10-K 1 f10k_lib2-2007.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2007 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NUMBER 0-24660 LIBERTY TAX CREDIT PLUS II L.P. (Exact name of registrant as specified in its charter) Delaware 13-3458180 ------------------------------------------------ ------------------- (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 (including underlying 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 (ss.229.405 of this chapter) 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 of 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 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 30, 2006 was $(6,485,000), 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 II L.P. (the "Partnership") is a limited partnership which was formed under the laws of the State of Delaware on March 25, 1988. The general partners of the Partnership are Related Credit Properties II L.P., a Delaware limited partnership (the "Related General Partner"), Liberty Associates II L.P., a Delaware limited partnership ("Liberty Associates"), and Liberty GP II Inc. (formerly Shearson Liberty GP II Inc.), a Delaware corporation (the "Liberty General Partner" and together with the Related General Partner and Liberty Associates, the "General Partners"). The general partner of the Related General Partner is Related Credit Properties II Inc., a Delaware corporation. The general partners of Liberty Associates are Related Credit Properties II Inc., and the Liberty General Partner. Liberty Associates is also the special limited partner of the Partnership. The ultimate parent of the General Partners is Centerline Holding Company ("Centerline") (which had been known as CharterMac until April 2007). On March 15, 2007, Centerline announced the retirement of Alan P. Hirmes as Chief Financial Officer of Centerline. Upon his retirement, he also resigned from his position as Director, President, Chief Executive Officer and Chief Financial Officer of the general partner of the Related General Partner. Centerline has named Robert L. Levy as Chief Financial Officer and Andrew J. Weil as President and Chief Executive Officer to replace Mr. Hirmes. On July 20, 1988 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"). As of January 9, 1989 (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 $115,917,500 of gross proceeds of the Offering from 8,431 investors. The Partnership was formed to invest, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships" or "subsidiary partnerships") each of which owns one or more leveraged low-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"). Some of the Apartment Complexes benefit from one or more other forms of federal and state housing assistance. The Partnership's investment in each Local Partnership represents from 73.52% to 98% of the partnership interests in the Local Partnership. The Partnership had originally acquired interests in twenty-seven Local Partnerships. The Partnership is currently in the process of disposing of its investments. During the fiscal year ended March 31, 2007, the property and the related assets and liabilities of eight Local Partnerships and the limited partnership interest in two Local Partnerships were sold. Through the fiscal year ended March 31, 2007, the property and the related assets and liabilities of thirteen Local Partnerships and the limited partnership interests in six Local Partnerships were sold. In addition, as of March 31, 2007, two Local Partnerships have entered into agreements to sell their property and the related assets and liabilities. Subsequently, on April 20, 2007, the property and the related assets and liabilities of one Local Partnership were sold (see Item 8, Note 14). See Item 2, Properties. Liberty Associates is the special limited partner in all remaining eight 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 execute control over the management and policies of the Local Partnerships. Investment Objectives, Tax Credits ---------------------------------- The investment objectives of the Partnership are to: 1. Entitle qualified BACs holders to Tax Credits (and to a lesser extent 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. Preserve and protect the Partnership's capital; 3. Participate in any capital appreciation in the value of the Properties and provide distributions of sale or refinancing proceeds upon the disposition of the Properties; 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. One of the Partnership's objectives is to entitle qualified BACs holders to Tax Credits over the period of the Partnership's entitlement to claim Tax Credits. Each of the Local Partnerships in which the Partnership has acquired an interest has been allocated by the relevant state credit agency 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 2 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 (i) the Local Partnership ceases to meet qualification requirements, (ii) there is a decrease in the qualified basis of a Property, or (iii) there is a reduction in its interest in the Property 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. 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). For the year ended March 31, 2007, the Partnership recorded approximately $3,540,000 as a loss on impairment of fixed assets. Through March 31, 2007, the Partnership has recorded approximately $15,022,000 as an aggregate loss on impairment of assets or reduction to estimated fair value. The Partnership has met its primary objective of generating Tax Credits for qualified BACs holders. As of March 31, 2007, the Tax Credit Periods and Compliance Periods for all of the Properties have expired. The Partnership 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 investments and other passive activities, and allocating passive losses to 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. The General Partners generally required, in connection with certain investments in Local Partnerships, that the general partners of the Local Partnership ("Local General Partners") undertake the funding of operating deficits (up to a stated maximum amount) of the Local Partnership during a limited period of time following the Partnership's investment ("Guarantee Period"). Generally the amounts funded pursuant to the operating deficit guarantee (the "Operating Deficit Guarantee") have been treated as Operating Loans, do not bear interest and will be repaid only out of 50% of available cash flow or out of available net sale or refinancing proceeds. See Item 8, Note 8 - Related Party Transactions. As of March 31, 2007, all Operating Deficit Guarantees have expired. As of March 31, 2007, 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 and through the fiscal year ended March 31, 2007, distributions from sales proceeds were made to the BACs holders of approximately $8,927,000 and to the General Partners of approximately $90,000. Government Regulations ---------------------- 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 38% 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 owner's equity contribution. As of March 31, 2007, there were seven Local Partnerships subsidized by HUD. The Partnership cannot sell or substantially liquidate its investments in Local 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. 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 hereto. Sale of Properties ------------------ The Partnership is currently in the process of disposing of its investments. During the fiscal year ended March 31, 2007, the property and the related assets and liabilities of eight Local Partnerships and the limited partnership interest in two Local Partnerships were sold. As of March 31, 2007, the property and the related assets and liabilities of thirteen Local Partnerships and the limited partnership interest in six Local Partnerships were sold. In addition, as of March 31, 2007, two Local Partnerships have entered into agreements to sell their property and the related assets and liabilities. There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investment. Subsequently, on April 20, 2007, the property and the related assets and liabilities of one Local Partnership were sold (see Item 8, Note 14). On December 19, 2006, the property and the related assets and liabilities of West 107th Street Associates, L.P. ("West 107th Street") were sold to an unaffiliated third party purchaser for a sales price of $200,000, which was used to pay closing costs and other liabilities. During the quarter ended December 31, 2006 and prior to the date of the sale, in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment of Disposal of Long-Lived Asset" ("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 $1,500,000. The sale resulted in a loss of approximately $215,000 resulting from the write-off of the basis in the property at the date of the sale. The sale also resulted in a net non-cash contribution to the Partnership of approximately $265,000 as a result of the write-off of advances owed by West 107th Street to an affiliate of the General Partner. On December 19, 2006, the property and the related assets and liabilities of General Atlantic Second Avenue Associates, L.P. ("96th Street") were sold to an unaffiliated third party purchaser for a sales price of $25,000, which was used 3 to pay closing costs and other liabilities. During the quarter ended September 30, 2006, 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 $1,160,000. The sale resulted in a loss of approximately $214,000 resulting from the write-off of the basis in the property at the date of the sale. The sale also resulted in a non-cash contribution to the Partnership of approximately $597,000 as a result of the write-off of advances owed by 96th Street to an affiliate of the General Partner. On December 31, 2006, the property and the related assets and liabilities of Spring Creek Associates II, L.P. ("Spring Creek") were sold to an unaffiliated third party purchaser for a sales price of $16,100,000 including a note receivable in the amount of $2,500,000. The Partnership received $12,280,115, as a distribution from this sale after the repayment of other liabilities and closing costs of approximately $2,170,000. During the quarter ended March 31, 2006, 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 $5,225,000. The sale resulted in a gain of approximately $145,000 resulting from the write-off of the deficit basis in the property at the date of the sale. The sale also resulted in a net non-cash distribution to the Partnership of approximately $1,176,000 as a result of the write-off of loans owed to Spring Creek from an affiliate of the General Partner. On October 25, 2006, the Partnership's limited partnership interest in Rolling Green Limited Partnership ("Rolling Green") was sold to the Local General Partner for a sales price of $399,990. The Partnership received proceeds of $399,990 from this sale. The sale resulted in a gain of approximately $1,940,000 resulting from the write-off of the deficit basis in the property of approximately $1,540,000 and the $399,990 cash received from the sale. On August 1, 2006, the Partnership's limited partnership interest in Metropolitan Towers Associates, L.P. ("Metropolitan") was sold to the Local General Partner for a sales price of $892,490. The Partnership received proceeds of $42,490 and the remaining $850,000 is to be paid in guaranteed payments payable on certain dates through December 31, 2008. As of March 31, 2007, $150,000 has been received against the $850,000 and the balance of $700,000 is included in other assets at March 31, 2007. The sale resulted in gain of approximately $1,133,000 resulting from the write-off of the deficit basis in the property of approximately $240,000 at the date of the sale and the $892,490 proceeds resulting from the sale. On July 6, 2006, the property and the related assets and liabilities of 235 East 14th Street Associates, L.P. ("14th Street") were sold to an unaffiliated third party purchaser for a sales price of $75,758, which was used to pay closing costs and other liabilities. During the quarter ended June 30, 2006, 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 $880,000. The sale resulted in a loss of approximately $614,000 resulting from the write-off of the basis in the property at the date of the sale. The sale also resulted in a net non-cash contribution to the Partnership of approximately $539,000 as a result of the write-off of advances owed by 14th Street to an affiliate of the General Partner. The sale resulted in the liquidation of 14th Street. On June 5, 2006, the property and the related assets and liabilities of Willoughby/Wyckoff Housing Associates, L.P. ("Willoughby") were sold to an unaffiliated third party purchaser for a sales price of $4,800,000. There was no distribution from this sale after the repayment of mortgages, other liabilities and closing costs of approximately $4,800,000. The sale resulted in a gain of approximately $2,033,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On May 1, 2006, the property and the related assets and liabilities of 2051 Grand Concourse Housing Associates, L.P. ("Grand Concourse") were sold to an unaffiliated third party purchaser for a sales price of $4,937,500. The Partnership received $200,066 as a distribution from this sale after the repayment of mortgages, other liabilities, distributions to minority interests and closing costs of approximately $4,737,000. The sale resulted in a gain of approximately $2,491,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On May 1, 2006, the property and the related assets and liabilities of Concourse Artists Housing Associates, L.P. ("Concourse Artists") were sold to an unaffiliated third party purchaser for a sales price of $1,797,500. The Partnership received $66,147 as a distribution from this sale after the repayment of mortgages, other liabilities, distributions to minority interests and closing costs of approximately $1,731,000. The sale resulted in a gain of approximately $704,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On May 1, 2006, the property and the related assets and liabilities of Robin Housing Associates, L.P. ("Robin Housing") were sold to an unaffiliated third party purchaser for a sales price of $7,265,000. The Partnership received $443,807 as a distribution from this sale after the repayment of mortgages, other liabilities, distributions to minority interests and closing costs of approximately $6,821,000. The sale resulted in a gain of approximately $3,339,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On January 17, 2006, the Partnership's remaining 80% of its limited partnership interest in Santa Juanita II Limited Partnership ("Santa Juanita") was sold to the Local General Partner for a sales price of $375,000 cash plus 50% of the amount, if any, by which the aggregate sales price for the apartment units exceeds the actual conversion cost, as defined in the transfer agreement, from the Local General Partner's conversion of the property to condominium ownership. The Partnership received proceeds of $375,000 from this sale. The sale resulted in a loss of approximately $907,000 resulting from the write-off of the basis in the property of approximately $1,282,000 and the $375,000 cash received from the sale. On October 20, 2005, the Partnership's limited partnership interest in Gramco Development Limited Dividend Partnership, L.P. ("Bayamon") was sold to the Local General Partner and one of its affiliates for a sale price of $3,000,000. The Partnership received proceeds of $3,000,000 from this sale. The sale resulted in a gain of approximately $2,728,000 resulting from the write-off of the basis in the property of approximately $272,000 and the $3,000,000 cash received from the sale. 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, which was used for the repayment of mortgages, other liabilities and closing costs. During the quarter ended September 30, 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 $850,000. The sale resulted in a gain of approximately $50,000, resulting from the write-off of the basis in the property which was recognized during the quarter ended December 31, 2005. An adjustment to the gain of approximately $(190,000) was recorded during the quarter ended March 31, 2006, resulting in overall loss of approximately $140,000. The sale resulted in the liquidation of Penn Alto. 4 On July 15, 2005, the Partnership sold 20% of its limited partnership interest in Santa Juanita to the Local General Partner for $100,000. The sale resulted in a gain of $100,000 which was recognized during the quarter ended September 30, 2005. The remaining 80% of limited partnership interest was sold on January 17, 2006 (see above for discussion). On May 11, 2005, the Partnership's limited partnership interest in Upper Fifth Avenue Residential Associates, L.P. ("Upper Fifth") was sold to the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $5,192,000 which was recognized during the quarter ended December 31, 2005. An additional gain of approximately $120,000 was recorded during the quarter ended March 31, 2006, resulting in a total gain of approximately $5,312,000, resulting from the write-off of the deficit basis in the property. On December 30, 2004, the property and the related assets and liabilities of Property Development Associates, L.P. ("Property Development") were sold to an affiliate of the Local General Partner for a sales price of $7,097,000, resulting in a loss of approximately $1,334,000, resulting from the write-off of the basis in the property. The sale resulted in the liquidation of Property Development. On September 21, 2004, the Partnership's limited partnership interest in Alexis Park Apartments ("Alexis Park") was sold to an unaffiliated third party purchaser for $1,000,000. This amount consisted of $600,000 paid in cash at the closing and $400,000 pursuant to two promissory notes of $200,000 each to the Partnership. Both notes compound interest at 5% and the principal and interest of one note was to be paid annually from 50% of cash flow, with a maturity in five years, when all unpaid principal and interest shall become payable. The principal and interest on the second note was to be paid upon refinancing or sale of the Property, but in no event later than 10 years. In April 2006 both notes were fully paid. The sale resulted in a gain of approximately $1,006,000, resulting from the write-off of the deficit basis in the property. Assets Held for Sale -------------------- On February 1, 2007, Williamsburg Residential, L.P. ("Williamsburg") entered into a purchase and sale agreement to sell its property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $2,250,346. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing is expected to occur by the end of 2007. No assurance can be given that the sale will actually occur. As of December 31, 2006, Williamsburg had property and equipment, at cost, of approximately $2,778,000, accumulated depreciation of approximately $1,211,000 and mortgage debt of approximately $1,833,000. On January 11, 2007, Whittier Plaza Associates, L.P. ("Whittier") entered into a purchase and sale agreement to sell its property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $1,444,500. The sales documents have been executed and the initial deposit funds were being held in escrow. As of December 31, 2006, Whittier had property and equipment, at cost, of approximately $1,608,000, accumulated depreciation of approximately $864,000 and mortgage debt of approximately $1,579,000. The closing occurred subsequently on April 20, 2007 (see Item 8, Note 14). Competition ----------- The real estate business is highly competitive and substantially all of the Properties acquired by the Partnership are subject to 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 business which may compete 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. 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 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 38% 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. As of March 31, 2007, there were seven Local Partnerships subsidized by HUD. 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 contract expires. Item 1B. Unresolved Staff Comments None Item 2. Properties The Partnership had originally acquired an interest as a limited partner in twenty-seven Local Partnerships. During the fiscal year ended March 31, 2007, the property and the related assets and liabilities of eight Local Partnerships and the limited partnership interest in two Local Partnerships were sold. Through the fiscal year ended March 31, 2007, the property and the related assets and liabilities of thirteen Local Partnerships and the limited partnership interest in six Local Partnerships were sold. Set forth below is a schedule of these Local Partnerships including certain information concerning the Apartment Complexes (the "Local Partnership Schedule"). Further information concerning these Local Partnerships and their Properties, including any encumbrances affecting the Properties, may be found in Item 15, Schedule III. 5 Except for the one Local Partnership listed below, the following is the allocation of ownership percentage as of March 31, 2007 for each of the eight remaining Local Partnerships: Local General Partner 1% Special Limited Partner 1% Limited Partner - Liberty Tax Credit Plus II L.P. 98%

