FORM 10-KSB--ANNUAL OR TRANSITIONAL REPORT UNDER
SECTION 13 OR 15(D)
FORM 10-KSB
[X] ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [NO FEE REQUIRED]
For the transition period to
Commission file number 0-15758
JACQUES-MILLER INCOME FUND L.P.-II
(Name of small business issuer in its charter)
Delaware 62-1244325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
102 Woodmont Boulevard, Suite 420
Nashville, Tennessee 37205
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (864) 239-1000
Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Units of Limited Partnership Interest
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 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
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year. $130,000
State the aggregate market value of the voting partnership interests by non-
affiliates computed by reference to the price at which the partnership interests
were sold, or the average bid and asked prices of such partnership interests, as
of December 31, 1998. No market exists for the limited partnership interests of
the Registrant, and, therefore, no aggregate market value can be determined.
DOCUMENTS INCORPORATED BY REFERENCE
None
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Jacques-Miller Income Fund L.P.-II ("Registrant" or "Partnership") is a Delaware
limited partnership formed in July 1985 for the purpose of making first mortgage
loans, wrap-around mortgage loans and other loans secured directly or indirectly
by interests in real property substantially all of which may be made to
affiliated public and private real estate limited partnerships. The Partnership
Agreement provides that the Partnership is to terminate on December 31, 2028
unless terminated prior to such date. The Registrant has made loans providing,
generally, for repayment of principal between 8 and 15 years after funding.
Substantially all of the assets of Jacques-Miller, Inc. (the "Corporate General
Partner"), a Tennessee corporation, were acquired by an affiliate of Insignia
Financial Group, Inc. ("Insignia") in December 1991, however, such assets
purchased did not include the general partner interest of the Partnership. On
October 1, 1998, Insignia merged into Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). On December 10, 1998,
AIMCO entered into an agreement with the sole shareholder of the Corporate
General Partner pursuant to which AIMCO was granted the right to elect the
directors of the Corporate General Partner. In connection with this
transaction, the then current officer and director of the Corporate General
Partner resigned and AIMCO appointed a new director who, in turn, appointed new
officers of the Corporate General Partner. The Corporate General Partner does
not believe that this transaction will have a material effect on the affairs and
operations of the Partnership. See "Item 9, Directors, Executive Officers,
Promoters and Control Persons; Compliance with Section 16(a) of the Exchange
Act".
The offering of the Registrant's limited partnership interests (the "Interests")
terminated on October 15, 1987. The Registrant received gross proceeds from the
offering of approximately $12,390,000 and net proceeds of approximately
$11,200,000.
See "Item 6. Management's Discussion and Analysis or Plan of Operation" for
information with respect to the Registrant's current note holdings.
Mansion Hill Apartments in Chattanooga, Tennessee, and Kingswood North
Apartments in Norcross, Georgia, were acquired during 1990 through foreclosure
proceedings. During 1991, these properties were sold. During 1991, the
Registrant acquired La Plaza Apartments ("La Plaza") through similar foreclosure
proceedings and during 1992, Willow Oaks Apartments ("Willow Oaks") and Brighton
Way Apartments ("Brighton Way") were foreclosed upon by separate limited
partnerships of which the Registrant is the sole limited partner. On February
1, 1993, Brighton Way was sold, on January 17, 1995, Willow Oaks was sold, and
on May 24, 1996, La Plaza was sold. The Partnership's sole remaining assets are
four notes receivable.
Effective June 30, 1989, Jacques-Miller, Inc. sold the economic benefits and
economic rights in Jacques-Miller sponsored limited partnerships, including the
Registrant, to Balanced Holdings Partners, L.P., an affiliate.
The Registrant has no employees. Management and administrative services are
performed by an affiliate of the Corporate General Partner, pursuant to
management and administrative agreements.
Tender Offer
It is expected that in the near future an affiliate of AIMCO will make a tender
offer to purchase up to 607.5 limited partnership units (4.9% of the total
units). The terms of this expected offer have not yet been determined.
ITEM 2. DESCRIPTION OF PROPERTIES
The Partnership no longer owns any investments in real estate.
ITEM 3. LEGAL PROCEEDINGS
The Partnership is not aware of any pending or outstanding litigation that is
not of a routine nature in the ordinary course of business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant did not submit any matter to a vote of its security holders
during the quarter ended December 31, 1998.
PART II
ITEM 5. MARKET FOR PARTNERSHIP EQUITY AND RELATED PARTNER MATTERS
There is no established market for the Units and it is not anticipated that any
will develop in the foreseeable future. As of December 31, 1998, there were
1,221 holders of record owning an aggregate of 12,400 Units.
