10-K 1 camr10k.txt TWELVE MONTHS 2001 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 February 28, 2001 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 0-12634 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) Massachusetts 13-3161322 ------------- ---------- (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] DOCUMENTS INCORPORATED BY REFERENCE None Page 1 of 148 PART I Item 1. Business. General ------- Cambridge + Related Housing Properties Limited Partnership (the "Partnership") is a limited partnership which was formed under the laws of the Commonwealth of Massachusetts on April 28, 1983. The general partners of the Partnership are Government Assisted Properties, Inc. (the "Assisted General Partner") and Related Housing Programs Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with an affiliate of The Related Companies, L.P. ("Related"), a New York limited partnership, and Cambridge/Related Housing Associates Limited Partnership ("Cambridge Related Associates"), a Massachusetts limited partnership, (together the "General Partners"). The general partners of Cambridge Related Associates 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. The Partnership completed its initial public offering (the "Offering") on May 4, 1984. Pursuant to the Offering, the Partnership issued 5,019 Initial Limited Partnership Interests in 1984 and 5,019 Additional Limited Partnership Interests in 1985, resulting in $50,190,000 in Gross Proceeds and $36,638,700 of net proceeds available for investment and reserves. The Partnership is currently in the process of winding up its operations and disposing of its investments. It is anticipated that this process will take a number of years. See "Sales of Underlying Properties/Local Partnership Interests" below. As of February 28, 2001, the Partnership has disposed of twenty-five of its forty-four original investments. 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 and operates an existing residential housing development (an "Apartment Complex") which is receiving some form of local, State or Federal assistance, such as mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). The Partnership's investment objectives are to: (1) provide current tax benefits in the form of passive losses which holders of Limited Partnership Interests may use to offset passive income from other sources; (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 down its operations as it continues to sell its assets;. therefore investment objectives (1), (2) and (4) are no longer applicable. The Partnership has to date distributed approximately $6,683,000 from sales transactions and expects to continue to make distributions from excess sales proceeds, although such aggregate distributions are not currently anticipated to 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 by a limited partner) 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. The intent of these incentives is to reduce certain market risks and permit investors to receive (i) tax benefits, (ii) limited cash distributions and (iii) long-term capital appreciation. Notwithstanding these factors, there remain significant risks. These risks include, and are not limited to, the financial strength and expertise of the local general partners. The long-term nature of the investments in government-subsidized housing and the continuance of government incentives limits the ability of the Partnership to vary its investment portfolio in response to changing economic, financial and investment conditions; such investments are also subject to changes in local economic circumstances and housing patterns which have an impact on real estate values. These Apartment Complexes also require greater management expertise and may have 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 interests in the Local Partnerships in which the Partnership invested ("Local Partnership Interests") were acquired from unaffiliated sellers. The Partnership became the principal limited partner in these Local Partnerships pursuant to local limited partnership agreements. The Partnership has acquired a 98.99% interest in each of the Local Partnerships. As a limited partner, the Partnership's liability for obligations of the Local Partnerships is limited to its investment. The general partners of the Local Partnerships ("Local General Partners") retain responsibility for maintaining, operating and managing the Apartment Complexes. Under certain circumstances, the Partnership has the right to replace the Local General Partner of the Local Partnership. The Partnership purchased the Local Partnership Interests for a purchase price consisting in each case of a cash down payment, a deferred cash payment due in April of the following year and a Purchase Money Note (as defined below), secured in each case by the Local Partnership Interest for which it was given in payment. The cash payments were made in part as the purchase price of the Local Partnership Interests and in part as capital contributions to the Local Partnerships. Such contributions were generally used by the Local Partnership to pay partnership management fees to the Local General Partners and fees to the Local General Partners for guaranteeing the funding of operating deficits (generally for a period of three to five years and subject to a maximum amount). Purchase Money Notes -------------------- Nonrecourse purchase money notes (the "Purchase Money Notes") were issued to the selling partners of the Subsidiary Partnerships as part of the purchase price, and are secured only by the Partnership's interest in the Subsidiary Partnership to which the Purchase Money Note relates. 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. As of February 28, 2001, the maturity dates of the Purchase Money Notes associated with the remaining properties owned by the Subsidiary Partnerships were extended for three to five years (see below). Any interest not paid currently accrues, without further interest thereon, through the extended due date of each of the Purchase Money Notes, respectively. Continued accrual of such interest without payment would impact the effective rate of the Purchase Money Notes, specifically by reducing the current effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and ultimate repayment dates of the Purchase Money Notes. Unpaid interest of $30,335,470 and $36,560,820 at February 28, 2001 and February 29, 2000, respectively, has been accrued and is included in the caption due to selling partners. 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 from the sale or refinancing of the Apartment Complex, or in some cases the Local Partnership Interest to which the Purchase Money Note relates. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. 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. The Partnership sent an extension notice to each Purchase Money Note holder that pursuant to the Purchase Money Note, it was extending the maturity. However in certain cases, the Partnership did not pay the extension fee at that time, deferring such payment to the future. Extension fees in the amount of $885,320 were incurred by the Partnership through February 28, 2001. All Purchase Money Notes are now extended with maturity dates ranging from July 2001 to December 2004. Extension fees of $404,817 were accrued and added to the Purchase Money Notes balance. The Partnership expects that upon final maturity it will be required to refinance or sell its investments in the Local Partnerships in order to pay the Purchase Money Notes and accrued interest thereon. Based on the historical operating results of the Local Partnerships and the current economic conditions including changes in tax laws, it is unlikely that the proceeds from such sales will be sufficient to meet the outstanding balances. Management is working with the Purchase Money Note holders to restructure and/or refinance the Purchase Money Notes. No assurance can be given that management's efforts will be successful. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the sellers' recourse, in the event of non-payment, would be to foreclose on the Partnership's interests in the respective Local Partnerships. Government Programs and Regulations ----------------------------------- The General Partners will carefully analyze the opportunities available upon the expiration of the properties' U.S. Department of Housing and Urban Development ("HUD") contracts, as well as the tax consequences of 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 whether there would be a return to the investors upon the sale of the applicable properties in the Partnership's portfolio. The Local Partnerships that receive government assistance are subject to low-income use restrictions which limited the owners' ability 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 ability to prepay their HUD mortgage and convert the property to condominiums or market-rate rental housing. Local general partners had filed for incentives under the Preservation Acts or the 1996 Act for the following local partnerships: San Diego - Logan Square Gardens Company, Albuquerque - Lafayette Square Apts. Ltd., Westgate Associates Limited, Riverside Gardens, a Limited Partnership, Pacific Palms, a Limited Partnership, Canton Commons Associates, Rosewood Manor Associates, Bethany Glen Associates and South Munjoy Associates, Limited. As of February 28, 2001, all of these Local Partnerships were sold except for Logan Square and Lafayette Square. The Preservation Acts have subsequently been repealed or revoked. The local general partner of the Logan Square and Lafayette Square properties is currently negotiating purchase and sale 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 instead of the above-market rentals which is generally the case under existing Section 8 Contracts. 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. 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 winding up its operations and disposing of its investments. It is anticipated that this process will take a number of years. As of February 28, 2001, the Partnership has disposed of twenty-five of its forty-four original investments. Five additional investments are listed for sale and the General Partner anticipates that the fourteen remaining investments will be listed for sale by December 31, 2002. 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 Partnerships 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. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed two entities: Cambridge Liquidating Trust LLC ("Trust I"), a Massachusetts limited liability company which is owned 99.99% by the Partnership and .01% by affiliates of Related; and, Cambridge Liquidating Trust II ("Trust II"), a Massachusetts general partnership which is owned 99% by Cambridge Liquidating GP II, L.L.C. ("GP II") and 1% by Cambridge Liquidating GP I, L.L.C. ("GP I"). Both GP I and GP II are owned by the Partnership. On December 30, 1998, the Partnership contributed its limited partnership interest in Bethany Glen Associates, Westwood, Ltd., Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Buena Vista Apartments, Ltd. and Wingate Associates, Ltd. to Trust I. On December 31, 1998, the Partnership contributed its limited partnership interests in Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral Apartments II, Ltd., El Paso-Gateway East, Ltd., Albequerque-Lafayette Square Apartments, Ltd., Corpus Christi-Oso Bay Apartments, Ltd., Westgate Associates Limited, San Diego-Logan Square Gardens Co., Ardmore-Rolling Meadows of Ardmore, Ltd., Fort Worth-Northwoods Apartments, Ltd. and Stephenville-Tarleton Arms Apartments, Ltd. to Trust II. 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 was no tax effect to the limited partners of the Partnership. Information Regarding Disposition --------------------------------- On April 21, 1998, the Partnership's limited partnership interest and related Purchase Money Note and interest thereon in Oklahoma City - Town and Country Village Apartments, Ltd. ("Town and Country") were assigned to the local general partner effective January 15, 1998, resulting in a gain of approximately $11,970,000. On April 27, 1998, the property and the related assets and liabilities of Riverside Gardens Limited Partnership ("Riverside") and Cudahy Gardens Limited Partnership ("Cudahy") were sold to a third party for approximately $1,834,000 and $232,000, respectively, resulting in losses of approximately $432,000 and $148,000, respectively, plus the assumption of the related mortgage notes. The Partnership used approximately $451,000 and $56,000, respectively, of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon which had total outstanding balances of approximately $5,402,000 and $2,672,000, respectively, resulting in forgiveness of indebtedness income of approximately $4,951,000 and $2,616,000, respectively. On June 18, 1999, the Partnership's limited partnership interest in Warren Manor Apartments Limited Partnership was sold to the local general partners for approximately $935,000, resulting in a loss in the amount of approximately $3,548,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $9,187,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Golf Manor Apartments Limited Partnership was sold to the local general partners for approximately $255,000, resulting in a loss in the amount of approximately $544,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $2,227,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Warren Woods Apartments, L.P. was sold to the local general partners for approximately $377,000, resulting in a loss in the amount of approximately $1,914,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $3,532,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Rosewood Manor Apartments Limited Partnership was sold to the local general partners for approximately $406,000, resulting in a loss in the amount of approximately $1,031,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $3,568,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Canton Commons Apartments Limited Partnership was sold to the local general partners for approximately $855,000, resulting in a gain in the amount of approximately $987,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $7,816,000, resulting in forgiveness of indebtedness income. On November 8, 1999, the property and the related assets and liabilities of Bethany Glen Associates ("Bethany") were sold to an unaffiliated third party for $3,450,000, resulting in a gain in the amount of approximately $1,582,000. The Partnership used $2,494,000 of the net proceed to settle the associated Purchase Money Note and accrued interest thereon which had a total outstanding balance of approximately $2,889,000, resulting in forgiveness of indebtedness income of $395,000. On January 17, 2000, Rolling Meadows Apartments, Ltd. ("Rolling Meadows") entered into an agreement for the purchase and sale of real estate with an unaffiliated third party for a purchase price of $2,400,000. This contract was terminated on April 30, 2001. Rolling Meadows entered into a new agreement for the purchase and sale of real estate to a different unaffiliated third party purchaser for a purchase price of $2,350,000. The sale is expected to occur in August 2001. No assurances can be given that the sale will actually occur. On April 28, 2000, the property and the related assets and liabilities of Pacific Palms were sold to a third party for approximately $4,900,000, resulting in a gain of approximately $2,554,000. The Partnership used approximately $1,668,000 of the net proceeds to settle the associated Purchase Money Notes and accrued interest thereon which had a total outstanding balance of approximately $5,214,000, resulting in forgiveness of indebtedness of approximately $3,546,000. The Partnership netted approximately $1,940,000 of cash which was placed into working capital to pay Partnership expenses. On September 14, 2000, the property and the related assets and liabilities of Westwood Apartments Company, Ltd. ("Westwood") were sold to an unaffiliated third party for $2,025,000, resulting in a loss of approximately $356,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,059,000, resulting in forgiveness of indebtedness income. On September 14, 2000, the property and the related assets and liabilities of Parktowne Ltd. ("Parktowne") were sold to an unaffiliated third party for $2,500,000, resulting in a gain of approximately $476,000. The Partnership used approximately $844,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,804,000, resulting in forgiveness of indebtedness income of approximately $960,000. On December 1, 2000, the property and the related assets and liabilities of Westgate Associates, Limited ("Westgate") were sold to an unaffiliated third party for $2,055,000, resulting in a loss of approximately $164,000. The Partnership used approximately $601,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,516,000, resulting in forgiveness of indebtedness income of approximately $915,000. On December 20, 2000, the property and the related assets and liabilities of New Jersey, Ltd. ("New Jersey") were sold to an unaffiliated third party for $2,049,600 resulting in a gain of approximately $65,000. The Partnership used approximately $500,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,369,000 resulting in forgiveness of indebtedness income of approximately $1,869,000. On December 26, 2000, Buena Vista Manor Apartments, Ltd. ("Buena Vista") 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 purchase price of $4,500,000. This contract was subsequently terminated. Operating Funds --------------- The expenditures required for operating the business of the Partnership are met out of the cash flow distributions from Local Partnerships. Accordingly, the Partnership believes that it will not be necessary to raise additional funds to meet the expenditures of operating its business. However, during the course of operations of the various Local Partnerships it may become necessary, from time to time, to use either their own assets or the Partnership's assets as security for loans to provide additional working capital. Tax Matters ----------- The Tax Reform Act of 1986 (the "TRA") provides as of 1991 that the passive losses generated by the Partnership can only be used to shelter passive income or, in the alternative, may be carried forward to offset a gain upon the sale of properties. 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 in the marketplace. However, the rental assistance and 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 direct employees. All services are performed for the Partnership by its General Partner and their affiliates. The General Partners receive compensation in connection with such activities as set forth in Items 11 and 13. 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's Amended and Restated Agreement and Certificate of Limited Partnership (the "Partnership Agreement"). Item 2. Properties. As of February 28, 2001, the Partnership holds a 98.99% limited partnership interest in each of nineteen Local Partnerships, which own nineteen residential Apartment Complexes receiving Government Assistance. During the fiscal year ended February 28, 2001, the property and the related assets and liabilities owned by five Local Partnerships were sold to third parties. Through the fiscal year ended February 28, 2001, the properties and the related assets and liabilities owned by thirteen Local Partnerships were sold to third parties and the Partnership's Local Partnership Interest in twelve other Local Partnerships were sold to the Local Partnership's general partners, respectively. Set forth below is a schedule of these Local Partnerships, including certain information concerning the Apartment Complexes (the "Local Partnership Schedule"). See Schedule III to the financial statements included herein for additional information, including encumbrances, pertaining to the Apartment Complexes.

