ARMORED STORAGE INCOME INVESTORS 2
10-K405, 1996-03-27
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                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    Form 10-K

 X     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----   ACT OF 1934 (FEE REQUIRED)

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 (NO FEE REQUIRED)

For the transition period from                          to
                              --------------------------  ---------------------
Commission file number:  33-2732
                       ----------

     ARMORED STORAGE INCOME INVESTORS 2 (a California Limited Partnership)
     ---------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

       California                                         93-0930503
- -------------------------------                ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
 incorporation or organization)

 3839 N. 3rd St., Ste. 108, Phoenix, Arizona                  85012
 -------------------------------------------               ------------
 (Address of principal executive office)                    (Zip Code)

Registrant's telephone number, including area code:  (602) 230-1655
                                                   ------------------
Securities registered pursuant to Section 12(b) of the Act:

Title of each class                    Name of each exchange on which registered
        None                                            None
- -------------------                    -----------------------------------------

Securities registered pursuant to Section 12(g) of the Act:
       Limited Partnership Units
- ----------------------------------------
           (Title of Class)

  Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not 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-K or any amendment to this
Form 10-K.
  X
- ----
  Indicated  by check mark  whether  the  registrant  (1) has filed all  reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. Yes X     No
                                             ----     ----
  As of March 1, 1996, 4210 Limited  Partnership  Units were  outstanding.  Such
limited Partnership Units were sold at $500 per Unit. However, no market for the
Limited  Partnership  Units of the Registrant exists and therefore the aggregate
market  value of the  Units  held by  non-affiliates  of the  Registrant  is not
determinable.

Documents Incorporated by Reference
- -----------------------------------
  The Registrant's Prospectus dated April 4, 1986 filed pursuant to Rule 424 (c)
under the  Securities Act of 1933 as amended is  incorporated  by reference into
Parts I, II and III of this report  pursuant to Rule 12b-23 under the Securities
Exchange Act of 1934.


                                     PART I

Item 1.  Business
         --------
(a) General Development of Business
    -------------------------------

Armored Storage Income Investors 2 Limited  Partnership (the  "Registrant") is a
limited  partnership  formed on January  13, 1986 under the laws of the State of
California to acquire,  develop, own and operate self-storage facilities using a
minimum of mortgage  indebtedness.  The  Registrant  sold  $2,105,000 in Limited
Partnership Interests to the public pursuant to a Registration Statement on Form
S-18 under the  Securities  Act of 1933  (Registration  Statement No. 33-2732 as
amended.  The  offering  commenced on April 4, 1986 and  terminated  on April 3,
1987.

(b)  Financial Information About Industry Segments
     ---------------------------------------------
The  Registrant  operates  in  only  one  industry  segment,   the  acquisition,
development,  operation and holding for investment of  self-storage  facilities.
Information relating to the Registrant's  revenues,  operating profit (loss) and
identifiable assets attributable  thereto for the fiscal year ended December 31,
1995 is set forth under Item 8 below.

(c)  Narrative Description of Business
     ---------------------------------
The  Self-Service   Storage  Association  (SSSA)  estimates  that  approximately
one-half of the population relocates every three years. Urban areas are becoming
more  congested,  houses are getting  smaller and people are  requiring  outside
storage space to meet their needs.  Business owners, too, are feeling the crunch
as the  square  foot cost of office  space  increases.  They need an  affordable
alternative  to using  expensive  office  space for the  storage of records  and
supplies.

Self-storage  is an  innovation  responding to the needs of the  community.  The
facility  owned and  operated by the  Registrant  is designed to offer low cost,
accessible  and secure  storage space for business and personal use. In addition
to some indoor  units,  on-site,  live-in  managers  provide an extra measure of
security.  The  facility  of  the  Registrant  is  designed  for  a  comfortable
architectural  blend with the  surrounding  residential,  commercial  and retail
areas.

The  Partnership's   principal   investment   objectives  are:  (i)  to  provide
distributions of Cash Flow from operations; (ii) realize capital appreciation of
the  Partnership's  Property;  and (iii) to  preserve  and  protect  the Limited
Partners'  capital.  There can be no  assurance  that these  objectives  will be
attained.

Markets and Competition.
- -----------------------
The metropolitan  Phoenix market has one of the greatest  saturations of storage
facilities per capita in the country.  This increased  competition  has required
delaying  anticipated  rental  increases  which may reduce  availability of cash
distributions.  To meet the  competition,  the  Registrant  is,  and  intends to
continue, taking steps to maximize efficient operations and to differentiate its
facilities from the competition.

General Risks of Real Estate Ownership.
- --------------------------------------
The Registrant's  investments are subject to the risks generally incident to the
ownership of real property.  These risks include the uncertainty of cash flow to
meet fixed obligations, adverse changes in national economic conditions, changes
in the  relative  demand for space in the locale of the  facility  (and thus the
relative  price which can be charged),  adverse local market  conditions  due to
changes in general or local economic conditions or neighborhood values,  changes
in interest rates and in the availability, cost and terms of mortgage funds, the
financial condition of tenants and sellers of properties, changes in real estate
tax rates and other operating  expenses,  governmental rules and fiscal policies
including  possible  proposals  for  rent  controls,  as  well  as  acts of God,
uninsured losses and other factors.

