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

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the fiscal year ended December 31, 2002;
Commission file number 0-14510

CEDAR INCOME FUND, LTD.
(Exact name of registrant as specified in its charter)

Maryland 42-1241468
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)

44 South Bayles Avenue, #304, Port Washington, NY 11050
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (516) 767-6492

Securities registered pursuant to Section 12(b) of the Act: None

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

Name of each exchange on
Title of each class which registered
- ------------------- ---------------------------
Common Stock, $0.01 par value The NASDAQ Stock Market

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 whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).

Yes [ ] No [X]

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. [ ]

Based on the closing sales price on March 26, 2003 of $5.19 per share, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $1,918,000.

The number of shares outstanding of the registrant's Common Stock $.01 par value
was 852,711 on March 26, 2003.

DOCUMENTS INCORPORATED BY REFERENCE: NONE



TABLE OF CONTENTS

Item No.

PART I
1. Business..........................................................3
2. Properties.......................................................14
3. Legal Proceedings................................................14
4. Submission of Matters to a Vote of Security Holders..............14

PART II
5. Market for Registrant's Common Equity and Related Stockholder
Matters.........................................................14
6. Selected Financial Data..........................................16
7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.......................................17
7(a). Quantitative and Qualitative Disclosures about Market Risk.......30
8. Financial Statements and Supplemental Data.......................31
9. Changes in, and Disagreements with Accountants on, Accounting
and Financial Disclosure........................................57

PART III
10. Directors and Executive Officers of the Registrant...............58
11. Compensation of Directors and Executives.........................59
12. Security Ownership of Certain Beneficial Owners and
Management......................................................60
13. Certain Relationships and Related Party Transactions.............62

PART IV
14. Controls and Procedures..........................................66
15. Exhibits, Financial Statement Schedules and Reports on
Form 8-K, Signatures and Certifications.........................67

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS Certain statements contained
in this Annual Report on Form 10-K constitute forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, the following: general economic and business
conditions, which will, among other things, affect demand for rental space, the
availability and creditworthiness of prospective tenants, lease rents and the
availability of financing; adverse changes in the Company's real estate markets,
including, among other things, competition with other companies; risks of real
estate development and acquisition; risks of adverse operating results and
creditworthiness of current tenants; governmental actions and initiatives; and
environmental/safety requirements.

2


Part I.

Item 1. Business

Cedar Income Fund, Ltd. (the "Company") was originally incorporated in Iowa
on December 10, 1984 and qualified to operate as a real estate investment trust
("REIT"). Shortly thereafter, the Company's common stock was listed on the
NASDAQ securities market. In June 1998, following a tender offer completed in
April 1998 for the purchase of the Company's shares by Cedar Bay Company
("CBC"), the Company was reorganized as a Maryland corporation and included in
an "umbrella partnership REIT" structure through the contribution of
substantially all of its assets to a Delaware limited partnership, Cedar Income
Fund Partnership, L.P. (the "Operating Partnership"). Following these
transactions, the Company's assets consisted primarily of the controlling
general partnership interest of the Operating Partnership and approximately 24%
of the limited partnership interests ("Units") in the Operating Partnership.

The Company, the Operating Partnership, their subsidiaries, and affiliated
partnerships are separate legal entities. For ease of reference the terms
"Company" and "Operating Partnership" (including their respective affiliates)
refer to the business and properties of all these entities, unless the context
otherwise requires.

General

The Company continues to operate as a REIT. To qualify as a REIT under
applicable provisions of the Internal Revenue Code, the Company must have a
significant percentage of its assets invested in, and income derived from, real
estate and related sources. The Company's objectives are to provide to its
shareholders a professionally managed, diversified portfolio of commercial
(primarily shopping center) real estate investments, which will provide the best
available cash flow and present an opportunity for capital appreciation.

The Company has no employees and accordingly relies on Cedar Bay Realty
Advisors, Inc. and its affiliates ("CBRA") to manage the affairs of the Company.
The Company is thus referred to as an "advised" REIT. Pursuant to the terms of
an Administrative and Advisory Agreement, CBRA provides the Company, among other
things, with acquisition, disposition, administrative, asset and property
management, leasing, construction management, loan placement, and certain legal
services. In addition, CBRA provides to the Company support personnel and office
facilities. Leo S. Ullman, the Company's Chairman and Chief Executive Officer,
is also the principal owner of CBRA. Certain of the Company's officers are also
officers and employees of CBRA. Ms. Brenda Walker, also an owner of an affiliate
of CBRA, is Vice President and a Director of the Company. The terms of the
Administrative and Advisory Agreement and Management Agreement are further
discussed in Item 13 and Note 9.

The Company as of December 31, 2002, had 694,411 shares outstanding; in
addition, the Operating Partnership had issued and outstanding 1,701,000 Units
convertible into shares of common stock of the Company on a one-to-one basis,
and 3,300 9% preferred units with a liquidation value of $1,000 per unit. The
preferred units are convertible into shares of the Company (2,748 units subject
to shareholder approval) at prices ranging from $3.6363 to $ 4.0909. (See
Homburg equity contribution below.)

3


Item 1. Business (continued)

The Company's shares are traded on the NASDAQ (SmallCap) Market under the
symbol "CEDR".

Acquisitions and Dispositions

During the years 2000 and 2001, the Company sold three of the four
originally acquired properties, which it had held for approximately fifteen
years, and reinvested the net proceeds together with newly-borrowed funds in a
portfolio of primarily supermarket-anchored shopping centers. This marked a
change of focus away from the prior concentration in office and office/warehouse
properties dispersed throughout the United States (Utah, Illinois, Kentucky and
Florida) to retail properties, primarily supermarket-anchored shopping centers,
in Pennsylvania and New Jersey.

During May 2002, the Company sold Southpoint Parkway Center ("Southpoint"),
the remaining original property, and incurred a $49,000 loss on the sale. The
Company utilized the net proceeds from the sale of approximately $4,390,000 to
repay certain borrowed funds used to finance the shopping center portfolio that
was acquired during 2001.

During May 2002, the Company completed the acquisition, from a related
party, of a 20% sole general partnership interest in the Red Lion Shopping
Center ("Red Lion") a 218,000 sq. ft. shopping center in Philadelphia,
Pennsylvania. The Company's general partnership interest cost $1.2 million,
payable $296,000 at closing with the balance payable in three equal annual
installments plus interest at 7.5%. A separate partnership acquired a 69%
limited partner interest in the partnership at the time of the Company's
investment. The investment was based on a property value of $23 million
including a lease for certain vacant space from the seller, subject to a $16.8
million, 8.86% first mortgage loan due February 2010. The center was originally
built in 1972, substantially rehabbed in 1999 and expanded to accommodate a new
Staples and a Best Buy, among others, in 2000.

During July 2002, the Company completed the acquisition of a 25% sole
general partnership interest in Loyal Plaza Shopping Center ("Loyal Plaza"), a
293,000 sq. ft. grocery-anchored shopping center in Williamsport, Pennsylvania.
The center cost $18.3 million and was purchased subject to a $13.9 million,
7.18% first mortgage loan, due June 2011. The Company's general partnership
interest cost $1.4 million and Kimco Preferred Investor IV Trust, as limited
partner, invested $4 million. Loyal Plaza was originally constructed in 1969,
and was substantially redeveloped during 1999 and 2000, including the
construction of a new Giant supermarket that opened in March 2001.

During November 2002, the Company completed the acquisition of Camp Hill
Mall ("Camp Hill"), a 528,000 sq. ft. one-level enclosed regional shopping mall
in Camp Hill, Pennsylvania. This acquisition cost $17.2 million and was financed
by a $14 million first mortgage bank loan due November 2004. The entire loan is
fixed via an interest rate swap at 4.74% for the first year, and $7 million of
the loan is fixed at the same rate for the second year. The remaining $ 7
million portion of the loan will float at the 30-day LIBOR rate plus 195 basis
points during the second year. The balance of the acquisition cost,
approximately $4.2 million, was funded from the proceeds of the SWH financing
(see SWH financing below). Camp Hill was originally constructed in 1958,
redeveloped in 1986, and a 90,000 sq. ft addition was completed during 1991. The
Company is

4


Item 1. Business (continued)

currently exploring several redevelopment opportunities, joint venture
partnership and other financing arrangements for the redevelopment of Camp Hill.
The redevelopment is expected to cost approximately $17 to $19 million. However,
no assurances can be given that any such joint venture or financing arrangements
can be successfully concluded.

During December 2002, the Company completed the purchase of a 50% sole
general partnership interest in a 7-acre parcel of land in Fort Washington,
Pennsylvania. The Company's general partnership interest cost $280,000 and the
limited partner, an affiliate of the 69% limited partner in the Red Lion
partnership, invested $1 million. The partnership has agreed to build a 41,000
sq. ft. health club facility, net-leased pursuant to a 15-year lease agreement
with LA Fitness International, L.L.C. The terms of the agreement with LA fitness
provide, among other things, that LA fitness is responsible for any construction
overruns that may occur. The project, which is scheduled to be completed during
the fourth quarter of 2003, is expected to cost $8.8 million and will be
financed in part by a $5 million LIBOR-based construction loan due on December
31, 2007, with a two-year extension option.

5


Item 1. Business (continued)

The Company's Properties

The following table and notes describe the Company's properties and rental
information for leases in effect as of December 31, 2002:



Rentable Percent Percent
Year Square Net Book Mortgage Occupied Occupied Major Square
Property (1) Acquired Feet Value Balance Y/E 2002 Y/E 2001 Tenants (1) Feet Expires
- ----------------------------- -------- ------- -------------- ------------- --------- -------- ---------------- ---------- -------

The Point Shopping Center(2) 2000 255,000 $ 21,597,000 $ 19,864,000 93% 92% Burlington Coat 77,000 2006
Harrisburg, PA Giant Food 55,000 2021

Port Richmond Village(3) 2001 157,000 14,478,000 11,439,000 89% 88% Thriftway 40,000 2008
Philadelphia, PA Pep Boys 21,000 2009

Academy Plaza(3) 2001 154,000 11,803,000 10,558,000 89% 95% Acme Market 50,000 2018
Philadelphia, PA Charter School 20,000 2004

Washington Center Shoppes(3) 2001 157,000 9,207,000 5,900,000 87% 95% Acme Market 66,000 2020
Washington Township, NJ

Loyal Plaza Shopping Center(4) 2002 293,000 19,277,000 13,814,000 92% N/A K-Mart Giant 103,000 2006
Williamsport, PA Food Store 67,000 2019

Red Lion Shopping Center(5) 2002 218,000 20,503,000 16,715,000 91% N/A Best Buy Stores 46,000 2014
Philadelphia, PA Sports Authority 44,000 2005
Ashley Furniture 29,000 2003
Staples 24,000 2015

Camp Hill Mall(3),(6) 2002 528,000 22,266,000 14,000,000 90% N/A Boscov's 168,000 2010
Camp Hill, PA Giant Foods 42,000 2003
Bames & Nobles 25,000 2011

LA Fitness facility(7) 2002 41,000 2,107,000 1,247,000 N/A N/A LA Fitness 41,000
Fort Washington, PA
---------- ------------- ------------
Totals 1,803,000 $ 121,238,000 $ 93,537,000



(1) The Company's properties are generally owned by bankruptcy-remote special
purpose entities. Accordingly, the assets of these entities, including the
properties, may not be available to satisfy claims that a creditor may have
against the Company. Major tenants are defined as those tenants that occupy
more than 10% of a property's total rentable square footage.
(2) The Point Associates L.P., a joint venture in which the Company is the sole
general partner with a 50% partnership interest, owns this property.
(3) The Company's interest in the ownership of these properties was pledged as
security for the SWH financing (see SWH financing below).
(4) Loyal Plaza Associates L.P., a joint venture in which the Company is the
sole general partner with a 25% ownership interest, owns this property. The
terms of the joint venture agreement provide, among other things, that the
limited partner is entitled to certain preferential returns on its
investment prior to any distributions to the Company. After such rates of
return have been achieved, the Company is entitled to receive distributions
from net cash flow, and any refinancing or sale proceeds in varying amounts
up to 50%.
(5) API Red Lion Shopping Center Associates, a limited partnership in which the
Operating Partnership is the sole general partner with a 20% partnership
interest, owns this property.
(6) This property is a redevelopment project on which the Company expects to
spend an additional $17 to $19 million. The Company is currently exploring
various joint venture and financing arrangements. However, no assurances
can be given that any such joint venture or financing arrangements can be
successfully concluded.
(7) Fort Washington Fitness, L.P., a limited partnership in which the Company
is the sole general partner with a 50% partnership interest, owns this
property. The limited partner is entitled to receive certain preferential
returns on its investment before any distributions to the Company. This
property is a development project that is expected to be completed during
the fourth quarter of 2003, and will be financed by a $5 million
construction loan that was arranged prior to acquisition.

6


Item 1. Business (continued)

The terms of the Company's outstanding retail leases vary from tenancies at
will to 18 years (excluding options). Anchor tenant leases are typically for 10
to 25 years, with one or more extension options available to the lessee upon
expiration of the initial lease term. By contrast, smaller shop leases are
typically negotiated for 5-year terms. The longer terms of the major tenant
leases serve to protect the Company against significant vacancies and to assure
the presence of strong tenants who draw consumers to its centers. The shorter
term of the smaller shop leases allows the Company to adjust rental rates for
non-major store space on a regular basis and upgrade the overall tenant mix.

Leases to anchor tenants generally provide lower minimum rents per square
foot than smaller shop leases. The Company believes that minimum rental rates
for anchor tenant leases entered into several years ago are at or below current
market rates, while recent anchor tenant leases and most non-anchor leases
provide for minimum rental rates that more closely reflect current market
conditions.

Capital Structure Activity

SWH Financing

During November 2002, the Company entered into a financing agreement with
SWH Funding Corp. of Hackensack, NJ ("SWH") for a $6 million loan of which
approximately $4.2 million was used to fund the Camp Hill acquisition and to
provide approximately $100,000 of working capital. The balance of the SWH
financing, approximately $1.3 million, was used to pay off the then-existing SWH
loan balance of approximately $880,000 together with certain "exit fees" of
approximately $500,000 attributable to financing previously provided by SWH for
the portfolio of supermarket-anchored shopping centers that the Company
purchased in October 2001. The term of the SWH loan is through November 30, 2005
and it carries interest at the rate of 12.5% (14% from December 1, 2004 through
maturity). The loan provides for monthly principal payments of $50,000
commencing January 1, 2003, a $2 million payment (the first prepayment) on April
1, 2003, continued payments of $50,000 from the 5th through 12th months and
$60,000 from the 13th through 17th months. A $3 million payment (the second
prepayment) is due on the 18th month, and monthly principal payments of $60,000
continue from the 19th month until the loan is fully amortized. The agreement
provides for an alternative amortization schedule which the company is
considering adopting. Under the alternative amortization schedule the first
prepayment is not required but the monthly principal payments are increased to
$150,000 per month from April 1, 2003 through and including the 12th month and
$200,000 commencing in the 13th month through the 17th month. If the second
prepayment (of $3 million) is not made on the 18th month, the Borrower will be
required to pay $250,000 per month commencing in the 19th month until the loan
is fully amortized.

In addition to the interest and principal payments, SWH received a funding
fee of $300,000 (equal to 5% of the loan amount) at closing and will receive an
exit fee of $120,000 if the loan is paid on or before February 28, 2004. If the
loan is repaid after February 28, 2004, SWH will receive the sum of $120,000
plus the product of (i) $30,000 and (ii) the number of months between February
2004 and the date the loan is paid in full. The loan may be repaid at any time
after six months in whole or in part without penalty. In the event of default,
in addition to a default interest

7


Item 1. Business (continued)

rate of 17.5%, Borrower will also be required to pay a late charge equal to 5%
of the amount overdue.

The security for repayment of the SWH financing remains the Company's
equity interest in the portfolio of three supermarket-anchored shopping centers
acquired in October 2001, together with a pledge of the Operating Partnership's
interest in the Camp Hill Mall. Citizens Bank, who holds the first mortgage on
the Camp Hill Mall, and SWH have entered into certain inter-creditor agreements,
which provide, among other things, for notice and other procedures in the event
of default under either of the loan agreements.

Homburg Equity Contribution

Homburg Invest USA Inc. ("Homburg USA"), a wholly-owned U.S. subsidiary of
Homburg Invest Inc. (approximately 62% owned by Mr. Richard Homburg), a real
estate company listed on the Toronto (Canada) Stock Exchange, purchased on
December 18, 2002 for $3 million, 3,300 preferred Operating Partnership units at
$909.09 with a liquidation value of $1,000 each and a preferred distribution
rate of 9%. The Board subsequently elected Mr. Homburg a Director of the Company
to serve alongside Mr. Frank Matheson who is also a Director of the Company and
an officer of Homburg Invest Inc. On January 3, 2003, 552 of the preferred units
were converted to 138,000 shares of the Company's common stock at $3.6363 per
share. At the next annual meeting of shareholders, the Company will seek
shareholder approval to issue 137,000 shares of additional common stock, if
approved, 548 preferred units would then be converted by Homburg USA into the
newly-approved common stock at $3.6363 per share. At the shareholder meeting,
the Company will also seek shareholder approval to have the remaining 2,200
preferred units owned by Homburg USA become ultimately convertible into common
stock of the Company (upon thirty days' notice at $4.0909 per share). The
Operating Partnership may redeem, at any time, the preferred units upon sixty
days' notice at 120% of liquidation value.

Upon completion of these transactions, if approved by shareholders
(affiliates of Homburg USA and Cedar Bay Company have agreed to vote their
shares in favor of the arrangements), Homburg USA will own 137,000 shares of
newly issued common stock in addition to the 288,000 shares already owned by
Homburg Invest Inc. The total shares owned by companies controlled by Richard
Homburg will represent approximately 43% of the presently outstanding common
shares of the Company. If all conversion rights available to option, warrant and
unit holders were exercised, Mr. Homburg would control approximately 26% of the
shares outstanding.

In accordance with a certain "standstill" agreement entered into by the
Company and affiliates of Homburg USA, Homburg USA will have a continuing right
to purchase and hold up to 29.9% of the Company's voting stock in the event that
dilution from any source reduces its ownership interest below 29.9%.

Proceeds of the new equity funding from Homburg USA are expected to be used
in part to pay the $1.4 million amortization required by the SWH financing
during 2003. The remainder of the proceeds were used to complete the 2003
purchase of three Giant supermarket-anchored shopping center properties located
in Newport, Halifax and New Cumberland, PA and to fund the acquisition of the
Company's partnership interest in the LA Fitness facility at Fort Washington,
PA.

8


Item 1. Business (continued)

The issuance of common stock to Homburg USA may result in the
disqualification of the Company's status as a REIT in 2003. If Mr. Richard
Homburg, directly or indirectly, together with the four other largest
shareholders of the Company, were to own, directly or indirectly, more than 50%
of the value of the Company, it would fail to meet the "five or fewer" test
(five or fewer individual shareholders owning more than 50%) for continued REIT
status. The loss of REIT status, while creating no immediate income tax
liability for the Company or its shareholders, would mean, among other things,
that the Company would be taxed as if it were a "C" corporation on future net
taxable income and capital gains. Additionally, the Company would generally be
disqualified for federal income tax purposes as a REIT for the four taxable
years following disqualification.

In November 1999, the Company and affiliates of Mr. Homburg entered into a
Subscription Agreement pursuant to which an affiliate of Mr. Homburg acquired
through a private placement, 150,000 shares of common stock of the Company at
$4.50 per share (prior to entering into the Subscription Agreement, investors
introduced by Mr. Homburg had purchased an additional 250,000 shares.). In
accordance with the terms of that agreement, Mr. Homburg was elected Chairman of
the Board of Directors of the Company. Mr. Homburg and his affiliates also
entered into Stockholder Agreements with Cedar Bay Company, among other things,
agreeing to hold their shares for a period of not less than five years. As
certain funding by affiliates of Mr. Homburg did not occur, the Company,
pursuant to the terms of the Subscription Agreement, in August 2000 exercised
its right to unwind the entire transaction. Mr. Homburg, at that time, submitted
his resignation as Chairman of the Board and the Company repurchased 150,000
shares of the Company's common stock from Mr. Homburg's affiliate at $4.50 per
share and also repurchased 100,000 shares from the investor group introduced by
Mr. Homburg at $4.60 per share. Subsequently Mr. Homburg's affiliate purchased
the remaining 150,000 shares from the investor group.

ARC Warrants

The Operating Partnership, in connection with the Red Lion acquisition,
issued to Arc Properties, Inc. ("ARC"), a limited partner in API Red Lion
Shopping Center Associates, Warrants to purchase 250,000 shares of the Operating
Partnership. The Warrants, with an exercise price of $4.50 per unit, are subject
to adjustment for, among other things, dividend payments, stock splits and
reorganizations. The Warrants expire in May 2012, and vest 83,333 units in May
2002, 83,333 units in January 2003 and 83,333 units in January 2004. Such
vesting is contingent upon ARC rendering certain services to the Company
throughout the vesting period.

The first 83,333 Warrants issued were capitalized as part of the Red Lion
transaction using the fair value method. The accounting treatment of the
subsequent issuance of Warrants will be determined by future services performed
by ARC. Approximately $173,000 was charged to operations during 2002. If ARC
continues to provide services to the Company pursuant to the terms of the
Warrant agreement, the remaining Warrants will be accounted for over the vesting
period.

9


Item 1. Business (continued)

Risk Factors

General

Income from the Company's real property investments and its resulting
ability to service debt and to meet other obligations as they become due may be
adversely affected by the general economic climate, competitive factors,
creditworthiness and operating results of retailing tenants, changing retailing
trends and changing demographics and traffic patterns. In addition, real estate
values may be affected by such factors as government regulations, interest
rates, availability of financing, zoning or tax laws, and potential liability
under environmental and other laws.