Pursuant to the terms of the Partnership Agreement, there are restrictions on
the ability of the Limited Partners to transfer their Units. In all cases the
Corporate General Partner must consent to any transfer.
No cash distributions were paid during the years ended December 31, 1998 or
1997. There are no material restrictions upon the Registrant's present or future
ability to make distributions in accordance with the provisions of the
Registrant's Partnership Agreement.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this Form 10-KSB contain certain forward-looking
statements and involve risks and uncertainties (including changing market
conditions, competitive and regulatory matters, etc.) detailed in the disclosure
contained in this Form 10-KSB and the other filings with the Securities and
Exchange Commission made by the Registrant from time to time. The discussion of
the Registrant's business and results of operations, including forward-looking
statements pertaining to such matters, does not take into account the effects of
any changes to the Registrant's business and results of operation. Accordingly,
actual results could differ materially from those projected in the forward-
looking statements as a result of a number of factors, including those
identified herein.
This item should be read in conjunction with the consolidated financial
statements and other items contained elsewhere in this report.
Results of Operations
The Partnership's net income for the year ended December 31, 1998 was
approximately $48,000 compared to a net loss of approximately $16,000 for the
year ended December 31, 1997. The increase in net income is attributable to an
increase in revenues which was offset by an increase in expenses. The increase
in revenues is directly attributable to the settlement of the notes receivable
from Woodlawn Village and Tall Oaks. Expenses increased as a result of an
increase in general and administrative expenses related to the payment of a
legal retainer in 1998 to cover the cost of collecting the remaining notes
receivable not settled during 1998. The Partnership currently holds four notes
from affiliated partnerships which require payments from excess cash flow (see
discussion below).
Liquidity and Capital Resources
At December 31, 1998, the Partnership held cash and cash equivalents of
approximately $774,000 compared to approximately $789,000 at December 31, 1997.
The net decrease in cash and cash equivalents for the year ended December 31,
1998 is approximately $15,000 due to net cash used in operating activities.
During 1998 the Partnership agreed to accept a payment of approximately $70,000
in full satisfaction of the note receivable from Woodlawn Village. The
outstanding balance of this note receivable totaled approximately $501,000,
including accrued interest, and was fully reserved. The Corporate General
Partner anticipates receipt of the settlement in April 1999. Additionally in
1998, the Partnership agreed to accept a payment of approximately $28,000 in
full settlement of the Tall Oaks note receivable. The outstanding balance for
this note receivable totaled approximately $682,000, including accrued interest,
and was fully reserved. Income was recorded as a result of the reduction in the
allowance on the notes and is recorded as recovery of bad debt on the 1998
consolidated statement of operations. During 1996 the Partnership agreed to
accept a payment of approximately $78,000, which was received in 1997, as full
satisfaction of two notes receivable on Governour's Square.
The Partnership holds four notes receivable at December 31, 1998, totaling
approximately $1,023,000 with approximately $1,174,000 of related accrued
interest, all of which is fully reserved except for approximately $70,000
expected to be collected on the Woodlawn Village Note. Included in the
provision for uncollectibles is approximately $981,000 of deferred interest
revenue. Additionally, these four notes are due from related partnerships.
These four promissory notes are unsecured by the related partnerships and are
subordinated to the underlying mortgages of the respective partnerships.
One note in the amount of approximately $413,000 with accrued interest due in
the amount of approximately $318,000, the "Catawba Club Note" matured
November 1, 1997. A second note in the amount of approximately $455,000 with
accrued interest due in the amount of approximately $358,000, the "Quail Run
Note," matured June 1, 1997. A third note in the amount of $70,000 with accrued
interest due in the amount of approximately $497,000, the "Highridge Note",
matured May 1, 1996. A fourth note in the amount of $86,000, "The Woodlawn
Village Note", matured January 1, 1998 and carries no accrued interest due to
the settlement discussed above. All four of these notes were in default at
December 31, 1998. The Partnership is currently seeking to receive full payment
and resolution on the three remaining notes for which no settlement has been
reached. Payments on these notes are restricted to excess cash flow after
payment of the first and second mortgages and are dependent on excess cash flow
from the properties or sales proceeds. No payments were received in 1998 or
1997.
No distributions were made during the years ended December 31, 1998 and 1997.
Future cash distributions will depend on the levels of net cash generated from
the collection of notes receivable and the availability of cash reserves.
