LIBERTY TAX CREDIT PLUS II L P - 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 0-24660

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

Delaware 13-3458180
- -------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

625 Madison Avenue, New York, New York 10022
- ---------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code (212) 421-5333

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Beneficial Assignment Certificates (including underlying Limited
Partnership Interests)
(Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

DOCUMENTS INCORPORATED BY REFERENCE

None

PART I

Item 1. Business.

General
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Liberty Tax Credit Plus II L.P. (the "Partnership") is a limited partnership
which was formed under the laws of the State of Delaware on March 25, 1988. The
general partners of the Partnership are Related Credit Properties II L.P., a
Delaware limited partnership (the "Related General Partner"), Liberty Associates
II L.P., a Delaware limited partnership ("Liberty Associates"), and Liberty GP
II Inc. (formerly Shearson Liberty GP II Inc.), a Delaware corporation (the
"Liberty General Partner" and together with the Related General Partner and
Liberty Associates, the "General Partners"). The general partner of the Related
General Partner is Related Credit Properties II Inc., a Delaware corporation.
The general partners of Liberty Associates are Related Credit Properties II
Inc., and the Liberty General Partner. On November 25, 1997, an affiliate of the
Related General Partner purchased 100% of the stock of the Liberty General
Partner (the "Transfer"). In addition to the Transfer, by acquiring the stock of
the Liberty General Partner, an affiliate of the Related General Partner also
acquired the Liberty General Partner's general partnership interest in Liberty
Associates, which is also the special limited partner of the Partnership.
Pursuant to the Partnership's Amended and Restated Partnership Agreement, the
consent of the limited partners was not required to approve the Transfer.

On July 20, 1988 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").

As of January 9, 1989 (the date on which the Partnership held the final closing
of the sale of BACs and on which the Offering was terminated), the Partnership
had received $115,917,500 of gross proceeds of the Offering from 8,431
investors.

The Partnership was formed to invest, as a limited partner, in other limited
partnerships (referred to herein as "Local Partnerships" or "subsidiary
partnerships") each of which owns one or more leveraged low-income multifamily
residential complexes ("Apartment Complexes") that are eligible for the
low-income housing tax credit ("Tax Credit") enacted in the Tax Reform Act of
1986, and to a lesser extent, in Local Partnerships owning properties that are
eligible for the historic rehabilitation tax credit (the "Historic
Rehabilitation Tax Credit") ("Rehabilitation Projects" and together with the
Apartment Complexes, the "Properties"). Some of the Apartment Complexes benefit
from one or more other forms of federal and state housing assistance. The
Partnership's investment in each Local Partnership represents from 20% to 98% of
the partnership interests in the Local Partnership. As of March 31, 2002, the
Partnership had acquired interests in 27 Local Partnerships and does not
anticipate making any additional investments. See Item 2, Properties. In June
1997, the Partnership sold 24.98% of its limited partnership interest in
United-Glenarden I Limited Partnership and 32.32% of its limited partnership
interest in Property Development Associates, L.P. On January 18, 2002, the
property and the related assets and liabilities of Campeche Isle Apartments,
Limited Partnership ("Campeche") were sold. See Results of Operations of Certain
Local Partnerships.

Liberty Associates is the special limited partner in all 27 Local Partnerships,
as well as a general partner of the Partnership. Liberty Associates has certain
rights and obligations in its role as special limited partner which permit it to
execute control over the management and policies of the Local Partnerships.

2

Investment Objectives, Tax Credits
- ----------------------------------

The investment objectives of the Partnership are to:

1. Entitle qualified BACs holders to Tax Credits (and to a lesser extent
Historic Rehabilitation Tax Credits) over the period of the Partnership's
entitlement to claim Tax Credits (for each Property, ten years from the date of
investment or, if later, the date the Property is placed in service.);

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. Provide cash distributions when available from the operations of Properties;
and

5. 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
active business income.

One of the Partnership's objectives is to entitle qualified BACs holders to Tax
Credits over the period of the Partnership's entitlement to claim Tax Credits
(for each Apartment Complex, ten years from the date of investment or, if later,
the date the Apartment Complex is leased to qualified tenants; referred to
herein as the "Credit Period"). Each of the Local Partnerships in which the
Partnership has acquired an interest has been allocated by the relevant state
credit agency 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 the 15-year period (the "Compliance Period") commencing at the beginning
of the Credit Period. Once a Local Partnership has become eligible to recognize
Tax Credits, it may lose such eligibility and suffer an event of "recapture" if
(i) the Local Partnership ceases to meet qualification requirements , (ii) there
is a decrease in the qualified basis of Apartment Complex, or (iii) there is a
reduction in its interest in the Apartment Complex at any time during the
Compliance Period. None of the Local Partnerships in which the Partnership has
acquired an interest has suffered an event of recapture.

The Partnership is in the final years of its Credit Period. The Tax Credits are
available for a ten-year period which commences when a Property is leased to
qualified tenants. However, the annual Tax Credits available in the year in
which an Apartment Complex is placed in service must be prorated based upon the
months remaining in the year. The amount of the annual Tax Credits 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 may not be claimed by the Partnership.

The General Partners generally required, in connection with certain investments
in Local Partnerships, that the general partner of the Local Partnership ("Local
General Partners") undertake the funding of operating deficits (up to a stated
maximum amount) of the Local Partnership during a limited period of time
following the Partnership's investment ("Guarantee Period"). As of March 31,
2002, all operating deficit guarantees have expired. Generally the amounts
funded pursuant to the operating deficit guarantee (the "Operating Deficit
Guarantee") have been treated as Operating Loans, do not bear interest and will
be repaid only out of 50% of available cash flow or out of available net sale or
refinancing proceeds. See Item 8, Note 8 - Related Party Transactions.

3

The Partnership continues to meet its primary objective of generating Tax
Credits to qualified BACs holders. To date, none of the Local Partnerships has
failed to remain in compliance with the Tax Credit requirements, and therefore
none has suffered an event of recapture of Tax Credits. The Partnership
generated $1,725,324, $4,415,175 and $12,240,583 in Tax Credits during the 2001,
2000 and 1999 Fiscal Years, respectively.

The Partnership also continues to meet its objective of allocating passive
losses to individual BACs holders to offset passive income that they may realize
from rental real estate investments and other passive activities, and allocating
passive losses to corporate BACs holders to offset business income.

As of March 31, 2002, cash distributions received from the Local Partnerships
have been relatively immaterial. Management expects that the distributions
received from the Local Partnerships will increase, although not to a level
sufficient to permit cash distributions to BACs holders. The Partnership does
not anticipate providing cash distributions to BACs holders in circumstances
other than refinancings or sales.

Government Regulations
- ----------------------

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership can
also be affected by poor economic conditions generally. However, no more than
33% of the properties are located in any single state.

The Partnership is the beneficiary of certain subsidy agreements pursuant to
which the United States Department of Housing and Urban Development ("HUD")
subsidizes the amount of rent that the Local Partnerships earn. There are
substantial risks associated with owning properties receiving government
assistance, such as the possibility that Congress may not appropriate funds to
enable HUD to make rental assistance payments. HUD also restricts annual cash
distributions to partners based on operating results and a percentage of the
owner's equity contribution. The Partnership cannot sell or substantially
liquidate its investments in Local Partnerships during the period that the
subsidy agreements are in existence without HUD's approval. Furthermore, there
may not be market demand for apartments at full market rents when the rental
assistance contracts expire.

Segments
- --------

The Partnership operates in one segment, which is the investment in multi-family
residential properties.

Competition
- -----------

The real estate business is highly competitive and substantially all of the
Properties acquired by the Partnership are subject to competition from similar
properties in their respective vicinities. In addition, various other limited
partnerships may, in the future, be formed by the General Partners and/or their
affiliates to engage in business which may compete with the Partnership.

Employees
- ---------

The Partnership does not have any direct employees. All services are performed
for the Partnership by its General Partners and their affiliates. The General
Partners receive compensation in connection with such activities as set forth in
Items 11 and 13. In addition, the Partnership reimburses the General Partners
and certain of their affiliates for expenses incurred in connection with the
performance by their employees of services for the Partnership in accordance

4

with the Partnerships Amended and Restated Agreement of Limited Partnership (the
"Partnership Agreement").

Item 2. Properties.

The Partnership has acquired an interest as a limited partner in 27 Local
Partnerships. On January 18, 2002, the property and the related assets and
liabilities of Campeche were sold. Set forth below is a schedule of these Local
Partnerships including certain information concerning the 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.

Except for the seven Local Partnerships listed below, the following is the
allocation of ownership percentage for each of the Local Partnerships:

Local General Partner 1%
Special Limited Partner 1%
Limited Partner - Liberty Tax Credit Plus II L.P. 98%

*Each is an affiliate of the Partnership, with the same management.

Local Partnership Schedule
--------------------------

(*) The property and the related assets and liabilities of this Partnership
were sold during the fiscal year ended March 31, 2002 (see Item 7. below).

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 rents
for the residential units are determined annually by HUD and reflect
increases/decreases in consumer price indices in various geographic areas.
Market conditions, however, determine the amount of rent actually charged.

Management annually reviews the physical state of the Properties and suggests to
the respective Local General Partners budget improvements, which are generally
funded from cash flow from operations or release of replacement reserve escrows
to the extent available.

Management annually reviews the insurance coverage of the Properties and subject
to budget constraints recommends to the respective Local General Partners
additional coverage if warranted. Management believes that coverage is presently
adequate.

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

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

Item 3. Legal Proceedings.

This information is incorporated by reference to the discussion of Alexis Park
Apartments contained under the heading "Results of Operations of Certain Local
Partnerships" in Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations.

7

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.

The Partnership has issued and outstanding 115,917.5 Limited Partnership
Interests, each representing a $1,000 capital contribution to the Partnership,
or an aggregate capital contribution of $115,917,500. All of the issued and
outstanding Limited Partnership Interests have been issued to Liberty Credit
Assignor Inc. (the "Assignor Limited Partner"), which has in turn issued
115,917.5 BACs to the purchasers thereof for an aggregate purchase price of
$115,917,500. 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 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 public trading market. Because of the provisions of the Revenue Act
of 1987, unless there are further changes in such law, 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 Partners
have imposed limited restrictions on the transferability of the BACs and the
Limited Partnership Interests in secondary market transactions. Implementation
of these 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 such 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 May 15, 2002, the Partnership had 8,493 registered holders of an aggregate
of 115,917.5 BACs.

All of the Partnership's general partnership interests, representing an
aggregate capital contribution of $2,000, are held by the three General
Partners.

There are no material provisions in the Partnership Agreement that restrict the
ability of the Partnership to make distributions.

The Partnership has not made any distributions to BACs holders as of March 31,
2002. The Partnership does not anticipate providing cash distributions to BACs
holders other than distributions of sale or refinancing proceeds upon the
disposition of Properties.

8

Item 6. Selected Financial Data.

The information set forth below presents selected financial data of the
Partnership. Additional financial information is set forth in the audited
financial statements in Item 8 hereof.

During the years ended March 31, 1998 through 2002, total assets decreased
primarily due to depreciation, partially offset by net additions to property and
equipment.

9

Selected Quarterly Financial Data (Unaudited)
---------------------------------------------

10

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

Liquidity and Capital Resources
- -------------------------------

Through March 31, 2002, the Partnership has invested all of the net proceeds in
twenty-seven Local Partnerships. On January 18, 2002, the Property and the
related assets and liabilities of Campeche were sold. None of the purchase price
remains to be paid

During the year ended March 31, 2002, the Partnership's primary sources of funds
included: (i) working capital reserves; (ii) interest earned on the working
capital reserves; and (iii) cash distributions from operations of the Local
Partnerships. Such funds are available to meet the obligations of the
Partnership but are not expected to be significant.

The Partnership is not expected to have access to additional sources of
financing, and in particular will not have the ability to access BACs holders
for additional capital contributions to provide capital if needed by the
Partnership. There can be no assurance that additional funds will be available
to the Partnership or any Local Partnership, nor that, if any Property is sold,
the proceeds of the sale will be sufficient to pay outstanding balances due on
mortgage loans or other outstanding indebtedness to which the Property is
subject.

During the years ended March 31, 2002, 2001 and 2000, respectively, cash
distributions received from operations of the Local Partnerships were
approximately $235,000, $246,000 and $6,000. The General Partners believe that
cash distributions received from the operations of the Local Partnerships are
sufficient to fund the Partnership's ongoing operations for the foreseeable
future (assuming the General Partners continue to defer payment of their
management fees).

