UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of
Securities Exchange Act of 1934
For the period ended March 31, 1996 Commission file number 0-15725
-------------- -------
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
-------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No____
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
Part I- FINANCIAL INFORMATION
Item
1. Financial Statements
2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II- OTHER INFORMATION
Item
1. Legal Proceedings
2. through 5. are not applicable.
6. Exhibits and Reports on Form 8-K
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
IN THOUSANDS, EXCEPT BAC DATA
<TABLE>
<CAPTION>
March 31,
1996 December 31,
(Unaudited) 1995
--------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $5,822 $9,810
Interest receivable 491 434
Investment in mortgage revenue bonds (Note 2) 146,142 146,142
Investment in parity working capital loans, net of valuation
allowance of $600 in 1996 and 1995 (Note 3) 2,890 2,890
Investment in MLP II (Note 4) 65,110 65,299
Other assets 50 240
--------------- ---------------
TOTAL ASSETS $220,505 $224,815
=============== ===============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $980 $544
Distributions payable 11 7,977
Due to affiliates (Note 5) 7 9
--------------- ---------------
TOTAL LIABILITIES 998 8,530
--------------- ---------------
Minority Interest 3 3
--------------- ---------------
Partners' Capital
Unrealized gain (loss) on mortgage revenue bonds
available for sale (981) (981)
General partners (445) (477)
Limited partners:
Series I (beneficial assignee certificates- issued
and outstanding 200,000 certificates) 143,181 141,111
Series II (beneficial assignee certificates- issued
and outstanding 96,256 certificates) 77,749 76,629
--------------- ---------------
TOTAL PARTNERS' CAPITAL 219,504 216,282
--------------- ---------------
COMMITMENTS AND CONTINGENCIES (Notes 2, 4 & 5)
TOTAL LIABILITIES AND PARTNERS' CAPITAL $220,505 $224,815
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME (Unaudited)
IN THOUSANDS, EXCEPT PER BAC DATA
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
1996 1995
--------------- ---------------
<S> <C> <C>
INCOME
Interest on mortgage revenue bonds and
parity working capital loans $3,116 $4,645
Net gain on sale of A bond receipts - 623
Interest on short-term investments 74 82
Equity in MLP II 879 360
--------------- ---------------
TOTAL INCOME 4,069 5,710
--------------- ---------------
EXPENSES
Operating expenses 842 1,363
Minority interest 5 3
--------------- ---------------
TOTAL EXPENSES 847 1,366
--------------- ---------------
NET INCOME $3,222 $4,344
=============== ===============
NET INCOME ALLOCATED TO GENERAL PARTNERS $32 $43
=============== ===============
NET INCOME ALLOCATED TO LIMITED PARTNERS:
SERIES I $2,070 $3,293
=============== ===============
SERIES II $1,120 $1,008
=============== ===============
NET INCOME PER BAC
SERIES I $10.35 $16.46
=============== ===============
SERIES II $11.63 $10.47
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS (Unaudited)
IN THOUSANDS
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, 1996 March 31, 1995
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $3,222 $4,344
Adjustments to reconcile net income to net cash
provided by operating activities:
Equity in MLP II net income (879) (360)
Income allocated to minority interest 5 3
Net realized gain on sale of A bond receipts - (2,347)
(Increase) in interest receivable (57) (100)
Decrease in other assets 190 257
Increase (decrease) in accounts payable
and accrued expenses 436 (989)
(Decrease) in due to affiliates (2) (30)
--------------- ---------------
Net cash provided by operating activities 2,915 778
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in MLP II - (61,000)
Distributions from MLP II 1,068 - -
Proceeds from sale of A bond receipts - 67,700
--------------- ---------------
Net cash provided by investing activities 1,068 6,700
--------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to partners (7,971) (7,713)
--------------- ---------------
NET (DECREASE) IN CASH AND CASH
EQUIVALENTS (3,988) (235)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 9,810 7,855
--------------- ---------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $5,822 $7,620
=============== ===============
DISCLOSURE OF NON-CASH ACTIVITIES:
Contribution of parity working capital loans
and other assets to MLP II - $4,647
=============== ===============
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
SCA TAX EXEMPT LIMITED PARTNERSHIP
STATEMENT OF CHANGES IN PARTNERS' CAPITAL
FOR THE PERIOD DECEMBER 31, 1995 THROUGH MARCH 31, 1996
IN THOUSANDS
<TABLE>
<CAPTION>
SERIES I SERIES II
LIMITED PARTNERS LIMITED PARTNERS UNREALIZED GAIN (LOSS)
BENEFICIAL BENEFICIAL ON MORTGAGE REVENUE
ASSIGNEE ASSIGNEE GENERAL BONDS AVAILABLE
CERTIFICATES CERTIFICATES PARTNERS FOR SALE, NET TOTAL
---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 $141,111 $76,629 ($477) ($981) $216,282
Net income (Unaudited) 2,070 1,120 32 - 3,222
---------------- --------------- --------------- --------------- ---------------
Balance, March 31, 1996 (Unaudited) 143,181 77,749 (445) (981) 219,504
================ =============== =============== =============== ===============
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 a fair statement of the results for the periods presented. These
results have been determined on the basis of accounting principles and
policies discussed in Note 1 and Note 2 to the Financial Statements
appearing in the SCA Tax Exempt Fund Limited Partnership's (the
"Partnership") 1995 Annual Report on Form 10-K, (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
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 the specific terms of the bonds are defined by the various loan
documents which were negotiated at the time of settlement. The basic terms
and structure of each bond which has not been refunded were described in
Note 4 to the December 31, 1995 financial statements included in the Form
10-K. On February 14, 1995, the Partnership refunded 11 of the original
mortgage revenue bonds (five in Series I and six in Series II) into 11 Series
A Bonds and 11 Series B Bonds. As part of the financing transaction (the
"Financing") consummated on February 14, 1995, custody receipts in the
Series A Bonds were sold to third party investors. A complete description
of the Financing and the bond terms are described in Note 3 to the
December 31, 1995 financial statements included in the Form 10-K.
