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 June 30, 1999
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-37704-03
INDEPENDENCE TAX CREDIT PLUS L.P. II
(Exact name of registrant as specified in its charter)
Delaware 13-3646846
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securi-
ties 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>
<TABLE>
PART I - Financial Information
Item 1. Financial Statements
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<CAPTION>
June 30, March 31,
1999 1999
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $13,675,432 and $12,842,757,
respectively $94,318,458 $95,123,555
Cash and cash equivalents 1,067,927 1,051,505
Cash held in escrow 2,624,534 2,487,110
Deferred costs, net of accumulated
amortization of $409,328
and $385,360, respectively 401,244 425,212
Other assets 635,491 757,455
Total assets $99,047,654 $99,844,837
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $59,009,575 $59,105,602
Accounts payable and other
liabilities 1,341,536 1,304,205
Accrued interest 6,668,664 6,449,318
Due to local general partners and
affiliates 1,789,103 1,839,744
Due to general partner and
affiliates 1,003,815 851,420
Total liabilities 69,812,693 69,550,289
Minority interest 149,576 152,233
Commitments and contingencies (Note 3)
Partners' capital (deficit):
Limited partners (58,928 BACs
issued and outstanding) 29,318,480 30,364,841
General partner (233,095) (222,526)
Total partners' capital (deficit) 29,085,385 30,142,315
Total liabilities and partners'
capital (deficit) $99,047,654 $99,844,837
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Revenues
Rental income $ 1,944,590 $ 1,843,589
Other income 35,762 51,881
Total revenues 1,980,352 1,895,470
Expenses
General and administrative 491,043 456,515
General and administrative-
related parties (Note 2) 223,334 103,446
Repairs and maintenance 378,592 382,595
Operating 226,775 221,777
Taxes 175,098 178,560
Insurance 121,821 140,440
Financial 566,633 542,726
Depreciation and amortization 856,643 855,655
Total expenses 3,039,939 2,881,714
Loss before minority interest (1,059,587) (986,244)
Minority interest in loss of
subsidiary partnerships 2,657 3,020
Net loss $(1,056,930) $ (983,224)
Net loss-limited partners $(1,046,361) $ (973,392)
Number of BACs outstanding 58,928 58,928
Net loss per BAC $ (17.76) $ (16.52)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statement of Changes in
Partners' Capital (Deficit)
(Unaudited)
<CAPTION>
Limited General
Total Partners Partner
<S> <C> <C> <C>
Partners' capital
(deficit) -
April 1, 1999 $30,142,315 $30,364,841 $(222,526)
Net loss (1,056,930) (1,046,361) (10,569)
Partners' capital
(deficit) -
June 30, 1999 $29,085,385 $29,318,480 $(233,095)
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
<TABLE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(Unaudited)
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,056,930) $ (983,224)
Adjustments to reconcile net loss to
net cash provided by
operating activities:
Depreciation and amortization 856,643 855,655
Minority interest in loss of
subsidiaries (2,657) (3,020)
Increase (decrease) in accounts
payable and other liabilities 37,331 (182,047)
Increase in accrued interest 219,346 150,363
Decrease in cash held in escrow 78,969 209,510
Increase in other assets 121,964 28,712
Increase in due to local general
partners and affiliates 10,090 139
Decrease in due to local general
partners and affiliates (63,132) (39,948)
Increase in due to
general partner and affiliates 152,395 31,560
Total adjustments 1,410,949 1,050,924
Net cash provided by
operating activities 354,019 67,700
Cash flows from investing activities:
Improvements to property and
equipment (27,578) (39,999)
Increase in cash held
in escrow (216,393) (149,944)
Increase in due to local general
partners and affiliates 7,392 0
Net cash used in investing
activities (236,579) (189,943)
Cash flows from financing activities:
Principal payments of mortgage
notes (96,027) (94,817)
Increase in due to local
general partner and affiliates 0 2,944
Decrease in due to local
general partner and affiliates (4,991) 0
Decrease in capitalization
of consolidated subsidiaries
attributable to minority interest 0 30,000
Net cash used in financing
activities (101,018) (61,873)
Net increase (decrease) in cash and
cash equivalents 16,422 (184,116)
Cash and cash equivalents at
beginning of period 1,051,505 2,651,208
Cash and cash equivalents at
end of period $ 1,067,927 $ 2,467,092
See Accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 1999
(Unaudited)
Note 1 - General
Independence Tax Credit Plus L.P. II (a Delaware limited partner-
ship) (the "Partnership") was organized on February 11, 1992, and
commenced its public offering on January 19, 1993. The general
partner of the Partnership is Related Independence Associates
L.P., a Delaware limited partnership (the "General Partner").
