<PAGE>
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, 2000
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 Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
<PAGE>
PART I - Financial Information
Item 1. Financial Statements
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
========== ==========
June 30, March 31,
2000 2000
---------- ----------
<S> <C> <C>
ASSETS
Property and equipment at cost,
net of accumulated depreciation
of $17,106,180 and $16,288,288,
respectively $91,044,969 $91,850,520
Cash and cash equivalents 856,041 971,474
Cash held in escrow 3,002,082 2,823,313
Deferred costs, net of accumulated
amortization of $114,779
and $107,534, respectively 286,232 293,477
Other assets 579,142 695,743
----------- -----------
Total assets $95,768,466 $96,634,527
=========== ===========
</TABLE>
2
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Balance Sheets
(Unaudited)
(continued)
<TABLE>
<CAPTION>
========== ==========
June 30, March 31,
2000 2000
---------- ----------
<S> <C> <C>
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Liabilities:
Mortgage notes payable $58,644,027 $58,753,322
Accounts payable and other
liabilities 1,530,559 1,427,263
Accrued interest 7,793,460 7,759,548
Due to local general partners and
affiliates 1,974,812 1,878,270
Due to general partner and
affiliates 1,658,237 1,520,461
----------- -----------
Total liabilities 71,601,095 71,338,864
---------- ----------
Minority interest 65,002 68,012
----------- -----------
Commitments and contingencies (Note 3)
Partners' capital (deficit):
Limited partners (58,928 BACs
issued and outstanding) 24,385,295 25,499,324
General partner (282,926) (271,673)
----------- -----------
Total partners' capital (deficit) 24,102,369 25,227,651
----------- -----------
Total liabilities and partners'
capital (deficit) $95,768,466 $96,634,527
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
===================
Three Months Ended
June 30,
-------------------
2000 1999
-------------------
<S> <C> <C>
Revenues
Rental income $ 2,029,524 $ 1,944,590
Other income 68,409 35,762
--------- ---------
Total revenues 2,097,933 1,980,352
--------- ---------
Expenses
General and administrative 570,067 491,043
General and administrative-
related parties (Note 2) 237,502 223,334
Repairs and maintenance 440,022 378,592
Operating 274,368 226,775
Taxes 174,324 175,098
Insurance 116,829 121,821
Financial 587,976 566,633
Depreciation and amortization 825,137 856,643
---------- ----------
Total expenses 3,226,225 3,039,939
---------- ----------
Loss before minority interest (1,128,292) (1,059,587)
Minority interest in loss of
subsidiary partnerships 3,010 2,657
---------- ----------
Net loss $(1,125,282) $(1,056,930)
========== ==========
Net loss-limited partners $(1,114,029) $(1,046,361)
========== ==========
Number of BACs outstanding 58,928 58,928
========== ==========
Net loss per BAC $ (18.90) $ (17.76)
========== ==========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statement of Changes in
Partners' Capital (Deficit)
(Unaudited)
<TABLE>
<CAPTION>
================================
Limited General
Total Partners Partner
--------------------------------
<S> <C> <C> <C>
Partners' capital
(deficit) -
April 1, 2000 $25,227,651 $25,499,324 $(271,673)
Net loss (1,125,282) (1,114,029) (11,253)
----------- ----------- ---------
Partners' capital
(deficit) -
June 30, 2000 $24,102,369 $24,385,295 $(282,926)
========== ========== ========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(Unaudited)
<TABLE>
<CAPTION>
==================
Three Months Ended
June 30,
------------------
2000 1999
------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,125,282) $(1,056,930)
---------- ----------
Adjustments to reconcile net loss to
net cash provided by
operating activities:
Depreciation and amortization 825,137 856,643
Minority interest in loss of
subsidiaries (3,010) (2,657)
Increase in accounts payable and
other liabilities 103,296 37,331
Increase in accrued interest 33,912 219,346
Decrease in cash held in escrow 92,610 78,969
Decrease in other assets 116,601 121,964
Increase in due to local general
partners and affiliates 20,739 10,090
Decrease in due to local general
partners and affiliates (59,854) (63,132)
Increase in due to
general partner and affiliates 137,776 152,395
---------- ----------
Total adjustments 1,267,207 1,410,949
--------- ---------
Net cash provided by
operating activities 141,925 354,019
---------- ----------
Cash flows from investing activities:
Improvements to property and
equipment (12,341) (27,578)
Increase in cash held
in escrow (271,379) (216,393)
Increase in due to local general
partners and affiliates 145,042 7,392
---------- ----------
