10-K 1 f10k_mar2005-cam1.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 25, 2005 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-13782 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 13-3228969 ------------------------------------------------- ------------------ (State or other jurisdiction of incorporation or (I.R.S. Employer organization) Identification No.) 625 Madison Avenue, New York, New York 10022 ------------------------------------------------- ------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 421-5333 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Initial Limited Partnership Interests (Title of Class) Additional Limited Partnership Interests (Title of Class) 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 is not contained herein, and will not be contained, to the best of 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 check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X] The approximate aggregate book value of the voting and non-voting common equity held by non-affiliates of the Registrant as of September 25, 2004 was $(6,317,000) based on Limited Partner equity (deficit) as of such date. Registrant's voting and non-voting common equity is not publicly traded. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Business General Cambridge Advantaged Properties Limited Partnership (formerly Hutton Advantaged Properties Limited Partnership) (the "Partnership") is a limited partnership which was formed under the laws of the Commonwealth of Massachusetts on June 28, 1984. The General Partners of the Partnership ("General Partners") are Assisted Housing Associates Inc. (formerly Cambridge Assisted Housing Associates Inc.) (the "Assisted General Partner"), and Related Beta Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with CharterMac (AMEX: CHC), and Cambridge/Related Associates Limited Partnership (formerly Hutton/Related Associates Limited Partnership) ("Cambridge/Related"), a Massachusetts limited partnership. The general partners of Cambridge/Related are the Assisted General Partner and the Related General Partner. On November 17, 2003, CharterMac acquired Related Capital Company, which is the indirect parent of RCC Manager L.L.C., the sole shareholder of the Related General Partner. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partners. This acquisition did not affect the Partnership or its day-to-day operations, as the majority of the General Partners' management team remained unchanged. The General Partners manage and control the affairs of the Partnership. See Item 10, Directors and Executive Officers of the Registrant, below. On August 9, 1984, pursuant to a prospectus dated August 9, 1984 as supplemented by the supplements thereto dated September 7, 1984, October 5, 1984 and November 20, 1984 (as so supplemented, the "Prospectus"), the Partnership commenced a public offering (the "Offering", as so supplemented). Pursuant to the Offering, the Partnership issued 6,674 Units (as defined below) in 1984, each Unit consisting of one initial limited partnership interest (the "Initial Limited Partnership Interest") and one warrant to purchase an additional limited partnership interest (the "Additional Limited Partnership Interest") and together with the Initial Limited Partnership Interests (the "Limited Partnership Interests") during the period from January 1, 1985 through January 25, 1985 (a "Unit"), and 5,400 Additional Limited Partnership Interests in 1985. The Partnership received $53,754,300 (net of Offering expenses and sales commissions of $6,615,700) as a result of the Offering. The Offering was completed in March 1985. Effective May 19, 1994, the Partnership's name was changed to Cambridge Advantaged Properties Limited Partnership. Investment Objectives/Government Incentives ------------------------------------------- The Partnership was formed to invest, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships" or "subsidiary partnerships"), each of which owns or leases and operates an existing residential housing development (an "Apartment Complex") which is receiving some form of local, state or federal assistance, including, without limitation, mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). In acquiring its interests in the Local Partnerships ("Local Partnership Interests"), the Partnership's investment objectives are to: (1) Provide current tax benefits in the form of passive tax losses which limited partners may use to offset passive taxable income from other sources; (2) provide long-term capital appreciation through an increase in the value of the Partnership's investments in Local Partnerships; (3) provide cash distributions from sale or refinancing transactions; and (4) preserve and protect the Partnership's capital. The Partnership is in the process of winding up its operations as it continues to sell its assets; therefore investment objectives (1), (2) and (4) are no longer applicable. During the years ended March 25, 2005, 2004 and 2003 the Partnership made cash distributions of approximately $0, $0 and $1,524,000, respectively, from sales transactions. The Partnership has to date made cash distributions of approximately $6,944,000 from sales transactions and expects to continue to make distributions from excess sales proceeds, although such aggregate distributions will not equal the original investment. The Partnership will no longer be generating passive losses due to the sale of properties. However, passive losses previously allocated (to the extent unused) are available to offset the income expected to be generated from the sales effort. Federal, state and local government agencies have provided significant incentives in order to stimulate private investment in government assisted housing. See "Government Programs and Regulations," below. Notwithstanding these incentives, there remain significant risks. These risks include, but are not limited to, the uncertainty as to the financial strength and expertise of the general partners of the Local Partnerships ("Local General Partners"); the long-term nature of investments in government-assisted housing has limited the ability of the Partnership to vary its investment portfolio in response to changing economic, financial and investment conditions; and changes in local economic circumstances and housing patterns which have an impact on real estate values and, in the Partnership's current liquidation phase, the ability to achieve a profit on the sale of the Apartment Complexes. Apartment Complexes benefiting from Government Assistance also have required greater management expertise and have had higher operating expenses than conventional apartment buildings. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, below. Investments ----------- The Local Partnership Interests owned by the Partnership were acquired from unaffiliated sellers. The Partnership became the principal limited partner in these Local Partnerships pursuant to local limited partnership agreements entered into with the Local General Partners. As a limited partner, the Partnership's liability for obligations of the Local Partnerships is limited to its investment. The Local General Partners of the Local Partnerships retain responsibility for maintaining, operating and managing the Apartment Complexes. The Partnership is a limited partner, with an ownership interest of 98.99% in each of the two remaining subsidiary partnerships. 2 Each Local Partnership also has as a special limited partner (the "Local Affiliated Partner"), either C/R Special Partnership or another affiliate of the General Partners, which under certain circumstances has the right to replace the Local General Partners of the Local Partnership and also has certain rights with respect to voting on or approving of certain matters, including the sale of an Apartment Complex. These rights were given to the Local Affiliated Partner rather than the Partnership to avoid claims that by the existence or exercise by the Partnership of such rights it would be taking part in the control of the Local Limited Partnerships' operations and should therefore incur liability as a General Partner of the Local Partnerships. The Local Affiliated Partner has agreed to exercise these rights as a fiduciary of the Limited Partners of the Partnership. As of March 25, 2005, the Partnership only has investments in two remaining Local Partnerships both of which are subject to contracts of sale entered into on December 15, 2004 (see below). Purchase Money Notes -------------------- Purchase money notes in the original amount of $85,458,825 were issued to the selling partners of the subsidiary partnerships as part of the purchase price and are secured only by the interest in the subsidiary partnership to which the purchase money note relates (the "Purchase Money Notes"). A portion of these Purchase Money Notes, in the original amount of $31,932,568 was an obligation at the subsidiary partnership level, whereas the remaining $53,526,257 was recorded at the Partnership level. The Purchase Money Notes generally provided for compound interest at rates which, in general, ranged from 9% to 10% per annum through August 31, 1989. Thereafter, simple interest has accrued, without further interest thereon, through maturity as extended (see below). The Purchase Money Notes, which provide for simple interest, will not be in default if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding subsidiary partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. Any interest not paid currently accrues, without further interest thereon, through the extended due date of the Purchase Money Note. Continued accrual of such interest beyond the initial term, without payment, reduces the effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and the ultimate repayment dates of the Purchase Money Notes. The Purchase Money Notes, after the extended maturity dates, call for the simple accrual of interest on the balance of principal, interest and Purchase Money Note Extension Fees Payable as of the date of maturity at one of the following two rates: (i) the lesser of 12% or the legally allowable rate; or (ii) the lesser of prime plus 2% or the lowest legally allowable rate. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of proceeds of the sale or refinancing of the Apartment Complex. The Partnership originally extended the terms of the two remaining Purchase Money Notes (with maturity dates of October 1996) for three additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2 % per annum of the outstanding principal balance of the Purchase Money Notes. Of such fees incurred, $23,210 was accrued and added to the Purchase Money Notes balance. The extension fees have been fully amortized over the term of the extensions. Additionally, an oral agreement was reached that extended the maturity dates of the remaining Purchase Money Notes through the completion of the sale of the Local Partnership Interest in the remaining two subsidiary partnerships. On December 15, 2004, the Partnership entered into contracts to sell its Limited Partnership Interests in the remaining two subsidiary partnerships' to an affiliate of the Local General Partner (See Note 4). In accordance with the liquidation basis of accounting, the Purchase Money Notes relating to these two subsidiary partnerships, totaling approximately $7,903,000 (including approximately $5,894,000 of interest) were written down to their estimated settlement value, resulting in a gain on liquidation of approximately $7,903,000. Based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, the proceeds from such sales will not be sufficient to meet the outstanding balances of principal, accrued interest and extension fees. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the Purchase Money Note holder's recourse, in the event of nonpayment, would be to foreclose on the Partnership's interests in the respective subsidiary partnerships. Distributions aggregating approximately $0, $0 and $10,072,000 were made to the Partnership during each of the years ended March 25, 2005, 2004 and 2003, respectively, of which approximately $0, $0 and $8,776,000, respectively, was used to pay principal, interest and extension fees on the Purchase Money Notes. Government Programs and Regulations ----------------------------------- The General Partners will carefully analyze the opportunities available upon the expiration of the properties' HUD contracts, as well as the tax consequences of each option to investors. Prior to expiration of the properties' HUD contracts, and based on the historical operating results and current economic conditions including changes in tax laws, it is uncertain as to whether there would be a return to the investors upon the sale of the applicable properties in the Partnership's portfolio. In September 1997, Congress enacted the Multi-Family Assisted Housing Reform and Affordability Act of 1997 ("MAHRA") which provides for the renewal of Section 8 Housing Assistance Payments Contracts ("Section 8 Contracts") to be based upon market rentals in instances where the existing Section 8 Contracts exceed current market rents. As a result, Section 8 Contracts that are renewed in the future in projects insured by the Federal Housing Administration ("FHA") may not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. MAHRA also provides for the restructuring of these mortgage loans so that the annual debt service on the restructured loan (or loans) can be supported by Section 8 rents established at the market rents. The restructured loans will be held by the current lender or another lender. There can be no assurance that a property owner will be permitted to restructure its mortgage indebtedness pursuant to the new rules implementing MAHRA or that an owner, or the holder of the mortgage, would choose to restructure the mortgage if it were able to participate. MAHRA went into effect on September 11, 1998 when interim regulations implementing the program were published. It should be noted that there are many uncertainties as to the economic and tax impacts on a property owner because of the combination of the reduced Section 8 contract rents and the restructuring of the existing FHA-insured mortgage loan under MAHRA. On October 21, 1998 President Clinton signed the Fiscal Year 1999 Departments of Veteran Affairs, Housing and Urban Development and Independent Agencies Appropriation Legislation into law. The bill provides, among other things, that owners of a property that were eligible for prepayment had to give notice of such prepayment to HUD tenants and to the chief executive of the state or local government for the jurisdiction in which the housing is located. The notice must be provided not less than 150 days, but not more than 270 days, before such payment. Moreover, the owner may not increase the rent charged to tenants for a period of 60 days following such prepayment. The bill also provides for 3 tenant-based vouchers for eligible tenants (generally below 80% of area median income) at the true comparable market rents for unassisted units in order to protect current residents from substantial increases in rent. On October 20, 1999, President Clinton signed FY 2000 VA, the HUD Independent Agencies Appropriations Act (the "Appropriations Act"). The Appropriations Act contains revisions to the HUD Mark-to-Market Program and other HUD programs concerning the preservation of the HUD housing stock. On December 29, 1999 HUD issued Notice H99-36 addressing "Project Based Section 8 Contracts Expiring in Fiscal Year 2000" reflecting the changes in the Appropriations Act and superseding earlier HUD Notices 98-34, 99-08, 99-15, 99-21 and 99-32. Notice 99-36 clarifies many of the earlier uncertainties with respect to the earlier HUD Section 8 Mark-to-Market Programs and continued the Mark-up-to-Market Program which allows owners with Section 8 contracts to increase the rents to market levels where contract rents are currently below market. Sales of Underlying Properties/Local Partnership Interests ---------------------------------------------------------- General ------- The Partnership is currently in the process of disposing of its investments. As of March 25, 2005, the Partnership had disposed of fifty-nine of its sixty-one original investments. On December 15, 2004, the Partnership entered into contracts to sell the Limited Partnership Interest in its remaining two subsidiary partnerships. There can be no assurance as to whether or when the sales will actually occur. All gains and losses on sales are included in discontinued operations. Gains on sales to affiliates of the Local General Partners are recorded as a capital transaction to minority interest. On December 15, 2004, the Partnership entered into two purchase and sale agreements to sell its Limited Partnership Interest in Pebble Creek ("Pebble Creek") and Nu Elm Apartments ("Nu Elm") to an affiliate of the Local General Partner for purchase prices of $1,490,000 and $20, respectively. The contracts specify that the sales will be completed in two installments. The first installment is expected to take place during the Fiscal Year ending March 25, 2006, and the final installment is expected to take place during Fiscal Year ending March 25, 2007. The sales are contingent on the approval of the Department of Housing and Urban Development ("HUD"). No assurances can be given as to whether or when HUD will approve the sales. On June 30, 2003, the Partnership's Limited Partnership Interest in Cabarras Arms Associates ("Cabarras") was sold to the Purchase Money Note Holder for $30,000, resulting in a loss in the amount of approximately $92,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,415,000, resulting in gain on sale of property of such amount. On June 30, 2003, the Partnership's Limited Partnership Interest in Hathaway Court Associates ("Hathaway") was sold to the Purchase Money Note Holder for $60,000, resulting in a gain in the amount of approximately $545,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $4,035,000, resulting in gain on sale of property of such amount. On March 28, 2003, the Partnership's interest in Saraland Apartments ("Saraland") was transferred to the U.S. Environmental Protection Agency pursuant to the First Amended Bankruptcy Plan by order of the United States Bankruptcy Court in Dallas, TX, resulting in a gain of approximately $350,000. No proceeds were used to pay off the Purchase Money Note and accrued interest, which had a total outstanding balance of approximately $2,124,000, resulting in additional gain of approximately $2,124,000, which was recognized during the year ended March 25, 2003. On December 31, 2002, the Partnership's Limited Partnership Interest in Summer Arms Apartments ("Summer Arms") was sold to the Purchase Money Note Holder for $25,000, resulting in gain of approximately $252,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,275,000, resulting in a gain on sale of approximately $3,275,000. On December 20, 2002, the property and the related assets and liabilities of Conifer 317 ("Pinewood") were sold to an unaffiliated third party for $2,000,000, resulting in a gain of approximately $1,030,000. The Partnership used approximately $1,453,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,634,000, resulting in gain on sale of approximately $180,000. On May 30, 2002, the property and the related assets and liabilities of Lexington Village ("Lexington") were sold to an affiliate of the Local General Partner for approximately $1,350,000, resulting in a capital contribution of approximately $412,000. The Partnership used approximately $617,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,445,000, resulting in gain on sale of approximately $2,828,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #1 were sold to the Local General Partner for approximately $1,750,000, resulting in a capital contribution of approximately $158,000. The Partnership used approximately $1,277,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,645,000, resulting in gain on sale of approximately $1,368,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #2 were sold to the Local General Partner for approximately $1,750,000, resulting in a capital contribution of approximately $379,000. The Partnership used approximately $1,194,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,725,000, resulting in gain on sale of approximately $531,000. On April 30, 2002, the property and the related assets and liabilities of Shelton Beach Apartments ("Northpointe I") were sold to an unaffiliated third party for $2,333,333, resulting in a gain of approximately $598,000. The Partnership used approximately $1,124,000 of proceeds to settle the associated 4 Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,239,000, resulting in gain on sale of approximately $2,115,000. On April 30, 2002, the property and the related assets and liabilities of Northpointe II were sold to an unaffiliated third party for $1,666,667 resulting in a gain of approximately $394,000. The Partnership used approximately $570,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,119,000, resulting in gain on sale of property of approximately $1,549,000. Segments -------- The Partnership operates in one segment, which is the investment in multi-family residential property. Competition ----------- The real estate business is highly competitive and each of the Local Partnerships in which the Partnership has invested owns an Apartment Complex which must compete for tenants with other rental housing in its area. However, the rental assistance and the preferred interest rates on mortgage financing generally make it possible to offer the apartments to eligible tenants at a cost to the tenant significantly below the market rate for comparable conventionally financed apartments in the area. Employees --------- The Partnership does not have any employees. All services are performed for the Partnership by its General Partners and their affiliates. The General Partners receive compensation in connection with such activities as set forth in Items 11 and 13 herein. In addition, the Partnership reimburses the General Partners and certain of their affiliates for expenses incurred in connection with the performance by their employees of services for the Partnership in accordance with the Partnership Agreement ("Partnership Agreement"). Item 2. Properties As of March 25, 2005, the Partnership holds a 98.99% limited partnership interest in each of two Local Partnerships, which own two Apartment Complexes receiving Government Assistance. Through the fiscal year ended March 25, 2005, the properties and the related assets and liabilities owned by thirty-one subsidiary partnerships were sold and the Partnership's Local Partnership Interests in twenty-eight subsidiary partnerships were sold (see Item 7, below). Set forth below is certain information concerning the Apartment Complexes and their operations and finances. See Schedule III to the financial statements included herein for information regarding encumbrances and for additional information pertaining to the Apartment Complexes. Each of the Local Partnerships owns one Apartment Complex. The Apartment Complexes owned as of March 25, 2005 are located in Missouri and Michigan. The two Apartment Complexes owned by the Local Partnerships at March 25, 2005 contain a total of 258 rental units. The larger of the Apartment Complexes consists of 186 units. Construction of each Apartment Complex was completed between 1972 and 1973. The remaining Apartment Complexes are occupied by low, moderate and middle-income tenants, some of whom are elderly. Each Apartment Complex is located in the vicinity of other housing developments receiving Government Assistance. The remaining two Apartment Complexes are subject to existing permanent first mortgages (the "Mortgage Loans"). See Schedule III.

LOCAL PARTNERSHIP SCHEDULE Government Assistance ~~-------------~~ Percentage of Units ~~HUD~~ Occupied at December 31, Name and Location Year HUD ------------- ----------------------------------- (Number of Units) Completed Programs(a) 2004 2003 2002 2001 2000 ~~1999 1998~~ -------------------------------- --------- ------------- ----- ---- ---- ---- ---- Knollwood I 1978 Sec.221(d)(4) (e) (e) (e) (e) (e) Mobile, AL (192) Knollwood II 1979 Sec.221(d)(4) (e) (e) (e) (e) (e) Mobile, AL (192) Knollwood III 1981 Sec.221(d)(4) (e) (e) (e) (e) (e) Mobile, AL (192) Knollwood, IV 1983 Sec.221(d)(4) (e) (e) (e) (e) (e) Mobile, AL (128) Parklane II 1977 Sec.221(d)(4) (e) (e) (e) (e) (e) Mobile, AL(140) Cedarbay 1981 Sec.221(d)(4) (n) (n) (n) ~~93%~~(n) ~~94%~~(n) Mobile, AL(112) Northwoods III Apts. 1982 Sec.221(d)(4) (p) (p) ~~87%~~(p) (p) 87% ~~88%~~ Pensacola, FL (192) Westminster Manor Apts. 1972 Sec.221(d)(4) (f) (f) (f) (f) (f) Arvada, CO (280) HAP

LOCAL PARTNERSHIP SCHEDULE (continued) Government Assistance ~~-------------~~ Percentage of Units ~~HUD~~ Occupied at December 31, Name and Location Year HUD ------------- ----------------------------------- (Number of Units) Completed Programs(a) 2004 2003 2002 2001 2000 ~~1999 1998~~ -------------------------------- --------- ------------- ----- ---- ---- ---- ---- ~~Westminster Manor Apts. 1972 Sec.221(d)(4) (f) (f) (f) (f) (f) Arvada, CO (280) HAP~~ Northgate Townhouse Apts. 1977 Sec.221(d)(4) (f) (f) (f) (f) (f) Thornton, CO (184) HAP Hackley Village 1971 Sec.236 (q) (q) ~~93%~~(q) ~~98%~~(q) ~~100~~93% Muskegon, MI (54) HAP Huntley #1 1972 Sec.236 (s) ~~88%~~(s) ~~98%~~(s) 9588% 98% Holt, MI (88) HAP Huntley #2 1973 Sec.236 (s) ~~82%~~(s) ~~99%~~(s) 9782% 99% Holt, MI (72) HAP Seymour O'Brien Manor Apts. 1972 Sec.236 (p) (p) ~~100%~~(p) (p) 100% ~~98%~~ Seymour, IN (56) HAP Washington Highland Apts. 1972 Sec.236 (p) (p) ~~96%~~(p) ~~93%~~(p) ~~100~~96% Washington, IN (56) HAP Vincennes Niblack Apts. 1972 Sec.236 (p) (p) ~~96%~~(p) ~~91%~~(p) 9496% ("Autumn Ridge Apartments") HAP Vincennes, IN (144) Casa Ramon Apartments 1974 Sec.236 (n) (n) (n) ~~99%~~(n) ~~100%~~(n) Orange, CA (75) HAP Nu-Elm Apartments 1972 Sec.236 8689% 9389% 9286% 9993% 9492% Springfield, MIMO (72) HAP Buttonwood Acres 1973 Sec.236 (f) (f) (f) (f) (f) New Bedford, MA (132) HAP(b) Rockdale West 1974 Sec.236 (i) (i) (i) (i) (i) New Bedford, MA (225) HAP(b) Solemar 1976 (c) (o) (o) (o) ~~98%~~(o) ~~100%~~(o) South Dartmouth, MA (200) Decatur Apartments 1971 Sec.236 (o) (o) (o) (lo) ~~84%~~(o) Decatur, AL (100) HAP Florence Apartments 1973 Sec.236 (o) (o) (o) (lo) ~~94%~~(o) Florence, AL (96) Saraland Apartments (g) 1972 Sec.236 (t) 0%(t) 0%(t) 0% 0% Saraland, AL (60) HAP University Gardens Apts. 1971 Sec.236 (q) (q) ~~100%~~(q) ~~100%~~(q) 100% Waxahachie, TX (104) Southside Village Apts. 1972 Sec.236 (q) (q) ~~91%~~(q) ~~96%~~(q) 9791% Brownwood, TX (104) HAP Dickens Ferry Apartments 1972 Sec.236 (o) (o) (o) (lo) ~~95%~~(o) Mobile, AL (80) HAP Bonnie Doone Apartments 1972 Sec.236 (o) (o) (o) (lo) ~~97%~~(o) Athens, AL (60) HAP Conifer 208 (Conifer Village) 1972 Sec.236 (n) (n) (n) ~~97%~~(n) ~~100%~~(n) Spokane, WA (64) HAP Conifer 307 (Fircrest) 1973 Sec.236 (k) (k) (k) (k) ~~97%~~(k) Beaverton, OR (60) HAP Conifer 317 (Pinewood) 1974 Sec.236 (s) (s) (s) 96% 100% ~~98% 92%~~ Hillsboro, OR (50) Bicentennial Apts. 1976 Sec.221(d)(4) (d) (d) (d) (d) (d) Houston, TX (292) Bellfort Apts. 1979 Sec.221(d)(4) (k) (k) (k) (k) (k) Houston, TX (272) HAP Cloisters (Sundown) 1974 Sec.236 (n) (n) (n) (n) (n) Birmingham, AL (192) HAP