Year 2000 Compliance
General Description of the Year 2000 Issue and the Nature and Effects of the
Year 2000 on Information Technology (IT) and Non-IT Systems
The Year 2000 issue is the result of computer programs being written using two
digits rather than four digits to define the applicable year. The Partnership
is dependent upon the Corporate General Partner and its affiliates for
management and administrative services ("Managing Agent"). Any of the computer
programs or hardware that have date-sensitive software or embedded chips may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices, or engage in similar normal business activities.
Over the past two years, the Managing Agent has determined that it will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Managing Agent presently believes that with modifications or
replacements of existing software and certain hardware, the Year 2000 issue can
be mitigated. However, if such modifications and replacements are not made or
not completed in time, the Year 2000 issue could have a material impact on the
operations of the Partnership.
The Managing Agent's plan to resolve Year 2000 issues involves four Phases:
assessment, remediation, testing, and implementation. To date, the Managing
Agent has fully completed its assessment of all the information systems that
could be significantly affected by the Year 2000, and has begun the remediation,
testing and implementation phases on both hardware and software systems.
Assessments are continuing in regards to embedded systems. The status of each
is detailed below.
Status of Progress in Becoming Year 2000 Compliant, Including Timetable for
Completion of Each Remaining Phase
Computer Hardware:
During 1997 and 1998, the Managing Agent identified all of the computer systems
at risk and formulated a plan to repair or replace each of the affected systems.
In August 1998, the mainframe system used by the Managing Agent became fully
functional. In addition to the mainframe, PC-based network servers and routers
and desktop PCs were analyzed for compliance. The Managing Agent has begun to
replace each of the non-compliant network connections and desktop PCs and, as of
December 31, 1998, had completed approximately 75% of this effort.
The total cost to the Managing Agent to replace the PC-based network servers,
routers and desktop PCs is expected to be approximately $1.5 million of which
$1.3 million has been incurred to date. The remaining network connections and
desktop PCs are expected to be upgraded to Year 2000 compliant systems by March
31, 1999.
Computer software:
The Managing Agent utilizes a combination of off-the-shelf, commercially
available software programs as well as custom-written programs that are designed
to fit specific needs. Both of these types of programs were studied, and
implementation plans written and executed with the intent of repairing or
replacing any non-compliant software programs.
The final software area is the office software and server operating systems.
The Managing Agent has upgraded all non-compliant office software systems on
each PC and has upgraded 80% of the server operating systems. The remaining
server operating systems are planned to be upgraded to be Year 2000 compliant by
March 31, 1999.
Nature and Level of Importance of Third Parties and Their Exposure to the Year
2000
The Managing Agent continues to conduct surveys of its banking and other vendor
relationships to assess risks regarding their Year 2000 readiness. The Managing
Agent has banking relationships with three major financial institutions, all of
which have indicated their compliance efforts will be complete before May 1999.
The Managing Agent has updated data transmission standards with two of the three
financial institutions. The Managing Agent's contingency plan in this regard is
to move accounts from any institution that cannot be certified Year 2000
compliant by June 1, 1999.
The Partnership does not rely heavily on any single vendor for goods and
services, and does not have significant suppliers and subcontractors who share
information systems (external agent). To date the Partnership is not aware of
any external agent with a Year 2000 compliance issue that would materially
impact the Partnership's results of operations, liquidity, or capital resources.
However, the Partnership has no means of ensuring that external agents will be
Year 2000 compliant.
The Managing Agent does not believe that the inability of external agents to
complete their Year 2000 remediation process in a timely manner will have a
material impact on the financial position or results of operations of the
Partnership. However, the effect of non-compliance by external agents is not
readily determinable.
Costs to Address Year 2000
The total cost of the Year 2000 project to the Managing Agent is estimated at
$3.5 million and is being funded from operating cash flows. To date, the
Managing Agent has incurred approximately $2.8 million ($0.6 million expensed
and $2.2 million capitalized for new systems and equipment) related to all
phases of the Year 2000 project. Of the total remaining project costs,
approximately $0.5 million is attributable to the purchase of new software and
operating equipment, which will be capitalized. The remaining $0.2 million
relates to repair of hardware and software and will be expensed as incurred.
The Partnership's portion of these costs are not material.
Risks Associated with the Year 2000
The Managing Agent believes it has an effective program in place to resolve the
Year 2000 issue in a timely manner. As noted above, the Managing Agent has not
yet completed all necessary phases of the Year 2000 program.
Disruptions in the economy generally resulting from Year 2000 issues could also
adversely affect the Partnership. The Partnership could be subject to
litigation for, among other things, computer system failures, equipment
shutdowns or failure to properly date business records. The amount of potential
liability and lost revenue cannot be reasonably estimated at this time.
