FORM 10-QSB.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Quarterly or Transitional Report (As last amended by 34-32231, eff. 6/3/93.) U.S. Securities and Exchange Commission Washington, D.C. 20549 Form 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period.........to......... Commission file number 0-16209 ANGELES PARTNERS 16 (Exact name of small business issuer as specified in its charter) California 95-4106417 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) One Insignia Financial Plaza, P.O. Box 1089 Greenville, South Carolina 29602 (Address of principal executive offices) (Zip Code) Issuer's telephone number (803) 239-1000 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS a) ANGELES PARTNERS 16 BALANCE SHEET (Unaudited) September 30, 1995 Assets Cash: Unrestricted $ 825,832 Restricted--tenant security deposits 63,700 Accounts receivable 8,617 Escrow for taxes 263,736 Restricted escrows 1,375,582 Other assets 226,045 Investment properties: Land $ 1,075,589 Buildings and related personal property 10,594,664 11,670,253 Less accumulated depreciation (2,934,019) 8,736,234 $11,499,746 Liabilities and Partners' Deficit Liabilities Accounts payable $ 40,610 Tenant security deposits 64,341 Accrued taxes 452,154 Other liabilities 2,741,157 Notes payable, including $2,342,345 in default 13,569,347 Partners' Deficit General partner $ (171,480) Limited partners (14,033 units issued and outstanding) (5,196,383) (5,367,863) $11,499,746 [FN] See Accompanying Notes to Financial Statements b) ANGELES PARTNERS 16 STATEMENTS OF OPERATIONS (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenues: Rental income $ 587,307 $ 865,076 $2,133,481 $ 2,604,422 Other income 64,608 57,921 158,322 146,474 Total revenues 651,915 922,997 2,291,803 2,750,896 Expenses: Operating 206,699 205,666 1,440,957 724,681 General and administrative 36,797 28,068 130,871 166,640 Property management fees 31,524 45,990 108,989 138,748 Maintenance 69,078 56,648 219,172 208,302 Depreciation 72,358 167,280 400,450 497,361 Amortization -- 1,716 11,833 5,149 Interest 298,063 391,340 1,217,827 1,326,278 Property taxes 130,489 335,902 662,424 917,523 Bad debt (recovery) expense -- (17,586) (4,226) 7,524 Tenant reimbursements -- (125,212) (298,142) (952,017) Total expenses 845,008 1,089,812 3,890,155 3,040,189 Loss before gain on sale of investment property and extraordinary item (193,093) (166,815) (1,598,352) (289,293) Gain on sale of investment property -- -- 610,767 -- Loss before extraordinary item (193,093) (166,815) (987,585) (289,293) Extraordinary item - gain on early extinguishment of debt -- -- 56,203 -- Net loss $ (193,093) $ (166,815) $ (931,382) $ (289,293) Net loss allocated to general partner (1%) $ (1,931) $ (1,668) $ (9,314) $ (2,893) Net loss allocated to limited partners (99%) (191,162) (165,147) (922,068) (286,400) $ (193,093) $ (166,815) $ (931,382) $ (289,293) Per limited partnership unit: Loss before extraordinary item $ (13.62) $ (11.75) $ (69.67) $ (20.38) Extraordinary item -- -- 3.97 -- Net loss $ (13.62) $ (11.75) $ (65.70) $ (20.38) [FN] See Accompanying Notes to Financial Statements c) ANGELES PARTNERS 16 STATEMENT OF CHANGES IN PARTNERS' DEFICIT (Unaudited) Limited Partnership General Limited Units Partner Partners Total Original capital contributions 14,050 $ 1,000 $14,050,000 $14,051,000 Partners' deficit at December 31, 1994 14,033 $(162,166) $(4,274,315) $(4,436,481) Net loss for the nine months ended September 30, 1995 -- (9,314) (922,068) (931,382) Partners' deficit at September 30, 1995 14,033 $(171,480) $(5,196,383) $(5,367,863) [FN] See Accompanying Notes to Financial Statements d) ANGELES PARTNERS 16 STATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September30, 1995 1994 Cash flows from operating activities: Net loss $ (931,382) $ (289,293) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation 400,450 497,361 Amortization of loan costs and leasing commissions 27,365 26,664 Gain on sale of investment property (610,767) -- Bad debt expense -- 7,524 Extraordinary item - gain on early extinguishment of debt (56,203) -- Change in accounts: Restricted cash 6,036 (7,861) Accounts receivable 39,897 12,433 Escrows for taxes 44,470 (63,042) Other assets (40,182) -- Accounts payable 13,129 (51,381) Tenant security deposit liabilities 6,355 723 Accrued taxes 108,655 (187,982) Due to affiliates -- 13,494 Other liabilities (157,464) 991,695 Net cash (used in) provided by operating activities (1,149,641) 950,335 Cash flows from investing activities: Property improvements and replacements (297,577) (94,747) Proceeds from sale of investment property 9,862,641 -- Deposits to restricted escrows (1,390,473) (96,299) Withdrawals from restricted escrows 191,912 -- Net cash provided by (used in) investing activities 8,366,503 (191,046) Cash flows from financing activities: Repayment of notes payable (8,140,130) -- Payments on notes payable (24,156) (58,807) Net cash used in financing activities (8,164,286) (58,807) Net (decrease) increase in cash (947,424) 700,482 Cash at beginning of period 1,773,256 983,119 Cash at end of period $ 825,832 $1,683,601 Supplemental disclosure of