10QSB 1 sp4.txt SP4 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 0-10884 SHELTER PROPERTIES IV (Exact name of small business issuer as specified in its charter) South Carolina 57-0721760 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, P.O. 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 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__ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) SHELTER PROPERTIES IV CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2001
Assets Cash and cash equivalents $ 550 Receivables and deposits 91 Restricted escrows 1,240 Other assets 284 Investment properties: Land $ 2,759 Buildings and related personal property 51,272 54,031 Less accumulated depreciation (31,122) 22,909 $ 25,074 Liabilities and Partners' Capital Liabilities Accounts payable $ 139 Tenant security deposit liabilities 210 Accrued property taxes 506 Other liabilities 458 Mortgage notes payable 17,550 Partners' Capital General partners $ 104 Limited partners (49,995 units issued and outstanding) 6,107 6,211 $ 25,074 See Accompanying Notes to Consolidated Financial Statements
b) SHELTER PROPERTIES IV CONSOLIDATED 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 $ 2,347 $ 2,401 $ 6,980 $ 8,064 Other income 213 165 579 518 Gain on sale of investment property (Note F) -- 12,350 -- 12,350 Casualty gain (Note E) -- -- 20 -- Total revenues 2,560 14,916 7,579 20,932 Expenses: Operating 1,102 1,199 3,417 3,782 General and administrative 105 209 300 382 Depreciation 512 604 1,550 1,618 Interest 448 451 1,241 1,478 Property taxes 163 195 506 604 Total expenses 2,330 2,658 7,014 7,864 Income before extraordinary loss 230 12,258 565 13,068 Extraordinary loss on early extinguishment of debt (Note F) -- (246) -- (246) Net income $ 230 $12,012 $ 565 $12,822 Net income allocated to general partners (1%) $ 3 $ 120 $ 6 $ 128 Net income allocated to limited partners (99%) 227 11,892 559 12,694 $ 230 $12,012 $ 565 $12,822 Per limited partnership unit: Income before extraordinary loss $ 4.54 $242.72 $ 11.18 $258.76 Extraordinary loss on early extinguishment of debt -- (4.86) -- (4.86) Net income $ 4.54 $237.86 $ 11.18 $253.90 Distributions per limited partnership unit $ 5.26 $234.89 $ 18.58 $274.49 See Accompanying Notes to Consolidated Financial Statements
c) SHELTER PROPERTIES IV CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' CAPITAL (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partners Partners Total Original capital contributions 50,000 $ 2 $50,000 $50,002 Partners' capital at December 31, 2000 49,995 $ 98 $ 6,477 $ 6,575 Distributions to partners -- -- (929) (929) Net income for the nine months ended September 30, 2001 -- 6 559 565 Partners' capital at September 30, 2001 49,995 $ 104 $ 6,107 $ 6,211 See Accompanying Notes to Consolidated Financial Statements
d) SHELTER PROPERTIES IV CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Nine Months Ended September 30, 2001 2000 Cash flows from operating activities: Net income $ 565 $12,822 Adjustments to reconcile net income to net cash provided by operating activities: Gain on sale of investment property -- (12,350) Extraordinary loss on early extinguishment of debt -- 246 Depreciation 1,550 1,618 Amortization of discounts and loan costs 201 199 Casualty gain (20) -- Change in accounts: Receivables and deposits 23 424 Other assets (105) 119 Accounts payable (12) (128) Tenant security deposit liabilities 7 (33) Accrued property taxes 313 209 Other liabilities (246) 575 Net cash provided by operating activities 2,276 3,701 Cash flows from investing activities: Property improvements and replacements (1,723) (2,540) Net (deposits to) withdrawals from restricted escrows (526) 197 Net proceeds from sale of investment property -- 17,385 Insurance proceeds received 28 -- Net cash (used in) provided by investing activities (2,221) 15,042 Cash flows from financing activities: Distributions to partners (929) (14,743) Payments on mortgage notes payable (618) (640) Repayment of mortgage note payable -- (4,172) Debt extinguishment costs -- (116) Net cash used in financing activities (1,547) (19,671) Net decrease in cash and cash equivalents (1,492) (928) Cash and cash equivalents at beginning of period 2,042 3,630 Cash and cash equivalents at end of period $ 550 $ 2,702 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,011 $ 1,298 Supplemental disclosure of non-cash flow information: Property improvements and replacements included in accounts payable $ -- $ 443 Included in property improvements for the nine months ended September 30, 2001 are approximately $927,000 of improvements which were included in accounts payable at December 31, 2000. Distributions of approximately $1,000,000 were accrued at December 31, 1999 and paid during January 2000. See Accompanying Notes to Consolidated Financial Statements