As of March 31, 1996, the Partnership held 23 mortgage revenue
bonds (14 bonds for Series I and nine bonds for Series II); of these, 12 are
the original mortgage revenue bonds and 11 are Series B Bonds. Five original
bonds in Series I and three Series B Bonds (two in Series I and one in Series
II) are delinquent on their debt service obligations. Descriptions of the
various mortgage revenue bonds owned by the Partnership at March 31, 1996 are
as follows:
<PAGE>
<TABLE>
<CAPTION>
March 31, 1996 and December 31, 1995
Series I ----------------------------------------
Base Face Amortized Unrealized Fair
Investment in Mortgage Interest Maturity Amount Cost Gain (Loss) Value
Revenue Bonds (Note 2) Rate Date (000's) (000's) (000's) (000's)
- ------------------------- ------------ ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Series I Original Bonds:
Alban Place 7.875 Oct. 2008 $10,065 $10,065 ($336) $9,729
Northridge Park 7.500 June 2012 8,815 8,815 (1,625) 7,190
Lakeview Garden 7.750 Aug. 2007 9,003 6,988 - 6,988
Riverset 7.875 Nov. 1999 6,475 6,475 (778) 5,697
Villa Hialeah 7.875 Oct. 2009 10,250 10,250 (725) 9,525
Newport-on-Seven 8.125 Aug. 2008 10,125 7,898 - 7,898
North Pointe 7.875 Aug. 2006 25,185 12,739 1,170 13,909
Creekside Village 7.500 Nov. 2009 11,760 8,635 - 8,635
Willowgreen 8.000 Dec. 2010 9,275 7,901 - 7,901
---------- ------------ ------------ ------------
Subtotal Series I Original Bonds 100,953 79,766 (2,294) 77,472
---------- ------------ ------------ ------------
Series I B Bonds:
Barkley Place 16.000 Jan. 2030 3,480 2,445 - 2,445
Montclair 3.000 Jan. 2030 6,840 1,691 - 1,691
Newport Village 3.000 Jan. 2030 4,175 2,973 287 3,260
Nicollet Ridge 3.000 Jan. 2030 12,415 6,075 475 6,550
Steeplechase Falls 16.000 Jan. 2030 5,300 5,851 267 6,118
---------- ------------ ------------ ------------
Subtotal Series I B Bonds 32,210 19,035 1,029 20,064
---------- ------------ ------------ ------------
Subtotal Series I Investment in
Mortgage Revenue Bonds $133,163 $98,801 ($1,265) $97,536
---------- ------------ ------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
March 31, 1996 and December 31, 1995
Series II ----------------------------------------
Base Face Amortized Cost Unrealized Fair
Investment in Mortgage Interest Maturity Amount Cost Gain (Loss) Value
Revenue Bonds (Note 2) Rate Date (000's) (000's) (000's) (000's)
- ------------------------- ------------ ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Series II Original Bonds:
Riverset 7.875 Nov. 1999 $12,525 $12,525 ($1,477) $11,048
Southfork Village 7.875 Jan. 2009 10,375 10,375 492 10,867
Emerald Hills 7.750 Apr. 2008 6,725 6,725 626 7,351
---------- ------------ ------------ ------------
Subtotal Series II Original Bonds 29,625 29,625 (359) 29,266
---------- ------------ ------------ ------------
Series II B Bonds:
Gilman Meadows 3.000 Jan. 2030 2,875 2,530 176 2,706
Hamilton Chase 3.000 Jan. 2030 6,250 4,140 - 4,140
Mallard Cove I 3.000 Jan. 2030 1,670 942 80 1,022
Mallard Cove II 3.000 Jan. 2030 3,750 2,590 284 2,874
Meadows 16.000 Jan. 2030 3,635 3,716 103 3,819
Whispering Lake 3.000 Jan. 2030 8,500 4,779 - 4,779
---------- ------------ ------------ ------------
Subtotal Series II B Bonds 26,680 18,697 643 19,340
---------- ------------ ------------ ------------
Subtotal Series II Investment in
Mortgage Revenue Bonds 56,305 48,322 284 48,606
---------- ------------ ------------ ------------
Total Investment in Mortgage
Revenue Bonds $189,468 $147,123 ($981) $146,142
========== ============ ============ ============
</TABLE>
<PAGE>
Under the provisions of Statement of Financial Accounting
Standards No. 115, "Accounting for Certain Investments in Debt and Equity
Securities," ("FAS 115"), investments in mortgage revenue bonds are
recorded at fair value. In the absence of readily ascertainable market values,
such fair values are estimated by the Managing General Partner. There were
no changes in fair value for the three months ended March 31, 1996 and
1995 on the Partnership's investment in mortgage revenue bonds. The
Managing General Partner will continue to use its best efforts in estimating
the fair value of the Partnership's mortgage revenue bonds.