(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: (i) mortgage loan insurance, (ii) rental subsidies, (iii) 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 221(d)(4) program and the 221(d)(3) program is the maximum amount of the loan which may be obtained. Under the 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 221(d)(3) program is substantially similar to the 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. HUD released the American Community Partnerships Act (the "ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing needs in an era of static or decreasing budget authority. Two key proposals in the ACPA that could affect the Local Partnerships are: (i) a discontinuation of project-based Section 8 subsidy payments and (ii) an attendant reduction in debt on properties that were supported by the Section 8 payments. The ACPA calls for a transition during which the project-based Section 8 would be converted to a tenant-based voucher system. Any FHA insured debt would then be "marked-to-market", that is revalued in light of the reduced income stream, if any. 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 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) State of jurisdiction is the same state as the location, unless otherwise indicated. (c) State of jurisdiction is Alabama. (d) State of jurisdiction is Michigan. (e) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 1997 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (f) The Partnership's Local Partnership Interest in this Local Partnership was sold during the fiscal year ended February 28, 1997 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (g) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 1998 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (h) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 28, 1998 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (i) The property and the related assets and liabilities were sold during the fiscal year ended February 29, 1999 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (j) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 29, 1999 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (k) 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. (l) The property and the related assets and liabilities were sold during the fiscal year ended February 29, 2000 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (m) The Partnership's Local Partnership Interests in these Local Partnerships were sold during the fiscal year ended February 29, 2000 (see Note 10 in Item 8. Financial Statements and Supplemental Data). (n) The property and the related assets and liabilities were sold during the fiscal year ended February 28, 2001 (see Note 10 in Item 8. Financial Statements and Supplemental Data). All leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the rentable square footage. Commercial tenants (to which average rental per square foot applies) comprise less than 5% of the rental revenues of the Partnership. Rents for the residential units are determined annually by HUD and reflect increases in consumer price indices in various geographic areas. Management of the Local Partnership continuously reviews the physical state of the properties and budgets improvements when required which are generally funded from cash flows from operations or release of replacement reserve escrows. No improvements are expected to require additional financing. 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 of the properties as shown in Schedule III to the financial statements included herein. Item 3. Legal Proceedings. The Partnership is the sole member of Cambridge Liquidating GP I, L.L.C., which is a 1% general partner in Cambridge Liquidating Trust II, a Massachusetts General Partnership ("CLT II"). The Partnership is the sole member of Cambridge Liquidating GP II, L.L.C., which is a 99% general partner in CLT II. On February 28, 2001, CLT II was a party to Cause No. 99-06802, pending in the 191st Judicial District Court of Dallas County, Texas; styled "CLT II v. Roar Company, a Texas Corporation, et al." CLT II asserted claims against the alleged owners and holders, Roar Company and liquidating trusts for whom Roar Company purports to act as trustee, of Purchase Money Notes executed by the Partnership in 1983. CLT II sought a declaratory judgment that maturity dates of the Purchase Money Notes were extended. CLT II also sought an accounting that the trustee for the alleged owners and holders of the Purchase Money Notes failed to make distributions to CLT II and/or its predecessors. Discovery was begun but not finished. Defendants denied CLT II's claims. Trial was scheduled for May 7, 2001. Mediation was conducted on December 7, 2000; but the case did not settle. The Purchase Money Notes at issue in that lawsuit relate to the acquisition by the Partnership, in 1983, of a 98.99% limited partnership interest in the following partnership operating apartment projects in the indicated cities: PARTNERSHIP LOCATION ----------- -------- Blue Ridge Manor, Ltd. Grandview, MO Gateway East, Ltd. El Paso, TX Lafayette Square Apartments, Ltd. Albuquerque, NM Logan Square Gardens Co. San Diego, CA Northwood Apartments, Ltd. Fort Worth, TX Oso Bay Apartments, Ltd. Corpus Christi, TX Tarleton Arms Apartments, Ltd. Stephensville, TX Chaparral Apartments, II, Ltd. Breckenridge, TX Rolling Meadows of Ardmore, Ltd. Ardmore, OK Caddo Parish - Villas South, Ltd.Caddo Parish, LA On April 19, 2001, Cause No. 06802, "CLT, II v. Roar Company, et al." was dismissed without prejudice. On or about July 24, 2000, three limited partnerships controlled by the Purchase Money Note holder commenced litigation in the Circuit Court of Jefferson County, Alabama against the Partnership, captioned as follows: Mobile Eastwyck III Apartments, Ltd. v. Shearson + Related Housing Properties Limited Partnership et al., CV-00-4431, Mobile Apartments, Ltd. v. Shearson + Related Housing Properties Limited Partnership et al., CV-00-4432, and Zeigler Partners Ltd. v. Shearson + Related Housing Properties Limited Partnership et al., CV-00-4433 (collectively, the "Litigations"). The Litigation commenced by Mobile Apartments, Ltd. has been voluntarily dismissed by the plaintiff in favor of an interpleader action described below. The plaintiffs in each of the Litigations sold their interests in certain limited partnerships to the Partnership. The interests that were sold to the Partnership consisted of limited partnerships that own low-income housing properties located in Mobile, Alabama (the "Alabama Limited Partnerships"). The Complaints allege that, as payment for a portion of the purchase price of the Partnership's acquired interest in the Alabama Limited Partnerships, the plaintiffs took a Purchase Money Note from the Partnership, and the Partnership pledged its right, title and interest in the Alabama Limited Partnerships as security for the Purchase Money Notes. The Complaints allege that the Partnership has defaulted in its obligations under the Purchase Money Notes, and that the plaintiffs are entitled to sell the Partnership's interests in the Alabama Limited Partnerships and the underlying property to pay off the Purchase Money Notes. The Partnership has vigorously contested the Litigations, claiming that, among other things, the Purchase Money Notes are not in default, that the Purchase Money Note holder has breached his fiduciary duty to the Partnership as general partner of the Alabama Limited Partnership, and that the Purchase Money Note holder assigned 25% of the Purchase Money Notes to third parties who are not joined in the Litigations. While the Partnership intends to continue to contest the Litigations, because the Litigations are in their earliest stages and no discovery has taken place, we are unable at this time to evaluate the likelihood of an unfavorable outcome or whether the resulting liability, if any, would have a material adverse effect on the financial condition of the Partnership. In or about March 2001, Wallace, Jordan, Ratliff, and Brandt, L.L.C. ("Wallace Jordan"), as Escrow Agents, commenced an interpleader action in the Circuit Court of Jefferson County, Alabama entitled Wallace, Jordan, Ratliff, and Brandt, LLC v. Shearson + Related Housing Properties Limited Partnership et al., CV -01-001155 (the "Interpleader Action"). The Interpleader Action seeks to resolve competing claims to $125,000 which is held in escrow by Wallace Jordan following the sale of the property known as Southbay, which was owned by the Local Partnership known as New Jersey, Ltd. The Partnership does not expect to have any liability as a result of the Interpleader Action because the action seeks only to resolve the claims of $125,000 paid into Court; however, because the Interpleader Action is in its earliest stages and no discovery has taken place, management is unable at this time to evaluate the likelihood of an unfavorable outcome or whether such an outcome would have a material adverse effect on the financial condition of the Partnership. 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. PART II Item 5. Market for the Registrant's Limited Partnership Interests and Related Security Holder Matters. At February 28, 2001, the Partnership had issued and outstanding 10,038 Limited Partnership Interests, of which 5,019 are Initial Limited Partnership Interests and 5,019 are Additional Limited Partnership Interests, each representing a $5,000 capital contribution per unit to the Partnership, for aggregate gross proceeds of $50,190,000. Additional Limited Partnership Interests are the Limited Partnership Interests acquired upon the exercise of warrants or sold by the Partnership upon the non-exercise of the warrants. The warrants are rights granted pursuant to the Partnership Agreement as part of the purchase of an Initial Limited Partnership Interest. No further issuance of Initial Limited Partnership Interests or Additional Limited Partnership Interests is anticipated and all warrants have expired. As of February 28, 2001, the Partnership had 4,356 registered holders of Limited Partnership Interests. Limited Partnership Interests are not traded in any organized market. It is not anticipated that any public market will develop for the purchase and sale of any Limited Partnership Interests. Limited Partnership Interests may be transferred only if certain requirements are satisfied, including that in the opinion of counsel to the Partnership 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. In March 2001 and 2000, distributions of approximately $511,000 and $994,000 and $5,000 and $10,000 were paid to the limited partners and General Partners, respectively, from net proceeds from the sale of properties (see Item 7. below). Of the total distributions of approximately $516,000 and $1,004,000 for the years ended February 28, 2001 and February 29, 2000, there was no return of capital determined in accordance with U.S. generally accepted accounting principles. As of March 2001, the aggregate amount of the distribution made since the commencement of the offering representing a return of capital, in accordance with generally accepted accounting principles, totaled approximately $0. 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. However, the Partnership has invested in Local Partnerships owning Apartment Complexes which receive Government Assistance under programs which in many instances restrict the cash return available to owners. See Item 8, Note 11(i). The Partnership does not anticipate providing cash distributions to its Limited Partners in circumstances other than refinancing or sale. Item 6. Selected Financial Data. The information set forth below presents selected financial data of the Partnership. Additional financial information is set forth in the audited financial statements in Item 8 hereof.

During the years ended February 28, 1997, 1998, 1999, February 29, 2000, and February 28, 2001 total assets decreased primarily due to the sale of properties (see Item 8., Note 10), depreciation and a loss for the impairment of assets, partially offset by an increase in cash and cash equivalents resulting from net proceeds from the sales and net additions to property and equipment. Long-term obligations and total liabilities decreased for the years ended February 28, 1996, 1997, 1998, 1999, February 29, 2000, and February 28, 2001 primarily due to the repayment of and forgiveness of indebtedness on Purchase Money Notes, mortgage notes payable and amounts due to selling partners as a result of the sale of underlying properties, partially offset by accruals of interest on Purchase Money Notes. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation. Liquidity and Capital Resources ------------------------------- General ------- The Partnership's primary sources of funds are (i) cash distributions from operations and cash distributions from sales of the Local Partnerships in which the Partnership has invested, (ii) interest earned on funds, and (iii) cash in working capital reserves. All these sources of funds are available to meet the obligations of the Partnership. During the fiscal year ended February 28, 2001, the property and the related assets and liabilities owned by five Local Partnerships were sold to third parties. Through the fiscal year ended February 28, 2001, the properties and the related assets and liabilities owned by thirteen Local Partnerships were sold and the Partnership's Local Partnership Interest in twelve other Local Partnerships were sold. The Partnership had a working capital reserve of approximately $1,200,000 (which does not include approximately $516,000 of net proceeds from the sales of properties which was distributed to the limited partners and General Partners in March 2001) and $1,170,000 (which does not include approximately $1,004,000 of net proceeds from the sale of properties which was distributed to the limited partners and General Partners in March 2000) at February 28, 2001 and February 29, 2000, respectively. The working capital reserve is temporarily invested in money market accounts which can be easily liquidated to meet obligations as they arise. The General Partners believe that the Partnership's reserves, net proceeds from future sales and future cash flow distributions will be adequate for its operating needs, and plans to continue investing available reserves in short-term investments. The General Partners fees are being paid currently other than approximately $1,092,000 of Partnership management fees which were accrued and continue to be deferred. In March 2001 and 2000, a distribution of approximately $511,000 and $994,000, and $5,000 and $10,000 was paid to the limited partners and General Partners, respectively, from net proceeds from the sale of properties. None of the total distributions of approximately $516,000 and $1,004,000 for the years ended February 28, 2001 and February 29, 2000, respectively, was deemed to be a return of capital in accordance with U.S. generally accepted accounting principles. During the fiscal year ended February 28, 2001, cash and cash equivalents of the Partnership and its twenty-four consolidated Local Partnerships (including the activity through the dates of sale for the five Local Partnerships noted above) decreased approximately $954,000. This decrease was primarily due to costs paid relating to sale of properties ($548,000), acquisition of property and equipment ($533,000), increases in mortgage escrows ($322,000), distributions ($1,004,000), payments of interest on purchase money notes ($118,000) and principal payments of mortgage notes and purchase money notes ($12,681,000) which exceeded proceeds from the sale of properties ($13,530,000) and cash provided by operating activities ($720,000). Included in the adjustments to reconcile the net income to cash provided by operating activities is gain on sale of properties ($2,577,000), forgiveness of indebtedness income ($10,348,000) and depreciation ($1,606,000). Cash flow distributions aggregating $196,814, $166,699 and $156,292 were made to the Partnership in the fiscal years ended 2000, 1999 and 1998, respectively, which does not include $5,397 escrow monies held for the Preservation Acts program in the fiscal year ended 1998. Of such distributions, $118,246, $100,019 and $93,776, respectively, was used to pay interest on the Purchase Money Notes. Distribution of proceeds from sales aggregating $5,988,453 and $2,493,720 were made to the Partnership in the 2000 and 1999 Fiscal Years, respectively of which $3,612,653 and $2,493,720, respectively, was used to pay principal and interest on the Purchase Money Notes. Purchase Money Notes -------------------- For a discussion of Purchase Money Notes Payable, see Note 7 to the Financial Statements. Government Programs and Regulations ----------------------------------- For a discussion of Government Programs and Regulations, see Item 1. Business. Sales of Underlying Properties/Local Partnership Interests ---------------------------------------------------------- General ------- The Partnership is currently in the process of winding up its operations and disposing of its investments. It is anticipated that this process will take a number of years. As of February 28, 2001, the Partnership has disposed of twenty-five of its forty-four original investments. Five additional investments are listed for sale and the General Partner anticipates that the fourteen remaining investments will be listed for sale by December 31, 2002. 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 Partnerships 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. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed Trust I, a Massachusetts limited liability company which is owned 99.99% by the Partnership and .01% by affiliates of Related; and, Trust II, a Massachusetts general partnership which is owned 99% by GP II and 1% by GP I. Both GP I and GP II are owned by the Partnership. On December 30, 1998, the Partnership contributed its limited partnership interest in Bethany Glen Associates, Westwood, Ltd., Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Buena Vista Apartments, Ltd. and Wingate Associates, Ltd. to Trust I. On December 31, 1998, the Partnership contributed its limited partnership interests in Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral Apartments II, Ltd., El Paso-Gateway East, Ltd., Albequerque-Lafayette Square Apartments, Ltd., Corpus Christi-Oso Bay Apartments, Ltd., Westgate Associates Limited, San Diego-Logan Square Gardens Co., Ardmore-Rolling Meadows of Ardmore, Ltd., Fort Worth-Northwoods Apartments, Ltd. and Stephenville-Tarleton Arms Apartments, Ltd. to Trust II. 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 was no tax effect to the limited partners of the Partnership. Information Regarding Disposition --------------------------------- For a discussion of the sale of properties in which the Partnership owns direct and indirect interest, 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 the Partnership would be liable for 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 as described above, 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. The portfolio is diversified by the location of the properties around the United States so that if one area of the United States is experiencing downturns in the economy, the remaining properties in the portfolio may be experiencing upswings. However, the geographic diversification of the portfolio may not protect 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, 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 the 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. 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. Through February 28, 2001, the Partnership has recorded approximately $8,889,000 as a loss on impairment of assets. The following is a summary of the results of operations of the Partnership for the Fiscal Years ended February 28, 2001, February 29, 2000 and February 28, 1999 (the 2000, 1999 and 1998 Fiscal Years, respectively). The results of operations of the Partnership, as well as the Local Partnerships, excluding gain on sale of property and forgiveness of indebtedness income, remained fairly constant during the 2000, 1999 and 1998 Fiscal Years. Contributing to the relatively stable operations at the Local Partnerships is the fact that a large portion of the Local Partnerships are operating under Government Assistance Programs which provide for rental subsidies and/or reductions of mortgage interest payments under HUD Section 8 and Section 236 Programs. Currently, seven of the twenty-five Local Partnerships are receiving rental subsidies and fifteen have mortgages with interest subsidies, which reduce the effective interest rates to a range of 1% to 2% per annum. The Partnership's primary source of income continues to be its portion of the Local Partnership's operating results. The majority of Local Partnership income continues to be in the form of rental income with the corresponding expenses being divided among operations, depreciation, and mortgage interest. In addition, the Partnership incurred interest expense relating to the Purchase Money Notes issued when the Local Partnerships Interests were acquired. The net income for the 2000, 1999 and 1998 Fiscal Years aggregated $10,075,724, $18,166,465 and $11,949,643, respectively. These represent income per Limited Partnership unit of $993, $1,792 and $1,179, respectively. Excluding the 2000, 1999 and 1998 Fiscal Years in which the Partnership generated passive income, the Partnership has met the investment objective of generating tax benefits in the form of passive losses (which Limited Partners may use to offset passive income from other sources). This passive income may be offset by the carryforward of any unused passive losses from prior years; however, to date the Partnership has been unable to provide cash distributions to the Limited Partners other than from the proceeds of sale of underlying properties. 2000 vs. 1999 ------------- Rental income decreased by approximately 25% during the 2000 Fiscal Year as compared to the 1999 Fiscal Year. Excluding New Jersey, Westgate, Parktowne, Westwood, Pacific Palm and Bethany Glen, which sold their properties and Canton Commons, Golf Manor, Rosewood Manor, Warren Manor and Warren Woods, in which the Partnership's interest was sold (collectively the "Sold Assets"), rental income increased approximately 4% during the 2000 Fiscal Year as compared to the 1999 Fiscal Year primarily due to rental increases and decreases in vacancies at several Local Partnerships. A gain on sale of properties and forgiveness of indebtedness was recorded in the 2000 Fiscal Year (see Notes 10 and 11, respectively, in Item 8. Financial Statements and Supplemental Data). Total expenses, excluding Sold Assets and loss on impairment of assets remained fairly consistent with a decrease of less than 1% for the 2000 Fiscal Year as compared to the 1999 Fiscal Year. Administrative and management, administrative and management-related parties, operating, repairs and maintenance, taxes and insurance, financial and depreciation expense decreased approximately $907,000, $364,000, $409,000, $1,139,000, $646,000, $1,006,000 and $963,000, respectively, for the 2000 Fiscal Year as compared to the 1999 Fiscal Year. Excluding the Sold Assets, and Zeigler Boulevard Ltd, Eastwyck III, Ltd., Rolling Meadows Apartments, Ltd., Wingate Associates Limited and Buena Vista Manor Apartments, Ltd. for depreciation only, such expenses remained fairly consistent with increases (decreases) of approximately ($309,000), ($3,000), $107,000, $166,000, $67,000, $2,000 and ($31,000), respectively, for the 2000 Fiscal Year as compared to the 1999 Fiscal Year. Zeigler Boulevard Ltd., Eastwyck III, Ltd, Rolling Meadows Apartment Ltd., Wingate Associates Limited and Buena Vista Manor Apartments, Ltd. are not depreciated during the period because they are classified as assets held for sale A loss on impairment of assets was recorded in the 1999 Fiscal Year (see Note 4 in Item 8. Financial Statements and Supplemental Data). 