-----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, Uj/u8b/Z0gm3JOppjDqQCGWnl9rbkBL5KnFq+RIXu19vf9XL3LA95O2DdUL9srLi BmBixXwUwsbpWaIWSPcgJA== 0000810663-05-000093.txt : 20051215 0000810663-05-000093.hdr.sgml : 20051215 20051115082241 ACCESSION NUMBER: 0000810663-05-000093 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051114 DATE AS OF CHANGE: 20051214 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: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-19765 FILM NUMBER: 051204573 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 10QSB 1 qh4q2.txt QH4 Q2 2005 10QSB November 14, 2005 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Re: Boston Financial Qualified Housing Tax Credits L.P. IV Report on Form 10-QSB for the Quarter Ended September 30, 2005 File Number 0-19765 Dear Sir/Madam: Pursuant to the requirements of section 15(d) of the Securities Exchange Act of 1934, filed herewith a copy of subject report. Very truly yours, /s/Stephen Guilmette Stephen Guilmette Assistant Controller UNITED STATES 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, 2005 ------------------------------------- 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 incorporation or organization) Identification No.) 101 Arch Street, Boston, Massachusetts 02110-1106 - ----------------------------------------------------- ------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (617) 439-3911 -------------------------- 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 . BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION Page No. - ------------------------------ -------- Item 1. Financial Statements Balance Sheet (Unaudited) - September 30, 2005 1 Statements of Operations (Unaudited) - For the Three and Six Months Ended September 30, 2005 and 2004 2 Statement of Changes in Partners' Equity (Deficiency) (Unaudited) - For the Six Months Ended September 30, 2005 3 Statements of Cash Flows (Unaudited) - For the Six Months Ended September 30, 2005 and 2004 4 Notes to the Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7 PART II - OTHER INFORMATION Items 1-6 15 SIGNATURE 16 CERTIFICATIONS 17
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) BALANCE SHEET September 30, 2005 (Unaudited)
Assets Cash and cash equivalents $ 1,992,217 Investment securities, at fair value (Note 1) 2,476,118 Investments in Local Limited Partnerships (Note 2) 5,872,125 Other assets 19,351 --------------- Total Assets $ 10,359,811 =============== Liabilities and Partners' Equity Due to affiliates $ 105,385 Accrued expenses 39,295 --------------- Total Liabilities 144,680 General, Initial and Investor Limited Partners' Equity 10,220,268 Net unrealized losses on investment securities (5,137) --------------- Total Partners' Equity 10,215,131 --------------- Total Liabilities and Partners' Equity $ 10,359,811 ===============
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 Three and Six Months Ended September 30, 2005 and 2004 (Unaudited)
Three Months Ended Six Months Ended September 30, September 30, September 30, September 30, 2005 2004 2005 2004 ---------------- ---------------- ---------------- --------------- Revenue Investment $ 42,851 $ 6,772 $ 76,728 $ 7,851 Other 618 816,532 101,278 842,215 ---------------- ---------------- ---------------- --------------- Total Revenue 43,469 823,304 178,006 850,066 ---------------- ---------------- ---------------- --------------- Expenses: Asset management fees, affiliate 34,542 45,978 69,084 91,956 Provision for valuation of advances to Local Limited Partneships (Note 2) 477 - 17,976 5,685 Provision for valuation of investments of advances in Local Limited Partnerships - 349,587 - 349,587 General and administrative (includes reimbursement to affiliate in the amounts of $64,190 and $147,388 in 2005 and 2004, respectively) 77,485 109,707 159,511 213,615 Amortization 7,124 10,170 14,249 20,340 ---------------- ---------------- ---------------- --------------- Total Expense 119,628 515,442 260,820 681,183 ---------------- ---------------- ---------------- --------------- Income (Loss) before equity in income (losses) of Local Limited Partnerships and gain on sale of investments in Local Limited Partnerships (76,159) 307,862 (82,814) 168,883 Equity in income (losses) of Local Limited Partnerships (Note 2) (67,158) 10,051 (204,071) (12,105) Gain on sale of investments in Local Limited Partnerships (Note 2) 4,167 - 4,167 - ---------------- ---------------- ---------------- --------------- Net Income (Loss) $ (139,150) $ 317,913 $ (282,718) $ 156,778 ================ ================ ================ =============== Net Income (Loss) allocated: General Partners $ (1,391) $ 3,179 $ (2,827) $ 1,568 Limited Partners (137,759) 314,734 (279,891) 155,210 ---------------- ---------------- ---------------- --------------- $ (139,150) $ 317,913 $ (282,718) $ 156,778 ================ ================ ================ =============== Net Income (Loss) Per Limited Partner Unit (68,043) Units $ (2.02) $ 4.62 $ (4.11) $ 2.28 ================ ================ ============== ===============
The accompanying notes are an integral part of these financial statements. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) STATEMENT OF CHANGES IN PARTNERS' EQUITY (DEFICIENCY) For the Six Months Ended September 30, 2005 (Unaudited)