In conjunction with a review of the Partnership's financial statements
by the Staff of the Securities and Exchange Commission ("SEC") in 1995,
the Partnership agreed that it would account for all of its mortgage revenue
bonds as debt securities under the provisions of FAS 115 effective January
1, 1994, and restated its 1994 and 1995 financial statements to reflect this
change. Accordingly, effective January 1, 1994, all investments in mortgage
revenue bonds, regardless of their status, are classified and accounted for as
available for sale debt securities and carried at fair value. The effect of
adopting this accounting change was to increase previously reported net
income by approximately $3.3 million for the quarter ended March 31, 1995.
NOTE 3 - INVESTMENT IN PARITY WORKING CAPITAL LOANS
As of March 31, 1996, the Partnership held 11 parity working capital
loans, eight for Series I and three for Series II, all relating to the 12
original mortgage revenue bonds. The terms of the loans are identical to the
mortgage revenue bonds to which they relate. A complete description is
included in Note 5 to the December 31, 1995 financial statements included
in the Form 10-K.
NOTE 4 - INVESTMENT IN MLP II
As previously discussed, on February 14, 1995, the Partnership
consummated the Financing which raised additional proceeds through the
offering of $67,700,000 in aggregate principal amount of Multifamily
Mortgage Revenue Bond Receipts, (collectively, the "Receipts"). A
complete description of the Financing is included in Note 3 to the December
31, 1995 financial statements included in the Form 10-K.
The proceeds from the sale of the Receipts in Series A Bonds, which
were allocated between Series I (60.1%) and Series II (39.9%) in
accordance with the relative fair values of the eleven refunded bonds as
reflected in proceeds of the Receipts, were invested in MLP III Investment
Limited Partnership ("MLP III"). MLP III invested the net proceeds from
the sale of the Receipts in Series A Bonds, approximately $61 million (net
of $6.7 million in proceeds used to finance transaction costs and additional
Partnership reserves), in MLP II Acquisition Limited Partnership ("MLP
II"). MLP II, in turn, loaned the operating partnerships whose properties
collateralize the eleven refunded bonds included in the Financing
approximately $4.2 million to purchase an interest rate cap. The balance of
the net proceeds, approximately $56.8 million, is available for MLP II, on
behalf of its partners, and therefore, the Partnership, to make additional
mortgage revenue bond investments.
On January 19, 1996, the Partnership, through MLP II, made its first
acquisition of an additional mortgage revenue bond when $7,238,000 of the
net Financing proceeds was invested in a bond collateralized by Riverset II,
a multi-family property located in Memphis, Tennessee. The remaining net
proceeds held by MLP II are currently invested in various short-term
investments.
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. Amounts so charged to the Partnership
attributed to Series I and Series II represent actual amounts expended or
allocations based on time spent, usage, original net offering proceeds or
other reasonable measures.
<PAGE>
<TABLE>
<CAPTION>
For the three For the three
months ended months ended
March 31, March 31,
1996 1995
(000's) (000's)
--------------- ---------------
<S> <C> <C>
Charged to Series I:
Salaries of noncontrolling persons &
related expenses $108 $89
Other administrative expenses 24 17
--------------- ---------------
Expenses reimbursed $132 $106
=============== ===============
Charged to Series II:
Salaries of noncontrolling persons &
related expenses $52 $43
Other administrative expenses 12 8
--------------- ---------------
Expenses reimbursed $64 $51
=============== ===============
Total:
Salaries of noncontrolling persons &
related expenses $160 $132
Other administrative expenses 36 25
--------------- ---------------
Expenses reimbursed $196 $157
=============== ===============
</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 March 31, 1996 and 1995,
the amounts due approximated $7,000 and $9,000, respectively.
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. The fees paid by
all borrowing partnerships to affiliates of the Managing General Partner
approximated $495,000 for the three months ended March 31, 1996 and 1995.
The General Partners are entitled to an allocation of the Partnership's
profits, losses and cash distributions as specified in the Partnership
Agreement. During the first quarter of 1996 the Partnership paid a cash
distribution to the General Partners of $72,891. This amount represents the
General Partners' portion of the $7,969,931 ($5,296,587 for Series I and
$2,673,344 for Series II) semi-annual distributions paid on February 9, 1996.
The operating expenses for several properties include property
management fees paid to affiliates of the Managing General Partner. During
the three months ended March 31, 1996 and 1995, these fees approximated
$253,000 for 11 properties and $254,000 for 10 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
March 31, 1996, approximated $148,000 and $205,000 for North Pointe
and Whispering Lake, respectively. Scheduled payments totaling $31,000
and $44,000 were received on the North Pointe obligation and the
Whispering Lake obligation, respectively, during the first three months of
1996 and 1995.
