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
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EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1998
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OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
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EXCHANGE ACT OF 1934.
For the transition period from to
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Commission file number 0-10225
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BALCOR PENSION INVESTORS-II
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(Exact name of registrant as specified in its charter)
Illinois 36-3114027
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 Waukegan Road
Bannockburn, Illinois 60015
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847) 267-1600
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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
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BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
BALANCE SHEETS
June 30, 1998 and December 31, 1997
(Unaudited)
ASSETS
1998 1997
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Cash and cash equivalents $ 1,280,699 $ 2,007,987
Cash and cash equivalents - Early Investment
Incentive Fund 3,833,584 3,659,687
Accounts and accrued interest receivable 21,984 37,089
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$ 5,136,267 $ 5,704,763
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LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 2,733 $ 24,414
Due to affiliates 39,930 27,638
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Total liabilities 42,663 52,052
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Commitments and contingencies
Limited Partners' capital (85,010
Interests issued) 10,109,211 10,617,808
Less Interests held by Early Investment
Incentive Fund (8,136 in 1998 and 1997) (5,015,607) (5,015,607)
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5,093,604 5,602,201
General Partner's capital None 50,510
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Total partners' capital 5,093,604 5,652,711
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$ 5,136,267 $ 5,704,763
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENT OF INCOME AND EXPENSES
for the six months ended June 30, 1998 and 1997
(Unaudited)
1998 1997
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Interest on short-term investments $ 136,212 $ 232,921
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Total income 136,212 232,921
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Expenses:
Loss from operations of real
estate held for sale 172,168
Administrative 96,703 169,554
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Total expenses 96,703 341,722
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Net income(loss) $ 39,509 $ (108,801)
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Net loss allocated to
General Partner None $ (8,160)
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Net income (loss) allocated to
Limited Partners $ 39,509 $ (100,641)
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Net income (loss) per average number of
Limited Partnership Interests
outstanding (76,874 in 1998 and 1997)
-Basic and Diluted $ 0.51 $ (1.31)
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Distributions to General Partner $ 50,510 $ 336,144
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Settlement Distribution to Limited Partners None $ 13,828
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Distributions to Limited Partners $ 548,106 $ 13,329,966
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Distributions per Limited Partnership
Interest outstanding $ 7.13 $ 173.40
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENT OF INCOME AND EXPENSES
for the quarters ended June 30, 1998 and 1997
(Unaudited)
1998 1997
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Interest on short-term investments $ 66,754 $ 81,714
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Total income 66,754 81,714
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Expenses:
Loss from operations of real
estate held for sale 67,554
Administrative 47,654 63,286
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Total expenses 47,654 130,840
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Net income(loss) $ 19,100 $ (49,126)
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Net loss allocated to
General Partner None $ (3,684)
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Net income (loss) allocated to
Limited Partners $ 19,100 $ (45,442)
============== ==============
Net income (loss) per average number of
Limited Partnership Interests
outstanding (76,874 in 1998 and 1997)
-Basic and Diluted $ 0.24 $ (0.59)
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Distributions to General Partner None $ 297,181
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Distributions to Limited Partners None $ 4,066,641
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Distributions per Limited Partnership
Interest outstanding $ None $ 52.90
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS
for the six months ended June 30, 1998 and 1997
(Unaudited)
1998 1997
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Operating activities:
Net income (loss) $ 39,509 $ (108,801)
Adjustments to reconcile net income(loss)
to net cash provided by operating
activities:
Net change in:
Accounts and accrued interest
receivable 15,105 584,468
Accounts payable (21,681) (101,649)
Due to affiliates 12,292 (12,288)
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Net cash provided by operating activities 45,225 361,730
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Financing activities:
Distributions to Limited Partners (548,106) (13,343,794)
Distributions to General Partner (50,510) (336,144)
Contribution by General Partner 38,963
Increase in cash and cash
equivalents - Early Investment
Incentive Fund (173,897) (1,595,896)
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Net cash used in financing activities (772,513) (15,236,871)
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Net change in cash and cash equivalents (727,288) (14,875,141)
Cash and cash equivalents
at beginning of year 2,007,987 16,852,472
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Cash and cash equivalents at end of period $ 1,280,699 $ 1,977,331
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The accompanying notes are an integral part of the financial statements.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) In the opinion of management, all adjustments necessary for a fair
presentation have been made to the accompanying financial statements for the
six months and quarter ended June 30, 1998, and all such adjustments are of a
normal and recurring nature.
(b) For financial statement purposes, the capital accounts of the General
Partner and Limited Partners have been adjusted to appropriately reflect their
remaining economic interests as provided for in the Partnership Agreement.