1999 vs. 1998 ------------- Rental income decreased by approximately 20% during the 1999 Fiscal Year as compared to the 1998 Fiscal Year. Excluding Country, Northbrook III, Riverside, Cudahy and Bethany Glen, which sold their properties and Town and Country, Canton Commons, Golf Manor, Rosewood Manor, Warren Manor and Warren Woods, in which the Partnership's interest was sold (collectively the "Sold Assets"), rental income decreased approximately 1% during the 1999 Fiscal Year as compared to the 1998 Fiscal Year primarily due to an increase in vacancies at one Local Partnership. A loss on sale of properties and forgiveness of indebtedness was recorded in the 1999 Fiscal Year (see Notes 10 and 11, respectively, in Item 8. Financial Statements and Supplemental Data). Total expenses, excluding Sold Assets, administrative and management and loss on impairment of assets remained fairly consistent with a decrease of less than 1% for the 1999 Fiscal Year as compared to the 1998 Fiscal Year. Administrative and management increased by approximately 7% during the 1999 Fiscal Year as compared to the 1998 Fiscal Year. Excluding the Sold Assets, such expenses increased approximately 23% during the 1999 Fiscal Year as compared to the 1998 Fiscal Year primarily due to increases in legal fees incurred by the Partnership and the amortization of the Purchase Money Note extension fees. Administrative and management-related parties, operating, repairs and maintenance, taxes and insurance, financial and depreciation expense decreased approximately $331,000, $600,000, $1,196,000, $651,000, $1,217,000 and $1,575,000, respectively, for the 1999 Fiscal Year as compared to the 1998 Fiscal Year. Excluding the Sold Assets, and Pacific Palms, Zeigler Boulevard Ltd, New Jersey, Ltd., Eastwyck III, Ltd., Westwood Apartments Ltd., Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Westgate Associates, Limited and Wingate Associates Limited for depreciation only, such expenses remained fairly consistent with increases (decreases) of approximately $4,000, ($58,000), $43,000, ($8,000), ($46,000) and ($6,000), respectively, for the 1999 Fiscal Year as compared to the 1998 Fiscal Year. Pacific Palms, Zeigler Boulevard Ltd., New Jersey Ltd., Eastwyck III, Ltd., Westood Apartments Ltd., Parktowne Ltd., Rolling Meadows Apartment Ltd., Westgate Associates, Limited and Wingate Associates, Limited are not depreciated during the period because they are classified as assets held for sale. A loss on impairment of assets was recorded in the 1999 Fiscal Year (see Note 4 in Item 8. Financial Statements and Supplemental Data). Results of Operations of Certain Local Partnerships --------------------------------------------------- Caddo Parish-Villas South, Ltd. ------------------------------- Caddo Parish-Villas South, Ltd. ("Villas South") continues to be in default of its original mortgage agreement. Until November 1995, the project operated under a provisional workout agreement with HUD. During November 1995, the mortgage note was sold to a conventional mortgagee. These items raise substantial doubt about Villas South's ability to continue as a going concern. Villas South is in the process of trying to renegotiate the terms of the notes with the new mortgage holders, but there can be no assurance that the renegotiation will be successful. Villas South filed for protection under Chapter 11 of the United States Bankruptcy Code on November 12, 1996 and the equivalent of a receiver has been appointed. The Partnership's investment in Villas South was approximately $0 at both February 28, 2001 and February 29, 2000, respectively, and the minority interest balance was zero at each date. Villas South's net loss after minority interest amounted to approximately $0, $0 and $3,136,923, for the 2000, 1999 and 1998 Fiscal Years, respectively. Accordingly, for the Fiscal Year ended February 28, 1999 a loss on impairment in the amount of $3,191,072 was recognized. As of February 28, 1999, the building was written down to zero. Char-Mur Apartments, Ltd. ------------------------- During the year ended December 31, 2000, Char-Mur Apartments, Ltd. ("Char-Mur ") incurred a net loss of approximately $43,000 and, as of that date, the local partnership's total current liabilities exceeded its total current assets by approximately $168,000. These factors, among others, raise substantial doubt about the partnership's ability to continue as a going concern. Char-Mur's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to comply with the terms of its mortgage, to obtain additional capital contributions from partners, and ultimately, to attain successful operations. Management is making all efforts possible to increase the occupancy and the rental income of the project and to make the necessary improvements to enhance the property, in an attempt to improve Char-Mur's cash flow. The Partnership's investment in Char-Mur was approximately $122,000 and $164,000 at February 28, 2001 and February 29, 2000, respectively, and the minority interest balance was zero at each date. Char-Mur's net loss after minority interest amounted to approximately $43,000, $18,000 and $39,000 for the 2000, 1999 and 1998 Fiscal Years, respectively. Subsequently on March 16, 2001, the property and the related assets and liabilities of Char-Mur were sold (see Note 12). San Diego - Logan Square Gardens Company ---------------------------------------- As of December 31, 2000, San Diego - Logan Square Gardens Company ("Logan Square") has a bank overdraft of $157,906. Logan Square has experienced negative cash flow for the past several years. These conditions create an uncertainty as to Logan Square's ability to continue as a going concern. Management of Logan Square has taken certain steps intended to improve Logan Square's cash position and restore profitability, including making repairs to the property and obtaining approval from HUD for a rent increase. The ability of Logan Square to continue as a going concern is dependent upon the success of these actions. The financial statements do not include any adjustments relating to the recoverability of recorded asset amounts or the amount of liabilities that might be necessary should the project be unable to continue as a going concern. The Partnership's investment in Logan Square was approximately $1,248,000 and $1,501,000 at February 28, 2001 and February 29, 2000, respectively, and the minority interest balance was zero at each date. Logan Square's net loss after minority interest amounted to approximately $233,000, $150,000 and $56,000 for the 2000, 1999 and 1998 Fiscal Years, respectively. Other ----- The Local General Partner of Grandview-Blue Ridge Manor, Ltd., Oakland-Keller Plaza, Country, Ltd., Stephenville-Tarleton Arms Apartments, Ltd., El Paso-Gateway East, Ltd., Breckenridge-Chaparral Apartments II, Ltd., Corpus Christi-Oso Bay Apartments, Ltd., Oklahoma City-Town and Country Village Apartments, Ltd., Ardmore-Rolling Meadows of Ardmore, Ltd., Caddo Parish-Villas South, Ltd., Albuquerque-Lafayette Square Apartments, Ltd. and San Diego-Loan Square Gardens Company passed away. The coexecutors of his estate are currently acting on his behalf until a successor can be named (see Item 3. Legal Proceedings). The Partnership's investment, as a limited partner in the Local Partnerships, is subject to the risks incident to the potential losses arising from management and ownership of improved real estate. The Partnership's investments could also be adversely affected by poor economic conditions generally, which could increase vacancy levels, rental payment defaults, and increased operating expenses, any or all of which could threaten the financial viability of one or more of the Local Partnerships. There are also 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 apartments in the 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 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. 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, particularly items such as fuel, utilities and labor. However, continued inflation should allow for appreciated values of the Local Partnerships' Apartment Complexes over a period of time as rental revenues and replacement costs continue to increase, the benefit of which may be recognized at the point in time when the Partnership is required to refinance or sell its investments in Local Partnerships in order to meet its obligations under the Purchase Money Notes. Item 7A. Quantitative and Qualitative Disclosures About Market Risk None.

INDEPENDENT AUDITORS' REPORT To the Partners of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries We have audited the consolidated balance sheets of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries as of February 28, 2001 and February 29, 2000, and the related consolidated statements of income, partners' deficit, and cash flows for the years ended February 28, 2001, February 29, 2000 and February 28, 1999 (the 2000, 1999 and 1998 Fiscal Years, respectively). 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 did not audit the financial statements for 24 (2000 Fiscal Year), 29 (1999 Fiscal Year) and 32 (1998 Fiscal Year) subsidiary partnerships whose income (losses) constituted $1,221,181, ($6,455,621) and ($1,888,891) of the Partnership's net income (loss) during the 2000, 1999 and 1998 Fiscal Years, respectively, and whose assets constituted 93% (2000 Fiscal Year) and 89% (1999 Fiscal Year) of the Partnership's assets at February 28, 2001 and February 29, 2000, presented in the accompanying consolidated financial statements. The financial statements for 23 (2000 Fiscal Year), 28 (1999 Fiscal Year) and 31 (1998 Fiscal Year) 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. The financial statements of one (2000, 1999 and 1998 Fiscal Years) of these subsidiary partnerships were unaudited. 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 + Related Housing Properties Limited Partnership and Subsidiaries at February 28, 2001 and February 29, 2000, and the results of their operations, and their cash flows for the years ended February 28, 2001, February 29, 2000 and February 28, 1999, in conformity with U.S. generally accepted accounting principles. As discussed in Note 10, the Partnership is currently in the process of winding up its operations and disposing of its investments. It is anticipated that this process will take a number of years. As discussed in Note 11(a), one subsidiary partnership is in default of its mortgage agreement and two other subsidiary partnerships have incurred losses and their current liabilities exceed current assets. This raises substantial doubt about these subsidiary partnerships' abilities to continue as going concerns. The financial statements for one of these subsidiary partnerships were unaudited and the auditors for the other subsidiary partnerships modified their reports due to the uncertainty of the abilities of the subsidiary partnerships to continue in existence. In addition, during the 2000 Fiscal Year three subsidiary partnerships adopted plans to sell their properties and liquidate in lieu of continuing their businesses. As a result, the financial statements for these three subsidiary partnerships are presented on the liquidating basis of accounting. Such subsidiary partnerships' assets aggregated $6,791,125 at February 28, 2001. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. As discussed in Note 7, the principal and all accrued interest on the purchase money notes became due during 1998 to 1999. The Partnership exercised its option to extend the maturity of such notes for three to five years. The Partnership expects that upon final maturity it will be required to refinance or sell its investments in the subsidiary partnerships in order to pay the purchase money notes and related interest obligations. 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 this uncertainty. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI, LLP New York, New York May 10, 2001 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Town & Country Village Apartments, Ltd. Oklahoma City, Oklahoma We have audited the accompanying balance sheet of Town & Country Village Apartments, Ltd. (the Project), as of January 15, 1998, and the related statements of profit and loss, changes in partners' equity, and cash flows for the period January 1, 1998 through January 15, 1998. 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. 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 January 15, 1998 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. 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 not in compliance with the terms of its original mortgage loan agreement, and has discontinued making payments on the loan. A receiver has been appointed to preserve and protect the mortgaged property pending foreclosure. These conditions raise 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. 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 October 12, 1998 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners New Jersey, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of New Jersey, Ltd. as of 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, effective as of 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 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/ Reznick Fedder & Silverman Bethesda, Maryland February 2, 2001 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners New Jersey, Ltd. We have audited the accompanying balance sheet of New Jersey, Ltd. as of December 31, 1999, and the related statements of operations, partners' equity (deficit) 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 New Jersey, Ltd., as of December 31, 1999 and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 20 through 24 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 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 and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 5, 2000 on our consideration of New Jersey, Ltd.'s internal control and on its compliance with specific requirements applicable to major HUD programs and fair housing and non-discrimination. /s/ Reznick Fedder & Silverman Lead Auditor: Philip A. Weitzel Boston, Massachusetts Taxpayer Identification Number: 52-1088612 January 25, 2000 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners New Jersey, Ltd. We have audited the accompanying balance sheet of New Jersey, Ltd. as of December 31, 1998, and the related statements of operations, partners' equity (deficit) 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 New Jersey, Ltd., as of December 31, 1998 and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 21 through 24 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 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 and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated February 4, 1999 on our consideration of New Jersey, Ltd.'s internal control and on its compliance with specific requirements applicable to major and nonmajor HUD programs and fair housing and non-discrimination. /s/ Reznick Fedder & Silverman Lead Auditor: Philip A. Weitzel Boston, Massachusetts Taxpayer Identification Number: 52-1088612 February 4, 1999 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Zeigler Boulevard, Ltd. We have audited the accompanying balance sheet of Zeigler Boulevard, Ltd. as of December 31, 2000, and the related statements of operations, 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 Zeigler Boulevard, Ltd., as of December 31, 2000, and the results of its operations, the changes in partners' equity and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 21 through 25 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 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 and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated March 14, 2001 on our consideration of Zeigler Boulevard, Ltd's internal control and on its compliance with specific requirements applicable to major HUD programs and 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. /s/ Reznick Fedder & Silverman Lead Auditor: Stephen Shumrak Bethesda, Maryland Taxpayer Identification Number: 52-1088612 March 14, 2001 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Zeigler Boulevard, Ltd. We have audited the accompanying balance sheet of Zeigler Boulevard, Ltd. as of December 31, 1999, and the related statements of operations, 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 Zeigler Boulevard, Ltd., as of December 31, 1999, and the results of its operations, the changes in partners' equity and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 20 through 24 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 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 and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 27, 2000 on our consideration of Zeigler Boulevard, Ltd's internal control and on its compliance with specific requirements applicable to major HUD programs and fair housing and non-discrimination. /s/ Reznick Fedder & Silverman Lead Auditor: Philip A. Weitzel Boston, Massachusetts Taxpayer Identification Number: 52-1088612 January 27, 2000 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Zeigler Boulevard, Ltd. We have audited the accompanying balance sheet of Zeigler Boulevard, Ltd. as of December 31, 1998, and the related statements of operations, partners' equity (deficit) 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 Zeigler Boulevard, Ltd., as of December 31, 1998, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 20 through 24 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 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 and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated February 4, 1999 on our consideration of Zeigler Boulevard, Ltd's internal control and on its compliance with specific requirements applicable to major and non-major HUD programs and fair housing and non-discrimination. /s/ Reznick Fedder & Silverman Lead Auditor: Philip A. Weitzel Boston, Massachusetts Taxpayer Identification Number: 52-1088612 February 4, 1999 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Eastwyck III, Ltd. We have audited the accompanying balance sheet of Eastwyck III, Ltd., as of December 31, 2000, and the related statements of operations, partners' equity (deficit) 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 Eastwyck III, Ltd., as of December 31, 2000, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 20 through 23 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 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, and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated March 14, 2001 on our consideration of Eastwyck III, Ltd.'s internal control and on its compliance with specific requirements applicable to major HUD programs and 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. /s/ Reznick Fedder & Silverman Lead Auditor: Stephen Shumrak Bethesda, Maryland Taxpayer Identification Number: 52-1088612 March 14, 2001 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Eastwyck III, Ltd. We have audited the accompanying balance sheet of Eastwyck III, Ltd., as of December 31, 1999, and the related statements of operations, partners' equity (deficit) 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 Eastwyck III, Ltd., as of December 31, 1999, and the results of its operations, the changes in partners' equity (deficit) and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 20 through 23 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 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, and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated January 24, 2000 on our consideration of Eastwyck III, Ltd.'s internal control and on its compliance with specific requirements applicable to major HUD programs and fair housing and non-discrimination. /s/ Reznick Fedder & Silverman Lead Auditor: Philip A. Weitzel Boston, Massachusetts Taxpayer Identification Number: 52-1088612 January 24, 2000 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Eastwyck III, Ltd. We have audited the accompanying balance sheet of Eastwyck III, Ltd., as of December 31, 1998, and the related statements of operations, 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 Eastwyck III, Ltd., as of December 31, 1998, and the results of its operations, the changes in partners' equity and its cash flows for the year then ended, in conformity with generally accepted accounting principles. 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 20 through 24 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 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, and the "Consolidated Audit Guide for Audits of HUD Programs," we have also issued reports dated February 4, 1999 on our consideration of Eastwyck III, Ltd.'s internal control and on its compliance with specific requirements applicable to major HUD programs and fair housing and non-discrimination. /s/ Reznick Fedder & Silverman Lead Auditor: Philip A. Weitzel Boston, Massachusetts Taxpayer Identification Number: 52-1088612 February 4, 1999 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Breckenridge-Chaparral Apartments II, Ltd. Breckenridge, Texas We have audited the accompanying balance sheet of Breckenridge-Chaparral Apartments II, Ltd. (the Project), Project No. 113-44016-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. In accordance with Government Auditing Standards and the Consolidated Audit Guide for 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, specific requirements applicable to the nonmajor 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. 