UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 1998
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: 0-18405
American Tax Credit Properties II L.P.
(Exact name of Registrant as specified in its charter)
Delaware 13-3495678
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Richman Tax Credit Properties II L.P.
599 West Putnam Avenue, 3rd Floor
Greenwich, Connecticut 06830
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 869-0900
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 filing requirements
for the past 90 days.
Yes X No____.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Table of Contents
Balance Sheets as of September 29, 1998 (Unaudited) and March 30, 1998
(Unaudited)
Statements of Operations for the three and six month periods ended
September 29, 1998 (Unaudited) and September 29, 1997 (Unaudited)
Statements of Cash Flows for the six months ended September 29, 1998
(Unaudited)and September 29, 1997 (Unaudited)
Notes to Financial Statements as of September 29, 1998 (Unaudited)
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 29, March 30,
Notes 1998 1998
----- ------------- -------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents $ 862,443 $ 513,536
Investments in bonds available-for-sale 3 4,113,655 4,270,266
Investment in local partnerships 4 14,120,145 15,304,416
Interest receivable 68,213 74,378
------------- -------------
$ 19,164,456 $ 20,162,596
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 657,490 $ 639,905
Payable to general partner 643,289 546,015
Other 48,600 55,600
------------- -------------
1,349,379 1,241,520
------------- -------------
Partners' equity (deficit)
General partner (316,700) (304,342)
Limited partners (55,746 units of limited partnership
interest outstanding) 17,923,828 19,147,253
Accumulated other comprehensive income, net 2,3 207,949 78,165
------------- -------------
17,815,077 18,921,076
------------- -------------
$ 19,164,456 $ 20,162,596
============= =============
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
September 29, September 29, September 29, September 29,
Notes 1998 1998 1997 1997
----- ------------- ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
REVENUE
Interest $ 99,040 $ 182,424 $ 89,805 $ 179,795
Other income from local partnerships 388 388
------------- -------------- ------------- ------------
TOTAL REVENUE 99,040 182,812 89,805 180,183
------------- -------------- ------------- ------------
EXPENSES
Administration fees 74,827 149,653 74,827 149,653
Management fees 74,827 149,653 74,827 149,653
Professional fees 17,967 42,565 13,796 28,966
Printing, postage and other 7,002 19,480 6,425 15,053
------------- -------------- ------------ ------------
TOTAL EXPENSES 174,623 361,351 169,875 343,325
------------ ------------- ------------ ------------
Loss from operations (75,583) (178,539) (80,070) (163,142)
Equity in loss of investment in local
partnerships 4 (438,011) (1,057,244) (756,501) (1,513,381)
------------- -------------- ------------- ------------
NET LOSS (513,594) (1,235,783) (836,571) (1,676,523)
Other comprehensive income 2,3 111,728 129,784 76,238 148,114
------------- -------------- ------------- ------------
COMPREHENSIVE LOSS $ (401,866) $ (1,105,999) $ (760,333) $ (1,528,409)
============= ============== ============= ============
NET LOSS ATTRIBUTABLE TO
General partner $ (5,136) $ (12,358) $ (8,366) $ (16,765)
Limited partners (508,458) (1,223,425) (828,205) (1,659,758)
------------- -------------- ------------- ------------
$ (513,594) $ (1,235,783) $ (836,571) $ (1,676,523)
============= ============== ============= ============
NET LOSS per unit of limited partnership
interest (55,746 units of limited
partnership interest) $ (9.12) $ (21.95) $ (14.86) $ (29.77)
============= ============== ============= ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED SEPTEMBER 29, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Interest received $ 174,984 $ 186,301
Cash used for local partnerships for deferred expenses (7,000) (7,000)
Cash paid for
administration fees (104,758) (104,757)
management fees (52,379) (104,757)
professional fees (66,565) (60,968)
printing, postage and other expenses (22,790) (22,876)
------------ -----------
Net cash used in operating activities (78,508) (114,057)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash distributions and other income from local partnerships 127,415 158,446
Maturity/redemption of bonds 300,000 130,000
Investment in local partnerships (124,503)
Investments in bonds (includes $1,089 of accrued interest) (51,589)
------------ -----------
Net cash provided by investing activities 427,415 112,354
------------ -----------
Net increase (decrease) in cash and cash equivalents 348,907 (1,703)
Cash and cash equivalents at beginning of period 513,536 674,160
------------ -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 862,443 $ 672,457
============ ===========
SIGNIFICANT NON-CASH INVESTING ACTIVITIES
Unrealized gain on investments in bonds available-for-sale, net $ 129,784 $ 148,114
============ ===========
--------------------------------------------------------------------------------------------------------------
See reconciliation of net loss to net cash used in operating activities on page
6.