During the year ended March 31, 2002, cash and cash equivalents of the
Partnership and its 27 consolidated Local Partnerships decreased approximately
$1,371,000. This decrease was the result of an increase in acquisitions of
property and equipment ($904,000), repayments of mortgage loans ($6,843,000), a
increase in deferred costs ($146,000) and a decrease in capitalization of
consolidated subsidiaries attributable to minority interest ($366,000) which
exceeded cash flows provided by operating activities ($535,000), a net increase
in due to Local General Partners and affiliates ($5,762,000), a decrease in cash
held in escrow relating to investing activities ($491,000) and a increase in due
to selling partners ($99,000). In the adjustments to reconcile net loss to cash
provided by operating is forgiveness of indebtedness income ($1,803,000),
depreciation and amortization ($8,062,000) and loss on impairment ($680,000).

Partnership management fees owed to the General Partners amounting to
approximately $9,808,000 and $8,312,000 were accrued and unpaid as of March 31,
2002 and 2001, respectively. Without the General Partner's continued accrual
without payment of these fees, the Partnership will not be in a position to meet
its obligations. The General Partners have allowed for the accrual without
payment of these amounts but are under no obligation to continue to do so.

For a discussion of contingencies affecting certain Local Partnerships, see
Results of Operations of Certain Local Partnerships below. Since the maximum
loss the Partnership would be liable for is its net investment in the respective
Local Partnerships, the resolution of the existing contingencies are 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 may result in recapture of Tax Credits if the investment
is lost before the expiration of the 15-year period during which the Properties
must comply with various rent and other restrictions.

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

11

in a material way. Management believes the only impact would be from laws that
have not yet been adopted. The portfolio is diversified by the location of the
Properties around the United States so that if one area of the 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 fully invested the proceeds of its offering in 27 Local
Partnerships, all of which fully have their Tax Credits in place. The Tax
Credits are attached to the project 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 is 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 such property and equipment. 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. Property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows) when the Property is considered to be impaired and the
depreciated cost exceeds estimated fair value. During the year ended March 31,
2002, the Partnership recorded approximately $680,000 as a loss on impairment of
assets. Through March 31, 2002, the Partnership has recorded approximately
$5,407,000 as a loss on impairment of assets.

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. Such
assets would be classified as property and equipment-held for sale and are not
depreciated. Assets classified as property and equipment-held for sale amounted
to approximately $4,467,000 and $0 at March 31, 2002 and 2001, respectively.

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 majority of the Local Partnerships' revenues continue to be in the form of
rental income with the corresponding expenses divided among operations,
depreciation and mortgage interest.

The net loss for the 2001, 2000 and 1999 Fiscal Years totaled $6,183,026,
$6,923,585 and $7,988,881, respectively.

The Partnership continues to meet its primary objective of generating Tax
Credits to qualified BACs holders. To date, none of the Local Partnerships have
failed to remain in compliance with the Tax Credit requirements, and, therefore,
none have suffered an event of recapture of Tax Credits. The Partnership
generated $1,725,324, $4,415,175 and $12,240,583 in Tax Credits during the 2001,
2000 and 1999 Fiscal Years, respectively.

12

2001 vs. 2000
- -------------

Rental income increased approximately 2% for the 2001 Fiscal Year as compared to
the 2000 Fiscal Year primarily due to rental rate increases.

Other income increased approximately $578,000 for the 2001 Fiscal Year as
compared to the 2000 Fiscal Year primarily due to the write-off of various
liabilities in 2001 at one Local Partnership due to its impending sale.

Total expenses, excluding operating and other and insurance, remained fairly
consistent with an increase of approximately 2% for the 2001 Fiscal Year as
compared to the 2000 Fiscal Year.

Operating and other increased approximately $515,000 for the 2001 Fiscal Year as
compared to the 2000 Fiscal Year primarily due to an increase in gas charges at
five Local Partnerships.

Insurance increased approximately $171,000 for the 2001 Fiscal Year as compared
to the 2000 Fiscal Year primarily due to small increases at seven Local
Partnerships as a result of increased premiums.

Forgiveness of indebtedness income of approximately $1,803,000 was recorded in
the 2001 Fiscal year as the result of one Local Partnership prepaying a portion
of a note in exchange for forgiving the remaining balance.

A loss on impairment of assets of approximately $680,000 was recorded in the
2001 Fiscal Year.

2000 vs. 1999
- -------------
Rental income increased approximately 2% for the 2000 Fiscal Year as compared to
the 1999 Fiscal Year, primarily due to rental rate increases.

Other income increased approximately $426,000 for the 2000 Fiscal Year as
compared to the 1999 Fiscal Year, primarily due to the write-off of old payables
at one Local Partnership partially offset by insurance proceeds received at a
second Local Partnership.

Forgiveness of indebtedness of approximately $695,000 was recorded in the 2000
Fiscal Year as the result of the restructuring of the outstanding mortgages and
write-offs of payables at one Local Partnership.

Total expenses, excluding insurance, remained fairly consistent, with an
increase of approximately 2% for the 2000 Fiscal Year as compared to the 1999
Fiscal Year.

Insurance increased approximately $123,000 for the 2000 Fiscal Year as compared
to the 1999 Fiscal Year, primarily due to small increases at seven Local
Partnerships as a result of increased premiums.

Results of Operations of Certain Local Partnerships
- ---------------------------------------------------

(a) Subsidiary Partnerships - Going Concerns and Uncertainties

Whittier Plaza Associates
- -------------------------
The financial statements for Whittier Plaza Associates Limited Partnership
("Whittier") have been prepared assuming that Whittier will continue as a going
concern. Whittier has sustained continuous losses since commencement of
operations in 1988. Whittier has experienced higher vacancies and lower rents
than those originally projected, resulting in increased difficulty in meeting
both operating and debt service obligations. The Local General Partner, pursuant
to a

13

development deficit guarantee agreement, has advanced approximately $1,000
and $40,000 in the 2001 and 2000 Fiscal Years, respectively, and approximately
$448,000 since 1988 to fund operating cash shortfalls. In addition, Whittier's
management company, an affiliate of the Local General Partner, has deferred
receipt of various fees since 1991 totaling approximately $81,000. These items
raise substantial doubt about Whittier's ability to continue as a going concern.
The Partnership's investment in Whittier at March 31, 2002 and 2001 was reduced
to zero as a result of prior years' losses and the minority interest balance was
$0 at each date. Whittier's net loss after minority interest amounted to
approximately $37,000, $26,000 and $49,000 for the 2001, 2000 and 1999 Fiscal
Years.

Alexis Park Apartments
- ----------------------
The financial statements for Alexis Park Apartments ("Alexis") have been
prepared in conformity with U.S. generally accepted accounting principles,
assuming the continuation of the Local Partnership as a going concern. However,
negative performance indicators and the environmental issue raise substantial
doubt about the Local Partnership's ability to continue as a going concern.

A hazardous waste issue has affected Alexis for nearly 11 years. Although this
environmental issue is in many respects beyond its control, management believes
that the selected remedy of the United States Environmental Protection Agency is
practical and is not likely to cause significant disruption to the apartment
project's operations beyond what it has experienced over the last several years.
The Local Partnership's congressman, U.S. Senators and the Mayor of Bossier City
have assisted Alexis in preventing this issue from escalating unnecessarily and
management believes that no escalation will occur in the near term. Further, all
indications are that an oil company will bear all costs of remediation and that
the Local Partnership will not be called upon to share in those costs.
Accordingly, management believes the Local Partnership has the opportunity to
continue as a going concern.

For the year ended December 31, 2001, the Local Partnership sustained a net loss
of approximately $340,000. At December 31, 2001, the Local Partnership's current
liabilities exceed its current assets by approximately $440,000. Management
expects operating income to improve for 2002 as a result of both increased
occupancy and slightly reduced expenses. In addition, included in current
liabilities are obligations to the management company totaling approximately
$295,000 that are not expected to require payment beyond Alexis' ability to pay.
Management believes, that if necessary, it can obtain funds to supplement
operating cash flows for 2002 to enable Alexis to meet its liabilities and
subject to the environmental uncertainty enable Alexis to continue as a going
concern for at least one year.

These items raise substantial doubt about Alexis' ability to continue as a going
concern. The maximum loss for which the Partnership would be liable is its net
investment in Alexis. The Partnership's investment in Alexis at March 31, 2002
and 2001 was reduced to zero as a result of prior years' losses and the minority
interest balance was $0 at each date. Alexis' net loss after minority interest
amounted to approximately $340,000, $277,000 and $243,000, for the 2001, 2000
and 1999 Fiscal Years, respectively.

United-Glen Arden II Limited Partnership
- ----------------------------------------
The financial statements for United-Glen Arden II Limited Partnership ("Glen
Arden II") have been prepared assuming that Glen Arden II will continue as a
going concern. Glen Arden II is in default of its loan agreement primarily as a
result of non-payment of the required mortgage payments. These conditions raise
substantial doubt about Glen Arden II's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty. Subsequently, as of May 31, 2002 the property
had paid all mortgage arrears. The Partnership's investment in Glen Arden II was
reduced to zero as a result of prior years' losses and the minority interest
balance was $0 at both March 31, 2002 and

14

2001, respectively. Glen Arden II's net loss after minority interest was
approximately $542,000, $538,000 and $368,000 for the 2001, 2000 and 1999 Fiscal
Years, respectively.

Willoughby-Wyckoff Housing Associates
- -------------------------------------
The financial statements for Willoughby-Wyckoff Housing Associates
("Willoughby") have been prepared assuming that Willoughby will continue as a
going concern. There are certain conditions that raise substantial doubt about
Willoughby's ability to continue as a going concern. Willoughby has had
operating losses and equity deficiencies and has required loans from related
parties to meet its obligations. Management plans to continue to minimize costs
within its control and seeks additional funding sources to supplement project
operations. Continuance of Willoughby as a going concern is dependent upon
Willoughby's ability to obtain additional funding to supplement project
operations and enable Willoughby to meet its obligations as they become due. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties. The Partnership's investment in Willoughby at
March 31, 2002 and 2001 has been reduced to zero by prior years' losses and the
minority interest balance amounted to approximately $171,000 and $174,000,
respectively. Willoughby's net loss after minority interest amounted to
approximately $276,000, $193,000 and $204,000 for the 2001, 2000 and 1999 Fiscal
Years, respectively.

b) Subsidiary Partnerships - Other

Gramco Development Limited Dividend Partnership, L.P.
- -----------------------------------------------------
Gramco Development Limited Dividend Partnership, L.P. ("Gramco") was granted net
funds of $4,867,000. In the event of a substantial violation to the provisions
of certain agreements between Gramco and the Municipality of Bayamon (the
"Municipality") and between the Municipality and HUD, the funds shall become
immediately due and payable at the election of HUD and the Municipality.
Otherwise, the principal amount of the obligation together with any interest
will be forgiven. Proceeds from the loan have been deducted from fixed assets.

Williamsburg Residential, L.P.
- ------------------------------
In November 1996, the Local General Partner of Williamsburg Residential, L.P.
("Williamsburg") stopped making the mortgage note payments which constituted an
event of default. A Reinstatement and Modification Agreement was entered into
effective March 1, 1997. The Partnership has advanced Williamsburg the necessary
funds to keep the mortgage and escrows current during 2001 and is expected to
continue to do so during 2002.

The Partnership's investment in Williamsburg has been written down to $0 by
prior years' losses and the minority interest balance was approximately $728,000
and $792,000 at March 31, 2002 and 2001, respectively. Williamsburg net loss
after minority interest amounted to approximately $128,000, $208,000 and
$201,000 for the 2001, 2000, and 1999 fiscal years, respectively. As of December
31, 2001, the Partnership has advanced Williamsburg approximately $818,000.

Campeche Isle Apartments
- ------------------------
On January 18, 2002, the property and the related assets and liabilities of
Campeche Isle Apartments, Limited Partnership ("Campeche") were sold to an
unaffiliated third party for $4,625,000, resulting in a gain of approximately
$38,000 which will be recognized in the financial statements Form 10-Q for the
quarter ending June 30, 2002.

Other
- -----
The Partnership's investments, as a limited partner in the Local Partnerships,
are subject to the risks incident to 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, rental payment defaults, and increased

15

operating expenses, any or all of which could threaten the financial 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 HUD to make the rental assistance payments it has
contracted to make, and the possibility that when the rental assistance
contracts expire, there may not be market demand for apartments at full market
rents in a Local Partnership's Apartment Complex.

The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Inflation also affects the Local Partnerships
adversely by increasing operating costs as, for example, for such items as fuel,
utilities and labor.

