FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 1996 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 0-17582
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 47-0719051
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
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> - i -
Part I. Financial Information
Item 1. Financial Statements
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Sept. 30, 1996 Dec. 31, 1995
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which
approximates market value $ 1,856,163 $ 1,813,499
Investment in mortgage-backed securities (Note 5) 8,631,160 9,361,640
Investment in preferred real estate participations (PREPs),
net of valuation allowance (Note 6) - -
Interest receivable 60,859 64,454
Other assets 43,790 49,375
-------------- --------------
$ 10,591,972 $ 11,288,968
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 7) $ 52,647 $ 58,676
Distribution payable (Note 4) 103,226 213,157
-------------- --------------
155,873 271,833
-------------- --------------
Partners' Capital
General Partner 100 100
Beneficial Unit Certificate Holders
($11.52 per BUC in 1996 and $12.16 in 1995) 10,435,999 11,017,035
-------------- --------------
10,436,099 11,017,135
-------------- --------------
$ 10,591,972 $ 11,288,968
============== ==============
</TABLE>
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the For the Nine For the Nine
Quarter Ended Quarter Ended Months Ended Months Ended
Sept. 30, 1996 Sept. 30, 1995 Sept. 30, 1996 Sept. 30, 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income
Mortgage-backed securities income $ 163,273 $ 178,784 $ 501,796 $ 547,381
Equity in earnings (losses) of
property partnerships (24,919) 21,046 17,808 59,043
Interest income on temporary cash investments 24,262 21,784 69,793 62,601
--------------- --------------- --------------- ---------------
162,616 221,614 589,397 669,025
Expenses
General and administrative expenses (Note 7) 45,278 41,644 137,083 130,728
--------------- --------------- --------------- ---------------
Net income $ 117,338 $ 179,970 $ 452,314 $ 538,297
=============== =============== =============== ===============
Net income allocated to:
General Partner $ 3,109 $ 3,257 $ 9,437 $ 9,883
BUC Holders 114,229 176,713 442,877 528,414
--------------- --------------- --------------- ---------------
$ 117,338 $ 179,970 $ 452,314 $ 538,297
=============== =============== =============== ===============
Net income per BUC $ .13 $ .20 $ .49 $ .59
=============== =============== =============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> - 1 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Beneficial Unit
General Certificate
Partner Holders Total
-------------- ---------------- ---------------
<S> <C> <C> <C>
Partners' Capital (excluding net unrealized holding gains (losses))
Balance at December 31, 1995 $ 100 $ 10,994,431 $ 10,994,531
Net income 9,437 442,877 452,314
Cash distributions paid or accrued (Note 4) (9,437) (934,240) (943,677)
-------------- ---------------- ---------------
100 10,503,068 10,503,168
-------------- ---------------- ---------------
Net unrealized holding gains (losses)
Balance at December 31, 1995 - 22,604 22,604
Net change - (89,673) (89,673)
-------------- ---------------- ---------------
- (67,069) (67,069)
-------------- ---------------- ---------------
Balance at September 30, 1996 $ 100 $ 10,435,999 $ 10,436,099
============== ================ ===============
</TABLE>
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, 1996 Sept. 30, 1995
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 452,314 $ 538,297
Adjustments to reconcile net income to net cash
provided by operating activities
Equity in earnings of property partnerships (17,808) (59,043)
Amortization of discount on mortgage-backed securities (8,421) (7,414)
Decrease in interest receivable 3,595 2,401
Decrease in other assets 5,585 5,401
Decrease in accounts payable (6,029) (483)
--------------- ---------------
Net cash provided by operating activities 429,236 479,159
Cash flows from investing activities
Mortgage principal payments received 649,228 586,895
Distributions received from PREPs 65,804 59,043
Investment in PREPs (47,996) -
--------------- ---------------
Net cash provided by investing activities 667,036 645,938
Cash flow used in financing activity
Distributions paid (1,053,608) (995,802)
--------------- ---------------
Net increase in cash and temporary cash investments 42,664 129,295
Cash and temporary cash investments at beginning of period 1,813,499 1,551,380
--------------- ---------------
Cash and temporary cash investments at end of period $ 1,856,163 $ 1,680,675
=============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> - 2 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. ORGANIZATION