Insurance

The Company carries comprehensive liability and all-risk property insurance
(fire, flood, extended coverage and rental loss insurance) with respect to its
assets. The Company's all-risk insurance policies in effect before September 11,
2001, did not expressly exclude coverage for hostile acts, except for acts of
war. Since September 11, 2001, insurance companies have for the most part
excluded terrorist acts from coverage in all-risk policies. The Company has
generally been unable to obtain all-risk insurance, which includes coverage for
terrorist acts, for policies it has renewed since September 11, 2001. In 2002,
the Company obtained a non-cancelable $50,000,000 per occurrence and annual
aggregate insurance policy for terrorist acts for its properties. The Company is
at risk for financial loss in excess of these limits for terrorist acts (as
defined), which loss could be material.

On November 26, 2002, the Terrorism Risk Insurance Act of 2002 was signed
into law. Under this new legislation, through 2004 (with a possible extension
through 2005), regulated insurers must offer coverage in their commercial
property and casualty policies (including existing policies) for losses
resulting from defined "acts of terrorism". Given the non-cancelable nature of
the Company's $50 million terrorism policy, the Company opted not to pay the
additional premiums to its commercial property and casualty insurance carriers.
At policy renewal on June 30, 2003, the Company expects to receive premium
quotes from its primary property and casualty insurer as well as its specialty
markets insurer. The Company will then decide which coverage is best for it,
based upon, among other things, the strength of the insurer, and the limits of
the policy for terrorist acts (as defined).

Dependence on Rental Income

Substantially all of the Company's revenues are derived from rental income
from its properties. The Company competes with other shopping centers for
tenants within the same geographic marketplace. The Company's ability to attract
new tenants and keep existing tenants may be affected by its ability to fund
tenant improvements, grant rent concessions, pay leasing commissions, pay for
capital improvements, and to periodically upgrade and modernize the shopping
centers. As a result, the Company's ability to service its debt and to meet its
other obligations may be adversely affected if a major tenant or a significant
number of smaller tenants were unable to meet their obligations, or if a
significant amount of space at our properties became vacant. Kmart, a major
tenant at Loyal Plaza, has filed for protection under Chapter 11 of the federal

10


Item 1. Business (continued)

bankruptcy laws. Although the Kmart store at Loyal Plaza was not included in
Kmart's January 14, 2003 announcement that it was closing an additional 326
stores, future events could result in Kmart closing its store at that center. In
the event that Kmart ultimately does close its store at Loyal Plaza, the Company
believes, based on inquires from prospective tenants, that a replacement tenant
or tenants would be found before the vacancy would have a material adverse
effect on the Company.

Six of the Company's properties (Loyal Plaza, Halifax Plaza, Newport Plaza,
Fairview Plaza, The Point Shopping Center and Camp Hill Mall) have Giant stores
as anchor tenants. In all, rental income and reimbursement of operating expenses
and taxes paid by Giant in 2002 represent approximately 10% of total gross
income from the Company's properties. Giant leases at the Newport, Halifax and
Fairview properties purchased in early 2003 represent a substantial majority of
the gross leaseable area and income from these properties. Ahold N.V., a
Netherlands corporation and Giant's ultimate parent company, generally
guarantees the Giant leases. Recent published reports indicate there have been
accounting irregularities at certain of Ahold's U.S. and foreign operations,
which do not necessarily include the grocery stores, or the Giant supermarket
affiliates. However, a reduction in Ahold's debt ratings may adversely affect
the resulting value of the Company's properties having such tenancies.

Market Liquidity

Real estate investments are relatively illiquid. Therefore, the Company is
limited in its ability to vary its real estate portfolio in response to economic
changes and may encounter difficulty in disposing of properties when tenants
vacate at the expiration of their lease terms or otherwise.

Competition

The Company competes with other public and private real estate owners for
new acquisitions. Many of the Company's competitors have greater financial
resources with which to conclude such acquisitions. The Company has relied, and
expects to continue to rely to a very considerable extent, on third-party
lenders and equity sources to fund most of the purchase price for new
acquisitions. The Company's ability to acquire additional properties will depend
on its ability to obtain additional financing on favorable terms, which will be
dependent upon conditions in the equity and credit markets generally.

Leverage

Prior to the reorganization in 1998, the Company had gross assets of
approximately $15 million and slightly less than 300,000 rentable sq. ft. At
December 31, 2002, and as a result of the acquisitions described above, the
Company had gross assets of approximately $120 million with more than 1.8
million rentable sq. ft. The Company has financed these acquisitions with a
considerable amount of third-party debt and at December 31, 2002, the Company
had outstanding approximately $94 million in long-term mortgage indebtedness and
approximately $7.5 million of other indebtedness as well as equity interests
owned by third parties. The minimum aggregate principal payments, over the next
twelve months, required by the terms of these financings (see Note 6 to the
financial statements) amount to approximately $3.2 million and the ratio of debt
to total assets at December 31, 2002 was approximately 79%.

11


Item 1. Business(continued)

The Company is subject to risks normally associated with debt financing,
including the risk that its cash flow will be insufficient to meet required
payments of principal and interest. The Company is also subject to the risk that
existing indebtedness on the properties (which, in most cases, will not have
been fully amortized at maturity) will not be able to be refinanced, or that the
terms of such refinancing will not be as favorable as the terms of the Company's
existing indebtedness. If the Company is not successful in refinancing this debt
when it becomes due, it may be forced to dispose of properties at
disadvantageous terms, which might adversely affect the Company's ability to
service other debt and to meet its other obligations. If prevailing interest
rates, or other factors at the time of refinancing result in higher interest
rates, the Company's interest expense would increase, which could also adversely
affect its ability to service other debt and to meet its other obligations. In
addition to the risks associated with debt financing the terms of certain of the
Company's joint venture partnership agreements provide for minimum priority
cumulative returns to the limited partners. To the extent that these specified
minimum returns are not achieved the Company's equity interest in these
partnerships can be negatively affected.

Adverse Consequences of Failure to Qualify as a REIT

The Company believes that it has operated to qualify as a REIT under the
Internal Revenue Code. Qualification as a REIT involves the application of
technical and complex Code provisions for which there are only limited judicial
and administrative interpretations. The determination of various factual matters
and circumstances not entirely within the Company's control may affect its
ability to qualify as a REIT. If the Company fails to qualify as a REIT, it will
be subject to federal, state and local income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates and
would not be allowed a deduction in computing its taxable income for amounts
distributed to stockholders. In addition, unless entitled to relief under
certain statutory provisions, the Company will be disqualified from treatment as
a REIT for the four taxable years following the year during which qualification
is lost.

The issuance of common stock to Homburg USA may result in the
disqualification of the Company's status as a REIT in 2003. If Mr. Richard
Homburg, directly or indirectly, together with the four other largest
shareholders of the Company, were to own, directly or indirectly, more than 50%
of the value of the Company, it would fail to meet the "five or fewer" test
(five or fewer individual shareholders owning more than 50%) for continued REIT
status. The loss of REIT status, while creating no immediate income taxes for
the Company or its shareholders, would mean, among other things, that the
Company would be taxed as if it were a "C" corporation on future net taxable
income and capital gains. Additionally, the Company would generally be
disqualified for federal income tax purposes as a REIT for the four taxable
years following disqualification. The Company does not presently expect to have
taxable income for the year ended December 31, 2003, and as such does not
contemplate paying dividends during 2003.

Environmental Risks

Under various federal, state, and local laws, ordinances, and regulations,
an owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a governmental entity or to third parties for property
damage and for investigation and clean up costs incurred by such parties in

12


Item 1. Business (continued)

connection with contamination. The cost of investigation, remediation or removal
of such substances may be substantial, and the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. In connection with the ownership, operation and management of
real properties, the Company is potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines and
injuries to persons and property.

With the exception of the Loyal Plaza environmental matter discussed below,
the Company believes that environmental studies made with respect to
substantially all of its properties has not revealed environmental liabilities
that would have a material adverse affect on its business, results of operations
and liquidity. However, no assurances can be given that existing environmental
studies with respect to any of the properties reveal all environmental
liabilities, that any prior owner of a property did not create a material
environmental condition not known to the Company, or that a material
environmental condition does not otherwise exist at any one or more of its
properties. If a material environmental condition does in fact exist, it could
have an adverse impact upon the Company's financial condition, results of
operations and liquidity.

There are certain environmental contamination matters that affect the Loyal
Plaza property. Those matters have been extensively reviewed by EMG of
Baltimore, Maryland for Lehman Brothers Bank, FSB as lenders on the property;
and in a Phase I report dated January 31, 2002, prepared by Brinkerhoff
Environmental Services, Inc., retained by the Company. Additional reports have
been prepared for the sellers by Civil and Environmental Consultants, Inc. of
Pittsburgh, Pennsylvania.

The two principal matters involved are (i) certain petroleum-impacted soil
at the newly-built, free-standing Eckerd drug store building on an outparcel of
the property; and (ii) a concentration of dry cleaning solvents,
tetrachloroethene (PCE) and trichloroethene (TCE), at levels in excess of
amounts permitted by the Pennsylvania Department of Environmental Protection
(PADEP).

Under loan agreements between the seller and its lender, the sellers had
maintained an escrow deposit of $450,000 for clean up and testing of
environmental contamination at the site. Pursuant to the purchase agreements for
the purchase of the property by Loyal Plaza Associates L.P., the seller will
remain liable for all costs up to and including a satisfactory "Release of
Liability" letter issued by PADEP with respect to all such contamination at the
property. Pursuant to the purchase agreement, the sellers increased the
environmental escrow deposit to $950,000. Further, in the event that the escrows
are insufficient to cover all required testing and remediation, the sellers have
undertaken to expend any and all monies required to complete such testing and
remediation including monitoring, etc. without limits as to time. The Company
has obtained opinion of counsel to the effect that an anticipated "Release of
Liability" letter from the PADEP will operate to relieve it of any further
liability for remediation of the site under Pennsylvania environmental statutes,
or for any contamination identified in reports submitted to and approved by
PADEP and shall not be subject to citizens' suits or other contribution actions.

13


Item 2. Properties

The properties the Company owned at December 31, 2002 are described under
Item 1 and in Note 3 of the Notes to Consolidated Financial Statements contained
in this report.

The Company's principal office is located at 44 South Bayles Avenue, Port
Washington, NY, and it maintains a property management and leasing office at one
of its properties located in Pennsylvania.

Item 3. Legal Proceedings

The Company is not presently involved in any litigation nor to its
knowledge is any litigation threatened against the Company or its subsidiaries
that, in management's opinion, would result in any material adverse effect on
the Company's ownership, management or operation of its properties, or which is
not covered by the Company's liability insurance.

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

None.

Part II.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Dividend Information

The Company is required to distribute at least 90% of its "REIT taxable
income", as defined in the Internal Revenue Code, to continue qualification as a
real estate investment trust. The Company was not required to, and did not, pay
dividends in 2001 or 2002. The Company does not presently expect to have taxable
income for the year ended December 31, 2003, and as such does not contemplate
paying dividends during 2003.


The SWH financing restricts the Company's ability to make distributions to
the Operating Partnership from the three supermarket-anchored shopping centers
acquired in October 2001. The effect of such restriction, during the period the
SWH financing remains outstanding, is to limit the Company's ability to pay
dividends during such period.

Where applicable, a Form 1099-DIV is mailed to shareholders at the end of
each year reflecting the dividends paid by the Company in that year. The
percentages indicated below, multiplied by the amount of dividends paid for that
year, result in the amount to be reported for income tax purposes.

14


Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

Dividend Information (continued)

Dividend Character 2002 2001 2000
------------------- ---- ---- ----
Ordinary
income 0% 0% 28.07%

Non-taxable
return of
capital 0% 0% 71.93%

Total 0% 0% 100%

Dividends
paid, per share $0 $0 $0.30

Market Information

The Company had 694,411 shares of common stock outstanding to 367
shareholders of record at December 31, 2002. The Company's shares trade on the
NASDAQ under the symbol "CEDR". The following table sets forth the high and low
bid prices and closing prices for each quarter for the Company's last two fiscal
years. Prices for shares of the Company reflect quotations between dealers
without adjustment for retail mark-ups, mark-downs or commissions and do not
necessarily represent actual transactions. The shares of the Company are thinly
traded and as such, the quoted price at any time may not reflect the actual
price at which the company's shares may be bought or sold. The quoted price can
vary significantly from actual transactions depending on the size of the inside
bid and asked quotations and the quantity of shares actually being traded.

Market Price Range

Over-the-Counter Bid Prices
------------------------------
Quarter Ended High Low Close
----------------- ------------------------------
2002
----
March 31 $ 4.85 $ 4.25 $ 4.74
June 30 8.85 4.73 5.01
September 30 6.40 3.55 4.23
December 31 4.00 2.61 4.00

2001
----
March 31 $ 3.31 $ 3.31 $ 3.31
June 30 3.50 3.45 3.50
September 30 7.94 4.60 6.50
December 31 4.25 4.25 4.25

15





Item 6. Selected Financial Data Years ended December 31,
2002 2001 2000 1999 1998
------------ ------------ ------------ ------------ ------------

Revenues
Rents $ 12,964,000 $ 4,817,000 $ 3,037,000 $ 2,489,000 $ 2,505,000
Interest 25,000 282,000 179,000 26,000 60,000
------------ ------------ ------------ ------------ ------------
Total Revenues 12,989,000 5,099,000 3,216,000 2,515,000 2,565,000

Operating Expenses
Operating, maintenance and management 2,313,000 1,091,000 745,000 587,000 560,000
Real estate taxes 1,527,000 494,000 308,000 259,000 263,000
General and administrative 2,005,000 731,000 635,000 669,000 861,000
Depreciation and amortization 2,546,000 991,000 622,000 493,000 480,000
Interest expense 5,523,000 1,888,000 604,000 128,000 130,000
------------ ------------ ------------ ------------ ------------
Total Operating Expenses 13,914,000 5,195,000 2,914,000 2,136,000 2,294,000

Operating (loss) income (925,000) (96,000) 302,000 379,000 271,000
Minority interests (159,000) (44,000) 8,000 - -
Limited partner's interest 806,000 75,000 (192,000) (315,000) (90,000)
Loss on impairment - (1,342,000) (204,000) - -
Gain on sale of properties - 1,638,000 91,000 - -
Loss on sale of properties (49,000) (296,000) - - -
------------ ------------ ------------ ------------ ------------
Net (loss) income before cumulative effect
adjustment (327,000) (65,000) 5,000 64,000 181,000

Cumulative effect of change in accounting
principles, (net of limited partner's
share of $15,000) - (6,000) - - -
------------ ------------ ------------ ------------ ------------
Net (loss) income before extraordinary items (327,000) (71,000) 5,000 64,000 181,000
Extraordinary items

Early extinguishment of debt (net of
limited partner's share of $346,000,
$188,000 and $32,000 in 2002, 2001 and
2000 respectively) (141,000) (76,000) (18,000) - -
------------ ------------ ------------ ------------ ------------
Net (loss) income $ (468,000) $ (147,000) $ (13,000) $ 64,000 $ 181,000
============ ============ ============ ============ ============

Net (loss) earnings per share before
cumulative effect adjustment $ (0.47) $ (0.09) $ 0.01 $ 0.11 $ 0.13
Cumulative change in accounting principle
per share 0.00 (0.01) 0.00 0.00 0.00
------------ ------------ ------------ ------------ ------------
Net (loss) earnings per share before
extraordinary item (0.47) (0.10) 0.01 0.11 0.13
Extraordinary (loss) per share (0.20) (0.11) (0.02) 0.00 0.00
------------ ------------ ------------ ------------ ------------
Net (loss) earnings per share $ (0.67) $ (0.21) $ (0.01) $ 0.11 $ 0.13
============ ============ ============ ============ ============

Dividends to shareholders $ - $ - $ 268,000 $ 257,000 $ 558,000
Dividends to shareholders per share $ - $ - $ 0.31 $ 0.43 $ 0.40
------------ ------------ ------------ ------------ ------------
Average number of shares outstanding 694,000 692,000 869,000 594,000 1,394,000


16


Item 6. Selected Financial Data (continued)



Years Ended December 31,
Balance Sheet Data 2002 2001 2000 1999 1998
- ------------------------------------------- ------------- ------------- --------------- ------------- -------------

Real estate before accumulated depreciation $ 123,634,000 $ 57,622,000 $ 28,272,000 $ 19,186,000 $ 18,904,000
Real estate after accumulated depreciation 121,238,000 56,948,000 24,095,000 13,995,000 14,206,000
Real estate held for sale - 4,402,000 1,850,000 - -
------------- ------------- --------------- ------------- -------------
Total assets 133,138,000 68,350,000 35,567,000 16,693,000 15,323,000

Mortgage loans and loan payable 101,001,000 52,110,000 19,416,000 1,347,000 1,375,000
Minority interest 10,238,000 2,235,000 2,291,000 - -
Preferred Operating Partnership Units $3,000,000 - - - -
Limited partner's intererst in
consolidated Operating Partnership 7,889,000 8,964,000 9,242,000 9,561,000 10,309,000
------------- ------------- --------------- ------------- -------------
Shareholders' equity $ 3,245,000 $ 3,667,000 $ 3,815,000 $ 5,243,000 $ 3,290,000
============= ============= =============== ============= =============
Other Data
Funds from operations for the
Operating Partnership (1) $ 36,000 $ 507,000 $ 823,000 $ 873,000 $ 750,000
Funds from operations for the Company (1) $ 11,000 $ 122,000 $ 197,000 $ 196,000 $ 477,000

Total properties - square feet 1,806,000 807,000 484,000 298,000 298,000
Total properties - percent leased 92% 92% 83% 92% 95%


(1) See Item 7 - "Operating Activities" for discussion of Funds From Operations

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

The Company, the Operating Partnership and their subsidiaries and
affiliated partnerships are separate legal entities. For ease of reference the
terms the "Company" and the "Operating Partnership" (including their respective
affiliates) refer to the business and properties of all these entities, unless
the context otherwise requires. The following discussion should be read together
with the Company's Consolidated Financial Statements and Notes thereto.

Summary of Critical Accounting Policies

Basis of Presentation and Consolidation Policy

The financial statements are prepared on the accrual basis in accordance
with accounting principles generally accepted in the United States ("GAAP"). The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the disclosure of contingent
assets and liabilities and the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.

The consolidated financial statements of the Company include the accounts
and operations of the Company and the Operating Partnership. The Operating
Partnership has a 50% general partnership interest in The Point, a 20% general
partnership interest in Red Lion and a 25% general partnership interest in Loyal
Plaza. Since the Company has operating control over the operating partnership,
and the operating partnership exercises similar control over the other entities,
all of the partnerships are included in the consolidated financial statements.

17


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

Rents and Other Receivables

Management has determined that all of the Company's leases with its various
tenants are operating leases. Minimum rents are recognized on a straight-line
basis over the terms of the related leases net of valuation adjustments based on
management's assessment of credit, collection and other business risks. The
excess of rents recognized over amounts contractually due is included in
deferred rents receivable on the Company's balance sheets. The leases also
typically provide for tenant reimbursements of common area maintenance and other
operating expenses and real estate taxes. Ancillary and other property-related
income is recognized in the period earned. The Company makes estimates as to the
collectibility of its accounts receivables and assesses historical bad debts,
customer creditworthiness, current economic trends and changes in customer
payment patterns when evaluating the adequacy of its allowance for doubtful
accounts. Such estimates have a direct impact on the Company's net income.

Real Estate Investments and Real Estate Held For Sale

Real estate investments are carried at cost less accumulated depreciation.
The provision for depreciation and amortization has been calculated using the
straight-line method based upon the following estimated useful lives of assets:

Buildings and Improvements 40 years
Tenant Improvements Over the life of the lease

Expenditures for maintenance, repairs, and betterments that do not
materially prolong the normal useful life of an asset are charged to operations
as incurred.

Additions and betterments that substantially extend the useful lives of the
properties are capitalized. Upon sale or other disposition of assets, the cost
and related accumulated depreciation and amortization are removed from the
accounts and the resulting gain or loss, if any, is reflected in net income.
Real estate investments include capitalized interest and other costs on
development and redevelopment activities and on significant construction in
progress. Capitalized costs are included in the cost of the related asset and
charged to operations through depreciation over the asset's estimated useful
life.

In October 2001, the FASB issued Statement of Accounting Standard No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").
SFAS 144 provides accounting guidance for financial accounting and reporting for
the impairment or disposal of long-lived assets. SFAS 144 supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." It also supersedes the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
related to the disposal of a segment of a business. The Company adopted SFAS 144
on January 1, 2002.

18


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

Real estate investments held for sale are carried at the lower of cost or
fair value less cost to sell. Depreciation and amortization are suspended during
the period held for sale.

Use of Estimates

The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.

Deferred Charges

Deferred charges consist of leasing commissions incurred in leasing the
Company's properties. Such charges are amortized using the straight-line method
over the term of the related lease. In addition, deferred charges include costs
incurred in connection with securing long-term debt, including the costs of
entering into interest rate protection agreements. Such costs are amortized over
the term of the related agreement.

Derivative Financial Instruments

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"), as amended. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments. This accounting standard
requires the Company to measure derivative instruments at fair value and to
record them in the Consolidated Balance Sheet as an asset or liability,
depending on the Company's rights or obligations under the applicable derivative
contract. The Company's derivative investments are primarily cash flow hedges
that limit the base rate of variable rate debt. For cash flow hedges the
ineffective portion of a derivative's change in fair value is immediately
recognized in earnings, if applicable, and the effective portion of the fair
value difference of the derivative is reflected separately in shareholders'
equity as accumulated other comprehensive income (loss).

The Company utilizes derivative financial instruments to reduce exposure to
fluctuations in interest rates. The Company has established policies and
procedures for risk assessment and the approval, reporting and monitoring of
derivative financial instrument activities. The Company has not, and does not
plan to enter into derivative financial instruments for trading or speculative
purposes. Additionally, the Company has a policy of only entering into
derivative contracts with major financial institutions. The principal derivative
financial instruments used by the Company are interest rate swaps and interest
rate caps.

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107"), requires the Company to
disclose fair value information of all financial instruments, whether or not
recognized in the balance sheet, for which it is practicable

19


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

to estimate fair value. The Company's financial instruments, other than debt are
generally short-term in nature and contain minimal credit risk. These
instruments consist of cash and cash equivalents, rents and other receivables,
and accounts payable. The carrying amount of these assets and liabilities in the
consolidated balance sheets are assumed to be at fair value.

