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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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 March 31, 1997
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission file number: 0-25600
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Maryland 52-1394232
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7200 Wisconsin Avenue, 11th floor, Bethesda, Maryland 20814
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 654-3100
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Beneficial Assignee Interests
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 / /
The Beneficial Assignee Interests of limited partnership interest
of the Partnership (the "OTEF II BACs") are not currently being
traded in any public market. 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 3.
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OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
FORM 10-Q
PART I-FINANCIAL INFORMATION
Item 1. Financial Statements.
The financial statements of the Partnership are incorporated
herein by reference to sequentially numbered pages 15
through 18 of OTEF II's Quarterly Report (Unaudited).
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 three-month period ended March 31, 1997 is
incorporated herein by reference to sequentially numbered pages
6 through 14 entitled "Report of Management" included in
OTEF II's Quarterly Report (Unaudited).
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
Information responsive to this Item regarding putative class
and derivative lawsuits is contained in Note 8 to Financial
Statements of the Form 10-K for the year ended December 31, 1996
filed by 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 3 of this
report.
(b) Reports on Form 8-K.
None.
No other items were applicable.
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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 March 31, 1997, follows on
sequentially numbered pages 5 through 27 of this report.
(27) Financial Data Schedule.
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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: 5/20/97 By: /S/ 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: 5/20/97 By: /S/ Leo E. Zickler
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Leo E. Zickler
Chairman of the Board of Directors and
Chief Executive Officer
Date: 5/20/97 By: /S/ Francis P. Lavin
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Francis P. Lavin
Director and President
Date: 5/20/97 By: /S/ Robert B. Downing
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Robert B. Downing
Director and Executive Vice President
<PAGE> 5
OXFORD TAX EXEMPT FUND II LIMITED PARTNERSHIP
Quarterly Report
(Unaudited)
March 31, 1997
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 information about the financial
condition of Oxford Tax Exempt Fund II Limited Partnership, a
Maryland limited partnership ("Oxford Tax Exempt Fund II,"
"OTEF II," or the "Partnership"), as of March 31, 1997, 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 previously discussed, an Information Memorandum dated
December 2, 1996, was furnished to the holders of beneficial
assignee interests (the "OTEF II BAC Holders") in connection with
and as part of the settlement of certain putative class and
derivative action litigation ("OTEF II Litigation"). The
Information Memorandum described the new business plan for OTEF
II ("Liquidity and Growth Plan"), and provided BAC Holders with
the information necessary to make an informed decision regarding
whether they wished to exchange their BACs for a new class of
BACs ("Status Quo BACs" or "SQBs"). The SQBs and the Liquidity
and Growth Plan are discussed below.
Status Quo BACs. Approximately 4.3% of the OTEF II BAC
Holders made a timely election to convert their OTEF II BACs to
SQBs. Effective April 1, 1997, OTEF II issued the SQBs in
uncertificated, book-entry form. The SQBs represent interests
only in the existing mortgage revenue bonds ("Existing MRBs"), as
refunded, and not in the new assets that will be acquired by
OTEF II pursuant to the terms of the Liquidity and Growth Plan.
The SQBs are designed to replicate, to the extent possible, the
economic interest that the holders of the SQBs (the "Status Quo
BAC Holders") would have had in the Existing MRBs, as refunded,
if the partnership agreement for Oxford Tax Exempt Fund Limited
Partnership ("OTEF"), OTEF II's predecessor, had continued to
govern and the Liquidity and Growth Plan was not implemented.
OTEF II is finalizing the accounting methodology that will be
used with respect to the SQBs. More detailed information will be
included in the Quarterly Report for the second quarter.
The Status Quo BAC Holders will not share in the growth and
the other benefits expected to be achieved under the Liquidity
and Growth Plan. The SQBs will not be listed on any securities
exchange, and it is not expected that there will be an active
trading market for them. In addition, the Status Quo BAC Holders
will not be allocated any capital losses for federal income tax
purposes that may result from the disposition of the Existing
MRBs or interests therein or new assets.
Under the Optional Sale Plan described in the Information
Memorandum, the original Status Quo BAC Holders have the option
to tender all or a portion of their SQBs for purchase or
redemption by OTEF II. As of May 16, 1997, 162 Status Quo BAC
Holders with 3,115 SQBs exercised this option, however, as the
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Report of Mangement
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election deadline of June 20, 1997, for Status Quo BAC Holders
to exercise this right has not occurred, the Managing General
Partner is unable to determine at this time the total amount of
OTEF II's funding obligation. All properly tendered SQBs
must be purchased or redeemed by OTEF II by March 17, 1998.
Liquidity and Growth Plan. Under the Liquidity and Growth
Plan, OTEF II will apply to list the OTEF II BACs for trading on
a national securities exchange, and the proceeds from the sale of
the bonds issued to refund the Existing MRBs, or interests
therein, or any debt issued by OTEF II and secured by such assets
(together, the "Financing") and any additional funds that OTEF
II may obtain, will be invested in new assets. The Managing
General Partner believes the Liquidity and Growth Plan will allow
OTEF II to take advantage of attractive investment opportunities
and thereby increase cash distributions and value to the holders
of the OTEF II BACs ("Liquidity BAC Holders").
