INDEPENDENCE TAX CREDIT PLUS L P II - 10-K Annual Report

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

FORM 10-K
(Mark One)

X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2004

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ----- EXCHANGE ACT OF 1934

Commission File Number 33-37704-03

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

Delaware 13-3646846
- -------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

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

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

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

None

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

Title of Class
--------------
Limited Partnership Interests and Beneficial Assignment Certificates

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

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes No X
----- -----

The approximate aggregate book value of the voting and non-voting common
equity held by non-affiliates of the Registrant as of September 30, 2003 was
$10,057,000, based on Limited Partner equity as of such date.

DOCUMENTS INCORPORATED BY REFERENCE
None

PART I

Item 1. Business.

General
- -------

Independence Tax Credit Plus L.P. II (the "Partnership") is a limited
partnership which was formed under the laws of the State of Delaware on February
11, 1992. The general partner of the Partnership is Related Independence
Associates L.P., a Delaware limited partnership (the "General Partner"). The
general partner of the General Partner is Related Independence Associates Inc.,
a Delaware corporation ("RIAI") and is an affiliate of Related Capital Company
("RCC").

On November 17, 2003, CharterMac acquired Related Capital Company, which is the
indirect parent of RCC Manager LLC, the sole shareholder of RIAI. Pursuant to
the acquisition, CharterMac acquired controlling interests in the General
Partner. This acquisition did not affect the Partnership or its day-to-day
operations, as the majority of the General Partner's management team remained
unchanged.

On January 19, 1993, the Partnership commenced a public offering (the
"Offering") of Beneficial Assignment Certificates ("BACs") representing
assignments of limited partnership interests in the Partnership ("Limited
Partnership Interests"). The Partnership received $58,928,000 of gross proceeds
from the Offering (the "Gross Proceeds") from 3,475 investors ("BACs holders").
The Offering was terminated on April 7, 1994.

The Partnership's business is primarily to invest as a limited partner in other
partnerships ("Local Partnerships") owning apartment complexes ("Apartment
Complexes" or "Properties") that are eligible for the low-income housing tax
credit ("Housing Tax Credit") enacted in the Tax Reform Act of 1986, some of
which may also be eligible for the historic rehabilitation tax credit ("Historic
Tax Credit"; and together with Housing Tax Credits, "Tax Credits"). The
Partnership's investment in each Local Partnership represents 98.99% of the
partnership interests in the Local Partnership. As of March 31, 2004, the
Partnership had acquired interests in fifteen Local Partnerships and does not
anticipate making any additional investments. As of March 31, 2004,
approximately $47,000,000 (not including acquisition fees of approximately
$3,502,000) of net proceeds has been invested in fifteen Local Partnerships of
which approximately $282,000 remains to be paid to the Local Partnerships, as
certain benchmarks such as occupancy levels must be attained prior to the
release of such funds. The Partnership does not intend to acquire additional
properties, however, the Partnership may be required to pay for potential
purchase price adjustments based on tax credit adjustor clauses. See Item 2.
Properties, below.

Investment Objectives/Government Incentives
- -------------------------------------------

The Partnership was formed to invest in Apartment Complexes that are eligible
for the Housing Tax Credit enacted in the Tax Reform Act of 1986. Some Apartment
Complexes may also be eligible for Historic Tax Credits. The investment
objectives of the Partnership are described below.

1. Entitle qualified BACs holders to Tax Credits over the period of the
Partnership's entitlement to claim Tax Credits (for each Property, generally ten
years from the date of investment or, if later, the date the Property is leased
to qualified tenants; referred to herein as the "Credit Period") with respect to
each Apartment Complex.

2. Preserve and protect the Partnership's capital.

3. Participate in any capital appreciation in the value of the Properties and
provide distributions of Sale or Refinancing Proceeds upon the disposition of
the Properties.

4. Allocate passive losses to individual BACs holders to offset passive income
that they may realize from rental real estate investments and other passive
activities, and allocate passive losses to corporate BACs holders to offset
business income.

One of the Partnership's objectives is to entitle qualified BACs holders to Tax
Credits over the Credit Period. Each of the Local Partnerships in which the
Partnership has acquired an interest has been allocated by the relevant state
credit agencies the authority to recognize Tax Credits during the Credit Period

2

provided that the Local Partnership satisfies the rent restriction, minimum
set-aside and other requirements for recognition of the Tax Credits at all times
during such period. Once a Local Partnership has become eligible to recognize
Tax Credits, it may lose such eligibility and suffer an event of "recapture" if
its Property fails to remain in compliance with the Tax Credit requirements.
None of the Local Partnerships in which the Partnership has acquired an interest
has suffered an event of recapture.

There can be no assurance that the Partnership will achieve its investment
objectives as described above.

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

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

Competition
- -----------
The real estate business is highly competitive and substantially all of the
Properties acquired by the Partnership are expected to have active competition
from similar properties in their respective vicinities. Various other limited
partnerships have, in the past, and may, in the future, be formed by the General
Partner and/or its affiliates to engage in businesses which may be competitive
with the Partnership.

Employees
- ---------
The Partnership does not have any direct employees. All services are performed
for the Partnership by the General Partner and its affiliates. The General
Partner receives compensation in connection with such activities as set forth in
Items 11 and 13. In addition, the Partnership reimburses the General Partner and
certain of its affiliates for expenses incurred in connection with the
performance by their employees of services for the Partnership in accordance
with the Partnership's Amended and Restated Agreement of Limited Partnership
(the "Partnership Agreement").

3

Item 2. Properties.

The Partnership holds a 98.99% limited partnership interest in fifteen Local
Partnerships as of March 31, 2004. Set forth below is a schedule of the Local
Partnerships including certain information concerning their respective Apartment
Complexes (the "Local Partnership Schedule"). Further information concerning
these Local Partnerships and their properties, including any encumbrances
affecting the properties, may be found in Item 15. Schedule III.

Local Partnership Schedule
--------------------------
% of Units Occupied at May 1,
Name and Location --------------------------------
(Number of Units) Date Acquired 2004 2003 2002 2001 2000
- ----------------- ------------- ---- ---- ---- ---- ----

Lincoln Renaissance
Reading, PA (52) April 1993 97% 100% 98% 96% 98%

United Germano-Millgate
Limited Partnership
Chicago, IL (350) October 1993 98% 99% 99% 99% 99%

Mansion Court Associates
Philadelphia, PA (30) November 1993 57% 87% 97% 90% 97%

Derby Run Associates, L.P.
Hampton, VA (160) February 1994 91% 96% 98% 98% 89%

Renaissance Plaza '93
Associates , L.P.
Baltimore, MD (95) February 1994 97% 98% 100% 100% 95%

Tasker Village Associates
Philadelphia, PA (28) May 1994 79% 100% 100% 96% 93%

Martha Bryant Manor, L.P.
Los Angeles, CA (77) September 1994 99% 100% 95% 100% 97%

Colden Oaks
Limited Partnership
Los Angeles, CA (38) September 1994 97% 100% 100% 97% 100%

Brynview Terrace, L.P.
Los Angeles, CA (8) September 1994 100% 100% 100% 100% 100%

NLEDC, L.P.
Los Angeles, CA (43) September 1994 98% 100% 100% 100% 100%

Creative Choice
Homes VI, Ltd.
Miami, FL (102) September 1994 99% 99% 100% 100% 100%

P&P Homes for the
Elderly, L.P.
Los Angeles, CA (107) September 1994 98% 100% 100% 100% 99%

4

Local Partnership Schedule
(continued)
% of Units Occupied at May 1,
Name and Location -------------------------------
(Number of Units) Date Acquired 2004 2003 2002 2001 2000
- ----------------- ------------- ---- ---- ---- ---- ----

Clear Horizons
Limited Partnership
Shreveport, LA (84) December 1994 95% 99% 95% 99% 98%

Neptune Venture, L.P.
Neptune Township, NJ (99) April 1995 100% 100% 100% 100% 97%

Affordable Green Associates L.P.
New York, NY (41) April 1995 100% 100% 100% 100% 100%

All leases are generally for periods not exceeding one to two years and no
tenant occupies more than 10% of the rentable square footage.

Rents from commercial tenants (to which average rental per square foot applies)
comprise less than 5% of the rental revenues of the Partnership. Maximum
allowable rents for the residential units are determined annually by HUD.

Management continuously reviews the physical state of the Properties and
suggests to the respective general partners of the Local Partnerships ("Local
General Partners") budget improvements which are generally funded from cash flow
from operations or release of replacement reserve escrows.

Management continuously reviews the insurance coverage of the Properties and
believes such coverage is adequate.

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

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

Housing Tax Credits with respect to a given Apartment Complex are available for
a ten-year period that commences when the property is placed into service.
However, the annual Tax Credits available in the year in which the Apartment
Complex is placed in service, must be prorated based upon the months remaining
in the year. The amount of the annual Tax Credit not available in the first year
will be available in the eleventh year. In certain cases, the Partnership
acquired its interest in a Local Partnership after the Local Partnership had
placed its Apartment Complex in service. In these cases, the Partnership may be
allocated Tax Credits only beginning in the month following the month in which
it acquired its interest and Tax Credits allocated in any prior period are not
available to the Partnership.

Item 3. Legal Proceedings.

None.

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

None.

5

PART II

Item 5. Market for the Registrant's Common Equity and Related Security Holder
Matters.

As of March 31, 2004, the Partnership had issued and outstanding 58,928 Limited
Partnership Interests, each representing a $1,000 capital contribution to the
Partnership, or an aggregate capital contribution of $58,928,000 before volume
discounts of $2,000. All of the issued and outstanding Limited Partnership
Interests have been issued to Independence Assignor Inc. (the "Assignor Limited
Partner"), which has in turn issued 58,928 BACs to the purchasers thereof for an
aggregate purchase price of $58,928,000 reduced by volume discounts of $2,000.
Each BAC represents all of the economic and virtually all of the ownership
rights attributable to a Limited Partnership Interest held by the Assignor
Limited Partner. BACs may be converted into Limited Partnership Interests at no
cost to the holder (other than the payment of transfer costs not to exceed
$100), but Limited Partnership Interests so acquired are not thereafter
convertible into BACs.

Neither the BACs nor the Limited Partnership Interests are traded on any
established trading market. The Partnership does not intend to include the BACs
for quotation on NASDAQ or for listing on any national or regional stock
exchange or any other established securities market. The Revenue Act of 1987
contained provisions which have an adverse impact on investors in "publicly
traded partnerships." Accordingly, the General Partner has imposed limited
restrictions on the transferability of the BACs and the Limited Partnership
Interests in secondary market transactions. Implementation of the restrictions
should prevent a public trading market from developing and may adversely affect
the ability of an investor to liquidate his or her investment quickly. It is
expected that these procedures will remain in effect until such time, if ever,
as further revision of the Revenue Act of 1987 may permit the Partnership to
lessen the scope of the restrictions.

As of May 4, 2004, the Partnership has approximately 3,442 registered holders of
an aggregate of 58,928 BACs.

All of the Partnership's general partnership interests, representing an
aggregate capital contribution of $1,000, are held by the General Partner.

There are no material legal restrictions in the Partnership Agreement on the
ability of the Partnership to make distributions. However, the Partnership has
made no distributions to the BACs holders as of March 31, 2004. The Partnership
does not anticipate providing cash distributions to its BACs holders other than
from net refinancing or sales proceeds.

6

Item 6. Selected Financial Data.

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

Year Ended March 31,
----------------------------------------------------------------------------
OPERATIONS 2004 2003 2002 2001 2000
- ---------- ------------ ------------ ------------ ------------ ------------

Revenues $ 9,359,288 $ 9,140,057 $ 9,013,667 $ 8,662,312 $ 8,211,451
Operating expenses (14,653,886) (13,685,802) (13,154,549) (13,480,310) (13,137,023)
------------ ------------ ------------ ------------ ------------

Loss before minority
interest (5,294,598) (4,545,745) (4,140,882) (4,817,998) (4,925,572)
Minority interest in loss of
subsidiaries 16,161 10,959 8,204 11,423 10,908
------------ ------------ ------------ ------------ ------------
Net loss $ (5,278,437) $ (4,534,786) $ (4,132,678) $ (4,806,575) $ (4,914,664)
============ ============ ============ ============ ============

Net loss per weighted
average BAC $ (88.68) $ (76.19) $ (69.43) $ (80.75) $ (82.57)
============ ============ ============ ============ ============

March 31,
----------------------------------------------------------------------------
FINANCIAL POSITION 2004 2003 2002 2001 2000
- ------------------ ------------ ------------ ------------ ------------ ------------

Total assets $ 84,016,822 $ 87,502,402 $ 90,796,504 $ 93,702,404 $ 96,634,527
============ ============ ============ ============ ============

Total liabilities $ 77,992,941 $ 76,092,507 $ 74,604,701 $ 73,295,501 $ 71,338,864
============ ============ ============ ============ ============

Minority interest $ (451,294) $ (343,717) $ (96,595) $ (14,173) $ 68,012
============ ============ ============ ============ ============

Total partners' capital $ 6,475,175 $ 11,753,612 $ 16,288,398 $ 20,421,076 $ 25,227,651
============ ============ ============ ============ ============

During the years ended March 31, 2004, 2003, 2002, 2001 and 2000, respectively,
total assets decreased primarily due to depreciation partially offset by
improvements to property and equipment.