Seasonality. The business of the Registrant is not generally subject to seasonal
- ----------
variations.

Employees.                 The Registrant has no full-time employees.
- ---------

(d)  Financial  Information About  Foreign and  Domestic Operations  and  Export
     ---------------------------------------------------------------------------
     Sales
     -----
The  registrant  does not derive any revenue from foreign  operations  or export
sales.

Item 2.  Description of Property
         -----------------------
The Partnership owns one self-storage facility located in Phoenix, Arizona.

Washington Street
- -----------------
The Registrant's  self-storage facility is located at 3036 E. Washington Street,
Phoenix,  Arizona,  in the central part of the city, with close proximity to Sky
Harbor  International  Airport and the downtown  business center.  The facility,
which  consists of both one and two level storage  buildings,  is  approximately
44,000  gross  square  feet,  built on  approximately  1.82  acres of land.  The
property  was  acquired on December  23,  1986,  for a total  purchase  price of
$1,122,000,  including a note  payable of $402,122 at 10.5% per annum  interest,
secured  by a deed of trust and  assignment  of rents.  This note was  repaid in
1987.  The  facility  was  approximately  10  years  old  at  the  time  of  the
Registrant's  purchase,  and had maintained an occupancy level averaging 90% for
the past several years. As of January 31, 1996 the facility was 97% occupied.

Item 3.  Legal Proceedings.
         -----------------
The registrant is not subject to any material pending legal proceedings.

Item 4.  Submission of Matters to a Vote of Security Holders
         ---------------------------------------------------

         None

                                     PART II

Item 5.  Market for the Registrant's Common Equity and Related  Security  Holder
         -----------------------------------------------------------------------
         Matters
         -------
(a)  Market Information.  No market for  Limited  Partnership Units exists or is
 expected to develop.

(b)  Holders.  The  approximate  number of holders of the  Registrant's  Limited
Partnership Units as of the close of business on December 31, 1995 was 337.

(c)  Dividends.  During the years ended  December 31, 1989,  through  1995,  the
Partnership made  distributions of cash to the limited  partners.  The source of
these distributions were as follows:
                  1989     1990     1991      1992      1993     1994     1995
                ------- --------- -------- --------- -------- --------- -------
From net income $ 2,869  $ 1,697  $  -0-   $ 10,502  $   -0-  $ 26,704  $ 9,585
From partners'
 capital         35,233   34,544   33,975    23,481    33,975    7,271   28,305
               -------- --------- -------- --------- -------- -------- --------

               $ 38,102 $ 36,241  $33,975  $ 33,983  $ 33,975 $ 33,975 $ 37,890
               ======== ========= ======== ========= ======== ======== =========

The Registrant will make annual distributions,  to the extent available, of Cash
Available  for  Distribution.  There is,  however,  no  assurance  as to when or
whether such cash will be available for distribution.

Cash Available for Distribution is generally the  Partnership's  Excess Reserves
and Cash Flow after  reduction for any additions to reserves,  and after payment
of all operating cash expenses.

To the extent  available,  Cash Available for  Distribution  for any Partnership
fiscal  year  will be  distributed  95% to the  Limited  Partners  and 5% to the
General  Partner.  As  referenced  to in Item 11, the  general  partner is to be
allocated a minimum of 1% of the cash available for distribution.

If in any period the General Partner determines that Partnership working capital
reserves are in excess of the amount deemed necessary for Partnership operations
(such  excess  being  called  "Excess  Reserves"),  such Excess  Reserves may be
distributed as Cash Available for Distribution.

Cash Available for  Distribution  will be distributed to the Limited Partners of
record as of the end of the applicable period in the ratio which the Units owned
by such Limited  Partner bears to the total Units owned by all Limited  Partners
entitled to such distribution.

Item 6.  Selected Financial Data
         -----------------------

The following  selected  financial data should be read in  conjunction  with the
financial  statements  and notes thereto  included  under Item 8 of this report.
This  data  is not  covered  by the  opinion  of  independent  certified  public
accountants.

                                                        For the Period
                         From Inception
                          Jan 13, 1988  Jan  1, 1989  Jan  1, 1990  Jan  1, 1991
Statement of Income           Thru          Thru          Thru          Thru
Information:              Dec 31, 1988  Dec 31, 1989  Dec 31, 1990  Dec 31, 1991
                          ------------  ------------  ------------  ------------

Total Revenues             $  151,707   $  166,423     $  168,868  $   174,295
Net Income (Loss)          $  (51,776)  $    3,020     $    1,786  $    (3,944)
Net Income (Loss) Per
Limited Partnership Unit   $   (12.18)  $      .68     $      .40  $      (.93)

                          Jan  1, 1992  Jan  1, 1993  Jan  1, 1994  Jan  1, 1995
                              Thru          Thru          Thru          Thru
                          Dec 31, 1992  Dec 31, 1993  Dec 31, 1994  Dec 31, 1995
                          ------------  ------------  ------------  ------------

Total Revenues            $   178,981   $   162,390   $  192,084   $ 191,603
Net Income (Loss)         $    11,055   $   (13,369)  $   28,109   $  10,089
Net Income (Loss) Per
Limited Partnership Unit  $      2.49   $     (3.14)  $     6.34   $    2.28


Balance Sheet             As of         As of         As of         As of
Information:              Dec 31, 1988  Dec 31, 1989  Dec 31, 1990  Dec 31, 1991
                          ------------  ------------  ------------  ------------

Total Assets              $ 1,343,872    $ 1,287,979   $ 1,256,839   $ 1,145,802
Long-Term Debt            $     -0-      $     -0-     $     -0-     $     -0-
Partners' Capital         $ 1,302,726    $ 1,267,259   $ 1,232,438   $ 1,123,515
Distributions Per Unit    $      9.51    $      9.05   $      8.61   $      8.07

                          As of         As of         As of         As of
                          Dec 31, 1992  Dec 31, 1993  Dec 31, 1994  Dec 31, 1995
                          ------------  ------------  ------------  ------------

Total Assets               $ 1,117,739   $ 1,076,397   $ 1,070,340  $ 1,047,288
Long-Term Debt             $     -0-     $     -0-     $     -0-    $     -0-
Partners' Capital          $ 1,103,365   $ 1,059,051   $ 1,055,872  $ 1,027,688
Distributions Per Unit     $      8.07   $      8.07   $      8.07  $      9.00

Item 7.  Management's discussion and Analysis of Financial Condition and Results
         -----------------------------------------------------------------------
         of Operations
         -------------

(a)(1) and (a)(2)  Liquidity and Capital Resources
                   -------------------------------

The  Registrant  was  organized  in  January,  1986 and its  offering of Limited
Partnership  Units was declared  effective April 13, 1986. The Registrant raised
$2,105,000 during the offering period.

The cash  balance at December  31,  1995 of $55,798  will be used  primarily  as
working capital reserves and, when appropriate, for distributions to the Limited
Partners.  Capital  resources  will only  increase  during the coming  year as a
result of a corresponding increase rental activity.

The registrant has acquired and developed all of its properties,  therefore,  no
significant  additional outlays of funds are expected beyond those items already
budgeted.

(a)(3)  Results of Operations
        ---------------------

Rental income for 1995 was substantially the same as 1994. The Washington Street
facility  maintained an overall occupancy level of approximately 95%. During the
year occupancy ranged from 88% to 97%. Occupancy at December 31, 1995 was 95%.

Expenses relating to property  operations  increased by 26% over the prior year.
An  unanticipated  property tax increase was  responsible  for over half of this
increase in expenses.  Partnership  administration  expenses  were  identical to
1994.

The registrant  anticipates  that rental income in 1996 will be similar to 1995.
Our market  studies  indicate  that our rates are  competitive  and future  rent
increases  will be made on a  selective  basis.  Expenses  for  1996  should  be
slightly less that in 1995 unless unforeseen circumstances occur.

Inflation has historically been a contributing  factor to the increase in rental
income levels and capital appreciation of income producing real estate. The most
significant  trends or  uncertainties  having  an  impact  on the  Partnership's
revenues are those associated with inflation, changes in demand for self-storage
spaces  and  fluctuations  in  rental  and  occupancy  rates of the  Partnership
property.  The modest  inflation levels of the past several years have kept rent
increases to a minimum.  We continue to monitor the  property's  performance  to
maximize   long-term   capital   appreciation   which  is  consistent  with  the
Partnership's objectives.

Item 8:  Financial Statements and Supplementary Data.
         -------------------------------------------

See Index to Financial Statements and Schedules attached hereto.

Item 9.      Changes  In and  Disagreements With  Accountants on  Accounting and
             -------------------------------------------------------------------
             Financial Disclosures
             ---------------------
                                    None

Item 10.     Directors and Executive Officers of the Registrant
             --------------------------------------------------

The Partnership is managed by Armored  Management,  L.L.C., a limited  liability
company whose members  include Carl R.  Spiekerman  and Dale D. Ulrich.  Armored
Management,  L.L.C.  was  elected  as general  partner by a vote of the  limited
partners in the fourth quarter of 1993. The new general partner succeeds Armored
Storage Ltd.,  which  dissolved  because of the  dissolution of its sole general
partner.

The  partnership  entered into an agreement  with  QuestCor,  inc. to manage the
Partnership's self-storage facility. The terms of the agreement are for one year
and shall be renewed on a  month-to-month  basis  unless and until  either party
terminates the agreement. The agreement provides that the manager shall receive,
as compensation for services, the greater of $1000 per month or 6% of the actual
gross cash receipts from the prior month.

The   Partnership   entered   into  an  agreement   with   QuestCor  to  provide
administrative services to the Partnership, such as investor relations, database
management   (including   data  processing  of  investor   subscriptions,   fund
distributions,   ownership  changes,   and  subscription   input),   accounting,
preparation and/or  coordinating the preparation of periodic  regulatory reports
and tax related forms.  The term of the agreement is one year and shall continue
on a  month-to-month  basis unless either party  terminates the  agreement.  The
agreement  provides that QuestCor  shall receive a fixed fee of $2,500 per month
as compensation for its services.  Additionally,  QuestCor bills the Partnership
for its cost of providing assistance in the annual Partnership audit.

(a)      Identification of Directors
         ---------------------------

Carl R.  Spiekerman  and Dale D.  Ulrich  are the  managing  members  of Armored
Management  L.L.C.  Mr.  Spiekerman,  52,  is the  sole  shareholder  and  Chief
Executive Officer of The Environmental  Group, Inc., a Phoenix based real estate
development  firm. Mr.  Spiekerman holds a Bachelor's Degree from the University
of Puget Sound, Tacoma, Washington, and a Master's Degree from the University of
Washington. Mr. Ulrich, 42, is a C.P.A. and a shareholder of QuestCor Inc. He is
also a panel  trustee for the  District of Arizona  Bankruptcy  Court and former
president of the Arizona Society of CPA's.  Mr. Ulrich  graduated from Marquette
University, Milwaukee, Wisconsin.


(b)      Identification of Executive Officers   None
         ------------------------------------

(c)      Significant Employees  None
         ---------------------

(d)      Family Relationships   None
         --------------------

(e)      Legal Proceedings      None
         -----------------

Item 11.          Executive Compensation
                  ----------------------

The General Partner, and its affiliates,  earned fees, commissions,  and expense
reimbursements, as permitted in the Limited Partnership Agreement, as follows:

                         For the Year Ended:       12/31/95   12/31/94  12/31/93
                                                   --------   --------  --------

Direct expenses relating to administration
of the Partnership which were reimbursed or
are to be reimbursed to the Managing General
Partner, or affiliates thereof                       $2000       None    None

General Partner's distributive share of
cash available for distribution                        383 (1)    343     343

Real estate commission upon the sale of Partnership
property payable to the General Partner               None (2)   None    None

General Partner's share of sale or refinancing
proceeds                                              None (3)   None    None

(1)Cash  Available for  Distribution,  if any, shall be  Distributed  95% to the
Limited  Partners,  and 5% to the General  Partner,  with the General  Partner's
share subordinated to a 10% annual cumulative, noncompounded return with respect
to the Limited Partners' Adjusted Capital Contribution.

If at any  time  the  allocation  and  distribution  provisions  of the  Limited
Partnership  Agreement do not result in the  allocation or  distribution  to the
General  Partners of an aggregate of at least one percent (1%) of the item being
allocated or  distributed,  the Limited  Partnership  Agreement  states that the
General Partners are to be allocated or distributed so much more of such item as
will cause the General  Partners to be allocated or distributed one percent (1%)
thereof.

(2)The General Partner, or an affiliate,  are entitled to receive a subordinated
real estate  commission  in an amount not to exceed the lesser of  one-half  the
amount  customarily  charged by others  rendering  similar services or 3% of the
sale price.

(3)Sale or  refinancing  proceeds  will be  distributed  to Limited  Partners in
accordance  with their  Capital  Accounts in an amount  equal to their  Adjusted
Capital  Contributions,  then to the Limited  Partners in an amount,  if any, by
which actual Distributions of Cash Available for Distribution were less than the
preferred 10% return,  then to the General Partner, a subordinated  unpaid 5% of
Cash Available for Distribution,  and the remaining 80% to the Limited Partners,
and 20% to the General Partner.

Item 12.          Security Ownership of Certain Beneficial Owners and Management
                  --------------------------------------------------------------

There is no person known to the  Registrant who owns  beneficially  or of record
more than 10% of the voting securities of the Registrant.  However,  the General
Partner has discretionary  control over most of the decisions made by or for the
Registrant  pursuant to the terms of the Partnership  Agreement.  The Registrant
has no directors or officers.

There are no arrangements  known to the Registrant,  the operation of which may,
at a subsequent date, result in a change in control of the Registrant.


Item 13.          Certain Relationships and Related Transactions
                  ----------------------------------------------

During the year  ended  December  31,  1995 The  Environmental  Group,  Inc.  an
affiliate of the General  Partner,  received or incurred $2000 in direct expense
reimbursement for the administration of the Partnership.

During the years ended December 31, 1995, 1994 and 1993 QuestCor, Inc. was  paid
the following fees:
                                          1995            1994           1993
                                         -------         -------        -----

         Property management            $12,179         $12,045        $12,048

         Partnership administration     $30,000         $30,000        $30,000

         Audit assistance               $ 5,000         $ 5,000        $ 5,000


                                     PART IV

Item 14.        Exhibits, Financial Statement Schedules and Reports on Form 8-K
                ---------------------------------------------------------------
(a)(1) and (a)(2)   List of Financial Statements and Schedules as a Part of this
                    ------------------------------------------------------------
                    Report
                    ------
Report of Independent Certified Public Accountants
FINANCIAL STATEMENTS
         Balance sheet
         Statement of operations
         Statement of changes in partners' equity
         Statement of cash flows 
         Notes to financial  statements 

(a)(3)            List of Exhibits Filed as Part of this Report
                  ---------------------------------------------

                  Exhibit 27 - Financial Data Schedule

(b)               Reports on Form 8-K                None
                  -------------------

                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934,
the  Registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                             ARMORED STORAGE INCOME INVESTORS 2
                                             LIMITED PARTNERSHIP               
                                                                               
                                             By:      Armored Management, L.L.C
                                                                               
                                             Its:     General partner          
                                                                               
                                                                               
                                                                               
Dated:  3/27/96                              By:  /s/ Carl R. Spiekerman       
        -------                                 ---------------------------    
                                                 Carl R. Spiekerman, Member    
                                             

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been  signed  below by the  following  person  in the  capacity  on the date
indicated.

