UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTONCOMMISSION WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

~~For~~ For the quarterly period ended ~~September~~June 30, ~~2003~~ 2004

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

Commission File Number 0-11655

NTS-PROPERTIES IV (Exact name of registrant as specified in its charter)

Kentucky	61-1026356
(State or other jurisdiction of	(~~IRS~~I.R.S. Employer Identification No.)
incorporation or organization)

10172 Linn Station Road, Louisville, Kentucky 40223 (Address of ~~Principal~~principal ~~Executive~~executive ~~Offices~~offices)

(502) 426-4800 (Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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 whether registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act ~~of 1934~~). Yes [ ] No [X]


				Pages

PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)
	Balance Sheets as of September 30, 2003 and December 31, 2002	4
	Balance Sheets as of June 30, 2004 and December 31, 2003	4
	Statement of Partners' Equity as of September 30, 2003	4
	Statement of Partners' Equity as of June 30, 2004	4
	Statements of Operations for the Three and Nine
	Statements of Operations for the Three and Six Months Ended June 30, 2004 and 2003	5
	Months Ended September 30, 2003 and 2002	5
	Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003	6
	Statements of Cash Flows for the Nine Months
	Notes to Financial Statements	7-17
	Ended September 30, 2003 and 2002	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	18-29
	Notes to Financial Statements	7-19
Item 2.	Management's Discussion and Analysis of Financial
	Condition and Results of Operations	20-28
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29

PART II — OTHER INFORMATION

Items 1 - 6				30-31
Signatures				3132
Exhibit Index				32

Some of the statements included in this ~~Quarterly~~quarterly ~~Report~~report on Form 10-Q, particularly those included in Part I, Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), may be considered “forward-looking statements” because the statements relate to matters which have not yet occurred. For example, phrases such as “we anticipate,” “believe” or “expect” indicate that it is possible that the event anticipated, believed or expected may not occur. If these events do not occur, the result which we expected also may ~~not occur~~, or may not, occur in a different manner, which may be more or less favorable to us. We do not undertake any obligation to update these forward-looking statements.

Any forward-looking statements included in MD&A, or elsewhere in this report, reflect our general partner’s best judgment based on known factors, but involve risks and uncertainties. Actual results could differ materially from those anticipated in any forward-looking statements as a result of a number of factors, including but not limited to those described in our filings with the Securities and Exchange Commission, particularly our ~~Annual~~annual ~~Report~~report on Form 10-K for the year ended December 31, ~~2002~~2003. Any forward-looking information provided by us pursuant to the safe harbor established by ~~securities~~the ~~legislation~~Private ~~should~~Securities Litigation Reform Act of 1995 should be evaluated in the context of these factors.

PART I — FINANCIAL INFORMATIONINFORMATIONItem Item 1 — Financial Statements

NTS-PROPERTIES IV
BALANCE SHEETS

                                                                                                                                             As of                               As of
                                                                   September                                                                     June 30,                 December 31,
                                                                       2004               2003                 2002
                                                                -------------------  -------------------
                                                                                                                                       (UNAUDITED)
ASSETS
Cash and equivalents                                           $            246           167,363997 $            205          298,729240
Cash and equivalents - restricted                                           11891,136               26552             47,750101
Accounts receivable, net                                                    181                                                   131,412              123084            171,412432
Land, buildings and amenities, net                                                                               5,923666,289            6143          5,258847,639221
Investment in and advances to joint ventures                                                           1,183205,139            952          1,120198,227424
Other assets                                                                13273,797              139028             92,526601
                                                                -------------------  -------------------

           TOTAL ASSETS                                                                                           $                   7,785335,136756 $                  7,874655,283019
                                                                ===================  ===================

LIABILITIES AND PARTNERS' EQUITY
Mortgages and note payable                                                                                   $          3         2,335860,507846 $                  3,785180,444515
Accounts payable                                                            191 and accrued expenses                                      324,300              104924            246,646940
Security deposits                                                            31                                                           26,131               31013             28,631663
Other liabilities                                                           167                                                          135,421               86985             75,449422
                                                                -------------------  -------------------

           TOTAL LIABILITIES                                                                                                      3,725347,359            4768          3,008531,170540

COMMITMENTS AND CONTINGENCIES (Note 10)

PARTNERS' EQUITY                                                          4                                                         3,059987,777            3988          4,866123,113479
                                                                -------------------  -------------------

TOTAL LIABILITIES AND PARTNERS' EQUITY                         $                   7,785335,136756 $                  7,874655,283019
                                                                ===================  ===================

NTS-PROPERTIES IV STATEMENT OF PARTNERS’ EQUITY (UNAUDITED)

                                                    Limited            General
                                                   Partners            Partner              Total
                                               -----------------  ------------------  ------------------
PARTNERS' EQUITY/(DEFICIT)
Capital contributions, net of offering costs     $       25,834,899 $                -- $        25,834,899
Net income - prior years                                 806                               1,219               8061,145             814011              10,364719           1,071,730
Net incomeloss - current year                                191                                 (134,725               138)             (1,937             193355)           (135,662493)
Cash distributions declared to date                  (21,586,280)           (218,253)        (21,804,533)
Repurchase of limited partnership interests             (978,615)                 --            (978,615)
                                               -----------------  ------------------  ------------------

BALANCES ON SEPTEMBERJUNE 30, 2003                2004                     $        4,267196,948877 $          (208,171889)$         43,059987,777988
                                               =================  ==================  ==================

The accompanying notes to financial statements are an integral part of these statements.

NTS-PROPERTIES IV
STATEMENTS OF OPERATIONS
(UNAUDITED)

                                                                                                                Three Months Ended             Nine              Six Months Ended
                                                      September                                                                 June 30,                  September                       June 30,
                                                                                                      -----------------------------  -----------------------------
                                                   2003                                                            2004           2002           2003           2004            20022003
                                                                                                      --------------  -------------  -------------     --------------
REVENUES
Rental income                                                                          $      614       538,204781 $      606589,530532 $    1,871090,538  292 $         1,767170,466792
IncomeTenant from investment in joint ventures              12reimbursements                                          45,747534         1443,358284         8591,460230          5486,091543
Interest and other income                              3,001          2,538          4,435           7,255
Gain on sale of assets                                                                                           --            249             --             498
                                               -------------  -------------  -------------     --------------

     TOTAL REVENUES                                  629                                           584,952315        623632,675816      1,961181,433522       1,829257,310335
                                                                                                      --------------  -------------  -------------     --------------

EXPENSES
Operating expenses                                   123                                            125,618976        133135,695198        373249,853692         406250,889232
Operating expenses - affiliated                       85                               114,495        102,756        276,690914         31099,560
Loss on disposal of assets                                --             --          3,953          51,268
Interest expense                                      64,450         76,625041        202242,609286         238191,556195
Management fees                                       35                                                34,723144         3534,230        104,475216         10068,197477          68,753
Real estate taxes                                     24                                              29,813907         3031,788266         8761,345261          9262,363532
Professional and administrative expenses              53                      104,442854         3896,856993        226307,259          96969         172,963817
Professional and administrative expenses -
   affiliated                                          33          42,711724         3339,007        109,737232         10380,641231          76,026
Depreciation and amortization                        127                                 126,852728        125128,680678        382252,850909         374254,188999
                                                                                                      --------------  -------------  -------------     --------------

     TOTAL OPERATING EXPENSES                                  549                                 579,104247        576564,637624      1,767262,771825       1,774076,625554
                                                                                                      --------------  -------------  -------------     --------------

OPERATING INCOME (LOSS)                                         5,068         68,192        (81,303)        180,781

Interest and other income                                       2,603            935          4,485           1,433
Interest expense                                              (54,766)       (67,547)      (112,826)       (138,160)
Loss on disposal of assets                                     (3,756)        (3,953)        (3,756)         (3,953)
Income from investment in joint ventures                       33,416         39,414         57,907          72,713
                                                       --------------  -------------  -------------  --------------

Net (loss) income                                                                         $       80(17,848 435)$       4737,038041 $      193     (135,662  493)$       54112,685814
                                                                                                      ==============  =============  =============     ==============

Net (loss) income allocated to the limited
   partners                                       $       80(17,040 261)$       4636,568671 $      191     (134,725  138)$       54111,138686
                                                                                                      ==============  =============  =============     ==============

Net (loss) income per limited partnership
   interest                                        $         3(0.32 72)$         1.9352 $         7        (5.95  56)$         2          4.2563
                                                                                                      ==============  =============  =============     ==============

Weighted average number of limited
  partnership interests                                                                       24,109         24,109         24,109          24,109
                                                                                                      ==============  =============  =============     ==============

The accompanying notes to financial statements are an integral part of these statements.

NTS-PROPERTIES IV STATEMENTSOFSTATEMENTS OF CASH FLOWS (UNAUDITED)

                                                                           Nine                                                                             Six Months Ended
                                                                             September                                                                                 June 30,
                                                                                                                                  ----------------------------------------
                                                                       2003                                                                        2004                 20022003
                                                                                                                                  -----------------    --  -------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income                                                                                                   $            193           (135,662 493)$             54            112,685814
Adjustments to reconcile net (loss) income to net cash
  provided by operating activities:
    ProvisionLoss for doubtful accounts                                           2,184                   --
    Write-off of uncollectible accounts receivable                           (1,745)                  --
    Loss on disposal of assets                                                3,953               51756                3,268953
    Gain on sale of assets                                                       --                 (498)
    Depreciation and amortization                                           413271,991079              405275,212803
    Income from investment in joint ventures                                (8557,460907)             (5472,091713)
    Changes in assets and liabilities:
      Cash and equivalents - restricted                                     (9144,386451)             (7561,803130)
      Accounts receivable                                                   (58                                                    40,439)348              23(94,304025)
      Other assets                                                          (24                                                            1,410)              (7404               10,126)073
      Accounts payable                                                       86 and accrued expenses                                  77,654                1984               55,041411
      Security deposits                                                                                                              (500)               2,550650)                 900
      Other liabilities                                                      8060,972              137563               70,944539
                                                                                                                                  -----------------    --  -------------------

     Net cash provided by operating activities                              519214,476633              538301,486625
                                                                                                                                  -----------------    --  -------------------

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to land, buildings and amenities                                  (5175,453586)                         (15316,967261)
ProceedsDistributions from sale of land, buildings and amenities                              --                  498
Investment in and advances from (to) joint ventures                          22,548              (62 net                                       50,019)379               33,697
                                                                                                                                  -----------------    --  -------------------

     Net cash (used in) provided by investing activities                                                     (2825,905207)            (215              17,488)436
                                                                                                                                  -----------------    --  -------------------

CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages and note payable                           (449319,937669)            (423298,658084)
                                                                                                                                  -----------------    --  -------------------

     Net cash used in financing activities                                 (449319,937669)            (423298,658084)
                                                                                                                                  -----------------    --  -------------------

     Net increase (decrease) increase in cash and equivalents                         40,634                                    (100130,660243)              20,977

CASH AND EQUIVALENTS, beginning of period                                   205298,729240              462205,107729
                                                                                                                                  -----------------    --  -------------------

CASH AND EQUIVALENTS, end of period                            $            246167,363997 $            361226,447706
                                                                                                                                  =================    ==  ===================

Interest paid on a cash basis                                  $            199111,884162 $            235136,588321
                                                                                                                                  =================    ==  ===================

The accompanying notes to financial statements are an integral part of these statements.

NTS-PROPERTIES IV NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

The unaudited financial statements included herein should be read in conjunction with NTS-Properties IV’s ~~2002~~2003 ~~Annual~~annual ~~Report~~report on Form 10-K as filed with the Securities and Exchange Commission on March 3126, ~~2003~~2004. In the opinion of our general partner, all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation have been made to the accompanying financial statements for the three and ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 and ~~2002~~2003. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year or any other interim period. As used in this ~~Quarterly~~quarterly ~~Report~~report on Form 10-Q the terms “we,” “us” or “our,” as the context requires, may refer to NTS-Properties IV or its interests in its properties and joint ventures.

Note 1 — Basis of Presentation and Joint Venture Accounting

The financial statements include the accounts of all wholly-owned properties. Intercompany transactions and balances have been eliminated. Less than 50% owned joint ventures are accounted for under the equity method.

Consolidation of Variable Interest Entities

In January 2003, the Financial Accounting Standards Board ("FASB") issued FASB Interpretation No. 46 (“FIN 46”), Consolidation of Variable Interest Entities. FIN 46 provides guidance on how to identify a variable interest entity (“VIE”) and determine when the assets, liabilities, noncontrolling interests and results of operations of a VIE are to be included in an entity’s consolidated financial statements. A VIE exists when either the total equity investment at risk is not sufficient to permit the entity to finance its activities by itself, or the equity investors lack one of three characteristics associated with owning a controlling financial interest. Those characteristics include the direct or indirect ability to make decisions about an entity’s activities through voting rights or similar rights, the obligation to absorb the expected losses of an entity if they occur, and the right to receive the expected residual returns of the entity if they occur.

FIN 46 was effective immediately for new entities created or acquired after February 1, 2003, and will become effective for the period ending December 31, 2003 for entities in which we had a variable interest prior to February 1, 2003. We are presently evaluating the effect of this pronouncement.

Note 2 — Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in accordance with ~~accounting~~U.S. ~~principles~~ generally accepted inaccounting ~~the~~principles ~~United States~~ requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Note 3 — Concentration of Credit Risk

We own and operate, either wholly or through a joint venture, four commercial properties — Commonwealth Business Center Phase I, Plainview Point Office Center Phases I and II, Plainview Point Office Center Phase III and Blankenbaker Business Center 1A (“BBC 1A”), in Louisville, Kentucky and three commercial properties — Lakeshore Business Center Phases I, II and III, in Fort Lauderdale, Florida. One tenant occupies 100% of BBC 1A. We also own and operate, either wholly or through a joint venture, two apartment communities — The Willows of Plainview Phases I and II, in Louisville, Kentucky and one apartment community — Golf Brook Apartments, in Orlando, Florida.

Our financial instruments that are exposed to concentrations of credit risk consist of cash and equivalents. We maintain our cash accounts primarily with banks located in Kentucky. Cash balances are insured by the FDIC up to $100,000 per bank account. We may at times, in certain accounts, have deposits in excess of $100,000.

Note 4 — Cash and Equivalents

Cash and equivalents include cash on hand and short-term, highly liquid investments with initial maturities of three months or less. We have a cash management program which provides for the overnight investment of excess cash balances. Under an agreement with a bank, excess cash is invested in a repurchase agreement for U.S. government or agency securities each night. As of ~~September~~ June 30, ~~2003~~ 2004, approximately $~~199~~102,000 of our overnight investment was included in cash and equivalents.