Cash Distributions
- ------------------
The Partnership has made no distributions to the BACs holders as of March 31,
2004.

7

Selected Quarterly Financial Data (Unaudited)

Quarter Ended
---------------------------------------------------------------------
OPERATIONS June 30,2003 September 30,2003 December 31,2003 March 31,2004
- ---------- ------------ ----------------- ---------------- -------------

Revenues $ 2,304,932 $ 2,328,028 $ 2,329,337 $ 2,396,991

Operating expenses (3,474,590) (3,290,185) (3,636,652) (4,252,459)
----------- ----------- ----------- -----------

Loss before minority interest (1,169,658) (962,157) (1,307,315) (1,855,468)

Minority interest in loss of
subsidiaries 3,507 3,863 3,592 5,199
----------- ----------- ----------- -----------

Net loss $(1,166,151) $ (958,294) $(1,303,723) $(1,850,269)
=========== =========== =========== ===========

Net loss per weighted aver-
age BAC $ (19.59) $ (16.10) $ (21.90) $ (31.09)
=========== =========== =========== ===========

Quarter Ended
---------------------------------------------------------------------
OPERATIONS June 30,2002 September 30,2002 December 31,2002 March 31,2003
- ---------- ------------ ----------------- ---------------- -------------

Revenues $ 2,193,120 $ 2,235,515 $ 2,258,692 $ 2,452,730

Operating expenses (3,221,107) (2,997,917) (3,436,025) (4,030,753)
----------- ----------- ----------- -----------

Loss before minority interest (1,027,987) (762,402) (1,177,333) (1,578,023)

Minority interest in loss of
subsidiaries 3,048 2,298 1,946 3,667
----------- ----------- ----------- -----------

Net loss $(1,024,939) $ (760,104) $(1,175,387) $(1,574,356)
=========== =========== =========== ===========

Net loss per weighted aver-
age BAC $ (17.22) $ (12.77) $ (19.75) $ (26.45)
=========== =========== =========== ===========

8

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

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

General
- -------

The Partnership's primary source of funds is a working capital reserve and
interest thereon. This source of funds is available to meet obligations of the
Partnership.

Through March 31, 2004, the Partnership has invested all of the net proceeds in
fifteen Local Partnerships of which approximately $282,000 remains to be paid
(including approximately $24,000 being held in escrow).

For the year ended March 31, 2004, cash and cash equivalents of the Partnership
and its fifteen consolidated Local Partnerships decreased approximately
($276,000) due to the principal payments of mortgage notes ($494,000),
acquisition of property and equipment ($357,000), a decrease in capitalization
of consolidated subsidiaries attributable to minority interest ($91,000) and a
net decrease in due to local general partners and affiliates relating to
investing and financing activities ($130,000) which exceeded cash provided by
operating activities ($792,000) and a decrease in cash held in escrow relating
to investing activities ($3,000). Included in the adjustments to reconcile the
net loss to cash provided by operations is depreciation and amortization of
approximately $3,426,000.

At March 31, 2004, there is a balance of approximately $136,000 in the working
capital reserve. The General Partner believes that these reserves, plus cash
distributions to be received from the operations of the Local Partnerships, will
be sufficient (subject to the continued deferral of fees payable to the General
Partner) to fund the Partnership's ongoing operations for the foreseeable
future. During the years ended March 31, 2004, 2003 and 2002, amounts received
from operations of the Local Partnerships were approximately $88,000, $88,000
and $71,000, respectively. Management anticipates receiving distributions in the
future, although not to a level sufficient to permit providing cash
distributions to BACs holders.

Partnership management fees owed to the General Partner amounting to
approximately $3,339,000 and $2,793,000 were accrued and unpaid as of March 31,
2004 and 2003, respectively (see Note 8). Without the General Partners' advances
and continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a position to meet its
obligations. The General Partner has continued to advance and allow the accrual
without payment of these amounts but is under no obligation to continue to do
so.

For a discussion of contingencies affecting certain Local Partnerships, see
Results of Operations of Certain Local Partnerships, below. Since the maximum
loss the Partnership would be liable for is its net investment in the respective
subsidiary partnerships, the resolution of the existing contingencies is not
anticipated to impact future results of operations, liquidity or financial
condition in a material way. However, the Partnership's loss of its investment
in a Local Partnership will eliminate the ability to generate future Tax Credits
from such Local Partnership and may also result in recapture of Tax Credits if
the investment is lost before expiration of the Credit Period.

Except as described above, management is not aware of any trends or events,
commitments or uncertainties, which have not otherwise been disclosed that will
or are likely to impact liquidity in a material way. Management believes the
only impact would be from laws that have not yet been adopted. The portfolio is
diversified by the location of the properties around the United States so that
if one area of the country is experiencing downturns in the economy, the
remaining Properties in the portfolio may be experiencing upswings. However the
geographic diversification of the portfolio may not protect against a general
downturn in the national economy. The Partnership has invested the proceeds of
its offering in 15 Local Partnerships, all of which fully have their Tax Credits
in place. The Tax Credits are attached to the Property for a period of ten
years, and are transferable with the Property during the remainder of the
ten-year period. If trends in the real estate market warranted the sale of a
Property, the remaining Tax Credits would transfer to the new owner; thereby
adding value to the Property on the market. However, such value declines each
year and is not included in the financial statement carrying amount.

9

Tabular Disclosure of Contractual Obligations
- ---------------------------------------------
The following table summarizes the Partnership's commitments as of March 31,
2004 to make future payments under its debt agreements and other contractual
obligations.

Less
than 1 - 3 3 -5 More than
Total 1 Year Years Years 5 Years
----------- ----------- ----------- ----------- -----------

Mortgage notes
payable (a) $57,109,969 $ 559,245 $ 1,259,165 $ 1,458,479 $53,833,080
Loans payable to
general partner
and affiliates (b) 238,634 238,634 0 0 0
----------- ----------- ----------- ----------- -----------

$57,348,603 $ 797,879 $ 1,259,165 $ 1,458,479 $53,833,080
=========== =========== =========== =========== ===========

(a) The mortgage notes are payable in aggregate monthly installments of
approximately $175,000 including principal and interest at rates ranging
from 0% to 9.65% per annum, through the year 2052. Each subsidiary
partnership's mortgage note payable is collateralized by the land and
buildings of the respective subsidiary partnership, the assignment of each
certain subsidiary partnership's rents and leases, and is without further
recourse.

(b) See Note 8 (B) in Item 8. Financial Statements and Supplementary Data.

Off Balance Sheet Arrangements
- ------------------------------

The Partnership has no off-balance sheet arrangements.

Critical Accounting Policies
- ----------------------------

The preparation of consolidated financial statements requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The following is a summary of certain
accounting estimates considered critical by the Partnership.

Property and Equipment
- ----------------------

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. The Partnership complies with Statement of Financial Accounting
Standards (SFAS) No. 144 "Accounting for the Impairment or Disposal of
Long-Lived Assets". A loss on impairment of assets is recorded when management
estimates amounts recoverable through future operations and sale of the property
on an undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).

Through March 31, 2004, the Partnership has recorded approximately $3,926,000 as
an aggregate loss on impairment of assets.

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

The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31.

10

New Accounting Pronouncements
- -----------------------------

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB
Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46").
FIN 46 is applicable immediately for variable interest entities created after
January 31, 2003. For variable interest entities created before February 1,
2003, the provisions of FIN 46 were applicable no later than December 15, 2003.
The Partnership has not created any variable interest entities after January 31,
2003. In December 2003 the FASB redeliberated certain proposed modifications and
revised FIN 46 ("FIN 46 (R)"). The revised provisions are applicable no later
than the first reporting period ending after March 15, 2004. The adoption of FIN
46 (R) is not anticipated to have a material impact on the Partnership's
financial reporting and disclosures.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". SFAS No. 150
changes the accounting for certain financial instruments that, under previous
guidance, could be classified as equity or "mezzanine" equity, by now requiring
those instruments to be classified as liabilities ( or assets in some
circumstances) in the Consolidated Balance Sheets. Further, SFAS No. 150
requires disclosure regarding the terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 generally was effective for all
financial instruments entered into or modified after May 31, 2003, and was
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003. The Partnership has evaluated SFAS No. 150 and determined that it
does not have an impact on the Partnership's financial reporting and
disclosures.

Results of Operations
- ---------------------

The following is a summary of the results of operations of the Partnership for
the years ended March 31, 2004, 2003 and 2002 (the 2003, 2002 and 2001 Fiscal
Years, respectively).

The net loss for the 2003, 2002 and 2001 Fiscal Years totaled $5,278,437,
$4,534,786 and $4,132,678, respectively.

The Partnership and BACs holders began to recognize Tax Credits with respect to
a Property when the Credit Period for such Property commenced. Because of the
time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC gradually increased over the first three years of
the Partnership. Housing Tax Credits not recognized in the first three years
will be recognized in the 11th through 13th years. The Partnership generated
$8,746,267 of Housing Tax Credits during each of the 2003, 2002 and 2001 tax
years, respectively.

2003 vs. 2002
- -------------
The Partnership's results of operations for the 2003 and 2002 Fiscal Years
consisted primarily of the results of the Partnership's investment in fifteen
consolidated Local Partnerships. The majority of Local Partnership income
continues to be in the form of rental income with the corresponding expenses
being divided among operations, depreciation and mortgage interest.

Rental income increased approximately 4% for the 2003 Fiscal Year as compared to
the 2002 Fiscal Year primarily due to rental rate increases.

Other income decreased approximately $122,000 for the 2003 Fiscal Year as
compared to the 2002 Fiscal Year primarily due to a decrease in interest earned
on a capital installment at one Local Partnership, a utility refund in the prior
year at a second Local Partnership and insurance claim proceeds in the prior
year at a third Local Partnership.

Total expenses, excluding general and administrative, repairs and maintenance
and insurance, remained fairly consistent with an increase of approximately 2%
for the 2003 Fiscal Year as compared to the 2002 Fiscal Year.

General and administrative increased approximately $422,000 for the 2003 Fiscal
Year as compared to the 2002 Fiscal Year primarily due to an increase in
incentive management fees at one Local Partnership and increased office supplies
and tenant programs at a second Local Partnership.

11

Repairs and maintenance increased approximately $259,000 for the 2003 Fiscal
Year as compared to the 2002 Fiscal Year primarily due to increased repairs and
maintenance payroll at one Local Partnership and upgrades in appliances,
painting and carpeting at a second Local Partnership.

Insurance increased approximately $81,000 for the 2003 Fiscal Year as compared
to the 2002 Fiscal Year primarily due to increased insurance premiums at the
Local Partnerships.

2002 vs. 2001
- -------------
The Partnership's results of operations for the 2002 and 2001 Fiscal Years
consisted primarily of the results of the Partnership's investment in fifteen
consolidated Local Partnerships. The majority of Local Partnership income
continues to be in the form of rental income with the corresponding expenses
being divided among operations, depreciation and mortgage interest.

Rental income increased approximately 4% for the 2002 Fiscal Year as compared to
the 2001 Fiscal Year primarily due to rental rate increases.

Other income decreased $196,000 for the 2002 Fiscal Year as compared to the 2001
Fiscal Year due to one Local Partnership receiving a property tax refund in the
2001 Fiscal Year and another Local Partnership receiving a HUD energy rebate in
the 2001 Fiscal Year.

Total expenses, excluding insurance, remained fairly consistent with an increase
of approximately 3% for the 2002 Fiscal Year as compared to the 2001 Fiscal
Year.

Insurance increased approximately $152,000 for the 2002 Fiscal year as compared
to the 2001 Fiscal Year primarily due to increased insurance premiums at the
Local Partnerships.

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

Clear Horizons Limited Partnership
- ----------------------------------
At December 31, 2003, Clear Horizons Limited Partnership ("Clear Horizons")
current liabilities exceeded its current assets by $195,919. Although this
condition could raise substantial doubt about Clear Horizons' ability to
continue as a going concern, such doubt is alleviated as follows:

1. Included in current liabilities at December 31, 2003, is $215,190 owed to
related parties who have advised Clear Horizons that they do not intend to
pursue collection beyond Clear Horizons' ability to pay.

2. The Local General Partner of Clear Horizons has agreed to fund operating
deficits up to $250,000.

Accordingly, management believes that Clear Horizons has the ability to continue
as a going concern for at least one year from December 31, 2003.

Other
- -----

The Partnership's investment as a limited partner in the Local Partnerships is
subject to the risks of potential losses arising from management and ownership
of improved real estate. The Partnership's investments also could be adversely
affected by poor economic conditions generally, which could increase vacancy
levels and rental payment defaults and by increased operating expenses, any or
all of which could threaten the financing viability of one or more of the Local
Partnerships.

There also are substantial risks associated with the operation of Apartment
Complexes receiving government assistance. These include governmental
regulations concerning tenant eligibility, which may make it more difficult to
rent apartments in the complexes; difficulties in obtaining government approval
for rent increases; limitations on the percentage of income which low and
moderate-income tenants may pay as rent; the possibility that Congress may not
appropriate funds to enable the Department of Housing and Urban Development to
make the rental assistance payments it has contracted to make; and that when the
rental assistance contracts expire, there may not be market demand for
apartments at full market rents in a Local Partnership's Apartment Complex.