New Pronouncements
- ------------------

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 141 "Business Combinations" and No. 142
"Goodwill and Other Intangible Assets". SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001 and that the use of pooling-of-interest method is no longer allowed.
SFAS No. 142 requires that upon adoption, amortization of goodwill will cease
and instead, the carrying value of goodwill will be evaluated for impairment on
an annual basis. Identifiable intangible assets will continue to be amortized
over their useful lives and reviewed for impairment in accordance with SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. The Partnership does not expect the adoption of these
standards to have any impact on the Partnership's consolidated financial
position or results of operations.

Additionally, the Financial Accounting Standard Board has issued SFAS No. 144
"ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS" in August 2001.
This Statement is effective for fiscal years beginning after December 15, 2001.

Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
Not applicable.

16

Item 8. Financial Statements and Supplementary Data.

17

INDEPENDENT AUDITORS' REPORT
----------------------------

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

We have audited the consolidated balance sheets of Liberty Tax Credit Plus II
L.P. 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). These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits. We did not
audit the financial statements for 27 (2001, 2000 and 1999 Fiscal Years)
subsidiary partnerships whose losses aggregated $2,587,660, $5,834,878 and
$6,417,444 for the 2001, 2000 and 1999 Fiscal Years, respectively, and whose
assets constituted 98% of the Partnership's assets at March 31, 2002 and 2001,
presented in the accompanying consolidated financial statements. The financial
statements for 27 (2001, 2000 and 1999 Fiscal Years) of these subsidiary
partnerships were audited by other auditors whose reports thereon have been
furnished to us and our opinion expressed herein, insofar as it relates to the
amounts included for these subsidiary partnerships, is based solely upon the
reports of the other auditors.

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

In our opinion, based upon our audits, and the reports of the other auditors
referred to above, the accompanying consolidated financial statements referred
to in the first paragraph present fairly, in all material respects, the
financial position of Liberty Tax Credit Plus II L.P. 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.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of four limited partnerships with significant contingencies
and uncertainties. The financial statements of these subsidiary partnerships
were prepared assuming that each will continue as a going concern. The four
subsidiary partnerships' net losses aggregated $1,195,732 (Fiscal 2001),
$1,035,987 (Fiscal 2000) and $865,425 (Fiscal 1999) and their assets aggregated
$17,087,258 and $18,279,322 at March 31, 2002 and 2001, respectively. These
matters raise substantial doubt about these subsidiary partnerships' abilities
to continue as going concerns. Management's plans in regard to these matters are
also described in Note 10(a). The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP

New York, New York
June 10, 2002

18

[Letterhead of FRIEDMAN ALPREN & GREEN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Polynesian Apartments Associates, Ltd.

We have audited the accompanying balance sheet of POLYNESIAN APARTMENTS
ASSOCIATES, LTD. (a limited partnership), FHA Project No. FL29-K005-015-152, 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 auditing standards generally accepted
in the Untied States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of POLYNESIAN APARTMENTS
ASSOCIATES, LTD. as of December 31, 2001 and the results of its operations and
its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

/s/ Friedman Alpren & Green LLP
New York, New York
February 4, 2002

19

[Letterhead of FRIEDMAN ALPREN & GREEN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Polynesian Apartments Associates, Ltd.

We have audited the accompanying balance sheet of POLYNESIAN APARTMENTS
ASSOCIATES, LTD. (a limited partnership), FHA Project No. FL29-K005-015-152, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of POLYNESIAN APARTMENTS
ASSOCIATES, LTD. as of December 31, 2000 and the results of its operations and
its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

/s/ Friedman Alpren & Green LLP
New York, New York
February 1, 2001

20

[Letterhead of FRIEDMAN ALPREN & GREEN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Polynesian Apartments Associates, Ltd.

We have audited the accompanying balance sheet of Polynesian Apartments
Associates, Ltd. (a limited partnership), FHA Project No. FL29-K005-015-152, 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.
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 Polynesian Apartments
Associates, Ltd. as of December 31, 1999 and the results of its operations and
its cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Friedman Alpren & Green LLP
New York, New York
January 24, 2000

21

[Letterhead of FRIEDMAN ALPREN & GREEN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Seagrape Village Associates, Ltd.

We have audited the accompanying balance sheet of SEAGRAPE VILLAGE ASSOCIATES,
LTD. (a limited partnership), FHA Project No. FL29-K005-015-151, as of December
31, 2001, and the related statements of operations, changes in partners' capital
deficiency and cash flows for the year then ended. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of of SEAGRAPE VILLAGE ASSOCIATES,
LTD. as of December 31, 2001 and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/ Friedman Alpren & Green LLP
New York, New York
February 5, 2002

22

[Letterhead of FRIEDMAN ALPREN & GREEN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Seagrape Village Associates, Ltd.

We have audited the accompanying balance sheet of Seagrape Village Associates,
Ltd. (a limited partnership), FHA Project No. FL29-K005-015-151, 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.
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 Seagrape Village Associates,
Ltd. as of December 31, 2000 and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/ Friedman Alpren & Green LLP
New York, New York
February 14, 2001

23

[Letterhead of FRIEDMAN ALPREN & GREEN LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Seagrape Village Associates, Ltd.

We have audited the accompanying balance sheet of Seagrape Village Associates,
Ltd. (a limited partnership), FHA Project No. FL29-K005-015-151, 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.
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 Seagrape Village Associates,
Ltd. as of December 31, 1999 and the results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

/s/ Friedman Alpren & Green LLP
New York, New York
January 24, 2000

24

[Letterhead of JOSE E. ROSARIO & CO.]

INDEPENDENT AUDITOR'S REPORT

To the Partners Puerto Rico Housing Finance Corporation
Metropolitan Towers Associates, LP San Juan, Puerto Rico
Rio Piedras, Puerto Rico

I have audited the accompanying balance sheets of Metropolitan Towers
Associates, LP, HUD Project No. RQ-46-K-051005, as of December 31, 2001 and
2000, and the related statements of income (loss), changes in partner's capital,
and cash flows for the years 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 audits.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Metropolitan Towers Associates, LP,
as of December 31, 2001 and2000, and the results of its operations and the
changes in partner's capital, and cash flows for the years then ended in
conformity with accounting principles generally accepted in the United State of
America and Puerto Rico.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, I have also issued a report dated January 25, 2002, on my
consideration of Metropolitan Towers Associates, LP's internal control and
reports dated January 25, 2002, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to Fair
Housing and Non-Discrimination. Those reports are an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of the audits.

My audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information on pages 14 to 19 is presented for purposes of additional analysis
and is not a required part of the basic financial statements of Metropolitan
Towers Associates, LP. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in my
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

/s/ Jose E. Rosario & Co.
License No. 961
Expires December 1, 2004
San Juan, Puerto Rico
January 25, 2002

Stamp No. 1780475 of the Puerto Rico College of CPA was affixed to the original.

25

[Letterhead of JOSE E. ROSARIO & CO.]

INDEPENDENT AUDITOR'S REPORT

To the Partners Puerto Rico Housing Finance Corporation
Metropolitan Towers Associates, LP San Juan, Puerto Rico
Rio Piedras, Puerto Rico

I have audited the accompanying balance sheet of Metropolitan Towers Associates,
LP as of December 31, 2000 and 1999, and the related statements of income,
changes in partner's capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Metropolitan Towers Associates, LP,
as of December 31, 2000 and 1999, and the results of its operations and the
changes in partner's capital, and cash flows for the years then ended in
conformity with generally accepted accounting principles.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, I have also issued a report dated January 24, 2001, on my
consideration of Metropolitan Towers Associates, LP's internal control structure
and reports dated January 24, 2001, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to Fair
Housing and Non-Discrimination. Those reports are an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of the audits.

My audits were conducted for the purpose of forming an opinion on the basic
Financial statements taken as a whole. The accompanying supplementary
information on pages 17 to 24 is presented for the purposes of additional
analysis and is not a required part of the basic financial statements of
Metropolitan Towers Associates, LP. Such information has been subjected to the
auditing procedures Applied in the audits of the basic financial statements and,
in my opinion, is fairly Stated in all material respects in relation to the
basic financial statements taken as a whole.

/s/ Jose E. Rosario & Co.
License No. 961
Expires December 1, 2001
January 24, 2001

Stamp No. 1690928 of the Puerto Rico College of CPA was affixed to the original.

26

[Letterhead of RBG & Co.]

S2100-020

Independent Auditors' Report

To The Partners
Westminster Place II - Olive Site, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Westminster Place II - Olive
Site, L.P., Project No. 085-35415-PM, a limited partnership, as of December 31,
2001 and 2000 and the related statements of profit and loss, partners' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America 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 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 Westminster Place II - Olive
Site, L.P. as of December 31, 2001 and 2000 and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 21, 2002 on our
consideration of Westminster Place II - Olive Site, L.P.'s internal controls and
reports dated January 21, 2002 on its compliance with specific requirements
applicable to major HUD programs, and specific requirements applicable to Fair
Housing and Non- Discrimination. Those reports are an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of the audits.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages 13 to 22) 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 financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

/s/ Rubin, Brown, Gornstein & Co. LLP
January 21, 2002
St. Louis, Missouri

27

[Letterhead of RBG & Co.]

S2100-020

Independent Auditors' Report

To The Partners
Westminster Place II - Olive Site, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Westminster Place II - Olive
Site, L.P., Project No. 085-35415-PM, a limited partnership, as of December 31,
2000 and 1999 and the related statements of profit and loss, partners' equity
and cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America 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 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 Westminster Place II - Olive
Site, L.P. as of December 31, 2000 and 1999 and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages 13 to 22) 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 financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 31, 2001 on our
consideration of Westminster Place II - Olive Site, L.P.'s internal controls and
reports dated January 31, 2001 on its compliance with specific requirements
applicable to major HUD programs, and specific requirements applicable to Fair
Housing and Non- Discrimination. Those reports are an integral part of an audit
performed in accordance with Government Auditing Standards and should be read in
conjunction with this report in considering the results of the audits.

/s/ Rubin, Brown, Gornstein & Co. LLP
January 31, 2000
St. Louis, Missouri

28

[Letterhead of RBG & Co.]

Independent Auditors' Report

Partners
Property Development Associates, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Property Development
Associates, L.P., a limited partnership, as of December 31, 2001 and 2000 and
the related statements of income, partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Property Development
Associates, L.P. as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
February 14, 2002

29

[Letterhead of RBG & Co.]

Independent Auditors' Report

To The Partners
Property Development Associates, L.P.
St. Louis, Missouri

We have audited the accompanying balance sheet of Property Development
Associates, L.P., a limited partnership, as of December 31, 2000 and 1999 and
the related statements of income, partners' equity and cash flows for the years
then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform 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 Property Development
Associates, L.P. as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
February 12, 2001 (Except for Notes 4 and 9, which are dated March 30, 2001)

30

[Letterhead of RBG & Co.]

S2100-020

Independent Auditors' Report

To The Partners
Whittier Plaza Associates Limited Partnership
St. Louis, Missouri

We have audited the accompanying balance sheet of Whittier Plaza Associates
Limited Partnership, Project No. 085-35412-PM-SR, a limited partnership, as of
December 31, 2001 and 2000 , and the related statements of income, partners'
equity (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America 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 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 Whittier Plaza Associates
Limited Partnership as of December 31, 2001 and 2000, and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 17, 2002 on our
consideration of Whittier Plaza Associates Limited Partnership's internal
control and reports dated January 17, 2002, on its compliance with specific
requirements applicable to major HUD programs, specific requirements applicable
to Fair Housing and Non-Discrimination, and specific requirements applicable to
nonmajor HUD program transactions. Those reports are an integral part of an
audit performed in accordance with Government Auditing Standards and should be
read in conjunction with this report in considering the results of our audit.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages 15 to 24) is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

31

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 5 to the
financial statements, the Partnership has sustained recurring losses from
operations, excessive vacancies, and has continually required a general partner
to fund deficits. These items raise substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
January 17, 2002

32

[Letterhead of RBG & Co.]

S2100-020

Independent Auditors' Report

To The Partners
Whittier Plaza Associates Limited Partnership
St. Louis, Missouri

We have audited the accompanying balance sheet of Whittier Plaza Associates
Limited Partnership, Project No. 085-35412-PM-SR, a limited partnership, as of
December 31, 2000 and 1999, and the related statements of income, partners'
equity (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing standards
and Government Auditing Standards, issued by the Comptroller General of the
United States. Those standards require that we plan and perform 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 Whittier Plaza Associates
Limited Partnership as of December 31, 2000 and 1999, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information (shown on pages 15 to 24) is presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the auditing procedures applied in the audit
of the financial statements and, in our opinion, is fairly stated in all
material respects in relation to the financial statements taken as a whole.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated January 24, 2001 on our
consideration of Whittier Plaza Associates Limited Partnership's internal
control and a reports dated January 24, 2001, on its compliance with specific
requirements applicable to major HUD programs, specific requirements applicable
to Fair Housing and Non-Discrimination, and specific requirements applicable to
nonmajor HUD program transactions. 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 the audits.

