-----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, IQmE8lN97+OVuI49yl7Pu+WEirmnfmCKbzKz3SFAnHYvMoC1vQBoqtVA0zVmegfP e3LTeyr466Nz7jKk/9LtSg== 0000810663-07-000061.txt : 20070717 0000810663-07-000061.hdr.sgml : 20070717 20070716173638 ACCESSION NUMBER: 0000810663-07-000061 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070331 FILED AS OF DATE: 20070717 DATE AS OF CHANGE: 20070716 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: 07982360 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 qh410k.txt QH410KSB2007 Microsoft Word 11.0.6502; July 16, 2007 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Boston Financial Qualified Housing Tax Credits L.P. IV Annual Report on Form 10-KSB for Year Ended March 31, 2007 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/Patricia Olsen-Goldberg Patricia Olsen-Goldberg 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, 2007 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, 2007 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, 2007 TABLE OF CONTENTS
PART I Page No. Item 1 Business K-3 Item 2 Properties K-5 Item 3 Legal Proceedings K-8 Item 4 Submission of Matters to a Vote of Security Holders K-8 PART II Item 5 Market for the Registrant's Units and Related Security Holder Matters K-8 Item 6 Management's Discussion and Analysis of Financial Condition and Results of Operations K-9 Item 7 Financial Statements and Supplementary Data K-15 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure K-15 Item 8A Controls and Procedures K-15 Item 8B Other Information K-15 PART III Item 9 Directors and Executive Officers of the Registrant K-16 Item 10 Management Remuneration K-17 Item 11 Security Ownership of Certain Beneficial Owners and Management K-17 Item 12 Certain Relationships and Related Transactions K-17 Item 13 Exhibits, Financial Statement Schedules and Reports on Form 8-K K-19 Item 14. Principal Accountant Fees and Services K-19 SIGNATURES K-20 CERTIFICATIONS K-21
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 originally invested as a limited partner in thirty-seven 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 Date Properties owned by Interest Local Limited Partnerships Location Acquired 46th & Vincennes Chicago, IL 03/29/91 Audobon (1) Boston, MA 12/22/89 Bent Tree (1) Jackson, TX 12/27/89 Bentley Court Columbia, SC 12/26/89 Brookscrossing Atlanta, GA 06/30/89 Brown Kaplan (1) Boston, MA 07/01/90 BK Apartments (1) Jamestown, ND 12/01/90 Carolina Woods (1) Greensboro, NC 01/31/90 Canfield Crossing (1) Milan, MI 08/20/90 Dorsett Apartments (1) Philadelphia, PA 10/20/89 Findlay Market (1) Cincinnati, OH 08/15/90 Grandview (1) Grandview, TX 12/27/89 Green Tree Village (1) Greenville, GA 07/06/90 Gateway Village Garden (1) Azle, TX 06/24/91 Hampton Lane (1) Buena Vista, GA 12/20/89 Hilltop (1) Rhome, TX 12/27/89 Justin Place (1) Justin, TX 12/27/89 Lancaster House North Lancaster, PA 03/13/89 Lakeside Square (1) Chicago, IL 05/17/90 Lincoln Green (1) Old Town, ME 03/21/90 Leawood Manor Leawood, KS 12/29/89 Mayfair Mansions (1) Washington, DC 03/21/90 Nocona Terrace (1) Nocona, TX 12/27/89 Oakview Square (1) Chesterfield, MI 03/22/89 Orchard View (1) Gobles, MI 04/29/90 Orocovix IV (1) Orocovix, PR 12/30/89 Pecan Hill (1) Bryson, TX 12/28/89 Pine Manor (1) Jacksboro, TX 12/27/89 Pinewood Terrace (1) Rusk, TX 12/27/89 Royal Crest (1) Bowie, TX 12/27/89 Seagraves (1) Seagraves, TX 11/28/90 Sencit Towne House Shillington, PA 12/26/89 Town House Apartments Allentown, PA 12/26/89 Valley View (1) Valley View, TX 12/27/89 West Pine Findlay, PA 12/31/90 Willow Ridge (1) Prescott, AZ 08/28/89 Whitehills II (1) Howell, MI 04/21/90
(1) The Partnership no longer has an interest in the Local Limited Partnership which owns this Property. 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, 2007, 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 Towne House L.P., Allentown Towne House, L.P. and Prince Street Towers L.P., representing 24.80%, have AIMCO Properties 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 MMA Financial, Inc. ("MMA"), an affiliate of the General Partners, 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 currently owns limited partnership interests in eight 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, which is 89%. Each of the Local Limited Partnerships has received an allocation of Tax Credits from its relevant state tax credit agency. In general, the Tax Credits run 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 Code, in order to maintain eligibility for the Tax Credits 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, with the exception of Bentley Court, 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; or iii) loans that have repayment terms that are based on a percentage of cash flow. The schedule on the following pages provides certain key information on the Local Limited Partnership interests acquired by the Partnership.
