10KSB 1 tc810k05.txt TC810K05 July 13, 2005 Securities and Exchange Commission 450 Fifth Street, N.W. Washington, D.C. 20549 Boston Financial Tax Credit Fund VIII, A Limited Partnership Annual Report on Form 10-KSB for the Year Ended March 31, 2005 File Number 0-26522 Dear Sir/Madam: Pursuant to the requirements of Section 15(d) of the Securities Exchange Act of 1934, filed herewith is one copy of subject report. Very truly yours, /s/Stephen Guilmette Stephen Guilmette Assistant Controller TC810K 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, 2005 -------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---------------------- ----------------------- Commission file number 0-26522 Boston Financial Tax Credit Fund VIII, A Limited Partnership (Exact name of registrant as specified in its charter) Massachusetts 04-3205879 (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) 200,000 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 non affiliates of the registrant. $36,497,000 as of March 31, 2005 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 Report on Form 8-K dated April 8, 1994 Part I, Item 1 Report on Form 8-K dated June 14, 1994 Part I, Item 1 Acquisition Reports Part I, Item 1 Prospectus - Sections Entitled: "Investment Objectives and Policies - Principal Investment Objectives" Part I, Item 1 "Investment Risks" 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 TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED MARCH 31, 2005 TABLE OF CONTENTS
Page No. PART I 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-12 Item 8 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure K-13 Item 8A Controls and Procedures K-13 Item 8B Other Information K-13 PART III Item 9 Directors and Executive Officers of the Registrant K-13 Item 10 Management Remuneration K-14 Item 11 Security Ownership of Certain Beneficial Owners and Management K-14 Item 12 Certain Relationships and Related Transactions K-15 Item 13 Exhibits, Financial Statement Schedules and Reports on Form 8-K K-16 Item 14. Principal Accountant Fees and Services K-17 SIGNATURES K-18 ---------- CERTIFICATIONS K-19 --------------
PART I Item 1. Business Boston Financial Tax Credit Fund VIII, A Limited Partnership (the "Fund") is a Massachusetts limited partnership formed on August 25, 1993 under the laws of the Commonwealth of Massachusetts. The Fund's partnership agreement ("Partnership Agreement") authorizes the sale of up to 200,000 units of Limited Partnership Interest ("Unit") at $1,000 per Unit in series. The first series offered 50,000 Units. On July 29, 1994, the Fund held its final investor closing. In total, the Fund raised $36,497,000 ("Gross Proceeds") through the sale of 36,497 Units. Such amounts exclude a fractional unregistered Unit previously acquired for $100 by the Initial Limited Partner. The offering of Units terminated on March 29, 1995. The Fund is engaged solely in the business of real estate investment. Accordingly, a presentation of information about industry segments is not applicable and would not be material to an understanding of the Fund's business taken as a whole. The Fund has invested as a limited partner in other limited partnerships ("Local Limited Partnerships") which own and operate residential apartment complexes ("Properties"), some of which were expected to benefit from some form of federal, state or local assistance programs and all of which qualify for 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 Fund include the following: (i) to provide investors with annual tax credits which they may use to reduce their federal income taxes; (ii) to provide limited cash distributions from the operations of apartment complexes; and (iii) to preserve and protect the Fund's capital. There cannot be any assurance that the Fund 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 sections of the Prospectus entitled "Investment Objectives and Policies - Principal Investment Objectives" and "Investment Risks", which are herein incorporated by this reference. Table A on the following page lists the properties originally acquired by the Local Limited Partnerships in which the Fund had 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 each Local Limited Partnership interest have been described in the Form 8-Ks and a supplement to the Prospectus; such descriptions are incorporated herein by this reference.
TABLE A SELECTED LOCAL LIMITED PARTNERSHIP DATA Property owned by Local Date Limited Partnerships Interest Location Acquired --------------------------- -------------------- ------------ Green Wood Apartments Gallatin, TN 03/02/94 Webster Court Apartments Kent, WA 05/13/94 Springwood Apartments Tallahassee, FL 12/15/94 Meadow Wood of Pella Pella, IA 06/03/94 Hemlock Ridge Livingston Manor, NY 04/29/94 Pike Place Fort Smith, AR 01/31/94 West End Place Springdale, AR 01/12/94 Oak Knoll Renaissance Gary, IN 11/01/94 Beaverdam Creek Mechanicsville, VA 11/16/94 Live Oaks Plantation West Palm Beach, FL 06/28/94
Although the Fund's investments in Local Limited Partnerships are not subject to seasonal fluctuations, the Fund's equity in losses of Local Limited Partnerships, to the extent it reflects 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. Each Local Limited Partnership has, as its general partners ("Local General Partners"), one or more individuals or entities not affiliated with the Fund or its General Partners. In accordance with the partnership agreements under which such entities are organized ("Local Limited Partnership Agreements"), the Fund depends on the Local General Partners for the management of each Local Limited Partnership. As of March 31, 2005, 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 total capital contributions in Local Limited Partnerships: (i) Green Wood Apartments, A Limited Partnership and Springwood Apartments, A Limited Partnership, representing 21.71%, have Flournoy Development Company as Local General Partner; (ii) Pike Place, A Limited Partnership and West End Place, A Limited Partnership, representing 12.90%, have Lindsey Management Company as Local General Partner. The Local General Partners of the remaining Local Limited Partnerships are identified in the Acquisition Reports which are herein incorporated by reference. The Properties owned by Local Limited Partnerships in which the Fund has invested are, and will continue to be, subject to competition from existing and future apartment complexes in the same areas. The success of the Fund depends on many outside factors, most of which are beyond the control of the Fund 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 Fund, 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 suppress the ability of the Local Limited Partnerships to generate operating cash flow. Since most of the Properties benefit from some form of governmental assistance, the Fund 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 Fund. The Fund is managed by Arch Street VIII Limited Partnership, the sole General Partner of the Fund. The Fund, which does not have any employees, reimburses MMA Financial, LLC. an affiliate of the General Partner, for certain expenses and overhead costs. A complete discussion of the management of the Fund is set forth in Item 9 of this Report. Item 2. Properties The Fund owns limited partnership interests in ten 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 Fund's ownership interest in the Local Limited Partnerships is 99%, with the exception of Springwood which is 79.20%, Hemlock Ridge which is 77% and Pike Place and West End Place which are 90%. Each of the Local Limited Partnerships have received an allocation of Tax Credits from the 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 Internal Revenue Service, in order to maintain eligibility for the Tax Credit at all times during the Compliance Period. Once a Local Limited Partnership has become eligible for the Tax Credits, it may lose such eligibility and suffer an event of recapture if its Property fails to remain in compliance with the requirements. To date, with the exception of Live Oaks Plantation, 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 Fund.