LOCAL PARTNERSHIP SCHEDULE (continued) Government Assistance ~~-------------~~ Percentage of Units ~~HUD~~ Occupied at December 31, Name and Location Year HUD ------------- ----------------------------------- (Number of Units) Completed Programs(a) 2004 2003 2002 2001 2000 ~~1999 1998~~ -------------------------------- --------- ------------- ----- ---- ---- ---- ---- ~~Bellfort~~Cabarrus ~~Apts.~~Arms ~~1979 Sec.221(d)(4) (k) (k) (k) (k) 93% Houston, TX (272) HAP Cloisters (Sundown)~~ 1974 Sec.236 (nu) (nu) ~~(n) 98% 98% Birmingham, AL (192) HAP Cabarrus Arms 1974 Sec.236~~ 97% 96% 95% ~~96% 96%~~ Kannapolis, NC (76) HAP Summer Arms Apts. 1974 Sec.236 (t) (t) (t) 92% 98% ~~96% 96%~~ Sumter, SC (100) HAP Lexington Village 1973 Sec.236 (s) (s) (s) 75% 95% ~~97% 98%~~ Conyers, GA (108) HAP Ware Manor 1971 Sec.236 (p) (p) ~~93%~~(p) ~~98%~~(p) 9893% Waycross, GA (84) HAP Nottingham Woods Apts. 1974 Sec.236 (p) (p) ~~97%~~(p) ~~92%~~(p) 9697% Oxford, AL (144) Hathaway Court 1974 Sec.236 (u) (u) 98% 100% 100% ~~100% 99%~~ Covington, KY (159) HAP Tall Pines 1972 Sec.236 (p) (p) ~~98%~~(p) ~~99%~~(p) ~~97%~~98 La Grange, GA (115) HAP Shelton Beach Apts. 1975 Sec.221(d)(4) (s) (s) (s) 94% 92% ~~83% 91%~~ Saraland, AL (112) Northpointe II 1978 Sec.221(d)(4) (s) (s) (s) 91% 93% ~~86% 86%~~ Saraland, AL (80) Caroline Forest Apts. 1973 Sec.236 (o) (o) (o) ~~100%~~(o) ~~100%~~(o) Salem, VA (72) (m) Park of Pecan I 1979 Sec.221(d)(4) (i) (i) (i) (i) (i) Rosenberg, TX (137) Park of Pecan II 1978 Sec.221(d)(4) (i) (i) (i) (i) (i) Rosenberg, TX (136) Villa Apollo No. 1 1971 Sec.236 (j) (j) (j) (j) ~~90%~~(j) Brownstown Township, MI (112) HAP Carlton Terrace Apartments 1973 Sec.236 (j) (j) (j) (j) ~~98%~~(j) Sterling Heights, MI (300) Cranbrook Manor Apartments 1970 Sec.236 (j) (j) (j) (j) ~~78%~~(j) Lansing, MI (136) HAP Oakbrook Villa Apartments 1970 Sec.236 (k) (k) (k) (k) ~~91%~~(k) Romulus, MI (352) HAP Pebble Creek 1973 Sec.236 96% 98% 9998% ~~100~~99% 100% ~~99%~~ East Lansing, MI (186) Villa Apollo No. 2 1971 Sec.236 (j) (j) (j) (j) ~~89%~~(j) Brownstown Township, MI (286) HAP Greenwood Manor 1974 Sec.236 (q) (q) ~~91%~~(q) ~~92%~~(q) 8091% Pine Bluff, AR (64) HAP Malvern Manor 1974 Sec.236 (q) (q) ~~90%~~(q) ~~98%~~(q) 9290% Malvern, AR (50) HAP Hereford Manor 1973 Sec.236 (q) (q) ~~94%~~(q) ~~84%~~(q) 9294% Siloam Springs, AR (50) HAP Henslee Heights 1974 Sec.236 (q) (q) ~~100%~~(q) (q) 100% ~~97%~~ Pine Bluff, AR (78) HAP Oakwood Manor 1972 Sec.236 (p) (p) (p) (p) 76% Little Rock, AR (200) HAP West Scenic Apartments 1971 Sec.236 (n) (n) (n) (n) (n) North Little Rock, AR (150) Robindale East Apartments 1974 Sec.236 (p) (p) (p) (p) 73% Blytheville, AR (88) HAP

(a) The Partnership invested in Local Partnerships owning existing Apartment Complexes which receive either federal or state subsidies. HUD, through FHA, administers a variety of subsidies for low and moderate-income housing. FHA administers similar housing programs for non-urban areas. The federal programs generally provide one or a combination of the following forms of assistance: (1) mortgage loan insurance, (2) rental subsidies and (3) reduction of mortgage interest payments. (1) HUD provides mortgage insurance for rental housing projects pursuant to a number of sections of Title II of the National Housing Act ("NHA"), including Section 236, Section 221(d)(4), Section 221(d)(3) and Section 220. Under all of these programs, HUD will generally provide insurance equal to 100% of the total replacement cost of the project to non-profit owners and 90% of the total replacement cost to limited-distribution owners. Mortgages are provided by institutions approved by HUD, including banks, savings and loan companies and local housing authorities. Section 221(d)(4) of NHA provides for federal insurance of private construction and permanent mortgage loans to finance new construction of rental apartment complexes containing five or more units. The most significant difference between the Section 221(d)(4) program and the Section 221(d)(3) program is the maximum amount of the loan which may be obtained. Under the Section 221(d)(3) program, non-profit sponsors may obtain a permanent mortgage equal to 100% of the total replacement cost; no equity contribution is required of a non-profit sponsor. In all other respects the Section 221(d)(3) program is substantially similar to the Section 221(d)(4) program. (2) Many of the tenants in HUD insured projects receive some form of rental assistance payments, primarily through the Section 8 Housing Assistance Payments Program (the "Section 8 Program"). Apartment Complexes not receiving assistance through the Section 8 Program ("Section 8 Payments") will generally have limitations on the amounts of rent which may be charged. One requirement imposed by HUD regulations effective for apartment complexes initially approved for Section 8 Payments on or after November 5, 1979 is to limit the amount of the owner's annual cash distributions from operations to 10% of the owner's equity investment in an apartment complex if the apartment complex is intended for occupancy by families and to 6% of the owner's equity investment in an apartment complex intended for occupancy by elderly persons. The owner's equity investment in the apartment complex is 10% of the project's replacement cost as determined by HUD. (3) Section 236 Program. As well as providing mortgage insurance, the Section 236 program also provides an interest credit subsidy which reduces the cost of debt service on a project mortgage, thereby enabling the owner to charge the tenants lower rents for their apartments. Interest credit subsidy payments are made monthly by HUD directly to the mortgagee of the project. Each payment is in an amount equal to the difference between (i) the monthly interest payment required by the terms of the mortgage to pay principal, interest and the annual mortgage insurance premium and (ii) the monthly payment which would have been required for principal and interest if the mortgage loan bore interest at the rate of 1%. These payments are credited against the amounts otherwise due from the owner of the project, who makes monthly payments of the balance. (b) The Local Partnership receives monthly rent supplements from HUD through MHFA and the New Bedford Housing Authority. (c) MHFA provides interest credit subsidies pursuant to Section 13A of the Massachusetts Acts of 1966. The Local Partnership also receives monthly rent supplements from the Dartmouth Housing Authority and the South Shore Housing Authority pursuant to Section 707 of the Massachusetts Act of 1966. (d) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1997. (e) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1998. (f) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 1998. (g) During the fiscal year ended March 25, 1998, the Local Partnership's property was declared unsafe to live due to amounts of Benzene and Aldrene found to be present in the air of some apartments. (h) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1999. (i) The Partnership's Local Partnership Interest in this Local Partnership was sold during the fiscal year ended March 25, 1999. (j) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2000. 8 (k) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2000. (l) As a result of on-going litigation related to the Roar Properties (as defined herein), occupancy rates have not been provided by the management agent pursuant to the instructions from the Local General Partner. (m) The Partnership's Local Partnership Interest in this Local Partnership was sold on March 31, 2000. (n) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2001. (o) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2001. (p) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2002. (q) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2002. (s) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2003. (t) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2003. (u) The Partnership's Local Partnership interest in these Local Partnerships were sold during the fiscal year ended March 25, 2004. All leases are generally for periods not exceeding one to two years and no tenant occupies more than 10% of the rentable square footage. Management continuously reviews the physical state of the properties and budgets improvements when required, which are generally funded from cash flow from operations or release of replacement reserve escrows. Management continuously reviews the insurance coverage of the properties and believes such coverage is adequate. See Item 1, Business, above for the general competitive conditions to which the properties described above are subject. Real estate taxes are calculated using rates and assessed valuations determined by the township or city in which the property is located. Such taxes have approximated 1% of the aggregate cost for the properties as shown in Schedule III to the financial statements included herein. Item 3. Legal Proceedings None Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fiscal year covered by this report through the solicitation of proxies or otherwise. 9 PART II Item 5. Market for the Registrant's Limited Partnerships Interests and Related Security Holder Matters As of March 25, 2005, the Partnership had issued and outstanding 12,074 Limited Partnership Interests, of which 6,674 are Initial Limited Partnership Interests and 5,400 are Additional Limited Partnership Interests, each representing a $5,000 capital contribution to the Partnership, for aggregate gross proceeds of $60,370,000. Additional Limited Partnership Interests are the Limited Partnership Interests acquired upon the exercise of warrants or sold by the Partnership upon the nonexercise of the warrants. The warrants are rights granted pursuant to the Partnership Agreement as part of the purchase of an Initial Limited Partner Interest. No further issuance of Initial Limited Partnership Interests or Additional Limited Partnership Interests is anticipated and all warrants have expired. The offering of Units consisting of Initial Limited Partnership Interests and warrants to purchase Additional Limited Partnership Interests terminated in 1984. The offering of Additional Limited Partnership Interests terminated in March 1985. No public market has developed, and it is not anticipated that any public market will develop, for the secondary purchase and sale of any Limited Partnership Interests. Limited Partnership Interests may be transferred only if certain requirements are satisfied, including the rendering of an opinion of counsel to the Partnership that such transfer would not cause a termination of the Partnership under Section 708 of the Internal Revenue Code and would not violate any federal or state securities laws. As of May 5, 2005, there were approximately 4,405 registered holders of Limited Partnership Interests. In March 2003, 2001, 2000 and 1998, cash distributions of approximately $1,509,000, $1,389,000, $1,980,000 and $1,997,000 were paid to the Limited Partners, respectively. Additionally, in March 2003, 2001, 2000 and 1998, cash distributions of approximately $15,000, $14,000, $20,000 and $20,000 were paid to the General Partners, respectively. These distributions were from net proceeds from the sale of properties by Local Partnerships in which the Partnership had invested (see Item 7. below). Of the total cash distributions of approximately $1,524,000, $1,403,000, $2,000,000 and $2,017,000 for the years ended March 25, 2003, 2001, 2000 and 1998, there was no return of capital determined in accordance with U.S. generally accepted accounting principles. With the exception of these distributions, the Partnership has made no distributions to its Limited Partners from its inception on June 28, 1984 to March 25, 2005. There are no material restrictions upon the Partnership's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. The Partnership has invested as a limited partner in Local Partnerships owning Apartment Complexes that receive Governmental Assistance under programs which in many instances restrict the cash return available to owners. See Item 8, Footnote 11(e) below, for a discussion of these restrictions. The Partnership does not anticipate providing significant cash distributions to its Limited Partners in circumstances other than refinancing or sale of the Apartment Complexes or the Local Partnership Interests. These distributions will not be sufficient to return to Limited Partners the full amount of their original investment in the Partnership. 10 Item 6. Selected Financial Data The information set forth below presents selected financial data of the Partnership. Additional detailed financial information is set forth in audited financial statements and footnotes contained in Item 8 hereof and in the schedules contained in Item 14 hereof.

Year Ended March 25, ----------------------------------------------------------------------------~~-----~~ OPERATIONS 2005 2004* 2003* 2002* 2001* ~~2000 1999~~ ---------- ---------------------- ------------ ------------ ------------- ------------- -------------- Revenues $ 1421,~~178,518~~029 $ 2829,~~892,169~~852 $ 3453,~~185,019~~011 $ 3894,~~002,609~~778 $ 36194,~~695,719~~105 Operating expenses (71,~~202~~274,590) (161,~~215~~862,~~466~~157) (~~28,223,218) (35,058,379) (39,658,795) Loss on impairment of assets 0 0 0 0 (~~2,~~399~~286,~~391~~345) ~~Minority interest~~ (~~337~~5,~~639) 213~~304,~~740 (888,911~~760) (310,~~110~~314,~~714~~132) ~~(4,662)~~ ------------- ------------- ------------- ------------- -------------- ~~Income~~Loss ~~(loss)~~from ~~before~~operations ~~extraordinary item 6~~(1,~~638~~253,~~289~~561) 12(1,~~890~~832,~~443~~305) 5(2,~~072~~233,~~890~~334) (~~166~~5,~~484~~209,982) (510,~~367~~120,~~129~~027) ~~Extraordinary~~Net ~~item-~~(loss) ~~forgiveness~~income offrom ~~indebt-~~discontinued ~~edness~~operations 11(Note 12) (3,~~962~~367,~~803~~212) 217,~~389~~456,~~335~~575 2120,~~773~~834,~~849~~426 2339,~~069~~489,~~821~~760 436,~~232~~966,~~663~~766 ------------- ------------- ------------- ------------- -------------- Net (loss) income $ (~~loss~~4,620,773) $ 5,624,270 $ 18,601,092 $ 34,279,778 $ 26,846,739 ~~$ 22,903,337 $ (1,134,466)~~ ============= ============= ============= ============= ============== ~~Income~~Loss ~~(loss)~~from ~~before~~operations ~~extraordinary item~~ per Unit $ ~~544~~(103) $ ~~1,057~~(150) $ ~~416~~(183) $ (14427) $ (~~440~~830) ~~Extraordinary~~(Loss) ~~item~~income from discontinued operations (including gain on sale of properties, loss on impairment of fixed assets and minority interest) per ~~Unit~~limited ~~981~~partner unit (276) 611 1,~~754~~708 13,~~785~~238 13,~~892~~031 ~~347~~ ------------- ------------- ------------- ------------- -------------- Net ~~income~~ (loss) income per Unit $ (379) $ 461 $ 1,525 $ 2,811 $ 2,201 ~~$ 1,878 $ (93)~~ ============= ============= ============= ============= ============= Year Ended March 25, ----------------------------------------------------------------------------~~-----~~ FINANCIAL POSITION 2005 2004* 2003* 2002* 2001 ~~2000 1999~~ ------------------ -------------- ------------ ------------ ------------- ------------- -------------- Total assets $ 104,~~583~~340,~~374~~766 $ 278,~~426~~431,~~999~~782 $ 5110,~~182~~583,~~923~~374 $ 8127,~~413~~426,~~006~~999 $ ~~112~~51,~~436~~182,~~709~~923 ============= ============= ============= ============= ============== Long-term obligations $ 0 $ 9,656,656 $ 18,613,182 $ 45,956,744 $ 103,353,307 ~~$ 162,421,389 $ 212,711,021~~ ============= ============= ============= ============= ============== Total liabilities $ 222,~~420~~442,~~241~~759 $ 5614,~~178~~798,~~198~~440 $ ~~113~~22,~~797~~420,~~425~~241 $ ~~169~~56,~~474~~178,~~875~~198 $ ~~221~~113,~~443~~797,~~873~~425 ============= ============= ============= ============= ============== Minority interest $ ~~59,888~~0 $ ~~222~~(94,~~153~~656) $ ~~638~~59,~~628~~888 $ ~~635~~222,~~465~~153 $ ~~593~~638,~~370~~628 ============= ============= ============= ============= ==============

* Reclassified for comparative purposes for discontinued operations from assets held for sale and sales of property and partnership interests. During the years ended March 25, 2001, 2002, 2003 and 2004, total assets decreased primarily due to depreciation and the sale of properties (see Note 10 in Item 8, Financial Statements and Supplementary Data), partially offset by net additions to property and equipment. During the year ended March 25, 2005, total assets decreased primarily due to the writedown of the remaining properties to their estimated net realizable value. Long-term obligations and total liabilities decreased for the years ended March 25, 2001, 2002, 2003 and 2004, primarily due to the forgiveness of indebtedness on Purchase Money Notes and amounts due to selling partners as a result of the sale, principal repayments of mortgage notes payable and payments of interest on Purchase Money Notes, partially offset by accruals of interest on Purchase Money Notes. During the year ended March 25, 2005, long-term obligations and total liabilities decreased, primarily due to these liabilities being written down to their estimated net settlement value. 11 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources ------------------------------- General ------- The Partnership's capital was originally invested primarily in 61 Local Partnerships, in which the Partnership made an initial investment of $50,293,934 (including acquisition expenses). These investments are highly illiquid. At the beginning of fiscal year 2004, the Partnership had interests in two Local Partnerships. During the fiscal year ended March 25, 2005, the Partnership entered into contracts to sell the Limited Partnership Interest in its remaining two subsidiary partnerships. The contracts specify that the sales will be completed in two installments. The first installment is expected to take place during the Fiscal Year ending March 25, 2006, and the final installment is expected to take place during Fiscal Year ending March 25, 2007. Through the fiscal year ended March 25, 2005, the properties and the related assets and liabilities owned by thirty-one subsidiary partnerships were sold and the Partnership's Local Partnership Interests in twenty-eight subsidiary partnerships were sold. As of March 25, 2005, the Partnership owned interests in two Local Partnerships. The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. In addition, the Partnership evaluates the amount of a potential environmental liability independently from any potential claim for recovery (see below). Short-Term ---------- During the period March 26 through December 15, 2005, cash and cash equivalents of the Partnership decreased approximately $396,000. This decrease is due to cash used in operating activities ($396,000). Included in the adjustments to reconcile the net loss to cash used in operating activities is income from discontinued operations ($3,367,000). Total expenses for the years ended March 15, 2005, 2004 and 2003, excluding depreciation and amortization, interest and general and administrative - related parties, totaled $75,381, $205,911 and $139,595, respectively. Accounts payable and other liabilities totaled $24,657 and $90,469 , respectively. Accounts payable are short term liabilities which are expected to be paid from operating cash flows, working capital balances at the Local Partnership level, local general partner advances and in certain circumstances advances from the Partnership. The Partnership believes it (and the applicable Local Partnerships) has sufficient liquidity and ability to generate cash and to meet existing and known or reasonably likely future cash requirements over both the short and long term. Distributions aggregating approximately $0, $0 and $10,072,000 were made to the Partnership during the 2004, 2003 and 2002 Fiscal Years, respectively, of which approximately $0, $0 and $8,776,000, respectively, was used to pay principal, interest and extension fees on the Purchase Money Notes. The Partnership's primary sources of funds are the cash distributions from operations of the Local Partnerships in which the Partnership has invested and net proceeds from sales. These sources are available to meet obligations of the Partnership. However, the cash distributions received from the Local Partnerships to date have not been sufficient to meet all such obligations of the Partnership. Accordingly, certain fees and expense reimbursements owed to the General Partners amounting to approximately $316,000, $4,351,000 and $3,439,000, were accrued and unpaid as of March 25, 2005, 2004 and 2003, respectively. Without the General Partners' continued allowance of accrual without payment of certain fees and expense reimbursements, the Partnership will not be in a position to meet its obligations. The General Partners have continued allowing the accrual without payment of these amounts but are under no obligation to continue to do so. Proceeds received from future sales will be used to pay any outstanding amounts due to the General Partners. Government Programs and Regulations ----------------------------------- For a discussion of Government Programs and Regulations see Item 1. Business. Tabular Disclosure of Contractual Obligations --------------------------------------------- The following table summarized the Partnership's commitments for the discontinued operations as of March 25, 2005, to make future payments under its debt agreements and other contractual obligations.