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 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Breckenridge-Chaparral Apartments II, Ltd. Breckenridge, Texas We have audited the accompanying balance sheet of Breckenridge-Chaparral Apartments II, Ltd. (the Project), Project No. 113-44016-LD as of December 31, 1999, 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 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 FIUD 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 January 17, 2000 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Breckenridge-Chaparral Apartments II, Ltd. Breckenridge, Texas We have audited the accompanying balance sheet of Breckenridge-Chaparral Apartments II, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Country, Ltd. We have audited the accompanying balance sheet of Country, Ltd. as of March 31, 1998, and the related statements of operations, partners' equity 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 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 Country, Ltd., as of March 31, 1998, and the results of its operations and its cash flows for the three months then ended, in conformity with generally accepted accounting principles. /s/ Reznick Fedder & Silverman Boston, Massachusetts May 7, 1998 [Letterhead of Reznick, Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Westwood Apartments Company, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Westwood Apartments Company, 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 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 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, during 1999, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On September 14, 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 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 January 15, 2001 [Letterhead of Reznick, Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Westwood Apartments Company, Ltd. We have audited the accompanying statement of net assets in liquidation of Westwood Apartments Company, Ltd. as of December 31, 1999, 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 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. As discussed in note A to the financial statements, during 1999, 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 Westwood Apartments Company, Ltd. as of December 31, 1999, and the changes in net assets in liquidation for the year then ended, in conformity with generally accepted accounting principles. As described in note A to the financial statements, there is a letter of intent to purchase the 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 11 through 13 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 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/ REZNICK FEDDER & SILVERMAN Bethesda, Maryland February 8, 2000 [REZNICK FEDDER & SILVERMAN-LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Partners Westwood Apartments Company, Ltd. We have audited the accompanying balance sheets of Westwood Apartments Company, Ltd. as of December 31, 1998 and 1997, 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 Westwood Apartments Company, Ltd. as of December 31, 1998 and 1997, 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 13 through 15 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. The accompanying financial statements have been prepared assuming that the partnership will continue as a going concern. As discussed in note B to the financial statements, low occupancy levels have resulted in operating losses and cash flow deficits which raise substantial doubt about the partnership's ability to continue as a going concern. Management's plans in regard to these matters are also described in note B. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. /S/ REZNICK FEDDER & SILVERMAN Bethesda, Maryland January 29, 1999 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Parktowne, Ltd. We have audited the accompanying statement of changes in net assets in liquidation of Parktowne, Ltd. as of 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, during 1999, the partnership adopted a plan to sell the rental property and liquidate the partnership in lieu of continuing the business. On September 14, 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 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 January 16, 2001 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Parktowne, Ltd. We have audited the accompanying statement of net assets in liquidation of Parktowne, Ltd. as of December 31, 1999, 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 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. As discussed in note A to the financial statements, during 1999, 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 Parktowned, Ltd. as of December 31, 1999, and the changes in net assets in liquidation for the year then ended, in conformity with generally accepted accounting principles. As discussed in note A to the financial statements, there is a letter of intent to purchase the 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 11 through 13 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 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/ Reznick Fedder & Silverman Bethesda, Maryland February 8, 2000 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Parktowne, Ltd. We have audited the accompanying balance sheets of Parktowne, Ltd. as of December 31, 1998 and 1997, 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 Parktowne, Ltd. as of December 31, 1998 and 1997, 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 11 through 13 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 28, 1999 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Corpus Christi-Oso Bay Apartments, Ltd. Corpus Christi, Texas We have audited the accompanying balance sheet of Corpus Christi-Oso Bay Apartments, Ltd. (the Project), Project No. 115-44129-LDP, 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. 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 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 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 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Corpus Christi-Oso Bay Apartments, Ltd. HUD Field Office Director Corpus Christi, Texas San Antonio, TX We have audited the accompanying balance sheet of Corpus Christi-Oso Bay Apartments, Ltd. (the Project), Project No. 115-44129-LDP, as of December 31, 1999, 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 January 17, 2000 [Letterhead of Browder & Associates, P.C.] Independent Auditor's Report To the Partners of Corpus Christi-Oso Bay Apartments, Ltd. Corpus Christi, Texas We have audited the accompanying balance sheet of Corpus Christi-Oso Bay Apartments, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [Letterhead of Reznick Fedder & Silverman] INDEPENDENT AUDITORS' REPORT To the Partners Northbrook III, Ltd. We have audited the accompanying balance sheet of Northbrook III, Ltd. as of March 31, 1998, and the related statements of operations, partners' equity 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 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 Northbrook III, Ltd., as of March 31, 1998, and the results of its operations and its cash flows for the three months then ended, in conformity with generally accepted accounting principles. /s/ Reznick Fedder & Silverman Boston, Massachusetts May 7, 1998 [Letterhead of Grass Coffey & Scharlau, C.P.A.'s, P.C.] Independent Auditor's Report To The Partners Bethany Glen Associates (A Limited Partnership) We have audited the accompanying balance sheets of Bethany Glen Associates, as of November 9, 1999 (Date of Liquidation) and December 31, 1998, and the related statements of operations, partners' equity, and cash flows for the periods then ended. These financial statements are the responsibility of the Company'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 Bethany Glen Associates as of November 9, 1999 (Date of Liquidation) and December 31, 1998, and the results of its operations and its cash flows for the periods then ended in conformity with generally accepted accounting principles applied on the basis described in the following paragraph. As described in Note 1 to the financial statements, the partners of Bethany Glen Associates approved a sale of the principal assets of the Partnership on June 1, 1999, and the partnership commenced liquidation shortly thereafter. As a result, the partnership has changed its basis of accounting for the period subsequent to June 1, 1999 to the liquidation basis. /s/ Grass Coffey & Scharlau, C.P.A.'s, P.C. Phoenix, Arizona November 10, 1999 [Letterhead of Grass Coffey & Scharlau, C.P.A.'s, P.C.] Independent Auditor's Report To The Partners Bethany Glen Associates (A Limited Partnership) We have audited the accompanying balance sheets of Bethany Glen Associates, as of December 31, 1998 and 1997, and the related statements of operations, partners' equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company'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 Bethany Glen Associates as of December 31, 1998 and 1997, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ Grass Coffey & Scharlau, C.P.A.'s, P.C. Phoenix, Arizona January 28, 1999 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Albuquerque-Lafayette Square Apartments, Ltd. Albuquerque, New Mexico We have audited the accompanying balance sheet of Albuquerque-Lafayette Square Apartments, Ltd. (the Project), Project No. 116-44022-LDP, 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. 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, specific requirements applicable to the nonmajor 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. 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 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Albuquerque-Lafayette Square Apartments, Ltd. Albuquerque, New Mexico We have audited the accompanying balance sheet of Albuquerque-Lafayette Square Apartments, Ltd. (the Project), Project No. 116-44022-LDP, as of December 31, 1999, 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 January 17, 2000 [Letterhead of BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Albuquerque-Lafayette Square Apartments, Ltd. Albuquerque, New Mexico We have audited the accompanying balance sheet of Albuquerque-Lafayette Square Apartments, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [Letterhead of Nessel, Smith, Leff & Borsen, PLLC] INDEPENDENT AUDITORS' REPORT WARREN MANOR APARTMENTS LIMITED PARTNERSHIP 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying balance sheet of Warren Manor Apartments Limited Partnership (a limited partnership) as of June 18, 1999 and the related statements of revenue and expense, partners' equity, and cash flows and, supplemental schedules on pages 9-11 for the period January 1, 1999 through June 18, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Warren Manor Apartments Limited Partnership as of June 18, 1999 and the results of its operations and its cash flows for the period January 1, 1999 through June 18, 1999, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ Nessel, Smith, Leff & Borsen, PLLC Certified Public Accountants Farmington Hills, MI January 19, 2000 [Letterhead of Nessel, Smith, Leff & Borsen, PLLC] INDEPENDENT AUDITORS' REPORT WARREN MANOR APARTMENTS LIMITED PARTNERSHIP 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying comparative balance sheet of Warren Manor Apartments Limited Partnership (a limited partnership) as of December 31, 1998 and 1997 and the related comparative statements of revenue and expense, partners' equity, and cash flows and, supplemental schedules on pages 9-11 for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Warren Manor Apartments Limited Partnership as of December 31, 1998 and 1997 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ Nessel, Smith, Leff & Borsen, PLLC Certified Public Accountants Farmington Hills, MI February 8, 1999 [Letterhead of Nessel, Smith, Leff & Borsen, PLLC] INDEPENDENT AUDITORS' REPORT To the Partners Golf Manor Apartments Limited Partnership 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying balance sheet of Golf Manor Apartments Limited Partnership (a limited partnership) as of June 18, 1999 and the related statements of revenue and expense, partners' equity, and cash flows and, supplemental schedules on pages 9-11 for the period January 1, 1999 through June 18, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Golf Manor Apartments Limited Partnership as of as of June 18, 1999 and the results of its operations and its cash flows for the period January 1, 1999 through June 18, 1999 in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ Nessel, Smith, Leff & Borsen, PLLC Certified Public Accountants Farmington Hills, MI January 15, 2000 [Letterhead of Nessel, Smith, Leff & Borsen, PLLC] INDEPENDENT AUDITORS' REPORT To the Partners Golf Manor Apartments Limited Partnership 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying Comparative Balance Sheet of Golf Manor Apartments Limited Partnership (a limited partnership) as of December 31, 1998 and 1997 and the related Comparative Statements of Revenue and Expense, Partners' Equity, Cash Flows and Supplemental Schedules on Pages 9-11 for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Golf Manor Apartments Limited Partnership as of December 31, 1998 and 1997 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ Nessel, Smith, Leff & Borsen, PLLC Certified Public Accountants Farmington Hills, MI February 8, 1999 [Nessel, Smith, Leff & Borsen, PLLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Warren Woods Apartments Limited Partnership 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying balance sheet of Warren Woods Apartments Limited Partnership (a limited partnership) as of June 18, 1999 and the related statements of revenue and expense, partners' equity, and cash flows and, supplemental schedules on Pages 9-11 for the period January 1, 1999 through June 18, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Warren Woods Apartments Limited Partnership as of June 18, 1999 and the results of its operations and its cash flows for the period January 1, 1999 through June 18, 1999, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ NESSEL, SMITH, LEFF & BORSEN, PLLC Certified Public Accountants Farmington Hills, MI January 19, 2000 [Nessel, Smith, Leff & Borsen, PLLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Warren Woods Apartments Limited Partnership 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying Comparative Balance Sheet of Warren Woods Apartments Limited Partnership (a limited partnership) as of December 31, 1998 and 1997 and the related Comparative Statements of Revenue and Expense, Partners' Equity, Cash Flows and Supplemental Schedules on Pages 9-11 for the years then ended. These financial statements are the responsibility of the Company'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 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 Warren Woods Apartments Limited Partnership as of December 31, 1998 and 1997 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ NESSEL, SMITH, LEFF & BORSEN, PLLC Certified Public Accountants Farmington Hills, MI February 6, 1999 [Nessel, Smith, Leff & Borsen, PLLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Canton Commons Apartments Limited Partnership 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying balance sheet of Canton Commons Apartments Limited Partnership (a limited partnership) as of June 18, 1999 and the related statements of revenue and expense, partners' equity, and cash flows and , supplemental schedules on Pages 9-11 for the period January 1, 1999 through June 18, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Canton Commons Apartments Limited Partnership as of June 18, 1999 and the results of its operations and its cash flows for the period January 1, 1999 through June 18, 1999, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ NESSEL, SMITH, LEFF & BORSEN, PLLC Certified Public Accountants Farmington Hills, MI January 5, 2000 [Nessel, Smith, Leff & Borsen, PLLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Canton Commons Apartments Limited Partnership 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying Comparative Balance Sheet of Canton Commons Apartments Limited Partnership (a limited partnership) as of December 31, 1998 and 1997 and the related Comparative Statements of Revenue and Expense, Partners' Equity, Cash Flows and Supplemental Schedules on Pages 9-11 for the years then ended. These financial statements are the responsibility of the Company'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 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 Canton Commons Apartments Limited Partnership as of December 31, 1998 and 1997 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ NESSEL, SMITH, LEFF & BORSEN, PLLC Certified Public Accountants Farmington Hills, MI February 8, 1999 [Nessel, Smith, Leff & Borsen, PLLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners ROSEWOOD MANOR APARTMENTS 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying balance sheet of Rosewood Manor Apartments (a limited partnership) as of June 18, 1999 and the related statements of revenue and expense, partners' equity, and cash flows and, supplemental schedules on pages 9-11 for the period January 1, 1999 through June 18, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. 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 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 Rosewood Manor Apartments as of June 18, 1999 and the results of its operations and its cash flows for the period January 1, 1999 through June 18, 1999, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ Nessel, Smith, Leff & Borsen, PLLC Certified Public Accountants Farmington Hills, MI January 17, 2000 [Nessel, Smith, Leff & Borsen, PLLC Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners ROSEWOOD MANOR APARTMENTS 28777 Northwestern Highway, Suite 100 Southfield, MI 48034 We have audited the accompanying Comparative Balance Sheet of Rosewood Manor Apartments (a limited partnership) as of December 31, 1998 and 1997 and the related Statements of Revenue and Expense, Partners' Equity, and Cash Flows and Supplemental schedules on Page 9-11 for the year then ended. These financial statements are the responsibility of the Company'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 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 Rosewood Manor Apartments as of December 31, 1998 and 1997 and the results of its operations and its cash flows for the year then ended, in conformity with generally accepted accounting principles. The supporting data included in this report have been subjected to the same auditing procedures applied in the examination of the basic financial statements and, in our opinion, are presented fairly in all material respects in relation to the basic financial statements taken as a whole. /s/ Nessel, Smith, Leff & Borsen, PLLC Certified Public Accountants Farmington Hills, MI February 8, 1999 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of San Diego-Logan Square Gardens Company HUD Field Office Director San Diego, California San Diego, CA We have audited the accompanying balance sheet of San Diego-Logan Square Gardens Company (the Project), Project No. 129-44051-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 in a poor cash position. This condition raises 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 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 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 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of San Diego-Logan Square Gardens Company HUD Field Office Director San Diego, California San Diego, CA We have audited the accompanying balance sheet of San Diego-Logan Square Gardens Company (the Project), Project No. 129-44051-LD, as of December 31, 1999, 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 January 17, 2000 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of San Diego-Logan Square Gardens Company San Diego, California We have audited the accompanying balance sheet of San Diego-Logan Square Gardens Company (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Blue Ridge Manor, Ltd. HUD Field Office Director Grandview, Missouri Kansas City, MO We have audited the accompanying balance sheet of Blue Ridge Manor, Ltd. (the Project), Project No. 084-44127-LDP, 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. 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. 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 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Blue Ridge Manor, Ltd. HUD Field Office Director Grandview, Missouri Kansas City, MO We have audited the accompanying balance sheet of Blue Ridge Manor, Ltd. (the Project), Project No. 084-44127-LDP, as of December 31, 1999, 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 2000 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. 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 17, 2000 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Blue Ridge Manor, Ltd. Grandview, Missouri We have audited the accompanying balance sheet of Blue Ridge Manor, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Ardmore-Rolling Meadows of Ardmore, Ltd. HUD Field Office Director Ardmore, Oklahoma Oklahoma City, OK We have audited the accompanying balance sheet of Ardmore-Rolling Meadows of Ardmore, Ltd. (the Project), Project No. 117-44044-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. 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 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 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 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Ardmore-Rolling Meadows of Ardmore, Ltd. HUD Field Office Director Ardmore, Oklahoma Oklahoma City, OK We have audited the accompanying balance sheet of Ardmore-Rolling Meadows of Ardmore, Ltd. (the Project), Project No. 117-44044-LD, as of December 31, 1999, 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 January 17, 2000 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Ardmore-Rolling Meadows of Ardmore, Ltd. Ardmore, Oklahoma We have audited the accompanying balance sheet of Ardmore-Rolling Meadows of Ardmore, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of El Paso-Gateway East Apartments, Ltd. HUD Field Office Director El Paso, Texas Fort Worth, TX We have audited the accompanying balance sheet of El Paso-Gateway East Apartments, Ltd. (the Project), Project No. 133-44016-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. 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, specific requirements applicable to the nonmajor 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. 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 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of El Paso-Gateway East Apartments, Ltd. HUD Field Office Director El Paso, Texas Fort Worth, TX We have audited the accompanying balance sheet of El Paso-Gateway East Apartments, Ltd. (the Project), Project No. 133-44016-LD, as of December 31, 1999, 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 January 17, 2000 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of El Paso-Gateway East Apartments, Ltd. El Paso, Texas We have audited the accompanying balance sheet of El Paso-Gateway East Apartments, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Fort Worth-Northwood Apartments, Ltd. HUD Field Office Director Fort Worth, Texas Fort Worth, TX We have audited the accompanying balance sheet of Fort Worth-Northwood Apartments, Ltd. (the Project), Project No. 113-44025-LDP-SUP, 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. 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, specific requirements applicable to the nonmajor 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. 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 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Fort Worth-Northwood Apartments, Ltd. HUD Field Office Director Fort Worth, Texas Fort Worth, TX We have audited the accompanying balance sheet of Fort Worth-Northwood Apartments, Ltd. (the Project), Project No. 113-44025-LDP-SUP, as of December 31, 1999, 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 January 17, 2000 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Fort Worth-Northwood Apartments, Ltd. Fort Worth, Texas We have audited the accompanying balance sheet of Fort Worth-Northwood Apartments, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Stephenville-Tarleton Arms Apartments, Ltd. HUD Field Office Director Stephenville, Texas Fort Worth, TX We have audited the accompanying balance sheet of Stephenville-Tarleton Arms Apartments, Ltd. (the Project), Project No. 113-44034-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. 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, specific requirements applicable to the nonmajor 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. 