The carrying amounts of cash and cash equivalents approximates their fair
value. The fair value of mortgage loans payable is estimated utilizing
discounted cash flow analysis, using interest rates reflective of current market
conditions and the risk characteristics of the loans.

Earnings Per Share

In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), basic EPS is computed by dividing income
available to common shareowners by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity.

Stock Option Plans and Warrants

In December 2002, the Financial Accounting Standards Board, ("FASB") issued
SFAS 148, "Accounting for Stock-Based Compensation-Transition and Disclosure"
("SFAS 148"). SFAS 148 amends SFAS 123 "Accounting for Stock-Based Compensation"
("SFAS 123") to provide alternative methods of transition for an entity that
voluntarily adopts the fair value recognition method of recording stock option
expense. SFAS 148 also amends the disclosure provisions of Statement 123 and APB
Opinion No. 28. "Interim Financial Reporting" to require disclosure in the
summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock options on reported net income and
earnings per share in annual and interim financial statements.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123") establishes financial accounting and
reporting standards for stock-based employee compensation plans, including all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. SFAS 123 defines a fair
value based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost using the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("Opinion No. 25"). The Company has
elected to continue using Opinion No. 25 and make pro forma disclosures of net
income and earnings per share as if the fair value method of accounting defined
in SFAS 123 had been applied.

The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued in
accordance with SFAS No. 123

20


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

and EITF 96-18 Accounting for Equity Instruments That are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or Services,
based on the fair value of the consideration received or the fair value of the
equity instruments issued, whichever is more reliably measurable with charges
taken into operations over the period goods and services are received.

Recent Accounting Pronouncements

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 significantly changes
the current practice in the accounting for, and disclosure of, guarantees.
Guarantees and indemnification agreements meeting the characteristics described
in FIN 45 are required to be initially recorded as a liability at fair value.
FIN 45 also requires a guarantor to make significant new disclosures for
virtually all guarantees even if the likelihood of the guarantor having to make
payment under the guarantee is remote. The disclosure requirements within FIN 45
are effective for financial statements for annual or interim periods ending
after December 15, 2002. The initial recognition and initial measurement
provisions are applicable on a prospective basis to guarantees issued or
modified after December 31, 2002. The Company is currently evaluating the
effects of FIN 45 on the Company's results of operations or financial condition.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"), which explains how to identify
variable interest entities ("VIE") and how to assess whether to consolidate such
entities. The provisions of this interpretation are immediately effective for
VIE's formed after January 31, 2003. For VIEs formed prior to January 31, 2003,
the provisions of this interpretation apply to the first fiscal year or interim
period beginning after June 15, 2003. Management has not yet determined whether
any of its consolidated entities represent variable interest entities pursuant
to such interpretation. Such determination could result in a change in the
Company's consolidation policy related to such entities.

Intangible Lease Asset/Liability

On July 1, 2001 and January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 141 "Business Combinations," and Statement of
Financial Accounting Standards No. 142 "Goodwill and Intangibles", respectively.
These standards govern business combinations and asset acquisitions, and the
accounting for acquired intangibles. As part of the acquisition of real estate
assets, the Company determines whether an intangible asset or liability related
to above or below market leases, was acquired as part of the acquisition of the
real estate. The intangible assets and liabilities are recorded at their
estimated fair market values at the date of acquisition, and are amortized over
the remaining term of the respective lease to rental income.

Liquidity and Capital Resources

The Company funds its operating expenses primarily from operating
cash flows, although, if needed, the Company may also use its bank line of
credit for this purpose. The Company funds acquisitions, developments, and other
capital expenditures primarily from available cash, property-specific

21


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

mortgage indebtedness, joint venture partner equity contributions, its line of
credit, and to a lesser extent, operating cash flows. The Company may also
acquire properties through the issuance of limited partnership Units of the
Operating Partnership. Additionally, the Company may dispose of certain
properties, reinvesting the proceeds from such dispositions into properties with
better growth potential or more consistent with its strategic focus.

The Company focuses its investment activities on community and neighborhood
shopping centers, primarily located in Pennsylvania and New Jersey, anchored
principally by regional and national grocery store chains. The Company continues
to seek acquisition opportunities where it can utilize its experience in
shopping center renovation, expansion, re-leasing and re-merchandising to
achieve long-term cash flow growth and favorable investment returns. The Company
would also consider investment opportunities in markets beyond the Pennsylvania
and New Jersey area in the event such opportunities were consistent with its
focus, could be effectively controlled and managed by it, and provided the
potential to create favorable investment returns and increased value to its
shareholders.

The Company's financial liquidity is provided by $3.8 million in cash and
cash equivalents at December 31, 2002 and by the unused balance of its $1
million bank line of credit. In March 2003 the Company entered into a new Line
of credit that will contribute to its liquidity during 2003 (see below). The
Company also believes that it has sufficient flexibility to fund the required
payments in connection with the SWH financing, property level capital
expenditures, tenant improvements, leasing costs and mortgage and other
scheduled principal payments, including the $1.4 million (based on $150,000
alternative amortization schedule) due with respect to the SWH financing in
2003. The Company's ability, however, to meet these obligations is dependent in
large part on its ability to attract a joint venture partner or suitable
financing for the Camp Hill redevelopment project. Based on preliminary
discussions with several potential partners, the Company believes it will be
successful in arranging a transaction that will allow it to withdraw a
significant portion of its equity investment in Camp Hill while retaining a
substantial portion of the upside potential in the redevelopment. However, no
assurances can be given that such an arrangement will ultimately be finalized.

Mortgage debt outstanding at December 31, 2002 consisted of fixed-rate
notes totaling $94 million with a weighted average interest rate of 7.13%,
maturing at various dates through 2013. Short-term liquidity requirements
include debt service payments due within one year. The scheduled principal
payments of mortgage debt in 2003 total $933,000. The Company expects to fund
short-term liquidity requirements, including mortgage principal payments with
operating cash flows and draw downs under its line of credit. While the Company
currently expects to fund long-term liquidity requirements primarily through a
combination of issuing additional mortgage debt and equity securities and with
borrowings under the bank line of credit, there can be no assurance that it will
in fact be able to repay or refinance its indebtedness on commercially
reasonable or any other terms.

22


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

In March 2002, the Company entered into a one-year $1 million unsecured
line of credit facility with North Fork Bank, Melville, New York. The line of
credit bore interest at the greater of 6% or the bank's prime rate plus 1%. The
line of credit was repaid on January 26, 2003. The Company entered into a new
line of credit facility effective as of March 16, 2003 for a one-year period at
the same rates as the previous facility and with a $2 million limit, provided,
however, that the additional $1 million will be available only when the SWH
financing has been repaid.

The Company obtained a $5 million LIBOR-based construction loan in
connection with the LA Fitness development project. The loan is due on December
31, 2007, has a two-year extension option, and carries interest at LIBOR plus
275 basis points.

Subsequent to year-end, the Company purchased a 30% sole general
partnership interest in three additional shopping centers located near
Harrisburg, Pennsylvania, aggregating approximately 190,000 square feet of
leaseable space. In the aggregate these centers cost approximately $19 million,
the Company's general partnership interest cost $1.4 million and Kimco Preferred
Investors III as limited partner invested $3,740,000. The balance of the
purchase price was financed by three separate mortgage loans aggregating
approximately $15.9 million. One loan is for ten years with a fixed rate of
5.64% and the Company entered into interest rate swaps for the entire amounts
and for the seven year terms of the other two of the loans, which results in a
fixed rate of 6.43%. The blended interest rate for all three loans amounts to
6.09%.

Significant portions of the Company's assets are owned through joint
venture partnership arrangements (see property table in Item 1). As the Company
is the sole general partner in these joint venture arrangements with substantial
control over ownership operations, it prepares its financial statements on a
consolidated basis. The joint venture partnership agreements require, among
other things, that the Company maintain separate cash accounts for the operation
of the joint venture and distributions to the general and limited partners are
strictly controlled. These arrangements to date have not resulted in any
significant liquidity shortfalls at the Company or the partnership level,
however; the Company or any combination of the joint venture partnerships could
suffer a liquidity crisis while other members of the group have sufficient
liquidity. Joint venture cash amounted to $1.2 million at December 31, 2002.

The terms of certain of the Company's mortgage agreements require it to
deposit certain replacement and other reserves with its lenders. This restricted
cash is generally available for property-level capital requirements for which
the reserve was established. This cash is not, however, available to fund other
property-level or Company-level obligations. Such restricted cash amounted to
$1.7 million at December 31, 2002.

The Company expects that capital markets in the United States will continue
to be active and will provide funds for the refinancing of its indebtedness as
such indebtedness matures over the next two to ten years. With the exception of
the Citizens Bank first mortgage financing on the Camp Hill property and the
construction loan on the LA fitness property, all such mortgages are amortizing
loans. The balances due at maturity and the annual amortization payments are
summarized below.

23


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

The combined aggregate future principal payments of mortgages, notes &
loans at December 31, 2002 are as follows:

Line of Credit
and Loans and
other Notes
Year Mortgages Payable Payable Total
----------- ------------------ -------------- -------------
2003 $ 933,000 $ 2,273,000 $ 3,206,000
2004 15,017,000 2,996,000 18,013,000
2005 1,106,000 2,195,000 3,301,000
2006 1,193,000 - 1,193,000
2007 2,448,000 - 2,448,000
Thereafter 72,840,000 - 72,840,000
------------------ -------------- -------------
$ 93,537,000 $ 7,464,000 $ 101,001,000
================== ============== =============

As the table incorporates only those exposures that exist as of December
31, 2002, it does not consider those exposures or positions that could arise
after that date. Moreover, because future commitments are not presented in the
table above, the information presented has limited predictive value. As a
result, the ultimate financial impact with respect to interest rate fluctuations
will depend on the exposures that arise during the period, the Company's hedging
strategies and interest rates at that time.

Funds From Operations

The Company generally considers Funds From Operations ("FFO") to be a
relevant and meaningful supplemental measure of the performance of an equity
REIT because it is predicated on a cash flow analysis, contrasted with net
income, a measure predicated on generally accepted accounting principles which
gives effect to non-cash items such as depreciation. The Company computes FFO in
accordance with the April 2002 "White Paper" on FFO published by the National
Association of Real Estate Investment Trusts ("NAREIT"), as income before
allocation to minority interest (computed in accordance with GAAP), excluding
gains or losses from debt restructuring and sales of property, plus depreciation
and amortization, and after preferred stock distributions and adjustments for
unconsolidated partnerships and joint ventures. Adjustments for unconsolidated
partnerships and joint ventures are computed to reflect FFO on the same basis.
In computing FFO, the Company does not add back to net income the amortization
of costs incurred in connection with our financing activities or depreciation of
non-real estate assets, but does add back to net income those items that are
defined as "extraordinary" under GAAP. FFO does not represent cash generated
from operating activities in accordance with GAAP and should not be considered
as an alternative to cash flow as a measure of liquidity. Since the NAREIT White
Paper only provides guidelines for computing FFO, the computation of FFO may
vary from one REIT to another. FFO is not necessarily indicative of cash
available to fund cash needs.

24


Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Cedar Income Fund, Ltd.
The following table represents the Company's FFO calculation for the years
ended December 31,



2002 2001 2000
----------- ----------- -----------

Net (loss) income before limited partner's
interest in Operating Partnership $(1,133,000) $ (140,000) $ 197,000
Add (Less):
Limited partner's interest in the
Operating Partnership 806,000 75,000 (192,000)
----------- ----------- -----------
Net (loss) income available to common shareholders (327,000) (65,000) 5,000

Add (less) Company's share of the following items:
Depreciation 497,000 201,000 150,000
Impairment loss - 388,000 70,000
Loss on sale of real estate 14,000 85,000 (2,000)
Minority interest 46,000 13,000 (26,000)
Gain on sale of real estate - (473,000) -
Amount distributable to minority partners (219,000) (51,000) (20,000)
----------- ----------- -----------
Basic and diluted funds from operation $ 11,000 $ 98,000 $ 177,000
=========== =========== ===========

Weighted average shares/units outstanding (1) 694,000 692,000 869,000


The following table represents the Operating Partnership's FFO calculation for
the years ended December 31,



2002 2001 2000
----------- ----------- -----------

Net (loss) income before limited partner's
interest in Operating Partnership $(1,133,000) $ (140,000) $ 197,000
Add (Less):
Limited partner's interest in the
Operating Partnership 806,000 75,000 (192,000)
----------- ----------- -----------
Net (loss) income available to common shareholders (327,000) (65,000) 5,000

Add (less) Company's share of the following items:
Limited partner's interest (806,000) (75,000) 192,000
Depreciation 1,720,000 697,000 521,000
Impairment loss - 1,342,000 204,000
Loss on sale of real estate 49,000 296,000 -
Minority interest 159,000 44,000 (8,000)
Gain on sale of real estate - (1,638,000) (91,000)
Amount distributable to minority partners (759,000) (178,000) (69,000)
----------- ----------- -----------
Basic and diluted funds from operation $ 36,000 $ 423,000 $ 754,000
=========== =========== ===========

Weighted average shares/units outstanding (1) 2,395,000 2,395,000 2,573,000


(1) Assumes conversion of limited partnership Units of the Operating
Partnership; reflects the issuance of 400,000 new shares of common stock on
November 15, 1999, and the repurchase of 150,000 shares of common stock on
November 22, 2000, and the repurchase of 100,000 shares of common stock on
December 14, 2000.

25


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

Net Cash Flows:

Operating Activities

Net cash flows provided by operating activities increased to $1,159,000
during 2002 from $1,000,000 in 2001, and $989,000 in 2000. These increases were
due primarily to the growth of the Company's portfolio.

Investing Activities

Net cash flows used in investing activities increased to approximately
$41,380,000 during 2002, from approximately $2,529,000 in 2001 and approximately
$8,850,000 in 2000. During 2002, the Company completed the acquisitions of four
shopping centers located in Pennsylvania aggregating 1.1 million square feet for
a cost of approximately $60 million, and sold one office property for a net
sales price of $4.37 million.

Financing Activities

Net cash flows provided by financing activities increased to approximately
$41,803,000 in 2002 from approximately $3,451,000 in 2001 and approximately
$5,886,000 in 2000. The Company funded the acquisitions of four shopping
centers, and capital expenditures necessary to improve and lease its properties
with cash provided by joint venture partners, mortgage and other indebtedness
and the sale of 3,300 preferred Operating Partnership Units in connection with
the Homburg capital contribution. The Company used the net proceeds from the
sale of one property during 2002 to pay down the outstanding balance on the 2001
SWH financing.

Results of Operations

Comparison of 2002 to 2001

During 2002, the Company acquired three shopping centers aggregating
approximately 1,039,000 rentable sq. ft. and the land for a 41,000 sq ft. LA
Fitness facility for an aggregate cost of approximately $60 million. During May
2002, the Company sold one office property that did not meet its strategic focus
for a net sales price of $4.37 million

During 2001, the Company completed the acquisitions of three shopping
centers for an aggregate purchase price of approximately $36 million, and sold
two properties for an aggregate gross sales price of $7.2 million.

Differences in results of operations between 2002 and 2001 were driven
largely by the Company's acquisition and disposition activity. Net loss before
the loss on sale of properties, income allocated to minority interest, and
income before extraordinary items increased approximately $829,000 from a net
loss of $96,000 in 2001 to a net loss of $925,000 in 2002. Net loss attributable
to common shareholders increased approximately $321,000 from a net loss of

26


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

$147,000 in 2001 to a net loss of $468,000 in 2002. Net loss per share increased
$0.46 from net loss per share of $.21 in 2001 to a net loss per share of $0.67
per share in 2002.

Results of operations for properties consolidated for financial reporting
purposes and held throughout both 2002 and 2001 included one property. Results
of operations for properties consolidated for financial reporting purposes and
purchased or sold subsequent to January 1, 2001 through December 31, 2002
included only three properties. As of December 31, 2002, the Company owned seven
shopping center properties.

Property-Specific Revenue and Expenses



Acquisitions/ Held in
2002 2001 Difference dispositions both years
------------ ------------ ------------- ---------------- -----------

Rents $ 12,964,000 $ 4,817,000 $ 8,147,000 $ 7,304,000 $ 843,000
Property expenses 3,840,000 1,585,000 2,255,000 2,061,000 194,000
Depreciation and amortization 2,546,000 991,000 1,555,000 1,195,000 360,000
Interest expense 5,523,000 1,888,000 3,645,000 3,531,000 104,000
General and Administrative Expense 2,005,000 731,000 1,274,000 N/A N/A


Results attributable to acquisition and disposition activities:

Rents increased from approximately $4,817,000 in 2001 to approximately
$12,964,000 in 2002, a net increase of approximately $8,147,000. Such increase
reflects approximately $7,304,000 attributable to the Company's acquisition
activities, and approximately $843,000 attributable to properties held in both
years.

Property expenses, excluding depreciation, amortization and interest
expense, increased from approximately $1,585,000 in 2001 to approximately
$3,840,000 in 2002, an increase of approximately $2,256,000. Approximately
$2,061,000 of the net increase was attributable to acquisition and disposition
activities, while approximately $194,000 was attributable to properties held
both years.

Depreciation and amortization increased from approximately $991,000 in 2001
to approximately $2,546,000 in 2002, an increase of approximately $1,555,000.
Approximately $1,195,000 of the net increase was attributable to acquisition and
disposition activities, while approximately $360,000 was attributable to
properties held both years.

Interest expense increased from approximately $1,888,000 in 2001 to
approximately $5,523,000 in 2002. Approximately $3,531,000 of the net increase
was attributable to mortgage and other indebtedness incurred with respect to
acquisition and disposition activities, while approximately $104,000 was
attributable to properties held both years.

27


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

General and administrative expense increased approximately $1,274,000 to
$2,005,000 in 2002 from approximately $731,000 in 2001. The increase is
primarily the result of the Company's growth throughout both years.

Results for properties fully operating throughout both years:

Several factors affected the comparability of results for The Point, the
only property fully operating throughout both years. Rental income for The Point
increased from approximately $2,066,000 in 2001 to approximately $2,910,000 in
2002. This is a result of the completion of the redevelopment of the center and
the commencement in August 2001 of the Giant supermarket tenancy.
Correspondingly, property expenses increased from approximately $629,000 in 2001
to approximately $823,000 in 2002.

Comparison of 2001 to 2000

During 2001, the Company acquired three shopping centers aggregating
approximately 440,000 rentable sq. ft. and an adjacent parcel of land (of
approximately 34,000 sq ft.) for a total cost of approximately $36 million.
During 2001, the Company sold two office properties that did not meet its
strategic focus for an aggregate gross sales price of $7.2 million.

During 2000, the Company completed the acquisition of a 50% interest in The
Point at a purchase price of $2.1 million (50% of the appraised value less the
existing first mortgage debt (i.e. $13,500,000 - $9,300,000 x .50)), and sold
one 50% interest in the Germantown Square property for a gross sales price of $3
million.

Differences in results of operations between 2001 and 2000 were driven
largely by the acquisition and disposition activity. Net loss attributable to
common shareholders for 2001 totaled approximately $147,000 compared with a net
loss of approximately $13,000 for the prior year. Net income before minority
interest, limited partnership's interest, loss on impairment, and gain (loss) on
sales decreased from net income of approximately $302,000 in 2000 to a net loss
of approximately $96,000 in 2001. The computation of net loss per share resulted
in a $0.20 per share increase from a net loss of $0.01 in 2000 to a net loss of
$0.21 for 2001. As the Company had no dilutive securities outstanding during
2000 or 2001, basic and diluted net loss per share figures are the same for both
years.

Results of operations for properties consolidated for financial reporting
purposes and held throughout both 2001 and 2000 included one property. Results
of operations for properties consolidated for financial reporting purposes and
purchased or sold during the period January 1, 2000 through December 31, 2001
included nine properties. As of December 31, 2001, the Company owned five
properties.

28


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

Property-Specific Revenue and Expenses



Acquisitions/ Held in
2001 2000 Difference dispositions both years
------------ ------------ ------------ --------------- ----------

Rents $ 4,817,000 $ 3,037,000 $ 1,780,000 $ 1,757,000 $ 23,000
Property expenses 1,585,000 1,053,000 532,000 506,000 26,000
Depreciation and amortization 991,000 622,000 369,000 420,000 (51,000)
Interest expense 1,888,000 604,000 1,284,000 1,284,000 -


Results attributable to acquisition and disposition activities:

Rents increased from approximately $3,037,000 in 2000 to approximately
$4,817,000 in 2001, an increase of approximately $1,780,000. Substantially all
of the net increase was attributable to the Company's acquisition and
disposition activities.

Property expenses increased from approximately $1,053,000 in 2000 to
approximately $1,585,000 in 2001, an increase of approximately $532,000.
Substantially all of the net increase was attributable to acquisition and
disposition activities.

Depreciation and amortization increased from approximately $622,000 in 2000
to approximately $991,000 in 2001, an increase of approximately $369,000.
Substantially all of the net increase was attributable to acquisition and
disposition activities.

Interest expense increased from approximately $604,000 in 2000 to
approximately $1,888,000 in 2001. The net increase was attributable to mortgage
and other indebtedness incurred with respect to acquisition and disposition
activities.

General and administrative fees increased from approximately $635,000 in
2000 to approximately $731,000 in 2001. The increase is primarily the result of
the Company's growth throughout both years.

During 2001, the Company incurred an extraordinary loss on the early
extinguishment of debt of approximately $76,000 (net of the limited partner's
portion) in connection with The Point refinancing. During 2000, the Company
incurred an extraordinary loss of approximately $17,500 (net of the limited
partner's interest portion) on the early extinguishment of debt in connection
with the prepayment of the Broadbent mortgage loan.

29


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

Inflation

Low to moderate levels of inflation during the past several years have
favorably impacted the Company's operations by stabilizing operating expenses.
At the same time, low inflation had an indirect effect of reducing the Company's
ability to increase tenant rents. The Company's properties have tenants whose
leases include expense reimbursements and other provisions to minimize the
effect of inflation. These factors, in the long run, are expected to result in
more attractive returns from the Company's real estate portfolio as compared to
short-term investment vehicles.

