UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
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 0-8071
URBAN IMPROVEMENT FUND LIMITED - 1974
(Exact name of registrant as specified in its charter)
California 95-6504946
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
1201 Third Avenue, Suite 5400, Seattle, Washington 98101-3076
(Address of principal executive offices) (ZIP code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
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 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 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-K or any amendment to
Form 10-K. [ ]
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant as of December 31, 1998: No established market value.
<PAGE>
PART I
Item 1. Business
(a) General Development of Business Urban Improvement Fund Limited
1974, a California limited partnership (the "Registrant"), was formed in 1974
for the purpose of investing, through local limited real estate partnerships
(LLP's), in federally and state-assisted low and moderate income housing
projects. Units of Limited Partnership Interest were sold in a public offering
to investors who require tax shelter for income from other sources. The
Registrant originally acquired equity interests as a limited partner in twelve
(12) such LLPs. The Elk Grove Village property was sold through a resyndication
in 1984. The Elk Grove Village partnership is still in existence with a note
receivable for the sales proceeds of the property. The TDC & Associates
property was donated in December 1985 to the Tenant's Development Association.
The Logan-Washington Associates property foreclosed in 1993. The remaining nine
(9) properties are described in Item 2 hereof.
(b) Financial Information about Industry Segment The Registrant is
engaged in only one line of business.
(c) Narrative Description of Business The real estate business is
highly competitive. The Registrant competes with numerous established apart-
ment owners and real estate developers of low-income housing having greater
financial resources. There is additional risk of new construction occurring
in areas where the Registrant has invested in existing government-assisted
housing projects. The outlook for subsidized housing is not determinable,
given existing and proposed federal legislation.
<PAGE>
(d) Financial information about foreign and domestic operations and export
sales The Registrant's income is entirely dependent upon revenues received
from the limited partnerships in which it is a limited partner. Investment
in government-assisted housing is subject to significant regulation. These
regulations limit, among other things, the amount of return allowed on the
initial equity investment, the manner in which such properties may be sold,
and the persons to whom such properties may be sold. In 1987, fearing the
loss of affordable housing units, Congress passed emergency legislation which
prohibited prepayment of all FHA insured Section 236 or Section 221(d)(3)
mortgages. Congress passed additional legislation in 1990 known as LIHPRHA
(the Low Income Housing Preservation and Resident Homeownership Act).
However, by 1995, Congress had determined the program was too expensive to
continue. In March 1996, Congress changed the compensation program, severely
limited funding, and restored the property owners' right to prepay the FHA
mortgages and change the use of the properties under legislation known as the
Housing Opportunity Program Extension Act of 1996. The General Partner of the
Partnership has initiated steps to ensure that the Local Limited Partnerships
comply with the provisions of LIHPRHA and subsequent legislation. See
financial information in Item 6, Selected Financial Data, in this report.
<PAGE>
Item 2. Properties.
The Registrant owns equity interests as a Limited Partner in the following
real estate projects as of December 31, 1998:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998
No. of Percent of
Name Type Units Occupancy
Weyerbacher Terrace Associates
Indianapolis, IN 236 Rehab. 296 85%
Capitol Hill Associates
Denver, CO 236 Rehab. 121 95%
Community Apartments Ltd.
Cleveland, OH 221 (d)(3) Rehab. 148 99%
51st and King Drive Partnership
Chicago, IL 236 Rehab. 96 96%
Met-Paca II Associates
New York, NY 236 Rehab. 192 98%
Monatiquot Village Associates
Braintree, MA MHFA-New* 324 93%
Norway Housing Associates
Boston, MA MHFA-Rehab.* 136 99%
Notre Dame Apartments
San Francisco, CA 236 Rehab. 205 100%
Southern Boulevard
Partners II
New York, NY 236 Rehab. 175 100%
</TABLE>
* Developed under the auspices of the Massachusetts Housing Finance Agency.
Mortgage indebtedness associated with each project is shown in Schedule XI of
this report.
The following is a description of each of the above listed properties:
<PAGE>
WEYERBACHER TERRACE ASSOCIATES (also known as Boulevard Terrace
Associates) is a 296 unit project located in Indianapolis, Indiana consisting
of four and five-story buildings of masonry construction. This project was
formerly St. Vincent's Hospital and was extensively rehabilitated and converted
into apartments designed for elderly tenants. The project was rehabilitated
under Section 236 of the National Housing Act.
<TABLE>
<CAPTION>
<S> <C> <C> C>
Number of Units Type Average Size (Sq. Ft.)
16 Efficiency 400
201 1 Bedroom 570
79 2 Bedroom 710
</TABLE>
CAPITOL HILL ASSOCIATES, is a multi-site 121-unit project, located one mile
from downtown Denver, Colorado. It is situated within an established area of
the city that is evenly mixed with apartment complexes and single-family
dwellings. The project was financed under the auspices of the United States
Department of Housing and Urban Development (HUD).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
58 Efficiency 350
35 1 Bedroom 480
20 2 Bedroom 650
8 3 Bedroom 850
</TABLE>
The Partnership sold one of its buildings containing 26 rental units on
December 31, 1986.
COMMUNITY APARTMENTS, LTD. is a 148-unit project located in Cleveland,
Ohio. The project consists of two-story row-type buildings of wood frame
construction with a masonry exterior. The project was rehabilitated under
Section 221(d)(3) of the National Housing Act.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
122 2 Bedroom 675
26 3 Bedroom 870-980
</TABLE>
51st AND KING DRIVE PARTNERSHIP (also known as Cummings Building) is a
96-unit project located at 51st and King Drive in Chicago, Illinois, consisting
of a four-story building of brick and masonry construction. The project was
rehabilitated under Section 236 of the National Housing Act.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
9 1 Bedroom 750
55 2 Bedroom 935
2 3 Bedroom 1,120
21 4 Bedroom 1,302
9 5 Bedroom 1,488
</TABLE>
MET-PACA II ASSOCIATES is a multi-site 192-unit project located in New York
City in the area bounded by East 118th and 123rd streets and Park and Lexington
Avenues. The project consists of nine four- and five-story buildings of masonry
and brick construction. The project was rehabilitated under Section 236 of the
National Housing Act.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
44 1 Bedroom 500
96 2 Bedroom 600
41 3 Bedroom 850
11 4 Bedroom 1,110
</TABLE>
MONATIQUOT VILLAGE ASSOCIATES is a 324-unit project located in Braintree,
Massachusetts consisting of 27 three-story buildings of pre-fabricated
concrete construction. The project was constructed under the auspices of
the Massachusetts Housing Finance Agency.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
80 1 Bedroom 990
40 1 Bedroom 990
134 2 Bedroom 1,170
25 2 Bedroom 1,170
29 3 Bedroom 1,370
16 3 Bedroom 1,370
</TABLE>
NORWAY HOUSING ASSOCIATES is a 136-unit project located in Boston,
Massachusetts. It is situated in a fine residential area surrounded by
the Fenway District and Northeastern University. The project was financed
under the auspices of the Massachusetts Housing Finance Agency (MHFA).
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
14 Efficiency 500
92 1 Bedroom 625
26 2 Bedroom 850
4 3 Bedroom 1,050
</TABLE>
NOTRE DAME APARTMENTS is a 205-unit project located in the Pacific Heights
area of San Francisco, California, consisting of a five-story building of
reinforced concrete, cement and plaster construction. The project is designed
for elderly residents and is a converted hospital. The project was rehabili-
tated under Section 236 of the National Housing Act.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
147 Efficiency 310
58 1 Bedroom 474
</TABLE>
SOUTHERN BOULEVARD PARTNERS II is a 175-unit project located in the Bronx,
New York, consisting of 5 five- and six-story buildings of brick and masonry
construction. The Project was rehabilitated under Section 236 of the National
Housing Act.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Number of Units Type Average Size (Sq. Ft.)
1 Efficiency 420
24 1 Bedroom 535
101 2 Bedroom 665
40 3 Bedroom 865
9 4 Bedroom 1,010
</TABLE>
Item 3. Legal Proceedings
There are no material legal proceedings pending, at this time, other than
ordinary routine litigation incidental to the Partnership's business,
including the Local Limited Partnerships in which the Partnership is a
limited partner.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted during the fourth quarter of the fiscal year covered
by this report to a vote of security holders through the solicitation of
proxies or otherwise.
