-----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, Lw8EAbgyoW6Ox+/zeGgdPJYmF5N5X8hd1FwM1SFNJ/ADUbcsjinYEFREzJLumZPH mxlspbQVzkfx9fDYcTvtag== 0000810663-02-000042.txt : 20020701 0000810663-02-000042.hdr.sgml : 20020701 20020701142843 ACCESSION NUMBER: 0000810663-02-000042 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020701 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L P IV CENTRAL INDEX KEY: 0000845035 STANDARD INDUSTRIAL CLASSIFICATION: OPERATORS OF APARTMENT BUILDINGS [6513] IRS NUMBER: 043044617 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19765 FILM NUMBER: 02693370 BUSINESS ADDRESS: STREET 1: 101 ARCH ST 16TH FLR CITY: BOSTON STATE: MA ZIP: 02110-1106 BUSINESS PHONE: 6174393911 MAIL ADDRESS: STREET 2: 101 ARCH STREET 16TH FL CITY: BOSTON STATE: MA ZIP: 021101106 10KSB 1 qh410k02.txt QH 4 10K 2002 June 28, 2002 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Boston Financial Qualified Housing Tax Credits L.P. IV Form 10-KSB Annual Report for Year Ended March 31, 2002 File Number 0-19765 Dear Sir/Madam: Pursuant to the requirements of section 15(d) of the Securities Exchange Act of 1934, filed herewith is one copy of subject report. Very truly yours, /s/Stephen Guilmette Stephen Guilmette Assistant Controller QH410K-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-KSB (Mark One) [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2002 ------------------------------------------------------ OR [ ] 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 0-19765 Boston Financial Qualified Housing Tax Credits L.P. IV - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Massachusetts 04-3044617 - ---------------------------------------- ------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 101 Arch Street, Boston, Massachusetts 02110-1106 - ----------------------------------------------- ------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 439-3911 ----------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered ------------------- -------------------------------- None None Securities registered pursuant to Section 12(g) of the Act: UNITS OF LIMITED PARTNERSHIP INTEREST (Title of Class) 100,000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Subsection 229.405 of this chapter) 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-KSB or any amendment to this Form 10-KSB. [ X ] State the aggregate sales price of partnership units held by nonaffiliates of the registrant. $67,653,000 as of March 31, 2002 -------------------------------- K-23 DOCUMENTS INCORPORATED BY REFERENCE: LIST THE FOLLOWING DOCUMENTS IF INCORPORATED BY REFERENCE AND THE PART OF THE FORM 10-KSB INTO WHICH THE DOCUMENT IS INCORPORATED: (1) ANY ANNUAL REPORT TO SECURITY HOLDERS: (2) ANY PROXY OR INFORMATION STATEMENT: AND (3) ANY PROSPECTUS FILED PURSUANT TO RULE 424(b) OR (c) UNDER THE SECURITIES ACT OF 1933. Part of Report on Form 10-KSB into Which the Document Documents incorporated by reference is Incorporated - ----------------------------------- ---------------------- Post-effective Amendments No. 1 through 3 to the Registration Statement, File # 33-26394 Part I, Item 1 Acquisition Reports Part I, Item 1 Prospectus - Sections Entitled: "Investment Objectives and Policies - Principal Investment Policies" Part I, Item 1 "Estimated Use of Proceeds" Part III, Item 12 "Management Compensation and Fees" Part III, Item 12 "Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions" Part III, Item 12 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED MARCH 31, 2002 TABLE OF CONTENTS PART I Page No. - ------ -------- Item 1 Business K-3 Item 2 Properties K-6 Item 3 Legal Proceedings K-13 Item 4 Submission of Matters to a Vote of Security Holders K-14 PART II Item 5 Market for the Registrant's Units and Related Security Holder Matters K-14 Item 6 Management's Discussion and Analysis of Financial Condition and Results of Operations K-14 Item 7 Financial Statements and Supplementary Data K-18 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure K-18 PART III Item 9 Directors and Executive Officers of the Registrant K-19 Item 10 Management Remuneration K-20 Item 11 Security Ownership of Certain Beneficial Owners and Management K-20 Item 12 Certain Relationships and Related Transactions K-20 Item 13 Exhibits and Reports on Form 8-K K-22 SIGNATURES K-23 - ---------- PART I Item 1. Business Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") is a limited partnership formed on March 30, 1989 under the Revised Uniform Limited Partnership Act of the Commonwealth of Massachusetts. The Partnership's partnership agreement ("Partnership Agreement") authorized the sale of up to 100,000 units of Limited Partnership Interest ("Units") at $1,000 per Unit, adjusted for certain discounts. The Partnership raised $67,653,000 ("Gross Proceeds"), net of discounts of $390,000, through the sale of 68,043 Units. Such amounts exclude five unregistered Units previously acquired for $5,000 by the Initial Limited Partner, which is also one of the General Partners. The offering of Units terminated on January 31, 1990. No further sale of Units is expected. The Partnership is engaged solely in the business of real estate investment. Therefore, a presentation of information about industry segments is not applicable and would not be material to an understanding of the Partnership's business taken as a whole. The Partnership has invested as a limited partner in other limited partnerships ("Local Limited Partnerships") which own and operate residential apartment complexes ("Properties"), most of which benefit from some form of federal, state or local assistance programs and all of which qualify for the low-income housing tax credits ("Tax Credits") added to the Internal Revenue Code (the "Code") by the Tax Reform Act of 1986. The investment objectives of the Partnership include the following: (i) to provide current tax benefits in the form of Tax Credits which qualified limited partners may use to offset their federal income tax liability; (ii) to preserve and protect the Partnership's capital; (iii) to provide limited cash distributions from Property operations which are not expected to constitute taxable income during the expected duration of the Partnership's operations; and (iv) to provide cash distributions from sale or refinancing transactions. There cannot be any assurance that the Partnership will attain any or all of these investment objectives. A more detailed discussion of these investment objectives, along with the risks in achieving them, is contained in the section of the prospectus entitled "Investment Objectives and Policies - Principal Investment Policies" which is herein incorporated by this reference. Table A on the following page lists the Properties originally acquired by the Local Limited Partnerships in which the Partnership has invested. Item 6 of this Report contains other significant information with respect to such Local Limited Partnerships. As required by applicable rules, the terms of the acquisition of Local Limited Partnership interests have been described in supplements to the Prospectus and collected in three post-effective amendments to the Registration Statement (collectively, the "Acquisition Reports"); such descriptions are incorporated herein by this reference. TABLE A SELECTED LOCAL LIMITED PARTNERSHIP DATA Properties Owned by Local Limited Partnerships * Date Interest Location Acquired ----------------------------- --------------------- --------------- Brookscrossing Atlanta, GA 06/30/89 Dorsett Philadelphia, PA 10/20/89 Willow Ridge Prescott, AZ 08/28/89 Town House Allentown, PA 12/26/89 Lancaster House North Lancaster, PA 03/13/89 Sencit Towne House Shillington, PA 12/26/89 Pinewood Terrace (1) Rusk, TX 12/27/89 Justin Place (1) Justin, TX 12/27/89 Grandview (1) Grandview, TX 12/27/89 Hampton Lane Buena Vista, GA 12/20/89 Audobon (1) Boston, MA 12/22/89 Bent Tree (1) Jackson, TX 12/27/89 Royal Crest (1) Bowie, TX 12/27/89 Nocona Terrace (1) Nocona, TX 12/27/89 Pine Manor (1) Jacksboro, TX 12/27/89 Hilltop (1) Rhome, TX 12/27/89 Valley View (1) Valley View, TX 12/27/89 Bentley Court Columbia, SC 12/26/89 Orocovix IV Orocovix, PR 12/30/89 Leawood Manor Leawood, KS 12/29/89 Pecan Hill (1) Bryson, TX 12/28/89 Carolina Woods Greensboro, NC 01/31/90 Mayfair Mansions Washington, DC 03/21/90 Oakview Square Chesterfield, MI 03/22/89 Whitehills II Howell, MI 04/21/90 Orchard View Gobles, MI 04/29/90 Lakeside Square Chicago, IL 05/17/90 Lincoln Green Old Town, ME 03/21/90 Brown Kaplan (1) Boston, MA 07/01/90 Green Tree Village Greenville, GA 07/06/90 Canfield Crossing Milan, MI 08/20/90 Findlay Market (1) Cincinnati, OH 08/15/90 Seagraves (1) Seagraves, TX 11/28/90 West Pine Findlay, PA 12/31/90 BK Apartments Jamestown, ND 12/01/90 46th & Vincennes Chicago, IL 03/29/91 Gateway Village Garden (1) Azle, TX 06/24/91 * The Partnership's interest in profits and losses of each Local Limited Partnership arising from normal operations is 99%, with the exception of Leawood Manor which is 89%. Profits and losses arising from sale or refinancing transactions are allocated in accordance with the respective Local Limited Partnership Agreements. (1) The Partnership no longer has an interest in the Local Limited Partnership. Although the Partnership's investments in Local Limited Partnerships are not subject to seasonal fluctuations, the Partnership's equity in losses of Local Limited Partnerships, to the extent they reflect the operations of individual Properties, may vary from quarter to quarter based upon changes in occupancy and operating expenses as a result of seasonal factors. With the exception of Leawood Manor, each Local Limited Partnership has as its general partners ("Local General Partners") one or more individuals or entities not affiliated with the Partnership or its General Partners. In accordance with the partnership agreements under which such entities are organized ("Local Limited Partnership Agreements"), the Partnership depends on the Local General Partners for the management of each Local Limited Partnership. As of March 31, 