~~Selected~~Less ~~Quarterly~~than ~~Financial~~1 ~~Data (Unaudited)~~ -~~--------------------------------------------~~ Quarter Ended ------------------------------------------------------------ OPERATIONS June 25, September 25, December 25, March 25, 2002 2002 2002 2003 --------------------- ------------ ------------ ------------ ------------ Revenues $ 1,982,707 $ 3~~,224,244~~ $ 3~~,529,709~~ $ -5~~,441,858~~ ~~Operating~~More ~~expenses~~than ~~(2,178,640)~~Total (1~~,864,150)~~ ~~(1,502,553)~~Year ~~(1,657,247)~~Years ~~Minority~~Years ~~Interest~~5 ~~64,728~~Years ~~(145,658) 21,514 (278,223)~~ ------------ ------------ ------------ ------------ ~~(Loss) income before extraordinary item (131,205) 1,214,436 2,048,670 3,506,388 Extraordinary item~~- ~~forgiveness of indebt~~- ~~edness 5,683,676 11,104,825 (242,779) (4,582,919)~~ ------------ ~~------------~~Mortgage ~~------------~~notes ~~------------~~payable ~~Net~~of ~~income~~assets ~~(loss)~~held $for ~~5,552,471~~sale ~~$ 12,319,261 $ 1,805,891 $~~ (~~1,076,531~~a) ~~============ ============ ============ ============ (Loss) income before extraordinary item per Unit~~ $ ~~(11) $ 100 $ 168 $ 288 Extraordinary item per Unit 466 910 (20) (376) ------------ ------------ ------------ ------------ Net income (loss) per Unit $ 455 $~~ 1,~~010 $ 148 $ (88) ============ ============ ============ ============ Quarter Ended ------------------------------------------------------------ OPERATIONS June 25~~987,373 ~~September 25, December 25, March 25, 2001 2001 2001 2002 --------------------- ------------ ------------ ------------ ------------ Revenues~~ $ 2150,~~536,631~~764 $ 5332,~~864,412~~746 $ 10379,~~180,566~~182 $ 10,310,560 Operating expenses (5,145,579) (4,410,027) (3,391,622) (3,268,238) Minority Interest 241,128 109,450 (123,311) (13,527) ------------ ------------ ------------ ------------ (Loss) income before (2,367,820) 1,~~563~~124,~~835~~681 6,665,633 7,028,795 extraordinary item Extraordinary item- forgiveness of indebtedness 3,839,356 10,473,627 1,667,561 5,408,791 ------------ ------------ ------------ ------------ Net income $ 1,471,536 $ 12,037,462 $ 8,333,194 $ 12,437,586 ============ ============ ============ ============ (Loss) income before extraordinary item per Unit $ (194) $ 128 $ 547 $ 576 Extraordinary item per Unit 315 859 136 444 ------------ ------------ ------------ ------------ Net income per Unit $ 121 $ 987 $ 683 $ 1,020 ============ ~~============ ============ ============~~

(a) Pebble Creek's mortgage note is payable in aggregate monthly installments of approximately $10,000, including principal and interest at a rate of 6.75% per annum, through July 2012. The subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership, the assignment of certain subsidiary partnership's rents and leases and is without further recourse. Under the terms of regulatory agreements with the Secretary of HUD, the subsidiary partnerships paid only that portion of the monthly payments that would be required if the interest rate was 1% per annum; the balance was subsidized under Section 236 of the National Housing Act. In accordance with the liquidation basis of accounting, The Nu Elm mortgage note payable, totaling approximately $488,000, was written down to its estimated settlement value, resulting in a gain on liquidation of approximately $488,000. 12 Off Balance Sheet Arrangements ------------------------------ The Partnership has no off-balance sheet arrangements. Critical Accounting Policies ---------------------------- In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Set forth below is a summary of the accounting policies that management believes are critical to the preparation of the consolidated financial statements. The summary should be read in conjunction with the more complete discussion of the Partnership's accounting policies included in Note 2 to the consolidated financial statements in this annual report on Form 10-K. a) Basis of Accounting On December 15, 2004, the Partnership entered into contracts to sell its remaining two limited partnership interests. Upon the closing of these contracts, the General Partners will commence the process of liquidating the Partnership. To fairly present the financial position of the Partnership, management has prepared the March 25, 2005 financial statements using the liquidation basis of accounting. The remaining assets were written down to their estimated net realizable value of approximately $4,341,000, and the remaining liabilities were written down to their estimated net settlement value of approximately $2,443,000. Management plans to distribute the remaining assets, if any, after all remaining expenses and accrued expenses have been settled. The accompanying financial statements for the years ended March 25, 2004 and 2003 are presented on the accrual basis of accounting. b) Property and Equipment Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value. At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. All property and equipment for subsidiary partnerships whose assets and liabilities are under sales contracts are classified as assets held for sale. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using discounted cash flows). For the year ended March 25, 2005, the Partnership has recorded a loss on impairment of assets of approximately $3,558,000. c) Discontinued Operations In accordance with FASB 144, the results of discontinued operations are reported as a separate component of income before extraordinary items on the Consolidated Statements of Operations. Discontinued operations include the results of operations and any gain or loss recognized for Local Partnerships that have been disposed of or are held for sale. A gain or loss recognized on the disposal is disclosed in the notes to the financials statements. Adjustments to amounts previously reported in operations that are directly related to the disposal of a Local Partnership are reclassified in the current period as discontinued operations for comparability purposes. Assets and liabilities of a Local Partnership that are classified as held for sale are presented separately in the asset and liability sections, respectively, of the Consolidated Balance Sheets. d) Revenue Recognition Rental income is earned primarily under standard residential operating leases and is typically due the first day of each month, but can vary by property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants' accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which it is earned. Other revenues are recorded when earned and consist of the following items: Interest income earned on cash and cash equivalent balances and cash held in escrow balances, and other miscellaneous items. e) Income Taxes No provision has been made for income taxes in the accompanying consolidated financial statements since such taxes, if any, are the responsibility of the individual partners. For income tax purposes, the Partnership has a fiscal year ending December 31. Purchase Money Notes -------------------- For a discussion of Purchase Money Notes Payable, see Note 7 to the Financial Statements. 13 Sale of Underlying Properties/Local Partnership Interests --------------------------------------------------------- For a discussion of the sale of properties in which the Partnership owns direct and indirect interests, see Note 10 to the Financial Statements. Since the maximum loss for which the Partnership would be liable is its net investment in the respective Local Partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way except that the Partnership would lose its investment in the properties and any potential proceeds from the sale or refinancing of the properties. Except as described above, management is not aware of any trends or events, commitments or uncertainties, which have not been otherwise disclosed, that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. Due to the sale of properties, the portfolio is not diversified by the location of the properties around the United States. The Partnership has two remaining properties and therefore the Partnership may not be protected against a general downturn in the national economy. New Accounting Pronouncements ----------------------------- On December 16, 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 153, Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29 ("SFAS No. 153"). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have "commercial substance." SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not believe that the adoption of SFAS No. 153 on June 15, 2005 will have a material effect on the Company's consolidated financial statements. In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 is applicable immediately for variable interest entities created after January 31, 2003. For variable interest entities created before February 1, 2003, the provisions of FIN 46 were applicable no later than December 15, 2003. The Partnership has not created any variable interest entities after January 31, 2003. In December 2003 the FASB redeliberated certain proposed modifications and revised FIN 46 ("FIN 46 (R)"). The revised provisions were applicable no later than the first reporting period ending after March 15, 2004. The adoption of FIN 46 (R) did not have a material impact on the Partnership's financial reporting and disclosures. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or "mezzanine" equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the Consolidated Balance Sheets. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. The guidance in SFAS No. 150 generally was effective for all financial instruments entered into or modified after May 31, 2003, and was otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The Partnership has evaluated SFAS No. 150 and determined that it does not have an impact on the Partnership's financial reporting and disclosures. Results of Operations --------------------- The following is a summary of the results of operations of the Partnership for the 2004, 2003 and 2002 Fiscal Years. The results of operations of the Partnership, as well as the Local Partnerships, excluding discontinued operations (including gain on sale of properties and forgiveness of indebtedness income), administrative and management, administrative and management-related parties and financial remained fairly constant for the 2004 Fiscal Year as compared to the 2003 Fiscal Year. Net operating loss during the 2004, 2003 and 2002 Fiscal Years totaled $1,253,561, $1,832,305 and $2,233,334, respectively. 2004 vs. 2003 ------------- Due to the remaining two Local Partnerships being classified as discontinued operations, the operating income and operating expenses for the 2004 and 2003 Fiscal Years were at the Partnership level. Other income decreased approximately $9,000 for the 2004 Fiscal Year as compared to the 2003 Fiscal Year primarily due to the 2004 Fiscal Year financial statements being prepared on the liquidation basis of accounting. As of December 16, 2004, all other income was included in liquidating activities. Administrative and management decreased approximately $131,000 for the 2004 Fiscal Year as compared to the 2003 Fiscal Year due to the write-off of uncollectible receivables at the Partnership level during the 2003 Fiscal Year as well as the 2004 Fiscal Year financial statements being prepared on the liquidation basis of accounting. As of December 16, 2004, all administrative and management expenses were included in liquidating activities. Administrative and management-related parties decreased approximately $306,000 for the 2004 Fiscal Year as compared to the 2003 Fiscal Year, primarily due to the General Partners' decision to waive the partnership management fee in the 2004 Fiscal Year (see Note 8). Interest expense decreased approximately $151,000 for the 2004 Fiscal year as compared to the 2003 Fiscal Year due to a decrease in the total principal of the Purchase Money Notes being charged interest at the Partnership level as well as the 2004 Fiscal Year financial statements being prepared on the liquidation basis of accounting. As of December 16, 2004, all interest expenses were included in liquidating activities. Net (loss) income from discontinued operations will continue to fluctuate as a result of the disposition of properties. 14 2003 vs. 2002 ------------- Due to the remaining two Local Partnerships being classified as discontinued operations, the operating income and operating expenses for the 2003 and 2002 Fiscal Years were at the Partnership level. Other income decreased approximately $23,000 for the 2003 Fiscal Year as compared to the 2002 Fiscal Year primarily due to higher cash and cash equivalents balance earning interest in 2002 Fiscal Year. Total operating expenses, excluding administrative and management and interest, remained fairly consistent with an increase of approximately 9% for the 2003 Fiscal Year as compared to the 2002 Fiscal Year. Administrative and management increased approximately $66,000 for the 2003 Fiscal Year as compared to the 2002 Fiscal Year, primarily due to the write-off of uncollectible receivables at the Partnership level during the 2003 Fiscal Year. Interest expense decreased approximately $597,000 for the 2003 Fiscal Year as compared to the 2002 Fiscal Year primarily due to a decrease in the total principal of the Purchase Money Notes being charged interest at the Partnership level. Net (loss) income from discontinued operations will continue to fluctuate as a result of the disposition of properties. Other ----- The Partnership's investment as a limited partner in the Local Partnerships is subject to the risks incident to the management and ownership of improved real estate. The Partnership's investments also could be adversely affected by poor economic conditions, which generally could increase vacancy levels, rental payment defaults, and operating expenses, any or all of which could threaten the financial viability of one or more of the Local Partnerships. There also are substantial risks associated with the operation of Apartment Complexes receiving Government Assistance. These include: governmental regulations concerning tenant eligibility, which may make it more difficult to rent units in the Apartment Complexes; difficulties in obtaining government approval for rent increases; limitations on the percentage of income which low and moderate-income tenants may pay as rent; the possibility that Congress may not appropriate funds to enable HUD to make the rental assistance payments it has contracted to make; and the possibility that, when the rental assistance contracts expire, there may not be market demand for apartments at full market rents in a Local Partnership's Apartment Complex. The Local Partnerships are impacted by inflation in several ways. Inflation allows for increases in rental rates generally to reflect the impact of higher operating and replacement costs. Furthermore, inflation generally does not impact the fixed long-term financing under which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs, such as fuel, utilities, and labor. Item 7A. Quantitative and Qualitative Disclosure about Market Risk The Partnership has mortgage notes that are payable in aggregate monthly installments including principal and interest at rates varying from 6.75% to 7% per annum. The Partnership does not believe there is a material risk associated with the various interest rates associated with the mortgage notes as the majority of the Local Partnership mortgage notes have fixed rates. In accordance with the liquidation basis of accounting, mortgage notes payable, totaling approximately $2,476,000, were written down to their estimated settlement value, resulting in a gain on liquidation of approximately $2,476,000. The Partnership currently discloses in Item 8, Note 3 of the Notes to Consolidated Financial Statements, the fair value of the mortgage notes payable. The Partnership does not have any other market risk sensitive instruments. 15 Item 8. Financial Statements and Supplementary Data Sequential Page ---------- (a) 1. Financial Statements Report of Independent Registered Public Accounting Firm 17 Consolidated Statement of Net Assets in Liquidation as of March 25, 2005 and Consolidated Balance Sheet as of March 25, 2004 37 Consolidated Statements of Operations for the Period March 26, 2004 through December 15, 2004 and for the Years Ended March 25, 2004 and 2003 38 Consolidated Statement of Changes in Net Assets in Liquidation for the Period December 16, 2004 through March 25, 2005 39 Consolidated Statements of Changes in Partners' Deficit for the Period March 26, 2004 through December15, 2004 and for the Years Ended March 25, 2004 and 2003 40 Consolidated Statements of Cash Flows for the Period March 26, 2004 through December 15, 2004 and for the Years Ended March 25, 2005 and 2004 41 Notes to Consolidated Financial Statements 42 16 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners of Cambridge Advantaged Properties Limited Partnership and Subsidiaries We have audited the consolidated balance sheets of Cambridge Advantaged Properties Limited Partnership and Subsidiaries as of March 25, 2004, and the related consolidated statements of income, changes in partners' deficit, and cash flows for the years ended March 25, 2004 and 2003 (the 2003 and 2002 Fiscal Years, respectively), and the consolidated statements of income, changes in partners' deficit, and cash flows for the period March 26, 2004 through December 15, 2004. In addition, we have audited the consolidated statement of net assets in liquidation as of March 25, 2005, and the related consolidated statement of changes in net assets in liquidation for the period December 16, 2004 through March 25, 2005. The 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 did not audit the financial statements for 4 (2003 Fiscal Year) and 15 (2002 Fiscal Year) subsidiary partnerships whose net income aggregated $805,748 and $3,741,030 for the 2003 and 2002 Fiscal Years, respectively, and whose assets constituted 88% of the Partnership's assets at March 25, 2004 presented in the accompanying consolidated financial statements. The financial statements of these subsidiary partnerships were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for these subsidiary partnerships, is based solely upon the reports of the other auditors. 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 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. We believe that our audits provide a reasonable basis for our opinion. As described in Note 1(a), the Partnership is currently in the process of disposing of its investments. As of March 25, 2005, the Partnership has disposed of fifty-nine of its sixty-one original investments and on December 15, 2004, entered into contracts to sell its Limited Partnership interest in the remaining two. The Partnership intends to liquidate upon the sale of the remaining investments. As a result, the Partnership has changed its basis of accounting for periods subsequent to December 15, 2004 from the going-concern basis to a liquidation basis. In our opinion, based upon our audits and the reports of the other auditors, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cambridge Advantaged Properties Limited Partnership and Subsidiaries at March 25, 2004, the results of their operations and their cash flows for the years ended March 25, 2004 and 2003 and for the period March 26, 2004 through December 15, 2004, their net assets in liquidation as of March 25, 2005, and the changes in their net assets in liquidation for the period December 16, 2004 through March 25, 2005, in conformity with U.S. generally accepted accounting principles applied on the basis described in the preceding paragraph. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI LLP New York, New York June 15, 2005 17 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Huntley Associates We have audited the accompanying balance sheet of Huntley Associates (A Limited Partnership) as of May 8, 2002, and the related statements of income and changes in partner's equity for period January 1, 2002 to May 8, 2002. We have also audited the statements of cash flows for the period January 1, 2002 to May 8, 2002. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the 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 audit provides 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 Huntley Associates as of May 8, 2002, and the results of its operations and cash flows for the period January 1, 2002 to May 8, 2002 in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issue a report dated September 11, 2002 on our consideration of Huntley Associates' internal controls and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Those reports are an integral part of the audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying supplemental included in the report (shown on pages 10 to 12) is presented for the purposes of additional analysis and is not a required part of the financial statements of Huntley Associates. Such information has been subjected to the auditing procedures applied in the audit of financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI September 11, 2002 18 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Huntley Associates #2 We have audited the accompanying balance sheet of Project #047-44063-LDP of Huntley Associates #2 (A Limited Partnership) as of May 8, 2002, and the related statements of operations and changes in partner's equity for the period then ended. We have also audited the statements of cash flows for the period ended May 8, 2002. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the 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 audit provides 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 Project #047-44063-LDP as at May 8, 2002, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated September 10, 2002 on our consideration of Huntley #2's internal control and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. Those reports are an integral part of the audit performed in accordance Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying supplemental information (shown on pages 10 to 15) is presented for the purposes of additional analysis and is not a required part of the basic financial statements of Huntley Associates #2. Such information has been subject to the auditing procedures applied in the audit of the basic financial statements and in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI September 10, 2002 19 [Letterhead of BORDMAN & WINNICK] Independent Auditor's Report To the Partners of AUTUMN RIDGE APARTMENTS Formerly known as Vincennes Niblack Apartments We have audited the accompanying balance sheet of AUTUMN RIDGE APARTMENTS formerly known as Vincennes Niblack Apartments (A Limited Partnership) as at December 31, 2002, and the related statements of operations, changes in partner's equity and cash flows for the period ended December 31, 2002. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the 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 audit provides 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 Project # 073-58501 LDP as of December 31, 2002, and the results of its operations and the changes in partners' equity and cash flows for the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI March 25, 2003 20 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Nu-Elm Apartments We have audited the accompanying balance sheet of Nu-Elm Apartments (A Limited Partnership) as of December 31, 2003, and the related statements of operations and changes in partner's equity and cash flows for the year then ended. These financial statements are the responsibility of Nu-Elm Apartments' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the 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 audit provides 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 Nu-Elm Apartments as of December 31, 2003, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our reports dated January 24, 2004 on our consideration of Nu-Elm Apartments' internal control and on our tests of the compliance with certain provisions of laws, regulations, contracts, and grants. Those report are an integral part of the audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information (shown on 10 to 12) and the accompanying Financial Data Templates are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Nu-Elm Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 24, 2004 21 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Nu-Elm Apartments We have audited the accompanying balance sheet of Nu-Elm Apartments (A Limited Partnership) as of December 31, 2002, and the related statements of operations and changes in partner's equity and cash flows for the year then ended. These financial statements are the responsibility of Nu-Elm Apartments' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the 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 audit provides 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 Nu-Elm Apartments as of December 31, 2002, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our reports dated January 28, 2003 on our consideration of Nu-Elm Apartments' internal control and on our tests of the compliance with certain provisions of laws, regulations, contracts, and grants. Those report are an integral part of the audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying supplemental information (shown on pages 9 to 11) is presented for the purposes of additional analysis and is not a required part of the basic financial statements of Nu-Elm Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 28, 2003 22 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Saraland Apartments, Ltd. Mobile, Alabama We have audited the accompanying balance sheet of Saraland Apartments, Ltd. (the Project), as of December 31, 2002, and the related statements of profit and loss and changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides 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 the Project as of December 31, 2002 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 31, 2003 23 [Letterhead of Blume Loveridge & Co., PLLC] INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS Partners Conifer 317, an Oregon Limited Partnership Tacoma, Washington We have audited the accompanying balance sheet of Conifer 317, An Oregon Limited Partnership, sponsor of FHA Project No. 126-44134, as of December 19, 2002, and the related statements of profit and loss, changes in partners' equity, and cash flows for the period then ended. 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the 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 audit provides 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 Conifer 317, An Oregon Limited Partnership as of December 19, 2002, and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. The Partnership is regulated by the U.S. Department of Housing and Urban Development (HUD) as to rental charges, operating methods and reporting requirements. The financial statements are presented in sufficient detail to facilitate the electronic submission of certain financial information by the Partnership to HUD's Real Estate Assessment Center. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying additional information on pages 15 through 18 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such additional information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report, dated January 25, 2003, on our consideration of the Partnership's internal control and reports dated January 25, 2003, on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. /s/ Blume Loveridge & Co., PLLC Bellevue, Washington January 25, 2003 24 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Cabarrus Arms Associates Atlanta, Georgia We have audited the balance sheets of Cabarrus Arms Associates ("the Partnership") as of June 30, 2003, and the related statements of operations, changes in partners' capital (deficit) and cash flows for six months then ended. 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides 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 Cabarrus Arms Associates at June 30, 2003, and the results of its operations and its cash flows for six months then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia July 31, 2003 25 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Cabarrus Arms Associates Atlanta, Georgia We have audited the balance sheets of Cabarrus Arms Associates ("the Partnership") as of December 31, 2002 and 2001, and the related statements of operations, changes in partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 2002. 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 audit. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 Cabarrus Arms Associates at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note B to the financial statements, effective December 31, 2002, the Partnership changed its method of accounting for property and equipment which was previously classified as held for sale. /s/ Williams Benator & Libby, LLP Atlanta, Georgia January 29, 2003 26 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITORS' REPORT To the Partners Summer Arms Apartments, Ltd. Sumter, South Carolina We have audited the accompanying balance sheets of Summer Arms Apartments (a limited partnership) as of December 31, 2002, 2001 and 2000, and the related statements of operations, changes in partners' equity and cash flows for the years then ended. 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 auditing standards generally accepted in the United States of America. 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 Summer Arms Apartments, Ltd. (a limited partnership) as of December 31, 2002, 2001 and 2000, 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/ Mauldin & Jenkins, LLC Atlanta, Georgia January 31, 2003 27 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITORS' REPORT To the Partners Lexington Village Company Conyers, Georgia We have audited the accompanying balance sheets of Lexington Village Company (a limited partnership) as of August 31, 2002 and December 31, 2001 and 2000, and the related statements of operations, changes in partners' equity and cash flows for the period of January 1, 2002 to August 31, 2002 and for the years ended December 31, 2001 and 2000. 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 auditing standards generally accepted in the United States of America. 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 Lexington Village Company (a limited partnership) as of August 31, 2002 and December 31, 2001 and 2000, and the results of its operations and its cash flows for the period of January 1, 2002 to August 31, 2002 and for years ended December 31, 2001 and 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ Mauldin & Jenkins, LLC Atlanta, Georgia September 4, 2002 28 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Nottingham Woods Apartments Limited Atlanta, Georgia We have audited the balance sheet of Nottingham Woods Apartments Limited ("the Partnership") as of March 31, 2002, and the related statements of income, changes in partners' capital (deficit), and cash flows for the three months then ended. 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides 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 Nottingham Woods Apartments Limited at March 31, 2002, and the results of its operations and its cash flows for the three months then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia April 23, 2002 29 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Hathaway Court Associates Atlanta, Georgia We have audited the balance sheets of Hathaway Court Associates ("the Partnership") as of June 30, 2003, and the related statements of operations, changes in partners' deficit, and cash flows for the six months then ended. 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 audit provides 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 Hathaway Court Associates at June 30, 2003, and the results of its operations and its cash flows for the six months then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia July 31, 2003 30 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Hathaway Court Associates Atlanta, Georgia We have audited the balance sheets of Hathaway Court Associates ("the Partnership") as of December 31, 2002 and 2001, and the related statements of operations, changes in partners' deficit, and cash flows for each of the three years in the period ended December 31, 2002. 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 auditing standards generally accepted in the United States of America. 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 Hathaway Court Associates at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia January 28, 2003 31 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Shelton Beach Apartments, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Shelton Beach Apartments, Ltd. for the period January 1, 2002 through August 9, 2002. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above present fairly, in all material respects the changes in net assets in liquidation for the period January 1, 2002 through August 9, 2002, in conformity with accounting principles generally accepted in the United States of America. As discussed in note A to the financial statements, during 2001, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On May 1, 2002, the partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 9 through 11 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland August 9, 2002 32 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Northpointe II, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Northpointe II, Ltd. for the period January 1, 2002 through August 9, 2002. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statement referred to above presents fairly, in all material respects, the changes in net assets in liquidation for the period January 1, 2002 through August 9, 2002, in conformity with accounting principles generally accepted in the United States of America. As described in note A to the financial statements, during 2001, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On May 1, 2002, the partnership sold the rental property As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland August 9, 2002 33 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Pebble Creek LDHA We have audited the accompanying balance sheet of MSHDA Development No. 277 of Pebble Creek LDHA (A Michigan Limited Partnership) as of December 31, 2003, and the related statements of Profit and Loss, and changes in accumulated earnings and cash flows for the year then ended. 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 audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements above present fairly, in all material respects, the financial position of MSHDA Development No. 277, Pebble Creek LDHA, as of December 31, 2003, and the results of its operations and the changes in cumulative income and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information of Pebble Creek LDHA, MSHDA NO. 277 on pages 10 to 16 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the partnership's management. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 26, 2004 on our consideration of the partnership's internal control structure on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 26, 2004 34 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Pebble Creek LDHA We have audited the accompanying balance sheet of MSHDA Development No. 277 of Pebble Creek LDHA (A Michigan Limited Partnership) as of December 31, 2002, and the related statements of Profit and Loss, and changes in accumulated earnings and cash flows for the year then ended. 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 audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements above present fairly, in all material respects, the financial position of MSHDA Development No. 277, Pebble Creek LDHA, as of December 31, 2002, and the results of its operations and the changes in cumulative income and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information of Pebble Creek LDHA, MSHDA NO. 277 on pages 10 to 16 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the partnership's management. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 29, 2003 on our consideration of the partnership's internal control structure on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 29, 2003 35 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Robindale East Apartments, Ltd.: We have audited the accompanying financial statements of Robindale East Apartments, Ltd. (the "Partnership") as of February 15, 2002, and for the period then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the general partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the 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 the general partner, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 the Partnership as of February 15, 2002, and the results of its operations, changes in partners' equity, and cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Notes 1 and 8 to the financial statements, the Partnership sold its sole revenue producing asset during the period, which raises substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated May 1, 2002, on our consideration of Robindale East Apartments, Ltd.'s internal control and a report dated May 1, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas May 1, 2002 36 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF MARCH 25, 2005 AND CONSOLIDATED BALANCE SHEET AS OF MARCH 25, 2004

