10-Q 1 a2061266z10-q.txt 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR ---- 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 25, 2001 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ---- Commission File Number 0-14941 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP --------------------------------- (Exact name of registrant as specified in its charter) Delaware 13-3330195 --------------------------------- -------------------- (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 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 ____ PART I - FINANCIAL INFORMATION Item 1. Financial Statements

CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) ================= ================= ~~JUNE~~SEPTEMBER 25, MARCH 25, 2001 2001 ----------------- ----------------- ASSETS Property and equipment held for sale - net of accumulated depreciation of $3111,~~864~~045,~~508~~433 and $31,899,194, respectively $3811,~~424~~464,~~278~~722 $38,338,237 Cash and cash equivalents 24,~~438~~097,~~836~~170 2,068,675 Cash - restricted for tenants' security deposits ~~332~~105,~~507~~300 290,573 Mortgage escrow deposits 1711,~~368,429~~503 1,300,124 Deferred costs, net of accumulated amortization of $~~354~~117,~~657~~610 and $907,014, respectively ~~810~~495,~~065~~082 823,935 Prepaid expenses and other assets ~~807~~770,~~991~~956 816,453 ----------- ----------- Total assets $4417,~~182~~644,~~106~~733 $43,637,997 =========== =========== 2 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (continued) ================= ================= SEPTEMBER 25, MARCH 25, 2001 2001 ----------------- ----------------- LIABILITIES AND PARTNERS' DEFICIT Liabilities Mortgage notes payable $16,678,458 $50,396,675 Accounts payable, accrued expenses and other liabilities 254,134 3,682,893 Tenants' security deposits payable 105,300 290,573 Due to general partners of subsidiaries and their affiliates 440,585 527,589 Due to general partners and affiliates 4,697,736 4,648,852 ----------- ----------- Total liabilities 22,176,213 59,546,582 ----------- ----------- Minority interest 1,586,295 3,771,395 ----------- ----------- Commitments and contingencies (Note 4) Partners' deficit: Limited partners (5,739,050) (19,165,633) General partners (378,725) (514,347) ----------- ----------- Total partners' deficit (6,117,775) (19,679,980) ----------- ----------- Total liabilities and partners' deficit $17,644,733 $43,637,997 =========== ===========

See Accompanying Notes to Consolidated Financial Statements. 3 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Operations (Unaudited)

=========================== =========================== ~~JUNE~~THREE MONTHS ENDED SIX MONTHS ENDED SEPTEMBER 25, ~~MARCH~~SEPTEMBER 25, 2001 2000 2001 2000 --------------------------- --------------------------- ~~LIABILITIES~~Revenues ~~AND~~Rentals, ~~PARTNERS'~~net ~~DEFICIT~~$ ~~Liabilities~~2,155,690 ~~Mortgage~~$ ~~notes~~3,400,537 ~~payable~~ $50 4,~~300~~807,~~179~~734 $50 6,~~396~~933,~~675~~239 ~~Accounts~~Other ~~payable~~166,421 ~~accrued~~208,166 ~~expenses~~278,322 ~~and~~339,073 ~~other~~Gain ~~liabilities~~on 4sale of property (Note 3) 17,~~342~~205,~~967~~619 0 17,140,604 2,951,106 ------------ ------------ ------------ ------------ Total revenues 19,527,730 3,~~682~~608,~~893~~703 ~~Tenants'~~22,226,660 ~~security~~10,223,418 ~~deposits~~------------ ~~payable~~------------ ~~332~~------------ ------------ Expenses Administrative and management 494,~~507~~105 ~~290~~717,~~573~~089 ~~Due~~1,033,871 to1,475,108 ~~general~~Administrative ~~partners~~and ofmanagement- ~~subsidiaries~~related parties (Note 2) 226,208 231,099 465,585 489,366 Operating 113,845 178,659 285,100 407,461 Repairs and ~~their~~maintenance ~~affiliates~~529,501 ~~527~~679,~~589~~999 ~~527~~958,~~589~~358 ~~Due~~1,094,129 toTaxes ~~general~~and ~~partners~~insurance 172,011 324,862 427,529 678,127 Interest 765,124 1,354,452 1,718,251 2,770,279 Depreciation and ~~affiliates~~amortization 4230,~~607~~178 516,~~652~~198 4249,~~648~~048 1,~~852~~029,410 ------------ ------------ ~~Total liabilities 60,110,894 59,546,582~~ ------------ ------------ ~~Minority~~Total ~~interest~~expenses 32,~~657~~530,~~870~~972 34,~~771~~002,~~395~~358 5,137,742 7,943,880 ------------ ------------ ~~Commitments~~------------ ~~and~~------------ ~~contingencies~~Income (~~Note 4~~loss) ~~Partners'~~before ~~deficit:~~minority ~~Limited~~interest ~~partners~~16,996,758 (19393,~~073~~655) 17,~~245~~088,918 2,279,538 Minority interest in (income) loss of subsidiaries (193,~~165~~527,~~633~~875) ~~General~~4,284 ~~partners~~ (~~513~~3,~~413~~526,713) (~~514~~8,~~347~~481) ------------ ------------ ~~Total partners' deficit (19,586,658) (19,679,980)~~ ------------ ------------ ~~Total~~Net ~~liabilities~~income ~~and~~(loss) ~~partners'~~$13,468,883 ~~deficit~~$ (389,371) $4413,~~182~~562,~~106~~205 $43 2,~~637~~271,~~997~~057 ============ ============== =========== ============