e) SHELTER PROPERTIES IV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Shelter Properties IV (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 Shelter Realty IV Corporation (the "Corporate 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 consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 2000. The Corporate General Partner is an affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Principles of Consolidation: The financial statements include all the accounts of the Partnership and its 99.99% owned partnership. The general partner of this partnership is the Corporate General Partner. The Corporate General Partner may be removed as the general partner of this partnership by the Registrant; therefore, it is controlled and consolidated by the Registrant. All significant interpartnership balances have been eliminated. 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 Corporate General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Note B - Reconciliation of Cash Flows As required by the Partnership Agreement, the following is a reconciliation of "Net cash provided by operating activities" in the accompanying consolidated statements of cash flows to "Net cash from operations", as defined in the Partnership Agreement. However, "Net cash from operations" should not be considered an alternative to net income as an indicator of the Partnership's operating performance or to cash flows as a measure of liquidity.
For the Nine Months Ended September 30, 2001 2000 (in thousands) Net cash provided by operating activities $ 2,276 $ 3,701 Payments on mortgage notes payable (618) (640) Property improvements and replacements (1,723) (2,540) Change in restricted escrows, net (526) 197 Changes in reserves for net operating liabilities 20 (1,166) Release of reserves 571 448 Net cash from operations $ -- $ --
The Corporate General Partner released previously reserved cash of approximately $571,000 and $448,000 during the nine months ended September 30, 2001 and 2000, respectively. Note C - Distributions During the nine months ended September 30, 2001, the Partnership declared and paid distributions from previously undistributed sales proceeds from the sale of Countrywood Village in August 2000 of approximately $929,000 to the limited partners ($18.58 per limited partnership unit). At September 30, 2001, approximately $424,000 of proceeds from this sale remain to be distributed. During the nine months ended September 30, 2000, the Partnership paid a distribution from operations of approximately $2,000,000 (approximately $1,980,000 to the limited partners or $39.60 per limited partnership unit) and paid a distribution to the limited partners of approximately $11,743,000 from sales proceeds ($234.89 per limited partnership unit) from the sale of Countrywood Village. Note D - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Corporate 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 Corporate General Partner and its affiliates during the nine months ended September 30, 2001 and 2000: 2001 2000 (in thousands) Property management fees (included in operating expenses) $381 $431 Reimbursement for services of affiliates (included in operating and general and administrative expenses and investment properties) 470 276 Affiliates of the Corporate General Partner are entitled to receive 5% of gross receipts from the Registrant's properties as compensation for providing property management services. The Registrant paid to such affiliates approximately $381,000 and $431,000 for the nine months ended September 30, 2001 and 2000, respectively. Affiliates of the Corporate General Partner received reimbursement of accountable administrative expenses amounting to approximately $470,000 and $276,000 for the nine months ended September 30, 2001 and 2000, respectively. Of this amount, approximately $90,000 was accrued at September 30, 2000. Included in these amounts at September 30, 2001 and 2000 are reimbursements of approximately $218,000 and $13,000, respectively, for construction oversight costs. Pursuant to the Partnership Agreement and in connection with the sale of Countrywood Village in August 2000, the Corporate General Partner is entitled to a commission of up to 1% for its assistance in the sale. Payment of such commission is subordinate to the limited partners receiving a cumulative 7% return on their investment. This return has not yet been met, and accordingly, a commission of $178,000 was accrued and is included in other liabilities in the accompanying consolidated balance sheet at September 30, 2001. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 32,878 limited partnership units (the "Units") in the Partnership representing 65.76% 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 acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. 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 Corporate General Partner. As a result of its ownership of 65.76% of the outstanding Units, AIMCO is in a position to control all such 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 Corporate General Partner because of its affiliation with the Corporate General Partner. Note E - Casualty Event During the nine months ended September 30, 2001, a net casualty gain of approximately $20,000 was recorded at Quail Run Apartments. The casualty gain related to a fire which occurred on September 30, 1999. The gain was a result of the receipt of insurance proceeds of approximately $28,000 and the write-off of the net book value of the destroyed assets of approximately $8,000. Note F - Sale of Property On August 1, 2000, the Partnership sold Countrywood Village to an unrelated third party, for net proceeds of approximately $17,385,000 after payment of closing costs. The Partnership realized a gain of approximately $12,350,000 as a result of the sale. In addition, the Partnership recorded an extraordinary loss on early extinguishment of debt of approximately $246,000 as a result of the unamortized debt discount and loan costs being written off and a prepayment penalty of approximately $116,000 relating to the prepayment of the mortgage encumbering the property. In connection with the sale, the Corporate General Partner is allowed to