<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
FOR QUARTER ENDED JUNE 30, 1996
COMMISSION FILE NUMBER 33-27658
NATIONAL TAX CREDIT PARTNERS, L.P.
A CALIFORNIA LIMITED PARTNERSHIP
I.R.S. EMPLOYER IDENTIFICATION NO. 95-4205231
9090 Wilshire Blvd., Suite 201
Beverly Hills, Calif. 90211
Registrant's Telephone Number,
Including Area Code (310) 278-2191
Securities Registered Pursuant to
Section 12(b) or 12(g) of the Act
NONE
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed with the Commission by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding twelve 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> 2
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1996
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements and Notes to Financial Statements
Balance Sheets, June 30, 1996 and 1995 . . . . . . . . . . . . 1
Statements of Operations
Six and Three Months Ended June 30, 1996 and 1995 . . . 2
Statement of Partners' Equity
Six Months Ended June 30, 1996 . . . . . . . . . . . . . 3
Statements of Cash Flows
Six Months Ended June 30, 1996 and 1995 . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . 11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 14
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995
ASSETS
<TABLE>
<CAPTION>
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
INVESTMENTS IN LIMITED PARTNERSHIPS
(Notes 1 and 2) $ 20,448,756 $ 21,923,823
CASH AND CASH EQUIVALENTS (Note 1) 244,764 500,282
RESTRICTED CASH 75,000 75,000
------------ ------------
TOTAL ASSETS $ 20,768,520 $ 22,499,105
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Accrued fees and expenses due to partners
(Notes 5 and 7) $ 3,661,835 $ 3,266,521
Capital contributions payable (Note 4) 322,300 441,300
Accounts payable and accrued expenses 283,312 325,351
------------ ------------
4,267,447 4,033,172
CONTINGENCIES (Note 6)
PARTNERS' EQUITY 16,501,073 18,465,933
------------ ------------
TOTAL LIABILITIES AND PARTNERS' EQUITY $ 20,768,520 $ 22,499,105
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE> 4
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
STATEMENTS OF OPERATIONS
SIX AND THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Six months Three months Six months Three months
ended ended ended ended
June 30, 1996 June 30, 1996 June 30, 1995 June 30, 199
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
INTEREST INCOME $ 10,553 $ 3,973 $ 6,719 $ 4,283
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Management fees - partners 346,478 173,239 346,477 173,238
Legal and accounting 94,293 37,823 227,635 151,828
General and administrative 64,174 29,914 68,412 35,994
------------ ------------ ------------ ------------
Total operating expenses 504,945 240,976 642,524 361,060
------------ ------------ ------------ ------------
LOSS FROM PARTNERSHIP
OPERATIONS (494,392) (237,003) (635,805) (356,777)
DISTRIBUTIONS FROM
LIMITED PARTNERS
RECOGNIZED AS INCOME (Note2) 37,532 37,532 - -
EQUITY IN LOSS OF
LIMITED PARTNERSHIPS
AND AMORTIZATION OF
ACQUISITION COSTS (Note 2) (1,508,000) (754,000) (1,419,104) (709,552)
------------ ------------ ------------ ------------
NET LOSS $ (1,964,860) $ (953,471) $ (2,054,909) $ (1,066,329)
============ ============ ============ ============
NET LOSS PER LIMITED
PARTNERSHIP INTEREST (Note 1) $ (82) $ (40) $ (86) $ (45)
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE> 5
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
STATEMENT OF PARTNERS' EQUITY (DEFICIENCY)
SIX MONTHS ENDED JUNE 30 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
Special
Limited General Limited
Partners Partners Partners Total
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
PARTNERSHIP INTERESTS,
June 30, 1996 23,899
============
PARTNERS' EQUITY (DEFICIENCY),
January 1, 1996 $ 1,000 $ (334,164) $ 18,799,097 $ 18,465,933
Net loss for the six months
ended June 30, 1996 - (19,649) (1,945,211) (1,964,860)
------------ ------------ ------------ ------------
PARTNERS' EQUITY (DEFICIENCY),
June 30, 1996 $ 1,000 $ (353,813) $ 16,853,886 $ 16,501,073
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 6
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,964,860) $ (988,580)
Adjustments to reconcile net loss to net cash
used in operating activities:
Equity in losses of limited partnerships
and amortization of acquisition costs 1,508,000 709,552