See Accompanying Notes to Consolidated Financial Statements. 4 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statement of Changes in Partners' Deficit (Unaudited)

================================================= ~~THREE~~LIMITED ~~MONTHS~~GENERAL ~~ENDED~~TOTAL ~~JUNE~~PARTNERS ~~25,~~PARTNERS ------------------------- ~~2001 2000~~ ------------------------ Balance- ~~Revenues~~March ~~Rentals~~26, ~~net~~2001 $2(19,~~652~~679,~~044~~980) $3(19,~~532~~165,~~702 Other 111,901 130,907 (Loss~~633) ~~gain on sale of property~~ $(~~Note 3) (65~~514,~~015~~347) ~~2,951,106~~Net ~~----------~~income -~~---------~~ ~~Total~~six ~~revenues~~months ~~2,698,930~~ended ~~6,614,715~~September ~~---------- ---------- Expenses Administrative and management 539~~25,~~766~~ ~~758,019~~2001 ~~Administrative and management- related parties (Note 2) 239~~13,~~377 258~~562,~~267~~205 ~~Operating 171~~13,~~255 228~~426,~~802~~583 ~~Repairs and maintenance 428~~135,~~857~~622 ~~414,130 Taxes and insurance 255,518 353,265 Interest 953,127 1,415,827 Depreciation and amortization 18,870 513,212~~ ---------- --- ------- ~~Total expenses 2,606,770 3,941,522~~ ------~~----~~ --------- Balance- ~~Income~~September ~~before minority interest 92~~25,~~160~~ ~~2,673,193~~2001 ~~Minority~~$ ~~interest in loss~~ (~~income) of subsidiaries 1~~6,~~162 (12~~117,~~765~~775) ~~---------- ---------- Net income~~ $ 93(5,~~322~~739,050) $2(378,~~660,428~~725) ============= ============= =========

See Accompanying Notes to Consolidated Financial Statements. 5 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows (Decrease) Increase in Cash and Cash Equivalents (Unaudited)

==============================~~=====================~~ ~~LIMITED~~SIX ~~GENERAL~~MONTHS ~~TOTAL~~ENDED ~~PARTNERS~~SEPTEMBER ~~PARTNERS~~25, ------------------------------ 2001 2000 ------------------------------ ~~Balance~~Cash flows from operating activities: Net income $ 13,562,205 $ 2,271,057 ------------ ~~March~~------------- Adjustments to reconcile net income to net cash provided by (used in) operating activities: Gain on sale of property (17,140,604) (2,951,106) Depreciation and amortization 249,048 1,029,410 Minority interest in income of subsidiaries 3,526,713 8,481 (Increase) decrease in cash-restricted for tenants' security deposits (101,054) 26,173 ~~2001~~Increase $in mortgage escrow deposits (19106,~~679~~997) (328,~~980~~467) $Increase in prepaid expenses and other assets (19,~~165~~904) (706,~~633~~374) $Increase in accounts payable, accrued expenses and other liabilities 456,860 1,595,597 Increase (~~514~~decrease) in tenants' security deposits payable 15,~~347~~899 (4,728) ~~Net~~Decrease ~~income~~in -due ~~three~~to ~~months~~general ~~ended~~partners ~~June~~of ~~25,~~subsidiaries ~~2001~~and 93their affiliates (73,~~322~~581) 92(34,~~388~~952) ~~934~~Increase (decrease) in due to general partners and affiliates 48,259 (1,493,999) ------------ ------------- Total adjustments (13,145,361) (2,859,965) ------------ ~~Balance~~------------- ~~June~~Net ~~25,~~cash ~~2001~~provided ~~$(19,586,658)~~by $(~~19,073,245~~used in) $operating activities 416,844 (~~513~~588,~~413~~908) ~~============~~------------ ~~============ ============~~-------------