NOTE 6 - LITIGATION
As previously discussed in the Partnership's 1995 Annual Report on
Form 10-K, a class action complaint was filed against the General Partners
of the Partnership alleging breach of the Partnership Agreement and their
fiduciary duties in connection with the Financing transaction completed in
February 1995. As a result of several negotiations, in November 1995, the
parties agreed to a settlement, which is conditioned on, among other things,
the consummation of a transaction disclosed in the Prospectus/Consent
Solicitation filed with the SEC on April 24, 1996. On March 13, 1996, the
court held a status conference in the action. At that time, all conditions
necessary for the settlement to proceed have not yet occurred and, for
reasons of case administration, the court dismissed the action without
prejudice and with leave to the parties to reinstate the action on or before
May 1, 1996 in order to proceed with the settlement or the litigation.
On May 1, 1996, counsel for the plaintiffs made application to the court
to reinstate the action. The parties intend to proceed with the settlement.
Once the Prospectus/Consent Solicitation is declared effective by the SEC,
the parties intend to file with the court an amended stipulation of settlement
setting forth the terms and conditions of the settlement. BAC Holders
would be sent under separate cover a Notice of Class and Derivative Action
Determination, Settlement and Hearing on the Proposed Settlement (the
"Notice"), which would explain the settlement and the rights of BAC
Holders in connection therewith. The settlement would be subject to the
approval of the court and other terms and conditions, as set forth in the
Notice.
NOTE 7 - SUPPLEMENTAL INFORMATION FOR SERIES I AND SERIES II
As discussed in Note 1 to the December 31, 1995 financial statements
included in the Form 10-K, the Series I and Series II BAC Holders are
effectively limited partners in the Partnership, even though they have
invested in two separate pools of investments. The Managing General
Partner maintains records for each such pool of investments for each Series
of BAC Holders. Information for each of Series I and Series II for the
quarters ended March 31, 1996 and 1995, and as of March 31, 1996 and
December 31, 1995 is set forth below.
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
BALANCE SHEETS
IN THOUSANDS, EXCEPT BAC DATA
<TABLE>
<CAPTION>
Series I Series II
March 31, Series I March 31, Series II
1996 December 31, 1996 December 31,
(Unaudited) 1995 (Unaudited) 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents $3,463 $6,169 $2,359 $3,641
Interest receivable 235 235 256 199
Investment in mortgage revenue bonds 97,536 97,536 48,606 48,606
Investment in parity working capital loans, net
of valuation allowances 2,075 2,075 815 815
Investment in MLP II 38,892 38,966 26,218 26,333
Other assets 34 160 16 80
------------ ------------ ------------ ------------
TOTAL ASSETS $142,235 $145,141 $78,270 $79,674
============ ============ ============ ============
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable and accrued expenses $662 $365 $318 $179
Distributions payable 7 5,301 4 2,676
Due to affiliates 5 5 2 4
------------ ------------ ------------ ------------
TOTAL LIABILITIES 674 5,671 324 2,859
------------ ------------ ------------ ------------
Minority Interest 2 2 1 1
------------ ------------ ------------ ------------
Partners' Capital
Unrealized gain (loss) on mortgage revenue bonds
available for sale (1,265) (1,265) 284 284
General Partners (357) (378) (88) (99)
Limited Partners (beneficial assignee certificates-
issued and outstanding 200,000 certificates for
Series I and 96,256 certificates for Series II) 143,181 141,111 77,749 76,629
------------ ------------ ------------ ------------
TOTAL PARTNERS' CAPITAL 141,559 139,468 77,945 76,814
------------ ------------ ------------ ------------
COMMITMENTS AND CONTINGENCIES
TOTAL LIABILITIES AND PARTNERS' CAPITAL $142,235 $145,141 $78,270 $79,674
============ ============ ============ ============
</TABLE>
<PAGE>
SCA TAX EXEMPT FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME (Unaudited)
IN THOUSANDS, EXCEPT PER BAC DATA
<TABLE>
<CAPTION>
Series I Series I Series II Series II
For the three For the three For the three For the three
months ended months ended months ended months ended
March 31, March 31, March 31, March 31,
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INCOME
Interest on mortgage revenue bonds and
parity working capital loans $2,062 $3,154 $1,054 $1,491
Net gain (loss) on sale of A bond receipts - 641 - (18)
Interest on short-term investments 51 54 23 28
Equity in MLP II 550 221 329 139
------------ ------------ ------------ ------------
TOTAL INCOME 2,663 4,070 1,406 1,640
------------ ------------ ------------ ------------
EXPENSES
Operating expenses 569 742 273 621
Minority interest 3 2 2 1
------------ ------------ ------------ ------------
TOTAL EXPENSES 572 744 275 622
------------ ------------ ------------ ------------
