10-K 1 f10k_cam1-2003.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 25, 2003 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ------- EXCHANGE ACT OF 1934 Commission File Number 0-13782 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP --------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 13-3228969 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or 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) 421-5333 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Initial Limited Partnership Interests (Title of Class) Additional Limited Partnership Interests (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). 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 25, 2002 was $(10,453,000) based on Limited Partner equity (deficit) as of such date. Registrant's voting and non-voting common equity is not publicly traded. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Business. General Cambridge Advantaged Properties Limited Partnership (formerly Hutton Advantaged Properties Limited Partnership) (the "Partnership") is a limited partnership which was formed under the laws of the Commonwealth of Massachusetts on June 28, 1984. The General Partners of the Partnership ("General Partners") are Assisted Housing Associates Inc. (formerly Cambridge Assisted Housing Associates Inc.) (the "Assisted General Partner"), and Related Beta Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with The Related Companies, L.P. ("Related"), a New York limited partnership, and Cambridge/Related Associates Limited Partnership (formerly Hutton/Related Associates Limited Partnership) ("Cambridge/Related"), a Massachusetts limited partnership. The general partners of Cambridge/Related are the Assisted General Partner and the Related General Partner. The General Partners manage and control the affairs of the Partnership. See Item 10, Directors and Executive Officers of the Registrant, below. On November 25, 1997, an affiliate of the Related General Partner purchased 100% of the stock of the Assisted General Partner (the "Transfer"), then an affiliate of Lehman Brothers, Inc. The Assisted General Partner is also a partner of Cambridge/Related and, therefore, as a result of the Transfer, such affiliate also acquired the Assisted General Partner's general partner interest in Cambridge/Related and C/R Special Partnership, the special limited partner of the Partnership. In connection with the Transfer, the Partnership paid to the Assisted General Partner the accrued asset management fees owed to it in the aggregate amount of $1,334,116. See Note 8 - Related Party Transactions to the Financial Statements included in Item 8. below. Effective May 19, 1994, the Partnership's name was changed to Cambridge Advantaged Properties Limited Partnership. On August 9, 1984, pursuant to a prospectus dated August 9, 1984 as supplemented by the supplements thereto dated September 7, 1984, October 5, 1984 and November 20, 1984 (as so supplemented, the "Prospectus"), the Partnership commenced a public offering (the "Offering", as so supplemented). Pursuant to the Offering, the Partnership issued 6,674 Units (as defined below) in 1984, each Unit consisting of one initial limited partnership interest (the "Initial Limited Partnership Interest") and one warrant to purchase an additional limited partnership interest (the "Additional Limited Partnership Interest") and together with the Initial Limited Partnership Interests (the "Limited Partnership Interests") during the period from January 1, 1985 through January 25, 1985 (a "Unit"), and 5,400 Additional Limited Partnership Interests in 1985. The Partnership received $53,754,300 (net of Offering expenses and sales commissions of $6,615,700) as a result of the Offering. The Offering was completed in March 1985 and no further issuance of Additional Limited Partnership Interests is anticipated. Investment Objectives/Government Incentives ------------------------------------------- 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 or leases and operates an existing residential housing development (an "Apartment Complex") which is receiving some form of local, state or federal assistance, including, without limitation, mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). In acquiring its interests in the Local Partnerships ("Local Partnership Interests"), the Partnership's investment objectives are to: (1) Provide current tax benefits in the form of passive tax losses which limited partners may use to offset passive taxable income from other sources; 2 (2) provide long-term capital appreciation through an increase in the value of the Partnership's investments in Local Partnerships; (3) provide cash distributions from sale or refinancing transactions; and (4) preserve and protect the Partnership's capital. The Partnership is in the process of winding up its operations as it continues to sell its assets; therefore investment objectives (1), (2) and (4) are no longer applicable. During the year ended March 25, 2003, the Partnership has distributed approximately $1,524,000 from sales transactions. The Partnership has to date distributed approximately $6,944,000 from sales transactions and expects to continue to make distributions from excess sales proceeds, although such aggregate distributions and will not equal the original investment. The Partnership will no longer be generating passive losses due to the sale of properties. However, passive losses previously allocated (to the extent unused) are available to offset the income expected to be generated from the sales effort. Federal, state and local government agencies have provided significant incentives in order to stimulate private investment in government assisted housing. See "Government Programs and Regulations," below. Notwithstanding these incentives, there remain significant risks. These risks include, but are not limited to, the uncertainty as to the financial strength and expertise of the general partners of the Local Partnerships ("Local General Partners"); the long-term nature of investments in government-assisted housing has limited the ability of the Partnership to vary its investment portfolio in response to changing economic, financial and investment conditions; and changes in local economic circumstances and housing patterns which have an impact on real estate values and, in the Partnership's current liquidation phase, the ability to achieve a profit on the sale of the Apartment Complexes. Apartment Complexes benefiting from Government Assistance also have required greater management expertise and have had higher operating expenses than conventional apartment buildings. See Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations, below. Investments ----------- The Local Partnership Interests owned by the Partnership were acquired from unaffiliated sellers. The Partnership became the principal limited partner in these Local Partnerships pursuant to local limited partnership agreements entered into with the Local General Partners. As a limited partner, the Partnership's liability for obligations of the Local Partnerships is limited to its investment. The Local General Partners of the Local Partnerships retain responsibility for maintaining, operating and managing the Apartment Complexes. The Partnership is a limited partner, with an ownership interest of 98.99% in each of the 4 remaining subsidiary partnerships. Each Local Partnership also has as a special limited partner (the "Local Affiliated Partner"), either C/R Special Partnership or another affiliate of the General Partners, which under certain circumstances has the right to replace the Local General Partners of the Local Partnership and also has certain rights with respect to voting on or approving of certain matters, including the sale of an Apartment Complex. These rights were given to the Local Affiliated Partner rather than the Partnership to avoid claims that by the existence or exercise by the Partnership of such rights it would be taking part in the control of the Local Limited Partnerships' operations and should therefore incur liability as a General Partner of the Local Partnerships. The Local Affiliated Partner has agreed to exercise these rights as a fiduciary of the Limited Partners of the Partnership. Purchase Money Notes -------------------- Purchase money notes in the original amount of $85,458,825 were issued to the selling partners of the subsidiary partnerships as part of the purchase price 3 and are secured only by the interest in the subsidiary partnership to which the purchase money note relates (the "Purchase Money Notes"). A portion of these Purchase Money Notes, in the original amount of $31,932,568 is an obligation at the subsidiary partnership level, whereas the remaining $53,526,257 is recorded at the Partnership level. The Purchase Money Notes generally provided for compound interest at rates which, in general, ranged from 9% to 10% per annum through August 31, 1989. Thereafter, simple interest has accrued, without further interest thereon, through maturity as extended (see below). Purchase Money Notes at March 25, 2003 and 2002 include $4,336,417 of interest accrued through August 31, 1989. The Purchase Money Notes, which provide for simple interest, will not be in default if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding subsidiary partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. Any interest not paid currently accrues, without further interest thereon, through the extended due date of the Purchase Money Note. Continued accrual of such interest beyond the initial term, without payment, reduces the effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and the ultimate repayment dates of the Purchase Money Notes. The Purchase Money Notes, after the extended maturity dates, call for the simple accrual of interest on the balance of principal, interest and Purchase Money Note Extension Fees Payable as of the date of maturity at one of the following two rates: (i) the lesser of 12% or the legally allowable rate; or (ii) the lesser of prime plus 2% or the lowest legally allowable rate. Unpaid interest of approximately $9,917,000 and $22,909,000 as of March 25, 2003 and 2002, respectively, has been accrued and is included in due to selling partners in the consolidated balance sheets. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of proceeds of the sale or refinancing of the Apartment Complex. The Partnership extended the terms of the Purchase Money Notes (ranging from August to December 1996) for up to three additional years (four years with respect to three subsidiary partnerships and seven years with respect to three subsidiary partnerships). In connection with such extensions, the Partnership incurred an extension fee of 1/2 % per annum of the outstanding principal balance of the Purchase Money Notes. Of such fees incurred, $47,367 was accrued and added to the Purchase Money Notes balance. The extension fees are being amortized over the term of the extensions. The Purchase Money Notes with seven year extensions have all been sold. Additionally, an oral agreement was reached in November 2002 that extended the maturity dates of the remaining Purchase Money Notes through June 2003. Further extensions, until such properties are sold, are currently in the discussion stage. The Partnership is working with the Local General Partners and Purchase Money Note holders to refinance or sell the properties. No assurance can be given that management's efforts will be successful. Based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, the proceeds from such sales will not be sufficient to meet the outstanding balances of principal, accrued interest and extension fees. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the Purchase Money Note holder's recourse, in the event of nonpayment, would be to foreclose on the Partnership's interests in the respective subsidiary partnerships. Distributions aggregating approximately $10,072,000, $4,452,000 and $6,550,000 were made to the Partnership during each of the years ended March 25, 2003, 2002 and 2001, respectively, of which approximately $8,776,000, $3,872,000 and $5,147,000, respectively, was used to pay principal, interest and extension fees on the Purchase Money Notes. In addition, approximately $0, $0 and $598,000 for the 2002, 2001 and 2000 Fiscal Years, respectively, was paid as "additional" interest on the Purchase Money Notes. Government Programs and Regulations ----------------------------------- The General Partners will carefully analyze the opportunities available upon the expiration of the properties' HUD contracts, as well as the tax consequences of 4 each option to investors. Prior to expiration of the properties' HUD contracts, and based on the historical operating results and current economic conditions including changes in tax laws, it is uncertain as to whether there would be a return to the investors upon the sale of the applicable properties in the Partnership's portfolio. The Local Partnerships which receive government assistance are subject to low-income use restrictions which limit the owners' abilities to sell or refinance the properties. In order to maintain the existing inventory of affordable housing, Congress passed a series of related acts including the Emergency Low Income Preservation Act of 1987, the Low-Income Housing Preservation and Resident Homeownership Act of 1990 (together the "Preservation Acts") and the Housing Opportunity Program Extension Act of 1996 (the "1996 Act"). In exchange for maintaining the aforementioned use restrictions, the Preservation Acts provided financial incentives for owners of government assisted properties. The 1996 Act provided financial assistance by funding the sale of such properties to not-for-profit owners and also restores the owners' abilities to prepay their HUD mortgage and convert the property to condominiums or market-rate rental housing. The following eight Local Partnerships filed for incentives under the Preservation Acts: Lansing, MI - Cranbrook Manor Apts., Romulus, MI - Oakbrook Villa Apts., New Bedford, MA - Buttonwood Acres, Wyandotte, MI - Villa Apollo Associates Limited Partnership and Villa Apollo # 2 Limited Partnership, South Dartmouth, MA - Solemar, Sterling Heights, MI - Carlton Terrace Apartments, and San Diego, CA - Lancaster Manor Apartments. Subsequently all of the properties owned by these eight Local Partnerships were sold. Funding for the 1996 Act is subject to appropriations by Congress. Congress has not appropriated any funds for preservation since 1997. Accordingly, no assurance can be given that any of the Local Partnerships will obtain such incentives. In September 1997, Congress enacted the Multi-Family Assisted Housing Reform and Affordability Act of 1997 ("MAHRA") which provides for the renewal of Section 8 Housing Assistance Payments Contracts ("Section 8 Contracts") to be based upon market rentals in instances where the existing Section 8 Contracts exceed current market rents. As a result, Section 8 Contracts that are renewed in the future in projects insured by the Federal Housing Administration ("FHA") may not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. MAHRA also provides for the restructuring of these mortgage loans so that the annual debt service on the restructured loan (or loans) can be supported by Section 8 rents established at the market rents. The restructured loans will be held by the current lender or another lender. There can be no assurance that a property owner will be permitted to restructure its mortgage indebtedness pursuant to the new rules implementing MAHRA or that an owner, or the holder of the mortgage, would choose to restructure the mortgage if it were able to participate. MAHRA went into effect on September 11, 1998 when interim regulations implementing the program were published. It should be noted that there are many uncertainties as to the economic and tax impacts on a property owner because of the combination of the reduced Section 8 contract rents and the restructuring of the existing FHA-insured mortgage loan under MAHRA. On October 21, 1998 President Clinton signed the Fiscal Year 1999 Departments of Veteran Affairs, Housing and Urban Development and Independent Agencies Appropriation Legislation into law. The bill provides, among other things, that owners of a property that were eligible for prepayment had to give notice of such prepayment to HUD tenants and to the chief executive of the state or local government for the jurisdiction in which the housing is located. The notice must be provided not less than 150 days, but not more than 270 days, before such payment. Moreover, the owner may not increase the rent charged to tenants for a period of 60 days following such prepayment. The bill also provides for tenant-based vouchers for eligible tenants (generally below 80% of area median income) at the true comparable market rents for unassisted units in order to protect current residents from substantial increases in rent. 5 On October 20, 1999, President Clinton signed FY 2000 VA, the HUD Independent Agencies Appropriations Act (the "Appropriations Act"). The Appropriations Act contains revisions to the HUD Mark-to-Market Program and other HUD programs concerning the preservation of the HUD housing stock. On December 29, 1999 HUD issued Notice H99-36 addressing "Project Based Section 8 Contracts Expiring in Fiscal Year 2000" reflecting the changes in the Appropriations Act and superceding earlier HUD Notices 98-34, 99-08, 99-15, 99-21 and 99-32. Notice 99-36 clarifies many of the earlier uncertainties with respect to the earlier HUD Section 8 Mark-to-Market Programs and continued the Mark-up-to-Market Program which allows owners with Section 8 contracts to increase the rents to market levels where contract rents are currently below market. Sales of Underlying Properties/Local Partnership Interests ---------------------------------------------------------- General ------- The Partnership is currently in the process of disposing of its investments. As of March 25, 2003, the Partnership had disposed of fifty-seven of its sixty-one original investments. Three additional investments are listed for sale and the Partnership anticipates that the remaining investment will be liquidated sometime during the first half of 2003. There can be no assurance as to whether or not the Partnership will achieve this goal. Furthermore, there can be no assurance that any proceeds will be realized based on the historical operating results of the Local Partnerships and the current economic conditions. Moreover, the Local General Partners and noteholders generally have decision-making rights with respect to the sale of each property which makes it more cumbersome for the General Partners to cause a sale of each property. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed a new entity: Cambridge Advantaged Liquidating L.L.C. (the "Trust"), a Delaware limited liability company which is wholly-owned by the Partnership. On July 21, 1999, the Partnership contributed its limited partnership interest in Decatur Apartments, Ltd., Florence Apartments, Ltd., Saraland Apartments, Ltd., Dickens Ferry Apartments, Ltd., Bonnie Doone Apartments, Ltd., University Gardens Apartments, Ltd., and Southside Village Apartments, Ltd. to the Trust. In each case, the interests were contributed subject to each respective Purchase Money Note. The contribution did not involve any consideration being paid to the Partnership; therefore, there should not be any tax effect to the limited partners of the Partnership. As of March 25, 2003, all of these properties were sold or disposed. On March 28, 2003, the Partnership's interest in Saraland Apartments ("Saraland") was transferred to the U.S. Environmental Protection Agency pursuant to the First Amended Bankruptcy Plan by order of the United States Bankruptcy Court in Dallas, TX, resulting in a gain of approximately $350,000. No proceeds were used to pay off the Purchase Money Note and accrued interest, which had a total outstanding balance of approximately $2,124,000 resulting in additional gain of approximately $2,124,000 (see Note 11). On December 31, 2002, the Partnership's limited partnership interest in Summer Arms Apartments ("Summer Arms") was sold to the Purchase Money Note Holder for $25,000, resulting in gain of approximately $252,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,275,000, resulting in a gain on sale of approximately $3,275,000. On December 20, 2002, the property and related assets and liabilities of Pinewood Village ("Pinewood") were sold to an unaffiliated third party for $2,000,000, resulting in a gain of approximately $1,030,000. The Partnership used approximately $1,453,000 of the proceeds to pay off the Purchase Money Note 6 and accrued interest thereon, which had a total outstanding balance of approximately $1,634,000, resulting in forgiveness of indebtedness income of approximately $180,000. On July 31, 2002, the Purchase Money Note Holder agreed to purchase the limited partnership interests in Cabarrus Arms Associates ("Cabarrus Arms") for an agreed upon price of $25,000. Such purchase is expected to be finalized sometime during 2003. No assurance can be given that the closing will actually occur. On July 31, 2002, the Purchase Money Note Holder agreed to purchase the limited partnership interests in Hathaway Court Associates ("Hathaway") for an agreed upon price of $50,000. Such purchase is expected to be finalized sometime during 2003. No assurance can be given that the closing will actually occur. On May 30, 2002, the property and the related assets and liabilities of Lexington Village ("Lexington") were sold to an affiliate of the Local General Partner for approximately $1,350,000, resulting in a gain of approximately $412,000. The Partnership used approximately $617,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,445,000, resulting in forgiveness of indebtedness income of approximately $2,828,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #1 were sold to the Local General Partner for approximately $1,750,000, resulting in a gain of approximately $158,000. The Partnership used approximately $1,277,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,645,000, resulting in forgiveness of indebtedness income of approximately $1,368,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #2 were sold to the Local General Partner for approximately $1,750,000, resulting in a gain of approximately $379,000. The Partnership used approximately $1,194,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,725,000, resulting in forgiveness of indebtedness income of approximately $531,000. On April 30, 2002, the property and the related assets and liabilities of Shelton Beach Apartments ("Northpointe I") were sold to an unaffiliated third party for $2,333,333, resulting in a gain of approximately $598,000. The Partnership used approximately $1,124,000 of proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,239,000, resulting in forgiveness of indebtedness income of approximately $2,115,000. On April 30, 2002, the property and the related assets and liabilities of Northpointe II were sold to an unaffiliated third party for $1,666,667 resulting in a gain of approximately $394,000. The Partnership used approximately $570,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,119,000, resulting in forgiveness of indebtedness income of approximately $1,549,000. On February 15, 2002, the property and the related assets and liabilities of Robindale East Apartments ("Robindale") were sold to an unaffiliated third party for $735,000, resulting in a loss of approximately $527,000. No proceeds were used to settle the related Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,904,000, resulting in forgiveness of indebtedness income of such amount. The auditors for Robindale modified their report due to the uncertainty of this subsidiary partnership to continue in existence since the sole revenue producing asset was sold during the year. 7 On February 14, 2002, the property and the related assets and liabilities of Nottingham Woods Apartments ("Nottingham") were sold to an unaffiliated third party for $1,900,000, resulting in a gain of approximately $806,000. The Partnership used approximately $249,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,251,000, resulting in forgiveness of indebtedness income. In Fiscal Year 2003, additional proceeds of approximately $298,000 were received, of which approximately $223,000 was paid on the Purchase Money Note, resulting in net forgiveness of indebtedness income of approximately $2,779,000. On December 4, 2001, the Partnership's Limited Partnership Interests in Greenwood Manor, Henslee Heights, Hereford Manor, Malvern Manor, and Southwest Apartments were sold to the Local General Partner effective January 1, 2002 for $11,988, $27,972, $11,988, $7,920, and $9,990, resulting in losses of approximately $264,000, $685,000, $329,000, $303,000, and $159,000, respectively. No proceeds were used to settle the related Purchase Money Notes and interest thereon which were assigned to the Local General Partner, resulting in gains on sale of properties of approximately $2,153,000, $2,692,000, $1,682,000, $1,769,000, and $1,480,000, respectively. On November 20, 2001, the property and related assets and liabilities of Vincennes NiBlack Apts. ("Autumn Ridge") were sold to a unaffiliated third party for $2,500,000, resulting in a loss of approximately $262,000. No proceeds were used to settle the Purchase Money Note and accrued interest thereon, resulting in forgiveness of indebtedness income of approximately $3,567,000 for the Fiscal Year 2002. In Fiscal 2003, additional proceeds of approximately $1,500,000 were received and paid on the Purchase Money Note, resulting in a reversal of forgiveness of indebtedness income of such amount. On November 13, 2001, the property and related assets and liabilities of Seymour O'Brien Manor Apts. ("Seymour O'Brien") were sold to an unaffiliated third party for $920,000, resulting in a loss of approximately $126,000. No proceeds were used to settle the Purchase Money Note and accrued interest thereon, resulting in forgiveness of indebtedness income of approximately $1,842,000 for the Fiscal Year 2002. In Fiscal 2003, additional proceeds of approximately $792,000 were received and paid on the Purchase Money Note, resulting in a reversal of forgiveness of indebtedness income of such amount. On August 15, 2001 the Partnership's Limited Partnership Interest in Hackley Village ("Hackley") was assigned to the Local General Partner resulting in a loss of approximately $522,000. The Partnership paid approximately $9,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,816,000, resulting in gain on sale of property of such amount. On August 14, 2001 the Partnership's Limited Partnership Interest in University Gardens Apts. ("University") was sold to the Local General Partner for $5,000, resulting in a loss in the amount of $330,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,246,000, resulting in gain on sale of property of such amount. On August 14, 2001, the Partnership's Limited Partnership Interest in Southside Village Apts. ("Southside") was sold to the Local General Partner for $5,000, resulting in a loss in the amount of $218,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,926,000, resulting in gain on sale of property of such amount. On July 20, 2001, the property and related assets and liabilities of Washington Highland Apts. ("Washington Highland") were sold to an unaffiliated third party purchaser for $800,000, resulting in a loss of approximately $482,000. The Partnership used approximately $238,000 of the proceeds to pay off the Purchase 8 Money Note and accrued interest thereon, which had a total outstanding balance of $1,905,000 resulting in forgiveness of indebtedness income of approximately $1,668,000. On June 27, 2001, the property and related assets and liabilities of Oakwood Manor ("Oakwood") were sold to an unaffiliated third party purchaser for $3,099,000, resulting in a loss of approximately $145,000. The Partnership used approximately $1,077,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $6,803,000 resulting in forgiveness of indebtedness income of approximately $5,726,000. On May 10, 2001, the property and related assets and liabilities of Ware Manor Associates ("Ware Manor") were sold to an unaffiliated third party for $1,364,500, resulting in a gain of approximately $389,000. The Partnership used approximately $472,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $1,846,000, resulting in forgiveness of indebtedness income of approximately $1,374,000. On April 20, 2001, the property and related assets and liabilities of Northwoods III Apartments were sold to an unaffiliated third party for $3,316,000, resulting in a gain of approximately $1,266,000. The Partnership used approximately $791,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $1,756,000, resulting in forgiveness of indebtedness income of approximately $965,000. On April 11, 2001, the property and related assets and liabilities of Tall Pines ("Tall Pines") were sold to an unaffiliated third party for $2,145,000, resulting in a gain of approximately $751,000. The Partnership used approximately $1,015,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $3,424,000, resulting in forgiveness of indebtedness income of approximately $2,409,000. On March 30, 2001 Nu-Elm Apartments ("Nu-Elm") entered into a purchase and sale agreement with an unaffiliated third party for a purchase price of $1,300,000. The contract has expired and the property was placed back on the market. On January 5, 2001, the property and the related assets and liabilities of West Scenic Apartments, Ltd. ("West Scenic") were sold back to the Purchase Money Note Holder for $1,188,000 resulting in a loss of approximately $973,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,839,000, resulting in forgiveness of indebtedness income during the 2001 Fiscal Year. On December 20, 2000, the property and related assets and liabilities of Cedarbay, Ltd. ("Cedarbay") were sold to an unaffiliated third party for $2,049,600, resulting in a gain of approximately $52,000. The Partnership used approximately $228,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,157,000, resulting in forgiveness of indebtedness income of approximately $2,943,000 inclusive of forgiveness of approximately $14,000 in accounts payable. On December 19, 2000, the property and related assets and liabilities of Conifer 208 ("Conifer") were sold to an unaffiliated third party for $1,750,000, resulting in a gain of approximately $846,000. The Partnership used approximately $1,231,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,691,000, resulting in forgiveness of indebtedness income of approximately $460,000. On December 18, 2000, the Partnership's limited partnership interest in Solemar at South Dartmouth, L.P. ("Solemar") was sold to a third party for $501,000, resulting in a loss in the amount of $2,369,000. The Purchase Money Note was 9 assumed by the Local Partnership. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $5,473,000, resulting in a gain on sale of property. On November 7, 2000, the property and related assets and liabilities of Cloisters Associates, Ltd. ("Sundown") were sold to an unaffiliated third party for $2,800,000, resulting in a gain of approximately $713,000. The Partnership used approximately $519,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which amounted to $4,825,000, resulting in forgiveness of indebtedness income of approximately $4,306,000. On July 14, 2000, the property and related assets and liabilities of Casa Ramon Apartments were sold to an unaffiliated third party for $4,500,000, resulting in a gain of approximately $2,999,000. The Partnership used approximately $3,062,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon which had a total outstanding balance of approximately $3,172,000 resulting in forgiveness of indebtedness income of approximately $111,000. On June 30, 2000, the Partnership sold 1% of its interest in Bonnie Doone Apartments, Florence Apartments, Dickens Ferry Apartments and Decatur Apartments to the Purchase Money Note holder, in each case, for $100. Simultaneously, the Partnership assigned its remaining interest of 97.99% in each of such four Local Partnerships and the related Purchase Money Notes and interest thereon to the Purchase Money Note holder, resulting in gains of approximately $1,903,000, $2,373,000, $2,091,000 and $2,867,000, respectively. On March 31, 2000, the Partnership's limited partnership interest in Caroline Forest Apartments ("Caroline Forest") was sold to the Purchase Money Note holder for $90,000, resulting in a loss in the amount of approximately $338,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $1,736,000, resulting in forgiveness of indebtedness income. On March 7, 2000, the property and related assets and liabilities of Conifer 307 ("Fircrest") were sold to an unaffiliated third party for $2,500,000, resulting in a gain in the amount of approximately $1,457,000. Approximately $1,397,000 of the proceeds was used to pay off the Purchase Money Note. On January 6, 2000, the property and related assets and liabilities of Bellfort Apts. ("Bellfort") were sold to an unaffiliated third party for $175,100, resulting in a loss in the amount of approximately $4,445,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $11,511,000, operating deficit loans and advances of approximately $558,000 and various payables of $162,000 resulting in forgiveness of indebtedness income. Segments -------- The Partnership operates in one segment, which is the investment in multi-family residential property. Competition ----------- The real estate business is highly competitive and each of the Local Partnerships in which the Partnership has invested owns an Apartment Complex which must compete for tenants with other rental housing in its area. However, the rental assistance and the preferred interest rates on mortgage financing generally make it possible to offer the apartments to eligible tenants at a cost to the tenant significantly below the market rate for comparable conventionally financed apartments in the area. Employees --------- The Partnership does not have any employees. All services are performed for the Partnership by its General Partners and their affiliates. The General Partners 10 receive compensation in connection with such activities as set forth in Items 11 and 13 herein. 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 Agreement ("Partnership Agreement"). Item 2. Properties. As of March 25, 2003, the Partnership holds a 98.99% limited partnership interest in each of four Local Partnerships, which own four Apartment Complexes receiving Government Assistance. During the fiscal year ended March 25, 2003, the properties and the related assets and liabilities owned by six subsidiary partnerships were sold and the Partnership's Local Partnership Interests in two subsidiary partnerships were sold. Through the fiscal year ended March 25, 2003, the properties and the related assets and liabilities owned by thirty-one subsidiary partnerships were sold and the Partnership's Local Partnership Interests in twenty-six subsidiary partnerships were sold (see Item 7, below). Set forth below is certain information concerning the Apartment Complexes and their operations and finances. See Schedule III to the financial statements included herein for information regarding encumbrances and for additional information pertaining to the Apartment Complexes. Each of the Local Partnerships owns one Apartment Complex. The Apartment Complexes owned as of March 25, 2003 are located in Kentucky (1), Michigan (1), Missouri (1) and North Carolina (1). The 4 Apartment Complexes owned by the Local Partnerships at March 25, 2003 contain a total of 493 rental units. The largest of the Apartment Complexes consists of 186 units; the smallest Apartment Complex contains 72 units. Construction of each Apartment Complex was completed between 1972 and 1974. The remaining Apartment Complexes are occupied by low, moderate and middle-income tenants, some of whom are elderly. Each Apartment Complex is located in the vicinity of other housing developments receiving Government Assistance. All of the Apartment Complexes are subject to existing permanent first mortgages (the "Mortgage Loans"). In some cases the Apartment Complexes are also subject to supplemental mortgages (the "Supplemental Mortgage Loans"). See Schedule III.

