FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[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: 0-16862
CAPITAL SOURCE II L.P.-A
(Exact name of registrant as specified in its Agreement of Limited Partnership)
Delaware 38-2684691
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Beneficial Assignment Certificates ("BACs") representing the beneficial
assignment of limited partnership interests.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by the 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of the chapter) is not contained herein,
and will not be contained, to the best of the 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]
BACs are not currently traded in any market. Therefore, there is no
market price or average bid and asked price for BACs within the 60 days prior
to the date of this filing.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE> -i-
TABLE OF CONTENTS
Page
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . 2
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . 3
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 3
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 4
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . 9
Item 9. Changes in and Disagreements With Accountants on Accounting and
Finacial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 9
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . 9
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 10
Item 12. Security Ownership of Certain Beneficial Owners and Management . . 11
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . 12
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE> -ii-
PART I
Item 1. Business. Capital Source II L.P. A (the "Registrant" or the
"Partnership") was formed in August 1986 under the Delaware Uniform Limited
Partnership Act to invest principally in federally-insured mortgages on
multifamily housing properties and to acquire, hold, sell, dispose of and
otherwise deal with limited partnership interests (the "Partnership Equity
Investments") in the limited partnerships (the "Operating Partnerships") which
construct and operate these properties. The Registrant's investment
objectives generally are to (i) preserve and protect the Registrant's capital;
(ii) provide quarterly cash distributions to investors; and (iii) achieve
increasing current income and long-term capital appreciation through increases
in income from the Partnership Equity Investments.
A total of 4,011,101 beneficial assignment certificates representing
beneficial assignment of limited partnership interests in the Registrant
("BACs") were sold at $20 per BAC for total capital contributions of
$80,222,020 prior to the payment of certain organization and offering costs.
The Registrant originally acquired (i) four mortgage-backed securities
(the "GNMA Certificates") guaranteed as to principal and interest by the
Government National Mortgage Association ("GNMA") collateralized by first
mortgage loans on multifamily housing properties located in three states, (ii)
a first mortgage loan insured by the Federal Housing Administration (the "FHA
Loan") on a multifamily housing property located in Charlotte, North Carolina,
and (iii) Partnership Equity Investments in five limited partnerships which
own the multifamily housing properties financed by the GNMA Certificates and
the FHA Loan. The Partnership has been repaid by GNMA on one of the GNMA
Certificates and the related property has been deeded to GNMA in lieu of
foreclosure, thus eliminating the Partnership Equity Investment in this
property. Collectively, the remaining GNMA Certificates, the FHA Loan and the
Partnership Equity Investments are referred to as the "Permanent
Investments." A description of the properties financed by the Registrant
through December 31, 1995, appears in Item 7 hereof.
While principal of and interest on the GNMA Certificates and the FHA Loan
are ultimately guaranteed by the United States government, the amount of cash
distributions received by the Registrant from the Partnership Equity
Investments is a function of the net rental revenues generated by the
properties owned by the Operating Partnerships. Net rental revenues from a
multifamily apartment complex depend on the rental and occupancy rates of the
property and on the level of operating expenses. Occupancy rate and rents are
directly affected by the supply of, and demand for, apartments in the market
areas in which a property is located. This, in turn, is affected by several
factors such as local or national economic conditions, the amount of new
apartment construction and interest rates on single-family mortgage loans. In
addition, factors such as government regulation (such as zoning laws),
inflation, real estate and other taxes, labor problems and natural disasters
can affect the economic operations of a property.
In each city in which the Registrant's properties are located, such
properties compete with a substantial number of other apartment complexes.
Apartment complexes also compete with single-family housing that is either
owned or leased by potential tenants. The principal method of competition is
to offer competive rental rates. The Registrant's properties also compete by
emphasizing regular maintenance and property amenities.
The Registrant believes that each of its properties is in compliance in
all material respects with federal, state and local regulations regarding
hazardous waste and other environmental matters and the Registrant is not
aware of any environmental contamination at any of such properties that would
require any material capital expenditure by the Registrant for the remediation
thereof.
