== ====== ======= ===

The provision for income taxes consists of the following:

YEARS ENDED DECEMBER 31,
--------------------------
1997 1996 1995
------- -------- -------
(In thousands)

Currently payable
United States $ -- $ -- $ --
Puerto Rico 1,453 3,005 723
Deferred (847) 629 729
------ ------ ------
$ 606 $3,634 $1,452
====== ====== ======

Pursuant to IGC's partnership agreement, a portion of the gain and
the related tax from the sale of four apartment projects was
specifically allocated to the general partner. The Company has
recorded tax owed by the general partner as a reduction of the
provision for income taxes.

The components of deferred taxes payable include the following:

AT DECEMBER 31,
-----------------
1997 1996
------- -------

(In thousands)
Tax on amortization of deferred income related
to long-term receivables from partnerships
operating in Puerto Rico $ 556 $ 499
Tax on equity in earnings of partnerships
operating in Puerto Rico 1,232 2,337
Tax on land development costs capitalized for book
purposes but deducted currently for tax purposes 2,465 2,312
Tax on interest income, payable when collected 367 293
Tax on sale to related party deferred for book
purposes but currently taxable (133) (108)
------ ------
$4,487 $5,333
====== ======

The reconciliation between net (loss) income per books and net taxable income
(loss) is as follows:

December 31,
----------------------------------------------------------
1997 1996 1995
----------------- ------------------ -----------------
(In thousands, except per Unit amounts)

Per Per Per
Total Unit Total Unit Total Unit
------- ----- ------- ------ ------- -----

Net (loss) income
per books $(3,585) $(.35) $ 9,845 .96 $(2,967) $(.29)
Built-in gain allocable
to Predecessors:
Current (464) (.04) (3,554) (.35) (1,369) (.13)
Deferred (529) (.05) (415) (.04) (364) (.04)
Difference in income or
losses from subsidiary
partnerships (430) (.04) (4,968) (.48) 1,141 .11
Losses from corporation
subsidiaries not
deductible by the
partnership 18 -- 269 .03 2,002 .20
Capitalization of general
and administrative
expenses under the
Uniform Capitalization
Rules 49 -- (246) (.02) 315 .03
Differences in deferred
income 175 .02 (1,431) (.14) 349 .03
Difference in cost of sales
due to interest related to
the acquisition of land,
deducted for tax purposes 390 .04 513 .05 505 .05
Deferred income taxes (847) (.08) 629 .06 729 .07
Losses from restructuring (225) (.02) (3,742) (.36) (245) (.02)
Differences in wetland
litigation costs 860 .08 (1,323) (.13) 2,000 .19
Other book to tax
reconciling items, none
of which is individually
significant 4,918 .48 3,783 .37 (650) (.06)
------- ----- ------- ----- ------- -----
Net taxable income (loss)
per partnership
federal return $ 330 $ .04 $ (640) $(.05) $ 1,446 $ .14
======= ===== ======= ===== ======= =====

Deferred income taxes reflect the "temporary differences" between amounts
of assets and liabilities for financial reporting purposes as determined in
accordance with SFAS No. 109 and such amounts as measured by tax laws.

IGC had been grandfathered through 1997 as a non-tax paying public
partnership. Such grandfathering was based on guidelines outlined in the
Omnibus Budget Reconciliation Act of 1987 allowing publicly traded partnerships
existing as of December 17, 1987 not to be taxed as corporations as long as a
substantial new line of business is not added.

As of December 31, 1997, IGC continues to comply with this requirement.
However, beginning in 1998, IGC will be taxed as a corporation unless at least
90% of IGC's gross income is derived from qualifying "passive type" sources such
as interest, dividends and real property income. IGC must be in compliance with
this provision by December 31, 1998. As of March 25, 1998, IGC was not in
compliance with this requirement. IGC plans to restructure prior to the end of
1998 in order to ensure it will comply with the 90% test. However, these
measures have not yet been accomplished and there is no assurance that such
measures will be successful. As discussed above, if IGC is not in compliance
with the 90% test by December 31, 1998, it will be taxed as a corporation at
statutory corporate rates and those taxes could be substantial.

(10) FAIR VALUE OF FINANCIAL INSTRUMENTS

The balance sheet carrying amounts of cash and cash equivalents,
receivables and other current assets approximate fair value due to the short-
term nature of these items. Fair value of long-term debt instruments was
determined by discounting future cash flows using IGC's current market rates.
As of December 31, 1997 and 1996, the fair value of long-term debt instruments
were $74,253,000 and $74,150,000, respectively.

(11) QUARTERLY SUMMARY (UNAUDITED)

IGC's quarterly results are summarized as follows:

Year Ended December 31, 1997
-----------------------------------------------------
1st 2nd 3rd 4th Total for
Quarter Quarter Quarter Quarter Year
------- -------- ------------------- ----------
(In thousands, except per Unit amounts)

Revenues $7,387 $10,809 $ 7,174 $10,842 $36,212
Income (loss) before
extraordinary item,
taxes and minority
interest 415 1,763 (246) (4,472) (2,540)
Net income (loss) as
previously reported 255 1,798 (808) (4,830) (3,585)
Adjustment for Coachman's
Landing (1) -- (576) -- 576 --
Adjustment for spin-off
costs (2) -- -- (300) 300 --
Net income (loss) as revised 255 1,222 (1,108) (3,954) (3,585)
Basic earnings per Unit
as previously reported:
Net income (loss) .02 .18 (.08) (.47) (.35)
Basic earnings per Unit
as revised:
Net income (loss) .02 .12 (.10) (.39) (.35)

(1) Adjustment made in the fourth quarter for Coachman's Landing is to
reverse gain recorded on sale of a portion of IGC's investment in
Coachman's Landing.

(2) Adjustment made in the fourth quarter for spin-off costs is to
expense spin-off costs which were capitalized as start-up costs
during the quarter.

Year Ended December 31, 1996
-------------------------------------------------
1st 2nd 3rd 4th Total for
Quarter Quarter Quarter Quarter Year
------- ------- ----------------- ---------
(In thousands, except per Unit amounts)

Revenues $24,884 $13,792 $ 5,765 $9,933 $54,374
Income (loss) before
extraordinary item,
taxes and minority
interest 13,957 1,353 (1,621) 1,028 14,717
Income (loss) before
extraordinary item 9,062 330 (869) 2,254 10,777
Net income (loss) 9,062 330 (869) 1,322 9,845
Basic earnings per Unit:
Net income (loss) before
extraordinary item .87 .03 (.08) .22 1.04
Net income (loss) .87 .03 (.08) .13 .95

(12) COMPANY RESTRUCTURING

The Company's operations have been severely restricted due to the Wetlands
Litigation and the terms and conditions of the Company's bank debt. Also, there
are certain investments of the Company, such as AFH, that have operating losses
and capital needs, and investments such as IWT and CWT that have substantial
current capital needs. In addition, the Company, as a master limited
partnership, is not an attractive investment for most pension funds, retirement
funds and mutual funds, thereby restricting the Company's access to these
substantial sources of capital. In order to address these issues, management is
seeking to implement a restructuring plan to achieve the following objectives:

1. To restructure the Company by transferring IGC's principal real estate
assets and operations to a new Maryland trust, American Community
Properties Trust ("ACPT") and distributing the shares of ACPT to the
Unitholders and general partners of IGC.

2. To eliminate from ACPT's operating results the expenses of the
Wetlands Litigation and operating and capital expenses of IWT, CWT and
AFH.

3. To capitalize IGC with sufficient assets so that it can meet its
operating needs and remain a viable publicly traded company.

4. To raise approximately $30,000,000 in new capital through a securities
offering by ACPT to pay down community development bank debt and
provide working capital for community development.

The new business entities that are to be created pursuant to the
restructure have been formed. ACPT will act as a self-managed holding company
that will own all of the outstanding equity interests in American Rental
Management Company ("American Management"), American Land Development US, Inc.
("American Land"), and Interstate General Properties Group S.E. ("IGP Group")
and all of the outstanding common stock of American Rental Properties Trust
("American Rental"). American Management has acquired IGC's United States
property management services operations. American Rental, through its
subsidiary partnership, American Housing Properties L.P., is currently seeking
HUD approval for the acquisition of IGC's partnership interests in United States
investment apartment properties.

