UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
Quarterly Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the period ended June 30, 1995 Commission file number 0-15725
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SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 52-1449733
- ----------------------- ------------------------------------
(State of organization) (I.R.S. Employer Identification No.)
218 North Charles Street, Suite 500, Baltimore, Maryland 21201
- -----------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:(410)962-0595
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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____
DESCRIPTION OF AMENDMENTS:
The following changes were made pursuant to SEC Comments dated August 18,
1995.
A) In Note 4, Investment in Real Estate Partnerships, summarized financial
information has been adjusted to reflect depreciation as a charge
against operating income.
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
INDEX TO FORM 10-Q/A
Part I- FINANCIAL INFORMATION
Item
1. Financial Statements- Amended to reflect change in Note 4.
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
SERIES I
IN THOUSANDS, EXCEPT BAC DATA
<TABLE>
<CAPTION>
June 30,
1995 December 31,
(Unaudited) 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $6,706 $5,240
Interest receivable 235 357
Investment in mortgage revenue bonds and working capital loans,
net of valuation allowance of $1,430 in 1994 (Note 2) 36,235 44,113
Investment in real estate partnerships (Note 3) 54,651 104,709
Investment in joint investment pool (Note 4) 53,908 -
Other assets 143 622
--------------- ---------------
TOTAL ASSETS $151,878 $155,041
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $167 $663
Distributions payable 5,297 5,044
Due to affiliates (Note 5) 27 64
--------------- ---------------
TOTAL LIABILITIES 5,491 5,771
--------------- ---------------
Partners' Capital
General Partners (328) (305)
Limited Partners (beneficial assignee certificates-
issued and outstanding 200,000 certificates) 146,715 149,575
--------------- ---------------
TOTAL PARTNERS' CAPITAL 146,387 149,270
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, & 5)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $151,878 $155,041
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME- (unaudited)
SERIES I
IN THOUSANDS EXCEPT PER BAC DATA
<TABLE>
<CAPTION> For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds and $765 $886 $1,650 $1,771
parity working capital loans
Interest on short-term investments 66 30 115 52
Equity in joint investment pool 778 - 60 -
Equity in property net income 365 1,326 1,282 2,772
--------------- --------------- --------------- ---------------
TOTAL INCOME 1,974 2,242 3,107 4,595
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 5) 522 302 693 499
--------------- --------------- --------------- ---------------
NET INCOME $1,452 $1,940 $2,414 $4,096
=============== =============== =============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $15 $19 $24 $41
=============== =============== =============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS $1,437 $1,921 $2,390 $4,055
=============== =============== =============== ===============
NET INCOME PER BAC $7.19 $9.60 $11.95 $20.28
=============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS- (unaudited)
SERIES I
IN THOUSANDS
<TABLE>
<CAPTION> For the six For the six
months ended months ended
June 30, June 30,
1995 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $2,414 $4,096
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (1,282) (2,772)
Equity in joint investment pool income (60) -
Interest distributions from investment in
real estate partnerships 2,560 3,955
Interest distributions from investment in joint
investment pool 1,220 -
(Increase) decrease in interest receivable (115) (25)
(Increase) decrease in other assets 479 (8)
Increase (decrease) in accounts payable
and accrued expenses (496) 3
Increase (decrease) in due to affiliates (37) 48
--------------- ---------------
Net cash provided by operating activities 4,683 5,297
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfer of proceeds from investment in joint investment pool 1,827 -
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (5,044) (5,052)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,466 245
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,240 5,032
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $6,706 $5,277
=============== ===============
DISCLOSURE OF NON-CASH ACTIVITES
Transfer of investment in mortgage revenue bonds,
working capital loans and related accrued interest
to investment in real estate $8,115 -
Transfer of investment in real estate partnerships
to investment in joint investment pool 56,886 -
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SERIES I
FOR THE PERIOD DECEMBER 31, 1994 THROUGH JUNE 30, 1995
IN THOUSANDS
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL
ASSIGNEE GENERAL
CERTIFICATES PARTNERS TOTAL
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1994 $149,575 ($305) $149,270
Net income (unaudited) 2,390 24 2,414
Distribution to partners (unaudited) (5,250) (47) (5,297)
---------------- --------------- ---------------
Balance, June 30, 1995 (unaudited) $146,715 ($328) $146,387
================ =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
SERIES II
IN THOUSANDS, EXCEPT BAC DATA
<TABLE>
<CAPTION> June 30,
1995 December 31,
