Exhibit
Number            Exhibit Description

EX   - 21.1 Financial  Statements of Yreka Investment Group, for the years ended
            December  31, 1999 and 1998  together  with  Independent  Auditors'
            Report Thereon; a significant subsidiary of the Partnership.

                                       39
<PAGE>

                             Yreka Investment Group

                                Table of Contents

                                                                           Page

Independent Auditors' Report                                                 41

        Financial Statements

        Balance Sheets                                                       42
        Statements of Operations                                             43
        Statements of Changes in Partners Capital                            46
        Statements of Cash Flows                                             47
        Notes to Financial Statements                                        49












                                       40
<PAGE>

                          INDEPENDENT AUDITORS' REPORT




To the Partners
Yreka Investment Group
A California Limited Partnership

     We have audited the accompanying  balance sheets of Yreka Investment Group,
a California  Limited  Partnership,  as of December  31, 1999 and 1998,  and the
related statements of operations,  changes in partners' capital,  and cash flows
for the years then ended.  These financial  statements are the responsibility of
the  Partnership's  management.  Our  responsibility is to express an opinion on
these financial statements based on our audits.

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

     In our opinion,  the financial statements referred to above present fairly,
in all material respects, the financial position of Yreka Investment Group as of
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years then ended,  in  conformity  with  generally  accepted  accounting
principles.

     In accordance with  Government  Auditing  Standards,  we have also issued a
report dated January 13, 2000, on our consideration of Yreka Investment  Group's
internal  control over financial  reporting and our tests of its compliance with
certain provisions of laws, regulations, contracts and grants.



                                   /s/ Tate, Propp, Beggs & Sugimoto
                                       An Accountancy Corporation


January 13, 2000
Sacramento, California


                                       41
<PAGE>



                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                                 BALANCE SHEETS
                           December 31, 1999 and 1998

<TABLE>
<CAPTION>


                                     ASSETS

                                                             1999                     1998
                                                        -------------             ------------
<S>                                                    <C>                       <C>

Current Project Assets:
 Cash                                                  $         696             $     10,035
 Restricted cash:
  Tenant security deposits - Note 2                            8,750                    8,750
  Taxes and insurance - Note 3                                21,361                   24,651
  USDA/RD reserve - Note 4                                   124,813                  113,617
 Accounts receivable                                           4,861                    5,147
 Prepaid expenses                                              2,280                    2,214
                                                        ------------             ------------
      Total current project assets                           162,761                  164,414

Property and equipment - Note 5                            1,589,673                1,626,528
                                                        ------------             ------------
        Total Assets                                    $  1,752,434             $  1,790,942
                                                        ============             ============
</TABLE>

                        LIABILITIES AND PARTNERS' CAPITAL
<TABLE>
<CAPTION>

<S>                                                     <C>                      <C>
Current Project Liabilities:
 Accounts payable - Note 7                               $          -             $      7,950
 Tenant security deposits - Note 2                              8,750                    8,750
 Note payable, current portion - Note 6                         4,324                    3,963
                                                         ------------             ------------
      Total current project liabilities                        13,074                   20,663

Long-Term Project Liabilities:
 Note payable, less current portion - Note 6                1,466,798                1,471,122

Non-Project Liabilities:
 Due to related party - Note 7                                  2,400                    2,400
                                                         ------------             ------------
      Total liabilities                                     1,482,272                1,494,185

Partners' capital                                             270,162                  296,757
                                                         ------------             ------------
        Total Liabilities and Partners' Capital          $  1,752,434             $  1,790,942
                                                         ============             ============

</TABLE>




                   The accompanying notes are an integral part
                          of these financial statements
                                       42

<PAGE>
                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                            STATEMENTS OF OPERATIONS
                 For the Years Ended December 31, 1999 and 1998