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 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Stephenville-Tarleton Arms Apartments, Ltd. HUD Field Office Director Stephenville, Texas Fort Worth, TX We have audited the accompanying balance sheet of Stephenville-Tarleton Arms Apartments, Ltd. (the Project), Project No. 113-44034-LD, as of December 31, 1999, 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, 1999 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. 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, 2000 on our consideration of the Project's internal controls and reports dated January 17, 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 January 17, 2000 [LETTERHEAD OF BROWDER & ASSOCIATES, P.C.] Independent Auditor's Report To the Partners of Stephenville-Tarleton Arms Apartments, Ltd. Stephenville, Texas We have audited the accompanying balance sheet of Stephenville-Tarleton Arms Apartments, Ltd. (the Project), as of December 31, 1998, 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 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. 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, 1998 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. 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 19, 1999 [Robert Ercolini & Company LLP Letterhead] INDEPENDENT AUDITOR'S REPORT The General Partners of Bay Village Company (a Massachusetts Limited Partnership) Boston, Massachusetts We have audited the accompanying balance sheets of Bay Village Company (a Massachusetts Limited Partnership) as of December 31, 2000 and 1999 and the related statements of operations, partners' equity, 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 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, the financial statements referred to above present fairly, in all material respects, the financial position of Bay Village Company as of December 31, 2000 and 1999, and the results of its operations, changes in partners' equity, 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/ Robert Ercolini & Company LLP Boston, Massachusetts January 22, 2001 [Robert Ercolini & Company LLP Letterhead] INDEPENDENT AUDITOR'S REPORT The General Partners of Bay Village Company (a Massachusetts Limited Partnership) Boston, Massachusetts We have audited the accompanying balance sheets of Bay Village Company (a Massachusetts Limited Partnership) as of December 31, 1999 and 1998 and the related statements of operations, partners' equity, and cash flows for each of the three 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 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, the financial statements referred to above present fairly, in all material respects, the financial position of Bay Village Company (a Massachusetts Limited Partnership) as of December 31, 1999 and 1998, and the results of its operations, changes in partners' equity, and its cash flows for each of the three years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. /s/ Robert Ercolini & Company LLP Boston, Massachusetts January 18, 2000 [Akersloot, Patterson & Associates, P.L.L.C. Letterhead] Independent Auditors' Report To The Partners of Buena Vista Manor Apartments, Ltd. We have audited the accompanying balance sheet of Buena Vista Manor Apartments, Ltd. (a limited partnership), which includes HUD Project No. 086-35009-SUP-LD as of December 31, 2000, and the related statements of operations, 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, Office of the Inspector General. 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 the 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 Buena Vista Manor Apartments, Ltd., (a limited partnership) as of December 31, 2000, and the results of its operations, changes in partners' equity, and its 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 20, 2001, on our consideration of Buena Vista Manor Apartments, Ltd.'s internal control, and reports dated January 20, 2001, on its compliance with specific requirements applicable to its 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 basic financial statements taken as a whole. The additional information included in the report is presented for the purposes of additional analysis and is not a required part of the basic financial statements of Buena Vista Manor Apartments, Ltd. (a limited partnership). Such information has been subjected to the auditing procedures applied to 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/ Akersloot, Patterson & Associates, P.L.L.C. January 20, 2001 Brentwood, Tennessee [Akersloot, Wall & Associates, P.L.L.C. Letterhead] Independent Auditors' Report To The Partners of Buena Vista Manor Apartments, Ltd. We have audited the accompanying balance sheet of Buena Vista Manor Apartments, Ltd. (a limited partnership), which includes HUD Project No. 086-35009-SUP-LD as of December 31, 1999, and the related statements of operations, 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, Office of the Inspector General. 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 the 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 Buena Vista Manor Apartments, Ltd., (a limited partnership) as of December 31, 1999, and the results of its operations, changes in partners' equity, and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Akersloot, Wall & Associates, P.L.L.C. January 18, 2000 Brentwood, Tennessee [Akersloot, DePriest, Wall & Associates, P.L.L.C. Letterhead] Independent Auditors' Report To The Partners of Buena Vista Manor Apartments, Ltd. We have audited the accompanying balance sheet of Buena Vista Manor Apartments, Ltd. (a Tennessee limited partnership), which includes HUD Project No. 086-35009-SUP-LD as of December 31, 1998, and the related statements of operations, 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, Office of the Inspector General. 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 the 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 Buena Vista Manor Apartments, Ltd., (a limited partnership) as of December 31, 1998, and the results of its operations, changes in partners' equity, and its cash flows for the year then ended in conformity with generally accepted accounting principles. /s/ Akersloot, DePriest, Wall & Associates, P.L.L.C. February 1, 1999 Brentwood, Tennessee [CBEW Professional Group, LLP. Letterhead] Independent Auditor's Report To the Partners Rolling Meadows Apartments, Ltd. We have audited the accompanying balance sheet of Rolling Meadows Apartments, Ltd., (A Limited Partnership) , HUD Project No.: 117-44009-LD, as of December 31, 2000 and 1999, and the related statements of income, changes in partners' capital (deficit) 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 in the first paragraph present fairly, in all material respects, the financial position of HUD Project No. 117-44009-LD Rolling Meadows Apartments, Ltd. at December 31, 2000 and 1999 and the results of its operations and changes in partners' capital (deficit) and its cash flows for the years 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 February 6, 2001, on our consideration of Rolling Meadows Apartments, LTD.'s internal control and reports dated February 6, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination and specific requirements applicable to nonmajor HUD program transactions. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information shown on pages 14-19 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of HUD Project No. 117-44009-LD, Rolling Meadows Apartments, Ltd. 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/ CBEW Professional Group, LLP Certified Public Accountants Cushing, Oklahoma February 6, 2001 [Onstott, Craddick & Hyde CPA's, Inc. Letterhead] Independent Auditor's Report To the Partners Rolling Meadows Apartments, Ltd. We have audited the accompanying balance sheet of HUD Project No. 117-44009-LD, Rolling Meadows Apartments, LTD., (a limited partnership) as of December 31, 1998, and the related statements of income, changes in partners' capital 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 HUD Project No. 117-44009-LD, Rolling Meadows Apartments, Ltd. at December 31, 1998 and the results of its operations and changes in partners' capital 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 February 4, 1999, on our consideration of Rolling Meadows Apartments, LTD.'s internal control and reports dated February 4, 1999, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD program transactions. 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 Schedules 1, 2 and 3 is presented for the purposes of additional analysis and is not a required part of the basic financial statements of HUD Project No. 117-44009-LD, Rolling Meadows 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 basic financial statements taken as a whole. /s/ Onstott, Craddick & Hyde CPA's, Inc. Oklahoma City, Oklahoma February 4, 1999 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Westgate Associates Limited I have audited the accompanying balance sheet of Westgate Associates Limited, HUD Project No.: 026-44008-SHM (a Vermont limited partnership) as of December 1, 2000, and the related statements of income, changes in partners' capital, and cash flows for the period then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards and Governing Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westgate Associates Limited, HUD Project No.: 026-44008-SHM, as of December 1, 2000, and the results of its operations, changes in partners' capital, and its 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, I have also issued a report dated January 4, 2001, on my consideration of Westgate Associates Limited's internal control and reports dated January 4, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My 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 16-18 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Westgate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 4, 2001 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Westgate Associates Limited I have audited the accompanying balance sheet of Westgate Associates Limited, HUD Project No.: 026-44008-SHM (a Vermont limited partnership) as of December 31, 1999, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards and Governing Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westgate Associates Limited, HUD Project No.: 026-44008-SHM, as of December 31, 1999, and the results of its operations, changes in partners' capital, and its 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, I have also issued a report dated January 31, 2000, on my consideration of Westgate Associates Limited's internal control and reports dated January 31, 2000, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My 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 16-19 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Westgate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 31, 2000 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Westgate Associates Limited I have audited the accompanying balance sheet of Westgate Associates Limited, HUD Project No.: 026-44008-SHM (a Vermont limited partnership) as of December 31, 1998, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards and Governing Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Westgate Associates Limited, HUD Project No.: 026-44008-SHM, as of December 31, 1998, and the results of its operations, its changes in partners' capital, and its 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, I have also issued a report dated February 2, 1999, on my consideration of Westgate Associates Limited's internal control and reports dated February 2, 1999, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My 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 16-19 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Westgate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut February 2, 1999 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Wingate Associates Limited I have audited the accompanying balance sheet of Wingate Associates Limited, HUD Project No.: 024-44018-LDP (a New Hampshire limited partnership), as of December 31, 2000, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my 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 I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wingate Associates Limited, HUD Project No.: 024-44018-LDP, as of December 31, 2000, and the results of its operations, changes in partners' capital, 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, I have also issued a report dated January 20, 2001, on my consideration of Wingate Associates Limited's internal control and reports dated January 20, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My 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 17-20 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Wingate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 20, 2001 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Wingate Associates Limited I have audited the accompanying balance sheet of Wingate Associates Limited, HUD Project No.: 024-44018-LDP (a New Hampshire limited partnership), as of December 31, 1999, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my 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 I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wingate Associates Limited, HUD Project No.: 024-44018-LDP, as of December 31, 1999, and the results of its operations, changes in partners' capital, 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, I have also issued a report dated January 30, 2000, on my consideration of Wingate Associates Limited's internal control and reports dated January 30, 2000, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My 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 17-20 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Wingate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut January 30, 2000 [EDWARD LEMKIN Letterhead] INDEPENDENT AUDITOR'S REPORT To the Partners Wingate Associates Limited I have audited the accompanying balance sheet of Wingate Associates Limited, HUD Project No.: 024-44018-LDP (a New Hampshire limited partnership), as of December 31, 1998, and the related statements of income, changes in partners' capital, and cash flows for the year then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audit. I conducted my 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 I 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. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Wingate Associates Limited, HUD Project No.: 024-44018-LDP, as of December 31, 1998, and the results of its operations, its changes in partners' capital, and its 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, I have also issued a report dated February 2, 1999, on my consideration of Wingate Associates Limited's internal control and reports dated February 2, 1999, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to Fair Housing and Non-Discrimination, and specific requirements applicable to nonmajor HUD programs transactions. My 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 17-21 is presented for purposes of additional analysis and is not a required part of the basic financial statements of Wingate Associates Limited. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. /s/ Edward Lemkin Certified Public Accountant Orange, Connecticut February 2, 1999 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Cedar Hill Apartments: We have audited the accompanying balance sheet of Cedar Hill Apartments, (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, such financial statements present fairly, in all material respects, the financial position of Cedar Hill Apartments 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, 2001, on our consideration of Cedar Hill Apartments' internal control and reports 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 9 and 10 is presented for the purpose of additional analysis and are not a required part of the basic financial statements of Cedar Hill Apartments. 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 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Cedar Hill Apartments: We have audited the accompanying balance sheet of Cedar Hill Apartments, (the "Partnership") as of December 31, 1999 and the related statements of income, changes in partners' capital, 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, such financial statements present fairly, in all material respects, the financial position of Cedar Hill Apartments as of December 31, 1999, 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, 2000, on our consideration of Cedar Hill Apartments' internal control and reports dated January 25, 2000, 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. 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 are not a required part of the basic financial statements of Cedar Hill Apartments. 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, 2000 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Cedar Hill Apartments: We have audited the accompanying financial statements of Cedar Hill Apartments (Project Number 082-44064 LD/SUP) (a limited partnership hereinafter referred to as the "Partnership") as of December 31, 1998, 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, such financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 1998, 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 13, 1999, on our consideration of Cedar Hill Apartments' internal control and reports dated January 13, 1999, 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. 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 11-13 are presented for the purpose of additional analysis and are 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 13, 1999 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Char-Mur Apartments: We have audited the accompanying financial statements of Char-Mur Apartments (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, such 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. 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 has incurred a net loss and its total current liabilities exceed its total current assets, which raises substantial doubt about its ability to continue as a going concern. Management's plan regarding those matters are also described in Note 1. 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 February 9, 2001, on our consideration of Char-Mur Apartments' internal control and reports dated February 9, 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 are presented for the purpose of additional analysis and are 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 9, 2001 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Char-Mur Apartments: We have audited the accompanying financial statements of Char-Mur Apartments (the "Partnership") as of December 31, 1999, 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, such financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 1999, 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. 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 has incurred a net loss and its total current liabilities exceed its total current assets, which raises substantial doubt about its ability to continue as a going concern. Management's plan regarding those matters are also described in Note 1. 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 17, 2000, on our consideration of Char-Mur Apartments' internal control and reports dated January 27, 2000, 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. 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 are presented for the purpose of additional analysis and are 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 27, 2000 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Char-Mur Apartments: We have audited the accompanying financial statements of Char-Mur Apartments (Project Number 082-44035 LD/SUP) (a limited partnership hereinafter referred to as the "Partnership") as of December 31, 1998, 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, such financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 1998, 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. 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 has incurred a net loss and its total current liabilities exceed its total current assets, which raises substantial doubt about its ability to continue as a going concern. Management's plan regarding those matters are also described in Note 1. 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 18, 1999, on our consideration of Char-Mur Apartments' internal control and reports dated January 18, 1999, 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. 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 13-15 are presented for the purpose of additional analysis and are 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 18, 1999 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Crossett Apartments, Ltd.: We have audited the accompanying balance sheet of Crossett Apartments, 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 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 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 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 20, 2001, on our consideration of Crossett Apartments, Ltd.'s internal control and reports dated January 20, 2001, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirement 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 on pages 9-10 are presented for purposes 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 20, 2001 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Crossett Apartments, Ltd.: We have audited the accompanying balance sheet of Crossett Apartments, Ltd. (the "Partnership") as of December 31, 1999, and the related statements of income, changes in partners' capital, and cash flows for the year 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 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 Partnership as of December 31, 1999, and the results of its operations, changes in partners' capital, 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, 2000, on our consideration of Crossett Apartments, Ltd.'s internal control and a report dated January 25, 2000, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirement applicable to fair housing and non-discrimination. 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 are presented for the purpose of additional analysis and are 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 ,2000 [Jeffrey, Phillips, Mosley & Scott, P.A. - Letterhead] INDEPENDENT AUDITORS' REPORT To the Partners Crossett Apartments, Ltd.: We have audited the accompanying financial statements of Crossett Apartments, Ltd. (Project Number 082-44063 LD/SUP) (a limited partnership hereinafter referred to as the "Partnership") as of December 31, 1998, and for the year then ended, listed in the foregoing table of contents. These financial statements are the responsibility of the General Partners. 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 Partners, 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, 1998, 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, 1999, on our consideration of Crossett Apartments, Ltd.'s internal control and a report dated January 18, 1999, on its compliance with specific requirements applicable to major HUD programs, specific requirements applicable to nonmajor HUD transactions, and specific requirement applicable to fair housing and non-discrimination. 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 11-13 are presented for the purpose of additional analysis and are 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 18, 1999 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

See accompanying notes to consolidated financial statements.

CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT Limited General Total Partners Partners ----- -------- -------- Balance - March 1, 1998 $(76,183,214) $(74,972,851) $(1,210,363) Net income - year ended February 28,1999 11,949,643 11,830,146 119,497 Distributions (2,020,374) (2,000,170) (20,204) ---------- ---------- ------- Balance - February 28, 1999 (66,253,945) (65,142,875) (1,111,070) Net income - year ended February 29,2000 18,166,465 17,984,800 181,665 Distributions (1,004,200) (994,158) (10,042) ---------- -------- ------- Balance - February 29, 2000 (49,091,680) (48,152,233) (939,447) Net income - year ended February 28,2001 10,075,724 9,974,966 100,758 Distributions (516,300) (511,139) (5,161) -------- -------- ------ Balance - February 28, 2001 $(39,532,256) $(38,688,406) $ (843,850) ============ ============ =========== See accompanying notes to consolidated financial statements.

CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 2001 NOTE 1 - Organization Cambridge + Related Housing Properties Limited Partnership, (the "Partnership") was formed pursuant to the laws of the State of Massachusetts on April 28, 1983. The Partnership invests, as a limited partner, in other limited partnerships (referred to herein as "Local Partnerships", "subsidiary" or "subsidiary partnerships"), each of which owns and operates an existing apartment complex (an "Apartment Complex") which is receiving some form of local, State or Federal assistance, including mortgage insurance, rental assistance payments, permanent mortgage financing and/or interest reduction payments ("Government Assistance"). As of February 28, 2001, the Partnership holds an interest in nineteen Local Partnerships, each of which owns one Apartment Complex which receives Government Assistance. During the fiscal year ended February 28, 2001, the properties and the related assets and liabilities owned by five Local Partnerships were sold to third parties. Through the fiscal year ended February 28, 2001, the properties and the related assets and liabilities owned by thirteen Local Partnerships were sold and the Partnership's Local Partnership Interest in twelve other Local Partnerships were sold. A portion of the net proceeds was used to settle the associated purchase money notes and accrued interest thereon (See Note 10). The general partners of the Partnership are Government Assisted Properties, Inc. (the "Assisted General Partner") and Related Housing Programs Corporation (the "Related General Partner"), both of which are Delaware corporations affiliated with an affiliate of The Related Companies, L.P. ("Related"), a New York limited partnership, and Cambridge/Related Housing Associates Limited Partnership ("Cambridge Related Associates"), a Massachusetts limited partnership, (together, the "General Partners"). The general partners of Cambridge Related Associates are the Assisted General Partner and the Related General Partner. Pursuant to the public offering, which occurred during 1983 through 1985, the Partnership received $50,190,000 of gross proceeds from 4,297 investors. No further issuance of Initial Limited Partnership Interests or Additional Limited Partnership Interests is anticipated. The terms of the Amended and Restated Agreement and Certificate of Limited Partnership of the Partnership (the "Partnership Agreement") provide, among other things, that profits or 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 24 (five of which only have activity through the date of sale of their property and the related assets and liabilities) and 30 (one of which only has activity through the date of sale of its property and the related assets and liabilities and five of which only have activity through the date of sale of the Partnership's interest), and 35 (four of which only have activity through the date of sale of their properties and the related assets and liabilities and one of which only has activity through the date of sale of the Partnership's interest) subsidiary partnerships in which the Partnership is a limited partner for the years ended February 28, 2001, February 29, 2000, and February 28, 1999, respectively. Through the rights of the Partnership and/or 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 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 year ends on the last day of February. All subsidiaries have fiscal years ending December 31. Accounts of subsidiaries have been adjusted for intercompany transactions from January 1 through the last day of February. The Partnership's fiscal year ends on the last day of February 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 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 contributions and 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 $0, $68,520 and $0 for the years ended February 28, 2001, February 29, 2000 and February 28, 1999, (the 2000, 1999 and 1998 Fiscal Years), respectively. The Partnership's investment in each subsidiary is equal to the respective subsidiary's partners' equity less minority interest capital, if any. 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, 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 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. 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. Through February 28, 2001, the Partnership has recorded approximately $8,889,000 as a loss on impairment of assets. c) Interest Subsidies Interest expense has been reduced by interest subsidies (Note 6). d) Cash and Cash Equivalents Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term investments with an original maturity of three months or less. e) 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 (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. 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, Certificates of Deposit, Cash-Restricted for Tenants' -------------------------------------------------------------------------------- Security Deposits and Mortgage Escrow Deposits ---------------------------------------------- The carrying amount approximates fair value because of the short maturity of those instruments. Mortgage Notes Payable ---------------------- The fair value of mortgage notes payable is estimated, where practicable, based on the borrowing rate currently available for similar loans. The estimated fair values of the Partnership's mortgage notes payable are as follows: February 28, 2001 February 29, 2000 ----------------- ----------------- Carrying Carrying Amount* Fair Value Amount* Fair Value ------- ---------- ------- ---------- Mortgage notes payable for which it is: Practicable to estimate fair value $ 2,507,457 $2,507,457 $10,253,555 $9,920,943 Not practicable (a) $18,704,496 (a) $19,638,709 (a) Purchase money notes payable for which it is Not practicable (b) $20,801,534 $ 0 $26,637,019 $ 0 (a) The mortgage notes payable are insured by the Department of Housing and Urban Development (the "HUD") primarily in accordance with Section 236 of the National Housing Act. New loans are no longer being insured in accordance with Section 236 and presently existing loans are subject to restrictions regarding prepayment. Management believes the estimation of fair value to be impracticable. (b) For the reasons discussed in Note 11(b), it is not practicable to estimate the fair value of these notes. *The carrying amount of other assets and liabilities, except for related party liabilities, reported on the statement of financial position that require such disclosure approximate fair value. Regarding the fair value of the related party liabilities, it has been determined that fair value is not practicable to determine due to the unique nature, repayment terms and related conditions pertaining to these instruments. 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: February 28, February 29, Estimated 2001 2000 Useful Lives ---- ---- ------------ Land $ 2,533,996 $ 2,828,577 Building and improvements 37,262,760 41,606,414 15-40 years Furniture and fixtures 4,631,704 4,976,751 3-10 years --------- --------- 44,428,460 49,411,742 Less: Accumulated depreciation (25,049,936) (27,628,782) ----------- ----------- $19,378,524 $21,782,960 =========== =========== Depreciation expense for the 2000, 1999 and 1998 Fiscal Years amounted to $1,606,397, $2,569,844 and $4,145,148, respectively. The components of property and equipment-held for sale are as follows: February 28, February 29, 2001 2000 Land $ 1,080,644 $ 1,794,141 Building and improvement 18,432,536 32,532,451 Furniture and fixtures 974,191 1,234,296 ------- --------- 20,487,371 35,560,888 Less: Accumulated depreciation (11,301,311) (17,631,202) ----------- ----------- $ 9,186,060 $17,929,686 ============ =========== During the year ended December 31, 1999, Westgate Associates, Limited and Wingate Associates, Limited had losses on impairment of assets of $38,079 and $58,645 respectively. During the year ended December 31, 1998, Caddo Parish-Villas South, Ltd. had a loss on impairment of assets of $3,191,072. As of December 31, 1998, the building has been written down to zero. NOTE 5 - Mortgage Escrow Deposits Mortgage escrow deposits consist of the following: February 28, February 29, 2001 2000 ---- ---- Reserve for replacements $3,908,032 $3,748,776 Real estate taxes, insurance and other 1,683,204 1,537,446 Preservation Acts 19,798 19,798 ------ ------ $5,611,034 $5,306,020 ========== ========== NOTE 6 - Mortgage Notes Payable The mortgage notes are payable in aggregate monthly installments of approximately $211,000, including principal and interest at rates ranging from 6.75% to 9.0% per annum, through May 2022. 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. Certain mortgage notes with balances aggregating $12,769,956 and $16,151,957 at December 31, 2000 and 1999, respectively, which bear interest at rates ranging from 7% to 8.5% per annum, were eligible for interest rate subsidies under the terms of regulatory agreements with HUD. Accordingly, 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% to 1.75% per annum; the balance was subsidized under Section 236 of the National Housing Act. Annual principal payment requirements for each of the next five fiscal years are as follows: Year Ending December 31 Amount ----------------------- ------ 2001 $ 3,505,796 2002 1,035,816 2003 1,115,065 2004 1,200,435 2005 1,292,436 Thereafter 13,062,405 ---------- $21,211,953 =========== The above principal payment requirements have been adjusted for principal acceleration which may result from the event of default of one subsidiary partnership. The mortgage agreements require monthly deposits to reserves for replacements aggregating approximately $82,000 and monthly deposits to escrow accounts for real estate taxes, insurance and other (Note 5). NOTE 7 - Purchase Money Notes Payable Nonrecourse purchase money notes (the "Purchase Money Notes") were issued to the selling partners of the Subsidiary Partnerships as part of the purchase price, and are secured only by the Partnership's interest in the Subsidiary Partnership to which the Purchase Money Note relates. 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. As of February 28, 2001, the maturity dates of the Purchase Money Notes associated with the remaining properties owned by the Subsidiary Partnerships were extended for three to five years (see below). Any interest not paid currently accrues, without further interest thereon, through the extended due date of each of the Purchase Money Notes, respectively. Continued accrual of such interest without payment would impact the effective rate of the Purchase Money Notes, specifically by reducing the current effective interest rate of 9%. The exact effect is not determinable inasmuch as it is dependent on the actual future interest payments and ultimate repayment dates of the Purchase Money Notes. Unpaid interest of $30,335,470 and $36,560,820 at February 28, 2001 and February 29, 2000, respectively, has been accrued and is included in the caption due to selling partners. 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 from the sale or refinancing of the Apartment Complex, or in some cases the Local Partnership Interest to which the Purchase Money Note relates. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. 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. The Partnership sent an extension notice to each Purchase Money Note holder that's pursuant to the Purchase Money Note, it was extending the maturity. However in certain cases, the Partnership did not pay the extension fee at that time, deferring such payment to the future. Extension fees in the amount of $885,320 were incurred by the Partnership through February 28, 2001. All Purchase Money Notes are now extended with maturity dates ranging from July 2001 to December 2004. Extension fees of $404,817 were accrued and added to the Purchase Money Notes balance. The Partnership expects that upon final maturity it will be required to refinance or sell its investments in the Local Partnerships in order to pay the Purchase Money Notes and accrued interest thereon. Based on the historical operating results of the Local Partnerships and the current economic conditions including changes in tax laws, it is unlikely that the proceeds from such sales will be sufficient to meet the outstanding balances. Management is working with the Purchase Money Note holders to restructure and/or refinance the Purchase Money Notes. No assurance can be given that management's efforts will be successful. The Purchase Money Notes are without personal recourse to either the Partnership or any of its partners and the sellers' recourse, in the event of non-payment, would be to foreclose on the Partnership's interests in the respective Local Partnerships. Cash flow distributions aggregating $196,814, $166,699 and $156,292 were made to the Partnership in the 2000, 1999 and 1998 Fiscal Years, respectively, which does not include $5,397 escrow monies held for the Preservation Acts program in the 1998 Fiscal Year. Of such distributions, $118,246, $100,019 and $93,776, respectively, was used to pay interest on the Purchase Money Notes. Distribution of proceeds from sales aggregating $5,988,453 and $2,493,720 were made to the Partnership in the 2000 and 1999 Fiscal Years, respectively, of which $3,612,653 and $2,493,720, respectively, was used to pay principal and interest on the Purchase Money Notes. NOTE 8 - Related Party Transactions The costs incurred to related parties for the years ended February 28, 2001, February 29, 2000 and February 28, 1999 were as follows: Year Ended ---------- February 28, February 29, February 28, 2001 2000 1999 ---------- ---------- --------- Partnership management fees (a) $ 966,838 $ 966,838 $ 966,838 Expense reimbursement (b) 107,602 124,661 111,233 Property management fees incurred to affiliates of the General Partners (c) 75,455 108,880 157,645 Local administrative fee (d) 16,250 18,750 21,250 ------ ------ ------ 1,166,145 1,219,129 1,256,966 Property management fees incurred to affiliates of the subsidiary partnerships general partners (c) 499,165 738,865 1,034,776 Subsidiary Partnerships general partners incentive fee (e) 7,605 3,165 0 ----- ----- ----- Total general and administrative related parties $1,672,915 $1,961,159 $2,291,742 ========== ========== ========== (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 $1,092,000 and $875,000 were accrued and unpaid as of February 28, 2001 and February 29, 2000, respectively. (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 Partnership is limited by the provisions of the Partnership Agreement. Another affiliate of the General Partners performs asset monitoring for the Partnership. These services include site visits and evaluations of the subsidiary partnerships' performance. (c) Property management fees paid by Local Partnerships to affiliates of the Local Partnerships amounted to approximately $499,165, $847,745 and $1,192,421 for the 2000, 1999 and 1998 Fiscal Years, respectively. Of such fees $75,455, $108,880 and $157,645 was paid to a company which is also an affiliate of the Related General Partner for the 2000, 1999 and 1998 Fiscal Years, respectively. (d) Cambridge/Related Associates, a limited partner of the subsidiary partnerships, is entitled to receive a local administrative fee of up to $2,500 from each subsidiary partnership. (e) The Partnership entered into an agreement with the local general partner of Parktowne Ltd. and Westwood Apartment Company Ltd., which provides for an annual incentive fee based on cash flow distributed from the respective properties. Such fee amounted to $7,605 and $3,165 for the years ended February 28, 2001 and February 29, 2000, respectively. Cambridge/Related Associates has a .01% interest, as a limited partner, in each of the subsidiary partnerships. Due to local general partners and affiliates at December 31, 2000 and 1999 consists of the following: December 31, 2000 1999 ---- ---- Operating advances $ 46,268 $ 50,640 General partner distributions 50,000 50,000 Management and other operating advances 126,012 225,519 --------- --------- $222,280 $326,159 ======== ======== NOTE 9 - Income Taxes A reconciliation of the financial statement net income to the income tax income for the Partnership and its consolidated subsidiaries is as follows: Year Ended December 31 2000 1999 1998 ---- ---- ---- Financial statement net income $10,075,724 $18,166,465 $11,949,643 Difference between depreciation expense recorded for financial reporting purposes and the accelerated cost recovery system utilized for income tax purposes 1,151,452 1,782,411 609,973 Difference resulting from accruals for financial reporting purposes not deductible for tax purposes until paid 0 33,900 87,708 Difference resulting from parent company having a different fiscal year for income tax and financial reporting purposes (47,960) (288,047) (198,480) Difference between gain on sale of properties recorded for financial reporting purposes and for income tax purposes 7,755,939 6,529,256 (1,896,868) Loss on impairment of assets 0 96,724 3,191,072 Difference between extraordinary item-forgiveness of indebtedness income recorded for financial reporting purposes and for income tax purposes 33,770 6,996,683 9,001,362 Other 2,300 (137,092) 29,075 ----------- ----------- ----------- Net income as shown on the income tax return for the calendar year ended $18,971,225 $33,180,300 $22,773,485 ========== ========== ========== NOTE 10 - Sale of Properties General ------- The Partnership is currently in the process of winding up its operations and disposing of its investments. It is anticipated that this process will take a number of years. As of February 28, 2001, the Partnership has disposed of twenty-five of its forty-four original investments. Five additional investments are listed for sale and the General Partner anticipates that the fourteen remaining investments will be listed for sale by December 31, 2002. 