10-Q 1 f10q_june2005-free.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2005 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-24652 FREEDOM TAX CREDIT PLUS L.P. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 13-3533987 ------------------------------------------------- ------------------- (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) 317-5700 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 whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes [ ] No [X] PART I - FINANCIAL INFORMATION Item 1. Financial Statements FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these condensed consolidated financial statements. 2 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

* Reclassified for comparative purposes The accompanying notes are an integral part of these condensed consolidated financial statements. 3 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements. 4 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

* Reclassified for comparative purposes. The accompanying notes are an integral part of these condensed consolidated financial statements. 5 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2005 (Unaudited) Note 1 - General The consolidated condensed financial statements include the accounts of Freedom Tax Credit Plus L.P. ("the Partnership") and 42 subsidiary partnerships ("subsidiaries", "subsidiary partnerships" or "Local Partnerships") in which the Partnership is a limited partner. 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 Local Partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the Local Partnerships. The Partnership's fiscal quarter ends June 30. All subsidiaries have fiscal quarters ending March 31 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. Accounts of the subsidiaries have been adjusted for intercompany transactions from April 1 through June 30. 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 from and cash distributions to the minority interest partners. Losses attributable to minority interests aggregated approximately $22,000 and $10,000 for the three months ended June 30, 2005 and 2004, respectively. These amounts include approximately $11,000 and $1,000, respectively, which are related to discontinued operations. The Partnership's investment in each subsidiary is generally equal to the respective subsidiary's partners' equity less minority interest capital, if any. The books and records of the Partnership are maintained on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. In the opinion of the General Partners of the Partnership, the accompanying unaudited consolidated condensed financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of June 30, 2005 and its results of operations and cash flows for the three months ended June 30, 2005 and 2004. However, the operating results and cash flows for the three months ended June 30, 2005 may not be indicative of the results for the entire year. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted or condensed. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership's Annual Report on Form 10-K for the year ended March 31, 2005. Note 2 - Related Party Transactions The costs incurred to related parties from operations for the three months ended June 30, 2005 and 2004 were as follows:

* Reclassified for comparative purposes. 6 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2005 (Unaudited) The costs incurred to related parties from discontinued operations for the three months ended June 30, 2005 and 2004 were as follows:

(a) The General Partners are entitled to receive a partnership management fee, after payment of all Partnership expenses, which together with the annual local administrative fees, will not exceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership Agreement), for administering the affairs of the Partnership. Subject to the foregoing limitation, the partnership management fee will be determined by the General Partners in their sole discretion based upon their review of the Partnership's investments. Unpaid partnership management fees for any year will be accrued without interest and will be payable from working capital reserves or to the extent of available funds after the Partnership has made distributions to the Limited Partners and Beneficial Assignment Certificates ("BACs") holders of sale or refinancing proceeds equal to their original capital contributions plus a 10% priority return thereon (to the extent not theretofore paid out of cash flow). Partnership management fees owed to the General Partners amounting to approximately $7,053,000 and $6,884,000 were accrued and unpaid as of June 30, 2005 and March 31, 2005, respectively. Without the General Partners' continued accrual without payment, 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. The Partnership is dependent upon the support of the General Partners and certain of their affiliates in order to meet its obligations at the Partnership level. The General Partners and these affiliates have agreed to continue such support for the foreseeable future. (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 General Partners performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships' performance. (c) Freedom SLP L.P., a special limited partner of the subsidiary partnerships, is entitled to receive an annual local administrative fee of up to $2,500 per year from each subsidiary partnership. (d) Property management fees incurred by subsidiary partnerships amounted to $274,766 and $266,383 for the three months ended June 30, 2005 and 2004, respectively. Of these fees, $223,870 and $223,649, which includes $4,583 and $4,817, respectively, relating to discontinued operations, were incurred to affiliates of the subsidiary partnerships' general partners