6 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows (Decrease) Increase in Cash and Cash Equivalents (Unaudited) (continued)

~~============================ THREE MONTHS ENDED JUNE 25,~~ ------------------------------- ~~2001~~SIX ~~2000~~MONTHS ENDED SEPTEMBER 25, ------------------------------- ~~Cash~~2001 ~~flows~~2000 ~~from operating activities: Net income $ 93,322 $ 2,660,428~~ ---------- --------------------- ~~Adjustments~~Cash toflows ~~reconcile~~from ~~net~~investing ~~income to net cash provided by (used in) operating~~ activities: ~~Loss~~Net ~~(gain)~~proceeds onfrom the sale of ~~properties~~property 6533,~~015 (2~~479,~~951,106)~~297 ~~Depreciation and amortization 18~~1,~~870 513~~638,~~212~~742 ~~Minority~~Decrease ~~interest in~~ (~~loss~~increase) ~~income~~in ofmortgage ~~subsidiaries~~escrow ~~(1,162)~~deposits ~~12,765 (Increase) decrease in cash~~-~~restricted~~ ~~for~~replacement ~~tenants'~~reserves ~~security~~44,734 ~~deposits~~ (4163,~~934~~816) ~~25,043~~Acquisition ~~Increase~~of inproperty ~~mortgage~~and ~~escrow~~equipment ~~deposits~~ (6330,~~357~~387) (~~139~~69,~~863~~958) ~~Increase~~------------- in------------- ~~prepaid~~Net ~~expenses~~cash ~~and~~provided ~~other~~by ~~assets~~investing ~~(56,553)~~activities ~~(24~~33,~~690)~~493,644 ~~Increase in accounts payable~~1,504,968 ~~accrued~~------------- ~~expenses~~------------- ~~and~~Cash ~~other~~flows ~~liabilities~~from ~~697,490~~financing ~~213,091~~activities: ~~Increase~~Principal ~~(decrease)~~payments inof ~~tenants'~~mortgage ~~security~~notes ~~deposits~~ payable 41(26,~~934~~170,180) (3456,~~598~~412) Decrease in ~~due~~capitalization toof ~~general~~consolidated ~~partners~~subsidiaries ~~and~~attributable ~~affiliates~~to minority interest (415,~~200~~711,813) (1198,~~600,453~~010) ------------- ------------- ~~Total~~Net ~~adjustments~~cash ~~619,103~~used in financing activities (331,~~955~~881,~~599~~993) (654,422) ------------- ------------- Net increase in cash ~~provided~~and bycash ~~(used~~equivalents ~~in)~~2,028,495 ~~operating~~261,638 ~~activities~~Cash ~~712~~and cash equivalents- beginning of period 2,~~425~~068,675 (1,~~295~~504,~~171)~~490 ------------- ------------- Cash and cash equivalents- end of period $ 4,097,170 $ 1,766,128 ============= =============

7 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Consolidated Statements of Cash Flows (Decrease) Increase in Cash and Cash Equivalents (Unaudited) (continued)

