FORM 10-QSB--QUARTERLY OR TRANSITIONAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2000 [ ] 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 0-11766 ANGELES PARTNERS XI (Exact name of small business issuer as specified in its charter) California 95-3788040 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 55 Beattie Place, PO Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (864) 239-1000 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 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___ PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES PARTNERS XI CONSOLIDATED BALANCE SHEET (Unaudited) (in thousands, except unit data) September 30, 2000 Assets Cash and cash equivalents $ 772 Receivables and deposits 634 Other assets 211 Investment in joint venture 4 Investment property: Land $ 3,998 Buildings and related personal property 27,857 31,855 Less accumulated depreciation (21,304) 10,551 $ 12,172 Liabilities and Partners' Deficit Liabilities Accounts payable $ 61 Tenant security deposits 620 Due to affiliate 45 Other liabilities 423 Mortgage notes payable 29,674 Partners' Deficit General partners $ (503) Limited partners (39,627 units issued and outstanding) (18,148) (18,651) $ 12,172 See Accompanying Notes to Consolidated Financial Statements b) ANGELES PARTNERS XI CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 Revenues: Rental income $ 2,052 $ 1,913 $ 5,924 $ 5,707 Other income 131 117 439 298 Casualty gain -- 120 -- 120 Total revenues 2,183 2,150 6,363 6,125 Expenses: Operating 600 515 1,912 1,625 General and administrative 93 44 191 147 Depreciation 393 384 1,162 1,128 Interest 685 698 2,053 2,141 Property taxes 208 203 626 580 Total expenses 1,979 1,844 5,944 5,621 Income before equity in (loss) income and extraordinary loss on debt extinguishment of joint venture 204 306 419 504 Equity in (loss) income of joint venture (Note D) -- (6) -- 1,214 Income before equity in extraordinary loss on debt extinguishment of joint venture 204 300 419 1,718 Equity in extraordinary loss on debt extinguishment (Note D) -- -- -- (3) Net income $ 204 $ 300 $ 419 $ 1,715 Net income allocated to general partners (1%) $ 2 $ 3 $ 4 $ 17 Net income allocated to limited partners (99%) 202 297 415 1,698 $ 204 $ 300 $ 419 $ 1,715 Net income per limited partnership unit: Income before equity in extraordinary loss on debt extinguishment of joint venture $ 5.09 $ 7.50 $ 10.47 $ 42.93 Extraordinary loss -- -- -- (0.08) $ 5.09 $ 7.50 $ 10.47 $ 42.85 Distributions per limited partnership unit $ -- $ 5.00 $ 44.59 $ 5.00 See Accompanying Notes to Consolidated Financial Statements c) ANGELES PARTNERS XI CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 40,000 $ 30 $ 40,000 $ 40,030 Partners' deficit at December 31, 1999 39,627 $ (489) $ (16,796) $(17,285) Distributions to partners -- (18) (1,767) (1,785) Net income for the nine months ended September 30, 2000 -- 4 415 419 Partners' deficit at September 30, 2000 39,627 $ (503) $ (18,148) $(18,651) See Accompanying Notes to Consolidated Financial Statements d) ANGELES PARTNERS XI CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Nine Months Ended September 30, 2000 1999 Cash flows from operating activities: Net income $ 419 $ 1,715 Adjustments to reconcile net income to net cash provided by operating activities: Equity in income of joint venture -- (1,214) Equity in extraordinary loss on debt extinguishment of joint venture -- 3 Depreciation 1,162 1,128 Amortization of loan costs 85 84 Casualty gain -- (120) Change in accounts: Receivables and deposits 151 (24) Other assets (38) (46) Accounts payable 19 26 Tenant security deposit liabilities 51 34 Due to affiliates 45 (33) Other liabilities 100 (16) Net cash provided by operating activities 1,994 1,537 Cash flows from investing activities: Property improvements and replacements (1,241) (674) Insurance proceeds received related to casualty -- 372 Distributions from joint venture -- 1,086 Repayment of advance to joint venture -- 164 Net cash (used in) provided by investing activities (1,241) 948 Cash flows from financing activities: Distributions to partners (1,785) (200) Payment on notes payable -- (868) Payment of mortgage notes payable (314) (270) Net cash used in financing activities (2,099) (1,338) Net (decrease) increase in cash and cash equivalents (1,346) 1,147 Cash and cash equivalents at beginning of period 2,118 1,207 Cash and cash equivalents at end of period $ 772 $ 2,354 Supplemental disclosure of cash flow information: Cash paid for interest $ 1,747 $ 2,065 See Accompanying Notes to Consolidated Financial Statements e) ANGELES PARTNERS XI NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The accompanying unaudited consolidated financial statements of Angeles Partners XI (the "Partnership" or "Registrant") have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Angeles