INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS

At September 30, 2013 and 2012, the Partnership had limited partnership equity interests in one and four Local Partnerships, owning zero and three apartment complexes, respectively.

Under the terms of the Partnership's investment in each Local Partnership, the Partnership was required to make capital contributions to the Local Partnerships. These contributions were payable in installments upon each Local Partnership achieving specified levels of construction and/or operations. At September 30, 2013 and 2012, all such capital contributions had been paid to the Local Partnerships.

a. Summarized financial information

Combined statements of operations for the Local Partnership in which the Partnership was invested as of September 30, 2013 and the four Local Partnerships in which the Partnership was invested as of September 30, 2012 follow. The combined statements are compiled from information supplied by the management agent of the Local Partnership properties and are unaudited. The information for each of the periods is presented separately for those Local Partnerships which have investment basis (equity method), and for those Local Partnerships which have cumulative losses in excess of the amount of the Partnership's investments in those local Partnerships (equity method suspended). Appended after the combined statements is information concerning the Partnership's share of income from partnerships related to cash distributions recorded as income, and related to the Partnership's share of income from Local Partnerships.

COMBINED STATEMENTS OF OPERATIONS

(Unaudited)




	For the nine months ended September 30,
	2013									2012
	Equity Method				Suspended		Total			Equity Method			Suspended				Total
Number of Local Partnerships	1			(a)	—		1			2		(b)	2			(c)	4

Revenue:
Rental	$	507,408			$	—	$	507,408		$	1,014,163		$	615,020			$	1,629,183
Other	8,338				—		8,338			18,606			19,805				38,411
Gain on sale of property	2,900,927				—		2,900,927			—			—				—

Total revenue	3,416,673				—		3,416,673			1,032,769			634,825				1,667,594

Expenses:
Operating and other	328,022				—		328,022			647,581			326,612				974,193
Interest (income) expense	(57,251		)		—		(57,251		)	25,476			123,043				148,519
Depreciation and amortization	199,310				—		199,310			179,784			40,235				220,019

Total expenses	470,081				—		470,081			852,841			489,890				1,342,731

Net income	$	2,946,592			$	—	$	2,946,592		$	179,928		$	144,935			$	324,863

Cash distribution	$	—			$	—	—			$	11,211		$	—			$	11,211
Partnership’s share of Local Partnership net income	$	136,528			$	—	$	136,528		$	177,916		$	—			$	177,916
Advances to Local Partnerships	—				—		—			—			(10,000		)		(10,000		)
Share of income from partnerships	$	136,528			$	—	$	136,528		$	177,916		$	(10,000	)		$	167,916

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	For the three months ended
	September 30,
	2013									2012
	Equity Method				Suspended		Total			Equity Method			Suspended			Total
Number of Local Partnerships	1			(a)	—		1			2		(b)	2		(c)	4

Revenue:
Rental	$	102,298			$	—	$	102,298		$	314,808		$	120,718		$	435,526
Other	781				—		781			6,388			718			7,106
Gain on sale of property	2,900,927				—		2,900,927			—			—			—

Total revenue	3,004,006				—		3,004,006			321,196			121,436			442,632

Expenses:
Operating and other	62,353				—		62,353			199,191			66,885			266,076
Interest (income) expense	(19,083		)		—		(19,083		)	8,492			22,345			30,837
Depreciation and amortization	66,436				—		66,436			59,928			582			60,510

Total expenses	109,706				—		109,706			267,611			89,812			357,423

Net income	$	2,894,300			$	—	$	2,894,300		$	53,585		$	31,624		$	85,209

Cash distribution	$	—			$	—	$	—		$	11,211		$	—		$	11,211
Partnership’s share of Local Partnership net income	$	126,492			$	—	$	126,492		$	50,610		$	—		$	50,610
Share of income from partnerships	$	126,492			$	—	$	126,492		$50,610			$	—		$	50,610

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(a) Meadow Lanes (operations through date of sale)

