FINANCIAL STATEMENTS AND
                          INDEPENDENT AUDITORS' REPORT

                             CASCADE PINES, L.P. II

                                DECEMBER 31, 2001


















<PAGE>


                             Cascade Pines, L.P. II

                                TABLE OF CONTENTS



                                                                            PAGE


INDEPENDENT AUDITORS' REPORT                                                   3

FINANCIAL STATEMENTS

         BALANCE SHEET                                                         4

         STATEMENT OF OPERATIONS                                               5

         STATEMENT OF CHANGES IN PARTNERS' EQUITY                              6

         STATEMENT OF CASH FLOWS                                               7

         NOTES TO FINANCIAL STATEMENTS                                         8









<PAGE>


                          INDEPENDENT AUDITORS' REPORT



To the Partners
Cascade Pines, L.P. II

          We have audited the accompanying balance sheet of Cascade Pines, L.P.
II, as of December 31, 2001, and the related statement of operations, changes in
partners'  equity,  and cash  flows for the year  then  ended.  These  financial
statements  are  the  responsibility  of  the  partnership's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit.

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

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


                                            /S/Reznick Fedder & Silverman

Atlanta, Georgia
April 22, 2002

                                      -3-
<PAGE>


                             CASCADE PINES, L.P. II

                                  Balance Sheet

                                December 31, 2001

                                     ASSETS
<TABLE>
<CAPTION>

<S>                                                                                  <C>
Investment in operating property, at cost
   Land                                                                              $     600,000
   Building                                                                              7,846,428
   Building improvements                                                                    95,780
   Building equipment                                                                      190,249
                                                                                     --------------
                                                                                         8,732,457
Less accumulated depreciation                                                           (1,407,604)
                                                                                     --------------
                                                                                         7,324,853

Cash                                                                                        53,420
Tenant security deposits held in trust                                                      61,536
Accounts receivable-tenants                                                                  5,732
Accounts receivable-other                                                                    1,338
Accounts receivable - HUD                                                                   41,879
Prepaid expenses                                                                             3,331
Utility deposits                                                                             9,400
Restricted cash - bond funds                                                               971,024
Bond issuance cost, net of accumulated amortization of $74,669                             279,021
Tax credit monitoring cost, net of accumulated amortization of $19,324                      28,989
                                                                                     --------------
                                                                                     $   8,780,523
                                                                                     ==============
                        LIABILITIES AND PARTNERS' EQUITY

LIABILITIES
   Accounts payable - operations                                                     $      73,971
   Tenant security deposits                                                                 61,536
   Due to owner                                                                            262,366
   Accrued management fees                                                                   5,994
   Accrued interest payable                                                                190,342
   Subordinate note payable                                                              1,100,000
   Mortgage payable                                                                      6,745,000
                                                                                     --------------
    Total liabilities                                                                    8,439,209
                                                                                     --------------
CONTINGENCY                                                                                      -
                                                                                     --------------
PARTNERS' EQUITY                                                                           341,314
                                                                                     --------------
                                                                                     $   8,780,523
                                                                                     ==============
</TABLE>
                       See notes to financial statements
                                      -4-
<PAGE>




                             CASCADE PINES, L.P. II

                             Statement of Operations

                          Year ended December 31, 2001
<TABLE>
<CAPTION>

<S>                                                                                  <C>
Revenues

  Rental, net of vacancies                                                           $   1,914,735
  Other                                                                                     57,819
  Interest                                                                                  54,433
                                                                                     --------------
    Total revenues                                                                       2,026,987
                                                                                     --------------
Expenses

  Depreciation                                                                             238,486
  Amortization                                                                              15,011
  Interest                                                                                 478,069
  Administrative                                                                           301,084
  Management fees                                                                           76,118
  Repairs and maintenance                                                                  536,352
  Property insurance                                                                        44,407
  Real estate taxes                                                                         88,455
  Salaries and wages                                                                       222,986
  Bank service charges                                                                       5,565
  Utilities                                                                                335,659
  Other taxes and insurance                                                                 53,765
                                                                                     --------------
    Total expenses                                                                       2,395,957
                                                                                     --------------
NET LOSS                                                                             $    (368,970)
                                                                                     ==============
</TABLE>
                        See notes to financial statements
                                      -5-
<PAGE>




                             CASCADE PINES, L.P. II

                    Statement of Changes in Partners' Equity

                          Year ended December 31, 2001







<TABLE>
<CAPTION>

<S>                                                                                  <C>
Beginning of year,
   partners' equity                                                                  $     710,284


