UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-KSB
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission File Number 0-15027
VMTGZ Mortgage Investors L.P. II
(Name of small business issuer in its charter)
Delaware 36-3365708
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o KPMG Peat Marwick LLP, 99 High Street, Boston, MA
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (617) 338-2925
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None None
Securities registered under Section 12(g) of the Exchange Act:
Depositary Units Representing Beneficial
Assignments 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 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 pursuant 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. $112,762
Depositary units outstanding as of March 15, 1996: 12,524,931. There is no
current market for the registrant's depositary units. As of December 31, 1995
the aggregate book value of the registrant's depositary units held by
non-affiliates of the registrant on such date was $1,937,416.
DOCUMENTS INCORPORATED BY REFERENCE
Exhibit index on page 19 of sequentially numbered pages.
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TABLE OF CONTENTS
PART I
Item 1. Description of Business.................................. 1
Item 2. Description of Property.................................. 4
Item 3. Legal Proceedings........................................ 4
Item 4. Submission of Matters to a Vote of Unitholders........... 6
PART II
Item 5. Market for the Registrant's Depositary Units and
Related Unitholder Matters............................... 7
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operation....................... 8
Item 7. Financial Statements..................................... 12
Item 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure................... 12
PART III
Item 9. Directors and Principal Executive Officers
of the Registrant........................................ 13
Item 10. Executive Compensation................................... 14
Item 11. Security Ownership of Certain Beneficial Owners and
Management............................................... 16
Item 12. Certain Relationships and Related Transactions........... 16
Item 13. Exhibits, Lists and Reports on Form 8-K.................. 17
SIGNATURES.............................................................. 18
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Item 1. Description of Business (continued)
PART I
Item 1. Description of Business
General
The registrant, VMTGZ Mortgage Investors L.P. II (the "Partnership"),
is a Delaware limited partnership that was organized on September 30, 1985 under
the name VMS Mortgage Investors L.P. II. In 1991, the Partnership changed its
name to Banyan Mortgage Investors L.P. II. In June 1995, the Partnership changed
its name to VMTGZ Mortgage Investors L.P. II. The sole general partner of the
Partnership is VMTGZ Mortgage Investors II, Inc., an Illinois corporation
organized in 1985 (the "General Partner").
In 1986, the Partnership sold 12,526,153 depositary units (the
"Units"), representing beneficial assignments of limited partnership interests,
at $10 per Unit, in a registered public offering under the Securities Act of
1933, as amended. The offering yielded $124,281,863 in gross proceeds (net of
volume discounts) to the Partnership. The Units were included for quotation on
the National Association of Securities Dealers Automated Quotations ("NASDAQ")
National Market System, and began trading on October 8, 1986. In August 1992,
the Partnership adopted a plan of liquidation. Following the initial liquidating
distribution under the plan, the Units were removed from the NASDAQ National
Market System on September 28, 1992 because the Partnership no longer satisfied
requirements for continued quotation in the NASDAQ National Market System. The
Units are presently traded over-the-counter, and are no longer quoted in the
NASDAQ system or reported in the trading section of any newspaper.
Business
The Partnership was established to make various types of real estate
investments through wraparound, first and junior mortgage loans principally to
VMS Realty Partners and its affiliates ("VMS"). In February 1990, VMS ceased
making payments on their mortgage loans due to liquidity problems, and the
Partnership ceased funding new mortgage loans and suspended all relationships
between the Partnership and VMS. Certain officers and directors of the General
Partner who were affiliated with VMS resigned, and the independent directors of
the General Partner assumed control of the Partnership. The independent
directors established a principal recovery plan and implemented its initial
steps to preserve and protect the Partnership's assets.
The Partnership's business plan has been based upon preserving and
maximizing the value of its remaining assets. In August 1992, the Partnership
adopted a plan of liquidation. In accordance with the plan, an initial
distribution in the amount of $1,941,557 ($0.155 per unit) was made in September
1992 to holders of Units ("Unitholders"). Upon disposition of the Partnership's
remaining non-cash assets and final resolution of various litigation affecting
the Partnership, the General Partner intends to complete the liquidation of the
Partnership as promptly as practicable and to distribute the remaining cash
assets, net of any reserves, to Unitholders. The General Partner does not
contemplate the making of any additional liquidating distributions until the
remaining non-cash assets have been disposed of and such litigation resolved.
In March 1992, the Partnership and other creditors of VMS and certain
other parties executed the Creditor Repayment Agreement with various VMS
entities. The Creditor Repayment Agreement, as amended by four subsequent
amendments, provided for the attempted sale by various VMS entities of their
assets in an orderly manner and the disposition of the proceeds of such sales to
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Item 1. Description of Business (continued)
the Partnership and such other creditors. In November 1993, the Partnership,
such other creditors and parties and various VMS entities executed a fifth
amendment to the Creditor Repayment Agreement. Pursuant to the fifth amendment,
on November 18 and December 28, 1993 the Partnership received certain
distributions of cash and a 3.46% beneficial interest in Partners Liquidating
Trust ("Partners Liquidating Trust"), a 9.1% beneficial interest in Chicago
Wheaton Liquidating Trust ("Chicago Wheaton Liquidating Trust"), and a 93%
beneficial interest in Investors Liquidating Trust ("Investors Liquidating
Trust"), each of which is a liquidating trust established for the benefit of
unsecured creditors of certain VMS entities pursuant to certain agreements and
declarations of trust dated as of November 17, 1993. Partners Liquidating Trust,
Chicago Wheaton Liquidating Trust and Investors Liquidating Trust are
collectively referred to as the "Liquidating Trusts". See Item 6, Management's
Discussion and Analysis of Financial Condition and Results of Operation, and
Note 2 of Notes to Financial Statements for additional descriptions of the
Liquidating Trusts and related matters.
In December 1994, the Partnership accrued cash distributions of
$182,085 (net of amounts due to certain third parties; see Note 2 of Notes to
Financial Statements) from Partners Liquidating Trust and Chicago Wheaton
Liquidating Trust. In 1995, the Partnership received cash distributions of
$259,700 (net of amounts due to such third parties; see Note 2 of Notes to
Financial Statements) from Partners Liquidating Trust and Chicago Wheaton
Liquidating Trust. Also in 1995, the Partnership sold its interest in Partners
Liquidating Trust for $39,812 and its interest in Chicago Wheaton Liquidating
Trust for $225,000. See Item 6, Management's Discussion and Analysis, and Note 2
of Notes to Financial Statements. The Partnership continues to monitor the
extent and timing of possible cash to be realized by and distributed from
Investors Liquidating Trust and how this may impact the liquidation of the
Partnership. The General Partner also continues its efforts to reduce the
ongoing operating expenses of the Partnership in order to maximize any further
net cash distributable to Unitholders.
On September 12, 1994, the General Partner terminated the employment by
the Partnership of Mr. Leonard G. Levine, including Mr. Levine's employment as
President of the General Partner. The General Partner also appointed one of its
independent Directors, Mr. Philip H. Brady, Jr., to serve as the President and
Chief Financial Officer of the General Partner. On September 16, 1994, the
General Partner received notice that William M. Karnes, Senior Vice President,
Finance and Administration, Neil D. Hansen, First Vice President, and Robert G.
Higgins, Vice President and General Counsel, resigned, effective September 12,
1994, as officers of the General Partner. On or about October 31, 1994, Mr.
Levine initiated an arbitration proceeding (the "Levine Arbitration") against
the Partnership before the American Arbitration Association in respect of the
termination of his employment. In May 1995, the Levine Arbitration was settled.
See Item 6, Management's Discussion and Analysis, and Note 7 of Notes to
Financial Statements for additional descriptions of the Levine Arbitration and
related matters.
The Partnership, Banyan Mortgage Investors L.P. III ("BMLP III") and
Banyan Mortgage Investment Fund ("BMIF") previously agreed to resolve by means
of arbitration issues surrounding the amount of compensation, if any, payable by
BMIF to the Partnership and BMLP III in consideration for the Partnership's and
BMLP III's agreement in 1990 to relinquish their interests in certain Beverly
Hills, California properties commonly known as the Buckeye properties. In July
1994, a majority of two members of a panel of three arbitrators awarded the
Partnership and BMLP III approximately $3,768,000 in connection with this
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Item 1. Description of Business (continued)
arbitration. In response to BMIF's announced intention to challenge the
decision, the Partnership filed suit in the Circuit Court of Cook County,
Illinois, to confirm the arbitration award. Pursuant to a settlement agreement
negotiated with BMIF, the amount of the award and the subsequent litigation were
settled by the payment of $3,250,000 by BMIF in October 1994. The Partnership
recorded $927,875, representing its 28.55% portion of the award, as a recovery
of losses on loans, notes and interest receivable on its statement of income and
expenses for the year ended December 31, 1994. See Item 6, Management Discussion
and Analysis of Financial Condition and Results of Operation, and Note 5 of
Notes to Financial Statements.
Other Information
During 1995, the Partnership had no operating properties. The
Partnership does not segregate revenue or assets by geographic region, and such
a presentation is not applicable and would not be significant to an
understanding of the Partnership's business taken as a whole.