Capital Contributions Mtge. loans Occupancy Local Limited Partnership Number Total Committed Paid Through payable at at Property Name of at March 31, March 31, December 31, Type of March 31, Property Location Apt. Units 2005 2005 2004 Subsidy* 2005 ---------------------- -------------- ------------------- ----------------- ---------------- ----------- --------------- Green Wood Apartments, a Limited Partnership Green Wood Apartments Gallatin, TN 164 $3,825,916 $3,825,916 $4,796,578 None 76% Webster Court Apartments a Limited Partnership Webster Court Apartments Kent, WA 92 2,318,078 2,318,078 2,654,915 None 95% Springwood Apartments a Limited Partnership (1) Springwood Apartments Tallahassee, FL 113 2,499,202 2,499,202 3,595,249 None 92% Meadow Wood Associates of Pella, a Limited Partnership Meadow Wood of Pella Pella, IA 30 893,808 893,808 952,871 Section 8 86% RMH Associates, a Limited Partnership (1) Hemlock Ridge Livingston Manor, NY 100 1,697,298 1,697,298 1,614,598 Section 8 98% Pike Place, a Limited Partnership (1) Pike Place Fort Smith, AR 144 1,915,328 1,915,328 2,989,349 None 98%
Capital Contributions Mtge. loans Occupancy Local Limited Partnership Number Total Committed Paid Through payable at at Property Name of at March 31, March 31, December 31, Type of March 31, Property Location Apt. Units 2005 2005 2004 Subsidy* 2005 ---------------------- -------------- ------------------- ----------------- ---------------- ----------- --------------- West End Place, a Limited Partnership (1) West End Place Springdale, AR 120 1,843,010 1,843,010 2,637,818 None 99% Oak Knoll Renaissance, a Limited Partnership Oak Knoll Renaissance Gary, IN 256 4,922,412 4,922,412 4,600,684 Section 8 96% Beaverdam Creek Associates, a Limited Partnership (2) Beaverdam Creek Mechanicsville, VA 120 3,629,140 3,629,140 3,088,194 None 96% Schickedanz Brothers Palm Beach Limited Live Oaks Plantation West Palm Beach, FL 218 5,587,953 5,587,953 5,955,275 None 89% ------ ------------- ------------ ------------ 1,357 $29,132,145 $29,132,145 $32,885,531 ====== =========== =========== =========== (1) Boston Financial Tax Credits Fund VIII has a 79.20% interest in Springwood Apartments, L.P., a 77% interest in RMH Associates, L.P., and a 90% interest in Pike Place, L.P. and West End Place, L.P. The mortgage payable balances represent 100% of the outstanding balances. (2) The amount paid includes funds advanced under a promissory note agreement with Boston Financial Tax Credit Fund VIII, a Limited Partnership. *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.
Five Local Limited Partnerships invested in by the Fund represent more than 20% of the Fund's consolidated assets, equity or net losses. The following financial information represents the Local Limited Partnerships' performance for the years ended December 31, 2004 and 2003:
Beaverdam Creek Associates, a Limited Partneship 2004 2003 ------------------------------------------------ ------------- ------------- Total Assets $ 5,879,403 $ 5,988,492 Total Liabilities $ 3,156,683 $ 3,202,448 Revenue $ 953,633 $ 939,666 Net Loss $ (14,707) $ (116,741) Greenwood Apartments, a Limited Partnership ------------------------------------------- Total Assets $ 3,621,580 $ 3,812,613 Total Liabilities $ 5,764,591 $ 5,624,047 Revenue $ 982,167 $ 980,806 Net Loss $ (331,577) $ (3,393,416) Webster Court, a Limited Partnership ------------------------------------ Total Assets $ 4,124,542 $ 4,219,165 Total Liabilities $ 2,934,673 $ 2,924,852 Revenue $ 471,126 $ 455,911 Net Loss $ (104,444) $ (129,953) Oak Knoll Renaissance, a Limited Partnership -------------------------------------------- Total Assets $ 8,430,008 $ 8,703,041 Total Liabilities $ 5,401,207 $ 5,165,184 Revenue $ 1,975,487 $ 1,952,669 Net Income (Loss) $ (389,223) $ 169,311 Schickedanz Brothers Palm Beach Limited --------------------------------------- Total Assets $ 10,955,205 $ 11,241,000 Total Liabilities $ 9,966,707 $ 9,993,798 Revenue $ 1,798,639 $ 1,741,553 Net Loss $ (337,700) $ (511,696)
The Fund 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 Fund, is contained in Items 1, 6 and 7 of this Report. Item 3. Legal Proceedings On August 24, 2004, Boston Financial Qualified Housing Limited Partnership, Boston Financial Tax Credit Fund Plus, A Limited Partnership, Boston Financial Qualified Housing Tax Credits L.P. II, Boston Financial Qualified Housing Tax Credits L.P. III, Boston Financial Qualified Housing Tax Credits L.P. IV, Boston Financial Qualified Housing Tax Credits L.P. V, Boston Financial Tax Credit Fund VII, A Limited Partnership, and Boston Financial Tax Credit Fund VIII, A Limited Partnership (collectively, the "Partnerships"), and their general partners commenced litigation against Everest Housing Investors 2, LLC ("Everest 2") and three other Everest-related entities (collectively , the "Everest Entities") in Massachusetts state court, seeking a declaratory judgment that certain materials the Everest Entities sought to inspect are not "books and records" of the Partnerships, and that the Everest Entities are in any case not entitled to inspect said information under applicable partnership agreements, partnership law or otherwise. On October 7, 2004, the Everest Entities filed an answer and counterclaim against the Partnerships and their purported general partners, claiming that they breached applicable partnership agreements, partnership law and their fiduciary duties to the Everest Entities by failing to make the purported "books and records" available. On January 12, 2005, the Partnerships served a motion to amend their complaint to, among other things, add a claim based on Everest 2's breach of a November 24, 2003 letter agreement which compelled Everest 2 to keep confidential certain information contemporaneously disseminated by four of the Partnerships to Everest 2. Having received no opposition within the specified time, the Partnerships filed the motion to amend with the proposed first amended complaint on January 31, 2005. The Court has granted this Motion. Defendants maintain that the Everest Entities are not entitled to review the materials requested and/or use the materials in secondary market transactions because, among other things, (i) they are not "books and records" of the Partnerships, (ii) Everest does not seek to review them for a proper purpose, and (iii) that selective disclosure of the information to Everest would give it an unfair informational advantage in secondary market transactions, and may violate federal and/or state securities laws. We have not formed an opinion that an unfavorable outcome is either probable or remote. In addition, our counsel refrains from expressing an opinion as to the likely outcome of the case, or the range of any loss. Except as noted above, the Fund is not a party to any 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 Fund. 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 Fund. The Partnership Agreement does not impose on the Fund or its General Partner 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, 2005, there were 1,187 record holders of Units of the Fund. Cash distributions, when made, are paid annually. For the years ended March 31, 2005 and 2004, no cash distributions were made. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Executive Level Overview The Fund's investment portfolio consists of limited partnership interests in ten 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 Fund has generated Tax Credits of approximately $1,379 per Limited Partner Unit, with approximately $53 of Tax Credits expected to be generated for 2005. In the aggregate, actual and estimated Tax Credits will enable the Fund to meet the objective specified in the Fund's prospectus. Properties that receive low income housing Tax Credits must remain in compliance with rent restrictions and set aside requirements for at least 15 years from the date the property is completed (the "Compliance Period"). Failure to do so would result in the recapture of a portion of the Property's Tax Credits. Between 2008 and continuing through 2009, the Compliance Period of the ten Properties in which the Fund has an interest will expire. It is unlikely that the General Partner will be able to dispose of the Fund's Local Limited Partnership interests concurrently with the expiration of each Property's Compliance Period. The Fund shall dissolve and its affairs shall be wound up upon the disposition of the final Local Limited Partnership interest and other assets of the Fund. Investors will continue to be Limited Partners, receiving K-1s and quarterly and annual reports, until the Fund is dissolved. Certain matters discussed herein constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Fund 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 Fund believes the forward-looking statements are based on reasonable assumptions, the Fund 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. Critical Accounting Policies The Fund's accounting polices include those that relate to its recognition of investments in Local Limited Partnerships using the equity method of accounting. The Fund's policy is as follows: The Fund accounts for its investments in Local Limited Partnerships using the equity method of accounting. Under the equity method, the investment is carried at cost, adjusted for the Fund'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 Fund'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 Fund'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 Fund investments where cumulative equity in losses plus cumulative distributions have exceeded the total investment in Local Limited Partnerships will not be recorded until all of the related unrecorded losses have been offset. To the extent that a Local Limited Partnership with a carrying value of zero distributes cash to the Fund, that distribution is recorded as income on the books of the Fund and is included in "Other Revenue" in the accompanying financial statements. The Fund has implemented policies and practices for assessing potential impairment of its investments in Local Limited Partnerships. The investments are reviewed for impairment whenever events or changes in circumstances indicate that the Fund may not be able to recover its carrying value. If an other than temporary impairment in carrying value exists, a provision to reduce the asset to fair value will be recorded in the Fund's financial statements. Accounting Standard Update In January 2003, the FASB issued Interpretation No. 46 ("Interpretation"), "Consolidation of Variable Interest Entities", which provides new criteria for determining whether or not consolidation accounting is required. The Interpretation, which was modified in December 2003 in order to address certain technical and implementation issues, requires the Fund to consider consolidation or provide additional disclosures of financial information for Local Limited Partnerships meeting the definition of a Variable Interest Entity ("VIE"). The Fund was required to apply the Interpretation to the Local Limited Partnerships meeting the definition of a VIE as of March 31, 2005. This Interpretation requires consolidation by the Fund of the Local Limited Partnerships' assets and liabilities and results of operations if the Partnership determined that the Local Limited Partnerships were VIEs and that the Fund was the "Primary Beneficiary". Minority interests may be recorded for the Local Limited Partnerships' ownership share attributable to other investors. Where consolidation of Local Limited Partnerships is not required, additional financial information disclosures of Local Limited Partnerships may be required. The Fund has assessed the Interpretation and concluded that it is not the Primary Beneficiary of any of the Local Limited Partnerships that meet the definition of a VIE. The Fund is involved with those VIEs as a non-controlling limited partner equity holder. The Fund is required to disclose its maximum exposure to economic and financial statement losses as a result of its involvement with the VIEs. The Fund 's exposure to economic and financial statement losses from the VIEs is limited to its investment in the VIEs ($8,790,754 at March 31, 2005). The Fund may be subject to additional losses to the extent of any financial support that the Fund voluntarily provides in the future. Liquidity and capital resources At March 31, 2005, the Fund had cash and cash equivalents of $332,386, as compared to $341,433 at March 31, 2004. The decrease is primarily attributable to cash used for the Fund's operating and advances to certain Local Limited Partnerships, partially offset by cash distributions received from Local Limited Partnerships. The General Partner initially designated 5% of the Gross Proceeds, as Reserves as defined in the Partnership Agreement. The Reserves were established to be used for working capital of the Fund and contingencies related to the ownership of Local Limited Partnership interests. The General Partner may increase or decrease such Reserves from time to time, as it deems appropriate. At March 31, 2005, $338,358 of cash, cash equivalents and marketable securities has been designated as Reserves. To date, professional fees relating to various Property issues totaling approximately $51,000 have been paid from Reserves. In the event a Local Limited Partnership encounters operating difficulties requiring additional funds, the Fund's management might deem it in its best interest to voluntarily provide such funds in order to protect its investment. As of March 31, 2005, the Fund has advanced approximately $1,248,000 to Local Limited Partnerships to fund operating deficits. The 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 Fund's ongoing operations. Reserves may be used to fund operating deficits, if the General Partner deems funding appropriate. To date, the Fund has used approximately $188,000 of Reserves to fund operations. If Reserves are not adequate to cover the Fund's operations, the Fund will seek other financing sources including, but not limited to, the deferral of Asset Management Fees paid to an affiliate of the General Partner or working with Local Limited Partnerships to increase cash distributions. Since the Fund invests as a limited partner, the Fund has no contractual duty to provide additional funds to Local Limited Partnerships beyond its specified investment. Thus, as of March 31, 2005, the Fund 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 during the two years ended March 31, 2005. It is expected that cash available for distribution, if any, will not be significant in fiscal year 2006. As funds from temporary investments are paid to Local Limited Partnerships or used in operations, interest earnings on those funds decrease. In addition, some 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 For the year ended March 31, 2005, the Fund's operations resulted in a net loss of $1,794,522, as compared to $4,297,936 for the year ended March 31, 2004. The decrease in net loss is primarily attributable to an decrease equity in losses of Local Limited Partnerships primarily caused by an impairment write-down at one of the Local Limited Partnerships in the prior year. In addition, net loss also decreased due to a current year decrease in the provision for valuation of investments in Local Limited Partnerships to appropriately reflect the