Item 7A.Quantitative And Qualitative Disclosures About Market Risk

The primary market risk facing the Company is interest rate risk on its
loans payable and mortgage notes payable. The Company will, when advantageous,
hedge its interest rate risk using financial instruments. The Company is not
subject to foreign currency risk.

The Company is exposed to interest rate changes primarily as a result of
(i) the line of credit used to maintain liquidity, fund capital expenditures and
expand its real estate investment portfolio and (ii) the Camp Hill acquisition
financing. The Company's interest rate risk management objectives are to limit
the impact of interest rate changes on earnings and cash flows and to lower its
overall borrowing costs. To achieve these objectives, the Company borrows
primarily at fixed rates and may enter into derivative financial instruments
such as interest rate swaps, caps and treasury locks in order to mitigate its
interest rate risk on a related financial instrument. The Company does not enter
into derivative or interest rate transactions for speculative purposes.

The Company will recognize all derivatives on the balance sheet at fair
value. Derivatives that are not hedges will be adjusted to fair value through
income. If a derivative is a hedge, depending on the nature of the hedge,
changes in the fair value of the derivative will either be offset against the
change in fair value of the hedged assets, liability or firm commitment through
earnings, or recognized in other comprehensive income until the hedged item is
recognized in earnings. The ineffective portion of a derivative's change in fair
value will be immediately recognized in earnings. As of December 31, 2002, the
Company has an interest rate swap on one of its mortgage loans. The derivative
had a change in fair value of approximately $224,000, of which $65,000 was
recognized in other comprehensive income and the remaining $159,000 was
recognized as the limited partner's interest in consolidated Operating
Partnership.

The Company's interest rate risk is monitored using a variety of
techniques. As of December 31, 2002, long-term debt consisted of fixed-rate
secured mortgage indebtedness, fixed-rate unsecured notes, a variable rate
secured mortgage note, and a variable rate line of credit facility. The average
interest rate on the $94 million of fixed rate secured mortgage indebtedness
outstanding at December 31, 2002 was 7.13%, with maturities at various dates
through 2013. The weighted average interest rate on the Company's line of credit
at December 31, 2002 was 6%. The line of credit, had an outstanding balance at
December 31, 2002 of $577,100, which amount was repaid and the credit facility
was retired during January 2003.

30


Item 8. Financial Statements and Supplemental Data

Report of Independent Auditors....................................32

Consolidated Balance Sheets as of December 31, 2002 and
December 31, 2001............................................33

Consolidated Statements of Operations for the years ended
December 31, 2002, 2001 and 2000.............................34

Consolidated Statements of Shareholders' Equity for the years
ended December 31, 2002, 2001 and 2000.......................35

Consolidated Statements of Cash Flows for the years ended
December 31, 2002, 2001 and 2000.............................36

Notes to Consolidated Financial Statements........................37

31


Report of Independent Auditors

The Board of Directors and Shareholders
Cedar Income Fund, Ltd.

We have audited the accompanying consolidated balance sheets of Cedar
Income Fund, Ltd. as of December 31, 2002 and 2001, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 2002. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in 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 consolidated financial position of Cedar Income
Fund, Ltd. at December 31, 2002 and 2001, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 2002, in conformity with accounting principles generally accepted
in the United States.

/s/ Ernst & Young, LLP
----------------------

New York, NY
March 16, 2003




32


Cedar Income Fund, Ltd.
Consolidated Balance Sheet
(Audited)



December 31, December 31,
2002 2001
---------------- --------------

Assets
Real estate
Land $ 24,741,000 $ 10,109,000
Buildings and improvements 98,893,000 47,513,000
---------------- --------------
123,634,000 57,622,000
Less: accumulated depreciation (2,396,000) (674,000)
---------------- --------------
Real estate, net 121,238,000 56,948,000
Real estate held for sale - 4,402,000
Cash and cash equivalents 3,827,000 2,245,000
Cash at joint ventures and restricted cash 2,883,000 2,030,000
Property deposits 344,000 -
Real estate tax deposits 627,000 642,000
Rents and other receivables, net 304,000 217,000
Prepaid expenses 496,000 131,000
Deferred rental income 432,000 48,000
Deferred charges, net 2,987,000 1,687,000
---------------- --------------
Total Assets $ 133,138,000 $ 68,350,000
================ ==============

Liabilities and Shareholders' Equity
Liabilities
Mortgage loans payable $ 93,537,000 $ 46,130,000
Loans payable 7,464,000 5,980,000
Accounts payable and accrued expenses 1,767,000 876,000
Security deposits 335,000 243,000
Deferred liabilities 5,195,000 -
Prepaid rents 468,000 255,000
---------------- --------------
Total Liabilities 108,766,000 53,484,000

Minority interests 10,238,000 2,235,000
Limited partner's interest in consolidated
Operating Partnership 7,889,000 8,964,000
Series A preferred 9% convertible, redeemable
Operating Partnership Units 3,000,000 -
---------------- --------------
10,889,000 8,964,000
Shareholders' Equity
Common stock ($.01 par value,
50,000,000 shares authorized,
694,411 and 694,111 shares issued and
outstanding, respectively) 7,000 7,000
Accumulated other comprehensive loss (65,000) 0
Additional paid-in-capital 3,303,000 3,660,000
---------------- --------------
Total Shareholders' Equity 3,245,000 3,667,000
---------------- --------------
Total Liabilities and Shareholders' Equity $ 133,138,000 $ 68,350,000
================ ==============
Total Shareholders' Equity in the Company
and limited partner's (equity) interest in
Operating Partnership and minority interests $ 24,372,000 $ 14,866,000
================ ==============


See the accompanying notes to consolidated financial statements.

33


Cedar Income Fund, Ltd.
Consolidated Statements of Operations



Years ended December 31,
2002 2001 2000
------------ ----------- -----------

Revenues
Rents $ 12,964,000 $ 4,817,000 $ 3,037,000
Interest 25,000 282,000 179,000
------------ ----------- -----------
Total Revenues 12,989,000 5,099,000 3,216,000
------------ ----------- -----------
Operating Expenses
Operating, maintenance and management 2,313,000 1,091,000 745,000
Real estate taxes 1,527,000 494,000 308,000
General and administrative 2,005,000 731,000 635,000
Depreciation and amortization 2,546,000 991,000 622,000
Interest expense 5,523,000 1,888,000 604,000
------------ ----------- -----------
Total Operating Expenses 13,914,000 5,195,000 2,914,000
------------ ----------- -----------
Operating (loss) income (925,000) (96,000) 302,000
Minority interests (159,000) (44,000) 8,000
Limited partner's interest 806,000 75,000 (192,000)
Loss on impairment - (1,342,000) (204,000)
Gain on sale of properties - 1,638,000 91,000
Loss on sale of properties (49,000) (296,000) -
------------ ----------- -----------
Net (loss) income before cumulative effect adjustment (327,000) (65,000) 5,000

Cumulative effect of change in accounting principles, net of
limited partnership share of ($15,000) - (6,000) -
------------ ----------- -----------
Net (loss) income before extraordinary items (327,000) (71,000) 5,000
Extraordinary items
Early extinguishment of debt (net of limited partner's share of
$346,000, $188,000 and $32,000 in 2002, 2001 and 2000 respectively) (141,000) (76,000) (18,000)
------------ ----------- ------------
Net (loss) $ (468,000) $ (147,000) $ (13,000)
============ =========== ===========

Net (loss) earnings per share before cumulative effect adjustment $ (0.47) $ (0.09) $ 0.01
Cumulative change in accounting principle per share - (0.01) -
------------ ----------- -----------
Net (loss) earnings per share before extraordinary item (0.47) (0.10) 0.01
Extraordinary (loss) per share (0.20) (0.11) (0.02)
------------ ----------- -----------
Net (loss) per share (0.67) $ (0.21) $ (0.01)
============ =========== ===========
Dividends to shareholders $ - $ - $ 268,000
Dividends to shareholders per share $ - $ - $ 0.30
------------ ----------- -----------
Average number of shares outstanding 694,000 692,000 869,000
============ =========== ===========


See the accompanying notes to consolidated financial statements.

34


Cedar Income Fund, Ltd.
Consolidated Statements of Shareholders' Equity



Accumulated
other Total
Common Additional Undistributed Comprehensive Shareholders'
Stock Paid-In Capital Net Income Loss Equity
--------- -------------- -------------- ------------- ---------------

Balance at December 31, 1999 $ 9,000 $ 5,234,000 $ - $ - 5,243,000

Net income - - (12,000) - (12,000)
Dividends to shareholders - (280,000) 12,000 - (268,000)
Treasury stock (2,000) (1,146,000) - - (1,148,000)
--------- -------------- -------------- ------------- ---------------
Balance at December 31, 2000 7,000 3,808,000 - - 3,815,000

Net loss - (148,000) - - (148,000)
Dividends to shareholders - - - -
--------- -------------- -------------- ------------- ---------------
Balance at December 31, 2001 7,000 3,660,000 - - 3,667,000

Net loss - (468,000) - (468,000)
Unrealized loss on change of fair value
of cash flow hedge - - - (65,000) (65,000)
Dividends to shareholders - - - - -
Issuance of warrants - 100,000 - - 100,000
Conversion of O.P. Units to stock - 11,000 - - 11,000
--------- -------------- -------------- ------------- ---------------
Balance at December 31, 2002 $ 7,000 $ 3,303,000 $ - $ (65,000) $ 3,245,000
========= ============== ============== ============= ===============


See the accompanying notes to the financial statements.

35


Cedar Income Fund, Ltd.
Consolidated Statement of Cash Flows



Years Ended December 31,
2002 2001 2000
------------ ------------- ------------

Cash Flow From Operating Activities
Net loss $ (468,000) $ (148,000) $ (12,000)

Adjustments to reconcile net (loss) to net cash provided
by operating activities:
Cumulative effect of change in accounting principle - 21,000
Minority interest 159,000 44,000 8,000
Distributions to minority interest partners (1,185,000) (100,000) -
Limited partner's interest in Operating Partnership (806,000) (75,000) 192,000
Gain (loss) on sale of properties 49,000 (1,342,000) (91,000)
Early extinguishment of debt 487,000 264,000 -
Depreciation and amortization 2,546,000 991,000 622,000
Impairment of real estate - 1,342,000 204,000
Straight line rent (385,000) (48,000) -
Changes in operating assets and liabilities:
(Increase) decrease in rent and other receivables (87,000) 39,000 (144,000)
(Increase) decrease in prepaid expenses (365,000) (30,000) 1,000
(Increase) decrease in taxes held in escrow 15,000 (489,000) (147,000)
Increase in accounts payable and accrued expense 891,000 206,000 305,000
(Increase) in amounts due from related parties - - 11,000
Security deposits collected, net 92,000 176,000 (21,000)
Increase in prepaid rents 216,000 149,000 61,000
------------ ------------- ------------
Net cash provided by operating activities 1,159,000 1,000,000 989,000

Cash Flow From Investing Activities
Expenditures for real estate and improvements (44,240,000) (14,566,000) (3,983,000)
Decrease (increase) in joint venture and restricted cash (836,000) 5,788,000 (7,818,000)
Increase in property deposits (344,000)
Payment of deferred leasing costs (313,000) (313,000) (32,000)
Net proceeds from sale of properties 4,353,000 6,562,000 2,983,000
------------ ------------- ------------
Net cash (used in) investing activities (41,380,000) (2,529,000) (8,850,000)

Cash Flow from Financing Activities
Proceeds from mortgages 32,708,000 4,484,000 10,116,000
Principal portion of scheduled mortgage payments (617,000) (111,000) (1,347,000)
Contributions from minority interest partners 9,030,000 - -
Proceeds from sale of preferred units 3,000,000 - -
Distributions to limited partner - - (511,000)
Dividends paid - - (268,000)
Reacquisition of treasury stock - - (1,148,000)
Deferred financing and legal costs (net) (2,318,000) (922,000) (956,000)
------------ ------------- ------------
Net cash provided by financing activities 41,803,000 3,451,000 5,886,000

Net increase (decrease) in cash and cash equivalents 1,582,000 1,922,000 (1,975,000)
Cash and cash equivalents at beginning of the period 2,245,000 323,000 2,298,000
------------ ------------- ------------
Cash and cash equivalents $ 3,827,000 $ 2,245,000 $ 323,000
============ ============= ============

Supplemental Disclosure of Cash Activities
Interest paid $ 5,144,000 $ 2,017,000 $ 604,000
============ ============= ============
Supplemental Disclosure of Non-Cash Financing
Activities:
Assumption of mortgage loans payable $ 16,800,000 $ 28,321,000 $ 9,300,000
============ ============= ============


See the accompanying notes to consolidated financial statements.

36


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 1. Organization

Cedar Income Fund, Ltd. ("Cedar" or the "Company"), organized in 1984 and
qualified to operate as a real estate investment trust ("REIT"), focuses on the
ownership, operation and redevelopment of community and neighborhood shopping
centers primarily located in the Pennsylvania and New Jersey area. As of
December 31, 2002, the Company owned seven properties, aggregating approximately
1.8 million square feet of rentable space. The Company's tenant mix is dominated
by supermarkets and other consumer necessity or value-oriented retailers.

The Company has no employees and accordingly relies on Cedar Bay Realty
Advisors, Inc. and its affiliates (collectively, "CBRA") to manage the affairs
of the Company. The Company is thus referred to as an "advised" REIT. Pursuant
to the terms of an Administrative and Advisory Agreement and Property Management
Agreement, CBRA provides the Company with acquisition, disposition, asset,
construction and property management, leasing, advisory services, loan
placement, certain legal services, accounting systems, professional and support
personnel and office facilities. Leo S. Ullman, the Company's Chairman and Chief
Executive Officer, is also the major shareholder of CBRA. Certain of the
Company's other officers are also officers and employees of CBRA. The terms of
the Agreements are further discussed in Note 9.

Cedar Income Fund Partnership, L.P. (the "Operating Partnership") is the
entity through which the Company conducts substantially all of its business and
owns (either directly or through subsidiaries) substantially all of its assets.
As of December 31, 2002, Cedar owned an approximate 29% economic interest in,
and is the sole general partner of, the Operating Partnership.

The Operating Partnership also has outstanding 3,300 Units of 9% Series A
Cumulative Redeemable Perpetual Preferred Units with a $1,000 par value. The
Series A Preferred Units were issued during 2002 to an investor at a price of
$909.09 per unit. The Units are redeemable by the Operating Partnership at any
time at a redemption price equal to 120% of par value plus an amount equal to
all accumulated, accrued and unpaid distributions or dividends thereon to the
date of redemption. Holders of the Series A Preferred Units have the right to
exchange their Units for shares of the Company's common stock at prices ranging
from $3.64 to $4.09 per common share. On January 3, 2002, 552 of such Preferred
Units were converted to 138,000 shares of common stock at $3.64 per share.

As used herein, the "Company" refers to Cedar Income Fund, Ltd. and its
subsidiaries on a consolidated basis, including the Operating Partnership or,
where the context so requires, Cedar Income Fund, Ltd. only.

37


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation Policy

The financial statements are prepared on the accrual basis in accordance
with accounting principles generally accepted in the United States ("GAAP"). The
preparation of financial statements in conformity with GAAP requires management
to make estimates and assumptions that affect the disclosure of contingent
assets and liabilities and the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from these
estimates.

The consolidated financial statements of the Company include the accounts
and operations of the Company and the Operating Partnership. The Operating
Partnership has a 50% general partnership interest in The Point Shopping Center
("The Point"), a 20% general partnership interest in the Red Lion Shopping
Center ("Red Lion") and a 25% general partnership interest in the Loyal Plaza
Shopping Center ("Loyal Plaza"). Since the Company has operating control over
the Operating Partnership, and the Operating Partnership exercises similar
control over the other entities, all of the partnerships are included in the
consolidated financial statements.

Rents and Other Receivables

Management has determined that all of the Company's leases with its various
tenants are operating leases. Minimum rents are recognized on a straight-line
basis over the terms of the related leases net of valuation adjustments based on
management's assessment of credit, collection and other business risks. The
excess of rents recognized over amounts contractually due is included in
deferred rents receivable on the Company's balance sheets. The leases also
typically provide for tenant reimbursements of common area maintenance and other
operating expenses and real estate taxes. Ancillary and other property-related
income is recognized in the period earned. The Company makes estimates as to the
collectibility of its accounts receivables and assesses historical bad debts,
customer creditworthiness, current economic trends and changes in customer
payment patterns when evaluating the adequacy of its allowance for doubtful
accounts. Such estimates have a direct impact on the Company's net income.

Real Estate Investments and Real Estate Held For Sale

Real estate investments are carried at cost less accumulated depreciation.
The provision for depreciation and amortization has been calculated using the
straight-line method based upon the following estimated useful lives of assets:

Buildings and Improvements 40 years
Tenant Improvements Over the life of the lease

38


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies (continued)

Expenditures for maintenance, repairs, and betterments that do not
materially prolong the normal useful life of an asset are charged to operations
as incurred and amounted to $827,000, $435,000 and $248,000 for 2002, 2001, and
2000, respectively.

Additions and betterments that substantially extend the useful lives of the
properties are capitalized. Upon sale or other disposition of assets, the cost
and related accumulated depreciation and amortization are removed from the
accounts and the resulting gain or loss, if any, is reflected in net income.
Real estate investments include capitalized interest and other costs on
development and redevelopment activities and on significant construction in
progress. Capitalized costs are included in the cost of the related asset and
charged to operations through depreciation over the asset's estimated useful
life. Interest capitalized amounted to $0, $181,000, and $92,000, in 2002, 2001,
and 2000, respectively.

In October 2001, the FASB issued Statement of Accounting Standard No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS 144").
SFAS 144 provides accounting guidance for financial accounting and reporting for
the impairment or disposal of long-lived assets. SFAS 144 supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of." It also supersedes the accounting and reporting provisions of
Accounting Principles Board Opinion No. 30, "Reporting the Results of
Operations-Reporting the Effects of Disposal of a Segment of a Business, and
Extraordinary, Unusual and Infrequently Occurring Events and Transactions"
related to the disposal of a segment of a business. The Company adopted SFAS 144
on January 1, 2002. The adoption of SFAS 144 has had no material affect on the
operations of the Company.

Real estate investments held for sale are carried at the lower of cost or
fair value less cost to sell. Depreciation and amortization are suspended during
the period held for sale.

Cash Equivalents

Cash and cash equivalents consist of cash in banks and short-term
investments with original maturities of less than ninety days.

Cash at Joint Ventures and Restricted Cash

Joint venture partnership agreements require, among other things, that the
Company maintain separate cash accounts for the operation of the joint venture
and distributions to the general and limited partners are strictly controlled.
These arrangements to date have not resulted in any significant liquidity
shortfalls at the Company or the partnership level, however; the Company or any
combination of the joint venture partnerships could suffer a liquidity crisis
while other members of the group have sufficient liquidity. Cash at joint
ventures amounted to $1.2 million at December 31, 2002.

39


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies (continued)

The terms of the Company's mortgage agreements require it to deposit
certain replacement and other reserves with its lenders. This restricted cash is
generally available for property-level capital requirements for which the
reserve was established. This cash is not, however, available to fund other
property-level or Company-level obligations. Restricted cash amounted to $1.7
million at December 31, 2002.

Deferred Charges

Deferred charges consist of leasing commissions incurred in leasing the
Company's properties. Such charges are amortized using the straight-line method
over the term of the related lease. In addition, deferred charges include costs
incurred in connection with securing long-term debt, including the costs of
entering into interest rate protection agreements. Such costs are amortized over
the term of the related agreement.

Derivative Financial Instruments

Effective January 1, 2001, the Company adopted Statement of Financial
Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS No. 133"), as amended. SFAS No. 133 establishes accounting
and reporting standards for derivative instruments. This accounting standard
requires the Company to measure derivative instruments at fair value and to
record them in the Consolidated Balance Sheet as an asset or liability,
depending on the Company's rights or obligations under the applicable derivative
contract. The Company's derivative investments are primarily cash flow hedges
that limit the base rate of variable rate debt. For cash flow hedges the
ineffective portion of a derivative's change in fair value is immediately
recognized in earnings, if applicable, and the effective portion of the fair
value difference of the derivative is reflected separately in shareholders'
equity as accumulated other comprehensive income (loss).

The Company utilizes derivative financial instruments to reduce exposure to
fluctuations in interest rates. The Company has established policies and
procedures for risk assessment and the approval, reporting and monitoring of
derivative financial instrument activities. The Company has not, and does not
plan to enter into derivative financial instruments for trading or speculative
purposes. Additionally, the Company has a policy of only entering into
derivative contracts with major financial institutions. The principal derivative
financial instruments used by the Company are interest rate swaps and interest
rate caps.

40


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies (continued)

Fair Value of Financial Instruments

Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" ("SFAS 107"), requires the Company to
disclose fair value information of all financial instruments, whether or not
recognized in the balance sheet, for which it is practicable to estimate fair
value. The Company's financial instruments, other than debt are generally
short-term in nature and contain minimal credit risk. These instruments consist
of cash and cash equivalents, rents and other receivables, and accounts payable.
The carrying amount of these assets and liabilities in the consolidated balance
sheets are assumed to be at fair value.