~~============================~~------------------------------- ~~THREE~~SIX MONTHS ENDED ~~JUNE~~SEPTEMBER 25, ------------------------------- 2001 2000 ------------------------------- ~~Cash~~Supplemental ~~flows~~disclosure ~~from~~of ~~investing~~non cash activities: ~~Net~~Summarized ~~proceeds~~below ~~from~~are the ~~sale~~components of ~~property~~the 0gain ~~1,638,742~~on ~~Increase~~sale inof ~~mortgage~~property: ~~reserve~~Decrease ~~deposits~~in ~~(4,948) (1,728) Acquisitions of~~ property and equipment ~~(123~~,~~457)~~ ~~(793)~~net ~~----------~~of ~~-----------~~accumulated ~~Net~~depreciation ~~cash~~$26,903,902 ~~(used~~$4,006,580 Decrease in) ~~provided~~tenants bysecurity ~~investing~~deposits ~~activities (128~~286,~~405)~~327 ~~1,636,221~~0 ~~----------~~Decrease ~~-----------~~in ~~Cash~~mortgage ~~flows~~escrow ~~from~~deposits ~~financing~~650,884 ~~activities:~~98,245 ~~Principal~~Decrease ~~payments~~in ofdeferred ~~mortgage~~costs ~~notes payable (96~~79,~~496)~~805 ~~(336~~51,~~320)~~469 Decrease in ~~capitalization~~accounts ofpayable, ~~consolidated~~accrued ~~subsidiaries~~expenses ~~attributable~~and toother ~~minority~~liabilities ~~interest~~ (~~112~~3,~~363~~885,619) (~~107~~84,~~505~~805) ~~Increase~~Decrease in ~~deferred~~prepaid ~~costs~~expenses ~~(5,000)~~and 0other ~~----------~~assets ~~-----------~~65,401 ~~Net~~16,271 ~~cash~~Decrease ~~used~~ in ~~financing~~tenants' ~~activities~~security deposits payable (~~213~~201,~~859~~172) (~~443~~21,~~825~~445) ~~----------~~Decrease ~~----------- Net increase (decrease)~~ in ~~cash~~mortgage ~~and~~notes ~~cash~~payable ~~equivalents 370~~(7,~~161~~548,037) (~~102~~5,~~775~~378,679) ~~Cash~~Increase ~~and~~in ~~cash~~due ~~equivalents-~~to ~~beginning~~general ofpartners ~~period~~and ~~2,068,675~~affiliates ~~1,504,490~~625 ~~----------~~0 ~~-----------~~Decrease ~~Cash~~in ~~and~~due ~~cash~~to ~~equivalents-~~general ~~end~~partners of ~~period~~subsidiaries ~~$2,438,836~~and ~~$1,401,715~~their ~~==========~~affiliates ~~===========~~(13,423) 0

See Accompanying Notes to Consolidated Financial Statements. 8 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) Note 1 - General The consolidated financial statements for the six months ended September 25, 2001 and 2000, include the accounts of Cambridge Advantaged Properties II Limited Partnership (the "Partnership") and five and eight subsidiary partnerships, respectively ("subsidiaries", "subsidiary partnerships" or "Local Partnerships"). The Partnership is a limited partner, with an ownership interest of 98% in each of the subsidiary partnerships. Through the rights of the Partnership and/or one of its general partners (a "General Partner"), which General Partner has a contractual obligation to act on behalf of the Partnership, to remove the general partner of the subsidiary partnerships (the "Local General Partners") and to approve certain major operating and financial decisions, the Partnership has a controlling financial interest in the subsidiary partnerships. For financial reporting purposes, the Partnership's fiscal quarter ends September 25. All subsidiaries have fiscal quarters ending June 30. Accounts of the subsidiary partnerships have been adjusted for intercompany transactions from July 1 through September 25. The Partnership's fiscal quarter ends on September 25 in order to allow adequate time for the subsidiaries' financial statements to be prepared and consolidated. The books and records of the Partnership are maintained on the accrual basis of accounting, in accordance with 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. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. Losses attributable to minority interests which exceed the minority interests' investment in a subsidiary have been charged to the Partnership. Such losses aggregated approximately $3,565,000 and $1,000 and $3,565,000 and $1,000 for the three and six months ended September 25, 2001 and 2000, respectively. In 9 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) consolidation, all subsidiary partnership losses are included in the Partnership's capital account except for losses allocated to minority interest capital. The unaudited financial statements have been prepared on the same basis as the audited financial statements included in the Partnership's Form 10-K for the year ended March 25, 2001. In the opinion of the General Partners, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly the financial position of the Partnership as of September 25, 2001, the results of operations for the three and six months ended September 25, 2001 and 2000 and cash flows for the six months ended September 25, 2001 and 2000, respectively. However, the operating results for the six months ended September 25, 2001 may not be indicative of the results for the year. Certain information and note disclosures normally included in financial statements prepared in accordance with GAAP have been omitted. It is suggested that these consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in the Partnership's March 25, 2001 Annual Report on Form 10-K. Note 2 - Related Party Transactions One of the General Partners of the Partnership, Related and Cambridge Associates Limited Partnership ("Related and Cambridge Associates"), has a 1% interest as a special limited partner in each of the subsidiary partnerships. 10 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) Fees incurred to related parties for the three and six months ended September 25, 2001 and 2000 were as follows:

~~============================~~ THREE MONTHS ENDED ~~JUNE~~SIX MONTHS ENDED SEPTEMBER 25, SEPTEMBER 25, ----------------------- ----------------------- 2001 2000 2001 2000 ----------------------- ----------------------- ~~Supplemental~~Partnership ~~disclosure of non cash investing and financing activities: Write~~manage-~~off~~ ofment ~~fully~~fees ~~amortized~~(a) ~~deferred~~$ ~~costs~~93,750 $ ~~571~~86,~~227~~750 $187,500 0$215,500 ~~Reclassification~~Expense ofreimburse- ~~property~~ment ~~and~~(b) ~~equipment~~37,680 to35,331 ~~accounts~~56,470 ~~payable 37~~57,~~416~~415 0Property ~~Summarized~~manage- ~~below~~ment ~~are~~fees ~~the~~incurred ~~components~~to affiliates of the ~~gain~~General onPartners ~~sale~~(c) of25,623 ~~property:~~43,274 ~~Decrease~~83,903 ~~in property and equipment~~84,544 ~~net~~Local ofadministra- ~~accumulated~~tive ~~depreciation~~fee 0(d) 31,~~989~~250 2,~~796~~000 ~~Decrease~~2,500 in4,000 ~~mortgage~~-------- ~~escrow~~-------- ~~deposits~~-------- 0-------- ~~98,245~~Total ~~Decrease~~general inand ~~deferred~~administrative- ~~costs~~General 0Partners 51158,~~469~~303 ~~Decrease~~167,355 in330,373 ~~prepaid~~361,459 ~~expenses~~-------- ~~and~~-------- ~~other~~-------- ~~assets~~-------- ~~64,390~~Property ~~16,271~~manage- ~~Decrease~~ment infees ~~tenants'~~incurred ~~security~~to ~~deposits~~affiliates ~~payable~~of 0the ~~(21,445)~~subsidiary ~~Decrease~~partnerships' ingeneral ~~mortgage~~partners ~~notes~~(c) ~~payable~~67,905 063,744 (5135,~~378~~212 127,~~679)~~907 ~~Decrease~~-------- in-------- ~~due~~-------- to-------- Total general ~~partners~~ and ~~affiliates~~administrative- ~~(625)~~related ~~(68~~parties $226,~~018)~~208 $231,099 $465,585 $489,366 ======== ======== ======== ========