33

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 5 to the
financial statements, the Partnership has sustained recurring losses from
operations, excessive vacancies, and has continually required a general partner
to fund deficits. These items raise substantial doubt about the Partnership's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.

/s/ Rubin, Brown, Gornstein & Co. LLP
St. Louis, Missouri
January 24, 2001

34

[Letterhead of Habif, Arogeti & Wynne, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of United - Glenarden I Limited
Partnership as of December 31, 2001, and the related statements of operations,
changes in partners' 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of United - Glenarden I Limited
Partnership as of December 31, 2001, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles in the United States of America.

/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
February 15, 2002

35

[Letterhead of Habif, Arogeti & Wynne, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of United - Glenarden I Limited
Partnership as of December 31, 2000, and the related statements of operations,
changes in partners' 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.
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 United - Glenarden I Limited
Partnership as of December 31, 2000, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
February 7, 2001

36

[Letterhead of Habif, Arogeti & Wynne, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden I Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1999, 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.

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 UNITED - GLENARDEN I LIMITED
PARTNERSHIP as of December 31, 1999, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
February 2, 2000

37

[Letterhead of Habif, Arogeti & Wynne, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners of
United - Glenarden II Limited Partnership

We have audited the accompanying balance of UNITED - GLENARDEN II LIMITED
PARTNERSHIP 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.

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 UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 2001, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

The accompanying financial statements have been prepared assuming that the
Project will continue as a going concern. As discussed in Note O to the
financial statements, as shown in the financial statements, the Project is in
default of its loan agreement at December 31, 2001 primarily as a result of
non-payment of the required mortgage payments. These conditions raise
substantial doubt about the Project's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
February 13, 2002

38

[Letterhead of Habif, Arogeti & Wynne, P.C.]

INDEPENDENT AUDITORS' REPORT

To the Partners
United - Glenarden II Limited Partnership

We have audited the accompanying balance of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 2000, 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.

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 UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 2000, and the results of its operations and its
cash flows for the year then ended in conformity with generally accepted
accounting principles.

/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
February 7, 2001

39

[Letterhead of Habif, Arogeti & Wynne, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
United - Glenarden II Limited Partnership

We have audited the accompanying balance sheet of UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1999, and the related statements of operations,
changes in partners' 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.
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 UNITED - GLENARDEN II LIMITED
PARTNERSHIP as of December 31, 1999, and results of its operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.

/s/ Habif, Arogeti & Wynne, P.C.
Atlanta, Georgia
February 2, 2000

40

[Letterhead of SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
ROLLING GREEN LIMITED PARTNERSHIP
D/B/A Prairie View Apartments
Libertyville, IL

We have audited the accompanying balance sheets of ROLLING GREEN LIMITED
PARTNERSHIP as of December 31, 2001 and 2000, and the related statements of
income, changes in partners' equity (deficit), and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ROLLING GREEN LIMITED
PARTNERSHIP as of December 31, 2001 and 2000, and the results of its operations,
changes in partners' equity (deficit) and cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Solomon, Baerson, Witonski, Patel & Kaskel, Ltd.
Chicago, IL
January 30, 2002

41

[Letterhead of SOLOMON, BAERSON, WITONSKI, PATEL & KASKEL, LTD.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
ROLLING GREEN LIMITED PARTNERSHIP
D/B/A Prairie View Apartments
Libertyville, IL

We have audited the accompanying balance sheets of ROLLING GREEN LIMITED
PARTNERSHIP at December 31, 2000 and 1999, and the related statements of income,
changes in partners' equity (deficit), and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ROLLING GREEN LIMITED
PARTNERSHIP as of December 31, 2000 and 1999, and the results of its operations,
changes in partners' equity (deficit) and cash flows for the years then ended in
conformity with generally accepted accounting principles.

/s/ Solomon, Baerson, Witonski, Patel & Kaskel, Ltd.
Chicago, IL
January 24, 2001

42

[Letterhead of ZAYAS, MORAZZANI & CO.]

Independent Auditors' Report

To the Partners
Santa Juanita II Limited Partnership:

We have audited the accompanying balance sheet of Santa Juanita II Limited
Partnership, as of December 31, 2001, and the related statements of profit and
loss, partners' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America and GOVERNMENT AUDITING STANDARDS issued by the
Comptroller General of the United States. Those standards require that we plan
and perform 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 Santa Juanita II Limited
Partnership as of December 31, 2001, and the results of its operations, changes
in partners' equity, and cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.

In accordance with GOVERNMENT AUDITING STANDARDS and THE CONSOLIDATED AUDIT
GUIDE FOR AUDITS OF HUD PROGRAMS issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 11, 2002, on our
consideration of Santa Juanita II Limited Partnership's internal control, a
report dated February 11, 2002, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to major
HUD programs, and a report dated February 11, 2002 on its compliance with
specific requirements applicable to Affirmative Fair Housing and
Non-Discrimination. Those reports are an integral part of an audit performed in
accordance with GOVERNMENT AUDITING STANDARDS and should be read in conjunction
with this report in considering the results of our audit.

Our audit was performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 23
through 32 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.

/s/ Zayas, Morazzani & Co.

February 11, 2002

Stamp No. 1781861 of the Puerto Rico Society of Certified Public Accountants was
affixed to original.

Federal Employer Identification Number: 66-0365844

43

[Letterhead of ZAYAS, MORAZZANI & CO.]

Independent Auditors' Report

To the Partners
Santa Juanita II Limited Partnership:

We have audited the accompanying balance sheet of Santa Juanita II Limited
Partnership, as of December 31, 2000, and the related statements of profit and
loss, partners' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Santa Juanita II Limited
Partnership as of December 31, 2000, and the results of its operations, changes
in partners' equity, and cash flows for the year then ended in conformity with
generally accepted accounting principles.

In accordance with GOVERNMENT AUDITING STANDARDS and THE CONSOLIDATED AUDIT
GUIDE FOR AUDITS OF HUD PROGRAMS issued by the U.S. Department of Housing and
Urban Development, we have also issued a report dated February 16, 2001, on our
consideration of Santa Juanita II Limited Partnership's internal control, a
report dated February 16, 2001, on its compliance with specific requirements
applicable to major HUD programs and specific requirements applicable to major
HUD programs, and a report dated February 16, 2001 on its compliance with
specific requirements applicable to Affirmative Fair Housing and
Non-Discrimination. Those reports are an integral part of an audit performed in
accordance with GOVERNMENT AUDITING STANDARDS and should be read in conjunction
with this report in considering the results of our audit.

Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 24
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.

/s/ Zayas, Morazzani & Co.

February 16, 2001, except for Notes 4 and 10, as to which the date is March 23,
2001

Stamp No. 1707989 of the Puerto Rico Society of Certified Public Accountants was
affixed to original.

Federal Employer Identification Number: 66-0365844

44

[Letterhead of ZAYAS, MORAZZANI & CO.]

Independent Auditors' Report

To the Partners
Santa Juanita II Limited Dividend Partnership:

We have audited the accompanying balance sheet of Santa Juanita II Limited
Dividend Partnership, as of December 31, 1999, and the related statements of
profit and loss, partners' equity and cash flows for the year then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Santa Juanita II Limited
Dividend Partnership as of December 31, 1999, and the results of its operations,
changes in partners' equity, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

As discussed in Note 13 to the financials statements, on April 2000, Santa
Juanita II Limited Dividend Partnership entered into a reinstatement and
amendment agreement related to the balances of the first mortgage and second
mortgage and their related accrued interests. The effect of such reinstatement
and amendment will be recognized during the year ending December 31, 2000.

As described in Note 9 to the financial statements, the Substitute Management
Agent was designated on July 1, 1997. The last audited information prior to such
designation, corresponds to the year ended December 31, 1994. For the period of
January 1, 1995 thru June 30, 1997, the financial records that have been made
available to the Substitute Management Agent were not complete or reliable. The
adjustments that could have been made to the beginning balance of partners'
equity and other accounts, if all financial records had been available, when the
Substitute management Agent assumed the project, may not be determined for those
who are not informed about such matters. 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 16, 2000, except for the first paragraph of such report,
as to which the date May 23, 2000 on our consideration of Santa Juanita II
Limited Dividend Partnership's internal control, a report dated February 16,
2000, except for the first paragraph of such report, as to which the date May
23, 2000 on its compliance with specific requirements applicable to major HUD
programs and specific requirements applicable to major HUD programs, and a
report dated February 16, 2000 except for the first paragraph of such report, as
to which the date May 23, 2000 on its compliance with specific requirements
applicable to Affirmative Fair Housing and Non-Discrimination. Those reports are
an integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the
results of our audit.

45

Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 26
through 35 is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.

/s/ Zayas, Morazzani & Co.

Stamp No. 1631923 of the Puerto Rico Society of Certified Public Accountants was
affixed to original.

Federal Employer Identification Number: 66-0365844

February 16, 2000, except for the fourth and sixth paragraphs of this report and
Note 13, as to which the date is May 23, 2000

46

[Letterhead of Berdon, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Spring Creek Associates, L.P.
New York, New York

We have audited the accompanying balance sheet of Spring Creek Associates, L.P.
(a Delaware Limited Partnership) as of December 31, 2001, and the related
statements of operations changes in partners' capital (deficit), and cash flows
for the year then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits. The financial statements of the
Partnership as of December 31, 2000 were audited by other auditors, whose report
dated February 9, 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 Spring Creek Associates,
L.P. as of December 31, 2001 and the results of its operations and its cash
flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

/s/ Berdon, LLP
Certified Public Accountants

New York, N.Y.
February 12, 2002

47

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Spring Creek Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of Spring Creek Associates, L.P.
(a Delaware limited partnership) as of December 31, 2000 and 1999, and the
related statements of income (loss), changes in partners' capital (deficit), and
cash flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Spring Creek Associates, L.P.
as of December 31, 2000 and 1999 and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 9, 2001

48

[Letterhead of Berdon, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
East Two Thirty-Five Associates, L.P.
New York, New York

We have audited the accompanying consolidated balance sheets of East Two
Thirty-Five Associates, L.P. and subsidiary as (Delaware limited partnership) as
of December 31, 2001, and the related consolidated statements of operations,
changes in partners' capital, and cash flows for the year then ended. These
consolidated financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit. The consolidated financial statements
of East Two Thirty-Five Associates, L.P. and subsidiary as of December 31, 2000
were audited by other auditors, whose report dated February 6, 2001, expressed
an unqualified opinion on those statements.

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

In our opinion, the 2001 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of East Two
Thirty-Five Associates, L.P. and subsidiary as of December 31, 2001 and the
consolidated results of their operations and their cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America.

/s/ Berdon, LLP
New York, N.Y.
February 7, 2002

49

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
East Two Thirty-Five Associates, L.P.
New York, New York

We have audited the accompanying consolidated balance sheets of East Two
Thirty-Five Associates, L.P. (a Delaware limited partnership) and subsidiary as
of December 31, 2000 and 1999, and the related consolidated statements of income
(loss), changes in partners' capital, and cash flows for the years then ended.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of East Two Thirty-Five
Associates, L.P. and subsidiary as of December 31, 2000 and 1999 and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 6, 2001

50

[Letterhead of Berdon, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Upper Fifth Avenue Residential Associates, L.P.
New York, New York

We have audited the accompanying balance sheet of Upper Fifth Avenue Residential
Associates, L.P. (a Delaware limited partnership) as of December 31, 2001, and
the related statements of operations, changes in partners' capital (deficit),
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit. The financial
statements of the Partnership as of December 31, 2000 were audited by other
auditors, whose report dated February 6, 2001, expressed an unqualified opinion
on those statements.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 Upper Fifth Avenue
Residential Associates, L.P. as of December 31, 2001 and the results of its
operations and its cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.

/s/ Berdon, LLP
Certified Public Accountants

New York, N.Y.
February 8, 2002

51

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Upper Fifth Avenue Residential Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of Upper Fifth Avenue
Residential Associates, L.P. (a Delaware limited partnership) as of December 31,
2000 and 1999, and the related statements of income (loss), changes in partners'
capital (deficit), and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Upper Fifth Avenue Residential
Associates, L.P. as of December 31, 2000 and 1999 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 6, 2001

52

[Letterhead of Berdon, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
West 107th Street Associates, L.P.
New York, New York

We have audited the accompanying balance sheet of West 107th Street Associates,
L.P. (a Delaware Limited Partnership) 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. The financial statements of the
Partnership as of December 31, 2000 were audited by other auditors, whose report
dated February 5, 2001, expressed an unqualified opinion on those statements.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our 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 West 107th Street
Associates, L.P. as of December 31, 2001 and the results of its operations and
its cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America.

