10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K

(Mark One)

X    ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 [FEE REQUIRED]

For the fiscal year ended December 31, 2003       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
       SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

For the transition period from to
Commission file number 2-89185

GULLEDGE REALTY INVESTORS II

                           Virginia                                                                             54-1191237
               (State of incorporation)                                            (I.R.S. Employer Identification No.)
  One North Jefferson, St. Louis, Missouri                                                       63103

Registrant's telephone number: 314-955-3000

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

Limited Partnership Interests
(Title of class)

________________

        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 (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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes    No  X  

Documents Incorporated by Reference:

1.	Registration Statement (No. 2-89185) of Registrant effective April 30, 1984 (the "Registration Statement").
2.	Prospectus of Registrant dated April 30, 1984 (the "Prospectus").
3.	Supplement No. 1 dated October 8, 1984 to Prospectus.
4.	Supplement No. 2 dated February 6, 1985 to Prospectus.
5.	Supplement No. 3 dated April 18, 1985 to Prospectus.

TABLE OF CONTENTS

PART I

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

PART II

Item 5.	Market for the Registrant's Common Equity and Related Security Holder Matters
Item 6.	Selected Financial Data
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk
Item 8.	Financial Statements and Supplementary Data
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Item 9A. Disclosure Controls and Procedures

PART III

Item 10.	Directors and Executive Officers of the Registrant
Item 11.	Executive Compensation
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Item 13.	Certain Relationships and Related Transactions
Item 14.	Principal Accounting Fees and Services

PART IV

Item 15. Exhibits, Financial Statements, Schedules and Reports on
Form 8K

SIGNATURES

CERTIFICATIONS

PART I

Item 1.        Business.

        Gulledge Realty Investors II, L.P., ("Registrant" or "Partnership") is a Virginia limited partnership formed to invest as a limited partner in other limited partnerships ("Project Partnerships") that own and operate apartment complexes ("Projects") that are financed and/or operated under federal or state housing assistance programs. Part of the original objective of the Registrant was to generate tax losses for investors. However, due to changes in the tax regulations, the use of these losses has been restricted for most investors.

        The Registrant is attempting to sell its assets and liquidate. Though the Registrant's current investment balance in these Project Partnerships is zero, the impact on future operations could be significant as distributions from Project Partnerships are the primary source of revenue for the Registrant. Proceeds, if any, from the sale of the Project Partnerships will be used to pay Registrant liabilities. The Registrant does not anticipate the sales to generate sufficient proceeds to make a distribution to partners. Any sale of the assets will cause capital gains to be passed through to partners as a result of negative tax basis in each of the investments from the accumulation of previous years' losses. The partners will also realize ordinary income to the extent liabilities are not satisfied by the sales proceeds.

        The ability to sell the Registrant's assets, i.e. the Project Partnerships, is limited by the overall market conditions in the geographic areas where the Projects operate and, potentially, by the ability of the Projects to qualify for Low Income Housing Tax Credits. For those Project Partnerships for which the Registrant's ownership interest is pledged as collateral in connection with promissory notes, the Registrant must also consider the outstanding balances of the notes and in some cases negotiate a reduced payoff on the notes.

        As of December 31, 2003, the Registrant has investments in Project Partnerships which own the Projects listed below:

		Year	Housing	Original	Offering	Acquisition	Government
	PROJECT	Completed	Units	Mortgages	Proceeds	Fees	Programs
1.	Hawthorn Ridge Apts. Woodbridge, IL	1977	176	$  4,196,243	$1,836,000	$164,700	HUD Section 223(F)
2.	Colony Place Apts. Fayetteville, NC	1970	100	$  1,744,265	$   598,750	$  53,950	HUD Sections 8 and 236
			______	__________	_________	________
			276	$5,940,508	$2,434,750	$218,650

        Although each Project must compete in the market place for tenants, interest subsidies and/or rent supplements from governmental agencies make it possible to offer certain of these dwelling units to eligible tenants at a cost significantly below the market rate for comparable conventionally-financed dwelling units.

        The Project Partnerships previously included Olympic Village Apts., which assets were sold in 2003, Country Oaks Apts., which limited partner interests were sold in 2003 and Pine West Ltd. and Rancho Vista Associates, which limited partner interests were sold in 2001.

Item 2.        Properties.

        Other than its interests in the Project Partnerships, the Registrant does not own any property. The General Partner believes that the Projects described below are all in satisfactory physical condition.

	Average Effective Occupancy Per Unit		Average Monthly   Rental Per Unit
Project	2003	2002	2003	2002
Hawthorn Ridge Apts.	83%	97%	$872	$838
Colony Place Apts.	89%	92%	$376	$338

Item 3.        Legal Proceedings.

        The Registrant is not currently subject to any pending material legal proceeding.

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

        No matters were submitted to a vote of security holders.

PART II

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

        As of December 31, 2003, the number of holders of units was 998.

        The Registrant is a limited partnership and thus has no common stock. There is no ready market for the Units and it is not anticipated that there will be any market. Any acquisitions or dispositions of Units that have occurred have been the result of private transactions, usually between related parties, and the Registrant has no knowledge of the prices bid for or asked with respect to the Units. The General Partner has no plans to offer any services that would match prospective buyers with prospective sellers of Units.

Item 6.        Selected Financial Data.

	Year Ended December 31,
	2003	2002	2001	2000	1999
Revenue and equity in Project Partnerships' Operations	$    313,858	$  410,492	$   162,241	$   200,007	$       582,499
Expenses	(584,362)	(530,977)	(492,210)	(509,105)	(498,059)
Net (Loss)/Income	$ (270,504)	$(120,485)	$ (329,969)	$(309,098)	$    84,440
Investment in Project Partnerships	$           -	$          -	$           -	$ 254,246	$      487,199
Total Assets	$     65,179	$    91,813	$   94,197	$  296,286	$   511,571
Net (Loss)/Income per partnership unit	$          (23)	$        (10)	$         (28)	$           (26)	$            7

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

        The Registrant is a limited partnership formed to acquire limited partner interests in real estate limited partnerships (Project Partnerships). Part of the original objective of the Registrant was to generate tax losses for investors. However, due to changes in the tax regulations, there are some restrictions on the use of these losses.

        The Registrant is attempting to sell its assets and liquidate the Partnership. The ability to sell the Registrant's assets, i.e. the Project Partnerships, is limited by the overall market conditions in the geographic areas where the Projects operate and, potentially, by the ability of the Projects to qualify for Low Income Housing Tax Credits. For those Project Partnerships for which the Registrant's ownership interest is pledged as collateral in connection with promissory notes, the Registrant must also consider the outstanding balances of the notes and in some cases negotiate a reduced payoff on the notes. The sale of the assets will cause capital gains to be passed through to its partners as a result of negative tax basis in each of the investments from the accumulation of previous years' losses. The partners will also realize ordinary income to the extent liabilities are not satisfied by sales proceeds.

        The accounting for an investment in a Project Partnership involves increasing and decreasing the Registrant's investment in each Project Partnership by the Registrant's share of the Project Partnership's income and loss, respectively. If losses accumulate greater than gains plus capital contributions and less distributions to date, the investment is reduced until that investment reaches zero. Losses incurred by a Project Partnership subsequent to the Registrant's investment reaching zero are not reflected in the Registrant's financial statements until such time as the Project Partnership reports net income. Losses reported from the Project Partnerships are primarily the result of depreciation expense and interest expense incurred on non-recourse government backed debt and sole-recourse secondary financing loans. These losses, in and of themselves, do not accurately portray the surplus cash or excess cash (as defined by the United States Department of Housing and Urban Development ("HUD")) generating potential of the projects, such surplus cash being available for distribution to the partners of the Project Partnerships. The Registrant treats distributions as income, if the investment in the Project Partnership is zero, or as a return or withdrawal of capital invested in the Project Partnership, if the investment is above zero.

Results of Operations

        The net loss for 2003 was $270,504 compared to net loss of $120,485 for 2002 and net loss for 2001 of $329,969 (see Items 6 and 15(a)1) due to the changes in revenues and expenses noted below.

        Distributions from zero-basis Project Partnerships were $237,076 in 2003 compared to $399,314 in 2002 and $96,370 in 2001. The decrease in distributions from zero-basis Project Partnerships in 2003 as compared to 2002 was mainly the result of a decrease in occupancy for Hawthorn. The increase in distributions from zero-basis Project Partnerships in 2002 as compared to 2001 was mainly the result of the accounting treatment of distributions from limited liability partnerships under the equity method (see Note A to the Financial Statements). In 2003 and 2002, the Registrant received distributions of $233,136 and $399,314, respectively, from Hawthorn which were recognized as distributions from zero-basis Project Partnerships. In 2001, the Registrant recognized only $86,912 of its $373,481 distribution received from Hawthorn as distributions from zero-basis Project Partnerships as it first reduced its $286,570 investment balance in Hawthorn to zero.

        Equity in income of Project Partnerships was $0 in 2003 and 2002 as compared to $32,323 in 2001. The decrease in equity in income of Project Partnerships in 2002 was also due to the accounting treatment of investments in limited liability partnerships under the equity method. In 2003 and 2002, the Registrant did not recognize equity in income of Project Partnerships from Hawthorn, because Hawthorn's operating results along with distributions did not result in a write up of the investment value above its beginning balance of zero. In 2001, the beginning investment balance in Hawthorn was above zero. The Registrant recognized $32,323 as equity in income of Project Partnerships, which represented its pro-rata share of the earnings of Hawthorn prior to receipt of a distribution. The distribution reduced the investment balance to zero and the remaining amount was recognized as distributions from zero-basis project partnerships as explained above. Subsequent to receipt of the distribution and reduction of the investment balance to zero, equity income in Hawthorn was no longer recognized.

        The gain on sale of Project Partnerships of $76,000 in 2003 was due to the sale of the limited partner interests of Country Oaks. The limited partnership interests in Country Oaks were sold to GULL-AGE Properties, Inc. ("GAP"). The proceeds from the sale of $26,000 were used to make a payment on the amount owed to the General Partner. The remaining gain of $50,000 was due to the write-off of a contribution payable to Country Oaks. The partners of the Partnership will recognize capital gains on the sale of approximately $834,000. The gain on sale of Project Partnerships of $31,867 in 2001 was due to the sale of the limited partner interests of Rancho Vista Associates and Pine West, Ltd.

        In April 2003, the Partnership sold the assets of Olympic. As part of the terms of the sale, the purchaser assumed the primary mortgage on Olympic and all of the operating liabilities. A reduced payoff was negotiated on a secondary note which was collateralized by the Partnership's ownership interest in Olympic. The Partnership did not receive a distribution from the sale as all proceeds were used to pay expenses related to the sale. The Partnership did not recognize a gain or loss on the sale in the Statement of Operations as no proceeds were received and the Partnership had a zero basis in Olympic. As a result of the sale, partners of the Partnership will realize tax consequences including capital gains of approximately $3,500,000 and ordinary income to the extent of the reduced payoff on the secondary note in the approximate amount of $8,400,000.

        The decrease in miscellaneous income in 2003 compared to 2002 was due to a $10,000 deposit received in 2002 under the terms of a contract for the sale of Colony. The prospective buyer exercised its right under the sales contract to terminate the sale, forfeiting the deposit to the Registrant.

        Interest expense increased in 2003 and 2002, compared to 2001 as the result of a 2 percent increase in the interest rate on the note payable that became effective July 1, 2002.

        Professional fees increased in 2003 compared to 2002 as a result of an increase in audit fees.

        Operating expenses in 2003 compared to 2002 increased as the result of state taxes paid on behalf of two of the Project Partnerships and legal fees being incurred in connection with the disposition of the Project Partnerships. Operating expenses increased in 2002 compared to 2001 due to state taxes being paid on behalf of two of the Project Partnerships.

Liquidity and Capital Resources

        The Registrant is liable for a promissory note that bears simple interest at a rate of 11 percent and is collateralized by the Registrant's ownership interest in Hawthorn. Principal and interest payable totaled $3,940,854 at December 31, 2003. Principal and interest can only be paid from distributions received from Hawthorn. The Registrant is not required to use distributions from other Project Partnerships to make payments on this promissory note. The promissory note along with accrued interest was due on June 30, 2002 and is currently in default. As a result, the Registrant's ownership interest in Hawthorn may revert to the noteholder (see Note E to Financial Statements). The noteholder has not notified the Registrant of a demand for payment or a claim on the collateral.

        In January of 2004, the Registrant sold the assets of Hawthorn. The Registrant recognized a gain on the sale of $3,401,551. Under the terms of the sale, the purchaser assumed the primary mortgage and all of the operating liabilities of Hawthorn. Proceeds of $3,301,551 from the sale were used to make a partial payment on the note payable which was collateralized by the Partnership's limited partner interests in Hawthorn. The remaining proceeds of $100,000 were used to pay Partnership liabilities owed to the general partner per the partnership agreement. The remaining balance of the note payable, including accrued interest to the date of the sale, of $597,363 was forgiven as part of the terms of a negotiated reduced payoff entered into prior to the sale.

        As a result of the sale of the assets of Hawthorn, capital gains of approximately $6,100,000 and ordinary income, to the extent of the debt forgiveness on the note payable, will be allocated to the partners based on the terms of the partnership agreement.

        The Registrant's ownership interest in Colony is pledged as collateral in connection with a promissory note issued by Colony. The Colony promissory note was due June 30, 1997 and had been extended to November 30, 1999, while the General Partner attempted to locate a buyer. A buyer was not located before November 30, 1999. This note is currently in default. Therefore, the Colony noteholder may demand payment and Colony may revert to its noteholder. In 2003, the Registrant entered into an agreement, subject to HUD approval, with a third-party purchaser to sell the limited partner interest in Colony. Under the terms of the agreement, the purchaser will acquire all of the assets as well as assume all of the liabilities of Colony, including the primary mortgage and operating liabilities, except for the secondary note. Immediately prior to the sale, $225,000 of proceeds will be used to make a negotiated reduced payoff on the secondary note, and approximately $10,000 will be used to pay expenses of the sale.

        The partners will be allocated capital gains of approximately $583,000 as a result of the gain on the sale of the limited partner interests in Colony, and ordinary income of approximately $756,000, resulting from the debt forgiveness on the promissory note, based on the terms of the partnership agreement.

        Due to the sales of Hawthorn and Country Oaks, the Partnership will no longer have a reliable source of operating cash, as Colony, its sole remaining project partnership, has not made a significant distribution to the Partnership since its purchase. Additionally, the sale of Colony is not expected to provide any proceeds to the Partnership. Also, as a result of the sale of Hawthorn, the Partnership will have no future obligations under the note payable agreement including the interest payments and annual consulting fees of $19,000 to GAP and $25,000 to the noteholder. Given the aforementioned sales and the pending sale of Colony, the Partnership will have limited operations going forward. Accordingly, the Partnership will not have sufficient cash to pay the liability to the General Partner, of approximately $997,000. To the extent existing cash balances are not sufficient, the Partnership will be unable to pay the liability to the General Partner and the partners will realize ordinary income to the extent of debt forgiveness. When the Partnership receives regulatory approval from HUD for its sale of Colony, the Partnership will dissolve. Since the ultimate dissolution is subject to the final sale of Colony, which is contingent upon HUD approval, no adjustments have been made to the accompanying financial statements to reflect the potential impact of liquidation.

Recent Accounting Pronouncements

        In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), an interpretation of Accounting Research Bulletin No. 51, " Consolidated Financial Stements," which requires the consolidation by a business enterprise of variable interest entities if the business enterprise is the primary beneficiary. FIN 46 was effective January 31, 2003 for the Partnership with respect to interests in variable interest entities obtained after that date. With respect to interests in variable interest entities existing prior to February 1, 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), which extends the effective date of FIN 46 to the interim period ending March 31, 2004. The Partnership currently does not believe it will be required to consolidate any material interests in variable interest entities.

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

        The Partnership is exposed to interest rate risk related to changes in fair value on its fixed rate debt. As of December 31, 2003, the partnership had $3,940,854 of principal and accrued interest on a fixed rate note bearing interest at 11% (See Note E to the Financial statements).

Item 8.        Financial Statements and Supplementary Data.

        Financial statements of the Registrant are filed herewith (See Item 15(a)1). The supplementary financial information specified by Item 302 of Regulation S-K is not applicable.

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

        None.

Item 9A.        Disclosure Controls and Procedures.

        The management of the General Partner including Mr. Douglas L. Kelly as President and Mr. Joseph G. Porter as Vice President have evaluated the Registrant's disclosure controls and procedures. Under rules promulgated by the SEC, disclosure controls and procedures are defined as those "controls or other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports filed or submitted by it under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms." Based on the evaluation of the Registrant's disclosure controls and procedures, it was determined that such controls and procedures were effective as of December 31, 2003.

        Further, there were no significant changes in the internal controls over financial reporting or in other factors that could significantly affect these controls after December 31, 2003.

PART III

Item 10.         Directors and Executive Officers of the Registrant.

        The Registrant has no officers or directors. The General Partner is Gull-AGE Properties, Inc. The following is information concerning the officers and directors of the General Partner, all of which are compensated by A.G. Edwards & Sons, Inc., an affiliate of the General Partner:

Name	Position
Douglas L. Kelly	Director, President, Treasurer and Secretary
Robert J. Herleth	Vice President and Assistant Secretary
Joseph G. Porter	Vice President, Assistant Treasurer and Assistant Secretary

        Douglas L. Kelly, age 55, is President, Secretary and Treasurer of the General Partner. Mr. Kelly succeeded Robert L. Proost who retired March 1, 2001. Mr. Kelly joined A.G. Edwards & Sons, Inc. on January 1, 1994 and serves as Director, Executive Vice President, Corporate Secretary, Director of Law and Compliance, Director of Administration and Chief Financial Officer.

        Robert J. Herleth, age 51, is a Vice President and Assistant Secretary of the General Partner. Mr. Herleth joined A.G. Edwards & Sons, Inc. in 1980. Since then he has specialized in the areas of real estate and finance. He is also Vice President of A.G.E. Realty Corp., the Special Limited Partner, which owns other real estate properties and interests.

        Joseph G. Porter, age 43, is a Vice President, Assistant Treasurer and Assistant Secretary of the General Partner. Mr. Porter manages the operations of the General Partner. Mr. Porter succeeded Eugene J. King who retired on February 28, 1999. Mr. Porter joined A.G. Edwards & Sons, Inc. in 1982 and serves as Senior Vice President, Assistant Director of Administration and Principal Accounting Officer.

        The General Partner does not have any standing audit, nominating or compensation committees.

Item 11.        Executive Compensation.

        Under the provisions of the Registrant's Limited Partnership Agreement, the General Partner is entitled to receive an asset management fee (an annual cumulative amount of $114,580) and a program management fee (an annual noncumulative amount up to $59,250). During 2003, $26,000 of asset management fees were paid versus $0 in 2002. The accumulated amount of these fees accrued but not paid to the General Partner at December 31, 2003 are $978,040 of asset management fees and $0 of program management fees. The ability to pay the program management fee is limited by payment of priority items as outlined in the Registrant's Limited Partnership Agreement.

        The General Partner is also to receive a fee of 1% of the gross capital proceeds generated by the Project Partnerships for services connected with the disposition of Partnership investments. This payment is limited by payment of priority items as outlined in the Registrant's Limited Partnership Agreement. In addition, the General Partner will receive any fees to which the prior General Partners would be entitled for performing services with respect to the Project Partnerships of which the Registrant is the limited partner.

        Please refer to Note D of the financial statements referenced under Item 15(a)1 for additional information.

Item 12.       Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

        The General Partner owns a 1.1% interest in the Registrant and its affiliate, A.G.E. Realty Corporation, owns a 0.1% interest in the Partnership as Special Limited Partner. As of December 31, 2003, no person was known by the Registrant to be the beneficial owner of more than a 5% interest in the Partnership.

Item 13.        Certain Relationships and Related Transactions.

        An affiliate of Gull-AGE Properties, Inc., A.G.E. Realty Corporation holds a 0.1% interest in the Registrant as a Special Limited Partner.

        Please refer to Item 12 for additional information.

Item 14.        Principal Accounting Fees and Services.

        The Registrant has no Audit Committee of its own, but relies upon the officers and directors of the General Partner (Committee). The Committee has adopted a policy relating to engagement of the Registrant's independent auditors. The policy provides that in addition to the audit of the financial statements, related quarterly reviews and other audit services, Deloitte & Touche LLP may be engaged to provide non-audit services as described herein. Prior to engagement, all services to be rendered by the independent auditors must be authorized by the Committee in accordance with pre-approval procedures which are defined in the policy. The pre-approval procedures require (i) the annual review and pre-approval by the Committee of all anticipated audit and non-audit services; and (ii) the quarterly pre-approval by the Committee of services, if any, not previously approved and the review of the status of previously approved services. The Committee may also approve certain on-going non-audit services not previously approved in the limited circumstances provided for in the SEC rules. All services performed by the independent auditor were pre-approved.

        Individual Project Partnerships retain their own independent auditors. Project Partnership independent auditors are not included in the Committee's policy relating to the engagement of the Registrant's independent auditors.

        For the years ended December 31, 2003 and 2002, audit fees billed to the Registrant by Deloitte & Touche LLP were $15,000 and $10,200, respectively.

Audit Fees

        Audit Fees consist of fees for services necessary to perform the annual audit and review Securities and Exchange Commission filings.

PART IV

Item 15.        Exhibits, Financial Statements, Schedules and Reports on Form 8-K

(a)	The following financial statements are included:
	1.	Financial Statements of the Registrant (filed herewith as Exhibit 1).
		Independent Auditors' Report.
		Balance Sheets as of December 31, 2003 and 2002.
		Statements of Operations for the three years in the period ended December 31, 2003.
		Statements of Changes in Partners' Deficit for the three years in the period ended December 31, 2003.
		Statements of Cash Flows for the three years in the period ended December 31, 2003.
		Notes to Financial Statements.
	Financial Statements of Unconsolidated Limited Partnership and Independent Auditors' Report meeting requirements of significant subsidiary/investee (Exhibit 2).
	No financial schedules are applicable.
	Management will provide, without charge, a copy of the Registrant's annual report on Form 10-K.
	Exhibits
	99 (i) President, Secretary, Treasurer and Director Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	99 (ii) Vice President and Assistant Treasurer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
	99 (iii) President, Secretary, Treasurer and Director Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
	99 (iv) Vice President and Assistant Treasurer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
(b)	Reports on Form 8-K:
	There were no reports filed on Form 8-K for the year ended December 31, 2003

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.

March 29, 2004                                               GULLEDGE REALTY INVESTORS II
                                                                                            (Registrant)

                                                                        By:    Gull-AGE Properties, Inc.
                                                                                 (General Partner)

                                                                        By:    /s/Douglas L. Kelly
                                                                                 Douglas L. Kelly
                                                                                 President, Secretary,
                                                                                 Treasurer & Director

                                                                        By:    /s/Robert J. Herleth
                                                                                 Robert J. Herleth
                                                                                 Vice President & Assistant Secretary

                                                                        By:    /s/Joseph G. Porter
                                                                                 Joseph G. Porter
                                                                                 Vice President, Assistant Treasurer
                                                                                 & Assistant Secretary

GULLEDGE REALTY INVESTORS II

(A Virginia Limited Partnership)

FINANCIAL STATEMENTS

FOR THE THREE YEARS ENDED DECEMBER 31, 2003

INDEPENDENT AUDITORS' REPORT

To the Partners of
Gulledge Realty Investors II:

We have audited the accompanying balance sheets of Gulledge Realty Investors II (a limited Partnership) (the "Partnership") as of December 31, 2003 and 2002, and the related statements of operations, changes in partners' deficit and cash flows for each of the three years in the period ended December 31, 2003. 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 did not audit the financial statements of Hawthorn Housing Limited Partnership, a majority owned Limited Partnership ("the Project Partnership"), the Partnership's investment in which is accounted for by use of the equity method. The Partnership's investment in the Project Partnership's net assets of $0 and $0 at December 31, 2003 and 2002, respectively, and its share of Project Partnership's net income of $0, $0 and $32,323 for each of the three years in the period ended December 31, 2003 are included in the accompanying financial statements. The financial statements of the Project Partnership were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to amounts included for such Project Partnership is based solely on the reports of the other auditors.