cash flow information: Cash paid for interest $ 2,034,096 $ 345,132 [FN] See Accompanying Notes to Financial Statements e) ANGELES PARTNERS 16 NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Going Concern The financial statements have been prepared assuming the Partnership will continue as a going concern. The Partnership has incurred recurring operating losses and continues to suffer from inadequate liquidity. In addition, there are limited identified capital resources available to the Partnership. As a result, the Partnership has not had cash available to perform the substantial rehabilitation necessary at each of the investment properties. The Partnership is in default on $2,342,345 of its indebtedness due to its inability to make interest and principal payments when due. The debt is unsecured debt of the Partnership payable to Angeles Mortgage Investment Trust ("AMIT") (See Note C). On June 12, 1995, the Partnership sold one of its investment properties, North Prior Industrial Park, for $10,450,000 to an unrelated third party. The net proceeds were used to pay the first mortgage and related accrued interest. Accrued interest of $56,203 related to the first mortgage was forgiven, and a total gain of $610,767 was realized on the sale. A principal payment of $117,384 was made on the AMIT debt, which is now unsecured debt of the Partnership. (See Note D for further details). An additional principal payment was made to AMIT for $104,602, during the third quarter of 1995, due to an escrow refund received as a result of the sale of North Prior. Prior to the sale, this property had been in receivership. The Partnership is presently paying non-debt related expenses of the properties, is current on its mortgages on its other two investment properties and is negotiating forbearance agreements with AMIT on the debt in default. As a result of the above conditions, there is substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability or classification of assets or amounts or classification of liabilities that may result from these uncertainties. Note B - Basis of Presentation The accompanying unaudited financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of the General Partner, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the nine month period ended September 30, 1995, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1995. For further information, refer to the financial statements and footnotes thereto included in the Partnership's annual report on Form 10-KSB for the fiscal year ended December 31, 1994. Note B - Basis of Presentation (continued) Certain reclassifications have been made to the September 30, 1994, information to conform to the September 30, 1995, presentation. 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 partnership activities. The Partnership Agreement provides for payments to affiliates for services and as reimbursement of certain expenses incurred by affiliates on behalf of the Partnership. The following payments were made to the General Partner and affiliates during the nine months ended September 30, 1995 and 1994: 1995 1994 Property management fees $108,989 $138,748 Reimbursement for services of affiliates 64,821 101,314 Marketing services 1,263 596 The Partnership insures its properties under a master policy through an agency and insurer unaffiliated with the General Partner. An affiliate of the General Partner acquired, in the acquisition of a business, certain financial obligations from an insurance agency which was later acquired by the agent who placed the current year's master policy. The current agent assumed the financial obligations to the affiliate of the General Partner, who receives payment on these obligations from the agent. The amount of the Partnership's insurance premiums accruing to the benefit of the affiliate of the General Partner by virtue of the agent's obligations is not significant. In November 1992, Angeles Acceptance Pool, L.P. ("AAP"), a Delaware limited partnership was organized to acquire and hold the obligations evidencing the working capital loan previously provided to the Partnership by Angeles Capital Investments, Inc. ("ACII"). Angeles Corporation ("Angeles") is the 99% limited partner of AAP and Angeles Acceptance Directives, Inc. ("AAD"), an affiliate of the General Partner, was, until April 14, 1995, the 1% general partner of AAP. On April 14, 1995, as part of a settlement of claims between affiliates of the General Partner and Angeles, AAD resigned as general partner of AAP and simultaneously received a 1/2% limited partner interest in AAP. An affiliate of Angeles now serves as the general partner of AAP. The AAP working capital loan funded the Partnership's operating deficits in prior years. Total indebtedness, which is included as a note payable, was $1,516,789 at September 30, 1995 and 1994, with monthly interest only payments at the prime rate plus 2%. Principal is to be paid the earlier of i) the availability of funds, ii) the sale of one or more properties owned by the Partnership, or iii) November 25, 1997. Total interest expense for this loan was $123,555 and $91,323 for the nine months