10-K 1 f10k_march2006-lib1.txt LIB1 MARCH 2006 10K 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 15, 2006 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-17015 LIBERTY TAX CREDIT PLUS L.P. (Exact name of registrant as specified in its charter) Delaware 13-3446500 ------------------------------------------------ -------------------- (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 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Beneficial Assignment Certificates and Limited Partnership Interests (Title of Class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K 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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 or the Exchange Act. (Check one): Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] The approximate aggregate book value of the voting and non-voting common equity held by non-affiliates of the Registrant as of September 15, 2005, was ($35,415,000), based on Limited Partner equity (deficit) as of such date. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Business. General ------- Liberty Tax Credit Plus L.P. (the "Partnership") is a limited partnership which was formed under the laws of the State of Delaware on June 26, 1987. The general partners of the Partnership are Related Credit Properties L.P., a Delaware limited partnership (the "Related General Partner") and Liberty Associates III L.P., a Delaware limited partnership ("Liberty Associates", and together with the Related General Partner, the "General Partners"). The Related General Partner is also the special limited partner of the Partnership. The general partner of the Related General Partner is Credit Properties GP LLC ("Credit Properties"), a Delaware limited liability company. The general partner of Liberty Associates is the Related General Partner. This acquisition did not affect the Partnership or its day-to-day operations, as the majority of the General Partners' management team remained unchanged. On November 17, 2003, CharterMac acquired CharterMac Capital LLC ("CharterMac Capital") (formerly known as Related Capital Company LLC), which is the parent of RCC Manager LLC, the managing member of Credit Properties. On November 8, 2005, CharterMac announced that Stuart J. Boesky would step down as Chief Executive Officer and trustee of CharterMac. Upon his stepping down, which was effective on November 15, 2005, he also resigned from his position as Executive Vice President of the general partner of the Related General Partner. Mr. Boesky will stay on as a consultant to CharterMac for the next year in order to ensure a smooth transition. On March 14, 2006, CharterMac's Board of Trustees named Marc D. Schnitzer the Chief Executive Officer, effective immediately. Mr. Schnitzer will replace Stephen M. Ross, who has served as interim Chief Executive Officer since Stuart J. Boesky resigned in November of 2005. Mr. Schnitzer also replaced Mr. Boesky as Executive Vice President of the general partner of the Related General Partner. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partners. On November 20, 1987, the Partnership commenced a public offering (the "Offering") of Beneficial Assignment Certificates ("BACs") representing assignments of limited partnership interests in the Partnership ("Limited Partnership Interests"), pursuant to a prospectus dated November 20, 1987, as supplemented by the supplements thereto dated January 14, 1988 and March 14, 1988 (as so supplemented, the "Prospectus"). As of April 4, 1988 (the date on which the Partnership held the final closing of the sale of BACs and on which the Offering was terminated), the Partnership had received $79,937,500 of gross proceeds of the Offering from 5,525 investors. The Partnership was formed to invest, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships," "subsidiaries" or "subsidiary partnerships") which own leveraged-low and moderate-income multifamily residential complexes ("Apartment Complexes") that are eligible for the low-income housing tax credit ("Tax Credit") enacted in the Tax Reform Act of 1986, and to a lesser extent in Local Partnerships owning properties ("Rehabilitation Projects", and together with the Apartment Complexes, the "Properties") that are eligible for the historic rehabilitation tax credit (the "Historic Rehabilitation Tax Credit"). The Partnership's investment in each Local Partnership represents a 20% to 98% interest in each of the Local Partnerships. The Partnership does not anticipate making any additional investments. As of March 15, 2006, the Partnership has disposed of fifteen of its 31 original Properties. Subsequently, on May 1, 2006, the property and the related assets and liabilities of three Local Partnerships were sold, and on June 5, 2006, the property and related assets and liabilities of a fourth Local Partnership were sold. See Item 2, Properties, below. Liberty Associates is the special limited partner in all of the Local Partnerships, as well as a general partner of the Partnership. Liberty Associates has certain rights and obligations in its role as special limited partner, which permit it to exercise control over the management and policies of the Local Partnerships. The investment objectives of the Partnership are to: 1. Entitle qualified BACs holders to substantial Tax Credits (and potentially Historic Rehabilitation Tax Credits) over the period of the Partnership's entitlement to claim Tax Credits (for each Property, ten years from the date of investment or, if later, the date the Property is placed in service referred to herein as the "Tax Credit Period"); 2. Participate in any capital appreciation in the value of the Properties and provide distributions of sale or refinancing proceeds upon the disposition of Properties; 3. Preserve and protect the Partnership's capital; 4. Provide cash distributions, when available, from the operations of Properties; and 5. Allocate passive losses to individual BACs holders to offset passive income that they may realize from rental real estate investments and other passive activities, and allocate passive losses to corporate BACs holders to offset active business income. Each of the Local Partnerships in which the Partnership has acquired an interest has been allocated by respective state credit agencies the authority to recognize Tax Credits during the Tax Credit Period provided that the Local Partnership satisfies the rent restriction, minimum set-aside and other requirements for recognition of the Tax Credits at all times during the 15-year period (the "Compliance Period") commencing at the beginning of the Tax Credit Period. Once a Local Partnership has become eligible to recognize Tax Credits, it may lose such eligibility and suffer an event of "recapture" if its Property fails to remain in compliance with the Tax Credit requirements at any time during the Compliance Period. None of the Local Partnerships in which the Partnership has acquired an interest has suffered an event of recapture. The Tax Credits are attached to a Local Partnership for the Tax Credit Period and are transferable with the property during the entirety of such ten year period. If trends in the real estate market warranted the sale of a property, the remaining Tax Credits would transfer to the new owner, thereby adding value to the property on the market. However, such value declines each year and is not included in the financial statement carrying amount. The Tax Credit Periods expired at various times through December 31, 2003 with respect to the Local Partnerships depending upon when the Tax Credit Periods commenced. 2 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 the discounted cash flow valuation method). Through March 15, 2006, the Partnership has recorded approximately $2,710,000 as an aggregate loss on impairment of assets or reduction to estimated fair value. While the value of the remaining Tax Credits is a factor in calculating fair value, the expiration of the Tax Credit Period, in and of itself, is not the only factor in determining whether there is an impairment and generally does not have any adverse impact on the fair value of the Local Partnerships. The Partnership generated $686 in Tax Credits during the year ended December 31, 2003. As of December 31, 2003 all the Local Partnerships had completed their Tax Credit Periods and the Partnership has met its primary objective of generating Tax Credits for qualified BACs holders. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Periods began to end on January 1, 2004 and will continue through December 31, 2008 with respect to the Properties depending upon when the Tax Credit Periods commenced. The Partnership also continues to meet its objective of allocating passive losses to individual BACs holders to offset passive income that they may realize from rental real estate investment and other passive activities, and allocating passive losses to the corporate BACs holders to offset business income. At this time, there can be no assurance that the Partnership will continue to meet this investment objective. As of March 15, 2006, the Partnership has not met its investment objective of providing cash distributions from the operations of the Properties. The Partnership does not anticipate providing cash distributions to BACs holders other than distributions of sale or refinancing proceeds upon the disposition of Properties. Furthermore, at this time there can be no assurance that the Partnership will achieve this investment objective. During the fiscal year ended March 15, 2006, distributions from sales proceeds were made to the BACs holders of approximately $5,372,000 and to the General Partners of approximately $54,000. The Partnership does not anticipate being able to make distributions sufficient to return to BACs holders their original capital contributions. The Partnership is subject to the 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 25% of the Properties are located in any single state. The Partnership is the beneficiary of certain subsidy agreements pursuant to which the United States Department of Housing and Urban Development ("HUD") subsidizes the amount of rent that the Local Partnerships earn. There are substantial risks associated with owning properties receiving government assistance, such as 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 be market demand for apartments at full market rents when the rental assistance contracts expire. Sales of Underlying Properties/Local Partnership Interests ---------------------------------------------------------- The Partnership is currently in the process of disposing of its investments. As of March 15, 2006, the Partnership had disposed of fifteen of its thirty-one original investments. Subsequently on May 1, 2006, the property and the related assets and liabilities of three Local Partnerships were sold, and on June 5, 2006, the property and related assets and liabilities of a fourth Local Partnership were sold. On September 15, 2005, the Partnership's limited partnership interest in Bayridge Associates, L.P. ("Bayridge") was sold to an affiliate of the general partner of the Local Partnership, (the "Local General Partner") for $1,130,000. The sale resulted in a general partner contribution of approximately $5,849,000. The sale resulted in the liquidation of Bayridge. As of the sale date, Bayridge had property and equipment, at cost, of approximately $13,246,000, accumulated depreciation of approximately $7,101,000 and mortgage debt of approximately $9,598,000. On July 27, 2005, the property and the related assets and liabilities of Penn Alto Associates, L.P. ("Penn Alto") were sold to an unaffiliated third party purchaser for $1,625,000. During the quarter ended September 15, 2005, in accordance with Statement of Financial Accounting Standards No. 144 ("SFAS No. 144") "Accounting for the Impairment of Disposal of Long-Lived Assets", the Partnership deemed the building impaired and wrote it down to its fair value which resulted in a loss on impairment of $850,000. The sale resulted in a loss of approximately $63,000. The sale resulted in the liquidation of Penn Alto. As of the sale date, Penn Alto had property and equipment, at cost, of approximately $11,113,000, accumulated depreciation of approximately $6,149,000 and mortgage debt of approximately $3,383,000. On June 8, 2005, the Partnership sold its limited partnership interest in Fox Glenn Investors, L.P. ("Fox Glenn") to the Local General Partner for a purchase price of $1,400,000. The Partnership received $200,000 and a note receivable for $1,200,000 that was paid on February 9, 2006. The sale resulted in a general partner contribution of approximately $3,126,000. The sale resulted in the liquidation of Fox Glenn. As of the sale date, Fox Glenn had property and equipment, at cost, of approximately $7,693,000, accumulated depreciation of approximately $4,480,000 and mortgage debt of approximately $5,230,000. On June 2, 2005, the Partnership sold its limited partnership interest in Lancaster Towers Associates, LTD ("Lancaster") to an affiliate of the Local General Partner for a purchase price of $449,750. During the quarter ended June 15, 2005, in accordance with SFAS No. 144, the Partnership deemed the building impaired and wrote it down to its fair value which resulted in a loss on impairment of $1,860,000. The sale resulted in a distribution to the Local General Partner of approximately $271,000. As of the sale date, Lancaster had property and equipment, at cost, of approximately $4,594,000, accumulated depreciation of approximately $2,757,000 and mortgage debt of approximately $1,605,000. 3 On March 29, 2005, the property and the related assets and liabilities of Regent Street Associates, L.P. ("Regent Street") were sold to an unaffiliated third party purchaser for the assumption of the outstanding debt, resulting in a gain of $1,230,000. The sale resulted in the liquidation of Regent Street. As of the sale date, Regent Street had property and equipment, at cost, of approximately $7,655,000, accumulated depreciation of approximately $4,543,000 and mortgage debt of approximately $3,629,000. On February 17, 2005, the Partnership's limited partnership interest in Redwood Villa Associates ("Redwood") was sold to the Local General Partner for $60,000. The sale resulted in a general partner contribution of approximately $1,789,000. The sale resulted in the liquidation of Redwood. As of the sale date, Redwood had property and equipment, at cost, of approximately $5,999,000, accumulated depreciation of approximately $3,525,000 and mortgage debt of approximately $3,746,000. On January 5, 2005, the property and the related assets and liabilities of Lund Hill Associates, L.P. ("Lund Hill") were sold to an unaffiliated thirty party purchaser for $6,500,000, resulting in a gain of approximately $1,345,000. The sale resulted in the liquidation of Lund Hill. As of the sale date, Lund Hill had property and equipment, at cost, of approximately $6,046,000, accumulated depreciation of approximately $2,423,000 and mortgage debt of approximately $2,971,000. On September 24, 2004, the property and the related assets and liabilities of Autumn Park Associates, L.P. ("Autumn Park") were sold to an unaffiliated third party for approximately $4,800,000. The proceeds were used to settle the associated mortgage which had an outstanding balance of approximately $3,600,000, and the balance was distributed to the partners. This amount consisted of $900,000 paid in cash at the closing and $150,000 pursuant to one promissory note. The note compounded interest at 10% and was due on October 30, 2005. The $150,000 note was received in March 2006. The sale resulted in a gain of approximately $2,110,000. The sale resulted in the liquidation of Autumn Park. As of the sale date, Autumn Park had property and equipment, at cost, of approximately $6,138,000, accumulated depreciation of approximately $3,472,000, and mortgage debt of approximately $3,754,000. On August 27, 2004, the property and the related assets and liabilities of 2108 Bolton Drive Associated, L.P. ("Bolton") were sold to an unaffiliated third party for $8,891,000, resulting in a gain of approximately $1,622,000 recognized in the year ended March 15, 2005. An additional loss of approximately $59,000 was recognized in the year ended March 15, 2006. The sale resulted in the liquidation of Bolton. As of the sale date, Bolton had property and equipment, at cost, of approximately $13,601,000 accumulated depreciation of approximately $7,554,000 and mortgage debt of approximately $7,266,000. On July 30, 2004, the property and the related assets and liabilities of Tanglewood Apartments, L.P. ("Tanglewood") were sold to an unaffiliated third party for $3,425,000, resulting in a gain of approximately $1,120,000. The sale resulted in the liquidation of Tanglewood. As of the sale date, Tanglewood had property and equipment, at cost, of approximately $5,902,000, accumulated depreciation of approximately $3,140,000 and mortgage debt of approximately $2,852,000. On March 31, 2004, the Partnership's limited partnership interest in Walnut Park Plaza ("Walnut") was sold to the Local General Partner for a purchase price of $1 plus the assumption of all the related debt which totaled approximately $7,700,000 resulting in a general partner contribution of approximately $2,589,000. The sale resulted in the liquidation of Walnut. As of the sale date, Walnut had property and equipment, at cost, of approximately $10,957,000, accumulated depreciation of approximately $4,530,000 and mortgage debt of approximately $7,330,000. On May 19, 2003, the property and the related assets and liabilities of Silver Blue Lake Apartments, LTD. ("Silver Blue") were sold to an unaffiliated third party for a purchase price of $3,500,000 resulting in a gain of approximately $409,000. Accrued interest on a note related to the Local Partnership was forgiven resulting in forgiveness of indebtedness income of approximately $114,000. The sale resulted in the liquidation of Silver Blue. As of the sale date, Silver Blue had property and equipment, at cost, of approximately $5,446,000, accumulated depreciation of approximately $2,645,000 and mortgage debt of approximately $2,500,000. On March 16, 2003, the Partnership recorded the transfer of the deed in lieu of foreclosure to Bryden Road Plaza ("Bryden Road"), one of the properties owned by Shiloh Grove, L.P. (Mt. Vernon) ("Shiloh") to an unaffiliated third party. The outstanding mortgage balance paid by the third party on the day of transfer was $189,871 resulting in a gain of $104,000, which is included in gain on sale of properties. As of the sale date, Bryden Road had property and equipment, at cost, of approximately $447,000, and accumulated depreciation of approximately $207,000. On January 23, 2003, the property and the related assets and liabilities of Ludlam Gardens Apartments, LTD. ("Ludlam") were sold to an unaffiliated third party for a purchase price of $3,900,000 resulting in a gain of approximately $959,000. The sale resulted in the liquidation of Ludlam. As of the sale date, Ludlam had property and equipment, at cost, of approximately $4,791,000, accumulated depreciation of approximately $2,032,000 and mortgage debt of approximately $2,827,000. On January 16, 2003, the property and the related assets and liabilities of Dixie Apartment Associates, LTD. ("Dixie") were sold to an unaffiliated third party for a purchase price of $1,300,000 resulting in a gain of approximately $327,000. The sale resulted in the liquidation of Dixie. As of the sale date, Dixie had property and equipment, at cost, of approximately $1,624,000, accumulated depreciation of approximately $712,000 and mortgage debt of approximately $865,000. Assets Held for Sale -------------------- On March 15, 2006, United-Pennsylvanian, L.P. ("United Penn") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an affiliate of the Local General Partner for a purchase price of $500,000 plus the assumption of the mortgage debt. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing is expected to occur by September 2006. No assurance can be given that the sale will actually occur. United Penn is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, United Penn had property and equipment, at cost, of approximately $5,966,000, accumulated depreciation of approximately $4,291,000 and mortgage debt of approximately $3,120,000. On November 28, 2005, Willoughby/Wycoff Housing Associates, L.P. ("Willoughby") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $4,800,000. The sales documents have been executed and the initial 4 deposit funds are being held in escrow. The closing occurred subsequently on June 5, 2006. No assurance can be given that the sale will actually occur. Willoughby is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Willoughby had property and equipment, at cost, of approximately $6,191,000, accumulated depreciation of approximately $3,801,000 and mortgage debt of approximately $4,016,000. On September 22, 2005, 2051 Grand Concourse Housing Associates, L.P. ("Grand Concourse") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $4,937,500. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing occurred subsequently on May 1, 2006. See Note 16 in Item 8 for subsequent events. Grand Concourse is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Grand Concourse had property and equipment, at cost, of approximately $5,271,000, accumulated depreciation of approximately $3,204,000 and mortgage debt of approximately $3,239,000. On September 22, 2005, Concourse Artist's Housing Associates, L.P. ("Concourse Artists") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $1,797,500. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing occurred subsequently on May 1, 2006. See Note 16 in Item 8 for subsequent events. Concourse Artists is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Concourse Artist's had property and equipment, at cost, of approximately $2,285,000, accumulated depreciation of approximately $1,385,000 and mortgage debt of approximately $1,409,000. On September 22, 2005, Robin Housing Associates, L.P. ("Robin Housing") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $7,265,000. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing occurred subsequently on May 1, 2006. See Note 16 in Item 8 for subsequent events. Robin Housing is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Robin Housing had property and equipment, at cost, of approximately $8,238,000, accumulated depreciation of approximately $5,014,000 and mortgage debt of approximately $4,895,000. Segments -------- The Partnership operates in one segment, which is the investment in multi-family residential properties. Financial information about this segment is set forth in Item 8 hereof. Competition ----------- The real estate business is highly competitive and substantially all of the Properties acquired by the Partnership are subject to active competition from similar properties in their respective vicinities. In addition, various other limited partnerships may, in the future, be formed by the General Partners and/or their affiliates to engage in businesses which may be competitive with the Partnership. Employees --------- The Partnership does not have any direct 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 hereof. 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's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement"). Item 1A. Risk Factors The Partnership is subject to the 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 25% 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 be market demand for apartments at full market rents when the rental assistance contracts expire. Item 1B. Unresolved Staff Comments Not applicable. 5 Item 2. Properties The Partnership originally acquired an interest as a limited partner in 31 Local Partnerships. During the fiscal year ended March 15, 2006, the property and the related assets and liabilities of two Local Partnerships were sold and the limited partnership interest in three Local Partnerships was sold. Through the fiscal year ended March 15, 2006, the properties and the related assets and liabilities of nine Local Partnerships and the limited partnership interests in six Local Partnerships were sold. Subsequently, on May 1, 2006, the property and the related assets and liabilities of three Local Partnerships were sold, and on June 5, 2006, the property and related assets and liabilities of a fourth Local Partnership were sold (See Note 16 in Item 8). Set forth below is a schedule of the Local Partnerships including certain information concerning the Properties. Further information concerning those Local Partnerships and their Properties, including any encumbrances affecting the Properties, may be found in Item 15, Schedule III. Except for the six Local Partnerships listed below, the following is the allocation of ownership percentage for each of the remaining Local Partnerships: Local General Partner 1% Special Limited Partner 1% Limited Partner - Liberty Tax Credit Plus L.P. 98%