Note 5 — Cash and Equivalents — Restricted

Cash and equivalents — restricted represents funds received for residential security deposits and funds escrowed with mortgage companies for property taxes and insurance in accordance with the loan agreements with said mortgage companies.

Note 6 — Basis of Property and Depreciation

Land, buildings and amenities are stated at historical cost, less accumulated depreciation. Costs directly associated with the acquisition, development and construction of a project are capitalized. Depreciation is computed using the straight-line method over the estimated useful lives of the assets which are 5-30 years for land improvements, 3-30 years for buildings and improvements, and 3-30 years for amenities ~~and the applicable lease term for tenant improvements~~. The aggregate cost of our properties for federal tax purposes is approximately $15,~~446~~441,000.

Statement of Financial Accounting Standards (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” specifies circumstances in which certain long-lived assets must be reviewed for impairment. If the carrying amount of an asset exceeds the sum of its expected future cash flows, the asset’s carrying value must be written down to fair value. ~~Application~~There ofwere ~~this~~no ~~standard~~impairment bylosses ~~management~~ during ~~the~~any ~~period~~of ~~ended~~the ~~September~~periods ~~30, 2003 did not result in an impairment loss~~presented.

Note 7 — Investment in Joint Ventures

We own several investments in joint ventures in conjunction with our affiliates. The unconsolidated subsidiaries of NTS-Properties IV consist of NTS/Willows Phase II Joint Venture, NTS Sabal Golf Villas Joint Venture, Plainview Point III Joint Venture, Blankenbaker Business Center Joint Venture and Lakeshore/University II Joint Venture. The interests we own through these unconsolidated subsidiaries are described as follows:

A 9.70% joint venture interest in The Willows of Plainview Phase II, a 144-unit luxury apartment community in Louisville, Kentucky.

A 3.97% joint venture interest in Golf Brook Apartments, a 195-unit luxury apartment community in Orlando, Florida.

·8 ~~A 4.96% joint venture interest in Plainview Point Office Center Phase III, an office center with approximately 62,000 net rentable square feet in Louisville, Kentucky.~~

· A 294.6196% joint venture interest in ~~BBC~~Plainview 1APoint ,Office aCenter ~~business~~Phase ~~center with approximately 50~~III,~~000~~ ~~net~~an ~~rentable~~office ~~ground~~center ~~floor~~with ~~square feet and~~ approximately 5061,~~000~~700 net rentable ~~mezzanine~~ square feet in Louisville, Kentucky.

9· A 29.61% joint venture interest in BBC 1A , a business center with approximately 50,300 net rentable ground floor square feet and approximately 50,300 net rentable mezzanine square feet in Louisville, Kentucky.

A 10.92% joint venture interest in the Lakeshore/University II Joint Venture. A description of the properties owned by this joint venture appears below:

· Lakeshore Business Center Phase I — a business center with approximately 104,~~000~~100 net rentable square feet located in Fort Lauderdale, Florida.

· Lakeshore Business Center Phase II — a business center with approximately 9796,~~000~~600 net rentable square feet located in Fort Lauderdale, Florida.

· Lakeshore Business Center Phase III — a business center with approximately 3938,~~000~~900 net rentable square feet located in Fort Lauderdale, Florida.

For the three months ended ~~September~~ June 30, 2004 ~~2003~~ and ~~2002~~2003, the unconsolidated joint ventures had total revenues of $2,~~240~~295,~~084~~922 and $2,~~272~~352,~~552~~890, respectively, and net income of $~~208~~287,~~576~~989 and $~~160~~318,~~718~~109, respectively. For the nine months ended September 30, 2003 and 2002, the unconsolidated joint ventures had total revenues of $6,792,839 and $6,737,449, respectively, and net income of $822,310 and $513,143, respectively.

~~Note~~For 8the —six ~~Mortgages~~months ended June 30, 2004 and ~~Note~~2003, ~~Payable~~the unconsolidated joint ventures had total revenues of $4,518,933 and $4,548,089, respectively, and net income of $450,361 and $613,734, respectively.

MortgagesNote and8 note— payableMortgages consist of the following: Payable

~~September~~Mortgages 30, December 31, 2003 2002 ------------------- ------------------- Mortgage payable toconsists ~~an insurance company in monthly installments, bearing interest at a fixed rate~~ of 8.8%, due October 1, 2004, secured by land and a building. $ 450,056 $ 737,515 Mortgage payable to an insurance company in monthly installments, bearing interest at a fixed rate of 7.15%, due January 5, 2013, secured by land, buildings and amenities. 1,478,238 1,559,662 Mortgage payable to an insurance company in monthly installments, bearing interest at a fixed rate of 7.15%, due January 5, 2013, secured by land, buildings and amenities. 1,407,213 1,484,724 Note payable to a bank in monthly installments, bearing interest at the ~~Prime Rate, but not less than 6.00%, repaid in~~ ~~March~~following: 2003. -- 3,543 ------------------- ------------------- $ 3,335,507 $ 3,785,444 =================== ===================

Based                                                                     June on30,         December the31,
                                                                       2004               2003
                                                                ------------------  -----------------
Mortgage borrowingpayable ratesto an insurance company in monthly
currentlyinstallments, availablebearing tointerest usat fora loansfixed withrate similarof terms8.8%, due
October 1, 2004, secured by land and averagea maturitiesbuilding.               $           143,057 the$          349,958

Mortgage fairpayable to an insurance company in monthly
valueinstallments, bearing interest at a fixed rate of long-term7.15%, debtdue
January is5,  2013, approximatelysecured $3by land,518 buildings and amenities.              1,000392,344          1,450,116

Mortgage payable to an insurance company in monthly
installments, bearing interest at a fixed rate of 7.15%, due
January 5, 2013, secured by land, buildings and amenities.               1,325,445          1,380,441
                                                                ------------------  -----------------

                                                               $         2,860,846 $        3,180,515
                                                                ==================  =================

~~Our~~9 ~~mortgages may be prepaid but are generally subject to a yield-maintenance premium.~~

10Our mortgages may be prepaid but are subject to a yield-maintenance premium.

As of June 30, 2004, the fair value of long-term debt is approximately $2,867,000, based on the borrowing rates currently available to us for mortgages with similar terms and average maturities.

Pursuant to an agreement with us, NTS Development Company, an affiliate of our ~~general~~General ~~partner~~Partner, receives property management fees on a monthly basis. The monthly fees are ~~paid in an amount~~ equal to 5% of the gross ~~revenues~~ receipts from our apartment community and 6% of the gross ~~revenues~~receipts from our commercial properties. ~~Also~~ Also pursuant to an agreement, NTS Development Company receives a repair and maintenance ~~fee~~ fee equal to 5.9% of costs incurred which ~~relate~~relates to capital improvements and major repair and renovation projects. These repair and maintenance fees are capitalized as part of land, buildings and amenities.

We were charged the following amounts from NTS Development Company for the ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 and ~~2002~~2003. These charges include items which have been expensed as operating expenses — affiliated or professional and administrative expenses — affiliated and items which have been capitalized as other assets or as land, buildings and amenities.

                                                                      Nine                                                                            Six Months Ended
                                                                        September                                                                                June 30,
                                                                                                                          -----------------------------------------
                                                                                                                                        2004                 2003                  2002
                                                                                                                          ------------------    -  -------------------

Property management fees                                                                      $             10468,475477 $              100             68,197753
                                                                                                                          ------------------    -  -------------------

Property management                                                  176                                                         150,215                176297              119,501565
Leasing                                                               43                                                                      33,202                 81213               33,022893
Administrative - operating                                            55                                                   53,583                 50700               36,048595
Other                                                                                                                                           5,076                1,690                  2,989142
                                                                                                                          ------------------    -  -------------------

     Total operating expenses - affiliated                           276                                  242,690                310286              191,560195
                                                                                                                          ------------------    -  -------------------

Professional and administrative expenses - affiliated                109                        80,737                103231               76,641026
                                                                                                                          ------------------    -  -------------------

Repair and maintenance fees                                            6                                                   1,738                  8990                5,331065
Leasing commissions                                                      655                 10,779
Construction management                                                   --                                                                             5,287788                  340
                                                                                                                          ------------------    -  -------------------

     Total related party transactions capitalized                                                   7,393                 24778                5,397405
                                                                                                                          ------------------    -  -------------------

Total related party transactions                                                      $             498            398,295772 $              538            341,795379
                                                                                                                          ==================    =  ===================

During the ~~nine~~six months ended ~~September~~ June 30, 2004 ~~2003~~ and ~~2002~~2003, NTS Development Company leased 1,604 square feet in Commonwealth Business Center Phase I at a rental rate of $5.50 per square foot. We received approximately $64,~~617~~ 000 in rental payments from NTS Development Company during each of the ~~nine~~six months ended ~~September~~ June 30, ~~2003~~2004 and ~~2002~~2003. The lease term for NTS Development Company ends on August 31, 2006.

1110

Note 10 — Commitments and Contingencies

As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. Our compliance with existing laws has not had a material adverse effect on our financial condition or results of operations. However, we cannot predict the impact of new or changed laws or regulations on our current properties or on properties that we may acquire in in the future.

We are jointly and severally liable for the mortgages and ~~notes~~note payable of our unconsolidated joint ventures. The outstanding balance on ~~these~~the mortgages and ~~notes~~note payable on ~~September~~June 30, ~~2003~~2004 was $13,~~867~~702,~~309~~285. Our ~~financial~~ financial statements do not reflect a liability for ~~these~~the mortgages and note payable.

On March 14, 2003, we reached an agreement with the mortgage lender on the Lakeshore Business Center Phases I and II mortgages to suspend principal payments for twelve months beginning with the payments due May 1, 2003. The principal payments due will continue to be paid and deposited by the lender into an escrow account. We will then be allowed to draw upon the escrowed funds for specific capital improvements listed in the agreement. These improvements include tenant finish costs, heating and air conditioning equipment and roof replacements. The agreement does not change any terms of the existing mortgage loans. However, the suspension of principal payments will result in significant balances remaining due on the loans at maturity in 2008, currently estimated to be approximately $757,000 and $814,000, respectively.

On June 1, 2003, we signed an amendment to the agreement reached on March 14, 2003 with the mortgage lender on the Lakeshore Business Center Phases I and II mortgages. The amendment suspended principal payments for twelve months beginning with the payments due June 1, 2003. The May 1, 2003 payments were applied to the principal balances. The amendment does not change any terms of the existing mortgage loans.

On March 14, 2003, we signed a tenant to a lease for approximately 20,000 square feet of Lakeshore Business Center Phase III. The lease agreement calls for tenant finish costing approximately $705,000. As of September 30, 2003, approximately $602,000 of this cost has been incurred. Our share of this cost is approximately $66,000.

As of September 30, 2003, we have a commitment for approximately $57,000 for tenant improvements on approximately 29,000 square feet at Plainview Point Office Center Phase II.

On October 1, 2003, we refinanced the existing debt on Lakeshore Business Center Phase III. The new loan will provide funds for tenant improvements, leasing commissions, closing costs, and interest carry. The new loan is for $3,150,000 and matures on October 1, 2005. The new loan has a variable interest rate based on the LIBOR daily rate plus 2.5% and is guaranteed by the joint venture partners, NTS-Properties V, NTS-Properties IV, NTS/Fort Lauderdale, Ltd. and ORIG, LLC, as well as NTS Corporation, an affiliate.

Litigation

On December 12, 2001, three individuals filed an action in the Superior Court of the State of California for the County of Contra Costa (the “Superior Court”) originally captioned Buchanan , et al. v. NTS-Properties Associates, et al. (Case No. C 01-05090) against ~~our~~ the general ~~partner,~~partners (the ~~general~~“General ~~partners~~Partners”) of ~~four~~NTS-Properties III, NTS-Properties ~~public~~IV, ~~partnerships~~NTS-Properties ~~affiliated~~V, ~~with~~NTS-Properties usVI and NTS-Properties VII, Ltd. (the “Partnerships”), as well as several individuals and entities affiliated with us. The action ~~purports~~purported to bring claims on behalf of a class of limited partners. These claims were based on, among other things, tender offers made by the ~~public~~Partnerships ~~partnerships~~ and an affiliate of ~~our~~the ~~general~~General ~~partner~~Partners, as well as the operation of the Partnerships by the General Partners. The plaintiffs ~~allege~~alleged, among other things, that the prices at which limited partnership interests were purchased in these tender offers were too low. The plaintiffs ~~are~~sought ~~seeking~~ monetary damages and equitable relief, including an order directing the disposition of the properties owned by the ~~public~~Partnerships ~~partnerships~~ and the distribution of the proceeds. No amounts have been accrued as a liability for this action in our financial statements. Under an indemnification agreement with our general partner, we are responsible for the costs of defending any such action.

On ~~June~~February 2027, 2003, ~~our~~two ~~general~~individuals ~~partner,~~filed ~~along~~a ~~with~~class ~~the~~and ~~general~~derivative ~~partners~~action ofin ~~four~~the ~~public~~Circuit ~~partnerships~~Court ~~affiliated~~of ~~with~~Jefferson usCounty, Kentucky ~~reached~~captioned anBohm, ~~agreement~~et inal. ~~principle~~v. ~~with~~J.D. ~~representatives~~Nichols, ofet ~~the~~al. ~~class~~(Case ofNo. ~~plaintiffs~~03-CI-01740) toagainst ~~settle~~certain of the ~~Buchanan~~General ~~action.~~Partners ~~This~~and ~~settlement~~several isindividuals ~~subject~~and ~~to,~~entities ~~among~~affiliated ~~other~~with ~~things,~~us. ~~preparing~~The ~~and~~complaint ~~executing~~was aamended ~~settlement~~to ~~agreement~~include tothe begeneral ~~presented~~partner toof ~~the~~NTS-Properties ~~court~~III ~~for~~and the ~~preliminary~~general ~~and~~partner ~~final~~of ~~approval.~~NTS-Properties ~~The~~Plus ~~proposed~~Ltd., ~~settlement~~which ~~would~~is ~~include~~no ~~releases~~longer ~~for~~in ~~all~~existence. ofIn the amended complaint, the ~~parties~~plaintiffs ~~for~~purport ~~any~~to bring claims on behalf of ~~the~~a ~~claims~~class ~~asserted~~of inlimited partners ~~the~~and ~~Buchanan~~derivatively ~~litigation~~on behalf of us and the Partnerships based on alleged ~~Bohm~~overpayment ~~litigation~~of ~~described~~fees, ~~below.~~prohibited Asinvestments, ~~part~~improper offailures ~~the~~to ~~proposed~~make ~~settlement~~distributions, purchases ~~the~~of ~~general~~limited partnerships interests at insufficient prices and other violations of ~~partners~~the ~~have~~limited ~~agreed~~partnership agreements. The plaintiffs are seeking, among other things, compensatory toand ~~pursue~~punitive adamages ~~merger~~in an unspecified amount, an accounting, the appointment of a receiver or liquidating trustee, the ~~partnerships~~entry ~~along~~of an order of dissolution against the ~~with~~Partnerships, ~~other~~a ~~real~~declaratory ~~estate~~judgment ~~entities~~and ~~affiliated~~injunctive ~~with~~relief. ~~the~~No ~~general~~amounts ~~partners~~have ~~into~~been accrued as a ~~newly-formed~~liability for this action in our financial statements. Our general partner and legal ~~partnership~~counsel believe that this action is without merit and are vigorously defending it.