The Partnership's business is to invest in other partnerships ("Lo-
cal Partnerships", "subsidiaries" or "subsidiary partnerships")
owning leveraged apartment complexes that are eligible for the
low-income housing tax credit ("Tax Credit") enacted in the Tax
Reform Act of 1986, some of which complexes may also be eligible
for the historic rehabilitation tax credit.
As of June 30, 1999, the Partnership has interests in fifteen Local
Partnerships. The Partnership does not intend to acquire addi-
tional properties. Through the rights of the Partnership and/or an
affiliate of the General Partner, which affiliate has a contractual
obligation to act on behalf of the Partnership, to remove the gen-
eral partner of the subsidiary partnerships and to approve certain
major operating and financial decisions, the Partnership has a
controlling financial interest in the subsidiary partnerships.
For financial reporting purposes, the Partnership's fiscal quarter
ends June 30. The Partnership's fiscal quarter ends June 30, in
order to allow adequate time for the subsidiary partnerships fi-
nancial statements to be prepared and consolidated. All subsidi-
aries have fiscal quarters ending March 31. Accounts of the sub-
sidiary partnerships have been adjusted for intercompany transac-
tions from April 1 through June 30.
All intercompany accounts and transactions with the subsidiary
partnerships have been eliminated in consolidation.
Increases (decreases) in the capitalization of consolidated subsidi-
aries attributable to minority interest arise from cash contributions
from and cash distributions to the minority interest partners.
Such losses aggregated approximately $6,000 and $6,000 for the
three months ended June 30, 1999 and 1998, respectively. The
Partnership's investment in each subsidiary is equal to the respec-
tive subsidiary's partners' equity less minority interest capital, if
any. Losses attributable to minority interests which exceed the
minority interests' investment in a subsidiary partnership have
been charged to the Partnership. In consolidation, all subsidiary
partnership losses are included in the Partnership's capital account
except for losses allocated to minority interest capital.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally ac-
cepted accounting principles have been omitted or condensed.
These condensed financial statements should be read in conjunc-
tion with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the period
ended March 31, 1999.
The books and records of the Partnership are maintained on the
accrual basis of accounting in accordance with generally accepted
accounting principles. In the opinion of the General Partner of the
Partnership, the accompanying unaudited financial statements
contain all adjustments (consisting only of normal recurring ad-
justments) necessary to present fairly the financial position of the
Partnership as of June 30, 1999 and the results of operations and
cash flows for the three months ended June 30, 1999 and 1998.
However, the operating results for the three months ended June
30, 1999 may not be indicative of the results for the year.
Note 2 - Related Party Transactions
An affiliate of the General Partner has a .01% interest as a special
limited partner in each of the Local Partnerships.
<TABLE>
The costs incurred to related parties for the three months ended
June 30, 1999 and 1998 were as follows:
<CAPTION>
Three Months Ended
June 30,
1999 1998
<S> <C> <C>
Partnership management fees (a) $ 136,500 $ 12,500
Expense reimbursement (b) 14,601 19,000
Local administrative fee (c) 8,000 8,000
Total general and administrative-
General Partner 159,101 39,500
Property management fees incurred
to affiliates of the subsidiary
partnerships' general partners (d) 64,233 63,946
Total general and administrative-
related parties $ 223,334 $ 103,446
</TABLE>
(a) The General Partner is entitled to receive a partnership man-
agement fee, after payment of all Partnership expenses, which
together with the annual local administrative fees will not exceed
a maximum of 0.5% per annum of invested assets (as defined in
the Partnership Agreement), for administering the affairs of the
Partnership. Subject to the foregoing limitation, the partnership
management fee will be determined by the General Partner in its
sole discretion based upon its review of the Partnership's invest-
ments. Unpaid partnership management fees for any year will be
accrued without interest and will be payable from working capital
reserves or to the extent of available funds after the Partnership
has made distributions to the limited partners of sale or refinanc-
ing proceeds equal to their original capital contributions plus a
10% priority return thereon (to the extent not theretofore paid out
of cash flow). Partnership management fees owed to the General
Partner amounting to approximately $795,000 and $659,000 were
accrued and unpaid as of June 30, 1999 and March 31, 1999, re-
spectively. Without the General Partners' advances and continued
accrual without payment of certain fees and expense reimburse-
ments, the Partnership will not be in a position to meet its obliga-
tions. The General Partners have continued advancing and al-
lowing the accrual without payment of these amounts but are
under no obligation to continue to do so.
(b) The Partnership reimburses the General Partner and its affili-
ates for actual Partnership operating expenses incurred by the
General Partner and its affiliates on the Partnership's behalf. The
amount of reimbursement from the Partnership is limited by the
provisions of the Partnership Agreement. Another affiliate of the
General Partner performs asset monitoring for the Partnership.