ended September 30, 1995 and 1994, respectively. Note C - Transactions with Affiliated Parties (continued) AMIT currently holds two unsecured note receivables from the Partnership. Total indebtedness of $2,342,345 and $2,564,331 was in default at September 30, 1995, and September 30, 1994, respectively. A principal payment of $117,384 was made as a result of the sale of North Prior on June 12, 1995. An additional principal payment of $104,602 was made during the third quarter of 1995, due to an escrow refund received also as a result of the sale of North Prior. Total interest expense on this financing was $331,308 and $220,275 for the nine months ended September 30, 1995 and 1994, respectively. Accrued interest was $1,050,245 at September 30, 1995. MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to receive 1% of the distributions of net cash distributed by AMIT. These Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares which allows MAE GP to vote approximately 37% of the total shares (unless and until converted to Class A Shares at which time the percentage of the vote controlled represented by the shares held by MAE GP would approximate 1% of the vote). Between the date of acquisition of these shares (November 24, 1992) and March 31, 1995, MAE GP has declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 annual meeting in connection with the election of trustees and other matters. MAE GP has not exerted and continues to decline to exert any management control over or participate in the management of AMIT. As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an option to acquire the Class B Shares owned by it. This option can be exercised at the end of 10 years or when all loans made by AMIT to partnerships affiliated with MAE GP as of November 9, 1994, (which is the date of execution of a definitive Settlement Agreement) have been paid in full, but in no event prior to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which occurred April 14, 1995, as payment for the option. Upon exercise of the option, AMIT would remit to MAE GP an additional $94,000. Simultaneously with the execution of the option, MAE GP executed an irrevocable proxy in favor of AMIT the result of which is MAE GP will be able to vote the Class B Shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to the Class B Shares instructing such trustees to vote said Class B Shares in accordance with the vote of the majority of the Class A Shares voting to be determined without consideration of the votes of "Excess Class A Shares" as defined in Section 6.13 of the Declaration of Trust of AMIT. Note D - Contingencies On June 12, 1995, North Prior Industrial Park was sold for $10,450,000 to an unrelated party. The net proceeds were used to pay off the first mortgage and related accrued interest. Accrued interest of $56,203 related to the first mortgage was forgiven. Proceeds were also used to pay down the AMIT debt in the amount of $117,384. A gain was recognized on the sale of $610,767. An additional principal payment of $104,602 was made to AMIT during the third quarter of 1995, due to an escrow refund received as a result of the sale of North Prior. The AMIT debt that had been the second mortgage of the property became unsecured debt of the Partnership, the principal balance of which is $1,482,818, which is currently in default. As required by the sales agreement the Partnership has set up three escrows as described below: Tenant Improvements Escrow - This escrow is being held pending completion of tenant improvements that were begun by the receiver prior to the sale. As the improvement projects are completed the funds will be disbursed. The projects are expected to be completed prior to December 31, 1995. The original escrow balance was $200,000 and at September 30, 1995, $125,487 has been expended. All funds are expected to be used in the improvement projects; however, any remaining funds will be used to reduce the AMIT debt discussed above. Environmental Escrow - This escrow was established for costs associated with fuel oil contamination at the property. In January 1993, a local fuel oil distributor pumped fuel oil into a testing well instead of into the storage tank at North Prior Industrial Park. The Partnership notified the necessary authorities and engaged an environmental engineering firm to develop a plan of action to clean up the site. The cost of the clean up, which is not covered by insurance, is estimated to be approximately $900,000 over a five year period. A liability was recorded for $200,000 in 1993, an additional liability was recorded during the second quarter of 1995, for the amount of $746,488. During 1994, the Partnership paid $46,488 relating to the remediation; a balance of $900,000 is included in "Other liabilities" at September 30, 1995. The Partnership entered into an Environmental Undertaking and Indemnity Agreement with the buyer of the property limiting the Partnership's liability with regard to the clean up of this site to the balance of the escrow account. This agreement will terminate when the Partnership receives a "Site Closure Letter" from the Minnesota Pollution and