C O N T E N T S




                                                                            Page

INDEPENDENT AUDITOR'S REPORT ON
     THE FINANCIAL STATEMENTS..................................................1


FINANCIAL STATEMENTS

     Balance sheets..........................................................2-3
     Statements of income....................................................4-7
     Statements of changes in partners' equity.................................8
     Statements of cash flows...............................................9-10
     Notes to financial statements.........................................11-14










<PAGE>






                          INDEPENDENT AUDITOR'S REPORT



To the Partners
Colonial Village Roseville
(A California Limited Partnership)
Roseville, California




I have audited the accompanying  balance sheets of Colonial Village Roseville (A
California  Limited  Partnership),  as of December  31,  2003 and 2002,  and the
related  statements of income,  partners'  equity,  and cash flows for the years
then  ended.   These  financial   statements  are  the   responsibility  of  the
Partnership's  management.  My  responsibility is to express an opinion on these
financial statements based on my audits.

I conducted my audits in accordance with auditing  standards  generally accepted
in the United States of America. Those standards require that I plan and perform
the audits 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.  I believe that my audit provides a reasonable basis for
my opinion.

In my opinion, the financial statements referred to above present fairly, in all
material  respects,  the  financial  position of Colonial  Village  Roseville (A
California  Limited  Partnership)  as of  December  31,  2003 and 2002,  and the
results  of its  operations  and its cash  flows  for the  years  then  ended in
conformity with accounting principles generally accepted in the United States of
America.




                                                 /s/ Bernard E. Rea, CPA

Stockton, California
February 11, 2004















                                      - 1 -


<PAGE>




                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                                 BALANCE SHEETS
                           December 31, 2003 and 2002
<TABLE>
<CAPTION>




                  ASSETS                                                         2003                   2002
                                                                              ------------           ------------

<S>                                                                           <C>                    <C>
CURRENT ASSETS
     Cash                                                                     $    55,090            $    10,583
     Rents receivable                                                                 - -                    - -
     Other receivables                                                                - -                    - -
     Prepaid expense                                                                4,556                  4,117
                                                                              ------------           ------------
                  Total current assets                                        $    59,646            $    14,700
                                                                              ------------           ------------


RESTRICTED DEPOSITS AND FUNDED RESERVES
     Tenants' security deposits                                               $    28,609            $    28,235
     Replacement reserve escrow                                                   135,245                127,477
                                                                              ------------           ------------
                                                                              $   163,854            $   155,712
                                                                              ------------           ------------


PROPERTY AND EQUIPMENT, AT COST
     Land                                                                     $   315,303            $   315,303
     Building                                                                   4,808,665              4,808,665
     Equipment                                                                    177,478                177,478
                                                                              ------------           ------------
                                                                              $ 5,301,446            $ 5,301,446
     Less accumulated depreciation                                              1,727,809              1,550,785
                                                                              ------------           ------------
                                                                              $ 3,573 ,637           $  3,750,661
                                                                              ------------           ------------

OTHER ASSETS
     Deferred charges, less accumulated
         amortization of $44,514 and $39,301                                  $    88,908            $    94,121
                                                                              ------------           ------------
                                                                              $    88,908            $    94,121
                                                                              ------------           ------------




                                                                              $ 3,886,045            $ 4,015,194
                                                                              ============           ============
</TABLE>







See Notes to Financial Statements.
                                      - 2 -
<PAGE>


                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                                 BALANCE SHEETS
                           December 31, 2003 and 2002
<TABLE>
<CAPTION>


                                                                                 2003                   2002
                                                                              ------------           ------------
                  LIABILITIES AND PARTNERS' EQUITY



<S>                                                                           <C>                    <C>
CURRENT LIABILITIES
     Current maturities of long-term debt                                     $    37,331            $    34,583
     Accounts payable                                                               4,571                 13,535
     Accounts payable - general partner                                             9,238                  8,230
     Accrued expense                                                                  800                    800
     Developer fees payable                                                        11,303                 96,303
     Advances from general partner, without
         interest, due date, or collateral                                            - -                    - -
     Accrued interest                                                                 - -                    - -
                                                                              ------------           ------------
                  Total current liabilities                                   $    63,243            $   153,451
                                                                              ------------           ------------