Listing of OTEF II BACs-Liquidity and Trading Market. The
Managing General Partner is continuing discussions with two
national securities exchanges and expects OTEF II to formally
apply for listing on one of them in the near future. In
addition, prior to listing or shortly after listing, OTEF II will
divide or "split" the outstanding OTEF II BACs into smaller
denominations to enhance trading in, and liquidity of, the
OTEF II BACs and encourage a broader range of investors. It is
expected that the division will result in the issuance of
approximately 25 new OTEF II BACs ("New BACs") for each
outstanding OTEF II BAC.
Issuance of New BACs. All OTEF II BACs currently are held in
uncertificated, book-entry form on OTEF II's books.
Nevertheless, the OTEF II position of many OTEF II BAC Holders
are reported on their brokerage account statements, and
distributions made by OTEF II are credited directly to their
brokerage accounts.
In connection with the listing of the OTEF II BACs for trading
and the issuance of the New BACs, OTEF II will issue certificates
representing ownership of the New BACs. Unless OTEF II is
instructed otherwise (as described below), those OTEF II BAC
Holders whose OTEF II BACs are currently reported on their
brokerage account statements will not receive certificates for
their New BACs. Instead, the New BACs for such holders will be
issued in a form that will: (i) enable the New BACs to continue
to be reported on their account statements; (ii) enable all
distributions payable with respect to such New BACs to continue
to be credited directly to their brokerage accounts; and (iii)
enable such OTEF II BAC Holders to hold or sell the New BACs
through their brokerage firm accounts. Such form of issuance is
referred to as "street name" issuance, and is the same form that
generally applies to traded securities held in a brokerage
account.
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Report of Management
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Business Plan for Growth. Under the Liquidity and Growth
Plan, OTEF II will invest the proceeds of the Financing and any
additional funds that OTEF II may obtain in new assets described
below to increase the distributions payable with respect to the
New BACs and the value to the Liquidity BAC Holders.
Refunding and Financing. As of March 31, 1997, OTEF II had
refunded 12 of the Existing MRBs, which comprise approximately
87.5% of OTEF II's portfolio, including two refundings that
closed during the first quarter of 1997 (Colonel I and
Middletown). It is expected that the refunding of the two
remaining Existing MRBs will close during 1997. Refunding an
Existing MRB means exchanging that bond for newly issued
refunding bonds ("Refunding Bonds") with approximately the same
principal amount, an extended maturity and restructured interest
rates that increase each year during the terms of the Refunding
Bonds and that are designed to require the limited partnerships
which own the properties securing the bonds (the "Operating
Partnerships") to pay substantially all of their projected cash
flow as interest on the Refunding Bonds. As a result of these
refundings, the estimated value of the bonds held by OTEF II
as shown on the Balance Sheet increased by approximately
$2,387,000 as of March 31, 1997, compared to December 31, 1996.
The Refunding Bonds are structured so as to consist of senior
bonds ("Series A Bonds") and subordinated bonds ("Series B
Bonds"). This senior/subordinated structure will permit OTEF II
to undertake the Financing, pursuant to which it will sell all or
a portion of the Series A Bonds, or interests therein, that are
designated as Liquidity Assets, or issue debt that may be secured
by such assets, new assets or both. OTEF II will retain the
related Series B Bonds for the benefit of the Liquidity BAC
Holders, and will retain both the senior Series A Bonds and the
subordinated Series B Bonds, or interests therein, that are
designated as Status Quo Assets for the benefit of the Status Quo
BAC Holders.
In addition to the proceeds from the Financing, OTEF II may
acquire new assets: (i) from the proceeds of sales or other
dispositions of the Refunding Bonds and the proceeds from
principal payments with respect to the Refunding Bonds (except
for the portion of such proceeds allocable to the SQBs); (ii)
from the proceeds of sales or other dispositions of new assets
and the proceeds from principal payments with respect to new
assets; (iii) from the proceeds of issuances of additional equity
securities, including additional limited partnership interests in
OTEF II and additional OTEF II BACs; (iv) by issuing additional
equity securities in exchange for new assets; or (v) by borrowing
funds from lenders or by issuing evidences of indebtedness.
Although the Managing General Partner is authorized under
OTEF II's partnership agreement to reinvest cash flow in new
assets, it has no current plans to do so in the foreseeable
future.
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Report of Management
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Investment in New Assets. The Managing General Partner intends
to invest primarily in additional mortgage revenue bonds and
securities of other entities which primarily hold tax-exempt
mortgage revenue bonds. OTEF II also may invest in multifamily
real estate, senior living facilities or residential health care
facilities, or other direct or indirect debt or equity interests
in such real estate, some of which may give rise to taxable
income, but the Managing General Partner does not currently
expect that these types of investments will be a significant part
of its business in the foreseeable future. (All of the foregoing
are referred to collectively as "New Assets".)
OTEF II generally will acquire additional mortgage revenue
bonds and taxable bonds that are not rated by any of the
nationally recognized rating agencies (such as Moody's Investor
Services, Inc. or Standard & Poor's Ratings Group) and that are
not credit-enhanced at the time of acquisition, although OTEF II
may seek to have all or a portion of such bonds credit-enhanced
or rated at a future date. It also is expected that OTEF II may
invest in bonds, including bonds that may be secured by bonds or
mortgages that are subordinated to senior bonds or mortgages held
by third parties, on terms that will permit it, in many cases, to
participate (either through stepped interest rates or otherwise)
in the future growth and increase in value of the properties
financed by such bonds. In addition, in the case of bonds that
require restructuring, it is anticipated that OTEF II may be able
to acquire such bonds on a discounted basis, that is, where the
nominal principal amount of the bond exceeds the purchase price
and/or the estimated current liquidation value of the underlying
property.