(Unaudited) 1994
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $3,639 $2,615
Interest receivable 199 199
Investment in mortgage revenue bonds and
parity working capital loans (Note 2) 30,440 30,440
Investment in real estate partnerships (Note 3) - 47,982
Investment in joint investment pool (Note 4) 45,224 - -
Other assets 68 504
--------------- ---------------
TOTAL ASSETS $79,570 $81,740
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $86 $447
Distributions payable 2,672 2,669
Due to affiliates (Note 5) 12 31
--------------- ---------------
TOTAL LIABILITIES 2,770 3,147
--------------- ---------------
Partners' Capital
General Partners (97) (81)
Limited Partners (beneficial assignee certificates-
issued and outstanding 96,256 certificates) 76,897 78,674
--------------- ---------------
TOTAL PARTNERS' CAPITAL 76,800 78,593
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 3, 4, & 5)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $79,570 $81,740
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME- (unaudited)
SERIES II
IN THOUSANDS EXCEPT PER BAC DATA
<TABLE>
<CAPTION> For the three For the three For the six For the six
months ended months ended months ended months ended
June 30, June 30, June 30, June 30,
1995 1994 1995 1994
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds and
parity working capital loans $597 $597 $1,194 $1,194
Interest on short-term investments 48 19 73 32
Equity in joint investment pool 409 - (352) -
Equity in property net income - 325 296 759
--------------- --------------- --------------- ---------------
TOTAL INCOME 1,054 941 1,211 1,985
--------------- --------------- --------------- ---------------
EXPENSES
Operating expenses (Note 5) 253 151 332 245
--------------- --------------- --------------- ---------------
NET INCOME $801 $790 $879 $1,740
=============== =============== =============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $8 $7 $9 $17
=============== =============== =============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS $793 $783 $870 $1,723
=============== =============== =============== ===============
NET INCOME PER BAC $8.24 $8.13 $9.04 $17.90
=============== =============== =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS- (unaudited)
SERIES II
IN THOUSANDS
<TABLE>
<CAPTION> For the six For the six
months ended months ended
June 30, June 30,
1995 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $879 $1,740
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in property net income (296) (759)
Equity in joint investment pool loss 352 -
Interest distributions from investment in
real estate partnerships 851 1,558
Interest distribution from investment in joint
investment pool 689 -
(Increase) decrease in interest receivable - 1
(Increase) decrease in other assets 436 (32)
Increase (decrease) in accounts payable
and accrued expenses (361) (5)
Increase (decrease) in due to affiliates (19) 24
--------------- ---------------
Net cash provided by operating activities 2,531 2,527
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Transfer of proceeds from investment in joint investment pool 1,162 -
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution to partners (2,669) (2,915)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 1,024 (388)
--------------- ---------------
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 2,615 3,035
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,639 $2,647
=============== ===============
DISCLOSURE OF NON-CASH ACTIVITES
Transfer of investment in real estate partnerships
to investment in joint investment pool $47,338 -
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
SERIES II
FOR THE PERIOD DECEMBER 31, 1994 THROUGH JUNE 30, 1995
IN THOUSANDS
<TABLE>
<CAPTION>
LIMITED PARTNERS
BENEFICIAL
ASSIGNEE GENERAL
CERTIFICATES PARTNERS TOTAL
---------------- --------------- ---------------
<S> <C> <C> <C>
Balance, December 31, 1994 $78,674 ($81) $78,593
Net income (unaudited) 870 9 879
Distribution to partners (unaudited) (2,647) (25) (2,672)
---------------- --------------- ---------------
Balance, June 30, 1995 (unaudited) $76,897 ($97) $76,800
================ =============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
NOTES TO THE FINANCIAL STATEMENTS
(SERIES I AND SERIES II)
(Unaudited)
NOTE 1 - STATEMENT OF INFORMATION FURNISHED
The accompanying unaudited financial statements have been prepared in
accordance with the rules and regulations of the Securities and Exchange
Commission and in the opinion of management contain all adjustments
(consisting of only normal recurring accruals) necessary to present fairly
the financial position as of June 30, 1995 and the results of operations for
the three and six months ended June 30, 1995 and 1994 and the cash
flows for the six months ended June 30, 1995 and 1994. These results
have been determined on the basis of accounting principles and policies
discussed in Note 2 to the Financial Statements appearing in the SCA Tax
Exempt Fund Limited Partnership's (the "Partnership") 1994 Annual
Report on Form 10-K, as amended (the "Form 10-K").
Accordingly, certain information and footnote disclosures normally
included in financial statements presented in accordance with generally
accepted accounting principles have been condensed or omitted. It is
suggested that the accompanying financial statements be read in
conjunction with the financial statements and notes thereto included in the
Form 10-K.