The General Partner has one employee who serves as the sole executive
and financial officer of the General Partner. Certain administrative and
accounting services have been provided to the Partnership by KPMG Peat Marwick
LLP since October 27, 1994. Prior to that date, certain administrative and
accounting services were provided to the Partnership by Banyan Management
Corporation ("BMC"), of which Mr. Levine is president, pursuant to the
Administrative Services Agreement (the "BMC Services Agreement"), dated as of
February 27, 1994, between the Partnership and BMC. On October 27, 1994, the
Partnership terminated the BMC Services Agreement. See Item 3, Legal
Proceedings, Item 12, Certain Relationships and Related Transactions, and Notes
3 and 7 of Notes to Financial Statements for additional descriptions of
transactions with BMC, including litigation arising from the termination of the
BMC Services Agreement.
On October 4, 1993, the outstanding capital stock (the "Stock") of the
General Partner was transferred to Banyan Mortgage Investors Holding Corp.
("Holding Corp.") pursuant to the terms of the class action settlement entered
into by the Partnership on September 25, 1991. Under the terms of the
settlement, VMS Realty, Inc., the prior owner of the Stock, agreed to transfer
the Stock to an entity designated by the Partnership in return for certain
releases. Holding Corp. is an Illinois corporation owned solely by Mr. Leonard
G. Levine, the former President of the Partnership and the General Partner. Mr.
Levine is also the sole director of Holding Corp. and President of BMC. Both BMC
and Mr. Levine have been named as defendants in a lawsuit brought by the
Partnership and VMLPZ Mortgage Investors L.P. I (the "BMC Lawsuit") as a result
of certain actions by BMC and Mr. Levine relating to the termination by the
Partnership of the BMC Services Agreement and certain other matters. See Item 3,
Legal Proceedings, Item 10, Executive Compensation, Item 12, Certain
Relationships and Related Transactions, and Notes 3 and 7 of Notes to Financial
Statements for additional descriptions of the BMC Lawsuit and related matters.
Holding Corp. transferred the Stock to a ten-year irrevocable voting trust, the
trustees of which are the three directors of the General Partner. Pursuant to
the terms of the voting trust, the trustees are required to vote the Stock in
the best interest of the Unitholders.
Because of the inability to predict with any degree of certainty the
timing or amount of proceeds of any disposition of the Partnership's remaining
non-cash assets, or the timing or costs or proceeds of final resolution of the
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Item 3. Legal Proceedings (continued)
various litigation affecting the Partnership, the General Partner is unable to
estimate the timing or amount of any final liquidating distribution to
Unitholders.
Item 2. Description of Property
As of December 31, 1995 the Partnership held no direct ownership
interest in any real estate, improved or unimproved. As the Partnership is in
the process of liquidation, it has no current plans to acquire or otherwise
invest in real estate, mortgages, securities of issuers engaged in real estate
activities or other real estate-related assets.
Item 3. Legal Proceedings
The General Partner is not aware of any material pending legal
proceedings to which the Partnership or its properties are subject, other than
the following:
The BMC Lawsuit
On October 27, 1994, the General Partner determined that Banyan
Management Corporation ("BMC") had breached various of its obligations to the
Partnership under the Administrative Services Agreement (the "BMC Services
Agreement"), dated as of February 27, 1994, between the Partnership and BMC, and
terminated the BMC Services Agreement. Subsequently, the Partnership made
various demands upon BMC for return of the Partnership's books and records. When
these demands proved unsuccessful, the Partnership together with VMLPZ Mortgage
Investors L.P. commenced litigation (the "BMC Lawsuit") on November 9, 1994
against BMC and Leonard G. Levine.
In the BMC Lawsuit, the Partnership sought to recover possession of its
funds, books and records which were under BMC's and Mr. Levine's control. The
Partnership also sought money damages and other relief. On November 22, 1994,
the court ordered BMC to make the books and records of the Partnership available
for copying. In addition, the court ordered Mr. Levine not to interfere with the
Partnership's copying of its books and records. BMC answered the complaint in
the BMC Lawsuit in November 1994 and denied certain of the material allegations
therein and asserted certain defenses. Mr. Levine answered the complaint in
January 1995 and also denied certain of the material allegations therein and
asserted certain additional defenses. On December 1, 1994 BMC filed a
counterclaim against the Partnership. In its counterclaim, BMC seeks to recover
$35,000 in contract termination fees from the Partnership under the BMC Services
Agreement and for an order requiring the Partnership to transfer the capital
stock of BMC owned by the Partnership to BMC. The Partnership denied the
material allegations of BMC's counterclaim and asserted certain additional
defenses. The General Partner is unable to predict the ultimate outcome of the
BMC Lawsuit. At December 31, 1995, the Partnership has a reserve established in
the aggregate amount of $7,452 for the BMC Lawsuit. See Item 12, Certain
Relationships and Related Transactions, and Notes 3 and 7 of Notes to Financial
Statements for additional descriptions of the BMC Lawsuit and related matters.
The Bishop Ranch Litigation
In September 1995, the Partnership, for itself and as trustee of
Investors Liquidating Trust, together with Monterey County Partners ("MCP"),
commenced litigation against BMIF Monterey County Limited Partnership (the "BMIF
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Item 3. Legal Proceedings (continued)
Monterey Partnership") and BMIF Monterey County Corp. ("BMIF Monterey Corp."),
which is the general partner of the BMIF Monterey Partnership, in the Circuit
Court of Cook County, Illinois, County Department, Chancery Division (the
"Bishop Ranch Litigation"). It is the position of Investors Liquidating Trust
that it indirectly owns a substantial economic interest in the BMIF Monterey
Partnership through its indirect interest in MCP, which is the limited partner
in the BMIF Monterey Partnership. BMIF Monterey Corp., which is a subsidiary of
Banyan Mortgage Investment Fund, is the general partner of the BMIF Monterey
Partnership. The BMIF Monterey Partnership owns an approximately 565-acre
residential development project in Monterey County, California known as Bishop
Ranch.
In the Bishop Ranch Litigation, MCP seeks the judicial removal of BMIF
Monterey Corp. as general partner of the BMIF Monterey Partnership and the
appointment of another suitable person as successor general partner to manage
the affairs of the BMIF Monterey Partnership. MCP also requests the court to
enter a declaratory judgment to the effect that BMIF Monterey Corp. is not
entitled to any "Priority Return" or "Preferred Return" (i.e., interest) on any
portion of its capital account in the BMIF Monterey Partnership. The
Partnership, for itself and as trustee of Investors Liquidating Trust, further
requests the court to grant relief under the Illinois Uniform Fraudulent
Transfer Act by establishing in favor of MCP an appropriate capital account in
the BMIF Monterey Partnership of not less than $4.8 million and to declare set
aside any "Priority Return" or "Preferred Return" claimed by BMIF Monterey Corp.
MCP also seeks a court-ordered accounting by BMIF Monterey Corp. with respect to
its management of the affairs of the BMIF Monterey Partnership and the
imposition of a constructive trust equitable liens upon BMIF Monterey Corp., for
the benefit of the BMIF Monterey Partnership, over and upon all of the books,
records, properties and funds of the BMIF Monterey Partnership. In February
1996, the court determined that certain claims which the Partnership, for itself
and as trustee of Investors Liquidating Trust, had asserted against BMC and
Leonard G. Levine for breach of fiduciary duty in the Bishop Ranch Litigation
were subsumed in the BMC Lawsuit, and dismissed those claims from the Bishop
Ranch Litigation.
The parties have commenced certain pre-trial discovery in the Bishop
Ranch Litigation. The General Partner believes that the Partnership has
meritorious claims in this matter, however, the General Partner is uncertain as
to the ultimate outcome of this litigation and the potential for, or amount of,
any recovery by Investors Liquidating Trust or the Partnership.
The California Quiet Title Action
In a matter related to the Bishop Ranch Litigation, in October 1995,
MCP, for itself and derivatively for the BMIF Monterey Partnership, filed an
action against the BMIF Monterey Partnership and its mortgagees in the Monterey
County, California, Superior Court (the "California Quiet Title Action"). In the
California Quiet Title Action, MCP seeks, among other things, the cancellation
of a deed of trust (i.e., mortgage) on the Bishop Ranch property which BMIF
Monterey Corp., in its capacity as general partner of the BMIF Monterey
Partnership, executed and delivered to the agent for certain secured lenders,
which collectively had loaned $20.5 million to Banyan Mortgage Investment Fund,
as collateral security for that loan. MCP also seeks to quiet title in the
Partnership to the Bishop Ranch property, free and clear of any claims by such
secured lenders or their agent.
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Item 3. Legal Proceedings (continued)
The parties have filed certain pre-trial motions and demurrers, and
commenced certain pre-trial discovery. The General Partner believes that MCP has
meritorious claims in this matter, however, the General Partner is uncertain as
to the ultimate outcome of this litigation and the potential for, or amount of,
any recovery or other relief by Investors Liquidating Trust or MCP.