A committee of the outside directors voted to proceed with the distribution
of ACPT and the filing of the preliminary proxy with the SEC. Upon approval of
the proxy material by the SEC, management intends to submit the plan to
Unitholders for approval. Completion of the plan will be conditioned upon
receiving approval by a majority in interest of the Unitholders and a majority
in interest of the Units not controlled by the Wilson family held by Unitholders
that vote on the transaction. The restructuring also will require approval of
certain creditors and government agencies. In addition, the terms and
conditions of any transaction to raise capital in ACPT will be subject to
uncertainties of the capital markets. Because of the significance of the
approval process and uncertainties of the capital markets, there is no assurance
that the proposed restructuring will be completed or completed under the terms
and conditions presented here. Management, however, is moving forward with this
planned restructuring and hopes to accomplish all or a portion of the objectives
outlined above in the second quarter of 1998.

The following represents the pro forma results of IGC's operations for the
year ended December 31, 1997 and IGC's pro forma balance sheet as of December
31, 1997 related to management's restructuring plan assuming objectives 1, 2 and
3 above were completed as of January 1, 1997. These results do not include the
costs of any capital markets transaction by ACPT.

PRO FORMA CONSOLIDATED STATEMENT OF LOSS
FOR THE YEAR ENDED DECEMBER 31, 1997
(In thousands)
(Unaudited)

Reclass- IGC Pro
IGC ification Reclass- Less Forma
Historical Entries ified ACPT IGC (c)
---------- ---------- -------- -------- ---------

Revenues:
Community development-
land sales $13,357 $105 (a) $13,462 $13,165 $ 297
Homebuilding-home sales 7,805 -- 7,805 -- 7,805
Revenues from investment
properties
Equity in earnings
from partnerships
and developer fees 1,494 -- 1,494 1,509 (15)
Rental property revenues 8,737 -- 8,737 8,737 --
Management and other fees 3,775 -- 3,775 3,775 --
Interest and other income 1,044 716 (b) 1,760 944 816
------- ---- ------- ------- --------
Total revenues 36,212 821 37,033 28,130 8,903
------- ---- ------- ------- --------
Expenses:
Cost of land sales 8,881 258 (a,b) 9,139 8,493 646
Cost of home sales 7,486 (23)(a) 7,463 -- 7,463
Selling and marketing 1,232 -- 1,232 127 1,105
General and administrative 7,034 -- 7,034 6,607 427
Interest expense 3,609 270 (b) 3,879 3,820 59
Rental properties operating
expense 3,597 -- 3,597 3,597 --
Depreciation and amortization 2,128 -- 2,128 1,850 278
Wetlands litigation expenses 1,772 -- 1,772 -- 1,772
Write-off of deferred project
costs 6 -- 6 6 --
Write-off of goodwill 1,843 -- 1,843 -- 1,843
Spin-off costs 1,164 -- 1,164 1,164 --
------- ---- ------- ------- --------
Total expenses 38,752 505 39,257 25,664 13,593
------- ---- ------- ------- --------
(LOSS) INCOME BEFORE PROVISION
FOR INCOME TAXES (2,540) 316 (2,224) 2,466 (4,690)
PROVISION FOR INCOME TAXES 606 -- 606 470 136
MINORITY INTEREST (439) -- (439) (439) --
------- ---- ------- ------- --------
NET (LOSS) INCOME $(3,585) $316 $(3,269) $ 1,557 ($4,826)
======= ==== ======= ======= ========

PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

Reclass- IGC Pro
IGC ification Reclass- Less Forma
Historical Entries ified ACPT IGC (c)
---------- ---------- -------- -------- ---------

CASH AND CASH EQUIVALENTS
Unrestricted $ 2,273 $ -- $ 2,273 $ 2,127 $ 146
Restricted 508 -- 508 374 134
-------- ------ -------- -------- -------
2,781 -- 2,781 2,501 280
-------- ------ -------- -------- -------
ASSETS RELATED TO COMMUNITY
DEVELOPMENT
Land and development costs
Puerto Rico 32,918 1,350 (b) 34,268 34,268 --
St. Charles, Maryland 28,417 -- 28,417 21,750 6,667
Other United States
locations 14,698 -- 14,698 -- 14,698
Notes receivable on lot sales
and other, substantially
all due from affiliates 6,476 -- 6,476 5,629 847
-------- ------ -------- -------- -------
82,509 1,350 83,859 61,647 22,212
-------- ------ -------- -------- -------
ASSETS RELATED TO RENTAL
PROPERTIES
Operating properties, net 37,829 -- 37,829 37,829 --
Investment in unconsolidated
rental property
partnerships 8,657 -- 8,657 8,657 --
Other receivables, net 805 -- 805 621 184
-------- ------ -------- -------- -------
47,291 47,291 47,107 184
-------- -------- -------- -------
ASSETS RELATED TO HOMEBUILDING
Homebuilding construction
and land 1,914 -- 1,914 -- 1,914
Investment in joint venture 591 -- 591 591 --
Receivables and other 68 -- 68 -- 68
-------- ------ -------- -------- -------
2,573 2,573 591 1,982
-------- -------- -------- -------
OTHER ASSETS
Receivables, deferred costs
regarding waste technology
and other projects and
other 8,797 6,772 (b) 15,569 2,514 13,055
Property, plant and
equipment, net 1,087 -- 1,087 448 639
-------- ------ -------- -------- -------
9,884 6,772 16,656 2,962 13,694
-------- ------ -------- -------- -------
TOTAL ASSETS $145,038 $8,122 $153,160 $114,808 $38,352
======== ====== ======== ======== =======

PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1997
(In thousands)
(Unaudited)

Reclass- IGC Pro
IGC ification Reclass- Less Forma
Historical Entries ified ACPT IGC (c)
---------- ---------- -------- -------- ---------

LIABILITIES RELATED TO
COMMUNITY DEVELOPMENT
Recourse debt $ 35,176 $6,772 (b) $ 41,948 $ 39,784 $ 2,164
Non-recourse debt 2,295 -- 2,295 2,295 --
Accounts payable, accrued
liabilities and deferred
income 5,245 -- 5,245 5,100 145
-------- ------ -------- -------- -------
42,716 6,772 49,488 47,179 2,309
-------- ------ -------- -------- -------
ABILITIES RELATED TO
RENTAL PROPERTIES
Recourse debt 969 -- 969 969 --
Non-recourse debt 39,101 -- 39,101 39,101 --
Accounts payable and
accrued liabilities 3,331 -- 3,331 2,701 630
-------- ------ -------- -------- -------
43,401 -- 43,401 42,771 630
-------- ------ -------- -------- -------
ABILITIES RELATED TO
HOMEBUILDING
Recourse debt 159 -- 159 -- 159
Accounts payable, accrued
liabilities and deferred
income 2,501 -- 2,501 -- 2,501
-------- ------ -------- -------- -------
2,660 -- 2,660 -- 2,660
-------- ------ -------- -------- -------
OTHER LIABILITIES
Accounts payable and
accrued liabilities 6,330 -- 6,330 3,246 3,084
Notes payable and capital
leases 615 -- 615 173 442
Accrued income tax
liability-current 1,541 -- 1,541 1,539 2
Accrued income tax
liability-deferred 4,487 -- 4,487 4,120 367
-------- ------ -------- -------- -------
12,973 -- 12,973 9,078 3,895
-------- ------ -------- -------- -------
TOTAL LIABILITIES 101,750 6,772 108,522 99,028 9,494
-------- ------ -------- -------- -------
PARTNERS' CAPITAL 43,288 1,350 (b) 44,638 15,780 28,858
-------- ------ -------- -------- -------

TOTAL LIABILITIES AND
PARTNERS' CAPITAL $145,038 $8,122 $153,160 $114,808 $38,352
======== ====== ======== ======== =======

(c) Reflects the operations and account balances remaining in IGC after
the restructure. These operations and account balances include those
of AFH, IWT, CWT and certain other land sales and development.