Realty Corporation II (the "Managing General Partner"), all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and nine month periods ended September 30, 2000, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto included in the Partnership's Annual Report on Form 10-KSB for the fiscal year ended December 31, 1999. Principles of Consolidation The Partnership's consolidated financial statements include all of the accounts of Fox Run AP XI, L.P., of which the Partnership owns a 99% limited partnership interest. The general partner of Fox Run AP XI, L.P. is AP XI Fox Run GP, LLC, a single member limited liability corporation which is wholly-owned by the Registrant. Thus, these entities are deemed controlled and, therefore, consolidated by the Partnership. All inter-entity balances have been eliminated. Note B - Transfer of Control Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and Insignia Properties Trust ("IPT") merged into Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO being the surviving corporation (the "Insignia Merger"). As a result, AIMCO acquired 100% ownership interest in the Managing General Partner. The Managing General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Note C - Transactions with Affiliated Parties The Partnership has no employees and is dependent on the Managing General Partner and its affiliates for the management and administration of all Partnership activities. The Partnership Agreement provides for (i) certain payments to affiliates for services and (ii) reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments owed to the Managing General Partner and affiliates during the nine months ended September 30, 2000 and 1999 were paid or accrued: 2000 1999 (in thousands) Property management fees (included in operating expense) $316 $297 Reimbursement for services of affiliates (included in general and administrative and operating expenses and investment property) 243 90 Due to affiliates 45 -- During the nine months ended September 30, 2000 and 1999, affiliates of the Managing General Partner were entitled to receive 5% of gross receipts from the Registrant's property for providing property management services. The Registrant paid to such affiliates approximately $316,000 and $297,000 for the nine months ended September 30, 2000 and 1999, respectively. An affiliate of the Managing General Partner received reimbursement of accountable administrative expenses amounting to approximately $243,000 and $90,000 for the nine months ended September 30, 2000 and 1999, respectively. Included in these expenses at September 30, 2000 and 1999 is approximately $104,000 and $6,000, respectively, in reimbursements for construction oversight costs. Also, approximately $45,000 of these reimbursements were accrued and included in "Due to affiliate" at September 30, 2000. Angeles Mortgage Investment Trust ("AMIT"), a real estate investment trust, provided financing (the "AMIT Loan") to the Princeton Meadows Golf Course Joint Venture ("Joint Venture") (see "Note D"). Pursuant to a series of transactions, affiliates of the Managing General Partner acquired ownership interests in AMIT. On September 17, 1998, AMIT was merged with and into IPT, the entity which controlled the Managing General Partner. Effective February 26, 1999, IPT was merged into AIMCO. As a result, AIMCO became the holder of the AMIT loan. On February 26, 1999, Princeton Meadows Golf Course was sold to an unaffiliated third party. Upon closing, the AMIT principal balance of $1,567,000 plus accrued interest of approximately $17,000 was paid off. Also, the Partnership had an AMIT note payable, which was collateralized by the Partnership's investment in the Joint Venture with a principal balance of approximately $868,000 and accrued interest of $8,500. In June 1999, the Joint Venture distributed a total of approximately $2,641,000 to the joint venturers from the proceeds of the sale of the property. The Partnership's share of this distribution represented approximately $1,086,000. Upon receipt of the distribution funds, the Partnership repaid its AMIT note payable of approximately $868,000 plus accrued interest of $8,500. In addition, the Partnership made advances to the Joint Venture as deemed appropriate by the Managing General Partner. These advances did not bear interest nor have stated terms of repayment. In June 1999, the advance receivable from the Joint Venture of approximately $164,000 was collected from the proceeds of the sale of the golf course. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates currently own 23,273 limited partnership units in the Partnership representing 58.73% of the outstanding units. A number of these units were acquired pursuant to tender offers made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates will make one or more additional offers to acquire additional limited partnership interests in the Partnership for cash or in exchange for units in the operating partnership of AIMCO. In this regard, on July 24, 2000, an affiliate of AIMCO commenced a tender offer to purchase any and all of the remaining partnership interests for a purchase price of $334 per limited partnership unit. This offer expired on September 28, 2000 with a total of 1,830 units acquired by an affiliate of AIMCO. Under the Partnership Agreement, unitholders holding a majority of the Units are entitled to take action with respect to a variety of matters, which would include without limitation, voting on certain amendments to the Partnership Agreement and voting to remove the Managing General Partner. As a result of its ownership of 58.73% of the outstanding units, AIMCO is in a position to influence all voting decisions with respect to the Registrant. When voting on matters, AIMCO would in all likelihood vote the Units it acquired in a manner favorable to the interest of the Managing General Partner because of their affiliation with the Managing General Partner. Note D - Investment in Joint Venture The Partnership has a 41.1% investment in Princeton Meadows Golf Course Joint Venture. On February 26, 1999, the Joint Venture sold its only investment property, Princeton Meadows Golf Course, to an unaffiliated third party. The sale resulted in net proceeds of approximately $3,411,000 after payment of closing costs, and repayment of mortgage principal and accrued interest. As of September 30, 1999, the Joint Venture recorded a gain on sale of approximately $3,088,000 after the write-off of undepreciated fixed assets. In connection with the sale, a commission of approximately $153,000 was paid to the Joint Venture's managing general partner in accordance with the Joint Venture Agreement. The Partnership's 1999 pro-rata share of this gain at September 30, 1999 was approximately $1,269,000 and its equity in loss on operations of the Joint Venture at September 30, 1999 amounted to approximately $55,000. The Joint Venture also recognized an extraordinary loss on early extinguishment of debt of approximately $7,000 as a result of unamortized loan costs being written off. Condensed balance sheet information of the Joint Venture at September 30, 2000, is as follows (in thousands): Assets Cash $ 16 Total $ 16 Liabilities and Partners' Capital Other liabilities $ 6 Partners' capital 10 Total $ 16 The condensed statement of operations of the Joint Venture for the nine months ended September 30, 2000 and 1999 are summarized as follows (in thousands): Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 Revenues $ -- $ 4 $ -- $ 94 Costs and expenses -- -- -- (230) Income (loss) before gain on sale of investment property and extraordinary loss on extinguishment of debt -- 4 -- (136) Gain (loss) on sale of investment property -- (20) -- 3,088 Extraordinary loss on extinguishment of debt -- -- -- (7) Net income (loss) $ -- $ (16) $ -- $2,945 The Partnership recognized its 41.1% equity income of approximately $1,214,000 in the Joint Venture for the nine months ended September 30, 1999. The Partnership also realized an extraordinary loss on extinguishment of debt of $3,000 for the nine months ended September 30, 1999. Due to the sale of Princeton Meadows Golf Course in February 1999, the Joint Venture had no operations during the nine months ended September 30, 2000. Therefore the Partnership did not recognize any equity in income of the Joint Venture for the nine months ended September 30, 2000. In addition, the Partnership anticipates that during the fourth quarter of 2000, all remaining assets and liabilities of the Joint Venture will be liquidated. Note E - Distributions A distribution of approximately $1,785,000 (approximately $1,767,000 to the limited partners, $44.59 per limited partnership unit) was paid from operations during the nine months ended September 30, 2000. During the nine months ended September 30, 1999, a distribution of approximately $200,000 was paid from operations to the partners, of which $198,000 was paid to the limited partners (approximately $5.00 per limited partnership unit). Subsequent to September 30, 2000, the Partnership declared and paid a distribution of approximately $294,000 (approximately $291,000 to limited partners or $7.34 per limited partnership unit) from operations. Note F - Segment Reporting Description of the types of products and services from which the reportable segment derives its revenues: The Partnership has one reportable segment: residential property. The Partnership's residential property segment consists of one apartment complex located in Plainsboro, New Jersey. The Partnership rents apartment units to tenants for terms that are typically twelve months or less. Measurement of segment profit or loss: The Partnership evaluates performance based on segment