Contingency Plans Associated with the Year 2000
The Managing Agent has contingency plans for certain critical applications and
is working on such plans for others. These contingency plans involve, among
other actions, manual workarounds and selecting new relationships for such
activities as banking relationships and elevator operating systems.
ITEM 7. FINANCIAL STATEMENTS
JACQUES-MILLER INCOME FUND L.P.-II
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
Report of Ernst & Young LLP, Independent Auditors
Consolidated Balance Sheet - December 31, 1998
Consolidated Statements of Operations - Years ended December 31, 1998 and 1997
Consolidated Statements of Changes in Partners' Capital (Deficit)--Years ended
December 31, 1998 and 1997
Consolidated Statements of Cash Flows - Years ended December 31, 1998 and 1997
Notes to Consolidated Financial Statements
Report of Ernst & Young LLP, Independent Auditors
The Partners
Jacques-Miller Income Fund L.P. II
We have audited the accompanying consolidated balance sheet of Jacques-Miller
Income Fund L.P. II as of December 31, 1998, and the related consolidated
statements of operations, changes in partners' capital (deficit) and cash flows
for each of the two years in the period ended December 31, 1998. These
financial statements are the responsibility of the Partnership's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by the
Partnership's management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Jacques-Miller Income Fund L.P. II at December 31, 1998, and the consolidated
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles.
/s/ERNST & YOUNG LLP
Greenville, South Carolina
March 3, 1999
JACQUES-MILLER INCOME FUND L.P.-II
CONSOLIDATED BALANCE SHEET
(in thousands, except unit data)
December 31, 1998
Assets
Cash and cash equivalents $ 774
Notes receivable from affiliated parties (net of
allowance of approximately $2,127) (Note C) 70
$ 844
Liabilities and Partners' Capital (Deficit)
Liabilities
Other liabilities $ 20
Partners' Capital (Deficit)
General partner's $(106)
Limited partners'
(12,400 units issued and outstanding) 930 824
$ 844
See Accompanying Notes to Consolidated Financial Statements
JACQUES-MILLER INCOME FUND L.P.-II
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except unit data)
Years Ended December 31,
1998 1997
Revenues:
Recovery of bad debt $ 98 $ --
Other income 32 37
Total revenues 130 37
Expenses:
General and administrative 82 53
Net income (loss) $ 48 $ (16)
Net income (loss) allocated to general partner (1%) $ -- $ --
Net income (loss) allocated to limited partners (99%) 48 (16)
$ 48 $ (16)
Net income (loss) per limited partnership unit $ 3.87 $(1.29)
See Accompanying Notes to Consolidated Financial Statements
JACQUES-MILLER INCOME FUND L.P.-II
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Partners' (deficit) capital
at December 31, 1996 12,400 $ (106) $ 898 $ 792
Net loss for the year ended
December 31, 1997 -- -- (16) (16)
Partners' (deficit) capital at
December 31, 1997 12,400 (106) 882 776
Net income for the year ended
December 31, 1998 -- -- 48 48
Partner's (deficit) capital at
December 31, 1998 12,400 $ (106) $ 930 $ 824
See Accompanying Notes to Consolidated Financial Statements
JACQUES-MILLER INCOME FUND L.P.-II
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended December 31,
1998 1997
Cash flows from operating activities:
Net income (loss) $ 48 $ (16)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Change in accounts:
Interest receivable 1 (1)
Note receivable (70) 78
Other liabilities 6 (8)
Net cash (used in) provided by operating activities (15) 53
Net (decrease) increase in cash and cash equivalents (15) 53
Cash and cash equivalents at beginning of year 789 736
Cash and cash equivalents at end of year $ 774 $ 789
See Accompanying Notes to Consolidated Financial Statements
JACQUES-MILLER INCOME FUND L.P.-II
Notes to Consolidated Financial Statements
December 31, 1998
NOTE A - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Organization: Jacques-Miller Income Fund L.P.-II (the "Partnership") is a
Delaware limited partnership organized in July 1985 to make long-term junior
mortgage loans, including wraparound mortgage loans and, to a lesser extent,
other mortgage loans including first mortgage loans primarily to affiliated
public and private real estate limited partnerships. The general partner of the
Partnership is Jacques-Miller, Inc. (the "Corporate General Partner"), a
Tennessee corporation. (See "Note B - Transfer of Control".) The Partnership
currently holds four notes receivable.
Principles of Consolidation: The consolidated financial statements include all
the accounts of the Partnership and a 99% limited partnership interest in
Jacques-Miller Income Fund II Special Asset Partnership (La Plaza) L.P. All
significant interpartnership balances have been eliminated.