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES
(In thousands)

Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- ----------- ------------ ---- --------- ----------

Bannister Apartments $3,625 $410 $4,180 $ 450
Garden Apartments
St. Charles, MD

Palmer Apartments 4,186 471 4,788 417
Garden Apartments
St. Charles, MD

Brookmont Apartments 2,304 162 2,677 274
Garden Apartments
St. Charles, MD

Brookside Gardens Apartments 873 156 2,487 44
Garden Shared Housing
St. Charles, MD

Headen Apartments 4,826 205 4,765 995
Garden Apartments
St. Charles, MD

Huntington Apartments 7,631 350 8,513 1,420
Garden Apartments
St. Charles, MD

Crossland Apartments 2,130 350 2,697 215
Garden Apartments
St. Charles, MD

Terrace Apartments 4,940 497 5,377 452
Garden Apartments
St. Charles, MD

Lakeside Apartments 2,239 440 3,649 80
Garden Apartments
St. Charles, MD

Lancaster Apartments 4,289 484 4,292 169
Garden Apartments
St. Charles, MD

Fox Chase Apartments 6,491 745 7,014 127
Garden Apartments
St. Charles, MD

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (CONTINUED)
(In thousands)

Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- ----------- ------------ ---- -------- ----------

New Forest Apartments 12,065 1,229 12,102 421
Garden Apartments
St. Charles, MD

Coachman's Landing Apt. 5,849 572 6,421 (13)
Garden Apartments
St. Charles, MD

Chastleton Apartments 16,474 2,630 23,624 928
High Rise Apartments
Washington, D.C.

Essex Village Apts. 15,896 2,667 21,381 (4,833)
Garden Apartments
Richmond, VA

Alturas Del Senorial 3,214 345 4,185 139
Highrise Apts.
Rio Piedras, PR

Bayamon Gardens 9,364 1,153 12,050 390
Highrise/Garden Apts.
Bayamon, PR

De Diego 6,413 601 6,718 191
Highrise Apts.
Rio Piedras, PR

Monserrate II 11,000 731 11,172 364
Highrise Apts.
Carolina, PR

Santa Juana 7,134 509 6,748 219
Highrise Apts.
Caguas, PR

Torre De Las Cumbres 5,603 466 5,954 162
Highrise Apts.
Rio Piedras, PR

Colinas De San Juan 8,336 900 10,742 402
Highrise Apts.
Carolina, PR

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

INITIAL AND SUBSEQUENT COSTS AND ENCUMBRANCES (CONTINUED)
(In thousands)

Bldgs. &
Improve- Subsequent
Description Encumbrances Land ments Costs
- ------------ ------------ ---- --------- ----------

Jardines De Caparra 4,983 546 5,719 1,103
Garden Apartments
Bayamon, PR

Monserrate I 1,103 543 10,436 464
Highrise Apts.
Carolina, PR

Monte De Oro 5,672 562 5,217 740
Highrise Apts.
Rio Piedras, PR

New Center 5,940 589 5,702 311
Highrise Apts.
San Juan, PR

San Anton 2,890 313 3,525 768
Highrise Apts.
Carolina, PR

Valle Del Sol 10,967 992 14,017 270
Highrise Apts.
Bayamon, PR

Vistas Del Turabo 2,261 354 2,508 496
Highrise Apts.
Caguas, PR

Office Condo 204 -- 284 --
East Whitiland Township
Pennsylvania

Fredericksburg, VA 169 158 95 5
Model Park 1 Model

Raleigh, NC -- -- 75 6
2 Models
-------- -------- -------- ------
Total Properties $179,071 $20,130 $219,114 $7,176
======== ======== ======== ======

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION
(In thousands)

Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- ----------- ---- ------------ ----- ------------

Bannister Apartments $410 $4,630 $ 5,040 $3,732
Garden Apartments
St. Charles, MD

Palmer Apartments 471 5,205 5,676 4,079
Garden Apartments
St. Charles, MD

Brookmont Apartments 162 2,951 3,113 2,318
Garden Apartments
St. Charles, MD

Brookside Gardens Apartments 156 2,531 2,687 303
Garden Shared Housing
St. Charles, MD

Headen Apartments 205 5,760 5,965 4,059
Garden Apartments
St. Charles, MD

Huntington Apartments 350 9,933 10,283 5,043
Garden Apartments
St. Charles, MD

Crossland Apartments 350 2,912 3,262 1,847
Garden Apartments
St. Charles, MD

Terrace Apartments 497 5,829 6,326 4,562
Garden Apartments
St. Charles, MD

Lakeside Apartments 440 3,729 4,169 125
Garden Apartments
St. Charles, MD

Lancaster Apartments 484 4,461 4,945 1,481
Garden Apartments
St. Charles, MD

Fox Chase Apartments 745 7,141 7,886 1,967
Garden Apartments
St. Charles, MD

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (CONTINUED)
(In thousands)

Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- ----------- ---- ------------ ----- ------------

New Forest Apartments 1,229 12,523 13,752 3,050
Garden Apartments
St. Charles, MD

Coachman's Landing Apt. 572 6,408 6,980 1,375
Garden Apartments
St. Charles, MD

Chastleton Apartments 2,630 24,552 27,182 6,735
High Rise Apartments
Washington, D.C.

Essex Village Apts. 2,667 16,548 19,215 14,778
Garden Apartments
Richmond, VA

Alturas Del Senorial 345 4,324 4,669 2,030
Highrise Apts.
Rio Piedras, PR

Bayamon Gardens 1,153 12,440 13,593 5,186
Highrise/Garden Apts.
Bayamon, PR

De Diego 601 6,909 7,510 3,147
Highrise Apts.
Rio Piedras, PR

Monserrate II 731 11,536 12,267 5,222
Highrise Apts.
Carolina, PR

Santa Juana 509 6,967 7,476 3,163
Highrise Apts.
Caguas, PR

Torre De Las Cumbres 466 6,116 6,582 2,827
Highrise Apts.
Rio Piedras, PR

Colinas De San Juan 900 11,144 12,044 4,775
Highrise Apts.
Carolina, PR

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

TOTAL CAPITALIZED COSTS AND ACCUMULATED DEPRECIATION (CONTINUED)
(In thousands)

Bldgs. & Accumulated
Description Land Improvements Total Depreciation
- ----------- ---- ------------ ----- ------------

Jardines De Caparra 546 6,822 7,368 3,105
Garden Apartments
Bayamon, PR

Monserrate I 543 10,900 11,443 5,128
Highrise Apts.
Carolina, PR

Monte De Oro 562 5,957 6,519 2,936
Highrise Apts.
Rio Piedras, PR

New Center 589 6,013 6,602 2,980
Highrise Apts.
San Juan, PR

San Anton 313 4,293 4,606 2,346
Highrise Apts.
Carolina, PR

Valle Del Sol 992 14,287 15,279 5,333
Highrise Apts.
Bayamon, PR

Vistas Del Turabo 354 3,004 3,358 1,141
Highrise Apts.
Caguas, PR

Office Condo -- 284 284 68
East Whitiland Township
Pennsylvania

Fredericksburg, VA 158 100 258 24
Model Park 1 Model

Raleigh, NC -- 81 81 21
2 Models
------- -------- -------- --------
Total Properties $20,130 $226,290 $246,420 $104,886
======= ======== ======== ========

NOTE TO TOTAL CAPITALIZED COSTS:

THE AGGREGATE COST FOR FEDERAL INCOME TAX PURPOSES
FOR U.S. AND P.R. PROPERTIES IS $210,224

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES

Date
Constructed
Description or Acquired Depreciable Life
- ---------------------------- ----------- ------------------

Bannister Apartments 11/30/76 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Palmer Apartments 3/31/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Brookmont Apartments 5/18/79 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Brookside Gardens Apartments 11/10/94 Bldg - 40 Yrs
Garden Shared Housing Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Headen Apartments 10/30/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Huntington Apartments 10/7/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Crossland Apartments 1/13/78 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Terrace Apartments 11/1/79 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Lakeside Apartments 7/1/96 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Lancaster Apartments 12/31/85 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Fox Chase Apartments 3/31/87 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (CONTINUED)

Date
Constructed
Description or Acquired Depreciable Life
- ----------- ----------- ----------------

New Forest Apartments 6/28/88 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Coachman's Landing Apt. 9/5/89 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
St. Charles, MD

Chastleton Apartments 11/7/86 Bldg - 40 Yrs
High Rise Apartments Constructed Bldg Equip - 5/10 Yrs
Washington, D.C.

Essex Village Apts. 1/31/82 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
Richmond, VA

Alturas Del Senorial 11/17/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Rio Piedras, PR

Bayamon Gardens 7/6/81 Bldg - 40 Yrs
Highrise/Garden Apts. Constructed Bldg Equip - 5/7 Yrs
Bayamon, PR

De Diego 3/20/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Rio Piedras, PR

Monserrate II 1/30/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Carolina, PR

Santa Juana 2/8/80 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Caguas, PR

Torre De Las Cumbres 12/6/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Rio Piedras, PR

Colinas De San Juan 3/20/81 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Carolina, PR

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997

DATE CONSTRUCTED OR ACQUIRED AND DEPRECIABLE LIVES (CONTINUED)

Date
Constructed
Description or Acquired Depreciable Life
- ----------- ----------- ----------------

Jardines De Caparra 4/1/80 Bldg - 40 Yrs
Garden Apartments Constructed Bldg Equip - 5/7 Yrs
Bayamon, PR

Monserrate I 5/1/79 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Carolina, PR

Monte De Oro 12/1/77 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Rio Piedras, PR

New Center 3/15/78 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
San Juan, PR

San Anton 12/10/74 Bldg - 40 Yrs
Highrise Apts. Acquired Bldg Equip - 5/7 Yrs
Carolina, PR

Valle Del Sol 3/15/83 Bldg - 40 Yrs
Highrise Apts. Constructed Bldg Equip - 5/7 Yrs
Bayamon, PR

Vistas Del Turabo 12/30/83 Bldg - 40 Yrs
Highrise Apts. Acquired Bldg Equip - 5/7 Yrs
Caguas, PR

Office Condo 5/14/90 31.5 Yrs
East Whitiland Township Acquired
Pennsylvania

Fredericksburg, VA 2/23/90 Bldg 5 - 40 Yrs
Model Park 1 Model Acquired

Raleigh, NC 2/23/90 Bldg 5 - 40 Yrs
Model Park 2 Models Acquired

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(In thousands)

Real Estate at December 31, 1996 $ 246,552

Additions for 1997:
Improvements 1,919
Land --
-----------
Total Additions 1,919
-----------
Deductions for 1997:
Dispositions 2,051
-----------
Total Deductions 2,051
-----------

Real Estate at December 31, 1997 $ 246,420
===========

INTERSTATE GENERAL COMPANY L.P.
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
AS OF DECEMBER 31, 1997
(In thousands)

Accumulated depreciation at December 31, 1996 $ 100,422

Additions for 1997:
Depreciation expense 6,408
-----------
Total Additions $ 6,408
-----------
Deductions for 1997:
Dispositions 1,944
-----------
Total Deductions 1,944
-----------

Accumulated depreciation at December 31, 1997 $ 104,886
===========

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS

The Board of Directors of IGC's managing general partner, Interstate
General Management Corporation ("IGMC"), is as follows:

NAME AGE OFFICE

James J. Wilson 64 Chairman, Director and Chief
Executive Officer

J. Michael Wilson 32 Vice Chairman, Director, Chief
Financial Officer and
Secretary

Thomas B. Wilson 35 Director

Edwin L. Kelly 56 Director, President and Chief
Operating Officer

Francisco Arrivi Cros 50 Director, Senior Vice President

Mark Augenblick 51 Director

Donald G. Blakeman 65 Director

Joel H. Cowan 61 Director

Thomas J. Shafer 68 Director

The following are the executive officers of IGC:

NAME AGE OFFICE

James J. Wilson 64 Chairman and Chief Executive Officer

Mark Augenblick 51 Vice Chairman

Edwin L. Kelly 56 President and Chief Operating Officer

J. Michael Wilson 32 Chief Financial Officer

Francisco Arrivi Cros 50 Senior Vice President

Paul A. Resnik 50 Senior Vice President

Eduardo Cruz Ocasio 51 Vice President

TERM OF OFFICE. Directors of IGMC are elected annually in April by action
of the directors then holding office. Under the IGC Partnership Agreement, IBC
has the right to designate one-third of the directors of IGMC as long as IBC
continues as a General Partner of IGC. As practicable, an additional one-third
are to be persons who are neither affiliates of IGC nor existing officers or
employees of IGC, any General Partner or any of their affiliates. The remaining
directors are to be persons who are officers of IGC. Messrs. Blakeman, Shafer
and Cowan currently serve as the unaffiliated directors. Messrs. James J., J.
Michael and Thomas B.

Wilson serve as the IBC director designates. Messrs. Kelly, Arrivi, and
Augenblick serve as directors representing IGC officers.

RELATIONSHIPS. James J. Wilson is the father of J. Michael and Thomas B.
Wilson.

JAMES J. WILSON has been Chairman of the Board of IGMC since its inception
in 1986. He also served as its President from 1986-1996. He is the founder of
IGC and has been Chief Executive Officer of IGC and its predecessors since its
inception in 1957, and was President from 1957-1994. He was named IGC Chairman
in 1994. He is the founder of IBC and its predecessors, and has served as IBC's
Chairman of the Board and Chief Executive Officer since 1957 and as President
from 1957-1994.

J. MICHAEL WILSON has been a Director of IGMC since December 1996 and was
named its Vice Chairman, Chief Financial Officer and Secretary and Chief
Financial Officer of the Company in January 1997. He has been President and
Chief Operating Officer of IBC since 1994 and a Director since 1991. He served
as Vice President of IBC from 1991-1994. He has been a Director of Wilson
Securities Corporation since 1991, and President since March 1996. He was Vice
President of Wilson Securities Corporation from 1991-1996. He has been Vice
President of IWT since 1994.

THOMAS B. WILSON has been a Director of IGMC since December 1995. He has
been a Vice President of IBC since 1994. Since 1994, he has been President of
El Comandante Operating Company ("ECOC"), which leases El Comandante race track
in Puerto Rico from a subsidiary of Equus. Since January 1, 1998, he is also
Chairman, Chief Executive Officer and President of Equus Gaming Company L.P. and
Equus Management Company.

MARK AUGENBLICK became a Director of IGMC and Vice Chairman of the Company
in March 1998. Prior to joining the Company, Mr. Augenblick was a partner in
the Washington, D.C. law firm, Shaw, Pittman, Potts & Trowbridge.

EDWIN L. KELLY was named President and Chief Operating Officer of IGMC and
IGC in January 1997. He previously served as Senior Vice President and
Treasurer of IGC and Senior Vice President of IGMC since their formation in
1986. He has served in various executive positions with IGC and its predecessor
companies since 1974, including as a Director of IGMC from 1986-1998.

DONALD G. BLAKEMAN has been a Director of IGMC since its inception in 1986.
He served as Executive Vice President of IGMC and IGC from 1986-1996 and
Secretary of IGMC from 1990-1995. He served in various executive positions with
IGC and its predecessor companies from 1968-1996. He served as President of
Equus and Equus Management Company ("EMC") from February 1996 until his
retirement in 1997. He has served as a Director of EMC since its formation in
1994.

JOEL H. COWAN has been a Director of IGMC since its formation in 1986. He
was a Director of IGC's predecessors from 1968-1986. He is President of Cowan &
Associates, a real estate investment company he has owned since 1976. Since
1984, he has been Chairman of the Habersham Group, an international business
owned by him whose activities include real estate development, trade and
merchant banking. From 1993-1996, he was a Director of Continental Airlines,
Inc.

THOMAS J. SHAFER was appointed a Director of IGMC in January 1998. He is a
registered Professional Engineer specializing in real estate evaluation and land
development. Until his retirement in December 1997, he was a partner of
Whitman, Requardt and Associates, LLP, an engineering and architectural firm,
since 1976 and its managing partner since 1989. Mr. Shafer serves on the
Business Advisory Committee of Mayor Kurt Schmoke of Baltimore and as the
President and Chairman of the Board of the Charles Village Community Benefits
District and the Charles Village Community Foundation, Inc. Mr. Shafer is a
member of the Urban Land Institute, the National Society of Professional
Engineers and the American Water Works Association. His firm has provided
engineering services to IGC in connection with the St. Charles development for
thirty years.

FRANCISCO ARRIVI CROS has been Senior Vice President of IGC since 1990,
Senior Vice President of IGMC since 1991 and President of IGP since 1996. He
was named as a director of IGMC in April of 1997. He was Vice President of the
Chase Manhattan Bank N.A. in Puerto Rico from 1977-1990, and Manager of its Real
Estate Finance Division from 1987-1990.

PAUL A. RESNIK has been Senior Vice President of IGC since 1993 and Senior
Vice President of IGMC since 1989. He served as Vice President of IGC from
1987-1993.