Capital Contributions Local Limited Partnership Total Paid Mtge. Loans Occupancy at Property Name Number of Committed at Through Payable at Type of March 31, Property Location Apts Units March 31, 2007 March 31, 2007 December 31, 2006 Subsidy * 2007 Brookscrossing Apartments, L.P. A Limited Partnership Brookscrossing 224 $ 3,363,776 $ 3,363,776 $ 5,488,167 None 90% Atlanta, GA Leawood Associates, L.P. A Limited Partnership Leawood Manor Leawood, KS 254 7,497,810 7,497,810 7,450,277 None 99% Allentown Towne House, L.P. Towne House Apartments Allentown, PA 160 1,589,403 1,589,403 5,611,174 Section 8 99% Prince Street Towers L.P. A Limited Partnership Lancaster House North Lancaster, PA 201 1,996,687 1,996,687 6,303,793 Section 8 99% Sencit Towne House L.P. Sencit Towne House Shillington, PA 200 1,996,687 1,996,687 3,089,906 Section 8 100% Bentley Court II Limited Partnership Bentley Court Columbia, SC 272 5,000,000 5,000,000 6,428,396 None 99%
Capital Contributions Local Limited Partnership Total Paid Mtge. Loans Occupancy at Property Name Number of Committed at Through Payable at Type of March 31, Property Location Apts Units March 31, 2007 March 31, 2007 December 31, 2006 Subsidy * 2007 West Pine Associates West Pine Findlay, PA 38 313,445 313,445 1,633,262 FmHA 87% 46th and Vincennes Limited Partnership 46th and Vincennes Chicago, IL 28 751,120 751,120 1,302,656 Section 8 89% 1,377 $ 22,508,928 $ 22,508,928 $37,307,631
* FmHA This subsidy, which is authorized under Section 515 of the Housing Act of 1949, can be one or a combination of different types of financing. 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) a rental assistance subsidy to tenants which allows 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. 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, for the past several years the following three litigation proceedings had been pending between certain investors and various affiliates of the General Partners, including the Partnership, concerning, among other things, those investors' requests to inspect certain alleged "books and records" of the Partnership and the affiliates: Park G.P., Inc. ("Park") brought a lawsuit against the Partnership and various affiliates of the General Partners and their purported general partners (collectively, the "Fund Parties") in state court in Missouri (the "Missouri Lawsuit"); the Fund Parties brought a declaratory judgment lawsuit against Everest Housing Investors 2, LLC and several other Everest-related entities (collectively, the "Everest Entities") in Massachusetts state court (the "Everest Massachusetts Lawsuit"); and the Partnership and its General Partners brought a lawsuit against Park and its affiliate Bond Purchase, L.L.C. ("Bond") in Massachusetts state court (the "Park and Bond Massachusetts Lawsuit"). As of April 21, 2007, the Fund Parties and the Partnership reached an agreement with Park, Bond and the Everest Entities to resolve these lawsuits (the "Settlement Agreement"). Under the terms of the Settlement Agreement, the claims and counterclaims asserted in the Everest Massachusetts Lawsuit have been dismissed with prejudice and the claims in the Missouri Lawsuit and the Park and Bond Massachusetts Lawsuit have been dismissed without prejudice, all in exchange for options, subject to various conditions, to purchase certain Local Limited Partnership interests held by the Partnership, Boston Financial Qualified Housing Tax Credits L.P. III, Boston Financial Qualified Housing Tax Credits L.P. V and Boston Financial Tax Credit Fund VII, A Limited Partnership at specified prices. With respect to the Partnership, the Settlement Agreement provides options, subject to various conditions, to purchase the Partnership's interests in Prince Street Towers, L.P., located in Lancaster, PA, Sencit Towne House L.P., located in Shillington, PA, Allentown Towne House, L.P., located in Allentown, PA, Brookscrossing Apartments, L.P., located in Atlanta, GA, and Leawood Associates, L.P., located in Leawood, KS, for specified prices aggregating to $13,300,000. Except as noted above, 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 March 31, 2007, there were 2,989 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, 2007 and 2006. 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. Executive Level Overview 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 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 VIII, 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 MMA. The fiscal year of the Partnership ends on March 31. As of March 31, 2007, the Partnership's investment portfolio consisted of limited partnership interests in eight 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. The aggregate amount of Tax Credits generated by the Partnership was 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 calendar years from the date the property is placed in service. Failure to do so would result in recapture of a portion of the property's Tax Credits. The Compliance Periods of the eight remaining Properties in which the Partnership has an interest all expired on or before December 31, 2006. The Managing General Partner has negotiated an agreement that will ultimately allow the Partnership to dispose of its interest in six Local Limited Partnerships. Two of the Local Limited Partnerships in which the Partnership had an interest were disposed of during the twelve months ended March 31, 2007. The Managing General Partner will continue to closely monitor the operations of the Properties and will formulate disposition strategies with respect to the Partnership's remaining Local Limited Partnership interests. 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. 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 Local Limited Partnerships in which the Partnership invests are Variable Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a non-controlling limited partner equity holder. Because the Partnership is not the primary beneficiary of these VIEs, it accounts for its investments in the Local Limited Partnerships using the equity method of accounting. As a result of its involvement with the VIEs, the Partnership's exposure to economic and financial statement losses is limited to its investments in the VIEs ($3,434,396 at March 31, 2007). The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. 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 other-than-temporary declines in values of its investments in Local Limited Partnerships. Periodically, the carrying values of the investments are compared to their respective fair values. If an other-than-temporary decline in carrying value exists, a provision to reduce the asset to fair value, as calculated based primarily on remaining tax benefits, will be recorded in the Partnership's financial statements. During the year ended March 31, 2007, the Partnership concluded that one of the Local Limited Partnerships had experienced an other-than-temporary decline in its carrying value and impairment losses were recorded for Prince Street Towers L.P., for approximately $250,000. During the year ended March 31, 2006, the Partnership concluded that two of the Local Limited Partnerships had experienced other-than-temporary declines in their carrying values and impairment losses were recorded: Prince Street Towers L.P., for approximately $250,000, and Sencit Towne House L.P., for approximately $1,020,000. 