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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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FORM 10-K



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|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
|- | ---------------------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2006

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
|- | ----------------------------------------------------------------------------------------------------------

For the transaction period from to

Commission File Number 0-15571



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CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP

(Exact name of registrant as specified in its
charter)



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|                                                              |  |                                    
|------------------------------------------------------------- |  | -----------------------------------
|North Carolina                                                |  | 56-1494619                         
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification No.)



|                                                    |  |           
|--------------------------------------------------- |  | ----------
|Suite 300, 1001 Wade Avenue Raleigh, North Carolina |  | 27605     
|(Address of principal executive offices)            |  | (Zip Code)

Registrants telephone number, including area code (919) 781-1700



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

Securities registered pursuant to Section 12(g) of the Act: 5,900 Units of Limited
Partnership Interests.



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Indicate
by checkmark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes ̈No  x.

Indicate by checkmark if the registrant is not required to file the
reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ̈No  x.

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 (Section 229.405
of this chapter) is not contained herein, and will not be contained, to the best of the 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  x.

Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer or a
non-accelerated filer (as defined in Rule 12b-2 of the Act).    Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act.    Yes ̈No  x.

Market Value of 5,875 Units held by nonaffiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrants most recently completed second fiscal quarter: $2,621,000 (based upon the offering price of $1,000 less the amount distributed per Unit).

Indicate the number of shares outstanding of each of the registrants classes of common stock, as of the latest practicable date: 5,900 Units outstanding as of
March 28, 2007.

The Exhibit Index appears on Page 13.



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PART I



|Item 1. | Business.
|------- | ---------

Carolina Investment Partners, Limited Partnership (the
Registrant) is a limited partnership organized in 1985 under the North Carolina Uniform Limited Partnership Act. The Registrant was formed for the purpose of investing in certain unimproved real properties located in Cary, North
Carolina. The Registrant acquired these properties, commonly known as the Martin Parcel and the Wellington Parcel, in 1986. As of April 9, 1998 all of the Wellington Parcel was sold.

On October 11, 2006, the Registrant sold 17.51 acres of the Martin Parcel to a third party under the terms of a Purchase Agreement between the Registrant and Singh
of Spectrum, LLC. The total sales price for the property sold was $4,212,445. Commissions paid as a result of the sale of the property were $315,933 including $105,311 paid to Walsmith Associates Two, a general partner of the Registrant.

On November 22, 2006, the Registrant sold the remaining 7.45 acres of the Martin Parcel to KCD Coorsdale, LLC. The total sales price for the property sold was
$1,682,486. Commissions paid as a result of the sale of the property were $126,186 including $42,062 paid to Walsmith Associates Two, a general partner of the Registrant.

As of November 22, 2006 all of the Martin Parcel was sold.

As of November 22, 2006, the Registrant did not own
any real property.



|Item 1A. | Risk Factors
|-------- | ------------

The Registrants business faces
numerous risks, including those set forth below. If any of the following risk and uncertainties develops into actual events, the Registrants business, financial condition or results of operations could be materially adversely affected. The
risks described below are not the only ones the Registrant faces. Additional risks not presently know to the General Partners or that the General Partners currently deem immaterial may also impair the Registrants business operations.

(a) Changes in Interest Rates

The Registrant currently invests most of its cash in a money market account at a local financial institution. The Registrant has exposure to changes in interest rates in that interest rates paid on money market balances fluctuate with
changes in market interest rates, therefore, interest earned on balances held in a money market account will decrease if market interest rates decrease.

The Registrant currently has no long-term debt; however, if the Registrant were to incur debt in the future, the Registrant would have exposure to changes in market rates. If the Registrant were to incur fixed rate
debt, the Registrant would have exposure to changes in market rates at the time such debt matures in that a market interest rate higher than that on the maturing debt: (a) may lower the amount of proceeds secured from a refinancing, and
(b) will decrease cash flow from future operations due to the higher interest rate. If the Registrant were to incur floating rate debt, the Registrant would also have exposure to changes in market rates in that with increases in market interest
rates, interest costs on such debt would increase and cash flow from future operations would decrease which such floating rate debt is outstanding.



1



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(b) Environmental Matters  General

The Registrant is subject to various federal, state and local laws, ordinances and regulations regarding environmental matters. Under these laws, the
Registrant may be required to investigate and clean up hazardous or toxic substances or petroleum product releases on land currently or formerly owned by it, and may be held liable to a governmental entity or to third parties for property damages
and cost of investigation, removal and contamination incurred by such parties. The penalty may be imposed whether or not the Registrant was aware of, or responsible for, the hazardous or toxic substances, and the liability under such laws has been
interpreted to be joint and several unless the harm is divisible and there is a reasonable basis for allocation of responsibility. The costs of investigation, removal and decontamination of such substances could be substantial. Some environmental
laws create a lien on a contaminated site in favor of the government for damages and costs it incurs in connection with such contamination. The Registrant may be subject to common law claims by third parties based on damages and costs resulting from
environmental contamination emanating from a site.

(c) Financial Covenants on Indebtedness

At December 31, 2006, the Registrant has no debt outstanding. Should the Registrant incur indebtedness in the future, required payments on such
future indebtedness generally would not be reduced if the Registrants economic performance declines. If the Registrants economic performance declines, cash flow from operations would be reduced. Under such circumstances, the Registrant
might not be able to sell some of its assets quickly enough to avoid default on any such future indebtedness. If debt service payments could not be made, the Registrant might sustain a loss or suffer judgments against the Registrant.

(d) FDIC Insurance Risk

The Registrant
maintains its cash at a bank insured by the Federal Deposit Insurance Corporation (FDIC). The FDIC, an independent agency of the United States government, insures deposits up to $100,000 per depositor, per bank, subject to certain
conditions. At December 31, 2006, the Registrant maintained cash balances of $2,225,783 in excess of FDIC-insured amounts. In the event that the bank where the Registrant maintains its accounts becomes insolvent, the Registrant may lose some or
all of such excess.