DEPOSIT AND PREPAYMENT LIABILITIES
     Tenants' security deposits                                               $    24,600            $    26,300
     Prepaid rents                                                                    - -                    - -
                                                                              ------------           ------------
                                                                              $    24,600            $    26,300
                                                                              ------------           ------------


LONG-TERM DEBT
     Mortgage payable, less current maturities                                $ 1,939,705            $ 1,977,036
     Developer fees payable                                                           - -                    - -
                                                                              ------------           ------------
                                                                              $ 1,939,705            $ 1,977,036
                                                                              ------------           ------------
COMMITMENT


PARTNERS' EQUITY                                                              $ 1,858,497            $ 1,858,407
                                                                              ------------           ------------




                                                                              $ 3,886,045            $ 4,015,194
                                                                              ============           ============
</TABLE>







See Notes to Financial Statements.
                                      - 3 -
<PAGE>



                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                              STATEMENTS OF INCOME
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>




                                                                                 2003                   2002
                                                                              -------------          ------------
<S>                                                                           <C>                    <C>
RENTAL INCOME
     Apartments                                                               $    528,822           $   462,853
     Tenant assistance payments                                                        - -                   - -
     Furniture and equipment                                                           - -                   - -
     Commercial                                                                        - -                   - -
     Parking spaces                                                                    - -                   - -
     Subsidy income                                                                    - -                   - -
     Miscellaneous                                                                     - -                   - -
                                                                              -------------          ------------
            Net rental revenue                                                $    528,822           $   462,853
                                                                              -------------          ------------


FINANCIAL REVENUE
     Interest Income - project operations                                     $        - -           $     2,862
     Income from investments - replacement reserve                                   2,027                 3,689
     Income from investments - operating reserve                                       100                   385
     Income from investments - miscellaneous                                           - -                   - -
                                                                              -------------          ------------
         Sub-total financial revenue                                          $      2,127           $     6,936
                                                                              -------------          ------------


OTHER REVENUE
     Laundry and vending                                                      $      4,704           $     6,953
     NSF and late charges                                                              641                   925
     Damage and cleaning fees                                                        8,252                 7,180
     Forfeited tenant security deposits                                                - -                   - -
     Other revenue                                                                   1,232                 2,082
                                                                              -------------          ------------
         Sub-total other revenue                                              $     14,829           $    17,140
                                                                              -------------          ------------


                   Total revenues                                             $    545,778           $   486,929
                                                                              =============          ============
</TABLE>











See Notes to Financial Statements.
                                      - 4 -
<PAGE>




                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                        STATEMENTS OF INCOME (CONTINUED)
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>




                                                                                 2003                   2002
                                                                              -------------          ------------
<S>                                                                           <C>                    <C>
OPERATING EXPENSES

     Renting expenses
         Advertising                                                          $        491           $       - -
         Miscellaneous renting expenses                                                - -                   836
                                                                              -------------          ------------
            Sub-total renting expenses                                        $        491           $       836
                                                                              -------------          ------------

     Administrative expenses
         Office salaries                                                      $        - -           $       - -
         Office supplies                                                             1,611                 1,753
         Office rent                                                                   - -                   - -
         Management fee                                                             32,928                32,256
         Manager's salary                                                           17,967                19,332
         Manager rent free unit                                                     10,464                10,159
         Legal expense                                                                 510                   844
         Audit expense                                                               6,269                 4,900
         Bookkeeping / accounting services                                             - -                   - -
         Telephone and answering service                                             1,518                 1,534
         Bad debts                                                                   3,514                 2,936
         Miscellaneous administrative expenses                                       9,134                 9,326
                                                                              -------------          ------------
            Sub-total administrative expenses                                 $     83,915           $    83,040
                                                                              -------------          ------------