ASSETS March 25, --------------------------------- ~~2003~~2005 2002*2004 ----------- ------------ Operating assets Property and equipment - net, less accumulated depreciation (Notes 2, 4 and 6) $ ~~3,478,246~~0 $ 53,~~470~~347,~~303~~387 ~~Property and equipment - held for sale (Notes 2, 4, 6 and 7) 2,465,394 11,548,976~~ Cash and cash equivalents (Notes 2 and 11) 1460,~~224,252~~403 4860,~~967,577~~978 Cash - restricted for tenants' security deposits (Note 3) ~~127,214~~0 ~~304~~198,~~539~~829 Mortgage escrow deposits (Notes 3, 5 and 6) 0 2,~~754~~039,~~151~~630 4Notes receivable 287,~~376~~791 370,~~911~~579 ~~Prepaid~~----------- ~~expenses~~------------ ~~and~~Total ~~other~~operating assets activities 748,194 6,817,403 ----------- ------------ Assets from discontinued operations (Note 812) ~~534~~Property and equipment held for sale,~~117~~ ~~758~~net of accumulated depreciation 1,~~693~~043,010 1,280,906 Net assets held for sale 2,549,562 333,473 ----------- ------------ Total assets ~~$10~~from discontinued operations 3,~~583~~592,~~374~~572 1,614,379 ----------- ------------ Total assets 4,340,766 $27 8,~~426~~431,~~999~~782 ~~===========~~----------- ============ LIABILITIES AND PARTNERS' DEFICIT ~~Liabilities~~AND NET ASSETS IN LIQUIDATION Operating liabilities Mortgage notes payable (Notes 3 and 6) $ ~~5,059,854~~0 $13 2,~~137~~128,~~483~~604 Purchase money notes payable (Notes 3 and 7) ~~3,635,924~~0 92,~~861~~009,~~837~~344 Due to selling partners (Notes 3 and 7) ~~9,917,404 22,957,424 Deferred revenue on sale of properties~~ 0 5,~~905~~518,~~828~~708 Accounts payable, accrued expenses and other liabilities ~~153~~24,~~890~~657 ~~587~~90,~~491~~469 Tenants' security deposits payable ~~119,183~~0 ~~283~~73,~~920~~817 Due to general partners ~~of subsidiaries~~ and ~~their~~ affiliates (Note 8) 22315,~~391~~550 ~~114~~4,~~744~~356,934 ~~Due~~----------- to------------ ~~general~~Total ~~partners~~operating ~~and~~liabilities ~~affiliates~~340,207 14,177,876 ----------- ------------ Liabilities from discontinued operations (including minority interest) (Note 812) 3Mortgage notes payable of assets held for sale 1,~~511~~987,~~595~~373 3535,~~329~~421 Net liabilities held for sale 115,~~471~~179 85,626 ----------- ------------ 22Total liabilities from discontinued operations 2,~~420~~102,~~241~~552 56621,~~178~~047 ----------- ------------ Total liabilities 2,~~198~~442,759 14,798,923 ----------- ------------ Minority interest (relating to operating activities) (Note 2) ~~59,888~~0 ~~222~~(94,~~153~~656) ----------- ------------ Commitments and contingencies (Notes 6, 7, 8 and 11) Partners' capital (deficit) Limited partners ~~(11,240,263)~~0 (285,~~146~~672,~~094~~236) General partners ~~(656,492)~~0 (~~827~~600,~~258~~249) ----------- ------------ ~~(11,896,755)~~0 (286,~~973~~272,~~352~~485) ----------- ------------ ~~Total~~Net ~~liabilities~~assets ~~and~~in ~~partners'~~liquidation ~~deficit~~ $~~10,583,374~~ ~~$27~~1,~~426~~898,~~999~~007 0 =========== ------------ Total liabilities and partners' deficit $ 8,431,782 ============

See accompanying notes to consolidated financial statements. 37 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

For the period March 26, 2004 through The Year The Year December 15, Ended Ended 2004 March 25,2004* March 25, 2003* -------------- --------------~~-----------~~ ~~2003 2002 2001~~ ----------- ----~~-------~~ ~~-----------~~Operations: Revenues: ~~Rentals,~~Other ~~net~~ $ 421,~~505,438~~029 $11 29,~~017,460~~852 $~~17,152,679~~ ~~Other 434~~53,~~385~~011 ~~947,492 1,211,751 Gain on sale of properties (Note 10) 9,238,695 16,927,217 15,820,589~~ ----------- -~~----------~~ ----------- ~~Total revenues 14,178,518 28,892,169 34,185,019~~ -~~----------~~ ----------- -~~----------~~ Expenses ~~Administrative~~General and ~~management~~administrative 175,~~282,928~~381 2205,~~385,647~~911 3139,~~906,671~~595 ~~Administrative~~General and ~~management~~administrative - related parties (Note 8) 1925,~~341,084~~890 1,~~815~~231,~~488~~509 21,134,~~544~~355 ~~Operating~~Interest ~~814~~273,~~883~~319 2424,~~159,557~~737 ~~3,098,242 Repairs and maintenance 985,589 2,771,078 4,307,937 Taxes and insurance 866,716~~ 1,~~522~~012,~~710~~395 ~~2,117,113 Financial, principally interest 1,132,302 4,196,910 9,446,421 Depreciation 779,088 1,364,076 3,212,290~~ ------------ ------------ ------------ Total expenses 71,~~202~~274,590 161,~~215~~862,~~466~~157 282,~~223~~286,~~218~~345 ------------ ------------ ------------ ~~Income~~Loss ~~before~~from ~~minority~~operations ~~interest and extraordinary item 6~~(1,~~975~~253,~~928~~561) 12(1,~~676~~832,~~703~~305) 5(2,~~961~~233,~~801 Minority interest (income~~334) ~~loss~~Discontinued ofoperations: ~~subsidiaries~~Net (~~337,639~~loss) ~~213,740~~income ~~(888,911)~~from ~~-----------~~discontinued ~~-----------~~operations ~~-----------~~(including ~~Income~~gain ~~before~~on ~~extraordinary~~sale ~~item~~of 6properties,~~638,289~~ ~~12,890,443~~loss ~~5,072,890~~on ~~Extraordinary~~impairment ~~item-forgiveness~~fixed ofassets ~~indebtedness~~and ~~income~~ minorityinterest)(~~Notes~~Note ~~6 and 10~~12) 11(3,~~962~~367,~~803~~212) 217,~~389~~456,~~335~~575 2120,~~773~~834,~~849~~426 ------------ ------------ ------------ Net (loss) income $18 (4,~~601~~620,~~092~~773) $34 5,~~279~~624,~~778~~270 $26 18,~~846~~601,~~739~~092 ============ ============ ============ Limited Partners Share: ~~Income~~Loss ~~before~~from ~~extraordinary~~operations ~~item~~ $ 6(1,~~571~~241,~~906~~025) $12 (1,~~761~~813,~~539~~982) $ 5(2,~~022~~211,~~161~~000) ~~Extraordinary~~(Loss) ~~item~~income 11from discontinued operations (including gain on sale of properties,~~843~~ loss on impairment fixed assets and minority interest) (3,~~175~~333,540) 217,~~175~~382,~~442~~009 2120,~~556~~626,~~111~~082 ------------ ------------ ------------ Net (loss) income $18 (4,~~415~~574,~~081~~565) $33 5,~~936~~568,~~981~~027 $26 18,~~578~~415,~~272~~082 ============ ============ ============ Number of units outstanding 12,074 12,074 12,074 ============ ============ ============ ~~Income~~Loss ~~before~~from ~~extraordinary~~operations ~~item~~ per limited partner unit $ ~~544~~(103) $ ~~1,057~~(150) $ ~~416~~(183) ~~Extraordinary~~(Loss) ~~item~~income from discontinued operations (including gain on sale of properties) per limited partner unit ~~981~~(276) ~~1,754~~611 1,~~785~~708 ------------ ------------ ------------ Net (loss) income per limited ~~partnership~~partner unit $ ~~1,525~~(379) $ ~~2,811~~461 $ 21,~~201~~525 ============ ============ ============

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 38 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

~~Limited~~For ~~General~~the ~~Total~~period ~~Partners~~December ~~Partners~~16, ~~------------~~2004 through March 25, 2005 ------------ -----~~-------~~ ~~Balance~~Liquidating -activities: ~~March~~Increases ~~26,~~in ~~2000~~net ~~$(88,697,334)~~assets ~~$(87,272,836)~~in liquidation Wrtitedown of payables due to General Partner to their net estimated settlement value $ (14,~~424~~807,~~498)~~576 ~~Net~~Writedown ~~income~~of ~~26,846,739~~related 26party Purchase Money Notes payable due to selling partners 7,~~578~~801,~~272~~371 ~~268~~Writedown of mortgage notes payable to their estimated settlement value 488,~~467~~243 ~~Distributions~~Writedown (1of accounts payable,~~402,535)~~ (1accrued expense and other liabilities to their estimated settlement value 53,~~388,510)~~522 ~~(14~~Write down tenants security deposits to their estimated settlement value 12,~~025)~~582 ------------ -~~-----------~~ Subtotal 13,163,294 ------------- ~~Balance~~Decreases -in ~~March~~net ~~25,~~assets ~~2001~~in ~~(63,253,130)~~liquidation Liquidation of tenants security deposits (6212,~~083,074~~766) Liquidation of mortgage escrow (1342,~~170,056~~744) ~~Net~~Writedown ~~income~~of ~~34,279,778~~other ~~33,936,980~~assets ~~342~~to their estimated realizable value (16,~~798~~519) ------------ -~~-----------~~ Subtotal (372,029) ------------- ~~Balance~~Increase -in ~~March~~net ~~25,~~assets ~~2002~~in ~~(28,973,352)~~liquidation ~~(28~~12,~~146~~791,~~094)~~265 Net assets (~~827,258~~liabilities) ~~Net~~in ~~income~~liquidation ~~18,601,092~~at ~~18,415,081~~December ~~186~~16,~~011~~ ~~Distributions~~2004 (110,~~524~~893,~~495~~258) ~~(1,509,250) (15,245)~~ ------------ -~~-----------~~ ~~------------~~Net ~~Balance~~assets -in liquidation at March 25, ~~2003~~2005 $~~(11,896,755)~~ ~~$(11~~1,~~240~~898,~~263)~~007 ============= Limited Partners Share: Increase in net assets in liquidation per limited partner unit $ ~~(656~~12,~~492)~~663,352 ============= Number of units outstanding $ 12,074 ============= Increase in net assets in liquidation per limited partner unit $ 1,048.81 =============

See accompanying notes to consolidated financial statements. 39 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

~~Year~~Limited ~~Ended~~General ~~March~~Total ~~25,~~Partners Partners -------------- --------------~~------------~~ ~~2003 2002 2001~~ ------------ --~~----------~~ Balance -~~-----------~~ ~~Cash~~March ~~flows from operating activities: Net income $ 18~~26,~~601,092~~ $2002 ~~34,279,778~~ $ ~~26,846,739 ------------ ------------ ------------ Adjustments to reconcile net income to net cash~~ (~~used in) provided by operating activities: Gain on sale of properties (9~~28,~~238~~973,~~695~~352) ~~(16,927,217)~~$ (1528,~~820~~146,~~589~~094) ~~Extraordinary~~$ ~~item-forgiveness of indebtedness income~~ (11827,~~962,803~~258) ~~(21,389,335)~~Net ~~(21,773,849) Depreciation 779,088 1,364,076 3,212,290 Minority interest in~~ income ~~(loss) of subsidiaries 337~~18,~~639 (213~~601,~~740)~~092 ~~888~~18,~~911 (Increase) decrease in assets: Cash-restricted for tenants' security deposits 38~~415,~~680~~081 60186,~~234~~011 ~~55,469~~Distributions ~~Mortgage escrow deposits - operating 386,089 45,298~~ (1,~~161~~524,~~193 Prepaid expenses and other assets (212,554~~495) ~~14,827~~ (~~237,713) Increase (decrease) in liabilities: Due to selling partners~~ 1,~~012~~509,~~395 3,787,630 8,588,157 Payments of interest to selling partners (2,966,329~~250) (~~115~~15,~~683~~245) (3,464,303) Accounts payable, accrued expenses and other liabilities 836,904 (261,696) (700,883) Tenants' security deposits payable (63,193) (37,030) (88,239) Due to general partners of subsidiaries and their affiliates 12,974 19,584 91,706 Due to general partners of subsidiaries and their affiliates (98,827) 0 (12,461) Due to general partners and affiliates 267,324 731,026 135,075 -------------- -------------- -------------- ~~Total~~Balance ~~adjustments~~- March 25, 2003 (2011,~~871~~896,~~308~~755) (3211,~~922~~240,~~026~~263) (27656,~~965,236~~492) ~~------------ ------------ ------------~~ Net ~~cash~~income ~~(used in) provided by operating activities (2~~5,~~270~~624,~~216)~~270 15,~~357~~568,~~752~~027 (156,~~118,497)~~243 -------------- -------------- -------------- ~~Cash~~Balance ~~flows~~- ~~from~~March ~~investing activities: Proceeds from sale of properties 12~~25,~~787,113~~ ~~15,419,779~~2004 ~~14,465,557 Costs paid relating to sale of properties~~ (~~595~~6,~~318) (556~~272,~~642~~485) (~~248~~5,~~996) Acquisitions of property and equipment (78~~672,~~873~~236) (~~353~~600,~~374~~249) ~~(1,483,538)~~Net ~~Acquisitions~~loss offor ~~property~~the ~~and~~period ~~equipment~~March -26, ~~held~~2004 ~~for~~through ~~sale~~December ~~(85~~15,~~400)~~ 2004 (~~105~~4,~~102~~620,773) (514,~~729~~574,565) ~~Decrease~~ (~~increase) in mortgage escrow deposits 451~~46,~~155 (236,255~~208) ~~57,081~~ -------------- -------------- -------------- ~~Net~~Balance ~~cash~~- ~~provided~~December by15, ~~investing~~2004 ~~activities~~$ 12(10,~~478~~893,~~677~~258) 14$ (10,~~168~~246,~~406~~801) 12$ (646,~~738,375~~457) ~~------------~~============== ~~------------~~============== ~~------------~~==============

See accompanying notes to consolidated financial statements. 40 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

For the Period March 26, 2004 Year Ended March 25, through ---------------------------- December 15, 2004 2004* 2003* ----------------- ~~2003~~------------ ~~2002~~------------ ~~2001~~Cash flows from operating activities: Net (loss) income $ (4,620,773) $ 5,624,270 $ 18,601,092 ------------ ------------ ------------ ~~Cash~~Adjustments ~~flows~~to ~~from~~reconcile ~~financing~~net (loss) income to net cash used in operating activities: ~~Principal~~Income ~~payments~~from ofdiscontinued ~~purchase~~operations ~~money~~(including ~~notes~~gain on sale of properties) 3,367,212 (57,~~809~~456,~~460~~575) (320,~~776~~834,~~208~~426) Decrease (2increase) in assets: Prepaid expenses and other assets 21,~~668~~171 102,~~624~~584 54,953 Increase (decrease) ~~Principal~~in ~~payments~~liabilities: Due to selling partners 273,319 424,737 1,012,395 Payments of ~~mortgage~~interest ~~notes~~to ~~payable~~selling partners 0 0 (62,~~117~~966,~~927~~329) Accounts payable, accrued expenses and other liabilities (10181,~~120~~792) 195,~~797~~255 1,182,432 Due to general partners and affiliates 744,942 911,221 364,824 ------------ ------------ ------------ Total adjustments 4,224,852 (5,822,778) (721,~~217~~186,~~599~~15) ~~Distributions~~------------ ~~paid~~------------ ------------ Net cash used in operating activities (1395,~~524~~921) (198,~~495~~508) (12,~~402~~585,~~535~~059) 0------------ ~~Decrease~~------------ in------------ ~~capitalization~~Cash flows from investing activities: Proceeds from sale of ~~minority~~properties ~~interest~~0 ~~(499~~90,~~904)~~000 ~~(202~~12,~~735~~787,113 Costs paid relating to sale of properties 0 (787) (~~885~~595,~~748~~318) ------------ ------------ ------------ Net cash ~~used~~provided inby investing activities 0 89,213 12,191,795 ------------ ------------ ------------ Cash flows from financing activities: Principal payments of purchase money notes 0 0 (135,~~951~~809,~~786~~460) Principal payments of mortgage notes payable 0 0 (156,~~502~~117,~~275~~927) Distributions paid 0 0 (101,~~771~~524,~~971~~495) ------------ ------------ ------------ Net cash used in financing activities 0 0 (~~decrease~~13,451,882) ~~increase~~------------ ------------ ------------ Net decrease in cash and cash equivalents (3395,~~743,325~~921) 23(109,~~883~~295) ~~847~~(3,~~907~~845,146) Cash and cash equivalents at beginning of period/year 4860,~~967,577~~978 4970,~~943,694~~273 4,~~095~~815,~~787~~419 ------------ ------------ ------------ Cash and cash equivalents at end of period/year $ 1465,~~224,252~~057 $ 4860,~~967,577~~978 $ 4970,~~943,694~~273 ============ ============ ============ Supplemental disclosure of cash flows information: Cash paid during the year for interest $ 337,~~045,739~~750 $ ~~609~~25,~~095~~884 $ 43,~~126~~045,~~412~~739 ============ ============ ============ Supplemental disclosures of noncash investing and financing activities: Increase in property and equipment-held for sale reclassified from property and equipment $ 784,434 $ 4,975,310 $ 16,291,211 Increase in purchase money notes payable due to the capitalization of prepaid expenses and other assets 0 0 5,209 Increase in accounts payable, accrued expenses and other liabilities for acquisitions of property and equipment 0 0 37,070 Increase in deferred revenue reclassified from purchase money notes payable and due to selling partners 0 5,906,928 3,839,356 Distributions payable 0 0 1,402,535 Forgiveness of indebtedness: Decrease in purchase money notes payable (789,814) (3,078,993) (9,619,581) Decrease in due to selling partners (7,782,197) (14,470,986) (11,433,550) Decrease in due to general partners of subsidiaries and their affiliates 0 0 (558,299) Decrease in deferred revenue on sale of properties (5,906,928) (3,839,356) 0 Decrease in accounts payable, accrued expenses and other liabilities 0 0 (162,419)

