INDEPENDENCE TAX CREDIT PLUS L P II - 10-K Annual Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2002

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934

Commission File Number 33-37704-03

INDEPENDENCE TAX CREDIT PLUS L.P. II
------------------------------------
(Exact name of registrant as specified in its charter)

Delaware 13-3646846
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

625 Madison Avenue, New York, New York 10022
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(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:

TITLE OF CLASS
Limited Partnership Interests and Beneficial Assignment Certificates

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

PART I

Item 1. Business.

GENERAL

Independence Tax Credit Plus L.P. II (the "Partnership") is a limited
partnership which was formed under the laws of the State of Delaware on February
11, 1992. The general partner of the Partnership is Related Independence
Associates L.P., a Delaware limited partnership (the "General Partner"). The
general partner of the General Partner is Related Independence Associates Inc.,
a Delaware corporation ("RIAI").

On January 19, 1993, the Partnership commenced a public offering (the
"Offering") of Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests in the Partnership ("Limited
Partnership Interests"). The Partnership received $58,928,000 of gross proceeds
from the Offering (the "Gross Proceeds") from 3,475 investors ("BACs holders").
The Offering was terminated on April 7, 1994.

The Partnership's business is primarily to invest as a limited partner in other
partnerships ("Local Partnerships") owning apartment complexes ("Apartment
Complexes" or "Properties") that are eligible for the low-income housing tax
credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986, some of
which may also be eligible for the historic rehabilitation tax credit ("Historic
Tax Credit"; and together with Housing Tax Credits, "Tax Credits"). The
Partnership's investment in each Local Partnership represents 98.99% of the
partnership interests in the Local Partnership. As of March 31, 2002, the
Partnership had acquired interests in fifteen Local Partnerships and does not
anticipate making any additional investments. As of March 31, 2002,
approximately $47,000,000 (not including acquisition fees of approximately
$3,502,000) of net proceeds has been invested in fifteen Local Partnerships of
which approximately $503,000 remains to be paid to the Local Partnerships, as
certain benchmarks such as occupancy levels must be attained prior to the
release of such funds. The Partnership does not intend to acquire additional
properties, however, the Partnership may be required to pay for potential
purchase price adjustments based on tax credit adjustor clauses. See Item 2.
Properties, below.

INVESTMENT OBJECTIVES/GOVERNMENT INCENTIVES

The Partnership was formed to invest in Apartment Complexes that are eligible
for the Housing Tax Credit enacted in the Tax Reform Act of 1986. Some Apartment
Complexes may also be eligible for Historic Tax Credits. The investment
objectives of the Partnership are described below.

1. Entitle qualified BACs holders to Tax Credits over the period of the
Partnership's entitlement to claim Tax Credits (for each Property, generally ten
years from the date of investment or, if later, the date the Property is leased
to qualified tenants; referred to herein as the "Credit Period") with respect to
each Apartment Complex.

2. Preserve and protect the Partnership's capital.

3. Participate in any capital appreciation in the value of the Properties and
provide distributions of Sale or Refinancing Proceeds upon the disposition of
the Properties.

4. Allocate passive losses to individual BACs holders to offset passive income
that they may realize from rental real estate investments and other passive
activities, and allocate passive losses to corporate BACs holders to offset
business income.

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One of the Partnership's objectives is to entitle qualified
BACs holders to Tax Credits over the Credit Period. Each of the Local
Partnerships in which the Partnership has acquired an interest has been
allocated by the relevant state credit agencies the authority to recognize Tax
Credits during the Credit Period provided that the Local Partnership satisfies
the rent restriction, minimum set-aside and other requirements for recognition
of the Tax Credits at all times during such period. Once a Local Partnership has
become eligible to recognize Tax Credits, it may lose such eligibility and
suffer an event of "recapture" if its Property fails to remain in compliance
with the Tax Credit requirements. None of the Local Partnerships in which the
Partnership has acquired an interest has suffered an event of recapture.

There can be no assurance that the Partnership will achieve its investment
objectives as described above.

COMPETITION
The real estate business is highly competitive and substantially all of the
properties acquired by the Partnership are expected to have active competition
from similar properties in their respective vicinities. Various other limited
partnerships may, in the future, be formed by the General Partner and/or its
affiliates to engage in businesses which may be competitive with the
Partnership.

EMPLOYEES
The Partnership does not have any direct employees. All services are performed
for the Partnership by the General Partner and its affiliates. The General
Partner receives compensation in connection with such activities as set forth in
Items 11 and 13. In addition, the Partnership reimburses the General Partner and
certain of its 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 of Limited Partnership
(the "Partnership Agreement").

Item 2. Properties.

The Partnership holds a 98.99% limited partnership interest in fifteen Local
Partnerships as of March 31, 2002. Set forth below is a schedule of the Local
Partnerships including certain information concerning their respective Apartment
Complexes (the "Local Partnership Schedule"). Further information concerning
these Local Partnerships and their properties, including any encumbrances
affecting the properties, may be found in Item 14. Schedule III.

LOCAL PARTNERSHIP SCHEDULE

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LOCAL PARTNERSHIP SCHEDULE
(continued)

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All leases are generally for periods not exceeding one to two years and no
tenant occupies more than 10% of the rentable square footage.

Rents from commercial tenants (to which average rental per square foot applies)
comprise less than 5% of the rental revenues of the Partnership. Maximum
allowable rents for the residential units are determined annually by HUD.

Management continuously reviews the physical state of the properties and
suggests to the respective general partners of the Local Partnerships ("Local
General Partners") budget improvements which are generally funded from cash flow
from operations or release of replacement reserve escrows.

Management continuously reviews the insurance coverage of the properties and
believes such coverage is adequate.

See Item 1, Business, above for the general competitive conditions to which the
properties described above are subject.

Real estate taxes are calculated using rates and assessed valuations determined
by the township or city in which the property is located. Such taxes have
approximated 1% of the aggregate cost of the properties as shown in Schedule III
to the financial statements included herein.

In connection with investments in development-stage Apartment Complexes, the
General Partner generally required that the Local General Partners provide
completion guarantees and/or undertake to repurchase the Partnership's interest
in the Local Partnership if construction or rehabilitation was not completed
substantially on time or on budget ("Development Deficit Guarantees"). The
Development Deficit Guarantees generally also required the Local General Partner
to provide any funds necessary to cover net operating deficits of the Local
Partnership until such time as the Apartment Complex had achieved break-even
operations. The General Partner generally required that the Local General
Partners undertake an obligation to fund operating deficits of the Local
Partnership (up to a stated maximum amount) during a limited period of time
(typically three to five years) following the achievement of break-even
operations ("Operating Deficit Guarantees"). Under the terms of the Development
and Operating Deficit Guarantees, amounts funded have been treated as Operating
Loans which will not bear interest and which will be repaid only out of 50% of
available cash flow or out of available net sale or refinancing proceeds. In
some instances, the Local General Partners are required to undertake an
obligation to comply with a Rent-Up Guaranty Agreement, whereby the Local
General Partner agrees to pay liquidated damages if predetermined occupancy
rates are not achieved. These payments are made without right of repayment. In
cases where the General Partner deems it appropriate, the obligations of a Local
General Partner under the Development Deficit (all of which have expired as of
March 31, 2002), Operating Deficit (all current operating deficits expire within
the next year) and/or Rent-Up Guarantees (all rent-up deficit guarantees have
expired as of March 31, 2002) are secured by letters of credit and/or cash
escrow deposits.