Net Initial Investor Unrealized General Limited Limited Gains Partners Partner Partners (Losses) Total Balance of March 31, 2005 $ (486,057) $ 5,000 $ 10,984,043 $ - $ 10,502,986 -------------- -------------- -------------- -------- ------------- Comprehensive Loss: Change in net unrealized gains on investment securities available for sale - - - (5,137) (5,137) Net Loss (2,827) - (279,891) - (282,718) -------------- -------------- -------------- -------------- ------------- Comprehensive Loss (2,827) - (279,891) (5,137) (287,855) -------------- -------------- -------------- -------------- ------------- Balance at September 30, 2005 $ (488,884) $ 5,000 $ 10,704,152 $ (5,137) $ 10,215,131 ============== ============== ============== ============== =============
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 Six Months Ended September 30, 2005 and 2004 (Unaudited)
2005 2004 ------------- ------------- Net cash used for operating activities $ (54,582) $ (322,682) Net cash provided by (used for) investing activities (2,429,404) 5,005,493 ------------- ------------- Net increase (decrease) in cash and cash equivalents (2,483,986) 4,682,811 Cash and cash equivalents, beginning 4,476,203 560,614 ------------- ------------- Cash and cash equivalents, ending $ 1,992,217 $ 5,243,425 ============= =============
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 (Unaudited) The unaudited financial statements presented herein have been prepared in accordance with the instructions to Form 10-QSB and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America. These statements should be read in conjunction with the financial statements and notes thereto included with the Partnership's Form 10-KSB for the year ended March 31, 2005. In the opinion of the Managing General Partner, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Partnership's financial position and results of operations. The results of operations for the periods may not be indicative of the results to be expected for the year. The Managing General Partner of the Partnership has elected to report results of the Local Limited Partnerships in which the Partnership has a limited partnership interest on a 90 day lag basis because the Local Limited Partnerships report their results on a calendar year basis. Accordingly, the financial information of the Local Limited Partnerships that is included in the accompanying financial statements is as of June 30, 2005 and 2004. 1. Investment Securities The Partnership's investment securities are classified as "Available for Sale" and are carried at fair value as reported by the brokerage firms at which they are held, with unrealized gains or losses excluded from earnings and reported as a separate component of partner's equity. 2. Investments in Local Limited Partnerships The Partnership has limited partnership interests in fifteen Local Limited Partnerships which were organized for the purpose of owning and operating multi-family housing complexes, all of which are government-assisted. The Partnership's ownership interest in each Local Limited Partnership is 99%, except for Leawood Manor where the Partnership's ownership interest is 89%. The Partnership may have negotiated or may negotiate options with the Local General Partners to purchase or sell the Partnership's interests in the Local Limited Partnerships at the end of the Compliance Period at nominal prices. In the event that Properties are sold to a third party or upon dissolution of the Local Limited Partnerships, proceeds will be distributed according to the terms of each Local Limited Partnership agreement. The following is a summary of investments in Local Limited Partnerships at September 30, 2005:
Capital contributions and advances paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 38,104,234 Cumulative equity in losses of Local Limited Partnerships (excluding cumulative unrecognized losses of $13,755,239) (21,395,089) Cumulative cash distributions received from Local Limited Partnerships (9,066,614) --------------- Investments in Local Limited Partnerships before adjustments 7,642,531 Excess investment costs over the underlying assets acquired: Acquisition fees and expenses 3,092,293 Cumulative amortization of acquisition fees and expenses (1,019,699) --------------- Investments in Local Limited Partnerships before impairment allowance 9,715,125 Impairment allowance on investments in Local Limited Partnerships (3,843,000) --------------- Investments in Local Limited Partnerships $ 5,872,125 ===============
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) (Unaudited) 2. Investments in Local Limited Partnerships (continued) For the six months ended September 30, 2005, the Partnership advanced $17,976 to one of the Local Limited Partnerships, all of which was impaired. The Partnership has recorded an impairment allowance for its investments in certain Local Limited Partnerships in order to appropriately reflect the estimated net realizable value of these investments. The Partnership's share of the net losses of the Local Limited Partnerships for the six months ended September 30, 2005 is $681,963. For the six months ended September 30, 2005, the Partnership has not recognized $692,342 of equity in losses relating to certain Local Limited Partnerships in which cumulative equity in losses and cumulative distributions exceeded its total investments in these Local Limited Partnerships. Previously unrecognized losses of $214,450 were included in losses recognized in the six months ended September 30, 2005. During the six months ended September 30, 2005, the Partnerships received additional proceeds from the sale of its interest in two Local Limited Partnerships which occurred during the year ended March 31, 2005, resulting in the recognition of a net gain of $4,167. 3. Significant Equity Investee Four Local Limited Partnerships invested in by the Partnership represent more than 20% of the Partnership's consolidated assets, equity or net losses. The following financial information represents the Local Limited Partnerships' performance for the six months ended September 30, 2005 and 2004:
Leawood Associates, L.P. A Limited Partnership 2005 2004 ---------------------------------------------- ------------- ------------- Revenue $ 979,639 $ 807,319 Net Loss $ (126,380) $ (266,803) Prince Street Towers L.P. A Limited Partnership 2005 2004 ----------------------------------------------- ------------- ------------- Revenue $ 903,427 $ 888,967 Net Loss $ (111,237) $ (3,980) Sencit Towne House L.P. 2005 2004 ------------------------ ------------- ------------- Revenue $ 989,082 $ 970,502 Net Income $ 73,540 $ 87,566 Kenilworth Associates LTD A Limited Partnership 2005 2004 ----------------------------------------------- ------------- ------------- Revenue $ 2,384,273 $ 2,275,309 Net Income (Loss) $ 26,310 $ (387,412)
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) 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 is 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 its 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. Critical Accounting Policies The Partnership's accounting policies 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. 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 Local Limited Partnerships, 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. The Partnership has implemented policies and practices for assessing potential impairment of its investments in Local Limited Partnerships. The investments are reviewed for impairment whenever events or changes in circumstances indicate that the Partnership may not be able to recover its carrying value. If an other than temporary impairment in carrying value exists, a provision to reduce the asset to fair value will be recorded in the Partnership's financial statements. In January 2003, the FASB issued Interpretation No. 46 ("Interpretation"), "Consolidation of Variable Interest Entities", which provides new criteria for determining whether or not consolidation accounting is required. The Interpretation, which was modified in December 2003 in order to address certain technical and implementation issues, requires the Partnership to consider consolidation or provide additional disclosures of financial information for Local Limited Partnerships meeting the definition of a Variable Interest Entity ("VIE"). The Partnership is required to apply the Interpretation to the Local Limited Partnerships meeting the definition of a VIE as of March 31, 2005. This Interpretation requires consolidation by the Partnership of the Local Limited Partnerships' assets and liabilities and results of operations if the Partnership determined that the Local Limited Partnerships were VIEs and that the Partnership was the "Primary Beneficiary". Minority interests may be recorded for the Local Limited Partnerships' ownership share attributable to other investors. Where consolidation of Local Limited Partnerships is not required, additional financial information disclosures of Local Limited Partnerships may be required. The Partnership has assessed the Interpretation and concluded that it is not the Primary Beneficiary of any of the Local Limited Partnerships that meet the definition of a VIE. The Partnership is involved with those VIEs as a non-controlling limited partner equity holder. The Partnership is required to disclose its maximum exposure to economic and financial statement losses as a result of its involvement with the VIEs. The Partnership's exposure to economic and financial statement losses from the VIEs is limited to its investment in the VIEs ($5,872,125 at September 30, 2005). The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Liquidity and Capital Resources The Partnership had a decrease in cash and cash equivalents of $2,483,986 from $4,476,203 at March 31, 2005 to $1,992,217 at September 30, 2005. The decrease is primarily attributable to purchases of investment securities, advances to one Local Limited Partnership and cash used for operations partially offset by cash distributions received from Local Limited Partnerships. 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 September 30, 2005, $4,468,335 of cash, cash equivalents and investment securities has been designated as Reserves. To date, professional fees relating to various Property issues totaling approximately $1,473,000 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 Managing General Partner might deem it in its best interest to voluntarily provide such funds in order to protect its investment. As of September 30, 2005, the Partnership has advanced approximately $1,329,000 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 $4,858,000 of operating funds to replenish Reserves. Since the Partnership invests as a limited partner, the Partnership has no contractual obligation to provide additional funds to Local Limited Partnerships beyond its specified investment. Thus, at September 30, 2005, 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 during the six months ended September 30, 2005. Results of Operations Three Month Period The Partnership's results of operations for the three months ended September 30, 2005 resulted in a net loss of $139,150 as compared to a net income of $317,913 for the same period in 2004. The decrease in net income is primarily attributable to a decrease in other revenue and a decrease in equity in income of Local Limited Partnerships, partially offset by a decrease in provision for valuation of investments in Local Limited Partnerships an increase in investment revenue