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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 10-Q
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 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: 0-25600
--------------------------------
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Maryland 52-1394232
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7200 Wisconsin Avenue, 11th floor, Bethesda, Maryland 20814
(Address of principal executive offices) (Zip Code)
(301) 654-3100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Assignee Interests ("BACs")
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 / /
There is no public trading market for the BACs. Therefore, the
BACs had neither a market selling price nor an average bid or
asked price within the 60 days prior to the date of this filing.
Index to Exhibits is found on page 5.
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<PAGE> 2
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
The Balance Sheets for Oxford Tax Exempt Fund II Limited
Partnership ("Oxford Tax Exempt Fund II," "OTEF II," or the
"Partnership") as of June 30, 1996 and December 31, 1995, the
Statements of Income for the three- and six-month periods ended
June 30, 1996 for OTEF II, one-month period ended June 30, 1995
for OTEF II and two- and five-month periods ended May 31, 1995
for OTEF II's predecessor, Oxford Tax Exempt Fund Limited
Partnership, a Maryland limited partnership ("OTEF,"
"Predecessor," or "OTEF II's predecessor"), the Statement of
Partners' Capital as of June 30, 1996, and the Statements of Cash
Flows for the six-month period ended June 30, 1996 for OTEF II,
and the one- and five-month periods ended June 30, 1995 and May
31, 1995, respectively, for OTEF and the notes thereto, in
accordance with generally accepted accounting principles, are
incorporated by reference to sequentially numbered pages 15
through 26 of OTEF II's Quarterly Report (Unaudited) dated
June 30, 1996, attached hereto as Exhibit 20 (the "Quarterly
Report").
For purposes of clarity, the Managing General Partner has
included two additional columns in the Statements of Income
representing pro forma information as of June 30, 1995. This pro
forma information has been prepared as if: (i) OTEF II had been
in existence during the period presented; (ii) OTEF II had
acquired the assets of OTEF in exchange for OTEF II BACs on
January 1, 1995; and (iii) OTEF II had begun accounting for its
investments in the mortgage revenue bonds ("Bonds") on that date
under the new accounting method. Under the pro forma
presentation, $1 million in Oxford advances, which were made to
the Operating Partnerships in December 1994 from the U.S.
Treasury strip bond that matured November 15, 1994 and paid to
OTEF as additional interest in January 1995, have been excluded,
since these payments are nonrecurring in nature. The pro forma
presentation reflects the interest paid by the Operating
Partnerships from available cash flows without taking into
account the effects of the refundings of the Bonds, which the
Managing General Partner anticipates will be completed during
1996.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
A discussion of OTEF II's financial condition and results of
operations for the six-month period ended June 30, 1996 is
incorporated herein by reference to sequentially numbered pages 7
through 14 entitled "Report of Management" included in OTEF II's
Quarterly Report (Unaudited).
<PAGE> 3
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
Four lawsuits were filed with respect to the 1995 OTEF
Restructuring Plan as of June 30, 1996. In general, the complaints
allege violations of certain provisions of the securities laws,
breach of partnership agreement and breach of fiduciary duty, and
seek unspecified monetary damage and various forms of equitable
relief. On November 29, 1995, a putative class and derivative
action was filed by a BAC Holder in U.S. District Court for the
District of Maryland against Oxford Tax Exempt Fund I Corporation
and certain affiliates. A similar putative class action was
filed by another BAC Holder on the same date in U.S. District
Court for the Northern District of California, and subsequently
transferred to the U.S. District Court of Maryland by agreement
of the parties and consolidated with the first case. On
January 23, 1996 and January 25, 1996, two additional putative
class actions were filed by BAC Holders in Circuit Court of
Montgomery County, Maryland alleging similar claims against
Oxford Tax Exempt Fund, L.P., certain affiliates and officers and
directors. These latter two actions have been consolidated.
Another putative class and derivative action was filed by a BAC
Holder in Circuit Court of Montgomery County, Maryland on July 3,
1996. Both the federal and the state courts have issued pre-
trial orders coordinating discovery, the effect of rulings and
related matters in these cases.
The Managing General Partner believes that these actions are
without merit, although it cannot predict the outcome of this
litigation. The Managing General Partner intends to vigorously
contest and defend against these suits. The Managing General
Partner does not believe that these suits will have a material
adverse effect on the operations of OTEF II.
Item 2. Changes in Securities.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
For a list of Exhibits as required by Item 601 of Regulation S-K,
see Exhibit Index on page 5 of this report.
(b) Reports on Form 8-K.
None.
No other items were applicable.
<PAGE> 4
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Oxford Tax Exempt Fund II Limited Partnership
By: Oxford Tax Exempt Fund II Corporation
Managing General Partner of the Registrant
Date: 8/14/96 By: Richard R. Singleton
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Richard R. Singleton
Senior Vice President and Chief
Financial Officer
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 indicated.
Date: 8/14/96 By: Leo E. Zickler
-------- ------------------------------------------
Leo E. Zickler
Chairman of the Board of Directors and
Chief Executive Officer
Date: 8/14/96 By: Francis P. Lavin
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Francis P. Lavin
Director and President
<PAGE> 5
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
EXHIBIT INDEX
(Listed according to the number assigned in the Exhibit Table in
Item 601 of Regulation S-K.)
(20) Report furnished to security holders.
Oxford Tax Exempt Fund II Limited Partnership's Quarterly
Report (Unaudited) dated June 30, 1996, follows on
sequentially numbered pages 6 through 26 of this report.
(27) Financial Data Schedule.
<PAGE> 6
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
Quarterly Report
(Unaudited)
June 30, 1996
CONTENTS
Report of Management
Balance Sheets
Statements of Income
Statement of Partners' Capital
Statements of Cash Flows
Notes to Financial Statements
Instructions for Investors who wish to reregister or
transfer OTEF II BACs
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Report of Management
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The following report provides additional information about the
financial condition of Oxford Tax Exempt Fund II Limited
Partnership ("Oxford Tax Exempt Fund II," "OTEF II," or the
"Partnership") as of June 30, 1996, and its results of operations
and cash flows for the period then ended. This report and
analysis should be read together with the financial statements
and related notes thereto and the selected financial data
appearing elsewhere in this Quarterly Report.
Recent Developments
As discussed more fully in prior reports and in the Information
Statement dated June 26, 1995, the managing general partner of
OTEF II (the "Managing General Partner") and Oxford Tax Exempt
Fund Limited Partnership ("OTEF" or "predecessor"), a Maryland
limited partnership, have adopted and taken significant steps to
consummate a plan (the "1995 OTEF Restructuring Plan") to
restructure OTEF. We will keep you apprised in future reports.
