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| TABLE OF CONTENTS                                              | Page |
|----------------------------------------------------------------|------|
| Independent Auditors' Report                                   | 1    |
| Balance Sheet                                                  | 2    |
| Statement of Income, Expenses and Changes in Partners' Capital | 3    |
| Statement of Cash Flows                                        | 4    |
| Notes to Financial Statements                                  | 5    |

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|  430 Verbena Court                               |   (925) 229-1950                 |
|-------------------------------------------------------|--------------------------------------------|
|  Pleasant Hill, CA 94523     |  Fax (925) 229-1952                   |
|                                                  |     wroweassoc@aol.com |

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|                                                                                                                                                       |   | 2004   |                                  |   | 2003   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|--------|--------|--------|
| ASSETSCURRENT ASSETS            Cash (Note 2)                                                       |   | $      |       66,297 |   |   | $      |      59,914 |   |
| Accounts receivable                                                                                                                                        |   |   | 1,249                                 |   |   |   | 215 |   |
| Prepaid expenses                                                                                                                                           |   |   | 3,335                                 |   |   |   | 2,652 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| TOTAL CURRENT ASSETS                                                                                                                                       |   |   | 70,881                                |   |   |   | 62,781 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| Restricted reserves (Note 3)                                                                                                                               |   |   | 55,350                                |   |   |   | 52,611 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| Land, structures and equipment, net ofaccumulated depreciation of $737,972and $699,947 (Note 4)                                                            |   |   | 1,427,382                             |   |   |   | 1,495,371 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| Organizational costs, net of accumulatedamortization of $18,997 and$17,329 (Note 5)                                                                        |   |   | 7,921                                 |   |   |   | 9,589 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| TOTAL ASSETS                                                                                                                                               |   | $      | 1,561,534                             |   |   | $      | 1,620,352 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| LIABILITIES AND PARTNERS' CAPITALCURRENT LIABILITIESAccounts payable - other                                                                               |   | $      | 10,468                                |   |   | $      | 8,564 |   |
| Accounts payable - related party (Note 7)                                                                                                                  |   |   | 3,462                                 |   |   |   | 2,007 |   |
| Security deposits payable                                                                                                                                  |   |   | 8,892                                 |   |   |   | 8,592 |   |
| Current portion of long-term debt (Note 6)                                                                                                                 |   |   | 38,536                                |   |   |   | 31,336 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| TOTAL CURRENT LIABILITIES                                                                                                                                  |   |   | 61,358                                |   |   |   | 50,499 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| Long-term debt (Note 6)                                                                                                                                    |   |   | 502,631                               |   |   |   | 544,925 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| TOTAL LIABILITIES                                                                                                                                          |   |   | 563,989                               |   |   |   | 595,424 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| Partners' Capital:General partner                                                                                                                          |   |   | 177,086                               |   |   |   | 215,383 |   |
| Limited partner                                                                                                                                            |   |   | 820,459                               |   |   |   | 809,545 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| TOTAL PARTNERS' CAPITAL                                                                                                                                    |   |   | 997,545                               |   |   |   | 1,024,928 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
|                     TOTAL LIABILITIES AND PARTNERS' CAPITAL |   | $      | 1,561,534                             |   |   | $      | 1,620,352 |   |
|                                                                                                                                                       |   |   |                                  |   |   |   |   |   |
| See accompanying notes.                                                                                                                                    |   |   |                                  |   |   |