(a) The Partnership invested in Local Partnerships owning existing Apartment Complexes which receive either federal or state subsidies. HUD, through FHA, administers a variety of subsidies for low and moderate-income housing. FHA administers similar housing programs for non-urban areas. The federal programs generally provide one or a combination of the following forms of assistance: (1) mortgage loan insurance, (2) rental subsidies and (3) reduction of mortgage interest payments. (1) HUD provides mortgage insurance for rental housing projects pursuant to a number of sections of Title II of the National Housing Act ("NHA"), including Section 236, Section 221(d)(4), Section 221(d)(3) and Section 220. Under all of these programs, HUD will generally provide insurance equal to 100% of the total replacement cost of the project to non-profit owners and 90% of the total replacement cost to limited-distribution owners. Mortgages are provided by institutions approved by HUD, including banks, savings and loan companies and local housing authorities. Section 221(d)(4) of NHA provides for federal insurance of private construction and permanent mortgage loans to finance new construction of rental apartment complexes containing five or more units. The most significant difference between the Section 221(d)(4) program and the Section 221(d)(3) program is the maximum amount of the loan which may be obtained. Under the Section 221(d)(3) program, non-profit sponsors may obtain a permanent mortgage equal to 100% of the total replacement cost; no equity contribution is required of a non-profit sponsor. In all other respects the Section 221(d)(3) program is substantially similar to the Section 221(d)(4) program. (2) Many of the tenants in HUD insured projects receive some form of rental assistance payments, primarily through the Section 8 Housing Assistance Payments Program (the "Section 8 Program"). Apartment Complexes not receiving assistance through the Section 8 Program ("Section 8 Payments") will generally have limitations on the amounts of rent which may be charged. One requirement imposed by HUD regulations effective for apartment complexes initially approved for Section 8 Payments on or after November 5, 1979 is to limit the amount of the owner's annual cash distributions from operations to 10% of the owner's equity investment in an apartment complex if the apartment complex is intended for occupancy by families and to 6% of the owner's equity investment in an apartment complex intended for occupancy by elderly persons. The owner's equity investment in the apartment complex is 10% of the project's replacement cost as determined by HUD. (3) Section 236 Program. As well as providing mortgage insurance, the Section 236 program also provides an interest credit subsidy which reduces the cost of 14 debt service on a project mortgage, thereby enabling the owner to charge the tenants lower rents for their apartments. Interest credit subsidy payments are made monthly by HUD directly to the mortgagee of the project. Each payment is in an amount equal to the difference between (i) the monthly interest payment required by the terms of the mortgage to pay principal, interest and the annual mortgage insurance premium and (ii) the monthly payment which would have been required for principal and interest if the mortgage loan bore interest at the rate of 1%. These payments are credited against the amounts otherwise due from the owner of the project, who makes monthly payments of the balance. (b) The Local Partnership receives monthly rent supplements from HUD through MHFA and the New Bedford Housing Authority. (c) MHFA provides interest credit subsidies pursuant to Section 13A of the Massachusetts Acts of 1966. The Local Partnership also receives monthly rent supplements from the Dartmouth Housing Authority and the South Shore Housing Authority pursuant to Section 707 of the Massachusetts Act of 1966. (d) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1997 (see Item 7. below). (e) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1998 (see Item 7. below). (f) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 1998 (see Item 7. below). (g) During the fiscal year ended March 25, 1998, the Local Partnership's property was declared unsafe to live due to amounts of Benzene and Aldrene found to be present in the air of some apartments (see Item 7. below). (h) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1999 (see Item 7. below). (i) The Partnership's Local Partnership Interest in this Local Partnership was sold during the fiscal year ended March 25, 1999 (see Item 7. below). (j) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2000 (see Item 7. below). (k) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2000 (see Item 7. below). (l) As a result of on-going litigation related to the Roar Properties (as defined herein), occupancy rates have not been provided by the management agent pursuant to the instructions from the Local General Partner. (m) The Partnership's Local Partnership Interest in this Local Partnership was sold on March 31, 2000 (see Item 7. below). (n) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2001. (o) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2001. 15 (p) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2002. (q) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2002. (s) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 2003. (t) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2003. All leases are generally for periods not exceeding one to two years and no tenant occupies more than 10% of the rentable square footage. Management continuously reviews the physical state of the properties and budgets improvements when required, which are generally funded from cash flow from operations or release of replacement reserve escrows. Management continuously reviews the insurance coverage of the properties and believes such coverage is adequate. See Item 1, Business, above for the general competitive conditions to which the properties described above are subject. Real estate taxes are calculated using rates and assessed valuations determined by the township or city in which the property is located. Such taxes have approximated 1% of the aggregate cost for the properties as shown in Schedule III to the financial statements included herein. Item 3. Legal Proceeding. None. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of security holders during the fiscal year covered by this report through the solicitation of proxies or otherwise and Note 11 to the financial statements. 16 PART II Item 5. Market for the Registrant's Limited Partnerships Interests and Related Security Holder Matters. As of March 25, 2003, the Partnership had issued and outstanding 12,074 Limited Partnership Interests, of which 6,674 are Initial Limited Partnership Interests and 5,400 are Additional Limited Partnership Interests, each representing a $5,000 capital contribution to the Partnership, for aggregate gross proceeds of $60,370,000. Additional Limited Partnership Interests are the Limited Partnership Interests acquired upon the exercise of warrants or sold by the Partnership upon the nonexercise of the warrants. The warrants are rights granted pursuant to the Partnership Agreement as part of the purchase of an Initial Limited Partner Interest. No further issuance of Initial Limited Partnership Interests or Additional Limited Partnership Interests is anticipated and all warrants have expired. The offering of Units consisting of Initial Limited Partnership Interests and warrants to purchase Additional Limited Partnership Interests terminated in 1984. The offering of Additional Limited Partnership Interests terminated in March 1985. No public market has developed, and it is not anticipated that any public market will develop, for the secondary purchase and sale of any Limited Partnership Interests. Limited Partnership Interests may be transferred only if certain requirements are satisfied, including the rendering of an opinion of counsel to the Partnership that such transfer would not cause a termination of the Partnership under Section 708 of the Internal Revenue Code and would not violate any federal or state securities laws. As of May 1, 2003, there were approximately 4,401 registered holders of Limited Partnership Interests. In March 2003, 2001, 2000 and 1998, distributions of approximately $1,509,000, $1,389,000, $1,980,000 and $1,997,000 and $15,000, $14,000, $20,000 and $20,000 was paid to the Limited Partners and General Partners, respectively, from net proceeds from the sale of properties by Local Partnerships in which the Partnership had invested (see Item 7. below). Of the total distributions of approximately $1,524,000, $1,403,000, $2,000,000 and $2,017,000 for the years ended March 25, 2003, 2001, 2000 and 1998, there was no return of capital determined in accordance with U.S. generally accepted accounting principles. With the exception of these distributions, the Partnership has made no distributions to its Limited Partners from its inception on June 28, 1984 to March 25, 2003. There are no material restrictions upon the Partnership's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. The Partnership has invested as a limited partner in Local Partnerships owning Apartment Complexes that receive Governmental Assistance under programs which in many instances restrict the cash return available to owners. See Item 8, Footnote 11(e) below, for a discussion of these restrictions. The Partnership does not anticipate providing significant cash distributions to its Limited Partners in circumstances other than refinancing or sale of the Apartment Complexes or the Local Partnership Interests. These distributions will not be sufficient to return to Limited Partners the full amount of their original investment in the Partnership. 17 Item 6. Selected Financial Data. The information set forth below presents selected financial data of the Partnership. Additional detailed financial information is set forth in audited financial statements and footnotes contained in Item 8 hereof and in the schedules contained in Item 14 hereof.

