SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-89968
INDEPENDENCE TAX CREDIT PLUS L.P. IV
(Exact name of registrant as specified in its charter)
Delaware 13-3809869
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
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 [ ]
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
=========== ===========
December 31, March 31,
1996 1996
----------- -----------
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $212,766 and $22,951,
respectively $16,073,689 $ 2,657,976
Construction in progress 3,136,474 0
Cash and cash equivalents 6,491,317 8,484,832
Investments available for sale 24,900,000 11,502,412
Cash held in escrow 3,474,126 3,000,000
Deferred costs, net of accumulated
amortization
of $16,562 and $5,921, respectively 2,217,931 1,700,358
Other assets 321,875 260,114
----------- -----------
Total assets $56,615,412 $27,605,692
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgage notes payable $ 9,235,649 $ 0
Construction loan payable 2,370,816 2,039,174
Accounts payable and other liabilities 2,546,874 106,084
Due to local general partners and
affiliates 262,482 311,987
Due to general partner and affiliates 149,027 288,599
----------- -----------
Total liabilities 14,564,848 2,745,844
----------- -----------
Minority interest 940,387 321,081
----------- -----------
Partners' capital:
Limited partners (100,000 BACs
authorized; 45,844 and 27,333
issued and outstanding,
respectively) 41,106,608 24,536,153
General partner 3,569 2,614
----------- -----------
Total partners' capital 41,110,177 24,538,767
----------- -----------
Total liabilities and partners'
capital $56,615,412 $27,605,692
=========== ===========
See Accompanying Notes to Consolidated Financial Statements
2
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
======================== =======================
Three Months Ended Nine Months Ended
December 31, December 31,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues
Rental income $ 226,456 $ 0 $ 394,187 $ 0
Other income
(principally interest
on capital
contributions) 324,242 68,937 825,851 68,937
--------- --------- --------- ---------
Total revenues 550,698 68,937 1,220,038 68,937
--------- --------- --------- ---------
Expenses
General and
administrative 157,948 4,157 306,112 6,369
General and administrative-
related parties
(Note 2) 125,930 13,195 252,730 18,207
Repairs and
maintenance 30,760 0 46,091 0
Operating and
other 18,712 0 47,729 0
Real estate taxes 21,957 0 21,957 0
Insurance 21,264 0 31,687 0
Interest 146,190 0 221,013 0
Depreciation and
amortization 123,744 2,560 200,456 2,560
--------- --------- --------- ---------
Total expenses 646,505 19,912 1,127,775 27,136
--------- --------- --------- ---------
Net income (loss)
before minority
interest (95,807) 49,025 92,263 41,801
Minority interest
in loss of subsidiary
partnerships 2,401 0 3,232 0
--------- --------- --------- ---------
Net income (loss) $(93,406) $ 49,025 $ 95,495 $ 41,801
========= ========= ========= =========
Net income (loss) -
limited partners $(92,472) $ 48,535 $ 94,540 $ 41,383
========= ========= ========= =========
Weighted average
number of BACs
outstanding 45,844 10,335 39,024 3,500
========= ========= ========= =========
Net income (loss)
per weighted
average BAC $ (2.02) $ 4.70 $ 2.42 $ 11.82
========= ========= ========= =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
3
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital
(Unaudited)
============================================
Limited General
Total Partners Partner
--------------------------------------------
Partners' capital -
April 1, 1996 $ 24,538,767 $ 24,536,153 $ 2,614
Capital contributions 18,511,000 18,511,000 0
Offering costs (2,035,085) (2,035,085) 0
Net income 95,495 94,540 955
------------ ------------ ------------
Partners' capital -
December 31, 1996 $ 41,110,177 $ 41,106,608 $ 3,569
============ ============ ============
See Accompanying Notes to Consolidated Financial Statements
4
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
(Unaudited)
=============================
Nine Months Ended
December 31,
-----------------------------
1996 1995
-----------------------------
Cash flows from operating activities:
Net income $ 95,495 $ 41,801
------------ ------------
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Depreciation and amortization 200,456 2,560
Minority interest in loss of
subsidiary properties (3,232) 0
Increase in cash held in escrow (16,428) 0
Increase in other assets (61,761) 0
Increase (decrease) in accounts
payable and other liabilities 1,759,794 (46,753)
Increase in due to local general
partners and affiliates 13,776 0
Increase in due to general partner
and affiliates 133,758 22,206
------------ ------------
Total adjustments 2,026,363 (21,987)
------------ ------------
Net cash provided by
operating activities 2,121,858 19,814
------------ ------------
Cash flows used in investing activities:
Acquisition of property and
equipment (12,801,331) (75,759)
Increase in construction in progress (3,136,474) 0
Increase in cash held in escrow (457,698) 0
Increase in accounts payable and
other liabilities 680,996 0
Decrease in due to local general
partners and affiliates (63,281) 0
Increase in investments available
for sale (13,397,588) (6,450,000)
Increase in deferred costs (1,133,549) (1,045,031)
------------ ------------
Net cash used in investing
activities (30,308,925) (7,570,790)
------------ ------------
See Accompanying Notes to Consolidated Financial Statements
5
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Decrease) Increase in Cash and Cash Equivalents
(continued)
(Unaudited)
<TABLE>
<CAPTION>
=============================
Nine Months Ended
December 31,
-----------------------------
1996 1995
-----------------------------
<S> <C> <C>
Cash flows provided by financing activities:
Proceeds from mortgage notes 9,247,947 0
Repayments of mortgage notes (12,298) 0
Proceeds from construction loans 331,642 0
Increase in offering costs (2,035,085) (1,867,379)
(Decrease) increase in due to
general partner and affiliates (273,330) 447,454
Capital contributions received 18,511,000 18,517,000
Distributions paid 0 (10)
Increase in deferred costs (198,862) 0
Increase in capitalization of
consolidated subsidiaries
attributable to minority interest 622,538 0
------------ ------------
Net cash provided by financing
activities 26,193,552 17,097,065
------------ ------------
Net (decrease) increase in cash and
cash equivalents (1,993,515) 9,546,089
Cash and cash equivalents at
beginning of period 8,484,832 1,010
------------ ------------
Cash and cash equivalents at
end of period $ 6,491,317 $ 9,547,099
============ ============
Supplemental disclosures of noncash investing activities:
Capitalization of deferred
acquisition costs 804,197 0
</TABLE>
See Accompanying Notes to Consolidated Financial Statements
6
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1996
(Unaudited)
Note 1 - General
Independence Tax Credit Plus L.P. IV (a Delaware limited partnership) (the
"Partnership") was organized on February 22, 1995, and commenced the public
offering on July 6, 1995. The general partner of the Partnership is Related
Independence L.L.C., a Delaware limited liability company (the "General
Partner").
The Partnership's business is to invest in other partnerships ("Local
Partnerships", "subsidiaries" or "subsidiary partnerships") owning apartment
complexes that are eligible for the low-income housing tax credit ("Housing Tax
Credit") enacted in the Tax Reform Act of 1986, some of which complexes may also
be eligible for the historic rehabilitation tax credit ("Historic Tax Credit";
together with Housing Tax Credits, "Tax Credits").
As of December 31, 1996, the Partnership has acquired a limited partnership
interest in six subsidiary partnerships, three of which have not been
consolidated and are shown on the balance sheet, at cost, as property and
equipment and anticipates acquiring a limited partnership interest in additional
subsidiary partnerships in the future. Through the rights of the Partnership
and/or an affiliate of the General Partner, which affiliate has a contractual
obligation to act on behalf of the Partnership, to remove the general partner of
the subsidiary local partnerships and to approve certain major operating and
financial decisions, the Partnership has a controlling financial interest in the
subsidiary local partnerships.
The Partnership is authorized to issue a total of 100,000 ($100,000,000)
Beneficial Assignment Certificates ("BACs") which have been registered with the
Securities and Exchange Commission for sale to the public. Each BAC represents
all of the economic and virtually all of the ownership rights attributable to a
limited partnership interest. The solicitation for the subscription of BACs was
terminated as of May 22, 1996 and the final closing occurred on August 15, 1996.
As of December 31, 1996 and March 31, 1996 the Partnership raised a total of
$45,844,000 and $27,333,000 representing 45,844 and 27,333 BACs, respectively.
The terms of the Amended and Restated Agreement of Limited Partnership of the
Partnership ("Partnership Agreement") provide, among other things, that, net
profits or losses and distributions of cash flow are, in general, allocated 99%
to the limited partners and BACs holders and 1% to the General Partner.
7
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1996
(Unaudited)
Note 1 General (continued)
The Partnership's fiscal quarter ends December 31. All subsidiaries have fiscal
quarters ending September 30. Accounts of the subsidiaries have been adjusted
for intercompany transactions from October 1 through December 31.
All intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.
Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arises from cash contributions and cash
distributions to the minority interest partners.
Losses attributable to minority interest which exceed the minority interests'
investment in a subsidiary have been charged to the Partnership. Such losses
aggregated $16 and $38 for the three and nine months ended December 31, 1996.
The Partnership's investment in each subsidiary is equal to the respective
subsidiary's partners' equity less minority interest capital, if any. In
consolidation, all subsidiary partnership losses are included in the
Partnership's capital account except for losses allocated to minority interest
capital.
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Asset and for Long-Lived Assets to Be Disposed Of".
Under SFAS No. 121, the Partnership is required to review long-lived assets and
certain identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the book value of an asset may not be recoverable.
An impairment loss should be recognized whenever the review demonstrates that
the book value of a long-lived asset is not recoverable. Effective April 1,
1996, the Partnership adopted SFAS No. 121, consistent with the required
adoption period.
Property and equipment are carried at the lower of depreciated cost or estimated
amounts recoverable through future operations and ultimate disposition of the
property. Cost includes the purchase price, acquisition fees and expenses, and
any other costs incurred in acquiring the properties. As required by SFAS 121, a
provision for loss on impairment of assets is recorded when estimated amounts
recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. However, depreciated cost,
adjusted for such reductions in value, if any, may be greater than the fair
value. Property investments
8
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1996
(Unaudited)
Note 1 - General (continued)
themselves are reduced to estimated fair value (generally using discounted cash
flows) when the property is considered to be impaired and the depreciated cost
exceeds estimated fair value. Through December 31, 1996, the Partnership has not
recorded any provisions for loss on impairment of assets or reduction to
estimated fair value.
Certain information and note disclosure normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K/A-1 for the period ended March 31,
1996.
The books and records of the Partnership are maintained on the accrual basis of
accounting in accordance with generally accepted accounting principles. In the
opinion of the General Partner of the Partnership, the accompanying unaudited
financial statements contain all adjustments (consisting only of normal
recurring adjustments) necessary to present fairly the financial position of the
Partnership as of December 31, 1996, the results of operations for the three and
nine months ended December 31, 1996 and 1995, and the changes in cash flows for
the nine months ended December 31, 1996 and 1995. However, the operating results
for the nine months ended December 31, 1996 may not be indicative of the results
for the year.
Note 2 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special limited
partner, in each of the Local Partnerships.
The General Partner and its affiliates perform services for the Partnership. The
costs incurred are as follows:
A) Acquisition Fees and Expenses
The General Partner is entitled to a consulting and monitoring fee equal to 6.0%
of the gross proceeds of the offering paid upon investor closings, for its
services in connection with assisting the Local Partnerships in acquiring
apartment complexes and supervising the construction of the complexes. Such fees
will be capitalized as a cost of the investments upon closing of subsidiary
partnership acquisitions. As of December 31, 1996 and March 31, 1996, $2,750,640
and $1,639,980, respectively, of such costs have
9
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1996
(Unaudited)
Note 2- Related Party Transactions (continued)
been incurred, of which $874,501 and $70,304 have been capitalized.
B) Public Offering Costs
Costs incurred to organize the Partnership and certain costs of offering the
BACs including but not limited to legal, accounting and registration fees are
considered organization and offering expenses. These costs have been
capitalized. Related Equities Corporation (the "Dealer Manger") is entitled to a
non-accountable organization and offering expense allowance equal to 2.5% of
Gross Proceeds, in consideration of which it is obligated to pay all such
expenses up to the amount of such allowance. The Partnership is obligated to pay
all such expenses that are in excess of 2.5% of Gross Proceeds and up to 3.5% of
Gross Proceeds, and the Dealer Manager is responsible for all such expenses in
excess of 3.5% of Gross Proceeds. As of December 31, 1996 and March 31, 1996,
offering costs totalled $1,554,540 and $906,655, respectively, and along with
selling commissions (see Note 2C) are charged directly to limited partners'
capital.
C) Selling Commissions and Fees
The Partnership has paid up to 7.5% of the aggregate purchase price of BACs
sold, without regard to quantity discounts, to Related Equities Corporation. To
the extent other broker/dealers sold the interests such amounts were fully
reallowed to the other broker/dealers. As of December 31, 1996 and March 31,
1996, $3,437,175 and $2,049,975, respectively, was paid or incurred to Related
Equities Corporation and then fully reallowed to other unaffiliated
broker/dealers.
D) Other Related Party Expenses
The costs incurred to related parties for the three and nine months ended
December 31, 1996 and 1995 were as follows:
Three Months Ended Nine Months Ended
December 31, December 31,
------------------ ------------------
1996 1995 1996 1995
------------------ ------------------
Partnership
management
fees (a) $ 86,155 $ 9,548 $123,052 $ 9,548
Expense
reimburse-
ment (b) 21,057 3,647 98,248 8,659
Property manage-
ment fees (c) 17,468 0 27,680 0
Local administrative
fee (d) 1,250 0 3,750 0
-------- -------- -------- -------
$125,930 $ 13,195 $252,730 $18,207
======== ======== ======== =======
10
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
December 31, 1996
(Unaudited)
Note 2 - Related Party Transactions (continued)
(a) The General Partner is entitled to receive a partnership management fee,
after payment of all Partnership expenses, which together with the annual local
administrative fees will not exceed a maximum of 0.5% per annum of invested
assets (as defined in the Partnership Agreement), for administering the affairs
of the Partnership. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its sole discretion
based upon its review of the Partnership's investments. Unpaid partnership
management fees for any year will be accrued without interest and will be
payable from working capital reserves or to the extent of available funds after
the Partnership has made distributions to the limited partners of sale or
refinancing proceeds equal to their original capital contributions plus a 10%
priority return thereon (to the extent not theretofore paid out of cash flow).
(b) The Partnership reimburses the General Partner and its affiliates for actual
Partnership operating expenses incurred by the General Partner and its
affiliates on the Partnership's behalf. The amount of reimbursement from the
Partnership is limited by the provisions of the Partnership Agreement. Another
affiliate of the General Partner performs asset monitoring for the Partnership.
These service include site visits and evaluations of the subsidiary
partnerships' performance.
(c) Property management fees incurred by Local Partnerships amounted to $17,468
and $27,680 for the three and nine months ended December 31, 1996, all of which
was incurred to affiliates of the subsidiary partnerships' general partner.
(d) Independence SLP IV L.P., a special limited partner of the subsidiary
partnerships is entitled to receive a local administrative fee of up to $5,000
per year.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Partnership's primary source of funds is the proceeds of its offering. Other
sources of funds include interest earned on such proceeds which will be invested
in tax-exempt money market instruments pending acquisition of Local Partnerships
and a working capital reserve in the original amount of 2.5% of gross equity
raised. The solicitation for the subscription of BACs was terminated as of May
22, 1996 and the final closing occurred on August 15, 1996. The Partnership has
received $45,844,000 in gross proceeds for BACs pursuant to a public offering,
resulting in net proceeds available for investment of approximately $36,446,000
after volume discounts, payment of sales commissions, acquisition fees and
expenses, organization and offering expenses and establishment of a working
capital reserve.
As of December 31, 1996, the Partnership has invested approximately $14,674,000
(including approximately $1,052,000 classified as a loan repayable from
sale/refinancing proceeds in accordance with the Contribution Agreement and not
including acquisition fees of approximately $875,000) of net proceeds in six
Local Partnerships of which approximately $10,761,000 remains to be paid to the
Local Partnerships (including approximately $3,458,000 being held in escrow) as
certain benchmarks, such as occupancy level, must be attained prior to the
release of the funds. Five of the Local Partnerships were acquired during the
nine months ended December 31, 1996 for a combined purchase price of
approximately $13,743,000 (including approximately $150,000 classified as a loan
repayable from sale/refinancing proceeds in accordance with the Contribution
Agreement and not including acquisition fees of approximately $804,000) of which
approximately $9,997,000 remains to be paid (including approximately $2,694,000
being held in escrow). The Partnership has approximately $21,772,000 available
for future investments. During the nine months ended December 31, 1996,
approximately $3,913,000 was paid to Local Partnerships, including purchase
price adjustments (of which approximately $168,000 was released from escrow). An
additional $3,625,000 was placed into escrow for purchase price payments during
the nine months ended December 31, 1996. In addition, during the nine months
ended December 31, 1996, $3,000,000 of cash which was held in escrow at March
31, 1996 for the potential acquisition of a subsidiary partnership was returned
to the Partnership. The Partnership will be acquiring additional properties, and
the Partnership may be required to fund potential purchase price adjustments
based on tax credit adjustor clauses.
12
<PAGE>
There have been no purchase price adjustments during the nine months ended
December 31, 1996.
During the nine months ended December 31, 1996, the Partnership raised
$18,511,000 in capital contributions, of which $14,716,000 was available for
investment in Local Partnerships. These funds were used to acquire five Local
Partnerships for a combined purchase price of approximately $13,743,000
(including approximately $150,000 classified as a loan repayable from
sale/refinancing proceeds in accordance with the Contribution Agreement and not
including acquisition fees of approximately $804,000) of which approximately
$9,997,000 (including approximately $2,694,000 being held in escrow) remains to
be paid. These activities, together with cash provided by operating activities
($2,122,000), an increase in accounts payable and other liabilities relating to
investing activities ($681,000), an increase in capitalization of consolidated
subsidiaries attributable to minority interest ($623,000) and net proceeds from
mortgage and construction loans ($9,567,000) were exceeded by acquisitions of
property and equipment ($12,801,000), an increase in construction in progress
($3,136,000), an increase in investments available for sale ($13,398,000), an
increase in deferred costs ($1,332,000), an increase in cash held for purchase
price payments ($458,000), an increase in offering costs ($2,035,000), an
increase in due to local general partners and affiliates relating to investing
activities ($63,000) and a decrease in due to general partner and affiliates
relating to financing activities ($273,000) resulting in a net decrease of
$1,994,000 in Partnership cash since March 31, 1996. Included in the adjustments
to reconcile the net income to cash flow from operations is depreciation and
amortization in the amount of approximately $200,000.
A working capital reserve of approximately $1,146,000 (2.5% of gross equity) has
been established from the Partnership's funds available for investment, which
includes amounts which may be required for potential purchase price adjustments
based on tax credit adjustor clauses. At December 31, 1996 and March 31, 1996
none of this reserve was used. The General Partners believe that these reserves,
plus any cash distributions received from the operations of the Local
Partnerships will be sufficient to fund the Partnership's ongoing operations for
the foreseeable future. As of December 31, 1996, there have been no cash
distributions from the Local Partnerships. Management anticipates receiving
distributions in the future, although not to a level sufficient to permit
providing cash distributions to the BACs holders.
The property owned by one of the Local Partnerships in which the Partnership has
invested has been in operations and has maintained stable occupancy since 1990.
13
<PAGE>
The Partnership has negotiated development deficit guarantees with the five
other Local Partnerships in which it has invested. The Local General Partners
and/or their affiliates have agreed to fund development deficits through the
breakeven dates of each of the five Local Partnerships.
The Partnership has negotiated Operating Deficit Guaranty Agreements with all
Local Partnerships by which the general partners of the Local Partnerships
and/or their affiliates have agreed to fund operating deficits for a specified
period of time. The terms of the Operating Deficit Guaranty Agreements vary for
each of these Local Partnerships, with maximum dollar amounts to be funded for a
specified period of time, generally three years, commencing on the break-even
date. The gross amount of the Operating Deficit Guarantees aggregates
approximately $1,008,000 as of December 31, 1996.
The Partnership has also negotiated rent-up guaranty agreements in which the
Local General Partners agreed to pay a liquidated damage if predetermined
occupancy rates are not achieved.
The development deficit, operating deficit and the rent-up guaranty agreements
were negotiated to protect the Partnership's interest in the Local Partnerships
and to provide incentive to the Local General Partners to generate positive cash
flow.
Management is not aware of any trends or events, commitments or uncertainties,
which have not otherwise been disclosed that will or are likely to impact
liquidity in a material way. Manage-
14
<PAGE>
ment believes the only impact would be from laws that have not yet been adopted.
The partnership has invested or committed for investment approximately 40% of
the net proceeds available for investment in six Local Partnerships, of which
two have commenced to generate tax credits which have been allocated to the BAC
holders and four are currently anticipated to commence to generate tax credits
in 1996 which will be allocable to the BAC holders. The Partnership does not
anticipate that it will acquire prior to the end of 1996 interests in any
additional Local Partnerships which will be qualified to recognize tax credits
in 1996. As a result, the Partnership does not anticipate that it will be able
to allocate to its BAC holders in 1996 the full amount of tax credits stated in
its investment objectives in the Prospectus with respect to the offering of
BACs. Additionally, due to recent increases in market demand for investments in
properties that are eligible to receive tax credits and limitations on the types
of investments which may be obtained by the Partnership the purchase price for
interests in Local Partnerships which are qualified for purchase by the
Partnership have increased. As a result of these changes in market, Management
does not believe that the Partnership will be able to invest the proceeds
available for investment in a manner which will enable the Partnership to
achieve tax credits in the range of $140-150 for each $1,000 BAC each year in
which the Partnership is receiving its full entitlement of tax credits. The
portfolio will be diversified by the location of the properties around the
United States so that if one area of the country is experiencing downturns in
the economy, the remaining properties in the portfolio may be experiencing
upswings. However, the geographic diversions of the portfolio may not protect
against a general downturn in the national economy. The tax credits will be
attached to the projects for a period of ten years, and will be transferable
with the properties during the remainder of the ten year period. If trends in
the real estate market warranted the sale of a property, the remaining tax
credits would transfer to the new owner; thereby adding significant value to the
property on the market, which are not included in the financial statement
carrying amount.
Results of Operations
In March 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Asset and for Long-Lived Assets to Be Disposed Of".
Under SFAS No. 121, the Partnership is required to review long-lived assets and
certain identifiable intangibles for impairment whenever events or changes in
circumstances indicate that the book value of an asset may not be recoverable.
An impairment loss should be recognized whenever the review demonstrates that
the book value of a long-lived
15
<PAGE>
asset is not recoverable. Effective April 1, 1996, the Partnership adopted SFAS
No. 121, consistent with the required adoption period.
Property and equipment are carried at the lower of depreciated cost or estimated
amounts recoverable through future operations and ultimate disposition of the
property. Cost includes the purchase price, acquisition fees and expenses, and
any other costs incurred in acquiring the properties. As required by SFAS 121, a
provision for loss on impairment of assets is recorded when estimated amounts
recoverable through future operations and sale of the property on an
undiscounted basis are below depreciated cost. However, depreciated cost,
adjusted for such reductions in value, if any, may be greater than the fair
value. Property investments themselves are reduced to estimated fair value
(generally using discounted cash flows) when the property is considered to be
impaired and the depreciated cost exceeds estimated fair value. Through December
31, 1996, the Partnership has not recorded any provisions for loss on impairment
of assets or reduction to estimated fair value.
As of December 31, 1996 and 1995, the Partnership had acquired an interest in
six and one Local Partnerships, respectively, three and zero of which were
consolidated at December 31, 1996. The Partnership intends to utilize the net
proceeds of the offering to acquire additional interests in Local Partnerships.
The Partnership's results of operations for the three and nine months ended
December 31, 1996 and 1995 consisted primarily of (1) approximately $304,000 and
$69,000, and $770,000 and $69,000, respectively, of tax-exempt interest income
earned on funds not currently invested in Local Partnerships and (2) the results
of the Partnership's investment in three and zero consolidated Local
Partnerships, respectively.
For the three and nine months ended December 31, 1996 as compared to 1995, all
categories of income and expenses increased and the results of operations are
not comparable due to the continued acquisition, construction and rent up of
properties, and are not reflective of future operations of the Partnership due
to uncompleted property construction, rent up of properties and the continued
utilization of the net proceeds of the Offering to invest in Local Partnerships.
In addition, interest income will decrease in future periods since a substantial
portion of the proceeds from the Offering will be invested in Local
Partnerships.
For the three months ended December 31, 1996, one of the Partnership's three
consolidated properties had completed construction
16
<PAGE>
in a previous fiscal quarter and was in various stages of rent up. In addition,
one of the properties had completed construction and was fully rented up in a
previous fiscal quarter. For the nine months ended December 31, 1996, one of the
Partnership's three consolidated properties completed construction and was in
various stages of rent up. In addition, one of the properties had completed
construction in a previous fiscal year and was in various stages of rent up for
the nine months. As of the end of the three and nine months ended December 31,
1996, one of the Partnership's three consolidated properties was still under
construction and two of the properties had construction loans with commitments
for permanent financing as of December 31, 1996.
17
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(4) Form of Amended and Restated Agreement of Limited Partnership of
the Partnership (attached to the Prospectus as Exhibit A)*
(10A)Form of Subscription Agreement (attached to the Prospectus as
Exhibit B)*
(10B)Form of Escrow Agreement between the Partnership and the Escrow
Agent**
(10C)Form of Purchase and Sales Agreement pertaining to the
Partnership's acquisition of Local Partnership Interests**
(10D)Form of Amended and Restated Agreement of Limited Partnership of
Local Partnerships**
(27) Financial Data Schedule (filed herewith)
* Incorporated herein by reference to the final Prospectus as filed
pursuant to Rule 424 under the Securities Act of 1933.
** Filed as an exhibit to the Registration Statement on Form S-11 of
the Partnership (File No. 33-89968) and incorporated herein by reference
thereto.
(b) Reports on Form 8-K - No reports on Form 8-K were filed during the
quarter.
18
<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.
INDEPENDENCE TAX CREDIT PLUS L.P. IV
(Registrant)
By: RELATED INDEPENDENCE L.L.C.,
a General Partner
Date: February 13, 1997
By: /s/ Alan P. Hirmes
-----------------------------
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: February 13, 1997
By: /s/ Richard A. Palermo
-----------------------------
Richard A. Palermo,
Treasurer
(principal accounting officer)
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Independence Tax Credit
Plus L.P. IV and is qualified in its
entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000940329
<NAME> Independence Tax Credit Plus L.P. IV
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 9,965,443
<SECURITIES> 24,900,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,539,806
<PP&E> 19,422,929
<DEPRECIATION> 212,766
<TOTAL-ASSETS> 56,615,412
<CURRENT-LIABILITIES> 2,958,383
<BONDS> 11,606,465
0
0
<COMMON> 0
<OTHER-SE> 42,050,564
<TOTAL-LIABILITY-AND-EQUITY> 56,615,412
<SALES> 0
<TOTAL-REVENUES> 1,220,038
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 906,762
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 221,013
<INCOME-PRETAX> 92,263
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 92,263
<EPS-PRIMARY> 2.42
<EPS-DILUTED> 0
</TABLE>