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. Liquidity and Capital Resources At March 31, 2007, the Partnership had cash and cash equivalents of $15,869,238 as compared to $1,884,202 at March 31, 2006. The increase is mainly attributable to the proceeds received from sale of investments in Local Limited Partnerships, the maturities of investment securities and cash distributions received from Local Limited Partnerships. These increases are partially offset by advances to Local Limited Partnerships and cash used for operations. Cash used for operations includes $107,148 paid to the Managing General Partner for accrued asset management fees. The Managing General Partner originally designated 4.00% 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, 2007, $16,368,768 has been designated as Reserves. To date, professional fees relating to various Property issues totaling approximately $1,973,000 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, 2007, the Partnership has advanced approximately $1,454,000 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 $17,379,000 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, 2007, 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, 2007. The Partnership is currently working on disposing of its interest in certain Local Limited Partnerships during the next twelve months. These dispositions may result in cash available for distribution, but due to the uncertainty of the sales, no guarantees can be made as to the extent of their outcome on distributions to Limited Partners. Based on the results of 2006 Property 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 The Partnership's results of operations for year ended March 31, 2007 resulted in a net income of $12,558,438 as compared to a net loss of $2,224,013 for the same period in 2006. The increase in net income is primarily attributable to an increase in gain on sale of investments in Local Limited Partnerships, a decrease in provision for valuation allowance on investments in Local Limited Partnerships, a decrease in provision for valuation allowance on advances to Local Limited Partnerships and an increase in investment revenue partially offset by an increase in general and administrative expenses and a decrease in other income. The increase in gain on sale of investments in Local Limited Partnerships is due to the sale of two Local Limited Partnerships during the current year. The decrease in provision for valuation allowance on investments in Local Limited Partnerships is due to the Partnership recording an impairment allowance for its investment in certain Local Limited Partnerships during the year ended March 31, 2006. The decrease in provision for valuation allowance on advances to Local Limited Partnerships is due to the reimbursement of advances from one Local Limited Partnership during the current year. The increase in investment income is primarily attributable to an increase in investment securities arising from sale proceeds received during the year ended March 31, 2007 and the Partnership investing in more lucrative securities. General and administrative expenses increased primarily due to increased legal costs associated with litigation in which the Partnership was involved, partially offset by a decrease in consulting fees and a decrease in salary expenses. The decrease in other income is due to a decrease in distributions from Local Limited Partnerships with carrying values of zero. Low-Income Housing Tax Credits The Tax Credits per Limited Partner stabilized in 1992. The credits have ended as all of the Properties have reached the end of the ten year credit period. Property Discussions A majority of the Properties in which the Partnership has an interest had stabilized operations and operated above breakeven as of December 31, 2006. 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. 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, an IRS audit of 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 (the disallowance of the 1993, 1994 and 1995 Tax Credits applies only to the Limited Partners of the Partnership that claimed Tax Credits for those years and the recapture applies to all current Limited Partners of the Partnership). 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 has not retracted its position of disallowing Tax Credits for 1993, 1994 and 1995, a total of $2,562,173, plus accrued interest of approximately $3,000,000, or approximately $80 per Unit. Based on of advice of tax counsel, the Managing General Partner determined to concede the disallowance of Tax Credits for those three years. In addition, the Local General Partner received notification that the IRS was expanding its claims to recapturing $502,472 of Tax Credits taken in 1990, 1991 and 1992, plus accrued interest of approximately $800,000, or approximately $20 per Unit. Based on advice of tax counsel, the Managing General Partner determined to challenge the IRS's findings with respect to this $502,472 of recapture, and a trial was held on this issue in November 2005. Last year, the Tax Court ruled against the Partnership. Upon advice of counsel, this decision was not appealed by the Managing General Partner. It is possible that the IRS will further expand its claims for additional amounts with respect to other years. However, counsel has advised that the statute of limitations has expired for the tax years 1996, 1997 and 1998. At this point, there appears to be no possibility of a settlement with the IRS, and the Managing General Partner anticipates that the IRS will forward the assessments for disallowance and recapture directly to the affected Limited Partners and that this could occur in 2007. The accrued interest calculations above respecting the disallowance and recapture of Tax Credits are estimates only based upon a rate of 8% simple interest from the dates that the taxes were deemed to be owed. The Managing General Partner has not included estimates for penalties because it is not expecting them. However, it is possible that the IRS will attempt to claim penalties. Tax counsel has advised that Limited Partners that acquired Units after 1998 will not be affected by these assessments. The Managing General Partner strongly recommends that Limited Partners consult with their tax advisors regarding the appropriate treatment of any disallowance or recapture assessments. As previously reported, the Managing General Partner negotiated an agreement with an unaffiliated entity to have the ability to transfer its interest to the unaffiliated entity or its designee with respect to the following Local Limited Partnerships: Canfield Crossing, located in Milan, Michigan, Whitehills II, located in Howell, Michigan and Orchard View, located in Gobles, Michigan. Although these Properties did not share a common Local General Partner, they were all Rural Housing Section 515 ("FMHA") properties. The Managing General Partner had the right to put its interest in any of the Local Limited Partnerships at any time in exchange for a contingent note that granted the Partnership 50% of all future net cash receipts from such Local Limited Partnership interest. If the Partnership disposed of its interest in the above-mentioned Properties in any other manner, the Partnership would have been required to pay a $2,500 termination fee, per Property, to the unaffiliated entity. Effective January 1, 2005, the Managing General Partner transferred the Partnership's interest in Canfield Crossing and Whitehills II to the unaffiliated entity. The Partnership received $4,166 in exchange for the sale of the contingent notes that were created in conjunction with put options entered into with the above-mentioned unaffiliated third party. These two sales resulted in 2005 taxable income of $663,002, or $9.74 per Unit. Effective January 1, 2006, the Partnership put its interest in Orchard View to the unaffiliated entity for approximately $2,100 in lieu of the Partnership carrying a remaining interest in the form of a contingent note. This transfer resulted in 2006 taxable income of $287,576, or $4.23 per Unit. The Managing General Partner, in accordance with and as permitted by the Partnership Agreement, retained the entire amount of net proceeds from these sale in Reserves. The Managing General Partner determined the values in these Properties to be less than their outstanding debt, and therefore the sale of the Partnership's interests in these Properties for nominal amounts was determined to be in the best interest of the Partnership. The Compliance Periods ended on December 31, 2004 for Canfield Crossing and Whitehills II and ended on December 31, 2005 for Orchard View. The Partnership no longer has an interest in these three Local Limited Partnerships. 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 had 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. Effective January 1, 2006, the Managing General Partner transferred its interest in the Local Limited Partnership to the Local General Partner for $4,000, or $0.06 per Unit. This transfer was consummated with the receipt of these proceeds in April 2006. This transfer resulted in 2006 taxable income of $185,716, or $2.73 per Unit. The Property has generated all of its Tax Credits, and the Property's Compliance Period ended on December 31, 2005. The Partnership no longer has an interest in this Local Limited Partnership. 