/s/ Berdon, LLP
Certified Public Accountants

New York, N.Y.
January 24, 2002

53

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
West 107th Street Associates, L.P.
New York, New York

We have audited the accompanying balance sheets of West 107th Street Associates,
L.P. (a Delaware limited partnership) as of December 31, 2000 and 1999, and the
related statements of income (loss), changes in partners' capital, and cash
flows for the years then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of West 107th Street Associates,
L.P. as of December 31, 2000 and 1999 and the results of its operations and its
cash flows for the years then ended in conformity with generally accepted
accounting principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 5, 2001

54

[Letterhead of Berdon, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
General Atlantic Second Avenue Associates, L.P.
New York, New York

We have audited the accompanying consolidated balance sheet of General Atlantic
Second Avenue Associates, L.P. and subsidiary (a Delaware Limited Partnership)
as of December 31, 2001, and the related consolidated statements of operations,
changes in partners' capital (deficit), and cash flows for the year then ended.
These consolidated financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. The consolidated financial
statements of General Atlantic Second Avenue Associates, L.P. as of December 31,
2000 were audited by other auditors, whose report dated February 5, 2001,
expressed an unqualified opinion on those statements.

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

In our opinion, the 2001 consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
General Atlantic Second Avenue Associates, L.P. and subsidiary as of December
31, 2001 and the consolidated results of their operations and their cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/ Berdon, LLP
Certified Public Accountants

New York, N.Y.
February 1, 2002

55

[Letterhead of GROSSMAN, TUCHMAN & SHAH, LLP]

INDEPENDENT AUDITORS' REPORT

To the Partners of
General Atlantic Second Avenue Associates, L.P.
New York, New York

We have audited the accompanying consolidated balance sheets of General Atlantic
Second Avenue Associates, L.P. (a Delaware limited partnership) and subsidiary
as of December 31, 2000 and 1999, and the related consolidated statements of
income (loss), changes in partners' capital (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the Partnership's management. Our responsibility is to express an opinion on
these consolidated 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 consolidated financial statements are
free of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General Atlantic
Second Avenue Associates, L.P. and subsidiary as of December 31, 2000 and 1999
and the consolidated results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting principles.

Respectfully submitted,

/s/ Grossman, Tuchman & Shah, LLP
New York, N.Y.
February 13, 2001

56

[Letterhead of Reznick Fedder & Silverman]

INDEPENDENT AUDITORS' REPORT

To the Partners
Church Lane Associates

We have audited the accompanying balance sheet of Church Lane 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 Church Lane Associates for the year ended
December 31, 2000, were audited by other auditors whose report, dated January
23, 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 and the standards applicable to financial audits
contained in GOVERNMENT AUDITING STANDARDS, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the 2001 financial statements referred to above present fairly,
in all material respects, the financial position of Church Lane 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.

Our 2001 audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 24
through 27 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, we have also issued our report
for the year ended December 31, 2001, dated January 25, 2002, on our
consideration of Church Lane Associates' internal control over financial
reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts and grants. That report is an integral part of an audit
performed in accordance with GOVERNMENT AUDITING STANDARDS and should be read in
conjunction with this report in considering the results of our audit.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 25, 2002

57

[Letterhead of ZINER, KENNEDY & LEHAN LLP

INDEPENDENT AUDITORS' REPORT

To the Partners of
Church Lane Associates

We have audited the accompanying balance sheets of Church Lane 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 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 Church Lane Associates as of
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
Quincy, Massachusetts
January 23, 2001

58

[Letterhead of Reznick Fedder & Silverman]

INDEPENDENT AUDITORS' REPORT

To the Partners
Campeche Isle Apartments Limited Partnership

We have audited the accompanying statement of net assets in liquidation of
Campeche Isle Apartments Limited Partnership as of December 31, 2001, and the
related statement of changes in net assets in liquidation for the period January
1, 2001 through December 31, 2001. These financial statements are the
responsibility of the partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

As described in note A to the financial statements, during 2001, the partnership
adopted a plan to sell the rental property and liquidate the partnership in lieu
of continuing the business. On April 18, 2002, the partnership sold the rental
property. As a result, the partnership's financial statements are presented on
the liquidation basis of accounting.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation of Campeche Isle Apartments
Limited Partnership as of December 31, 2001, and the changes in net assets in
liquidation for the period January 1, 2001 through December 31, 2001, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
March 6, 2002

59

[Letterhead of Reznick Fedder & Silverman]

INDEPENDENT AUDITORS' REPORT

To the Partners
Campeche Isle Apartments Limited Partnership

We have audited the accompanying balance sheet of Campeche Isle Apartments
Limited Partnership as of December 31, 2000, and the related statements of
operations, partners' 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.
Those standards require that we plan and perform the audit to obtain reasonable
assurance that 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 Campeche Isle Apartments
Limited Partnership as of December 31, 2000, and the results of its operations,
the changes in partners' deficit and cash flows for the year then ended, in
conformity with generally accepted accounting principles.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 15, 2001

60

[Letterhead of Reznick Fedder & Silverman]

INDEPENDENT AUDITORS' REPORT

To the Partners
Campeche Isle Apartments Limited Partnership

We have audited the accompanying balance sheet of Campeche Isle Apartments
Limited Partnership as of December 31, 1999, and the related statements of
operations, partners' 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.
Those standards require that we plan and perform the audit to obtain reasonable
assurance that 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 Campeche Isle Apartments
Limited Partnership as of December 31, 1999, and the results of its operations,
the changes in partners' deficit and cash flows for the year then ended, in
conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
partnership will continue as a going concern. As discussed in note B to the
financial statements, the partnership has suffered recurring losses from
operations. This raises substantial doubt about the partnership's ability to
continue as a going concern. Management's plans in regard to these matters are
also described in note B. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 1, 2000

61

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
Robin Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Robin Housing Associates (a
limited partnership) as of December 31, 2001 and 2000, and the related
statements of operations, partners' capital (deficiency), and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Robin Housing Associates as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.

White Plains, New York
January 31, 2002

62

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
Robin Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Robin Housing Associates (a
limited partnership) as of December 31, 2000 and 1999, and the related
statements of operations, partners' capital (deficiency), and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 Robin Housing Associates as of
December 31, 2000 and 1999, and the results of its operations and its cash flows
for the years then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.
White Plains, New York
January 30, 2001

63

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
Concourse Artists Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Concourse Artists Housing
Associates (a limited partnership) as of December 31, 2001 and 2000, and the
related statements of operations, partners' capital (deficiency), and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Concourse Artists Housing
Associates as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.

White Plains, New York
January 31, 2002

64

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
Concourse Artists Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Concourse Artists Housing
Associates (a limited partnership) as of December 31, 2000 and 1999, and the
related statements of operations, partners' capital (deficiency), and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 Concourse Artists Housing
Associates as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.
White Plains, New York
January 30, 2001

65

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
2051 Grand Concourse Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of 2051 Grand Concourse Housing
Associates (a limited partnership) as of December 31, 2001 and 2000, and the
related statements of operations, partners' capital (deficiency), and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 2051 Grand Concourse Housing
Associates as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.

White Plains, New York
January 31, 2002

66

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
2051 Grand Concourse Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of 2051 Grand Concourse Housing
Associates (a limited partnership) as of December 31, 2000 and 1999, and the
related statements of operations, partners' capital (deficiency), and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 2051 Grand Concourse Housing
Associates as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.
Port Chester, New York
January 30, 2001

67

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
Willoughby-Wyckoff Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Willoughby-Wyckoff Housing
Associates (a limited partnership) as of December 31, 2001 and 2000, and the
related statements of operations, partners' capital (deficiency), and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 Willoughby-Wyckoff Housing
Associates as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended in conformity with conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 1B to the
financial statements, the Partnership has had operating losses and equity
deficiencies. These conditions raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.

White Plains, New York
January 31, 2002

68

[Letterhead of MARDEN, HARRISON & KREUTER]

INDEPENDENT AUDITORS' REPORT

To the Partners
Willoughby-Wyckoff Housing Associates
3743-A White Plains Road
Bronx, New York 10467

We have audited the accompanying balance sheets of Willoughby-Wyckoff Housing
Associates (a limited partnership) as of December 31, 2000 and 1999, and the
related statements of operations, partners' capital (deficiency), and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the 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 Willoughby-Wyckoff Housing
Associates as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with conformity with
accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
company will continue as a going concern. As discussed in Note 1B to the
financial statements, the Partnership has had operating losses and equity
deficiencies. These conditions raise substantial doubt about its ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Marden, Harrison & Kreuter
Certified Public Accountants, P.C.
White Plains, New York
January 30, 2001

69

[Letterhead of WOLFE NILGES NAHORSKI]

INDEPENDENT AUDITORS' REPORT

To the Partners
Goodfellow Place Limited Partnership
St. Louis, Missouri

We have audited the accompanying balance sheets of Goodfellow Place Limited
Partnership as of December 31, 2001 and 2000, and the related statements of
Income (loss), partners' equity (deficit), 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 audit.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial 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 Goodfellow Place Limited
Partnership as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended, in conformity with accounting
principles generally accepted in the United States of America.

/s/ Wolfe Nilges Nahorski
A Professional Corporation

January 30, 2002
St. Louis, Missouri

70

[Letterhead of WOLFE NILGES NAHORSKI]

INDEPENDENT AUDITORS' REPORT

To the Partners
Goodfellow Place Limited Partnership
St. Louis, Missouri

We have audited the accompanying balance sheets of Goodfellow Place Limited
Partnership as of December 31, 2000 and 1999, and the related statements of
Income (loss), partners' equity (deficit), 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 audit.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial 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 Goodfellow Place Limited
Partnership as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.

/s/ Wolfe Nilges Nahorski
A Professional Corporation
St. Louis, Missouri
January 18, 2001

71

[Letterhead of HAMILTON & MUSSER, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Penn Alto Associates, Limited Partnership
Altoona, Pennsylvania 16601

We have audited the accompanying balance sheets of Penn Alto Associates, Limited
Partnership as of December 31, 2001 and 2000 and the related statements of
income, changes in partners' capital, and cash flows for the years then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our 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 the opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Penn Alto Associates, Limited
Partnership, as of December 31, 2001 and 2000, and the results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information on pages
9 and 10 is presented for the purpose of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Hamilton & Musser
Certified Public Accountants
Mechanicsburg, Pennsylvania
February 20, 2002

72

[Letterhead of HAMILTON & MUSSER, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners of
Penn Alto Associates, Limited Partnership
Altoona, Pennsylvania 16601

We have audited the accompanying balance sheets of Penn Alto Associates, Limited
Partnership as of December 31, 2000 and 1999 and the related statements of
income, changes in partners' capital, and cash flows for the years then ended.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our 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 the opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Penn Alto Associates, Limited
Partnership, as of December 31, 2000 and 1999, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The accompanying supplementary information on pages
9 and 10 is presented for the purpose of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Hamilton & Musser
Certified Public Accountants
Mechanicsburg, Pennsylvania
February 22, 2001

73

[Letterhead of Torres Llompart, Sanchez Ruiz & Co.]

Partners
Gramco Development Limited Dividend Partnership, L.P.
San Juan, Puerto Rico

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

We have audited the accompanying balance sheets of Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December
31, 2001 and 2000, and the related statements of profit and loss, partners'
capital, and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the
Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements 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 Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December
31, 2001 and 2000, and the results of its operations, changes in partners'
capital and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.

In accordance with GOVERNMENT AUDITING STANDARDS and the Consolidated Audit
Guide for audits of HUD Programs, issued by the US Department of Housing and
Urban Development, we have also issued a report dated January 22, 2002, on our
consideration of the Partnership's internal control structure and reports dated
January 22, 2002, on its compliance with specific requirements applicable to
major HUD programs; compliance with laws, regulations, contracts, loan covenants
and agreements; and compliance with specific requirements applicable to Fair
Housing and Non-Discrimination. Those reports are an integral part of an audit
performed in accordance with GOVERNMENT AUDITING STANDARDS and should be read in
conjunction with this report in considering the results of the audits.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements, taken as a whole. The accompanying supplementary
information included in the report on pages 23 to 26 is presented for purposes
of additional analysis and is not a required part of the basic financial
statements of Gramco Development Limited Dividend Partnership, L.P., HUD Project
No. 056-35140-LD (HODAG). Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements for the year
ended December 31, 2001, and in our opinion, is fairly stated in all material
respects in relation to the basic financial statements for the year ended
December 31, 2001, taken as a whole.