NOTE 2 - INVESTMENT IN MORTGAGE REVENUE BONDS
AND PARITY WORKING CAPITAL LOANS
The Partnership has invested in various mortgage revenue bonds, the
proceeds from which were used to make nonrecourse participating first
mortgage loans on multifamily housing developments. The Partnership's
rights and specific terms are defined by the various loan documents which
were negotiated at the time of settlement. The basic terms and structure
of each transaction were described in Note 3 to the December 31, 1994
financial statements included in the Form 10-K.
As of June 30, 1995, Series I held 14 mortgage revenue bonds, four of
which are treated as investments in mortgage revenue bonds aggregating
$35,605,400 and five of which are treated as investments in real estate
partnerships (see Note 3). The remaining Series I mortgage revenue
bonds (five) were reclassified to the joint investment pool discussed in
Note 4. Series II held nine mortgage revenue bonds at June 30, 1995,
three of which are treated as investments in mortgage revenue bonds
aggregating $29,624,600. (See also Note 3.) The remaining Series II
mortgage revenue bonds (six) were reclassified to the joint investment
pool discussed in Note 4.
During the quarter ended June 30, 1995, Lakeview Garden (Series I) was
reclassified from investment in mortgage revenue bonds to an investment
in real estate partnerships. See further discussion of Lakeview Garden in
Note 3.
Descriptions of the various mortgage revenue bonds and working capital
loans owned by the Partnership at June 30, 1995 are as follows:
<PAGE>
<TABLE>
<CAPTION>
Series I
Investment in Mortgage Base First Tier Face Carrying
Revenue Bonds and Parity Interest Contingent Maturity Amount Amount
Working Capital Loans (Note 2) Rate Rate Date (000's) (000's)
- ----------------------------------- --------------- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Alban Place Apartments 7.875 2.375 Oct. 2008 $10,500 $10,500
Frederick, MD
Alban Place Limited Partnership
Northridge Park Apartments 7.500 2.000 June 2012 8,950 8,950
Salinas, CA
Northridge Park Phase II
Riverset Apartments 7.875 2.100 Nov. 1999 6,535 6,535
Memphis, TN
Auction Street Associates
Limited Partnership
Villa Hialeah 7.875 2.375 Oct. 2009 10,250 10,250
Hialeah, FL
Shelter Group South East -
Hialeah, A Limited Partnership
------------ ---------------
Series I Mortgage Revenue
Bond and Parity Working
Capital Loan Investment Total $36,235 $36,235 (1)
============ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Date of In-
Substance Base First Tier Face Carrying
Series I Investment in Real Foreclosure/ Interest Contingent Maturity Amount Amount
Estate Partnerships (Note 3) Deed Transfer Rate Rate Date (000's) (000's)
- ----------------------------------- --------------- ---------- ---------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Newport-on-Seven Dec. 1, 1991 8.125 2.375 Aug. 2008 $10,800 $7,432
St. Louis Park, MN
St. Louis Park Housing Partners,
A Limited Partnership
North Pointe Apartments Dec. 31, 1991 7.875 2.375 Aug. 2006 25,850 19,860
San Bernardino, CA
Cal-Shel Limited Partnership
Creekside Village Apartments Dec. 31, 1992 7.500 2.250 Nov. 2009 11,985 10,213
Sacramento, CA
Creekside Village Limited
Partnership
Willowgreen Apartments Sep. 30, 1993 8.000 2.250 Dec. 2010 9,450 9,080
Tacoma, WA
Willowgreen Associates
Limited Partnership
Lakeview Garden Apartments Apr. 19, 1995 7.750 2.500 Aug. 2007 9,308 8,066
Dade Co., FL
SCA Lakeview Apartments
Limited Partnership
--------------- ---------------
Series I Investment in
Real Estate Partnerships Total $67,393 $54,651
=============== ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Series II
Investment in Mortgage Base First Tier Face Carrying
Revenue Bonds and Parity Interest Contingent Maturity Amount Amount
Working Capital Loans (Note 2) Rate Rate Date (000's) (000's)
- ----------------------------------- --------------- ---------- ---------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Riverset Apartments 7.875 2.100 Nov. 1999 $12,640 $12,640
Memphis, TN
Auction Street Associates
Limited Partnership
Southfork Village Apartments 7.875 2.375 Jan. 2009 10,550 10,550
Lakeville, MN
Southfork Apartments
Limited Partnership
Emerald Hills Apartments 7.750 2.500 Apr. 2008 7,250 7,250
Issaquah, WA
Axelrod Emerald Hills Association
Limited Partnership ------------ ---------------
Series II Mortgage Revenue
Bond and Working Capital
Loan Investment Total $30,440 $30,440 (2)
============ ===============
<FN>
(1) Amount includes $35,605,400 of mortgage revenue bonds and $629,600 of parity working capital loans.