America First PREP Fund 2 Pension Series Limited Partnership (the Partnership)
was formed on February 2, 1988, under the Delaware Revised Uniform Limited
Partnership Act for the purpose of acquiring a portfolio of federally-insured
multifamily mortgages and other investments including preferred real estate
participations (PREPs). PREPs consist of equity interests which are intended
to provide the Partnership with a participation in the net cash flow and net
sale or refinancing proceeds of the properties collateralizing the mortgage
loans. The Partnership began operations with the first escrow closing on May
25, 1988, and will continue in existence until December 31, 2017, unless
terminated earlier under the provisions of the Partnership Agreement. The
General Partner of the Partnership is America First Capital Associates Limited
Partnership Six (AFCA 6).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A) Financial Statement Presentation
The financial statements of the Partnership are prepared without audit on
the accrual basis of accounting in accordance with generally accepted
accounting principles. The financial statements should be read in
conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the year ended December
31, 1995. In the opinion of management, all normal and recurring
adjustments necessary to present fairly the financial position at
September 30, 1996, and results of operations for all periods presented
have been made.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
B) Investment in Mortgage-Backed Securities
Investment securities are classified as held-to-maturity,
available-for-sale, or trading. Investments classified as
held-to-maturity are carried at amortized cost. Investments classified as
available-for-sale are reported at fair value with any unrealized gains or
losses excluded from earnings and reflected as a separate component of
partners' capital. Subsequent increases and decreases in the net
unrealized gain/loss on the available-for-sale securities are reflected as
adjustments to the carrying value of the portfolio and adjustments to the
component of partners' capital. The Partnership does not have investment
securities classified as trading.
C) Investment in PREPs
The investment in PREPs consists of interests in limited partnerships
which own properties underlying the mortgage-backed securities and are
accounted for using the equity method. When an investment in a PREP has
been reduced to zero, earnings are recorded to the extent that
distributions are received. PREPs are not insured or guaranteed. The
value of these investments is a function of the value of the real estate
underlying the PREPs.
D) Allowance for Losses on Investments in PREPs
The allowance for losses on investments in PREPs is a valuation reserve
which has been established at a level that management feels is adequate to
absorb potential losses on investments in PREPs. The allowance is based
on management's best estimate of the net realizable value of such
properties; however, the ultimate realized values may vary from these
estimates. The allowance is periodically reviewed and adjustments are
made to the allowance when there are significant changes in the estimated
net realizable value of the properties underlying the PREPs.
<PAGE> - 3 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
E) Income Taxes
No provision has been made for income taxes since Beneficial Unit
Certificate (BUC) Holders are required to report their share of the
Partnership's income for federal and state income tax purposes.
F) Temporary Cash Investments
Temporary cash investments are invested in short-term debt securities
purchased with an original maturity of three months or less.
G) Net Income Per BUC
Net income per BUC has been calculated based on the number of BUCs
outstanding (905,974) for all periods presented.
3. PARTNERSHIP RESERVE ACCOUNT
The Partnership maintains a reserve account which consisted of the following
at September 30, 1996:
<TABLE>
<S> <C>
Cash and temporary cash investments $ 1,764,545
GNMA Certificates 1,504,480
FNMA Certificates 1,111,023
---------------
$ 4,380,048
===============
</TABLE>
The reserve account was established to maintain working capital for the
Partnership and is available for distribution to BUC Holders and for any
contingencies related to Permanent Investments and the operation of the
Partnership. See Note 5 regarding the investment in mortgage-backed
securities.
4. PARTNERSHIP INCOME, EXPENSES AND CASH DISTRIBUTIONS
The Partnership Agreement contains provisions for distributing the cash
available for distribution and for the allocation of income and expenses for
tax purposes among AFCA 6 and BUC Holders.
Cash distributions included in the financial statements represent the actual
cash distributions made during each period, and the cash distributions accrued
at the end of each period.