On11 February 27, 2003, two individuals filed a class and derivative action in the Circuit Court of Jefferson County, Kentucky captioned Bohm et al. v. J.D. Nichols et al. (Case No. 03-CI-01740) against our general partner, the general partners of three public partnerships affiliated with us and several individuals and entities affiliated with us. On March 21, 2003, the complaint was amended to include the general partner of a public partnership affiliated with us and the general partner of a partnership that was affiliated with us but is no longer in existence. In the amended complaint, the plaintiffs purport to bring claims on behalf of a class of limited partners and derivatively on behalf of us and affiliated public partnerships based on alleged overpayments of fees, prohibited investments, improper failures to make distributions, purchases of limited partnership interests at insufficient prices and other violations of the limited partnership agreements. The plaintiffs are seeking, among other things, compensatory and punitive damages in an unspecified amount, an accounting, the appointment of a receiver or liquidating trustee, the entry of an order of dissolution against the public partnerships, a declaratory judgment, and injunctive relief. No amounts have been accrued as a liability for this action in our financial statements. Our general partner believes that this action is without merit, and is vigorously defending it.

13On June 20, 2003, the General Partners reached an agreement in principle with the representatives of the class of plaintiffs to settle the Buchanan litigation. This agreed upon settlement includes releases for all of the parties for all of the claims asserted in the Buchanan litigation and the Bohm litigation. As part of the agreed upon settlement, the General Partners agreed to pursue a merger of the Partnerships and other real estate entities affiliated with the General Partners into a newly-formed entity named NTS Realty Holdings Limited Partnership (“NTS Realty”). NTS Development Company agreed to pay the Partnerships $1,500,000 on the closing date of the merger. We expect to receive $202,500 of this payment.

On ~~October~~December 15, 2003, in the General ~~Bohm~~Partners, ~~litigation~~certain ~~the~~of ~~judge~~their ~~granted~~affiliates and the ~~defendants’~~class ~~motion~~of toplaintiffs ~~extend~~in athe ~~stay that~~Buchanan ~~had~~litigation ~~previously~~jointly ~~been~~filed ~~agreed~~a ~~upon~~Stipulation byand ~~the~~Agreement ~~parties~~of ~~which~~Settlement ~~expired~~(the “Settlement onAgreement”) ~~September~~with 8,the ~~2003~~Superior Court. The ~~stay~~ ~~will~~Settlement ~~remain~~Agreement sets forth in ~~effect~~writing ~~only if~~ the ~~parties~~terms inof the ~~Buchanan~~agreed ~~litigation~~upon ~~seek preliminary approval of a~~ settlement ofthe ~~that~~parties ~~litigation~~reached byon ~~November~~June 1920, 2003. ~~and~~On ~~the~~February ~~final settlement~~26, of2004, the ~~Buchanan~~Superior ~~litigation~~Court ~~includes~~preliminarily ~~releases~~approved ~~relating~~the toSettlement Agreement as within the ~~Bohm litigation.~~range Ifof ~~these~~reasonableness ~~two~~and ~~conditions~~that ~~are~~it ~~satisfied~~is fair, ~~the~~just ~~stay~~and ~~will~~adequate ~~become~~to the ~~permanent~~class ~~when~~of ~~the Buchanan~~plaintiffs. ~~settlement~~The isSuperior ~~subject~~Court toscheduled a ~~final,~~hearing ~~non-appealable~~to ~~order.~~finally ~~For~~determine whether the ~~nine months~~Settlement ~~ended~~Agreement ~~September~~is ~~30,~~in ~~2003,~~the ~~our~~best ~~share~~interests of the ~~legal~~class ~~costs~~of ~~for~~plaintiffs ~~the Buchanan~~ and ~~Bohm~~whether ~~litigations~~the ~~was~~Buchanan ~~approximately~~litigation ~~$21,000,~~should ~~which~~be ~~was~~dismissed ~~included~~with ~~in our professional and administrative expenses~~prejudice.

WeOn doMarch ~~not~~2, ~~believe~~2004, ~~there~~we, isalong ~~any~~with ~~other~~all ~~litigation~~defendants, ~~threatened~~filed ~~against~~a usMotion ~~other~~to ~~than~~Dismiss ~~routine~~the Bohm litigation. After ~~arising~~the Motion ~~out~~to ofDismiss was fully briefed, the ~~ordinary~~settlement agreement in the Buchanan ~~course~~litigation received final court approval. The Circuit Court of ~~business~~Jefferson County, Kentucky, ~~some~~instructed ofthe ~~which~~plaintiffs isin ~~expected~~the Bohm litigation to befile ~~covered~~an byamended complaint ~~insurance,~~in ~~none~~light of ~~which~~the isapproved settlement of the Buchanan litigation. The ~~expected~~plaintiffs toin ~~have~~the Bohm litigation filed a ~~material~~corrected ~~effect~~Second Amended Complaint on August ~~our~~11, ~~financial~~2004. Our ~~position~~general orpartner ~~results~~believes ofthat ~~operations~~the claims asserted in the ~~except~~corrected asSecond ~~discussed~~Amended ~~herein~~Complaint have no merit.

On May 6, 2004, the Superior Court granted its final approval of the Settlement Agreement. At the final hearing, any member of the class of plaintiffs was given the opportunity to object to the final approval of the Settlement Agreement, the entry of a final judgment dismissing with prejudice the Buchanan litigation, or an application of an award for attorneys’ fees and expenses to plaintiffs’ counsel. The Superior Court’s order provides, among other things, that: (1) the Settlement Agreement, and all transactions contemplated thereby, including the proposed merger of the Partnerships into NTS Realty, are fair, reasonable and adequate, and in the best interests of the class of plaintiffs; (2) the plaintiffs’ complaint and each and every cause of action and claim set forth therein is dismissed with prejudice; (3) each class member is barred from (a) transferring, selling or otherwise disposing of (other than by operation of law) their interests until the earlier of the closing date of the merger, the termination of the settlement or June 30, 2004; and (4) each class member who requested to be excluded from the settlement released their claims in the Bohm litigation.

On June 11, 2004, Joseph Bohm and David Duval, class members who objected to the Settlement Agreement but were overruled by the Superior Court, filed an appeal in the Court of Appeals of the State of California, first Appellate District. Our general partner believes that this appeal has no merit and intends to defend it and the decision of the Superior Court.

For the six months ended June 30, 2004 and 2003, our share of the legal costs for the Buchanan and Bohm litigations was approximately $71,000 and $10,000, respectively which was included in our professional and administrative expenses.

We do not believe there is any other litigation threatened against us other than routine litigation arising out of the ordinary course of business, some of which is expected to be covered by insurance, none of which is expected to have a material effect on our financial position or results of operations, except as discussed herein.

Proposed Merger

OnAs ~~June~~part ~~20,~~of ~~2003,~~the Settlement Agreement, our general partner, ~~along~~and ~~with~~ the general partners of the four public partnerships affiliated with us, ~~reached~~ anhave ~~agreement~~agreed into ~~principle~~pursue ~~with~~a ~~representatives~~merger of the ~~class~~partnerships ofand ~~plaintiffs~~several toother affiliated ~~settle~~real ~~the~~estate ~~action~~entities ~~captioned~~into ~~Buchanan~~a etnewly ~~al.~~formed v.limited ~~NTS-Properties~~partnership ~~Associates~~known etas ~~al. (Case~~NTS NoRealty. ~~C 01- 05090).~~ The merger ~~action~~is ~~was~~subject ~~originally~~to, ~~filed~~among inother ~~the~~things, ~~Superior~~approval ~~Court~~by ofa ~~the~~majority ~~State~~ of ~~California for~~ the ~~County~~limited ~~of Contra Costa against the general partners and several~~partner ~~affiliated~~interests ~~individuals and entities~~ in ~~December~~each ~~2001~~partnership. ~~The~~We ~~settlement~~may isnot ~~subject~~seek ~~to,~~the ~~among other~~approval ~~things,~~of ~~preparing~~the ~~and~~limited ~~executing~~partners until a ~~settlement~~filing ~~agreement~~made toby beNTS ~~presented~~Realty towith the ~~court for~~Securities ~~preliminary~~ and ~~final~~Exchange ~~approval~~Commission is declared effective. ~~The~~For ~~proposed~~the ~~settlement~~six ~~would~~months ~~include~~ended ~~releases~~June ~~for~~30, ~~all of~~2004 ~~the~~and ~~parties~~2003, ~~for~~our ~~any~~share of the ~~claims~~legal ~~asserted in the Buchanan litigation~~ and ~~the~~ ~~class~~professional ~~action~~fees ~~and~~for ~~derivative litigation filed in~~ the ~~Circuit~~proposed ~~Court~~merger ofwas ~~Jefferson~~approximately ~~County~~$194, ~~Kentucky~~000 and ~~captioned Bohm et al~~$53,000, respectively. ~~v. J.D. Nichols et al. (Case No. 03-CI- 01740).~~

AsOn ~~part~~February of4, ~~the proposed settlement of the Buchanan and Bohm litigation~~2004, ~~the~~NTS ~~general~~Realty ~~partners have agreed to pursue~~filed a ~~merger~~joint ofconsent ~~the~~solicitation ~~partnerships~~statement/prospectus ~~along~~on ~~with~~Form ~~other~~S-4 ~~real estate entities affiliated~~ with the ~~general~~ ~~partners~~Securities ~~into~~and Exchange ~~a newly-formed partnership~~Commission. The ~~general~~solicitation ~~partners~~statement/prospectus ~~would~~presents ~~seek~~the tomerger ~~list~~of ~~the~~NTS-Properties ~~limited~~III; ~~partnership~~NTS-Properties ~~interests~~IV; toNTS-Properties beV; ~~issued~~NTS-Properties inVI; ~~the~~and NTS-Properties ~~merger~~VII, onLtd. awith ~~national~~NTS ~~securities exchange~~Realty. ~~The~~Concurrent ~~merger~~with ~~will~~the bemerger, ~~subject to~~ORIG, ~~among other things~~LLC, ~~approval by holders of~~ a ~~majority~~Kentucky ~~of the~~ limited ~~partner~~liability ~~interests in each partnership~~company, ~~final approval of the court in~~ which ~~the Buchanan litigation~~ is ~~pending~~affiliated ~~and~~with ~~receipt~~our ~~by the~~ general ~~partners~~partner, ofwill ancontribute ~~opinion~~substantially ~~regarding the fairness of the merger to the limited partners from a financial point of view. An independent appraiser has been retained to appraise~~ all ofits ~~the properties~~real ~~owned~~estate byassets ~~the existing partnerships~~ and ~~affiliated~~all ~~entities that would be owned after the merger by the new partnership. The appraisal will be used in establishing exchange values which will determine the number~~ of ~~interests~~its ~~that~~liabilities ~~will be issued~~ to ~~each~~NTS ~~existing partnership in the merger~~Realty. The interests in the newly-formed partnership will be subsequently distributed to the limited and general partners in each existing partnership as though each partnership had been liquidated. The general partners have also retained a third

14On June 24, 2004 and August 13, 2004, NTS Realty filed first and second amendments, respectively, to Form S-4 with the Securities and Exchange Commission. Both amendments are in response to comments made by the Securities and Exchange Commission.

party to provide an opinion on the fairness of the merger to limited partners from a financial point of view. For the nine months ended September 30, 2003, our share of the legal and professional fees for the proposed merger was approximately $69,000.

Note 11 — Segment Reporting

Our two reportable operating segments are Residential and Commercial Real Estate Operations. The residential operations represent our ownership and operating results relative to an apartment community known as The Willows of Plainview Phase I. The commercial real estate operations represent our ownership and operating results relative to suburban commercial office space known as ~~Commonwealth~~ Commonwealth Business Center Phase I and Plainview Point Office Center Phases I and II.

The financial information of the operating segments has been prepared using a management approach, which is consistent with the basis and manner in which our management internally reports financial information for the purposes of assisting in making internal operating decisions. Our management evaluates performance based on stand-alone operating segment net income.

Three Months Ended September 30, 2003 --------------------------------------------------------- Residential Commercial Total ----------------- ------------------ ------------------ Rental income $ 268,550 $ 345,654 $ 614,204 Interest and other income 242 1,811 2,053 ----------------- ------------------ ------------------ Total net revenues $ 268,792 $ 347,465 $ 616,257 ================= ================== ================== Operating expenses and operating expenses - affiliated $ 107,739 $ 101,374 $ 209,113 Interest expense 52,405 12,045 64,450 Management fees 13~~,188 22,535 35,723 Real~~ estate taxes 8,976 15,837 24,813 Depreciation and amortization 51,167 75,156 126,323 ----------------- ------------------ ------------------ Total expenses $ 233,475 $ 226,947 $ 460,422 ================= ================== ================== Net income $ 35,317 $ 120,518 $ 155,835 ================= ================== ==================

Certain items such as professional and administrative expenses and joint venture income or loss incurred at the Partnership level have not been allocated to the operating segments.