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

(a) The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2002 (see Item 7 below). (b) The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2004 (see Item 7 below). (c) The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2005 (see Item 7 below). (d) The limited partnership interest was sold during the fiscal year ended March 31, 2005 (see Item 7 below). (e) The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2006 (see Item 7 below). (f) The limited partnership interest was sold during the fiscal year ended March 31, 2006 (see Item 7 below). (g) The property and the related assets and liabilities were sold during the fiscal year ended March 31, 2007 (see Item 7 below). (h) The limited partnership interest was sold during the fiscal year ended March 31, 2007 (see Item 7 below). All leases are generally for periods not exceeding one to two years and no tenant occupies more than 10% of the rentable square footage. Rents from commercial tenants (to which average rental per square foot applies) comprise less than 5% of the rental revenues of the 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 periodically reviews the physical state of the Properties and suggests to the respective Local General Partners budget improvements, which are generally funded from cash flow from operations or release of replacement reserve escrows to the extent available. Management periodically reviews the insurance coverage of the Properties and subject to budget constraints recommends to the respective Local General Partners additional coverage if warranted. Management believes that coverage is presently adequate. See Item 1, Business, above for the general competitive conditions to which the Local Partnerships and 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. Item 3. Legal Proceedings None Item 4. Submission of Matters to a Vote of Stockholders None 7 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The Partnership had issued and has outstanding 115,917.5 Limited Partnership Interests, each representing a $1,000 capital contribution to the Partnership, or an aggregate capital contribution of $115,917,500. 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 115,917.5 BACs to the purchasers thereof for an aggregate purchase price of $115,917,500. 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 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. Implementation of these 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. As of May 25, 2007, the Partnership had 7,752 registered holders of an aggregate of 115,917.5 BACs. All of the Partnership's general partnership interests, representing an aggregate capital contribution of $2,000, are held by the three General Partners. There are no material provisions in the Partnership Agreement that restrict the ability of the Partnership to make distributions. During and through March 31, 2007, distributions from sales proceeds were made to the BACs holders of approximately $8,927,000 and to the General Partners of approximately $90,000. The Partnership does not anticipate providing cash distributions to BACs holders other than distributions of sale or refinancing proceeds upon the disposition of Properties. The Partnership does not anticipate being able to make distributions sufficient to return to BACs holders their original capital contributions. Transfer Procedures ------------------- The Partnership from time to time receives requests by unit holders and others to transfer BACs and/or limited partnership interests. Such requests may occur in connection with tender offers for the Partnership's units. Such requests 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 In 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 acceptable indemnity and legal opinion of the type described above. At the end of each tax year, the General Partners, in 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. 8 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.

During the years ended March 31, 2003 through 2005, total assets and liabilities decreased primarily due to the sale of Local Partnerships. During the years ended March 31, 2007 and 2006, total assets and liabilities decreased due to the sale of Local Partnerships as well as losses on impairment of property and equipment. 9 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 twenty-seven Local Partnerships. During the fiscal year ended March 31, 2007, the property and the related assets and liabilities of eight Local Partnerships and the limited partnership interest in two Local Partnerships were sold. Through the year ended March 31, 2007, the properties and the related assets and liabilities of thirteen Local Partnerships and the limited partnership interest in six Local Partnerships were sold. For a discussion of these sales, see Sale of Properties (Item 8, Note 10). In addition, as of March 31, 2007, two Local Partnerships have entered into agreements to sell their property and the related assets and liabilities (see Item 8, Note 11). Subsequently, on April 20, 2007, the property and the related assets and liabilities of one Local Partnership were sold (see Item 8, Note 14). Short-Term ---------- During the year ended March 31, 2007, the Partnership's primary sources of funds included: (i) working capital reserves; (ii) interest earned on the working capital reserves; (iii) cash distributions from operations of the Local Partnerships; and (iv) sales proceeds and distributions. Such funds are available to meet the obligations of the Partnership. The Partnership does not anticipate providing cash distributions to BACs holders in circumstances other than refinancing or sales. During the years ended March 31, 2007, 2006 and 2005, cash distributions received from the Local Partnerships were approximately $12,993,000, $246,000 and $4,000, respectively, which included distributions from sales amounting to approximately $12,990,000, $0 and $21,000, respectively. Additionally, during the years ended March 31, 2007, 2006 and 2005, approximately $1,667,000, $3,100,000 and $1,000,000, respectively, of sales proceeds were received by the Partnership from the sale of partnership interest. The Partnership had a working capital of approximately $3,159,000 on March 31, 2007. The Partnership is not expected to have access to additional sources of financing, and in particular will not have the ability to access BACs holders for additional capital contributions to provide capital if needed by the Partnership. There can be no assurance that additional funds will be available to the Partnership or any Local Partnership, nor that, if any Property is sold, the proceeds of the sale will be sufficient to pay outstanding balances due on mortgage loans or other outstanding indebtedness to which the Property is subject. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investment. The General Partners believe that cash distributions received from the operations of the Local Partnerships are sufficient to fund the Partnership's ongoing operations for the foreseeable future (assuming the General Partners continue to defer payment of their management fees). Certain fees and expense reimbursements owed to the General Partners amounting to approximately $2,057,000 and $15,022,000 were accrued and unpaid as of March 31, 2007 and 2006, respectively. In particular, partnership management fees owed to the General Partners amounting to approximately $2,023,000 and $14,970,000 were accrued and unpaid as of March 31, 2007 and 2006, respectively. During the year ended March 31, 2007, the Partnership deemed the unpaid partnership management fees that were related to sold properties uncollectible and, as a result, wrote them off in the amount of approximately $12,325,000. Furthermore, expense reimbursements and asset monitoring fees owed to the General Partners amounting to approximately $33,000 and $52,000 were accrued and unpaid as of March 15, 2007 and 2006, 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 31, 2007, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $2,892,000. This increase was due to proceeds from sales ($33,668,000) and an increase in due to selling partners ($8,000) which exceeded net cash used in operating activities ($1,200,000), improvements to property and equipment ($536,000), cost paid relating to sale of properties ($2,148,000), an increase in cash held in escrow ($147,000), a decrease in capitalization of consolidated subsidiaries attributable to minority interest ($3,480,000) and net repayments of mortgage notes ($14,255,000). In the adjustments to reconcile the net loss to net cash used in operating activities are gain on sale of properties of approximately ($9,414,000), depreciation and amortization of approximately ($3,046,000) and a loss on impairment of fixed assets of ($3,540,000). Total expenses for the years ended March 31, 2007, 2006 and 2005, excluding depreciation and amortization, interest and general and administrative - related parties, totaled $5,410,212, $5,571,250 and $4,882,435, respectively. Accounts payable and other liabilities totaled $1,787,747 and $3,212,976, as of March 31, 2007 and 2006, 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. Accrued interest payable as of March 31, 2007 and 2006 was $2,944,857 and $1,793,739, 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 indicated in the above table 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. Long-Term --------- 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 10 Local Partnerships, the resolution of the existing contingencies are not anticipated to impact future results of operations, liquidity or financial condition in a material way. However, the Partnership's loss of its investment in a Local Partnership may result in recapture of Tax Credits if the investment is lost before the expiration of the Compliance Period during which the Properties must comply with various rent and other restrictions. As of March 31, 2007, the Compliance Periods for all the Properties have ended. 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 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 31, 2007 to make future payments under its debt agreements and other contractual obligations.

(a) The mortgage notes are payable in aggregate monthly installments of approximately $185,000 including principal and interest at rates varying from 1% to 9% per annum, through 2042. 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. The following table summarizes the Partnership's commitments from discontinued operations as of March 31, 2007 to make future payments under its debt agreements and other contractual obligations.