for the three months ended June 30, 2005 and 2004, respectively. Note 3 - Sale of Properties The Partnership is currently in the process of disposing of its investments. As of June 30, 2005, the Partnership has disposed of one of its 42 original investments. On June 20, 2005, the Partnership's Limited Partnership Interest in Parkside Townhomes ("Parkside") was sold to the Local General Partner for a purchase price of $650,000 resulting in a Local General Partner contribution of approximately $1,000. This amount consisted of $200,000 paid in cash at closing and $450,000 pursuant to a promissory note payable to the Partnership. During the quarter ended June 30, 2005, in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144 "Accounting for the Impairment of Disposal of Long-Lived Asset", the Partnership deemed the building impaired and wrote it down to its fair value which resulted in a loss on impairment of $555,000. The sale resulted in the liquidation of Parkside. As of the sale date, Parkside had property and equipment, recorded at a fair value, of approximately $4,162,000 and accumulated depreciation of approximately $2,349,000. Note 4 - Discontinued Operations During the first quarter of fiscal year ended March 31, 2006, the Partnership approved a plan to dispose of Parkside and classified it as an asset held for sale. The disposal meets the criteria established for recognition as a discontinued operation under SFAS 144. SFAS 144 specifically requires that such amounts must differentiate a component of a business comprised of operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes, from the rest of the entity. Parkside is reflected as discontinued operations in our condensed consolidated statements of operations. 7 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2005 (Unaudited) Condensed Consolidated Balance Sheets:

In accordance with SFAS 144, during the quarter ended June 30, 2005, Parkside was classified as an asset held for sale and was classified as a discontinued operation. The following table summarizes the results of operations at Parkside for the three months ended June 30, 2005 and 2004. Condensed Consolidated Statements of Discontinued Operations:

Note 5 - Recent Accounting Pronouncements In June 2005, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections ("FAS 154"). FAS 154 replaces APB Opinion No. 20, Accounting Changes and FAS No. 3, Reporting Accounting Changes in Interim Financial Statements. FAS 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. FAS 154 also requires that a change in method of depreciating or amortizing a long-lived nonfinancial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed a restatement. FAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning 8 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2005 (Unaudited) after December 15, 2005. The Partnership does not expect the adoption of FAS 154 to have a material impact on the Partnership's consolidated results of operations. In June 2005, the FASB issued Emerging Issues Task Force ("EITF") No. 04-5, Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights. EITF No. 04-5 replaces counterpart requirements in SOP 78-9, which provides guidance on accounting for investments in real-estate ventures and limited partnerships. Under EITF No. 04-5, the general partner's control would be overcome if the limited partners have either "kick-out rights"- the right to dissolve or liquidate the partnership or otherwise remove the general partner "without cause" or participating rights - the right to effectively participate in significant decisions made in the ordinary course of the Partnership's business. The kick-out rights and the participating rights must be substantive in order to overcome the general partner's control. EITF 04-5 is effective after June 29, 2005. The Partnership does not expect the adoption of EITF 04-5 to have a material effect on the consolidated results of operations. Note 6 - Commitments and Contingencies Washington Brooklyn ------------------- In or about September 2003, two putative mortgagees commenced a mortgage foreclosure action in the Supreme Court of the State of New York, Kings County (the "Court"), entitled 150 Beach 120th Street Inc. v. Washington Brooklyn Limited Partnership, Index No. 35255/2003, seeking to foreclose on an alleged $100,000 loan and mortgage against the real property (the "Apartment Complex") owned by Washington Brooklyn Limited Partnership ("Washington"). Apparently, the former general partner of Washington, BUFNY Houses of Brooklyn, Inc. ("BUFNY"), allegedly granted two mortgages in the amounts of $225,000 and $100,000 secured by the Apartment Complex. Each of the foregoing mortgages was granted without the knowledge of Freedom SLP, L.P. (the "Special Limited Partner") or the Partnership (collectively the "Freedom LPs") or the consent of the Special Limited Partner, as required by Washington's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"). The Freedom LPs believe that BUFNY did not use the alleged loan proceeds for the benefit of Washington or the Apartment Complex. For these and other reasons, the Freedom LPs contend that the alleged mortgages are invalid. In addition, BUFNY allegedly failed to comply with the terms of either mortgage, which resulted in the holders of the alleged $100,000 mortgage commencing the foreclosure proceedings. BUFNY did not appear in or otherwise respond to the foreclosure proceedings. The holders of the alleged $225,000 mortgage have not yet, to the knowledge of the Freedom LPs, commenced any foreclosure proceedings. Shortly after the Freedom LPs became aware of these foreclosure proceedings, their counsel contacted counsel for the plaintiffs and mortgagees in an effort to learn more about the