----

|                                                     | Page   |
|----------------------------------------------------------|--------|
|                                                     |   |
| INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS | 1      |
|                                                     |   |
|                                                     |   |
| FINANCIAL STATEMENTS                                     |   |
|                                                     |   |
| Balance sheets                                           | 2-3    |
| Statements of income                                     | 4-7    |
| Statements of changes in partners capital                | 8      |
| Statements of cash flows                                 | 9-10   |
| Notes to financial statements                            | 11-14  |

----

| ASSETS                                                                 |   | 2005   |      |   | 2004   |   |
|------------------------------------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                                                   |   |   |      |   |   |   |
| CURRENT ASSETS                                                         |   |   |      |   |   |   |
| Cash                                                                   |   | $      | 8,049     |   |   | $      | 31,707 |   |
| Real estate tax and insurance                                          |   |   | 17,512    |   |   |   | 3,559 |   |
| Prepaid expense                                                        |   |   | 12,519    |   |   |   | 10,455 |   |
| Total current assets                                                   |   | $      | 38,080    |   |   | $      | 45,721 |   |
|                                                                   |   |   |      |   |   |   |   |   |
| RESTRICTED DEPOSITS AND FUNDED RESERVES                                |   |   |      |   |   |   |   |   |
| Tenant security deposits held in trust                                 |   | $      | 44,020    |   |   | $      | 43,565 |   |
| Replacement reserve                                                    |   |   | 148,497   |   |   |   | 159,069 |   |
|                                                                   |   | $      | 192,517   |   |   | $      | 202,634 |   |
| PROPERTY AND EQUIPMENT, AT COST                                        |   |   |      |   |   |   |   |   |
| Land                                                                   |   | $      | 300,000   |   |   | $      | 300,000 |   |
| Buildings                                                              |   |   | 3,667,343 |   |   |   | 3,662,431 |   |
| Equipment                                                              |   |   | 178,017   |   |   |   | 178,017 |   |
|                                                                   |   | $      | 4,145,360 |   |   | $      | 4,140,448 |   |
| Less accumulated depreciation                                          |   |   | 1,584,945 |   |   |   | 1,443,082 |   |
|                                                                   |   | $      | 2,560,415 |   |   | $      | 2,697,366 |   |
| OTHER ASSETS                                                           |   |   |      |   |   |   |   |   |
| Deferred charges, less accumulated amortization of $31,907 and $28,823 |   | $      | 33,943    |   |   | $      | 37,027 |   |
|                                                                   |   |   |      |   |   |   |   |   |
|                                                                   |   | $      | 2,824,955 |   |   | $      | 2,982,748 |   |

----

| LIABILITIES AND PARTNERS CAPITAL          |   | 2005   |      |   | 2004   |   |
|-------------------------------------------|--------|--------|-----------|--------|--------|--------|
|                                      |   |   |      |   |   |   |
| CURRENT LIABILITIES                       |   |   |      |   |   |   |
| Current maturities of long-term debt      |   | $      | 42,103    |   |   | $      | 33,616 |   |
| Accounts payable                          |   |   | 4,733     |   |   |   | 11,080 |   |
| Accrued interest                          |   |   | -         |   |   |   | - |   |
| Accrued reporting and administrative fees |   |   | 4,000     |   |   |   | 4,000 |   |
| Accrued partnership management fee        |   |   | 5,600     |   |   |   | - |   |
| Total current liabilities                 |   | $      | 56,436    |   |   | $      | 48,696 |   |
|                                      |   |   |      |   |   |   |   |   |
| DEPOSIT AND PREPAYMENT LIABILITIES        |   |   |      |   |   |   |   |   |
| Tenant security deposits                  |   | $      | 35,890    |   |   | $      | 34,175 |   |
| Prepaid rents                             |   |   | -         |   |   |   | - |   |
|                                      |   | $      | 35,890    |   |   | $      | 34,175 |   |
| LONG-TERM DEBT                            |   |   |      |   |   |   |   |   |
| Mortgage payable, less current maturities |   | $      | 1,673,185 |   |   | $      | 1,716,705 |   |
|                                      |   |   |      |   |   |   |   |   |
| COMMITMENT                                |   |   |      |   |   |   |   |   |
|                                      |   |   |      |   |   |   |   |   |
| PARTNERS CAPITAL                          |   | $      | 1,059,444 |   |   | $      | 1,183,172 |   |
|                                      |   |   |      |   |   |   |   |   |
|                                      |   | $      | 2,824,955 |   |   | $      | 2,982,748 |   |