12

The Local Partnerships are impacted by inflation in several ways. Inflation
allows for increases in rental rates generally to reflect the impact of higher
operating and replacement costs. Furthermore, inflation generally does not
impact the fixed long-term financing under which real property investments were
purchased. Inflation also affects the Local Partnerships adversely by increasing
operating costs as, for example, for such items as fuel, utilities and labor.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The Partnership does not have any market risk sensitive instruments.

13

Item 8. Financial Statements and Supplementary Data.

Sequential
Page
----------
(a) 1. Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm 15

Consolidated Balance Sheets at March 31, 2004 and 2003 52

Consolidated Statements of Operations for the Years Ended
March 31, 2004, 2003 and 2002 53

Consolidated Statements of Changes in Partners' Capital
(Deficit) for the Years Ended March 31, 2004, 2003 and
2002 54

Consolidated Statements of Cash Flows for the Years Ended
March 31, 2004, 2003 and 2002 55

Notes to Consolidated Financial Statements 57

14

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

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

We have audited the consolidated balance sheets of Independence Tax Credit Plus
L.P. II and Subsidiaries (A Delaware Limited Partnership) as of March 31, 2004
and 2003, and the related consolidated statements of operations, changes in
partners' capital (deficit), and cash flows for the years ended March 31, 2004,
2003 and 2002 (the 2003, 2002 and 2001 Fiscal Years, respectively). The
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits. We did not audit the financial statements for thirteen (Fiscal 2003)
and twelve (Fiscal 2002 and 2001) subsidiary partnerships whose losses
aggregated $3,685,633, $2,808,360 and $2,471,026 for the 2003, 2002 and 2001
Fiscal Years, respectively, and whose assets constituted 68% of the
Partnership's assets at March 31, 2004 and 2003, respectively, presented in the
accompanying consolidated financial statements. The financial statements of
these subsidiary partnerships were audited by other auditors whose reports
thereon have been furnished to us and our opinion expressed herein, insofar as
it relates to the amounts included for these subsidiary partnerships, is based
solely upon the reports of the other auditors.

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

In our opinion, based upon our audits and the reports of the other auditors, the
accompanying consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Independence Tax Credit Plus
L.P. II and Subsidiaries at March 31, 2004 and 2003, and the results of their
operations and their cash flows for the years ended March 31, 2004, 2003 and
2002, in conformity with U.S. generally accepted accounting principles.

Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP

New York, New York
June 17, 2004

15

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lincoln Renaissance

We have audited the accompanying balance sheets of Lincoln Renaissance as of
December 31, 2003 and 2002, and the related statements of profit and loss,
changes in partners' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Lincoln Renaissance as of
December 31, 2003 and 2002, and the results of its operations, the changes in
partners' equity (deficit) 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 our report
for the year ended December 31, 2003, dated January 30, 2004, on our
consideration of Lincoln Renaissance's internal control over financial reporting
and on our test 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 27
through 30 is presented for purposes of additional analysis and is not a
required part of the basis financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basis financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 30, 2004

16

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Lincoln Renaissance

We have audited the accompanying balance sheets of Lincoln Renaissance as of
December 31, 2002 and 2001, and the related statements of profit and loss,
changes in partners' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Lincoln Renaissance as of
December 31, 2002 and 2001, and the results of its operations, the changes in
partners' equity (deficit) 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 our report
for the year ended December 31, 2002, dated January 31, 2003, on our
consideration of Lincoln Renaissance's internal control over financial reporting
and on our test 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 27
through 30 is presented for purposes of additional analysis and is not a
required part of the basis financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basis financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 31, 2003

17

[Letterhead of WIELAND & COMPANY, INC.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
United - Germano - Millgate Limited Partnership

We have audited the accompanying balance sheets of United - Germano - Millgate
Limited Partnership as of December 31, 2003 and 2002, and the related statements
of operations, partners' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits 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, and the Illinois Housing Development Authority's
FINANCIAL REPORTING AND AUDITS GUIDELINES FOR MORTGAGORS OF MULTIFAMILY HOUSING
DEVELOPMENTS. 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 United - Germano - Millgate
Limited Partnership as of December 31, 2003 and 2002, and the results of its
operations, changes in partners' equity, and 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 February 9, 2004, on our consideration of the internal control of United -
Germano - Millgate Limited Partnership, and on our tests of its compliance with
certain provisions of laws, regulations, contracts, and grants. Those reports
are an integral part of an audit performed in accordance with GOVERNMENT
AUDITING STANDARDS and should be read in conjunction with this report in
considering the results of our audit.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information on pages 11 - 12 is presented for purposes of additional analysis
and is not a required part of the basic financial statements of United - Germano
- - Millgate Limited Partnership. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

/s/ Wieland & Company, Inc.
Batavia, Illinois
February 9, 2004

18

[Letterhead of WIELAND & COMPANY, INC.]

INDEPENDENT AUDITOR'S REPORT

To the Partners
United - Germano - Millgate Limited Partnership

We have audited the accompanying balance sheets of United - Germano - Millgate
Limited Partnership as of December 31, 2002 and 2001, and the related statements
of operations, partners' equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

We conducted our audits 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, and the Illinois Housing Development Authority's
FINANCIAL REPORTING AND AUDITS GUIDELINES FOR MORTGAGORS OF MULTIFAMILY HOUSING
DEVELOPMENTS. 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 United - Germano - Millgate
Limited Partnership as of December 31, 2002 and 2001, and the results of its
operations, changes in partners' equity, and 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 29, 2003, on our consideration of the internal control of United -
Germano - Millgate Limited Partnership, and on our tests of its compliance with
certain provisions of laws, regulations, contracts, and grants. Those reports
are an integral part of an audit performed in accordance with GOVERNMENT
AUDITING STANDARDS and should be read in conjunction with this report in
considering the results of our audit.

Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplementary
information on pages 11 - 12 is presented for purposes of additional analysis
and is not a required part of the basic financial statements of United - Germano
- - Millgate Limited Partnership. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

/s/ Wieland & Company, Inc.
Batavia, Illinois
January 29, 2003

EIN 36-4025026
Engagement Partner: Paul H. Wieland

19

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mansion Court Associates

We have audited the accompanying balance sheets of Mansion Court Associates as
of December 31, 2003 and 2002, and the related statements of profit and loss,
changes in partners' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Mansion Court Associates as of
December 31, 2003 and 2002, and the results of its operations, the changes in
partners' equity (deficit) 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 our report
for the year ended December 31, 2003, dated February 6, 2004, on our
consideration of Mansion Court Associates 's internal control over financial
reporting and on our test 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 24
through 27 is presented for purposes of additional analysis and is not a
required part of the basis financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basis financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 6, 2004

20

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Mansion Court Associates

We have audited the accompanying balance sheets of Mansion Court Associates as
of December 31, 2002 and 2001, and the related statements of operations, changes
in partners' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our 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 Mansion Court Associates as of
December 31, 2002 and 2001, and the results of its operations, the changes in
partners' equity (deficit) 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 our report
for the year ended December 31, 2002, dated February 7, 2003, on our
consideration of Mansion Court Associates 's internal control over financial
reporting and on our test 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 24
through 27 is presented for purposes of additional analysis and is not a
required part of the basis financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basis financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
February 7, 2003

21

[Letterhead of WALL, EINHORN & CHERNITZER, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners Virginia Housing Development Authority
DERBY RUN ASSOCIATES, L.P. 601 South Belvidere Street
(A Virginia Limited Partnership) Richmond, Virginia 23320
Virginia Beach, Virginia

We have audited the accompanying balance sheets of DERBY RUN ASSOCIATES, L.P. (A
Virginia Limited Partnership) as of December 31, 2003 and 2002, and the related
statements of operations, partners' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the project's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DERBY RUN ASSOCIATES, L.P. as
of December 31, 2003 and 2002, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity and
accounting principles generally accepted in the United States and America.

The accompanying supplementary information shown on pages 14 - 20, is presented
for purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

Our audits were made for the purpose of forming an opinion on the basic
financial statements referred to above. The Partnership's management has elected
to disclose certain information relating to the low-income housing tax credits
allocated to the Partnership as described in Note 7 to the financial statements
which are not required to be disclosed in accordance with auditing standards
generally accepted in the United States of America. Such disclosures have not
been subjected to the auditing procedures applied in the audits of the financial
statements, and accordingly, we express no opinion on them.

/s/ Wall, Einhorn & Chernitzer, P.C.
Norfolk, Virginia
January 23, 2004

22

[Letterhead of WALL, EINHORN & CHERNITZER, P.C.]

INDEPENDENT AUDITOR'S REPORT

To the Partners Virginia Housing Development Authority
DERBY RUN ASSOCIATES, L.P. 601 South Belvidere Street
(A Virginia Limited Partnership) Richmond, Virginia 23320
Virginia Beach, Virginia

We have audited the accompanying balance sheets of DERBY RUN ASSOCIATES, L.P. (A
Virginia Limited Partnership) as of December 31, 2002 and 2001, and the related
statements of operations, partners' equity, and cash flows for the years then
ended. These financial statements are the responsibility of the project's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of DERBY RUN ASSOCIATES, L.P. as
of December 31, 2002 and 2001, and the results of its operations, changes in
partners' equity and its cash flows for the years then ended in conformity and
accounting principles generally accepted in the United States and America.

The accompanying supplementary information shown on pages 14 - 20, is presented
for purposes of additional analysis and is not a required part of the basic
financial statements. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.

Our audits were made for the purpose of forming an opinion on the basic
financial statements referred to above. The Partnership's management has elected
to disclose certain information relating to the low-income housing tax credits
allocated to the Partnership as described in Note 7 to the financial statements
which are not required to be disclosed in accordance with auditing standards
generally accepted in the United States of America. Such disclosures have not
been subjected to the auditing procedures applied in the audits of the financial
statements, and accordingly, we express no opinion on them.

/s/ Wall, Einhorn & Chernitzer, P.C.
Norfolk, Virginia
January 20, 2003

23

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Renaissance Plaza 93 Associates, L.P.

We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. as of December 31, 2002, and the related statements of
operations, partners' equity (deficit) and cash flows for the year then ended.
These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Renaissance Plaza 93
Associates, L.P. as of December 31, 2002, and the results of its operations, the
changes in partners' equity (deficit) and cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated January 15,
2003 on our consideration of Renaissance Plaza 93 Associates, L.P.'s internal
control and on its compliance with requirements applicable to DHCD-assisted
programs and compliance over financial reporting. Those reports are an integral
part of an audit performed in accordance with Government Auditing Standards and
should be read in conjunction with this report in considering the results of our
audit.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 25 through 34
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Lead Auditor: James P. Martinko
Bethesda, Maryland
Federal Employer Identification Number: 52-1088612

January 15, 2003

24

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Renaissance Plaza 93 Associates, L.P.

We have audited the accompanying balance sheet of Renaissance Plaza 93
Associates, L.P. as of December 31, 2001, and the related statements of
operations, partners' equity (deficit) and cash flows for the year then ended.
These financial statements are the responsibility of the partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Renaissance Plaza 93
Associates, L.P. as of December 31, 2001, and the results of its operations, the
changes in partners' equity (deficit) and cash flows for the year then ended, in
conformity with accounting principles generally accepted in the United States of
America.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental information on pages 25 through 34
is presented for purposes of additional analysis and is not a required part of
the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is fairly stated in all material respects in relation to the
basic financial statements taken as a whole.

In accordance with Government Auditing Standards and the "Consolidated Audit
Guide for Audits of HUD Programs," we have also issued reports dated January 31,
2002 on our consideration of Renaissance Plaza 93 Associates, L.P.'s internal
control and on its compliance with requirements applicable to DHCD-assisted
programs, and laws and regulations applicable to the financial statements.

/s/ Reznick Fedder & Silverman
Audit Principal: Robert J. Denmark
Bethesda, Maryland
Federal Employer Identification Number: 52-1088612
January 31, 2002

25

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Tasker Village Associates

We have audited the accompanying balance sheets of Tasker Village Associates as
of December 31, 2003 and 2002, and the related statements of profit and loss,
changes in partners' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on the 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 provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tasker Village Associates as of
December 31, 2003 and 2002, and the results of its operations, the changes in
partners' equity (deficit) 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 our report
for the year ended December 31, 2003, dated January 16, 2004, on our
consideration of Tasker Village's internal control over financial reporting and
on our test 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 25
through 29 is presented for purposes of additional analysis and is not a
required part of the basis financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basis financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 16, 2004

26

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Tasker Village Associates

We have audited the accompanying balance sheets of Tasker Village Associates as
of December 31, 2002 and 2001, and the related statements of profit and loss,
changes in partners' equity (deficit) and cash flows for the years then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of
the United States. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on the 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 provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Tasker Village Associates as of
December 31, 2002 and 2001, and the results of its operations, the changes in
partners' equity (deficit) 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 our report
for the year ended December 31, 2002, dated January 17, 2003, on our
consideration of Tasker Village's internal control over financial reporting and
on our test 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.

Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental information on pages 25
through 280 is presented for purposes of additional analysis and is not a
required part of the basis financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basis financial
statements and, in our opinion, is fairly stated in all material respects in
relation to the basic financial statements taken as a whole.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 17, 2003

27

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
2003 and the related statements of loss, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Martha Bryant Manor, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Martha Bryant Manor, L.P. at
December 31, 2003 and the results of its operations and its cash flow for the
year then ended in conformity with generally accepted accounting principles used
in the United States of America.