The Registrant is engaged solely in the business of providing financing
for the acquisition and improvement of multifamily real estate. Accordingly,
the presentation of information about industry segments is not applicable and
would not be material to an understanding of the Registrant's business taken
as a whole.
The Registrant has no employees. Certain services are provided to the
Registrant by employees of an affiliate of the managing general partner of the
Registrant, and the Registrant reimburses such affiliate for such services at
cost. The Registrant is not charged and does not reimburse for the services
performed by managers and officers of the managing general partner of the
general partner of the Registrant.
<PAGE> -1-
Item 2. Properties. The Registrant does not directly own or lease any
physical properties. However, by virtue of Partnership Equity Investments in
the Operating Partnerships, the Registrant indirectly owns the four
multifamily apartment projects described in the following table:
<TABLE>
<CAPTION>
Average
Number Square Feet Federal
Property Name Location of Units Per Unit Tax Basis
- -------------------------- ------------------- -------- ----------- ---------------
<S> <C> <C> <C> <C>
Crane's Landing Winter Park, FL 252 751 $ 9,110,009
Delta Crossing Charlotte, NC 178 880 5,363,404
Monticello Apartments Southfield, MI 106 1,027 4,411,779
The Ponds at Georgetown Ann Arbor, MI 134 1,002 4,056,725
-------- ---------------
670 $ 22,941,917
======== ===============
</TABLE>
Depreciation is taken on each property on a straight-line basis over the
estimated useful life of the properties ranging from five to 40 years.
The average annual occupancy rate and average effective rental rate per
unit for each of the properties for each of the last five years are listed in
the following table:
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
CRANE'S LANDING
Average Occupancy Rate 89% 90% 96% 95% 89%
Average Effective Annual Rental Per Unit $6,327 $6,322 $6,718 $6,609 $5,216
DELTA CROSSING
Average Occupancy Rate 94% 95% 92% 87% 83%
Average Effective Annual Rental Per Unit $6,866 $6,380 $5,691 $5,328 $5,080
MONTICELLO APARTMENTS
Average Occupancy Rate 99% 97% 95% 88% 91%
Average Effective Annual Rental Per Unit $8,630 $8,287 $8,000 $7,363 $7,806
THE PONDS AT GEORGETOWN
Average Occupancy Rate 95% 95% 90% 88% 88%
Average Effective Annual Rental Per Unit $9,174 $8,955 $8,398 $7,970 $8,089
</TABLE>
In the opinion of the Partnership's management, each of the properties is
adequately covered by insurance. For additional information concerning the
properties, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 5 to the Partnership's Financial
Statements. A discussion of general competitive conditions to which these
properties are subject is included in Item 1 hereof.
Item 3. Legal Proceedings. There are no material pending legal
proceedings to which the Registrant is a party or to which any of its property
is subject.
Item 4. Submission of Matters to a Vote of Security Holders. No matter
was submitted during the fourth quarter of 1995 to a vote of the Registrant's
security holders.
<PAGE> 2
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. The BACs are subject to various transfer
restrictions imposed to prevent the Registrant from being treated as a
publicly traded partnership for federal income tax purposes and, accordingly,
there is no public trading market for the BACs.
(b) Investors. The approximate number of BAC Holders on December 31,
1995, was 5,909.
(c) Distributions. Cash distributions are being distributed on a monthly
basis to the record holders of BACs as of the last day of each month. Total
cash distributions paid or accrued to BAC Holders during the fiscal years
ended December 31, 1995, and December 31, 1994, equaled $3,248,992 and
$3,248,992, respectively. The cash distributions paid per BAC during the
fiscal years ended December 31, 1995, and December 31, 1994, were as follows:
<TABLE>
<CAPTION>
Per BAC
Year Ended Year Ended
December 31, 1995 December 31, 1994
----------------- -----------------
<S> <C> <C>
Income $ .4266 $ .3559
Return of Capital .3834 .4541
----------------- -----------------
Total $ .8100 $ .8100
================= =================
</TABLE>
See Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations, for information regarding the sources of funds
used for cash distributions and for a discussion of factors, if any, which may
adversely affect the Registrant's ability to make cash distributions at the
same levels in 1996 and thereafter.
