SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter Ended June 30, 2002 Commission File Number 33-19316 Qualified Housing Partners Limited Partnership (Exact name of registrant as specified in its charter) North Carolina 56-1589469 (State or other jurisdiction (I.R.S. Employer incorporation or organization) Identification Number) Suite 220 4700 Homewood Court Raleigh, North Carolina 27609 (Address of principal executive offices)(Zip Code) Registrant's telephone number, including area code: (919)787-4243 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 ( ) PART I FINANCIAL INFORMATION QUALIFIED HOUSING PARTNERS LIMITED PARTNERSHIP Item 1: Financial Statements - Unaudited Consolidated Balance Sheets - Unaudited Consolidated Statements of Income and Expenses (Three Months) - Unaudited Consolidated Statements of Income and Expenses (Six Months) - Unaudited Consolidated Statements of Cash Flows - Unaudited Cash Available for Distribution and Reserves - Unaudited Notes to Financial Statements Item 2: Management's Discussion - Liquidity and Capital Resources - Results of Operations - Tax Credits QUALIFIED HOUSING PARTNERS LIMITED PARTNERSHIP CONSOLIDATED BALANCE SHEETS June 30, 2002 and December 31, 2001 06/30/02 (Unaudited) 12/31/01 ASSETS Rental Properties Land $1,326,402 $1,326,402 Buildings 34,385,351 34,375,952 Furniture & Fixtures 2,067,222 2,054,878 Construction in Progress 209,471 209,471 37,988,446 37,966,703 Accumulated Depreciation (12,180,814) (11,740,067) 25,807,632 26,226,636 Cash 229,164 327,416 Other Assets 2,288,422 2,301,299 TOTAL ASSETS $28,325,218 $28,855,351 LIABILITIES AND PARTNERS' CAPITAL Liabilities Applicable to Rental Properties $24,812,461 $25,038,280 Other Liabilities 1,182,066 1,211,279 Total Liabilities 25,994,527 26,249,559 Minority Interests in Subsidiary Operating Partnerships 1,703,395 1,705,615 Partners' Capital 627,296 900,177 TOTAL LIABILITIES AND PARTNERS' CAPITAL $28,325,218 $28,855,351 See accompanying notes. CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES Three Months Ended June 30, 2002 and 2001 (Unaudited) 04/01/02- 04/01/01- 06/30/02 06/30/01 Revenue Rent $962,985 $947,498 Other 22,321 22,819 985,306 970,317 Rental Expense Interest 157,307 163,095 Depreciation 219,174 222,197 Repairs and Maintenance 290,125 269,766 Utilities 82,292 82,262 Real Estate Taxes 85,563 66,921 Management Fees 106,855 110,526 Advertising 2,520 1,221 Other 162,643 110,683 1,106,479 1,025,671 Loss from Rental Activities (121,173) (55,354) Other Income (Expenses) Interest Income 98 120 Management Fees (21,140) (21,140) Administrative Costs (5,825) (5,892) Loss Before Deducting Minority Interests in Subsidiary Operating Partnerships (148,040) (82,266) Minority Interests in Losses of Subsidiary Operating Partnerships 1,224 560 Net Loss ($146,816) ($81,706) Net Loss Allocated to General Partners ($1,468) ($817) Net Loss Allocated to Limited Partners (145,348) (80,889) Net Loss ($146,816) ($81,706) Net Loss per Limited Partnership Unit ($16.76) ($9.33) Average Number of Limited Partnership Units Outstanding 8,673 8,673 See accompanying notes. CONSOLIDATED STATEMENTS OF INCOME AND EXPENSES Six Months Ended June 30, 2002 and 2001 (Unaudited) 01/01/02- 01/01/01- 06/30/02 06/30/01 Revenue Rent $1,922,665 $1,883,387 Other 52,971 51,719 1,975,636 1,935,106 Rental Expense Interest 315,922 332,122 Depreciation 440,746 449,142 Repairs and Maintenance 537,328 488,310 Utilities 174,181 179,766 Real Estate Taxes 179,825 103,503 Management Fees 223,459 226,586 Advertising 5,181 2,235 Other 306,898 295,835 2,183,540 2,077,499 Loss from Rental Activities (207,904) (142,393) Other Income (Expenses) Interest Income 189 359 Management Fees (42,281) (42,281) Administrative Costs (24,985) (26,249) Loss Before Deducting Minority Interests in Subsidiary Operating Partnerships (274,981) (210,564) Minority Interests in Losses of Subsidiary Operating Partnerships 2,100 1,438 Net Loss ($272,881) ($209,126) Net Loss Allocated to General Partners ($2,729) ($2,091) Net Loss Allocated to Limited Partners (270,152) (207,035) Net Loss ($272,881) ($209,126) Net Loss per Limited Partnership Unit ($31.15) ($23.87) Average Number of Limited Partnership Units Outstanding 8,673 8,673 See accompanying notes. CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended June 30, 2002 and 2001 (Unaudited) 01/01/02- 01/01/01- 06/30/02 06/30/01 Cash Flows from Operating Activities Net Loss ($272,881) ($209,126) Adjustments to Reconcile Net Loss To Net Cash Provided by Operating Activities: Depreciation 440,746 449,142 Minority Interest in Losses of Subsidiary Operating Partnerships (2,100) (1,438) Other (16,335) (89,549) Net Cash Provided by Operating Activities 149,430 149,029 Cash Flows from Investing Activities Purchases of Buildings and Equipment (21,743) (17,964) Net Cash Used by Investing Activities (21,743) (17,964) Cash Flows from Financing Activities Principal Payments on Borrowings (225,819) (202,785) Return of Equity to Minority Investors (120) (50,162) Net Cash Used by Financing Activities (225,939) (252,947) Net Decrease in Cash (98,252) (121,882) Cash Beginning 327,416 360,620 Cash Ending $229,164 $238,738 See accompanying notes. CASH AVAILABLE FOR DISTRIBUTION AND RESERVES Quarter Ended June 30, 2002 (Unaudited) Cash Receipts from Operating Partnerships $30,704 Cash Receipts (Disbursements) from Operations Interest 97 Expenses (38,137) Reserves Utilized for Operations ($7,336) NOTES TO FINANCIAL STATEMENTS (Unaudited) Note A - Basis of Presentation The unaudited consolidated financial statements included herein have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. In the opinion of the Partnership, all adjustments which are considered necessary for a fair statement of the results for