These services include site visits and evaluations of the subsidiary
partnerships' performance.
(c) Independence SLP L.P., a special limited partner of the sub-
sidiary partnerships, is entitled to receive a local administrative fee
of up to $5,000 per year from each subsidiary partnership.
(d) Property management fees incurred by the Local Partnerships
amounted to $149,175 and $149,187 for the three months ended
June 30, 1999 and 1998, respectively. Of these fees, $64,233 and
$63,946 were incurred to affiliates of the subsidiary partnerships'
general partners.
Note 3 - Commitments and Contingencies
There were no material changes and/or additions to disclosures
regarding the subsidiary partnerships which were included in the
Partnership's Annual Report on Form 10-K for the period ended
March 31, 1999.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Con-
dition and Results of Operations
Liquidity and Capital Resources
The Partnership's primary source of funds include interest earned
on proceeds from the offering which were invested in tax-exempt
money market instruments pending final payments to Local Part-
nerships and a working capital reserve and interest thereon. All
these sources of funds are available to meet obligations of the
Partnership.
As of June 30, 1999, the Partnership has approximately $890,000
remaining to be paid (including approximately $631,000 being
held in escrow) as certain benchmarks, such as occupancy level,
must be attained prior to the release of the funds. The Partnership
does not intend to acquire additional properties. During the three
months ended June 30, 1999, $0 was paid to Local Partnerships.
For the three months ended June 30, 1999, cash and cash equiva-
lents of the Partnership and its fifteen consolidated Local Partner-
ships increased approximately $16,000. This increase is attribut-
able to cash provided by operating activities ($354,000) and a net
increase in due to local general partners and affiliates for financing
and investing activities ($2,000) which exceeded improvements to
property and equipment ($28,000), an increase in cash held in
escrow from investing activities ($216,000) and principal payments
of mortgage notes ($96,000). Included in the adjustments to rec-
oncile the net loss to cash provided by operating activities is de-
preciation and amortization of approximately $857,000.
At June 30, 1999, there is approximately $143,000 in the working
capital reserves. For the three months ended June 30, 1999 and
1998, the Partnership did not receive any distributions. Manage-
ment anticipates receiving distributions in the future, although not
to a level sufficient to permit providing cash distributions to the
BACs holders.
Partnership management fees owed to the General Partner
amounting to approximately $795,000 and $659,000 were accrued
and unpaid as of June 30, 1999 and March 31, 1999, respectively.
Without the General Partners' advances and continued accrual
without payment of certain fees and expense reimbursements, the
Partnership will not be in a position to meet its obligations. The
General Partners have continued advancing and allowing the
accrual without payment of these amounts but are under no obli-
gation to continue to do so (see Note 2).
For a discussion of contingencies affecting certain Local Partner-
ships, see Note 3 to the financial statements. Since the maximum
loss the Partnership would be liable for is its net investment in the
respective Local Partnerships, the resolution of the existing con-
tingencies is not anticipated to impact future results of operations,
liquidity or financial condition in a material way. However, the
Partnership's loss of its investment in a Local Partnership will
eliminate the ability to generate future Tax Credits from such Lo-
cal Partnership and may also result in recapture of Tax Credits, if
the investment is lost before the expiration of the compliance pe-
riod.
Management is not aware of any trends or events, commitments
or uncertainties which have not otherwise been disclosed that will
or are likely to impact liquidity in a material way. Management
believes the only impact would be from laws that have not yet
been adopted. The portfolio is diversified by the location of the
properties around the United States so that if one area of the coun-
try is experiencing downturns in the economy, the remaining
properties in the portfolio may be experiencing upswings. How-
ever, the geographic diversification of the portfolio may not pro-
tect against a general downturn in the national economy. The
Partnership has fully invested the proceeds of its offering in fifteen
Local Partnerships, all of which fully have their Tax Credits in
place. The Tax Credits are attached to the project for a period of
ten years, and are transferable with the property during the re-
mainder of such ten-year period. If the General Partner deter-
mined that a sale of a property is warranted, the remaining Tax
Credits would transfer to the new owner, thereby adding value to
the property on the market, which are not included in the financial
statement carrying amount.
Results of Operations
The Partnership's results of operations for the three months ended
June 30, 1999 and 1998 consisted primarily of the results of the
Partnership's investment in fifteen consolidated Local Partner-
ships. The majority of Local Partnership income continues to be in
the form of rental income with the corresponding expenses being
divided among operations, depreciation and mortgage interest.
Rental income increased approximately 6% for the three months
ended June 30, 1999 as compared to the corresponding period in
1998 primarily due to rental rate increases as well as an increase in
occupancy at two Local Partnerships.