Item 6. Selected Financial Data. Set forth below is selected financial
data for the Registrant. The information set forth below should be read in
conjunction with the Financial Statements and Notes thereto filed in response
to Item 8 hereof.
<TABLE>
<CAPTION>
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992 Dec. 31, 1991
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Rental income $ 4,656,371 $ 4,529,975 $ 4,442,657 $ 5,674,854 $ 5,967,654
Interest income on temporary cash investments
and U.S. government securities 218,077 195,309 372,655 154,918 298,063
Mortgage-backed securities income 123,033 78,153 259,294 389,217 -
Other income 144,967 161,039 254,238 131,853 187,503
Gain on sale of mortgage-backed securities 15,670 - - - -
Unusual item - gain from disposition of
Brookridge assets and related liabilities - - - 3,953,659 -
Expenses (including depreciation) (3,432,024) (3,526,029) (3,674,507) (4,687,491) (5,771,083)
Minority interest in losses of
operating partnerships 2,220 3,582 6,243 13,306 19,040
------------- ------------- ------------- ------------- -------------
Net income $ 1,728,314 $ 1,442,029 $ 1,660,580 $ 5,630,316 $ 701,177
============= ============= ============= ============= =============
Net income per BAC $ .43 $ .36 $ .41 $ 1.39 $ .17
============= ============= ============= ============= =============
Cash distributions per BAC $ .8100 $ .8100 $ 4.0702 $ 1.0429 $ 1.0885
============= ============= ============= ============= =============
Total assets $ 29,822,282 $ 31,262,819 $ 33,356,335 $ 48,954,681 $ 50,402,282
============= ============= ============= ============= =============
</TABLE>
<PAGE> -3-
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership originally acquired: (i) four GNMA Certificates which are
guaranteed as to principal and interest by the Government National Mortgage
Association (GNMA) collateralized by first mortgage loans on multifamily
housing properties located in three states; (ii) an FHA Loan which is insured
as to principal and interest by the Federal Housing Administration (FHA) on a
multifamily housing property; and (iii) Partnership Equity Investments in five
Operating Partnerships which own the multifamily properties financed by the
GNMA Certificates and the FHA Loan. During 1992, one of the properties was
deeded to GNMA in lieu of foreclosure, thus eliminating the Partnership Equity
Investment in this Property. In March 1993, the GNMA Certificate related to
this property was paid in full. Collectively, the remaining GNMA
Certificates, the FHA Loan, and the Partnership Equity Investments are
referred to as the "Permanent Investments". The Partnership has also invested
amounts held in its reserve account in certain GNMA securities backed by pools
of single-family mortgages and in U.S. government securities ("Reserve
Investments"). The obligations of GNMA and FHA are backed by the full faith
and credit of the United States government.
The FHA Loan, GNMA Certificates, U.S. government securities and Partnership
Equity Investments in Operating Partnerships represent the Partnership's
principal assets as shown in the Parent Company Only Financial Information in
Note 6 to the financial statements. The parent company information is
presented using the equity method of accounting for the investment in
Operating Partnerships. Generally accepted accounting principles, however,
require that the Partnership's financial statements consolidate the Operating
Partnerships, since the Partnership holds a majority ownership interest in
each Operating Partnership, and can influence decisions of the general
partners in certain circumstances.
The following FHA Loan, GNMA Certificates and U.S. government securities were
owned by the Partnership at December 31, 1995. Interest income from the FHA
Loan, GNMA Certificates and U.S. government securities is the primary source
of cash available for distribution to investors.
<TABLE>
<CAPTION>
Guaranteed Interest Maturity Carrying
Property Name or Insured by Rate Date Value
- ---------------------------------- --------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Crane's Landing GNMA 8.75% 12-15-2030 $ 10,321,185
Delta Crossing FHA 9.10% 10-01-2030 6,595,251
Monticello Apartments GNMA 8.75% 11-15-2029 5,381,469
The Ponds at Georgetown GNMA 9.00% 12-15-2029 5,113,653
Pools of single-family properties GNMA 7.58% (1) 2008 to 2009 1,326,114
U.S. government securities U.S. government 6.41% (1) 03-31-1996 2,512,500
------------
$ 31,250,172
============
</TABLE>
(1)Represents yield to the Partnership.
