FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 0-14314
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 47-0695511
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
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
<PAGE> -i-
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, 1996 Dec. 31, 1995
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which
approximates market value (Note 4) $ 1,308,275 $ 1,103,805
Investment in tax-exempt mortgage bonds, at estimated fair value (Note 5) 66,026,000 66,026,000
Interest receivable 485,762 556,466
Other assets 20,566 12,645
-------------- --------------
$ 67,840,603 $ 67,698,916
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 6) $ 105,607 $ 145,520
Distribution payable (Note 3) 453,597 453,597
-------------- --------------
559,204 599,117
-------------- --------------
Partners' Capital
General Partner 8,258 6,443
Beneficial Unit Certificate Holders
($6.74 per BUC in 1996 and $6.72 in 1995) 67,273,141 67,093,356
-------------- --------------
67,281,399 67,099,799
-------------- --------------
$ 67,840,603 $ 67,698,916
============== ==============
</TABLE>
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the For the Nine For the Nine
Quarter Ended Quarter Ended Months Ended Months Ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Income
Mortgage bond investment income $ 1,537,198 $ 1,543,015 $ 4,626,797 $ 4,657,915
Interest income on temporary cash investments 12,006 10,776 34,284 30,569
Contingent interest income (Note 5) 66,989 35,950 121,681 123,403
-------------- -------------- -------------- --------------
1,616,193 1,589,741 4,782,762 4,811,887
Expenses
General and administrative expenses (Note 6) 160,877 155,845 489,293 429,682
-------------- -------------- -------------- --------------
Net income $ 1,455,316 $ 1,433,896 $ 4,293,469 $ 4,382,205
============== ============== ============== ==============
Net income allocated to:
General Partner $ 30,630 $ 22,967 $ 72,137 $ 73,439
BUC Holders 1,424,686 1,410,929 4,221,332 4,308,766
-------------- -------------- -------------- --------------
$ 1,455,316 $ 1,433,896 $ 4,293,469 $ 4,382,205
============== ============== ============== ==============
Net income per BUC $ .14 $ .14 $ .42 $ .43
============== ============== ============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> -1-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Beneficial Unit
General Certificate
Partner Holders Total
-------------- --------------- --------------
<S> <C> <C> <C>
Partners' Capital (excluding net unrealized holding losses)
Balance at December 31, 1995 $ 6,443 $ 77,693,356 $ 77,699,799
Net income 72,137 4,221,332 4,293,469
Cash distributions paid or accrued (Note 3)
Income (70,322) (4,041,547) (4,111,869)
-------------- --------------- --------------
8,258 77,873,141 77,881,399
-------------- --------------- --------------
Net unrealized holding losses
Balance at December 31, 1995 and September 30, 1996 - (10,600,000) (10,600,000)
-------------- --------------- --------------
Balance at September 30, 1996 $ 8,258 $ 67,273,141 $ 67,281,399
============== =============== ==============
</TABLE>
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 4,293,469 $ 4,382,205
Adjustments to reconcile net income to net cash
from operating activities
Decrease (increase) in interest receivable 70,704 (38,555)
Increase in other assets (7,921) (5,063)
Decrease in accounts payable (39,913) (7,668)
-------------- --------------
Net cash provided by operating activities 4,316,339 4,330,919
Cash flow used in financing activity
Distributions paid (4,111,869) (4,112,287)
-------------- --------------
Net increase in cash and temporary cash investments 204,470 218,632
Cash and temporary cash investments at beginning of period 1,103,805 840,454
-------------- --------------
Cash and temporary cash investments at end of period $ 1,308,275 $ 1,059,086
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> -2-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. ORGANIZATION
America First Tax Exempt Mortgage Fund Limited Partnership (the Partnership)
was formed on November 11, 1985, under the Delaware Revised Uniform Limited
Partnership Act for the purpose of acquiring a portfolio of federally
tax-exempt mortgage bonds collateralized by income-producing real estate
consisting of multifamily residential apartments. The Partnership will
terminate on December 31, 2015, unless terminated earlier under the provisions
of the Partnership Agreement. The General Partner of the Partnership is
America First Capital Associates Limited Partnership Two (AFCA 2).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A)Financial Statement Presentation
The financial statements of the Partnership are prepared without audit on
the accrual basis of accounting in accordance with generally accepted
accounting principles. The financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1995. In the opinion of management, all normal and recurring
adjustments necessary to present fairly the financial position at
September 30, 1996, and results of operations for all periods presented
have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles 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.