/s/ Clifford R. Benn
February 11, 2004
Carson, California

28

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
2002 and the related statements of loss, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Martha Bryant Manor, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Martha Bryant Manor, L.P. at
December 31, 2002 and the results of its operations and its cash flow for the
year then ended in conformity with generally accepted accounting principles used
in the United States of America.

/s/ Clifford R. Benn
February 21, 2003
Carson, California

29

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Martha Bryant Manor, L.P.
Los Angeles, California

I have audited the balance sheet of Martha Bryant Manor, L.P. at December 31,
2001 and the related statements of loss, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Martha Bryant Manor, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Marth Bryant Manor, L.P. at
December 31, 2001 and the results of its operations and its cash flow for the
year then ended in conformity with generally accepted accounting principles.

/s/ Clifford R. Benn
February 26, 2002
Carson, California

30

[Letterhead of MARVIN D. MASON]

To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheets of Colden Oaks, a California
Limited Partnership, as of December 31, 2003 and 2002, and the related
statements of operations, changes in partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's general partners. My responsibility is to express an opinion on
these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in the
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 2003 and 2002, and the results of its operations,
changes in partners' equity and its cash flows for the year then ended in
conformity with general accepted accounting principles.

/s/ Marvin Mason
Certified Public Accountant
Tarzana, California
February 28, 2004

31

[Letterhead of MARVIN D. MASON]

To the Partners of
Colden Oaks, A California Limited Partnership
Los Angeles, California

I have audited the accompanying balance sheets of Colden Oaks, a California
Limited Partnership, as of December 31, 2002 and 2001, and the related
statements of operations, changes in partners' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Partnership's general partners. My responsibility is to express an opinion on
these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in the
material respects, the financial position of Colden Oaks, a California Limited
Partnership, at December 31, 2002 and 2001, and the results of its operations,
changes in partners' equity and its cash flows for the year then ended in
conformity with general accepted accounting principles.

/s/ Marvin Mason
Certified Public Accountant
Tarzana, California
February 28, 2003

32

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 2003
and the related statements of loss, changes in partners' capital, and cash flow
for the year then ended. These financial statements are the responsibility of
Brynview Terrace, L.P.'s management. My responsibility is to express an opinion
on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 2003 and the results of its operations and its cash flow for the year then
ended in conformity with generally accepted accounting principles used in the
United States of America.

/s/ Clifford R. Benn
February 20, 2004
Carson, California

33

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 2002
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 2002 and the results of its operations and its cash flow for the year then
ended in conformity with generally accepted accounting principles used in the
United States of America.

/s/ Clifford R. Benn
February 21, 2003
Carson, California

34

[Letterhead of CLIFFORD R. BENN]

INDEPENDENT AUDITOR'S REPORT

General Partner
Brynview Terrace, L.P.
Los Angeles, California

I have audited the balance sheet of Brynview Terrace, L.P. at December 31, 2001
and the related statements of income, changes in partners' capital, and cash
flow for the year then ended. These financial statements are the responsibility
of Brynview Terrace, L.P.'s management. My responsibility is to express an
opinion on these financial statements based on my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Brynview Terrace, L.P. at December
31, 2001 and the results of its operations and its cash flow for the year then
ended in conformity with generally accepted accounting principles.

/s/ Clifford R. Benn
February 22, 2002
Carson, California

35

[Letterhead of ROBERT J. PACHECO, CPA]

Independent Auditor's Report

To the Partners of NLEDC, L.P., A California Limited Partnership:

We have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 2003, and the related statements of
income, changes in partners' capital, and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
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 principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NLEDC, L.P., a California
Limited Partnership, at December 31, 2003, and the results of its operations,
changes in partners' capital and cash flows for the year then ended in
conformity with generally accepted accounting principles.

In accordance with GOVERNMENT AUDITING STANDARDS AND THE CONSOLIDATED AUDIT
GUIDE FOR AUDITS OF HUD PROGRAMS issued by the U. S. Department of Housing and
Urban Development, we have also issued reports dated February 7, 2004, on our
consideration of the Partnership's internal control, on its compliance with
specific requirements applicable to nonmajor HUD programs and specific
requirements applicable to Fair Housing and Non-Discrimination.

/s/ Robert J. Pacheco, CPA
Pasadena, California
February 7, 2004

36

[Letterhead of ROBERT J. PACHECO, CPA]

Independent Auditor's Report

To the Partners of NLEDC, L.P., A California Limited Partnership:

We have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 2002, and the related statements of
income, changes in partners' capital, and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
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 principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NLEDC, L.P., a California
Limited Partnership, at December 31, 2002, and the results of its operations,
changes in partners' capital and cash flows for the year then ended in
conformity with generally accepted accounting principles.

In accordance with GOVERNMENT AUDITING STANDARDS AND THE CONSOLIDATED AUDIT
GUIDE FOR AUDITS OF HUD PROGRAMS issued by the U. S. Department of Housing and
Urban Development, we have also issued reports dated February 20, 2003, on our
consideration of the Partnership's internal control, on its compliance with
specific requirements applicable to nonmajor HUD programs and specific
requirements applicable to Fair Housing and Non-Discrimination.

/s/ Robert J. Pacheco, CPA
Pasadena, California
February 20, 2003

37

[Letterhead of ROBERT J. PACHECO, CPA]

Independent Auditor's Report

To the Partners of NLEDC, L.P., A California Limited Partnership:

We have audited the accompanying balance sheet of NLEDC, L.P., a California
Limited Partnership, as of December 31, 2001, and the related statements of
income, changes in partners' capital, and cash flows for the year then ended.
These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards
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 principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of NLEDC, L.P., a California
Limited Partnership, at December 31, 2000, and the results of its operations,
changes in partners' capital and cash flows for the year then ended in
conformity with generally accepted accounting principles.

In accordance with GOVERNMENT AUDITING STANDARDS AND THE CONSOLIDATED AUDIT
GUIDE FOR AUDITS OF HUD PROGRAMS issued by the U. S. Department of Housing and
Urban Development, we have also issued reports dated March 11, 2002, on our
consideration of the Partnership's internal control, on its compliance with
specific requirements applicable to nonmajor HUD programs and specific
requirements applicable to Fair Housing and Non-Discrimination.

/s/ Robert J. Pacheco, CPA
Pasadena, California
March 11, 2002

38

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Creative Choice Homes VI, Ltd.

We have audited the accompanying balance sheet of Creative Choice Homes VI, Ltd.
as of December 31, 2003, and the related statements of operations, partners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Creative Choice Homes VI, Ltd.
as of December 31, 2003, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
May 18, 2004

39

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Creative Choice Homes VI, Ltd.

We have audited the accompanying balance sheet of Creative Choice Homes VI, Ltd.
as of December 31, 2002, and the related statements of operations, partners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Creative Choice Homes VI, Ltd.
as of December 31, 2002, and the results of its operations, the changes in
partners' equity and cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of America.

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 4, 2003

40

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners
Creative Choice Homes VI, Ltd.

We have audited the accompanying balance sheet of Creative Choice Homes VI, Ltd.
as of December 31, 2001, and the related statements of operations, partners'
equity and cash flows for the year then ended. These financial statements are
the responsibility of the partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.

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

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

/s/ Reznick Fedder & Silverman
Bethesda, Maryland
February 4, 2002

41

[Letterhead of BERT D. SAMUELS CPA]

Independent Auditor's Report

To the Partners
P & P Home for the Elderly, L.P.
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. as of December 31, 2003, and the related statements of income, changes in
partners' equity and cash flows for the year then ended. The financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of P & P Home for the Elderly, L.P. as
of December 31, 2003, and the results of its operations and cash flows for the
year then ended, in conformity with accounting principles generally accepted in
the United States of America.

/s/ Bert D. Samuels CPA
Encino, California
February 28, 2004

42

[Letterhead of SHENOUDA & ASSOCIATES, LLP]

Independent Auditor's Report

To the Partners
P & P Home for the Elderly, L.P.
Los Angeles, California

We have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. (A Limited Partnership) as of December 31, 2002, and the related statements
of operations, changes in partners' equity and cash flows for the year then
ended. These financial statements are the responsibility of the P & P Home for
the Elderly, L.P. management. Our responsibility is to express an opinion on
these financial statements based on our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of P & P Home for the Elderly,
L.P. as of December 31, 2002, and the results of its operations and cash flows
for the year then ended, in conformity with accounting principles generally
accepted in the United States of America.

/s/ Shenouda & Associates, LLP
Huntington Beach, California
February 18, 2003

43

[Letterhead of CHARLES P. BENEDICT, CPA]

Independent Auditor's Report

To the Partners
P & P Home for the Elderly, L.P.
Los Angeles, California

I have audited the accompanying balance sheet of P & P Home for the Elderly,
L.P. as of December 31, 2001, and the related statements of income, changes in
partners' capital, and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. My
responsibility is to express an opinion on these financial statements based on
my audit.

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

In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of P & P Home for the Elderly, L.P. at
December 31, 2001, and the results of its operations and cash flows for the year
then ended, in conformity with generally accepted accounting principles.

/s/ Charles P. Benedict, CPA
Monrovia, California
February 28, 2002

44

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION

Clear Horizons Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 2003, and the related statements of income, capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 2003 and the results of its
operations, changes in capital, and cash flows for the year then ended in
conformity with U.S. generally accepted accounting principles.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2003 taken as a whole. The
supplementary Schedules 1 through 6 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 9, 2004 on our consideration of Clear Horizons Limited
Partnership's internal control and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grants. Those reports are an
integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the
results of our audit.

/s/ Cole, Evans & Peterson
Shreveport, Louisiana
Federal ID No. 72-0506596
Lead Auditor: Steven W. Hedgepeth
February 9, 2004

45

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION

Clear Horizons Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 2002, and the related statements of income, capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 2002 and the results of its
operations, changes in capital, and cash flows for the year then ended in
conformity with U.S. generally accepted accounting principles.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2002 taken as a whole. The
supplementary Schedules 1 through 6 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards, we have also issued a report
dated February 6, 2003 on our consideration of Clear Horizons Limited
Partnership's internal control and on our tests of its compliance with certain
provisions of laws, regulations, contracts, and grants. Those reports are an
integral part of an audit performed in accordance with Government Auditing
Standards and should be read in conjunction with this report in considering the
results of our audit.

/s/ Cole, Evans & Peterson
Shreveport, Louisiana
Federal ID No. 72-0506596
Lead Auditor: Steven W. Hedgepeth
February 6, 2003

46

[Letterhead of COLE, EVANS & PETERSON]

INDEPENDENT AUDITORS' REPORT ON THE BASIC FINANCIAL STATEMENTS
AND SUPPLEMENTAL INFORMATION

Clear Horizons Limited Partnership
Shreveport, Louisiana

We have audited the accompanying balance sheet of Clear Horizons Limited
Partnership, at December 31, 2001, and the related statements of income, capital
and cash flows for the year then ended. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

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

In our opinion, the financial statements referred to in the first paragraph
above present fairly, in all material respects, the financial position of Clear
Horizons Limited Partnership, at December 31, 2001 and the results of its
operations, changes in capital, and cash flows for the year then ended in
conformity with generally accepted accounting principles.

Our audit was made primarily for the purpose of forming an opinion on the basic
financial statements for the year ended December 31, 2001 taken as a whole. The
supplementary Schedules 1 through 6 are presented for purposes of additional
analysis and are not a required part of the basic financial statements. Such
information has been subjected to the audit procedures applied in the audit of
the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.

In accordance with Government Auditing Standards and the Consolidated Audit
Guide for Audits of HUD Programs issued by the U. S. Department of Housing and
Urban Development, we have also issued a report dated February 8, 2002 on our
consideration of Clear Horizons Limited Partnership's internal control, and
reports dated February 8, 2002, on its compliance with laws and regulations,
compliance with specific requirements applicable to Affirmative Fair Housing,
and compliance with specific requirements applicable to major HUD-assisted
programs. Those reports are an integral part of an audit performed in accordance
with Government Auditing Standards and should be read in conjunction with this
report in considering the results of our audit.

/s/ Cole, Evans & Peterson
Shreveport, Louisiana
Federal ID No. 72-0506596
Lead Auditor: Steven W. Hedgepeth
February 8, 2002

47

[Letterhead of REZNICK FEDDER & SILVERMAN]

INDEPENDENT AUDITORS' REPORT

To the Partners of
Neptune Venture, L.P.

We have audited the accompanying balance sheets of Neptune Venture, L.P. as of
December 31, 2002 and 2001, and the related statements of operations, changes in
partners' equity (deficit) and cash flows for the years then ended. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Neptune Venture, L.P. at
December 31, 2002 and 2001, and the results of its operations, changes in
partners' equity (deficit) and its cash flows for the years then ended, in
conformity with accounting principles generally accepted in the United States of
America.

/s/ Reznick Fedder & Silverman
Baltimore, Maryland
January 31, 2003

48

[Letterhead of LAWLOR, O'BRIEN & CHERVENAK, LLC]

INDEPENDENT AUDITORS' REPORT

To the Partners
Affordable Green Associates, L.P.

We have audited the accompanying balance sheet of Affordable Green Associates,
L.P. as of December 31, 2003 and the related statements of operations, changes
in partners' (deficit), and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Green Associates,
L.P. as of December 31, 2003 and the results of its operations, changes in
partners' (deficit), and its cash flows for the year then ended in conformity
with generally accepted accounting principles in the United States of America.

