-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Jho0FO2ffxr40VYPxhW8NZ5IIn9gDf0Wltn4a/ARzegmdDHCXbIOx7PL0VQ5bwxY mbI5hWIz+kMwOciRazhU5g== 0000806641-96-000049.txt : 19960525 0000806641-96-000049.hdr.sgml : 19960525 ACCESSION NUMBER: 0000806641-96-000049 CONFORMED SUBMISSION TYPE: 10-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960524 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SCA TAX EXEMPT FUND LIMITED PARTNERSHIP CENTRAL INDEX KEY: 0000806641 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 521449733 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-15725 FILM NUMBER: 96572342 BUSINESS ADDRESS: STREET 1: 218 N CHARLES ST STE 500 CITY: BALTIMORE STATE: MD ZIP: 21201 BUSINESS PHONE: 3019620595 MAIL ADDRESS: STREET 1: 218 N CHARLES STREET STREET 2: SUITE 500 CITY: BALTIMORE STATE: MD ZIP: 21201 10-K/A 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K/A Amendment #2 Annual Report Pursuant to Section 13 or 15(d) of Securities Exchange Act of 1934 For the fiscal year ended: December 31, 1995 Commission file number: 0-15725 ----------------- ------- SCA TAX EXEMPT FUND LIMITED PARTNERSHIP - ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 52-1449733 ----------------------- ------------------------------------ (State of organization) (I.R.S. Employer Identification No.) 218 North Charles Street, Suite 500, Baltimore, Maryland 21201 - -------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (410) 962-0595 -------------- Securities registered pursuant to Section 12(b) of the Act: Title of each class: Name of each exchange on which registered: None None -------- -------- Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] ----- The Registrant is a partnership. Accordingly, no voting stock is held by non-affiliates of the Registrant. DESCRIPTION OF AMENDMENTS: AMENDMENT #1 (All changes for Amendment #1 were a result of the SEC Staff Comments dated April 19, 1996 and comments from the Chief Accountant of Corporate Finance dated April 25, 1996 and May 13, 1996. These were included in the 10-K/A filed on May 16, 1996): A) References to "Documents Incorporated by Reference" in Item 1. Business and Item 11. Executive Compensation have been deleted. The related information has been disclosed in the applicable Items accordingly. The Index to Exhibits has also been amended to reflect the deletion of Exhibit 99. B) Item 1. Business, New Business has been amended to include a brief description of the proposed new investment structure under the caption "Proposed New Investment Structure." C) Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters has been amended to reflect per BAC distributions. D) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations has been amended as follows: a) to expand the Registrant's discussion of the Financing transaction consummated on February 14, 1995 including, but not limited to, effects of cross-collateralization, use of Financing proceeds and risks and uncertainties related to a particular Series as a result of the Financing; and, b) to disclose the amount and sources of cash used to pay interest on the Series I and Series II Bonds under "Revenues." E) Item 8. Financial Statements and Supplementary Data has been amended to reflect changes to Note 3 - The Financing/Investment in MLP II, Note 4 - Investment in Mortgage Revenue Bonds and Note 5 - Investment in Parity Working Capital Loans including applicable schedules. AMENDMENT #2 (All changes included in Amendment #2 are a result of the SEC Staff Comments dated May 22, 1996): A) Note 2 in Item 8. Financial Statements and Supplementary Data has been amended to expand the Registrant's discussion regarding the differences in value that could occur if a market existed for mortgage revenue bonds. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. See the Financial Statements, together with the report thereon of Price Waterhouse dated March 28, 1996, which are filed as a part of this Annual Report on Form 10-K. PART IV ITEM 14. EXHIBITS, FINANICAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report: 1. Financial Statements - The Financial Statements listed on the accompanying Index to Financial Statements and Schedule are filed as a part of this Annual Report on Form 10-K. 2. Exhibits - The Exhibits listed in the accompanying Index to Exhibits are filed as part of this Annual Report on Form 10-K. (b) Reports on Form 8-K: 1. There were no reports on Form 8-K filed during the quarter ended December 31, 1995. INDEX TO EXHIBITS Exhibit Number Title of Document --------- ------------------- 2. Not applicable. 3. Amended and Restated Agreement of Limited Partnership of SCA Tax Exempt Fund Limited Partnership, dated as of June 3, 1986 (incorporated herein by reference to Exhibit A of the Prospectus of the Registrant dated June 3, 1986 (the "Prospectus") filed with the Commission pursuant to Rule 424(b)). 4. Amended and Restated Agreement of Limited Partnership of SCA Tax Exempt Fund Limited Partnership, dated as of June 3, 1986 (incorporated herein by reference to Exhibit A of the Prospectus of the Registrant dated June 3, 1986 (the "Prospectus") filed with the Commission pursuant to Rule 424(b)). 9. Not applicable. 10. Not applicable. 11. Not applicable. 12. Not applicable. 13. Not applicable. 16. Not applicable. 18. Not applicable. 21. Not applicable. 22. Not applicable. 23. Not applicable. 24. Not applicable. 27. Financial Data Schedules. 28. Not applicable. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. SCA TAX EXEMPT FUND LIMITED PARTNERSHIP By: SCA REALTY I, INC. Date: May 24, 1996 By: /s/ Mark K. Joseph Mark K. Joseph President/Treasurer, Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates set forth below opposite their respective names. Signatures Title Date /s/ Garrett G. Carlson Chairman of the Board May 24, 1996 Garrett G. Carlson of Directors /s/ Mark K. Joseph President/Treasurer, May 24, 1996 Mark K. Joseph Director SCA TAX EXEMPT FUND LIMITED PARTNERSHIP INDEX TO FINANCIAL STATEMENTS AND SCHEDULES Report of Independent Accountants Balance Sheets as of December 31, 1995 and 1994 Statements of Income for the three years ended December 31, 1995, 1994, and 1993 Statements of Cash Flows for the three years ended December 31, 1995, 1994, and 1993 Statement of Changes in Partners' Capital for the three years ended December 31, 1995 Separate financial statements of MLP II Acquisition Limited Partnership, accounted for on the equity method, are set forth in Note 3 to the financial statements of the Registrant. All schedules prescribed by Regulation S-X have been omitted as the required information is inapplicable or the information is presented elsewhere in the financial statements or related notes. REPORT OF INDEPENDENT ACCOUNTANTS To The Partners of SCA Tax Exempt Fund Limited Partnership In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of income, of cash flows and of changes in partners' capital present fairly, in all material respects, the consolidated financial position of SCA Tax Exempt Fund Limited Partnership (the "Partnership"), SCA Tax Exempt Trust and MLP III Investment Limited Partnership at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Partnership's Managing General Partner; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed under "Investments in Mortgage Revenue Bonds" in Note 2, the Partnership's 1994 financial statements have been restated to account for its investments in mortgage revenue bonds as debt securities. As explained in Note 2, the financial statements include mortgage revenue bonds valued at $146,142,000 (65% of total assets) and $213,842,000 (93% of total assets) at December 31, 1995 and 1994, respectively, which values have been estimated by the Partnership's Managing General Partner in the absence of readily ascertainable market values. Those estimated values may differ significantly from the values that would have been used had a ready market for the mortgage revenue bonds existed, and the differences could be material. Price Waterhouse LLP Baltimore, Maryland March 28, 1996 SCA TAX EXEMPT FUND LIMITED PARTNERSHIP BALANCE SHEETS IN THOUSANDS, EXCEPT BAC DATA
December 31, December 31, 1995 1994 --------------- --------------- ASSETS Cash and cash equivalents $9,810 $7,855 Interest receivable 434 770 Investment in mortgage revenue bonds (Notes 2, 3 and 4) 146,142 213,842 Investment in parity working capital loans, net of valuation allowance of $600 in 1995 and $1,196 in 1994 (Notes 2, 3 and 5) 2,890 6,689 Investment in MLP II (Note 3) 65,299 - Other assets 240 1,126 --------------- --------------- TOTAL ASSETS $224,815 $230,282 =============== =============== LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued expenses $544 $1,110 Distributions payable 7,977 7,713 Due to affiliates (Note 7) 9 95 --------------- --------------- TOTAL LIABILITIES 8,530 8,918 --------------- --------------- Minority Interest (Note 1) 3 - --------------- --------------- Partners' Capital Unrealized gain (loss) on mortgage revenue bonds available for sale (including cumulative effect of accounting change of ($8,028) as of January 1, 1994) (Note 2) (981) 1,366 General partners (477) (464) Limited partners: Series I (beneficial assignee certificates- issued and outstanding 200,000 certificates) 141,111 142,862 Series II (beneficial assignee certificates- issued and outstanding 96,256 certificates) 76,629 77,600 --------------- --------------- TOTAL PARTNERS' CAPITAL 216,282 221,364 --------------- --------------- COMMITMENTS AND CONTINGENCIES (Notes 2, 4, 5, 6 & 8) TOTAL LIABILITIES AND PARTNERS' CAPITAL $224,815 $230,282 =============== =============== The accompanying notes are an integral part of these financial statements.
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP STATEMENTS OF INCOME IN THOUSANDS, EXCEPT PER BAC DATA
For the year endedFor the year endedFor the year ended December 31, December 31, December 31, 1995 1994 1993 --------------- --------------- --------------- INCOME Interest on mortgage revenue bonds and parity working capital loans $13,574 $17,380 $7,614 Net gain on sale of A bond receipts 623 - - Interest on short-term investments 366 210 197 Equity in MLP II 3,150 - - Equity in property net income - - 5,185 --------------- --------------- --------------- TOTAL INCOME 17,713 17,590 12,996 --------------- --------------- --------------- EXPENSES Operating expenses (Note 3) 4,491 2,365 1,248 Other-than-temporary impairments and valuation adjustments related to investment in mortgage revenue bonds and investment in real estate partnerships - 2,014 6,050 Minority interest 18 - - --------------- --------------- --------------- TOTAL EXPENSES 4,509 4,379 7,298 --------------- --------------- --------------- INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 13,204 13,211 5,698 CUMULATIVE EFFECT ON PRIOR YEARS (to January 1, 1994) OF CHANGE IN ACCOUNTING FOR MORTGAGE REVENUE BONDS (NOTE 2) - (11,881) - --------------- --------------- --------------- NET INCOME $13,204 $1,330 $5,698 =============== =============== =============== NET INCOME ALLOCATED TO GENERAL PARTNERS $132 $14 $57 =============== =============== =============== NET INCOME (LOSS) ALLOCATED TO LIMITED PARTNERS: SERIES I $8,749 ($1,122) $2,835 =============== =============== =============== SERIES II $4,323 $2,438 $2,806 =============== =============== =============== SERIES I EARNINGS PER BAC: Income before cumulative effect of accounting change $43.74 $41.79 $14.18 Cumulative effect on prior years (to January 1, 1994) of change in accounting for mortgage revenue bonds (Note 2) - (47.40) - --------------- --------------- --------------- NET INCOME (LOSS) PER BAC ALLOCATED TO SERIES I $43.74 ($5.61) $14.18 =============== =============== =============== SERIES II EARNINGS PER BAC: Income before cumulative effect of accounting change $44.91 $49.04 $29.15 Cumulative effect on prior years (to January 1, 1994) of change in accounting for mortgage revenue bonds (Note 2) - (23.71) - --------------- --------------- --------------- NET INCOME PER BAC ALLOCATED TO SERIES II $44.91 $25.33 $29.15 =============== =============== =============== The accompanying notes are an integral part of these financial statements.
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS IN THOUSANDS
For the year endedFor the year endedFor the year ended December 31, December 31, December 31, 1995 1994 1993 --------------- --------------- --------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $13,204 $1,330 $5,698 Adjustments to reconcile net income to net cash provided by operating activities: Equity in MLP II net income (3,150) - - Equity in property net income - - (5,185) Income allocated to minority interest 18 - - Recovery of valuation allowance on parity working capital loans - (46) - Net realized gain on sale of A bond receipts (2,347) - - Interest receivable transferred to investment in real estate partnerships - - (327) Other-than-temporary impairments and valuation adjustments related to investment in mortgage revenue bonds and investment in real estate partnerships - 2,014 6,050 Cumulative effect of accounting change - 11,881 - Interest distributions from investment in real estate partnerships - - 9,100 Decrease in interest receivable 336 84 123 (Increase) decrease in other assets 38 (1,100) 20 Increase (decrease) in accounts payable and accrued expenses (566) 996 49 Increase (decrease) in due to affiliates (86) 71 (15) --------------- --------------- --------------- Net cash provided by operating activities 7,447 15,230 15,513 --------------- --------------- --------------- CASH FLOWS FROM INVESTING ACTIVITIES: Investment in MLP II (61,000) - - Distributions from MLP II 3,499 - - Proceeds from sale of A bond receipts 67,700 - - --------------- --------------- --------------- Net cash provided by investing activities 10,199 - - --------------- --------------- --------------- CASH FLOWS FROM FINANCING ACTIVITIES: Distributions to partners (15,691) (15,692) (15,931) --------------- --------------- --------------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,955 (462) (418) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 7,855 8,317 8,735 --------------- --------------- --------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $9,810 $7,855 $8,317 =============== =============== =============== DISCLOSURE OF NON-CASH ACTIVITIES: Contribution of parity working capital loans and other assets to MLP II $4,647 - - =============== =============== =============== Transfer of investment in mortgage revenue bonds and working capital loans to investment in real estate partnerships - - $23,425 =============== =============== =============== The accompanying notes are an integral part of these financial statements.
SCA TAX EXEMPT LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIOD DECEMBER 31, 1992 THROUGH DECEMBER 31, 1995 IN THOUSANDS
SERIES I SERIES II LIMITED PARTNERS LIMITED PARTNERS UNREALIZED GAIN (LOSS) BENEFICIAL BENEFICIAL ON MORTGAGE REVENUE ASSIGNEE ASSIGNEE GENERAL BONDS AVAILABLE CERTIFICATES CERTIFICATES PARTNERS FOR SALE, NET TOTAL ---------------- --------------- --------------- --------------- --------------- Balance, December 31, 1992 $161,149 $83,425 ($236) $0 $244,338 Net income 2,835 2,806 57 - 5,698 Distribution to partners (10,000) (5,775) (155) - (15,930) ---------------- --------------- --------------- --------------- --------------- Balance, December 31, 1993 153,984 80,456 (334) - 234,106 Cumulative effect on prior years (to January 1, 1994) of change in accounting (Note 2) - - - (8,028) (8,028) Net income (1,122) 2,438 14 - 1,330 Distribution to partners (10,000) (5,294) (144) - (15,438) Change in market value of mortgage revenue bonds available for sale, net - - - 7,380 7,380 Realization of other-than-temporary impairment on mortgage revenue bonds available for sale - - - 2,014 2,014 ---------------- --------------- --------------- --------------- --------------- Balance, December 31, 1994 142,862 77,600 (464) 1,366 221,364 Net income 8,749 4,323 132 - 13,204 Distribution to partners (10,500) (5,294) (145) - (15,939) Net realized gains on sale of A bond receipts - - - (2,347) (2,347) ---------------- --------------- --------------- --------------- --------------- Balance, December 31, 1995 $141,111 $76,629 ($477) ($981) $216,282 ================ =============== =============== =============== =============== The accompanying notes are an integral part of these financial statements.
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP NOTES TO THE FINANCIAL STATEMENTS (SERIES I AND SERIES II) NOTE 1 - ORGANIZATION AND BASIS OF PRESENTATION The Partnership SCA Tax Exempt Fund Limited Partnership (the "Partnership"), was organized on January 10, 1986, under the Delaware Revised Uniform Limited Partnership Act for the purpose of investing in a portfolio of tax-exempt mortgage revenue bonds (the "Bonds") issued by various state or local governments or their agencies or authorities, and secured by nonrecourse participating first mortgage loans on real estate projects. The Partnership will terminate on December 31, 2036, or sooner, in accordance with the terms of the Partnership Agreement. SCA Realty I, Inc. is the .01% Managing General Partner and SCA Associates 86 Limited Partnership is the .99% Associate General Partner (collectively, the "General Partners"). The Series The Partnership has had two offerings ("Series I" and "Series II") of Beneficial Assignee Certificates ("BACs") which represent the assignment of limited partnership interests in the Partnership. Because the rights and obligations of BAC Holders are those of limited partners in the Partnership, they are considered such for purposes of these financial statements. A total of 200,000 BACs in Series I and 96,256 BACs in Series II were issued at a stated value of $1,000 each and the net proceeds from each of these offerings were invested in two separate pools of investments. In accordance with the Partnership Agreement, the Managing General Partner is required to maintain records for each such pool of investments and to report the results of such investments to the Series I and Series II BAC Holders. Other Entities As more fully described in Note 3, certain new entities were created to facilitate the Financing. A brief description of each such entity follows: SCA Tax Exempt Trust (the "Trust") - The Trust was created to hold certain assets of the Partnership, which is the sole holder of the Certificate of Participation in the corpus and income of the Trust. MLP III Investment Limited Partnership ("MLP III") - MLP III is a Maryland limited partnership owned by the Partnership through a 99% general partner interest and SCA Limited Partner Corporation ("SCALPC"), an affiliate of the Managing General Partner, through a 1% limited partner interest. MLP II Acquisition Limited Partnership ("MLP II") - MLP II is a Maryland limited partnership owned by MLP III through a 98.99% limited partner capital interest (39.996% annual profits and annual distributions interest), SCALPC through a .01% limited partner capital interest (.004% annual profits and annual distributions interest) and MLP I (see below) through a 1% general partner capital interest (60% annual profits and annual distributions interest). Distributions of capital proceeds, as defined, after payment of all debts, liabilities and expenses and after any reserves deemed necessary, are distributed to the partners pro rata up to an amount equal to their unreturned capital contributions. MLP I LLC ("MLP I") - MLP I is a Maryland limited liability company ("LLC"), whose members comprise the operating partnerships that are the ultimate debtors in the bonds involved in the Financing. Basis of Presentation The Partnership previously has presented financial statements for each of Series I and Series II reflecting the pool of investments attributable to each Series. Following a review of the Partnership's financial statements in 1995, the Staff of the Securities and Exchange Commission (the "SEC") concluded, and the Managing General Partner agreed, that the Partnership would present financial statements comprising both Series I and Series II. Financial information with respect to each Series is set forth supplementally in Note 9. The consolidated financial statements of the Partnership include the Partnership (comprising Series I and Series II), the Trust and MLP III. MLP II is accounted for under the equity method and financial information with respect to MLP II is set forth in Note 3. The minority interest represents SCALPC's limited partner proportionate share of the equity in MLP III. All significant intercompany transactions are eliminated. Partnership Distributions Cash flow, as defined in the Partnership Agreement, is distributable and net income is allocable 1% to the Partnership's general partnership interests and 99% to its limited partnership interests until the BAC Holders have received an 8.5% non-cumulative return on their adjusted capital contribution as defined. Thereafter, cash flow is distributable and income is allocable based on varying percentages as defined in the Partnership Agreement. The Partnership is not, however, precluded from making distributions to BAC Holders in excess of annual cash flow. The Partnership is required to pay distributions declared within 45 days following the end of each six-month period of the calendar year. Proceeds from sale, repayment or liquidation, as defined in the Partnership Agreement, are distributable substantially in the same manner as other cash flow, after repayment of the partners' adjusted capital contributions. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Set forth below are the more significant accounting policies followed by the Partnership in its consolidated financial statements and by MLP II. Cash and Cash Equivalents Cash and cash equivalents consist principally of investments in money market mutual funds and short-term marketable securities with original maturities of 90 days or less, both of which are readily convertible to known amounts of cash in seven days or less. The carrying amount of cash and cash equivalents approximates fair value. Short-Term Investments Short-term investments are classified as trading securities and carried at fair value; unrealized gains or losses are recorded through results of operations. The Managing General Partner places short-term investments in highly-rated commercial paper and limits the amount of credit exposure with any one issuer. The Managing General Partner actively evaluates the creditworthiness of the issuers in which it invests. The estimated fair value of short-term investments approximates carrying value. Investments in Mortgage Revenue Bonds In 1994, the Partnership adopted the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities," ("FAS 115") and applied them to its short-term investments. Following such adoption, the Partnership (as did others in the industry) continued to account for its investments in mortgage revenue bonds as either investments in real estate partnerships or real estate loans, depending on whether or not the Managing General Partner had directed its affiliates to take deed to the underlying property in lieu of the Partnership foreclosing. In conjunction with the review of the Partnership's financial statements by the SEC Staff in 1995 as discussed in Note 1, the Partnership agreed that it would account for all of its investments in mortgage revenue bonds as debt securities under the provisions of FAS 115 effective January 1, 1994, and restated its 1994 financial statements to reflect this change. Accordingly, effective January 1, 1994, all investments in mortgage revenue bonds, regardless of their status, are classified and accounted for as available for sale debt securities and carried at fair value; unrealized holding gains or losses are included as a separate component of Partners' Capital and other-than-temporary impairments are recorded through operations. The cumulative effect of adopting this accounting was to decrease Partners' Capital by approximately $19.9 million as of January 1, 1994; of such amount, approximately $11.9 million was attributable to operations prior to January 1, 1994 and is reflected in the income statement as a cumulative effect of the accounting change and approximately $8.0 million was attributable to an unrealized holding loss as of such date. The cumulative effect adjustment discussed above does not affect the cash flow generated from property operations, distributions to BAC Holders, the characterization of the tax-exempt income stream or the financial obligations under the Bonds. In connection with a Consent Solicitation and Proxy filed with the SEC on March 28, 1996, the Partnership requested an independent appraisal firm to conduct appraisals as of May 1, 1995 of all of the properties collateralizing the Partnership's investments in mortgage revenue bonds. Because only a limited market exists for such bonds and they are wholly collateral dependent, the Partnership used such appraisals as the basis for its estimates of fair values of the bonds. In connection with the adoption of FAS 115 as of January 1, 1994 and its application to the accompanying financial statements, the Managing General Partner used such estimates, as adjusted for intervening changes in circumstances, in making its estimates of fair value for the mortgage revenue bonds at various dates throughout 1994 and 1995. The Managing General Partner will continue to use its best efforts in estimating the fair value of the Partnership's mortgage revenue bonds. For those mortgage revenue bonds where estimated fair value has declined to an amount below amortized cost, the Managing General Partner considers the following in determining whether the indicated decline is other-than-temporary. With respect to bonds that are not performing in accordance with their contractual terms established at the time of issuance, the Partnership considers all declines in fair value, if any, to be other-than-temporary as required under the provisions of FAS 115. Indicated impairments of performing bonds are evaluated on an individual basis, but, in the absence of contrary evidence, are generally considered to be temporary. Base interest on the mortgage revenue bonds is recognized as revenue as it accrues; contingent interest is recognized when received. Although no debt service obligations have been forgiven, delinquent mortgage revenue bonds are placed on non-accrual status for financial reporting purposes when collection of interest is in doubt. Interest payments on non-accrual mortgage revenue bonds are applied first to previously recorded accrued interest and, once previously accrued interest is satisfied, is then recognized as income when received. The accrual of interest income is reinstated once a property's ability to perform is adequately demonstrated. For tax purposes, the Partnership recognizes interest income on the mortgage revenue bonds at rates negotiated at the time such investments were made. Interest recognized on the bonds is exempt for federal income tax purposes to the partners. Investments in Parity Working Capital Loans The Partnership adopted the provisions of Statement of Financial Accounting Standards No. 114, "Accounting by Creditors for Impairment of a Loan" ("FAS 114") effective January 1, 1994. The provisions of FAS 114 clarify that a creditor should evaluate the collectability of both interest and principal receivable when assessing the need for a valuation allowance. FAS 114 requires a creditor to base its measure of loan impairment on the present value of expected future cash flows discounted at the loan's effective interest rate, or the fair value of the collateral if the loan is collateral dependent. A valuation allowance is provided to record the loan impairment with a corresponding charge to net income. The cumulative effect of adopting FAS 114 was not significant. Base interest on the parity working capital loans is recognized as revenue as it accrues; contingent interest is recognized when received. Although no debt service obligations have been forgiven, delinquent parity working capital loans are placed on non-accrual status for financial reporting purposes when collection of interest is in doubt. Interest payments on non-accrual parity working capital loans are applied first to previously recorded accrued interest and, once previously accrued interest is satisfied, is then recognized as income when received. The accrual of interest income is reinstated once a property's ability to perform is adequately demonstrated. For tax purposes, the Partnership recognizes interest income on the loans at rates negotiated at the time such investments were made. For income tax purposes, interest recognized on the parity working capital loans is taxable to the partners. Equity in Property Income (Loss) Prior to the adoption of FAS 115 on January 1, 1994, the Partnership reclassified investments in mortgage revenue bonds to investments in real estate partnerships whenever it became apparent that the underlying properties were unable to continue to support their entire debt service obligation, and the other sources of debt service, including property level reserves and operating deficit guarantees, were considered insufficient to meet mortgage loan obligations. Once reclassified to investments in real estate partnerships, the investments were accounted for using the equity method of accounting. The carrying value of these investments was increased or decreased, and income or loss was recognized, for the Partnership's share of the underlying property's income or loss. Interest collected from investment in real estate partnerships was recorded not as interest income, but as a distribution which decreased the investment's carrying value. Earnings per BAC Earnings per BAC are calculated on a Series basis using the income or loss attributable to Series I and Series II and the average outstanding BACs in each Series. For each of the three years ended December 31, 1995, 1994 and 1993, 200,000 and 96,256 BACs were outstanding for Series I and Series II, respectively. Income Taxes No recognition has been given to income taxes in the accompanying financial statements as the distributive share of the Partnership's income, deductions and credits is included in each partner's income tax returns. The Managing General Partner believes that the Partnership is not subject to income taxes. The tax basis of the Partnership's net assets exceeds the carrying value for book purposes by approximately $69 million, of which approximately $57 million and approximately $12 million is attributable to Series I and Series II, respectively. Significant Risks and Uncertainties The Partnership's assets are primarily invested in tax-exempt mortgage revenue bonds, secured by non-recourse loans on real estate projects. Accordingly, the value of the Partnership's assets is subject to all of the factors affecting bond and real estate values, including interest rate changes, demographics, local real estate markets and individual property performance. The use of estimates is inherent in the preparation of all financial statements, but is especially important in the case of the Partnership, which is required under FAS 115 to carry a substantial portion of its assets at fair value, even though only a limited market exists for them. Because only a limited market exists for the Partnership's investment in mortgage revenue bonds, fair value is estimated by the Managing General Partner. These estimates involve uncertainties and matters of judgment, and therefore cannot be determined with precision. The assumption and methodologies selected by the Managing General Partner were intended to estimate the amount at which the mortgage revenue bonds could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. Changes in assumptions could significantly affect estimates. These estimated values may differ significantly from the values that would have been used had a ready market for the mortgage revenue bonds existed, and the differences could be material. NOTE 3 - THE FINANCING/INVESTMENT IN MLP II As discussed in previous reports, on February 14, 1995, the Partnership consummated a transaction which raised gross proceeds through the sale of $67,700,000 in aggregate principal amount of Multifamily Mortgage Revenue Bond Receipts (the "Financing"). The Multifamily Mortgage Revenue Bond Receipts (collectively, the "Receipts") are collateralized by a pool of eleven of the Partnership's 23 original mortgage revenue bonds (five in Series I and six in Series II). (The Partnership's 12 remaining mortgage revenue bonds not refunded in the Financing are discussed in Note 4.) These eleven bonds all relate to properties that defaulted on their original debt obligations. The cash stream from one additional bond, Creekside Village ("Creekside"), which also defaulted on its original debt obligation, has been pledged as further security for the Financing transaction. The operating partnerships for the underlying properties that collateralize these bonds, including Creekside, were controlled by SCA Successor, Inc., an affiliate of the Managing General Partner. On January 1, 1995, SCA Successor, Inc., the General Partner of these operating partnerships, withdrew and was replaced by SCA Successor II, Inc., an affiliate of the Managing General Partner, as sole General Partner. Eleven bonds, in the aggregate principal amount of $126,590,000, were refunded by the issuers of such bonds. As a result, a Series A Bond and a Series B Bond (whose aggregate principal amount equals that of the original bonds) were exchanged for each of the original bonds. The aggregate principal amount of the Series A Bonds and Series B Bonds is $67,700,000 and $58,890,000, respectively. Each Series B Bond is subordinate to the related issue of Series A Bonds. In addition, the maturity date for each bond has been extended to January 2030. The Series A Bonds bear interest at various fixed rates per annum, ranging from 7.05% to 7.40%, and are due and payable monthly. The Series A Bonds are subject to mandatory sinking fund redemptions commencing January 1, 2001 and continuing through maturity. As a result of the Financing and the sale of the Receipts in the Series A Bonds to unrelated investors, the Partnership no longer has any interest in the Series A Bonds. The specific Series B Bonds as of December 31, 1995 are as follows: SCA TAX EXEMPT FUND LIMITED PARTNERSHIP MORTGAGE REVENUE REFUNDING BONDS AS OF DECEMBER 31, 1995
B Bond B Bond B Bond B Bond Amortized Unrealized Fair Face Amount Cost Gain (Loss) Value (000's) (000's) (000's) (000's) --------------- --------------- --------------- --------------- Montclair $6,840 $1,691 $0 $1,691 Newport Village 4,175 2,973 287 3,260 Nicollet Ridge 12,415 6,075 475 6,550 Steeplechase Falls 5,300 5,851 267 6,118 Barkley Place 3,480 2,445 - 2,445 --------------- --------------- --------------- --------------- Total Series I 32,210 19,035 1,029 20,064 --------------- --------------- --------------- --------------- Mallard Cove I 1,670 942 80 1,022 Mallard Cove II 3,750 2,590 284 2,874 Whispering Lake 8,500 4,779 - 4,779 Gilman Meadows 2,875 2,530 176 2,706 Hamilton Chase 6,250 4,140 - 4,140 Meadows 3,635 3,716 103 3,819 --------------- --------------- --------------- --------------- Total Series II 26,680 18,697 643 19,340 --------------- --------------- --------------- --------------- TOTAL $58,890 $37,732 $1,672 $39,404 =============== =============== =============== ===============
The Series B Bonds, except for the Series B Bonds relating to Steeplechase Falls, Barkley Place and The Meadows, bear interest equal to the greater of (a) three percent (3%) per annum ("base interest") or (b) the amount of available cash flow not exceeding 16% per annum. To the extent annual interest paid on these Series B Bonds for the period is less than 16%, the difference between 16% and the greater of: a) actual interest collected, and b) base interest shall be payable on the earlier of the maturity date or the redemption date for the Series B Bonds. The Series B Bonds relating to Steeplechase Falls, Barkley Place and The Meadows bear interest equal to 16%. Principal amortization on the Series B Bonds is permitted but not required. However, in any event, Series B Bond principal will be required to be repaid or refinanced in a lump sum payment at maturity, January 2030. To the extent the operating partnerships have available cash flow, as defined, interest on the principal amount shall be due and payable monthly. For the year ended December 31, 1995 approximately $3.4 million of interest was received on the Series B Bonds. The Partnership deposited each of the Series A Bonds and Series B Bonds with the Trust which was created to hold these assets. A Certificate of Participation in the corpus and the income of the Trust was issued representing interests in the two series of bonds. The Partnership is the sole holder of the Certificate of Participation. The Series A Bonds were then deposited by the Trust with a custodian and the additional proceeds were raised through the sale of Receipts in the Series A Bonds to Receipt holders. As a result of the sale of Receipts in the Series A Bonds, the Partnership recognized a gain of approximately $623,000. Included in this amount is a portion of the net unrealized gain associated with the refunded bonds of approximately $2.3 million, net of selling expenses of approximately $1.7 million. The portion of the unrealized gain (loss) recognized for each bond was determined by allocating the net carrying amount at the time of sale to the Series A Bond and the Series B Bond based upon their relative fair values, using the concepts outlined in the Financial Accounting Standard Board's Emerging Issues Task Force Issue No. 88-11. The Receipts are credit enhanced by Financial Security Assurance Inc. ("FSA") and are rated AAA and Aaa by Standard and Poors and Moody's, respectively. The General Partners believe that the transaction costs, all of which were paid to third parties, incurred pursuant to the Financing were appropriate and consistent with transactions of similar size and characteristics. Through the Series A Bonds, held by the custodian, the Receipt holders have a fixed interest rate and preferred return position so that a guaranteed, preferred, fixed-rate tax-exempt return will be paid by the operating partnerships. The operating partnerships entered into an interest rate swap agreement whereby a portion of the fixed interest rate under the Series A Bonds was swapped for a floating tax-exempt interest rate through 2004. This mechanism is intended to allow the Partnership to realize the potential benefit of traditionally lower floating tax-exempt interest rates by lowering the effective cost of the Series A Bonds to the operating partnerships which, for 1995, enabled the operating partnerships to pay an additional $1.3 million in Series B Bond interest payments to the Partnership. Under this interest rate swap, the operating partnerships are obligated to pay a floating rate equivalent to the PSA Municipal Swap Index, an index of weekly tax-exempt variable rate issues. Also, an interest rate cap was purchased for approximately $4.2 million by the operating partnerships to limit their exposure (and ultimately the Partnership's) resulting from the floating tax-exempt interest rate obligation. In order to obtain credit enhancement and an investment grade rating of the Receipts, the cash stream from the eleven properties collateralizing the bonds was pledged to FSA. In addition, the Creekside bond has been pledged to FSA as further security. Any cash in excess of the amount needed to pay interest on the Receipts is then paid for the benefit of BAC Holders through the Notes, as defined below, and the Series B Bonds. The cash flow generated on assets acquired with the new proceeds, as discussed below, and any net proceeds received under the swap agreement also will be for the benefit of BAC Holders. These cash streams are not pledged to the Receipt holders. In return for the sale of Receipts in the Series A Bonds, the Trust, for the benefit of the Partnership, received $67.7 million. The proceeds from the sale of the Receipts, which have been allocated between Series I (60.1%) and Series II (39.9%) in accordance with the relative fair values of the refunded bonds as reflected in proceeds of the Receipts, have been invested in MLP III. MLP III invested the net proceeds from the sale of the Receipts, approximately $61 million (net of $6.7 million in proceeds used to finance transaction costs and additional Partnership reserves) in MLP II. MLP II, in turn, loaned the operating partnerships approximately $4.2 million (the "Load Loan Notes") to purchase an interest rate cap, as discussed above. The purpose of the MLP structure is to enable the BAC Holders, through the Partnership, to participate in substantially all of the investment income generated from the remaining net proceeds (approximately $56.8 million) on a primarily tax-exempt basis. In addition to the Partnership's 40% profits and annual distributions interest in MLP II (through MLP III), the Partnership receives substantially all of the operating partnerships' 60% profits and annual distribution interest in MLP II (through MLP I) as additional Series B Bond debt service payments. MLP I was allocated a 60% annual profits and annual distributions interest in MLP II in exchange for providing a variety of services, including, but not limited to, investment advisory services, asset management services and loan servicing. As previously discussed, the net Financing proceeds allocated to each Series were dependent upon the fair values of the refunded Bonds as reflected in the proceeds of the Receipts (and not face values as they may be different). The Financing proceeds generated by each Series, specifically, $40,675,000 or 60.1% from Series I bonds and $27,025,000 or 39.9% from Series II bonds, were independently determined through a review of the cash flows, market conditions and physical characteristics of the properties which collateralize such bonds. These percentages are being used to determine each Series' interest in the net Financing proceeds currently held by MLP II. Consequently, the proportion of fair values attributable to Series I and Series II, with respect to the refunded bonds and the net Financing proceeds, was identical immediately prior and subsequent to the Financing. Since the other Partnership assets were unaffected by the Financing, the proportion of Partnership assets attributed to Series I and Series II remains unchanged. In summary, neither the Financing or the refunding enhanced the benefits of one Series at the expense of the other. It should be noted that the pledging of the Creekside bond resulted in an increase to Series I's gross Financing proceeds above what they would have been without it (as discussed in greater detail below). The following table details the effect of the Refunding and Financing on the fair values of the Partnership assets.
Fair Value at Fair Value at Fair Value at February 14, 1995 February 14, 1995 February 14, 1995 Pre-Refunding and Post-Refunding and Post-Refunding and Pre-Financing Pre-Financing Post-Financing Bonds and Net Financing Proceeds (000's) (000's) (000's) - ------------------------------------------ ----------------- ----------------- ----------------- Series I Bonds Refunded: Barkley Place $7,795 $7,795 $2,445 The Montclair 10,191 10,191 1,691 Newport Village 9,511 9,511 3,260 Nicollet Ridge 14,475 14,475 6,550 Steeplechase Falls 18,767 18,767 6,118 ----------------- ----------------- ----------------- Subtotal Series I Bonds Refunded 60,739 60,739 20,064 Plus: Net Proceeds from Financing Transaction - - 36,668 ----------------- ----------------- ----------------- Subtotal of Series I Bonds Refunded and Net Financing Proceeds 60,739 60,739 56,732 Series I Bonds not Refunded 77,472 77,472 77,472 ----------------- ----------------- ----------------- Total Series I Bonds and Net Financing Proceeds (% of Total Series I and Series II) 138,211 65% 138,211 65% 134,204 65% ----------------- ----------------- ----------------- Series II Bonds Refunded: Mallard Cove I 1,822 1,822 1,022 Mallard Cove II 5,574 5,574 2,874 Gilman Meadows 6,706 6,706 2,706 The Meadows 6,819 6,819 3,819 Whispering Lake 13,679 13,679 4,779 Hamilton Chase 11,765 11,765 4,140 ----------------- ----------------- ----------------- Subtotal Series II Refunded 46,365 46,365 19,340 Plus: Net Proceeds from Financing Transaction - - 24,365 ----------------- ----------------- ----------------- Subtotal of Series II Bonds Refunded and Net Financing Proceeds 46,365 46,365 43,705 Series II Bonds not Refunded 29,266 29,266 29,266 ----------------- ----------------- ----------------- Total Series II Bonds and Net Financing Proceeds (% of Total Series I and Series II) 75,631 35% 75,631 35% 72,971 35% ----------------- ------ ----------------- ----- ----------------- ------ Total Series I and II Bonds and Net Financing Proceeds $213,842 100% $213,842 100% $207,175 100% ================= ====== ================= ===== ================= ====== On January 19, 1996, the Partnership, through MLP II, made its first acquisition of an additional mortgage revenue bond when $7,238,000 of the net Financing proceeds was invested in a bond collateralized by Riverset II, a multi-family property located in Memphis, Tennessee. The remaining net proceeds held by MLP II are currently invested in various short-term investments. Since each Series is part of one entity (the Partnership), either or both Series may be obligated to honor claims against the Partnership even if that claim resulted from the other Series. Prior to the Financing, except for short term inter-Series borrowing for working capital purposes, although not prohibited from doing so, the Series never extended credit or provided guarantees to one another. As part of the Financing, the affected operating partnerships entered into a cross-collateralization agreement among themselves. While the Managing General Partner believes that the likelihood of required performance under the cross-collateralization agreement is remote because of the significant current Series A Bond debt service coverages, this agreement may result in the affected operating partnerships being obligated under the Series A Bond obligations of the other affected operating partnerships included in the Financing due to shortfalls in their cash flows or required Series A Bond debt service coverage ratios. However, to the extent that there is performance under the cross-collateralization agreement, the Managing General Partner will make every effort to limit the performance of the operating partnerships within the affected Series (that is, have a Series I operating partnership perform for a Series I obligation and vice-versa). Nonetheless, if there is performance under the cross-collateralization agreement, the performing operating partnership will be repaid by the "non-performing" operating partnership with its first available cash flow. The cross-collateralization agreement did not conflict the Series, but rather benefitted both Series because it had the effect of increasing the amount of gross Financing proceeds and lowering the operating partnerships' Series A Bond interest obligations. As a result of their lower Series A Bond interest obligations, the operating partnerships utilize their additional cash flow to make larger debt service payments to the Partnership on the Series B Bonds. The pledging of the Creekside Bond, directly resulting from FSA's concern about cash flow weaknesses of the pledged Series I properties, resulted in an increase to Series I's gross Financing proceeds above what they would have been without it. Unpaid and unaccrued base interest receivable of approximately $15.5 million on the eleven original bonds, and the related parity working capital loans (see Notes 2 and 5) and unpaid and unaccrued interest thereon, aggregating approximately $4.8 million, were converted to Accrued Interest Notes and Working Capital Notes, respectively, in equivalent principal amounts. The Partnership contributed the Accrued Interest Notes and Working Capital Notes to MLP III, which recorded them at the Partnership's carrying values of $-0- and approximately $3.8 million, respectively, and contributed them, in turn, to MLP II, which recorded them at the same carrying values. The fair value of these Accrued Interest Notes and Working Capital Notes, as of February 14, 1995, approximated $12.2 million and $3.8 million, respectively. The fair value of these Notes has been estimated by the Managing General Partner (in the absence of an appraisal and an active market) by discounting the anticipated future cash streams of such Notes. As of December 31, 1995, the fair value of the Accrued Interest Notes and Working Capital Notes approximated $11.3 million and $3.5 million, respectively. As discussed above, MLP II loaned the operating partnerships approximately $4.2 million (the Load Loan Notes). In addition, MLP II paid approximately $755,000 in various financing costs on behalf of the operating partnerships included in the Financing. The Accrued Interest Notes, Working Capital Notes and Load Loan Notes, (collectively the "Notes") in the aggregate principal face amount of approximately $24.5 million, are due on demand, but in any case not later than January 2030. To the extent the operating partnerships have available cash flow, interest on the principal amount and scheduled principal payments shall be due and payable monthly. For financial reporting purposes, income is recognized by MLP II for the portion of principal payments collected on the Notes in excess of the carrying value. For the period ended December 31, 1995, approximately $2.2 million was received by MLP II for principal payments on the Notes, of which approximately $1.4 was recorded as income. Principal payments recognized as income by MLP II are allocated to the partners of MLP II based on their pro rata unreturned capital contributions as discussed in Note 1. The Notes bear interest at a compound annual rate equal to the Blended Annual Rate in effect for that calendar year as published by the Internal Revenue Service. For 1995, the Blended Annual Rate approximated 6.6% and generated approximately $1.3 million of taxable income to MLP II. Of this amount, approximately 40% or $510,000 was allocated to the Partnership. Considering that, for tax purposes, the working capital loans contributed to MLP II previously generated approximately $284,000 of taxable income to the Partnership per year, during 1995, as a result of the Financing and Refunding transactions, there was an incremental increase of approximately $226,000 to the taxable income allocated to the Partnership relating to the Notes. In addition, as a result of the net Financing proceeds being temporarily invested in taxable short term securities during 1995, the Partnership was allocated an additional $1.3 million of taxable income. The taxable income allocated to the Partnership should decrease over time as the Notes are amortized and as the net Financing proceeds are permanently invested in tax exempt bonds. The Notes and the Series B Bonds are subordinate in priority and right of payment to the Series A Bonds and are payable only to the extent of cash flow. Payments of principal and interest on the Notes and the Series B Bonds are prioritized as follows: (I) interest payments due to MLP II on the Notes, pro rata between the Notes; (ii) scheduled principal payments due to MLP II on the Notes, pro rata between the Notes; (iii) interest payments due to the Trust on the Series B Bonds; and (iv) the principal payment of the Series B Bonds due January 2030. For the year ended December 31, 1995, approximately $3.4 million was received for Series B Bond interest. As of December 31, 1995, while three of the 11 Series B Bonds (those that bear interest at 16%) were delinquent on the debt service obligations and, therefore, in default of their bond terms, all 11 of the Series B Bonds were on non-accrual status. Additional interest income that would have been recognized by the Partnership had these bonds not been placed on non-accrual status was approximately $802,000 for the year ended December 31, 1995. In accordance with the Partnership Agreement, the Managing General Partner continues to maintain records for each pool of investments originally acquired for Series I and Series II and to report the results of such investments to the Series I and Series II BAC Holders. The Trust and MLP III are included in the consolidated financial statements of the Partnership. Financial information for MLP II, which is accounted for under the equity method, is set forth below. MLP II follows the same accounting policies followed by the Partnership, and has incurred organizational costs of approximately $93,000, which have been deferred and are being amortized over five years. MLP II ACQUISITION LIMITED PARTNERSHIP BALANCE SHEET IN THOUSANDS
December 31, 1995 ----------------- ASSETS Cash and cash equivalents $348 Short-term investments 56,893 Interest receivable from short-term investments 343 Notes receivable from operating partnerships 7,250 Due from operating partnerships 755 Other assets 216 ----------------- TOTAL ASSETS $65,805 ================= LIABILITIES AND PARTNERS' CAPITAL Due to affiliates $120 Distributions payable 20 ----------------- TOTAL LIABILITIES 140 ----------------- Partners' Capital General partner - MLP I 366 Limited partners - MLP III and SCALPC 65,299 ----------------- TOTAL PARTNERS' CAPITAL 65,665 ----------------- COMMITMENTS AND CONTINGENCIES TOTAL LIABILITIES AND PARTNERS' CAPITAL $65,805 =================
MLP II ACQUISITION LIMITED PARTNERSHIP STATEMENT OF INCOME IN THOUSANDS
For the year ended December 31, 1995 ----------------- INTEREST INCOME $5,850 OPERATING EXPENSES 18 ----------------- NET INCOME $5,832 ================= NET INCOME ALLOCATED TO GENERAL PARTNER (MLP I) $2,681 ================= NET INCOME ALLOCATED TO LIMITED PARTNERS (MLP III and SCALPC) $3,151 =================
MLP II ACQUISITION LIMITED PARTNERSHIP STATEMENT OF CASH FLOWS IN THOUSANDS
For the year ended December 31, 1995 ----------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $5,832 Adjustments to reconcile net income to net cash provided by operating activities: Amortization 17 (Increase) in interest receivable on short-term investments (343) (Increase) in other assets (140) Increase in due to affiliates 120 ----------------- Net cash provided by operating activities 5,486 ----------------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of short-term investments (56,893) Issuance of load loans to operating partnerships (4,233) Principal payments on notes receivable from operating partnerships 782 ----------------- Net cash used in investing activities (60,344) ----------------- CASH FLOWS FROM FINANCING ACTIVITIES: Capital contribution from partners 61,001 Distribution to partners (5,795) ----------------- Net cash provided by financing activities 55,206 ----------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 348 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD - - ----------------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $348 ================= DISCLOSURE OF NON-CASH ACTIVITIES: Contribution of working capital loans and other assets from MLP III Investment Limited Partnership $4,647 ================= Transfer of other assets to operating partnerships $755 =================
MLP II ACQUISITION LIMITED PARTNERSHIP STATEMENT OF CHANGES IN PARTNERS' CAPITAL FOR THE PERIOD JANUARY 1, 1995 THROUGH DECEMBER 31, 1995 IN THOUSANDS
LIMITED PARTNERS GENERAL PARTNER (MLP III and SCALPC) (MLP I) TOTAL ------------------ ----------------- ----------------- Balance, January 1, 1995 $0 $0 $0 Net contributions 65,647 1 65,648 Net income 3,151 2,681 5,832 Distribution to partners (3,499) (2,316) (5,815) ------------------ ----------------- ----------------- Balance, December 31, 1995 $65,299 $366 $65,665 ================== ================= =================
NOTE 4 - INVESTMENT IN MORTGAGE REVENUE BONDS As of December 31, 1995, the Partnership continued to hold 23 mortgage revenue bonds, 14 for Series I and nine for Series II. Of the 14 bonds for Series I and nine bonds for Series II, ten and six, respectively, were unable to support their entire debt service obligation, after other sources of debt service other than property operations. As a result, the deeds to the properties collateralizing the mortgage revenue bonds were transferred by deed in lieu of foreclosure to "New Borrowers." These New Borrowers are partnerships whose general partner is SCA Successor, Inc., a corporation which is an affiliate of the Managing General Partner. In certain instances, instead of the formal transfer of the property to a New Borrower, SCA Successor, Inc. has been designated as the general partner of the original borrowing entity. On January 1, 1995, SCA Successor, Inc. withdrew as general partner of the operating partnerships included in the Financing and was replaced by SCA Successor II, Inc., an affiliate of the Managing General Partner, as sole general partner. For those properties owned by partnerships controlled by SCA Successor, Inc. and SCA Successor II, Inc., although the Partnership has not waived default, the Managing General Partner has no plans or intentions to accelerate the maturity of the mortgage loans. In addition, the Partnership is responsible for the post-transfer operating deficits of New Borrowers. No operating deficits were funded for the three years ended December 31, 1995, 1994 and 1993. General Mortgage Loan Terms The proceeds from the issuance of the bonds were used to make nonrecourse participating first mortgage loans on multi-family housing developments. The Partnership's rights under the mortgage revenue bonds are defined by and dependent on the terms and conditions of the mortgage loans. The mortgage loans are assigned to the Partnership to secure the payment of principal and interest on the mortgage revenue bonds. This assignment includes an assignment of a first mortgage on the property and an assignment of rents. Additional collateral was provided in the form of property level operating reserves funded from construction period cash flow and by operating deficit guarantees. Of the additional collateral originally provided, the property level operating reserves have been exhausted on all but three of the loans, and all but one of the operating deficit guarantees have expired. Of the 23 mortgage revenue bonds, the 12 bonds not refunded in the Financing transaction (and the 11 bonds discussed in Note 3 for the period prior to the Financing) provide for the payment of base interest and additional contingent interest. In addition, the bonds provide for the Partnership to hold the mortgage revenue bonds and the related mortgage loans for 14 years or more. Principal on the mortgage loans will not be amortized while held by the Partnership, but will be required to be repaid or refinanced in a lump sum payment at the end of the holding period or at such earlier time as the Partnership may require. The mortgage loans are non-assumable except with the consent of the Partnership. Prepayment is prohibited during the first seven years of the mortgage loan. Between years eight and eleven, the mortgage loan may be prepaid at the option of the borrower subject to a declining penalty. Prepayments after the twelfth year, subject to par value, are allowed without regard to whether or not the mortgaged property is sold or refinanced. The Partnership may also require prepayment of the mortgage loan upon the occurrence of an event which would cause significant risk that the interest on the mortgage revenue bonds would be subject to federal income taxation. The remaining 11 Series B Bonds are discussed in Note 3. The mortgage loans bear interest at base rates determined by arms length negotiations that reflect market conditions at the time the mortgage revenue bonds were purchased by the Partnership. Each loan provides for contingent interest in an amount equal to the difference between the stated base interest rate and 16%. During the construction period, each bond bore interest at base rates that were separately negotiated, and payment of any construction period contingent interest was deferred until the project was sold or refinanced. Contingent interest (other than contingent interest during the construction period) is payable during the year from 100% of the project cash flow until the Partnership's aggregate non-compounded interest rate equals the base interest rate plus 1.5% to 2.5% (first tier contingent interest), as the case may be, on each mortgage loan. Any remaining cash flow is split equally with the owner until the Partnership reaches its 16% per annum limit. To the extent that the aggregate of all interest payments, including contingent interest, for any year does not equal 16% per annum, the difference is deferred until the mortgaged property is sold or the mortgage loan is repaid. Sale or repayment proceeds remaining after the repayment of principal and other specified payments are paid 100% to the Partnership to the extent necessary for the Partnership to recover the base rate plus first tier contingent interest previously deferred; thereafter, 50% of any excess sale or repayment proceeds is paid to the Partnership until it reaches its 16% per annum limit. Accordingly, the ability of the Partnership to collect contingent interest on the mortgage revenue bonds is dependent upon the level of project cash flow and sale or repayment proceeds. Pursuant to the Refundings, the mortgage loan terms outlined above have been modified with respect to the Series B Bonds, as discussed in Note 3. With respect to the 23 original mortgage revenue bonds held by the Partnership prior to the Refundings, at December 31, 1994, there were eight bonds for Series I and six bonds for Series II placed on non-accrual status. Additional interest income that would have been recognized had these bonds not been placed on non-accrual status was approximately $3,241,000 for the year ended December 31, 1994 (approximately $2,150,000 and $1,091,000 for Series I and Series II, respectively). For 1993, there were no bonds on non-accrual status. On February 14, 1995, five of the Series I bonds and all of the Series II bonds placed on non-accrual status were refunded in connection with the Financing, as discussed in Note 3. During 1995, two additional bonds for Series I were place on non-accrual status. Thus as of December 31, 1995, of the 12 remaining original mortgage revenue bonds, there were five bonds for Series I on non-accrual status and no bonds for Series II on non-accrual status. Additional interest income that would have been recognized had these bonds not been placed on non-accrual status was approximately $2.2 million for the year ended December 31, 1995, all related to Series I. Descriptions of the 12 mortgage revenue bonds not refunded in the Financing at December 31, 1995 and 1994 are provided in the following table. Also included in the table are descriptions of the 11 refunded bonds included in the Financing at December 31, 1994. Refer to Note 3 for description of the 11 bonds included in the Financing and discussion of general mortgage loan terms amended by the Financing for the Series B Bonds. The Series B Bonds continue to be separately reported by Series since the Managing General Partner believes that the likelihood of performance under the cross-collateralization is remote.
December 31, 1994 December 31, 1995 and February 14, 1995 Series I ----------------------------------- ----------------------------------- Base Face Amortized Unrealized Fair Amortized Unrealized Fair Investment in Mortgage Interest Maturity Amount Cost Gain (Loss) Value Cost Gain (Loss) Value Revenue Bonds (Note 4) Rate Date (000's) (000's) (000's) (000's) (000's) (000's) (000's) - ------------------------- ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- Bonds not Refunded: Alban Place 7.875 Oct. 2008 $10,065 $10,065 ($336) $9,729 $10,065 ($336) $9,729 Northridge Park 7.500 June 2012 8,815 8,815 (1,625) 7,190 8,815 (1,625) 7,190 Lakeview Garden 7.750 Aug. 2007 9,003 6,988 - 6,988 6,988 - 6,988 Riverset 7.875 Nov. 1999 6,475 6,475 (778) 5,697 6,475 (778) 5,697 Villa Hialeah 7.875 Oct. 2009 10,250 10,250 (725) 9,525 10,250 (725) 9,525 Newport-on-Seven 8.125 Aug. 2008 10,125 7,898 - 7,898 7,898 - 7,898 North Pointe 7.875 Aug. 2006 25,185 12,739 1,170 13,909 12,739 1,170 13,909 Creekside Village 7.500 Nov. 2009 11,760 8,635 - 8,635 8,635 - 8,635 Willowgreen 8.000 Dec. 2010 9,275 7,901 - 7,901 7,901 - 7,901 ----------- ----------- ----------- ----------- ----------- ----------- Subtotal Bonds not Refunded 79,766 (2,294) 77,472 79,766 (2,294) 77,472 ----------- ----------- ----------- ----------- ----------- ----------- Bonds Refunded: Prior to Financing and Refunding (Note 4) Barkley 8.000 May 2011 8,830 7,795 - 7,795 Montclair 7.875 Dec 2015 15,340 10,191 - 10,191 Newport Village 7.875 Dec 2010 10,425 8,672 838 9,510 Nicollet 7.875 Dec 2010 20,340 13,425 1,050 14,475 Steeplechase Falls 7.875 Dec 2008 17,950 17,950 818 18,768 ----------- ----------- ----------- Subtotal Series I Bonds Refunded 58,033 2,706 60,739 ----------- ----------- ----------- Subsequent to Financing and Refunding (Note 3) 32,210 19,035 1,029 20,064 - - - ----------- ----------- ----------- ----------- ----------- ----------- Subtotal Series I Investment in Mortgage Revenue Bonds $98,801 ($1,265) $97,536 $137,799 $412 $138,211 ----------- ----------- ----------- ----------- ----------- -----------
December 31, 1994 December 31, 1995 and February 14, 1995 Series II ----------------------------------- ----------------------------------- Base Face Amortized Unrealized Fair Amortized Unrealized Fair Investment in Mortgage Interest Maturity Amount Cost Gain (Loss) Value Cost Gain (Loss) Value Revenue Bonds (Note 4) Rate Date (000's) (000's) (000's) (000's) (000's) (000's) (000's) - ------------------------- ---------- ---------- ---------- ----------- ----------- ----------- ----------- ----------- ----------- Bonds not Refunded: Riverset 7.875 Nov. 1999 $12,525 $12,525 (1,477) $11,048 $12,525 (1,477) $11,048 Southfork Village 7.875 Jan. 2009 10,375 10,375 492 10,867 10,375 492 10,867 Emerald Hills 7.750 Apr. 2008 6,725 6,725 626 7,351 6,725 626 7,351 ----------- ----------- ----------- ----------- ----------- ----------- Subtotal Bonds not Refunded 29,625 (359) 29,266 29,625 (359) 29,266 ----------- ----------- ----------- ----------- ----------- ----------- Bonds Refunded: Prior to Financing and Refunding (Note 4) Gilman Meadows 8.000 Apr 2007 6,875 6,270 436 6,706 Hamilton Chase 8.000 Aug 2006 13,875 11,765 - 11,765 Mallard Cove I 7.300 Jan 2006 2,470 1,680 142 1,822 Mallard Cove II 8.094 Jan 2006 6,450 5,023 551 5,574 Meadows 7.625 Jan 2008 6,635 6,635 184 6,819 Whisperng Lake 7.625 Dec 2007 17,400 13,679 - 13,679 ----------- ----------- ----------- Subtotal Series II Bonds Refunded 45,052 1,313 46,365 ----------- ----------- ----------- Subsequent to Financing and Refunding (Note 3) 26,680 18,697 643 19,340 - - - ----------- ----------- ----------- ----------- ----------- ----------- Subtotal Series II Investment in Mortgage Revenue Bonds 48,322 284 48,606 74,677 954 75,631 ----------- ----------- ----------- ----------- ----------- ----------- Total Investment in Mortgage Revenue Bonds $147,123 ($981) $146,142 $212,476 $1,366 $213,842 =========== =========== =========== =========== =========== ===========
NOTE 5 - INVESTMENT IN PARITY WORKING CAPITAL LOANS As of December 31, 1995, the Partnership held 11 parity working capital loans, eight for Series I and three for Series II. The remaining loans (four for Series I and six for Series II) were contributed to MLP II as discussed in Note 3. In general, the terms of the loans unaffected by the Financing are similar to the mortgage revenue bonds to which they relate. The carrying value of the Partnership's investment in parity working capital loans approximates fair value and reflects valuation allowances of $600,000 and $1,196,000 at December 31, 1995 and 1994, respectively. Of the 21 parity working capital loans, at December 31, 1994, there were seven parity working capital loans for Series I and six for Series II placed on non-accrual status. Additional interest income that would have been recognized had these parity working capital loans not been placed on non-accrual status was approximately $71,000 for the year ended December 31, 1994 (approximately $44,000 and $27,000 for Series I and Series II, respectively). For 1993, there were no parity working capital loans on non-accrual status. On February 14, 1995, four of the Series I loans and all of the Series II loans placed on non-accrual status were contributed to MLP II in connection with the Financing discussed in Note 3. During 1995, two additional loans for Series I were place on non-accrual status. Thus as of December 31, 1995, there were five loans for Series I on non-accrual status and none for Series II on non-accrual status. Additional interest income that would have been recognized had these loans not been placed on non-accrual status was approximately $68,000 for the year ended December 31, 1995, all related to Series I. NOTE 6 - EQUITY IN PROPERTY INCOME (LOSS) As more fully described in Note 2, prior to the adoption of FAS 115 effective January 1, 1994, the Partnership accounted for certain investments in mortgage revenue bonds as investments in real estate partnerships under the equity method of accounting. This accounting treatment was for financial reporting purposes only and did not affect the income reported for federal income tax purposes, the amount of distributions to investors or the Managing General Partner's intentions related to other matters including ongoing legal actions, if any. Properties classified as investments in real estate partnerships typically had been transferred by deed in lieu of foreclosure to New Borrowers. In certain instances, instead of the formal transfer of the property to a New Borrower, SCA Successor, Inc. has been designated as the general partner of the original borrowing entity. The Managing General Partner has taken the position that these transactions do not affect the tax-exempt nature of the income received by the Partnership on any of the loans, nor does it change the character of the Partnership's income for tax purposes. This position was consistent with industry practice, and the Managing General Partner was not aware of any contrary rulings. As with all federal income tax matters, the Internal Revenue Service may choose to review and rule on the subject at a later date. Summarized Financial Information Combined unaudited results of operations for the year ended December 31, 1993 are presented. The combined results of operations for 1993 includes nine properties for Series I and five properties for Series II. Combined Results of Operations For the year ended December 31, 1993 (in 000's) (unaudited) Series I Series II Total ------------ ------------ -------------- Revenues $17,314 $5,153 $22,467 Operating expenses 13,197 4,085 17,282 ------------ ------------ -------------- Net Income $4,117 $1,068 $5,185 ============ ============ ============== NOTE 7 - RELATED PARTY TRANSACTIONS The Managing General Partner and its affiliates are entitled to reimbursement for all costs and expenses paid by them on behalf of the Partnership for administrative services necessary for the prudent operation of the Partnership. The Partnership does not employ any personnel. All staff required by the Partnership are employees of the Managing General Partner or its affiliates which receive direct reimbursement from the Partnership for all costs related to such personnel, including payroll taxes, workers' compensation and health insurance and other fringe benefits, as summarized in the table below. Amounts so charged to the Partnership attributed to Series I and Series II represent actual amounts expended or allocations based on time spent, usage, original net offering proceeds or other reasonable measures.
For the year For the year For the year ended ended ended December 31, December 31, December 31, 1995 1994 1993 (000's) (000's) (000's) --------------- --------------- --------------- Charged to Series I: Salaries of noncontrolling persons & related expenses $458 $439 $327 Other administrative expenses 95 109 92 --------------- --------------- --------------- Expenses reimbursed $553 $548 $419 =============== =============== =============== Charged to Series II: Salaries of noncontrolling persons & related expenses $220 $212 $157 Other administrative expenses 46 52 44 --------------- --------------- --------------- Expenses reimbursed $266 $264 $201 =============== =============== =============== Total: Salaries of noncontrolling persons & related expenses $678 $651 $484 Other administrative expenses 141 161 136 --------------- --------------- --------------- Expenses reimbursed $819 $812 $620 =============== =============== ===============
Included in Due to Affiliates in the accompanying balance sheets are amounts payable to the Managing General Partner and its affiliates related to such costs. At December 31, 1995, the amounts due approximated $7,000 while at December 31, 1994, they were approximately $95,000. Affiliates of the Managing General Partner receive fees for mortgage servicing from the limited partnerships owning the mortgaged properties. The fees paid to affiliates by all borrowing partnerships approximated $1,972,000 for the years ended December 31, 1995, 1994 and 1993 irrespective of any ownership changes in the underlying partnership. Also, an affiliate of the Managing General Partner has been engaged as MLP II's exclusive project acquisition and servicing agent. The affiliate will receive as compensation project selection and acquisition fees (one percent of the gross acquisition proceeds) and annual mortgage servicing fees to the extent the net proceeds raised by the Financing, as discussed in Note 3, are permanently invested. As of December 31, 1995, there were no fees paid by MLP II to the affiliate for acquisitions or mortgage servicing. As a result of their general partnership interests, the General Partners are entitled to an allocation of the Partnership's profits, losses and cash distributions as specified in the Partnership Agreement. As of December 31, 1995, the Partnership declared its cash distributions for the six months then ended to the General Partners of $72,891. These amounts represent the General Partners' portion of the $7,969,931 ($5,296,587 for Series I and $2,673,344 for Series II) semi-annual distributions declared at December 31, 1995. The operating expenses for various properties accounted for as investments in mortgage revenue bonds include property management fees paid to affiliates of the Managing General Partner. During the years ended December 31, 1995, 1994 and 1993, these fees approximated $950,000 for 11 properties, $707,000 for 10 properties and $539,000 for 8 properties, respectively. In addition, 177061 Canada Ltd. (formerly Shelter Corporation of Canada Limited Partnership), a general partner of the Associate General Partner, is contractually obligated to the nonaffiliated borrowers of North Pointe and Whispering Lake to fund operating deficits under guarantees to the Partnership. The unaccrued and unpaid balances due under the limited operating deficit guarantees, including interest as of December 31, 1995, totaled $176,000 and $245,000 for North Pointe and Whispering Lake, respectively. Scheduled payments totaling $116,000 and $119,000 were received on the North Pointe obligation and recorded as income during 1995 and 1994, respectively. Under the Whispering Lake obligation, $165,000 and $168,000 were received and recorded as income during 1995 and 1994, respectively. NOTE 8 - LITIGATION In response to the Refunding and Financing, a class action complaint entitled Gerald J. Osher, et al. v. SCA Realty, Inc., et al. was filed on May 18, 1995 in the Superior Court for the State of California, for the County of Los Angeles. The action alleged, inter alia, that by consummating the Financing, the Defendants - the Managing General Partner, the Associate General Partner and Shelter Corporation of Canada Limited, (the "Defendants") - breached the Partnership Agreement and their fiduciary duties. On July 21, 1995, the parties to the action stipulated to its dismissal without prejudice. The parties also stipulated that plaintiff could refile the action in the Superior Court for the District of Columbia. On July 24,1995, the action was refiled in the District of Columbia Superior Court, Civil Division, Washington, D.C. The complaint is entitled "Class Action Complaint for Breach of Partnership Agreement and Breach of Fiduciary Duties and Alternatively, Derivative Action for Breach of Fiduciary Duties" (the "Complaint"). It is brought by plaintiff Dr. Gerald J. Osher, individually and on behalf of all others similarly situated, and by the Partnership, derivatively through the plaintiff (jointly, the "Plaintiffs"), and names as defendants each of the Defendants. In the Complaint, Plaintiffs allege that the Financing was entered into without proper authority under the Partnership Agreement and without obtaining the consent of the BAC Holders by a majority vote, allegedly in violation of various provisions of the Partnership Agreement. In addition, Plaintiffs allege that Defendants failed to distribute to the BAC Holders the proceeds of the Financing, as allegedly required by the Partnership Agreement, and also failed to inform the BAC Holders of their purported right to the proceeds of the Financing in recent public filings and in correspondence with the BAC Holders. Based on these allegations, Plaintiffs assert purported claims for breach of the Partnership Agreement and of the Defendants' purported fiduciary duties and seeks, inter alia, an accounting of the Financing, the immediate distribution of the Financing proceeds, compensatory and punitive damages, attorneys' fees, and pre- and post-judgement interest. In addition, based on the allegations regarding the Defendants' purported breach of their fiduciary duties by entering into the Financing, the Complaint asserts a derivative claim seeking inter alia, an accounting of the Financing, compensatory and punitive damages, attorneys' fees, and pre- and post-judgement interest. The General Partners believe that the allegations are without merit. On September 22, 1995, Defendants removed the action to the United States District Court for the District of Columbia (the "Court"). In November, 1995, the parties agreed to a settlement of the action in consideration of certain modifications to the terms of and disclosure with respect to the Transaction (disclosed in the Prospectus/Consent Solicitation filed with the SEC on March 28, 1996), as set forth in a stipulation of settlement filed with the Court. The settlement is conditioned on, among other things, the consummation of the Transaction. On March 13, 1996, the Court held a status conference in the action. At that time, all conditions necessary for the settlement to proceed have not yet occurred and, for reasons of case administration, the Court dismissed the action without prejudice and with leave to the parties to reinstate the action on or before May 1, 1996 in order to proceed with the settlement or the litigation. NOTE 9- SUPPLEMENTAL INFORMATION FOR SERIES I AND SERIES II As discussed in Note 1, the Series I and Series II BAC Holders are effectively limited partners in the Partnership, even though they have invested in two separate pools of investments. The Managing General Partner maintains records for each such pool of investments for each Series of BAC Holders. Information for each of Series I and Series II for each of the two years in the period ended December 31, 1995 is set forth below. Information for 1993 has not been presented because it is not comparable following the accounting change for investments in mortgage revenue bonds discussed in Note 2. SCA TAX EXEMPT FUND LIMITED PARTNERSHIP BALANCE SHEETS IN THOUSANDS, EXCEPT BAC DATA
Series I Series I Series II Series II December 31, December 31, December 31, December 31, 1995 1994 1995 1994 ------------ ------------ ------------ ------------ ASSETS Cash and cash equivalents $6,169 $5,240 $3,641 $2,615 Interest receivable 235 571 199 199 Investment in mortgage revenue bonds 97,536 138,211 48,606 75,631 Investment in parity working capital loans, net of valuation allowances 2,075 4,029 815 2,660 Investment in MLP II 38,966 - 26,333 - Other assets 160 622 80 504 ------------ ------------ ------------ ------------ TOTAL ASSETS $145,141 $148,673 $79,674 $81,609 ============ ============ ============ ============ LIABILITIES AND PARTNERS' CAPITAL Accounts payable and accrued expenses $365 $663 $179 $447 Distributions payable 5,301 5,044 2,676 2,669 Due to affiliates 5 64 4 31 ------------ ------------ ------------ ------------ TOTAL LIABILITIES 5,671 5,771 2,859 3,147 ------------ ------------ ------------ ------------ Minority Interest 2 - 1 - ------------ ------------ ------------ ------------ Partners' Capital Unrealized gain (loss) on mortgage revenue bonds available for sale (1,265) 412 284 954 General Partners (378) (372) (99) (92) Limited Partners (beneficial assignee certificates- issued and outstanding 200,000 certificates for Series I and 96,256 certificates for Series II) 141,111 142,862 76,629 77,600 ------------ ------------ ------------ ------------ TOTAL PARTNERS' CAPITAL 139,468 142,902 76,814 78,462 ------------ ------------ ------------ ------------ COMMITMENTS AND CONTINGENCIES TOTAL LIABILITIES AND PARTNERS' CAPITAL $145,141 $148,673 $79,674 $81,609 ============ ============ ============ ============
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP STATEMENTS OF INCOME IN THOUSANDS, EXCEPT PER BAC DATA
Series I Series I Series II Series II For the year For the year For the year For the year ended ended ended ended December 31, December 31, December 31, December 31, 1995 1994 1995 1994 ------------ ------------ ------------ ------------ INCOME Interest on mortgage revenue bonds and parity working capital loans $8,992 $11,812 $4,582 $5,568 Net gain (loss) on sale of A bond receipts 641 - (18) - Interest on short-term investments 227 134 139 76 Equity in MLP II 1,842 - 1,308 - ------------ ------------ ------------ ------------ TOTAL INCOME 11,702 11,946 6,011 5,644 ------------ ------------ ------------ ------------ EXPENSES Operating expenses 2,854 1,489 1,637 876 Other-than-temporary impairments related to investment in mortgage revenue bonds - 2,014 - - Minority interest 11 - 7 - ------------ ------------ ------------ ------------ TOTAL EXPENSES 2,865 3,503 1,644 876 ------------ ------------ ------------ ------------ INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 8,837 8,443 4,367 4,768 CUMULATIVE EFFECT ON PRIOR YEARS (to January 1, 1994) OF CHANGE IN ACCOUNTING FOR MORTGAGE REVENUE BONDS - (9,576) - (2,305) ------------ ------------ ------------ ------------ NET INCOME (LOSS) $8,837 ($1,133) $4,367 $2,463 ============ ============ ============ ============ NET INCOME (LOSS) ALLOCATED TO GENERAL PARTNERS $88 ($11) $44 $25 ============ ============ ============ ============ NET INCOME(LOSS) ALLOCATED TO LIMITED PARTNERS $8,749 ($1,122) $4,323 $2,438 ============ ============ ============ ============ EARNINGS PER BAC: Income before cumulative effect of accounting change $43.74 $41.79 $44.91 $49.04 Cumulative effect on prior years (to January 1, 1994) of change in accounting for mortgage revenue bonds - (47.40) - (23.71) ------------ ------------ ------------ ------------ NET INCOME (LOSS) PER BAC $43.74 ($5.61) $44.91 $25.33 ============ ============ ============ ============
EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF THE PARTNERSHIP AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO BOTH THOSE FINANCIAL STATEMENTS AND THE FOOTNOTES PROVIDED WITHIN THIS SCHEDULE. YEAR DEC-31-1995 DEC-31-1995 9,810,000 0 434,000 0 0 10,244,000 0 0 224,815,000 8,530,000 0 0 0 0 216,282,000 224,815,000 0 17,713,000 0 4,509,000 0 0 0 13,204,000 0 13,204,000 0 0 0 13,204,000 88.65 0 SERIES I SERIES II ---------- ----------- CASH 6,169,000 3,641,000 RECEIVABLES 235,000 199,000 CURRENT ASSETS 6,404,000 3,840,000 TOTAL ASSETS 145,141,000 79,674,000 CURRENT LIABILITIES 5,671,000 2,859,000 OTHER S-E 139,468,000 76,814,000 TOTAL LIABILITIES & EQUITY 145,141,000 79,674,000 TOTAL REVENUE 11,702,000 6,011,000 TOTAL COSTS 2,865,000 1,644,000 INCOME- PRETAX 8,837,000 4,367,000 INCOME-CONTINUING 8,837,000 4,367,000 NET INCOME 8,837,000 4,367,000 EPS 43.74 44.91
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