(Increase) decrease in deposits and other receivables (116,454) 15,000
Increase (decrease) in:
Accrued fees and expenses due to partners 395,314 214,779
Accounts payable and accrued expenses (42,039) 35,601
------------ ------------
Net cash used in operating activities (220,039) (13,648)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments in investee partnerships:
Capital (contributions) recovery (119,000) 1,563
Capitalized acquisition costs and fees - (13,385)
Distributions recognized as a return of capital 83,521 44,674
------------ ------------
Net cash (used in) provided by investing activities (35,479) 32,852
------------ ------------
NET (DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (255,518) 19,204
CASH AND CASH EQUIVALENTS, beginning of period 500,282 156,175
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 244,764 $ 175,379
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 7
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The information contained in the following notes to the financial
statements is condensed from that which would appear in the annual
audited financial statements. Accordingly, the financial statements
included herein should be reviewed in conjunction with the audited
financial statements and related notes thereto contained in the
National Tax Credit Partners, L.P. (the "Partnership") annual report
for the year ended December 31, 1995. Accounting measurements at
interim dates inherently involve greater reliance on estimates than at
year end. The results of operations for the interim periods presented
are not necessarily indicative of the results for the entire year.
In the opinion of the Partnership, the accompanying unaudited
financial statements contain all adjustments (consisting primarily of
normal recurring accruals) necessary to present fairly the financial
position as of June 30, 1996 and the results of operations for the six
and three months then ended and changes in cash flows for the six
months then ended.
ORGANIZATION
The Partnership, formed under the California Revised Limited
Partnership Act, was organized on March 7, 1989. The Partnership was
formed to invest primarily in other limited partnerships which own or
lease and operate multifamily housing complexes that are eligible for
low-income housing tax credits or, in certain cases, historic
rehabilitation tax credits ("Tax Credits"). The general partner of
the Partnership (the "General Partner") is National Partnership
Investments Corp. ("NAPICO"), a California corporation. The special
limited partner of the Partnership (the "Special Limited Partner") is
PaineWebber T.C., Inc., a Delaware corporation.
The Partnership originally registered 14,000 units, consisting of
28,000 Limited Partnership Interests ("LPI"), and warrants to purchase
a maximum of 14,000 Additional Limited Partnership Interests ("ALPI").
The term of the offering expired in September 1990, at which date the
Partnership raised $59,749,000 from the sale of 16,336 LPI and
warrants representing 7,563 ALPI.
The General Partner has a one percent interest in operating profits
and losses of the Partnership. The limited partners will be allocated
the remaining 99 percent interest in proportion to their respective
investments.
The Partnership shall continue in full force and effect until December
31, 2029, unless terminated prior to that, pursuant to the partnership
agreement or law.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates.
5
<PAGE> 8
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
METHOD OF ACCOUNTING FOR INVESTMENT IN LIMITED PARTNERSHIPS
The investments in limited partnerships are accounted for using the
equity method. Acquisition, selection and other costs related to the
acquisition of the projects acquired are capitalized as part of the
investment accounts and are being amortized on a straight line basis
over the estimated lives of the underlying assets, which is 30 years.
Acquisition, selection and other costs related to Local Partnerships
for which the Partnership has not consummated its investment, have
been expensed currently.
NET LOSS PER LIMITED PARTNERSHIP INTEREST
Net loss per limited partnership interest was computed by dividing the
limited partners' share of net loss by the number of limited
partnership interests outstanding during the year. The number of
limited partnership interests outstanding was 23,899 for the periods
presented.
