YREKA INVESTMENT GROUP
                        A California Limited Partnership

                              FINANCIAL STATEMENTS
                           December 31, 2002 and 2001










<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership


                                    CONTENTS



                                                                            Page
                                                                            ----
INDEPENDENT AUDITORS' REPORT ON THE
  FINANCIAL STATEMENTS                                                      1


FINANCIAL STATEMENTS
  Balance Sheets                                                            2
  Statements of Operations                                                3 - 5
  Statements of Changes in Partners' Capital                                6
  Statements of Cash Flows                                                7 - 8
  Notes to Financial Statements                                           9 - 14


INDEPENDENT AUDITORS' REPORT ON THE
  SUPPORTING DATA REQUIRED BY USDA/RD                                      15


SUPPORTING DATA REQUIRED BY USDA/RD                                      16 - 25


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                          26 - 27


<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, 2002 and 2001, 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 auditing standards generally
accepted  in the United  States of America  and  Government  Auditing  Standards
issued by the Comptroller General of the United States.  Those standards require
that we plan and perform the audit to obtain reasonable  assurance about whether
the financial  statements are free of material  misstatement.  An audit includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

     In our opinion, the financial statements referred to above present
fairly,  in all material  respects,  the financial  position of Yreka Investment
Group as of December 31, 2002 and 2001,  and the results of its  operations  and
its  cash  flows  for the  years  then  ended,  in  conformity  with  accounting
principles generally accepted in the United States of America.

     In accordance with Government Auditing Standards, we have also issued a
report dated January 8, 2003, 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. That report is an
integral  part of an audit  performed in  accordance  with  Government  Auditing
Standards and should be read in conjunction  with this report in considering the
results of our audit.

                                              Tate, Propp, Beggs & Sugimoto
                                              An Accountancy Corporation


January 8, 2003
Sacramento, California


<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                                 BALANCE SHEETS
                           December 31, 2002 and 2001


                                     ASSETS
<TABLE>
<CAPTION>

                                                                                                2002                 2001
                                                                                           ----------------    -----------------
<S>                                                                                        <C>                  <C>
Current Project Assets:
 Cash                                                                                      $          5,380     $        11,657
   Restricted cash:
     Tenant security deposits                                                                         8,750               8,750
     Taxes and insurance                                                                              5,561               5,850
     USDA/RD reserve                                                                                143,058             140,717
   Accounts receivable                                                                                9,665               8,610
   Prepaid expenses                                                                                   4,737               2,730
                                                                                           ----------------    -----------------

       Total current project assets                                                                 177,151             178,314

Property and equipment                                                                            1,479,105           1,515,961
                                                                                           ----------------    -----------------

         Total Assets                                                                      $      1,656,256     $     1,694,275
                                                                                           ================    =================

                        LIABILITIES AND PARTNERS' CAPITAL

Current Project Liabilities:
   Accounts payable                                                                        $                    $
                                                                                                      1,787                   -
   Tenant security deposits                                                                           8,750               8,750
   Note payable, current portion                                                                      5,617               5,148
                                                                                           ----------------    -----------------

       Total current project liabilities                                                             16,154              13,898

Long-Term Project Liabilities:
   Note payable, less current portion                                                             1,451,315           1,456,932

Non-Project Liabilities:
   Due to related party                                                                               1,980               2,400
                                                                                           ----------------    -----------------

       Total liabilities                                                                          1,469,449           1,473,230

Partners' capital                                                                                   186,807             221,045
                                                                                           ----------------    -----------------

         Total Liabilities and Partners' Capital                                           $      1,656,256       $   1,694,275
                                                                                              ===============    =================
</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements
                                       2
<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                            STATEMENTS OF OPERATIONS
                 For the Years Ended December 31, 2002 and 2001
<TABLE>
<CAPTION>


                                                                                                2002                 2001
                                                                                           ----------------    -----------------
<S>                                                                                        <C>                 <C>
Project Operating Income:
   Gross rent                                                                              $        64,160     $        64,362
   Rental assistance                                                                               112,465             103,848
   Less vacancies                                                                                   (5,613)             (2,177)
                                                                                           ----------------    -----------------
   Net rent                                                                                        171,012             166,033
   Other project income:
     Late charges                                                                                      464                 324
     Laundry income                                                                                  1,458               1,645
     Tenant damages                                                                                  3,860               2,109
   Interest income                                                                                   2,116               4,019
                                                                                           ----------------    -----------------
       Total project operating income                                                              178,910             174,130
                                                                                           ----------------    -----------------