estimated net realizable value of certain investments. Low-income housing tax credits The 2004 and 2003 tax credits were $134 and $142 per Unit, respectively. The Tax Credits per Limited Partner stabilized in 1997 at approximately $142 per Unit, as Properties reached completion and became fully leased. Since the Tax Credits had stabilized, the annual amount allocated to investors remained the same for about the first seven years. In years eight through ten, the credits are decreasing as Properties reach the end of the ten year credit period. However, because the Compliance Periods extend significantly beyond the Tax Credit periods, the Fund is expected to retain most of its interests in the Local Limited Partnerships for the foreseeable future. Property discussions Many of the Properties in which the Fund has an interest have stabilized operations and operate above break-even. Some Properties generate cash flow deficits that the Local General Partners of those Properties fund through project expense loans, subordinated loans or operating escrows. However, a few Properties have had persistent operating difficulties that could either: i) have an adverse impact on the Fund's liquidity; ii) result in their foreclosure; or iii) result in the General Partner deeming it appropriate for the Fund to dispose of its interest in the Local Limited Partnership prior to the expiration of the Compliance Period. Also, the General Partner, in the normal course of the Fund's business, may arrange for the future disposition of its interest in certain Local Limited Partnerships. The following Property discussions focus only on such Properties. As previously reported, the Local General Partner of Live Oaks Plantation, located in West Palm Beach, Florida, indicated a desire to transfer its interest in the Local Limited Partnership to a replacement Local General Partner. Accordingly, the General Partner began working with the Local General Partner to identify an acceptable replacement. Negotiations to replace the Local General Partner were then delayed due to an audit by the Internal Revenue Service ("IRS"). The audit focused on the tax treatment of certain items, such as land improvements, impact fees, utility fees and developer fees. In April 2002, the Florida office of the IRS issued their report indicating an eligible basis reduction of approximately $1,000,000, which would reduce the amount of Tax Credits and losses generated by the Property. The Local General Partner filed an appeal of the report to the Washington D.C. office of the IRS. The appeal was successful, and during April 2004 a settlement was reached whereby the eligible basis was reduced by approximately $93,000. As a result, the Fund had recapture of previously taken Tax Credits of approximately $2 per Unit. Future Tax Credits will also be reduced by approximately $0.25 per Unit. Subsequent to reaching a settlement with the IRS, negotiations to replace the Local General Partner resumed. Effective June 28, 2004, an affiliate of the General Partner replaced the Local General Partner. The General Partner has continued to seek a permanent replacement Local General Partner. A potential replacement Local General Partner has been identified and it is anticipated that that the Local General Partner interest will be transferred during the second quarter of 2005. In addition, while occupancy and working capital levels have consistently remained adequate, the Property generated significant operating deficits in 2001 and 2002. The Fund funded slightly more than $1,000,000 of deficits from Fund reserves. The General Partner anticipates that the recent increase in cash from operations will continue and will be sufficient to fund the monthly debt service. Occupancy at the Property averaged 90% during 2004 and debt service coverage and working capital were at appropriate levels. As previously reported, turnover at Green Wood Apartments, located in Gallatin, Tennessee, had caused a decline in Property operations. Although the economy in Gallatin is growing, the major employers of tenants qualifying for affordable housing had layoffs. Rents were reduced in an effort to stabilize occupancy and administrative and maintenance expenses have been higher than budgeted. The Local General Partner has funded the operating deficits, enabling the Property to remain current on its loan obligations. However, the Property's occupancy and debt service coverage are below levels adequate to ensure breakeven operations. The General Partner will continue to closely monitor Property operations. As previously reported, Meadow Wood of Pella, located in Pella, Iowa, has experienced operating deficits for the past several quarters due to reduced revenues resulting from low occupancy and high expenses. Operating deficits have continued in 2004, although smaller than in 2003. The Local General Partner has funded the operating deficit, and the Property has remained current on its debt service. Occupancy and working capital deteriorated during 2004. The General Partner will continue to closely monitor Property operations. Inflation and other economic factors Inflation had no material impact on the operations or financial condition of the Fund for the years ended March 31, 2005 and 2004. Since most Properties benefit from some form of governmental assistance, the Fund is subject to the risks inherent in that area including decreased subsidies, difficulties in finding suitable tenants and obtaining permission for rent increases. In addition, any Tax Credits allocated to investors with respect to a Property are subject to recapture to the extent that the Property, or any portion thereof, ceases to qualify for the Tax Credits. Certain Properties in which the Fund 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 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 the Fund's evaluation within 120 days prior to filing this Form 10-KSB, the Fund's director has concluded that the Fund's disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that the Fund files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. There have been no significant changes in the Fund's internal controls or in other factors that could significantly affect those controls subsequent to the date of their evaluation. Item 8B. Other Information No reports on Form 8-K were filed during the fourth quarter of the year ended March 31, 2005. PART III Item 9. Directors and Executive Officers of the Registrant The General Partner of the Fund is Arch Street VIII Limited Partnership, a Massachusetts limited partnership (the "General Partner"), an affiliate of MMA Financial, LLC. The General Partner was formed in August 1993. The Investment Committee of the General Partner approves all investments. The names and positions of the principal officers and directors of the General Partner are set forth below. Name Position Jenny Netzer Executive Vice President, Tax Credit Equity Group Michael H. Gladstone Principal, Member The General Partner provides day-to-day management of the Fund. Compensation is discussed in Item 10 of this report. Such day-to-day management does not include the management of the properties. The business experience of each of the persons listed above is described below. There is no family relationship between any of the persons listed in this section. Jenny Netzer, age 49 Executive Vice President, Tax Credit Equity Group - Ms. Netzer is responsible for tax credit investment programs to institutional clients. She joined MMA Financial, LLC as a result of the Boston Financial and subsequent Lend Lease HCI acquisitions, starting with Boston Financial in 1987 and leading Boston Financial's new business initiatives and managing the