<PAGE> -4-
DISTRIBUTIONS
Cash distributions paid or accrued per BAC were as follows:
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Regular monthly distributions
Income $ .4266 $ .3559 $ .4099
Return of capital .3834 .4541 .5003
-------------- -------------- --------------
$ .8100 $ .8100 $ .9102
============== ============== ==============
Special distribution from asset disposition
Return of capital $ - $ - $ 3.1600
============== ============== ==============
Total distributions
Income $ .4266 $ .3559 $ .4099
Return of capital .3834 .4541 3.6603
-------------- -------------- --------------
$ .8100 $ .8100 $ 4.0702
============== ============== ==============
Distributions
Paid out of cash flow $ .6497 $ .6055 $ 4.0702
Paid out of reserves .1603 .2045 -
-------------- -------------- --------------
$ .8100 $ .8100 $ 4.0702
============== ============== ==============
</TABLE>
Regular monthly distributions to BAC Holders consist primarily of interest
received on the FHA Loan, GNMA Certificates and the Reserve Investments.
Additional cash for distributions is received from other investments. The
Partnership may draw on reserves to pay operating expenses or to supplement
cash distributions to investors. The Partnership is permitted to replenish
reserves with cash flows in excess of distributions paid. During 1995,
$649,486 was withdrawn from reserves to supplement regular monthly cash
distributions. The total amount held in reserves at December 31, 1995, was
$3,898,337 of which $3,838,614 was invested in mortgaged-backed
securities and U.S. government securities.
The Partnership believes that cash provided by operating activities and, if
necessary, withdrawals from the Partnership's reserves will be adequate to
meet its short-term and long-term liquidity requirements, including the
payments of distributions to BAC Holders. The Company has no other internal
or external sources of liquidity. Under the terms of the Partnership
agreement, the Partnership is not authorized to enter into short- or long-term
debt financing arrangements or issue additional BACs to meet short-term and
long-term liquidity requirements.
Asset Quality
The FHA Loan and GNMA Certificates owned by the Partnership are guaranteed as
to principal and interest by FHA and GNMA, respectively. The obligations of
FHA and GNMA are backed by the full faith and credit of the United States
government. The Partnership Equity Investments, however, are not insured or
guaranteed. The value of these investments is a function of the value of the
real estate owned by the Operating Partnerships.
<PAGE> -5-
The following table shows the occupancy levels of the properties financed by
the Partnership as of December 31, 1995:
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
------------------------------------ ------------------ --------- ---------- -----------
<S> <C> <C> <C> <C>
Crane's Landing Winter Park, FL 252 239 95%
Delta Crossing Charlotte, NC 178 166 93%
Monticello Apartments Southfield, MI 106 104 98%
The Ponds at Georgetown Ann Arbor, MI 134 132 99%
--------- ---------- -----------
670 641 96%
========= ========== ===========
</TABLE>
Crane's Landing
Crane's Landing, located in Winter Park, Florida, is a 252-unit complex with
one-, two- and three-bedroom apartments on fourteen acres of land. Average
occupancy was 89% during 1995, compared to 90% during 1994. While rental
revenues generated by this property during 1995, were approximately the same
as during 1994, the net cash flow generated by the property, excluding
interest, increased approximately $84,000 from 1994 to 1995, due principally
to a decrease in expenses incurred for capital improvements. The property
generated cash flow in excess of debt service and was current on its mortgage
obligations during 1995.
Delta Crossing
Delta Crossing is a 178-unit apartment complex located in Charlotte, North
Carolina. Average occupancy was 94% in 1995, compared to 96% in 1994.
Despite the slightly lower average occupancy rate, the net cash flow generated
by the property in 1995, excluding interest, increased approximately 13%
compared to 1994. This increase is due primarily to an increase in rental
income resulting from rental rate increases. Real estate operating expenses
for 1995 approximated those of 1994. The property generated cash flow in
excess of debt service and was current on its mortgage obligations during 1995.