2002, the following Local Limited Partnerships have a common Local General Partner or affiliated group of Local General Partners accounting for the specified percentage of the capital contributions to Local Limited Partnerships: Sencit Townhouse L.P., Allentown Townehouse, L.P. and Prince Street Ltd., representing 12.83%, have AIMCO Properties as Local General Partner; Greentree Village L.P. and Buena Vista Properties L.P., representing 0.69%, have Boyd Management, Inc. as Local General Partner; and Whitehills Apartments Co., L.P., Milan Apartments Co., L.P. and Gobles LDHA, L.P., representing 1.29%, have First Centrum as Local General Partner. The Local General Partners of the remaining Local Limited Partnerships are identified in the Acquisition Reports, which are incorporated herein by reference. The Properties owned by Local Limited Partnerships in which the Partnership has invested are and will continue to be subject to competition from existing and future apartment complexes in the same areas. The continued success of the Partnership will depend on many outside factors, most of which are beyond the control of the Partnership and which cannot be predicted at this time. Such factors include general economic and real estate market conditions, both on a national basis and in those areas where the Properties are located, the availability and cost of borrowed funds, real estate tax rates, operating expenses, energy costs and government regulations. In addition, other risks inherent in real estate investment may influence the ultimate success of the Partnership, including: (i) possible reduction in rental income due to an inability to maintain high occupancy levels or adequate rental levels; (ii) possible adverse changes in general economic conditions and adverse local conditions, such as competitive overbuilding, a decrease in employment or adverse changes in real estate laws, including building codes; and (iii) the possible future adoption of rent control legislation which would not permit increased costs to be passed on to the tenants in the form of rent increases or which would suppress the ability of the Local Limited Partnerships to generate operating cash flow. Since most of the Properties benefit from some form of government assistance, the Partnership is subject to the risks inherent in that area including decreased subsidies, difficulties in finding suitable tenants and obtaining permission for rent increases. In addition, any Tax Credits allocated to investors with respect to a Property are subject to recapture to the extent that the Property or any portion thereof ceases to qualify for the Tax Credits. Other future changes in federal and state income tax laws affecting real estate ownership or limited partnerships could have a material and adverse affect on the business of the Partnership. The Partnership is managed by Arch Street VIII, Inc., the Managing General Partner of the Partnership. The other General Partner of the Partnership is Arch Street IV Limited Partnership. The Partnership, which does not have any employees, reimburses Lend Lease Real Estate Investments, Inc., an affiliate of the General Partner, for certain expenses and overhead costs. A complete discussion of the management of the Partnership is set forth in Item 9 of this Report. Item 2. Properties The Partnership owns limited partnership interests in twenty-two Local Limited Partnerships which own and operate Properties, some of which benefit from some form of federal, state or local assistance programs and all of which qualify for the Tax Credits added to the Code by the Tax Reform Act of 1986. The Partnership's ownership interest in each Local Limited Partnership is 99% with the exception of Leawood Manor and BK Associates, which are 89% and 49.5%, respectively. Each of the Local Limited Partnerships has received an allocation of Tax Credits by its relevant state tax credit agency. In general, the Tax Credit runs for ten years from the date the Property is placed in service. The required holding period (the "Compliance Period") of the Properties is fifteen years. During these fifteen years, the Properties must satisfy rent restrictions, tenant income limitations and other requirements, as promulgated by the Internal Revenue Service, in order to maintain eligibility for the Tax Credit at all times during the Compliance Period. Once a Local Limited Partnership has become eligible for the Tax Credits, it may lose such eligibility and suffer an event of recapture if its Property fails to remain in compliance with the requirements. To date, none of the Local Limited Partnerships have suffered an event of recapture of Tax Credits. In addition, some of the Local Limited Partnerships have obtained one or a combination of different types of loans such as: i) below market rate interest loans; ii) loans provided by a redevelopment agency of the town or city in which the property is located at favorable terms; and iii) repayment terms that are based on a percentage of cash flow. The schedule on the following pages provide certain key information on the Local Limited Partnership interests acquired by the Partnership.
Capital Contributions Total Total Paid Mtge. Loans Local Limited Partnership Number of Committed at through payable at Occupancy at Property Name Apt. Units March 31, 2002 March 31, December 31, Type of March 31, 2002 Property Location 2002 2001 Subsidy* - --------------------------------------- ----------- --------------- ------------ -------------------------- --------------- Brookscrossing Apartments, L.P. A Limited Partnership Brookscrossing Atlanta, GA 224 $3,363,776 $3,363,776 $5,794,946 None 92% Willow Ridge Development Co. Limited Partnership Willow Ridge Prescott, AZ 134 2,125,000 2,125,000 2,966,165 None 94% Leawood Associates, L.P. A Limited Partnership Leawood Manor Leawood, KS 254 7,497,810 7,497,810 8,077,037 None 92% Dorsett Limited Partnership Dorsett Apartments Philadelphia, PA 58 2,482,107 2,482,107 1,914,640 Section 8 88% Allentown Towne House, L.P. Towne House Apartments Allentown, PA 160 1,589,403 1,589,403 6,234,909 Section 8 100% Prince Street Towers L.P. A Limited Partnership Lancaster House North Lancaster, PA 201 1,996,687 1,996,687 7,375,026 Section 8 98% Sencit Towne House L.P. Sencit Towne House Shillington, PA 201 1,996,687 1,996,687 5,297,596 Section 8 100% Capital Contributions Total Total Paid Mtge. Loans Local Limited Partnership Number of Committed at through payable at Occupancy at Property Name Apt. Units March 31, 2002 March 31, December 31, Type of March 31, 2002 Property Location 2002 2001 Subsidy* - --------------------------------------- ----------- --------------- ------------ -------------------------- --------------- East Rusk Housing Associates, LTD (1) Pinewood Terrace Apartments Rusk, TX Gateway Housing Associates, LTD (1) Gateway Village Garden Apts. Azle, TX Justin Housing Associates, LTD (1) Justin Place Justin, TX Grandview Housing Associates, LTD (1) Grandview Grandview, TX Buena Vista Limited Partnership Hampton Lane (Buena Vista) Buena Vista, GA 24 153,474 153,474 710,293 None 96% Audobon Group, L.P. A Massachusetts Limited Partnership (1) Audobon Boston, MA Bent Tree Housing Associates (1) Bent Tree Jacksboro, TX Bowie Housing Associates, LTD (1) Royal Crest (Bowie) Bowie, TX Capital Contributions Total Total Paid Mtge. Loans Local Limited Partnership Number of Committed at through payable at Occupancy at Property Name Apt. Units March 31, 2002 March 31, December 31, Type of March 31, 2002 Property Location 2002 2001 Subsidy* - --------------------------------------- ----------- --------------- ------------ -------------------------- --------------- Nocona Terrace Housing Associates, LTD (1) Nocona Terrace Nocona, TX Pine Manor Housing Associates (1) Pine Manor Jacksboro, TX Rhome Housing Associates, LTD (1) Hilltop Apartments Rhome, TX Valley View Housing Associates, LTD (1) Valley View Valley View, TX Bentley Court II Limited Partnership Bentley Court Columbia, SC 273 5,000,000 5,000,000 6,750,174 None 80% Bryson Housing Associates, LTD (1) Pecan Hill Apartments Bryson, TX Orocovix Limited Dividend Partnership, S.E. Orocovix IV Orocovix, PR 40 361,444 361,444 1,630,922 FmHA 100% Carolina Woods Associates, L.P. Carolina Woods Greensboro, NC 48 1,000,000 1,000,000 974,104 None 92% Capital Contributions Total Total Paid Mtge. Loans Local Limited Partnership Number of Committed at through payable at Occupancy at Property Name Apt. Units March 31, 2002 March 31, December 31, Type of March 31, 2002 Property Location 2002 2001 Subsidy* - --------------------------------------- ----------- --------------- ------------ -------------------------- --------------- Kenilworth Associates LTD A Limited Partnership Mayfair Mansions Washington, DC 569 4,250,000 4,250,000 18,555,011 Section 8 99% Oakview Square Limited Partnership A Michigan Limited Partnership Oakview Square Chesterfield, MI 192 5,299,652 5,299,652 5,864,446 None 94% Whitehills II Apartments Company Limited Partnership Whitehills II Howell, MI 24 169,276 169,276 747,598 FmHA 100% Gobles Limited Dividend Housing Associates Orchard View Gobles, MI 24 162,022 162,022 731,208 FmHA 100% Lakeside Square Limited Partnership An Illinois Limited Partnership Lakeside Square Chicago, IL 308 3,978,813 3,978,813 5,382,660 Section 8 100% Lincoln Green Associates, A Limited Partnership Lincoln Green Old Towne, ME 30 352,575 352,575 1,639,250 Section 8 97% Brown Kaplan Limited Partnership (1) Brown Kaplan Boston, MA Capital Contributions Total Total Paid Mtge. Loans Local Limited Partnership Number of committed at through payable at Occupancy at Property Name Apt. Units March 31, 2002 March 31, December 31, Type of March 31, 2002 Property Location 2002 2001 Subsidy* - --------------------------------------- ----------- --------------- ------------ -------------------------- --------------- Green Tree Village Limited Partnership A Limited Partnership Green Tree Village Greenville, GA 24 145,437 145,437 652,094 FmHA 96% Milan Apartments Company Limited Partnership Canfield Crossing Milan, MI 32 230,500 230,500 1,007,097 FmHA 100% Findlay Market Limited Partnership (1) Findlay Market Cincinnati, OH Seagraves Housing Associates, LTD. (1) Seagraves Seagraves, TX West Pine Associates West Pine Findlay, PA 38 313,445 313,445 1,661,992 FmHA 92% B-K Apartments Limited Partnership BK Apartments Jamestowne, ND 48 290,000 290,000 782,500 Section 8 94% 46th and Vincennes Limited Partnership 46th and Vincennes Chicago, IL 28 751,120 751,120 1,320,225 Section 8 86% ------ ----------- ----------- ------------ 2,934 $ 43,509,228 $ 43,509,228 $ 86,069,893 ====== ============= ============== =============