and a decrease in general and administrative expenses. The decrease in other revenue is primarily due to a decrease in distributions from Local Limited Partnerships with carrying values of zero. The decrease in equity in income of Local Limited Partnerships is primarily due to the Partnership recognizing previously unrecognized losses relating to Local Limited Partnerships where cumulative equity in losses and cumulative distributions have exceeded its total investment and an increase in unrecognized losses by the Partnership of Local Limited Partnerships with carrying values of zero. The decrease in provision for valuation of investments in Local Limited Partnerships is due to the Partnership recording an impairment allowance for its investments in certain Local Limited Partnerships in the prior year. The increase in investment revenue is primarily attributable to an increase investment securities arising from sale proceeds received in 2005 and the Partnership investing in more lucrative securities. General and administrative expenses decreased primarily due to decreased charges from an affiliate of the General Partner for administrative expenses necessary for the operation of the Partnership. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Results of Operations (continued) Six Month Period The Partnership's results of operations for the six months ended September 30, 2005 resulted in a net loss of $282,718 as compared to a net income of $156,778 for the same period in 2004. The decrease in net income is primarily attributable to a decrease in other revenue and a increase in equity in losses of Local Limited Partnerships, partially offset by a decrease in provision for valuation of investments in Local Limited Partnerships an increase in investment revenue and a decrease in general and administrative expenses. The decrease in other revenue is primarily due to a decrease in distributions from Local Limited Partnerships with carrying values of zero. The increase in equity in losses of Local Limited Partnerships is primarily due to the Partnership recognizing previously unrecognized losses relating to Local Limited Partnerships where cumulative equity in losses and cumulative distributions have exceeded its total investment and an increase in unrecognized losses by the Partnership of Local Limited Partnerships with carrying values of zero. The decrease in provision for valuation of investments in Local Limited Partnerships is due to the Partnership recording an impairment allowance for its investments in certain Local Limited Partnerships in the prior year. The increase in investment revenue is primarily attributable to an increase investment securities arising from sale proceeds received in 2005 and the Partnership investing in more lucrative securities. General and administrative expenses decreased primarily due to decreased charges from an affiliate of the General Partner for administrative expenses necessary for the operation of the Partnership. Portfolio Update The Partnership's investment portfolio consists of limited partnership interests in fifteen Local Limited Partnerships, each of which owns and operates a multi-family apartment complex and each of which has generated Tax Credits. Since inception, the Partnership has generated Tax Credits, net of recapture, of approximately $1,287 per Limited Partner Unit, with an immaterial amount of Tax Credits expected to be generated during 2005. The aggregate amount of net Tax Credits generated by the Partnership is consistent with the objective specified in the Partnership's prospectus. Properties that receive low income housing Tax Credits must remain in compliance with rent restriction and set-aside requirements for at least 15 years from the date the property is completed. Failure to do so would result in recapture of a portion of the property's Tax Credits. Between 2003 and continuing through 2006, the Compliance Period of the fifteen Properties in which the Partnership has an interest will expire. The Managing General Partner has negotiated agreements that will ultimately allow the Partnership to dispose of its interest in five Local Limited Partnerships. It is unlikely that the disposition of any of these Local Limited Partnership interests will generate any material cash distributions to the Partnership. The Managing General Partner will continue to closely monitor the operations of the Properties during the Compliance Period and will formulate disposition strategies with respect to the Partnership's remaining Local Limited Partnership interests. It is unlikely that the Managing General Partner's efforts will result in the Partnership disposing of all of its remaining Local Limited Partnership interests concurrently with the expiration of each Property's Compliance Period. The Partnership shall dissolve and its affairs shall be wound up upon the disposition of the final Local Limited Partnership interest and other assets of the Partnership. Investors will continue to be Limited Partners, receiving K-1s and quarterly and annual reports, until the Partnership is dissolved. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Portfolio Update (continued) On or about July 13, 2004, Park G.P., Inc. ("Park") commenced litigation against the Partnership and its purported general partners (collectively, the "Defendants") in Clay County, Missouri (the "Missouri Action"), claiming that the Defendants breached the Partnership Agreement and their fiduciary duties owed to Park by, among other things, failing to permit inspection of certain alleged "books and records" of the Partnership. On or about October 7, 2004, Park sought leave of the court to amend its petition to include claims for inspection of the alleged "books and records" against Boston Financial Qualified Housing Limited Partnership, Boston Financial Qualified Housing Tax Credits L.P. II, Boston Financial Qualified Housing Tax Credits L.P. III, Boston Financial Qualified Housing Tax Credits L.P. V, Boston Financial Tax Credit Fund Plus, A Limited Partnership, Boston Financial Tax Credit Fund VII, A Limited Partnership, and their purported general partners (collectively, the "New Defendants"). The court granted the amendment on November 15, 2004, and the New Defendants subsequently moved to dismiss the amended complaint in its entirety. That motion is currently pending, and oral arguments on the motion took place on February 16, 2005. On or about October 8, 2004, Park moved the court for entry of a temporary restraining order compelling the Defendants and the New Defendants to turn over the alleged "books and records" in conjunction with a transaction Park was proposing entering into. On October 12, 2004, the court denied Park's request. On or about October 3, 2005, the Partnership and its general partners ("BFQH IV") commenced litigation against Park in Suffolk Superior Court, Massachusetts and requested the court to issue a declaration that BHQH IV was not in violation of section 5.4.2 of the Partnership Agreement by virtue of its periodic disposition of interests in Local Limited Partnerships following expiration of the Properties' applicable Compliance Period(s). On or about October 11, 2005, Park sought leave of the court in the Missouri Action to amend its petition again and moved the court for entry of a temporary restraining order prohibiting the Defendants from entering into any agreement to sell, transfer or otherwise convey any interest in Local Limited Partnerships. On October 14, 2005 the court denied Park's request. The Defendants and New Defendants maintain that Park is not entitled to review the alleged "books and records" requested and/or use the materials in secondary market transactions because, among other things: (i) they are not "books and records" of the relevant partnerships; (ii) Park does not seek to review them for a proper purpose; and (iii) selective disclosure of the information to Park would give it an unfair informational advantage in secondary market transactions and may violate federal and/or state securities laws. Likewise, the Defendants maintain that they may continue to periodically dispose of interests in Local Limited Partnerships because, among other things, said dispositions do not constitute the sale "at one time" of "all or substantially all of the assets of the partnership" pursuant to Section 5.4.2 of the Partnership Agreement. The Defendants and New Defendants accordingly intend on defending against all of the aforementioned claims vigorously. These entities have not, however, formed an opinion that an unfavorable outcome is either probable or remote. Therefore, their counsel refrains from expressing an opinion as to the likely outcome of the case or the range of any loss. On October 27, 2005, Bond Purchase, L.L.C. ("Bond"), an entity affiliated with Park, commenced litigation in the district court for Johnson County, Kansas against the Partnership and its purported general partners (collectively, the "BFQH Defendants"), Leawood Associates, L.P. and BF Leawood Limited Partnership, claiming, among other things: (i) that section 5.4.2 of the Partnership Agreement prohibits the BFQH Defendants from engaging in their plan to dispose of interests in Local Limited Partnerships; (ii) that the BFQH Defendants violated the Partnership Agreement by failing to submit Bond's request to amend the Partnership Agreement to the Partnership's limited partners for a vote, instead calling a meeting; (iii) that the BFQH Defendants breached the Partnership Agreement by, among other things, failing to permit inspection of certain alleged "books and records" of the Partnership; and (iv) that the BFQH Defendants have violated their fiduciary duties owed to Bond. The BFQH Defendants intend on defending against these claims vigorously, but given, among other things, the preliminary nature of this matter, they have not formed an opinion that an unfavorable outcome is either probable or remote. Therefore, their counsel refrains from expressing an opinion as to the likely outcome of the case or the range of any loss. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Portfolio Update (continued) On August 24, 2004, the Partnership, Boston Financial Qualified Housing Limited Partnership, Boston Financial Qualified Housing Tax Credits L.P. II, Boston Financial Qualified Housing Tax Credits L.P. III, Boston Financial Qualified Housing Tax Credits L.P. V, Boston Financial Tax Credit Fund Plus, A Limited Partnership, Boston Financial Tax Credit Fund VII, A Limited Partnership, and Boston Financial Tax Credit Fund VIII, A Limited Partnership (collectively, the "Partnerships"), and their general partners commenced litigation against Everest Housing Investors 2, LLC ("Everest 2") and several other Everest 2-related entities (collectively, the "Everest Entities") in Massachusetts state court, seeking a declaratory judgment that certain materials the Everest Entities sought to inspect are not "books and records" of the Partnerships and that the Everest Entities are in any case not entitled to inspect said information under applicable partnership agreements, partnership law or otherwise. On October 7, 2004, the Everest Entities filed an answer and counterclaim against the Partnerships