Project Operating Expenses:
   Maintenance and operating:
     Caretaker                                                                                      12,395               8,978
     Supplies                                                                                        2,420               2,257
     Painting and decorating                                                                           840                 531
     General maintenance and repairs                                                                 1,362                 967
     Snow removal                                                                                        -                   -
     Elevator maintenance                                                                                -                   -
     Grounds maintenance                                                                               274                 480
     Services                                                                                          370                 566
     Furniture and furnishings replacement                                                           2,133               2,113
     Other operating expenses                                                                            -                   -
                                                                                           ----------------    -----------------

       Total maintenance and operating                                                              19,794              15,892
                                                                                           ----------------    -----------------

   Utilities:
     Electricity                                                                                     2,140               1,919
     Water                                                                                           9,670               9,460
     Sewer                                                                                           7,638               7,385
     Heating fuel/other                                                                              3,605               3,866
     Garbage and trash removal                                                                       3,695               3,510
     Other utilities                                                                                     -
                                                                                                                        (2,191)
                                                                                           ----------------    -----------------

       Total utilities                                                                              26,748              23,949
                                                                                           ----------------    -----------------
</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements
                                       3
<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      STATEMENTS OF OPERATIONS (CONTINUED)
                 For the Years Ended December 31, 2002 and 2001
<TABLE>
<CAPTION>


                                                                                                2002                 2001
                                                                                           ----------------    -----------------
<S>                                                                                        <C>                 <C>
Project Operating Expenses (Continued):
   Administrative:
     Manager                                                                               $         10,254    $          9,832
     Management fees                                                                                 19,008              17,928
     Accounting/auditing                                                                              4,240               4,120
     Bookkeeping                                                                                          -                 864
     Legal                                                                                              953                   -
     Advertising                                                                                        335                 151
     Telephone                                                                                        1,091                 815
     Office supplies                                                                                  2,885               2,536
     Office furniture and equipment                                                                     223                 293
     Training expense                                                                                   530                   -
     Health insurance                                                                                 3,738               3,314
     Payroll taxes                                                                                    2,195               1,831
     Worker's compensation insurance                                                                  3,822               2,616
     Other administrative expenses                                                                    1,226                 946
                                                                                           ----------------    -----------------

       Total administrative                                                                          50,500              45,246
                                                                                           ----------------    -----------------

   Taxes and insurance:
     Real estate taxes                                                                               13,551              13,551
     Special assessments                                                                                  -                   -
     Other taxes, fees and permits                                                                    1,168                 899
     Property insurance                                                                               3,782               4,540
     Other insurance                                                                                  3,022                 578
                                                                                           ----------------    -----------------

       Total taxes and insurance                                                                     21,523              19,568
                                                                                           ----------------    -----------------

       Total project operating expenses                                                             118,565             104,655
                                                                                           ----------------    -----------------
</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements
                                       4
<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      STATEMENTS OF OPERATIONS (CONTINUED)
                 For the Years Ended December 31, 2002 and 2001
<TABLE>
<CAPTION>


                                                                                                2002                 2001
                                                                                           ----------------    -----------------
<S>                                                                                         <C>                 <C>
Other Project Income (Expenses):
   Interest subsidy - PASS Credit                                                           $       94,672      $       94,672
   Depreciation and amortization                                                                   (36,856)            (36,856)
   Interest expense:
     USDA/RD 1% interest                                                                           (33,057)            (33,487)
     Interest subsidy                                                                              (94,672)            (94,672)
   Authorized capital improvements from USDA/RD reserve                                            (20,884)            (13,050)
   Authorized capital improvements from excess USDA/RD reserve                                        (510)                  -
                                                                                           ----------------    -----------------
       Total other project income (expenses)                                                       (91,307)            (83,393)
                                                                                           ----------------    -----------------

Non-Project Expenses:
   Partnership administration fee                                                                    1,980               2,400
   Tax administration fee                                                                                -                 800
                                                                                           ----------------    -----------------

       Total non-project expenses                                                                    1,980               3,200
                                                                                           ----------------    -----------------

         Net loss                                                                           $      (32,942)     $      (17,118)
                                                                                           ================    =================

</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements
                                       5