profit (loss) before depreciation. The accounting policies of the reportable segment are the same as those of the Partnership as described in the Partnership's Annual Report on Form 10-KSB for the year ended December 31, 1999. Segment information for the three and nine months ended September 30, 2000 and 1999, is shown in the tables below (in thousands). The "Other" column includes Partnership administration related items and income and expense not allocated to the reportable segment. Three Months Ended September 30, 2000 Residential Other Totals Rental income $ 2,052 $ -- $ 2,052 Other income 130 1 131 Interest expense 685 -- 685 Depreciation 393 -- 393 General and administrative expense -- 93 93 Segment profit (loss) 296 (92) 204 Nine months Ended September 30, 2000 Residential Other Totals Rental income $ 5,924 $ -- $ 5,924 Other income 414 25 439 Interest expense 2,053 -- 2,053 Depreciation 1,162 -- 1,162 General and administrative expense -- 191 191 Segment profit (loss) 585 (166) 419 Total assets 12,020 152 12,172 Capital expenditures for investment property 1,241 -- 1,241 Three Months Ended September 30, 1999 Residential Other Totals Rental income $ 1,913 $ -- $ 1,913 Other income 107 10 117 Casualty gain 120 -- 120 Interest expense 698 -- 698 Depreciation 384 -- 384 General and administrative expense -- 44 44 Equity in (loss) of joint venture -- (6) (6) Segment profit 340 (40) 300 Nine Months Ended September 30, 1999 Residential Other Totals Rental income $ 5,707 $ -- $ 5,707 Other income 270 28 298 Casualty gain 120 -- 120 Interest expense 2,141 -- 2,141 Depreciation 1,128 -- 1,128 General and administrative expense -- 147 147 Equity in income of joint venture -- 1,214 1,214 Equity in extraordinary loss on debt extinguishment of joint venture -- (3) (3) Segment profit 623 1,092 1,715 Total assets 12,948 1,479 14,427 Capital expenditures for investment property 674 -- 674 Note G - Legal Proceedings In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. The Partnership is unaware of any other pending or outstanding litigation that is not of a routine nature arising in the ordinary course of business. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The matters discussed in this Form 10-QSB contain certain forward-looking statements and involve risks and uncertainties (including changing market conditions, competitive and regulatory matters, etc.) detailed in the disclosure contained in this Form 10-QSB and the other filings with the Securities and Exchange Commission made by the Registrant from time to time. The discussion of the Registrant's business and results of operations, including forward-looking statements pertaining to such matters, does not take into account the effects of any changes to the Registrant's business and results of operations. Accordingly, actual results could differ materially from those projected in the forward-looking statements as a result of a number of factors, including those identified herein. The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the nine months ended September 30, 2000 and 1999: Average Occupancy Property 2000 1999 Fox Run Apartments 96% 98% Plainsboro, New Jersey Results from Operations The Partnership's net income for the nine months ended September 30, 2000 was approximately $419,000 compared to approximately $1,715,000 for the corresponding period in 1999. The net income for the three months ended September 30, 2000 was approximately $204,000 compared to approximately $300,000 for the corresponding period in 1999. The decrease in net income for the nine months ended September 30, 2000 is primarily due to the recognition of the equity in income from the gain on disposal of the Princeton Meadows Golf Course Joint Venture ("Joint Venture") during the nine months ended September 30, 1999, as discussed below. Income before equity in (loss) income and extraordinary loss on debt extinguishment of the joint venture for both the three and nine months ended September 30, 2000 decreased as compared to the corresponding periods in 1999 due to an increase in total expenses which was partially offset by an increase to total revenues. The increase in total revenues was the result of increases in rental income and other income. The increase in rental revenue is due to an increase in average rental rates which more than offset a decrease in average occupancy at the property. Other income increased due to increases in corporate unit revenue, clubhouse rental income, cable rebates, and interest income. Total expenses for the three and nine months ended September 30, 2000 increased due to increases in operating expenses, property tax expense, depreciation expense and general and administrative expenses, partially offset by a decreases in interest expense. The increase in operating expenses was due to increases in utilities, interior painting, floor