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 March 31, 1996 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT For the transition period.........to......... Commission file number 0-8851 ANGELES PARTNERS VII (Exact name of small business issuer as specified in its charter) California 95-3215214 (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 (864) 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 VII BALANCE SHEET (Unaudited) (in thousands, except unit data) March 31, 1996 Assets Cash and cash equivalents: Unrestricted $ 232 Restricted--tenant security deposits 33 Accounts receivable 5 Escrows for taxes 14 Other assets 4 Investment properties Land $ 366 Buildings and related personal property 5,168 5,534 Less accumulated depreciation (3,418) 2,116 $ 2,404 Liabilities and Partners' Deficit Liabilities Accounts payable $ 11 Tenant security deposits 33 Other liabilities 53 Mortgage note payable 2,530 Partners' Capital (Deficit) General partner $ 293 Limited partners' (8,669 units issued and outstanding) (516) (223) $ 2,404 See Accompanying Notes to Financial Statements b) ANGELES PARTNERS VII STATEMENTS OF OPERATIONS (Unaudited) (in thousands, except unit data) Three Months Ended March 31, 1996 1995 Revenues: Rental income $ 270 $ 241 Other income 13 15 Total revenues 283 256 Expenses: Operating 84 77 General and administrative 22 21 Maintenance 34 43 Depreciation 63 56 Interest 58 61 Property taxes 10 10 Total expenses 271 268 Net income (loss) $ 12 $ (12) Net income (loss) allocated to general partner (1%) $ -- $ -- Net income (loss) allocated to limited partners (99%) 12 (12) Net income (loss) $ 12 $ (12) Net income (loss) per limited partnership unit $ 1.38 $ (1.38) See Accompanying Notes to Financial Statements c) ANGELES PARTNERS VII STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) (Unaudited) (in thousands, except unit data) Limited Partnership General Limited Unit Partner Partners Total Original capital contributions 8,674 $ 88 $ 8,674 $ 8,762 Partners' capital (deficit) at December 31, 1995 8,669 $ 293 $ (528) $ (235) Net income for the three months ended March 31, 1996 -- -- 12 12 Partners' capital (deficit) at March 31, 1996 8,669 $ 293 $ (516) $ (223) <FN> See Accompanying Notes to Financial Statements d) ANGELES PARTNERS VII STATEMENTS OF CASH FLOWS (Unaudited) (in thousands) Three Months Ended March 31, 1995 1995 Cash flows from operating activities: Net income (loss) $ 12 $ (12) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation 63 56 Change in accounts: Restricted cash (1) (3) Accounts receivable 1 2 Escrows for taxes 28 (11) Accounts payable (24) (10) Tenant security deposit liabilities 1 1 Other liabilities 3 13 Net cash provided by operating activities 83 36 Cash flows used in investing activities: Property improvements and replacements (19) (24) Cash flows from financing activities: Payments on mortgage notes payable (25) (23) Cash distributions to partners -- (100) Net cash used in financing activities (25) (123) Net increase (decrease) in cash 39 (111) Cash at beginning of period 193 454 Cash at end of period $ 232 $ 343 Supplemental disclosure of cash flow information: Cash paid for interest $ 58 $ 60 <FN> See Accompanying Notes to Financial Statements e) ANGELES PARTNERS VII NOTES TO FINANCIAL STATEMENTS (Unaudited) Note 1 - 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 management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month period ended March 31, 1996, are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 1996. For further information, refer to the financial statements and footnotes thereto included in Angeles Partners VII's (the "Partnership") annual report on Form 10-KSB for the fiscal year ended December 31, 1995. Certain reclassifications have been made to the 1995 information to conform to the 1996 presentation. Note 2 - Transactions with Affiliates 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 paid to the General Partner and affiliates for the three months ended March 31, 1996 and 1995: 1996 1995 (in thousands) Property management fees $14 $13 Reimbursement for services of affiliates 15 12 The Partnership insures its property 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 of the affiliate of the General Partner who receives payments 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. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION The Partnership's investment property consists of one apartment complex. The following table sets forth the average occupancy of the property for the three months ended March 31, 1996 and 1995: Average Occupancy Property 1996 1995 Cedarwood Apartments (1) 97% 94% Gretna, Louisiana (1) The increase in occupancy at Cedarwood Apartments is attributable to property improvements and increased advertising. The Partnership realized net income of $12,000 for the first three months of 1996 versus a net loss of $12,000 for the first three months of 1995. The increase in net income is primarily attributable to an increase in rental income. Rental income increased as a result of increased occupancy and increased rental rates. Complimenting the increase in rental income is a decrease in maintenance expense. Maintenance expense decreased due to the completion of the unit renovations in the beginning of 1995. There was an increase in operating expenses and depreciation expense for the three months ended March 31, 1996, versus the three months ended March 31, 1995. The increase in operating expense is a result of higher electricity costs and the increase in depreciation expense is due to increased property improvements to upgrade the interior of the units. The General Partner continues to monitor the rental market environment at its apartment property to assess the feasibility of increasing rents, to maintain or increase the occupancy level and to protect the Partnership from increases in expense. The General Partner expects to be able, at a minimum, to continue protecting the Partnership from the burden of inflation-related increases in expenses by increasing rents and maintaining a high overall occupancy level. However, rental concessions and rental rate reductions needed to offset softening market conditions could affect the ability to sustain this plan. The General Partner plans to actively market this apartment complex for sale in May 1996. At March 31, 1996, the Partnership had unrestricted cash of $232,000 versus $343,000 at March 31, 1995. Net cash provided by operating activities increased primarily due to the increase in net income, as mentioned above, and due to the decrease in escrows for taxes. This increase was partially offset by a decrease in accounts payable. Net cash used in investing activities decreased slightly as a result of decreased property improvements during the first three months of 1996 as compared to the first three months of 1995. Net cash used in financing activities decreased due to distributions to partners during the three months ended March 31, 1995. There were no distributions for the three months ended March 31, 1996. The sufficiency of existing liquid assets to meet future liquidity and capital expenditure requirements is directly related to the level of capital expenditures required at the property to adequately maintain the physical assets and other operating needs of the Partnership. Such assets are currently thought to be sufficient for any near-term needs of the Partnership. The mortgage indebtedness of $2,530,000 is being amortized over 28 years with a maturity date of May 2007. Future cash distributions will depend on the levels of net cash generated from operations, refinancings, property sales and the availability of cash reserves. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Registrant is unaware of any 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 March 31, 1996. 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 VII By: Angeles Realty Corporation General Partner By: /s/Carroll D. Vinson Carroll D. Vinson President and Principal Executive Officer By: /s/Robert D. Long, Jr. Robert D. Long, Jr. Vice President/CAO Date: May 8, 1996