(a) The mortgage notes are payable in aggregate monthly installments of approximately $26,000 including principal and interest with rates varying from 1% to 10.75% per annum and have maturity dates through 2030. The loans are collateralized by the land and buildings of the subsidiary partnerships, the assignment of certain subsidiary partnerships' rents, leases, and replacement reserves, and are 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, construction period interest and any other costs incurred in acquiring such property and equipment. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). 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 11 depreciated cost. Property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the Property is considered to be impaired and the depreciated cost exceeds estimated fair value. During the year ended March 31, 2007, the Partnership has recorded $3,540,000 as a loss on impairment of fixed assets. Through March 31, 2007, the Partnership has recorded approximately $15,022,000 as a loss on impairment of fixed assets. In accordance with SFAS No. 144, the results of discontinued operations are reported as a separate component of income before extraordinary items on the Consolidated Statements of Operations. Discontinued operations include the results of operations and any gain or loss recognized for Local Partnerships that have been disposed of or are held for sale. A gain or loss recognized on the disposal is disclosed in the Notes 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. See Note 13 in Item 8 regarding discontinued operations. At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. Such assets would be classified as property and equipment-held for sale and are not depreciated. There were two assets classified as property and equipment-held for sale at March 31, 2007. See Notes 10 and 13 in Item 8 regarding assets held for sale and discontinued operations. 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:

* Reclassified for comparative purposes. Other revenues from discontinued operations include the following amounts at both the Partnership and Local Partnership level:

* Reclassified for comparative purposes. 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. Results of Operations --------------------- The net loss for the years ended March 31, 2007, 2006 and 2005 (the 2006, 2005 and 2004 Fiscal Years, respectively) totaled $(5,841,070), $(701,571) and $(4,623,823), respectively. The majority of the Local Partnerships' revenues continue to be in the form of rental income with the corresponding expenses divided among operations, depreciation and mortgage interest. 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. As of March 31, 2007, the Compliance Periods for all the Properties have ended. The following is a summary of the results of operations of the Partnership for the 2006, 2005 and 2004 Fiscal Years, respectively, excluding the results of its discontinued operations which are not reflected in the following discussions (see Item 8, Note 13). 2006 vs. 2005 ------------- Rental income increased approximately 1% for the 2006 Fiscal Year as compared to the 2005 Fiscal Year, primarily due to increases in rental rates and decreases in vacancies at five Local Partnerships partially offset by a decrease in occupancy at three Local Partnerships. 12 Other income increased approximately $116,000 for the 2006 Fiscal Year as compared to the 2005 Fiscal Year, primarily due to an increase in interest income at the Partnership level resulting from the increase in proceeds from the sale of properties, a real estate tax rebate received at one Local Partnership and an increase in interest income resulting from higher reserve balances at a second Local Partnership, partially offset by the write-off of debt due to forgiveness at a third Local Partnership. Total expenses, excluding general and administrative-related parties, remained fairly consistent with a decrease of approximately 1% for the 2006 Fiscal Year as compared to the 2005 Fiscal Year. For the year ended March 31, 2007, the Partnership recorded $3,540,000 as a loss on impairment of fixed assets. General and administrative-related parties expenses decreased approximately $475,000 for the 2006 Fiscal Year as compared to the 2005 Fiscal Year, primarily due to a decrease in partnership management fees and expense reimbursement charges at the Partnership level resulting from the sale of properties. 2005 vs. 2004 ------------- Rental income increased approximately 1% for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to increases in rental rates and decreases in vacancies at the Local Partnerships. Other income increased approximately $144,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to the write-off of accrued interest at one Local Partnership. Total expenses, excluding repairs and maintenance, operating and other and insurance, remained fairly consistent with an increase of approximately 2% for the 2005 Fiscal Year as compared to the 2004 Fiscal Year. For the year ended March 31, 2006, the Partnership recorded $6,075,000 as a loss on impairment of fixed assets. Repairs and maintenance expenses increased approximately $649,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to an increase in security contract costs due to violent crimes and an increase in repair contracts at one Local Partnership and an increase in costs related to building and apartment restoration as well as landscaping and plumbing at a second Local Partnership. Operating and other expenses increased approximately $116,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to an increase in gas and electricity costs at several Local Partnerships. Insurance expenses decreased approximately $85,000 for the 2005 Fiscal Year as compared to the 2004 Fiscal Year, primarily due to a decrease in the insurance premium due to a change in the insurance provider at two Local Partnerships and a decrease in the health insurance premium due to a change in the employment policy under new management at a third Local Partnership. Results of Operations of Certain Local Partnerships --------------------------------------------------- (a) Subsidiary Partnerships - Going Concerns and Uncertainties Whittier Plaza Associates Limited Partnership ("Whittier") ---------------------------------------------------------- The financial statements for Whittier have been prepared assuming that Whittier will continue as a going concern. Whittier has sustained continuous losses since commencement of operations in 1988, including losses of $24,274 and $28,239 in 2006 and 2005 Fiscal Years, respectively. Whittier has experienced higher vacancies and lower rents than those originally projected, resulting in increased difficulty in meeting both operating and debt service obligations. The Local General Partner, pursuant to a development deficit guarantee agreement, has advanced approximately $5,000 and $3,000 in the 2006 and 2005 Fiscal Years, respectively, and approximately $492,000 since 1988 to fund operating cash shortfalls. In addition, Whittier's management company, an affiliate of the Local General Partner, has deferred receipt of various fees since 1991 totaling approximately $116,000. These items raise substantial doubt about Whittier's ability to continue as a going concern. The Partnership's investment in Whittier at March 31, 2007 and 2006 was reduced to zero as a result of prior years' losses and the minority interest balance was $0 at each date. Whittier's net loss after minority interest amounted to approximately $24,000, $28,000 and $24,000 for the 2006, 2005 and 2004 Fiscal Years. Subsequently, on April 20, 2007, the property and the related assets and liabilities of Whittier were sold (see Item 8, Note 14). Westminster Place II - Olive Site, L.P. ("Westminster") ------------------------------------------------------- The financial statements for Westminster have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of Westminster as a going concern. Westminster's rental subsidy fund agreement with the Missouri Housing Development Commission ("MHDC") was depleted in June 2004. Westminster has been approved by the MHDC for rental increases, however, these increases have not been sufficient to cover the loss of the rental subsidy payments. The loss of the rental subsidy payments and insufficient rental increases raise substantial doubt about Westminster's ability to continue as a going concern. Management is exploring a sale of Westminster and will continue to submit requests for rental increases for MHDC approval. b) Subsidiary Partnerships - Other Goodfellow Place Limited Partnership ("Goodfellow") --------------------------------------------------- In recent years, Goodfellow has experienced significant cash flow deficiencies. In addition, current liabilities exceed current assets by approximately $42,000, and there is $313,730 due to the General Partners and their affiliates. During 2006, the General Partners advanced Goodfellow $77,582 in the form of a long term interest free loan. The General Partners have informally indicated that they will continue to advance funds to Goodfellow in 2007, as needed, with an unsecured loan that will strengthen Goodfellow's overall financial position. Management believes that this action will allow Goodfellow to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of the sale of the Property and subsequent liquidation of the Local Partnership. 13 Williamsburg Residential, L.P. ("Williamsburg") ----------------------------------------------- In November 1996, the Local General Partner of Williamsburg stopped making its mortgage note payments which constituted an event of default. A Reinstatement and Modification Agreement was entered into effective March 1, 1997. The Partnership has advanced Williamsburg the necessary funds to keep the mortgage and escrows current during 2006 and is expected to continue to do so during 2007. The Partnership's investment in Williamsburg has been written down to $0 by prior years' losses and the minority interest balance was approximately $718,000 and $719,000 at March 31, 2007 and 2006, respectively. Williamsburg's net loss after minority interest amounted to approximately $82,000, $241,000 and $283,000 for the 2006, 2005, and 2004 Fiscal Years, respectively. As of March 31, 2007, the Partnership has advanced Williamsburg approximately $1,571,000. On February 1, 2007, Williamsburg entered into a purchase and sale agreement to sell its property and the related assets and liabilities (see Item 8, Note 10). Other ----- The Partnership's investments, as a limited partner in the Local Partnerships, are subject to the risks incident to potential losses arising from management and ownership of improved real estate. The Partnership's investments also could be adversely affected by poor economic conditions generally, which could increase vacancy levels, rental payment defaults, and increased operating expenses, any or all of which could threaten the financial viability of one or more of the Local Partnerships. There also are substantial risks associated with the operation of Properties receiving government assistance. These include governmental regulations concerning tenant eligibility, which may make it more difficult to rent apartments in the complexes, difficulties in obtaining government approval for rent increases, limitations on the percentage of income which low and moderate-income tenants may pay as rent, the possibility that Congress may not appropriate funds to enable HUD to make the rental assistance payments it has contracted to make, and the possibility that when the rental assistance contracts expire, there may not be market demand for apartments at full market rents in a Local Partnership's Property. 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 with which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs as, for example, for such items as fuel, utilities and labor. Item 7A. Quantitative and Qualitative Disclosure about Market Risk The Partnership has mortgage notes that are payable in aggregate monthly installments including principal and interest at rates varying from 1% to 10.75% per annum. The Partnership does not believe there is a material risk associated with the various interest rates associated with the mortgage notes as the majority of the Local Partnership mortgage notes have fixed rates. The Partnership currently discloses in Item 8, Note 3, the fair value of the mortgage notes payable. The Partnership does not have any other market risk sensitive instruments. 14 Item 8. Financial Statements and Supplementary Data Sequential Page ---------- Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 16 Consolidated Balance Sheets at March 31, 2007 and 2006 41 Consolidated Statements of Operations for the Years Ended March 31, 2007, 2006 and 2005 42 Consolidated Statements of Changes in Partners' (Deficit) Capital for the Years Ended March 31, 2007, 2006 and 2005 43 Consolidated Statements of Cash Flows for the Years Ended March 31, 2007, 2006 and 2005 44 Notes to Consolidated Financial Statements 46 15 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners of Liberty Tax Credit Plus II L.P. and Subsidiaries (A Delaware Limited Partnership) We have audited the consolidated balance sheets of Liberty Tax Credit Plus II L.P. and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2007 and 2006, and the related consolidated statements of operations, changes in partners' (deficit) capital, and cash flows for the years ended March 31, 2007, 2006 and 2005 (the 2006, 2005 and 2004 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 twelve (2006 Fiscal Year), thirteen (2005 Fiscal Year), and eleven (2004 Fiscal Year) subsidiary partnerships whose income (losses) aggregated $6,108,161, $(7,418,882) and $(1,984,913) for the 2006, 2005 and 2004 Fiscal Years, respectively, and whose assets constituted 68% and 42% of the Partnership's assets at March 31, 2007 and 2006, respectively, presented in the accompanying consolidated financial statements. The financial statements of these subsidiary partnerships were audited by other auditors whose reports thereon have been furnished to us and our opinion expressed herein, insofar as it relates to the amounts included for these subsidiary partnerships, is based solely upon the reports of the other auditors. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. 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 II L.P. and Subsidiaries at March 31, 2007 and 2006, and the results of their operations and their cash flows for the years ended March 31, 2007, 2006 and 2005, in conformity with U.S. generally accepted accounting principles. As discussed in Note 12(a), the consolidated financial statements include the financial statements of two limited partnerships with significant contingencies and uncertainties. The financial statements of these subsidiary partnerships were prepared assuming that each will continue as a going concern. The two subsidiary partnerships' net losses aggregated $186,984 (Fiscal 2006), $263,008 (Fiscal 2005) and $146,138 (Fiscal 2004) and their assets aggregated $5,311,512 and $5,499,209 at March 31, 2007 and 2006, respectively. These matters raise substantial doubt about these subsidiary partnerships' abilities to continue as going concerns. 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. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI LLP New York, New York June 28, 2007 16 [Letterhead of JOSE E. ROSARIO & CO.] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners Metropolitan Towers Associates, L.P. Rio Piedras, Puerto Rico I have audited the accompanying balance sheet of Metropolitan Towers Associates, LP as of July 31, 2006, and the related statement of loss and changes in partners' deficit and cash flows for the seven months period 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 audit. I conducted my audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Metropolitan Towers Associates, LP as of July 31, 2006, and the results of its operations and changes in partners' deficit and cash flows for the seven month period then ended in conformity with accounting principles generally accepted in the United State of America and Puerto Rico. /s/ Jose E. Rosario & Co. License No. 961 Expires December 1, 2007 San Juan, Puerto Rico September 21, 2006 Stamp No. 2198027 of the Puerto Rico Society of Certified Public Accountants is affixed to the original of this report. 17 [Letterhead of JOSE E. ROSARIO & CO.] INDEPENDENT AUDITOR'S REPORT To the Partners Metropolitan Towers Associates, L.P. I have audited the accompanying balance sheets of Metropolitan 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 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 Metropolitan Towers Associates, LP as of December 31, 2005 and 2004 and the results of its operations, changes in partners' capital and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United State of America. /s/ Jose E. Rosario & Co. License No. 961 Expires December 1, 2007 San Juan, Puerto Rico January 31, 2006 Stamp No. 2114029 of the Puerto Rico College of CPA was affixed to the original. 18 [Letterhead of RubinBrown] S2100-020 Report of Independent Registered Public Accounting Firm To The Partners Westminster Place II - Olive Site, L.P. St. Louis, Missouri We have audited the accompanying balance sheet of Westminster Place II - Olive Site, L.P., a limited partnership, as of December 31, 2005 and 2004 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 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. 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 Westminster Place II - Olive Site, 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 7 to the financial statements, the Partnership's rental subsidy was depleted during 2004 and the rent increases have not been sufficient to cover the loss of the subsidy payments. This situation raises substantial doubt about the Partnership's ability to continue as a going concern. Management's plans regarding theses matters are described in Note 7. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ RubinBrown LLP St. Louis, Missouri February 8, 2006 19 [Letterhead of RubinBrown] S2100-020 Report of Independent Registered Public Accounting Firm To The Partners Whittier Plaza Associates Limited Partnership St. Louis, Missouri We have audited the accompanying balance sheet of Whittier Plaza Associates Limited Partnership, a limited partnership (the Partnership), as of December 31, 2005 and 2004, 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 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. 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 Whittier Plaza 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. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 5 to the financial statements, the Partnership has sustained recurring losses from operations, lower than anticipated rental income, and has continually required a general partner to fund deficits. These items raise substantial doubt about the Partnership's ability to continue as a going concern. Management's plans regarding theses matters are described in Note 5. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ RubinBrown LLP St. Louis, Missouri January 31, 2006 20 [Letterhead of Habif, Arogeti & Wynne, LLP] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners United - Glenarden I Limited Partnership We have audited the accompanying balance sheet of United - Glenarden I Limited Partnership as of December 31, 2006, and the related statements of operations, changes in 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. 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 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 - Glenarden I Limited Partnership as of December 31, 2006, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles in the United States of America. /s/ Habif, Arogeti & Wynne, P.C. Atlanta, Georgia February 28, 2007 21 [Letterhead of Habif, Arogeti & Wynne, P.C.] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of United - Glenarden II Limited Partnership We have audited the accompanying balance of UNITED - GLENARDEN II LIMITED PARTNERSHIP as of December 31, 2006, and the related statements of operations, changes in 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. 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 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 - GLENARDEN II LIMITED PARTNERSHIP as of December 31, 2006, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles in the United States of America. /s/ Habif, Arogeti & Wynne, P.C. Atlanta, Georgia February 28, 2007 22 [Letterhead of BAERSON, WITONSKI, PATEL, BERKOWITZ & RUBIN LLC] INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of ROLLING GREEN LIMITED PARTNERSHIP D/B/A Prairie View Apartments Libertyville, IL We have audited the accompanying balance sheets of Rolling Green Limited Partnership as of October 25, 2006 and December 31, 2005, and the related statements of operations, partners' equity (deficit), and cash flows for the periods 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. 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 our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rolling Green Limited Partnership as of October 25, 2006 and December 31, 2005, and the results of its operations, changes in partner's equity (deficit) and its cash flows for the period from January 1, 2006 through October 25, 2006 and for the year ended December 31, 2005, in conformity with accounting principles generally accepted in the United States of America. /s/ BAERSON, WITONSKI, PATEL, BERKOWITZ & RUBIN, LLC Chicago, IL January 4, 2007 23 [Letterhead of SOLOMON & ASSOCIATES LLC] INDEPENDENT AUDITORS' REPORT To the Partners ROLLING GREEN LIMITED PARTNERSHIP D/B/A Prairie View Apartments Libertyville, IL We have audited the accompanying balance sheets of Rolling Green Limited Partnership (FHA Project No. 071-11078-LDT) as of December 31, 2005 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 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) (PCAOB) 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. 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, under the PCAOB standards. 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 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 Rolling Green Limited Partnership as of December 31, 2005 and 2004, and the results of its operations, changes in partners' equity (deficit) and 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 issued by the U.S. Department of Housing and Urban Development, we have also issued reports dated January 31, 2006, on our consideration of the Project's internal control, on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and on specific requirements applicable to Fair Housing and Non-Discrimination. Those reports consider matters that could have a direct and material effect on a major HUD-assisted program. In addition, those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information shown on pages 16 through 25 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Rolling Green 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 aspects, in relation to the basic financial statements taken as a whole. /s/ Solomon & Associates LLC Chicago, IL January 31, 2006 24 [Letterhead of ZAYAS, MORAZZANI & CO.] Independent Auditors' Report To the Partners Santa Juanita II Limited Partnership: We have audited the accompanying balance sheet of Santa Juanita II Limited Partnership, as of December 31, 2005, and the related statements of profit and loss, 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. 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 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 Santa Juanita II 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. /s/ Zayas, Morazzani & Co. February 16, 2006 San Juan, Puerto Rico Stamp No. 2107202 of the Puerto Rico Society of Certified Public Accountants was affixed to original. Federal Employer Identification Number: 66-0365844 25 [Letterhead of REZNICK GROUP, P.C.] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Partners Church Lane Associates We have audited the accompanying balance sheet of Church Lane Associates as of December 31, 2006 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 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 Church Lane Associates as of December 31, 2006, and the results of its operations, the changes in partners' equity (deficit) and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. /s/ Reznick Group, P.C. Baltimore, Maryland March 29, 2007 26 [Letterhead of MARDEN, HARRISON & KREUTER] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners Robin Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheet of Robin Housing Associates (a limited partnership) as of November 30, 2006, and the related statements of income, partners' capital (deficiency), and cash flows for the eleven months then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 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 Robin Housing Associates as of November 30, 2006, and the results of its operations and its cash flows for the eleven months 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 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. As discussed in Note 8 to the financial statements, on April 28, 2006, the Partnership sold its apartment building for a sale price of $7,265,000. In addition, as discussed in Note 9 to the financial statements, the General Partner is in discussions with the Limited Partners with respect to certain distributions and allocations of cash flow that were made during the period. /s/ MARDEN, HARRISON & KREUTER Certified Public Accountants, P.C. White Plains, New York February 16, 2007 27 [Letterhead of MARDEN, HARRISON & KREUTER] 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 28 [Letterhead of MARDEN, HARRISON & KREUTER] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners Concourse Artists Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheet of Concourse Artists Housing Associates (a limited partnership) as of November 30, 2006, and the related statements of income, partners' capital (deficiency), and cash flows for the eleven months then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 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 Concourse Artists Housing Associates as of November 30, 2006, and the results of its operations and its cash flows for the eleven months 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 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. As discussed in Note 8 to the financial statements, on April 28, 2006, the Partnership sold its apartment building for a sale price of $1,797,500. In addition, as discussed in Note 9 to the financial statements, the General Partner is in discussions with the Limited Partners with respect to certain distributions and allocations of cash flow that were made during the period. /s/ MARDEN, HARRISON & KREUTER Certified Public Accountants, P.C. White Plains, New York February 16, 2007 29 [Letterhead of MARDEN, HARRISON & KREUTER] 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 30 [Letterhead of MARDEN, HARRISON & KREUTER] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners 2051 Grand Concourse Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheet of 2051 Grand Concourse Housing Associates (a limited partnership) as of November 30, 2006, and the related statements of income, partners' capital (deficiency), and cash flows for the eleven months then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 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 2051 Grand Concourse Housing Associates as of November 30, 2006, and the results of its operations and its cash flows for the eleven months 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 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. As discussed in Note 8 to the financial statements, on April 28, 2006, the Partnership sold its apartment building for a sale price of $4,937,500. In addition, as discussed in Note 9 to the financial statements, the General Partner is in discussions with the Limited Partners with respect to certain distributions and allocations of cash flow that were made during the period. /s/ MARDEN, HARRISON & KREUTER Certified Public Accountants, P.C. White Plains, New York February 16, 2007 31 [Letterhead of MARDEN, HARRISON & KREUTER] 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 32 [Letterhead of MARDEN, HARRISON & KREUTER] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners Willoughby-Wyckoff Housing Associates 3743-A White Plains Road Bronx, New York 10467 We have audited the accompanying balance sheet of Willoughby-Wyckoff Housing Associates (a limited partnership) as of November 30, 2006, and the related statements of income, partners' deficiency, and cash flows for the eleven months then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with 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 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 Willoughby-Wyckoff Housing Associates as of November 30, 2006, and the results of its operations and its cash flows for the eleven months 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 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. As discussed in Note 7 to the financial statements, on June 5, 2006, the Partnership sold its apartment building for a sale price of $4,800,000. /s/ MARDEN, HARRISON & KREUTER Certified Public Accountants, P.C. White Plains, New York February 16, 2007 33 [Letterhead of MARDEN, HARRISON & KREUTER] 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 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 34 [Letterhead of WOLFE NILGES NAHORSKI] INDEPENDENT AUDITORS' REPORT To the Partners Goodfellow Place Limited Partnership St. Louis, Missouri We have audited the accompanying balance sheets of Goodfellow Place Limited Partnership as of December 31, 2006 and 2005, and the related statements of income (loss), 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 audit. 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. 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 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 Goodfellow Place Limited Partnership as of December 31, 2006 and 2005, 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 report on our audits of Goodfellow Place Limited Partnership for 2006 and 2005 were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of operating expenses is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information for 2006 and 2005 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 basis financial statements taken as a whole. /s/ Wolfe Nilges Nahorski A Professional Corporation March 7, 2007 St. Louis, Missouri 35 [Letterhead of WOLFE NILGES NAHORSKI] INDEPENDENT AUDITORS' REPORT To the Partners Goodfellow Place Limited Partnership St. Louis, Missouri We have audited the accompanying balance sheets of Goodfellow Place Limited Partnership as of December 31, 2005 and 2004, and the related statements of income (loss), 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 audit. 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. 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 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 Goodfellow Place 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. Our report on our audits of Goodfellow Place Limited Partnership for 2005 and 2004 were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule of operating expenses is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information for 2005 and 2004 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 basis financial statements taken as a whole. /s/ Wolfe Nilges Nahorski A Professional Corporation January 19, 2006 St. Louis, Missouri 36 [Letterhead of HAMILTON & MUSSER, P.C.] 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 operations, 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 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. 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 our 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 and more fully explained in Note 1. /s/ Hamilton & Musser Certified Public Accountants Mechanicsburg, Pennsylvania January 27, 2006 37 [Letterhead of Dickey, Wolf & Humbard, LLC] INDEPENDENT AUDITOR'S REPORT ---------------------------- To the Partners Williamsburg Residential, L.P. We have audited the balance sheets of Williamsburg Residential, L.P. (a Kansas Limited Partnership) as of December 31, 2006 and 2005, 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. 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 our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Williamsburg Residential, L.P. as of December 31, 2006 and 2005, 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/ Dickey, Wolf & Humbard, LLC Certified Public Accountants Harrisonville, MO February 19, 2007 38 [Letterhead of Dickey, Wolf & Humbard, LLC] INDEPENDENT AUDITOR'S REPORT To the Partners Williamsburg Residential, L.P. We have audited the balance sheets of Williamsburg Residential, L.P. (a Kansas 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. 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 our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Williamsburg Residential, 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. /s/ Dickey, Wolf & Humbard, LLC Certified Public Accountants Harrisonville, MO February 2, 2006 39 [Letterhead of MAYER HOFFMAN MCCANN P.C.] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Partners Victory Apartments We have audited the accompanying balance sheets of Victory Apartments - F.H.A. Project No. 071-35701 as of December 31, 2006 and 2005, 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 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 the standards of the Public Company Accounting Oversight Board (United States) 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 Victory Apartments - F.H.A. Project No. 071-35701 as of December 31, 2006 and 2005, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. In accordance with GOVERNMENT AUDITING STANDARDS, we have also issued a reports dated February 22, 2007, on our consideration of the Partnership's internal control over financial reporting. The purpose of those reports is to describe the scope of our testing of internal control over financial reporting and the results of that testing and not to provide an opinion on the internal control over financial reporting. In accordance with GOVERNMENT AUDITING STANDARDS, we have also issued an opinion dated February 22, 2007, on the Partnership's compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters that could have a direct and material effect on a major HUD-assisted program. 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/ Mayer Hoffman McCann P.C. Chicago, Illinois February 22, 2007 40 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements. 41 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 42 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' (DEFICIT) CAPITAL