1995 OTEF Restructuring Plan. Under the terms of the 1995 OTEF
Restructuring Plan, on June 1, 1995, OTEF transferred all of its
assets, including its portfolio of 15 tax-exempt mortgage revenue
bonds ("Bonds"), to OTEF II in exchange for all of the existing
beneficial assignee interests ("OTEF II BACs") representing
assignments of limited partnership interests in OTEF II, and the
agreement of OTEF II to assume all rights, obligations and
liabilities of OTEF. On June 30, 1995, OTEF distributed the
OTEF II BACs to the holders ("OTEF BAC Holders") of beneficial
assignee certificates representing assignments of limited
partnership interests in OTEF, who thereby became holders of
OTEF II BACs ("OTEF II BAC Holders"). See Note 5 to Financial
Statements. The Bonds are secured by mortgages on the ten
underlying apartment properties and four senior living properties
owned by fourteen limited partnerships (collectively, the
"Operating Partnerships"), and which are all controlled by
affiliates of the Managing General Partner.
The business of OTEF II initially consists of holding the
assets it acquired from OTEF and consummating the refunding of
the Bonds. The Bonds were transferred by OTEF to OTEF II to
facilitate refundings of the Bonds and to permit, subject to the
approval of the OTEF II BAC Holders, the development of a new
business plan. In general, the purpose of the new business plan
is: (i) to enable OTEF II to increase its asset base; (ii) to
increase its earnings and the level of distributions to the
OTEF II BAC Holders; and (iii) to improve the resale value of the
OTEF II BACs. Following implementation of the new business plan,
OTEF II will also apply for listing of the OTEF II BACs for
trading on a national securities exchange or NASDAQ to provide
better liquidity and a more efficient trading market for the
OTEF II BACs.
<PAGE> 8
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Report of Management
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Liquidity and Capital Resources
Current Position. OTEF II uses the interest payments it
receives under the terms of the Bonds to: (i) make distributions
to its General Partners and OTEF II BAC Holders; (ii) pay
administrative expenses; (iii) pay for costs associated with the
development of the 1995 OTEF Restructuring Plan; and (iv) fund
reserves. Except as may be required in connection with the 1995
OTEF Restructuring Plan, as discussed below, OTEF II has no
commitments for capital expenditures. A distribution for the
quarter ended June 30, 1996, in the amount of $3,642,796, or
$11.90 per BAC (4.76% per annum on the original $1,000 invested
per BAC), will be made on August 14, 1996. This distribution is
consistent with the distribution made for the previous five
quarters.
As of June 30, 1996, OTEF II held $11,286,000 in cash and cash
equivalents, representing an increase of $1,588,000, or 16.4%,
from $9,698,000 in cash and cash equivalents as of December 31,
1995. The increase in OTEF II's cash and cash equivalents is due
primarily to increasing interest paid on the Bonds during the six-
month period ended June 30, 1996. The increase in OTEF II's cash
and cash equivalents was offset by administrative and governance
costs associated with the development of the 1995 OTEF
Restructuring Plan, as discussed below. (See Results of
Operations-The Partnership's Operations.)
Bond Refunding Costs. These costs totaled $310,000 as of
December 31, 1995. During 1995, OTEF II paid for such costs on
behalf of the Operating Partnerships to facilitate the Bond
refunding process. Under the Debt Modification Agreement, the
Operating Partnerships are obligated to reimburse OTEF II for up
to $1.5 million of such costs. Consequently, these costs
totaling $310,000 were classified by OTEF II as receivables from
affiliates as of December 31, 1995. In March 1996, these
receivables were extinguished through a payment made by the
Operating Partnerships from the proceeds of advances made by
Oxford in March 1996 (see "Other Sources" below). As of June 30,
1996, OTEF II paid additional Bond refunding costs totaling
$3,665 which will be reimbursed by the Operating Partnerships
later this year.
Bond Interest. The primary source of cash receipts for OTEF II
is tax-exempt interest received from the Operating Partnerships
pursuant to their debt service obligations under the Bond
documents and interest earned on OTEF II's cash reserves. Under
the 1988 OTEF Restructuring Plan (discussed in prior reports),
the Bonds and the underlying Mortgage Loans continue to provide
for the payment of interest at an aggregate annual rate of up to
16%, consisting of Base Interest and additional Contingent
Interest. Base Interest is owed at the rate of 8.25% per annum,
but is payable only to the extent funds are available from cash
flow and sale or refinance proceeds. Unpaid Base Interest is
deferred, with additional interest charged on such deferred
<PAGE> 9
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Report of Management
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amounts at the rate of 8.25% per annum, compounded monthly and
payable from future cash flow and sale or refinancing proceeds.
As of June 30, 1996, the 14 Operating Partnerships had cumulative
unpaid Base Interest and interest on unpaid Base Interest of
$100.9 million. Under the applicable method of accounting, this
unpaid interest was not reflected in the financial statements of
OTEF II or OTEF. Under the 1995 OTEF Restructuring Plan, this
unpaid interest will be forgiven upon completion of the Bond
refundings. The Managing General Partner believes interest
payments received from the Operating Partnerships, together with
OTEF II's existing cash reserves, should be adequate to fund
anticipated expenses and maintain the current level of
distributions to the OTEF II BAC Holders.
Other Sources. The Operating Partnerships have paid additional
interest to OTEF and OTEF II, as the case may be, from advances
made by Oxford Development Corporation and its affiliates
("Oxford"), pursuant to operating deficit guarantees and
obligations under a Yield Maintenance Reserve ("YMR") Agreement.
Through June 30, 1996, Oxford had advanced a total of $17.8
million to the Operating Partnerships, which in turn, have used
substantially all of these funds to make interest payments on the
Bonds. During 1994, Oxford satisfied all of its remaining
obligations under the operating deficit guarantees. As of
June 30, 1996, the remaining YMR obligations of Oxford and the
Operating Partnerships total $2.1 million. As part of the
Oxford/NHP transaction purchase price (discussed in prior
reports), Oxford received a $1.7 million face amount U.S.
Treasury strip bond that matured on August 15, 1995 and will
receive an additional $2 million from a U.S. Treasury strip bond
that will mature in August 1996. Oxford will satisfy the
remaining YMR obligations in conjunction with advancing all of
these funds to the Operating Partnerships. In accordance with
the 1995 OTEF Restructuring Plan, the Operating Partnerships will
use these funds totaling $3.7 million to pay aggregate Bond
refunding expenses up to a maximum of $l.5 million and to create
reserves with the remaining balance of $2.2 million. Of the $1.7
million U.S. Treasury strip bond that matured on August 15, 1995,
Oxford advanced, in the aggregate, $310,000 to the Operating
Partnerships in March 1996. The Operating Partnerships, in turn,
reimbursed OTEF II $310,000 in March 1996 for costs previously
incurred in connection with the refunding of the Bonds. The
remaining $1.4 million of the $1.7 million advanced in August
1995 is being held in an interest-bearing account pending a
determination as to which Operating Partnerships these funds will
be allocated to. The allocation will be based on the Bond
refunding costs they incur individually.