/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 24, 2004

49

[Letterhead of LAWLOR, O'BRIEN & CHERVENAK, LLC]

INDEPENDENT AUDITORS' REPORT

To the Partners
Affordable Green Associates, L.P.

We have audited the accompanying balance sheet of Affordable Green Associates,
L.P. as of December 31, 2002 and the related statements of operations, changes
in partners' (deficit), and cash flows for the year then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Affordable Green Associates,
L.P. as of December 31, 2002 and the results of its operations, changes in
partners' (deficit), and its cash flows for the year then ended in conformity
with generally accepted accounting principles in the United States of America.

/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 15, 2003

50

[Letterhead of LAWLOR, O'BRIEN & CHERVENAK, LLC]

INDEPENDENT AUDITORS' REPORT

To the Partners
Affordable Green Associates, L.P.

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

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

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

/s/ Lawlor, O'Brien & Chervenak, LLC
Totowa, New Jersey
February 27, 2002

51

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

ASSETS

March 31,
-----------------------------
2004 2003
------------ ------------

Property and equipment net, less accumulated
depreciation (Notes 2, 4 and 7) $ 79,455,298 $ 82,509,050
Cash and cash equivalents (Notes 2, 3 and 10) 716,058 992,367
Cash held in escrow (Notes 3 and 5) 3,041,671 3,032,158
Deferred costs, less accumulated amortization (Notes 2 and 6) 211,030 226,427
Other assets 592,765 742,400
------------ ------------

$ 84,016,822 $ 87,502,402
============ ============

LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)

Liabilities:
Mortgage notes payable (Note 7) $ 57,109,969 $ 57,603,476
Accounts payable and other liabilities 1,208,552 1,333,488
Accrued interest 13,698,965 12,031,123
Due to local general partners and affiliates (Note 8) 1,754,760 1,617,113
Due to general partner and affiliates (Note 8) 4,220,695 3,507,307
------------ ------------

77,992,941 76,092,507
------------ ------------
Minority interest (451,294) (343,717)
------------ ------------

Commitments and contingencies (Notes 7, 8 and 10)

Partners' capital (deficit):
Limited partners
(58,928 BACs issued and outstanding) 6,934,373 12,160,026
General partner (459,198) (406,414)
------------ ------------

Total partners' capital (deficit) 6,475,175 11,753,612
------------ ------------

Total liabilities and partners' capital (deficit) $ 84,016,822 $ 87,502,402
============ ============

See accompanying notes to consolidated financial statements.

52

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

Year Ended March 31,
----------------------------------------------
2004 2003 2002
------------ ------------ ------------

Revenues

Rental income $ 9,182,883 $ 8,841,414 $ 8,519,231
Other income 176,405 298,643 494,436
------------ ------------ ------------
9,359,288 9,140,057 9,013,667
------------ ------------ ------------
Expenses
General and administrative 2,702,969 2,280,440 2,088,577
General and administrative-related parties
(Note 8) 991,402 992,455 969,639
Repairs and maintenance 2,205,546 1,946,913 1,802,164
Operating 1,105,217 1,011,399 954,117
Taxes 733,695 668,743 724,587
Insurance 696,677 616,132 463,831
Financial, principally interest 2,792,662 2,650,829 2,650,875
Depreciation and amortization 3,425,718 3,518,891 3,500,759
------------ ------------ ------------
Total expenses 14,653,886 13,685,802 13,154,549
------------ ------------ ------------

Loss before minority interest (5,294,598) (4,545,745) (4,140,882)

Minority interest in loss of subsidiary
partnerships 16,161 10,959 8,204
------------ ------------ ------------

Net loss $ (5,278,437) $ (4,534,786) $ (4,132,678)
============ ============ ============

Net loss - limited partners $ (5,225,653) $ (4,489,438) $ (4,091,351)
============ ============ ============

Number of BACs outstanding 58,928 58,928 58,928
============ ============ ============

Net loss per BAC $ (88.68) $ (76.19) $ (69.43)
============ ============ ============

See accompanying notes to consolidated financial statements.

53

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

Limited General
Total Partners Partner
------------ ------------ ------------

Partners' capital (deficit) -- April 1, 2001 $ 20,421,076 $ 20,740,815 $ (319,739)

Net loss (4,132,678) (4,091,351) (41,327)
------------ ------------ ------------
Partners capital (deficit) -- March 31, 2002 16,288,398 16,649,464 (361,066)

Net loss (4,534,786) (4,489,438) (45,348)
------------ ------------ ------------

Partners capital (deficit) - March 31, 2003 11,753,612 12,160,026 (406,414)

Net loss (5,278,437) (5,225,653) (52,784)
------------ ------------ ------------

Partners capital (deficit) - March 31, 2004 $ 6,475,175 $ 6,934,373 $ (459,198)
============ ============ ============

See accompanying notes to consolidated financial statements.

54

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

Year Ended March 31,
-------------------------------------------
2004 2003 2002
----------- ----------- -----------

Cash flows from operating activities:
Net loss $(5,278,437) $(4,534,786) $(4,132,678)
----------- ----------- -----------
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 3,425,718 3,518,891 3,500,759
Minority interest in loss of subsidiary
partnerships (16,161) (10,959) (8,204)
(Increase) decrease in assets:
Cash held in escrow (12,713) (30,654) 12,106
Other assets 149,635 (82,455) (3,880)
Increase (decrease) in liabilities:
Accounts payable and other liabilities (124,936) (44,300) (246,440)
Accrued interest 1,667,842 1,453,193 1,408,575
Increase in due to local general partners
and affiliates 272,373 23,862 20,166
Decrease in due to local general partners
and affiliates (4,522) (181,090) (169,418)
Due to general partner and affiliates 713,388 692,199 611,089
----------- ----------- -----------
Total adjustments 6,070,624 5,338,687 5,124,753
----------- ----------- -----------

Net cash provided by operating activities 792,187 803,901 992,075
----------- ----------- -----------

Cash flows from investing activities:
Improvements to property and equipment (356,569) (487,607) (336,097)
Decrease in cash held in escrow 3,200 73,813 72,248
Increase in due to local general partners
and affiliates 0 137,141 1,570
Decrease in due to local general partners
and affiliates (38,151) 0 (51,364)
----------- ----------- -----------

Net cash used in investing activities (391,520) (276,653) (313,643)
----------- ----------- -----------

Cash flows from financing activities:
Principal payments of mortgage notes (493,507) (479,998) (296,775)
Increase in due to local general partners
and affiliates 7,097 14,940 31,797
Decrease in due to local general partners
and affiliates (99,150) (128,141) 0
Decrease in capitalization of consolidated
subsidiaries attributable to minority interest (91,416) (236,163) (74,218)
----------- ----------- -----------

Net cash used in financing activities (676,976) (829,362) (339,196)
----------- ----------- -----------

55

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

Year Ended March 31,
-------------------------------------------
2004 2003 2002
----------- ----------- -----------

Net (decrease) increase in cash and cash
equivalents (276,309) (302,114) 339,236

Cash and cash equivalents at beginning of year 992,367 1,294,481 955,245
----------- ----------- -----------

Cash and cash equivalents at end of year $ 716,058 $ 992,367 $ 1,294,481
=========== =========== ===========

Supplemental disclosure of cash flows
information:
Cash paid during the year for interest $ 1,135,516 $ 1,211,218 $ 1,217,349
=========== =========== ===========

See accompanying notes to consolidated financial statements.

56

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

NOTE 1 - General

Independence Tax Credit Plus L.P. II (a Delaware limited partnership) (the
"Partnership") was organized on February 11, 1992 and commenced the public
offering on January 19, 1993. The general partner of the Partnership is Related
Independence Associates L.P., a Delaware limited partnership (the "General
Partner"). The general partner of the General Partner is Related Independence
Associates Inc., a Delaware Corporation ("RIAI") and is an affiliate of Related
Capital Company ("RCC").

On November 17, 2003, CharterMac acquired RCC, which is the indirect parent of
RCC Manager LLC, the sole shareholder of RIAI. Pursuant to the acquisition,
CharterMac acquired controlling interests in the General Partner. This
acquisition did not affect the Partnership or its day-to-day operations, as the
majority of the General Partner's management team remained unchanged.

The Partnership's business is to invest in other partnerships ("Local
Partnerships," "subsidiaries" or "subsidiary partnerships") owning leveraged
apartment complexes that are eligible for the low-income housing tax credit
("Tax Credit") enacted in the Tax Reform Act of 1986, some of which complexes
may also be eligible for the historic rehabilitation tax credit.

The Partnership has interests in fifteen subsidiary partnerships as of March 31,
2004.

The Partnership was authorized to issue a total of 100,000 ($100,000,000)
Beneficial Assignment Certificates ("BACs") which were registered with the
Securities and Exchange Commission for sale to the public. Each BAC represents
all of the economic and virtually all of the ownership rights attributable to a
limited partnership interest. The Partnership raised a total of $58,928,000
representing 58,928 BACs. The offering was terminated on April 7, 1994.

The terms of the Partnership's Amended and Restated Agreement of Limited
Partnership (the "Partnership Agreement") provide, among other things, that net
profits or losses and distributions of cash flow are, in general, allocated 99%
to the limited partners and BACs holders and 1% to the general partner.

NOTE 2 - Summary of Significant Accounting Policies

a) Basis of Consolidation

The consolidated financial statements include the accounts of the Partnership
and fifteen subsidiary partnerships in which the Partnership is the principal
limited partner, with an ownership interest of 98.99%. Through the rights of the
Partnership and/or an affiliate of the General Partner, which affiliate has a
contractual obligation to act on behalf of the Partnership, to remove the
general partner of the subsidiary local partnerships and to approve certain
major operating and financial decisions, the Partnership has a controlling
financial interest in the subsidiary local partnerships. All intercompany
accounts and transactions with the subsidiary partnerships have been eliminated
in consolidation.

For financial reporting purposes, the Partnership's fiscal year ends on March
31. All subsidiaries have fiscal years ending December 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from January 1
through March 31. The Partnership's fiscal year ends March 31, in order to allow
adequate time for the subsidiaries financial statements to be prepared and
consolidated. The books and records of the Partnership are maintained on the
accrual basis of accounting, in accordance with U.S. generally accepted
accounting principles.

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

57

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

The Partnership's investment in each subsidiary is equal to the respective
subsidiary's partners' equity less minority interest capital, if any. Losses
attributable to minority interest which exceed the minority interests'
investment in a subsidiary partnership have been charged to the Partnership.
Such losses aggregated approximately $29,000, $27,000 and $26,000 for the years
ended March 31, 2004, 2003 and 2002 (the 2003, 2002 and 2001 Fiscal Years),
respectively. In consolidation, all subsidiary partnership losses are included
in the Partnership's capital account except for losses allocated to minority
interest capital. As of March 31, 2004, distributions to several minority
interests have exceeded their investments.

b) Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks, and investments
in short-term highly liquid instruments purchased with original maturities of
three months or less. Cash held in escrow has various use restrictions and is
not considered a cash equivalent.

c) Property and Equipment

Property and equipment to be held and used are carried at cost which includes
the purchase price, acquisition fees and expenses, construction period interest
and any other costs incurred in acquiring the properties. The cost of property
and equipment is depreciated over their estimated useful lives using accelerated
and straight-line methods. Expenditures for repairs and maintenance are charged
to expense as incurred; major renewals and betterments are capitalized. At the
time property and equipment are retired or otherwise disposed of, the cost and
accumulated depreciation are eliminated from the assets and accumulated
depreciation accounts and the profit or loss on such disposition is reflected in
earnings. A loss on impairment of assets is recorded when management estimates
amounts recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. At that time, property
investments themselves are reduced to estimated fair value (generally using
discounted cash flows).

Through March 31, 2004, the Partnership has recorded an aggregate loss on
impairment of assets of approximately $3,926,000.

d) Income Taxes

The Partnership is not required to provide for, or pay, any federal income
taxes. Net income or loss generated by the Partnership is passed through to the
partners and is required to be reported by them. The Partnership may be subject
to state and local taxes in jurisdictions in which it operates. For income tax
purposes, the Partnership has a fiscal year ending December 31 (Note 9).

e) Offering Costs

Costs incurred to sell BACs, including brokerage and the nonaccountable expense
allowance, are considered selling and offering expenses. These costs are charged
directly to limited partners' capital.

f) Loss Contingencies

The Partnership records loss contingencies as a charge to income when
information becomes available which indicates that it is probable that an asset
has been impaired or a liability has been incurred as of the date of the
financial statements and the amount of loss can be reasonably estimated.

58

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

g) Use of Estimates

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

NOTE 3 - Fair Value of Financial Instruments

The following methods and assumptions were used to estimate the fair value of
each class of financial instruments (all of which are held for nontrading
purposes) for which it is practicable to estimate that value:

Cash and Cash Equivalents and Cash Held in Escrow
- -------------------------------------------------
The carrying amount approximates fair value.

Mortgage Notes Payable
- ----------------------
The fair value of mortgage notes payable is estimated, where practicable, based
on the borrowing rate currently available for similar loans.

The estimated fair values of the Partnership's mortgage notes payable are as
follows:

March 31, 2004 March 31, 2003
-------------------------- --------------------------
Carrying Carrying
Amount Fair Value Amount Fair Value
----------- ----------- ----------- -----------

Mortgage notes payable for
which it is:
Practicable to estimate fair value $ 8,078,570 $ 8,227,133 $20,163,868 $15,987,427
Not practicable $49,031,399 * $37,439,608 *

*Management believes it is not practical to estimate the fair value of the
mortgage notes payable because mortgage programs with similar characteristics
are not currently available to the Local Partnerships.