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 exercised its right to put the Partnership's remaining interest to the new Local General Partner, effective February 24, 2006. This transfer resulted in 2006 taxable income of $107,397, or $1.58 per Unit. The Compliance Period expired on December 31, 2005. The Partnership no longer has an interest in this Local Limited Partnership. As previously reported, Carolina Woods, located in Greensboro, North Carolina, experienced decreasing levels of 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. Throughout the three-month period ended December 31, 2005 occupancy was 92%. Although revenues, debt service coverage and working capital levels remained favorable, the Property, due to high operating costs, continued to operate at a below breakeven level as of December 31, 2005. The Local General Partner had advanced funds as necessary to ensure the Property remain current on its debt service obligations. The Property's Compliance Period expired on December 31, 2004 and therefore posed minimal recapture risk to the Partnership. On March 22, 2006, Carolina Woods was sold, causing the Partnership's disposition of its interest in this Local Limited Partnership. As expected, the Property's sales price was insufficient to produce any net proceeds to the Partnership. This sale resulted in a 2006 taxable loss of $358,616, or $5.27 per Unit. The Partnership no longer has an interest in this Local Limited Partnership. As previously reported, Lakeside Square, located in Chicago, Illinois, 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, 2005, 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, 2005. 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. Effective January 2, 2006, the Managing General Partner exercised its put option on this Local Limited Partnership, receiving $304,020 in return for its interest in this Local Limited Partnership. The Managing General Partner, in accordance with and as permitted by the Partnership Agreement, retained the entire amount of net proceeds from this sale in Reserves. This transfer resulted in 2006 taxable income of $1,221,251, or $17.95 per Unit. The Partnership no longer has an interest in this Local Limited Partnership. The Partnership's interest in the Local Limited Partnership that owns Mayfair Mansions, located in Washington, DC, was terminated upon the July 2006 sale of the Property to an unaffiliated entity. The Partnership received net sales proceeds of $12,794,835, or $188.04 per Unit, resulting in taxable income of $17,236,598, or $253.32 per Unit. The Managing General Partner believed that the Partnership had a claim of up to an additional $1,500,000 of sale proceeds under the terms of the partnership agreement and investment documents for this Local Limited Partnership. The Local General Partners disputed that at least a portion of this amount is due. On behalf of the Partnership, the Managing General Partner retained counsel and filed suit in the Superior Court of the District of Columbia (Civil Action No. 0006755-06) seeking a declaratory judgment and damages. The Local General Partners filed counter-claims and disputed the Partnership's claims. On January 10, 2007, representatives of the Managing General Partner and the Local General Partners reached a settlement during court-ordered mediation with regard to all of the above referenced legal claims. The settlement requires an additional distribution to the Partnership in the amount of approximately $1,050,000, or $15.23 per Unit. This payment is anticipated to be received in the first quarter of the fiscal year ending March 31, 2008, upon the receipt by the Local Limited Partnership of all outstanding amounts due from the sale of the Property including lender held escrows and reserves. All pending legal matters were subsequently dismissed with prejudice. The Partnership no longer has an interest in this Local Limited Partnership. The Managing General Partner anticipated the termination of the Partnership's interest in the Local Limited Partnership that owned Oakview Square, located in Chesterfield, Michigan upon the sale of the Property. The sale of this Property, resulting in net proceeds to the Partnership of $75,000, or $2.20 per Unit, occurred on February 28, 2007, effectively terminating the Partnership's interest in this Local Limited Partnership; the proceeds are expected to be paid to the Partnership during the first quarter of fiscal year 2008. This sale will result in 2007 taxable income projected to be approximately $794,000, or $11.67 per Unit. The Partnership will no longer have an interest in this Local Limited Partnership upon receipt of sale proceeds. 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 anytime after the expiration of the Compliance Period on December 31, 2006. West Pine generated its final year of Tax Credits in 2001. The Managing General Partner has begun exploring explore an exit strategy that may result in a 2007 disposal of the Partnership's interest in the Local Limited Partnership. As previously reported, although occupancy levels at 46th and Vincennes, located in Chicago, Illinois, improved to acceptable levels throughout the three-month period ending December 31, 2006, increases in utility costs and bad debt expense have resulted in unfavorable debt service coverage while working capital levels remain well below appropriate levels as of December 31, 2006. A site visit by the Managing General Partner in October 2006 found the Property in need of some capital improvements. Although advances from the Local General Partner have enabled the Property to remain current on its loan obligations, 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. Based on the results of a recent market valuation the Managing General Partner will most likely enter into a put agreement, pending the U.S. Department of Housing and Urban Development's approval of a Transfer of Physical Assets Application, and subsequently transfer the Partnership's interest in the Local Limited Partnership during 2007. The Property's Compliance Period ended on December 31, 2005. In connection with the Settlement Agreement described in the "Legal Proceedings" section above, the Partnership has granted options, subject to various conditions, to sell its interests in Prince Street Towers, L.P., located in Lancaster, PA, Sencit Towne House L.P., located in Shillington, PA, Allentown Towne House, L.P., located in Allentown, PA, Brookscrossing Apartments, L.P., located in Atlanta, GA, and Leawood Associates, L.P., located in Leawood, KS, for a price of $13,300,000 specified in the Settlement Agreement. In accordance with the terms of the previously mentioned Settlement Agreement, the Managing General Partner anticipates that the Partnership's interest in the Local Limited Partnership that owns Leawood Manor, located in Leawood, Kansas, will be terminated upon the sale of the Property in July 2007. This sale is expected to result in net proceeds to the Partnership, via two installments of approximately $4,200,000 each or approximately $8,400,000 total, of $123 per Unit. This sale would result in taxable income projected to also be approximately $8,400,000, or $123 per Unit. 