firm's Asset Management division. Prior to joining Boston Financial, Ms. Netzer served as Deputy Budget Director for the Commonwealth of Massachusetts where she was responsible for the Commonwealth's health care and public pension program's budgets. Ms. Netzer also served as Assistant Controller at Yale University, as a former member of Watertown Zoning Board of Appeals, as the Officer of Affordable Housing Tax Credit Coalition and is a frequent speaker on affordable housing and tax credit industry issues. Ms. Netzer is a graduate of Harvard University (BA) and Harvard's Kennedy School of Government (MPP). Michael H. Gladstone, age 48, Principal, Member - Mr. Gladstone is responsible for capital transactions work in the Asset Management group of MMA Financial, LLC. He joined MMA Financial, LLC 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 Fund is organized as a Limited Partnership solely for the purpose of real estate investment and does not have any employees. Therefore the Fund has not adopted a Code of Ethics. The Fund is structured as a Limited Partnership that was formed principally for real estate investment and is not "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 Fund. Item 10. Management Remuneration Neither the partners of Arch Street VIII Limited Partnership nor any other individual with significant involvement in the business of the Fund receives any current or proposed remuneration from the Fund. Item 11. Security Ownership of Certain Beneficial Owners and Management As of March 31, 2005, the following entities are the only entities known to the Fund to be the beneficial owners of more than 5% of the Units outstanding:
Amount Title of Class Name and Address of Beneficially Percent of Beneficial Owner Owned Class --------------- ------------------------------- -------------- ------------- Limited Oldham Institutional Tax Credits LLC 2,476 Units 6.78% Partner 101 Arch Street Boston, MA Limited Oldham Institutional Tax Credits 5,220 Units 14.30% Partner VI LLC 101 Arch Street Boston, MA Limited Liberty Corporation 2,079 Units 5.70% Partner PO Box 789 Greenville, SC
Oldham Institutional Tax Credits LLC and Oldham Institutional Tax Credits VI LLC are affiliates of Arch Street VIII Limited Partnership, the General Partner. The equity securities registered by the Fund under Section 12(g) of the Act of 1934 consist of 200,000 Units, 36,497 of which have been sold to the public. Holders of Units are permitted to vote on matters affecting the Fund only in certain unusual circumstances and do not generally have the right to vote on the operation or management of the Fund. Arch Street VIII, Inc. owns a fractional (unregistered) Unit not included in the Units sold to the public. Except as described in the preceding paragraphs, neither Arch Street VIII, Inc., Arch Street VIII Limited Partnership, MMA Financial, LLC nor any of their executive officers, directors, partners or affiliates is the beneficial owner of any Units. None of the foregoing persons possesses a right to acquire beneficial ownership of Units. The Fund does not know of any existing arrangement that might at a later date result in a change in control of the Fund. Item 12. Certain Relationships and Related Transactions The Fund is required to pay certain fees to and reimburse certain expenses of the General Partner or its affiliates (including MMA Financial, LLC) in connection with the organization of the Fund and the offering of Units. The Fund is also required to pay certain fees to and reimburse certain expenses of the General Partner or its affiliates (including MMA Financial, LLC) in connection with the administration of the Fund and its acquisition and disposition of investments in Local Limited Partnerships. In addition, the General Partner is entitled to certain Fund distributions under the terms of the Partnership Agreement. Also, an affiliate of the General Partner 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, expenses and distributions paid in the years ended March 31, 2005 and 2004 are described below and in the sections of the Prospectus entitled "Estimated Use of Proceeds", "Management Compensation and Fees" and "Profits and Losses for Tax Purposes, Tax Credits and Cash Distributions". Such sections are incorporated herein by reference. The Fund is permitted to enter into transactions involving affiliates of the General Partner, subject to certain limitations established in the Partnership Agreement. Information regarding the Fees paid and expense reimbursements made in the two years ended March 31, 2005 is as follows: Organizational fees and expenses and selling expenses In accordance with the Partnership Agreement, the Fund was required to pay certain fees to and reimburse expenses of the General Partner and others in connection with the organization of the Fund and the offering of its Limited Partnership Units. Selling commissions, fees and accountable expenses related to the sale of the Units totaling $4,664,369 have been charged directly to Limited Partners' equity. In connection therewith, $2,828,918 of selling expenses and $1,835,451 of offering expenses incurred on behalf of the Fund have been paid to an affiliate of the General Partner. The Fund was also required to pay a non-accountable expense allowance for marketing expense equal to a maximum of 1% of Gross Proceeds. The Fund has capitalized an additional $50,000 which was reimbursed to an affiliate of the General Partner. Total organization and offering expenses exclusive of selling commissions and underwriting advisory fees did not exceed 5.5% of the Gross Proceeds and organizational and offering expenses, inclusive of selling commissions and underwriting advisory fees, did not exceed 15.0% of the Gross Proceeds. There were no organizational fees and expenses paid for the two years ended March 31, 2005. Acquisition fees and expenses In accordance with the Partnership Agreement, the Fund was required to pay acquisition fees to and reimburse acquisition expenses of the General Partner or its affiliates for selecting, evaluating, structuring, negotiating and closing the Fund's investments in Local Limited Partnerships. Acquisition fees totaled 6% of the Gross Proceeds. Acquisition expenses, which include such expenses as legal fees and expenses, travel and communications expenses, costs of appraisals, accounting fees and expenses, were expected to total 1.5% of the Gross Proceeds. Acquisition fees totaling $2,189,820 for the closing of the Fund's Local Limited Partnership Investments were paid to an affiliate of the General Partner. Acquisition expenses totaling $335,196 were reimbursed to an affiliate of the General Partner. There were no acquisition fees and expenses paid for the two years ended March 31, 2005. Asset management fees In accordance with the Partnership Agreement, an affiliate of the General Partner currently receives 0.50% (annually adjusted by the CPI factor) of Gross Proceeds annually as an Asset Management Fee for administering the affairs of the Fund. Asset Management Fees incurred in the years ended March 31, 2005 and 2004 are as follows: 2005 2004 ------------ ----------- Asset management fees $ 233,865 $ 226,580 Salaries and benefits expense reimbursement An affiliate of the General Partner is reimbursed for the cost of certain salaries and benefits expenses which are incurred by an affiliate of the General Partner on behalf of the Fund. The reimbursements are based upon the size and complexity of the Fund's operations. Reimbursements paid or payable in the years ended March 31, 2005 and 2004 are as follows: 2005 2004 ------------ ----------- Salaries and benefits expense reimbursement $ 103,838 $ 74,805 Cash distributions paid to the General Partners In accordance with the Partnership Agreement, the General Partner of the Fund, Arch Street VIII Limited Partnership, receives 1% of cash distributions made to partners. As of March 31, 2005, the Fund has not paid any cash distributions to partners. Additional information concerning cash distributions and other fees paid or payable to the General Partner and its affiliates and the reimbursement of expenses paid or payable to MMA Financial, LLC and its affiliates during each of the two years ended March 31, 2005 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 pursuant to section 302 of the Sarbanes-Oxley Act of 2002 31.2 Certification of 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, 2005 as follows: 2005 2004 --------- -------- Audit fees $ 16,750 $ 19,140 Tax fees $ 1,950 $ 1,850 No other fees were paid or accrued to the principal accountants during the two years ended March 31, 2005. 