See accompanying notes to consolidated financial statements. 43 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

44 LIBERTY TAX CREDIT PLUS II 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 at end of period includes cash and cash equivalents from discontinued operations of $474,178, $266,521 and $111,730, respectively. 45 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 1 - General Liberty Tax Credit Plus II L.P., a Delaware limited partnership (the "Partnership"), was organized on March 25, 1988, but had no activity until July 1, 1988 (which date is considered to be inception for financial accounting purposes). The Partnership had no operations until commencement of the public offering on July 20, 1988. The general partners of the Partnership are Related Credit Properties II L.P., a Delaware limited partnership (the "Related General Partner"), Liberty Associates II L.P., a Delaware limited partnership ("Liberty Associates"), and Liberty GP II Inc. (formerly Shearson Liberty GP II Inc.), a Delaware corporation (the "Liberty General Partner" and together with the Related General Partner and Liberty Associates, the "General Partners"). The general partner of the Related General Partner is Related Credit Properties II Inc., a Delaware corporation. The general partners of Liberty Associates are Related Credit Properties II Inc., and the Liberty General Partner. Liberty Associates is also the special limited partner of the Partnership. The ultimate parent of the General Partners is Centerline Holding Company ("Centerline") (which had been known as CharterMac until April 2007). On March 15, 2007, Centerline announced the retirement of Alan P. Hirmes as Chief Financial Officer of Centerline. Upon his retirement, he also resigned from his position as Director, President, Chief Executive Officer and Chief Financial Officer of the general partner of the Related General Partner. Centerline has named Robert L. Levy as Chief Financial Officer and Andrew J. Weil as President and Chief Executive Officer to replace Mr. Hirmes. The Partnership's business is to invest in other limited partnerships ("Local Partnerships", "subsidiaries" or "subsidiary partnerships") owning leveraged low-income multifamily residential complexes ("Apartment Complexes") that are eligible for the low-income housing tax credit ("Housing 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 Partnership's investment in each Local Partnership represents from a 73.52% to a 98% interest in that Local Partnership. The Partnership originally invested in twenty-seven Local Partnerships. During the year ended March 31, 2007, the property and the related assets and liabilities of eight Local Partnerships and the limited partnership interest in two Local Partnerships were sold. Through the year ended March 31, 2007, the properties and the related assets and liabilities of thirteen Local Partnerships and the limited partnership interest in six Local Partnerships were sold. In addition, as of March 31, 2007, two Local Partnerships have entered into agreements to sell their property and the related assets and liabilities (see Note 10). Subsequently, on April 20, 2007, the property and the related assets and liabilities of one Local Partnership were sold (see Note 14). The Partnership was authorized to issue a total of 200,000 Beneficial Assignment Certificates ("BACs"), of which 120,000 have been registered with the Securities and Exchange Commission for sale to the public. The public offering was completed on January 9, 1989 with a total of 115,917.5 BACs sold and $115,917,500 of proceeds received by the Partnership. 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 BACs holders and 1% to the general partners. NOTE 2 - Summary of Significant Accounting Policies a) Basis of Consolidation The consolidated financial statements include the accounts of the Partnership and 19, 22 and 24 subsidiary partnerships in which the Partnership is a limited partner for the years ended March 31, 2007, 2006 and 2005 (the 2006, 2005 and 2004 "Fiscal Years"), respectively. Through the rights of the Partnership and/or a General Partner (which has a contractual obligation to act on behalf of the Partnership) to remove the general partner of the subsidiary local partnerships (the "Local General Partner") and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary local partnerships. For financial reporting purposes, the Partnership's fiscal year ends on March 31, 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"). All subsidiaries have fiscal years ending December 31. Accounts of the subsidiaries have been adjusted for intercompany transactions from January 1 through March 31. All intercompany accounts and transactions with the subsidiary partnerships have been eliminated in consolidation. Increases (decreases) in the capitalization of consolidated subsidiaries attributable to minority interest arise from cash contributions and cash distributions to the minority interest partners. The Partnership's investment in each subsidiary partnership is equal to the respective subsidiary partners' equity less minority interest capital, if any. Losses attributable to minority interests which exceed the minority interest's investment in a subsidiary partnership have been charged to the Partnership. Such losses aggregated approximately $403,000, $0 and $398,000 for the years ended March 31, 2007, 2006 and 2005, respectively. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital. 46 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 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 as of March 31, 2007 is a $2,500,000 auction security. These assets are securities issued by a Northstar Educational Student loan fund with a maturity of December 2044. 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 a 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 such property and equipment. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). 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. Property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the Property is considered to be impaired and the depreciated cost exceeds estimated fair value. During the year ended March 31, 2007, the Partnership has recorded $3,540,000 as a loss on impairment of fixed assets. Through March 31, 2007, the Partnership has recorded approximately $15,022,000 as a loss on impairment of fixed assets. In accordance with SFAS No. 144, the results of discontinued operations are reported as a separate component of income before extraordinary items on the consolidated statements of operations. Discontinued operations include the results of operations and any gain or loss recognized for Local Partnerships that have been disposed of or are held for sale. A gain or loss recognized on the disposal is disclosed in the notes to the financial statements. Adjustments to amounts previously reported in operations that are directly related to the disposal of a Local Partnership are reclassified in the current period as discontinued operations for comparability purposes. Assets and liabilities of a Local Partnership that are classified as held for sale are presented separately in the asset and liability sections, respectively, of the consolidated balance sheets. See Note 13 regarding discontinued operations. At the time management commits to a plan to dispose of assets, said assets are adjusted to the lower of carrying amount or fair value less costs to sell. Such assets would be classified as property and equipment-held for sale and are not depreciated. There were two assets classified as property and equipment-held for sale at March 31, 2007. See Notes 10 and 13 regarding assets held for sale and discontinued operations. 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:

* Reclassified for comparative purposes. Other revenues from discontinued operations include the following amounts at both the Partnership and Local Partnership level:

* Reclassified for comparative purposes. 47 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 e) Offering Costs Costs incurred to sell BACs, including brokerage and the nonaccountable expense allowance, are considered selling and offering expenses. These costs are charged directly to limited partners' capital. f) 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). g) Loss Contingencies The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. In addition, the Partnership evaluates a potential environmental liability independently from any potential claim for recovery. h) 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 nontrading 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 operating liabilities are as follows:

The estimated fair values of the Partnership's mortgage notes payable from discontinued liabilities 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. 48 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 4 - Property and Equipment The components of property and equipment and their estimated useful lives from operating assets are as follows:

The initial cost to the Partnership, as shown on Schedule III in Item 15, includes $6,955,050 of acquisition fees paid or accrued to the General Partners, $1,606,014 of acquisition expenses and $7,015,991 of capitalized interest. In connection with the rehabilitation of the Properties, the subsidiary partnerships have incurred developer's fees of $20,563,695 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 31, 2007, 2006 and 2005 amounted to $2,206,430, $2,116,106 and $2,017,810, respectively. During the 2006 and 2005 Fiscal Years, there were write-offs of accumulated depreciation in the amounts of $50,092,640 and $20,054,077, respectively, and $49,914,170 and $20,029,595 of these write-offs were related to the discontinued assets. The components of property and equipment held for sale and their estimated useful lives from discontinued assets are as follows:

Depreciation expense from discontinued operations for the years ended March 31, 2007, 2006 and 2005 amounted to $273,868, $3,390,196 and $5,053,980, respectively. NOTE 5 - Cash Held in Escrow Cash held in escrow from operating assets is restricted and consists of the following:

49 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 Cash held in escrow from discontinued assets is restricted and consists of the following:

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

* Over the life of the respective mortgages Amortization expense for the years ended March 31, 2007, 2006 and 2005 amounted to $34,676, $34,677, and $34,674, respectively. During the years ended March 31, 2007 and 2006, there were decreases in deferred costs of $1,386,141 and $1,320,498 and decreases in accumulated amortization of $1,155,078 and $1,187,943, respectively, due to the write-offs and reclasses into discontinued operations. The components of deferred costs and their periods of amortization from discontinued assets are as follows:

* Over the life of the respective mortgages Amortization expense from discontinued operations for the years ended March 31, 2007, 2006 and 2005 amounted to $531,194, $76,562 and $104,978, respectively. NOTE 7 - Mortgage Notes Payable The mortgage notes are payable in aggregate monthly installments of approximately $185,000 including principal and interest at rates varying from 1% to 9% per annum, through 2042. 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 and is without further recourse. 50 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 Annual principal payment requirements of the subsidiary partnerships for each of the next five years and thereafter are as follows: December 31, Amount ------------ ----------- 2007 $ 438,433 2008 467,662 2009 498,857 2010 532,251 2011 567,983 Thereafter 31,544,643 ----------- $34,049,829 =========== Accrued interest payable at March 31, 2007 and 2006 was approximately $2,945,000 and $1,794,000, 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 $26,000 including principal and interest at rates varying from 1% to 10.75% per annum, through 2030. 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 and is without further recourse. Annual principal payment requirements of the subsidiary partnerships for each of the next five years and thereafter are as follows: December 31, Amount ------------ ----------- 2007 $ 1,855,554 2008 23,583 2009 25,038 2010 26,582 2011 28,222 Thereafter 1,453,555 ----------- $ 3,412,534 ----------- Accrued interest payable for the discontinued liabilities at March 31, 2007 and 2006 was approximately $21,000 and $37,000, 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. Santa Juanita II Limited Partnership ("Santa Juanita") - Refinance ------------------------------------------------------------------ In July 2005, Santa Juanita entered into a refinancing agreement with Popular Mortgage for $1,500,000. The proceeds were used to pay off the balance due on the former mortgage payable of approximately $727,000, to finance the purchase of 20% of the Partnership's limited partnership interest in Santa Juanita and obtain funds for major building improvements. On January 17, 2006, the Partnership sold its remaining limited partnership interest in Santa Juanita. NOTE 8 - Related Party Transactions Related Party Fees ------------------ One of the General Partners has a 1% interest as a special limited partner in each of the Local Partnerships. An affiliate of the General Partners also has a minority interest in certain Local Partnerships. The General Partners and their affiliates perform services for the Partnership. The costs incurred to related parties from operations for the years ended March 31, 2007, 2006 and 2005 are as follows: 51 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007