These sources of funds are nonrecurring in nature, and the
Managing General Partner anticipates the ability of the Operating
Partnerships to make interest payments will, in the future,
depend to a greater degree on the operations and performance of
the Properties.
<PAGE> 10
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Report of Management
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Results of Operations
The Partnership's Operations
Distributions. Distributions to Partners amounted to $3,642,796
or $11.90 per BAC (4.76% per annum on the original $1,000
invested per BAC) to BAC Holders of Record as of June 30, 1996.
This distribution is consistent with the distribution made for
the previous five quarters.
The Partnership's Three-Month Operations. For financial
statement purposes, Net Income and Net Income per BAC were
$4,390,000 and $14.34, respectively, for the three-month period
ended June 30, 1996 for OTEF II under SFAS No. 115. Net Income
and Net income per BAC were $1,205,000 and $3.94, respectively,
for the one-month period ended June 30, 1995 for OTEF II under
SFAS No. 115, and $891,000 and $2.91, respectively, for the two-
month period ended May 31, 1995 under the equity method of
accounting for OTEF.
Administrative Expenses. These normal recurring costs of
OTEF II, other than governance costs totaling $165,000, totaled
$122,000 for the three-month period ended June 30, 1996, compared
to $142,000 for the three-month period ended June 30, 1995 for
OTEF and OTEF II.
Governance Costs. These costs, which are included in
administrative expenses in the Statements of Income, are
accounting, legal and consultation costs relating to: (i) the
preparation of all disclosure materials to be sent to BAC
Holders; (ii) the development of the 1995 OTEF Restructuring
Plan; and (iii) legal defense against certain lawsuits described
in Note 5 to Financial Statements. Such costs incurred during
the three-month period ended June 30, 1996 totaled $165,000. No
such costs were incurred as of June 30, 1995.
Other revenues for the three-month period ended June 30, 1996
relate to the interest income earned on cash accounts held by
OTEF II. Other revenues for the three-month period ended
June 30, 1995 include interest associated with the repayment of
the project loan made to the Operating Partnership that owns the
Chambrel at Club Hill Senior Living Property, as well as interest
income earned on cash accounts held by OTEF and OTEF II.
The Partnership's Six-Month Operations. For financial statement
purposes, Net Income and Net Income per BAC were $8,463,000 and
$27.65, respectively, for the six-month period ended June 30,
1996 for OTEF II under SFAS No. 115. Net Income and Net income
per BAC were $1,205,000 and $3.94, respectively, for the one-
month period end June 30, 1995 for OTEF II under SFAS No. 115,
and $2,277,000 and $7.44, respectively, for the five-month period
ended May 31, 1995 under the equity method of accounting for
OTEF.
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Report of Management
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Administrative Expenses. These normal recurring costs of
OTEF II, other than governance costs totaling $652,000, totaled
$249,000 for the six-month period ended June 30, 1996, compared
to $262,000 for the six-month period ended June 30, 1995 for OTEF
and OTEF II.
Governance Costs. These costs, which are included in
administrative expenses in the Statements of Income, are
accounting, legal and consultation costs relating to: (i) the
preparation of all disclosure materials to be sent to BAC
Holders; (ii) the development of the 1995 OTEF Restructuring
Plan; and (iii) legal defense against certain lawsuits described
in Note 5 to Financial Statements. Such costs incurred during
the six-month period ended June 30, 1996 totaled $652,000. No
such costs were incurred as of June 30, 1995.
Other revenues for the six-month period ended June 30, 1996
relate to the interest income earned on cash accounts held by
OTEF II. Other revenues for the six-month period ended June 30,
1995 include interest associated with the repayment of the
project loan made to the Operating Partnership that owns the
Chambrel at Club Hill Senior Living Property, as well as interest
income earned on cash accounts held by OTEF and OTEF II.
BAC Issuance Costs. Costs associated with issuing the OTEF II
BACs, in the amount of $1,891,234 as of December 31, 1995, were
reclassified for financial statement purposes from deferred costs
to a reduction in Partners' Capital during the fourth quarter of
1995. No additional BAC issuance costs were incurred as of
June 30, 1996, nor are any expected to be incurred in the future.
Operating Partnership Loan. As of June 30, 1996, none of the
Operating Partnerships had any taxable project loan obligations
to OTEF II. No additional project loans were made by OTEF II to
the Operating Partnerships during the six-month period ended
June 30, 1996, and no such additional project loans are
anticipated. On July 28, 1995, the Operating Partnership that
owns the Chambrel at Club Hill Senior Living Property paid its
project loan in full.
The Partnership's Pro forma Operations. For purposes of
clarity, the Managing General Partner has included two additional
columns in the Statements of Income representing pro forma
information as of June 30, 1995. This pro forma information has
been prepared as if: (i) OTEF II had been in existence during the
period presented; (ii) OTEF II had acquired the assets of OTEF in
exchange for OTEF II BACs on January 1, 1995; and (iii) OTEF II
had begun accounting for its investments in the Bonds on that
date under the new accounting method. Under the pro forma
presentation, $1 million in Oxford advances, which were made to
the Operating Partnerships in December 1994 from the U.S.
Treasury strip bond that matured November 15, 1994 and paid to
OTEF as additional interest in January 1995, have been excluded,
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Report of Management
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since these payments are nonrecurring in nature. The pro forma
presentation reflects the interest paid by the Operating
Partnerships from available cash flows without taking into
account the effects of the refundings of the Bonds, which the
Managing General Partner anticipates will be completed during
1996.
The Partnership's Pro forma Three-Month Operations. For pro
forma financial statement purposes, Net Income and Net Income per
BAC were $4,390,000 and $14.34, respectively, for the three-month
period ended June 30, 1996, compared to $4,197,000 and $13.71,
respectively, for the three-month period ended June 30, 1995.
The $193,000, or 4.6%, increase for the three-month period ended
June 30, 1996, compared to the three-month period ended June 30,
1995, is primarily attributable to improvements in the aggregate
operations of the Operating Partnerships and their ability to pay
more interest on the Bonds.
The Partnership's Pro forma Six-Month Operations. For pro
forma financial statement purposes, Net Income and Net Income per
BAC were $8,463,000 and $27.65, respectively, for the six-month
period ended June 30, 1996, compared to $8,049,000 and $26.29,
respectively, for the six-month period ended June 30, 1995. The
$414,000, or 5.1%, increase for the six-month period ended
June 30, 1996, compared to the six-month period ended June 30,
1995 is primarily attributable to improvements in the aggregate
operations of the Operating Partnerships and their ability to pay
more interest on the Bonds.