Net cash used in investing activities (138,678) (236,579)
---------- ----------
</TABLE>
6
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Decrease in Cash and Cash Equivalents
(Unaudited)
(continued)
<TABLE>
<CAPTION>
==================
Three Months Ended
June 30,
------------------
2000 1999
------------------
<S> <C> <C>
Cash flows from financing activities:
Principal payments of mortgage
notes (109,295) (96,027)
Decrease in due to local
general partner and affiliates (9,385) (4,991)
---------- ---------
Net cash used in financing activities (118,680) (101,018)
---------- ---------
Net (decrease) increase in cash and
cash equivalents (115,433) 16,422
Cash and cash equivalents at
beginning of period 971,474 1,051,505
---------- ---------
Cash and cash equivalents at
end of period $ 856,041 $1,067,927
========== =========
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
7
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
Note 1 - General
The consolidated financial statements include the accounts of Independence Tax
Credit Plus L.P. II (the "Partnership") and 15 other limited partnerships
("subsidiary partnerships", "subsidiaries" or "Local Partnerships") owning
leveraged apartment complexes that are eligible for the low-income housing tax
credit. Some of such apartment complexes may also be eligible for the
rehabilitation investment credit for certified historic structures. The general
partner of the Partnership is Related Independence Associates L.P., a Delaware
limited partnership (the "General Partner"). 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
general partner of the subsidiary local 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 financial statements to be prepared and
consolidated. All subsidiaries have fiscal quarters ending March 31. Accounts of
the subsidiary partnerships have been adjusted for intercompany transactions
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 subsidiaries
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, 2000 and 1999, respectively. The Partnership's investment in each
subsidiary is equal to the respective 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.
8
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted or condensed. These condensed financial statements should be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K for the period ended March 31,
2000.
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 adjustments) necessary to present fairly the financial position of the
Partnership as of June 30, 2000 and the results of operations and cash flows for
the three months ended June 30, 2000 and 1999. However, the operating results
for the three months ended June 30, 2000 may not be indicative of the results
for the year.
9
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
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.
The costs incurred to related parties for the three months ended June 30, 2000
and 1999 were as follows:
<TABLE>
<CAPTION>
Three Months Ended
June 30,
------------------
2000 1999
------------------
<S> <C> <C>
Partnership management fees (a) $136,500 $136,500
Expense reimbursement (b) 26,462 14,601
Local administrative fee (c) 6,500 8,000
Total general and administrative- ------- -------
General Partner 169,462 159,101
Property management fees incurred ------- -------
to affiliates of the subsidiary
partnerships' general partners (d) 68,040 64,233
Total general and administrative- ------- -------
related parties $237,502 $223,334
======= =======
</TABLE>
(a) The General Partner is entitled to receive a partnership management 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 investments. 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
refinancing 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 $1,341,000 and $1,205,000 were accrued and unpaid as of June 30,
2000 and March 31, 2000, respectively. Without the General Partner's advances
and continued accrual without payment of certain fees and expense
reimbursements, the Partnership will not be in a
10
<PAGE>
INDEPENDENCE TAX CREDIT PLUS L.P. II
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
June 30, 2000
(Unaudited)
position to meet its obligations. The General Partner has continued advancing
and allowing the accrual without payment of these amounts but is under no
obligation to continue to do so.
(b) The Partnership reimburses the General Partner and its affiliates 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 subsidiary
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
$150,584 and $149,175 for the three months ended June 30, 2000 and 1999,
respectively. Of these fees, $68,040 and $64,233 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, 2000.