Net loss                                                                                  (368,970)
                                                                                     --------------
End of year,
   partners' equity                                                                  $     341,314
                                                                                     ==============
</TABLE>
                        See notes to financial statements
                                      -6-
<PAGE>


                             CASCADE PINES, L.P. II

                             STATEMENT OF CASH FLOWS

                          Year ended December 31, 2001
<TABLE>
<CAPTION>


<S>                                                                                  <C>
Cash flows from operating activities

   Net loss                                                                          $    (368,970)
   Adjustments to reconcile net loss to net cash
   used in operating activities
       Depreciation                                                                        238,486
       Amortization                                                                         15,011
   Decrease (increase) in assets
       Accounts receivable - tenants                                                        44,888
       Accounts receivable - HUD                                                           (41,879)
       Accounts receivable - other                                                           1,234
       Prepaid expenses                                                                     41,094
   Increase (decrease) in liabilities
       Accounts payable                                                                   (112,302)
       Accrued interest payable                                                           (134,163)
       Accrued expenses                                                                    (19,500)
       Due to owner                                                                        267,020
       Tenant security deposits, net                                                         3,395
                                                                                     --------------
          Net cash used in operating activities                                            (65,686)
                                                                                     --------------
Cash flows from investing activities

   Investment in operating property                                                        (79,914)
   Withdrawals from restricted cash held by bond trustee                                   (33,567)
                                                                                     --------------
          Net cash used in investing activities                                           (113,481)
                                                                                     --------------
Cash flows from financing acitvities
   Principal payments on bonds payable                                                    (145,000)
   Proceeds from subordinate note payable                                                  226,971
                                                                                     --------------
          Net cash provided by financing activities                                         81,971
                                                                                     --------------
NET DECREASE IN CASH                                                                       (97,196)
Cash, beginning                                                                            150,616
                                                                                     --------------
Cash, ending                                                                         $      53,420
                                                                                     ==============

Supplemental disclosure of cash flow information:
   Cash paid during the year for interest                                            $     612,232
                                                                                     ==============
</TABLE>

                                      -7-

<PAGE>


                             CASCADE PINES, L.P. II

                          NOTES TO FINANCIAL STATEMENTS

                                December 31, 2001


NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Cascade  Pines,  L.P. II, (the  "Partnership"),  was organized as a limited
     partnership under the laws of the state of Georgia during September of 1995
     to acquire, own, rehabilitate, maintain, and operate a 376 unit multifamily
     apartment complex located in Atlanta,  Georgia,  and is currently operating
     under the name of Cascade Pines Apartments (the "Project").

     Each building of the Project has qualified  and been  allocated  low-income
     housing tax credits  pursuant to Internal Revenue Code Section 42 ("Section
     42"), which regulates the use of the Project as to occupant eligibility and
     unit gross rent,  among other  requirements.  Each  building of the Project
     must meet the provisions of these regulations during each of 15 consecutive
     years in order to remain qualified to receive the credits. In addition, the
     Partnership  has executed a Land Use  Restriction  Agreement which requires
     the  utilization of the Project  pursuant to Section 42 for a minimum of 30
     years, even if the Partnership disposes of the Project.

     Use of Estimates
     ----------------

     The  preparation  of financial  statements  in conformity  with  accounting
     principles  generally  accepted  in the United  States of America  requires
     management  to make  estimates  and  assumptions  that affect the  reported
     amounts of assets and liabilities  and disclosure of contingent  assets and
     liabilities at the date of the financial statements and the reported amount
     of revenue and expenses  during the reporting  period.  Actual  results may
     differ from those estimates.

     Operating Property
     ------------------

     Operating  property is carried at cost.  Depreciation  is  provided  for in
     amounts  sufficient to relate the cost of depreciable  assets to operations
     over  their   estimated   service   lives  using  the   straight-line   and
     double-declining balance methods as follows:

                  Building                                              40 years
                  Building improvements                                 40 years
                  Building equipment                                   5-7 years

                                      -8-
<PAGE>


                             Cascade Pines, L.P. II

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                                December 31, 2001


NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
              (Continued)

     Amortization
     ------------

     Bond issuance costs consist of fees for obtaining the mortgage note payable
     and are being  amortized over the 30-year life of the mortgage note payable
     using the straight-line  method,  which approximates the effective interest
     method.