Housing Tax Credits with respect to a given Apartment Complex are available for
a ten-year period that commences when the property is placed into service.
However, the annual Tax Credits available in the year in which the Apartment
Complex is placed in service, must be prorated based upon the months remaining
in the year. The amount of the annual Tax Credit not available in the first year
will be available in the eleventh year. In certain cases, the Partnership
acquired its interest in a Local Partnership after the Local Partnership had
placed its Apartment Complex in service. In these cases, the Partnership may be
allocated Tax Credits only beginning in the month following the month in which
it acquired its interest and Tax Credits allocated in any prior period are not
available to the Partnership.

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Item 3. Legal Proceedings.

None.

Item 4. Submission of Matters to a Vote of Security Holders.

None.

PART II

Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters.

As of March 31, 2002, the Partnership had issued and outstanding 58,928 Limited
Partnership Interests, each representing a $1,000 capital contribution to the
Partnership, or an aggregate capital contribution of $58,928,000 before volume
discounts of $2,000. All of the issued and outstanding Limited Partnership
Interests have been issued to Independence Assignor Inc. (the "Assignor Limited
Partner"), which has in turn issued 58,928 BACs to the purchasers thereof for an
aggregate purchase price of $58,928,000 reduced by volume discounts of $2,000.
Each BAC represents all of the economic and virtually all of the ownership
rights attributable to a Limited Partnership Interest held by the Assignor
Limited Partner. BACs may be converted into Limited Partnership Interests at no
cost to the holder (other than the payment of transfer costs not to exceed
$100), but Limited Partnership Interests so acquired are not thereafter
convertible into BACs.

Neither the BACs nor the Limited Partnership Interests are traded on any
established trading market. The Partnership does not intend to include the BACs
for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in "publicly
traded partnerships." Accordingly, the General Partner has imposed limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restrictions
should prevent a public trading market from developing and may adversely affect
the ability of an investor to liquidate his or her investment quickly. It is
expected that these procedures will remain in effect until such time, if ever,
as further revision of the Revenue Act of 1987 may permit the Partnership to
lessen the scope of the restrictions.

As of March 31, 2002, the Partnership has approximately 3,425 registered holders
of an aggregate of 58,928 BACs.

All of the Partnership's general partnership interests, representing an
aggregate capital contribution of $1,000, are held by the General Partner.

There are no material legal restrictions in the Partnership Agreement on the
ability of the Partnership to make distributions. However, the Partnership has
made no distributions to the BACs holders as of March 31, 2002. The Partnership
does not anticipate providing cash distributions to its BACs holders other than
from net refinancing or sales proceeds.

In January 2001, affiliates of Everest Properties, Inc. ("Everest") conducted a
tender offer for up to 1,492.50 BACs. In connection with a prior tender offer
for BACs, an affiliate of the General Partner entered into a standstill
agreement dated as of April 23, 1997 (the "Standstill"), which precluded Everest
from independently soliciting BACs (by tender offer or otherwise). At Everest's
request, the General Partner caused its affiliate to release Everest from the
Standstill for the limited purpose of permitting Everest to make its tender
offer. In connection with such

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arrangements, Everest agreed to cover all of the Partnership's expenses with
respect to processing the tender offer including mailing costs, legal fees and
other administrative costs incurred by the Partnership. These reimbursements
resulted in aggregate payments to the Partnership of $65,928 which are reflected
as "other income" on the financial statements for Fiscal Year 2000.

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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
consolidated financial statements in Item 8 hereof.

During the years ended March 31, 2002, 2001 and 2000, respectively, total assets
decreased primarily due to depreciation partially offset by improvements to
property and equipment. During the year ended March 31, 1998, total assets
decreased primarily due to depreciation, loss on impairment of assets and the
repayments of amounts due to Local General Partners and affiliates, partially
offset by improvements to property and equipment.

CASH DISTRIBUTIONS
The Partnership has made no distributions to the BACs holders as of March 31,
2002.

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Selected Quarterly Financial Data (Unaudited)

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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.

LIQUIDITY AND CAPITAL RESOURCES

GENERAL

The Partnership's primary source of funds is a working capital reserve and
interest thereon. This source of funds is available to meet obligations of the
Partnership.

Through March 31, 2002, the Partnership has invested all of the net proceeds in
fifteen Local Partnerships of which approximately $503,000 remains to be paid
(including approximately $244,000 being held in escrow).

For the Fiscal Year ended March 31, 2002, cash and cash equivalents for the
Partnership and its fifteen consolidated Local Partnerships increased
approximately $339,000. This increase was due to cash provided by operating
activities ($992,000) and a decrease in cash held in escrow relating to
investing activities ($72,000) which exceeded improvements to property and
equipment ($336,000), a net decrease in due to local general partners and
affiliates relating to investing and financing activities ($18,000), principal
payments of mortgage notes ($297,000) and a decrease in capitalization of
consolidated subsidiaries attributable to minority interest ($74,000). Included
in the adjustments to reconcile the net loss to cash provided by operating
activities is depreciation and amortization ($3,501,000).

At March 31, 2002, there is a balance of approximately $159,000 in the working
capital reserve. The General Partner believes that these reserves, plus cash
distributions to be received from the operations of the Local Partnerships, will
be sufficient (subject to the continued deferral of fees payable to the General
Partner) to fund the Partnership's ongoing operations for the foreseeable
future. During the years ended March 31, 2002, 2001 and 2000, amounts received
from operations of the Local Partnerships were approximately $71,000, $68,000
and $70,000, respectively. Management anticipates receiving distributions in the
future, although not to a level sufficient to permit providing cash
distributions to BACs holders.

Partnership management fees owed to the General Partner amounting to
approximately $2,247,000 and $1,751,000 were accrued and unpaid as of March 31,
2002 and 2001, respectively (see Note 8). Without the General Partners' advances
and continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partner has continued to advance and allow the accrual
without payment of these amounts but is under no obligation to continue to do
so.

The Partnership has negotiated Operating Deficit Guaranty Agreements with all
Local Partnerships by which the Local General Partners have agreed to fund
operating deficits for a specified period of time. The terms of the Operating
Deficit Guaranty Agreements vary for each Local Partnership, with maximum dollar
amounts to be funded for a specified period of time, generally three years,
commencing on the break-even date. The gross amount of the Operating Deficit
Guarantees aggregates approximately $5,670,000, of which $4,840,000 has expired
as of March 31, 2002. As of March 31, 2002, $374,626 has been funded under the
Operating Deficit Guaranty agreements. All current Operating Deficit Guarantees
expire within the next year. Management does not expect their expiration to have
a material impact on liquidity based on prior years' fundings.

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
subsidiary partnerships, the resolution of the existing

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contingencies is not anticipated to impact future results of operations,
liquidity or financial condition in a material way. However, the Partnership's
loss of its investment in a Local Partnership will eliminate the ability to
generate future Tax Credits from such Local Partnership and may also result in
recapture of Tax Credits if the investment is lost before expiration of the
Credit Period.

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 for 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 country 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. The Partnership has invested the proceeds of
its offering in 15 Local Partnerships, all of which fully have their Tax Credits
in place. The Tax Credits are attached to the property for a period of ten
years, and are transferable with the property during the remainder of the
ten-year period. If trends in the real estate market warranted the sale of a
property, the remaining Tax Credits would transfer to the new owner; thereby
adding significant value to the property on the market, which are not included
in the financial statement carrying amount.

RESULTS OF OPERATIONS

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).

Through March 31, 2002, the Partnership has recorded approximately $3,926,000 as
a loss on impairment of assets.

The following is a summary of the results of operations of the Partnership for
the years ended March 31, 2002, 2001 and 2000 (the 2001, 2000 and 1999 Fiscal
Years, respectively).

The net loss for the 2001, 2000 and 1999 Fiscal Years totaled $4,132,678,
$4,806,575 and $4,914,664, respectively.