the interim periods have been made; all such adjustments are of a normal recurring nature. These financial statements, which do not include all disclosures included in the annual financial statements, should be read in conjunction with the consolidated financial statements and notes thereto included in the Partnership's latest annual report on Form 10-K. The results of operations for the six months ended June 30, 2002 are not necessarily indicative of the results to be achieved for the year. Note B - Net Loss Per Limited Partnership Unit Net loss per limited partnership Unit is based upon the net loss allocated to the limited partners and is computed using the number of Units outstanding of 8,673. Note C - Liabilities Applicable to Rental Properties Liabilities applicable to rental properties at June 30, 2002 consist of $24,812,461 of permanent mortgage loans to Subsidiary Operating Partnerships. Note D - Related Party Transactions The accompanying consolidated financial statements reflect transactions between Qualified Housing Partners Limited Partnership ("QHP") and its general partners or affiliates and between the various Subsidiary Operating Partnerships and their general partners or affiliates. Frederick Investment Corporation, the Managing General Partner of QHP, is a general or special limited partner in each of the Operating Partnerships. Each Operating Partnership also has one or more other general partners (the "Local General Partners"). Following is a summary of related party transactions for the three months ended June 30, 2002. QHP General Local General Items Paid or Payable Partners Partners Management Fees $21,000 $97,000 Reimbursable Operating Expenses $8,500 $0 Following is a summary of related party transactions for the six months ended June 30, 2002. QHP General Local General Items Paid or Payable Partners Partners Management Fees $42,000 $204,000 Reimbursable Operating Expenses $12,800 $0 MANAGEMENT'S DISCUSSION Liquidity and Capital Resources Net of the Subsidiary Operating Partnerships, QHP held approximately $25,000 in cash and liquid investments at June 30, 2002. These assets will be held as working capital. At June 30, 2002, there were 640 holders of limited partnership Units. Results of Operations Occupancy averaged 92%, with 857 out of a total of 934 apartment units owned by the Subsidiary Operating Partnerships occupied as of June 30, 2002. This is down 2.4% over the same period in 2001. The Partnership's loss from rental activities, including depreciation, during the second quarter of 2002 is $121,173 as compared with a loss of $55,354 for the same period in 2001. Second quarter revenue increased due to rent increases received in the first quarter. Maintenance and repairs are up slightly as expected with aging properties. Property tax accruals exceed the accruals made from the previous year but are not expected to vary greatly at year-end. As compared to the same period last year, other expenses are up in the second quarter after being down in the first quarter due to timing differences. Dimmitt Senior Citizen Housing in Texas continues to have vacancy problems as a result of a diminishing market. After over a year of discussions with Rural Development, they have finally verbally agreed to a rent increase to help offset some of the vacancy loss the property has suffered. The managing General Partner is working with the local General Partner and Rural Development to determine how to handle liabilities such as property insurance and real estate taxes for which there will be insufficient funds available. Tax Credits One of the Partnership's primary investment objectives, the generation of tax benefits through Low Income Housing Tax Credits, has been substantially fulfilled. The majority of the apartment units stopped producing tax credits in 1999. The ten-year tax credit period for the final two properties expired in the first quarter of 2000. A small number of apartment units are generating tax credits over a fifteen-year period rather than the ten years. This will produce an insignificant amount of tax credits over the next four or five years. PART II OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a) Exhibits 4 The Partnership Agreement is Exhibit A to the Prospectus that is part of the Registration Statement on Form S-11, Number 33-19316 and effective May 20, 1988, the final form of which was filed on May 20, 1988 pursuant to Rule 424(b), and is incorporated herein b reference. (b) Reports No reports on Form 8-K were filed for the quarter ended June 30, 2002. SIGNATURES Under the requirements of the Securities Exchange Act of 1934, the Bank has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Frederick Investment Corporation A General Partner Date: August 14, 2002 By: 	 /s/ George F. Marshall George F. Marshall, President (Chief Executive Officer) Date: August 14, 2002 By: /s/ Jenny C. Petri Jenny C. Petri, Vice President (Chief Financial Officer) Date: August 14, 2002 By: 	 /s/ George F. Marshall George F. Marshall A General Partner CERTIFICATION The undersigned hereby certifies that the Form 10-Q filed by Qualified Housing Partners Limited Partnership (the "Issuer") for the quarter ended June 30, 2002, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and the information contained in that report fairly presents, in all material respects, the financial condition and results of operations of the Issuer. Frederick Investment Corporation A General Partner Date: August 14, 2002 By: 	 /s/ George F. Marshall George F. Marshall, President (Chief Executive Officer) Date: August 14, 2002 By: /s/ Jenny C. Petri Jenny C. Petri, Vice President (Chief Financial Officer) Date: August 14, 2002 By: 	 /s/ George F. Marshall George F. Marshall A General Partner