     Tax credit fees are being  amortized over 15 years using the  straight-line
     method.

     Income Taxes
     ------------

     Profit or loss of the  Partnership  is  allocated  1 percent to the general
     partners and 99 percent to the  investor  limited  partners.  No income tax
     provision  has been included in the  financial  statements  since income or
     loss of the  Partnership  is  required  to be  reported  by the  respective
     partners on their income tax returns.

     Rental Income
     -------------

     Rents are recognized as they become due. Rental payments received in
     advance are deferred until earned. All leases between the Partnership and
     the tenants of the property are operating leases.

NOTE B - MORTGAGE PAYABLE

     The mortgage payable, in the original amount of $7,455,000, was funded with
     the proceeds from the issuance of Multifamily  Housing Revenue Bonds issued
     by Urban  Residential  Finance  Authority  of the City of Atlanta,  Georgia
     ("URFA").  The note bears  interest  at the rates of 6.25  percent and 6.60
     percent  on unpaid  principal  amounts  of  $2,160,000  and  $4,990,000  at
     December 31, 2001. Principal  installments are required to be paid annually
     on September 1. Interest  installments  are due  semi-annually on March 1st
     and  September  1st,  until  maturity on September 1, 2025. At December 31,
     2001, accrued interest is $146,342.

     Under agreements with the Trustee, the Partnership is required to make
     monthly escrow deposits for property taxes and insurance, and replacement
     of project assets, and is subject to restrictions as to operating policies,
     rental charges, operating expenditures, and distributions to partners.

                                      -9-
<PAGE>

                             Cascade Pines, L.P. II

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                                December 31, 2001


NOTE B - MORTGAGE PAYABLE (Continued)

     The  liability  of the  Partnership  under the  mortgage  is limited to the
     underlying value of the real estate collateral plus other amounts deposited
     with the Trustee.

     Aggregate annual maturities of the mortgage payable are as follows:

             December 31, 2002                             $          150,000
                          2003                                        160,000
                          2004                                        170,000
                          2005                                        180,000
                          2006                                        195,000
           2007 and thereafter                                      5,890,000
                                                            ------------------
                                                           $        6,745,000
                                                            ==================

NOTE C - SUBORDINATE NOTE PAYABLE

     In connection with the acquisition of the Project, the Partnership obtained
     an assignment  of the property  purchase  agreement,  granting the right to
     purchase the Project in exchange for a $1,100,000 note payable to URFA. The
     note is secured by a second deed of trust in the  property  and  equipment,
     and originally bore interest at a rate of 7 percent. During September 2000,
     the note was refinanced by URFA. As part of the refinancing, the balance of
     the note was restored to $1,100,000 and the interest rate was reduced to 3%
     per annum.  The note  matures  December  31,  2031.  At December  31, 2001,
     accrued  interest is $44,000.  Annual  payments of  principal  and interest
     commence  on March 31,  2002 and  continue  until  final  payment of unpaid
     principal and interest.

     Aggregate annual maturities of the subordinate note payable are as follows:

             December 31, 2002                                         23,121
                          2003                                         23,815
                          2004                                         24,529
                          2005                                         25,265
                          2006                                         26,023
                    Thereafter                                        977,247
                                                            ------------------
                                                           $        1,100,000
                                                            ==================

                                      -10-
<PAGE>

                             Cascade Pines, L.P. II

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                                December 31, 2001


NOTE D - HOUSING ASSISTANCE PAYMENT CONTRACT AGREEMENT

     The U.S.  Department of Housing and Urban  Development  ("HUD")  contracted
     with the Partnership  effective  October 1, 1995, under Section 8 of the U.
     S. Housing Act of 1937, to make housing assistance  payments ("HAP") to the
     Partnership  on behalf of  qualified  tenants  for a term of 15 years.  The
     Project has 70 units that receive HUD  assistance.  This agreement  expires
     October 1, 2010.

     The HAP contract is pledged as collateral  under the promissory  note loan.
     Payments  received  are  required to be  deposited  into the  revenue  fund
     pursuant to the Trust Indenture.  All disbursements are strictly controlled
     by the Trustee.

NOTE E - RESTRICTED CASH HELD BY BOND TRUSTEE

     Cash held by the Bond  Trustee  consists of various  funds  established  at
     closing of the bond issue as  required  by the trust  indenture.  The funds
     were established to remit the amounts required to pay for insurance, taxes,
     principal and interest when due and payable.  The debt service reserve fund
     is used  solely  to make up any  deficiency  in the bond fund  relating  to
     payments of interest  and  principal  on the bonds,  whether at maturity or
     upon earlier  redemption.  Investments  for the amounts held by the Trustee
     are subject to limitations.