<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                       STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
                 For the Years Ended December 31, 2002 and 2001
<TABLE>
<CAPTION>


                                                             General                Limited
                                                             Partner                Partner
                                                        -------------------     -----------------
                                                                                      WNC
                                                                                   California
                                                            Ronald D.               Housing
                                                           Bettencourt            Tax Credits                Total
                                                        -------------------     -----------------     --------------------

<S>               <C> <C>                               <C>                     <C>                  <C>
Balance, December 31, 2000                              $            1,200      $        237,459     $           238,659

Return on investment                                                    (5)                 (491)                   (496)

Net loss                                                              (171)              (16,947)                (17,118)
                                                        -------------------     -----------------     --------------------

Balance, December 31, 2001                                           1,024               220,021                 221,045

Return on investment                                                   (13)               (1,283)                 (1,296)

Net loss                                                              (329)              (32,613)                (32,942)
                                                        -------------------     -----------------     --------------------

Balance, December 31, 2002                              $              682      $        186,125     $           186,807
                                                        ===================     =================     ====================
</TABLE>


                   The accompanying notes are an integral part
                          of these financial statements
                                       6

<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                            STATEMENTS OF CASH FLOWS
                 For the Years Ended December 31, 2002 and 2001
                           Increase (Decrease) in Cash
<TABLE>
<CAPTION>


                                                                                                2002                 2001
                                                                                           ----------------    -----------------
<S>                                                                                         <C>                 <C>
Cash Flows From Operating Activities:
   Cash received from tenants for rent                                                      $      169,957      $      159,445
   Miscellaneous cash received                                                                       7,898               8,097
   Cash paid to suppliers and employees and
     for other restricted cash                                                                    (141,070)           (117,635)
   Mortgage interest paid                                                                          (33,057)            (33,487)
   Limited partnership tax paid                                                                       (800)               (800)
                                                                                           ----------------    -----------------

     Net cash provided by operating activities                                                       2,928              15,620
                                                                                           ----------------    -----------------

Cash Flows From Investing Activities:
   Deposits to the USDA/RD reserve                                                                 (24,288)            (24,480)
   Withdrawals from the USDA/RD reserve                                                             21,947              16,901
                                                                                           ----------------    -----------------

     Net cash used by investing activities                                                          (2,341)             (7,579)
                                                                                           ----------------    -----------------

Cash Flows From Financing Activities:
   Principal payments on note payable                                                               (5,148)             (4,718)
   Return on investment                                                                             (1,296)               (496)
   Decrease in due to related party                                                                   (420)                  -
                                                                                           ----------------    -----------------

     Net cash used by financing activities                                                          (6,864)             (5,214)
                                                                                           ----------------    -----------------

Increase (decrease) in cash                                                                         (6,277)              2,827

Cash, beginning of year                                                                             11,657               8,830
                                                                                           ----------------    -----------------

Cash, end of year                                                                          $         5,380      $       11,657
                                                                                           ================    =================
</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements
                                       7
<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                            STATEMENTS OF CASH FLOWS (CONTINUED)
                 For the Years Ended December 31, 2002 and 2001
                           Increase (Decrease) in Cash
<TABLE>
<CAPTION>


Reconciliation of Net Loss to Net
  Cash Provided By Operating Activities:                                                        2002                 2001
----------------------------------------
                                                                                           ----------------    -----------------

<S>                                                                                         <C>                 <C>
Net loss                                                                                    $      (32,942)     $      (17,118)
Adjustments to reconcile net loss to net
   cash provided by operating activities:
   Depreciation and amortization                                                                    36,856              36,856
   Increase in accounts receivable                                                                  (1,055)             (6,588)
   Increase in prepaid expenses                                                                     (2,007)               (342)
   Decrease in other restricted cash                                                                   289               2,812
   Increase in accounts payable                                                                      1,787                   -
                                                                                           ----------------    -----------------
Net cash provided by operating activities                                                  $          2,928    $        15,620
                                                                                           ================    =================
</TABLE>

                   The accompanying notes are an integral part
                          of these financial statements
                                       8
<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


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).


                                       9
<PAGE>
                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2002 and 2001

NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

                  (f) The  presentation  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 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 2001,
         $3,000 of unrestricted  cash was transferred from this interest bearing
         account.

NOTE 4: USDA/RD RESERVE

         The  loan  agreement   with  USDA/RD   requires  cash  transfers  to  a
         replacement   reserve   account  each  year  until  $201,600  has  been
         accumulated. Withdrawals from the reserve account may be made only with
         the approval and countersignature of the USDA/RD.