The Partnership and BACs holders began to recognize Tax Credits with respect to
a Property when the Credit Period for such Property commenced. Because of the
time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC gradually increased over the first three years of
the Partnership. Housing Tax Credits not recognized in the first three years
will be recognized in the 11th through 13th years. The Partnership generated
$8,746,267, $8,728,115 and $8,728,115 of Housing Tax Credits during the 2001,
2000 and 1999 tax years, respectively.

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2002 VS. 2001
The Partnership's results of operations for the 2001 and 2000 Fiscal Years
consisted primarily of the results of the Partnership's investment in fifteen
consolidated Local Partnerships. 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.

Rental income increased approximately 4% for the year ended March 31, 2002 as
compared to 2001 primarily due to rental rate increases.

Total expenses, excluding operating, remained fairly consistent with a decrease
of approximately 2% for the year ended March 31, 2002 as compared to 2001.

Operating decreased approximately $126,000 for the year ended March 31, 2002 as
compared to 2001 primarily due to decreased electrical and water charges at one
Local Partnership for the year ended March 31, 2002.

2000 VS. 1999
The Partnership's results of operations for the 2000 and 1999 Fiscal Years
consisted primarily of the results of the Partnership's investment in fifteen
consolidated Local Partnerships. 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.

Rental income increased approximately 3% for the year ended March 31, 2001 as
compared to 2000 primarily due to rental rate increases.

Other income increased approximately $203,000 for the year ended March 31, 2001
as compared to 2000 primarily due to increased laundry income at one Local
Partnership and administrative fees paid by the offerer to the Partnership in
connection with a tender offer for the Partnership's BACs at the Partnership
level.

Total expenses, excluding operating, remained fairly consistent with an increase
of approximately 1% for the year ended March 31, 2001 as compared to 2000.

Operating increased approximately $199,000 for the year ended March 31, 2001 as
compared to 2000 primarily due to increased electrical and water charges at one
Local Partnership for the year ended March 31, 2001.

RESULTS OF OPERATIONS OF CERTAIN LOCAL PARTNERSHIPS

CLEAR HORIZONS LIMITED PARTNERSHIP
At December 31, 2001, Clear Horizons Limited Partnership ("Clear Horizons")
current liabilities exceeded its current assets by over $162,000. Although this
condition could raise substantial doubt about Clear Horizons' ability to
continue as a going concern, such doubt is alleviated as follows:

1. Included in current liabilities at December 31, 2001, is $164,908 owed to
related parties who have advised Clear Horizons that they do not intend to
pursue collection beyond Clear Horizons' ability to pay.

2. The Local General Partner of Clear Horizons has agreed to fund operating
deficits up to $250,000.

Accordingly, management believes that Clear Horizons has the ability to continue
as a going concern for at least one year from December 31, 2001.

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OTHER

The Partnership's investment as a limited partner in the Local Partnerships is
subject to the risks of potential losses arising from management and ownership
of improved real estate. The Partnership's investments also could be adversely
affected by poor economic conditions generally, which could increase vacancy
levels and rental payment defaults and by increased operating expenses, any or
all of which could threaten the financing viability of one or more of the Local
Partnerships.

There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These include governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent 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 the Department of Housing and Urban Development 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 also affects the Local Partnerships
adversely by increasing operating costs as, for example, for such items as fuel,
utilities and labor.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

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Item 8. Financial Statements and Supplementary Data.

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INDEPENDENT AUDITORS' REPORT

To the Partners of
Independence Tax Credit Plus L.P. II and Subsidiaries
(A Delaware Limited Partnership)

We have audited the consolidated balance sheets of Independence Tax Credit Plus
L.P. II and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2002
and 2001, and the related consolidated statements of operations, changes in
partners' capital (deficit), and cash flows for the years ended March 31, 2002,
2001 and 2000 (the 2001, 2000 and 1999 Fiscal Years, respectively). The
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements for twelve (Fiscal 2001)
and fifteen (Fiscal 2000 and 1999) subsidiary partnerships whose losses
aggregated $2,471,026, $4,013,266 and $4,170,745 for the 2001, 2000 and 1999
Fiscal Years, respectively, and whose assets constituted 68% and 97% of the
Partnership's assets at March 31, 2002 and 2001, respectively, presented in the
accompanying consolidated financial statements. The financial statements of
these subsidiary partnerships were audited by other auditors whose reports
thereon have been furnished to us and our opinion expressed herein, insofar as
it relates to the amounts included for these subsidiary partnerships, is based
solely upon the reports of the other auditors.

We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, based upon our audits and the reports of other auditors, the
accompanying consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Independence Tax Credit Plus
L.P. II and Subsidiaries at March 31, 2002 and 2001, and the results of their
operations and their cash flows for the years ended March 31, 2002, 2001 and
2000, in conformity with U.S. generally accepted accounting principles.

Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP

New York, New York
June 13, 2002

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[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lincoln Renaissance

We have audited the accompanying balance sheet of Lincoln Renaissance as of
December 31, 2001, and the related statements of profit and loss, changes in
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. The financial statements of Lincoln Renaissance for the year ended
December 31, 2000, were audited by other auditors whose report, dated January
16, 2001, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 2001 financial statements referred to above present fairly,
in all material respects, the financial position of Lincoln Renaissance as of
December 31, 2001, and the results of its operations, the changes in partners'
equity (deficit) and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 1, 2002

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[Letterhead of ZINER, KENNEDY & LEHAN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Lincoln Renaissance

We have audited the accompanying balance sheets of Lincoln Renaissance (a
Pennsylvania Limited Partnership) as of December 31, 2000 and 1999, and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. 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 the
Partnership's general partners and contracted management agent, 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 Lincoln Renaissance at December
31, 2000 and 1999, and the results of its operations, changes in partners'
equity and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

/s/ Ziner, Kennedy & Lehman LLP
Boston, Massachusetts
January 16, 2001

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Letterhead of WIELAND & COMPANY, INC.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
United - Germano - Millgate Limited Partnership

We have audited the accompanying balance sheets of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 2001
and 2000, and the related statements of operations, partners' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards, GOVERNMENT AUDITING STANDARDS issued by the Comptroller General of
the United States and the Illinois Housing Development Authority's FINANCIAL
REPORTING AND AUDITS GUIDELINES FOR MORTGAGORS OF MULTIFAMILY HOUSING
DEVELOPMENTS. 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 United - Germano - Millgate
Limited Partnership as of December 31, 2001 and 2000, and the results of its
operations, changes in partners' equity, and cash flows for the years then ended
in conformity with generally accepted accounting principles.

In accordance with GOVERNMENT AUDITING STANDARDS, the Illinois Housing
Development Authority's FINANCIAL REPORTING AND AUDIT GUIDELINES FOR MORTGAGORS
OF MULTIFAMILY HOUSING DEVELOPMENTS, 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 11, 2002, on our consideration of
the internal control of United - Germano - Millgate Limited Partnership, and
reports dated February 11, 2002, on its compliance with specific requirements
applicable to major HUD and IHDA-assisted programs and specific requirements
applicable to Fair Housing and Non-Discrimination.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information is presented for purposes of additional analysis and is not a
required part of the basic financial statements of United - Germano - Millgate
Limited Partnership. 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/ Wieland & Company, Inc.
Batavia, Illinois
February 11, 2002

EIN 36-4025026
Engagement Partner: Paul H. Wieland

-18-

[Letterhead of WIELAND & COMPANY, INC.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
United - Germano - Millgate Limited Partnership

We have audited the accompanying balance sheets of United - Germano - Millgate
Limited Partnership (an Illinois limited partnership) as of December 31, 2000
and 1999, and the related statements of operations, partners' equity, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards, Government Auditing Standards issued by the Comptroller General of
the United States and the Illinois Housing Development Authority's Financial
Reporting and Audits Guidelines for Mortgagors of Multifamily Housing
Developments. 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 United - Germano - Millgate
Limited Partnership as of December 31, 2000 and 1999, and the results of its
operations, changes in partners' equity, and cash flows for the years then ended
in conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards, the Illinois Housing
Development Authority's Financial Reporting and Audit Guidelines for Mortgagors
of Multifamily Housing Developments, 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 2, 2001, on our consideration of the
internal control of United - Germano - Millgate Limited Partnership, and reports
dated February 2, 2001, on its compliance with specific requirements applicable
to major HUD and IHDA-assisted programs and specific requirements applicable to
Fair Housing and Non-Discrimination.