* Reclassified for comparative purposes The costs incurred to related parties from discontinued operations for the years ended March 31, 2007, 2006 and 2005 are as follows:

* 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 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. Unpaid partnership management fees for any year will be accrued without interest and will be payable from working capital reserves or to the extent of available funds after the Partnership has made distributions to the limited partners and BACs holders of sale or refinancing proceeds equal to their original capital contributions plus a 10% priority return thereon (to the extent not theretofore paid out of cash flow). During the year ended March 31, 2007, management deemed the unpaid partnership management fees related to sold properties uncollectible and wrote off approximately $12,325,000, resulting in a non-cash General Partner contribution of the same amount. Partnership management fees owed to the General Partners amounting to approximately $2,023,000 and $14,970,000 were accrued and unpaid as of March 31, 2007 and March 31, 2006. In the absence of the General Partner's continued accrual without payment, the Partnership will not be in a position to meet its obligations. (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 affiliates of the General Partners amounting to approximately $33,000 and $52,000 were accrued and unpaid as of March 31, 2007 and 2006, respectively. (c) Property management fees incurred by subsidiary partnerships in operations amounted to $1,131,298, $1,430,711 and $1,600,039 for the 2006, 2005 and 2004 Fiscal Years, respectively. Of these fees $1,011,457, $1,184,748 and $1,248,610 were incurred to affiliates of the Local General Partners. Included in amounts incurred to affiliates of the Local General Partners are $441,513, $425,268 and $434,890, respectively, which were also incurred to affiliates of the General Partners. Also included in these fees are $603,887, $749,643 and $839,213, respectively, which were incurred to affiliates of the Local General Partners of Properties classified as discontinued operations. (d) Liberty Associates, a 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 has a 1% interest as the special limited partner in each of the subsidiary partnerships. Liberty Associates received cash distributions of approximately $4,000, $5,000 and $50 during the 2006, 2005 and 2004 Fiscal Years, respectively. (f) During the years ended March 31, 2007, 2006 and 2005, two Local Partnerships (having common ownership) paid to its managing agent salary reimbursements and bookkeeping fees in the amount of $692,886, $819,726 and $919,382, respectively. 52 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 Pursuant to the Partnership Agreement and the partnership agreements of the Local Partnerships (the "Local Partnership Agreements"), the General Partners and Liberty Associates received their allocable share of profits, losses and tax credits allocated by the Partnership and the Local Partnerships, respectively. (g) Due to Local General Partners and affiliates at March 31, 2007 and 2006 consists of the following:

Due to Local General Partners and affiliates from discontinued liabilities at March 31, 2007 and 2006 consists of the following:

Advances to Local Partnerships ------------------------------ During the fiscal years ended March 31, 2007 and 2006, net advances to certain Local Partnerships by the General Partners amounted to $208,724 and $166,813, respectively. As of March 31, 2007 and 2006, the amounts due to the General Partners from Local Partnerships totaled $1,913,625 and $1,725,914, respectively, and are recorded in due to general partners and affiliates on the consolidated balance sheets. Due to General Partners and affiliates from the Local Partnerships consists of the following:

53 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 9 - Taxable Net Loss A reconciliation of the financial statement net loss to the taxable net 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. During the fiscal year ended March 31, 2007, the property and the related assets and liabilities of eight Local Partnerships and the limited partnership interest in two Local Partnerships were sold. As of March 31, 2007, the property and the related assets and liabilities of thirteen Local Partnerships and the limited partnership interest in six Local Partnerships were sold. In addition, as of March 31, 2007, two Local Partnerships have entered into agreements to sell their property and the related assets and liabilities. There can be no assurance as to when the Partnership will dispose of its remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, it is unlikely that the proceeds from such sales received by the Partnership will be sufficient to return to the limited partners their original investment. Subsequently, on April 20, 2007, the property and the related assets and liabilities of one Local Partnership were sold (see Note 14). On December 19, 2006, the property and the related assets and liabilities of West 107th Street Associates, L.P. ("West 107th Street") were sold to an unaffiliated third party purchaser for a sales price of $200,000, which was used to pay closing costs and other liabilities. During the quarter ended December 31, 2006 and prior to the date of the sale, in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment of Disposal of Long-Lived Asset" ("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 $1,500,000. The sale resulted in a loss of approximately $215,000 resulting from the write-off of the basis in the property at the date of the sale. The sale also resulted in a net non-cash contribution to the Partnership of approximately $265,000 as a result of the write-off of advances owed by West 107th Street to an affiliate of the General Partner. On December 19, 2006, the property and the related assets and liabilities of General Atlantic Second Avenue Associates, L.P. ("96th Street") were sold to an unaffiliated third party purchaser for a sales price of $25,000, which was used to pay closing costs and other liabilities. During the quarter ended September 30, 2006, 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 $1,160,000. The sale resulted in a loss of approximately $214,000 resulting from the write-off of the basis in the property at the date of the sale. The sale also resulted in a non-cash contribution to the Partnership of approximately $597,000 as a result of the write-off of advances owed by 96th Street to an affiliate of the General Partner. On December 31, 2006, the property and the related assets and liabilities of Spring Creek Associates II, L.P. ("Spring Creek") were sold to an unaffiliated third party purchaser for a sales price of $16,100,000 including a note receivable in the amount of $2,500,000. The Partnership received $12,280,115, as a distribution from this sale after the repayment of other liabilities and 54 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 closing costs of approximately $2,170,000. During the quarter ended March 31, 2006, 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 $5,225,000. The sale resulted in a gain of approximately $145,000 resulting from the write-off of the deficit basis in the property at the date of the sale. The sale also resulted in a net non-cash distribution to the Partnership of approximately $1,176,000 as a result of the write-off of loans owed to Spring Creek from an affiliate of the General Partner. On October 25, 2006, the Partnership's limited partnership interest in Rolling Green Limited Partnership ("Rolling Green") was sold to the Local General Partner for a sales price of $399,990. The Partnership received proceeds of $399,990 from this sale. The sale resulted in a gain of approximately $1,940,000 resulting from the write-off of the deficit basis in the property of approximately $1,540,000 and the $399,990 cash received from the sale. On August 1, 2006, the Partnership's limited partnership interest in Metropolitan Towers Associates, L.P. ("Metropolitan") was sold to the Local General Partner for a sales price of $892,490. The Partnership received proceeds of $42,490 and the remaining $850,000 is to be paid in guaranteed payments payable on certain dates through December 31, 2008. As of March 31, 2007, $150,000 has been received against the $850,000 and the balance of $700,000 is included in other assets at March 31, 2007. The sale resulted in gain of approximately $1,133,000 resulting from the write-off of the deficit basis in the property of approximately $240,000 at the date of the sale and the $892,490 proceeds resulting from the sale. On July 6, 2006, the property and the related assets and liabilities of 235 East 14th Street Associates, L.P. ("14th Street") were sold to an unaffiliated third party purchaser for a sales price of $75,758, which was used to pay closing costs and other liabilities. During the quarter ended June 30, 2006, 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 $880,000. The sale resulted in a loss of approximately $614,000 resulting from the write-off of the basis in the property at the date of the sale. The sale also resulted in a net non-cash contribution to the Partnership of approximately $539,000 as a result of the write-off of advances owed by 14th Street to an affiliate of the General Partner. The sale resulted in the liquidation of 14th Street. On June 5, 2006, the property and the related assets and liabilities of Willoughby/Wyckoff Housing Associates, L.P. ("Willoughby") were sold to an unaffiliated third party purchaser for a sales price of $4,800,000. There was no distribution from this sale after the repayment of mortgages, other liabilities and closing costs of approximately $4,800,000. The sale resulted in a gain of approximately $2,033,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On May 1, 2006, the property and the related assets and liabilities of 2051 Grand Concourse Housing Associates, L.P. ("Grand Concourse") were sold to an unaffiliated third party purchaser for a sales price of $4,937,500. The Partnership received $200,066 as a distribution from this sale after the repayment of mortgages, other liabilities, distributions to minority interests and closing costs of approximately $4,737,000. The sale resulted in a gain of approximately $2,491,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On May 1, 2006, the property and the related assets and liabilities of Concourse Artists Housing Associates, L.P. ("Concourse Artists") were sold to an unaffiliated third party purchaser for a sales price of $1,797,500. The Partnership received $66,147 as a distribution from this sale after the repayment of mortgages, other liabilities, distributions to minority interests and closing costs of approximately $1,731,000. The sale resulted in a gain of approximately $704,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On May 1, 2006, the property and the related assets and liabilities of Robin Housing Associates, L.P. ("Robin Housing") were sold to an unaffiliated third party purchaser for a sales price of $7,265,000. The Partnership received $443,807 as a distribution from this sale after the repayment of mortgages, other liabilities, distributions to minority interests and closing costs of approximately $6,821,000. The sale resulted in a gain of approximately $3,339,000 resulting from the write-off of the deficit basis in the property at the date of the sale. On January 17, 2006, the Partnership's remaining 80% of its limited partnership interest in Santa Juanita II Limited Partnership ("Santa Juanita") was sold to the Local General Partner for a sales price of $375,000 cash plus 50% of the amount, if any, by which the aggregate sales price for the apartment units exceeds the actual conversion cost, as defined in the transfer agreement, from the Local General Partner's conversion of the property to condominium ownership. The Partnership received proceeds of $375,000 from this sale. The sale resulted in a loss of approximately $907,000 resulting from the write-off of the basis in the property of approximately $1,282,000 and the $375,000 cash received from the sale. On October 20, 2005, the Partnership's limited partnership interest in Gramco Development Limited Dividend Partnership, L.P. ("Bayamon") was sold to the Local General Partner and one of its affiliates for a sale price of $3,000,000. The Partnership received proceeds of $3,000,000 from this sale. The sale resulted in a gain of approximately $2,728,000 resulting from the write-off of the basis in the property of approximately $272,000 and the $3,000,000 cash received from the sale. 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, which was used for the repayment of mortgages, other liabilities and closing costs. During the quarter ended September 30, 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 $850,000. The sale resulted in a gain of approximately $50,000, resulting from the write-off of the basis in the property which was recognized during the quarter ended December 31, 2005. An adjustment to the gain of approximately $(190,000) was recorded during the quarter ended March 31, 2006, resulting in overall loss of approximately $140,000. The sale resulted in the liquidation of Penn Alto. On July 15, 2005, the Partnership sold 20% of its limited partnership interest in Santa Juanita to the Local General Partner for $100,000. The sale resulted in a gain of $100,000 which was recognized during the quarter ended September 30, 2005. The remaining 80% of limited partnership interest was sold on January 17, 2006 (see above for discussion). 55 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 On May 11, 2005, the Partnership's limited partnership interest in Upper Fifth Avenue Residential Associates, L.P. ("Upper Fifth") was sold to the Local General Partner for a sales price of $10. The sale resulted in a gain of approximately $5,192,000 which was recognized during the quarter ended December 31, 2005. An additional gain of approximately $120,000 was recorded during the quarter ended March 31, 2006, resulting in a total gain of approximately $5,312,000, resulting from the write-off of the deficit basis in the property. On December 30, 2004, the property and the related assets and liabilities of Property Development Associates, L.P. ("Property Development") were sold to an affiliate of the Local General Partner for a sales price of $7,097,000, resulting in a loss of approximately $1,334,000, resulting from the write-off of the basis in the property. The sale resulted in the liquidation of Property Development. On September 21, 2004, the Partnership's limited partnership interest in Alexis Park Apartments ("Alexis Park") was sold to an unaffiliated third party purchaser for $1,000,000. This amount consisted of $600,000 paid in cash at the closing and $400,000 pursuant to two promissory notes of $200,000 each to the Partnership. Both notes compound interest at 5% and the principal and interest of one note was to be paid annually from 50% of cash flow, with a maturity in five years, when all unpaid principal and interest shall become payable. The principal and interest on the second note was to be paid upon refinancing or sale of the Property, but in no event later than 10 years. In April 2006 both notes were fully paid. The sale resulted in a gain of approximately $1,006,000, resulting from the write-off of the deficit basis in the property. Assets Held for Sale -------------------- On February 1, 2007, Williamsburg Residential, L.P. ("Williamsburg") entered into a purchase and sale agreement to sell its property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $2,250,346. The sales documents have been executed and the initial deposit funds are being held in escrow. The closing is expected to occur by the end of 2007. No assurance can be given that the sale will actually occur. As of December 31, 2006, Williamsburg had property and equipment, at cost, of approximately $2,778,000, accumulated depreciation of approximately $1,211,000 and mortgage debt of approximately $1,833,000. On January 11, 2007, Whittier Plaza Associates, L.P. ("Whittier") entered into a purchase and sale agreement to sell its property and the related assets and liabilities to an unaffiliated third party purchaser for a sales price of $1,444,500. The sales documents have been executed and the initial deposit funds were being held in escrow. As of December 31, 2006, Whittier had property and equipment, at cost, of approximately $1,608,000, accumulated depreciation of approximately $864,000 and mortgage debt of approximately $1,579,000. The closing occurred subsequently on April 20, 2007 (see Note 14). 56 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 11 - Selected Quarterly Financial Data (Unaudited) The following table summarizes the Partnership's quarterly results of operations for the years ended March 31, 2007 and 2006. The fluctuations between the quarters are primarily due to the sales of Local Partnerships (see Note 10).