----

|                                          |   | 2005   |    |   | 2004   |   |
|-----------------------------------------------|--------|--------|---------|--------|--------|--------|
|                                          |   |   |    |   |   |   |
| RENTAL INCOME                                 |   |   |    |   |   |   |
| Apartments                                    |   | $      | 595,045 |   |   | $      | 581,172 |   |
| Tenant assistance payments                    |   |   | -       |   |   |   | - |   |
| Subsidy income                                |   |   | -       |   |   |   | - |   |
| Miscellaneous                                 |   |   | -       |   |   |   | - |   |
| Sub-total potential rent revenue              |   | $      | 595,045 |   |   | $      | 581,172 |   |
|                                          |   |   |    |   |   |   |   |   |
| VACANCIES                                     |   |   |    |   |   |   |   |   |
| Apartments                                    |   | $      | (30,191 | )      |   | $      | (47,932 | ) |
| Miscellaneous                                 |   |   | -       |   |   |   | - |   |
| Sub-total vacancies                           |   | $      | (30,191 | )      |   | $      | (47,932 | ) |
|                                          |   |   |    |   |   |   |   |   |
| Net rental revenue                            |   | $      | 564,854 |   |   | $      | 533,240 |   |
|                                          |   |   |    |   |   |   |   |   |
| FINANCIAL REVENUE                             |   |   |    |   |   |   |   |   |
| Interest Income - project operations          |   | $      | 838     |   |   | $      | 672 |   |
| Income from investments - replacement reserve |   |   | 2,581   |   |   |   | 1,115 |   |
| Income from investments - operating reserve   |   |   | -       |   |   |   | - |   |
| Income from investments - miscellaneous       |   |   | -       |   |   |   | - |   |
| Sub-total financial revenue                   |   | $      | 3,419   |   |   | $      | 1,787 |   |
|                                          |   |   |    |   |   |   |   |   |
| OTHER REVENUE                                 |   |   |    |   |   |   |   |   |
| Laundry and vending                           |   | $      | 10,252  |   |   | $      | 12,754 |   |
| NSF and late charges                          |   |   | -       |   |   |   | - |   |
| Damage and cleaning fees                      |   |   | 24      |   |   |   | 2 |   |
| Forfeited tenant security deposits            |   |   | 3,851   |   |   |   | 8,915 |   |
| Other revenue                                 |   |   | 12,670  |   |   |   | 12,438 |   |
| Sub-total other revenue                       |   | $      | 26,797  |   |   | $      | 34,109 |   |
|                                          |   |   |    |   |   |   |   |   |
| Total revenues                                |   | $      | 595,070 |   |   | $      | 569,136 |   |