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, 2007 and 2006. Since most 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 Tax Credits. Certain Properties in which the Partnership has invested 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. Item 8A. Controls and Procedures Based on their evaluation, required by the Securities Exchange Act Rules 13a-15(d) and 15d-15(d), the Partnership's principal executive officer and principal financial officer have concluded that the Partnership's disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(d) and 15d-15(d)) were effective as of March 31, 2007 to ensure that information required to be disclosed by the Partnership in reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and were effective as of March 31, 2007 to ensure that information required to be disclosed by the Partnership issuer in the reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the Partnership's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There were no other changes in the Partnership's internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of the Securities and Exchange Act Rules 13a-15(d) or 15d-15(d) that occurred during the quarter ended March 31,2007 that affected, or were reasonably likely to affect, the Partnership's internal control over financial reporting. Item 8B. Other Information The following reports on Form 8-K were filed during the fourth quarter of the year ended March 31, 2007: Form 8-K dated February 27, 2007 PART III Item 9. Directors and Executive Officers of the Registrant The Managing General Partner of the Partnership is Arch Street VIII, Inc., a Massachusetts corporation (the "Managing General Partner"), an affiliate of MMA. 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 Gary Mentesana Executive Vice President Michael H. Gladstone Principal, Member 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. Gary A. Mentesana, age 42, Executive Vice President, Head of the Affordable Housing Group - Mr. Mentesana has been Executive Vice President of MuniMae (the "Company") since July 2003. He is the head of the Company's Affordable Housing Group and is responsible for both the affordable tax exempt and taxable lending and equity businesses. Prior to his appointment as EVP, Mr. Mentesana served as the Company's Chief Capital Officer as well as the Company's Chief Financial Officer. Mr. Mentesana's tenure with the Company began with the Company's predecessor, the SCA Tax-Exempt Fund Limited Partnership, in 1988. Prior to joining the Company, Mr. Mentesana worked for Coopers and Lybrand and was a Certified Public Accountant. Mr. Mentesana graduated from the University of Rhode Island. Michael H. Gladstone, age 50, Principal, Member - Mr. Gladstone is responsible for capital transactions work in the Asset Management group of MMA. He joined MMA as a result of the Boston Financial and Lend Lease HCI acquisitions, 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 has 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). The Partnership is organized as a limited partnership solely for the purpose of real estate investment and does not have any employees. Therefore the Partnership has not adopted a Code of Ethics. The Partnership is structured as a limited partnership that was formed principally for real estate investment and is not a "listed" issuer as defined by Rule 10A-3 of the Securities Exchange Act of 1934. Accordingly, neither an audit committee nor a financial expert to serve on such a committee has been established by the Partnership. Item 10. Management Remuneration Neither the directors nor officers of Arch Street VIII, 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, 2007, the following are the only entities known to the Partnership to be the beneficial owners of more than 5% of the Units outstanding:
Amount Title of Name and Address of Beneficially Class Beneficial Owner Owned Percent of Class Limited Bond Purchase, LLC 10,818 Units 15.90% Partner 104 Armor Road P.O Box 34729 Kansas City, MO 64116-1129 Limited Danford M Baker 4,354 Units 6.40% Partner 600 Orange Grove Circle Pasadena, CA 91105 Limited Anise, LLC 3,802 Units 5.59% Partner 1001 Walnut Kansas City, MO 64106
The equity securities registered by the Partnership under Section 12(g) of the Act of 1934 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 VIII, Inc., Arch Street IV L.P., MMA nor any of their executive officers, directors, principals or affiliates is the beneficial owner of any Units. None of the foregoing persons possess a right to acquire beneficial ownership of Units. The Partnership does not know of any existing arrangement that might at a later date 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 is 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, 2007 is presented as follows: Organizational Fees and Expenses In accordance with the Partnership Agreement, affiliates of the General Partner were 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 included printing expenses and legal, accounting, escrow agent and depository fees and expenses. Such expenses also included a non-accountable expense allowance for marketing expenses equal to 1% of the Gross Proceeds. From inception through March 31, 2007, $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 Proceeds. No payments were made or expenses reimbursed in each of two years ended March 31, 2007. Acquisition Fees and Expenses In accordance with the Partnership Agreement, the Partnership was 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 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 Proceeds. Acquisition fees totaling $5,080,756 for the closing of the Partnership's Local Limited Partnership investments were paid to an affiliate of the Managing General Partner. Acquisition expenses totaling $974,240 were incurred and were 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, 2007. 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 receives the base amount of $5,500 (annually adjusted by the CPI factor) per Local Limited Partnership as the annual Asset Management Fee. Fees earned in each of the two years ended March 31, 2007 are as follows: 2007 2006 Asset management fees $ 100,952 $ 130,421 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, 2007 are as follows: 2007 2006 Salaries and benefits expense reimbursements $ 77,349 $ 115,879 Cash Distributions Paid to the General Partners In accordance with the Partnership Agreement, the General Partners of the Partnership, Arch Street VIII, Inc. and Arch Street IV L.P., 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, 2007. 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 MMA and its affiliates during each of the two years ended March 31, 2007 is presented in Note 5 to the Financial Statements. Item 13. Exhibits, Financial Statement Schedules 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) 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 Item 14. Principal Accountant Fees and Services The Partnership paid or accrued fees for services rendered by the principal accountant for the two years ended March 31, 2007 as follows: 2007 2006 Audit fees $ 87,530 $ 75,220 Tax fees $ 2,400 $ 2,400 No other fees were paid or accrued to the principal accountants during the two years ended March 31, 2007. 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 VIII, Inc. its Managing General Partner By: /s/Gary Mentesana Date: July 16, 2007 Gary Mentesana President Arch Street VIII, Inc. 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/ Gary Mentesana Date: July 16, 2007 Gary Mentesana President Arch Street VIII, Inc. By: /s/Michael H. Gladstone Date: July 16, 2007 Michael H. Gladstone Vice President Arch Street VIII, Inc. Microsoft Word 11.0.6502; BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) Annual Report on Form 10-KSB For the Year Ended March 31, 2007 Index
Page No. Report of Independent Registered Public Accounting Firm for the years ended March 31, 2007 and 2006 F-2 Report of Independent Registered Public Accounting Firm for the year ended December 31, 2005 for Leawood Associates, LP F-3 Report of Independent Registered Public Accounting Firm for the year ended December 31, 2005 for Allentown Towne House, LP F-4 Report of Independent Registered Public Accounting Firm for the year ended December 31, 2005 for Sencit Towne House, LP F-5 Financial Statements Balance Sheet - March 31, 2007 F-6 Statements of Operations - For the years ended March 31, 2007 and 2006 F-7 Statements of Changes in Partners' Equity (Deficiency) - For the years ended March 31, 2007 and 2006 F-8 Statements of Cash Flows - For the years ended March 31, 2007 and 2006 F-9 Notes to the Financial Statements F-10