<TABLE>
<CAPTION>


                                                       1999                     1998
                                                    ----------               ----------
<S>                                               <C>                       <C>
Project Operating Income:
 Gross rent                                        $    69,801               $   65,101
 Rental assistance                                      86,951                   91,299
 Less vacancies                                         (1,567)                  (2,935)
                                                   -----------               ----------
 Net rent                                              155,185                  153,465
 Other project income:
  Late charges                                             218                      350
  Laundry income                                         1,991                    2,294
  Tenant damages                                         2,241                    1,501
 Interest income                                         4,115                    3,223
 Miscellaneous income                                        -                    9,800
                                                   -----------               ----------
        Total project operating income                 163,750                  170,633
                                                   -----------               ----------
Project Operating Expenses:
 Maintenance and operating:
  Caretaker                                              5,561                    7,681
  Supplies                                               4,981                    3,658
  Painting and decorating                                  402                       77
  General maintenance and repairs                        2,624                    4,178
  Snow removal                                            (400)                       -
  Elevator maintenance                                       -                        -
  Grounds maintenance                                    2,204                      498
  Services                                                 484                      772
  Furniture and furnishings replacement                  3,208                    2,982
  Other operating expenses                                   -                        -
                                                   -----------               ----------
        Total maintenance and operating                 19,064                   19,846
                                                   -----------               ----------
 Utilities:
  Electricity                                            1,205                    1,544
  Water                                                  5,183                    1,253
  Sewer                                                  6,534                    2,405
  Heating fuel/other                                     3,837                    2,935
  Garbage and trash removal                              3,307                    3,158
                                                   -----------               ----------
        Total utilities                                 20,066                   11,295
                                                   -----------               ----------

</TABLE>




                   The accompanying notes are an integral part
                          of these financial statements
                                       43

<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      STATEMENTS OF OPERATIONS (CONTINUED)
                 For the Years Ended December 31, 1999 and 1998

<TABLE>
<CAPTION>


                                                       1999                     1998
                                                    ----------               ----------
<S>                                                <C>                      <C>
Project Operating Expenses (continued):
 Administrative:
  Manager                                         $   11,465              $     9,242
  Management fees                                     17,712                   17,280
  Accounting/auditing                                  3,880                    3,770
  Bookkeeping                                            216                        -
  Legal                                                    -                        -
  Advertising                                            931                      467
  Telephone                                            1,047                    1,023
  Office supplies                                      2,442                    2,440
  Office furniture and equipment                         300                      125
  Training expense                                       231                      776
  Health insurance                                     1,508                    1,509
  Payroll taxes                                        1,712                    1,931
  Worker's compensation insurance                      1,799                    2,255
  Other administrative expenses                        1,332                    1,463
                                                  ----------               ----------
        Total administrative                          44,575                   42,281
                                                  ----------               ----------
 Taxes and Insurance:
  Real estate taxes                                   14,775                   20,051
  Special assessments                                      -                        -
  Other taxes, fees and permits                          910                       80
  Property insurance                                   4,494                    4,339
  Other insurance                                          -                        -
                                                  ----------               ----------
        Total taxes and insurance                     20,179                   24,470
                                                  ----------               ----------
        Total project operating expenses             103,884                   97,892
                                                  ----------               ----------
</TABLE>





                   The accompanying notes are an integral part
                          of these financial statements
                                       44

<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      STATEMENTS OF OPERATIONS (CONTINUED)
                 For the Years Ended December 31, 1999 and 1998
<TABLE>
<CAPTION>



                                                                     1999                     1998
                                                                  ----------               ----------
<S>                                                              <C>                      <C>
Other Project Income (Expenses):
 Interest subsidy - PASS Credit                                  $   94,672               $   94,672
 Depreciation and amortization                                      (36,855)                 (35,720)
 Interest expense:
  USDA/RD 1% interest                                               (34,242)                 (34,572)
  Interest subsidy                                                  (94,672)                 (94,672)
 Authorized capital improvements from USDA/RD reserve                (6,804)                  (1,935)
 Authorized capital improvements from unrestricted cash              (4,864)                  (4,557)

        Total other project income (expenses)                       (82,765)                 (76,784)
                                                                 ----------               ----------
Non-Project Expenses:
 Partnership administration fee                                       2,400                    2,400
 Limited partnership tax                                                  -                      800
 Tax administration fee                                                 800                        -
                                                                 ----------               ----------
    Total non-project expenses                                        3,200                    3,200
                                                                 ----------               ----------
          Net loss                                               $  (26,099)              $   (7,243)
                                                                 ==========               ==========
</TABLE>