----

|                                  |   | 2005   |   |   | 2004   |   |
|---------------------------------------|--------|--------|--------|--------|--------|--------|
| OPERATING EXPENSES                    |   |   |   |   |   |   |
|                                  |   |   |   |   |   |   |
| Renting expenses                      |   |   |   |   |   |   |
| Advertising                           |   | $      | 659    |   |   | $      | 895 |   |
| Miscellaneous renting expenses        |   |   | 4,630  |   |   |   | 3,429 |   |
| Sub-total renting expenses            |   | $      | 5,289  |   |   | $      | 4,324 |   |
|                                  |   |   |   |   |   |   |   |   |
| Administrative expenses               |   |   |   |   |   |   |   |   |
| Office salaries                       |   | $      | -      |   |   | $      | - |   |
| Office supplies                       |   |   | 1,858  |   |   |   | 4,607 |   |
| Office rent                           |   |   | -      |   |   |   | - |   |
| Management fee                        |   |   | 48,384 |   |   |   | 46,704 |   |
| Manager's salary                      |   |   | 26,358 |   |   |   | 30,016 |   |
| Legal expense                         |   |   | 2,022  |   |   |   | 9,408 |   |
| Audit expense                         |   |   | 4,725  |   |   |   | 4,532 |   |
| Bookkeeping / accounting services     |   |   | -      |   |   |   | - |   |
| Telephone and answering service       |   |   | 1,274  |   |   |   | 1,145 |   |
| Bad debts                             |   |   | -      |   |   |   | - |   |
| Miscellaneous administrative expenses |   |   | -      |   |   |   | 4,958 |   |
| Sub-total administrative expenses     |   | $      | 84,621 |   |   | $      | 101,370 |   |
|                                  |   |   |   |   |   |   |   |   |
| Utilities expense                     |   |   |   |   |   |   |   |   |
| Fuel oil / coal                       |   | $      | -      |   |   | $      | - |   |
| Electricity                           |   |   | 16,371 |   |   |   | 12,012 |   |
| Water                                 |   |   | 15,949 |   |   |   | 14,709 |   |
| Gas                                   |   |   | -      |   |   |   | - |   |
| Sewer                                 |   |   | -      |   |   |   | - |   |
| Sub-total utilities expense           |   | $      | 32,320 |   |   | $      | 26,721 |   |

----

|                                         |   | 2005   |    |   | 2004   |   |
|----------------------------------------------|--------|--------|---------|--------|--------|--------|
| Operating and maintenance expense            |   |   |    |   |   |   |
| Janitor and cleaning payroll                 |   | $      | -       |   |   | $      | - |   |
| Janitor and cleaning supplies                |   |   | -       |   |   |   | - |   |
| Janitor and cleaning contract                |   |   | -       |   |   |   | - |   |
| Exterminating payroll / contract             |   |   | -       |   |   |   | - |   |
| Exterminating supplies                       |   |   | -       |   |   |   | - |   |
| Garbage and trash removal                    |   |   | 18,339  |   |   |   | 17,594 |   |
| Security payroll / contract                  |   |   | -       |   |   |   | - |   |
| Grounds payroll                              |   |   | -       |   |   |   | - |   |
| Grounds supplies                             |   |   | -       |   |   |   | - |   |
| Grounds contract                             |   |   | 29,967  |   |   |   | 23,727 |   |
| Repairs payroll                              |   |   | 45,494  |   |   |   | 37,938 |   |
| Repairs material                             |   |   | 32,121  |   |   |   | 20,742 |   |
| Repairs contract                             |   |   | 40,896  |   |   |   | 23,644 |   |
| Heating / cooling repairs and maintenance    |   |   | -       |   |   |   | - |   |
| Decorating payroll / contract                |   |   | -       |   |   |   | - |   |
| Decorating supplies                          |   |   | -       |   |   |   | 1,079 |   |
| Vehicle and maintenance equipment o & r  |   |   | -       |   |   |   | - |   |
| Miscellaneous operating and maint. expenses  |   |   | 8,304   |   |   |   | 19,720 |   |
| Sub-total operating & maint. expense     |   | $      | 175,121 |   |   | $      | 144,444 |   |
|                                         |   |   |    |   |   |   |   |   |
| Taxes and insurance                          |   |   |    |   |   |   |   |   |
| Real estate taxes                            |   | $      | 17,323  |   |   | $      | 25,744 |   |
| Payroll taxes                                |   |   | 6,809   |   |   |   | 7,511 |   |
| Miscellaneous taxes, licenses, and permits   |   |   | 1,035   |   |   |   | 1,005 |   |
| Property and liability insurance             |   |   | 12,958  |   |   |   | 12,832 |   |
| Fidelity bond insurance                      |   |   | -       |   |   |   | - |   |
| Workman's compensation                       |   |   | 8,292   |   |   |   | 7,776 |   |
| Health insurance and other employee benefits |   |   | 8,470   |   |   |   | 8,086 |   |
| Other insurance                              |   |   | -       |   |   |   | - |   |
| Sub-total taxes & insurance              |   | $      | 54,887  |   |   | $      | 62,954 |   |
|                                         |   |   |    |   |   |   |   |   |
|                                         |   |   |    |   |   |   |   |   |
| Total operating expenses                     |   | $      | 352,238 |   |   | $      | 339,813 |   |