*Each is an affiliate of the Partnership with the same management. 6

(a) The properties and the related assets and liabilities were sold during the fiscal year ended March 15, 2003 (see Note 10 in Item 8. Financial Statements and Supplementary Data). (b) The Partnership's limited partnership interest was sold during the fiscal year ended March 15, 2003 (see Note 10 in Item 8. Financial Statements and Supplementary Data). (c) The property and the related assets and liabilities were sold during the fiscal year ended March 15, 2004 (see Note 10 in Item 8. Financial Statements and Supplementary Data). (d) The property and the related assets and liabilities were sold during the fiscal year ended March 15, 2005 (see Note 10 in Item 8. Financial Statements and Supplementary Data). (e) The Partnership's limited partnership interest was sold during the fiscal year ended March 15, 2005 (see Note 10 in Item 8. Financial Statements and Supplementary Data). (f) The property and the related assets and liabilities were sold during the fiscal year ended March 15, 2006 (see Note 10 in Item 8. Financial Statements and Supplementary Data). (g) The Partnership's limited partnership interest was sold during the fiscal year ended March 15, 2006 (see Note 10 in Item 8. Financial Statements and Supplementary Data). (h) The property and the related assets and liabilities were subsequently sold on May 1, 2006 (see Note 16 in Item 8 Financial Statements and Supplementary Data). All development deficit, rent-up and operating deficit guarantees with respect to the Properties have expired. All leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the rentable square footage. Commercial tenants (to which average rental per square foot applies) comprise less than 5% of the rental revenues of the Local Partnership. Maximum rents for the residential units are determined annually by HUD and reflect increases/decreases in consumer price indices in various geographic areas. Market conditions, however, determine the amount of rent actually charged. Management annually reviews the physical state of the Properties and budgets improvements when required, which improvements are generally funded from cash flow from operations or release of replacement reserve escrows to the extent available. 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 of the properties as shown in Schedule III to the financial statements included herein. 8 Item 3. Legal Proceedings None Item 4. Submission of Matters to a Vote of Security Holders None 9 PART II Item 5. Market for the Registrant's Common Equity, Related Security Holder Matters and Issuer Purchases of Equity Securities The Partnership has issued 15,987.5 Limited Partnership Interests, each representing a $5,000 capital contribution to the Partnership, for aggregate gross proceeds of $79,937,500. All of the issued and outstanding Limited Partnership Interests have been issued to Liberty Credit Assignor Inc. (the "Assignor Limited Partner"), which has in turn issued BACs to the purchasers thereof for an aggregate purchase price of $79,937,500. Each BAC represents all of the economic and virtually all of the ownership rights attributable to a Limited Partnership Interest held by the Assignor Limited Partner. BACs may be converted into Limited Partnership Interests at no cost to the holder (other than the payment of transfer costs not to exceed $100), but Limited Partnership Interests so acquired are not thereafter convertible into BACs. Neither the BACs nor the Limited Partnership Interests are traded on any established public trading market. Because of the provisions of the Revenue Act of 1987, unless there are further changes in such law, the Partnership does not intend to include the BACs for quotation on NASDAQ or for listing on any national or regional stock exchange or any other established securities market. The Revenue Act of 1987 contained provisions which have an adverse impact on investors in "publicly traded partnerships." Accordingly, the General Partners have imposed limited restrictions on the transferability of the BACs and the Limited Partnership Interests in secondary market transactions. The restrictions should prevent a public trading market from developing and may adversely affect the ability of an investor to liquidate his or her investment quickly. It is expected that such procedures will remain in effect until such time, if ever, as further revision of the Revenue Act of 1987 may permit the Partnership to lessen the scope of the restrictions. The Partnership has 5,501 registered holders of an aggregate of 15,987.5 BACs, as of May 10, 2006. All of the Partnership's general partnership interests, representing an aggregate capital contribution of $2,000, are held by the two General Partners. Certain Local Partnerships are subject to HUD restrictions which limit annual cash distributions to partners and restrict the Local Partnerships from selling or otherwise liquidating their assets without HUD's approval during the period that the agreement with HUD is in existence. There are no material legal restrictions in the Partnership Agreement on the ability to make distributions. During the fiscal year ended March 15, 2006, distributions from sales proceeds were made to the BACs holders of approximately $5,372,000 and to the General Partners of approximately $54,000. The Partnership does not anticipate providing cash distributions to the BACs holders other than distributions of sale or refinancing proceeds upon the disposition of Properties. Tender Offer Response --------------------- The Partnership responded to an unsolicited tender offer and expressed no opinion with respect to whether or not BACs holders should tender their Units as more fully discussed in the Partnership's press release dated October 6, 2005 which is included as Exhibit 99.1 to this Report on Form 10-K. Transfer Procedures ------------------- As was previously disclosed, the Partnership has been the subject of at least two ongoing tender offers by persons not affiliated with it or its General Partners, each such tender offer seeking to purchase up to 4.9% of the outstanding units of the Partnership. See "Tender Offer Response" above. Those tender offers, as well as other transfer requests made independently of the tender offers, implicate the Partnership's policies and procedures concerning transfers generally and tender offers in particular, which were adopted by the Partnership pursuant to the terms of its Partnership Agreement, to ensure compliance with applicable law, avoid adverse tax consequences for the Partnership and its investors, and preserve the Partnership's advantageous tax status. In prior years, the Partnership relied on the 5% safe harbor established by Internal Revenue Service ("IRS") regulations to avoid being characterized as a "publicly-traded partnership" that is taxed as a corporation. The 5% safe harbor, however, expired and is no longer available as of December 31, 2005. Accordingly, the Partnership now relies on a 2% safe harbor established by another IRS regulation to avoid being characterized as a "publicly-traded partnership" that is taxed as a corporation. A brief summary of certain of the Partnership's key policies, practices and requirements with respect to transfers and tender offers is as follows: o No transfer (whether for substitution, assignment or otherwise) is effective or binding on the Partnership unless and until it is approved by the General Partners. o No transfer will be approved unless the transferor and transferee submit complete and properly executed forms of the Partnership's own transfer documentation. The Partnership does not accept forms of transfer documentation other than its own and does not accept signatures made by power of attorney in lieu of original signatures by each of the transferors and transferees. o The Partnership will not approve transfers that in the cumulative aggregate for any tax year exceed the IRS 2% safe harbor, unless a financially responsible person provides the Partnership and its partners with (i) an indemnity (in form and substance in all ways acceptable to the General Partners) for all liability (including, without limitation, any adverse tax consequences) arising from or relating to exceeding the 2% safe harbor and (ii) a legal opinion (in form and substance in all ways acceptable to the General Partners) that there will be no adverse tax consequences to the Partnership and its partners from exceeding the 2% safe harbor. o It order to avoid the undesirable situation of one or more tender offers consuming the entire safe harbor limitation early in the tax year and leaving the Partnership's remaining investors with no liquidity opportunity for the rest of that tax year, the Partnership restricts the cumulative aggregate total of transfers made pursuant to all tender offers to 1.5% of its outstanding units in each tax year, unless a financially responsible person conducting such tender offer provides the Partnership with an 10 acceptable indemnity and legal opinion of the type described above. At the end of each tax year, the General Partners, in its their discretion, may allow the cumulative total number of transfers (including those by tender offer) to reach the 2% safe harbor limit. o The Partnership requires that all tender offers for its units be conducted in accordance with all applicable law including, without limitation, the federal securities laws. The foregoing is solely a summary of the Partnership's policies, requirements and practices with respect to transfers and tender offers. More complete information, including a copy of the Partnership's transfer documentation package, may be obtained from the Partnership. 11 Item 6. Selected Financial Data The information set forth below presents selected financial data of the Partnership. Additional financial information is set forth in the audited financial statements in Item 8 hereof.

* Reclassified for comparative purposes. During the year ended March 15, 2002, total assets decreased primarily due to depreciation, partially offset by net additions to property and equipment. During the years ended March 15, 2003 through 2006, total assets and liabilities decreased primarily due to the sale of Local Partnerships. 12 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources ------------------------------- The Partnership's capital was originally invested in 31 Local Partnerships. As of March 15, 2006, the properties and the related assets and liabilities of nine Local Partnerships and the limited partnership interest in six Local Partnerships were sold (the "Sold Assets"). Subsequently, on May 1, 2006, the property and the related assets and liabilities of three Local Partnerships were sold, and on June 5, 2006, the property and related assets and liabilities of a fourth Local Partnership were sold. For a discussion of these sales, see Note 10 in Item 8. Short-Term ---------- The Partnership's primary source of funds is cash distributions from operations of the Local Partnerships in which the Partnership has invested. Such funds are available to meet the obligations of the Partnership. During the years ended March 15, 2006, 2005 and 2004, such distributions amounted to approximately $3,131,000, $4,698,000 and $124,000, respectively which included distributions from sales amounting to approximately $3,030,000, $4,585,000 and $20,000, respectively. In addition, certain fees and expense reimbursements owed to the General Partners amounting to approximately $7,808,000, $7,846,000 and $8,002,000 were accrued and unpaid as of March 15, 2006, 2005 and 2004, respectively. In particular, partnership management fees owed to the General Partners amounting to approximately $7,697,000 and $7,811,000 were accrued and unpaid as of March 15, 2006 and 2005, respectively. Furthermore, expense reimbursements and asset monitoring fees owed to the General Partners amounting to approximately $111,000 and $35,000 were accrued and unpaid as of March 15, 2006 and 2005, respectively. Without the General Partners' continued accrual without payment of the partnership management fees, the Partnership will not be in the position to meet its obligations. The General Partners have allowed for the accrual without payment of the partnership management fees but are under no obligation to continue to do so. During the year ended March 15, 2006, cash and cash equivalents of the Partnership decreased approximately $773,000. This decrease is attributable to cash used in operating activities ($396,000), an increase in property and equipment ($1,591,000), costs paid relating to sale of properties ($366,000), principal repayments of mortgage notes ($10,128,000), decrease in due to selling partners ($1,412,000) and distributions ($5,426,000), which exceeded a net increase in due to local general partners and affiliates ($3,550,000), a decrease in cash held in escrow ($44,000), proceeds from sale of investments ($12,628,000) and a decrease in capitalization of consolidated subsidiaries attributable to minority interest ($2,325,000). Included in the adjustments to reconcile net income to net cash used in operating activities is depreciation and amortization ($5,649,000), gain on sale of properties ($2,319,000) and loss on impairment of fixed assets ($2,710,000). Total expenses for the years ended March 15, 2006, 2005 and 2004, excluding depreciation and amortization, interest and general and administrative-related parties, totaled $13,363,085, $12,128,515 and $12,111,688, respectively. Accounts payable as of March 15, 2006 and 2005 were $2,115,469 and $2,436,882, 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. 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. Included in accounts payable as of March 15, 2006 and 2005 are $0 and $7,730 of deferred revenue from sales, respectively. Accrued interest payable as of March 15, 2006 and 2005 was $5,963,620 and $7,885,329, respectively. Accrued interest payable 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. A working capital reserve of approximately $2,286,000 remained unused at March 15, 2006. During the year ended March 15, 2006, distributions from sales proceeds were made to the Limited Partners of approximately $5,372,000 and to the General Partners of approximately $54,000. The Partnership is not expected to have access to additional sources of financing. Long-Term --------- On October 20, 1999, President Clinton signed FY 2000 VA, the HUD Independent Agencies Appropriations Act. The Act contained 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 Act and superceding earlier HUD Notices 98-34, 99-08, 99-15, 99-21 and 99-32. Notice 99-36 clarified 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 where contract rents are currently below market to increase the rents to market levels. For a discussion of contingencies affecting certain Local Partnerships, see Results of Operations of Certain Local Partnerships below. 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 expiration of the Compliance Period. Except as described above, 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 13 only impact would be from laws that have not yet been adopted. The portfolio is diversified by the 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 portfolio may be experiencing upswings. However, the geographic diversification of the portfolio may not protect against a general downturn in the national economy. 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 in Item 8. Discontinued Operations ----------------------- For a discussion of discontinued operations, see Note 13 in Item 8. Tabular Disclosure of Contractual Obligations --------------------------------------------- The following table summarizes the Partnership's commitments from operations as of March 15, 2006, to make future payments under its debt agreements and other contractual obligations.

(a) The mortgage notes are payable in aggregate monthly installments of approximately $298,000 including principal and interest at rates varying from 1% to 12% per annum, through 2036. Each subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership and the assignment of certain subsidiary partnerships' rents and leases is without further recourse. (b) See Note 8(g) in Item 8. The following table summarizes the Partnership's commitments from discontinued operations as of March 15, 2006, to make future payments under its debt agreements and other contractual obligations.