Control Agency. Upon receipt of this letter, any remaining funds in the escrow account will be used to pay down the AMIT debt discussed above. In January 1995, the holder of the first mortgage, along with the receiver, initiated two separate lawsuits against the Partnership, among others, for damages sustained as a result of the above. The General Partner believes that the former holder of the first mortgage will not pursue their lawsuit. The General Partner also believes that prior to December 31, 1995, the Partnership will be substituted in as the Plaintiff in the lawsuit initiated by the former receiver in a suit filed against the fuel distributor, among others. However, the outcome of these claims is uncertain and their effect on the Partnership cannot presently be determined. Note D - Contingencies (continued) North Prior Industrial Park also had ground water contamination that originated off site. In 1994 the Minnesota Pollution and Control Agency issued a "No Further Action" letter to the party responsible for causing the problem. There have been no claims against the Partnership for this matter. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The Partnership's investment properties consist of two apartment complexes. The following table sets forth the average occupancy of the properties for the nine months ended September 30, 1995 and 1994: Average Occupancy Property 1995 1994 Whispering Pines Apartments Fitchburg, Wisconsin (1) 93% 98% Silver Ridge Apartments Maplewood, Minnesota 95% 92% (1) Decrease in occupancy due to increased home sales in the area. New home construction and low interest rates for home buyers has made renting less appealing and thereby decreased occupancy. The Partnership realized a net loss for the three and nine months ended September 30, 1995, of $193,093 and $931,382, respectively as compared to a net loss for the three and nine months ended September 30, 1994, of $166,815 and $289,293, respectively. The increase in the net loss for the nine months ended September 30, 1995, as compared to the nine months ended September 30, 1994, is due to the accrual of $746,488 in the second quarter of 1995 for the estimated costs associated with the environmental clean up of North Prior Industrial Park (See Note D for additional information). Partially offsetting this expense is the gain recognized on the sale of North Prior Industrial Park on June 12, 1995 (See discussion below). Rental income decreased for the three and nine months ended September 30, 1995, as compared to the three and nine months ended September 30, 1994, due to the sale of North Prior on June 12, 1995, resulting in the loss of rental revenue at this property. Also contributing to the decrease in rental income was the decrease in occupancy at Whispering Pines Apartments. Operating expenses for the nine months ended September 30, 1995, versus the nine months ended September 30, 1994, increased due to the estimated clean up costs at North Prior, as discussed above, along with increased advertising at Whispering Pines Apartments. This increase was partially offset by the overall decrease in operating expenses at North Prior Industrial Park due to the sale of the property during the second quarter of 1995 (See discussion below). General and administrative expenses decreased for the nine months ended September 30, 1995, as compared to the nine months ended September 30, 1994, primarily due to decreased cost reimbursements for partnership accounting, asset management and investor services. The decrease in property management fees for the three and nine months ended September 30, 1995, as compared to the three and nine months ended September 30, 1994, is attributable to the decrease in rental income, as such fees are based on revenue. Depreciation expense decreased for the three and nine months ended September 30, 1994, versus the three and nine months ended September 30, 1995, primarily due to the sale of North Prior Industrial Park during the second quarter of 1995. Amortization expense increased for the nine months ended September 30, 1995, versus the nine months ended September 30, 1994, due to the addition of lease commissions at North Prior Industrial Park prior to the sale. Interest expense also decreased for the three and nine months ended September 30, 1995, as compared to the three and nine months ended September 30, 1994, due to the sale of North Prior. This decrease was partially offset by increases in interest expense at Whispering Pines Apartments and Silver Ridge Apartments due to rising interest rates on the variable rate mortgages secured by these properties. Property tax expense decreased for the three and nine months ended September 30, 1995, as compared to the three and nine months ended September 30, 1994, due to lower tax bills at North Prior Industrial Park along with the sale of the property during the second quarter of 1995. The bad debt recovery for the nine months ended September 30, 1995, relates to past due amounts received from tenants of the North Prior Industrial Park that had been previously reserved. The bad debt recovery for the three months ended September 30, 