10QSB 1 aipl4.txt AIPL4 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 0-14283 ANGELES INCOME PROPERTIES, LTD. IV (Exact name of small business issuer as specified in its charter) California 95-3974194 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 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) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED STATEMENT OF NET LIABILITIES IN LIQUIDATION (Unaudited) (in thousands) September 30, 2001 Assets Cash and cash equivalents $ 185 Receivables and deposits 174 Restricted escrow 675 Other assets 22 Investment property 11,840 12,896 Liabilities Accounts payable 107 Tenant security deposit liabilities 10 Accrued property taxes 87 Other liabilities 186 Mortgage payable 12,509 Estimated costs during the period of liquidation 124 13,023 Net liabilities in liquidation $ (127) See Accompanying Notes to Consolidated Financial Statements b) ANGELES INCOME PROPERTIES, LTD. IV STATEMENT OF CHANGES IN NET LIABILITIES IN LIQUIDATION (Unaudited) (in thousands) Period From August 23 through September 30, 2001 Net liabilities in liquidation at August 22, 2001 $ (127) Changes in net liabilities in liquidation attributed to: Decrease in cash and cash equivalents (165) Increase in receivables and deposits 50 Increase in restricted escrows 61 Increase in accounts payable (86) Decrease in other liabilities 100 Decrease in mortgage note payable 28 Decrease in estimated costs during the period of liquidation 12 Net liabilities in liquidation at September 30, 2001 $ (127) See Accompanying Notes to Consolidated Financial Statements c) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) August 22, 2001
Assets Cash and cash equivalents $ 350 Receivables and deposits, net of allowance for doubtful accounts of $169 124 Restricted escrows 614 Other assets 366 Investment property: Land $ 2,414 Buildings and related personal property 18,205 20,619 Less accumulated depreciation (13,969) 6,650 $ 8,104 Liabilities and Partners' Deficit Liabilities Accounts payable $ 21 Tenant security deposit liabilities 10 Accrued property taxes 87 Other liabilities 287 Mortgage note payable 14,507 Partners' Deficit General partner $ (158) Limited partners (131,585 units issued and outstanding) (6,650) (6,808) $ 8,104 See Accompanying Notes to Consolidated Financial Statements
d) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except per unit data)
Period From Period From July 1 through Three Months Ended January 1 through Nine Months Ended August 22, September 30, August 22, September 30, 2001 2000 2001 2000 Revenues: Rental income $ 504 $ 824 $ 2,031 $ 2,565 Other income 48 19 69 61 Total revenues 552 843 2,100 2,626 Expenses: Operating 241 449 956 1,208 General and 19 63 137 143 administrative Depreciation 157 237 627 711 Interest 230 376 959 1,102 Property taxes 20 30 81 108 Bad debt (recovery) expense, net -- (18) 67 51 Total expenses 667 1,137 2,827 3,323 Net loss $ (115) $ (294) $ (727) $ (697) Net loss allocated to general partner (2%) $ (2) $ (6) $ (15) $ (14) Net loss allocated to limited partners (98%) (113) (288) (712) (683) $ (115) $ (294) $ (727) $ (697) Net loss per limited $ (0.86) $ (2.19) $ (5.41) $ (5.19) partnership unit Distributions per limited partnership unit $ -- $ -- $ -- $ 7.08
See Accompanying Notes to Consolidated Financial Statements e) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT/NET LIABILITIES IN LIQUIDATION (Unaudited) (in thousands, except unit data)
Limited Partnership General Limited Units Partner Partners Total Original capital contributions 131,800 $ 1 $65,900 $65,901 Partners' deficit at December 31, 2000 131,585 $ (138) $(5,938) $(6,076) Distributions to partners -- (5) -- (5) Net loss for the period ended August 22, 2001 -- (15) (712) (727) Partners' deficit at August 22, 2001 131,585 $ (158) $(6,650) (6,808) Adjustment to liquidation basis (Note C) 6,681 Net liabilities in liquidation at August 22, 2001 $ (127) See Accompanying Notes to Consolidated Financial Statements
f) ANGELES INCOME PROPERTIES, LTD. IV CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Period From January 1 through Nine Months Ended August 22, September 30, 2001 2000 Cash flows from operating activities: Net loss $ (727) $ (697) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation 627 711 Amortization of loan costs and leasing commissions 41 86 Bad debt expense, net 67 51 Change in accounts: Receivables and deposits 166 295 Other assets (32) 40 Accounts payable (79) 1 Tenant security deposit liabilities (6) 10 Accrued property taxes (41) (32) Other liabilities 43 (9) Net cash provided by operating activities 59 456 Cash flows from investing activities: Lease commission paid -- (59) Property improvements and replacements (11) (69) Net deposits to restricted escrows (129) (144) Deposit on sale of investment in joint venture 50 -- Net cash used in investing activities (90) (272) Cash flows from financing activities: Payments on mortgage note payable (150) (154) Distribution to partners (94) (950) Net cash used in financing activities (244) (1,104) Net decrease in cash and cash equivalents (275) (920) Cash and cash equivalents at beginning of period 625 1,170 Cash and cash equivalents at end of period $ 350 $ 250 Supplemental disclosure of cash flow information: Cash paid for interest $ 949 $ 1,082 A distribution of approximately $89,000 was declared and accrued at December 31, 2000. This distribution was paid during the period ended August 22, 2001. See Accompanying Notes to Consolidated Financial Statements