Liquidity and Capital Resources
Current Position. OTEF II uses the interest payments it
receives from the Refunding Bonds and Existing MRBs primarily for
distributions to its General Partners, OTEF II BAC Holders and
SQB Holders, and to pay administrative expenses and fund
reserves, as well as the costs associated with the
implementation of the 1995 OTEF Restructuring Plan, including
OTEF II's costs associated with the defense of the OTEF II
Litigation and the payment by OTEF II of $2.5 million of fees and
expenses incurred by plaintiffs' counsel. As of May 16, 1997,
OTEF II has estimated that approximately $1.7 million will be
required to meet its obligations under the Optional Sale Plan.
Although OTEF II is unable to determine the total amount of its
funding obligations at this time, it believes that its funding
obligations will increase above this amount. Except as may be
required in connection with the 1995 OTEF Restructuring Plan,
OTEF II has no commitments for capital expenditures. A
distribution for the quarter ended March 31, 1997, in the amount
of $3,642,796, or $11.90 per BAC (4.76% per annum on the original
$1,000 invested per BAC) was made on May 15, 1997. This
distribution is consistent with the distributions made for the
previous eight quarters.
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Report of Management
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As of March 31, 1997, OTEF II held $11,977,000 in cash and
cash equivalents, a decrease of $95,000, or less than 1%, from
$12,072,000 in cash and cash equivalents held as of December 31,
1996. The slight decrease in OTEF II's cash and cash equivalents
is due primarily to payments received from its investments in the
Existing MRBs and the Refunding Bonds, offset by administrative,
governance and litigation costs associated with the
implementation of the 1995 OTEF Restructuring Plan which were
paid during the quarter ended March 31, 1997, as well as the
payment by OTEF II of the fourth quarter 1996 distribution. The
total liabilities of OTEF II shown on the Balance Sheet
decreased to $6,465,000 as of March 31, 1997, from $6,964,000
at December 31, 1996, and does not include an amount for its
obligation under the Optional Sale Plan discussed above.
Governance and administrative expenses totaled $332,000 for
the three-month period ended March 31, 1997, as compared to
$614,000 for the three-month period ended March 31, 1996. The
decrease of $282,000 was primarily attributable to a decrease in
governance expenses relating to the 1995 OTEF Restructuring Plan
offset by an increase in expense reimbursements to the General
Partners and their affiliates. Litigation and settlement costs
due to the OTEF II Litigation totaled $98,000 for the three-month
period ended March 31, 1997.
Existing MRBs. As of March 31, 1997, OTEF II held Existing
MRBs for two of the Operating Partnerships. It is expected that
the refunding of the two remaining Existing MRBs will close
during 1997.
The term of each Existing MRB, and accordingly, each Mortgage
Loan is 24 years. The principal will not be amortized during the
term of the Existing MRB, and will be required to be repaid in a
lump-sum balloon payment at the expiration of the bond term or at
such earlier time as OTEF II may require. Beginning on the first
day of the thirteenth year and continuing through the end of the
fourteenth year, OTEF II may require payment of all principal and
deferred interest due, upon 12 months' prior notice. In the
fifteenth year (if an Existing MRB has not been repaid earlier),
OTEF II will demand payment of principal and deferred contingent
interest due. Each Mortgage Loan is nonassumable and due on sale
of the Existing Mortgaged Property.
The Existing MRBs 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 amounts at the rate of 8.25% per annum, compounded
monthly and payable from future cash flow and sale or refinancing
proceeds.
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Report of Management
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Cumulative Unpaid Base Interest and interest on interest. As
of March 31, 1997, the two remaining Operating Partnerships with
Existing MRBs had cumulative unpaid Base Interest and interest on
interest at 8.25% per annum, compounded monthly, of approximately
$27,946,000. Under the applicable method of accounting, this
unpaid Base Interest was not reflected in the financial
statements of OTEF II. All cumulative unpaid Base Interest and
interest on interest on the remaining Existing MRBs is written-
off at such time as the Existing MRBs are refunded. During the
quarter ended March 31, 1997, the Existing MRBs for Middletown
and Colonel I were refunded, and $24,066,000 of accrued interest
was written-off during the quarter ended March 31, 1997.
As previously reported, under the 1988 OTEF Restructuring Plan
and the Debt Modification Agreements, dated as of April 12, 1995,
as amended, OTEF, OTEF II, the Operating Partnerships, and Oxford
entered into certain forbearance arrangements which modify many
of the terms of the Existing MRBs described above. At such time
as the Existing MRBs are refunded, the obligations of the
Operating Partnerships will be modified substantially as
discussed below.
Refunding Bonds
Series A Bonds. The term of each Refunding Bond and,
accordingly, each Mortgage Loan is 30 years following the date of
refunding. The Series A Bonds require interest only payments
during the first three years and, thereafter, are subject to
annual sinking fund redemptions that will result in full
amortization of the Series A Bonds during the 27-year remaining
term.