(e) Structure as a Limited Partnership

The Registrant is treated for federal and state income tax purposes as a limited partnership, and the General Partner has taken such steps as are known to it to perfect such treatment. Changes to laws may adversely
affect the treatment of the Registrant as a limited partnership. No assurance can be given that new tax laws will not significantly affect the Registrants qualifications as a limited partnership or the federal income tax consequences of such
qualification. New laws could be applied retroactively, which means that past operations could be found to be in violation, which would have a negative effect on the Registrants business. If the Registrant were to lose its status as a limited
partnership for federal and state tax purposes, the Registrant would be subject to federal and state income tax on the Registrants taxable income at the corporate tax rates.



|Item 2. | Properties
|------- | ----------

As of November 22, 2006, the Registrant did not
own any real property.



|Item 3. | Legal Proceedings.
|------- | ------------------

No material legal proceedings are pending
against the Registrant or its properties.



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|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

No matters
were submitted to a vote by the limited partners of the Registrant during the fourth quarter of 2006.

PART II



|Item 5. | Market for the Registrants Common Equity and Related Stockholder Matters.
|------- | --------------------------------------------------------------------------

(a) The Registrant has no common stock. There is no established public trading market for the Units.

(b)
The Registrant had 994 Limited Partners holding 5,900 Units as of December 31, 2006. The number of Limited Partners was determined by the Partnerships records maintained by the General Partner. An affiliate of the General Partner owns 25
of these 5,900 units.

(c) Until the Limited Partners have received distributions of cash from the Registrant of an aggregate amount equal
to 100% of the Capital Contributions of the Limited Partners, plus an additional return equivalent to 10% per annum simple interest on their Unreturned Capital Contributions, the Limited Partners will receive at least 99% of all
distributions of cash, which will be distributed and allocated among them in the ratio which the number of Units owned by each of them bears to the total number of Units outstanding. Thereafter, the Registrants distributions will be allocated
90% to the Limited Partners and 10% to the General Partner. Unreturned Capital Contribution means the Capital Contribution of a Limited Partner less any distributions of cash made by the Registrant to such Limited Partner.



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|Item 6. | Selected Financial Data.
|------- | ------------------------



|                                                |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|----------------------------------------------- |  | ---- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | ---- | --------- | - |  | - | --------- | -
|                                                |  | 2006 |           |   | 2005 |   |           | 2004 |  |   | 2003      |   |  | 2002 |          
|Summary of Operations:                          |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Gain on sale of land                            |  | $    | 1,750,074 |   |      | $ | 8,213     |      |  | $ | -0-       |   |  | $    | -0-       |   |  | $ | -0-       |  
|Gain from land Acquisition                      |  |      | -0-       |   |      |   | 390,080   |      |  |   | -0-       |   |  |      | -0-       |   |  |   | -0-       |  
|Other Income                                    |  |      | 46,866    |   |      |   | 1,634     |      |  |   | 872       |   |  |      | 1,885     |   |  |   | 1,719     |  
|Expenses                                        |  |      | 86,276    |   |      |   | 58,420    |      |  |   | 72,961    |   |  |      | 52,977    |   |  |   | 51,676    |  
|Net Income (Loss)                               |  |      | 1,710,664 |   |      |   | 341,507   |      |  |   | (72,089   | ) |  |      | (51,092   | ) |  |   | (49,957   | )
|Net Income (Loss) per limited partnership unit: |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|From gain on sale of land                       |  |      | 296.62    |   |      |   | 1.39      |      |  |   | -0-       |   |  |      | -0-       |   |  |   | -0-       |  
|From gain on land Acquisition                   |  |      | -0-       |   |      |   | 66.11     |      |  |   | -0-       |   |  |      | -0-       |   |  |   | -0-       |  
|From other operations                           |  |      | (6.68     | ) |      |   | (9.62     | )    |  |   | (12.22    | ) |  |      | (8.66     | ) |  |   | (8.47     | )
|                                                |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Total per unit                                  |  |      | 289.94    |   |      |   | 57.88     |      |  |   | (12.22    | ) |  |      | (8.66     | ) |  |   | (8.47     | )
|Distribution per unit                           |  |      | 910.99    |   |      |   | -0-       |      |  |   | -0-       |   |  |      | -0-       |   |  |   | -0-       |  
|Selected Balances:                              |  |      |           |   |      |   |           |      |  |   |           |   |  |      |           |   |  |   |           |  
|Cash and Short-Term Investments                 |  |      | 377,243   |   |      |   | 250,459   |      |  |   | 4,559     |   |  |      | 95,214    |   |  |   | 168,822   |  
|Land held for Investment                        |  |      | -0-       |   |      |   | 3,678,897 |      |  |   | 3,594,592 |   |  |      | 3,594,592 |   |  |   | 3,594,592 |  
|Total Assets                                    |  |      | 378,381   |   |      |   | 3,956,301 |      |  |   | 3,603,255 |   |  |      | 3,694,070 |   |  |   | 3,767,514 |  
|Total Liabilities                               |  |      | 209,282   |   |      |   | 102,483   |      |  |   | 90,944    |   |  |      | 109,669   |   |  |   | 132,022   |  
|General Partners equity                        |  |      | -0-       |   |      |   | 3,415     |      |  |   | -0-       |   |  |      | -0-       |   |  |   | -0-       |  
|Limited Partners equity                        |  |      | 169,099   |   |      |   | 3,850,403 |      |  |   | 3,512,311 |   |  |      | 3,584,400 |   |  |   | 3,635,492 |  



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

The Registrants operations resulted in net income of $1,710,664 during 2006 compared to net income of $341,507 during 2005 and a net loss of $72,089 during 2004. The primary differences between 2006 in
comparison to 2005 and 2004 were:

2006 vs. 2005



| |  |  | During 2006, the Registrant sold its remaining undeveloped land. The amount sold in 2006 was higher than that sold in 2005, thus yielding a higher gain.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | During 2006, operating expenses were higher than 2005 due to costs incurred during the sale of the land.
| | - |  | --------------------------------------------------------------------------------------------------------

2006 vs. 2004



| |  |  | During 2006, the Registrant sold its remaining undeveloped land. No land was sold in 2004, thus income was higher in 2006.
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | During 2006, operating expenses were higher than 2004 due to costs incurred during the sell of the land.
| | - |  | --------------------------------------------------------------------------------------------------------

As of November 22, 2006, the Registrant did not own any real property.