B)Investment in Tax-Exempt Mortgage Bonds
The Partnership adopted Statement of Financial Accounting Standards No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (FAS
115) as of January 1, 1994. FAS 115 requires that investment securities
be classified as held-to-maturity, available-for-sale, or trading. Under
FAS 115, investments classified as available-for-sale are reported at fair
value with any unrealized gains or losses excluded from earnings and
reflected as a separate component of partners' capital. Subsequent
increases and decreases in the net unrealized gain/loss on
available-for-sale securities are reflected as adjustments to the carrying
value of the portfolio and adjustments to the component of partners'
capital. The Partnership does not have investment securities classified
as held-to-maturity or trading. Unrealized losses of $10,600,000 on
tax-exempt mortgage bonds previously recognized through income were
reclassified to a separate component of partners' capital with the
adoption of FAS 115. There was no additional impact resulting from
adoption since the bonds had already been reduced to estimated fair
value. The carrying value of tax-exempt mortgage bonds is periodically
reviewed and adjusted when there are significant changes in the estimated
net realizable value of the underlying collateral.
Accrual of mortgage bond investment income is excluded from income, when,
in the opinion of management, collection of related interest is doubtful.
This interest is recognized as income when it is received.
C)Income Taxes
No provision has been made for income taxes since the Beneficial Unit
Certificate (BUC) Holders are required to report their share of the
Partnership's taxable income for federal and state income tax purposes.
D)Temporary Cash Investments
Temporary cash investments are invested in federally tax-exempt securities
purchased with an original maturity of three months or less.
E)Net Income per BUC
Net income per BUC has been calculated based on the number of BUCs
outstanding (9,979,128) for all periods presented.
<PAGE> -3-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
3. PARTNERSHIP INCOME, EXPENSES AND CASH DISTRIBUTIONS
The Partnership Agreement contains provisions for the distribution of Net
Interest Income and Net Residual Proceeds and for the allocation of income and
expenses for tax purposes among AFCA 2 and BUC Holders.
Cash distributions included in the financial statements represent the actual
cash distributions made during each period and the cash distributions accrued
at the end of each period.
4. PARTNERSHIP RESERVE ACCOUNT
The Partnership maintains a reserve account which totaled $1,255,300 at
September 30, 1996. The reserve account was established to maintain working
capital for the Partnership and is available to supplement distributions to
BUC Holders or for any other contingencies related to the ownership of the
mortgage bonds and the operation of the Partnership.
5. INVESTMENT IN TAX-EXEMPT MORTGAGE BONDS
Descriptions of the tax-exempt mortgage bonds owned by the Partnership at
September 30, 1996, are as follows:
<TABLE>
Base
Number Maturity Interest Carrying
Property Name Location of Units Date Rate1 Amount
- ------------------------ ----------------- -------- -------- --------- --------------
<S> <C> <C> <C> <C> <C>
Performing:
Shoals Crossing Atlanta, GA 176 12/01/09 8.5% $ 4,500,000
Arama Apartments Miami, FL 293 07/01/10 8.5% 12,100,000
--------------
16,600,000
--------------
Nonperforming:2
Woodbridge Apts. of
Bloomington III Bloomington, IN 280 12/01/15 8.5% 12,600,000
Ashley Pointe at
Eagle Crest Evansville, IN 150 12/01/15 8.5% 6,700,000
Woodbridge Apts. of
Louisville II Louisville, KY 190 12/01/15 8.5% 8,976,000
Northwoods Lake
Apartments Duluth, GA 492 12/01/06 8.5% 25,250,000
Ashley Square Des Moines, IA 144 12/01/09 8.5% 6,500,000
--------------
60,026,000
--------------
76,626,000
Unrealized holding losses (10,600,000)
--------------
Balance at September 30, 1996 (at estimated fair value) $ 66,026,000
==============
</TABLE>
1 In addition to the base interest rate shown, the bonds bear additional
contingent interest as defined in each revenue note which, when combined with
the base interest, is limited to a cumulative, noncompounded amount not greater
than 16% per annum. The Partnership received additional contingent interest
from Arama Apartments of $121,681 during 1996 ($66,989 for the quarter ended
September 30, 1996).
2 Nonperforming bonds are bonds which are not fully current as to interest
payments. The amount of foregone interest on nonperforming bonds for 1996 was
$302,487 ($106,380 for the quarter ended September 30, 1996).
<PAGE> -4-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
6. TRANSACTIONS WITH RELATED PARTIES
Substantially all of the Partnership's general and administrative expenses are
paid by AFCA 2 or an affiliate and are reimbursed by the Partnership. The
amount of such expenses reimbursed to AFCA 2 during 1996 was $520,886
($132,468 for the quarter ended September 30, 1996). The reimbursed expenses
are presented on a cash basis and do not reflect accruals made at quarter end.
AFCA 2 received from property owners administrative fees of $40,838 during
1996 ($13,612 for the quarter ended September 30, 1996). Since these fees are
not Partnership expenses, they have not been reflected in the accompanying
financial statements.
