FORM 10-K--ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 Form 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the fiscal year ended December 31, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [No Fee Required] For the transition period from _________to _________ Commission file number 0-11002 CONSOLIDATED CAPITAL PROPERTIES IV (Name of small business issuer in its charter) California 94-2768742 (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) Issuer's telephone number (864) 239-1000 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Units of Limited Partnership Interests (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] State the aggregate market value of the voting partnership interests held by non-affiliates computed by reference to the price at which the partnership interests were sold, or the average bid and asked prices of such partnership interests as of December 31, 2001. No market exists for the limited partnership interests of the Registrant, and, therefore, no aggregate market value can be determined. DOCUMENTS INCORPORATED BY REFERENCE None PART I Item 1. Description of Business Consolidated Capital Properties IV (the "Partnership" or "Registrant") was organized on September 22, 1981 as a limited partnership under the California Uniform Limited Partnership Act. On December 18, 1981, the Partnership commenced a public offering for the sale of 200,000 Units with the general partner's right to increase the offering to 400,000 Units. The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units closed on December 14, 1983, with 343,106 Units sold at $500 each, or gross proceeds of $171,553,000 to the Partnership. Since its initial offering, the Partnership has not received, nor are limited partners required to make, additional capital contributions. By the end of fiscal year 1985, approximately 73% of the proceeds raised had been invested in 48 properties. Of the remaining 27%, 11% was required for organizational and offering expenses, sales commissions and acquisition fees, and 16% was retained in Partnership reserves for project improvements and working capital as required by the Partnership Agreement. The general partner of the Partnership is ConCap Equities, Inc., a Delaware corporation (the "General Partner" or "CEI"). The General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The directors and officers of the General Partner also serve as executive officers of AIMCO. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2011 unless terminated prior to that date. The Partnership's primary business and only industry segment is real estate related operations. The Partnership is engaged in the business of operating and holding real estate properties for investment. As of the close of fiscal year 1985, the Partnership had completed its property acquisition stage and had acquired 48 properties. At December 31, 2001, the Partnership owned 15 income-producing properties (or interests therein), which range in age from 25 to 30 years old, principally located in the midwest, southeastern and southwestern United States. Prior to 2001, the Partnership had disposed of 33 properties originally owned by the Partnership. See "Item 2. Description of Properties" for further information about the Partnership's remaining properties. The real estate business in which the Partnership is engaged is highly competitive. There are other residential properties within the market area of the Partnership's properties. The number and quality of competitive properties, including those which may be managed by an affiliate of the General Partner, in such market area could have a material effect on the rental market for the apartments at the Registrant's properties and the rents that may be charged for such apartments. While the General Partner and its affiliates own and/or control a significant number of apartment units in the United States, such units represent an insignificant percentage of total apartment units in the United States and competition for the apartments is local. Both the income and expenses of operating the properties owned by the Partnership are subject to factors outside of the Partnership's control, such as changes in the supply and demand for similar properties resulting from various market conditions, increases/decreases in unemployment or population shifts, changes in the availability of permanent mortgage financing, changes in zoning laws, or changes in patterns or needs of users. In addition, there are risks inherent in owning and operating residential properties because such properties are susceptible to the impact of economic and other conditions outside of the control of the Partnership. The Registrant has no employees. Property management and administrative services are provided by the General Partner and by agents of the General Partner. The General Partner has also selected an affiliate to provide real estate advisory and asset management services to the Partnership. As advisor, such affiliate provides all Partnership accounting and administrative services, investment management, and supervisory services over property management and leasing. There have been, and it is possible there may be other, Federal, state and local legislation and regulations enacted relating to the protection of the environment. The Partnership is unable to predict the extent, if any, to which such new legislation or regulations might occur and the degree to which such existing or new legislation or regulations might adversely affect the properties owned by the Partnership. The Partnership monitors its properties for evidence of pollutants, toxins and other dangerous substances, including the presence of asbestos. In certain cases environmental testing has been performed which resulted in no material adverse conditions or liabilities. In no case has the Partnership received notice that it is a potentially responsible party with respect to an environmental clean up site. A further description of the Partnership's business is included in "Management's Discussion and Analysis of Financial Condition and Results of Operations" included in "Item 7" of this Form 10-K. Transfers of Control Upon the Partnership's formation in 1981, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner and Consolidated Capital Management Company ("CCMC"), a California general partnership, was the non-corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired a controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of its reorganization plan, CEI acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing general partner in all 16 partnerships. The selection of CEI as the sole managing general partner was approved by a majority of the Limited Partners in the Partnership and in each of the affiliated partnerships pursuant to a solicitation of the Limited Partners dated August 10, 1990. As part of this solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership, and the conversion of CCMC from a general partner to a special limited partner, thereby leaving CEI as the sole general partner of the Partnership. On November 14, 1990, CCMC was dissolved and its special limited partnership interest was divided among its former partners. All of CEI's outstanding stock was owned by Insignia Properties Trust ("IPT") (See below). Pursuant to a series of transactions which closed on October 1, 1998 and February 26, 1999, Insignia Financial Group, Inc. and IPT merged into 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 General Partner. The General Partner does not believe that this transaction has had or will have a material effect on the affairs and operations of the Partnership. Item 2. Description of Properties The Partnership originally acquired 48 properties of which thirteen (13) were sold, ten (10) were conveyed to lenders in lieu of foreclosure, and ten (10) were foreclosed upon by the lenders. As of December 31, 2001, the Partnership owned fifteen (15) apartment complexes. Additional information about the properties is found in "Item 8. Financial Statements and Supplementary Data". Date of Property Purchase Type of Ownership Use The Apartments (1) 04/84 Fee ownership, subject to Apartment Omaha, Nebraska a first mortgage 204 units Arbours of Hermitage Apts. (1) 09/83 Fee ownership subject to Apartment Nashville, Tennessee a first mortgage 350 units Briar Bay Racquet Club Apts. (2) 09/82 Fee ownership subject to Apartment Miami, Florida a first mortgage 194 units Chimney Hill Apts. (2) 08/82 Fee ownership subject to Apartment Marietta, Georgia a first mortgage 326 units Citadel Apts. (1) 05/83 Fee ownership subject Apartment El Paso, Texas to a first mortgage 261 units Citadel Village Apts. (1) 12/82 Fee ownership subject Apartment Colorado Springs, Colorado to a first mortgage 122 units Foothill Place Apts. (2) 08/85 Fee ownership subject Apartment Salt Lake City, Utah to a first mortgage 450 units Knollwood Apts. (1) 07/82 Fee ownership subject Apartment Nashville, Tennessee to a first mortgage 326 units Lake Forest Apts. 04/84 Fee ownership subject Apartment Omaha, Nebraska to a first mortgage 312 units Nob Hill Villa Apts. (1) 04/83 Fee ownership subject Apartment Nashville, Tennessee to a first mortgage 472 units Point West Apts. (1) 11/85 Fee ownership subject Apartment Charleston, South Carolina a first mortgage 120 units Post Ridge Apts. (2) 07/82 Fee ownership subject Apartment Nashville, Tennessee to a first mortgage 150 units Rivers Edge Apts. (2) 04/83 Fee ownership subject Apartment Auburn, Washington to a first mortgage 120 units South Port Apts. (3) 11/83 Fee ownership subject Apartment Tulsa, Oklahoma to a first mortgage 240 units Village East Apts. (1) 12/82 Fee ownership subject Apartment Cimarron Hills, Colorado to a first mortgage 137 units (1) Property is held by a limited partnership and/or limited liability corporation in which the Partnership owns a 100% interest. (2) Property is held by a limited partnership in which the Registrant owns a 99% interest. (3) Property is held by a limited partnership in which the Partnership owns a 50% interest. Schedule of Properties Set forth below for each of the Registrant's properties is the gross carrying value, accumulated depreciation, depreciable life, method of depreciation and Federal tax basis. Gross Carrying Accumulated Depreciable Federal Property Value Depreciation Life Method Tax Basis (in thousands) (in thousands) The Apartments $ 9,302 $ 7,860 5-18 yrs S/L $ 1,731 Arbours of Hermitage Apartments 14,880 11,601 5-18 yrs S/L 3,653 Briar Bay Racquet Club Apartments 8,166 6,645 5-18 yrs S/L 2,132 Chimney Hill Apartments 11,887 10,121 5-18 yrs S/L 2,627 Citadel Apartments 8,056 6,816 5-18 yrs S/L 1,100 Citadel Village Apartments 4,580 3,672 5-18 yrs S/L 1,436 Foothill Place Apartments 16,519 10,958 5-18 yrs S/L 6,974 Knollwood Apartments 12,466 10,160 5-18 yrs S/L 2,774 Lake Forest Apartments 9,978 7,910 5-18 yrs S/L 2,082 Nob Hill Villa Apartments 14,054 11,816 5-18 yrs S/L 2,205 Point West Apartments 3,313 2,561 5-40 yrs S/L 1,040 Post Ridge Apartments 5,466 4,215 5-18 yrs S/L 1,441 Rivers Edge Apartments 3,598 2,763 5-18 yrs S/L 1,012 South Port Apartments 8,968 6,881 5-18 yrs S/L 1,817 Village East Apartments 3,975 3,236 5-18 yrs S/L 881 Total $135,208 $107,215 $32,905 See "Note A" to the consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for a description of the Partnership's depreciation policy. Schedule of Property Indebtedness The following table sets forth certain information relating to the loans encumbering the Registrant's properties. Principal Principal Principal Balance At Balance At Stated Balance December 31, December 31, Interest Period Maturity Due At Property 2001 2000 Rate Amortized Date Maturity (2) (in thousands) (in thousands) The Apartments $ 4,601 $ 4,703 8.37% 20 yrs 03/20 $ -- Arbours of Hermitage Apartments 5,650 5,650 6.95% (1) 12/05 5,650 Briar Bay Racquet Club Apartments 3,500 3,500 6.95% (1) 12/05 3,500 Chimney Hill Apartments 5,400 5,400 6.95% (1) 12/05 5,400 Citadel Apartments 4,536 4,638 8.25% 20 yrs 03/20 -- Citadel Village Apartments 2,450 2,450 6.95% (1) 12/05 2,450 Foothill Place Apartments 10,100 10,100 6.95% (1) 12/05 10,100 Knollwood Apartments 6,780 6,780 6.95% (1) 12/05 6,780 Lake Forest Apartments 6,475 4,700 7.13% 20 yrs 10/21 -- Nob Hill Villa Apartments 6,789 6,926 9.20% 25 yrs 04/05 6,250 Point West Apartments 2,350 2,407 7.86% 20 yrs 12/19 -- Post Ridge Apartments 4,500 4,050 6.63% 20 yrs 01/22 -- Rivers Edge Apartments 3,891 3,979 7.82% 20 yrs 09/20 -- South Port Apartments 4,303 4,358 7.19% 30 yrs 12/04 4,119 Village East Apartments 2,150 2,150 6.95% (1) 12/05 2,150 Totals $73,475 $71,791 $46,399 (1) Monthly payments of interest only at the stated rate until maturity. (2) See "Item 8. Financial Statements and Supplementary Date - Note D" for information with respect to the Registrant's ability to repay these loans and other specific details about the loans. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information relating to the financing at Point West Apartments in the fourth quarter of 1999, the refinancing of the mortgages encumbering The Apartments and Citadel Apartments in February 2000, the refinancing of the mortgage encumbering Stratford Place Apartments in May 2000, the refinancing of the mortgage encumbering River's Edge Apartments in August 2000, the refinancing of the mortgage encumbering Lake Forest Apartments in September 2001, and the refinancing of the mortgage encumbering Post Ridge Apartments in December 2001. Rental Rate and Occupancy The following table sets forth the average annual rental rates and occupancy for 2001 and 2000 for each property. Average Annual Average Rental Rates Occupancy (per unit) Property 2001 2000 2001 2000 The Apartments $ 7,344 $ 7,088 91% 94% Arbours of Hermitage Apartments 7,926 7,697 92% 94% Briar Bay Racquet Club Apartments 9,781 9,204 96% 97% Chimney Hill Apartments 8,934 8,553 94% 94% Citadel Apartments 6,908 6,892 93% 92% Citadel Village Apartments 9,549 9,098 95% 96% Foothill Place Apartments 8,257 8,043 96% 96% Knollwood Apartments 8,434 8,197 93% 94% Lake Forest Apartments 7,409 7,530 92% 89% Nob Hill Villa Apartments 6,408 6,277 92% 94% Point West Apartments 6,897 6,450 96% 97% Post Ridge Apartments 9,924 9,763 91% 92% Rivers Edge Apartments 8,232 7,795 96% 98% South Port Apartments 6,851 6,641 95% 96% Village East Apartments 8,331 7,756 93% 97% The decrease in occupancy at The Apartments and Village East Apartments is due to increased competition and changing economic conditions in their respective local markets. The increase in occupancy at Lake Forest Apartments is attributable to capital improvements incurred at the investment property to improve the curb appeal to potential tenants. As noted under "Item 1. Description of Business", the real estate industry is highly competitive. All of the properties are subject to competition from other residential apartment complexes in the area. The General Partner believes that all of the properties are adequately insured. Each property is an apartment complex which leases units for lease terms of one year or less. No residential tenant leases 10% or more of the available rental space. All of the properties are in good physical condition, subject to normal depreciation and deterioration as is typical for assets of this type and age. Real Estate Taxes and Rates Real estate taxes and rates in 2001 and 2000 for each property were: 2001 2001 2000 2000 Billing Rate Billing Rate (in thousands) (in thousands) The Apartments $147 2.0% $135 1.9% Arbours of Hermitage Apartments 192 3.8% 149 3.4% Briar Bay Racquet Club Apartments 167 2.2% 169 2.2% Chimney Hill Apartments 139 3.0% 135 2.9% Citadel Apartments 205 3.0% 147 2.9% Citadel Village Apartments 21 5.5% 23 5.8% Foothill Place Apartments 169 1.4% 180 0.8% Knollwood Apartments 206 3.8% 163 3.4% Lake Forest Apartments 193 2.0% 190 1.9% Nob Hill Villa Apartments 238 4.6% 205 4.2% Point West Apartments 62 28.0% 35 36.4% Post Ridge Apartments 108 3.8% 92 3.4% Rivers Edge Apartments 53 1.4% 55 1.5% South Port Apartments 66 1.4% 62 1.4% Village East Apartments 24 5.7% 21 5.9% Capital Improvements The Apartments During the year ended December 31, 2001, the Partnership completed approximately $232,000 of capital improvements at the property consisting primarily of structural upgrades, brick replacement, floor covering replacements, and perimeter fencing upgrades. These improvements were funded from operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $61,200. Additional improvements may be considered and will depend on the physical condition of the property as well as Partnership reserves and anticipated cash flow generated by the property. Arbours of Hermitage Apartments During the year ended December 31, 2001, the Partnership completed approximately $413,000 of capital improvements at the property, consisting primarily of structural enhancements, a vinyl siding project, floor covering replacements and perimeter fencing upgrades. These improvements were funded from Partnership reserves, insurance proceeds and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $105,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. In April 2001, The Arbours of Hermitage had a fire, which damaged one apartment building. Insurance proceeds of approximately $83,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $83,000 for the year ended December 31, 2001. The damaged assets were fully depreciated at the time of the fire. Briar Bay Racquet Club Apartments During the year ended December 31, 2001, the Partnership completed approximately $160,000 of capital improvements at the property consisting primarily of plumbing enhancements, floor covering replacements and elevator upgrades. These improvements were funded from operating cash flow and Partnership reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $58,200. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Chimney Hill Apartments During the year ended December 31, 2001, the Partnership completed approximately $263,000 of capital improvements at the property consisting primarily of floor covering replacements, structural upgrades, interior decorating and cabinet and countertop replacements. These improvements were funded from operating cash flow and Partnership reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $97,800. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Citadel Apartments During the year ended December 31, 2001, the Partnership completed approximately $97,000 of capital improvements at the property consisting primarily of HVAC, floor covering and appliance replacements and replacement of swimming pool decking. These improvements were funded from operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $78,300. Additional improvements may be considered and will depend on the physical condition of the property as well as Partnership reserves and anticipated cash flow generated by the property. Citadel Village Apartments During the year ended December 31, 2001, the Partnership completed approximately $142,000 of capital improvements at the property, consisting primarily of floor covering replacements, structural improvements and swimming pool upgrades. These improvements were funded from Partnership reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $36,600. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Foothill Place Apartments During the year ended December 31, 2001, the Partnership completed approximately $502,000 of capital improvements at the property, consisting primarily of floor covering and appliance replacements, interior decorating, structural improvements, plumbing replacements, lighting replacements, and water heater replacements. These improvements were funded from Partnership reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $135,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Knollwood Apartments During the year ended December 31, 2001, the Partnership completed approximately $452,000 of capital improvements at the property, consisting primarily of a water submetering project and floor covering and appliance replacements. These improvements were funded from Partnership reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $97,800. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Lake Forest Apartments During the year ended December 31, 2001, the Partnership completed approximately $217,000 of capital improvements at the property, consisting primarily of floor covering and water heater replacements, window coverings and appliance replacements. These improvements were funded from Partnership reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $93,600. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Nob Hill Villa Apartments During the year ended December 31, 2001, the Partnership completed approximately $454,000 of capital improvements at the property consisting primarily of floor covering replacements, a water submetering project, appliance replacements, other building improvements and water heater replacements. These improvements were funded from Partnership reserves, insurance proceeds, and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $141,600. Additional improvements may be considered and will depend on the physical condition of the property as well as Partnership reserves and anticipated cash flow generated by the property. In May 2000, Nob Hill Villa Apartments had a fire, which damaged two apartment units. Insurance proceeds of approximately $33,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $25,000 for the year ended December 31, 2001 which represents the excess of the proceeds received as of December 31, 2001 over the write-off of the undepreciated damaged assets. Point West Apartments During the year ended December 31, 2001, the Partnership completed approximately $97,000 of capital improvements at the property consisting primarily of floor covering replacements, a water submetering project and appliance replacements. These improvements were funded from operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $36,000. Additional improvements may be considered and will depend on the physical condition of the property as well as Partnership reserves and anticipated cash flow generated by the property. Post Ridge Apartments During the year ended December 31, 2001, the Partnership completed approximately $239,000 of capital improvements at the property, consisting primarily of floor covering and appliance replacements, structural improvements, plumbing enhancements, major landscaping, lighting and electrical upgrades. These improvements were funded from operating cash flow and Partnership reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $45,000. Additional improvements may be considered and will depend on the physical condition of the property as well as Partnership reserves and anticipated cash flow generated by the property. Rivers Edge Apartments During the year ended December 31, 2001, the Partnership completed approximately $91,000 of capital improvements at the property consisting primarily of floor covering and appliance replacements and plumbing enhancements. These improvements were funded from operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $36,000. Additional improvements may be considered and will depend on the physical condition of the property as well as Partnership reserves and anticipated cash flow generated by the property. South Port Apartments During the year ended December 31, 2001, the Partnership completed approximately $305,000 of capital improvements at the property, consisting primarily of building upgrades, land improvements, floor covering and appliance replacements and plumbing fixture replacements. These improvements were funded from operating cash flow, insurance proceeds and Partnership reserves. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $72,000. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. In March 2000, South Port Apartments had hail and wind damage, which affected all 240 units and damaged 100% of the roof, which was replaced. Insurance proceeds of approximately $182,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $128,000 for the year ended December 31, 2001 which represents the excess of the proceeds received as of December 31, 2001 over the write-off of the undepreciated damaged assets. Village East Apartments During the year ended December 31, 2001, the Partnership completed approximately $231,000 of capital improvements at the property, consisting primarily of plumbing and sewer upgrades and floor covering and appliance replacements. These improvements were funded from Partnership reserves and operating cash flow. The Partnership is currently evaluating the capital improvement needs of the property for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $41,100. Additional improvements may be considered and will depend on the physical condition of the property as well as replacement reserves and anticipated cash flow generated by the property. Item 3. 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. (the "Nuanes action") 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 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, among other things, 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; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases 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 4. Submission of Matters to a Vote of Security Holders The unit holders of the Partnership did not vote on any matter during the quarter ended December 31, 2001. PART II Item 5. Market for the Registrant's Units of Limited Partnership and Related Security Holder Matters (A) No established trading market for the Partnership's Units exists, nor is one expected to develop. (B) Title of Class Number of Unitholders of Record Limited Partnership Units 8,070 as of December 31, 2001 There were 342,773 Units outstanding at December 31, 2001, of which affiliates of the General Partner owned 186,758.50 Units or approximately 54.48%. The following table sets forth the distributions declared by the Partnership for the years ended December 31, 1999, 2000 and 2001 (see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for more details): Distributions Per Limited Aggregate Partnership Unit (in thousands) 01/01/99 - 12/31/99 $17,601 (1) $49.29 01/01/00 - 12/31/00 11,239 (2) 31.32 01/01/01 - 12/31/01 9,205 (3) 25.59 (1) Consists of approximately $12,544,000 of cash from operations and approximately $5,057,000 of surplus funds. The surplus funds were from the financing at Point West Apartments and previously undistributed refinance proceeds from 1996 and 1997. Of these amounts, $4,318,000 was accrued at December 31, 2000. In January 2000, approximately $4,113,000 of this distribution was paid and the remainder was accrued at December 31, 2001. (2) Consists of approximately $6,250,000 of cash from operations and approximately $4,989,000 of surplus cash. The surplus funds were from the refinancing of The Apartments, Citadel Apartments, Stratford Place Apartments, and River's Edge Apartments and sales proceeds from Overlook Apartments sold in December 1999. Approximately $197,000 of this distribution from surplus cash was accrued at December 31, 2001. (3) Consists of approximately $5,047,000 of cash from operations and approximately $4,158,000 of surplus cash. Surplus funds were from the refinancing of Lake Forest Apartments and sales proceeds from Stratford Place Apartments sold in December of 2000. Approximately $166,000 of this distribution from surplus cash was accrued at December 31, 2001. 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 property sales. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit distributions to its partners in the year 2002 or subsequent periods. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for information relating to anticipated capital expenditures at the properties. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 186,758.50 limited partnership units in the Partnership representing 54.48% of the outstanding units at December 31, 2001. 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 either through private purchases or tender offers. 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 voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 54.48% of the outstanding units, AIMCO is in a position to control all such 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 General Partner because of its affiliation with the General Partner. Item 6. Selected Financial Data The following table sets forth a summary of certain financial data for the Partnership. Certain reclassifications have been made to the 1997 information to conform to the 1998, 1999, 2000 and 2001 presentation. This summary should be read in conjunction with the Partnership's consolidated financial statements and notes thereto appearing in "Item 8. Financial Statements and Supplementary Data." Years Ended December 31, (in thousands, except per unit data) Consolidated Statements of Operations 2001 2000 1999 1998 1997 Total revenues $ 29,079 $ 33,687 $ 31,189 $ 30,093 $ 28,710 Total expenses (24,739) (25,006) (25,071) (26,164) (28,296) Income before extraordinary items 4,340 8,681 6,118 3,929 414 Extraordinary items (182) (207) -- (5) (47) Net income $ 4,158 $ 8,474 $ 6,118 $ 3,924 $ 367 Per Limited Partnership Unit: Income before extraordinary items $ 12.16 $ 24.31 $ 17.13 $ 11.00 $ 1.15 Extraordinary items (.51) (0.58) -- (0.01) (0.12) Net income $ 11.65 $ 23.73 $ 17.13 $ 10.99 $ 1.03 Distributions per Limited Partnership Unit $ 25.59 $ 31.32 $ 49.29 $ 11.07 $ 7.01 Limited Partnership Units outstanding 342,773 342,773 342,773 342,773 342,773 Consolidated Balance Sheets Total assets $ 34,180 $ 38,870 $ 44,464 $ 50,671 $ 52,381 Mortgage notes payable $ 73,475 $ 71,791 $ 70,997 $ 70,775 $ 72,439 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations INTRODUCTION The matters discussed in this Form 10-K 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-K 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 operation. 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 operations of the Partnership primarily include operating and holding income-producing real estate properties for the benefit of its partners. Therefore, the following discussion of operations, liquidity and capital resources will focus on these activities and should be read in conjunction with "Item 8. Financial Statements and Supplementary Data" and the notes related thereto included elsewhere in this report. Results of Operations The Partnership's income before extraordinary items totaled approximately $4,340,000 for the year ended December 31, 2001, as compared to approximately $8,681,000 for the year ended December 31, 2000 and income before extraordinary items of approximately $6,118,000 for the year ended December 31, 1999. For the year ended December 31, 2001, a decrease in total revenues and a decrease in total expenses resulted in a decrease in income before extraordinary items as compared to 2000. As part of the ongoing business plan of the Partnership, the General Partner monitors the rental market environment of each of its investment properties 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 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 General Partner will be able to sustain such a plan. 2001 Compared to 2000 The decrease in total revenues is primarily attributable to a decrease in the gain on sale of investment properties and a decrease in rental income which was partially offset by an increase in casualty gain for the year ended December 31, 2001, as compared to the year ended December 31, 2000. During the year ended December 31, 2001, the Partnership did not sell an investment property while Stratford Place was sold during the year ended December 31, 2000. Excluding the results of operations and gain on sale of investment property relating to Stratford Place Apartments, total revenues increased due to an increase in rental income, casualty gain income and other income. The increase in rental income is due to increased average rental rates at fourteen of the Partnership's fifteen properties partially offset by a decrease in occupancy levels at eleven of the investment properties. The increase in casualty gain was the result of fires and wind and hail damage at three of the properties as discussed below. The increase in other income is primarily attributable to an increase in utility reimbursements partially offset by a decrease in interest income due to lower average cash balances being maintained in interest bearing accounts. Excluding the operations of Stratford Place Apartments, total expenses increased due to increases in operating, general and administrative, depreciation, property tax, and interest expenses, partially offset by a decrease in extraordinary loss on early extinguishment of debt. Operating expense increased due to increases in property, insurance, and maintenance expenses. Property expense increased due to an increase in employee salaries and related benefits and an increase in utility expense relating to vacant apartments. Insurance expense increased due to an increase in insurance premiums at fourteen of the Partnership's investment properties. Maintenance expense increased due to contract labor and materials and supplies used by the investment properties. General and administrative expenses increased primarily due to a new tax imposed by the State of Tennessee on the Partnership's properties in that state during the year ended December 31, 2001 and in an increase in the cost of services included in management reimbursements to the General Partner as allowed under the Partnership Agreement partially offset by a decrease in the 9% management fee on distributions from operating cash flows. Depreciation expense on the remaining properties increased due to capital improvements completed and placed into service during the past twelve months. The increase in property tax expense is due to an increase in the assessed value of five of the Partnership's properties. The increase in interest expense is primarily attributable to new financing at River's Edge Apartments in September 2000 and Lake Forest Apartments in September 2001 which increased the debt balances. For 2001, extraordinary losses on early extinguishment of debt arose from the refinancings of Lake Forest Apartments and Post Ridge Apartments, while the extraordinary losses on early extinguishment of debt for 2000 arose from the refinancings at The Apartments, Stratford Place Apartments, Rivers Edge Apartments, and Citadel Apartments in 2000. 2000 Compared to 1999 The increase in total revenues is attributable to increased gain on the sale of investment properties, casualty gain, and other income for the year ended December 31, 2000, as compared to the year ended December 31, 1999. The Partnership recognized a gain on the sale of Stratford Place Apartments of approximately $3,440,000 versus a gain on the sale of Overlook Apartments of approximately $638,000 recognized in 1999. Excluding the results of Stratford Place Apartments and Overlook Apartments, total revenues increased due to an increase in rental and other income. The increase in rental income is due to increased rental rates at the Partnership's investment properties accompanied by increased occupancy levels at five of the properties, which more than offset occupancy decreases at eight properties. The increase in rental income is also due to increases in tenant reimbursements primarily at Arbor East Apartments. An increase in bad debt expense at most of the Partnership's properties partially offset the increase in rental income. A casualty gain of approximately $154,000 at Stratford Place Apartments due to a fire which damaged 12 apartment units also contributed to the increase in total revenues for the year ended December 31, 2000. The increase in other income is primarily attributable to an increase in interest income due to higher average balances being maintained in interest bearing accounts. Excluding the results of Stratford Place Apartments and Overlook Apartments, total expenses increased due to increases in operating and interest expenses partially offset by a decrease in general and administrative expenses. Operating expenses increased due to reduced net insurance proceeds on casualties, increased utility charges, and increased salary expenses; partially offset by decreased interior building expenses and decreased snow removal charges. During the twelve months ended December 31, 1999, there were several small insurance claims made and proceeds received, primarily at Nob Hill Villa Apartments. Fewer similar claims were made during the twelve months ended December 31, 2000 at various Partnership properties. The increase in interest expense is primarily attributable to the new financing at Point West Apartments late in 1999 and due to increased debt balances at The Apartments, Stratford Place Apartments, Rivers Edge, and Citadel Apartments due to refinancings in 2000. General and administrative expenses decreased due to a decrease in the 9% management fee on distributions from operating cash flows partially offset by increases in the cost of services included in the management reimbursements to the Managing General Partner as allowed under the Partnership Agreement and in professional fees. Extraordinary loss on early extinguishment of debt increased primarily due to the refinancings at Stratford Place Apartments, The Apartments, and Citadel Apartments (see discussions below). On December 28, 2000, ConCap Stratford Associates, Ltd. sold Stratford Place Apartments to an unaffiliated third party for $7,600,000. After payment of closing costs of approximately $587,000, the net proceeds received by the Partnership were approximately $2,508,000. The purchaser assumed the mortgage encumbering the property of approximately $4,505,000. The gain on the sale recognized during the fourth quarter of 2000 was approximately $3,440,000. On December 14, 1999, Overlook Associates, Ltd. sold Overlook to an unaffiliated third party for $1,975,000. After payment of closing costs of approximately $84,000 the net proceeds received by the Partnership were approximately $1,891,000. The Partnership used most of the proceeds to pay off the mortgage encumbering the property of approximately $1,780,000. The remaining net proceeds were used to establish additional cash reserves for the Partnership. The Partnership's gain on the sale during the fourth quarter of 1999 was approximately $638,000. LIQUIDITY AND CAPITAL RESOURCES 2001 Compared to 2000 At December 31, 2001, the Partnership held cash and cash equivalents of approximately $2,729,000 as compared to approximately $6,377,000 at December 31, 2000. The decrease in cash and cash equivalents of approximately $3,648,000 since the Partnership's year ended December 31, 2000 is due to approximately $7,936,000 and $3,341,000 of cash used in financing and investing activities, respectively, partially offset by approximately $7,629,000 of cash provided by operating activities. Cash used in financing activities consisted primarily of distributions to partners, repayment of mortgages at Lake Forest Apartments and Post Ridge Apartments due to refinancing, payments of principal on the mortgages encumbering the Partnership's properties, payment of new loan costs, and prepayment penalties associated with the repaid mortgage at Post Ridge Apartments, partially offset by proceeds from the refinancing of Lake Forest Apartments and Post Ridge Apartments. Cash used in investing activities consisted primarily of property improvements and replacements partially offset by net insurance proceeds received for casualties (see discussion below) and net withdrawals from restricted escrows. The Partnership invests its working capital in interest bearing accounts. In April 2001, The Arbours of Hermitage had a fire, which damaged one apartment building. Insurance proceeds of approximately $83,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $83,000 for the year ended December 31, 2001. The damaged assets were fully depreciated at the time of the fire. In May 2000, Nob Hill Villa Apartments had a fire, which damaged two apartment units. Insurance proceeds of approximately $33,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $25,000 for the year ended December 31, 2001, which represents the excess of the proceeds received as of December 31, 2001 over the write-off of the undepreciated damaged assets. In March 2000, South Port Apartments had hail and wind damage, which affected all 240 units and damaged 100% of the roof, which was replaced. Insurance proceeds of approximately $182,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $128,000 for the year ended December 31, 2001, which represents the excess of the proceeds received as of December 31, 2001 over the write-off of undepreciated damaged assets. In January 2000, Stratford Place Apartments had a fire which damaged 12 apartment units and 30% of the roof. Insurance proceeds of approximately $354,000 were received during the year ended December 31, 2000. The Managing General Partner successfully completed the repairs prior to the sale of the property on December 28, 2000. The Partnership recognized a casualty gain of approximately $154,000 for the year ended December 31, 2000. 