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
STATEMENTS OF CASH FLOWS - (Continued)
SIX MONTHS ENDED SEPTEMBER 29, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
RECONCILIATION OF NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES
Net loss $ (1,235,783) $ (1,676,523)
Adjustments to reconcile net loss to net cash used in operating activities
Equity in loss of investment in local partnerships 1,057,244 1,513,381
Distributions from local partnerships classified as other income (388) (388)
Gain on maturity/redemption of investments in bonds (11,403)
Amortization of net premium on investments in bonds 17,392 22,797
Accretion of zero coupon bonds (19,594) (21,107)
Decrease in interest receivable 6,165 4,816
Increase in payable to general partner 97,274 44,896
Increase in accounts payable and accrued expenses 17,585 5,071
Decrease in other liabilities (7,000) (7,000)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES $ (78,508) $ (114,057)
============ ============
</TABLE>
See Notes to Financial Statements.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 29, 1998
(UNAUDITED)
1. Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. They do not include all information and footnotes
required by generally accepted accounting principles for complete financial
statements. The results of operations are impacted significantly by the
combined results of operations of the Local Partnerships, which are
provided by the Local Partnerships on an unaudited basis during interim
periods. Accordingly, the accompanying financial statements are dependent
on such unaudited information. In the opinion of the General Partner, the
financial statements include all adjustments necessary to present fairly
the financial position as of September 29, 1998 and the results of
operations and cash flows for the interim periods presented. All
adjustments are of a normal recurring nature. The results of operations for
the three and six month periods ended September 29, 1998 are not
necessarily indicative of the results that may be expected for the entire
year.
Certain reclassifications of amounts have been made to conform to the
current period presentation.
2. Comprehensive Income
On March 31, 1998, the Partnership adopted Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income." As
a result, the statements of operations include an amount for other
comprehensive income, as well as comprehensive loss. Other comprehensive
income (loss) consists of revenues, expenses, gains and losses that have
affected partners' equity (deficit) but which are excluded from net loss.
Other comprehensive income in the accompanying statements of operations for
the three and six month periods ended September 29, 1998 resulted from a
net unrealized gain on investments in bonds available-for-sale of $111,728
and $129,784, respectively. Accumulated other comprehensive income in the
accompanying balance sheet as of September 29, 1998 reflects the net
unrealized gain on investments in bonds available-for-sale of $207,949. The
balance sheet as of March 30, 1998 and the statements of operations for the
three and six month periods ended September 29, 1997 include certain
reclassifications to reflect the adoption of SFAS No. 130.
3. Investments in Bonds Available-For-Sale
As of September 29, 1998, certain information concerning investments in
bonds available-for-sale is as follows:
<TABLE>
<CAPTION>
Gross Gross
Amortized unrealized unrealized Estimated
Description and maturity cost gains losses fair value
-------------------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Corporate debt securities
Within one year $ 201,720 $ 2,110 $ -- $ 203,830
After one year through five years 760,088 34,371 -- 794,459
After five years through ten years 1,667,581 108,513 -- 1,776,094
After ten years 202,533 -- (83) 202,450
------------- ----------- ---------- -----------
2,831,922 144,994 (83) 2,976,833
------------- ----------- ---------- -----------
U.S. Treasury debt securities
After five years through ten years 502,630 59,516 -- 562,146
------------- ----------- ---------- -----------
U.S. government and agency securities
After five years through ten years 571,154 3,522 -- 574,676
------------- ----------- ---------- -----------
$ 3,905,706 $ 208,032 $ (83) $ 4,113,655
============= =========== ========== ===========
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 1998
(UNAUDITED)
4. Investment in Local Partnerships
The Partnership owns limited partnership interests in fifty Local
Partnerships representing capital contributions in the aggregate amount of
$45,877,165. As of June 30, 1998, the Local Partnerships have outstanding
mortgage loans payable totaling approximately $91,641,000 and accrued
interest payable on such loans totaling approximately $4,698,000, which are
secured by security interests and liens common to mortgage loans on the
Local Partnerships' real property and other assets.