Item 4. Submission of Matters to a Vote of Unitholders
The Partnership did not submit any matter to a vote of its Unitholders
during the fourth quarter of 1995.
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PART II
Item 5. Market for the Registrant's Depositary Units and Related
Unitholder Matters
During the public offering period, which commenced January 22, 1986 and
ended on June 25, 1986 (the final closing occurred on July 3, 1986), the selling
price of the Units was $10 per Unit (adjusted, where applicable, for volume
discounts). On October 8, 1986, the Partnership's Units began trading on the
NASDAQ National Market System (symbol - VMTGZ). From November 19, 1986 to
September 28, 1992, the Units were quoted on the NASDAQ National Market System.
In August 1992, the Partnership adopted a plan of liquidation. Following the
initial liquidating distribution, the Units were removed from the NASDAQ
National Market System on September 28, 1992 because the Partnership no longer
satisfied requirements for continued quotation in the NASDAQ National Market
System. The Units are presently traded over-the-counter, and are no longer
quoted in the NASDAQ system or reported in the trading section of any newspaper.
The range of high and low bid price quotations per Unit by quarter for the years
ended December 31, 1994 and 1995 are as follows:
UNIT PRICE
-----------------------------
Quarter 1994 1995
------- ------ -----
1 High $0.0625 $0.0825
Low $0.0469 $0.0300
2 High $0.0469 $0.1000
Low $0.0469 $0.0400
3 High $0.0938 $0.0499
Low $0.0469 $0.0040
4 High $0.0781 $0.0499
Low $0.0625 $0.0200
The quotations were obtained from an independent pricing service and
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not represent actual transactions.
As a result of the defaults by various VMS entities on the
Partnership's mortgage loans and the resultant interruption in the Partnership's
cash flow and the implementation of its principal recovery plan, the Partnership
suspended distributions in 1990. No distributions were declared by the
Partnership in 1995 or 1994. In accordance with the plan of liquidation, a
distribution in the amount of $1,941,557 ($0.155 per Unit) was made in September
1992 to Unitholders. The Partnership is not anticipated to generate cash flow
from operations on a sustainable basis. Any future distributions will result
from the distributions (if any) from Investors Liquidating Trust, the proceeds
(if any) of the sale or other disposition of the Partnership's beneficial
interest in Investors Liquidating Trust, interest on cash and cash equivalents
earned prior to final liquidation.
At March 15, 1996, there were 4,299 record holders of Units.
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<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
General
Since 1990, the Partnership's business plan has been based upon
preserving and maximizing the value of its remaining assets. In August 1992, the
Partnership adopted a plan of liquidation. In accordance with the plan, an
initial distribution in the amount of $1,941,557 ($0.155 per unit) was made in
September 1992 to Unitholders. Upon disposition of the Partnership's remaining
non-cash assets and final resolution of various litigation affecting the
Partnership, the General Partner intends to complete the liquidation of the
Partnership as promptly as practicable and to distribute the remaining cash
assets, net of any reserves, to Unitholders. The General Partner does not
contemplate the making of any additional liquidating distributions until the
remaining non-cash assets have been disposed of and such litigation resolved.
Certain administrative and accounting services have been provided to
the Partnership by KPMG Peat Marwick LLP since October 27, 1994. Prior to that
date, certain administrative and accounting services were provided to the
Partnership by BMC pursuant to the BMC Services Agreement. On October 27, 1994,
the Partnership terminated the BMC Services Agreement. See Item 3, Legal
Proceedings, Item 12, Certain Relationships and Related Transactions, and Notes
3 and 7 of Notes to Financial Statements for additional descriptions of the BMC
Lawsuit and related matters.
Liquidity and Capital Resources
Cash and cash equivalents consist of cash and short-term investments.
The Partnership's cash and cash equivalents balance at December 31, 1995 and
December 31, 1994 was $2,169,802 and $2,241,059, respectively. This decrease of
$71,257 in cash and cash equivalents is due primarily to payment of the
Partnership's operating expenses, including amounts payable to the settling
class from cash distributions received from Partners Liquidating Trust, the
premium for directors and officers liability insurance purchased by the
Partnership, and litigation expenses incurred in connection with legal
proceedings affecting the Partnership during the year ended December 31, 1995.
The decrease in cash and cash equivalents due to the payment of the
Partnership's operating expenses was substantially offset by cash distributions
received in 1995 from the Liquidating Trusts, and proceeds of the sale by the
Partnership of its interest in Partners Liquidating Trust and its interest in
Chicago Wheaton Liquidating Trust. See Other Information under this Item 6,
Management's Discussion and Analysis, and Note 2 of Notes to Financial
Statements. The Partnership also earned interest income on its cash and cash
equivalents.
The Partnership's future source of liquidity is expected to be
generated through interest earned on short-term investments in investment- grade
securities, the distributions (if any) from Investors Liquidating Trust and
proceeds (if any) from the sale or other disposition of the Partnership's
beneficial interest in the trust. It is anticipated that, pending distributions
(if any) from Investors Liquidating Trust and proceeds (if any) from the sale or
other disposition of the Partnership's beneficial interest in the trust, cash
generated from interest earned on short-term investments may be less than the
Partnership's operating expenses during future periods. A portion of the
Partnership's cash will be used to meet any shortfall. The General Partner
believes that the Partnership's cash and cash equivalents, together with
interest earned on short-term investments, will be sufficient to meet the
Partnership's reasonably anticipated cash needs for the foreseeable future.
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Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
As of December 31, 1995, the General Partner has a deficit capital
balance in the Partnership of $732,702. It is currently anticipated that the
Partnership will be unable to recover this deficit upon liquidation due to the
financial limitations of the General Partner. The Partnership has no obligation
to cover this deficit on behalf of the General Partner.
In December 1994, the Partnership accrued cash distributions of
$182,085 (net of amounts due to certain third parties; see Note 2 of Notes to
Financial Statements) from Partners Liquidating Trust and Chicago Wheaton
Liquidating Trust. In 1995, the Partnership accrued cash distributions of
$259,700 (net of amounts due to such third parties; see Note 2 of Notes to
Financial Statements) from Partners Liquidating Trust and Chicago Wheaton
Liquidating Trust. Also in 1995, the Partnership sold its interest in Partners
Liquidating Trust for $39,812 and its interest in Chicago Wheaton Liquidating
Trust for $225,000. See Item 1, Description of Business, and Note 2 of Notes to
Financial Statements. The Partnership continues to monitor the extent and timing
of possible cash to be realized by and distributed from Investors Liquidating
Trust and how this may impact the liquidation of the Partnership. The General
Partner also continues its efforts to reduce the ongoing operating expenses of
the Partnership in order to maximize any further net cash return to Unitholders.
For the year ended December 31, 1995, the Partnership valued its
interest in Investors Liquidating Trusts at $1, which reflects its pro rata
share of cash assets of the Investors Liquidating Trust available for
distribution. The Partnership believes that the remaining assets in Investors
Liquidating Trust may have some value. However, those assets are not accorded
any carrying value due to the substantial uncertainties regarding the timing and
amount of potential recoveries. See Item 3, Legal Proceedings, and Note 2 of
Notes to Financial Statements for additional descriptions of the Partnership's
interest in Investors Liquidating Trust.
The Partnership's ultimate remaining distribution of cash to its
Unitholders is dependent upon, among other things: (i) the receipt of
distributions (if any) from the Investors Liquidating Trust resulting from
recoveries on remaining assets of the trust; (ii) the proceeds (if any) or the
sale or other disposition of the Partnership's interest in Investors Liquidating
Trust; (iii) the final resolution of the various litigation affecting the
Partnership (see Item 3, Legal Proceedings, Item 12, Certain Relationships and
Related Transactions, and Note 7 of Notes to Financial Statements for additional
descriptions of such litigation and related matters); and (iv) the Partnership's
ability to control its operating and liquidating expenses.
Results of Operations
Fiscal Year 1995 Compared to Fiscal Year 1994
Total income for the years ended December 31, 1995, 1994 and 1993 was
$112,762, $62,201 and $29,449, respectively. The increase in total income
between 1995 and 1994 is due to increased interest earnings on cash and cash
equivalents due to an increase in cash available for short-term investments. The
increase in total income between 1994 and 1993 was also due to increased
interest earnings on cash and cash equivalents due to an increase in cash
available for short-term investments and, to a lesser extent, an increase in the
average rate of interest earned on such investments.
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Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
Total expenses for the year ended December 31, 1995 increased to
$422,512 from a net recovery of $441,439 for the year ended December 31, 1994
due principally to a decrease in recoveries of losses on loans, notes and
interest receivable. During 1995, the Partnership recorded $524,512 in aggregate
recoveries of losses on loans, notes and interest receivable as compared to
$1,082,054 in the prior year. In 1995, the Partnership received $259,700 in cash
distributions from Partners Liquidating Trust and Chicago Wheaton Liquidating
Trust and $264,812 in connection with the sale of the Partnership's beneficial
interests in those Liquidating Trusts. In 1994, the Partnership received a
$927,875 recovery of losses on loans, notes and interest receivable in
connection with the arbitration proceeding relating to the Partnership's
interest in certain Beverly Hills, California properties commonly known as the
Buckeye properties. The Partnership also recovered in 1994 $126,549 previously
paid into escrow in connection with the class action settlement of the
litigation captioned In re VMS Securities Litigation. See Note 5 of Notes to
Financial Statements. There were no similar recoveries during 1995.