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 41 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 NOTE 1 - Organization Cambridge Advantaged Properties Limited Partnership (the "Partnership") was formed pursuant to the laws of the Commonwealth of Massachusetts on June 28, 1984. The Partnership invests, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships" or "subsidiary partnerships"), each of which owns and operates an existing residential housing development (an "Apartment Complex") that is financed and/or operated with some form of local, state or federal assistance, including mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). The General Partners of the Partnership are Assisted Housing Associates Inc., (the "Assisted General Partner"), and Related Beta Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with CharterMac (AMEX: CHC), and Cambridge/Related Associates Limited Partnership (formerly Hutton/Related Associates Limited Partnership) ("Cambridge/Related"), a Massachusetts limited partnership. The general partners of Cambridge/Related are the Assisted General Partner and the Related General Partner. On November 17, 2003, CharterMac acquired Related Capital Company, which is the indirect parent of RCC Manager L.L.C., the sole shareholder of the Related General Partner. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partners. This acquisition did not affect the Partnership or its day-to-day operations, as the majority of the General Partners' management team remained unchanged. Pursuant to the public offering, the Partnership received $53,754,000 (net of offering expenses and sales commissions of $6,615,700) from 4,452 investors in 12,074 limited partnership interests. The offering was completed in March 1985. As of March 25, 2005, the Partnership holds a 98.99% limited partnership interest in each of the two remaining Local Partnerships, which own Apartment Complexes receiving Government Assistance. Through the fiscal year ended March 25, 2005, the properties and the related assets and liabilities owned by thirty-one subsidiary partnerships were sold and the Partnership's Local Partnership Interests in twenty-eight subsidiary partnerships were sold, respectively (see Note 10). The terms of the Partnership Agreement provide, among other things, that profits and losses, in general, be shared 99% by the limited partners and 1% by the General Partners. NOTE 2 - Summary of Significant Accounting Policies a) Basis of Accounting On December 15, 2004, the Partnership entered into contracts to sell its remaining two limited partnership interests. Upon the closing of these contracts, the General Partners will commence the process of liquidating the Partnership. To fairly present the financial position of the Partnership, management has prepared the March 25, 2005 financial statements using the liquidation basis of accounting. The remaining assets were written down to their estimated net realizable value of approximately $4,341,000, and the remaining liabilities were written down to their estimated net settlement value of approximately $2,443,000. Management plans to distribute the remaining assets, if any, after all remaining expenses and accrued expenses have been settled in accordance with the Partnership Agreement. The accompanying financial statements for the years ended March 25, 2004 and 2003 are presented on the accrual basis of accounting. b) Basis of Consolidation The consolidated financial statements include the accounts of the Partnership and 2, 4 and 13, subsidiary partnerships in which the Partnership is a limited partner for the years ended March 25, 2005, 2004 and 2003, respectively. The Partnership is a limited partner, with an ownership interest of 98.99% in each of the subsidiary partnerships. The Partnership continues to hold its interest in certain subsidiary partnerships which have sold their properties and have not formally liquidated. Through the rights of the Partnership and/or an affiliate of a General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. For financial reporting purposes, the Partnership's fiscal year ends March 25. The subsidiaries have fiscal years ending December 31. Accounts of subsidiaries have been adjusted for intercompany transactions from January 1 through March 25. The Partnership's fiscal year ends on March 25 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records are maintained in accordance with U.S. generally accepted accounting principles ("GAAP"). All intercompany accounts and transactions have been eliminated in consolidation. Increases (decreases) in the capitalization of consolidated subsidiaries attributable to minority interest arise from cash contributions and cash distributions to the minority interest partners. Losses attributable to minority interests which exceed the minority interests' investment in a subsidiary have been charged to the Partnership. Such losses aggregated approximately $0, $0 and $5,000 for the years ended March 25, 2005 (the "2004 Fiscal Year"), March 25, 2004 (the "2003 Fiscal Year") and March 25, 2003 (the "2002 Fiscal Year"), respectively. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital. 42 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 c) Discontinued Operations In accordance with FASB 144, the results of discontinued operations are reported as a separate component of income before extraordinary items on the Consolidated Statements of Operations. Discontinued operations include the results of operations and any gain or loss recognized for Local Partnerships that have been disposed of or are held for sale. A gain or loss recognized on the disposal is disclosed in the notes to the financials statements. Adjustments to amounts previously reported in operations that are directly related to the disposal of a Local Partnership are reclassified in the current period as discontinued operations for comparability purposes. Assets and liabilities of a Local Partnership that are classified as held for sale are presented separately in the asset and liability sections, respectively, of the Consolidated Balance Sheets. d) Property and Equipment Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time, the property investments themselves are reduced to estimated fair value (generally using discounted cash flows). At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. These assets are classified as property and equipment-held for sale and are not depreciated. All property and equipment for subsidiary partnerships whose assets and liabilities are under sales contracts are classified as assets held for sale. A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using discounted cash flows). For the year ended March 25, 2005, the Partnership has recorded a loss on impairment of assets of approximately $3,558,000. e) Interest Subsidies Interest expense has been reduced by interest subsidies (Note 6). f) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term highly liquid instruments purchased with original maturities of three months or less. g) Income Taxes No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the responsibility of the individual partners. For income tax purposes, the Partnership has a fiscal year ending December 31 (Note 9). h) Loss Contingencies The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. In addition, the Partnership evaluates the amount of a potential environmental liability independently from any potential claim for recovery. i) Revenue Recognition Rental income is earned primarily under standard residential operating leases and is typically due the first day of each month, but can vary by property due to the terms of the tenant leases. Rental income is recognized when earned and charged to tenants' accounts receivable if not received by the due date. Rental payments received in advance of the due date are deferred until earned. Rental subsidies are recognized as rental income during the month in which it is earned. Other revenues are recorded when earned and consist of the following items: Interest income earned on cash and cash equivalent balances and cash held in escrow balances, and other miscellaneous items. 43 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 j) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. k) New Accounting Pronouncements On December 16, 2004, the FASB issued Statement of Financial Accounting Standards ("SFAS") No. 153, Exchanges of Nonmonetary Assets - An Amendment of APB Opinion No. 29 ("SFAS No. 153"). The amendments made by SFAS No. 153 are based on the principle that exchanges of nonmonetary assets should be measured based on the fair value of the assets exchanged. Further, the amendments eliminate the narrow exception for nonmonetary exchanges of similar productive assets and replace it with a broader exception for exchanges of nonmonetary assets that do not have "commercial substance." SFAS No. 153 is effective for nonmonetary asset exchanges occurring in fiscal periods beginning after June 15, 2005. The Company does not believe that the adoption of SFAS No. 153 on June 15, 2005 will have a material effect on the Company's consolidated financial statements. In January 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"). FIN 46 is applicable immediately for variable interest entities created after January 31, 2003. For variable interest entities created before February 1, 2003, the provisions of FIN 46 were applicable no later than December 15, 2003. The Partnership has not created any variable interest entities after January 31, 2003. In December 2003 the FASB redeliberated certain proposed modifications and revised FIN 46 ("FIN 46 (R)"). The revised provisions were applicable no later than the first reporting period ending after March 15, 2004. The adoption of FIN 46 (R) did not have a material impact on the Partnership's financial reporting and disclosures. In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity." SFAS No. 150 changes the accounting for certain financial instruments that, under previous guidance, could be classified as equity or "mezzanine" equity, by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the Consolidated Balance Sheets. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and settlement alternatives. The guidance in SFAS No. 150 generally was effective for all financial instruments entered into or modified after May 31, 2003, and was otherwise effective at the beginning of the first interim period beginning after June 15, 2003. The Partnership has evaluated SFAS No. 150 and determined that it does not have an impact on the Partnership's financial reporting and disclosures. 44 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 NOTE 3 - Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for non-trading purposes) for which it is practicable to estimate that value: Cash and Cash Equivalents, Cash-Restricted for Tenants' Security Deposits and -------------------------------------------------------------------------------- Mortgage Escrow Deposits ------------------------ The carrying amount approximates fair value. Mortgage Notes Payable ---------------------- The fair value of mortgage notes payable is estimated, where practicable, based on the borrowing rate currently available for similar loans. In accordance with the liquidation basis of accounting, mortgage notes payable, totaling approximately $488,000, were written down to their estimated settlement value, resulting in a gain on liquidation of approximately $488,000. The estimated fair values of the Partnership's mortgage notes payable from operations are as follows:

~~Year Ended~~ March 25, ---------------------------------------------------- ~~2003~~2005 ~~2002~~2004 ~~2001~~ ------------ ------------- ------------------------ ~~Summarized~~Carrying ~~below~~Carrying ~~are~~Amount ~~the~~Fair ~~components~~Value ofAmount ~~the~~Fair ~~gain~~Value on----------- ~~sale~~----------- of----------- ~~properties: Decrease in property and equipment, net of accumulated depreciation $ 836,680 $ 8,824,210 $ 14,546,004 Decrease in property and equipment~~ ---------- ~~held~~Mortgage ~~for~~notes ~~sale~~payable ~~9,624,144 12,232,872 11,097,071 Decrease in cash - restricted~~ for ~~tenants'~~which ~~security~~it ~~deposits~~is ~~138,645~~Practicable ~~176,886~~to ~~171,634~~estimate ~~Decrease~~fair invalue: ~~mortgage~~$ ~~escrow~~0 ~~deposits~~$ ~~785,516~~0 ~~1,468,683~~$ 2,~~307~~128,~~112~~604 ~~Decrease in prepaid expenses and other assets 437~~$2,~~130 287~~128,~~452~~604 ~~285,395~~Purchase ~~Decrease in mortgage notes payable (1,959,702) (4,494,870) (9,200,379) Decrease in purchase~~ money notes payable ~~(1,449,327)~~for ~~(5,210,794)~~which ~~(6,990,061)~~it ~~Decrease~~is inNot ~~due~~practicable to ~~selling~~estimate ~~partners~~fair ~~(3,997,337)~~value: ~~(14,008,934)~~$ ~~(13,227,995) Increase in deferred revenue on sale of properties 1,100~~ 0 0 ~~Decrease~~$ ~~in accounts payable~~2, ~~accrued expenses and other liabilities (1~~009,~~270,505)~~344 (~~795,917~~a) ~~(357,370)~~Due ~~Decrease~~to inselling ~~tenant's~~partners ~~security~~for ~~deposits~~which ~~payable~~it ~~(101,544)~~is ~~(161,000)~~Not ~~(180,932)~~practicable ~~Decrease in due~~ to ~~general~~estimate ~~partners~~fair ofvalue: ~~subsidiaries~~$ ~~and~~0 ~~their~~0 ~~affiliates~~$ (65,~~500) (3~~518,~~105)~~708 (~~54,507~~a) ~~Decrease in due to general partners and affiliates (85,200) (379,563) 0~~

The estimated fair values of the Partnership's mortgage notes payable from discontinued operations are as follows:

March 25, ~~2003~~---------------------------------------------------- ~~March~~2005 ~~25,~~2004 ~~2002~~ ------------------------- ------------------------ Carrying Carrying Amount Fair Value Amount Fair Value ----------- ----------- ----------- ----------- Mortgage notes payable for which it is: Practicable to estimate fair value: $~~5,059,854~~ $51,~~502~~987,~~323~~373 $~~10,381,052~~ ~~$10~~1,~~848~~987,~~189~~373 ~~Not practicable to estimate fair value~~ $ ~~0 (a) $ 2~~535,~~756,431~~421 ~~(a) Purchase money notes payable for which it is: Practicable to estimate fair value~~ $ ~~0 $ 0 $ 0 $ 0 Not practicable to estimate fair value $3~~535,~~635,924 (b) $ 9,861,837 (b) Due to selling partners for which it is: Not practicable to estimate fair value $9,917,404 (b) $23,474,596 (b)~~421

(a) For the reasons discussed in Note 7, it is not practicable to estimate the fair value of these notes, or accrued interest thereon. The carrying amount of other financial instruments that require such disclosure approximates fair value. 45 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 NOTE 4 - Property and Equipment The components of property and equipment from operations and their estimated useful lives are as follows:

March 25, ------------------------------ Estimated ~~2003~~2005 ~~2002~~2004 Useful Lives ---------- -- -------- ---- --------------- Land $ ~~266,942~~0 $ ~~613~~266,~~524~~942 Buildings and improvements 0 6,~~382~~383,~~726~~530 ~~12,028,469~~ 5 - 40 Years Furniture and fixtures ~~100,334~~0 ~~467~~185,~~863~~446 3 - 10 Years ------------ ------------ 0 6,~~750~~835,~~002~~918 ~~13,109,856~~ Less: Accumulated depreciation 0 (3,~~271~~488,~~756~~531) ~~(7,639,553)~~ ------------ ------------ $~~3,478,246~~ 0 $5 3,~~470~~347,~~303~~387 ============ ============

Property acquisition fees of $5,131,535 were earned by the General Partners of the Partnership and have been capitalized as a cost of property and equipment. During the year ended March 25, 2005, there was a decrease in accumulated depreciation in the amount of $3,488,531 due to the liquidation method of accounting. The components of property and equipment held for sale from discontinued operations and their estimated useful lives are as follows:

March 25, ------------------------------ ~~2003~~Estimated ~~2002~~2005 2004 Useful Lives ------------ ------------ ------------- Land $ ~~421~~266,~~499~~942 $ 1100,~~265,470~~552 Buildings and improvements 8512,~~216,060~~224 251,~~536~~899,~~100~~576 5 - 40 Years Furniture and fixtures ~~698~~263,~~306~~844 1425,~~073,490~~593 3 - 10 Years ------------ ------------ 91,~~335~~043,~~865~~010 272,~~875~~425,~~060~~721 Less: Accumulated depreciation (~~6,870,471~~0) (161,~~326~~144,~~084~~815) ------------ ------------ $ 21,~~465~~043,~~394~~010 $11 1,~~548~~280,~~976~~906 ============ ============

During the year ended March 25, 2005, the Partnership entered into contracts to sell its limited partnership interest in the remaining two local partnerships at which time the related fixed assets were written down to their estimated fair value; as a result there was a decrease in accumulated depreciation on assets held for sale in the amount of $1,144,815. NOTE 5 - Mortgage Escrow Deposits Mortgage escrow deposits from operations consist of the following:

March 25, --------------------------- ~~2003~~2005 ~~2002~~2004 ------------ ------------ Reserves for replacements $ ~~2,072,906~~0 $ 31,~~269~~453,~~620~~367 Real estate taxes, insurance and other ~~681,245~~0 1586,~~107,291~~263 ------------ ------------ $ ~~2,754,151~~0 $ 42,~~376~~039,~~911~~630 ============ ============

46 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 Mortgage escrow deposits from discontinued operations consist of the following:

~~Amount~~March 25, --------------------------- ~~2003~~2005 2004 ------------ ------------ Reserves for replacements $ ~~306~~1,~~982~~592,786 ~~2004~~$ ~~328~~211,~~540~~061 ~~2005~~Real ~~351~~estate taxes,~~614~~ ~~2006~~insurance ~~376,310~~and ~~2007~~other ~~402~~619,~~876~~146 ~~Thereafter 3~~86,~~293,532~~857 ------------ ~~Total~~------------ $5 2,~~059~~211,~~854~~932 $ 297,918 ============ ============

NOTE 6 - Mortgage Notes Payable Pebble Creek's mortgage note is payable in aggregate monthly installments of approximately $10,000, including principal and interest at a rate of 6.75% per annum, through July 2012. The subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership, the assignment of certain subsidiary partnership's rents and leases and is without further recourse. Under the terms of regulatory agreements with the Secretary of HUD, the subsidiary partnership paid only that portion of the monthly payments that would be required if the interest rate was 1% per annum; the balance was subsidized under Section 236 of the National Housing Act. In accordance with the liquidation basis of accounting, the Nu Elm mortgage note payable, totaling approximately $488,000, was written down to its estimated settlement value, resulting in a gain on liquidation of approximately $488,000. Annual principal payment requirements as of March 25, 2005 for each of the next five fiscal years and thereafter for the liabilities from discontinued operations are as follows:

Fiscal Year ~~Ended~~Ending ~~March~~Amount ~~25,~~ ------------------~~--------------------~~ ~~2003 2002 2001~~ ----------- -~~----------~~ ~~-----------~~2005 ~~Partnership management fees (a)~~ $ 1150,~~052,162~~764 $2006 1160,~~069,239~~941 $2007 1171,~~085,769~~805 ~~Expense~~2008 ~~reimbursement (b) 82~~183,~~193~~401 ~~150,097~~2009 ~~148~~195,~~355~~781 ~~Local~~Thereafter ~~administrative fee (c) 16,250 38,750 54,355 ------------ ----------- ----------- Total general and administrative- General Partners~~ 1,~~150~~124,~~605~~681 ~~1,258,086 1,288,479~~ ------------ ----------- ----------- Property management fees incurred to affiliates of the subsidiary partnerships' general partners 190,479 557,402 846,065 ------------ ----------- ----------- Total general and administrative-related parties $ 1,~~341~~987,~~084~~373 ~~$ 1,815,488 $ 2,134,544~~ ============ ~~=========== =-=========~~

s NOTE 7 - Purchase Money Notes Payable Purchase money notes in the original amount of $85,458,825 were issued to the selling partners of the subsidiary partnerships as part of the purchase price and are secured only by the interest in the subsidiary partnership to which the purchase money note relates (the "Purchase Money Notes"). A portion of these Purchase Money Notes, in the original amount of $31,932,568 is an obligation at the subsidiary partnership level, whereas the remaining $53,526,257 is recorded at the Partnership level. The Purchase Money Notes generally provided for compound interest at rates which, in general, ranged from 9% to 10% per annum through August 31, 1989. Thereafter, simple interest has accrued, without further interest thereon, through maturity as extended (see below). The Purchase Money Notes, which provide for simple interest, will not be in default if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding subsidiary partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. Any interest not paid currently accrues, without further interest thereon, through the extended due date of the Purchase Money Note. Continued accrual of such interest beyond the initial term, without payment, reduces the effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and the ultimate repayment dates of the Purchase Money Notes. The Purchase Money Notes, after the extended maturity dates, call for the simple accrual of interest on the balance of principal, interest and Purchase Money Note Extension Fees Payable as of the date of maturity at one of the following two rates: (i) the lesser of 12% or the legally allowable rate; or (ii) the lesser of prime plus 2% or the lowest legally allowable rate. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of proceeds of the sale or refinancing of the Apartment Complex. The Partnership originally extended the terms of the two remaining Purchase Money Notes (with maturity dates of October 1996) for up to three additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2 % per annum of the outstanding principal balance of the Purchase Money Notes. Of such fees incurred, $23,210 was accrued and added to the Purchase Money Notes balance. The extension fees have been fully amortized over the term of the extensions. Additionally, an oral agreement was reached that extended the maturity dates of the remaining Purchase Money Notes through the completion of the sale of the Local Partnership Interest in the remaining two subsidiary partnerships. On December 15, 2004, the Partnership entered into contracts to sell it's Limited Partnership Interests in the remaining two subsidiary partnerships' to an affiliate of the Local General Partner (See Note 4). In accordance with the liquidation basis of accounting, the Purchase Money Notes relating to these two subsidiary partnerships, totaling approximately 47 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 $7,801,000 (including approximately $5,792,000 of interest) were written down to their estimated settlement value and is shown as an increase in net assets in liquidation. Based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, the proceeds from such sales will not be sufficient to meet the outstanding balances of principal, accrued interest and extension fees. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the Purchase Money Note holder's recourse, in the event of nonpayment, would be to foreclose on the Partnership's interests in the respective subsidiary partnerships. Distributions aggregating approximately $0, $0 and $10,072,000 were made to the Partnership during each of the years ended March 25, 2005, 2004 and 2003, respectively, of which approximately $0, $0 and $8,776,000, respectively, was used to pay principal, interest and extension fees on the Purchase Money Notes. In addition, no payments were made as "additional" interest on the Purchase Money Notes for the 2004, 2003 and 2002 Fiscal Years, respectively. NOTE 8 - Related Party Transactions The costs incurred to related parties from operations were as follows:

For the period March 26, 2004 The Year The Year through Ended Ended December 3115, March 25, March 25, 2004 2004 2003 -------------- -------------~~-----------~~ ~~2002 2001 2000~~ ------------ ~~-----------~~Partnership ~~-----------~~management ~~Financial~~fees ~~statement~~(a) ~~net income~~ $ 18856,~~601,092~~500 $~~33,764,246~~ ~~$26,846,739 Difference resulting from parent company having a different fiscal year for income tax and financial reporting purposes (454,038) (~~1,~~151~~142,~~548)~~000 ~~(83,979)~~$ ~~Difference resulting primarily from depreciation and amortization expense recorded for financial reporting purposes and income tax purposes 558,422~~ 1,~~698~~052,~~402~~162 ~~1,855,267~~Expense ~~Difference~~reimbursement between gain on sale of assets recorded for financial reporting purposes and for income tax purposes 15,087,741 18,142,817 12,690,603 Difference between a forgiveness of indebtedness income recorded for financial reporting purposes and for income tax purposes 3,140,441 (~~14,208,768~~b) 469,~~538,705~~390 ~~Other~~89,509 ~~including accruals for financial reporting purposes not deductible for tax purposes until paid 41~~82,~~967~~193 ~~(1,127,675) 3,500~~ ------------- ------------- ------------ ~~Income~~Total asgeneral ~~shown~~and onadministrative ~~the~~- ~~income~~related ~~tax~~parties ~~return for the calendar year ended~~ $ 36925,~~975,625~~890 $37 1,~~117~~231,~~474~~509 $45 1,~~850~~134,~~835~~355 ============= ============= ============

The costs incurred to related parties from discontinued operations were as follows:

~~Percentage~~For ofthe ~~Outstanding~~period ~~Name~~March of26, ~~General~~2004 ~~Partner~~The ~~Title~~Year ofThe ~~Class~~Year ~~Beneficial~~through ~~Ownership~~Ended ~~Amount~~Ended ~~Interest~~December 15, March 25, March 25, 2004 2004 2003 -------------- -------------~~-------~~ ------ ------~~---------~~ ~~General~~Local ~~Partnership~~administrative ~~Assisted~~fee ~~Housing~~$ ~~Interest~~3,000 in$ ~~the~~3,750 ~~Associates~~$ ~~Inc.~~16,250 ~~$10~~Property ~~13.2%~~management ~~Partnership~~fees ~~General~~incurred ~~Partnership~~to ~~Related~~affiliates ~~Beta~~of ~~Corporation~~the 6subsidiary ~~19.8%~~partnerships' ~~Interest~~general inpartners ~~the~~109,772 ~~Partnership~~98,430 ~~General~~190,479 ~~Partnership~~------------- ~~Interest~~-------------- in------------- ~~the~~Total ~~Cambridge/Related~~general ~~Associates~~and ~~Partnership~~administrative ~~Limited~~- ~~Partnership~~related 4parties ~~67.0%~~$ ~~------~~112,772 ~~100.0%~~$ 102,180 $ 206,729 ============= ============= =============

(a) After all other expenses of the Partnership are paid, an annual partnership management fee of up to .5% of invested assets is payable to the Partnership's General Partners and affiliates. Partnership management fees owed to the General Partners amounting to approximately $250,000 and $4,416,000 were accrued and unpaid as of March 25, 2005 and 2004, respectively. In accordance with the liquidation basis of accounting, partnership management fees owed to the General Partners were written down to their estimated settlement value, resulting in a gain on liquidation of approximately $4,800,000. Commencing with the quarter ended December 25, 2004, the General Partners have waived any Partnership management fees to which they otherwise may have been entitled under the Partnership's Agreement of Limited Partnership. (b) The Partnership reimburses the General Partners and their affiliates for actual Partnership operating expenses incurred by the General Partners and their affiliates on the Partnership's behalf. The amount of reimbursement from the Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the Related General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships' performance. Expense reimbursements and asset monitoring fees owed to the Related General Partner amounting to approximately $66,000 and $57,000 were accrued and unpaid as of March 25, 2005 and 2004, respectively. (c) C/R Special Partnership, the special limited partner, owning a .01% interest, is entitled to receive a local administrative fee of up to $2,500 per year from each subsidiary partnership. 48 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 NOTE 9 - Taxable Net Loss A reconciliation of the financial statement net (loss) income to the taxable net (loss) income for the Partnership and its subsidiaries is as follows:

~~ASSETS~~Year ~~March~~Ended 25December 31, ---------------------------------------------- 2004 2003 2002 ------------ ------------- ~~Cash~~------------- ~~and~~Financial ~~cash~~statement ~~equivalents~~net (loss) income $ ~~970~~(4,~~273~~620,773) $ 25,~~111~~624,~~766~~270 ~~Investment~~$ in18,601,092 ~~and~~Loss ~~advances~~on toimpairment ~~subsidiary~~recorded ~~partnerships~~for ~~4,312,170~~financial 11reporting purposed not deductible for tax purposes 3,~~964~~558,~~839~~434 ~~Other~~0 ~~assets~~0 ~~415,566~~Difference ~~473,806~~resulting ~~------------~~from ~~----------~~parent ~~Total~~company ~~assets~~having $a 5different fiscal year for income tax and financial reporting purposes (400,~~698~~289) (56,~~009~~186) ~~$14~~(454,~~550,411~~038) ~~============~~Difference ~~===========~~resulting ~~LIABILITIES~~primarily ~~AND~~from ~~PARTNERS'~~depreciation ~~DEFICIT~~and ~~Purchase~~amortization ~~money~~expense ~~notes~~recorded ~~payable~~for $financial ~~3,635,924~~reporting $purposes 9and income tax purposes 39,~~861~~898 157,~~837~~985 ~~Due~~558,422 toDifference ~~general~~between ~~partner~~gain on sale of assets recorded for financial reporting purposes and ~~affiliates~~for 3income tax purposes 0 639,~~439,463~~121 315,~~078~~087,~~766~~741 ~~Due~~Difference tobetween ~~selling~~a ~~partners~~forgiveness ~~9,917,404~~of 22indebtedness income recorded for financial reporting purposes and for income tax purposes 0 0 3,~~909~~140,~~179~~441 Other, ~~liabilities~~including 0accruals 5for financial reporting purposes not deductible for tax purposes until paid 155,~~954~~064 (142,~~932~~155) ~~------------~~41,967 ------------ ~~Total liabilities 16,992,791 41,804,714 Partners' deficit (11,294,782) (27,254,303)~~ ------------- ------------- ~~Total~~(Loss) ~~liabilities~~income ~~and~~as ~~partners'~~shown ~~deficit~~on the income tax return for the calendar year ended $ 5(1,~~698~~267,~~009~~666) $14 6,~~550~~223,~~411~~035 $ 36,975,625 ============ ============= =============

NOTE 10 - Sale of Properties General ------- The Partnership is currently in the process of disposing of its investments. As of March 25, 2005, the Partnership had disposed of fifty-nine of its sixty-one original investments. On December 15, 2004, the Partnership entered into contracts to sell the Limited Partnership Interest in its remaining two subsidiary partnerships. There can be no assurance as to whether or when the sales will actually occur. All gains and losses on sales are included in discontinued operations. Gains and losses on sales to affiliates of the Local General Partners are recorded as a capital transaction to minority interest. On December 15, 2004, the Partnership entered into two purchase and sale agreements to sell its Limited Partnership Interest in Pebble Creek ("Pebble Creek") and Nu Elm Apartments ("Nu Elm") to an affiliate of the Local General Partner for purchase prices of $1,490,000 and $20, respectively. The contracts specify that the sales will be completed in two installments. The first installment is expected to take place during the Fiscal Year ending March 25, 2006, and the final installment is expected to take place during Fiscal Year ending March 25, 2007. The sales are contingent on the approval of the Department of Housing and Urban Development ("HUD"). No assurances can be given as to whether or when HUD will approve the sales. As a result of the contracts, Pebble Creek and Nu Elm's fixed assets were written down to their estimated net realizable value of approximately $1,043,000 and $0, respectively. On June 30, 2003 the Partnership's Limited Partnership Interest in Cabarras Arms Associates ("Cabarras") was sold to the Purchase Money Note Holder for $30,000, resulting in a loss in the amount of approximately $92,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,415,000, resulting in gain on sale of property of such amount. On June 30, 2003, the Partnership's Limited Partnership Interest in Hathaway Court Associates ("Hathaway") was sold to the Purchase Money Note Holder for $60,000, resulting in a gain in the amount of approximately $545,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $4,035,000, resulting in gain on sale of property of such amount. On March 28, 2003, the Partnership's interest in Saraland Apartments ("Saraland") was transferred to the U.S. Environmental Protection Agency pursuant to the First Amended Bankruptcy Plan by order of the United States Bankruptcy Court in Dallas, TX, resulting in a gain of approximately $350,000. No proceeds were used to pay off the Purchase Money Note and accrued interest, which had a total outstanding balance of approximately $2,124,000, resulting in additional gain of approximately $2,124,000, which was recognized during the year ended March 25, 2003. On December 31, 2002, the Partnership's Limited Partnership Interest in Summer Arms Apartments ("Summer Arms") was sold to the Purchase Money Note Holder for $25,000, resulting in gain of approximately $252,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,275,000, resulting in a gain on sale of approximately $3,275,000. 49 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 On December 20, 2002, the property and the related assets and liabilities of Conifer 317 ("Pinewood") were sold to an unaffiliated third party for $2,000,000, resulting in a gain of approximately $1,030,000. The Partnership used approximately $1,453,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,634,000, resulting in gain on sale of property of approximately $180,000. On May 30, 2002, the property and the related assets and liabilities of Lexington Village ("Lexington") were sold to an affiliate of the Local General Partner for approximately $1,350,000, resulting in a capital contribution of approximately $412,000. The Partnership used approximately $617,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,445,000, resulting in gain on sale of property of approximately $2,828,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #1 were sold to the Local General Partner for approximately $1,750,000, resulting in a capital contribution of approximately $158,000. The Partnership used approximately $1,277,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,645,000, resulting in gain on sale of property of approximately $1,368,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #2 were sold to the Local General Partner for approximately $1,750,000, resulting in a capital contribution of approximately $379,000. The Partnership used approximately $1,194,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,725,000, resulting in gain on sale of property of approximately $531,000. On April 30, 2002, the property and the related assets and liabilities of Shelton Beach Apartments ("Northpointe I") were sold to an unaffiliated third party for $2,333,333, resulting in a gain of approximately $598,000. The Partnership used approximately $1,124,000 of proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,239,000, resulting in gain on sale of property of approximately $2,115,000. On April 30, 2002, the property and the related assets and liabilities of Northpointe II were sold to an unaffiliated third party for $1,666,667 resulting in a capital contribution of approximately $394,000. The Partnership used approximately $570,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,119,000, resulting in gain on sale of property of approximately $1,549,000. On February 15, 2002, the property and the related assets and liabilities of Robindale East Apartments ("Robindale") were sold to an unaffiliated third party for $735,000, resulting in a loss of approximately $527,000. No proceeds were used to settle the related Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,904,000, resulting in gain on sale of property of such amount. The auditors for Robindale modified their Fiscal Year 2003 report due to the uncertainty of this subsidiary partnership to continue in existence since the sole revenue producing asset was sold during the year. On February 14, 2002, the property and the related assets and liabilities of Nottingham Woods Apartments ("Nottingham") were sold to an unaffiliated third party for $1,900,000, resulting in a gain of approximately $806,000. The Partnership used approximately $249,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,251,000, resulting in gain on sale of property. In Fiscal Year 2003, additional proceeds of approximately $298,000 were received, of which approximately $223,000 was paid on the Purchase Money Note, resulting in gain on sale of property of approximately $2,779,000. NOTE 11 - Commitments and Contingencies a) Management Agreement The subsidiary partnerships have entered into management agreements of which some are with affiliates of the subsidiaries' general partners, which require annual fees ranging from approximately 6% to 10% of gross rental revenues. Such management fees amounted to $109,772, $152,044 and $691,345 for the 2004, 2003 and 2002 Fiscal Years, respectively. b) Uninsured Cash and Cash Equivalents The Partnership maintains its cash and cash equivalents in various banks. Accounts at each bank are guaranteed by the Federal Deposit Insurance Corporation ("FDIC") up to $100,000. As of March 25, 2005, uninsured cash and cash equivalents approximated $514,000. c) Housing Assistance Payments Contracts In September 1997, Congress enacted the Multi-Family Assisted Housing Reform and Affordability Act of 1997 ("MAHRA") which provides for the renewal of Section 8 Housing Assistance Payments Contracts ("Section 8 Contracts") to be based upon market rentals in instances where the existing Section 8 Contracts exceed current market rents. As a result, Section 8 Contracts that are renewed in the future in projects insured by the Federal Housing Administration ("FHA") may not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. MAHRA also provides for the restructuring of these mortgage loans so that the annual debt 50 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 service on the restructured loan (or loans) can be supported by Section 8 rents established at the market rents. The restructured loans will be held by the current lender or another lender. There can be no assurance that a property owner will be permitted to restructure its mortgage indebtedness pursuant to the new rules implementing MAHRA or that an owner, or the holder of the mortgage, would choose to restructure the mortgage if it were able to participate. MAHRA went into effect on September 11, 1998 when interim regulations implementing the program were published. It should be noted that there are many uncertainties as to the economic and tax impact on a property owner because of the combination of the reduced Section 8 contract rents and the restructuring of the existing FHA-insured mortgage loan under MAHRA. On October 21, 1998 President Clinton signed the Fiscal Year 1999 Departments of Veteran Affairs, Housing and Urban Development and Independent Agencies Appropriation Legislation into law. The bill provides, among other things, that owners of a property that were eligible for prepayment had to give notice of such prepayment to HUD tenants and to the chief executive of the state or local government for the jurisdiction in which the housing is located. The notice must be provided not less than 150 days, but not more than 270 days, before such payment. Moreover, the owner may not increase the rent charged to tenants for a period of 60 days following such prepayment. The bill also provides for tenant-based vouchers for eligible tenants (generally below 80% of area median income) at the true comparable market rents for unassisted units in order to protect current residents from substantial increases in rent. On October 20, 1999, President Clinton signed FY 2000 VA, the HUD Independent Agencies Appropriations Act (the "Appropriations Act"). The Appropriations Act contains revisions to the HUD Mark-to-Market Program and other HUD programs concerning the preservation of the HUD housing stock. On December 29, 1999 HUD issued Notice H99-36 addressing "Project Based Section 8 Contracts Expiring in Fiscal Year 2000" reflecting the changes in the Appropriations Act and superceding earlier HUD Notices 98-34, 99-08, 99-15, 99-21 and 99-32. Notice 99-36 clarifies many of the earlier uncertainties with respect to the earlier HUD Section 8 Mark-to-Market Programs and continued the Mark-up-to-Market Program which allows owners with Section 8 contracts to increase the rents to market levels where contract rents are currently below market. d) Cash Distributions Cash distributions from the Local Partnerships to the Partnership are restricted by the provisions of the respective Local Partnership agreements and or HUD based on operating results and a percentage of the owner's equity contribution. Such cash distributions are typically made from surplus cash flow. e) Other The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. Due to the sale of properties, the portfolio is not diversified by the location of the properties around the United States. The Partnership has two remaining properties and therefore the Partnership may not be protected against a general downturn in the national economy. There are also substantial risks associated with owning properties receiving government assistance, for example the possibility that Congress may not appropriate funds to enable HUD to make rental assistance payments. HUD also restricts annual cash distributions to partners based on operating results and a percentage of the owner's equity contribution. The Partnership cannot sell or substantially liquidate its investments in subsidiary partnerships during the period that the subsidy agreements are in existence, without HUD's approval. Furthermore, there may not be market demand for apartments at full market rents when the rental assistance contracts expire. Note 12 - Discontinued Operations The following table summarizes the financial position of the Local Partnerships that are classified as discontinued operations because the respective Local Partnerships were classified as assets held for sale. As of March 25, 2005, Pebble Creek and Nu Elm were classified as discontinued operations in the Consolidated Statement of Net Assets in Liquidation. As of March 25, 2004, Nu Elm, Cabarras and Hathaway were reclassified as discontinued operations on the Consolidated Balance Sheets.

~~Year~~Consolidated ~~Ended~~Balance Sheets: March 25, ~~--------------------------------------------~~March ~~2003~~25, ~~2002~~2005 ~~2001~~2004 ------------ ------------ Assets Property and equipment -~~-----------~~ ~~Revenues~~less ~~Other~~accumulated ~~income~~depreciation of $0 53and $1,~~011~~144,815, respectively $ 941,~~778~~043,010 $ ~~194~~1,~~105~~280,906 ~~------------~~Cash ~~------------~~and ~~------------~~cash ~~Total~~equivalents ~~revenues 53~~195,~~011~~947 943,~~778~~652 ~~194,105~~Cash -~~-----------~~ ~~------------~~restricted ~~------------~~for ~~Expenses~~tenants ~~Administrative~~security ~~and~~deposits ~~management 139~~85,~~595~~152 ~~297~~9,~~794~~998 ~~520,432~~Mortgage ~~Administrative~~escrow ~~and~~deposits ~~management-related parties 1~~2,~~134~~211,~~355~~932 1297,~~219,336~~918 ~~1,234,125~~Other ~~Financial,~~assets ~~principally interest 1~~56,~~012,395~~531 321,~~787,630~~905 ~~8,559,575~~ ------------ ------------ ~~------------~~ Total ~~expenses~~assets ~~2,286,345~~$ 53,~~304~~592,~~760~~572 10$ 1,~~314~~614,~~132~~379 ~~------------~~============ ~~------------~~============ ~~------------~~Liabilities ~~Loss~~Mortgage ~~from~~notes ~~operations~~payable ~~(2,233,334)~~$ (51,~~209~~987,~~982)~~373 ~~(10~~$ 535,~~120,027)~~421 ~~Gain~~Accounts onpayable, ~~sale~~accrued ofexpenses ~~investments~~and inother ~~subsidiary~~liabilities ~~partnerships 5~~39,~~690,236~~154 1549,~~998,925~~342 ~~14,076,580~~Tenants' ~~Forgiveness~~security ofdeposits ~~indebtedness~~payable ~~income 11~~76,~~962,803~~025 ~~21,389,335~~ 9,~~542,034~~603 ~~Distribution~~Due ~~income~~to oflocal ~~subsidiary~~general ~~partnerships~~partners inand ~~excess~~affiliates of0 ~~investments 139~~32,~~402~~400 ~~845,503~~Minority ~~120,047~~interest ~~Equity~~0 ~~in income of subsidiary partnerships~~ (*5,719) ~~1,924,909 1,189,720 1,564,867~~ ------------ ------------ ~~------------~~Total ~~Net~~liabilities ~~income~~ $ 172,~~484~~102,~~016~~552 $ 34621,~~213,501~~047 ~~$ 15,183,501~~ ============ ============ ~~============~~

51 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 The following table summarizes the results of operations of the Local Partnerships that are classified as discontinued operations. For the year ended March 25, 2005, Pebble Creek and Nu Elm were classified as discontinued operations on the Consolidated Statements of Operations. For the year ended March 25, 2004, Pebble Creek and Nu Elm, in order to present comparable results to the year ended March 25, 2005, and Cabarras and Hathaway, which were sold during the year, were classified as discontinued operations on the Consolidated Statements of Operations. For the year ended March 25, 2003, Pebble Creek, Nu Elm, Cabarras and Hathaway, in order to present comparable results to the year ended March 25, 2005, and Huntley I, Huntley II, Lexington, Northpointe I, Northpointe II, Pinewood, Summer Arms, Saraland, Robindale and Nottingham which were sold during the year, were classified as discontinued operations on the Consolidated Statements of Operations.