EDUARDO CRUZ OCASIO has been Vice President of IGMC since June of 1997. He
has also been Vice President of IGC since 1991. He has served in various
positions with IGC and its predecessor companies since 1971, including
Comptroller of IGP from 1977-1990.

ITEM 11. EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE. The following information is furnished with
respect to the Chief Executive Officer and each of the other four most highly
compensated Executive Officers of the Company (collectively, the "Executive
Officers").

Long-Term
Compensation
------------
Annual Compensation Awards
---------------------------------------------------- ------------
Securities
Other Underlying
Annual Options/ All Other
Name & Principal Year Salary Bonus Compensation SAR's Compensation
Position ($) ($) ($) (2) # ($) (1)
---------------- ---- ------- --------- ------------ ------------ ------------

James J. Wilson 1997 498,391 -- -- -- 10,184
Chairman & Chief 1996 499,075 -- -- -- 9,492
Executive Officer 1995 474,325 -- -- -- 9,552

Francisco Arrivi Cros
Senior Vice 1997 227,244 -- -- 65,000 9,420
President 1996 205,200 100,000 -- -- 9,492
1995 190,200 -- -- -- 9,552

Edwin L. Kelly 1997 223,827 -- -- -- 10,184
President & Chief 1996 197,367 -- -- -- 9,492
Operating Officer 1995 181,908 -- -- -- 9,552

Paul Resnik 1997 168,781 -- -- 50,000 10,184
Senior Vice 1996 164,800 -- -- -- 9,492
President 1995 159,033 -- -- -- 9,552

Carlos R. Rodriguez (3)
Vice President 1997 133,717 -- -- -- 8,101
1996 127,200 -- -- -- 7,652
1995 120,200 -- -- -- 7,344

(1) Reflects IGC's contributions to Retirement Plan discussed below.
(2) Represents the difference between the price paid for shares of the
Company's stock obtained by exercising stock options and the fair
market value of the stock at the date of purchase.
(3) Effective January 1, 1998, Carlos R. Rodriguez became an employee
of Equus.

EMPLOYMENT AGREEMENTS. Mr. Wilson entered into an amended three-year
employment agreement with IGC commencing January 1, 1996. Mr. Wilson's
agreement provides for a base salary of $473,000, to be modified annually,
certain fringe benefits, and death or disability benefits. The agreement may be
terminated without cause upon a 90-day written notice, and provides for a
severance pay of base salary for the unexpired term of the contract.

Mr. Kelly entered into an employment agreement with the Company commencing
April 1, 1994. The agreement can be terminated without cause upon 90 days
notice, and provides for a base salary of $173,000 per year, certain fringe
benefits and a severance package for 18 months salary.

Mr. Arrivi entered into a compensation agreement with IGC on September 13,
1990. The agreement provided for a base salary of $149,000, to be modified
annually, a one-time signing bonus of $40,000, certain fringe benefits, death or
disability benefits, and a severance package of one-year salary.

DIRECTORS. Directors of the Managing General Partner that do not receive
salaries from the Company or affiliates receive directors' fees established by
the Board of Directors of the Managing General Partner. These directors are
compensated at a rate of $5,000 per quarter, $1,400 per meeting and out of
pocket travel reimbursements for meeting attendance. In 1997, the directors'
fees totaled $102,400 all of which were unpaid as of December 31, 1997.

IBC indemnifies the directors of the Managing General Partner against any
liability (including legal fees and expenses) arising out of their serving in
such capacities, except for liabilities arising out of the gross negligence or
willful misconduct of such directors.

UNIT OPTIONS AND UNIT APPRECIATION RIGHTS. IGC's employees, including its
directors and officers, are eligible to participate in the Unit Incentive Plan
(the "Employees Plan"). Under the Employees Plan, a committee composed of the
independent directors of IGMC (the "Committee") awards Unit options ("Options")
or Unit Appreciation Rights ("Rights") to employees and officers on the basis of
their performance. The Rights entitle the holder to receive upon exercise, an
amount payable in cash, Class A units of the Company, other property or some
combination thereof, as determined by the Committee. The amount received upon
exercise is determined based on the excess of the fair market value of the
Company's Units on the exercise date, (plus 50% of the fair market value of
Equus Units on the exercise date for Rights granted prior to 1995), over the
base price of the Right specified in the individual rights agreements. The 1997
activity under these plans for the CEO and most highly compensated officers are
summarized on the following tables:

UNIT APPRECIATION RIGHTS GRANTED DURING 1997

Percent of
Total Unit
Number of Appreciation
Unit Rights Granted
Appreciation to Employees Base
Rights in 1997 Price Expiration
Granted (%) ($) Date
--------- ---------------- -------- ----------

James J. Wilson -- -- -- --
Francisco Arrivi Cros 65,000 57% 3.125 6/19/07
Edwin L. Kelly -- -- -- --
Paul Resnik 50,000 43% 3.125 8/13/07
Carlos R. Rodriguez -- -- -- --

Potential Realizable Value at Assumed
Annual Rate of Unit Price Appreciation
for Unit Appreciation Rights Term
--------------------------------------
5% 10%
($) ($)
----------- ----------

James J. Wilson -- --
Francisco Arrivi Cros 127,744 323,729
Edwin L. Kelly -- --
Paul Resnik 37,181 151,757
Carlos R. Rodriguez -- --

The Rights granted became exercisable evenly over a five year period
beginning on the grant date. However, in the event of a publicly announced
agreement to dispose of all or substantially all of the assets of the Company,
all Rights become immediately exercisable. The Rights are also subject to
appropriate adjustments to be determined in the event of any subdivision,
reorganization, consolidation or merger of the Company.

AGGREGATED OPTION/UNIT APPRECIATION RIGHTS EXERCISES IN 1997
AND DECEMBER 31, 1997 OPTION/UNIT APPRECIATION RIGHTS VALUES

Number of
Securities Value of
Underlying Unexercised
Unexercised in-the-money
Options Options and
and Unit Unit
Appreciation Appreciation
Rights at Rights at
December 31, December 31,
1997 1997
---------------- ---------------
Units Value Exercisable/ Exercisable/
Acquired On Realized Unexercisable Unexercisable
Name Exercise (#) ($) (#) ($)
- --------------------- ------------- -------- ------------- -------------

James J. Wilson -- -- --/-- --/--
Francisco Arrivi Cros -- -- 15,000/75,000 19,680/115,105
Edwin L. Kelly -- -- 24,000/16,000 31,488/20,992
Paul Resnik -- -- 0/50,000 0/78,450
Carlos R. Rodriguez -- -- 2,880/1,920 3,779/2,519

LONG-TERM INCENTIVE PLAN. IGC has established an incentive compensation
plan (the "Profit Sharing Plan") pursuant to which IGC awards annual cash
bonuses to officers and employees in reasonable amounts reflecting their
contributions to the Company. The persons to receive bonuses and the amounts of
such bonuses are approved by the unaffiliated directors of IGMC. Under the
Profit Sharing Plan, a portion of each bonus, keyed by the compensation
committee to a percentage of the employees' salary, is contributed on behalf of
the employee to the retirement plan discussed below. No contributions were made
to the Profit Sharing Plan during 1997, 1996 or 1995.

RETIREMENT PLAN. IGC maintains a retirement plan (the "Retirement Plan")
for eligible employees of the Company. Employees are generally eligible to
participate when they complete one year of service. Contributions to the
Retirement Plan in 1997, 1996 and 1995 were in amounts equal to 4% of base
salaries and wages not in excess of the U.S. Social Security taxable wage base,
and 8% of salaries (limited to $150,000) that exceeded that wage base.
Additional contributions to the Retirement Plan are made pursuant to the Profit
Sharing Plan.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN UNITHOLDERS AND MANAGEMENT

The following table sets forth certain information regarding the Units that
were beneficially owned on March 1, 1998 (i) by each person who is known by the
general partners to beneficially own more than 5% of the outstanding units of
the Company, (ii) by named executive officers of a general partner, and (iii) by
all executive officers of the Company and directors of the general partners as a
group. Except where noted, the address for the beneficial owner is 222
Smallwood Village Center, St. Charles, Maryland, 20602.