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 amounts reported in the consolidated financial
statements and accompanying notes. Actual results could differ from those
estimates.
Allocations to Partners: Net income (loss) of the Partnership and taxable
income (loss) are allocated 99% to the limited partners and 1% to the Corporate
General Partner. Distributions of available cash, as defined by the partnership
agreement, are allocated among the limited partners and the Corporate General
Partner in accordance with the agreement of limited partnership.
Cash and Cash Equivalents: Includes cash on hand and in banks, certificates of
deposit, and money market funds with original maturities less than 90 days. At
certain times, the amount of cash deposited at a bank may exceed the limit on
insured deposits.
Deferred Revenue: Deferred revenue results from accrued but unpaid interest
receivable, realization of which is dependent upon appreciation of the property
which collateralizes the receivable. The net interest revenue is recognized
when collectibility is assured.
Fair Value of Financial Instruments: The Partnership believes that the carrying
amount of its financial instruments approximates their fair value due to the
short term maturity of these instruments. Management of the Partnership believes
that the carrying amount of the notes receivable approximates their fair value.
Reclassifications: Certain reclassifications have been made to the 1997
information to conform to the 1998 presentation.
Segment Information: In June 1997, the Financial Accounting Standards Board
issued SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
Information", which is effective for years beginning after December 15, 1997.
SFAS 131 established standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports. It also establishes standards for
related disclosures about products and services, geographic areas, and major
customers. As defined in SFAS No. 131, the Partnership has only one reportable
segment. Moreover, due to the very nature of the Partnership's operations, the
Corporate General Partner believes that segment-based disclosures will not
result in a more meaningful presentation than the financial statements as
currently presented.
NOTE B _ TRANSFER OF CONTROL
On December 10, 1998, Apartment Investment and Management Company ("AIMCO"),
a publicly traded real estate investment trust, entered into an agreement with
the sole shareholder of the Corporate General Partner pursuant to which AIMCO
was granted the right to elect the directors of the Corporate General Partner.
In connection with this transaction, the then current officer and director of
the Corporate General Partner resigned and AIMCO appointed a new director who,
in turn, appointed new officers of the Corporate General Partner. The Corporate
General Partner does not believe that this transaction will have a material
effect on the affairs and operations of the Partnership.
NOTE C - NOTES RECEIVABLE FROM AFFILIATED PARTIES
Notes receivable consist of the following (in thousands):
December 31,
1998
Notes receivable $ 1,023
Accrued interest receivable 1,174
2,197
Provision for uncollectibles
(including approximately $981,000
of deferred interest revenue) (2,127)
$ 70
The Partnership holds four notes receivable at December 31, 1998, totaling
approximately $1,023,000 with approximately $1,174,000 of related accrued
interest, all of which is fully reserved except for approximately $70,000
expected to be collected on the Woodlawn Village Note. Included in the
provision for uncollectibles is approximately $981,000 of deferred interest
revenue. Additionally, these four notes are due from related partnerships.
These four promissory notes bear interest at rates ranging from 11% to 12.5%,
and are unsecured by the related partnerships and are subordinated to the
underlying mortgages of the respective partnerships.
During 1998 the Partnership agreed to accept a payment of approximately $70,000
in full satisfaction of the Woodlawn Village Note. The outstanding balance of
this note receivable totaled approximately $501,000 including accrued interest,
and was fully reserved. The General Partner anticipates receipt of the
settlement in April 1999. Also in 1998, the Partnership agreed to accept a
payment of approximately $28,000 in full settlement of the note receivable for
Tall Oaks. The outstanding balance for this note receivable totaled
approximately $682,000, including accrued interest, and was fully reserved. In
1996, the Partnership agreed to accept a payment of approximately $78,000, which
payment was received in 1997, as full satisfaction of two notes receivable on
Governour's Square.
One note in the amount of approximately $413,000 with accrued interest due in
the amount of approximately $318,000, the "Catawba Club Note" matured November
1, 1997. A second note in the amount of approximately $455,000 with accrued
interest due in the amount of approximately $358,000, the "Quail Run Note,"
matured June 1, 1997. A third note in the amount of $70,000 with accrued
interest due in the amount of approximately $497,000, the "Highridge Note,"
matured May 1, 1996. All of these notes were in default at December 31, 1998.
The Partnership is currently seeking to receive full payment on and resolution
of the notes for which no settlement has been reached. Payments on these notes
are restricted to excess cash flow after payment of the first and second
mortgages and are dependent on excess cash flow from the properties or sales
proceeds. No payments were received in 1998 or 1997. These notes are fully
reserved.
NOTE D - INCOME TAXES
The Partnership has received a ruling from the Internal Revenue Service that it
will be classified as a partnership for federal income tax purposes.
Accordingly, no provision for income taxes is made in the financial statements
of the Partnership. Taxable income or loss of the Partnership is reported in the
income tax returns of its partners. The following is a reconciliation of
reported net income (loss) and Federal taxable (loss) income:
1998 1997
(in thousands)
Net income (loss) as reported $ 48 $ (16)
Add (deduct):
Bad debt (399) --
Other (57) (15)
Federal taxable loss $ (408) $ (31)
Federal taxable loss
per limited partnership unit $(32.57) $ (2.48)
The following is a reconciliation between the Partnership's reported amounts and
Federal tax basis of net assets and liabilities (in thousands):
Net assets as reported $ 824
Allowance for doubtful accounts 1,380
Other (51)
Net assets _ Federal tax basis $ 2,153
NOTE E - TRANSACTIONS WITH AFFILIATED PARTIES
Other than the notes receivable, as previously disclosed, the Partnership had
the following transactions:
On December 31, 1991, MAE GP Corporation ("MAE GP"), an affiliate of Insignia
acquired substantially all of the assets of Jacques-Miller, Inc. (the general
partner interest of the Registrant) including Jacques-Miller's property
management organization. However, the general partner interest of the Registrant
was not acquired during this transaction. As a result of a separate Advisory
Agreement between the Registrant and IFGP Corporation (an affiliate of
Insignia), Insignia and its affiliates succeeded to those asset management and
property management duties previously performed by Jacques-Miller.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The general partner of Jacques-Miller Income Fund L.P.-II (the "Partnership" or
the "Registrant") is:
Jacques-Miller, Inc., a Tennessee Corporation
Jacques-Miller, Inc., (the "Corporate General Partner"), was formed under the
laws of the State of Tennessee in 1972.
The principal executive officer and director of the Corporate General Partner
is:
Name Age Position
Patrick J. Foye 41 President, Treasurer and Director
Patrick J. Foye has been President, Treasurer and Director of the Corporate
General Partner since December 10, 1998. Mr. Foye has served as Executive Vice
President of AIMCO since May 1998. Prior to joining AIMCO, Mr. Foye was a
partner in the law firm of Skadden, Arps, Slate, Meagher & Flom LLP from 1989 to
1998 and was Managing Partner of the firm's Brussels, Budapest and Moscow
offices from 1992 through 1994. Mr. Foye is also Deputy Chairman of the Long
Island Power Authority and serves as a member of the New York State
Privatization Council. He received a B.A. from Fordham College and a J.D. from
Fordham University Law School.
Balanced Holding Partners, L.P. Transaction
In December of 1989, Balanced Holdings Partners, L.P., a Delaware limited
partnership ("BHP"), purchased from Jacques-Miller, Inc. and certain of its
subsidiaries ("Jacques-Miller") certain real estate assets, which included,
among other things, the General Partner's economic benefits and economic rights
in Jacques-Miller sponsored limited partnerships, including the Registrant.
Jacques-Miller remained as the Corporate General Partner, but was indemnified by
BHP to the full extent of BHP's assets up to a maximum aggregate amount of
$2,000,000 of which approximately all has been utilized.
As the Corporate General Partner, Jacques-Miller itself remains liable for the
recourse obligations of the Registrant to the extent that the Registrant's cash
flow and assets become insufficient to meet Registrant's obligations, and could
be required to make payments on behalf of the Registrant in such events.
As the Corporate General Partner, Jacques-Miller receives a residual interest in
the proceeds of the disposition of Registrant's assets, typically computed as a
percentage of net proceeds from the sale or refinancing of partnership assets
and subordinated to the recovery by the limited partners of their investments
plus a specified cumulative annual return. Jacques-Miller effectively sold all
of its residual interest to BHP in connection with this transaction.
Insignia Transaction
On December 31, 1991, MAE GP Corporation ("MAE GP"), an affiliate of Insignia
Financial Group, Inc. ("Insignia") acquired substantially all of the assets of
Jacques-Miller, Inc. (the general partner interest of the Registrant) including
Jacques-Miller's property management organization. However, the general partner
interest of the Registrant was not acquired during this transaction. As a
result of a separate Advisory Agreement between the Registrant and IFGP
Corporation (an affiliate of Insignia), Insignia and its affiliates succeeded to
those asset management and property management duties previously performed by
Jacques-Miller.
