-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SscZAjTXPgVH2pUxntpeNBHiZ5SffrURvrzLPob3FPCMYE+vncJo25EdmU8U9X2W nK1rRQIHQJB9w6ybwV06Lw== 0000721465-98-000002.txt : 19980401 0000721465-98-000002.hdr.sgml : 19980401 ACCESSION NUMBER: 0000721465-98-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: APT HOUSING PARTNERS LTD PARTNERSHIP CENTRAL INDEX KEY: 0000721465 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 042791736 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 002-84474 FILM NUMBER: 98581041 BUSINESS ADDRESS: STREET 1: 500 W CUMMINGS PARK STE 6050 CITY: WOBURN STATE: MA ZIP: 01801 BUSINESS PHONE: 6179354200 MAIL ADDRESS: STREET 1: 500 W CUMMINGS PARK STE 6050 CITY: WOBURN STATE: MA ZIP: 01801 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Fiscal Year Ended December 31, 1997 Commission File Number 2-84474 APT HOUSING PARTNERS LIMITED PARTNERSHIP A Massachusetts Limited Partnership I.R.S. Employer Identification No. 04-2791736 500 West Cummings Park, Suite 6050, Woburn, Massachusetts 01801 Registrant's Telephone Number, Including Area Code (617) 935-4200 Securities Registered Pursuant to Section 12(b) or 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed with the commission by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [X]. DOCUMENTS INCORPORATED BY REFERENCE NONE TOTAL NUMBER OF PAGES 50 INDEX TO EXHIBITS AT PAGE 15 PART I ITEM 1. BUSINESS: General APT HOUSING PARTNERS LIMITED PARTNERSHIP (the "Partnership") is a limited partnership which was formed under the laws of the Commonwealth of Massachusetts on June 8, 1983. The General Partner of the Partnership is APT Asset Management, Inc., a Massachusetts corporation. APT Asset Management, Inc. is a wholly owned subsidiary of APT Financial Services, Inc. (a Delaware Corporation) whose majority shareholder is John M. Curry. The Partnership's business is to invest, as a limited partner, in Local Limited Partnerships owning government-assisted housing developments and to provide its partners current tax benefits, potential appreciation in real estate investments, distribution of net capital transaction proceeds and distributable cash to the extent available. On September 30, 1983, the Partnership offered for sale 9,000 units of limited partnership interests at $1,000 each pursuant to a prospectus dated September 30, 1983. The offering was subsequently amended on March 30, 1984 to provide for 3,700 units of limited partnership interests at $1,000 each. The public offering was managed by American Investment Team, Inc. ("AIT") ("the dealer manager"), an affiliate of the General Partner of the Partnership. The minimum investment allowed was $5,000. The Partnership received $3,700,000 of subscriptions for limited partnership interests during the period September 30, 1983 through April 30, 1984 from 329 Investors. No further issuance of partnership interests is anticipated. The net proceeds ($3,071,000) of the public offering were primarily used to purchase limited partnership interests in existing multi-family rental housing developments known as Ashland Commons Associates, Rockledge Apartments Associates and Historic Cohoes II. The Partnership's investments in each Local Limited Partnership represents 95.5%, 97% and 97%, respectively. On December 18, 1986 the Partnership withdrew its 97% investment interest in Historic Cohoes II and received its original investment of $1,321,234 from the Local Limited Partnership. A distribution of the same amount was made to the Limited Partners on April 3, 1987. Federal, state or local government agencies have provided significant incentives in order to stimulate private investment in government-assisted housing. The intent of these incentives was to reduce certain market risks and provide investors (i) tax benefits, (ii) limited cash distributions and (iii) long-term capital appreciation. Notwithstanding these factors, there remain significant risks. These risks include, but are not limited to, the financial strength of the local general partners. The long-term nature of investments in government-assisted housing limits the ability of the Partnership to vary its investment portfolio in response to changing economic, financial and investment conditions; such investments are also subject to changes in local economic circumstances and housing patterns which have an impact on real estate values. These housing developments also require greater management expertise and may have higher operating expenses than conventional housing developments. The Partnership became the principal limited partner in these Local Limited Partnerships pursuant to Local Limited Partnership agreements entered into with the local general partners. As a limited partner, the Partnership's liability for obligations of the Local Limited Partnerships is limited to its investment. The local general partners of the Local Limited Partnerships retain responsibility for maintaining, operating and managing the housing developments. Under certain circumstances, the Partnership has the right to replace the local general partner of the Local Limited Partnerships. John M. Curry is a General Partner in one of the Local Limited Partnerships. An affiliated company in which John M. Curry is the President, is the General Partner in the other Local Limited Partnership. Although each of the Local Limited Partnerships in which the Partnership has invested owns a housing development which must compete for tenants in the market place, the rental assistance and below market interest rates on mortgage financing provided by government-assisted housing programs make it possible to offer apartments to eligible tenants at a cost to the tenant significantly below the market rate for comparable conventionally-financed apartments in the area. The Internal Revenue Service (IRS) scrutinizes, in general, "tax shelters" that generate tax losses in any taxable year. The Local Limited Partnerships will deduct certain fees such as General Partners' fees and other expenses on the basis that such expenses constitute ordinary and necessary expenses of carrying on the business. If the federal income tax information return filed annually by the Partnership or by any Local Limited Partnership are audited, no assurance can be given as to what extent the deductions claimed for these fees will be allowed. Any disallowance by the IRS that is not successfully rebutted will have the effect of increasing the taxable income or decreasing the taxable loss of each Limited Partner for the year in question. The Limited Partners do not have a right to participate in the management of the Partnership or its operations. However, a majority in interest of the Limited Partners have the authority to (1) approve or disapprove the sale of all or substantially all of the assets of the Partnership in a single transaction or a related series of transactions, (2)dissolve the Partnership, (3) remove the General Partner, for cause, or (4) elect a substitute General Partner. Limited Partners holding 10% or more of the limited partnership interests have the right to call meetings of the Partnership and propose amendments to the Partnership Agreement. As a Limited Partner of each of the Local Limited Partnerships, the Partnership does not have the right to participate in the management of such Local Limited Partnerships or their operations. The Partnership retains certain rights with respect to voting on or approving certain matters, including the sale of the housing developments. By the existence or exercise of such rights, it could be asserted that the Partnership was taking part in the control of the Local Limited Partnerships' operations and should thereby incur liability for all debts and obligations of the Local Limited Partnerships. If this were found to be the case, the Partnership interest in one Local Limited Partnership could be reached by creditors of another Local Limited Partnership. The Partnership has received opinions of counsel for the Local Limited Partnerships that the existence and exercise of such rights will not subject it to liability as a Local General Partner of the Local Limited Partnership. Holders of the Partnership's limited partnership interests will need to bear the economic risk of their investment for an indefinite period of time. Transferability of the limited partnership interests is restricted so as not to cause a termination of the Partnership for tax purposes. In California, Maine, New Hampshire, Pennsylvania and South Carolina, transferability of the limited partnership interests is restricted to transferees meeting the investor suitability standards. In addition, a transfer of limited partnership interests is subject to the consent of the General Partner, which may be withheld in its sole discretion. Losses recognized for tax purposes from the ownership and operations of the housing developments decline over time. This occurs because the tax advantages of accelerated depreciation are greatest in earlier years and decline over the life of the housing developments, and because those portions of the level mortgage payment attributable to deductible interest likewise decrease with the passage of time. In addition, the benefits to be received in the form of tax savings in future years may decline as a result of the enactment of the Tax Reform Act of 1986, depending on the individual circumstances of each Limited Partner. For these reasons, among others, it is not anticipated that any public market will develop for the purchase and sale of limited partnership interests. Consequently, holders of limited partnership interests in the Partnership may not be able to liquidate their investments in the event of an emergency and limited partnership interests probably will not be readily acceptable as collateral for loans. Moreover, should a limited partner dispose of his limited partnership interest, he will realize taxable income to the extent that his allocable share of the mortgage debt obligations plus the other consideration he receives upon such disposition exceeds his tax basis, while at the same time he may not receive sufficient cash to pay