/s/ Torres Llompart, Sanchez Ruiz & Co.
January 22, 2002
License No. 169
San Juan, Puerto Rico
Stamp number 1780551 was affixed to the original of this report.

74

[Letterhead of Torres Llompart, Sanchez Ruiz & Co.]

Partners
Gramco Development Limited Dividend Partnership, L.P.
San Juan, Puerto Rico

INDEPENDENT AUDITORS' REPORT ON FINANCIAL STATEMENTS

We have audited the accompanying balance sheets of Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December
31, 2000 and 1999, and the related statements of profit and loss, partners'
capital, and cash flows for the years then ended. These financial statements are
the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and GOVERNMENT AUDITING STANDARDS, issued by the
Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements 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 Gramco Development Limited
Dividend Partnership, L.P., HUD Project No. 056-35140-LD (HODAG), as of December
31, 2000 and 1999, and the results of its operations, changes in partners'
capital and its cash flows for the years then ended, in conformity with
accounting principles generally accepted in the United States of America.

In accordance with GOVERNMENT AUDITING STANDARDS and the Consolidated Audit
Guide for audits of HUD Programs, issued by the US Department of Housing and
Urban Development, we have also issued a report dated February 3, 2001, on our
consideration of the Partnership's internal control structure and reports dated
February 3, 2001, on its compliance with specific requirements applicable to
major HUD programs; compliance with laws, regulations, contracts, loan covenants
and agreements; and compliance with specific requirements applicable to Fair
Housing and Non-Discrimination. Those reports are an integral part of an audit
performed in accordance with GOVERNMENT AUDITING STANDARDS and should be read in
conjunction with this report in considering the results of the audits.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements, taken as a whole. The accompanying supplementary
information included in the report on pages 23 to 26 is presented for purposes
of additional analysis and is not a required part of the basic financial
statements of Gramco Development Limited Dividend Partnership, L.P., HUD Project
No. 056-35140-LD (HODAG). Such information has been subjected to the auditing
procedures applied in the audit of the basic financial statements for the year
ended December 31, 2000, and in our opinion, is fairly stated in all material
respects in relation to the basic financial statements for the year ended
December 31, 2000, taken as a whole.

/s/ Torres Llompart, Sanchez Ruiz & Co.
San Juan, Puerto Rico
License No. 169
Stamp number 1703788 was affixed to the original of this report.
February 3, 2001

75

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT

To the Partners
Alexis Park Apartments, A Louisiana Partnership In Commendam
Bossier City, Louisiana

We have audited the accompanying balance sheets of Alexis Park Apartments, A
Louisiana Partnership In Commendam at December 31, 2001 and December 31, 2000
and the related statements of income, partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with 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, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of Alexis
Park Apartments, A Louisiana Partnership In Commendam at December 31, 2001 and
December 31, 2000, and the results of its operations and its cash flows for the
years then ended in conformity with U.S. generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed at Note 11 to the
financial statements, there are uncertainties that affect the Partnership
concerning the existence of hazardous waste and negative performance indicators
that raise substantial doubt about the Partnership's ability to continue as a
going concern. Management's position in regard to these matters is also
discussed at Note 10. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the years ended December 31, 2001 and December 31, 2000
taken as a whole. The supplementary Schedule 1 is presented for the purpose of
additional analysis and is 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.

/s/ Cole, Evans & Peterson
Shreveport, Louisiana
February 12, 2002

76

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT

To the Partners
Alexis Park Apartments, A Louisiana Partnership In Commendam
Bossier City, Louisiana

We have audited the accompanying balance sheets of Alexis Park Apartments, A
Louisiana Partnership In Commendam at December 31, 2000 and December 31, 1999
and the related statements of income, partners' capital and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 in the first paragraph
above present fairly, in all material respects, the financial position of Alexis
Park Apartments, A Louisiana Partnership In Commendam at December 31, 2000 and
December 31, 1999, and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed at Note 10 to the
financial statements, there are uncertainties that affect the Partnership
concerning the existence of hazardous waste and negative performance indicators
that raise substantial doubt about the Partnership's ability to continue as a
going concern. Management's position in regard to these matters is also
discussed at Note 10. The financial statements do not include any adjustments
that might result from the outcome of these uncertainties.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the years ended December 31, 2000 and December 31, 1999
taken as a whole. The supplementary Schedule 1 is presented for the purpose of
additional analysis and is 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.

/s/ Cole, Evans & Peterson
Shreveport, Louisiana
February 8, 2001

77

[Letterhead of Dickey, Wolf & Humbard, LLC]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Williamsburg Residential, L.P.

We have audited the accompanying balance sheet of Williamsburg Residential,
L.P. (a Kansas Limited Partnership) as of December 31, 2001, 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 auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Williamsburg Residential, L.P.
as of December 31, 2001, and the results of its operations and its cash flows
for the year then ended in conformity with accounting principles generally
accepted in the United States of America.

/s/ Dickey, Wolf & Humbard, LLC
Certified Public Accountants

Harrisonville, MO
February 13, 2002

78

[Letterhead of CHESSER & COMPANY]

INDEPENDENT AUDITOR'S REPORT

Partners
Williamsburg Residential, L.P.
New York, New York

We have audited the accompanying balance sheet of Williamsburg Residential, L.P.
as of December 31, 2000 and 1999, and the related statements of operations,
changes in Partners' capital, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our 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 Williamsburg Residential, L.P.
as of December 31, 2000 and 1999, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.

/s/ Chesser & Company, P.A.
Wichita, Kansas
March 16, 2001

79

[Letterhead of PHILIP ROOTBERG & COMPANY, LLP]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Victory Apartments

We have audited the accompanying balance sheet of Victory Apartments (a limited
partnership) - F.H.A. Project No. 071-35588 as of December 31, 2001 and 2000,
and the related statements of profit and loss, partners' capital, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with U.S. 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 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 Victory Apartments, F.H.A.
Project No. 071-35588 as of December 31, 2001 and 2000, and the results of its
operations, changes in its partners' capital and its cash flows for the years
then ended in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 22, 2002, on our consideration of the Partnership's internal
control and a report dated January 22, 2002, on its compliance with laws and
regulations. Those reports are an integral part of an audit performed in
accordance with Government Auditing Standards and should be read in conjunction
with this report in considering the results of our audits.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
listed on the preceding contents page are presented for purposes of additional
analysis to comply with HUD reporting requirements and are not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

/s/ Philip Rootberg & Company, LLP
Chicago, Illinois
January 22, 2002

80

[Letterhead of PHILIP ROOTBERG & COMPANY, LLP]

INDEPENDENT AUDITOR'S REPORT

To the Partners
Victory Apartments

We have audited the accompanying balance sheet of Victory Apartments (a limited
partnership) - F.H.A. Project No. 071-35588 as of December 31, 2000 and 1999,
and the related statements of profit and loss, partners' capital, and cash flows
for the years then ended. These financial statements are the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with U.S. 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 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 Victory Apartments, F.H.A.
Project No. 071-35588 as of December 31, 2000 and 1999, and the results of its
operations, changes in partners' capital and its cash flows for the years then
ended in conformity with U.S. generally accepted accounting principles.

In accordance with Government Auditing Standards, we have also issued a report
dated January 24, 2001, on our consideration of the Partnership's internal
control and a report dated January 24, 2001, on its compliance with laws and
regulations. Those reports are an integral part of an audit performed in
accordance with Government Auditing Standards and should be read in conjunction
with this report in considering the results of our audits.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedules
listed on the preceding contents page are presented for purposes of additional
analysis to comply with HUD reporting requirements and are not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audits of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

/s/ Philip Rootberg & Company, LLP
Chicago, Illinois
January 24, 2001

81

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

See accompanying notes to consolidated financial statements.

82

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

See accompanying notes to consolidated financial statements.

83

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

See accompanying notes to consolidated financial statements.

84

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

See accompanying notes to consolidated financial statements

86

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

NOTE 1 - General

Liberty Tax Credit Plus II L.P., a Delaware limited partnership (the
"Partnership"), was organized on March 25, 1988, but had no activity until July
1, 1988 (which date is considered to be inception for financial accounting
purposes). The Partnership had no operations until commencement of the public
offering on July 20, 1988.

The Partnership's business is to invest in other limited partnerships ("Local
Partnerships", "subsidiaries" or "subsidiary partnerships") owning leveraged
low-income multifamily residential complexes ("Apartment Complexes") that are
eligible for the low-income housing tax credit ("Housing Tax Credit") enacted in
the Tax Reform Act of 1986, and to a lesser extent in Local Partnerships owning
properties ("Rehabilitation Projects" and together with the Apartment Complexes,
the "Properties") that are eligible for the historic rehabilitation tax credit.
The Partnership's investment in each Local Partnership represents a 20% to 98%
interest in that Local Partnership.

As of March 31, 2002, the Partnership had acquired interests in 27 Local
Partnerships and does not anticipate making any additional investments. On
January 18, 2002, the Property and the related assets and liabilities of
Campeche Isle Apartments, Limited Partnership ("Campeche") were sold.

The Partnership was authorized to issue a total of 200,000 Beneficial Assignment
Certificates ("BACs"), of which 120,000 have been registered with the Securities
and Exchange Commission for sale to the public. The public offering was
completed on January 9, 1989 with a total of 115,917.5 BACs sold and
$115,917,500 of proceeds received by the Partnership.

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 partners.

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Consolidation

The consolidated financial statements include the accounts of the Partnership
and 27 subsidiary partnerships in which the Partnership is a limited partner.
Through the rights of the Partnership and/or a General Partner (which 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.

For financial reporting purposes, the Partnership's fiscal year ends on 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 ("GAAP"). All subsidiaries have fiscal years
ending December 31. Accounts of the subsidiaries have been adjusted for
inter-

87

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

company transactions from January 1 through March 31. All intercompany accounts
and transactions with the subsidiary partnerships have been eliminated in
consolidation.

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

The Partnership's investment in each subsidiary partnership is equal to the
respective subsidiary partners' equity less minority interest capital, if any.
Losses attributable to minority interests which exceed the minority interest's
investment in a subsidiary partnership have been charged to the Partnership.
Such losses aggregated approximately $625,000, $562,000 and $510,000 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.

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.

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 such property and equipment. 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. Property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows) when the Property is considered to be impaired and the
depreciated cost exceeds estimated fair value. During the year ended March 31,
2002, the Partnership recorded approximately $680,000 as a loss on impairment of
assets. Through March 31, 2002, the Partnership has recorded approximately
$5,407,000 as a loss on impairment of assets.

At the time management commits to a plan to dispose of assets, said assets are
adjusted to the lower of carrying amount or fair value less costs to sell. Such
assets would be classified as property and equipment-held for sale and are not
depreciated. Assets classified as property and equipment-held for sale amounted
to approximately $4,467,000 and $0 at March 31, 2002 and 2001, respectively.

d) 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.

88

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

e) 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).

f) Loss Contingencies

The Partnership records loss contingencies as a charge to income when
information becomes available which indicates that it is probable that an asset
has been impaired or a liability has been incurred as of the date of the
financial statements and the amount of loss can be reasonably estimated. In
addition, the Partnership evaluates a potential environmental liability
independently from any potential claim for recovery.

g) Use of Estimates

The preparation of financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those
estimates.

h) New Pronouncements

The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards ("SFAS") No. 141 "Business Combinations" and No. 142
"Goodwill and Other Intangible Assets". SFAS No. 141 requires that the purchase
method of accounting be used for all business combinations initiated after June
30, 2001 and that the use of pooling-of-interest method is no longer allowed.
SFAS No. 142 requires that upon adoption, amortization of goodwill will cease
and instead, the carrying value of goodwill will be evaluated for impairment on
an annual basis. Identifiable intangible assets will continue to be amortized
over their useful lives and reviewed for impairment in accordance with SFAS No.
121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". SFAS No. 142 is effective for fiscal years beginning
after December 15, 2001. The Partnership does not expect the adoption of these
standards to have any impact on the Partnership's consolidated financial
position or results of operations.

Additionally, the Financial Accounting Standard Board has issued SFAS No. 144
"ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS" in August 2001.
This Statement is effective for fiscal years beginning after December 15, 2001.

89

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

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 practicable to estimate the fair value of the
mortgage notes payable because mortgage programs with similar characteristics
are not currently available to the Local Partnerships.