Monticello Apartments
Monticello Apartments, located in Southfield, Michigan, contains 106 rental
units. Average occupancy was 99% in 1995, compared to 97% in 1994. As a
result, rental income increased approximately 3% in 1995, compared to 1994.
The increase in rental income, combined with a decrease of approximately 15%
and 13% in repairs and maintenance expenses and administrative expenses,
respectively, resulted in an increase in net cash flow generated by this
property in 1995, compared to 1994. The property generated cash flow in
excess of debt service and was current on its mortgage obligations during 1995.
The Ponds at Georgetown
The Ponds at Georgetown consists of 134 apartments located in Ann Arbor,
Michigan. Average occupancy was 95% in 1995 and 1994. In the past, the
property has relied heavily on university students, who are generally
short-term tenants. Recently, aggressive marketing strategies have been
implemented which target more long-term tenants, resulting in a stabilization
in the property's occupancy. Despite this, the persistent sluggishness of the
Ann Arbor rental market is preventing the property from generating sufficient
cash flow from operations to fully pay its mortgage obligations, and the
mortgage on the property remains in default. Despite the default, the
Partnership has continued to receive full payments with respect to the GNMA
Certificate, due to the co-insurer's (HUD's) funding of the deficits. The
co-insurer has the option to suspend its funding of the property's deficits and
assign its mortgage to GNMA, which would result in a return to the Partnership
of the outstanding principal balance of the GNMA Certificate and the possible
loss of the Partnership Equity Investment in the property. To date, the
co-insurer has not indicated plans to suspend funding of the property's
deficits. There can be no assurance, however, that the co-insurer will not
make such an election in the future if the property remains in default.
Excluding interest, the property's net cash flow was approximately 9.7% less in
1995, compared to 1994. This decrease is due to an increase in operating
expenses which was partially offset by an increase in rental revenues.
<PAGE> -6-
Results of Operations
The table below compares the results of operations for each year
shown.
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Rental income $ 4,656,371 $ 4,529,975 $ 4,442,657
Interest income on temporary cash investments
and U.S. government securities 218,077 195,309 372,655
Mortgage-backed securities income 123,033 78,153 259,294
Other income 144,967 161,039 254,238
Gain on sale of mortgage-backed securities 15,670 - -
-------------- -------------- --------------
5,158,118 4,964,476 5,328,844
-------------- -------------- --------------
Real estate operating expenses 2,134,277 2,173,229 2,247,420
Depreciation 704,155 780,143 838,420
Property development and management fees 28,769 35,780 67,708
General and administrative expenses (Note 4)
Investor servicing 221,174 209,689 181,109
Professional fees 40,234 32,142 41,295
Other expenses 10,119 9,181 13,677
Asset management and partnership administration fees 166,000 166,000 166,000
Amortization 127,296 119,865 118,878
-------------- -------------- --------------
3,432,024 3,526,029 3,674,507
-------------- -------------- --------------
Minority interest in losses of operating partnerships 2,220 3,582 6,243
-------------- -------------- --------------
Net income $ 1,728,314 $ 1,442,029 $ 1,660,580
============== ============== ==============
</TABLE>
<PAGE> -7-
<TABLE>
<CAPTION>
Increase Increase
(Decrease) (Decrease)
From 1994 From 1993
-------------- --------------
<S> <C> <C>
Rental income $ 126,396 $ 87,318
Interest income on temporary cash investments
and U.S. government securities 22,768 (177,346)
Mortgage-backed securities income 44,880 (181,141)
Other income (16,072) (93,199)
Gain on sale of mortgage-backed securities 15,670 -
-------------- --------------
193,642 (364,368)
-------------- --------------
Real estate operating expenses (38,952) (74,191)
Depreciation (75,988) (58,277)
Property development and management fees (7,011) (31,928)
General and administrative expenses (Note 4)
Investor servicing 11,485 28,580
Professional fees 8,092 (9,153)
Other expenses 938 (4,496)
Asset management and partnership administration fees - -
Amortization 7,431 987
-------------- --------------
(94,005) (148,478)
-------------- --------------
Minority interest in losses of operating partnerships (1,362) (2,661)
-------------- --------------
Net income $ 286,285 $ (218,551)
============== ==============
</TABLE>
Rental income is recognized net of any vacancy losses and rental concessions
offered. Rental income, net of real estate operating expenses, depreciation,
and amortization, increased $233,905 from 1994 to 1995. The increase was due
to an increase in rental rates in certain markets, a decrease in operating
expenses due primarily to a decrease in capital improvement and administrative
expenses and a decrease in depreciation due to certain personal property
becoming fully depreciated. Rental income, net of real estate operating
expenses, depreciation and amortization, increased $218,799 from 1993 to
1994. Rental income increased $87,318 from 1993 to 1994 primarily due to
increases in rental and occupancy rates. Real estate operating expenses
decreased $74,191 from 1993 to 1994 due to overall expense reductions. See
the discussion of each property in the Asset Quality section for additional
information.