g) ANGELES INCOME PROPERTIES, LTD. IV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation As of August 22, 2001, Angeles Income Properties, Ltd. IV (the "Partnership" or "Registrant") adopted the liquidation basis of accounting due to the sale of its joint venture interest in its sole investment property. Upon passing the one-year right of rescission under the sale of the Partnership's joint venture interest entered into on August 22, 2001, the Partnership is expected to terminate. The Partnership and ARC II have entered into a contract with an unrelated third party to sell their ownership in the joint venture that indirectly owns Factory Merchants Mall. The contract closed on August 22, 2001. The Partnership received $49,750 for its 99.5% ownership and Angeles Realty Corporation ("ARC II") received $250 for its 0.5% ownership of the joint venture. For a period of one year after the transaction, should the lender declare a default under the mortgage debt encumbering the Factory Merchants Mall property as a result of this transfer or prior act or omission of the lower tier partnership which owns the Factory Merchants Mall property, the purchaser has the right to transfer the ownership interest back to the Partnership and ARC II with the cash being paid back to the purchaser. Assuming that the aforementioned recission right does not occur, the Partnership will then be terminated. This sale transaction will be complete upon the elapse of the right of recission. Until that time, the purchaser can transfer the ownership interest back to the Partnership and ARC II. Therefore, the consolidated statement of net liabilities in liquidation will include the operations of the joint venture property. The funds received by the Partnership for its joint venture interest are currently being considered as a deposit from the purchaser in advance of the sales transaction completion and are included in other liabilities on the accompanying statement of net liabilities in liquidation. As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at August 22, 2001, to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation of the Partnership and estimated operations of the joint venture property. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon estimates of ARC II (or the "General Partner") as of the date of the consolidated financial statements. Included in liabilities in the statement of net liabilities in liquidation as of September 30, 2001 is approximately $124,000 of cost, net of income, that the General Partner estimates will be incurred during the period of liquidation based on the assumption that the liquidation process will be completed by August 22, 2002. If the mortgage encumbering the joint venture property is refinanced during the one year right of rescission period without the current mortgage being called due as the result of the change in ownership of the joint venture, the liquidation period will be shorter than currently projected. Principles of Consolidation The consolidated financial statements include a joint venture which owns Factory Merchants AIP IV, L.P., and AIP IV Factory GP, LLC., which the Partnership held a majority interest in until its sale on August 22, 2001. Due to the nature of the right of rescission, the statement of net liabilities in liquidation includes amounts for the joint venture property. All significant interentity balances have been eliminated. The General Partner is an affiliate of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. Note B - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following amounts were paid or accrued to the General Partner and affiliates during the nine months ended September 30, 2001 and 2000, respectively: 2001 2000 (in thousands) Reimbursement for services of affiliates (included in general and administrative expense) $ 65 $ 36 An affiliate of the General Partner received reimbursement of accountable administrative expenses amounting to approximately $65,000 and $36,000 for the nine months ended September 30, 2001 and 2000, respectively. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 28,838 limited partnership units in the Partnership representing 21.92% 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. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. Note C - Adjustment to Liquidation Basis of Accounting At August 22, 2001, in accordance with the liquidation basis of accounting, assets were adjusted to their estimated net realizable value and liabilities were adjusted to their settlement amount. The net adjustment required to convert to the liquidation basis of accounting was an increase in net assets of approximately $6,681,000 which is included in the Statement of Changes in Partners' Deficit/Net Liabilities In Liquidation. The adjustments are summarized as follows: Increase in Net Assets (in thousands) Adjustment from book value of property and improvements to estimated net realizable value $ 5,190 Adjustment of mortgage note payable to estimated settlement amount 1,970 Adjustment of other assets and liabilities, net (479) Net increase in net assets $ 6,681 Note D - Distribution During the period ended August 22, 2001, the Partnership paid distributions of approximately $89,000 from operations, of which approximately $87,000 ($0.66 per limited partnership unit) is allocable to the limited partners. This distribution was declared and accrued as of December 31, 2000. During the nine months ended September 30, 2000, the Partnership paid a cash distribution from operations of approximately $950,000, of which approximately $931,000 ($7.08 per limited partnership unit) was paid to the limited partners. In conjunction with the transfer of funds from the majority-owned joint venture to the Partnership during the period ended August 22, 2001, approximately $5,000 was distributed to the general partner of the majority-owned joint venture. Note E - Segment Reporting Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Note F - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which, together with a demurrer filed by other defendants, is currently scheduled to be heard on November 15, 2001. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. The matters are currently scheduled to be heard on November 15, 2001. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosures contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussions of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operation. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment property consists of one commercial property. The following table sets forth the average occupancy of the property for the period ended August 22, 2001 and the nine months ended September 30, 2000, respectively: Average Occupancy Property 2001 2000 Factory Merchants Mall 86% 90% Pigeon Forge, Tennessee As of August 22, 2001, Angeles Income Properties, Ltd. IV (the "Partnership" or "Registrant") adopted the liquidation basis of accounting due to the sale of its joint venture interest in its sole investment property. Upon passing the one-year right of rescission under the sale of the Partnership's joint venture interest entered into on August 22, 2001, the Partnership is expected to terminate. The Partnership and ARC II have entered into a contract with an unrelated third party to sell their ownership in the joint venture that indirectly owns Factory Merchants Mall. The contract closed on August 22, 2001. The Partnership received $49,750 for its 99.5% ownership and Angeles Realty Corporation ("ARC II") received $250 for its 0.5% ownership of the joint venture. For a period of one year after the transaction, should the lender declare a default under the mortgage debt encumbering the Factory Merchants Mall property as a result of this transfer or prior act or omission of the lower tier partnership which owns the Factory Merchants Mall property, the purchaser has the right to transfer the ownership interest back to the Partnership and ARC II with the cash being paid back to the purchaser. Assuming that the aforementioned recission right does not occur, the Partnership will then be terminated. This sale transaction will be complete upon the elapse of the right of recission. Until that time, the purchaser can transfer the ownership interest back to the Partnership and ARC II. Therefore, the consolidated statement of net liabilities in liquidation will include the operations of the joint venture property. The funds received by the Partnership for its joint venture interest are currently being considered as a deposit from the purchaser in advance of the sales transaction completion and are included in other liabilities on the accompanying statement of net liabilities in liquidation. As a result of the decision to liquidate the Partnership, the Partnership changed its basis of accounting for its financial statements at August 22, 2001, to the liquidation basis of accounting. Consequently, assets have been valued at estimated net realizable value and liabilities are presented at their estimated settlement amounts, including estimated costs associated with carrying out the liquidation of the Partnership and estimated operations of the joint venture property. The valuation of assets and liabilities necessarily requires many estimates and assumptions and there are substantial uncertainties in carrying out the liquidation. The actual realization of assets and settlement of liabilities could be higher or lower than amounts indicated and is based upon estimates of ARC II (or the "General Partner") as of the date of the consolidated financial statements. Included in liabilities in the statement of net liabilities in liquidation as of September 30, 2001 is approximately $124,000 of cost, net of income, that the General Partner estimates will be incurred during the period of liquidation based on the assumption that the liquidation process will be completed by August 22, 2002. If the mortgage encumbering the joint venture property is refinanced during the one year right of rescission period without the current mortgage being called due as the result of the change in ownership of the joint venture, the liquidation period will be shorter than currently projected. Results from Operations The Partnership realized a net loss of approximately $727,000 for the period ending August 22, 2001 as compared to a net loss of approximately $697,000 for the nine months ended September 30, 2000. The increase in net loss for the period ending August 22, 2001 as compared to the nine months ended September 30, 2000 is due to a decrease in total revenues partially offset by a decrease in total expenses. The majority of the increase in net loss is attributable to reporting less than nine months of activity for 2001, resulting from the adoption of liquidation basis on August 22, 2001. Excluding the effect of the difference in time periods being reported, total