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 Partnerships 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. In order to facilitate an orderly disposition of the Partnership's assets, the Partnership formed two entities: Cambridge Liquidating Trust LLC ("Trust I"), a Massachusetts limited liability company which is owned 99.99% by the Partnership and .01% by affiliates of Related; and, Cambridge Liquidating Trust II ("Trust II"), a Massachusetts general partnership which is owned 99% by Cambridge Liquidating GP II, L.L.C. ("GP II") and 1% by Cambridge Liquidating GP I, L.L.C. ("GP I"). Both GP I and GP II are owned by the Partnership. On December 30, 1998, the Partnership contributed its limited partnership interest in Bethany Glen Associates, Westwood, Ltd., Parktowne, Ltd., Rolling Meadows Apartments, Ltd., Buena Vista Apartments, Ltd. and Wingate Associates, Ltd. to Trust I. On December 31, 1998, the Partnership contributed its limited partnership interests in Grandview-Blue Ridge Manor Limited, Breckenridge-Chaparral Apartments II, Ltd., El Paso-Gateway East, Ltd., Albequerque-Lafayette Square Apartments, Ltd., Corpus Christi-Oso Bay Apartments, Ltd., Westgate Associates Limited, San Diego-Logan Square Gardens Co., Ardmore-Rolling Meadows of Ardmore, Ltd., Fort Worth-Northwoods Apartments, Ltd. and Stephenville-Tarleton Arms Apartments, Ltd. to Trust II. 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 was no tax effect to the limited partners of the Partnership. Information Regarding Disposition --------------------------------- On April 21, 1998, the Partnership's limited partnership interest and related Purchase Money Note and interest thereon in Oklahoma City - Town and Country Village Apartments, Ltd. ("Town and Country") was assigned to the local general partner effective January 15, 1998, resulting in a gain of approximately $11,970,000. On April 27, 1998, the property and the related assets and liabilities of Riverside Gardens Limited Partnership ("Riverside") and Cudahy Gardens Limited Partnership ("Cudahy") were sold to a third party for approximately $1,834,000 and $232,000, respectively, resulting in losses of approximately $432,000 and $148,000 plus the assumption of the related mortgage notes. The Partnership used approximately $451,000 and $56,000, respectively, of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon which had total outstanding balances of approximately $5,402,000 and $2,672,000, respectively, resulting in forgiveness of indebtedness income of approximately $4,951,000 and $2,616,000, respectively. On June 18, 1999, the Partnership's limited partnership interest in Warren Manor Apartments Limited Partnership was sold to the local general partners for approximately $935,000, resulting in a loss in the amount of approximately $3,548,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $9,187,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Golf Manor Apartments Limited Partnership was sold to the local general partners for approximately $255,000, resulting in a loss in the amount of approximately $544,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $2,227,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Warren Woods Apartments, L.P. was sold to the local general partners for approximately $377,000, resulting in a loss in the amount of approximately $1,914,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $3,532,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Rosewood Manor Apartments Limited Partnership was sold to the local general partners for approximately $406,000, resulting in a loss in the amount of approximately $1,031,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $3,568,000, resulting in forgiveness of indebtedness income. On June 18, 1999, the Partnership's limited partnership interest in Canton Commons Apartments Limited Partnership was sold to the local general partners for approximately $855,000, resulting in a gain in the amount of approximately $987,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest which had a total outstanding balance of approximately $7,816,000, resulting in forgiveness of indebtedness income. On November 8, 1999, the property and the related assets and liabilities of Bethany Glen Associates ("Bethany") were sold to an unaffiliated third party for $3,450,000, resulting in a gain in the amount of approximately $1,582,000. The Partnership used $2,494,000 of the net proceed to settle the associated Purchase Money Note and accrued interest thereon which had a total outstanding balance of approximately $2,889,000, resulting in forgiveness of indebtedness income of $395,000. On January 17, 2000, Rolling Meadows Apartments, Ltd. ("Rolling Meadows") entered into an agreement for the purchase and sale of real estate with an unaffiliated third party for a purchase price of $2,400,000. This contract was terminated on April 30, 2001. Rolling Meadows entered into a new agreement for the purchase and sale of real estate to a different unaffiliated third party purchaser for a purchase price of $2,350,000. The sale is expected to occur in August 2001. No assurances can be given that the sale will actually occur. On April 28, 2000, the property and the related assets and liabilities of Pacific Palms were sold to a third party for approximately $4,900,000, resulting in a gain of approximately $2,554,000. The Partnership used approximately $1,668,000 of the net proceeds to settle the associated Purchase Money Notes and accrued interest thereon which had a total outstanding balance of approximately $5,214,000, resulting in forgiveness of indebtedness of approximately $3,546,000. The Partnership netted approximately $1,940,000 of cash which was placed into working capital to pay Partnership expenses. On September 14, 2000, the property and the related assets and liabilities of Westwood Apartments Company, Ltd. ("Westwood") were sold to an unaffiliated third party for $2,025,000, resulting in a loss of approximately $356,000. No proceeds were used to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $3,059,000, resulting in forgiveness of indebtedness income. On September 14, 2000, the property and the related assets and liabilities of Parktowne Ltd. ("Parktowne") were sold to an unaffiliated third party for $2,500,000, resulting in a gain of approximately $476,000. The Partnership used approximately $844,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $1,804,000, resulting in forgiveness of indebtedness income of approximately $960,000. On December 1, 2000, the property and the related assets and liabilities of Westgate Associates, Limited ("Westgate") were sold to an unaffiliated third party for $2,055,000, resulting in a loss of approximately $164,000. The Partnership used approximately $601,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $1,516,000, resulting in forgiveness of indebtedness income of approximately $915,000. On December 20, 2000, the property and the related assets and liabilities of New Jersey, Ltd. ("New Jersey") were sold to an unaffiliated third party for $2,049,600 resulting in a gain of approximately $65,000. The Partnership used approximately $500,000 of the net proceeds to settle the associated Purchase Money Note and accrued interest thereon, which had an outstanding balance of approximately $2,369,000 resulting in forgiveness of indebtedness income of approximately $1,869,000. On December 26, 2000, Buena Vista Manor Apartments, Ltd. ("Buena Vista") 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 purchase price of $4,500,000. This contract was subsequently terminated. NOTE 11 - Commitments and Contingencies a) Events of Default and Going Concern Caddo Parish-Villas South, Ltd. ------------------------------- Caddo Parish-Villas South, Ltd. ("Villas South") continues to be in default of its original mortgage agreement. Until November 1995, the project operated under a provisional workout agreement with HUD. During November 1995, the mortgage note was sold to a conventional mortgagee. These items raise substantial doubt about Villas South's ability to continue as a going concern. Villas South is in the process of trying to renegotiate the terms of the notes with the new mortgage holders, but there can be no assurance that the renegotiation will be successful. Villas South filed for protection under Chapter 11 of the United States Bankruptcy Code on November 12, 1996 and the equivalent of a receiver has been appointed. The Partnership's investment in Villas South was approximately $0 at both February 28, 2001 and February 29, 2000, respectively, and the minority interest balance was zero at each date. Villas South's net loss after minority interest amounted to approximately $0, $0 and $3,136,923, for the 2000, 1999 and 1998 Fiscal Years, respectively. Accordingly, for the Fiscal Year ended February 28, 1999 a loss on impairment in the amount of $3,191,072 was recognized. As of February 28, 1999, the building was written down to zero. Char-Mur Apartments, Ltd. ------------------------- During the year ended December 31, 2000, Char-Mur Apartments, Ltd. ("Char-Mur ") incurred a net loss of approximately $43,000 and, as of that date, the local partnership's total current liabilities exceeded its total current assets by approximately $168,000. These factors, among others, raise substantial doubt about the partnership's ability to continue as a going concern. Char-Mur's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to comply with the terms of its mortgage, to obtain additional capital contributions from partners, and ultimately, to attain successful operations. Management is making all efforts possible to increase the occupancy and the rental income of the project and to make the necessary improvements to enhance the property, in an attempt to improve Char-Mur's cash flow. The Partnership's investment in Char-Mur was approximately $122,000 and $164,000 at February 28, 2001 and February 29, 2000, respectively, and the minority interest balance was zero at each date. Char-Mur's net loss after minority interest amounted to approximately $43,000, $18,000 and $39,000 for the 2000, 1999 and 1998 Fiscal Years, respectively. Subsequently on March 16, 2001, the property and the related assets and liabilities of Char-Mur were sold (see Note 12). San Diego - Logan Square Gardens Company ---------------------------------------- As of December 31, 2000, San Diego - Logan Square Gardens Company ("Logan Square") has a bank overdraft of $157,906. Logan Square has experienced negative cash flow for the past several years. These conditions create an uncertainty as to Logan Square's ability to continue as a going concern. Management of Logan Square has taken certain steps intended to improve Logan Square's cash position and restore profitability, including making repairs to the property and obtaining approval from HUD for a rent increase. The ability of Logan Square to continue as a going concern is dependent upon the success of these actions. The financial statements do not include any adjustments relating to the recoverability of recorded asset amounts or the amount of liabilities that might be necessary should the project be unable to continue as a going concern. The Partnership's investment in Logan Square was approximately $1,248,000 and $1,501,000 at February 28, 2001 and February 29, 2000, respectively, and the minority interest balance was zero at each date. Logan Square's net loss after minority interest amounted to approximately $233,000, $150,000 and $56,000 for the 2000, 1999 and 1998 Fiscal Years, respectively. b) Purchase Money Notes As part of the purchase price of its investment in the Local Partnerships, the Partnership issued approximately $61,029,000 of Purchase Money Notes. As of the end of the 2000 Fiscal Year, unpaid accrued interest on the Purchase Money Notes amounted to approximately $30,335,000. The principal of and all accrued interest on the Purchase Money Notes is due at maturity. The Partnership was permitted to extend the term of the Purchase Money Notes for up to five additional years. In connection with such extensions, the Partnership incurred an extension fee of 1/2% per annum of the outstanding principal balance of the assets. The Partnership sent an extension notice to each Purchase Money Note holder that pursuant to the note, it was extending the maturity. However, in certain cases the Partnership did not pay the extension fee at that time, deferring such payment to the future. The holders of the Note could argue that until the fee is paid the Note has not been properly extended. c) Legal Proceedings The Partnership is the sole member of Cambridge Liquidating GP I, L.L.C., which is a 1% general partner in Cambridge Liquidating Trust II, a Massachusetts General Partnership ("CLT II"). The Partnership is the sole member of Cambridge Liquidating GP II, L.L.C., which is a 99% general partner in CLT II. On February 28, 2001, CLT II was a party to Cause No. 99-06802, pending in the 191st Judicial District Court of Dallas County, Texas; styled "CLT II v. Roar Company, a Texas Corporation, et al." CLT II asserted claims against the alleged owners and holders, Roar Company and liquidating trusts for whom Roar Company purports to act as trustee, of Purchase Money Notes executed by the Partnership in 1983. CLT II sought a declaratory judgment that maturity dates of the Purchase Money Notes were extended. CLT II also sought an accounting that the trustee for the alleged owners and holders of the Purchase Money Notes failed to make distributions to CLT II and/or its predecessors. Discovery was begun but not finished. Defendants denied CLT II's claims. Trial was scheduled for May 7, 2001. Mediation was conducted on December 7, 2000; but the case did not settle. The Purchase Money Notes at issue in that lawsuit relate to the acquisition by the Partnership, in 1983, of a 98.99% limited partnership interest in the following partnership operating apartment projects in the indicated cities: PARTNERSHIP LOCATION ----------- -------- Blue Ridge Manor, Ltd. Grandview, MO Gateway East, Ltd. El Paso, TX Lafayette Square Apartments, Ltd. Albuquerque, NM Logan Square Gardens Co. San Diego, CA Northwood Apartments, Ltd. Fort Worth, TX Oso Bay Apartments, Ltd. Corpus Christi, TX Tarleton Arms Apartments, Ltd. Stephensville, TX Chaparral Apartments, II, Ltd. Breckenridge, TX Rolling Meadows of Ardmore, Ltd. Ardmore, OK Caddo Parish - Villas South, Ltd. Caddo Parish, LA On April 9, 2001, Cause No. 99-06802, "CLT, II v. Roar Company, et al." was dismissed without prejudice. On or about July 24, 2000, three limited partnerships controlled by the Purchase Money Note holder commenced litigation in the Circuit Court of Jefferson County, Alabama against the Partnership, captioned as follows: Mobile Eastwyck III Apartments, Ltd. v. Shearson + Related Housing Properties Limited Partnership et al., CV-00-4431, Mobile Apartments, Ltd. v. Shearson + Related Housing Properties Limited Partnership et al., CV-00-4432, and Zeigler Partners Ltd. v. Shearson + Related Housing Properties Limited Partnership et al., CV-00-4433 (collectively, the "Litigations"). The Litigation commenced by Mobile Apartments, Ltd. has been voluntarily dismissed by the plaintiff in favor of an interpleader action described below. The plaintiffs in each of the Litigations sold their interests in certain limited partnerships to the Partnership. The interests that were sold to the Partnership consisted of limited partnerships that own low-income housing properties located in Mobile, Alabama (the "Alabama Limited Partnerships"). The Complaints allege that, as payment for a portion of the purchase price of the Partnership's acquired interest in the Alabama Limited Partnerships, the plaintiffs took a Purchase Money Note from the Partnership, and the Partnership pledged its right, title and interest in the Alabama Limited Partnerships as security for the Purchase Money Notes. The Complaints allege that the Partnership has defaulted in its obligations under the Purchase Money Notes, and that the plaintiffs are entitled to sell the Partnership's interests in the Alabama Limited Partnerships and the underlying property to pay off the Purchase Money Notes. The Partnership has vigorously contested the Litigations, claiming that, among other things, the Purchase Money Notes are not in default, that the Purchase Money Note holder has breached his fiduciary duty to the Partnership as general partner of the Alabama Limited Partnership, and that the Purchase Money Note holder assigned 25% of the Purchase Money Notes to third parties who are not joined in the Litigations. While the Partnership intends to continue to contest the Litigations, because the Litigations are in their earliest stages and no discovery has taken place, we are unable at this time to evaluate the likelihood of an unfavorable outcome or whether the resulting liability, if any, would have a material adverse effect on the financial condition of the Partnership. In or about March 2001, Wallace, Jordan, Ratliff, and Brandt, L.L.C. ("Wallace Jordan"), as Escrow Agents, commenced an interpleader action in the Circuit Court of Jefferson County, Alabama entitled Wallace, Jordan, Ratliff, and Brandt, LLC v. Shearson + Related Housing Properties Limited Partnership et al., CV -01-001155 (the "Interpleader Action"). The Interpleader Action seeks to resolve competing claims to $125,000 which is held in escrow by Wallace Jordan following the sale of the property known as Southbay, which was owned by the Local Partnership known as New Jersey, Ltd. The Partnership does not expect to have any liability as a result of the Interpleader Action because the action seeks only to resolve the claims of $125,000 paid into Court; however, because the Interpleader Action is in its earliest stages and no discovery has taken place, management is unable at this time to evaluate the likelihood of an unfavorable outcome or whether such an outcome would have a material adverse effect on the financial condition of the Partnership. d) 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 February 28, 2001, uninsured cash and cash equivalents and mortgage escrow deposits approximated $1,680,000. e) 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 instead of the above-market rentals which is generally the case under existing Section 8 Contracts. 