Series A Bond Interest and Principal. The Series A Bonds
require pre-determined annual sinking fund redemptions based on a
27-year amortization schedule beginning in the fourth year,
calculated with an assumed rate of interest of 5.6% per year.
Series A Bond interest is set initially at closing of the
refundings and reset annually at a market rate based upon a
percentage of the then prevailing one-year U.S. Treasury Bill
rate, with a maximum rate of 5.6% per annum. The initial
interest rate on the Series A Bonds that have been issued to date
is 4.9%. Upon a remarketing, the Series A Bonds may be converted
to a different interest rate mode (fixed or floating) and the
interest rates may be modified at that time to reflect the
prevailing market interest rates for whatever rate mode and
remaining term is then applicable. All required interest payments
were made on the Refunding Bonds, including accrued interest for
March 1997 that was paid in April 1997.
Series B Bonds. The term of each Series B Bond and,
accordingly, each Mortgage Loan is 30 years following the date of
refunding.
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Report of Management
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Series B Bond Interest and Principal. The Series B Bonds
accrue interest equal to the product of the Combined Rate (as
defined below) multiplied by the total combined principal balance
of the Series A Bonds and the Series B Bonds for each Operating
Partnership, less the interest payable on the related Series A
Bonds; the resulting amount of interest divided by the principal
balance of the Series B Bonds equals the interest accrual rate on
the Series B Bonds. Interest-only is payable on the Series B
Bonds to the extent of available cash flow of the Operating
Partnership, with the entire principal balance due at maturity.
Combined Rate. The Combined Rate represents that portion of
each Property's projected Cash Flow Before Debt Service ("CFBDS")
for each year (projected at the time of the refunding of each
Existing MRB) that may be applied to interest on the combined
Series A Bonds and Series B Bonds.
Other Sources. In connection with the closing of each
Refunding Bond, the applicable Operating Partnership will enter
into certain agreements which provide as follows: (i) for so long
as the Series A Bonds remain outstanding, each Operating
Partnership will apply its net operating income before payment of
interest and principal on its Series B Bonds to make loans to the
Operating Partnerships for the payment of interest and principal,
and related fees and expenses, reserves and deposits owed by such
Operating Partnerships on their respective Series A Bonds to the
extent the other Operating Partnerships are unable to make such
payments on their respective Series A Bonds, and (ii) for so long
as OTEF II owns the majority of the Series B Bonds relating to an
Operating Partnership's property and the Managing General Partner
of OTEF II is an affiliate of the current Managing General
Partner, the Operating Partnerships will each deposit into an
escrow account any excess cash flow on a monthly basis after the
obligations described in subparagraph (i) above have been met and
the payments required under that Operating Partnership's Series B
Bonds have been made, which funds shall be applied at OTEF II's
discretion to, among other things, make loans to other Operating
Partnerships to enable them to make all debt service payments due
on their Series B Bonds. As of March 31, 1997, the aggregate
amount of excess cash flow held in the escrows was approximately
$172,000, and approximately $162,000 of net excess cash flow
generated from March 1997 operations will be deposited into the
applicable escrows in April 1997.
Oxford Advances. As discussed in prior reports, Oxford is
continuing to hold proceeds from the $2 million Treasury Strip
Bond that it received on August 15, 1996. At March 31, 1997,
Oxford was holding approximately $1.2 million of such proceeds,
plus approximately $168,000 in accrued interest, in an interest-
bearing account pending a determination as to which Operating
Partnerships these funds should be allocated. This allocation
will be based on the individual refunding costs and reserve
requirements of the Operating Partnerships. The decrease totaling
$800,000 represents an allocation of funds based on the
individual refunding costs of certain Operating Partnerships'
bonds during the first quarter of 1997.
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Report of Management
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Results of Operations
The Partnership's Operations
The Partnerships' Three-Month Operations. 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 March 31, 1997. This distribution is consistent
with the distribution made for the previous eight quarters. For
financial statement purposes, Net Income and Net Income per BAC
were $4,266,000 and $13.94, respectively, for the three-month
period ended March 31, 1997, as compared to $4,073,000 and
$13.31, respectively, for the three-month period ended March 31,
1996.
As we announced in the Information Memorandum, the Managing
General Partner currently anticipates that the amount of the
quarterly distribution payable to the Liquidity BAC Holders and
the Status Quo BAC Holders will be increased by approximately 4%
later in 1997 following implementation of the Liquidity and
Growth Plan. Of course, future distributions (and any increases
in the distributions per BAC) are always subject to the ability
of the Operating Partnerships to make their scheduled debt
service payments, which, in turn, depends on the results of
future operations of their properties and on the aggregate
amount in the excess cash flow escrows.
The Operating Partnerships' Operations
The operating performance of each of the Operating
Partnerships depends primarily on occupancy and rental rates, the
amount of rent actually collected and expenditures for property
improvements and operating expenses for their respective
Properties. The occupancy and rental rates, in turn, depend on a
number of factors, including the location of a Property in its
particular community, local economic conditions and changes in
neighborhood characteristics, demand for similar housing, and
competition from existing and future housing complexes in the
vicinity of each Property.