* FmHA This subsidy, which is authorized under Section 515 of the Housing Act of 1949, can be one or a combination of many different types. For instance, FmHA may provide: 1) direct below-market-rate mortgage loans for rural rental housing; 2) mortgage interest subsidies which effectively lower the interest rate of the loan to 1%; 3) rental assistance subsidies to tenants which allow them to pay no more than 30% of their monthly income as rent with the balance paid by the federal government; or 4) a combination of any of the above. Section 8 This subsidy, which is authorized under Section 8 of Title II of the Housing and Community Development Act of 1974, allows qualified low-income tenants to pay 30% of their monthly income as rent with the balance paid by the federal government. Also includes comparable state subsidies. (1) The Partnerships no longer has an interest in this Local Limited Partnership. Three Local Limited Partnerships invested in by the Partnership each represent more than 10% of the total capital contributions made to Local Limited Partnerships by the Partnership. The first is Leawood Associates, L.P., A Limited Partnership ("Leawood Manor"). Leawood Manor, representing 17.23% of the total capital contributions to Local Limited Partnerships, is a 254-unit apartment complex located in Leawood, Kansas. Leawood Manor is financed by a first mortgage at an annual rate of 6.66% with monthly installments of $53,659 of principal and interest. The mortgage matures on February 1, 2009. The second Local Limited Partnership which represents more than 10% of the total capital contributions to Local Limited Partnerships is Oakview Square Limited Partnership, A Michigan Limited Partnership ("Oakview Square"). Oakview Square, representing 12.18% of the total capital contributions to Local Limited Partnerships, is a 192-unit apartment complex located in Chesterfield, Michigan. Oakview Square is financed by a first mortgage loan at 9.75% interest and a 35 year term with monthly installments of approximately $52,100. The loan matures in April 2010. The third Local Limited Partnership which represents more than 10% of the total capital contributions to Local Limited Partnerships is Bentley Court II Limited Partnership ("Bentley Court"). Bentley Court, representing 11.49% of the total capital contributions to Local Limited Partnerships, is a 273-unit apartment complex located in Columbia, South Carolina. Bentley Court is financed by a first mortgage loan at 8.50% interest with monthly installment of $52,129. The loan matures in August 2031. The Partnership does not guarantee any of the mortgages or other debt of the Local Limited Partnerships. Duration of leases for occupancy in the Properties described above is generally six to twelve months. The Managing General Partner believes the Properties described herein are adequately covered by insurance. Additional information required under this Item, as it pertains to the Partnership, is contained in Items 1, 6 and 7 of this Report. Item 3. Legal Proceedings As previously reported, Audobon Apartments located in Boston, Massachusetts, and Brown Kaplan located in Dorchester, Massachusetts, are operating below break-even. Both Properties previously received a material amount of income subsidies through the State Housing Assistance Rental Program (SHARP). As originally conceived, the SHARP subsidy was scheduled to decline over time to match increases in net operating income. However, increases in net operating income failed to keep pace with the decline in the SHARP subsidy. Many of the SHARP properties (including Audobon Apartments and Brown Kaplan) sought restructuring workouts with the lender, Massachusetts Housing Finance Agency (MHFA), that included additional subsidies in the form of Operating Deficit Loans (ODL's). In July 1997, MHFA refused to close the restructuring for Brown Kaplan. Effective October 1, 1997, MHFA, which provided the SHARP subsidies, withdrew funding of the ODL's from its portfolio of 77 subsidized properties. Properties unable to make full debt service payments were declared in default by MHFA. The Managing General Partner has joined a group of SHARP property owners called the responsible SHARP Owners, Inc. (RSO) and is negotiating with MHFA and the Local General Partners of Audobon and Brown Kaplan to find a solution to the problems that will result from the withdrawn subsidies. On September 16, 1998, the Partnership joined with the RSO and about 20 other SHARP property owners and filed suit against the MHFA (Mass. Sup. Court Civil Action #98-4720). Among other things, the suit seeks to enforce the MHFA's previous financial commitments to the SHARP properties. The lawsuit is complex so no predictions can be made at this time as to the ultimate outcome. In the meantime, the Managing General Partner intends to continue to participate in the RSO's efforts to negotiate a resolution of this matter with MHFA. As a result of the existing operating deficits, Audobon Apartments was foreclosed on March 30, 2000. Due to concerns regarding the long-term viability of Brown Kaplan, the Managing General Partner negotiated a plan with the Local General Partner that ultimately transferred the Partnership's interest in the Property to the Local General Partner. The plan includes provisions to minimize the risk of recapture. Effective November 30, 1999, the Managing General Partner consummated the transfer of 49.5% of the Partnership's capital and profits in the properties to the Local General Partner. Effective December 5, 2000, the Managing General Partner excercised its right to transfer the Partnership's remaining interest in the Property to the Local General Partner. In June of 1998, the Managing General Partner was informed that the Local General Partner of Bentley Court, located in Columbia, South Carolina, was indicted on various criminal charges and pled guilty on certain counts. The Managing General Partner has replaced the Local General Partner and replaced the site management company. Further, an IRS audit of the 1993 tax return for the Local Limited Partnership questioned the treatment of certain items and has findings of non-compliance in 1993. The IRS then expanded the scope of the audit to include the 1994 and 1995 tax returns. As a result, the IRS disallowed the Property's tax credits for each of these years. On behalf of the Partnership, the Managing General Partner retained counsel to appeal the IRS's findings in order to minimize the loss of tax credits. In the opinion of the Managing General Partner, there is a substantial risk that Bentley Court and, consequently, the Partnership will suffer significant tax credit recapture and/or credit disallowance. However, it is not possible to quantify the risk at this time. As a result of the continuing tax issues at this Property, the Managing General Partner has fully reserved the Partnership's investment in Bentley Court. On April 28, 2000, the Managing General Partner, on behalf of the Partnership, filed suit against the former Local General Partners of Bentley Court alleging mismanagement of the Local Limited Partnership. During May 2001, the former Local General Partner authorized the release of funds held in escrow in the amount of approximately $640,000 to the Partnership which was used to reimburse the Partnership for advances made in previous years. The Partnership is not a party to any other pending legal or administrative proceeding, and to the best of its knowledge, no legal or administrative proceeding is threatened or contemplated against it. Item 4. Submission of Matters to a Vote of Security Holders - ------------------------------------------------------------ None. PART II Item 5. Market for the Registrant's Units and Related Security Holder Matters There is no public market for the Units, and it is not expected that a public market will develop. If a Limited Partner desires to sell Units, the buyer of those Units will be required to comply with the minimum purchase and retention requirements and investor suitability standards imposed by applicable federal or state securities laws and the minimum purchase and retention requirements imposed by the Partnership. The price to be paid for the Units, as well as the commissions to be received by any participating broker-dealers, will be subject to negotiation by the Limited Partner seeking to sell his Units. Units will not be redeemed or repurchased by the Partnership. The Partnership Agreement does not impose on the Partnership or its General Partners any obligation to obtain periodic appraisals of assets or to provide Limited Partners with any estimates of the current value of Units. As of April 4, 2002, there were 3,676 record holders of Units of the Partnership. Cash distributions, when made, are paid annually. No cash distributions were paid for the years ended March 31, 2002 and 2001. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations - -------------------------------------------------------------------------------- Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Partnership intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements and are including this statement for purposes of complying with these safe harbor provisions. Although the Partnership believes the forward-looking statements are based on reasonable assumptions, the Partnership can give no assurance that their expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, general economic and real estate conditions, and interest rates. Accounting Policies The Partnership's accounting polices include those that relate to its recognition of investments in Local Limited Partnerships using the equity method of accounting. The Partnership's policy is as follows: The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting because the Partnership does not have control over the major operating and financial policies of the Local Limited Partnerships in which it invests. Under the equity method, the investment is carried at cost, adjusted for the Partnership's share of net income or loss and for cash distributions from the Local Limited Partnerships; equity in income or loss of the Local Limited Partnerships is included currently in the Partnership's operations. Under the equity method, a Local Limited Partnership investment will not be carried below zero. To the extent that equity in losses are incurred when the Partnership's carrying value of the respective Local Limited Partnership has been reduced to a zero balance, the losses will be suspended and offset against future income. Income from Partnership investments where cumulative equity in losses plus cumulative distributions have exceeded the total investment in Local Limited Partnerships will not be recorded until all of the related unrecorded losses have been offset. To the extent that a Local Limited Partnership with a carrying value of zero distributes cash to the Partnership, that distribution is recorded as income on the books of the Partnership and is included in "Other Revenue" in the accompanying financial statements. Liquidity and capital resources The Partnership had an increase in cash and cash equivalents of $329,681 from $418,233 at March 31, 2001 to $747,914 at March 31, 2002. The increase is mainly attributable to proceeds from sales and maturities of marketable securities in excess of purchases of marketable securities, reimbursements of advances made to a Local Limited Partnership in previous years and cash distributions received from Local Limited Partnerships. These increases are partially offset by cash used for operations and advances to a Local Limited Partnership. The Managing General Partner originally designated 4% of the Gross Proceeds as Reserves, as defined in the Partnership Agreement. The Reserves were established to be used for working capital of the Partnership and contingencies related to the ownership of Local Limited Partnership interests. The Managing General Partner may increase or decrease such Reserves from time to time, as it deems appropriate. At March 31, 2002, approximately $1,169,000 of cash, cash equivalents and marketable securities has been designated as Reserves. To date, professional fees relating to various Property issues totaling approximately $1,394,000 have been paid from Reserves. To date, Reserve funds in the amount of approximately $304,000 also have been used to make additional capital contributions to one Local Limited Partnership. In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Partnership's management might deem it in its best interest to voluntarily provide such funds in order to protect its investment. As of March 31, 2002, the Partnership has advanced approximately $1,101,000 to Local Limited Partnerships to fund operating deficits. The Managing General Partner believes that the investment income earned on the Reserves, along with cash distributions received from Local Limited Partnerships, to the extent available, will be sufficient to fund the Partnership's ongoing operations. Reserves may be used to fund Partnership operating deficits, if the Managing General Partner deems funding appropriate. If Reserves are not adequate to cover the Partnership's operations, the Partnership will seek other financing sources including, but not limited to, the deferral of Asset Management Fees paid to an affiliate of the Managing General Partner or working with Local Limited Partnerships to increase cash distributions. To date, the Partnership has used approximately $1,247,000 of operating funds to replenish Reserves. Since the Partnership invests as a limited partner, the Partnership has no contractual duty to provide additional funds to Local Limited Partnerships beyond its specified investment. Thus, as of March 31, 2002, the Partnership had no contractual or other obligation to any Local Limited Partnership which had not been paid or provided for. Cash distributions No cash distributions were made to Limited Partners in the two years ended March 31, 2002. It is not expected that cash available for distribution, if any, will be significant during the 2002 calendar year. Based on the results of 2001 operations, the Local Limited Partnerships are not expected to distribute significant amounts of cash to the Partnership because such amounts will be needed to fund Property operating costs. In addition, many of the Properties benefit from some type of federal or state subsidy and, as a consequence, are subject to restrictions on cash distributions. Results of operations 2002 versus 2001 The Partnership's results of operations for the fiscal year ended March 31, 2002 resulted in a net loss of $406,429, as compared to a net loss of $2,106,368 for the same period in 2001. The decrease in net loss is primarily attributable to a decrease in equity in losses of Local Limited Partnerships, recording a provision for valuation of investments in Local Limited Partnerships in the 2001 period, a decrease in general and administrative expenses and a recovery of provision for valuation of advances to Local Limited Partnerships in the 2002 period. The decrease in equity in losses of Local Limited Partnerships is due to one Local Limited Partnership whose loss was approximately $300,000 higher in 2000 because of high vacancies in 2000, which also caused higher unit renovation costs. The provision for valuation of investments in Local Limited Partnerships in the 2001 period resulted from a reserve being setup for investments in Local Limited Partnerships. The decrease in general and administrative expense is primarily due to decreased charges from an affiliate of the General Partner for operational and administrative expenses necessary for operation of the Partnership. The recovery of provision for valuation of advances to Local Limited Partnerships in the 2002 period resulted from the reimbursement of $639,875 of advances made to one Local Limited Partnership in previous years Low-income housing tax credits The 2001 and 2000 Tax Credits per Unit were $15.25 and $48.33, respectively, for individual investors. The 2001 and 2000 Tax Credits per Unit were $15.25 and $50.15 respectively for corporate investors. The Tax Credits per limited partner stabilized in 1992. The credits have decreased significantly as several Properties have reached the end of the ten year credit period. However, because the Tax Credit compliance periods extend significantly beyond the Tax Credit periods, the Partnership intends to hold its Local Limited Partnership investments for the foreseeable future. Property discussions The Partnership's investment portfolio consists of limited partnership interests in twenty-two Local Limited Partnerships, each of which owns and operates a multi-family apartment complex. A majority of the Properties have stabilized operations and operate above break-even. A few Properties generate cash flow deficits that the Local General Partners of those Properties fund through project expenses loans, subordinated loans or operating escrows. However, some Properties have persistent operating difficulties that could either: i) have an adverse impact on the Partnership's liquidity; ii) result in their foreclosure or iii) result in the Managing General Partner deeming it appropriate for the Partnership to dispose of its interest in the Property. Also, the Managing General Partner, in the normal course of the Partnership's business, may desire to dispose of the Partnership's interest in certain Properties. The following Property discussion focuses only on such Properties. The Local General Partner of Buena Vista, located in Buena Vista, Georgia, and Greentree Village, located in Greenville, Georgia, expressed to the Managing General Partner some concerns over the long-term financial health of the Properties. In response to these concerns and to reduce possible future risk, the Managing General Partner reached agreement with the Local General Partner on a plan that will ultimately transfer ownership of the Properties to the Local General Partner. The plan includes provisions to minimize the risk of recapture. The Properties have generated the majority of their total Tax Credits. The Managing General Partner has not yet transferred any of the Partnership's interest in these Properties. In June of 1998, the Managing General Partner was informed that the Local General Partner of Bentley Court, located in Columbia, South Carolina was indicted on various criminal charges and pled guilty on certain counts. The Managing General Partner has replaced the Local General Partner and replaced the site management company. Further, an IRS audit of the 1993 tax return for the Property questioned the treatment of certain items and had findings of non-compliance in 1993. The IRS then expanded the scope of the audit to include the 1994 and 1995 tax returns. As a result, the IRS disallowed the Property's Tax Credits for each of these years. On behalf of the Partnership, the Managing General Partner retained counsel to appeal the IRS's findings in order to minimize the loss of Credits. In the opinion of the Managing General Partner, there is a substantial risk that Bentley Court and, consequently, the Partnership will suffer significant Tax Credit recapture and/or Credit disallowance. However, it is not possible to quantify the risk at this time. As a result of the continuing tax issues at this Property, The Managing General Partner has decided to fully reserve the Partnership's investment in Bentley Court. On April 28, 2000, the Managing General Partner, on behalf of the Partnership, filed suit against the former Local