                                                           Three Months Ended June 30, 2004
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          274,383 $           264,398 $           538,781
Tenant reimbursements                                         --              45,534              45,534
                                               -----------------  ------------------  ------------------

     Total revenues                                      274,383             309,932             584,315
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             119,640             121,250             240,890
Management fees                                           14,300              19,844              34,144
Real estate taxes                                         13,260              16,647              29,907
Depreciation and amortization                             51,140              74,059             125,199
                                               -----------------  ------------------  ------------------

     Total operating expenses                            198,340             231,800             430,140
                                               -----------------  ------------------  ------------------

Operating income                                          76,043              78,132             154,175

Interest and other income                                    179               1,722               1,901
Interest expense                                         (49,426)             (5,340)            (54,766)
Loss on disposal of assets                                (3,756)                 --              (3,756)
                                               -----------------  ------------------  ------------------

Net income                                    $           23,040 $            74,514 $            97,554
                                               =================  ==================  ==================

                                                           Three Months Ended June 30, 2003
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          292,706 $           296,826 $           589,532
Tenant reimbursements                                         --              43,284              43,284
                                               -----------------  ------------------  ------------------

     Total revenues                                      292,706             340,110             632,816
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             123,107             111,132             234,239
Management fees                                           14,610              19,606              34,216
Real estate taxes                                         15,429              15,837              31,266
Depreciation and amortization                             51,281              75,868             127,149
                                               -----------------  ------------------  ------------------

     Total operating expenses                            204,427             222,443             426,870
                                               -----------------  ------------------  ------------------

Operating income                                          88,279             117,667             205,946

Interest and other income                                   (118)                796                 678
Interest expense                                         (53,363)            (14,184)            (67,547)
Loss on disposal of assets                                    --              (3,953)             (3,953)
                                               -----------------  ------------------  ------------------

Net income                                    $           34,798 $           100,326 $           135,124
                                               =================  ==================  ==================

                                                            Six Months Ended June 30, 2004
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          560,972 $           529,320 $         1,090,292
Tenant reimbursements                                         --              91,230              91,230
                                               -----------------  ------------------  ------------------

     Total revenues                                      560,972             620,550           1,181,522
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             257,616             234,362             491,978
Management fees                                           29,017              39,460              68,477
Real estate taxes                                         26,520              34,741              61,261
Depreciation and amortization                            102,005             147,846             249,851
                                               -----------------  ------------------  ------------------

     Total operating expenses                            415,158             456,409             871,567
                                               -----------------  ------------------  ------------------

Operating income                                         145,814             164,141             309,955

Interest and other income                                    247               3,224               3,471
Interest expense                                         (99,863)            (12,963)           (112,826)
Loss on disposal of assets                                (3,756)                 --              (3,756)
                                               -----------------  ------------------  ------------------

Net income                                    $           42,442 $           154,402 $           196,844
                                               =================  ==================  ==================

                                                            Six Months Ended June 30, 2003
                                               ---------------------------------------------------------

                                                  Residential         Commercial            Total
                                               -----------------  ------------------  ------------------
Rental income                                 $          577,810 $           592,982 $         1,170,792
Tenant reimbursements                                         --              86,543              86,543
                                               -----------------  ------------------  ------------------

     Total revenues                                      577,810             679,525           1,257,335
                                               -----------------  ------------------  ------------------

Operating expenses and operating expenses -
  affiliated                                             221,815             219,612             441,427
Management fees                                           29,663              39,090              68,753
Real estate taxes                                         30,858              31,674              62,532
Depreciation and amortization                            102,967             148,974             251,941
                                               -----------------  ------------------  ------------------

     Total operating expenses                            385,303             439,350             824,653
                                               -----------------  ------------------  ------------------

Operating income                                         192,507             240,175             432,682

Interest and other income                                    (55)              1,061               1,006
Interest expense                                        (107,701)            (30,459)           (138,160)
Loss on disposal of assets                                    --              (3,953)             (3,953)
                                               -----------------  ------------------  ------------------

Net income                                    $           84,751 $           206,824 $           291,575
                                               =================  ==================  ==================

~~Three~~A ~~Months~~reconciliation ~~Ended~~of ~~September~~the ~~30, 2002~~totals --------------------------------------------------------- Residential Commercial Total ----------------- ------------------ ------------------ Rentalreported ~~income $ 277,915~~for ~~$ 328,615~~the ~~$ 606,530 Interest~~operating ~~and~~segments ~~other~~to ~~income 688 1,643 2,331 Gain~~the onapplicable ~~sale~~line ofitems assets 249 -- 249 ----------------- ------------------ ------------------ Totalin ~~net~~the ~~revenues $ 278,852~~financial statements ~~$ 330,258~~for ~~$ 609,110 ================= ================== ================== Operating~~the ~~expenses~~three and ~~operating expenses~~six -months ~~affiliated $ 131,260~~ended ~~$ 105,191~~June ~~$ 236~~30,~~451 Interest~~ ~~expense 56,300 20,325 76,625 Management~~2004 ~~fees 14~~and 2003,~~162 21,068 35,230 Real~~ ~~estate~~is ~~taxes 15,020 15,768 30,788~~necessary given ~~Depreciation~~amounts recorded at the Partnership level and amortization 52,633 71,518 124,151 ----------------- ------------------ ------------------ Totalnot ~~expenses $ 269,375~~allocated ~~$ 233,870~~to ~~$ 503,245 ================= ================== ================== Net income $ 9,477~~the ~~$ 96,388~~operating ~~$ 105,865~~properties ~~================= ================== ==================~~ for internal reporting purposes.

                                                         Nine                                                                        Three Months Ended
                                                                             June September 30, 2003
                                                                                                            ---------------------------------------------------------
                                                                    2004                 2003
                                                  Residential         Commercial            Total
                                                                                                            -----------------  ------------------  -------------------
RentalDEPRECIATION income                                 $          846,360AND AMORTIZATION
Total depreciation and amortization for reportable segments $         1            125,025,178199 $         1            127,871,538149
InterestDepreciation and otheramortization income                                    188               2for Partnership                              1,872               3529                1,060529
                                                                                                            -----------------  ------------------  -------------------

     Total netdepreciation revenues                       $          846,548and amortization                    $         1            126,028,050728 $         1            128,874,598678
                                                                                                            =================  ==================  ===================

OperatingINTEREST expensesAND andOTHER operatingINCOME
  expensesTotal -interest affiliated                       $          329,555and $           320,988other $           650,543
Lossincome onfor disposalreportable of assets                                    --               3,953               3,953
Interest expense                                         160,106segments     $              421,503             202,609
Management901 fees                                           42,851              61,624             104,475$                678
RealInterest estateand taxes                                         39,834              47,511              87,345
Depreciationother andincome amortization                            154,134             224,129             378,263for Partnership                                    702                  257
                                                                                                            -----------------  ------------------  -------------------

     Total expenses                           $          726,480interest and other income                        $           700              2,708603 $         1,427,188                935
                                                                                                            =================  ==================  ===================

     NetNET INCOME (LOSS)
Total net income                                for reportable segments                    $          120             97,068554 $           327            135,342124
Net loss for Partnership (1)                                            (114,989)             (98,083)
                                                             -------------------  -------------------

     Total net (loss) income                                $           447            (17,410435)$             37,041
                                                                                                            =================  ==================  ===================

(1)

The Partnership net loss is primarily composed of professional and administrative costs born by the Partnership as well as interest and other income, depreciation and any joint venture income or loss recorded at the partnership level and not allocated to the operating segments. The professional and administrative costs include the tax and public company reporting and compliance costs associated with a public limited partnership.

                                                         Nine                                                                         Six Months Ended
                                                                             June September 30, 2002
                                                                                                            ---------------------------------------------------------
                                                                    2004                 2003
                                                  Residential         Commercial            Total
                                                                                                            -----------------  ------------------  -------------------
RentalDEPRECIATION income                                 $          765,522AND AMORTIZATION
Total depreciation and amortization for reportable segments $         1            249,001,944851 $         1            251,767,466941
InterestDepreciation and otheramortization income                                  1for Partnership                              3,026               4058                3,765               5,791058
Gain on sale of assets                                       498                                                                               --                 498
                                               -----------------  ------------------  ------------------

     Total netdepreciation revenues                       $          767,046and amortization                    $         1            252,006,709909 $         1            254,773,755999
                                                                                                            =================  ==================  ===================

OperatingINTEREST expensesAND andOTHER operatingINCOME
  expensesTotal -interest affiliated                       $          389,114and $           330,335other $           719,449
Lossincome onfor disposalreportable of assets                                51,268                  --segments     $              513,268
Interest471 expense                                         171,745$              661,811             238,556006
ManagementInterest fees                                           38,584              61,613             100,197
Realand estateother taxes                                         45,059              47,304              92,363
Depreciationincome andfor amortization                            155Partnership                                  1,048             214,553             369,601014                  427
                                                                                                            -----------------  ------------------  -------------------

     Total expenses                           $          850,818interest and other income                        $           720              4,616485 $                       1,571,434433
                                                                                                            =================  ==================  ===================

     NetNET INCOME (lossLOSS)
Total net income                         for reportable segments                    $                      196,844 $            291,575
Net loss for Partnership (831)                                            (332,772337)$           286            (178,093761)
                                                             -------------------  -------------------

     Total net (loss) income                                $           202(135,321493)$            112,814
                                                                                                            =================  ==================  ===================

(1)

A reconciliation of the totals reported for the operating segments to the applicable line items in the financial statements for the three and nine months ended September 30, 2003 and 2002 is necessary given amounts recorded at the Partnership level and not allocated to the operating properties for internal reporting purposes.

                                                                  Three Months Ended
                                                                    September 30,
                                                       ----------------------------------------
                                                              2003                 2002
                                                       -------------------  -------------------
NET REVENUES
Total revenues for reportable segments                $            616,257 $            609,110
Other income for Partnership                                           948                  207
Income from investment in joint ventures                            12,747               14,358
                                                       -------------------  -------------------

     Total net revenues                               $            629,952 $            623,675
                                                       ===================  ===================

DEPRECIATION AND AMORTIZATION
Total depreciation and amortization for
  reportable segments                                 $            126,323 $            124,151
Depreciation and amortization for Partnership                        1,529                1,529
                                                       -------------------  -------------------

     Total depreciation and amortization              $            127,852 $            125,680
                                                       ===================  ===================

NET INCOME (LOSS)
Total net income for reportable segments              $            155,835 $            105,865
Net loss for Partnership                                           (74,987)             (58,827)
                                                       -------------------  -------------------

     Total net income                                 $             80,848 $             47,038
                                                       ===================  ===================

                                                                  Nine Months Ended
                                                                    September 30,
                                                       ----------------------------------------
                                                              2003                 2002
                                                       -------------------  -------------------
NET REVENUES
Total revenues for reportable segments                $          1,874,598 $          1,773,755
Other income for Partnership                                         1,375                1,464
Income from investment in joint ventures                            85,460               54,091
                                                       -------------------  -------------------

     Total net revenues                               $          1,961,433 $          1,829,310
                                                       ===================  ===================

OPERATING EXPENSES
Operating expenses for reportable segments            $            650,543 $            719,449
Other operating expenses for Partnership                                --               (2,000)
                                                       -------------------  -------------------

     Total operating expenses                         $            650,543 $            717,449
                                                       ===================  ===================

DEPRECIATION AND AMORTIZATION
Total depreciation and amortization for reportable
  segments                                            $            378,263 $            369,601
Depreciation and amortization for Partnership                        4,587                4,587
                                                       -------------------  -------------------

     Total depreciation and amortization              $            382,850 $            374,188
                                                       ===================  ===================

NET INCOME (LOSS)
Total net income for reportable segments              $            447,410 $            202,321
Net loss for Partnership                                          (253,748)            (147,636)
                                                       -------------------  -------------------

     Total net income                                 $            193,662 $             54,685
                                                       ===================  ===================

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations ~~(“MD&A”)~~ should be read in conjunction with the Financial Statements in Item 1 and the cautionary statements below.

Critical Accounting Policies

~~The~~General accompanying financial statements were prepared in conformity with accounting principles generally accepted in the United States. Application of these accounting principles requires us to make estimates about the future resolution of existing uncertainties; as a result, actual results could differ from these estimates. In preparing these financial statements, we have made our best estimates and judgements of the amounts and disclosures included in the financial statements, giving due regard to materiality.

~~Impairment~~ A critical accounting policy is one that would materially affect our operations or financial condition, and requires management to make estimates or judgments in certain circumstances. These judgments often result from the need to make estimates about the effect of matters that are inherently uncertain. Critical accounting policies discussed in this section are not to be confused with accounting principles and methods disclosed in accordance with U.S. generally accepted accounting principles (“GAAP”). GAAP requires information in financial statements about accounting principles, methods used and disclosures pertaining to significant estimates. The following disclosure discusses judgments known to management pertaining to trends, events or uncertainties known which were taken into consideration upon the application of those policies and the likelihood that materially different amounts would be reported upon taking into consideration different conditions and assumptions.

WeImpairment review properties for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. These circumstances include, but are not limited to, declines in cash flows, occupancy and ~~comparable~~Valuation sales per square foot at the property. We would be required to recognize an impairment when a property’s estimated undiscounted cash flow is less than the carrying value of the property. To the extent an impairment has occurred, we charge to income the excess of the carrying value of the property over its estimated fair value. We may decide to sell properties that are held for use. The sales prices of these properties may differ from their carrying values.

Statement of Financial Accounting Standards (“SFAS”) No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets,” specifies circumstances in which certain long-lived assets must be reviewed for impairment. If the carrying amount of an asset exceeds the sum of its expected future cash flows, the asset’s carrying value must be written down to fair value. In determining the value of an investment property and whether the investment property is impaired, management considers several factors such as projected rental and vacancy rates, property operating expenses, capital expenditures and interest rates. The capitalization rate used to determine property valuation is based on the market in which the investment property is located, length of leases, tenant financial strength, the economy in general, demographics, environment, property location, visibility, age and physical condition among others. All of these factors are considered by management in determining the value of any particular investment property. The value of any particular investment property is sensitive to the actual results of any of these factors, either individually or taken as a whole. If the actual results differ from management’s judgment, the valuation could be negatively or positively affected.

Recognition of Rental Income

Our apartment community has operating leases with apartment residents with terms generally of twelve months or less. We recognize rental revenue related to these leases on an accrual basis when due from residents. In accordance with our standard lease terms, rental payments are generally due on a monthly basis.

Our commercial property leases are accounted for as operating leases. We accrue minimum rents on a straight-line basis over the terms of their respective leases. We structure our leases to allow us to recover a significant portion of our property operating, real estate taxes and repairs and maintenance expenses from our commercial tenants. Property operating expenses typically include utility, insurance, security, janitorial, landscaping and other administrative expenses. We accrue reimbursements from tenants for recoverable portions of all these expenses as revenue in the period the applicable expenditures are incurred. We also receive estimated payments for these reimbursements from substantially all our tenants throughout the year. We do this to reduce the risk of loss on uncollectible accounts once we perform the final year-end billings for recoverable expenditures. We recognize the difference between estimated recoveries and the final billed amounts in the subsequent year and we believe these differences were not material in any period presented.