Beneficial Ownership (1)
------------------------
Number of
Name of Beneficial Owner IGC Units Percent
- ------------------------ ------------------------

James J. Wilson (2) 30,679 .3

Edwin L. Kelly 111,214 1.07

Francisco Arrivi Cros (3) 10,000 .1

Paul Resnik 10,000 .1

Carlos Rodriguez (3) 6,000 .06

All executive officers of IGC
and directors of IGMC as a group
(12 persons) (3)(4) 973,828 9.41

Bessemer Interstate Corporation
245 Peachtree Center Avenue #804
Atlanta, GA 30303 522,208 5.05

Interstate Business Corporation
222 Smallwood Village Center
St. Charles, MD 20602 3,080,515 29.77

Wilson Securities Corporation
222 Smallwood Village Center
St. Charles, MD 20602 1,172,203 11.33

(1) The beneficial ownership of Units is determined on the basis of Units
directly and indirectly owned by executive officers of IGC and
directors of IGMC and Units to be issued to IGC officers under
options which are exercisable within the next 60 days.

(2) Includes 100 IGC Units (0%) held by his wife, Barbara A. Wilson.

(3) Includes IGC Units subject to options exercisable under the IGC
Employees and Directors Plans of 10,000 and 6,000 for Francisco
Arrivi Cros and Carlos Rodriguez, respectively.

(4) Includes 42,700 IGC Units (.42%) attributable to Units held by Wilson
Family Limited Partnership, a partnership for which James M. Wilson
serves as a general partner.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information responding to this item appears in Note 5 to the Company's
Consolidated Financial Statements included in Item 8 of this report.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K

(a) 1. FINANCIAL STATEMENTS

The following financial statements of Interstate General Company L.P.
are contained herein:

Report of Independent Public Accountants

Consolidated Statements of Income for the years ended December
31, 1997, 1996 and 1995

Consolidated Balance Sheets as of December 31, 1997 and 1996

Consolidated Statements of Changes in Partners' Capital for the
years ended December 31, 1997, 1996 and 1995

Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995

Notes to Consolidated Financial Statements for the years ended
December 31, 1997, 1996 and 1995

2. FINANCIAL STATEMENT SCHEDULES

The following financial statements schedules are contained herein:

Report of Independent Public Accountants

Schedule III -- Real Estate and Accumulated Depreciation

3. EXHIBITS

Exhibits required by Securities and Exchange Commission Section 601 of
Regulation S-K.

Exhibit
No. Description of Exhibit Reference
- ------- ----------------------------------------- --------------------------

3(a) Third Amended and Restated Agreement of Exhibit 3(a) to Amendment
Limited Partnership of Interstate General No. 3 to Registration
Company L.P. Statement No. 33-10636 on
Form S-1, filed February
11, 1987 (Form "S-1")

(b) First Amendment to Third Amended and Exhibit 3(b) to 1987 10-K
Restated Agreement of Limited Partnership
of Interstate General Company L.P.

(c) Second Amendment to Third Amended and Exhibit 3(c) to 1988 10-K
Restated Agreement of Limited Partnership
of Interstate General Company L.P.

(d) Amended and Restated Certificate of Exhibit 3(b) to Form S-1
Limited Partnership of Interstate
General Company L.P.

(e) Certificate of Incorporation of Exhibit 3(c) to Form S-1
Interstate General Management Corporation

(f) Bylaws of Interstate General Management Exhibits 3(d) and 3(1) to
Corporation, as amended Form S-1

(g) Certificate of Incorporation of Exhibit 3(g) to Form S-1
Interstate Business Corporation
(formerly Interstate St. Charles, Inc.)
as amended

(h) Bylaws of Interstate Business Corporation Exhibit 3(h) to Form S-1
(formerly Interstate St. Charles, Inc.)
as amended February 4, 1986

(i) Amendment to Bylaws of Interstate Exhibit 3(i) to 1988 10-K
General Management Corporation dated
November 10, 1988

4(a) Form of beneficial assignment Exhibit 4(a) to Form S-1
certificate representing Units

(b) Form of certificate evidencing limited Exhibit 4(b) to Form S-1
partnership interest

(c) Certificate of Incorporation of Exhibit 4(c) to Form S-1
Interstate Management Title Company
dated September 19, 1986

(d) Bylaws of Interstate Management Title Exhibit 4(d) to Form S-1
Company dated September 25, 1986

(e) Amendment to Certificate of Incorporation Exhibit 4(e) to Form S-1
of Interstate Management Title Company
dated December 31, 1986

10. Material Contracts

(a) Employment Agreement with Exhibit 10(a) to Form 10-Q
Edwin L. Kelly for the quarter ended
June 30, 1994

(b) Amendment to Employment Agreement between Exhibit 10(a) to Form 10-Q
Interstate General Company L.P. and for the quarter ended
Edwin L. Kelly dated May 20, 1994 June 30, 1995

(c) Second Amendment to Employment Agreement Exhibit 10(b) to Form 10-Q
between Interstate General Company L.P. for the quarter ended
and Edwin L. Kelly dated May 20, 1994 June 30, 1996

(d) Third Amendment to Employment Agreement Exhibit 10(l) to 1996 10-K
between Interstate General Company L.P.
and Edwin L. Kelly dated May 20, 1994

(e) Employment Agreement between Interstate Exhibit 10(j) to 1995 10-K
General Company L.P. and James J. Wilson
dated January 15, 1996

(f) Employment Agreement between Interstate Exhibit 10(a) to Form 10-Q
Waste Technologies, Inc. and Francis C. for the quarter ended
Campbell dated September 1, 1996 September 30, 1996

(g) Employment Agreement between Interstate Filed herewith
General Company L.P. and Mark Augenblick
dated March 11, 1998

(h) Indemnity Agreement among Interstate Exhibit 10(f) to Form S-1
General Business Corporation, Interstate
St. Charles, Inc. and each director and
officer of Interstate General
Management Corporation

(i) Unit Incentive Plan for Directors, Exhibit 10(i) to 1994 10-K
Amended and Restated, dated
March 17, 1995

(j) Unit Incentive Plan for Employees, Exhibit 10(j) to 1994 10-K
Amended and Restated, dated
March 17, 1995

(k) Amended and Restated Certificate and Exhibit 10(11) to Form S-1
Agreement of Limited Partnership of
St. Charles Associates Limited
Partnership dated March 14, 1985

(l) Amended and Restated Certificate and Exhibit 10(j) to Form S-1
Agreement of Limited Partnership of
Interstate General Properties Limited
Partnership dated December 31, 1986

(m) Second Amended and Restated Certificate Exhibit 10(kk) to Form S-1
and Agreement of Limited Partnership of
Interstate General Properties Limited
Partnership dated as of December 31, 1986

(n) Fourth Amendment to Second Amendment Exhibit 10(lll) to
and Restated Certificate and Agreement 1991 10-K
of Interstate General Properties
Limited Partnership S.P., dated
June 29, 1981

(o) Fifth Amendment to Second Amendment and Exhibit 10(mmm) to
Restated Certificate and Agreement of 1991 10-K
Interstate General Properties Limited
Partnership S.P., dated June 29, 1981

(p) Third Amended and Restated Certificate Exhibit 10(kk) to
and Agreement of Limited Partnership of 1989 10-K
Interstate General Properties Limited
Partnership dated as of December 31, 1986

(q) Partnership agreement for Fox Chase Exhibit 10(p) to Form S-1
Apartments General Partnership as
amended January 29, 1986

(r) Amendment to Partnership Agreement for Exhibit 10(mm) to Form S-1
Fox Chase Apartments General Partnership
dated February 10, 1987

(s) Withdrawal, Mutual Release and Exhibit 10(q) to 1993 10-K
Indemnification Agreement and Amendment
to Fox Chase General Partnership Agreement
dated August 20, 1993

(t) Partnership agreement for Wakefield Third Exhibit 10(r) to Form S-1
Age Associates Limited Partnership dated
July 1, 1985

(u) Partnership agreement for Wakefield Exhibit 10(t) to Form S-1
Terrace Associates Limited Partnership
dated July 1, 1985

(v) Partnership agreement for Headen House Exhibit 10(v) to Form S-1
Associates Limited Partnership dated
July 1, 1985

(w) Partnership agreement for Palmer Exhibit 10(w) to Form S-1
Apartments Associates Limited
Partnership dated July 1, 1985

(x) Partnership agreement for Chastleton Exhibit 10(dd) to Form S-1
Apartments Associates dated May 1, 1986

(y) Partnership agreement for New Forest Exhibit 10(ff) to Form S-1
Apartments General Partnership dated
November 18, 1986

(z) First Amendment to the General Exhibit 10(ii) to
Partnership Agreement of New Forest 1988 10-K
Apartments General Partnership dated
February 24, 1987