     Utilities expense
         Fuel oil / coal                                                      $        - -           $       - -
         Electricity                                                                 4,874                 5,905
         Water                                                                       3,476                 3,509
         Gas                                                                         3,331                 2,418
         Sewer                                                                       5,830                 6,609
                                                                              -------------          ------------
            Sub-total utilities expense                                       $     17,511           $    18,441
                                                                              =============          ============
</TABLE>












See Notes to Financial Statements.
                                      - 5 -
<PAGE>



                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                        STATEMENTS OF INCOME (CONTINUED)
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>




                                                                                  2003                   2002
                                                                              --------------         --------------
<S>                                                                           <C>                    <C>
     Operating and maintenance expense
         Janitor and cleaning payroll                                         $       8,958          $       4,552
         Janitor and cleaning supplies                                                  726                  1,863
         Janitor and cleaning contract                                                2,940                  1,865
         Exterminating payroll / contract                                               938                    849
         Exterminating supplies                                                         - -                    - -
         Garbage and trash removal                                                    7,336                  8,309
         Security payroll / contract                                                    - -                    - -
         Grounds payroll                                                                - -                    - -
         Grounds supplies                                                             1,510                     50
         Grounds contract                                                            10,097                  7,469
         Repairs payroll                                                             22,696                 24,544
         Repairs material                                                             3,833                  3,583
         Repairs contract                                                            10,200                 12,183
         Elevator maintenance / contract                                                - -                    - -
         Heating / cooling repairs and maintenance                                      - -                    - -
         Swim pool maintenance / contract                                               - -                    - -
         Snow removal                                                                   - -                    - -
         Decorating payroll / contract                                                1,284                  2,535
         Decorating supplies                                                          2,841                  2,860
         Vehicle and maintenance equipment o & r                                        - -                    - -
         Miscellaneous operating and maint. expenses                                  5,748                  3,019
                                                                              --------------         --------------
            Sub-total operating & maint. expense                              $      79,107          $       3,681
                                                                              --------------         --------------

     Taxes and insurance
         Real estate taxes                                                    $         315          $          64
         Payroll taxes                                                                4,433                  3,891
         Miscellaneous taxes, licenses, and permits                                     800                    800
         Property and liability insurance                                             6,480                  5,660
         Fidelity bond insurance                                                        - -                    - -
         Workman's compensation                                                      11,230                  4,951
         Health insurance and other employee benefits                                 6,077                  7,270
         Other insurance                                                                - -                    - -
                                                                              --------------         --------------
            Sub-total taxes & insurance                                       $      29,335          $      22,636
                                                                              --------------         --------------

                   Total operating expenses                                   $     210,359          $     198,634
                                                                              ==============         ==============
</TABLE>





See Notes to Financial Statements.
                                      - 6 -
<PAGE>



                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                        STATEMENTS OF INCOME (CONTINUED)
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>




                                                                                  2003                   2002
                                                                              --------------         --------------
<S>                                                                           <C>                    <C>
OTHER EXPENSES
     Interest expense - mortgage                                              $     153,092          $     155,638
     Interest expense - notes                                                           - -                    - -
     Miscellaneous financial expense                                                    - -                    - -
     Depreciation and amortization                                                  182,237                189,634
     Non project expenses                                                               - -                    - -
                                                                              --------------         --------------
         Sub-total other expenses                                             $     335,329          $     345,272
                                                                              --------------         --------------

                   Total expenses                                             $     545,688          $     543,906
                                                                              --------------         --------------

                   Net income (loss)                                          $          90          $     (56,977)
                                                                              ==============         ==============
</TABLE>










See Notes to Financial Statements.
                                      - 7 -
<PAGE>



                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                         STATEMENTS OF PARTNERS' EQUITY
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>



                                                                                   General                  Limited
                                                        Total                      Partner                  Partner
                                                    ---------------             -------------           ----------------

<S>                                                 <C>                         <C>                     <C>
Partners' equity
     December 31, 2001                              $    1,923,884              $     44,850            $    1,879,034

Partners' capital
     contributions                                             - -                       - -                       - -