The Properties' Operations
The primary source of funds for the payment of interest on the
Bonds is the aggregate net operating income of the Operating
Partnerships. Except with respect to the Ocala and Tidewater
partnerships, none of the Operating Partnerships was able to pay
fully its Base Interest from operations for the six-month period
ended June 30, 1996, and the Managing General Partner
anticipates, based on information available to it, that none of
the Operating Partnerships will be able to pay all of its
respective Base Interest from operations until the related Bond
is refunded in accordance with the 1995 OTEF Restructuring Plan.
Although the Ocala and Tidewater partnerships are expected to pay
fully all of their current Base Interest from operations for
1996, they have accrued unpaid Base Interest and interest on
unpaid Base Interest of $7,354,529 and $4,353,770, respectively.
The Managing General Partner expects each Operating Partnership
to be able to pay currently all of the debt service obligations
due under its respective Bond after Bond refunding.
The operating performance of each of the Properties depends
primarily on: (i) occupancy and rental rates; (ii) the amount of
rent actually collected; and (iii) the expenditures for property
improvements and operating expenses. The occupancy and rental
<PAGE> 13
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Report of Management
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rates, in turn, depend on a number of factors, including: (i) the
location of a Property in its particular community; (ii) local
economic conditions and changes in neighborhood characteristics;
(iii) demand for similar housing; and (iv) competition from
existing and future housing complexes in the vicinity of each
Property.
Set forth below is a discussion of the Properties which compares
their respective operations for the three-month periods ended
June 30, 1996 and 1995.
The Operating Partnerships reported an aggregate net operating
income before property improvements of $5,270,000 for the three-
month period ended June 30, 1996, representing an increase of
$166,000, or 3.3%, over the aggregate net operating income before
property improvements reported for the same period in 1995. In
addition, during the three-month period ended June 30, 1996,
overall property improvement expenditures were $472,000,
representing a decrease of $265,000, or 35.9%, compared to the
same period in 1995.
Senior Living Properties. The Operating Partnerships that own
the four Senior Living Properties reported an aggregate net
operating income before property improvements of $1,298,000 for
the three-month period ended June 30, 1996, representing an
increase of $57,000, or 4.6%, over the aggregate net operating
income before property improvements reported for the same period
in 1995. In addition, during the three-month period ended
June 30, 1996, overall property improvement expenditures for the
four Senior Living Properties were $109,000, representing a
decrease of $47,000, or 30.1%, compared to the same period in
1995.
Apartment Properties. The Operating Partnerships that own the
10 garden apartments reported an aggregate net operating income
before property improvements of $3,972,000 for the three-month
period ended June 30, 1996, representing an increase of $110,000,
or 2.8%, over the aggregate net operating income before property
improvements reported for the same period in 1995. In addition,
during the three-month period ended June 30, 1996, overall
property improvement expenditures for the 10 garden apartments
were $363,000, representing a decrease of $218,000, or 37.5%,
compared to the same period in 1995.
Set forth below is a discussion of the Properties which compares
their respective operations for the six-month periods ended
June 30, 1996 and 1995.
The Operating Partnerships reported an aggregate net operating
income before property improvements of $10,494,000 for the six-
month period ended June 30, 1996, representing an increase of
$420,000, or 4.2%, over the aggregate net operating income before
property improvements reported for the same period in 1995. In
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Report of Management
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addition, during the six-month period ended June 30, 1996,
overall property improvement expenditures were $881,000,
representing a decrease of $76,000, or 7.9%, compared to the same
period in 1995.
Senior Living Properties. The Operating Partnerships that own
the four Senior Living Properties reported an aggregate net
operating income before property improvements of $2,718,000 for
the six-month period ended June 30, 1996, representing an
increase of $342,000, or 14.4%, over the aggregate net operating
income before property improvements reported for the same period
in 1995. In addition, during the six-month period ended June 30,
1996, overall property improvement expenditures for the four
Senior Living Properties were $222,000, representing an increase
of $27,000, or 13.8%, compared to the same period in 1995.
Apartment Properties. The Operating Partnerships that own the
10 garden apartments reported an aggregate net operating income
before property improvements of $7,776,000 for the six-month
period ended June 30, 1996, representing an increase of $78,000,
or 1%, over the aggregate net operating income before property
improvements reported for the same period in 1995. In addition,
during the six-month period ended June 30, 1996, overall property
improvement expenditures for the 10 garden apartments were
$659,000, representing a decrease of $103,000, or 13.5%, compared
to the same period in 1995.
Summary
Based upon actual results through June 30, 1996, and the
current outlook for the remainder of 1996, the Managing General
Partner anticipates there will be sufficient interest payments
from the Operating Partnerships to fund anticipated expenses and
maintain the current level of distributions to the OTEF II BAC
Holders. The Managing General Partner will reassess the ability
to increase the level of distributions on a quarterly basis.