                                       10
<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2002 and 2001
<TABLE>
<CAPTION>

NOTE 4:         USDA/RD RESERVE (CONTINUED)

                Changes in the reserve for the years ended December 31, 2002 and 2001, are as follows:

<S>                                                                                                             <C>
                Balance, December 31, 2000                                                                      $      133,138

                Deposits                                                                                                20,629
                Interest earned                                                                                          3,851
                Withdrawals                                                                                            (13,050)
                Interest withdrawn                                                                                      (3,851)
                                                                                                               -----------------
                Balance, December 31, 2001                                                                             140,717

                Deposits                                                                                                22,235
                Interest earned                                                                                          2,053
                Withdrawals                                                                                            (21,394)
                Interest withdrawn                                                                                        (543)
                Bank charges                                                                                               (10)
                                                                                                               -----------------
                Balance, December 31, 2002                                                                      $      143,058
                                                                                                               =================
</TABLE>
<TABLE>
<CAPTION>

                The underfunding of this account at December 31, 2001 was corrected in 2002.

NOTE 5:         PROPERTY AND EQUIPMENT

                Property and equipment at December 31, 2002 and 2001, was comprised of the following:

                                                                                                  2002                2001
                                                                                           ----------------    -----------------

<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                                     564,682             527,826
                                                                                           ----------------    -----------------

                  Total property and equipment                                              $    1,479,105      $    1,515,961
                                                                                           ================    =================
</TABLE>

                                       11
<PAGE>
                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


         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, 2040. The note is secured by a deed of trust on
                  the apartment project.

                  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:
                              ------------------------
                                        2003                      $        5,617
                                        2004                               6,128
                                        2005                               6,687
                                        2006                               7,296
                                        2007                               7,960
                                     Thereafter                        1,423,244
                                                                  --------------
                                       Total                      $    1,456,932
                                                                  ==============

         NOTE     7: RELATED PARTY TRANSACTIONS

                     Fees Paid to Related Entities
                     -----------------------------

                  The  general  partner  of the  Project is a partner in The CBM
                  Management Group. The general partner of the Project is also a
                  shareholder in the following related entities:

         o        The CBM  Group,  Inc.  and  its  divisions:  CBM  Diversified,
                  Consolidated Building Maintenance,  and CBM Landscape.  During
                  2002 and  2001,  The CBM  Group,  Inc.  was paid  $19,008  and
                  $17,928, respectively, in management fees and $864 in 2001 for
                  automation  services.  CBM  Diversified was paid $572 and $490
                  during 2002 and 2001, respectively, for credit checking fees.
         o        Capital  Resources,  Inc. and its division,  Atlantic  Vending
                  Services.  During 2002 and 2001, Atlantic Vending Services was
                  paid $1,458 and  $1,645,  respectively,  for laundry  facility
                  maintenance.

                                       12
<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 7: RELATED PARTY TRANSACTIONS (CONTINUED)

        Fees Paid to Related Entities (Continued)

        o       Rural Housing Reinsurance, the surety company which provides the
                insurance  coverage for the Project.  The general partner owns a
                less than 5%  interest  in the  surety  company,  which was paid
                $5,789  and  $4,882  during  2002 and  2001,  respectively,  for
                insurance premiums.

        During 2001, a tax administration fee of $800 was paid to The CBM Group,
        Inc. as a non-project expense. (See Note 8.)

        The Project  also pays The CBM Group,  Inc. a ten-cent  per copy fee for
        bulk copies of forms.

        Fees Paid in Accordance with the Partnership Agreement.
        -------------------------------------------------------

        In  accordance  with the  partnership  agreement,  a fee for each of the
        years  ended  December  31, 2002 and 2001,  was  charged to  non-project
        expenses as follows:

        Fee               Partner                           2002            2001
        ---               -------                           ----           -----
        Partnership       Ronald D.
        administration    Bettencourt                      $1,980         $2,400

        At December  31, 2002 and 2001,  $1,980 and $2,400,  respectively,  were
        payable to the general  partner for accrued  partnership  administration
        fees.

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 2002 and 2001,  a portion of the 2001 and 2000  earned  return on
        investment, $2,400 and $3,200, respectively, was used to pay non-project
        expenses and liabilities.