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 TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP By: Arch Street VIII Limited Partnership its General Partner By:/s/Jenny Netzer Date: July 13, 2005 --------------------------------------- ------------- Jenny Netzer Executive Vice President MMA Financial, LLC Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Managing General Partner of the Partnership and in the capacities and on the dates indicated: By: /s/Jenny Netzer Date: July 13, 2005 --------------------------------------- ------------- Jenny Netzer Executive Vice President MMA Financial, LLC By: /s/Michael H. Gladstone Date: July 13, 2005 ----------------------------- ------------- Michael H. Gladstone Principal MMA Financial, LLC
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP ANNUAL REPORT ON FORM 10-KSB FOR THE YEAR ENDED MARCH 31, 2005 INDEX Page No. Report of Independent Registered Public Accounting Firm For the years ended March 31, 2005 and 2004 F-2 Financial Statements Balance Sheet - March 31, 2005 F-3 Statements of Operations - For the years ended March 31, 2005 and 2004 F-4 Statements of Changes in Partners' Equity (Deficiency) - For the years ended March 31, 2005 and 2004 F-5 Statements of Cash Flows - For the years ended March 31, 2005 and 2004 F-6 Notes to the Financial Statements F-7
Report of Independent Registered Public Accounting Firm To the Partners of Boston Financial Tax Credit Fund VIII, A Limited Partnership In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Boston Financial Tax Credit Fund VIII, A Limited Partnership ("the Partnership") at March 31, 2005, and the results of its operations and its cash flows for each of the two years in the period ended March 31, 2005 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. 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 provide a reasonable basis for our opinion. /s/PricewaterhouseCoopers LLP Boston, Massachusetts July 13, 2005 BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP BALANCE SHEET March 31, 2005
Assets Cash and cash equivalents $ 332,386 Marketable securities, at fair value (Note 3) 5,972 Investments in Local Limited Partnerships (Note 4) 8,790,754 Other assets 204 -------------- Total Assets $ 9,129,316 ============== Liabilities and Partners' Equity Due to affiliate (Note 5) $ 1,226,892 Accrued expenses 44,823 -------------- Total Liabilities 1,271,715 ============== General, Initial and Investor Limited Partners' Equity 7,857,557 Net unrealized gains on marketable securities 44 -------------- Total Partners' Equity 7,857,601 -------------- Total Liabilities and Partners' Equity $ 9,129,316 ============== The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS For the Years Ended March 31, 2005 and 2004
2005 2004 Revenue: Investment $ 5,896 $ 5,996 Other - - ------------- ------------- Total Revenue 5,896 5,996 ------------- ------------- Expenses: Asset management fees, related party (Note 5) 233,865 226,580 Provision for valuation of advances to Local Limited Partnerships (Note 4) 73,076 40,000 Provision for valuation of investments in Local Limited Partnerships (Note 4) 96,000 1,116,000 General and administrative (includes reimbursements to an affiliate in the amounts of $103,838 and $74,805 in 2005 and 2004, respectively) (Note 5) 178,022 153,220 Amortization 28,126 28,685 -------------- ------------- Total Expenses 609,089 1,564,485 Loss before equity in losses of Local Limited Partnerships (603,193) (1,558,489) Equity in losses of Local Limited Partnerships (Note 4) (1,191,329) (2,739,447) ------------- ------------- Net Loss $ (1,794,522) $ (4,297,936) ============= ============== Net Loss allocated: General Partner $ (17,945) $ (42,979) Limited Partners (1,776,577) (4,254,957) ------------- -------------- $ (1,794,522) $ (4,297,936) Net Loss per Limited Partner Unit ============= ============== (36,497 Units) $ (48.68) $ (116.58) ============= ============== The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP STATEMENTS OF CHANGES IN PARTNERS EQUITY (DEFICIENCY) For the Years Ended March 31, 2005 and 2004
Initial Investor Net General Limited Limited Unrealized Partner Partner Partners Gains Total Balance at March 31, 2003 $ (176,847) $ 100 $ 14,126,762 $ 3,206 $ 13,953,221 ----------- --------- ------------- ----------- ------------- Comprehensive Loss: Change in net unrealized gains on marketable securities available for sale - - - (2,686) (2,686) Net Loss (42,979) - (4,254,957) - (4,297,936) ----------- --------- ------------- ----------- ------------- Comprehensive Loss (42,979) - (4,254,957) (2,686) (4,300,622) ----------- --------- ------------- ----------- ------------- Balance at March 31, 2004 (219,826) 100 9,871,805 520 9,652,599 ----------- --------- ------------- ----------- ------------- Comprehensive Loss: Change in net unrealized gains on marketable securities available for sale - - - (476) (476) Net Loss (17,945) - (1,776,577) - (1,794,522) ----------- --------- ------------- ----------- ------------- Comprehensive Loss (17,945) - (1,776,577) (476) (1,794,998) ----------- --------- ------------- ----------- ------------- Balance at March 31, 2005 $ (237,771) $ 100 $ 8,095,228 $ 44 $ 7,857,601 =========== ========= ============= =========== ============= The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS For the Years Ended March 31, 2005 and 2004
2005 2004 Cash flows from operating activities: Net Loss $ (1,794,522) $ (4,297,936) Adjustments to reconcile net loss to net cash used for operating activities: Equity in losses of Local Limited Partnerships 1,191,329 2,739,447 Provision for valuation of advances to Local Limited Partnerships 73,076 40,000 Provision for valuation of investments in Local Limited Partnerships 96,000 1,116,000 Amortization 28,126 28,685 Other non-cash item (177) (236) Increase (decrease) in cash arising from changes in operating assets and liabilities: Other assets (62) 886 Due to affiliate 337,703 301,385 Accrued expenses 14,811 5,206 ------------- ------------ Net cash used for operating activities (53,716) (66,563) ------------- ------------ Cash flows from investing activities: Proceeds from maturities of marketable securities 12,441 75,228 Advances to Local Limited Partnerships (73,076) (40,000) Cash distributions received from Local Limited Partnerships 105,304 169,766 ------------- ------------- Net cash provided by investing activities 44,669 204,994 ------------- ------------- Net increase (decrease) in cash and cash equivalents (9,047) 138,431 Cash and cash equivalents, beginning 341,433 203,002 ------------- ------------- Cash and cash equivalents, ending $ 332,386 $ 341,433 ============= ============= The accompanying notes are an integral part of these financial statements.