                   The accompanying notes are an integral part
                          of these financial statements
                                       45

<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                   STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                 For the Years Ended December 31, 1999 and 1998

<TABLE>
<CAPTION>

                                                                 Limited
                                                                 Partner
                                                               -----------
                                            General                WNC
                                            Partner            California
                                          -----------            Housing
                                            Ronald             Tax Credits
                                          Bettencourt              L.P.               Total
                                          -----------          -----------         -----------
<S>                                      <C>                  <C>                 <C>

Balance, December 31, 1997                $     1,858          $   302,638         $   304,496


Return on investment - Note 8                      (5)                (491)               (496)


Net loss                                          (72)              (7,171)             (7,243)
                                          -----------          -----------         -----------

Balance, December 31, 1998                      1,781              294,976             296,757


Return on investment - Note 8                      (5)                (491)               (496)


Net loss                                         (261)             (25,838)            (26,099)
                                          -----------          -----------         -----------

Balance, December 31, 1999                $     1,515          $   268,647         $   270,162
                                          ===========          ===========         ===========

</TABLE>





                   The accompanying notes are an integral part
                          of these financial statements
                                       46

<PAGE>



                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                            STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 1999 and 1998
                           Increase (Decrease) in Cash

<TABLE>
<CAPTION>



                                                                  1999                   1998
                                                             ------------            ------------
<S>                                                         <C>                     <C>

Cash Flows From Operating Activities:
 Cash received from tenants for rent                        $    155,471            $    153,287
 Cash received from tenants for security deposits                      -                     250
 Miscellaneous cash received                                       8,565                  17,168
 Cash paid to suppliers and employees
  and for other restricted cash                                 (122,678)               (103,745)
 Mortgage interest paid                                          (34,242)                (34,572)
 Limited partnership tax paid                                       (800)                   (800)
                                                            ------------            ------------
      Net cash provided by operating activities                    6,316                  31,588
                                                            ------------            ------------
Cash Flows From Investing Activities:
 Capital expenditures                                                  -                  (7,950)
 Deposits to the USDA/RD reserve                                 (21,622)                (20,637)
 Withdrawals from the USDA/RD reserve                             10,426                   4,582
                                                            ------------            ------------
       Net cash used by investing activities                     (11,196)                (24,005)
                                                            ------------            ------------
Cash Flows From Financing Activities:
 Principal payments on note payable                               (3,963)                 (3,632)
 Return on investment                                               (496)                   (496)
                                                            ------------            ------------
       Net cash used by financing activities                      (4,459)                 (4,128)
                                                            ------------            ------------
Increase (decrease) in cash                                       (9,339)                  3,455

Cash, beginning of year                                           10,035                   6,580
                                                            ------------            ------------
Cash, end of year                                           $        696            $     10,035
                                                            ============            ============

</TABLE>








                   The accompanying notes are an integral part
                          of these financial statements
                                       47

<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      STATEMENTS OF CASH FLOWS (CONTINUED)
                 For the Years Ended December 31, 1999 and 1998
                           Increase (Decrease) in Cash

<TABLE>
<CAPTION>
                                                                1999                        1998
                                                            -----------                  -----------
<S>                                                        <C>                          <C>

Reconciliation of Net Loss to Net Cash
 Provided By Operating Activities:

Net loss                                                    $   (26,099)                 $    (7,243)
Adjustments to reconcile net loss to net
 cash provided by operating activities:
  Depreciation and amortization                                  36,855                       35,720
  (Increase) decrease in accounts receivable                        286                         (178)
  Increase in prepaid expenses                                      (66)                         (89)
  (Increase) decrease in other restricted cash                    3,290                       (4,822)
  Increase (decrease) in accounts payable                        (7,950)                       7,950
  Increase in tenant security deposits                                -                          250
                                                            -----------                  -----------
Net cash provided by operating activities                   $     6,316                  $    31,588
                                                            ===========                  ===========

</TABLE>







                                       48

<PAGE>
                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 1:        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

               Yreka Investment  Group, a California  Limited  Partnership,  was
               formed  in  October  1988 for the  purpose  of  constructing  and
               operating  a 36-unit  rural  rental  housing  project  located in
               Yreka, California,  known as Siskiyou Valley Apartments.  Project
               construction began in February 1989 and was completed in November
               1989. Rental operations commenced in November 1989.