Other expenses increased to $947,024 for the year ended December 31,
1995 from $767,164 for the year ended December 31, 1994. This increase was due
primarily to settlement costs recorded by the Partnership during the 1995 in the
amount of $97,452 relating to the Levine Arbitration and the BMC Lawsuit (see
Item 1, Description of Business, and Note 7 of Notes to Financial Statements for
additional descriptions of the Levine Arbitration and related matters) and the
refund of state income taxes of $120,921 in 1994. The Partnership received no
similar refund in 1995.
The increase in other expenses was offset in part by decreases in
unitholder expenses, directors' fees, expenses and insurance, and general and
administrative expenses. Unitholder expenses declined in the amount of $80,966.
Directors' fees, expenses and insurance declined in the amount of $4,541.
General and administrative expenses declined in the amount of $7,874. Other
professional fees increased in the amount of $54,868. Unitholder expenses
decreased reflecting continuing efforts by the General Partner to control such
expenses and the shifting of some costs associated with unitholder services from
BMC to outside servicing firms. The decrease in directors' fees, expenses and
insurance is attributable to a decrease in the premium for director's and
officer's insurance and continued cost control efforts by the General Partner.
The decrease in general and administrative expenses reflect continued efforts by
the General Partner to control these costs. The increase in other professional
fees to $327,376 for the year ended December 31, 1995 from $272,508 for the year
ended December 31, 1994 reflects costs of the Bishop Ranch Litigation and the
California Quiet Title Action. (See Item 3, Legal Proceedings, and Note 7 of
Notes to Financial Statements.
These changes resulted in a net loss to the Partnership for the year
ended December 31, 1995 of ($309,750) (($0.025) per unit) compared to net income
of $503,640 ($0.040 per unit) for the year ended December 31, 1994.
Fiscal Year 1994 Compared to Fiscal Year 1993
Total expenses of the Partnership for the year ended December 31, 1994
were offset by a $1,082,054 recovery of losses on loans, notes and interest
receivable primarily recorded in connection with the Buckeye Arbitration and
cash distributions from the Liquidating Trusts. Also, total expenses for 1994
were partially offset by the receipt of $126,549 representing recovery of an
-10-
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
escrow established as part of the Class Action Settlement and by a state income
tax refund in the amount of $120,921. Total expenses of the Partnership for the
year ended December 31, 1993 were offset by a $1,309,196 recovery of losses on
loans, notes and interest receivable in connection with the Liquidating Trusts.
Expenses from lending activities for 1994 reflects a recovery of losses
on loans, notes and interest receivable of $1,082,054 primarily consisting of
the receipt of $927,875 in connection with the Buckeye Arbitration (see Item 1,
Description of Business, and Note 5 of Notes to Financial Statements for
additional descriptions of the Buckeye Arbitration and related matters) and cash
distributions of $182,085 (net of amounts due to certain third parties; see Note
2 of Notes to Financial Statements) from Partners Liquidating Trust and Chicago
Wheaton Liquidating Trust. Expenses from lending activities for 1993 reflected a
recovery of losses on loans, notes and interest receivable of $1,309,196
attributable to the receipt of cash and Liquidating Trust interests pursuant to
the Creditor Repayment Agreement, as amended. (See Item 1, Description of
Business, and Note 2 of Notes to Financial Statements for additional
descriptions of the Liquidating Trusts and related matters).
Other expenses decreased by $6,140 for 1994 from 1993. Directors' fees,
expenses and insurance declined in the amount of $44,723, and the Partnership
received a refund of state income taxes in the amount of $120,921. This decline
and the tax refund receipt were offset by increases in unitholder expenses,
other professional fees and general and administrative expenses. The decrease in
directors' fees, expenses and insurance is attributable to a decrease in the
premium for director's and officer's insurance and continued cost control
efforts by the General Partner. Unitholder expenses increased due to increases
in annual reporting services fees and other increases in printing, distribution
and other unitholder service costs. The increase in other professional fees is
attributable principally to the Levine Arbitration, the BMC Lawsuit and the
Buckeye Arbitration. See Item 1, Description of Business, Item 3, Legal
Proceedings, Item 10, Executive Compensation, and Notes 3 and 7 of Notes to
Financial Statements for additional descriptions of the Levine Arbitration and
the BMC Lawsuit; see Item 1, Description of Business, and Note 5 of Notes to
Financial Statements for additional descriptions of the Buckeye Arbitration. The
increase in general and administrative expenses of $24,311 reflects inflation
and costs incurred in connection with the termination of the BMC Services
Agreement with BMC. Also, the Partnership recovered in January 1994 $126,549 in
expenses previously paid into escrow in connection with the class action
settlement of the litigation captioned In re VMS Securities Litigation. The
Partnership realized no similar recovery in 1993.
These changes for the years ended December 31, 1994 and 1993 resulted
in a net income of $503,640 (($0.040) per Unit) for 1994 and net income of
$565,341 ($.045 per Unit) for 1993.
Other Information
During the years ended December 31, 1995, 1994 and 1993 the Partnership
did not fund any mortgage loans. There were no distributions made by the
Partnership during the years ended December 31, 1995 and 1994, respectively.
The Partnership serves as the initial trustee of Investors Liquidating
Trust. Prior to October 27, 1994, certain administrative and accounting
-11-
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition
and Results of Operations (continued)
services were provided to the Partnership by BMC, of which Mr. Levine is
president, pursuant to the BMC Services Agreement. On October 27, 1994, the
Partnership terminated the BMC Services Agreement. Since that date, the General
Partner has been obtaining documents and developing information as to the
financial condition and results of operation of Investors Liquidating Trust, and
investigating its underlying assets. Such efforts led to the determination of
the General Partner to initiate the Bishop Ranch Litigation and the California
Quiet Title Action on behalf of the Partnership and Investors Liquidating Trust.
See Item 3, Legal Proceedings. Based upon such documents and information
obtained to date, it appears that at December 31, 1995 Investors Liquidating
Trust's assets were comprised principally of illiquid junior interests in
various partnerships that hold indirect interests in certain real property
developments controlled by Banyan Mortgage Investment Fund, and certain other
miscellaneous assets. Although, the General Partner's efforts to collect
documents and information regarding the assets of Investors Liquidating Trust
continues, at present the General Partner lacks sufficient information regarding
the value or collectibility of any of the assets of Investors Liquidating Trust
(including but not limited to the ultimate outcome of the Bishop's Ranch
Litigation and the California Quiet Title Action). Accordingly, the General
Partner is unable to predict with any degree of certainty the timing or
proceeds, if any, to Investors Liquidating Trust of any disposition of or
recovery on any of the remaining assets of the trust (including the timing or
proceeds of the Bishop Ranch Litigation or the California Quiet Title Action).
Item 7. Financial Statements
See Index to Financial Statements on Page F-1 of this Report.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There have been no changes in, or reported disagreements, with the
accountants of the Partnership on any matter of accounting principles, practices
or financial statement disclosure.
-12-
<PAGE>
PART III
Item 9. Directors and Principal Executive Officers of the Registrant
The directors and executive officers of the general partner are as
follows:
David G. Blalock, Sr. Director
E. James Wisner Director
Philip H. Brady, Jr. Director, President and Chief Financial
Officer
DAVID G. BLALOCK, SR., age 77, has served as a Director of the
Partnership since 1986. Mr. Blalock's term of office as Director will continue
until the next annual meeting of the shareholders of the General Partner or
until his successor shall has been elected and qualified. He is also one of the
members of the boards of directors of VMLPZ Mortgage Investors, Inc. Mr. Blalock
is an attorney. He was a partner in the Newport News, Virginia law firm of
Marshall, Blalock & Garner, which firm was dissolved in January 1995. From 1988
to June 1990, he was a member of the board of directors of Jefferson National
Bank/Tidewater, Newport News, Virginia, successor to American Bank, of which he
was chairman of the board from 1977 to 1988. From 1962 to 1969, he also served
as chairman of the board of directors of Associated Mortgage Companies of
Virginia, Inc.
E. JAMES WISNER, age 54, has served as a Director of the Partnership
since 1986. Mr. Wisner's term of office as Director will continue until the next
annual meeting of the shareholders of the General Partner or until his successor
shall has been elected and qualified. He is also one of the members of the
boards of directors of VMLPZ Mortgage Investors, Inc. Mr. Wisner is president
and chairman of the board of Financial Service Corporation. Mr. Wisner has been
a consultant for several major insurance companies, real estate syndicators and
oil and gas syndicators. Mr. Wisner was with Connecticut General Life Insurance
Company from 1964 to 1984; he was second vice president of marketing services
between 1979 and 1981 when he became the president of Connecticut General
Management Resources, Inc., a subsidiary of Connecticut General Life Insurance
Company which organized and managed tax advantaged investment products.