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 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 and the reports of the other auditors provide a reasonable basis for our opinion.

In our opinion, based on our audits and the reports of the other auditors, such financial statements present fairly, in all material respects, the financial position of Gulledge Realty Investors II as of December 31, 2003 and 2002, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2003 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note A to the financial statements, subject to regulatory approval from the United States Department of Housing and Urban Development, the Partnership is in the process of selling Colony Place Associates, Ltd. ("Colony") the sole remaining Project Partnership. Once approval is obtained and Colony is sold, the Partnership intends to liquidate its assets and liabilities and dissolve.

/s/Deloite & Touche

March 26, 2004

RBG&CO.

Independent Auditors' Report

S2100-020

To The Partners
Hawthorn Housing Limited Partnership

We have audited the accompanying balance sheet of Hawthorn Housing Limited Partnership, Project No. 071-11069, a limited partnership, as of December 31, 2003 and the related statements of profit and loss, 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 Hawthorn Housing Limited Partnership as of December 31, 2003 and the results of its operations and its 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, we have also issued our report dated January 29, 2004 on our consideration of Hawthorn Housing 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. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (shown on Pages 13 through 15) 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 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2004

                                    Rubin, Brown, Gornstein & Co. LLP                                                                     230 South Bemiston Avenue
                                    Certified Public Accountants/Business Consultants                                        St. Louis, MO 63105

                                    314/727-8150 TEL                                    www.rbgco.com                                   314/727-9195 FAX

GULLEDGE REALTY INVESTORS II
(A Virginia Limited Partnership)

Balance Sheets

	December 31,
Assets	2003	2002
Cash and cash equivalents	$     57,640	$     71,610
Advances to Project Partnerships	7,539	20,203
Total Assets	$     65,179	$     91,813
Liabilities and Partners' Deficit
Accounts payable	$     40,000	$     35,200
Payable to General Partner (Note D)	997,040	908,460
Capital contributions payable	-	50,000
Note Payable (Note E)	3,940,854	3,740,364
Total Liabilities	4,977,894	4,734,024
Partners' Deficit (Note B)	(4,912,715)	(4,642,211)
Total Liabilities and
Partners' Deficit	$     65,179	$      91,813

See Notes to Financial Statements.

GULLEDGE REALTY INVESTORS II
(A Virginia Limited Partnership)

Statements of Operations

	Year Ended December 31,
	2003	2002	2001
Revenue and equity in
Project Partnerships' operations:
Interest	$         782	$        1,178	$     1,681
Distributions from zero-basis
Project Partnerships	237,076	399,314	96,370
Equity in income of
Project Partnerships	-	-	32,323
Gain on sale of Project
Partnerships	76,000	-	31,867
Miscellaneous Income	-	10,000	-
	313,858	410,492	162,241
Expenses:
Asset management fee (Note D)	114,580	114,580	114,580
Interest expense	382,496	348,409	314,424
Professional fees	15,000	10,200	10,200
Consulting fees (Note E)	44,000	44,000	44,000
Operating expenses	28,286	13,788	9,006
	584,362	530,977	492,210
Net Loss	$  (270,504)	$ (120,485)	$ (329,969)
Net loss per partnership unit	$           (23)	$          (10)	$          (28)

See Notes to Financial Statements.

GULLEDGE REALTY INVESTORS II
(A Virginia Limited Partnership)

Statements of Changes in Partners' Deficit

Three Years Ended December 31, 2003

			Special
	Total	General	Limited	Limited
Balances at January 1, 2001	$ (4,191,757)	$  (54,730)	$  (95,813)	$ (4,041,214)
Net loss for 2001	(329,969)	(3,630)	(6,269)	(320,070)
Balances at December 31, 2001	(4,521,726)	(58,360)	(102,082)	(4,361,284)
Net loss for 2002	(120,485)	(1,326)	(2,289)	(116,870)
Balances at December 31, 2002	(4,642,211)	(59,686)	(104,371)	(4,478,154)
Net loss for 2003	(270,504)	(2,975)	(5,140)	(262,389)
Balances at December 31, 2003	$ (4,912,715)	$  (62,661)	$(109,511)	$ (4,740,543)

See Notes to Financial Statements.

GULLEDGE REALTY INVESTORS II
(A Virginia Limited Partnership)

Statements of Cash Flows

	Year Ended December 31,
	2003	2002	2001
Cash Flows From Operating Activities:
Net loss	$ (270,504)	$  (120,485)	$  (329,969)
Adjustments to reconcile net loss to
net cash from operating activities:
Provision for bad debts	-	-	600
Equity in income of Project Partnership	-	-	(32,323)
Distributions from zero-basis
Project Partnerships	(237,076)	(399,314)	(96,370)
Gain on sale of Project Partnerships	(76,000)	-	(31,867)
Change in assets and liabilities:
Advances to Project Partnerships	12,664	(2,551)	(11,501)
Escrow deposit	-	(10,000)	10,000
Accounts Payable	4,800	-	-
Payable to general partner	88,580	114,580	114,580
Accrued interest note payable	200,490	29,880	3,300
Net Cash From Operating Activities	(277,046)	(387,890)	(373,550)
Cash Flows From Investing Activities:
Proceeds from Sale of Project Partnerships	26,000	-	31,867
Distributions from all Project Partnerships	237,076	399,314	403,488
Net Cash From Investing Activities	263,076	399,314	435,355
Cash Flows From Financing Activities -
Payment on Note Payable	-	(16,359)	-
Net Change In Cash and Cash Equivalents	(13,970)	(4,935)	(61,805)
Cash and Cash Equivalents-Beginning of Year	71,610	76,545	14,740
Cash and Cash Equivalents-End of Year	$    57,640	$      71,610	$     76,545
Additional Cash Flow Information:
Interest Payments	$  182,006	$     318,529	$   311,124

See Notes to Financial Statements.

GULLEDGE REALTY INVESTORS II
(A Virginia Limited Partnership)

Notes To Financial Statements
Three Years Ended December 31, 2003

Note A           Summary of Significant Accounting Policies

Partnership Organization

Gulledge Realty Investors II (the "Partnership") is a limited partnership organized on December 1, 1983 under the laws of the Commonwealth of Virginia for the purpose of acquiring limited partner interests in real estate limited partnerships ("Project Partnerships"). At December 31, 2003, these Project Partnerships include Colony Place Associates, Ltd. ("Colony") and Hawthorn Housing Limited Partnership ("Hawthorn"). Hawthorn was sold in January 2004 (see Note F). The Project Partnerships previously included Olympic Housing Limited Partnership ("Olympic") which assets were sold in April 2003, Country Oaks Apartments Limited Partnership ("Country Oaks") which limited partner interests were sold in December 2003 and Pine West, Ltd., ("Pine West") and Rancho Vista Associates ("Rancho Vista"), which limited partner interests were sold in 2001. Each of the remaining Project Partnerships is an operating real estate project which receives mortgage interest subsidies and/or rental assistance from the United States Department of Housing and Urban Development (HUD). The Registrant commenced operations in March 1984. GULL-AGE Properties, Inc. ("GAP") is the General Partner of the Partnership. GAP is an indirectly owned subsidiary of A.G. Edwards, Inc.

The Partnership owns 100% of the limited partner interests in the Project Partnerships, which represents 99.0% and 99.0% of the total ownership interests in Colony and Hawthorn, respectively. GULL-AGE Realty Advisors, Inc., ("GARA") an entity related to GAP, is the General Partner or the agent for the General Partner or Special General Partner of Colony and Hawthorn. GARA owns or controls through its agency agreement .10% and .01% of Colony and Hawthorn, respectively. The remaining partnership interests of the Project Partnerships are owned by unrelated individuals or entities.

In January 2004, the Partnership completed the sale of Hawthorn (See Note F). Absent Hawthorn, the Partnership’s sole remaining project partnership is Colony. In 2003, the Partnership entered into an agreement with a third-party purchaser to sell the limited partner interests in Colony. The ability to sell the Partnership’s limited partner interests in Colony, i.e., the Project Partnership, is limited by the overall market conditions in the geographic area where the Project operates and, potentially, the ability of the Project to qualify for Low Income Housing Tax Credits and regulatory approval from HUD. The Partnership’s limited partner interest in Colony is pledged as collateral in connection with a promissory note issued by Colony (See Note E). Therefore, the Partnership must also consider the outstanding balance of the note and negotiate a reduced payoff on the note.

Due to the sales of Hawthorn and Country Oaks, the Partnership will no longer have a reliable source of operating cash, as Colony, its sole remaining project partnership, has not made a significant distribution to the Partnership since its purchase. Additionally, the sale of Colony is not expected to provide any proceeds to the Partnership. Also, as a result of the sale of Hawthorn, the Partnership will have no future obligations under the note payable agreement including interest payments and annual consulting fees of $19,000 to GAP and $25,000 to the noteholder. Given the aforementioned sales and the pending sale of Colony, the Partnership will have limited operations going forward. Accordingly, the Partnership will not have sufficient cash to pay the liability to the General Partner, of approximately $997,000. To the extent existing cash balances are not sufficient, the Partnership will be unable to pay the liability to the General Partner and the partners will realize ordinary income to the extent of debt forgiveness. When the Partnership receives regulatory approval from HUD for its sale of Colony, the Partnership will dissolve. Since the ultimate dissolution is subject to the final sale of Colony, which is contingent upon HUD approval, no adjustments have been made to the accompanying financial statements to reflect the potential impact of liquidation.

Partner's Activities

The financial statements include only those assets, liabilities, and results of operations which relate to the business of the Partnership and do not include any assets, liabilities, or operating results attributable to the partners' individual activities.

Cash and Cash Equivalents

The Partnership considers interest bearing money market account balances to be cash equivalents.

Investment in Project Partnerships

The investment in Project Partnerships is accounted for using the equity method of accounting. Under the equity method, investments are reflected at cost, adjusted for the Partnership's share of the Project Partnerships' income or loss. The Partnership is under no obligation to contribute additional capital, or to lend monies necessary to fund cash flow deficiencies of the Project Partnerships, because the Partnership is a limited partner in such partnerships. The investment account for a Project Partnership will not be reduced below zero because the Partnership is not liable for Project Partnership losses in excess of such investment. Any distributions received from the Project Partnerships subsequent to reducing the investment account to zero, will be recognized as income in the year received.

Income Taxes

No provision has been made for current or deferred income taxes since they are the responsibility of each partner. Profits (or gains) and losses of the Partnership are allocated to the partners in accordance with the partnership agreement.

Comprehensive Income

Comprehensive income for the year ended December 31, 2003 and 2002 were equal to the Partnership net loss.

Use of Estimates

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

Segment Reporting

The Partnership's principal line of business is investing in Project Partnerships that own and operate low-income housing Projects that are financed and/or operated under federal or state housing assistance programs. Management believes that the Partnership operates in one business segment.

Reclassifications

Where appropriate, prior years' financial information has been reclassified to conform with the current year presentation.

Recent Accounting Pronouncements

In January 2003, the Financial Accounting Standards Board ("FASB") issued Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), an interpretation of Accounting Research Bulletin No. 51, "Consolidated Financial Statements", which requires the consolidation by a business enterprise of variable interest entities if the business enterprise is the primary beneficiary. FIN 46 was effective January 31, 2003, for the Partnership with respect to interests in variable interest entities obtained after that date. With respect to interests in variable interest entities existing prior to February 1, 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003), which extends the effective date of FIN 46 to the interim period ending March 31, 2004. The Partnership currently does not believe it will be required to consolidate any material interests in variable interest entities.

Note B           Partners' Deficit

Profits and losses of the Partnership are allocated pro-rata to the partners in accordance with their interest as follows:

General partner (131 units)	1.1%
Special limited partners (225 units)	1.9
Investor limited partners (11,458 units)	97.0
	100.0%

Upon dissolution and termination of the Partnership, the net proceeds resulting from the sale of Partnership assets are first used to pay all debts and liabilities of the Partnership; next, to repay capital contributions of the partners less any prior cash distributions from capital proceeds; then, to the payment of a cumulative disposition fee to the General Partner, with any remaining funds allocated as follows:

General partner	4.0%
Special limited partners	6.0
Investor limited partners	90.0
	100.0%

In the event that net operating revenues, as defined, are realized during any fiscal year, an annual noncumulative program management fee of up to $59,250 is payable to the managing General Partner. The fee represents compensation for maintaining the Partnership's books, records and accounts per the Partnership agreement. The amount of the program management fee plus the asset management fee accrued each year shall not exceed .5% of invested assets, as defined in the Partnership's Limited Partnership Agreement (the "Agreement").

Upon the distribution of capital proceeds by the Partnership, the General Partner is authorized to receive a cumulative disposition fee equal to 1% of the capital proceeds generated through the sale of Project Partnerships to the extent such proceeds exceed priority payments as defined in the Agreement.

Note C           Reconciliation of Operations: Financial Statement Versus Income Tax Return

The financial statement (loss)/income is reconciled to income tax loss for the years ended December 31, 2003, 2002 and 2001 as follows:

	2003	2002	2001
Net (loss)/income per financial statements	$   (270,504)	$   (120,485)	$    (329,969)
Less: equity in income of Project
Partnership for financial statement
purposes			(32,323)
Less: gain on sale of Project Partnerships	(76,000)		(31,867)
Less: distributions received from
zero-basis Project Partnership	(237,076)	(399,314)	(96,370)
Add: equity in income/(losses) of
Project Partnerships for tax
return purposes (unaudited)	13,126,469	(145,887)	1,335,563
Net income/(loss) per income tax return	$12,542,889	$  (665,686)	$     845,034

Note D           Payable To General Partner

In accordance with the Agreement, the Partnership is required to pay to the General Partner an annual asset management fee of $114,580. Amounts due in accordance with the Agreement at December 31, 2003 and 2002 are $978,040 and $889,460, respectively. The Partnership also pays annual consulting fees of $19,000 out of the distributions from Hawthorn to GAP. Amounts due for consulting fees at December 31, 2003 and 2002 are $19,000.

Note E            Project Partnerships

The Partnership's limited partner interests in Colony serve as collateral in connection with a promissory note issued by Colony as described below:

Project Partnership          (Debtor)	Promissory Note, Including Accrued Interest	Payment Terms
Colony	$1,021,355	9% interest due annually.
		Principal plus unpaid interest
		due on November 30, 1999.
		Note is currently in default.

Colony's promissory note was originally due December 31, 1995, but was extended until June 30, 1997, while a sale of the project was being pursued under the Low Income Housing Preservation and Resident Homeownership Act ("LIHPRHA"). LIHPRHA was a program administered by the Department of Housing and Urban Development ("HUD"). Unfortunately, funds are no longer available under the LIHPRHA program. The promissory note had been extended to November 30, 1999, while the General Partner attempted to locate a buyer for the project. A buyer was not located before November 30, 1999. This note is currently in default. Therefore, the Colony noteholder may demand payment and Colony may revert to its noteholder at any time. In 2003, the Registrant entered into an agreement, subject to HUD approval, with a third-party purchaser to sell the limited partner interest in Colony. Under the terms of the agreement, the purchaser will acquire all of the assets as well as assume all of the liabilities of Colony, including the primary mortgage and operating liabilities, except for the secondary note. Immediately prior to the sale, $225,000 of proceeds will be used to make a negotiated reduced payoff on the secondary note, and approximately $10,000 will be used to pay expenses of the sale.

Hawthorn refinanced its mortgage during 1997. Proceeds from the refinancing were used to make a partial payment on the promissory note which had come due December 31, 1996. The remaining balance of the promissory note was renegotiated. The mortgage was refinanced under HUD regulations which limit the amount of debt that can be collateralized by the project. Accordingly, HUD would not approve the mortgage refinance unless the promissory note was no longer a liability of the project. Therefore, the General Partner of the Partnership and the noteholder agreed to have the promissory note assumed by the Partnership. The promissory note is now collateralized by the Partnership's interest in Hawthorn. Principal and interest are only payable from surplus cash received by the Partnership from Hawthorn. The Partnership is not required to make any payments from surplus cash it receives from any other project. Under the terms of the promissory note, the Partnership pays an annual consulting fee of $19,000 to GAP and $25,000 to the noteholder. The consulting fees are only payable out of distributions from Hawthorn.

The promissory note plus accrued interest totaled $3,940,854 at December 31, 2003, and bears simple interest at a rate of 11%. The note bore simple interest at a rate of 9% until the note expired on June 30, 2002, at which time, the interest rate increased to 11%.

In conjunction with assuming the liability for the promissory note, the Partnership recorded a corresponding investment in Hawthorn. The investment account was then reduced by previously unrecorded losses of Hawthorn in accordance with the equity method of accounting. The investment account was adjusted in subsequent years by the Partnership's share of any additional income or loss from Hawthorn. This investment account was also reduced when the Partnership received distributions from Hawthorn. In 2003 and 2002, the Partnership did not recognize equity in income of Project Partnerships from Hawthorn, because the beginning investment balance was zero. In 2001, the Partnership's share of income and distributions from Hawthorn were $105,970 and $373,481, respectively. Income of $32,323 was recorded as equity in income of Project Partnerships in the Statements of Operations, prior to receipt of the distribution. The distribution was recorded as a reduction of investment in Project Partnerships of $286,569 on the Balance Sheet and distributions from zero-basis Project Partnerships of $86,912 in the Statement of Operations.

During the fourth quarter of 2003, the limited partnership interests in Country Oaks were sold to GAP. The gain on the sale of the interest of $76,000 is included in gain on sale of Project Partnerships in the Statement of Operations. The proceeds from the sale of $26,000 were used to make a payment on the amount owed to the General Partner. The remaining gain of $50,000 was due to the write-off of a contribution payable to Country Oaks. The partners of the Partnership will recognize capital gains on the sale of approximately $834,000.

In April 2003, the Partnership sold the assets of Olympic. As part of the terms of the sale, the purchaser assumed the primary mortgage on Olympic and all of the operating liabilities. A reduced payoff was negotiated on a secondary note which was collateralized by the Partnership's ownership interest in Olympic. The Partnership did not receive a distribution from the sale as all proceeds were used to pay expenses related to the sale. The Partnership did not recognize a gain or loss on the sale in the Statement of Operations as no proceeds were received and the Partnership had a zero basis in Olympic. As a result of the sale, partners of the Partnership will realize tax consequences including capital gains of approximately $3,500,000 and ordinary income to the extent of the reduced payoff on the secondary note in the approximate amount of $8,400,000.

The Partnership's limited partner interests in Pine West and Rancho Vista were sold in 2001. The gains on the sale of the interests are included in gain on sale of Project Partnerships in the Statement of Operations.

Notwithstanding the balances owed on the defaulted notes, none of the Project Partnerships are experiencing significant operating cash flow deficiencies.

Note F           Subsequent Events

In January 2004, the Registrant sold the assets of Hawthorn. The Registrant recognized a gain on the sale of $3,401,551. Under the terms of the sale, the purchaser assumed the primary mortgage and all of the operating liabilities of Hawthorn. Proceeds of $3,301,551 from the sale were used to make a partial payment on the note payable which was collateralized by the Partnership's limited partner interests in Hawthorn. The remaining proceeds of $100,000 were used to pay Partnership liabilities owed to the General Partner per the Partnership Agreement. The remaining balance of the note payable, including accrued interest to the date of the sale, of $597,363 was forgiven as part of the terms of a negotiated reduced payoff entered into prior to the sale.

As a result of the sale of the assets of Hawthorn, capital gains of approximately $6,100,000 and ordinary income, to the extent of the debt forgiveness on the note payable, will be allocated to the partners based on the terms of the partnership agreement.

Note G           Condensed Financial Data of Project Partnership

The following is a summary of the condensed financial position and results of operations of Hawthorn (dollars in thousands):

Hawthorn Housing Limited Partnership
Condensed Balance Sheets

	December 31,
	2003	2002
Assets:
Rental Property (Net)	$  3,151	$   3,371
Other Assets	1,065	1,216
	$  4,216	$   4,587
Liabilities and Partners' Capital:
Mortgage Notes Payable	$  4,633	$   4,684
Other Liabilities	269	276
Partners' Capital	(686)	(373)
	$  4,216	$   4,587

Condensed Statements of Operations

	For the Year Ended December 31,
	2003	2002	2001
Revenues:
Rental Income	$   1,504	$   1,539	$   1,591
Interest Income	7	12	36
Other Income	17	18	29
Total Revenue	$   1,528	1,569	1,656
Expenses:
Operating Expenses	1,039	958	967
Financial Expenses	331	334	339
Depreciation	234	235	243
Total Expenses	1,604	1,527	1,549
Net (Loss)/Income	$      (76)	$        42	$      107

EX-2 3 exhibit2.htm HAWTHORN 2003,2002, 2001

Exhibit 2

FINANCIAL STATEMENTS

OF

UNCONSOLIDATED LIMITED PARTNERSHIPS

MEETING REQUIREMENTS OF SIGNIFICANT

SUBSIDIARY/INVESTEE

HAWTHORN HOUSING

LIMITED PARTNERSHIP

071-11069

FINANCIAL STATEMENTS

DECEMBER 31, 2003

Contents

            Page

Independent Auditors' Report.......................................................................... 1

Balance Sheet.............................................................................................2 - 3

Statement Of Profit And Loss.................................................................... 4 - 5

Statement Of Partners' Equity (Deficit)............................................................ 6

Statement Of Cash Flows............................................................................. 7 - - 8

Notes To Financial Statements................................................................ 9 - - 12

Supporting Data Required By HUD..................................................... 13 - - 15

Independent Auditors' Report On Internal Control

(Combined Report Applicable To Internal Control

Over Financial Reporting Based On An Audit Of

Financial Statements And Internal Control Over

Compliance For HUD-Assisted Programs)...................................... 16 - - 17

Independent Auditors' Report On Compliance With

Specific Requirements Applicable To Major HUD

Programs................................................................................................ 18 - - 19

Independent Auditors' Report On Compliance With

Specific Requirements Applicable To Fair Housing

And Non-Discrimination............................................................................. 20

Mortgagor's Certification................................................................................ 21

Management Agent's Certification ............................................................... 22

Auditor's Transmittal Letter.......................................................................... 23

S2100-020 Independent Auditors' Report

To The Partners

Hawthorn Housing Limited Partnership

We have audited the accompanying balance sheet of Hawthorn Housing Limited Partnership, Project No. 071-11069, a limited partnership, as of December 31, 2003 and the related statements of profit and loss, 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 Hawthorn Housing Limited Partnership as of December 31, 2003 and the results of its operations and its 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, we have also issued our reports dated January 29, 2004 on our consideration of Hawthorn Housing 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. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (shown on pages 13 to 15) 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 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

BALANCE SHEET

Page 1 Of 2

December 31, 2003

Assets
Current Assets
1120	Cash - operations	$ 175,683
1125	Cash - entity	2,079
1130	Tenant accounts receivable	15,092
1200	Miscellaneous prepaid expenses	50,093
1100T	Total Current Assets		$ 242,947
Deposits Held In Trust - Funded
1191	Tenant deposits held in trust		39,539
Restricted Deposits And Funded Reserves
1310	Escrow deposits	117,406
1320	Replacement reserve	243,092
1300T	Total Deposits		360,498
Fixed Assets (Note 2)
1410	Land	620,000
1420	Buildings	6,607,108
1440	Building equipment - portable	488,841
1400T	Total Fixed Assets	7,715,949
1495	Less: Accumulated depreciation	4,564,990
1400N	Net Fixed Assets		3,150,959
Other Assets
1520	Intangible assets	417,862
1590	Miscellaneous other assets - easement fee receivable	4,000
1500T	Total Other Assets		421,862
1000T	Total Assets		$ 4,215,805