               The  major   activities  of  the  Project  are  governed  by  the
               Partnership   agreement  and  the  United  States  Department  of
               Agriculture/Rural  Development (USDA/RD) pursuant to Sections 515
               and 521 of the Housing Act of 1949, as amended, which provide for
               interest  and  rental   subsidies,   respectively.   USDA/RD  has
               contracted  with  the  Partnership  to  make  rental   assistance
               payments to the Partnership on behalf of qualified  tenants.  The
               contract  terminates  upon total  disbursement  of the assistance
               obligation.

               The following is a summary of significant accounting policies:

               (a)  The financial  statements  are prepared on the accrual basis
                    of accounting.

               (b)  The Partnership is not an income tax paying entity although,
                    as a  limited  partnership,  it  is  subject  to  a  limited
                    partnership  tax. The net income or loss of the  Partnership
                    passes   through  to  and  is  reportable  by  the  partners
                    individually.  Therefore,  no provision  for income taxes is
                    reflected in these financial statements.

               (c)  Property  and  equipment  is  stated  at  cost.  Assets  are
                    depreciated  over their  estimated  useful  lives  using the
                    straight-line  method. The estimated useful lives range from
                    5 to 50 years.

               (d)  Loan acquisition costs and construction  period interest are
                    amortized over 50 years using the straight-line method.

               (e)  The Partnership  maintains its cash balances in institutions
                    where  they are  insured,  up to  $100,000,  by the  Federal
                    Deposit Insurance Corporation (FDIC).




                                       49

<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998



NOTE 1:        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

               (f)  The presentation of financial  statements in conformity with
                    generally accepted accounting principles 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  amounts of revenues
                    and expenses  during the reporting  period.  Actual  results
                    could differ from those estimates.

NOTE 2:        TENANT SECURITY DEPOSITS

               Tenant security  deposits are maintained in a separate account at
               a bank insured by the FDIC.

NOTE 3:        TAXES AND INSURANCE RESERVE

               A separate bank account has been  established to accumulate  cash
               transfers for the payment of property taxes and insurance. During
               1999 and 1998, $3,300 and $6,500,  respectively,  of unrestricted
               cash was transferred from this interest  bearing account.  During
               1998, a property tax refund of $9,800 was received and  deposited
               into this same account.

NOTE 4:        USDA/RD RESERVE

               The loan  agreement  with USDA/RD  requires  cash  transfers to a
               replacement  reserve  account  each year until  $149,380 has been
               accumulated.  Withdrawals  from the  reserve  account may be made
               only with the approval and countersignature of the USDA/RD.







                                       50

<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998



NOTE 4:         USDA/RD RESERVE (CONTINUED)

               Changes in the reserve for the years ended  December 31, 1999 and
               1998, are as follows:
<TABLE>
<CAPTION>
              <S>                                               <C>
               Balance, December 31, 1997                        $  97,562

                Deposits                                            18,000
                Interest earned                                      2,637
                Withdrawals                                         (1,935)
                Interest withdrawn                                  (2,627)
                Bank charges                                           (20)
                                                                 ---------
                Balance, December 31, 1998                         113,617

                Deposits                                            18,000
                Interest earned                                      3,622
                Withdrawals                                         (6,804)
                Interest withdrawn                                  (3,622)
                                                                 ---------
                Balance, December 31, 1999                       $ 124,813
                                                                 =========
</TABLE>


NOTE 5:        PROPERTY AND EQUIPMENT

               Property  and  equipment  at  December  31,  1999 and  1998,  was
               comprised of the following:
<TABLE>
<CAPTION>
                                                                       1999                    1998
                                                                   -----------              -----------
              <S>                                                <C>                       <C>

               Land                                               $   157,378               $   157,378
                Building                                             1,786,004                1,786,004
                Furniture and equipment                                100,405                  100,405
                                                                   -----------              -----------
                                                                     2,043,787                2,043,787
                Less accumulated depreciation and amortization         454,114                  417,259
                                                                   -----------              -----------
                    Total property and equipment                   $ 1,589,673              $ 1,626,528
</TABLE>

NOTE 6:        NOTE PAYABLE

               The  Partnership  has  a  note  payable  to  USDA/RD  in  monthly
               installments  of $11,073  including  interest at 8.75% per annum,
               due  January 1,  2039.  The note is secured by a deed of trust on
               the apartment project.