PHILIP H. BRADY, JR., age 57, has served as a Director of the
Partnership since 1986. Mr. Brady's term of office as Director will continue
until the next annual meeting of the shareholders of the General Partner or
until his successor has been elected and qualified. Mr. Brady has served as
President and Chief Financial Officer of the General Partner since September 12,
1994. He is also one of the members of the boards of directors, and president
and chief financial officer, of VMLPZ Mortgage Investors, Inc. Mr. Brady is
currently an independent financial consult ant. From December 1984 to May 1990
he was president of Merchco Investment Corporation and Senior Vice President and
Director of MerchantsBank of Boston, Massachusetts. From December 1980 to
November 1984, he was senior vice president of real estate for Homeowners
Federal Savings & Loan Association in Boston, Massachusetts. In such position,
he was responsible for national commercial real estate lending, including joint
ventures, various types of mortgage loans, land sale-leasebacks and condominium
conversions. Prior to that, he was director of real estate of the Metropolitan
Transit Authority, New York State, where he was responsible for the purchase,
sale and leasing of real estate. Mr. Brady was a trustee of the Dime Savings
Bank in Williamsburgh, New York, from 1976 to 1980 and was a director of
Greenery Rehabilitation Group, Inc. from 1985 to 1993.
-13-
<PAGE>
Item 10. Executive Compensation
Director Compensation
The Directors, other than Mr. Brady since his appointment as Acting
President and Acting Chief Financial Officer on September 12, 1994, are paid an
annual fee of $15,000, payable quarterly, plus $875 for each Board meeting,
including meetings of the audit committee, attended in person and $250 an hour
for each Board meeting, including meetings of the audit committee, attended via
telephonic conference call. In addition, each Director is reimbursed for
out-of-pocket expenses incurred in attending meetings of the Board.
Executive Compensation
Compensation paid to Executive Officers of the General Partner for the
years ended December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------------
Annual Compensation Awards Payouts
- -------------------------- ------------------------------------------------------------------- -----------------------
Other
Annual Restricted All Other
Compensa- Stock Options/ LTIP Compen-
Year Salary Bonus(2) tion (3) Award(s) SARs (#) Payouts sation
---- ------ -------- -------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip H. Brady, Jr., 1995 $65,000 n/a n/a n/a n/a n/a n/a
President, Chief 1994 $14,089 n/a $16,391 n/a n/a n/a n/a
Financial Officer 1993 n/a n/a n/a n/a n/a n/a n/a
and Director
Leonard G. Levine, 1995 n/a n/a n/a n/a n/a n/a n/a
President and Chief 1994 $31,935 n/a n/a n/a n/a n/a n/a
Executive Officer (1) 1993 $46,024 $24,135 n/a n/a n/a n/a n/a
<FN>
(1) No executive officers of the General Partner of the Partnership earned
more than $100,000 in salary and bonus.
(2) See incentive compensation program disclosure below with respect to Mr.
Levine.
(3) In the case of Mr. Brady, the amount set forth under the heading "Other
Annual Compensation" reflects fees paid during 1994 to Mr. Brady in his
capacity as a Director of the General Partner of the Partnership prior
to his becoming the President and Chief Financial Officer on September
12, 1994. Mr. Brady currently receives no compensation for his services
as a Director.
</FN>
</TABLE>
Mr. Brady has served as President and, as such, Chief Executive
Officer, Chief Financial Officer and Director of the Partnership and the General
Partner since September 12, 1994. Prior to that date, he served only as a
Director of the General Partner. There is no employment agreement between Mr.
Brady and the Partnership or the General Partner. In consideration of his
employment, Mr. Brady receives compensation from the General Partner at an
annual rate equal to $65,000 per year, plus any bonus which may be granted at
the discretion of the Board of Directors of the General Partner. No bonus was
granted to Mr. Brady in respect of 1995.
Mr. Levine served through September 12, 1994 as President and Chief
Executive Officer of the Partnership pursuant to a Second Amended and Restated
Employment Agreement dated as of December 31, 1992, and as President of the
-14-
<PAGE>
Item 10. Executive Compensation (continued)
General Partner. This agreement provided that Mr. Levine would be employed
through December 31, 1993 with automatic one year renewals thereafter unless
either the General Partner or Mr. Levine gave the other notice of termination
before March 31 preceding the end of the current employment period.
In consideration of his employment, Mr. Levine received compensation at
an annual rate equal to $46,024 per year. Further, Mr. Levine was eligible to
receive compensation, which was calculated and earned on a calendar year basis,
under an incentive program included in his employment agreement based upon the
following: (i) 0.56% of the Partnership's collateralized claims which were
converted into cash; (ii) 1.35% of the amount of the Partnership's unsecured
claims which were converted into cash; (iii) the percentage increase in the
Partnership's market capitalization between January 1, 1990 and the end of each
calendar year (0.25% of the first 10% increase, 0.5% of the next 10% increase
and 1.00% of any increase in excess of 20%); and (iv) 0.1% of the amount of cash
distributions to Unitholders. The total incentive compensation that Mr. Levine
might have received in any year (on a cumulative basis) was subject to certain
deferrals and restrictions. Any amounts earned during or prior to calendar year
1993 which were deferred were due under the terms of his employment agreement on
March 31, 1994. In order to be eligible to receive the incentive compensation
for any calendar year, Mr. Levine was required to be employed on March 31 of the
following year. Except as provided below, any incentive compensation which was
not paid prior to Mr. Levine's termination was forfeited.
Mr. Levine's employment agreement provided, among other things, that if
the General Partner terminated Mr. Levine for cause, all incentive compensation
not previously paid to Mr. Levine would be forfeited and he would not be
entitled to any severance payment. If Mr. Levine were terminated without cause,
he would be entitled to a 90-day continuation of his salary and a severance
payment equal to one year's salary plus all incentive compensation earned
through the date of his termination (includ ing incentive compensation based
upon assets converted into cash within one year following his termination in
accordance with an expression of interest received by the Partnership prior to
Mr. Levine's termination), plus an amount equal to the full cost of continuing
Mr. Levine's health benefits for one year.
On September 12, 1994, the General Partner terminated the employment by
the Partnership of Mr. Levine, including Mr. Levine's employment as President of
the General Partner. On or about October 31, 1994, Mr. Levine initiated the
Levine Arbitration against the Partnership, claiming $127,567, plus interest and
attorneys' fees, on account of the termination of his employment. In the second
quarter of 1995 the Partnership settled the Levine Arbitration. As a part of
such settlement, the Partnership paid $90,000 to Levine in full satisfaction of
his claims in the Levine Arbitration. See Item 1, Description of Business, and
Note 7 of Notes to Financial Statements for additional descriptions of the
Levine Arbitration and the settlement thereof.
-15-
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
As of March 15, 1996 no person or entity owns of record or is known by
the Partnership to be the beneficial owner of more than five percent (5%) of the
Units of the Partnership.
The following table sets forth the ownership of Units directly or
indirectly by the directors and executive officers of the General Partner of the
Partnership as of March 15, 1996:
<TABLE>
<CAPTION>
Amount of
Name of Beneficial Percent of
Title of Class Beneficial Owner Ownership Interest
- ------------------------------ ------------------------------------------ ------------------ ----------------------
<S> <C> <C> <C>
Depositary Units E. James Wisner 250 Units Less than 1%
Depositary Units All Directors and Officers of
the General Partner as a group 250 Units Less than 1%
(7 persons)
</TABLE>
Item 12. Certain Relationships and Related Transactions
Banyan Management Corp. ("BMC") performed certain administrative
services on behalf of the Partnership for which it was reimbursed pursuant to
the Administrative Services Agreement, dated as of February 27, 1994, between
the Partnership and BMC (the "BMC Services Agreement") at cost. Such services
ceased on or before October 27, 1994 when the Partnership terminated the BMC
Services Agreement. BMC is owned by the Partnership and the Banyan funds. Mr.
Levine, the former President of the General Partner, is the president of BMC.
Through October 27, 1994 when the BMC Services Agreement was terminated, Messrs.
Karnes, Hansen and Higgins were compensated by BMC and their compensation was
historically included in the administrative costs allocated by BMC to and
reimbursed by the Partnership. Certain directors/trustees of the eight Banyan
funds and their general partners, including the Directors of the General Partner
of the Partnership, have served as directors of BMC but receive no additional
compensation. In November 1994, the Directors of the General Partner resigned
their respective directorships at BMC. Administrative costs reimbursed by the
Partnership to BMC for the period January 1, 1994 through October 27, 1994 and
the year ended December 31, 1993 totaled $73,088 and $95,384, respectively. No
such costs were reimbursed by the Partnership to BMC in 1995. BMC charged its
operating expenses among the Banyan funds for which it performed services and
acted as a common paymaster for the Partnership.
Reference is made to Item 3, Legal Proceedings, and Notes 3 and 7 of
the Notes to Financial Statements for the amount of administrative costs paid
to, and additional descriptions of the BMC Lawsuit and related matters.