(a) The mortgage notes are payable in aggregate monthly installments of approximately $119,000 including principal and interest at rates varying from 1% to 10.25% per annum, through 2018. Each subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership and the assignment of certain subsidiary partnership's rents and leases is without further recourse. 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 in Item 8. 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 Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets", 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 in Item 8. 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. 14 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). Through March 15, 2006, the Partnership recorded $2,710,000 as a loss on impairment of assets or reduction to estimated fair value for two Local Partnerships. 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, income from forfeited security deposits, late charges, laundry and vending income and other rental related items. Other revenues from operations include the following amounts at both the Partnership and Local Partnership level:

Other revenues from discontinued operations include the following amounts at both the Partnership and Local Partnership level:

* Reclassified for comparative purposes. The subsidy income is related to Charles Drew Court Associates, L.P. ("Charles Drew"). The Atlantic County Improvement Authority ("ACIA") entered into a pledge/security agreement with Bank of America (formerly Fleet Bank, N.A.), Charles Drew's mortgagor, under which ACIA pledged certificates of deposit originally in the amount of $4,772,500. The funds, including interest earned thereon, provided a subsidy to Charles Drew equal to the debt service on the mortgage. The funds were used to payoff the mortgage in September 2004.

Income Taxes ------------ The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31. New 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 Accounting Principles Board ("APB") Opinion No. 20, "Accounting Changes" and Statement of Financial Accounting Standards No. 3, "Reporting Accounting Changes in Interim Financial Statements". APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in the current period's net income the cumulative effect of changing to the new accounting principle. In contrast, FAS 154 requires that a voluntary change in accounting principle be applied retrospectively to prior periods' financial statements, unless this would be impracticable. In addition, FAS 154 makes a distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an error. FAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Partnership does not expect the adoption of FAS 154 to have a material impact on its consolidated results of operations. In June 2005, the FASB issued Emerging Issues Task Force 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 15 Rights" ("EITF No. 04-5"). EITF No. 04-5 replaces counterpart requirements in the Statement of Position 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 (i) "kick-out rights"- the right to dissolve or liquidate the partnership or otherwise remove the general partner "without cause" or (ii) "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 No. 04-5 is now effective. Since the Partnership's financial statements are presented on a consolidated basis, the adoption of EITF No. 04-5 has not had a material effect on the Partnership's consolidated results of operations. Results of Operations --------------------- The following is a summary of the results of operations of the Partnership for the years ended March 15, 2006, 2005 and 2004 (the 2005, 2004 and 2003 Fiscal Years, respectively). The Partnership's revenues continue to consist primarily of the results of the Partnership's investment in consolidated Local Partnerships. Ten of the remaining Local Partnerships receive HUD Section 8 subsidies which serve to stabilize the revenues of these Local Partnerships. The majority of the Local Partnership income continues to be in the form of rental income with the corresponding expenses being divided among operations, depreciation, and mortgage interest. The net income for the 2005 and 2004 Fiscal Years totaled $3,322,567 and $4,752,436, respectively, and the net loss for the 2003 Fiscal Year totaled $7,123,790. The 2003 Fiscal Year is net of an extraordinary gain of $113,565 which is included in discontinued operations for the year ended March 15, 2004. The Partnership generated $686 in Tax Credits during the 2003 Fiscal Year. As of December 31, 2003 all the Local Partnerships have completed their Tax Credit Periods and the Partnership has met its primary objective of generating Tax Credits for qualified BACs holders. However, each Local Partnership must continue to comply with the Tax Credit requirements until the end of the Compliance Period in order to avoid recapture of the Tax Credits. The Compliance Period began to end on January 1, 2004 and will continue through December 31, 2008 with respect to the Properties depending upon when the Tax Credit Period commenced. 2005 vs. 2004 ------------- Rental income increased approximately 2% for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to rental rate increases at the Local Partnerships. Subsidy income decreased approximately $4,008,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to the subsidy being fully paid in 2004 at one Local Partnership. Other income increased approximately $227,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to an increase in interest income at the Partnership level, an increase in grant revenue at one Local Partnership and a reversal of an overaccrual from 2004 at a second Local Partnership. Total expenses, excluding repairs and maintenance and operating, remained fairly consistent with a decrease of approximately 1% for the 2005 Fiscal Year as compared to the 2004 Fiscal Year. Repairs and maintenance increased approximately $923,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to boiler repairs, painting, plastering apartments and door repairs at one Local Partnership, an increase in appliance and carpentry repairs at a second Local Partnership and an increase in supplies and payroll at three additional Local Partnerships. Operating increased approximately $384,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to an increase in water, sewer and gas at one Local Partnership, an increase in electricity at a second Local Partnership and an increase in gas costs at a third and fourth Local Partnerships. 2004 vs. 2003 ------------- Rental income decreased approximately 1% for the 2004 Fiscal Year as compared to the 2003 Fiscal Year, primarily due to a grant received in 2003 at one Local Partnership which also converted to a Mark to Market program during 2003 and a decrease in tenants' assistance payments in 2004 at a second Local Partnership. Subsidy income increased approximately $3,506,000 for the 2004 Fiscal Year as compared to the 2003 Fiscal Year, primarily due to an increase in subsidy income being received at one Local Partnership in 2004. Total expenses, excluding taxes and interest, remained fairly consistent with a decrease of approximately 2% for the 2004 Fiscal Year as compared to the 2003 Fiscal Year. Taxes increased approximately $97,000 for the 2004 Fiscal Year as compared to the 2003 Fiscal Year, primarily due to a reassessment in real estate taxes during the current year at one Local Partnership. Interest decreased approximately $585,000 for the 2004 Fiscal Year as compared to the 2003 Fiscal Year, primarily due to a decrease in interest on mortgage payable during 2004 due to refinancings at three Local Partnerships in 2003. Results of Operations of Certain Local Partnerships --------------------------------------------------- Discussed below are the results of operations of certain Local Partnerships who had going concern issues for the year ended March 15, 2006. 16 Magnolia Arms Associates, LTD ("Magnolia Arms") ----------------------------------------------- Magnolia Arms made the first seven monthly payments on its mortgage in 2005, but defaulted on its last five payments due to operating deficits. The mortgagee can take possession of the Property, collect the rents directly from the tenants and foreclose on the Property. There can be no assurance that Magnolia Arms will be able to cure the default. The mortgage payable is a current liability as of December 31, 2005. Because of these circumstances, there is substantial doubt regarding whether the Local Partnership can continue as a going concern. The Partnership's investment in Magnolia Arms was written down to zero by prior years' losses and the minority interest was approximately $47,000 and $51,000 at March 15, 2006 and 2005, respectively. The net loss after minority interest for Magnolia Arms amounted to approximately $200,000, $190,000 and $113,000 for the years ended March 15, 2006, 2005 and 2004, respectively. Quality Hill Historic District-Phase II-A, L.P. ("Quality Hill") ---------------------------------------------------------------- The financial statements of Quality Hill have been prepared assuming it will continue as a going concern. Quality Hill has had negative cash flows from operating activities for the past several years. Quality Hill is trying to obtain extensions for its mortgage notes payable, and is not expected to have operating cash flow to meet the financial obligations of its mortgage notes coming due. This situation raises substantial doubt about its ability to continue as a going concern. During 2005, Quality Hill entered into a Modification Agreement with the Missouri Housing Development Commission ("MHDC") which extended the maturity date of the permanent nonrecourse financing for the Quality Hill-Cordova Hotel Apartments, which is one of the two projects included in Quality Hill, to December 2006. The balance of this note as of December 31, 2005 was $424,800. During 2005, Quality Hill entered into negotiations with both the Hall Family Foundation of Kansas ("Foundation") and Kansas City Downtown Minority Development Corporation ("DMDC") to extend the maturity dates of each note payable to December 2006. The combined balance of the Foundation notes is $2,126,426 and was due in full in December 2005 and the combined balance of the DMDC notes was $735,000 ($225,000 was due in December 2005 and $510,000 was due in May 2005). As of December 31, 2005, Quality Hill has not been granted such an extension by either lender. Subsequent to December 31, 2005, Quality Hill Received a one year extension on the Foundation note. The total of these three notes, $3,286,266, is included as a current liability in mortgage notes payable. These items raise substantial doubt about Quality Hill's ability to continue as a going concern. The Partnership's investment in Quality Hill has been written down to zero by prior years' losses and the minority interest balance was $0 at both March 15, 2006 and 2005. The net loss after minority interest for Quality Hill amounted to approximately $287,000, $291,000 and $261,000 for the years ended March 15, 2006, 2005 and 2004, respectively. Willoughby ---------- The financial statements of Willoughby have been prepared assuming that it will continue as a going concern. Willoughby has had operating losses and equity deficiencies that raise substantial doubt about its ability to continue as a going concern. The Partnership's investment in Willoughby has been written down to zero by prior years' losses and the minority interest balance was approximately $257,000 and $262,000 at March 15, 2006 and 2005, respectively. The net loss after minority interest for Willoughby amounted to approximately $219,000, $164,000 and $100,000 for the years ended March 15, 2006, 2005 and 2004, respectively. Redwood ------- Redwood has sustained operating losses since its inception. For the period from January 1, 2005 through February 17, 2005, Redwood experienced a loss of $10,484, including $28,720 of depreciation and $569 of amortization, and at February 17, 2005 had a partners' deficit of $1,729,732. In addition, Redwood has been able to defer ground lease payments that are due to a related party in the cumulative amount of $391,147 as of February 17, 2005 and $388,647 as of December 31, 2004. These conditions raise substantial doubt about Redwood's ability to continue as a going concern. Redwood's continuation as a going concern is dependent upon its ability to achieve continued profitable operations or obtain future capital contributions from the partners. The Local General Partner, whenever possible, plans to reduce operating costs to achieve profitable operations. The financial statements for the period from January 1, 2005 through February 17, 2005 and the 2004 and 2003 Fiscal Years for Redwood have been prepared assuming that Redwood will continue as a going concern. The Partnership's investment in Redwood at March 15, 2006 and 2005 was reduced to zero by prior years' losses and the minority interest balance was approximately $0 and $393,000, respectively. Redwood's net loss after minority interest amounted to approximately $10,000, $195,000 and $200,000 for the period from January 1, 2005 through February 17, 2005 and the 2004 and 2003 Fiscal Years, respectively. On February 17, 2005, the Partnership's Limited Partnership interest in Redwood was sold (See Note 10 of Item 8 for a discussion of the sale). Other ----- 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. For a discussion of mortgage notes payable, see Note 7 in Item 8. 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 1% to 12% 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 Note 3 of Item 8, the fair value of the mortgage notes payable. The Partnership does not have any other market risk sensitive instruments. 17 Item 8. Financial Statements and Supplementary Data Sequential Page ---------- (a) 1. Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 19 Consolidated Balance Sheets at March 15, 2006 and 2005 67 Consolidated Statements of Operations for the Years Ended March 15, 2006, 2005 and 2004 68 Consolidated Statements of Changes in Partners' Deficit for the Years Ended March 15, 2006, 2005 and 2004 69 Consolidated Statements of Cash Flows for the Years Ended March 15, 2006, 2005 and 2004 70 Notes to Consolidated Financial Statements 72 18 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners of Liberty Tax Credit Plus L.P. and Subsidiaries (A Delaware Limited Partnership) We have audited the consolidated balance sheets of Liberty Tax Credit Plus L.P. (A Delaware Limited Partnership) and Subsidiaries as of March 15, 2006 and 2005, and the related consolidated statements of operations, changes in partners' deficit, and cash flows for the years ended March 15, 2006, 2005 and 2004 (the 2005, 2004 and 2003 Fiscal Years, respectively). 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 did not audit the financial statements for 11 (Fiscal Year 2005), 13 (Fiscal Year 2004) and 30 (Fiscal Year 2003) subsidiary partnerships whose losses aggregated $997,674 (2005 Fiscal Year), $1,537,904 (2004 Fiscal Year) and $700,428 (2003 Fiscal Year) and whose assets constituted 52% and 47% of the Partnership's assets at March 15, 2006 and 2005, presented in the accompanying consolidated financial statements. The financial statements for 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. In our opinion, based upon our audits, and the reports of the other auditors referred to above, the accompanying consolidated financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of Liberty Tax Credit Plus L.P. and Subsidiaries at March 15, 2006 and 2005 and the results of their operations and their cash flows for the years ended March 15, 2006, 2005 and 2004, in conformity with U.S. generally accepted accounting principles. As discussed in Note 12(a), the consolidated financial include the financial statements of four subsidiary partnerships with significant contingencies and uncertainties. The financial statements of these subsidiary partnerships were prepared assuming that they will continue as going concerns. These subsidiary partnerships' net losses aggregated $725,929 (Fiscal 2005), $698,154 (Fiscal 2004) and $678,419 (Fiscal 2003), and their assets aggregated $10,591,434 and $14,038,472 at March 15, 2006 and 2005, respectively. Management's plans in regard to these matters are also described in Note 12(a). The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. /s/ TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI LLP New York, New York June 12, 2006 19 [ASHER & COMPANY LETTERHEAD] Independent Auditor's Report The Partners B & C Housing Associates T/A St. Thomas Square/Worthington Apartments Marlton, New Jersey We have audited the accompanying balance sheets of B & C Housing Associates T/A St. Thomas Square/Worthington Apartments (A Limited Partnership), HUD Project No. 118-94008, as of December 31, 2003 and 2002, and the related statements of loss, Partners' capital and cash flows for the year ended December 31, 2003. 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 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 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 B & C Housing Associates T/A St. Thomas Square/Worthington Apartments (A Limited Partnership), HUD Project No. 118-94008, as of December 31, 2003 and 2002, and the results of its operations, changes in its Partners' capital and its cash flows for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. 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 reports dated January 15, 2004 on our consideration of B & C Housing Associates' T/A St. Thomas Square/Worthington Apartments (A Limited Partnership), HUD Project No. 118-94008, 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 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/ Asher & Company, Ltd. Philadelphia, Pennsylvania January 15, 2004 20 [FISHBEIN & COMPANY, P.C. Letterhead] INDEPENDENT AUDITOR'S REPORT Partners State Street 86 Associates Limited Partnership We have audited the accompanying balance sheets of STATE STREET 86 ASSOCIATES LIMITED PARTNERSHIP (A Limited Partnership) as of December 31, 2005 and 2004, and the related statements of operations, 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 and Standards of the Public Companies Auditing Oversight Board. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 State Street 86 Associates Limited Partnership as of December 31, 2005 and 2004, 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/ Fishbein & Company, P.C. Horsham, Pennsylvania January 18, 2006 21 [FISHBEIN & COMPANY, P.C. Letterhead] INDEPENDENT AUDITOR'S REPORT Partners State Street 86 Associates Limited Partnership We have audited the accompanying balance sheets of STATE STREET 86 ASSOCIATES LIMITED PARTNERSHIP (A Limited Partnership) as of December 31, 2003 and 2002, and the related statements of operations, 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 State Street 86 Associates Limited Partnership as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Fishbein & Company, P.C. Elkins Park, Pennsylvania January 21, 2004 22 [Fishbein & Company, P.C. Letterhead] INDEPENDENT AUDITOR'S REPORT Partners Foxglenn Investors We have audited the accompanying balance sheet of FOXGLENN INVESTORS (A Limited Partnership) as of June 8, 2005, and the related statements of operations, partners' equity deficiency and cash flows for the period from January 1, 2005 to June 8, 2005. 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 standards of the PUBLIC COMPANIES AUDITING OVERSIGHT BOARD. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, and 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 Foxglenn Investors as of June 8, 2005, and the results of its operations and its cash flows for the period from January 1, 2005 to June 8, 2005 in conformity with accounting principles generally accepted in the United States of America. /s/ Fishbein & Company, P.C. Horsham, Pennsylvania March 17, 2006 23 [Fishbein & Company, P.C. Letterhead] INDEPENDENT AUDITOR'S REPORT Partners Foxglenn Investors We have audited the accompanying balance sheet of FOXGLENN INVESTORS (A Limited Partnership) as of December 31, 2004, and the related statements of operations, partners' equity deficiency 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 auditing standards generally accepted in the United States of America and standards of the PUBLIC COMPANIES AUDITING OVERSIGHT BOARD. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, and 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 Foxglenn Investors as of December 31, 2004, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Fishbein & Company, P.C. Horsham, Pennsylvania January 15, 2005 24 [Fishbein & Company, P.C. Letterhead] INDEPENDENT AUDITOR'S REPORT Partners Foxglenn Investors We have audited the accompanying balance sheets of FOXGLENN INVESTORS (A Limited Partnership) as of December 31, 2003 and 2002, and the related statements of operations, partners' equity deficiency 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 Foxglenn Investors as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Fishbein & Company, P.C. Elkins Park, Pennsylvania January 15, 2004 25 [Bordman & Winnick CPAs Letterhead] Independent Auditor's Report To the Partners of Shiloh Grove Limited Partnership We have audited the accompanying balance sheet of Shiloh Grove Limited Partnership, FHA Project #043-35445 as of December 31, 2005, and the related Statements of income, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of Shiloh Grove Limited 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor we were engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Shiloh Grove Limited Partnership as of December 31, 2005, and the results of its operations, changes in partners' equity and its 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 January 27, 2006 on our consideration of Shiloh Grove Limited Partnership'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 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 supplemental information included in the report (shown on pages 13 to 18) and the Financial Data Template (shown on page 25 to 39) are presented for purposes of additional analysis and are not a required part of the basic financial statements of Shiloh Grove Limited Partnership. 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. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 27, 2006 26 [Bordman & Winnick CPAs Letterhead] Independent Auditor's Report To the Partners of Shiloh Grove Limited Partnership We have audited the accompanying balance sheet of Shiloh Grove Limited Partnership, FHA Project #043-35445 as of December 31, 2004, and the related Statements of income, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of Shiloh Grove Limited 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor we were engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Shiloh Grove Limited Partnership as of December 31, 2004, and the results of its operations, changes in partners' equity, and its 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 February 15, 2005 on our consideration of Shiloh Grove Limited Partnership's internal control and 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. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information included in the report (shown on pages 12 to 17) and the Financial Data Template (shown on page 25 to 38) are presented for purposes of additional analysis and is not a required part of the basic financial statements of Shiloh Grove Limited Partnership. 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. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI February 15, 2005 27 [Bordman & Winnick CPAs Letterhead] Independent Auditor's Report To the Partners Shiloh Grove Limited Partnership Beachwood, Ohio We have audited the accompanying balance sheet of SHILOH GROVE LIMITED PARTNERSHIP, FHA PROJECT #043-35445 as of December 31, 2003, and the related Statements of income, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of SHILOH GROVE LIMITED PARTNERSHIP'S management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of SHILOH GROVE LIMITED PARTNERSHIP as of December 31, 2002, were audited by other auditors whose report, dated February 21, 2003 expressed an unqualified opinion on those statements. 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 SHILOH GROVE LIMITED PARTNERSHIP as of December 31, 2003, and the results of its operations, changes in partners' equity, and its 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 March 5, 2004 on our consideration of SHILOH GROVE LIMITED PARTNERSHIP's internal control and 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. Our audit were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information included in the report (shown on pages 12 to 17) and the Financial Data Template is presented for purposes of additional analysis and is not a required part of the basic financial statements of SHILOH GROVE LIMITED PARTNERSHIP. 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. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI March 5, 2004 28 [Bordman & Winnick CPAs Letterhead] Independent Auditor's Report To the Partners of Shiloh Grove Limited Partnership We have audited the accompanying balance sheet of Shiloh Grove Limited Partnership, FHA Project #043-35442 as of December 31, 2005, and the related Statements of income, changes in partners' equity (deficit) and cash flows for the year then ended. These financial statements are the responsibility of Shiloh Grove Limited 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor we were engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Shiloh Grove Limited Partnership as of December 31, 2005, and the results of its operations, changes in partners' equity (deficit) and its 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 February 6, 2006 on our consideration of Shiloh Grove Limited Partnership'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 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 supplemental information included in the report (shown on pages 12 to 17) and the Financial Data Template (shown on page 25 to 38) are presented for purposes of additional analysis and are not a required part of the basic financial statements of Shiloh Grove Limited Partnership. 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. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI February 6, 2006 29 [Bordman & Winnick CPAs Letterhead] Independent Auditor's Report To the Partners of Shiloh Grove Limited Partnership We have audited the accompanying balance sheet of Shiloh Grove Limited Partnership, FHA Project #043-35442 as of December 31, 2004, and the related Statements of income, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of Shiloh Grove Limited 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor we were engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Shiloh Grove Limited Partnership as of December 31, 2004, and the results of its operations, changes in partners' equity, and its 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 February 15, 2005 on our consideration of Shiloh Grove Limited Partnership's internal control and 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. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information included in the report (shown on pages 12 to 16) and the Financial Data Template is presented for purposes of additional analysis and is not a required part of the basic financial statements of Shiloh Grove Limited Partnership. 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. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI February 15, 2005 30 [Bordman & Winnick CPAs Letterhead] Independent Auditor's Report To the Partners Shiloh Grove Limited Partnership Beachwood, Ohio We have audited the accompanying balance sheet of SHILOH GROVE LIMITED PARTNERSHIP, FHA PROJECT #043-35442 as of December 31, 2003, and the related Statements of income, changes in partners' equity and cash flows for the year then ended. These financial statements are the responsibility of SHILOH GROVE LIMITED PARTNERSHIP'S management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of SHILOH GROVE LIMITED PARTNERSHIP as of December 31, 2002, were audited by other auditors whose report, dated February 21, 2003 expressed an unqualified opinion on those statements. 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 SHILOH GROVE LIMITED PARTNERSHIP as of December 31, 2003, and the results of its operations, changes in partners' equity, and its 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 March 5, 2004 on our consideration of SHILOH GROVE LIMITED PARTNERSHIP's internal control and 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. Our audit were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information included in the report (shown on pages 12 to 16) and the Financial Data Template is presented for purposes of additional analysis and is not a required part of the basic financial statements of SHILOH GROVE LIMITED PARTNERSHIP. 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. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI March 5, 2004 31 [FRIEDMAN ALPREN & GREEN LLP Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners of Silver Blue Lake Apartments, Ltd. We have audited the accompanying statements of income, changes in partners' capital and cash flows of SILVER BLUE LAKE APARTMENTS, LTD. (a limited partnership), FHA Project No. FL29-K005-009-124, for the period January 1, 2003 to June 18, 2003 (date of dissolution). 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 results of operations and cash flows of SILVER BLUE LAKE APARTMENTS, LTD. for the period January 1, 2003 to June 18, 2003 (date of dissolution), in conformity with accounting principles generally accepted in the United States of America. /s/ Friedman Alpren & Green LLP New York, New York September 18, 2003 32 [Saltz, Shamis & Goldfarb, Inc. Letterhead] Independent Auditor's Report To the General and Limited Partners Lancaster Towers Associates, L.P. We have audited the accompanying balance sheet of Lancaster Towers Associates, L.P. (A Delaware Limited Partnership), December 31, 2003, and the related statements of income, partners' capital 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. The financial statement as of December 31, 2002 were audited by Bick Fredman & Company whose Audit Department merged with Saltz, Shamis & Goldfarb, Inc. as of October 1, 2003 and whose report dated January 10, 2003 expressed an unqualified opinion on those statements. 