Partners' capital
     distributions                                          (8,500)                      - -                    (8,500)

Net income (loss)                                          (56,977)                     (570)                  (56,407)
                                                    ---------------             -------------           ----------------
Partners' equity
     December 31, 2002                              $    1,858,407              $     44,280            $    1,814,127

Partners' capital
     contributions                                             - -                       - -                       - -

Partners' capital
     distributions                                             - -                       - -                       - -

Net income (loss)                                               90                         1                        89
                                                    ---------------             -------------           ----------------
Partners' equity
     December 31, 2003                              $    1,858,497              $     44,281            $    1,814,216

                                                    ===============             =============           ================
Percentage at
     December 31, 2003                                         100%                        1%                       99%
                                                    ===============             =============           ================
</TABLE>














See Notes to Financial Statements.
                                      - 8 -
<PAGE>




                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                            STATEMENTS OF CASH FLOWS
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>




                                                                                   2003                  2002
                                                                              --------------        ---------------
<S>                                                                           <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES
     Net income (loss)                                                        $          90         $      (56,977)
     Adjustments to reconcile net income
      (loss) to net cash provided by
       (used in) operating activities:
         Depreciation and amortization                                              182,237                189,634
         Change in assets and liabilities:
          Decrease (increase) in:
            Prepaid expenses                                                           (439)                  (867)
            Tenants' security deposits                                                 (374)                  (822)
            Rents receivable                                                            - -                    - -
            Other receivables                                                           - -                    - -
          Increase (decrease) in:
            Accounts payable                                                         (8,964)                 5,732
            Accounts payable - general partner                                        1,008                    493
            Accrued expenses                                                            - -                    - -
            Accrued interest                                                            - -                    - -
            Prepaid rents                                                               - -                    - -
            Tenants' security deposits                                               (1,700)                  (754)
                                                                              --------------        ---------------
                Net cash provided by (used in)
                    operating activities                                      $     171,858         $      136,439
                                                                              --------------        ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Funding of replacement reserve escrow                                    $     (17,839)        $      (14,866)
     Withdrawals from replacement reserve escrow                                     10,071                    - -
     Acquisition of property and equipment                                              - -                 (2,092)
                                                                              --------------        ---------------
                Net cash provided by (used in)
                   investing activities                                       $      (7,768)        $      (16,958)
                                                                              --------------        ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Partner contributions                                                    $         - -         $          - -
     Partner distributions                                                              - -                 (8,500)
     Advances from general partner                                                      - -                    - -
     Payment of development fees payable                                            (85,000)              (218,750)
     Principal payments on long-term debt                                           (34,583)               (32,038)
                                                                              --------------        ---------------
                Net cash provided by (used in)
                   financing activities                                       $    (119,583)        $     (259,288)
                                                                              ==============        ===============
</TABLE>




See Notes to Financial Statements.
                                      - 9 -



<PAGE>
                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                      STATEMENTS OF CASH FLOWS (CONTINUED)
                     Years Ended December 31, 2003 and 2002
<TABLE>
<CAPTION>




                                                                                  2003                 2002

                                                                              -------------       -----------------
<S>                                                                           <C>                 <C>
                Increase (decrease) in cash and
                   cash equivalents                                           $     44,507        $    (139,807)

Cash and cash equivalents
     Beginning                                                                      10,583              150,390
                                                                              -------------       -----------------
     Ending                                                                   $     55,090        $      10,583
                                                                              =============       =================

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
     INFORMATION
         Cash paid during the year for interest                               $    153,092        $     155,638
                                                                              =============       =================
</TABLE>








See Notes to Financial Statements.
                                     - 10 -
<PAGE>


                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS




NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     A summary of the Partnership's significant accounting policies consistently
     applied  in  the  preparation  of  the  accompanying  financial  statements
     follows.

     BASIS OF ACCOUNTING
     -------------------

     The  financial  statements of the  partnership  are prepared on the accrual
     basis of accounting and in accordance with accounting  principles generally
     accepted in the United States of America.