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

BALANCE SHEET

Page 2 Of 2

December 31, 2003

Liabilities
Current Liabilities
2110	Accounts payable - operations	$ 24,782
2113	Accounts payable - entity	7,539
2120	Accrued wages payable	6,510
2123	Accrued management fee payable (Note 4)	7,548
2150	Accrued property taxes	183,623
2170	Mortgage payable - first mortgage (short-term) (Note 2)	55,213
2210	Prepaid revenue	1,655
2122T	Total Current Liabilities		$ 286,870
Deposit And Prepayment Liabilities
2191	Tenant deposits held in trust (contra)		37,157
Long-Term Liabilities
2320	Mortgage payable - first mortgage (Note 2)		4,577,297
2000T	Total Liabilities		4,901,324
Partners' Equity (Deficit)
3130	Partners' equity (deficit)		(685,519)
2033T	Total Liabilities And Partners' Equity		$ 4,215,805

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF PROFIT AND LOSS

For The Year Ended December 31, 2003

Part 1	Description of Account	Acct. No.		Amount
Rent Revenue 5100	Rent Revenue - Gross Potential	5120	$	1,298,024
	Tenant Assistance Payments	5121	$	543,920
	Rent Revenue - Stores and Commercial	5140	$	-
	Garage and Parking Spaces	5170	$	-
	Flexible Subsidy Revenue	5180	$	-
	Miscellaneous Rent Revenue	5190	$	-
	Excess Rent	5191	$	-
	Rent Revenue/Insurance	5192	$	-
	Special Claims Revenue	5193	$	-
	Retained Excess Income	5194	$	-
	Total Rent Revenue	5100T			$	1,841,944
Vacancies 5200	Apartments	5220	$	310,794
	Stores and Commercial	5240	$	-
	Rental Concessions	5250	$	26,878
	Garage and Parking Space	5270	$	-
	Miscellaneous	5290	$	-
	Total Vacancies	5200T			$	337,672
	Net Rental Revenue Rent Revenue Less Vacancies	5152N			$	1,504,272
5300	Nursing Homes/Assisted Living/Board and Care/Other
	Elderly Care/Coop/ and Other Revenues	5300			$	-
Financial Revenue 5400	Financial Revenue - Project Operations	5410	$	2,749
	Revenue from Investments - Residual Receipts	5430	$	-
	Revenue from Investments - Replacement Reserve	5440	$	4,433
	Revenue from Investments - Miscellaneous	5490	$	-
	Total Financial Revenue	5400T			$	7,182
Other Revenue 5900	Laundry and Vending Revenue	5910	$	3,394
	Tenant Charges	5920	$	13,102
	Interest Reduction Payments Revenue	5945	$	-
	Miscellaneous Revenue	5990	$	-
	Total Other Revenue	5900T			$	16,496
	Total Revenue	5000T			$	1,527,950
Administrative Expenses 6200/6300	Conventions and Meetings	6203	$	-
	Management Consultants	6204	$	-
	Advertising and Marketing	6210	$	17,053
	Other Renting Expenses	6250	$	-
	Office Salaries	6310	$	30,149
	Office Expenses	6311	$	23,624
	Office or Model Apartment Rent	6312	$	9,704
	Management Fee	6320	$	90,825
	Manager or Superintendent Salaries	6330	$	48,190
	Administrative Rent Free Unit	6331	$	-
	Legal Expense - Project	6340	$	8,819
	Audit Expense	6350	$	10,775
		6351	$	7,392
	Bad Debts	6370	$	9,103
	Miscellaneous Administrative Expenses	6390	$	5,469
	Total Administrative Expenses	6263T			$	261,103
Utilities Expense 6400	Fuel Oil/Coal	6420	$	-
	Electricity	6450	$	29,332
	Water	6451	$	34,223
	Gas	6452	$	100,612
	Sewer	6453	$	16,321
	Total Utilities Expense	6400T			$	180,488
	Total Expenses (Carry Forward to Page 2)				$	441,591
Page 1 of 2

	Project Name:	Hawthorn Housing Limited Partnership
			Balance Carried Forward			$	441,591
Operating Maintenance Expenses 6500		Payroll	6510	$	126,713
		Supplies	6515	$	41,429
		Contracts	6520	$	114,422
		Operating and Maintenance Rent Free Unit	6521	$	-
		Garbage and Trash Removal	6525	$	9,991
		Security Payroll/Contract	6530	$	-
		Security Rent Free Unit	6531	$	-
		Heating/Cooling Repairs and Maintenance	6546	$	1,088
		Snow Removal	6548	$	9,222
		Vehicle and Maintenance Equipment Operation and Repairs	6570	$	-
		Miscellaneous Operating and Maintenance Expenses	6590	$	2,061
		Total Operating and Maintenance Expenses	6500T			$	304,926
Taxes and Insurance 6700		Real Estate Taxes	6710	$	185,200
		Payroll Taxes (Project's Share)	6711	$	16,443
		Property and Liability Insurance (Hazard)	6720	$	50,356
		Fidelity Bond Insurance	6721	$	1,283
		Workmen's Compensation	6722	$	13,509
		Health Insurance and Other Employee Benefits	6723	$	15,179
		Miscellaneous Taxes, Licenses, Permits and Insurance	6790	$	3,101
		Total Taxes and Insurance	6700T			$	285,071
Financial Expenses 6800		Interest on Mortgage Payable	6820	$	307,877
		Interest on Notes Payable (Long-Term)	6830	$	-
		Interest on Notes Payable (Short-Term)	6840	$	-
		Mortgage Insurance Premium/Service Charge	6850	$	23,040
		Miscellaneous Financial Expenses	6890	$	102
		Total Financial Expenses	6800T			$	331,019
6900		Nursing Homes/ Assisted Living/ Board and Care/ Other
		Elderly Care Expenses	6900			$	-
		Total Cost of Operations before Depreciation and Amortization	6000T			$	1,362,607
		Profit (Loss) before Depreciation and Amortization	5060T			$	165,343
		Depreciation Expense	6600	$	219,840
		Amortization Expense	6610	$	14,400
		Total Depreciation and Amortization				$	234,240
		Operating Profit or (Loss)	5060N			$	(68,897)
Corporate or Mortgagor Entity Expenses 7100		Officer's Salaries	7110	$	-
		Legal Expenses	7120	$	7,539
		Federal, State, and Other Income Taxes	7130	$	-
		Interest Income	7140	$	-
		Interest on Notes Payable	7141	$	-
		Interest on Mortgage Payable	7142	$	-
		Other Expenses	7190	$	-
		Net Entity Expenses	7100T			$	7,539
		Profit or Loss (Net Income or Loss)	3250			$	(76,436)
Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6790, 6890 and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense.
Part II
1.	Total mortgage principal payments required during the audit year (12 monthly payments). This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD approved second mortgages should be included in the figures. (Account S1000-010)					$	51,413
2.	Total of 12 monthly deposits in the audit year into the Replacement Reserve account, as required by the Regulatory Agreement even if payments may be temporarily suspended or reduced. (Account S1000-020)					$	18,600
3.	Replacement Reserve or Residual Receipts releases which are included as expense items on this Profit and Loss Statement. (Account S1000-030)					$	56,897
4.	Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. (Account S1000-040)					$	-
Page 2 of 2

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF PARTNERS' EQUITY (DEFICIT)

For The Year Ended December 31, 2003

S1100-010	Beginning Of Year	$ (373,591)
3250	Net Loss	(76,436)
S1200-420	Distributions	(235,492)
3130	December 31, 2003	$ (685,519)

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF CASH FLOWS

Page 1 Of 2

For The Year Ended December 31, 2003

Cash Flows From Operating Activities
	Receipts:
S1200-010		Rental receipts	$ 1,494,208
S1200-020		Interest receipts	7,182
S1200-030		Other operating receipts	16,496
S1200-040		Total Receipts	1,517,886
	Disbursements:
S1200-050		Administrative	169,585
S1200-070		Management fee	91,374
S1200-090		Utilities	179,098
S1200-100		Salaries and wages	124,859
S1200-110		Operating and maintenance	176,032
S1200-120		Real estate taxes	183,168
S1200-140		Property insurance	85,108
S1200-150		Miscellaneous taxes and insurance	19,544
S1200-160		Tenant security deposits	(18,463)
S1200-180		Interest on mortgage	307,877
S1200-210		Mortgage insurance premium (MIP)	23,040
S1200-220		Miscellaneous financial	104
S1200-225		Entity Disbursements:
S1200-226		Entity legal fees	17,069
S1200-230		Total Disbursements	1,358,395
S1200-240		Net Cash Provided By Operating Activities	159,491
Cash Flows From Investing Activities
S1200-245		Net deposits to the mortgage escrow account	(2,457)
S1200-250		Net releases from the reserve for replacement account	33,864
S1200-340		Other investing activities - collection of easement receivable	3,000
S1200-350		Net Cash Provided By Investing Activities	34,407
Cash Flows From Financing Activities
S1200-360		Mortgage principal payments	(51,413)
S1200-420		Distributions	(235,492)
S1200-460		Net Cash Used By Financing Activities	(286,905)
S1200-470		Net Decrease In Cash	(93,007)
S1200-480		Beginning Of Period Cash	270,769
S1200T		End Of Period Cash	$ 177,762

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF CASH FLOWS

Page 2 Of 2

For the Year Ended December 31, 2003

Reconciliation Of Net Loss To Net Cash
Provided By Operating Activities
3250	Net loss		$ (76,436)
	Adjustments to reconcile net loss to net cash
	provided by operating activities
6600	Depreciation		219,840
6610	Amortization		14,400
	Change in assets and liabilities:
S1200-490		Increase in tenant accounts receivable	(8,016)
S1200-520		Increase in prepaid expenses	(4,782)
S1200-530		Decrease in cash restricted for tenant security deposits	21,891
S1200-540		Decrease in accounts payable	(5,266)
S1200-560		Increase in accrued liabilities	3,337
S1200-580		Decrease in tenant security deposits held in trust	(3,428)
S1200-590		Decrease in prepaid revenue	(2,049)
S1200-610		Net Cash Provided By Operating Activities	$ 159,491

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

NOTES TO FINANCIAL STATEMENTS

December 31, 2003

1. Organization And Summary Of Significant Accounting Policies

Organization (S3100-010)

Hawthorn Housing Limited Partnership (the Partnership) was organized as a limited partnership during June 1984 for the purpose of constructing and operating a rental housing project (the Project) pursuant to a regulatory agreement with the Illinois Housing Development Authority (IHDA). In November 1997, the Project was refinanced under Section 223(f) of the National Housing Act. The Project consists of 176 units located in Woodridge, Illinois, operating under the name of Hawthorn Ridge Apartments. The Project is regulated by the U.S. Department of Housing and Urban Development (HUD) and IHDA, as administrator of the housing assistance contract, as to rent charges and operating methods.

The regulatory agreement with HUD limits annual distributions of net operating receipts to surplus cash. At December 31, 2003, there was surplus cash in the amount of $137,570 available for distribution.

Significant Accounting Policies (S3100-040)

The following significant accounting policies have been followed in the preparation of the financial statements:

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

The Partnership considers all temporary cash investments as cash equivalents.  These temporary cash investments are securities held for cash management purposes, having maturities of three months or less.

The Partnership deposits its cash in financial institutions. At times, deposits exceed federally insured limits. The Partnership has not experienced losses in such accounts.

Tenant accounts receivable are stated at the amount management expects to collect from outstanding balances. Based on management's assessment of the credit history with tenants having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding at year end would be immaterial.

Rental property is carried as cost. Depreciation is provided using straight-line and accelerated methods over estimated useful lives ranging from 5 to 40 years.

The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.

Intangible assets consist of deferred loan costs of $506,303, incurred for obtaining the HUD insured mortgage loan, which are being amortized using the straight‑line method over the life of the mortgage loan. Accumulated amortization amounted to $88,441 at December 31, 2003.

Income or loss of the Partnership is allocated .01 % to the general partner and 99.99 % to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.

2. Mortgage Payable (S3100-050)

The mortgage payable is insured by the Department of Housing and Urban Development and collateralized by a deed of trust on the rental property. The mortgage is payable to P/R Mortgage & Investment Corp. and bears interest at the rate of 6.6% per annum. Principal and interest are payable by the Partnership in monthly installments of $29,940 through December 2032.

Under agreements with the mortgage lender and HUD, the Partnership is required to make monthly escrow deposits for property taxes, insurance, mortgage insurance and replacement of Project assets.

The scheduled maturities of the mortgage payable at December 31, 2003 are as follows: (S3100-x1x)

Year	Account	Amount
2004	S3100-060	$ 55,213
2005	S3100-070	58,647
2006	S3100-080	62,637
2007	S3100-090	66,898
2008	S3100-100	71,450
Thereafter	S3100-110	4,317,665
		$ 4,632,510

3. Commitments (S3100-x3x) (S3100-240)

The Partnership has entered into a regulatory agreement with HUD which regulates, among other things, the rents which may be charged for apartment units in the Project, prohibits the sale of the Project without HUD consent, limits the annual distribution of cash flow to the partners and otherwise regulates the relationship between the Partnership and HUD.

The Department of Housing and Urban Development, through a program administered by the Illinois Housing Development Authority, has contracted with the Partnership, effective December 1976, under Section 8 of the National Housing Act of 1968, to make housing assistance payments to the Project on behalf of qualified tenants. The term of the agreement is 5 years with renewal options for terms not to exceed 40 years.

4. Related-Party Transactions (S3100-200)

The Project is managed by Alan A. Fox Real Estate Investment and Management Co., Inc., an affiliate of the special limited partner. The management contract provides for a management fee of 6% of gross collections. Total fees incurred for 2003 were $90,825. At December 31, 2003, management fees of $7,548 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc. (S3100‑230)

Alan A. Fox Real Estate Investment and Management Co., Inc. also receives a monthly accounting services fee of $3.50 per unit. This fee is charged for services which are not included in the monthly management fee. Total fees incurred during 2003 were $7,392. At December 31, 2003, fees of $616 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc.

S3100-210 Company Name Alan A. Fox Real Estate Investment and Management Co, Inc.

S3100-220 Amount Received $98,766

5. Subsequent Event (S3100-x3x) (S3100-240)

On June 6, 2003, the Partnership entered into an agreement to sell its operating assets. Effective January 21, 2004, the operating assets, including property and equipment, were sold in exchange for cash of approximately $3,434,000 plus assumption of the mortgage payable having a principal balance of approximately $4,632,000 on the date of sale.

HAWTHORN HOUSING LIMITED PARTNERSHIP

PROJECT NO. 071-11069

SUPPORTING DATA REQUIRED BY HUD

December 31, 2003

Replacement Reserve

In accordance with the provisions of the regulatory agreement, restricted cash is held by P/R Mortgage & Investment Corp. to be used for replacement of property with the approval of HUD as follows:

1320P Balance at beginning of year	$ 276,956
1320DT Total monthly deposits
($1,550 x 12)	18,600
1320ODT Other deposits	4,433
1320OD-010 Interest income
1320OD-020 $4,433
1320WT Approved withdrawals	(56,897)
1320 Balance at end of year, confirmed
by mortgagee	$ 243,092

Computation of Surplus Cash,
Distributions and Residual
Receipts
PROJECT NAME		FISCAL PERIOD ENDED:		PROJECT NUMBER
Hawthorn Housing Limited Partnership		12/31/2003		071-11069
Part A - Compute Surplus Cash
Cash
1.	Cash (Accounts 1120, 1170, 1191 minus Account 2105) (S1300-010)		$	215,222
2.	Tenant subsidy due for period covered by financial statement (1135)		$
3.	Other (accounts and notes receivable - entity) (S1300-030)		$
	(a) Total Cash (Add Lines 1, 2, and 3) (S1300-040)				$	215,222
Current Obligations
4.	Accrued mortgage interest payable (S1300-050)		$
5.	Delinquent mortgage principal payments (S1300-060)		$
6.	Delinquent deposits to reserve for replacements (S1300-070)		$
7.	Accounts payable - 30 days (S1300-075)		$	24,782
8.	Loans and notes payable (due within 30 days) (S1300-080)		$
9.	Deficient tax insurance or MIP escrow deposits (S1300-090)		$
10.	Accrued expenses (not escrowed) (S1300-100)		$	14,058
11.	Prepaid revenue (2210)		$	1,655
12.	Tenant security deposits liability (2191)		$	37,157
13.	Other current obligations (Describe) (S1300-110)		$
	(b) Total Current Obligations (Add Lines 4 through 13) (S1300-140)				$	77,652
	(c) Surplus Cash (Deficiency) [Line (a) minus Line (b)] (S1300-150)				$	137,570
Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1.	Surplus Cash				$
Limited Dividend Projects
2a.	Annual distribution earned during fiscal period covered by the statement (S1300-160)		$
2b.	Distribution accrued and unpaid as of the end of the prior fiscal period (S1300-170)		$
2c.	Distributions and entity expenses paid during fiscal period covered by statement (S1300-180)		$
3.	Distribution earned but unpaid (Line 2a plus 2b minus 2c) (S1300-190)		$
4.	Amount available for distribution during next fiscal period (S1300-200)				$
5.	Deposit due residual receipts (S1300-210)				$

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

SUPPORTING DATA REQUIRED BY HUD (Continued)

December 31, 2003

Schedule Of Fixed Assets

	Assets
	Balance			Balance
	January 1,			December 31,
	2003	Additions	Deductions	2003
1410 Land	$ 620,000	$ -	$ -	$ 620,000
1420 Buildings	6,607,108	-	-	6,607,108
1440 Building equipment - portable	488,841	-	-	488,841
Total	7,715,949	-	-	7,715,949
Accumulated depreciation	4,345,150	219,840	-	4,564,990
Net Book Value	$ 3,370,799	$ (219,840)	$ -	$ 3,150,959

S2200-020 Independent Auditors' Report On Internal

Control (Combined Report Applicable To Internal

Control Over Financial Reporting Based On An Audit

Of Financial Statements And Internal Control

Over Compliance For HUD-Assisted Programs)

To The Partners

Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorn Housing Limited Partnership as of and for the year ended December 31, 2003, and have issued our report thereon dated January 29, 2004. We have also audited Hawthorn Housing Limited Partnership's compliance with requirements applicable to HUD-assisted programs and have issued our reports thereon dated January 29, 2004.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether Hawthorn Housing Limited Partnership complied with laws and regulations, noncompliance with which would be material to a HUD-assisted program.

The management of Hawthorn Housing Limited Partnership is responsible for establishing and maintaining internal control. In planning and performing our audit of the financial statements, we considered Hawthorn Housing Limited Partnership's internal control over financial reporting and its internal control over compliance with requirements that would have a direct and material effect on a major HUD-assisted program in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and on compliance and not to provide assurance on the internal control over financial reporting and the internal control over compliance.

Our consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements that would be material in relation to the financial statements or that noncompliance with applicable requirements of laws and regulations that would be material in relation to a major HUD-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control and its operation that we consider to be material weaknesses as defined above.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

S2300-020 Independent Auditors' Report On Compliance

With Specific Requirements Applicable To Major HUD Programs

To The Partners

Hawthorn Housing Limited Partnership

We have audited Hawthorn Housing Limited Partnership's compliance with the specific program requirements governing federal financial reports, mortgage status, replacement reserve, distributions to owners, cash receipts and disbursements, tenant application, eligibility and recertification, and management functions that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2003. The management of Hawthorn Housing Limited Partnership is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above that could have a direct and material effect on a major HUD-assisted program occurred. An audit includes examining, on a test basis, evidence about Hawthorn Housing Limited Partnership's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of Hawthorn Housing Limited Partnership's compliance with those requirements.

In our opinion, Hawthorn Housing Limited Partnership complied, in all material respects, with the requirements referred to above that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2003.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

S2500-020 Independent Auditors' Report On

Compliance With Specific Requirements

Applicable To Fair Housing And Non-Discrimination

To The Partners

Hawthorn Housing Limited Partnership

We have applied procedures to test Hawthorn Housing Limited Partnership's compliance with the Fair Housing and Non-Discrimination requirements applicable to its HUD-assisted programs for the year ended December 31, 2003.

Our procedures were limited to the applicable compliance requirement described by the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on Hawthorn Housing Limited Partnership's compliance with the Fair Housing and Non-Discrimination requirements. Accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

HAWTHORN HOUSING
LIMITED PARTNERSHIP
071-11069

FINANCIAL STATEMENTS
DECEMBER 31, 2002

Contents
Independent Auditor's Report	1
Balance Sheet	2 - 3
Statement of Profit and Loss	4 - 5
Statement of Partners' Equity (Deficit)	6
Statement of Cash Flows	7 - 8
Notes to Financial Statements	9 - 12
Supporting Data Required by HUD	13 - 15
Independent Auditors' Report on Internal Control	16 - 17
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Major HUD Programs	18 - 19
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Fair Housing and Non-Discrimination	20
Auditors' Comment on Audit Resolution Matters Relating To The HUD Programs	21

RBG&CO.