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 Lancaster Towers Associates, L.P. as of December 31, 2003, and the results of its operations 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 January 9, 2004 on our consideration of Lancaster Towers Associates, L.P.'s internal control and reports dated January 9, 2004 on its compliance with certain laws and regulations. Those reports is 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/ Saltz, Shamis & Goldfarb, Inc. CERTIFIED PUBLIC ACCOUNTANTS Cleveland, Ohio January 9, 2004 33 [Asher & Company, Ltd. Letterhead] Independent Auditors' Report The Partners West Kinney Associates, L.P. T/A Willie T. Wright Plaza Marlton, New Jersey We have audited the accompanying balance sheets of West Kinney Associates, L.P. T/A Willie T. Wright Plaza (A Limited Partnership) Project No. NJHMFA 607, as of December 31, 2003 and 2002, and the related statements of operations, changes in Partners' capital, 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 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 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 West Kinney Associates, L.P. T/A Willie T. Wright Plaza (A Limited Partnership) Project No. NJHMFA 607, as of December 31, 2003 and 2002, and the results of its operations, changes in its Partners' capital and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have issued reports dated January 19, 2004 on our consideration of West Kinney Associates, L.P.'s T/A Willie T. Wright Plaza (A Limited Partnership) Project No. NJHMFA 607, 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 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/ Asher & Company, Ltd. Philadelphia, Pennsylvania January 19, 2004 34 [MERINA & COMPANY, LLP Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Autumn Park Associates Limited Partnership We have audited the accompanying balance sheets of Autumn Park Associates Limited Partnership as of December 31, 2003 and 2002, and the related statements of profit and loss, changes of partner' 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 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 the partnership as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ Merina & Company, LLP West Linn, Oregon February 26, 2004 35 [REZNICK FEDDER & SILVERMAN Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Regent Street Associates We have audited the accompanying balance sheets of Regent Street Associates as of December 31, 2003 and 2002, and the statements of operations, partners' equity (deficit) 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 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 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 Regent Street Associates as of December 31, 2003 and 2002, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports for the year ended December 31, 2003, dated February 13, 2004, on our consideration of Regent Street Associates' internal control and on its compliance with specific requirements applicable to major HUD programs 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 audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information on pages 27 through 40 is presented for purposes 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 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. /s/ Reznick Fedder & Silverman Taxpayer Identification Number; 52-1088612 Baltimore, Maryland February 13, 2004 Lead Auditor: Michael A. Cumming 36 [Asher & Company, Ltd. Letterhead] Independent Auditors' Report The Partners Magnolia Arms Associates, Ltd. T/A Palm Terrace Apartments Marlton, New Jersey We have audited the accompanying balance sheets of Magnolia Arms Associates, Ltd. T/A Palm Terrace Apartments (A Limited Partnership) as of December 31, 2003 and 2002, and the related statements of loss, Partners' capital 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 Magnolia Arms Associates, Ltd. T/A Palm Terrace Apartments (A Limited Partnership) as of December 31, 2003 and 2002, and the results of its operations, changes in its Partners' capital and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Asher & Company, Ltd. Philadelphia, Pennsylvania January 31, 2004 37 [Asher & Company, Ltd. Letterhead] Independent Auditors' Report The Partners Greenleaf Associates, L.P. Marlton, New Jersey We have audited the accompanying balance sheets of Greenleaf Associates, L.P. (A Limited Partnership), HUD Project No. 084-35341, as of December 31, 2003 and 2002, and the related statements of loss, Partners' capital and cash flows for the year ended December 31, 2003. 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 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 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 Greenleaf Associates, L.P. (A Limited Partnership), HUD Project No. 084-35341, as of December 31, 2003 and 2002, and the results of its operations, changes in its Partners' capital and its cash flows for the year ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. 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 reports dated January 23, 2004 on our consideration of Greenleaf Associates, L.P.'s (A Limited Partnership), HUD Project No. 084-35341, 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 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/ Asher & Company, Ltd. Philadelphia, Pennsylvania January 23, 2004 38 [JOSE E. ROSARIO & CO. Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Alameda Towers Associates, LP I have audited the accompanying balance sheets of Alameda Towers Associates, LP as of December 31, 2005 and 2004, and the related statements of loss, changes in partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor I was engaged to perform, an audit of its internal control over financial reporting. My audit included consideration of internal control over financial reporting as a basis for a designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, I express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alameda Towers Associates, L.P. as of December 31, 2005 and 2004 and the results of its operations, changes in partners' capital, and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Jose E. Rosario & Co. License No. 961 Expires December 1, 2007 February 2, 2006 San Juan, Puerto Rico Stamp No. 2114030 of the Puerto Rico College of CPA was affixed to the original. 39 [JOSE E. ROSARIO & CO. Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners of Puerto Rico Housing Finance Corporation Alameda Towers Associates, L.P. San Juan, Puerto Rico Rio Piedras, PR I have audited the accompanying balance sheets of Alameda Towers Associates, L.P. HUD Project No. RQ-46-K-006-003, as of December 31, 2003 and 2002, and the related statements of loss, changes in partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with auditing standards generally accepted in the United States of America and Puerto Rico 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 I 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. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alameda Towers Associates, L.P. as of December 31, 2003 and 2002 and the results of its operations, changes in partners' capital, and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America and Puerto Rico. In accordance with GOVERNMENT AUDITING STANDARDS, I have also issued a report dated January 28, 2004 on my consideration of Alameda Towers Associates, L.P.'s internal control and on my 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 my audits. My audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information on pages 13 to 19 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Alameda Towers Associates, LP. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jose E. Rosario & Co. License No. 961 Expires December 1, 2004 Stamp No. 1931870 of the Puerto Rico College of CPA was affixed to the original. January 28, 2004 San Juan, Puerto Rico 40 [Friedman, Alpren & Green, LLP Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Dixie Apartment Associates, Ltd. We have audited the accompanying statements of income, changes in partners' capital and cash flows of DIXIE APARTMENT ASSOCIATES, LTD. (a limited partnership), for the period January 1, 2003 to June 18, 2003 (date of dissolution). 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 results of operations, changes in partners' capital and cash flows of DIXIE APARTMENT ASSOCIATES, LTD. for the period January 1, 2003 to June 18, 2003 (date of dissolution), in conformity with accounting principles generally accepted in the United States of America. /s/ Friedman, Alpren & Green LLP New York, New York June 18, 2003 41 [Friedman, Alpren & Green LLP Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners Ludlam Gardens Apartments, Ltd. We have audited the accompanying statements of income, changes in partners' capital and cash flows of LUDLAM GARDENS APARTMENTS, LTD. (a limited partnership) for the period January 1, 2003 to June 18, 2003 (date of dissolution). 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 results of operations, changes in partners' capital and cash flows of LUDLAM GARDENS APARTMENTS, LTD. for the period January 1, 2003 to June 18, 2003 (date of dissolution), in conformity with accounting principles generally accepted in the United States of America. /s/ Friedman, Alpren & Green LLP New York, New York June 18, 2003 42 [FRIDUSS, LUKEE, SCHIFF & CO., P.C. Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners GROVE PARC ASSOCIATES LIMITED PARTNERSHIP We have audited the accompanying balance sheet of GROVE PARC ASSOCIATES LIMITED PARTNERSHIP, FHA Project No. 071-11091 (An Illinois Limited Partnership) as of December 31, 2003, and the related statement of operations, partners' deficit, 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. The financial statements of GROVE PARC ASSOCIATES LIMITED PARTNERSHIP as of December 31, 2002 were audited by other auditors, whose report dated, January 30, 2003, expressed an unqualified opinion on those statements. We conducted our audit in accordance with U.S. generally accepted auditing standards 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 GROVE PARC ASSOCIATES LIMITED PARTNERSHIP as of December 31, 2003, and the results of its operations, changes in its partners' deficit and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued reports, dated March 18, 2004 on our consideration of GROVE PARC ASSOCIATES LIMITED PARTNERSHIP'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 an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audits. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information for the year ended December 31, 2003 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. /s/ Friduss, Lukee, Schiff & Co., P.C. Chicago, Illinois March 18, 2004 43 [BRODSHATZER, WALLACE, SPOON & YIP Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners of Redwood Villa Associates (A Limited Partnership) We have audited the balance sheets of Redwood Villa Associates (A Limited Partnership) ("Partnership") as of December 31, 2003 and 2002, and the related statements of operations, changes in partners' (deficit), 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 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 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 Redwood Villa Associates (A Limited Partnership) as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 2 to the financial statements, the Partnership has sustained operating losses since inception. For the year ended December 31, 2003, the Partnership experienced a loss of $201,871 (including $212,076 of depreciation and $4,553 of amortization expense) and as of that date, had a working capital deficiency of $754,531 and a partners' (deficit) of $1,729,970. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. Management's plans regarding these matters are described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. In accordance with GOVERNMENT AUDITING STANDARDS, we have also issued our report dated January 27, 2004 on our consideration of Redwood Villa Associates' (A Limited Partnership) internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grants. /s/ Brodshatzer, Wallace, Spoon & Yip San Diego, California January 27, 2004 44 [Asher & Company, Ltd. Letterhead] Independent Auditors' Report ---------------------------- The Partners Charles Drew Court Associates, L.P. Marlton, New Jersey We have audited the accompanying balance sheets of Charles Drew Court Associates, L.P. (A Limited Partnership) as of December 31, 2003 and 2002 and the related statements of operations, Partners' capital 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 Charles Drew Court Associates, L.P. (A Limited Partnership) as of December 31, 2003 and 2002 and the results of its operations, changes in its Partners' capital and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Asher & Company, Ltd. Philadelphia, Pennsylvania February 6, 2004 45 [Koch Group & Company, LLP Letterhead] INDEPENDENT AUDITORS' REPORT To The Partners Walnut Park Plaza Associates, L.P. We have audited the accompanying statement of financial position of Walnut Park Plaza Associates, L.P. (A Pennsylvania Limited Partnership), as of March 31, 2004 and the related statements of operations, changes in partner's equity, and cash flows for the three months then ended. These financial statements are the responsibility of the Walnut Park Plaza Associates, L.P.'s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor we were engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Walnut Park Plaza Associates, L.P. (A Pennsylvania Limited Partnership), as of March 31, 2004 and the changes in its net assets and its cash flows for the three months then ended in conformity with generally accepted accounting principles. /s/ Koch Group & Company, LLP Certified Public Accountants New York, New York December 17, 2004 46 [Koch Group & Company, LLP Letterhead] INDEPENDENT AUDITORS' REPORT To The Partners Walnut Park Plaza Associates, L.P. We have audited the accompanying statement of financial position of Walnut Park Plaza Associates, L.P. (A Pennsylvania Limited Partnership) as of December 31, 2003, and the related statements of operations, changes in partner's equity (deficiency), cash flows for the year then ended. These financial statements are the responsibility of the Walnut Park Plaza Associates, L.P.'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 Walnut Park Plaza Associates, L.P. (A Pennsylvania Limited Partnership), as of December 31, 2003, and the results of its operations, changes in its partner's equity (deficiency), and its cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming the Partnership will continue as a going concern. As discussed in Note 3 to the financial statements, the Partnership has suffered recurring losses from operations and is in default of certain obligation under the terms of the mortgage loan. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern at December 31, 2003. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Koch Group & Company, LLP New York, New York March 31, 2004, except for notes 8 and 11, as to which the date is June 2, 2004 47 [Richey May & Co. Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Bayridge Associates Limited Partnership Denver, Colorado We have audited the accompanying balance sheet of Bayridge Associates Limited Partnership as of December 31, 2003 and the related statements of operations, partners' equity 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. The financial statements of Bayridge Associates Limited Partnership as of December 31, 2002 were audited by other auditors whose report dated January 31, 2003 expressed an unqualified opinion on those statements. 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 Bayridge Associates Limited Partnership, as of December 31, 2003 and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 11 and 12 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected 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 basic financial statements taken as a whole. /s/ Richey May & Co. Englewood, Colorado January 16, 2004 48 [Habif, Arogeti & Wynne, LLP. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of United-Pennsylvanian Limited Partnership We have audited the accompanying balance sheets of UNITED-PENNSYLVANIAN LIMITED PARTNERSHIP, [FHA Project No. R-251-8E] as of December 31, 2003 and 2002, and the related statements of profit and loss, changes in partners' deficit, 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 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 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 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 UNITED-PENNSYLVANIAN LIMITED PARTNERSHIP as of December 31, 2003 and 2002, and the results of its operations, its changes in partners' deficit, and its cash flows for the years then ended in conformity with generally accepted accounting principles generally. In accordance with Government Auditing Standards, issued by the Comptroller General of the United States and the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, we have also issued our reports dated January 28, 2004, on our consideration of UNITED-PENNSYLVANIAN LIMITED PARTNERSHIP'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 an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the result of our audits. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supporting information included in the report [shown on pages 14 to 21] 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 the audits 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/ Habif, Arogeti & Wynne, LLP Atlanta, Georgia January 28, 2004 49 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners 2051 Grand Concourse Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of 2051 Grand Concourse Housing Associates (a limited partnership) as of December 31, 2005 and 2004, and the related statements of operations, partners' deficiency, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of 2051 Grand Concourse Housing Associates as of December 31, 2005 and 2004, 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. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C White Plains, New York January 27, 2006 50 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners 2051 Grand Concourse Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of 2051 Grand Concourse Housing Associates (a limited partnership) as of December 31, 2003 and 2002, and the related statements of operations, partners' capital (deficiency), 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 2051 Grand Concourse Housing Associates as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C White Plains, New York January 23, 2004 51 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners Concourse Artists Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of Concourse Artists Housing Associates (a limited partnership) as of December 31, 2005 and 2004, and the related statements of operations, partners' deficiency, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Concourse Artists Housing Associates as of December 31, 2005 and 2004, 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. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C. White Plains, New York January 27, 2006 52 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners Concourse Artists Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of Concourse Artists Housing Associates (a limited partnership) as of December 31, 2003 and 2002, and the related statements of operations, partners' capital (deficiency), 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 Concourse Artists Housing Associates as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C. White Plains, New York January 23, 2004 53 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners Willoughby-Wyckoff Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of Willoughby-Wyckoff Housing Associates (a limited partnership) as of December 31, 2005 and 2004, and the related statements of operations, partners' deficiency, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Willoughby-Wyckoff Housing Associates as of December 31, 2005 and 2004, 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. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1B to the financial statements, the Partnership has had operating losses and equity deficiencies. These conditions raise 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. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C. White Plains, New York January 27, 2006 54 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners Willoughby-Wyckoff Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of Willoughby-Wyckoff Housing Associates (a limited partnership) as of December 31, 2003 and 2002, and the related statements of operations, partners' capital (deficiency), 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 Willoughby-Wyckoff Housing Associates as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C. White Plains, New York January 23, 2004 55 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners Robin Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of Robin Housing Associates (a limited partnership) as of December 31, 2005 and 2004, and the related statements of operations, partners' deficiency, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Robin Housing Associates as of December 31, 2005 and 2004, 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. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C. White Plains, New York January 27, 2006 56 [Marden, Harrison & Kreuter Certified Public Accountants, P.C. Letterhead] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners Robin Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheets of Robin Housing Associates (a limited partnership) as of December 31, 2003 and 2002, and the related statements of operations, partners' capital (deficiency), 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 Robin Housing Associates as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements take as a whole. The accompanying information is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audits 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/ Marden, Harrison & Kreuter Certified Public Accountants, P.C. White Plains, New York January 23, 2004 57 [CARTER & COMPANY, CERTIFIED PUBLIC ACCOUNTANTS, LLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Lund Hill Associates We have audited the accompanying balance sheet of Lund Hill Associates, (a limited partnership), as of March 31, 2005, and the related statements of operations, partners' equity (deficit) 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor we were engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 my 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 Lund Hill Associates as of March 31, 2005, and the results of its operations, changes in partners' equity (deficit) and its cash flows for the period then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ Carter & Company Destin, Florida May 5, 2005 58 [CARTER & COMPANY, CERTIFIED PUBLIC ACCOUNTANTS, LLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Lund Hill Associates We have audited the accompanying balance sheet of Lund Hill Associates, (a limited partnership), WHEDA Project No. 021, as of December 31, 2004, and the related statement of operations, partners' equity (deficit) 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 standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor we were engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 Lund Hill Associates as of December 31, 2004, and the results of its operations, changes in partners' equity (deficit) and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ Carter & Company Destin, Florida January 31, 2005 59 [CARTER & COMPANY, CERTIFIED PUBLIC ACCOUNTANTS, LLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Lund Hill Associates We have audited the accompanying balance sheet of Lund Hill Associates, (a limited partnership), WHEDA Project No. 021, as of December 31, 2003, and the related statements of operations, changes in partners' equity (deficit) 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 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 my 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 Lund Hill Associates as of December 31, 2003, and the results of its operations and its 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 our reports dated January 16, 2004 on our consideration of Lund Hill Associates 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 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. The accompanying supplemental information (shown on pages 14-23) is presented for purposes of additional analysis and is not a required part of the basic financial statements of Lund Hill Associates. 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 financial statements taken as a whole. /s/ Carter & Company Atlanta, Georgia January 16, 2004 60 [RICK J. TANNEBERGER, CERTIFIED PUBLIC ACCOUNTANT Letterhead] Independent Auditor's Report ---------------------------- The Partners Tanglewood Apartments, A Limited Partnership We have audited the accompanying balance sheets of Tanglewood Apartments, A Limited Partnership, as of July 30, 2004 and December 31, 2003, and the related statements of income, partners' capital and cash flows for the period and 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 the standards of the Public Company Accounting Oversight Board (United States). These 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 Tanglewood Apartments, A Limited Partnership as of July 30, 2004 and December 31, 2003, and the results of its operations and its cash flows for the period and year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information presented on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. 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. /s/ Rick J. Tanneberger, CPA, P.A. January 31, 2005 Fayetteville, Arkansas 61 [RBG & CO. Letterhead] Independent Auditors' Report Partners Quality Hill Historic District - Phase II-A, L.P. St. Louis, Missouri We have audited the accompanying balance sheet of Quality Hill Historic District-Phase II-A, L.P., a limited partnership, as of December 31, 2005 and 2004, and the related statements of operations, partners' equity (deficit) 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Quality Hill Historic District-Phase II-A, L.P. as of December 31, 2005 and 2004, 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. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 10 to the financial statements, the Partnership is trying to obtain extensions for its mortgage notes payable, and is not expected to have the operating cash flow to meet the financial obligations of its mortgage notes coming due. This situation raises substantial doubt about the Partnership's ability to continue as a going concern. Management's plans regarding these matters are described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Rubin, Brown, Gornstein & Co. LLP St. Louis, Missouri February 6, 2006 62 [RBG & CO. Letterhead] Independent Auditors' Report Partners Quality Hill Historic District - Phase II-A, L.P. St. Louis, Missouri We have audited the accompanying balance sheet of Quality Hill Historic District-Phase II-A, L.P., a limited partnership, as of December 31, 2003 and 2002, and the related statements of income, partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. 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 Quality Hill Historic District-Phase II-A, L.P. as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Rubin, Brown, Gornstein & Co. LLP St. Louis, Missouri February 3, 2004 63 [HAMILTON & MUSSER, P.C. LETTERHEAD] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of Penn Alto Associates, Limited Partnership Altoona, Pennsylvania 16601 We have audited the accompanying balance sheets of Penn Alto Associates, Limited Partnership as of December 31, 2005 (FINAL) and 2004, and the related statements of income, changes in partners' equity (deficit) and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Partnership's internal control over financial reporting. Accordingly, we express no such opinion. 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 the opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Penn Alto Associates, Limited Partnership as of December 31, 2005 (FINAL) and 2004, and the results of its operations, changes in partners' equity (deficit) and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The partnership ceased operations in September 2005 as more fully explained in Note 1. /s/ Hamilton & Musser, P.C. Certified Public Accountants Mechanicsburg, Pennsylvania January 27, 2006 64 [HAMILTON & MUSSER, P.C. LETTERHEAD] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of Penn Alto Associates, Limited Partnership Altoona, Pennsylvania 16601 We have audited the accompanying balance sheets of Penn Alto Associates, Limited Partnership as of December 31, 2003 and 2002 and the related statements of income, changes in partners' capital, and cash flows for the years then ended. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 the opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Penn Alto Associates, Limited Partnership, as of December 31, 2003 and 2002, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information on pages 9 and 10 is presented for the purpose of additional analysis and is not a required part of the basic financial statements. 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. /s/ Hamilton & Musser, P.C. Certified Public Accountants Mechanicsburg, Pennsylvania February 19, 2004 65 [REZNICK FEDDER & SILVERMAN Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Sartain School Venture We have audited the accompanying balance sheets of Sartain School Venture as of December 31, 2003 and 2002, and the related statements of profit and loss, changes in partners' deficit 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 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 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 Sartain School Venture at December 31, 2003 and 2002, and the results of its operations, the changes in partners' deficit and its cash flows for the years 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 our report for the year ended December 31, 2003, dated February 6, 2004, on our consideration of Sartain School Venture's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. That report is 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 made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 24 through 27 is presented for purposes of additional analysis and is not a required part of the basic financial statements. 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. /s/ Reznick Fedder & Silverman Baltimore, Maryland February 6, 2004 66 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements. 67 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 68 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