     CAPITALIZATION AND DEPRECIATION
     -------------------------------

     Land,  buildings and  improvements  are recorded at cost.  Depreciation  of
     buildings  and  equipment  is  computed   principally  using  the  Modified
     Accelerated  Cost  Recovery  System which  approximates  straight-line  for
     buildings and  double-declining  balance for  equipment  over the following
     estimated useful lives:


                                                                  Years
                                                                  -----

               Buildings                                           27.5
               Equipment                                              7

     Improvements  are  capitalized,  while  expenditures  for  maintenance  and
     repairs are charged to expense as incurred.  Upon  disposal of  depreciable
     property,  the  appropriate  property  accounts  are reduced by the related
     costs and  accumulated  depreciation.  The  resulting  gains and losses are
     reflected in the statement of operations.

     CASH AND CASH EQUIVALENTS
     -------------------------

     For purposes of reporting  the  statements of cash flows,  the  Partnership
     includes all cash accounts which are not subject to withdrawal restrictions
     or  penalties,  and all highly  liquid debt  instruments  purchased  with a
     maturity  of  three  months  or less as cash and  cash  equivalents  on the
     accompanying balance sheet.

     AMORTIZATION
     ------------

     Deferred  charges are amortized over the following  estimated  useful lives
     using the straight-line method:


                                                                  Years
                                                                  -----

               Deferred debt expense                                 30
               Tax credit monitoring fee                             15

     Income Taxes
     ------------

     No  provision  or  benefit  for  income  taxes has been  included  in these
     financial statements since taxable income or loss passes through to, and is
     reportable by, the partners individually.





                                     - 11 -


<PAGE>
                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS



Note 1 - Summary of Significant Accounting Policies (continued)

     ESTIMATES
     ---------

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally  accepted  in the United  States of America  requires
     management to make estimates and assumptions.  These assumptions affect the
     reported  amounts of assets,  liabilities  and the amount of any 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 the estimates made.

     PERSONAL ASSETS AND LIABILITIES
     -------------------------------

     In accordance with the generally accepted method of presenting  partnership
     financial statements,  the financial statements do not include the personal
     assets and  liabilities  of the partners,  including  their  obligation for
     income  taxes  on  their  distributive  shares  of the  net  income  of the
     Partnership, nor any provision for income tax expense.

      SFAs NO. 144
      ------------

     Statement of Financial  Accounting  Standards  (SFAS) No. 144 requires that
     long-lived assets and certain  identifiable  intangibles held and used by a
     entity  be  reviewed  for   impairment   whenever   events  or  changes  in
     circumstances  that the carrying amount of an asset may not be recoverable.
     The adoption of SFAS No. 144 has not materially  affected the partnership's
     reported earnings, financial condition or cash flows.


NOTE 2 - ORGANIZATION

     Colonial Village  Roseville is a California  Limited  Partnership which was
     formed in April 1993, to develop,  construct,  own,  maintain and operate a
     56-unit  multi-family  apartment  complex  and is  located  in the  city of
     Roseville,  California.  The  Partnership  Agreement and the loan agreement
     with the California Community Reinvestment Corporation (CCRC), a California
     nonprofit  public benefit  corporation  governs the major activities of the
     Partnership.  Under the agreements,  the Partnership is required to provide
     low cost housing to very low-income or lower-income households.

     The Partnership has one general partner,  Project Go Inc., a 501(c) (3) tax
     exempt, non-profit community service organization and one investing limited
     partner,   WNC  Housing  Tax  Credits  III,  L.P.,  a  California   limited
     partnership.  Partnership  transactions  with the partners are described in
     other notes to these financial statements.


Note 3 - Restricted deposits and Funded reserves

     In accordance with the  Partnership  Agreement and the Rider to Multifamily
     Instrument with CCRC, the Partnership is required to maintain a replacement
     reserve account.  The replacement  reserve account is to be funded annually
     in the amount of $16,800.