The carrying amounts of cash and cash equivalents approximates their fair
value. The fair value of mortgage loans payable is estimated utilizing
discounted cash flow analysis, using interest rates reflective of current market
conditions and the risk characteristics of the loans. The following sets forth a
comparison of the fair values and carrying values of the Company's financial
instruments subject to the provisions of statement of Financial Accounting
Standard No. 107 ("SFAS 107"):



2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
Carrying Value Fair Value Carrying Value Fair Value
- -----------------------------------------------------------------------------------------------------------------------------

Assets

Cash and Cash Equivalents $ 3,827,000 $ 3,827,000 $ 2,245,000 $ 2,245,000
Cash at Joint Ventures and Restricted
Cash $ 2,883,000 $ 2,883,000 $ 2,030,000 $ 2,030,000

Liabilities

Mortgage Loans Payable

The Point $19,864,000 $ 21,800,000 $17,900,000 $17,900,000
Academy Plaza 10,558,000 11,400,000 10,684,000 10,833,000
Washington Center 5,900,000 6,000,000 5,968,000 6,290,000
Port Richmond 11,439,000 12,100,000 $11,577,000 11,767,000
Red Lion 16,715,000 19,400,000 - -
Loyal Plaza 13,814,000 14,700,000 - -
Camp Hill 14,000,000 14,000,000 - -
L..A. Fitness 1,247,000 1,247,000
- -----------------------------------------------------------------------------------------------------------------------------
$93,537,000 $100,647,000 $46,129,000 $46,790,000
- -----------------------------------------------------------------------------------------------------------------------------
Loans payable 7,464,000 7,464,000 5,980,000 5,980,000


41


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies (continued)

Earnings Per Share

In accordance with Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS No. 128"), basic EPS is computed by dividing income
available to common shareowners by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock or resulted in the issuance of common
stock that then shared in the earnings of the entity. Since the Company reported
a net loss in 2002, 2001 and 2000, the diluted EPS is not presented.

Stock Option Plans and Warrants

In December 2002, the Financial Accounting Standards Board, ("FASB") issued
SFAS 148, "Accounting for Stock-Based Compensation-Transition and Disclosure"
("SFAS 148"). SFAS 148 amends SFAS 123 "Accounting for Stock-Based Compensation"
("SFAS 123") to provide alternative methods of transition for an entity that
voluntarily adopts the fair value recognition method of recording stock option
expense. SFAS 148 also amends the disclosure provisions of Statement 123 and APB
Opinion No. 28. "Interim Financial Reporting" to require disclosure in the
summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock options on reported net income and
earnings per share in annual and interim financial statements.

Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation" ("SFAS 123") establishes financial accounting and
reporting standards for stock-based employee compensation plans, including all
arrangements by which employees receive shares of stock or other equity
instruments of the employer or the employer incurs liabilities to employees in
amounts based on the price of the employer's stock. SFAS 123 defines a fair
value based method of accounting for an employee stock option or similar equity
instrument and encourages all entities to adopt that method of accounting for
all of their employee stock compensation plans. However, it also allows an
entity to continue to measure compensation cost using the intrinsic value based
method of accounting prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("Opinion No. 25"). The Company has
elected to continue using Opinion No. 25 and make pro forma disclosures of net
income and earnings per share as if the fair value method of accounting defined
in SFAS 123 had been applied.

The Company's Shareholders approved, in 1998, an incentive stock option
plan authorizing the issuance of option grants for up to 500,000 shares. During
2001, the Company granted to each of its five directors options to purchase
10,000 shares at $3.50 per share, the market value of the Company's common stock
on the date of the grant. The following table sets forth, on a pro-forma basis,
the net loss and net loss per share as if the fair value method of accounting
defined in SFAS 123 had been applied.

42


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies (continued)

Pro-forma Basic Net Loss Per Share
2002 2001 2000
------------------------------------------
Net loss as reported $ 468,000 $ 147,000 $ 13,000
Adjustment to amortize
the value of options granted 17,000 8,000 -
------------------------------------------
Pro-forma loss $ 485,000 $ 155,000 $ 13,000
==========================================

Outstanding shares 694,000 692,000 869,000
Pro-forma basic net loss per share $ (0.70) $ (0.22) $ (0.01)
==========================================

The Company accounts for non-employee stock-based awards in which goods or
services are the consideration received for the equity instruments issued in
accordance with SFAS 123 and EITF 96-18 Accounting for Equity Instruments That
are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling, Goods or Services, based on the fair value of the consideration
received or the fair value of the equity instruments issued, whichever is more
reliably measurable with charges taken into operations over the period goods and
services are received.

The Operating Partnership, in connection with the Red Lion acquisition,
issued to Arc Properties, Inc. ("ARC"), a limited partner in API Red Lion
Shopping Center Associates, Warrants to purchase 250,000 shares of the Operating
Partnership. The Warrants, with an exercise price of $4.50 per unit, are subject
to adjustment for, among other things, dividend payments, stock splits and
reorganizations. The Warrants expire in May 2012, and vest 83,333 units in May
2002, 83,333 units in January 2003 and 83,333 units in January 2004. Such
vesting is contingent upon ARC rendering certain services to the Company
throughout the vesting period.

The first 83,333 Warrants issued were capitalized as part of the Red Lion
transaction using the fair value method. The accounting treatment of the
subsequent issuance of Warrants will be determined by future services performed
by ARC. Approximately $173,000 was charged to operations during 2002. If ARC
continues to provide services to the Company pursuant to the terms of the
Warrant agreement, the remaining Warrants will be accounted for over the vesting
period.

Recent Accounting Pronouncements

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 significantly changes
the current practice in the accounting for, and disclosure of, guarantees.
Guarantees and indemnification agreements meeting the characteristics described
in FIN 45 are required to be initially recorded as a liability at fair value.
FIN 45 also requires a guarantor to make significant new disclosures for
virtually all guarantees even if the likelihood of the guarantor having to make
payment under the guarantee is remote. The disclosure requirements

43


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies (continued)

within FIN 45 are effective for financial statements for annual or interim
periods ending after December 15, 2002. The initial recognition and initial
measurement provisions are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002. The Company is currently evaluating
the effects of FIN 45 on the Company's results of operations or financial
condition.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"), which explains how to identify
variable interest entities ("VIE") and how to assess whether to consolidate such
entities. The provisions of this interpretation are immediately effective for
VIE's formed after January 31, 2003. For VIEs formed prior to January 31, 2003,
the provisions of this interpretation apply to the first fiscal year or interim
period beginning after June 15, 2003. Management has not yet determined whether
any of its consolidated entities represent variable interest entities pursuant
to such interpretation. Such determination could result in a change in the
Company's consolidation policy related to such entities.

Reclassifications

Certain reclassifications have been made to the prior year consolidated
financial statements to conform to the classifications used in the current year.

Intangible Lease Asset/Liability

On July 1, 2001 and January 1, 2002, the Company adopted Statement of
Financial Accounting Standards No. 141 "Business Combinations," and Statement of
Financial Accounting Standards No. 142 "Goodwill and Intangibles", respectively.
These standards govern business combinations and asset acquisitions, and the
accounting for acquired intangibles. As part of the acquisition of real estate
assets, the Company determines whether an intangible asset or liability related
to above or below market leases, was acquired as part of the acquisition of the
real estate. As a result of adopting the standards, amounts totaling $5,117,000
have been recorded as intangible lease liabilities, relating to above and below
market lease arrangements for properties acquired in 2002. The intangible assets
and liabilities are recorded at their estimated fair market values at the date
of acquisition, and are amortized over the remaining term of the respective
lease to rental income. Such amortization amounted to $146,000 during 2002. The
weighted average amortization period for the intangible lease liabilities was
approximately eight years.

44


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 2. Summary of Significant Accounting Policies (continued)

These intangibles will be amortized as follows:

Intangible Lease
For the year ending December 31: Liability
--------------------
2003 $ 719,000
2004 678,000
2005 642,000
2006 577,000
2007 591,000
Thereafter 1,764,000
--------------------
$ 4,971,000
====================

Note 3. Real Estate and Accumulated Depreciation

The following is a summary of the Company's real estate held for investment
at December 31:

2002 2001
----------------- ----------------
Land $ 24,741,000 $ 10,109,000
Buildings 89,514,000 39,506,000
Redevelopment and Improvements 9,379,000 8,007,000
----------------- ----------------
123,634,000 57,622,000
Accumulated depreciation (2,396,000) (674,000)
----------------- ----------------
Net real estate held for investment $ 121,238,000 $ 56,948,000
================= ================

During 2002, the Company completed the acquisition of four properties for
an aggregate purchase price of approximately $60 million. The L.A. Fitness
property is a ground up development project on which the Company expects to
spend an additional $5 million. Construction financing in that amount was
arranged before closing the acquisition. The Camp Hill Mall acquisition is a
redevelopment project on which the Company expects to spend an additional $17 to
$19 million. The Company is currently exploring joint venture or other financing
partnership arrangements for this redevelopment. No assurances, however, can be
given that such a joint venture or other financing can be arranged. The Company
also sold the Southpoint office property in Jacksonville, Florida for
$4,370,000. Impairment losses of $204,000 and $1,342,000 were recorded in 2000
and 2001, respectively, and a loss on sale of $49,000 was recognized in 2002.

45


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 3. Real Estate and Accumulated Depreciation (continued)

The following table summarizes, on an unaudited pro forma basis, the
combined results of operations of the Company for the years ended December 31,
2002 and 2001 as though the 2001 acquisitions of Washington Center Shops L.P.,
Port Richmond Associates, LLC, Academy Stores LP, and Greentree Road Inc., (all
purchased on October 6, 2001) and the 2002 acquisitions of the Red Lion Shopping
Center (purchased on June 1, 2002), Loyal Plaza (purchased on July 1, 2002), and
Camp Hill Mall (purchased on November 20,2002) were completed as of January 1,
2001.

2002 2001
---- ----

Proforma revenues $ 19,204,000 $ 19,796,000
Proforma net income (loss) $ (97,000) $ (53,000)
Proforma net income per common share $ (0.14) $ (0.08)
Common shares outstanding 694,000 692,000

The following table sets forth detail with respect to the properties owned
by the Company at December 31, 2002:



Gross Amount at Which Carried
Initial Cost to Company December 31, 2002
---------------------------- --------------------------------------------
Buildings Subsequent
& Cost Buildings &
Property Description Land Improvements Capitalized Land Improvements Total
- --------------------------------------------------------------------------------------------------------------------

The Point Shopping Center $ 2,700,000 $10,800,000 $9,101,000 $ 2,700,000 $19,901,000 $ 22,601,000
Harrisburg, PA

Red Lion Shopping Center 4,213,000 16,531,000 3,000 4,213,000 16,534,000 20,747,000
Philadelphia, PA

Camp Hill Mall 4,460,000 17,857,000 - 4,460,000 17,857,000 22,317,000
Camp Hill, PA

Loyal Plaza 3,852,000 15,620,000 - 3,852,000 15,620,000 19,472,000
Williamsport, PA

Port Richmond Village 2,942,000 11,769,000 137,000 2,942,000 11,906,000 14,848,000
Philadelphia, PA

Academy Plaza 2,406,000 9,623,000 77,000 2,406,000 9,700,000 12,106,000
Philadelphia, PA

Washington Center Shoppes (1) 2,061,000 7,314,000 61,000 2,061,000 7,375,000 9,436,000
Washington Township, NJ

LA Fitness Property 2,107,000 - - 2,107,000 - 2,107,000
Fort Washington, PA
- --------------------------------------------------------------------------------------------------------------------
Totals $24,741,000 $89,514,000 $9,379,000 $24,741,000 $98,893,000 $123,634,000
====================================================================================================================


Depreciation
Accumulated Amount of Date Date Life
Property Description Depreciation Encumbrance Built Acquired (years)
- ---------------------------------------------------------------------------------------------

The Point Shopping Center $1,004,000 $19,864,000 1972 Jul-00 10-40
Harrisburg, PA

Red Lion Shopping Center 244,000 16,715,000 1971 Jun-02 10-40
Philadelphia, PA

Camp Hill Mall 51,000 14,000,000 1958 Nov-02 10-40
Camp Hill, PA

Loyal Plaza 195,000 13,814,000 1969 Jul-02 10-40
Williamsport, PA

Port Richmond Village 370,000 11,439,000 1988 Oct-01 10-40
Philadelphia, PA

Academy Plaza 303,000 10,558,000 1965 Oct-01 10-40
Philadelphia, PA

Washington Center Shoppes (1) 229,000 5,900,000 1979 Oct-01 10-40
Washington Township, NJ

LA Fitness Property - 1,247,000 N/A Dec-02 N/A
Fort Washington, PA (2)
- ---------------------------------------------------------------
Totals $2,396,000 $93,537,000
===============================================================


(1) Includes adjacent unencumbered development parcel.

46


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 3. Real Estate and Accumulated Depreciation (continued)

The activity in real estate and accumulated depreciation for the years ending
December 31:



Cost 2002 2001 2000
--------------------- --------------------- ---------------------

Beginning of year real estate balance $ 57,622,000 $ 28,272,000 $ 19,186,000
Improvement additions 1,372,000 6,055,000 2,066,000
Acquisition of The Point property - - 13,500,000
Acquisition of Red Lion property 20,744,000 - -
Acquisition of Loyal Plaza property 19,472,000 - -
Acquisition of Camp Hill property 22,317,000 - -

Acquisition of LA Fitness development property 2,107,000 -
Acquisition of three supermarket-anchored shopping centers - 36,114,000 -
Reclass Southpoint to "real estate held for sale" - (8,111,000)
Impairment loss - - (2,715,000)
Sale of Broadbent - (4,708,000) -
Sale of Germantown - - (3,765,000)
--------------------- --------------------- ---------------------
End of Year $ 123,634,000 $ 57,622,000 $ 28,272,000
===================== ===================== =====================

Accumulated depreciation
Beginning of year accumulated balance $ 674,000 $ 4,177,000 $ 5,191,000
Additional depreciation expense this year 1,722,000 697,000 521,000
Reclass Southpoint to "real estate held for sale" - (2,702,000)
Impairment property - - (661,000)
Sale of Broadbent - (1,498,000) -
Sale of Germantown - - (874,000)
--------------------- --------------------- ---------------------
End of Year $ 2,396,000 $ 674,000 $ 4,177,000
===================== ===================== =====================


47


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 4. Rentals Under Operating Leases

Annual minimum future rentals due to be received under non-cancelable
operating leases in effect at December 31, 2002 are as follows:

Minimum Future Rental Income
---------------------------------------------------
2003 $ 12,595,000
2004 11,636,000
2005 10,574,000
2006 9,225,000
2007 8,143,000
Thereafter 51,123,000
-------------------
Total $ 103,296,000
===================

Total minimum future rentals do not include contingent rentals under
certain leases based upon tenant's sales volume or contributions to real estate
taxes and operating costs. Such contingent rentals amounted to $ 2,990,000,
$811,412, and $ 450,470 in 2002, 2001, and 2000, respectively.

Giant Food Stores accounted for 10% of rental income in 2002 and 2001. The
Giant leases are generally guaranteed by Ahold N.V., a Netherlands corporation
and Giant's ultimate parent company. Recent published reports indicate there
have been accounting irregularities at certain of Ahold's U.S. and foreign
operations, which do not necessarily include the grocery stores, or the Giant
supermarket affiliates. However, a reduction in Ahold's debt ratings may
adversely affect the resulting value of the Company's properties having such
tenancies.

Note 5. Commitments and Contingencies

The Company is a party to several legal actions, which arose in the normal
course of business. Management does not expect there to be adverse consequences
from these actions that would be material to the Company's financial position or
results of operations.

Under various federal, state, and local laws, ordinances, and regulations,
an owner or operator of real estate may be required to investigate and clean up
hazardous or toxic substances or petroleum product releases at such property and
may be held liable to a governmental entity or to third parties for property
damage and for investigation and cleanup costs incurred by such parties in
connection with contamination. The cost of investigation, remediation or removal
of such substances may be substantial, and the presence of such substances, or
the failure to properly remediate such substances, may adversely affect the
owner's ability to sell or rent such property or to borrow using such property
as collateral. In connection with the ownership, operation and management of
real properties, the Company is potentially liable for removal or remediation
costs, as well as certain other related costs, including governmental fines and
injuries to persons and property.

48


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 5. Commitments and Contingencies (continued)

With the exception of the Loyal Plaza environmental matter discussed below,
the Company believes that environmental studies made with respect to
substantially all of its properties has not revealed environmental liabilities
that would have a material adverse affect on its business, results of operations
and liquidity. However, no assurances can be given that existing environmental
studies with respect to any of the properties reveal all environmental
liabilities, that any prior owner of a property did not create a material
environmental condition not known to the Company, or that a material
environmental condition does not otherwise exist at any one or more of its
properties. If a material environmental condition does in fact exist, it could
have an adverse impact upon the Company's financial condition, results of
operations and liquidity.

There are certain environmental contamination matters that affect the Loyal
Plaza property. Those matters have been extensively reviewed by EMG of
Baltimore, Maryland for Lehman Brothers Bank, FSB as lenders on the property;
and in a Phase I report dated January 31, 2002, prepared by Brinkerhoff
Environmental Services, Inc., retained by the Company. Additional reports have
been prepared for the sellers by Civil and Environmental Consultants, Inc. of
Pittsburgh, Pennsylvania.

The two principal matters involved are (i) certain petroleum-impacted soil
at the newly-built, free-standing Eckerd drug store building on an outparcel of
the property; and (ii) a concentration of dry cleaning solvents,
tetrachloroethene (PCE) and trichloroethene (TCE), at levels in excess of
amounts permitted by the Pennsylvania Department of Environmental Protection
(PADEP).

Under loan agreements between the seller and its lender, the sellers had
maintained an escrow deposit of $450,000 for clean up and testing of
environmental contamination at the site. Pursuant to the purchase agreements for
the purchase of the property by Loyal Plaza Associates L.P., the seller will
remain liable for all costs up to and including a satisfactory "Release of
Liability" letter issued by PADEP with respect to all such contamination at the
property. Pursuant to the purchase agreement, the sellers increased the
environmental escrow deposit to $950,000. Further, in the event that the escrows
are insufficient to cover all required testing and remediation, the sellers have
undertaken to expend any and all monies required to complete such testing and
remediation including monitoring, etc. without limits as to time. The Company
has obtained opinion of counsel to the effect that an anticipated "Release of
Liability" letter from the PADEP will operate to relieve it of any further
liability for remediation of the site under Pennsylvania environmental statutes,
or for any contamination identified in reports submitted to and approved by
PADEP and shall not be subject to citizens' suits or other contribution actions.

49


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 6. Mortgage Loans, Other Loans Payable, and Line of Credit

Mortgage loans outstanding consist of the following:



December 31,
------------------------------------
Original Mortgage Effective
Property Description Amount interest rate Maturity 2002 2001
- --------------------------- ----------------- ----------------- ----------------- ----------------- -----------------

The Point Shopping Center $ 20,000,000 7.625% 05/29/2012 $ 19,864,000 $17,900,000
Harrisburg, PA

Red Lion Shopping Center 16,800,000 8.860% 02/01/2010 16,715,000 N/A
Philadelphia, PA

Camp Hill Mall (1) 14,000,000 4.740% 11/22/2004 14,000,000 N/A
Camp Hill, PA

Loyal Plaza 13,877,000 7.180% 07/11/2011 13,814,000 N/A
Williamsport, PA

Port Richmond Village 12,000,000 7.174% 04/10/2007 11,439,000 11,577,000
Philadelphia, PA

Academy Plaza 11,080,000 7.275% 03/10/2013 10,558,000 10,685,000
Philadelphia, PA

Washington Center Shoppes 6,192,000 7.530% 11/11/2027 5,900,000 5,968,000
Washington Township, NJ

LA Fitness facility 5,000,000 LIBOR + 12/31/2007 1,247,000 N/A
Fort Washington, PA (2) .275 points
- -------------------------------------------------------------------------------------------------------------------------------
Totals $ 98,949,000 $ 93,537,000 $46,130,000


(1) The interest rate on the entire loan amount is fixed via an interest
rate swap at 4.74% through November 2003 and $7 million of the loan is
fixed at that same rate through maturity. The remaining $7 million
portion of the loan will float at the 30-day LIBOR rate plus 195 basis
points from November 2003 through maturity. The Company has agreed in
connection with this loan to maintain a minimum net worth of
$13,000,000 (including minority and limited partner interests) and
consolidated liquid assets of at least $1,000,000.
(2) The Company obtained a $5 million LIBOR based construction loan in
connection with the LA Fitness development project. The loan is due on
December 31, 2007, has a two-year extension option, and carries
interest at LIBOR plus 275 basis points.

The net book value of real estate pledged as collateral for mortgage loans was
approximately $121 million.

50


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 6. Mortgage Loans, Other Loans Payable, and Line of Credit (continued)

Line of credit, and loans and other notes payable are as follows:

During November 2002, the Company entered into a financing agreement with
SWH Funding Corp. ("SWH") for a $6 million loan. The term of the SWH loan is
through November 30, 2005 and the loan carries interest at the rate of 12.5%
(14% from December 1, 2004 through maturity). The loan provides for monthly
principal payments of $50,000 commencing January 1, 2003, a $2 million payment
(the first prepayment) on April 1, 2003, continued payments of $50,000 on the
fifth through 12th months and $60,000 from the 13th through 17th months. A $3
million (the second prepayment) is due on the 18th month, and monthly principal
payments of $60,000 continue from the 19th month until the loan is fully
amortized. The agreement provides for an alternative amortization schedule
which the Company is considering adopting. Under the alternative amortization
schedule the first prepayment is not required but the monthly principal payments
are increased to $150,000 per month from April 1, 2003 through and including the
12th month and $200,000 commencing in the 13th month through the 17th month. If
the second prepayment (of $3 million) is not made on the 18th month, the
Borrower will be required to pay $250,000 per month commencing in the 19th month
until the loan is fully amortized.

The Company's financial liquidity is provided by $3.8 million in cash and
cash equivalents at December 31, 2002 and by the unused balance of its $1
million bank line of credit. In March 2003 the Company entered into a new Line
of credit that will contribute to its liquidity during 2003 (see below). The
Company also believes that it has sufficient flexibility to fund the required
payments in connection with the SWH financing, property level capital
expenditures, tenant improvements, leasing costs and mortgage and other
scheduled principal payments, including the $1.4 million (based on $150,000
alternative amortization schedule) due with respect to the SWH financing in
2003. The Company's ability, however, to meet these obligations is dependent in
large part on its ability to attract a joint venture partner or suitable
financing for the Camp Hill redevelopment project. Based on preliminary
discussions with several potential partners, the Company believes it will be
successful in arranging a transaction that will allow it to withdraw a
significant portion of its equity investment in Camp Hill while retaining a
substantial portion of the upside potential in the redevelopment. However, no
assurances can be given that such an arrangement will ultimately be finalized.