For the six months ended September 29, 1998, the investment in Local
Partnerships activity consists of the following:
<TABLE>
<CAPTION>
<S> <C>
Investment in Local Partnerships as of March 30, 1998 $ 15,304,416
Equity in loss of investment in Local Partnerships (1,057,244)*
Cash distributions received from Local Partnerships (127,415)
Cash distributions classified as other income 388
------------
Investment in Local Partnerships as of September 29, 1998 $ 14,120,145
============
</TABLE>
*Equity in loss of investment in Local Partnerships is limited to the
Partnership's investment balance in each Local Partnership; any excess is
applied to other partners' capital in any such Local Partnership. The
amount of such excess losses applied to other partners' capital was
$354,726 for the six months ended June 30, 1998 as reflected in the
combined statement of operations of the Local Partnerships reflected
herein Note 4.
The combined unaudited balance sheets of the Local Partnerships as of June
30, 1998 and December 31, 1997 and the combined unaudited statements of
operations of the Local Partnerships for the three and six month periods
ended June 30, 1998 and 1997 are reflected on pages 9 and 10, respectively.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 1998
(UNAUDITED)
4. Investment in Local Partnerships (continued)
The combined balance sheets of the Local Partnerships as of June 30, 1998
and December 31, 1997 are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------- ---------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 3,466,128 $ 4,208,629
Rents receivable 631,810 334,976
Escrow deposits and reserves 5,887,883 5,438,953
Land 4,180,673 4,180,673
Buildings and improvements (net of accumulated depreciation of
$44,712,256 and $42,156,402) 95,373,964 97,712,120
Intangible assets (net of accumulated amortization of
$1,009,098 and $962,322) 1,671,593 1,718,369
Other 1,026,872 1,082,118
------------- -------------
$ 112,238,923 $ 114,675,838
============= =============
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Liabilities
Accounts payable and accrued expenses $ 1,492,658 $ 1,386,630
Due to related parties 4,517,263 4,763,846
Mortgage loans 91,640,583 92,291,126
Notes payable 2,484,981 2,599,572
Accrued interest 4,697,511 4,603,549
Other 765,209 630,192
------------- -------------
105,598,205 106,274,915
------------- -------------
Partners' equity (deficit)
American Tax Credit Properties II L.P.
Capital contributions, net of distributions 44,895,291 45,045,349
Cumulative loss (30,768,317) (29,711,073)
------------- -------------
14,126,974 15,334,276
------------- -------------
General partners and other limited partners, including
ATCP & ATCP III
Capital contributions, net of distributions 3,327,604 3,363,369
Cumulative loss (10,813,860) (10,296,722)
------------- --------------
(7,486,256) (6,933,353)
------------- --------------
6,640,718 8,400,923
------------- --------------
$ 112,238,923 $ 114,675,838
============= ==============
</TABLE>
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 1998
(UNAUDITED)
4. Investment in Local Partnerships (continued)
The combined statements of operations of the Local Partnerships for the
three and six month periods ended June 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
Three Months Six Months Three Months Six Months
Ended Ended Ended Ended
June 30, June 30, June 30, June 30,
1998 1998 1997 1997
--------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
REVENUE
Rental $ 5,205,437 $ 10,295,150 $ 5,025,072 $ 10,026,208
Interest and other 113,467 240,467 108,533 220,775
------------- ------------ ------------- -------------
TOTAL REVENUE 5,318,904 10,535,617 5,133,605 10,246,983
------------- ------------ ------------- -------------
EXPENSES
Administrative 906,854 1,772,390 806,555 1,594,037
Utilities 575,151 1,370,140 574,729 1,411,524
Operating, maintenance and other 1,033,776 1,957,070 989,416 1,950,579
Taxes and insurance 591,523 1,187,268 605,345 1,201,913
Financial (including amortization of
$25,911, $46,776, $24,484 and $45,974) 1,632,522 3,267,277 1,659,660 3,298,117
Depreciation 1,258,992 2,555,854 1,447,156 2,745,814
------------- ------------- ------------- ------------
TOTAL EXPENSES 5,998,818 12,109,999 6,082,861 12,201,984
------------- ------------- ------------- ------------
NET LOSS $ (679,914) $ (1,574,382) $ (949,256) $ (1,955,001)
============= ============= ============= ============
NET LOSS ATTRIBUTABLE TO
American Tax Credit Properties II L.P. $ (438,011) $ (1,057,244) $ (756,501) $ (1,513,381)
General partners and other limited
partners, including ATCP &
ATCP III, which includes $149,881,
$354,726, $77,465 and $216,612 of
American Tax Credit Properties II L.P.