Oxford Tax Exempt Fund II Limited Partnership
<PAGE> 15
Oxford Tax Exempt Fund II Limited Partnership
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Balance Sheets (in thousands)
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<TABLE>
<CAPTION>
June 30, 1996 December 31,
(Unaudited) 1995
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<S> <C> <C>
Assets
Investments in Bonds $164,000 $164,000
Cash and cash equivalents 11,286 9,698
Interest receivable 25 26
Due from affiliates 4 310
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Total Assets $175,315 $174,034
============================================================================
Liabilities and Partners' Capital
Liabilities
Accounts payable and accrued expenses $ 596 $ 492
Distributions payable 3,643 3,643
- ----------------------------------------------------------------------------
Total Liabilities 4,239 4,135
- ----------------------------------------------------------------------------
Partners' Capital
General Partners (2,377) (2,400)
Limited Partners'Interests (Beneficial
Assignee Interests-299,995 interests
issued and outstanding) 162,485 161,331
Unrealized Gain on Investments 10,968 10,968
- ----------------------------------------------------------------------------
Total Partners' Capital 171,076 169,899
- ----------------------------------------------------------------------------
Total Liabilities and Partners's Capital $175,315 $174,034
============================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 16
<TABLE>
- ----------------------------------------------------------------------------------------------------------------------------
Oxford Tax Exempt Fund II Limited Partnership
Statements of Income (in thousands, except per BAC amounts)
(Unaudited)
- ----------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Three months ended June 30, Six months ended June 30,
------------------------------------ ----------------------------------------------
OTEF II(F4)| || OTEF II(4)| ||
OTEF II Pro forma| OTEF II || OTEF OTEF II Pro forma | OTEF II || OTEF
Three Three | One || Two Six Six | One || Five
months months | month || months months months | month || months
ended ended | ended || ended ended ended | ended || ended
June 30, June 30,| June 30,|| May 31, June 30, June 30,| June 30, || May 31,
1996 1995 | 1995 || 1995 1996 1995 | 1995 || 1995
- ----------------------------------------------|---------||--------------- -----------------------|-----------||----------
<S> <C> <C> | <C> || <C> <C> <C> | <C> || <C>
Revenues | || | ||
Interest on Bonds<F1> $4,593 $4,244 | $1,264 || $ 0 $9,195 $8,135 | $1,264 || $ 0
Equity income on | || | ||
investments in Bonds<F2> 0 0 | 0 || 880 0 0 | 0 || 2,305
Other, primarily | || | ||
interest on short-term | || | ||
investments 84 95 | 28 || 66 169 176 | 28 || 147
- ----------------------------------------------|---------||-------------- -----------------------|-----------||----------
4,677 4,339 | 1,292 || 946 9,364 8,311 | 1,292 || 2,452
Expenses | || | ||
Administrative expenses 287 142 | 87 || 55 901<F3> 262 | 87 || 175
- ----------------------------------------------|---------||-------------- -----------------------|-----------||----------
Net income $4,390 $4,197 | $1,205 || $ 891 $8,463 $8,049 | $1,205 || $2,277
==============================================|=========||============== =======================|===========||==========
Net income allocated to | || | ||
General Partners $ 88 $ 84 | $ 24 || $ 18 $ 169 $ 161 | $ 24 || $ 45
==============================================|=========||============== =======================|===========||==========
Net income allocated to | || | ||
BAC Holders $4,302 $4,113 | $1,181 || $ 873 $8,294 $7,888 | $1,181 || $2,232
==============================================|=========||============== =======================|===========||==========
Net income per BAC $14.34 $13.71 | $ 3.94 || $2.91 $27.65 $26.29 | $ 3.94 || $ 7.44
==============================================|=========||============== =======================|===========||==========
Distribution per BAC $11.90 $11.90 | $11.90 || $ 0 $23.80 $23.80 | $11.90 || $11.90
==============================================|=========||============== =======================|===========||==========
<PAGE> 17
<FN>
<F1> On June 1, 1995, OTEF II adopted the provisions of SFAS No. 115-Accounting for Certain Investments in Debt
and Equity Securities in connection with the transfer of all assets and liabilities from OTEF to OTEF II. Under
this method, payments on the Bonds by the Operating Partnerships are treated as interest income.
<F2> From October 1, 1987 to May 31, 1995, OTEF's investments in the Bonds were accounted for under the equity method, in
accordance with Financial Release No. 28 and a notice issued to practitioners, dated February 10, 1986, by the
Accounting Standards Executive Committee, which provides guidance on accounting for real estate acquisition,
development and construction lending arrangements. Under this method, OTEF's investments in Bonds were:
(i) reduced for interest payments (Base Interest) received; (ii) increased or decreased by OTEF's equity, which was
based on its participation percentages (generally 50%, except when it had outstanding project advances to an
Operating Partnership) in the income or losses of the related Operating Partnerships; and (iii) written down to
the fair value of the Properties with such fair value representing the present value of the projected cash flows
from the Properties. Since OTEF had outstanding project loans to certain senior living Operating Partnerships
from 1989 to 1995, OTEF's participation percentages were increased to 100% for these Operating Partnerships during
these years.
<F3> For the six-month period ended June 30, 1996, administrative expenses also included $652,000 of governance costs
associated with the accounting, legal and consultation fees relating to: (i) the preparation of the proxy to be sent
to BAC holders; (ii) the development of the 1995 OTEF Restructuring Plan; and (iii) legal defense against
certain lawsuits described in Note 5 to Financial Statements.
<F4> These pro forma columns have been prepared as if: (i) OTEF II had been in existence during the period presented;
(ii) OTEF II had acquired the assets of OTEF in exchange for OTEF II BACs on January 1, 1995; and (iii) OTEF II
had begun accounting for its investments in the Bonds on that date under the new accounting method. Under the pro
forma presentation, $1 million in Oxford advances, which were made to the Operating Partnerships in December 1994
from the U.S. Treasury strip bond that matured November 15, 1994 and paid to OTEF as additional interest in January
1995, have been excluded, since these payments are nonrecurring in nature.
</FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 18
Oxford Tax Exempt Fund II Limited Partnership
- --------------------------------------------------------------------------------
Statement of Partners' Capital (in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Limited
Partners'
Interests
----------
Beneficial Unrealized
General Assignee Gain on
Partners Interests Investments Total
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1995 $(2,400) $161,331 $10,968 $169,899
- -------------------------------------------------------------------------------
Net income 169 8,294 0 8,463
Distributions to Partners, including
$23.80 per BAC (146) (7,140) 0 (7,286)
- -------------------------------------------------------------------------------
Balance, June 30, 1996 (Unaudited) $(2,377) $162,485 $10,968 $171,076
===============================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
Oxford Tax Exempt Fund II Limited Partnership
- -------------------------------------------------------------------------------
Statements of Cash Flows (in thousands) (Note 3)
(Unaudited)
- -------------------------------------------------------------------------------
OTEF II | OTEF II || OTEF
Six months | One month || Five months
ended | ended || ended
June 30, | June 30, || May 31,
1996 | 1995 || 1995
- ------------------------------------------------------|-----------||------------
<S> <C> | <C> || <C>
Operating Activities | ||
Net income<F1> $ 8,463 | $ 1,205 || $ 2,277
Adjustments to reconcile net income | ||
to net cash provided by operating | ||
activities: | ||
Equity income from investments in | ||
in Bonds<F2> 0 | 0 || (2,305)
Changes in assets and liabilities: | ||
Interest receivable 1 | 30 || (9)
Due from affiliates 306 | 0 || 0
Accounts payable 104 | 659 || 97
- ------------------------------------------------------|-----------||------------
Net cash provided by operating activities 8,874 | 1,894 || 60
- ------------------------------------------------------|-----------||------------
Investing activities | ||
Working capital reserve 0 | 0 || 1,518
Payments received from investments | ||
in Bonds<F1> 0 | 0 || 7,872
Project loans 0 | 109 || 411
Capital contributions 0 | 1 || 0
- ------------------------------------------------------|-----------||------------
Net cash provided by investing activities 0 | 110 || 9,801
- ------------------------------------------------------|-----------||------------
Financing activities | ||
Distributions paid to Partners and | ||
BAC Holders (7,286) | 0 || (7,087)
Deferred costs paid 0 | (817) || (671)
- ------------------------------------------------------|-----------||------------
Net cash used by financing activities (7,286) | (817) || (7,758)
- ------------------------------------------------------|-----------||------------
Net increase in cash and cash equivalents 1,588 | 1,187 || 2,103
Cash and cash equivalents, begining of period 9,698 | 9,441 || 7,338
- ------------------------------------------------------|-----------||------------
Cash and cash equivalents, end of period $11,286 | $10,628 || $ 9,441
======================================================|===========||============
<PAGE> 20
<FN>
<F1> On June 1, 1995, OTEF II adopted the provisions of SFAS No.
