10QSB 1 ap7.txt AP7 FORM 10-QSB-- QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________to _________ Commission file number 0-8851 ANGELES PARTNERS VII (Exact name of small business issuer as specified in its charter) California 95-3215214 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Partnership was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES PARTNERS VII BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2001
Assets Cash and cash equivalents $ 1,113 Receivables and deposits 23 Restricted escrows 77 Other assets 91 Investment property: Land $ 366 Buildings and related personal property 5,867 6,233 Less accumulated depreciation (4,939) 1,294 $ 2,598 Liabilities and Partners' Capital (Deficit) Liabilities Accounts payable $ 29 Tenant security deposit liabilities 21 Accrued property taxes 32 Other liabilities 91 Mortgage note payable 2,915 Partners' Capital (Deficit) General partner $ 291 Limited partners (8,669 units issued and outstanding) (781) (490) $ 2,598 See Accompanying Notes to Financial Statements
b) ANGELES PARTNERS VII STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data) Three Months Ended Nine Months Ended September 30, September 30, 2001 2000 2001 2000 Revenues: Rental income $ 354 $ 360 $ 1,063 $ 1,041 Other income 18 22 64 63 Total revenues 372 382 1,127 1,104 Expenses: Operating 137 122 375 378 General and administrative 36 34 88 78 Depreciation 65 65 206 208 Interest 41 46 128 139 Property taxes 12 11 32 34 Total expenses 291 278 829 837 Net income $ 81 $ 104 $ 298 $ 267 Net income allocated to general partner (1%) $ 1 $ 1 $ 3 $ 3 Net income allocated to limited partners (99%) 80 103 295 264 $ 81 $ 104 $ 298 $ 267 Net income per limited partnership unit $ 9.23 $11.88 $34.03 $30.45 Distributions per limited partnership unit $ 9.57 $ -- $37.49 $34.26 See Accompanying Notes to Financial Statements c) ANGELES PARTNERS VII STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 8,674 $ 88 $8,674 $ 8,762 Partners' capital (deficit) at December 31, 2000 8,669 $ 291 $ (751) $ (460) Distributions to partners -- (3) (325) (328) Net income for the nine months ended September 30, 2001 -- 3 295 298 Partners' capital (deficit) at September 30, 2001 8,669 $ 291 $ (781) $ (490) See Accompanying Notes to Financial Statements
d) ANGELES PARTNERS VII STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2001 2000 Cash flows from operating activities: Net income $ 298 $ 267 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 206 208 Change in accounts: Receivables and deposits 11 57 Other assets (11) (6) Accounts payable (25) 14 Tenant security deposit liabilities (5) (4) Accrued property taxes 32 35 Other liabilities 2 (8) Net cash provided by operating activities 508 563 Cash flows from investing activities: Property improvements and replacements (121) (64) Net deposits to restricted escrows (77) -- Net cash used in investing activities (198) (64) Cash flows from financing activities: Distribution to partners (328) (300) Payments on mortgage note payable (134) (110) Repayment of mortgage note payable (1,809) -- Loan costs paid (64) -- Consideration received for assumption of loan from an affiliate 2,928 -- Net cash provided by (used in) financing activities 593 (410) Net increase in cash and cash equivalents 903 89 Cash and cash equivalents at beginning of period 210 356 Cash and cash equivalents at end of period $ 1,113 $ 445 Supplemental disclosure of cash flow information: Cash paid for interest $ 142 $ 139 See Accompanying Notes to Financial Statements
e) ANGELES PARTNERS VII NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited financial statements of Angeles Partners VII (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Angeles Realty Corporation (the "General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2001, are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further information, refer to the financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 2000. The General Partner is indirectly owned by Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Segment Reporting: Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the financial statements as currently presented. Note B - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all partnership activities. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made to the General Partner and affiliates during the nine months ended September 30, 2001 and 2000: 2001 2000 (in thousands) Property management fees (included in operating expenses) $ 56 $ 54 Reimbursement for services of affiliates (included in general and administrative expenses) 43 40 Partnership management fee (included in other liabilities, general and administrative expense) 10 -- Affiliates of the General Partner are entitled to receive 5% of gross receipts from the Registrant's property for providing property management services. The Registrant paid to such affiliates approximately $56,000 and $54,000 for the nine months ended September 30, 2001 and 2000, respectively. An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $43,000 and $40,000 for the nine months ended September 30, 2001 and 2000, respectively. Approximately $12,000 of these expenses were accrued at September 30, 2000. The Partnership Agreement provides for a fee equal to 7.5% of "net cash flow from operations", as defined in the Partnership Agreement to be paid to the General Partner for executive and administrative management services. At September 30, 2001, the Partnership has accrued $10,000 of Partnership management fees included in other liabilities on the accompanying consolidated balance sheet. On September 28, 2001, the Partnership assumed the mortgage loan of an affiliate of the General Partner. The Partnership substituted its investment property as collateral for the mortgage and assumed the payments and terms of the mortgage. In consideration for the assumption of this mortgage, the Partnership received approximately $2,928,000 from an affiliate of the General Partner. See Note D for further details. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 5,858 limited partnership units (the "Units") in the Partnership representing 67.57% of the outstanding Units at September 30, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 67.57% of the outstanding Units, AIMCO is in a position to control all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Note C - Distributions During the nine months ended September 30, 2001, the Partnership declared and paid distributions of approximately $328,000 (approximately $325,000 paid to the limited partners or $37.49 per limited partnership unit) from operations. During the nine months ended September 30, 2000, the Partnership declared and paid distributions of approximately $300,000 (approximately $297,000 paid to the limited partners or $34.26 per limited partnership unit) from operations. Subsequent to September 30, 2001, the Partnership declared and paid a distribution of approximately $1,044,000 (approximately $945,000 paid to the limited partners or $109.01 per limited partnership unit) of which approximately $66,000 (approximately $65,000 to the limited partners or $7.50 per limited partnership unit) was from operations and approximately $978,000 (approximately $880,000 to the limited partners or $101.51 per limited partnership unit) was from the net consideration received for the assumption of the mortgage loan as discussed in Note D. Note D - Assumption of Mortgage Loan On September 28, 2001, the Partnership assumed the mortgage loan of an affiliate of the General Partner. The Partnership substituted its investment property as collateral for the mortgage and assumed the payments and terms of the mortgage. In consideration for the assumption of this mortgage, the Partnership received approximately $2,928,000, from the affiliate of the General Partner, which was the outstanding principal balance of the mortgage assumed. From this amount, the Partnership paid approximately $64,000 in closing costs which were capitalized and included in other assets on the accompanying balance sheet and deposited approximately $77,000 into a mortgage escrow account maintained by the lender. Additionally, the Partnership repaid its existing mortgage of approximately $1,809,000. The new mortgage carries a stated interest rate of 6.62% while the interest rate on the old mortgage was 9.13%. Principal and interest payments on the assumed mortgage loan are due monthly until the loan matures in July 2013 at which time the mortgage will be fully amortized. Note E - Legal Proceedings In March 1998, several putative unitholders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which, together with a demurrer filed by other defendants, is currently scheduled to be heard on November 15, 2001. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. The matters are currently scheduled to be heard on November 15, 2001. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the nine months ended September 30, 2001 and 2000: Average Occupancy Property 2001 2000 Cedarwood Apartments 95% 97% Gretna, Louisiana Results of Operations The Partnership recognized net income of approximately $81,000 for the three months ended September 30, 2001 compared to net income of approximately $104,000 for the same period in 2000. The decrease in net income is due to a slight increase in total expenses and a slight decrease in total revenues. Total expenses increased slightly for the three months ended September 30, 2001 due to an increase in operating expenses which was attributable to an increase in insurance costs and legal fees. Total revenues decreased slightly for the three months ended September 30, 2001 due primarily to a decrease in rental income. Rental income decreased due to a decrease in occupancy at the Partnership's investment property. The Partnership recognized net income of approximately $298,000 for the nine months ended September 30, 2001 compared to net income of approximately $267,000 for the same period in 2000. The increase in net income is due to an increase in total revenues and a slight decrease in total expenses. Total revenues increased as a result of an increase in rental income due to increases in average rental rates which were more than sufficient to offset a decrease in occupancy at Cedarwood Apartments. Total expenses decreased slightly due to a decrease in interest expense partially offset by an increase in general and administrative expenses. Interest expense decreased due to principal payments made on the mortgage encumbering the Partnership's investment property. General and administrative expenses increased for the nine months ended September 30, 2001 due to an increase in professional fees. Also included in general and administrative expenses for the three and nine months ended September 30, 2001 and 2000, are management reimbursements to the General Partner allowed under the Partnership Agreement. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. As part of the ongoing business plan of the Registrant, the General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Registrant from increases in expense. As part of this plan, the General Partner attempts to protect the Registrant from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions needed to offset softening market conditions, there is no guarantee that the General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2001, the Partnership had cash and cash equivalents of approximately $1,113,000 compared to approximately $445,000 at September 30, 2000. Cash and cash equivalents increased approximately $903,000 since December 31, 2000 due to approximately $508,000 and $593,000 of cash provided by operating and financing activities, respectively, partially offset by approximately $198,000 of cash used in investing activities. Cash provided by financing activities consisted of proceeds from the assumption of a mortgage loan of an affiliate of the General Partner, partially offset by distributions to partners, principal payments made on the mortgage encumbering the Registrant's property, repayment of the mortgage note payable and loan costs paid. Cash used in investing activities consisted of property improvements and replacements and net deposits to restricted escrows maintained by the mortgage lender. The Partnership invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the investment property to adequately maintain the physical assets and other operating needs of the Registrant and to comply with Federal, state and local, legal and regulatory requirements. Capital improvements planned for the Partnership's property are detailed below. Cedarwood Apartments: For 2001, the Partnership budgeted approximately $100,000 for capital improvements, consisting primarily of structural and plumbing upgrades, pool improvements, and floor covering and appliance replacements. The Partnership completed approximately $121,000 of budgeted and unbudgeted capital expenditures at Cedarwood Apartments during the nine months ended September 30, 2001, consisting primarily of fencing, plumbing, structural improvements, pool upgrades and appliance and floor covering replacements. These improvements were funded from operations. Additional capital expenditures will be incurred only if cash is available from operations. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. On September 28, 2001, the Partnership assumed the mortgage loan of an affiliate of the General Partner. The Partnership substituted its investment property as collateral for the mortgage and assumed the payments and terms of the mortgage. In consideration for the assumption of this mortgage, the Partnership received approximately $2,928,000, from the affiliate of the General Partner, which was the outstanding principal balance of the mortgage assumed. From this amount, the Partnership paid approximately $64,000 in closing costs which were capitalized and included in other assets on the accompanying balance sheet and deposited approximately $77,000 into a mortgage escrow account maintained by the lender. Additionally, the Partnership repaid its existing mortgage of approximately $1,809,000. The new mortgage carries a stated interest rate of 6.62% while the interest rate on the old mortgage was 9.13%. Principal and interest payments on the assumed mortgage loan are due monthly until the loan matures in July 2013 at which time the mortgage will be fully amortized. During the nine months ended September 30, 2001, the Partnership declared and paid distributions of approximately $328,000 (approximately $325,000 paid to the limited partners or $37.49 per limited partnership unit) from operations. During the nine months ended September 30, 2000, the Partnership declared and paid distributions of approximately $300,000 (approximately $297,000 paid to the limited partners or $34.26 per limited partnership unit) from operations. Subsequent to September 30, 2001, the Partnership declared and paid a distribution of approximately $1,044,000 (approximately $945,000 paid to the limited partners or $109.01 per limited partnership unit) of which approximately $66,000 (approximately $65,000 to the limited partners or $7.50 per limited partnership unit) was from operations and approximately $978,000 (approximately $880,000 to the limited partners or $101.51 per limited partnership unit) was from the net consideration received for the assumption of the mortgage loan as discussed above. The Partnership's distribution policy is reviewed on a monthly basis. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of the debt maturity, refinancing, and/or the sale of the property. There can be no assurance that the Partnership will generate sufficient funds from operations, after planned capital improvement expenditures, to permit any additional distributions to its partners during the remainder of 2001 or subsequent periods. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 5,858 limited partnership units (the "Units") in the Partnership representing 67.57% of the outstanding Units at September 30, 2001. A number of these Units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 67.57% of the outstanding Units, AIMCO is in a position to control all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unitholders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which, together with a demurrer filed by other defendants, is currently scheduled to be heard on November 15, 2001. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. The matters are currently scheduled to be heard on November 15, 2001. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: None. b) Reports on Form 8-K: None filed during the quarter ended September 30, 2001. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS VII By: Angeles Realty Corporation General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: November 13, 2001