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|                                                                                                                                             |   | 2004   |                                  |   | 2003   |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|---------------------------------------|--------|--------|--------|
| OPERATING INCOME                    Rental income |   | $      |      220,203 |   |   | $      |       205,982 |   |
| Tenant charges                                                                                                                                   |   |   | 3,111                                 |   |   |   | 1,043 |   |
| Other                                                                                                                                            |   |   | 1,900                                 |   |   |   | 2,034 |   |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| TOTAL OPERATING INCOME                                                                                                                           |   |   | 225,214                               |   |   |   | 209,059 |   |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| OPERATING EXPENSESAdministration                                                                                                                 |   |   | 22,732                                |   |   |   | 20,953 |   |
| Insurance and taxes                                                                                                                              |   |   | 8,233                                 |   |   |   | 5,660 |   |
| Maintenance                                                                                                                                      |   |   | 40,838                                |   |   |   | 28,676 |   |
| Utilities                                                                                                                                        |   |   | 20,289                                |   |   |   | 22,674 |   |
| Depreciation and amortization                                                                                                                    |   |   | 69,657                                |   |   |   | 69,704 |   |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| TOTAL EXPENSES                                                                                                                                   |   |   | 161,749                               |   |   |   | 147,667 |   |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| NET INCOME (LOSS) FROM OPERATIONS                                                                                                                |   |   | 63,465                                |   |   |   | 61,392 |   |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| OTHER INCOME AND EXPENSESInterest income                                                                                                         |   |   | 1,635                                 |   |   |   | 1,614 |   |
| Interest expense                                                                                                                                 |   |   | (41,100                               | )      |   |   | (43,596 | ) |
| NET OTHER INCOME UNDER EXPENSES                                                                                                                  |   |   | (39,465                               | )      |   |   | (41,982 | ) |
| NET INCOME (LOSS)                                                                                                                                |   |   | 24,000                                |   |   |   | 19,410 |   |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| BEGINNING PARTNERS' CAPITAL                                                                                                                      |   |   | 1,024,928                             |   |   |   | 1,048,211 |   |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| Partner withdrawals                                                                                                                              |   |   | (51,383                               | )      |   |   | (42,693 | ) |
|                                                                                                                                             |   |   |                                  |   |   |   |   |   |
| ENDING PARTNERS' CAPITAL                                                                                                                         |   | $      | 997,545                               |   |   | $      | 1,024,928 |   |

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|                                                                                                                     |   | 2004   |    |   | 2003   |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|--------|---------|--------|--------|--------|
| CASH FLOWS FROM OPERATING ACTIVITIES:Rents received                                                                      |   | $      | 219,169 |   |   | $      | 206,590 |   |
| Other operating revenues                                                                                                 |   |   | 5,011   |   |   |   | 3,077 |   |
| Cash payments for goods and services                                                                                     |   |   | (89,416 | )      |   |   | (74,188 | ) |
|      Net cash provided (used) by operating activities                                           |   |   | 134,764 |   |   |   | 135,479 |   |
|                                                                                                                     |   |   |    |   |   |   |   |   |
| CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES:       Increases in security deposits |   |   | 300     |   |   |   | 154 |   |
| Withdrawal from replacement reserves                                                                                     |   |   | 2,061   |   |   |   | - |   |
| Additions to replacement reserves                                                                                        |   |   | (4,800  | )      |   |   | (4,800 | ) |
|     Net cash provided (used) by capital and financing activities                                     |   |   | (2,439  | )      |   |   | (4,646 | ) |
|                                                                                                                     |   |   |    |   |   |   |   |   |
| CASH FLOWS FROM CAPITAL ANDRELATED FINANCING ACTIVITIES:Capital withdrawals                                              |   |   | (51,383 | )      |   |   | (42,693 | ) |
| Payment of debt                                                                                                          |   |   | (35,094 | )      |   |   | (32,931 | ) |
| Net cash provided (used) by capital andrelated financing activities                                                      |   |   | (86,477 | )      |   |   | (75,624 | ) |
|                                                                                                                     |   |   |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:Interest income                                                                     |   |   | 1,635   |   |   |   | 1,224 |   |
| Interest paid on notes                                                                                                   |   |   | (41,100 | )      |   |   | (43,596 | ) |
| Net cash provided (used) by investing activities                                                                         |   |   | (39,465 | )      |   |   | (42,372 | ) |
|                                                                                                                     |   |   |    |   |   |   |   |   |
| NET INCREASE (DECREASE) IN CASH                                                                                          |   |   | 6,383   |   |   |   | 12,837 |   |
| CASH - BEGINNING OF YEAR                                                                                                 |   |   | 59,914  |   |   |   | 47,077 |   |
| CASH - END OF YEAR                                                                                                       |   | $      | 66,297, |   |   | $      | 59,914 |   |
|                                                                                                                     |   |   |    |   |   |   |   |   |
| RECONCILIATION OF OPERATING LOSS TO NETCASH PROVIDED BY OPERATING ACTIVITIES:Net income from operations                  |   | $      | 63,465  |   |   | $      | 61,392 |   |
| Adjustments to reconcile net loss to   Net cash provided by operating activitiesDepreciation and amortization  |   |   | 69,657  |   |   |   | 69,704 |   |
| Decrease (increase) in accounts receivable                                                                               |   |   | (1,034  | )      |   |   | 608 |   |
| Increase in prepaid expenses                                                                                             |   |   | (683    | )      |   |   | (892 | ) |
| Increase in accounts payable - other                                                                                     |   |   | 1,904   |   |   |   | 5,411 |   |
|      Increase (decrease) in accounts payable -related parties                                        |   |   | 1,455   |   |   |   | (744 | ) |
| NET CASH PROVIDED BY OPERATING ACTIVITIES                                                                                |   | $      | 134,764 |   |   | $      | 135,479 |   |