                                       13
<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                          NOTES TO FINANCIAL STATEMENTS
                           December 31, 2002 and 2001


NOTE 9:         TAXABLE LOSS

                A  reconciliation  of the  financial  statement  net loss to the
                taxable loss of the  Partnership  at December 31, 2002 and 2001,
                is as follows:
<TABLE>
<CAPTION>


                                                                                                  2002                2001
                                                                                           ----------------    -----------------

<S>                                                                                         <C>                 <C>
                 Financial statement net loss                                               $      (32,942)     $      (17,118)

                 Adjustments:
                    Excess of tax depreciation and amortization over
                      financial statement depreciation and amortization                            (28,999)            (28,999)
                    Expenses reported on tax return in excess of
                      financial statement expenses                                                    (420)                  -
                                                                                           ----------------    -----------------

                        Taxable loss                                                        $      (62,361)     $      (46,117)
                                                                                           ================    =================
</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.

                                       14
<PAGE>









                       SUPPORTING DATA REQUIRED BY USDA/RD



<PAGE>



                       INDEPENDENT AUDITORS' REPORT ON THE
                       SUPPORTING DATA REQUIRED BY USDA/RD



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, 2002,
and have issued our report  thereon dated January 8, 2003. Our audit was made in
accordance with auditing  standards  generally  accepted in the United States of
America and Government  Auditing Standards issued by the Comptroller  General of
the United  States  and,  accordingly,  included  such  tests of the  accounting
records and such other  auditing  procedures as we  considered  necessary in the
circumstances.

        Our audit was made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information provided on
pages 16 through 25, including USDA/RD Form RD 1930-7,  has been prepared in the
format  and  following  the  instructions  of the  USDA/RD.  Those  instructions
prescribe  practices  that differ in some  respects from  accounting  principles
generally   accepted  in  the  United  States  of  America.   Accordingly,   the
accompanying  forms are not intended to present financial position or results of
operations in conformity with accounting  principles  generally  accepted in the
United  States of America.  The  information  in USDA/RD Form RD 1930-7 has been
subjected to the auditing procedures applied in the audit of the basic financial
statements  and, in our opinion,  is fairly  stated in all material  respects in
accordance with practices and instructions prescribed by USDA/RD.

        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.



                                           Tate, Propp, Beggs & Sugimoto
                                           An Accountancy Corporation


January 8, 2003
Sacramento, California


<PAGE>


                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      SUPPLEMENTAL INFORMATION REQUIRED FOR
                      2002 ANNUAL REPORTS FOR 515 PROJECTS
<TABLE>
<CAPTION>


<S>                        <C>                                                                   <C>
                           Requirement                                                           Response

1.    Identity of interest.                                            See the audited financial statements of Yreka Investment
                                                                       Group, a California Limited Partnership, as of and for the
                                                                       year ended December 31, 2002, and the accompanying Note 7 -
                                                                       Related Party Transactions to the audited financial
                                                                       statements dated January 8, 2003.

2.    Funds paid to management firm in excess of the approved
      management fee.                                                  $0

3.    Incumbrance of project accounts.                                 None

4.    Project accounts.                                                Cash, account #12589-08513 maintained at Bank of America,
                                                                       2885 Bell Road, Auburn, CA 95603, with a balance of $5,230,
                                                                       non-interest bearing.

                                                                       Tenant security deposits, account #12589-01408 maintained at
                                                                       Bank of America, 2885 Bell Road, Auburn, CA 95603, with a
                                                                       balance of $8,750, non-interest bearing.

                                                                       Taxes and insurance reserve, account #12587-01409 maintained
                                                                       at Bank of America, 2885 Bell Road, Auburn, CA 95603, with a
                                                                       balance of $5,561, interest at 0.65% annually.

                                                                       USDA/RD reserve, account #3150963973 maintained at Union
                                                                       Bank of California, 874 Lincoln Way, Auburn, CA 95603, with
                                                                       a balance of $3,336, interest at 0.75% annually.

                                                                       USDA/RD reserve, account #190002253 maintained at Bank of
                                                                       Sacramento, 1750 Howe Avenue, Suite 100, Sacramento, CA
                                                                       95825, with a balance of $81,451, interest at 0.90% annually.
</TABLE>



                                       22

<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      SUPPLEMENTAL INFORMATION REQUIRED FOR
                2002 ANNUAL REPORTS FOR 515 PROJECTS (CONTINUED)
<TABLE>
<CAPTION>


<S>                     <C>                                                                      <C>
                        Requirement                                                              Response

4.    Project accounts (continued).                                    USDA/RD reserve, account #92-24126988, maintained at
                                                                       California Federal Bank, 2845 Bell Road, Auburn, CA 95603,
                                                                       with a balance of $58,271, interest at 1.242% annually.