115-Accounting for Certain Investments in Debt and Equity
Securities in connection with the transfer of all assets and
liabilities from OTEF to OTEF II. Under this method, payments
on the Bonds by the Operating Partnerships are treated as
interest income.
<F2> From October 1, 1987 to May 31, 1995, OTEF's investments in
the Bonds were accounted for under the equity method, in
accordance with Financial Release No. 28 and a notice issued to
practitioners, dated February 10, 1986, by the Accounting
Standards Executive Committee, which provides guidance on
accounting for real estate acquisition, development and
construction lending arrangements. Under this method, OTEF's
investments in Bonds were: (i) reduced for interest payments
(Base Interest) received; (ii) increased or decreased by OTEF's
equity, which was based on its participation percentages
(generally 50%, except when it had outstanding project advances
to an Operating Partnership) in the income or losses of the
related Operating Partnerships; and (iii) written down to the
fair value of the Properties with such fair value representing
the present value of the projected cash flows from the
Properties. Since OTEF had outstanding project loans to certain
senior living Operating Partnerships from 1989 to 1995, OTEF's
participation percentages were increased to 100% for these
Operating Partnerships during these years.
</FN>
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<PAGE> 21
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
Note 1. Financial Statements
The financial statements reflect all adjustments which, in the
opinion of the Managing General Partner of Oxford Tax Exempt Fund
II Limited Partnership ("Oxford Tax Exempt Fund II," "OTEF II,"
or the "Partnership"), are necessary to present fairly OTEF II's
financial position as of June 30, 1996 and December 31, 1995, the
Statements of Income for the three- and six-month periods ended
June 30, 1996 for OTEF II, one-month period ended June 30, 1995
for OTEF II and two- and five-month periods ended May 31, 1995
for OTEF II's predecessor, Oxford Tax Exempt Fund Limited
Partnership, a Maryland limited partnership ("OTEF,"
"Predecessor," or "OTEF II's predecessor"), the Statement of
Partners' Capital as of June 30, 1996, and the Statements of Cash
Flows for the six-month period ended June 30, 1996 for OTEF II,
and the one- and five-month periods ended June 30, 1995 and May
31, 1995, respectively, for OTEF and the notes thereto, in
accordance with generally accepted accounting principles.
For purposes of clarity, the Managing General Partner has
included two additional columns in the Statements of Income
representing pro forma information as of June 30, 1995. This pro
forma information has been prepared as if: (i) OTEF II had been
in existence during the period presented; (ii) OTEF II had
acquired the assets of OTEF in exchange for OTEF II BACs on
January 1, 1995; and (iii) OTEF II had begun accounting for its
investments in the mortgage revenue bonds ("Bonds") on that date
under the new accounting method. Under the pro forma
presentation, $1 million in Oxford advances, which were made to
the Operating Partnerships in December 1994 from the U.S.
Treasury strip bond that matured November 15, 1994 and paid to
OTEF as additional interest in January 1995, have been excluded,
since these payments are nonrecurring in nature. These
statements should be read in conjunction with the audited
financial statements and the notes included in the Partnership's
Annual Report for the year ended December 31, 1995.
Note 2. Business
OTEF II was formed under the laws of the State of Maryland on
February 9, 1995 in connection with a plan (the "1995 OTEF
Restructuring Plan") to restructure OTEF. Oxford Tax Exempt Fund
II Corporation, a Maryland corporation, is the Managing General
Partner of OTEF II ("Managing General Partner"). OTEF II
Associates Limited Partnership, a Maryland limited partnership,
is the associate general partner of OTEF II (together with the
Managing General Partner, the "General Partners"). There is
currently no established public market in which the OTEF II BACs
are traded.
1995 OTEF Restructuring Plan. Under the terms of the 1995 OTEF
Restructuring Plan, on June 1, 1995, OTEF transferred all of its
assets, including its portfolio of 15 tax-exempt Bonds, to
OTEF II in exchange for all of the existing beneficial assignee
<PAGE> 22
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
interests ("OTEF II BACs") representing assignments of limited
partnership interests in OTEF II, and the agreement of OTEF II to
assume all rights, obligations and liabilities of OTEF. On
June 30, 1995, OTEF distributed the OTEF II BACs to the holders
("OTEF BAC Holders") of beneficial assignee certificates
representing assignments of limited partnership interests in
OTEF, who thereby became holders of OTEF II BACs ("OTEF II BAC
Holders"). See Note 5 to Financial Statements. The Bonds are
secured by mortgages on the ten underlying apartment properties
and four senior living properties owned by fourteen limited
partnerships (collectively, the "Operating Partnerships"), and
which are all controlled by affiliates of the Managing General
Partner.
The business of OTEF II initially consists of holding the
assets it acquired from OTEF and consummating the refunding of
the Bonds. The Bonds were transferred by OTEF to OTEF II to
facilitate refundings of the Bonds and to permit, subject to the
approval of the OTEF II BAC Holders, the development of a new
business plan. In general, the purpose of the new business plan
is: (i) to enable OTEF II to increase its asset base; (ii) to
increase its earnings and the level of distributions to the
OTEF II BAC Holders; and (iii) to improve the resale value of the
OTEF II BACs. Following implementation of the new business plan,
OTEF II will also apply for listing of the OTEF II BACs for
trading on a national securities exchange or NASDAQ to provide
better liquidity and a more efficient trading market for the
OTEF II BACs.
Note 3. Significant Accounting Policies
Method of Accounting. OTEF II's financial statements are
prepared in accordance with generally accepted accounting
principles.
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 dates of the financial statements and the
reported amounts of revenues and expenses during the reporting
periods. Actual results could differ from those estimates.
Income Taxes. No provision has been made for federal, state,
or local income taxes in the financial statements of OTEF II
since the Partners and OTEF II, formerly OTEF, BAC Holders
(collectively, "BAC Holders") are required to report on their
individual tax returns their allocable share of taxable income,
gains, losses, deductions, and credits of OTEF II.
Investment in Bonds and Change in Accounting Method. As
previously reported, on June 1, 1995, the Bonds were transferred
from OTEF to OTEF II at their book value of $153 million. The
Managing General Partner estimated at December 31, 1995 that the
<PAGE> 23
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
fair value of the Bonds, in the aggregate, was $164 million and,
accordingly, OTEF II recorded a credit to Partners' Capital in an
amount equal to approximately $11 million of unrealized gain on
investments. As of June 30, 1996, the fair value of the Bonds
remained unchanged. The current fair value of the Bonds was
determined by the Managing General Partner using the same cash
flow methodology applied by a major investment banking firm in
connection with structuring advice rendered to OTEF II and its
predecessor with respect to the 1995 OTEF Restructuring Plan. In
accordance with this methodology, the applicable cash flows are
based on certain assumptions concerning the Properties and the
markets in which they are located, including the timing and
realization of such cash flows.