NET INCOME $2,091 $3,326 $1,131 $1,018
============ ============ ============ ============
NET INCOME ALLOCATED TO GENERAL PARTNERS $21 $33 $11 $10
============ ============ ============ ============
NET INCOME ALLOCATED TO LIMITED PARTNERS $2,070 $3,293 $1,120 $1,008
============ ============ ============ ============
NET INCOME PER BAC $10.35 $16.46 $11.63 $10.47
============ ============ ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
| | | | | Total | Total | Total | Total |
Mortgaged | | | Occupancy |Occupancy| Operating | Operating | Operating | Operating |
Property Name & | Loan | Total | as of | as of | Revenues(1)| Revenues(1)|Expenses (1)|Expenses (1)|
Location | Amount | Units | 3/31/96 | 3/31/95 |1/96 to 3/96 |1/95 to 3/95 |1/96 to 3/96|1/95 to 3/95|
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES I | | | | | | | | |
Alban Place | 10,500,000 | 194 | 90.2%| 95.4%| 376,484 | 389,465 | 176,656 | 190,363 |
Frederick, MD | | | | | | | | |
Barkley Place | 9,630,000 | 156 | 94.9%| 94.2%| 755,284 | 735,734 | 619,400 | 504,255 |
Fort Myers, FL | | | | | | | | |
Creekside Village | 11,985,000 | 296 | 93.2%| 90.5%| 393,630 | 372,313 | 217,654 | 207,645 |
Sacramento, CA | | | | | | | | |
Lakeview Garden | 9,307,500 | 180 | 91.7%| 95.0%| 306,695 | 303,699 | 186,538 | 175,317 |
Dade County, FL | | | | | | | | |
The Montclair | 15,465,000 | 159 | 98.1%| 95.6%| 662,352 | 627,082 | 370,491 | 315,273 |
Springfield, MO | | | | | | | | |
Newport Village | 10,880,000 | 220 | 92.3%| 99.5%| 379,862 | 390,979 | 211,472 | 197,560 |
Thornton, CO | | | | | | | | |
Newport on Seven | 10,800,000 | 167 | 100.0%| 94.6%| 397,158 | 367,312 | 267,742 | 220,935 |
St. Louis Park, MN| | | | | | | | |
Nicollet Ridge | 20,340,000 | 339 | 95.0%| 100.0%| 710,605 | 690,651 | 485,920 | 446,276 |
Burnsville, MN | | | | | | | | |
North Pointe | 25,850,000 | 540 | 91.9%| 75.0%| 744,877 | 606,596 | 438,115 | 471,691 |
San Bernardino, CA| | | | | | | | |
Northridge Park II | 8,950,000 | 128 | 95.0%| 97.6%| 247,779 | 254,635 | 125,911 | 117,341 |
Salinas, CA | | | | | | | | |
Riverset Apartments | 6,535,000 | 120 | 97.7%| 98.0%| 219,081 | 212,955 | 86,248 | 70,847 |
Memphis, TN | | | | | | | | |
Steeplechase Falls | 18,100,000 | 450 | 90.7%| 94.2%| 706,133 | 729,454 | 370,926 | 344,910 |
Knoxville, TN | | | | | | | | |
Villa Hialeah | 10,250,000 | 245 | 95.9%| 95.9%| 438,002 | 421,891 | 261,635 | 244,396 |
Hialeah, FL | | | | | | | | |
Willowgreen | 9,450,000 | 241 | 91.3%| 87.1%| 340,171 | 352,662 | 202,366 | 181,076 |
Fife, WA | | | | | | | | |
- ------------------------------------------------------------------|---------|------------------------------------------------------
TOTALS: | 178,042,500 | 3,435 |--------------|---------| 6,678,113 | 6,455,428 | 4,021,074 | 3,687,885 |
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------
| | | |
| | | 1/96 to 3/96 |
Mortgaged |1/96 to 3/96 |1/96 to 3/96 | Cash |
Property Name & |Debt Service |Debt Service |Available for |
Location | Due ($) |Paid ($) (3) | SCATEF (4) |
- -------------------------------------------------------------------
<S> <C> <C> <C>
SERIES I | | | |
Alban Place | 206,719 | 206,719 | 206,719 |
Frederick, MD | | | |
Barkley Place | 325,354 (2)| 207,801 | 21,647 |
Fort Myers, FL | | | |
Creekside Village | 224,719 | 188,013 | 188,013 |
Sacramento, CA | | | |
Lakeview Garden | 180,333 | 117,000 | 117,000 |
Dade County, FL | | | |
The Montclair | 409,636 (2)| 409,636 | 138,203 |
Springfield, MO | | | |
Newport Village | 248,384 (2)| 248,384 | 41,265 |
Thornton, CO | | | |
Newport on Seven | 219,375 | 143,896 | 143,896 |
St. Louis Park, MN| | | |
Nicollet Ridge | 526,761 (2)| 526,761 | 227,684 |
Burnsville, MN | | | |
North Pointe | 508,922 | 298,452 | 298,452 |
San Bernardino, CA| | | |
Northridge Park II | 167,811 | 167,812 | 167,812 |
Salinas, CA | | | |
Riverset Apartments | 128,658 | 128,658 | 128,658 |
Memphis, TN | | | |
Steeplechase Falls | 570,670 (2)| 439,074 | 80,405 |
Knoxville, TN | | | |
Villa Hialeah | 201,797 | 201,797 | 201,797 |
Hialeah, FL | | | |
Willowgreen | 189,000 | 132,195 | 132,195 |
Fife, WA | | | |
Cash from Other | | | |
Sources (5) | | | 627,893 |
- -------------------------------------------------------------------
TOTALS: | 4,108,139 | 3,416,198 | 2,721,639 |
- -------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
| | | | | Total | Total | Total | Total |
Mortgaged | | | Occupancy |Occupancy| Operating | Operating | Operating | Operating |
Property Name & | Loan | Total | as of | as of | Revenues(1)| Revenues(1)|Expenses (1)|Expenses (1)|
Location | Amount | Units | 3/31/96 | 3/31/95 |1/96 to 3/96 |1/95 to 3/95 |1/96 to 3/96|1/95 to 3/95|
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SERIES II | | | | | | | | |
Emerald Hills | 7,250,000 | 130 | 99.0%| 100.0%| 283,584 | 258,599 | 141,184 | 134,801 |
Issaquah, WA | | | | | | | | |
Gilman Meadows | 7,100,000 | 125 | 96.0%| 94.4%| 286,236 | 272,307 | 153,614 | 129,800 |
Issaquah, WA | | | | | | | | |
Hamilton Chase | 13,975,000 | 300 | 96.7%| 97.3%| 512,206 | 501,605 | 294,976 | 285,233 |