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|   | Note 1 - DEFINITION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|--------|----------------------------------------------------------------------------------------|

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|      |   | Cost   |      |   | AccumulatedDepreciation |   |
|-----------|--------|--------|-----------|--------|-------------------------|--------|
|      |   |   |      |   |                    |   |
| Land      |   | $      | 275,000   |   |                    | $      |   |   |
| Building  |   |   | 1,868,634 |   |                    |   | 716,252 |   |
| Equipment |   |   | 21,720    |   |                    |   | 21,720 |   |
|      |   | $      | 2,165,354 |   |                    | $      | 737,972, |   |

|                                                                                                                                                                                             |   | Cost   |   |   | AccumulatedDepreciation |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|--------|-------------------------|--------|
|                                                                                                                                                                                             |   |   |   |   |                    |   |
|                              Organization costs |   | $      | 26,918 |   |                    | $      | 18,997 |   |

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| LAUREL CREEK APARTMENTSNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2004 |
|-----------------------------------------------------------------------|

| 2005                                                                                                                                                                                                                                                                                                                                                              |   | $       | 76,620        |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------|---------------|--------|
| 2006                                                                                                                                                                                                                                                                                                                                                              |   |    | 76,620        |   |
| 2007                                                                                                                                                                                                                                                                                                                                                              |   |    | 76,620        |   |
| 2008                                                                                                                                                                                                                                                                                                                                                              |   |    | 76,620        |   |
| 2009                                                                                                                                                                                                                                                                                                                                                              |   |    | 379,405       |   |
| Total                                                                                                                                                                                                                                                                                                                                                             |   |    | 685,885       |   |
|                                                       Less amounts representing interest |   |    | 144,718       |   |
|                                                                                                                                                                                                                                                                                                                                                              |   |    |          |   |
|                                                                                                                                                                                                                                                                                                                                                              |   |  $ | 541,167  |   |

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| LAUREL CREEK APARTMENTSNOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2004 |
|-----------------------------------------------------------------------|

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| LAUREL CREEK APARTMENTS                                  |   |   |       |
|----------------------------------------------------------|--------|--------|------------|
|                                                     |   |   |       |
| Calculation of Cash Distribution                         |   |   |       |
|                                                     |   |   |       |
| Net Profit @ 12-31-04                                    |   |   | 23,999.65  |   |
| Add back depreciation expense                            |   |   | 67,989.00  |   |
| Add back amortization expense                            |   |   | 1,668.00   |   |
| Deposits to replacement reserve account                  |   |   | (4,800.00  | ) |
| Debt service (mortgage loan)                             |   |   | (35,094.16 | ) |
| Adjusted cash available from operations through 12-31-04 |   | $      | 53,762.49  |   |
|                                                     |   |   |       |   |
| Net cash available for disbursement                      |   | $      | 53.762.49  |   |

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| Beginning balance as of:     | 1/1/2004    |   |   | 44,019.14 |   |              |
|------------------------------|-------------|--------|--------|-----------|--------|-------------------|
| Deposits to account for year | $400 per mo |   |   | 4,800.00  |   |              |
| Withdrawals during year      |        |   |   | (2,061.46 | )      | carpet in 2 units |
| Ending balance as of:        | 12/31/2004  |   |   | 46,757.68 |   |              |

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