AIMCO Transaction
On October 1, 1998, Insignia merged into Apartment Investment and Management
Company ("AIMCO"), a publicly traded real estate investment trust, with AIMCO
being the surviving corporation (the "Insignia Merger"). On December 10, 1998,
AIMCO entered into an agreement with the sole shareholder of the Corporate
General Partner pursuant to which AIMCO was granted the right to elect the
directors of the Corporate General Partner. In connection with this
transaction, the then current officer and director of the Corporate General
Partner resigned and AIMCO appointed a new director who, in turn, appointed new
officers of the Corporate General Partner. The Corporate General Partner does
not believe that this transaction will have a material effect on the affairs and
operations of the Partnership.
ITEM 10. EXECUTIVE COMPENSATION
The Registrant was not required to and did not pay remuneration to officers
and/or directors of the Corporate General Partner during 1998 or 1997.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
No person or group is known by the Registrant to own beneficially more than 5%
of the outstanding Interests of the Registrant, as of December 31, 1998.
No officer or director of the Corporate General Partner of the Registrant owns,
nor do the officers or directors as a group own, any of the Registrant's
Interests as of December 31, 1998. No officer or director of the Corporate
General Partner possesses a right to acquire beneficial ownership of Interests
of the Registrant.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Partnership has outstanding notes receivable in the amount of approximately
$1,023,000 with affiliated partnerships at December 31, 1998. During 1998 the
Partnership agreed to accept a payment of approximately $70,000 in full
satisfaction of the Woodlawn Village Note. The outstanding balance of this note
receivable totaled approximately $501,000 including accrued interest, and was
fully reserved. The General Partner anticipates receipt of the settlement in
April 1999. Also, the Partnership agreed to accept a payment of approximately
$28,000 in full settlement of the note receivable for Tall Oaks. The
outstanding balance for this note receivable totaled approximately $682,000,
including accrued interest, and was fully reserved. Income was recorded as a
result of the reduction in the allowance on the notes and is recorded as
recovery of bad debt on the 1998 statement of operations. In 1996, the
Partnership agreed to accept a payment of approximately $78,000, which payment
was received in 1997, as full satisfaction of two notes receivable on
Governour's Square.
On December 31, 1991, MAE GP Corporation ("MAE GP"), an affiliate of Insignia
Financial Group, Inc. ("Insignia") acquired substantially all of the assets of
Jacques-Miller, Inc. (the general partner interest of the Registrant) including
Jacques-Miller's property management organization. However, the general partner
interest of the Registrant was not acquired during this transaction. As a
result of a separate Advisory Agreement between the Registrant and IFGP
Corporation (an affiliate of Insignia), Insignia and its affiliates succeeded to
those asset management and property management duties previously performed by
Jacques-Miller.
ITEM 13. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit 27, Financial Data Schedule, is filed as an exhibit to this report.
(b) Reports on Form 8-K filed in the fourth quarter of fiscal year 1998:
None.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JACQUES-MILLER INCOME FUND L.P.-II
By: Jacques-Miller, Inc.
as Corporate General Partner
BY: /s/Patrick J. Foye
Patrick J. Foye
President and Treasurer
Date: March 31, 1999
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
date indicated.
/s/Patrick J. Foye President, Treasurer Date:
Patrick J. Foye and Director March 31, 1999
EXHIBIT INDEX
Exhibit
3 Partnership Agreement is incorporated by reference to Exhibit A of the
Prospectus contained in the Registrant's Registration Statement (2-
99745) as filed with the Commission pursuant to Rule 424(b) under the
Act.
4 Form of Certificate representing interests in the Registrant.
[Exhibit 4 to Registration Statement on Form S-11 dated October 16,
1985, Registration Number 2-99745 is incorporated herein by
reference.]
10A Promissory Note dated July 20, 1990 in the amount of $476,000.00
payable to the Registrant executed by Balanced Holding Partners, L.P.
[Filed as Exhibit 10A to Form 10K for the year ended December 30,
1990, and incorporated herein by reference.]
10B Settlement Agreement dated July 25, 1991 between Jacques-Miller Income
Fund L.P. II and Balanced Holdings Partners, L.P., Jacques-Miller,
Inc., and Jacques-Miller Mortgage, Inc. of Tennessee. [Filed as
Exhibit 10B to Form 10K for the year ended December 31, 1991, and
incorporated herein by reference.]
10C Advisory Agreement, dated December 30, 1991, between Jacques-Miller
Income Fund L.P. II and Insignia GP Corporation. [Filed as Exhibit
10C to Form 10K for the year ended December 31, 1991, and incorporated
herein by reference.]