Report of Independent Registered Public Accounting Firm To the Partners of Boston Financial Qualified Housing Credits Limited Partnership IV In our opinion, based on our audits and the report 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 Limited Partnership IV ("the Partnership") at March 31, 2007, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2007 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 investments in the 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 Leawood Associates L.P., Sencit Towne House L.P. and Allentown Towne House L.P. (the local "Limited Partnerships"), investments in which the Partnership's investment in the Local Limited Partnerships is stated at $3,331,324 at March 31, 2006, and the Partnership's equity in earnings (losses) of the Local Limited Partnerships is stated at ($262,643), $126,000 and ($113,388) respectively for the year ended March 31, 2006. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for the Local Limited Partnerships is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 report of other auditors provide a reasonable basis for our opinion. PricewaterhouseCoopers, LLP Boston, Massachusetts June 22, 2007 HA&W Certified Public Accountants and Business Advisors INDEPENDENT AUDITORS' REPORT To the Partners Leawood Associates, L.P. We have audited the accompanying balance sheet of LEAWOOD ASSOCIATES, L.P. [a limited partnership], as of December 31, 2005, and the related statements of changes in partners equity, operations, and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The partnership has determined that it is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the partnership's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of LEAWOOD ASSOCIATES, L.P. as of December 31, 2005, and the results of its operations, its changes in partners equity, and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The accompanying supporting information shown on pages 13 and 14 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. /s/Habif, Arogeti & Wynne, LLP Atlanta, Georgia January 20, 2006 Habif, Arogeti & Wynne, LLP Glenridge Highlands Two 5565 Glenridge Connector Suite 200 Atlanta, Georgia 30342 404.892.9651 Fax 404.876.3913 www.hawcpa.com An Independent Member of Baker Tilly International Certified Public Accountants Carter & Company Certified Public Accountants, LLC 543 Highway 98 East, Suite 201 Destin, Florida 32541 Phone: 850-650-0125 Fax: 850-650-0126 Independent Auditors' Report To the Partners Allentown Towne House Limited Partnership (A Limited Partnership) In our opinion, the accompanying balance sheet and the related statement of profit and loss, changes in partners' equity (deficiency) and cash flows present fairly, in all material aspects, the financial position of Allentown Towne House Limited Partnership (A Limited Partnership) as of December 31, 2005 and the results of its operations and its cash flows for the year then ended 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 audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/Carter & Company Destin, Florida January 20, 2006 Carter & Company Certified Public Accountants, LLC 543 Highway 98 East, Suite 201 Destin, Florida 32541 Phone: 850-650-0125 Fax: 850-650-0126 Independent Auditors' Report To the Partners Sencit Towne House Limited Partnership (A Limited Partnership) In our opinion, the accompanying balance sheet and the related statement of profit and loss, changes in partners' equity (deficiency) and cash flows present fairly, in all material aspects, the financial position of Sencit Towne House Limited Partnership (A Limited Partnership) as of December 31, 2005 and the results of its operations and its cash flows for the year then ended 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 audit. We conducted our audit of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/Carter & Company Destin, Florida January 20, 2006
BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) BALANCE SHEET March 31, 2007 Assets Cash $ 15,869,238 Investment securities, at fair value (Note 3) 499,530 Investments in Local Limited Partnerships (Note 4) 3,434,396 Accounts receivable (Note 4) 1,125,000 Other assets 6,332 --------------- Total Assets $ 20,934,496 --------------- Liabilities and Partners' Equity Due to affiliate (Note 5) $ 20,593 Accrued expenses 76,740 --------------- Total Liabilities 97,333 --------------- General, Initial and Investor Limited Partners' Equity 20,837,411 Net unrealized losses on investment securities (248) --------------- Total Partners' Equity 20,837,163 --------------- Total Liabilities and Partners' Equity $ 20,934,496 --------------- 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, 2007 and 2006
2007 2006 Revenue: Investment $ 347,589 $ 157,940 Other 43,100 117,968 ----------- -------- Total Revenue 390,689 275,908 ----------- -------- Expense: Asset management fees, affiliate (Note 5) 100,952 130,421 Provision for (recovery of) valuation allowance on advances to Local Limited Partnerships (Note 4) (118,248) 261,049 Provision for valuation allowance on investments in Local Limited Partnerships (Note 4) 250,000 1,270,000 General and administrative (includes reimbursements to an affiliate in the amount of $77,349 and $115,879 in 2007 and 2006, respectively) 1,103,804 783,533 Amortization 27,336 28,498 ----------- --------- Total Expense 1,363,844 2,473,501 ---------- --------- Loss before equity in losses of Local Limited Partnerships and gain on sale of investments in Local Limited Partnerships (973,155) (2,197,593) Equity in losses of Local Limited Partnerships (Note 4) (388,242) (318,903) Gain on sale of investments in Local Limited Partnerships (Note 4) 13,919,835 292,483 ----------- ------------ Net Income (Loss) $ 12,558,438 $ (2,224,013) ----------- ------------ Net Income (Loss) allocated: General Partners $ 716,668 $ (22,240) Limited Partners 11,841,770 (2,201,773) ----------- ----------- $ 12,558,438 $ (2,224,013) Net Income (Loss) per Limited Partner Unit ----------- ----------- (68,043 Units) $ 174.03 $ (32.36) ----------- -------- 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 For the Years Ended March 31, 2007 and 2006
Initial Investor Net General Limited Limited Unrealized Partners Partner Partners Loss Total Balance at March 31, 2005 $ (486,057) $ 5,000 $ 10,984,043 $ - $ 10,502,986 Comprehensive Loss: Change in net unrealized losses on investment securities available for sale - - - (14,693) (14,693) Net Loss (22,240) - (2,201,773) - (2,224,013) Comprehensive Loss (22,240) - (2,201,773) (14,693) (2,238,706) -------- ------ ----------- ------- ----------- Balance at March 31, 2006 (508,297) 5,000 8,782,270 (14,693) 8,264,280 -------- ------ ---------- ------- ---------- Comprehensive Income: Change in net unrealized losses on investment securities available for sale - - - 14,445 14,445 Net Income 716,668 - 11,841,770 - 12,558,438 ------- -------- ----------- ------ ----------- Comprehensive Income 716,668 - 11,841,770 14,445 12,572,883 ------- --------- ---------- ------ ----------- Balance at March 31, 2007 $ 208,371 $ 5,000 $ 20,624,040 $ (248) $ 20,837,163 -------- -------- ---------- ------ ----------- 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, 2007 and 2006
2007 2006 Cash flows from operating activities: Net Income (Loss) $ 12,558,438 $ (2,224,013) Adjustments to reconcile net income (loss) to net cash used for operating activities: Equity in losses of Local Limited Partnerships 388,242 318,903 Gain on sale of investments in Local Limited Partnerships (13,919,835) (292,483) Provision for valuation (recovery of) allowance on advances to Local Limited Partnerships (118,248) 261,049 Provision for valuation allowance on investments In Local Limited Partnerships 250,000 1,270,000 Amortization 27,336 28,498 Cash distributions included in net income or loss (35,000) (117,349) Other non cash item (8,892) (12,526) Increase (decrease) in cash arising from changes in operating assets and liabilities: Other assets 12,701 (18,679) Due to affiliate (106,196) 92,248 Accrued expenses (31,175) 78,440 ------------ ----------- Net cash used for operating activities (982,629) (615,912) ------------ ----------- Cash flows from investing activities: Purchases of investment securities - (2,728,360) Proceeds from maturities of investment securities 1,750,000 500,000 Advances to Local Limited Partnerships (81,752) (261,049) Reimbursement of advances to Local Limited Partnerships 200,000 - Cash distributions received from Local Limited Partnerships 290,582 213,050 Proceeds received from sale of investments in Local Limited Partnerships 13,919,835 314,270 Accounts receivable from sale of investments in Local Limited Partnerships (1,111,000) (14,000) ----------- ----------- Net cash provided by (used for) investing activities 14,967,665 (1,976,089) ----------- ---------- Net increase (decrease) in cash and cash equivalents 13,985,036 (2,592,001) Cash and cash equivalents, beginning 1,884,202 4,476,203 Cash and cash equivalents, ending $ 15,869,238 $ 1,884,202 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 VIII, 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 MMA Financial, Inc. ("MMA"). 