   Signature                      Title                              Date
   ---------                      -----                              ----


  /s/ Carl R. Spiekerman   Member of Armored Management              3/27/96
- ------------------------   L.L.C., general partner                  --------
  Carl R. Spiekerman       

<PAGE>
                              ARMORED STORAGE INCOME INVESTORS 2
                              (A CALIFORNIA LIMITED PARTNERSHIP)

                                     FINANCIAL STATEMENTS

                                      DECEMBER 31, 1995


                                           CONTENTS

                                                                           Page

Independent auditors' report                                                 1


Financial statements:

   Balance sheets                                                            2

   Statements of operations                                                  3

   Statements of changes in partners' equity                                 4

   Statements of cash flows                                                5 - 6

   Notes to financial statements                                          7 - 11

<PAGE>
To the Partners of
Armored Storage Income Investors 2
Phoenix, Arizona


                          INDEPENDENT AUDITOR'S REPORT
                          ----------------------------

         We have  audited the  accompanying  balance  sheets of Armored  Storage
Income  Investors 2 (a California  limited  partnership) as of December 31, 1995
and 1994, and the related statements of operations, changes in partners' equity,
and cash flows for each of the three  years in the  period  ended  December  31,
1995.  These  financial  statements  are  the  responsibility  of the  Company'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.

      In our opinion, the financial statements referred to above present fairly,
in all material  respects,  the  financial  position of Armored  Storage  Income
Investors 2 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.





TOBACK CPAs, P.C.
Phoenix, Arizona
March 14, 1996


<PAGE>
                       ARMORED STORAGE INCOME INVESTORS 2
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                                 BALANCE SHEETS

                           DECEMBER 31, 1995 AND 1994


                                     ASSETS

                                                         1995            1994  
                                                  -------------   -------------
Rental property and equipment:                                                 
   Land                                           $     242,825   $    242,825 
   Building                                           1,059,970      1,051,470 
   Furniture and fixtures                                22,655         22,655 
                                                  -------------   ------------ 
                                                      1,325,450      1,316,950 
   Less accumulated depreciation                       (336,360)      (301,147)
                                                  -------------   ------------ 
                                                                               
                                                        989,090      1,015,803 
                                                                               
Cash and cash equivalents                                55,798         48,837 
Accounts receivable, net of allowance                                          
   of $2,400 and $5,700                                   2,400          5,700 
                                                  -------------   ------------ 
                                                                               
         Total assets                             $   1,047,288   $  1,070,340 
                                                  =============   ============ 
                                                                               
                        LIABILITIES AND PARTNERS' EQUITY
                                                                               
Accounts payable and accrued expenses             $      15,231   $      9,127 
                                                                               
Unearned rent                                             4,369          5,341 
                                                  -------------   ------------ 
                                                                               
   Total liabilities                                     19,600         14,468 
                                                  -------------   ------------ 
                                                                               
Commitments (Note 3)                                                           
                                                                               
Partners' equity (Note 4):                                                     
   General partner                                       (3,941)        (4,062)
   Limited partners; 4,210 units outstanding          1,092,766      1,121,071 
                                                  -------------   ------------ 
                                                      1,088,825      1,117,009 
   Less amount due from former                                                 
      general partner (Note 5)                          (61,137)       (61,137)
                                                  -------------   ------------ 
                                                      1,027,688      1,055,872 
                                                  -------------   ------------ 
                                                                               
       Total liabilities and partners' equity     $   1,047,288   $  1,070,340 
                                                  =============   ============ 
                                                  

                          The accompanying notes are an
                  integral part of these financial statements.
 
                                      2
<PAGE>
                       ARMORED STORAGE INCOME INVESTORS 2
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF OPERATIONS

                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993


                                       1995          1994           1993
                                  ------------  -------------   ------------

Rental income                     $    190,629  $     191,360  $     161,736
Interest income                            974            724            654
                                  ------------  -------------  -------------

                                       191,603        192,084        162,390
                                  ------------  -------------  -------------

Expenses:
   Property operations                  96,153         76,089         80,461
   Partnership
     administration (Note 3)            50,148         50,649         60,169
   Depreciation                         35,213         37,237         35,129
                                  ------------  -------------  -------------

                                       181,514        163,975        175,759
                                  ------------  -------------  -------------

Net income (loss)                 $     10,089  $      28,109  $     (13,369)
                                  ============  =============  =============

Net income (loss) allocated to
   general partner                $        504  $       1,405  $        (134)

Net income (loss) allocated to
   limited partners                      9,585         26,704        (13,235)
                                  ------------  -------------  -------------

Net income (loss)                 $     10,089  $      28,109  $     (13,369)
                                  ============  =============  =============

Net income (loss) allocated to
   limited partners per limited
   partnership unit (Note 4)      $       2.28  $        6.34  $       (3.14)
                                  ============  =============  =============

Distributions per
   limited partnership unit       $       9.00  $        8.07  $        8.07
                                  ============  =============  =============

Number of limited partnership
   units outstanding                     4,210          4,210          4,210
                                  ============  =============  =============

                          The accompanying notes are an
                  integral part of these financial statements.