S2100-020 Independent Auditors' Report

To The Partners
Hawthorn Housing Limited Partnership

We have audited the accompanying balance sheet of Hawthorn Housing Limited Partnership, Project No. 071-11069, a limited partnership, as of December 31, 2002 and the related statements of profit and loss, 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 Hawthorn Housing Limited Partnership as of December 31, 2002 and the results of its operations and its 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, we have also issued our reports dated January 28, 2003 on our consideration of Hawthorn Housing 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.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (shown on Pages 13 through 15) 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 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

Rubin, Brown, Gornstein & Co. LLP	One North Brentwood
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/290-3300 TEL www.rbgco.com	314/290-3400 FAX

BALANCE SHEET
Page 1 of 2
December 31, 2002

Assets

Current Assets
1120 Cash - operations	$ 268,690
1125 Cash - entity	2,079
1130 Tenant accounts receivable	7,076
1200 Miscellaneous prepaid expenses	45,311
1100T Total Current Assets		$ 323,156
Deposits Held In Trust - Funded
1191 Tenant deposits held in trust		61,430
Restricted Deposits And Funded Reserves
1310 Escrow deposits	114,949
1320 Replacement reserve	276,956
1300T Total Deposits		391,905
Fixed Assets (Note 2)
1410 Land	620,000
1420 Buildings	6,607,108
1440 Building equipment - portable	488,841
1400T Total Fixed Assets	7,715,949
1495 Less: Accumulated depreciation	4,345,150
1400N Net Fixed Assets		3,370,799
Other Assets
1520 Intangible assets	432,262
1590 Miscellaneous other assets	7,000
1500T Total Other Assets		439,262
1000T Total Assets		$ 4,586,552

BALANCE SHEET
Page 2 of 2
December 31, 2002

Liabilities

Current Liabilities
2110 Accounts payable - operations	$ 20,518
2113 Accounts payable - entity	17,069
2120 Accrued wages payable	4,656
2123 Accrued management fee payable (Note 4)	8,097
2150 Accrued property taxes	181,591
2170 Mortgage payable - first mortgage(short-term) (Note 2)	51,413
2210 Prepaid revenue	3,704
2122T Total Current Liabilities		$ 287,048
Deposit And Prepayment Liabilities
2191 Tenant deposits held in trust (contra)		40,585
Long-Term Liabilities
2320 Mortgage payable - first mortgage (Note 2)		4,632,510
2000T Total Liabilities		4,960,143
Partners' Equity (Deficit)
3130 Partners' equity (deficit)		(373,591)
2033T Total Liabilities And Partners' Equity (Deficit)		$ 4,586,552

STATEMENT OF PROFIT AND LOSS
For The Year Ended December 31, 2002

Part 1	Description of Account	Acct. No.	Amount
	Rent Revenue - Gross Potential	5120	$ 1,242,742
	Tenant Assistance Payments	5121	$ 470,011
	Rent Revenue - Stores and Commercial	5140	$
	Garage and Parking Spaces	5170	$
Rental	Flexible Subsidy Revenue	5180	$
Revenue	Miscellaneous Rent Revenue	5190	$
5100	Excess Rent	5191	$
	Rent Revenue/Insurance	5192	$
	Special Claims Revenue	5193	$
	Retained Excess Income	5194	$
	Total Rent Revenue	5100T		$ 1,712,753
	Apartments	5220	$ 160,354
	Stores and Commercial	5240	$
Vacancies	Rental Concessions	5250	$ 13,709
5200	Garage and Parking Spaces	5270	$
	Miscellaneous	5290	$
	Total Vacancies	5200T		$ 174,063
	Net Rental Revenue Rent Revenue Less Vacancies	5152N		$ 1,538,690
5300	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care/ Coop/ and Other Revenues	5300
	Financial Revenue - Project Operations	5410	$ 6,199
Financial	Revenue from Investments - Residual Receipts	5430	$
Revenue	Revenue from Investments - Replacement Reserve	5440	$ 6,174
5400	Revenue from Investments - Miscellaneous	5490	$
	Total Financial Revenue	5400T		$ 12,373
	Laundry and Vending Revenue	5910	$ 430
Other	Tenant Charges	5920	$ 17,909
Revenue	Interest Reduction Payments Revenue	5945	$
5900	Miscellaneous Revenue	5990	$
	Total Other Revenue	5900T		$ 18,339
	Total Revenue	5000T		$ 1,569,402
	Conventions and Meetings	6203	$
	Management Consultants	6204	$
	Advertising and Marketing	6210	$ 16,400
	Other Renting Expenses	6250	$
	Office Salaries	6310	$ 26,548
Administrative	Office Expenses	6311	$ 23,500
Expenses	Office or Model Apartment Rent	6312	$ 9,352
6200/6300	Management Fee	6320	$ 88,233
	Manager or Superintendent Salaries	6330	$ 43,890
	Administrative Rent Free Unit	6331	$
	Legal Expenses - Project	6340	$ 2,959
	Audit Expense	6350	$ 9,850
	Bookkeeping Fees/Accounting Services	6351	$ 7,392
	Bad Debts	6370	$ 10,008
	Miscellaneous Administrative Expenses	6390	$ 8,812
	Total Administrative Expenses	6263T		$ 246,944
	Fuel Oil/Coal	6420	$
Utilities	Electricity	6450	$ 27,434
Expense	Water	6451	$ 35,385
6400	Gas	6452	$ 82,411
	Sewer	6453	$ 15,920
	Total Utilities Expense	6400T		$ 161,150
	Total Expenses (Carry forward to Page 2)			$ 408,094

Page 1 of 2

Project Name: Hawthorn Housing Limited Partnership

		Balance Carried Forward		$ 408,094
Part 1	Description of Account	Acct. No.	Amount
	Payroll	6510	$ 116,930
	Supplies	6515	$ 38,336
	Contracts	6520	$ 132,913
Operating	Operating and Maintenance Rent Free Unit	6521	$
Maintenance	Garbage and Trash Removal	6525	$ 9,428
Expenses	Security Payroll/Contract	6530	$
6500	Security Rent Free Unit	6531	$
	Heating/Cooling Repairs and Maintenance	6546	$ 95
	Snow Removal	6548	$ 8,048
	Vehicle and Maintenance Equipment Operation and Repairs	6570	$
	Miscellaneous Operating and Maintenance Expenses	6590	$ 235
	Total Operating and Maintenance Expenses	6500T		$ 305,985
	Real Estate Taxes	6710	$ 175,200
	Payroll Taxes (Project's Share)	6711	$ 15,148
Taxes	Property and Liability Insurance (Hazard)	6720	$ 35,188
and	Fidelity Bond Insurance	6721	$ 1,160
Insurance	Workmen's Compensation	6722	$ 4,686
6700	Health Insurance and Other Employee Benefits	6723	$ 9,402
	Miscellaneous Taxes, Licenses, Permits and Insurance	6790	$ 3,095
	Total Taxes and Insurance	6700T		$ 243,879
	Interest on Mortgage Payable	6820	$ 310,887
Financial	Interest on Notes Payable (Long-Term)	6830	$
Expenses	Interest on Notes Payable (Short-Term)	6840	$
6800	Mortgage Insurance Premium/Service Charge	6850	$ 23,100
	Miscellaneous Financial Expenses	6890	$ 190
	Total Financial Expenses			$ 334,177
6900	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care Expenses	6900	$
	Total Cost of Operations before Depreciation and Amortization	6000T		$ 1,292,135
	Profit (Loss) before Depreciation and Amortization	5060T		$ 277,267
	Depreciation Expense	6600	$ 220,120
	Amortization Expense	6610	$ 14,400
	Total Depreciation and Amortization			$ 234,520
	Operating Profit or (Loss)	5060N		$ 42,747
	Officer's Salaries	7110	$
Corporate or	Legal Expenses	7120	$ 703
Mortgagor	Federal, State, and Other Income Taxes	7130	$
Entity	Interest Income	7140	$
Expenses	Interest on Notes Payable	7141	$
7100	Interest on Mortgage Payable	7142	$
	Other Expenses Amortization of organization costs	7190	$
	Net Entity Expenses	7100T		$ 703
	Profit or Loss (Net Income or Loss)	3250		$ 42,044

Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6790, 6890 and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense.

Part II

1.	Total mortgage principal payments required during the audit year (12 monthly payments). This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD approved second mortgages should be included in the figures. (S1000-010)	$ 48,404
2.	Total of 12 monthly deposits in the audit year into the Replacement Reserve account, as required by the Regulatory Agreement even if payments may be temporarily suspended or reduced. (Account S1000-020)	$ 18,600
3.	Replacement Reserve or Residual Receipts releases which are included as expense items on this Profit and Loss Statement. (Account S1000-030)	$ 59,754
4.	Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. (Account S1000-040)	$

Page 2 of 2

STATEMENT OF PARTNERS' EQUITY (DEFICIT)

For The Year Ended December 31, 2002

S1100-010	Beginning Of Year	$ (12,288)
3250	Net Income	42,044
S1200-420	Distributions	(403,347)
3130	End Of Year	$(373,591)

STATEMENT OF CASH FLOWS
Page 1 of 2
For The Year Ended December 31, 2002

Cash Flows From Operating Activities	Amount
Receipts:
S1200-010 Rental receipts	$ 1,530,545
S1200-020 Interest receipts	12,373
S1200-030 Other operating receipts	18,339
S1200-040 Total Receipts	1,561,257
Disbursements:
S1200-050 Administrative	165,847
S1200-070 Management fee	88,024
S1200-090 Utilities	162,845
S1200-100 Salaries and wages	116,547
S1200-110 Operating and maintenance	189,595
S1200-120 Real estate taxes	165,178
S1200-140 Property insurance	45,181
S1200-150 Miscellaneous taxes and insurance	33,491
S1200-160 Tenant security deposits	9,860
S1200-180 Interest on mortgage	310,887
S1200-210 Mortgage insurance premium (MIP)	23,100
S1200-220 Miscellaneous financial	190
S1200-230 Total Disbursements	1,310,745
S1200-240 Net Cash Provided By Operating Activities	250,512
Cash Flows From Investing Activities
S1200-245 Net deposits to the mortgage escrow account	(12,057)
S1200-250 Net releases from the reserve for replacement account	56,327
S1200-330 Net purchases of fixed assets	(21,347)
S1200-340 Other investing activities	3,000
S1200-350 Net Cash Provided By Investing Activities	25,923
Cash Flows From Financing Activities
S1200-360 Mortgage principal payments	(48,404)
S1200-420 Distributions	(403,347)
S1200-460 Net Cash Used In Financial Activities	(451,751)
S1200-470 Net Decrease In Cash And Cash Equivalents	(175,316)
S1200-480 Beginning Of Period Cash and Cash Equivalents	446,085
S1200T End of Period Cash And Cash Equivalents	$ 270,769

STATEMENT OF CASH FLOWS
Page 2 of 2
For The Year Ended December 31, 2002

Reconciliation Of Net Income To Net Cash Provided By Operating Activities	Account	Amount
3250 Net income		$ 42,044
Adjustments to reconcile net income to net cash provided by operating activities:
6600 Depreciation		220,120
6610 Amortization		14,400
Change in assets and liabilities:
S1200-490 Increase in tenant accounts receivable		(2,227)
S1200-520 Increase in prepaid expenses		(9,993)
S1200-530 Increase in cash restricted for tenant security deposits		(3,600)
S1200-540 Decrease in accounts payable		(9,371)
S1200-560 Increase in accrued liabilities		10,614
S1200-580 Decrease in tenant security deposits held in trust		(6,260)
S1200-590 Decrease in prepaid revenue		(5,918)
S1200-605 Increase in entity liability accounts:
S1200-606 Increase in accounts payable - entity	S1200-607	703
S1200-610 Net Cash Provided By Operating Activities		$ 250,512

NOTES TO FINANCIAL STATEMENTS
December 31, 2002

1. Organization And Summary Of Significant Accounting Policies

Organization (S3100-010)

Hawthorn Housing Limited Partnership (the Partnership) was organized as a limited partnership during June 1984 for the purpose of constructing and operating a rental housing project (the Project) pursuant to a regulatory agreement with Illinois Housing Development Authority (IHDA). In November 1997, the Project was refinanced under Section 223(f) of the National Housing Act. The Project consists of 176 units located in Woodridge, Illinois, operating under the name of Hawthorn Ridge Apartments. The Project is regulated by the U.S. Department of Housing and Urban Development (HUD) and IHDA, as administrator of the housing assistance contract, as to rent charges and operating methods.

The regulatory agreement with HUD limits annual distributions of net operating receipts to surplus cash. At December 31, 2002, there was surplus cash in the amount of $252,560 available for distribution.

Significant Accounting Policies (S3100-040)

The following significant accounting policies have been followed in the preparation of the financial statements:

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

The Partnership considers all temporary cash investments as cash equivalents. These temporary cash investments are securities held for cash management purposes, having maturities of three months or less.

The Partnership deposits its cash in financial institutions. At times, deposits exceed federally insured limits. The Partnership has not experienced losses in such accounts.

Tenant accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based on a review of the current status of the existing receivables. No allowance for doubtful accounts was provided for at December 31, 2002 as none was deemed necessary by management.

Rental property is carried as cost. Depreciation is provided using straight-line and accelerated methods over estimated useful lives ranging from 5 to 40 years.

The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.

Deferred loan costs of $506,303 consist of fees for obtaining the HUD insured mortgage loan and are being amortized using the straight-line method over the life of the mortgage loan. Accumulated amortization amounted to $74,041 at December 31, 2002.

Income or loss of the Partnership is allocated .01% to the general partner and 99.99% to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.

2. Mortgage Payable (S3100-050)

The mortgage payable is insured by the Department of Housing and Urban Development and collateralized by a deed of trust on the rental property. The mortgage is payable to P/R Mortgage & Investment Corp. and bears interest at the rate of 6.6% per annum. Principal and interest are payable by the Partnership in monthly installments of $29,940 through December 2032.

Under agreements with the mortgage lender and HUD, the Partnership is required to make monthly escrow deposits for property taxes, insurance, mortgage insurance and replacement of Project assets.

The scheduled maturities of the mortgage payable at December 31, 2002 are as follows: (S3100-x1x)

Year		Amount
2003	S3100-060	52,413
2004	S3100-070	54,911
2005	S3100-080	58,647
2006	S3100-090	62,637
2007	S3100-100	66,898
Thereafter	S3100-110	4,389,417
		$ 4,683,923

3. Commitments (S3100-x3x) (S3100-240)

The Partnership has entered into a regulatory agreement with HUD which regulates, among other things, the rents which may be charged for apartment units in the Project, prohibits the sale of the project without HUD consent, limits the annual distribution of cash flow to the partners and otherwise regulates the relationship between the Partnership and HUD.

The Department of Housing and Urban Development, through a program administered by the Illinois Housing Development Authority, has contracted with the Partnership, effective December 1976, under Section 8 of the National Housing Act of 1968, to make housing assistance payments to the project on behalf of qualified tenants. The term of the agreement is five years with renewal options for terms not to exceed 40 years.

4. Related Party Transactions (S3100-200)

The Project is managed by Alan Fox Real Estate Investment and Management Co., Inc., an affiliate of the special limited partner. The management contract provides for a management fee of 5.4% of gross collections. The management contract was amended effective July 1, 2002 to provide for a management fee of 6% of gross collections. Total fees incurred for 2002 were $88,233. At December 31, 2002, management fees of $7,481 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc. (53100-230).

Alan A. Fox Real Estate Investment and Management Co., Inc. also receives a monthly accounting services fee of $3.50 per unit. This fee is charged for services which are not included in the monthly management fee. Total fees incurred during 2002 were $7,392. At December 31, 2002, fees of $616 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc.

S3100-210	Company Name	Alan A. Fox Real Estate Investment and Management Co., Inc.
S3100-220	Amount Received	$95,416

SUPPORTING DATA REQUIRED BY HUD
December 31, 2002

Replacement Reserve

In accordance with the provisions of the regulatory agreement, restricted cash is held by P/R Mortgage & Investment Corp. to be used for replacement of property with the approval of HUD as follows:

1320P	Balance at beginning of year	$ 333,283
1320DT	Total monthly deposits
	($1,550 x 12)	18,600
1320ODT	Other deposits	6,174
1320OD-010	Interest income
1320OD-020	$6,174
1320WT	Approved withdrawals	(81,101)
1320	Balance at end of year, confirmed by mortgagee	$ 276,956

PROJECT NAME Hawthorne Housing Limited Partnership		FISCAL PERIOD ENDED: 12/31/02	PROJECT NUMBER: 071-11069
Part A - Compute Surplus Cash
Cash
1.	Cash (Accounts 1120, 1170, 1191 minus Account 2105) (S1300-010)			$ 330,120
2.	Tenant subsidy due for period covered by financial statement (1135)			$
3.	Other (describe) (S1300-030)			$
	(a) Total Cash (Add Lines 1, 2, and 3) (S1300-040)				$ 330,120
Current Obligations
4.	Accrued mortgage interest payable (S1300-050)			$
5.	Delinquent mortgage principal payments (S1300-060)			$
6.	Delinquent deposits to reserve for replacements (S1300-070)			$
7.	Accounts payable - 30 days (S1300-075)			$ 20,518
8.	Loans and notes payable (due within 30 days) (S1300-080)			$
9.	Deficient tax insurance or MIP escrow deposits (S1300-090)			$
10.	Accrued expenses (not escrowed) (S1300-100)			$ 12,753
11.	Prepaid revenue (2210)			$ 3,704
12.	Tenant security deposits liability (2191)			$ 40,585
13.	Other current obligations (Describe) (S1300-110)			$
	(b) Total Current Obligations (Add Lines 4 through 13) (S1300-140)				$ 77,560
	(c) Surplus Cash (Deficiency) [Line (a) minus Line (b)] (S1300-150)				$ 252,560
Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1.	Surplus Cash				$
Limited Dividend Projects
2a.	Annual distribution earned during fiscal period covered by the statement (S1300-160)			$
2b.	Distribution accrued and unpaid as of the end of the prior fiscal period (S1300-170)			$
2c.	Distributions and entity expenses paid during fiscal period covered by statement (S1300-180)			$
3.	Distribution earned but unpaid (Line 2a plus 2b minus 2c) (S1300-190)			$
4.	Amount available for distribution during next fiscal period (S1300-200)				$
5.	Deposit due residual receipts (S1300-210)				$

SUPPORTING DATA REQUIRED BY HUD (CONTINUED)

DECEMBER 31, 2002

			Assets
		Balance January 1, 2002	Additions	Deductions	Balance December 31, 2002
1410	Land	$ 620,000	$ -	$ -	$ 620,000
1420	Buildings	6,595,513	11,595	-	6,607,108
1410	Building equipment - portable	479,089	9,752	-	488,841
	Total	7,694,602	21,347	-	7,715,949
Accumulated depreciation		4,125,030	220,120	-	4,345,150
	Net Book Value	$ 3,569,572	$(198,773)	$ -	$ 3,370,799

RBG&CO.

S2200-020 Independent Auditors' Report On Internal Control

(Combined Report Applicable To Internal Control Over
Financial Reporting Based On An Audit Of Financial
Statements And Internal Control Over Compliance For
HUD-Assisted Programs)

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorne Housing Limited Partnership as of and for the year ended December 31, 2002, and have issued our report thereon dated January 28, 2003. We have also audited Hawthorn Housing Limited Partnership's compliance with requirements applicable to HUD-assisted programs and have issued our reports thereon dated January 28, 2003.

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 Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether Hawthorn Housing Limited Partnership complied with laws and regulations, noncompliance with which would be material to a major HUD-assisted program.

The management of Hawthorn Housing Limited Partnership is responsible for establishing and maintaining internal control. In planning and performing our audit of the financial statements, we considered Hawthorn Housing Limited Partnership's internal control over financial reporting and its internal control over compliance with requirements that would have a direct and material effect on a major HUD-assisted program in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and on compliance and not to provide assurance on the internal control over financial reporting and the internal control over compliance.

To the Partners
Hawthorn Housing Limited Partnership

Our consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements that would be material in relation to the financial statements or that noncompliance with applicable requirements of laws and regulations that would be material in relation to a major HUD-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control and its operation that we consider to be material weaknesses as defined above.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

RBG&CO.

S2300-020

Independent Auditors' Report On Compliance With
Specific Requirements Applicable To Major HUD Programs

To The Partners
Hawthorn Housing Limited Partnership

We have audited Hawthorn Housing Limited Partnership's compliance with the specific program requirements governing federal financial reports, mortgage status, replacement reserve, security deposits, cash receipts and disbursements, tenant application, eligibility and recertification, and management functions that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2002. The management of Hawthorn Housing Limited Partnership is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above that could have a direct and material effect on a major HUD-assisted program occurred. An audit includes examining, on a test basis, evidence about Hawthorn Housing Limited Partnership's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of Hawthorn Housing Limited Partnership's compliance with those requirements.

To The Partners
Hawthorn Housing Limited Partnership

In our opinion, Hawthorn Housing Limited Partnership complied, in all material respects, with the requirements described above that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2002.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

Rubin, Brown, Gornstein & Co. LLP	One North Brentwood
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/290-3300 TEL www.rbgco.com	314/290-3400 FAX

RBG&CO.

S2500-020

Independent Auditors' Report On Compliance With Specific
Requirements Applicable To Fair Housing and Non-Discrimination

To The Partners
Hawthorn Housing Limited Partnership

We have applied procedures to test Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements applicable to its HUD-assisted programs for the year ended December 31, 2002.

Our procedures were limited to the applicable compliance requirement described by the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements. Accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

Rubin, Brown, Gornstein & Co. LLP	One North Brentwood
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/290-3300 TEL www.rbgco.com	314/290-3400 FAX

HAWTHORN HOUSING LIMITED PARTNERSHIP
PROJECT NO. 071-11069

Auditors' Comment On Audit Resolution
Matters Relating To The HUD Programs (S2800-x1x)

S2800-005	Previous Finding Reference Number - 2001 - 1
S2800-010	Narrative - Fidelity bond coverage amount is less than two months potential collections.
S2800-020	Status CLEARED
S2800-030	Reporting Period December 31, 2001

HAWTHORN HOUSING
LIMITED PARTNERSHIP
071-11069
FINANCIAL STATEMENTS
DECEMBER 31, 2001

Contents
Independent Auditor's Report	1
Balance Sheet	2 - 3
Statement of Profit and Loss	4 - 5
Statement of Partners' Equity (Deficit)	6
Statement of Cash Flows	7 - 8
Notes to Financial Statements	9 - 11
Supporting Data Required by HUD	12 - 14
Independent Auditors' Report on Internal Control	15 - 16
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Major HUD Programs	17 - 18
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Fair Housing and Non-Discrimination	19
Schedule of Findings and Questioned Costs	20
Auditors' Comment on Audit Resolution Matters Relating To The HUD Programs	21

RBG&CO.

S2100-020 Independent Auditors' Report

To The Partners
Hawthorn Housing Limited Partnership

We have audited the accompanying balance sheet of Hawthorn Housing Limited Partnership, Project No. 071-11069, a limited partnership, as of December 31, 2001 and the related statements of profit and loss, 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 Hawthorn Housing Limited Partnership as of December 31, 2001 and the results of its operations and its 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 issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 29, 2002 on our consideration of Hawthorn Housing Limited Partnership's internal control and reports dated January 29, 2002 on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. 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 conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (shown on Pages 14 through 16) 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 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

BALANCE SHEET
Page 1 of 2
December 31, 2001

Assets

Current Assets
1120 Cash - operations	$ 444,034
1125 Cash - entity	2,051
1130 Tenant accounts receivable	4,849
1200 Miscellaneous prepaid expenses	35,318
1100T Total Current Assets		$ 486,252
Deposits Held In Trust - Funded
1191 Tenant deposits held in trust		57,830
Restricted Deposits And Funded Reserves
1310 Escrow deposits	102,892
1320 Replacement reserve	333,283
1300T Total Deposits		436,175
Fixed Assets (Note 2)
1410 Land	620,000
1420 Buildings	6,595,513
1440 Building equipment - portable	479,089
1400T Total Fixed Assets	7,694,602
1495 Less: Accumulated depreciation	4,125,030
1400N Net Fixed Assets		3,569,572
Other Assets
1520 Intangible assets	446,662
1590 Miscellaneous other assets	10,000
1500T Total Other Assets		456,662
1000T Total Assets		$ 5,006,491

BALANCE SHEET
Page 2 of 2
December 31, 2001

Liabilities

Current Liabilities
2110 Accounts payable - operations	$ 29,889
2113 Accounts payable - entity	16,366
2120 Accrued wages payable	4,273
2123 Accrued management fee payable	7,888
2150 Accrued property taxes	171,569
2170 Mortgage payable - first mortgage (short-term) (Note 2)	48,138
2210 Prepaid revenue	9,622
2122T Total Current Liabilities		$ 287,745
Deposit And Prepayment Liabilities
2191 Tenant deposits held in trust (contra)		46,845
Long-Term Liabilities
2320 Mortgage payable - first mortgage (Note 2)		4,684,189
2000T Total Liabilities		5,018,779
Partners' Equity (Deficit)
3130 Partners' equity (deficit)		(12,288)
2033T Total Liabilities And Partners' Equity (Deficit)		$ 5,006,491

STATEMENT OF PROFIT AND LOSS
For The Year Ended December 31, 2001

Part 1	Description of Account	Acct. No.	Amount
	Rent Revenue - Gross Potential	5120	$ 1,208,889
	Tenant Assistance Payments	5121	$ 442,164
	Rent Revenue - Stores and Commercial	5140	$
	Garage and Parking Spaces	5170	$
Rental	Flexible Subsidy Revenue	5180	$
Revenue	Miscellaneous Rent Revenue	5190	$
5100	Excess Rent	5191	$
	Rent Revenue/Insurance	5192	$
	Special Claims Revenue	5193	$
	Retained Excess Income	5194	$
	Total Rent Revenue	5100T		$ 1,651,053
	Apartments	5220	$ 53,762
	Stores and Commercial	5240	$
Vacancies	Rental Concessions	5250	$ 5,878
5200	Garage and Parking Spaces	5270	$
	Miscellaneous	5290	$
	Total Vacancies	5200T		$ 59,640
	Net Rental Revenue Rent Revenue Less Vacancies	5152N		$ 1,591,413
5300	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care/ Coop/ and Other Revenues	5300
	Financial Revenue - Project Operations	5410	$ 15,126
Financial	Revenue from Investments - Residual Receipts	5430	$
Revenue	Revenue from Investments - Replacement Reserve	5440	$ 21,178
5400	Revenue from Investments - Miscellaneous	5490	$
	Total Financial Revenue	5400T		$ 36,304
	Laundry and Vending Revenue	5910	$ 5,893
Other	Tenant Charges	5920	$ 22,677
Revenue	Interest Reduction Payments Revenue	5945	$
5900	Miscellaneous Revenue	5990	$
	Total Other Revenue	5900T		$ 28,570
	Total Revenue	5000T		$ 1,656,287
	Conventions and Meetings	6203	$
	Management Consultants	6204	$
	Advertising and Marketing	6210	$ 15,456
	Other Renting Expenses	6250	$
	Office Salaries	6310	$ 23,596
Administrative	Office Expenses	6311	$ 18,677
Expenses	Office or Model Apartment Rent	6312	$ 8,996
6200/6300	Management Fee	6320	$ 85,820
	Manager or Superintendent Salaries	6330	$ 39,503
	Administrative Rent Free Unit	6331	$
	Legal Expenses - Project	6340	$ 10,172
	Audit Expense	6350	$ 9,650
	Bookkeeping Fees/Accounting Services	6351	$ 7,392
	Bad Debts	6370	$ 21,729
	Miscellaneous Administrative Expenses	6390	$ 8,467
	Total Administrative Expenses	6263T		$ 249,458
	Fuel Oil/Coal	6420	$
Utilities	Electricity	6450	$ 26,706
Expense	Water	6451	$ 33,749
6400	Gas	6452	$ 109,481
	Sewer	6453	$ 16,350
	Total Utilities Expense	6400T		$ 186,286
	Total Expenses (Carry forward to Page 2)			$ 435,744