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 properties 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 is currently evaluating the capital improvement needs of the properties for the upcoming year. The minimum amount to be budgeted is expected to be $300 per unit or $1,135,200. Additional improvements may be considered and will depend on the physical condition of the properties as well as replacement reserves and anticipated cash flow generated by the properties. The additional capital expenditures will be incurred only if cash is available from operations or from Partnership reserves. To the extent that such budgeted capital improvements are completed, the Partnership's distributable cash flow, if any, may be adversely affected at least in the short term. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The Partnership's remaining mortgage indebtedness of approximately $49,472,000 is amortized over various periods with required balloon payments ranging from 2004 and 2005. The General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If a property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure. On December 21, 2001, the Partnership refinanced the mortgage encumbering Post Ridge Apartments. The refinancing replaced mortgage indebtedness of approximately $4,050,000 with a new mortgage of $4,500,000. The mortgage was refinanced at a rate of 6.63% compared to the prior rate of 7.33% and matures on January 1, 2022. Capitalized loan costs incurred for the refinancing were approximately $254,000. The Partnership wrote off approximately $32,000 in unamortized loan costs and paid prepayment penalties of approximately $110,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $142,000. On September 27, 2001, the Partnership refinanced the mortgage encumbering Lake Forest Apartments. The refinancing replaced mortgage indebtedness of approximately $4,700,00 with a new mortgage of $6,500,000. The mortgage was refinanced at a rate of 7.13% compared to the prior rate of 7.33% and matures on October 1, 2021. Capitalized loan costs incurred for the refinancing were approximately $217,000. The Partnership wrote off unamortized loan costs, which resulted in an extraordinary loss on early extinguishment of debt of approximately $40,000. The Partnership was required to establish a repair escrow of approximately $36,000 at the date of the refinancing. The Partnership is also required to establish a replacement reserve escrow by making monthly deposits until the mortgage is paid in full. On August 31, 2000, the Partnership refinanced the mortgage encumbering Rivers Edge Apartments. The refinancing replaced mortgage indebtedness of approximately $1,895,000 with a new mortgage of $4,000,000. The mortgage was refinanced at a rate of 7.82% compared to a prior rate of 8.40% and matures on September 1, 2020. Capitalized loan costs incurred for the refinancing were approximately $90,000. There was no extraordinary loss recognized due to the refinancing occurring at the maturity of the prior mortgage. On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford Place Apartments. The refinancing replaced mortgage indebtedness of approximately $2,493,000 with a new mortgage of $4,550,000. The mortgage was refinanced at a rate of 8.48% compared to the prior rate of 8.65%. Capitalized loan costs incurred for the refinancing were approximately $149,000. The Partnership wrote off approximately $4,000 in unamortized loan costs and paid prepayment penalties of approximately $1,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $5,000. On December 28, 2000, the Partnership sold Stratford Place Apartments to an unaffiliated third party whom assumed the mortgage encumbering the property. The Partnership wrote off the unamortized loan costs resulting in an additional extraordinary loss on early extinguishment of debt of approximately $143,000. On February 28, 2000, the Partnership refinanced the mortgage encumbering Citadel Apartments. The refinancing replaced mortgage indebtedness of approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on March 1, 2020. Capitalized loan costs incurred for the refinancing were approximately $142,000. The Partnership wrote off approximately $19,000 in unamortized loan costs and paid prepayment penalties of approximately $7,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $26,000. On February 2, 2000, the Partnership refinanced the mortgage encumbering The Apartments. The refinancing replaced mortgage indebtedness of approximately $3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020. Capitalized loan costs incurred for the refinancing were approximately $129,000. The Partnership wrote off approximately $11,000 in unamortized loan costs and paid prepayment penalties of approximately $22,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $33,000. On November 9, 1999, the Partnership obtained financing on Point West Apartments in the amount of $2,460,000. The mortgage was financed at a rate of 7.86% and matures on December 1, 2019. Capitalized loan costs incurred for the financing were approximately $47,000 during the year ended December 31, 1999. An additional $20,000 of loan costs were incurred during the year ended December 31, 2000. The Partnership's current assets are thought to be sufficient for any near-term needs (exclusive of capital improvements) of the Partnership. The Partnership's remaining mortgage indebtedness of approximately $49,472,000 is amortized over various periods with required balloon payments ranging from 2004 and 2005. The General Partner will attempt to refinance such indebtedness and/or sell the properties prior to such maturity dates. If a property cannot be refinanced or sold for a sufficient amount, the Partnership will risk losing such property through foreclosure. Pursuant to the Partnership Agreement, the term of the Partnership is scheduled to expire on December 31, 2011. Accordingly, prior to such date the Partnership will need to either sell its investment properties or extend the term of the Partnership. If the Partnership is unable to extend its term, the ultimate sale price of the investment properties may be adversely affected. During 2001, the Partnership declared and paid distributions of approximately $9,139,000 (approximately $8,773,000 to the limited partners or $25.59 per limited partnership unit) consisting of approximately $4,981,000 (approximately $4,782,000 to the limited partners or $13.95 per limited partnership unit) from operations and approximately $4,158,000 (approximately $3,991,000 to the limited partners or $11.64 per limited partnership unit) of refinance proceeds for Lake Forest Apartments and sale proceeds of Stratford Place Apartments, which sold in December of 2000. Approximately $166,000 of these distributions from proceeds is payable to the General Partner and special limited partners as this portion is subordinated and deferred per the Partnership Agreement until the limited partners receive 100% of their original capital contributions from surplus cash. In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $66,000 was distributed to the general partner of the majority owned sub-tier limited partnerships. During 2000, the Partnership declared distributions of approximately $11,183,000 (approximately $10,736,000 to the limited partners or $31.32 per limited partnership unit) consisting of approximately $6,194,000 (approximately $5,947,000 to the limited partners or $17.35 per limited partnership unit) from operations and approximately $4,989,000 (approximately $4,789,000 to the limited partners or $13.97 per limited partnership unit) of refinancing proceeds from The Apartments, Citadel Apartments, Rivers Edge Apartments, and Stratford Place Apartments and sale proceeds from Overlook Apartments which sold December 1999. Approximately $197,000 of the distribution from proceeds was payable at December 31, 2000 to the General Partner and special limited partners as this distribution is subordinated and deferred per the Partnership Agreement until the limited partners receive 100% of their original capital contributions from surplus funds. In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $56,000 was distributed to the general partner of the majority owned sub-tier limited partnerships. During 1999, the Partnership paid distributions of approximately $13,283,000 (approximately $12,730,000 to the limited partners or $37.14 per limited partnership unit) consisting of cash flow from operations totaling approximately $10,670,000 (approximately $10,117,000 to the limited partners or $29.52 per limited partnership unit) and approximately $2,613,000 (all to the limited partners or $7.62 per limited partnership unit) representing funds from previously undistributed refinance proceeds from 1996 and 1997. As of December 31, 1999, the Partnership had a distribution payable of approximately $4,318,000 (approximately $3,921,000 to the limited partners or $11.44 per limited partnership unit) consisting of cash from operations of approximately $1,874,000 (approximately $1,679,000 to the limited partners or $4.90 per limited partnership unit) and a distribution of refinance proceeds representing funds from the financing of Point West Apartments of approximately $2,444,000 (approximately $2,242,000 to the limited partners or $6.54 per limited partnership unit). In January 2000, approximately $4,113,000 of this distribution was paid and the remainder was accrued at December 31, 2000. Future cash distributions will depend on the levels of net cash generated from operations, the availability of cash reserves, and the timing of debt maturities, refinancings, and/or property sales. The Partnership's cash available for distribution is reviewed on a monthly basis. There can be no assurance, however, that the Partnership will generate sufficient funds from operations after required capital expenditures to permit distributions to its partners in the year 2002 or subsequent periods. On September 16, 2000, the Partnership sought the vote of the limited partners to amend the Partnership Agreement to eliminate the requirement for the Partnership to maintain reserves equal to at least 5% of the limited partners' capital contributions less distributions as reserve requirements of the Partnership. The vote, sought pursuant to a Consent Solicitation, expired on October 16, 2000 at which time the amendment was approved by the requisite percent of limited partnership units. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 186,758.50 limited partnership units in the Partnership representing 54.48% of the outstanding units at December 31, 2001. 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 either through private purchases or tender offers. 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 voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 54.48% of the outstanding units, AIMCO is in a position to control all such 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 General Partner because of its affiliation with the General Partner. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. Item 7a. Market Risk Factors The Partnership is exposed to market risks from adverse changes in interest rates. In this regard, changes in U.S. interest rates affect the interest earned on the Partnership's cash and cash equivalents as well as interest paid on its indebtedness. As a policy, the Partnership does not engage in speculative or leveraged transactions, nor does it hold or issue financial instruments for trading purposes. The Partnership is exposed to changes in interest rates primarily as a result of its borrowing activities used to maintain liquidity and fund business operations. To mitigate the impact of fluctuations in U.S. interest rates, the Partnership maintains its debt as fixed rate in nature by borrowing on a long-term basis. Based on interest rates at December 31, 2001, a 100 basis point increase or decrease in market interest rates would have an annual impact of approximately $735,000 on the Partnership. The following table summarizes the Partnership's debt obligations at December 31, 2001. The interest rates represent the weighted-average rates. The fair value of the the debt obligations approximated the recorded value as of December 31, 2001. Long-term Debt Principal amount by expected maturity: Fixed Rate Debt Average Interest Rate (in thousands) 2002 $ 845 7.81% 2003 923 7.81% 2004 5,112 7.81% 2005 43,138 7.42% 2006 875 7.68% Thereafter 22,582 7.68% Total $73,475 Item 8. Financial Statements and Supplementary Data CONSOLIDATED CAPITAL PROPERTIES IV LIST OF FINANCIAL STATEMENTS Report of Ernst & Young LLP, Independent Auditors Consolidated Balance Sheets - December 31, 2001 and 2000 Consolidated Statements of Operations - Years ended December 31, 2001, 2000 and 1999 Consolidated Statements of Changes in Partners' Deficit - Years ended December 31, 2001, 2000, and 1999 Consolidated Statements of Cash Flows - Years ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements Report of Ernst & Young LLP, Independent Auditors The Partners Consolidated Capital Properties IV We have audited the accompanying consolidated balance sheets of Consolidated Capital Properties IV as of December 31, 2001 and 2000, and the related consolidated statements of operations, changes in partners' deficit, and cash flows for each of the three years in the period ended December 31, 2001. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by the Partnership's management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Consolidated Capital Properties IV at December 31, 2001 and 2000, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ERNST & YOUNG LLP Greenville, South Carolina February 15, 2002 CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED BALANCE SHEETS (in thousands, except unit data) December 31, 2001 2000 Assets Cash and cash equivalents $ 2,729 $ 6,377 Receivables and deposits 1,186 1,854 Restricted escrows 644 900 Other assets 1,628 1,497 Investment properties (Notes D, G and H): Land 10,907 10,907 Buildings and related personal property 124,301 120,607 135,208 131,514 Less accumulated depreciation (107,215) (103,272) 27,993 28,242 $ 34,180 $ 38,870 Liabilities and Partners' Deficit Liabilities Accounts payable $ 204 $ 1,021 Tenant security deposit liabilities 497 488 Accrued property taxes 1,189 1,311 Other liabilities 947 1,510 Distribution payable (Note F) 568 402 Mortgage notes payable (Note D) 73,475 71,791 76,880 76,523 Partners' Deficit General partners (Note F) (7,064) (6,798) Limited partners (342,773 units issued and outstanding) (35,636) (30,855) (42,700) (37,653) $ 34,180 $ 38,870 See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except unit data) Years Ended December 31, 2001 2000 1999 Revenues: Rental income $26,609 $27,859 $28,533 Other income 2,234 2,234 2,018 Gain on sale of investment property (Note E) -- 3,440 638 Casualty gains (Note H) 236 154 -- Total revenues 29,079 33,687 31,189 Expenses: Operating 11,267 11,242 11,146 General and administrative 1,929 1,844 1,942 Depreciation 4,082 4,161 4,398 Interest 5,615 5,851 5,661 Property taxes 1,846 1,908 1,924 Total expenses 24,739 25,006 25,071 Income before extraordinary item 4,340 8,681 6,118 Extraordinary loss on early extinguishment of debt (Note D) (182) (207) -- Net income (Note I) $ 4,158 $ 8,474 $ 6,118 Net income allocated to general partners (4%) $ 166 $ 339 $ 245 Net income allocated to limited partners (96%) 3,992 8,135 5,873 Net income $ 4,158 $ 8,474 $ 6,118 Per limited partnership unit: Income before extraordinary item $ 12.16 $ 24.31 $ 17.13 Extraordinary loss on early extinguishment of debt (.51) (0.58) -- Net income $ 11.65 $ 23.73 $ 17.13 Distributions per limited partnership unit $ 25.59 $ 31.32 $ 49.29 See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' DEFICIT (in thousands, except unit data) Limited Partnership General Limited Units Partners Partners Total Original capital contributions 343,106 $ 1 $171,553 $171,554 Partners' deficit at December 31, 1998 342,773 $ (6,175) $(17,230) $(23,405) Net income for the year ended December 31, 1999 -- 245 5,873 6,118 Distributions to partners -- (704) (16,897) (17,601) Partners' deficit at December 31, 1999 342,773 (6,634) (28,254) (34,888) Net income for the year ended December 31, 2000 -- 339 8,135 8,474 Distributions to partners -- (503) (10,736) (11,239) Partners' deficit at December 31, 2000 342,773 (6,798) (30,855) (37,653) Net income for the year ended December 31, 2001 -- 166 3,992 4,158 Distributions to partners -- (432) (8,773) (9,205) Partners' deficit at December 31, 2001 342,773 $ (7,064) $(35,636) $(42,700) See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES IV CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) Year Ended December 31, 2001 2000 1999 Cash flows from operating activities: Net income $ 4,158 $ 8,474 $ 6,118 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 4,082 4,161 4,398 Amortization of loan costs 221 281 315 Gain on sale of investment property -- (3,440) (638) Casualty gain (236) (154) -- Extraordinary loss on early extinguishment of debt 182 207 -- Change in accounts: Receivables and deposits 668 327 32 Other assets 47 (22) (203) Accounts payable (817) 61 581 Tenant security deposit liabilities 9 (18) (62) Accrued property taxes (122) 27 (25) Other liabilities (563) 228 247 Net cash provided by operating activities 7,629 10,132 10,763 Cash flows from investing activities: Property improvements and replacements (3,895) (5,624) (5,207) Net proceeds from sale of investment property -- 2,508 1,891 Net withdrawals from restricted escrows 256 502 1,341 Net insurance proceeds from casualties 298 354 -- Net cash used in investing activities (3,341) (2,260) (1,975) Cash flows from financing activities: Payments on mortgage notes payable (566) (512) (458) Repayment of mortgage notes payable (8,750) (12,224) (1,780) Proceeds from mortgage notes payable 11,000 18,035 2,460 Prepayment penalties (110) (30) -- Loan costs paid (471) (530) (47) Distributions to partners (9,039) (15,155) (13,283) Net cash used in financing activities (7,936) (10,416) (13,108) Net decrease in cash and cash equivalents (3,648) (2,544) (4,320) Cash and cash equivalents at beginning of the year 6,377 