<PAGE>
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
Matters.
(a) Market Information - There is not a ready market for the transfer of
limited partnership interests. Limited partnership interests may be trans-
ferred between individuals with the consent of the General Partner.
(b) Holders
<TABLE>
<CAPTION>
<S>
<C> <C> <C> <C>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 115 Units 100%
Interest Estate Management Co. ($5,000)
1201 Third Avenue
Suite 5400
Seattle, Washington 98101 3076
Limited Partner C. T. Holland 625 Units 5.425%
Interest Henderson, Texas 75652 ($625,000)
711 other Limited Partners 10,779 Units
($10,779,000) 94.575%
100.000%
</TABLE>
The Registrant has no officers or directors. Interfinancial Real Estate
Management Company, the General Partner of the Registrant, is a corporation.
(c) Dividends - There were no distributions to partners during 1994, 1995,
1996, 1997 and 1998.
Item 6. Selected Financial Data
These statements do not include all disclosures required under generally
accepted accounting principles; however, when read in conjunction with the
related financial statements and notes thereto included under Item 8, the
statements include all generally accepted accounting principles disclosures
for the latest three years.
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Year Ended December 31,
1998 1997 1996 1995 1994
Interest income $ 159,207 $ 59,661 $ 70,644 $ 31,093 $ 1,434
Expenses:
Professional fees 18,701 17,666 15,024 14,078 14,310
Management fee 57,020 57,020 57,020 57,020 57,020
Incentive management
fees 33,250 -0- -0- -0- -0-
Amortization of
costs of
acquisition 3,333 3,333 3,333 3,333 6,821
Other expenses 41,268 33,639 2,971 4,185 3,954
153,572 111,658 78,348 78,616 82,105
Income (loss)
before equity
in income (loss)
of Local Limited
Partnerships 5,635 (51,997) (7,704) (47,523) (80,671)
Equity in income
(loss) of Local
Limited
Partnerships 2,509,131 298,881 256,509 (1,186,846) 536,636
Net income
(loss) $2,514,766 $ 246,884 $ 248,805 $(1,234,369) $ 455,965
Allocation of net
income (loss):
Net income (loss)
allocated to
General Partner 25,148 2,469 2,488 (12,344) $ 4,560
Net income (loss)
allocated to
Limited Partners 2,489,618 244,415 246,317 (1,222,025) 451,405
$2,514,766 $ 246,884 $ 248,805 $(1,234,369) $ 455,965
Net financial
reporting income
(loss) per units:
General partnership
units (115 units
outstanding
allocated to
General
Partner) $ 218 $ 21 $ 22 $ (107) $ 40
Limited
Partnership
units (11,404
units outstanding
allocated to Limited
Partners) $ 218 $ 21 $ 22 $ (107) $ 40
Total Assets $5,309,233 $2,803,522 $2,556,685 $2,293,578 $3,514,400
Long-term
obligations $ -0- $ -0- $ -0- $ -0- $ -0-
Cash distributions $ -0- $ -0- $ -0- $ -0- $ -0-
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Partnership has followed the practice of investing available funds not
used in the purchase of properties or in operations into short-term invest-
ments. Interest income resulted from such short-term investments. The Part-
nership is dependent upon interest earned and the distributions and repayment
of advances from Local Limited Partnerships for cash flow. As shown in the
table below, the Partnership has received distributions in recent years
(including $2,253,035 in 1998 from the sale of Elk Grove Village). This
trend is expected to continue. The Partnership has advanced funds to selected
Local Limited Partnerships. The General Partner does not believe these net
advances will significantly affect the operations of the Partnership.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994
Urban's share of
distributions $2,363,866 $ 78,807 $ 60,553 $1,290,551 $ 82,596
Advances (made
to) repaid by
Local Limited
Partnerships $ -0- $ 29,730 $ 21,343 $ (1,890) $ 9,723
</TABLE>
Under the terms of the Limited Partnership Agreement, the Partnership is
required to pay the General Partner an annual management fee equal to one-
quarter of one percent of invested assets or $146,065. (The fee will not be
more than fifty percent of the Partnership's annual net cash flow as defined,
subject to an annual minimum of $57,020.) The Partnership recorded management
fee expense of $57,020 per year from 1994 through 1998. The Partnership will
also pay the General Partner a liquidation fee for the sale of projects. The
liquidation fee is the lesser of (i) ten percent of the net proceeds to the
Partnership from the sale of a project(s) or (ii) one percent of the sales
price plus three percent of the net proceeds after deducting an amount
sufficient to pay long-term capital
<PAGE>
gains taxes. No part of such fee shall accrue or be paid unless: (i) the
Limited Partners' share of the proceeds has been distributed to them, (ii) the
Limited Partners shall have first received an amount equal to their invested
capital attributable to the project(s) sold, and (iii) the Limited Partners
have received an amount sufficient to pay long-term capital gains taxes from
the sale of the project(s), if any, calculated at the maximum rate then in
effect.
The Partnership also paid an incentive management fee of $33,250 to one of the
local limited partnership's general partnership. The incentive fee was equal
to fifty percent of the distributable cash flow to the Partnership.
At December 31, 1998, the Partnership had investments in nine active real
estate limited partnerships as a Limited Partner. The Partnership carries
such investments on the equity method of accounting. The Partnership discon-
tinues recording losses for financial reporting purposes when its investment
in a particular Local Limited Partnership is reduced to zero, unless the
Partnership intends to commit additional funds to the Local Limited Partnership.
The equity in income in Local Limited Partnerships resulted from several Local
Limited Partnerships, whose investments have not been reduced to zero, reporting
income from operations and/or Local Limited Partnerships, whose investments have
been reduced to zero, who paid distributions or repaid an advance. Additional
advances to Local Limited Partnerships, after an investment is reduced to zero,
are recorded as losses. The real estate of the Elk Grove Village Partnership
was sold during 1984. The Partnership had a note receivable that was paid off
during 1998. The components of the Partnership's equity in net income (loss)
of the Local Limited Partnerships for 1998, 1997 and 1996 is summarized as
follows:
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Net repayments of advances
by (advances to)
Partnerships with
zero investments:
Capitol Hill $ -0- $ 26,598 $ 19,871
Distributions received
from Partnerships
with zero investments:
51st and King 7,074 4,766 3,375
Elk Grove Village 2,253,035 15,217 15,217
Norway House -0- -0- 10,654
Southern Boulevard III 66,500 24,700 -0-
Income (loss) from
investments with
non-zero investment:
Notre Dame 182,522 227,600 207,392
$ 2,509,131 $ 298,881 $ 256,509
</TABLE>
The actual combined losses of Local Limited Partnerships will generally
decrease as depreciation and interest decreases and the projects achieve
stable operations. Much of the rental revenue of the Local Limited
Partnerships is dependent on subsidy. The rents have increased for
inflation and operating costs. In recent years, several Local Limited
Partnerships increased operating expenses to fund repairs and maintenance
on the projects. Such repairs are limited by available cash flow. The
distributions to the Partnership from Local Limited Partnerships are the
result of the profitable operations of these projects.
Liquidity
The Partnership is dependent upon distributions from its investments in
Local Limited Partnerships for cash flow. The Partnership may not be able
to generate sufficient cash flow from operations or from distributions from
its interests in Local Limited Partnerships to pay future obligations as they
become due without additional financing or advances from the General Partner.
The General Partner
<PAGE>
is under no obligation to advance additional funds to the Partnership. The
General Partner, however, anticipates it will receive adequate distributions
from the Local Limited Partnerships to maintain operations.
Capital Resources
The General Partner believes that situations may arise where it would be
advantageous to the Partnership to exchange properties in a tax-free trans-
action. The Partnership's basis in its properties has been reduced through
depreciation deductions and other losses to levels substantially below the
amount of debt secured by the properties. Additionally, the rental properties
owned and operated by the Local Limited Partnerships have typically computed
depreciation for financial reporting purposes using the straight-line method
over the estimated economic useful life of the property. For income tax
reporting purposes, depreciation generally has been computed over the same or
shorter periods using accelerated methods. As a result, the carrying values
of the Partnership's investments in Local Limited Partnerships are substantially
greater for financial reporting purposes than for income tax reporting purposes.