(2) Amount includes $29,624,600 of mortgage revenue bonds and $815,400 of parity working capital loans.
</TABLE>
<PAGE>
The Managing General Partner periodically evaluates the carrying values
of investments in mortgage revenue bonds and working capital loans.
There were no valuation adjustments on the investment in mortgage
revenue bonds and working capital loans during the six months ended
June 30, 1995 and 1994, as the Managing General Partner's estimate of
net realizable value exceeded the respective carrying value for each
investment. The Managing General Partner will continue to evaluate the
need for valuation allowances in the future as circumstances change.
NOTE 3 - INVESTMENT IN REAL ESTATE PARTNERSHIPS
As previously discussed in Note 4 to the December 31, 1994 financial
statements included in the Form 10-K, the Partnership accounts for certain
investments in mortgage revenue bonds as investments in real estate
partnerships. This accounting treatment is for financial reporting purposes
only and does not affect the income reported for federal income tax
purposes, the amount of distributions to investors or the Managing
General Partner's intentions related to other matters including ongoing
legal actions, if any.
On February 14, 1995, the Partnership consummated a financing
transaction whereby additional proceeds were raised through the offering
of $67,700,000 in aggregate principal amount of Multifamily Mortgage
Revenue Bond Receipts, (collectively, the "Receipts"). The Receipts are
collateralized by a pool of eleven of the original mortgage revenue bonds
(five in Series I and six in Series II) held by the Partnership. As a result,
the eleven original mortgage revenue bonds, previously recorded as
investments in real estate partnerships, were reclassified to the joint
investment pool (discussed in Note 4).
After the reclassification of properties to the joint investment pool and the
reclassification of Lakeview Garden (see discussion below), five
properties in Series I and none in Series II were accounted for as
investments in real estate partnerships at June 30, 1995 as compared to
nine in Series I and six in Series II at June 30, 1994.
The Partnership continues to share in earnings of properties treated as
investments in real estate partnerships in accordance with the original
terms of the mortgage loans collateralizing the mortgage revenue bonds.
For those properties owned by partnerships controlled by SCA Successor,
Inc., an affiliate of the Managing General Partner, the Partnership has not
waived default; however, the Managing General Partner has no plans or
intentions to accelerate the maturity of the mortgage loans. In addition,
the Partnership is responsible for any post-transfer operating deficits
incurred. No operating deficits were funded by the Partnership during the
first six months of 1995 or 1994.
Legal and Other
The following summarizes the status of legal and other matters affecting
the investments in real estate partnerships since December 31, 1994:
Lakeview Garden: On April 19, 1995, the Managing General Partner
successfully transferred the Lakeview Garden deed to a new borrower
pursuant to the terms of a settlement agreement negotiated with the
original borrower. As of the date of transfer, therefore, Lakeview Garden
is accounted for as an investment in real estate partnerships.
Summarized Financial Information
Combined financial information for the investments in real estate
partnerships is presented below. Each Series recognized net operating
income after depreciation for the period January 1 through February 14,
1995 for those properties reclassified to the joint investment pool (five
for Series I and six for Series II). In addition, Series I recognized net
operating income after depreciation for the three and six months ended
June 30, 1995 for five properties classified as investments in real estate
partnerships (See Note 2 for effective dates of reclassification). For the
three and six months ended June 30, 1994, the combined results of
operations for Series I and Series II includes nine and six properties,
respectively. This summary has been derived from the financial records
of the individual partnerships and does not reflect related valuation
adjustments and other basis differences recorded by the Partnership in its
financial statements.