-19-

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information is presented for purposes of additional analysis and is not a
required part of the basic financial statements of United - Germano - Millgate
Limited Partnership. 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/ Wieland & Company, Inc.

Batavia, Illinois
February 2,2001

EIN 36-4025026

-20-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mansion Court Associates

We have audited the accompanying balance sheet of Mansion Court Associates as of
December 31, 2001, and the related statements of operations, changes in
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. The financial statements of Mansion Court Associates for the year
ended December 31, 2000, were audited by other auditors whose report, dated
January 27, 2001, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the 2001 financial statements referred to above present fairly,
in all material respects, the financial position of Mansion Court Associates as
of December 31, 2001, and the results of its operations, the changes in
partners' equity (deficit) and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 1, 2002

-21-

[Letterhead of ZINER, KENNEDY & LEHAN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Mansion Court Associates

We have audited the accompanying balance sheets of Mansion Court Associates (a
Pennsylvania limited partnership) as of December 31, 2000 and 1999 and the
related statements of operations, changes in partners' equity and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's general partners and contracted management agent. 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 the
Partnership's general partners and contracted management agent, 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 Mansion Court Associates at
December 31, 2000 and 1999, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 27, 2001

-22-

[Letterhead of WALL, EINHORN & CHERNITZER, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners Virginia Housing Development Authority
DERBY RUN ASSOCIATES, L.P. 601 South Belvidere Street
(A Virginia Limited Partnership) Richmond, Virginia 23320
Virginia Beach, Virginia

We have audited the accompanying balance sheets of DERBY RUN ASSOCIATES, L.P. (A
Virginia Limited Partinrship) as of December 31, 2001 and 2000, and the related
statements of operations, partners' equity, and cash flows for the years 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 audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 DERBY RUN ASSOCIATES, L.P. as
of December 31, 2001 and 2000, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity and
accounting principles generally accepted in the United States and America.

The accompanying supplementary information shown on pages 14 - 20, 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements referred to above. The Partnership's management has elected
to disclose certain information relating to the low-income housing tax credits
allocated to the Partnership as described in Note 7 to the financial statements
which are not required to be disclosed in accordance with auditing standards
generally accepted in the United States of America. Such disclosures have not
been subjected to the auditing procedures applied in the audits of the financial
statements, and accordingly, we express no opinion on them.

/s/ Wall, Einhorn & Chernitzer, P.C.
Norfolk, Virgina
January 17, 2002

-23-

[Letterhead of WALL, EINHORN & CHERNITZER, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
Derby Run Associates, L.P.
(A Virginia Limited Partnership)
Virginia Beach, Virginia

We have audited the accompanying balance sheets of Derby Run Associates, L.P.,
(A Virginia Limited Partnership) as of December 31, 2000 and 1999, and the
related statements of operations, partners' equity and cash flows for the years
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 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 Derby Run Associates, L.P. as of
December 31, 2000 and 1999, and the results of its operations, changes in
partner's equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

The accompanying supplementary information shown on pages 13-19, 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 financial
statements taken as a whole.

Our audits were conducted for the purposes of forming an opinion on the
financial statements referred to above. The Partnership's management has elected
to disclose certain information relating to the low-income housing tax credits
allocated to the Partnership as described in Note 7 to the financial statements
which are not required to be disclosed in accordance with generally accepted
accounting principles. Such disclosures have not been subjected to the auditing
procedures applied in the audits of the financial statements and, accordingly,
we express no opinion on them.

/s/ Wall, Einhorn & Chernitzer, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
Norfolk, Virginia
January 25, 2001

-24-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Renaissance Plaza 93 Associates, L.P.

We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. 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 Renaissance Plaza 93
Associates, L.P. as of December 31, 2000, and the results of its operations, the
changes in partners' equity (deficit) and 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 23 through 33
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
12, 2001 on our consideration of Renaissance Plaza 93 Associates, L.P.'s
internal control and on its compliance with requirements applicable to
DHCD-assisted programs, and laws and regulations applicable to the financial
statements.

/s/ Reznick Fedder & Silverman
Audit Principal: Robert J. Denmark
Bethesda, Maryland
Federal Employer Identification Number: 52-1088612
February 12, 2001

-25-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Renaissance Plaza 93 Associates, L.P.

We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. 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 Renaissance Plaza 93
Associates, L.P. as of December 31, 1999, and the results of its operations, the
changes in partners' equity (deficit) and 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 23 through 33
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 26,
2000 on our consideration of Renaissance Plaza 93 Associates, L.P.'s internal
control and on its compliance with requirements applicable to DHCD-assisted
programs, and laws and regulations applicable to the financial statements.

/s/ Reznick Fedder & Silverman
Audit Principal: Robert J. Denmark
Bethesda, Maryland
Federal Employer Identification Number: 52-1088612
January 26, 2000

-26-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Tasker Village Associates

We have audited the accompanying balance sheet of Tasker Village Associates as
of December 31, 2001, and the related statements of profit and loss, changes in
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. The financial statements of Tasker Village Associates for the year
ended December 31, 2000, were audited by other auditors whose report, dated
January 19, 2001, expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing stardards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
the 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 2001 financial statements referred to above present fairly,
in all material respects, the financial position of Tasker Village Associates as
of December 31, 2001, and the results of its operations, the changes in
partners' equity (deficit) and its cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 8, 2002

-27-

[Letterhead of ZINER, KENNEDY & LEHAN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Tasker Village Associates

We have audited the accompanying balance sheets of Tasker Village Associates (a
Pennsylvania limited partnership) as of December 31, 2000 and 1999, and the
related statements of operations, changes in partners' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's general partners and contracted management agent. 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 the
Partnership's general partners and contracted management agent, as well as
evaluating the overall financial statement presentation. We believe that our
audits 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 Tasker Village Associates at
December 31, 2000 and 1999, and the results of its operations, changes in
partners' equity, and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 19, 2001

-28-

[Letter of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
2001 and the related statements of loss, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Martha Bryant Manor, L.P.'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.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit include examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also include
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 Marth Bryant Manor, L.P. at
December 31, 2001 and the results of its operations and its cash flow for the
year then ended in conformity with generally accepted accounting principles.

/s/ Clifford R. Benn
February 26, 2002
Carson, California

-29-

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
2000 and the related statements of income, changes in partners' capital, and
cash flow for the year then ended. These financial statements are the
responsibility of Martha Bryant Manor, L.P.'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.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 Martha Bryant Manor, L.P. at
December 31, 2000 and the results of its operations and its cash flow for the
year then ended in conformity with generally accepted accounting principles.

/s/ Clifford R. Benn
Carson, California
February 13, 2001

-30-

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
1999 and the related statements of income, changes in partners' capital, and
cash flow for the year then ended. These financial statements are the
responsibility of Martha Bryant Manor, L.P.'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.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. 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 Martha Bryant Manor, L.P. at
December 31, 1999 and the results of its operations and its cash flow for the
year then ended in conformity with generally accepted accounting principles.