Upon sale or other disposition of a property by the Local Limited Partnership,
the gain recognized by the Partnership for income tax reporting purposes may
be substantially greater than the gain recorded for financial reporting
purposes.
Accordingly, if the properties are sold, the Partnership may recognize taxable
gain in excess of the cash available for distribution. If sale proceeds are
reinvested in a manner which permits the original sale to be treated as a like-
kind exchange, the Partnership can defer this gain until the new property is
sold. Additionally, the Partnership will receive the benefit of any cash flow
or appreciation in value of the new property. If reinvestments are made, it is
<PAGE>
likely that the acquired properties will be conventional, multi-family
residential projects. The Partnership has had inquiries about the sale or
exchange of properties in its portfolio, but no offers have been made.
The partnership has made no material commitments for capital expenditures.
Item 8. Financial Statements and Supplementary Data
The response to this item is submitted in a separate section of
this report.
Item 9. Change In and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no disagreements with accountants on any matters of accounting
principles or practices or financial statement disclosure.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
(a) The General Partner of the Registrant is Interfinancial Real Estate
Management Company. The Registrant does not have directors as such. The
following is a listing of the Directors of the General Partner of the
Registrant. These Directors are elected to serve one-year terms and will
continue to serve until their successors are duly elected and qualified as
directors.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Office
Paul H. Pfleger 63 Director/President
John M. Orehek 44 Director/Senior Vice President
</TABLE>
(b) The General Partner of the Registrant is Interfinancial Real Estate
Management Company. The Registrant does not have executive officers as such.
The following is a listing of the executive officers of the General Partner of
the Registrant. These executive officers are elected to serve one-year terms
and will continue to serve until their successors are duly elected and
qualified as executive officers.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name Age Office
Paul H. Pfleger 63 Chairman of the Board
John M. Orehek 44 Senior Vice President
Michael Fulbright 44 Secretary
</TABLE>
(c) The Registrant has no employees.
(d) There are no family relationships between any directors or executive
officers.
(e) The principal occupation and employment of each of the executive
officers and directors of the General Partner are as follows:
<PAGE>
Paul H. Pfleger, President/Director. Mr. Pfleger organized and was Chairman
of the Board of Security Properties Inc. (formerly Security Pacific, Inc.)
from 1969 to the present, except for a period between 1984 and 1986. Farmers
Savings acquired Security Properties Inc. as a wholly-owned subsidiary during
1984 and sold the company back to the original owners during 1987. The major
line of business of Security Properties Inc. is the administration of previously
syndicated, subsidized multifamily residential real estate. Mr. Pfleger was
first elected an officer and director of the General Partner, Interfinancial
Real Estate Management Company, in July 1981 and has maintained his dual
status since that time.
Mr. Pfleger is the General Partner in over 280 properties with approximately
38,000 housing units throughout the United States.
John M. Orehek, Senior Vice President. Mr. Orehek is the Chief Executive
Officer and President of Security Properties Investment Inc. From 1982 to
1987, he was employed by Security Properties Inc. (SPI) as President of First
Columbia Corporation, its affiliated broker/dealer, and Senior Vice President
of SPI. From 1987 to 1991, when he rejoined SPI, he was President of Hallmark
Capital Partners, Ltd., a Seattle real estate development corporation. From
1979 to 1982 he was a member of the tax department in the Cleveland, Ohio and
Seattle, Washington offices of Arthur Andersen & Co., Certified Public
Accountants. He received a B.S. degree in Economics from Allegheny College,
Meadville, Pennsylvania and a law degree from Case Western Reserve University
School of Law. Mr. Orehek was first elected a director of the General Partner,
Interfinancial Real Estate Management Company, during 1992.
<PAGE>
Michael Fulbright, Secretary. Mr. Fulbright is General Counsel for Security
Properties Inc. He joined the Company in 1989 as Special Counsel responsible
for new development activities and sales and financing transactions in the
syndication portfolio. Prior to joining SPI, he was a partner at Tousley
Brain, a Seattle law firm that specializes in commercial real estate matters.
His practice there included representation of lenders, institutional investors
and commercial developers. He received a Masters of Business Administration
degree from Texas A&M and a law degree from the University of Washington. He
is a member of the Washington State Bar Association. Mr. Fulbright was first
elected an officer of the General Partner, Interfinancial Real Estate Management
Company, during 1994.
(f) Section 20 of the Amended Certificate and Agreement of Limited Part-
nership of the Registrant provides for the indemnification of the General
Partner and its designees and nominees against liability resulting from errors
in judgment or any acts or omissions, whether or not disclosed, unless caused
by a breach of fiduciary duty of such parties to the Registrant or its limited
partners. None of the officers or directors of the General Partner of the
registrant have filed a petition under the federal bankruptcy laws or any
state insolvency act, nor have they been engaged in any acts over the past
five years that would impair their ability or integrity as directors or
executive officers of the General Partner of the registrant.
<PAGE
Item 11. Executive Compensation
(a) The Registrant does not pay any salary or other remuneration to the
officers of the General Partner of the Registrant.
(b) The Registrant has no plan or arrangement to pay any salary or other
remuneration to the officers in the future.
(c) There are no options, warrants, rights or any other such remuneration
available to the General Partner of the Registrant.
(d) The Registrant will not pay any salary or other remuneration to the
directors of the General Partner of the Registrant.
(e) There are no retirement benefit plans or other remuneration that
would result from the resignation, retirement, termination or any other change
in control of any officer or director of the General Partner of the Registrant.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) Security Ownership of Certain Beneficial Owners
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title of Name & Address of Amount and Nature of % of
Class Beneficial Owner Beneficial Ownership Class
General Partner Interfinancial Real 115 Units 100%
Interest Estate Management Co. ($5,000)
1201 Third Avenue
Suite 5400
Seattle, Washington 98101 3076
</TABLE>
(b) No officers or directors of the General Partner of the Registrant own a
Partnership interest.
(c) No change in control of the Registrant is anticipated.
Item 13. Certain Relationships and Related Transactions
(a) There are no transactions in which the directors or officers of the
General Partner or security holder of the Registrant have a material interest.
(b) There are no transactions in which the directors of the General
Partner have a material interest.
(c) There is no indebtedness of the management of the General Partner of
the Registrant to the Registrant.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) 1. Financial Statements:
Report of independent certified public accountants.
Balance Sheets at December 31, 1998 and 1997.
Statements of Income for the years ended December 31, 1998, 1997
and 1996.
Statements of Changes in Partners' Capital for the years ended
December 31, 1998, 1997 and 1996.
Statements of Cash Flows for the years ended December 31, 1998, 1997
and 1996.
Notes to Financial Statements.
(a) 2. Financial Statement Schedules:
IV Indebtedness of and to Related Parties
XI Real Estate and Accumulated Depreciation and Amortization
of Local Limited Partnerships.
All other schedules are omitted because they are not applicable or the required
information is included in the financial statements or the notes thereto.
FINANCIAL STATEMENTS OF UNCONSOLIDATED SUBSIDIARIES
FIFTY PERCENT OWNED PERSONS OR OTHER UNCONSOLIDATED PERSONS
ACCOUNTED FOR ON THE EQUITY METHOD
Separate financial statements of the nine limited partnerships accounted for
on the equity method have been omitted because combined financial statements
are included in Note 4 to the financial statements.
(a) 3. Exhibits
1.A. Form of proposed Selling Brokers' Agreement,
incorporated by reference from Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed July 1974.
3.A. Amended Certificate and Agreement of Limited
Partnership, incorporated by reference from Pre-
Effective Amendment No. 2 on form S-11 filed July
1974.
<PAGE>
3.B. Amendment to Certificate of Limited Partnership,
incorporated by reference from Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed July 1974.
3.C. Amendment to certificate of Limited Partnership.
Incorporated by reference from proxy statement
filed September 18, 1991.
4.A. Subscription agreement incorporated by reference
from Pre-Effective Amendment No. 2 to Registration
Statement on Form S-11 filed July 1974.
5.A. Opinion and Consent of Counsel, incorporated by
reference from Pre-Effective Amendment No. 2 to
Registration Statement on Form S-11 filed July
1974.
8.A. Opinion and Consent of special Tax Counsel,
incorporated by reference from Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed July 1974.