<PAGE>
<TABLE>
<CAPTION>
Series I
Combined Financial Position (unaudited) June 30, December 31,
(in 000's) 1995 1994
------------ ------------
<S> <C> <C>
Land, buildings and equipment,
net of accumulated depreciation $58,706 $114,160
Other assets 1,511 2,057
------------ ------------
Total Assets $60,217 $116,217
============ ============
Liabilities due to the Partnership
including bonds $73,408 $146,996
Other liabilities 1,121 2,351
Partners' deficit (14,312) (33,130)
------------ ------------
Total liabilities and partners' deficit $60,217 $116,217
============ ============
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations (unaudited)
(in 000's)
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues $1,872 $4,682 $5,222 $9,427
Operating expenses 1,155 2,613 3,019 5,169
Depreciation 352 743 921 1,486
------------ ------------ ------------ ------------
Net Operating Income $365 $1,326 $1,282 $2,772
============ ============ ============ ============
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
Series II
Combined Financial Position (unaudited) December 31,
(in 000's) 1994
------------
<S> <C>
Land, buildings and equipment,
net of accumulated depreciation $45,616
Other assets 1,219
------------
Total Assets $46,835
============
Liabilities due to the Partnership
including bonds $57,572
Other liabilities 1,220
Partners' deficit (11,957)
------------
Total liabilities and partners' deficit $46,835
============
</TABLE>
<TABLE>
<CAPTION>
Combined Results of Operations (unaudited)
(in 000's)
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues - $1,798 $959 $3,692
Operating expenses - 1,084 483 2,173
Depreciation - 389 180 760
------------ ------------ ------------ ------------
Net Operating Income - $325 $296 $759
============ ============ ============ ============
<PAGE>
For the six months ended June 30, 1995 and 1994, Series I collected
interest payments of approximately $2,560,000 and $3,955,000,
respectively, from the investments in real estate partnerships while Series
II collected approximately $851,000 and $1,558,000, respectively.
The Managing General Partner periodically evaluates the carrying values
of investments in real estate partnerships. During the first six months of
1995 and 1994, no valuation adjustments were made as estimated net sale
or refinancing proceeds exceeded the respective carrying value for each
investment. The Managing General Partner will continue to evaluate the
need for valuation allowances in the future as circumstances change.
NOTE 4 - JOINT INVESTMENT POOL
As previously discussed, on February 14, 1995, the Partnership
consummated a financing transaction which raised additional proceeds
through the offering of $67,700,000 in aggregate principal amount of
Multifamily Mortgage Revenue Bond Receipts, (collectively, the
"Receipts"). The Receipts are collateralized by a pool of eleven
mortgage revenue bonds held by the Partnership (five in Series I and six
in Series II). These eleven bonds all relate to properties that defaulted on
their original debt obligation and were previously recorded as investments
in real estate partnerships. Subsequent to the financing transaction, the
net carrying values of these bonds were reclassified to the joint investment
pool. The cash stream from one additional property, Creekside Village
("Creekside"), which also defaulted on its original debt obligation, has
been pledged as further security for the transaction. The operating
partnerships for the underlying properties that collateralize the bonds,
including Creekside, were controlled by SCA Successor, Inc., an affiliate
of the Managing General Partner. On January 1, 1995, SCA Successor,
Inc., the general partner of these operating partnerships, withdrew and
was replaced by SCA Successor II, Inc., an affiliate of the Managing
General Partner, as sole general partner. The specific bonds are as
follows:
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
MORTGAGE REVENUE REFUNDING BONDS
</TABLE>
<TABLE>
<CAPTION>
A Bond
Interest A Bond B Bond Total
Rate Face Amount Face Amount Face Amount
------------ ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Montclair 7.10% $ 8,500,000 $ 6,840,000 $ 15,340,000
Newport Village 7.10% 6,250,000 4,175,000 10,425,000
Nicollet Ridge 7.10% 7,925,000 12,415,000 20,340,000
Steeplechase Falls 7.125% 12,650,000 5,300,000 17,950,000
Barkley Place 7.05% 5,350,000 3,480,000 8,830,000
---------------- ---------------- ----------------
Total Series I 40,675,000 32,210,000 72,885,000
---------------- ---------------- ----------------
Mallard Cove I 7.40% 800,000 1,670,000 2,470,000
Mallard Cove II 7.40% 2,700,000 3,750,000 6,450,000
Whispering Lake 7.10% 8,900,000 8,500,000 17,400,000
Gilman Meadows 7.40% 4,000,000 2,875,000 6,875,000
Hamilton Chase 7.35% 7,625,000 6,250,000 13,875,000
Meadows 7.35% 3,000,000 3,635,000 6,635,000
---------------- ---------------- ----------------
Total Series II 27,025,000 26,680,000 53,705,000
---------------- ---------------- ----------------
TOTAL 67,700,000 58,890,000 126,590,000
Creekside Village N/A N/A 11,760,000
---------------- ---------------- ----------------
TOTAL with Creekside $ 67,700,000 $ 58,890,000 $ 138,350,000
================ ================ ================
</TABLE>
<PAGE>
Eleven bonds in the aggregate principal amount of $126,590,000 were
refunded by the issuers of such bonds. As a result, a Series A Bond and
a Series B Bond (whose aggregate principal amount equals that of the
original bonds) were exchanged for each of the original bonds. The
aggregate principal amount of the Series A Bonds and Series B Bonds is
$67,700,000 and $58,890,000, respectively. Each Series B Bond is
subordinate to the Series A Bonds. In addition, the maturity date for
each bond has been extended as part of the refunding to January 2030.