----

|                            |   | 2005   |    |   | 2004   |   |
|---------------------------------|--------|--------|---------|--------|--------|--------|
| OTHER EXPENSES                  |   |   |    |   |   |   |
| Interest expense - mortgage     |   | $      | 136,413 |   |   | $      | 144,390 |   |
| Interest expense - notes        |   |   | -       |   |   |   | - |   |
| Miscellaneous financial expense |   |   | -       |   |   |   | - |   |
| Depreciation and amortization   |   |   | 144,947 |   |   |   | 143,936 |   |
| Reporting fee                   |   |   | 2,000   |   |   |   | 2,000 |   |
| Administrative fee              |   |   | 2,000   |   |   |   | 2,000 |   |
| Partnership management fee      |   |   | 11,200  |   |   |   | - |   |
| Sub-total other expenses        |   | $      | 296,560 |   |   | $      | 292,326 |   |
|                            |   |   |    |   |   |   |   |   |
| Total expenses                  |   | $      | 648,798 |   |   | $      | 632,139 |   |
|                            |   |   |    |   |   |   |   |   |
| Net income (loss)               |   | $      | (53,728 | )      |   | $      | (63,003 | ) |

----

|                               |   |   |      |   | General  |   |     | Limited |   |
|------------------------------------|--------|--------|-----------|--------|----------|--------|----------|---------|--------|
|                               |   | Total  |      |   | Partners |   |     | Partner |   |
| Partners capital December 31, 2003 |   | $      | 1,324,175 |   |     | $      | (410,640 | )       |   | $ | 1,734,815 |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
| Partners capital contributions     |   |   | -         |   |     |   | -        |    |   |   | - |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
| Partners capital distributions     |   |   | (78,000   | )      |     |   | (78,000  | )       |   |   | - |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
| Net income (loss)                  |   |   | (63,003   | )      |     |   | (630     | )       |   |   | (62,373 | ) |
| Partners capital December 31, 2004 |   | $      | 1,183,172 |   |     | $      | (489,270 | )       |   | $ | 1,672,442 |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
| Partners capital contributions     |   |   | -         |   |     |   | -        |    |   |   | - |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
| Partners capital distributions     |   |   | (70,000   | )      |     |   | (70,000  | )       |   |   | - |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
| Net income (loss)                  |   |   | (53,728   | )      |     |   | (537     | )       |   |   | (53,191 | ) |
| Partners capital December 31, 2005 |   | $      | 1,059,444 |   |     | $      | (559,807 | )       |   | $ | 1,619,251 |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
|                               |   |   |      |   |     |   |     |    |   |   |   |   |
| Percentage at December 31, 2005    |   |   | 100       | %      |     |   | 1        | %       |   |   | 99 | % |