loss in excess of investment (241,903) (517,138) (192,755) (441,620)
------------- ------------- ------------- ------------
$ (679,914) $ (1,574,382) $ (949,256) $ (1,955,001)
============= ============= ============= ============
</TABLE>
The combined results of operations of the Local Partnerships for the three
and six month periods ended June 30, 1998 are not necessarily indicative of
the results that may be expected for an entire operating period.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
NOTES TO FINANCIAL STATEMENTS - (Continued)
SEPTEMBER 29, 1998
(UNAUDITED)
5. Additional Information
Additional information, including the audited March 30, 1998 Financial
Statements and the Organization, Purpose and Summary of Significant
Accounting Policies, is included in the Partnership's Annual Report on Form
10-K for the fiscal year ended March 30, 1998 on file with the Securities
and Exchange Commission.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Material Changes in Financial Condition
As of September 29, 1998, American Tax Credit Properties II L.P. (the
"Registrant") has not experienced a significant change in financial condition as
compared to March 30, 1998. Principal changes in assets are comprised of
periodic transactions and adjustments and anticipated equity in loss from
operations of local partnerships (the "Local Partnerships") which own low-income
multifamily residential complexes (the "Properties") which qualify for the
low-income tax credit in accordance with Section 42 of the Internal Revenue Code
(the "Low-income Tax Credit"). During the six months ended September 29, 1998,
Registrant received cash from interest revenue, maturity/redemption of bonds and
distributions from Local Partnerships and utilized cash for operating expenses.
Cash and cash equivalents and investments in bonds available-for-sale increased,
in the aggregate, by approximately $192,000 during the six months ended
September 29, 1998 (which included a net unrealized gain on investments in bonds
of approximately $130,000, amortization of net premium on investments in bonds
of approximately $17,000 and accretion of zero coupon bonds of approximately
$20,000). Notwithstanding circumstances that may arise in connection with the
Properties (see Local Partnership Matters - Christian Street Local Partnerships
below), Registrant does not expect to realize significant gains or losses on its
investments in bonds, if any. During the six months ended September 29, 1998,
the investment in Local Partnerships decreased as a result of Registrant's
equity in the Local Partnerships' net loss for the six months ended June 30,
1998 of $1,057,244 and cash distributions received from Local Partnerships of
$127,415 (exclusive of distributions from Local Partnerships of $388 classified
as other income). Accounts payable and accrued expenses and payable to general
partner in the accompanying balance sheet as of September 29, 1998 include
deferred administration fees and management fees, respectively.
Results of Operations
Registrant's operating results are dependent upon the operating results of the
Local Partnerships and are significantly impacted by the Local Partnerships'
policies. In addition, the operating results herein are not necessarily the same
for tax reporting. Registrant accounts for its investment in Local Partnerships
in accordance with the equity method of accounting. Accordingly, the investment
is carried at cost, and is adjusted for Registrant's share of each Local
Partnership's results of operations and by cash distributions received. Equity
in loss of each investment in Local Partnership allocated to Registrant is
recognized to the extent of Registrant's investment balance in each Local
Partnership. Equity in loss in excess of Registrant's investment balance in a
Local Partnership is allocated to other partners' capital in any such Local
Partnership. As a result, the reported equity in loss of investment in Local
Partnerships is expected to decrease as Registrant's investment balances in the
respective Local Partnerships become zero. The combined statements of operations
of the Local Partnerships reflected in Note 4 to Registrant's financial
statements include the operating results of all Local Partnerships, irrespective
of Registrant's investment balances.