     The balances in the funds at December 31, 2001, are as follows:

              Bond fund                                         $        119,692
              Debt service fund                                          593,091
              Maintenance and replacement fund                            28,900
              Revenue fund                                                58,280
              Transition fund                                            170,154
              Bond surplus fund                                              907
                                                                ----------------
                                                                $        971,024
                                                                ================

The Partnership will receive any amounts  remaining in the funds upon redemption
of the bonds after payment of all fees and expenses.

                                      -11-
<PAGE>

                             Cascade Pines, L.P. II

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                                December 31, 2001


NOTE F - RELATED PARTY TRANSACTIONS

     Management Fee
     --------------

     The Project is managed by Lane Management Company. The management agreement
     provides for a  management  fee of four  percent of gross  collections,  as
     defined. The fee incurred under the agreement in 2001 was $76,118.

     Incentive Management Fee
     ------------------------

     An affiliate  of the general  partner and the special  limited  partner can
     earn an  incentive  management  fee equal to 45 percent of  available  cash
     flow. During 2001, no fees were expensed.

     Due To Owner
     ------------

     The general  partner of the project has  periodically  made advances to the
     Project  during the year.  These  advances  are  non-interest  bearing  and
     payable upon demand. At December 31, 2001, the balance totals $262,366.

NOTE G - COMMITMENTS AND CONTINGENCIES

     Tax Credits
     -----------

     The  project's  low-income  housing tax credits will be  contingent  on its
     ability to  maintain  compliance  with  applicable  sections of Section 42.
     Failure to maintain  compliance  with occupancy  eligibility,  and/or gross
     rent,  or to correct  noncompliance  within a specified  time period  could
     result in  recapture of  previously  taken tax credits  plus  interest.  In
     addition,  such  potential  noncompliance  may require an adjustment to the
     contributed capital by the limited partner.

     Land Use Restriction
     --------------------

     The  Partnership  has  entered  into a Land Use  Restriction  Agreement  in
     connection  with its note with URFA which restricts the use of the Project.
     Under this land use restriction,  40 percent of the units must be leased to
     households whose income does not exceed 60 percent of the applicable county
     median income. The agreement expires on the latest of the redemption of the
     bonds or September 28, 2010.


                                  -12-

<PAGE>


                             Cascade Pines, L.P. II

                    NOTES TO FINANCIAL STATEMENTS (Continued)

                                December 31, 2001


NOTE G - COMMITMENTS AND CONTINGENCIES (Continued)

     Lawsuits
     --------

     Wagner  Munford and Tonya A. Blea vs. Brencor , Inc.,  Brencor  management,
     LLC,  Cascade Pines,  LPII,  Brencor Asset  Management,  Inc. and Southside
     Mechanical , Inc.

     On February 23, 2000,  the above two tenants  brought legal action  against
     the  partnership,  the  former  management  agent,  and  a  vendor  of  the
     partnership.  The claimants  assert claims for punitive  damages,  premises
     liability and negligence for injuries  allegedly  caused by carbon monoxide
     poisoning  within their building.  The claimants assert that a water heater
     located in a shed  attached to the rear of the  building  was the source of
     the carbon monoxide.  The water heater was installed during  renovations to
     the building done in 1996.

     During  2001,  this claim was settled  with the  claimants  and the lawsuit
     dismissed.  The settlement was paid by the Partnership's  insurance company
     and did not result in any loss to the Partnership.

     Anne Tanksley et al. Vs. Brencor,  Inc., Brencor  Management,  LLC, Cascade
     Pines, LPII, Brencor Asset Management,  Inc., Southside  Mechanical,  Inc.,
     Horn's Refurbishers and Gardner Service Corporation

     On August 13, 1999,  the relatives of a tenant brought legal action against
     the  partnership,  the former  management  agent,  and three vendors of the
     partnership.  The claimants  assert claims for punitive  damages,  premises
     liability  and  negligence  arising  out of the  carbon  monoxide  incident
     described above which resulted in the death of a tenant.

     During  2001,  this claim was settled  with the  claimants  and the lawsuit
     dismissed.  The settlement was paid by the Partnership's  insurance company
     and did not result in any loss to the Partnership.

                                      -13-

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