10D Contracts related to refinancing of debt:
(a) First Mortgage and Security Agreement dated October 28, 1992 between
Jacques-Miller Income Fund II Special Asset Partnership (La Plaza), L.P.
and First Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing La Plaza Apartments. *
(b) First Deed of Trust and Security Agreement dated October 28, 1992 between
Jacques-Miller Income Fund II Special Asset Partnership (Willow Oaks),
L.P. and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing Willow Oaks Apartments. *
(c) Second Mortgage and Security Agreement dated October 28, 1992 between
Jacques-Miller Income Fund II Special Asset Partnership (La Plaza), L.P.
and First Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing La Plaza Apartments.
(d) Second Deed of Trust and Security Agreement dated October 28, 1992
between Jacques-Miller Income Fund II Special Asset Partnership (Willow
Oaks), L.P. and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing Willow Oaks Apartments. *
(e) First Assignment of Leases and Rents dated October 28, 1992 between
Jacques-Miller Income Fund II Special Asset Partnership (La Plaza), L.P.
and First Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing La Plaza Apartments. *
(f) First Assignment of Leases and Rents dated October 28, 1992 between
Jacques-Miller Income Fund II Special Asset Partnership (Willow Oaks),
L.P. and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing Willow Oaks Apartments. *
(g) Second Assignment of Leases and Rents dated October 28, 1992 between
Jacques-Miller Income Fund II Special Asset Partnership (La Plaza), L.P.
and First Commonwealth Realty Credit Corporation, a Virginia Corporation,
securing La Plaza Apartments. *
(h) Second Assignment of Leases and Rents dated October 28, 1992 between
Jacques-Miller Income Fund II Special Asset Partnership (Willow Oaks),
L.P. and First Commonwealth Realty Credit Corporation, a Virginia
Corporation, securing Willow Oaks Apartments. *
(i) First Mortgage Note dated October 28, 1992 between Jacques-Miller Income
Fund II Special Asset Partnership (La Plaza), L.P. and First Commonwealth
Realty Credit Corporation, relating to La Plaza Apartments. *
(j) First Deed of Trust Note dated October 28, 1992 between Jacques-Miller
Income Fund II Special Asset Partnership (Willow Oaks), L.P. and First
Commonwealth Realty Credit Corporation, relating to Willow Oaks
Apartments. *
(k) Second Mortgage Note dated October 28, 1992 between Jacques-Miller Income
Fund II Special Asset Partnership (La Plaza), L.P. and First Commonwealth
Realty Credit Corporation, relating to La Plaza Apartments. *
(l) Second Deed of Trust Note dated October 28, 1992 between Jacques-Miller
Income Fund II Special Asset Partnership (Willow Oaks), L.P. and First
Commonwealth Realty Credit Corporation, relating to Willow Oaks
Apartments. *
* Filed as Exhibits 10D (a) through (l), respectively, to Form 10KSB
for the year ended December 31, 1992 and incorporated herein by
reference.
21 Subsidiaries of the Registrant
27 Financial Data Schedule
99A Agreement of Limited Partnership for Jacques-Miller Income Fund II
Special Asset Partnership (La Plaza), L.P. between Jacques-Miller,
Inc. and Jacques-Miller Income Fund L.P.-II entered into August 21,
1991. [Filed as Exhibit 28A to Form 10KSB for the year ended December
31, 1992, and incorporated herein by reference.]
99B Agreement of Limited Partnership for Jacques-Miller Income Fund II
Special Asset Partnership (Willow Oaks), L.P. between Jacques-Miller,
Inc. and Jacques-Miller Income Fund L.P.-II entered into December 16,
1991. [Filed as Exhibit 28B to Form 10KSB for the year ended December
31, 1992, and incorporated herein by reference.]
99C Agreement of Limited Partnership for Jacques-Miller Income Fund II
Special Asset Partnership (Brighton Way), L.P. between Jacques-Miller,
Inc. and Jacques-Miller Income Fund L.P.-II entered into December 16,
1991. [Filed as Exhibit 28C to Form 10KSB for the year ended December
31, 1992, and incorporated herein by reference.]
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Jacques-Miller Income Fund L.P.-II 1998 Year-End 10-KSB and is qualified in its
entirety by reference to such 10-KSB filing.
</LEGEND>
<CIK> 0000774655
<NAME> JACQUES-MILLER INCOME FUND L.P.-II
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 774
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 844
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 824
<TOTAL-LIABILITY-AND-EQUITY> 844
<SALES> 0
<TOTAL-REVENUES> 130
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 82
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 48
<EPS-PRIMARY> 3.87<F2>
<EPS-DILUTED> 0
<FN>
<F1>Registrant has an unclassified balance sheet.
<F2>Multiplier is 1.
</FN>
</TABLE>