As of December 31, 2006, the Registrant has $377,244 in cash and short-term investments which is sufficient to meet its needs during the next year.

The Registrant maintains its excess funds in a money market account at Capstone Bank. The General Partner believes the account is an appropriate investment of the Registrants funds.

During 2006, the Registrant made total distributions of 5,395,383.



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Cautionary Statement Identifying Important Factors That Could Cause the Registrants Actual Results to Differ
From Those Projected in Forward Looking Statements.

In connection with the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995, readers of this document, and any document incorporated by reference herein, are advised that this document and documents incorporated by reference into this document contain both statements of historical facts and forward
looking statements. Forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from those indicated by the forward looking statements. Examples of forward looking statements
include, but are not limited to (i) projections of revenues, income or loss, earnings or loss per share, capital expenditures, dividends, capital structure and other financial items, (ii) statements of the plans and objectives of the
Registrant or its management, including the introduction of new products, or estimates or predictions of actions by customers, suppliers, competitors or regulatory authorities, (iii) statements of future economic performance, and
(iv) statements of assumptions underlying other statements and statements about the Registrant or its business.

This document and any documents
incorporated by reference herein also identify important factors which could cause actual results to differ materially from those indicated by the forward looking statements. These risks and uncertainties include environmental and similar
liabilities, future operating expenses and the adequacy of capital resources to meet future operating expenses, which are described herein and/or in documents incorporated by reference herein.

The cautionary statements made pursuant to the Private Securities Litigation Reform Act of 1995 above and elsewhere by the Registrant should not be construed as
exhaustive or as any admission regarding the adequacy of disclosures made by the Registrant prior to the effective date of such Act. Forward looking statements are beyond the ability of the Registrant to control and in many cases the Registrant
cannot predict what factors would cause actual results to differ materially from those indicated by the forward looking statements.



|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk.
|-------- | -----------------------------------------------------------

The
Registrant does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item. The Registrants cash is held in checking accounts or highly
liquid investments with original maturities of three months or less.



|Item 8. | Financial Statements and Supplementary Data.
|------- | --------------------------------------------

Registrants
financial statements are included elsewhere herein. See List of Financial Statements.



|Item 9. | Changes in and Disagreements with Accountant on Accounting and Financial Disclosure.
|------- | ------------------------------------------------------------------------------------

None.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

An evaluation of the Registrants
disclosure controls and procedures (as defined in Rules 13a-15 and 15d-15 under the Securities Exchange Act) was carried out under the supervision and with the participation of the Registrants management, including the general partner of
Walsmith Associates Two, which is the general partner of the Registrant, within the 90 days preceding the filing of this Annual Report on Form 10-K. Based on that evaluation, the general partner has concluded that the Registrants disclosure
controls and procedures were effective as of the end of the annual period covered by this report (December 31, 2005), in ensuring that material information relating to the Registrant required to be disclosed by the Registrant in reports that it
files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms, including ensuring that such material information is
accumulated and communicated to the Registrants management, including the Registrants general partner, as appropriate to allow timely decisions regarding required disclosure.



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There were no significant changes in the Registrants internal controls over financial reporting during the
Registrants most recently completed fiscal quarter that materially affected, or are reasonably likely to materially affect, the Registrants internal control over financial reporting.



|Item 9B | Other Information
|------- | -----------------

None.

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance.
|-------- | -------------------------------------------------------

The
Registrant has no directors or executive officers. The Registrant is managed, and its investment decisions are made, by the general partners of the General Partner. The General Partner is Walsmith Associates Two, a North Carolina general
partnership. Except as expressly provided in the Partnership Agreement, the General Partner has the power to do any and all things necessary or incident to the conduct of the Registrants business. The general partners of the General Partner
are:



|                    |  |     |  |                                                                                                                                                                               
|------------------- |  | --- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|NAME                |  | AGE |  | Business Experience During Past Five Years, Family Relationships
and Directorships in Public Companies                                                                        
|Donald F. Walston   |  | 64  |  | President since 1982, and founder of Howard Perry & Walston Realty, Inc., a residential real estate brokerage company located in the Research Triangle area of North
Carolina.
|                    |  |    
|Alton L. Smith, III |  | 57  |  | Mr. Smith is an officer and director of Trademark Properties, Inc. Mr. Smith is the brother of C. Stephen Smith                                                               
|                    |  |    
|C. Stephen Smith    |  | 56  |  | Mr. Smith is an independent commercial real estate broker. Mr. Smith is the brother of Alton L. Smith, III                                                                    

To the knowledge of the Registrant, no person is the beneficial owner of more than 590 units, 10% of the
outstanding Units.



|Item 11. | Executive Compensation.
|-------- | -----------------------

The Agreement of Limited Partnership of
the Registrant (the Partnership Agreement) governs the amount of compensation payable to Walsmith Associates, Two, the General Partner of the Registrant.

Each year any portion of the properties of the Registrant remained undeveloped, the Registrant pays the General Partner an annual $3,000 management fee.

If any portion of the Registrants properties were developed by the Registrant, the Registrant would pay the General Partner a 3% development fee based upon the cost of improvements, net of land. No amounts were
paid to the General Partner as a development fee during the year ended December 31, 2006.

The Registrant may also pay personnel engaged by or on its
behalf to coordinate or supervise development, construction and operational activities, including partners and employees of its General Partner. The Registrant has hired an outside accounting firm for all other record keeping such as securities law
filings and maintenance of the partnership database.

The Partnership Agreement calls for the General Partner to be allocated a minimum of 1% of the gain
from the sale of property. The General Partner receives cash to the extent it is allocated income. (See Item 6. Managements Discussion and Analysis of Financial Condition and Results of Operations.)