revenues decreased due to a decrease in rental income partially offset by an increase in other income. Rental income decreased due to decreased rent revenue and percentage rent caused by increased competition in the local market for comparable commercial space. Other income increased primarily due to an increase in lease cancellation fees partially offset by a decrease in interest income due a decrease in cash held in interest bearing accounts. Excluding the effect of the difference in time periods being reported, total expenses decreased due to a decrease in operating and property tax expenses partially offset by an increase in bad debt expense. The decrease in operating expense is due lower merchant association dues, which are affected by the decrease in rental income at Factory Merchant Mall. The decrease in property tax expense is due to a lowering of assessed value on the Partnership's remaining property through August 22, 2001. Bad debt expense increased due to an increase in past due account receivables. Included in general and administrative expenses for the period ended August 22, 2001 and the nine months ended September 30, 2000, are reimbursements to the General Partner allowed under the Partnership Agreement associated with its management of the Partnership. In addition, costs associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. Liquidity and Capital Resources At August 22, 2001, the Partnership had cash and cash equivalents of approximately $350,000 as compared to approximately $250,000 at September 30, 2000. For the period ended August 22, 2001, cash and cash equivalents decreased approximately $275,000 from the Partnership's year ended December 31, 2000. This decrease in cash and cash equivalents is due to approximately $90,000 of cash used in investing activities and approximately $244,000 of cash used in financing activities partially offset by approximately $59,000 of cash provided by operating activities. The cash used in investing activities consists of net deposits to restricted escrows maintained by the mortgage lender and, to a lesser extent, property improvements and replacements offset by the deposit received from the sale of joint venture interest. Cash used in financing activities consists of payments of principal made on the mortgage encumbering Factory Merchants Mall and payment of a distribution accrued in the prior year. The Partnership invests its working capital reserves in interest bearing accounts. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical asset and other operating needs of the Registrant and to comply with Federal, state, and local legal and regulatory requirements. Capital improvements planned for the Partnership's property is detailed below. Factory Merchants Mall During the period ended August 22, 2001, the Partnership completed approximately $11,000 of capital improvements consisting of parking area improvements and tenant improvements. These improvements were funded from operating cash flow. During the period ended August 22, 2001, the Partnership paid distributions of approximately $89,000 from operations, of which approximately $87,000 ($0.66 per limited partnership unit) is allocable to the limited partners. This distribution was declared and accrued as of December 31, 2000. During the nine months ended September 30, 2000, the Partnership paid a cash distribution from operations of approximately $950,000, of which approximately $931,000 ($7.08 per limited partnership unit) was paid to the limited partners. In conjunction with the transfer of funds from the majority-owned joint venture to the Partnership during the period ended August 22, 2001, approximately $5,000 was distributed to the general partner of the majority-owned joint venture. The attached statement of net assets in liquidation includes cash of both the Partnership and the joint venture property. However, the cash of the joint venture property is currently not available to the Partnership. Once the right of rescission expires and when the Partnership terminates, any cash available after payment of Partnership termination costs will be distributed to the partners. However, based on current estimates, there will be no cash available to distribute at that time. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 28,838 limited partnership units in the Partnership representing 21.92% 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. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the General Partner because of its affiliation with the General Partner. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. (the "Nuanes action") in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging, among other things, the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which, together with a demurrer filed by other defendants, is currently scheduled to be heard on November 15, 2001. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. The matters are currently scheduled to be heard on November 15, 2001. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: None. b) Reports on Form 8-K: Current Report on Form 8-K dated August 23, 2001 and filed August 28, 2001, disclosing the sale of the Partnership's and ARC II's ownership in the joint venture that indirectly owns Factory Merchants Mall. SIGNATURES In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES INCOME PROPERTIES, LTD. IV By: Angeles Realty Corporation II 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: