<PAGE>
UNITED STATES
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 June 30, 2000
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)
<TABLE>
<CAPTION>
----------- ------------
June 30, March 31,
2000 2000
----------- ------------
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $5,180,772 and $4,577,654,
respectively $73,861,649 $74,451,342
Cash and cash equivalents 5,320,557 4,384,477
Investments available for sale 1,300,000 3,100,000
Cash held in escrow 2,208,648 1,670,171
Deferred costs, net of accumulated
amortization of $161,249 and $133,414,
respectively 1,980,774 2,008,609
Other assets 605,732 772,771
----------- -----------
Total assets $85,277,360 $86,387,370
=========== ===========
</TABLE>
-2-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
<TABLE>
<CAPTION>
----------- ------------
June 30, March 31,
2000 2000
----------- ------------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $35,502,228 $35,515,034
Construction loans payable 3,243,234 3,243,234
Accounts payable and other
liabilities 5,269,348 4,942,532
Due to local general partners and
affiliates 3,463,789 3,822,627
Due to general partner and affiliates 842,380 790,655
----------- -----------
Total liabilities 48,320,979 48,314,082
----------- -----------
Minority interest 1,957,693 1,998,515
----------- -----------
Partners' capital (deficit):
Limited partners (45,844 BACs
issued and outstanding) 35,056,234 36,121,558
General partner (57,546) (46,785)
----------- -----------
Total partners' capital (deficit) 34,998,688 36,074,773
----------- -----------
Total liabilities and partners'
capital (deficit) $85,277,360 $86,387,370
=========== ===========
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
-3-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
-------------------------
Three Months Ended
June 30,
-------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenues
Rental income $1,245,706 $ 804,919
Other income (principally interest
on capital contributions) 97,885 149,380
----------- ----------
Total revenues 1,343,591 954,299
----------- ----------
Expenses
General and administrative 469,166 253,193
General and administrative-
related parties (Note 2) 150,746 131,785
Repairs and maintenance 195,244 132,889
Operating 161,752 79,915
Taxes 95,585 18,767
Insurance 67,597 37,771
Interest 657,228 261,849
Depreciation and amortization 632,578 358,931
----------- ----------
Total expenses 2,429,896 1,275,100
----------- ----------
Loss before minority interest
and extraordinary item (1,086,305) (320,801)
Minority interest in loss income
of subsidiary partnerships 10,220 4,520
----------- ----------
Loss before extraordinary item (1,076,085) (316,281)
Extraordinary item-cumulative
effect of a change in accounting
principle - amortization of
organization costs 0 (132,520)
----------- ----------
Net loss $(1,076,085) $ (448,801)
=========== ==========
Limited Partners Share:
Loss before extraordinary item $(1,065,324) $ (313,118)
Extraordinary item 0 (131,195)
----------- ----------
Net loss - limited partners $(1,065,324) $ (444,313)
=========== ==========
Number of BACs outstanding 45,844 45,844
=========== ==========
Net loss per BAC before
extraordinary item $ (23.24) $ (6.83)
Extraordinary item per BAC 0 (2.86)
----------- ----------
Net loss per BAC $ (23.24) $ (9.69)
=========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-4-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statement of Changes in Partners' Capital (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
---------------------------------------
Limited General
Total Partners Partner
---------------------------------------
<S> <C> <C> <C>
Partners' capital
(deficit) -
April 1, 2000 $36,074,773 $36,121,558 $ (46,785)
Net loss (1,076,085) (1,065,324) (10,761)
----------- ----------- ----------
Partners' capital
(deficit)-
June 30, 2000 $34,998,688 $35,056,234 $ (57,546)
========== ========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-5-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
---------------------------
Three Months Ended
June 30,
---------------------------
2000 1999
---------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,076,085) $ (448,801)
----------- ----------
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation and amortization 632,578 358,931
Cumulative effect of change in
accounting principle - amortization
of organization costs 0 132,520
Minority interest in loss
of subsidiary properties (10,220) (4,520)
Increase in cash held in escrow (538,477) (469,027)
Decrease (increase) in other assets 167,039 (8,304)
Increase in accounts payable
and other liabilities 490,415 706,454
Increase in due to local general
partners and affiliates 144,615 45,233
Decrease in due to local general
partners and affiliates (503,453) 0
Increase in due to general
partner and affiliates 51,725 172,051
----------- ----------
Total adjustments 434,222 933,338
----------- ----------
Net cash (used in) provided by
operating activities (641,863) 484,537
----------- ----------
-6-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(continued)
<CAPTION>
---------------------------
Three Months Ended
June 30,
---------------------------
2000 1999
---------------------------
<S> <C> <C>
Cash flows from investing activities:
Increase in property and equipment (13,425) (5,426,973)
Increase in construction in progress 0 (796,907)
Decrease in cash held in escrow 0 185,509
Decrease in accounts payable and
other liabilities (163,599) 0
Increase in due to local general
partners and affiliates 0 787,807
Decrease in due to local general
partners and affiliates 0 (626,965)
Decrease in investments
available for sale 1,800,000 2,450,000
Increase in deferred costs 0 (30,176)
----------- ----------
Net cash provided by (used in)
investing activities 1,622,976 (3,457,705)
----------- -----------
Cash flows from financing activities:
Proceeds from mortgage notes 19,764 0
Repayments of mortgage notes (32,570) (21,519)
Proceeds from construction loans 0 1,987,694
Increase in deferred costs (1,625) (181,343)
Decrease in capitalization of
consolidated subsidiaries
attributable to minority interest (30,602) 0
----------- ----------
Net cash (used in) provided by
financing activities (45,033) 1,784,832
----------- ----------
Net increase (decrease) in cash
and cash equivalents 936,080 (1,188,336)
Cash and cash equivalents at
beginning of period 4,384,477 3,438,165
----------- ----------
Cash and cash equivalents at
end of period $5,320,557 $2,249,829
=========== ==========
-7-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
(continued)
<CAPTION>
---------------------------
Three Months Ended
June 30,
---------------------------
2000 1999
---------------------------
<S> <C> <C>
Supplemental disclosures of
noncash investing and financing
activities:
Property and equipment
reclassified from construction
in progress $ 0 11,273,436
Conversion of construction loans
to mortgage notes $ 0 2,500,000
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
-8-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2000
(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 June 30, 2000, the Partnership has acquired a limited partnership interest
in fourteen subsidiary partnerships, all of which have been consolidated. The
Partnership does not anticipate acquiring limited partnership interests in any
additional subsidiary partnerships. The Partnership's investment in each Local
Partnership represents from 98.99% to 99.98% with one Local Partnership at
58.12% of the partnership interests in the Local Partnership. 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 partnerships and to approve certain major
operating and financial decisions, the Partnership has a controlling financial
interest in the subsidiary partnership.
For financial reporting purposes, the Partnership's fiscal quarter ends June 30.
All subsidiaries have fiscal quarters ending March 31. Accounts of the
subsidiaries have been adjusted for intercompany transactions from April 1
through June 30. The Partnership's fiscal quarter ends June 30 in order to allow
adequate time for the subsidiaries financial statements to be prepared and
consolidated.
All intercompany accounts and transactions with the subsidiary partnerships have
been eliminated in consolidation.
-9-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2000
(Unaudited)
Increases (decreases) in the capitalization of consolidated subsidiaries
attributable to minority interest arise from cash contributions from 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 approximately $3,000 and $2,000 for the three months ended June 30,
2000 and 1999, respectively. 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 April of 1998, the Financial Accounting Standards Board issued Statement of
Position 98-5 ("SOP 98-5") "Reporting on the Costs of Start-Up Activities". This
statement provides guidance on the financial reporting of start-up costs and
organization costs. This statement is effective for all fiscal quarters of
fiscal years beginning after December 15, 1998. Such change in accounting
principle amounted to a charge to operations of $132,520 for the three months
ended June 30, 1999.
Certain information and note disclosures 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 for the period ended March 31,
2000.
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 June 30, 2000 and the results of operations and its cash flows
for the three months ended June 30, 2000 and 1999. However, the operating
results for the three months ended June 30, 2000 may not be indicative of the
results for the year.
-10-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2000
(Unaudited)
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 costs incurred to related parties for the three months ended June 30, 2000
and 1999 were as follows:
<TABLE>
<CAPTION>
-------------------------
Three Months Ended
June 30,
-------------------------
2000 1999
-------------------------
<S> <C> <C>
Partnership management fees (a) $ 82,399 $ 69,369
Expense reimbursement (b) 28,831 40,845
Local administrative fee (c) 9,500 5,000
----------- -----------
Total general and administrative-
General Partner 120,730 115,214
----------- -----------
Property management fees incurred
to affiliates of the subsidiary
partnerships' general partners (d) 30,016 16,571
----------- -----------
Total general and administrative-
related parties $ 150,746 $ 131,785
=========== ===========
</TABLE>
(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).
Partnership management fees owed to the General Partner amounting to
approximately $473,000 and $415,000 were accrued and unpaid as of June 30, 2000
and March 31, 2000, respectively.
(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 reim-
-11-
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. IV
AND SUBSIDIARIES
Notes to Financial Statements
June 30, 2000
(Unaudited)
bursement 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 services include site visits and evaluations of the
subsidiary partnerships' performance.
(c) 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 from each subsidiary partnership.
(d) Property management fees incurred by the Local Partnerships amounted to
$85,073 and $54,761 for the three months ended June 30, 2000 and 1999,
respectively. Of these fees $30,016 and $16,571 were incurred to affiliates of
the subsidiary partnerships' general partners.
-12-
<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 include (i) interest earned on Gross
Proceeds which are invested in tax-exempt money market instruments pending
acquisition of and final payments to Local Partnerships and (ii) working capital
reserves and interest earned thereon. All these sources of funds are available
to meet obligations of the Partnership.
As of June 30, 2000, the Partnership has invested approximately $37,669,000
(including approximately $1,161,000 classified as a loan repayable from
sale/refinancing proceeds in accordance with the Contribution Agreement and not
including acquisition fees of approximately $1,771,000) of net proceeds in
fourteen Local Partnerships of which approximately $2,997,000 remains to be paid
to the Local Partnerships (including approximately $629,000 being held in
escrow) as certain benchmarks, such as occupancy level, must be attained prior
to the release of the funds. During the three months ended June 30, 2000,
approximately $765,000 was paid to Local Partnerships (none of which was
released from escrow). The Partnership has completed acquiring additional
properties, but the Partnership may be required to fund potential purchase price
adjustments based on tax credit adjustor clauses. There were no increases in
purchase price adjustments during the three months ended June 30, 2000.
For the three months ended June 30, 2000, cash and cash equivalents of the
Partnership and its fourteen consolidated Local Partnerships increased
approximately $936,000 due to a decrease in investments available for sale
($1,800,000) and proceeds from mortgage notes ($20,000) which exceeded cash used
in operating activities ($642,000), a decrease in accounts payable and other
liabilities relating to investing activities ($164,000), an increase in property
and equipment ($13,000), an increase in deferred costs relating to financing
activities ($2,000), repayments of mortgage notes ($33,000) and a decrease in
capitalization of consolidated subsidiaries attributable to minority interest
($31,000). Included in the adjustments to reconcile the net loss to cash used in
operations is depreciation and amortization of approximately $633,000.
A working capital reserve 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
June 30, 2000, there is approximately $1,048,000 in the working capital
reserves. The General Partner believes that these reserves, plus any cash
distributions received from the operations of the
-13-
<PAGE>
Local Partnerships, will be sufficient to fund the Partnership's ongoing
operations for the foreseeable future. Cash distributions from the Local
Partnership will be relatively immaterial. During the three months ended June
30, 2000, there has been no cash distributions from the Local Partnerships.
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. Management believes the only impact would be from
laws that have not yet been adopted. 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
diversification of the portfolio may not protect against a general downturn in
the national economy. The tax credits will be attached to the project for a
period of ten years, and will be transferable with the property during the
remainder of such ten-year period. If the General Partner determined that a sale
of a property is warranted, the remaining tax credits would transfer to the new
owner, thereby adding value to the property on the market, which are not
included in the financial statement carrying amount.
RESULTS OF OPERATIONS
As of June 30, 2000 and 1999, the Partnership had acquired an interest in
fourteen and ten Local Partnerships, all of which were consolidated at June 30,
2000 and 1999, respectively. The Partnership does not intend to acquire any
additional interests in Local Partnerships.
The Partnership's results of operations for the three months ended June 30, 2000
and 1999 consisted primarily of (1) approximately $39,000 and $120,000,
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 fourteen and ten consolidated Local Partnerships, respectively.
For the three months ended June 30, 2000 as compared to the corresponding period
in 1999, rental income and all categories of expenses increased and the results
of operations are not comparable due to the acquisition, construction and rent
up of properties, and are not reflective of future operations of the Partnership
due to uncompleted property construction and rent up of properties. In addition,
interest income will decrease in future periods since a substantial portion of
the proceeds from the Offering will be included in or released to Local
Partnerships. Other income decreased approximately $51,000 for the three months
ended June 30, 2000 as compared to the corresponding period in 1999
-14-
<PAGE>
primarily due to a decrease in interest income as a result of the acquisition of
and the release of proceeds to the Local Partnerships.
Extraordinary item - amortization of organization costs decreased by
approximately $133,000 for the three months ended June 30, 2000 as compared to
the corresponding period in 1999 due to the adoption of SOP 98-5, pursuant to
which the Partnership is required to charge all unamortized organization costs
as of January 1, 1999.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
-15-
<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.
-16-
<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.,
General Partner
Date: July 31, 2000
By:/s/ Alan P. Hirmes
------------------
Alan P. Hirmes,
President and Member
(principal executive and financial officer)
Date: July 31, 2000
By:/s/ Glenn F. Hopps
------------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