General Partner of Bentley Court and certain affiliates of the former Local General Partner alleging mismanagement of the Local Limited Partnership. During May 2001, the former Local General Partner authorized the release of funds held in escrow in the amount of approximately $640,000 to the Partnership which was used to reimburse the Partnership for advances made in previous years. Two of the buildings at Bentley Court, which comprise 32 of the 273 units at the Property, caught on fire and were determined to be a total loss. Insurance proceeds covered the cost to rebuild both buildings and the reconstructed units were ready for occupancy during late 2001. The vacancy of the two buildings caused the Property to operate at a deficit. The Managing General Partner visited Bentley Court in October 2001 and found the Property in good condition. BK Apartments, located in Jamestown, North Dakota, continues to operate at a deficit. As previously reported, in November 1997, due to concerns about the Property's long term viability, the Managing General Partner consummated a transfer of 50% of the Partnership's interest in capital and profits of BK Apartments Limited Partnership to the Local General Partner. The Managing General Partner also has the right to put the Partnership's remaining interest to the new Local General Partner any time after September 1, 2001. The Local General Partner subsequently transferred its general partner interest to a new, nonprofit general partner. The Partnership will retain its full share of the Property's Tax Credits, which expire in 2001, until such time as the remaining interest is put to the new Local General Partner. In addition, the new Local General Partner has the right to call the remaining interest after the Tax Credit period has expired. The Property currently operates below break-even and the new Local General Partner has funded the deficits. Although the neighborhood in which 46 & Vincennes (Chicago, Illinois) is located improved in the last few years, potential tenants are reluctant to occupy the Property due to its location. As a result, maintaining occupancy, and therefore, revenues, continues to be an issue. Advances from the Local General Partner's Developer Escrow have enabled the Property to stay current on its loan obligations. During 1994, the Local General Partner at the Dorsett (Philadelphia, Pennsylvania) transferred its interest in the Property. The IRS subsequently conducted a compliance audit at the Property and has taken the position that the Property is subject to recapture due to non-compliance issues. The Managing General Partner disagrees with the IRS and is working to resolve the matter. However, in the opinion of the Managing General Partner, there is a substantial risk that the Dorsett and the Partnership could suffer significant Tax Credit recapture or Tax Credit disallowance. However, it is not possible to quantify the potential amount at this time. Further, the Property suffers from poor location and security issues. Vandalism has caused an increase in maintenance and repair expenses and has negatively affected the Property's occupancy levels and tenant profile. The Managing General Partner is negotiating a transfer of the Local General Partner interest in West Pine (Imperial, Pennsylvania) to the Allegheny County Housing Authority ("ACHA"). The ACHA has informed the Managing General Partner of its interest in acquiring the Partnership's interest in the Property, pending their assumption of the Local General Partner interest. Should ACHA assume the Local General Partner interest, it is likely that the Managing General Partner would negotiate an agreement that would ultimately transfer the Partnership's interest in the Property to ACHA. West Pine generated its final year of Tax Credits during 2001. The Partnership has implemented policies and practices for assessing potential impairment of its investments in Local Limited Partnerships. Real estate experts analyze the investments to determine if impairment indicators exist. If so, the carrying value is compared to the undiscounted future cash flows expected to be derived from the asset. If there is a significant impairment in carrying value, a provision to write down the asset to fair value will be recorded in the Partnership's financial statements. Inflation and other economic factors Inflation had no material impact on the operations or financial condition of the Partnership for the years ended March 31, 2002 and 2001. Since some of the Properties benefit from some sort of government assistance, the Partnership is subject to the risks inherent in that area including decreased subsidies, difficulties in finding suitable tenants and obtaining permission for rent increases. In addition, any Tax Credits allocated to investors with respect to a Property are subject to recapture to the extent that the Property or any portion thereof ceases to qualify for the Tax Credits. Certain of the Properties listed in this Report are located in areas suffering from poor economic conditions. Such conditions could have an adverse effect on the rent or occupancy levels at such Properties. Nevertheless, the Managing General Partner believes that the generally high demand for below-market rate housing will tend to negate such factors. However, no assurance can be given in this regard. Item 7. Financial Statements and Supplementary Data Information required under this Item is submitted as a separate section of this Report. See Index on page F-1 hereof. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure - ------------------------------------------------------------------------------- None. PART III Item 9. Directors and Executive Officers of the Registrant - ------------------------------------------------------------ The Managing General Partner of the Partnership is Arch Street IV, Inc., a Massachusetts corporation (the "Managing General Partner"), an affiliate of Lend Lease. The Managing General Partner was incorporated in December 1988. The Investment Committee of the Managing General Partner approved all investments. The names and positions of the principal officers and the directors of the Managing General Partner are set forth below. Name Position Jenny Netzer Principal, Head of Housing and Community Investment Michael H. Gladstone Principal, Member, Legal Lauren M. Guillette Principal, Member, Legal The other General Partner of the Partnership is Arch Street IV Limited Partnership, a Massachusetts Limited Partnership ("Arch Street IV L.P.") that was organized in December 1988. Arch Street VIII, Inc. is the managing general partner of Arch Street IV L.P. The Managing General Partner provides day-to-day management of the Partnership. Compensation is discussed in Item 10 of this Report. Such day-to-day management does not include the management of the Properties. The business experience of each of the persons listed above is described below. There is no family relationship between any of the persons listed in this section. Jenny Netzer, age 46, Principal, Head of Housing and Community Investment Group - - Ms. Netzer is responsible for tax credit investment programs to institutional clients. She joined Lend Lease as a result of the Boston Financial acquisition, starting with Boston Financial in 1987 and leading Boston Financial's new business initiatives and managing the firm's Asset Management division. Prior to joining Boston Financial, Ms. Netzer served as Deputy Budget Director for the Commonwealth of Massachusetts where she was responsible for the Commonwealth's health care and public pension program's budgets. Ms. Netzer also served as Assistant Controller at Yale University, was a former member of Watertown Zoning Board of Appeals, the Officer of Affordable Housing Tax Credit Coalition and a frequent speaker on affordable housing and tax credit industry issues. Ms. Netzer is a graduate of Harvard University (BA) and Harvard's Kennedy School of Government (MPP). Michael H. Gladstone, age 45, Principal, Member, Legal - Mr. Gladstone is responsible for legal work in the areas of affordable and conventional housing and investment products and services. He joined Lend Lease as a result of the Boston Financial acquisition, starting with Boston Financial in 1985 as the firm's General Counsel. Prior to joining Boston Financial, Mr. Gladstone was associated with the law firm of Herrick & Smith and served on the advisory board of the Housing and Development Reporter. Mr. Gladstone lectured at Harvard University on affordable housing matters and is a member of the National Realty Committee, Cornell Real Estate Council, National Association of Real Estate Investment Managers and Massachusetts Bar. Mr. Gladstone is a graduate of Emory University (BA) and Cornell University (J.D. & MBA). Lauren M. Guillette, age 37, Principal, Member, Legal - Ms. Guillette is responsible for legal work in the areas of affordable and conventional housing and investment products and services. She joined Lend Lease as a result of the Boston Financial acquisition, starting with Boston Financial in 1996 as the firm's Assistant General Counsel. Prior to joining Boston Financial, Ms. Guillette was associated with the law firm of Peabody & Brown where she practiced real estate syndication and securities law. Ms. Guillette is a graduate of McGill University (BA) and Suffolk University (J.D.). Item 10. Management Remuneration Neither the directors nor officers of Arch Street IV, Inc., nor the partners of Arch Street IV L.P. nor any other individual with significant involvement in the business of the Partnership receives any current or proposed remuneration from the Partnership. Item 11. Security Ownership of Certain Beneficial Owners and Management As of March 31, 2002, the following is the only entity known to the Partnership to be the beneficial owner of more than 5% of the Units outstanding: Amount Title of Name and Address of Beneficially Class Beneficial Owner Owned Percent of Class - ---------- ----------------------------------------- -------------------- Limited AMP, Incorporated 10,000 Units 