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS 1. Organization Boston Financial Tax Credit Fund VIII, A Limited Partnership (the "Fund") is a Massachusetts limited partnership organized to invest in other limited partnerships ("Local Limited Partnerships") which own and operate apartment complexes which are eligible for low income housing tax credits that may be applied against the federal income tax liability of an investor. The Fund's objectives are to: (i) provide investors with annual tax credits which they may use to reduce their federal income tax liability; ii) provide limited cash distributions from the operations of apartment complexes; and iii) preserve and protect the Fund's capital. Arch Street VIII Limited Partnership ("Arch Street L.P."), a Massachusetts limited partnership consisting of Arch Street VIII, Inc., a Massachusetts corporation ("Arch Street, Inc.") as the sole general partner and MMA Financial, LLC as the sole limited partner, is the sole General Partner of the Fund. Arch Street L.P. and Arch Street, Inc. are affiliates of MMA Financial, LLC. The fiscal year of the Fund ends on March 31. The Partnership Agreement authorizes the sale of up to 200,000 units of limited partnership interest ("Units") at $1,000 per Unit in series. The first series offered 50,000 Units. On July 29, 1994, the Fund held its final investor closing. In total, the Fund received $36,497,000 of capital contributions from investors admitted as Limited Partners, for a total of 36,497 Units. Under the terms of the Partnership Agreement, the Fund originally designated 5% of the Gross Proceeds from the sale of Units as a reserve for working capital of the Fund and contingencies related to ownership of Local Limited Partnership interests. The General Partner may increase or decrease such amounts from time to time, as it deems appropriate. At March 31, 2005, the General Partner has designated $338,358 of cash, cash equivalents and marketable securities as such Reserve. Generally, profits, losses, tax credits and cash flow from operations are allocated 99% to the Limited Partners and 1% to the General Partner. Net proceeds from a sale or refinancing will be allocated 95% to the Limited Partners and 5% to the General Partner, after certain priority payments. The General Partner has an obligation to fund deficits in its capital account, subject to limits set forth in 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 Fund 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. Marketable Securities The Fund's investments in securities are classified as "Available for Sale" securities and reported at fair value as reported by the brokerage firm at which the securities are held. All marketable securities have fixed maturities. Realized gains and losses from the sales of securities are based on the specific identification method. Unrealized gains and losses are excluded from earnings and reported as a separate component of partners' equity. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS (continued) 2. Significant Accounting Policies (continued) Investments in Local Limited Partnerships The Fund accounts for its investments in Local Limited Partnerships using the equity method of accounting. Under the equity method, the investment is carried at cost, adjusted for the Fund'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 Fund'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 Fund'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 Fund, that distribution is recorded as income on the books of the Fund 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 Fund 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 Fund. These fees and expenses are included in the Fund's investments in Local Limited Partnerships and are being amortized on a straight-line basis over 35 years until a Local Limited Partnership's respective investment balance has been reduced to zero. The Fund provides advances to the Local Limited Partnerships to finance operations or to make debt service payments. The Fund assesses the collectibility of these advances at the time the advance is made and records a reserve if collectibility is not reasonably assured. The Fund does not guarantee any of the mortgages or other debt of the Local Limited Partnerships. The Fund, 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 of facilities and continued eligibility of tax credits. If the cost of operating a property exceeds the rental income earned thereon, the Fund may deem it in its best interest to voluntarily provide funds in order to protect its investment. The General Partners have decided to report results of the Local Limited Partnerships on a 90-day lag basis because the Local Limited Partnerships report their results on a calendar year basis. Accordingly, the financial information about the Local Limited Partnerships that is included in the accompanying financial statements is as of December 31, 2004 and 2003 and for the years then ended. The Fund has implemented policies and practices for assessing potential impairment of its investments in Local Limited Partnerships. The investments are reviewed for impairment whenever events or changes in circumstances indicate that the Fund may not be able to recover its carrying value. If an other than temporary impairment in carrying value exists, a provision to reduce the asset to fair value will be recorded in the Fund's financial statements. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS (continued) 2. Significant Accounting Policies (continued) 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. 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 Fund'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 an obligation of the partners of the Fund. Accounting Standard Update In January 2003, the FASB issued Interpretation No. 46 ("Interpretation"), "Consolidation of Variable Interest Entities", which provides new criteria for determining whether or not consolidation accounting is required. The Interpretation, which was modified in December 2003 in order to address certain technical and implementation issues, requires the Fund to consider consolidation or provide additional disclosures of financial information for Local Limited Partnerships meeting the definition of a Variable Interest Entity ("VIE"). The Fund was required to apply the Interpretation to the Local Limited Partnerships meeting the definition of a VIE as of March 31, 2005. This Interpretation requires consolidation by the Fund of the Local Limited Partnerships' assets and liabilities and results of operations if the Fund determined that the Local Limited Partnerships were VIEs and that the Fund was the "Primary Beneficiary". Minority interests may be recorded for the Local Limited Partnerships' ownership share attributable to other investors. Where consolidation of Local Limited Partnerships is not required, additional financial information disclosures of Local Limited Partnerships may be required. The Fund has assessed the Interpretation and concluded that it is not the Primary Beneficiary of any of the Local Limited Partnerships that meet the definition of a VIE. The Fund is involved with those VIEs as a non-controlling limited partner equity holder. The Fund is required to disclose its maximum exposure to economic and financial statement losses as a result of its involvement with the VIEs. The Fund 's exposure to economic and financial statement losses from the VIEs is limited to its investment in the VIEs ($8,790,754 at March 31, 2005). The Fund may be subject to additional losses to the extent of any financial support that the Fund voluntarily provides in the future. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS (continued)
3. Marketable Securities A summary of marketable securities is as follows: Gross Gross Unrealized Unrealized Fair Cost Gains Losses Value Mortgage backed securities $ 5,928 $ 44 $ - $ 5,972 Marketable securities at March 31, 2005 $ 5,928 $ 44 $ - $ 5,972 The contractual maturities at March 31, 2005 are as follows: Fair Cost Value Mortgage backed securities $ 5,928 $ 5,972 $ 5,928 $ 5,972