In addition to the interest and principal payments, SWH received a funding
fee equal to 5% of the loan amount ($300,000) at closing and will receive an
exit fee of $120,000 if the loan is paid on or prior to February 28, 2004. If
the loan is repaid after February 28, 2004, SWH will receive the sum of $120,000
plus the product of (i) $30,000 and (ii) the number of months between February
2004 and the date the loan is paid in full. The loan may be repaid at any time
after six months in whole or in part without penalty. In the event of default,
in addition to a default interest rate of 17.5%, Borrower will also be required
to pay a late charge equal to 5% of the amount overdue.

The security for repayment of the SWH financing is the Company's equity
interests in Port Richmond Village, Academy Plaza, Washington Center Shoppes,
and the Camp Hill Mall.

The December 31, 2001 SWH loan balance of $5,980,000 was repaid during
2002.

In connection with the acquisition of the Red Lion partnership interest
from a related party, the Company agreed to pay $888,000 in three equal annual
installments of $296,000 plus interest at 7.5%.

In March 2002, the Company entered into a one-year $1 million unsecured
line of credit facility with North Fork Bank, Melville, New York. The line of
credit bore interest at the greater of 6% or the bank's prime rate plus 1%. The
line of credit was repaid on January 26, 2003. The Company entered into a new
line of credit facility effective as of March 16, 2003 for a 1-year period at
the same rates as the previous facility and with a $2 million limit, provided,
however, that the additional $1 million will be available only when the SWH
financing has been repaid.

51


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 6. Mortgage Loans, Other Loans Payable, and Line of Credit (continued)

Scheduled principal payments of debt outstanding at December 31, 2002 are as
follows:

The combined aggregate future principal payments of mortgages, notes &
loans at December 31, 2002 are as follows:



Line of Credit and
Loans and other Notes
Year Mortgages Payable Payable Total
- ---------------- ---------------------- ---------------------- --------------------

2003 $ 933,000 $ 2,273,000 $ 3,206,000
2004 15,017,000 2,996,000 18,013,000
2005 1,106,000 2,195,000 3,301,000
2006 1,193,000 - 1,193,000
2007 2,448,000 - 2,448,000
Thereafter 72,840,000 - 72,840,000
---------------------- ---------------------- --------------------
$ 93,537,000 $ 7,464,000 $ 101,001,000
====================== ====================== ====================


Note 7. Interest Rate Hedges

During 2002, the Company completed one interest rate swap transaction to
hedge the Company's exposure to changes in interest rates with respect to $14
million of LIBOR based variable rate debt. The swap agreement provides for a
fixed all-in rate of 4.74% (includes a credit spread of 1.95%). The swap
agreement extends through November 19, 2003, on $7 million of notional principal
and through November 19, 2004 on the remaining $7 million.

As of December 31, 2002, unrealized losses of $224,000 representing the
change in fair value of the aforementioned swaps were reflected 29% or
approximately $65,000 in accumulated other comprehensive loss, a component of
shareholder's equity, and 71% or approximately $159,000 is reflected in the
limited partner's interest.

The Company's interest rate hedges are designated as cash flow hedges and
hedge the future cash outflows on debt. Interest rate swaps that convert
variable payments to fixed payments, such as those held by the Company, as well
as interest rate caps, floors, collars, and forwards are cash flow hedges. The
unrealized gains/losses in the fair value of these hedges are reported on the
balance sheet with a corresponding adjustment to either accumulated other
comprehensive income or earnings. For cash flow hedges, the ineffective portion
of a derivative's change in fair value is immediately recognized in earnings.

52


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 7. Interest Rate Hedges (continued)

The following table summarizes the notional value and fair value of the
Company's derivative financial instrument, interest rate swap, as of December
31, 2002 :



Notational Interest Fair
Hedge Type Value Rate Term Value
----- ---- ----- ---- ---- -----

Interest Rate Swap Cash Flow Hedge $ 14,000,000 4.74% 11/19/2002-11/19/2003 Combined Value
Interest Rate Swap Cash Flow Hedge $ 7,000,000 4.74% 11/19/2003-11/19/2004 $ 224,000


Note 8. Income Taxes

The Company believes that it has operated to qualify as a REIT under the
Internal Revenue Code. Qualification as a REIT involves the application of
technical and complex Code provisions for which there are only limited judicial
and administrative interpretations. The determination of various factual matters
and circumstances not entirely within the Company's control may affect its
ability to qualify as a REIT. If the Company fails to qualify as a REIT, it will
be subject to federal, state and local income tax (including any applicable
alternative minimum tax) on its taxable income at regular corporate rates and
would not be allowed a deduction in computing its taxable income for amounts
distributed to stockholders. In addition, unless entitled to relief under
certain statutory provisions, the Company will be disqualified from treatment as
a REIT for the four taxable years following the year during which qualification
is lost.

The issuance of common stock to any shareholder who directly or
indirectly, together with the four other largest shareholders of the Company,
were to own, directly or indirectly, more than 50% of the outstanding shares the
Company would fail to meet the "five or fewer" test (five or fewer individual
shareholders owning more than 50%) for continued REIT status. The loss of REIT
status, while creating no immediate income taxes for the Company or its
shareholders, would mean, among other things, that the Company would be taxed as
if it were a C corporation on future net taxable income and capital gains (See
Note 9). Additionally, the Company would generally be disqualified from federal
income taxation as a REIT for the four taxable years following disqualification.
The Company does not presently expect to have taxable income for the year ended
December 31, 2003, and as such does not contemplate paying dividends during
2003.

Note 9. Related Party Transactions

The Company has no employees and accordingly relies on CBRA and its
affiliates to manage the affairs of the Company. The Company is thus referred to
as an "advised" REIT. Pursuant to the terms of an Administrative and Advisory
Agreement (the "Advisory Agreement"), CBRA provides the Company with management,
acquisition, leasing, advisory services, accounting systems, professional and
support personnel and office facilities. Leo S. Ullman, the Company's Chairman
and Chief Executive

53


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 9. Related Party Transactions (continued)

Officer, is also the principal stockholder of CBRA. Certain of the Company's
other officers are also officers and employees of CBRA.

The Advisory Agreement may be terminated (i) for cause upon not less than
sixty days' prior written notice, and (ii) by vote of at least 75% of the
independent Directors at the end of the third or fourth year of its five-year
term in the event gross assets fail to increase by 15% per annum.

Pursuant to the Advisory Agreement, effective as of January 1, 2002, CBRA
will earn a disposition or acquisition fee, as applicable, equal to 1% of the
sale/purchase price; no other fees will be payable in connection with such
transactions. All accrued acquisition fees are included in accounts payable at
December 31, 2002.

The following is a schedule of acquisition and disposition fees paid,
accrued, or deferred by the Company to CBRA:

Property Deferred Paid Accrued Total
2002 Transactions ---------- --------- ---------- ----------
- -----------------
Southpoint $ - $ 47,000 $ - $ 47,000
Red Lion - - 44,000 44,000
Loyal Plaza - - 183,000 183,000
Camp Hill - - 172,000 172,000
LA Fitness - 60,000 - 60,000
---------- --------- ---------- ----------
Total - $ 107,000 399,000 506,000
========== ========= ========== ==========
2001 Transactions (1)
- -----------------
Broadbent $ 106,000 $ 53,000 $ - $ 159,000
Corporate Center 37,000 19,000 - 56,000
The three supermarket-
anchored shopping centers - 348,000 - 348,000
---------- --------- ---------- ----------
Totals $ 143,000 $ 420,000 $ - $ 563,000
========== ========= ========== ==========
2000 Transaction
- ----------------
Germantown $ 53,000 $ 23,000 $ - $ 76,000
========== ========= ========== ==========

(1) During 2001 the Advisory Agreement was modified and CBRA agreed to defer
certain fees and to ultimately waive such fees if the Agreement is not
terminated before December 31, 2004.

54


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 9. Related Party Transactions (continued)

The following is a schedule of management, administrative, advisory, legal,
leasing and loan placement fees paid to CBRA or its affiliates.

Years ended December 31,
2002 2001 2000
--------- --------- ---------
Management Fees (1) $ 536,000 $ 103,000 $ 70,000
Construction Management (2) $ 20,000 $ 180,000 $ 28,000
Leasing Fees (3) $ 135,000 $ 135,000 $ 44,000
Administrative and Advisory (4) $ 360,000 $ 163,000 $ 98,000
Legal (5) $ 210,000 $ 182,000 $ 33,000
Loan Placement Fees (6) $ 100,000 $ 100,000 $ -

(1) Management fees are calculated at 3%-4% of prospective gross revenues.
(2) Construction management fees are calculated at 5% of construction costs.
(3) Leasing fees are calculated at 4%-4.5% of a new tenants' base rent.
(4) Administrative and advisory fees are equal to 1/2 of 3/4 of 1% of
the estimated current value of real estate assets of the Company
plus 1/12 of 1/4 of 1% of the estimated current value of all other
assets of the Company.
(5) Legal fees are paid to an affiliate of CBRA for the services provided by
Stuart H. Widowski, Esq., in-house counsel.
(6) Loan placement fees are calculated at 1% of the loan cost up to a maximum
of $100,000.

During May 2002, the Company completed the acquisition, from an affiliate
of Cedar Bay Company ("CBC") the sole Operating Partnership limited unit holder,
of a 20% sole general partnership interest in the Red Lion. The Company's
general partnership interest cost $1.2 million, payable $296,000 at closing with
the balance payable in three equal annual installments plus interest at 7.5%.
The investment was based on a property value of $23 million including a lease
for certain vacant space from the seller, subject to a $16.8 million, 8.86%
first mortgage loan due February 2010. The CBC affiliate retained an 11% limited
partnership interest in Red Lion. The Company also purchased in 2000 a 50%
general partnership interest in The Point from another affiliate of CBC who
retains a 50% limited partnership interest.

Homburg Invest USA Inc. ("Homburg USA"), a wholly-owned U.S. subsidiary of
Homburg Invest Inc. (approximately 62% owned by Mr. Richard Homburg), a real
estate company listed on the Toronto (Canada) Stock Exchange, and which owns
21.6% of the Company's common shares outstanding, purchased on December 24, 2002
for $3 million, 3,300 convertible preferred Operating Partnership Units at
$909.09 with a liquidation value of $1,000 each and a preferred distribution
rate of 9%. The Board subsequently elected Mr. Homburg a Director of the Company
to serve alongside Mr. Frank Matheson who is also a Director of the Company and
an officer of Homburg Invest Inc.

55


CEDAR INCOME FUND, LTD.
Notes to Consolidated Financial Statements
December 31, 2002

Note 9. Related Party Transactions (continued)

The issuance of common stock to Homburg USA may result in the
disqualification of the Company's status as a REIT in 2003. If Mr. Richard
Homburg, directly or indirectly, together with the four other largest
shareholders of the Company, were to own, directly or indirectly, more than 50%
of the value of the Company, it would fail to meet the "five or fewer" test
(five or fewer individual shareholders owning more than 50%) for continued REIT
status. The loss of REIT status, while creating no immediate income taxes for
the Company or its shareholders, would mean, among other things, that the
Company would be taxed as if it were a "C" corporation on future net taxable
income and capital gains. Additionally, the Company would generally be
disqualified for federal income tax purposes as a REIT for the four taxable
years following disqualification. The Company does not presently expect to have
taxable income for the year ended December 31, 2003, and as such does not
contemplate paying dividends during 2003.

Note 10. Selected Quarterly Financial Data



Quarter Ended Year Ended
- --------------------------------------------- ----------------------------------------------------------------------------
Year 3/31 6/30 9/30 12/31 12/31
- --------------------------------------------- ------------ ------------ ------------ ------------ ------------

2002
Revenue $ 2,510,000 $ 2,656,000 $ 3,614,000 $ 4,184,000 $ 12,964,000
Net (loss) (53,000) (226,000) (60,000) (129,000) (468,000)
Basic and diluted net loss per share $ (0.08) $ (0.33) $ (0.09) $ (0.17) $ (0.67)
- --------------------------------------------- ------------ ------------ ------------ ------------ ------------
2001
Revenue $ 983,000 $ 966,000 $ 861,000 $ 2,289,000 $ 5,099,000
Net (loss) income (9,000) 336,000 (27,000) (448,000) (147,000)
Basic and diluted net (loss) income per share $ (0.01) $ 0.49 $ (0.04) $ (0.65) $ (0.21)
- --------------------------------------------- ------------ ------------ ------------ ------------ ------------
2000
Revenue $ 696,000 $ 601,000 $ 966,000 $ 953,000 $ 3,216,000
Net income (loss) 64,000 (56,000) (28,000) 7,000 (13,000)
Basic and diluted net income (loss) per share $ 0.07 $ (0.06) $ (0.03) $ 0.01 $ (0.01)
- --------------------------------------------- ------------ ------------ ------------ ------------ ------------


Note 11. Subsequent Events

In February 2003, the Company completed the acquisition of a 30% general
partnership interest in three Giant supermarket-anchored shopping centers with
an aggregate gross leaseable area of approximately 190,000 sq. ft., in the
Pennsylvania area.

The centers cost approximately $19 million. The Company's general
partnership interest cost $1.4 million and the limited partner, who is
affiliated with the limited partner in the Loyal Plaza partnership, invested
$3,740,000. The balance of the purchase price was financed by three separate
mortgage loans aggregating approximately $15.9 million. One loan is for ten
years with a fixed rate of 5.64% and the Company entered into interest rate
swaps for the entire amounts and for the seven year terms of the other two of
the loans, which results in a fixed rate of 6.43%. The blended interest rate for
all three loans amounts to 6.09%.

56


CEDAR INCOME FUND, LTD. Notes to Consolidated
Financial Statements
December 31, 2002

Note 11. Subsequent Events (continued)

The Company entered into a new line of credit facility effective as of
March 16, 2003 for a one year period with a $2 million limit, provided, however,
that $1 million will be available only when the SWH financing has been repaid.
The line bares interest on the outstanding balance at the greater of 6% or the
bank's prime rate plus 1%.

Item 9. Changes in, and Disagreements with Accountants on, Accounting and
Financial Disclosure

None.

57


Part III.

Item 10. Directors and Executive Officers of the Registrant

LEO S. ULLMAN, age 63, President and Chairman of the Board of Directors of
the Company has been involved in real estate property and asset management for
approximately twenty-five years. He has been Chairman and President of SKR
Management Corp. and Chairman of Brentway Management LLC from 1994 through the
current date, and President of Cedar Bay Realty Advisors, Inc. since the latter
company's formation in January 1998. He is also President and sole director of a
number of companies affiliated with CBC. Mr. Ullman was first elected as
Chairman of the Company in April 1998 and served until November 1999. He was
re-elected in December 2000. Mr. Ullman has been President of the Company from
April 1998 to date. He has been a member of the New York Bar since 1966 and in
private legal practice until 1998. From 1984 until 1993, he was a partner in the
New York law firm, Reid & Priest, and served as initial director of its real
estate group. From 1993 until the end of 1998, in addition to his real estate
management affiliations, Mr. Ullman was "of counsel" to the New York office of
the law firm Schnader Harrison Segal & Lewis, LLP.

BRENDA J. WALKER, age 50, has been Vice President and a Director of the
Company since 1998 and Treasurer of the Company from April 1998 until November
1999. She has been President of Brentway Management LLC and Vice President of
SKR Management Corp. from 1994 through the current date; Vice President of API
Management Services Corp. and API Asset Management, Inc. from 1992 through 1995,
and Vice President of CBRA from 1998 to date. Ms. Walker has been involved in
real estate property and asset management for more than twenty years.

THOMAS J. O'KEEFFE, age 58, joined the Company during November 2002 as
Chief Financial Officer. Prior to joining the Company, Mr. O'Keeffe served as a
financial consultant from 1997 to 2002, as Chief Financial Officer of Bradley
Real Estate, Inc., a shopping center REIT, from 1985 to 1996, as Chief Financial
Officer of R. M. Bradley & Co., Inc., a full service real estate management
company from 1981 to 1997, and as audit manager for Deloitte & Touche from 1975
to 1981. Mr. O'Keeffe, a Certified Public Accountant, is also a Director of the
John Fitzgerald Kennedy Library Foundation and serves on its Executive, Audit,
and Investment Committees.

JAMES J. BURNS, age 63, a Director of the Company since 2001, has been
Chief Financial Officer and Senior Vice President, of Wellsford Real Properties,
Inc. since December 2000. He joined Wellsford in October 1999 as Chief
Accounting Officer upon his retirement from Ernst & Young in September 1999. At
Ernst & Young, Mr. Burns was a senior audit partner in the E&Y Kenneth Leventhal
Real Estate Group for 22 years. Mr. Burns also serves as a director of One
Liberty Properties, Inc., a real estate investment trust. Mr. Burns is a
Certified Public Accountant and a member of the American Institute of Certified
Public Accountants.

JOHANNES A.M.H. DER KINDEREN, age 63, a Director of the Company since 1998
was the Director of Investments from 1984 through 1994 for Rabobank Pension
Fund, and has been or is Chairman and/or a member of the Board of the following
entities: Noord Amerika Real Estate B.V. (1995-present); Noord Amerika Vast Goed
B.V. (1985-present); Mass Mutual Pierson (M.M.P.) (1988-1997); Warner Building
Corporation (1996 to date). GIM Vastgoed (1998 to date); Fellion Investments
B.V. (2001 to date); and N.V. Maatschappij voor Trustzaken Ameuro (from 2002 to
date).

58


Item 10. Directors and Executive Officers of the Registrant (continued)

RICHARD HOMBURG, age 53, a Director of the Company and its Chairman from
November 1999 to August 2000, and a Director again since December 18, 2002, was
born and educated in the Netherlands. In 1991, Mr. Homburg was the former
President and CEO of Uni-Invest N.V., a publicly listed Dutch real estate fund.
In 2002, an investment group purchased 100% of the shares of Uni-Invest N.V.,
taking it private, at which time it was one of the largest real estate funds in
the Netherlands with assets of approximately $2.5 billion CDN. Mr. Homburg is
Chairman and CEO of Homburg Invest, Inc. and President of Homburg Invest USA,
Inc. In addition to his varied business interests, Mr. Homburg has served on
many boards including Past President and Director of the Investment Property
Owners of Nova Scotia, Evangeline Trust, World Trade Center in Eindhoven, the
Netherlands, as well as sitting on the Board of Directors or Advisory Boards of
other large charitable organizations.

FRANK W. MATHESON, age 58, a Director of the Company since April 2002, has
been involved in the real estate industry for the past 14 years, serving as
President and CEO of Homburg Canada Incorporated, an international real estate
company with holdings in residential, commercial, industrial and retail
properties. Before that time, he was active in the general insurance industry.
An active community member, Mr. Matheson is past Chairman of the Halifax School
Board and Halifax Forum Commission. He is presently Vice Chairman and Director
of the Halifax International Airport. He has also served on other community and
corporate boards. Mr. Matheson is an affiliate of Homburg Invest Inc.

EVERETT B. MILLER, III, age 57, a Director of the Company since 1998, is
currently a member of the Board of Directors of Commonfund Realty, Inc. a
registered investment advisor. In March 2003, Mr. Miller was appointed to the
Real Estate Advisory Committee of the New York State Common Retirement Fund.
Prior to his retirement from Commonfund Realty and his appointment to the Board
in May, 2002, Mr. Miller served as the Chief Operating Officer of that company.
Before that, starting in March 1997, Mr. Miller was the Senior Vice President
and Chief Executive Officer of two privately held REITs, Endowment Realty
Investors and Endowment Realty Investors II sponsored by Commonfund, Wilton,
Connecticut. From January 1995 through March 1997, Mr. Miller was the Principal
Investment Officer for Real Estate and Alternative Investment at the Office of
the Treasurer of the State of Connecticut. Before that, Mr. Miller was employed
for eighteen years at affiliates of the Travelers Insurance Company, at which
his most recent position was Senior Vice President of the Travelers Realty
Investment Company.

Item 11. Compensation of Directors and Executives

The officers and directors of the Company who are affiliated with CBRA do
not receive any direct remuneration for their services to the Company other than
reimbursement of travel and other out of pocket expenses incurred in connection
with their duties. Mr. Ullman and Ms. Walker and Mr. O'Keeffe and certain of the
Company's other officers are also officers and employees of CBRA and accordingly
receive remuneration from CBRA. During 2002, directors not affiliated with CBRA,
Mr. Miller, Mr. der Kinderen and Mr. Burns, each received an annual fee of
$10,000 plus $1,000 for each Board meeting and $250 for each Audit Committee
meeting attended. Effective January 1, 2003, independent directors' fees shall
be $4,000 per quarter; meeting attendance fees shall be $1,000 per regular Board
meeting and Audit Committee meeting.

59


Item 11. Compensation of Directors and Executives (continued)

The Company established a stock option plan (the "Plan") for the purpose of
attracting and retaining executive officers, directors and other key employees.
Five hundred thousand (500,000) of the Company's authorized shares of common
stock have been reserved for issuance under the Plan. The Plan is administered
by a committee of the Board of Directors, which committee will, among other
things, select the number of shares subject to each grant, the vesting period
for each grant and the exercise price (subject to applicable regulations with
respect to incentive stock options) for the options.

Item 12. Security Ownership of Certain Beneficial Owners and Management

Security Ownership of Certain Beneficial Owners

The following table sets forth information with respect to each person and
group (as that term is used in Section 13(d)(3) of the Securities Exchange Act
of 1934) known by the Company to be the beneficial owner of more than 5% of the
outstanding Shares of the Company as of March 20, 2003. Each such owner has sole
voting and investment powers with respect to the shares owned by such person.

Number of Shares
Name and Address Beneficially Owned Percent of Class
- ---------------- ------------------ ----------------

Cedar Bay Company (1) 1,891,937 66.9%
c/o SKR Management Corp.
44 South Bayles Avenue, #304
Port Washington, NY 11050

Homburg Invest USA Inc. (2) 288,000 33.8%
11 Akerley Boulevard, #200
Halifax, Nova Scotia
Canada B3B 1V7

(1) Consists of 189,937 shares of common stock and 1,701,000 Units
convertible into shares of common stock owned by Cedar Bay Company.
Cedar Bay Company is a New York partnership owned 55% by Duncomb
Corp., 40% by Lindsay Management Corp. and 5% by Hicks Corp. Mr.
Ullman is an executive officer and director, but not an owner, of each
of these entities.
(2) Does not include any common stock to be issued to Homburg Invest USA
Inc. upon approval by stockholders. Homburg Invest USA Inc., which is
a wholly-owned subsidiary of Homburg Invest Inc., is owned 49.29% by
Uni-Invest Holdings N.V., a company controlled by Richard Homburg and
14.48% by Homburg Euro Inc., a company controlled by Mr. Homburg for
the benefit of a family trust.