AFCA 2 is entitled to an administrative fee from the Partnership in the event
the Partnership becomes the equity owner of a property by reason of
foreclosure. AFCA 2 was entitled to receive approximately $359,000 in
administrative fees from the Partnership for the year ended December 31,
1989. The payment of these fees, which has been deferred by AFCA 2, is
contingent upon, and will be paid only out of future profits realized by the
Partnership from the disposition of any Partnership assets. This amount will
be recorded as an expense by the Partnership when it is probable that these
fees will be paid.
An affiliate of AFCA 2 has been retained to provide property management
services for Ashley Square, Northwoods Lake Apartments and Ashley Pointe at
Eagle Crest (beginning in July 1996). The fees for services provided
represent the lower of (i) costs incurred in providing management of the
property, or (ii) customary fees for such services determined on a competitive
basis, and amounted to $179,853 in 1996 ($66,980 for the quarter ended
September 30, 1996).
7. RESTATEMENT
The tax-exempt mortgage bonds were previously accounted for as loans.
However, the bonds are considered debt securities under FAS 115, which was
effective January 1, 1994. Accordingly, 1995 financial statements have been
restated to properly present the bonds as debt securities. The only effect of
the restatement was to segregate the $10,600,000 of unrealized losses as a
separate component of partners' capital. There was no effect on the carrying
value of the bonds, total assets, total partners' capital or net income.
<PAGE> -5-
Item 2.
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
The Partnership originally acquired 14 tax-exempt mortgage bonds, the proceeds
of which were used to provide construction and/or permanent financing for 14
multifamily housing properties. On June 1, 1993, the Partnership transferred
to America First REIT, Inc. (REIT) seven real estate properties acquired in
foreclosure. At September 30, 1996, the Partnership continued to hold seven
tax-exempt mortgage bonds with a carrying value, at estimated fair value, of
$66,026,000.
The following table shows the various occupancy levels of the properties
financed by the Partnership at September 30, 1996.
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------------- ------------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Woodbridge Apts. of Bloomington III Bloomington, IN 280 276 99%
Ashley Pointe at Eagle Crest Evansville, IN 150 147 98%
Woodbridge Apts. of Louisville II Louisville, KY 190 183 96%
Northwoods Lake Apartments Duluth, GA 492 443 90%
Shoals Crossing Atlanta, GA 176 169 96%
Ashley Square Des Moines, IA 144 144 100%
Arama Apartments Miami, FL 293 286 98%
--------- ---------- -----------
1,725 1,648 96%
========= ========== ===========
</TABLE>
The principal amounts of the tax-exempt mortgage bonds do not amortize over
their terms. The tax-exempt mortgage bonds provide for the payment of base
interest at a fixed rate. In addition, the Partnership may earn contingent
interest based on a participation in the net cash flow and net sale or
refinancing proceeds from the real estate collateralizing the tax-exempt
mortgage bonds. The interest payments received on the tax-exempt mortgage
bonds and interest on temporary cash investments represent the principal
sources of the Partnership's income and distributable cash. The Partnership
may draw on the reserve to pay operating expenses or to supplement cash
distributions to Beneficial Unit Certificate (BUC) Holders.
During the nine months ended September 30, 1996, a net amount of undistributed
income totaling $181,600 was placed in reserves (a net amount of $78,286 for
the quarter ended September 30, 1996). The total amount held in reserves at
September 30, 1996, was $1,255,300. Future distributions to BUC Holders will
depend upon the amount of base and contingent interest received on the
mortgage bonds, the size of the reserves established by the Partnership and
the extent to which withdrawals are made from reserves.
The Partnership believes that cash provided by operating activities and, if
necessary, withdrawals from the Partnership's reserves will be adequate to
meet its short-term and long-term liquidity requirements, including the
payments of distributions to BUC Holders. Under the terms of the Partnership
Agreement, the Partnership has the authority to enter into short- and
long-term debt financing arrangements; however, the Partnership currently does
not anticipate entering into such arrangements. The Partnership is not
authorized to issue additional BUCs to meet short-term and long-term liquidity
requirements.
<PAGE> -6-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
DISTRIBUTIONS
Cash distributions paid or accrued per BUC were as follows:
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
<S> <C> <C>
Regular monthly distributions
Income $ .4050 $ .4050
============== ==============
Distributions
Paid out of current and prior undistributed cash flow $ .4050 $ .4050
============== ==============
</TABLE>
Asset Quality
It is the policy of the Partnership to make a periodic review of the real
estate collateralizing the Partnership's mortgage bonds in order to adjust,
when necessary, the carrying value of the mortgage bonds. Adjustments are
made to the carrying value when there are significant changes in the estimated
net realizable value of the underlying collateral. Internal property
valuations and reviews performed during the first nine months of 1996
indicated that the mortgage bonds recorded on the balance sheet at September
30, 1996, required no adjustments to their current carrying amounts.