8,921 13,241 Cash and cash equivalents at end of year $ 2,729 $ 6,377 $ 8,921 Supplemental disclosure of noncash activity: Extinguishment of debt in connection with sale of investment property $ -- $ 4,505 $ -- Supplemental Disclosures of Cash Flow Information and Non-Cash Activities: At December 31, 2001 and 2000, distributions payable to partners were each adjusted by approximately $166,000 and $197,000 for non-cash activity, respectively. At December 31, 1999, distributions to partners of approximately $4,318,000 were declared and approximately $4,113,000 of this balance was paid during the year ended December 31, 2000. The remaining balance is deferred per the Partnership Agreement. Cash paid for interest was approximately $5,408,000, $5,552,000 and $5,372,000 for the years ended December 31, 2001, 2000 and 1999, respectively. See Accompanying Notes to Consolidated Financial Statements CONSOLIDATED CAPITAL PROPERTIES IV NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 Note A - Organization and Significant Accounting Policies Organization: Consolidated Capital Properties IV (the "Partnership" or "Registrant"), a California limited partnership, was formed on September 22, 1981, to operate and hold real estate properties. The general partner of the Partnership is ConCap Equities, Inc. (the "General Partner" or "CEI"), a Delaware corporation. Additionally, the General Partner is a subsidiary of Apartment Investment and Management Company ("AIMCO"), a publicly traded real estate investment trust. The directors and officers of the General Partner also serve as executive officers of AIMCO. The Partnership Agreement provides that the Partnership is to terminate on December 31, 2011 unless terminated prior to that date. As of December 31, 2001, the Partnership operates 15 residential properties in or near major urban areas in the United States. Upon the Partnership's formation in 1981, Consolidated Capital Equities Corporation ("CCEC"), a Colorado corporation, was the corporate general partner and Consolidated Capital Management Company ("CCMC"), a California general partnership, was the non-corporate general partner. In 1988, through a series of transactions, Southmark Corporation ("Southmark") acquired controlling interest in CCEC. In December 1988, CCEC filed for reorganization under Chapter 11 of the United States Bankruptcy Code. In 1990, as part of CCEC's reorganization plan, CEI acquired CCEC's general partner interests in the Partnership and in 15 other affiliated public limited partnerships (the "Affiliated Partnerships") and CEI replaced CCEC as managing general partner in all 16 partnerships. The selection of CEI as the sole managing general partner was approved by a majority of the limited partners in the Partnership and in each of the Affiliated Partnerships pursuant to a solicitation of the Limited Partners dated August 10, 1990. As part of the solicitation, the Limited Partners also approved an amendment to the Partnership Agreement to limit changes of control of the Partnership, and the conversion of CCMC from a general partner to a Special Limited Partner, thereby leaving CEI as the sole general partner of the Partnership. On November 14, 1990, CCMC was dissolved and its Special Limited Partnership interest was divided among its former partners. All of CEI's outstanding stock is owned by Insignia Properties Trust ("IPT"), which is an affiliate of AIMCO. In December 1994, the parent of GII Realty, Inc., entered into a transaction (the "Insignia Transaction") in which an affiliate of Insignia acquired an option (exercisable in whole or in part from time to time) to purchase all of the stock of GII Realty, Inc. and, pursuant to a partial exercise of such option, acquired 50.5% of that stock. As part of the Insignia Transaction, the Insignia affiliate also acquired all of the outstanding stock of Partnership Services, Inc., an asset management entity, and a subsidiary of Insignia acquired all of the outstanding stock of Coventry Properties, Inc., a property management entity. In addition, confidentiality, non-competition, and standstill arrangements were entered into between certain of the parties. Those arrangements, among other things, prohibit GII Realty's former sole shareholder from purchasing Partnership Units for a period of three years. On October 24, 1995, the Insignia affiliate exercised the remaining portion of its option to purchase all of the remaining outstanding capital stock of GII Realty, Inc. Consolidation: The consolidated financial statements include the Partnership's majority interest in a joint venture which owns South Port Apartments. The Partnership has the ability to control the major operating and financial policies of the joint venture. No minority interest has been reflected for the joint venture because minority interests are limited to the extent of their equity capital, and losses in excess of the minority interest equity capital are charged against the Partnership's interest. Should the losses reverse, the Partnership would be credited with the amount of minority interest losses previously absorbed. The other partner of this joint venture is AIMCO Properties, LP, an affiliate of the General Partner. The Partnership's consolidated financial statements also include the accounts of the Partnership, its wholly-owned partnerships, and its 99% limited partnership interest in Briar Bay Apartments Associates, Ltd., Post Ridge Associates, Ltd., Concap River's Edge Associates, Ltd., Foothill Chimney Associates, L.P., and ConCap Stratford Associates, Ltd. The Partnership may remove the general partner of its 99% owned partnerships; therefore, the partnerships are deemed controlled and therefore consolidated by the Partnership. All significant interpartnership balances have been eliminated. Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and in banks. At certain times, the amount of cash deposited at a bank may exceed the limit on insured deposits. Cash balances include approximately $2,504,000 and $2,899,000 at December 31, 2001 and 2000, respectively, that are maintained by the affiliated management company on behalf of affiliated entities in a cash concentration account. Security Deposits: The Partnership requires security deposits from lessees for the duration of the lease and such deposits are included in receivables and deposits. Deposits are refunded when the tenant vacates, provided the tenant has not damaged its space and is current on its rental payments. Restricted Escrows: Capital Improvement Reserves - At the time of the refinancings of the mortgage notes payable encumbering Nob Hill Villa, the Arbours of Hermitage, Briar Bay, Chimney Hill, Citadel Village, Foothill Place, Knollwood, Village East, Lake Forest and South Port, approximately $1,638,000 was designated for certain capital improvements. At December 31, 2001, the total remaining escrow balance is approximately $36,000 and $213,000 for Lake Forest and South Port Apartments, respectively. The capital improvement reserves for Nob Hill Villa, Arbours of Hermitage, Briar Bay, Chimney Hill, Citadel Village, Foothill Place, Knollwood and Village East had been fully utilized as of December 31, 2001. Replacement Reserve Account - At the time of the refinancing of the mortgage notes payable encumbering the Arbours of Hermitage, Briar Bay, Chimney Hill, Citadel Village, Foothill Place, Knollwood, and Village East, $507,000 of the proceeds, ranging from $191 to $325 per unit, were designated for replacement reserves. These funds were established to cover necessary repairs and replacements of existing improvements. At December 31, 2001, the total remaining reserve balance was approximately $418,000. Investments in Real Estate: Investment properties consist of fifteen apartment complexes, which are stated at cost. Acquisition fees are capitalized as a cost of real estate. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of", the Partnership records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. The impairment loss is measured by comparing the fair value of the assets to its carrying amount. Costs of apartment properties that have been permanently impaired have been written down to appraised value. No adjustments for impairment of value were recorded in any of the years ended December 31, 2001, 2000 or 1999. See "Recent Accounting Pronouncements" below. Depreciation: Depreciation is provided by the straight-line method over the estimated lives of the investment properties and related personal property. For Federal income tax purposes, the accelerated cost recovery method is used (1) for real property over 18 years for additions after March 15, 1984, and before May 9, 1985, and 19 years for additions after May 8, 1985 and before January 1, 1987. As a result of the Tax Reform Act of 1986, for additions after December 31, 1986, the modified accelerated cost recovery method is used for depreciation of (1) real property over 27 1/2 years and (2) personal property additions over 5 years. Leases: The Partnership generally leases apartment units for twelve-month terms or less. The Partnership recognizes income as earned on its leases. In addition, the General Partner's policy is to offer rental concessions during particularly slow months or in response to heavy competition from other similar complexes in the area. Concessions are charged against rental income as incurred. Loan Costs: Loan costs, net of accumulated amortization, of approximately $1,146,000 and $1,180,000 at December 31, 2001 and 2000, respectively, are amortized using the straight-line method over the lives of the related mortgage notes. Unamortized loan costs are included in other assets. Amortization of loan costs is included in interest expense. Fair Value of Financial Statements: SFAS No. 107, "Disclosures about Fair Value of Financial Instruments", as amended by SFAS No. 119, "Disclosures about Derivative Financial Instruments and Fair Value of Financial Instruments", requires disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate fair value. Fair value is defined in the SFAS as the amount at which the instruments could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The Partnership believes that the carrying amount of its financial instruments (except for long term debt) approximates their fair value due to the short term maturity of these instruments. The fair value of the Partnership's long term debt, after discounting the scheduled loan payments to maturity, approximates its carrying balance. Allocation of Net Income and Net Loss: The Partnership Agreement provides for net income (losses) and distributions of distributable cash from operations to be allocated generally 96% to the Limited Partners and 4% to the General Partner. Net Income (Loss) Per Limited Partnership Unit: Net income (loss) per Limited Partnership Unit is computed by dividing net income (loss) allocated to the Limited Partners by the number of Units outstanding. Per Unit information has been computed based on the number of Units outstanding at the beginning of each year. Segment Reporting: SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information" established standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. It also established standards for related disclosures about products and services, geographic areas, and major customers. As defined in SFAS No. 131, the Partnership has only one reportable segment. The General Partner believes that segment-based disclosures will not result in a more meaningful presentation than the consolidated financial statements as currently presented. Advertising Costs: Advertising costs of approximately $469,000, $543,000 and $549,000 in 2001, 2000 and 1999, respectively, are charged to operating expense as incurred. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Commitments: On September 16, 2000, the Partnership sought the vote of the limited partners to amend the Partnership Agreement to eliminate the requirement for the Partnership to maintain reserves equal to at least 5% of the limited partners' capital contributions less distributions as reserve requirements of the Partnership. The vote, sought pursuant to a Consent Solicitation, expired on October 16, 2000 at which time the amendment was approved by the requisite percent of limited partnership units. Reclassification: Certain reclassifications have been made to the 1999 balances to conform to the 2000 and 2001 presentations. Recent Accounting Pronouncements In August 2001, the Financial Accounting Standards Board issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets". SFAS No. 144 provides accounting guidance for financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The General Partner does not anticipate that its adoption will have a material effect on the financial position or results of operations of the Partnership. 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 IPT merged into 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 General Partner. The 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 General Partner and its affiliates for the management and administration of all of the Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursements of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with the General Partner and/or its affiliates were incurred during the years ended December 31, 2001, 2000 and 1999: 2001 2000 1999 (in thousands) Property management fees (included in operating expense) $1,569 $1,515 $1,547 Reimbursements for services of affiliates (included in investment properties, general and administrative expense and operating expense) 2,172 1,103 565 Partnership management fee (included in general and administrative expense) 430 535 1,084 Loan costs (included in other assets) 110 180 25 Real estate commission -- 268 -- During the years ended December 31, 2001, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $1,569,000, $1,515,000 and $1,547,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Affiliates of the General Partner received reimbursement of accountable expenses amounting to approximately $2,172,000, $1,103,000 and $565,000, for the years ended December 31, 2001, 2000 and 1999, respectively. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $1,208,000, $159,000 and $31,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The construction management service fees are calculated based on a percentage of current and certain prior period additions to investment properties and are being depreciated over 15 years. The Limited Partnership Agreement ("Partnership Agreement") provides for a special management fee equal to 9% of the total distributions made to the limited partners from cash flow provided by operations to be paid to the General Partner for executive and administrative management services. Affiliates of the General Partner paid approximately $430,000, $535,000 and $1,084,000 under this provision of the Partnership Agreement to the General Partner during the years ended December 31, 2001, 2000 and 1999, respectively. In addition to reimbursement for services of affiliates, the Partnership paid an affiliate of the General Partner approximately $110,000, $180,000 and $25,000 in 2001, 2000 and 1999, respectively, for loan costs which are capitalized and included with other assets on the consolidated balance sheets. These loan costs were associated with the refinancing of two of the Partnership's properties in 2001, four of the Partnership's properties in 2000 and one of the Partnership's properties in 1999 (see "Note D"). For acting as real estate broker in connection with the sale of Stratford Place Apartments, a real estate commission of approximately $228,000 was accrued as of December 31, 2000 and was paid to the General Partner during the year ended December 31, 2001. For acting as real estate broker in connection with the sale of Overlook Apartments in December 1999, the General Partner was paid a real estate commission of approximately $40,000 during the year ended December 31, 2000. When the Partnership terminates, the General Partner will have to return these commissions if the limited partners do not receive their original invested capital plus a 6% per annum cumulative return. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $250,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 186,758.50 limited partnership units in the Partnership representing 54.48% of the outstanding units at December 31, 2001. 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 either through private purchases or tender offers. 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 voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 54.48% of the outstanding units, AIMCO is in a position to control all such 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 General Partner because of its affiliation with the General Partner. Note D - Mortgage Notes Payable The principle terms of mortgage notes payable are as follows: Principal Principal Monthly Principal Balance At Balance At Payment Stated Balance December 31, December 31, Including Interest Maturity Due At Property 2001 2000 Interest Rate Date Maturity The Apartments $ 4,601 $ 4,703 $ 41 (b) 8.37% 03/20 $ -- Arbours of Hermitage Apartments 5,650 5,650 33 (a) 6.95% 12/05 5,650 Briar Bay Racquet Club Apartments 3,500 3,500 20 (a) 6.95% 12/05 3,500 Chimney Hill Apartments 5,400 5,400 31 (a) 6.95% 12/05 5,400 Citadel Apartments 4,536 4,638 40 (c) 8.25% 03/20 -- Citadel Village Apartments 2,450 2,450 14 (a) 6.95% 12/05 2,450 Foothill Place Apartments 10,100 10,100 58 (a) 6.95% 12/05 10,100 Knollwood Apartments 6,780 6,780 39 (a) 6.95% 12/05 6,780 Lake Forest Apartments 6,475 4,700 51 (e) 7.13% 10/21 -- Nob Hill Villa Apartments 6,789 6,926 64 9.20% 04/05 6,250 Point West Apartments 2,350 2,407 20 7.86% 12/19 -- Post Ridge Apartments 4,500 4,050 34 (f) 6.63% 01/22 -- Rivers Edge Apartments 3,891 3,979 33 (d) 7.82% 09/20 -- South Port Apartments 4,303 4,358 31 7.19% 12/04 4,119 Village East Apartments 2,150 2,150 12 (a) 6.95% 12/05 2,150 Total $73,475 $71,791 $ 521 $46,399 (a) Monthly payments of interest only at the stated rate until maturity. (b) Debt was obtained effective February 2, 2000 (see below for further explanation). (c) Debt was obtained effective February 28, 2000 (see below for further explanation). (d) Debt was obtained effective August 31, 2000 (see below for further explanation). (e) Debt was obtained effective September 28, 2001 (see below for further explanation). (f) Debt was obtained effective December 21, 2001 (see below for further explanation). On December 21, 2001, the Partnership refinanced the mortgage encumbering Post Ridge Apartments. The refinancing replaced mortgage indebtedness of approximately $4,050,000 with a new mortgage of $4,500,000. The mortgage was refinanced at a rate of 6.63% compared to the prior rate of 7.33% and matures on January 1, 2022. Capitalized loan costs incurred for the refinancing were approximately $254,000. The Partnership wrote off approximately $32,000 in unamortized loan costs and paid prepayment penalties of approximately $110,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $142,000. On September 27, 2001, the Partnership refinanced the mortgage encumbering Lake Forest Apartments. The refinancing replaced mortgage indebtedness of approximately $4,700,000 with a new mortgage of $6,500,000. The mortgage was refinanced at a rate of 7.13% compared to the prior rate of 7.33% and matures on October 1, 2021. Capitalized loan costs incurred for the refinancing were approximately $217,000. The Partnership wrote off unamortized loan costs, which resulted in an extraordinary loss on early extinguishment of debt of approximately $40,000. On August 31, 2000, the Partnership refinanced the mortgage encumbering Rivers Edge Apartments. The refinancing replaced mortgage indebtedness of approximately $1,895,000 with a new