                                       51

<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998



NOTE 6:        NOTE PAYABLE (CONTINUED)

               The  Partnership has entered into an interest  subsidy  agreement
               with USDA/RD.  USDA/RD provides a monthly interest subsidy in the
               amount of $7,889,  which reduces the  effective  interest rate to
               approximately  1% over  the  term of the  loan.  The  subsidy  is
               credited to subsidy income,  and interest at 8.75% is included in
               interest expense.  The USDA/RD regulatory  agreement provides for
               USDA/RD to establish and control the allowable rents.

               Principal  payments for the succeeding  five years and thereafter
               are as follows:

                   Year Ending December 31:
                               2000                               $       4,324
                               2001                                       4,718
                               2002                                       5,148
                               2003                                       5,617
                               2004                                       6,128
                         Thereafter                                   1,445,187
                                                                  -------------
                              Total                                  $1,471,122
                                                                  =============

NOTE 7:        RELATED PARTY TRANSACTIONS

               Ronald  Bettencourt,  general  partner of the Project,  is also a
               shareholder in The CBM Group,  Inc. The CBM Group,  Inc. provides
               management  services  to  the  Project.  Other  related  entities
               include Consolidated Building Maintenance,  a division of The CBM
               Group, Inc., and Atlantic Vending Services, a division of Capital
               Resources,  Inc.  The  general  partner of the  Project is also a
               shareholder in Capital Resources,  Inc. Atlantic Vending Services
               is responsible for laundry money  collection and laundry facility
               maintenance in accordance with USDA/RD  procedures.  Consolidated
               Building  Maintenance was formed to provide maintenance  services
               with prior USDA/RD  approval.  The general partner of the Project
               is also a partner in CBM Management Group.

               Partnership Administration Fee

               In accordance  with the  Partnership  agreement,  the Partnership
               accrued, as a non-project  expense,  $2,400 for each of the years
               ended December 31, 1999 and 1998,  payable to the general partner
               for services  rendered in connection with the  administration  of
               the business and affairs of the Partnership. At December 31, 1999
               and 1998, $2,400 was payable under this agreement.






                                       52

<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998



NOTE 7:        RELATED PARTY TRANSACTIONS (CONTINUED)

               Tax Administration Fee

               During 1999, the Partnership paid The CBM Group, Inc. an $800 tax
               administration  fee from the 1998  earned  return on  investment,
               which was charged to non-project operations.

               Management Fees

               Management fees paid to The CBM Group, Inc. during 1999 and 1998,
               totaled $17,712 and $17,280, respectively.

               Maintenance

               At  December  31,  1998,  accounts  payable  consisted  of $7,950
               payable  to   Consolidated   Building   Maintenance  for  project
               maintenance expenses incurred during 1998.

NOTE 8:        PARTNERSHIP PROFITS, LOSSES AND DISTRIBUTIONS

               Profits and losses,  as adjusted  for certain  provisions  of the
               Partnership  agreement,  are allocated 1% to the general  partner
               and  99% to  the  limited  partner.  Under  USDA/RD  regulations,
               distributions  to partners  may be made from  project  operations
               only to the extent funds exceed the required contributions to the
               cash reserve account.  Annual  distributions are limited to 8% of
               the Partnership's  initial capital  investment.  If the return on
               investment is not paid in a given year, any unpaid portion may be
               carried forward for one year and paid if earned.  During 1999 and
               1998, a portion of the 1998 and 1997 earned return on investment,
               $3,200  each  year,  was  used to pay  non-project  expenses  and
               liabilities.