~~Year~~Consolidated ~~Ended~~Statements ~~March~~of ~~25,~~Discontinued ~~--------------------------------------------~~Operations: ~~2003~~For ~~2002~~the ~~2001~~period ~~------------~~March ~~------------~~26, ~~------------~~2004 ~~Cash~~The ~~flows~~Year ~~from~~The ~~operating~~Year ~~activities:~~through ~~Net~~Ended ~~income~~Ended $December 1715,~~484,016~~ $March 3425,~~213,501~~ $March 1525,~~183,501~~ 2004 2004 2003 -------------- ------------- ------------ ~~Adjustments~~Revenues toRental ~~reconcile net~~ income to$ ~~net cash used in operating activities: Gain on sale of investments in subsidiary partnerships (5~~1,~~690~~135,~~236)~~052 ~~(15,998,925)~~$ ~~(14~~2,~~076~~186,~~580)~~458 ~~Forgiveness~~$ ~~of indebtedness income (11~~4,~~962~~505,~~803)~~438 ~~(21,389,335)~~Other (9148,~~542,034)~~256 ~~Equity in income of subsidiary partnerships (1~~174,~~924,909)~~558 (1381,~~189,720)~~374 ~~(1,564,867)~~Gain ~~Distribution~~on ~~income~~sale of ~~subsidiary~~properties ~~partnerships~~0 ~~in excess of investments (139~~6,~~402) (845~~903,~~503)~~614 ~~(120~~20,~~047) (Increase) decrease in other assets 58~~251,~~240~~626 19,709 (390,293) Increase (decrease) in liabilities: Due to general partners and affiliates 360,697 696,027 226,542 Due to selling partners 1,012,395 3,787,630 8,559,575 Payments to selling partners (2,966,329) (115,683) (3,462,448) Other liabilities (142,948) 21,729 (48,026) ------------ ------------- ------------ Total ~~adjustments~~revenue ~~(21~~1,~~395~~283,~~295)~~308 ~~(35~~9,~~014~~264,~~071)~~630 ~~(20~~25,~~418~~138,~~178)~~438 ------------ ------------- ------------ ~~Net~~Expenses ~~cash~~General ~~used~~and inadministrative ~~operating~~101,581 ~~activities~~351,185 (31,~~911~~143,~~279)~~333 General and administrative-related parties (~~800,570~~Note 8) (5112,~~234~~772 102,~~677)~~180 ~~------------~~206,729 ~~------------~~Operating ~~------------~~202,840 ~~Cash~~414,620 ~~flows~~814,883 ~~from~~Repairs ~~investing~~and ~~activities:~~maintenance ~~Proceeds~~226,467 ~~from~~468,092 ~~sale~~985,589 ofTaxes ~~investments~~and ininsurance ~~subsidiary~~226,809 ~~partnerships 31~~368,~~959~~451 ~~165~~866,~~465~~716 ~~553~~Interest 0 0 119,~~995~~907 ~~Distributions~~Depreciation ~~from~~and ~~subsidiaries~~amortization 10168,~~071~~666 216,~~782~~270 4779,~~451,612~~088 6Loss on impairment of fixed assets 3,~~550~~558,~~351~~435 0 0 ------------ ------------- ------------ ~~Net~~Total ~~cash~~expenses ~~provided by investing activities 10~~4,~~103~~597,~~741~~570 41,~~617~~920,~~077~~798 74,~~104~~916,~~346~~245 ------------ ------------- ------------ ~~Cash~~(Loss) ~~flows~~income ~~from~~before ~~financing~~minority ~~activities:~~interest ~~Principal payments of purchase money notes payable~~ (53,~~809~~314,~~460~~262) (37,~~776~~343,~~208)~~832 (220,~~266~~222,~~919)~~193 ~~Increase~~Minority interest in ~~purchase~~loss ~~money~~of ~~notes~~subsidiaries ~~payable~~from 0discontinued 0operations ~~5,208 Distributions to partners~~ (152,~~524,495~~950) (1112,~~402~~743 612,~~536)~~233 0 ------------ ------------- ------------ ~~Net~~Total ~~cash~~(loss) ~~used~~income infrom ~~financing~~discontinued ~~activities~~operations $ (73,~~333~~367,~~955~~212) (5$ 7,~~178~~456,~~744)~~575 (2$ 20,~~261~~834,~~711~~426 (including gain on sale of properties) ~~------------~~============ ~~------------~~============= ~~------------~~============ ~~Net~~(Loss) ~~decrease~~income in- ~~cash~~limited ~~and~~partners ~~cash~~from ~~equivalents~~discontinued operations (~~1,141,493~~including gain on sale of properties) $ (13,~~362~~333,~~237~~540) ~~(392~~$ 7,~~042)~~382,009 ~~Cash~~$ ~~and~~20,626,082 ~~cash~~============ ~~equivalents,~~============= ~~beginning~~============ Number of ~~year~~Units 2outstanding 12,~~111,766~~074 312,~~474,003~~074 312,~~866,045~~074 ~~------------~~============ ~~------------~~============= ~~------------~~============ ~~Cash~~(Loss) ~~and~~income ~~cash~~discontinued ~~equivalents,~~operations ~~end~~(including gain on sale of ~~year~~properties) per Unit $ ~~970,273~~(276) $ ~~2,111,766~~611 $ 31,~~474,003~~708 ============ ============= ============

52 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2005 Note 13 - Selected Quarterly Financial Data (Unaudited) The following table summarizes the quarterly results of operations for the years ended March 31, 2005 and 2004:

~~Cost~~Quarter ~~(a)~~Ended ~~Initial Cost to Partnership Capitalized~~ ------------------------------------------------------------------ ~~Subsequent~~June to25, ~~Bulidings~~September ~~and~~25, ~~Acquisition:~~December ~~Subsidiary~~25, ~~Partnership~~March ~~Residential~~25, ~~Property~~OPERATIONS ~~Encumbrances~~2004* ~~Land~~2004* ~~Improvements~~2004** ~~Improvements~~2005 ------------------------------------~~-------~~ ------------ ----------- -- ------------ ------------- ~~(10)Pebble~~Revenues ~~Creek~~ $ 36,~~596,848~~886 $ ~~266~~6,~~942~~983 $ 47,~~968,283~~160 $ ~~1,514,777 (1) Knollwood I (e)~~ 0 ~~311,807~~Operating ~~5,924,337~~Expenses (6425,~~236,144~~707) (~~1) Knollwood II (e) 0 310~~407,~~663 5,902,600 (6,213,263~~941) (~~1) Knollwood III (e) 0 310~~440,~~257~~942 ~~5,899,971 (6,210,228~~) ~~(1) Knollwood IV (e)~~ 0 ~~210,423~~------------ ~~3,998,047~~------------- ~~(4,208,470)~~------------ ~~(1)~~------------- ~~Parklane~~Loss IIfrom ~~(e)~~operations ~~0 228,684 4,344,999~~ (4418,~~573,683~~821) (~~6) Northwoods III (n) 0 183~~400,~~789 3,492,002 (3,675,791~~958) (~~1) Northpointe I (Shelton Beach) (p) 0 156~~433,~~968~~782 ~~2,982,380 (3,139,348~~) ~~(1) Cedarbay (l)~~ 0 ~~184,523~~Net ~~3,505,947~~income (~~3,690,470~~loss) ~~(1)~~from ~~Northpointe~~discontinued IIoperations (p)including 0gain ~~118,651~~on ~~2,254,361~~sale ~~(2,373,012)~~of ~~(9) Rockdale West (i) 0 610~~properties,~~192~~ ~~8,240,035~~loss ~~(8,850,227)~~on ~~(9)~~impairment ~~Buttonwood~~of ~~Acres~~fixed ~~(f)~~assets 0and ~~382,930~~minority ~~4,392,292 (4,775,222~~interest) (9)Note ~~Solemar I (m~~6) ~~0 567~~53,~~644~~728 7114,~~359,738~~973 (~~7,927,382) (2) West Scenic (l) 0 201,556~~ 3,~~893~~535,~~464~~913 ~~(4,095,020~~) ~~(2) Greenwood Manor (o)~~ 0 ~~84,416~~------------ ~~1,603,982~~------------- ~~(1,688,398)~~------------ ~~(2)~~------------- ~~Henslee~~Net ~~Heights~~loss ~~(o)~~$ ~~0 107,068 2,035,034~~ (2365,~~142,102~~093) ~~(2)~~$ ~~Hereford Manor~~ (~~o) 0 70~~285,~~391 1,319,817 (1,390,208~~985) ~~(2)~~$ ~~Oakwood Manor~~ (n) 0 295,312 5,627,044 (5,922,356) (2) Robindale East (n) 0 121,808 2,314,340 (2,436,148) (12)Valley Arms (j) 0 257,254 2,648,264 (2,905,518) (2) Malvern Manor (o) 0 73,494 1,396,388 (1,469,882) (2) Southwest (o) 0 68,995 1,310,896 (1,379,891) (3~~) Lancaster Manor Associates (h) 0 392~~,~~991 7~~969,~~476,427~~695 ~~(7,869,418~~) ~~(16)Caroline~~$ ~~Apartments (m)~~ 0 ~~122,239~~============ ~~1,804,976~~============= ~~(1,927,215)~~============ ~~(1)~~============= ~~Florence~~Loss ~~Apartments~~from ~~(m)~~operations 0per ~~135,644~~limited ~~2,533,694~~partner ~~(2,669,338)~~unit ~~(1)~~$ ~~Saraland Apartments~~ (g34)~~(q)~~ 0$ ~~79,104 1,487,507~~ (~~1,566,611~~33) ~~(1)~~$ ~~Bonnie Doone~~ (m)36 ~~0 89,034 1,649,278 (1,738,312~~) ~~(13)Pinewood~~$ ~~Village (Conifer 317) (p)~~ 0 ~~110,658~~Net ~~1,229,121~~income (~~1,339,779~~loss) ~~(17)Conifer~~from ~~Village~~discontinued ~~(Conifer~~operations ~~208)~~(l)including 0gain ~~83,189~~on ~~1,569,170~~sale ~~(1,652,359)~~of ~~(13)Fircrest Manor (Conifer 307)(j) 0 133~~properties,~~179~~ ~~1,479,049~~loss ~~(1,612,228)~~on ~~(4)~~impairment ~~Westminster~~of ~~Manor~~fixed ~~(f)~~assets 0and ~~457,575~~minority ~~8,662,800 (9,120,375~~interest) ~~(4)~~per ~~Northgate~~limited ~~Townhouse~~partner ~~(f)~~unit 0 336,820 6,280,710 (6,617,530) (15)Pecan Park I (i) 0 193,864 3,682,091 (3,875,955) (15)Pecan Park II (i) 0 187,760 3,481,597 (3,669,357) (15)Bicentennial Square (d) 0 1,147,629 6,576,179 (7,723,808) (15)Bellfort Arms (j) 0 1,130,077 6,996,265 (8,126,342) (8) Hathaway Court 2,706,335 217,960 4~~,157,713~~ ~~324,354~~10 (5)290 ~~Lexington Village (p~~) 0 ~~133,830~~------------ ~~2,580,297~~------------- ~~(2,714,127)~~------------ ~~(5)~~------------- ~~Ware~~Net ~~Manor~~loss ~~(n)~~per 0limited ~~108,955~~partner ~~2,079,603~~unit ~~(2,188,558)~~$ (1430)~~Summer~~ ~~Arms~~$ (q23) 0$ ~~123,135 2,381,092~~ (~~2,504,227)~~326 ~~(12~~)~~Cabarrus~~ ~~Arms~~$ ~~1,139,777 102,987 1,850,151 256,043 (1) Sundown Apts. (Cloister)(l)~~ 0 ~~357,930~~============ ~~5,134,467~~============= ~~(5,492,397)~~============ ~~(5)~~============= ~~Tall~~Quarter ~~Pines~~Ended (n) 0 166,974 2,657,152 (2,824,126) (1) Nottingham Woods (n) 0 185,145 3,556,877 (3,742,022) (7) Seymour O'Brien Manor (n) 0 77,893 1,483,726 (1,561,619) (7) Washington Highlands (n) 0 79,571 1,508,983 (1,588,554) Gross Amount at which Carried At Close of Period ------------------------------------------------------------------ ~~Bulidings~~June ~~and~~25, ~~Accumulated~~September ~~Subsidiary~~25, ~~Partnership~~December ~~Residential~~25, ~~Property~~March ~~Land~~25, ~~Improvements~~OPERATIONS ~~Total~~2003* ~~Depreciation~~2003* 2003* 2004* ------------------------------------~~-------~~ ------------ ------------- ------------ ------------- ~~(10)Pebble~~Revenues ~~Creek~~ $ ~~266~~8,~~942~~123 $ 67,~~483,060~~539 $ 67,~~750,002~~580 $ (36,~~271,757)~~610 ~~(1)~~Operating ~~Knollwood~~Expenses I (e531,597) ~~0 0 0 0~~ (1515,198) ~~Knollwood II~~ (e)407,788 ~~0 0 0 0 (1~~) ~~Knollwood III~~ (e407,574) 0------------ 0------------- 0------------ 0------------- ~~(1)~~Loss ~~Knollwood~~from IVoperations (e523,474) ~~0 0 0 0~~ (1507,659) ~~Parklane II~~ (e) 0 0 0 0 (6) Northwoods III (n) 0 0 0 0 (1) Northpointe I (Shelton Beach) (p) 0 0 0 0 (1) Cedarbay (l) 0 0 0 0 (1) Northpointe II (p) 0 0 0 0 (9) Rockdale West (i) 0 0 0 0 (9) Buttonwood Acres (f) 0 0 0 0 (9) Solemar I (m) 0 0 0 0 (2) West Scenic (l) 0 0 0 0 (2) Greenwood Manor (o) 0 0 0 0 (2) Henslee Heights (o) 0 0 0 0 (2) Hereford Manor (o) 0 0 0 0 (2) Oakwood Manor (n) 0 0 0 0 (2) Robindale East (n) 0 0 0 0 (12)Valley Arms (j) 0 0 0 0 (2) Malvern Manor (o) 0 0 0 0 (2) Southwest (o) 0 0 0 0 (3) Lancaster Manor Associates (h) 0 0 0 0 (16)Caroline Apartments (m) 0 0 0 0 (1) Florence Apartments (m) 0 0 0 0 (1) Saraland Apartments (g)(q) 0 0 0 0 (1) Bonnie Doone (m) 0 0 0 0 (13)Pinewood Village (Conifer 317) (p) 0 0 0 0 (17)Conifer Village (Conifer 400,208~~)(l)~~ ~~0 0 0 0 (13~~)~~Fircrest~~ ~~Manor~~ (Conifer 307)(j) 0 0 0 0 (4) Westminster Manor (f) 0 0 0 0 (4) Northgate Townhouse (f) 0 0 0 0 (15)Pecan Park I (i) 0 0 0 0 (15)Pecan Park II (i) 0 0 0 0 (15)Bicentennial Square (d) 0 0 0 0 (15)Bellfort Arms (j) 0 0 0 0 (8) Hathaway Court 217400,~~960 4,482,067 4,700,027 (3,915,592~~964) ~~(5)~~Net ~~Lexington~~income ~~Village~~from ~~(p)~~discontinued 0operations ~~0 0 0~~ (5)including ~~Ware~~gain ~~Manor~~on ~~(n)~~sale 0of 0properties 0and 0minority ~~(14~~interest)~~Summer~~ ~~Arms~~ (q)Note ~~0 0 0 0 (12~~6)~~Cabarrus~~ ~~Arms 102~~127,~~987~~677 241,~~106,194~~024 27,~~209~~241,~~181~~419 (146,~~809,475)~~455 (1) Sundown Apts. (Cloister)(l) 0 0 0 0 (5) Tall Pines (n) 0 0 0 0 (1) Nottingham Woods (n) 0 0 0 0 (7) Seymour O'Brien Manor (n) 0 0 0 0 (7) Washington Highlands (n) 0 0 0 0 Life on which Depreciation in Latest Income Date of Date Statment is Subsidiary Partnership Residential Property onstruction Acquired Computed(b)(c) ------------ -------------~~------------------~~ ----------- -~~---------~~ --------------- ~~(10)Pebble~~Net ~~Creek~~ (closs) ~~Nov.~~income ~~1984~~$ ~~5 - 27.5~~ (1395,797) ~~Knollwood~~$ I (e466,635) ~~(c)~~$ ~~Sept.~~6,841,211 ~~1984~~$ 30 (1354,509) ~~Knollwood~~============ II============= ~~(e)~~============ ~~(c)~~============= ~~Sept.~~Loss ~~1984~~from 30operations ~~(1)~~per ~~Knollwood~~limited ~~III~~partner ~~(e)~~unit ~~(c)~~$ ~~Sept. 1984 30~~ (142) ~~Knollwood~~$ IV (e42) ~~(c)~~$ ~~Sept. 1984 30~~ (1)33 ~~Parklane II (e~~) ~~(c)~~$ ~~Sept. 1984 30~~ (633) ~~Northwoods~~Net ~~III~~income ~~(n)~~from ~~(c)~~discontinued ~~Oct.~~operations ~~1984 15 - 30~~ (1)including ~~Northpointe~~gain Ion ~~(Shelton~~sale ~~Beach)~~of (pproperties) ~~(c)~~per ~~Nov.~~limited ~~1984~~partner 15unit -10 303 ~~(1)~~594 ~~Cedarbay~~4 ~~(l) (c) Sept. 1984 15~~ - ~~30 (1) Northpointe II (p) (c) Nov. 1984 15~~ - ~~30 (9) Rockdale West (i) (c) Oct. 1984 15~~-~~27 (9) Buttonwood Acres (f) (c) Oct. 1984 20 (9) Solemar I (m) (c) Oct. 1984 15~~-~~27 (2) West Scenic (l) (c) Dec. 1984 10~~ - ~~30 (2) Greenwood Manor (o) (c) Dec. 1984 30 (2) Henslee Heights (o) (c) Dec. 1984 35 (2) Hereford Manor (o) (c) Dec. 1984 35 (2) Oakwood Manor (n) (c) Dec. 1984 5~~ - ~~30 (2) Robindale East (n) (c) Dec. 1984 10~~ - 30 (12)Valley Arms (j) (c) Dec. 1984 35 (2) Malvern Manor (o) (c) Dec. 1984 35 (2) Southwest (o) (c) Dec. 1984 30 (3) Lancaster Manor Associates (h) (c) Dec. 1984 30 (16)Caroline Apartments (m) (c) Nov. 1984 28 (1) Florence Apartments (m) (c) Oct. 1984 15 - ~~30 (1) Saraland Apartments (g)(q) (c) Oct. 1984 5~~ - ~~30 (1) Bonnie Doone (m) (c) Nov. 1984 27.5~~ - ~~30 (13)Pinewood Village (Conifer 317) (p) (c) Nov. 1984 15~~ - ~~30 (17)Conifer Village (Conifer 208)(l) (c) Nov. 1984 19~~ - ~~30 (13)Fircrest Manor (Conifer 307)(j) (c) Nov. 1984 20~~ - ~~30 (4) Westminster Manor (f) (c) Oct. 1984 30 (4) Northgate Townhouse (f) (c) Oct. 1984 30 (15)Pecan Park I (i) (c) Dec. 1984 30 (15)Pecan Park II (i) (c) Dec. 1984 18~~ - ~~30 (15)Bicentennial Square (d) (c) Dec. 1984 30~~ - ~~40 (15)Bellfort Arms (j) (c) Nov. 1984 30 (8) Hathaway Court (c) Nov. 1984 20 (5) Lexington Village (p) (c) Nov. 1984 15~~ - ~~27.5 (5) Ware Manor (n) (c) Nov. 1984 15~~ - ~~27.5 (14)Summer Arms (q) (c) Nov. 1984 20 (12)Cabarrus Arms (c) Nov. 1984 7~~ -------- ~~20 (1) Sundown Apts. (Cloister)(l) (c) Nov. 1984 10~~ ------------ ~~20 (5) Tall Pines (n) (c) Nov. 1984 20~~ ------------- ~~27.5~~Net (1loss) ~~Nottingham~~income ~~Woods~~per ~~(n)~~limited ~~(c)~~partner ~~Nov.~~unit ~~1984~~$ ~~10 - 20~~ (732) ~~Seymour~~$ ~~O'Brien Manor~~ (n39) ~~(c)~~$ ~~Oct.~~561 ~~1984~~$ ~~5 - 27.5~~ (729) ~~Washington~~============ ~~Highlands~~============= ~~(n)~~============ ~~(c) Oct. 1984 5 - 27.5~~=============