Chattanooga, TN | | | | | | | | |
Mallard Cove I | 2,610,000 | 63 | 100.0%| 93.7%| 91,920 | 89,933 | 58,647 | 54,667 |
Everett, WA | | | | | | | | |
Mallard Cove II | 6,740,000 | 135 | 93.3%| 99.3%| 218,069 | 234,959 | 130,845 | 121,753 |
Everett, WA | | | | | | | | |
The Meadows | 7,200,000 | 200 | 98.0%| 100.0%| 304,601 | 307,859 | 163,814 | 137,499 |
Memphis, TN | | | | | | | | |
Riverset Apartments | 12,640,000 | 232 | 97.7%| 98.0%| 423,762 | 411,913 | 166,827 | 137,036 |
Memphis, TN | | | | | | | | |
Southfork Village | 10,550,000 | 200 | 97.0%| 97.5%| 469,588 | 443,395 | 201,758 | 193,049 |
Lakeville, MN | | | | | | | | |
Whispering Lake | 18,190,000 | 384 | 94.3%| 97.9%| 588,189 | 539,282 | 325,918 | 269,010 |
Kansas City, MO | | | | | | | | |
- ------------------------------------------------------------------|---------|------------------------------------------------------
TOTALS: | 86,255,000 | 1,769 |--------------|---------| 3,178,155 | 3,059,852 | 1,637,583 | 1,462,848 |
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
| | |1/96 to 3/96 |
Mortgaged |1/96 to 3/96 |1/96 to 3/96 | Cash |
Property Name & |Debt Service |Debt Service |Available for |
Location | Due ($) |Paid ($) (3) | SCATEF (4) |
- ------------------------------------------------------------------
<S> <C> <C> <C>
SERIES II | | | |
Emerald Hills | 140,469 | 140,469 | 140,469 |
Issaquah, WA | | | |
Gilman Meadows | 165,437 (2)| 165,437 | 39,342 |
Issaquah, WA | | | |
Hamilton Chase | 295,708 (2)| 295,708 | 76,366 |
Chattanooga, TN | | | |
Mallard Cove I | 65,433 (2)| 65,433 | 30,932 |
Everett, WA | | | |
Mallard Cove II | 148,673 (2)| 148,673 | 45,872 |
Everett, WA | | | |
The Meadows | 254,147 (2)| 191,163 | 82,417 |
Memphis, TN | | | |
Riverset Apartments | 248,850 | 248,850 | 248,850 |
Memphis, TN | | | |
Southfork Village | 207,703 | 211,605 | 211,605 |
Lakeville, MN | | | |
Whispering Lake | 413,371 (2)| 413,371 | 120,806 |
Kansas City, MO | | | |
Cash from Other | | | |
Sources (5) | | | 440,734 |
- -------------------------------------------------------------------
TOTALS: | 1,939,791 | 1,880,709 | 1,437,393 |
- -------------------------------------------------------------------
<FN>
FOOTNOTES:
(1) "Total Expenses" includes normal operating expenses (excluding depreciation)
plus escrows for real estate taxes and insurance, reserve for replacement
payments, servicing fees, bond issuer fees, guarantor fees, collateral agent
expenses and capital improvements (offset by the amount of any draw on the
reserve for replacement account to fund the improvements).
Total Operating Revenues and Total Operating Expenses for 1995 as reported
in this quarterly report may differ from those reported in last year's
quarterly report due to revisions in property operating statements or
reclassification of certain expenses.
(2) "Debt Service Due" includes interest on Series A Bonds, Series B Bonds
and principal and interest on Demand Notes.
(3) "Debt Service Paid" equals, generally, debt service paid from property
operations, property level reserves and other sources during the reporting
period including interest payments on Series A and B Bonds and interest and
principal payments on Demand Notes. For puposes of this table, these receipts
are compared to debt service due in the same reporting period. Therefore,
the cumulative debt service shortfall for a property may exceed the resulting
shortfall for the reporting period.
(4) "Cash Available for SCATEF" represents total debt service paid by the
properties less any interest on Series A Bonds paid.
(5) "Cash from Other Sources" includes cash received from investments
subsequent to the reporting period.
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results
of Operations
Significant Events
Proposed New Investment Structure
On April 24, 1996, the Partnership filed on Form S-4 a
Prospectus/Consent Solicitation under the Securities Act of 1933. The
Prospectus/Consent Solicitation describes a business strategy for the future
of the Partnership's investments and a new investment structure developed
by the Managing General Partner anticipated to enhance the value of BAC
Holder investments. The transaction will provide BAC Holders with
different investment choices designed to fit their individual investment
objectives. These choices will provide BAC Holders with the opportunity
to exchange their BACs for: a) liquid, growth-oriented securities, b)
securities which are substantially similar to BACs subsequent to the
Financing, but assume a special capital distribution, and/or c) securities
whose distributions are substantially similar to BACs as they existed prior
to the Financing. The Partnership anticipates presenting the transaction to
BAC Holders for consideration in the near future. As with any new
investment structure, there can be no assurance as to what the returns will
be over time. For the quarter ended March 31, 1996, approximately
$275,000 was expensed related to the preparation of the Prospectus/Consent
Solicitation.