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, 2007, the Managing General Partner has designated $16,368,768 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. The General Partners may have an obligation to fund deficits in their capital accounts, subject to limits set forth in the Partnership Agreement. However, to the extent that the General Partner' capital accounts are in deficit position certain items of net income may be allocated to the General Partners in accordance with the Partnership Agreement. 2. Significant Accounting Policies Cash Equivalents Cash equivalents represent short-term, highly liquid instruments with original maturities of 90 days or less. Concentration of Credit Risk The Partnership invests its cash primarily in money market funds with commercial banks. At times, cash balances at a limited number of banks and financial institutions may exceed federally insured amounts. Management believes it mitigates its credit risk by investing in major financial institutions. Investment Securities The Partnership's investment securities are classified as "Available for Sale" securities and are reported at fair value as reported by the brokerage firm at which the securities are held. All investment 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 Local Limited Partnerships in which the Partnership invests are Variable Interest Entities ("VIE"s). The Partnership is involved with the VIEs as a non-controlling limited partner equity holder. Because the Partnership is 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) not the primary beneficiary of these VIEs, it accounts for its investments in the Local Limited Partnerships using the equity method of accounting. As a result of its involvement with the VIEs, the Partnership's exposure to economic and financial statement losses is limited to its investments in the VIEs ($3,434,396 at March 31, 2007). The Partnership may be subject to additional losses to the extent of any financial support that the Partnership voluntarily provides in the future. 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 Tax Credits generated by Local Limited Partnerships are not reflected on the books of the Partnership as such credits are allocated to partners for use in offsetting their Federal income tax liability. 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 or until a Local Limited Partnership's respective investment balance has been reduced to zero. The Partnership may provide advances to the Local Limited Partnerships to finance operations or to make debt service payments. The Partnership assesses the collectibility of any 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 of the Local Limited Partnerships that is included in the accompanying financial statements is as of December 31, 2006 and 2005 and for the years then ended. 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 other-than-temporary declines in values of its investments in Local Limited Partnerships. Periodically, the carrying values of the investments are compared to their respective fair values. If an other-than-temporary decline in carrying value exists, a provision to reduce the asset to fair value, as calculated based primarily on remaining tax benefits, 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) Fair Value of Financial Instruments Statements of Financial Accounting Standards No. 107 ("SFAS No. 107"), Disclosures About Fair Value of Financial Instruments, requires disclosure for the fair value of most on- and off-balance sheet financial instruments for which it is practicable to estimate that value. The scope of SFAS No. 107 excludes certain financial instruments, such as trade receivables and payables when the carrying value approximates the fair value and investments accounted for under the equity method, and all nonfinancial assets, such as real property. Unless otherwise described, the fair values of the Partnership's assets and liabilities which qualify as financial instruments under SFAS No. 107 approximate their carrying amounts in the accompanying balance sheet. 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. Effect of New Accounting Principle In June 2006, the FASB issued Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"), which is effective for financial statements for fiscal years beginning after December 15, 2006. FIN 48 provides guidance to all enterprises, including pass-through entities, for how uncertain tax provisions should be recognized, measured, presented and disclosed in the financial statements. The General Partner will adopt FIN 48 as of April 1, 2007. The General Partner is currently assessing the impact of FIN 48 but believes that FIN 48 will not have a material impact on the financial position or operating results of the Partnership. 3. Investment Securities A summary of investment securities is as follows:
Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value Debt securities issued by the US Treasury and other US Government Agency $ 499,778 $ - $ (248) $ 499,530 Investment securities at March 31, 2007 $ 499,778 $ - $ (248) $ 499,530 The contractual maturities at March 31, 2007 are as follows: Fair Cost Value Due in less than one year $ 499,778 $ 499,530 $ 499,778 $ 499,530
Proceeds from maturities of investments securities for the year ended March 31, 2007 were approximately $1,750,000. 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 eight 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 March 31, 2007: Capital contributions and advances paid to Local Limited Partnerships and purchase price paid to withdrawing partners of Local Limited Partnerships $ 23,103,135 Cumulative equity in losses of Local Limited Partnerships (excluding cumulative unrecognized losses of $6,986,299) (14,360,284) Cumulative cash distributions received from Local Limited Partnerships (2,372,719) Investments in Local Limited Partnerships before adjustments 6,370,132 Excess investment costs over the underlying assets acquired: Acquisition fees and expenses 2,042,689 Cumulative amortization of acquisition fees and expenses (769,572) Investments in Local Limited Partnerships before valuation allowance 7,643,249 Valuation allowance on investments in Local Limited Partnerships (4,208,853) Investments in Local Limited Partnerships $ 3,434,396
For the year ended March 31, 2007, the Partnership advanced $81,752 to one of the Local Limited Partnerships, all of which was reserved. In addition, $200,000 was reimbursed from one Local Limited Partnership relating to advances made in previous years, all of which has been previously reserved. The Partnership has also recorded a valuation allowance for its investments in certain Local Limited Partnerships in order to appropriately reflect the estimated net realizable value of these investments. During the year ended March 31, 2007, the Partnership concluded that one of the Local Limited Partnerships had experienced other-than-temporary declines in their carrying value and impairment losses were recorded: Prince Street Towers L.P., for approximately $250,000. 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 combined financial information of the Local Limited Partnerships in which the Partnership has invested as of December 31, 2006 and 2005 (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, 2006 2005 Assets: Investment property, net $ 44,777,700 $ 73,460,785 Other assets 6,434,117 15,472,934 Total Assets $ 51,211,817 $ 88,933,719 Liabilities and Partners' Deficiency: Mortgage notes payable $ 42,829,668 $ 80,507,639 Other liabilities 7,861,063 12,979,096 Total Liabilities 50,690,731 93,486,735 Partnership's deficiency (1,171,670) (7,853,026) Other partners' equity 1,692,756 3,300,010 Total Partners' Equity (Deficiency) 521,086 (4,553,016) Total Liabilities and Partners' Equity (Deficiency) $ 51,211,817 $ 88,933,719 Summarized Statements of Operations - for the years ended December 31, 2006 2005 Rental and other income $ 15,269,576 $ 22,237,222 Expenses: Operating 9,900,968 13,354,816 Interest 3,993,333 5,601,792 Depreciation and amortization 3,813,233 4,771,152 Total Expenses 17,707,534 23,727,760 Net Loss $ (2,437,958) $ (1,490,538) Partnership's share of Net Loss $ (2,385,141) $ (1,892,758) Other partners' share of Net Loss $ (52,817) $ 402,220