Interest income on temporary cash investments and U.S. government securities
increased $22,768 from 1994 to 1995, due to the acquisition of additional U.S.
government securities in March 1995. The effect of the additional
acquisitions was partially offset by the elimination of interest earned on
other temporary cash investments which were liquidated in order to purchase
the additional U.S. government securities and to supplement cash distributions
to investors. Interest income on temporary cash investments decreased
$177,346 from 1993 to 1994, primarily due to the distribution of the proceeds
from the redemption of the GNMA Certificate during 1993 and the reinvestment
of the remaining proceeds in pools of single-family properties.
Mortgage-backed securities income increased $44,880 from 1994 to 1995, due to
the acquisition of additional mortgage-backed securities during the second
quarter of 1994. Interest income on mortgage-backed securities decreased
$181,141 from 1993 to 1994. The decrease resulted from the payoff of the GNMA
Certificate related to the Brookridge at Newgate property and the related
distribution to BAC Holders on July 31, 1993, of a substantial portion of the
proceeds. The remaining portion of the proceeds were added to Partnership
reserves and invested in pools of single-family properties.
Other income consists of income such as garage rentals, washer/dryer and
vending income earned by the properties. Other income decreased $16,072 from
1994 to 1995 and $93,199 from 1993 to 1994.
<PAGE> -8-
Investor servicing expenses, professional fees and other expenses increased
$20,515 from 1994 to 1995 and investor servicing costs increased $28,580 from
1993 to 1994, due to an increase associated with maintaining and providing
investors with Partnership information. Professional fees decreased $9,153
from 1993 to 1994 as a result of a reduction of legal and accounting fees
associated with the Operating Partnerships. Property development and
management fees decreased $31,928 from 1993 to 1994 and $7,011 from 1994 to
1995 since a substantial portion of these fees related to services performed
by the Operating Partnerships' general partners during the initial rent-up
phase of operations.
Item 8. Financial Statements and Supplementary Data. The Financial
Statements and supporting schedules of the Registrant are set forth in Item 14
hereof and are incorporated herein by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. There were no disagreements with the Registrant's
independent accountants on accounting principles and practices or financial
disclosure during the fiscal years ended December 31, 1995 and 1994.
PART III
Item 10. Directors and Executive Officers of Registrant. The Registrant
has no directors or officers. The general partners of the Registrant are
America First Capital Source II, L.L.C., a Delaware limited liability company
(the "America First General Partner"), and Insured Mortgage Equities II L.P.,
a Delaware limited partnership (the "IME II General Partner") (collectively,
the America First General Partner and the IME II General Partner are referred
to as the "General Partners").
The following individuals are the officers of the America First General
Partner, and each serves for a term of one year.
Name Position Held Position Held Since
- ----------------- ----------------------- -------------------
Michael B. Yanney Chairman and 1991
Chief Executive Officer
Stewart Zimmerman President 1991
Michael Thesing Vice President, 1991
Secretary, Treasurer
Michael B. Yanney, 62, is the Chairman and Chief Executive Officer of
various affiliates of the America First General Partner which manage public
investment funds which have raised over $1.3 billion since 1984. From 1977
until the organization of the first such fund in 1984, Mr. Yanney was
principally engaged in the ownership and management of commercial banks. Mr.