11
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's primary source of funds include working capital reserves,
interest earned on working capital reserves and distributions received from the
Local Partnerships. However, none of these sources provides a material amount of
funds.
As of June 30, 2000, the Partnership has invested all of its net proceeds in
fifteen Local Partnerships. Approximately $890,000 of the purchase price remains
to be paid to the Local Partnerships (including approximately $631,000 being
held in escrow).
For the three months ended June 30, 2000, cash and cash equivalents of the
Partnership and its fifteen consolidated Local Partnerships decreased
approximately $115,000. This decrease is due to an increase in acquisitions of
property and equipment ($12,000), repayments of mortgage loans ($109,000) and an
increase in cash held in escrow ($271,000) which exceeded cash flows provided by
operating activities ($142,000) and a net increase in due to local general
partners and affiliates relating to investing and financing activities
($136,000). Included in the adjustments to reconcile the net loss to cash
provided by operating activities is depreciation and amortization ($825,000).
At June 30, 2000, there is approximately $190,000 in the working capital
reserves. For the three months ended June 30, 2000 and 1999, the Partnership did
not receive any distributions. Management 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 $1,341,000 and $1,205,000 were accrued and unpaid as of June 30,
2000 and March 31, 2000, respectively. Without the General Partner's 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 Partner has continued advancing and allowing the
accrual without payment of these amounts but is under no obligation to continue
to do so (see Note 2).
For a discussion of contingencies affecting certain Local Partnerships, 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 contingencies is not anticipated to impact future
results of operations, liquidity or financial
12
<PAGE>
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 Local Partnership and may also result in recapture of Tax Credits, if
the investment is lost before the expiration of the compliance period.
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
country is experiencing downturns in the economy, the remaining properties in
the portfolio may be experiencing upswings. However, the geographic
diversification of the portfolio may not protect 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 remainder of such
ten-year period. If the General Partner determined 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, 2000
and 1999 consisted primarily of the results of the Partnership's investment in
fifteen consolidated Local Partnerships. 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 4% for the three months ended June 30,
2000 as compared to the corresponding period in 1999 primarily due to rental
rate increases.
Other income increased approximately $33,000 for the three months ended June 30,
2000 as compared to the corresponding period in 1999 primarily due to an
increase in laundry fee income received at one Local Partnership in 2000.
Total expenses, excluding general and administrative, repairs and maintenance
and operating remained fairly consistent with a decrease of less than 1% for the
three months ended June 30, 2000 as compared to the corresponding period in
1999.
13
<PAGE>
General and administrative increased approximately $79,000 for the three months
ended June 30, 2000 as compared to the corresponding period in 1999 primarily
due to an increase in officers salaries at one Local Partnership and small
increases at two other Local Partnerships and an increase in administration
expenses at the Partnership level.
Repairs and maintenance increased approximately $61,000 for the three months
ended June 30, 2000 as compared to the corresponding period in 1999 primarily
due to interior painting and apartment refurbishments at one Local Partnership.
Operating increased approximately $48,000 for the three months ended June 30,
2000 as compared to the corresponding period in 1999 primarily due to
underaccrual of meter charges by one Local Partnership in 1999, as well as small
increases at three other Local Partnerships.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None
14
<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 Independence 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, attached to the Prospectus as Exhibit A**
(3C) Certificate of Limited Partnership of Independence 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 pertaining to the
Partnership's acquisition of Local Partnership Interests*
(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 Registration Statement on Form S-11
(Registration No. 33-37704)
15
<PAGE>
**Incorporated herein as an exhibit by reference to exhibits filed with
Post-Effective Amendment No. 8 to the Registration 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 quarter.
16
<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: July 26, 2000
By:/s/Alan P. Hirmes
------------------
Alan P. Hirmes,
Senior Vice President
(principal financial officer)
Date: July 26, 2000
By:/s/Glenn F. Hopps
-----------------
Glenn F. Hopps,
Treasurer
(principal accounting officer)