5. INVESTMENT IN MORTGAGE-BACKED SECURITIES
The mortgage-backed securities held by the Partnership represent Government
National Mortgage Association (GNMA) Certificates and Federal National
Mortgage Association (FNMA) Certificates. The GNMA Certificates are backed by
first mortgage loans on multifamily housing properties and pools of
single-family properties. The FNMA Certificates are backed by pools of
single-family properties. The GNMA Certificates are debt securities issued by
a private mortgage lender and are guaranteed by GNMA as to the full and timely
payment of principal and interest on the underlying loans. The FNMA
Certificates are debt securities issued by FNMA and are guaranteed as to the
full and timely payment of principal and interest on the underlying loans.
At September 30, 1996, the total amortized cost, gross unrealized holding
gains, gross unrealized holding losses, and aggregate fair value of
available-for-sale securities are $2,682,572, $17,106, $84,175 and $2,615,503,
respectively. The total amortized cost, gross unrealized holding gains, gross
unrealized holding losses, and aggregate fair value of held-to-maturity
securities are $6,015,657, $149,195, $288,339 and $5,876,513, respectively.
<PAGE> - 4 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
Descriptions of the Partnership's mortgage-backed securities at September 30,
1996, are as follows:
<TABLE>
<CAPTION>
Number Interest Maturity Carrying
Type of Security and Name Location of Units Rate Date Amount
---------------------------------- -------------------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Held-to-Maturity
GNMA Certificates:
Ashwood Apartments Tulsa, OK 144 9.25% 07/15/23 $ 557,588
Broadmoor Court Colorado Springs, CO 46 9.25% 10/15/29 581,988
Owings Chase Apartments Pikesville, MD 234 6.75% 12/15/23 3,203,768
Pools of single-family properties 8.74%(1) 2016 to 2018 1,672,313
--------------
6,015,657
--------------
Available-for-Sale
GNMA Certificates:
Pools of single-family properties 6.03%(1) 2008 761,875(2)
Pools of single-family properties 7.58%(1) 2008 742,605(2)
FNMA Certificates:
Pools of single-family properties 5.52%(1) 2000 1,111,023(2)
---------------
2,615,503
---------------
Balance at September 30, 1996 $ 8,631,160
===============
</TABLE>
(1) Represents yield to the Partnership.
(2) Reserve account asset - see Note 3.
Reconciliation of the carrying amount of the mortgage-backed securities is as
follows:
<TABLE>
<S> <C>
Balance at December 31, 1995 $ 9,361,640
Addition
Amortization of discount on mortgage-backed securities 8,421
Deductions
Mortgage principal payments received (649,228)
Change in net unrealized holding losses on available-for-sale securities (89,673)
---------------
Balance at September 30, 1996 $ 8,631,160
===============
</TABLE>
6. INVESTMENT IN PREPs
The Partnership's PREPs consist of interests in limited partnerships which own
multifamily properties financed by the Partnership. The limited partnership
agreements originally provided for the payment of a base return on the equity
provided to the limited partnerships and for the payment of additional amounts
out of a portion of the net cash flow or net sale or refinancing proceeds of
the properties subject to various priority payments. Certain of the
agreements have been amended to defer payment of the base return.
<PAGE> - 5 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
Descriptions of the PREPs at September 30, 1996, are as follows:
<TABLE>
<CAPTION>
Carrying
Name Location Partnership Name Amount
-------------------------- -------------------- ----------------------------- -----------------
<S> <C> <C> <C>
Broadmoor Court Colorado Springs, CO Stazier Associates Colorado Springs, Ltd. $ 53,547
Owings Chase Apartments Pikesville, MD Owings Chase Limited Partnership 150,000
Ashwood Apartments Tulsa, OK 129th Street Limited Partnership -
Laurel Park Apartments Riverdale, GA Gold Key Venture -
-----------------
203,547
Less valuation allowance (203,547)
-----------------
Balance at September 30, 1996 $ -
=================
</TABLE>
Reconciliation of the carrying amount of the PREPs is as follows:
<TABLE>
<S> <C>
Balance at December 31, 1995 $ -
Additions
Investment in PREPs 47,996
Equity in earnings of property partnerships 17,808
Deduction
Distributions received from PREPs (65,804)
-----------------
Balance at September 30, 1996 $ -
=================
</TABLE>
7. TRANSACTIONS WITH RELATED PARTIES
Substantially all the Partnership's general and administrative expenses are
paid by AFCA 6 or an affiliate and reimbursed by the Partnership. The amount
of such expenses reimbursed to AFCA 6 during 1996 was $115,108 ($28,316 for
the quarter ended September 30, 1996). The reimbursed expenses are presented
on a cash basis and do not reflect accruals made at quarter end.