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

NOTE 4 - Property and Equipment and Property and Equipment - Held for Sale

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

Included in property and equipment are $6,955,050 of acquisition fees paid or
accrued to the General Partners and $1,606,014 of acquisition expenses as of
March 31, 2002 and 2001. In addi-

90

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

tion, as of March 31, 2002 and 2001, buildings and improvements include
$7,015,991 of capitalized interest.

Depreciation expense for the years ended March 31, 2002, 2001 and 2000 amounted
to $7,545,850, $7,807,498 and $7,700,682, respectively.

In connection with the rehabilitation of the Properties, the subsidiary
partnerships have incurred developer's fees of $20,563,695 to the local general
partners and affiliates. Such fees have been included in the cost of property
and equipment.

During the 2001 and 2000 Fiscal Years, there was a decrease in accumulated
depreciation in the amounts of $134,753 and $110,392, respectively, due to
write-offs on dispositions.

The components of property and equipment held for sale are as follows:

NOTE 5 - Cash Held in Escrow

Cash held in escrow is restricted and consists of the following:

91

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

NOTE 6 - Deferred Costs

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

*Over the life of the respective related mortgages.

Amortization expense for the years ended March 31, 2002, 2001 and 2000 amounted
to $515,748, $298,947 and $248,118, respectively. During the years ended March
31, 2002 and 2001, respectively, $18,434 and $91,846 of fully amortized deferred
costs were written off.

NOTE 7 - Mortgage Notes Payable

The mortgage notes are payable in aggregate monthly installments of
approximately $688,000 including principal and interest at rates varying from 1%
to 15% per annum, through 2034. Each subsidiary partnership's mortgage note
payable is collateralized by the land and buildings of the respective subsidiary
partnership and the assignment of certain subsidiary partnership's rents and
leases and is without further recourse.

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

One subsidiary partnership, United Glen Arden II Limited Partnership, holds a
mortgage note which is eligible for an interest reduction subsidy under Section
236 of the National Housing Act. At December 31, 2001, said note, which bears
interest at 7.5% per annum through April 1, 2011, had a balance of $2,093,303.

Santa Juanita II Limited Partnership
- ------------------------------------
Effective April 1, 2000, a reinstatement and modification agreement was made and
entered by and between Santa Juanita II Limited Partnership ("Santa Juanita"),
Federal National Mortgage

92

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

Association, and Banco Popular de Puerto Rico, regarding the outstanding debt of
$1,243,581 as of December 31, 1999.

Based on this agreement, the debt of $1,243,581, plus accrued interest, was
modified and reinstated for the amount of $986,021 at a rate of 10%, payable in
61 monthly installments of $11,784, and the remaining unpaid balance payable on
May 1, 2005.

Effective January 27, 2000, the financial institution where the second mortgage
was held, reinstated the mortgage in the amount of $500,000 for a fixed amount
of $100,000, payable with a cash payment of $40,000, and the balance of $60,000
would be payable in 30 monthly installments of $2,000 commencing not later than
June 16, 2000.

As a result of these transactions, forgiveness of indebtedness income of
approximately $695,000 was recognized as of March 31, 2001.

Rolling Green Limited Partnership
- ---------------------------------
On February 1, 1999, Rolling Green Limited Partnership ("Rolling Green")
refinanced its existing indebtedness by borrowing $5,865,000 from the United
States Department of Housing and Urban Development ("HUD"). The loan bears
interest at the rate of 6.85% per annum, and matures on March 1, 2034. Rolling
Green's prior mortgage indebtedness in the principal amount of approximately
$1,671,000 and a purchase money note of $1,450,000 along with $1,695,000 in
accrued interest were repaid.

Metropolitan Towers Associates L.P.
- -----------------------------------
On February 22, 2002, Metropolitan Towers Associates L.P. ("Metropolitan
Towers") refinanced its existing indebtedness by borrowing $5,364,000 from the
Puerto Rico Housing Finance Corporation ("PRHFC"). The loan bears interest at
the rate of 7% per annum and matures on February 1, 2032. Metropolitan Tower's
prior indebtedness of approximately $4,625,000 was repaid, and a Capital
Improvement Account of approximately $387,000 was established.

Goodfellow Place Limited Partnership
- ------------------------------------
During the year ended December 31, 2000, Goodfellow Place Limited Partnership
("Goodfellow") began negotiations with the St. Louis Community Development
Agency (CDA) to modify its non-interest bearing promissory note payable to CDA
in the amount of $1,827,622. The note was secured by a second deed of trust on
the property and principal was to be paid in an amount equal to 20% of surplus
cash. Any unpaid principal was due upon the earliest of September 2030, the
vacancy or abandonment of the property, full repayment of any note secured by a
deed of trust on the property or the transfer of the property or change in
ownership interest without CDA consent. As a part of its negotiation offer,
Goodfellow made a prepayment of $25,000 on the note in 2000. During 2001, CDA
agreed to accept the $25,000 prepayment in exchange for its forgiveness of the
remaining note balance of $1,802,622, resulting in cancellation of indebtedness
income of the same amount.

93

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

NOTE 8 - Related Party Transactions

Related Party Fees
- ------------------

One of the General Partners has a 1% interest as a special limited partner in
each of the Local Partnerships. An affiliate of the General Partners also has a
minority interest in certain Local Limited Partnerships.

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

(a) The General Partners are entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the local annual
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. The partnership management fee, subject to the foregoing
limitation, will be determined by the General Partners in their sole discretion
based upon their review of the Partnership's investments. Partnership management
fees owed to the General Partners amounting to approximately $9,808,000 and
$8,312,000 were accrued and unpaid as of March 31, 2002 and March 31, 2001.
Without the General Partner's continued accrual without payment, the Partnership
will not be in a position to meet its obligations. The General Partners have
allowed for the accrual without payment of these amounts but are under no
obligation to do so.

(b) The Partnership reimburses the General Partners and their affiliates for
actual Partnership operating expenses incurred by the General Partners and their
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partners performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.

(c) Property management fees incurred by subsidiary partnerships amounted to
$1,636,460, $1,629,770 and $1,568,548 for the 2001, 2000 and 1999 Fiscal Years,
respectively. Of these fees $887,000, $914,280 and $867,174 were incurred to
affiliates of the Local General Partners. In-

94

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

cluded in amounts incurred to affiliates of the Local General Partners are
$355,825, $348,560 and $341,738, respectively, which were also incurred to
affiliates of the Partnership.

(d) Liberty Associates, a special limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $2,500
per year from each subsidiary partnership.

Liberty Associates has a 1% interest as the special limited partner in each of
the subsidiary partnerships. Liberty Associates received cash distributions of
approximately $5,900, $5,200 and $2,600 during the 2001, 2000 and 1999 Fiscal
Years, respectively.

Pursuant to the Partnership Agreement and the Local Partnership Agreements, the
General Partners and Liberty Associates received their allocable share of
profits, losses and tax credits allocated by the Partnership and the Local
Partnerships, respectively.

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

95

LIBERTY TAX CREDIT PLUS II L.P.
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 - Going Concerns and Uncertainties

The auditors for four subsidiary partnerships, Whittier Plaza Associates Limited
Partnership, Alexis Park Apartments, United-Glen Arden II and Willoughby-Wyckoff
Housing Associates modified their reports on the 2001 Fiscal Year financial
statements due to the uncertainty of each subsidiary partnership's ability to
continue as a going concern. The financial statements do not include any
adjustments that would be necessary in the event the subsidiary partnerships are
unable to continue as going concerns.

Whittier Plaza Associates
- -------------------------
The financial statements for Whittier Plaza Associates Limited Partnership
("Whittier") have been prepared assuming that Whittier will continue as a going
concern. Whittier has sustained continuous losses since commencement of
operations in 1988. Whittier has experienced higher vacancies and lower rents
than those originally projected, resulting in increased difficulty in meeting
both operating and debt service obligations. The Local General Partner, pursuant
to a development deficit guarantee agreement, has advanced approximately $1,000
and $40,000 in the 2001 and 2000 Fiscal Years, respectively, and approximately
$448,000 since 1988 to fund operating cash shortfalls. In addition, Whittier's
management company, an affiliate of the Local General Partner, has deferred
receipt of various fees since 1991 totaling approximately

96

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

$81,000. These items raise substantial doubt about Whittier's ability to
continue as a going concern. The Partnership's investment in Whittier at March
31, 2002 and 2001 was reduced to zero as a result of prior years' losses and the
minority interest balance was $0 at each date. Whittier's net loss after
minority interest amounted to approximately $37,000, $26,000 and $49,000 for the
2001, 2000 and 1999 Fiscal Years.

Alexis Park Apartments
- ----------------------
The financial statements for Alexis Park Apartments ("Alexis") have been
prepared in conformity with U.S. generally accepted accounting principles,
assuming the continuation of the Local Partnership as a going concern. However,
negative performance indicators and the environmental issue raise substantial
doubt about the Local Partnership's ability to continue as a going concern.

A hazardous waste issue has affected Alexis for nearly 11 years. Although this
environmental issue is in many respects beyond its control, management believes
that the selected remedy of the United States Environmental Protection Agency is
practical and is not likely to cause significant disruption to the apartment
project's operations beyond what it has experienced over the last several years.
The Local Partnership's congressman, U.S. Senators and the Mayor of Bossier City
have assisted Alexis in preventing this issue from escalating unnecessarily and
management believes that no escalation will occur in the near term. Further, all
indications are that an oil company will bear all costs of remediation and that
the Local Partnership will not be called upon to share in those costs.
Accordingly, management believes the Local Partnership has the opportunity to
continue as a going concern.

For the year ended December 31, 2001, the Local Partnership sustained a net loss
of approximately $340,000. At December 31, 2001, the Local Partnership's current
liabilities exceed its current assets by approximately $440,000. Management
expects operating income to improve for 2002 as a result of both increased
occupancy and slightly reduced expenses. In addition, included in current
liabilities are obligations to the management company totaling approximately
$295,000 that are not expected to require payment beyond Alexis' ability to pay.
Management believes, that if necessary, it can obtain funds to supplement
operating cash flows for 2002 to enable Alexis to meet its liabilities and
subject to the environmental uncertainty enable Alexis to continue as a going
concern for at least one year.

These items raise substantial doubt about Alexis' ability to continue as a going
concern. The maximum loss for which the Partnership would be liable is its net
investment in Alexis. The Partnership's investment in Alexis at March 31, 2002
and 2001 was reduced to zero as a result of prior years' losses and the minority
interest balance was $0 at each date. Alexis' net loss after minority interest
amounted to approximately $340,000, $277,000 and $243,000, for the 2001, 2000
and 1999 Fiscal Years, respectively.

United-Glen Arden II Limited Partnership
- ----------------------------------------
The financial statements for United-Glen Arden II Limited Partnership ("Glen
Arden II") have been prepared assuming that Glen Arden II will continue as a
going concern. Glen Arden II is in default of its loan agreement primarily as a
result of non-payment of the required mortgage payments. These conditions raise
substantial doubt about Glen Arden II's ability to continue as a going concern.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty. Subsequently, as of May 31, 2002 the property
had paid all mortgage arrears. The Partnership's investment in Glen Arden II was
reduced to zero as a result of prior years' losses and the minority interest
balance was $0 at both March 31, 2002 and

97

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

2001, respectively. Glen Arden II's net loss after minority interest was
approximately $542,000, $538,000 and $368,000 for the 2001, 2000 and 1999 Fiscal
Years, respectively.

Willoughby-Wyckoff Housing Associates
- -------------------------------------
The financial statements for Willoughby-Wyckoff Housing Associates
("Willoughby") have been prepared assuming that Willoughby will continue as a
going concern. There are certain conditions that raise substantial doubt about
Willoughby's ability to continue as a going concern. Willoughby has had
operating losses and equity deficiencies and has required loans from related
parties to meet its obligations. Management plans to continue to minimize costs
within its control and seeks additional funding sources to supplement project
operations. Continuance of Willoughby as a going concern is dependent upon
Willoughby's ability to obtain additional funding to supplement project
operations and enable Willoughby to meet its obligations as they become due. The
financial statements do not include any adjustments that might result from the
outcome of these uncertainties. The Partnership's investment in Willoughby at
March 31, 2002 and 2001 has been reduced to zero by prior years' losses and the
minority interest balance amounted to approximately $171,000 and $174,000,
respectively. Willoughby's net loss after minority interest amounted to
approximately $276,000, $193,000 and $204,000 for the 2001, 2000 and 1999 Fiscal
Years, respectively.

b) Subsidiary Partnerships - Other

Gramco Development Limited Dividend Partnership, L.P.
- -----------------------------------------------------
Gramco Development Limited Dividend Partnership, L.P. ("Gramco") was granted net
funds of $4,867,000. In the event of a substantial violation to the provisions
of certain agreements between Gramco and the Municipality of Bayamon (the
"Municipality") and between the Municipality and HUD, the funds shall become
immediately due and payable at the election of HUD and the Municipality.
Otherwise, the principal amount of the obligation together with any interest
will be forgiven. Proceeds from the loan have been deducted from fixed assets.