The Series A Bonds bear interest at various fixed rates per annum, as
detailed on the schedule above, which is due and payable monthly. The
Series A Bonds are subject to mandatory sinking fund redemptions
commencing January 1, 2001 and continuing through maturity. Interest
paid on the Series A Bonds for the six months ended June 30, 1995
approximated $1,091,000 for Series I and $743,000 for Series II.
The Series B Bonds, except for the Series B Bonds relating to
Steeplechase Falls, Barkley Place and Meadows, bear interest equal to the
greater of (a) three percent (3%) per annum or (b) the amount of available
cash flow not exceeding 16% per annum. The Series B Bonds relating to
Steeplechase Falls, Barkley Place and Meadows bear interest equal to
16%. Principal on the Series B Bonds will not be amortized, but will be
required to be repaid or refinanced in a lump sum payment at maturity,
January 2030. To the extent the operating partnerships have available
cash flow, interest on the principal amount shall be due and payable
monthly. For the six months ended June 30, 1995, approximately
$595,000 and $302,000 of interest was paid on the Series B Bonds for
Series I and Series II, respectively.
The Partnership deposited each of the Series A Bonds and Series B Bonds
with the SCA Tax Exempt Trust (the "Trust") which was created to hold
these assets. A Certificate of Participation in the corpus and the income
of the Trust was issued representing interests in the two series of bonds.
The Partnership is the sole holder of the Certificate of Participation.
The Series A Bonds were then deposited by the Trust with a custodian
and the additional proceeds were raised through the sale of Receipts in the
Series A Bonds to new investors. The Receipts are credit enhanced by
Financial Security Assurance Inc. ("FSA") and are rated AAA and Aaa by
Standard and Poors and Moody's, respectively.
Through the Series A Bonds, the Receipt holders have a fixed interest rate
and preferred return position so that a guaranteed, preferred, fixed rate tax
exempt return will be paid from the interest collected. The operating
partnerships entered into an interest rate swap agreement whereby a
portion of the fixed interest rate under the Series A Bonds was swapped
for a floating tax exempt interest rate. This mechanism will allow the
Partnership to realize the potential benefit of traditionally lower floating
interest rates. Under this interest rate swap, the operating partnerships are
obligated to pay a floating rate equivalent to the PSA Municipal Swap
Index, an index of weekly tax exempt variable rate issues. For the six
months ended June 30, 1995, approximately $281,000 and $187,000 of
net proceeds was received under the swap agreement in Series I and
Series II properties, respectively. Also, an interest rate cap was purchased
by the operating partnerships to limit their exposure resulting from the
floating tax exempt interest rate obligation. Approximately $94,000 and
$72,000 of amortization was expensed related to the cost of the interest
rate cap in Series I and Series II properties, respectively. These amounts
are included in net interest expense as adjustments to the cost of the
additional proceeds.
In order to obtain credit enhancement and an investment grade rating of
the Receipts, the Partnership was required to pledge the eleven bonds, as
well as the cash stream from the eleven properties collateralizing the
bonds to FSA. In addition, the cash stream from Creekside has been
pledged to FSA as further security. Any cash in excess of the amount
needed to pay interest on the Receipts is then paid for the benefit of BAC
Holders. The cash flow generated on assets acquired with the new
proceeds, as discussed below, and any net proceeds received under the
swap agreement also will be for the benefit of BAC Holders. These cash
streams are not pledged to the new investors.
In return for the sale of Receipts in the Series A Bonds, the Trust, for the
benefit of the Partnership, received $67.7 million. The proceeds from the
sale of the Receipts have been invested in MLP III Investment Limited
Partnership ("MLP III"), a Maryland limited partnership. MLP III is
owned by the Partnership through a 99% general partner interest and by
SCA Limited Partner Corporation ("SCALPC"), an affiliate of the
Managing General Partner, through a one percent (1%) limited partner
interest. MLP III invested the net proceeds from the sale of the Receipts,
approximately $56.8 million, in MLP II Acquisition Limited Partnership
("MLP II"), a Maryland limited partnership. MLP II is owned by MLP III
through a 98.99% limited partner interest (39.996% annual profits and
distributions interest), MLP I LLC ("MLP I"), a Maryland limited liability
company, through a one percent (1%) general partner interest (60%
annual profits and distributions interest) and SCALPC through a .01%
limited partner interest (.001% annual profits and distributions interest).