claiming that they breached applicable partnership agreements, partnership law and their fiduciary duties to the Everest Entities by failing to make the purported "books and records" available. On January 12, 2005, the Partnerships served a motion to amend their complaint to, among other things, add a claim based on Everest 2's breach of a November 24, 2003 letter agreement which compelled Everest 2 to keep confidential certain information contemporaneously disseminated by four of the Partnerships to Everest 2. Having received no opposition within the specified time, the Partnerships filed the motion to amend with the proposed first amended complaint on January 31, 2005. The court has granted this Motion. The Partnerships maintain that the Everest Entities are not entitled to review the materials requested and/or use the materials in secondary market transactions because, among other things: (i) they are not "books and records" of the Partnerships; (ii) the Everest Entities do not seek to review them for a proper purpose; and (iii) selective disclosure of the information to the Everest Entities would give them an unfair informational advantage in secondary market transactions and may violate federal and/or state securities laws. The Partnerships have not formed an opinion that an unfavorable outcome is either probable or remote. Therefore, the Partnerships' counsel refrains from expressing an opinion as to the likely outcome of the case or the range of any loss. Property Discussions Most of the Properties in which the Partnership has an interest have stabilized operations and operate above break-even. Some Properties generate cash flow deficits that the Local General Partners of those Properties fund through project expense loans, subordinated loans or operating escrows. However, a few Properties have had 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 Local Limited Partnership prior to the expiration of the Compliance Period. Also, the Managing General Partner, in the normal course of the Partnership's business, may arrange for the future disposition of its interest in certain Local Limited Partnerships. The following Property discussions focus only on such Properties. As previously reported, the Local General Partner of Green Tree Village, located in Greenville, Georgia, expressed to the Managing General Partner some concerns over the long-term financial health of the Property. In response to these concerns and to reduce possible future risk, the Managing General Partner entered into a put agreement with the Local General Partner in which the Partnership has the right to ultimately transfer ownership of the Local Limited Partnership to the Local General Partner for a nominal price after the expiration of the Compliance Period. The plan includes provisions to minimize the risk of recapture. The Property has generated all of its Tax Credits and the Compliance Period ends on December 31, 2005. As previously reported, the Managing General Partner negotiated an agreement with an unaffiliated entity to have the ability to transfer its interest in Orchard View, located in Gobles, Michigan, to the unaffiliated entity or its designee. The Managing General Partner has the right to put its interest in the Local Limited Partnership at any time in exchange for a contingent note that grants the Partnership 50% of all future net cash receipts from such Local Limited Partnership interest. Should the Partnership dispose of its interest in the Local Limited Partnership in any other manner, the Partnership will be required to pay a $2,500 termination fee to the unaffiliated entity. The Compliance Period for the Property will end on December 31, 2005. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) As previously reported, an IRS audit of the 1993 tax return for Bentley Court II Limited Partnership 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 Tax Credits. This administrative appeal has been unsuccessful, and the IRS continues to take the position of disallowing Tax Credits for 1993, 1994 and 1995. Based on advice of tax counsel, the Managing General Partner recently determined to concede the disallowance of tax credits for those three years. In addition, the Local General Partner received formal notification that the IRS was expanding its claims to recapturing approximately $500,000 of Tax Credits deducted in 1990, 1991 and 1992, or $7 per Unit, not including interest. Based on advice of tax counsel, the Managing General Partner has determined to continue to challenge the IRS's findings with respect to this $500,000 of recapture, and a trial is scheduled on this issue for later this year. Counsel has advised that the statute of limitations expired for the tax years 1996, 1997 and 1998. The Managing General Partner is currently considering its options including a possible settlement with the IRS. A Partnership level settlement could raise certain complications because a portion of the Partnership's ownership has changed since the tax years in question as a result of Unit transfers. In other words, not all current Unit holders are subject to the tax liabilities associated with Bentley Count. The Managing General Partner will study this issue to determine whether a full or partial Partnership level settlement is appropriate. The issue may be moot because, to date, the IRS has not expressed any interest in such a settlement. Absent a settlement, it is anticipated that the IRS will contact Limited Partners directly for any adjustments that need to be made to returns for those years. Subject to the considerations stated above, it is possible that the