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Upon the sale of the Martin Parcel the General Partner was to be
paid a broker listing fee of up to five (5%) percent of the sales price if the sale is to a party unaffiliated with the General Partner. If the property was sold by a broker unaffiliated with the General Partner, the Registrant may also pay the
unaffiliated broker a two and one-half (21/2%) percent broker-reallowance fee. The Registrant paid broker
listing fees in the amount of $442,119 during the year ended December 31, 2006, including $142,373 paid to the General Partner.

No other
amounts were paid for services during the year ended December 31, 2006 to the General Partner or any of its partners or employees.

If the Registrant
operates developed projects, the General Partner would receive standard leasing commissions and standard property management fees. No amounts were paid during the year ended December 31, 2006.

The General Partner receives cash to the extent it is allocated income. Pursuant to the Partnership Agreement, the General Partner is allocated 1% of each material item
of Partnership income, gain, loss, deduction, or credit. Otherwise all distributions are to the limited partners until such time as these distributions equal their original capital contributions plus an additional return of 10% per annum simple
interest on their outstanding capital contribution (original contributions as reduced by any prior distributions). Thereafter, Partnership distributions will be allocated 10% to the General Partner and 90% to the limited partners. During 2006, the
General Partner was allocated total distributions of $20,522. $17,107 of this amount remains unpaid as of December 31, 2006.

Information about
comparative five-year return on investment in the Registrant compared to market indexes has not been included herein because there is no public market in Units of the Registrant. The limited partnership agreement of the Registrant places substantial
restrictions on transfer of Units of the Registrant. Accordingly, the Registrant believes comparisons to indexes of publicly traded securities would not be meaningful disclosure for investors.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management.
|-------- | ---------------------------------------------------------------

(a) As of March 28, 2007, no person was known by the Registrant to beneficially own more than 5% of the Units. The table set forth below indicates the ownership of units by certain general partners of the General
Partner as of December 31, 2006:



|                         |  |                                                    |  |                   |  |                 
|------------------------ |  | -------------------------------------------------- |  | ----------------- |  | ----------------
|Title                    |  | Name & Address                                     |  | Amount and Nature |  | Percent of Class
|Limited Partnership Unit |  | Alton L. Smith III 4000 Blue Ridge Road, Suite
100 |  | 25 units (1)      |  | *               
|                         |  | Raleigh, NC 27612                                  |  |                   |  |                 

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|* | Indicates less than 1%.
|- | -----------------------

|(1) | Held in trust for Mr. Smiths children. Mr. Smith serves as trustee of the trust.
|--- | ---------------------------------------------------------------------------------



| | (b) | As a limited partnership, the Registrant has no officers and directors, although Alton L. Smith, III, a general partner of the General Partner, serves the Registrant in the role of
its principal financial officer. The General Partner has contributed $1,000 to the Registrants capital account; however, this contribution is not treated as the equivalent of a Unit of limited partnership interest. The General
Partners contribution constitutes less than 1% of the total capital contributed to the Registrant. Walston, Smith and Smith are general partners of the General Partner. Alton L. Smith III beneficially owns 25 units through a trust, for which
he serves as trustee. Neither Mr. Walston nor Mr. C. Stephen Smith beneficially owns any units of the Registrant.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 13. | Certain Relationships and Related Transactions and Director Independence
|-------- | ------------------------------------------------------------------------

See Item 11 Executive Compensation.

The Registrant has no directors or executive officers. The Registrant is managed, and its
investment decisions are made, by the general partners of the General Partner.



|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

The
following table presents fees for professional audit services rendered by Lynch & Howard, P.A., for the audit of the Registrants annual financial statements for 2005 and 2006, fees billed for tax and other services rendered by Thomas,
Judy & Tucker, P.A., and general accounting services rendered by Mary Ann Orr.



|               |  |      |       |      |   |       
|-------------- |  | ---- | ----- | ---- | - | ------
|               |  | 2005 |       | 2006
|Audit fees     |  | $    | 6,550 |      | $ | 8,700 
|               |  |      |       |      |   |       
|Tax fees (1)   |  | $    | 2,300 |      | $ | 3,500 
|               |  |      |       |      |   |       
|All other fees |  | $    | 7,548 |      | $ | 15,494
|               |  |      |       |      |   |       

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|(1) | Tax fees consisted primarily of amounts billed for preparation of the annual tax return.
|--- | ----------------------------------------------------------------------------------------

PART IV



|Item 15. | Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
|-------- | -----------------------------------------------------------------



| | (a) | The following documents are filed as part of this report:
| | --- | ---------------------------------------------------------



| | (1) | List of Financial Statements:
| | --- | -----------------------------

See List of
Financial Statements.



| | (2) | List of Financial Statement Schedules: All schedules are omitted as they are not applicable or the required information is shown in the financial statements or the notes thereto.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (3) | Exhibit Index. All exhibits are incorporated by reference.
| | --- | ----------------------------------------------------------



| | (b) | No Current Report on Form 8-K was filed during the quarter ended December 31, 2006.
| | --- | -----------------------------------------------------------------------------------



| | (c) | The following exhibits have been filed by the Registrant with the Securities and Exchange Commission under the Securities Exchange Act of 1934 (File Number 0-15571) and are
incorporated herein by reference:
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                |  |                                                                                                                                                                                                 
|--------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. 3.1 |  | Amended Agreement of Limited Partnership of the Registrant (incorporated by reference to Exhibit 4.1 to the Registrants Annual Report filed on Form 10-K for the year ended
December 31, 1986).