Page 1 of 2

Project Name: Hawthorn Housing Limited Partnership

		Balance Carried Forward		$ 435,744
Part 1	Description of Account	Acct. No.	Amount
	Payroll	6510	$ 111,355
	Supplies	6515	$ 35,493
	Contracts	6520	$ 133,730
Operating	Operating and Maintenance Rent Free Unit	6521	$
Maintenance	Garbage and Trash Removal	6525	$ 9,099
Expenses	Security Payroll/Contract	6530	$
6500	Security Rent Free Unit	6531	$
	Heating/Cooling Repairs and Maintenance	6546	$
	Snow Removal	6548	$ 4,730
	Vehicle and Maintenance Equipment Operation and Repairs	6570	$
	Miscellaneous Operating and Maintenance Expenses	6590	$ 429
	Total Operating and Maintenance Expenses	6500T		$ 294,836
	Real Estate Taxes	6710	$ 169,720
	Payroll Taxes (Project's Share)	6711	$ 13,938
Taxes	Property and Liability Insurance (Hazard)	6720	$ 21,720
and	Fidelity Bond Insurance	6721	$ 888
Insurance	Workmen's Compensation	6722	$ 3,218
6700	Health Insurance and Other Employee Benefits	6723	$ 8,748
	Miscellaneous Taxes, Licenses, Permits and Insurance	6790	$ 3,095
	Total Taxes and Insurance	6700T		$ 221,327
	Interest on Mortgage Payable	6820	$ 313,970
Financial	Interest on Notes Payable (Long-Term)	6830	$
Expenses	Interest on Notes Payable (Short-Term)	6840	$
6800	Mortgage Insurance Premium/Service Charge	6850	$ 23,786
	Miscellaneous Financial Expenses	6890	$ 791
	Total Financial Expenses			$ 338,547
6900	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care Expenses	6900	$
	Total Cost of Operations before Depreciation and Amortization	6000T		$ 1,290,454
	Profit (Loss) before Depreciation and Amortization	5060T		$ 365,833
	Depreciation Expense	6600	$ 228,035
	Amortization Expense	6610	$ 14,465
	Total Depreciation and Amortization			$ 242,500
	Operating Profit or (Loss)	5060N		$ 123,333
	Officer's Salaries	7110	$
Corporate or	Legal Expenses	7120	$ 16,366
Mortgagor	Federal, State, and Other Income Taxes	7130	$
Entity	Interest Income	7140	$ (73)
Expenses	Interest on Notes Payable	7141	$
7100	Interest on Mortgage Payable	7142	$
	Other Expenses Amortization of organization costs	7190	$
	Net Entity Expenses	7100T		$ 16,293
	Profit or Loss (Net Income or Loss)	3250		$ 107,040

Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6790, 6890 and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense.

Part II

1.	Total mortgage principal payments required during the audit year (12 monthly payments). This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD approved second mortgages should be included in the figures. (S1000-010)	$ 45,320
2.	Total of 12 monthly deposits in the audit year into the Replacement Reserve account, as required by the Regulatory Agreement even if payments may be temporarily suspended or reduced. (Account S1000-020)	$ 18,600
3.	Replacement Reserve or Residual Receipts releases which are included as expense items on this Profit and Loss Statement. (Account S1000-030)	$ 104,164
4.	Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. (Account S1000-040)	$

Page 2 of 2

STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For The Year Ended December 31, 2001

S1100-010	Beginning Of Year	$ 257,927
3250	Net Income	107,040
S1200-420	Distributions	(377,255)
3130	End Of Year	$ (12,288)

STATEMENT OF CASH FLOWS
Page 1 of 2
For The Year Ended December 31, 2001

Cash Flows From Operating Activities	Account	Amount
Receipts:
S1200-010 Rental receipts		$ 1,599,866
S1200-020 Interest receipts		36,377
S1200-030 Other operating receipts		28,570
S1200-040 Total Receipts		1,664,813
Disbursements:
S1200-050 Administrative		157,148
S1200-070 Management fee		85,514
S1200-090 Utilities		199,192
S1200-100 Salaries and wages		110,652
S1200-110 Operating and maintenance		184,407
S1200-120 Real estate taxes		148,151
S1200-140 Property insurance		21,940
S1200-150 Miscellaneous taxes and insurance		29,887
S1200-160 Tenant security deposits		(4,679)
S1200-180 Interest on mortgage		313,970
S1200-210 Mortgage insurance premium (MIP)		23,786
S1200-220 Miscellaneous financial		791
S1200-225 Entity disbursements:
S1200-226 Payment of entity accounts payable	S1200-227	1,972
S1200-230 Total Disbursements		1,272,731
S1200-240 Net Cash Provided By Operating Activities		392,082
Cash Flows From Investing Activities
S1200-245 Net releases from the mortgage escrow account		(10,318)
S1200-250 Net releases from the reserve for replacement account		64,386
S1200-340 Other investing activities		3,000
S1200-350 Net Cash Provided By Investing Activities		57,068
Cash Flows From Financing Activities
S1200-360 Mortgage principal payments		(45,320)
S1200-420 Distributions		(377,255)
S1200-460 Net Cash Used In Financial Activities		422,575
S1200-470 Net Increase In Cash And Cash Equivalents		26,575
S1200-480 Beginning Of Period Cash and Cash Equivalents		419,510
S1200T End of Period Cash And Cash Equivalents		$ 446,085

STATEMENT OF CASH FLOWS
Page 2 of 2
For The Year Ended December 31, 2001

Reconciliation Of Net Income To Net Cash Provided By Operating Activities	Account	Amount
3250 Net income		$ 107,040
Adjustments to reconcile net income to net cash provided by operating activities:
6600 Depreciation		228,035
6610 Amortization		14,465
Change in assets and liabilities:
S1200-490 Decrease in tenant accounts receivable		4,418
S1200-520 Increase in prepaid expenses		(220)
S1200-530 Decrease in cash restricted for tenant security deposits		6,170
S1200-540 Decrease in accounts payable		(7,342)
S1200-560 Increase in accrued liabilities		22,578
S1200-580 Decrease in tenant security deposits held in trust		(1,491)
S1200-590 Increase in prepaid revenue		4,035
S1200-605 Increase in entity liability accounts:
S1200-606 Increase in accounts payable - entity	S1200-607	14,394
S1200-610 Net Cash Provided By Operating Activities		$ 392,082

NOTES TO FINANCIAL STATEMENTS
December 31, 2001

1. Organization And Summary Of Significant Accounting Policies

Organization (S3100-010)

Hawthorn Housing Limited Partnership (the Partnership) was organized as a limited partnership during June 1984 for the purpose of constructing and operating a rental housing project (the Project) pursuant to a regulatory agreement with Illinois Housing Development Authority (IHDA). In November 1997, the Project was refinanced under Section 223(f) of the National Housing Act. The Project consists of 176 units located in Woodridge, Illinois, operating under the name of Hawthorn Ridge Apartments. The Project is regulated by the U.S. Department of Housing and Urban Development (HUD) and the Illinois Housing Development Authority (IHDA), as administrator of the housing assistance contract, as to rent charges and operating methods.

The regulatory agreement with HUD limits annual distributions of net operating receipts to surplus cash. At December 31, 2001, there was "surplus cash" in the amount of $403,347 available for distribution.

Significant Accounting Policies (S3100-040)

The following significant accounting policies have been followed in the preparation of the financial statements:

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

The Partnership considers all temporary cash investments as cash equivalents. These temporary cash investments are securities held for cash management purposes, having maturities of three months or less.

The Partnership deposits its cash in financial institutions. At times, deposits exceed federally insured limits. The Partnership has not experienced losses in such accounts.

The Partnership provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based on a review of the current status of the existing receivables. No allowance for doubtful accounts was provided for at December 31, 2001 as none was deemed necessary by management.

Rental property is carried as cost. Depreciation is provided using straight-line and accelerated methods over estimated useful lives ranging from five to forty years.

The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.

Deferred loan costs of $506,303 consist of fees for obtaining the HUD insured mortgage loan and are being amortized using the straight-line method over the life of the mortgage loan. Accumulated amortization amounted to $59,641 at December 31, 2001.

Income or loss of the Partnership is allocated .01% to the general partner and 99.99% to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.

2. Mortgage Payable (S3100-050)

The mortgage payable is insured by the Department of Housing and Urban Development and collateralized by a deed of trust on the rental property. The mortgage is payable to P/R Mortgage & Investment Corp. and bears interest at the rate of 6.6% per annum. Principal and interest are payable by the Partnership in monthly installments of $29,940 through December 2032.

Under agreements with the mortgage lender and HUD, the Partnership is required to make monthly escrow deposits for property taxes, insurance, mortgage insurance and replacement of Project assets.

The scheduled maturities of the mortgage payable at December 31, 2001 are as follows: (S3100-x1x)

Year		Amount
2002	S3100-060	48,138
2003	S3100-070	51,413
2004	S3100-080	54,911
2005	S3100-090	58,647
2006	S3100-100	62,637
Thereafter	S3100-110	4,456,581
		$ 4,732,327

3. Commitments (S3100-x3x) (S3100-240)

The Partnership has entered into a regulatory agreement with HUD which regulates, among other things, the rents which may be charged for apartment units in the Project, prohibits the sale of the project without HUD consent, limits the annual distribution of cash flow to the partners and otherwise regulates the relationship between the Partnership and HUD.

The Department of Housing and Urban Development, through a program administered by the Illinois Housing Development Authority, has contracted with the Partnership, effective December 1976, under Section 8 of the National Housing Act of 1968, to make housing assistance payments to the project on behalf of qualified tenants. The term of the agreement is five years with renewal options for terms not to exceed forty years.

4. Related Party Transactions (S3100-200)

The Project is managed by Alan Fox Real Estate Investment and Management Co., Inc., an affiliate of the special limited partner. The management contract provides for a management fee of 5.4% of gross collections. Total fees incurred for 2001 were $85,820. At December 31, 2001, management fees of $7,272 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc. (53100-230).

Alan A. Fox Real Estate Investment and Management Co., Inc. also receives a monthly accounting services fee of $3.50 per unit. This fee is charged for services which are not included in the monthly management fee. Total fees incurred during 2001 were $7,392. At December 31, 2001, fees of $616 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc.

S3100-210	Company Name	Alan A. Fox Real Estate Investment and Management Co., Inc.
S3100-220	Amount Received	$93,522

SUPPORTING DATA REQUIRED BY HUD
December 31, 2001

Replacement Reserve

In accordance with the provisions of the regulatory agreement, restricted cash is held by P/R Mortgage & Investment Corp. to be used for replacement of property with the approval of HUD as follows:

1320P	Balance at beginning of year	$ 397,669
1320DT	Total monthly deposits
	($1,550 x 12)	18,600
1320ODT	Other deposits	21,178
1320OD-010	Interest income
1320OD-020	$21,178
1320WT	Approved withdrawals	(104,164)
1320	Balance at end of year, confirmed by mortgagee	$ 333,283

PROJECT NAME Hawthorne Housing Limited Partnership		FISCAL PERIOD ENDED: 12/31/01	PROJECT NUMBER: 071-11069
Part A - Compute Surplus Cash
Cash
1.	Cash (Accounts 1120, 1170, 1191 minus Account 2105) (S1300-010)			$ 501,864
2.	Tenant subsidy due for period covered by financial statement (1135)			$
3.	Other (describe) (S1300-030)			$
	(a) Total Cash (Add Lines 1, 2, and 3) (S1300-040)				$ 501,864
Current Obligations
4.	Accrued mortgage interest payable (S1300-050)			$
5.	Delinquent mortgage principal payments (S1300-060)			$
6.	Delinquent deposits to reserve for replacements (S1300-070)			$
7.	Accounts payable - 30 days (S1300-075)			$ 29,889
8.	Loans and notes payable (due within 30 days) (S1300-080)			$
9.	Deficient tax insurance or MIP escrow deposits (S1300-090)			$
10.	Accrued expenses (not escrowed) (S1300-100)			$ 12,161
11.	Prepaid revenue (2210)			$ 9,622
12.	Tenant security deposits liability (2191)			$ 46,845
13.	Other current obligations (Describe) (S1300-110)			$
	(b) Total Current Obligations (Add Lines 4 through 13) (S1300-140)				$ 98,517
	(c) Surplus Cash (Deficiency) [Line (a) minus Line (b)] (S1300-150)				$ 403,347
Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1.	Surplus Cash				$
Limited Dividend Projects
2a.	Annual distribution earned during fiscal period covered by the statement (S1300-160)			$
2b.	Distribution accrued and unpaid as of the end of the prior fiscal period (S1300-170)			$
2c.	Distributions and entity expenses paid during fiscal period covered by statement (S1300-180)			$
3.	Distribution earned but unpaid (Line 2a plus 2b minus 2c) (S1300-190)			$
4.	Amount available for distribution during next fiscal period (S1300-200)				$
5.	Deposit due residual receipts (S1300-210)				$

SUPPORTING DATA REQUIRED BY HUD (CONTINUED)

DECEMBER 31, 2001

			Assets
		Balance January 1, 2001	Additions	Deductions	Balance December 31, 2001
1410	Land	$ 620,000	$ -	$ -	$ 620,000
1420	Buildings	6,595,513	-	-	6,595,513
1410	Building equipment - portable	479,089	-	-	479,089
	Total	7,694,602	-	-	7,694,602
Accumulated depreciation		3,896,995	228,035	-	4,125,030
	Net Book Value	$ 3,797,607	$(228,035)	$ -	$ 3,569,572

RBG&CO.

S2200-020

Independent Auditors' Report On Internal Control

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorne Housing Limited Partnership as of and for the year ended December 31, 2001, and have issued our report thereon dated January 29, 2002. We have also audited Hawthorn Housing Limited Partnership's compliance with requirements applicable to HUD-assisted programs and have issued our reports thereon dated January 29, 2002.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether Hawthorn Housing Limited Partnership complied with laws and regulations, noncompliance with which would be material to a major HUD-assisted program.

The management of Hawthorn Housing Limited Partnership is responsible for establishing and maintaining internal control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management authorization and recorded properly to permit the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that HUD-assisted programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control, errors, irregularities or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of internal control to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of controls may deteriorate.

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

To the Partners
Hawthorn Housing Limited Partnership

In planning and performing our audits, we obtained an understanding of the design of relevant controls and determined whether they had been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements of Hawthorn Housing Limited Partnership and on its compliance with specific requirements applicable to its major HUD-assisted programs and to report on internal control in accordance with the provisions of the Guide and not to provide any assurance on internal control.

We performed tests of controls, as required by the Guide, to evaluate the effectiveness of the design and operation of controls that we considered relevant to preventing or detecting material noncompliance with specific requirements applicable to Hawthorn Housing Limited Partnership's major HUD-assisted programs. Our procedures were less in scope than would be necessary to render an opinion on internal control. Accordingly, we do not express such an opinion.

Our consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements or that noncompliance with laws and regulations that would be material to a HUD-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control and its operation that we consider to be material weaknesses as defined above.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

RBG&CO.

S2300-020

Independent Auditors' Report On Compliance With

Specific Requirements Applicable To Major HUD Programs

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorn Housing Limited Partnership as of and for the year ended December 31, 2001 and have issued our report thereon dated January 29, 2002. We have also audited Hawthorn Housing Limited Partnership's compliance with the specific program requirements governing federal financial reports, mortgage status, replacement reserve, security deposits, cash receipts and disbursements, tenant application, eligibility and recertification, and management functions that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2001. The management of Hawthorn Housing Limited Partnership is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.

We conducted our audit of compliance with those requirements in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about Hawthorn Housing Limited Partnership's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion.

The results of our audit procedures disclosed an immaterial instance of noncompliance with the requirements referred to above, which is described in the accompanying Schedule of Financings and Questioned Costs. We considered this instance of noncompliance in forming our opinion on compliance, which is expressed in the following paragraph.

In our opinion, Hawthorn Housing Limited Partnership complied, in all material respects, with the requirements described above that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2001.

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

To The Partners
Hawthorn Housing Limited Partnership

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

RBG&CO.

S2500-020

Independent Auditors' Report On Compliance With Specific
Requirements Applicable To Fair Housing and Non-Discrimination

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorn Housing Limited Partnership as of and for the year ended December 31, 2001, and have issued our report thereon dated January 29, 2002.

We have also applied procedures to test Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements applicable to its HUD-assisted programs for the year ended December 31, 2001.

Our procedures were limited to the applicable compliance requirement described by the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements. Accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

HAWTHORN HOUSING LIMITED PARTNERSHIP
PROJECT NO. 071-11069

Schedule Of Findings and Questioned Costs (S2700-xlx)

S2700-005	Finding Reference Number - 2001 - 1
S2700-010	Statement of Condition - Fidelity bond coverage amount is less than two months potential collections.
S2700-020	Criteria - HUD requires fidelity bond coverage be equal to at least two months potential collections.
S2700-050	Recommendation - Project management should obtain increased fidelity bond coverage.
S2700-055	Auditor Non-Compliance Code - Other
S2700-065	Amount of Questioned Costs - $0

HAWTHORN HOUSING LIMITED PARTNERSHIP

PROJECT NO. 071-11069

Auditors' Comment On Audit Resolution
Matters Relating To The HUD Programs (S2800-x1x)

S2800-005		Previous Finding Reference Number - 2000 - 1
S2800-010		Narrative - Management of the Project has no formal move-out inspection process.
S2800-020		Status CLEARED
S2800-030		Reporting Period December 31, 2000
*S2900-030	Name of Signatory #2 (if required)
* For all owning entities other than a sole proprietor or a limited partnership, this field is required.
S2900-040	Auditee Telephone Number
S2900-050	Date of Certification

EX-99 4 exhibit99i10k.htm SEC CERT

EXHIBIT 99(i)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ASDOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Gulledge Realty Investors II, L.P. (the "Registrant") on Form 10-K for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on March 29, 2004 and as amended on the date hereof, (the "Report"), the undersigned officers 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, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

		GULLEDGE REALTY INVESTORS II, L.P.
		By:	GULL-AGE Properties, Inc.
			Managing General Partner
Date:	March 29, 2004	By:	/s/ Douglas L. Kelly
			Douglas L. Kelly
			President, Secretary, Treasurer
			and Director

EX-99 5 exhibit99ii10k.htm SEC CERT

EXHIBIT 99(ii)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Gulledge Realty Investors II, L.P. (the "Registrant") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on March 29, 2004 and as amended on the date hereof (the "Report"), the undersigned officer certifies 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, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

		GULLEDGE REALTY INVESTORS II, L.P.
		By:	GULL-AGE Properties, Inc.
			Managing General Partner
Date:	March 29, 2004	By:	/s/ Joseph G. Porter
			Joseph G. Porter
			Vice President and
			Assistant Treasurer

EX-99 6 exhibit310k.htm SEC CERT

EXHIBIT 99(iii)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ASDOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas L. Kelly, certify that:

1. I have reviewed this annual report on Form 10-K of Gulledge Realty Investors II, L.P.;
   
   
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
   
   
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
   
   
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
   
   
   1. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
      
      
   2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual 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
      
      
   3. Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
      
      
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
   
   
   1. 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 registrant's ability to record, process, summarize and report financial information; and
      
      
   2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
      
      
      
      Date: March 29, 2004

   /s/ Douglas L. Kelly

   Douglas L. Kelly

   President, Secretary,

   Treasurer and Director

   of Gull-AGE Properties, Inc.

EX-99 7 exhibit410k.htm SEC CERT

EXHIBIT 99(iv)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ASDOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph G. Porter, certify that:

1. I have reviewed this annual report on Form 10-K of Gulledge Realty Investors II, L.P.;
   
   
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
   
   
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
   
   
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
   
   
   1. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
      
      
   2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual 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
      
      
   3. Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
      
      
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
   
   
   1. 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 registrant's ability to record, process, summarize and report financial information; and
      
      
   2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
      
      
      
      Date: March 29, 2004

   /s/ Joseph G. Porter

   Joseph G. Porter

   Vice President and Assistant Treasurer

   of Gull-AGE Properties, Inc.