2. Partnership Termination:
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its remaining five properties and loan
receivable during 1996. The Partnership has retained a portion of the cash from
the property sales to satisfy obligations of the Partnership as well as
establish a reserve for contingencies. The timing of the termination of the
Partnership and final distribution of cash will depend upon the nature and
extent of liabilities and contingencies which exist or may arise. Such
contingencies may include legal and other fees and costs stemming from
litigation involving the Partnership including, but not limited to, the lawsuit
discussed in Note 4 of Notes to Financial Statements. Due to this litigation,
the Partnership will not be dissolved and reserves will be held by the
Partnership until the conclusion of all contingencies. There can be no
assurances as to the time frame for conclusion of these contingencies.
3. Transactions with Affiliates:
Fees and expenses, paid and payable by the Partnership to affiliates during the
six months and quarter ended June 30, 1998 were:
Paid
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Six Months Quarter Payable
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Reimbursement of expenses to
the General Partner, at cost $ 14,505 $ 6,403 $ 39,930
The General Partner made a contribution of $38,963 during 1997 in connection
with the settlement of certain litigation.
4. Contingency:
The Partnership is currently involved in a lawsuit whereby the Partnership, the
<PAGE>
General Partner and certain third parties have been named as defendants seeking
damages relating to tender offers to purchase interests in the Partnership and
nine affiliated partnerships initiated by the third party defendants in 1996.
The defendants continue to vigorously contest this action. The action has been
dismissed with prejudice and plaintiffs have filed an appeal, which is pending.
It is not determinable at this time whether or not an unfavorable decision in
this action would have a material adverse impact on the financial position of
the Partnership. The Partnership believes it has meritorious defenses to
contest the claims.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
MANAGEMENT'S DISCUSSION AND ANALYSIS
Balcor Pension Investors-II (the "Partnership") is a limited partnership formed
in 1981 to invest in wrap-around mortgage loans and, to a lesser extent, in
other junior mortgage loans and first mortgage loans. The Partnership raised
$85,010,000 through the sale of Limited Partnership Interests and used these
proceeds to originally fund thirty-three loans. Proceeds from the loan
repayments were used to fund three additional mortgage loans. As of June 30,
1998, the Partnership has no loans outstanding or properties remaining in its
portfolio.
Inasmuch as the management's discussion and analysis below relates primarily to
the time period since the end of the last fiscal year, investors are encouraged
to review the financial statements and the management's discussion and analysis
contained in the annual report for 1997 for a more complete understanding of
the Partnership's financial position.
Operations
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Summary of Operations
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The Partnership recognized net income during the six months and quarter ended
June 30, 1998 as compared to a net loss for the same periods in 1997 primarily
due to the payment in 1997 of additional expenditures related to certain of the
Partnership's properties sold in 1996. Further discussion of the Partnership's
operations is summarized below.
1998 Compared to 1997
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Unless otherwise noted, discussions of fluctuations between 1998 and 1997 refer
to both the six months and quarters ended June 30, 1998 and 1997.
Due to higher average cash balances in 1997 as a result of the investment of
proceeds received in connection with the 1996 property and loan sales prior to
distribution to Limited Partners in 1997, interest income on short-term
investments was higher during 1997 as compared to 1998.
During 1997, the Partnership paid additional expenditures related to certain of
the properties sold during 1996, which resulted in a loss from operations of
real estate held for sale in 1997.
During February 1997, the General Partner made a payment relating to the
settlement of certain litigation to original investors who previously sold
their Interests in the Partnership, which was accounted for as an
administrative expense. In addition, the Partnership incurred lower accounting
<PAGE>
and professional fees during 1998 as compared to 1997. As a result
administrative expenses decreased during 1998 as compared to 1997.
Liquidity and Capital Resources
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The cash position of the Partnership decreased by approximately $727,000 as of
June 30, 1998 when compared to December 31, 1997 primarily due to the
distribution made to Limited Partners in January 1998 from remaining available
Cash Flow reserves. The Partnership generated cash flow totaling approximately
$45,000 from its operating activities primarily as a result of the interest
income earned on its short-term investments, net of the payment of
administrative expenses. The Partnership used cash of approximately $772,000 to
fund its financing activities which consisted of the payment of distributions
to the Partners and an increase in cash principally from interest income earned
in the Early Investment Incentive Fund.
