As of June 30, 2013 and December 31, 2012, the Partnership held limited partnership interests in five Local Limited Partnerships. As of June 30, 2013 and December 31, 2012, the Local Limited Partnerships own residential low-income rental projects consisting of 311 apartment units. Certain of the Local Limited Partnerships are encumbered by mortgage notes payable to or insured by various governmental agencies.

The Partnership, as a limited partner, does not have a contractual relationship with the Local Limited Partnerships or exercise control over the activities and operations, including refinancing or selling decisions, of the Local Limited Partnerships that would require or allow for consolidation. Accordingly, the Partnership accounts for its investments in the Local Limited Partnerships using the equity method. The Partnership is allocated profits and losses of the Local Limited Partnerships based upon its respective ownership percentages between 90% and 99%. Distributions of surplus cash from operations from most of the Local Limited Partnerships are restricted by the Local Limited Partnerships’ Regulatory Agreements with the United States Department of Housing and Urban Development (“HUD”). These restrictions limit the distribution to a portion, generally less than 10% of the initial invested capital. The excess surplus cash is deposited into a residual receipts reserve, of which the ultimate realization by the Partnership is uncertain as HUD frequently retains it upon sale or dissolution of the Local Limited Partnership. The Partnership is allocated profits and losses and receives distributions from refinancings and sales in accordance with the Local Limited Partnerships’ partnership agreements. These agreements usually limit the Partnership’s distributions to an amount substantially less than its ownership percentage in the Local Limited Partnership.

The individual investments are carried at cost plus the Partnership’s share of the Local Limited Partnership’s profits less the Partnership’s share of the Local Limited Partnership’s losses, distributions and impairment charges. The Partnership is not legally liable for the obligations of the Local Limited Partnerships and is not otherwise committed to provide additional support to them. Therefore, it does not recognize losses once its investment in each of the Local Limited Partnerships reaches zero. Distributions from the Local Limited Partnerships are accounted for as a reduction of the investment balance until the investment balance is reduced to zero. When the investment balance has been reduced to zero, subsequent distributions received are recognized as income in the accompanying statements of operations. An operating distribution of approximately $4,000 was received from one Local Limited Partnership, Oakridge Park II, during the six months ended June 30, 2013. No operating distributions were received from the Local Limited Partnerships during the six months ended June 30, 2012.

In January 2012, Marshall Plaza Apartments I and Marshall Plaza Apartments II sold their investment properties for approximately $1,110,000 and $1,385,000, respectively. After payment of closing costs and non-recourse notes payable due to an affiliate of the purchaser, the Partnership received proceeds of approximately $58,000 from the sale of Marshall Plaza Apartments I and approximately $72,000 from the sale of Marshall Plaza Apartments II during the six months ended June 30, 2012. These amounts were recognized as income on the statements of operations. The proceeds received were reduced by tax payments of approximately $36,000 reserved by the Partnership and returned to Marshall Plaza Apartments I and Marshall Plaza Apartments II in the second quarter of 2012 and 2013 to pay taxes associated with the sale. The Partnership had no investment balance remaining in Marshall Plaza Apartments I and II as of the date of sale.

In March 2012, Cassady Village sold its investment property to the holder of the non-recourse note payable in exchange for (i) full satisfaction of the non-recourse note payable due to the purchaser (as discussed in “Note 3”), (ii) the assumption of the outstanding mortgage loan encumbering the property, and (iii) the sum of one dollar. The Partnership did not receive any proceeds from the sale. The Partnership had no investment balance remaining in Cassady Village as of the date of sale.

Crockett Manor has entered into a purchase and sale contract to sell its investment property to a third party for a sale price that exceeds the balance of the mortgage encumbering the property by $75,000. After payment of closing costs and the mortgage encumbering the property, the Partnership does not expect to receive any proceeds from the sale of Crockett Manor. The transaction is expected to close during 2013. The Partnership had no investment balance remaining in Crockett Manor as of June 30, 2013 or December 31, 2012.

For those investments where the Partnership has determined that the carrying value of its investments approximates the estimated fair value of those investments, the Partnership’s policy is to recognize equity in income of the Local Limited Partnerships only to the extent of distributions received and amortization of acquisition costs from those Local Limited Partnerships. Therefore, the Partnership limits its recognition of equity earnings to the amount it expects to ultimately realize.

As of June 30, 2013 and December 31, 2012, the investment balance in all but one of the Local Limited Partnerships had been reduced to zero. The Partnership still has an investment balance in Park Place Limited Partnership.

At times, advances are made to the Local Limited Partnerships. Advances made by the Partnership to the individual Local Limited Partnerships are considered part of the Partnership’s investment in the Local Limited Partnership. Advances made to Local Limited Partnerships for which the investment has been reduced to zero are charged to expense. During the six months ended June 30, 2012, the Partnership advanced approximately $4,000 to two Local Limited Partnerships, Crockett Manor and Oakwood Manor, to fund tax payments. During the six months ended June 30, 2013, the Partnership advanced approximately $88,000 to Park Place Limited Partnership of which $58,000 was for non-resident withholding taxes and $30,000 was for REAC inspection related cost. While not obligated to make advances to any of the Local Limited Partnerships, the Partnership made this advance to protect its economic investment in the Local Limited Partnership.

The following is a summary of the investments in Local Limited Partnerships for the six months ended June 30, 2013 (in thousands):

Balance, beginning of period	$ 899
Equity in income of Local Limited Partnership	208
Advance	88
Amortization of acquisition costs	(4)
Balance, end of period	$ 1,191

The following are unaudited condensed combined estimated statements of operations for the three and six months ended June 30, 2013 and 2012 of Local Limited Partnerships in which the Partnership has invested (in thousands):

The combined results of operations for the three and six months ended June 30, 2013 and 2012 exclude the operations of Kentucky Manor, for which no financial information is available. The combined results of operations for the six months ended June 30, 2012 also exclude the operations of Marshall Plaza I and II, due to their sales in January 2012, Cassady Village due to its sale in March 2012 and Oakwood Manor, due to its sale in September 2012.