AFCA 6 is entitled to an administrative fee of .35% per annum of the
outstanding principal amounts invested in mortgage-backed securities, PREPs,
and temporary cash investments to be paid by the Partnership to the extent
such amount is not paid by property owners. During 1996, AFCA 6 earned
administrative fees of $20,826 ($6,852 for the quarter ended September 30,
1996). Of this amount, $19,086 ($6,272 for the quarter ended September 30,
1996) was paid by the Partnership and the remainder was paid by property
owners.
The general partner of the property partnership which owns Owings Chase
Apartments is principally owned by an employee of an affiliate of AFCA 6.
Such employee has a nominal interest in the affiliate. Affiliates of AFCA 6
also own small interests in the general partner. The general partner has a
nominal interest in the property partnership's profits, losses and cash flow
which is subordinate to the interest of the Partnership. The general partner
did not receive cash distributions from the property partnership in 1996.
An affiliate of AFCA 6 has been retained to provide property management
services for Laurel Park Apartments and Owings Chase Apartments. The fees for
services provided represent the lower of (i) costs incurred in providing
management of the property, or (ii) customary fees for such services
determined on a competitive basis and amounted to $29,377 in 1996 ($10,246 for
the quarter ended September 30, 1996).
<PAGE> - 6 -
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership originally acquired: (i) five mortgage-backed securities
guaranteed as to principal and interest by the Government National Mortgage
Association (GNMA) collateralized by first mortgage loans on multifamily
housing properties located in four states, GNMA Certificates backed by pools
of single-family mortgages (the GNMA Certificates); and (ii) limited
partnership interests (PREPs) in five limited partnerships which own the
multifamily housing properties financed by the GNMA Certificates. The
Partnership has been repaid by GNMA on the mortgage-backed securities
collateralized by the Villages at Moonraker and Laurel Park Apartments.
During the second quarter of 1995, the Partnership withdrew as a limited
partner of the operating partnership which owns the Villages at Moonraker.
Therefore, the Partnership no longer has an equity interest in this property.
The Partnership continues to hold its equity interest in Laurel Park
Apartments. Collectively, the remaining GNMA Certificates and the PREPs are
referred to as the Permanent Investments.
The following table shows the occupancy levels of the properties financed by
the Partnership at September 30, 1996.
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------------- ------------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Ashwood Apartments Tulsa, OK 144 140 97%
Broadmoor Court Colorado Springs, CO 46 44 96%
Laurel Park Apartments Riverdale, GA 387 379 98%
Owings Chase Apartments Pikesville, MD 234 230 98%
--------- ---------- -----------
811 793 98%
========= ========== ===========
</TABLE>
Distributions
Cash distributions paid or accrued per Beneficial Unit Certificate (BUC) were
as follows:
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, 1996 Sept. 30, 1995
-------------- --------------
<S> <C> <C>
Regular monthly distributions
Income $ .4888 $ .5833
Return of Capital .5424 .4967
-------------- --------------
$ 1.0312 $ 1.0800
============== ==============
Distributions
Paid out of cash flow (including mortgage principal payments) $ 1.0312 $ 1.0800
============== ==============
</TABLE>
Regular monthly distributions to investors consist primarily of interest and
principal received on GNMA and Federal National Mortgage Association (FNMA)
Certificates. Additional cash for distributions is received from PREPs and
temporary cash investments. The Partnership may draw on reserves to pay
operating expenses or to supplement cash distributions to BUC Holders. The
Partnership is permitted to replenish its reserves through the sale or
refinancing of assets. During the nine months ended September 30, 1996, a net
amount of $205,861 ($154,920 for the quarter ended September 30, 1996) of
undistributed mortgage principal payments was placed in reserves. The total
amount held in reserves at September 30, 1996, was $4,380,048 of which
$2,615,503 was invested in GNMA and FNMA Certificates.