8.B-1 Tax Ruling from the Internal Revenue Service dated
July 10, 1974, incorporated by reference from Pre-
Effective Amendment No. 2 to Registration Statement
on Form S-11 filed July 1974.
8.B-2 Supplemental Tax ruling from the Internal Revenue
Service dated July 19, 1974, incorporated by
reference from Pre-Effective Amendment No. 2 to
Registration Statement on Form S-11 filed July
1974.
10.A. Correspondence between the Management Company on
behalf of the General Partner, with various
developers, constituting agreements to invest in
local limited partnerships, incorporated by
reference from Pre-Effective Amendment No. 2 to
Registration Statement on Form S-11 filed July
1974.
10.B. Extension of Maturity Date of promissory note dated
April 18, 1990 on behalf of Elk Grove Village
Associates by Elk Grove Investors, Ltd.
16.A. Copy of letter of Price Waterhouse & Co. regarding
change in certifying accountant, incorporated by
reference from Form 8-K filed July 1976.
28.A. Letter to investors dated August 28, 1974 regarding
status of the offering, incorporated by reference
from Post-Effective Amendment No. 1 to Registration
Statement on Form S-11 filed August 1974.
<PAGE>
28.B. Sticker Supplement dated August 28, 1974 to
Prospectus dated July 23, 1974, incorporated by
reference from Pre-Effective Amendment No. 1 to
Registration Statement on Form S-11 filed August
1974.
28.C. Balance Sheet (unaudited) dated June 30, 1974 of
Interfinancial Real Estate Management Company,
incorporated by reference from Pre-Effective
Amendment No. 1 to Registration Statement on Form
S-11 filed August 1974.
28.D. Letters to Subscribers dated January 21, 1975 and
February 7, 1975 relating to tax reporting
information and status of the offering,
incorporated by reference from Pre-Effective
Amendment No. 2 to Registration Statement on Form
S-11 filed February 1975.
28.E. Net worth statements by general partners of local
limited partnerships, incorporated by reference
from Pre-Effective Amendment No. 3 to Registration
Statement on Form S-11 filed March 1975.
28.F. Table of limited partnership interests acquired in
local distribution entities, incorporated by
reference from Form 8-K filed December 1974.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the last quarter of
1998.
(c) Exhibits
Form 12b-25
(d) Financial Statement Schedules:
IV Indebtedness of and to Related Parties
XI Real Estate and Accumulated Depreciation and Amortization of Local
Limited Partnerships.
All other schedules are omitted because they are not applicable or the required
information is included in the financial statements or the notes thereto.
<PAGE>
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.
(REGISTRANT) URBAN IMPROVEMENT FUND LIMITED - 1974
BY: INTERFINANCIAL REAL ESTATE MANAGEMENT COMPANY
Date: October 1, 1999 By: Paul H. Pfleger
Paul H. Pfleger
President
Interfinancial Real Estate Management Company
Date: October 1, 1999 By: John M. Orehek
John M. Orehek
Senior Vice President
Interfinancial Real Estate Management Company
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: Paul H. Pfleger October 1, 1999
Paul H. Pfleger, Director Date
Interfinancial Real Estate Management Company
By: John M. Orehek October 1, 1999
John M. Orehek, Director Date
Interfinancial Real Estate Management Company.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
SEATTLE, WASHINGTON
ANNUAL REPORT ON FORM 10-K
ITEM 8, ITEM 14(a)(1) AND (2) AND ITEM 14(d)
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
YEAR ENDED December 31, 1998
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
Form 10-K - Items 14(a)(1) and (2)
Form 10-K - Item 14(d)
INDEX TO FINANCIAL STATEMENTS
The following financial statements of Urban Improvement Fund Limited - 1974
are included in Item 8 and Item 14(a)(1)
Independent auditors' report . . . . . . . . . . . . . . . . . . F-3
Balance sheets at December 31, 1998 and 1997 . . . . . . . . . F-4
Statements of income (loss)
for the years ended December 31, 1998, 1997 and 1996. . . . . F-5
Statements of changes in partners' capital
for the years ended December 31, 1998, 1997 and 1996. . . . . F-5
Statements of cash flows
for the years ended December 31, 1998, 1997 and 1996. . . . . F-6
Notes to financial statements. . . . . . . . . . . . . . . . . . F-7
The following financial statement schedules of Urban Improvement Fund Limited -
1974 are included in Item 14(a)(2) and 14(d):
IV. Indebtedness of and to Related Parties. . . . . . . . . . .F-22
XI. Real Estate and Accumulated Depreciation of
Local Limited Partnerships. . . . . . . . . . . . . . . .F-23
All other schedules are omitted because they are not applicable or required
information is shown in the financial statements or notes thereto.
FINANCIAL STATEMENTS OF UNCONSOLIDATED SUBSIDIARIES
FIFTY PERCENT OWNED PERSONS OR OTHER UNCONSOLIDATED PERSONS
ACCOUNTED FOR ON THE EQUITY METHOD
Separate financial statements of the nine limited partnerships accounted for
on the equity method have been omitted because combined financial statements
are included in Note 4 to the financial statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To The Partners
Urban Improvement Fund Limited - 1974
We have audited the accompanying balance sheets of Urban Improvement Fund
Limited - 1974 (a Limited Partnership), as of December 31, 1998 and 1997,
and the related statements of changes in partners' capital, income (loss)
and cash flows for the years ended December 31, 1998, 1997 and 1996 and the
related schedules listed in Item 14(a)(2) of the annual report on Form 10-K
of Urban Improvement Fund Limited - 1974 for the years ended December 31, 1998,
1997 and 1996. These financial statements and financial statement schedules
are the responsibility of the Partnership's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audits. We did not audit the financial statements of
seven of Urban Improvement Fund Limited 1974's investments in local limited
partnerships whose combined financial statements are included in Note 4.
These statements were audited by other auditors whose reports have been
furnished to us, and our opinion, to the extent it relates to the amounts
included for these local limited partnership investments, is based solely on
the reports of the other auditors. Urban's investment in these Partnerships
represents zero of total assets at December 31, 1998, 1997 and 1996; and its
equity in their operations represents three percent of the net income for 1998,
twelve percent of the net income for 1997 and six percent of net income for
1996.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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. 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 audits and the reports of other auditors
provide a reasonable basis for our opinion.
In our opinion, based on our audits and the reports of other auditors, the
financial statements referred to above present fairly, in all material
respects, the financial position of Urban Improvement Fund Limited - 1974 as
of December 31, 1998 and 1997, and the results of its operations and its cash
flows for the years ended December 31, 1998, 1997 and 1996, in conformity with
generally accepted accounting principles. In addition, in our opinion, based
upon our audits and the reports of other auditors, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information required therein.