1994, also related to past due amounts received from tenants of the North Prior Industrial Park that had previously been reserved. The bad debt expense for the nine months ended September 30, 1994, can be attributed to reserving accounts receivable at North Prior Industrial Park that were considered uncollectible. Tenant reimbursements decreased for the three and nine months ended September 30, 1995, versus the three and nine months ended September 30, 1994, due to the sale of North Prior Industrial Park during the second quarter of 1995. Furthermore, due to changes in management companies of North Prior Industrial Park, the detailed data needed to accurately estimate the receivable was not available and, therefore, tenant reimbursements were underestimated in 1993 resulting in significant recoveries during the first nine months of 1994, which contributed to the increased tenant reimbursements for the nine months ended September 30, 1994. On June 12, 1995, the Partnership sold one of its investment properties, North Prior Industrial Park, for $10,450,000 to an unrelated third party. The net proceeds were used to pay the first mortgage and related accrued interest. Accrued interest of $56,203 related to the first mortgage was forgiven, and a total gain of $610,767 was realized on the sale. A principal payment of $117,384 was made on the AMIT debt, which will now become unsecured debt of the Partnership (See Note D for further details). An additional principal payment of $104,602 was made during the third quarter of 1995, with proceeds from an escrow refund received as a result of the sale of North Prior. 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. At September 30, 1995, the Partnership had unrestricted cash of $825,832 versus $1,683,601 at September 30. 1994. Net cash used in operating activities increased due to the increased net loss and a decrease in other liabilities. Net cash provided by investing activities increased due to the proceeds from the sale of North Prior. Net cash used in financing activities increased due to repayments of the mortgage principal balances relating to the sale of North Prior. The financial statements have been prepared assuming the Partnership will continue as a going concern. The Partnership has incurred recurring operating losses and continues to suffer from inadequate liquidity. In addition, there are limited identified capital resources available to the Partnership. As a result, the Partnership has not had cash available to perform the substantial rehabilitation necessary at each of the investment properties. The Partnership is in default on $2,342,345 of its indebtedness due to its inability to make interest and principal payments when due. The debt is unsecured debt of the Partnership payable to AMIT. The Partnership is presently paying non-debt related expenses of the properties, is current on its mortgages on its other two investment properties and is negotiating forbearance agreements with AMIT on the debt in default. As a result of the above conditions, there is substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability or classification of assets or amounts or classification of liabilities that may result from these uncertainties. The second mortgage secured by the Silver Ridge Apartments property in the amount of $775,000 has $400,000 of principal due by December 31, 1995. The General Partner is negotiating a refinance of this indebtedness or this property may be lost through foreclosure. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In January 1993, a local fuel oil distributor pumped fuel oil into a testing well instead of into the storage tank at North Prior Industrial Park. The Partnership notified the necessary authorities and engaged an environmental engineering firm to develop a plan of action to clean up the site. The cost of the clean up, which is not covered by insurance, is estimated to be approximately $900,000 over a five year period. A liability was recorded for $200,000 in 1993, an additional liability was recorded during the second quarter of 1995, for the amount of $746,488. During 1994, the Partnership paid $46,488 relating to the remediation; a balance of $900,000 is included in "Other liabilities" at September 30, 1995. The Partnership entered into an Environmental Undertaking and Indemnity Agreement with the buyer of the property limiting the Partnership's liability with regard to the clean up of this site to the balance of the escrow account. This agreement will terminate when the Partnership receives a "Site Closure Letter" from the Minnesota Pollution and Control Agency. Upon receipt of this letter, any remaining funds in the escrow account will be used to pay down the AMIT debt discussed above. In January 1995, the holder of the first mortgage, along with the receiver, initiated two separate lawsuits against the Partnership, among others, for damages sustained as a result of the above. The General Partner believes that the former holder of the first mortgage will not pursue their lawsuit. The General Partner also believes that prior to December 31, 1995, the Partnership will be substituted in