<PAGE> - 7 -
The Partnership believes that cash provided by operating and investing
activities and, if necessary, withdrawals from the Partnership's reserves will
be adequate to meet its short-term and long-term liquidity requirements,
including the payments of distributions to BUC Holders. Under the terms of
the Partnership Agreement, the Partnership has the authority to enter into
short-term and long-term debt financing arrangements; however, the Partnership
currently does not anticipate entering into such arrangements. The
Partnership is not authorized to issue additional BUCs to meet short-term and
long-term liquidity requirements.
Asset Quality
The Partnership continues to receive the full amount of monthly principal and
interest payments on its GNMA and FNMA Certificates. The GNMA and FNMA
Certificates are fully guaranteed as to principal and interest by GNMA and
FNMA respectively. The obligations of GNMA are backed by the full faith and
credit of the United States government.
PREPs, however, are not insured or guaranteed. The value of these investments
is a function of the value of the real estate underlying the PREPs. It is the
policy of the Partnership to make a periodic review of the real estate
underlying the PREPs in order to establish, when necessary, a valuation
reserve on the investment in PREPs. The allowance for losses on investment in
PREPs is based on the fair value of the properties underlying the PREPs. The
fair value of the properties underlying the PREPs is based on management's
best estimate of the net realizable value of such properties; however, the
ultimate realized values may vary from these estimates. The allowance is
periodically reviewed and adjustments are made to the allowance when there are
significant changes in the estimated net realizable value of the properties
underlying the PREPs. Internal property valuations and reviews performed
during the nine months ended September 30, 1996, indicated that the PREPs
recorded on the balance sheet at September 30, 1996, required no adjustments
to their current carrying amounts.
As previously reported, Laurel Park Apartments has not been current on its
mortgage obligations since December 31, 1994. Until such time that the
mortgage is current, the Partnership does not anticipate receiving an equity
distribution from Laurel Park Apartments. During August 1996, the General
Partner of the Partnership and general partner of the operating partnership
which owns Laurel Park Apartments negotiated a Loan Modification Agreement
(LMA) with HUD. Among other things, the LMA reduced the interest rate on the
mortgage from 9.25% to 7.75% as well as satisfied all delinquent principal and
interest. Laurel Park Apartment is now current on its mortgage obligations.
The Partnership made an additional equity investment of $47,996 to effect the
LMA. The General Partner feels the LMA will better position Laurel Park
Apartments to remain current on its mortgage obligations as well as provide
for future equity distributions.
The overall status of the Partnership's other Permanent Investments has
generally remained constant since June 30, 1996.
RESULTS OF OPERATIONS
The tables below compare the results of operations for each period shown.
<TABLE>
<CAPTION>
For the For the Increase
Quarter Ended Quarter Ended (Decrease)
Sept. 30, 1996 Sept. 30, 1995 From 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Mortgage-backed securities income $ 163,273 $ 178,784 $ (15,511)
Equity in earnings (losses) of property partnerships (24,919) 21,046 (45,965)
Interest income on temporary cash investments 24,262 21,784 2,478
--------------- --------------- ---------------
162,616 221,614 (58,998)
General and administrative expenses (45,278) (41,644) 3,634
--------------- --------------- ---------------
Net income $ 117,338 $ 179,970 $ (62,632)
=============== =============== ===============
</TABLE>
<PAGE> - 8 -
<TABLE>
<CAPTION>
For the Nine For the Nine Increase
Months Ended Months Ended (Decrease)
Sept. 30, 1996 Sept. 30, 1995 From 1995
--------------- --------------- ---------------
<S> <C> <C> <C>
Mortgage-backed securities income $ 501,796 $ 547,381 $ (45,585)
Equity in earnings of property partnerships 17,808 59,043 (41,235)
Interest income on temporary cash investments 69,793 62,601 7,192
--------------- --------------- ---------------
589,397 669,025 (79,628)
General and administrative expenses (137,083) (130,728) 6,355
--------------- --------------- ---------------
Net income $ 452,314 $ 538,297 $ (85,983)
=============== =============== ===============
</TABLE>
Mortgage-backed securities income decreased for the quarter and nine months
ended September 30, 1996, compared to the same periods in 1995. This decrease
was primarily due to the continued amortization of the principal balances of
the mortgage-backed securities.