5.    Total cash paid to owners in 2002.                               $3,696 return on investment was paid in 2002.  Of that
                                                                       amount, $2,400 was used to pay non-project expenses and
                                                                       liabilities, and $1,296 was paid to the owners.
</TABLE>


                                       23
<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      SUPPLEMENTAL INFORMATION REQUIRED FOR
                2002 ANNUAL REPORTS FOR 515 PROJECTS (CONTINUED)


                              Requirement/Response
                              --------------------
<TABLE>
<CAPTION>

6.    USDA/RD reserve activity.

      The reserve account activity for the year ended December 31, 2002 is summarized below:

                                                                                              Actual              Required
                                                                                         -----------------    -----------------

<S>                                                                  <C>                  <C>                   <C>
     Required reserve balance, December 31, 2001                                                                $      142,792

     Actual reserve balance, December 31, 2001                                            $      140,717

     Required 2002 annual reserve deposit                                                                               20,160

     Actual 2002 reserve account deposit                                                          22,235

     Less 2002 authorized withdrawals:
        06/01 Replace carpet and vinyl                               $        1,650
        07/01 Replace carpet and vinyl                                        3,198
        08/21 Reimburse legal fees                                              674
        09/18 Seal and stripe parking lot                                     4,745
        09/18 Replace carpet                                                  1,404
        09/18 Stove                                                             402
        10/11 Refrigerator                                                      426
        10/30 Weed removal, bark for planters                                 4,685
        11/26 Preventive maintenance on all units                             3,700
                                                                     ----------------
     Total 2002 authorized withdrawals                                                           (20,884)              (20,884)
                                                                                                               -----------------

     Less 2002 authorized withdrawal from excess
        reserves:
        08/21 Reimburse legal fees                                                                  (510)

     Net interest earned                                                                           1,510

     Bank charges                                                                                    (10)
                                                                                         -----------------
     Required reserve balance, December 31, 2002                                                                       142,068

     Actual reserve balance, December 31, 2002                                            $      143,058               143,058
                                                                                         =================     -----------------

     Overfunded                                                                                               $
                                                                                                                           990
                                                                                                              =================
</TABLE>

                                       24
<PAGE>

                             YREKA INVESTMENT GROUP
                        A California Limited Partnership

                      SUPPLEMENTAL INFORMATION REQUIRED FOR
                2002 ANNUAL REPORTS FOR 515 PROJECTS (CONTINUED)
<TABLE>
<CAPTION>


                              Requirement/Response
                              --------------------
<S>                                                                                                              <C>

7.    Owners' return on investment.

      Total project operating income                                                                             $     178,910

      Less total project operating expenses                                                                           (118,565)
                                                                                                               -----------------

         Net project income                                                                                             60,345

      Less authorized capital improvements from USDA/RD reserve                                                        (20,884)

      Less authorized capital improvement from excess USDA/RD reserve                                                     (510)

      Less debt service:
         Principal                                                                                                      (5,148)
         Interest                                                                                                      (33,057)

      Less required USDA/RD reserve contribution                                                                       (20,160)

      Add authorized USDA/RD reserve withdrawals                                                                        20,884

      Add authorized excess USDA/RD reserve withdrawals                                                                    510
                                                                                                               -----------------

         Surplus cash                                                                                          $         1,980
                                                                                                               =================

      Budgeted return on investment                                                                            $         3,696
                                                                                                               =================

      Available for distribution in 2003                                                                       $         1,980

      Less partnership administration fee
        (Ronald D. Bettencourt)                                                                                         (1,980)
                                                                                                               -----------------

      Net available for distribution in 2003                                                                   $             -
                                                                                                               =================
</TABLE>
                                       25

<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


<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, 2002,
and have issued our report thereon dated January 8, 2003. We conducted our audit
in accordance with auditing standards generally accepted in the United States of
America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States.

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.


<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.


                                          Tate, Propp, Beggs & Sugimoto
                                          An Accountancy Corporation


January 8, 2003
Sacramento, California