(b) Meadow Lanes; Villa Mirage I

Cash distributions received from Local Partnerships which have investment basis (equity method) are recorded as a reduction of investments in partnerships and as cash receipts on the respective balance sheets. Cash distributions received from Local Partnerships which have cumulative losses in excess of the amount of the Partnership's investments in those Local Partnerships (equity method suspended) are recorded as share of income from partnerships on the respective statements of operations and as cash receipts on the respective balance sheets. As of September 30, 2012, the Partnership's share of cumulative losses to date for two of four Local Partnerships exceeded amount of the Partnership's investments in and advances to those Local Partnerships by $8,930,372. As of September 30, 2013, the remaining Local Partnership did not have cumulative losses in excess of the Partnership's investment. As the Partnership has no further obligation to advance funds or provide financing to these Local Partnerships, the excess losses have not been reflected in the accompanying financial statements.

b. Due on investments in partnerships and accrued interest payable

Due on investment in partnerships includes $119,544 due to a previous owner related to Meadow Lanes Apartments at both September 30, 2013 and December 31, 2012; accrued interest payable thereon was $33,976 at both September 30, 2013 and December 31, 2012. These amounts are scheduled to be paid upon the occurrence of certain specific events, as outlined in the note agreement. At September 30, 2013 and December 31, 2012, the Partnership is in dispute with the previous owner regarding amounts owed under the note agreement. Management cannot determine the outcome of the dispute at this time. Accordingly, the condensed financial statements do not reflect any adjustment due to the uncertainty.

c. Completed Sales

Villa Mirage I and Villa Mirage II

On November 15, 2011, the general partners of Villa Mirage I, a California limited partnership, and Villa Mirage II, a California limited partnership, entered into a contract with an unaffiliated third party to sell their properties for an aggregate sale price of $6,500,000. On September 27, 2012, the sale of the properties closed. The investment balance in the Local Partnerships at the time of sale was $214,467. Of the $1,388,500 of proceeds received as a result of the sale, a disposition fee was paid to the managing general partner in the amount of $325,000. The disposition fee was netted against the related gain on disposition of property.

A gain of $849,033 was recorded during the three months ended September 30, 2012 as a result of the sale of Villa Mirage I and Villa Mirage II.

Monterey/Hillcrest

On September 29, 2011, the general partners of Pebble Valley Housing Partners Limited Partnership, a Wisconsin limited partnership, entered into a contract with an unaffiliated third party to sell its property (Monterey/Hillcrest) and the transaction closed on January 31, 2012. The sales price was $18,920,000 and total proceeds amounted to $3,694,108. Proceeds received in February 2012 totaled $3,611,288. The investment balance in the Local Partnership was $0 at December 31, 2011. Net unamortized acquisition costs and property purchase costs of $3,656 were written off and netted against the gain on sale of property. A disposition fee of $946,000 was paid to the managing general partner. The disposition fee was netted against the related gain on disposition of property.

During the three months ended March 31, 2012, a gain of $2,744,452 was recorded as a result of the sale of Monterey/Hillcrest.

Meadow Lanes

On June 18, 2012, the Local Partnership entered into a purchase and sale agreement to sell Meadow Lanes Apartments for $2,900,000. The sale occurred on August 19, 2013. All sale proceeds were used to satisfy Local Partnership obligations and the remaining funds available will be distributed to partners in accordance with the Meadow Lanes–II Associates Limited Dividend Housing Association Limited Partnership Agreement. The Partnership's investment basis in this Local Partnership at December 31, 2012 was $2,582,473. The Partnership expects to receive $2,719,001 as a result of the sale. Net unamortized acquisition and property purchases costs of $1,070 were written off and a disposition fee of $145,000 was paid to the managing general partner. Both of these amounts are included in the loss on disposition of properties line item on the accompanying condensed statements of operations and accumulated losses.

During the three months ended September 30, 2013, a loss of $146,070 was recorded as a result of the sale of Meadow Lanes.

Subsequent to the the receipt of the distribution related to the sale, the Partnership will be liquidated.

d. Advances to Local Partnerships

On February 8, 2012, the Partnership advanced $10,000 to Villa Mirage I and $10,000 to Villa Mirage II Limited Partnerships for the issuance of a prepayment letter, as required by CalHFA. For financial statement purposes the advance to Villa Mirage II was charged off by the Partnership as a result of losses at the Local Partnership level during prior years.

e. Investment Reconciliation

The following reconciliation of investments in partnership at September 30, 2013:



Investments in and receivable from partnership at December 31, 2012:	$	2,582,473

Share of income from partnership	136,528

Investments in and receivable from partnership at September 30, 2013:	$	2,719,001