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
INCOME TAXES
No provision has been made for income taxes in the accompanying
financial statements since such taxes, if any, are the liability of
the individual partners.
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS
The Partnership currently holds limited partnership interests in 31
local limited partnerships ("Local Partnerships"), having relinquished
its interest in the Cigar Factory during 1995. As a limited partner
of the Local Partnerships, the Partnership does not have authority
over day-to-day management of the Local Partnerships or their
properties (the "Apartment Complexes"). The general partners
responsible for management of the Local Partnerships (the "Local
Operating General Partners") are not affiliated with the General
Partner of the Partnership, except as discussed below.
6
<PAGE> 9
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
At June 30, 1996, the Local Partnership's own residential projects
consisted of 2,786 apartment units.
The Partnership, as a limited partner in each Local Partnership, is
generally entitled to 99 percent of the operating profits and losses
of the Local Partnerships. National Tax Credit, Inc. ("NTC"), an
affiliate of the General Partner, serves either as a special limited
partner or non-managing administrative general partner in which case
it receives .01 percent of operating profits and losses of the Local
Partnership, or as the Local Operating General Partner of the Local
Partnership in which case it is entitled to .09 percent of operating
profits and losses of the Local Partnership. The Partnership is also
generally entitled to receive 50 percent of the net cash flow
generated by the Apartment Complexes, subject to repayment of any
loans made to the Local Partnerships (including loans provided by NTC
or an affiliate), repayment for funding of development deficit and
operating deficit guarantees by the Local Operating General Partners
or their affiliates (excluding NTC and its affiliates), and certain
priority payments to the Local Operating General Partners other than
NTC or its affiliates.
The Partnership's allocable share of losses from Local Partnerships
are recognized in the financial statements until the related
investment account is reduced to a zero balance. Losses incurred
after the investment account is reduced to zero are not recognized.
Distributions from the Local Partnerships are accounted for as a
return of capital until the investment balance is reduced to zero.
Subsequent distributions received will be recognized as income.
The following is a summary of the investment in Local Partnerships as
of June 30, 1996:
<TABLE>
<S> <C>
Balance, beginning of period $21,923,823
Capital contributions to limited partnerships 116,452
Equity in losses of limited partnerships (1,424,000)
Amortization of capitalized acquisition costs (84,000)
Distributions recognized as a return of capital (83,519)
-----------
Balance, end of period $20,448,756
===========
</TABLE>
Victorian Park
Victorian Park Associates, which owns a 336-unit Apartment Complex
located in Illinois, defaulted on its mortgage in July 1991
principally because it failed to fund insurance and tax escrows
required by the mortgage and the unaffiliated Local Operating General
Partners failed to honor their obligation under their guarantees to
fund such partnership deficits. On March 25, 1992, the Partnership
commenced litigation against the Local Operating General Partners.
On November 13, 1992 the Partnership was advised that a Chapter 11
petition in bankruptcy was filed by the Local Operating General
Partners on behalf of the Local Partnership and that the lender,
Patrician Mortgage ("Patrician"), had accelerated its mortgage. On
January 7, 1993, the Partnership
7
<PAGE> 10
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 2 - INVESTMENTS IN LIMITED PARTNERSHIPS (CONTINUED)
obtained an order compelling the Local Operating General Partners to
perform under their Guarantees, which order was reversed by the U.S.
Court of Appeals for the Seventh Circuit. Victorian Park and
Patrician have notified the Partnership and the Bankruptcy Court that
they have reached a Settlement Agreement which will keep Victorian
Park as owner of the Apartment Complex and preserve all of the
Partnership's rights. No assurances can be given that the settlement
will be successfully implemented or that Victorian Park will not be
lost by the Partnership. As of June 30, 1996, and December 31, 1995
the Partnership's carrying value of the investment in the Victorian
Local Partnership (which represents approximately 5.7 percent of the
Partnership's total equity initially invested in Local Partnerships)
was zero.
