<PAGE> 1
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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 March 31, 2000
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
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:
Beneficial Assignee Interests
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes /X/ NO / /.
At March 31, 2000, the following classes of beneficial assignee
interests of Oxford Tax Exempt Fund II Limited Partnership were
outstanding: (i) 7,329,050 beneficial assignee interests
("BACs") with an aggregate market value ($23.50 per share) of
$172,232,675, and (ii) 712 Status Quo BACs ("SQBs").
Index to Exhibits is found on page 3.
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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 financial statements of OTEF II are incorporated herein by
reference to sequentially numbered pages 11 through 14 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, 2000 is
incorporated herein by reference to sequentially numbered pages 6
through 10 entitled "Report of Management" included in OTEF II's
Quarterly Report (Unaudited).
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Changes in Securities.
Information responsive to this Item regarding changes in
securities is contained in Item 2 of the Form 10-Q/A for the
quarter ended March 31, 1997, filed by OTEF II.
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.
<PAGE> 3
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, 2000, follows on
sequentially numbered pages 5 through 20 of this report.
(27) Financial Data Schedule.
<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: 5/03/00 By: /S/ Richard R. Singleton
-------- ----------------------------------------
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: 5/03/00 By: /S/ Francis P. Lavin
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Francis P. Lavin
Director and President
Date: 5/03/00 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, 2000
CONTENTS
Report of Management
Balance Sheets
Statements of Income and Comprehensive 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
<PAGE> 6
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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 ("OTEF II" or the
"Partnership"), as of March 31, 2000, 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
Distribution for the Quarter ended March 31, 2000. The
Managing General Partner declared, on March 16, 2000 a
distribution for the quarter ended March 31, 2000 in the amount
of $0.54 per BAC. This distribution is in the same amount as the
fourth quarter of 1999, which was paid on February 14, 2000.
Investment Transactions. On November 24 , 1999, OTEF II
closed a development venture transaction for The Peaks at Conyers
Apartments, a 260-unit apartment community being developed in
Conyers, Georgia, an Atlanta suburb, for a total development cost
of approximately $18.2 million. As of the date of this report,
construction continues on the The Peaks at Conyers, including
grading and related sitework. Based on the draw requests
received to date, work completed and materials supplied represent
approximately 21% of the amount of the construction contract.
The foundations have been completed for buildings 6-10, and
framing of the first floor walls of buildings 2-5 and the
clubhouse has been completed. OTEF II will continue to monitor
the progress of construction relating to this property.
Financing Transactions. In connection with the River Reach
investment transaction, the Managing General Partner has been
working on an extension of the existing credit enhancement
arrangement. The credit enhancement on the $24 million of
floating rate, tax-exempt bonds provided by Banco Santander
Central Hispano, S.A.("Banco Santander"), was scheduled to expire
on or about June 9, 2000. In addition, OTEF II executed a standby
reimbursement agreement with a Merrill Lynch affiliate which
effectively guarantees the approximately $24 million obligations
of the Naples borrower to Banco Santander. In April, the
Managing General Partner of OTEF II was advised by Merrill Lynch
and Banco Santander that the letter of credit and reimbursement
agreement will be extended to December 11, 2000. On February 4,
2000, an additional advance in the amount of approximately
$0.25 million was made by OTEF II on the taxable loan,
increasing the outstanding principal balance to $11.8 million at
March 31, 2000. OTEF II also made additional advances on its
taxable loans to the Summerwalk and Jacaranda borrowers in the
aggregate amount of $0.188 million.
OTEF II is continuing to work on bond refunding and
refinancing transactions with respect to the Summerwalk property.
The senior tax-exempt bonds secured by this property are
currently held by third parties. Based on its preliminary
discussions, the Managing General Partner anticipates
consummating refunding or refinancing transactions for this
property later this year.
Amortization of Series A Bonds. Effective April 15, 2000,
mandatory quarterly sinking fund redemptions begin on the twelve
Original Refunding Bonds (as defined below). These Original
Refunding Bonds provide for payments of interest only for the
first three years and then amortize over a 27-year period
beginning in the fourth bond year. While the total payments on
these bonds increase each year, the portion of the payments
allocable to interest will decrease in the fourth year and
increase each year thereafter. Accordingly, it is anticipated
that OTEF II will receive aggregate principal payments of
approximately $1.4 million in 2000. Of this amount,
approximately 41% will be applied to reduce the financing debt
reported by OTEF II on its balance sheet, which was approximately
$52.6 million at March 31, 2000. Substantially all of the
balance of the principal payments will reduce OTEF II's remaining
investment in the related bonds. While the interest earned on
these bonds will decrease in 2000, from the amount earned for
1999, by approximately $0.19 per share, the total principal and
interest that is projected to be received by OTEF II with respect
to these bonds for 2000 will be higher than the amount of
interest received on these bonds for 1999. The interest rates on
these bonds will increase in 2001 and each year thereafter
through the remaining term of the Original Refunding Bonds.
Book Value. At March 31, 2000, the book value of the BACs
was approximately $36.28 on a fully diluted basis, taking into
account the 1997 Incentive Options. Book value is calculated as
the sum of the BAC capital account plus the BACs' allowable share
of accumulated comprehensive income, divided by the fully diluted
shares outstanding at March 31, 2000.
<PAGE> 7
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Report of Management
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BAC Repurchase Program. On October 30, 1998, the Managing
General Partner authorized the repurchase, from time to time, of
up to 250,000 BACs. OTEF II may purchase BACs in the open market
or through privately negotiated transactions. The timing and
amount of BACs purchased will be dependent on the availability of
BACs and other market factors. OTEF II will purchase BACs only
to the extent that they may be purchased at favorable prices.