Under GAAP, we are required to recognize rental income based on the effective monthly rent for each lease. The effective monthly rent is equal to the average monthly rent during the term of the lease, not the stated rent for any particular month. The process, known as “straight-lining” or “stepping” rent generally has the effect of increasing rental revenues during the early phases of a lease and decreasing rental revenues in the latter phases of a lease. Due to the impact of “straight- lining,” cash collected for rent exceeded rental income by approximately $23,000 for the six months ended June 30, 2004, while the rental income exceeded the cash collected for rent by approximately $18,000 for the six months ended June 30, 2003. If rental income calculated on a straight-line basis exceeds the cash rent due under the lease, the difference is recorded as an increase in deferred rent receivable and included as a component of accounts receivable on the relevant balance sheet. If the cash rent due under the lease exceeds rental income calculated on a straight-line basis, the difference is recorded as a decrease in deferred rent receivable and is recorded as a decrease of accounts receivable on the relevant balance sheet. We defer recognition of contingent rental income, such as percentage or excess rent, until the specified target that triggers the contingent rental income is achieved. We periodically review the collectability of outstanding receivables. Allowances are generally taken for tenants with outstanding balances due for a period greater than ninety days and for tenants with potentially uncollectible outstanding balances due for a period less than ninety days.

Recognition of Lease Termination Income

We recognize lease termination income upon receipt of the income. We accrue lease termination income if there is a signed termination agreement, all of the conditions of the agreement have been met and the tenant is no longer occupying the property.

Cost Capitalization and Depreciation Policies

We review all expenditures and capitalize any item exceeding $1,000 deemed to be an upgrade or a tenant improvement with an expected useful life greater than one year. Land, building and amenities are stated at cost. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Buildings and improvements have estimated useful lives between 3-30 years, land improvements have estimated useful lives between 5-30 years and amenities have estimated useful lives between 3-30 years.

Results of Operations

The following tables include our selected summarized operating data for the three and ~~nine~~six months ended ~~September~~June 30, 2004 and 2003. This data is presented to provide assistance in identifying trends in our operating results and ~~2002~~other factors affecting our business. This data should be read in conjunction with our financial statements, including the notes thereto, in Part I, Item 1 of this report.

                                                                                                                Three Months Ended SeptemberJune 30, 20032004
                                                                             -----------------------------------------------------------------------
                                                                                        Residential               Commercial      Partnership       Partnership         Total
                                                                             -----------------------------------------------------------------------
Net revenues                                                        $        268274,792383 $         347309,465932 $         13,695             -- $         629584,952315
Operating expenses and operating
  expenses - affiliated                    107                                119,739640           101121,374250               --           209240,113890
Interest expense                            52,405            12,045               --            64,450
Depreciation and amortization                                          51,167140            7574,156059            1,529           127126,852728
Interest expense                                        49,426             5,340               --            54,766
Net income (loss)                           35                                       23,317           120040            74,518          514         (74114,987989)           80          (17,848435)

                                                               Three Months Ended June 30, 2003
                                            -----------------------------------------------------------------------
                                                 Residential       Commercial       Partnership         Total
                                            -----------------------------------------------------------------------
Net revenues                                  $        292,706 $         340,110 $             -- $         632,816
Operating expenses and operating
  expenses - affiliated                                123,107           111,132               --           234,239
Depreciation and amortization                           51,281            75,868            1,529           128,678
Interest expense                                        53,363            14,184               --            67,547
Net income (loss)                                       34,798           100,326          (98,083)           37,041

                                                                Six Months Ended June 30, 2004
                                            -----------------------------------------------------------------------
                                                 Residential       Commercial       Partnership         Total
                                            -----------------------------------------------------------------------
Net revenues                                  $        560,972 $         620,550 $             -- $       1,181,522
Operating expenses and operating
  expenses - affiliated                                257,616           234,362               --           491,978
Depreciation and amortization                          102,005           147,846            3,058           252,909
Interest expense                                        99,863            12,963               --           112,826
Net income (loss)                                       42,442           154,402         (332,337)         (135,493)

                                                  Three                                                                Six Months Ended SeptemberJune 30, 20022003
                                                                              -----------------------------------------------------------------------
                                                                                         Residential               Commercial      Partnership       Partnership         Total
                                                                              -----------------------------------------------------------------------
Net revenues                                                         $        278577,852810 $         330679,258525 $         14,565             -- $         623       1,675257,335
Operating expenses and operating
  expenses - affiliated                     131                                221,260815           105219,191612               --           236441,451427
InterestDepreciation expense                             56and amortization                          102,300            20967           148,325               --974            763,625058           254,999
DepreciationInterest and amortization                52expense                                       107,633701            7130,518            1,529459               --           125138,680160
Net income (loss)                             9                                       84,477            96751           206,388          824         (58178,827761)           47          112,038814

~~Nine~~During ~~Months~~our ~~Ended~~most ~~September~~recent ~~30, 2003~~operating ---------------------------------------------------------------------- Residential Commercial Partnership Total ---------------------------------------------------------------------- Netperiod net revenues ~~$ 846,548~~ ~~$ 1,028,050~~for ~~$ 86,835~~the ~~$ 1,961,433~~residential and commercial segments have decreased primarily due to lower average occupancy. Operating expenses ~~and~~have ~~operating~~remained relatively stable, while operating expenses -– affiliated ~~329,555 320,988 -- 650,543~~ have increased as the result of increased personnel ~~Interest~~at both the residential and commercial segments. Depreciation expense ~~160~~ has remained level,~~106 42,503 -- 202,609~~ ~~Depreciation~~while ~~and~~interest ~~amortization 154,134 224,129 4,587 382,850~~expense has decreased due to lower debt balances. The expenses related to ~~Net~~our ~~income~~ongoing ~~(loss) 120,068 327,342 (253,748) 193,662~~litigation and proposed merger have negatively impacted our partnership net losses.

~~Nine~~Rental ~~Months~~income ~~Ended~~and ~~September~~tenant reimbursements ~~30,~~generated 2002 ---------------------------------------------------------------------- Residential Commercial Partnership Total ---------------------------------------------------------------------- Netby ~~revenues $ 767,046~~our ~~$ 1,006,709~~properties ~~$ 55,555~~and ~~$ 1,829,310 Operating~~joint ~~expenses~~ventures for the three and ~~operating~~six months ~~expenses~~ended -June ~~affiliated 389~~30,~~114 330,335 (2,000) 717,449 Interest~~ ~~expense 171,745 66,811 -- 238,556 Depreciation~~2004 and ~~amortization 155,048 214,553 4,587 374,188 Net~~2003 ~~(loss)~~were ~~income (83,772) 286,093 (147,636) 54,685~~ as follows:

During                                                            Three ourMonths mostEnded              Six recentMonths operatingEnded
period                                                                 June net30,                       June revenues30,
                                                       -----------------------------  -----------------------------
                                                            2004           2003           2004            2003
                                                       --------------  -------------  -------------  --------------
Wholly-Owned forProperties
Commonwealth residentialBusiness andCenter commercialPhase propertiesI                  $       185,646 have$      191,882 increased$      372,081 due$       384,040
Plainview toPoint higher
averageOffice occupancyCenter atPhases I & II                   124,286        148,228        248,469         295,485
The Willows of Plainview Phase I                              274,383        292,706        560,972         577,810

Joint andVenture Commonwealth Business CenterProperties
Phase(Ownership I.% Residentialon operatingJune expenses30, have decreased due to decreased repairs and2004)
maintenance expense at The Willows of Plainview Phase III (9.70%)             $       284,470 while$      303,787 the$      577,608 commercial operating$       619,892
expensesGolf haveBrook remainedApartments relatively level(3.97%)                                 710,197        716,882      1,426,980       1,460,774
Plainview InterestPoint expenseOffice continuesCenter toPhase decreaseIII as a(4.96%)               182,902        127,920        320,878         258,263
resultBlankenbaker ofBusiness normalCenter recurring1A principal reductions(29.61%)                      237,253        237,253        474,506         474,506
Lakeshore OurBusiness partnershipCenter netPhase lossesI have been(10.92%)                    375,477        436,276        740,706         795,903
negativelyLakeshore impactedBusiness byCenter thePhase expensesII related(10.92%)                   366,213        445,818        702,146         780,201
Lakeshore toBusiness ourCenter ongoingPhase litigation.III (10.92%)                  139,410         84,954        276,109         158,550

We believe the changes in rental income and tenant reimbursements from period to period are temporary effects of each property’s specific mix of lease maturities and are not indicative of any known trend, except for Lakeshore Business Center Phase III where rental income and tenant reimbursements trended up at this recently constructed property.

~~Rental~~The ~~and~~occupancy ~~other~~levels ~~income~~at ~~generated by~~ our properties and joint ventures ~~for~~as ~~the~~of ~~three~~June ~~and nine months ended September~~ 30, ~~2003~~ 2004 and ~~2002~~2003 were as follows:

                                                      Three                                                                            June Months Ended            Nine Months Ended
                                                         September 30,                September 30,
                                                                                                                ---------------------------   --------------------------
                                                                                                                           2004               2003           2002           2003          2002
                                                                                                                ------------   ------  ------   ------------  ------------
Wholly-Owned Properties
Commonwealth Business Center Phase I           $       198,889 $      181,864  $     583,471 $     558,965                                 88%                 91%
Plainview Point Office Center Phases I & II    $       148,576 $      148,394  $     444,579 $     447,744                          72%                 85%
The Willows of Plainview Phase I               $       268,792 $      278,852  $     846,548 $     767,046                                     83%                 92%

Joint Venture Properties
(Ownership % on SeptemberJune 30, 20032004)
The Willows of Plainview Phase II (9.70%)            $       306,566 $      319,310  $     926,695 $     903,097                            80%                 88%
Golf Brook Apartments (3.97%)                  $       766,291 $      746,319  $   2,229,714 $   2,201,948                                        99%                 92%
Plainview Point III Office Center Phase III (4.96%)      $       125,270 $      140,001  $     383,805 $     422,242                      78%                 48%
Blankenbaker Business Center 1A (29.61%)       $       237,302 $      237,406  $     712,031 $     714,851                             100%               100%
Lakeshore Business Center Phase I (10.92%)     $       358,459 $      400,292  $   1,154,871 $   1,210,294                           72%                 69%
Lakeshore Business Center Phase II (10.92%)    $       332,246 $      355,482  $   1,112,707 $   1,068,140                          83%                 81%
Lakeshore Business Center Phase III (10.92%)   $       113,949 $       73,742  $     273,015 $     216,877                         89%                 38%

~~The~~We believe the changes in occupancy on ~~levels~~June at30 ~~our~~from year to year are temporary effects of each property’s specific mix of ~~properties~~lease maturities and ~~joint~~are ~~ventures~~not asindicative of ~~September~~any 30known trend, ~~2003~~except ~~and~~for ~~2002~~Lakeshore ~~were~~Business Center asPhase ~~follows:~~III where occupancy has trended up at this recently constructed property.

~~2003 2002 ------------------- ------------------- Wholly-Owned~~The ~~Properties Commonwealth~~average ~~Business~~occupancy ~~Center~~levels ~~Phase~~at ~~I 91% 86%~~our ~~Plainview~~properties ~~Point~~and ~~Office~~joint ~~Center~~ventures ~~Phases~~for I&the ~~II 85% 86% The~~three ~~Willows~~and ofsix ~~Plainview~~months ~~Phase~~ended ~~I 92% 97% Joint~~June ~~Venture Properties (Ownership % on September~~ 30, ~~2003) The~~2004 ~~Willows~~and ~~of Plainview Phase II (9.70%) 83% 93%~~2003 ~~Golf~~were ~~Brook~~as ~~Apartments~~follows: (3.97%) 97% 94% Plainview Point Office Center Phase III (4.96%) 52% 56% Blankenbaker Business Center 1A (29.61%) 100% 100% Lakeshore Business Center Phase I (10.92%) 72% 80% Lakeshore Business Center Phase II (10.92%) 78% 85% Lakeshore Business Center Phase III (10.92%) 89% 37%

                                                            Three Months Ended              Six Months Ended
                                                                 June 30,                       June 30,
                                                       -----------------------------  -----------------------------
                                                            2004           2003           2004            2003
                                                       --------------  -------------  -------------  --------------
Wholly-Owned Properties
Commonwealth Business Center Phase I                        88%             91%            88%            91%
Plainview Point Office Center Phases I & II                 72%             85%            72%            85%
The Willows of Plainview Phase I                            88%             94%            90%            95%

Joint Venture Properties
(Ownership % on June 30, 2004)
The Willows of Plainview Phase II (9.70%)                   81%             85%            82%            85%
Golf Brook Apartments (3.97%)                               96%             91%            93%            91%
Plainview Point Office Center Phase III (4.96%)             76%             49%            66%            49%
Blankenbaker Business Center 1A (29.61%)                    100%           100%           100%            100%
Lakeshore Business Center Phase I (10.92%)                  72%             69%            72%            70%
Lakeshore Business Center Phase II (10.92%)                 80%             81%            80%            81%
Lakeshore Business Center Phase III (10.92%)                89%             38%            89%            38%

We believe the changes in average occupancy from period to period are temporary effects of each property’s specific mix of lease maturities and are not indicative of any known trend, except for Lakeshore Business Center Phase III where average occupancy has trended up at this recently constructed property.

The ~~average~~following ~~occupancy~~discussion ~~levels~~relating atto changes in our results of operations includes only material line items within our ~~properties~~Statements ~~and~~of ~~joint~~Operations ~~ventures~~or line items for ~~the~~which there was a material change between the three and ~~nine~~six months ~~ended~~ending ~~September~~June 30, ~~2003~~2004 and ~~2002~~ ~~were~~2003. ~~as follows:~~

~~Three~~Rental ~~Months~~Income ~~Ended Nine~~and ~~Months Ended~~Tenant ~~September~~Reimbursements 30, September 30, --------------------------- --------------------------- 2003 2002 2003 2002 ----------- ----------- ----------- ----------- Wholly-Owned Properties Commonwealth Business Center Phase I 91% 86% 91% 87% Plainview Point Office Center Phases I & II 85% 86% 85% 86% The Willows of Plainview Phase I 90% 92% 93% 82% Joint Venture Properties (Ownership % at September 30, 2003) The Willows of Plainview Phase II (9.70%) 87% 90% 85% 83% Golf Brook Apartments (3.97%) 96% 97% 93% 91% Plainview Point III Office Center (4.96%) 50% 56% 49% 55% Blankenbaker Business Center 1A (29.61%) 100% 100% 100% 100% Lakeshore Business Center Phase I (10.92%) 71% 80% 70% 82% Lakeshore Business Center Phase II (10.92%) 81% 85% 81% 85% Lakeshore Business Center Phase III (10.92%) 72% 37% 49% 36%

WeOur ~~are~~rental ~~making~~income ~~efforts~~and totenant reimbursements ~~increase~~for the ~~occupancy~~ ~~levels~~three atmonths ~~our~~ended ~~commercial~~June ~~properties.~~30, ~~The~~2004 ~~leasing~~ and ~~renewal~~2003 ~~negotiations~~were ~~at the~~approximately ~~Lakeshore~~$584,000 ~~Business~~and ~~Center~~$633,000, ~~development~~respectively. ~~are~~The ~~conducted~~decrease byof an$49,000, ~~off-site~~or ~~leasing~~8%, ~~agent.~~was ~~The leasing~~primarily ~~and~~due ~~renewal~~to decreased ~~negotiations~~average ~~for~~occupancy ~~our~~at ~~remaining~~Plainview ~~commercial~~Point ~~properties~~Office ~~are~~Center ~~managed~~Phases ~~by leasing~~I ~~agents~~and II, ~~who~~The ~~are~~Willows of ~~employees~~Plainview ofPhase ~~NTS~~I ~~Development~~and ~~Company,~~Commonwealth ~~located~~Business inCenter ~~Louisville, Kentucky~~Phase I. ~~The~~Our ~~leasing~~rental ~~agents~~income ~~are~~and tenant ~~located~~reimbursements infor the ~~same~~six ~~city~~months asended ~~the~~June ~~commercial~~30, ~~properties. All~~2004 ~~advertising~~and ~~for~~2003 ~~these~~were ~~properties~~approximately $1,181,000 isand ~~coordinated~~$1,257,000, byrespectively. ~~NTS~~The ~~Development~~decrease ~~Company’s marketing~~of ~~staff~~$76,000, ~~located~~or ~~in Louisville~~6%, ~~Kentucky.~~was Inprimarily ~~an effort~~ due to ~~continue~~decreased toaverage ~~improve~~ occupancy at ~~our~~Plainview ~~residential~~Point ~~properties,~~Office weCenter ~~have~~Phases anI ~~on-site~~and ~~leasing staff~~II, ~~who are~~The ~~employees~~Willows of ~~NTS~~Plainview ~~Development~~Phase ~~Company,~~I atand ~~each~~Commonwealth ofBusiness ~~the~~Center ~~apartment~~Phase ~~communities~~I. The ~~staff facilitates~~decrease ~~all on-site visits from potential tenants, coordinates local advertising with~~is ~~NTS~~partially ~~Development~~offset ~~Company’s~~by ~~marketing~~decreased ~~staff,~~free ~~makes~~rent ~~visits~~at toCommonwealth ~~local~~Business ~~companies~~Center toPhase ~~promote fully furnished apartments and negotiates lease renewals with current residents~~I.

The following discussion relating to changes in our results of operations includes only those line items within our Statements of Operations for which there was a material change between the three and nine months ending September 30, 2002 and 2003.

Rental Income

Rental income increased approximately $104,000, or 6%, for the nine months ended September 30, 2003, as compared to the same period in 2002, primarily as the result of increased occupancy at The Willows of Plainview Phase I and Commonwealth Business Center Phase I.

Quarter-ending occupancy percentages represent occupancy only on a specific date; therefore, the above analysis considers average occupancy percentages, which are more representative of the entire year-to-date results.

~~Income~~Operating ~~from~~Expenses ~~Investment in~~and ~~Joint~~Operating ~~Ventures~~ Expenses – Affiliated

~~Income~~Our ~~from~~operating ~~investment~~expenses indid ~~joint~~not change ~~ventures~~significantly ~~increased~~between ~~approximately~~the ~~$31,000,~~three orand ~~58%,~~six ~~for the nine~~ months ended ~~September~~June 30, ~~2003,~~ as2004 ~~compared to the same period in 2002, primarily as the result of decreased net loss from the Lakeshore/University II Joint Venture~~ and ~~increased~~2003. ~~net~~There ~~income~~were ~~from The~~no ~~Willows~~offsetting ofmaterial ~~Plainview Phase II~~changes.

~~Operating~~Our ~~Expenses~~operating —expenses – ~~Affiliated~~ affiliated for the three months ended June 30, 2004 and 2003 were approximately $115,000 and $99,000, respectively. The increase of $16,000, or 16%, was primarily due to an increase in personnel at Commonwealth Business Center Phase I and Plainview Point Office Center Phases I and II. Our operating expenses-affiliated for the six months ended June 30, 2004 and 2003 were approximately $242,000 and $191,000, respectively. The increase of $51,000, or 27%, was primarily due to increased personnel at The Willows of Plainview Phase I, Commonwealth Business Center Phase I and Plainview Point Office Center Phases I and II.

Operating expenses —– affiliated ~~decreased~~are ~~approximately $17,000, or 17%, and $34,000, or 11%,~~ for the three and nine months ended September 30, 2003, respectively, as compared to the same periods in 2002, primarily as the result of a change in personnel. Operating expenses – affiliated are expenses for services performed by employees of NTS Development Company, an affiliate of our ~~general~~General ~~partner~~Partner. These employee services include property management, leasing, maintenance, security and other services necessary to manage and operate our business.

~~Loss~~23 ~~on Disposal of Assets~~

~~The~~Professional ~~loss on disposal of assets for~~and ~~2003~~Administrative ~~can~~Expenses beand ~~attributed~~Professional ~~to the retirement of assets at Plainview Point Office Center Phases I~~ and ~~II,~~Administrative ~~primarily~~Expenses as–Affiliated a result of tenant improvements. The loss on disposal of assets for 2002 can be attributed to the retirement of assets at The Willows of Plainview Phase I, primarily as a result of clubhouse renovations. The loss represents the cost to retire assets, which were not fully depreciated at the time of replacement.

Our professional and administrative expenses did not change significantly for the three months ended June 30, 2004 and 2003. There were no offsetting material changes. Our professional and administrative expenses for the six months ended June 30, 2004 and 2003 were approximately $308,000 and $173,000, respectively. The increase of $135,000, or 78%, was the result of costs incurred for legal and professional fees related to our proposed merger and litigation filed by limited partners. See Item 1 – Note 10 for information regarding our proposed merger and litigation filed by limited partners.

Our professional and administrative expenses — affiliated did not change significantly between the three and six months ended June 30, 2004 and 2003. There were no offsetting material changes.

Professional and administrative expenses – affiliated are for the services performed by employees of NTS Development Company, an affiliate of our General Partner. These employee services include legal, financial and other services necessary to manage and operate our business.

Depreciation and Amortization

Our depreciation and amortization did not change significantly between the three and six months ended June 30, 2004 and 2003. There were no offsetting material changes.

Interest Expense

~~Interest~~Our interest expense ~~decreased~~for the three months ended June 30, 2004 and 2003 was approximately $1255,000, ~~or 16%,~~ and $3668,000, orrespectively. Our ~~15%,~~interest expense for the ~~three~~six ~~and nine~~ months ended ~~September~~ June 30, 2004 and 2003 was approximately $113,000 ~~respectively~~and $138,000, asrespectively. ~~compared~~The todecrease ~~the~~of ~~same~~$13,000, ~~periods~~or in19%, ~~2002~~and $25,000, or 18%, respectively, was primarily asthe a result of principal payments ~~reducing~~made in 2004, which reduced the outstanding balance on ~~the~~our ~~Commonwealth~~mortgages ~~Business Center~~payable ~~Phase~~at ~~I and~~ The Willows of Plainview Phase I ~~mortgages~~and Commonwealth Business Center Phase I.

~~Professional~~Income ~~and~~from Investment in ~~Administrative~~Joint ~~Expenses~~ Ventures

~~Professional~~Our ~~and~~income ~~administrative~~from investment in joint ~~expenses~~ventures ~~increased~~for the three months ended June 30, 2004 and 2003 was approximately $1533,000 and $39,000, orrespectively. ~~38%,~~The ~~and~~decrease of $~~129~~6,000, ~~for~~or 15%, was the ~~three~~result ~~and~~of ~~nine~~decreased net ~~months~~income ~~ended~~from ~~September~~the ~~30,~~Lakeshore/University ~~2003~~II Joint Venture, ~~respectively~~The Willows of Plainview Phase II and Blankenbaker Business Center 1A, aspartially ~~compared~~offset toby ~~the~~increased ~~same~~net ~~periods~~loss infrom ~~2002.~~Plainview ~~The~~Point ~~increase~~Office isCenter ~~primarily~~Phase ~~due~~III. toOur anincome ~~increase~~from investment in ~~legal~~joint ~~and~~venture ~~professional~~for ~~fees~~the ~~related~~six tomonths ~~our~~ended June ~~proposed~~30, ~~merger~~2004 and ~~litigation~~2003 ~~filed~~was byapproximately ~~limited~~$58,000 ~~partners.~~and ~~See~~$73,000, ~~the~~respectively. ~~following~~The ~~discussion~~decrease of ~~under~~$15,000, or 20%, was the ~~caption~~result ~~“Proposed~~of ~~Merger,”~~increased ~~and~~net ~~Part~~loss from Lakeshore/University II, ~~Item~~Joint Venture 1and The Willows of ~~this~~Plainview ~~Form~~Phase ~~10-Q~~II and decreased net income at Golf Brook Apartments and Blankenbaker Business Center 1A. The decrease is partially offset by decreased net loss from Plainview Point Office Center Phase III.

Liquidity and Capital Resources

The following table sets forth the cash provided by or used in operating activities, investing activities and financing activities for the ~~nine~~six months ended ~~September~~June 30, ~~2003~~2004 and ~~2002~~2003.

Cash flows ~~provided by~~ (used in) provided by:

                                                                      Nine                                                                              Six Months Ended
                                                                        September                                                                                  June 30,
                                                                                                                            -----------------------------------------
                                                                 2003                                                                         2004                  20022003
                                                                                                                            ------------------    -------------------
Operating activities                                                                              $             519214,476633 $              538301,486625
Investing activities                                                                                                          (2825,905207)              (215                17,488)436
Financing activities                                                                                                        (449319,937669)              (423298,658084)
                                                                                                                            ------------------    -------------------

     Net increase (decrease) increase in cash and equivalents              $              40,634 $                         (100130,660243)$               20,977
                                                                                                                            ==================    ===================

~~Cash~~Net ~~Flows~~ cash provided by operating activities decreased from approximately $302,000 for the six months ended June 30, 2003 to approximately $215,000 for the six months ended June 30, 2004. The $87,000 decrease was primarily due to decreased net income from operations as a result of increased expenses associated with our litigation filed by limited partners and proposed merger. The decrease is partially offset by increased cash collection of outstanding accounts receivable.

Net cash ~~provided~~used byin ~~operating~~ investing activities was ~~decreased~~ approximately $1925,000, ~~or 4%,~~ for the ~~nine~~six months ended ~~September~~June 30, 2004. For the six months ended ~~2003~~June 30, as2003 ~~compared~~net tocash ~~the~~provided ~~same~~by ~~period~~investing inactivities ~~2002~~was approximately $17,000. The increase ~~decrease~~is ~~was~~ primarily ~~driven~~due byto ~~the~~increased capital expenditures at Commonwealth Business ~~change~~Center inPhase ~~other~~I, ~~liabilities~~Plainview Point Office Center Phases I and ~~accounts~~II ~~receivable,~~and The Willows of Plainview Phase I. The increase is partially offset by ~~the~~changes ~~change~~ in ~~accounts~~ ~~payable~~cash ~~and~~flows ~~increased earnings~~ from ~~operations~~our ~~before~~joint ~~noncash items~~ventures investments.

Net cash used in ~~investing~~financing activities ~~decreased~~increased from approximately $~~187~~298,000, ~~or 87%,~~ for the ~~nine~~six months ended ~~September~~June 30, 2003, asto ~~compared~~approximately to$320,000 for the ~~same~~six ~~period~~months inended ~~2002~~June 30, ~~primarily~~2004. asThe aincrease ~~result~~was the result of ~~decreased~~continued ~~capital expenditures,~~principal ~~partially~~payments ~~offset~~made byon ~~changes~~The inWillows ~~cash~~of ~~flows~~Plainview ~~from~~Phase ~~our~~I ~~joint~~and ~~venture~~Commonwealth ~~investments~~Business Center Phase I mortgages.

~~Net~~Due ~~cash~~to ~~used~~the infact ~~financing~~that ~~activities~~no distributions ~~increased~~were ~~approximately~~made ~~$26,000,~~during ~~or 6%, for~~ the ~~nine~~six months ended ~~September~~June 30, 2004 or 2003, ~~as compared to~~ the ~~same~~table ~~period~~which inpresents ~~2002.~~that portion ~~The increase is the result~~ of ~~continued principal payments made on~~ the ~~Commonwealth~~distributions ~~Business~~that ~~Center~~represents ~~Phase~~a Ireturn ~~and~~of ~~The~~capital ~~Willows~~in ofaccordance ~~Plainview~~with GAAP ~~Phase~~has Ibeen ~~mortgages~~omitted.

Due to the fact that no distributions were made during the nine months ended September 30, 2003 or 2002, the table which presents that portion of the distributions that represents a return of capital in accordance with accounting principles generally accepted in the United States has been omitted.

Future Liquidity

We believe the current occupancy levels are adequate to fund the operations of our properties. However, our future liquidity depends significantly on our properties’ occupancy remaining at a level which provides for debt payments and adequate working capital, currently and in the future. If occupancy were to fall below that level and remain at or below that level for a significant

~~period~~Future ofLiquidity time, our ability to make payments due under our debt agreements and to continue paying daily operational costs would be greatly impaired. In addition, we may be required to obtain financing in connection with the capital improvements and leasing costs described below.

