INVESTMENTS IN PARTNERSHIPS

a. Due on investments in partnerships and accrued interest payable

As of December 31, 2012 and 2011, the Partnership held limited partner interests in three and six Local Partnerships, respectively, which were organized to develop, construct, own, maintain and operate rental apartment properties. The remaining amounts due on investments in the Local Partnerships follow.



	December 31,
	2012		2011
Purchase money notes due in:
1999	$	840,000	$	840,000
2025	500,000		500,000
Subtotal	1,340,000		1,340,000
Accrued interest payable	7,723,421		7,225,145
Total	$	9,063,421	$	8,565,145

The remaining purchase money notes have stated interest rates ranging from 8.17% to 9.00%, of which Northridge Park compounds annually and Westport Village has simple interest. The purchase money notes are non-recourse, but their terms provide for payment in full upon the earliest of: (i) sale or refinancing of the respective Local Partnership's rental property; (ii) payment in full of the respective Local Partnership's permanent loan; or (iii) maturity.

The purchase money note related to the following property has matured and has not been paid or extended as of April 30, 2013.



Property	Principal	Accrued Interest as of December 31, 2012		Maturity
Westport Village (1)	$840,000	$	3,166,365	9/1/1999


(1)	In receivership.

The remaining purchase money note related to Northridge Park matures in 2025. As of December 31, 2012, principal and accrued interest balances were $500,000 and $4,557,056, respectively.

The Partnership has received notice from IHDA of foreclosure sale of the Westport Village property. As of December 31, 2012, Westport Village is in receivership. The Partnership’s non-recourse purchase money notes and accrued interest totaled $840,000 and $3,166,365, respectively, at December 31, 2012. The Partnership is not anticipating any loss resulting from the change in ownership.

The Partnership's inability to pay certain of the purchase money note principal and accrued interest balances when due, and the resulting uncertainty regarding the Partnership's continued ownership interest in the related Local Partnerships, does not adversely impact the Partnership's financial condition because the purchase money notes are nonrecourse and secured solely by the Partnership's interest in the related Local Partnerships. Therefore, should the investment in any of the Local Partnerships with matured or maturing purchase money notes not produce sufficient value to satisfy the related purchase money notes, the Partnership's exposure to loss is limited because the amount of the nonrecourse indebtedness of each of the matured or maturing purchase money notes exceeds the carrying amount of the investment in each of the related Local Partnerships. Thus, even a complete loss of the Partnership's interest in one of these Local Partnerships would not have a material adverse impact on the financial condition of the Partnership.

Of the three Local Partnerships in which the Partnership is invested as of December 31, 2012, the one Local Partnership with an associated purchase money note which has matured, or which matures through December 31, 2012, and which remain unpaid or unextended as of March 31, 2013, represented 0% of the Partnership's total distributions received from Local Partnerships and share of income from Local Partnerships for the immediately preceding two calendar years.

The Managing General Partner continues to address the maturity and impending maturity of the Partnership’s debt obligations and to seek solutions that will provide the most favorable outcome to the Limited Partners. However, there can be no assurance that these strategies will be successful.

Interest expense on the Partnership's purchase money note for the years ended December 31, 2012 and 2011 was $498,276 and $469,428, respectively. The accrued interest payable on the purchase money notes of $7,723,421 and $7,225,145 as of December 31, 2012 and 2011, respectively, is due on the respective maturity dates of the purchase money notes or earlier, in some instances, if (and to the extent of a portion thereof) the related Local Partnership has distributable net cash flow, as defined in the relevant Local Partnership agreement.

Westport Village

The purchase money note secured by the Partnership’s interest in Westport Associates (Westport Village) matured on September 1, 1999 and was not paid. The default amount included principal and accrued interest of $840,000 and $1,615,644, respectively. The Partnership was sued by the noteholders but there has not been any legal action since 2000.

The mortgage loan encumbering the property associated with the Partnership’s investment in Westport Village is in default. The Managing General Partner of the Local Partnership was unable to reach an agreement with IHDA to a mortgage restructuring. IHDA has provided notice of foreclosure sale of the property. As of December 31, 2012, Westport Village is in receivership.