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

NOTE 4 - Property and Equipment

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

March 31, Estimated
------------------------------- Useful Lives
2004 2003 (Years)
------------- ------------- ------------

Land $ 6,228,836 $ 6,228,836 --
Building and improvements 102,072,423 101,718,677 10-40
Furniture and fixtures 1,299,937 1,297,603 5-10
------------- -------------
109,601,196 109,245,116
Less: Accumulated depreciation (30,145,898) (26,736,066)
------------- -------------

$ 79,455,298 $ 82,509,050
============= =============

59

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

Included in property and equipment is $3,501,977 of acquisition fees paid to the
General Partner and $867,942 of acquisition expenses as of March 31, 2004 and
2003, respectively.

In connection with the rehabilitation of the properties, the subsidiary
partnerships have incurred developer's fees of $9,282,042 to the local general
partners and affiliates as of March 31, 2004 and 2003. Such fees have been
included in the cost of property and equipment.

Depreciation expense for the years ended March 31, 2004, 2003 and 2002 amounted
to $3,410,321, $3,499,640 and $3,475,234, respectively.

During Fiscal Year 2004, $489 of accumulated depreciation on assets disposed of
was written off.

NOTE 5 - Cash Held in Escrow

Cash held in escrow consists of the following:

March 31,
--------------------------
2004 2003
---------- ----------

Purchase price payments* $ 23,683 $ 23,683
Real estate taxes, insurance and other 1,138,159 1,125,446
Reserve for replacements (Note 7) 1,879,829 1,883,029
---------- ----------

$3,041,671 $3,032,158
========== ==========

*Represents amounts to be paid to seller upon completion of properties under
construction and upon meeting specified rental achievement criteria.

NOTE 6 - Deferred Costs

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

March 31,
------------------------
2004 2003 Period
--------- ---------- -------

Financing costs $ 361,409 $ 361,409 *
Other 33,703 33,703 various
--------- ----------
395,112 395,112
Less: Accumulated amortization (184,082) (168,685)
--------- ----------

$ 211,030 $ 226,427
========= ==========

*Over the life of the related mortgages.

Amortization expense for the years ended March 31, 2004, 2003 and 2002 amounted
to $15,397, $19,251 and $25,525, respectively.

60

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

NOTE 7 - Mortgage Notes Payable

The mortgage notes are payable in aggregate monthly installments of
approximately $175,000 including principal and interest at rates ranging from 0%
to 9.65% per annum, through the year 2052. Each subsidiary partnership's
mortgage note payable is collateralized by the land and buildings of the
respective subsidiary partnership, the assignment of each certain subsidiary
partnership's rents and leases, and is without further recourse.

One mortgage note with a balance of $4,102,647 and $4,347,411 at December 31,
2003 and 2002, respectively, which bears interest at 7% per annum is eligible
for an interest rate subsidy. Accordingly, the subsidiary partnership paid only
that portion of the monthly payments that would be required if the interest rate
was 1%. The balance was subsidized under Section 236 of the National Housing
Act.

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

Fiscal Year Ending Amount
- ------------------ -----------
2004 $ 559,245
2005 606,012
2006 653,153
2007 699,311
2008 759,168
Thereafter 53,833,080
----------
$57,109,969
===========

The mortgage agreements require monthly deposits to replacement reserves of
approximately $29,000 and monthly deposits to escrow accounts for real estate
taxes, hazard insurance and mortgage insurance and other (Note 5).

NOTE 8 - Related Party Transactions

An affiliate of the General Partner has a .01% interest as a special limited
partner in each of the subsidiary partnerships. An affiliate of the General
Partner also has a minority interest in certain local partnerships.

61

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

A) Other Related Party Expenses

The costs incurred to related parties for the years ended March 31, 2004, 2003
and 2002 were as follows:

Year Ended March 31,
--------------------------------
2004 2003 2002
-------- -------- --------

Partnership management fees (a) $546,000 $546,000 $546,000
Expense reimbursement (b) 122,835 121,297 110,132
Local administrative fees (d) 35,000 32,550 32,500
-------- -------- --------
Total general and administrative-
General Partner 703,835 699,847 688,632
-------- -------- --------
Property management fees incurred to
affiliates of the subsidiary partnerships'
general partners (c) 287,567 292,608 281,007
-------- -------- --------
Total general and administrative-
related parties $991,402 $992,455 $969,639
======== ======== ========

(a) The General Partner is entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its sole discretion
based upon its review of the Partnership's investments. Unpaid partnership
management fees for any year will be accrued without interest and will be
payable from working capital reserves or to the extent of available funds after
the Partnership has made distributions to the limited partners of sale or
refinancing proceeds equal to their original capital contributions plus a 10%
priority return thereon (to the extent not theretofore paid out of cash flow).
Partnership management fees owed to the General Partner amounting to
approximately $3,339,000 and $2,793,000 were accrued and unpaid as of March 31,
2004 and 2003, respectively.

(b) The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses incurred by the General Partner and its
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partner performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance. Expense reimbursements and asset monitoring fees owed
to the General Partner and its affiliates amounting to approximately $651,000
and $528,000 were accrued and unpaid as of March 31, 2004 and 2003,
respectively.

(c) Property management fees incurred by subsidiary partnerships amounted to
$672,734, $621,058, and $621,561 for the years ended March 31, 2004, 2003 and
2002, respectively. Of these fees $287,567, $292,608 and $281,007 were earned by
affiliates of the Local General Partners.

(d) Independence SLP L.P., a special limited partner of the subsidiary
partnerships, is entitled to receive a local administrative fee of up to $5,000
per year from each subsidiary partnership.

62

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

B) Due to Local General Partners and Affiliates

Due to Local General Partners and affiliates at March 31, 2004 and 2003 consists
of the following:

March 31,
--------------------------
2004 2003*
----------- -----------

Operating deficit advances $ 0 $ 99,150
Operating advances 5,000 5,000
Development fee payable 804,941 825,950
Construction costs payable 476,570 493,712
Management and other operating advances 229,615 (38,236)
Loans payable to general partner and affiliates (a) 238,634 231,537
----------- -----------

$ 1,754,760 $ 1,617,113
=========== ===========

(a) Affordable Green Associates, L.P. ("Affordable Green") borrowed monies from
affiliates of the local general partners while the building was being
constructed. Interest was accrued at rates from 8% to 11% during the
construction period. The loans are now due on demand and do not accrue
interest. During 2003, Affordable Green borrowed additional monies from
affiliates of a local general partner. The loans are non-interest bearing
and are not expected to be repaid within the next operating cycle.

* Reclassified for comparative purposes.

NOTE 9 - Income Taxes

A reconciliation of the financial statement net loss to the income tax loss for
the Partnership and its consolidated subsidiaries is as follows:

Year Ended March 31,
-------------------------------------------
2004 2003 2002
----------- ----------- -----------

Financial statement net loss $(5,278,437) $(4,534,786) $(4,132,678)

Differences between depreciation and amortiza-
tion expense records for financial reporting
purposes and the accelerated costs recovery
system utilized for income tax purposes (478,109) (563,731) (748,215)

Tax exempt interest income (2,100) (3,606) (8,680)

Differences resulting from parent company
having a different fiscal year for income tax
and financial reporting purposes 12,179 4,309 53,481

Other, including accruals for financial repo-
rting not deductible for tax purposes until
paid 585,145 316,434 103,406
----------- ----------- -----------

Net loss as shown on the income tax return
for the calendar year ended $(5,161,322) $(4,781,380) $(4,732,686)
=========== =========== ===========

63

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2004

NOTE 10 - Commitments and Contingencies

a) Subsidiary Partnerships-Other

Clear Horizons Limited Partnership
- ----------------------------------
At December 31, 2003, Clear Horizons Limited Partnership ("Clear Horizons")
current liabilities exceeded its current assets by $195,919. Although this
condition could raise substantial doubt about Clear Horizons' ability to
continue as a going concern, such doubt is alleviated as follows:

1. Included in current liabilities at December 31, 2003 is $215,190 owed to
related parties who have advised Clear Horizons that they do not intend to
pursue collection beyond Clear Horizons' ability to pay.

2. The Local General Partner of Clear Horizons has agreed to fund operating
deficits up to $250,000.

Accordingly, management believes that Clear Horizons has the ability to continue
as a going concern for at least one year from December 31, 2003.

b) Uninsured Cash and Cash Equivalents

The Partnership maintains its cash and cash equivalents in various banks. The
accounts at each bank are guaranteed by the Federal Deposit Insurance
Corporation up to $100,000. At March 31, 2004, uninsured cash and cash
equivalents approximated $955,000.

c) Other

The Partnership and BACs holders began to recognize Tax Credits with respect to
a Property when the Credit Period for such Property commenced. Because of the
time required for the acquisition, completion and rent-up of Properties, the
amount of Tax Credits per BAC has gradually increased over the first three years
of the Partnership. Housing Tax Credits not recognized in the first three years
will be recognized in the 11th through 13th years. The Partnership generated
$8,746,267 of Housing Tax Credits during each of the 2003, 2002 and 2001 tax
years, respectively.

64

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

None

Item 9A. Controls and Procedures

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Chief Executive
Officer and Chief Financial Officer of Related Independence Associates L.P., the
general partner of the Partnership, has evaluated the effectiveness of the
Partnership's disclosure controls and procedures (as such term is defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as
amended ("Exchange Act") as of the end of the period covered by this report.
Based on such evaluation, such officer has concluded that, as of the end of such
period, the Partnership's disclosure controls and procedures are effective.

(b) INTERNAL CONTROL OVER FINANCIAL REPORTING. There have not been any changes
in the Partnership's internal control over financial reporting during the fiscal
year to which this report relates that have materially affected, or are
reasonably likely to materially affect, the Partnership's internal control over
financial reporting.

PART III

Item 10. Directors and Executive Officers of the Registrant.

The Partnership is a limited partnership which was formed under the laws of the
State of Delaware on February 11, 1992. The general partner of the Partnership
is Related Independence Associates L.P., a Delaware limited partnership (the
"General Partner"). The general partner of the General Partner is Related
Independence Associates Inc., a Delaware corporation ("RIAI") and is an
affiliate of Related Capital Company ("RCC"). The Partnership has no directors
or executive officers. The Partnership's affairs are managed and controlled by
the General Partner.

On November 17, 2003, CharterMac acquired RCC, which is the indirect parent of
RCC Manager LLC, the sole shareholder of RIAI. Pursuant to the acquisition,
CharterMac acquired controlling interests in the General Partner. Alan P. Hirmes
replaced Stephen M. Ross as Director of RIAI effective April 1, 2004 as a result
of this acquisition. This acquisition did not affect the Partnership or its
day-to-day operations as the majority of the General Partner's management team
remained unchanged. The Partnership has not adopted a separate code of ethics
because the Partnership has no directors or executive officers. However, the
parent company of RCC, which controls the General Partner, has adopted a code of
ethics. See http://www.chartermac.com.

Certain information concerning the directors and executive officers of RIAI, is
set forth below. The General Partner is also the general partner of Independence
Tax Credit Plus L.P.

Name Position
- ---- --------

Alan P. Hirmes Director and Senior Vice President

Stuart J. Boesky Senior Vice President

Marc D. Schnitzer Vice President

Denise L. Kiley Vice President

Glenn F. Hopps Treasurer

Teresa Wicelinski Secretary

65

ALAN P. HIRMES, 49, has been a Certified Public Accountant in New York since
1978. Prior to joining Related in October 1983, Mr. Hirmes was employed by
Weiner & Co., Certified Public Accountants. Mr. Hirmes is also a Vice President
of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts
degree. Mr. Hirmes also serves on the Board of Trustees of CharterMac and
American Mortgage Acceptance Company ("AMAC").

STUART J. BOESKY, 48, practiced real estate and tax law in New York City with
the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined
Capital. From 1983 to 1984 Mr. Boesky practiced law with the Boston law firm of
Kaye Fialkow Richard & Rothstein (which subsequently merged with Strook & Strook
& Lavan LLP) and from 1978 to 1980 was a consultant specializing in real estate
at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from
Michigan State University with a Bachelor of Arts degree and from Wayne State
School of Law with a Juris Doctor degree. He then received a Master of Laws
degree in Taxation from Boston University School of Law. Mr. Boesky also serves
on the Board of Trustees of CharterMac and AMAC.

MARC D. SCHNITZER, 43, is responsible both for financial restructurings of real
estate properties and directing Related's acquisitions of properties generating
Housing Tax Credits. Mr. Schnitzer received a Masters of Business Administration
from The Wharton School of the University of Pennsylvania in December 1987
before joining Related in January 1988. From 1983 to January 1986, he was a
financial analyst for the First Boston Corporation in New York. Mr. Schnitzer
graduated summa cum laude with a Bachelor of Science in Business Administration
from the School of Management at Boston University in May 1983. Mr. Schnitzer
also serves on the Board of Trustees of CharterMac.