-16-
<PAGE>
Item 13. Exhibits, Lists and Reports on Form 8-K
The following exhibits are incorporated herein by reference from the
Registrant's Registration Statement on Form S-11 (file number 2-94347),
referencing the exhibit numbers used in such Registration Statement.
Exhibit Nos. Description
(3) and (4) Agreement of and First Amendment to the Certificate of
Limited Partnership
The following exhibit is incorporated herein by reference from the Form
10-K Annual Report dated December 31, 1987 (file number 0-15027)
Exhibit No. Description
3(a) Amendment to the Agreement of Limited Partnership
The following exhibits are incorporated herein by reference from the
Form 10-KSB Annual Report dated December 31, 1984 (file number 0-15027)
Exhibit Nos. Description
10.1 Second Amended and Restated Employment Agreement between
the Partnership and Leonard G. Levine
10.2 Administrative Services Agreement between the Partnership
and Banyan Management Corp.
10.3 Agreement and Declaration of Trust dated as of November
17, 1993 (Partners Liquidating Trust)
10.4 Amended and Restated Declaration of Trust dated as of
December 29, 1994 (Partners Liquidating Trust)
10.5 Agreement and Declaration of Trust dated as of November
17, 1993 (Chicago Wheaton Liquidating Trust)
10.6 Agreement and Declaration of Trust dated as of November
17, 1993 (Investors Liquidating Trust)
No Reports on Form 8-K were filed during the quarter ended December 31,
1995.
An annual report will be sent to the Unitholders subsequent to this
filing and the Partnership will furnish copies of such report to the Commission
at that time.
-17-
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Partnership
caused this Report to be signed on its behalf by the undersigned, thereunto duly
authorized.
VMTGZ MORTGAGE INVESTORS L.P. II
By: VMTGZ Mortgage Investors II, Inc.,
General Partner
By: /s/ Philip H. Brady, Jr. Date: March 29, 1996
Philip H. Brady, Jr.,
President
In accordance with the Exchange Act, this Report has been signed below by
the following persons on behalf of the Partnership and in the capacity and on
the dates indicated.
By: VMTGZ Mortgage Investors II, Inc.,
General Partner
By: /s/ Philip H. Brady, Jr. Date: March 29, 1996
Philip H. Brady, Jr.,
President
By: /s/ Philip H. Brady, Jr. Date: March 29, 1996
Philip H. Brady, Jr.,
Chief Financial Officer
By: /s/ David G. Blalock, Sr. Date: March 29, 1996
David G. Blalock, Sr., Director
By: /s/ Philip H. Brady, Jr. Date: March 29, 1996
Philip H. Brady, Jr., Director
By: /s/ E. James Wisner Date: March 29, 1996
E. James Wisner, Director
-18-
<PAGE>
EXHIBIT INDEX
Exhibit No. Page No.
27.1 Financial Data Schedule (EDGAR Filer) 20
-19-
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Index to Financial Statements
Pages
Report of Independent Accountants F-2
Balance Sheets at December 31, 1995 and 1994 F-3
Statements of Income and Expenses For the Years Ended
December 31, 1995, 1994 and 1993 F-4
Statements of Partners' Capital For the Years Ended
December 31, 1995, 1994 and 1993 F-5
Statements of Cash Flows For the Years Ended
December 31, 1995, 1994 and 1993 F-6
Notes to Financial Statements F-7 to F-12
F - 1
<PAGE>
Report of Independent Accountants
To the Partners of VMTGZ Mortgage Investors L.P. II:
We have audited the Financial Statements of VMTGZ Mortgage Investors
L.P. II (a limited partnership) listed in the index on Page F-1 of this Form
10-KSB. 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
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As described in Note 1 to the Financial Statements, the Board of
Directors of the Partnership's General Partner has approved a plan of
liquidation. In accordance with the terms of the Partnership Agreement, the plan
provides for the dissolution of the Partnership upon repayment or other
disposition of all mortgage loans held by the Partnership and receipt of final
payment with respect to all investments. Upon disposal of the Partnership's
remaining assets and resolution of pending litigation, the General Partner will
dissolve the Partnership by distributing any available cash and terminating the
Partnership.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of VMTGZ Mortgage
Investors L.P. II as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 in conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
March 28, 1996
F - 2
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Balance Sheets
December 31, 1995 and 1994
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -------
<S> <C> <C>
Cash and Cash Equivalents $ 2,169,802 $ 2,241,059
Investment in Liquidating Trusts 1 1
Distributions Receivable from Liquidating Trusts --- 196,616
Prepaid Insurance 84,250 78,892
State Income Tax Refund Receivable --- 35,483
Other Assets 6,837 26,175
----------- -----------
Total Assets $ 2,260,890 $ 2,578,226
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Accounts Payable and Accrued Expenses $ 323,435 $ 273,602
Distribution From Liquidating Trust Payable to Settling
Class --- 57,419
------------ ------------
Total Liabilities 323,435 331,021
------------ ------------
Commitments and Contingencies --- ---
Partners' Capital
Partners Capital (12,526,153 Depositary
Units Outstanding) 1,937,646 2,247,396
Treasury Units, at Cost, for 1,222 Depositary Units (191) (191)
------------ ------------
Total Partners' Capital 1,937,455 2,247,205
------------ ------------
Total Liabilities and Partners' Capital $ 2,260,890 $ 2,578,226
=========== ===========
Book Value Per Unit (12,524,931 Depositary Units
Outstanding) $ 0.155 $ 0.179
============== ==============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F - 3
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Statements of Income and Expenses
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
--------- --------- --------
<S> <C> <C> <C>
INCOME
Interest Income $ 112,762 $ 62,201 $ 29,449
EXPENSES
Expenses From Lending Activities:
(Recovery of) Provision for Losses on Loans, Notes
and Interest Receivable (524,512) (1,082,054) (1,309,196)
Other Expenses:
Unitholder Expenses 141,079 222,045 174,968
Directors' Fees, Expenses and Insurance 208,143 212,684 257,407
Other Professional Fees 327,376 272,508 184,392
Refund of State Income Taxes -- (120,921) --
General and Administrative 172,974 180,848 156,537
Settlement Costs for Arbitration and Litigation with Related Parties 97,452 -- --
-----------
Total Other Expenses 947,024 767,164 773,304
(Recovery of) Class Action Settlement Costs and Expenses -- (126,549) --
and Expenses
Total (Recoveries) Expenses 422,512 (441,439) (535,892)
----------- ----------- -----------
Net Income (Loss) $ (309,750) $ 503,640 $ 565,341
=========== =========== ===========
Net Income (Loss) Allocated to
General Partner (1%) $ (3,098) $ 5,036 $ 5,653
=========== =========== ===========
Net Income (Loss) Allocated to
Unitholders (99%) $ (306,652) $ 498,604 $ 559,688
=========== =========== ===========
Net Income (Loss) Per Unit (Based on Weighted Average Number of
Depositary Units Outstanding of 12,524,931 during 1995, 1994 and 1993) $ (0.025) $ 0.040 $ 0.045
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F - 4
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Statements of Partners' Capital
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
General Treasury
Partner Unitholders Units Total
-------- ----------- --------- -------
<S> <C> <C> <C> <C>
Partners' Capital (Deficit),
December 31, 1992 $ (740,293) $ 1,918,708 $ (191) $ 1,178,224
Net Income (Loss) 5,653 559,688 -- 565,341
----------- ----------- ----------- -----------
Partners' Capital (Deficit),
December 31, 1993 (734,640) 2,478,396 (191) 1,743,565
Net Income (Loss) 5,036 498,604 -- 503,640
----------- ----------- ----------- -----------
Partners' Capital (Deficit),
December 31, 1994 (729,604) 2,977,000 (191) 2,247,205
Net Income (Loss) (3,098) (306,652) -- (309,750)
----------- ----------- ----------- -----------
Partners' Capital (Deficit),
December 31, 1995 $ (732,702) $ 2,670,348 $ (191) $ 1,937,455
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F - 5
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---------- --------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C>
NET INCOME (LOSS) $ (309,750) $ 503,640 $ 565,341
Adjustments to Reconcile Net Income(Loss) to
Net Cash Used In Operating Activities:
Amortization of Premium on Investments -- 12,187
Net Change In:
Investment in Liquidating Trusts -- 27,906 (27,907)
Distributions Receivable from Liquidating Trusts 196,616 (196,616) --
State Income Tax Refund Receivable 35,483 (35,483) --
Prepaid Insurance (5,358) (31,979) 42,216
Other Assets 19,338 16,342 (720)
Accounts Payable and Accrued Expenses 49,833 141,757 (71,329)
Distribution from Liquidating Trust Payable to Settling Class (57,419) 57,419 --
----------- ----------- -----------
Net Cash Provided by (Used in) Operating Activities (71,257) 495,173 507,601
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase (Maturity) of Marketable Securities -- 780,000 (792,187)
----------- ----------- -----------
Net Cash (Used In) Provided by Investing Activities -- 780,000 (792,187)
Net Increase (Decrease) in Cash and Cash Equivalents (71,257) 1,275,173 (284,586)
Cash and Cash Equivalents at Beginning of Year 2,241,059 965,886 1,250,472
----------- ----------- -----------
Cash and Cash Equivalents at End of Year $ 2,169,802 $ 2,241,059 $ 965,886
=========== =========== ===========
</TABLE>
[S] [C] [C] [C] [C] [C] [C]
The accompanying notes are an integral part of the financial statements.