Due to the impending foreclosure, the Partnership’s basis in the Local Partnership, along with the net unamortized amount of acquisition fees and property purchase costs, which totaled $0 at both December 31, 2012 and December 31, 2011, has been reclassified to investment in partnerships held for sale or transfer in the accompanying consolidated balance sheets. The Partnership’s non-recourse purchase money notes and accrued interest thereon total $840,000 and $3,166,365, respectively, at December 31, 2012 relating to this property. There can be no assurance as to the ultimate timing of the foreclosure sale and/or transfer of ownership of the property.

b. Interests in profits, losses and cash distributions made by Local Partnerships

The Partnership has a 96.00% to 98.99% interest in profits, losses and cash distributions (as restricted by various federal and state housing agencies) (collectively, the “Agencies”) of each Local Partnership. An affiliate of the Managing General Partner of the Partnership is also a general partner of each Local Partnership or the intermediary limited partnership which invested in the Local Partnership. As stipulated by the Local Partnerships’ partnership agreements, the Local Partnerships are required to make annual cash distributions from surplus cash flow, if any. During 2012 and 2011, the Partnership received cash distributions from rental operations of the Local Partnerships totaling $774,234 and $415,550, respectively. As of December 31, 2012 and 2011, two and three of the Local Partnerships had aggregate surplus cash, as defined by their respective regulatory Agencies, in the amounts of $586,793 and $864,504, respectively, which may be available for distribution in accordance with their respective regulatory Agencies' regulations.

The cash distributions to the Partnership from the operations of the Local Partnerships may be limited by the Agencies’ regulations. Such regulations limit annual cash distributions to a percentage of the owner's equity investment in a rental property. Funds in excess of those which may be distributed to owners are generally required to be placed in a residual receipts account held by the governing state or federal agency for the benefit of the property. In addition, local general partners have the authority to withhold funds if needed for property repairs, improvements, or other property needs.

Upon sale or refinancing of a property owned by a Local Partnership, or upon liquidation of a Local Partnership, the proceeds from such sale, refinancing or liquidation shall be distributed in accordance with the respective provisions of each Local Partnership's partnership agreement. In accordance with such provisions, the Partnership would receive from such proceeds its respective percentage interest of any remaining proceeds, after payment of (i) all debts and liabilities of the Local Partnership and certain other items, (ii) the Partnership's capital contributions plus certain specified amounts as outlined in each partnership agreement, and (iii) certain special distributions to the general partners and related entities of the Local Partnership.

c. Assets held for sale or transfer

Westport Village

The mortgage loan encumbering the property associated with the Partnership's investment in Westport Village is in default. As of December 31, 2012, Westport Village was in receivership pending a foreclosure sale of the property. Accordingly, the Partnership's basis in the Local Partnership, which totaled $0 at both December 31, 2012 and December 31, 2011, has been reclassified to investment in partnerships held for sale or transfer in the accompanying consolidated balance sheets. There can be no assurance as to the ultimate timing of the foreclosure sale and/or transfer of ownership of the property.

d. Completed sales

Fairway Park

On October 26, 2012, a purchase and sale agreement was entered into between the Partnership and Morey Acquisition LLC to sell the its limited partner interest in the Local Partnership that owns the Fairway Park property for $8,710,000.

On December 20, 2012, the sale was complete and the Partnership received proceeds of $8,710,000. The Partnership's basis in this Local Partnership at both December 31, 2012 and 2011 was $0. Net acquisition fees and property purchase costs of $8,294 and $4,130, respectively, were written off and netted against the gain on disposition of investment in partnerships during the year ended December 31, 2012.

From the sales proceeds, the Partnership incurred and paid CRI, Inc. a fee in the amount of $415,560 for services provided in connection with the sale of the limited partnership interest in the Local Partnership. The net gain incurred on the sale was $8,282,016 for the year ended December 31, 2012.

Mary Allen West Tower

On October 13, 2011, the Mary Allen West Tower property was sold. The investment balance at December 31, 2011 was $4,767,709. This represents the distribution the Partnership received from the sale of the property. The distribution proceeds were received on February 22, 2012.