MLP I is owned collectively by the operating partnerships. MLP III and
MLP II are both affiliates of the Managing General Partner. The net
proceeds held by MLP II are currently invested in various short-term
investments. Approximately $10.9 million was used to finance transaction
costs, Partnership reserves and the interest rate cap.
As part of the financing transaction, the operating partnerships entered
into a cross-collateralization agreement among themselves. This cross-
collateralization agreement may result in the operating partnerships being
obligated under the Series A Bond obligations of the other operating
partnerships due to shortfalls in their cash flows or required debt service
coverage ratios. Based upon information currently available, the
Managing General Partner does not anticipate that any payments will be
required under the cross-collateralization agreement.
Unpaid accrued base interest of approximately $15.5 million on the
eleven original bonds and the Parity Working Capital Loans, and interest
thereon, of approximately $4.8 million, were converted to Accrued
Interest Notes and Working Capital Notes, respectively, in equivalent
principal amounts. The Partnership contributed the Accrued Interest
Notes and Working Capital Notes to MLP III who contributed them, in
turn, to MLP II. In addition, MLP II loaned the operating partnerships
approximately $4.2 million (the "Load Loan Notes") to purchase an
interest rate cap which will serve to limit the operating partnerships'
obligation under the floating rate obligations discussed above. The
Accrued Interest Notes, Working Capital Notes and Load Loan Notes,
(collectively the "Notes") in the aggregate principal amount of
approximately $24.5 million, are due on demand, but in any case not later
than January 2030. The Notes bear interest at a compound annual rate
equal to the Blended Annual Rate in effect for that calendar year as
published by the Internal Revenue Service. To the extent the operating
partnerships have available cash flow, interest on the principal amount and
scheduled principal payments shall be due and payable monthly. Principal
payments made on the Notes for the six months ended June 30, 1995 were
approximately $432,000 for Series I properties and $357,000 for Series
II properties while interest payments made during the first six months of
1995 were approximately $378,000 and $191,000 in Series I and Series
II properties.
The Notes and the Series B Bonds (collectively the "Junior Obligations")
are subordinate in priority and right of payment to the Series A Bonds and
payable only to the extent of cash flow. Payments of principal and interest
on the Junior Obligations are prioritized as follows: (i) interest payments
due to MLP II on the Notes, prorata between the Notes; (ii) principal
payments due to MLP II on the Notes, prorata between the Notes; (iii)
interest payments due to Trust on the Series B Bonds; and (iv) the
principal payment of the Series B Bonds due January 2030.
The Partnership will continue to report Series I and Series II separately
after the financing transaction with each Series having an interest in the
joint investment pool as described below. Income generated from the
additional proceeds will be allocated approximately 60.1% to Series I and
approximately 39.9% to Series II. Such percentages are based on the face
amount of the Series A Bonds related to the refunded bonds of each
respective Series.
The joint investment pool comprises the eleven operating partnerships,
MLP I, MLP II, MLP III and the Trust. The combined balance sheet,
income statement and changes in equity of the joint investment pool as of
and for the three and six months ended June 30, 1995 shown below
reflects all related valuation adjustments and other basis differences
recorded by the Partnership in its financial statements through that date.
All significant intercompany balances and transactions have been
eliminated.
<PAGE>
JOINT INVESTMENT POOL:
(Unaudited) June 30, 1995
---------------
ASSETS (000's)
Land & land improvements $ 10,811
Buildings & improvements 103,619
Furniture & fixtures 3,453
---------------
Subtotal 117,883
Less accumulated depreciation (14,190)
---------------
Total 103,693
Cash and cash equivalents 2,595
Short-term investments 56,834
Interest receivable on
short-term investments 727
Accounts receivable and
prepaid expenses 112
Other assets 5,769
---------------
TOTAL ASSETS $ 169,730
===============
LIABILITIES AND EQUITY
Accounts payable and accrued expenses $ 2,891
Custody receipts outstandings 67,700
---------------
TOTAL LIABILITIES 70,591
---------------
Minority interest 7
---------------
Equity:
Series I 53,908
Series II 45,224
---------------
TOTAL EQUITY 99,132
---------------
TOTAL LIABILITIES AND EQUITY $ 169,730
===============
<PAGE>
INCOME STATEMENT: Three Six
(in thousands) Months ended Months ended
June 30, 1995 June 30, 1995
--------------- --------------
INCOME:
Net rental income $ 5,202 $ 7,696
Interest income 941 1,413
--------------- --------------
TOTAL INCOME 6,143 9,109
--------------- --------------
Rental expenses 4,082 6,082
Operating expenses 11 1,909
Net interest expense 821 1,366
--------------- --------------
TOTAL EXPENSES 4,914 9,357
--------------- --------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST 1,229 (248)
MINORITY INTEREST 42 44
--------------- --------------
NET INCOME (LOSS) $ 1,187 $ (292)
=============== ==============
NET INCOME (LOSS)
ALLOCATED TO SERIES I $ 778 $ 60
=============== ==============
NET INCOME (LOSS)
ALLOCATED TO SERIES II $ 409 $ (352)
=============== ==============
STATEMENT OF CHANGES IN EQUITY:
(Unaudited)
(in thousands) SERIES I SERIES II
--------------- --------------
Balance, February 14, 1995 $ 55,068 $ 46,265
Net income (loss) 60 (352)
Distributions (1,220) (689)
--------------- --------------
Balance, June 30, 1995 $ 53,908 $ 45,224
=============== ==============
<PAGE>
NOTE 5 - RELATED PARTY TRANSACTIONS
The Managing General Partner and its affiliates are entitled to
reimbursement for all costs and expenses paid by them on behalf of the
Partnership for administrative services necessary for the prudent operation
of the Partnership. The Partnership does not employ any personnel. All
staff required by the Partnership are employees of the Managing General
Partner or its affiliates which receive direct reimbursement from the
Partnership for all costs related to such personnel including payroll taxes,
workers' compensation and health insurance and other fringe benefits, as
summarized in the table below.