-----END PRIVACY-ENHANCED MESSAGE-----

EX-2

Exhibit 2

FINANCIAL STATEMENTS

OF

UNCONSOLIDATED LIMITED PARTNERSHIPS

MEETING REQUIREMENTS OF SIGNIFICANT

SUBSIDIARY/INVESTEE

HAWTHORN HOUSING

LIMITED PARTNERSHIP

071-11069

FINANCIAL STATEMENTS

DECEMBER 31, 2003

Contents

            Page

Independent Auditors' Report.......................................................................... 1

Balance Sheet.............................................................................................2 - 3

Statement Of Profit And Loss.................................................................... 4 - 5

Statement Of Partners' Equity (Deficit)............................................................ 6

Statement Of Cash Flows............................................................................. 7 - - 8

Notes To Financial Statements................................................................ 9 - - 12

Supporting Data Required By HUD..................................................... 13 - - 15

Independent Auditors' Report On Internal Control

(Combined Report Applicable To Internal Control

Over Financial Reporting Based On An Audit Of

Financial Statements And Internal Control Over

Compliance For HUD-Assisted Programs)...................................... 16 - - 17

Independent Auditors' Report On Compliance With

Specific Requirements Applicable To Major HUD

Programs................................................................................................ 18 - - 19

Independent Auditors' Report On Compliance With

Specific Requirements Applicable To Fair Housing

And Non-Discrimination............................................................................. 20

Mortgagor's Certification................................................................................ 21

Management Agent's Certification ............................................................... 22

Auditor's Transmittal Letter.......................................................................... 23

S2100-020 Independent Auditors' Report

To The Partners

Hawthorn Housing Limited Partnership

We have audited the accompanying balance sheet of Hawthorn Housing Limited Partnership, Project No. 071-11069, a limited partnership, as of December 31, 2003 and the related statements of profit and loss, 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 Hawthorn Housing Limited Partnership as of December 31, 2003 and the results of its operations and its 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, we have also issued our reports dated January 29, 2004 on our consideration of Hawthorn Housing 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. Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (shown on pages 13 to 15) 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 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

BALANCE SHEET

Page 1 Of 2

December 31, 2003

Assets
Current Assets
1120	Cash - operations	$ 175,683
1125	Cash - entity	2,079
1130	Tenant accounts receivable	15,092
1200	Miscellaneous prepaid expenses	50,093
1100T	Total Current Assets		$ 242,947
Deposits Held In Trust - Funded
1191	Tenant deposits held in trust		39,539
Restricted Deposits And Funded Reserves
1310	Escrow deposits	117,406
1320	Replacement reserve	243,092
1300T	Total Deposits		360,498
Fixed Assets (Note 2)
1410	Land	620,000
1420	Buildings	6,607,108
1440	Building equipment - portable	488,841
1400T	Total Fixed Assets	7,715,949
1495	Less: Accumulated depreciation	4,564,990
1400N	Net Fixed Assets		3,150,959
Other Assets
1520	Intangible assets	417,862
1590	Miscellaneous other assets - easement fee receivable	4,000
1500T	Total Other Assets		421,862
1000T	Total Assets		$ 4,215,805

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

BALANCE SHEET

Page 2 Of 2

December 31, 2003

Liabilities
Current Liabilities
2110	Accounts payable - operations	$ 24,782
2113	Accounts payable - entity	7,539
2120	Accrued wages payable	6,510
2123	Accrued management fee payable (Note 4)	7,548
2150	Accrued property taxes	183,623
2170	Mortgage payable - first mortgage (short-term) (Note 2)	55,213
2210	Prepaid revenue	1,655
2122T	Total Current Liabilities		$ 286,870
Deposit And Prepayment Liabilities
2191	Tenant deposits held in trust (contra)		37,157
Long-Term Liabilities
2320	Mortgage payable - first mortgage (Note 2)		4,577,297
2000T	Total Liabilities		4,901,324
Partners' Equity (Deficit)
3130	Partners' equity (deficit)		(685,519)
2033T	Total Liabilities And Partners' Equity		$ 4,215,805

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF PROFIT AND LOSS

For The Year Ended December 31, 2003

Part 1	Description of Account	Acct. No.		Amount
Rent Revenue 5100	Rent Revenue - Gross Potential	5120	$	1,298,024
	Tenant Assistance Payments	5121	$	543,920
	Rent Revenue - Stores and Commercial	5140	$	-
	Garage and Parking Spaces	5170	$	-
	Flexible Subsidy Revenue	5180	$	-
	Miscellaneous Rent Revenue	5190	$	-
	Excess Rent	5191	$	-
	Rent Revenue/Insurance	5192	$	-
	Special Claims Revenue	5193	$	-
	Retained Excess Income	5194	$	-
	Total Rent Revenue	5100T			$	1,841,944
Vacancies 5200	Apartments	5220	$	310,794
	Stores and Commercial	5240	$	-
	Rental Concessions	5250	$	26,878
	Garage and Parking Space	5270	$	-
	Miscellaneous	5290	$	-
	Total Vacancies	5200T			$	337,672
	Net Rental Revenue Rent Revenue Less Vacancies	5152N			$	1,504,272
5300	Nursing Homes/Assisted Living/Board and Care/Other
	Elderly Care/Coop/ and Other Revenues	5300			$	-
Financial Revenue 5400	Financial Revenue - Project Operations	5410	$	2,749
	Revenue from Investments - Residual Receipts	5430	$	-
	Revenue from Investments - Replacement Reserve	5440	$	4,433
	Revenue from Investments - Miscellaneous	5490	$	-
	Total Financial Revenue	5400T			$	7,182
Other Revenue 5900	Laundry and Vending Revenue	5910	$	3,394
	Tenant Charges	5920	$	13,102
	Interest Reduction Payments Revenue	5945	$	-
	Miscellaneous Revenue	5990	$	-
	Total Other Revenue	5900T			$	16,496
	Total Revenue	5000T			$	1,527,950
Administrative Expenses 6200/6300	Conventions and Meetings	6203	$	-
	Management Consultants	6204	$	-
	Advertising and Marketing	6210	$	17,053
	Other Renting Expenses	6250	$	-
	Office Salaries	6310	$	30,149
	Office Expenses	6311	$	23,624
	Office or Model Apartment Rent	6312	$	9,704
	Management Fee	6320	$	90,825
	Manager or Superintendent Salaries	6330	$	48,190
	Administrative Rent Free Unit	6331	$	-
	Legal Expense - Project	6340	$	8,819
	Audit Expense	6350	$	10,775
		6351	$	7,392
	Bad Debts	6370	$	9,103
	Miscellaneous Administrative Expenses	6390	$	5,469
	Total Administrative Expenses	6263T			$	261,103
Utilities Expense 6400	Fuel Oil/Coal	6420	$	-
	Electricity	6450	$	29,332
	Water	6451	$	34,223
	Gas	6452	$	100,612
	Sewer	6453	$	16,321
	Total Utilities Expense	6400T			$	180,488
	Total Expenses (Carry Forward to Page 2)				$	441,591
Page 1 of 2

	Project Name:	Hawthorn Housing Limited Partnership
			Balance Carried Forward			$	441,591
Operating Maintenance Expenses 6500		Payroll	6510	$	126,713
		Supplies	6515	$	41,429
		Contracts	6520	$	114,422
		Operating and Maintenance Rent Free Unit	6521	$	-
		Garbage and Trash Removal	6525	$	9,991
		Security Payroll/Contract	6530	$	-
		Security Rent Free Unit	6531	$	-
		Heating/Cooling Repairs and Maintenance	6546	$	1,088
		Snow Removal	6548	$	9,222
		Vehicle and Maintenance Equipment Operation and Repairs	6570	$	-
		Miscellaneous Operating and Maintenance Expenses	6590	$	2,061
		Total Operating and Maintenance Expenses	6500T			$	304,926
Taxes and Insurance 6700		Real Estate Taxes	6710	$	185,200
		Payroll Taxes (Project's Share)	6711	$	16,443
		Property and Liability Insurance (Hazard)	6720	$	50,356
		Fidelity Bond Insurance	6721	$	1,283
		Workmen's Compensation	6722	$	13,509
		Health Insurance and Other Employee Benefits	6723	$	15,179
		Miscellaneous Taxes, Licenses, Permits and Insurance	6790	$	3,101
		Total Taxes and Insurance	6700T			$	285,071
Financial Expenses 6800		Interest on Mortgage Payable	6820	$	307,877
		Interest on Notes Payable (Long-Term)	6830	$	-
		Interest on Notes Payable (Short-Term)	6840	$	-
		Mortgage Insurance Premium/Service Charge	6850	$	23,040
		Miscellaneous Financial Expenses	6890	$	102
		Total Financial Expenses	6800T			$	331,019
6900		Nursing Homes/ Assisted Living/ Board and Care/ Other
		Elderly Care Expenses	6900			$	-
		Total Cost of Operations before Depreciation and Amortization	6000T			$	1,362,607
		Profit (Loss) before Depreciation and Amortization	5060T			$	165,343
		Depreciation Expense	6600	$	219,840
		Amortization Expense	6610	$	14,400
		Total Depreciation and Amortization				$	234,240
		Operating Profit or (Loss)	5060N			$	(68,897)
Corporate or Mortgagor Entity Expenses 7100		Officer's Salaries	7110	$	-
		Legal Expenses	7120	$	7,539
		Federal, State, and Other Income Taxes	7130	$	-
		Interest Income	7140	$	-
		Interest on Notes Payable	7141	$	-
		Interest on Mortgage Payable	7142	$	-
		Other Expenses	7190	$	-
		Net Entity Expenses	7100T			$	7,539
		Profit or Loss (Net Income or Loss)	3250			$	(76,436)
Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6790, 6890 and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense.
Part II
1.	Total mortgage principal payments required during the audit year (12 monthly payments). This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD approved second mortgages should be included in the figures. (Account S1000-010)					$	51,413
2.	Total of 12 monthly deposits in the audit year into the Replacement Reserve account, as required by the Regulatory Agreement even if payments may be temporarily suspended or reduced. (Account S1000-020)					$	18,600
3.	Replacement Reserve or Residual Receipts releases which are included as expense items on this Profit and Loss Statement. (Account S1000-030)					$	56,897
4.	Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. (Account S1000-040)					$	-
Page 2 of 2

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF PARTNERS' EQUITY (DEFICIT)

For The Year Ended December 31, 2003

S1100-010	Beginning Of Year	$ (373,591)
3250	Net Loss	(76,436)
S1200-420	Distributions	(235,492)
3130	December 31, 2003	$ (685,519)

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF CASH FLOWS

Page 1 Of 2

For The Year Ended December 31, 2003

Cash Flows From Operating Activities
	Receipts:
S1200-010		Rental receipts	$ 1,494,208
S1200-020		Interest receipts	7,182
S1200-030		Other operating receipts	16,496
S1200-040		Total Receipts	1,517,886
	Disbursements:
S1200-050		Administrative	169,585
S1200-070		Management fee	91,374
S1200-090		Utilities	179,098
S1200-100		Salaries and wages	124,859
S1200-110		Operating and maintenance	176,032
S1200-120		Real estate taxes	183,168
S1200-140		Property insurance	85,108
S1200-150		Miscellaneous taxes and insurance	19,544
S1200-160		Tenant security deposits	(18,463)
S1200-180		Interest on mortgage	307,877
S1200-210		Mortgage insurance premium (MIP)	23,040
S1200-220		Miscellaneous financial	104
S1200-225		Entity Disbursements:
S1200-226		Entity legal fees	17,069
S1200-230		Total Disbursements	1,358,395
S1200-240		Net Cash Provided By Operating Activities	159,491
Cash Flows From Investing Activities
S1200-245		Net deposits to the mortgage escrow account	(2,457)
S1200-250		Net releases from the reserve for replacement account	33,864
S1200-340		Other investing activities - collection of easement receivable	3,000
S1200-350		Net Cash Provided By Investing Activities	34,407
Cash Flows From Financing Activities
S1200-360		Mortgage principal payments	(51,413)
S1200-420		Distributions	(235,492)
S1200-460		Net Cash Used By Financing Activities	(286,905)
S1200-470		Net Decrease In Cash	(93,007)
S1200-480		Beginning Of Period Cash	270,769
S1200T		End Of Period Cash	$ 177,762

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

STATEMENT OF CASH FLOWS

Page 2 Of 2

For the Year Ended December 31, 2003

Reconciliation Of Net Loss To Net Cash
Provided By Operating Activities
3250	Net loss		$ (76,436)
	Adjustments to reconcile net loss to net cash
	provided by operating activities
6600	Depreciation		219,840
6610	Amortization		14,400
	Change in assets and liabilities:
S1200-490		Increase in tenant accounts receivable	(8,016)
S1200-520		Increase in prepaid expenses	(4,782)
S1200-530		Decrease in cash restricted for tenant security deposits	21,891
S1200-540		Decrease in accounts payable	(5,266)
S1200-560		Increase in accrued liabilities	3,337
S1200-580		Decrease in tenant security deposits held in trust	(3,428)
S1200-590		Decrease in prepaid revenue	(2,049)
S1200-610		Net Cash Provided By Operating Activities	$ 159,491

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

NOTES TO FINANCIAL STATEMENTS

December 31, 2003

1. Organization And Summary Of Significant Accounting Policies

Organization (S3100-010)

Hawthorn Housing Limited Partnership (the Partnership) was organized as a limited partnership during June 1984 for the purpose of constructing and operating a rental housing project (the Project) pursuant to a regulatory agreement with the Illinois Housing Development Authority (IHDA). In November 1997, the Project was refinanced under Section 223(f) of the National Housing Act. The Project consists of 176 units located in Woodridge, Illinois, operating under the name of Hawthorn Ridge Apartments. The Project is regulated by the U.S. Department of Housing and Urban Development (HUD) and IHDA, as administrator of the housing assistance contract, as to rent charges and operating methods.

The regulatory agreement with HUD limits annual distributions of net operating receipts to surplus cash. At December 31, 2003, there was surplus cash in the amount of $137,570 available for distribution.

Significant Accounting Policies (S3100-040)

The following significant accounting policies have been followed in the preparation of the financial statements:

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

The Partnership considers all temporary cash investments as cash equivalents.  These temporary cash investments are securities held for cash management purposes, having maturities of three months or less.

The Partnership deposits its cash in financial institutions. At times, deposits exceed federally insured limits. The Partnership has not experienced losses in such accounts.

Tenant accounts receivable are stated at the amount management expects to collect from outstanding balances. Based on management's assessment of the credit history with tenants having outstanding balances and current relationships with them, it has concluded that realization losses on balances outstanding at year end would be immaterial.

Rental property is carried as cost. Depreciation is provided using straight-line and accelerated methods over estimated useful lives ranging from 5 to 40 years.

The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.

Intangible assets consist of deferred loan costs of $506,303, incurred for obtaining the HUD insured mortgage loan, which are being amortized using the straight‑line method over the life of the mortgage loan. Accumulated amortization amounted to $88,441 at December 31, 2003.

Income or loss of the Partnership is allocated .01 % to the general partner and 99.99 % to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.

2. Mortgage Payable (S3100-050)

The mortgage payable is insured by the Department of Housing and Urban Development and collateralized by a deed of trust on the rental property. The mortgage is payable to P/R Mortgage & Investment Corp. and bears interest at the rate of 6.6% per annum. Principal and interest are payable by the Partnership in monthly installments of $29,940 through December 2032.

Under agreements with the mortgage lender and HUD, the Partnership is required to make monthly escrow deposits for property taxes, insurance, mortgage insurance and replacement of Project assets.

The scheduled maturities of the mortgage payable at December 31, 2003 are as follows: (S3100-x1x)

Year	Account	Amount
2004	S3100-060	$ 55,213
2005	S3100-070	58,647
2006	S3100-080	62,637
2007	S3100-090	66,898
2008	S3100-100	71,450
Thereafter	S3100-110	4,317,665
		$ 4,632,510

3. Commitments (S3100-x3x) (S3100-240)

The Partnership has entered into a regulatory agreement with HUD which regulates, among other things, the rents which may be charged for apartment units in the Project, prohibits the sale of the Project without HUD consent, limits the annual distribution of cash flow to the partners and otherwise regulates the relationship between the Partnership and HUD.

The Department of Housing and Urban Development, through a program administered by the Illinois Housing Development Authority, has contracted with the Partnership, effective December 1976, under Section 8 of the National Housing Act of 1968, to make housing assistance payments to the Project on behalf of qualified tenants. The term of the agreement is 5 years with renewal options for terms not to exceed 40 years.

4. Related-Party Transactions (S3100-200)

The Project is managed by Alan A. Fox Real Estate Investment and Management Co., Inc., an affiliate of the special limited partner. The management contract provides for a management fee of 6% of gross collections. Total fees incurred for 2003 were $90,825. At December 31, 2003, management fees of $7,548 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc. (S3100‑230)

Alan A. Fox Real Estate Investment and Management Co., Inc. also receives a monthly accounting services fee of $3.50 per unit. This fee is charged for services which are not included in the monthly management fee. Total fees incurred during 2003 were $7,392. At December 31, 2003, fees of $616 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc.

S3100-210 Company Name Alan A. Fox Real Estate Investment and Management Co, Inc.

S3100-220 Amount Received $98,766

5. Subsequent Event (S3100-x3x) (S3100-240)

On June 6, 2003, the Partnership entered into an agreement to sell its operating assets. Effective January 21, 2004, the operating assets, including property and equipment, were sold in exchange for cash of approximately $3,434,000 plus assumption of the mortgage payable having a principal balance of approximately $4,632,000 on the date of sale.

HAWTHORN HOUSING LIMITED PARTNERSHIP

PROJECT NO. 071-11069

SUPPORTING DATA REQUIRED BY HUD

December 31, 2003

Replacement Reserve

In accordance with the provisions of the regulatory agreement, restricted cash is held by P/R Mortgage & Investment Corp. to be used for replacement of property with the approval of HUD as follows:

1320P Balance at beginning of year	$ 276,956
1320DT Total monthly deposits
($1,550 x 12)	18,600
1320ODT Other deposits	4,433
1320OD-010 Interest income
1320OD-020 $4,433
1320WT Approved withdrawals	(56,897)
1320 Balance at end of year, confirmed
by mortgagee	$ 243,092

Computation of Surplus Cash,
Distributions and Residual
Receipts
PROJECT NAME		FISCAL PERIOD ENDED:		PROJECT NUMBER
Hawthorn Housing Limited Partnership		12/31/2003		071-11069
Part A - Compute Surplus Cash
Cash
1.	Cash (Accounts 1120, 1170, 1191 minus Account 2105) (S1300-010)		$	215,222
2.	Tenant subsidy due for period covered by financial statement (1135)		$
3.	Other (accounts and notes receivable - entity) (S1300-030)		$
	(a) Total Cash (Add Lines 1, 2, and 3) (S1300-040)				$	215,222
Current Obligations
4.	Accrued mortgage interest payable (S1300-050)		$
5.	Delinquent mortgage principal payments (S1300-060)		$
6.	Delinquent deposits to reserve for replacements (S1300-070)		$
7.	Accounts payable - 30 days (S1300-075)		$	24,782
8.	Loans and notes payable (due within 30 days) (S1300-080)		$
9.	Deficient tax insurance or MIP escrow deposits (S1300-090)		$
10.	Accrued expenses (not escrowed) (S1300-100)		$	14,058
11.	Prepaid revenue (2210)		$	1,655
12.	Tenant security deposits liability (2191)		$	37,157
13.	Other current obligations (Describe) (S1300-110)		$
	(b) Total Current Obligations (Add Lines 4 through 13) (S1300-140)				$	77,652
	(c) Surplus Cash (Deficiency) [Line (a) minus Line (b)] (S1300-150)				$	137,570
Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1.	Surplus Cash				$
Limited Dividend Projects
2a.	Annual distribution earned during fiscal period covered by the statement (S1300-160)		$
2b.	Distribution accrued and unpaid as of the end of the prior fiscal period (S1300-170)		$
2c.	Distributions and entity expenses paid during fiscal period covered by statement (S1300-180)		$
3.	Distribution earned but unpaid (Line 2a plus 2b minus 2c) (S1300-190)		$
4.	Amount available for distribution during next fiscal period (S1300-200)				$
5.	Deposit due residual receipts (S1300-210)				$

HAWTHORN HOUSING LIMITED PARTNERSHIP

071-11069

SUPPORTING DATA REQUIRED BY HUD (Continued)

December 31, 2003

Schedule Of Fixed Assets

	Assets
	Balance			Balance
	January 1,			December 31,
	2003	Additions	Deductions	2003
1410 Land	$ 620,000	$ -	$ -	$ 620,000
1420 Buildings	6,607,108	-	-	6,607,108
1440 Building equipment - portable	488,841	-	-	488,841
Total	7,715,949	-	-	7,715,949
Accumulated depreciation	4,345,150	219,840	-	4,564,990
Net Book Value	$ 3,370,799	$ (219,840)	$ -	$ 3,150,959

S2200-020 Independent Auditors' Report On Internal

Control (Combined Report Applicable To Internal

Control Over Financial Reporting Based On An Audit

Of Financial Statements And Internal Control

Over Compliance For HUD-Assisted Programs)

To The Partners

Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorn Housing Limited Partnership as of and for the year ended December 31, 2003, and have issued our report thereon dated January 29, 2004. We have also audited Hawthorn Housing Limited Partnership's compliance with requirements applicable to HUD-assisted programs and have issued our reports thereon dated January 29, 2004.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether Hawthorn Housing Limited Partnership complied with laws and regulations, noncompliance with which would be material to a HUD-assisted program.

The management of Hawthorn Housing Limited Partnership is responsible for establishing and maintaining internal control. In planning and performing our audit of the financial statements, we considered Hawthorn Housing Limited Partnership's internal control over financial reporting and its internal control over compliance with requirements that would have a direct and material effect on a major HUD-assisted program in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and on compliance and not to provide assurance on the internal control over financial reporting and the internal control over compliance.

Our consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements that would be material in relation to the financial statements or that noncompliance with applicable requirements of laws and regulations that would be material in relation to a major HUD-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control and its operation that we consider to be material weaknesses as defined above.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

S2300-020 Independent Auditors' Report On Compliance

With Specific Requirements Applicable To Major HUD Programs

To The Partners

Hawthorn Housing Limited Partnership

We have audited Hawthorn Housing Limited Partnership's compliance with the specific program requirements governing federal financial reports, mortgage status, replacement reserve, distributions to owners, cash receipts and disbursements, tenant application, eligibility and recertification, and management functions that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2003. The management of Hawthorn Housing Limited Partnership is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above that could have a direct and material effect on a major HUD-assisted program occurred. An audit includes examining, on a test basis, evidence about Hawthorn Housing Limited Partnership's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of Hawthorn Housing Limited Partnership's compliance with those requirements.

In our opinion, Hawthorn Housing Limited Partnership complied, in all material respects, with the requirements referred to above that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2003.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

S2500-020 Independent Auditors' Report On

Compliance With Specific Requirements

Applicable To Fair Housing And Non-Discrimination

To The Partners

Hawthorn Housing Limited Partnership

We have applied procedures to test Hawthorn Housing Limited Partnership's compliance with the Fair Housing and Non-Discrimination requirements applicable to its HUD-assisted programs for the year ended December 31, 2003.

Our procedures were limited to the applicable compliance requirement described by the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on Hawthorn Housing Limited Partnership's compliance with the Fair Housing and Non-Discrimination requirements. Accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/ RUBIN, BROWN, GORNSTEIN & CO. LLP

January 29, 2004

HAWTHORN HOUSING
LIMITED PARTNERSHIP
071-11069

FINANCIAL STATEMENTS
DECEMBER 31, 2002

Contents
Independent Auditor's Report	1
Balance Sheet	2 - 3
Statement of Profit and Loss	4 - 5
Statement of Partners' Equity (Deficit)	6
Statement of Cash Flows	7 - 8
Notes to Financial Statements	9 - 12
Supporting Data Required by HUD	13 - 15
Independent Auditors' Report on Internal Control	16 - 17
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Major HUD Programs	18 - 19
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Fair Housing and Non-Discrimination	20
Auditors' Comment on Audit Resolution Matters Relating To The HUD Programs	21

RBG&CO.

S2100-020 Independent Auditors' Report

To The Partners
Hawthorn Housing Limited Partnership

We have audited the accompanying balance sheet of Hawthorn Housing Limited Partnership, Project No. 071-11069, a limited partnership, as of December 31, 2002 and the related statements of profit and loss, 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 Hawthorn Housing Limited Partnership as of December 31, 2002 and the results of its operations and its 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, we have also issued our reports dated January 28, 2003 on our consideration of Hawthorn Housing 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.

Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (shown on Pages 13 through 15) 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 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

Rubin, Brown, Gornstein & Co. LLP	One North Brentwood
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/290-3300 TEL www.rbgco.com	314/290-3400 FAX

BALANCE SHEET
Page 1 of 2
December 31, 2002

Assets

Current Assets
1120 Cash - operations	$ 268,690
1125 Cash - entity	2,079
1130 Tenant accounts receivable	7,076
1200 Miscellaneous prepaid expenses	45,311
1100T Total Current Assets		$ 323,156
Deposits Held In Trust - Funded
1191 Tenant deposits held in trust		61,430
Restricted Deposits And Funded Reserves
1310 Escrow deposits	114,949
1320 Replacement reserve	276,956
1300T Total Deposits		391,905
Fixed Assets (Note 2)
1410 Land	620,000
1420 Buildings	6,607,108
1440 Building equipment - portable	488,841
1400T Total Fixed Assets	7,715,949
1495 Less: Accumulated depreciation	4,345,150
1400N Net Fixed Assets		3,370,799
Other Assets
1520 Intangible assets	432,262
1590 Miscellaneous other assets	7,000
1500T Total Other Assets		439,262
1000T Total Assets		$ 4,586,552

BALANCE SHEET
Page 2 of 2
December 31, 2002

Liabilities

Current Liabilities
2110 Accounts payable - operations	$ 20,518
2113 Accounts payable - entity	17,069
2120 Accrued wages payable	4,656
2123 Accrued management fee payable (Note 4)	8,097
2150 Accrued property taxes	181,591
2170 Mortgage payable - first mortgage(short-term) (Note 2)	51,413
2210 Prepaid revenue	3,704
2122T Total Current Liabilities		$ 287,048
Deposit And Prepayment Liabilities
2191 Tenant deposits held in trust (contra)		40,585
Long-Term Liabilities
2320 Mortgage payable - first mortgage (Note 2)		4,632,510
2000T Total Liabilities		4,960,143
Partners' Equity (Deficit)
3130 Partners' equity (deficit)		(373,591)
2033T Total Liabilities And Partners' Equity (Deficit)		$ 4,586,552

STATEMENT OF PROFIT AND LOSS
For The Year Ended December 31, 2002

Part 1	Description of Account	Acct. No.	Amount
	Rent Revenue - Gross Potential	5120	$ 1,242,742
	Tenant Assistance Payments	5121	$ 470,011
	Rent Revenue - Stores and Commercial	5140	$
	Garage and Parking Spaces	5170	$
Rental	Flexible Subsidy Revenue	5180	$
Revenue	Miscellaneous Rent Revenue	5190	$
5100	Excess Rent	5191	$
	Rent Revenue/Insurance	5192	$
	Special Claims Revenue	5193	$
	Retained Excess Income	5194	$
	Total Rent Revenue	5100T		$ 1,712,753
	Apartments	5220	$ 160,354
	Stores and Commercial	5240	$
Vacancies	Rental Concessions	5250	$ 13,709
5200	Garage and Parking Spaces	5270	$
	Miscellaneous	5290	$
	Total Vacancies	5200T		$ 174,063
	Net Rental Revenue Rent Revenue Less Vacancies	5152N		$ 1,538,690
5300	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care/ Coop/ and Other Revenues	5300
	Financial Revenue - Project Operations	5410	$ 6,199
Financial	Revenue from Investments - Residual Receipts	5430	$
Revenue	Revenue from Investments - Replacement Reserve	5440	$ 6,174
5400	Revenue from Investments - Miscellaneous	5490	$
	Total Financial Revenue	5400T		$ 12,373
	Laundry and Vending Revenue	5910	$ 430
Other	Tenant Charges	5920	$ 17,909
Revenue	Interest Reduction Payments Revenue	5945	$
5900	Miscellaneous Revenue	5990	$
	Total Other Revenue	5900T		$ 18,339
	Total Revenue	5000T		$ 1,569,402
	Conventions and Meetings	6203	$
	Management Consultants	6204	$
	Advertising and Marketing	6210	$ 16,400
	Other Renting Expenses	6250	$
	Office Salaries	6310	$ 26,548
Administrative	Office Expenses	6311	$ 23,500
Expenses	Office or Model Apartment Rent	6312	$ 9,352
6200/6300	Management Fee	6320	$ 88,233
	Manager or Superintendent Salaries	6330	$ 43,890
	Administrative Rent Free Unit	6331	$
	Legal Expenses - Project	6340	$ 2,959
	Audit Expense	6350	$ 9,850
	Bookkeeping Fees/Accounting Services	6351	$ 7,392
	Bad Debts	6370	$ 10,008
	Miscellaneous Administrative Expenses	6390	$ 8,812
	Total Administrative Expenses	6263T		$ 246,944
	Fuel Oil/Coal	6420	$
Utilities	Electricity	6450	$ 27,434
Expense	Water	6451	$ 35,385
6400	Gas	6452	$ 82,411
	Sewer	6453	$ 15,920
	Total Utilities Expense	6400T		$ 161,150
	Total Expenses (Carry forward to Page 2)			$ 408,094

Page 1 of 2

Project Name: Hawthorn Housing Limited Partnership

		Balance Carried Forward		$ 408,094
Part 1	Description of Account	Acct. No.	Amount
	Payroll	6510	$ 116,930
	Supplies	6515	$ 38,336
	Contracts	6520	$ 132,913
Operating	Operating and Maintenance Rent Free Unit	6521	$
Maintenance	Garbage and Trash Removal	6525	$ 9,428
Expenses	Security Payroll/Contract	6530	$
6500	Security Rent Free Unit	6531	$
	Heating/Cooling Repairs and Maintenance	6546	$ 95
	Snow Removal	6548	$ 8,048
	Vehicle and Maintenance Equipment Operation and Repairs	6570	$
	Miscellaneous Operating and Maintenance Expenses	6590	$ 235
	Total Operating and Maintenance Expenses	6500T		$ 305,985
	Real Estate Taxes	6710	$ 175,200
	Payroll Taxes (Project's Share)	6711	$ 15,148
Taxes	Property and Liability Insurance (Hazard)	6720	$ 35,188
and	Fidelity Bond Insurance	6721	$ 1,160
Insurance	Workmen's Compensation	6722	$ 4,686
6700	Health Insurance and Other Employee Benefits	6723	$ 9,402
	Miscellaneous Taxes, Licenses, Permits and Insurance	6790	$ 3,095
	Total Taxes and Insurance	6700T		$ 243,879
	Interest on Mortgage Payable	6820	$ 310,887
Financial	Interest on Notes Payable (Long-Term)	6830	$
Expenses	Interest on Notes Payable (Short-Term)	6840	$
6800	Mortgage Insurance Premium/Service Charge	6850	$ 23,100
	Miscellaneous Financial Expenses	6890	$ 190
	Total Financial Expenses			$ 334,177
6900	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care Expenses	6900	$
	Total Cost of Operations before Depreciation and Amortization	6000T		$ 1,292,135
	Profit (Loss) before Depreciation and Amortization	5060T		$ 277,267
	Depreciation Expense	6600	$ 220,120
	Amortization Expense	6610	$ 14,400
	Total Depreciation and Amortization			$ 234,520
	Operating Profit or (Loss)	5060N		$ 42,747
	Officer's Salaries	7110	$
Corporate or	Legal Expenses	7120	$ 703
Mortgagor	Federal, State, and Other Income Taxes	7130	$
Entity	Interest Income	7140	$
Expenses	Interest on Notes Payable	7141	$
7100	Interest on Mortgage Payable	7142	$
	Other Expenses Amortization of organization costs	7190	$
	Net Entity Expenses	7100T		$ 703
	Profit or Loss (Net Income or Loss)	3250		$ 42,044

Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6790, 6890 and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense.

Part II

1.	Total mortgage principal payments required during the audit year (12 monthly payments). This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD approved second mortgages should be included in the figures. (S1000-010)	$ 48,404
2.	Total of 12 monthly deposits in the audit year into the Replacement Reserve account, as required by the Regulatory Agreement even if payments may be temporarily suspended or reduced. (Account S1000-020)	$ 18,600
3.	Replacement Reserve or Residual Receipts releases which are included as expense items on this Profit and Loss Statement. (Account S1000-030)	$ 59,754
4.	Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. (Account S1000-040)	$

Page 2 of 2

STATEMENT OF PARTNERS' EQUITY (DEFICIT)

For The Year Ended December 31, 2002

S1100-010	Beginning Of Year	$ (12,288)
3250	Net Income	42,044
S1200-420	Distributions	(403,347)
3130	End Of Year	$(373,591)

STATEMENT OF CASH FLOWS
Page 1 of 2
For The Year Ended December 31, 2002

Cash Flows From Operating Activities	Amount
Receipts:
S1200-010 Rental receipts	$ 1,530,545
S1200-020 Interest receipts	12,373
S1200-030 Other operating receipts	18,339
S1200-040 Total Receipts	1,561,257
Disbursements:
S1200-050 Administrative	165,847
S1200-070 Management fee	88,024
S1200-090 Utilities	162,845
S1200-100 Salaries and wages	116,547
S1200-110 Operating and maintenance	189,595
S1200-120 Real estate taxes	165,178
S1200-140 Property insurance	45,181
S1200-150 Miscellaneous taxes and insurance	33,491
S1200-160 Tenant security deposits	9,860
S1200-180 Interest on mortgage	310,887
S1200-210 Mortgage insurance premium (MIP)	23,100
S1200-220 Miscellaneous financial	190
S1200-230 Total Disbursements	1,310,745
S1200-240 Net Cash Provided By Operating Activities	250,512
Cash Flows From Investing Activities
S1200-245 Net deposits to the mortgage escrow account	(12,057)
S1200-250 Net releases from the reserve for replacement account	56,327
S1200-330 Net purchases of fixed assets	(21,347)
S1200-340 Other investing activities	3,000
S1200-350 Net Cash Provided By Investing Activities	25,923
Cash Flows From Financing Activities
S1200-360 Mortgage principal payments	(48,404)
S1200-420 Distributions	(403,347)
S1200-460 Net Cash Used In Financial Activities	(451,751)
S1200-470 Net Decrease In Cash And Cash Equivalents	(175,316)
S1200-480 Beginning Of Period Cash and Cash Equivalents	446,085
S1200T End of Period Cash And Cash Equivalents	$ 270,769

STATEMENT OF CASH FLOWS
Page 2 of 2
For The Year Ended December 31, 2002

Reconciliation Of Net Income To Net Cash Provided By Operating Activities	Account	Amount
3250 Net income		$ 42,044
Adjustments to reconcile net income to net cash provided by operating activities:
6600 Depreciation		220,120
6610 Amortization		14,400
Change in assets and liabilities:
S1200-490 Increase in tenant accounts receivable		(2,227)
S1200-520 Increase in prepaid expenses		(9,993)
S1200-530 Increase in cash restricted for tenant security deposits		(3,600)
S1200-540 Decrease in accounts payable		(9,371)
S1200-560 Increase in accrued liabilities		10,614
S1200-580 Decrease in tenant security deposits held in trust		(6,260)
S1200-590 Decrease in prepaid revenue		(5,918)
S1200-605 Increase in entity liability accounts:
S1200-606 Increase in accounts payable - entity	S1200-607	703
S1200-610 Net Cash Provided By Operating Activities		$ 250,512

NOTES TO FINANCIAL STATEMENTS
December 31, 2002

1. Organization And Summary Of Significant Accounting Policies

Organization (S3100-010)

Hawthorn Housing Limited Partnership (the Partnership) was organized as a limited partnership during June 1984 for the purpose of constructing and operating a rental housing project (the Project) pursuant to a regulatory agreement with Illinois Housing Development Authority (IHDA). In November 1997, the Project was refinanced under Section 223(f) of the National Housing Act. The Project consists of 176 units located in Woodridge, Illinois, operating under the name of Hawthorn Ridge Apartments. The Project is regulated by the U.S. Department of Housing and Urban Development (HUD) and IHDA, as administrator of the housing assistance contract, as to rent charges and operating methods.

The regulatory agreement with HUD limits annual distributions of net operating receipts to surplus cash. At December 31, 2002, there was surplus cash in the amount of $252,560 available for distribution.

Significant Accounting Policies (S3100-040)

The following significant accounting policies have been followed in the preparation of the financial statements:

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

The Partnership considers all temporary cash investments as cash equivalents. These temporary cash investments are securities held for cash management purposes, having maturities of three months or less.

The Partnership deposits its cash in financial institutions. At times, deposits exceed federally insured limits. The Partnership has not experienced losses in such accounts.

Tenant accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based on a review of the current status of the existing receivables. No allowance for doubtful accounts was provided for at December 31, 2002 as none was deemed necessary by management.

Rental property is carried as cost. Depreciation is provided using straight-line and accelerated methods over estimated useful lives ranging from 5 to 40 years.

The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.

Deferred loan costs of $506,303 consist of fees for obtaining the HUD insured mortgage loan and are being amortized using the straight-line method over the life of the mortgage loan. Accumulated amortization amounted to $74,041 at December 31, 2002.

Income or loss of the Partnership is allocated .01% to the general partner and 99.99% to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.

2. Mortgage Payable (S3100-050)

The mortgage payable is insured by the Department of Housing and Urban Development and collateralized by a deed of trust on the rental property. The mortgage is payable to P/R Mortgage & Investment Corp. and bears interest at the rate of 6.6% per annum. Principal and interest are payable by the Partnership in monthly installments of $29,940 through December 2032.

Under agreements with the mortgage lender and HUD, the Partnership is required to make monthly escrow deposits for property taxes, insurance, mortgage insurance and replacement of Project assets.

The scheduled maturities of the mortgage payable at December 31, 2002 are as follows: (S3100-x1x)

Year		Amount
2003	S3100-060	52,413
2004	S3100-070	54,911
2005	S3100-080	58,647
2006	S3100-090	62,637
2007	S3100-100	66,898
Thereafter	S3100-110	4,389,417
		$ 4,683,923

3. Commitments (S3100-x3x) (S3100-240)

The Partnership has entered into a regulatory agreement with HUD which regulates, among other things, the rents which may be charged for apartment units in the Project, prohibits the sale of the project without HUD consent, limits the annual distribution of cash flow to the partners and otherwise regulates the relationship between the Partnership and HUD.

The Department of Housing and Urban Development, through a program administered by the Illinois Housing Development Authority, has contracted with the Partnership, effective December 1976, under Section 8 of the National Housing Act of 1968, to make housing assistance payments to the project on behalf of qualified tenants. The term of the agreement is five years with renewal options for terms not to exceed 40 years.

4. Related Party Transactions (S3100-200)

The Project is managed by Alan Fox Real Estate Investment and Management Co., Inc., an affiliate of the special limited partner. The management contract provides for a management fee of 5.4% of gross collections. The management contract was amended effective July 1, 2002 to provide for a management fee of 6% of gross collections. Total fees incurred for 2002 were $88,233. At December 31, 2002, management fees of $7,481 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc. (53100-230).

Alan A. Fox Real Estate Investment and Management Co., Inc. also receives a monthly accounting services fee of $3.50 per unit. This fee is charged for services which are not included in the monthly management fee. Total fees incurred during 2002 were $7,392. At December 31, 2002, fees of $616 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc.

S3100-210	Company Name	Alan A. Fox Real Estate Investment and Management Co., Inc.
S3100-220	Amount Received	$95,416

SUPPORTING DATA REQUIRED BY HUD
December 31, 2002

Replacement Reserve

In accordance with the provisions of the regulatory agreement, restricted cash is held by P/R Mortgage & Investment Corp. to be used for replacement of property with the approval of HUD as follows:

1320P	Balance at beginning of year	$ 333,283
1320DT	Total monthly deposits
	($1,550 x 12)	18,600
1320ODT	Other deposits	6,174
1320OD-010	Interest income
1320OD-020	$6,174
1320WT	Approved withdrawals	(81,101)
1320	Balance at end of year, confirmed by mortgagee	$ 276,956

PROJECT NAME Hawthorne Housing Limited Partnership		FISCAL PERIOD ENDED: 12/31/02	PROJECT NUMBER: 071-11069
Part A - Compute Surplus Cash
Cash
1.	Cash (Accounts 1120, 1170, 1191 minus Account 2105) (S1300-010)			$ 330,120
2.	Tenant subsidy due for period covered by financial statement (1135)			$
3.	Other (describe) (S1300-030)			$
	(a) Total Cash (Add Lines 1, 2, and 3) (S1300-040)				$ 330,120
Current Obligations
4.	Accrued mortgage interest payable (S1300-050)			$
5.	Delinquent mortgage principal payments (S1300-060)			$
6.	Delinquent deposits to reserve for replacements (S1300-070)			$
7.	Accounts payable - 30 days (S1300-075)			$ 20,518
8.	Loans and notes payable (due within 30 days) (S1300-080)			$
9.	Deficient tax insurance or MIP escrow deposits (S1300-090)			$
10.	Accrued expenses (not escrowed) (S1300-100)			$ 12,753
11.	Prepaid revenue (2210)			$ 3,704
12.	Tenant security deposits liability (2191)			$ 40,585
13.	Other current obligations (Describe) (S1300-110)			$
	(b) Total Current Obligations (Add Lines 4 through 13) (S1300-140)				$ 77,560
	(c) Surplus Cash (Deficiency) [Line (a) minus Line (b)] (S1300-150)				$ 252,560
Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1.	Surplus Cash				$
Limited Dividend Projects
2a.	Annual distribution earned during fiscal period covered by the statement (S1300-160)			$
2b.	Distribution accrued and unpaid as of the end of the prior fiscal period (S1300-170)			$
2c.	Distributions and entity expenses paid during fiscal period covered by statement (S1300-180)			$
3.	Distribution earned but unpaid (Line 2a plus 2b minus 2c) (S1300-190)			$
4.	Amount available for distribution during next fiscal period (S1300-200)				$
5.	Deposit due residual receipts (S1300-210)				$

SUPPORTING DATA REQUIRED BY HUD (CONTINUED)

DECEMBER 31, 2002

			Assets
		Balance January 1, 2002	Additions	Deductions	Balance December 31, 2002
1410	Land	$ 620,000	$ -	$ -	$ 620,000
1420	Buildings	6,595,513	11,595	-	6,607,108
1410	Building equipment - portable	479,089	9,752	-	488,841
	Total	7,694,602	21,347	-	7,715,949
Accumulated depreciation		4,125,030	220,120	-	4,345,150
	Net Book Value	$ 3,569,572	$(198,773)	$ -	$ 3,370,799

RBG&CO.

S2200-020 Independent Auditors' Report On Internal Control

(Combined Report Applicable To Internal Control Over
Financial Reporting Based On An Audit Of Financial
Statements And Internal Control Over Compliance For
HUD-Assisted Programs)

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorne Housing Limited Partnership as of and for the year ended December 31, 2002, and have issued our report thereon dated January 28, 2003. We have also audited Hawthorn Housing Limited Partnership's compliance with requirements applicable to HUD-assisted programs and have issued our reports thereon dated January 28, 2003.

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 Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether Hawthorn Housing Limited Partnership complied with laws and regulations, noncompliance with which would be material to a major HUD-assisted program.

The management of Hawthorn Housing Limited Partnership is responsible for establishing and maintaining internal control. In planning and performing our audit of the financial statements, we considered Hawthorn Housing Limited Partnership's internal control over financial reporting and its internal control over compliance with requirements that would have a direct and material effect on a major HUD-assisted program in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements and on compliance and not to provide assurance on the internal control over financial reporting and the internal control over compliance.

To the Partners
Hawthorn Housing Limited Partnership

Our consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements that would be material in relation to the financial statements or that noncompliance with applicable requirements of laws and regulations that would be material in relation to a major HUD-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control and its operation that we consider to be material weaknesses as defined above.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

RBG&CO.

S2300-020

Independent Auditors' Report On Compliance With
Specific Requirements Applicable To Major HUD Programs

To The Partners
Hawthorn Housing Limited Partnership

We have audited Hawthorn Housing Limited Partnership's compliance with the specific program requirements governing federal financial reports, mortgage status, replacement reserve, security deposits, cash receipts and disbursements, tenant application, eligibility and recertification, and management functions that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2002. The management of Hawthorn Housing Limited Partnership is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America, the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above that could have a direct and material effect on a major HUD-assisted program occurred. An audit includes examining, on a test basis, evidence about Hawthorn Housing Limited Partnership's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of Hawthorn Housing Limited Partnership's compliance with those requirements.

To The Partners
Hawthorn Housing Limited Partnership

In our opinion, Hawthorn Housing Limited Partnership complied, in all material respects, with the requirements described above that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2002.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

Rubin, Brown, Gornstein & Co. LLP	One North Brentwood
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/290-3300 TEL www.rbgco.com	314/290-3400 FAX

RBG&CO.

S2500-020

Independent Auditors' Report On Compliance With Specific
Requirements Applicable To Fair Housing and Non-Discrimination

To The Partners
Hawthorn Housing Limited Partnership

We have applied procedures to test Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements applicable to its HUD-assisted programs for the year ended December 31, 2002.

Our procedures were limited to the applicable compliance requirement described by the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements. Accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 28, 2003

Rubin, Brown, Gornstein & Co. LLP	One North Brentwood
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/290-3300 TEL www.rbgco.com	314/290-3400 FAX

HAWTHORN HOUSING LIMITED PARTNERSHIP
PROJECT NO. 071-11069

Auditors' Comment On Audit Resolution
Matters Relating To The HUD Programs (S2800-x1x)

S2800-005	Previous Finding Reference Number - 2001 - 1
S2800-010	Narrative - Fidelity bond coverage amount is less than two months potential collections.
S2800-020	Status CLEARED
S2800-030	Reporting Period December 31, 2001

HAWTHORN HOUSING
LIMITED PARTNERSHIP
071-11069
FINANCIAL STATEMENTS
DECEMBER 31, 2001

Contents
Independent Auditor's Report	1
Balance Sheet	2 - 3
Statement of Profit and Loss	4 - 5
Statement of Partners' Equity (Deficit)	6
Statement of Cash Flows	7 - 8
Notes to Financial Statements	9 - 11
Supporting Data Required by HUD	12 - 14
Independent Auditors' Report on Internal Control	15 - 16
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Major HUD Programs	17 - 18
Independent Auditors' Report on Compliance With Specific Requirements Applicable to Fair Housing and Non-Discrimination	19
Schedule of Findings and Questioned Costs	20
Auditors' Comment on Audit Resolution Matters Relating To The HUD Programs	21

RBG&CO.

S2100-020 Independent Auditors' Report

To The Partners
Hawthorn Housing Limited Partnership

We have audited the accompanying balance sheet of Hawthorn Housing Limited Partnership, Project No. 071-11069, a limited partnership, as of December 31, 2001 and the related statements of profit and loss, 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 Hawthorn Housing Limited Partnership as of December 31, 2001 and the results of its operations and its 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 issued by the U.S. Department of Housing and Urban Development, we have also issued a report dated January 29, 2002 on our consideration of Hawthorn Housing Limited Partnership's internal control and reports dated January 29, 2002 on its compliance with specific requirements applicable to major HUD programs and specific requirements applicable to Fair Housing and Non-Discrimination. 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 conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supplementary information (shown on Pages 14 through 16) 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 financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

BALANCE SHEET
Page 1 of 2
December 31, 2001

Assets

Current Assets
1120 Cash - operations	$ 444,034
1125 Cash - entity	2,051
1130 Tenant accounts receivable	4,849
1200 Miscellaneous prepaid expenses	35,318
1100T Total Current Assets		$ 486,252
Deposits Held In Trust - Funded
1191 Tenant deposits held in trust		57,830
Restricted Deposits And Funded Reserves
1310 Escrow deposits	102,892
1320 Replacement reserve	333,283
1300T Total Deposits		436,175
Fixed Assets (Note 2)
1410 Land	620,000
1420 Buildings	6,595,513
1440 Building equipment - portable	479,089
1400T Total Fixed Assets	7,694,602
1495 Less: Accumulated depreciation	4,125,030
1400N Net Fixed Assets		3,569,572
Other Assets
1520 Intangible assets	446,662
1590 Miscellaneous other assets	10,000
1500T Total Other Assets		456,662
1000T Total Assets		$ 5,006,491

BALANCE SHEET
Page 2 of 2
December 31, 2001

Liabilities

Current Liabilities
2110 Accounts payable - operations	$ 29,889
2113 Accounts payable - entity	16,366
2120 Accrued wages payable	4,273
2123 Accrued management fee payable	7,888
2150 Accrued property taxes	171,569
2170 Mortgage payable - first mortgage (short-term) (Note 2)	48,138
2210 Prepaid revenue	9,622
2122T Total Current Liabilities		$ 287,745
Deposit And Prepayment Liabilities
2191 Tenant deposits held in trust (contra)		46,845
Long-Term Liabilities
2320 Mortgage payable - first mortgage (Note 2)		4,684,189
2000T Total Liabilities		5,018,779
Partners' Equity (Deficit)
3130 Partners' equity (deficit)		(12,288)
2033T Total Liabilities And Partners' Equity (Deficit)		$ 5,006,491