* Reclassified for comparative purposes. 57 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 NOTE 12 - Commitments and Contingencies a) Subsidiary Partnerships - Going Concerns and Uncertainties The auditors for two subsidiary partnerships, Whittier and Westminster, modified their reports on the 2006 Fiscal Year financial statements due to the uncertainty of each subsidiary partnership's ability to continue as a going concern. The financial statements do not include any adjustments that would be necessary in the event the subsidiary partnerships are unable to continue as going concerns. Whittier Plaza Associates Limited Partnership ("Whittier") ---------------------------------------------------------- The financial statements for Whittier have been prepared assuming that Whittier will continue as a going concern. Whittier has sustained continuous losses since commencement of operations in 1988, including losses of $24,274 and $28,239 in 2006 and 2005 Fiscal Years, respectively. Whittier has experienced higher vacancies and lower rents than those originally projected, resulting in increased difficulty in meeting both operating and debt service obligations. The Local General Partner, pursuant to a development deficit guarantee agreement, has advanced approximately $5,000 and $3,000 in the 2006 and 2005 Fiscal Years, respectively, and approximately $492,000 since 1988 to fund operating cash shortfalls. In addition, Whittier's management company, an affiliate of the Local General Partner, has deferred receipt of various fees since 1991 totaling approximately $116,000. These items raise substantial doubt about Whittier's ability to continue as a going concern. The Partnership's investment in Whittier at March 31, 2007 and 2006 was reduced to zero as a result of prior years' losses and the minority interest balance was $0 at each date. Whittier's net loss after minority interest amounted to approximately $24,000, $28,000 and $24,000 for the 2006, 2005 and 2004 Fiscal Years. Subsequently, on April 20, 2007, the property and the related assets and liabilities of Whittier were sold (see Item 8, Note 14). Westminster Place II - Olive Site, L.P. ("Westminster") ------------------------------------------------------- The financial statements for Westminster have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplate continuation of Westminster as a going concern. Westminster's rental subsidy fund agreement with the Missouri Housing Development Commission ("MHDC") was depleted in June 2004. Westminster has been approved by the MHDC for rental increases, however, these increases have not been sufficient to cover the loss of the rental subsidy payments. The loss of the rental subsidy payments and insufficient rental increases raise substantial doubt about Westminster's ability to continue as a going concern. Management is exploring a sale of Westminster and will continue to submit requests for rental increases for MHDC approval. b) Subsidiary Partnerships - Other Goodfellow Place Limited Partnership ("Goodfellow") --------------------------------------------------- In recent years, Goodfellow has experienced significant cash flow deficiencies. In addition, current liabilities exceed current assets by approximately $42,000, and there is $313,730 due to the General Partners and their affiliates. During 2006, the General Partners advanced Goodfellow $77,582 in the form of a long term interest free loan. The General Partners have informally indicated that they will continue to advance funds to Goodfellow in 2007, as needed, with an unsecured loan that will strengthen Goodfellow's overall financial position. Management believes that this action will allow Goodfellow to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of the sale of the Property and subsequent liquidation of the Local Partnership. Williamsburg Residential, L.P. ("Williamsburg") ----------------------------------------------- In November 1996, the Local General Partner of Williamsburg stopped making its mortgage note payments which constituted an event of default. A Reinstatement and Modification Agreement was entered into effective March 1, 1997. The Partnership has advanced Williamsburg the necessary funds to keep the mortgage and escrows current during 2006 and is expected to continue to do so during 2007. The Partnership's investment in Williamsburg has been written down to $0 by prior years' losses and the minority interest balance was approximately $718,000 and $719,000 at March 31, 2007 and 2006, respectively. Williamsburg's net loss after minority interest amounted to approximately $82,000, $241,000 and $283,000 for the 2006, 2005, and 2004 Fiscal Years, respectively. As of March 31, 2007, the Partnership has advanced Williamsburg approximately $1,571,000. On February 1, 2007, Williamsburg entered into a purchase and sale agreement to sell its property and the related assets and liabilities (see Item 8, Note 10). 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 31, 2007, uninsured cash and cash equivalents approximated $8,974,000. 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 Housing Tax Credits are subject still to recapture in future years if (i) a Local Partnership ceases to meet qualification requirements, or (ii) there is a decrease in the qualified basis of the Local Partnership's Property, or (iii) 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 Tax Credit Period. The Partnership has met its primary objective of generating Tax Credits for qualified BACs holders. As of March 31, 2007, the Tax Credit Periods and Compliance Periods for all of the Properties have expired. 58 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 f) Other 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 38% of the Properties are located in any single state. There are also 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 owner's equity contribution. The Partnership cannot sell or substantially liquidate its investments in subsidiary partnerships during the period that the subsidy agreements are in existence without HUD's approval. Furthermore, there may not be market demand for apartments at market rents when the rental assistance contracts expire. 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 31, 2007, 14th Street, 96th Street, Concourse Artists, Grand Concourse, Metropolitan, Robin Housing, Rolling Green, Santa Juanita, Spring Creek, West 107th Street, Whittier, Williamsburg and Willoughby were classified as discontinued operations in the consolidated balance sheets. As of March 31, 2006, Santa Juanita, Rolling Green, Concourse Artists, Grand Concourse, Robin Housing and Willoughby were classified as discontinued operations in 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 31, 2007, 14th Street, 96th Street, Concourse Artists, Grand Concourse, Metropolitan, Robin Housing, Rolling Green, Santa Juanita, Spring Creek, West 107th Street and Willoughby, which were sold during the year, and Whittier and Williamsburg, which were classified as assets held for sale, were all classified as discontinued operations in the consolidated statements of operations. For the year ended March 31, 2006, Upper Fifth, Penn Alto and Bayamon, which were sold during the year, and Santa Juanita, Rolling Green, Concourse Artists, Grand Concourse, Robin Housing, Willoughby, which were classified as assets held for sale, and 14th Street, 96th Street, Spring Creek, West 107th Street, Metropolitan, Whittier and Williamsburg, in order to present comparable results to the year ended March 31, 2007, were all classified as discontinued operations in the consolidated statements of operations. For the year ended March 31, 2005, Property Development and Alexis Park, which were sold during the year, and Upper Fifth, Penn Alto, Bayamon, Santa Juanita, Rolling Green, Concourse Artists, Grand Concourse, Robin Housing, Willoughby, 14th Street, 96th Street, Spring Creek, West 107th Street, Metropolitan, Whittier and Williamsburg, in order to present comparable results to the year ended March 31, 2007, were classified as discontinued operations on the consolidated statements of operations. 59 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 2007 Consolidated Statements of Discontinued Operations: --------------------------------------------------

* Reclassified for comparative purposes

* Reclassified for comparative purposes. NOTE 14 - Subsequent Event On April 20, 2007, the property and the related assets and liabilities of Whittier were sold to an unaffiliated third party purchaser for a sales price of $1,444,500, resulting in a gain of approximately $934,000, which will be recognized on the Partnership's Form 10-Q dated June 30, 2007. The sale resulted in the liquidation of Whittier. Whittier is classified as an asset held for sale as of March 31, 2007 (see Note 10). 60 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 Chief Executive Officer and Chief Financial Officer of Related Credit Properties II, Inc., the general partner of the Related General Partner, have 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 officers have 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 the 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. Item 9B. Other Information None 61 PART III Item 10. Directors and Executive Officers and Corporate Governance The Partnership has no directors or executive officers. The general partners of the Partnership are Related Credit Properties II L.P., a Delaware limited partnership (the "Related General Partner"), Liberty Associates II L.P., a Delaware limited partnership ("Liberty Associates"), and Liberty GP II Inc. (formerly Shearson Liberty GP II Inc.), a Delaware corporation (the "Liberty General Partner" and together with the Related General Partner and Liberty Associates, the "General Partners"). The general partner of the Related General Partner is Related Credit Properties II Inc., a Delaware corporation. The general partners of Liberty Associates are Related Credit Properties II Inc., and the Liberty General Partner. Liberty Associates is also the special limited partner of the Partnership. 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 ultimate parent of the General Partners, Centerline Holding Company ("Centerline") (which had been known as CharterMac until April 2007), has adopted a code of ethics (see http://www.centerline.com). On March 15, 2007, Centerline announced the retirement of Alan P. Hirmes as Chief Financial Officer of Centerline. Upon his retirement, he also resigned from his position as Director, President, Chief Financial Officer and Chief Executive Officer of the general partner of the Related General Partner. Centerline has named Robert L. Levy as Chief Financial Officer and Andrew J. Weil as President and Chief Executive Officer to replace Mr. Hirmes. Certain information concerning the directors and executive officers of the Liberty General Partner and of Related Credit Properties II, Inc., is set forth below. Related Credit Properties II, Inc. ---------------------------------- Name Position ---- -------- Robert L. Levy Chief Financial Officer Andrew J. Weil President, Chief Executive Officer Mark D. Schnitzer Executive Vice President Glenn F. Hopps Treasurer ROBERT L. LEVY, 41, is the Chief Financial Officer of Centerline. Mr. Levy is also the Chief Financial Officer of American Mortgage Acceptance Company ("AMAC"), a publicly traded real estate investment trust managed by an affiliate of Centerline. Mr. Levy is responsible for overseeing the Corporate Finance, Capital Markets, Accounting, Budgeting, Tax and Treasury departments. Mr. Levy joined Centerline's predecessor in November of 2001 as the Director of Capital Markets. From 1998 through 2001, Mr. Levy was a Vice President in the Real Estate Equity Research and Investment Banking Departments at Robertson Stephens, an investment banking firm in San Francisco. Prior to 1998, Mr. Levy was employed by Prudential Securities in the Real Estate Equity Research Group and at Prudential Realty Group, the real estate investment arm of the Prudential Insurance Company. He received his Masters in Business Administration from the Leonard N. Stern School of Business at New York University and his Bachelor of Arts from Northwestern University. ANDREW J. WEIL, 36, is an Executive Managing Director of Centerline, and is the Head of the Affordable Housing Group. Mr. Weil is responsible for overseeing the day to day operations of the Affordable Housing Group, including the acquisition of properties with Low-Income Housing Tax Credits and the origination and structuring of institutional funds. Prior to joining Centerline's predecessor in January 1994, Mr. Weil was a Financial Analyst for the Heights Management Company, where he specialized in the analysis of potential investments and property management. Mr. Weil received a Bachelor of Science degree in Economics with a concentration in Finance form the Wharton School of the University of Pennsylvania. MARC D. SCHNITZER, 46, is responsible both for financial restructuring of real estate properties and directing Centerline's acquisitions of properties generating Housing Tax Credits. Mr. Schnitzer received a Masters of Business Administration from The Wharton School of the University of Pennsylvania in December 1987 before joining Centerline in January 1988. From 1983 to January 1986, he was a financial analyst for the First Boston Corporation in New York. Mr. Schnitzer graduated summa cum laude with a Bachelor of Science in Business Administration from the School of Management at Boston University in May 1983. In March 2006, Mr. Schnitzer was appointed Chief Executive Officer of Centerline. Mr. Schnitzer also serves on the Board of Trustees of Centerline and AMAC. GLENN F. HOPPS, 44, joined Centerline in December, 1990, and prior to that date was employed by Mark 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. 62 Liberty GP II Inc. ------------------ Name Position ---- -------- Robert L. Levy Chief Financial Officer Andrew J. Weil President, Chief Executive Officer Mark D. Schnitzer Senior Vice President Glenn F. Hopps Treasurer Biographical information with respect to Messrs. Levy, Weil, Schnitzer and Hopps is set forth above. Item 11. Executive Compensation The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to directors or officers of the Liberty General Partner or the general partner of the Related General Partner for their services. Certain directors and executive officers of the Liberty General Partner and the general partner of the Related General Partner receive compensation from the General Partners and their affiliates for services performed for various affiliated entities which may include services performed for the Partnership. Under the terms of the Partnership Agreement, the General Partners and their affiliates are entitled to receive compensation from the Partnership in consideration of certain services rendered to the Partnership by such parties. Such arrangements include, but are not limited to, the payment of an accountable operating expense reimbursement, an annual partnership management fee not to exceed 0.5% of invested assets and subordinated disposition fees. In addition, the General Partners are entitled to 1% of all cash distributions and Housing Tax Credit allocations and a subordinated 15% interest in net sales or refinancing proceeds. Also see Note 8 in Item 8 for a presentation of the types and amounts of compensation paid to the General Partners and their affiliates, which is incorporated 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 level 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 Stockholder Matters The general partnership interests and BACs in the Partnership are owned in the manner indicated on the chart below. Liberty Associates II L.P. holds a 1% limited partnership interest in each Local Partnership. Except as set forth in the table below, 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 the Liberty General Partner or of the general partner of the Related General Partner owns any Limited Partnership Interests or BACs, except as noted in the chart below.