Under this program, OTEF II acquired 2,000 BACs in December 1998
for approximately $0.05 million. On January 18, 2000, OTEF II
acquired an additional 10,000 BACs for approximately $0.24
million. These securities are reflected in partners capital on
the balance sheet as Treasury Stock.
Liquidity and Capital Resources
To pursue additional investment opportunities , OTEF II
requires additional capital from time to time. In addition to
proceeds from financings, OTEF II may generally acquire
additional investments ("New Assets"): (i) from the proceeds of
sales or other dispositions of Original Refunding Bonds (defined
below) and the Existing MRBs (as defined below) and the proceeds
from principal payments with respect to the Original Refunding
Bonds (except for the portion of such proceeds allocable to
SQBs), as well as bonds issued to refund any tax-exempt bonds
acquired by OTEF II pursuant to the Liquidity and Growth Plan;
(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 BACs or other limited
partnership interests in OTEF II; (iv) from the issuance of
additional equity securities in exchange for New Assets; or (v)
by funds borrowed from lenders or by issuing evidences of
indebtedness.
Current Position. OTEF II uses its cash receipts primarily
for distributions to BAC Holders, and its General Partners, to
pay administrative expenses, and to acquire New Assets and pay
the costs and expenses relating to such transactions. As of
March 31, 2000, OTEF II held approximately $4.8 million in cash
and cash equivalents, a decrease of $0.7 million, or
approximately 13%, from the $5.5 million in cash and cash
equivalents held as of December 31, 1999. In addition to the use
of funds described under "Recent Developments" above, this
decrease in cash results from timing differences from the
reduction in the combined rates of the Original Refunding Bonds
in the fourth quarter of 1999 and first quarter of 2000 and the
due date of their first principal payments on April 15, 2000.
This decrease also reflects the change in the timing of payments
on the San Bruno bond from monthly to semi-annual, which change
in payment frequency was effective with the issuance of the
remarketing bonds on November 1, 1999. The first semi-annual
payment is due May 2000.
Financing Transactions . OTEF II undertakes securitization
transactions with respect to its bond portfolio from time to time
to enhance its overall return on investment and to generate
proceeds, which facilitate the acquisition of New Assets. OTEF
II has securitized approximately $76.8 million of its bond
portfolio, including certain of the Series A Bonds and the
Carpenter bond, by assigning these bonds to a Merrill Lynch
affiliate which, in turn, deposited them into trusts. The trusts,
in turn, sold to institutional investors senior, floating rate
securities credit enhanced by a Merrill Lynch affiliate. These
senior securities have first priority on the debt service
payments related to the bonds held in these trusts. OTEF II
acquired all the subordinated interests in these trusts,
aggregating approximately $15 million, and received the proceeds,
net of transaction costs from the sale of the senior securities.
In addition, in a transaction involving the Carpenter bonds, OTEF
II acquired approximately $9 million of senior trust interests,
which may be sold at any time to provide cash to OTEF II for new
acquisitions or for any other purpose. OTEF II has certain
rights to repurchase and/or refinance the bonds and to repurchase
the senior securities and, therefore, retains a level of control
over the bonds. These securitization transactions provide a low-
cost financing option for OTEF II's growth. The portion of the
net proceeds from these transactions that is not invested in New
Assets is temporarily invested in liquid tax-exempt money market
securities.
In connection with these transactions , OTEF II converted
the interest rate mode on the Series A Bonds involved in these
transactions from an annual to weekly reset. On August 22, 1997,
and September 21, 1998, OTEF II purchased three-year interest
rate caps on a notional amount of approximately $27 million and
$30 million, respectively, to minimize the effects of interest
rate volatility. Under these arrangements, if the average short-
term, tax-exempt interest rates during the term of the cap
increase above a specified level (6% and 4.5%, respectively), the
counter-party to the interest rate cap transaction is required to
pay directly to OTEF II the amount by which such rates exceed the
specified level. Through March 31, 2000 no payments were
required to be made by the counter-party pursuant to these
interest cap agreements.
<PAGE> 8
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Report of Management
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For financial statement purposes , these transactions are
accounted for as financing transactions. The amount of bonds
financed, approximately $76.8 million, is reflected as Securities
Held in Trust, the net cash proceeds not reinvested are
classified as Cash and Cash Equivalents and the difference
between the principal amount of the bonds financed and the
principal amount of the subordinated interests acquired by OTEF
II is classified as financing debt on OTEF II's balance sheet.
The aggregate financing debt at March 31, 2000 and December 31,
1999 was approximately $52.6 million. OTEF II's financing debt
represents approximately 16.4% of OTEF II's total assets (or
30.4% of OTEF II's total assets if the entities in which OTEF II
has made a subordinated debt investment were consolidated). Due
to the credit enhancement provided by a Merrill Lynch affiliate
in connection with the securitization transactions, and favorable
underwriting characteristics (generally, low loan-to-value and
high debt coverage), this financing debt bears interest at the
Bond Marketing Association (BMA) weekly floating bond index plus
approximately 80 to 85 basis points (including credit
enhancement, trustee and related fees). This rate averaged 4.47%
for the 3 months ended March 31, 2000, 3.71% for the 3 months
ended March 31, 1999 and 4.18% for the twelve months of 1999.