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|                 |  |                                                                                                                                                                                                                                                                                                                       
|---------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. 10.1 |  | Purchase Agreement between Registrant and Walsmith Associates regarding the Martin Parcel (incorporated by reference to Exhibit 10.1 to the Registrants Annual Report filed on Form 10-K for
the year ended December 31, 1986).                                                                                      
|Exhibit No. 10.2 |  | Offer to Purchase and Contract for the Sale and Purchase of Real Estate, dated as of January 24, 1986, between Wellington Park Associates and the Registrant (incorporated by reference to Exhibit
6A to the Registrants Quarterly Report filed on Form 10-Q for the period ended June 30, 1989).                    
|Exhibit No. 10.3 |  | Agreement between the North Carolina Department of Transportation and Walsmith Associates (incorporated by reference to Exhibit 10.3 to the Registrants Annual Report on Form 10-K for the
year ended December 31, 1986).                                                                                            
|Exhibit No. 10.4 |  | Assignment and Assumption Agreement between the Registrant and Walsmith Associates (incorporated by reference to Exhibit 10.4 to the Registrants Annual Report on Form 10-K for the year
ended December 31, 1986).                                                                                                   
|Exhibit No. 10.5 |  | Amendment to Offer to Purchase and Contract for the Sale and Purchase of Real Estate, dated as of February 1, 1990, between Wellington Park Associates and the Registrant (incorporated by
reference to Exhibit 10.6 to the Registrants Annual Report filed on Form 10-K for the period ended December 31, 1989).    
|Exhibit No. 10.6 |  | Agreement for the Purchase and Sale of Real Estate, dated as of April 20, 1995, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant (incorporated by
reference to Exhibit C to the Registrants Current Report filed on Form 8-K, dated April 20, 1995).                           
|Exhibit No. 10.7 |  | First Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of August 9, 1995, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit C to the Registrants Current Report filed on Form 8-K, dated August 9, 1995).    
|Exhibit No. 10.8 |  | Second Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of April 19, 1996, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit 28.5 to the Registrants Quarterly Report filed on Form 10-Q for the period ended



10



---

|                  |  |                                                                                                                                                                                                                                                                                                                                                          
|----------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  |  | March 31, 1996).                                                                                                                                                                                                                                                                                                                                         
|Exhibit No. 10.9  |  | Third Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 10, 1996, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit 10.1 to the Registrants Current Report filed on Form 8-K, dated September 25, 1996).                            
|Exhibit No. 10.10 |  | Fourth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September, 1996, between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit 10.2 to the Registrants Current Report filed on Form 8-K, dated September 25, 1996).                              
|Exhibit No. 10.11 |  | Fifth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 27, 1996, between Wellington Center Associates, LLC, ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit 10.3 to the Registrants Current Report filed on Form 8-K, dated September 25, 1996).                  
|Exhibit No. 10.12 |  | Sixth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated as of September 12, 1997, between Wellington Center Associates, LLC, ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit 10.12 to the Registrants Quarterly Report filed on Form 10-Q for the period ended September 30, 1997).
|Exhibit No. 10.13 |  | Letter Agreement to amend the Agreement for the Purchase and Sale of Real Estate, dated December 12, 1997 between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the
Registrant (incorporated by reference to Exhibit 10.13 to the Registrants Quarterly Report filed on Form 10-Q for the period ended March 31, 1998).               
|Exhibit No. 10.14 |  | Eighth Amendment to the Agreement for the Purchase and Sale of Real Estate, dated March 24, 1998 between Churchill & Banks, Ltd., ADA Corporation of North Carolina, and the Registrant
(incorporated by reference to Exhibit 10.14 to the Registrants Quarterly Report filed on Form 10-Q for the period ended March 31, 1998).                        
|Exhibit No. 10.15 |  | Agreement of Purchase and Sale, dated October 29, 2002, between Valterra Holdings, LLC and the Registrant (incorporated by reference to Exhibit 10.15 to the Registrants                                                                                                                                                                                



11



---

|                  |  |                                                                                                                                                                                                                                                             
|----------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                  |  | Annual Report filed on Form 10-K for the period ended December 31, 2002).                                                                                                                                                                                   
|Exhibit No. 10.16 |  | Quitclaim Deed, dated January 25, 2005, between the North Carolina Department of Transportation and the Registrant (incorporated by reference to Exhibit 10.16 to the Registrants
Quarterly Report filed on Form 10-Q for the period ended March 31, 2005).
|Exhibit No. 10.17 |  | Purchase Agreement, dated June 6, 2006, between Singh Properties Co., LLC and the Registrant (incorporated by reference to Exhibit 10.16 to the Registrants Quarterly Report filed on Form
10-Q for the period ended June 30, 2006).                       
|Exhibit No. 31.1  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                    
|Exhibit No. 31.2  |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                    
|Exhibit No. 32.1  |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                     
|Exhibit No. 32.2  |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                     

(d) All financial statement schedules are omitted because they are not applicable or the required
information is shown in the financial statements attached hereto or notes thereto.



12



---

ANNUAL REPORT ON FORM 10-K

ITEMS 8 AND 14 (a) (1)

FINANCIAL STATEMENTS

LIST OF FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2006

CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP

RALEIGH, NORTH CAROLINA



13



---

Form 10-KItems, 8, 14 (a) (1) and (2) and (d)

CAROLINA INVESTMENT PARTNERS, LIMITED PARTNERSHIP

December 31, 2006

LIST OF FINANCIAL STATEMENTS

The following financial
statements of Carolina Investment Partners, Limited

Partnership are included in Item 8:



|                                                                                        |  |    
|--------------------------------------------------------------------------------------- |  | ---
|Report of Independent Registered Public Accounting Firm                                 |  | F-1
|                                                                                        | 
|Balance SheetsDecember 31, 2006 and 2005                                               |  | F-2
|                                                                                        | 
|Statements of OperationsYears Ended December 31, 2006, 2005 and 2004                   |  | F-3
|                                                                                        | 
|Statements of Changes in Partners EquityYears Ended December 31, 2006, 2005, and 2004 |  | F-4
|                                                                                        | 
|Statements of Cash FlowsYears Ended December 31, 2006, 2005, and 2004                  |  | F-5
|                                                                                        | 
|Notes to Financial Statements                                                           |  | F-6

Schedules to the financial statements for which provision is made in the applicable accounting regulations of the
Securities and Exchange Commission are inapplicable or the required information is included in the financial statements or the notes thereto.



14



---

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Partners

Carolina Investment Partners Limited Partnership

Raleigh, North Carolina

We have audited the accompanying balance sheets of Carolina Investment Partners Limited Partnership as of December 31, 2006 and 2005, and the related
statements of operations, changes in partners equity and cash flows for each of the three years in the period ended December 31, 2006. These financial statements are the responsibility of the Partnerships management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the
Public Company Accounting Oversight Board (United States). 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.