/s/ Clifford R. Benn
Carson, California
February 23, 2000

-31-

[Letterhead of MARVIN D. MASON]

To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheets of Colden Oaks, a California
Limited Partnership, as of December 31, 2001 and 2000, and the related
statements of operations, changes in partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's general partners. My responsibility is to express an opinion on
these financial statements based on my audit.

I conducted my audit in accordance with general accepted auditing standards.
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 the
Partnership's general partners, 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 the
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 2001 and 2000, and the results of its operations,
changes in partners' equity and its cash flows for the year then ended in
conformity with general accepted accounting principles.

/s/ Marvin Mason
Certified Public Accountant
Tarzana, California
March 1, 2002

-32-

[Letterhead of MARVIN D. MASON]

To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheets of Colden Oaks, a California
Limited Partnership, as of December 31, 2000 and 1999, and the related
statements of operations, changes in partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's general partners. 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.
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 the
Partnership's general partners, 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 Colden Oaks, a California Limited
Partnership as of December 31, 2000 and 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/ Marvin Mason
Certified Public Accountant
Tarzana, California
March 1, 2001

-33-

Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 2001
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'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.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also include
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 Brynview Terrace, L.P. at December
31, 2001 and the results of its operations and its cash flow for the year then
ended in conformity with generally accepted accounting principles.

/s/ Clifford R. Benn
February 22, 2002
Carson, California

-34-

Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 2000
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'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.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also include
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 Brynview Terrace, L.P. at December
31, 2000 and the results of its operations and its cash flow for the year then
ended in conformity with generally accepted accounting principles.

/s/Clifford R. Benn, C.P.A.
Carson, California
February 6, 2001

-35-

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 1999
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'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.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatements. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also include
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 Brynview Terrace, L.P. at December
31, 1999 and the results of its operations and its cash flow for the year then
ended in conformity with generally accepted accounting principles.

/s/ Clifford R. Benn, C.P.A.
Carson, California
February 17, 2000

-36-

[Letterhead of ROBERT J. PACHECO, CPA]

Independent Auditor's Report

To the Partners of NLEDC, L.P., A California Limited Partnership:

We have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 2001, 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. 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 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 NLEDC, L.P., a California
Limited Partnership, at 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, we have also issued reports dated March 11, 2002, on our
consideration of the Partnership's internal control, on its compliance with
specific requirements applicable to nonmajor HUD programs and specific
requirements applicable to Fair Housing and Non-Discrimination.

/s/ Robert J. Pacheco, CPA
Pasadena, California
March 11, 2002

-37-

[Letterhead of ROBERT J. PACHECO, CPA]

Independent Auditor's Report

To the Partners of NLEDC, L.P., A California Limited Partnership:

We have audited the accompanying balance sheet of NLEDC, L.P., a California
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. 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 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 NLEDC, L.P., a California
Limited Partnership, at 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, we have also issued reports dated March 30, 2001, on our
consideration of the Partnership's internal control, on its compliance with
specific requirements applicable to nonmajor HUD programs and specific
requirements applicable to Fair Housing and Non-Discrimination. These 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/ Robert Pacheco
Pasadena, California
March 30, 2001

-38-

[Letterhead of ROBERT J. PACHECO, CPA]

Independent Auditor's Report

To the Partners of NLEDC, L.P., A California Limited Partnership:

I have audited the accompanying balance sheet of NLEDC, L.P., a California
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 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 NLEDC, L.P., a California Limited
Partnership, at 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 reports dated March 25, 2000, on my
consideration of the Partnership's internal control, on its compliance with
specific requirements applicable to nonmajor HUD programs and specific
requirements applicable to Fair Housing and Non-Discrimination.

/s/ Robert Pacheco
Pasadena, California
March 25, 2000

-39-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Creative Choice Homes VI, Ltd.

We have audited the accompanying balance sheet of Creative Choice Homes VI, 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.
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 Creative Choice Homes VI, Ltd.
as of December 31, 2000, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
January 31, 2001

-40-

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Creative Choice Homes VI, Ltd.

We have audited the accompanying balance sheet of Creative Choice Homes VI, 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.
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 Creative Choice Homes VI, Ltd.
as of December 31, 1999, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
January 11, 2000

-41-

[Letterhead of CHARLES P. BENEDICT, CPA]

Independent Auditor's Report

To the Partners
P & P Home for the Elderly, L.P.
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. as of December 31, 2001, 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.
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 P & P Home for the Elderly, L.P. at
December 31, 2001, and the results of its operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

/s/ Charles P. Benedict, CPA
Monrovia, California
February 28, 2002

-42-

[Letterhead of CHARLES P. BENEDICT, CPA]

Independent Auditor's Report

To the Partners
P & P Home for the Elderly, L.P.
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. 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.
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 P & P Home for the Elderly, L.P. at
December 31, 2000, and the results of its operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

/s/ Charles P. Benedict, CPA
Castak, California
March 9, 2001

-43-

[Letterhead of SUAREZ ACCOUNTANCY CORPORATION]

Independent Auditor's Report

To the Partners
P & P Home for the Elderly, L.P.
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. 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.
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 P & P Home for the Elderly, L.P. at
December 31, 1999, and the results of its operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

/s/ Suarez Accountancy Corporation
San Pedro, California
February 3, 2000

-44-

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION

Clear Horizons Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 2001, and the related statements of income, capital
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
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 2001 and the results of its
operations, changes in capital, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2001 taken as a whole. The
supplementary Schedules 1 through 6 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit 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 issued by the U. S. Department of Housing and
Urban Development, we have also issued a report dated February 8, 2002 on our
consideration of Clear Horizons Limited Partnership's internal control, and
reports dated February 8, 2002, on its compliance with laws and regulations,
compliance with specific requirements applicable to Affirmative Fair Housing,
and compliance with specific requirements applicable to major HUD-assisted
programs. 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/ Cole, Evans & Peterson
Shreveport, Louisiana
Federal ID No. 72-0506596
Lead Auditor: Steven W. Hedgepeth
February 8, 2002

-45-

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION

Clear Horizons Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 2000, and the related statements of income, capital
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
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 2000 and the results of its
operations, changes in capital, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2000 taken as a whole. The
supplementary Schedules 1 through 6 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit 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 issued by the U. S. Department of Housing and
Urban Development, we have also issued a report dated February 13, 2001 on our
consideration of Clear Horizons Limited Partnership's internal control, and
reports dated February 13, 2001, on its compliance with laws and regulations,
compliance with specific requirements applicable to Affirmative Fair Housing,
and compliance with specific requirements applicable to major HUD-assisted
programs. 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/ Cole, Evans & Peterson
Lead Auditor: Steven W. Hedgepeth
Federal ID No. 72-0506596
Shreveport, Louisiana
February 13, 2001

-46-

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION

Clear Horizons Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 1999, and the related statements of income, capital
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
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 1999 and the results of its
operations, changes in capital, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 1999 taken as a whole. The
supplementary Schedules 1 through 6 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit 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 issued by the U. S. Department of Housing and
Urban Development, we have also issued a report dated February 9, 2000 on our
consideration of Clear Horizons Limited Partnership's internal control, and
reports dated February 9, 2000, on its compliance with laws and regulations,
compliance with specific requirements applicable to Affirmative Fair Housing,
and compliance with specific requirements applicable to major HUD-assisted
programs.