such taxes. Competition The real estate rental business in which the Local Limited Partnerships are engaged is highly competitive and the properties owned by the Local Limited Partnerships are expected to be subject to active competition from similar properties in their respective vicinities. The Local Limited Partnerships compete with many other entities providing residential rental housing through government-assisted and conventionally-financed housing developments. Some of these entities are owned by large real estate operators with significantly greater resources than the Partnership as well as local organizations which own and operate a relatively small number of properties. The Local Limited Partnerships believe that they have a reputation for providing safe, clean, quality residential housing which enables them to compete effectively for tenants. While the Local Limited Partnerships believe that they will continue to compete effectively for tenants, there can be no assurance that they will do so or that they will not encounter further increased competition in the future due to changes in the various government-assisted housing programs and from rehabilitated or new housing developments in their respective vicinities. Employees The Partnership does not have any direct employees. All services are performed for the Partnership by its General Partner and its affiliates. The General Partner receives compensation in connection with such activities as set forth in Item 11. In addition, the Partnership reimburses the General Partner and certain of its affiliates for expenses incurred in connection with the performance by their employees of services for the Partnership in accordance with the Partnership's Amended and Restated Agreement and Certificate of Limited Partnership (the "Partnership Agreement"). ITEM 2. PROPERTIES: The Partnership holds limited partnership interests in two (2) Local Limited Partnerships as of December 31, 1997. Set forth is a schedule of the Local Limited Partnerships including certain information concerning the Apartment Complexes. Name and Location % of Units Occupied (Number of Units) Date Acquired at December 31, 1997 1996 1995 1994 1993 Ashland Commons Associates March 30, 1984 99% 100% 99% 100% 99% Ashland, MA (96) Rockledge Apartments Associates June 22, 1984 98% 97% 98.2% 100% 100% Wakefield, MA (60) The Local Limited Partnerships in which the Partnership has invested own existing Apartment Complexes which receive either Federal or State subsidies. The U.S. Department of Housing and Urban Development (HUD), through the Federal Housing Administration (FHA), administers a variety of subsidy programs for low- and moderate-income housing developments. The Federal programs generally provide one of a combination of the following forms of assistance: (i) mortgage loan insurance (ii) rental subsidies, (iii) reduction of mortgage interest payments. i) HUD provides mortgage insurance for rental housing projects pursuant to a number of sections of Title II of the National Housing Act ("NHA") including, among others, Section 236 and Section 221(d)(4). Under these programs, HUD will generally provide insurance equal to 90% of the total replacement cost to limited-distribution owners. Mortgages are provided by institutions approved by HUD, including banks, savings and loan companies and local housing authorities. Section 221(d)(4) of the NHA provides for federal insurance of private construction and permanent mortgage loans to finance new construction of rental apartment complexes containing five or more units. ii) Many of the tenants in HUD insured projects receive some form of rental assistance payments, primarily through the Section 8 Housing Assistance Payments Program ("Section 8 Program"). Apartment Complexes receiving assistance through the Section 8 Program will generally have limitations on the amount of rent which may be charged. One requirement imposed by HUD regulations effective for apartment complexes initially approved for Section 8 payments on or after November 5, 1979 is to limit the amount of the owner's annual cash distributions from operations to 10% of the owner's equity investment in an apartment complex if the apartment complex is intended for occupancy by families and to 6% of the owner's equity investment in an apartment complex intended for occupancy by elderly persons. The owner's equity investment in the apartment complex is 10% of the project's replacement cost as determined by HUD. HUD released the American Community Partnerships Act (the "ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing needs in an era of static or decreasing budget authority. Two key proposals in the ACPA that could affect the Local Limited Partnerships are: A discontinuation of project-based Section 8 subsidy payments and an attendant reduction in debt on properties that were supported by the Section 8 payments. The ACPA calls for a transition during which the project-based Section 8 would be converted to a tenant-based voucher system. Any FHA insured debt would then be "marked-to-market"; that is, revalued in light of the reduced income stream, if any. Currently, any Section 8 subsidy contract that expires, HUD is renewing on a year to year basis until such time as a new program is implemented, if any. The impact of ACPA, if enacted in its present form, is not presently determinable. Several industry sources have already commented to HUD and Congress that in the event the ACPA were fully enacted in its present form, the reduction in mortgage indebtedness would be considered taxable income to limited partners in the Partnership. Legislative relief has been proposed to exempt "mark-to-market" debt from cancellation of indebtedness income treatment. iii) The Section 236 Program, as well as providing mortgage insurance, also provides a subsidy which reduces the debt service on a project mortgage, thereby enabling the owner to charge the tenants lower rents for their apartments. Interest credit subsidy payments are made monthly by HUD directly to the mortgagee of the project. Each payment is in an amount equal to the difference between (i) the monthly payment required by the terms of the mortgage to pay principal and interest and (ii) the monthly payment which would have been required for principal and interest if the mortgage loan provided for interest at the rate of 1%. These payments are credited against the amounts otherwise due from the owner of the project, who makes monthly payments of the balance. All tenant leases are generally for periods not greater than one to two years and no tenant occupies more than 10% of the rentable square footage. Management continuously reviews the physical state of the properties and budgets improvements when required which are generally funded from cash flow from operations or release of replacement reserve escrows. No improvements are expected to require additional financing. See Item 1, Business, above for the general competitive conditions to which the properties described herein are subject. Real estate taxes are calculated using rates and assessed valuations determined by the town or city in which the property is located. ITEM 3. LEGAL PROCEEDINGS: None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None. PART II ITEM 5. MARKET FOR THE REGISTRANT'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS: Limited partnership interests are not traded in a public market but were sold through a public offering managed by American Investment Team, Inc. It is not anticipated that any public market will develop for the purchase and sale of any limited partnership interest. Limited partnership interests may be transferred only if certain requirements are satisfied. As of March 15, 1998, there were 326 registered holders of an aggregate of 3,700 units of limited partnership interests in the Partnership. The Partnership has invested in Local Limited Partnerships owning housing developments which receive governmental assistance under programs which restrict the cash return available to housing development owners. The Partnership does not anticipate providing significant cash distributions to its limited partners in circumstances other than a refinancing or sale. On February 24, 1995, the Partnership distributed $200,000 to the partners, of which $196,000 or $52.97 per unit of limited partnership interest, was distributed to the Limited Partners. The Partnership does not anticipate that it will make any further cash distributions. ITEM 6. SELECTED FINANCIAL DATA: The information set forth below presents selected financial data of the Partnership. Additional financial information is set forth in the audited financial statements in Part IV, Item 14, beginning on page 15. Year Ended December 31, OPERATIONS 1997 1996 1995 1994 1993 Revenue $ 2,610 $ 1,389 $ 1,884 $ 4,843 $ 1,507 Expenses 46,464 45,891 46,948 46,713 47,799 Loss before share of losses of and distributions from the Local Limited Partnerships ( 43,854) ( 44,502) ( 45,064) ( 41,870) ( 46,292) Distribution from Local Limited Partnership 87,903 87,903 87,064 82,255 96,546 Share of losses of Local Limited Partnerships - - - - - Net income $ 44,049 $ 43,401 $ 42,000 $ 40,385 $ 50,254 Net income per weighted average limited partnership unit $ 11.67 $ 11.50 $ 11.12 $ 10.70 $ 13.31 FINANCIAL POSITION December 31, 1997 1996 1995 1994 1993 Total assets $ 108,175 $ 64,360 $ 20,946 $ 179,140 $ 138,681 Investment in Local Limited Partnerships $ -0- $ -0- $ -0- $ -0- $ -0- Total liabilities $ 17,357 $ 17,591 $ 17,578 $ 17,772 $ 17,698 Total partners'capital $ 90,818 $ 46,769 $ 3,368 $ 161,368 $ 120,983 Cash distributions per limited partnership unit $ -0- $ -0- $ 52.97 $ -0- $ -0- ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS: Liquidity and Capital Resources The Partnership's primary source of funds were the proceeds of its public offering. Other sources of liquidity include interest earned on funds and cash distributions from operations of the Local Limited Partnerships in which the Partnership has invested. These sources of liquidity are available to meet obligations of the Partnership. The