The credit enhancement associated with substantially all of the
financing debt was extended to February 15, 2001. While OTEF II
is not an obligor and, therefore, is not liable for repayment of
this financing debt, the Securitized Bonds (in which OTEF II owns
approximately $24 million of subordinated interests through the
trusts) are in effect collateral for this financing debt. Based
on its preliminary discussions with financing sources, the
Managing General Partner believes that OTEF II will be able to
extend the credit enhancement or refinance this financing debt,
although no assurances can be given.
Costs associated with these financing transactions are
amortized over ten years for financial statement purposes, and
costs associated with the interest rate cap are being amortized
over the life of each interest rate cap agreement, which is three
years. For federal income tax purposes, these transactions are
treated as sales by OTEF II of the applicable bonds and a
purchase of senior and subordinated interests in the trusts.
Original Refunding Bonds. OTEF II has acquired refunding
bonds ("Original Refunding Bonds") for twelve of the fifteen
original mortgage revenue bonds ("MRBs"), representing
approximately 88% of the face amount of the original bond
portfolio. The Original Refunding Bonds currently held by OTEF
II consist of senior bonds ("Series A Bonds") and subordinated
bonds ("Series B Bonds"). This senior/subordinated structure
has allowed OTEF II to undertake several financing transactions
involving the Series A Bonds allocable to BAC Holders
("Liquidity Assets"). OTEF II retained the related Series B
Bonds for the benefit of the BAC Holders, and retained both the
Series A Bonds and the Series B Bonds that are designated as
Status Quo Assets and held for the benefit of SQB Holders.
Series A Bonds. The term of each Original 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. See "Recent Developments" for a discussion of
the amortization.
In the annual reset mode, Series A Bond interest was set
initially at closing of the refundings and is reset annually
thereafter 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 interest rate on seven of the Series A
Bonds retained by OTEF II was reset on November 1, 1999 to 4.88%;
the interest rate on three Series A Bonds retained by OTEF II was
reset on December 1, 1999 to 5.12%. On January 1, 2000, the
interest rate on one Series A Bond retained by OTEF II was reset
to 5.37%, and the interest rate on another Series A Bond was
reset on March 1, 2000 to 5.54%. The interest rate on the Series
A Bonds involved in the financing transactions described above
was converted from annual reset to a weekly floating rate based
on a spread over the BMA index. This rate averaged 3.57% for the
3 months ended March 31, 2000, 3.77% for the 3 months ended March
31, 1999, and 4.18% for the twelve months of 1999. 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.
Series B Bonds. The term of each Series B Bond and,
accordingly, each Mortgage Loan is 30 years following the date of
refunding.
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 and any unpaid
interest due at maturity.
<PAGE> 9
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Report of Management
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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 the
Original Refunding Bonds, the applicable Operating Partnerships
entered into certain pooling agreements which may provide under
certain circumstances additional sources of funds to enable them
to pay their respective debt service on the Series A Bonds and
the Series B Bonds and related fees and expenses. As of March 31,
2000, the aggregate amount of net excess cash flow held in the
Operating Partnership escrows was approximately $4.4 million,
including deposits from March's cash flow compared to $3.8
million at the end of 1999.
Remarketed Bonds. As required under the trust indentures
for the Existing MRBs, on November 1, 1999, the Existing MRBs for
the Apollo and San Bruno Operating Partnerships were remarketed,
which means that OTEF II exchanged the Existing MRBs for new
bonds that bear a fixed rate of interest to maturity at a market
rate determined by a remarketing agent. The remarketing agent
determined the fixed rate of interest on the San Bruno bonds to
be 9% per annum. The trust indenture for the Apollo bonds
specified that the fixed rate of interest on the remarketed bonds
was the lower of the rate established by the remarketing agent or
150 basis points in excess of the Bond Buyer 20-bond index. The
new rate was determined to be 7.49% on the remarketing date. The
original maturity date of November 2009 was not changed.
In addition , in connection with the remarketing, the San
Bruno and Apollo Operating Partnerships delivered to OTEF II
interest-bearing, demand promissory notes dated November 1, 1999,
in the original principal amount of $8.8 million and $5.2
million, respectively. The principal amount of the San Bruno
note reflects contingent interest in the amount of $8.6 million
due and payable on the remarketing date together with accrued but
unpaid base interest. The principal amount of the Apollo note
reflects accrued but unpaid interest only since no contingent
interest was due and payable on the remarketing date. The demand
notes bear floating rate interest at the short-term federal rate.
For tax purposes the principal amount of the San Bruno demand
note was reported as tax exempt interest income. For financial
statement purposes, the estimated amounts to be collected on the
San Bruno note are being accrued to income, under the effective
interest method, over the expected remaining life of the San
Bruno bond. Due to uncertainty of collection, the Apollo demand
note has not been recognized for either tax or financial
statement purposes. As of March 31, 2000, the unpaid principal
and accrued interest on the San Bruno and Apollo demand notes was
approximately $8.5 million and $5.2 million, respectively.
OTEF II is continuing to explore with the Apollo Operating
Partnership a possible bond restructuring or refinancing
transaction. The Managing General Partner currently believes
that the amount of the Apollo bond and cumulative unpaid base
interest exceeds the value of the property owned by the Apollo
Operating Partnership. The San Bruno Operating Partnership is
currently considering a refinancing of its mortgage indebtedness
in addition to a possible bond restructuring or other capital
transaction. The Managing General Partner currently believes
that the value of the property owned by the San Bruno Operating
Partnership exceeds the combined outstanding principal balance of
the $26 million San Bruno bond and the demand note, and that
OTEF II will realize in full the value of the San Bruno bond and
demand note through a future sale, securitization, refinancing or
other capital transaction involving the bond and/or the note,
or a repayment of the bond and note by the San Bruno Operating
Partnership in accordance with the terms of such instruments.