                                       3
<PAGE>
                       ARMORED STORAGE INCOME INVESTORS 2
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                    STATEMENTS OF CHANGES IN PARTNERS' EQUITY

                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>

                                    Amount due
                                    from former
                                      general           General           Limited
                                      partner           partner           partners           Total
                                 ---------------   --------------    ---------------   ---------------

<S>                              <C>               <C>               <C>               <C>            
Balance, December 31, 1992       $      (67,540)   $       (4,647)   $    1,175,552    $     1,103,365

   Distributions to partners                  -              (343)          (33,975)           (34,318)
   Payments received from
     former general partner               3,373                 -                 -              3,373
   Net loss                                   -              (134)          (13,235)           (13,369)
                                 ---------------   --------------    --------------    ---------------

Balance, December 31, 1993              (64,167)           (5,124)        1,128,342          1,059,051
                                                                                   

   Distributions to partners                  -              (343)          (33,975)           (34,318)
   Payments received from
     former general partner               3,030                 -                 -              3,030
   Net income                                 -             1,405            26,704             28,109
                                 ---------------   --------------    --------------    ---------------

Balance, December 31, 1994              (61,137)           (4,062)        1,121,071          1,055,872

   Distributions to partners                  -              (383)          (37,890)           (38,273)

   Net income                                 -               504             9,585             10,089
                                 ---------------   ---------------   ---------------   ---------------

Balance, December 31, 1995
   (Notes 4 and 5)               $      (61,137)   $       (3,941)   $    1,092,766   $      1,027,688
                                 ==============    ==============    ===============   ===============
</TABLE>


                          The accompanying notes are an
                  integral part of these financial statements.

                                       4
<PAGE>
                       ARMORED STORAGE INCOME INVESTORS 2
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                            STATEMENTS OF CASH FLOWS

                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993

<TABLE>
<CAPTION>
                                                     1995              1994              1993
                                               ---------------   ---------------   ---------------
<S>                                            <C>               <C>               <C>            
Cash flows from operating activities:
   Cash received from customers                $       192,957   $       186,954   $       168,779
   Cash paid to suppliers and service                 (140,197)         (126,586)         (142,172)
   providers
   Interest received                                       974               724               654
                                               ---------------   ---------------   ---------------

     Net cash provided by operating activities          53,734            61,092            27,261
                                               ---------------   ---------------   ---------------
        

Cash flows from investing activities:
   Purchase of rental property and equipment            (8,500)          (10,094)                -
                                               ---------------   ---------------   ---------------

Cash flows from financing activities:
   Distributions to limited partners                   (37,890)          (33,975)          (33,975)
   Distributions to general partner                       (383)             (343)                -
   Payments received on due from former
     general partner                                         -             3,030             3,030
                                               ---------------   ---------------   ---------------

     Net cash used in financing activities             (38,273)          (31,288)          (30,945)
                                               ---------------   --------------    ---------------

   Increase (decrease) in cash and cash
     equivalents                                         6,961            19,710            (3,684)

Cash and cash equivalents:
   Beginning                                            48,837            29,127            32,811
                                               ---------------   ---------------   ---------------

   Ending                                      $        55,798   $        48,837   $        29,127
                                               ===============   ===============   ===============
</TABLE>

             Supplemental Schedule of Non-Cash Financing Activities

   During the year ended December 31, 1993, the Partnership offset distributions
totalling $343 against amounts due from the former General Partner.

                          The accompanying notes are an
                  integral part of these financial statements.

                                       5
<PAGE>
                       ARMORED STORAGE INCOME INVESTORS 2
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                      STATEMENTS OF CASH FLOWS (CONTINUED)

                  YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993


<TABLE>
<CAPTION>
                                               
                                                                1995          1994          1993    
                                                            -----------   -----------   ----------  
<S>                                                          <C>           <C>           <C>         
Reconciliation of net income (loss) to net                                                          
   cash provided by operating activities                                                            
     Net income (loss)                                                                              
     Adjustments to reconcile net income (loss) to          $   10,089   $    28,109   $   (13,369) 
        net cash provided by operating activities:                                                  
          Depreciation                                                                              
                                                                35,213        37,237        35,129 
          Changes in assets and liabilities:                                                        
             Decrease (increase) in accounts                                                        
              receivable                                         3,300        (1,376)        2,529 
             Increase (decrease) in accounts                                                        
              payable and accrued expenses                       6,104           152        (1,542) 
             Increase (decrease) in unearned rent                 (972)       (3,030)        4,514 
                                                            ----------    ----------    ----------- 
        Net cash provided by operating activities
                                                           $    53,734   $    61,092   $    27,261
                                                            ===========   ===========   =========== 
</TABLE>
                          The accompanying notes are an
                  integral part of these financial statements.
                                                            
                                       6
<PAGE>
                       ARMORED STORAGE INCOME INVESTORS 2
                       (A CALIFORNIA LIMITED PARTNERSHIP)