In our opinion, the financial statements referred
to above present fairly, in all material respects, the financial position of Carolina Investment Partners Limited Partnership as of December 31, 2006 and 2005, and the results of its operations and its cash flows for each of the three years in
the period ended December 31, 2006 in conformity with U.S. generally accepted accounting principles.

/s/ Lynch & Howard, P.A.

Raleigh, North Carolina

February 26, 2007



F-1



---

Exhibit A

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

BALANCE SHEETS

ASSETS



|                                                                          |  |             |         |      |   |          
|------------------------------------------------------------------------- |  | ----------- | ------- | ---- | - | ---------
|                                                                          |  | December 31
|                                                                          |  | 2006        |         | 2005
|ASSETS:                                                                   |  |             |         |      |   |          
|Cash                                                                      |  | $           | 99,424  |      | $ |         
|Short-term investments                                                    |  |             | 277,819 |      |   | 250,459  
|Land held for investment (Note 4)                                         |  |             |        |      |   | 3,678,897
|Accounts receivable                                                       |  |             |        |      |   | 22,841   
|Accounts receivable - related party                                       |  |             | 1,138   |      |   | 4,104    
|                                                                          |  |             |         |      |   |          
|                                                                          |  | $           | 378,381 |      | $ | 3,956,301
|                                                                          |  |             |         |      |   |          
|LIABILITIES AND PARTNERS EQUITY                                          |  |             |         |      |   |          
|LIABILITIES:                                                              |  |             |         |      |   |          
|Cash overdraft                                                            |  | $           |        |      | $ | 20,567   
|Accounts payable - trade                                                  |  |             | 31,484  |      |   | 15,960   
|Accounts payable - related party                                          |  |             | 17,107  |      |   |         
|Distributions not claimed by limited partners                             |  |             | 160,691 |      |   | 65,956   
|                                                                          |  |             |         |      |   |          
|Total Liabilities                                                         |  |             | 209,282 |      |   | 102,483  
|                                                                          |  |             |         |      |   |          
|PARTNERS EQUITY:                                                         |  |             |         |      |   |          
|General Partners equity                                                  |  |             |        |      |   | 3,415    
|Limited partners equity - 5,900 units authorized, issued and outstanding |  |             | 169,099 |      |   | 3,850,403
|                                                                          |  |             |         |      |   |          
|Total Partners Equity                                                    |  |             | 169,099 |      |   | 3,853,818
|                                                                          |  |             |         |      |   |          
|                                                                          |  | $           | 378,381 |      | $ | 3,956,301
|                                                                          |  |             |         |      |   |          

The Notes to Financial Statements are an integral part of this statement.



F-2



---

Exhibit B

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

STATEMENTS OF OPERATIONS



|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|-------------------------------------------------------------------------------------------------------------- |  | ---------------------- | --------- | ---- | - | ------- |  | - | ------- | -
|                                                                                                               |  | Year Ended December 31 |          
|                                                                                                               |  | 2006                   |           | 2005 |   | 2004    | 
|REVENUES:                                                                                                      |  |                        |           |      |   |         |  |   |         |  
|Gain on sale of land                                                                                           |  | $                      | 1,750,074 |      | $ | 8,213   |  | $ |        |  
|Gain from land acquisition                                                                                     |  |                        |          |      |   | 390,080 |  |   |        |  
|Interest and other income                                                                                      |  |                        | 46,866    |      |   | 1,634   |  |   | 872     |  
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|Total Revenues                                                                                                 |  |                        | 1,796,940 |      |   | 399,927 |  |   | 872     |  
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|OPERATING EXPENSES:                                                                                            |  |                        |           |      |   |         |  |   |         |  
|General and administrative expenses                                                                            |  |                        | 83,276    |      |   | 55,420  |  |   | 69,961  |  
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|Related party expenses (Note 3)                                                                                |  |                        | 3,000     |      |   | 3,000   |  |   | 3,000   |  
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|Total Operating Expenses                                                                                       |  |                        | 86,276    |      |   | 58,420  |  |   | 72,961  |  
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|NET INCOME (LOSS)                                                                                              |  | $                      | 1,710,664 |      | $ | 341,507 |  | $ | (72,089 | )
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|ALLOCATION OF NET INCOME (LOSS) (Note 2):                                                                      |  |                        |           |      |   |         |  |   |         |  
|To General Partner                                                                                             |  | $                      | 17,107    |      | $ | 3,415   |  | $ |        |  
|To Limited Partners                                                                                            |  |                        | 1,693,557 |      |   | 338,092 |  |   | (72,089 | )
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|                                                                                                               |  | $                      | 1,710,664 |      | $ | 341,507 |  | $ | (72,089 | )
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  
|NET INCOME (LOSS) PER LIMITED PARTNERSHIP UNIT:                                                                |  |                        |           |      |   |         |  |   |         |  
|(Based on 5,900 weighted average limited partnership units outstanding during each year) From other operations |  | $                      | 287       |      | $ | 57      |  | $ | (12     | )
|                                                                                                               |  |                        |           |      |   |         |  |   |         |  

The Notes to Financial Statements are an integral part of this statement.