Other income decreased approximately $16,000 for the three
months ended June 30, 1999 as compared to the corresponding
period in 1998 primarily due to less interest earned at the Partner-
ship level due to lower cash and cash equivalent balances in 1999.
Total expenses, excluding general and administrative-related par-
ties and insurance remained fairly consistent with an increase of
approximately 2% for the three months ended June 30, 1999 as
compared to the corresponding period in 1998.
General and administrative-related parties increased approxi-
mately $120,000 for the three months ended June 30, 1999 as com-
pared to the corresponding period in 1998 primarily due to an
increase in Partnership management fees payable to the General
Partner.
Insurance decreased approximately $19,000 for the three months
ended June 30, 1999 as compared to the corresponding period in
1998 primarily due to a reduction in coverage at one Local Part-
nership and a reduction in the insurance premium at a second
Local Partnership.
Year 2000 Compliance
The Partnership utilizes the computer services of an affiliate of the
General Partner. The affiliate of the General Partner has upgraded
its computer information systems to be year 2000 compliant. The
most likely worst case scenario that the General Partner faces is
that computer operations will be suspended for a few days to a
week commencing on January 1, 2000. The Partnership contin-
gency plan is to have (i) a complete backup done on December 31,
1999 and (ii) both electronic and printed reports generated for all
critical data up to and including December 31, 1999.
In regard to third parties, the General Partner is in the process of
evaluating the potential adverse impact that could result from the
failure of material service providers to be year 2000 compliant. A
detailed survey and assessment was sent to material third parties
in the fourth quarter of 1998. The Partnership has received assur-
ances from a majority of the material service providers with which
it interacts that they have addressed the year 2000 issues and is
evaluating these assurances for their adequacy and accuracy. In
cases where the Partnership has not received assurances from
third parties, it is initiating further mail and/or phone correspon-
dence. The Partnership relies heavily on third parties and is vul-
nerable to the failures of third parties to address their year 2000
issues. There can be no assurance given that the third parties will
adequately address their year 2000 issues.
Item 3. Quantitative and Qualitative Disclosures about Market
Risk
None
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(3A) Agreement of Limited Partnership of Inde-
pendence Tax Credit Plus L.P. II as adopted on February 11, 1992*
(3B) Form of Amended and Restated Agreement of
Limited Partnership of Independence Tax Credit Plus L.P. II, at-
tached to the Prospectus as Exhibit A**
(3C) Certificate of Limited Partnership of Independ-
ence Tax Credit Plus L.P. II as filed on February 11, 1992*
(10A) Form of Subscription Agreement attached to
the Prospectus as Exhibit B**
(10B) Escrow Agreement between Independence Tax
Credit Plus L.P. II and Bankers Trust Company*
(10C) Form of Purchase and Sales Agreement per-
taining to the Partnership's acquisition of Local Partnership Inter-
ests*
(10D) Form of Amended and Restated Agreement of
Limited Partnership of Local Partnerships*
(27) Financial Data Schedule (filed herewith).
*Incorporated herein as an exhibit by reference to
exhibits filed with Post-Effective Amendment No. 4 to the Regis-
tration Statement on Form S-11 (Registration No. 33-37704)
**Incorporated herein as an exhibit by reference to
exhibits filed with Post-Effective Amendment No. 8 to the Regis-
tration Statement on Form S-11 (Registration No. 33-37704)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quar-
ter.
<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.
INDEPENDENCE TAX CREDIT PLUS L.P. II
(Registrant)
By: RELATED INDEPENDENCE
ASSOCIATES L.P., General Partner
By: RELATED INDEPENDENCE
ASSOCIATES INC., General Partner
Date: August 3, 1999
By: /s/ Alan P. Hirmes
Alan P. Hirmes,
Vice President
(principal financial officer)
Date: August 3, 1999
By: /s/ Glenn F. Hopps
Glenn F. Hopps,
Treasurer
(principal accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial information extracted
from the financial statements for Independence Tax Credit Plus
L.P. II and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<CIK> 0000907045
<NAME> Independence Tax Credit Plus L.P. II
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-2000
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 3,692,461
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 635,491
<PP&E> 107,993,890
<DEPRECIATION> 13,675,432
<TOTAL-ASSETS> 99,047,654
<CURRENT-LIABILITIES> 10,803,118
<BONDS> 59,009,575
0
0
<COMMON> 0
<OTHER-SE> 29,234,961
<TOTAL-LIABILITY-AND-EQUITY> 99,047,654
<SALES> 0
<TOTAL-REVENUES> 1,980,352
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2,473,306
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 566,633
<INCOME-PRETAX> (1,059,587)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,059,587)
<EPS-BASIC> (17.76)
<EPS-DILUTED> 0
</TABLE>