Results of Operations
OTEF II Distributions . Distributions to Partners will
amount to approximately $4.0 million, or $0.54 per Liquidity BAC
holders of record as of March 31, 2000.
OTEF IIs Three-Month Operations. For financial statement
purposes, Net Income allocated to BAC holders and Net Income per
BAC was $4.90 million and $0.668, respectively, for the three-
month period ended March 31, 2000, as compared to $4.7 million
and $0.644, respectively, for the three-month period ended March
31, 1999, representing an increase of approximately 3.9% over the
prior comparative period. OTEF II's net interest margin and
expenses for the first quarter increased by approximately 4.1%
and 8.5%, respectively, over the prior comparative period. The
increase in net income is the result of additional interest on
New Assets and taxable loans exceeding the costs associated with
the implementation of the Liquidity & Growth Plan that were not
incurred in the prior comparative period.
<PAGE> 10
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Report of Management
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THIS REPORT CONTAINS STATEMENTS THAT ARE FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, AND SECTION 27A OF THE
SECURITIES ACT OF 1933, AS AMENDED, AND IS SUBJECT TO THE SAFE
HARBORS CREATED BY THOSE SECTIONS. THESE FORWARD-LOOKING
STATEMENTS REFLECT MANAGEMENT'S CURRENT VIEWS WITH RESPECT TO
FUTURE EVENTS AND FINANCIAL PERFORMANCE. ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE DESCRIBED IN THE FORWARD-LOOKING
STATEMENTS, AND WILL BE AFFECTED BY A VARIETY OF RISKS AND
FACTORS. THESE STATEMENTS ARE SUBJECT TO MANY UNCERTAINTIES AND
RISKS, AND SHOULD NOT BE CONSIDERED GUARANTEES OF FINANCIAL
PERFORMANCE. READERS SHOULD REVIEW CAREFULLY OTEF II's FINANCIAL
STATEMENTS AND THE NOTES THERETO, AS WELL AS RISK FACTORS
DESCRIBED IN THE SEC FILINGS. OTEF II DISCLAIMS ANY OBLIGATION
TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD-
LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES OCCURRING SUBSEQUENT TO THE FILING OF THE FORM 10 K
WITH THE SEC OR OTHERWISE TO REVISE OR UPDATE ANY ORAL OR WRITTEN
FORWARD-LOOKING STATEMENT THAT MAY BE MADE FROM TIME TO TIME BY
OR ON BEHALF OF OTEF II.
<PAGE> 11
<TABLE>
Oxford Tax Exempt Fund II Limited Partnership
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Balance Sheets (in thousands, except per BAC and SQB amounts)
(Unaudited)
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<CAPTION>
March 31,
2000 December 31,
(Unaudited) 1999
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<S> <C> <C>
Assets
Investments:
Tax-exempt securities $ 209,441 $ 208,216
Tax-exempt securities held in trust 76,765 76,765
Taxable securities 27,628 27,190
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Total Investments 313,834 312,171
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Cash and cash equivalents 4,772 5,500
Other assets 4,837 3,980
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Total Assets $ 323,443 $ 321,651
============================================================================
Liabilities and Partners' Capital
Liabilities
Financing debt $ 52,614 $ 52,614
Distributions payable 4,038 4,049
Accounts payable and accrued expenses 436 571
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Total Liabilities 57,088 57,234
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Partners' Capital
General Partners' Interests (2,170) (2,189)
Limited Partners' Interests:
Beneficial Assignee Interests (7,499,875
interests issued and 7,329,050 and 7,338,425
interest outstanding as of March 31, 2000
and December 31, 1999, respectively) 169,260 168,308
SQB Interests (12,587 interests issued and 712
and 737 interests outstanding as of March 31,
2000 and December 31, 1999, respectively) 362 379
Accumulated other comprehensive income 99,191 97,966
Treasury shares (288) (47)
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Total Partners' Capital 266,355 264,417
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Total Liabilities and Partners'Capital $ 323,443 $ 321,651
============================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 12
<TABLE>
Oxford Tax Exempt Fund II Limited Partnership
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Statements of Income and Comprehensive Income (in thousands,
except per BAC amounts)(Unaudited)
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<CAPTION>
Three months ended
March 31,
----------------------------
2000 1999
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<S> <C> <C>
Interest Earned:
Interest on tax-exempt securities $ 4,610 $ 4,873
Interest on tax-exempt securities
held in trust 957 589
Interest on taxable securities 611 266
Other, primarily tax-exempt income 55 135
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Total Interest Earned 6,233 5,863
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Finance interest expense (591) (443)
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Net Interest Margin 5,642 5,420
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Expenses:
Third party expenses 283 276
Related party expenses 367 323
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Total Expenses 650 599
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Net income $ 4,992 $ 4,821
=========================================================================
Other comprehensive income:
Unrealized gains on investments $ 1,225 $ 2,774
=========================================================================
Comprehensive income $ 6,217 $ 7,595
=========================================================================
Net income allocated to BAC holders $ 4,896 $ 4,711
=========================================================================
Net income per BAC $ 0.668 $ 0.644
=========================================================================
Net income per BAC - assuming dilution $ 0.668 $ 0.644
=========================================================================
Weighted Average BACS outstanding 7,329 7,318
=========================================================================
Weighted Average BACs outstanding -
assuming dilution 7,329 7,318
=========================================================================
Distribution per BAC $ 0.540 $ 0.510
=========================================================================
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE> 13
<TABLE>
Oxford Tax Exempt Fund II Limited Partnership
- ----------------------------------------------------------------------------
Statement of Partners' Capital (in thousands, except per BAC and SQB