<TABLE>
<CAPTION> For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
(Unaudited) June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
--------------- --------------- ------------ ------------
(in 000's)
<S> <C> <C> <C> <C>
Series I
Salaries of noncontrolling persons &
related expenses $106 $107 $195 $174
Other administrative expenses 17 35 34 54
--------------- --------------- ------------ ------------
Expenses reimbursed $123 $142 $229 $228
=============== =============== ============ ============
Series II
Salaries of noncontrolling persons &
related expenses $51 $52 $94 $84
Other administrative expenses 8 17 16 26
--------------- --------------- ------------ ------------
Expenses reimbursed $59 $69 $110 $110
=============== =============== ============ ============
</TABLE>
Included in Due to Affiliates in the accompanying balance sheets are
amounts payable to the Managing General Partner and its affiliates related
to such administrative and operating costs. At June 30, 1995, the
amounts due approximated $27,000 in Series I and $12,000 in Series II,
while at December 31, 1994, they were approximately $64,000 in Series
I and $31,000 in Series II.
As previously detailed in the Partnership's Prospectus, affiliates of the
Managing General Partner receive fees for mortgage servicing from the
operating partnerships owning the mortgaged properties. With respect to
the investments in real estate partnerships (see Note 3) and those
properties in the joint investment pool (see Note 4), the payment of these
fees has continued after the reclassification from investments in mortgage
revenue bonds, since the bonds are still owned by the Partnership. The
fees paid by all borrowing partnerships to affiliates of the Managing
General Partner approximated $739,000 for the six months ended June 30,
1995 and 1994.
The General Partners are entitled to an allocation of the Partnership's
profits, losses and cash distributions as specified in the Partnership
Agreement. For the six months ended June 30, 1995 the Partnership
declared a cash distribution of $47,000 and $25,000 to the General
Partners of Series I and Series II, respectively. These amounts represent
the General Partners' portion of the $5,297,000 and $2,672,000
semi-annual distributions paid for Series I and Series II, respectively, on
August 11, 1995.
The operating expenses for several properties include property
management fees paid to affiliates of the Managing General Partner.
During the six months ended June 30, 1995 and 1994, these fees
approximated $452,000 for eleven properties and $297,000 for seven
properties, respectively.
177061 Canada Ltd. (formerly Shelter Corporation of Canada Limited),
a general partner of the Associate General Partner, is contractually
obligated under guarantees to the nonaffiliated borrowers of North Pointe
and Whispering Lake to fund operating deficits. The unpaid balances due
under the limited operating deficit guarantees, including accrued interest
as of June 30, 1995, approximated $227,000 and $317,000 for North
Pointe and Whispering Lake, respectively. Scheduled payments totalling
$58,000 and $60,000 were received on the North Pointe obligation during
the first six months of 1995 and 1994, respectively. Under the Whispering
Lake obligation, scheduled payments totalling $83,000 and $86,000 were
received during the first six months of 1995 and 1994, respectively.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SCA TAX EXEMPT FUND
LIMITED PARTNERSHIP
(Registrant)
By: SCA REALTY I, INC.
Managing General Partner
By: Thomas R. Hobbs
---------------
Thomas R. Hobbs
Senior Vice President
Signing on behalf of registrant and as acting chief financial officer.
DATED: October 6, 1995
<PAGE>