Summit I, II and III
The general contractor for three related Local Partnerships, Summit I,
II and III, initiated a lawsuit in December 1992 against the Local
Partnerships and the Partnership seeking damages in the amount of
approximately $600,000 allegedly due pursuant to the respective
general contracts plus damanges for alleged misrepresentation and
punitive damages. The Partnership believes that the general
contractor's claims are barred and/or subject to offset and it has
filed responsive pleadings. The Partnership has not accrued any
liability in the accompanying financial statements as of June 30,
1996. The carrying value of the investments, at June 30, 1996, in
Summit I, Summit II and Summit III totaled approximately $1,689,000.
Summit I, II and III represent 3.2%, 1.4% and 4.6%, respectively, of
NTCP's original portfolio investment.
Meadows
The Meadows Apartments is a 112-unit building in Ysilanti, Michigan.
The first mortgage loan on the property matured on May 15, 1996 and
the property is delinquent in making its property tax payments. The
Partnership endeavored to negotiate an extension and modification of
the first mortgage but, upon the lender's refusal, filed a Chapter 11
petition in bankruptcy to avert a foreclosure of the property. There
can be no assurances that the bankruptcy plan will be confirmed or
that property will not be lost to foreclosure. As of June 30, 1996,
the carrying value of the investment is zero. The mortgage note
outstanding at June 30, 1996 has an interest rate of 11.5 percent per
annum, with principal and interest payments due monthly.
NOTE 3 - MORTGAGE NOTES PAYABLE
The Partnership has withheld the mortgage payments on the Country View
property since October of 1995 and a default letter was received from
the lender. The Partnership has received a commitment from a lender
to refinance the Property. The refinancing transaction is expected to
be completed in August of 1996.
NOTE 4 - CAPITAL CONTRIBUTION PAYABLE
Capital contributions payable represents $70,000 due annually, until
paid in full, for the investment in the Blue Lake Local Partnership.
The capital contributions payable are unsecured and non interest
bearing.
8
<PAGE> 11
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 5 - RELATED-PARTY TRANSACTIONS
Under the terms of the Amended and Restated Agreement of the Limited
Partnership, the Partnership has paid the General Partner and the
Special Limited Partner the following fees:
(a) An annual Partnership management fee in an amount equal to 0.5
percent of invested assets (as defined in the Partnership
Agreement) is payable to the General Partner and Special
Limited Partner. For the six months ended June 30, 1996
approximately $346,000 has been expensed. The unpaid balance
at June 30, 1996 is approximately $3,622,000.
(b) A property disposition fee is payable to the General Partner
in an amount equal to the lesser of (I) one-half of the
competitive real estate commission that would have been
charged by unaffiliated third parties providing comparable
services in the area where the apartment complex is located,
or (ii) 3% of the sales price received in connection with the
sale or disposition of the apartment complex or local
partnership interest, but in no event will the property
disposition fee and all amounts payable to unaffiliated real
estate brokers in connection with any such sale exceed in the
aggregate, the lesser of the competitive rate (as described
above) or 6% of such sale price. Receipt of the property
disposition fee will be subordinated to the distribution of
sale or refinancing proceeds by the Partnership until the
limited partners have received distributions of sale or
refinancing proceeds in an aggregate amount equal to (I) their
10% priority return for any year not theretofore satisfied (as
defined in the partnership agreement) and (ii) an amount equal
to the aggregate adjusted investment (as defined in the
partnership agreement) of the limited partners. No
disposition fees have been paid.
(c) The Partnership reimburses NAPICO for certain expenses. The
reimbursement paid to NAPICO was $8,826 and $14,615 for the
six months ended June 30, 1996 and 1995, respectively, and is
included in general and administrative expenses.
NTC is the Local Operating General Partner in nineteen of the
Partnership's 31 Local Partnerships. In addition, NTC is either a
special limited partner or an administrative general partner in the
other Local Partnerships.