Partnership received $3,700,000 in gross proceeds from the sale of partnership interests pursuant to the public offering, resulting in net proceeds available for investment, after volume discounts, establishment of working capital reserves, payment of sales commissions, acquisition fees and offering expenses, of $3,071,000. As of December 31, 1997, the Partnership has invested all of the net proceeds available for investment. The Partnership's commitment to investments requiring initial capital contributions has been paid. The Partnership has no other significant capital commitments. HUD released the American Community Partnerships Act (the "ACPA"). The ACPA is HUD's blueprint for providing for the nation's housing needs in an era of static or decreasing budget authority. Two key proposals in the ACPA that could affect the Local Limited Partnerships are: A discontinuation of project based Section 8 subsidy payments and an attendant reduction in debt on properties that were supported by the Section 8 payments. The ACPA calls for a transition during which the project based Section 8 would be converted to a tenant based voucher system. Any FHA insured debt would them be "marked-to-market", that is revalued in light of the reduced income stream, if any. Currently, any Section 8 subsidy contract that expires, HUD is renewing on a year to year basis until such time as a new program is implemented, if any. The impact of ACPA, if enacted in its present form, is not presently determinable. Several industry sources have already commented to HUD and Congress that in the event the ACPA were fully enacted in its present form, the reduction in mortgage indebtedness would be considered taxable income to limited partners in the Partnership. Legislative relief has been proposed to exempt "mark-to-market" debt from cancellation of indebtedness income treatment. Cash distributions received from a Local Limited Partnership amounted to $87,903, $87,903, and $87,064 during the years ended December 31, 1997, 1996 and 1995, respectively. These distributions were used to meet the Partnership's obligations and, in 1995, to make distributions to its partners. The Partnership has invested in Local Limited Partnerships owning housing developments which receive governmental assistance under programs which restrict the cash return available to the housing development owners. The Partnership believes that it will continue to receive cash distributions from a Local Limited Partnership in an amount sufficient to meet its operating expenses. However, there can be no assurance that cash distributions received will be adequate to allow the Partnership to make any further cash distributions to its partners. Management is not aware of any trends or events, commitments or uncertainties that will impact liquidity in a material way. Management believes the only impact would be for laws that have not yet been adopted. Results of Operations The Partnership was formed to provide various benefits to its limited partners as discussed in Part I, Item 1 of this Report. It is anticipated that the Local Limited Partnerships in which the Partnership has invested will primarily produce tax losses of approximately $17,000 per $5,000 investment in approximately 14 to 17 full years of Partnership operations, with approximately $11,000 of such tax losses occurring during the first 5 full years of Partnership operations (assuming the applicability of current laws, regulations and court decisions). The benefits received in the form of tax savings may be reduced due to the enactment of the Tax Reform Act of 1986, depending on the individual circumstances of each Limited Partner. There can be no assurance that the Partnership will be able to attain its investment objectives. The Partnership will not seek to sell its interest in any housing development or Local Limited Partnership until proceeds of such sale would supply sufficient cash to enable its Limited Partners to pay applicable taxes. Proceeds of such sales will not be reinvested. It is not expected that any of the Local Limited Partnerships in which the Partnership has invested will generate cash flow sufficient to provide for distributions to Limited Partners in any material amount. Except for the operating balance of cash, the Partnership's assets consist primarily of limited partnership interests in Local Limited Partnerships owning government-assisted housing developments. The Partnership accounts for its investments in the Local Limited Partnerships using the equity method of accounting. Under the equity method of accounting, the investment cost is subsequently adjusted for the Partnership's share of each Local Limited Partnership's results of operations and cash distributions. The Partnership's share in the loss of each Local Limited Partnership is not recognized to the extent that the investment balance would become negative. For the years ended December 31, 1997, 1996 and 1995, the aggregate share of losses of the Local Limited Partnerships attributable to the Partnership and not included in the statements of income for those years amounted to $89,247, $11,813, and $22,868, respectively. At December 31, 1997 and 1996, the Partnership's cumulative share of losses of the Local Limited Partnerships exceeded its investments by $484,824 and 395,577, respectively, and, accordingly, have not been reflected in the Partnership's financial statements in accordance with the equity method of accounting because the investment balances have been reduced to zero. The Partnership's net income in 1997, 1996 and 1995 was due primarily to cash distributions received of $87,903, $87,903 and $87,064, respectively, from one Local Limited Partnership which offset the Partnership's net operating expenses in these years resulting in net income of $44,049, $43,401, and $42,000, respectively. The Partnership incurs an annual program management fee payable to American Securities Team, Inc. ("AST") commencing in January, 1997 and to American Investment Team, Inc. ("AIT"), for the years prior thereto, both affiliates of the General Partner, for managing the affairs of the Partnership and for providing investor services to the limited partners. The fee to the affiliate is equal to .5% of invested assets plus the Local Limited Partnerships' annualized outstanding nonrecourse debt. The fee amounted to $36,907, $37,141, and $37,353, for 1997, 1996 and 1995, respectively. Administrative expenses consist of professional fees. Other The Partnership's investment as a Limited Partner in the Local Limited Partnerships is subject to the risks incident to the potential losses arising from management and ownership of improved real estate. The Partnership's investments also could be adversely affected by poor economic conditions, generally, which could increase vacancy levels, increase rental payment defaults, or increase operating expenses. Any or all of these circumstances could threaten the financial viability of one or both of the Local Limited Partnerships. There are also substantial risks associated with the operations of Apartment Complexes receiving government assistance. These include: governmental regulations concerning tenant eligibility which may make it more difficult to rent apartments in the complexes; difficulties in obtaining government approval for rent increases; limitations on the percentage of income which low and moderate income tenants may pay as rent; the possibility that Congress may not appropriate funds to enable the U.S. Department of Housing and Urban Development to make the rental assistance payments it has contracted to make; and that, when the rental assistance contracts expire, there may not be market demand for apartments at full market rents in a Local Limited Partnership's Apartment Complex. The Local Limited Partnerships are impacted by inflation in several ways. Inflation allows for increases in rental rates generally to reflect the impact of higher operating and replacement costs. Inflation also affects the Local Limited Partnerships adversely by increasing operating costs, such as fuel, utilities and labor. The Partnership has evaluated the potential impact of the situation commonly referred to as the "Year 2000 Problem". The Year 2000 Problem, which is common to most companies, concerns the inability of information systems, primarily computer software programs, to properly recognize and process date sensitive information related to the year 2000. Management does not expect the Partnership to incur any significant expenses related to this issue. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA: The financial statements and supplementary data required by this item are set forth under Item 14 of Part IV beginning on page 15 and are incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE: Not applicable PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT: The Partnership has no directors or executive officers. The Partnership's affairs are managed and controlled by the General Partner. Certain information concerning the director and executive officers of the General Partner is set forth below: JOHN M. CURRY, BS, MBA, CPM, GSP, RR, 55, is the founder, Chairman, Director, and Shareholder of APT Financial Services, Inc., and its subsidiaries. Mr. Curry has been responsible for the construction of over 4,000 units of multi-family housing at a cost of over $120,000,000 and 240,000 square feet of commercial space. Mr. Curry is a graduate of the University of San Francisco (BS, 1968) and the Harvard Graduate School of Business Administration (MBA, 1970). He is a licensed Real Estate Broker in Massachusetts and New York and a licensed Builder in Massachusetts. His professional memberships include the Institute of Real Estate Management with the classification of Certified Property Manager, the Greater Boston Real Estate Board, Builders Association of Greater Boston, and is listed in Who's Who in America. JEFF E. EWING, BS, CPA, 32, is the President, Chief Financial Officer, Director and Shareholder of APT Financial Services, Inc. Mr. Ewing joined the company in December 1992, becoming its