* Reclassified for comparative purposes. ** Includes $3,558,434 loss on impairment of fixed asset which was included in gain on liquidation in the December 25, 2004 Form 10-Q. 53 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable Item 9A. Controls and Procedures (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Chief Executive Officer and Chief Financial Officer of the Assisted General Partner, the Related General Partner and Cambridge/Related, the general partners of the Partnership, has evaluated the effectiveness of the Partnership's disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ("Exchange Act") as of the end of the period covered by this report. Based on such evaluation, such officer has concluded that, as of the end of such period, the Partnership's disclosure controls and procedures are effective. (b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes in Partnership's internal control over financial reporting during the fiscal year to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. PART III Item 10. Directors and Executive Officers of the Registrant The Partnership has no directors or executive officers. The Partnership's affairs are managed and controlled by the General Partners. The Partnership has not adopted a separate code of ethics because the Partnership has no directors or executive officers. However, the parent company of Related Capital Company ("RCC"), which controls our General Partners, has adopted a code of ethics. See http://www.chartermac.com Assisted Housing Associates, Inc. ("Assisted General Partner"), Related Beta Corporation ("Related General Partner") and Cambridge/Related Associates Limited Partnership ("Cambridge/Related") are all affiliates of RCC. The general partner of RCC is The Related Realty Group, Inc. The general partners of Cambridge/Related are the Assisted General Partner and The Related General Partner. On November 17, 2003, CharterMac acquired RCC, which is the indirect parent of RCC Manager L.L.C., the sole shareholder of the Related General Partner. Alan P. Hirmes replaced Stephen M. Ross as Director of the Related General Partner and Michael Brenner as Director of the Assisted General Partner, each effective April 1, 2004, as a result of this acquisition. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partners. This acquisition did not affect the Partnership or its day-to-day operations, as the majority of the General Partners' management team remained unchanged. The Assisted General Partner was incorporated in Delaware on June 25, 1985 and the Related General Partner was incorporated in Delaware on January 23, 1984. On November 25, 1997, an affiliate of the Related General Partner purchased 100% of the stock of the Assisted General Partner (the "Transfer"), then an affiliate of Lehman Brothers, Inc. The Assisted General Partner is also a partner of Cambridge/Related and, therefore, as a result of the Transfer, such affiliate also acquired the Assisted General Partner's general partner interest in Cambridge/Related and C/R Special Partnership, the special limited partner of the Partnership. In connection with the Transfer, the Partnership paid to the Assisted General Partner the accrued asset management fees owed to it in the aggregate amount of $1,334,116. Certain information concerning the directors and executive officers of the General Partners is set forth below. The directors and executive officers of the Related General Partner are as follows: Name Position ------------------- ---------------------- Alan P. Hirmes Director and President Stuart J. Boesky Vice President Denise Kiley (1) Vice President Marc D. Schnitzer Vice President Mark E. Carbone Vice President Glenn F. Hopps Treasurer Teresa Wicelinski Secretary (1) On February 25, 2005, Ms. Kiley announced here retirement as Chief Credit Officer and trustee of CharterMac, the indirect parent of RCC Manager LLC, the sole share holder of the Related General Partner. Upon her retirement, she will also resign from her position as Vice President of the Related General Partner. ALAN P. HIRMES, 50, has been a Certified Public Accountant in New York since 1978. Prior to joining Related Capital Company ("Capital") in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Managing Director of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree. Mr. Hirmes also serves on the Board of Trustees of CharterMac and American Mortgage Acceptance Company ("AMAC"). 54 STUART J. BOESKY, 49, practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined Capital. From 1983 to 1984, Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow Richard & Rothstein (which subsequently merged with Strook & Strook & Lavan) and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He then received a Master of Laws degree in Taxation from Boston University School of Law. Mr. Boesky also serves on the Board of Trustees of CharterMac and AMAC. DENISE L. KILEY, 45, is responsible for overseeing the due diligence and asset management of all multifamily residential properties invested in RCC sponsored corporate, public and private equity and debt funds. Prior to joining Capital in 1990, Ms. Kiley had experience acquiring, financing and asset managing multifamily residential properties. From 1981 through 1985 she was an auditor with Price Waterhouse. Ms. Kiley holds a Bachelor of Science in Accounting from Boston College. Ms. Kiley also serves on the Board of Trustees of CharterMac. As noted above, Ms. Kiley is retiring in 2005. MARC D. SCHNITZER, 44, joined Capital in January 1988 after receiving his Master of Business Administration degree from The Wharton School of The University of Pennsylvania in December 1987. From 1983 to 1986, Mr. Schnitzer was a Financial Analyst with The First Boston Corporation in New York, an international investment banking firm. Mr. Schnitzer received a Bachelor of Science degree, summa cum laude, in Business Administration, from the School of Management at Boston University in May 1983. Mr. Schnitzer also serves on the Board of Trustees of CharterMac. MARK E. CARBONE, 48, rejoined Capital in 1998 where his primary responsibility has been disposition of real estate. From 1994 to 1998 he was President of WHC, Inc., a distressed asset real estate fund. From 1986 to 1994 he was President of Marigold Real Estate and Development, Inc., a real estate development company located in Greenwich, CT. From 1979 to 1986 he was a Vice President at Related Capital Company. He received a Bachelor of Arts in Government from Harvard University in 1979. GLENN F. HOPPS, 42, joined Capital in December 1990, and prior to that date Mr. Hopps was employed by Marks Shron & Company and Weissbarth, Altman and Michaelson certified public accountants. Mr. Hopps graduated from New York State University at Albany with a Bachelor of Science Degree in Accounting. TERESA WICELINSKI, 39, joined Capital in June 1992, and prior to that date was employed by Friedman, Alpren & Green, certified public accountants. Ms. Wicelinski, graduated from Pace University with a Bachelor of Arts Degree in Accounting. The directors and executive officers of the Assisted General Partner are as follows: Name Position ------------------- ------------------------ Alan P. Hirmes Director and President Stuart J. Boesky Executive Vice President Mark E. Carbone Vice President Denise L. Kiley (1) Vice President Glenn F. Hopps Treasurer Teresa Wicelinski Secretary Biographical information with respect to Messrs, Hirmes, Boesky, Carbone and Hopps and Ms. Kiley and Ms. Wicelinski is set forth above. Item 11. Executive Compensation The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to directors or officers of the General Partners for their services. However, under the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, the General Partners and their affiliates are entitled to receive compensation from the Partnership in consideration of certain services rendered to the Partnership by such parties. In addition, the General Partners collectively hold a 1% interest in all profits, losses and distributions attributable to operations and a subordinated 15% interest in such items attributable to sales and refinancings. See Note 8 to the Financial Statements in Item 8 above, which information is incorporated herein by reference thereto. Certain directors and officers of the General Partners receive compensation from the General Partner and their affiliates for services performed for various affiliated entities which may include services performed for the Partnership. Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in this annual report. As noted above, the Partnership has no executive officers. The levels of compensation payable to the General Partners and/or their affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis. 55 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Security Holder Matters The General Partners own all of the outstanding general partnership interests in the Partnership. The General Partners have a 1% interest in all profits, losses and distributions of the Partnership from operations and a subordinated 15% interest in such items from sale or refinancing proceeds. Except as aforesaid, no person is known to own beneficially in excess of 5% of the outstanding partnership interests. At March 25, 2005, security ownership by the General Partners and their affiliates is as listed:

~~Cost~~Percentage ~~(a)~~of ~~Initial~~Outstanding ~~Cost~~General toPartner ~~Partnership~~Title ~~Capitalized~~of ~~---------------------------~~Class ~~Subsequent~~Name toof ~~Bulidings~~Beneficial ~~and~~Ownership ~~Acquisition:~~Amount ~~Subsidiary~~Interest ~~Partnership Residential Property Encumbrances Land Improvements Improvements~~ ------------------------------------------- ----~~--------~~ ----------- ------------- ------------- (7) Vincennes Niblack ("Autumn Ridge Apartments) (n) 0 184,718 3,502,697 (3,687,415) (11)Nu Elm 1,252,818 100,552 1,913,293 412,812 (3) Casa Ramon (l) 0 121,197 2,318,916 (2,440,113) (10)Hackley Village (o) 0 80,562 1,530,639 (1,611,201) (10)Huntley Associates I (p) 0 125,087 2,376,634 (2,501,721) (10)Huntley Associates II (p) 0 98,140 1,864,671 (1,962,811) (1) Decatur (m) 0 135,554 2,531,304 (2,666,858) (1) Dickens Ferry (m) 0 108,914 2,058,001 (2,166,915) (15) University Gardens (o) 0 127,004 2,288,254 (2,415,258) (15)Southside Villages (o) 0 135,624 2,508,705 (2,644,329) (10)Carlton Terrace (k) 0 755,304 8,627,605 (9,382,909) (10)Apollo Villa (k) 0 229,304 2,903,658 (3,132,962) (10)Apollo Villa II (k) 0 577,304 7,260,975 (7,838,279) (10)Cranbrook Manor (k) 0 261,948 3,510,485 (3,772,433) (10)Oakbrook Villa (j) 0 411,597 9,143,169 (9,554,766) ------------ ----------- --------- ------~~-------~~ $General ~~8,695,778~~Partnership ~~$14,730,719~~Interest $in ~~222,052,152~~the $(220,697,004) ============ =========== ============= ============= Gross Amount at which Carried At Close of Period ------------------------------------------------- Bulidings and Accumulated Subsidiary Partnership ~~Residential~~Assisted ~~Property~~Housing ~~Land~~Associates ~~Improvements~~Inc. ~~Total~~$ ~~Depreciation~~10 ~~------------------------------------------- ----------- ------------- ------------ ------------ (7) Vincennes Niblack ("Autumn Ridge Apartments) (n) 0 0 0 0 (11)Nu Elm 100,552~~ 13.2~~,326,105~~% ~~2,426,657~~General ~~(1,145,403)~~Partnership ~~(3)~~Interest ~~Casa~~in ~~Ramon~~the ~~(l)~~Partnership 0Related 0Beta 0Corporation 06 ~~(10)Hackley~~19.8% ~~Village~~General ~~(o)~~Partnership 0Interest 0in 0the 0Partnership ~~(10)Huntley~~Cambridge/Related Associates ILimited ~~(p)~~Partnership 04 67.0% 0 0 (10)Huntley Associates II (p) 0 0 0 0 (1) Decatur (m) 0 0 0 0 (1) Dickens Ferry (m) 0 0 0 0 (15) University Gardens (o) 0 0 0 0 (15)Southside Villages (o) 0 0 0 0 (10)Carlton Terrace (k) 0 0 0 0 (10)Apollo Villa (k) 0 0 0 0 (10)Apollo Villa II (k) 0 0 0 0 (10)Cranbrook Manor (k) 0 0 0 0 (10)Oakbrook Villa (j) 0 0 0 0 ----------- ~~-------------~~100.0% ~~------------ ------------ $ 688,441 $ 15,397,426 $16,085,867 $(10,142,227)~~ =========== ============= ============ ============ Life on which Depreciation in Latest Income Date of Date Statment is Subsidiary Partnership Residential Property Construction Acquired Computed(b)(c) ------------------------------------------- ------------ ---------- --------------- (7) Vincennes Niblack ("Autumn Ridge Apartments) (n) (c) Oct. 1984 5 - 27.5 (11)Nu Elm (c) Oct. 1984 5 - 27.5 (3) Casa Ramon (l) (c) Oct. 1984 5 - 27.5 (10)Hackley Village (o) (c) Oct. 1984 5 - 27.5 (10)Huntley Associates I (p) (c) Oct. 1984 5 - 27.5 (10)Huntley Associates II (p) (c) Oct. 1984 5 - 27.5 (1) Decatur (m) (c) Oct. 1984 15 - 40 (1) Dickens Ferry (m) (c) Nov. 1984 15 - 40 (15) University Gardens (o) (c) Nov. 1984 25 (15)Southside Villages (o) (c) Nov. 1984 25 (10)Carlton Terrace (k) (c) Dec. 1984 25 (10)Apollo Villa (k) (c) Dec. 1984 25 (10)Apollo Villa II (k) (c) Dec. 1984 25 (10)Cranbrook Manor (k) (c) Dec. 1984 5 - 40 (10)Oakbrook Villa (j) (c) Dec. 1984 5 - 40

No director or executive officer of any General Partner owns any Initial Limited Partnership Interests or Additional Limited Partnership Interests. Item 13. Certain Relationships and Related Transactions The Partnership has and will continue to have certain relationships with the General Partners and their affiliates, as discussed below and in Item 11 above and also Note 8 to the Financial Statements in Item 8 above, which are incorporated herein by reference. However, there have been no direct financial transactions between the Partnership and the directors and officers of the General Partners. C/R Special Partnership is the special limited partner of each Local Partnership, with a .01% interest in profits, losses and distributions from such Local Partnerships. As set forth in Item 1, C/R Special Partnership has been admitted to the Local Partnerships for the purpose of monitoring the Local Partnerships and exercising certain rights under the Local Partnership Agreements on behalf of the Partnership. Item 14. Principal Accountant Fees and Services Audit Fees ---------- The aggregate fees billed by Trien Rosenberg Rosenberg Weinberg Ciullo and Fazzari LLP and their respective affiliates (collectively, "Trien") for professional services rendered for the audit of our annual financial statements for the years ended March 25, 2005 and 2004 and for the reviews of the financial statements included in the Partnership's Quarterly Reports on Form 10-Q for those years were $25,000 and $38,500, respectively. Audit Related Fees ------------------ The aggregate fees billed by Trien Rosenberg Rosenberg Weinberg Ciullo and Fazzari LLP and their respective affiliates (collectively, "Trien") for professional services rendered relating to audit of our annual financial statements for the years ended March 25, 2005 and 2004 and for reviews of the financial statements included in the Partnership's Quarterly Reports on Form 10-Q for those years were $9,600 and $41,100, respectively. Tax Fees -------- The aggregate fees billed by Weiser LLP (formerly, Rubin and Katz LLP) and their respective affiliates (collectively, "Weiser") for professional services rendered for the preparation of our annual tax returns for the years ended December 31, 2004 and 2003 were $12,500 and $11,500, respectively. All Other Fees -------------- None. The Partnership is not required to have, and does not have, a stand-alone audit committee. 56 PART IV Item 15. Exhibits and Financial Statement Schedules Sequential Page ---------- (a) 1. Financial Statements -------------------- Report of Independent Registered Public Accounting Firm 17 Consolidated Statement of Net Assets in Liquidation as of March 25, 2005 and Consolidated Balance Sheet as of March 25, 2004 37 Consolidated Statements of Operations for the Period March 26, 2004 through December 15, 2004 and for the Years Ended March 25, 2004 and 2003 38 Consolidated Statement of Changes in Net Assets in Liquidation for the Period December 16, 2004 through March 25, 2005 39 Consolidated Statements of Changes in Partners' Capital (Deficit) for the Years Ended March 25, 2005, 2004 and 2003 40 Consolidated Statements of Cash Flows for the Period March 26, 2004 through December 15, 2004 and for the Years Ended March 25, 2005 and 2004 41 Notes to Consolidated Financial Statements 42 (a) 2. Financial Statement Schedules ----------------------------- Report of Independent Registered Public Accounting Firm 62 Schedule I - Condensed Financial Information of Registrant 63 Schedule III - Real Estate and Accumulated Depreciation 67 The remaining schedules are omitted because the required information is included in the financial statements and notes thereto, or they are not applicable or not required. (a) 3. Exhibits -------- (3) Amended and Restated Agreement and Certificate of Limited Partnership as filed with the Secretary of State of the State of the Commonwealth of Massachusetts.** (10A) Form of Escrow Agreement** (21) Subsidiaries of the Registrant 57 (31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) 60 (32.1) Certification Pursuant to Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Title 18 of the United States Code (18 U.S.C. 1350) 61 ** Incorporated by reference to exhibits filed with Amendment No. 1 to Cambridge Advantaged Properties L.P.'s Registration Statement on Form S-11 Registration File No. 2-91993. Subsidiaries of the Registrant (Exhibit 21) ------------------------------------------- Jurisdiction of Formation ------------ Nu-Elm Apartments MO Pebble Creek LDHA MI 57 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. CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP (Registrant) By: RELATED BETA CORPORATION a General Partner Date: June 20, 2005 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Director and President By: ASSISTED HOUSING ASSOCIATES, INC. a General Partner Date: June 20, 2005 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Director and President By: CAMBRIDGE/ RELATED ASSOCIATES LIMITED PARTNERSHIP By: Related Beta Corporation Date: June 20, 2005 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Director and President 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 Title Date ------------------ --------------------------------------- -------------- Director and President /s/ Alan P. Hirmes (chief executive and financial officer) ------------------ of Related Beta Corporation and Alan P. Hirmes Assisted Housing Associates, Inc. June 20, 2005 /s/ Glenn F. Hopps Treasurer (chief accounting officer) ------------------ of Related Beta Corporation and Glenn F. Hopps Assisted Housing Associates, Inc. June 20, 2005 Exhibit 31.1 CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, General Partners of the Partnership) and Assisted Housing Associates, Inc. (general partner of the Partnership), hereby certify that: 1. I have reviewed this annual report on Form 10-K for the period ending March 25, 2005 of the Partnership; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Partnership and I have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this annual report was being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under my supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the Partnership's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and d) disclosed in this report any change in the Partnership's internal control over financial reporting that occurred during the Partnership's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Partnership's internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Partnership's auditors and to the boards of directors of the General Partners: a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Partnership's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal control over financial reporting. Date: June 20, 2005 By: /s/ Alan P. Hirmes ------------- ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer Exhibit 32.1 CERTIFICATION PURSUANT TO RULE 13a-14(b) OR RULE 15d-14(b) AND SECTION 1350 OF TITLE 18 OF THE UNITED STATES CODE (18 U.S.C. 1350) In connection with the Annual Report of Cambridge Advantaged Properties Limited Partnership (the "Partnership") on Form 10-K for the period ending March 25, 2005 as filed with the Securities and Exchange Commission ("SEC") on the date hereof (the "Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, general partner of the Partnership) and Assisted Housing Associates, Inc. (general partner of the Partnership), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. A signed original of this written statement required by Section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the SEC or its staff upon request. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer June 20, 2005 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners of Cambridge Advantaged Properties Limited Partnership and Subsidiaries In connection with our audits of the consolidated financial statements of Cambridge Advantaged Properties Limited Partnership and Subsidiaries included in the Form 10-K as presented in our opinion dated June 15, 2005 on page 17, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2004, 2003 and 2002 Fiscal Years and Schedule III at March 25, 2004. In our opinion, and based on the reports of the other auditors, these consolidated schedules present fairly, when read in conjunction with the related consolidated financial statements, the financial data required to be set forth therein. As described in Note 1(a), the Partnership is currently in the process of disposing of its investments. As of March 25, 2005, the Partnership has disposed of fifty-nine of its sixty-one original investments and on December 15, 2004, entered into contracts to sell its Limited Partnership interest in the remaining two. The Partnership intends to liquidate upon the sale of the remaining investments. As a result, the Partnership has changed its basis of accounting for periods subsequent to December 15, 2004 from the going-concern basis to a liquidation basis. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI LLP New York, New York June 15, 2005 62 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT Summarized condensed financial information of registrant (not including consolidated subsidiary partnerships) CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP CONDENSED STATEMENT OF NET ASSETS IN LIQUIDATION AS OF MARCH 25, 2005 AND CONSOLIDATED BALANCE SHEET AS OF MARCH 25, 2004

~~Cost~~ASSETS ofMarch ~~Property~~25, ~~and Equipment Accumulatd Depreciation~~ --------------------------- 2005 2004 ------------~~--------~~ ------------~~-----------------------------------~~ ~~Year~~Cash ~~Ended~~and ~~March~~cash 25equivalents $ 460,403 ~~--------------------------------------------------------------------------------------------------~~$ ~~2003~~675,787 ~~2002~~Investment ~~2001~~in ~~2003~~and ~~2002~~advances ~~2001~~to ~~-------------~~subsidiary ~~-------------~~partnerships ~~-------------~~1,490,020 ~~-------------~~4,601,026 Other assets 287,782 328,635 ------------- ------------- ~~Balance~~Total atassets ~~beginning of period~~ $ 402,~~984~~238,~~916~~205 $ 855,~~344~~605,~~137~~448 $============ ~~133,535,911~~============ $LIABILITIES ~~23,965,637~~AND $PARTNERS' ~~46,362,176~~CAPITAL $(DEFICIT) ~~67,270,922~~Accounts ~~Additions~~payable ~~during~~and ~~period:~~other ~~Improvements~~liabilities ~~164,274~~$ ~~459~~24,~~572~~657 ~~1,572,337~~$ ~~Depreciation~~0 ~~expense~~Purchase ~~779,088~~money ~~1,364,076~~notes 3payable 0 2,~~212~~009,~~290~~344 ~~Deductions~~Due ~~during~~to ~~period:~~general ~~Dispositions~~partner ~~(25,063,323)~~and ~~(44,818,793)~~affiliates ~~(49~~315,~~764,111)~~550 ~~(14~~4,~~602~~350,~~498)~~684 ~~(23,760,615)~~Due ~~(24~~to selling partners 0 5,~~121~~518,~~036)~~708 ------------- ------------- ~~-------------~~Total ~~-------------~~liabilities 340,207 11,878,736 Partners' capital (deficit) 1,897,998 (6,273,288) ------------- ------------- ~~Balance~~Total atliabilities ~~close~~and ofpartners' ~~period~~capital $(deficit) ~~16,085,867~~ $ 402,~~984~~238,~~916~~205 $ 855,~~344~~605,~~137~~448 ~~$ 10,142,227 $ 23,965,637 $ 46,362,176~~ ============= ============~~= ============= ============= ============= =============~~

Investments in subsidiary partnerships are recorded in accordance with the equity method of accounting, wherein the investments are not reduced below zero. Accordingly, partners' deficit on the consolidated balance sheet will differ from partners' deficit shown above. 63 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP

(*) Includes suspended prior year losses in excess of investment in accordance with equity method of accounting amounting to $0, $455,279 and $1,119,403 for the years ended March 25, 2004 and 2003. (**) Reclassified for comparative purposes. 64 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP CONDENSED STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents

** Reclassified for comparative purposes. 65 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP CONDENSED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION

See accompanying notes to consolidated financial statements. 66 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 25, 2005

67 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 25, 2005 (continued)

(a) No carrying costs have been capitalized since all properties were acquired after completion of construction. (b) Furniture and fixtures, included in buildings and improvements, are depreciated primarily by the straight-line method over the estimated useful lives ranging from 5 to 15 years. (c) Since all properties were acquired as operating properties, depreciation is computed using primarily the straight-line method over the estimated useful lives determined by the Partnership at date of acquisition. (d) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1997. See Note 10 in Item 8, Financial Statements and Supplementary Data. (e) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1998. See Note 10 in Item 8, Financial Statements and Supplementary Data. (f) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 1998. See Note 10 in Item 8, Financial Statements and Supplementary Data. (g) During the fiscal year ended March 25, 1998, the Local Partnership's property was declared unsafe to live due to amounts of Benzene and Aldrene found to be present in the air of some apartments. See Note 11 in Item 8, Financial Statements and Supplementary Data. (h) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1999. See Note 10 in Item 8, Financial Statements and Supplementary Data. (i) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 1999. See Note 10 in Item 8, Financial Statements and Supplementary Data. (j) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2000. See Note 10 in Item 8, Financial Statements and Supplementary Data. 68 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 25, 2005 (continued) (k) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 2000. See Note 10 in Item 8, Financial Statements and Supplementary Data. (l) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2001. See Note 10 in Item 8, Financial Statements and Supplementary Data. (m) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 2001. See Note 10 in Item 8, Financial Statements and Supplementary Data. (n) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2002. See Note 10 in Item 8, Financial Statements and Supplementary Data. (o) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2002. See Note 10 in Item 8, Financial Statements and Supplementary Data. (p) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2003. See Note 10 in Item 8, Financial Statements and Supplementary Data. (q) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2003. See Note 10 in Item 8, Financial Statements and Supplementary Data. (r) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2004. See Note 10 in Item 8, Financial Statements and Supplementary Data. (s) The cost capitalized subsequent to acquisition reflects a loss on liquidation in the amount of $2,273,000. (t) The cost capitalized subsequent to acquisition reflects a loss on liquidation in the amount of $1,058,211. (u) These properties are included in discontinued operations for the year ended March 25, 2004. (v) These properties are included in discontinued operations for the year ended March 25, 2005. Geographic Locations: (1) Alabama, (2) Arkansas, (3) California, (4) Colorado, (5) Georgia, (6) Florida, (7) Indiana, (8) Kentucky, (9) Massachusetts, (10) Michigan, (11) Missouri, (12) North Carolina, (13) Oregon, (14) South Carolina, (15) Texas, (16) Virginia, (17) Washington.

At the time the local partnerships were acquired by Cambridge Advantaged Properties Limited Partnership, the entire purchase price paid by Cambridge Advantaged Properties Limited Partnership was pushed down to the local partnerships as property and equipment with an offsetting credit to capital. Since the projects were in the construction phase at the time of acquisition, the capital accounts were insignificant at the time of purchase. Therefore, there are no material differences between the original cost basis for tax and GAAP. 69

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