                                     - 12 -
<PAGE>



<TABLE>
<CAPTION>

                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS


NOTE 4 - Deferred charges

      Deferred charges as of December 31, 2003 and 2002, consists of the following:


                                                                 2003                 2002
                                                           ---------------      ----------------

<S>                                                        <C>                  <C>
      Deferred debt expense                                $       110,462      $       110,462
      Tax credit monitoring fee                                     22,960               22,960
                                                           ---------------      ---------------

                                                           $       133,422      $       133,422
              Less accumulated amortization                         44,514               39,301
                                                           ---------------      ---------------


                                                           $        88,908      $        94,121
                                                           ===============      ===============


Note 5 - Long-Term Debt

     Long-Term  debt  consisted of a permanent  loan with CCRC in face amount of
     $2,200,000.

     Under the terms of the 30-year Promissory Note with CCRC, the loan provides
     for an initial  interest  rate of 7.67% and monthly  payments of $15,639.62
     commencing on September 1, 1995,  and  continuing  through August 2025. The
     interest rate and monthly  payment will be adjusted at year eleven (11) and
     year  twenty-one  (21),  at which time the  interest  rate will be adjusted
     based on the Current  Index plus 2.75% and the payment will be adjusted and
     determined by the amount of the monthly payment that would be sufficient to
     repay  the note  within  360  months of the  initial  payment  date.  As Of
     December 31, 2003, the current  interest rate, and minimum  monthly payment
     due is 7.67% and $15,639.62, respectively.

      The apartment complex is pledged as collateral for the mortgage and is
      secured by deeds of trust, assignment of rents, security agreements and
      fixture filings against the property.

      Aggregate maturities of Long-term debt for the next five years are as follows:

                  December 31,      2004                                        $        37,331
                                    2005                                                 40,297
                                    2006                                                 43,499
                                    2007                                                 46,955
                                    2008                                                 50,686
                                 Thereafter                                           1,758,268
                                                                                ----------------
                                    TOTAL                                       $     1,977,036
                                                                                ================
</TABLE>

NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES

     MANAGEMENT FEE
     --------------

     In accordance with the Management  Agreement,  the Partnership paid Project
     Go, Inc., the general  partner,  a management fee during 2003 in the amount
     of  $32,928,  for  services  rendered  in  connection  with the leasing and
     operation of the project.  The fee for its services is  approximately 7% of
     the project's rental income.





                                     - 13 -
<PAGE>

                           COLONIAL VILLAGE ROSEVILLE
                       (A California Limited Partnership)

                          NOTES TO FINANCIAL STATEMENTS



NOTE 6 - TRANSACTIONS WITH AFFILIATES AND RELATED PARTIES (continued)

     DEVELOPER FEES
     --------------

     In accordance with the Partnership Agreement, the Partnership agreed to pay
     the general partner a development fee of $648,000 for services  rendered to
     the  Partnership  for overseeing the  development  and  construction of the
     project.  However,  during 1995,  $3,526,  of this amount was waived by the
     general  partner  in  accordance  with  the  limitations   imposed  by  the
     California Tax Credit Allocation Committee.

     Payment of the development fee is to be paid from future  operational  cash
     flows.

     The developer fee has been capitalized into the basis of the building.


Note 7 - Commitment

     The  Partnership  entered into a Regulatory  Agreement  with the Tax Credit
     Allocation Committee (TCAC),  established under Section 50185 of the Health
     and  Safety  Code of the State of  California.  Under this  Agreement,  the
     Partnership  shall maintain the project as a Qualified  Low-income  Housing
     Project for a period of 55 consecutive  taxable years  beginning with 1995,
     the  first  taxable  year  of the  Credit  Period.  In  exchange  for  this
     agreement,  TCAC has  authorized an allocation  relating to the  low-income
     housing credit under the  provisions of Section 42 of the Internal  Revenue
     Code.


Note 8 - Current VULNERABILITY due to certain concentrations

     The Partnership's sole asset is Colonial Village Roseville Apartments.  The
     Partnership's  operations are  concentrated in the multifamily  real estate
     market.







                                     - 14 -