Atlanta, Georgia
July 22, 1999
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1998 1997
Cash and cash equivalents $3,818,235 $1,454,456
Investments in and advances
to Local Limited Partnerships
accounted for on the equity
method - Notes 4, 5, 6 and 7
(Schedules IV and XI) 1,490,998 1,349,066
$5,309,233 $2,803,522
LIABILITIES AND PARTNERS' CAPITAL
Distributions payable $ 2,096 $ 2,096
Accounts payable 5,200 -0-
Management fee payable 14,255 28,510
Partners' capital - Note 2
General Partners - 115
partnership units
Authorized, issued and outstanding 52,877 27,729
Limited Partners - 11,404 partnership
units
Authorized, issued and outstanding 5,234,805 2,745,187
5,287,682 2,772,916
Commitments and contingent
liabilities - Note 3
$5,309,233 $2,803,522
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
STATEMENTS OF INCOME (LOSS)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Interest income $ 159,207 $ 59,661 $ 70,644
Expenses:
Professional fees 18,701 17,666 15,024
Management fees - Note 3 57,020 57,020 57,020
Incentive management fees 33,250 -0- -0-
Amortization of costs of
acquisition 3,333 3,333 3,333
Other expenses 41,268 33,639 2,971
153,572 111,658 78,348
Income (loss) before equity in
income (loss) of Local Limited
Partnerships 5,635 (51,997) (7,704)
Equity in income (loss) of
Local Limited Partnerships -
Note 4 2,509,131 298,881 256,509
Net income $ 2,514,766 $ 246,884 $ 248,805
Allocation of net income:
Net income allocated to
General Partners $ 25,148 $ 2,469 $ 2,488
Net income allocated to
Limited Partners 2,489,618 244,415 246,317
$ 2,514,766 $ 246,884 $ 248,805
Net financial reporting
income per unit:
General partnership units
(115 units outstanding
allocated to General
Partner) $ 218 $ 21 $ 22
Limited partnership units
(11,404 units outstanding
allocated to Limited
Partners) $ 218 $ 21 $ 22
</TABLE>
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
<TABLE>
<CAPTION>
<S> <C> <C> <C>
General Limited
Partner Partners Total
Partners' capital at
January 1, 1997 $ 25,260 $ 2,500,772 $2,526,032
Net income - 1997 2,469 244,415 246,884
Partners' capital at
December 31, 1997 27,729 2,745,187 2,772,916
Net income - 1998 25,148 2,489,618 2,514,766
Partners' capital at
December 31, 1998 $ 52,877 $ 5,234,805 $5,287,682
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $2,514,766 $ 246,884 $ 248,805
Adjustments to reconcile
net income to net cash
provided (used) by
operating activities:
Amortization of initial
and rent up fees 3,333 3,333 3,333
Increase (decrease) in
accounts payable 5,200 (47) 47
Increase (decrease)
in management
fee payable (14,255) -0- 14,257
Equity in loss (income)
of Local Limited
Partnerships (220,345) (298,881) (256,509)
Total adjustments (226,067) (295,595) (238,872)
Net cash provided (used)
by operating activities 2,288,699 (48,711) 9,933
CASH FLOWS FROM
INVESTING ACTIVITIES:
Current year distributions 75,080 78,807 60,553
Net repayments from
(advances to) Local
Limited Partnerships -0- 29,370 21,343
Net cash provided by
investing activities 75,080 108,177 81,896
NET INCREASE IN
CASH AND CASH
EQUIVALENTS 2,363,779 59,466 91,829
CASH BALANCE AT
BEGINNING OF YEAR 1,454,456 1,394,990 1,303,161
CASH BALANCE
AT END OF YEAR $3,818,235 $1,454,456 $1,394,990
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
<PAGE>
Note 1 - Organization and Accounting Policies
Organization
Urban Improvement Fund Limited (the Partnership) was formed under the California
Uniform Limited Partnership Act on January 13, 1974, for the principal purpose
of investing in other limited partnerships (Local Limited Partnerships), which
own federal and state-assisted housing projects. The Partnership issued 11,404
units of limited partnership interest pursuant to a public offering of such
units which terminated on December 31, 1974. The Partnership also issued 115
units of general partnership interest to Interfinancial Real Estate Management
Company (the General Partner).
The Urban Improvement Fund Limited-1974 prospectus, dated July 23, 1974,
specified that the General Partner will have at least a one percent interest
in profits, losses and special allocations, and the limited partners will share
the remainder of the interest in profits, losses and special allocations in
proportion to their respective units of limited partnership interests. It is
the General Partners' intention to allocate, for income tax and financial
reporting purposes, the profits, losses and special allocations in the ratio
of ninety-nine percent to the limited partners and one percent to the
General Partner.
Investment in Local Limited Partnerships
As of December 31, 1998 and 1997, the Partnership had investments in nine
active real estate limited partnerships (Local Limited Partnerships), which
are accounted for on the equity method (Note 4). The investment account
represents the sum of the capital investment and unamortized cost of acquisi-
tions less the Partnership's share in losses since the date of acquisition.
The Partnership discontinues recognizing losses and amortizing cost of acquisi-
tion under the equity method when the investment in a particular Local Limited
Partnership is reduced to zero, unless the Partnership intends to commit
additional funds to the Local Limited Partnership. Repayment of advances
and cash distributions by the Local Limited Partnerships, after the Partnership
investment has been reduced to zero, are recognized as income by the Partnership
in the year received. Additional advances to a Local Limited Partnership,
after an investment is reduced to zero, are recognized as losses.
Initial rent-up fees paid by the Partnership to the General Partner, deducted
when paid for income tax purposes, are capitalized as acquisition costs of the
Local Limited Partnerships for financial reporting purposes. These costs and
other costs of acquisition are amortized using the straight-line method over
the lives (15 to 40 years) of the Local Limited Partnership properties.
Amortization is discontinued when the investment is reduced to zero.
<PAGE>
Note 1 - Organization and Accounting Policies - Continued
The Partnership had an investment in one Limited Partnership that sold its
real estate during 1984 (Note 6). This Partnership (Elk Grove Elderly) held
a note receivable for a portion of the sales proceeds. The note was paid off
during 1998.
The Partnerships' equity in income (loss) of the Local Limited Partnerships is
summarized as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
1998 1997 1996
Repayment of advances
by (advances to)
Partnerships with
zero investments:
Capitol Hill $ -0- $ 26,598 $ 19,871
Distributions received
from Partnerships
with zero investments:
51st and King 7,074 4,766 3,375
Elk Grove 2,253,035 15,217 15,217
Norway House -0- -0- 10,654
Southern Boulevard II 66,500 24,700 -0-
Income (loss) from
investments with
non-zero investment:
Notre Dame 182,522 227,600 207,392
$ 2,509,131 $ 298,881 $ 256,509
</TABLE>
Significant accounting policies followed by the Local Limited Partnerships are
summarized in Note 4.
Taxes on Income
No provision for taxes on income has been recorded since all taxable income or
loss of the Partnership is allocated to the partners for inclusion in their
respective tax returns.
<PAGE>
Note 1 - Organization and Accounting Policies - Continued
Cash Equivalents
Marketable securities that are highly liquid and have maturities of three
months or less at the date of purchase are classified as cash equivalents.
Fair Value of Financial Instruments and Use of Estimates
The Partnership estimates that the aggregate fair value of all financial
instruments at December 31, 1998 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the balance sheet.
These estimates are not necessarily indicative of the amounts that the Part-
nership could realize in a current market exchange. The preparation of
financial statements requires the use of estimates and assumptions. Actual
results could differ from those estimates.
Note 2 - Reconciliation Between Net Income (Loss) and Partners' Capital
(Deficit) of the Partnership For Financial Reporting Purposes
and Income Tax Reporting Purposes
A reconciliation of the Partnership's income (loss)for financial reporting
purposes and the Partnership's income (loss) for income tax reporting
purposes follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Net income (loss)
for financial
reporting purposes $2,514,766 $ 246,884 $ 248,805
Amortization of initial
and rent-up fees and
other costs of acquisition
capitalized for financial
reporting purposes and
previously deducted for
income tax purposes 3,333 3,333 3,333
Equity in losses reported
by Local Limited Partner-
ships for income tax
reporting purposes in excess
of income (losses) for
financial reporting purposes 706,851 652,520 663,282
Accrual and other
adjustments for
financial reporting
purposes (16,636) 3,189 19,370
Net income (loss)
as reported on
the federal income
tax return $ 3,208,314 $ 905,926 $ 934,790
</TABLE>
<PAGE>
Note 2 - Reconciliation Between Net Income (Loss) and Partners' Capital
(Deficit) of the Partnership For Financial Reporting Purposes
and Income Tax Reporting Purposes - Continued
A reconciliation between partners' capital for financial reporting purposes
and partners' capital (deficit) for income tax reporting purposes follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year Ended December 31,
1998 1997 1996
Partners' capital for
financial reporting
purposes $ 5,287,682 $ 2,772,916 $ 2,526,032
Unamortized portion of
initial and rent-up
fees and other costs
of acquisition capital-
ized for financial
reporting purposes
and previously
deducted for income
tax purposes (902,357) (905,690) (909,023)
Commissions and
offering expenses
capitalized for
income tax purposes
and charged to capital
for financial reporting
purposes 1,315,039 1,315,039 1,315,039
Equity in cumulative
losses of Local Limited
Partnerships for income
tax reporting purposes
in excess of losses for
financial reporting
purposes (22,662,587) (23,369,438) (24,005,801)
Accrual and other
adjustments for
financial reporting
purposes 36,335 52,971 33,625
Partners' capital
(deficit) as
reported on the
federal income
tax return $(16,925,888) $(20,134,202) $(21,040,128)
</TABLE>
The Partnership has received a ruling from the Internal Revenue Service that
the basis of the limited partners' interest in the Partnership will include
the Partnership's allocable share of basis resulting from mortgage debt of
the Local Limited Partnerships under Section 752 of the Internal Revenue Code.
<PAGE>
Note 3 - Management of Urban Improvement Fund Limited
Under the terms of the Limited Partnership Agreement, the Partnership is
required to pay the General Partner an annual management fee equal to one-
quarter of one percent of invested assets or $146,065. (The fee will not be
more than fifty percent of the Partnership's annual net cash flow, as defined,
subject to an annual minimum of $57,020.) In 1998, 1997 and 1996, the minimum
annual management fee of $57,020 was earned and recorded as an expense of the
Partnership. The Partnership will also pay the General Partner a liquidation
fee for the sale of projects. The liquidation fee is the lesser of (i) ten
percent of the net proceeds to the Partnership from the sale of a project(s)
or (ii) one percent of the sales price plus three percent of the net proceeds
after deducting an amount sufficient to pay long-term capital gains taxes.
No part of such fee shall accrue or be paid unless: (i) the Limited Partners'
share of the proceeds has been distributed to them, (ii) the Limited Partners
shall have first received an amount equal to their invested capital attributable
to the project(s) sold, and (iii) the Limited Partners have received an amount
sufficient to pay long-term capital gains taxes from the sale of the project(s),
if any, calculated at the maximum rate then in effect.
The Partnership also paid an incentive management fee of $33,250 to one of the
local limited partnership's general partnership. The incentive fee was equal
to fifty percent of the distributable cash flow to the Partnership.
The General Partner of the Partnership is a corporation in which Paul H.
Pfleger owns a majority interest. Partnership Services, Inc. (PSI), another
corporation in which Paul H. Pfleger is a majority shareholder, has contracted
with the General Partner and the Partnership to provide certain management and
other services to any projects in which the Partnership has an interest. No
fees were paid to PSI during 1998, 1997 or 1996. In addition, as shown in the
following table, PSI has become the General Partner in three of the Local
Limited Partnerships in which the Partnership has or had investments:
<TABLE>
<CAPTION>
<S> <C> <C>
Date PSI Became
Local Limited Partnership General Partner
Notre Dame Apartments March 1977
Capitol Hill Associates December 1978
Logan-Washington Associates December 1978
</TABLE>
Note 4 - Investments in Local Limited Partnerships Accounted for on the Equity
Method
The Partnership has ninety-five percent to ninety-nine percent interests in
profits and losses of the Local Limited Partnerships. Investments in these
Local Limited Partnerships were made in installments based typically on the
stages of completion and/or occupancy.
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on the Equity
Method - Continued
Investment in and advances to the Local Limited Partnerships accounted for on
the equity method are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1998:
Capitol Hill $ 277,900 $ (729,125) $ (451,225)
Community Apts. 287,244 (1,212,667) (925,423)
51st & King Drive 180,508 (679,659) (499,151)
Met-Paca II 1,219,550 (5,183,296) (3,963,746)
Monatiquot Village 940,000 (9,308,751) (8,368,751)
Norway Housing (1,053,606) 370,602 (683,004)
Notre Dame 216,615 1,214,790 1,431,405
Southern Boulevard II 497,264 (2,235,967) (1,738,703)
Weyerbacher Terrace 703,080 (2,455,520) (1,752,440)
$3,268,555 $(20,219,593) $(16,951,038)
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Losses Not Costs of
Recorded Acquisition
(Note 1) Advances (Note 1) Total
December 31, 1998:
Capitol Hill $ 236,610 $ 150,633 $ 63,982 $ -0-
Community Apts. 870,497 -0- 54,926 -0-
51st & King Drive 452,181 -0- 46,970 -0-
Met-Paca II 3,832,414 -0- 131,332 -0-
Monatiquot Village 8,083,086 -0- 285,665 -0-
Norway Housing 652,477 -0- 30,527 -0-
Notre Dame -0- 2,501 57,093 1,490,999
Southern Boulevard II 1,634,311 -0- 104,392 -0-
Weyerbacher Terrace 1,624,972 -0- 127,468 -0-
$17,386,548 $ 153,134 $ 902,355 $1,490,999
</TABLE>
<TABLE>
<S> <C> <C> <C>
Equity In
Capital Income
Contributions (Losses) Subtotal
December 31, 1997:
Capitol Hill $ 277,900 $ (899,718) $ (621,818)
Community Apts. 287,244 (1,189,220) (901,976)
51st & King Drive 187,582 (822,134) (634,552)
Met-Paca II 1,219,550 (5,602,267) (4,382,717)
Monatiquot Village 940,000 (8,722,221) (7,782,221)
Norway Housing (1,053,606) 101,132 (952,474)
Notre Dame 253,871 1,032,268 1,286,139
Southern Boulevard II 563,764 (2,393,654) (1,829,890)
Weyerbacher Terrace 703,080 (2,280,608) (1,577,528)
$ 3,379,385 $(20,776,422) $(17,397,037)
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Losses Not Costs of
Recorded Acquisition
(Note 1) Advances (Note 1) Total
December 31, 1997:
Capitol Hill $ 407,203 $ 150,633 $ 63,982 $ -0-
Community Apts. 847,050 -0- 54,926 -0-
51st & King Drive 587,582 -0- 46,970 -0-
Met-Paca II 4,251,385 -0- 131,332 -0-
Monatiquot Village 7,496,556 -0- 285,665 -0-
Norway Housing 921,946 -0- 30,528 -0-
Notre Dame -0- 2,501 60,426 1,349,066
Southern Boulevard II 1,725,498 -0- 104,392 -0-
Weyerbacher Terrace 1,450,059 -0- 127,469 -0-
$17,687,279 $ 153,134 $ 905,690 $1,349,066
</TABLE>
The combined balance sheets of the Local Limited Partnerships, accounted for
on the equity method at December 31, 1998 and 1997, and the related combined
statements of income, changes in partners capital (deficit) and cash flows
and selected footnote disclosures from the audited financial statements for
the years ended December 31, 1998, 1997 and 1996, are summarized as follows:
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
COMBINED BALANCE SHEETS OF LOCAL LIMITED PARTNERSHIPS
Assets
<TABLE>
<CAPTION>
<S> <C> <C>
December 31,
1998 1997
Cash $ 1,188,256 $ 1,207,917
Cash in escrow and other
restricted funds 4,681,614 4,497,543
Accounts receivable 377,838 304,643
Prepaid expenses 547,813 544,078
Other assets (net of
accumulated amortization) 271,242 275,442
7,066,673 6,829,623
Property on the basis of cost:
Land 1,645,981 1,637,381
Buildings and improvements 50,918,793 50,144,891
52,564,774 51,782,272
Less accumulated depreciation (41,565,354) (40,287,794)
10,999,420 11,494,478
$ 18,066,093 $18,324,101
Liabilities and Partners' Capital (Deficit)
Mortgage notes payable $ 30,691,987 $ 31,781,655
Accounts payable and
accrued expenses 1,324,127 1,403,802
Notes payable 4,795,501 4,354,660
Advances from Urban Improvement
Fund Limited - 1974 153,134 153,134
Tenants' security and
other deposits 425,938 415,849
37,390,687 38,109,100
Partners' capital (deficit)
per accompanying statements (19,324,594) (19,784,999)
$ 18,066,093 $ 18,324,101
</TABLE>
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
COMBINED STATEMENTS OF INCOME (LOSS) OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31,
1998 1997 1996
Revenue:
Net rental income $12,235,410 $12,169,958 $12,423,399
Financial income 342,183 439,839 412,522
Other income 255,072 335,088 108,247
12,832,665 12,944,885 12,944,168
Expenses:
Administrative 2,429,293 2,084,812 2,118,987
Utilities 2,053,968 2,375,107 2,341,588
Operating 3,255,656 3,189,805 3,347,357
Taxes and insurance 1,475,794 1,576,715 1,552,464
Total Operating Expenses 9,214,711 9,226,439 9,360,396
Net Operating Income 3,617,954 3,718,446 3,583,772
Non-operating (income)
expenses:
Financial expenses 1,705,620 1,721,987 1,753,314
Depreciation expense 1,302,510 1,316,907 1,503,842
Other expenses 34,270 35,225 24,302
Proceeds from sale
of Elk Grove (4,506,070) -0- -0-
(1,463,670) 3,074,119 3,281,458
Net income $ 5,081,624 $ 644,327 $ 302,314
</TABLE>
Amortization of capitalized interest was $44,436 in 1998, 1997 and 1996.