controller, and in December 1994, he became the Company's President and Chief Financial Officer. He is responsible for new business development, corporate operations and the development, implementation and review of all financial reporting systems as well as compliance with applicable tax and regulatory requirements. Prior to joining APT, Mr. Ewing was employed by Congress Realty Group of Companies as assistant controller and the accounting firm of Robert Ercolini and Company as a senior auditor. Mr. Ewing is a Certified Public Accountant in the Commonwealth of Massachusetts and a NASD registered Financial and Operations Principal. Mr. Ewing received his B.S. in Accountancy from Bentley College and is a member of the American Institute of Certified Public Accountants and the Massachusetts Society of Certified Public Accountants. THERESE M. COCHRAN, CPM, 40, is a Director and Shareholder of APT Financial Services, Inc. and the President of American Properties Team, Inc., a wholly-owned subsidiary of APT Financial Services, Inc. She is responsible for the operations of the management company and new business development. Ms. Cochran currently serves as an Executive Member of the Community Associates Institute, is the Chairperson of the CAI Legislative Action Committee and is a member of the Institute of Real Estate Management having earned the designation of Certified Property Manager. ELLIOT J. FEINER, BA, MBA, 59, is a Director and Shareholder of APT Financial Services, Inc. and its subsidiaries. Mr. Feiner graduated from Brown University (BA-Economics, 1959) and Suffolk University (MBA, 1962). He is a Certified Public Accountant. Mr. Feiner was Vice President of Finance for FMR Investment Management Services, Inc., a subsidiary of the Fidelity Group, and is currently self-employed. J. STEWART HARVEY, JR., BSBA, MBA, 65, is a Director and Shareholder of APT Financial Services, Inc., and its subsidiaries. Mr. Harvey is Managing Director of Aberdeen American Inc., an investment firm. He has held the position since 1985. Prior to this, Mr. Harvey was Vice President and Director of Gardner and Preston Moss, Inc. He was Vice President and Director of Research for Fidelity Management and Research Company, the largest mutual funds firm in the country. Mr. Harvey is a graduate of Boston University (BSBA, 1960) and Northeastern University (MBA-Finance, 1966). MICHAEL LEMOYNE KENNEDY, BA, JD, was a Director and Shareholder of APT Financial Services, Inc., and its subsidiaries. Mr. Kennedy was Chairman of Citizens Energy Corporation, a non-profit energy company. Citizens Energy, through its partnership with Medco Containment, provides at cost, AZT to low-income AIDS patients in several states. Mr. Kennedy was a graduate of Harvard College (BA, 1980) and the University of Virginia Law School (JD, 1984). Mr. Kennedy was also an active member of the boards of the Robert F. Kennedy Memorial, the John F. Kennedy Library Foundation, the Friends of Boston's Long Island Shelter, and The Pacific National Bank, Santa Ana, CA. During 1997, Mr. Kennedy passed away at the age of 39 and a replacement director has not been selected. ROBERT E. HALLAGAN, BS, MBA, 54, is a Director and Shareholder of APT Financial Services, Inc., and its subsidiaries. Mr. Hallagan is President of Heidrick & Struggles, Inc., a worldwide executive search firm. He has been associated with the company since 1976. Prior to this, he was an Executive Vice President and Treasurer for Hawthorne Securities, and for the Boston Stock Exchange. Mr. Hallagan is a graduate of Deerfield Academy, Williams College (BS, 1966), and Harvard Graduate School of Business (MBA, 1970). AFFILIATES: APT FINANCIAL SERVICES INC., ("APT" OR "Company") is a Delaware corporation organized on April 19, 1983. The Company's principal office is located at 500 West Cummings Park, Woburn, MA. APT Financial Services, Inc. and its wholly-owned subsidiaries, American Properties Team, Inc., APT Asset Management, Inc., American Securities Team, Inc. and American Investment Team, Inc. form a real estate service company providing property management, asset management, syndication, development and investor services to third- party owners, affiliates and partners. AMERICAN PROPERTIES TEAM, INC. ("APT") is a Massachusetts corporation organized on March 4, 1977. APT provides property management services to third party entities, primarily condominium associations. Currently, the Company manages approximately 4,000 condominium units in Massachusetts. APT ASSET MANAGEMENT, INC. is a Massachusetts corporation organized on August 17, 1982. The company has developed over $100 million in residential and commercial properties. In addition, APT Asset Management, Inc. serves as the General Partner for ten real estate limited partnerships one of which is publicly registered. The company conducts strategic planning for the limited partnerships including development, recapitalization, refinancing and sales. AMERICAN INVESTMENT TEAM, INC. ("AIT") is a Massachusetts corporation organized on August 13, 1982. AIT is an approved U.S. Department of Housing and Urban Development ("HUD") Title II nonsupervised mortgagee and was, until January 1, 1997, a NASD registered broker-dealer for both public and private placements. Until January 1, 1997, the company also served as investor services agent for over 570 clients who have invested $30 million of equity in the Company's developments. AMERICAN SECURITIES TEAM, INC. ("AST") is a Massachusetts corporation organized on December 19, 1996. AST commenced operations on January 1, 1997, at which date it acquired AIT's NASD registered broker-dealer and investor services operations. The company serves as investor services agent for over 570 clients who have invested $30 million of equity in the Company's developments. APT MANAGEMENT, INC. (formerly known as Curry Management, Inc.) is a Massachusetts corporation organized on June 19, 1987. The company provides property management services to both multi-family and commercial properties. Currently, the company manages over 5,000 units of multi-family housing and 75,000 square feet of commercial space in Massachusetts, New York and Indiana. Of the 5,000 units under management, 1,200 are subsidized units through Federal and State programs including Section 8, Section 13A, and Section 236. ITEM 11. EXECUTIVE COMPENSATION: The Partnership has no officers or directors. The Partnership does not pay or accrue any fees, salaries or other forms of compensation to directors or officers of the General Partner for their services. Under the terms of the Partnership Agreement, the General Partner and affiliates are entitled to receive compensation from the Partnership in consideration of certain services rendered to the Partnership by such parties. In addition, an affiliate of the General Partner, American Securities Team, Inc., receives from the Partnership an annual program management fee equal to .5% of invested assets plus the Local Limited Partnerships' annualized outstanding nonrecourse mortgage debt. The Local Limited Partnerships pay fees ranging from 4.5% to 6% of gross revenue collected to APT Management, Inc., an affiliate of the General Partner, for management of properties owned by the Local Limited Partnerships. Further, the Local Limited Partnerships have incurred $1,373,195 of fees from inception with their local general partners or affiliates for development, construction, administration and various operating and construction deficit guarantees. Included in these fees of the Local Limited Partnerships are fees totaling $618,929 paid or to be paid to John M. Curry or affiliated companies. Tabular information concerning salaries, bonuses and other types of compensation payable to executive officers has not been included in the annual report. As noted above, the Partnership has no executive officers. The levels of compensation payable to the General Partner and/or its affiliates is limited by the terms of the Partnership Agreement and may not be increased therefrom on a discretionary basis. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT: (a) Security Ownership of Certain Beneficial Owners The General Partner owns all of the outstanding general partnership interests of APT Housing Partners Limited Partnership. One person is known to own beneficially in excess of 5% of the outstanding limited partnership interests. As of March 15, 1998, the ownership interests by the General Partner and its affiliates and holders of 5% or greater of outstanding limited partnership interests is as listed: Title of Name and Address of Amount and Nature of Percentage of Class Beneficial Ownership Beneficial Ownership Class General APT Asset Management,Inc. $2000 Capital 2.000% Partner- 500 West Cummings Park contribution ship Suite 6050 directly Interest Woburn, MA 01801 owned Limited John M. Curry $5,000 Capital .1351% Partner- 211 Commodore Dr. contribution ship Jupiter, FL 33477 (5 units) directly Interest owned Chistopher Burden $275,000 Capital 7.4324% 731 Hospital Trust Bldg. contribution Providence, RI 02903 (275 units)directly owned APT Asset Management, Inc. $7,000 Capital 1.7568% 500 West Cummings Park contribution Suite 6050 (65 units)directly Woburn, MA 01801 owned (b) Changes in Control None ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS: The Partnership has and will continue to have certain relationships with affiliates of the General Partner, as discussed in Item 11 and also Note 5 to the financial statements in Item 14, which is incorporated herein by reference. However, there have been no direct financial transactions between the Partnership and the directors and officers of the General Partner. PART IV ITEM 14. FINANCIAL STATEMENTS, SCHEDULES, EXHIBITS AND REPORTS ON FORM 8K: Page (a) 1. Financial Statements Independent Auditor's Report of Robert Ercolini & Company LLP 16 - 17 Balance Sheets as of December 31, 1997 and 1996 18 Statements of Income for the years ended December 31, 1997, 1996 and 1995 19 Statements of Partners' Capital (Deficiency) for the years ended December 31, 1997, 1996 and 1995 20 Statements of Cash Flows for the years ended December 31, 1997, 1996 and 1995 21 Notes to Financial Statements 22 - 25 (a) 2. Financial Statement Schedules Schedules Applicable to Local Limited Partnerships Schedule III - Real Estate and Accumulated Depreciation as of December 31, 1997 26 Schedule IV - Mortgage Loans on Real Estate as of December 31, 1997 27 All other financial statement schedules have been omitted because the required information is shown in the financial statements or notes thereto or they are not applicable. Individual financial statements of the Local Limited Partnerships for the years ended December 31, 1997, 1996 and 1995 -Ashland Commons Associates 28 - 37 -Rockledge Apartments Associates 38 - 47 (a) 3. Exhibits The exhibits listed on the accompanying Index to Exhibits on page 48 are filed as part of this report or incorporated herein by reference. (b) Reports on Form 8-K No reports on Form 8-K were filed by the Partnership during the fiscal quarter ended December 31, 1997. INDEPENDENT AUDITOR'S REPORT To the Partners of APT Housing Partners Limited Partnership Woburn, Massachusetts We have audited the accompanying balance sheets of APT Housing Partners Limited Partnership (a Massachusetts Limited Partnership) as of December 31, 1997 and 1996, and the related statements of income, partners' capital (deficiency), and cash flows for each of the three years in the period ended December 31, 1997. 