                          NOTES TO FINANCIAL STATEMENTS


 1. Partnership organization:

    Armored Storage Income  Investors 2 (the  Partnership),  was organized under
       the laws of the State of  California  pursuant to an agreement of limited
       partnership  filed  January  13,  1986,  for the  purpose  of  acquiring,
       developing,  and operating  self-service  storage  facilities in Phoenix,
       Arizona.  As of  December  31,  1993,  the  General  Partner  was Armored
       Storage, Ltd., a California Limited Partnership. Sales of the Partnership
       units  commenced in April of 1986 as the  Partnership  was  authorized to
       issue a total of 20,000 units for a total  offering of  $10,000,000.  The
       Partnership  reached its minimum  funding  requirement  of 2,400 units of
       limited  partnership  interests on September 22, 1986, and has sold 4,210
       units in total.  The  Partnership's  offering  period  closed on April 3,
       1987.  In January 1994,  Armored  Management  L.L.C.  assumed the general
       partnership interest from Armored Storage, Ltd. as a result of a majority
       vote of the limited partners.

 2. Summary of significant accounting policies:

    Rental property and equipment:

    Rental property and equipment are stated at cost.  Depreciation  is provided
       on the straight-line method over the following estimated useful lives:

                                             Years
                                             -----

        Building                              30
        Furniture and fixtures                 5

    Rental income and accounts receivable:

    The Partnership  generates   rental   income  from   month-to-month   rental
       agreements for space at its self-storage facility on the accrual basis.

    Accounts  receivable are recorded for rental payments that are delinquent at
       year  end.  An  allowance  is  recorded  for  management's   estimate  of
       uncollectible   rental  receivables.   After  a  receivable  is  90  days
       delinquent  the contents of the units are generally sold and the proceeds
       are used to reduce the receivable balance.

    Advertising:

    Advertising costs are charged to operations as incurred.

    Accounting estimates:

    The preparation of  financial   statements  in  conformity   with  generally
       accepted accounting  principles requires management to make estimates and
       assumptions  that affect the reported  amounts of assets and  liabilities
       and  disclosure of contingent  assets and  liabilities at the date of the
       financial  statements  and the reported  amounts of revenues and expenses
       during the  reporting  period.  Actual  results  could  differ from those
       estimates.

    Income taxes:

    The Partnership does not record a provision  for income  taxes as any income
       or loss from the Partnership is recognized by the individual partners for
       tax reporting purposes.

    Cash and cash equivalents:

    For reporting in the statements of cash flows, the Partnership considers all
       certificates  of deposit and money  market funds with a maturity of three
       months or less to be cash equivalents.

    The carrying amount of cash and cash  equivalents  approximates  fair  value
       because of the short maturity of those instruments.

 3. Commitments and related party transactions:

    The Partnership has the following commitments at December 31, 1995:

    The Partnership entered into an  agreement  with Chris Cap  Corporation  dba
       QuestCor,  Inc.  (QuestCor)  to  manage  the  Partnership's  self-storage
       facility.  The term of the  agreement is for one year  through  November,
       1996,  to be  renewed  on a  month-to-month  basis  unless  either  party
       terminates the agreement.  The agreement  provides that the manager shall
       receive, as compensation for services, the greater of $1,000 per month or
       6% of the gross cash receipts from the prior month.

    The Partnership  entered  into  an  agreement   with   QuestCor  to  provide
       administrative  services to the Partnership,  such as investor relations,
       database management (including data processing of investor subscriptions,
       fund   distributions,   ownership  changes,   and  subscription   input),
       accounting,  preparation  and  coordinating  the  preparation of periodic
       regulatory  reports and tax related  forms.  The term of the agreement is
       for  one  year   through   December,   1996  and  shall   continue  on  a
       month-to-month  basis unless either party  terminates the agreement.  The
       agreement  provided for payment by the  Partnership to QuestCor of $2,500
       per  month in  1995,  1994 and  1993 as  compensation  for its  services.
       Additionally, the Partnership pays QuestCor $5,000 per year for providing
       assistance  in the  annual  Partnership  audit.  A 50%  member of Armored
       Management, L.L.C. is also a 50% shareholder of QuestCor.

    The following are the approximate fees paid to QuestCor,  Inc. for the years
       ended December 31, 1995, 1994 and 1993:

                                            1995         1994          1993
                                       -----------  -----------   -----------

         Property management           $    12,000  $    12,000   $   12,000
         Partnership administration         30,000       30,000       30,000
         Audit assistance                    5,000        5,000        5,000

    During the year ended December 31, 1995, the  Partnership  paid an affiliate
       of the General Partner $2,000 in direct expense reimbursements associated
       with a market study for the facility.

 4. Partners' equity:

    The Limited Partnership  Agreement  provides that profits,  losses, and cash
       available for distribution shall be allocated as follows:

    Allocation of net income:

    Net income is to be allocated to the Limited Partners,  ninety-five  percent
       (95%) in  accordance  with their capital  percentages  and to the General
       Partner,  five percent (5%), until such time as the Limited Partners have
       received  in cash  from  all  sources  (other  than  cash  available  for
       distribution)  an amount  equal to one  hundred  percent  (100%) of their
       capital contribution;  thereafter to the Limited Partners, eighty percent
       (80%) in accordance  with their capital  percentages,  and to the General
       Partner, twenty percent (20%).