The Operating Partnerships reported an aggregate net operating
income before property improvements of approximately $5,576,000
for the three-month period ended March 31, 1997, representing an
increase of approximately $352,000, or 6.7%, over the aggregate
net operating income before property improvements reported for
the same period in 1996. In addition, for the three-month period
ended March 31, 1997, overall property improvement expenditures
were approximately $467,000, representing an increase of
approximately $59,000, or 14.3%, as compared to the same period
in 1996.
Senior Living Properties. The Operating Partnerships that own
the four Senior Living Communities reported an aggregate net
operating income before property improvements of approximately
$1,579,000 for the three-month period ended March 31, 1997,
representing an increase of approximately $159,000, or 11.2%,
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Report of Management
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over the aggregate net operating income before property
improvements reported for the same period in 1996. The weighted
average occupancy rate for these four properties at March 31,
1997 was 92%, as compared to 89% at March 31, 1996. The weighted
average monthly rent collected for March 1997 for the four Senior
Living Communities increased by approximately 3% to $1,772, as
compared to $1,723 for the same period in 1996. In addition, for
the three-month period ended March 31, 1997, overall property
improvement expenditures for the four Senior Living Communities
were approximately $161,000, representing an increase of
approximately $48,000, or 42.6%, as compared to the same period
in 1996.
Apartment Properties. The Operating Partnerships that own the
10 garden apartments reported an aggregate net operating income
before property improvements of approximately $3,997,000 for the
three-month period ended March 31, 1997, representing an increase
of approximately $194,000, or 5.1%, over the aggregate net
operating income before property improvements reported for the
same period in 1996. The weighted average occupancy rate for the
10 garden apartment communities was approximately 93% at
March 31, 1997, as compared to 94% at March 31, 1996. The
weighted average monthly rent collected for March 1997 for the 10
garden apartments increased by approximately 4% to $751, as
compared to $720 for the same period in 1996. In addition, for
the three-month period ended March 31, 1997, overall property
improvement expenditures for the 10 garden apartments were
approximately $306,000 representing a decrease of approximately
$10,000, or 3.5%, as compared to the same period in 1996.
Summary
With the restructuring program nearly completed, OTEF II is
poised to take advantage of attractive investment opportunities.
The refunding of the Existing MRBs held by OTEF II is expected to
give OTEF II access to the capital markets. The Liquidity BAC
Holders should benefit from the increase in value of the OTEF II
BACs that is expected to occur as OTEF II acquires new assets.
In addition, the Liquidity BAC Holders should benefit from more
efficient market pricing of the OTEF II BACs that is expected to
occur as a result of listing the OTEF II BACs on a national
securities exchange.
<PAGE> 15
Oxford Tax Exempt Fund II Limited Partnership
<TABLE>
- -------------------------------------------------------------------
Balance Sheets (in thousands)
- -------------------------------------------------------------------
<CAPTION>
March 31, 1997
(Unaudited) December 31, 1996
- -------------------------------------------------------------------
<S> <C> <C>
Assets
Investments in Bonds $217,916 $215,529
Cash and cash equivalents 11,977 12,072
Bond interest receivable 1,323 1,099
Other, primarily interest
receivable 28 33
- -------------------------------------------------------------------
Total Assets $231,244 $228,733
===================================================================
Liabilities and Partners' Capital
Liabilities
Accounts payable and accrued
expenses $ 2,822 $ 3,321
Distributions payable 3,643 3,643
- -------------------------------------------------------------------
Total Liabilities 6,465 6,964
- -------------------------------------------------------------------
Partners' Capital
General Partners (2,381) (2,393)
Limited Partners' Interests
(Beneficial Assignee
Interests-299,995 interests
issued and outstanding) 162,276 161,665
Unrealized Gain on Investments 64,884 62,497
- -------------------------------------------------------------------
Total Partners' Capital 224,779 221,769
- -------------------------------------------------------------------
Total Liabilities and
Partners' Capital $231,244 $228,733
===================================================================
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE> 16
Oxford Tax Exempt Fund II Limited Partnership
<TABLE>
- -------------------------------------------------------------------
Statements of Income (in thousands, except per BAC amounts)
(Unaudited)
- -------------------------------------------------------------------
<CAPTION>
For the three months
ended March 31,
--------------------
1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Revenues
Interest on Bonds $4,605 $4,602
Other, primarily interest on short-term
investments 91 85
- -------------------------------------------------------------------
4,696 4,687
Expenses
Governance and administrative expenses 332 614
Litigation and settlement costs 98 0
- -------------------------------------------------------------------
Net income $4,266 $4,073
===================================================================
Net income allocated to General Partners $ 85 $ 81
===================================================================
Net income allocated to BAC Holders $4,181 $3,992
===================================================================
Net income per BAC $13.94 $13.31
===================================================================
Distribution per BAC $11.90 $11.90
===================================================================
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE> 17
Oxford Tax Exempt Fund II Limited Partnership
<TABLE>
- -----------------------------------------------------------------------------
Statement of Partners' Capital (in thousands)
- -----------------------------------------------------------------------------
<CAPTION>
Limited
Partners'
Interests
----------
Beneficial Unrealized
General Assignee Gain on
Partners Interests Investments Total
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, December 31, 1996 $(2,393) $161,665 $62,497 $221,769
- -----------------------------------------------------------------------------
Net Income 85 4,181 0 4,266
Distributions payable to Partners,
including $11.90 per BAC (73) (3,570) 0 (3,643)
Unrealized Gain on Investments 0 0 2,387 2,387
- -----------------------------------------------------------------------------
Balance, March 31, 1997 (Unaudited) $(2,381) $162,276 $64,884 $224,779
=============================================================================
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE> 18
Oxford Tax Exempt Fund II Limited Partnership
<TABLE>
- --------------------------------------------------------------------
Statements of Cash Flows (in thousands)
(Unaudited)
- --------------------------------------------------------------------
<CAPTION>
For the three months
ended March 31,
--------------------
1997 1996
- --------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 4,266 $ 4,073
Adjustments to reconcile net income to net
cash provided by operating activities:
Changes in assets and liabilities:
Bond interest receivable (224) 0
Other, primarily interest receivable 5 3
Due from affiliates 0 308
Accounts payable and accrued expenses (499) 26
- --------------------------------------------------------------------
Net cash provided by operating activities 3,548 4,410
- --------------------------------------------------------------------
Net cash provided by investing activities 0 0
- --------------------------------------------------------------------
Financing activities
Distributions paid to Partners and BAC Holders (3,643) (3,643)
- --------------------------------------------------------------------
Net cash used by financing activities (3,643) (3,643)
- --------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (95) 767
Cash and cash equivalents, beginning of period 12,072 9,698
- --------------------------------------------------------------------
Cash and cash equivalents, end of period $11,977 $10,465
====================================================================
The accompanying notes are an integral part
of these financial statements.