covering repair, snow removal, and payroll costs. Property tax expense increased due to the timing of the receipt of tax bills in 1999, which affected the accruals at September 30, 1999. Depreciation expense increased due to capital asset expenditures during the past twelve months. Interest expense decreased primarily due to the repayment of the note payable to Angeles Mortgage Investment Trust ("AMIT") in 1999, which was collateralized by the Partnership's investment in the Joint Venture. In June 1999, the Partnership paid off the principal balance of the AMIT note plus accrued interest upon receiving its share of net proceeds from the sale of Princeton Meadows Golf Course. General and administrative expenses increased during the nine months ended September 30, 2000 due to an increase in the cost of services included in the management reimbursements to the General Partner as allowed under the Partnership Agreement. This increase in general and administrative expenses was partially offset by a decrease in legal costs due to the settlement of a legal dispute, which was previously disclosed during 1999. In addition, cost associated with the quarterly and annual communications with investors and regulatory agencies and the annual audit required by the Partnership Agreement are also included. The Partnership has a 41.1% investment in Princeton Meadows Golf Course Joint Venture. On February 26, 1999, the Joint Venture sold the Princeton Meadows Golf Course to an unaffiliated third party for gross sale proceeds of $5,100,000. The Joint Venture received net proceeds of $3,411,000 after payment of closing costs, and repayment of the mortgage principal and accrued interest. As of September 30, 1999 the Joint Venture recorded a gain on sale of approximately $3,088,000 after the write-off of undepreciated fixed assets. For the nine months ended September 30, 1999 the Partnership realized equity in income of the Joint Venture of approximately $1,214,000, which included its equity in the gain on disposal of Princeton Meadows Golf Course of $1,269,000 and the equity in loss on operations of $55,000. For the nine months ended September 30, 2000, Princeton Meadows Golf Course did not have any operations, therefore, the Partnership did not recognize any equity earnings from the Joint Venture. As part of the ongoing business plan of the Partnership, the Managing General Partner monitors the rental market environment of its investment property to assess the feasibility of increasing rents, maintaining or increasing occupancy levels and protecting the Partnership from increases in expenses. As part of this plan, the Managing General Partner attempts to protect the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, due to changing market conditions, which can result in the use of rental concessions and rental reductions to offset softening market conditions, there is no guarantee that the Managing General Partner will be able to sustain such a plan. Liquidity and Capital Resources At September 30, 2000, the Partnership had cash and cash equivalents of approximately $772,000 as compared to approximately $2,354,000 at September 30, 1999. Cash and cash equivalents decreased approximately $1,346,000 for the period ended September 30, 2000, from the Registrant's fiscal year-end and is primarily due to approximately $2,099,000 of cash used in financing activities and approximately $1,241,000 of cash used in investing activities which is partially offset by approximately $1,994,000 of cash provided by operations. Cash used in investing activities consisted of property improvements and replacements. Cash used in financing activities consisted primarily of distributions to partners and, to a lesser extent, payments of principal made on the mortgages encumbering Fox Run Apartments. The Registrant invests its working capital reserves in a money market account. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership and to comply with Federal, state, and local legal and regulatory requirements. The Partnership has budgeted approximately $465,000 for capital improvements for the property during 2000 consisting primarily of heating improvements, appliances and floor coverings. In addition approximately $1,200,000 has been added to the 2000 budget to complete work begun in 1999 but not yet completed. This amount consists of costs for air conditioning and parking lot upgrades. As of September 30, 2000, the Partnership spent approximately $1,241,000 on capital improvements at Fox Run Apartments of which approximately $930,000 relates to 1999 budgeted items completed in 2000. These improvements consisted primarily of cabinet replacements, carpet and vinyl replacements, resurfacing, appliances, air conditioning units, and electrical upgrades. These improvements were funded from cash flow. The additional improvements planned for 2000 