The Partnership Agreement provides for the dissolution of the Partnership upon
the occurrence of certain events, including the disposition of all interests in
real estate. The Partnership sold its remaining five properties and one loan
receivable during 1996. The Partnership has retained a portion of the cash from
these sales to satisfy obligations of the Partnership as well as establish a
reserve for contingencies. The timing of the termination of the Partnership and
final distribution of cash will depend upon the nature and extent of
liabilities and contingencies which exist or may arise. Such contingencies may
include legal and other fees and costs stemming from litigation involving the
Partnership including, but not limited to, the lawsuit discussed in Note 4 of
Notes to the Financial Statements. Due to this litigation, the Partnership will
not be dissolved and the reserves will be held by the Partnership until the
conclusion of all contingencies. There can be no assurances as to the time
frame for conclusion of these contingencies.
In February 1997, the Partnership discontinued the repurchase of Interests from
Limited Partners. As of June 30, 1998, there was 8,136 Interests and cash of
$3,833,584 held in the Early Investment Incentive Fund.
To date, Limited Partners have received distributions totaling $1,750.21 per
$1,000 Interest. Of this amount, $1,101.08 represents Cash Flow from operations
and $649.13 represents a return of Original Capital. No additional
distributions are anticipated to be made prior to the termination of the
Partnership. However, after paying final partnership expenses, any remaining
cash reserves will be distributed. Amounts allocated to the Early Investment
Incentive Fund will also be distributed at that time.
<PAGE>
BALCOR PENSION INVESTORS-II
(An Illinois Limited Partnership)
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits:
(4) Form of Subscription Agreement previously filed as Exhibit 4(a) to
Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated
May 7, 1981 (Registration No. 2-70841) and Form of Confirmation regarding
Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report
on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-10225)
is incorporated herein by reference.
(10) Material Contracts:
(a)(i) Agreement of Sale and attachment thereto and Amendment to Agreement of
Sale and Escrow Agreement relating to the sale of Parkway Commerce Center, Fort
Lauderdale, Florida, previously filed as Exhibits 2(a) and 2(b) to the
Registrant's Current Report on Form 8-K dated August 13, 1996, is incorporated
herein by reference.
(ii) Second Amendment to Agreement of Sale and Escrow Agreement relating to the
sale of Parkway Commerce Center, Fort Lauderdale, Florida, previously filed as
Exhibit (99) to the Registrant's Current Report on Form 8-K dated September 17,
1996, is incorporated herein by reference.
(b)(i) Agreement of Sale and attachment thereto and First Amendment to
Agreement of Sale relating to the sale of Hollowbrook Apartments, Orlando,
Florida, previously filed as Exhibits 2(a) and 2(b) to the Registrant's Current
Report on Form 8-K dated September 17, 1996, are incorporated herein by
reference.
(ii) Letter Agreement relating to the sale of Hollowbrook Apartments, Orlando,
Florida, previously filed as Exhibit (99) to the Registrant's Current Report on
Form 8-K dated October 14, 1996, is incorporated herein by reference.
(c)(i) Agreement of Sale and attachment thereto relating to the sale of
Sherwood Acres Apartments, Phases I and II, Baton Rouge, Louisiana, previously
filed as Exhibit (2) to the Registrant's Current Report on Form 8-K dated
October 14, 1996, is incorporated herein by reference.
(ii) First Amendment to Agreement of Sale relating to the sale of Sherwood
Acres Apartments, Phases I and II, Baton Rouge, Louisiana, previously filed as
Exhibit (10)(v)(b) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, is incorporated herein by reference.
(iii) Second Amendment to Agreement of Sale relating to the sale of Sherwood
<PAGE>
Acres Apartments, Phases I and II, Baton Rouge, Louisiana, previously filed as
Exhibit (10)(v)(c) to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for the six months ending June
30, 1998 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter
ended June 30, 1998.
<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.
BALCOR PENSION INVESTORS-II
By: /s/ Thomas E. Meador
-----------------------------
Thomas E. Meador
President and Chief Executive Officer
(Principal Executive Officer) of Balcor
Mortgage Advisors, the General Partner
By: /s/ Jayne A. Kosik
-----------------------------
Jayne A. Kosik
Senior Managing Director and Chief Financial
Officer (Principal Accounting Officer) of
Balcor Mortgage Advisors, the General
Partner
Date: August 8, 1998
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<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 5114
<SECURITIES> 0
<RECEIVABLES> 22
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5136
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5136
<CURRENT-LIABILITIES> 43
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 5093
<TOTAL-LIABILITY-AND-EQUITY> 5136
<SALES> 0
<TOTAL-REVENUES> 136
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 97
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 39
<INCOME-TAX> 0
<INCOME-CONTINUING> 39
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
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