(aa) Second Amendment to the General Exhibit 10(hh) to
Partnership Agreement of New Forest 1988 10-K
Apartments General Partnership dated
December 19, 1988

(bb) Withdrawal, Mutual Release and Exhibit 10(z) to 1993 10-K
Indemnification Agreement and Amendment
to New Forest Apartments General
Partnership Agreement dated
August 20, 1993

(cc) Limited Partnership Agreement and Exhibit 10(zz) to
Amended and Restated Limited Partnership 1988 10-K
Certificate of Coachman's Limited
Partnership dated June 2, 1988

(dd) Management Services Agreements between Exhibit 10(k) to Form S-1
Interstate General Properties Limited
Partnership and National General
Corporation (3 separate agreements)

(ee) Property Management Agreement between Exhibit 10(oo) to Form S-1
National General Corporation and
Interstate General Corporation and
Interstate General Properties Limited
Partnership as amended March 30, 1986

(ff) Management service agreement between Exhibit 10(jj) to
Interstate General Company L.P. and 1989 10-K
Coachman's Limited Partnership dated
May 2, 1988

(gg) Amendment to Management Service Exhibit 10(hh) to
Agreement between Interstate General 1993 10-K
Company L.P. and Coachman's Limited
Partnership dated January 1, 1993

(hh) Management Agreement by and between Exhibit 10(zzzz) to
Interstate Properties and Interstate 1992 10-K
St. Charles, Inc. (El Monte), dated
January 5, 1987

(ii) First Amendment to Management Agreement Exhibit 10(aaaaa) to
by and between Interstate Properties and 1992 10-K
Interstate Business Corporation (El Monte),
dated January 4, 1988

(jj) Second Amendment to Management Agreement Exhibit 10(bbbbb) to
by and between Interstate Properties and 1992 10-K
Interstate Business Corporation (El Monte),
dated December 31, 1992

(kk) Management Agreement by and between Exhibit 10(ccccc) to
Interstate General Properties and 1992 10-K
Interstate St. Charles, Inc. (Santa Maria
Shopping Center), dated January 5, 1987

(ll) First Amendment to Management Agreement Exhibit 10(ddddd) to
by and between Interstate General 1992 10-K
Properties Limited Partnership and
Interstate Business Corporation (Santa
Maria Shopping Center), dated
January 4, 1988

(mm) Second Amendment to Management Agreement Exhibit 10(eeeee) to
by and between Interstate General 1992 10-K
Properties Limited Partnership S.E. and
Interstate Business Corporation and
Santa Maria Associates S.E., dated
December 28, 1990

(nn) Two (2) Property management agreements Exhibit 10(aa) to Form S-1
between Interstate General Properties
Limited Partnership and Capitol Park
Associates as amended December 31, 1984

(oo) Lease for office space between Interstate Exhibit 10(r) to Form S-1
General Business Corporation and
Smallwood Village Associates Limited
Partnership dated May 21, 1981

(pp) Lease for office space between Interstate Exhibit 10(m) to Form S-1
General Business Corporation and
Smallwood Village Associates Limited
Partnership dated June 15, 1981

(qq) Lease Amendment to Lease for commercial Exhibit 10(c) to Form 10-Q
space between Smallwood Village Associates for the quarter ended
and Interstate General Company L.P. September 30, 1995
dated October 1, 1991

(rr) Lease Amendment II to Lease for commercial Exhibit 10(d) to Form 10-Q
space between Smallwood Village Associates for the quarter ended
and Interstate General Company L.P. September 30, 1995
dated September 5, 1995

(ss) Store Lease between Interstate General Exhibit 10(fff) to
Business Corporation and Smallwood 1991 10-K
Village Associates Limited Partnership
dated April 1, 1988

(tt) Store Lease between Smallwood Village Exhibit 10(e) to Form 10-Q
Associates and Interstate General for the quarter ended
Company L.P. dated December 1, 1987 September 30, 1995

(uu) Lease Amendment to Store Lease between Exhibit 10(f) to Form 10-Q
Smallwood Village Associates and for the quarter ended
Interstate General Company L.P. dated September 30, 1995
February 1, 1989

(vv) Lease Amendment II to Store Lease Exhibit 10(g) to Form 10-Q
between Smallwood Village Associates for the quarter ended
and Interstate General Company L.P. September 30, 1995
dated December 1, 1992

(ww) Lease Amendment III to Store Lease Exhibit 10(h) to Form 10-Q
between Smallwood Village Associates for the quarter ended
and Interstate General Company L.P. September 30, 1995
dated September 30, 1994

(xx) Lease Amendment IV to Store Lease Exhibit 10(i) to Form 10-Q
between Smallwood Village Associates for the quarter ended
and Interstate General Company L.P. September 30, 1995
dated September 5, 1995

(yy) Office Lease between Smallwood Village Exhibit 10(a) to Form 10-Q
Associates and Interstate General Company for the quarter ended
L.P. for Smallwood Village Center dated September 30, 1995
August 25, 1995

(zz) Amendment to Office Lease between Exhibit 10(b) to Form 10-Q
Smallwood Village Associates and for the quarter ended
Interstate General Company L.P. for September 30, 1995
Smallwood Village Center dated
September 5, 1995

(aaa) Fourth Amendment to Interstate General Exhibit 10(yyyy) to
Company L.P. Retirement Plan, dated 1992 10-K
July 1, 1992

(bbb) Fifth Amendment to Interstate General Exhibit 10(b) to Form 10-Q
Company L.P. Retirement Plan dated for the quarter ended
June 5, 1995 June 30, 1995

(ccc) Agreement Regarding Partnership Interest Exhibit 10(nn) to Form S-1
in Chastleton Apartment Associates
dated January, 1987

(ddd) Stockholders Agreement among Interstate Exhibit 10(pp) to Form S-1
and certain stockholders of Interstate
St. Charles, Inc. dated as of
December 1, 1986

(eee) License Agreement between Interstate Exhibit 10(qq) to Form S-1
General Company L.P., Interstate
General Business Corporation and
Interstate St. Charles, Inc., dated
as of December 31, 1986

(fff) Amendment to License Agreement between Exhibit 10(rr) to Form S-1
Interstate General Company L.P.,
Interstate General Business Corporation
and Interstate General Company L.P.,
dated as of February 9, 1987

(ggg) Unitholders Agreement among Interstate Exhibit 10(ss) to Form S-1
General Business Corporation, Interstate
St. Charles, Inc., and Interstate
Properties Trust dated as of
February 9, 1987

(hhh) Agreement dated March 15, 1990 among Exhibit 10(ddd) to
Interstate General Company L.P., 1990 10-K
Interstate Business Corporation and
Interstate General Properties

(iii) Management service agreement between Exhibit 10(ee) to Form S-1
Interstate General Business Corporation Amendment Exhibit 10(ee)
and Chastleton Apartments Associates to 1989 10-K
as amended February 26, 1987

(jjj) Amendment to February 26, 1987 Exhibit 10(bbb) to
Management Service Agreement between 1993 10-K
Interstate General Business Corporation
and Chastleton Apartment Associates
dated January 1, 1993

(kkk) Property management agreement between Exhibit 10(z) to Form S-1
Interstate General Properties Limited Amendment Exhibit 10(z) to
Partnership and G.L. Limited Partnership 1989 10-K
as amended September 30, 1985 and as
amended March 1, 1989

(lll) Amendment to Property Management Exhibit 10(ddd) to
Agreement between Interstate General 1993 10-K
Properties Limited Partnership and
G. L. Limited Partnership dated
January 1, 1993

(mmm) Warrant Agreement between HDA Management Exhibit 10.3 to the S-4
Corporation, Housing Development
Associates S.E. and Banco Popular De
Puerto Rico as Warrant Agent dated
December 15, 1993

(nnn) Limited Partnership Agreement of Equus Exhibit 10(d) to Form 10-Q
Gaming Company L.P. dated August 1, 1994 for the quarter ended
June 30, 1994

(ooo) First Amendment to the Limited Exhibit 10(e) to Form 10-Q
Partnership Agreement of Equus Gaming for the quarter ended
Company L.P. dated August 1, 1994 June 30, 1994

(ppp) Second Amendment to the Limited Exhibit 10(f) to Form 10-Q
Partnership Agreement of Equus Gaming for the quarter ended
Company L.P. dated August 1, 1994 June 30, 1994

(qqq) Third Amendment to the Limited Exhibit 3.4 to
Partnership Agreement of Equus Gaming to Registration Statement
Company L.P. on Form S-11 of Equus
Gaming Company L.P.
Registration # 33-82750
(the "Equus S-11")

(rrr) Registration Rights Agreement with Exhibit 10.4 to the S-4
respect to the Warrants dated
December 15, 1993, among HDAMC, HDA,
Oppenheimer & Co., Inc. and The
Argosy Securities Group L.P.