In connection with the transfer of the Bonds to OTEF II and the
change in the Managing General Partner from Oxford Tax Exempt
Fund I Corporation to Oxford Tax Exempt Fund II Corporation,
OTEF II adopted a new accounting method governed by the
provisions of Statement of Financial Accounting Standards No. 115-
"Accounting for Certain Investments in Debt and Equity
Securities" ("SFAS No. 115"). Under this method, (i) the Bonds
are reflected at their current fair value on the face of the
Balance Sheet, with cumulative unrealized gains or losses being
charged or credited as unrealized gains or losses on investments
and included in capital as applicable, rather than reflected in
the Statements of Income, and (ii) cash payments on the Bonds
received from the Operating Partnerships are treated as interest
income on the Bonds.
From October 1, 1987 to May 31, 1995, OTEF's investments in the
Bonds were accounted for under the equity method, in accordance
with Financial Release No. 28 and a notice issued to
practitioners, dated February 10, 1986, by the Accounting
Standards Executive Committee, which provides guidance on
accounting for real estate acquisition, development and
construction lending arrangements. Under this method, OTEF's
investments in the Bonds were: (i) reduced for interest payments
(Base Interest) received; (ii) increased or decreased by OTEF's
equity, which was based on its participation percentages
(generally 50%, except when it had outstanding project advances
to an Operating Partnership) in the income or losses of the
related Operating Partnerships; and (iii) written down to the
fair value of the Properties with such fair value representing
the present value of the projected cash flows from the
Properties. Since OTEF had outstanding project loans to certain
senior living Operating Partnerships from 1989 to 1995, OTEF's
participation percentages were increased to 100% for these
Operating Partnerships during these years.
The change in accounting treatment for financial reporting
purposes is technical in nature and does not affect the amount of
payments received by OTEF II or the level of distributions to
OTEF II BAC Holders. In addition, this change has no effect on
the tax-exempt nature of OTEF II's net income or the obligation
<PAGE> 24
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
of the Operating Partnerships to make all payments due on the
Bonds. To permit OTEF II BAC Holders to evaluate the results of
operations of OTEF II, as reported under the new accounting
method, the Managing General Partner has included two additional
columns in the Statements of Income which reflect the operations
of OTEF II as if: (i) OTEF II had been in existence during the
period presented; (ii) OTEF II had acquired the assets of OTEF in
exchange for OTEF II BACs on January 1, 1995; and (iii) OTEF II
had begun accounting for its investments in the Bonds on that
date under the new accounting method. Under the pro forma
presentation, $1 million in Oxford advances, which were made to
the Operating Partnerships in December 1994 from the U.S.
Treasury strip bond that matured November 15, 1994 and paid to
OTEF as additional interest in January 1995, have been excluded,
since these payments are nonrecurring in nature.
Net Income and Distributions per Beneficial Assignee Interest
(BAC). Net income and distributions per BAC are based upon the
weighted average number of BACs outstanding during the applicable
year.
Working Capital Reserve. OTEF II invests in tax-exempt money
market funds stated at cost, which approximates market value.
The partnership agreement for OTEF provided for additions to the
reserve as deemed advisable by the Managing General Partner of
OTEF. The reserve was used at the discretion of OTEF's Managing
General Partner to pay operating expenses and/or future
distributions. The Managing General Partner of OTEF II has
determined that a separate working capital reserve is no longer
warranted and, accordingly, the proceeds have been combined with
cash and cash equivalents for financial statement presentation.
Statements of Cash Flows. The Statements of Cash Flows are
intended to reflect only cash receipts and cash payment activity.
The statements do not reflect investing and financing activity
that affect recognized assets or liabilities that do not result
in cash receipts or cash payments. This non-cash activity
consists of distributions payable to Partners and OTEF II BAC
Holders of $3,642,796 at June 30, 1996 and June 30, 1995.
Cash and cash equivalents. Cash and cash equivalents consist
of all demand deposits and tax-exempt money market funds stated
at cost, which approximates market value with original maturities
of three months or less.
Governance costs. These costs, which are included in
administrative expenses in the Statements of Income, are
accounting, legal and consultation costs relating to: (i) the
preparation of all disclosure materials to be sent to BAC
Holders; (ii) the development of the 1995 OTEF Restructuring
Plan; and (iii) legal defense against certain lawsuits described
in Note 5 to Financial Statements. Such costs incurred during
the six-month period ended June 30, 1996 totaled $652,000. No
such costs were incurred as of June 30, 1995.
<PAGE> 25
- ----------------------------------------------------------------
Notes to Financial Statements
- ----------------------------------------------------------------
BAC Issuance Costs. Costs associated with issuing the OTEF II
BACs, in the amount of $1,891,234 as of December 31, 1995, were
reclassified for financial statement purposes from deferred costs
to a reduction in Partners' Capital during the fourth quarter of
1995. Such deferred costs paid as of June 30, 1995 totaled
$817,000. No additional BAC issuance costs were incurred as of
June 30, 1996, nor are any expected to be incurred in the future.
Note 4. Related Party Transactions
Interests in OTEF II and the Operating Partnerships. The
General Partners own interests in OTEF II that entitle them to
receive a share of OTEF II cash flow and possibly of sale,
refinancing and liquidation proceeds. The percentage interests
of the General Partners in OTEF II are the same as the percentage
interests of the General Partners in OTEF. Distributions to the
General Partners for the quarters ended June 30, 1996 and 1995
totaled $72,856 for each period.
Affiliates of the Managing General Partner that are general and
limited partners of the Operating Partnerships have an interest
in the Operating Partnerships that entitles them to receive a
share of any cash flow and sale, refinancing and liquidation
proceeds of the Operating Partnerships. Since inception, the
Operating Partnerships have not been able to make any
distributions of cash flow to their respective partners. In
addition, in connection with the 1995 OTEF Restructuring Plan and
after the Bonds are refunded, it is anticipated that all or a
portion of any cash distributions attributable to these interests
will be pledged for the benefit of OTEF II.
Compensation and Fees. For the six-month periods ended
June 30, 1996 and 1995, the Operating Partnerships paid total
property and asset management fees of $1,149,410 and $1,102,134,
respectively. The increase of $47,276, or 4.3%, between the two
periods is due to improved operating revenues of the Operating
Partnerships for the six-month period ended June 30, 1996.
During the six-month periods ended June 30, 1996 and 1995, the
Operating Partnerships also paid ORFG, in the aggregate, $348,368
of fees pursuant to the OTEF Restructuring Plan
Administration/Asset Management Fee Agreement, which amount is
equal to .25% per annum of the principal amount of the Bonds.