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) For the years ended March 31, 2007 and 2006, the Partnership has not recognized $1,996,899 and $1,653,595, 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. Previously unrecognized losses of $79,740 were included in losses recognized in the year ended March 31, 2006. The Partnership's deficiency as reflected by the Local Limited Partnerships of ($1,171,690) differs from the Partnership's investments in Local Limited Partnerships before adjustments of $6,370,132 primarily due to: (i) one Local Limited Partnership whose interest was sold in the quarter ended March 31, 2007 being included in the summarized balance sheet of the Local Limited Partnerships at December 31, 2006; (ii) cumulative unrecognized losses as described above; (iii) advances to Local Limited Partnerships which the Partnership included in investments in Local Limited Partnerships; and (iv) differences in the accounting treatment of miscellaneous items. The Partnership's interest in two of its investments in Local Limited Partnerships were sold during the year ended March 31, 2007, resulting in gains totaling $13,919,835. As of March 31, 2007, $1,125,000 is receivable related to the sale of these two Local Limited Partnerships. 5. Transactions with Affiliates An affiliate of the Managing General Partner receives the base amount of $5,500 (annually adjusted by the CPI factor) per Local Limited Partnership as the annual Asset Management Fee for administering the affairs of the Partnership. Asset Management Fees for the years ended March 31, 2007 and 2006 were $100,952 and $130,421, respectively. As of March 31, 2007, $20,593 is payable to an affiliate of the Managing General Partner for Asset Management Fees. During the years ended March 31, 2007 and 2006, Asset Management Fees of $107,148 and $138,173, respectively, were paid out of available cash flow. An affiliate of the Managing General Partner is reimbursed for the cost of the Partnership's salaries and benefits expenses. Included in general and administrative expenses for the years ended March 31, 2007 and 2006 is $77,349 and $115,879, respectively, that the Partnership has incurred for these expenses. As of March 31, 2007, all reimbursements to the affiliate of the Managing General Partner for these expenses have been paid. In December 2006, Partnership cash was invested in below-market interest bearing accounts as part of a banking arrangement which resulted in financial benefits to affiliates of MMA Financial. MMA Financial subsequently determined that this arrangement was inconsistent with the terms of the Partnership Agreement and terminated the arrangement. MMA intends to pay the interest lost by the Partnership (approximately $363,000) to the Partnership in July 2007. BOSTON FINANCIAL QUALIFIED HOUSING TAX CREDITS L.P. IV (A Limited Partnership) NOTES TO THE FINANCIAL STATEMENTS (continued) 6. Federal Income Taxes The following schedule reconciles the reported financial statement net loss for the fiscal years ended March 31, 2007 and 2006 to the net income reported on the Form 1065, U.S. Partnership Return of Income for the years ended December 31, 2006 and 2005:
2007 2006 Net Income (Loss) per financial statements $ 12,558,438 $ (2,224,013) Equity in losses of Local Limited Partnerships for financial reporting purposes in excess of equity in losses for tax purposes 911,625 1,452,867 Equity in losses of Local Limited Partnerships not recognized for financial reporting purposes (1,996,899) (1,573,855) Adjustment to reflect March 31 fiscal year end to December 31 taxable year end (154,658) 167,692 Amortization for financial reporting (tax) purposes in excess of amortization for tax (financial reporting) purposes 27,336 (493,046) Provision for valuation allowance on advances to Local Limited Partnerships not deductible for tax purposes - 261,049 Recovery of provision for valuation allowance on advances to Local Limited Partnerships, net of provision not reportable for tax purposes (118,248) - Provision for valuation allowance on investments in Local Limited Partnerships not deductible for tax purposes 250,000 1,270,000 Gain on sale of investments in Local Limited Partnerships recognized for tax purposes in excess of gain recognized for financial reporting purposes 4,752,231 1,836,620 Cash distributions included in net loss for financial reporting purposes (35,000) (117,968) Net Income per tax return $ 16,194,825 $ 579,346
The differences in the assets and liabilities of the Partnership for financial reporting purposes and tax purposes as of March 31, 2007 and December 31, 2006, respectively, are as follows:
Financial Reporting Tax Purposes Purposes Differences Investments in Local Limited Partnerships $ 3,434,396 $ (598,003) $ 4,032,399 Other assets $ 17,500,100 $ 25,575,497 $ (8,075,397) Liabilities $ 97,333 $ 112,930 $ (15,597)
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 and tax purposes are primarily attributable to: (i) the cumulative equity in losses from Local Limited Partnerships for tax purposes is approximately $15,090,000 greater than for financial reporting purposes, including approximately $6,986,000 of losses the Partnership has not recognized relating to Local Limited Partnerships whose cumulative equity in losses exceeded its total investment; (ii) the Partnership has provided an impairment allowance of approximately $4,209,000 against its investments in Local Limited Partnerships for financial reporting purposes; (iii) approximately $406,000 of amortization has been deducted for financial reporting purposes only; (iv) organizational and offering costs of approximately $8,352,000 have been capitalized for tax purposes and charged to Limited Partners' equity for financial reporting purposes; and (v) the sale of investments in one Local Limited Partnership during the quarter ended March 31, 2007 resulting in its removal from investments in Local Limited Partnerships for financial reporting purposes. 7. Significant Subsidiaries The following Local Limited Partnership invested in by the Partnership represents more than 20% of the Partnership's total assets or equity as of March 31, 2007 or 2006 or net losses for the years ended either March 31, 2007 or 2006. The following financial information represents the performance of these Local Limited Partnerships for the years ended December 31, 2006 and 2005:
Sencit Towne House, L.P. 2006 2005 Total Assets $N/A $ 7,538,460 Total Liabilities $N/A $ 3,775,134 Revenue $N/A $ 1,974,390 Net Income $N/A $ 127,273
The Partnership does not guarantee any of the mortgages or other debt of the Local Limited Partnerships. EX-31 2 ex31q407.txt QH4EX3107 EXHIBIT 31.1 I, Gary Mentesana, certify that: 1. I have reviewed this annual report on Form 10-KSB 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 our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us 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 our 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 our 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: July 16, 2007 /s/Gary Mentesana Gary Mentesana 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 exh32q407.txt EHX32Q407 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 Annual Report of Boston Financial Qualified Housing Tax Credits L.P. IV (the "Partnership") on Form 10-KSB for the year ended March 31, 2007 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/Gary Mentesana Gary Mentesana 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: July 16, 2007 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-----