(sss) Amended and Restated Management Exhibit 10.6 to the S-4
Agreement dated December 15, 1993,
between Interstate General Properties
Limited Partnership S.E. ("IGP") and
HDA

(ttt) Master Support and Services Agreement Exhibit 10.20 to the
dated December 9, 1994, between IGC Equus S-11
and Equus Gaming Company L.P.

(uuu) Consulting Agreement dated December 15, Exhibit 10.21 to the
1993, between El Comandante Operating Equus S-11
Company and Interstate General
Properties Limited Partnership

(vvv) Amended and Restated Registration Rights Exhibit 10.29 to the
Agreement with Respect to the Warrants Equus S-11
dated December 12, 1994, among HDAMC,
HDA, Oppenheimer & Co., Inc., the
Argosy Securities Group L.P. and Equus
Gaming Company L.P.

(www) Agreement of Purchase and Sale between Exhibit 10(dddd) to
Interstate General Company L.P. and 1994 10-K
Interstate Business Corporation dated
December 30, 1994 for the Partnership
Interests in:
New Forest Apartments General Partnership
Headen House Associates Limited Partnership
Fox Chase Apartments General Partnership
Palmer Apartments Associates
Wakefield Terrace Associates
Wakefield Third Age Associates

(xxx) Agreement of Purchase and Sale between Exhibit 10(a) to Form 10-Q
Interstate Business Corporation and for the quarter ended
Interstate General Company L.P. dated June 30, 1996
June 12, 1996 for the Partnership
Interests in:
Wakefield Terrace Associates
Wakefield Third Age Associates
Palmer Apartments Associates
Headen House Associates Limited Partnership

(yyy) Agreement of Purchase and Sale between Exhibit 10(c) to Form 10-Q
A.P.S. Associates Limited Partnership, for the quarter ended
Interstate General Company L.P. and June 30, 1996
St. Charles Associates L.P. dated
April 3, 1996

(zzz) Agreement between H&C Trading, LLC and Exhibit 10(d) to Form 10-Q
Interstate General Company L.P. dated for the quarter ended
August 6, 1996 June 30, 1996

(aaaa) Agreement of Sale between Land Development Exhibit 10(j) to Form 10-Q
Associates S.E. and Twenty First Century for the quarter ended
Homes S.E. dated September 8, 1995 September 30, 1995

(bbbb) Option Agreement between Land Development Exhibit 10(k) to Form 10-Q
Associates S.E. and Compri Caribe for the quarter ended
Hospitality Corp. dated March 31, 1995 September 30, 1995

(cccc) Amendment to Option Agreement between Exhibit 10(l) to Form 10-Q
Land Development Associates S.E. and for the quarter ended
Compri Caribe Hospitality Corp. dated September 30, 1995
November 13, 1995

(dddd) Real Estate Sales Contract between Exhibit 10(c) to Form 10-Q
American Family Homes, Inc. and for the quarter ended
Interstate Business Corporation dated September 30, 1996
September 30, 1996

(eeee) Real Estate Sales Contract between Exhibit 10(ggggg) to 1996
American Family Homes, Inc. and 10-K
Darby Station Limited Partnership,
Interstate Business Corporation, General
Partner dated December 20, 1996

(ffff) Control Transfer Agreement dated Exhibit 10(hhhhh) to 1996
December 31, 1996 and Amendment to 10-K
Control Transfer Agreement dated
March 25, 1997 between Interstate
Business Corporation, Interstate
General Company L.P., Interstate
General Properties Limited Partnership
S.E., Housing Development Associates
S.E., Equus Management Company and
Equus Gaming Company L.P.

(gggg) Amendment to Control Transfer Agreement Filed herewith
dated December 19, 1997 between
Interstate Business Corporation,
Interstate General Company L.P.,
Interstate General Properties Limited
Partnership S.E., Housing Development
Associates S.E., Equus Management Company
and Equus Gaming Company L.P.

(hhhh) Compensation Agreement with Exhibit 10(iiiii) to 1996
Francisco Arrivi dated September 13, 1990 10-K

(iiii) Real Estate Sales Contract between Exhibit 10(a) to Form 10-Q
American Family Homes, Inc. and Deer for the quarter ended
Valley Limited Liability Company dated June 30, 1997
June 30, 1997

(jjjj) Agreement of Purchase and Sale between Exhibit 10(b) to Form 10-Q
Interstate Business Corporation and for the quarter ended
Interstate General Company L.P. dated June 30, 19
June 30, 1997 for the Partnership
Interest in Coachman's Limited Partnership

(kkkk) Amendment to Agreement of Purchase and Filed herewith
Sale between Interstate General Company
L.P. and Interstate Business Corporation
dated December 31, 1997 for the Partnership
Interest in Coachman's Limited Partnership

(llll) Agreement of Purchase and Sale between Exhibit 10(c) to Form 10-Q
A.P.S. Associates Limited Partnership for the quarter ended
and Interstate General Company L.P. June 30, 1997
dated June 30, 1997

(mmmm) Master Loan Agreement dated as of Exhibit 10(a) to Form 10-Q
August 1, 1997 by and among Interstate for the quarter ended
General Company L.P. and American Community September 30, 1997
Properties Trust, St. Charles Community,
LLC and Banc One Capital Partners IV, Ltd.

(nnnn) Agreement between Interstate General Filed herewith
Company L.P., Interstate General
Properties Limited Partnership S.E.,
Equus Gaming Company L.P., Equus Management
Company and Housing Development
Associates S.E. dated December 16, 1997

(oooo) Agreement to Retire Partnership Interest Filed herewith
of Interstate General Company L.P. in
Equus Gaming Company L.P. dated
December 30, 1997

(pppp) Guaranty dated December 30, 1997 between Filed herewith
Equus Management Company and Interstate
General Company L.P.

21. List of Subsidiaries of Interstate Filed herewith
General Company L.P.

(b) Reports on Form 8-K

None

See (a) 2, above.

(d) Financial Statement Schedules

See (a) 2, above.

SIGNATURES
----------

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

INTERSTATE GENERAL COMPANY L.P.

By: Interstate General Management
Corporation
Managing General Partner

Dated: March 31, 1998 By: /s/ James J. Wilson
------------------ --------------------------
James J. Wilson
Chairman and Chief
Executive Officer

Dated: March 31, 1998 By: /s/ J. Michael Wilson
------------------- ---------------------------
J. Michael Wilson
Vice Chairman, Chief Financial
Officer and Director

Dated: March 31, 1998 By: /s/ Cynthia L. Hedrick
-------------------- ---------------------------
Cynthia L. Hedrick
Vice President and Controller

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated:

SIGNATURE TITLE DATE
--------- ------------------------- ------

/s/ James J. Wilson March 31, 1998
- ------------------------- Chairman, Chief Executive ---------------
James J. Wilson Officer and Director

/s/ Edwin L. Kelly March 31, 1998
- ------------------------- President, Chief Operating ---------------
Edwin L. Kelly Officer and Director

/s/ J. Michael Wilson March 31, 1998
- ------------------------- Vice Chairman, Chief ---------------
J. Michael Wilson Financial Officer
and Director

/s/ Mark Augenblick March 31, 1998
- ------------------------- Vice Chairman and ---------------
Mark Augenblick Director

SIGNATURE TITLE DATE
--------- ------------------------- ------

/s/ Francisco Arrivi Cros March 31, 1998
- ------------------------- Senior Vice President ---------------
Francisco Arrivi Cros and Director

/s/ Donald G. Blakeman March 31, 1998
- ---------------------- Director ---------------
Donald G. Blakeman

/s/ Thomas J. Shafer March 31, 1998
- ---------------------- Director ---------------
Thomas J. Shafer

/s/ Joel H. Cowan March 31, 1998
- ---------------------- Director ---------------
Joel H. Cowan

- ---------------------- Director ---------------
Thomas B. Wilson