At September 30, 1996, five of the Partnership's seven tax-exempt mortgage
bonds were classified as nonperforming. The bonds will continue to be
classified as nonperforming until such time that the properties
collateralizing the mortgage bonds generate sufficient net cash flow to bring
the mortgage bonds fully current as to interest payments. The Partnership has
a limited amount of influence in controlling the operations of the properties.
The overall status of the Partnership's mortgage bonds has generally remained
constant since June 30, 1996.
<PAGE> -7-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS
The tables below compare the results of operations for each period shown.
<TABLE>
<CAPTION>
For the For the Increase
Quarter Ended Quarter Ended (Decrease)
Sept. 30, 1996 Sept. 30, 1995 From 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Mortgage bond investment income $ 1,537,198 $ 1,543,015 $ (5,817)
Interest income on temporary cash investments 12,006 10,776 1,230
Contingent interest income 66,989 35,950 31,039
-------------- -------------- --------------
1,616,193 1,589,741 26,452
General and administrative expenses 160,877 155,845 5,032
-------------- -------------- --------------
Net income $ 1,455,316 $ 1,433,896 $ 21,420
============== ============== ==============
<CAPTION>
For the Nine For the Nine Increase
Months Ended Months Ended (Decrease)
Sept. 30, 1996 Sept. 30, 1995 From 1995
-------------- -------------- --------------
<S> <C> <C> <C>
Mortgage bond investment income $ 4,626,797 $ 4,657,915 $ (31,118)
Interest income on temporary cash investments 34,284 30,569 3,715
Contingent interest income 121,681 123,403 (1,722)
-------------- -------------- --------------
4,782,762 4,811,887 (29,125)
General and administrative expenses 489,293 429,682 59,611
-------------- -------------- --------------
Net income $ 4,293,469 $ 4,382,205 $ (88,736)
============== ============== ==============
</TABLE>
Mortgage bond investment income for the quarter ended September 30, 1996, is
comparable to the same period in 1995. The decrease in mortgage bond
investment income for the nine months ended September 30, 1996, compared to
the same period in 1995, is attributable to decreased cash flow from
properties collateralizing the nonperforming tax-exempt mortgage bonds. The
decreased cash flow is due primarily to increases in: (i) property
improvements; (ii) repairs and maintenance expenses; (iii) utility expenses;
(iv) property taxes; and (v) administrative expenses during the quarter ended
June 30, 1996.
The increase in contingent interest income for the quarter ended
September 30, 1996, compared to the same period in 1995, is primarily due to
an increase in earnings generated by Arama Apartments for the respective
contingent interest period in 1996 compared to the same period in 1995.
Contingent interest income for the nine months ended September 30, 1996, is
comparable to the same period in 1995 as the earnings generated by Arama
Apartments for the respective contingent interest period in 1996 were
comparable to the same period in 1995.
The increase in interest income on temporary cash investments for the quarter
and nine months ended September 30, 1996, compared to the same periods in
1995, is attributable to an increase in the amount of undistributed income
held in reserves and to slightly higher interest rates.
General and administrative expenses for the quarter ended September 30, 1996,
were relatively constant with the same period in 1995. However, general and
administrative expenses for the nine months ended September 30, 1996,
increased compared to the same period in 1995, primarily as a result of higher
salaries and related expenses for the six month period ended June 30, 1996,
compared to the same period in 1995.
<PAGE> -8-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Agreement of Limited Partnership dated November 11, 1985
(incorporated herein by reference to Form 10-K dated
December 31, 1986 filed pursuant to Section 13 or 15(d) of
the Securities Act of 1934 by America First Tax Exempt
Mortgage Fund Limited Partnership (Commission File
No. 0-14314)).
4(b) Form of Certificate of Beneficial Unit Certificate
(incorporated herein by reference to Form S-11
Registration Statement filed August 30, 1985 with the
Securities and Exchange Commission by America First Tax
Exempt Mortgage Fund Limited Partnership (Commission File
No. 2-99997)).
(b) Form 8-K
The registrant did not file a report on Form 8-K during the
quarter for which this report is filed.
<PAGE> -9-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 12, 1996 AMERICA FIRST TAX EXEMPT MORTGAGE
FUND LIMITED PARTNERSHIP
By America First Capital
Associates Limited
Partnership Two, General
Partner
By America First Companies L.L.C.,
General Partner
By /s/ Michael Thesing
Michael Thesing
Vice President, Secretary,
Treasurer and Chief Financial
Officer
<PAGE> -10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,308,275
<SECURITIES> 0
<RECEIVABLES> 485,762
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,814,603
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 67,840,603
<CURRENT-LIABILITIES> 559,204
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 67,281,399
<TOTAL-LIABILITY-AND-EQUITY> 67,840,603
<SALES> 0
<TOTAL-REVENUES> 4,782,762
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 489,293
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,293,469
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,293,469
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
