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|                                                                                                                    | PAGE   |
|-------------------------------------------------------------------------------------------------------------------------|--------|
| INDEPENDENT AUDITOR'S REPORT                                                                                            | 3      |
|                                                                                                                    |   |
| FINANCIAL STATEMENTS:                                                                                                   |   |
|     Balance Sheets                                                                                  | 4-5    |
|     Statements of Income                                                                            | 6      |
|     Statements of Changes in Partners' Equity                                                       | 7      |
|     Statements of Cash Flows                                                                        | 8-9    |
|     Notes to Financial Statements                                                                   | 10-14  |
|                                                                                                                    |   |
| INDEPENDENT AUDITOR'S REPORT ON SUPPLEMENTARY INFORMATION                                                               | 16     |
|     Balance Sheet Data                                                                              | 17-18  |
|     Statement of Income Data                                                                        | 19-22  |
|     Statement of Changes in Partners' Equity Data                                                   | 23     |
|     Statement of Cash Flows Data                                                                    | 24-25  |
|     Supplementary Data Required by HUD                                                              | 26-28  |
|                                                                                                                    |   |
| INDEPENDENT AUDITOR'S REPORT ON THE INTERNAL CONTROL                                                                    | 29-30  |
|                                                                                                                    |   |
| INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR HUD PROGRAMS                  | 31     |
|                                                                                                                    |   |
| INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO FAIR HOUSING AND NON-DISCRIMINATION | 32     |
|                                                                                                                    |   |
| CERTIFICATION OF PARTNERS                                                                                               | 33     |
|                                                                                                                    |   |
| MANAGEMENT AGENT'S CERTIFICATION                                                                                        | 34     |
|                                                                                                                    |   |
| AUDITOR INFORMATION                                                                                                     | 35     |

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| ASSETS                                                                    |   |   |       |
|---------------------------------------------------------------------------|--------|--------|------------|
| Rental property and equipment, at cost:                                   |   |   |       |
|     Buildings, furnishings and equipment              |   | $      | 9,729,480  |   |
|     Accumulated depreciation                          |   |   | (1,043,949 | ) |
|                                                                      |   |   | 8,685,531  |   |
|     Land                                              |   |   | 876,846    |   |
|                                                                      |   |   | 9,562,377  |   |
|                                                                      |   |   |       |   |
| Restricted deposits:                                                      |   |   |       |   |
|     Replacement reserves                              |   |   | 14,720     |   |
|     Other reserves                                    |   |   | 122,486    |   |
|     Tenant trust - security deposits                  |   |   | 19,237     |   |
|                                                                      |   |   | 156,443    |   |
|                                                                      |   |   |       |   |
| Other assets:                                                             |   |   |       |   |
|     Cash                                              |   |   | 58,147     |   |
|     Accounts receivable                               |   |   | 4,837      |   |
|     Prepaid expenses                                  |   |   | 24,350     |   |
|     Intangible assets, net of amortization of $33,793 |   |   | 319,700    |   |
|                                                                      |   |   | 407,034    |   |
|        TOTAL ASSETS                    |   | $      | 10,125,854 |   |

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| LIABILITIES AND PARTNERS' EQUITY                                                         |   |   |       |
|------------------------------------------------------------------------------------------|--------|--------|------------|
| Liabilities:                                                                             |   |   |       |
| Mortgage note payable                                                                    |   | $      | 6,119,975  |   |
| Developer fee payable                                                                    |   |   | 1,487,120  |   |
| Notes payable - affiliate                                                                |   |   | 2,065,969  |   |
| Accounts payable                                                                         |   |   | 397,418    |   |
| Accrued interest payable                                                                 |   |   | 446,002    |   |
| Rents received in advance                                                                |   |   | 10,820     |   |
| Tenant security deposits payable                                                         |   |   | 18,559     |   |
|                                                                                     |   |   | 10,545,863 |   |
|                                                                                     |   |   |       |   |
| Partners' equity                                                                         |   |   | (420,009   | ) |
|                                                                                     |   |   |       |   |
|           TOTAL LIABILITIES AND EQUITY |   | $      | 10,125,854 |   |