DENISE L. KILEY, 44, is responsible for overseeing the due diligence and asset
management of all multifamily residential properties invested in RCC sponsored
corporate, public and private equity and debt funds. Prior to joining Related in
1990, Ms. Kiley had experience acquiring, financing and asset managing
multifamily residential properties. From 1981 through 1985 she was an auditor
with Price Waterhouse. Ms. Kiley holds a Bachelor of Science in Accounting from
Boston College. Ms. Kiley also serves on the Board of Trustees of CharterMac.

GLENN F. HOPPS, 41, was employed prior to joining Related in December, 1990 by
Marks Shron & Company and Weissbarth, Altman and Michaelson, certified public
accountants. Mr. Hopps graduated from New York State University at Albany with a
Bachelor of Science Degree in Accounting.

TERESA WICELINSKI, 38, joined Related in June 1992, and prior to that date was
employed by Friedman, Alpren & Green, certified public accountants. Ms.
Wicelinski graduated from Pace University with a Bachelor of Arts Degree in
Accounting.

Item 11. Executive Compensation.

The Partnership has no officers or directors. The Partnership does not pay or
accrue any fees, salaries or other forms of compensation to directors or
officers of the General Partner for their services. However, under the terms of
the Partnership Agreement, the Partnership has entered into certain arrangements
with the General Partner and its affiliates, which provide for compensation to
be paid to the General Partner and its affiliates. Such arrangements include
(but are not limited to) agreements to pay nonrecurring Acquisition Fees, a
nonaccountable Acquisition Expense allowance and an accountable expense
reimbursement. In addition, the General Partner is entitled to a subordinated
interest in Cash from Sales or Financings and a 1% interest in Net Income, Net
Loss, Distributions of Adjusted Cash from Operations and Cash from Sales or
Financings. Certain directors and officers of the General Partner receive
compensation from the General Partner and its affiliates for services performed
for various affiliated entities which may include services performed for the
Partnership. The maximum annual partnership management fee paid to the General
Partner is 0.5% of invested assets. See Note 8 to the Financial Statements in
Item 8 above, which is incorporated herein by reference.

Tabular information concerning salaries, bonuses and other types of compensation
payable to executive officers has not been included in this annual report. As
noted above, the Partnership has no executive officers. The levels of
compensation payable to the General Partner and/or its affiliates is limited by
the terms of the Partnership Agreement and may not be increased therefrom on a
discretionary basis.

66

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

Name and Address of Amount and Nature of Percentage
Title of Class Beneficial Ownership Beneficial Ownership of Class
- -------------- -------------------- -------------------- ----------

General Partnership Related Independence $1,000 capital contribution 100%
Interest in the Associates L.P. -directly owned
Partnership 625 Madison Avenue
New York, NY 10022

Independence SLP L.P., a limited partnership whose general partner is the
general partner of the General Partner of the Partnership and which acts as the
special limited partner of each Local Partnership, holds a .01% limited
partnership interest in each Local Partnership. See Note 8 to the Financial
Statements in Item 8 above, which information is incorporated herein by
reference thereto.

Except as set forth below, no person is known by the Partnership to be the
beneficial owner of more than 5% of the Limited Partnership Interests and
neither the General Partner nor any director or executive officer of the General
Partner owns any Limited Partnership Interests. The following table sets forth
the number of BACs beneficially owned, as of May 4, 2004, by (i) each BACs
holder known to the Partnership to be a beneficial owner of more than 5% of the
BACs, (ii) each director and executive officer of the general partner of the
General Partner and (iii) the directors and executive officers of the general
partner of the General Partner as a group. Unless otherwise noted, all BACs are
owned directly with sole voting and dispositive powers.

Amount and Nature of
Name of Beneficial Owner (1) Beneficial Ownership Percent of Class
- ------------------------ -------------------- ----------------

Lehigh Tax Credit Partners, Inc. 4,453.20 (2) (3) 7.6%

J. Michael Fried 4,453.20 (2) (3) (4) 7.6%

Alan P. Hirmes 4,453.20 (2) (3) (4) 7.6%

Stuart J. Boesky 4,453.20 (2) (3) (4) 7.6%

Marc D. Schnitzer 4,453.20 (2) (3) (4) 7.6%

Denise L. Kiley 4,453.20 (2) (3) (4) 7.6%

Glenn F. Hopps - -

Teresa Wicelinski - -

All directors and executive officers 4,453.20 (2) (3) (4) 7.6%
of the general partner of the
Related General Partner as a group
(eight persons)

(1) The address for each of the persons in the table is 625 Madison Avenue, New
York, New York 10022.

(2) As set forth in Schedule 13D filed by Lehigh Tax Credit Partners L.L.C.
("Lehigh I") and Lehigh Tax Credit Partners, Inc., (the "Managing Member") on
June 10, 1997 with the Securities and Exchange Commission (the "Commission") and
pursuant to a letter agreement dated November 7, 1997 among the Partnership,
Lehigh I and the General Partner (the "Standstill Agreement"), Lehigh I agreed
that, prior to November 7, 2007 (the "Standstill Expiration Date"), it will not
and it will cause certain affiliates (including Lehigh II) not to (i) acquire,
attempt to acquire or make a proposal to acquire, directly or indirectly, more
than 45% (including BACs acquired through all other means) of the outstanding
BACs, (ii) seek to propose to enter into, directly or indirectly, any merger,
consolidation, business combination, sale or acquisition of assets, liquidation,
dissolution or other similar transaction involving the Partnership, (iii) make,

67

or in any way participate, directly or indirectly, in any "solicitation" of
"proxies" or "consents" (as such terms are used in the proxy rules of the
Commission) to vote any voting securities of the Partnership, (iv) form, join or
otherwise participate in a "group" (within the meaning of Section 13 (d)(3) of
the Securities and Exchange Act of 1934) with respect to any voting securities
of the Partnership, except those affiliates bound by the Standstill Agreement
will not be deemed to have violated it and formed a "group" solely by acting in
accordance with the Standstill Agreement, (v) disclose in writing to any third
party any intention, plan or arrangement inconsistent with the terms of the
Standstill Agreement, or (vi) loan money to, advise, assist or encourage any
person in connection with any action inconsistent with the terms of the
Standstill Agreement. In addition, Lehigh I agreed that until the Standstill
Expiration Date it will not sell any BACs acquired by it unless the buyer of
such BACs agrees to be bound by the Standstill Agreement; provided, however,
Lehigh I may make transfers in the secondary market to any purchaser which
represents that following such sale it will not own three (3%) percent or more
of the BACs outstanding. By the terms of the Standstill Agreement, Lehigh I also
agreed to vote its BACs in the same manner as a majority of all voting BACs
holders; provided, however, Lehigh I is entitled to vote its BACs as it
determines with regard to any proposal (i) to remove the General Partner as a
general partner of the Partnership or (ii) concerning the reduction of any fees,
profits, distributions or allocations for the benefit of the General Partner or
its affiliates. The addresses of each of the Partnership, Lehigh I and the
General Partner is 625 Madison Avenue, New York, New York 10022.

(3) All of such BACs represent BACs owned directly by Lehigh I and Lehigh Tax
Credit Partners II, L.L.C. ("Lehigh II"), for which the Managing Member serves
as managing member. As of May 4, 2004, Lehigh I held 2,213.60 BACs and Lehigh II
held 2,239.60 BACs.

(4) Each such party serves as a director and executive officer of the Managing
Member and owns an equity interest therein except J. Michael Fried who owns only
an economic interest.

Item 13. Certain Relationships and Related Transactions.

The Partnership has and will continue to have certain relationships with the
General Partner and its affiliates, as discussed in Item 11 and also Note 8 to
the Financial Statements in Item 8 above, which are incorporated herein by
reference thereto. However, there have been no direct financial transactions
between the Partnership and the directors and officers of the General Partner.

Item 14. Principal Accountant Fees and Services

Audit Fees
- ----------
The aggregate fees billed by Trien Rosenberg Rosenberg Weinberg Ciullo and
Fazzari LLP and their respective affiliates (collectively, "Trien") for
professional services rendered for the audit of our annual financial statements
for the years ended March 31, 2004 and 2003 and for the reviews of the financial
statements included in the Partnership's Quarterly Reports on Form 10-Q for
those years were $53,400 and $53,400, respectively.

Audit - Related Fees
- --------------------
None.

Tax Fees
- --------
The aggregate fees billed by Weiser LLP (formerly, Rubin and Katz LLP) and their
respective affiliates (collectively, "Weiser") for professional services
rendered for the preparation of our annual tax returns for the years ended
December 31, 2003 and 2002 were $10,800 and $10,500, respectively.

All Other Fees
- --------------
None.

The Partnership is not required to have, and does not have, a stand-alone audit
committee.

68

PART IV

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential Page

Sequential
Page
----------

(a) 1. Consolidated Financial Statements
---------------------------------

Report of Independent Registered Public Accounting Firm 15

Consolidated Balance Sheets at March 31, 2004 and 2003 52

Consolidated Statements of Operations for the Years Ended
March 31, 2004, 2003 and 2002 53

Consolidated Statements of Changes in Partners' Capital
(Deficit) for the Years Ended March 31, 2004, 2003 and
2002 54

Consolidated Statements of Cash Flows for the Years Ended
March 31, 2004, 2003 and 2002 55

Notes to Consolidated Financial Statements 57

(a) 2. Consolidated Financial Statement Schedules
------------------------------------------

Report of Independent Registered Public Accounting Firm 76

Schedule I - Condensed Financial Information of Registrant 77

Schedule III - Real Estate and Accumulated Depreciation 80

All other schedules have been omitted because they are
not required or because the required information is
contained in the financial statements or notes thereto.

(a) 3. Exhibits
--------

(3A) Agreement of Limited Partnership of Independence Tax Credit
Plus L.P. II as adopted on February 11, 1992*

(3B) Form of Amended and Restated Agreement of Limited Partne-
rship of Independence Tax Credit Plus L.P. II, attached to
the Prospectus as Exhibit A**

(3C) Certificate of Limited Partnership of Independence Tax Cre-
dit Plus L.P. II as filed on February 11, 1992*

(10A) Form of Subscription Agreement attached to the Prospectus
as Exhibit B**

(10B) Escrow Agreement between Independence Tax Credit Plus L.P.
II and Bankers Trust Company*

(10C) Form of Purchase and Sales Agreement pertaining to the Par-
tnership's acquisition of Local Partnership Interests*

(10D) Form of Amended and Restated Agreement of Limited Partners-
hip of Local Partnerships*

69

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(continue)
Sequential
Page
----------

(21) Subsidiaries of the Registrant 70

(31.1) Certification Pursuant to Rule 13a-14(a) or Rule 15d-14(a). 73

(32.1) Certification Pursuant to Rule 13a-14(b) or Rule 15d-14
(b) and Section 1350 of Title 18 of the United States
Code (18 U.S.C. 1350). 75

*Incorporated herein as an exhibit by reference to exhi-
bits filed with Post-Effective Amendment No. 4 to the
Registration Statement on Form S-11 (Registration No. 33-
37704)

**Incorporated herein as an exhibit by reference to exhi-
bits filed with Post-Effective Amendment No. 8 to the
Registration Statement on Form S-11 (Registration No. 33-
37704)

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the quarter ended
March 31, 2004.

Jurisdiction
(c) Subsidiaries of the Registrant (Exhibit 21) of Organization
------------------------------ ---------------

Lincoln Renaissance PA
United Germano - Millgate Limited Partnership IL
Mansion Court Associates PA
Derby Run Associates, L.P. VA
Renaissance Plaza '93 Associates, L.P. MD
Tasker Village Associates PA
Martha Bryant Manor, L.P. CA
Colden Oaks Limited Partnership CA
Brynview Terrace, L.P. CA
NLEDC, L.P. CA
Creative Choice Homes VI, Ltd. FL
P & P Homes for the Elderly, L.P. CA
Clear Horizons Limited Partnership LA
Neptune Venture, L.P. NJ
Affordable Green Associates L.P. NY

(d) Not applicable

70

SIGNATURES
----------

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

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

By: RELATED INDEPENDENCE ASSOCIATES L.P.,
General Partner

By: RELATED INDEPENDENCE ASSOCIATES INC.,
General Partner

Date: June 18, 2004 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Director and Senior Vice President
(Chief Executive and Financial Officer)

Date: June 18, 2004 By: /s/ Glenn F. Hopps
------------------
Glenn F. Hopps
Treasurer
(Chief Accounting Officer)

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

Signature Title Date
- ------------------ --------------------------------------- -------------

Director and Senior Vice President
/s/ Alan P. Hirmes (chief executive and financial officer)
- ------------------
Alan P. Hirmes of Related Independence Associates Inc. June 18, 2004
-------------

Treasurer (chief accounting
/s/ Glenn F. Hopps officer) of Related Independence
- ------------------
Glenn F. Hopps Associates Inc. June 18, 2004
-------------

Exhibit 31.1

CERTIFICATION PURSUANT TO RULE
13a-14(a) OR RULE 15d-14(a)

I, Alan P. Hirmes, Chief Executive Officer and Chief Financial Officer of
Related Independence Associates Inc. ("RIAI") the general partner of Related
Independence Associates L.P. the General Partner of Independence Tax Credit Plus
L.P. II (the "Partnership"), hereby certify that:

1. I have reviewed this annual report on Form 10-K for the period ending
March 31, 2004 of the Partnership;

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

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

4. I am responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and
15d-15(e)) and internal control over financial reporting (as defined
in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Partnership and
I have:

a) designed such disclosure controls and procedures or caused such
disclosure controls and procedures to be designed under my
supervision, to ensure that material information relating to the
Partnership including its consolidated subsidiaries, is made known to
me by others within those entities, particularly during the period in
which this annual report was being prepared;

b) designed such internal control over financial reporting, or caused
such internal control over financial reporting to be designed under my
supervision, to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting
principles; and

c) evaluated the effectiveness of the Partnership's disclosure
controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures as
of the end of the period covered by this annual report based on such
evaluation; and

d) disclosed in this annual report any change in the Partnership's
internal control over financial reporting that occurred during the
period ending March 31, 2004 that has materially affected, or is
reasonably likely to materially affect, the Partnership's internal
control over financial reporting; and

5. I have disclosed, based on my most recent evaluation of internal
control over financial reporting, to the Partnership's auditors and to
the boards of directors of the General Partners:

a) all significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the Partnership's ability to
record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the Partnership's
internal control over financial reporting.