Managing General Partner may decide to use additional Partnership Reserves or sell Bentley Court to generate proceeds that may be used in connection with the tax liabilities described above. As previously reported, in February 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, located in Jamestowne, North Dakota, to the Local General Partner. The Property generated its final year of Tax Credits in 2001, and the Partnership retained its full share of the Property's Tax Credits through such time period. The Local General Partner subsequently transferred its general partner interest to a new, nonprofit 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 December 1, 2001. In addition, the new Local General Partner has the right to call the remaining interest after the Compliance Period expires on December 31, 2005. The Property operated above break-even for the six months ended June 30, 2005. As previously reported, although the Chicago, Illinois neighborhood in which 46th & Vincennes is located has improved in the last few years, potential tenants are reluctant to occupy the Property due to its location and curb appeal. As a result, maintaining occupancy, and therefore revenues, continues to be an issue, and debt service coverage and working capital are below appropriate levels. Site visits by the Managing General Partner have found the Property in need of some minor improvements but in overall fair condition. However, the Managing General Partner believes that the Local General Partner and its affiliated management company are not adequately performing their responsibilities with respect to the Property. The Managing General Partner has expressed these concerns to the Local General Partner and will continue to closely monitor the Property's operations. Advances from the Local General Partner have enabled the Property to stay current on its loan obligations. As previously reported, during 1994 the Local General Partner of Dorsett Apartments, located in Philadelphia, Pennsylvania, transferred its interest in the Local Limited Partnership. The IRS subsequently conducted a compliance audit of the Property and took the position that the Property is subject to recapture due to non-compliance issues. The Managing General Partner disagrees with the IRS. In the opinion of the Managing General BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) Partner, there is a risk that the Property and the Partnership could suffer significant Tax Credit recapture. However, it is not possible to quantify the potential amount at this time. Further, the Property suffered from poor location and security issues. Vandalism caused an increase in maintenance and repair expenses and negatively affected the Property's occupancy levels and tenant profile, causing debt service coverage and working capital to drop below appropriate levels. In 2003, the Managing General Partner and the Local General Partner began to pursue disposition options of the Partnership's interest in the Local Limited Partnership. On September 21, 2004, the Property was sold. The Partnership received $25,000 in sales proceeds in December 2004 and received an additional $50,000 in February 2005. The Partnership continued to have an interest in this Local Limited Partnership until January 1, 2005, at which time the Property's Compliance Period expired, and the Partnership's interest was fully transferred. The sale resulted in a taxable loss of approximately $89,000, or $1 per Unit. The Managing General Partner, in accordance with and as permitted by the Partnership Agreement, retained the entire amount of net proceeds in Reserves. As previously reported, the Managing General Partner negotiated an agreement to transfer the Local General Partner interest in West Pine, located in Findlay, Pennsylvania, to an affiliate of the Allegheny County Housing Authority ("ACHA"), contingent upon receiving approval from the U.S. Department of Housing and Urban Development ("HUD"). HUD approval was received, and the Local General Partner interest was transferred on October 17, 2003. In addition, the ACHA had informed the Managing General Partner of its interest in acquiring the Partnership's interest in the Local Limited Partnership, pending their assumption of the Local General Partner interest. Concurrent with the replacement of the Local General Partner, another ACHA affiliate acquired 30% of the Partnership's Limited Partner interest in the Local Limited Partnership. As part of this transaction, the Partnership acquired a put option for the remaining 70% exercisable for $1 upon the expiration of the Compliance Period, December 31, 2006. West Pine generated its final year of Tax Credits in 2001. As previously reported, Carolina Woods, located in Greensboro, North Carolina, had experienced decreasing occupancy since early 2003. The Local General Partner replaced its own management agent affiliate with a third party local management agent that, in an effort to increase occupancy, evicted several tenants for non-payment. . As of June 30, 2005, occupancy has improved to an acceptable level of 90%. Although revenues and debt service coverage have improved and working capital levels are favorable, the Property continues to operate at a below breakeven level due to high operating costs. The Local General Partner has advanced funds as necessary to ensure the Property remains current on its debt service obligations. The Property's Compliance Period expired on December 31, 2004 and therefore poses minimal risk to the Partnership. The Managing General Partner is working with the Local General Partner to develop an exit strategy