as the Plaintiff in the lawsuit initiated by the former receiver in a suit filed against the fuel distributor, among others. However, the outcome of these claims is uncertain and their effect on the Partnership cannot presently be determined. AMIT, a real estate investment trust, made a loan to the Partnership in October 1992 in the amount of $1,879,804, secured by the Partnership's real property known as North Prior Industrial Park, on a non-recourse basis. In January 1993, the Partnership repaid $175,000 in principal on this loan. As mentioned previously, the Partnership paid $117,384 in principal on this loan from the sales proceeds of this property, along with an additional principal payment of $104,602 during the third quarter of 1995. The current principal balance as of September 30, 1995, is $1,482,818. The Partnership believed that the loan was a non-recourse obligation. AMIT has asserted that the loan is recourse by virtue of a certain amendment purportedly entered into as of November 1, 1992, but which the Partnership has been informed and believes was actually executed in December 1992 ("Note Modification"). The Partnership has been further informed and believes that the amendment may have been executed at the direction of Angeles by an individual in his purported capacity as an officer of the General Partner of the Partnership at a time when such person was not in fact an officer of such entity. Accordingly, the Partnership filed a Proof of Claim in the Angeles bankruptcy proceeding with respect to such purported amendment. Additionally, the Partnership filed a Proof of Claim in the Angeles Funding Corporation and Angeles Real Estate Corporation bankruptcy proceedings on similar grounds. Both Angeles Funding Corporation and Angeles Real Estate Corporation are affiliates of Angeles. Subsequently, the Partnership determined that the original note agreement was in fact recourse and, therefore,the Partnership's Proofs of Claim were withdrawn. MAE GP Corporation ("MAE GP"), an affiliate of the General Partner, owns 1,675,113 Class B Shares of AMIT. MAE GP has the option to convert these Class B Shares, in whole or in part, into Class A Shares on the basis of 1 Class A Share for every 49 Class B Shares. These Class B Shares entitle MAE GP to receive 1% of the distributions of net cash distributed by AMIT. These Class B Shares also entitle MAE GP to vote on the same basis as Class A Shares which allows MAE GP to vote approximately 37% of the total shares (unless and until converted to Class A Shares at which time the percentage of the vote controlled represented by the shares held by MAE GP would approximate 1% of the vote). Between the date of acquisition of these shares (November 24, 1992) and March 31, 1995, MAE GP declined to vote these shares. Since that date, MAE GP voted its shares at the 1995 annual meeting in connection with the election of trustees and other matters. MAE GP has not exerted, and continues to decline to exert, any management control over or participate in the management of AMIT. As part of a settlement of certain disputes with AMIT, MAE GP granted to AMIT an option to acquire the Class B Shares owned by it. This option can be exercised at the end of 10 years or when all loans made by AMIT to partnerships affiliated with MAE GP as of November 9, 1994, (which is the date of execution of a definitive Settlement Agreement) have been paid in full, but in no event prior to November 9, 1997. AMIT delivered to MAE GP cash in the sum of $250,000 at closing, which occurred April 14, 1995, as payment for the option. Upon exercise of the option, AMIT would remit to MAE GP an additional $94,000. Simultaneously with the execution of the option, MAE GP executed an irrevocable proxy in favor of AMIT the result of which is MAE GP will be able to vote the Class B Shares on all matters except those involving transactions between AMIT and MAE GP affiliated borrowers or the election of any MAE GP affiliate as an officer or trustee of AMIT. On those matters, MAE GP granted to the AMIT trustees, in their capacity as trustees of AMIT, proxies with regard to the Class B Shares instructing such trustees to vote said Class B Shares in accordance with the vote of the majority of the Class A Shares voting to be determined without consideration of the votes of "Excess Class A Shares" as defined in Section 6.13 of the Declaration of Trust of AMIT. The Registrant is unaware of any other pending or outstanding litigation that is not of a routine nature. The General Partner of the Registrant believes that all such pending or outstanding litigation will be resolved without a material adverse effect upon the business, financial condition, or operations of the Partnership. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report. b) Reports on Form 8-K: None filed during the three months ended September 30, 1995. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ANGELES PARTNERS 16 By: Angeles Realty Corporation II General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President By: /s/Robert D. Long Robert D. Long Controller and Principal Accounting Officer Date: November 13, 1995