Cumulative losses and cash distributions in excess of investment in Local
Partnerships may result from a variety of circumstances, including a Local
Partnership's accounting policies, subsidy structure, debt structure and
operating deficits, among other things. Accordingly, cumulative losses and cash
distributions in excess of the investment are not necessarily indicative of
adverse operating results of a Local Partnership. See discussion below under
Local Partnership Matters regarding certain Local Partnerships currently
operating below economic break even levels.
Registrant's operations for the three months ended September 29, 1998 and 1997
resulted in net losses of $513,594 and $836,571, respectively. The decrease in
net loss is primarily attributable to a decrease in equity in loss of investment
in Local Partnerships of approximately $318,000, which is primarily the result
of an increase in the nonrecognition of losses in excess of Registrant's
investment in Local Partnerships of approximately $72,000 in accordance with the
equity method of accounting and the decrease in the net operating losses of
those Local Partnerships in which Registrant continues to have an investment
balance. Other comprehensive income for the three months ended September 29,
1998 and 1997 resulted from a net unrealized gain on investments in bonds
available-for-sale of $111,728 and $76,238, respectively.
The Local Partnerships' net loss of approximately $680,000 for the three months
ended June 30, 1998 was attributable to rental and other revenue of
approximately $5,319,000, exceeded by operating and interest expenses (including
interest on non-mandatory debt) of approximately $4,714,000 and approximately
$1,285,000 of depreciation and amortization expenses. The Local Partnerships'
net loss of approximately $949,000 for the three months ended June 30, 1997 was
attributable to rental and other revenue of approximately $5,134,000, exceeded
by operating and interest expenses (including interest on non-mandatory debt) of
approximately $4,611,000 and approximately $1,472,000 of depreciation and
amortization expenses. The results of operations of the Local Partnerships for
the three months ended June 30, 1998 are not necessarily indicative of the
results that may be expected in future periods.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Registrant's operations for the six months ended September 29, 1998 and 1997
resulted in net losses of $1,235,783 and $1,676,523, respectively. The decrease
in net loss is primarily attributable to a decrease in equity in loss of
investment in Local Partnerships of approximately $456,000, which is primarily
the result of an increase in the nonrecognition of losses in excess of
Registrant's investment in Local Partnerships of approximately $138,000 in
accordance with the equity method of accounting and the decrease in the net
operating losses of those Local Partnerships in which Registrant continues to
have an investment balance. Other comprehensive income for the six months ended
September 29, 1998 and 1997 resulted from a net unrealized gain on investments
in bonds available-for-sale of $129,784 and $148,114, respectively.
The Local Partnerships' net loss of approximately $1,574,000 for the six months
ended June 30, 1998 was attributable to rental and other revenue of
approximately $10,536,000, exceeded by operating and interest expenses
(including interest on non-mandatory debt) of approximately $9,507,000 and
approximately $2,603,000 of depreciation and amortization expenses. The Local
Partnerships' net loss of approximately $1,955,000 for the six months ended June
30, 1997 was attributable to rental and other revenue of approximately
$10,247,000, exceeded by operating and interest expenses (including interest on
non-mandatory debt) of approximately $9,410,000 and approximately $2,792,000 of
depreciation and amortization expenses. The results of operations of the Local
Partnerships for the six months ended June 30, 1998 are not necessarily
indicative of the results that may be expected in future periods.
Local Partnership Matters
The Properties are principally comprised of subsidized and leveraged low-income
multifamily residential complexes located throughout the United States and
Puerto Rico. The rents of the Properties, many of which receive rental subsidy
payments pursuant to subsidy agreements ("HAP Contracts") are subject to
specific laws, regulations and agreements with federal and state agencies. Seven
Local Partnerships have one or more HAP Contracts, certain of which cover only
certain rental units, which are scheduled to expire in 1999, of which six Local
Partnerships had HAP Contracts extended during 1998 for one year and one Local
Partnership has a HAP Contract scheduled to expire in December 1998. In
addition, the Local Partnerships have various financing structures which include
(i) required debt service payments ("Mandatory Debt Service") and (ii) debt
service payments which are payable only from available cash flow subject to the
terms and conditions of the notes, which may be subject to specific laws,
regulations and agreements with appropriate federal and state agencies
("Non-Mandatory Debt Service or Interest"). During the six months ended June 30,
1998, revenue from operations of the Local Partnerships, Local General Partner
advances and reserves of the Local Partnerships have generally been sufficient
to cover the operating expenses and Mandatory Debt Service. Substantially all of
the Local Partnerships are effectively operating at or near break even levels,
although certain Local Partnerships' operating information reflects operating
deficits that do not represent cash deficits due to their mortgage and financing
structure and the required deferral of property management fees. However, as
discussed below, certain Local Partnerships' operating information indicates
below break even operations after taking into account their mortgage and
financing structure and any required deferral of property management fees.