mortgage of $4,000,000. The mortgage was refinanced at a rate of 7.82% compared to a prior rate of 8.40% and matures on September 1, 2020. Capitalized loan costs incurred for the refinancing were approximately $90,000. There was no extraordinary loss recognized due to the refinancing occurring at the maturity of the prior mortgage. On May 31, 2000, the Partnership refinanced the mortgage encumbering Stratford Place Apartments. The refinancing replaced mortgage indebtedness of approximately $2,493,000 with a new mortgage of $4,550,000. The mortgage was refinanced at a rate of 8.48% compared to the prior rate of 8.65% and matures on June 1, 2020. Capitalized loan costs incurred for the refinancing were approximately $149,000. The Partnership wrote off approximately $4,000 in unamortized loan costs and paid prepayment penalties of approximately $1,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $5,000. On December 28, 2000, the Partnership sold Stratford Place Apartments to an unaffiliated third party whom assumed the mortgage encumbering the property. The Partnership wrote off the unamortized loan costs resulting in an additional extraordinary loss on early extinguishment of debt of approximately $143,000. On February 28, 2000, the Partnership refinanced the mortgage encumbering Citadel Apartments. The refinancing replaced mortgage indebtedness of approximately $4,548,000 with a new mortgage of $4,710,000. The mortgage was refinanced at a rate of 8.25% compared to the prior rate of 8.38% and matures on March 1, 2020. Capitalized loan costs incurred for the refinancing were approximately $142,000. The Partnership wrote off approximately $19,000 in unamortized loan costs and paid prepayment penalties of approximately $7,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $26,000. On February 2, 2000, the Partnership refinanced the mortgage encumbering The Apartments. The refinancing replaced mortgage indebtedness of approximately $3,288,000 with a new mortgage of $4,775,000. The mortgage was refinanced at a rate of 8.37% compared to the prior rate of 8.34% and matures on March 1, 2020. Capitalized loan costs incurred for the refinancing were approximately $129,000. The Partnership wrote off approximately $11,000 in unamortized loan costs and paid prepayment penalties of approximately $22,000 resulting in an extraordinary loss on early extinguishment of debt of approximately $33,000. On November 9, 1999, the Partnership obtained financing on Point West Apartments in the amount of $2,460,000. The mortgage was financed at a rate of 7.86% and matures on December 1, 2019. Capitalized loan costs incurred for the financing were approximately $47,000 during the year ended December 31, 1999. An additional $20,000 of loan costs were incurred during the year ended December 31, 2000. The notes payable represent borrowings on the properties purchased by the Partnership. The notes are non-recourse, and are collateralized by deeds of trust on the investment properties. The notes mature between 2004 and 2022 and bear interest at rates ranging from 6.63% to 9.20%. Various mortgages require prepayment penalties if repaid prior to maturity. Further, the properties may not be sold subject to existing indebtedness. Future annual principal payments required under the terms of the mortgage notes payable subsequent to December 31, 2001, are as follows (in thousands): 2002 $ 845 2003 923 2004 5,112 2005 43,138 2006 875 Thereafter 22,582 Total $73,475 Note E - Disposition of Real Estate On December 28, 2000, ConCap Stratford Associated, Ltd. sold Stratford Place Apartments to an unaffiliated third party for $7,600,000. After payment of closing costs of approximately $587,000, the net proceeds received by the Partnership were approximately $2,508,000. The purchaser assumed the mortgage encumbering the property of approximately $4,505,000. The gain on the sale of Stratford Place Apartments during the fourth quarter of 2000 was approximately $3,440,000. The sales transactions are summarized as follows (amounts in thousands): Net sale price, net of selling costs $ 7,013 Less: Net real estate (1) (3,574) Net other assets 1 Gain on sale of real estate $ 3,440 (1) Net of accumulated depreciation of approximately $4,851,000. On December 14, 1999, Overlook Associates, Ltd. sold Overlook Apartments to an unaffiliated third party for $1,975,000. After payment of closing costs of approximately $84,000 the net proceeds received by the Partnership were approximately $1,891,000. The Partnership used most of the proceeds to pay off the mortgage encumbering the property of approximately $1,780,000. The remaining net proceeds were used to establish additional cash reserves for the Partnership. The Partnership's gain on the sale during the fourth quarter of 1999 was approximately $638,000. Note F - Distributions During 2001, the Partnership declared and paid distributions of approximately $9,139,000 (approximately $8,773,000 to the limited partners or $25.59 per limited partnership unit) consisting of approximately $4,981,000 (approximately $4,782,000 to the limited partners or $13.95 per limited partnership unit) from operations and approximately $4,158,000 (approximately $3,991,000 to the limited partners or $11.64 per limited partnership unit) of refinance proceeds for Lake Forest Apartments and sale proceeds of Stratford Place Apartments, which sold in December of 2000. Approximately $166,000 of these distributions from proceeds is payable to the General Partner and special limited partners as this portion is subordinated and deferred per the Partnership Agreement until the limited partners receive 100% of their original capital contributions from surplus cash. In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $66,000 was distributed to the general partner of the majority owned sub-tier limited partnerships. During 2000, the Partnership declared distributions of approximately $11,183,000 (approximately $10,736,000 to the limited partners or $31.32 per limited partnership unit) consisting of approximately $6,194,000 (approximately $5,947,000 to the limited partners or $17.35 per limited partnership unit) from operations and approximately $4,989,000 (approximately $4,789,000 to the limited partners or $13.97 per limited partnership unit) of refinancing proceeds from The Apartments, Citadel Apartments, Rivers Edge Apartments, and Stratford Place Apartments and sale proceeds from Overlook Apartments which sold December 1999. Approximately $197,000 of the distribution from proceeds was payable at December 31, 2000 to the General Partner and special limited partners as this distribution is subordinated and deferred per the Partnership Agreement until the limited partners receive 100% of their original capital contributions from surplus funds. In conjunction with the transfer of funds from their certain majority-owned sub-tier limited partnerships to the Partnership, approximately $56,000 was distributed to the general partner of the majority owned sub-tier limited partnerships. During 1999, the Partnership paid distributions of approximately $13,283,000 (approximately $12,730,000 to the limited partners or $37.14 per limited partnership unit) consisting of cash flow from operations totaling approximately $10,670,000 (approximately $10,117,000 to the limited partners or $29.52 per limited partnership unit) and approximately $2,613,000 (all to the limited partners or $7.62 per limited partnership unit) representing funds from previously undistributed refinance proceeds from 1996 and 1997. As of December 31, 1999, the Partnership had a distribution payable of approximately $4,318,000 (approximately $3,921,000 to the limited partners or $11.44 per limited partnership unit) consisting of cash from operations of approximately $1,874,000 (approximately $1,679,000 to the limited partners or $4.90 per limited partnership unit) and a distribution of refinance proceeds representing funds from the financing of Point West Apartments of approximately $2,444,000 (approximately $2,242,000 to the limited partners or $6.54 per limited partnership unit). In January 2000, approximately $4,113,000 of this distribution was paid and the remainder was accrued at December 31, 2000. Note G - Real Estate and Accumulated Depreciation Initial Cost To Partnership (in thousands) Buildings Net Cost and Capitalized Personal Subsequent to Description Encumbrances Land Property Acquisition (in thousands) (in thousands) The Apartments $ 4,601 $ 438 $ 6,218 $ 2,646 Arbours of Hermitage Apartments 5,650 547 8,574 5,759 Briar Bay Racquet Club Apartments 3,500 1,084 5,271 1,811 Chimney Hill Apartments 5,400 659 7,188 4,040 Citadel Apartments 4,536 695 5,619 1,742 Citadel Village Apartments 2,450 337 3,334 909 Foothill Place Apartments 10,100 3,492 9,435 3,592 Knollwood Apartments 6,780 345 7,065 5,056 Lake Forest Apartments 6,475 692 5,811 3,475 Nob Hill Villa Apartments 6,789 490 8,922 4,642 Point West Apartments 2,350 285 2,919 109 Post Ridge Apartments 4,500 143 2,498 2,825 Rivers Edge Apartments 3,891 512 2,160 926 South Port Apartments 4,303 1,175 6,496 1,297 Village East Apartments 2,150 184 2,236 1,555 Totals $73,475 $11,078 $83,746 $40,384 Gross Amount At Which Carried At December 31, 2001 (in thousands) Buildings And Related Personal Accumulated Date of Date Depreciable Description Land Property Total Depreciation Construction Acquired Life-Years (in thousands) The Apartments $ 438 $ 8,864 $ 9,302 $ 7,860 1973 04/84 5-18 Arbours of Hermitage Apartments 547 14,333 14,880 11,601 1973 09/83 5-18 Briar Bay Racquet Club Apartments 1,084 7,082 8,166 6,645 1975 09/82 5-18 Chimney Hill Apartments 659 11,228 11,887 10,121 1973 08/82 5-18 Citadel Apartments 694 7,362 8,056 6,816 1973 05/83 5-18 Citadel Village Apartments 337 4,243 4,580 3,672 1974 12/82 5-18 Foothill Place Apartments 3,402 13,117 16,519 10,958 1973 08/85 5-18 Knollwood Apartments 345 12,121 12,466 10,160 1972 07/82 5-18 Lake Forest Apartments 692 9,286 9,978 7,910 1971 04/84 5-18 Nob Hill Villa Apartments 490 13,564 14,054 11,816 1971 04/83 5-18 Point West Apartments 206 3,107 3,313 2,561 1973 11/85 5-40 Post Ridge Apartments 143 5,323 5,466 4,215 1972 07/82 5-18 Rivers Edge Apartments 512 3,086 3,598 2,763 1976 04/83 5-18 South Port Apartments 1,175 7,793 8,968 6,881 -- 11/83 5-18 Village East Apartments 183 3,792 3,975 3,236 1973 12/82 5-18 Totals $10,907 $124,301 $135,208 $107,215 Reconciliation of "Real Estate and Accumulated Depreciation": Years Ended December 31, 2001 2000 1999 (in thousands) Real Estate Balance at beginning of year $131,514 $134,633 $134,232 Additions 3,895 5,624 5,207 Property dispositions - other (201) (8,743) (4,806) Balance at end of year $135,208 $131,514 $134,633 Accumulated Depreciation Balance at beginning of year $103,272 $104,057 $103,250 Additions charged to expense 4,082 4,161 4,398 Property dispositions - other (139) (4,946) (3,591) Balance at end of year $107,215 $103,272 $104,057 The aggregate cost of the real estate for Federal income tax purposes at December 31, 2001, 2000 and 1999, is approximately $153,587,000, $149,980,000 and $152,079,000, respectively. The accumulated depreciation taken for Federal income tax purposes at December 31, 2001, 2000 and 1999, is approximately $120,682,000, $116,415,000 and $116,541,000, respectively. Note H - Casualties In April 2001, The Arbours of Hermitage had a fire, which damaged one apartment building. Insurance proceeds of approximately $83,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $83,000 for the year ended December 31, 2001 as the damaged assets were fully depreciated at the time of the fire. In May 2000, Nob Hill Villa Apartments had a fire, which damaged two apartment units. Insurance proceeds of approximately $33,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $25,000 for the year ended December 31, 2001 which represents the excess of the proceeds received as of December 31, 2001 over the write-off of the undepreciated damaged assets. In March 2000, South Port Apartments had hail and wind damage, which affected all 240 units and damaged 100% of the roof, which was replaced. Insurance proceeds of approximately $182,000 were received during the year ended December 31, 2001. The Partnership recognized a casualty gain of approximately $128,000 for the year ended December 31, 2001 which represents the excess of the proceeds received as of December 31, 2001 over the write-off of the undepreciated damaged assets. In January 2000, Stratford Place Apartments had a fire which damaged 12 apartment units and 30% of the roof. Insurance proceeds of approximately $354,000 were received during the year ended December 31, 2000. The General Partner successfully completed the repairs prior to the sale of the property on December 20, 2000. The Partnership recognized a casualty gain of approximately $154,000 for the year ended December 31, 2000. Note I - Income Taxes The Partnership is classified as a partnership for Federal income tax purposes. Accordingly, no provision for income taxes is made in the consolidated financial statements of the Partnership. Taxable income or loss of the Partnership is reported in the income tax returns of its partners. The following is a reconciliation between net income as reported in the consolidated financial statements and Federal taxable income allocated to the partners in the Partnership's information return for the years ended December 31, 2001, 2000 and 1999 (in thousands, except per unit data): 2001 2000 1999 Net income as reported $ 4,158 $ 8,474 $ 6,118 (Deduct) add: Deferred revenue and other liabilities (89) (151) (393) Depreciation differences (185) 15 473 Accrued expenses 20 30 39 Minority interest (255) (302) (220) Other (22) 41 (29) Gain (loss) on casualty/ disposition/foreclosure (343) 412 (514) Federal taxable income $ 3,284 $ 8,519 $ 5,474 Federal taxable income per Limited Partnership unit $ 9.20 $ 23.86 $ 15.33 The following is a reconciliation between the Partnership's reported amounts and Federal tax basis of net liabilities (in thousands): Net liabilities as reported $(42,700) Land and Buildings 18,379 Accumulated depreciation (13,467) Syndication fees 18,871 Other 5,041 Net liabilities - Federal tax basis $(13,876) Note J - 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. (the "Nuanes action") 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 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, among other things, 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; management of the partnerships by the Insignia affiliates; and the series of transactions which closed on October 1, 1998 and February 26, 1999 whereby Insignia and Insignia Properties Trust, respectively, were merged into AIMCO. The plaintiffs seek monetary damages and equitable relief, including judicial dissolution of the Partnership. On June 25, 1998, the General Partner filed a motion seeking dismissal of the action. In lieu of responding to the motion, the plaintiffs filed an amended complaint. The 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 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 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 and an appeal was taken from the order on October 5, 2000. On December 4, 2000, the Court appointed the law firm of Lieff Cabraser Heimann & Bernstein LLP as new lead counsel for plaintiffs and the putative class. Plaintiffs filed a third amended complaint on January 19, 2001. On March 2, 2001, the General Partner and its affiliates filed a demurrer to the third amended complaint. On May 14, 2001, the Court heard the demurrer to the third amended complaint. On July 10, 2001, the Court issued an order sustaining defendants' demurrer on certain grounds. On July 20, 2001, Plaintiffs filed a motion for reconsideration of the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer. On September 7, 2001, Plaintiffs filed a fourth amended class and derivative action complaint. On September 12, 2001, the Court denied Plaintiffs' motion for reconsideration. On October 5, 2001, the General Partner and affiliated defendants filed a demurrer to the fourth amended complaint, which was heard on December 11, 2001. On February 2, 2002, the Court served its order granting in part the demurrer. The Court has dismissed without leave to amend certain of the plaintiffs' claims. On February 11, 2002, plaintiffs filed a motion seeking to certify a putative class comprised of all non-affiliated persons who own or have owned units in the partnerships. The General Partner and affiliated defendants intend to oppose the motion and are scheduled to file their opposition brief on March 26, 2002. A hearing on the motion has been scheduled for April 29, 2002. The Court has set the matter for trial in January 2003. During the third quarter of 2001, a complaint (the "Heller action") was filed against the same defendants that are named in the Nuanes action, captioned Heller v. Insignia Financial Group. On or about August 6, 2001, plaintiffs filed a first amended complaint. The first amended complaint in the Heller action is brought as a purported derivative action, and asserts claims for among other things breach of fiduciary duty; unfair competition; conversion, unjust enrichment; and judicial dissolution. Plaintiffs in the Nuanes action filed a motion to consolidate the Heller action with the Nuanes action and stated that the Heller action was filed in order to preserve the derivative claims that were dismissed without leave to amend in the Nuanes action by the Court order dated July 10, 2001. On October 5, 2001, the General Partner and affiliated defendants moved to strike the first amended complaint in its entirety for violating the Court's July 10, 2001 order granting in part and denying in part defendants' demurrer in the Nuanes action, or alternatively, to strike certain portions of the complaint based on the statute of limitations. Other defendants in the action demurred to the fourth amended complaint, and, alternatively, moved to strike the complaint. On December 11, 2001, the court heard argument on the motions and took the matters under submission. On February 4, 2002, the Court served notice of its order granting defendants' motion to strike the Heller complaint as a violation of its July 10, 2001 order in the Nuanes action. The General Partner does not anticipate that any costs, whether legal or settlement costs, associated with these cases 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. Note K - Selected Quarterly Financial Data (unaudited) The following is a summary of the unaudited quarterly results of operations for the Partnership (in thousands, except per unit data): 2001 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total Total revenues $ 7,125 $ 7,224 $ 7,366 $ 7,364 $ 29,079 Total expenses (5,974) (6,467) (6,221) (6,077) (24,739) Income before extraordinary item 1,151 757 1,145 1,287 4,340 Extraordinary loss on early extinguishment of debt -- -- (40) (142) (182) Net income $ 1,151 $ 757 $ 1,105 $ 1,145 $ 4,158 Per limited partnership unit: Income before extraordinary item $ 3.22 $ 2.12 $ 3.21 $ 3.61 $ 12.16 Extraordinary loss on early extinguishment of debt -- -- (.11) (0.40) (0.51) Net income $ 3.22 $ 2.12 $ 3.10 $ 3.21 $ 11.65 2000 1st 2nd 3rd 4th Quarter Quarter Quarter Quarter Total Total revenues $ 7,399 $ 7,548 $ 7,539 $ 11,201 $ 33,687 Total expenses (6,180) (6,175) (6,284) (6,367) (25,006) Income before extraordinary item 1,219 1,373 1,255 4,834 8,681 Extraordinary loss on early extinguishment of debt (59) (5) -- (143) (207) Net income $ 1,160 $ 1,368 $ 1,255 $ 4,691 $ 8,474 Per limited partnership unit: Income before extraordinary item $ 3.41 $ 3.84 $ 3.52 $ 13.54 $ 24.31 Extraordinary loss on early extinguishment of debt (0.16) (0.01) -- (0.41) (0.58) Net income $ 3.25 $ 3.83 $ 3.52 $ 13.13 $ 23.73 The increase in net income for the fourth quarter of 2000 is due to the sale of Stratford Place Apartments which resulted in a gain on the sale of approximately $3,440,000. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Consolidated Capital Properties IV (the "Registrant" or "Partnership") has no officers or directors. ConCap Equities, Inc. ("CEI" or the "General Partner") manages and controls the Partnership and has general responsibility and authority in all matters affecting its business. The names of the directors, and executive officers of the General Partner, their ages and the nature of all positions presently held by them are set forth below. Name Age Position Patrick J. Foye 44 Executive Vice President and Director Martha L. Long 42 Senior Vice President and Controller Patrick J. Foye has been Executive Vice President and Director of the General Partner since October 1, 1998. Mr. Foye has served as Executive Vice President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to 1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long Island Power Authority and serves as a member of the New York State Privatization Council. He received a B.A. from Fordham College and a J.D. from Fordham University Law School. Martha L. Long has been Senior Vice President and Controller of the General Partner since October 1998 as a result of the acquisition of Insignia Financial Group, Inc. As of February 2001, Ms. Long was also appointed head of the service business for AIMCO. From June 1994 until January 1997, she was the Controller for Insignia, and was promoted to Senior Vice President - Finance and Controller in January 1998, retaining that title until October 1998. From 1988 to June 1994, Ms. Long was Senior Vice President and Controller for The First Savings Bank, FSB in Greenville, South Carolina. One or more of the above persons are also directors and/or officers of a general partner (or general partner of a general partner) of limited partnerships which either have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15(d) of such Act. Further, one or more of the above persons are also directors and/or officers of Apartment Investment and Management Company and the general partner of AIMCO Properties, L.P., entities that have a class of securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934, or are subject to the reporting requirements of Section 15 (d) of such Act. The executive officers and director of the General Partner fulfill the obligations of the Audit Committee and oversee the Partnership's financial reporting process on behalf of the General Partner. Management has the primary responsibility for the financial statements and the reporting process including the systems of internal controls. In fulfilling its oversight responsibilities, the executive officers and director of the General Partner reviewed the audited financial statements with management including a discussion of the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. The executive officers and director of the General Partner reviewed with the independent auditors, who are responsible for expressing an opinion on the conformity of those audited financial statements with accounting principles generally accepted in the United States, their judgments as to the quality, not just the acceptability, of the Partnership's accounting principles and such other matters as are required to be discussed with the Audit Committee or its equivalent under auditing standards generally accepted in the United States. In addition, the Partnership has discussed with the independent auditors the auditors' independence from management and the Partnership including the matters in the written disclosures required by the Independence Standards Board and considered the compatibility of non-audit services with the auditors' independence. The executive officers and director of the General Partner discussed with the Partnership's independent auditors the overall scope and plans for their audit. In reliance on the reviews and discussions referred to above, the executive officers and director of the General Partner have approved the inclusion of the audited financial statements in the Form 10-K for the year ended December 31, 2001 for filing with the Securities and Exchange Commission. The General Partner has reappointed Ernst & Young LLP as independent auditors to audit the financial statements of the Partnership for the current fiscal year. Fees for the last fiscal year were audit services of approximately $150,000 and non-audit services (principally tax-related) of approximately $84,000. Item 11. Executive Compensation None of the directors and officers of the General Partner received any remuneration from the Registrant during the year ended December 31, 2001. Item 12. Security Ownership of Certain Beneficial Owners and Management (a) Security Ownership of Certain Beneficial Owners Except as provided below, as of December 31, 2001, no person or group was known to CEI to own of record or beneficially more than five percent of the Units of the Partnership: Entity Number of Units Percentage Insignia Properties, LP 67,033.50 19.55% (an affiliate of AIMCO) IPLP Acquisition I, LLC 29,612.50 8.64% (an affiliate of AIMCO) AIMCO Properties, LP 90,112.50 26.29% (an affiliate of AIMCO) Insignia Properties, LP and IPLP Acquisition I, LLC are indirectly, ultimately owned by AIMCO. Their business address is 55 Beattie Place, Greenville, SC 29602. AIMCO Properties, L.P. is indirectly ultimately controlled by AIMCO. Its business address is 2000 South Colorado Blvd., Denver, CO 80222. (b) Beneficial Owners of Management Neither CEI nor any of the directors or officers or associates of CEI own any Units of the Partnership of record or beneficially. (c) Changes in Control Beneficial Owners of CEI As of December 31, 2001, the following persons were known to CEI to be the beneficial owners of more than five percent (5%) of its common stock: Number of Percent Name and Address CEI Shares Of Total Insignia Properties Trust ("IPT") 100,000 100% 55 Beattie Place, Greenville, SC 29602 Effective February 26, 1999, IPT was merged with and into AIMCO. As of December 31, 2001, AIMCO owns 51% of the outstanding common shares of beneficial interest of IPT. Item 13. Certain Relationships and Related Transactions The Partnership has no employees and is dependent on the General Partner and its affiliates for the management and administration of all of the Partnership activities. The Partnership Agreement provides for certain payments to affiliates for services and as reimbursements of certain expenses incurred by affiliates on behalf of the Partnership. The following transactions with the General Partner and/or its affiliates were incurred during the years ended December 31, 2001, 2000 and 1999: 2001 2000 1999 (in thousands) Property management fees $1,569 $1,515 $1,547 Reimbursements for services of affiliates 2,172 1,103 565 Partnership management fee 430 535 1,084 Loan costs 110 180 25 Real estate commission -- 268 -- During the years ended December 31, 2001, 2000 and 1999, affiliates of the General Partner were entitled to receive 5% of gross receipts from all of the Partnership's properties as compensation for providing property management services. The Partnership paid to such affiliates approximately $1,569,000, $1,515,000 and $1,547,000 for the years ended December 31, 2001, 2000 and 1999, respectively. Affiliates of the General Partner received reimbursement of accountable expenses amounting to approximately $2,172,000, $1,103,000 and $565,000, for the years ended December 31, 2001, 2000 and 1999, respectively. Included in these amounts are fees related to construction management services provided by an affiliate of the General Partner of approximately $1,208,000, $159,000 and $31,000 for the years ended December 31, 2001, 2000 and 1999, respectively. The construction management service fees are calculated based on a percentage of current and certain prior period additions to investment properties and are being depreciated over 15 years. The Limited Partnership Agreement ("Partnership Agreement") provides for a special management fee equal to 9% of the total distributions made to the limited partners from cash flow provided by operations to be paid to the General Partner for executive and administrative management services. Affiliates of the General Partner paid approximately $430,000, $535,000 and $1,084,000 under this provision of the Partnership Agreement to the General Partner during the years ended December 31, 2001, 2000 and 1999, respectively. In addition to reimbursement for services of affiliates, the Partnership paid an affiliate of the General Partner approximately $110,000, $180,000 and $25,000 in 2001, 2000 and 1999, respectively, for loan costs which are capitalized and included with other assets on the consolidated balance sheets. These loan costs were associated with the refinancing of two of the Partnership's properties in 2001, four of the Partnership's properties in 2000 and one of the Partnership's properties in 1999 (see "Note D"). For acting as real estate broker in connection with the sale of Stratford Place Apartments, a real estate commission of approximately $228,000 was accrued as of December 31, 2000 and was paid to the General Partner during the year ended December 31, 2001. For acting as real estate broker in connection with the sale of Overlook Apartments in December 1999, the General Partner was paid a real estate commission of approximately $40,000 during the year ended December 31, 2000. When the Partnership terminates, the General Partner will have to return these commissions if the limited partners do not receive their original invested capital plus a 6% per annum cumulative return. Beginning in 2001, the Partnership began insuring its properties up to certain limits through coverage provided by AIMCO which is generally self-insured for a portion of losses and liabilities related to workers compensation, property casualty and vehicle liability. The Partnership insures its properties above the AIMCO limits through insurance policies obtained by AIMCO from insurers unaffiliated with the General Partner. During the year ended December 31, 2001, the Partnership paid AIMCO and its affiliates approximately $250,000 for insurance coverage and fees associated with policy claims administration. In addition to its indirect ownership of the general partner interest in the Partnership, AIMCO and its affiliates owned 186,758.50 limited partnership units in the Partnership representing 54.48% of the outstanding units at December 31, 2001. 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 either through private purchases or tender offers. 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 voting on certain amendments to the Partnership Agreement and voting to remove the General Partner. As a result of its ownership of 54.48% of the outstanding units, AIMCO is in a position to control all such 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 General Partner because of its affiliation with the General Partner. Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K (a) The following documents are filed as part of this report: 1. Financial Statements Consolidated Balance Sheets - December 31, 2001 and 2000 Consolidated Statements of Operations - Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Changes in Partners' Deficit - Years Ended December 31, 2001, 2000 and 1999 Consolidated Statements of Cash Flows - Years Ended December 31, 2001, 2000 and 1999 Notes to Consolidated Financial Statements 2. Schedules All schedules are omitted because either they are not required, or not applicable or the financial information is included in the financial statements or notes thereto. 3. Exhibits S-K Reference Number Document Description 2.1 Agreement and Plan of Merger, dated as of October 1, 1999 by and between AIMCO and IPT; incorporated by reference to Registrant's Current Report on Form 8-K dated October 1, 1999. 3 Certificate of Limited Partnership, as amended to date. 10.1 Property Management Agreement No. 105 dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.2 Property Management Agreement No. 106 dated October 23, 1990, by and between the LeTourneau Associates, Ltd. and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.3 Property Management Agreement No. 107 dated October 23, 1990, by and between Overlook Associates, Ltd. and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.4 Property Management Agreement No., 108 dated October 23, 1990, by and between Park 77 Associates, Ltd. and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.5 Property Management Agreement No., 205 dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.6 Property Management Agreement No., 306 dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.7 Property Management Agreement No., 307 dated October 23, 1990, by and between Point West Associates, Ltd. and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.8 Property Management Agreement No., 403 dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.9 Property Management Agreement No., 404 dated October 23, 1990, by and between Denbigh Village Associates, Ltd. and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.10 Property Management Agreement No., 405 dated October 23, 1990, by and between Stratford Place Associates, Ltd. and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.11 Bill of Sale and Assignment dated October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.12 Assignment and Assumption Agreement dated October 23, 1990, by and between CCEC and ConCap Management Limited Partnership ("CCMLP") (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.13 Assignment and Assumption Agreement as to Certain Property Management Services dated October 23, 1990, by and between CCMLP and ConCap Capital Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.14 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and The Hayman Company (100 Series of Property Management Contracts) (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.15 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and Horn-Barlow Companies (200 Series of Property Management Contracts). (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.16 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and Metro ConCap, Inc. (300 Series of Property Management Contracts). (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.17 Assignment and Assumption Agreement dated October 23, 1990, by and between CCMLP and R&B Realty Group (400 Series of Property Management Contracts). (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.18 Assignment and Assumption Agreement dated February 21, 1991, by and between the Partnership and Greenbriar Apartments Associates Limited Partnership (Property Management Agreement No. 403). CCMLP and Horn-Barlow Companies (200 Series of Property Management Contracts). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.19 Assignment and Assumption Agreement dated April 1, 1991, by and between the Partnership and ConCap Village East Apartments Associates, L.P. (Property Management Agreement No. 205). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.20 Assignment and Assumption Agreement dated April 1, 1991, by and between the Partnership and Nob Hill Apartments Associates, L.P. (Property Management Agreement No. 306). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.21 Assignment and Assumption Agreement dated April 1, 1991, by and between the Partnership and Barnett Regency Tower Associates, Limited Partnership (Property Management Agreement No. 105). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.22 Assignment and Assumption of Property Management Agreement dated August 1, 1991, by and between R & B Realty Group and R & B Apartment Management Company, Inc. (Property Management Agreement with Denbigh Village Associates, Ltd.). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.23 Assignment and Assumption of Property Management Agreement dated August 1, 1991, by and between R & B Realty Group and R & B Apartment Management Company, Inc. (Property Management Agreement with Greenbriar Associates Limited Partnership). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.24 Assignment and Assumption of Property Management Agreement dated August 1, 1991, by and between R & B Realty Group and R & B Apartment Management Company, Inc. (Property Management Agreement with the Partnership concerning Briar Bay Racquet Club). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.25 Assignment and Assumption of Property Management Agreement dated August 1, 1991, by and between R & B Realty Group and R & B Apartment Management Company, Inc. (Property Management Agreement with Stratford Place Associates, Ltd.). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.26 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership and CCP IV Associates, Ltd. (Property Management Agreement No. 306). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.27 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership and CCP IV Associates, Ltd. (Property Management Agreement No. 205). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.28 Assignment and Assumption Agreement dated September 1, 1991, by and between ConCap Village East Apartments Associates, L.P. and CCP IV Associates, Ltd. (Property Management Agreement No. 205). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.29 Assignment and Assumption Agreement dated September 15, 1991, by and between the Partnership and Foothill Chimney Associates Limited Partnership (Property Management Agreement No. 105). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.30 Assignment and Assumption Agreement dated September 15, 1991, by and between the Partnership and Foothill Chimney Associates Limited Partnership (Property Management Agreement No. 205). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.31 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and Horn-Barlow Companies (the "Horn-Barlow Construction Management Agreement") (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.33 Assignment and Assumption Agreement dated September 15, 1991, by and between the Partnership and Foothill Chimney Associates Limited Partnership (Horn-Barlow Construction Management Agreement Concerning Chimney Hill Apartments). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.34 Assignment and Assumption Agreement dated September 1, 1991, by and between ConCap Village East Apartments Associates, L.P. and CCP IV Associates, Ltd. (Village East Construction Agreement). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.35 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and Metro ConCap, Inc. (the "Metro Construction Management Agreement") (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.36 Assignment and Assumption Agreement dated September 1, 1991, by and between the Partnership and CCP IV Associates, Ltd. (Metro Construction Management Agreement concerning Arbour East and Knollwood Apartments). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.37 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and The Hayman Company (the "Hayman Construction Management Agreement") (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.38 Assignment and Assumption Agreement dated September 15, 1991, by and between the Partnership and Foothill Chimney Associates Limited Partnership (Hayman Construction Management Agreement concerning Chimney Hill Apartments). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.39 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between the Partnership and R & B Apartment Management Company, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.40 Construction Management Cost Reimbursement Agreement dated January 1, 1991, by and between ConCap Metro Centre Associates, L.P. and R & B Commercial Management Company, Inc. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.41 Investor Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). . 10.42 Assignment and Assumption Agreement (Investor Services Agreement) dated October 23, 1990, by and between CCEC and ConCap Services Company (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1990). 10.43 Letter of Notice dated December 20, 1991, from Partnership Services, Inc. ("PSI") to the Partnership regarding the change in ownership and dissolution of ConCap Services Company whereby PSI assumed the Investor Services Agreement. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.44 Financial Services Agreement dated October 23, 1990, by and between the Partnership and CCEC (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.45 Assignment and Assumption Agreement (Financial Service Agreement) dated October 23, 1990, by and between CCEC and ConCap Capital Company (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1990). 10.46 Letter of Notice dated December 20, 1991, from PSI to the Partnership regarding the change in ownership and dissolution of ConCap Capital Company whereby PSI (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1991). 10.47 Property Management Agreement No. 419 dated May 13, 1993, by and between the Partnership and Coventry Properties, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.48 Assignment and Assumption Agreement (Property Management Agreement No. 419) dated May 13, 1993, by and between Coventry Properties, Inc., R & B Apartment Management Company, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.49 Assignment and Assumption as to certain Property Management Services dated May 13, 1993, by and between Coventry Properties, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.50 Property Management Agreement No. 419A dated October 11, 1993, by and between ConCap Stratford Associates, Ltd. and Coventry Properties, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.51 Assignment and Assumption Agreement (Property Management Agreement No. 419A) dated October 11, 1993, by and between Coventry Properties, Inc., R & B Apartment Management Company, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.52 Assignment and Agreement as to Certain Property Management Services dated October 11, 1993, by and between Coventry Properties, Inc., and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.53 Property Management Agreement No. 427A dated October 11, 1993, by and between ConCap River's Edge Associates, Ltd. and Coventry Properties, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.54 Assignment and Assumption Agreement (Property Management Agreement No. 427A) dated October 11, 1993, by and between Coventry Properties, Inc., R & B Apartment Management Company, Inc. and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.55 Assignment and Agreement as to Certain Property Management Services dated October 11, 1993, by and between Coventry Properties, Inc., and Partnership Services, Inc. (Incorporated by reference to the Quarterly Report on Form 10-Q for the quarter ended September 30, 1993). 10.56 Property Management Agreement No. 513A dated August 18, 1993, by and between ConCap Citadel Associates, Ltd. and Coventry Properties, Inc. 10.57 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc., and Partnership Services, Inc. 10.58 Property Management Agreement No. 514 dated June 1, 1993, by and between the Partnership and Coventry Properties, Inc. 10.59 Assignment and Agreement as to Certain Property Management Services dated November 17, 1993, by and between Coventry Properties, Inc., and Partnership Services, Inc. 10.60 Stock and Asset Purchase Agreement, dated December 8, 1994 (the "Gordon Agreement"), among MAE-ICC, Inc. ("MAE-ICC"), Gordon Realty Inc. ("Gordon"), GII Realty, Inc. ("GII Realty"), and certain other parties. (Incorporated by reference to Form 8-K dated December 8, 1994). 10.61 Exercise of the Option (as defined in the Gordon Agreement), dated December 8, 1994, between MAE-ICC and Gordon. (Incorporated by reference to Form 8-K dated December 8, 1994). 10.62 Contracts related to refinancing of debt: (a) Deed of Trust and Security Agreement dated March 27, 1995 between Nob Hill Villa Apartment Associates, L.P., a Tennessee limited partnership, and First Union National Bank of North Carolina, a North Carolina Corporation. (b) Promissory Note dated March 27, 1995 between Nob Hill Villa Apartment Associates, L.P., a Tennessee limited partnership, and First Union National Bank of North Carolina, a North Carolina Corporation. (c) Assignment of leases and Rents dated March 27, 1995 between Nob Hill Villa Apartment Associates, L.P., a Tennessee limited partnership, and First Union National Bank of North Carolina, a North Carolina Corporation. 10.63 Multifamily Note dated November 30, 1995 between Briar Bay Apartments, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. 10.64 Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. 10.65 Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. 10.66 Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. 10.67 Multifamily Note dated November 30, 1995 between CCP IV Associates, LTD., a Texas limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. 10.68 Multifamily Note dated November 30, 1995 between Foothill Chimney Associates Limited Partnership, a Georgia limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. 10.69 Multifamily Note dated November 30, 1995 between Foothill Chimney Associates Limited Partnership, a Georgia limited partnership, and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings Inc. 10.70 Multifamily Note dated September 30, 1996 between Foothill Post Ridge Associates, Ltd. Limited Partnership, a Tennessee Limited Partnership and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings, Inc. 10.71 Exercise of the remaining portion of the option (as defined in the Gordon Agreement), dated December 8, 1994 between MAE-ICC and Gordon. (Incorporated by reference to Form 8-K dated October 24, 1995). 10.72 Multifamily Note dated November 1, 1996 between Post Ridge Associates, Ltd., Limited Partnership, a Tennessee Limited Partnership and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings, Inc. 10.73 Amended and Restated Multifamily note dated November 1, 1996, between Post Ridge Associates, Ltd., Limited Partnership, a Tennessee Limited Partnership and Lehman Brothers Holding, Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings, Inc. 10.74 Multifamily Note dated November 1, 1996 between Consolidated Capital Properties IV, a California Limited Partnership and Lehman Brothers Holdings Inc. d/b/a Lehman Capital, A Division of Lehman Brothers Holdings, Inc. 10.75 Mortgage and Security Agreement dated November 18, 1997, between Southport CCP IV, L.L.C., a South Carolina limited liability company and Lehman Brothers Holdings, Inc. d/b/a Lehman Capital, a division of Lehman Brothers Holdings, Inc., a Delaware Corporation. 10.76 Multifamily Note dated November 9, 1999 between Point West Associates Limited Partnership, a Georgia limited partnership and GMAC Commercial Mortgage Corporation, a California corporation. (Incorporated by reference to Annual Report on Form 10-K ended December 31, 1999). 10.77 Purchase and Sale Contract between Registrant and Overlook Associates, Ltd, a Georgia limited partnership dated December 13, 1999, documenting sale of Overlook Apartments located in Memphis, Tennessee. (Incorporated by reference to Annual Report on Form 10-K ended December 31, 1999). 10.78 Multifamily Note dated February 2, 2000 between Apartment Associates, Ltd., a Texas limited partnership and ARCS Commercial Mortgage Co., L.P., a California limited partnership. (Incorporated by reference to Annual Report on Form 10-K ended December 31, 1999). 10.79 Multifamily Note dated February 28, 2000 between ConCap Citadel Associated, Ltd., a Texas limited partnership and ARCs Commercial Mortgage Cl., L.P., a California corporation. (Incorporated by reference to Annual Report on Form 10-K ended December 31, 1999). 10.80 Multifamily Note dated May 31, 2000 between Concap Stratford Associates, Ltd., a Texas limited partnership and ARCS Commercial Mortgage Co., L.P., a California limited partnership. (Incorporated by reference to Quarterly Report on Form 10-Q for quarter ended June 30, 2000.) 10.81 Multifamily Note dated August 29, 2000 between ConCap Rivers Edge Associates, Ltd., a Texas Limited Partnership, and GMAC Commercial Mortgage Corporation, a California Corporation. (Incorporated by reference to Quarterly Report on Form 10-Q for quarter ended September 30, 2000.) 10.82 Purchase and Sale Contract dated September 26, 2000 between ConCap Stratford Associates, Ltd., a Texas Limited Partnership, and First Worthing Company Limited, a Texas Limited Partnership. 10.83 First Amendment to Purchase and Sale Contract dated October 26, 2000 between ConCap Stratford Associates, Ltd., a Texas Limited Partnership, and First Worthing Company Limited, a Texas Limited Partnership. 10.84 Second Amendment to Purchase and Sale Contract dated October 31, 2000 between ConCap Stratford Associates, Ltd., a Texas Limited Partnership, and First Worthing Company Limited, a Texas Limited Partnership. 10.85 Multifamily Note dated September 27, 2001 between Consolidated Capital Properties IV, a California limited partnership, doing business in Nebraska as Consolidated Capital Properties IV Limited Partnership and AIMCO Properties, L.P., a Delaware limited partnership, in favor of GMAC Commercial Mortgage Corporation, a California corporation. 10.86 Multifamily Note dated December 20, 2001 between Post Ridge Associates, Ltd., a Tennessee limited partnership, and GMAC Commercial Mortgage Corporation, a California corporation. 11 Statement regarding computation of Net Income per Limited Partnership Unit (Incorporated by reference to Note A of Item 8 - Financial Statements of this Form 10-K). 16.1 Letter, dated August 12, 1992, from Ernst & Young to the Securities and Exchange Commission regarding change in certifying accountant. (Incorporated by reference to Form 8-K dated August 6, 1992). 16.2 Letter dated May 9, 1995 from the Registrant's former independent accountant regarding its concurrence with the statements made by the Registrant regarding a change in the certifying accountant. (Incorporated by reference to Form 8-K dated May 3, 1995). 19.1 Chapter 11 Plan of CCP/IV Associates, Ltd. (Restated to incorporate first amended Chapter 11 Plan filed October 27, 1992 and second amendments to Chapter 11 Plan of CCP/IV Associates, Ltd. filed December 14, 1992) dated December 14, 1992, and filed December 14, 1992, in the United States Bankruptcy Court for the Middle District of Tennessee. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). 19.2 First amended disclosure statement to accompany Chapter 11 Plan, dated February 21, 1992, and amended October 27, 1992 filed by CCP/IV Associates, Ltd. filed October 27, 1992, in the United States Bankruptcy Court for the Middle District of Tennessee. (Incorporated by reference to the Annual Report on Form 10-K for the year ended December 31, 1992). (b) Reports on Form 8-K filed during the fourth quarter of calendar year 2001: None. 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. CONSOLIDATED CAPITAL PROPERTIES IV By: ConCap Equities, Inc. 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: Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities on the date indicated. /s/Patrick J. Foye Date: Patrick J. Foye Executive Vice President and Director /s/Martha L. Long Date: Martha L. Long Senior Vice President and Controller Exhibit 10.86 FHLMC Loan No. 002694271 Post Ridge Apartments MULTIFAMILY NOTE (MULTISTATE - REVISION DATE 11-01-2000) US $4,500,000.00 As of December 20, 2001 FOR VALUE RECEIVED, the undersigned ("Borrower") jointly and severally (if more than one) promises to pay to the order of GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation, the principal sum of Four Million Five Hundred Thousand and 00/100 Dollars (US $4,500,000.00), with interest on the unpaid principal balance at the annual rate of six and sixty-three hundredths percent (6.63%). Defined Terms. As used in this Note, (i) the term "Lender" means the holder of this Note, and (ii) the term "Indebtedness" means the principal of, interest on, and any other amounts due at any time under, this Note, the Security Instrument or any other Loan Document, including prepayment premiums, late charges, default interest, and advances to protect the security of the Security Instrument under Section 12 of the Security Instrument. "Event of Default" and other capitalized terms used but not defined in this Note shall have the meanings given to such terms in the Security Instrument. Address for Payment. All payments due under this Note shall be payable at 200 Witmer Road, Post Office Box 809, Horsham, Pennsylvania 19044, Attn: Servicing - Account Manager, or such other place as may be designated by written notice to Borrower from or on behalf of Lender. Payment of Principal and Interest. Principal and interest shall be paid as follows: Unless disbursement of principal is made by Lender to Borrower on the first day of the month, interest for the period beginning on the date of disbursement and ending on and including the last day of the month in which such disbursement is made shall be payable simultaneously with the execution of this Note. Interest under this Note shall be computed on the basis of a 360-day year consisting of twelve 30-day months. Consecutive monthly installments of principal and interest, each in the amount of Thirty Three Thousand Eight Hundred Ninety Six and 08/100 Dollars (US $33,896.08), shall be payable on the first day of each month beginning on February 1, 2002, until the entire unpaid principal balance evidenced by this Note is fully paid. Any accrued interest remaining past due for 30 days or more may, at Lender's discretion, be added to and become part of the unpaid principal balance and shall bear interest at the rate or rates specified in this Note, and any reference below to "accrued interest" shall refer to accrued interest which has not become part of the unpaid principal balance. Any remaining principal and interest shall be due and payable on January 1, 2022 or on any earlier date on which the unpaid principal balance of this Note becomes due and payable, by acceleration or otherwise (the "Maturity Date"). The unpaid principal balance shall continue to bear interest after the Maturity Date at the Default Rate set forth in this Note until and including the date on which it is paid in full. Any regularly scheduled monthly installment of principal and interest that is received by Lender before the date it is due shall be deemed to have been received on the due date solely for the purpose of calculating interest due. Application of Payments. If at any time Lender receives, from Borrower or otherwise, any amount applicable to the Indebtedness which is less than all amounts due and payable at such time, Lender may apply that payment to amounts then due and payable in any manner and in any order determined by Lender, in Lender's discretion. Borrower agrees that neither Lender's acceptance of a payment from Borrower in an amount that is less than all amounts then due and payable nor Lender's application of such payment shall constitute or be deemed to constitute either a waiver of the unpaid amounts or an accord and satisfaction. Security. The Indebtedness is secured, among other things, by a multifamily mortgage, deed to secure debt or deed of trust dated as of the date of this Note (the "Security Instrument"), and reference is made to the Security Instrument for other rights of Lender as to collateral for the Indebtedness. Acceleration. If an Event of Default has occurred and is continuing, the entire unpaid principal balance, any accrued interest, the prepayment premium payable under Paragraph 10, if any, and all other amounts payable under this Note and any other Loan Document shall at once become due and payable, at the option of Lender, without any prior notice to Borrower (except if notice is required by applicable law, then after such notice). Lender may exercise this option to accelerate regardless of any prior forbearance. Late Charge. If any monthly amount payable under this Note or under the Security Instrument or any other Loan Document is not received by Lender within ten (10) days after the amount is due (unless applicable law requires a longer period of time before a late charge may be imposed, in which event such longer period shall be substituted), Borrower shall pay to Lender, immediately and without demand by Lender, a late charge equal to five percent (5%) of such amount (unless applicable law requires a lesser amount be charged, in which event such lesser amount shall be substituted). Borrower acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the loan evidenced by this Note (the "Loan"), and that it is extremely difficult and impractical to determine those additional expenses. Borrower agrees that the late charge payable pursuant to this Paragraph represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional expenses Lender will incur by reason of such late payment. The late charge is payable in addition to, and not in lieu of, any interest payable at the Default Rate pursuant to Paragraph 8. Default Rate. So long as (a) any monthly installment under this Note remains past due for thirty (30) days or more, or (b) any other Event of Default has occurred and is continuing, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or the occurrence of such other Event of Default, as applicable, at a rate (the "Default Rate") equal to the lesser of four (4) percentage points above the rate stated in the first paragraph of this Note and the maximum interest rate which may be collected from Borrower under applicable law. If the unpaid principal balance and all accrued interest are not paid in full on the Maturity Date, the unpaid principal balance and all accrued interest shall bear interest from the Maturity Date at the Default Rate. Borrower also acknowledges that its failure to make timely payments will cause Lender to incur additional expenses in servicing and processing the Loan, that, during the time that any monthly installment under this Note is delinquent for more than thirty (30) days, Lender will incur additional costs and expenses arising from its loss of the use of the money due and from the adverse impact on Lender's ability to meet its other obligations and to take advantage of other investment opportunities, and that it is extremely difficult and impractical to determine those additional costs and expenses. Borrower also acknowledges that, during the time that any monthly installment under this Note is delinquent for more than thirty (30) days or any other Event of Default has occurred and is continuing, Lender's risk of nonpayment of this Note will be materially increased and Lender is entitled to be compensated for such increased risk. Borrower agrees that the increase in the rate of interest payable under this Note to the Default Rate represents a fair and reasonable estimate, taking into account all circumstances existing on the date of this Note, of the additional costs and expenses Lender will incur by reason of the Borrower's delinquent payment and the additional compensation Lender is entitled to receive for the increased risks of nonpayment associated with a delinquent loan. Limits on Personal Liability. Except as otherwise provided in this Paragraph 9, Borrower shall have no personal liability under this Note, the Security Instrument or any other Loan Document for the repayment of the Indebtedness or for the performance of any other obligations of Borrower under the Loan Documents, and Lender's only recourse for the satisfaction of the Indebtedness and the