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
COMBINED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Urban
Improvement Other
Fund Limited General
Limited Partners Partners Total
Partners capital
(deficit) at
January 1, 1996 $(18,163,091) $ (2,834) $(2,382,454) $(20,548,379)
Net income - 1996 297,216 335 4,763 302,314
Distributions - 1996 (60,553) -0- (658) (61,211)
Partners capital
(deficit) at
December 31, 1996 (17,926,428) (2,499) (2,378,349) (20,307,276)
Net income - 1997 608,198 287 35,842 644,327
Distributions - 1997 (78,807) -0- (43,243) (122,050)
Partners capital
(deficit) at
December 31, 1997 (17,397,037) (2,212) (2,385,750) (19,784,999)
Net income - 1998 2,809,865 296 2,271,463 5,081,624
Distributions - 1998 (2,363,866) -0- (2,257,353) (4,621,219)
Partners capital
(deficit) at
December 31, 1998 $(16,951,038) $ (1,916) $(2,371,640) $(19,324,594)
</TABLE>
<PAGE>
STATEMENTS OF CASH FLOWS OF LOCAL LIMITED PARTNERSHIPS
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31,
1998 1997 1996
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $5,081,624 $ 644,327 $ 302,314
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation 1,302,510 1,316,907 1,503,842
Increase in receivables,
escrows, restricted
deposits, prepaid
expenses and other
assets (281,751) (452,223) (335,714)
Increase (decrease) in
accounts payable,
accrued expenses,
notes payable and
tenant security
deposit liability (69,586) 232,181 (164,171)
Total adjustments 951,173 1,096,865 1,003,957
Net cash provided by
operating activities 6,032,797 1,741,192 1,306,271
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures (782,412) (939,231) (526,994)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Mortgage principal
payments (1,089,668) (1,024,665) (1,226,989)
Increase in notes
payable 440,841 406,696 371,628
Distributions paid (4,621,219) (122,050) (61,211)
Advances from
(repayments to)
affiliates - net -0- (8,199) (13,674)
Net cash used by financing
activities (5,270,046) (748,218) (930,246)
INCREASE (DECREASE)
IN CASH AND
CASH EQUIVALENTS (19,661) 53,743 (150,969)
CASH BALANCE AT
BEGINNING OF YEAR 1,207,917 1,154,174 1,305,143
CASH BALANCE AT
END OF YEAR $ 1,188,256 $ 1,207,917 $ 1,154,174
SUPPLEMENTAL INFORMATION REGARDING
INTEREST PAYMENTS IS AS FOLLOWS:
Interest paid, net
of subsidy $ 917,371 $ 1,157,659 $ 1,274,606
</TABLE>
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
A reconciliation between the combined net income (loss) for financial
reporting purposes and the combined income (loss) for income tax reporting
purposes follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31,
1998 1997 1996
Combined net income
(loss) for financial
reporting purposes $ 5,081,624 $ 644,327 $ 302,314
Excess of depreciation
for financial reporting
purposes over depreciation
for tax reporting purposes 270,947 397,834 439,323
Accrual adjustments for
financial reporting purposes (5,354) (45,732) 27,285
Combined net income
(loss) for income tax
purposes as reported
on the federal income
tax returns $ 5,347,217 $ 996,429 $ 768,922
</TABLE>
A reconciliation between combined partners' capital (deficit) for financial
reporting purposes and combined partners' capital (deficit) for income tax
reporting purposes follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
December 31,
1998 1997 1996
Combined partners
capital (deficit)
for financial
reporting purposes $(19,324,594) $(19,784,999) $(20,307,276)
Carrying costs
during construction
capitalized for
financial reporting
purposes, excess
of depreciation
for tax reporting
purposes over
depreciation for
financial reporting
purposes and
accrual adjustments
for financial reporting
purposes (2,393,259) (2,669,638) (2,869,058)
Combined partners'
capital (deficit)
as reported on the
federal income
tax returns $(21,717,853) $(22,454,637) $(23,176,334)
</TABLE>
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
Cost of buildings
For financial statement purposes, the Local Limited Partnerships generally
capitalized all project costs, including payments to the general partners,
interest, taxes, carrying costs and operating expenses offset by incidental
rental income during the construction period. For income tax purposes,
certain of these amounts were deducted when paid.
Depreciation and amortization
For financial statement purposes, depreciation is computed using straight-line
and various accelerated methods over useful lives of fifteen to forty years
from the date of completion of the building or rehabilitation. For income tax
purposes, buildings are depreciated over fifteen to forty years using various
accelerated methods and certain rehabilitation costs are amortized on the
straight-line method over sixty months under the provisions of Section 167(k)
of the Internal Revenue Code.
Certain expenses related to obtaining permanent financing for the partnerships
have been deferred and are being amortized for financial reporting purposes
using the straight-line method over periods of five to forty years.
Mortgage Notes Payable
The Partnerships have mortgages which are payable to or are insured by the
Department of Housing and Urban Development (HUD) and the Massachusetts
Housing Finance Agency (MHFA) totaling $30,691,987 at December 31, 1998
($19,935,876 by HUD and $10,756,111 by MFHA) and $31,781,655 at December 31,
1997 ($20,517,357 by HUD and $11,264,298 by MFHA). The mortgage notes payable
are secured by deeds of trust on rental property and bear interest at rates of
seven to nine percent per annum. The mortgages are payable in monthly install-
ments of principal and interest of approximately $269,000 over periods of forty
years. HUD makes interest reduction payments on the mortgages insured under
Section 236 in amounts which effectively reduce the mortgage payments to those
required for mortgages carrying a one percent interest rate.
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
Mortgage Notes Payable - Continued
The scheduled principal reductions for the next five years are as follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Year Ended December 31, Amount
1999 $ 1,139,749
2000 1,197,104
2001 963,211
2002 1,035,020
2003 1,112,114
Beyond 25,244,789
$30,691,987
</TABLE>
National Housing Act Subsidies and Restrictions
Under terms of the regulatory agreements with HUD and MHFA, the Local Limited
Partnerships cannot make cash distributions to partners of the Local Limited
Partnerships in excess of six percent per annum of stated equity in the
respective partnerships. Such distributions are cumulative but can only be
paid from "surplus cash," as defined in the agreements. The Local Limited
Partnerships must deposit all cash in excess of the distributable amounts
into residual receipts funds which are under the control of the mortgagees,
and from which disbursements must be approved by the respective agencies.
As of December 31, 1998, approximately $2,295,000 could be paid to partners
of the Local Limited Partnerships as surplus cash becomes available.
Under terms of the regulatory agreements, the Local Limited Partnerships are
required to make monthly deposits into replacement funds which are under the
control of the mortgagees. Such deposits commence with the initial principal
payments on the mortgage loans. Expenditures from the replacement funds must
be approved by the respective agencies.
All of the Local Limited Partnerships have entered into rent supplement and/or
Section 8 contracts with HUD or state agencies to provide financial assistance
to qualified tenants of the apartment units. Under terms of these contracts,
HUD will pay a portion of the rent on behalf of qualified tenants. The maximum
dollar amount of these payments is limited by HUD. A substantial portion of
rental income is collected through these contracts. During 1998, the Local
Limited Partnerships received approximately $5,500,000 in rent supplement and
Section 8 funds.
<PAGE>
Note 4 - Investments in Local Limited Partnerships Accounted for on
the Equity Method - Continued
Management
The Local Limited Partnerships have entered into property management contracts
with various agents under which the agents are paid property management fees of
approximately four percent to eleven percent of the gross revenues of the
respective projects. The management agents are affiliated with the general
partners of the Local Limited Partnerships.
Note 5 - Sale of the Assets of Elk Grove Village
The property of Elk Grove Village was sold during 1984. The sales price of
$11,235,930 was composed of $5,855,464 for assumption of the underlying
mortgage and installment payments as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Urban 74 General Partner
1985 $ 651,191 $ -0-
1986 411,116 70,059
1987 -0- 176,425
1989 -0- 171,675
1999 1,950,000 1,950,000
$3,012,307 $2,368,159
</TABLE>
The final installment is due on December 31, 1999 along with accrued interest.