F - 6
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Notes to Financial Statements
1. Organization and Basis of Presentation
VMTGZ Mortgage Investors L.P. II (the "Partnership" formerly known as
Banyan Mortgage Investors L.P. II) was organized on September 30, 1985 as a
Delaware limited partnership. The Partnership's business purpose was to invest
primarily in mortgage loans to entities affiliated with VMS Realty Partners and
its affiliates ("VMS") collateralized by existing income-producing properties.
Through a public offering, the Partnership sold 12,526,153 units resulting in
total proceeds of $124,281,863 to the Partnership. The units are evidenced by
depositary receipts which are freely transferable by the holders of the units
(the "Unitholders"). The Partnership 's units are currently traded
over-the-counter and their market is largely inactive. The Partnership
terminated its relationship with VMS Realty Partners in 1990.
On October 4, 1993, the stock (the "Stock") of the Partnership's general
partner, VMTGZ Mortgage Investors, Inc. (the "General Partner" formerly known as
Banyan Mortgage Investors II, Inc.), was transferred to Banyan Mortgage
Investors Holding Corp. ("Holding Corp.") pursuant to the terms of the class
action settlement entered into by the Partnership on September 25, 1991 (the
"Settlement"). Holding Corp. is an Illinois corporation owned solely by Mr.
Leonard G. Levine, the former President of the General Partner. Mr. Levine is
also the sole director of Holding Corp. and President of Banyan Management Corp.
Refer to Note 3 "Transactions with Affiliates" and Note 7, "Arbitration and
Litigation with Related Parties". Under the terms of the Settlement, VMS Realty,
Inc., the prior owner of the Stock, agreed to transfer the Stock to an entity
designated by the Partnership in return for certain releases. Holding Corp. has
transferred the Stock to a ten-year irrevocable voting trust, the trustees of
which are the three directors of the General Partner. Pursuant to the terms of
the Voting Trust Agreement between Holding Corp. and the trustees of the Voting
Trust Agreement, the trustees are required to vote the stock of the General
Partner in the best interests of the Unitholders of the Partnership.
On August 19, 1992, the General Partner announced adoption of a plan of
liquidation (the "Plan"). In accordance with the Plan, an initial liquidating
distribution of $1,941,557 ($0.155 per unit), was made on September 25, 1992, to
all unitholders of record as of August 31, 1992. As permitted by the Plan, the
General Partner established a cash reserve fund equal to approximately
$1,300,000 in 1992 to settle the Partnership's obligations and to pay the
expenses associated with liquidation and any other contingencies that may arise
during liquidation. Upon disposal of the Partnership's remaining assets (its
interests in certain liquidating trusts established pursuant to the finalization
of the Creditor Repayment Agreement with VMS Realty Partners and its affiliates)
and resolution of pending litigation, the General Partner will complete
liquidation of the Partnership by distributing any available cash and
terminating the Partnership. Future distributions, if any, will be announced
from time to time by the General Partner.
Management is uncertain as to the proceeds that the Partnership may
ultimately realize from its investments in the remaining liquidating trust. The
Partnership cannot be liquidated until such investment is sold or otherwise
disposed of. The Partnership continues to carry its assets and liabilities at
historical cost and believes that the carrying values of the Partnership's
assets and liabilities would not differ materially if the financial statements
were presented under a liquidation basis of accounting.
2. Summary of Significant Accounting Policies
A. Cash and Cash Equivalents
Cash and cash equivalents represent deposits held with financial
institutions in demand and money market accounts, as well as obligations of the
US Government and its agencies that have maturities of three months or less at
the date of purchase. The Partnership records cash and cash equivalents at
amortized cost which approximates market value.
F - 7
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Notes to Financial Statements (Continued)
B. Investment in Liquidating Trusts
On November 18, 1993, the Partnership executed the fifth amendment to the
Creditor Repayment Agreement and, in connection therewith, received
distributions of cash totaling $1,281,289 and interests in three liquidating
trusts (Partners Liquidating trust, Chicago Wheaton Liquidating trust and
Investors Liquidating trust) established for the benefit of unsecured creditors
of VMS. The trusts held cash as well as secured and unsecured, notes and
mortgages to individuals, entities, or real estate properties, most of which
were subordinated to those of senior lenders. The Partnership records its
investment in the liquidating trusts at its pro rata portion of the cash assets
available for distribution in the trusts. Despite the fact that the Partnership
believes that the notes and mortgages remaining in the trusts may have value,
they are not accorded any carrying value due to the uncertainties regarding the
timing and amount of any potential recovery. At December 31, 1995 and December
31, 1994, that pro rata portion amounted to $1. The Partnership records its
portion of all receipts from the trusts as a reduction in the Provision for
Losses on Mortgage Loans, Notes and Interest Receivable, when distributions are
declared by the trusts.
During 1994, Partners Liquidating trust declared a distribution in the
amount of $196,616 which was recorded as a receivable at December 31, 1994.
Pursuant to a settlement agreement with a settling class (the "Settling Class"),
roughly 29% of all distributions from that trust are to be remitted to the
Settling Class. Accordingly, the Partnership recorded a payable at December 31,
1994, in the amount of $57,419, representing the Settling Class's portion of the
December 29, 1994 distribution. That amount was paid to the Settling Class
during 1995.
In 1995, Partners Liquidating trust and Chicago Wheaton Liquidating trust
together declared, and the Partnership received, $338,100 in additional
distributions. Of those distributions, $77,855 was remitted to the Settling
Class pursuant to the above agreement. Also during 1995, the Partnership sold
its beneficial interests in Partners Liquidating trust and Chicago Wheaton
Liquidating trust to third parties for $39,812 and $225,000, respectively. Those
sales have been recorded as reductions in the Provision
for Losses on Mortgage Loans, Notes and Interest Receivable during 1995.
C. Income Taxes
No provision or credit for Federal income taxes has been recorded in the
Partnership's financial statements because the results of its operations are
included in the income tax returns of the Partners.
D. Book Value and Net Income(Loss) per Unit
The Book Value per Unit is calculated by dividing Total Partner's Capital
by the number of Depositary Units outstanding at the end of the respective
years. Net Income(Loss) per Unit is computed by dividing Net Income(Loss) by the
weighted average number of units outstanding during the year.
E. Reclassifications
Certain reclassifications have been made to the previously reported
financial statements in order to provide comparability with the current
financial statements. Those reclassifications have not changed the Partnership's
previously reported operating results.
F - 8
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Notes to Financial Statements (Continued)
3. Transactions With Affiliates
Administrative costs, primarily salaries and general and administrative
expenses, have been reimbursed by the Partnership to Banyan Management Corp.
("BMC") prior to the decision of the General Partner to terminate the
Partnership's contractual relationship with BMC on October 27, 1994. Pursuant to
the former administrative services agreement between BMC and the Partnership
from January 1, 1993 through October 27, 1994 these costs were charged to each
Banyan fund based upon the actual number of hours spent by BMC personnel on
matters related to that fund. The Partnership's costs during the period from
January 1 through October 27, 1994, and for all of 1993 were $73,088 and
$95,384, respectively.
4. Treasury Units
On August 31, 1992, the Partnership terminated its Dividend Reinvestment
Plan. Unitholders in the Plan received a certificate for any full Depositary
Units held and cash for any fractional Units. In conjunction with the payment of
cash for fractional Units under the Plan, the Partnership acquired 1,222 Units
for $191. The Units are held as Treasury Units by the Partnership.
5. Settled Litigation
The Partnership, Banyan Mortgage Investors L.P. III ("BMLP III") and Banyan
Mortgage Investment Fund ("BMIF") previously agreed to resolve, by means of
arbitration, issues surrounding the amount of compensation, if any, payable by
BMIF to the Partnership and BMLP III in consideration for the Partnership's and
BMLP III's agreement to relinquish, and take no action with respect to their
interests in certain Beverly Hills, California properties commonly known as the
Buckeye properties at the time that BMIF took control of certain of these
properties and received cash and certain other consideration in 1990. On July
20, 1994, a majority of two members of a panel of three arbitrators awarded the
Partnership and BMLP III approximately $3,768,000 in connection with this
arbitration. In response to BMIF's announced intention to challenge the
decision, on July 25, 1994 the Partnership filed suit in the Circuit Court of
Cook County, Illinois, to confirm the arbitration award. Pursuant to a
settlement agreement negotiated with BMIF, the award and the subsequent
litigation were settled by the payment of $3,250,000 on October 17, 1994. The
Partnership recorded $927,875, representing its 28.55% portion of the award, as
Recovery of Losses on Mortgage Loans, Notes and Interest Receivable.