----

|                                                                                               |   | 2005   |     |   | 2004   |   |
|----------------------------------------------------------------------------------------------------|--------|--------|----------|--------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES                                                               |   |   |     |   |   |   |
| Net income (loss)                                                                                  |   | $      | (53,728  | )      |   | $      | (63,003 | ) |
| Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |   |   |     |   |   |   |   |   |
| Depreciation and amortization                                                                      |   |   | 144,947  |   |   |   | 143,936 |   |
| Change in assets and liabilities:                                                                  |   |   |     |   |   |   |   |   |
| Decrease (increase) in:                                                                            |   |   |     |   |   |   |   |   |
| Rents receivable                                                                                   |   |   | -        |   |   |   | - |   |
| Prepaid expenses                                                                                   |   |   | (2,064   | )      |   |   | 286 |   |
| Tenants' security deposits                                                                         |   |   | (455     | )      |   |   | (366 | ) |
| Tax and insurance impounds                                                                         |   |   | (13,953  | )      |   |   | 5,896 |   |
| Increase (decrease) in:                                                                            |   |   |     |   |   |   |   |   |
| Accounts payable                                                                                   |   |   | (6,347   | )      |   |   | 5,837 |   |
| Bank overdraft                                                                                     |   |   | -        |   |   |   | - |   |
| Accrued reporting and administrative fee                                                           |   |   | -        |   |   |   | - |   |
| Accrued partnership management fee                                                                 |   |   | 5,600    |   |   |   | - |   |
| Accrued interest                                                                                   |   |   | -        |   |   |   | - |   |
| Prepaid rents                                                                                      |   |   | -        |   |   |   | - |   |
| Tenants' security deposits                                                                         |   |   | 1,715    |   |   |   | (1,425 | ) |
| Net cash provided by (used in) operating activities                                                |   | $      | 75,715   |   |   | $      | 91,161 |   |
|                                                                                               |   |   |     |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES                                                               |   |   |     |   |   |   |   |   |
| Funding of replacement reserve                                                                     |   | $      | (29,874  | )      |   | $      | (28,458 | ) |
| Withdrawals from replacement reserve                                                               |   |   | 40,446   |   |   |   | 18,150 |   |
| Acquisition of property and equipment                                                              |   |   | (4,912   | )      |   |   | (15,542 | ) |
| Net cash provided by (used in) investing activities                                                |   | $      | 5,660    |   |   | $      | (25,850 | ) |
|                                                                                               |   |   |     |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES                                                               |   |   |     |   |   |   |   |   |
| Partner contributions                                                                              |   | $      | -        |   |   | $      | - |   |
| Partner distributions                                                                              |   |   | (70,000  | )      |   |   | (78,000 | ) |
| Principal payments on long-term debt                                                               |   |   | (35,033  | )      |   |   | (30,987 | ) |
| Net cash provided by (used in) financing activities                                                |   | $      | (105,033 | )      |   | $      | (108,987 | ) |

----

|                                             |   | 2005   |    |   | 2004   |   |
|--------------------------------------------------|--------|--------|---------|--------|--------|--------|
| Increase (decrease) in cash and cash equivalents |   | $      | (23,658 | )      |   | $      | (43,676 | ) |
|                                             |   |   |    |   |   |   |   |   |
| Cash and cash equivalents                        |   |   |    |   |   |   |   |   |
| Beginning                                        |   |   | 31,707  |   |   |   | 75,383 |   |
|                                             |   |   |    |   |   |   |   |   |
| Ending                                           |   | $      | 8,049   |   |   | $      | 31,707 |   |
|                                             |   |   |    |   |   |   |   |   |
|                                             |   |   |    |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |   |   |    |   |   |   |   |   |
| Cash paid during the year for interest           |   | $      | 136,413 |   |   | $      | 144,390 |   |

----

|   |      | Years          |
|--------|-----------|----------------|
|   | Buildings |   27.5    |
|   | Equipment |    7 |

|   |                      | Years |
|--------|---------------------------|-------|
|   | Deferred debt expense     | 30    |
|   | Tax credit monitoring fee | 15    |

----

----

|                          |   | 2005   |   |   | 2004   |   |
|-------------------------------|--------|--------|--------|--------|--------|--------|
| Deferred debt expense         |   | $      | 39,200 |   |   | $      | 39,200 |   |
| Tax credit monitoring fee     |   |   | 26,650 |   |   |   | 26,650 |   |
|                          |   | $      | 65,850 |   |   | $      | 65,850 |   |
| Less accumulated amortization |   |   | 31,907 |   |   |   | 28,823 |   |
|                          |   | $      | 33,943 |   |   | $      | 37,027 |   |

| December 31, 2006 |   | $      | 42,103    |   |
|-------------------|--------|--------|-----------|--------|
| 2007              |   |   | 45,116    |   |
| 2008              |   |   | 48,343    |   |
| 2009              |   |   | 51,802    |   |
| 2010              |   |   | 55,508    |   |
| Thereafter        |   |   | 1,472,416 |   |
| TOTAL             |   | $      | 1,715,288 |   |

----

----