</TABLE>
<PAGE> 19
- -----------------------------------------------------------------
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 March 31, 1997 and
December 31, 1996, the Statements of Income for the three-month
periods ended March 31, 1997 and 1996, the Statement of Partners'
Capital as of March 31, 1997, and the Statements of Cash Flows
for the three-month periods ended March 31, 1997 and 1996, and
the notes thereto, in accordance with generally accepted
accounting principles. These statements should be read in
conjunction with the audited financial statements and notes
included in the Partnership's Annual Report for the year ended
December 31, 1996.
In February 1997, the Financial Accounting Standards Board
issued a Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," which will change the reporting of earnings
per share effective in the fourth quarter of 1997. Basic
earnings per share, a measure required by the new standard, will
not include stock options as common stock equivalents. The new
standard also requires a company to report diluted earnings per
share.
Note 2. Business
The Partnership 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 Oxford Tax Exempt
Fund Limited Partnership, a Maryland limited partnership ("OTEF,"
"Predecessor," or "OTEF II's predecessor"). Oxford Tax Exempt
Fund II Corporation, a Maryland corporation, is the Managing
General Partner of OTEF II (the "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").
Business Plan for Growth. Under the Liquidity and Growth
Plan, OTEF II will invest the proceeds of the Financing and any
additional funds that OTEF II may obtain in new assets described
below to increase the distributions payable with respect to the
New BACs and the value to the Liquidity BAC Holders.
Refunding and Financing. As of March 31, 1997, OTEF II had
refunded 12 of the Existing MRBs, which comprise approximately
87.5% of OTEF II's portfolio, including two refundings that
closed during the first quarter of 1997 (Colonel I and
Middletown). It is expected that the refunding of the two
remaining Existing MRBs will close during 1997. Refunding an
Existing MRB means exchanging that bond for newly issued
refunding bonds ("Refunding Bonds") with approximately the same
principal amount, an extended maturity and restructured interest
<PAGE> 20
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
rates that increase each year during the terms of the Refunding
Bonds and that are designed to require the limited partnerships
which own the properties securing the bonds (the "Operating
Partnerships") to pay substantially all of their projected cash
flow as interest on the Refunding Bonds. As a result of these
refundings, the estimated value of the bonds held by OTEF II
as shown on the Balance Sheet increased by approximately
$2,387,000 as of March 31, 1997, compared to December 31, 1996.
The Refunding Bonds are structured so as to consist of senior
bonds ("Series A Bonds") and subordinated bonds ("Series B
Bonds"). This senior/subordinated structure will permit OTEF II
to undertake the Financing, pursuant to which it will sell all or
a portion of the Series A Bonds, or interests therein, that are
designated as Liquidity Assets, or issue debt that may be secured
by such assets, new assets or both. OTEF II will retain the
related Series B Bonds for the benefit of the Liquidity BAC
Holders, and will retain both the senior Series A Bonds and the
subordinated Series B Bonds, or interests therein, that are
designated as Status Quo Assets for the benefit of the Status Quo
BAC Holders.
In addition to the proceeds from the Financing, OTEF II may
acquire new assets: (i) from the proceeds of sales or other
dispositions of the Refunding Bonds and the proceeds from
principal payments with respect to the Refunding Bonds (except
for the portion of such proceeds allocable to the SQBs); (ii)
from the proceeds of sales or other dispositions of new assets
and the proceeds from principal payments with respect to new
assets; (iii) from the proceeds of issuances of additional equity
securities, including additional limited partnership interests in
OTEF II and additional OTEF II BACs; (iv) by issuing additional
equity securities in exchange for new assets; or (v) by borrowing
funds from lenders or by issuing evidences of indebtedness.
Although the Managing General Partner is authorized under
OTEF II's partnership agreement to reinvest cash flow in new
assets, it has no current plans to do so in the foreseeable
future.