An affiliate of the General Partner is currently managing two
properties owned by Local Partnerships. The Local Partnerships pay
the affiliate property management fees which have been reduced from 5%
to 4.5% of their gross rental revenues. The amounts paid were $30,385
and $37,376 for the six months ended June 30, 1996 and 1995,
respectively.
NOTE 6 - CONTINGENCIES
The General Partner and the Partnership, are plaintiffs in various
lawsuits and also have been named as defendants in other lawsuits
arising from transactions in the ordinary course of business. In the
opinion of management and the General Partner, the claims will not
result in any material liability to the Partnership.
9
<PAGE> 12
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, "Disclosure about
Fair Value of Financial Instruments," requires disclosure of fair
value information about financial instruments, when it is practicable
to estimate that value. The operations generated by the investee
limited partnerships, which account for the Partnership's primary
source of funds, are subject to various government rules, regulations
and restrictions which make it impracticable to estimate the fair
value of the accrued fees due to partners. The carrying amount of
other assets and liabilities reported on the balance sheets that
require such disclosure approximates fair value due to their
short-term maturity.
10
<PAGE> 13
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
The Partnership received proceeds totaling $59,749,000 from the sale
of Limited Partnership Interests, pursuant to a registration statement
filed on Form S-11 which sale commenced in September 1989 and
terminated in September 1990. This amount includes $18,907,500 from
the sale of 7,563 Additional Limited Partnership Interests. The
proceeds have been used to invest in Local Partnerships which own and
operate Apartment Complexes that are eligible for Tax Credits.
It is not expected that any of the Local Partnerships in which the
Partnership invested will generate cash from operations sufficient to
provide distributions to the Limited Partners. Such cash from
operations, if any, would first be used to meet operating expenses of
the Partnership. The Partnership's investments are not readily
marketable and may be affected by adverse general economic conditions
which, in turn, could substantially increase the risk of operating
losses for the Apartment Complexes, the Local Partnerships and the
Partnership. These problems may result from a number of factors, many
of which cannot be controlled by the General Partner.
In order to further replenish Partnership reserves, the Partnership
anticipates offering limited partnership interests for sale in two or
three Local Partnerships to investors who would be entitled to receive
a portion of the tax credits otherwise allocable to the Partnership.
There is no assurance that the Partnership will be successful in these
sales. If the offerings were successfully concluded, the net proceeds
would be added to the Partnership's reserves.
RESULTS OF OPERATIONS
The Countryview Apartments have historically operated at an annual
deficit of approximately $60,000 - $70,000 because the property was
adversely impacted by excessive debt service payments. During the
reporting period, the General Partner restructured the loan which was
in default. In connection with the restructuring, the loan will be
modified and the interest rate will be reduced from 11.515% to 8%. As
a result, management expects the property to operate at a break-even
level; however, since two new affordable housing properties are being
built within one-quarter of a mile, no assurances can be given. In
connection with the loan modification, a total of $364,657 is required
at closing to pay the mortgage in arrears, establish a replacement
reserve and pay lender's loan modification costs. The $364,657 will
be funded from three sources as follows: (i) $200,000 from the
property; (ii) $51,022 advance from NTCP; and (iii) $113,265 paid by
NTCP in installments of $15,729 over 6 months and then $10,910 for an
additional 2 months.
In order to replenish the Partnership's reserves, your General Partner
further diluted its interest in the Rose City Local Partnership. In
connection with the dilution,s the Local General Partner's have
purchased the Partnership's interest in cash flow and back-end
distributions. The Partnership, however, shall continue to receive
its allocable portion of housing tax credits, subject to the
allocation made to the Additional Limited Partner, through the 10-year
period. As a result of the modification, the Partnership will receive
$240,000, $120,000 of which will be paid in September 1996, and
$120,000 of which will be paid one year thereafter. These funds will
be retained in the Partnership's reserves.