14.70% Partner P.O. Box 3608 Harrisburg, PA The equity securities registered by the Partnership under Section 12(g) of the Act consist of 100,000 Units, of which 68,043 were sold to the public. The remaining Units were deregistered in Post-Effective Amendment No. 3, dated February 21, 1990. Holders of Units are permitted to vote on matters affecting the Partnership only in certain unusual circumstances and do not generally have the right to vote on the operation or management of the Partnership. Arch Street IV L.P. owns five (unregistered) Units not included in the 68,043 Units sold to the public. Except as described in the preceding paragraph, neither Arch Street IV, Inc., Arch Street IV L.P., Lend Lease nor any of their executive officers, directors, partners or affiliates is the beneficial owner of any Units. None of the foregoing persons possess a right to acquire beneficial ownership of Units. There is no arrangement in existence, to the Partnership's knowledge, that would result in a change in control of the Partnership. Item 12. Certain Relationships and Related Transactions The Partnership paid certain fees to and reimbursed certain expenses of the Managing General Partner or its affiliates in connection with the organization of the Partnership and the offering of Units. The Partnership was also required to pay certain fees to and reimburse certain expenses of the Managing General Partner or its affiliates in connection with the administration of the Partnership and its acquisition and disposition of investments in Local Limited Partnerships. In addition, the General Partners are entitled to certain Partnership distributions under the terms of the Partnership Agreement. Also, an affiliate of the General Partners will receive up to $10,000 from the sale or refinancing proceeds of each Local Limited Partnership, if it is still a limited partner at the time of such transaction. All such fees and distributions are more fully described in the sections entitled "Estimated Use of Proceeds", "Management Compensation and Fees" and "Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions" of the Prospectus. Such sections are incorporated herein by reference. The Partnership is permitted to enter into transactions involving affiliates of the Managing General Partner, subject to certain limitations established in the Partnership Agreement. Information regarding the fees paid and expense reimbursements made in the two years ending March 31, 2002 is presented as follows: Organizational fees and expenses In accordance with the Partnership Agreement, affiliates of the General Partner are to be reimbursed by the Partnership for organizational, offering and selling expenses advanced on behalf of the Partnership for salaries and direct expenses of certain employees of the Managing General Partner and its affiliates in connection with the registration and organization of the Partnership. Such expenses include printing expenses and legal, accounting, escrow agent and depository fees and expenses. Such expenses also include a non-accountable expense allowance for marketing expenses equal to 1% of gross offering proceeds. From inception through March 31, 2002, $8,351,601 of organization and offering fees and expenses incurred on behalf of the Partnership were paid and reimbursed to an affiliate of the Managing General Partner. Total organization and offering expenses did not exceed 5.50% of the gross offering proceeds. No payment were made or expenses reimbursed in each of two years ended March 31, 2002. Acquisition fees and expenses In accordance with the Partnership Agreement, the Partnership is required to pay acquisition fees to and reimburse acquisition expenses of the Managing General Partner or its affiliates for selecting, evaluating, structuring, negotiating and closing the Partnership's investments in Local Limited Partnerships. Acquisition fees totaled 7.50% of the gross offering proceeds. Acquisition expenses, which included such expenses as legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, did not exceed 1.75% of the gross offering proceeds. Acquisition fees totaling $5,080,756 for the closing of the Partnership's Local Limited Partnership investments have been paid to an affiliate of the Managing General Partner. Acquisition expenses totaling $974,240 were incurred and have been reimbursed to an affiliate of the Managing General Partner. No payments were made or expenses reimbursed in each of the two years ended March 31, 2002. Asset management fees In accordance with the Partnership Agreement, an affiliate of the Managing General Partner is paid an annual fee for services in connection with the administration of the affairs of the Partnership. The affiliate currently receives $8,012 (as adjusted by the CPI factor) per Local Limited Partnership annually as the Asset Management Fee. Fees earned in each of the two years ended March 31, 2002 are as follows: 2002 2001 ------------- ------------- Asset management fees $ 170,228 $ 184,640 Salaries and benefits expense reimbursements An affiliate of the Managing General Partner is reimbursed for the cost of the Partnership's salaries and benefits expenses. The reimbursements are based upon the size and complexity of the Partnership's operations. Reimbursements paid or payable in each of the two years ended March 31, 2002 are as follows: 2002 2001 ------------- ------------- Salaries and benefits expense reimbursements $ 158,607 $ 241,509 Cash distributions paid to the General Partners In accordance with the Partnership Agreement, the General Partners of the Partnership, Arch Street IV, Inc. and Arch Street IV Limited Partnership, receive 1% of cash distributions paid to partners. No cash distributions were paid to the General Partners in either of the two years ended March 31, 2002. Additional information concerning cash distributions and other fees paid or payable to the Managing General Partner and its affiliates and the reimbursement of expenses paid or payable to Lend Lease and its affiliates during each of the two years ended March 31, 2002 is presented in Note 5 to the Financial Statements. Item 13. Exhibits and Reports on Form 8-K (a) Documents filed as a part of this Report In response to this portion of Item 13, the financial statements and the auditors' reports relating thereto are submitted as a separate section of this Report. See Index to the Financial Statements on page F-1 hereof. All other financial statement schedules and exhibits for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under related instructions or are inapplicable and therefore have been omitted. (b) Reports on Form 8-K: No Reports on Form 8-K were filed during the year ended March 31, 2002. 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. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV By: Arch Street IV, Inc. its Managing General Partner By: /s/Jenny Netzer Date: June 28, 2002 --------------------------------------- ------------- Jenny Netzer Principal, Head of Housing and Community Investment Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Managing General Partner of the Partnership and in the capacities and on the dates indicated: By: /s/Jenny Netzer Date: June 28, 2002 --------------------------------------- ------------- Jenny Netzer Director By: /s/Michael H. Gladstone Date: June 28, 2002 ----------------------------- ------------- Michael H. Gladstone Director Report of Independent Accountants To the Partners of Boston Financial Qualified Housing Tax Credits L.P. IV In our opinion, based upon our audits and the reports of other auditors, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") as of March 31, 2002, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2002 in conformity with accounting principles generally accepted in the United States of America. 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. The Partnership accounts for its investment in Local Limited Partnerships, as discussed in Note 2 of the notes to the financial statements, using the equity method of accounting. We did not audit the financial statements of the Local Limited Partnerships, investments in which the Partnership's investment in Local Limited Partnerships is stated at $14,406,529 at March 31, 2002, and the Partnership's equity in earnings (losses) of Local Limited Partnerships is stated at $(387,761) and $(596,865) for the years ended March 31, 2002 and 2001, respectively. The financial statements of these Local Limited Partnerships were audited by other auditors whose reports thereon have been furnished to us, and our opinion expressed herein, insofar as it relates to amounts included for Local Limited Partnerships, is based solely upon the reports of other auditors. We conducted our audits of the Partnership's financial statements in accordance with auditing standards generally accepted in the United States of America which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the reports of the other auditors provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP June 21, 2002 Boston, Massachusetts BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Annual Report on Form 10-KSB For the Year Ended March 31, 2002 Index Page No. Report of Independent Accountants For the years ended March 31, 2002 and 2001 F-2 Financial Statements Balance Sheet - March 31, 2002 F-3 Statements of Operations - For the years ended March 31, 2002 and 2001 F-4 Statements of Changes in Partners' Equity - For the years ended March 31, 2002 and 2001 F-5 Statements of Cash Flows - For the years ended March 31, 2002 and 2001 F-6 Notes to the Financial Statements F-7 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) BALANCE SHEET March 31, 2002
Assets Cash and cash equivalents $ 747,914 Marketable securities, at fair value (Note 3) 420,896 Investments in Local Limited Partnerships, net (Note 4) 14,406,529 Other assets 4,385 Total Assets $ 15,579,724 Liabilities and Partners' Equity Accounts payable to affiliates (Note 5) $ 559,455 Accrued expenses 104,819 Total Liabilities 664,274 General, Initial and Investor Limited Partners' Equity 14,908,052 Net unrealized gains on marketable securities 7,398 Total Partners' Equity 14,915,450 Total Liabilities and Partners' Equity $ 15,579,724