receive a commission of up to 1% for its assistance in the sale. Payment of such commission is subordinate to the limited partners receiving a cumulative 7% return on their investment. This return has not yet been met and accordingly, the $178,000 earned by the Corporate General Partner was accrued and is included in other liabilities at September 30, 2001 on the accompanying consolidated balance sheet. Note G - 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 Corporate 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 Corporate General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Corporate 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 Corporate 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 Corporate 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 Corporate 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 Corporate 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 Corporate 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 operations. 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 properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for each of the nine month periods ended September 30, 2001 and 2000: Average Occupancy Property 2001 2000 Baymeadows Apartments Jacksonville, Florida 96% 93% Quail Run Apartments Columbia, South Carolina 94% 90% The Corporate General Partner attributes the increase in average occupancy at Baymeadows Apartments to a quicker turnaround in getting vacant apartment units ready for occupancy by new tenants and improved marketing strategies. The Corporate General Partner attributes the increase in average occupancy at Quail Run to improved local market conditions primarily related to a local military training base. Results of Operations The Partnership recorded net income of approximately $230,000 and $565,000, respectively, for the three and nine months ended September 30, 2001 compared to net income of approximately $12,012,000 and $12,822,000, respectively, for the corresponding periods in 2000. The decrease in net income for the three and nine months ended September 30, 2001 is primarily due to the sale of Countrywood Village. On August 1, 2000, the Partnership sold Countrywood Village to an unrelated third party for net proceeds of approximately $17,385,000 after payment of closing costs. During the third quarter of 2000, the Partnership realized a gain of approximately $12,350,000 as a result of the sale. In addition, the Partnership recorded an extraordinary loss on early extinguishment of debt of approximately $246,000 as a result of unamortized loan costs and debt discount being written off and a prepayment penalty of approximately $116,000 relating to the prepayment of the mortgage encumbering the property. Excluding the impact of the sale and operations of Countrywood Village, net income for the nine months ended September 30, 2001 and 2000 was approximately $565,000 and $288,000, respectively. The net income for the three months ended September 30, 2001 was approximately $230,000 versus a net loss for the three months ended September 30, 2000 of approximately $66,000. The increase in net income for the nine months ended September 30, 2001 was due to an increase in total revenues and a recognition of a casualty gain, partially offset by an increase in total expenses. The increase in net income for the three months ended September 30, 2001 was due to an increase in total revenues and a decrease in total expenses. Total revenues increased for the three and nine months ended September 30, 2001 due to an increase in rental revenue and other income. Rental revenue increased due to increases in average rental rates and occupancy at both properties. Other income increased due to increases in utility reimbursements from tenants at both properties. Total expenses for the three months ended September 30, 2001 decreased due to decreases in general and administrative expenses. Total expenses for the nine months ended September 30, 2001 increased due to increases in depreciation and operating expenses offset by a decrease in general and administrative expenses. Depreciation expense increased for the nine months ended September 30, 2001 for both investment properties due to capital improvements and replacements completed during the past twelve months, which are now being depreciated. Operating expense increased for the nine months ended September 30, 2001 as a result of increased insurance expense at both properties offset by decreases in utility and salary expenses and related employee costs at Baymeadows. General and administrative expenses decreased for the three and nine months ended September 30, 2001 due to decreases in audit expense and reimbursements to the Corporate General Partner as allowed under the Partnership Agreement. In addition to these costs, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit and appraisals required by the Partnership Agreement are also included in general and administrative expenses. As part of the ongoing business plan of the Partnership, the Corporate General Partner monitors the rental market environment of each of its investment properties to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Corporate General Partner attempts to protect the Partnership 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 to offset softening market conditions, there is no guarantee that the Corporate 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 $550,000 compared to approximately $2,702,000 at September 30, 2000. Cash and cash equivalents