                                       53

<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 1999 and 1998


NOTE 9:         TAXABLE LOSS

               A  reconciliation  of the  financial  statement  net  loss to the
               taxable loss of the Partnership at December 31, 1999 and 1998, is
               as follows:
<TABLE>
<CAPTION>
                                                                                         1999                      1998
                                                                                     ------------              ------------
               <S>                                                                  <C>                       <C>

                Financial statement net loss                                         $    (26,099)             $    (7,243)

                Adjustments:
                 Excess of tax depreciation and amortization
                  over financial statement depreciation and
                  amortization                                                            (30,628)                 (29,219)
                 Expenses reported on financial statements in
                  excess of tax return expenses                                             7,950                        -
                 Expenses reported on tax return in excess of
                  financial statement expenses                                                  -                   (7,950)
                 Miscellaneous                                                                  -                        1
                                                                                     ------------               ----------
                      Taxable loss                                                   $    (48,777)              $  (44,411)
                                                                                     ============               ==========
</TABLE>

NOTE 10:       CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS

               The Project's operations are concentrated in the multifamily real
               estate  market.  In addition,  the Project  operates in a heavily
               regulated environment.  The operations of the Project are subject
               to  the  administrative  directives,  rules  and  regulations  of
               federal, state and local regulatory agencies,  including, but not
               limited to, USDA/RD.  Such administrative  directives,  rules and
               regulations  are  subject to change by an act of  congress  or an
               administrative change mandated by USDA/RD. Such changes may occur
               with little notice or  inadequate  funding to pay for the related
               cost, including the additional  administrative  burden, to comply
               with a change.


                                       54

<PAGE>

INDEPENDENT  AUDITORS'  REPORT  ON  COMPLIANCE  AND  ON  INTERNAL  CONTROL  OVER
FINANCIAL  REPORTING  BASED ON AN AUDIT OF  FINANCIAL  STATEMENTS  PERFORMED  IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS



To the Partners
Yreka Investment Group
A California Limited Partnership

We have audited the financial statements of Yreka Investment Group, a California
Limited  Partnership,  as of and for the year ended  December 31, 1999, and have
issued our report  thereon  dated  January 13, 2000.  We conducted  our audit in
accordance  with  generally   accepted  auditing  standards  and  the  standards
applicable  to financial  audits  contained in  Government  Auditing  Standards,
issued by the Comptroller General of the United States.

Compliance

As part of obtaining reasonable assurance about whether Yreka Investment Group's
financial  statements are free of material  misstatement,  we performed tests of
its  compliance  with certain  provisions  of laws,  regulations,  contracts and
grants,  noncompliance with which could have a direct and material effect on the
determination of financial statement amounts.  However,  providing an opinion on
compliance  with  those  provisions  was not an  objective  of our  audit,  and,
accordingly,  we do not  express  such an  opinion.  The  results  of our  tests
disclosed no instances of  noncompliance  that are required to be reported under
Government Auditing Standards.

Internal Control Over Financial Reporting

In planning and performing our audit,  we considered  Yreka  Investment  Group's
internal  control over  financial  reporting in order to determine  our auditing
procedures for the purpose of expressing our opinion on the financial statements
and not to provide  assurance on the internal control over financial  reporting.
Our  consideration  of the internal  control over financial  reporting would not
necessarily  disclose  all  matters  in  the  internal  control  over  financial
reporting that might be material weaknesses.  A material weakness is a condition
in  which  the  design  or  operation  of one or  more of the  internal  control
components does not reduce to a relatively low level the risk that misstatements
in amounts that would be material in relation to the financial  statements being
audited may occur and not be detected within a timely period by employees in the
normal  course of  performing  their  assigned  functions.  We noted no  matters
involving the internal  control over financial  reporting and its operation that
we consider to be material weaknesses.

                                       55
<PAGE>

This  report is  intended  solely for filing with  regulatory  agencies  and the
United States Department of Agriculture/Rural Development and is not intended to
be and should not be used by anyone other than these specific parties.


                                 /s/ Tate, Propp, Beggs & Sugimoto
                                     An Accountancy Corporation


January 13, 2000
Sacramento, California

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