alleged mortgages and to resolve the disputes relating to the mortgages. When those efforts failed, the Freedom LPs filed a motion to intervene in the foreclosure action and for leave to file a late answer on behalf of themselves and Washington. The Freedom LPs contend that the mortgages are invalid and that Washington is not liable for them or the underlying indebtedness. In an order dated September 7, 2004, the Court granted the Freedom LPs' motion to intervene and to file a late answer on behalf of the Partnership. On or about September 21, 2004, the Freedom LPs, on behalf of themselves and the Partnership, served an answer, counterclaims and crossclaims in defending against the action. The answer denied the material allegations of the complaint and asserted certain affirmative defenses, counterclaims and crossclaims. Among other things, the Freedom LPs, on behalf of themselves and the Partnership, added The Levites Organization, one of the two co-holders of the $225,000 mortgage for which the plaintiffs' complaint did not seek foreclosure, as an additional counterclaim defendant, and the Freedom LPs assert that both the $100,000 and $225,000 mortgages are invalid and void ab initio. After obtaining discovery from the putative mortgagees, the Partnership and the Freedom LPs on July 12, 2005 made a motion for summary judgment dismissing the complaint and declaring the mortgages invalid and void ab initio. The motion is currently scheduled to be fully briefed and submitted to the Court by August 17, 2005. The Freedom LPs intend to defend the action and prosecute their counterclaims and crossclaims vigorously. The final outcome of this case, however, cannot be determined at this time. If the Court were to reject the Freedom LPs defenses and counterclaims, then it is possible that the Apartment Complex might be foreclosed upon and the Partnership might lose its title to and interests in the Apartment Complex as well as risk the possible recapture of a portion of the tax credits generated by Washington. However, the outcome of this case cannot be determined at this time. In addition, due to BUFNY's breach of fiduciary duties and breaches of the Partnership Agreement, the Special Limited Partner exercised its rights under the Partnership Agreement to remove BUFNY as Washington's general partner and to substitute itself as the new replacement general partner, effective April 26, 2004. Other ----- The Partnership is subject to risks incident to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally, however no more than 24% of the properties are located in any single state. 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 owners' 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 9 FREEDOM TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 2005 (Unaudited) be market demand for apartments at full market rents when the rental assistance contract expires. 10 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources ------------------------------- The Partnership's capital has been invested in 42 Local Partnerships. As of June 30, 2005, the Limited Partnership Interest in one Local Partnership was sold. For a discussion of this sale of the Local Partnership, see Note 3 to the financial statements. Short-Term ---------- The Partnership's primary sources of funds included: (i) working capital reserves; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales proceeds and distributions. Such funds, although minimal, are available to meet the obligations of the Partnership. During the three months ended June 30, 2005 and 2004, distributions from operations of the Local Partnerships amounted to approximately $22,000 and $26,000, respectively. Additionally, during the three months ended June 30, 2005 and 2004, the Partnership received approximately $200,000 and $0 of proceeds from the sale of an investment. For the three months ended June 30, 2005, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $371,000. This increase is attributable to net cash provided by operating activities ($583,000) and proceeds from sale of investment of discontinued operations ($200,000), acquisition of property and equipment ($30,000), repayments of mortgage notes ($286,000) and a decrease in capitalization of consolidated subsidiaries attributable to minority interest ($96,000). Included in adjustments to reconcile the net loss to net cash provided by operating activities is depreciation and amortization of approximately ($1,212,000) and net loss from discontinued operations of approximately ($552,000). Total expenses for the three months ended June 30, 2005 and 2004, excluding depreciation and amortization, interest and general and administrative-related parties, totaled $2,359,505 and $2,288,594, respectively. As of June 30, 2005 and March 31, 2005, accounts payable and other liabilities totaled $3,441,819 and $2,455,386, which is comprised of the following amounts:

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. Because the provisions of the secondary loans defer the payment of accrued interest of the respective Local Partnerships, 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. As indicated in the above table, accrued interest payable comprised approximately 46% and 60% of the total accounts payable and other liabilities amount at June 30, 2005 and March 31, 2005, respectively. Such amount represents the accrued interest on all mortgage loans, which include primary and secondary loans. Certain secondary loans have provisions such that interest is accrued but not payable until a future date. The Partnership anticipates the payment of accrued interest on the secondary loans (which make up the majority of the accrued interest payable amount and which have been accumulating since the Partnership's investment in the respective Local Partnership) will be made from future refinancings or sales proceeds of the respective Local Partnerships. In addition, each Local Partnership's mortgage notes are collateralized by the land and buildings of the respective Local Partnership, and are without further recourse to the Partnership. Security deposits payable are offset by cash held in security deposits, which are included in "Cash held in escrow" on the financial statements. A working capital reserve of approximately $287,000, exclusive of Local Partnerships' working capital, remained unused at June 30, 2005. Long-Term --------- Partnership management fees and expense reimbursements owed to the General Partners amounting to approximately $7,053,000 and $6,884,000 were accrued and unpaid as of June 30, 2005 and March 31, 2005, respectively. Without the General Partners' continued accrual without payment of the partnership management fees, the Partnership will not be in a position to meet its obligations. The General Partners have allowed for the accrual without payment of a portion of the partnership management fees but are under no obligation to continue to do so. The Partnership is dependent upon the support of the General Partners and certain of its affiliates in order to meet its obligations at the Partnership level. The General Partners and these affiliates have agreed to continue such support for the foreseeable future. For a discussion of contingencies affecting certain Local Partnerships, see Note 6 to the condensed consolidated financial statements. Since the maximum loss the Partnership would be liable for 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. However, the Partnership's loss of its investment in a Local Partnership may result in recapture of tax credits if the investment is lost before the expiration of the applicable compliance period. Management is not aware of any trends or events, commitments or uncertainties which have not otherwise been 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. The portfolio is diversified by the 11 location of the properties around the United States so that if one area of the country is experiencing downturns in the economy, the remaining properties in the Partnership's portfolio may be experiencing upswings. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy. The Partnership has fully invested the proceeds of its offering in 42 local partnerships, all of which have their tax credits in place. The tax credits are attached to the property for a period of ten years and are transferable with the property during the remainder of such ten year period. As of December 31, 2002 all the Local Partnerships have completed their tax credit periods and the Partnership has met its primary objective of generating Housing Tax Credits ("Tax Credits") for qualified BACs holders. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the 15 year Compliance Period ("Compliance Period") in order to avoid recapture of the Tax Credits. The Compliance Period ends between December 31, 2004 and December 31, 2007 with respect to the Properties depending upon when the Compliance Period commenced. Discontinued Operations ----------------------- During the first quarter of fiscal year ended March 31, 2006, the Partnership approved a plan to dispose of Parkside and classified it as an asset held for sale. The disposal meets the criteria established for recognition as a discontinued operation under SFAS 144. SFAS 144 specifically requires that such amounts must differentiate a component of a business comprised of operations and cash flows that can be clearly distinguished operationally and for financial reporting purposes, from the rest of the entity. Parkside is reflected as discontinued operations in our condensed consolidated statements of operations. 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 accounting policies included in Note 2 to the consolidated financial statements in the annual report on Form 10-K for the year ended March 31, 2005. 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. In accordance with SFAS 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 financial 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. 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). During the three months ended and through June 30, 2005, the Partnership has recorded $555,000 as a loss on impairment of assets or reduction to 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. As of June 30, 2005 and March 31, 2005, the Partnership has recorded property and equipment net of accumulated depreciation of $1,812,570 and $0, respectively, as held for sale. 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 as rents become due 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, income from forfeited security deposits, late charges, laundry and vending income, and other rental related items. Results of Operations --------------------- Three months ended June 30, 2005 as compared to the same period in 2004 ----------------------------------------------------------------------- The results of operations continued to be in the form of rental income with corresponding expenses divided among operations, depreciation and mortgage interest. 12 Rental income remained fairly consistent with a decrease of less than 1% for the three months ended June 30, 2005 as compared to the corresponding period in 2004 primarily due to slight decreases in occupancy at four Local Partnerships, partially offset by an increase in rental rates at the Local Partnerships. Total expenses, excluding operating and other and taxes, remained fairly consistent with a decrease of less than 1% for the three months ended June 30, 2005 as compared to the corresponding period in 2004. Operating and other increased by approximately $44,000 for the three months ended June 30, 2005 as compared to the corresponding period in 2004, primarily due to an increase in fuel costs at four Local Partnerships in 2005 as compared to the same period in 2004. Taxes increased approximately $28,000 for the three months ended June 30, 2005 as compared to the corresponding period in 2004, primarily due to an increase in state property taxes at one Local Partnership. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Partnership has mortgage notes that are payable in aggregate monthly installments including principal and interest at rates varying from 0% to 13.50% 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. The Partnership currently discloses in Item 8, Note 3 to the consolidated financial statements in the Partnership's Annual Report on Form 10-K for the year ended March 31, 2005, the fair value of the mortgage notes payable. The Partnership does not have any other market sensitive instruments. Item 4. Controls and Procedures (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Principal Executive Officer and Principal Financial Officer of Related Freedom Associates L.P. and Freedom G.P. Inc., 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 quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Partnership's internal control over financial reporting. 13 PART II. OTHER INFORMATION Item 1. Legal Proceedings - See Item I. Financial Statements - Note 6 Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other Information - None Item 6. Exhibits (3A) The Partnership's Amended and Restated Agreement of Limited Partnership, incorporated herein as an exhibit by reference to Exhibit A to the Partnership's Prospectus, dated February 9, 1990, as supplemented by supplements thereto dated December 7, 1990, May 10, 1991, July 10, 1991 and July 23, 1991 (as so supplemented, the "Prospectus"), filed with the Securities and Exchange Commission on July 30, 1992, as part of Post-Effective Amendment No. 6 to the Partnership's registration statement on Form S-11, File No. 33-30859 ("Post-Effective Amendment No. 6") (3B) The Partnership's Certificate of Limited Partnership, as filed with Secretary of State of the State of Delaware on August 28, 1989, incorporated herein as an exhibit by reference to Exhibit (3C) to the Partnership's registration statement on Form S-11, File No. 33-30859, as filed with the Securities and Exchange Commission on September 1, 1989 (the "Initial S-11") (10A) Form of Subscription Agreement, incorporated herein as an exhibit by reference to Exhibit B to the Prospectus as filed as part of Post-Effective Amendment No. 6 (10B) Form of Purchase and Sale Agreement pertaining to the Partnership's acquisition of Local Partnership Interests, incorporated herein as an exhibit by reference to Exhibit (10C) to the Initial S-11 (10C) Form of Amended and Restated Agreement of Limited Partnership of Local Partnerships, incorporated herein as an exhibit by reference to Exhibit (10D) to Pre-Effective Amendment No. 1 to the Partnership's registration statement on Form S-11, File No. 33-30859, as filed with the Securities and Exchange Commission on December 21, 1989 (31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) (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) 14 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. FREEDOM TAX CREDIT PLUS L.P. ---------------------------- (Registrant) By: RELATED FREEDOM ASSOCIATES L.P., a General Partner By: RELATED FREEDOM ASSOCIATES INC., General Partner Date: August 8, 2005 -------------- By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, Director and President (Principal Executive Officer and Principal Financial Officer) Date: August 8, 2005 -------------- By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (Principal Accounting Officer) and By: FREEDOM GP INC., a General Partner Date: August 8, 2005 -------------- By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, Director and President (Principal Executive Officer and Principal Financial Officer) Date: August 8, 2005 -------------- By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (Principal Accounting Officer) Exhibit 31.1 CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) I, Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer of Related Freedom Associates L.P. and Freedom GP Inc. (the "General Partners"), each of which is a general partner of Freedom Tax Credit Plus L.P. (the "Partnership"), hereby certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ending June 30, 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 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 report; 3. Based on my knowledge, the financial statements, and other financial information included in this 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 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 report is 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 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 most recent 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: August 8, 2005 -------------- By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, Principal Executive Officer and Principal 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 Quarterly Report of Freedom Tax Credit Plus L.P. (the "Partnership") on Form 10-Q for the period ended June 30, 2005 as filed with the Securities and Exchange Commission ("SEC") on the date hereof (the "Report"), I, Alan P. Hirmes, Principal Executive Officer and Principal Financial Officer of Related Freedom Associates L.P. and Freedom GP Inc., each of which is the 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, Principal Executive Officer and Principal Financial Officer August 8, 2005

FREEDOM TAX CREDIT PLUS LP 10-Q