Financial Statements
The Partnership previously has presented financial statements for each
of Series I and Series II reflecting the pool of investments attributable to
each Series. Following a review of the Partnership's financial statements in
1995, the Staff of the Securities and Exchange Commission (the "SEC")
concluded, and the Managing General Partner agreed, that the Partnership
would present financial statements comprising both Series I and Series II.
Financial information with respect to each Series is set forth supplementally
in Note 7 to the Partnership's financial statements included herein. The
consolidated financial statements of the Partnership include the Partnership
(comprising both Series I and Series II), the SCA Tax Exempt Trust (the
"Trust") and MLP III Investment Limited Partnership ("MLP III"). Also,
as part of the SEC Staff review, the Partnership agreed to account for all of
its investments in mortgage revenue bonds as debt securities under the
provisions of Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities" ("FAS
115"). As a result, effective January 1, 1994, all investments in mortgage
revenue bonds, regardless of their status, are classified and accounted for as
available for sale debt securities and carried at fair value; unrealized holding
gains or losses are included as a separate component of Partners' Capital and
other-than-temporary impairments are recorded through operations.
Financial statements for the three months ended March 31, 1995 have been
restated to reflect this change.
Financial Condition and Liquidity
As of March 31, 1996, the Partnership's capital is primarily invested in
23 mortgage revenue bonds and related parity working capital loans totaling
$192,958,000 of face value. Of these investments, 14 bonds and related
parity working capital loans (totaling $135,838,000 of face value) were
acquired with Series I proceeds while nine bonds and related parity working
capital loans (totaling $57,120,000 of face value) were acquired with Series
II proceeds. To the extent that offering proceeds exceeded organization and
offering expenses and initial project investments, the Managing General
Partner created Partnership working capital reserves.
The original Partnership working capital reserves, as a result of
supplementing distributions to BAC Holders and providing additional
working capital loans to the properties, were exhausted during 1992 and
1994, for Series I and Series II, respectively. As a result of the February
1995 Financing, additional Partnership working capital reserves (of
approximately $4.4 million) were established of which $1.5 million
($850,000 in Series I and $600,000 in Series II) were utilized to pay one-time
Financing origination costs in 1995. For Series I and Series II, reserves
of approximately $1.1 million and $100,000 were used during 1995 to pay
distributions declared in excess of cash generated from operations. As of
March 31, 1996, the Partnership's working capital reserves approximated
$1.9 million (approximately $900,000 in Series I and approximately $1.0
million in Series II).
Distributions are affected by the Partnership's ability to collect interest
from the cash flow of the properties securing the bonds and the ability of the
Managing General Partner to control operating expenses. Cash collected by
the Partnership does not necessarily reflect property operating results to the
extent that debt service can be paid from other sources, including property
reserves and guarantees and, for those properties subject to the Financing,
investment income and swap income. Similarly, some of the cash generated
by property operations may not be available to pay debt service as it may be
utilized for Series A Bond principal and interest and related items, capital
expenditures, escrows or prepaid expenses. Distributions are also affected
by the investment income generated by the net Financing proceeds as
compared to the reduction in revenues caused by the sale of the Receipts in
the Series A Bonds.
On February 9, 1996, the Managing General Partner paid semi-annual
distributions of $26.25 and $27.50 per BAC in Series I and Series II,
respectively. These amounts represent an annualized primarily tax-exempt
distribution rate of 5.25% in Series I and 5.50% in Series II. These
distribution rates for Series I and Series II remained unchanged from the
previous semi-annual distributions.
At March 31, 1996, the Partnership's liquid assets approximated $5.8
million. These funds primarily consist of undistributed funds generated from
operations during the first quarter of 1996 and working capital reserves.
Results of Operations
Revenues
With respect to Series I bonds, for the quarters ended March 31, 1996
and 1995, approximately $2.1 million and $3.0 million, respectively, of
interest was available to the Partnership, of which $2.0 million and $2.6
million was generated from property operations. With respect to Series II
bonds, approximately $1.0 million and $1.5 million, respectively, of interest
was available to the Partnership, of which $1.0 million and $1.3 million,
respectively, was generated from property operations. The differences
between interest paid and cash generated from operations are due to payments
from sources other than property operations. Specifically, property level
operating deficit guarantees of approximately $45,000 and $66,000 for Series I
and $-0- and $15,000 for Series II were used to pay interest for the quarters
ended March 31, 1996 and 1995, respectively. Also, for the quarter ended
March 31, 1995, approximately $320,000 and $162,000 for Series I and Series
II, respectively, of excess funds in property capital improvement replacement
reserves and tax and insurance escrows was used to pay interest to the
Partnership. The table at the beginning of this report should be referenced for
more information regarding the specific bond interest payment information.