6. Recovery of Class Action Settlement Costs and Expenses
On January 25, 1994, the Partnership received net proceeds of $126,549
relating to a recovery of payments previously made into an escrow established as
part of the class action settlement of the litigation captioned In re VMS
Securities Litigation. The escrow was established to provide the officers and
directors of the Partnership's general partner with monies to fund the cost of
any litigation in which they may be named as defendants post settlement of the
class action. Subsequently, the directors released the proceeds from the escrow
and the Partnership purchased an insurance policy to cover the officers and
directors.
F - 9
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Notes to Financial Statements (Continued)
7. Arbitration and Litigation with Related Parties
On September 12, 1994, the Board of Directors (the "Board") of the General
Partner voted unanimously to terminate, for cause, the employment by the
Partnership of Mr. Leonard G. Levine, including Mr. Levine's employment as
President of the General Partner. The Board also elected Mr. Philip H. Brady,
Jr., one of its members, to serve as Acting President and Acting Chief Financial
Officer of the General Partner. On September 16, 1994, the Board of the General
Partner received notice that other officers of the General Partner, including
the Senior Vice President of Finance and Administration, the First Vice
President, and the Vice President and General Counsel, had resigned effective
September 12, 1994.
Levine Arbitration
On or about October 31, 1994, Mr. Levine initiated an arbitration
proceeding against the Partnership before the American Arbitration Association.
Mr. Levine claimed that he was entitled to an award of $127,567 plus interest
and attorneys' fees on account of the termination of his employment by the
Partnership. In May 1995, the Partnership settled this arbitration proceeding
and a consent award was entered providing for a gross severance payment of
$90,000 from the Partnership to Mr. Levine.
That amount was paid during 1995.
BMC/Levine Litigation
On October 27, 1994, the Board determined that BMC had breached certain of
its obligations to the Partnership pursuant to the BMC Services Agreement and
resolved, unanimously, to terminate the BMC Services Agreement. In a
simultaneous action, the Board resolved to engage KPMG Peat Marwick LLP to
provide certain administrative and other services formerly provided by BMC.
Subsequently, the Partnership made various demands upon BMC for return of the
Partnership's books and records. On November 9, 1994, when these demands proved
unsuccessful, the Partnership and VMLPZ Mortgage Investors L.P. (formerly known
as Banyan Mortgage Investors L.P.) commenced litigation against BMC and Mr.
Levine, who continues to serve as President of BMC. In its lawsuit against BMC
and Mr. Levine, the Partnership sought to recover possession of its funds, books
and records which were under BMC's and Mr. Levine's control. The Partnership
also sought to recover money damages and other relief against BMC and Mr.
Levine. On November 22, 1994, the court ordered BMC to make the books and
records of the Partnership available for copying by the Partnership. In
addition, the court ordered Mr. Levine not to interfere with the Partnership's
copying of its books and records.
BMC answered the complaint in the BMC Lawsuit on November 22, 1994 and
denied certain of the material allegations therein and asserted certain
defenses. Mr. Levine answered the complaint on or about January 25, 1995 and
also denied certain of the material allegations therein and asserted certain
additional defenses. On December 1, 1994 BMC filed a counterclaim against the
Partnership. In its counterclaim, BMC sought to recover $35,000 in contract
termination fees from the Partnership under the BMC Services Agreement and for
an order requiring the Partnership to transfer the capital stock of BMC owned by
the Partnership to BMC. The Partnership denied the material allegations of BMC's
counterclaim and asserted certain additional defenses. The General Partner has
conducted settlement negotiations in the BMC Lawsuit. However, the General
Partner is unable to predict the ultimate outcome of the BMC Lawsuit at this
time. The Partnership and VMLPZ Mortgage Investors, Inc. have filed a motion for
summary judgment on BMC's counterclaim. The court has scheduled a hearing on
that motion for May 2, 1996. The Partnership recorded a provision for
arbitration and litigation with related parties in the amount of $7,452 in
F - 10
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Notes to Financial Statements (Continued)
connection with the BMC Lawsuit. As of December 31, 1995 the Partnership had
established a reserve in the aggregate amount of $7,452 for the BMC Lawsuit,
which reserve is included in accounts payable and accrued expenses.
The Bishop Ranch Litigation
In September 1995, the Partnership, for itself and as trustee of Investors
Liquidating Trust, together with Monterey County Partners ("MCP"), commenced
litigation against BMIF Monterey County Limited Partnership (the "BMIF Monterey
Partnership") and BMIF Monterey County Corp. ("BMIF Monterey Corp."), which is
the general partner of the BMIF Monterey Partnership, in the Circuit Court of
Cook County, Illinois, County Department, Chancery Division (the "Bishop ranch
Litigation"). It is the position of Investors Liquidating Trust that it
indirectly owns a substantial economic interest in the BMIF Monterey Partnership
through its indirect interest in MCP, which is the limited partner in the BMIF
Monterey Partnership. BMIF Monterey Corp., which is a subsidiary of Banyan
Mortgage Investment Fund, is the general partner of the BMIF Monterey
Partnership. The BMIF Monterey Partnership owns an approximately 565-acre
residential development project in Monterey County, California known as Bishop
Ranch.
In the Bishop Ranch Litigation, MCP seeks the judicial removal of BMIF
Monterey Corp. as general partner of the BMIF Monterey Partnership and the
appointment of another suitable person or entity as successor general partner to
manage the affairs of the BMIF Monterey Partnership. MCP also requests the court
to enter a declaratory judgment to the effect that BMIF Monterey Corp. is not
entitled to any "Priority Return" or "Preferred Return" (i.e., interest) on any
portion of its capital account in the BMIF Monterey Partnership. The
Partnership, for itself and as trustee of Investors Liquidating Trust, further
requests the court to grant relief under the Illinois Uniform Fraudulent
Transfer Act by establishing in favor of MCP an appropriate capital account in
the BMIF Monterey Partnership of not less than $4.8 million and to declare set
aside any "Priority Return" or "Preferred Return" claimed by BMIF Monterey Corp.
MCP also seeks a court-ordered accounting by BMIF Monterey Corp. with respect to
its management of the affairs of the BMIF Monterey Partnership and the
imposition of a constructive trust equitable liens upon BMIF Monterey Corp., for
the benefit of the BMIF Monterey Partnership, over and upon all of the books,
records, properties and funds of the BMIF Monterey Partnership. In February
1996, the court determined that certain claims which the Partnership, for itself
and as trustee of Investors Liquidating Trust, had asserted against BMC and
Leonard G. Levine for breach of fiduciary duty in the Bishop Ranch Litigation
were subsumed in the BMC Lawsuit, and dismissed those claims from the Bishop
Ranch Litigation.
The parties have commenced various pre-trial discovery in the Bishop Ranch
Litigation. Management believes the Partnership has meritorious claims in this
matter, however, management is uncertain as to the ultimate outcome of this
litigation and the potential for, or amount of, any recovery by Investors
Liquidating Trust or the Partnership, if any.
The California Quiet Title Action
In a matter related to the Bishop Ranch Litigation, in October 1995, MCP,
for itself and derivatively for the BMIF Monterey Partnership, filed an action
against the BMIF Monterey Partnership and its mortgagees in the Monterey County,
California, Superior Court (the "California Quiet Title Action"). In the
California Quiet Title Action, MCP seeks, among other things, the cancellation
of a deed of trust (i.e., mortgage) on the Bishop Ranch property which BMIF
Monterey Corp., in its capacity as general partner of the BMIF Monterey
Partnership, executed and delivered to the agent for certain secured
F - 11
<PAGE>
VMTGZ Mortgage Investors L.P. II
(A Limited Partnership)
Notes to Financial Statements (Continued)
lenders, which collectively had loaned $20.5 million to Banyan Mortgage
Investment Fund, as collateral security for that loan. MCP also seeks to quiet
title in the Partnership to the Bishop Ranch property, free and clear of any
claims by such secured lenders or their agent.
Motions by the defendants to stay the California Quiet Title Action in
favor of the Bishop Ranch Litigation were denied without prejudice in January
1996. The defendants subsequently filed demurrers, challenging the legal
sufficiency of the pleading. Those demurrers are pending. The parties have also
commenced certain pre-trial discovery. As noted above in the Bishop Ranch
Litigation, management believes that MCP has meritorious claims in this matter,
however, management is uncertain as to the ultimate outcome of this litigation
and the potential for, or amount of, any recovery or other relief by Investors
Liquidating Trust or MCP, if any.
F - 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF VMTGZ MORTGAGE INVESTORS L.P. II AS AT AND FOR THE YEAR
ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,169,802
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,260,890
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,260,890
<CURRENT-LIABILITIES> 323,435
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,937,455
<TOTAL-LIABILITY-AND-EQUITY> 2,260,890
<SALES> 0
<TOTAL-REVENUES> 112,762
<CGS> 0
<TOTAL-COSTS> 422,512
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (524,512)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (309,750)
<INCOME-TAX> 0
<INCOME-CONTINUING> (309,750)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (309,750)
<EPS-PRIMARY> (0.025)
<EPS-DILUTED> (0.025)
</TABLE>