at the Partnership's property will be incurred only if cash is available from operations and Partnership reserves. To the extent that such budgeted capital improvements are completed, the Registrant's distributable cash flow, if any, may be adversely affected at least in the short term. The Registrant's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Registrant. The mortgage indebtedness of approximately $29,674,000 encumbering Fox Run Apartments is being amortized over periods ranging from 15 to 27 years with balloon payments of $29,108,000 due January 2002. The Managing General Partner may attempt to refinance such indebtedness and/or sell the property prior to such maturity date. If the property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure. A distribution of approximately $1,785,000 (approximately $1,767,000 to the limited partners, $44.59 per limited partnership unit) was paid from operations during the nine months ended September 30, 2000. During the nine months ended September 30, 1999, a distribution of approximately $200,000 was paid from operations to the partners, of which $198,000 was paid to the limited partners (approximately $5.00 per limited partnership unit). Subsequent to September 30, 2000, the Partnership declared and paid a distribution of approximately $294,000 (approximately $291,000 to limited partners or $7.34 per limited partnership unit) from operations. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves and the timing of the debt maturities, refinancings and/or sale of the property. The Partnership's distribution policy is reviewed on a semi-annual basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations, after required capital improvement expenditures, to permit additional distributions to its partners during the remainder of 2000 or subsequent periods. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In March 1998, several putative unit holders of limited partnership units of the Partnership commenced an action entitled Rosalie Nuanes, et al. v. Insignia Financial Group, Inc., et al. in the Superior Court of the State of California for the County of San Mateo. The plaintiffs named as defendants, among others, the Partnership, its Managing General Partner and several of their affiliated partnerships and corporate entities. The action purports to assert claims on behalf of a class of limited partners and derivatively on behalf of a number of limited partnerships (including the Partnership) which are named as nominal defendants, challenging the acquisition of interests in certain general partner entities by Insignia Financial Group, Inc. ("Insignia") and entities which were, at one time, affiliates of Insignia; past tender offers by the Insignia affiliates to acquire limited partnership units; the management of partnerships by the Insignia affiliates; and the Insignia Merger. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the Managing General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs have filed an amended complaint. The Managing General Partner filed demurrers to the amended complaint which were heard February 1999. Pending the ruling on such demurrers, settlement negotiations commenced. On November 2, 1999, the parties executed and filed a Stipulation of Settlement, settling claims, subject to final court approval, on behalf of the Partnership and all limited partners who owned units as of November 3, 1999. Preliminary approval of the settlement was obtained on November 3, 1999 from the Court, at which time the Court set a final approval hearing for December 10, 1999. Prior to the December 10, 1999 hearing, the Court received various objections to the settlement, including a challenge to the Court's preliminary approval based upon the alleged lack of authority of prior lead counsel to enter the settlement. On December 14, 1999, the Managing General Partner and its affiliates terminated the proposed settlement. In February 2000, counsel for some of the named plaintiffs filed a motion to disqualify plaintiff's lead and liaison counsel who negotiated the settlement. On June 27, 2000, the Court entered an order disqualifying them from the case. The Court is considering applications for lead counsel and has currently scheduled a hearing on the matter for November 20, 2000. The Managing General Partner does not anticipate that costs associated with this case will be material to the Partnership's overall operations. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27 is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the quarter ended September 30, 2000. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS XI By: Angeles Realty Corporation II Managing General Partner By: /s/Patrick J. Foye Patrick J. Foye Executive Vice President By: /s/Martha L. Long Martha L. Long Senior Vice President and Controller Date: November 13, 2000