Interest will continue to accrue at nine and one-half percent per annum and is
payable on the anniversary date of the note to the extent that the property has
distributable cash flow in excess of $10,000. The gain on the sale of the real
estate is recognized on the cost recovery method to first recognize the recovery
of the asset value, then recognize the gain as the proceeds are received. For
each of the years ended December 31, 1997 and 1996, the Partnership received and
recorded interest income of $15,217. During 1998, with the consent of the Part-
nership, Elk Grove Village Associates agreed to discount the note to accept
$4,500,000 in full satisfaction of the note and accrued interest. This resulted
in a discount of approximately $3,520,000.
Note 6 - Recapitalization
In April 1995, Norway Housing Associates entered into an agreement with MHFA to
borrow $2,623,679 under a second mortgage and to distribute the proceeds of this
borrowing, together with the Partnership's surplus cash, as determined by MHFA.
Approximately fifty-one percent of the available funds after payment of
allowable fees and expenses were paid to MHFA and $2,787,584 was distributed
to the partners.
<PAGE>
Note 6 - Recapitalization - Continued
The MHFA required that approximately $348,000 be retained as debt service and
operating reserves controlled by MHFA. $2,841,242, the amount paid to MHFA was
of current requirements. Payment of these funds to MHFA has been treated as a
charge against operations for financial and tax reporting purposes.
Note 7 - Investment in Met Paca II Associates
Met Paca II Associates has a severe working capital deficiency primarily
resulting from the loss of its real estate tax abatement. This deficiency
caused the Partnership to become delinquent in meeting its obligation under
the mortgage note payable to HUD. Although the Partnership is attempting to
obtain additional real estate tax abatements, there is no assurance that the
Partnership will be successful. This raises substantial doubt about the
Partnership's ability to continue as a going concern. The financial statements
do not include any adjustments that might be necessary if the Partnership is
unable to continue as a going concern.
Note 8 - Year 2000 Risk Assessment and Action Plan
The Partnership is aware of the current concerns throughout the business
community of reliance upon computer software that does not properly recognize
the year 2000 in date formats, often referred to as the "Year 2000 Problem."
The Year 2000 Problem is the result of software being written using two digits
rather than four digits to define the applicable year (i.e., "98" rather than
"1998"). A failure by a business to properly identify and correct a Year 2000
Problem in its operations could result in system failures or miscalculations.
In turn, this could result in disruptions of operations, including, among other
things, a temporary inability to process transactions, or otherwise engage in
routine business transactions on a day-to-day basis.
Operations of the Partnership are not dependent upon the successful operation
on a daily basis of its computer software programs. The Partnership relies
upon software purchased from third-party vendors rather than internally-
generated software. In its analysis of software, and based upon its ongoing
discussions with these vendors, a plan of action has been put in place by the
Partnership to minimize its risk exposure to the Year 2000 Problem. The
properties that the Partnership has invested in may be dependent upon the
successful operation on a daily basis of its computer software programs. The
Partnership has not been informed by any of these properties that they are not
Year 2000 compliant.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
SCHEDULE IV
INDEBTEDNESS OF RELATED PARTIES
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
December 31,
Change Change
1998 1998 1997 1997 1996
Advances to (repayments
from) local limited
partnerships:
Capitol Hill $ 150,633 $ -0- $ 150,633 $(26,598) $ 177,231
Notre Dame 2,501 -0- 2,501 (2,777) 5,278
$ 153,134 $ -0- $ 153,134 $(29,375) $ 182,509
</TABLE>
All advances are included in the balance sheet caption "Investments in and
advances to Local Limited Partnerships accounted for on the equity method."
See Note 4 to the financial statements. The advances have been reduced to
zero on the books of the Partnership for Capitol Hill Associates because the
investment in this partnership has been reduced to zero under the equity method
of accounting.
<PAGE>
URBAN IMPROVEMENT FUND LIMITED - 1974
(A Limited Partnership)
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION OF LOCAL LIMITED
PARTNERSHIPS
December 31, 1998
<TABLE>
<CAPTION>
<S>
<C> <C> <C>
Outstanding
Description Mortgage
Partnership/Location No. of Units Balance Land
Capitol Hill Associates
Denver, Colorado 121 apartments $ 1,763,727 $ 309,590
Community Apartments, Ltd.
Cleveland, OH 148 apartments 1,273,779 182,031
51st and King Drive
Chicago, IL 96 apartments 1,424,397 100,858
Met-Paca II Associates
New York, New York 192 apartments 5,002,095 205,597
Monatiquot Village Associates
Braintree, MA 324 apartments 7,228,163 393,928
Norway Housing Associates
Boston, MA 136 apartments 3,527,948 150,026
Notre Dame
San Francisco, CA 205 apartments 3,266,443 244,847
Southern Boulevard II
New York, New York 175 apartments 3,283,309 37,441
Weyerbacher Terrace
Indianapolis, IN 296 apartments 3,922,126 21,663
$30,691,987 $ 1,645,981
</TABLE>
<TABLE>
<S>
<C> <C> <C>
Buildings
and Accumulated
Partnership/Location Improvement Total Depreciation
Capitol Hill Associates
Denver, Colorado $2,363,156 $2,672,746 $(1,786,041)
Community Apartments, Ltd.
Cleveland, OH 2,075,954 2,257,985 (1,947,195)
51st and King Drive
Chicago, IL 2,652,002 2,752,860 (2,352,169)
Met-Paca II Associates
New York, New York 7,679,235 7,884,832 (7,462,196)
Monatiquot Village Associates
Braintree, MA 11,915,849 12,309,777 (9,919,184)
Norway Housing Associates
Boston, MA 3,331,715 3,481,741 (3,098,840)
Notre Dame
San Francisco, CA 6,839,694 7,084,541 (3,579,979)
Southern Boulevard II
New York, New York 6,501,036 6,538,477 (5,863,343)
Weyerbacher Terrace
Indianapolis, IN 7,560,062 7,581,725 (5,556,407)
$50,918,703 $52,564,684 $(41,565,354)
</TABLE>
<TABLE>
<S>
<C> <C> <C>
Life over which
Depreciation
in Latest
Date of Income
Completion of Date Statement
Partnership/Location Construction Acquired is Computed
Capitol Hill Associates
Denver, Colorado 1975 1974 5-25 years
Community Apartments, Ltd.
Cleveland, OH 1975 1974 15-25 years
51st and King Drive
Chicago, IL 1975 1974 15 years
Met-Paca II Associates
New York, New York 1976 1974 7-27.5 years
Monatiquot Village Associates
Braintree, MA 1975 1974 4-40 years
Norway Housing Associates
Boston, MA 1975 1974 3-25 years
Notre Dame
San Francisco, CA 1976 1974 5-40 years
Southern Boulevard II
New York, New York 1975 1974 7-27.5 years
Weyerbacher Terrace
Indianapolis, IN 1976 1974 5-30 years
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Building and Accumulated
Land Improvements Cost Depreciation
Balance at
January 1, 1997 $1,637,381 $49,259,098 $50,896,479 $39,024,325
Additions -0- 939,231 939,231 1,316,907
Deletions -0- (53,438) (53,438) (53,438)
Balance at
December 31, 1997 1,637,381 50,144,891 51,782,272 40,287,794
Additions 8,600 798,762 807,362 1,302,510
Deletions -0- (24,950) (24,950) (24,950)
Balance at
December 31, 1998 $1,645,981 $50,918,703 $52,564,684 $41,565,354
</TABLE>
NOTE: Capital improvements since original construction or rehabilitation
are not material to the combined financial statements and, as such, are
not disclosed separately. The financial statement category of buildings
and improvements is composed substantially of cost plus the initial renovation
upon acquisition. Total cost of land and buildings for federal income tax
purposes is approximately $49,000,000.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,818,235
<SECURITIES> 0
<RECEIVABLES> 1,490,998
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,309,233
<CURRENT-LIABILITIES> 21,551
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5,287,682
<TOTAL-LIABILITY-AND-EQUITY> 5,309,233
<SALES> 0
<TOTAL-REVENUES> 2,668,338
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 153,572
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,514,766
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,514,766
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