Investment in New Assets. The Managing General Partner intends
to invest primarily in additional mortgage revenue bonds and
securities of other entities which primarily hold tax-exempt
mortgage revenue bonds. OTEF II also may invest in multifamily
real estate, senior living facilities or residential health care
facilities, or other direct or indirect debt or equity interests
in such real estate, some of which may give rise to taxable
income, but the Managing General Partner does not currently
expect that these types of investments will be a significant part
of its business in the foreseeable future. (All of the foregoing
are referred to collectively as "New Assets".)
OTEF II generally will acquire additional mortgage revenue
bonds and taxable bonds that are not rated by any of the
nationally recognized rating agencies (such as Moody's Investor
<PAGE> 21
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
Services, Inc. or Standard & Poor's Ratings Group) and that are
not credit-enhanced at the time of acquisition, although OTEF II
may seek to have all or a portion of such bonds credit-enhanced
or rated at a future date. It also is expected that OTEF II may
invest in bonds, including bonds that may be secured by bonds or
mortgages that are subordinated to senior bonds or mortgages held
by third parties, on terms that will permit it, in many cases, to
participate (either through stepped interest rates or otherwise)
in the future growth and increase in value of the properties
financed by such bonds. In addition, in the case of bonds that
require restructuring, it is anticipated that OTEF II may be able
to acquire such bonds on a discounted basis, that is, where the
nominal principal amount of the bond exceeds the purchase price
and/or the estimated current liquidation value of the underlying
property.
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 (collectively, "OTEF II 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.
Valuation of Bonds. The OTEF II Managing General Partner
estimated at March 31, 1997 that the fair value of the 12 Series
A and B Bonds and the two Existing MRBs was approximately
$217,916,000 and, accordingly, OTEF II recorded a credit to
Partners' Capital in an amount equal to approximately $64,884,000
of unrealized gain on investments. The current fair value of the
Series A and B Bonds and the Existing MRBs 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. The Series A Bonds
are valued at par based on comparable municipal bond securities,
and all other bonds (the Existing MRBs and the Series B Bonds)
are valued based on a discounted cash flow analysis. For this
purpose 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.
<PAGE> 22
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
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.
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 March 31, 1997 and 1996.
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 and administrative expenses totaled $332,000 for
the three-month period ended March 31, 1997, as compared to
$614,000 for the three-month period ended March 31, 1996. The
decrease of $282,000 was primarily attributable to a decrease in
governance expenses relating to the 1995 OTEF Restructuring Plan
offset by an increase in expense reimbursements to the General
Partners and their affiliates. Litigation and settlement costs
due to the OTEF II Litigation totaled $98,000 for the three-month
period ended March 31, 1997.
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's cash flow and possibly of sale,
refinancing and liquidation proceeds. Distributions to the
General Partners totaled $73,000 for March 31, 1997 and 1996.
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 Existing MRBs are refunded, all cash flow attributable
to these interests will be pledged for the benefit of OTEF II.
Compensation and Fees. For the three-month periods ended
March 31, 1997 and 1996, the Operating Partnerships paid total
property and asset management fees of $577,000 and $564,000,
respectively. Of the $577,000 of property and asset management
fees, $428,000 was paid to NHP, Inc. and certain affiliates
(collectively, "NHP"), as compared to $421,000 for the same
period in 1996. The remaining fees totaling $149,000 was paid to
Oxford Realty Financial Group, Inc. ("ORFG"), as compared to
<PAGE> 23
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
$143,000 for the same period in 1996. During the three-month
periods ended March 31, 1997 and 1996, the Operating Partnerships
also paid ORFG, in the aggregate, $174,000 of fees pursuant to
the OTEF Restructuring Plan Administration/Asset Management Fee
Agreement, which amount is equal to 0.25% per annum of the
principal amount of the bonds collateralized by the properties
owned by the Operating Partnerships ("Existing Mortgaged
Properties").
Fees Payable to ORFG. As discussed above, ORFG provides
various management services, relating to the Existing Mortgaged
Properties and OTEF II's investment therein. It will provide
additional services in connection with OTEF II's investment in
New Assets, as described above. The fees payable to ORFG for the
services it is providing currently (the "Existing Fees") are
operating expenses of the Operating Partnerships that are payable
prior to the payment of interest on the Existing MRBs. OTEF II
did not pay any fees in connection with OTEF II's investment in
New Assets to ORFG during the quarter ended March 31, 1997;
however, with the implementation of the Liquidity and Growth Plan
in 1997, OTEF II anticipates that it will pay ORFG new fees (the
"New Asset Fees") in the near future. The paragraphs below
describe the New Asset Fees:
Acquisition Fee. ORFG will be entitled to an acquisition fee
for finding, analyzing and acquiring New Assets. The acquisition
fee, which is payable on the closing of any transaction in which
OTEF II acquires a New Asset, is equal to 1.0% of (i) the
purchase price paid by OTEF II for the New Asset, or (ii) with
respect to a New Asset which is subordinated in payment to senior
indebtedness, the sum of (A) the purchase price paid by OTEF II
for its subordinated interest and (B) the principal amount of the
senior interest, if any; provided, however, that no acquisition
fee shall be paid with respect to the principal amount of any
such senior interest if OTEF II has not purchased the senior
interest and neither the Managing General Partner nor any of its
affiliates had any material involvement in the negotiation,
structuring or closing of the purchase of the senior interest.