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| Revenue:                                                      |   |   |       |
|---------------------------------------------------------------|--------|--------|------------|
| Rent, net                                                     |   | $      | 1,518,444  |   |
| Other                                                         |   |   | 29,229     |   |
|                                                          |   |   |       |   |
| Total Income                                                  |   |   | 1,547,673  |   |
| Expenses:                                                     |   |   |       |   |
| Administrative                                                |   |   | 495,412    |   |
| Utilities                                                     |   |   | 464,832    |   |
| Operating and maintenance                                     |   |   | 269,966    |   |
| Taxes and insurance                                           |   |   | 138,351    |   |
| Interest                                                      |   |   | 445,109    |   |
| Other financial                                               |   |   | 65,695     |   |
| Depreciation                                                  |   |   | 606,331    |   |
| Amortization                                                  |   |   | 24,921     |   |
| Total expenses                                                |   |   | 2,510,617  |   |
|                                                          |   |   |       |   |
| Operating income (loss) before partnership revenue (expenses) |   |   | (962,944   | ) |
| Partnership revenue                                           |   |   | 52         |   |
| Other expenses                                                |   |   | (140,313   | ) |
|                                                          |   |   |       |   |
| Net income (loss)                                             |   | $      | (1,103,205 | ) |

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|                        |   | Total  |       |   | GeneralPartner |   |       | LimitedPartner |   |
|-----------------------------|--------|--------|------------|--------|----------------|--------|------------|----------------|--------|
| Balance - January 1, 2008   |   | $      | 9,302      |   |           | $      | (1,321,330 | )              |   | $ | 1,330,632 |   |
|                        |   |   |       |   |           |   |       |           |   |   |   |   |
| Contributions               |   |   | 673,894    |   |           |   | 217,455    |           |   |   | 456,439 |   |
|                        |   |   |       |   |           |   |       |           |   |   |   |   |
| Net income (loss)           |   |   | (1,103,205 | )      |           |   | (110       | )              |   |   | (1,103,095 | ) |
|                        |   |   |       |   |           |   |       |           |   |   |   |   |
| Balance - December 31, 2008 |   | $      | (420,009   | )      |           | $      | (1,103,985 | )              |   | $ | 683,976 |   |

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| Cash flows from operating activities:                                                                                                 |   |   |        |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|--------|-------------|
| Net Income (Loss)                                                                                                                     |   | $      | (1,103,205  | ) |
| Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities:                                       |   |   |        |   |
| Depreciation and amortization expense                                                                                                 |   |   | 631,252     |   |
| Changes in certain assets and liabilities:                                                                                            |   |   |        |   |
| Accounts receivable                                                                                                                   |   |   | 181,479     |   |
| Prepaid expenses                                                                                                                      |   |   | (13,235     | ) |
| Accounts payable                                                                                                                      |   |   | 249,216     |   |
| Accrued interest payable                                                                                                              |   |   | 202,136     |   |
| Rent received in advance                                                                                                              |   |   | 4,860       |   |
| Entity/construction liability accounts                                                                                                |   |   | 7,500  |   |
| Tenant security deposits                                                                                                              |   |   | (678        | ) |
|                                                                                                                                  |   |   |        |   |
|                Net cash provided (used) by operating activities |   |   | 159,325     |   |
|                                                                                                                                  |   |   |        |   |
| Cash flow from investing activities:                                                                                                  |   |   |        |   |
| Additions to fixed assets                                                                                                             |   |   | (104,884    | ) |
| Deposits to reserve accounts                                                                                                          |   |   | (135,451    | ) |
| Net cash provided (used) by investing activities                                                                                      |   |   | (240,335    | ) |
|                                                                                                                                  |   |   |        |   |
| Cash flow from financing activities:                                                                                                  |   |   |        |   |
| Proceeds from notes payable                                                                                                           |   |   | (60,025     | ) |
| Contributions                                                                                                                         |   |   | 643,440     |   |
| Payment of construction payable                                                                                                       |   |   | (467,000    | ) |
| Net cash provided (used) by financing activities                                                                                      |   |   | 116,415     |   |
|                                                                                                                                  |   |   |        |   |
| Net increase (decrease) in cash and equivalents                                                                                       |   |   | 35,405      |   |
| Cash and equivalents, beginning of year                                                                                               |   |   | 22,742      |   |
| Cash and equivalents, end of year                                                                                                     |   | $      | 58,147      |   |

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| Supplemental disclosure of cash flow information:                                                                                              |   |   |   |
|------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|--------|
|     Cash paid for interest                                                                                                 |   | $      | 61,976 |   |
|                                                                                                                                           |   |   |   |   |
| Supplemental schedule of non-cash investing and financing activities:                                                                          |   |   |   |   |
|                                                                                                                                           |   |   |   |   |
|     Additions to fixed assets from reclassification of:        Construction-in-progress |   | $      | 2,388  |   |

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| Year                |   | Amount |      |
|---------------------|--------|--------|-----------|
|                |   |   |      |
| 2009                |   | $      | 71,352    |   |
| 2010                |   |   | 76,896    |   |
| 2011                |   |   | 81,704    |   |
| 2012                |   |   | 86,819    |   |
| 2013                |   |   | 91,934    |   |
| 2014 and thereafter |   |   | 5,711,270 |   |
|                |   |   |      |   |
|                |   | $      | 6,119,975 |   |

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