From the sale proceeds, the Partnership paid CRI, Inc. a fee in the amount of $70,000 for services provided in connection with the sale of the Mary Allen West Tower property. At December 31, 2011, this fee had been accrued and was included in accounts payable and accrued expenses on the accompanying consolidated balance sheets. The fee was paid during the year ended December 31, 2012.

Madison Square

On May 7, 2008, the Local Managing General Partner signed a contract to sell the property related to Madison Square, Ltd. Dividend Housing Associates (Madison Square) to a non-profit organization. The potential purchaser of the property defaulted on the contract. The mortgage loan encumbering the property associated with the Partnership's investment in Madison Square is in default. During the year ended December 31, 2011, The Michigan State Housing Development Authority sold the property via deed in lieu of foreclosure. The Partnership's basis in this Local Partnership was $0 at both December 31, 2012 and 2011. Acquisition fees and property purchase costs totaled $0 at both December 31, 2012 and 2011. As of December 31, 2011, the Local Partnership was dissolved, and the Partnership no longer holds a limited partner interest in Madison Square. The Partnership did not recognize any loss during 2012 or 2011 from this transaction.

Hale Ohana

On March 18, 2008, the Local Partnership entered into a contract with a third party to sell its property for approximately $3,875,000. The sale was completed on March 15, 2010. The sale resulted in a gain on disposition of investment in partnerships of $1,603,594, which was recognized in 2010. During the year ended December 31, 2012, the Partnership received a final distribution of $50,916 relating to the final release of the Local Partnership reserves. This amount is included in gain on disposition of investment in partnership on the accompanying consolidated statements of operations.

e. Summarized financial information

Combined balance sheets and combined statements of operations for the three Local Partnerships in which the Partnership is invested as of December 31, 2012, follow. The information is presented separately for one Local Partnership which has an investment basis (equity method), and for two Local Partnerships for which the Partnership's carrying value is zero (equity method suspended).

COMBINED BALANCE SHEETS December 31, 2012

	Equity Method			Suspended				Total
Number of Local Partnerships	1		(a)	2			(b)	3

Rental property, at cost, net of accumulated
depreciation of $2,869,944 and $8,904,400,
respectively	$	602,910		$	1,214,695			$	1,817,605
Land	176,923			1,182,873				1,359,796
Other assets	524,769			727,210				1,251,979

Total assets	$	1,304,602		$	3,124,778			$	4,429,380

Mortgage notes payable	$	—		$	3,898,568			$	3,898,568
Other liabilities	74,752			2,455,132				2,529,884
Due to general partners	—			—				—

Total liabilities	74,752			6,353,700				6,428,452

Partners' capital (deficit)	1,229,850			(3,228,922		)		(1,999,072		)

Total liabilities and partners' capital	$	1,304,602		$	3,124,778			$	4,429,380

_______________________________

(a) Tradewinds

(b) Northridge; Westport Village

COMBINED STATEMENTS OF OPERATIONS For the year ended December 31, 2012

	Equity Method			Suspended			Total
Number of Local Partnerships	1		(a)	3		(c)	4

Revenue:
Rental	$	787,586		$	4,280,411		$	5,067,997
Other	37,836			344,970			382,806

Total revenue	825,422			4,625,381			5,450,803

Expenses:
Operating	643,508			2,477,645			3,121,153
Interest	—			717,999			717,999
Depreciation and amortization	127,026			684,429			811,455

Total expenses	770,534			3,880,073			4,650,607

Net income	$	54,888		$	745,308		$	800,196

Cash distributions	$	—		$	774,234		$	774,234

Cash distributions recorded as reduction of
investments in partnerships	$	—		$	—		$	—

Cash distributions recorded as income	$	—		$	774,234		$	774,234

Partnership’s share of Local Partnership
net income	54,329			—			54,329

Share of income from partnerships	$	54,329		$	774,234		$	828,563

All of the cash distributions recorded as income are included in share of income from partnerships on the consolidated statements of operations for the respective years, and are recorded as cash receipts on the respective consolidated balance sheets. Cash distributions recorded as a reduction of the related investment are recorded as cash receipts on the respective consolidated balance sheets, and are recorded as a reduction of investments in partnerships, also on the respective consolidated balance sheets.