The terms of the partnership agreement of Christian Street Associates Limited
Partnership and 2000-2100 Christian Street Associates (collectively the
"Christian Street Local Partnerships"), which Local Partnerships have certain
common general partner interests and a common mortgage lender, require the Local
General Partners to cause the management agent to defer property management fees
in order to avoid a default under the respective mortgages. The properties have
experienced ongoing operating deficits, and as of June 30, 1998, the Local
General Partners have advanced approximately $1,065,000 to the Christian Street
Local Partnerships, which amount includes deferred property management fees.
However, the Local General Partners, which have fulfilled their respective
deficit guarantees, have informed Registrant that they do not intend to continue
to voluntarily fund the operating deficits of the properties. The Local General
Partners have also informed Registrant that the Christian Street Local
Partnerships are current under their respective first mortgage obligations as a
result of the Local General Partners' funding of operating deficits and deferral
of property management fees. The Local General Partners have approached the
lender and are attempting to restructure the loans; however the lender has
indicated that in connection with any such restructuring, the respective Local
Partnerships would be responsible for certain costs, which may be significant.
There can be no assurance that any such restructuring will be achieved. The
Christian Street Local Partnerships have incurred operating deficits of
approximately $133,000 for the six months ended June 30, 1998, which includes
property management fees of approximately $21,000. The Christian Street Local
Partnerships have allocated approximately 7.5 years of Low-income Tax Credits to
Registrant through December 31, 1997. Accordingly, if the Local General Partners
cease to fund the operating deficits, Registrant may incur substantial recapture
of Low-income Tax Credits.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
In an attempt to avoid adverse tax consequences, Registrant has been conducting
discussions with the Local General Partners whereby Registrant and the Local
General Partners would agree to share the funding of operating deficits up to a
maximum annual amount. Registrant's investment balances in the Christian Street
Local Partnerships, after cumulative equity losses, became zero during the year
ended March 30, 1997. Of Registrant's total annual Low-income Tax Credits,
approximately 9% is allocated from the Christian Street Local Partnerships and
are scheduled to expire in 2000.
During the six months ended June 30, 1998, Forest Village Housing Partnership
(the "Forest Village Local Partnership") incurred an operating deficit of
approximately $19,000, resulting primarily from costs associated with increased
vacancies, tenant turnover and maintenance costs and is in arrears under its
first and second mortgages as of October 31, 1998. Registrant's investment
balance in the Forest Village Local Partnership, after cumulative equity losses,
became zero during the year ended March 30, 1995. Of Registrant's total annual
Low-income Tax Credits, approximately 1% is allocated from the Forest Village
Local Partnership.
During the six months ended June 30, 1998, Ann Ell Apartments Associates, Ltd.
(the "Ann Ell Local Partnership") incurred an operating deficit of approximately
$25,000. Payments on the mortgage and real estate taxes are current.
Registrant's investment balance in the Ann Ell Local Partnership, after
cumulative equity losses, became zero during the year ended March 30, 1994. Of
Registrant's total annual Low-income Tax Credits, less than 1% is allocated from
the Ann Ell Local Partnership.
The terms of the partnership agreement of Batesville Family, L.P. (the
"Batesville Local Partnership") require the management agent to defer property
management fees in order to avoid a default under the mortgage. The Batesville
Local Partnership incurred an operating deficit of approximately $16,000 for the
six months ended June 30, 1998, which includes property management fees of
approximately $1,000. Payments on the mortgage and real estate taxes are
current. Registrant's investment balance in the Batesville Local Partnership,
after cumulative equity losses, became zero during the year ended March 30,
1998. Of Registrant's total annual income Low-income Tax Credits, less than 1%
is allocated from the Batesville Local Partnership.