Williamsburg Residential, L.P.
- ------------------------------
In November 1996, the Local General Partner of Williamsburg Residential, L.P.
("Williamsburg") stopped making the mortgage note payments which constituted an
event of default. A Reinstatement and Modification Agreement was entered into
effective March 1, 1997. The Partnership has advanced Williamsburg the necessary
funds to keep the mortgage and escrows current during 2001 and is expected to
continue to do so during 2002.

The Partnership's investment in Williamsburg has been written down to $0 by
prior years' losses and the minority interest balance was approximately $728,000
and $792,000 at March 31, 2002 and 2001, respectively. Williamsburg net loss
after minority interest amounted to approximately $128,000, $208,000 and
$201,000 for the 2001, 2000, and 1999 fiscal years, respectively. As of December
31, 2001, the Partnership has advanced Williamsburg approximately $818,000.

Campeche Isle Apartments
- ------------------------
On January 18, 2002, the property and the related assets and liabilities of
Campeche Isle Apartments, Limited Partnership ("Campeche") were sold to an
unaffiliated third party for $4,625,000, resulting in a gain of approximately
$38,000 which will be recognized in the financial statements Form 10-Q for the
quarter ending June 30, 2002.

98

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

c) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks.
Accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. As of March 31, 2002, uninsured cash and cash
equivalents approximated $1,250,000.

d) Other

The Partnership is subject to the risks incident to potential losses arising
from the management and ownership of improved real estate. The Partnership can
also be affected by poor economic conditions generally. However, no more than
33% of the Properties are located in any single state. There are also
substantial risks associated with owning Properties receiving government
assistance, such as the possibility that Congress may not appropriate funds to
enable HUD to make rental assistance payments. HUD also restricts annual cash
distributions to partners based on operating results and a percentage of the
owner's equity contribution. The Partnership cannot sell or substantially
liquidate its investments in subsidiary partnerships during the period that the
subsidy agreements are in existence without HUD's approval. Furthermore, there
may not be market demand for apartments at market rents when the rental
assistance contracts expire.

e) Tax Credits

The Partnership and BACs holders began recognizing Housing Tax Credits with
respect to a Property when the Credit Period for such Property began. 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. For the 2001, 2000 and 1999
tax years, Housing Tax Credits of $1,725,324, $4,415,175 and $12,240,583, were
generated.

A portion of the Housing Tax Credits are subject to recapture in future years if
(i) a Local Partnership ceases to meet qualification requirements, or (ii) if
there is a decrease in the qualified basis of the Local Partnership's Property,
or (iii) if there is a reduction in the Local Partnership interest in the
Property at any time during the 15-year Compliance Period that began with the
first tax year of the Credit Period.

99

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.

On November 25, 1997, an affiliate of the Related General Partner, purchased
100% of the stock of the Liberty General Partner (the "Transfer"). As a result
of the Transfer, that affiliate of the Related General Partner also acquired the
Liberty General Partner's general partnership interest in Liberty Associates,
which is also the special limited partner of the Partnership. Pursuant to the
Partnership's Amended and Restated Partnership Agreement, the consent of the
limited partners was not required to approve the Transfer.

The Partnership has no directors or executive officers. The Partnership's
affairs are managed and controlled by the General Partners. Certain information
concerning the directors and executive officers of the Liberty General Partner
and of Related Credit Properties II, Inc., the general partner of the Related
General Partner, is set forth below.

Related Credit Properties II, Inc.
- ----------------------------------

STEPHEN M. ROSS, 62, is the President, and a Director and shareholder of The
Related Realty Group, Inc., the general partner of The Related Companies, L.P.
He graduated from the University of Michigan School of Business Administration
with a Bachelor of Science degree and from Wayne State University School of Law
with a Juris Doctor degree. Mr. Ross then received a Master of Laws degree in
taxation from New York University School of Law. He joined the accounting firm
of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York,
where he worked for two large Wall Street investment banking firms in their real
estate and corporate finance departments. Mr. Ross formed the predecessor of The
Related Companies, L.P. in 1972 to develop, manage, finance and acquire
subsidized and conventional apartment developments. Mr. Ross also serves on the
Board of Trustees of Charter Municipal Mortgage Acceptance Company.

ALAN P. HIRMES, 47, has been a Certified Public Accountant in New York since
1978. Prior to joining Related Capital Company ("Capital") in October 1983, Mr.
Hirmes was employed by Weiner & Co., certified public accountants. Mr. Hirmes is
also a Vice President of Capital. Mr.

100

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), 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, joined Capital in January 1988 after receiving his Master
of Business Administration degree from The Wharton School of The University of
Pennsylvania in December 1987. From 1983 to 1986, Mr. Schnitzer was a Financial
Analyst with The First Boston Corporation in New York, an international
investment banking firm. Mr. Schnitzer received a Bachelor of Science degree,
summa cum laude, in Business Administration, from the School of Management at
Boston University in May 1983.

DENISE L. KILEY, 42, is responsible for overseeing the due diligence and asset
management of all multifamily residential properties invested in Capital
sponsored corporate, public and private equity and debt funds. Prior to joining
Capital in 1990, Ms. Kiley had experience acquiring, financing and asset
managing multifamily residential properties. From 1981 through 1985, she was an
auditor with Price Waterhouse. Ms. Kiley holds a Bachelor of Science degree in
Accounting from Boston College.

GLENN F. HOPPS, 39, joined Capital in December 1990, and prior to that date, was
employed by Marks Shron & Company and Weissbarth, Altman and Michaelson,
certified public accountants. Mr. Hopps graduated from New York State University
at Albany with a Bachelor of Science degree in Accounting.

TERESA WICELINSKI, 36, joined Capital in June 1992, and prior to that date was
employed by Friedman, Alpren & Green, certified public accountants. Ms.
Wicelinski graduated from Pace University with a Bachelor of Arts degree in
Accounting.

Liberty GP II Inc.
- ------------------

101

Glenn F. Hopps Treasurer

Teresa Wicelinski Secretary

MICHAEL BRENNER, 56, is a Director of Aegis Realty, Inc., and is the Executive
Vice President and Chief Financial Officer of The Related Companies, LP. 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 the Chairman of its National Real Estate Industry
Group from 1984-1986. Mr. Brenner graduated summa cum laude from the University
of Detroit with a Bachelors degree in Business Administration and from the
University of Michigan with a Masters of Business Administration, with
distinction. Mr. Brenner also serves on the Board of Trustees of Charter
Municipal Mortgage Acceptance Company and Aegis Realty, Inc.

Biographical information with respect to Messrs. Hirmes, Boesky, Schnitzer, Ms.
Kiley, Hopps and Ms. Wicelinski is set forth above.

Item 11. Executive Compensation.

The Partnership has no officers or directors. The Partnership does not pay or
accrue any fees, salaries or other forms of compensation to directors or
officers of the Liberty General Partner or the general partner of the Related
General Partner for their services. Certain directors and executive officers of
the Liberty General Partner and the general partner of the Related General
Partner receive compensation from the General Partners and their affiliates for
services performed for various affiliated entities which may include services
performed for the Partnership.

Under the terms of the Partnership Agreement, the General Partners and their
affiliates are entitled to receive compensation from the Partnership in
consideration of certain services rendered to the Partnership by such parties.
Such arrangements include, but are not limited to, the payment of an accountable
operating expense reimbursement, an annual partnership management fee not to
exceed 0.5% of invested assets and subordinated disposition fees. In addition,
the General Partners are entitled to 1% of all cash distributions and Housing
Tax Credit allocations and a subordinated 15% interest in net sales or
refinancing proceeds. Also see Note 8 to the Financial Statements in Item 8 for
a presentation of the types and amounts of compensation paid to the General
Partners and their affiliates, which is incorporated by reference thereto.

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 level of
compensation payable to the General Partners and/or their affiliates is limited
by the terms of the Partnership Agreement and may not be increased therefrom on
a discretionary basis.

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The general partnership interest and BACs in the Partnership are owned in the
manner indicated on the chart below.

Liberty Associates II L.P. holds a 1% limited partnership interest in each Local
Partnership.

No person is known by the Partnership to be the beneficial owner of more than 5%
percent of the Limited Partnership Interests and/or the BACs; and none of the
General Partners nor any director or executive officer of the Liberty General
Partner or of the general partner of the Re-

102

lated General Partner owns any Limited Partnership Interests or BACs, except as
noted in the chart below.

103

(1) All such BACs represent BACs owned directly by Lehigh Tax Credit Partners
L.L.C. ("Lehigh I") and Lehigh Tax Credit Partners II L.L.C. ("Lehigh II") for
which Lehigh Tax Credit Partners, Inc. (the "Managing Member") serves as
managing member. As of June 1, 2002, Lehigh I held 1,080.5 BACs and Lehigh II
held 1,161.5 BACs.

(2) Each such party serves as a director and executive officer of the Managing
Member, and owns an equity interest therein.

104

Item 13. Certain Relationships and Related Transactions.

The Partnership has and will continue to have certain relationships with the
General Partners and their affiliates, as discussed 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 executive officers of the Liberty
General Partner and the general partner of the Related General Partner.

105

PART IV

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

106

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

107

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.

LIBERTY TAX CREDIT PLUS II L.P.
-------------------------------
(Registrant)

By: RELATED CREDIT PROPERTIES II L.P.,
a General Partner

By: Related Credit Properties II Inc.,
its general partner

Date: June 26, 2002
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
President and
Chief Executive Officer
(Principal Executive Officer)

and

By: LIBERTY GP II INC.,
a General Partner

Date: June 26, 2002
By: /s/ Alan P. Hirmes
-------------------
Alan P. Hirmes
President

and

By: LIBERTY ASSOCIATES II, L.P.,
a General Partner

By: Related Credit Properties II, Inc.,
its General Partner

Date: June 26, 2002
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
President

By: Liberty G.P. II Inc.,
its General Partner

By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated:

INDEPENDENT AUDITORS' REPORT
----------------------------

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

In connection with our audits of the consolidated financial statements of
Liberty Tax Credit Plus II L.P. and Subsidiaries (A Delaware Limited
Partnership) included in this Form 10-K as presented in our opinion dated June
10, 2002 on page 18, and based on the reports of other auditors, we have also
audited supporting Schedule I for the 2001, 2000 and 1999 Fiscal Years and
Schedule III at March 31, 2002. In our opinion, and based on 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.

As discussed in Note 10(a), the consolidated financial statements include the
financial statements of four limited partnerships with significant contingencies
and uncertainties. The financial statements of these subsidiary partnerships
were prepared assuming that each will continue as a going concern. The four
subsidiary partnerships' net losses aggregated $1,195,732 (Fiscal 2001),
$1,035,987 (Fiscal 2000) and $865,425 (Fiscal 1999) and their assets aggregated
$17,087,258 and $18,279,322 at March 31, 2002 and 2001, respectively. These
matters raise substantial doubt about these subsidiary partnerships' abilities
to continue as going concerns. Management's plans in regard to these matters are
also described in Note 10(a). The accompanying consolidated financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.

TRIEN ROSENBERG ROSENBERG
WEINBERG CIULLO & FAZZARI LLP

New York, New York
June 10, 2002

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

Summarized 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' equity on the consolidated balance sheet will differ from
partners' equity shown above.

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF OPERATIONS

(*) Includes suspended prior year losses in excess of investment in accordance
with the equity method of accounting amounting to $(811,399), $(162,132) and
$(130,920) for 2002, 2001, and 2000, respectively.

LIBERTY TAX CREDIT PLUS II L.P.
AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT

CONDENSED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

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

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

(a) Since all properties were acquired as operating properties, depreciation is
computed using primarily the straight-line method over the estimated useful
lives determined by the partnership date of acquisition.
(b) Furniture and fixtures, included in building improvements, are depreciated
primarily by the straight-line method over the estimated useful lives
ranging from 5 to 15 years.
(c) The property and the related assets and liabilities of this Local
Partnership were sold during the fiscal year ended March 31, 2002.

At the time the local partnerships were acquired by Liberty Tax Credit Plus II
Limited Partnership, the entire purchase price paid by Liberty 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.