(1) All such BACs represent BACs owned directly by Lehigh Tax Credit Partners L.L.C. ("Lehigh I") and Lehigh Tax Credit Partners II L.L.C. ("Lehigh II") for which Lehigh Tax Credit Partners, Inc. (the "Managing Member") serves as managing member. As of June 7, 2007, Lehigh I held 1,080.5 BACs and Lehigh II held 1,161.5 BACs. (2) Each such party serves as a director and executive officer of the Managing Member, and owns an equity interest therein, except Stuart J. Boesky and Alan P. Hirmes, who own only an economic interest. Item 13. Certain Relationships and Related Transactions; Director Independence 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 to the Financial Statements in Item 8 above, which are incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership, on the one hand, and the directors or executive officers of the Liberty General Partner or the general partner of the Related General Partner, on the other. Item 14. Principal Accounting Fees and Services Audit Fees ---------- The aggregate fees billed by Trien Rosenberg Rosenberg Weinberg Ciullo and Fazzari LLP and its affiliates for professional services rendered for the audit of the Partnership's annual financial statements for the years ended March 31, 2007 and 2006 and for the reviews of the financial statements included in the Partnership's Quarterly Reports on Form 10-Q were $76,800 and $54,800, respectively. Audit Related Fees ------------------ None Tax Fees -------- The aggregate fees billed by Weiser LLP and its affiliates for professional services rendered for the preparation of the Partnership's annual tax returns were $10,500 and $10,200 for the years ended December 31, 2006 and 2005, respectively. All Other Fees -------------- None The Partnership is not required to have, and does not have, a stand-alone audit committee. 64 PART IV Item 15. Exhibits and Financial Statements Schedules Sequential Page ---------- (a) 1. Financial Statements -------------------- Report of Independent Registered Public Accounting Firm 16 Consolidated Balance Sheets at March 31, 2007 and 2006 41 Consolidated Statements of Operations for the Years Ended March 31, 2007, 2006 and 2005 42 Consolidated Statements of Changes in Partners' (Deficit) Capital for the Years Ended March 31, 2007, 2006 and 2005 43 Consolidated Statements of Cash Flows for the Years Ended March 31, 2007, 2006 and 2005 44 Notes to Consolidated Financial Statements 46 (a) 2. Financial Statements Schedules ------------------------------ Report of Independent Registered Public Accounting Firm 72 Schedule I - Condensed Financial Information of Registrant 73 Schedule III - Real Estate and Accumulated Depreciation 76 All other schedules have been omitted because they are not required or because the required information is contained in the financial statements and notes thereto. (a) 3. Exhibits -------- (3B) Form of Amended and Restated Agreement of Limited Partnership of Liberty Tax Credit Plus II L.P. (incorporated by reference to exhibits filed with Amendment No. 1 to Liberty Tax Credit Plus II L.P.'s Registration Statement on Form S-11 Registration No. 33-21429) (21) Subsidiaries of the Registrant 66 (31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) 69 (31.2) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a) 70 (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) 71 65 Item 15. Exhibits and Financial Statements Schedules (continued) Jurisdiction of Subsidiaries of the Registrant (Exhibit 21) Organization ------------------------------ ------------ Westminster Place II - Olive Site, L.P. MO Whittier Plaza Associates Limited Partnership MO United-Glen Arden I Limited Partnership MD United-Glen Arden II Limited Partnership MD Church Lane Associates PA Goodfellow Place Limited Partnership MO Williamsburg Residential, L.P. KS Victory Apartments IL 66 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 II L.P. ------------------------------- (Registrant) By: RELATED CREDIT PROPERTIES II L.P., a General Partner By: Related Credit Properties II Inc., its general partner Date: June 28, 2007 ------------- By: /s/ Robert L. Levy ------------------ Robert L. Levy Chief Financial Officer Date: June 28, 2007 ------------- By: /s/ Andrew J. Weil ------------------ Andrew J. Weil President, Chief Executive Officer and By: LIBERTY GP II, INC., a General Partner Date: June 28, 2007 ------------- By: /s/ Robert L. Levy ------------------ Robert L. Levy Chief Financial Officer Date: June 28, 2007 ------------- By: /s/ Andrew J. Weil ------------------ Andrew J. Weil President, Chief Executive Officer and By: LIBERTY ASSOCIATES II, L.P., a General Partner By: Related Credit Properties II, Inc., a General Partner Date: June 28, 2007 ------------- By: /s/ Robert L. Levy ------------------ Robert L. Levy Chief Financial Officer Date: June 28, 2007 ------------- By: /s/ Andrew J. Weil ------------------ Andrew J. Weil President, Chief Executive Officer By: Liberty GP II, Inc., a General Partner Date: June 28, 2007 ------------- By: /s/ Robert L. Levy ------------------ Robert L. Levy Chief Financial Officer Date: June 28, 2007 ------------- By: /s/ Andrew J. Weil ------------------ Andrew J. Weil President, Chief Executive Officer 67 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:

68 Exhibit 31.1 CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) I, Robert L. Levy, certify that: 1. I have reviewed this annual report on Form 10-K for the period ended March 31, 2007 of Liberty Tax Credit Plus II, L.P.; 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are 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 registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us 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 our 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 registrant'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 registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and to the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 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 registrant'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 registrant's internal control over financial reporting. Date: June 28, 2007 ------------- By: /s/ Robert L. Levy ------------------ Robert L. Levy Chief Financial Officer 69 Exhibit 31.2 CERTIFICATION PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) I, Andrew J. Weil, certify that: 1. I have reviewed this annual report on Form 10-K for the period ended March 31, 2007 of Liberty Tax Credit Plus II, L.P.; 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 registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer and I are 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 registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us 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 our 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 registrant'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 registrant's internal control over financial reporting that occurred during the registrant's fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and to the audit committee of the registrant's board of directors (or persons performing the equivalent functions): 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 registrant'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 registrant's internal control over financial reporting. Date: June 28, 2007 ------------- By: /s/ Andrew J. Weil ------------------ Andrew J. Weil Chief Executive Officer 70 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 II L.P. on Form 10-K for the period ended March 31, 2007 as filed with the Securities and Exchange Commission ("SEC") on the date hereof (the "Report"), I, Robert L. Levy and I, Andrew J. Weil, 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 registrant. A signed original of this written statement required by Section 906 has been provided to the registrant and will be retained by the registrant and furnished to the SEC or its staff upon request. By: /s/ Robert L. Levy By: /s/ Andrew J. Weil ------------------ ------------------ Robert L. Levy Andrew J. Weil Chief Financial Officer Chief Executive Officer June 28, 2007 June 28, 2007 71 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------------------------------------- To the Partners of Liberty Tax Credit Plus II L.P. and Subsidiaries (A Delaware Limited Partnership) In connection with our audits of the consolidated financial statements of Liberty Tax Credit Plus II L.P. and Subsidiaries (A Delaware Limited Partnership) included in this Form 10-K as presented in our opinion dated June 28, 2007 on page 16, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2006, 2005 and 2004 Fiscal Years and Schedule III at March 31, 2007. 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 statements include the financial statements of two limited partnerships with significant contingencies and uncertainties. The financial statements of these subsidiary partnerships were prepared assuming that each will continue as a going concern. The two subsidiary partnerships' net losses aggregated $186,984 (Fiscal 2006), $263,008 (Fiscal 2005) and $146,138 (Fiscal 2004) and their assets aggregated $5,311,512 and $5,499,209 at March 31, 2007 and 2006, respectively. These matters raise substantial doubt about these subsidiary partnerships' abilities to continue as going concerns. 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. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI LLP New York, New York June 28, 2007 72 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT Summarized condensed financial information of registrant (not including consolidated subsidiary partnerships) 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. 73 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF OPERATIONS

(*) Includes suspended prior year losses in excess of investment in accordance with the equity method of accounting amounting to $(8,319,332), $(355,152) and $(2,487) for the years ended March 31, 2007, 2006, and 2005, respectively. 74 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

75 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 2007

76 LIBERTY TAX CREDIT PLUS II L.P. AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 31, 2007 (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 building improvements, are depreciated primarily by the straight-line method over the estimated useful lives ranging from 5 to 15 years. (c) The property and the related assets and liabilities of this Local Partnership were sold during the fiscal year ended March 31, 2002 and included in discontinued operations. (d) The property and the related assets and liabilities of these Local Partnerships were sold during the fiscal year ended March 31, 2004. (e) The property and the related assets and liabilities of this Local Partnership were sold during the fiscal year ended March 31, 2005. (f) The limited partnership interest of this Local Partnership was sold during the fiscal year ended March 31, 2005. (g) These properties are included in discontinued operations for the fiscal year ended March 31, 2004. (h) These properties are included in discontinued operations for the fiscal year ended March 31, 2005. (i) The property and the related assets and liabilities of this Local Partnership were sold during the fiscal year ended March 31, 2006. (j) The limited partnership interest of this Local Partnership was sold during the fiscal year ended March 31, 2006. (k) These properties are included in discontinued operations for the fiscal year ended March 31, 2006. (l) The limited partnership interest of this Local Partnership was sold during the fiscal year ended March 31, 2007. (m) The property and the related assets and liabilities of this Local Partnership were sold during the fiscal year ended March 31, 2007.

At the time the local partnerships were acquired by Liberty Tax Credit Plus II Limited Partnership, the entire purchase price paid by Liberty Tax Credit Plus II 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. 77

LIBERTY TAX CREDIT PLUS II L P 10-K