Littleton Avenue Community Village, L.P. (the "Littleton Local Partnership") is
a defendant in a lawsuit resulting from an accident in 1989 during the
construction of the complex owned by the Littleton Local Partnership. In
November 1995 the Littleton Local Partnership and one co-defendant were found
liable in the lawsuit, of which the Littleton Local Partnership's potential
liability is approximately $300,000. The Littleton Local Partnership appealed
the result of the trial and filed a lawsuit against the construction period
insurance companies, which were not co-defendants in the lawsuit. Although the
Local General Partner expects the incident to be covered by insurance, it agreed
to indemnify the Littleton Local Partnership and established an escrow of
approximately $325,000 from development proceeds in the event the Littleton
Local Partnership is unsuccessful in its appeal and its action against the
construction period insurance companies.
Adoption of Accounting Standard
On March 31, 1998, Registrant adopted Statement of Financial Accounting Standard
("SFAS") No. 130, "Reporting Comprehensive Income." SFAS No. 130 establishes
standards for reporting and display of comprehensive income and its components
(revenue, expenses, gains and losses) in a full set of general-purpose financial
statements. The adoption of SFAS No. 130 has not materially impacted
Registrant's financial position and results of operations.
<PAGE>
AMERICAN TAX CREDIT PROPERTIES II L.P.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, Littleton Avenue
Community Village, L.P. (the "Littleton Local Partnership") is a
defendant in a lawsuit resulting from an accident in 1989 during the
construction of the complex owned by the Littleton Local Partnership.
In November 1995 the Littleton Local Partnership and one co-defendant
were found liable in the lawsuit, of which the Littleton Local
Partnership's potential liability is approximately $300,000. The
Littleton Local Partnership appealed the result of the trial and filed
a lawsuit against the construction period insurance companies, which
were not co-defendants in the lawsuit. Although the Local General
Partner of the Littleton Local Partnership expects the incident to be
covered by insurance, it agreed to indemnify the Littleton Local
Partnership and established an escrow of approximately $325,000 from
development proceeds in the event the Littleton Local Partnership is
unsuccessful in its appeal and its action against the construction
period insurance companies.
Registrant is not aware of any other material legal proceedings.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None; see Item 5 regarding a mortgage default of a Local Partnership.
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
As discussed in Part I, Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of Operations, the local general
partner of Forest Village Housing Partnership (the "Forest Village
Local Partnership") reports that the Forest Village Local Partnership
is in arrears under its first and second mortgages as of October 31,
1998.
Item 6. Exhibits and Reports on Form 8-K
None
<PAGE>
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.
<TABLE>
<S> <C>
AMERICAN TAX CREDIT PROPERTIES II L.P.
(a Delaware limited partnership)
By: Richman Tax Credit Properties II L.P.,
General Partner
by: Richman Tax Credits Inc.,
general partner
Dated: November 13, 1998 /s/ Richard Paul Richman
----------------- -------------------------
Richard Paul Richman
President, Chief Executive Officer and
Director of the general partner of the
General Partner
Dated: November 13, 1998 /s/ Neal Ludeke
----------------- ----------------
Neal Ludeke
Vice President and Treasurer of the general partner
of the General Partner
(Principal Financial and Accounting
Officer of Registrant)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the quarter ended September 29, 1998 Form 10-Q Balance
Sheets and Statements of Operations and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000842314
<NAME> American Tax Credit Properties, II L.P.
<MULTIPLIER> 1000
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAR-30-1999
<PERIOD-START> MAR-31-1998
<PERIOD-END> SEP-29-1998
<EXCHANGE-RATE> 1.00
<CASH> 862
<SECURITIES> 4,114
<RECEIVABLES> 68
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,164
<CURRENT-LIABILITIES> 1,349
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,164
<SALES> 0
<TOTAL-REVENUES> 183
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 361
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,106)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,106)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,106)
<EPS-PRIMARY> (21.95)
<EPS-DILUTED> 0
</TABLE>