See accompanying notes to consolidated financial statements. 69 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

70 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (continued)

* Reclassified for comparative purposes. ** Cash and cash equivalents, end of year, includes cash and cash equivalents from discontinued operations of $245,660, $444,267 and $135,652, respectively. See accompanying notes to consolidated financial statements. 71 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 NOTE 1 - General Liberty Tax Credit Plus L.P., a Delaware limited partnership (the "Partnership"), was organized on June 26, 1987, but had no activity until October 1, 1987 (which date is considered to be inception for financial accounting purposes). The Partnership had no operations until commencement of the public offering on November 20, 1987. The Partnership's business is to invest as a limited partner in other limited partnerships ("Local Partnerships," "subsidiaries" or "subsidiary partnerships") owning leveraged apartment complexes that are eligible for the low-income housing tax credit (the "Low-Income Housing Tax Credit") enacted in the Tax Reform Act of 1986, and to a lesser extent in Local Partnerships owning properties that are eligible for the historic rehabilitation tax credit. The Partnership had originally invested in 31 subsidiary partnerships. During the year ended March 15, 2006, the Partnership sold the properties and the related assets and liabilities of two Local Partnerships and the limited partnership interest in three Local Partnerships. Through the year ended March 15, 2006, the Partnership sold the properties and the related assets and liabilities of nine Local Partnerships and its limited partnership interest in six Local Partnerships. Subsequently on May 1, 2006, the property and the related assets and liabilities of three Local Partnerships were sold, and on June 5, 2006, the property and related assets and liabilities of a fourth Local Partnership were sold. The general partners of the Partnership are Related Credit Properties L.P., a Delaware limited partnership (the "Related General Partner") and Liberty Associates III L.P., a Delaware limited partnership ("Liberty Associates", and together with the Related General Partner, the "General Partners"). The Related General Partner is also the special limited partner of the Partnership. The general partner of the Related General Partner is Credit Properties GP LLC ("Credit Properties"), a Delaware limited liability company. The general partner of Liberty Associates is the Related General Partner. On November 17, 2003, CharterMac acquired CharterMac Capital LLC ("CharterMac Capital") (formerly known as Related Capital Company LLC), which is the parent of RCC Manager LLC, the managing member of Credit Properties. 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. On November 8, 2005, CharterMac announced that Stuart J. Boesky would step down as Chief Executive Officer and trustee of CharterMac. Upon his stepping down, which was effective on November 15, 2005, he also resigned from his position as Executive Vice President of the general partner of the Related General Partner. Mr. Boesky will stay on as a consultant to CharterMac for the next year in order to ensure a smooth transition. On March 14, 2006, CharterMac's Board of Trustees named Marc D. Schnitzer the Chief Executive Officer, effective immediately. Mr. Schnitzer will replace Stephen M. Ross, who has served as interim Chief Executive Officer since Stuart J. Boesky resigned in November of 2005. Mr. Schnitzer also replaced Mr. Boesky as Executive Vice President of the general partner of the Related General Partner. The terms of the Partnership's Amended and Restated Agreement of Limited Partnership (the "Partnership Agreement") provide, among other things, that net profits or losses and distributions of cash flow are, in general, allocated 99% to the limited partners and Beneficial Assignment Certificates ("BACs") holders and 1% to the General Partners. NOTE 2 - Summary of Significant Accounting Policies a) Basis of Consolidation The consolidated financial statements for the years ended March 15, 2006, 2005 and 2004 include the accounts of the Partnership and 23, 27 and 30 subsidiary partnerships, respectively, in which the Partnership is a limited partner. Through the rights of the Partnership and/or a General Partner, which General Partner 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. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation. For financial reporting purposes, the Partnership's fiscal year ends on March 15. All subsidiaries have fiscal years ending December 31. Accounts of subsidiaries have been adjusted for intercompany transactions from January 1 through March 15. The Partnership's fiscal year ends on March 15 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with U.S. generally accepted accounting principles ("GAAP"). Accounts of the subsidiary partnerships have been adjusted for intercompany transactions from January 1 through March 15. Increases (decreases) in the capitalization of consolidated subsidiary partnerships attributable to minority interest arise from cash contributions and cash distributions to the minority interest partners. The Partnership's investment in each subsidiary partnership is equal to the respective subsidiary partnership's partners' equity less minority interest capital, if any. Losses attributable to minority interests which exceed the minority interests' investment in subsidiary partnerships have been charged to the Partnership. Such losses aggregated approximately $0, $0 and $192,000 for the years ended March 15, 2006, 2005 and 2004, respectively. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital. b) 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. Also included in cash and cash equivalents is a $2,000,000 72 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 auction security. The asset is a Missouri Higher Education loan fund with a maturity of July 2032. The fund is a pool of student loans packaged into a trust with a 98% guarantee by the Department of Education and AAA rated. These securities are in a 28-day auction and are reset each period which gives the Partnership the opportunity to withdraw funds as needed on liquid basis. c) 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. In accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment of Disposal of Long-Lived Assets", 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. 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). Through March 15, 2006, the Partnership recorded $2,710,000 as a loss on impairment of assets or reduction to estimated fair value for two Local Partnerships (see Note 13). 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, income from forfeited security deposits, late charges, laundry and vending income and other rental related items. Other revenues from operations include the following amounts at both the Partnership and Local Partnership level:

Other revenues from discontinued operations include the following amounts at both the Partnership and Local Partnership level:

e) Income Taxes The Partnership is not required to provide for, or pay, any federal income taxes. Net income or loss generated by the Partnership is passed through to the partners and is required to be reported by them. The Partnership may be subject to state and local taxes in jurisdictions in which it operates. For income tax purposes, the Partnership has a fiscal year ending December 31 (Note 9). f) 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. g) 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. 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 and Cash Held in Escrow --------------------------------------------------------- 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. The estimated fair values of the Partnership's mortgage notes payable from operations are as follows:

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

* Management believes it is not practicable to estimate the fair value of the mortgage notes payable because mortgage programs with similar characteristics are not currently available to the Local Partnerships. The carrying amount of other financial instruments that require such disclosure approximates fair value. 74 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 NOTE 4 - Property and Equipment The components of property and equipment from operations are as follows:

The initial cost to the Partnership, as shown on Schedule III in Item 15, includes $6,859,371 of acquisition fees paid to the General Partners, $809,661 of acquisition expenses and $2,870,719 of capitalized interest. In connection with the development or rehabilitation of the Properties, the subsidiary partnerships have incurred developer's fees of $23,360,275 to the local general partners and affiliates. Such fees have been included in the cost of property and equipment. Depreciation expense for the years ended March 15, 2006, 2005 and 2004 amounted to $4,142,102, $4,162,791 and $4,141,882, respectively. During the years ended March 15, 2006 and 2005, there were write-offs of accumulated depreciation in the amounts of $31,075,978 and $18,808,334, respectively, and $31,075,978 and $18,691,793 of these write-offs are related to the discontinued assets. The components of property and equipment held for sale from discontinued operations are as follows:

Depreciation expense for the discontinued property and equipment for the years ended March 15, 2006, 2005 and 2004 amounted to $1,406,805, $3,402,195 and $4,268,918, respectively. NOTE 5 - Cash Held in Escrow Cash held in escrow consists of the following:

75 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 Cash held in escrow included in the discontinued assets consists of the following:

NOTE 6 - Deferred Costs The components of deferred costs and their periods of amortization are as follows:

** Over the life of the respective mortgages. Amortization of deferred costs for the years ended March 15, 2006, 2005 and 2004 amounted to $68,348, $74,816 and $367,439, respectively. The operating guarantee fee and supervisory salaries are fully amortized as of March 15, 2006. During the years ended March 15, 2006 and 2005, there were decreases in deferred costs of $1,034,042 and $965,076 and net decreases in accumulated amortization of $639,015 and $650,906, respectively, due to write-offs and reclasses into discontinued operations. The discontinued assets components of other deferred costs and their periods of amortization are as follows:

** Over the life of the respective mortgages. Amortization of deferred costs in the discontinued assets for the years ended March 15, 2006, 2005 and 2004 amounted to $32,157, $229,323 and $404,129, respectively. NOTE 7 - Mortgage Notes Payable The mortgage notes from operations are payable in aggregate monthly installments of approximately $298,000 including principal and interest at rates varying from 1% to 12% per annum, through 2036. Each subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership and the assignment of certain subsidiary partnership's rents and leases and is without further recourse. 76 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 Annual principal payment requirements as of March 15, 2006 for each of the next five fiscal years and thereafter are as follows: Fiscal YearEnding Amount ----------------- ------------- 2006 $ 10,097,996 2007 1,151,876 2008 1,248,518 2009 1,353,408 2010 1,469,267 Thereafter 45,305,554 ------------ $ 60,626,619 ============ Accrued interest payable at March 15, 2006 and 2005 was approximately $5,964,000 and $7,885,000, respectively. Interest accrues 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. The mortgage notes from discontinued operations are payable in aggregate monthly installments of approximately $119,000 including principal and interest at rates varying from 1% to 10.25% per annum, through 2018. Each subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership and the assignment of certain subsidiary partnership's rents and leases is without further recourse. Magnolia Arms Associates, LTD ("Magnolia Arms") made the first seven monthly payments on its mortgage in 2005, but defaulted on its last five payments due to operating deficits. The mortgagee can take possession of the Property, collect the rents directly from the tenants and foreclose on the Property. The mortgage balance of approximately $5,700,000 is due within the next twelve months as shown in the annual principal payment table above. There can be no assurance that Magnolia Arms will be able to cure the default. Charles Drew Court Associates, L.P. ("Charles Drew") received funds from a pledge/security agreement with Bank of America (formerly Fleet Bank, N.A.), Charles Drew's mortgagor, under which the Atlantic County Improvement Authority pledged certificates of deposit originally in the amount of $4,772,500. The funds, including interest earned thereon, provided a subsidy to Charles Drew equal to the debt service on the mortgage. The funds were used to payoff the mortgage in September 2004. On October 21, 2003, Greenleaf Associates Limited Partnership's ("Greenleaf") mortgage note was refinanced under the Mark-to-Market program sponsored by HUD. The USGI, Inc. mortgage, in the amount of $4,257,383, was paid-off from proceeds from a new HUD insured first mortgage held by Heartland Bank at a rate of 6.25% in the amount of $796,200 and a second mortgage held by the Secretary of HUD at a rate of 1% in the amount of $3,297,016. Also, a third mortgage provided by the Secretary of HUD at a rate of 1% in the amount of $543,064 was obtained. The refinancing proceeds were committed to Greenleaf for the purpose of paying the related finance costs totaling $48,786, and increasing the amount of reserve for replacement by $276,218. On June 17, 2003, Shiloh-Grove LP ("Shiloh") entered into a mortgage restructuring agreement for the purpose of refinancing its existing mortgages and adjusting rents to market rates related to its Mount Vernon Plaza II project (FHA Project #043-35445). As part of the restructuring agreement, the partnership refinanced its outstanding mortgage of $3,436,620 by obtaining three new mortgages. One mortgage is held by Greystone Servicing Corporation, Inc. and two are held by the Secretary of HUD in the amounts of $564,000, $2,288,000 and $1,116,120, respectively. All three have maturity dates of July 1, 2033. Principal and interest payments of $3,117 are made monthly on the first mortgage and interest will accrue on the second and third mortgage at the rate of 1% per annum. Tax and insurance escrow payments and replacement reserve deposits are made monthly. On April 25, 2003, Shiloh entered into a mortgage restructuring agreement for the purpose of refinancing its existing mortgages and adjusting rents to market rates related to its Mount Vernon Plaza I project (FHA project #043-35442). As part of the restructuring agreement, the partnership refinanced its outstanding mortgage of $4,710,536 by obtaining three new mortgages. One mortgage is held by Greystone Servicing Corporation, Inc. and two are held by the Secretary of HUD in the amounts of $972,400, $3,530,000 and $1,288,848, respectively. All three have maturity dates of July 1, 2033. Principal and interest payments of $5,706 are made monthly on the first mortgage and interest will accrue on the second and third mortgage at the rate of 1% per annum. Tax and insurance escrow payments and replacement reserve deposits are made monthly. 77 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 Annual principal payment requirements as of March 15, 2006 for each of the next five fiscal years and thereafter for the discontinuing liabilities are as follows: Fiscal Year Ending Amount ----------------- ------------- 2006 $ 456,602 2007 494,741 2008 536,445 2009 543,055 2010 524,032 Thereafter 14,122,753 ------------ $ 16,677,628 ============ Accrued interest payable for the discontinued liabilities at March 15, 2006 and 2005 was approximately $2,910,000 and $711,000, respectively. Interest accrues 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. See Notes 10 and 12 for other subsidiary partnerships' financing activities. NOTE 8 - Related Party Transactions An affiliate of the General Partners has a 1% interest as a special limited partner in each of the subsidiary partnerships. An affiliate of the General Partners also has a minority interest in certain subsidiary partnerships. The costs incurred to related parties for the years ended March 15, 2006, 2005 and 2004 were as follows: Related Party Fees

Related Party Fees - discontinued operations

* Reclassified for comparative purposes. (a) The General Partners are entitled to receive a Partnership management fee, after payment of all Partnership expenses, which together with the local annual administrative fees will not exceed a maximum of 0.5% per annum of invested assets (as defined in the Partnership's Amended and Restated Agreement of 78 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 Limited Partnership ("Partnership Agreement")) for administering the affairs of the Partnership. The Partnership management fee, subject to the foregoing limitation, will be determined by the General Partners in their sole discretion based upon their review of the Partnership's investments. Partnership management fees owed to the General Partners amounting to approximately $7,697,000 and $7,811,000 were accrued and unpaid as of March 15, 2006 and 2005, respectively. (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. Expense reimbursements and asset monitoring fees owed to the Related General Partner amounting to approximately $111,000 and $35,000 were accrued and unpaid as of March 15, 2006 and 2005, respectively. The General Partners have allowed for the accrual without payment of the amounts set forth in (a) and (b) but are under no obligation to continue to do so. (c) Property management fees incurred by subsidiary partnerships in operations amounted to $1,370,964, $1,689,474 and $1,826,298 for the years ended March 15, 2006, 2005 and 2004, respectively. Of these fees $803,110, $1,035,932 and $962,962 was incurred to affiliates of the general partners of the Local Partnership (the "Local General Partners"), which includes $189,199, $395,998 and $357,995 of fees relating to discontinued operations. (d) Liberty Associates, the special limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $2,500 per year from each subsidiary partnership. (e) Liberty Associates received cash distributions of approximately $24,000, $7,000 and $4,000 during the years ended March 15, 2006, 2005 and 2004, respectively. Liberty Associates was allocated Low-Income Housing Tax Credits of approximately $0, $0 and $10 for the taxable years ended March 15, 2006, 2005 and 2004, respectively. (f) Due to local general partners and affiliates at March 15, 2006 and 2005 consists of the following:

(f) Due to local general partners and affiliates at March 15, 2006 and 2005 included in the discontinued liabilities consists of the following:

79 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 (g) Long-term notes payable consist of the following:

The Partnership had negotiated Operating Deficit Guaranty Agreements with all Local Partnerships by which the general partners of the Local Partnerships had agreed to fund operating deficits for a specified period of time. The terms of the Operating Deficit Guaranty Agreements varied for each Local Partnership, with maximum dollar amounts to be funded for a specified period of time, generally three years, commencing on the break-even date. Amounts funded under the Operating Deficit Guaranty Agreements were treated as non-interest bearing loans, which will be paid only out of available cash flow or out of available net sale or refinancing proceeds. As of March 31, 2006, there were no advances under the Operating Deficit Guaranty Agreements. Any amounts funded under such agreements would be reflected under "Due to local general partner and affiliates" on the Partnership's financial statements. As of March 31, 2006, all Operating Deficit Guaranty Agreements have expired. 80 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 NOTE 9 - Taxable Net Income A reconciliation of the financial statement net income (loss) to the taxable net income (loss) for the Partnership and its consolidated subsidiaries is as follows:

NOTE 10 - Sale of Properties The Partnership is currently in the process of disposing of its investments. As of March 15, 2006, the Partnership had disposed of fifteen of its 31 original investments. Subsequently on May 1, 2006, the property and the related assets and liabilities of three Local Partnerships were sold, and on June 5, 2006, the property and related assets and liabilities of a fourth Local Partnership were sold. On September 15, 2005, the Partnership's limited partnership interest in Bayridge Associates, L.P. ("Bayridge") was sold to an affiliate of the Local General Partner for $1,130,000. The sale resulted in a general partner contribution of approximately $5,849,000. The sale resulted in the liquidation of Bayridge. As of the sale date, Bayridge had property and equipment, at cost, of approximately $13,246,000, accumulated depreciation of approximately $7,101,000 and mortgage debt of approximately $9,598,000. On July 27, 2005, the property and the related assets and liabilities of Penn Alto Associates, L.P. ("Penn Alto") were sold to an unaffiliated third party purchaser for $1,625,000. During the quarter ended September 15, 2005, in accordance with Statement of Financial Accounting Standards No. 144 ("SFAS No. 144"), the Partnership deemed the building impaired and wrote it down to its fair value which resulted in a loss on impairment of $850,000. The sale resulted in a loss of approximately $63,000. The sale resulted in the liquidation of Penn Alto. As of the sale date, Penn Alto had property and equipment, at cost, of approximately $11,113,000, accumulated depreciation of approximately $6,149,000 and mortgage debt of approximately $3,383,000. On June 8, 2005, the Partnership sold its limited partnership interest in Fox Glenn Investors, L.P. ("Fox Glenn") to the Local General Partner for a purchase price of $1,400,000. The Partnership received $200,000 and a note receivable for $1,200,000 that was paid on February 9, 2006. The sale resulted in a general partner contribution of approximately $3,126,000. The sale resulted in the liquidation of Fox Glenn. As of the sale date, Fox Glenn had property and equipment, at cost, of approximately $7,693,000, accumulated depreciation of approximately $4,480,000 and mortgage debt of approximately $5,230,000. On June 2, 2005, the Partnership sold its limited partnership interest in Lancaster Towers Associates, LTD ("Lancaster") to an affiliate of the Local General Partner for a purchase price of $449,750. During the quarter ended June 15, 2005, in accordance with SFAS No. 144, the Partnership deemed the building impaired and wrote it down to its fair value which resulted in a loss on impairment of $1,860,000. The sale resulted in a distribution to the Local General Partner of approximately $271,000. As of the sale date, Lancaster had property and equipment, at cost, of approximately $4,594,000, accumulated depreciation of approximately $2,757,000 and mortgage debt of approximately $1,605,000. On March 29, 2005, the property and the related assets and liabilities of Regent Street Associates, L.P. ("Regent Street") were sold to an unaffiliated third party purchaser for the assumption of the outstanding debt, resulting in a gain of $1,230,000. The sale resulted in the liquidation of Regent Street. As of the sale date, Regent Street had property and equipment, at cost, of approximately $7,655,000, accumulated depreciation of approximately $4,543,000 and mortgage debt of approximately $3,629,000. 81 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 On February 17, 2005, the Partnership's limited partnership interest in Redwood Villa Associates ("Redwood") was sold to the Local General Partner for $60,000. The sale resulted in a general partner contribution of approximately $1,789,000. The sale resulted in the liquidation of Redwood. As of the sale date, Redwood had property and equipment, at cost, of approximately $5,999,000, accumulated depreciation of approximately $3,525,000 and mortgage debt of approximately $3,746,000. On January 5, 2005, the property and the related assets and liabilities of Lund Hill Associates, L.P. ("Lund Hill") were sold to an unaffiliated thirty party purchaser for $6,500,000, resulting in a gain of approximately $1,345,000. The sale resulted in the liquidation of Lund Hill. As of the sale date, Lund Hill had property and equipment, at cost, of approximately $6,046,000, accumulated depreciation of approximately $2,423,000 and mortgage debt of approximately $2,971,000. On September 24, 2004, the property and the related assets and liabilities of Autumn Park Associates, L.P. ("Autumn Park") were sold to an unaffiliated third party for approximately $4,800,000. The proceeds were used to settle the associated mortgage which had an outstanding balance of approximately $3,600,000, and the balance was distributed to the partners. This amount consisted of $900,000 paid in cash at the closing and $150,000 pursuant to one promissory note. The note compounded interest at 10% and was due on October 30, 2005. The $150,000 note was received in March 2006. The sale resulted in a gain of approximately $2,110,000. The sale resulted in the liquidation of Autumn Park. As of the sale date, Autumn Park had property and equipment, at cost, of approximately $6,138,000, accumulated depreciation of approximately $3,472,000, and mortgage debt of approximately $3,754,000. On August 27, 2004, the property and the related assets and liabilities of 2108 Bolton Drive Associated, L.P. ("Bolton") were sold to an unaffiliated third party for $8,891,000, resulting in a gain of approximately $1,622,000 recognized in the year ended March 15, 2005. An additional loss of approximately $59,000 was recognized in the year ended March 15, 2006. The sale resulted in the liquidation of Bolton. As of the sale date, Bolton had property and equipment, at cost, of approximately $13,601,000 accumulated depreciation of approximately $7,554,000 and mortgage debt of approximately $7,266,000. On July 30, 2004, the property and the related assets and liabilities of Tanglewood Apartments, L.P. ("Tanglewood") were sold to an unaffiliated third party for $3,425,000, resulting in a gain of approximately $1,120,000. The sale resulted in the liquidation of Tanglewood. As of the sale date, Tanglewood had property and equipment, at cost, of approximately $5,902,000, accumulated depreciation of approximately $3,140,000 and mortgage debt of approximately $2,852,000. On March 31, 2004, the Partnership's limited partnership interest in Walnut Park Plaza ("Walnut") was sold to the Local General Partner for a purchase price of $1 plus the assumption of all the related debt which totaled approximately $7,700,000 resulting in a general partner contribution of approximately $2,589,000. The sale resulted in the liquidation of Walnut. As of the sale date, Walnut had property and equipment, at cost, of approximately $10,957,000, accumulated depreciation of approximately $4,530,000 and mortgage debt of approximately $7,330,000. On May 19, 2003, the property and the related assets and liabilities of Silver Blue Lake Apartments, LTD. ("Silver Blue") were sold to an unaffiliated third party for a purchase price of $3,500,000 resulting in a gain of approximately $409,000. Accrued interest on a note related to the Local Partnership was forgiven resulting in forgiveness of indebtedness income of approximately $114,000. The sale resulted in the liquidation of Silver Blue. As of the sale date, Silver Blue had property and equipment, at cost, of approximately $5,446,000, accumulated depreciation of approximately $2,645,000 and mortgage debt of approximately $2,500,000. On March 16, 2003, the Partnership recorded the transfer of the deed in lieu of foreclosure to Bryden Road Plaza ("Bryden Road"), one of the properties owned by Shiloh-Grove L.P. (Mt. Vernon) ("Shiloh") to an unaffiliated third party. The outstanding mortgage balance paid by the third party on the day of transfer was $189,871 resulting in a gain of $104,000, which is included in gain on sale of properties. As of the sale date, Bryden Road had property and equipment, at cost, of approximately $447,000, and accumulated depreciation of approximately $207,000. On January 23, 2003, the property and the related assets and liabilities of Ludlam Gardens Apartments, LTD. ("Ludlam") were sold to an unaffiliated third party for a purchase price of $3,900,000 resulting in a gain of approximately $959,000. The sale resulted in the liquidation of Ludlam. As of the sale date, Ludlam had property and equipment, at cost, of approximately $4,791,000, accumulated depreciation of approximately $2,032,000 and mortgage debt of approximately $2,827,000. On January 16, 2003, the property and the related assets and liabilities of Dixie Apartment Associates, LTD. ("Dixie") were sold to an unaffiliated third party for a purchase price of $1,300,000 resulting in a gain of approximately $327,000. The sale resulted in the liquidation of Dixie. As of the sale date, Dixie had property and equipment, at cost, of approximately $1,624,000, accumulated depreciation of approximately $712,000 and mortgage debt of approximately $865,000. NOTE 11 - Assets Held for Sale On March 15, 2006, United-Pennsylvanian, L.P. ("United Penn") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an affiliate of the Local General Partner for a purchase price of $500,000 plus the assumption of the mortgage debt. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing is expected to occur by September 2006. No assurance can be given that the sale will actually occur. United Penn is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, United Penn had property and equipment, at cost, of approximately $5,966,000, accumulated depreciation of approximately $4,291,000 and mortgage debt of approximately $3,120,000. 82 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 On November 28, 2005, Willoughby/Wycoff Housing Associates, L.P. ("Willoughby") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $4,800,000. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing occurred subsequently on June 5, 2006. No assurance can be given that the sale will actually occur. Willoughby is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Willoughby had property and equipment, at cost, of approximately $6,191,000, accumulated depreciation of approximately $3,801,000 and mortgage debt of approximately $4,016,000. On September 22, 2005, 2051 Grand Concourse Housing Associates, L.P. ("Grand Concourse") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $4,937,500. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing occurred subsequently on May 1, 2006. See Note 16 for subsequent events. Grand Concourse is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Grand Concourse had property and equipment, at cost, of approximately $5,271,000, accumulated depreciation of approximately $3,204,000 and mortgage debt of approximately $3,239,000. On September 22, 2005, Concourse Artist's Housing Associates, L.P. ("Concourse Artists") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $1,797,500. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing occurred subsequently on May 1, 2006. See Note 16 for subsequent events. Concourse Artists is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Concourse Artists had property and equipment, at cost, of approximately $2,285,000, accumulated depreciation of approximately $1,385,000 and mortgage debt of approximately $1,409,000. On September 22, 2005, Robin Housing Associates, L.P. ("Robin Housing") entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a purchase price of $7,265,000. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing occurred subsequently on May 1, 2006. See Note 16 for subsequent events. Robin Housing is being held as an asset held for sale as of March 15, 2006. As of December 31, 2005, Robin Housing had property and equipment, at cost, of approximately $8,238,000, accumulated depreciation of approximately $5,014,000 and mortgage debt of approximately $4,895,000. NOTE 12 - Commitments and Contingencies a) Subsidiary Partnerships - Going Concern Magnolia Arms Associates, LTD ("Magnolia Arms") ----------------------------------------------- Magnolia Arms made the first seven monthly payments on its mortgage in 2005, but defaulted on its last five payments due to operating deficits. The mortgagee can take possession of the Property, collect the rents directly from the tenants and foreclose on the Property. There can be no assurance that Magnolia Arms will be able to cure the default. The mortgage payable is a current liability as of December 31, 2005. Because of these circumstances, there is substantial doubt regarding whether the Local Partnership can continue as a going concern. The Partnership's investment in Magnolia Arms was written down to zero by prior years' losses and the minority interest was approximately $47,000 and $51,000 at March 15, 2006 and 2005, respectively. The net loss after minority interest for Magnolia Arms amounted to approximately $200,000, $190,000 and $113,000 for the years ended March 15, 2006, 2005 and 2004, respectively. Quality Hill Historic District-Phase II-A, L.P. ("Quality Hill") ---------------------------------------------------------------- The financial statements of Quality Hill have been prepared assuming it will continue as a going concern. Quality Hill has had negative cash flows from operating activities for the past several years. Quality Hill is trying to obtain extensions for its mortgage notes payable, and is not expected to have operating cash flow to meet the financial obligations of its mortgage notes coming due. This situation raises substantial doubt about its ability to continue as a going concern. During 2005, Quality Hill entered into a Modification Agreement with the Missouri Housing Development Commission ("MHDC") which extended the maturity date of the permanent nonrecourse financing for the Quality Hill-Cordova Hotel Apartments, which is one of the two projects included in Quality Hill, to December 2006. The balance of this note as of December 31, 2005 was $424,800. During 2005, Quality Hill entered into negotiations with both the Hall Family Foundation of Kansas ("Foundation") and Kansas City Downtown Minority Development Corporation ("DMDC") to extend the maturity dates of each note payable to December 2006. The combined balance of the Foundation notes is $2,126,426 and was due in full in December 2005 and the combined balance of the DMDC notes was $735,000 ($225,000 was due in December 2005 and $510,000 was due in May 2005). As of December 31, 2005, Quality Hill has not been granted such an extension by either lender. Subsequent to December 31, 2005, Quality Hill Received a one year extension on the Foundation note. The total of these three notes, $3,286,266, is included as a current liability in mortgage notes payable. These items raise substantial doubt about Quality Hill's ability to continue as a going concern. The Partnership's investment in Quality Hill has been written down to zero by prior years' losses and the minority interest balance was $0 at both March 15, 2006 and 2005. The net loss after minority interest for Quality Hill amounted to approximately $287,000, $291,000 and $261,000 for the years ended March 15, 2006, 2005 and 2004, respectively. 83 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 Willoughby ---------- The financial statements of Willoughby have been prepared assuming that it will continue as a going concern. Willoughby has had operating losses and equity deficiencies that raise substantial doubt about its ability to continue as a going concern. The Partnership's investment in Willoughby has been written down to zero by prior years' losses and the minority interest balance was approximately $257,000 and $262,000 at March 15, 2006 and 2005, respectively. The net loss after minority interest for Willoughby amounted to approximately $219,000, $164,000 and $100,000 for the years ended March 15, 2006, 2005 and 2004, respectively. Redwood ------- Redwood has sustained operating losses since its inception. For the period from January 1, 2005 through February 17, 2005, Redwood experienced a loss of $10,484, including $28,720 of depreciation and $569 of amortization, and at February 17, 2005 had a partners' deficit of $1,729,732. In addition, Redwood has been able to defer ground lease payments that are due to a related party in the cumulative amount of $391,147 as of February 17, 2005 and $388,647 as of December 31, 2004. These conditions raise substantial doubt about Redwood's ability to continue as a going concern. Redwood's continuation as a going concern is dependent upon its ability to achieve continued profitable operations or obtain future capital contributions from the partners. The Local General Partner, whenever possible, plans to reduce operating costs to achieve profitable operations. The financial statements for the period from January 1, 2005 through February 17, 2005 and the 2004 and 2003 Fiscal Years for Redwood have been prepared assuming that Redwood will continue as a going concern. The Partnership's investment in Redwood at March 15, 2006 and 2005 was reduced to zero by prior years' losses and the minority interest balance was approximately $0 and $393,000, respectively. Redwood's net loss after minority interest amounted to approximately $10,000, $195,000 and $200,000 for the period from January 1, 2005 through February 17, 2005 and the 2004 and 2003 Fiscal Years, respectively. On February 17, 2005, the Partnership's Limited Partnership interest in Redwood was sold (See Note 10 for a discussion of the sale). b) Lease Commitment None c) 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 15, 2006, uninsured cash and cash equivalents approximated $6,051,000. 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. Such cash distributions are typically made from surplus cash flow. e) Tax Credits A portion of the Tax Credits could be subject to recapture in future years if (i) a Local Partnership ceases to meet qualification requirements, or (ii) if there is a decrease in the qualified basis of the Local Partnership property or (iii) if there is a reduction in the Local Partnership interest in the property at any time during the 15-year Compliance Period that began with the first tax year of the Credit Period. As of December 31, 2003, the Tax Credit Period for each Local Partnership had expired. f) Other Greenleaf Associates, L.P. ("Greenleaf") ---------------------------------------- A former tenant brought suit against Greenleaf's on-site manager for damages of $100,000. An amended complaint does not specify an amount of damages. The former tenant claims violation of the 14th Amendment, false arrest, obstruction of justice and civil conspiracy. Management intends to vigorously contest the matter. An evaluation of the likelihood of an unfavorable outcome and estimate of the amount of possible loss cannot be made at this early stage of the proceedings. State Street 86 Associates, L.P. ("State Street") ------------------------------------------------- The Camden Redevelopment Agency has designated the Cramer Hill Waterfront Redevelopment Agency as a possible future redevelopment project. This area includes Centennial Village, a 200-unit apartment project that State Street owns and operates. There have been various lawsuits involving this redevelopment and at this time there is no further information as to whether or not the Property will be purchased or acquired by eminent domain. The Partnership is subject to the 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 25% 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 be market demand for apartments at full market rents when the rental assistance contracts expire. 84 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 Note 13 - 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 15, 2006, Bayridge, Bolton, Concourse Artists, Grand Concourse, Fox Glenn, Lancaster, Lund Hill, Penn Alto, Redwood, Regent Street, Robin Housing, United Penn and Willoughby were classified as discontinued operations in the consolidated financial statements. As of March 15, 2005, Bolton, Lancaster, Lund Hill, Redwood and Regent Street were classified as discontinued operations on the consolidated balance sheets. Consolidated Balance Sheets:

The following table summarizes the results of operations of the Local Partnerships that are classified as discontinued operations. For the year ended March 15, 2006, Concourse Artists, Grand Concourse, Robin Housing, United Penn and Willoughby which were classified as assets held for sale, and Bayridge, Fox Glenn, Lancaster, Lund Hill, Penn Alto, Redwood and Regent Street, which were sold during the year, were all classified as discontinued operations on the consolidated financial statements. For the year ended March 15, 2005, Bayridge, Concourse Artists, Fox Glenn, Grand Concourse, Lancaster, Lund Hill, Penn Alto, Redwood, Regent Street, Robin Housing, United Penn and Willoughby, in order to present comparable results to the year ended March 15, 2006, and Autumn Park, Bolton, Tanglewood and Walnut, which were sold during the year, were all classified as discontinued operations on the consolidated financial statements. For the year ended March 15, 2004, Bayridge, Concourse Artists, Fox Glenn, Grand Concourse, Lancaster, Lund Hill, Redwood, Penn Alto, Regent Street, Robin Housing, United Penn, Willoughby, Autumn Park, Bolton, Walnut and Tanglewood, in order to present comparable results to the year ended March 15, 2006, and Silver Blue and Bryden Road, which were sold during the year, were all classified as discontinued operations on the consolidated financial statements. 85 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 Consolidated Statements of Discontinued Operations:

86 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 NOTE 14 - New 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 Accounting Principles Board ("APB") Opinion No. 20, "Accounting Changes" and Statement of Financial Accounting Standards No. 3, "Reporting Accounting Changes in Interim Financial Statements". APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in the current period's net income the cumulative effect of changing to the new accounting principle. In contrast, FAS 154 requires that a voluntary change in accounting principle be applied retrospectively to prior periods' financial statements, unless this would be impracticable. In addition, FAS 154 makes a distinction between retrospective application of an accounting principle and the restatement of financial statements to reflect the correction of an error. FAS 154 is effective for accounting changes and correction of errors made in fiscal years beginning after December 15, 2005. The Partnership does not expect the adoption of FAS 154 to have a material impact on its consolidated results of operations. In June 2005, the FASB issued Emerging Issues Task Force 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"). EITF No. 04-5 replaces counterpart requirements in the Statement of Position 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 (i) "kick-out rights"- the right to dissolve or liquidate the partnership or otherwise remove the general partner "without cause" or (ii) "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 No. 04-5 is now effective. Since the Partnership's financial statements are presented on a consolidated basis, the adoption of EITF No. 04-5 has not had a material effect on the Partnership's consolidated results of operations. 87 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 NOTE 15 - Selected Quarterly Financial Data (Unaudited) The following table summarizes the Partnership's quarterly results of operations for the years ended March 15, 2006 and 2005. The fluctuations between the quarters are primarily due to the sales of Local Partnerships (see Note 10).

* Reclassified for comparative purposes. 88 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 15, 2006 NOTE 16 - Subsequent Events On May 1, 2006, the property and related assets and liabilities of Grand Concourse were sold to an unaffiliated third party purchaser for $4,937,500, resulting in a gain of approximately $1,311,000, which will be recognized on the Partnership's Form 10-Q dated September 15, 2006. The sale resulted in the liquidation of Grand Concourse. Grand Concourse is classified as an asset held for sale as of March 15, 2006 (see Note 11). On May 1, 2006, the property and the related assets and liabilities of Concourse Artists were sold to an unaffiliated third party purchaser for $1,797,500, resulting in a gain of approximately $627,000, which will be recognized on the Partnership's Form 10-Q dated September 15, 2006. The sale resulted in the liquidation of Concourse Artists. Concourse Artist's is classified as an asset held for sale as of March 15, 2006 (see Note 11). On May 1, 2006, the property and the related assets and liabilities of Robin Housing were sold to an unaffiliated third party purchaser for $7,265,000, resulting in a gain of approximately $2,792,000, which will be recognized on the Partnership's Form 10-Q dated September 15, 2006. The sale resulted in the liquidation of Robin Housing. Robin Housing is classified as an asset held for sale as of March 15, 2006 (see Note 11). On June 5, 2006, the property and the related assets and liabilities of Willoughby were sold to an unaffiliated third party purchaser for $4,800,000, resulting in a gain of approximately $2,100,000, which will be recognized on the Partnership's Form 10-Q dated September 15, 2006. The sale resulted in the liquidation of Willoughby. Willoughby is classified as an asset held for sale as of March 15, 2006 (see Note 11). 89 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None Item 9A. Controls and Procedures (a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Principal Executive Officer and Principal Financial Officer of Related Credit Properties L.P. and Liberty Associates III, L.P., 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 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, which controls the General Partners, has adopted a code of ethics. See http://www.chartermac.com. On November 17, 2003, CharterMac acquired CharterMac Capital LLC ("CharterMac Capital") (formerly known as Related Capital Company LLC), which is the parent of RCC Manager LLC, the managing member of the general partner of the Related General Partner. Pursuant to the acquisition, CharterMac acquired controlling interests in the General Partners. Alan P. Hirmes replaced Stephen M. Ross as director of the general partner of the Related General Partner effective April 1, 2004 as a result of this acquisition. This acquisition did not affect the Partnership or its day-to-day operations as the majority of the General Partner's management team remained unchanged. On November 8, 2005, CharterMac announced that Stuart J. Boesky would step down as Chief Executive Officer and trustee of CharterMac. Upon his stepping down, which was effective on November 15, 2005, he also resigned from his position as Executive Vice President of the general partner of the Related General Partner. Mr. Boesky will stay on as a consultant to CharterMac for the next year in order to ensure a smooth transition. On March 14, 2006, CharterMac's Board of Trustees named Marc D. Schnitzer the Chief Executive Officer, effective immediately. Mr. Schnitzer will replace Stephen M. Ross, who has served as interim Chief Executive Officer since Stuart J. Boesky resigned in November of 2005. Mr. Schnitzer also replaced Mr. Boesky as Executive Vice President of the general partner of the Related General Partner. Certain information concerning the directors and executive officers of Credit Properties GP LLC, the general partner of the Related General Partner (which, in turn, is the general partner of Liberty Associates), who may be deemed directors or executive officers of the Partnership is set forth below. Credit Properties GP LLC ------------------------ Name Position ------------------------ ---------------------------------- Alan P. Hirmes President, Chief Executive Officer and Chief Financial Officer Glenn F. Hopps Treasurer ALAN P. HIRMES, 51, has been a Certified Public Accountant in New York since 1978. Prior to joining CharterMac Capital in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice President of CharterMac 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"). GLENN F. HOPPS, 43, joined CharterMac Capital in December, 1990, and prior to that date 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. 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 executive officers of the General Partners for their services. However, under the terms of the Partnership Agreement, the Partnership has entered into certain arrangements with the General Partners and their affiliates which provide for compensation to be paid to the General Partners and their affiliates. Such arrangements include (but are not limited to) agreements to pay nonrecurring acquisition fees, a nonaccountable acquisition expense allowance, a Partnership management fee and an accountable expense reimbursement. The General Partners are entitled, in the aggregate, to 1% of all cash distributions and an additional 15% of distributions from net sale or refinancing proceeds after the BACs holders have received distributions of such proceeds equal to their original capital contributions plus a 10% return thereon (to the extent not previously paid out of cash flow). Certain directors and executive officers of the General Partners receive compensation from the General Partners and their 90 affiliates for services performed for various affiliated entities which may include services performed for the Partnership. Such compensation may be based in part on the performance of the Partnership. See also Note 8 in Item 8, which is incorporated in this Item 11 by reference thereto. 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. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Security Holder Matters The general partnership interests in the Partnership are owned as follows:

Liberty Associates III L.P. holds a 1% limited partnership interest in each Local Partnership. No person is known by the Partnership to be the beneficial owner of more than 5% percent of the Limited Partnership Interests and/or the BACs; and none of the General Partners nor any director or executive officer of any of the General Partners owns any Limited Partnership Interests or BACs. 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 in Item 11 and also Note 8 in Item 8 above, which is incorporated herein by reference thereto and as set forth above. However, there have been no direct financial transactions between the Partnership and the directors and executive officers of the General Partners. Item 14. Principal Accounting 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 the Partnership's annual financial statements for the years ended March 15, 2006 and 2005 and for the reviews of the financial statements included in the Partnership's quarterly reports on Form 10-Q for those years were $54,900 and $54,900, respectively. Audit Related Fees ------------------ None. Tax Fees -------- The aggregate fees billed by Weiser LLP (formerly, Rubin and Katz LLP) and its affiliates for professional services rendered for the preparation of our annual tax returns for the years ended December 31, 2005 and 2004 were approximately $8,400 and $8,400, respectively. All Other Fees -------------- None. The Partnership is not required to have, and does not have, a stand-alone audit committee. 91 PART IV Item 15. Exhibits, Financial Statement Schedules

92 Item 15. Exhibits, Financial Statement Schedules (continued)

93 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. LIBERTY TAX CREDIT PLUS L.P. ---------------------------- (Registrant) By: RELATED CREDIT PROPERTIES L.P., a General Partner By: Credit Properties GP LLC, its General Partner Date: June 13, 2006 ------------- By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) By: LIBERTY ASSOCIATES III, L.P., a General Partner By: Related Credit Properties L.P., its General Partner By: Related Credit Properties Inc., its General Partner Date: June 13, 2006 ------------- By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President and Chief Executive Officer (Principal Executive Officer and Principal Financial Officer) 94 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:

95 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 Credit Properties L.P. and Liberty Associates III, L.P. (the "General Partners"), each of which is a general partner of Liberty Tax Credit Plus L.P. (the "Partnership"), hereby certify that: 1. I have reviewed this annual report on Form 10-K for the period ending March 15, 2006 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 our 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 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 controlling entities 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 13, 2006 By: /s/ Alan P. Hirmes ------------- ------------------ Alan P. Hirmes Principal Executive Officer and Principal Financial Officer 96 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 Liberty Tax Credit Plus L.P. (the "Partnership") on Form 10-K for the period ending March 15, 2006 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 Credit Properties L.P. and Liberty Associates III, L.P., the general partners 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 June 13, 2006 97 Exhibit 99.1 LIBERTY TAX CREDIT PLUS L.P. RESPONDS TO UNSOLICITED TENDER OFFER ------------------------------------ New York, New York, October 6, 2005 -- Liberty Tax Credit Plus L.P. ("Liberty") responded today as follows to an unsolicited tender offer (the "Offer") by MacKenzie Patterson Fuller, Inc. ("MacKenzie"), SCM Special Fund, LLC and Sutter Opportunity Fund 3, LLC (collectively, the "Offerors") to purchase up to 799 units, or approximately 4.9% of the outstanding limited partnership units, of Liberty at a price of $50 per unit, less certain reductions to that purchase price as described in the Offerors' written tender offer materials dated September 15, 2005 (the "Offering Materials"). The Offerors are not affiliated with Liberty or its general partner. The Offerors did not provide Liberty with a copy of the Offering Materials at or prior to the time they commenced the Offer. Liberty learned of the Offer only after certain unit holders contacted Liberty to inquire about the Offer and Liberty thereafter obtained a copy of the Offering Materials. Liberty expresses no opinion and is neutral with respect to whether or not unit holders should tender their units in response to the Offer. As Liberty has previously disclosed to its unit holders, Liberty is in the process of liquidating its portfolio of investments in other limited partnerships. It is uncertain at this time how much money, if any, will be realized by Liberty and its unit holders from the liquidation of Liberty's investments. Liberty has not prepared itself or received from any third party any valuations of its investments. Accordingly, Liberty takes no position on whether or not the Offer and its purchase price are attractive or unattractive to unit holders from an economic point of view. Nevertheless, the Offer contains certain misstatements of material fact and there are other facts that unit holders may wish to consider in deciding whether or not to tender their units in response to the Offer. Liberty urges its unit holders to consider the following: First, the Offering Materials incorrectly state: "The general partner has given no indication when the partnership will be liquidating. Therefore, if the general partner's past actions are any indication of the future, investors may not see liquidity for some time." Those statements are untrue. In its July 2005 letter to all unit holders, which accompanied Liberty's Annual Report for the fiscal year ended March 15, 2005, Liberty informed unit holders of recent sales of Liberty's investments, which resulted in a distribution by Liberty to unit holders of $120 per unit in April 2005 and further stated: "The General Partner continues to actively work with the local general partners to pursue other potential purchases for the remaining properties. It is anticipated to take at least three years for the Partnership to liquidate its entire portfolio." Second, the Offer raises certain questions about its potential impact on Liberty's tax status for federal income tax purposes. Liberty is currently treated, and has since its inception been treated, as a partnership and a pass-through entity for federal income tax purposes -- a tax status that is desirable and beneficial to Liberty and its investors. That beneficial tax status might be lost, and Liberty might be taxed as a corporation, if it were deemed to be a "publicly traded partnership" within the meaning of the Internal Revenue Code and certain regulations promulgated by the Internal Revenue Service. It is uncertain whether or not the Offer, if consummated, might cause Liberty to be deemed a "publicly traded partnership." Accordingly, Liberty will not permit any units to be transferred pursuant to the Offer unless and until the Offerors provide Liberty with (i) an opinion of counsel that the Offer will not result in Liberty being deemed to be a "publicly traded partnership" for federal income tax purposes and (ii) an agreement to indemnify Liberty its general partner and its unit holders for any loss or liability relating to any adverse tax consequences arising from the Offer. This legal opinion and indemnity must be in a form and content satisfactory to Liberty and its counsel. Third, the Assignment Form and proposed transfer documentation included with the Offering Materials are inconsistent with Liberty's long-established practices, procedures and documentation necessary for unit holders to transfer their units. Accordingly, the Offerors' Assignment Form and proposed transfer documentation will not be accepted by Liberty and units will not be transferred based on the Offerors' proposed documentation. The Offerors and any unit holder wishing to sell his, her or its units must each complete Liberty's standard transfer and subscription documentation in accordance with Liberty's standard practices and procedures. Among other things, each selling unit holder must individually sign each of Liberty's required transfer documents. Pursuant to Liberty's well-established practices and procedures, Liberty does not accept and, and will not accept in connection with the Offer, signatures by persons other than the selling unit holder who purport to act based on a power of attorney executed by the unit holder. Persons who wish to sell their units to the Offerors should contact Liberty and request its standard transfer documentation. Fourth, the Offer does not afford tendering unit holders withdrawal or proration rights and states that units "will be purchased on a first-come, first-buy basis." Liberty believes that such terms are highly coercive and unfair to unit holders and may be in violation of the federal securities laws. Fifth, the Offer in its entirety may be in violation of the federal securities laws. Persons making a tender offer who, after the consummation of the offer, will directly or indirectly own more than 5% of a class of securities are required under federal law to provide significantly more information and disclosures to unit holders than the Offering Materials provide and to provide tendering unit holders with full withdrawal and proration rights during the entire time the tender offer remains open, which, as noted above, the Offer does not provide. While the Offer by its terms seeks approximately 4.9% of Liberty's outstanding units, Liberty is unable at this time to determine whether the Offerors and their affiliates will own more than 5% of Liberty's units after consummation of the Offer. In particular, there are certain facts and circumstances that suggest that the Offerors may be acting as part of an undisclosed group, within the meaning of the federal securities laws, with an individual who is currently a unit holder of Liberty (the "Current Unit Holder"). If the Offerors and the Current Unit Holder are acting as a group, then collectively the existing holdings of the Current Unit Holder combined with the units sought by the Offerors would exceed the 5% threshold. Under such circumstances, the Offer would be in violation of the federal securities laws and the Offerors should have provided unit holders 98 with additional information about themselves and the Offer and the Offer should have included full withdrawal and proration rights. Liberty does not currently have sufficient information to know whether or not the Offerors and the Current Unit Holder are acting as a group within the meaning of the federal securities laws. Among other things that suggest that they may be acting as a group are: (1) the Current Unit Holder obtained from the Internal Revenue Service a copy of Liberty's federal income tax return, which includes the names and addresses of Liberty's unit holders, and gave that information to the Offerors to help them mail the Offering Materials to unit holders; (2) the Current Unit Holder made a request to inspect Liberty's books and records shortly before the commencement of the Offer and designated MacKenzie, one of the Offerors, as his representative for inspecting the books and records; (3) the general counsel of MacKenzie has described the Current Unit Holder as "a competitor/joint venturer" with MacKenzie; and (4) there appear to be other relationships and dealings between the Offerors or their affiliates and the Current Unit Holder. The Current Unit Holder is also subject to a consent decree enjoining him from violating the federal securities laws and engaging in certain mini-tender offers that resolved a prior action brought by the Securities and Exchange Commission against him which alleged that the Current Unit Holder had made "fraudulent mini-tender offers." Liberty, through its counsel, has asked both the Offerors and the Current Unit Holder to disclose the precise nature of their relationship and to inform Liberty of any agreements between the Offerors and the Current Unit Holder respecting Liberty and its securities, but neither the Offerors nor the Current Unit Holder has yet provided this requested information. If Liberty hereafter obtains additional information such that its counsel is of the opinion that the Offer does violate any applicable federal or state securities laws, then Liberty, in accordance with the terms of its Partnership Agreement, will not permit the transfer of any units pursuant to the Offer. * * * Each unit holder should consult with his, her or its own investment, tax and legal advisors in deciding whether or not to tender units in response to the Offer. As a precaution to make sure that any tendering unit holder is aware of the disclosures contained in this press release, Liberty will require, as a condition to processing transfer requests, each tendering unit holder to sign a written statement acknowledging that they are aware of and understand the disclosures contained in this press release and that they wish to proceed with the sale of their units to the Offerors anyway. Certain statements in this press release may constitute forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and beliefs and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are detailed in Liberty Tax Credit Plus L.P.'s Annual Report on Form 10-K for the period ended March 15, 2005, and in its other filings with the Securities and Exchange Commission. Such forward-looking statements speak only as of the date of this press release. Liberty Tax Credit Plus L.P. expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in Liberty Tax Credit Plus L.P.'s expectations with regard thereto or change in events, conditions, or circumstances on which any such statement is based. # # # 99 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners of Liberty Tax Credit Plus L.P. and Subsidiaries (A Delaware Limited Partnership) In connection with our audits of the consolidated financial statements of Liberty Tax Credit Plus L.P. and Subsidiaries included in the Form 10-K as presented in our opinion dated June 12, 2006 on page 19 and based on the reports of other auditors, we have also audited supporting Schedule I for the 2005, 2004 and 2003 Fiscal Years and Schedule III at March 15, 2006. 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 discussed in Note 12(a), the consolidated financial include the financial statements of four subsidiary partnerships with significant contingencies and uncertainties. The financial statements of these subsidiary partnerships were prepared assuming that they will continue as going concerns. These subsidiary partnerships' net losses aggregated $725,929 (Fiscal 2005), $698,154 (Fiscal 2004) and $678,419 (Fiscal 2003), and their assets aggregated $10,591,434 and $14,038,472 at March 15, 2006 and 2005, respectively. Management's plans in regard to these matters are also described in Note 12(a). The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. /s/ TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI LLP New York, New York June 12, 2006 100 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT Summarized condensed financial information of registrant (not including consolidated subsidiary partnerships): LIBERTY TAX CREDIT PLUS L.P. CONDENSED BALANCE SHEETS ASSETS

Investments in subsidiary partnerships are recorded in accordance with the equity method of accounting, wherein the investments are not reduced below zero. Accordingly, partners' equity on the consolidated balance sheet will differ from partners' equity shown above. 101 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT LIBERTY TAX CREDIT PLUS L.P. CONDENSED STATEMENTS OF OPERATIONS

(*) Includes suspended prior year losses in excess of investment in accordance with equity method of accounting amounting to $2,234,157, $7,694,855 and $1,444,277 for the years ended March 15, 2006, 2005, and 2004, respectively. 102 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT LIBERTY TAX CREDIT PLUS L.P. CONDENSED STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents

103 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 15, 2006

104 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 15, 2006 (continued)

(a) 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 date of acquisition. (b) Furniture and fixtures, included in buildings and improvements, are depreciated primarily by the straight line method over their estimated useful lives ranging from 3 to 20 years. (c) The Property and the related assets and liabilities were sold during the fiscal year ended March 15, 2003 and included as part of discontinued operations. See Note 10 in Item 8, Financial Statements and Supplementary Data. (d) The Partnership's Local Partnership Interests in this Local Partnership was sold during the fiscal year ended March 15, 2003. 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 15, 2004 and included as part of discontinued operations. See Note 10 in Item 8, Financial Statements and Supplementary Data. (f) The Partnership recorded the transfer of the deed in lieu of foreclosure to Bryden Road, a property owned by Shiloh. See Note 10 in Item 8, Financial Statements and Supplementary Data. (g) The Property and the related assets and liabilities were sold during the fiscal year ended March 15, 2005. See Note 10 in Item 8, Financial Statements and Supplementary Data. (h) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 15, 2005. See Note 10 in Item 8., Financial Statements and Supplementary Data. (i) These properties are included in discontinued operations for the year ended March 15, 2004. See Note 13 in item 8, Financial Statements and Supplementary Data. (j) These properties are included in discontinued operations for the year ended March 15, 2005. See Note 13 in item 8, Financial Statements and Supplementary Data. (k) The Property and the related assets and liabilities were sold during the fiscal year ended March 15, 2006. See Note 10 in Item 8, Financial Statements and Supplementary Data. (l) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 15, 2006. See Note 10 in Item 8., Financial Statements and Supplementary Data. (m) These properties are included in discontinued operations for the year ended March 15, 2006. See Note 13 in item 8, Financial Statements and Supplementary Data. 105 LIBERTY TAX CREDIT PLUS L.P. AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 15, 2006 (continued)

At the time the local partnerships were acquired by Liberty Tax Credit Plus Limited Partnership, the entire purchase price paid by Liberty Tax Credit Plus 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. 106

LIBERTY TAX CREDIT PLUS LP 10-K