For the quarter ended March 31, 1996, interest on mortgage revenue
bonds and parity working capital loans decreased by approximately $1.5
million versus the same period last year. The decrease is primarily due to
certain terms of the Financing, which served to increase the first quarter of
1995 interest revenue, in addition to the increase in interest revenue of
approximately $482,000 resulting from excess funds in property reserves (as
discussed above). More specifically, the timing of interest on the Series B
Bonds was changed from in arrears to current, which resulted in additional
interest of approximately $710,000. The remaining difference of
approximately $308,000 is due to the reclassification of income which
resulted from the Financing in February 1995. Following the Financing, the
Partnership no longer receives interest on the Series A Bonds, but instead
recognizes income from its equity interest in MLP II which holds the net
proceeds from the Financing. For the quarter ended March 31, 1996, the
Partnership's equity in MLP II income increased by approximately $519,000
as compared to the same period last year.
As a result of the Financing transaction consummated in February 1995,
the Partnership recorded a net gain on sale of A bond receipts, for the
quarter ended March 31, 1995. Included in this amount is a portion of the
net unrealized gain associated with the refunded bonds of approximately
$2.3 million, net of selling expenses of approximately $1.7 million. A
complete description of the Financing is included the Partnership's 1995
Form 10-K.
For the quarter ended March 31, 1996, equity in MLP II increased by
approximately $519,000 as compared to the same period last year. The
quarter ended March 31, 1995 only includes income for the period February
15, 1995 (the date of the Financing transaction) through March 31, 1995.
Expenses
Partnership operating expenses are either specifically identified by Series
or allocated to each Series based on the original net offering proceeds.
Partnership operating expenses decreased by approximately $521,000 in the
first quarter of 1996 versus the first quarter of 1995. This decrease is
primarily due to the Financing transaction, which resulted in approximately
$1.1 million of expenses in the first quarter of 1995. This decrease was
partially offset by increases in the first quarter of 1996 of: 1) costs
associated with the Prospectus/Consent Solicitation ($275,000); and 2)
accounting fees related to the restatement of prior period financial
statements ($150,000).
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
As previously discussed in the Partnership's 1995 Annual Report on
Form 10-K, a class action complaint was filed against the General Partners
of the Partnership alleging breach of the Partnership Agreement and their
fiduciary duties in connection with the Financing transaction completed in
February 1995. As a result of several negotiations, in November 1995, the
parties agreed to a settlement, which is conditioned on, among other things,
the consummation of a transaction disclosed in the Prospectus/Consent
Solicitation filed with the SEC on April 24, 1996. On March 13, 1996, the
court held a status conference in the action. At that time, all conditions
necessary for the settlement to proceed have not yet occurred and, for
reasons of case administration, the court dismissed the action without
prejudice and with leave to the parties to reinstate the action on or before
May 1, 1996 in order to proceed with the settlement or the litigation.
On May 1, 1996, counsel for the plaintiffs made application to the court
to reinstate the action. The parties intend to proceed with the settlement.
Once the Prospectus/Consent Solicitation is declared effective by the SEC,
the parties intend to file with the court an amended stipulation of settlement
setting forth the terms and conditions of the settlement. BAC Holders
would be sent under separate cover a Notice of Class and Derivative Action
Determination, Settlement and Hearing on the Proposed Settlement (the
"Notice"), which would explain the settlement and the rights of BAC
Holders in connection therewith. The settlement would be subject to the
approval of the court and other terms and conditions, as set forth in the
Notice.
Items 2 through 5 are not applicable.
Item 6 - Exhibits and Reports on Form 8-K
The Partnership filed no reports on Form 8-K for the period covered by
this report.
<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: [S] Thomas R. Hobbs
--------------------
Thomas R. Hobbs
Senior Vice President
Signing on behalf of registrant and as acting chief financial officer.
DATED: May 15, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE PARTNERHSIP AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THOSE FINANCIAL STATEMENTS AND THE FOOTNOTES PROVIDED
WITHIN THIS SCHEDULE.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 5,822,000<F1>
<SECURITIES> 0
<RECEIVABLES> 491,000<F2>
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,313,000<F3>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 220,505,000<F4>
<CURRENT-LIABILITIES> 998,000<F5>
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 219,504,000<F6>
<TOTAL-LIABILITY-AND-EQUITY> 220,505,000<F7>
<SALES> 0
<TOTAL-REVENUES> 4,069,000<F8>
<CGS> 0
<TOTAL-COSTS> 847,000<F9>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,222,000<F10>
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,222,000<F11>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,222,000<F12>
<EPS-PRIMARY> 21.98<F13>
<EPS-DILUTED> 0
<FN>
<F1> SERIES I SERIES II
---------- -----------
CASH 3,463,000 2,359,000
<F2>RECEIVABLES 235,000 256,000
<F3>CURRENT ASSETS 3,698,000 2,615,000
<F4>TOTAL ASSETS 142,235,000 78,270,000
<F5>CURRENT LIABILITIES 674,000 324,000
<F6>OTHER S-E 141,559,000 77,945,000
<F7>TOTAL LIABILITIES
& EQUITY 142,235,000 78,270,000
<F8>TOTAL REVENUE 2,663,000 1,406,000
<F9>TOTAL COSTS 572,000 275,000
<F10>INCOME- PRETAX 2,091,000 1,131,000
<F11>INCOME-CONTINUING 2,091,000 1,131,000
<F12>NET INCOME 2,091,000 1,131,000
<F13>EPS 10.35 11.63
</FN>
</TABLE>