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 Ashland Commons Associates and Rockledge Apartments Associates ("Local Limited Partnerships"), the investments in which, as discussed in Note 3 to the financial statements, are accounted for by the equity method of accounting. The Partnership's cumulative share of losses of and distributions from the Local Limited Partnerships have exceeded its investments therein. Accordingly, the Partnership has reduced the investments to zero and has suspended application of the equity method. The financial statements of the Local Limited Partnerships were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to the amounts included for the Local Limited Partnerships, is based solely on the reports of the other auditors. We conducted our audits in accordance with generally accepted auditing standards. 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 other auditors provide a reasonable basis for our opinion. In our opinion, based on our audits and the reports of other auditors, the financial statements referred to above present fairly, in all material respects, the financial position of APT Housing Partners Limited Partnership as of December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules listed in the accompanying index on page 15 are presented for purposes of complying with the Securities and Exchange Commission's rules and are not a required part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements. In our opinion, which insofar as it relates to amounts included for the Local Limited Partnerships, is based on the reports of other auditors, these schedules fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. Robert Ercolini & Company LLP Boston, Massachusetts March 15, 1998 APT HOUSING PARTNERS LIMITED PARTNERSHIP BALANCE SHEETS ASSETS December 31, 1997 1996 Investment in Local Limited Partnerships $ - $ - Cash and cash equivalents 108,175 64,360 Total assets $108,175 $ 64,360 LIABILITIES AND PARTNERS' CAPITAL (DEFICIENCY) Liabilities: Accrued expenses - Affiliate $ 8,857 $ 9,091 Professional fees 8,500 8,500 Total liabilities 17,357 17,591 Commitments and contingencies Partners' capital (deficiency): General partner ( 37,509) ( 38,390) Limited partner, 3,700 partnership units authorized, issued and outstanding 128,327 85,159 Total partners' capital (deficiency) 90,818 46,769 Total liabilities and partners' capital (deficiency) $ 108,175 $ 64,360 See notes to financial statements. APT HOUSING PARTNERS LIMITED PARTNERSHIP STATEMENTS OF INCOME For the years ended December 31, 1997 1996 1995 Interest income $ 2,610 $ 1,389 $ 1,884 Operating expenses: Management fees - affiliate 36,907 37,141 37,353 Administrative 9,557 8,750 9,595 Total operating expenses 46,464 45,891 46,948 Loss before share of losses of and distributions from Local Limited Partnerships ( 43,854) ( 44,502) ( 45,064) Distribution from Local Limited Partnership 87,903 87,903 87,064 Share of losses of Local Limited Partnerships - - - Net income $ 44,049 $ 43,401 $ 42,000 Limited partners' interest in net income $ 43,168 $ 42,533 $ 41,160 Weighted average number of outstanding limited partnership units 3,700 3,700 3,700 Net income per limited partnership unit $ 11.67 $ 11.50 $ 11.12 See notes to financial statements APT HOUSING PARTNERS LIMITED PARTNERSHIP STATEMENTS OF PARTNERS' CAPITAL (DEFICIENCY) FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 and 1995 General Limited Partner Partners Total Balance, December 31, 1994 ($ 36,098) $ 197,466 $ 161,368 Net income 840 41,160 42,000 Distributions ( 4,000) ( 196,000) ( 200,000) Balance, December 31, 1995 ( 39,258) 42,626 3,368 Net income 868 42,533 43,401 Balance, December 31, 1996 ( 38,390) 85,159 46,769 Net income 881 43,168 44,049 Balance, December 31, 1997 ($ 37,509) $ 128,327 $ 90,818 See notes to financial statements APT HOUSING PARTNERS LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the years ended December 31, 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 44,049 $ 43,401 $ 42,000 Adjustments to reconcile net income to net cash provided by operating activities: Change in operating assets and liabilities: Increase (decrease) in accrued expenses ( 234) 13 ( 194) Net cash provided by operating activities 43,815 43,414 41,806 CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to limited partners - - ( 196,000) Distributions to general partner - - ( 4,000) Net cash used in financing activities - - ( 200,000) Net increase (decrease) in cash and cash equivalents 43,815 43,414 ( 154,194) Cash and cash equivalents, beginning of year 64,360 20,946 179,140 Cash and cash equivalents, end of year $ 108,175 $ 64,360 $ 20,946 See notes to financial statements APT HOUSING PARTNERS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 1. Organization and summary of significant accounting policies: Organization: APT Housing Partners Limited Partnership ("the Partnership"), organized as a Massachusetts Limited Partnership on June 8, 1983, was formed to invest in other Local Limited Partnerships ("the Local Limited Partnerships") which own and operate existing residential rental housing developments that are financed or operated with assistance from Federal, state and/or local governmental agencies. The Partnership has limited partnership interests in two Local Limited Partnerships, with a total of 156 residential apartment units, located within the Commonwealth of Massachusetts. The general partner of the Partnership is APT Asset Management, Inc. APT Asset Management, Inc. also owns 65 limited partnership units which it acquired at an aggregate cost of $7,000 during 1996. The Partnership Agreement, as amended, authorized the issuance of 3,700 limited partnership units, all of which were issued and are outstanding. Use of estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Investment in Local Limited Partnerships: The Partnership accounts for its investments in the Local Limited Partnerships by the equity method. Accordingly, the investments are carried at cost, adjusted for the Partnership's proportionate share of earnings or losses. The Partnership's share of losses on an investment is recognized only to the extent of the investment. Distributions received are reflected as reductions of the investments. Once an investment balance has been reduced to zero, subsequent distributions received by the Partnership are recognized as income. Income taxes: Federal and state income taxes are not included in the accompanying financial statements because these taxes, if any, are the responsibility of the individual Partners. Statement of cash flows: For purposes of the statement of cash flows, the Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents consist of money market funds and are carried at cost which approximates their market values. APT HOUSING PARTNERS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS - CONTINUED 1. Organization and summary of significant accounting policies - continued: Net income per limited partnership unit: Net income per limited partnership unit is computed by dividing net income available to limited partnership units by the weighted average number of outstanding limited partnership units during the year. 2. Allocation of benefits: In accordance with the Partnership Agreement, income, losses, credits and distributions are allocated 2% to the General Partner and 98% to the Limited Partners. During 1995, the Partnership made distributions of $4,000 to the General Partner and $196,000 to the Limited Partners. The distributions to the Limited Partners amounted to $52.97 per limited partnership unit. 3. Investment in Local Limited Partnerships: The Partnership has investments in two Local Limited Partnerships, Ashland Commons Associates ("Ashland") and Rockledge Apartments Associates ("Rockledge"). The Partnership's investments consist of $1,143,695 for a 95.5% limited partnership interest in Ashland which owns an apartment complex of 96 units located in Ashland, Massachusetts and $543,900 for a 97% limited partnership interest in Rockledge which owns an apartment complex of 60 units located in Wakefield, Massachusetts. The Local Limited Partnerships receive governmental assistance under programs which restrict the payment of annual cash distributions to the owners to specified maximum distributable amounts and to available surplus cash, as defined in the applicable Regulatory Agreement between the governmental agency and the Local Limited Partnership. Undistributed amounts are cumulative and may be distributed in subsequent years if there is available surplus cash. Based upon the Partnership's ownership interest in each of the Local Limited Partnerships, the maximum annual distributable