Equity in earnings of property partnerships is a function of the cash flow
received by the Partnership from its interest in the operating partnerships
which own the properties. Prior to the write-down of each investment in PREP
to zero, equity in earnings of property partnerships also reflects the
Partnership's allocable share of earnings generated by each of the properties.
Equity in earnings of property partnerships decreased for the quarter and nine
months ended September 30, 1996, compared to the same periods in 1995. This
decrease was primarily a result of recording a loss of approximately $48,000
for Laurel Park Apartments during the quarter ended September 30, 1996. This
loss resulted from expenses incurred in conjunction with entering into a loan
modification agreement with HUD in August.
Excluding the loss due to Laurel Park Apartments, equity in earnings of
property partnerships increased $2,031 for the quarter ended September 30,
1996, compared to the same period in 1995. This increase was primarily
attributable to an increase of approximately $2,000 in cash flow received from
Broadmoor Court during the quarter ended September 30, 1996. Excluding the
loss due to Laurel Park Apartments, equity in earnings of property
partnerships increased $6,761 for the nine months ended September 30, 1996,
compared to the same period in 1995. This was due to an increase of
approximately $6,000, and $1,000 in cash flow received from Broadmoor Court
and Ashwood Apartments, respectively, for the nine months ended September 30,
1996, compared to the same period in 1995.
The increase in interest on temporary cash investments for the quarter and
nine months ended September 30, 1996, compared to the same periods in 1995 was
primarily attributable to the increase in cash reserves as undistributed
principal was placed in reserves throughout 1995 and the first nine months of
1996.
General and administrative expenses increased for the quarter and nine months
ended September 30, 1996, due primarily to an increase in travel expenses and
professional fees.
<PAGE> - 9 -
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Agreement of Limited Partnership dated May 25, 1988
(incorporated herein by reference to Form 10-Q dated
June 30, 1988 filed pursuant to Section 13 or 15(d) of
the Securities Act of 1934 by America First PREP Fund 2
Pension Series Limited Partnership (Commission File No.
33-13407)).
4(b) Form of Certificate of Beneficial Unit Certificate
(incorporated herein by reference to Form 10-Q dated
June 30, 1988 filed pursuant to Section 13 or 15(d) of
the Securities Act of 1934 by America First PREP Fund 2
Pension Series Limited Partnership (Commission File No.
33-13407)).
(b) Form 8-K
The registrant did not file a report on Form 8-K during the
quarter for which this report is filed.
<PAGE> - 10 -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: November 12, 1996 AMERICA FIRST PREP FUND 2
PENSION SERIES LIMITED PARTNERSHIP
By America First Capital
Associates Limited
Partnership Six, General
Partner
By America First Companies L.L.C.,
General Partner
By /s/ Michael Thesing
Michael Thesing
Vice President, Secretary,
Treasurer and Chief Financial
Officer
<PAGE> - 11 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,856,163
<SECURITIES> 8,631,160
<RECEIVABLES> 60,859
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,917,022
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,591,972
<CURRENT-LIABILITIES> 155,873
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 10,436,099
<TOTAL-LIABILITY-AND-EQUITY> 10,591,972
<SALES> 0
<TOTAL-REVENUES> 589,397
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 137,083
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 452,314
<INCOME-TAX> 0
<INCOME-CONTINUING> 452,314
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</TABLE>