STATEMENT OF PROFIT AND LOSS
For The Year Ended December 31, 2001

Part 1	Description of Account	Acct. No.	Amount
	Rent Revenue - Gross Potential	5120	$ 1,208,889
	Tenant Assistance Payments	5121	$ 442,164
	Rent Revenue - Stores and Commercial	5140	$
	Garage and Parking Spaces	5170	$
Rental	Flexible Subsidy Revenue	5180	$
Revenue	Miscellaneous Rent Revenue	5190	$
5100	Excess Rent	5191	$
	Rent Revenue/Insurance	5192	$
	Special Claims Revenue	5193	$
	Retained Excess Income	5194	$
	Total Rent Revenue	5100T		$ 1,651,053
	Apartments	5220	$ 53,762
	Stores and Commercial	5240	$
Vacancies	Rental Concessions	5250	$ 5,878
5200	Garage and Parking Spaces	5270	$
	Miscellaneous	5290	$
	Total Vacancies	5200T		$ 59,640
	Net Rental Revenue Rent Revenue Less Vacancies	5152N		$ 1,591,413
5300	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care/ Coop/ and Other Revenues	5300
	Financial Revenue - Project Operations	5410	$ 15,126
Financial	Revenue from Investments - Residual Receipts	5430	$
Revenue	Revenue from Investments - Replacement Reserve	5440	$ 21,178
5400	Revenue from Investments - Miscellaneous	5490	$
	Total Financial Revenue	5400T		$ 36,304
	Laundry and Vending Revenue	5910	$ 5,893
Other	Tenant Charges	5920	$ 22,677
Revenue	Interest Reduction Payments Revenue	5945	$
5900	Miscellaneous Revenue	5990	$
	Total Other Revenue	5900T		$ 28,570
	Total Revenue	5000T		$ 1,656,287
	Conventions and Meetings	6203	$
	Management Consultants	6204	$
	Advertising and Marketing	6210	$ 15,456
	Other Renting Expenses	6250	$
	Office Salaries	6310	$ 23,596
Administrative	Office Expenses	6311	$ 18,677
Expenses	Office or Model Apartment Rent	6312	$ 8,996
6200/6300	Management Fee	6320	$ 85,820
	Manager or Superintendent Salaries	6330	$ 39,503
	Administrative Rent Free Unit	6331	$
	Legal Expenses - Project	6340	$ 10,172
	Audit Expense	6350	$ 9,650
	Bookkeeping Fees/Accounting Services	6351	$ 7,392
	Bad Debts	6370	$ 21,729
	Miscellaneous Administrative Expenses	6390	$ 8,467
	Total Administrative Expenses	6263T		$ 249,458
	Fuel Oil/Coal	6420	$
Utilities	Electricity	6450	$ 26,706
Expense	Water	6451	$ 33,749
6400	Gas	6452	$ 109,481
	Sewer	6453	$ 16,350
	Total Utilities Expense	6400T		$ 186,286
	Total Expenses (Carry forward to Page 2)			$ 435,744

Page 1 of 2

Project Name: Hawthorn Housing Limited Partnership

		Balance Carried Forward		$ 435,744
Part 1	Description of Account	Acct. No.	Amount
	Payroll	6510	$ 111,355
	Supplies	6515	$ 35,493
	Contracts	6520	$ 133,730
Operating	Operating and Maintenance Rent Free Unit	6521	$
Maintenance	Garbage and Trash Removal	6525	$ 9,099
Expenses	Security Payroll/Contract	6530	$
6500	Security Rent Free Unit	6531	$
	Heating/Cooling Repairs and Maintenance	6546	$
	Snow Removal	6548	$ 4,730
	Vehicle and Maintenance Equipment Operation and Repairs	6570	$
	Miscellaneous Operating and Maintenance Expenses	6590	$ 429
	Total Operating and Maintenance Expenses	6500T		$ 294,836
	Real Estate Taxes	6710	$ 169,720
	Payroll Taxes (Project's Share)	6711	$ 13,938
Taxes	Property and Liability Insurance (Hazard)	6720	$ 21,720
and	Fidelity Bond Insurance	6721	$ 888
Insurance	Workmen's Compensation	6722	$ 3,218
6700	Health Insurance and Other Employee Benefits	6723	$ 8,748
	Miscellaneous Taxes, Licenses, Permits and Insurance	6790	$ 3,095
	Total Taxes and Insurance	6700T		$ 221,327
	Interest on Mortgage Payable	6820	$ 313,970
Financial	Interest on Notes Payable (Long-Term)	6830	$
Expenses	Interest on Notes Payable (Short-Term)	6840	$
6800	Mortgage Insurance Premium/Service Charge	6850	$ 23,786
	Miscellaneous Financial Expenses	6890	$ 791
	Total Financial Expenses			$ 338,547
6900	Nursing Homes/ Assisted Living/ Board and Care/ Other Elderly Care Expenses	6900	$
	Total Cost of Operations before Depreciation and Amortization	6000T		$ 1,290,454
	Profit (Loss) before Depreciation and Amortization	5060T		$ 365,833
	Depreciation Expense	6600	$ 228,035
	Amortization Expense	6610	$ 14,465
	Total Depreciation and Amortization			$ 242,500
	Operating Profit or (Loss)	5060N		$ 123,333
	Officer's Salaries	7110	$
Corporate or	Legal Expenses	7120	$ 16,366
Mortgagor	Federal, State, and Other Income Taxes	7130	$
Entity	Interest Income	7140	$ (73)
Expenses	Interest on Notes Payable	7141	$
7100	Interest on Mortgage Payable	7142	$
	Other Expenses Amortization of organization costs	7190	$
	Net Entity Expenses	7100T		$ 16,293
	Profit or Loss (Net Income or Loss)	3250		$ 107,040

Miscellaneous or other Income and Expense Sub-account Groups. If miscellaneous or other income and/or expense sub-accounts (5190, 5290, 5490, 5990, 6390, 6590, 6790, 6890 and 7190) exceed the Account Groupings by 10% or more, attach a separate schedule describing or explaining the miscellaneous income or expense.

Part II

1.	Total mortgage principal payments required during the audit year (12 monthly payments). This applies to all direct loans and HUD-held and fully insured mortgages. Any HUD approved second mortgages should be included in the figures. (S1000-010)	$ 45,320
2.	Total of 12 monthly deposits in the audit year into the Replacement Reserve account, as required by the Regulatory Agreement even if payments may be temporarily suspended or reduced. (Account S1000-020)	$ 18,600
3.	Replacement Reserve or Residual Receipts releases which are included as expense items on this Profit and Loss Statement. (Account S1000-030)	$ 104,164
4.	Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. (Account S1000-040)	$

Page 2 of 2

STATEMENT OF PARTNERS' EQUITY (DEFICIT)
For The Year Ended December 31, 2001

S1100-010	Beginning Of Year	$ 257,927
3250	Net Income	107,040
S1200-420	Distributions	(377,255)
3130	End Of Year	$ (12,288)

STATEMENT OF CASH FLOWS
Page 1 of 2
For The Year Ended December 31, 2001

Cash Flows From Operating Activities	Account	Amount
Receipts:
S1200-010 Rental receipts		$ 1,599,866
S1200-020 Interest receipts		36,377
S1200-030 Other operating receipts		28,570
S1200-040 Total Receipts		1,664,813
Disbursements:
S1200-050 Administrative		157,148
S1200-070 Management fee		85,514
S1200-090 Utilities		199,192
S1200-100 Salaries and wages		110,652
S1200-110 Operating and maintenance		184,407
S1200-120 Real estate taxes		148,151
S1200-140 Property insurance		21,940
S1200-150 Miscellaneous taxes and insurance		29,887
S1200-160 Tenant security deposits		(4,679)
S1200-180 Interest on mortgage		313,970
S1200-210 Mortgage insurance premium (MIP)		23,786
S1200-220 Miscellaneous financial		791
S1200-225 Entity disbursements:
S1200-226 Payment of entity accounts payable	S1200-227	1,972
S1200-230 Total Disbursements		1,272,731
S1200-240 Net Cash Provided By Operating Activities		392,082
Cash Flows From Investing Activities
S1200-245 Net releases from the mortgage escrow account		(10,318)
S1200-250 Net releases from the reserve for replacement account		64,386
S1200-340 Other investing activities		3,000
S1200-350 Net Cash Provided By Investing Activities		57,068
Cash Flows From Financing Activities
S1200-360 Mortgage principal payments		(45,320)
S1200-420 Distributions		(377,255)
S1200-460 Net Cash Used In Financial Activities		422,575
S1200-470 Net Increase In Cash And Cash Equivalents		26,575
S1200-480 Beginning Of Period Cash and Cash Equivalents		419,510
S1200T End of Period Cash And Cash Equivalents		$ 446,085

STATEMENT OF CASH FLOWS
Page 2 of 2
For The Year Ended December 31, 2001

Reconciliation Of Net Income To Net Cash Provided By Operating Activities	Account	Amount
3250 Net income		$ 107,040
Adjustments to reconcile net income to net cash provided by operating activities:
6600 Depreciation		228,035
6610 Amortization		14,465
Change in assets and liabilities:
S1200-490 Decrease in tenant accounts receivable		4,418
S1200-520 Increase in prepaid expenses		(220)
S1200-530 Decrease in cash restricted for tenant security deposits		6,170
S1200-540 Decrease in accounts payable		(7,342)
S1200-560 Increase in accrued liabilities		22,578
S1200-580 Decrease in tenant security deposits held in trust		(1,491)
S1200-590 Increase in prepaid revenue		4,035
S1200-605 Increase in entity liability accounts:
S1200-606 Increase in accounts payable - entity	S1200-607	14,394
S1200-610 Net Cash Provided By Operating Activities		$ 392,082

NOTES TO FINANCIAL STATEMENTS
December 31, 2001

1. Organization And Summary Of Significant Accounting Policies

Organization (S3100-010)

Hawthorn Housing Limited Partnership (the Partnership) was organized as a limited partnership during June 1984 for the purpose of constructing and operating a rental housing project (the Project) pursuant to a regulatory agreement with Illinois Housing Development Authority (IHDA). In November 1997, the Project was refinanced under Section 223(f) of the National Housing Act. The Project consists of 176 units located in Woodridge, Illinois, operating under the name of Hawthorn Ridge Apartments. The Project is regulated by the U.S. Department of Housing and Urban Development (HUD) and the Illinois Housing Development Authority (IHDA), as administrator of the housing assistance contract, as to rent charges and operating methods.

The regulatory agreement with HUD limits annual distributions of net operating receipts to surplus cash. At December 31, 2001, there was "surplus cash" in the amount of $403,347 available for distribution.

Significant Accounting Policies (S3100-040)

The following significant accounting policies have been followed in the preparation of the financial statements:

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

The Partnership considers all temporary cash investments as cash equivalents. These temporary cash investments are securities held for cash management purposes, having maturities of three months or less.

The Partnership deposits its cash in financial institutions. At times, deposits exceed federally insured limits. The Partnership has not experienced losses in such accounts.

The Partnership provides an allowance for doubtful accounts equal to the estimated collection losses that will be incurred in collection of all receivables. The estimated losses are based on a review of the current status of the existing receivables. No allowance for doubtful accounts was provided for at December 31, 2001 as none was deemed necessary by management.

Rental property is carried as cost. Depreciation is provided using straight-line and accelerated methods over estimated useful lives ranging from five to forty years.

The replacement reserve can only be used for improvements to buildings upon prior approval of HUD.

Deferred loan costs of $506,303 consist of fees for obtaining the HUD insured mortgage loan and are being amortized using the straight-line method over the life of the mortgage loan. Accumulated amortization amounted to $59,641 at December 31, 2001.

Income or loss of the Partnership is allocated .01% to the general partner and 99.99% to the limited partners. No income tax provision has been included in the financial statements since income or loss of the Partnership is required to be reported by the partners on their respective income tax returns.

2. Mortgage Payable (S3100-050)

The mortgage payable is insured by the Department of Housing and Urban Development and collateralized by a deed of trust on the rental property. The mortgage is payable to P/R Mortgage & Investment Corp. and bears interest at the rate of 6.6% per annum. Principal and interest are payable by the Partnership in monthly installments of $29,940 through December 2032.

Under agreements with the mortgage lender and HUD, the Partnership is required to make monthly escrow deposits for property taxes, insurance, mortgage insurance and replacement of Project assets.

The scheduled maturities of the mortgage payable at December 31, 2001 are as follows: (S3100-x1x)

Year		Amount
2002	S3100-060	48,138
2003	S3100-070	51,413
2004	S3100-080	54,911
2005	S3100-090	58,647
2006	S3100-100	62,637
Thereafter	S3100-110	4,456,581
		$ 4,732,327

3. Commitments (S3100-x3x) (S3100-240)

The Partnership has entered into a regulatory agreement with HUD which regulates, among other things, the rents which may be charged for apartment units in the Project, prohibits the sale of the project without HUD consent, limits the annual distribution of cash flow to the partners and otherwise regulates the relationship between the Partnership and HUD.

The Department of Housing and Urban Development, through a program administered by the Illinois Housing Development Authority, has contracted with the Partnership, effective December 1976, under Section 8 of the National Housing Act of 1968, to make housing assistance payments to the project on behalf of qualified tenants. The term of the agreement is five years with renewal options for terms not to exceed forty years.

4. Related Party Transactions (S3100-200)

The Project is managed by Alan Fox Real Estate Investment and Management Co., Inc., an affiliate of the special limited partner. The management contract provides for a management fee of 5.4% of gross collections. Total fees incurred for 2001 were $85,820. At December 31, 2001, management fees of $7,272 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc. (53100-230).

Alan A. Fox Real Estate Investment and Management Co., Inc. also receives a monthly accounting services fee of $3.50 per unit. This fee is charged for services which are not included in the monthly management fee. Total fees incurred during 2001 were $7,392. At December 31, 2001, fees of $616 are payable to Alan A. Fox Real Estate Investment and Management Co., Inc.

S3100-210	Company Name	Alan A. Fox Real Estate Investment and Management Co., Inc.
S3100-220	Amount Received	$93,522

SUPPORTING DATA REQUIRED BY HUD
December 31, 2001

Replacement Reserve

In accordance with the provisions of the regulatory agreement, restricted cash is held by P/R Mortgage & Investment Corp. to be used for replacement of property with the approval of HUD as follows:

1320P	Balance at beginning of year	$ 397,669
1320DT	Total monthly deposits
	($1,550 x 12)	18,600
1320ODT	Other deposits	21,178
1320OD-010	Interest income
1320OD-020	$21,178
1320WT	Approved withdrawals	(104,164)
1320	Balance at end of year, confirmed by mortgagee	$ 333,283

PROJECT NAME Hawthorne Housing Limited Partnership		FISCAL PERIOD ENDED: 12/31/01	PROJECT NUMBER: 071-11069
Part A - Compute Surplus Cash
Cash
1.	Cash (Accounts 1120, 1170, 1191 minus Account 2105) (S1300-010)			$ 501,864
2.	Tenant subsidy due for period covered by financial statement (1135)			$
3.	Other (describe) (S1300-030)			$
	(a) Total Cash (Add Lines 1, 2, and 3) (S1300-040)				$ 501,864
Current Obligations
4.	Accrued mortgage interest payable (S1300-050)			$
5.	Delinquent mortgage principal payments (S1300-060)			$
6.	Delinquent deposits to reserve for replacements (S1300-070)			$
7.	Accounts payable - 30 days (S1300-075)			$ 29,889
8.	Loans and notes payable (due within 30 days) (S1300-080)			$
9.	Deficient tax insurance or MIP escrow deposits (S1300-090)			$
10.	Accrued expenses (not escrowed) (S1300-100)			$ 12,161
11.	Prepaid revenue (2210)			$ 9,622
12.	Tenant security deposits liability (2191)			$ 46,845
13.	Other current obligations (Describe) (S1300-110)			$
	(b) Total Current Obligations (Add Lines 4 through 13) (S1300-140)				$ 98,517
	(c) Surplus Cash (Deficiency) [Line (a) minus Line (b)] (S1300-150)				$ 403,347
Part B - Compute Distributions to Owners and Required Deposit to Residual Receipts
1.	Surplus Cash				$
Limited Dividend Projects
2a.	Annual distribution earned during fiscal period covered by the statement (S1300-160)			$
2b.	Distribution accrued and unpaid as of the end of the prior fiscal period (S1300-170)			$
2c.	Distributions and entity expenses paid during fiscal period covered by statement (S1300-180)			$
3.	Distribution earned but unpaid (Line 2a plus 2b minus 2c) (S1300-190)			$
4.	Amount available for distribution during next fiscal period (S1300-200)				$
5.	Deposit due residual receipts (S1300-210)				$

SUPPORTING DATA REQUIRED BY HUD (CONTINUED)

DECEMBER 31, 2001

			Assets
		Balance January 1, 2001	Additions	Deductions	Balance December 31, 2001
1410	Land	$ 620,000	$ -	$ -	$ 620,000
1420	Buildings	6,595,513	-	-	6,595,513
1410	Building equipment - portable	479,089	-	-	479,089
	Total	7,694,602	-	-	7,694,602
Accumulated depreciation		3,896,995	228,035	-	4,125,030
	Net Book Value	$ 3,797,607	$(228,035)	$ -	$ 3,569,572

RBG&CO.

S2200-020

Independent Auditors' Report On Internal Control

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorne Housing Limited Partnership as of and for the year ended December 31, 2001, and have issued our report thereon dated January 29, 2002. We have also audited Hawthorn Housing Limited Partnership's compliance with requirements applicable to HUD-assisted programs and have issued our reports thereon dated January 29, 2002.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General. Those standards and the Guide require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and about whether Hawthorn Housing Limited Partnership complied with laws and regulations, noncompliance with which would be material to a major HUD-assisted program.

The management of Hawthorn Housing Limited Partnership is responsible for establishing and maintaining internal control. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of controls. The objectives of internal control are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management authorization and recorded properly to permit the preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that HUD-assisted programs are managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control, errors, irregularities or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of internal control to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the effectiveness of the design and operation of controls may deteriorate.

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

To the Partners
Hawthorn Housing Limited Partnership

In planning and performing our audits, we obtained an understanding of the design of relevant controls and determined whether they had been placed in operation, and we assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinions on the financial statements of Hawthorn Housing Limited Partnership and on its compliance with specific requirements applicable to its major HUD-assisted programs and to report on internal control in accordance with the provisions of the Guide and not to provide any assurance on internal control.

We performed tests of controls, as required by the Guide, to evaluate the effectiveness of the design and operation of controls that we considered relevant to preventing or detecting material noncompliance with specific requirements applicable to Hawthorn Housing Limited Partnership's major HUD-assisted programs. Our procedures were less in scope than would be necessary to render an opinion on internal control. Accordingly, we do not express such an opinion.

Our consideration of internal control would not necessarily disclose all matters in internal control that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements or that noncompliance with laws and regulations that would be material to a HUD-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. We noted no matters involving internal control and its operation that we consider to be material weaknesses as defined above.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

RBG&CO.

S2300-020

Independent Auditors' Report On Compliance With

Specific Requirements Applicable To Major HUD Programs

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorn Housing Limited Partnership as of and for the year ended December 31, 2001 and have issued our report thereon dated January 29, 2002. We have also audited Hawthorn Housing Limited Partnership's compliance with the specific program requirements governing federal financial reports, mortgage status, replacement reserve, security deposits, cash receipts and disbursements, tenant application, eligibility and recertification, and management functions that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2001. The management of Hawthorn Housing Limited Partnership is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit.

We conducted our audit of compliance with those requirements in accordance with auditing standards generally accepted in the United States of America, Government Auditing Standards, issued by the Comptroller General of the United States, and the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about Hawthorn Housing Limited Partnership's compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion.

The results of our audit procedures disclosed an immaterial instance of noncompliance with the requirements referred to above, which is described in the accompanying Schedule of Financings and Questioned Costs. We considered this instance of noncompliance in forming our opinion on compliance, which is expressed in the following paragraph.

In our opinion, Hawthorn Housing Limited Partnership complied, in all material respects, with the requirements described above that are applicable to each of its major HUD-assisted programs for the year ended December 31, 2001.

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

To The Partners
Hawthorn Housing Limited Partnership

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

RBG&CO.

S2500-020

Independent Auditors' Report On Compliance With Specific
Requirements Applicable To Fair Housing and Non-Discrimination

To The Partners
Hawthorn Housing Limited Partnership

We have audited the financial statements of Hawthorn Housing Limited Partnership as of and for the year ended December 31, 2001, and have issued our report thereon dated January 29, 2002.

We have also applied procedures to test Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements applicable to its HUD-assisted programs for the year ended December 31, 2001.

Our procedures were limited to the applicable compliance requirement described by the Consolidated Audit Guide for Audits of HUD Programs (the Guide) issued by the U.S. Department of Housing and Urban Development, Office of Inspector General. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on Hawthorn Housing Limited Partnership's compliance with Fair Housing and Non-Discrimination requirements. Accordingly, we do not express such an opinion.

The results of our tests disclosed no instances of noncompliance that are required to be reported herein under the Guide.

This report is intended solely for the information and use of management, the Illinois Housing Development Authority and the Department of Housing and Urban Development and is not intended to be and should not be used by anyone other than these specified parties.

/s/Rubin, Brown, Gornstein & Co. LLP

January 29, 2002

Rubin, Brown, Gornstein & Co. LLP	230 South Bemiston Avenue
Certified Public Accountants/Business Consultants	St. Louis, MO 63105
314/727-8150 TEL www.rbgco.com	314/727-9195 FAX

HAWTHORN HOUSING LIMITED PARTNERSHIP
PROJECT NO. 071-11069

Schedule Of Findings and Questioned Costs (S2700-xlx)

S2700-005	Finding Reference Number - 2001 - 1
S2700-010	Statement of Condition - Fidelity bond coverage amount is less than two months potential collections.
S2700-020	Criteria - HUD requires fidelity bond coverage be equal to at least two months potential collections.
S2700-050	Recommendation - Project management should obtain increased fidelity bond coverage.
S2700-055	Auditor Non-Compliance Code - Other
S2700-065	Amount of Questioned Costs - $0

HAWTHORN HOUSING LIMITED PARTNERSHIP

PROJECT NO. 071-11069

Auditors' Comment On Audit Resolution
Matters Relating To The HUD Programs (S2800-x1x)

S2800-005		Previous Finding Reference Number - 2000 - 1
S2800-010		Narrative - Management of the Project has no formal move-out inspection process.
S2800-020		Status CLEARED
S2800-030		Reporting Period December 31, 2000
*S2900-030	Name of Signatory #2 (if required)
* For all owning entities other than a sole proprietor or a limited partnership, this field is required.
S2900-040	Auditee Telephone Number
S2900-050	Date of Certification

EX-99

EXHIBIT 99(i)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ASDOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Gulledge Realty Investors II, L.P. (the "Registrant") on Form 10-K for the period ended December 31, 2003 as filed with the Securities and Exchange Commission on March 29, 2004 and as amended on the date hereof, (the "Report"), the undersigned officers 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, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

		GULLEDGE REALTY INVESTORS II, L.P.
		By:	GULL-AGE Properties, Inc.
			Managing General Partner
Date:	March 29, 2004	By:	/s/ Douglas L. Kelly
			Douglas L. Kelly
			President, Secretary, Treasurer
			and Director

EX-99

EXHIBIT 99(ii)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED
PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Gulledge Realty Investors II, L.P. (the "Registrant") on Form 10-K for the period ending December 31, 2003 as filed with the Securities and Exchange Commission on March 29, 2004 and as amended on the date hereof (the "Report"), the undersigned officer certifies 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, as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

		GULLEDGE REALTY INVESTORS II, L.P.
		By:	GULL-AGE Properties, Inc.
			Managing General Partner
Date:	March 29, 2004	By:	/s/ Joseph G. Porter
			Joseph G. Porter
			Vice President and
			Assistant Treasurer

EX-99

EXHIBIT 99(iii)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ASDOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Douglas L. Kelly, certify that:

1. I have reviewed this annual report on Form 10-K of Gulledge Realty Investors II, L.P.;
   
   
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
   
   
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
   
   
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
   
   
   1. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
      
      
   2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual 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
      
      
   3. Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
      
      
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
   
   
   1. 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 registrant's ability to record, process, summarize and report financial information; and
      
      
   2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
      
      
      
      Date: March 29, 2004

   /s/ Douglas L. Kelly

   Douglas L. Kelly

   President, Secretary,

   Treasurer and Director

   of Gull-AGE Properties, Inc.

EX-99

EXHIBIT 99(iv)

GULLEDGE REALTY INVESTORS II, L.P.
(A Limited Partnership)

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ASDOPTED
PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph G. Porter, certify that:

1. I have reviewed this annual report on Form 10-K of Gulledge Realty Investors II, L.P.;
   
   
2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
   
   
3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
   
   
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
   
   
   1. Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
      
      
   2. Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this annual 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
      
      
   3. Disclosed in this annual report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and
      
      
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
   
   
   1. 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 registrant's ability to record, process, summarize and report financial information; and
      
      
   2. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
      
      
      
      Date: March 29, 2004

   /s/ Joseph G. Porter

   Joseph G. Porter

   Vice President and Assistant Treasurer

   of Gull-AGE Properties, Inc.