Actual maturities may differ from contractual maturities because some borrowers have the right to call or prepay obligations. Proceeds from the maturities of marketable securities were approximately $12,000 and $75,000 during the years ended March 31, 2005 and 2004, respectively. 4. Investments in Local Limited Partnerships The Fund has limited partnership interests in ten Local Limited Partnerships, which were organized for the purpose of owning and operating multi-family housing complexes, all of which are government assisted. The Fund's ownership interest in the Local Limited Partnerships is 99%, with the exception of Springwood, which is 79.20%, Hemlock Ridge, which is 77% and Pike Place and West End Place, which are 90%. The Fund may have negotiated or may negotiate options with the Local General Partners to purchase or sell the Fund's interests in the Local Limited Partnerships at the end of the Compliance Period at nominal prices. In the event that Local Limited Partnerships are sold to a third parties, 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, 2005: Capital contributions and advances paid to Local Limited Partnerships $ 30,513,168 Cumulative equity in losses of Local Limited Partnerships (excluding cumulative unrecognized losses of $2,114,358) (18,598,790) Cumulative cash distributions received from Local Limited Partnerships (1,111,725) ------------- Investments in Local Limited Partnerships before adjustments 10,802,653 Excess of investment costs over the underlying assets acquired: Acquisition fees and expenses 1,048,010 Cumulative amortization of acquisition fees and expenses (287,474) ------------- Investments in Local Limited Partnerships before impairment allowance 11,563,189 Impairment allowance on investments in Local Limited Partnerships (2,772,435) ------------- Investments in Local Limited Partnerships $ 8,790,754 =============
For the year ended March 31, 2005, the Fund advanced $73,076 to one of the Local Limited Partnerships, all of which was impaired. In addition, the Fund has also recorded an impairment allowance for its investments in certain Local Limited Partnerships in order to appropriately reflect the estimated net realizable value of these investments. BOSTON FINANCIAL TAX CREDIT FUND VIII, 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 Fund has invested as of December 31, 2004 and 2003 (due to the Fund'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, 2004 2003 Assets: Investment property, net $ 48,126,113 $ 50,195,293 Other assets 3,609,728 3,552,699 ------------- ------------- Total Assets $ 51,735,841 $ 53,747,992 ============= ============= Liabilities and Partners' Equity: Mortgage notes payable $ 32,885,531 $ 33,621,184 Other liabilities 11,028,487 10,332,184 ------------- ------------- Total Liabilities 43,914,018 43,953,368 ============= ============= Fund's Equity 8,893,788 10,558,877 Other partners' deficiency (1,071,965) (764,253) ------------- ------------- Total Equity 7,821,823 9,794,624 ------------- ------------- Total Liabilities and Partners' Equity $ 51,735,841 $ 53,747,992 ============= ============= Summarized Income Statements - for the year ended December 31, Rental and other income $ 9,157,494 $ 8,998,065 ------------- ------------- Expenses: Operating 5,730,458 8,208,385 Interest 2,836,555 2,888,426 Depreciation and amortization 2,284,398 2,473,932 ------------- ------------- Total Expenses 10,851,411 13,570,743 ------------- ------------- Net Loss $ (1,693,917) $ (4,572,678) ============= ============= Fund's share of Net Loss $ (1,601,766) $ (4,443,367) ============= ============= Other partners' share of Net Loss $ (92,151) $ (129,311) ============= =============
For the years ended March 31, 2005 and 2004, the Fund has not recognized $410,437 and $1,703,920, respectively, of equity in losses relating to certain Local Limited Partnerships in which cumulative equity in losses and distributions exceeded its total investment in the Local Limited Partnership. The Fund's equity as reflected by the Local Limited Partnerships of $8,893,788 differs from the Fund's investments in Local Limited Partnerships before adjustments of $10,802,653 primarily because of cumulative unrecognized losses as described above and differences in the accounting treatment of miscellaneous items. BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS (continued) 5. Transactions with Affiliates An affiliate of the General Partner receives a base amount of 0.50% (annually adjusted by the CPI factor) of the Gross Proceeds as the annual Asset Management Fee for administering the affairs of the Fund. Asset Management Fees of $233,865 and $226,580 for the years ended March 31, 2005 and 2004, respectively, have been included in expenses. Included in due to affiliate at March 31, 2005 is $1,001,049 of Asset Management Fees. During the years ended March 31, 2005 and 2004, $0 and $0, respectively, were paid out of available cash flow for Asset Management Fees. An affiliate of the General Partner is reimbursed for the cost of the Fund's salaries and benefits expenses. Included in general and administrative expenses for the years ended March 31, 2005 and 2004, is $103,838 and $74,805, respectively that the Fund incurred for these expenses. As of March 31, 2005, $225,843 is payable to an affiliate of the General Partner for salaries and benefits. 6. Federal Income Taxes The following schedule reconciles the reported financial statement net loss for the fiscal years ended March 31, 2005 and 2004 to the net loss reported on the Form 1065, U.S. Partnership Return of Income for the years ended December 31, 2004 and 2003:
2005 2004 Net Loss per financial statements $ (1,794,522) $ (4,297,936) Equity in losses of Local Limited Partnerships for financial reporting (tax) purposes in excess of equity in losses for tax (financial reporting) purposes (108,986) 2,911,853 Equity in losses of Local Limited Partnerships not recognized for financial reporting purposes (410,437) (1,703,920) Adjustment to reflect March 31 fiscal year end to December 31 taxable year end (4,011) (2,203) Amortization for tax purposes in excess of amortization for financial reporting purposes (9,983) (9,424) Provision for valuation of advances to Local Limited Partnerships not deductible for tax purposes 73,076 40,000 Provision for valuation of investments in Local Limited Partnerships not deductible for tax purposes 96,000 1,116,000 ------------- ------------- Net Loss per tax return $ (2,158,863) $ (1,945,630) ============= =============
The differences in the assets and liabilities of the Fund for financial reporting purposes and tax purposes as of March 31, 2005 and December 31, 2004, respectively are as follows:
Financial Reporting Tax Purposes Purposes Differences Investments in Local Limited Partnerships $ 8,790,754 $ 9,870,846 $ 1,080,092 Other assets $ 338,562 $ 5,018,304 $ 4,679,742 Liabilities $ 1,271,715 $ 1,191,393 $ (80,322)
BOSTON FINANCIAL TAX CREDIT FUND VIII, A LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS (continued) 6. Federal Income Taxes (continued) The differences in assets and liabilities of the Fund for financial reporting and tax purposes are primarily attributable to: (i) the cumulative equity in losses from Local Limited Partnerships for tax reporting purposes is approximately $1,600,000 more than for financial reporting purposes, including approximately $2,114,000 of losses the Fund has not recognized relating to two Local Limited Partnerships whose cumulative equity in losses exceeded the total investment; (ii) the cumulative amortization of acquisition fees for tax purposes exceeds financial reporting purposes by approximately $73,000; (iii) the Fund has provided an impairment allowance of approximately $2,772,000 against its investments in Local Limited Partnerships for financial reporting purposes; (iv) organizational and offering costs of approximately $4,664,000 that have been capitalized for tax purposes are charged to Limited Partners' equity for financial reporting purposes.