F-3



---

Exhibit C

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

STATEMENTS OF CHANGES IN PARTNERS EQUITY



|                             |  |                         |  |                        |         |   |                        |   |            |       |  |   |            |  
|---------------------------- |  | ----------------------- |  | ---------------------- | ------- | - | ---------------------- | - | ---------- | ----- |  | - | ---------- | -
|                             |  | LimitedPartnershipUnits |  | GeneralPartnersEquity |         |   | LimitedPartnersEquity |   |            | Total | 
|Balance at December 31, 2003 |  | 5,900                   |  | $                      |        |   |                        | $ | 3,584,400  |       |  | $ | 3,584,400  |  
|Net loss for 2004            |  |                        |  |                        |        |   |                        |   | (72,089    | )     |  |   | (72,089    | )
|                             |  |                         |  |                        |         |   |                        |   |            |       |  |   |            |  
|Balance at December 31, 2004 |  | 5,900                   |  | $                      |        |   |                        | $ | 3,512,311  |       |  | $ | 3,512,311  |  
|Net income for 2005          |  |                        |  |                        | 3,415   |   |                        |   | 338,092    |       |  |   | 341,507    |  
|                             |  |                         |  |                        |         |   |                        |   |            |       |  |   |            |  
|Balance at December 31, 2005 |  | 5,900                   |  | $                      | 3,415   |   |                        | $ | 3,850,403  |       |  | $ | 3,853,818  |  
|Net income for 2006          |  |                        |  |                        | 17,107  |   |                        |   | 1,693,557  |       |  |   | 1,710,664  |  
|Distributions for 2006       |  |                        |  |                        | (20,522 | ) |                        |   | (5,374,861 | )     |  |   | (5,395,383 | )
|                             |  |                         |  |                        |         |   |                        |   |            |       |  |   |            |  
|Balance at December 31, 2006 |  | 5,900                   |  | $                      |        |   |                        | $ | 169,099    |       |  | $ | 169,099    |  
|                             |  |                         |  |                        |         |   |                        |   |            |       |  |   |            |  

The Notes to Financial Statements are an integral part of this statement.



F-4



---

Exhibit D

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

STATEMENTS OF CASH FLOWS



|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|------------------------------------------------------------------------------------ |  | ----------------------- | ---------- | - | ---- | - | -------- | ---- |  | - | ------- | -
|                                                                                     |  | Years Ended December 31 |           
|                                                                                     |  | 2006                    |            |   | 2005 |   |          | 2004 | 
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                |  |                         |            |   |      |   |          |      |  |   |         |  
|Net income (loss)                                                                    |  | $                       | 1,710,664  |   |      | $ | 341,507  |      |  | $ | (72,089 | )
|Adjustments to reconcile net income (loss) to net cash used in operating activities: |  |                         |            |   |      |   |          |      |  |   |         |  
|Gain on sale of land                                                                 |  |                         | (1,750,074 | ) |      |   | (8,213   | )    |  |   |        |  
|Gain from land acquisition                                                           |  |                         |           |   |      |   | (390,080 | )    |  |   |        |  
|Changes in operating assets and liabilities:                                         |  |                         |            |   |      |   |          |      |  |   |         |  
|Accounts receivable                                                                  |  |                         | 22,841     |   |      |   | (22,841  | )    |  |   |        |  
|Accounts receivable - related party                                                  |  |                         | 2,966      |   |      |   |         |      |  |   | (2      | )
|Prepaid expense                                                                      |  |                         |           |   |      |   |         |      |  |   | 162     |  
|Accounts payable - trade                                                             |  |                         | 15,524     |   |      |   | 2,715    |      |  |   | 619     |  
|Accounts payable - related party                                                     |  |                         | 17,107     |   |      |   | (10,423  | )    |  |   | 10,423  |  
|Distributions not claimed by limited partners                                        |  |                         | 94,735     |   |      |   | (1,320   | )    |  |   | (29,767 | )
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|Net Cash Provided By (Used In) Operating Activities                                  |  |                         | 113,763    |   |      |   | (88,655  | )    |  |   | (90,654 | )
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                |  |                         |            |   |      |   |          |      |  |   |         |  
|Proceeds from sale of land                                                           |  |                         | 5,769,185  |   |      |   | 314,017  |      |  |   |        |  
|Payments for capitalized costs                                                       |  |                         | (340,214   | ) |      |   | (29      | )    |  |   |        |  
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|Net Cash Provided By Investing Activities                                            |  |                         | 5,428,971  |   |      |   | 313,988  |      |  |   |        |  
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                |  |                         |            |   |      |   |          |      |  |   |         |  
|Distributions to partners                                                            |  |                         | (5,395,383 | ) |      |   |         |      |  |   |        |  
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|NET INCREASE (DECREASE) IN CASH                                                      |  |                         | 147,351    |   |      |   | 225,333  |      |  |   | (90,654 | )
|                                                                                     |  |                         |           
|CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                        |  |                         | 229,892    |   |      |   | 4,559    |      |  |   | 95,213  |  
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|CASH AND CASH EQUIVALENTS - END OF YEAR                                              |  | $                       | 377,243    |   |      | $ | 229,892  |      |  | $ | 4,559   |  
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|Supplemental Disclosure of Cash Flows Information:                                   |  |                         |            |   |      |   |          |      |  |   |         |  
|                                                                                     |  |                         |           
|Cash and cash equivalents:                                                           |  |                         |            |   |      |   |          |      |  |   |         |  
|Cash                                                                                 |  | $                       | 99,424     |   |      | $ |         |      |  | $ | 4,297   |  
|Short-term investments                                                               |  |                         | 277,819    |   |      |   | 250,459  |      |  |   | 262     |  
|Cash overdraft                                                                       |  |                         |           |   |      |   | (20,567  | )    |  |   |        |  
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  
|                                                                                     |  | $                       | 377,243    |   |      | $ | 229,892  |      |  | $ | 4,559   |  
|                                                                                     |  |                         |            |   |      |   |          |      |  |   |         |  

The Notes to Financial Statements are an integral part of this statement.



F-5



---

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

NOTES TO
FINANCIAL STATEMENTS

December 31, 2006 and 2005



|(1) | ORGANIZATION AND NATURE OF OPERATIONS
|--- | -------------------------------------

Carolina
Investment Partners Limited Partnership (the Partnership) was organized in 1985 to invest in real property, which it will sell or lease undeveloped or develop into office or commercial projects. Walsmith Associates Two, a North Carolina
General Partnership, is the general partner (General Partner). The Partnership has invested in real estate located in Cary, North Carolina.



|(2) | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|--- | ------------------------------------------

Statement of Cash Flows

For the purposes of reporting cash flows, the Partnership considers cash equivalents to be cash on
hand, cash in banks, and all highly liquid debt instruments with a maturity of less than three months.