60


Item 12. Security Ownership of Certain Beneficial Owners and Management
(continued)

Security Ownership of Management

The following table sets forth the number of shares of common stock
beneficially owned as of March 20, 2003, by each director and officer and by all
directors and officers as a group (8 persons).

Amount and Nature of Percent of
Name Beneficial Ownership Class
- ---- -------------------- -----------

Leo S. Ullman 1,898,070 (1) (2) (3) 69.1%

J.A.M.H. der Kinderen 3,433 (2) *

Everett B. Miller III 3,433 (2) *

Brenda J. Walker 3,833 (2) *

James J. Burns 3,333 (2) *

Richard Homburg 288,000 (4) 0%

Frank Matheson 288,000 (4) 0%

Directors and Officers as a group
(8 persons) 2,203,935 (2) 85.6%

* less than 1%

(1) Includes 189,737 shares of common stock and 1,701,000 Units convertible into
shares of common stock owned by Cedar Bay Company.
(2) Includes options to purchase shares of common stock which are exercisable
within 60 days.
(3) Mr. Ullman may be deemed to be the beneficial owner of all the shares of
common stock and Units owned by Cedar Bay Company. Mr. Ullman disclaims
beneficial ownership of such securities.
(4) Messrs. Homburg and Matheson, respectively, may be deemed to be the
beneficial owners of all the shares of common stock and Units owned by Homburg
Invest Inc. and Homburg Invest USA Inc. They disclaim beneficial ownership of
such securities.

The following table sets forth information regarding our existing compensation
plans and individual compensation arrangements pursuant to which our equity
securities are authorized for issuance to employees or non-employees (such as
directors, consultants, advisors, vendors, customers, suppliers or lenders) in
exchange for consideration in the form of goods or services:



- ------------------------------------------------------------------------------------------------
A B C
- ------------------------------------------------------------------------------------------------

Number of Weighted-average Number of securities
securities to be of exercise remaining available for
issued upon price of futures issuance under
exercise of outstanding equity compensation
outstanding options, plans (excluding
options, warrants warrants and securities in column A)
Plan category and rights rights

Equity compensation plans
approved by security holders 50,000 $ 3.50 450,000

Equity compensation plans
not approved by security
holders 166,666 4.50 83,333

Total 216,666 $ 4.00 533,333
- ------------------------------------------------------------------------------------------------


61


Item 12. Security Ownership of Certain Beneficial Owners and Management
(continued)

Section 16(a) Beneficial Reporting Compliance

The Company believes that during 2002 all of its officers, directors and
holders of more than 10% of its common stock complied with all filing
requirements under Section 16(a) of the Securities Exchange Act of 1934, except
that Mr. Homburg was late in filing his Form 3 relating to his election as a
director and Homburg Invest USA Inc. has failed to file Form 3.

Item 13. Certain Relationships and Related Party Transactions

The Company has no employees and accordingly relies on CBRA and its
affiliates to manage the affairs of the Company. The Company is thus referred to
as an "advised" REIT. Pursuant to the terms of an Administrative and Advisory
Agreement, CBRA provides the Company with management, acquisition, leasing,
advisory services, accounting systems, professional and support personnel and
office facilities. Leo S. Ullman, the Company's chairman and Chief Executive
Officer, is also the principal stockholder of CBRA. Ms. Brenda Walker (Vice
President, Treasurer and Director), Mr. Thomas J O'Keeffe (Chief Financial
Officer) and Stuart H. Widowski (Secretary) are also officers and employees of
CBRA.

The Advisory Agreement may be terminated (i) for cause upon not less than
sixty days' prior written notice, and (ii) by vote of at least 75% of the
independent Directors at the end of the third or fourth year of its five-year
term in the event gross assets fail to increase by 15% per annum.

Pursuant to the Advisory Agreement, effective as of January 1, 2002, CBRA
will earn a disposition or acquisition fee, as applicable, equal to 1% of the
sale/purchase price; no other fees will be payable in connection with such
transactions. All accrued acquisition fees are included in accounts payable at
December 31, 2002.

The following is a schedule of acquisition and disposition fees paid,
accrued, or deferred by the Company to CBRA:



Property Deferred Paid Accrued Total
- ----------------------- --------- ----------- --------- ------------

2002 Transaction
- ----------------
Southpoint $ - $ 47,000 $ - $ 47,000
Red Lion - - 44,000 44,000
Loyal Plaza - - 183,000 183,000
Camp Hill - - 172,000 172,000
LA Fitness - 60,000 - 60,000
--------- ----------- --------- ------------
Total $ - $ 107,000 $ 399,000 $ 506,000
========= =========== ========= ============
2001 Transactions (1)
- ----------------------
Broadbent $ 106,000 $ 53,000 $ - $ 159,000
Corporate Center 37,000 19,000 - 56,000
The three supermarket-
anchored shopping centers - 348,000 - 348,000
--------- ----------- --------- ------------
Totals $ 143,000 $ 420,000 $ - $ 563,000
========= =========== ========= ============
2000 Transaction
- ----------------
Germantown $ 53,000 $ 23,000 $ - $ 76,000
========= =========== ========= ============


(1) During 2001, the Advisory Agreement was modified and CBRA agreed to defer
certain fees and to ultimately waive such fees if the Agreement is not
terminated before December 31, 2004.

62


Item 13. Certain Relationships and Related Party Transactions (continued)

Property Management Services

Brentway provides property management, leasing, construction management and
loan placement services to the Company's real properties pursuant to a
Management Agreement dated April 1998 between Brentway and the Company (the
"Management Agreement") and individual management agreements between Brentway
and each of the Company's properties. Brentway is owned by Mr. Ullman and Ms.
Walker, who are also Chairman and President of Brentway, respectively. Mr.
Ullman is President and Chairman of the Company and Ms. Walker is Vice President
and Director of the Company. The term of the Management Agreement is for one
year and is automatically renewed annually for additional one-year periods
subject to the right of either party to cancel the Management Agreement upon
sixty days' written notice. Under the Management Agreement, Brentway is
obligated to provide property management services, which include leasing and
collection of rent, maintenance of books and records, establishment of bank
accounts and payment of expenses, maintenance and operation of property,
reporting and accounting for the Company regarding property operations, and
maintenance of insurance.

As discussed above, Brentway has entered into individual management
agreements with each entity holding title to the properties owned by the
Company. Such individual management agreements are required by the properties'
first mortgage lenders and in some instances by the individual partnership
agreements. The following table outlines the fees provided in the Management
Agreement and the fees provided in each property's management agreement
(Greentree Road is vacant land and as such there is no individual management
agreement).

Legal Services

SKR Management Corp. is wholly-owned by Leo S. Ullman. Stuart H. Widowski,
Esq. through SKR, provides certain legal services to the Company and its
properties at rates which the Company believes to be less than those prevailing
in the market.

63


Item 13. Certain Relationships and Related Party Transactions (continued)

The following is a schedule of management, administrative, advisory, legal,
leasing and loan placement fees paid to CBRA or its affiliates.

Years ended December 31,
2002 2001 2000
--------- --------- -------
Management Fees (1) $ 536,000 $ 103,000 $ 70,000
Construction Management (2) $ 20,000 $ 180,000 $ 28,000
Leasing Fees (3) $ 135,000 $ 135,000 $ 44,000
Administrative and Advisory (4) $ 360,000 $ 163,000 $ 98,000
Legal (5) $ 210,000 $ 182,000 $ 33,000
Loan Placement Fees (6) $ 100,000 $ 100,000 $ -

(1) Management fees are calculated at 3%-4% of prospective gross revenues.
(2) Construction management fees are calculated at 5% of construction costs.
(3) Leasing fees are calculated at 4%-4.5% of a new tenants' base rent.
(4) Administrative and advisory fees are equal to 1/2 of 3/4 of 1% of the
estimated current value of real estate assets of the Company plus 1/12 of
1/4 of 1% of the estimated current value of all other assets of the
Company.
(5) Legal fees are paid to an affiliate of CBRA for the services provided by
Stuart H. Widowski, Esq., in-house counsel.
(6) Loan placement fees are calculated at 1% of the loan cost up to a maximum
of $100,000.

Leasing and management fees paid by the Company during these periods were
also paid to third parties. Brentway subcontracted with local management
companies for site management and leasing services for the Company's office
properties in Jacksonville, Florida, and Salt Lake City, Utah, which properties
were sold as of May 24, 2002 and May 22, 2002, respectively.

Purchase of 20% interest in API Red Lion Shopping Center Associates

On May 31, 2002, Cedar-RL, LLC ("Cedar-RL"), a newly-formed special
purpose, wholly-owned subsidiary of the Operating Partnership, purchased from
Silver Circle Management Corp. ("Silver Circle"), an affiliate of Leo S. Ullman
and CBC (the limited partner of the Operating Partnership and a 27.4% owner of
the Company's outstanding shares), a 20% interest in API Red Lion Shopping
Center Associates ("Red Lion Associates"), a partnership owned by Leo S. Ullman
(as limited partner with an 8% ownership interest) and Silver Circle (as sole
general partner with a 92% ownership interest). The purchase price was
$1,182,857.

Also on May 31, 2002, Silver Circle and Leo S. Ullman sold an aggregate 69%
limited partnership interest in Red Lion Associates to Philadelphia ARC-Cedar
LLC ("ARC Cedar") for $4,360,500 to an unrelated party. As a result of such
transactions, Leo S. Ullman will have no continuing ownership interest in Red
Lion Associates. The proceeds of sale of Mr. Ullman's interest

64


Item 13. Certain Relationships and Related Party Transactions (continued)

in Red Lion Associates were used in their entirety to repay certain loans to
Silver Circle. Mr. Ullman and Brenda J. Walker, President and Vice President of
the Company, respectively, are officers of Silver Circle, but have no ownership
interest in that entity.

The purchase price was based on a third party appraisal of the Red Lion
Shopping Center property.

The Board of Directors of the Company obtained a "fairness" opinion from
the investment banking firm, Robert A. Stanger & Co. Inc., with respect to the
purchase of the partnership interest in Red Lion Associates by the Operating
Partnership.

Subscription Agreement

On December 24, 2002, the Company entered into a Subscription Agreement
(the "Subscription Agreement") with Homburg Invest USA Inc., (the "Subscriber")
pursuant to which the Company issued in a private placement to the Subscriber
3,300 Series A Preferred Partnership Units (the "Preferred Units") in the
Operating Partnership at a purchase price of $909.00 per Preferred Unit, for an
aggregate purchase price of $3 million. On January 2, 2003, the Subscriber
converted 552 Preferred Units into 138,000 shares of Common Stock of the Company
(the "Common Stock").

Pursuant to the Subscription Agreement, Mr. Richard Homburg was appointed
as a director of the Company. The Company also agreed to seek approval of its
shareholders to enable the Company to issue to the Subscriber 137,000 additional
shares of Common Stock at a purchase price of $3.6363 per share, to cause 548
Preferred Units to be redeemed at their purchase price and to cause the balance
of the 2,200 Preferred Units to be convertible into Common Stock of the Company.
Each of Cedar Bay Company and the Subscriber agreed to vote all its shares
477,737 shares representing approximately 56% of the shares entitled to vote) in
favor of the proposal.

Standstill Agreement

On or about January 18, 2002, Homburg Invest Inc., a Canadian corporation
listed on the Toronto Stock Exchange, acquired from Richard Homburg, a Canadian
national, and/or affiliated persons, 150,000 shares of Common Stock of the
Company (approximately 21.7%). As the Articles and By-Laws of the Company
prohibit acquisition of more than 3.5% of the stock of the Company without
consent of the Board of Directors, the Company, Homburg Invest Inc. and Richard
Homburg entered into a certain "standstill" agreement pursuant to which Homburg
Invest Inc., Mr. Homburg and their respective affiliates have agreed not to
purchase more than 29.9% of the stock of the Company in the aggregate for a
period of five (5) years, not to commence or support a "hostile" tender offer
during that period, and to vote for certain persons as directors of the Company.
The Company has agreed to support the election of a designee of Homburg Invest
Inc. to its Board of Directors. The first designee was Mr. Frank Matheson.
Pursuant to the Subscription Agreement, this agreement was amended to permit
Homburg Invest to continue to own all securities owned by it after the
consummation of the Subscription Agreement; provided, however, that if its
ownership interest gets reduced to below 29.9%, then it may continue to own
29.9%. In addition, Richard Homburg was appointed to the Board of Directors,
pending election to a full term by shareholders at the next annual meeting.

65


Item 14. Controls and Procedures

The Company maintains disclosure controls and procedures and internal
controls designed to ensure that information required to be disclosed in its
filings under the Securities Exchange Act of 1934 is reported within the time
periods specified in the Securities and Exchange Commission's ("SEC") rules and
forms. In this regard, the Company has formed a Disclosure Committee currently
comprised of all of the Company's executive officers as well as certain other
employees with knowledge of information that may be considered in the SEC
reporting process. The Committee has responsibility for the development and
assessment of the financial and non-financial information to be included in the
reports filed by the Company with the SEC and assists the Company's Chief
Executive Officer and Chief Financial Officer in connection with their
certifications contained in the Company's SEC reports. The Committee meets
regularly and reports to the Audit Committee on a quarterly or more frequent
basis. The Company's principal executive and financial officers have evaluated
its disclosure controls and procedures within ninety days prior to the filing of
this Annual Report on Form 10-K and have determined that such disclosure
controls and procedures are effective.

There have been no significant changes in the internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.

66


Part IV

Items 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a) 1. and 2. The response to this portion of Item 15 is submitted as a
separate section of this report.

3. Exhibits

(3.1) Articles of Incorporation of the Company. Incorporated by reference
to Exhibit 3.1 of Form 10-K for the year ended 1998 ("1998 10-K").

(3.2) By-laws of the Company. Incorporated by reference to Exhibit 3.2 of
Form 10-K for the year ended 1998 ("1998 10-K").

(3.3) Agreement of Limited Partnership for the Operating Partnership.
Incorporated by reference to Exhibit 3.3 to Form 10-K for the year
ended 1998 ("1998 10-K").

(10.1) Administrative and Advisory Agreement dated April 2, 1998 between
Cedar Bay Realty Advisors, Inc. and the Company. Incorporated by
reference to Exhibit 10.1 of Form 10-K for the year ended 1998
("1998 10-K").

(10.2) Management Agreement dated April 2, 1998 between Brentway Management
LLC and the Company. Incorporated by reference to Exhibit 10.2 of
Form 10-K for the year ended 1998 ("1998 10-K").

(10.3) Assignment of Administrative and Advisory Agreement dated April 30,
1999, between Cedar Income Fund, Ltd. and Cedar Income Fund
Partnership, L.P.; Amendment of Administrative and Advisory
Agreement dated August 21, 2000, between Cedar Income Fund
Partnership, L.P. and Cedar Bay Realty Advisors, Inc.; Second
Amendment of Administrative and Advisory Agreement dated August 21,
2000, between Cedar Income Fund Partnership, L.P. and Cedar Bay
Realty Advisors, Inc.; and Third Amendment of the Administrative and
Advisory Agreement dated as of January 1, 2002 between Cedar Income
Fund Partnership, L.P. and Cedar Bay Realty Advisors, Inc.,
incorporated by reference to Exhibit 10.3 of Form 10-K for the year
ended 2001 ("2001 10-K").

(10.4) Standstill Agreement between Homburg Invest Inc., Richard Homburg
and the Company dated January 18, 2002, incorporated by reference to
Exhibit 10.4 of Form 10-K for the year ended 2001 ("2001 10-K").

(10.5) Real Estate Purchase and Sale Agreement regarding the sale of
Southpoint Parkway, Jacksonville, Florida, by and between Cedar
Income Fund Partnership, L.P. and Southpoint Parkway Center, L.C.
dated February 1, 2002, incorporated by reference to Exhibit 10.1 to
Form 8-K filed June 10, 2002; and Addendum Number One to Real Estate
Purchase and Sale Agreement by and between Cedar Income Fund
Partnership, L.P. and Southpoint Parkway Center, L.C., incorporated
by reference to Exhibit 10.2 of Form 8-K filed on June 20, 2002.

67


(10.6) Subscription Agreement by and between Cedar Income Fund, Ltd. and
Homburg Invest USA Inc., dated as of December 18, 2002.

(10.7) Property Management Agreement by and between API Red Lion Shopping
Center Associates and SKR Management Corp., dated as of January 1,
1995, incorporated by reference to Exhibit 10.1 of Form 8-K filed on
June 13, 2002.

(10.8) Assignment of Property Management Agreement by and between SKR
Management Corp. and Brentway Management LLC, dated as of January 1,
1996, incorporated by reference to Exhibit 10.2 of Form 8-K filed on
June 13, 2002.

(10.9) Standstill Agreement by and between Robert J. Ambrosi and ARC
Properties, Inc. and Cedar Income Fund, Ltd., dated May 31, 2002,
incorporated by reference to Exhibit 10.3 of Form 8-K filed on June
13, 2002.

(10.10) Purchase and Sale Agreement by and between Silver Circle Management
Corp. and Leo S. Ullman and Philadelphia Cedar-RL, LLC, dated as of
February 6, 2002, incorporated by reference to Exhibit 10.4 of Form
8-K filed on June 13, 2002.

(10.11) Indemnity Agreement by Cedar-RL, LLC to and for the benefit of Leo
S. Ullman, dated as of May 31, 2002, incorporated by reference to
Exhibit 10.5 of Form 8-K filed on June 13, 2002.

(10.12) Promissory Note between Cedar-RL, LLC to Silver Circle Management
Corp., dated as of May 31, 2002, incorporated by reference to
Exhibit 10.6 of Form 8-K filed on June 13, 2002.

(10.13) Subordinate Pledge and Security Agreement by Cedar-RL, LLC and
Silver Circle Management Corp., dated as of May 31, 2002,
incorporated by reference to Exhibit 10.7 of Form 8-K filed on June
13, 2002.

(10.14) Compensation Agreement between Cedar Income Fund, Ltd., Cedar Income
Fund Partnership, L.P., SKR Management Corp., Cedar Bay Realty
Advisors, Inc., Brentway Management LLC, Leo S. Ullman and ARC
Properties, Inc., dated May 31, 2002, incorporated by reference to
Exhibit 10.8 of Form 8-K filed on June 13, 2002.

(10.15) Amended and Restated Limited Partnership Agreement of API Red Lion
Shopping Center Associates, L.P., a New York Limited Partnership
among Cedar-RL, LLC and Silver Circle Management Corp. and
Philadelphia ARC-Cedar, LLC, dated as of May 31, 2002, incorporated
by reference to Exhibit 11.11 of Form 8-K filed on June 13, 2002.

(10.16) Warrant by Cedar Income Fund Partnership, L.P. to ARC Properties,
Inc., dated as of May 31, 2002, incorporated by reference to Exhibit
10.12 of Form 8-K filed on June 13, 2002.

68


(10.17) Property Management Agreement by and between The Point Associates,
L.P. and SKR Management Corp., dated as of December 1, 1994,
incorporated by reference to Exhibit 10.17 of Form 8-K filed on June
13, 2002.

(10.18) Assignment of Property Management Agreement by and between SKR
Management Corp. and Brentway Management LLC, dated as of January 1,
1996, incorporated by reference to Exhibit 10.18 of Form 8-K filed
on June 13, 2002.

(10.19) Agreement to Purchase Real Estate by and between Loyal Plaza
Venture, L.P. and Cedar Income Fund Partnership, L.P. dated January
7, 2002; First Amendment to Agreement to Purchase Real Estate by and
between Loyal Plaza Venture, L.P. and Cedar Income Fund Partnership,
L.P. dated February 22, 2002; Second Amendment to Agreement to
Purchase Real Estate by and between Loyal Plaza Venture, L.P. and
Cedar Income Fund Partnership, L.P. dated February 24, 2002; Third
Amendment to Agreement to Purchase Real Estate between Loyal Plaza
Venture, L.P. and Cedar Income Fund Partnership, L.P. dated March 1,
2002; Fourth Amendment to Agreement to Purchase Real Estate by and
between Loyal Plaza Venture, L.P. and Cedar Income Fund Partnership,
L.P. dated March 8, 2002; Fifth Amendment to Agreement to Purchase
Real Estate by and between Loyal Plaza Venture, L.P. and Cedar
Income Fund Partnership, L.P. dated March 13, 2002; Sixth Amendment
to Agreement to Purchase Real Estate by and between Loyal Plaza
Venture, L.P. and Cedar Income Fund Partnership, L.P. dated March
15, 2002; and Seventh Amendment to Agreement to Purchase Real Estate
by and between Loyal Plaza Venture, L.P. and Cedar Income Fund
Partnership, L.P. dated March 22, 2002 (collectively, the "Purchase
Contract"), incorporated by reference to Exhibit 10.1 of Form 8-K
filed on July 17, 2002.

(10.20) Agreement to Assign Agreement between Cedar Income Fund Partnership,
L.P. as Assignor to Loyal Plaza Associates, L.P. as Assignee, made
by and between Assignor and Loyal Plaza Venture, L.P. dated June __,
2002, incorporated by reference to Exhibit 10.2 of Form 8-K filed on
July 17, 2002.

(10.21) Limited Partnership Agreement of Loyal Plaza Associates, L.P.
between CIF-Loyal Plaza Associates, L.P. and Kimco Preferred
Investor IV Trust dated June 28, 2002, incorporated by reference to
Exhibit 10.3 of Form 8-K filed on July 17, 2002.

(10.22) Limited Partnership Agreement of CIF-Loyal Plaza Associates, L.P. by
and among CIF-Loyal Plaza Associates, L.P. and Cedar Income Fund
Partnership, L.P. dated as of June 28, 2002, incorporated by
reference to Exhibit 10.4 of Form 8-K filed on July 17, 2002.