(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 have been charged to operations and are included in administrative and management-related parties expenses. Partnership management fees owed to the General Partners amounting to approximately $3,629,000 and $3,466,000 were accrued and unpaid as of September 25, 2001 and March 25, 2001, respectively. Without the General Partners' continued accrual without payment of certain fees and expense reimbursements, the Partnership will not be in the position to meet its obligations. The General Partners have continued allowing the accrual without payment of these amounts, but are under no obligation to do so. 11 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) (b) An affiliate of Related Advantaged Residential Associates, Inc. (the "Related General Partner") performs services for the Partnership which include, but are not limited to: accounting and financing management, registrar, transfer and assignment functions, asset management, investor communications, printing and other administrative services. The amount of reimbursement from the 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 partnerships' performance. Expense reimbursements and asset monitoring fees owed to the Related General Partner amounting to approximately $44,000 and $134,000 were accrued and unpaid as of September 25, 2001 and March 25, 2001, respectively. (c) Property management fees paid by subsidiary partnerships amounted to $104,904 and $166,984 and $247,726 and $344,510 for the three and six months ended September 25, 2001 and 2000, respectively. Of these fees $93,528 and $107,018 and $219,115 and $212,451 were incurred to affiliates of the Local General Partners. Of such amounts incurred to affiliates of the Local General Partners, $25,623 and $43,274 and $83,903 and $84,544 were also incurred to affiliates of the General Partners. (d) Related and Cambridge Associates, a limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $2,500 per year from each subsidiary partnership. Note 3 - Sale of Properties GENERAL The Partnership is currently in the process of winding up its operations and disposing of its investments. As of September 25, 2001, the Partnership has disposed of ten of its twelve original investments. The final two investments are listed for sale and the General Partners anticipate that these remaining investments will be disposed of by December 31, 2001. There can be no assurance as to when the Partnership will dispose of its last remaining investments or the amount of proceeds which may be received. However, based on the historical operating results of the Local 12 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) Partnership and the current economic conditions including changes in tax laws, it is unlikely that the proceeds from such sales will be sufficient to return the limited partners original investment. INFORMATION REGARDING DISPOSITION SHERIDAN SQUARE ASSOCIATES OF LAWTON ("SHERIDAN") On May 31, 2001, the Partnership assigned its limited partnership interest in Sheridan to an unaffiliated third party purchaser for $10, resulting in a gain of approximately $5,502,000. TRIANGLE/OAKS LIMITED PARTNERSHIP ("TRIANGLE/OAKS") On May 23, 2001, the property and the related assets and liabilities of Triangle/Oaks were sold to an unaffiliated third party purchaser for a price of $20,476,000, resulting in a gain of approximately $5,626,000. The Local Partnership has filed a claim with their insurance company for $4,300,000 with respect to termite damage. The claim was rejected by the insurance company and a counter claim was filed. The Local Partnership intends to vigorously pursue their claim against the insurance company. No assurance can be given that the claim will be settled favorably. SUNCREEK - 268 LTD. ("SUNCREEK") On June 29, 2001, the property and related assets and liabilities of Suncreek were sold to an unaffiliated third party purchaser for a price of $13,669,000, resulting in a gain of approximately $6,062,000. THE HARBOURS ASSOCIATES ("HARBOURS") On August 6, 2001, Harbours entered into a purchase and sale agreement to sell the property and the related assets and liabilities to an unaffiliated third party purchaser for a price of $19,100,000. The closing is expected to occur in November 2001. No assurances can be given that the sale will actually occur. 13 CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP AND SUBSIDIARIES Notes to Consolidated Financial Statements September 25, 2001 (Unaudited) WESTWIND II ASSOCIATES ("WESTWIND") On August 6, 2001, the Partnership entered into a purchase and sale agreement to sell the limited partnership interest to the Local General Partner for a price of $1,378,808. The closing is expected to occur in November 2001. No assurances can be given that the closing will actually occur. Note 4 - Commitments and Contingencies Except as described in Note 3, there were no material changes and/or additions to disclosures regarding the subsidiary partnerships which were included in the Partnership's Annual Report on Form 10-K for the period ended March 25, 2001. 14 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations LIQUIDITY AND CAPITAL RESOURCES The Partnership's primary sources of funds are the cash distributions from operations and cash distributions from sales of the Local Partnerships in which the Partnership has invested. These sources are available to meet the obligations of the Partnership. Cash distributions received from the Local Partnerships to date have been sufficient to meet all current operating expenses other than the payment of fees to the General Partners. During the six months ended September 25, 2001 and 2000, such distributions amounted to approximately $1,784,000 and $2,055,000, respectively. However, the Related General Partner advanced funds in prior years to meet the Partnership's third party obligations with remaining unpaid balances due to the Related General Partner totaling approximately $1,020,000 and $1,015,000 at September 25, 2001 and March 25, 2001, respectively. In addition, certain fees and expense reimbursements owed to the General Partners amounting to approximately $3,673,000 and $3,600,000 were accrued and unpaid as of September 25, 2001 and March 25, 2001, respectively. Without the General Partners' continued accrual without payment of certain fees and expense reimbursements, the Partnership will not be in the position to