for the Partnership's interest in the Local Limited Partnership now that the Property's Compliance Period has expired. As previously reported, Lakeside Square, located in Chicago, Illinois, has enjoyed very strong operations for a number of years. In 2003, the Local General Partner requested approval for a refinancing of the Property. In return for the Partnership's approval, the Managing General Partner obtained a put option to transfer the Partnership's interest at any time after December 31, 2006, the end of the Property's Compliance Period, for $300,000. As part of the agreement, the Local General Partner received a call option to be exercised any time after December 31, 2006. The Partnership received Sale or Refinancing Proceeds, as defined in the Local Limited Partnership Agreement, of $4,922,665 from the refinancing, which closed on August 31, 2004. The Managing General Partner, in accordance with and as permitted by the Partnership Agreement, retained the entire amount of net proceeds in Reserves. As previously reported, Oakview Square, located in Chesterfield, Michigan, continues to show the combined effects of a softening local economy and a surplus of affordable single-family homes. Job losses have adversely impacted a number of residents at the Property. Despite current asking rents well below the maximum LIHTC rents, the Property struggles to compete with a number of affordable and market-rate properties in the area. However, the Property remains current on its debt obligations. The Managing General Partner and the Local General Partner are in negotiations regarding a 2006 sale of the Property. The Property's Compliance Period will end on December 31, 2005. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) Property Discussions (continued) The Partnership has policies and practices for assessing potential impairment of its investments in Local Limited Partnerships. The Partnership analyzes these investments to determine if impairment indicators exist and if an other then temporary impairment adjustment is necessary. If impairment indicators are present, the investment is further analyzed to consider the Partnership's ability to recover the investment's carrying value. If an other than temporary impairment in carrying value exists, an impairment loss is recorded to write down the investment to its fair value. Fair value is primarily established from the current market value estimate of the remaining unused Tax Credits associated with the Properties owned by the Local Limited Partnerships. During the six months ended September 30, 2004, the Partnership concluded one of the Local Limited Partnerships, Carolina Woods Associates, L.P., had experienced other than temporary declines in its carrying value, and impairment losses of approximately $350,000 were recorded. Generally, the carrying values of most Local Limited Partnerships will decline through losses and distributions in amounts sufficient to prevent other than temporary impairments. However, the Partnership may record similar impairment losses in the future if the expiration of Tax Credits outpaces losses and distributions from any of the Local Limited Partnerships. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) PART II OTHER INFORMATION Items 1-5 Not applicable Item 6 Exhibits and reports on Form 8-K (a) Exhibits 31.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification of Principal Executive Officer and Principal Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K - No reports on Form 8-K were filed during the quarter ended September 30, 2005 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) SIGNATURE Pursuant to the requirements 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. DATED: November 14, 2005 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV By: Arch Street VIII, Inc., its Managing General Partner /s/Jenny Netzer Jenny Netzer Executive Vice President MMA Financial, LLC EX-31 2 qh4311.txt QH4 Q2 2005 EXHIBIT 31.1 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) EXHIBIT 31.1 I, Jenny Netzer, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of Boston Financial Qualified Housing Tax Credits L.P. IV; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to me by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report my conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. I have disclosed, based on my most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalents functions): (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: November 14, 2005 /s/Jenny Netzer ------------------------------ Jenny Netzer Principal Executive Officer and Principal Financial Officer Arch Street VIII, Inc., as Managing General Partner of Boston Financial Qualified Housing Tax Credits L.P. IV EX-32 3 qh4321.txt QH4 Q2 2005 EXHIBIT 32.1 BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") on Form 10-QSB for the period ended September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, the Principal Executive Officer and Principal Financial Officer, hereby certifies pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: 1. the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Partnership. /s/Jenny Netzer ------------------------------- Jenny Netzer Principal Executive Officer and Principal Financial Officer Arch Street VIII, Inc., as Managing General Partner of Boston Financial Qualified Housing Tax Credits L.P. IV Date: November 14, 2005 A signed original of this written statement required by section 906 has been provided to the Partnership and will be retained by the Partnership and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----