In the case of a New Asset which is subordinated in payment to
senior indebtedness as of the closing of the transaction in which
OTEF II acquires its interest, the maximum acquisition fee
payable shall be equal to 2.5% of the purchase price paid by
OTEF II for such interest as of the date of closing.
Advisory Fee. OTEF II also will pay ORFG an advisory fee for
managing OTEF II's New Assets after their acquisition. The
advisory fee, which is payable annually, is equal to 0.5% of (i)
the purchase price paid by OTEF II for a New Asset, or (ii) with
respect to a New Asset which is subordinated in payment to senior
indebtedness, the sum of (A) the purchase price paid by OTEF II
for its subordinated interest and (B) the principal amount of the
senior interest; provided, however, that if an affiliate of the
Managing General Partner is receiving fees for property
management services pursuant to a property management agreement
<PAGE> 24
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
entered into with the owner of an Additional Mortgaged Property,
the advisory fee will be equal to 0.5% of the purchase price paid
by OTEF II for the related New Asset. In addition, if the
Managing General Partner receives in any year compensation or
fees from an unaffiliated person that serves as the property
manager for the Additional Mortgaged Property, the amount of the
advisory fee payable with respect to the related New Asset shall
be reduced by 50% of any such compensation or fees received by
the Managing General Partner.
Expense Reimbursements. The Operating Partnerships and
OTEF II also reimburse ORFG for certain expenses it incurs in
providing services with respect to the Existing Mortgaged
Properties and the administration of OTEF II's affairs. Total
reimbursements to the General Partners and their affiliates for
the three-month periods ended March 31, 1997 and 1996, were
$86,000 and $22,900, respectively. Such reimbursable amount is
determined based on the actual time the officers and employees
devote to OTEF II based upon their respective salaries.
Incentive Option Plan. OTEF II intends to adopt an incentive
option plan (the "Incentive Option Plan") in order for the
Managing General Partner to attract and retain key employees and
advisers. The Incentive Option Plan will authorize the granting
to the directors, officers and employees of the Managing General
Partner and certain affiliates of options to purchase
approximately 26,000 OTEF II BACs (prior to any division of the
OTEF II BACs in connection with listing the OTEF II BACs on a
national securities exchange), which will represent approximately
8.3% of the outstanding OTEF II BACs (assuming approximately
13,000 OTEF II BACs are converted into SQBs.)
The Managing General Partner anticipates that options to
purchase all or substantially all of the OTEF II BACs offered
pursuant to the Incentive Option Plan will be granted prior to
the effective date of listing of the OTEF II BACs for trading.
The exercise price per BAC shall be the average of the closing
price of an OTEF II BAC, as reported on the appropriate exchange
on which the OTEF II BACs are listed or designated for the first
twenty days of trading or, with respect to any BAC option
exercised between the option grant date and the determination of
the average trading price, it shall be the fair market value as
determined by the Board of Directors of the Managing General
Partner on the basis of available prices.
Note 5. Subsequent Events
Effective April 1, 1997, OTEF II issued in book-entry form
SQBs to BAC Holders who made a timely election to convert their
OTEF II BACs to SQBs, representing approximately 4.3% of the
outstanding BACs. SQB Holders have until June 20, 1997, to
exercise their option to require OTEF II to purchase or redeem
their SQBs pursuant to the Optional Sale Plan, described in the
Information Memorandum dated December 2, 1996, that was furnished
to BAC Holders. As of May 16, 1997, 3,115 SQBs have been
tendered by 162 Status Quo BAC Holders.
<PAGE> 25
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
On May 15, 1997, OTEF II made a quarterly cash distribution of
$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 March 31,
1997. This distribution is consistent with the distribution made
for the previous eight quarters.
<PAGE> 26
- -----------------------------------------------------------------
Instructions for Investors who wish to reregister or transfer
OTEF II BACs
- -----------------------------------------------------------------
Please follow the instructions below to expedite the
reregistration or transfer of ownership of any OTEF II Beneficial
Assignee Interests ("OTEF II 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 charges $150 for
the conversion of a BAC into a limited partner interest.
To transfer ownership of OTEF II 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 Investor Services at (248) 614-4550 or
P.O. Box 7090, Troy, Michigan 48007-7090, to obtain transfer
documents. YOU MUST OBTAIN THE PROPER TRANSFER DOCUMENTS FROM
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 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> 27
- -----------------------------------------------------------------
Instructions for Investors who wish to reregister or transfer
OTEF II BACS
- -----------------------------------------------------------------
Please remember to notify Investor Services in writing at the
address below or by calling (248) 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
March 31, 1997, 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 48007-7090
(248) 614-4550
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted
from the Balance Sheet at March 31, 1997 (Unaudited) and the
Statements of Income for the year ended March 31, 1997 (Unaudited)
and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 11,977
<SECURITIES> 217,916
<RECEIVABLES> 1,351
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 231,244
<CURRENT-LIABILITIES> 6,465
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 224,779
<TOTAL-LIABILITY-AND-EQUITY> 231,244
<SALES> 0
<TOTAL-REVENUES> 4,696
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 430
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,266
<EPS-PRIMARY> 13.94
<EPS-DILUTED> 13.94
</TABLE>