meet its obligations. The General Partners have continued allowing the accrual without payment of these amounts but they are under no obligation to do so. During the six months ended September 25, 2001, cash and cash equivalents of the Partnership and its consolidated Local Partnerships increased approximately $2,028,000. This increase was attributable to the net proceeds from the sale of properties ($33,479,000), cash flow provided by operating activities ($417,000) and a decrease in mortgage reserve deposits ($45,000) which exceeded a decrease in capitalization of consolidated subsidiaries attributable to minority interest ($5,712,000), principal payments of mortgage notes payable ($26,170,000) and acquisition of property and equipment ($30,000). Included in the adjustments to reconcile the net income to cash flow provided by operating activities is gain on sale of properties ($17,141,000) and amortization ($249,000). For a discussion of contingencies affecting certain Local Partnerships, see Note 4 to the financial statements. 15 Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed, that will or are likely to impact liquidity in a material way. Management believes the only impact would be from laws that have not yet been adopted. Due to the sale of properties, the portfolio is not diversified by the location of the properties around the United States. The Partnership has two properties remaining located in one state and therefore the Partnership may not be protected against a general downturn in the national economy. RESULTS OF OPERATIONS The results of operations of the Partnership, as well as the Local Partnerships, remained fairly consistent during the three and six months ended September 25, 2001 and 2000, excluding AppleCreek, Woodridge, Triangle/Oaks and Suncreek which sold their respective properties and the related assets and liabilities and Sheridan in which the Partnership sold its limited partnership interest (collectively the "Sold Assets"). Rental income decreased approximately 37% and 31% for the three and six months ended September 25, 2001 as compared to 2000. Excluding the Sold Assets, rental income increased approximately 5% and 4% for the three and six months ended September 25, 2001 as compared to 2000, primarily due to rental rate increases. Other income decreased approximately $42,000 and increased approximately $61,000 for the three and six months ended September 25, 2001 as compared to 2000. Excluding the sold assets, other income increased approximately $17,000 and $35,000, primarily due to higher cash and cash equivalent balances at the Partnership level earning interest. Total expenses, excluding the operations for the Sold Assets and the categories of operating and repairs and maintenance remained fairly consistent with increases of approximately 4% and less than 1% for the three and six months ended September 25, 2001 as compared to 2000. Operating expense decreased approximately $65,000 and $122,000 for the three and six months ended September 25, 2001 as compared to 2000. Excluding the Sold Assets, operating expenses increased approximately $2,000 and $21,000, due to a increase in water and gas usage at one Local Partnership. 16 Repairs and maintenance decreased approximately $150,000 and $136,000 for the three and six months ended September 25, 2001 as compared to 2000. Excluding the Sold Assets, repairs and maintenance decreased approximately $56,000 and $77,000, primarily due to repairs on building exteriors, concrete work, common area painting and rehabilitation of neglected units at one Local Partnership in 2000. Administration and management, taxes and insurance and interest decreased approximately ($224,000) and ($441,000), ($153,000) and ($251,000), ($589,000) and ($1,052,000), respectively, for the three and six months ended September 25, 2001 as compared to 2000, primarily due to decreases relating to the Sold Assets. Excluding the Sold Assets, administration and management, taxes and insurance and interest increased (decreased) approximately $21,000 and $32,000, $3,000 and $8,000, ($6,000) and ($11,000), respectively. Depreciation and amortization decreased approximately $286,000 and $780,000 for the three and six months ended September 25, 2001 as compared to 2000 primarily due to the sale of properties and all the remaining properties being classified as assets held for sale and not being depreciated anymore. Item 3. Quantitative and Qualitative Disclosures about Market Risk None 17 PART II - OTHER INFORMATION Item 1. Legal Proceedings - None Item 2. Changes in Securities and Use of Proceeds - None Item 3. Defaults Upon Senior Securities - None Item 4. Submission of Matters to a Vote of Security Holders - None Item 5. Other information - None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 27 Financial Data Schedule (filed herewith). (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter. 18 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CAMBRIDGE ADVANTAGED PROPERTIES II LIMITED PARTNERSHIP (Registrant) By: RELATED ADVANTAGED RESIDENTIAL ASSOCIATES, INC., a General Partner Date: October 16, 2001 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, President (principal executive and financial officer) Date: October 16, 2001 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer) By: RELATED AND CAMBRIDGE ASSOCIATES, LIMITED PARTNERSHIP, a General Partner By: Related Advantaged Residential Associates, Inc., its General Partner Date: October 16, 2001 By: /s/ Alan P. Hirmes ------------------ Alan P. Hirmes, Senior Vice President (principal executive and financial officer) Date: October 16, 2001 By: /s/ Glenn F. Hopps ------------------ Glenn F. Hopps, Treasurer (principal accounting officer)

======================== THREE MONTHS ENDED JUNE 25, ------------------------ 2001 2000 ------------------------ Partnership management fees (a) $ 93,750 $128,750 Expense reimbursement (b) 18,790 22,084 Property management fees incurred to affiliates of the General Partners (c) 58,280 41,270 Local administrative fee (d) 1,250 2,000 --------- -------- Total general and administrative- General Partners 172,070 194,104 --------- -------- Property management fees incurred to affiliates of the subsidiary partnerships' general partners (c) 67,307 64,163 --------- -------- Total general and administrative- related parties $ 239,377 $258,267 ========= ========

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