performance of such obligations shall be Lender's exercise of its rights and remedies with respect to the Mortgaged Property and any other collateral held by Lender as security for the Indebtedness. This limitation on Borrower's liability shall not limit or impair Lender's enforcement of its rights against any guarantor of the Indebtedness or any guarantor of any obligations of Borrower. Borrower shall be personally liable to Lender for the repayment of a portion of the Indebtedness equal to zero percent (0%) of the original principal balance of this Note, plus any other amounts for which Borrower has personal liability under this Paragraph 9. In addition to Borrower's personal liability under Paragraph 9(b), Borrower shall be personally liable to Lender for the repayment of a further portion of the Indebtedness equal to any loss or damage suffered by Lender as a result of (1) failure of Borrower to pay to Lender upon demand after an Event of Default all Rents to which Lender is entitled under Section 3(a) of the Security Instrument and the amount of all security deposits collected by Borrower from tenants then in residence; (2) failure of Borrower to apply all insurance proceeds and condemnation proceeds as required by the Security Instrument; or (3) failure of Borrower to comply with Section 14(d) or (e) of the Security Instrument relating to the delivery of books and records, statements, schedules and reports. For purposes of determining Borrower's personal liability under Paragraph 9(b) and Paragraph 9(c), all payments made by Borrower or any guarantor of this Note with respect to the Indebtedness and all amounts received by Lender from the enforcement of its rights under the Security Instrument shall be applied first to the portion of the Indebtedness for which Borrower has no personal liability. Borrower shall become personally liable to Lender for the repayment of all of the Indebtedness upon the occurrence of any of the following Events of Default: (1) Borrower's acquisition of any property or operation of any business not permitted by Section 33 of the Security Instrument; (2) a Transfer (including, but not limited to, a lien or encumbrance) that is an Event of Default under Section 21 of the Security Instrument, other than a Transfer consisting solely of the involuntary removal or involuntary withdrawal of a general partner in a limited partnership or a manager in a limited liability company; or (3) fraud or written material misrepresentation by Borrower or any officer, director, partner, member or employee of Borrower in connection with the application for or creation of the Indebtedness or any request for any action or consent by Lender. In addition to any personal liability for the Indebtedness, Borrower shall be personally liable to Lender for (1) the performance of all of Borrower's obligations under Section 18 of the Security Instrument (relating to environmental matters); (2) the costs of any audit under Section 14(d) of the Security Instrument; and (3) any costs and expenses incurred by Lender in connection with the collection of any amount for which Borrower is personally liable under this Paragraph 9, including fees and out of pocket expenses of attorneys and expert witnesses and the costs of conducting any independent audit of Borrower's books and records to determine the amount for which Borrower has personal liability. To the extent that Borrower has personal liability under this Paragraph 9, Lender may exercise its rights against Borrower personally without regard to whether Lender has exercised any rights against the Mortgaged Property or any other security, or pursued any rights against any guarantor, or pursued any other rights available to Lender under this Note, the Security Instrument, any other Loan Document or applicable law. For purposes of this Paragraph 9, the term "Mortgaged Property" shall not include any funds that (1) have been applied by Borrower as required or permitted by the Security Instrument prior to the occurrence of an Event of Default or (2) Borrower was unable to apply as required or permitted by the Security Instrument because of a bankruptcy, receivership, or similar judicial proceeding. To the fullest extent permitted by applicable law, in any action to enforce Borrower's personal liability under this Paragraph 9, Borrower waives any right to set off the value of the Mortgaged Property against such personal liability. Voluntary and Involuntary Prepayments. A prepayment premium shall be payable in connection with any prepayment (any receipt by Lender of principal, other than principal required to be paid in monthly installments pursuant to Paragraph 3(b), prior to the scheduled Maturity Date set forth in Paragraph 3(c)) under this Note as provided below: Borrower may voluntarily prepay all of the unpaid principal balance of this Note on a Business Day designated as the date for such prepayment in a written notice from Borrower to Lender given at least 30 days prior to the date of such prepayment. Such prepayment shall be made by paying (A) the amount of principal being prepaid, (B) all accrued interest, (C) all other sums due Lender at the time of such prepayment, and (D) the prepayment premium calculated pursuant to Paragraph 10(c). For all purposes including the accrual of interest, any prepayment received by Lender on any day other than the last calendar day of the month shall be deemed to have been received on the last calendar day of such month. For purposes of this Note, a "Business Day" means any day other than a Saturday, Sunday or any other day on which Lender is not open for business. Unless expressly provided for in the Loan Documents, Borrower shall not have the option to voluntarily prepay less than all of the unpaid principal balance. However, if a partial prepayment is provided for in the Loan Documents or is accepted by Lender in Lender's discretion, a prepayment premium calculated pursuant to Paragraph 10(c) shall be due and payable by Borrower. Upon Lender's exercise of any right of acceleration under this Note, Borrower shall pay to Lender, in addition to the entire unpaid principal balance of this Note outstanding at the time of the acceleration, (A) all accrued interest and all other sums due Lender, and (B) the prepayment premium calculated pursuant to Paragraph 10(c). Any application by Lender of any collateral or other security to the repayment of any portion of the unpaid principal balance of this Note prior to the Maturity Date and in the absence of acceleration shall be deemed to be a partial prepayment by Borrower, requiring the payment to Lender by Borrower of a prepayment premium. Notwithstanding the provisions of Paragraph 10(a), no prepayment premium shall be payable with respect to (A) any prepayment made during the period from one hundred eighty (180) days before the scheduled Maturity Date to the scheduled Maturity Date, or (B) any prepayment occurring as a result of the application of any insurance proceeds or condemnation award under the Security Instrument. Any prepayment premium payable under this Note shall be computed as follows: (1) If the prepayment is made between the date of this Note and the date that is 180 months after the first day of the first calendar month following the date of this Note (the "Yield Maintenance Period"), the prepayment premium shall be whichever is the greater of subparagraphs (i) and (ii) below: (i) 1.0% of the unpaid principal balance of this Note; or (ii) the product obtained by multiplying: (A) the amount of principal being prepaid, by (B) the excess (if any) of the Monthly Note Rate over the Assumed Reinvestment Rate, by (C) the Present Value Factor. For purposes of subparagraph (ii), the following definitions shall apply: Monthly Note Rate: one-twelfth (1/12) of the annual interest rate of this Note, expressed as a decimal calculated to five digits. Prepayment Date: in the case of a voluntary prepayment, the date on which the prepayment is made; in the case of the application by Lender of collateral or security to a portion of the principal balance, the date of such application; and in any other case, the date on which Lender accelerates the unpaid principal balance of this Note. Assumed Reinvestment Rate: one-twelfth (1/12) of the yield rate as of the date 5 Business Days before the Prepayment Date, on the 9.250% U.S. Treasury Security due February 1, 2016, as reported in The Wall Street Journal, expressed as a decimal calculated to five digits. In the event that no yield is published on the applicable date for the Treasury Security used to determine the Assumed Reinvestment Rate, Lender, in its discretion, shall select the non-callable Treasury Security maturing in the same year as the Treasury Security specified above with the lowest yield published in The Wall Street Journal as of the applicable date. If the publication of such yield rates in The Wall Street Journal is discontinued for any reason, Lender shall select a security with a comparable rate and term to the Treasury Security used to determine the Assumed Reinvestment Rate. The selection of an alternate security pursuant to this Paragraph shall be made in Lender's discretion. Present Value Factor: the factor that discounts to present value the costs resulting to Lender from the difference in interest rates during the months remaining in the Yield Maintenance Period, using the Assumed Reinvestment Rate as the discount rate, with monthly compounding, expressed numerically as follows: [OBJECT OMITTED] n = number of months remaining in Yield Maintenance Period ARR = Assumed Reinvestment Rate (2) If the prepayment is made after the expiration of the Yield Maintenance Period but before the period set forth in Paragraph 10(b)(A) above, the prepayment premium shall be 1.0% of the unpaid principal balance of this Note. Any permitted or required prepayment of less than the unpaid principal balance of this Note shall not extend or postpone the due date of any subsequent monthly installments or change the amount of such installments, unless Lender agrees otherwise in writing. Borrower recognizes that any prepayment of the unpaid principal balance of this Note, whether voluntary or involuntary or resulting from a default by Borrower, will result in Lender's incurring loss, including reinvestment loss, additional expense and frustration or impairment of Lender's ability to meet its commitments to third parties. Borrower agrees to pay to Lender upon demand damages for the detriment caused by any prepayment, and agrees that it is extremely difficult and impractical to ascertain the extent of such damages. Borrower therefore acknowledges and agrees that the formula for calculating prepayment premiums set forth in this Note represents a reasonable estimate of the damages Lender will incur because of a prepayment. Borrower further acknowledges that the prepayment premium provisions of this Note are a material part of the consideration for the Loan, and acknowledges that the terms of this Note are in other respects more favorable to Borrower as a result of the Borrower's voluntary agreement to the prepayment premium provisions. Costs and Expenses. To the fullest extent allowed by applicable law, Borrower shall pay all expenses and costs, including fees and out-of-pocket expenses of attorneys (including Lender's in-house attorneys) and expert witnesses and costs of investigation, incurred by Lender as a result of any default under this Note or in connection with efforts to collect any amount due under this Note, or to enforce the provisions of any of the other Loan Documents, including those incurred in post-judgment collection efforts and in any bankruptcy proceeding (including any action for relief from the automatic stay of any bankruptcy proceeding) or judicial or non-judicial foreclosure proceeding. Forbearance. Any forbearance by Lender in exercising any right or remedy under this Note, the Security Instrument, or any other Loan Document or otherwise afforded by applicable law, shall not be a waiver of or preclude the exercise of that or any other right or remedy. The acceptance by Lender of any payment after the due date of such payment, or in an amount which is less than the required payment, shall not be a waiver of Lender's right to require prompt payment when due of all other payments or to exercise any right or remedy with respect to any failure to make prompt payment. Enforcement by Lender of any security for Borrower's obligations under this Note shall not constitute an election by Lender of remedies so as to preclude the exercise of any other right or remedy available to Lender. Waivers. Presentment, demand, notice of dishonor, protest, notice of acceleration, notice of intent to demand or accelerate payment or maturity, presentment for payment, notice of nonpayment, grace, and diligence in collecting the Indebtedness are waived by Borrower and all endorsers and guarantors of this Note and all other third party obligors. Loan Charges. Neither this Note nor any of the other Loan Documents shall be construed to create a contract for the use, forbearance or detention of money requiring payment of interest at a rate greater than the maximum interest rate permitted to be charged under applicable law. If any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower in connection with the Loan is interpreted so that any interest or other charge provided for in any Loan Document, whether considered separately or together with other charges provided for in any other Loan Document, violates that law, and Borrower is entitled to the benefit of that law, that interest or charge is hereby reduced to the extent necessary to eliminate that violation. The amounts, if any, previously paid to Lender in excess of the permitted amounts shall be applied by Lender to reduce the unpaid principal balance of this Note. For the purpose of determining whether any applicable law limiting the amount of interest or other charges permitted to be collected from Borrower has been violated, all Indebtedness that constitutes interest, as well as all other charges made in connection with the Indebtedness that constitute interest, shall be deemed to be allocated and spread ratably over the stated term of the Note. Unless otherwise required by applicable law, such allocation and spreading shall be effected in such a manner that the rate of interest so computed is uniform throughout the stated term of the Note. Commercial Purpose. Borrower represents that the Indebtedness is being incurred by Borrower solely for the purpose of carrying on a business or commercial enterprise, and not for personal, family, household or agricultural purposes. Counting of Days. Except where otherwise specifically provided, any reference in this Note to a period of "days" means calendar days, not Business Days. Governing Law. This Note shall be governed by the law of the jurisdiction in which the Land is located. Captions. The captions of the paragraphs of this Note are for convenience only and shall be disregarded in construing this Note. Notices; Written Modifications. All notices, demands and other communications required or permitted to be given by Lender to Borrower pursuant to this Note shall be given in accordance with Section 31 of the Security Instrument. Any modification or amendment to this Note shall be ineffective unless in writing signed by the party sought to be charged with such modification or amendment; provided, however, that in the event of a Transfer under the terms of the Security Instrument, any or some or all of the Modifications to Multifamily Note may be modified or rendered void by Lender at Lender's option by notice to Borrower/transferee. Consent to Jurisdiction and Venue. Borrower agrees that any controversy arising under or in relation to this Note shall be litigated exclusively in the jurisdiction in which the Land is located (the "Property Jurisdiction"). The state and federal courts and authorities with jurisdiction in the Property Jurisdiction shall have exclusive jurisdiction over all controversies which shall arise under or in relation to this Note. Borrower irrevocably consents to service, jurisdiction, and venue of such courts for any such litigation and waives any other venue to which it might be entitled by virtue of domicile, habitual residence or otherwise. WAIVER OF TRIAL BY JURY. BORROWER AND LENDER EACH (A) AGREES NOT TO ELECT A TRIAL BY JURY WITH RESPECT TO ANY ISSUE ARISING OUT OF THIS NOTE OR THE RELATIONSHIP BETWEEN THE PARTIES AS LENDER AND BORROWER THAT IS TRIABLE OF RIGHT BY A JURY AND (B) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO SUCH ISSUE TO THE EXTENT THAT ANY SUCH RIGHT EXISTS NOW OR IN THE FUTURE. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS SEPARATELY GIVEN BY EACH PARTY, KNOWINGLY AND VOLUNTARILY WITH THE BENEFIT OF COMPETENT LEGAL COUNSEL. ATTACHED EXHIBIT. The following Exhibit is attached to this Note: ----- X Exhibit A Modifications to Multifamily Note ----- IN WITNESS WHEREOF, Borrower has signed and delivered this Note under seal or has caused this Note to be signed and delivered under seal by its duly authorized representative. Borrower intends that this Note shall be deemed to be signed and delivered as a sealed instrument. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] POST RIDGE ASSOCIATES, LTD., LIMITED PARTNERSHIP, a Tennessee limited partnership By: ConCap Equities, Inc., a Delaware corporation, its general partner By: -------------------------------- Patti K. Fielding Senior Vice President 58-1763207 Borrower's Social Security/Employer ID Number PAY TO THE ORDER OF FEDERAL HOME LOAN MORTGAGE CORPORATION, WITHOUT RECOURSE, THIS _____ DAY OF _______________, 20__. GMAC COMMERCIAL MORTGAGE CORPORATION, a California corporation By:_________________________________ Robert D. Falese, III Vice President EXHIBIT A MODIFICATIONS TO MULTIFAMILY NOTE The following modifications are made to the text of the Note that precedes this Exhibit: 1. The first sentence of Paragraph 8 of the Note ("Default Rate") is hereby deleted and replaced with the following: So long as (a) any monthly installment under this Note remains past due for more than thirty (30) days or (b) any other event of Default has occurred and is continuing, interest under this Note shall accrue on the unpaid principal balance from the earlier of the due date of the first unpaid monthly installment or the occurrence of such other Event of Default, as applicable, at a rate (the "Default Rate") equal to the lesser of (1) the maximum interest rate which may be collected from Borrower under applicable law or (2) the greater of (i) three percent (3%) above the Interest Rate or (ii) four percent (4.0%) above the then-prevailing Prime Rate. As used herein, the term "Prime Rate" shall mean the rate of interest announced by The Wall Street Journal from time to time as the "Prime Rate". 2. Paragraph 9(c) of the Note is amended to add the following subparagraph (4): (4) failure by Borrower to pay the amount of the water and sewer charges, taxes, fire, hazard or other insurance premiums, ground rents, assessments or other charges in accordance with the terms of the Security Instrument. 3. Paragraph 19 is modified by deleting: "; provided, however, that in the event of a Transfer under the terms of the Security Instrument, any or some or all of the Modifications to Multifamily Note may be modified or rendered void by Lender at Lender's option by notice to Borrower/transferee" in the last sentence of the Paragraph; and by adding the following new sentence: The Modifications to Multifamily Note set forth in this Exhibit A shall be null and void unless title to the Mortgaged Property is vested in an entity whose Controlling Interest(s) are directly or indirectly held by AIMCO REIT or AIMCO OP. The capitalized terms used in this paragraph are defined in the Security Instrument.