amounts)(Unaudited)
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<CAPTION>
Partners'Limited
Interests
-------------------- Accumulated
Beneficial Status Other
General Assignee Quo BAC Treasury Comprehensive
Partners Interest Interests Shares Income Total
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31, 1999 $(2,189) $168,308 $379 $(47) $97,966 $264,417
- --------------------------------------------------------------------------------
Comprehensive Income:
Net Income (loss),
including $0.668 per
Liquidity BAC and
$(5.88) per SQB 100 4,896 (4) 0 0 4,992
Unrealized gains on
investments 0 0 0 0 1,225 1,225
- --------------------------------------------------------------------------------
Total comprehensive
income 100 4,896 (4) (47) 1,225 6,217
Allocation of SQB
Capital 0 13 (13) 0 0 0
Purchase of Treasury
Shares 0 0 0 (241) 0 (241)
Distributions payable to
Liquidity BAC Partners
of $0.54 (81) (3,957) 0 0 0 (4,038)
================================================================================
Balance,
March 31, 2000 $(2,170) $169,260 $362 $(288) $99,191 $266,355
================================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 14
<TABLE>
Oxford Tax Exempt Fund II Limited Partnership
- -----------------------------------------------------------------------------
Statements of Cash Flows (in thousands)
(Unaudited)
=============================================================================
<CAPTION>
Three months ended
March 31,
------------------------
2000 1999
- -----------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 4,992 $ 4,821
Adjustments to reconcile net income to net cash
provided by operating activities:
Changes in assets and liabilities:
Other assets, primarily interest receivable (857) (28)
Accounts payable and accrued expenses (135) (79)
- -----------------------------------------------------------------------------
Net cash provided by operating activities 4,000 4,714
- -----------------------------------------------------------------------------
Investing Activities
Increase in other assets, net 0 (484)
Investment in new assets (438) (130)
- -----------------------------------------------------------------------------
Net cash used in investing activities (438) (614)
- -----------------------------------------------------------------------------
Financing activities
Purchase of treasury shares (241) 0
Distributions paid (4,049) (3,826)
- -----------------------------------------------------------------------------
Net cash (used in) provided by financing activities (4,290) 5,866
- -----------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (728) 274
Cash and cash equivalents, beginning of period 5,500 18,011
- -----------------------------------------------------------------------------
Cash and cash equivalents, end of period $4,772 $18,285
=============================================================================
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE> 15
- -----------------------------------------------------------------
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, 2000 and December
31, 1999, the Statements of Income and Comprehensive Income for
the three-month periods ended March 31, 2000 and 1999, the
Statement of Partners' Capital as of March 31, 2000, and the
Statements of Cash Flows for the three-month periods ended March
31, 2000 and 1999, 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, 1999. Certain amounts have been
restated for comparative purposes.
Note 2. General Business
The Partnership was formed under the laws of the State of
Maryland, commenced operations on March 1, 1995. 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").
OTEF II is a publicly-traded partnership (AMEX: OTF) that
invests in tax-exempt bonds issued to finance high quality
apartment and senior living/health care communities, with the
objective of producing increasing income and quarterly
distributions for its shareholders. These distributions are
primarily exempt from federal income taxation.
Original Refunding Bonds (Series A Bonds). The term of
each Original 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 quarterly sinking fund redemptions
that will result in full amortization of the Series A Bonds
during the 27-year remaining term beginning in the fourth bond
year, calculated using an assumed interest rate of 5.6% per year.
While the total payments on the Original Refunding Bonds
increase each year, the portion of the payments allocable to
interest will decrease in the fourth year and increase each year
thereafter. Accordingly, it is anticipated that OTEF II will
receive aggregate principal payments of approximately $1.4
million in 2000. Of this amount, approximately 41% will be
applied to reduce the financing debt reported by OTEF II on its
balance sheet, which was approximately $52.6 million at March 31,
2000. Substantially all of the balance of the principal payments
will reduce OTEF II's remaining investment in the related bonds.
While the interest earned on these bonds will decrease in 2000 by
approximately $0.19 per share, the total principal and interest
that is projected to be received by OTEF II with respect to these
bonds for 2000 will be higher than the amount of interest
received on these bonds for 1999. The interest rates on these
bonds will increase in 2001 and each year thereafter through the
remaining term of the Original Refunding Bonds.
Series A Bond Interest. In the annual reset mode, Series A
Bond interest was set initially at closing of the refundings and
is reset annually thereafter 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 $54.153 million
Series A Bonds retained by OTEF II were reset to the following
annual interest rates:
<TABLE>
-------------------------------------------------
<CAPTION>
Bond Amount
Date (in thousands) Interest Rate
--------------------------------------------------
<C> <C> <C>
November 1,1999 $ 7,010 4.88%
December 1,1999 27,344 5.12%
January 1, 2000 11,126 5.37%
March 1, 2000 8,673 5.54%
--------------------------------------------------
Total 54,153
</TABLE>
The interest rate on the remaining $62.565 million of Series
A Bonds involved in the financing transactions described under
"Financing Transactions" in Note 3 below was converted at the
time such transactions were closed from annual reset to a weekly
floating rate based on a spread over the BMA index. This rate
averaged 4.47% for the 3 months ended March 31, 2000, 3.77% for
the 3 months ended March 31, 1999, and 4.18% for the twelve
months of 1999. 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.
<PAGE> 16
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
Taxable Investments. In the first quarter of 2000, OTEF II
made additional taxable advances of $0.25 million, $0.138
million and $0.05 million to River Reach, Summerwalk and
Jacaranda borrower entities, respectively.
Note 3. Significant Accounting Policies
Method of Accounting. OTEF II's financial statements are
prepared in accordance with generally accepted accounting
principles.
Use of Estimates. 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 BAC Holders
(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.
Comprehensive Income . Comprehensive income includes both
"Net Income" and "Other Comprehensive Income". OTEF II's only
source of "Other Comprehensive Income" is related to the
valuation of its investments to fair value, which results in
unrealized gains or losses previously charged to an equity
account under SFAS No. 115 "Accounting for Certain Investments in
Debt and Equity Securities".
Investments. As previously reported , on June 1, 1995, the
then Existing MRBs were transferred from OTEF to OTEF II at their
book value of approximately $153 million. The OTEF II Managing
General Partner estimated at March 31, 2000 that the fair value
of the Original Refunding Bonds and the Remarketed Bonds was
approximately $251 million and, accordingly, unrealized
appreciation on these investments of $98 million is recorded as a
credit to partners' capital. The Series A Bonds, the Remarketed
Bonds and the Other Refunding Bonds are valued based on
comparable municipal bond securities, and the Series B Bonds and
the taxable loans 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.
Investments are accounted for using 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 the investments are reflected at their
current estimated fair value, with cumulative unrealized gains or
losses being credited or charged to Other Comprehensive Income in
partners' capital. In the event of a sale of a Bond, these
unrealized gains or losses would be realized and would impact
the Statement of Income in the period the sale occurred.
Accounting for earnings per share . Basic earnings per
share, a measure required by Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," does not include
incentive BAC options as common share equivalents. Diluted
earnings per share reflects the potential dilution that could
occur if such options were exercised or resulted in the issuance
of an incremental amount of new shares based on the Treasury
Method. The Treasury Method assumes that the proceeds from
exercise of the options are used to purchase shares at the average
market price during the reporting period, which was $23.87 and
$24.06 for March 31, 2000 and 1999, respectively. Because the
strike price of $23.88 exceeded the average share price for the
first quarter of 2000, the options were not dilutive. All
amounts have been restated to reflect the 25-for-1 stock split
effective July 1, 1997.
Net Income and Distributions per BAC and SQB. Net income
and distributions per BAC and net income and distributions per
SQB are based upon the weighted average number of BACs and SQBs
outstanding during the applicable period. As of December 31,
1998 there were 7,183,200 BACs and 6,946 SQBs outstanding.
During the first quarter of 1999, 5,190 SQBs were exchanged for
129,750 BACs under the exchange program. As of March 31, 1999
<PAGE> 17
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
there were 7,312,950 and 1,756 outstanding BACs and SQBs,
respectively. As of December 31, 1999, there were 7,338,425 BACs
and 737 SQBs outstanding. In January 2000, an additional 25 SQBs
were exchanged for 625 BACs and 10,000 BACs were repurchased by
OTEF II for approximately $0.24 million. BACs and SQBs
outstanding at March 31, 2000 were 7,329,050 and 712,
respectively.
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 and do not result in
cash receipts or cash payments. This non-cash activity consists
of distributions payable to Partners, SQB holders and OTEF II BAC
Holders of $4.0 million, at March 31, 2000 and December 31, 1999,
respectively. Non-cash investing activity includes a change in
unrealized gain on investments of approximately $1.2 million for
the quarter ended March 31, 2000 and $3.1 million, for year ended
December 31, 1999, respectively.
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 at date of purchase.
Financing Transactions . For financial statement purposes,
the securitization transactions described in Note 2 are accounted
for as financing transactions. The amount of the bonds financed,
including certain of the Series A Bonds and the Carpenter bond in
outstanding principal amount of approximately $76.8 million, is
reflected as Securities Held in Trust, the net cash proceeds are
classified as cash and cash equivalents and the difference
between the principal amount of the bonds financed and the
principal amount of the subordinated interests acquired by OTEF
II is classified as financing debt on the accompanying balance
sheet.
Costs associated with these financing transactions are
being amortized over ten years for financial statement purposes,
and costs associated with the interest rate cap are being
amortized over the life of each interest rate cap agreement,
which is three years. These deferred costs are included in other
assets on the balance sheet. For federal income tax purposes,
these transactions are treated as sales by OTEF II of the
applicable Series A Bonds and a purchase of subordinated
interests in the trusts.
Accounting for SQBs. On February 8 , 1999, OTEF II
distributed to SQB holders an offering circular describing a
voluntary offer to exchange 25 beneficial assignee certificates
("BACs"), which are publicly traded (AMEX: OTF), for each SQB
(SQBs are not publicly traded). This offer terminated on July
31, 1999. As of March 31, 2000, holders of 6,234 SQBs, or 90% of
the amount of SQBs originally issued, had converted their SQBs to
BACs, leaving 712 SQBs outstanding. These remaining SQBs
represent less than one-quarter of one percent of the total
outstanding equity interests of OTEF II.
As previously reported, since substantially all of the SQBs
have been exchanged for BACs, the remaining SQBs have been
allocated increased shares of administrative costs, which are
relatively fixed costs and not dependent on the number of SQBs
outstanding. Since the second quarter of 1999 such costs have
exceeded allocable income reducing existing SQB cash reserves.