Date: June 18, 2004

By: /s/ Alan P. Hirmes
-------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer

Exhibit 32.1

CERTIFICATION PURSUANT
TO RULE 13a-14(b) OR RULE 15d-14(b)
AND SECTION 1350 OF TITLE 18
OF THE UNITED STATES CODE (18 U.S.C. 1350)

In connection with the Annual Report of Independence Tax Credit Plus L.P. II
(the "Partnership") on Form 10-K for the period ending March 31, 2004 as filed
with the Securities and Exchange Commission ("SEC") on the date hereof (the
"Report"), I, Alan P. Hirmes, Chief Executive Officer and Chief Financial
Officer of Related Independence Associates Inc. the general partner of Related
Independence Associates L.P., the General Partner of the Partnership, certify,
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of section 13(a) or
15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and result of operations of the
Partnership.

A signed original of this written statement required by Section 906 has been
provided to the Partnership and will be retained by the Partnership and
furnished to the SEC or its staff upon request.

By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Chief Executive Officer and
Chief Financial Officer
June 18, 2004

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
-------------------------------------------------------

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

In connection with our audits of the consolidated financial statements of
Independence Tax Credit Plus L.P. II and Subsidiaries (A Delaware Limited
Partnership) included in the Form 10-K as presented in our opinion dated June
17, 2004 on page 15, and based on the reports of other auditors, we have also
audited supporting Schedule I for the 2003, 2002 and 2001 Fiscal Years and
Schedule III at March 31, 2004. In our opinion, and based upon the reports of
the other auditors, these consolidated schedules present fairly, when read in
conjunction with the related consolidated financial statements, the financial
data required to be set forth therein.

Trien Rosenberg Rosenberg
Weinberg Ciullo & Fazzari LLP

New York, New York
June 17, 2004

76

INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

CONDENSED BALANCE SHEETS

ASSETS

March 31,
----------------------------
2004 2003
----------- -----------

Cash and cash equivalents $ 394,494 $ 411,989
Cash held in escrow 23,683 23,683
Investment in subsidiary partnerships 18,624,424 21,326,577
Other assets 33,704 34,293
----------- -----------

Total assets $19,076,305 $21,796,542
=========== ===========

LIABILITIES AND PARTNERS' CAPITAL

Due to general partner and affiliates $ 3,983,195 $ 3,314,807

Other liabilities 12,520 7,359
----------- -----------

Total liabilities 3,995,715 3,322,166

Partners' capital 15,080,590 18,474,376
----------- -----------

Total liabilities and partners' capital $19,076,305 $21,796,542
=========== ===========

Investments in subsidiary partnerships are recorded in accordance with the
equity method of accounting, wherein the investments are not reduced below zero.
Accordingly, partners' capital on the consolidated balance sheet will differ
from partners' capital shown above.

77

INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

CONDENSED STATEMENTS OF OPERATIONS

Year Ended March 31,
-------------------------------------------
2004 2003 2002
----------- ----------- -----------

Revenues

Other income $ 1,775 $ 3,531 $ 8,258
----------- ----------- -----------

Expenses

Administrative and management 112,406 108,838 118,912
Administrative and management-related parties 668,835 667,297 656,132
----------- ----------- -----------

Total expenses 781,241 776,135 775,044
----------- ----------- -----------

Loss from operations (779,466) (772,604) (766,786)

Equity in loss of subsidiary partnerships (2,614,320) (2,621,702) (2,634,166)
----------- ----------- -----------

Net loss $(3,393,786) $(3,394,306) $(3,400,952)
=========== =========== ===========

78

INDEPENDENCE TAX CREDIT PLUS L.P. II
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(NOT INCLUDING CONSOLIDATED SUBSIDIARY PARTNERSHIPS)

CONDENSED STATEMENTS OF CASH FLOWS

Year Ended March 31,
-------------------------------------------
2004 2003 2002
----------- ----------- -----------

Cash flows from operating activities:
Net loss $(3,393,786) $(3,394,306) $(3,400,952)
----------- ----------- -----------

Adjustments to reconcile net loss to net cash
used in operating activities:

Equity in loss of subsidiary partnerships 2,614,320 2,621,702 2,634,166

(Increase) decrease in assets:

Other assets 589 0 0

Increase (decrease) in liabilities:

Due to general partners and affiliates 668,388 677,499 602,489
Other liabilities 5,161 1,402 7
----------- ----------- -----------

Total adjustments 3,288,458 3,300,603 3,236,662
----------- ----------- -----------

Net cash used in operating activities (105,328) (93,703) (164,290)
----------- ----------- -----------

Cash flows from investing activities:

Investment in subsidiary partnerships 0 (220,341) (386,976)
Decrease in cash held in escrow -
purchase price adjustments 0 220,341 386,976
----------- ----------- -----------

Net cash used in investing activities 0 0 0
----------- ----------- -----------

Net cash provided by financing activities:

Distributions from subsidiary partnerships 87,833 87,587 71,307
----------- ----------- -----------

Net decrease in cash and cash equivalents (17,495) (6,116) (92,983)

Cash and cash equivalents, beginning of year 411,989 418,105 511,088
----------- ----------- -----------

Cash and cash equivalents, end of year $ 394,494 $ 411,989 $ 418,105
=========== =========== ===========

79

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2004

Initial Cost to Partnership Cost Capitalized
----------------------------- Subsequent to
Buildings and Acquisition:
Description Encumbrances Land Improvements Improvements
- ------------------------------------ ------------ ------------ ------------ ------------

Apartment Complexes
Lincoln Renaissance
Reading, PA $ 2,553,000 $ 0 $ 5,240,173 $ 238,372
United Germano Millgate Limited
Partnership
Chicago, IL 9,215,759 580,000 6,070,477 11,361,065
Mansion Court Associates
Philadelphia, PA 1,505,862 19,072 3,224,984 230,564
Derby Run Associates L.P.
Hampton, VA 4,325,898 407,410 3,069,628 4,555,191
Renaissance Plaza Assoc
Baltimore, MD 6,665,765 684,255 9,840,170 4,421,290
Tasker Village
Philadelphia, PA 1,784,881 18,235 0 3,935,436
Martha Bryant Manor, L.P.
Los Angeles, CA 7,641,030 966,577 0 10,702,055
Colden Oaks Limited Partnership
Los Angeles, CA 5,424,835 922,790 0 2,090,771
Brynview Terrace Limited Partnership
Los Angeles, CA 1,000,770 175,943 0 1,448,016
NLEDC, L.P.
Los Angeles, CA 4,269,283 624,000 0 5,884,672
Creative Choice Homes VI Ltd.
Miami, FL 3,466,656 650,072 13,134 5,593,277
P&P Homes for the Elderly, L.P.
Los Angeles, CA 6,281,077 0 0 10,002,384
Clear Horizons Limited Partnership
Shreveport, LA 790,000 15,304 2,058,729 226,889
Neptune Venture L.P.
Neptune Township, NJ 0 460,631 10,151,873 146,716
Affordable Green Associates L.P.
New York, NY 2,185,153 20,500 3,506,961 43,580
------------ ------------ ------------ ------------

$ 57,109,969 $ 5,544,789 $ 43,176,129 $ 60,880,278
============ ============ ============ ============

Gross Amount at which Carried at Close of Period
------------------------------------------------
Buildings and Accumulated
Description Land Improvements Total Depreciation
- ------------------------------------ ------------ ------------ ------------ ------------

Apartment Complexes
Lincoln Renaissance
Reading, PA $ 5,373 $ 5,473,172 $ 5,478,545 $ 1,421,207
United Germano Millgate Limited
Partnership
Chicago, IL 585,374 17,426,168 18,011,542 7,954,014
Mansion Court Associates
Philadelphia, PA 25,095 3,449,525 3,474,620 883,431
Derby Run Associates L.P.
Hampton, VA 409,771 7,622,458 8,032,229 1,969,104
Renaissance Plaza Assoc
Baltimore, MD 686,616 14,259,099 14,945,715 3,296,311
Tasker Village
Philadelphia, PA 20,596 3,933,075 3,953,671 955,347
Martha Bryant Manor, L.P.
Los Angeles, CA 968,938 10,699,694 11,668,632 2,896,461
Colden Oaks Limited Partnership
Los Angeles, CA 925,151 2,088,410 3,013,561 954,437
Brynview Terrace Limited Partnership
Los Angeles, CA 178,304 1,445,655 1,623,959 395,626
NLEDC, L.P.
Los Angeles, CA 626,361 5,882,311 6,508,672 1,662,320
Creative Choice Homes VI Ltd.
Miami, FL 652,433 5,604,050 6,256,483 1,716,990
P&P Homes for the Elderly, L.P.
Los Angeles, CA 642,360 9,360,024 10,002,384 2,033,665
Clear Horizons Limited Partnership
Shreveport, LA 17,665 2,283,257 2,300,922 830,347
Neptune Venture L.P.
Neptune Township, NJ 462,465 10,296,755 10,759,220 2,071,606
Affordable Green Associates L.P.
New York, NY 22,334 3,548,707 3,571,041 1,105,032
------------ ------------ ------------ ------------

$ 6,228,836 $103,372,360 $109,601,196 $ 30,145,898
============ ============ ============ ============

Life on which
Depreciation in
Year of Latest Income
Construction/ Date Statements is
Description Renovation Acquired Computed(a)(b)
- ------------------------------------ ---------- ---------- --------------

Apartment Complexes
Lincoln Renaissance
Reading, PA 1993-94 Apr. 1993 20-40
United Germano Millgate Limited
Partnership
Chicago, IL 1993-94 Oct. 1993 10-25
Mansion Court Associates
Philadelphia, PA 1993-94 Nov. 1993 20-40
Derby Run Associates L.P.
Hampton, VA 1994-95 Feb. 1994 40
Renaissance Plaza Assoc
Baltimore, MD 1994-95 Feb. 1994 27.5
Tasker Village
Philadelphia, PA 1994-95 May 1994 40
Martha Bryant Manor, L.P.
Los Angeles, CA 1994-95 Sept. 1994 27.5
Colden Oaks Limited Partnership
Los Angeles, CA 1994-95 Sept. 1994 31
Brynview Terrace Limited Partnership
Los Angeles, CA 1994-95 Sept. 1994 27.5
NLEDC, L.P.
Los Angeles, CA 1994-95 Sept. 1994 27.5
Creative Choice Homes VI Ltd.
Miami, FL 1994-95 Sept. 1994 40
P&P Homes for the Elderly, L.P.
Los Angeles, CA 1994-95 Sept. 1994 30
Clear Horizons Limited Partnership
Shreveport, LA 1994-95 Dec. 1994 27.5
Neptune Venture L.P.
Neptune Township, NJ 1995-96 Apr. 1995 40
Affordable Green Associates L.P.
New York, NY 1995-96 May 1995 27

(a) Depreciation is computed using primarily the straight-line method over the
estimated useful lives determined by the Partnership date of acquisition.
(b) Personal property is depreciated primarily by the straight-line method over
the estimated useful lives ranging from 5 to 10 years.

80

INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
SCHEDULE III
REAL ESTATE AND ACCUMULATED DEPRECIATION
Partnership Property Pledged as Collateral
MARCH 31, 2004

Cost of Property and Equipment Accumulated Depreciation
----------------------------------------------- -----------------------------------------------
Year Ended March 31,
-------------------------------------------------------------------------------------------------
2004 2003 2002 2004 2003 2002
------------- ------------- ------------- ------------- ------------- -------------

Balance at beginning of period $ 109,245,116 $ 108,763,199 $ 108,427,102 $ 26,736,066 $ 23,242,116 $ 19,766,882
Additions during period:
Improvements 356,569 490,218 336,097
Depreciation expense 3,410,321 3,499,640 3,475,234

Deductions during period:
Dispositions (489) (8,301) 0 (489) (5,690) 0
------------- ------------- ------------- ------------- ------------- -------------

Balance at close of period $ 109,601,196 $ 109,245,116 $ 108,763,199 $ 30,145,898 $ 26,736,066 $ 23,242,116
============= ============= ============= ============= ============= =============

At the time the Local Partnerships were acquired by Independence Tax Credit Plus
II Limited Partnership, the entire purchase price paid by Independence Tax
Credit Plus II Limited Partnership was pushed down to the Local Partnerships as
property and equipment with an offsetting credit to capital. Since the projects
were in the construction phase at the time of acquisition, the capital accounts
were insignificant at the time of purchase. Therefore, there are no material
differences between the original cost basis for tax and GAAP.

81