Operating Partnership Loans. As of June 30, 1996, none of the
Operating Partnerships had any taxable project loan obligations
to OTEF II. No additional project loans were made by OTEF II to
the Operating Partnerships during the six-month period ended
June 30, 1996, and no such additional project loans are
anticipated. On July 28, 1995, the Operating Partnership that
owns the Chambrel at Club Hill Senior Living Property paid its
project loan in full.
Reimbursement for Expenses. The General Partners and their
affiliates are entitled to be reimbursed for expenses they incur
<PAGE> 26
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
on behalf of OTEF II. Total reimbursements to the General
Partners and their affiliates for the quarters ended June 30,
1996 and 1995 were $37,251, and $56,873, respectively, for
administrative expenses (excluding expenses relating to the 1995
OTEF Restructuring Plan).
Bond refunding costs. These costs totaled $310,000 as of
December 31, 1995. During 1995, OTEF II paid for such costs on
behalf of the Operating Partnerships to facilitate the Bond
refunding process. Under the Debt Modification Agreement, the
Operating Partnerships are obligated to reimburse OTEF II for up
to $1.5 million of such costs. Consequently, these costs
totaling $310,000 were classified by OTEF II as receivables from
affiliates as of December 31, 1995. In March 1996, these
receivables were extinguished through a payment made by the
Operating Partnerships from the proceeds of advances made by
Oxford in March 1996. As of June 30, 1996, OTEF II paid
additional Bond refunding costs totaling $3,665 which will be
reimbursed by the Operating Partnerships later this year.
Note 5. Other Events
Four lawsuits were filed with respect to the 1995 OTEF
Restructuring Plan as of June 30, 1996. In general,the complaints
allege violations of certain provisions of the securities laws,
breach of partnership agreement and breach of fiduciary duty, and
seek unspecified monetary damage and various forms of equitable
relief. On November 29, 1995, a putative class and derivative
action was filed by a BAC Holder in U.S. District Court for the
District of Maryland against Oxford Tax Exempt Fund I Corporation
and certain affiliates. A similar putative class action was
filed by another BAC Holder on the same date in U.S. District
Court for the Northern District of California, and subsequently
transferred to the U.S. District Court of Maryland by agreement
of the parties and consolidated with the first case. On
January 23, 1996 and January 25, 1996, two additional putative
class actions were filed by BAC Holders in Circuit Court of
Montgomery County, Maryland alleging similar claims against
Oxford Tax Exempt Fund, L.P., certain affiliates and officers and
directors. These latter two actions have been consolidated.
Another putative class and derivative action was filed by a BAC
Holder in Circuit Court of Montgomery County, Maryland on July 3,
1996. Both the federal and the state courts have issued pre-
trial orders coordinating discovery, the effect of rulings and
related matters in these cases.
The Managing General Partner believes that these actions are
without merit, although it cannot predict the outcome of this
litigation. The Managing General Partner intends to vigorously
contest and defend against these suits. The Managing General
Partner does not believe that these suits will have a material
adverse effect on the operations of OTEF II.
<PAGE> 27
- -----------------------------------------------------------------
Instructions for Investors who wish to reregister or transfer
OTEF II BACs
- -----------------------------------------------------------------
Your OTEF BACs were automatically transferred to OTEF II and no
action by you is required in this regard.
Please follow the instructions below to expedite the
reregistration or transfer of ownership of any Oxford Tax Exempt
Fund II Limited Partnership ("OTEF II") Beneficial Assignee
Interests ("BACs") that you may own. Note that no transfers or
sales can be effected without the consent of the Managing General
Partner and the completion of the proper documents.
To cover the costs associated with processing transfers, MMS
Escrow & Transfer Agency, Inc. ("MMS"), the transfer agent for
OTEF II, charges $25 for each transfer of OTEF II BACs between
related parties, and $50 per seller for each transfer for
consideration (sale). The only exception is a transfer to a
surviving joint holder of BACs when the other joint holder
dies, in which case no fee is charged. MMS will continue to
charge $150 for the conversion of a BAC into a limited partner
interest.
To transfer ownership of BACs held in a Merrill Lynch account,
please have your Merrill Lynch financial consultant contact
Merrill Lynch Partnership Operations in New Jersey at (201)
557-1619 to request the necessary transfer documents. Merrill
Lynch Partnership Operations will only accept calls from your
financial consultant. YOU MUST HAVE THE PROPER TRANSFER
DOCUMENTS FROM MERRILL LYNCH TO EFFECT A TRANSFER. You must
have your financial consultant contact Partnership Operations,
as OTEF II Investor Services does not send out transfer papers
for BACs held in a Merrill Lynch account.
Investors who no longer hold OTEF II BACs in a Merrill Lynch
account should contact OTEF II Investor Services at (810) 614-
4550 or P.O. Box 7090, Troy, Michigan 48007-9921, to obtain
transfer documents. YOU MUST OBTAIN THE PROPER TRANSFER
DOCUMENTS FROM OTEF II INVESTOR SERVICES TO EFFECT A TRANSFER
OF BACs WHICH YOU HOLD PERSONALLY.
MMS does not issue paper certificates to investors who take
their OTEF II BACs out of their Merrill Lynch accounts. Paper
confirmations are issued instead. (Please note that
previously issued OTEF paper certificates are no longer valid.
Investors who hold OTEF certificates may retain or discard
them, as they choose. It is no longer necessary to return
certificates to MMS when transferring ownership interests.)
If an individual who holds his or her OTEF II BACs directly
wishes to redeposit the BACs into a Merrill Lynch account, he
or she should send written instructions to OTEF II Investor
Services after the Merrill Lynch account has been opened.
OTEF II Investor Services will then instruct Merrill Lynch to
deposit the BACs into the account.
<PAGE> 28
Please remember to notify OTEF II Investor Services in writing
at the address below or by calling (810) 614-4550 in the event
you change your mailing address or your financial consultant.
We can then continue to provide you and your representative
with timely information about your investment in OTEF II.
The Quarterly Report on Form 10-Q for the quarter ended
June 30, 1996, filed with the Securities and Exchange
Commission, is available to BAC Holders and may be obtained by
writing:
Investor Services
Oxford Tax Exempt Fund II Limited Partnership
P.O. Box 7090
Troy, Michigan 48007-9921
(810) 614-4550
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Balance Sheet at June 30, 1996 (Unaudited) and the Statements of Income
for the six months ended June 30, 1996 (Unaudited) and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 11,286
<SECURITIES> 164,000
<RECEIVABLES> 29
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 175,315
<CURRENT-LIABILITIES> 4,239
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 171,076
<TOTAL-LIABILITY-AND-EQUITY> 175,315
<SALES> 0
<TOTAL-REVENUES> 9,364
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 901
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,463
<EPS-PRIMARY> 27.65
<EPS-DILUTED> 27.65
</TABLE>