For the quarter ended December 31, 1999, these costs exceeded
income allocable to SQBs resulting in a net loss of $7.84 per
SQB. Accordingly, the February 15, 2000 distribution was paid
exclusively from existing cash reserves allocable to remaining
SQB holders. As of March 31, 2000, costs again exceeded income
allocable to SQBs resulting in a net loss of $5.88 per SQB for
the first quarter of 2000 and remaining SQB cash reserves were
fully utilized. Accordingly, on March 16, 2000 the Board of
Directors declared that no distribution would be paid to SQB
holders for the quarter ended March 31, 2000. In the absence of
a sale of any remaining SQB assets, or a redemption by one or
more borrowers of the bonds in which SQB holders have an
ownership interest, or some other transaction of a capital
nature, it is anticipated that SQB holders will continue to
realize net losses and the SQBs will no longer receive quarterly
distributions payable from recurring operations. Continued
losses will cause a reduction in the SQB capital accounts, which
will reduce the amount of net proceeds from any future capital
transaction otherwise payable to SQB holders.
For financial statement purposes, the SQBs are treated as a
separate class of equity and, accordingly, net income allocated
to SQB holders, net income per SQB, and distribution per SQB are
reflected separately from the OTEF II BAC Holders on the
Statement of Partners' Capital. The SQBs were not split as were
the OTEF II BACs on July 1, 1997. The redeemed SQBs are
<PAGE> 18
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
reflected as a reduction of Partners' Capital and were offset
against the SQB Holders' interests when redeemed. Assets
associated with those SQB holders exchanging their shares for
BACs have been reclassified as BAC assets.
The SQB Holders do not share in the growth or other
benefits expected to be achieved under the Liquidity and Growth
Plan. In addition, the SQBs are not allocated any capital losses
for federal income tax purposes that may result from the
disposition of the Refunding Bonds or interests therein or new
assets in connection with a financing undertaken pursuant to the
Liquidity and Growth Plan. A schedule of SQB (loss) income as of
March 31, 2000 and 1999 is as follows:
<TABLE>
- -----------------------------------------------------------------------------
STATEMENT OF STATUS QUO BAC (LOSS) INCOME
(in thousands, except per SQB interest amounts)
(Unaudited)
- -----------------------------------------------------------------------------
<CAPTION>
Three Months Ended Three Months Ended
---------------------- -------------------
March 31,2000 March 31,1999
------------------------------------------------
<S> <C> <C>
Revenues
Interest on Bonds $ 12 $ 29
Other Interest 0 1
- ----------------------------------------------------------------------------
12 30
Expenses
Governance and Administration (16) (17)
- ----------------------------------------------------------------------------
Net income to SQB holders $ (4) $ 13
- ----------------------------------------------------------------------------
Other comprehensive income:
Unrealized gains on investment
in tax-exempt securities 3 12
- ----------------------------------------------------------------------------
Comprehensive (loss)income $ (1) $ 25
============================================================================
Weighted average SQB shares outstanding 712 1,756
============================================================================
Net income (loss) per SQB interest $ (5.88) $ 7.57
============================================================================
Distribution per SQB interest $ 0 $ 12.38
============================================================================
</TABLE>
Note 4. Related Party Transactions
The Oxford Affiliates. The General Partner and each of the
affiliates discussed below are collectively referred to as the
Oxford Affiliates in the accompanying financial statements. 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 approximately $0.08 million for each of
the quarters ended March 31, 2000 and 1999.
Interests in the Operating Partnerships. 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 original 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 each Existing MRB
is refunded, all cash flow from each such Operating Partnership
that is attributable to these interests will be pledged for the
benefit of OTEF II. Affiliates of the Managing General Partner
receive fees from these partnerships and serve as their general
partners, which entitles them to a share of any cash flow and
refinancing and liquidation proceeds from these partnerships.
Compensation and Fees. ORFG provides various management
services relating to the Existing Mortgaged Properties and
OTEF II's investment therein. It also provides additional
services in connection with OTEF II's investment in New Assets,
as described below. These ORFG services (the "Existing Fees")
are operating expenses of the Operating Partnerships that are
payable prior to the payment of interest on the Remarketed Bonds.
ORFG generally receives a 1% acquisition fee from OTEF II
for services rendered in connection with investment transactions.
No acquisition fees were paid in the first quarter of 2000.
<PAGE> 19
- -----------------------------------------------------------------
Notes to Financial Statements
- -----------------------------------------------------------------
OTEF II also generally pays ORFG a 0.5% advisory fee for
managing OTEF II's new investments after their acquisition. The
advisory fees associated with the acquisition of the Dallas,
Carpenter, Jacaranda and Summerwalk investments commenced in
1998. The advisory fees associated with the acquisition of the
Lakeside, River Reach and Conyers investments commenced in 1999.
Total advisory fees incurred by OTEF II from ORFG for the 3
months ended March 31, 2000 and 1999 were approximately $0.15 and
$0.08 million, respectively.
For the three month periods ended March 31, 2000 and 1999,
the Operating Partnerships, including the Carpenter Borrower and
the Dallas Borrower, paid ORFG total asset management fees of
approximately $0.17 million and $0.17 million, respectively. The
original Operating Partnerships also paid ORFG, in the aggregate,
approximately $0.2 million of fees in March 31, 2000 and 1999
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 original Operating Partnerships
("Existing Mortgaged Properties"). Oxford affiliates may also
receive other fees and expense reimbursements from entities other
than OTEF II in connection with the acquisition, financing or
refinancing, operation, repair, replacement and improvement of
Mortgaged Properties.