(10.23) Open-End Mortgage and Security Agreement in the amount of $14
million (Original Mortgage) by Loyal Plaza Venture, L.P. (Borrower)
and Glimcher Loyal Plaza Tenant, L.P. (Tenant) (collectively
referred to as Mortgagor) to Lehman Brothers Bank, FSB (Lender)
dated May 31, 2001, incorporated by reference to Exhibit 10.5 of
Form 8-K filed on July 17, 2002.

(10.24) Loan Assumption and Modification Agreement by and among Loyal Plaza
Associates, L.P. (Assuming Borrower), Cedar Income Fund, Ltd.
(Assuming Principal), Loyal Plaza Venture, L.P. (Original Borrower),
Glimcher Properties Limited Partnership (Glimcher)

69


and Glimcher Loyal Plaza Tenant, L.P. (Tenant), in favor of LaSalle
Bank National Association (Trustee) and LB-UBS Commercial Mortgage
Trust 2001-C3 (Lender) dated as of July 2, 2002, incorporated by
reference to Exhibit 10.6 of Form 8-K filed on July 17, 2002.

(10.25) Property Management Agreement [Loyal Plaza] by and between Loyal
Plaza Associates, L.P. and Brentway Management LLC dated as of June
___, 2002, incorporated by reference to Exhibit 10.11 of Form 8-K
filed on July 17, 2002.

(10.26) Post Closing Agreement regarding the Assumption by Loyal Plaza
Associates, L.P. (Assuming Borrower) of that certain Loan evidenced
by that certain Note dated May 31, 2001 payable by Loyal Plaza
Venture, L.P. (Original Borrower) to Lehman Brothers Bank, FSB
(Original Lender) as secured by that certain Open-End Mortgage and
Security Agreement of even date to Glimcher Loyal Plaza Tenant, L.P.
(Mortgage) currently held and owned by LaSalle Bank National
Association (Trustee) of LB-UBS Commercial Trust 2001-C3 (Lender)
dated July 2, 2002, incorporated by reference to Exhibit 10.13 of
Form 8-K filed on July 17, 2002.

(10.27) Agreement of Purchase and Sale between Connecticut General Life
Insurance Company and Cedar Income Fund Partnership, L.P., dated
August 12, 2002, incorporated by reference to Exhibit 10.1 of Form
8-K filed on December 9, 2002.

(10.28) First Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated September 12, 2002, incorporated by
reference to Exhibit 10.2 of Form 8-K filed on December 9, 2002.

(10.29) Second Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated as of October 31, 2002, incorporated by
reference to Exhibit 10.3 of Form 8-K filed on December 9, 2002.

(10.30) Third Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated as of November 15, 2002, incorporated by
reference to Exhibit 10.4 of Form 8-K filed on December 9, 2002.

(10.31) Assignment and Assumption of Contract of sale between Cedar Income
Fund Partnership, L.P. and Cedar-Camp Hill, LLC dated as of November
__, 2002, incorporated by reference to Exhibit 10.5 of Form 8-K
filed on December 9, 2002.

(10.32) Limited Liability Company Agreement of Cedar-Camp Hill, LLC by Cedar
Income Fund Partnership, L.P., effective as of November 1, 2002,
incorporated by reference to Exhibit 10.6 of Form 8-K filed on
December 9, 2002.

(10.33) Property Management Agreement by and between Cedar-Camp Hill, LLC
and Brentway Management LLC dated as of __________, 2002,
incorporated by reference to Exhibit 10.7 of Form 8-K filed on
December 9, 2002.

70


(10.34) Loan Agreement by and between SWH Funding Corp. and Cedar Income
Fund Partnership, L.P., dated as of November __, 2002, incorporated
by reference to Exhibit 10.9 of Form 8-K filed on December 9, 2002.

(10.35) Loan Agreement by and between Cedar-Camp Hill, LLC and Citizens Bank
of Pennsylvania, executed on November 14, 2002, incorporated by
reference to Exhibit 10.10 of Form 8-K filed on December 9, 2002.

(10.36) Open-End Mortgage and Security Agreement between Cedar Camp Hill,
LLC, Cedar Bay Realty Advisors, Inc. and Citizens Bank of
Pennsylvania, executed on November 14, 2002, incorporated by
reference to Exhibit 10.11 of Form 8-K filed on December 9, 2002.

(10.37) Pledge and Security Agreement by Cedar Income Fund Partnership, L.P.
and SWH Funding Corp. regarding that certain Loan Agreement; dated
as of November 22, 2002, incorporated by reference to Exhibit 10.22
of Form 8-K filed on December 9, 2002.

(10.38) Intercreditor Recognition Agreement among Citizens Bank of
Pennsylvania, SWH Funding Corp., Cedar-Camp Hill, LLC and Cedar
Income Fund Partnership, L.P., dated as of November 22, 2002,
incorporated by reference to Exhibit 10.26 of Form 8-K filed on
December 9, 2002.

(21) Listing of the Company's subsidiaries.

(b) Reports on Form 8-K. Report on Form 8-K filed on December 9, 2002,
reporting on an event listed under Item 2.

(c) Exhibits The response to this portion of Item 15 is submitted in a separate
section of this report.

(d) Financial Statement Schedules The response to this portion of Item 15 is
submitted in a separate section of this report

71


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.

CEDAR INCOME FUND, LTD.

/s/ LEO S. ULLMAN /s/ THOMAS J. O'KEEFFE
- ----------------------------- ------------------------------
Leo S. Ullman Thomas J. O'Keeffe
President and Chairman Chief Financial Officer
(principal executive officer) (principal financial officer)

/s/ ANN MANERI
- ------------------------------
Ann Maneri
Controller
(principal accounting officer)

March 28, 2003

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

/s/ J.A.M.H. DER KINDEREN /s/ JAMES J. BURNS
- -------------------------- --------------------------
J.A.M.H. der Kinderen James J. Burns
Director Director

/s/ EVERETT B. MILLER, III /s/ BRENDA J. WALKER
- -------------------------- --------------------------
Everett B. Miller, III Brenda J. Walker
Director Director

/s/ RICHARD HOMBURG /s/ FRANK W. MATHESON
- -------------------------- --------------------------
Richard Homburg Frank W. Matheson
Director Director

March 28, 2003

72


CERTIFICATION

I, Leo S. Ullman, Chief Executive Officer of Cedar Income Fund, Ltd. (the
"Company"), certify that:

1. I have reviewed this annual report on Form 10-K of the Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Company as of, and for, the periods presented in
this annual report;

4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

(b) evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The Company's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Company's auditors and the audit
committee of the Company's board of directors (or persons performing
the equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls; and

6. The Company's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: March 28, 2003 /s/ Leo S. Ullman
------------------------------
Leo S. Ullman
Chief Executive Officer

73


CERTIFICATION

I, Thomas J. O'Keeffe, Chief Financial Officer of Cedar Income Fund, Ltd..
(the "Company"), certify that:

1. I have reviewed this annual report on Form 10-K of the Company;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Company as of, and for, the periods presented in
this annual report;

4. The Company's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Company and
we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the Company, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
annual report is being prepared;

(b) evaluated the effectiveness of the Company's disclosure controls
and procedures as of a date within 90 days prior to the filing
date of this annual report (the "Evaluation Date"); and

(c) presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;

5. The Company's other certifying officers and I have disclosed, based on
our most recent evaluation, to the Company's auditors and the audit
committee of the Company's board of directors (or persons performing
the equivalent function):

(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the Company's
ability to record, process, summarize and report financial data
and have identified for the Company's auditors any material
weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Company's
internal controls; and

6. The Company's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in
internal controls or in other factors that could significantly affect
internal controls subsequent to the date of our most recent
evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.

Date: March 28, 2003 /s/ Thomas J. O'Keeffe
------------------------------
Thomas J. O'Keeffe
Chief Financial Officer

74


CERTIFICATION

I, Leo S. Ullman, Chief Executive Officer of Cedar Income Fund, Ltd. (the
"Company"), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do hereby
certify as follows:

1. The annual report on Form 10-K of the Company for the period ended December
31, 2002, fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

2. The information contained in such Form 10-K fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

IN WITNESS WHEREOF, I have executed this Certification this 28th day of
March, 2003.
/s/ LEO S. ULLMAN
--------------------------------------
Leo S. Ullman, Chief Executive Officer

I, Thomas J. O'Keeffe, Chief Financial Officer of Cedar Income Fund, Ltd.
(the "Company"), pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, do
hereby certify as follows:

3. The annual report on Form 10-K of the Company for the period ended December
31, 2002, fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and

4. The information contained in such Form 10-K fairly presents, in all
material respects, the financial condition and results of operations of the
Company.

IN WITNESS WHEREOF, I have executed this Certification this 28th day of
March, 2003.
/s/ THOMAS J. O'KEEFFE
-------------------------------------------
Thomas J. O'Keeffe, Chief Financial Officer

75


EXHIBIT INDEX

Exhibit
Item Title or Description

(3.1) Articles of Incorporation of the Company. Incorporated by reference
to Exhibit 3.1 of Form 10-K for the year ended 1998 ("1998 10-K").

(3.2) By-laws of the Company. Incorporated by reference to Exhibit 3.2 of
Form 10-K for the year ended 1998 ("1998 10-K").

(3.3) Agreement of Limited Partnership for the Operating Partnership.
Incorporated by reference to Exhibit 3.3 to Form 10-K for the year
ended 1998 ("1998 10-K").

(10.1) Administrative and Advisory Agreement dated April 2, 1998 between
Cedar Bay Realty Advisors, Inc. and the Company. Incorporated by
reference to Exhibit 10.1 of Form 10-K for the year ended 1998
("1998 10-K").

(10.2) Management Agreement dated April 2, 1998 between Brentway Management
LLC and the Company. Incorporated by reference to Exhibit 10.2 of
Form 10-K for the year ended 1998 ("1998 10-K").

(10.3) Assignment of Administrative and Advisory Agreement dated April 30,
1999, between Cedar Income Fund, Ltd. and Cedar Income Fund
Partnership, L.P.; Amendment of Administrative and Advisory
Agreement dated August 21, 2000, between Cedar Income Fund
Partnership, L.P. and Cedar Bay Realty Advisors, Inc.; Second
Amendment of Administrative and Advisory Agreement dated August 21,
2000, between Cedar Income Fund Partnership, L.P. and Cedar Bay
Realty Advisors, Inc.; and Third Amendment of the Administrative and
Advisory Agreement dated as of January 1, 2002 between Cedar Income
Fund Partnership, L.P. and Cedar Bay Realty Advisors, Inc.,
incorporated by reference to Exhibit 10.3 of Form 10-K for the year
ended 2001 ("2001 10-K").

(10.4) Standstill Agreement between Homburg Invest Inc., Richard Homburg
and the Company dated January 18, 2002, incorporated by reference to
Exhibit 10.4 of Form 10-K for the year ended 2001 ("2001 10-K").

(10.5) Real Estate Purchase and Sale Agreement regarding the sale of
Southpoint Parkway, Jacksonville, Florida, by and between Cedar
Income Fund Partnership, L.P. and Southpoint Parkway Center, L.C.
dated February 1, 2002, incorporated by reference to Exhibit 10.1 to
Form 8-K filed June 10, 2002; and Addendum Number One to Real Estate
Purchase and Sale Agreement by and between Cedar Income Fund
Partnership, L.P. and Southpoint Parkway Center, L.C., incorporated
by reference to Exhibit 10.2 of Form 8-K filed on June 20, 2002.

(10.6) Subscription Agreement by and between Cedar Income Fund, Ltd. and
Homburg Invest USA Inc., dated as of December 18, 2002.

76


(10.7) Property Management Agreement by and between API Red Lion Shopping
Center Associates and SKR Management Corp., dated as of January 1,
1995, incorporated by reference to Exhibit 10.1 of Form 8-K filed on
June 13, 2002.

(10.8) Assignment of Property Management Agreement by and between SKR
Management Corp. and Brentway Management LLC, dated as of January 1,
1996, incorporated by reference to Exhibit 10.2 of Form 8-K filed on
June 13, 2002.

(10.9) Standstill Agreement by and between Robert J. Ambrosi and ARC
Properties, Inc. and Cedar Income Fund, Ltd., dated May 31, 2002,
incorporated by reference to Exhibit 10.3 of Form 8-K filed on June
13, 2002.

(10.10) Purchase and Sale Agreement by and between Silver Circle Management
Corp. and Leo S. Ullman and Philadelphia Cedar-RL, LLC, dated as of
February 6, 2002, incorporated by reference to Exhibit 10.4 of Form
8-K filed on June 13, 2002.

(10.11) Indemnity Agreement by Cedar-RL, LLC to and for the benefit of Leo
S. Ullman, dated as of May 31, 2002, incorporated by reference to
Exhibit 10.5 of Form 8-K filed on June 13, 2002.

(10.12) Promissory Note between Cedar-RL, LLC to Silver Circle Management
Corp., dated as of May 31, 2002, incorporated by reference to
Exhibit 10.6 of Form 8-K filed on June 13, 2002.

(10.13) Subordinate Pledge and Security Agreement by Cedar-RL, LLC and
Silver Circle Management Corp., dated as of May 31, 2002,
incorporated by reference to Exhibit 10.7 of Form 8-K filed on June
13, 2002.

(10.14) Compensation Agreement between Cedar Income Fund, Ltd., Cedar Income
Fund Partnership, L.P., SKR Management Corp., Cedar Bay Realty
Advisors, Inc., Brentway Management LLC, Leo S. Ullman and ARC
Properties, Inc., dated May 31, 2002, incorporated by reference to
Exhibit 10.8 of Form 8-K filed on June 13, 2002.

(10.15) Amended and Restated Limited Partnership Agreement of API Red Lion
Shopping Center Associates, L.P., a New York Limited Partnership
among Cedar-RL, LLC and Silver Circle Management Corp. and
Philadelphia ARC-Cedar, LLC, dated as of May 31, 2002, incorporated
by reference to Exhibit 11.11 of Form 8-K filed on June 13, 2002.

(10.16) Warrant by Cedar Income Fund Partnership, L.P. to ARC Properties,
Inc., dated as of May 31, 2002, incorporated by reference to Exhibit
10.12 of Form 8-K filed on June 13, 2002.

(10.17) Property Management Agreement by and between The Point Associates,
L.P. and SKR Management Corp., dated as of December 1, 1994,
incorporated by reference to Exhibit 10.17 of Form 8-K filed on June
13, 2002.

(10.18) Assignment of Property Management Agreement by and between SKR
Management Corp. and Brentway Management LLC, dated as of January 1,
1996, incorporated by reference to Exhibit 10.18 of Form 8-K filed
on June 13, 2002.

(10.19) Agreement to Purchase Real Estate by and between Loyal Plaza
Venture, L.P. and Cedar Income Fund Partnership, L.P. dated January
7, 2002; First Amendment to Agreement to

77


Purchase Real Estate by and between Loyal Plaza Venture, L.P. and
Cedar Income Fund Partnership, L.P. dated February 22, 2002; Second
Amendment to Agreement to Purchase Real Estate by and between Loyal
Plaza Venture, L.P. and Cedar Income Fund Partnership, L.P. dated
February 24, 2002; Third Amendment to Agreement to Purchase Real
Estate between Loyal Plaza Venture, L.P. and Cedar Income Fund
Partnership, L.P. dated March 1, 2002; Fourth Amendment to Agreement
to Purchase Real Estate by and between Loyal Plaza Venture, L.P. and
Cedar Income Fund Partnership, L.P. dated March 8, 2002; Fifth
Amendment to Agreement to Purchase Real Estate by and between Loyal
Plaza Venture, L.P. and Cedar Income Fund Partnership, L.P. dated
March 13, 2002; Sixth Amendment to Agreement to Purchase Real Estate
by and between Loyal Plaza Venture, L.P. and Cedar Income Fund
Partnership, L.P. dated March 15, 2002; and Seventh Amendment to
Agreement to Purchase Real Estate by and between Loyal Plaza
Venture, L.P. and Cedar Income Fund Partnership, L.P. dated March
22, 2002 (collectively, the "Purchase Contract"), incorporated by
reference to Exhibit 10.1 of Form 8-K filed on July 17, 2002.

(10.20) Agreement to Assign Agreement between Cedar Income Fund Partnership,
L.P. as Assignor to Loyal Plaza Associates, L.P. as Assignee, made
by and between Assignor and Loyal Plaza Venture, L.P. dated June __,
2002, incorporated by reference to Exhibit 10.2 of Form 8-K filed on
July 17, 2002.

(10.21) Limited Partnership Agreement of Loyal Plaza Associates, L.P.
between CIF-Loyal Plaza Associates, L.P. and Kimco Preferred
Investor IV Trust dated June 28, 2002, incorporated by reference to
Exhibit 10.3 of Form 8-K filed on July 17, 2002.

(10.22) Limited Partnership Agreement of CIF-Loyal Plaza Associates, L.P. by
and among CIF-Loyal Plaza Associates, L.P. and Cedar Income Fund
Partnership, L.P. dated as of June 28, 2002, incorporated by
reference to Exhibit 10.4 of Form 8-K filed on July 17, 2002.

(10.23) Open-End Mortgage and Security Agreement in the amount of $14
million (Original Mortgage) by Loyal Plaza Venture, L.P. (Borrower)
and Glimcher Loyal Plaza Tenant, L.P. (Tenant) (collectively
referred to as Mortgagor) to Lehman Brothers Bank, FSB (Lender)
dated May 31, 2001, incorporated by reference to Exhibit 10.5 of
Form 8-K filed on July 17, 2002.

(10.24) Loan Assumption and Modification Agreement by and among Loyal Plaza
Associates, L.P. (Assuming Borrower), Cedar Income Fund, Ltd.
(Assuming Principal), Loyal Plaza Venture, L.P. (Original Borrower),
Glimcher Properties Limited Partnership (Glimcher) and Glimcher
Loyal Plaza Tenant, L.P. (Tenant), in favor of LaSalle Bank National
Association (Trustee) and LB-UBS Commercial Mortgage Trust 2001-C3
(Lender) dated as of July 2, 2002, incorporated by reference to
Exhibit 10.6 of Form 8-K filed on July 17, 2002.

(10.25) Property Management Agreement [Loyal Plaza] by and between Loyal
Plaza Associates, L.P. and Brentway Management LLC dated as of June
___, 2002, incorporated by reference to Exhibit 10.11 of Form 8-K
filed on July 17, 2002.

(10.26) Post Closing Agreement regarding the Assumption by Loyal Plaza
Associates, L.P. (Assuming Borrower) of that certain Loan evidenced
by that certain Note dated May 31, 2001 payable by Loyal Plaza
Venture, L.P. (Original Borrower) to Lehman Brothers Bank, FSB
(Original Lender) as secured by that certain Open-End Mortgage and
Security

78


Agreement of even date to Glimcher Loyal Plaza Tenant, L.P.
(Mortgage) currently held and owned by LaSalle Bank National
Association (Trustee) of LB-UBS Commercial Trust 2001-C3 (Lender)
dated July 2, 2002, incorporated by reference to Exhibit 10.13 of
Form 8-K filed on July 17, 2002.

(10.27) Agreement of Purchase and Sale between Connecticut General Life
Insurance Company and Cedar Income Fund Partnership, L.P., dated
August 12, 2002, incorporated by reference to Exhibit 10.1 of Form
8-K filed on December 9, 2002.

(10.28) First Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated September 12, 2002, incorporated by
reference to Exhibit 10.2 of Form 8-K filed on December 9, 2002.

(10.29) Second Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated as of October 31, 2002, incorporated by
reference to Exhibit 10.3 of Form 8-K filed on December 9, 2002.

(10.30) Third Amendment to Agreement of Purchase and Sale between
Connecticut General Life Insurance Company and Cedar Income Fund
Partnership, L.P., dated as of November 15, 2002, incorporated by
reference to Exhibit 10.4 of Form 8-K filed on December 9, 2002.

(10.31) Assignment and Assumption of Contract of sale between Cedar Income
Fund Partnership, L.P. and Cedar-Camp Hill, LLC dated as of November
__, 2002, incorporated by reference to Exhibit 10.5 of Form 8-K
filed on December 9, 2002.

(10.32) Limited Liability Company Agreement of Cedar-Camp Hill, LLC by Cedar
Income Fund Partnership, L.P., effective as of November 1, 2002,
incorporated by reference to Exhibit 10.6 of Form 8-K filed on
December 9, 2002.

(10.33) Property Management Agreement by and between Cedar-Camp Hill, LLC
and Brentway Management LLC dated as of __________, 2002,
incorporated by reference to Exhibit 10.7 of Form 8-K filed on
December 9, 2002.

(10.34) Loan Agreement by and between SWH Funding Corp. and Cedar Income
Fund Partnership, L.P., dated as of November __, 2002, incorporated
by reference to Exhibit 10.9 of Form 8-K filed on December 9, 2002.

(10.35) Loan Agreement by and between Cedar-Camp Hill, LLC and Citizens Bank
of Pennsylvania, executed on November 14, 2002, incorporated by
reference to Exhibit 10.10 of Form 8-K filed on December 9, 2002.

(10.36) Open-End Mortgage and Security Agreement between Cedar Camp Hill,
LLC, Cedar Bay Realty Advisors, Inc. and Citizens Bank of
Pennsylvania, executed on November 14, 2002, incorporated by
reference to Exhibit 10.11 of Form 8-K filed on December 9, 2002.

(10.37) Pledge and Security Agreement by Cedar Income Fund Partnership, L.P.
and SWH Funding Corp. regarding that certain Loan Agreement; dated
as of November 22, 2002, incorporated by reference to Exhibit 10.22
of Form 8-K filed on December 9, 2002.

79


(10.38) Intercreditor Recognition Agreement among Citizens Bank of
Pennsylvania, SWH Funding Corp., Cedar-Camp Hill, LLC and Cedar
Income Fund Partnership, L.P., dated as of November 22, 2002,
incorporated by reference to Exhibit 10.26 of Form 8-K filed on
December 9, 2002.

(21) Listing of the Company's subsidiaries.

80