11
<PAGE> 14
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
In general, in order to avoid recapture of Housing Tax Credits, the
Partnership does not expect that it will dispose of its Local
Partnership Interests or approve the sale by a Local Partnership of
any Apartment Complex prior to the end of the applicable 15-year
Compliance Period. Because of (I) the nature of the Apartment
Complexes, (ii) the difficulty of predicting the resale market for
low- income housing 15 or more years in the future, and (iii) the
inability of the Partnership to directly cause the sale of Apartment
Complexes by local general partners, but generally only to require
such local general partners to use their respective best efforts to
find a purchaser for the Apartment Complexes, it is not possible at
this time to predict whether the liquidation of substantially all of
the Partnership's assets and the disposition of the proceeds, if any,
in accordance with the partnership agreement will be able to be
accomplished promptly at the end of the 15-year period. If a Local
Partnership is unable to sell an Apartment Complex, it is anticipated
that the Local Operating General Partner will either continue to
operate such Apartment Complex or take such other actions as the Local
Operating General Partner believes to be in the best interest of the
Local Partnership. In addition, circumstances beyond the control of
the General Partner may occur during the Compliance Period which would
require the Partnership to approve the disposition of an Apartment
Complex prior to the end of the Compliance Period.
Except for interim investments in highly liquid debt investments, the
Partnership's investments consist entirely of interests in other Local
Partnerships owning Apartment Complexes. Funds temporarily not
required for such investments in projects are invested in these highly
liquid debt investments earning interest income as reflected in the
statement of operations. These interim investments can be easily
converted to cash to meet obligations as they arise.
The Partnership, as a limited partner in the Local Partnerships in
which it has invested, is subject to the risks incident to the
construction, management, and ownership of improved real estate. The
Partnership investments are also subject to adverse general economic
conditions, and accordingly, the status of the national economy,
including substantial unemployment and concurrent inflation could
increase vacancy levels, rental payment defaults, and operating
expenses, which in turn, could substantially increase the risk of
operating losses for the Apartment Complexes. Certain of the Local
Partnerships and their respective Apartment Complexes are subject to
litigation and operating problems. See Part II - Other Information,
Item 1. Legal Proceedings.
The Partnership accounts for its investments in the Local Partnerships
on the equity method, thereby adjusting its investment balance by its
proportionate share of the income or loss of the Local Partnerships.
Distributions received from Local Partnerships are recognized as
return of capital until the investment balance has been reduced to
zero or to a negative amount equal to future capital contributions
required. Subsequent distributions received are recognized as income.
The Partnership's income consists primarily of interest income earned
on certificates of deposit and other temporary investment of funds not
required for investment in Local Partnerships.
12
<PAGE> 15
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1996
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (CONTINUED)
RESULTS OF OPERATIONS (CONTINUED)
Operating expenses consist primarily of recurring general and
administrative expenses and professional fees for services rendered to
the Partnership. In addition, an annual Partnership management fee in
an amount equal to 0.5 percent of invested assets is payable to the
General Partner and Special Limited Partner. To date, however, these
partners have not received a management fee for their continuing
management of the Partnership's affairs.
13
<PAGE> 16
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1996
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of June 30, 1996, NTCP's General Partner was a plaintiff or defendant in
several lawsuits. None of these suits were related to NTCP. In addition, the
Partnership is involved in the following lawsuits arising from transactions in
the ordinary course of business. Although certain of these claims involve
substantial amounts, in the opinion of management, these claims will not result
in any material liability to the Partnership.