Expense Reimbursements . OTEF II and the Operating
Partnerships also reimburse ORFG for certain expenses it incurs
in providing services with respect to the mortgaged properties
and the administration of OTEF II's affairs. Total
reimbursements to the General Partners and their affiliates for
the 3 months ended March 31, 2000 and 1999 were approximately
$0.22 million and $0.19 million, respectively, representing
primarily staff rebillable time. The Managing General Partner
anticipates that the amount of expense reimbursements payable by
OTEF II will increase in accordance with the terms of OTEF II's
partnership agreement due, in part, to the additional acquisition
and financing activities relating to the Liquidity and Growth
Plan. The portion of the expense reimbursement relating to
salaries is determined based on the actual time the officers and
employees devote to OTEF II.
OTEF II's Incentive Option Plans. On May 21, 1997, OTEF II
adopted an incentive option plan (the "1997 Incentive Option
Plan") in order for the Managing General Partner to attract and
retain key employees of ORFG and advisers. The 1997 Incentive
Option Plan authorizes the granting to the directors, officers
and employees of the Managing General Partner and certain
affiliates of options to purchase 652,125 OTEF II BACs (on a post-
split basis), representing approximately 8.3% of the then
outstanding OTEF II BACs on a fully diluted basis. Such options
are exercisable for 10 years. The Managing General Partner has
awarded all of the OTEF II BACs authorized under the terms of the
1997 Incentive Option Plan. Of the 652,125 options, 613,000 were
fully vested upon issuance and 39,125 are vested equally over 3
years commencing January 1, 1998. The exercise price for all
options is $23.88 per BAC, which approximated the fair market
value at the date of grant. Since the exercise price of the
options approximated the BAC market price at the date of grant,
no compensation expense was recognized at that time in accordance
with APB 25. For the quarter ended March 31, 2000, the average
market price of $23.87 was less than the exercise price. Since
the date of grant, no options have been exercised or forfeited.
Guarantees and Pledges. In connection with the Lakeside
North and Summerwalk investments, OTEF II, along with the
operating partnership that owns the applicable property, executed
a guaranty agreement relating to payment of issuer and trustee
fees and expenses (including expenses of their respective
counsel), as well as an indemnity agreement relating to
environmental matters pertaining to the property. OTEF II
obtained Phase I environmental site assessment reports for these
investments which, subject to the limitations stated therein,
conclude generally that no adverse environmental conditions
requiring remediation exist at either site. Accordingly, the
Managing General Partner believes that OTEF II does not have
material financial exposure under these agreements. In
connection with the Carpenter bond securitization, OTEF II
pledged the $10.3 million of Dallas bonds as collateral. In
connection with the River Reach investment transaction, OTEF II
executed a standby reimbursement agreement with a Merrill Lynch
affiliate which effectively guarantees approximately $24 million
obligations of the Naples Borrower to Banco Santander Central
Hispano, S.A. This credit arrangement is scheduled to expire
on or about June 9, 2000. In April 2000, the Managing General
Partner of OTEF II was advised by Merrill Lynch and Banco
Santander that this credit arrangement will be extended to
December 11, 2000. OTEF II may execute similar agreements in
connection with new investments made after the date of this report.
<PAGE> 20
- -----------------------------------------------------------------
Instructions for Investors who wish to register or transfer
OTEF II BACs or SQBs
- -----------------------------------------------------------------
On July 22, 1997, the American Stock Exchange began trading
OTEF II BACs under the ticker symbol, OTF. Please follow
the instructions below to expedite the reregistration or transfer
of ownership of any OTEF II BACs or Status Quo BACs ("SQB") that
you may own.
IF YOU DO NOT HOLD CERTIFICATES
Your shares are being held by your brokerage firm in "street
name". To register a change of ownership of OTEF II BACs held
in such accounts, please have your account representative or
financial consultant request the necessary transfer documents.
YOU MUST HAVE THE PROPER TRANSFER DOCUMENTS FROM YOUR
BROKERAGE FIRM. Additionally, please contact your account
representative or financial consultant for address changes.
IF YOU HOLD CERTIFICATES
Effective July 1, 1997, OTEF II appointed Registrar and
Transfer Company ("R&T") as the sole registrar and transfer
agent with respect to the OTEF II BACs and SQBs.
All notices, claims, certificates, requests, demands and other
communications relating to transfers of OTEF II BACs and SQBs
should be sent to:
Registrar and Transfer Company
Attn: William Tatler, Vice President
Stock Transfer Department
10 Commerce Drive
Cranford, NJ 07016
All phone calls relating to such transfers should be directed
to:
Registrar and Transfer Company
Stock Transfer Department
1-800-368-5948
GENERAL INFORMATION
All general inquiries relating to OTEF II should be directed
to OTEF II Investor Services at 1-888-321-OTEF.
The Quarterly Report on Form 10-Q for the quarter ended March
31, 1999, filed with the Securities and Exchange Commission,
is available to SQB and OTEF II BAC Holders and may be
obtained by writing:
Investor Services
Oxford Tax Exempt Fund II Limited Partnership
7200 Wisconsin Avenue, 11th Floor
Bethesda, Maryland 20814
1-888-321-OTEF
ALSO VISIT OUR WEB SITE AT WWW.OTEF.COM
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Balance
Sheet at March 31, 2000 and the Statements of Income and Comprehensive for the
three months ended March 31, 2000 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 4,772
<SECURITIES> 313,834
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,837
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 323,443
<CURRENT-LIABILITIES> 57,088
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 266,355
<TOTAL-LIABILITY-AND-EQUITY> 323,443
<SALES> 0
<TOTAL-REVENUES> 6,233
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,241
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,992
<EPS-BASIC> .67
<EPS-DILUTED> .67
</TABLE>