    Allocation of net loss:

    Net losses are to be allocated to the Limited Partners, ninety-nine  percent
       (99%) in  accordance  with their capital  percentages  and to the General
       Partner,  one percent (1%),  until such time as the Limited Partners have
       received  distributions  of  cash  from  all  sources  (other  than  cash
       available  for  distribution)  in an amount equal to one hundred  percent
       (100%)  of  their  capital  contributions;   thereafter  to  the  Limited
       Partners,   eighty  percent  (80%)  in  accordance   with  their  capital
       percentages and to the General partner, twenty percent (20%).

    Cash available for distribution:

    Cash available  for  distribution,  if any,  realized by or available to the
       Partnership, shall be distributed no less frequently than annually in the
       following percentages:  (1) to the Limited Partners,  ninety-five percent
       (95%)  in  accordance  with  their  capital  percentages;  and (2) to the
       General  Partner five percent (5%)  subordinated  to a ten percent  (10%)
       annual  cumulative  noncompounded  return  with  respect  to the  Limited
       Partners adjusted capital contributions determined as of the first day of
       each calendar quarter, which distribution must be made before the General
       Partner is entitled to  participate  in cash  available for  distribution
       (Limited Partners Preferred Distribution).

    Cash available for distribution is generally the Partnership's net cash flow
       less amounts set aside as reserves.

    If in any period the General  Partner  determines that  Partnership  working
       capital  reserves  are in  excess  of the  amount  deemed  necessary  for
       Partnership  operations,  such excess reserves may be distributed as cash
       available for distribution.

    Minimum allocation and distribution to the General Partners:

    If, at any time, the allocation and  distribution  provisions of the Limited
       Partnership  Agreement do not result in the allocation or distribution to
       the General  Partner of an  aggregate of at least one percent (1%) of the
       item being allocated or distributed,  the Limited  Partnership  Agreement
       states that the General Partner is to be allocated or distributed so much
       more of such item as will cause the General  Partner to be  allocated  or
       distributed one percent (1%) thereof.

 5. Due from former General Partner:

    Due from former  General  Partner  (Armored  Storage,   Ltd.)  represents  a
       receivable of the Partnership for those amounts  reimbursed to the former
       Managing  General Partner for syndication  fees incurred in excess of the
       percentage  allowable by the Partnership's  prospectus which was based on
       the total amount of limited  partners'  capital  raised.  At December 31,
       1986,  syndication fees of approximately $309,000 had been paid. On April
       3, 1987, the offering was terminated.  Based on actual units sold through
       the date of termination,  excess syndication fees totalling approximately
       $113,000 were recorded as amounts due from the former General Partner. As
       collateral for the receivable, Armored Storage One Limited Partnership (a
       related   partnership  through  common  general  partners)  assigned  its
       partnership  interests  in any  proceeds or  distributions  from  Armored
       Storage Income  Investors  Limited  Partnership to Armored Storage Income
       Investors 2 until such time as the indebtedness is satisfied.

    During  1995,  no  distributions  were  made  from  Armored  Storage  Income
       Investors  Limited  Partnership  to its  partners  and,  as a result,  no
       proceeds were assigned to reduce the due from former general partner.

 6. Property operations:

    Included in property operations are the following expenses:

                                   1995            1994             1993
                               -----------     -----------     ------------

       Accounting              $    11,520     $    11,005     $    14,302
      Advertising                    6,620           5,121           5,456
      Insurance                      2,085           2,034           2,086
      Legal                              -           3,000           8,810
      Property taxes                28,944          16,671          17,035
      Repairs and maintenance        4,150           1,335           5,400
      Utilities                      7,368           6,599           6,899
      Wages and payroll taxes       20,535          23,429          23,018


<TABLE> <S> <C>

<ARTICLE>                     5
<MULTIPLIER>                                             1
<CURRENCY>                                         DOLLARS
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                               DEC-31-1995
<PERIOD-START>                                  JAN-01-1995
<PERIOD-END>                                    DEC-31-1995
<EXCHANGE-RATE>                                           1
<CASH>                                               55,798
<SECURITIES>                                              0
<RECEIVABLES>                                         4,800
<ALLOWANCES>                                          2,400
<INVENTORY>                                               0
<CURRENT-ASSETS>                                     58,198
<PP&E>                                            1,325,450
<DEPRECIATION>                                      336,360
<TOTAL-ASSETS>                                    1,047,288
<CURRENT-LIABILITIES>                                19,600
<BONDS>                                                   0
                                     0
                                               0
<COMMON>                                                  0
<OTHER-SE>                                        1,027,688
<TOTAL-LIABILITY-AND-EQUITY>                      1,047,288
<SALES>                                                   0
<TOTAL-REVENUES>                                    191,603
<CGS>                                                     0
<TOTAL-COSTS>                                       131,366
<OTHER-EXPENSES>                                     50,148
<LOSS-PROVISION>                                          0
<INTEREST-EXPENSE>                                        0
<INCOME-PRETAX>                                      10,089
<INCOME-TAX>                                              0
<INCOME-CONTINUING>                                  10,089
<DISCONTINUED>                                            0
<EXTRAORDINARY>                                           0
<CHANGES>                                                 0
<NET-INCOME>                                         10,089
<EPS-PRIMARY>                                          2.28
<EPS-DILUTED>                                          2.28
                                                           

</TABLE>


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