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) STATEMENTS OF OPERATIONS For the Years Ended March 31, 2002 and 2001
2002 2001 Revenue: Investment $ 48,817 $ 55,433 Recovery of provision for valuation of advances to Local Limited Partnerships 639,875 - Other 92,945 123,398 Total Revenue 781,637 178,831 Expenses: Asset management fees, affiliate (Note 5) 170,228 184,640 General and administrative (includes reimbursements to affiliate in the amounts of $158,607 and $241,509 in 2002 and 2001, respectively) (Note 5) 280,958 420,732 Provision for valuation of investments in Local Limited Partnerships - 791,939 Provision for valuation of advances to Local Limited Partnerships 283,516 225,420 Amortization 65,603 65,603 Total Expenses 800,305 1,688,334 Loss before equity in losses of Local Limited Partnerships (18,668) (1,509,503) Equity in losses of Local Limited Partnerships (Note 4) (387,761) (596,865) Net Loss $ (406,429) $ (2,106,368) Net Loss allocated: General Partners $ (4,064) $ (21,064) Limited Partners (402,365) (2,085,304) $ (406,429) $ (2,106,368) Net Loss per Limited Partner Unit (68,043 Units) $ (5.91) $ (30.65)
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) STATEMENTS OF CHANGES IN PARTNERS' EQUITY (Deficiency) For the Years Ended March 31, 2002 and 2001
Net Initial Investor Unrealized General Limited Limited Gains Partners Partners Partners (Losses) Total Balance at March 31, 2000 $ (416,878) $ 5,000 $ 17,832,727 $ (3,991) $ 17,416,858 Comprehensive Income (Loss): Change in net unrealized losses on marketable securities available for sale - - - 11,565 11,565 Net Loss (21,064) - (2,085,304) - (2,106,368) Comprehensive Income (Loss) (21,064) - (2,085,304) 11,565 (2,094,803) Balance at March 31, 2001 (437,942) 5,000 15,747,423 7,574 15,322,055 Comprehensive Loss: Change in net unrealized gains on marketable securities available for sale - - - (176) (176) Net Loss (4,064) - (402,365) - (406,429) Comprehensive Loss (4,064) - (402,365) (176) (406,605) Balance at March 31, 2002 $ (442,006) $ 5,000 $ 15,345,058 $ 7,398 $ 14,915,450
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) STATEMENTS OF CASH FLOWS For the Years Ended March 31, 2002 and 2001
2002 2001 Cash flows from operating activities Net Loss $ (406,429) $ (2,106,368) Adjustments to reconcile net loss to net cash used for operating activities: Equity in losses of Local Limited Partnerships 387,761 596,865 Provision for valuation of investments to Local Limited Partnerships - 791,939 Provision for valuation of advances to Local Limited Partnerships 283,516 225,420 Recovery of provision for valuation of advances to Local Limited Partnerships (639,875) - Amortization 65,603 65,603 Gain on sales of marketable securities, net (2,890) (3,170) Cash distributions included in net loss (70,982) (118,913) Increase (decrease) in cash arising from changes in operating assets and liabilities: Other assets 4,500 (2,361) Accounts payable to affiliates (155,587) 426,149 Accrued expenses 5,597 27,922 Net cash used for operating activities (528,786) (96,914) Cash flows from investing activities: Purchases of marketable securities (399,299) (721,608) Proceeds from sales and maturities of marketable securities 597,374 843,417 Cash distributions received from Local Limited Partnerships 304,033 531,571 Advances to Local Limited Partnerships (283,516) (225,420) Reimbursement of advances to Local Limited Partnerships 639,875 - Net cash provided by investing activities 858,467 427,960 Net increase in cash and cash equivalents 329,681 331,046 Cash and cash equivalents, beginning 418,233 87,187 Cash and cash equivalents, ending $ 747,914 $ 418,233
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to the Financial Statements 1. Organization Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") was formed on March 30, 1989 under the laws of the Commonwealth of Massachusetts for the primary purpose of investing, as a limited partner, in other limited partnerships ("Local Limited Partnerships") which own and operate apartment complexes, most of which benefit from some form of federal, state or local assistance program and each of which qualifies for low-income housing tax credits. The Partnership's objectives are to: (i) provide current tax benefits in the form of tax credits which qualified investors may use to offset their federal income tax liability; (ii) preserve and protect the Partnership's capital; (iii) provide limited cash distributions which are not expected to constitute taxable income during Partnership operations; and iv) provide cash distributions from sale or refinancing transactions. The General Partners of the Partnership are Arch Street IV, Inc., which serves as the Managing General Partner, and Arch Street IV L.P., which also serves as the Initial Limited Partner. Both of the General Partners are affiliates of Lend Lease Real Estate Investments, Inc. ("Lend Lease"). The fiscal year of the Partnership ends on March 31. The Partnership's partnership agreement ("Partnership Agreement") authorized the sale of up to 100,000 units of Limited Partnership Interest ("Units") at $1,000 per Unit, adjusted for certain discounts. The Partnership raised $67,653,000 ("Gross Proceeds"), net of discounts of $390,000, through the sale of 68,043 Units. Such amounts exclude five unregistered Units previously acquired for $5,000 by the Initial Limited Partner, which is also one of the General Partners. The offering of Units terminated on January 31, 1990. Under the terms of the Partnership Agreement, the Partnership originally designated 4.00% of the gross proceeds from the sale of Units as a reserve for working capital of the Partnership and contingencies related to ownership of Local Limited Partnership interests. The Managing General Partner may increase or decrease such amounts from time to time as it deems appropriate. At March 31, 2002, the Managing General Partner has designated approximately $1,169,000 of cash, cash equivalents and marketable securities as such Reserves. Generally, profits, losses, tax credits and cash flows from operations are allocated 99% to the Limited Partners and 1% to the General Partners. Net proceeds from a sale or refinancing will be allocated 95% to the Limited Partners and 5% to the General Partners, after certain priority payments. 2. Significant Accounting Policies Cash Equivalents Cash equivalents consist of short-term money market instruments with maturities of ninety days or less at acquisition and approximate fair value. Marketable Securities Marketable securities consist primarily of U.S. Treasury instruments and various asset-backed investment vehicles. The Partnership's marketable securities are classified as "Available for Sale" securities and reported at fair value as reported by the brokerage firm at which the securities are held. All marketable securities have fixed maturities. Realized gains and losses from the sales of securities are based on the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a separate component of partners' equity. Investments in Local Limited Partnerships The Partnership accounts for its investments in Local Limited Partnerships using the equity method of accounting because the Partnership does not have control over the major operating and financial policies of the Local Limited Partnerships in which it invests. Under the equity method, the investment is carried at cost, adjusted for the Partnership's share of net income or loss of the Local Limited Partnerships, additional investments in and cash BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to the Financial Statements (continued) 2. Significant Accounting Policies (continued) Investments in Local Limited Partnerships (continued) distributions from the Local Limited Partnerships. Equity in income or loss of the Local Limited Partnerships is included in the Partnership's operations. The Partnership has no obligation to fund liabilities of the Local Limited Partnerships beyond its investment, therefore the Local Limited Partnership's investment will not be carried below zero. To the extent that equity losses are incurred or distributions received when a Local Limited Partnership's respective investment balance has been reduced to zero, the losses will be suspended to be used against future income and distributions received will be included in income. Excess investment costs over the underlying net assets acquired have arisen from acquisition fees paid and expenses reimbursed to an affiliate of the Partnership. These fees and expenses are included in the Partnership's investments in Local Limited Partnerships and are being amortized on a straight-line basis over 35 years until a Local Limited Partnership's respective investment balance has been reduced to zero. The Partnership provides advances to the Local Limited Partnerships to finance operations or to make debt service payments. The Partnership assesses the collectibility of these advances at the time the advance is made and records a reserve if collectibility is not reasonably assured. The Partnership does not guarantee any of the mortgages or other debt of the Local Limited Partnerships. The Managing General Partner has elected to report results of the Local Limited Partnerships on a 90 day lag basis, because the Local Limited Partnerships report their results on a calendar year basis. Accordingly, the financial information about the Local Limited Partnerships included in the accompanying financial statements is as of December 31, 2001 and 2000. The Partnership, as a limited partner in the Local Limited Partnerships, is subject to risks inherent in the ownership of property which are beyond its control, such as fluctuations in occupancy rates and operating expenses, variations in rental schedules, proper maintenance and continued eligibility for tax credits. If the cost of operating a property exceeds the rental income earned thereon, the Partnership may deem it in its best interest to voluntarily provide funds in order to protect its investment. The Partnership has implemented policies and practices for assessing potential impairment of its investments in Local Limited Partnerships. Real estate experts analyze the investments to determine if impairment indicators exist. If so, the carrying value is compared to the undiscounted future cash flows expected to be derived from the asset. If a significant impairment in carrying value exists, a provision to write down the asset to fair value will be recorded in the Partnership's financial statements. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, 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. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to the Financial Statements (continued) 2. Significant Accounting Policies (continued) Income Taxes No provision for income taxes has been made, as the liability for such taxes is the obligation of the partners of the Partnership. Reclassification Certain prior year amounts have been reclassified herein to conform with current year presentation. 3. Marketable Securities A summary of marketable securities is as follows: Gross Unrealized Fair Cost Gains Value Debt securities issued by the US Treasury and other US government corporations $ 399,810 $ 7,003 $ 406,813 Mortgage backed securities 13,688 395 14,083 Marketable securities at March 31, 2002 $ 413,498 $ 7,398 $ 420,896 The contractual maturities at March 31, 2002 are as follows: Fair Cost Value Due in less than one year $ 300,619 $ 305,063 Due in one to five years 99,191 101,750 Mortgage backed securities 13,688 14,083 413,498 $ 420,896 Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations. Proceeds from sales of marketable securities were approximately $23,000 and $43,000 during the years ended March 31, 2002 and 2001, respectively. Proceeds from the maturities of marketable securities were approximately $574,000 and $800,000 during the years ended March 31, 2002 and 2001, respectively. Included in investment income are gross gains of $2,890 and $3,170 that were realized on the sales during the years ended March 31, 2002 and 2001, respectively. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to the Financial Statements (continued) 4. Investments in Local Limited Partnerships The Partnership has limited partnership interests in twenty-two Local Limited Partnerships which were organized for the purpose of owning and operating multi-family housing complexes, all of which are government-assisted. Upon dissolution of the Local Limited Partnerships, proceeds will be distributed according to the respective Local Limited Partnership agreements. The following is a summary of investments in Local Limited Partnerships at March 31, 2002:
Capital contributions and advances paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 43,750,337 Cumulative equity in losses of Local Limited Partnerships (excluding cumulative unrecognized losses of $9,080,621) (25,425,172) Cumulative cash distributions received from Local Limited Partnerships (3,365,468) Investments in Local Limited Partnerships before adjustment 14,959,697 Excess of investment cost over the underlying assets acquired: Acquisition fees and expenses 3,613,837 Cumulative amortization of acquisition fees and expenses (1,039,310) Investments in Local Limited Partnerships before reserve for valuation 17,534,224 Reserve for valuation of investments in Local Limited Partnerships (3,127,695) Investments in Local Limited Partnerships $ 14,406,529
For the year ended March 31, 2002, the Partnership advanced $283,516 to one of the Local Limited Partnerships, all of which was reserved. In addition, $639,875 was reimbursed from the same Local Limited Partnership relating to advances made in previous years. The Partnership has recorded a reserve for valuation for its investments in Local Limited Partnerships because there is evidence of a non-temporary decline in the recoverable amounts of three of the Local Limited Partnerships. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to the Financial Statements (continued) 4. Investments in Local Limited Partnerships (continued) Summarized financial information of the Local Limited Partnerships in which the Partnership has invested as of December 31, 2001 and 2000 (due to the Partnership's policy of reporting the financial information of its Local Limited Partnership interests on a 90 day lag basis) is as follows: Summarized Balance Sheets - as of December 31,
2001 2000 Assets: Investment property, net $ 96,256,438 $ 99,715,250 Other assets 13,381,471 13,816,104 Total Assets $ 109,637,909 $ 113,531,354 Liabilities and Partners' Equity: Mortgage notes payable $ 86,069,893 $ 87,772,248 Other liabilities 13,439,123 12,928,424 Total Liabilities 99,509,016 100,700,672 Partners' Equity: Partnership's equity 5,523,487 7,990,541 Other partners' equity 4,605,406 4,840,141 Total Partners' Equity 10,128,893 12,830,682 Total Liabilities and Partners' Equity $ 109,637,909 $ 113,531,354 Summarized Income Statements - for the years ended December 31, Rental and other revenue $ 22,209,158 $ 22,305,654 Expenses: Operating 12,706,903 12,514,097 Interest 5,989,552 6,802,045 Depreciation and amortization 5,104,429 5,428,756 Total Expenses 23,800,884 24,744,898 Net Loss $ (1,591,726) $ (2,439,244) Partnership's share of Net Loss $ (1,976,719) $ (2,440,203) Other partners' share of Net Loss $ 384,993 $ 959
For the fiscal years ended March 31, 2002 and 2001, the Partnership has not recognized $1,588,958 and $1,843,338, respectively, of equity in losses relating to certain Local Limited Partnerships in which cumulative equity in losses and distributions exceeded its total investment in these Local Limited Partnerships. The Partnership's equity as reflected by the Local Limited Partnerships of $5,523,487 differs from the Partnership's investments in Local Limited Partnerships before adjustment of $14,959,697 primarily because of unrecognized losses as described above and advances made to Local Limited Partnerships which the Partnership includes in investments in Local Limited Partnerships. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to the Financial Statements (continued) 5. Transactions with Affiliates An affiliate of the Managing General Partner currently receives $8,012 (as adjusted by the CPI factor) per Local Limited Partnership annually as the Asset Management Fee for administering the affairs of the Partnership. Included in the Statements of Operations are Asset Management Fees of $170,228 and $184,640 for the years ended March 31, 2002 and 2001, respectively. As of March 31, 2002, $487,311 is payable to an affiliate of the Managing General Partner for Asset Management Fees. An affiliate of the Managing General Partner is reimbursed for the actual cost of the Partnership's operating expenses. Included in general and administrative expenses for the years ended March 31, 2002 and 2001 is $158,607 and $241,509, respectively, that has been paid or is payable by the Partnership as reimbursement for salaries and benefits. As of March 31, 2002, $72,144 is payable to an affiliate of the Managing General Partner for salaries and benefits. 6. Federal Income Taxes The following schedule reconciles the reported financial statement net loss for the fiscal years ended March 31, 2002 and 2001 to the net loss reported on the Form 1065, U.S. Partnership Return of Income for the years ended December 31, 2001 and 2000:
2002 2001 Net Loss per financial statements $ (406,429) $ (2,106,368) Adjustment for equity in losses of Local Limited Partnerships for financial reporting purposes in excess of equity in losses for tax purposes 158,505 2,214,161 Equity in losses of Local Limited Partnerships not recognized for financial reporting purposes (1,588,958) (1,843,338) Adjustment to reflect March 31 fiscal year end to December 31 tax year end (131,252) 48,661 Recovery of provision for valuation of advances to Local Limited Partnerships recognized for financial reporting purposes (639,875) - Provision for valuation of investments in Local Limited Partnerships recognized for financial reporting purposes - 791,939 Provision for valuation of advances to Local Limited Partnerships for financial reporting purposes in excess of bad debt expense for tax purposes 283,516 219,620 Loss on write-off of investments in Local Limited Partnerships for tax purposes (160,906) (238,466) Amortization not deductible for tax purposes 65,603 65,603 Related party expenses for tax purposes in excess of related party expenses for financial reporting purposes - (185,131) Cash distributions included in net loss for financial reporting purposes (1,554) (118,092) Net Loss per tax return $ (2,421,350) $ (1,151,411)
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Notes to the Financial Statements (continued) 6. Federal Income Taxes (continued) The differences in the assets and liabilities of the Partnership for financial reporting purposes and tax reporting purposes for the year ended March 31, 2002 are as follows: Financial Tax
Reporting Reporting Purposes Purposes Differences Investments in Local Limited Partnerships $ 14,406,529 $ 8,954,895 $ 5,451,634 Other assets $ 1,173,195 $ 9,593,588 $ (8,420,393) Liabilities $ 664,274 $ 669,001 $ (4,727)
The differences in the assets and liabilities of the Partnership for financial reporting and tax purposes are primarily attributable to: (i) the Partnership has not recognized approximately $9,081,000 of equity in losses relating to Local Limited Partnerships whose cumulative equity in losses exceeded their total investments; (ii) the Partnership has provided a reserve for valuation of approximately $3,128,000 against its investments in Local Limited Partnerships for financial reporting purposes; (iii) approximately $1,039,000 of amortization has been deducted for financial reporting purposes only; and (iv) organizational and offering costs of approximately $8,352,000 have been capitalized for tax purposes but are charged to Limited Partners' equity for financial reporting purposes. -----END PRIVACY-ENHANCED MESSAGE-----