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. f) Other The Partnership is subject to the risks incident to potential losses arising from the management and ownership of improved real estate. The Partnership can also be affected by poor economic conditions generally, however no more than 26% of the properties are located in any single state. 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. NOTE 12 - Subsequent Events In March 2001, a distribution of approximately $511,000 and $5,000 which was accrued at February 28, 2001 was paid to the limited partners and General Partners, respectively, from net proceeds from the sale of underlying properties. On March 16, 2001, the property and the related assets and liabilities of Char-Mur Apartments ("Char-Mur") were sold to an unaffiliated third party purchaser for $475,000, resulting in a loss in the amount of approximately $33,000. The Partnership used approximately $85,000 to settle the associated Purchase Money Note and accrued interest thereon, which had a total outstanding balance of approximately $986,000, resulting in forgiveness of indebtedness income of approximately $901,000. On April 9, 2001, Cause No. 99-06802, "CLT, II v. Roar Company, et al." was dismissed without prejudice. On April 19, 2001, San Diego - Logan Square Gardens Company ("Logan Square") 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 purchase price of $9,500,000. The closing is expected to occur in November 2001. No assurances can be given that the sale will actually occur. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None PART III Item 10. Directors and Executive Officers of the Registrant. The Partnership has no directors or officers. The Partnership's affairs are managed and controlled by the General Partners. Government Assisted Properties, Inc. (the "Assisted General Partner") and Related Housing Programs Corporation (the "Related General Partners") are affiliated with The Related Companies, L.P. ("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 manage and control the affairs of the Partnership by engaging other affiliates of Related. The Assisted General Partner was incorporated in Delaware on April 15, 1983 and the Related General Partner was incorporated in Delaware on July 2, 1982. On November 25, 1997, an affiliate of the Related General Partner purchased 100% of the stock of the Assisted General Partner (the "Transfer"). In addition to the Transfer, an affiliate of the Related General Partner also acquired the Assisted General Partner's general partner interest in Cambridge/Related Housing Associates Limited Partnership, the special limited partner of the Partnership. Pursuant to the Partnership's Amended and Restated Partnership Agreement, the consent of the limited partners was not required to approve the Transfer. 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 $1,000,814. See Note 8 to the Financial Statements in Item 8 above. Certain information concerning the directors and officers of the General Partners are set forth below. The director and officers of the Related General Partner are as follows: Name Position ---- -------- Stephen M. Ross Director Alan P. Hirmes President Stuart J. Boesky Senior Vice President Denise Kiley Vice President Marc Schnitzer Vice President Mark E. Carbone Vice President Robert Bordonaro Vice President Glenn F. Hopps Treasurer Teresa Wicelinski Secretary Susan J. McGuire Assistant Secretary STEPHEN M. ROSS, 61, President, Director and 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. 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, 46, has been a Certified Public Accountant in New York since 1978. Prior to joining Related 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 Directors of Aegis Realty, Inc. and Charter Municipal Mortgage Acceptance Company. STUART J. BOESKY, 44, 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, 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 Directors of Aegis Realty, Inc., Charter Municipal Mortgage Acceptance Company and American Mortgage Acceptance Company. DENISE L. KILEY, 41, 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 Related 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, 40, joined Related 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, 44, rejoined Related 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. ROBERT BORDONARO, 47, is a Vice President - Finance of Related. He has also served as Controller of Related. Mr. Bordonaro has been a Certified Public Accountant in New York since 1977. Prior to joining Related, Mr. Bordonaro was employed by the accounting firms of Weiner & Co. from 1982 to 1985 and Arthur Young from 1975 to 1981. Mr. Bordonaro graduated summa cum laude from New York University with a Bachelor of Science degree and with a Masters degree in Business Administration. GLENN F. HOPPS, 38, joined Related in December 1990, and prior to that date 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, 35, joined Related 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. SUSAN J. McGUIRE, 54, graduated from William Cullen Bryant High School in Woodside, New York, and attended Queensboro Community College. Since January 1977, she has served as Assistant to the President and Office Manager at Capital. From May 1973 to January 1977, she was employed as an administrative assistant with Condren, Walker & Co., Inc., an investment banking firm in New York City. 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 Marc D. Schnitzer Vice President Denise L. Kiley Vice President Mark E. Carbone Vice President Glenn F. Hopps Treasurer Teresa Wicelinski Secretary MICHAEL BRENNER, 55, is a Director of Aegis, and is the Executive Vice President and Chief Financial Officer of TRCLP. Prior to joining TRCLP in 1996, Mr. Brenner was a partner with Coopers & 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 and Aegis Realty, Inc. Biographical information with respect to Messrs. Hirmes, Boesky, Schnitzer, Kiley, Carbone, 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 Partnership Agreement, 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. 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 collectively 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 February 28, 2001, security ownership by the General Partners and their affiliates was as follows: Name and Address of Amount of Percentage Title of Class Beneficial Ownership Beneficial Ownership of Class -------------- -------------------- -------------------- -------- General Partnership Government Assisted Interest in the Properties, Inc. $ 1 25% Partnership 625 Madison Avenue New York, NY 10022 Related Housing Programs Corporation 1 25% 625 Madison Avenue New York, NY 10022 Cambridge/Related Housing Associates Limited Partnership 998 50% 625 Madison Avenue New York, NY 10022 The Assisted General Partner and the Related General Partner each hold a .5% general partnership interest in Cambridge Related Associates. Ronald W. Weiss and J. Michael Fried each own a 49.5% limited partner interest in Cambridge Related Associates. Ronald W. Weiss is not affiliated with the Assisted or Related General Partner. J. Michael Fried is no longer affiliated as of December 31, 1999. Item 13. Certain Relationships and Related Transactions. The Partnership has and will continue to have certain relationships with the General Partner and its affiliates, as discussed in Item 11 and also Note 8 to the Financial Statements in Item 8 above, which is incorporated herein by reference thereto. However, there have been no direct financial transactions between the Partnership and the directors and officers of the General Partners. Affiliates of the Related General Partner earned approximately $158,000 in management fees during the 1998 Fiscal Year for providing property management services to eight of the Local Partnerships.

All other schedules have been 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) The Partnership's Amended and Restated Agreement and Certificate of Limited Partnership, as filed with the Secretary of State of the Commonwealth of Massachusetts, incorporated by reference to Exhibit (3) to the Partnership's Annual Report on Form 10-K for the fiscal year ended February 29, 1984 (Commission File #0-12634). (21) The Local Partnerships set forth in Item 2 may be considered subsidiaries of the Registrant (b) Reports on Form 8-K None 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 on its behalf by the undersigned, thereunto duly authorized. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP By: GOVERNMENT ASSISTED PROPERTIES, INC., a general partner Date: May 22, 2001 By: ____________________________ Alan P. Hirmes President and By: RELATED HOUSING PROGRAMS CORPORATION, a general partner Date: May 22, 2001 By: _____________________________ Alan P. Hirmes President 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 --------- ----- ---- President (principal financial _____________________ officer) of Related Housing Alan P. Hirmes Programs Corporation and Government Assisted Properties, Inc. May 22, 2001 Treasurer (principal accounting _____________________ officer) of Related Housing Glenn F. Hopps Programs Corporation and Government Assisted Properties, Inc. May 22, 2001 _____________________ Director of Related Housing Stephen M. Ross Programs Corporation May 22, 2001 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 on its behalf by the undersigned, thereunto duly authorized. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP By: GOVERNMENT ASSISTED PROPERTIES, INC., a general partner Date: May 22, 2001 By: /s/ Alan P. Hirmes ------------------- Alan P. Hirmes President and By: RELATED HOUSING PROGRAMS CORPORATION, a general partner Date: May 22, 2001 By: /s/ Alan P. Hirmes ------------------- Alan P. Hirmes President 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 --------- ----- ---- President (principal financial /s/ Alan P. Hirmes officer) of Related Housing Alan P. Hirmes Programs Corporation and Government Assisted Properties, Inc. May 22, 2001 Treasurer (principal accounting /s/ Glenn F. Hopps officer) of Related Housing Glenn F. Hopps Programs Corporation and Government Assisted Properties, Inc. May 22, 2001 /s/ Stephen M. Ross Director of Related Housing Stephen M. Ross Programs Corporation May 22, 2001 INDEPENDENT AUDITORS' REPORT To the Partners of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries In connection with our audits of the consolidated financial statements of Cambridge + Related Housing Properties Limited Partnership and Subsidiaries included in this Form 10-K as presented in our opinion dated May 10, 2001 on pages 27 and 28, and based on the reports of other auditors, we have also audited supporting Schedules I and III for the 2000, 1999 and 1998 Fiscal Years. In our opinion, and based on the reports of other auditors (certain of which were modified due to the uncertainty 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 winding up its operations and disposing of its investments. It is anticipated that this process will take a number of years. As discussed in Note 11(a), one subsidiary partnership is in default of its mortgage agreement and two other subsidiary partnerships have incurred losses and their current liabilities exceed current assets. This raises substantial doubt about these subsidiary partnerships' abilities to continue as going concerns. The financial statements for one of these subsidiary partnerships were unaudited and the auditors for the other subsidiary partnerships modified their reports due to the uncertainty of the abilities of the subsidiary partnerships to continue in existence. In addition, during the 2000 Fiscal Year three subsidiary partnerships adopted plans to sell their properties and liquidate in lieu of continuing their businesses. As a result, the financial statements for these three subsidiary partnerships are presented on the liquidating basis of accounting. Such subsidiary partnerships' assets aggregated $6,791,125 at February 28, 2001. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties. As discussed in Note 7, the principal and all accrued interest on the purchase money notes became due during 1998 to 1999. The Partnership exercised its option to extend the maturity of such notes for three to five years. The Partnership expects that upon final maturity it will be required to refinance or sell its investments in the subsidiary partnerships in order to pay the purchase money notes and related interest obligations. 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 this uncertainty. TRIEN ROSENBERG ROSENBERG WEINBERG CIULLO & FAZZARI, LLP New York, New York May 10, 2001 CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT Summarized condensed financial information of registrant (not including consolidated subsidiary partnerships) CONDENSED BALANCE SHEETS ASSETS February 28, February 29, 2001 2000 ---------- --------- Cash and cash equivalents $ 1,716,718 $ 2,174,349 Investment in and advances to subsidiary partnerships 14,691,988 17,036,931 Other assets 210,367 237,369 ------- ------- Total assets $16,619,073 $ 19,448,649 =========== ============ LIABILITIES AND PARTNERS' DEFICIT Purchase money notes payable $20,801,534 $26,637,019 Due to general partner and affiliates 1,637,784 1,452,351 Due to selling partners 30,351,470 36,560,820 Other liabilities 46,226 97,008 Distribution payable 516,300 1,004,200 ------- --------- Total liabilities 53,353,314 65,751,398 Partners' deficit (36,734,241) (46,302,749) ----------- ----------- Total liabilities and partners' deficit $16,619,073 $19,448,649 =========== =========== 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. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT

(a) Includes suspended prior year losses in excess of investment in accordance with equity method of accounting amounting to $0, ($66,913) and ($4,742,328) for 2001, 2000 and 1999. CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE I CONDENSED FINANCIAL INFORMATION OF REGISTRANT CONDENSED STATEMENTS OF CASH FLOWS Year Ended ---------- February 28, February 29, February 28, 2001 2000 1999 ---- ---- ---- Cash flows from operating activities: Net income $10,084,808 $18,140,614 $ 8,846,985 ----------- ----------- ------------ Adjustments to reconcile net income to net cash used in operating activities: Loss (gain) on sale of investments in subsidiary partnerships 0 4,467,865 (11,970,286) Forgiveness of indebtedness income (10,348,388) (26,725,364) (7,567,720) (Increase) decrease in assets: Decrease in certificates of deposit 0 0 159,348 Equity in (income) loss of subsidiary partnerships (3,884,831) (501,350) 5,843,290 Decrease in other assets 367,339 562,605 15,661 Increase (decrease) in liabilities: Due to general partners and affiliates 185,433 366,353 63,158 Due to selling partners 2,082,541 2,770,875 3,569,130 Other liabilities (50,782) 68,475 10,868 ------- ------ ------ Total adjustments (11,648,688) (18,990,541) (9,876,551) ----------- ----------- ---------- Net cash used in operating activities (1,563,880) (849,927) (1,029,566) ---------- -------- ---------- Cash flows from investing activities: Proceeds from sale of investments in subsidiary partnerships 0 2,828,103 0 Investment in, advances to, and (repayments from) subsidiaries 107,803 (91,906) (242,213) Distributions from subsidiaries 6,121,971 2,753,325 2,039,907 --------- --------- --------- Net cash provided by investing activities 6,229,774 5,489,522 1,797,694 --------- --------- --------- Cash flows from financing activities: Principal payments of purchase money notes (4,001,079) (1,352,412) 0 Payments to selling partners (118,246) (1,393,987) (600,492) Distributions to partners (1,004,200) (2,020,374) (2,030,972) ---------- ---------- ---------- Net cash used in financing activities (5,123,525) (4,766,773) (2,631,464) ---------- ---------- ---------- Net decrease in cash and cash equivalents (457,631) (127,178) (1,863,336) Cash and cash equivalents, beginning of year 2,174,349 2,301,527 4,164,863 --------- --------- --------- Cash and cash equivalents, end of year $ 1,716,718 $ 2,174,349 $ 2,301,527 ============ =========== =========== CAMBRIDGE + RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION Partnership Property Pledged as Collateral FEBRUARY 28, 2001

(a) Properties are subject to mortgage notes and purchase money notes, as shown above. (b) No carrying costs have been capitalized since all properties were acquired after completion of construction. (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 date of acquisition. (d) Furniture and fixtures, included in building and improvements, are depreciated primarily by the straight line method over the estimated useful lives ranging from 5 to 15 years. (e) These amounts differ from the amounts presented in the audited financial statements of these subsidiary partnerships due to a difference in accounting between these partnerships and the other forty-one subsidiary partnerships. This difference, which is significant to the individual subsidiary partnerships, relates to discounts on the respective mortgages payable and the related acquisition cost and current carrying value of property and equipment. Geographic Locations: (1) Vermont, (2) New Hampshire, (3) Maine, (4) Tennessee, (5) Oklahoma, (6) Colorado, (7) Michigan, (8) California, (9) Massachusetts, (10) Texas, (11) Missouri, (12) Arizona, (13) Mississippi, (14) Alabama, (15) South Carolina, (16) New Mexico, (17) Louisiana, (18) Arkansas

At the time the local partnerships were acquired by Cambridge & Related Housing Properties Limited Partnership, the entire purchase price paid by Cambridge & Related Housing 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 RELATED HOUSING PROPERTIES LIMITED PARTNERSHIP 10-K