Victorian Park Associates, which owns a 336-unit Apartment Complex located in
Illinois, defaulted on its mortgage in July 1991 principally because the
unaffiliated local operating general partners failed to pay $800,000 of real
estate taxes required under their guarantees. On March 25, 1992, the
Partnership commenced litigation National Tax Credit Partners, L.P. v. Havlick,
Owings, United Development et al., Case No. 92C2074 in the United States
District Court for the Northern District of Illinois Eastern Division against
the local operating general partners to enforce its rights. On November 13,
1992 the Partnership was advised that a Chapter 11 petition in bankruptcy was
filed by the local operating general partners on behalf of the Local
Partnership [In re: Victorian Park Associates, Debtor, Case No. 92-B-25140,
Chapter 11] and that the lender, Patrician Mortgage ("Patrician"), had
accelerated its mortgage. On January 7, 1993, the Partnership obtained an
order compelling the Local Operating General Partners to perform under their
Guarantees, which order was reversed by the U.S. Court of Appeals for the
Seventh Circuit. Victorian Park and Patrician have notified the Partnership
and the Bankruptcy Court that they have reached a Settlement Agreement which
will keep Victorian Park as owner of the Apartment Complex and preserve all of
the Partnership's rights. No assurances can be given that the Plan will be
successfully implemented. As of June 30, 1996, the Partnership's carrying
value of the investment in the Victorian Local Partnership (which represents
approximately 5.7% of the Partnership's total equity initially invested in
Local Partnerships) was zero.
In December 1992, Tara Construction, the general contractor for Art Museum
properties (Summit I, II and III), commenced an action in the Court of Common
Pleas, Montgomery County, Pennsylvania Tara Construction v. NTCP et al., (Case
No. 92-23505) against the three Summit Local Partnerships, the Partnership,
NTC, the General partner PaineWebber Incorporated, and a PaineWebber affiliate,
seeking damages of approximately $600,000 allegedly due the general contractor
for work done in connection with the completion of construction plus damages
for alleged misrepresentations and punitive damages. The Partnership believes
that the general contractor's claims are barred and/or subject to offset and it
has filed responsive pleadings. The Partnership has not accrued any liability
in the accompanying financial statements as of March 31, 1996. Tara
Construction's lawsuit has now been dormant for more than two years. The
carrying value of the investments, at June 30, 1996, in Summit I, Summit II and
Summit III totaled approximately $1,689,000. Summit I, II and III represent
3.2%, 1.4% and 4.6%, respectively, of NTCP's original portfolio investment.
The Meadows Apartments is a 112-unit building in Ysilanti, Michigan. The first
mortgage loan on the property matured on May 15, 1996 and the property is
delinquent in making its property tax payments. Accordingly, the Partnership
endeavored to negotiate an extension and modification of the first but, upon
the lender's refusal, filed a Chapter 11 petition in bankruptcy to avert a
foreclosure of the property. There can be no assurances that the bankruptcy
plan will be confirmed or that property will not be lost to foreclosure. As
of June 30, 1996, the carrying value of the investment is zero.
14
<PAGE> 17
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1996
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS (CONTINUED)
The Partnership's three separate lawsuits regarding the Dynes Village Local
Partnership were settled on December 2, 1994. The settlement, however, will
not affect the pending I.R.S. audits in the course of which the I.R.S. has
preliminary disqualifed the Housing Tax Credits taken by the Dynes Local
Partnership in 1989 and 1990.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are required per the provision of Item 1 of
regulation S-K.
15
<PAGE> 18
NATIONAL TAX CREDIT PARTNERS, L.P.
(A CALIFORNIA LIMITED PARTNERSHIP)
JUNE 30, 1996
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.
NATIONAL TAX CREDIT PARTNERS, L.P.
(a California limited partnership)
By: National Partnership Investments Corp.
General Partner
Date:
----------------------------------------------
By:
----------------------------------------------
Bruce Nelson
President
Date:
----------------------------------------------
By:
----------------------------------------------
Shawn Horwitz
Executive Vice President and
Chief Financial Officer
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS, THE STATEMENTS OF OPERATIONS, AND STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 319,764
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 319,764
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,768,520
<CURRENT-LIABILITIES> 283,312
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 16,501,073
<TOTAL-LIABILITY-AND-EQUITY> 20,768,520
<SALES> 0
<TOTAL-REVENUES> 48,085
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,012,945
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,964,860)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,964,860)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,964,860)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