amounts that can be made to the Partnership from Ashland and Rockledge are $87,903 and $9,552, respectively. For the years ended December 31, 1997, 1996 and 1995, the aggregate share of losses of the Local Limited Partnerships attributable to the Partnership amounted to $89,247, $11,813, and $22,868, respectively. The Partnership's cumulative share of losses of the Local Limited Partnerships exceeded its investments by $484,824 at December 31, 1997 and $395,577 at December 31, 1996. Accordingly, the investments have been reduced to zero and have not been reflected in the accompanying financial statements, and the Partnership has discontinued the application of the equity method. The Partnership will resume applying the equity method only after its allocable share of the net income of the Local Limited Partnerships equals the share of net losses not previously recognized during the period the equity method was suspended. The Partnership's tax bases of the investments in the Local Limited Partnerships aggregate and ($3,622,117) and ($3,469,767) at December 31, 1997 and 1996, respectively. During 1997, 1996 and 1995, the Partnership received distributions of $87,903, $87,903, and $87,064,respectively, from Ashland which were received subsequent to the reduction of the Partnership's investment balance to zero. Accordingly, these distributions have been included as income in the accompanying statements of income. APT HOUSING PARTNERS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS - CONTINUED 3. Investment in Local Limited Partnerships - continued: Summarized audited balance sheet information on a combined basis for the Local Limited Partnerships as of December 31, 1997 and 1996 was as follows: December 31, 1997 1996 Rental property $ 7,597,934 $ 7,597,934 Accumulated depreciation ( 4,039,745) ( 3,773,556) Cash and cash equivalents 463,361 464,868 Restricted assets and deposits 678,790 601,273 Other assets 114,273 119,041 Total assets 4,814,613 5,009,560 Mortgage loans payable 5,942,838 5,991,356 Other liabilities 206,975 168,384 Total liabilities 6,149,813 6,159,740 Partners' capital (deficiency) ($ 1,335,200) ($ 1,150,180) Composition of partners' capital (deficiency): General partners ($ 104,890) ($ 97,262) Limited Partners ( 1,230,310) ( 1,052,918) Partners' capital (deficiency) ($ 1,335,200) ($ 1,150,180) Summarized audited income statement information on a combined basis for the Local Limited Partnerships for the years ended December 31, 1997, 1996 and 1995 was as follows: For the years ended December 31, 1997 1996 1995 Revenues $ 1,661,392 $ 1,662,166 $ 1,655,345 Net income (loss) ($ 92,975) ($ 12,079) ($ 19,241) 4. Cash and cash equivalents: The Partnership maintains cash and cash equivalent balances in a financial institution located in the Commonwealth of Massachusetts. Accounts in the institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $100,000. At December 31, 1997, the Partnership's uninsured cash and cash equivalent balances totaled $10,612. At December 31, 1996, the Partnership's cash and cash equivalent balances were fully insured. APT HOUSING PARTNERS LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS - CONTINUED 5. Transactions with related parties: Commencing in January, 1997, American Securities Team, Inc., an affiliate of the General Partner of the Partnership, receives an annual program management fee. In 1996 and 1995, this fee was paid to American Investment Team, Inc., also an affiliate of the General Partner of the Partnership. This fee is for managing the affairs of the Partnership and for providing investor services to the Limited Partners. The fee is equal to .5% of invested assets plus the Local Limited Partnerships' annualized outstanding nonrecourse mortgage debt. Program management fees charged to operations for the years ended December 31, 1997, 1996 and 1995 amounted to $36,907, $37,141, and $37,353, respectively. Of these amounts, $8,857 and $9,091 remained unpaid at December 31, 1997 and 1996, respectively. 6. Fair value of financial instruments: The fair values of the Partnership's financial instruments have been determined at a specific point in time, based on relevant market information and information about the financial instrument. Estimates of fair value are subjective in nature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes in assumptions could affect the estimates. The carrying amounts of cash and cash equivalents and accrued expenses at December 31, 1997 and 1996 approximate their fair values because of the short-term maturity of these instruments. APT HOUSING PARTNERS LIMITED PARTNERSHIP SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION OF LOCAL LIMITED PARTNERSHIPS Property Pledged as Collateral DECEMBER 31, 1997 Life on which Depre Cost ciati- Intial Cost Capita- on in to Partnership lized Year Latest ______________ Subseq- Gross Amount at of Income Build- uent to which Carried At Con- Stat ings Acqui Close of Period Accum struc ement and sition: ________________ ulated tion/ Date is Descr- Encum- Impro- Impro- Improv- Deprec Renov Acqu Compu iption brances Land vements vements Land ments Total iation ation ired ted _____ ______ ____ ______ _______ ____ _____ _____ ______ _____ ____ _____ Apart- ment Comp- lexes Rock- ledge Apart- ments Assoc- iates Wake- field, MA (a)$90,000 $1,426,190 $462,170 $90,000 $1,888,360 $1,978,360 $1,142,946 1973 June,1984 25 years Ashl- and Commons Assoc- iates Ashl- and, MA (a)215,210 5,560,343(155,979) (b)215,210 5,404,364 5,619,574 2,896,799 1982 March, 1984 25 years $305,210 $6,986,533 $306,191 $305,210 $7,292,724 $7,597,934 $4,039,745 (a) Properties are subject to mortgage notes as shown in Schedule IV. (b) Net of retirements (c) The aggregate cost for Federal income tax purposes at December 31 ,1997 is as follows: Rockledge Apartments Associates - $ 1,978,360 Ashland Commons Associates - 4,970,347 Total $ 6,948,707 Cost of Property and Equipment Accumulated Depreciation Year Ended December 31, 1997 1996 1995 1997 1996 1995 Balance at beginning of period $7,597,934 $7,597,934 $7,597,934 $3,773,556 $3,507,367 $3,241,178 Additions during period Improvements Depreciation expense 266,189 266,189 266,189 Reductions during period: Dispositions Balance at end of period $7,597,934 $7,597,934 $7,597,934 $4,039,745 $3,773,556 $3,507,367 APT HOUSING PARTNERS LIMITED PARTNERSHIP SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE OF LOCAL LIMITED PARTNERSHIPS DECEMBER 31, 1997 Principal Amount of Loans Subject to Final Periodic Face Carrying Delinquent Mortgage Interest Maturity Payment Prior Amount of Amount of Principal Loan rate(s) Date Terms Leins Mortgages Mortgages(a) or Interest _______ _______ ________ ______ _____ __________ ___________ ___________ Rockledge Apartments Associates 7.5485% 7/1/19 monthly None $ 1,477,000 $ 1,228,943 None Ashland Commons Associates 11.728% 5/1/24 monthly None 5,108,100 4,713,895 None $ 6,585,100 $ 5,942,838 (a) The aggregate carrying amounts for Federal income tax purposes at December 31, 1997 are the same as those amounts listed above. Carrying Amount of Mortgages Year Ended December 31, 1997 1996 1995 Balance at beginning of period $ 5,991,356 $ 6,035,522 $ 6,075,751 Additions during period: New mortgage loans Other (describe) Deductions during period: Payments of principal ( 48,518) ( 44,166) ( 40,229) Other (describe) Balance at end of period $ 5,942,838 $ 5,991,356 $ 6,035,522 ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 REPORT ON FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 CONTENTS Page Auditors' Report 3 Financial Statements: Balance Sheet 4 Statement of Profit and Loss 5 Statement of Partners' Deficit 6 Statement of Cash Flows 7 Summary of Accounting Policies 8 Notes to Financial Statements 9 INDEPENDENT AUDITORS' REPORT February 3, 1998 To the Partners of Ashland Commons Associates Woburn, Massachusetts We have audited the accompanying balance sheet of Ashland Commons Associates, HUD Project No. 023-35279, (a limited partnership) as of December 31, 1997, 1996, and 1995 and the related statements of operations, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Ashland Commons Associates as of December 31, 1997, 1996, and 1995 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 BALANCE SHEET ASSETS DECEMBER 31, 1997 1996 1995 Property and Equipment (Mortgaged) - Note 2 Land $ 215,210 $ 215,210 $ 215,210 Building 5,030,902 5,030,902 5,030,902 Equipment and Furnishings 373,462 373,462 373,462 5,619,574 5,619,574 5,619,574 Less: Accumulated Depreciation 2,896,799 2,695,603 2,494,407 Net Property and Equipment 2,722,775 2,923,971 3,125,167 Cash and Cash Equivalents 219,932 300,024 320,686 Rents and Other Receivables 5,252 3,059 3,452 Prepaid Expenses 10,322 10,445 10,454 Escrow Deposits 75,536 61,340 68,513 Restricted Cash - Tenants' Security Deposits 14,612 14,503 12,643 Reserve for Replacements 266,538 225,309 185,439 Residual Receipts Reserve 165,700 85,458 61,366 Deferred Charges 93,433 98,341 103,249 $ 3,574,100 $ 3,722,450 $ 3,890,969 LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Mortgage Loan Payable - Note 2 $ 4,713,895 $ 4,738,829 $ 4,761,016 Accrued Interest Payable 46,071 46,314 46,531 Accounts Payable and Accrued Expenses 58,650 28,096 89,787 Tenants' Security Deposits Payable 14,612 13,912 12,643 Prepaid Rents 167 1 87 TOTAL LIABILITIES 4,833,395 4,827,152 4,910,064 COMMITMENTS AND CONTINGENCIES Notes 2,3 and 4 PARTNERS' DEFICIT - Note 4 General Partners (107,636) (100,679) (96,827) Limited Partners (1,151,659) (1,004,023) (922,268) TOTAL PARTNERS' DEFICIT (1,259,295) (1,104,702) (1,019,095) $ 3,574,100 $ 3,722,450 $ 3,890,969 See accompanying summary of accounting policies and notes to financial statements. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 1996 1995 RENT AND RELATED INCOME $ 1,222,987 $ 1,232,925 $ 1,221,215 OPERATING EXPENSES: Administrative and Marketing 155,371 162,765 155,877 Utilities 57,270 33,938 42,785 Maintenance and Repair 224,503 169,617 191,553 Real Estate Tax 66,827 72,905 75,666 Interest 577,914 580,735 583,309 Insurance 34,885 35,575 35,487 Depreciation and Amortization 206,104 206,104 206,104 Total Operating Expenses 1,322,874 1,261,639 1,290,781 OPERATING LOSS (99,887) (28,714) (69,566) OTHER INCOME - Interest 37,339 35,152 32,704 NET INCOME (LOSS) $ (62,548) $ 6,438 $ (36,862) NET INCOME (LOSS) TO GENERAL PARTNERS $ (2,815) $ 290 $ (1,659) NET INCOME (LOSS) TO LIMITED PARTNERS $ (59,733) $ 6,148 $ (35,203) See accompanying summary of accounting policies and notes to financial statements. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 STATEMENT OF PARTNERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 General Limited Total Partner Partners BALANCE, at December 31, 1994 $ (891,066) $ (91,066) $ (800,000) Net loss (36,862) (1,659) (35,203) Distributions (91,167) (4,102) (87,065) BALANCE, at December 31, 1995 (1,019,095) (96,827) (922,268) Net income 6,438 290 6,148 Distributions (92,045) (4,142) (87,903) BALANCE, at December 31, 1996 (1,104,702) (100,679) (1,004,023) Net loss (62,548) (2,815) (59,733) Distributions (92,045) (4,142) (87,903) BALANCE, at December 31, 1997 $ (1,259,295) $ (107,636) $ (1,151,659) Percent of interest in profit and losses 100% 4.5% 95.5% See accompanying summary of accounting policies and notes to financial statements. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 STATEMENT OF CASH FLOWS YEARS ENDED DECEMBER 31, 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (62,548) $ 6,438 $ (36,862) Adjustments to reconcile Net Income (Loss) to Net Cash (Used) by Operating Activities: Depreciation and Amortization 206,104 206,104 206,104 (Increase) Decrease in Receivables (2,193) 393 14,289 (Increase) Decrease in Prepaid Expenses 123 9 25,100 (Increase) Decrease in Escrow Deposits (14,196) 7,173 (29,564) (Increase) Decrease in Restricted Cash (109) (1,860) 1,155 Increase (Decrease) in Accounts Payable and Accrued Expenses 30,311 (61,908) (29,673) Increase (Decrease) in Tenants Security Deposits 700 1,269 (814) Increase (Decrease) in Prepaid Rents 166 (86) 55 Net Cash Provided (Used) by Operating Activities 158,358 157,532 149,790 CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) Decrease in Reserve for Replacements (41,229) (39,870) (22,245) (Increase) Decrease in Residual Receipts Reserve (80,242) (24,092) (11,965) Net Cash Provided (Used) by Investing Activities (121,471) (63,962) (34,210) CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in Mortgage Loan Payable (24,934) (22,187) (19,743) Distributions to Partners (92,045) (92,045) (91,167) Net Cash Used by Financing Activities (116,979) (114,232) (110,910) Net Increase (Decrease) in Cash and Cash Equivalents (80,092) (20,662) 4,670 Cash and Cash Equivalents, Beginning of Year 300,024 320,686 316,016 Cash and Cash Equivalents, End of Year $ 219,932 $300,024 $320,686 Supplemental Disclosure: Cash Paid During Year For Interest $ 576,623 $ 587,042 $ 583,419 See accompanying summary of accounting policies and notes to financial statements. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 SUMMARY OF ACCOUNTING POLICIES BASIS OF ACCOUNTING Financial Statements are prepared on the accrual basis and all development and construction costs were capitalized. The partnership, for tax purposes, charged to expense certain costs, such as interest and real estate taxes during construction. Accordingly, the cost of property and equipment shown in these statements includes $649,227 which has been deducted for tax purposes. The balance sheet does not give effect to any assets that the partners may have outside their interest in the partnership, nor to any personal obligations, including income taxes, of the individual partners. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are stated at cost. Depreciation of buildings is based on a 25 year life using the straight-line method for financial reporting purposes. For income tax purposes, accelerated depreciation methods are used. AMORTIZATION Amortization of financing costs is based on a forty year life using the straight-line method for both financial reporting and income tax purposes. INCOME TAXES The partnership, as an entity, is not subject to income tax. The partners' share of the loss for tax purposes is includable in their income tax returns. CASH AND CASH EQUIVALENTS For purposes of statement of cash flows, the Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 NOTES TO FINANCIAL STATEMENTS NOTE 1 - GENERAL Ashland Commons Associates is a Massachusetts limited partnership which was formed on September 29, 1982 for the purpose of owning, rehabilitating and operating a multi-unit apartment complex containing 96 residential units under the provisions of Section 221 (d)(4) of the National Housing Act. The partnership has a Section 8 contract with HUD to receive rent subsidy equal to approximately 83% of the total rental income. This contract expires September, 2002. NOTE 2 - MORTGAGE LOAN PAYABLE The mortgage note is insured by the Federal Housing Administration (FHA) and is payable in monthly installments of approximately $48,283, including interest at 11.728% per annum, through 2024. Annual principal payments will average approximately $35,868 each year for the next five years. The partnership is required to make monthly payments of $2,094 into a fund for replacements. Withdrawals from this fund can only be made upon the approval of the Federal Housing Commissioner. The partnership and its partners have no personal liability on the mortgage loan; the mortgaged property is the only collateral for the loan. NOTE 3 - RELATED PARTY TRANSACTIONS The partnership pays a 4.5% management fee based on gross revenues collected, which, at present, is capped at $43 PUPM, to an affiliate of a general partner, and also $506 per month for bookkeeping. Further, the management company is reimbursed at cost for salaries and wages and related employee expenses such as payroll taxes, health insurance, disability insurance, workers compensation and other insurance. NOTE 4 - CAPITAL DISTRIBUTION RESTRICTION No distribution of assets may be made except from "surplus cash" as defined in the regulatory agreement with the Federal Housing Administration. Total distributions are limited to $92,045 per annum as allowed by MHFA. ASHLAND COMMONS ASSOCIATES (a limited partnership) PROJECT NO: 023-35279 NOTES TO FINANCIAL STATEMENTS Continued NOTE 5 - FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Partnership's financial instruments have been determined at a specific point in time, based on relevant market information and information about the financial instrument. Estimates of fair value are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could affect the estimates. The carrying amounts of cash and cash equivalents, tenants' security deposits cash, tenant's accounts receivable, restricted deposits and funded reserves, and accounts payable and other liabilities approximate their fair market values because of the short-term maturity of these instruments. The Partnership obtained its mortgage financing under Section 221(d)(4) of the National Housing Act, as amended, and is supported by a Section 8 rent subsidy contract. Currently, no new mortgages are being insured and supported under these combined programs. Accordingly, management does not believe that it is practicable to estimate the fair value of its mortgage loan. Additional information pertinent to the value of this loan is provided in Note 2. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N REPORT ON FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995 CONTENTS Page Auditors' Report 3 Financial Statements: Balance Sheet 4 Statement of Profit and Loss 5 Statement of Partners' Deficit 6 Statement of Cash Flows 7 Summary of Accounting Policies 8 Notes to Financial Statements 9 INDEPENDENT AUDITORS' REPORT February 4, 1998 To the Partners of Rockledge Apartments Associates Woburn, Massachusetts We have audited the accompanying balance sheet of Rockledge Apartments Associates, Project No. 71-187-N, (a limited partnership) as of December 31, 1997, 1996, and 1995 and the related statements of operations, partners' deficit and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rockledge Apartments Associates as of December 31, 1997, 1996, and 1995 and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N BALANCE SHEET ASSETS DECEMBER 31, 1997 1996 1995 Property and Equipment (Mortgaged) - Note 2 Land $ 90,000 $ 90,000 $ 90,000 Building 1,624,825 1,624,825 1,624,825 Equipment and Furnishings 263,535 263,535 263,535 1,978,360 1,978,360 1,978,360 Less: Accumulated Depreciation 1,142,946 1,077,953 1,012,960 Net Property and Equipment 835,414 900,407 965,400 Cash and Cash Equivalents 243,429 164,844 204,669 Rents and Other Receivables 5,266 7,196 14,340 Escrow Deposits 26,604 16,219 17,420 Restricted Cash - Tenants' Security Deposits 25,287 25,103 24,086 Reserve for Replacements 104,513 173,341 118,074 Deferred Charges -- -- 55 $ 1,240,513 $ 1,287,110 $ 1,344,044 LIABILITIES AND PARTNERS' DEFICIT LIABILITIES: Mortgage Loan Payable - Note 2 $ 1,228,943 $ 1,252,527 $ 1,274,506 Note payable - Affiliate (Note 3) 28,052 35,922 43,665 Accrued Interest Payable 1,841 1,977 2,104 Accounts Payable and Accrued Expenses 28,731 18,802 26,862 Tenants' Security Deposits Payable 25,287 23,358 23,868 Prepaid Rents 3,564 2 -- TOTAL LIABILITIES 1,316,418 1,332,588 1,371,005 COMMITMENTS AND CONTINGENCIES Notes 2,3 and 4 PARTNERS' DEFICIT - Note 4 General Partner 2,746 3,659 4,215 Limited Partner (78,651) (49,137) (31,176) TOTAL PARTNERS' DEFICIT (75,905) (45,478) (26,961) $ 1,240,513 $ 1,287,110 $ 1,344,044 See accompanying summary of accounting policies and notes to financial statements. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1997 1996 1995 RENT AND RELATED INCOME $ 383,550 $ 375,241 $ 386,168 OPERATING EXPENSES: Administrative and Marketing 85,095 85,653 69,742 Utilities 47,791 46,256 44,090 Maintenance and Repair 167,323 157,368 125,273 Real Estate Tax 34,785 24,035 43,163 Interest 25,976 28,648 30,822 Insurance 5,530 5,598 5,578 Depreciation and Amortization 64,993 65,048 65,137 Total Operating Expenses 431,493 412,606 383,805 OPERATING INCOME (LOSS) (47,943) (37,365) 2,363 OTHER INCOME - Interest 17,516 18,848 15,258 NET INCOME (LOSS) $ (30,427) $ (18,517) $ 17,621 NET INCOME (LOSS) TO GENERAL PARTNERS $ (913) $ (556) $ 529 NET INCOME (LOSS) TO LIMITED PARTNERS $ (29,514) $ (17,961) $ 17,092 See accompanying summary of accounting policies and notes to financial statements. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N STATEMENT OF PARTNERS' DEFICIT FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 General Limited Total Partner Partners BALANCE, at December 31, 1994 $ (44,582) $ 3,686 $ (48,268) Net income 17,621 529 17,092 BALANCE, at December 31, 1995 (26,961) 4,215 (31,176) Net loss (18,517) (556) (17,961) BALANCE, at December 31, 1997 (45,478) 3,659 (49,137) Net loss (30,427) (913) (29,514) BALANCE, at December 31, 1997 $ (75,905) $ 2,746 $ (78,651) Percent of interest in profit and losses 100% 3% 97% See accompanying summary of accounting policies and notes to financial statements. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1997 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income (Loss) $ (30,427) $ (18,517) $ 17,621 Adjustments to reconcile Net Income (Loss) to Net Cash (Used) by Operating Activities: Depreciation and Amortization 64,993 65,048 65,137 (Increase) Decrease in Receivables 1,930 7,144 (3,540) (Increase) Decrease in Prepaid Expenses -- -- 5,745 (Increase) Decrease in Escrow Deposits (10,385) 1,201 (3,394) (Increase) Decrease in Restricted Cash (184) (1,017) (3,256) Increase (Decrease) in Accounts Payable and Accrued Expenses 9,793 (8,187) 5,757 Increase (Decrease) in Tenants Security Deposits 1,929 (510) 3,619 Increase (Decrease) in Prepaid Rents 3,562 2 (90) Net Cash Provided (Used) by Operating Activities 41,211 45,164 87,599 CASH FLOWS FROM INVESTING ACTIVITIES: (Increase) Decrease in Reserve for Replacements 68,828 (55,267) 4,628 Net Cash Provided (Used) by Investing Activities 68,828 (55,267) 4,628 CASH FLOWS FROM FINANCING ACTIVITIES: Decrease in Mortgage Loan Payable (23,584) (21,979) (20,486) Note payable - affiliate (7,870) (7,743) (1,812) Net Cash Used by Financing Activities (31,454) (29,722) (22,298) Net Increase (Decrease) in Cash and Cash Equivalents 78,585 (39,825) 69,929 Cash and Cash Equivalents, Beginning of Year 164,844 204,669 134,740 Cash and Cash Equivalents, End of Year $ 243,429 $164,844 $204,669 Supplemental Disclosure: Cash Paid During Year For Interest $ 24,488 $ 26,220 $ 33,645 See accompanying summary of accounting policies and notes to financial statements. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N SUMMARY OF ACCOUNTING POLICIES BASIS OF ACCOUNTING Financial Statements are prepared on the accrual basis and all development and construction costs were capitalized. The balance sheet does not give effect to any assets that the partners may have outside their interest in the partnership, nor to any personal obligations, including income taxes, of the individual partners. PROPERTY, EQUIPMENT AND DEPRECIATION Property and equipment are stated at cost. Depreciation of buildings and equipment is based on a twenty-five year life and a five year life respectively. The ACRS method is used for tax purposes. INCOME TAXES The partnership, as an entity, is not subject to income tax. The partners' share of the loss for tax purposes is includable in their income tax returns. ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the partnership considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N NOTES TO FINANCIAL STATEMENTS NOTE 1 - GENERAL Rockledge Apartments Associates is a Massachusetts limited partnership which was formed on February 24, 1973 for the purpose of owning, rehabilitating and operating a multi-unit apartment complex containing 60 residential units. The partnership has a contract with HUD to receive rent subsidy equal to approximately 84% of the total rental income. The contract expires in May, 2018. NOTE 2 - MORTGAGE LOAN PAYABLE The mortgage note is payable to the Massachusetts Housing Finance Agency (MHFA) over a forty year period, in monthly installments of approximately $3,841 (after interest subsidy payments of $6,597 monthly), including interest at 7.5485% per annum, through 2018. Principal payments for the next five years are as follows: 1998 $ 25,310 1999 27,116 2000 29,163 2001 31,311 2002 33,623 The partnership is required to make monthly payments of $7,418 to MHFA for real estate taxes, insurance, and a reserve for replacements. Withdrawals must have the approval of MHFA. The partnership and its partners have no personal liability on the mortgage loan; the mortgaged property is the only collateral for the loan. NOTE 3 - NOTE PAYABLE The note payable to affiliate bears interest at the rate of 12% per annum for a period of 15 years at which time the note is payable in full. Interest is payable only from Distributable Cash and residual amounts of Net Capital Transactions proceeds. ROCKLEDGE APARTMENTS ASSOCIATES (a limited partnership) PROJECT NO: 71-187-N NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 4 - RELATED PARTY TRANSACTIONS The partnership pays to an affiliate of a general partner a monthly management fee of 6% of rents collected and a monthly bookkeeping fee of $385, and an annual fee of $1,862 to another affiliate of a general partner. NOTE 5 - CAPITAL DISTRIBUTION RESTRICTION No distribution of assets may be made except from "surplus cash" as defined in the regulatory agreement with the MHFA. Annual distributions are limited to $9,847, as allowed by MHFA. NOTE 6 - FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Partnership's financial instruments have been determined at a specific point in time, based on relevant market information and information about the financial instrument. Estimates of fair value are subjective in nature and involve uncertainties and matters of significant judgement and therefore cannot be determined with precision. Changes in assumptions could affect the estimates. The carrying amounts of cash and cash equivalents, tenants' security deposits cash, tenant's accounts receivable, restricted deposits and funded reserves, and accounts payable and other liabilities approximate their fair market values because of the short-term maturity of these instruments. The Partnership obtained its mortgage financing under Section 236 of the National Housing Act, as amended, and is supported by a Section 8 rent subsidy contract. Currently, no new mortgages are being insured under these combined programs. Accordingly, management does not believe that it is practicable to estimate the fair value of its mortgage loan. Additional information pertinent to the value of this loan is provided in Note 2. INDEX TO EXHIBITS Sequentially Exhibit Numbered No. Description Page (3) Articles of Incorporation and By-laws: The registrant is not incorporated. The partnership Agreement was filed with the registrant's Registration Statement on Form S-11 (#2-84474) and is incorporated herein by reference. (10.1) Purchase and Sale Agreement, dated as of March 30, 1984, relating to Ashland Commons Associates (filed with Registrant's Form 8-K dated March 30, 1984 and incorporated herein by reference). (10.2) Purchase and Sale Agreement, dated as of April 30, 1984, relating to Historic Cohoes, II (filed with Registrant's Form 8-K dated April 30,1984 and incorporated herein by reference). (10.3) Purchase and Sale Agreement, dated as of June 22, 1984, relating to Rockledge Apartment Associates (filed with Registrant's Form 8-K dated June 22, 1984 and incorporated herein by reference). (10.4) Withdrawal of APT Housing Partners Limited Partners as a Limited Partner in a Local Limited Partnership, dated as of December 18, 1986, relating to Historic Cohoes, II, (filed with Registrant's Form 8-K dated March 30, 1987 and incorporated herein by reference). (27) Financial data schedule. 49 APT HOUSING PARTNERS LIMITED PARTNERSHIP FINANCIAL DATA SCHEDULE This schedule contains summary financial information extracted from the balance sheet and statement of income on pages 18 through 19 of the Partnership's 1997 Annual Report on Form 10-K and is qualified in its entirety by reference to such financial statements. Item Number Item Description Year End 1997 5-02(1) Cash and cash items $ 108,175 5-02(2) Marketable securities -0- 5-02(3)(a)(1)Notes and accounts receivable-trade -0- 5-02(4) Allowance for doubtful accounts -0- 5-02(6) Inventory -0- 5-02(9) Total current assets 108,175 5-02(13) Property, plant and equipment -0- 5-02(14) Accumulated depreciation -0- 5-02(18) Total assets 108,175 5-02(21) Total current liabilities 17,357 5-02(22) Bonds, mortgages and similar debt -0- 5-02(28) Preferred stock-mandatory redemption -0- 5-02(29) Preferred stock-no mandatory redemption -0- 5-02(30) Common stock -0- 5-02(31) Other stockholders' equity 90,818 5-02(32) Total liabilities and stockholders' equity 108,175 Item Number Item Description Year Ended 1997 5-03(b)1(a) Net sales of tangible products $ -0- 5-03(b)1 Total revenues 90,513 5-03(b)2(a) Cost of tangible goods sold -0- 5-03(b)2 Total costs and expenses applicable to sales and revenues -0- 5-03(b)3 Other costs and expenses 46,464 5-03(b)5 Provision for doubtful accounts and notes -0- 5-03(b)(8) Interest and amortization of debt discount -0- 5-03(b)(10) Income before taxes and other items 44,049 5-03(b)(11) Income tax expense -0- 5-03(b)(14) Income/loss continuing operations 44,049 5-03(b)(15) Discontinued operations -0- 5-03(b)(17) Extraordinary items -0- 5-03(b)(18) Cumulative effect- changes in accounting principles -0- 5-03(b)(19) Net income or loss 44,049 5-03(b)(20) Earnings per share-primary 11.67 5-03(b)(20) Earnings per share-fully diluted 11.67 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. APT HOUSING PARTNERS LIMITED PARTNERSHIP By: APT Asset Management, Inc. General Partner By:[SIGNATURE] Date Jeff E. Ewing - President APT ASSET MANAGEMENT, INC. WP7/APT/APTH97S.10K See notes to financial statements. EX-27 2
5 12-MOS DEC-31-1997 DEC-31-1997 108175 0 0 0 0 108175 0 0 108175 17357 0 0 0 0 90818 108175 0 90513 0 0 46464 0 0 44049 0 44049 0 0 0 44049 11.67 11.67
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