We ~~are~~believe ~~aware that~~ the ~~sole~~current ~~tenant in~~occupancy ~~one~~levels ofare ~~our~~adequate ~~joint~~to ~~venture~~fund ~~commercial~~the ~~buildings~~operations isof ~~making~~our ~~efforts~~properties. toHowever, ~~seek~~our ~~alternatives to~~future ~~renewing~~liquidity ~~its~~depends ~~expiring~~significantly ~~lease.~~on ~~The~~our ~~failure~~properties’ ofoccupancy ~~this~~remaining ~~tenant~~at toa ~~renew~~level which ~~its~~provides ~~lease~~for ~~would~~debt ~~result~~payments ~~in a~~and ~~loss~~adequate ofworking ~~annual~~capital, ~~rental~~currently ~~revenue~~ and ~~operating~~in ~~expense~~the future. ~~recoveries~~If ofoccupancy ~~approximately~~were ~~$938,000~~ to ~~the~~fall ~~joint~~below ~~venture.~~that ~~Income~~level ~~from~~and ~~our~~remain ~~investment~~at inor ~~the~~below ~~joint venture~~ that ~~owns~~level ~~this~~for a ~~property~~significant ~~would~~period ~~decrease~~of ~~accordingly.~~time, ~~This~~our ~~would~~ability ~~significantly~~to ~~affect~~make ~~our~~payments ~~liquidity,~~due ~~and could~~under ~~result~~our indebt ~~significant~~agreements ~~costs~~ and to ~~refurbish~~continue ~~the~~paying ~~vacated~~daily ~~space~~operational ~~and~~costs ~~locate~~would abe ~~new~~greatly ~~tenant~~impaired. At ~~this~~In ~~time~~addition, we ~~are~~may be ~~not~~required ~~certain whether the tenant intends~~ to ~~renew~~obtain ~~its~~financing ~~lease~~in asconnection ~~allowed by~~with the ~~lease~~capital ~~agreement,~~improvements orand ~~vacate~~leasing costs ~~its~~described ~~space~~below.

InAs ~~the~~of ~~next~~June 1230, ~~months~~2004, ~~the~~our ~~demand on~~planned ~~future~~capital ~~liquidity~~improvements isfor ~~anticipated~~Commonwealth ~~to increase as a result of the replacement of a roof at Lakeshore~~ Business Center Phase I ~~and~~include asHVAC wereplacements estimated ~~continue~~to ~~our~~cost ~~efforts~~approximately ~~in the leasing of our commercial properties~~$12,000. ~~There~~At ~~may~~Plainview bePoint ~~significant~~Office ~~demands~~Center onPhases ~~future~~I ~~liquidity~~and ~~due to the~~II ~~lease~~we upplan ofto ~~Lakeshore~~replace ~~Business~~the ~~Center~~roof ~~Phase~~on ~~III~~one ~~and~~building ~~our~~for ~~seeking~~an toestimated ~~return~~cost ~~Plainview~~of ~~Point~~approximately ~~Office Center Phase III to full occupancy~~$35,000.

~~On March 14~~Currently, ~~2003,~~our weplans ~~reached~~for anrenovations ~~agreement~~and ~~with~~other ~~the~~major ~~mortgage~~capital ~~lender~~expenditures oninclude ~~the~~tenant ~~Lakeshore~~improvements ~~Business~~at ~~Center~~our ~~Phases I and II~~commercial ~~mortgages~~properties toas ~~suspend~~required ~~principal~~by ~~payments~~lease ~~for~~negotiations ~~twelve~~at ~~months~~these ~~beginning~~properties. ~~with~~Changes ~~the~~to ~~payments due~~current ~~May~~tenant 1,finish ~~2003.~~improvements ~~The~~are ~~principal~~a ~~payments~~typical ~~due~~part ~~will~~of ~~continue~~any tolease benegotiation. ~~paid and deposited by the~~Improvements ~~lender~~generally ~~into~~include ana ~~escrow~~revision ~~account. We will then be allowed~~ to ~~draw upon~~ the ~~escrowed~~current ~~funds~~floor ~~for specific~~plan ~~capital~~to ~~improvements~~accommodate ~~listed~~a ~~in the agreement. These improvements include~~ tenant’s ~~finish costs~~needs, ~~heating~~new carpeting and ~~air~~paint ~~conditioning equipment~~ and/or ~~roof replacements (some of which are described below)~~wallcovering. The ~~agreement~~extent ~~does~~and ~~not~~cost ~~change any terms~~ of the improvements ~~existing~~are ~~mortgage loans.~~determined ~~However,~~by the ~~suspension~~size of ~~principal~~the ~~payments~~space ~~will~~being ~~result~~leased inand ~~significant~~whether ~~balances~~the ~~remaining~~improvements ~~due~~are onfor ~~the~~a ~~loans~~new attenant ~~maturity~~or inincurred ~~2008,~~because ~~currently~~of ~~estimated~~a tolease ~~be approximately $757,000 and $814,000, respectively~~renewal.

OnThe ~~June~~demands 1,on ~~2003,~~liquidity weas ~~signed an~~discussed ~~amendment~~above towill ~~the~~be ~~agreement~~managed ~~reached~~by onour ~~March~~general ~~14,~~partner ~~2003~~using ~~with~~cash ~~the~~provided ~~mortgage~~by ~~lender~~operations, ~~on the~~cash ~~Lakeshore~~reserves, ~~Business~~existing ~~Center~~financing ~~Phases~~or Iadditional ~~and~~financing IIsecured ~~mortgages.~~by ~~The~~our ~~amendment~~properties. ~~suspended principal~~Typically, ~~payments~~these ~~for~~capital ~~twelve~~improvements ~~months~~and ~~beginning~~leasing ~~with~~costs ~~the~~require ~~payments~~use ~~due~~of ~~June~~existing 1,financing ~~2003~~or additional financing. ~~The~~There ~~May~~can 1,be ~~2003 payments~~no ~~were~~guarantee ~~applied~~that tosuch ~~the~~funds ~~principal~~will ~~balances.~~be ~~The~~available ~~amendment~~at ~~does~~which time ~~not~~our ~~change~~general ~~any~~partner ~~terms of~~will manage the ~~existing~~demand ~~mortgage~~on ~~loans~~liquidity according to our best interest.

On March 14, 2003 we signed a tenant to a lease for approximately 20,000 square feet of Lakeshore Business Center Phase III. The lease agreement calls for tenant finish costing approximately $705,000. As of September 30, 2003, approximately $602,000 of this cost has been incurred. Our share of this cost is approximately $66,000.

As of September 30, 2003, we have a commitment for approximately $57,000 for tenant improvements on approximately 29,000 square feet at Plainview Point Office Center Phase II.

As of September 30, 2003, we have a commitment from a tenant to lease approximately 11,000 square feet of Plainview Point Office Center Phase III. The lease agreement calls for tenant finish estimated to cost approximately $432,000. As of September 30, 2003, approximately $98,000 of this cost has been incurred. Our share of this cost is approximately $5,000. It is estimated that an additional $285,000 will be needed for tenant finish costs in order to lease the remaining vacant space in this building. Our share of the total cost will be approximately $36,000.

Lakeshore Business Center Phase I is expected to require a new roof in 2003. The roof replacement is expected to cost approximately $150,000. Our share of this cost would be approximately $16,000.

We anticipate using cash provided by operations and cash reserves to fund a portion of the capital improvements and leasing costs described above. However, we believe that funding these expenses may also require existing financing or additional financing secured by our properties and there is no assurance that this financing will be available.

We ~~have~~are nomaking ~~other~~efforts ~~material~~to ~~commitments~~increase the occupancy levels at our commercial properties. The leasing and renewal negotiations at the Lakeshore Business Center development are conducted by an employee of NTS Development Company, who makes calls to potential tenants and negotiates lease renewals with current tenants. The leasing and renewal negotiations for ~~renovations~~our orremaining ~~capital~~commercial ~~improvements~~properties asare managed by leasing agents that are employees of ~~September~~NTS 30Development Company in Louisville, Kentucky. ~~2003~~The leasing agents are located in the same city as the commercial properties. All advertising for these properties is coordinated by NTS Development Company’s marketing staff located in Louisville, Kentucky. In an effort to continue to improve occupancy at our residential properties, we have an on-site leasing staff that are employees of NTS Development Company, at

~~Ownership~~26 ~~of Joint Ventures~~

Oneach ~~June 25, 2002, NTS-Properties Plus Ltd. merged with ORIG, LLC (“ORIG”), an affiliate~~ of ~~our general partner. ORIG is~~ the ~~surviving~~apartment ~~entity as a result of this merger~~communities. ~~We continue to hold a 29.61% interest~~ inThe ~~the~~staff ~~Blankenbaker~~facilitates ~~Business~~all ~~Center~~on-site ~~Joint~~visits ~~Venture~~from ~~and~~potential atenants, ~~10.92%~~coordinates ~~interest in the~~local ~~Lakeshore/University~~advertising IIwith ~~Joint~~NTS ~~Venture~~Development ~~after~~Company’s ~~the~~marketing ~~completion~~staff, ofmakes ~~the~~visits ~~NTS-Properties~~to ~~Plus,~~local ~~Ltd./ORIG~~companies ~~Merger.~~to ~~ORIG~~promote ~~now~~fully ~~holds~~furnished aunits ~~39.05%~~and ~~interest~~negotiates inlease ~~the~~renewals ~~Blankenbaker~~with ~~Business Center~~current ~~Joint Venture and a 7~~residents.~~69%~~ ~~interest in the Lakeshore/University II Joint Venture.~~

27Leases at Commonwealth Business Center Phase I, Blankenbaker Business Center 1A and Lakeshore Business Center Phases I, II and III provide for tenants to contribute toward the payment of common area maintenance expenses, insurance and real estate taxes. Leases at Plainview Point Office Center Phases I, II and III provide for tenants to contribute toward the payment of common area maintenance expenses, insurance, utilities and real estate taxes. These lease provisions, along with the fact that residential leases are generally for a period of one year, provide limited protection to our operations from the impact of inflation and changing prices.

A major tenant at Commonwealth Business Center Phase I, currently occupying 40,079 square feet, or 48% of the building, intends to vacate their space at the end of their lease term, which expires November 9, 2004. This vacancy will leave Commonwealth Business Center Phase I with occupancy of only 40%. This may significantly impact our liquidity and could result in significant costs to refurbish the vacated space and locate new tenants, currently estimated to be approximately $150,000.

We are aware that the sole tenant in one of our joint venture commercial buildings is making efforts to seek alternatives to renewing its expiring lease. The failure of this tenant to renew its lease would result in a loss of annual rental revenue and operating expense recoveries of approximately $938,000 to the joint venture. Income from our investment in the joint venture that owns this property would decrease accordingly. This would significantly affect our liquidity, and could result in significant costs to refurbish the vacated space and locate a new tenant. At this time, we are not certain whether the tenant intends to renew its lease as allowed by the lease agreement, or vacate its space.

The demand on future liquidity is also anticipated to increase as we continue our efforts in the leasing of Plainview Point Office Center Phase III. One tenant which occupied 16,895 square feet, or 27%, of the building, vacated its space on November 30, 2001. As a result of this vacancy, there will likely be a protracted period extending beyond 2004 for the property to become fully leased again. On April 16, 2004, a tenant leased approximately 11,000 square feet of Plainview Point Office Center Phase III. The lease agreement calls for tenant finish, estimated to cost approximately $411,000 of which our share will be approximately $20,000. The tenant finish cost will be funded by loan proceeds from a note payable obtained October 1, 2003 and cash reserves. Through June 30, 2004, approximately $401,000 of the tenant finish cost has been incurred of which our share is approximately $20,000. It is estimated that an additional $54,000 will be needed for tenant finish costs in order to return the building to full occupancy. Our share of these additional costs will be approximately $3,000.

As of June 30, 2004, we have a commitment from a tenant to lease approximately 4,000 square feet of Lakeshore Business Center Phase III. The lease agreement calls for tenant finish, estimated to cost approximately $162,000 of which our share will be approximately $18,000. Through June 30, 2004, approximately $19,000 of the tenant finish cost has been incurred of which our share is approximately $2,000.

We had no other material commitments for renovations or capital improvements as of June 30, 2004.

Proposed Merger

OnAs ~~June~~part ~~20,~~of ~~2003~~the Settlement Agreement, our ~~general~~ general partner, ~~along~~and ~~with~~ the general partners of the four public partnerships affiliated with us, ~~reached~~ anhave ~~agreement~~agreed into ~~principle~~pursue ~~with~~a ~~representatives~~merger of the ~~class~~partnerships ofand ~~plaintiffs~~several toother affiliated real ~~settle~~estate ~~the~~entities ~~action~~into ~~captioned~~a ~~Buchanan~~newly etformed ~~al.~~limited v.partnership ~~NTS-Properties~~known ~~Associates~~as etNTS ~~al.~~Realty Holdings ~~(Case~~Limited ~~No.~~Partnership C(“NTS ~~01- 05090~~Realty”). The ~~action~~merger ~~was~~is ~~originally~~subject ~~filed~~to, inamong ~~the Superior Court of the State~~other ofthings, ~~California~~approval ~~for~~by ~~the~~a ~~County~~majority of ~~Contra Costa against~~ the ~~general~~limited ~~partners~~partner ~~and~~interests ~~several affiliated individuals and entities~~ in ~~December~~each ~~2001~~partnership. ~~The~~We may ~~settlement~~not isseek ~~subject~~the ~~to,~~approval ~~among other~~of ~~things,~~the ~~preparing~~limited ~~and~~partners ~~executing~~until a ~~settlement~~filing ~~agreement~~made toby beNTS ~~presented~~Realty to with the ~~court for~~Securities ~~preliminary~~ and ~~final~~Exchange ~~approval.~~Commission ~~The~~is ~~proposed~~declared ~~settlement~~effective. ~~would~~For ~~include~~the ~~releases~~six ~~for~~months ~~all~~ended ofJune ~~the~~30, ~~parties~~2004 ~~for~~and ~~any~~2003, ofour ~~the~~share ~~claims~~of ~~asserted in~~ the ~~Buchanan~~legal ~~litigation~~ and ~~the class~~professional ~~action~~fees ~~and~~for ~~derivative litigation filed in~~ the ~~Circuit~~proposed merger ~~Court~~was ofapproximately ~~Jefferson County~~$194, ~~Kentucky~~000 and ~~captioned~~$53,000, ~~Bohm et al~~respectively. ~~v. J.D. Nichols et al. (Case No. 03-CI- 01740).~~

AsOn ~~part~~February of4, ~~the proposed settlement~~2004, ~~the~~ ~~general~~NTS ~~partners~~Realty ~~have agreed to pursue~~ filed a ~~merger~~joint ofconsent ~~the~~solicitation ~~partnerships~~statement/prospectus ~~along~~on ~~with~~Form ~~other real~~S-4 ~~estate entities affiliated~~ with the ~~general~~Securities ~~partners into a newly-formed partnership.~~and ~~The~~Exchange ~~general partners would seek to list the limited partnership interests to be issued in the merger on a national securities exchange~~Commission. The ~~merger~~solicitation ~~will~~statement/prospectus bepresents ~~subject to, among other things, approval by holders of a majority of~~ the ~~limited partner interests in each partnership, final approval of the court in which the Buchanan litigation is pending and receipt by the general partners of an opinion regarding the fairness of the~~ merger ~~to the limited partners from a financial point~~ of ~~view. An independent appraiser~~ ~~has~~NTS-Properties ~~been~~III; ~~retained~~NTS-Properties toIV; ~~appraise~~NTS-Properties ~~all~~V; ofNTS-Properties ~~the~~VI; ~~properties owned by the existing partnerships~~ and ~~affiliated~~NTS-Properties ~~entities~~VII, ~~that~~Ltd. ~~would~~with beNTS ~~owned after the merger by the new partnership~~Realty. ~~The appraisal~~Concurrent ~~will~~with ~~be used in establishing exchange values which will determine~~ the ~~number of interests that will be issued to each existing partnership in the~~ merger., ~~The~~ORIG, ~~interests~~LLC, ina ~~the~~Kentucky ~~newly-formed partnership will be subsequently distributed to the~~ limited ~~and~~liability ~~general partners~~company, inwhich ~~each~~is ~~existing~~affiliated ~~partnership~~with asour ~~though each partnership had been liquidated. The~~ general ~~partners~~partner, ~~have also retained a third party to provide an opinion on the fairness of~~will ~~the~~contribute ~~merger~~substantially toall ~~limited~~its ~~partners~~real ~~from~~estate aassets ~~financial~~and ~~point~~all of ~~view.~~its ~~For~~liabilities ~~the~~to ~~nine months ended~~NTS ~~September 30, 2003, our share of the legal and professional fees for the proposed merger was approximately $69,000~~Realty.

On June 24, 2004 and August 13, 2004, NTS Realty filed first and second amendments, respectively, to Form S-4 with the Securities and Exchange Commission. Both amendments are in response to comments made by the Securities and Exchange Commission.

Ownership of Joint Ventures

On June 25, 2002, NTS-Properties Plus Ltd. merged with ORIG, LLC, (“ORIG”) an affiliate of ours. ORIG is the surviving entity as a result of this merger. NTS-Properties IV continues to hold a 29.61% interest in the Blankenbaker Business Center Joint Venture and a 10.92% interest in the Lakeshore/University II Joint Venture after the completion of the NTS-Properties Plus Ltd./ORIG Merger. ORIG now holds a 39.05% interest in the Blankenbaker Business Center Joint Venture and a 7.69% interest in the Lakeshore/University II Joint Venture.

Website Information

Our website address is www.ntsdevelopment.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act are available and may be ~~accessed~~ accessed free of charge through the “About NTS” section of our website as soon as as reasonably practicable after we electronically file this material with, or furnish it to, the SEC. Our website and the information contained therein or connected thereto are ~~not~~ not incorporated into this ~~Quarterly~~quarterly ~~Report~~report on Form 10-Q.

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

Our primary market risk exposure with regard to financial instruments ~~stems~~is ~~from~~ changes in interest rates. All of our debt ~~bears~~ bears interest at a fixed rate. On ~~September~~June 30, ~~2003~~2004, a hypothetical 100 basis point increase in interest rates would result in an approximate $~~130~~103,000 decrease in the fair value of ~~the~~ debt.

Item 4 — Controls and Procedures

~~The~~Our General Partner, with the participation of the Chief Executive Officer and Chief Financial Officer ~~of NTS Capital Corporation~~, has evaluated the ~~general~~effectiveness ~~partner~~ of our ~~general~~disclosure ~~partner, have~~controls ~~concluded,~~and ~~based~~procedures ~~on their evaluation~~ as of ~~September~~June 30, ~~2003,~~2004. ~~that~~Based ~~our disclosure~~on ~~controls~~that ~~and~~evaluation, ~~procedures~~the ~~are~~Chief ~~effective~~Executive ~~for~~Officer ~~gathering, analyzing~~ and ~~disclosing~~Chief ~~the information~~Financial weOfficer ~~are~~concluded ~~required~~that our todisclosure ~~disclose~~controls inand ~~our~~procedures ~~reports~~were ~~filed~~effective ~~under~~as ~~the~~of ~~Securities~~June ~~Exchange Act~~30, ~~of 1934~~2004. There ~~have~~were ~~been~~ no material ~~significant~~ changes in our internal controls over financial reporting orduring inthe ~~other~~six ~~factors that could significantly affect these controls~~months ~~subsequent~~ended toJune ~~the~~30, ~~date of the previously mentioned evaluation~~2004.

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings

On ~~October~~May 16, ~~2003~~2004, inthe Superior Court of the ~~litigation~~State of California for the County of Contra Costa granted its final approval of the ~~against~~Stipulation ~~our~~and ~~general~~Agreement ~~partner,~~of Settlement (the “Settlement Agreement”) jointly filed by the general partners of(the ~~four~~“General ~~public~~Partners”) ~~partnerships~~of ~~affiliated~~NTS-Properties III, ~~with~~NTS-Properties usIV, ~~and~~NTS-Properties ~~several~~V, ~~individuals~~NTS-Properties VI and ~~entities~~NTS-Properties ~~affiliated~~VII, Ltd. (the “Partnerships”), along with uscertain of their affiliates, with the class of plaintiffs in the action originally captioned ~~Bohm~~Buchanan, et al. v. ~~J..D.~~NTS-Properties Associates, ~~Nichols~~ et al. (Case No. 03C 01-~~CI-01740~~05090) ~~that~~on isDecember ~~pending~~5, in2003. At the ~~Circuit~~final hearing, ~~Court~~any member of ~~Jefferson~~the ~~County,~~class ~~Kentucky,~~of ~~the~~plaintiffs ~~judge~~was ~~granted~~given the ~~defendants’~~opportunity ~~motion~~to object to the final ~~extend~~approval aof ~~stay~~the ~~that~~Settlement ~~had~~Agreement, ~~previously~~the ~~been~~entry ~~agreed~~of ~~upon~~a byfinal judgment dismissing with prejudice the ~~parties~~Buchanan ~~which~~litigation, ~~expired~~or onan application of an award for ~~September~~attorneys’ 8,fees ~~2003~~and expenses to plaintiffs’ counsel. The ~~stay~~Superior ~~will~~Court’s order ~~remain~~provides, inamong ~~effect~~other ~~only~~things, ifthat: (1) the ~~parties~~Settlement inAgreement, ~~the~~and ~~litigation~~all ~~captioned~~transactions ~~Buchanan~~contemplated etthereby, ~~al.~~including v.the ~~NTS~~proposed —merger ~~Properties~~of ~~Associates~~the etPartnerships ~~al.~~into NTS ~~(Case~~Realty ~~No.~~Holdings ~~C 01-05090)~~Limited Partnership, ~~filed~~are ~~against~~fair, ~~our~~reasonable ~~general~~and ~~partner~~adequate, and in the best ~~general~~interests ~~partners~~of the class of ~~four~~plaintiffs; ~~public partnerships~~(2) ~~affiliated~~the ~~with~~plaintiffs’ uscomplaint and ~~several~~each ~~individuals~~and every cause of action and ~~entities~~claim ~~affiliated~~set ~~with~~forth ~~us that~~therein is ~~pending~~dismissed inwith ~~the~~prejudice; ~~Superior~~(3) ~~Court~~each class ofmember ~~the~~is ~~State~~barred offrom ~~California~~(a) transferring, ~~seek~~selling ~~preliminary approval~~or ofotherwise adisposing ~~settlement~~ of ~~that~~(other than ~~litigation~~ by ~~November~~operation ~~19,~~of ~~2003~~law) ~~and~~their ~~final~~interests ~~settlement~~until of the ~~Buchanan~~earlier ~~litigation~~of ~~includes~~the ~~releases~~closing ~~relating~~date toof the merger, ~~Bohm~~the ~~litigation. If~~termination ~~these~~of ~~two~~the ~~conditions~~settlement ~~are~~or ~~satisfied~~June 30, ~~the~~2004; ~~stay~~and ~~will~~(4) ~~become~~each ~~permanent~~class ~~when~~member ~~the~~who ~~Buchanan~~requested ~~settlement~~to isbe ~~subject~~excluded tofrom athe ~~final,~~settlement ~~non-appealable~~released ~~order~~their claims in the Bohm litigation.

Items 2 through 5 are omitted because these items are inapplicable or the answers to the items are negative.

Item 6 — Exhibits and Reports on Form 8-K

~~(a)~~ Exhibit ~~Exhibits~~No.

(3) Amended and Restated Agreement and Certificate of Limited Partnership of NTS-Properties IV. *


3	Amended and Restated Agreement and Certificate of Limited Partnership of NTS-Properties IV.	*

10	Property Management Agreement and Construction Management Agreement between NTS Development Company and NTS-Properties IV.	*

14	Code of Ethics.	**

(31.1) Certification of Chief Executive Officer Pursuant to SEC Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

(31.2) Certification of Chief Financial Officer Pursuant to SEC Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **

(32.1) Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

(32.2) Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

(b) Reports on Form 8-K None.

* Incorporated by reference to documents filed with the Securities and Exchange Commission in connection with the filing of the Registration Statements on Form S-11 on May 16, 1983 (effective August 1, 1983) under Commission File No. 2-83771.

** Attached as an exhibit to this Quarterly Report on Form 10-Q.

SIGNATURES


31.1	Certification of Chief Executive Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	***

31.2	Certification of Chief Financial Officer Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended.	***

32.1	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	***

32.2	Certification of Chief Financial Officer Pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	***

*	Incorporated by reference to documents filed with the Securities and Exchange Commission in connection with the filing of the Registration Statements on Form S-11 on May 16, 1983 (effective August 1, 1983) under Commission File No. 2-83771.

**	See www.ntsdevelopment.com for our code of ethics.

***	Attached as an exhibit with this Form 10-Q.

~~Pursuant to the requirements of the Securities~~ ~~Exchange~~Reports ~~Act of 1934, the registrant has duly caused this report to be signed~~ on ~~its behalf~~Form by8-K ~~the undersigned thereunto duly authorized.~~

~~NTS~~We filed a Form 8-~~PROPERTIES~~K IVon ~~By:~~June 24, 2004, to announce that NTS Realty Holdings Limited Partnership filed an amendment to Form S-~~Properties~~4 with ~~Associates~~the ~~IV,~~Securities ~~General~~and ~~Partner~~Exchange Commission on June 18, ~~By:~~2004. ~~NTS~~The ~~Capital~~original ~~Corporation~~Form S-4 was filed on February 4, ~~General~~2004. ~~Partner~~

~~/s/~~We ~~Brian~~filed F.a ~~Lavin~~Form ~~Brian~~8-K F.on ~~Lavin~~August ~~President~~13, 2004, ofto announce that NTS ~~Capital~~Realty ~~Corporation~~Holdings ~~/s/~~Limited ~~Gregory~~Partnership A.filed ~~Wells~~a ~~Gregory~~second Aamendment to Form S-4 with the Securities and Exchange Commission on August 13, 2004. ~~Wells~~The ~~Chief~~original ~~Financial~~Form S-4 ~~Officer~~was offiled ~~NTS~~on ~~Capital~~February ~~Corporation~~4, 2004.

~~Date: November 13, 2003~~ 31

31 SIGNATURES

~~EXHIBIT~~ Pursuant ~~INDEX~~to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

NTS-PROPERTIES IV
Exhibit Number			Description of Document
	3		Amended and Restated Agreement and Certificate of Limited Partnership of NTS-Properties IV. *
By:		NTS-Properties Associates IV,
	31.1		Certification of Chief Executive Officer Pursuant to SEC Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **
		General Partner
	31.2		Certification of Chief Financial Officer Pursuant to SEC Rules 13a-15(e) and 15d-15(e), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. **
		By: NTS Capital Corporation,
	32.1		Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **
		General Partner
	32.2		Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. **

*/s/ ~~Incorporated~~Brian byF. ~~reference~~Lavin toBrian ~~documents~~F. ~~filed~~Lavin ~~with~~President ~~the~~of ~~Securities~~NTS ~~and~~Capital ~~Exchange~~Corporation ~~Commission~~/s/ inGregory ~~connection~~A. ~~with~~Wells ~~the~~Gregory ~~filing~~A. ofWells ~~the~~Chief ~~Registration~~Financial ~~Statements~~Officer onof ~~Form~~NTS ~~S-11~~Capital onCorporation ~~May~~Date: ~~16, 1983 (effective~~ August 116, ~~1983) under Commission File No. 2-83771.~~2004

**32 ~~Attached as an exhibit to this Quarterly Report on Form 10-Q.~~

UNITED STATES SECURITIES AND EXCHANGE COMMISSIONWASHINGTONCOMMISSION WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION

PART II — OTHER INFORMATION

PART I — FINANCIAL INFORMATIONINFORMATIONItem Item 1 — Financial Statements

NTS-PROPERTIES IV BALANCE SHEETS

NTS-PROPERTIES IV STATEMENT OF PARTNERS’ EQUITY (UNAUDITED)

NTS-PROPERTIES IV STATEMENTS OF OPERATIONS (UNAUDITED)

NTS-PROPERTIES IV STATEMENTSOFSTATEMENTS OF CASH FLOWS (UNAUDITED)

NTS-PROPERTIES IV NOTES TO FINANCIAL STATEMENTS (UNAUDITED)

Note 1 — Basis of Presentation and Joint Venture Accounting

Note 2 — Use of Estimates in the Preparation of Financial Statements

Note 3 — Concentration of Credit Risk

Note 4 — Cash and Equivalents

Note 5 — Cash and Equivalents — Restricted

Note 6 — Basis of Property and Depreciation

Note 7 — Investment in Joint Ventures

MortgagesNote and8 note— payableMortgages consist of the following: Payable

Note 9 — Related Party Transactions

Note 10 — Commitments and Contingencies

Note 11 — Segment Reporting

Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

Results of Operations

Liquidity and Capital Resources

Proposed Merger

Ownership of Joint Ventures

Website Information

Item 3 — Quantitative and Qualitative Disclosures About Market Risk

Item 4 — Controls and Procedures

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings

Item 6 — Exhibits and Reports on Form 8-K

SIGNATURES

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

NTS-PROPERTIES IV
BALANCE SHEETS

NTS-PROPERTIES IV
STATEMENTS OF OPERATIONS
(UNAUDITED)

Filing Compare · NTS PROPERTIES IV