decreased approximately $1,492,000 since December 31, 2000 due to approximately $2,221,000 and $1,547,000 of cash used in investing and financing activities, respectively, partially offset by approximately $2,276,000 of cash provided by operating activities. Cash used in investing activities consisted of property improvements and replacements and net deposits to restricted escrows maintained by the mortgage lender slightly offset by insurance proceeds received. Cash used in financing activities consisted of distributions to partners and principal payments made on the mortgages encumbering the Registrant's properties. The Registrant 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 properties to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. Capital improvements planned for each of the Registrant's properties are detailed below. Baymeadows Apartments: The Partnership budgeted approximately $2,422,000 in capital improvements at Baymeadows Apartments for 2001 consisting primarily of appliance and flooring replacements, structural improvements, major landscaping, plumbing, parking lot and air conditioning upgrades and other building improvements. During the nine months ended September 30, 2001, the Partnership spent approximately $615,000 consisting primarily of carpet and vinyl replacements, plumbing and structural upgrades, interior decoration, appliances, and major landscaping. These improvements were funded from operating cash flow. Quail Run Apartments: The Partnership budgeted approximately $241,000 in capital improvements at Quail Run Apartments for 2001 consisting primarily of new appliances, structural upgrades, and flooring replacements. During the nine months ended September 30, 2001, the Partnership spent approximately $181,000 consisting primarily of flooring, appliance and air conditioning replacements. These improvements were funded from operating cash flow and insurance proceeds. Additional capital expenditures will be incurred only if cash is available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant'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. The mortgage indebtedness of approximately $17,550,000, net of discount, is amortized over 257 months with a balloon payment of approximately $16,907,000 due on November 15, 2002. The Corporate General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity date. If the properties cannot be refinanced or sold for a sufficient amount, the Registrant will risk losing such properties through foreclosure. During the nine months ended September 30, 2001, the Partnership declared and paid distributions from previously undistributed sales proceeds from the sale of Countrywood Village in August 2000 of approximately $929,000 to the limited partners ($18.58 per limited partnership unit). At September 30, 2001, approximately $424,000 of proceeds from this sale remain to be distributed. During the nine months ended September 30, 2000, the Partnership paid a distribution from operations of approximately $2,000,000 (approximately $1,980,000 to the limited partners or $39.60 per limited partnership unit) and paid a distribution to the limited partners of approximately $11,743,000 from sales proceeds ($234.89 per limited partnership unit) from the sale of Countrywood Village. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of debt maturities, refinancings, and/or property sales. The Partnership's distribution policy is reviewed on a monthly basis. There can be no assurance that the Partnership will generate sufficient funds from operations, after required capital expenditures, to permit any additional distributions to its partners for the remainder of 2001 or subsequent periods. In addition, the Partnership may be restricted from making distributions if the amount in the reserve account for each property is less than $400 per apartment unit at such property or a total of approximately $494,000. As of September 30, 2001, the reserve account was fully funded with approximately $1,240,000 on deposit with the mortgage lender. In addition to its indirect ownership of the general partner interests in the Partnership, AIMCO and its affiliates owned 32,878 limited partnership units (the "Units") in the Partnership representing 65.76% 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 acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO either through private purchases or tender offers. 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 Corporate General Partner. As a result of its ownership of 65.76% of the outstanding Units, AIMCO is in a position to control all such 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 Corporate General Partner because of its affiliation with the Corporate 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 Corporate 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 Corporate General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The Corporate 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 Corporate 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 Corporate 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 Corporate 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 Corporate 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 Corporate 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 filed during the quarter ended September 30, 2001: None. 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. SHELTER PROPERTIES IV By: Shelter Realty IV Corporation Corporate 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