/s/ Cole, Evans & Peterson
Lead Auditor: Steven W. Hedgepeth
Federal ID No. 72-0506596
Shreveport, Louisiana
February 9, 2000

-47-

[Letterhead of ZINER, KENNEDY & LEHAN LLP

INDEPENDENT AUDITORS' REPORT

To the Partners of
Neptune Venture, L.P.

We have audited the accompanying balance sheets of Neptune Venture, L.P. (a New
Jersey limited partnership) as of December 31, 2000 and 1999, and the related
statements of operations, changes in partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's general partner and contracted management agent. 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 the
Partnership's general partner and contracted management agent, 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 Neptune Venture, L.P. at
December 31, 2000 and 1999, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Ziner, Kennedy & Lehan LLP
Boston, Massachusetts
January 31, 2001

-48-

[Letterhead of LAWLOR, O'BRIEN & CHERVENAK, LLC]

INDEPENDENT AUDITORS' REPORT

To the Partners
Affordable Green Associates, L.P.

We have audited the accompanying balance sheet of Affordable Green Associates,
L.P. as of December 31, 2001 and the related statements of operations, changes
in partners' capital, 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
in the United States and Government Auditing Standards, issued by the
Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Green Associates,
L.P. as of December 31, 2001 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 the United States of America.

/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 27, 2002

-49-

[Letterhead of LAWLOR, O'BRIEN & CHERVENAK, LLC]

INDEPENDENT AUDITORS' REPORT

To the Partners
Affordable Green Associates, L.P.

We have audited the accompanying balance sheet of Affordable Green Associates,
L.P. as of December 31, 2000 and the related statements of operations, changes
in partners' capital, 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 Affordable Green Associates,
L.P. as of December 31, 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.

/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 14, 2001

-50-

[Letterhead of LAWLOR, O'BRIEN & CHERVENAK, LLC]

INDEPENDENT AUDITORS' REPORT

To the Partners
Affordable Green Associates, L.P.

We have audited the accompanying balance sheet of Affordable Green Associates,
L.P. as of December 31, 1999 and the related statements of operations, changes
in partners' capital, 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 Affordable Green Associates, L.P.
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.

/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 15, 2000

-51-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

ASSETS

See accompanying notes to consolidated financial statements.

-52-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS

See accompanying notes to consolidated financial statements.

-53-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)

Limited General
Total Partners Partner
------------ ------------ ------------

Partners' capital (deficit)-April 1, 1999 $30,142,315 $30,364,841 $(222,526)

Net loss (4,914,664) (4,865,517) (49,147)
------------ ------------ ------------

Partners' capital (deficit)-March 31, 2000 25,227,651 25,499,324 (271,673)

Net loss (4,806,575) (4,758,509) (48,066)
------------ ------------ ------------

Partners' capital (deficit)-March 31, 2001 20,421,076 20,740,815 (319,739)

Net loss (4,132,678) (4,091,351) (41,327)
------------ ------------ ------------
Partners capital (deficit) - March 31, 2002 $16,288,398 $16,649,464 $(361,066)
============ ============ ============

See accompanying notes to consolidated financial statements.

-54-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

-55-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

See accompanying notes to consolidated financial statements.

-56-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

NOTE 1 - General

Independence Tax Credit Plus L.P. II (a Delaware limited partnership) (the
"Partnership") was organized on February 11, 1992 and commenced the public
offering on January 19, 1993. The general partner of the Partnership is Related
Independence Associates L.P., a Delaware limited partnership (the "General
Partner").

The Partnership's business is to invest in other partnerships ("Local
Partnerships," "subsidiaries" or "subsidiary partnerships") owning leveraged
apartment complexes that are eligible for the low-income housing tax credit
("Tax Credit") enacted in the Tax Reform Act of 1986, some of which complexes
may also be eligible for the historic rehabilitation tax credit.

The Partnership has interests in fifteen subsidiary partnerships as of March 31,
2002.

The Partnership was authorized to issue a total of 100,000 ($100,000,000)
Beneficial Assignment Certificates ("BACs") which have been registered with the
Securities and Exchange Commission for sale to the public. Each BAC represents
all of the economic and virtually all of the ownership rights attributable to a
limited partnership interest. The Partnership raised a total of $58,928,000
representing 58,928 BACs. The offering was terminated on April 7, 1994.

The terms of the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") provide, among other things, that net
profits or losses and distributions of cash flow are, in general, allocated 99%
to the limited partners and BACs holders and 1% to the general partner.

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Consolidation

The consolidated financial statements include the accounts of the Partnership
and fifteen subsidiary partnerships in which the Partnership is the principal
limited partner, with an ownership interest of 98.99%. Through the rights of the
Partnership and/or an affiliate of the General Partner, which affiliate has a
contractual obligation to act on behalf of the Partnership, to remove the
general partner of the subsidiary local partnerships and to approve certain
major operating and financial decisions, the Partnership has a controlling
financial interest in the subsidiary local partnerships. All intercompany
accounts and transactions with the subsidiary partnerships have been eliminated
in consolidation.

For financial reporting purposes, the Partnership's fiscal year ends on March
31. The Partnership's fiscal year ends March 31, 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.
All subsidiaries have fiscal years ending December 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from January 1
through March 31.

Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arises from cash contributions and cash
distributions to the minority interest partners.

-57-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

The Partnership's investment in each subsidiary is equal to the respective
subsidiary's partners' equity less minority interest capital, if any. Losses
attributable to minority interest which exceed the minority interests'
investment in a subsidiary partnership have been charged to the Partnership.
Such losses aggregated approximately $26,000, $30,000 and $32,000 for the years
ended March 31, 2002, 2001 and 2000 (the 2001, 2000 and 1999 Fiscal Years),
respectively. In consolidation, all subsidiary partnership losses are included
in the Partnership's capital account except for losses allocated to minority
interest capital. As of March 31, 2002, distributions to several minority
interests have exceeded their investments.

b) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks, and investments
in short-term highly liquid instruments purchased with original maturities of
three months or less. Cash held in escrow has various use restrictions and is
not considered a cash equivalent.

c) Property and Equipment

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).

Through March 31, 2002, the Partnership has recorded a loss on impairment of
assets of approximately $3,926,000.

d) Income Taxes

The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (Note 9).

e) Offering Costs

Costs incurred to sell BACs, including brokerage and the nonaccountable expense
allowance, are considered selling and offering expenses. These costs are charged
directly to limited partners' capital (Note 8).

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INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

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 U.S. generally
accepted accounting principles 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 nontrading
purposes) for which it is practicable to estimate that value:

CASH AND CASH EQUIVALENTS AND CASH HELD IN ESCROW
The carrying amount approximates fair value.

MORTGAGE NOTES PAYABLE
The fair value of mortgage notes payable is estimated, where practicable, based
on the borrowing rate currently available for similar loans.

The estimated fair values of the Partnership's mortgage notes payable are as
follows:

*Management believes it is not practical to estimate the fair value of the
mortgage notes payable because mortgage programs with similar characteristics
are not currently available to the partnerships.

The carrying amount of other financial instruments that require such disclosure
approximates fair value.

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INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

NOTE 4 - Property and Equipment

The components of property and equipment and their estimated useful lives are as
follows:

Included in property and equipment is $3,501,977 of acquisition fees paid to the
General Partner and $867,942 of acquisition expenses as of March 31, 2002 and
2001, respectively.

In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developer's fees of $9,282,042 to the local general
partners and affiliates as of March 31, 2002 and 2001. Such fees have been
included in the cost of property and equipment.

Depreciation expense for the years ended March 31, 2002, 2001 and 2000 amounted
to $3,475,234, $3,482,114 and $3,452,322, respectively.

During Fiscal Year 2000, $3,520 of accumulated depreciation was written off.

NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:

*Represents amounts to be paid to seller upon completion of properties under
construction and upon meeting specified rental achievement criteria.

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INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

NOTE 6 - Deferred Costs

The components of deferred costs and their periods of amortization are as
follows:

*Over the life of the related mortgages.

Amortization expense for the years ended March 31, 2002, 2001 and 2000 amounted
to $25,525, $26,544 and $73,211, respectively. During the 2000 Fiscal Year,
$14,552 of deferred costs were written off and $10,169 of accumulated
amortization was written off.

NOTE 7 - Mortgage Notes Payable

The mortgage notes are payable in aggregate monthly installments of
approximately $155,000 including principal and interest at rates ranging from 0%
to 9.65% per annum, through the year 2052. Each subsidiary partnership's
mortgage note payable is collateralized by the land and buildings of the
respective subsidiary partnership, the assignment of each certain subsidiary
partnership's rents and leases, and is without further recourse.

One mortgage note with a balance of $4,575,674 and $4,788,548 at December 31,
2001 and 2000, respectively, which bears interest at 7% per annum is eligible
for an interest rate subsidy. Accordingly, the subsidiary partnership paid only
that portion of the monthly payments that would be required if the interest rate
was 1%. The balance was subsidized under Section 236 of the National Housing
Act.

Annual principal payment requirements for mortgage notes payable for each of the
next five fiscal years and thereafter are as follows:

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INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

The mortgage agreements require monthly deposits to replacement reserves of
approximately $26,000 and monthly deposits to escrow accounts for real estate
taxes, hazard insurance and mortgage insurance and other (Note 5).

NOTE 8 - Related Party Transactions

An affiliate of the General Partner has a .01% interest as a special limited
partner in each of the subsidiary partnerships. An affiliate of the General
Partner also has a minority interest in certain local limited partnerships.

The General Partner and its affiliates perform services for the Partnership. The
costs incurred for the years ended March 31, 2002, 2001 and 2000 are as follows:

A) Guarantees

The Partnership has negotiated Operating Deficit Guaranty Agreements with all
subsidiary partnerships by which the Local General Partners have agreed to fund
operating deficits for a specified period of time. The terms of the Operating
Deficit Guaranty Agreements vary for each subsidiary partnership, with maximum
dollar amounts to be funded for a specified period of time, generally three
years, commencing on the break-even date. The gross amount of the Operating
Deficit Guarantees aggregates approximately $5,670,000, of which $4,840,000 has
expired at March 31, 2002. As of March 31, 2002, $374,626 has been funded under
the Operating Deficit Guaranty agreements. Amounts funded under such agreements
are treated as noninterest bearing loans, which will be repaid only out of 50%
of available cash flow or out of available net sale or refinancing proceeds.

B) Other Related Party Expenses

The costs incurred to related parties for the years ended March 31, 2002, 2001
and 2000 were as follows:

(a) The General Partner is entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership

-62-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

Agreement), for administering the affairs of the Partnership. Subject to the
foregoing limitation, the partnership management fee will be determined by the
General Partner in its sole discretion based upon its review of the
Partnership's investments. Unpaid partnership management fees for any year will
be accrued without interest and will be payable from working capital reserves or
to the extent of available funds after the Partnership has made distributions to
the limited partners of sale or refinancing proceeds equal to their original
capital contributions plus a 10% priority return thereon (to the extent not
theretofore paid out of cash flow). Partnership management fees owed to the
General Partner amounting to approximately $2,247,000 and $1,751,000 were
accrued and unpaid as of March 31, 2002 and 2001, respectively.

(b) The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses incurred by the General Partner and its
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 Partner performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance. Expense reimbursements and asset monitoring fees owed
to the General Partner and its affiliates amounting to approximately $407,000
and $297,000 were accrued and unpaid as of March 31, 2002 and 2001,
respectively.

(c) Property management fees incurred by subsidiary partnerships amounted to
$621,561, $606,572 and $578,531 for the years ended March 31, 2002, 2001 and
2000, respectively. Of these fees $281,007, $269,674 and $262,324 were earned by
affiliates of the Local General Partners.

(d) Independence SLP L.P., a special limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $5,000
per year from each subsidiary partnership.

C) Due to Local General Partners and Affiliates

Due to Local General Partners and affiliates at March 31, 2002 and 2001 consists
of the following:

March 31,
-----------------------
2002 2001
---------- ----------
Operating deficit advances $ 144,150 $ 144,150
Operating advances 5,000 5,000
Development fee payable 825,950 830,950
Construction costs payable 356,571 401,365
Management and other operating advances (*) 418,730 536,185
---------- ----------

$1,750,401 $1,917,650
========== ==========

(*) Includes loans from Local General Partners and affiliates totaling $83,141
and $78,670, respectively, bearing interest at 11%.

-63-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

NOTE 9 - Income Taxes

A reconciliation of the financial statement net loss to the income tax loss for
the Partnership and its consolidated subsidiaries is as follows:

NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnerships-Other

CLEAR HORIZONS LIMITED PARTNERSHIP
At December 31, 2001, Clear Horizons Limited Partnership ("Clear Horizons")
current liabilities exceeded its current assets by over $162,000. Although this
condition could raise substantial doubt about Clear Horizons' ability to
continue as a going concern, such doubt is alleviated as follows:

1. Included in current liabilities at December 31, 2001 is $164,908 owed to
related parties who have advised Clear Horizons that they do not intend to
pursue collection beyond Clear Horizons' ability to pay.

2. The Local General Partner of Clear Horizons has agreed to fund operating
deficits up to $250,000.

Accordingly, management believes that Clear Horizons has the ability to continue
as a going concern for at least one year from December 31, 2001.

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INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2002

b) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks. The
accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation up to $100,000. At March 31, 2002, uninsured cash and cash
equivalents approximated $1,037,000.

c) Other

The Partnership and BACs holders began to recognize Tax Credits with respect to
a Property when the Credit Period for such Property commenced. Because of the
time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC has gradually increased over the first three years
of the Partnership. Housing Tax Credits not recognized in the first three years
will be recognized in the 11th through 13th years. For the 2001, 2000 and 1999
tax years, Housing Tax Credits of $8,746,267, $8,728,115 and $8,728,115 were
generated, respectively.

-65-

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 executive officers. The Partnership's
affairs are managed and controlled by the General Partner. Certain information
concerning the directors and executive officers of Related Independence
Associates Inc. ("RIAI"), the sole general partner of the General Partner, is
set forth below.

STEPHEN M. ROSS, 62, is also 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.

MICHAEL BRENNER, 56, 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.

-66-

ALAN P. HIRMES, 47, 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.,
Charter Municipal Mortgage Acceptance Company and American Mortgage Acceptance
Company.

STUART J. BOESKY, 46, practiced real estate and tax law in New York City with
the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined
Capital. From 1983 to 1984 Mr. Boesky practiced law with the Boston law firm of
Kaye Fialkow Richard & Rothstein (which subsequently merged with Strook & Strook
& Lavan LLP) 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.

MARC D. SCHNITZER, 41, is responsible both for financial restructurings of real
estate properties and directing Related's acquisitions of properties generating
Housing Tax Credits. Mr. Schnitzer received a Masters of Business Administration
from The Wharton School of the University of Pennsylvania in December 1987
before joining Related in January 1988. From 1983 to January 1986, he was a
financial analyst for the First Boston Corporation in New York. Mr. Schnitzer
graduated summa cum laude with a Bachelor of Science in Business Administration
from the School of Management at Boston University in May 1983.

DENISE L. KILEY, 42, 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.

GLENN F. HOPPS, 39, was employed prior to joining Related in December, 1990 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, 36, 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.