Combined balance sheets and combined statements of operations for the five Local Partnerships in which the Partnership is invested as of December 31, 2011, follow. The information is presented separately for two Local Partnerships which

have investment basis (equity method), and for three Local Partnerships for which the Partnership’s carrying value is zero (equity method suspended).

COMBINED BALANCE SHEETS December 31, 2011

	Equity Method			Suspended				Total
Number of Local Partnerships	2		(a)	3			(b)	5

Rental property, at cost, net of accumulated
depreciation of $2,742,918 and $23,232,543,
respectively	$	710,424		$	3,481,864			$	4,192,288
Land	176,923			2,912,649				3,089,572
Other assets	5,334,742			2,529,541				7,864,283

Total assets	$	6,222,089		$	8,924,054			$	15,146,143

Mortgage notes payable	$	60,516		$	11,927,387			$	11,987,903
Other liabilities	90,588			3,160,711				3,251,299
Due to general partners	—			—				—

Total liabilities	151,104			15,088,098				15,239,202

Partners' capital (deficit)	6,070,985			(6,164,044		)		(93,059		)

Total liabilities and partners' capital	$	6,222,089		$	8,924,054			$	15,146,143

_______________________________

(a) Mary Allen West Tower; Tradewinds

(b) Fairway Park; Westport Village; Northridge

COMBINED STATEMENTS OF OPERATIONS For the year ended December 31, 2011

	Equity Method			Suspended			Total
Number of Local Partnerships	2		(a)	3		(b)	5

Revenue:
Rental	$	1,589,442		$	4,190,158		$	5,779,600
Other	2,386,044			211,299			2,597,343

Total revenue	3,975,486			4,401,457			8,376,943

Expenses:
Operating	1,053,431			2,374,368			3,427,799
Interest	—			624,740			624,740
Depreciation and amortization	124,335			665,119			789,454

Total expenses	1,177,766			3,664,227			4,841,993

Net income	$	2,797,720		$	737,230		$	3,534,950

Cash distributions	$	—		$	415,550		$	415,550

Cash distributions recorded as reduction of
investments in partnerships	$	—		$	—		$	—

Cash distributions recorded as income	$	—		$	415,550		$	415,550

Partnership’s share of Local Partnership
net income	2,769,466			—			2,769,466

Share of income from partnerships	$	2,769,466		$	415,550		$	3,185,016

f. Reconciliation of the Local Partnerships' financial statement

net income to taxable income

For federal income tax purposes, the Local Partnerships report on a basis whereby: (i) certain revenue and the related assets are recorded when received rather than when earned; (ii) certain costs are expensed when paid or incurred rather than capitalized and amortized over the period of benefit; and (iii) a shorter life is used to compute depreciation on the property as permitted by the Internal Revenue Code and the underlying regulations. These returns are subject to examination and, therefore, possible adjustment by the IRS.

A reconciliation of the Local Partnerships' financial statement net income reflected above to taxable income follows.



	December 31,
	2012		2011
Financial statement net income	$	800,196	$	3,534,950
Differences between financial statement
and tax depreciation, amortization,
and miscellaneous differences	320,359		7,333,041
Taxable income	$	1,120,555	$	10,867,991

g. Investment reconciliation

The following is a reconciliation of investments in partnerships at December 31, 2012 and 2011:



Investments in partnerships at January 1, 2011:	$	1,058,968

Share of income from partnerships	548,918
Distribution from partnerships	(415,550		)

Investments in partnerships at December 31, 2011:	1,192,336

Share of income from partnerships	828,563
Distribution from partnerships	(774,234		)

Investments in partnerships at December 31, 2012:	$	1,246,665

The following is a reconciliation of investments in partnerships held for sale or transfer at December 31, 2012 and 2011:



Investments in partnerships at January 1, 2011:	$	2,348,551

Share of income from partnerships	2,636,098
Write off investment due to sale of property included in share of income from partnerships	(216,940		)

Investments in partnerships at December 31, 2011:	4,767,709

Receipt of proceeds from sale of investment in partnership	(4,767,709		)

Investments in partnerships at December 31, 2012:	$	—