Land Held for Investment

Land held for investment is stated at contract cost plus highway interchange construction costs and capitalized appraisal, survey, and
closing costs and adjusted for impairments as required by Financial Accounting Standards Board Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Management compares the cost of land held to sales of
similar property and obtains an independent appraisal to determine the potential for impairment. There are no material differences between the book and federal tax cost basis of the property.

Income Taxes

No provision has been
made for income taxes since income or loss is includable in the partners returns as they report to tax authorities in their respective capacities as partners.

Managements Use of Estimates

The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates and assumptions. These affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



F-6



---

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

NOTES TO FINANCIAL STATEMENTS

December 31, 2006 and 2005



|(2) | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
|--- | ------------------------------------------------------

Concentrations of Credit Risk

The Partnership may, from time to time, maintain cash deposits in banks in excess of the
federally insured amounts.

Cash and Short-Term Investments

Cash and short-term investments consisted of cash in banks and money market funds. They are reported at current value.

Allocation of Net Income or Net Loss

Pursuant to the Partnership Agreement, the General Partner is allocated 1% of each material item of Partnership income, gain, loss, deduction or credit. The limited partners receive 99% of each material item of Partnership income, gain,
loss, deduction or credit until their original capital contributions plus interest have been distributed (see Cash Distribution Policy below). Thereafter, the net income is allocated 10% to the General Partner and 90% to the limited partners.

Net loss is allocated 10% to the General Partner and 90% to the limited partners. The Partnership Agreement provides that no partners
capital account balance shall be less than zero. For purposes of the allocation, net income or net loss is the amount recognized by the Partnership for federal income tax purposes, excluding gains or losses from the disposition of land. For the
years ended December 31, 2006, 2005 and 2004 there were no material differences between net income (loss) as reported for financial statement and federal income tax purposes.

Cash Distribution Policy

The General
Partner receives cash to the extent it is allocated income. Otherwise, all distributions are to the limited partners until such time as these distributions equal 100% of their original capital contributions plus an additional return of 10% per
annum simple interest on their outstanding capital contribution (original contributions as reduced by any prior distributions). Thereafter, Partnership distributions will be allocated 10% to the General Partner and 90% to the limited partners.



F-6



---

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

NOTES TO FINANCIAL STATEMENTS

December 31, 2006 and 2005



|(3) | RELATED PARTY TRANSACTIONS
|--- | --------------------------

The Partnership
Agreement allows the General Partner to receive a broker listing fee of up to 5% of the sales price for all properties sold by the Partnership to unaffiliated buyers. During the years ended December 31, 2006, 2005 and 2004 the Partnership paid
a commission in the amount of $147,373, $6,977, and $0 to the General Partner. These commissions for 2006 and 2005 were 2.5% and 2.0%, respectively.

The Partnership Agreement allows the Partnership to pay the General Partner a $3,000 annual management fee while the properties are in an undeveloped state. Amounts payable to related parties for unpaid distributions at December 31,
2006 and 2005 were $17,107 and $0, respectively.

Accounts receivable - related party included on Exhibit A consists of income taxes paid on
behalf of out-of-state partners and an overpayment of interest on a note payable to the General Partner. This receivable will be offset against the next cash distribution.



|(4) | LAND HELD FOR INVESTMENT
|--- | ------------------------

In June 1986, the
Partnership purchased for approximately $3,080,200 an undeveloped 26.7 acre parcel of land in Cary, NC, known as the Martin Parcel, from an affiliate of the General Partner. An additional $514,392 was spent for highway interchange construction costs
and for capitalized appraisal, survey, and closing costs. Subsequent to the purchase of the land, approximately 1.6 acres were used in the highway interchange and approximately 4.2 acres were designated as a buffer zone. As of December 31,
2006, all of the Martin parcel had been sold.



F-6



---

CAROLINA INVESTMENT PARTNERS

LIMITED PARTNERSHIP

Raleigh, North Carolina

NOTES TO FINANCIAL STATEMENTS

December 31, 2006 and 2005



|(5) | LAND SALES
|--- | ----------

2005

In November 2002, the Partnership entered into an agreement to sell approximately 2.5 acres of the Martin Parcel with an option to sell an additional 6.84
acres. During 2005, the sale of approximately two acres under this agreement was closed, resulting in a gain to the Partnership of $8,213. Also during 2005, the North Carolina Department of Transportation deeded approximately two acres to the
Partnership. Pursuant to APB Opinion No. 29, Accounting for Nonmonetary Transactions, the receipt of this land was recorded at fair market value at the time of the transfer and is reported in Exhibit B as Gain from land
acquisition.

2006

On October 11, 2006, the Partnership sold 17.5 acres of land to an unrelated party. The total sales price for the property sold was $4,212,445. Commissions paid as a result of the sale of the property were $315,933, which included
$105,311 paid to Walsmith Associates II as the General Partner of the Partnership and $105,311 paid to another related party of the Partnership.

On November 22, 2006, the Partnership sold the remaining 7.45 acres to another unrelated party. The total sales price for the property was $1,682,486. Commissions paid as a result of the sale of the property were $126,186, which
included $42,062 paid to Walsmith Associates II as the General Partner of the Partnership and $33,650 paid to another related party of the Partnership.

These two sales resulted in a gain to the Partnership of $1,750,074.



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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, thereunto duly authorized on March 28, 2007.



CAROLINA INVESTMENT PARTNERSBy:

WALSMITH ASSOCIATES TWO,General PartnerBy:

/s/ Alton L. Smith, IIIAlton L. Smith, IIIGeneral Partner and Principal Financial Officer


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                |  | Capacity                                          |  | Date          
|/s/ Donald F. Walston    |  | General Partner of Walsmith                       |  | March 28, 2007
|                         |  | Associates Two, general partner of the Registrant |  |               
|                         |  |                                                  
|/s/ Alton, L. Smith, III |  | General Partner of Walsmith                       |  | March 28, 2007
|                         |  | Associates Two, general partner of the Registrant |  |               

Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by
Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act.

No annual report or proxy statement has been or will be sent
to the Limited Partners of the Registrant.



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