During the years ended March 25, 1999, 2000, 2001, 2002 and 2003, total assets decreased primarily due to depreciation and the sale of properties (see Note 10 in Item 8, Financial Statements and Supplementary Data), partially offset by net additions to property and equipment. Long-term obligations and total liabilities decreased for the years ended March 25, 1999, 2000, 2001, 2002 and 2003 primarily due to the forgiveness of indebtedness on Purchase Money Notes and amounts due to selling partners as a result of the sale, principal repayments of mortgage notes payable and payments of interest on Purchase Money Notes, partially offset by accruals of interest on Purchase Money Notes. 18

19 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources ------------------------------- General ------- The Partnership's capital was originally invested primarily in 61 Local Partnerships, in which the Partnership made an initial investment of $50,293,934 (including acquisition expenses). These investments are highly illiquid. At the beginning of fiscal year 2002, the Partnership had interests in 12 Local Partnerships. During the fiscal year ended March 25, 2003, the property and the related assets and liabilities owned by six subsidiary partnerships were sold and the Partnership's Local Partnership Interests in two subsidiary partnerships were sold. Through the fiscal year ended March 25, 2003, the properties and the related assets and liabilities owned by thirty-one subsidiary partnerships were sold and the Partnership's Local Partnership Interests in twenty-six subsidiary partnerships were sold. As of March 25, 2003, the Partnership owned interests in 4 Local Partnerships. 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 the amount of a potential environmental liability independently from any potential claim for recovery (see below). During the year ended March 25, 2003, cash and cash equivalents of the Partnership decreased approximately $3,743,000. This decrease is due to cash used in operating activities ($2,270,000), principal payments of Purchase Money Notes ($5,809,000), repayments of mortgage notes payable ($6,118,000), a decrease in the capitalization of minority interest ($500,000), costs paid relating to sale of property ($595,000), distributions paid ($1,524,000) and acquisition of property and equipment and property and equipment held for sale ($164,000) which exceeded a decrease in mortgage escrow deposits ($451,000) and proceeds from the sale of property ($12,787,000). Included in the adjustments to reconcile the net income to cash used in operating activities is gain on sale of property ($9,239,000), forgiveness of indebtedness income ($11,963,000) and depreciation ($779,000). Distributions aggregating approximately $10,072,000, $4,452,000 and $6,550,000 were made to the Partnership during the 2002, 2001 and 2000 Fiscal Years, respectively, of which approximately $8,776,000, $3,872,000 and $5,147,000, respectively, was used to pay principal, interest and extension fees on the Purchase Money Notes. In addition, approximately $0, $0 and $598,000 for the 2002, 2001 and 2000 Fiscal Years, respectively, was paid as "additional" interest on the Purchase Money Notes. The Partnership's primary sources of funds are the cash distributions from operations of the Local Partnerships in which the Partnership has invested and net proceeds from sales. These sources are available to meet obligations of the Partnership. However, the cash distributions received from the Local Partnerships to date have not been sufficient to meet all such obligations of the Partnership. Accordingly, certain fees and expense reimbursements owed to the General Partners amounting to approximately $3,439,000, $3,217,000 and $2,514,000, were accrued and unpaid as of March 25, 2003, 2002 and 2001, respectively. Without the General Partners' continued allowance of accrual without payment of certain fees and expense reimbursements, the Partnership will not be in a position to meet its obligations. The General Partners have continued allowing the accrual without payment of these amounts but are under no obligation to continue to do so. Proceeds received from future sales will be used to pay any outstanding amounts due to the General Partners. 20 Government Programs and Regulations ----------------------------------- For a discussion of Government Programs and Regulations see Item 1. Business. 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 Company's accounting policies included in Note 2 to the consolidated financial statements in this annual report on Form 10-K. a) Property and Equipment Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. The Partnership complies with Statement of Financial Accounting Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of Long-Lived Assets". A loss on impairment of assets is recorded when management estimates amounts recoverable through future operations and sale of the property on an undiscounted basis are below depreciated cost. At that time property investments themselves are reduced to estimated fair value (generally using discounted cash flows) when the property is considered to be impaired and the depreciated cost exceeds estimated fair value. b) Income Taxes No provision has been made for income taxes in the accompanying consolidated financial statements since such taxes, if any, are the responsibility of the individual partners. For income tax purposes, the Partnership has a fiscal year ending December 31. Purchase Money Notes -------------------- For a discussion of Purchase Money Notes Payable, see Note 7 to the Financial Statements. 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 to the Financial Statements. For a discussion of contingencies affecting certain Local Partnerships, see Results of Operations of Certain Local Partnerships below. Since the maximum loss for which the Partnership would be liable is its net investment in the respective Local Partnerships, the resolution of the existing contingencies is not anticipated to impact future results of operations, liquidity or financial condition in a material way except that the Partnership would lose its investment in the properties and any potential proceeds from the sale or refinancing of the properties. Except as described above, management is not aware of any trends or events, commitments or uncertainties, which have not been otherwise 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. Due to the sale 21 of properties, the portfolio is not diversified by the location of the properties around the United States. The Partnership has four remaining properties and therefore the Partnership may not be protected against a general downturn in the national economy. Results of Operations --------------------- Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. 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 discounted cash flows). 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. These assets are classified as property and equipment-held for sale and are not depreciated. All property and equipment for subsidiary partnerships whose assets and liabilities are under sales contracts are classified as assets held for sale. For the year ended March 25, 2003, the Partnership did not record a loss on impairment of assets. Through March 25, 2003, the Partnership has recorded approximately $7,682,000 as a loss on impairment of assets. The following is a summary of the results of operations of the Partnership for the 2002, 2001 and 2000 Fiscal Years. The results of operations of the Partnership, as well as the Local Partnerships, excluding gain on sale of properties, forgiveness of indebtedness income, administrative and management, taxes and insurance and financial remained fairly constant for the 2002, 2001 and 2000 Fiscal Years. Contributing to the relatively stable operations at the Local Partnerships is the fact that all of the Apartment Complexes receive Government Assistance. Net income during the 2002, 2001 and 2000 Fiscal Years totaled $18,601,092, $34,279,778 and $26,846,739, respectively. 2002 vs. 2001 ------------- Rental income decreased by 59% for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding Bellfort Apartments, Valley Arms, Conifer 307, Cloisters (Sundown), Conifer 208, West Scenic Apartments, Tall Pines, Northwoods III Apartments, Ware Manor, Oakwood Manor, Washington Highlands Apartments, Seymour O'Brien Manor Apartments, Vincennes NiBlack Apartments, Nottingham Woods Apartments, Robindale East Apartments, Shelton Beach Apartments, Northpointe II, Huntley #1, Huntley #2, Lexington Village and Conifer 317 which sold their properties and the related assets and liabilities and Southside Village Apartments, University Gardens Apartments, Hackley Village, Greenwood Manor, Malvern Manor, Hereford Manor, Henslee Heights, Southwest Apartments, Saraland Apartments and Summer Arms Apartments in which the Partnership sold its Local Partnership interests (collectively, the "Sold Assets"), rental income increased by approximately 6% during the 2002 Fiscal Year as compared to the 2001 Fiscal Year primarily due to rental rate increases. 22 Other income decreased approximately 54% for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding the Sold Assets, other income decreased approximately 30% primarily due to a decrease in interest income in 2002 at one Local Partnership and the Partnership level as a result of lower interest rates. Total expenses, excluding the Sold Assets, administrative and management, taxes and insurance and financial, remained fairly consistent with a decrease of approximately 8% for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Administrative and management decreased approximately 46% for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding Sold Assets, such expense decreased approximately 17% primarily due to a decrease in legal fees in 2002. Taxes and insurance decreased approximately 43% for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding the Sold Assets, such expense increased approximately 19% primarily due to an increase in insurance premiums at the Local Partnerships. Financial decreased approximately 73% for the 2002 Fiscal Year as compared to the 2001 Fiscal Year. Excluding the Sold Assets, such expense decreased approximately 17% primarily due to a decrease in the prime interest rate in 2002. Administrative and management-related parties, operating, repairs and maintenance and depreciation decreased approximately $474,000, $1,345,000, $1,785,000 and $585,000 respectively, during the 2002 Fiscal Year compared to the 2001 Fiscal Year. Excluding the Sold Assets, such expenses increased (decreased) approximately $(104,000), $27,000, $(53,000) and $1,000, respectively, during the 2002 Fiscal Year compared to the 2001 Fiscal Year. Gain on sale of properties and forgiveness of indebtedness income will continue to fluctuate as a result of the disposition of properties. 2001 vs. 2000 ------------- Rental income decreased by 36% for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Excluding Oakbrook Villa Apartments, Bellfort Apartments, Valley Arms, Conifer 307, Casa Ramon Apartments, Cloisters (Sundown), Conifer 208, Cedarbay, West Scenic Apartments, Tall Pines, Northwoods III Apartments, Ware Manor, Oakwood Manor, Washington Highlands Apartments, Seymour O'Brien Manor Apartments, and Vincennes NiBlack Apartments which sold their properties and the related assets and liabilities and Cranbrook Manor Apartments, Caroline Forest Apartments, Bonnie Doone Apartments, Dickens Ferry Apartments, Decatur Apartments, Florence Apartments, Solemar, Southside Village Apartments, University Gardens Apartments, Hackley Village, Greenwood Manor, Malvern Manor, Hereford Manor, Henslee Heights, and Southwest Apartments in which the Partnership sold its Local Partnership interests (collectively, the "Sold Assets"), rental income increased by approximately 3% during the 2001 Fiscal Year as compared to the 2000 Fiscal Year primarily due to rental rate increases. Other income decreased approximately 22% for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Excluding the Sold Assets, other income increased approximately 13% primarily due to an underaccrual of interest income at two Local Partnerships in 2000, partially offset by a decrease in interest income at the Partnership level as the result of lower cash and cash equivalent balances in 2001. A gain on sale of properties and forgiveness of indebtedness income was recorded in the 2001 Fiscal Year (see Notes 10 and 11, respectively, in Item 8. Financial Statements and Supplemental Data, below). 23 Total expenses, excluding the Sold Assets, administrative and management, financial and depreciation, remained fairly consistent with an increase of approximately 2% for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Administrative and management decreased approximately 39% for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Excluding the Sold Assets, such expense decreased approximately 12% primarily due to a decrease in legal expenses at the Partnership level. Financial decreased approximately 56% for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Excluding the Sold Assets, such expense decreased approximately 27% primarily due to a decrease in the prime interest rate in 2001. Depreciation decreased approximately 58% for the 2001 Fiscal Year as compared to the 2000 Fiscal Year. Excluding the Sold Assets, such expense increased approximately 34% primarily due to the expiration of a sales contract at one Local Partnership. The Local Partnership was classified as an asset held for sale in 2000 and was not depreciated. Administrative and management-related parties, operating, repairs and maintenance, and taxes and insurance decreased approximately $319,000, $939,000, $1,537,000, and $594,000 respectively, during the 2001 Fiscal Year compared to the 2000 Fiscal Year. Excluding the Sold Assets, such expenses increased (decreased) approximately ($22,000), $111,000, ($45,000), and $68,000, respectively, during the 2001 Fiscal Year compared to the 2000 Fiscal Year. Results of Operations of Certain Local Partnerships --------------------------------------------------- Saraland Apartments, Ltd. ------------------------- Saraland Apartments, Ltd. ("Saraland") was designated as a superfund site by the Environmental Protection Agency ("EPA") in the mid-1990's after the EPA funded the cleanup of hazardous waste caused by the property's former owner, Redwing Carriers, Inc. (n/k/a Rentokil Initial Environmental Services, Inc. "Rentokil"). During the year ended December 31, 1996, the tenants of Saraland were moved to temporary housing to facilitate cleanup of the site. However, as of February 1997, the EPA, along with other agencies, concluded that the apartment residents should not return to the site, and the tenants were permanently relocated. The EPA has since concluded that the apartments will have to be demolished in order to accomplish the removal of contamination that has been found to exist underneath the buildings. The EPA filed suit and named Rentokil, Saraland and others as potentially responsible parties. Various other lawsuits have been filed on related issues. All parties involved in the EPA litigation entered into a Consent Decree which would dispose of all claims in that litigation. The Bankruptcy Court approved the Consent Decree on March 13, 2002. Saraland filed its voluntary petition for relief under Chapter 11 of Title 11, United States Code on March 21, 2001 and The First Amended Plan of Reorganization was filed on April 26, 2002. On July 23, 2002 the United States Bankruptcy Court for the Northern District of Texas Dallas Division confirmed the plan of reorganization. Under the plan, effective March 28, 2003, the Partnership was released from all claims in the EPA litigation in exchange for a $100,000 cash payment to the EPA and for the transfer of its interest in the property, subject to the existing secured indebtedness, to Rentokil. The plan also requires that other unsecured claims be paid a pro rata distribution for allowed claims from a $20,000 fund to be contributed by the general partners of Saraland. 24 Other ----- The Partnership's investment as a limited partner in the Local Partnerships is subject to the risks incident to the management and ownership of improved real estate. The Partnership's investments also could be adversely affected by poor economic conditions, which generally could increase vacancy levels, rental payment defaults, and operating expenses, any or all of which could threaten the financial viability of one or more of the Local Limited Partnerships. There also are substantial risks associated with the operation of Apartment Complexes receiving Government Assistance. These include: governmental regulations concerning tenant eligibility, which may make it more difficult to rent units in the Apartment 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 Apartment Complex. The Local Partnerships are impacted by inflation in several ways. Inflation allows for increases in rental rates generally to reflect the impact of higher operating and replacement costs. Furthermore, inflation generally does not impact the fixed long-term financing under which real property investments were purchased. Inflation also affects the Local Partnerships adversely by increasing operating costs, such as fuel, utilities, and labor. Item 7A. Quantitative and Qualitative Disclosure About Market Risk. Not applicable. 25 Item 8. Financial Statements and Supplementary Data. Sequential Page ---------- (a) 1. Financial Statements Independent Auditors' Report 27 Consolidated Balance Sheets at March 25, 2003 and 2002 112 Consolidated Statements of Income for the Years Ended March 25, 2003, 2002 and 2001 113 Consolidated Statements of Changes in Partners' Deficit for the Years Ended March 25, 2003, 2002 and 2001 114 Consolidated Statements of Cash Flows for the Years Ended March 25, 2003, 2002 and 2001 115 Notes to Consolidated Financial Statements 118 26 INDEPENDENT AUDITORS' REPORT ---------------------------- To the Partners of Cambridge Advantaged Properties Limited Partnership and Subsidiaries We have audited the consolidated balance sheets of Cambridge Advantaged Properties Limited Partnership and Subsidiaries as of March 25, 2003 and 2002, and the related consolidated statements of income, changes in partners' deficit, and cash flows for the years ended March 25, 2003, 2002 and 2001 (the 2002, 2001 and 2000 Fiscal Years, respectively). The 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 15 (2002 Fiscal Year), 31 (2001 Fiscal Year) and 43 (2000 Fiscal Year) subsidiary partnerships whose net income (losses) aggregated $3,741,030, ($1,523,249) and $11,048,206 for the 2002, 2001 and 2000 Fiscal Years, respectively, and whose assets constituted 86% and 91% of the Partnership's assets at March 25, 2003 and 2002, 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 U.S. generally accepted auditing standards. 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, the accompanying consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cambridge Advantaged Properties Limited Partnership and Subsidiaries at March 25, 2003 and 2002, and the results of their operations and their cash flows for the years ended March 25, 2003, 2002 and 2001, in conformity with U.S. generally accepted accounting principles. As discussed in Note 10, the Partnership is currently in the process of disposing of its investments. As of March 25, 2003, the Partnership has disposed of fifty-seven of its sixty-one original investments. Three additional investments are listed for sale and the remaining investment is expected to be liquidated during 2003. As discussed in Note 7, the principal of and all accrued interest on the Purchase Money Notes are due at final maturity. The remaining Purchase Money Notes are now extended, with maturity dates through June 2003 and the Partnership is attempting to refinance or sell the properties. It is uncertain as to whether the proceeds from such sales will be sufficient to meet the outstanding balances of the Purchase Money Notes and accrued interest thereon. The 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 May 28, 2003 27 [REZNICK FEDDER & SILVERMAN LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Cedarbay, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Cedarbay, Ltd. for the year ended December 31, 2000. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 statement referred to above present fairly, in all material respects, the changes in net assets in liquidation for the year ended December 31, 2000, in conformity with generally accepted accounting principles. As described in note A to the financial statement, on June 19, 2000, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On December 20, 2000, the partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland January 19, 2001 28 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Northwoods III Apartments, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Northwoods III Apartments, Ltd. for the period January 1, 2001 through August 23, 2001. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 changes in net assets in liquidation for the period January 1, 2001 through August 23, 2001, in conformity with accounting principles generally accepted in the United States of America. As described in note A to the financial statement, during 2001, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On April 23, 2001, the partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland August 23, 2001 29 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Northwoods III Apartments, Ltd. We have audited the accompanying balance sheets of Northwoods III Apartments, Ltd. as of December 31, 2000 and 1999, and the related statements of revenue and expenses, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 Northwoods III Apartments, Ltd. as of December 31, 2000 and 1999, and the results of its operations, the changes in partners' capital and cash flows for the years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 12 through 14 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/ Reznick Fedder & Silverman Bethesda, Maryland January 16, 2001 30 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Hackley Village Associates #1 We have audited the accompanying balance sheet of Hackley Village Associates #1, HUD Project #047-44030-LDP-SUP, as of August 15, 2001, and the related statements of income, and cash flows, and changes in partner's equity for the period then ended. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An Audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hackley Village Associates #1 as of August 15, 2001, and the results of its operations and its cash flows and its changes in partners' equity for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 15) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Project #047-44030-LDP-SUP. Such information has been subject to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government auditing Standards, we have also issued a report dated October 3, 2001, on our consideration of Hackley Village Associates' internal controls and a report dated October 3, 2001, on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI October 3, 2001 31 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Hackley Village Associates #1 We have audited the accompanying balance sheet of Hackley Village Associates #1, HUD Project #047-44030-LDP-SUP, as of December 31, 2000, and the related statements of income, and cash flows, and changes in partner's equity for the year then ended. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An Audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hackley Village Associates #1 as of December 31, 2000, and the results of its operations and its cash flows and its changes in partners' equity for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 15) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Project #047-44030-LDP-SUP. Such information has been subject to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government auditing Standards, we have also issued a report dated February 7, 2001, on our consideration of Hackley Village Associates' internal controls and a report dated February 7, 2001, on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 February 7, 2001 32 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Huntley Associates We have audited the accompanying balance sheet of Huntley Associates (A Limited Partnership) as of May 8, 2002, and the related statements of income and changes in partner's equity for period January 1, 2002 to May 8, 2002. We have also audited the statements of cash flows for the period January 1, 2002 to May 8, 2002. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that 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 Huntley Associates as of May 8, 2002, and the results of its operations and cash flows for the period January 1, 2002 to May 8, 2002 in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issue a report dated September 11, 2002 on our consideration of Huntley Associates' internal controls and on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Those reports are an integral part of the audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying supplemental included in the report (shown on pages 10 to 12) is presented for the purposes of additional analysis and is not a required part of the financial statements of Huntley Associates. Such information has been subjected to the auditing procedures applied in the audit of financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI September 11, 2002 33 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Huntley Associates We have audited the accompanying balance sheet of Project #047-44029 LDP-SUP of Huntley Associates (A Limited Partnership) as of December 31, 2001, and the related statements of income and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the years ended December 31, 2001. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An Audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #047-44029 LDP-SUP as at December 31, 2001, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 10 to 12) are presented for the purposes of additional analysis and are not a required part of the financial statements of Huntley Associates. Such information has been subjected to the auditing procedures applied in the audit of financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issue a report dated January 21, 2002 on our consideration of Huntley Associates' internal controls and a report dated January 21, 2002 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI January 21, 2002 34 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Huntley Associates We have audited the accompanying balance sheet of Project #047-44029 LDP-SUP of Huntley Associates (A Limited Partnership) as of December 31, 2000, and the related statements of income and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the years ended December 31, 2000. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An Audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #047-44029 LDP-SUP as at December 31, 2000, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 10 to 12) are presented for the purposes of additional analysis and are not a required part of the financial statements of Huntley Associates. Such information has been subjected to the auditing procedures applied in the audit of financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issue a report dated January 22, 2001 on our consideration of Huntley Associates' internal controls and a report dated January 22, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 January 22, 2001 35 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Huntley Associates #2 We have audited the accompanying balance sheet of Project #047-44063-LDP of Huntley Associates #2 (A Limited Partnership) as of May 8, 2002, and the related statements of operations and changes in partner's equity for the period then ended. We have also audited the statements of cash flows for the period ended May 8, 2002. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #047-44063-LDP as at May 8, 2002, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated September 10, 2002 on our consideration of Huntley #2's internal control and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. Those reports are an integral part of the audit performed in accordance Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying supplemental information (shown on pages 10 to 15) is presented for the purposes of additional analysis and is not a required part of the basic financial statements of Huntley Associates #2. Such information has been subject to the auditing procedures applied in the audit of the basic financial statements and in our opinion, is fairly stated, in all material respects, in relation to the financial statements taken as a whole. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI September 10, 2002 36 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Huntley Associates #2 We have audited the accompanying balance sheet of Project #047-44063-LDP of Huntley Associates #2 (A Limited Partnership) as of December 31, 2001, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the years ended December 31, 2001. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #047-44063-LDP as at December 31, 2001, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 10 to 15) are presented for the purposes of additional analysis and are not a required part of the financial statements of Huntley Associates #2. Such information has been subject to the auditing procedures applied in the audit of financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 16, 2002 on our consideration of Huntley Associates #2's internal controls and a report dated January 16, 2002 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI January 16, 2002 37 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Huntley Associates #2 We have audited the accompanying balance sheet of Project #047-44063-LDP of Huntley Associates #2 (A Limited Partnership) as of December 31, 2000, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the years ended December 31, 2000. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #047-44063-LDP as at December 31, 2000, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 10 to 15) are presented for the purposes of additional analysis and are not a required part of the financial statements of Huntley Associates #2. Such information has been subject to the auditing procedures applied in the audit of financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 25, 2001 on our consideration of Huntley Associates #2's internal controls and a report dated January 25, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 January 25, 2001 38 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Seymour O'Brien Manor Apartments We have audited the accompanying balance sheet of Project #073-44152 LDP of Seymour O'Brien Manor Apartments (a Limited Partnership) as at November 13, 2001, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the period ended December 31, 2002. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #073-44152 LDP as of December 31, 2002, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated March 25, 2003 on our consideration of Seymour O'Brien Manor Apartments (a Limited Partnership) internal controls and a report dated March 25, 2003 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI March 25, 2003 39 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Seymour O'Brien Manor Apartments We have audited the accompanying balance sheet of Project #073-44152 LDP of Seymour O'Brien Manor Apartments (a Limited Partnership) as at November 13, 2001, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the period ended November 13, 2001. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #073-44152 LDP as of November 13, 2001, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Seymour O'Brien Manor Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 8, 2002 on our consideration of Seymour O'Brien Manor Apartments (a Limited Partnership) internal controls and a report dated January 8, 2002 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI January 8, 2002 40 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Seymour O'Brien Manor Apartments We have audited the accompanying balance sheet of Project #073-44152 LDP of Seymour O'Brien Manor Apartments (a Limited Partnership) as at December 31, 2000, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the year ended December 31, 2000. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #073-44152 LDP as of December 31, 2000, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Seymour O'Brien Manor Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 15, 2001 on our consideration of Seymour O'Brien Manor Apartments (a Limited Partnership) internal controls and a report dated January 15, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 January 15, 2001 41 [Letterhead of Bordman & Winnick] Independent Auditors Report To the Partners of Washington Highland Apartments We have audited the accompanying balance sheet of HUD Project No. 073-44073 of Washington Highland Apartment (a Limited Partnership) as of July 20, 2001, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statement of cash flows for the years ended July 20, 2001. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of HUD Project No. 073-44073 as of July 20, 2001, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Washington Highland Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated September 13, 2001 on our consideration of Washington Highland Apartment (a Limited Partnership) internal controls and a report dated September 13, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI September 13, 2001 42 [Letterhead of Bordman & Winnick] Independent Auditors Report To the Partners of Washington Highland Apartments We have audited the accompanying balance sheet of HUD Project No. 073-44073 of Washington Highland Apartment (a Limited Partnership) as of December 31, 2000, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statement of cash flows for the years ended December 31, 2000. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of HUD Project No. 073-44073 as of December 31, 2000, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Washington Highland Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 14, 2001 on our consideration of Washington Highland Apartment (a Limited Partnership) internal controls and a report dated January 14, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 January 14, 2001 43 [Letterhead of BORDMAN & WINNICK] Independent Auditor's Report To the Partners of AUTUMN RIDGE APARTMENTS Formerly known as Vincennes Niblack Apartments We have audited the accompanying balance sheet of AUTUMN RIDGE APARTMENTS formerly known as Vincennes Niblack Apartments (A Limited Partnership) as at December 31, 2002, and the related statements of operations, changes in partner's equity and cash flows for the period ended December 31, 2002. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project # 073-58501 LDP as of December 31, 2002, and the results of its operations and the changes in partners' equity and cash flows for the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI March 25, 2003 44 [Letterhead of BORDMAN & WINNICK] Independent Auditor's Report To the Partners of AUTUMN RIDGE APARTMENTS Formerly known as Vincennes Niblack Apartments We have audited the accompanying balance sheet of Project #073-58501 LDP of AUTUMN RIDGE APARTMENTS formerly known as Vincennes Niblack Apartments (A Limited Partnership) as at November 20, 2001, and the related statements of operations and changes in partner's equity for the period January 1, 2001 to November 20, 2001. We have also audited the statements of cash flows for the period January 1, 2001 to November 20, 2001. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project # 073-58501 LDP as of November 20, 2001, and the results of its operations and the changes in partners' equity and cash flows for the period January 1, 2001 to November 20, 2001 in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of AUTUMN RIDGE APARTMENTS formerly known as Vincennes Niblack Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 8, 2002 on our consideration of AUTUMN RIDGE APARTMENTS' formerly known as Vincennes Niblack Apartments (A Limited Partnership) internal controls and reports dated January 8, 2002 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants EIN 38-2900295 West Bloomfield, MI January 8, 2002 45 [Letterhead of BORDMAN & WINNICK] Independent Auditors Report To the Partners of AUTUMN RIDGE APARTMENTS Formerly known as Vincennes Niblack Apartments We have audited the accompanying balance sheet of Project No. 073-58501 LDP of AUTUMN RIDGE APARTMENTS formerly known as Vincennes Niblack Apartments (A Limited Partnership) as at December 31, 2000, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statements of cash flows for the year ended December 31, 2000. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project # 073-58501 LDP as at December 31, 2000, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of AUTUMN RIDGE APARTMENTS formerly known as Vincennes Niblack Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 22, 2001 on our consideration of AUTUMN RIDGE APARTMENTS' formerly known as Vincennes Niblack Apartments (A Limited Partnership) internal controls and reports dated January 22, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 January 22, 2001 46 [Letterhead of Bordman & Winnick] To the Partners of Casa Ramon Apartments INDEPENDENT AUDITOR'S REPORT We have audited the accompanying balance sheet of Project #122-44476 LDP-SUP of Casa Ramon Apartments (A Limited Partnership) as at July 14, 2000, and the related statements of operations and changes in partner's equity for the period then ended. We have also audited the statements of cash flows for the period ended July 14, 2000. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #122-44476 LDP-SUP as at July 14, 2000, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on page 9) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Casa Ramon Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated September 19, 2000 on our consideration of Casa Ramon Apartments' internal controls and a report dated September 19, 2000, on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 September 19, 2000 47 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Nu-Elm Apartments We have audited the accompanying balance sheet of Nu-Elm Apartments (A Limited Partnership) as of December 31, 2002, and the related statements of operations and changes in partner's equity and cash flows for the year then ended. These financial statements are the responsibility of Nu-Elm Apartments' management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that 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 Nu-Elm Apartments as of December 31, 2002, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our reports dated January 28, 2003 on our consideration of Nu-Elm Apartments' internal control and on our tests of the compliance with certain provisions of laws, regulations, contracts, and grants. Those report are an integral part of the audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. The accompanying supplemental information (shown on pages 9 to 11) is presented for the purposes of additional analysis and is not a required part of the basic financial statements of Nu-Elm Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 28, 2003 48 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Nu-Elm Apartments We have audited the accompanying balance sheet of Project #084-44035 LDP of Nu-Elm Apartments (A Limited Partnership) as of December 31, 2001, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statement of cash flows for the year ended December 31, 2001. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #084-44035 LDP as of December 31, 2001, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Nu-Elm Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 31, 2002 on our consideration of Nu-Elm Apartments (A Limited Partnership) internal controls and a report dated January 31, 2002 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 31, 2002 49 [Letterhead of Bordman & Winnick] Independent Auditor's Report To the Partners of Nu-Elm Apartments We have audited the accompanying balance sheet of Project #084-44035 LDP of Nu-Elm Apartments (A Limited Partnership) as of December 31, 2000, and the related statements of operations and changes in partner's equity for the year then ended. We have also audited the statement of cash flows for the year ended December 31, 2000. These financial statements are the responsibility of the project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Project #084-44035 LDP as of December 31, 2000, and the results of its operations and the changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supporting information included in the report (shown on pages 9 to 11) are presented for the purposes of additional analysis and are not a required part of the basic financial statements of Nu-Elm Apartments. Such information has been subject to the auditing procedures applied in the audit of basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 15, 2001 on our consideration of Nu-Elm Apartments (A Limited Partnership) internal controls and a report dated January 15, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI EIN 38-2900295 January 15, 2001 50 [Letterhead of Lefkowitz, Garfinkel, Champi & DeRienzo P.C.] Independent Auditors' Report The Partners Solemar at South Dartmouth Limited Partnership Quincy, Massachusetts We have audited the accompanying balance sheet of Solemar at South Dartmouth Limited Partnership, MHFA Project No. 72-085-N, as of December 31, 2000, and the related statements of operations, partners' equity (deficiency) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Solemar at South Dartmouth Limited Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity (deficiency) and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States. In accordance with Government Auditing Standards, we have also issued our report dated January 30, 2001 on our consideration of the Partnership's internal control over financial reporting and on its compliance with laws and regulations. That report is a 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/ Lefkowitz, Garfinkel, Champi & DeRienzo P.C. Providence, Rhode Island January 30, 2001 51 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Decatur Apartments, Ltd. Decatur, Alabama We have audited the accompanying balance sheet of Decatur Apartments, Ltd. (the Project), Project No. 062-44012-LD as of June 30, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the six months then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of June 30, 2000 and the results of its operations, changes in owners' equity and cash flows for the six months then ended in conformity with generally accepted accounting principles. 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 a report dated July 24, 2000 on our consideration of the Project's internal controls and reports dated July 24, 2000 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 July 24 2000 52 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Florence Apartments, Ltd. Florence, Alabama We have audited the accompanying balance sheet of Florence Apartments, Ltd. (the Project), Project No. 062-44083-LD, as of June 30, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the six months then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of June 30, 2000 and the results of its operations, changes in owners' equity anFd cash flows for the six months then ended in conformity with generally accepted accounting principles. 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 a report dated July 24, 2000 on our consideration of the Project's internal controls and reports dated July 24, 2000 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 July 24, 2000 53 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Saraland Apartments, Ltd. Mobile, Alabama We have audited the accompanying balance sheet of Saraland Apartments, Ltd. (the Project), as of December 31, 2002, and the related statements of profit and loss and changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2002 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 31, 2003 54 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Saraland Apartments, Ltd. Mobile, Alabama We have audited the accompanying balance sheet of Saraland Apartments, Ltd. (the Project), as of December 31, 2001, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with U.S. generally accepted auditing standards. 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 the Project as of December 31, 2001 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Project will continue as a going concern. As discussed in the Notes to the Financial Statements, the Project is located on an Environmental Protection Agency "Superfund Cleanup" site and has been determined to be uninhabitable. The Project is a party to related litigation of which the outcome is uncertain. The Project is also in default on the mortgage and future financing is uncertain. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in the footnotes to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2002 55 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Saraland Apartments, Ltd. Mobile, Alabama We have audited the accompanying balance sheet of Saraland Apartments, Ltd. (the Project), Project No. 062-44065-LD, as of December 31, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the year then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of December 31, 2000 and the results of its operations, changes in owners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Project will continue as a going concern. As discussed in the Notes to the Financial Statements, the Project is located on an Environmental Protection Agency "Superfund Cleanup" site and has been determined to be uninhabitable. The Project is a party to related litigation of which the outcome is uncertain. The Project is also in default on the mortgage and future financing is uncertain. These conditions raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters also are described in the footnotes to the financial statements. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. 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 a report dated January 15, 2001 on our consideration of the Project's internal controls and reports dated January 15, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. 56 Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 January 15, 2001 57 [Letterhead of Crabtree & Associates, L.L.P.] INDEPENDENT AUDITOR'S REPORT To The Partners University Gardens Apartments LTD. (A Limited Partnership) We have audited the accompanying balance sheet of University Gardens Apartments LTD., (a limited partnership) as of August 14, 2001 and the related statements of income, changes in partners' equity, and cash flows for the period January 1, 2001 through August 14, 2001. 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 U.S. generally accepted auditing standards. 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 University Gardens Apartments, Ltd. as of August 14, 2001, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supporting information included in this report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of University Gardens Apartments, Ltd. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Crabtree & Associates, L.L.P. Certified Public Accountants Azle, Texas December 18, 2001 58 [Letterhead of Crabtree, Crabtree & Hatter, L.L.P.] INDEPENDENT AUDITOR'S REPORT To The Partners University Gardens Apartments LTD. (A Limited Partnership) We have audited the accompanying balance sheet of University Gardens Apartments LTD., Project No. 112-44200 LD, (a limited partnership) as of December 31, 2000 and the related statements of income, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of 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 generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") issued by the U.S. Department of Housing and Urban Development, Officer of Inspector General in August 1997. Those standards and the Guide 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 University Gardens Apartments LTD. at December 31, 2000 and the results of its operations, changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Guide, we have also issued a report dated February 7, 2001 on our consideration of University Gardens Apartments, Ltd.'s internal control structure and reports dated February 7, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the non-major HUD program and specific requirements applicable to Affirmative Fair Housing. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supporting data included in this report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of University Gardens Apartments, Ltd. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Crabtree, Crabtree & Hatter, L.L.P. Certified Public Accountants Azle, Texas February 7, 2001 59 [Letterhead of Crabtree & Associates, L.L.P.] INDEPENDENT AUDITOR'S REPORT To The Partners Southside Village Apartments LTD. (A Limited Partnership) We have audited the accompanying balance sheet of Southside Village Apartments LTD., (a limited partnership) as of August 14, 2001 and the related statements of income, changes in partners' equity, and cash flows for the period January 1, 2001 through August 14, 2001. 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 U.S. generally accepted auditing standards. 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 Southside Village Apartments Ltd. as of August 14, 2001, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supporting data included in this report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of Southside Village Apartments, Ltd. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Crabtree & Associates, L.L.P. Certified Public Accountants Azle, Texas December 18, 2001 60 [Letterhead of Crabtree, Crabtree & Hatter, L.L.P.] INDEPENDENT AUDITOR'S REPORT To The Partners Southside Village Apartments LTD. (A Limited Partnership) We have audited the accompanying balance sheet of Southside Village Apartments LTD., Project No. 113-44076 LD, (a limited partnership) as of December 31, 2000 and the related statements of income, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of 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 generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") issued by the U.S. Department of Housing and Urban Development, Officer of Inspector General in August 1997. Those standards and the Guide 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 Southside Village Apartments LTD. at December 31, 2000 and the results of its operations, changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Guide, we have also issued a report dated February 11, 2001 on our consideration of Southside Village Apartments, Ltd.'s internal control structure and reports dated February 11, 2001 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the non-major HUD program and specific requirements applicable to Affirmative Fair Housing. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supporting data included in this report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of Southside Village Apartments, Ltd. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Crabtree, Crabtree & Hatter, L.L.P. Certified Public Accountants Azle, Texas February 11, 2001 61 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Dickens Ferry Apartments, Ltd. Mobile, Alabama We have audited the accompanying balance sheet of Dickens Ferry Apartments, Ltd. (the Project), Project No. 062-44055-LD as of June 30, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the six months then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of June 30, 2000 and the results of its operations, changes in owners' equity and cash flows for the six months then ended in conformity with generally accepted accounting principles. 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 a report dated July 24, 2000 on our consideration of the Project's internal controls and reports dated July 24, 2000 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD program, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 July 24, 2000 62 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Bonnie Doone Apartments, Ltd. Athens, Alabama We have audited the accompanying balance sheet of Bonnie Doone Apartments, Ltd. (the Project), Project No. 062-44045-LD, as of June 30, 2000, and the related statements of profit and loss, changes in owners' equity, and cash flows for the six months then ended. These financial statements are the responsibility of the Project's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Project as of June 30, 2000 and the results of its operations, changes in owners' equity and cash flows for the six months then ended in conformity with generally accepted accounting principles. 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 a report dated July 24, 2000 on our consideration of the Project's internal controls and reports dated July 24, 2000 on its compliance with laws and regulations applicable to the basic financial statements, specific requirements applicable to the major HUD programs, specific requirements applicable to the nonmajor HUD program, and specific requirements applicable to Fair Housing and Non-Discrimination. Our audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The supplemental information included in the report is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Project. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/ Browder & Associates, P.C. Audit Principal: E.O. Browder, Jr. Birmingham, Alabama Federal Employer Identification Number: 63-0986156 July 24, 2000 63 [Letterhead of Blume Loveridge & Co., PLLC] INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS Partners Conifer 208, A Limited Partnership Tacoma, Washington We have audited the statement of net assets available for liquidation of Conifer 208, A Limited Partnership, as of December 31, 2000, and the related statement of changes in net assets in liquidation for the period from December 21, 2000 to December 31, 2000. In addition, we have audited the statement of income from operations for the period from January 1, 2000 to December 21, 2000 and this statement of changes in partners' equity and cash flows for the year ended December 31, 2000. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about weather 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. As described in Note 2 to the financial statements, closing on the sale of the rental property occurred December 21, 2000, and the Partnership commenced liquidation shortly thereafter. As a result, the Partnership has changed its basis of accounting, for periods subsequent to December 21, 2000, from the going-concern basis to liquidation basis. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for liquidation of Conifer 208 as of December 31, 2000, the results of its operations for the period January 1, 2000 to December 21, 2000, the changes in its net assets in liquidation for the period from December 21, 2000 to December 31, 2000, and its cash flows for the twelve months ended December 31, 2000 in conformity with generally accepted accounting principles applied on the basis described in the preceding paragraph. /s/ Blume Loveridge & Co., PLLC Bellevue, Washington February 5, 2001 64 [Letterhead of Blume Loveridge & Co., PLLC] INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS Partners Conifer 307, A Limited Partnership Tacoma, Washington We have audited the statement of net assets available for liquidation of Conifer 307 Oreg.Ltd., (a Limited Partnership), as of May 31, 2000, and the related statement of changes in net assets in liquidation for the period from March 9, 2000 to May 31, 2000. In addition, we have audited the statement of income from operations for the period from January 1, 2000 to March 8, 2000 and the statements of changes in partners' equity and cash flows for the five months ended May 31, 2000. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about weather 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. As described in Note 2 to the financial statements., closing on the sale of the rental property occurred March 8, 2000, and the Partnership commenced liquidation shortly thereafter. As a result, the Partnership has changed its basis of accounting, for periods subsequent to March 8, 2000, from the going-concern basis to liquidation basis. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for liquidation of Conifer 307 Oreg. Ltd. as of May 31, 2000, the results of its operations for the period January 1, 2000 to March 8, 2000, the changes in its net assets in liquidation for the period from March 9, 2000 to May 31, 2000, and its cash flows for the five months ended May 31, 2000 in conformity with generally accepted accounting principles applied on the basis described in the preceding paragraph. /s/ Blume Loveridge & Co., PLLC Bellevue, Washington June 20, 2000 65 [Letterhead of Blume Loveridge & Co., PLLC] INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS Partners Conifer 317, an Oregon Limited Partnership Tacoma, Washington We have audited the accompanying balance sheet of Conifer 317, An Oregon Limited Partnership, sponsor of FHA Project No. 126-44134, as of December 19, 2002, and the related statements of profit and loss, changes in partners' equity, and cash flows for the period then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Conifer 317, An Oregon Limited Partnership as of December 19, 2002, and the results of its operations and its cash flows for the period then ended in conformity with accounting principles generally accepted in the United States of America. The Partnership is regulated by the U.S. Department of Housing and Urban Development (HUD) as to rental charges, operating methods and reporting requirements. The financial statements are presented in sufficient detail to facilitate the electronic submission of certain financial information by the Partnership to HUD's Real Estate Assessment Center. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying additional information on pages 15 through 18 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such additional information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report, dated January 25, 2003, on our consideration of the Partnership's internal control and reports dated January 25, 2003, on our tests of its compliance with certain provisions of laws, regulations, contracts and grants. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. /s/ Blume Loveridge & Co., PLLC Bellevue, Washington January 25, 2003 66 [Letterhead of Blume Loveridge & Co., PLLC] INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS Partners Conifer 317, an Oregon Limited Partnership Tacoma, Washington We have audited the accompanying balance sheets of Conifer 317, An Oregon Limited Partnership, sponsor of FHA Project No. 126-44134, as of December 31, 2001, and the related statements of profit and loss, changes in 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 auditing standards generally accepted in the United States of America and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform an 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 Conifer 317, An Oregon Limited Partnership, as of December 31, 2001, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. The Partnership is regulated by the U.S. Department of Housing and Urban Development (HUD) as to rental charges, operating methods and reporting requirements. The financial statements are presented in sufficient detail to facilitate the electronic submission of certain financial information by the Partnership to HUD's Real Estate Assessment Center. Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying additional information shown on pages 15 through 18 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such additional information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report, dated February 8, 2002, on our consideration of the Partnership's internal controls and reports, dated February 8, 2002, on its compliance with laws and regulations. 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/ Blume Loveridge & Co., PLLC Bellevue, Washington February 8, 2002 67 [Letterhead of Blume Loveridge & Co., PLLC] INDEPENDENT AUDITOR'S REPORT ON FINANCIAL STATEMENTS Partners Conifer 317, an Oregon Limited Partnership Tacoma, Washington We have audited the accompanying balance sheets of Conifer 317, An Oregon Limited Partnership, sponsor of FHA Project No. 126-44134, as of December 31, 2000 and 1999, and the related statements of income, changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform an 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 Conifer 317, An Oregon Limited Partnership, as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information shown on pages 10 to 14 is presented for purposes of additional analysis for the year ended December 31, 2000, and is not a required part of the basic financial statements. Such additional information has been subjected to the auditing procedures applied in the audit of the basic financial statements for that year, and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report, dated February 3, 2001, on our consideration of the Partnership's internal controls and reports, dated February 3, 2001, on its compliance with laws and regulations. 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 related audit. /s/ Blume Loveridge & Co., PLLC Bellevue, Washington February 3, 2001 68 [Letterhead of Deloitte & Touche LLP] INDEPENDENT AUDITORS' REPORT To the Partners Bellfort Associates, Ltd. We have audited the accompanying balance sheets of Bellfort Associates, Ltd. (the "Partnership"), a Texas limited partnership, as of January 12, 2000 and December 31, 1999, and the related statements of operations, partners' equity (deficiency), and cash flows for the period January 1, 2000 through January 12, 2000 and each of the two years in the period ended December 31, 1999 and 1998. 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 generally accepted auditing standards in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of Bellfort Associates, Ltd. as of January 12, 2000 and December 31, 1999, and the results of its operations and its cash flows for the period January 1, 2000 through January 12, 2000 and each of the two years in the period ended December 31, 1999 and 1998 in conformity with accounting principles generally accepted in the United States of America As discussed in Notes 1 and 4 to the financial statements, the Partnership sold its income producing property on January 12, 2000 which raises substantial doubt about the Partnership's ability to continue as a going concern. The General Partner has indicated that the Partnership is expected to be terminated in 2000. /s/ Deloitte & Touche LLP Houston, Texas August 23, 2000 69 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Cloisters Associates, Ltd. Atlanta, Georgia We have audited the balance sheets of Cloisters Associates, Ltd.("the Partnership") as of November 8, 2000 and December 31, 1999, and the related statements of operations, changes in partners' capital (deficit), and cash flows for the period ended November 8, 2000 and each of the two years in the period ended December 31, 1999. 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 generally accepted auditing standards. 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 Cloisters Associates, Ltd. at November 8, 2000 and December 31, 1999, and the results of its operations and its cash flows for the period ended November 8, 2000 and each of the two years in the period ended December 31, 1999 in conformity with generally accepted accounting principles. /s/ Williams Benator & Libby, LLP Atlanta, Georgia December 15, 2000 70 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Cabarrus Arms Associates Atlanta, Georgia We have audited the balance sheets of Cabarrus Arms Associates ("the Partnership") as of December 31, 2002 and 2001, and the related statements of operations, changes in partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cabarrus Arms Associates at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. As discussed in Note B to the financial statements, effective December 31, 2002, the Partnership changed its method of accounting for property and equipment which was previously classified as held for sale. /s/ Williams Benator & Libby, LLP Atlanta, Georgia January 29, 2003 71 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Cabarrus Arms Associates Atlanta, Georgia We have audited the balance sheets of Cabarrus Arms Associates ("the Partnership") as of December 31, 2001 and 2000, and the related statements of operations, changes in partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Cabarrus Arms Associates at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia February 8, 2002 72 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Cabarrus Arms Associates Atlanta, Georgia We have audited the balance sheets of Cabarrus Arms Associates ("the Partnership") as of December 31, 2000 and 1999, and the related statements of operations, changes in partners' capital (deficit), and cash flows for each of the three years in the period ended December 31, 2000. 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 generally accepted auditing standards. 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 Cabarrus Arms Associates at December 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2000 in conformity with generally accepted accounting principles. /s/ Williams Benator & Libby, LLP Atlanta, Georgia January 24, 2001 73 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITOR'S REPORT To the Partners Summer Arms Apartments, Ltd. Sumter, South Carolina We have audited the accompanying balance sheets of Summer Arms Apartments, Ltd. (a limited partnership) as of December 31, 2002, 2001 and 2000, and the related statements of operations, changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Summer Arms Apartments, Ltd. (a limited partnership) as of December 31, 2002, 2001 and 2000, 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/ Mauldin & Jenkins, LLC Atlanta, Georgia January 31, 2003 74 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITOR'S REPORT To the Partners Summer Arms Apartments, Ltd. Sumter, South Carolina We have audited the accompanying balance sheets of Summer Arms Apartments, Ltd. (a limited partnership) as of December 31, 2001, 2000 and 1999, and the related statements of operations, changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Summer Arms Apartments, Ltd. (a limited partnership) as of December 31, 2001, 2000 and 1999, 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/ Mauldin & Jenkins, LLC Atlanta, Georgia February 1, 2002 75 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITOR'S REPORT To the Partners Lexington Village Company Conyers, Georgia We have audited the accompanying balance sheets of Lexington Village Company (a limited partnership) as of August 31, 2002 and December 31, 2001 and 2000, and the related statements of operations, changes in partners' equity and cash flows for the period of January 1, 2002 to August 31, 2002 and for the years ended December 31, 2001 and 2000. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lexington Village Company (a limited partnership) as August 31, 2002 and December 31, 2001 and 2000, and the results of its operations and its cash flows for the period of January 1, 2002 to August 31, 2002 and for years ended December 31, 2001 and 2000, in conformity with accounting principles generally accepted in the United States of America. /s/ Mauldin & Jenkins, LLC Atlanta, Georgia September 4, 2002 76 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITOR'S REPORT To the Partners Lexington Village Company Conyers, Georgia We have audited the accompanying balance sheets of Lexington Village Company (a limited partnership) as of December 31, 2001, 2000 and 1999, and the related statements of operations, changes in partners' equity and cash flows for the years then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Lexington Village Company (a limited partnership) as of December 31, 2001, 2000 and 1999, 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/ Mauldin & Jenkins, LLC Atlanta, Georgia February 1, 2002 77 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITOR'S REPORT To the Partners Ware Manor Associates Waycross, Georgia We have audited the accompanying balance sheets of Ware Manor Associates (a limited partnership) as of June 20, 2001 and December 31, 2000 and 1999 and the related statements of operations, changes in partners' equity and cash flows for the period of January 1, 2001 to June 20, 2001 and for the years ended December 31, 2000 and 1999. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ware Manor Associates (a limited partnership) as of June 20, 2001 and December 31, 2000 and 1999, and the results of its operations and its cash flows for the period of January 1, 2001 to June 20, 2001 and for years ended December 31, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America. /s/ Mauldin & Jenkins, LLC Atlanta, Georgia August 23, 2001 78 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Nottingham Woods Apartments Limited Atlanta, Georgia We have audited the balance sheet of Nottingham Woods Apartments Limited ("the Partnership") as of March 31, 2002, and the related statements of income, changes in partners' capital (deficit), and cash flows for the three 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nottingham Woods Apartments Limited at March 31, 2002, and the results of its operations and its cash flows for the three months then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia April 23, 2002 79 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Nottingham Woods Apartments Limited Atlanta, Georgia We have audited the balance sheets of Nottingham Woods Apartments Limited ("the Partnership") as of December 31, 2001 and 2000, and the related statements of operations, changes in partners' deficit, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nottingham Woods Apartments Limited at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia February 8, 2002, except for Note I, which is as of February 14, 2002 80 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Hathaway Court Associates Atlanta, Georgia We have audited the balance sheets of Hathaway Court Associates ("the Partnership") as of December 31, 2002 and 2001, and the related statements of operations, changes in partners' deficit, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hathaway Court Associates at December 31, 2002 and 2001, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2002 in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia January 28, 2003 81 [Letterhead of WILLIAMS BENATOR & LIBBY, LLP] INDEPENDENT AUDITORS' REPORT Partners Hathaway Court Associates Atlanta, Georgia We have audited the balance sheets of Hathaway Court Associates ("the Partnership") as of December 31, 2001 and 2000, and the related statements of operations, changes in partners' deficit, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hathaway Court Associates at December 31, 2001 and 2000, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2001 in conformity with accounting principles generally accepted in the United States of America. /s/ Williams Benator & Libby, LLP Atlanta, Georgia February 8, 2002 82 [Letterhead of Mauldin & Jenkins] INDEPENDENT AUDITOR'S REPORT To the Partners Tall Pines Associates LaGrange, Georgia We have audited the accompanying balance sheets of Tall Pines Associates (a limited partnership) as of June 20, 2001 and December 31, 2000 and 1999, and the related statements of operations, changes in partners' equity and cash flows for the period of January 1, 2001 to June 20, 2001 and for years ended December 31, 2000 and 1999. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our 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 Tall Pines Associates as of June 20, 2001 and December 31, 2000 and 1999, and the results of its operations and its cash flows for the period of January 1, 2001 to June 20, 2001 and for years ended December 31, 2000 and 1999, in conformity with accounting principles generally accepted in the United States of America. /s/ Mauldin & Jenkins, LLC Atlanta, Georgia August 23, 2001 83 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Shelton Beach Apartments, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Shelton Beach Apartments, Ltd. for the period January 1, 2002 through August 9, 2002. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 statement referred to above present fairly, in all material respects the changes in net assets in liquidation for the period January 1, 2002 through August 9, 2002, in conformity with accounting principles generally accepted in the United States of America. As discussed in note A to the financial statements, during 2001, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On May 1, 2002, the partnership sold the rental property. As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 9 through 11 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland August 9, 2002 84 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Shelton Beach Apartments, Ltd. We have audited the accompanying statement of net assets in liquidation of Shelton Beach Apartments, Ltd. as of December 31, 2001, and the related statement of changes in net assets in liquidation for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. As discussed in note A to the financial statements, during 2001, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. As a result, the partnership's financial statements are presented on the liquidation basis of accounting. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Shelton Beach Apartments, Ltd. as of December 31, 2001, and the changes in net assets in liquidation for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As discussed in note A to the financial statements, the partnership has entered into a purchase and sale agreement to sell the rental property. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 12 through 14 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/ Reznick Fedder & Silverman Bethesda, Maryland January 11, 2002 85 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Shelton Beach Apartments, Ltd. We have audited the accompanying balance sheets of Shelton Beach Apartments, Ltd. as of December 31, 2000 and 1999, and the related statements of revenue and expenses, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 Shelton Beach Apartments, Ltd. as of December 31, 2000 and 1999, and the results of its operations, the changes in partners' capital and cash flows for the years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 12 through 14 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/ Reznick Fedder & Silverman Bethesda, Maryland January 16, 2001 86 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Northpointe II, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Northpointe II, Ltd. for the period January 1, 2002 through August 9, 2002. This financial statement is the responsibility of the partnership's management. Our responsibility is to express an opinion on this financial statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statement is free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statement. 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 statement referred to above presents fairly, in all material respects, the changes in net assets in liquidation for the period January 1, 2002 through August 9, 2002, in conformity with accounting principles generally accepted in the United States of America. As described in note A to the financial statements, during 2001, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On May 1, 2002, the partnership sold the rental property As a result, the partnership's financial statement is presented on the liquidation basis of accounting. Our audit was made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplemental information on pages 8 through 10 is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ Reznick Fedder & Silverman Bethesda, Maryland August 9, 2002 87 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Northpointe II, Ltd. We have audited the accompanying statement of net assets in liquidation of Northpointe II, Ltd. as of December 31, 2001, and the related statement of changes in net assets in liquidation for the year then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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. As discussed in note A to the financial statements, during 2001, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. As a result, the partnership's financial statements are presented on the liquidation basis of accounting. In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets in liquidation of Northpointe II, Ltd. as of December 31, 2001, and the changes in net assets in liquidation for the year then ended, in conformity with accounting principles generally accepted in the United States of America. As discussed in note A to the financial statements, the partnership has entered into a purchase and sale agreement to sell the rental property. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 12 through 14 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/ Reznick Fedder & Silverman Bethesda, Maryland January 11, 2002 88 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Northpointe II, Ltd. We have audited the accompanying balance sheets of Northpointe II, Ltd. as of December 31, 2000 and 1999, and the related statements of revenue and expenses, partners' capital and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 Northpointe II, Ltd. as of December 31, 2000 and 1999, and the results of its operations, the changes in partners' capital and cash flows for the years then ended, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information on pages 12 through 14 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/ Reznick Fedder & Silverman Bethesda, Maryland January 16, 2001 89 [Letterhead of KPMG LLP] Independent Auditors' Report The Partners Caroline Forest Apartments: We have audited the accompanying balance sheet of Caroline Forest Apartments Limited Partnership (a Virginia Limited Partnership) as of March 31, 2000, and the related statements of profit and loss, changes in partners' equity and cash flows for the three-month period then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Caroline Forest Apartments Limited Partnership (a Virginia Limited Partnership) as of March 31, 2000, and the results of its operations and its cash flows for the three-month period then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued a report dated July 7, 2000 on our consideration of the Partnership's internal control over financial reporting and a report dated July 7, 2000 on our tests of its compliance with certain provisions of laws and regulations. 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 made for the purpose of forming an opinion on the basic financial statement taken as a whole. The supplementary information as listed in the accompanying table of contents, is presented for purposes of additional analysis and is not a required part of the basic financial statement. Such information has been subjected to the auditing procedures applied in the audits of the basic financial statement and, in our opinion, is fairly stated in all material respects in relation to the basic financial statement taken as a whole. /s/ KPMG LLP Roanoke, Virginia July 7, 2000 90 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Pebble Creek LDHA We have audited the accompanying balance sheet of MSHDA Development No. 277 of Pebble Creek LDHA (A Michigan Limited Partnership) as of December 31, 2002, and the related statements of Profit and Loss, and changes in accumulated earnings 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 generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements above present fairly, in all material respects, the financial position of MSHDA Development No. 277, Pebble Creek LDHA, as of December 31, 2002, and the results of its operations and the changes in cumulative income and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information of Pebble Creek LDHA, MSHDA NO. 277 on pages 10 to 16 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the partnership's management. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 29, 2003 on our consideration of the partnership's internal control structure on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 29, 2003 91 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Pebble Creek LDHA We have audited the accompanying balance sheet of MSHDA Development No. 277 of Pebble Creek LDHA (A Michigan Limited Partnership) as of December 31, 2001, and the related statements of Profit and loss, and changes in accumulated earnings for the year then ended. We have also audited the statements of cash flows for the years ended December 31, 2001. 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 generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements above present fairly, in all material respects, the financial position of MSHDA Development No. 277, Pebble Creek LDHA, as of December 31, 2001, and the results of its operations and the changes in cumulative income and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information of Pebble Creek LDHA, MSHDA NO. 277 on pages 10 to 16 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the partnership's management. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 21, 2002 on our consideration of the partnership's internal control structure and a report dated January 21, 21002 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 21, 2002 92 [Letterhead of Bordman & Winnick] INDEPENDENT AUDITOR'S REPORT To the Partners of Pebble Creek LDHA We have audited the accompanying balance sheet of MSHDA Development No. 277 of Pebble Creek LDHA (A Michigan Limited Partnership) as of December 31, 2000, and the related statements of Profit and loss, and changes in accumulated earnings for the year then ended. We have also audited the statements of cash flows for the years ended December 31, 2000. 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 generally accepted auditing standards and GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements above present fairly, in all material respects, the financial position of MSHDA Development No. 277, Pebble Creek LDHA, as of December 31, 2000, and the results of its operations and the changes in cumulative income and its cash flows for the year then ended in conformity with generally accepted accounting principles. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The additional information of Pebble Creek LDHA, MSHDA NO. 277 on pages 10 to 16 is presented for the purposes of additional analysis and is not a required part of the basic financial statements. This additional information is the responsibility of the partnership's management. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. In accordance with Government Auditing Standards, we have also issued a report dated January 18, 2001 on our consideration of the partnership's internal control structure and a report dated January 18, 2001 on its compliance with laws and regulations. /s/ Bordman & Winnick Certified Public Accountants West Bloomfield, MI January 18, 2001 93 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Greenwood Manor, Ltd.: We have audited the accompanying financial statements of Greenwood Manor, Ltd., (the "Partnership") as of December 31, 2001, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Greenwood Manor, Ltd. as of December 31, 2001, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards 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 a report dated January 17, 2002, on our consideration of Greenwood Manor Ltd.'s internal control and reports dated January 17, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information on pages 10 and 11 is presented for purposes of additional analysis and is not a required part the basic financial statements of Greenwood Manor, Ltd. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 17, 2002 94 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Greenwood Manor, Ltd.: We have audited the accompanying balance sheet of Greenwood Manor, Ltd., (the "Partnership") as of December 31, 2000, and the related statements of income, changes in partners' equity, and cash flows for the year then ended. These financial statements are the responsibility of 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 generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Greenwood Manor, Ltd. as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. 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 a report dated January 18, 2001, on our consideration of Greenwood Manor Ltd.'s internal control and reports dated January 18, 2001, on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our audits were conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplemental information on pages 10 and 11 is presented for purposes of additional analysis and is not a required part the basic financial statements of Greenwood Manor, Ltd. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 18, 2001 95 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Malvern Manor, Ltd.: We have audited the accompanying financial statements of Malvern Manor, Ltd. (the "Partnership") as of December 31, 2001, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and 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 the general partner, 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 the Partnership as of December 31, 2001, and the results of its operations, changes in partners' equity and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards 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 a report dated January 25, 2002, on our consideration of Malvern Manor, Ltd.'s internal control and reports dated January 25, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 25, 2002 96 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Malvern Manor, Ltd.: We have audited the accompanying financial statements of Malvern Manor, Ltd. (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, 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 the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. 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 a report dated January 24, 2001, on our consideration of Malvern Manor, Ltd.'s internal control and reports dated January 24, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to fair housing and non-discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 24, 2001 97 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Hereford Manor, Ltd.: We have audited the accompanying financial statements of Hereford Manor, Ltd. (the "Partnership") as of December 31, 2001, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the general partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and 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 the general partner, 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 the Partnership at December 31, 2001, and the results of its operations, changes in partners' equity and cash flows for the year then ended in conformity with accepted accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards and Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a reported dated January 21, 2002, on our consideration of Hereford Manor, Ltd.'s internal control and reports dated January 21, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 9 and 10 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 21, 2002 98 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Hereford Manor, Ltd.: We have audited the accompanying financial statements of Hereford Manor, Ltd. (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, 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 the Partnership at December 31, 2000, and the results of its operations, changes in partners' equity and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a reported dated February 2, 2001, on our consideration of Hereford's internal control and reports dated February 2, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to fair housing and nondiscrimination. 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 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas February 12, 2001 99 rhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Henslee Heights, Ltd.: We have audited the accompanying financial statements of Henslee Heights, Ltd. (the "Partnership") as of December 31, 2001, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the general partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and 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 the general partner, 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 the Partnership as of December 31, 2001, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards and the Consolidated Audit Guide of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 17, 2002, on our consideration of Henslee Heights, Ltd.'s internal control structure and reports dated January 17, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are 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 9 and 10 is presented for the purpose of additional analysis. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 17, 2002 100 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Henslee Heights, Ltd.: We have audited the accompanying financial statements of Henslee Heights, Ltd. (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, 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 the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide of HUD Programs issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 24, 2001, on our consideration of Henslee Heights, Ltd.'s internal control structure and reports dated January 24, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirements applicable to fair housing and nondiscrimination. Those reports are 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 9 and 10 is presented for the purpose of additional analysis. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 24, 2001 101 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Oakwood Manor, Ltd.: We have audited the accompanying special-purpose balance sheet of Oakwood Manor, Ltd. (the "Partnership") as of June 27, 2001, and the related special-purpose statements of income, partners' equity, and cash flows for the period then ended. These financial statements are the responsibility of the general partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the general partner, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying special-purpose financial statements have been prepared, as described in Note 1 to the financial statements, for the purpose of consolidation with those of Cambridge Advantaged Properties Limited Partnership ("Cambridge"), and on the basis of accounting practices specified by the management of Cambridge. These financial statements are not intended to be a presentation in conformity with accounting principles generally accepted in the United States of America. In our opinion, such special-purpose financial statements present fairly, in all material respects, the financial position of the Partnership as of June 27, 2001, and the results of its operations and its cash flows for the period then ended in conformity with the basis of accounting described in Note 1. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Notes 1 and 7 to the financial statements, the Partnership sold its sole revenue producing asset during the period, which raises 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. This report is intended solely for the information and use of the partners of Oakwood Manor, Ltd., management and Cambridge and should not be used for any other purpose. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas November 28, 2001 102 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Oakwood Manor, Ltd.: We have audited the accompanying financial statements of Oakwood Manor, Ltd. (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, 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 the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. 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 a reported dated January 30, 2001, on our consideration of Oakwood Manor, Ltd.'s internal control and a report dated January 30, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to non-major HUD transactions and specific requirements applicable to fair housing and non-discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 9 and 10 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 30, 2001 103 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners West Scenic Apartments, Ltd.: We have audited the accompanying special-purpose balance sheet of West Scenic Apartments, Ltd. (the "Partnership") as of January 5, 2001, and the related special-purpose statements of income, partners' equity, and cash flows for the five day period then ended. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance generally accepted auditing standards. 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 the General Partner, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The accompanying special-purpose financial statements have been prepared, as described in Note 1 to the financial statements, for the purpose of consolidation with those of Cambridge Advantaged Properties Limited Partnership ("Cambridge"), and on the basis of accounting practices specified by the management of Cambridge. These financial statements are not intended to be a presentation in conformity with generally accepted accounting principles. In our opinion, such special-purpose financial statements present fairly, in all material respects, the financial position of the Partnership as of January 5, 2001, and the results of its operations and its cash flows for the five day period then ended in conformity with the basis of accounting described in Note 1. This report is intended solely for the information and use of the partners of West Scenic Apartments, Ltd., management and Cambridge and should not be used for any other purpose. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas February 16, 2001 104 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners West Scenic Apartments, Ltd.: We have audited the accompanying financial statements of West Scenic Apartments, Ltd. (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, 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 the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. In accordance with Government Auditing Standards and the Consolidated Audit Guide for Audits of HUD Programs, we have also issued a report dated January 31, 2001, on our consideration of West Scenic Apartments, Ltd.'s internal control and reports dated January 31, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to fair housing and non-discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 31, 2001 105 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Robindale East Apartments, Ltd.: We have audited the accompanying financial statements of Robindale East Apartments, Ltd. (the "Partnership") as of February 15, 2002, and for the period then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the general partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and 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 the general partner, 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 the Partnership as of February 15, 2002, and the results of its operations, changes in partners' equity, and cash flows for the period 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 Notes 1 and 8 to the financial statements, the Partnership sold its sole revenue producing asset during the period, which raises 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. 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 a report dated May 1, 2002, on our consideration of Robindale East Apartments, Ltd.'s internal control and a report dated May 1, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas May 1, 2002 106 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Robindale East Apartments, Ltd.: We have audited the accompanying financial statements of Robindale East Apartments, Ltd. (the "Partnership") as of December 31, 2001, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the general partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and 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 the general partner, 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 the Partnership as of December 31, 2001, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards 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 a report dated January 16, 2002, on our consideration of Robindale East Apartments, Ltd.'s internal control and a report dated January 16, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 11 and 12 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 16, 2002 107 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Robindale East Apartments, Ltd.: We have audited the accompanying financial statements of Robindale East Apartments, Ltd. (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, 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 the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. 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 a report dated January 29, 20001, on our consideration of Robindale East Apartments, Ltd.'s internal control and a report dated January 29, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirements applicable to fair housing and non-discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 29, 2001 108 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Southwest Apartments, Ltd.: We have audited the accompanying financial statements of Southwest Apartments, Ltd. (the "Partnership") as of December 31, 2001, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the general partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and 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 the general partner, 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 the Partnership as of December 31, 2001, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards 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 a report dated January 21, 2002, on our consideration of Southwest Apartments, Ltd.'s internal control and reports dated January 21, 2002, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to Fair Housing and Non-Discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 9 and 10 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 21, 2002 109 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Southwest Apartments, Ltd.: We have audited the accompanying financial statements of Southwest Apartments, Ltd. (the "Partnership") as of December 31, 2000, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partner. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the General Partner, 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 the Partnership as of December 31, 2000, and the results of its operations, changes in partners' equity, and cash flows for the year then ended in conformity with generally accepted accounting principles. 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 a report dated January 25, 2001, on our consideration of Southwest Apartments, Ltd.'s internal control and reports dated January 25, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions and specific requirements applicable to fair housing and non-discrimination. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. Our 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 10 and 11 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of the Partnership. Such information has been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas January 25, 2001 110 [Letterhead of JEFFREY PHILLIPS MOSLEY & SCOTT, P.A.] INDEPENDENT AUDITORS' REPORT To the Partners Valley Arms, Ltd.: We are engaged to audit the accompanying balance sheet of Valley Arms, Ltd. (the "Partnership") as of December 31, 2000, and the related statements of profit and loss, partners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the General Partner. Management has refused to provide written representations as to its responsibility for the fair presentation of the financial statements and other matters which could materially affect the amounts and classification of items included in the financial statements. Such representations are required under generally accepted auditing standards. Since the management of the Partnership has refused to provide written representations as noted in the preceding paragraph, the scope of our work was not sufficient to enable us to express, and we do not express, and opinion on the financial statements referred to above. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 1 to the financial statements, the Partnership filed a petition for bankruptcy under Chapter 11 during the year ended December 31, 1998, and sold its sole revenue producing asset on April 13, 1999, which raises substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Jeffrey Phillips Mosley & Scott, P.A. Little Rock, Arkansas February 1, 2001 111 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS

* Reclassified for comparative purposes. See accompanying notes to consolidated financial statements. 112 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes to consolidated financial statements. 113 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT

See accompanying notes to consolidated financial statements. 114 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

115 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (CONTINUED)

116 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (CONTINUED)

See accompanying notes to consolidated financial statements. 117 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 NOTE 1 - Organization Cambridge Advantaged Properties Limited Partnership (the "Partnership") was formed pursuant to the laws of the Commonwealth of Massachusetts on June 28, 1984. The Partnership invests, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships" or "subsidiary partnerships"), each of which owns and operates an existing residential housing development (an "Apartment Complex") that is financed and/or operated with some form of local, state or federal assistance, including mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). The General Partners of the Partnership are Assisted Housing Associates Inc., (the "Assisted General Partner"), and Related Beta Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with The Related Companies, L.P. ("Related"), a New York limited partnership, and Cambridge/Related Associates Limited Partnership (formerly Hutton/Related Associates Limited Partnership) ("Cambridge/Related"), a Massachusetts limited partnership, which is also affiliated with Related. The general partners of Cambridge/Related are the Assisted General Partner and the Related General Partner. The General Partners manage and control the affairs of the Partnership. Pursuant to the public offering, the Partnership received $53,754,000 (net of offering expenses and sales commissions of $6,615,700) from 4,452 investors in 12,074 limited partnership interests. The offering was completed in March 1985 and no further issuance of initial limited partnership interests or additional limited partnership interests is anticipated. As of March 25, 2003, the Partnership holds a 98.99% limited partnership interest in each of the four remaining Local Partnerships, which own Apartment Complexes receiving Government Assistance. During the fiscal year ended March 25, 2003, the properties and the related assets and liabilities owned by six subsidiary partnerships were sold and the Partnership's Local Partnership Interests in two subsidiary partnerships were sold, respectively. Through the fiscal year ended March 25, 2003, the properties and the related assets and liabilities owned by thirty-one subsidiary partnerships were sold and the Partnership's Local Partnership Interests in twenty-six subsidiary partnerships were sold, respectively (see Note 10). The terms of the Partnership Agreement provide, among other things, that profits and losses, in general, be shared 99% by the limited partners and 1% by 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 13, 30 and 43, subsidiary partnerships in which the Partnership is a limited partner for the years ended March 25, 2003, 2002 and 2001, respectively. The Partnership is a limited partner, with an ownership interest of 98.99% in each of the subsidiary partnerships. The Partnership continues to hold its interest in certain subsidiary partnerships which have sold their properties and have not formally liquidated. Through the rights of the Partnership and/or an affiliate of a General Partner, which affiliate has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary partnerships and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. 118 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 For financial reporting purposes, the Partnership's fiscal year ends March 25. All subsidiaries have fiscal years ending December 31. Accounts of subsidiaries have been adjusted for intercompany transactions from January 1 through March 25. The Partnership's fiscal year ends on March 25 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records are maintained on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles ("GAAP"). All intercompany accounts and transactions 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. Losses attributable to minority interests which exceed the minority interests' investment in a subsidiary have been charged to the Partnership. Such losses aggregated approximately $5,000, $49,000 and $41,000 for the years ended March 25, 2003 (the "2002 Fiscal Year"), March 25, 2002 (the "2001 Fiscal Year") and March 25, 2001 (the "2000 Fiscal Year"), respectively. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. In consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital. b) Property and Equipment Property and equipment to be held and used are carried at cost which includes the purchase price, acquisition fees and expenses, construction period interest and any other costs incurred in acquiring the properties. The cost of property and equipment is depreciated over their estimated useful lives using accelerated and straight-line methods. Expenditures for repairs and maintenance are charged to expense as incurred; major renewals and betterments are capitalized. At the time property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are eliminated from the assets and accumulated depreciation accounts and the profit or loss on such disposition is reflected in earnings. 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 discounted cash flows). 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. These assets are classified as property and equipment-held for sale and are not depreciated. All property and equipment for subsidiary partnerships whose assets and liabilities are under sales contracts are classified as assets held for sale. For the year ended March 25, 2003, the Partnership has not recorded a loss on impairment of assets. Through March 25, 2003, the Partnership has recorded approximately $7,682,000 as a loss on impairment of assets. c) Interest Subsidies Interest expense has been reduced by interest subsidies (Note 6). 119 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 d) 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. e) Income Taxes No provision has been made for income taxes in the accompanying financial statements since such taxes, if any, are the responsibility of the individual partners. For income tax purposes, the Partnership has a fiscal year ending December 31 (Note 9). f) Loss Contingencies The Partnership records loss contingencies as a charge to income when information becomes available which indicates that it is probable that an asset has been impaired or a liability has been incurred as of the date of the financial statements and the amount of loss can be reasonably estimated. In addition, the Partnership evaluates the amount of a potential environmental liability independently from any potential claim for recovery. g) Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE 3 - Fair Value of Financial Instruments The following methods and assumptions were used to estimate the fair value of each class of financial instruments (all of which are held for non-trading purposes) for which it is practicable to estimate that value: Cash and Cash Equivalents, Cash-Restricted for Tenants' Security Deposits and -------------------------------------------------------------------------------- Mortgage Escrow Deposits ------------------------ 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. 120 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 The estimated fair values of the Partnership's mortgage notes payable are as follows:

(a) Management believes it is not practical to estimate the fair value of the mortgage notes payable because mortgage programs with similar characteristics are not currently available to the Local Partnerships. (b) For the reasons discussed in Note 7, it is not practicable to estimate the fair value of these notes, or accrued interest thereon. The carrying amount of other financial instruments that require such disclosure approximates fair value. NOTE 4 - Property and Equipment and Property and Equipment-Held for Sale The components of property and equipment and their estimated useful lives are as follows:

Property acquisition fees of $5,131,535 were earned by the General Partners of the Partnership and have been capitalized as a cost of property and equipment. 121 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 Depreciation expense for the 2002, 2001 and 2000 Fiscal Years amounted to $779,088, $1,364,076 and $3,212,290, respectively. The components of property and equipment held for sale are as follows:

NOTE 5 - Mortgage Escrow Deposits Mortgage escrow deposits consist of the following:

NOTE 6 - Mortgage Notes Payable The mortgage notes are payable in aggregate monthly installments of approximately $36,000, including principal and interest at rates varying from 6.75% to 7.0% per annum, through June 2014. Each subsidiary partnership's mortgage note payable is collateralized by the land and buildings of the respective subsidiary partnership, the assignment of certain subsidiary partnership's rents and leases and is without further recourse. Under the terms of regulatory agreements with the Secretary of HUD, the subsidiary partnerships paid only that portion of the monthly payments that would be required if the interest rate was in the range of 1% - 3% per annum; the balance was subsidized under Section 236 of the National Housing Act. 122 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 Annual principal payment requirements for each of the next five years are as follows:

The mortgage agreements require monthly deposits to replacement reserves of approximately $18,000 and monthly deposits to escrow accounts for real estate taxes, hazard, and mortgage insurance and other (Note 5). NOTE 7 - Purchase Money Notes Payable Purchase money notes in the original amount of $85,458,825 were issued to the selling partners of the subsidiary partnerships as part of the purchase price and are secured only by the interest in the subsidiary partnership to which the purchase money note relates (the "Purchase Money Notes"). A portion of these Purchase Money Notes, in the original amount of $31,932,568 is an obligation at the subsidiary partnership level, whereas the remaining $53,526,257 is recorded at the Partnership level. The Purchase Money Notes generally provided for compound interest at rates which, in general, ranged from 9% to 10% per annum through August 31, 1989. Thereafter, simple interest has accrued, without further interest thereon, through maturity as extended (see below). Purchase Money Notes at March 25, 2003 and 2002 include $4,336,417 of interest accrued through August 31, 1989. The Purchase Money Notes, which provide for simple interest, will not be in default if not less than 60% of the cash flow actually distributed to the Partnership by the corresponding subsidiary partnership (generated by the operations, as defined) is applied first to accrued interest and then to current interest thereon. Any interest not paid currently accrues, without further interest thereon, through the extended due date of the Purchase Money Note. Continued accrual of such interest beyond the initial term, without payment, reduces the effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and the ultimate repayment dates of the Purchase Money Notes. The Purchase Money Notes, after the extended maturity dates, call for the simple accrual of interest on the balance of principal, interest and Purchase Money Note Extension Fees Payable as of the date of maturity at one of the following two rates: (i) the lesser of 12% or the legally allowable rate; or (ii) the lesser of prime plus 2% or the lowest legally allowable rate. Unpaid interest of approximately $9,917,000 and $22,909,000 as of March 25, 2003 and 2002, respectively, has been accrued and is included in due to selling partners in the consolidated balance sheets. In general, the interest on and the principal of each Purchase Money Note is also payable to the extent of the Partnership's actual receipt of proceeds of the sale or refinancing of the Apartment Complex. The Partnership extended the terms of the Purchase Money Notes (ranging from August to December 1996) for up to three additional years (four years with respect to three subsidiary partnerships and seven years with respect to three subsidiary partnerships). In connection with such extensions, the Partnership incurred an extension fee of 1/2 % per annum of the outstanding principal balance of the Purchase Money Notes. Of such fees incurred, $47,367 was accrued and added to the Purchase Money Notes balance. The extension fees are being 123 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 amortized over the term of the extensions. The Purchase Money Notes with seven year extensions have all been sold. Additionally, an oral agreement was reached in November 2002 that extended the maturity dates of the remaining Purchase Money Notes to June 2003. Further extensions, until such properties are sold, are currently in the discussion stage. The Partnership is working with the Local General Partners and Purchase Money Note holders to refinance or sell the properties. No assurance can be given that management's efforts will be successful. Based on the historical operating results of the Local Partnerships and the current economic conditions, including changes in tax laws, the proceeds from such sales will not be sufficient to meet the outstanding balances of principal, accrued interest and extension fees. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the Purchase Money Note holder's recourse, in the event of nonpayment, would be to foreclose on the Partnership's interests in the respective subsidiary partnerships. Distributions aggregating approximately $10,072,000, $4,452,000 and $6,550,000 were made to the Partnership during each of the years ended March 25, 2003, 2002 and 2001, respectively, of which approximately $8,776,000, $3,872,000 and $5,147,000, respectively, was used to pay principal, interest and extension fees on the Purchase Money Notes. In addition, approximately $0, $0 and $598,000 for the 2002, 2001 and 2000 Fiscal Years, respectively, was paid as "additional" interest on the Purchase Money Notes. NOTE 8 - Related Party Transactions The costs incurred to related parties were as follows:

(a) After all other expenses of the Partnership are paid, an annual partnership management fee of up to .5% of invested assets is payable to the Partnership's General Partners and affiliates. Partnership management fees owed to the General Partners amounting to approximately $3,524,000 and $3,122,000 were accrued and unpaid as of March 25, 2003 and 2002, respectively. Without the General Partners' continued allowance of accrual without payment of certain fees and expense reimbursements, the Partnership will not be in a position to meet its obligations. The General Partners have continued allowing the accrual without payment of these amounts but are under no obligation to continue to do so. Proceeds received from future sales will be used to pay any outstanding amounts due to the General Partners. (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 124 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the Related General Partner performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnership's performance. Expense reimbursements and asset monitoring fees owed to the Related General Partner amounting to $37,858 and $95,092 were accrued and unpaid as of March 25, 2003 and 2002, respectively. (c) C/R Special Partnership, the special limited partner, owning a .01% interest, is entitled to receive a local administrative fee of up to $2,500 per year from each subsidiary partnership. NOTE 9 - Income Taxes A reconciliation of the financial statement net income to the income tax income for the Partnership and its subsidiaries is as follows:

NOTE 10 - Sale of Properties General ------- The Partnership is currently in the process of disposing of its investments. As of March 25, 2003, the Partnership had disposed of fifty-seven of its sixty-one original investments. Three additional investments are listed for sale and the Partnership anticipates that the remaining investment will be liquidated sometime during the first half of 2003. There can be no assurance as to whether or not the Partnership will achieve this goal. Furthermore, there can be no assurance that any proceeds will be realized based on the historical operating results of the Local Partnerships and the current economic conditions. Moreover, the Local General Partners and noteholders generally have decision-making rights with respect to the sale of each property which makes it more cumbersome for the General Partners to cause a sale of each property. 125 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed a new entity: Cambridge Advantaged Liquidating L.L.C. (the "Trust"), a Delaware limited liability company which is wholly-owned by the Partnership. On July 21, 1999, the Partnership contributed its limited partnership interest in Decatur Apartments, Ltd., Florence Apartments, Ltd., Saraland Apartments, Ltd., Dickens Ferry Apartments, Ltd., Bonnie Doone Apartments, Ltd., University Gardens Apartments, Ltd., and Southside Village Apartments, Ltd. to the Trust. In each case, the interests were contributed subject to each respective Purchase Money Note. The contribution did not involve any consideration being paid to the Partnership; therefore, there should not be any tax effect to the limited partners of the Partnership. As of March 25, 2003, all of these properties were sold or disposed. On March 28, 2003, the Partnership's interest in Saraland Apartments ("Saraland") was transferred to the U.S. Environmental Protection Agency pursuant to the First Amended Bankruptcy Plan by order of the United States Bankruptcy Court in Dallas, TX, resulting in a gain of approximately $350,000. No proceeds were used to pay off the Purchase Money Note and accrued interest, which had a total outstanding balance of approximately $2,124,000 resulting in additional gain of approximately $2,124,000 (see Note 11). On December 31, 2002, the Partnership's limited partnership interest in Summer Arms Apartments ("Summer Arms") was sold to the Purchase Money Note Holder for $25,000, resulting in gain of approximately $252,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,275,000, resulting in a gain on sale of approximately $3,275,000. On December 20, 2002, the property and related assets and liabilities of Pinewood Village ("Pinewood") were sold to an unaffiliated third party for $2,000,000, resulting in a gain of approximately $1,030,000. The Partnership used approximately $1,453,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,634,000, resulting in forgiveness of indebtedness income of approximately $180,000. On July 31, 2002, the Purchase Money Note Holder agreed to purchase the limited partnership interests in Cabarrus Arms Associates ("Cabarrus Arms") for an agreed upon price of $25,000. Such purchase is expected to be finalized sometime during 2003. No assurance can be given that the closing will actually occur. On July 31, 2002, the Purchase Money Note Holder agreed to purchase the limited partnership interests in Hathaway Court Associates ("Hathaway") for an agreed upon price of $50,000. Such purchase is expected to be finalized sometime during 2003. No assurance can be given that the closing will actually occur. On May 30, 2002, the property and the related assets and liabilities of Lexington Village ("Lexington") were sold to an affiliate of the Local General Partner for approximately $1,350,000, resulting in a gain of approximately $412,000. The Partnership used approximately $617,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,445,000, resulting in forgiveness of indebtedness income of approximately $2,828,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #1 were sold to the Local General Partner for approximately $1,750,000, resulting in a gain of approximately $158,000. The Partnership used approximately $1,277,000 of the proceeds to pay off the Purchase Money Note and 126 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 accrued interest thereon, which had an outstanding balance of approximately $2,645,000, resulting in forgiveness of indebtedness income of approximately $1,368,000. On May 9, 2002, the property and the related assets and liabilities of Huntley #2 were sold to the Local General Partner for approximately $1,750,000, resulting in a gain of approximately $379,000. The Partnership used approximately $1,194,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,725,000, resulting in forgiveness of indebtedness income of approximately $531,000. On April 30, 2002, the property and the related assets and liabilities of Shelton Beach Apartments ("Northpointe I") were sold to an unaffiliated third party for $2,333,333, resulting in a gain of approximately $598,000. The Partnership used approximately $1,124,000 of proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,239,000, resulting in forgiveness of indebtedness income of approximately $2,115,000. On April 30, 2002, the property and the related assets and liabilities of Northpointe II were sold to an unaffiliated third party for $1,666,667 resulting in a gain of approximately $394,000. The Partnership used approximately $570,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,119,000, resulting in forgiveness of indebtedness income of approximately $1,549,000. On February 15, 2002, the property and the related assets and liabilities of Robindale East Apartments ("Robindale") were sold to an unaffiliated third party for $735,000, resulting in a loss of approximately $527,000. No proceeds were used to settle the related Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $2,904,000, resulting in forgiveness of indebtedness income of such amount. The auditors for Robindale modified their report due to the uncertainty of this subsidiary partnership to continue in existence since the sole revenue producing asset was sold during the year. On February 14, 2002, the property and the related assets and liabilities of Nottingham Woods Apartments ("Nottingham") were sold to an unaffiliated third party for $1,900,000, resulting in a gain of approximately $806,000. The Partnership used approximately $249,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,251,000, resulting in forgiveness of indebtedness income. In Fiscal Year 2003, additional proceeds of approximately $298,000 were received, of which approximately $223,000 was paid on the Purchase Money Note, resulting in net forgiveness of indebtedness income of approximately $2,779,000. On December 4, 2001, the Partnership's Limited Partnership Interests in Greenwood Manor, Henslee Heights, Hereford Manor, Malvern Manor, and Southwest Apartments were sold to the Local General Partner effective January 1, 2002 for $11,988, $27,972, $11,988, $7,920, and $9,990, resulting in losses of approximately $264,000, $685,000, $329,000, $303,000, and $159,000, respectively. No proceeds were used to settle the related Purchase Money Notes and interest thereon which were assigned to the Local General Partner, resulting in gains on sale of properties of approximately $2,153,000, $2,692,000, $1,682,000, $1,769,000, and $1,480,000, respectively. On November 20, 2001, the property and related assets and liabilities of Vincennes NiBlack Apts. ("Autumn Ridge") were sold to a unaffiliated third party 127 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 for $2,500,000, resulting in a loss of approximately $262,000. No proceeds were used to settle the Purchase Money Note and accrued interest thereon, resulting in forgiveness of indebtedness income of approximately $3,567,000 for the Fiscal Year 2002. In Fiscal 2003, additional proceeds of approximately $1,500,000 were received and paid on the Purchase Money Note, resulting in a reversal of forgiveness of indebtedness income of such amount. On November 13, 2001, the property and related assets and liabilities of Seymour O'Brien Manor Apts. ("Seymour O'Brien") were sold to an unaffiliated third party for $920,000, resulting in a loss of approximately $126,000. No proceeds were used to settle the Purchase Money Note and accrued interest thereon, resulting in forgiveness of indebtedness income of approximately $1,842,000 for the Fiscal Year 2002. In Fiscal 2003, additional proceeds of approximately $792,000 were received and paid on the Purchase Money Note, resulting in a reversal of forgiveness of indebtedness income of such amount. On August 15, 2001 the Partnership's Limited Partnership Interest in Hackley Village ("Hackley") was assigned to the Local General Partner resulting in a loss of approximately $522,000. The Partnership paid approximately $9,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,816,000, resulting in gain on sale of property of such amount. On August 14, 2001 the Partnership's Limited Partnership Interest in University Gardens Apts. ("University") was sold to the Local General Partner for $5,000, resulting in a loss in the amount of $330,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,246,000, resulting in gain on sale of property of such amount. On August 14, 2001, the Partnership's Limited Partnership Interest in Southside Village Apts. ("Southside") was sold to the Local General Partner for $5,000, resulting in a loss in the amount of $218,000. The Partnership was released from the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,926,000, resulting in gain on sale of property of such amount. On July 20, 2001, the property and related assets and liabilities of Washington Highland Apts. ("Washington Highland") were sold to an unaffiliated third party purchaser for $800,000, resulting in a loss of approximately $482,000. The Partnership used approximately $238,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $1,905,000 resulting in forgiveness of indebtedness income of approximately $1,668,000. On June 27, 2001, the property and related assets and liabilities of Oakwood Manor ("Oakwood") were sold to an unaffiliated third party purchaser for $3,099,000, resulting in a loss of approximately $145,000. The Partnership used approximately $1,077,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $6,803,000 resulting in forgiveness of indebtedness income of approximately $5,726,000. On May 10, 2001, the property and related assets and liabilities of Ware Manor Associates ("Ware Manor") were sold to an unaffiliated third party for $1,364,500, resulting in a gain of approximately $389,000. The Partnership used approximately $472,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $1,846,000, resulting in forgiveness of indebtedness income of approximately $1,374,000. 128 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 On April 20, 2001, the property and related assets and liabilities of Northwoods III Apartments were sold to an unaffiliated third party for $3,316,000, resulting in a gain of approximately $1,266,000. The Partnership used approximately $791,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $1,756,000, resulting in forgiveness of indebtedness income of approximately $965,000. On April 11, 2001, the property and related assets and liabilities of Tall Pines ("Tall Pines") were sold to an unaffiliated third party for $2,145,000, resulting in a gain of approximately $751,000. The Partnership used approximately $1,015,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which had a total outstanding balance of $3,424,000, resulting in forgiveness of indebtedness income of approximately $2,409,000. On March 30, 2001 Nu-Elm Apartments ("Nu-Elm") entered into a purchase and sale agreement with an unaffiliated third party for a purchase price of $1,300,000. The contract has expired and the property was placed back on the market. On January 5, 2001, the property and the related assets and liabilities of West Scenic Apartments, Ltd. ("West Scenic") were sold back to the Purchase Money Note Holder for $1,188,000 resulting in a loss of approximately $973,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,839,000, resulting in forgiveness of indebtedness income during the 2001 Fiscal Year. On December 20, 2000, the property and related assets and liabilities of Cedarbay, Ltd. ("Cedarbay") were sold to an unaffiliated third party for $2,049,600, resulting in a gain of approximately $52,000. The Partnership used approximately $228,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,157,000, resulting in forgiveness of indebtedness income of approximately $2,943,000 inclusive of forgiveness of approximately $14,000 in accounts payable. On December 19, 2000, the property and related assets and liabilities of Conifer 208 ("Conifer") were sold to an unaffiliated third party for $1,750,000, resulting in a gain of approximately $846,000. The Partnership used approximately $1,231,000 of the proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,691,000, resulting in forgiveness of indebtedness income of approximately $460,000. On December 18, 2000, the Partnership's limited partnership interest in Solemar at South Dartmouth, L.P. ("Solemar") was sold to a third party for $501,000, resulting in a loss in the amount of $2,369,000. The Purchase Money Note was assumed by the Local Partnership. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $5,473,000, resulting in a gain on sale of property. On November 7, 2000, the property and related assets and liabilities of Cloisters Associates, Ltd. ("Sundown") were sold to an unaffiliated third party for $2,800,000, resulting in a gain of approximately $713,000. The Partnership used approximately $519,000 of the proceeds to pay off the Purchase Money Note and accrued interest thereon, which amounted to $4,825,000, resulting in forgiveness of indebtedness income of approximately $4,306,000. On July 14, 2000, the property and related assets and liabilities of Casa Ramon Apartments were sold to an unaffiliated third party for $4,500,000, resulting in a gain of approximately $2,999,000. The Partnership used approximately $3,062,000 of the proceeds to pay off the Purchase Money Note and accrued 129 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 interest thereon which had a total outstanding balance of approximately $3,172,000 resulting in forgiveness of indebtedness income of approximately $111,000. On June 30, 2000, the Partnership sold 1% of its interest in Bonnie Doone Apartments, Florence Apartments, Dickens Ferry Apartments and Decatur Apartments to the Purchase Money Note holder, in each case, for $100. Simultaneously, the Partnership assigned its remaining interest of 97.99% in each of such four Local Partnerships and the related Purchase Money Notes and interest thereon to the Purchase Money Note holder, resulting in gains of approximately $1,903,000, $2,373,000, $2,091,000 and $2,867,000, respectively. On March 31, 2000, the Partnership's limited partnership interest in Caroline Forest Apartments ("Caroline Forest") was sold to the Purchase Money Note holder for $90,000, resulting in a loss in the amount of approximately $338,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $1,736,000, resulting in forgiveness of indebtedness income. On March 7, 2000, the property and related assets and liabilities of Conifer 307 ("Fircrest") were sold to an unaffiliated third party for $2,500,000, resulting in a gain in the amount of approximately $1,457,000. Approximately $1,397,000 of the proceeds was used to pay off the Purchase Money Note. On January 6, 2000, the property and related assets and liabilities of Bellfort Apts. ("Bellfort") were sold to an unaffiliated third party for $175,100, resulting in a loss in the amount of approximately $4,445,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $11,511,000, operating deficit loans and advances of approximately $558,000 and various payables of $162,000 resulting in forgiveness of indebtedness income. NOTE 11 - Commitments and Contingencies a) Subsidiary Partnerships - Event of Default Saraland Apartments, Ltd. ------------------------- Saraland was designated as a superfund site by the Environmental Protection Agency ("EPA") in the mid-1990's after the EPA funded the cleanup of hazardous waste caused by the property's former owner, Redwing Carriers, Inc. (n/k/a Rentokil Initial Environmental Services, Inc. "Rentokil"). During the year ended December 31, 1996, the tenants of Saraland were moved to temporary housing to facilitate cleanup of the site. However, as of February 1997, the EPA, along with other agencies, concluded that the apartment residents should not return to the site, and the tenants were permanently relocated. The EPA has since concluded that the apartments will have to be demolished in order to accomplish the removal of contamination that has been found to exist underneath the buildings. The EPA filed suit and named Rentokil, Saraland and others as potentially responsible parties. Various other lawsuits have been filed on related issues. All parties involved in the EPA litigation entered into a Consent Decree which would dispose of all claims in that litigation. The Bankruptcy Court approved the Consent Decree on March 13, 2002. Saraland filed its voluntary petition for relief under Chapter 11 of Title 11, United States Code on March 21, 2001 and The First Amended Plan of Reorganization was filed on April 26, 2002. On July 23, 2002 the United States Bankruptcy Court for the Northern District of Texas 130 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 Dallas Division confirmed the plan of reorganization. Under the plan, effective March 28, 2003, the Partnership was released from all claims in the EPA litigation in exchange for a $100,000 cash payment to the EPA and for the transfer of its interest in the property, subject to the existing secured indebtedness, to Rentokil. The plan also requires that other unsecured claims be paid a pro rata distribution for allowed claims from a $20,000 fund to be contributed by the general partners of Saraland. b) Management Agreement The subsidiary partnerships have entered into management agreements of which some are with affiliates of the subsidiaries' general partners, which require annual fees ranging from approximately 6% to 10% of gross rental revenues. Such management fees amounted to $691,345, $889,446 and $1,395,709 for the 2002, 2001 and 2000 Fiscal Years, respectively. 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 25, 2003, uninsured cash and cash equivalents approximated $1,019,000. d) Housing Assistance Payments Contracts In September 1997, Congress enacted the Multi-Family Assisted Housing Reform and Affordability Act of 1997 ("MAHRA") which provides for the renewal of Section 8 Housing Assistance Payments Contracts ("Section 8 Contracts") to be based upon market rentals in instances where the existing Section 8 Contracts exceed current market rents. As a result, Section 8 Contracts that are renewed in the future in projects insured by the Federal Housing Administration ("FHA") may not provide sufficient cash flow to permit owners of properties to meet the debt service requirements of these existing FHA-insured mortgages. MAHRA also provides for the restructuring of these mortgage loans so that the annual debt service on the restructured loan (or loans) can be supported by Section 8 rents established at the market rents. The restructured loans will be held by the current lender or another lender. There can be no assurance that a property owner will be permitted to restructure its mortgage indebtedness pursuant to the new rules implementing MAHRA or that an owner, or the holder of the mortgage, would choose to restructure the mortgage if it were able to participate. MAHRA went into effect on September 11, 1998 when interim regulations implementing the program were published. It should be noted that there are many uncertainties as to the economic and tax impact on a property owner because of the combination of the reduced Section 8 contract rents and the restructuring of the existing FHA-insured mortgage loan under MAHRA. On October 21, 1998 President Clinton signed the Fiscal Year 1999 Departments of Veteran Affairs, Housing and Urban Development and Independent Agencies Appropriation Legislation into law. The bill provides, among other things, that owners of a property that was eligible for prepayment had to give notice of such prepayment to HUD tenants and to the chief executive of the state or local government for the jurisdiction in which the housing is located. The notice must be provided not less than 150 days, but not more than 270 days, before such payment. Moreover, the owner may not increase the rent charged to tenants for a period of 60 days following such prepayment. The bill also provides for tenant-based vouchers for eligible tenants (generally below 80% of area median income) at the true comparable market rents for unassisted units in order to protect current residents from substantial increases in rent. 131 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 25, 2003 On October 20, 1999, President Clinton signed FY 2000 VA, the HUD Independent Agencies Appropriations Act (the "Appropriations Act"). The Appropriations Act contains revisions to the HUD Mark-to-Market Program and other HUD programs concerning the preservation of the HUD housing stock. On December 29, 1999 HUD issued Notice H99-36 addressing "Project Based Section 8 Contracts Expiring in Fiscal Year 2000" reflecting the changes in the Appropriations Act and superceding earlier HUD Notices 98-34, 99-08, 99-15, 99-21 and 99-32. Notice 99-36 clarifies many of the earlier uncertainties with respect to the earlier HUD Section 8 Mark-to-Market Programs and continued the Mark-up-to-Market Program which allows owners with Section 8 contracts to increase the rents to market levels where contract rents are currently below market. e) Other The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. Due to the sale of properties, the portfolio is not diversified by the location of the properties around the United States. The Partnership has four remaining properties and therefore the Partnership may not be protected against a general downturn in the national economy. 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 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 full market rents when the rental assistance contracts expire. 132 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. Not applicable PART III Item 10. Directors and Executive Officers of the Registrant. The Partnership has no directors or executive officers. The Partnership's affairs are managed and controlled by the General Partners. Assisted Housing Associates, Inc. ("Assisted General Partner"), Related Beta Corporation ("Related General Partner") and Cambridge/Related Associates Limited Partnership ("Cambridge/Related") are all affiliates of Related. The general partner of Related is The Related Realty Group, Inc., of which Stephen M. Ross is president, director and a stockholder. The General Partners will manage and control the affairs of the Partnership directly and by engaging other affiliates of Related. The general partners of Cambridge/Related are the Assisted General Partner and The Related General Partner. The Assisted General Partner was incorporated in Delaware on June 25, 1985 and the Related General Partner was incorporated in Delaware on January 23, 1984. On November 25, 1997, an affiliate of the Related General Partner purchased 100% of the stock of the Assisted General Partner (the "Transfer"), then an affiliate of Lehman Brothers, Inc. The Assisted General Partner is also a partner of Cambridge/Related and, therefore, as a result of the Transfer, such affiliate also acquired the Assisted General Partner's general partner interest in Cambridge/Related and C/R Special Partnership, the special limited partner of the Partnership. In connection with the Transfer, the Partnership paid to the Assisted General Partner the accrued asset management fees owed to it in the aggregate amount of $1,334,116. In December 2002, Charter Municipal Mortgage Acceptance Company ("CharterMac"), which is also managed by an affiliate of Related Capital Company, announced a proposed acquisition of Related Capital Company, an affiliate of the General Partner. Pursuant to the proposed acquisition, CharterMac will acquire controlling interests in the general partners of the General Partners. This acquisition is not anticipated to affect the Partnership or its day-to-day operations as management of the General Partners will not change. Certain information concerning the directors and executive officers of the General Partners is set forth below. The directors and executive officers of the Related General Partner are as follows: Name Position ---- -------- Stephen M. Ross Director Alan P. Hirmes President Stuart J. Boesky Vice President Denise Kiley Vice President Marc D. Schnitzer Vice President Mark E. Carbone Vice President 133 Glenn F. Hopps Treasurer Teresa Wicelinski Secretary STEPHEN M. ROSS, 63, is the President, a Director and a shareholder of The Related Realty Group, Inc., the General Partner of The Related Companies, L.P. He graduated from the University of Michigan School of Business Administration with a Bachelor of Science degree and from Wayne State University School of Law with a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in taxation from New York University School of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York, where he worked for two large Wall Street investment banking firms in their real estate and corporate finance departments. Mr. Ross formed the predecessor of The Related Companies, L.P. ("TRCLP") in 1972 to develop, manage, finance and acquire subsidized and conventional apartment developments. Mr. Ross also serves on the Board of Trustees of Charter Municipal Mortgage Acceptance Company. ALAN P. HIRMES, 48, has been a Certified Public Accountant in New York since 1978. Prior to joining Related Capital Company ("Capital") in October 1983, Mr. Hirmes was employed by Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice President of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree. Mr. Hirmes also serves on the Board of Trustees of Charter Municipal Mortgage Acceptance Company and American Mortgage Acceptance Company. STUART J. BOESKY, 47, practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined Capital. From 1983 to 1984, Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow Richard & Rothstein (which subsequently merged with Strook & Strook & Lavan) and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He then received a Master of Laws degree in Taxation from Boston University School of Law. Mr. Boesky also serves on the Board of Trustees of, Charter Municipal Mortgage Acceptance Company and American Mortgage Acceptance Company. DENISE L. KILEY, 43, is responsible for overseeing the due diligence and asset management of all multifamily residential properties invested in RCC sponsored corporate, public and private equity and debt funds. Prior to joining Capital in 1990, Ms. Kiley had experience acquiring, financing and asset managing multifamily residential properties. From 1981 through 1985 she was an auditor with Price Waterhouse. Ms. Kiley holds a Bachelor of Science in Accounting from Boston College. MARC D. SCHNITZER, 42, joined Capital in January 1988 after receiving his Master of Business Administration degree from The Wharton School of The University of Pennsylvania in December 1987. From 1983 to 1986, Mr. Schnitzer was a Financial Analyst with The First Boston Corporation in New York, an international investment banking firm. Mr. Schnitzer received a Bachelor of Science degree, summa cum laude, in Business Administration, from the School of Management at Boston University in May 1983. MARK E. CARBONE, 46, rejoined Capital in 1998 where his primary responsibility has been disposition of real estate. From 1994 to 1998 he was President of WHC, Inc., a distressed asset real estate fund. From 1986 to 1994 he was President of Marigold Real Estate and Development, Inc., a real estate development company located in Greenwich, CT. From 1979 to 1986 he was a Vice President at Related Capital Company. He received a Bachelor of Arts in Government from Harvard University in 1979. 134 GLENN F. HOPPS, 40, joined Capital in December 1990, and prior to that date Mr. Hopps was employed by Marks Shron & Company and Weissbarth, Altman and Michaelson certified public accountants. Mr. Hopps graduated from New York State University at Albany with a Bachelor of Science Degree in Accounting. TERESA WICELINSKI, 37, joined Capital in June 1992, and prior to that date was employed by Friedman, Alpren & Green, certified public accountants. Ms. Wicelinski, graduated from Pace University with a Bachelor of Arts Degree in Accounting. The directors and executive officers of the Assisted General Partner are as follows: Name Position ---- -------- Michael Brenner Director Alan P. Hirmes President Stuart J. Boesky Executive Vice President Mark E. Carbone Vice President Denise L. Kiley Vice President Glenn F. Hopps Treasurer Teresa Wicelinski Secretary MICHAEL BRENNER, 57, is the Executive Vice President and Chief Financial Officer of TRCLP. Prior to joining TRCLP in 1996, Mr. Brenner was a partner with Cooper & Lybrand, having served as managing partner of its Industry Programs and Client Satisfaction initiatives from 1993-1996, managing partner of the Detroit group of offices from 1986-1993 and Chairman of its National Real Estate Industry Group from 1984-1986. Mr. Brenner graduated summa cum laude from the University of Detroit with a Bachelors degree in Business Administration and from the University of Michigan with a Masters of Business Administration, with distinction. Mr. Brenner also serves on the Board of Trustees of Charter Municipal Mortgage Acceptance Company. Biographical information with respect to Messrs, Hirmes, Boesky, Carbone, Ms. Kiley, Hopps and Ms. Wicelinski 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 General Partners for their services. However, under the terms of the Amended and Restated Agreement of Limited Partnership of the Partnership, 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. In addition, the General Partners collectively hold a 1% interest in all profits, losses and distributions attributable to operations and a subordinated 15% interest in such items attributable to sales and refinancings. See Note 8 to the Financial Statements in Item 8 above, which information is incorporated herein by reference thereto. Certain directors and officers of the General Partners receive compensation from the General Partner and their affiliates for services performed for various affiliated entities which may include services performed for the Partnership. 135 Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in this annual report. As noted above, the Partnership has no executive officers. The levels of compensation payable to the General Partners and/or their affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis. Item 12. Security Ownership of Certain Beneficial Owners and Management. The General Partners own all of the outstanding general partnership interests in the Partnership. The General Partners have a 1% interest in all profits, losses and distributions of the Partnership from operations and a subordinated 15% interest in such items from sale or refinancing proceeds. Except as aforesaid, no person is known to own beneficially in excess of 5% of the outstanding partnership interests. At March 25, 2003, security ownership by the General Partners and their affiliates is as listed:

No director or executive officer of any General Partner owns any Initial Limited Partnership Interests or Additional Limited Partnership Interests. Item 13. Certain Relationships and Related Transactions. The Partnership has and will continue to have certain relationships with the General Partners and their affiliates, as discussed below and in Item 11 above and also Note 8 to the Financial Statements in Item 8 above, which are incorporated herein by reference. However, there have been no direct financial transactions between the Partnership and the directors and officers of the General Partners. C/R Special Partnership is the special limited partner of each Local Partnership, with a .01% interest in profits, losses and distributions from such Local Partnerships. As set forth in Item 1, C/R Special Partnership has been admitted to the Local Partnerships for the purpose of monitoring the Local Partnerships and exercising certain rights under the Local Partnership Agreements on behalf of the Partnership. 136 Item 14. Controls and Procedures The Chief Executive Officer and Chief Financial Officer of Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, general partners of the Partnership) and Assisted Housing Associates Inc. (general partner of the Partnership), has evaluated the Partnership's disclosure controls and procedures relating to the Partnership's annual report on Form 10-K for the period ending March 15, 2003 as filed with the Securities and Exchange Commission and has judged such controls and procedures to be effective as of March 15, 2003 (the "Evaluation Date"). There have been no significant changes in the internal controls or in other factors that could significantly affect internal controls relating to the Partnership since the Evaluation Date. 137 PART IV Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. Sequential Page ---------- (a) 1. Financial Statements Independent Auditors' Report 27 Consolidated Balance Sheets at March 25, 2003 and 2002 112 Consolidated Statements of Income for the Years Ended March 25, 2003,2002 and 2001 113 Consolidated Statements of Changes in Partners' Deficit for the Years Ended March 25, 2003, 2002 and 2001 114 Consolidated Statements of Cash Flows for the Years Ended March 25, 2003, 2002 and 2001 115 Notes to Consolidated Financial Statements 118 (a)2. Financial Statement Schedules ----------------------------- Independent Auditors' Report 145 Schedule I - Condensed Financial Information of Registrant 146 Schedule III - Real Estate and Accumulated Depreciation 149 The remaining schedules are omitted because the required information is included in the financial statements and notes thereto, or they are not applicable or not required. (a)3. Exhibits -------- (3) Amended and Restated Agreement and Certificate of Limited Partnership as filed with the Secretary of State of the State of the Commonwealth of Massachusetts.** (10A) Form of Escrow Agreement** (21) Subsidiaries of the Registrant 139 99.1 Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. ** Incorporated by reference to exhibits filed with Amendment No.1 to Cambridge Advantaged Properties L.P.'s Registration Statement on Form S-11 Registration File No. 2-91993. (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter. 138 Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K. (Continued) (c) Subsidiaries of the Registrant (Exhibit 21) ------------------------------ Jurisdiction of Formation ------------- Nu-Elm Apartments MO Cabarrus Arms Associates, LTD GA Hathaway Court Associates KY Pebble Creek LDHA MI (d) Not applicable 139 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 below on its behalf by the undersigned, thereunto duly authorized. CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP (Registrant) By: RELATED BETA CORPORATION a General Partner Date: June 3, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President By: ASSISTED HOUSING ASSOCIATES, INC. a General Partner Date: June 3, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President By: CAMBRIDGE AND RELATED ASSOCIATES LIMITED PARTNERSHIP By: Related Beta Corporation Date: June 3, 2003 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes President 140 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. Signature Title Date -------------------- ---------------------------------------- ------------- /s/ Alan P. Hirmes President (chief executive and financial ------------------ officer) of Related Beta Corporation Alan P. Hirmes and Assisted Housing Associates, Inc. June 3, 2003 /s/ Glen F. Hopps Treasurer (chief accounting ----------------- officer) of Related Beta Corporation Glenn F. Hopps and Assisted Housing Associates, Inc. June 3, 2003 /s/ Stephen M. Ross ------------------- Director of Related Beta Corporation June 3, 2003 Stephen M. Ross 141 CERTIFICATION I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, General Partners of the Partnership) and Assisted Housing Associates, Inc. (general partner of the Partnership), hereby certify that: 1. I have reviewed this annual report on Form 10-K for the period ending March 25, 2003 of the Partnership; 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Partnership as of, and for, the periods presented in this annual report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15-d-14) for the Partnership and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the Partnership, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this annual report was being prepared; b) evaluated the effectiveness of the Partnership's disclosure controls and procedures as of March 25, 2003 (the "Evaluation Date"); and c) presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on my evaluation as of the Evaluation Date; 142 5. I have disclosed, based on our most recent evaluation, to the Partnership's auditors and to the board of directors of the General Partners: a) all significant deficiencies in the design or operation of internal controls which could adversely affect the Partnership's ability to record, process, summarize and report financial data and have identified for the Partnership's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Partnership's internal controls; and 6. I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer June 3, 2003 143 Exhibit 99.1 CERTIFICATION PURSUANT TO 18.U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Cambridge Advantaged Properties Limited Partnership (the "Partnership") on Form 10-K for the period ending March 25, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of Related Beta Corporation (general partner of each of the Partnership and Cambridge and Related Associates, general partner of the Partnership) and Assisted Housing Associates, Inc. (general partner of the Partnership), certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Partnership. By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes Chief Executive Officer and Chief Financial Officer June 3, 2003 144 INDEPENDENT AUDITORS' REPORT To the Partners of Cambridge Advantaged Properties Limited Partnership and Subsidiaries In connection with our audits of the consolidated financial statements of Cambridge Advantaged Properties Limited Partnership and Subsidiaries included in the Form 10-K as presented in our opinion dated June 5, 2003 on pages 28 and 29, and based on the reports of other auditors, we have also audited supporting Schedule I for the 2002, 2001 and 2000 Fiscal Years and Schedule III at March 25, 2003. In our opinion, and based on the reports of the other auditors (certain of which were modified due to the uncertainties of these subsidiary partnerships' abilities to continue in existence), 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 10, the Partnership is currently in the process of disposing of its investments. As of March 25, 2003, the Partnership has disposed of fifty-seven of its sixty-one original investments. Three additional investments are listed for sale and the remaining investment is expected to be liquidated during 2003. As discussed in Note 7, the principal of and all accrued interest on the Purchase Money Notes are due at final maturity. The remaining Purchase Money Notes are now extended, with maturity dates through June 2003 and the Partnership is attempting to refinance or sell the properties. It is uncertain as to whether the proceeds from such sales will be sufficient to meet the outstanding balances of the Purchase Money Notes and accrued interest thereon. The 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 May 28, 2003 145 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT Summarized condensed financial information of registrant (not including consolidated subsidiary partnerships) CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP CONDENSED BALANCE SHEETS

Investments in subsidiary partnerships are recorded in accordance with the equity method of accounting, wherein the investments are not reduced below zero. Accordingly, partners' deficit on the consolidated balance sheet will differ from partners' deficit shown above. 146 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP CONDENSED STATEMENTS OF INCOME

(*) Includes suspended prior year losses in excess of investment in accordance with equity method of accounting amounting to $1,119,403, $445,165 and $12,005,114 for the years ended March 25, 2003, 2002 and 2001. 147 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP CONDENSED STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents

148 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 25, 2003

149 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 25, 2003 (continued)

(a) No carrying costs have been capitalized since all properties were acquired after completion of construction. (b) Furniture and fixtures, included in buildings and improvements, are depreciated primarily by the straight-line method over the estimated useful lives ranging from 5 to 15 years. (c) 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 at date of acquisition. (d) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1997. See Note 10 in Item 8, Financial Statements and Supplementary Data. (e) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1998. See Note 10 in Item 8, Financial Statements and Supplementary Data. (f) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 1998. See Note 10 in Item 8, Financial Statements and Supplementary Data. (g) During the fiscal year ended March 25, 1998, the Local Partnership's property was declared unsafe to live due to amounts of Benzene and Aldrene found to be present in the air of some apartments. See Note 11 in Item 8, Financial Statements and Supplementary Data. (h) The property and the related assets and liabilities were sold during the fiscal year ended March 25, 1999. See Note 10 in Item 8, Financial Statements and Supplementary Data. (i) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 1999. See Note 10 in Item 8, Financial Statements and Supplementary Data. (j) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2000. See Note 10 in Item 8, Financial Statements and Supplementary Data. (k) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 2000. See Note 10 in Item 8, Financial Statements and Supplementary Data. (l) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2001. (m) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended March 25, 2001. (n) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2002. (o) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2002. (p) The Property and the related assets and liabilities were sold during the fiscal year ended March 25, 2003. (q) The Partnership's Local Partnership Interest in these Local Partnerships were sold during the fiscal year ended March 25, 2003. Geographic Locations: (1) Alabama, (2) Arkansas, (3) California, (4) Colorado, (5) Georgia, (6) Florida, (7) Indiana, (8) Kentucky, (9) Massachusetts, (10) Michigan, (11) Missouri, (12) North Carolina, (13) Oregon, (14) South Carolina, (15) Texas, (16) Virginia, (17) Washington.

150 CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral MARCH 25, 2003 (continued) At the time the local partnerships were acquired by Cambridge Advantaged Properties Limited Partnership, the entire purchase price paid by Cambridge Advantaged Properties 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.

CAMBRIDGE ADVANTAGED PROPERTIES LIMITED PARTNERSHIP 10-K