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 Partner for their services. However, under the terms of
the Partnership Agreement, the Partnership has entered into certain arrangements
with the General Partner and its affiliates, which provide for compensation to
be paid to the General Partner and its affiliates. Such arrangements include
(but are not limited to) agreements to pay nonrecurring Acquisition Fees, a
nonaccountable Acquisition Expense allowance and an accountable expense
reimbursement. In addition, the General Partner is entitled to a subordinated
interest in Cash from Sales or Financings and a 1% interest in Net Income, Net
Loss, Distributions of Adjusted Cash from Operations and Cash from Sales or
Financings. Certain directors and officers of the General Partner receive
compensation from the

-67-

General Partner and its affiliates for services performed for various affiliated
entities which may include services performed for the Partnership. The maximum
annual partnership management fee paid to the General Partner is 0.5% of
invested assets. See Note 8 to the Financial Statements in Item 8 above, which
is incorporated herein by reference.

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 Partner and/or its 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.

Independence SLP L.P., a limited partnership whose general partner is the
general partner of the General Partner of the Partnership and which acts as the
special limited partner of each Local Partnership, holds a .01% limited
partnership interest in each Local Partnership. See Note 8 to the Financial
Statements in Item 8 above, which information is incorporated herein by
reference thereto.

-68-

Except as set forth below, no person is known by the Partnership to be the
beneficial owner of more than 5% of the Limited Partnership Interests and
neither the General Partner nor any director or executive officer of the General
Partner owns any Limited Partnership Interests. The following table sets forth
the number of BACs beneficially owned, as of June 1, 2002, by (i) each BACs
holder known to the Partnership to be a beneficial owner of more than 5% of the
BACs, (ii) each director and executive officer of the general partner of the
General Partner and (iii) the directors and executive officers of the general
partner of the General Partner as a group. Unless otherwise noted, all BACs are
owned directly with sole voting and dispositive powers.

(1) The address for each of the persons in the table is 625 Madison Avenue, New
York, New York 10022.

(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners L.L.C.
("Lehigh I") and Lehigh Tax Credit Partners, Inc., (the "Managing Member") on
June 10, 1997 with the Securities and Exchange Commission (the "Commission") and
pursuant to a letter agreement dated November 7, 1997 among the Partnership,
Lehigh I and the Related General Partner (the "Standstill Agreement"), Lehigh I
agreed that, prior to November 7, 2007 (the "Standstill Expiration Date"), it
will not and it will cause certain affiliates (including Lehigh II) not to (i)
acquire, attempt to acquire or make a proposal to acquire, directly or
indirectly, more than 45% (including BACs acquired through all other means) of
the outstanding BACs, (ii) seek to propose to enter into, directly or
indirectly, any merger, consolidation, business combination, sale or acquisition
of assets, liquidation, dissolution or other similar transaction involving the
Partnership, (iii) make, or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" or "consents" (as such terms are used in the
proxy rules of the Commission) to vote any voting securities of the Partnership,
(iv) form, join or otherwise participate in a "group" (within the meaning of
Section 13 (d)(3) of the Securities and Exchange Act of 1934) with respect to
any voting securities of the Partnership, except those affiliates bound by the
Standstill Agreement will not be

-69-

deemed to have violated it and formed a "group" solely by acting in accordance
with the Standstill Agreement, (v) disclose in writing to any third party any
intention, plan or arrangement inconsistent with the terms of the Standstill
Agreement, or (vi) loan money to, advise, assist or encourage any person in
connection with any action inconsistent with the terms of the Standstill
Agreement. In addition, Lehigh I agreed that until the Standstill Expiration
Date it will not sell any BACs acquired by it unless the buyer of such BACs
agrees to be bound by the Standstill Agreement; provided, however, Lehigh I may
make transfers in the secondary market to any purchaser which represents that
following such sale it will not own three (3%) percent or more of the BACs
outstanding. By the terms of the Standstill Agreement, Lehigh I also agreed to
vote its BACs in the same manner as a majority of all voting BACs holders;
provided, however, Lehigh I is entitled to vote its BACs as it determines with
regard to any proposal (i) to remove the General Partner as a general partner of
the Partnership or (ii) concerning the reduction of any fees, profits,
distributions or allocations for the benefit of the General Partner or its
affiliates. The addresses of each of the Partnership, Lehigh I and the General
Partner is 625 Madison Avenue, New York, New York 10022.

(3) All of such BACs represent BACs owned directly by Lehigh I and Lehigh Tax
Credit Partners II, L.L.C. ("Lehigh II"), for which the Managing Member serves
as managing member. As of June 1, 2002, Lehigh I held 2,213.60 BACs and Lehigh
II held 2,239.60 BACs.

(4) Each such party serves as a director and executive officer of the Managing
Member and owns an equity interest therein except J. Michael Fried who owns only
an economic interest.

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 Partner.

-70-

PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

All other schedules have been omitted because they are not required or
because the required information is contained in the financial
statements or notes thereto.

(a)3. EXHIBITS

(3A) Agreement of Limited Partnership of Independence Tax Credit Plus L.P.
II as adopted on February 11, 1992*

(3B) Form of Amended and Restated Agreement of Limited Partnership of
Independence Tax Credit Plus L.P. II, attached to the Prospectus as
Exhibit A**

(3C) Certificate of Limited Partnership of Independence Tax Credit Plus L.P.
II as filed on February 11, 1992*

(10A) Form of Subscription Agreement attached to the Prospectus as Exhibit
B**

(10B) Escrow Agreement between Independence Tax Credit Plus L.P. II and
Bankers Trust Company*

-71-

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)

-72-

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(continued)

(d) Not applicable

-73-

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.

INDEPENDENCE TAX CREDIT PLUS L.P. II
(Registrant)

By: RELATED INDEPENDENCE ASSOCIATES L.P.,
General Partner

By: RELATED INDEPENDENCE ASSOCIATES INC.,
General Partner

Date: June 17, 2002 By: /s/ Michael Brenner
-------------------
Michael Brenner
President and Chief
Executive Officer
(Principal Executive Officer)

-74-

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:

-75-

INDEPENDENT AUDITORS' REPORT

To the Partners of
Independence Tax Credit Plus L.P. II and Subsidiaries
(A Delaware Limited Partnership)

In connection with our audits of the consolidated financial statements of
Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited
Partnership) included in the Form 10-K as presented in our opinion dated June
11, 2002 on page 15, and based on the reports of other auditors, we have also
audited supporting Schedule I for the 2002, 2001 and 2000 Fiscal Years and
Schedule III at March 31, 2002. In our opinion, and based upon the reports of
the other auditors, these consolidated schedules present fairly, when read in
conjunction with the related consolidated financial statements, the financial
data required to be set forth therein.

Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP

New York, New York
June 13, 2002

-76-

INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

CONDENSED BALANCE SHEETS

ASSETS

Investments in subsidiary partnerships are recorded in accordance with the
equity method of accounting, wherein the investments are not reduced below zero.
Accordingly, partners' capital on the consolidated balance sheet will differ
from partners' capital shown above.

-77-

INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

CONDENSED STATEMENTS OF OPERATIONS

-78-

INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

CONDENSED STATEMENTS OF CASH FLOWS

-79-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2002

(a) Depreciation is computed using primarily the straight-line method over the
estimated useful lives determined by the Partnership date of acquisition.
(b) Personal property is depreciated primarily by the straight-line method over
the estimated useful lives ranging from 5 to 10 years.

-80-

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2002

At the time the Local Partnerships were acquired by Independence Tax Credit Plus
II Limited Partnership, the entire purchase price paid by Independence Tax
Credit Plus II 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.

-81-