Yanney also has investments in private corporations engaged in a variety of
businesses. From 1961 to 1977, Mr. Yanney was employed by Omaha National Bank
and Omaha National Corporation (subsequently merged into FirsTier Financial,
Inc.), where he held various positions, including the position of Executive
Vice President and Treasurer of the holding company. Mr. Yanney also serves
as a member of the boards of directors of Burlington Northern Santa Fe
Corporation, Forest Oil Corporation, MFS Communications Company, Inc.,
Lozier Corporation, Mid-America Apartment Communities, Inc., and PKS
Information Services Inc..
Stewart Zimmerman, 51, has been Executive Vice President of affiliates of
the America First General Partner since January 1989. In addition, Mr.
Zimmerman has served as a consultant to affiliates of the America First
General Partner beginning in September 1985. From September 1986 though
September 1988, he served as a director and managing director of Security
Pacific Merchant Bank and was responsible for ongoing sales, trading and
finance group activities. Prior thereto, he served in various capacities with
E.F. Hutton & Company Inc. and with Lehman Brothers, where he was responsible
for sales and trading of mortgage-backed securities. From 1968 to 1972, Mr.
Zimmerman was an officer with Zenith Mortgage Company and Zenith East, a
national mortgage banking and brokerage firm engaged in the servicing of
single-family and multifamily residential mortgages as well as the financing
of real estate properties throughout the United States.
<PAGE> -9-
Michael Thesing, 41, has been Vice President and Chief Financial Officer
of affiliates of the America First General Partner since July 1984. From
January 1984 until July 1984 he was employed by various companies controlled
by Mr. Yanney. He was a certified public accountant with Coopers & Lybrand
from 1977 through 1983.
The following individuals are the officers and director of CSII Housing,
Inc. ("CSII"), the corporate general partner of the IME II General Partner,
and each serves for a term of one year.
Director
Name Position Held Position Held Since
- ---------------- ------------------------ -------------------
Paul Abbott Director 1989
Officers
Name Position Held Position Held Since
- ---------------- ------------------------ -------------------
Paul Abbott President, Chief 1989
Operating Officer,
Chief Financial Officer
Donald E. Petrow Vice President 1992
Elizabeth I. Rubin Vice President 1992
Paul L. Abbott, 50, is a Managing Director of Lehman Brothers Inc.
("Lehman"), which he joined in 1988. At Lehman, Mr. Abbott is responsible for
the investment management of residential, commercial and retail real estate.
Prior to joining Lehman, Mr. Abbott was a real estate consultant and, from
1983 to 1987, was a senior officer of The Daseke Group, Inc., a privately held
company specializing in the syndication of private real estate limited
partnerships. From 1974 to 1983, Mr. Abbott was an officer of two life
insurance companies and a director of an insurance agency subsidiary.
Donald E. Petrow, 39, is a First Vice President of Lehman. Since March
1989, he has been responsible for the investment management and restructuring
of various investment portfolios, including but not limited to, federally
insured mortgages, tax exempt bonds, residential real estate, cable and
energy. From November 1981 to February 1989, Mr. Petrow, as Vice President of
Lehman, was involved in investment banking activities relating to partnership
finance and acquisition. Prior to joining Lehman, Mr. Petrow was employed in
accounting and equipment leasing firms. Mr. Petrow holds a B.S. Degree in
accounting from Saint Peters College and an M.B.A. in Finance from Pace
University.
Elizabeth I. Rubin is a Vice President of Lehman in the Diversified Asset
Group. Ms. Rubin joined Lehman in April 1992. Prior to joining Lehman, she
was employed, from September 1988 to April 1992, by the accounting firm of
Kenneth Leventhal and Co. Ms. Rubin is a Certified Public Accountant and
received a B.S. degree from the State University of New York at Binghamton in
1988.
Certain officers and directors of the corporate general partner of the
IME II General Partner are now serving (or in the past have served) as officers
or directors of entities which act as general partners of a number of real
estate limited partnerships which have sought protection under the provisions
of the Federal Bankruptcy Code. The partnerships which have filed bankruptcy
petitions own real estate which has been adversely affected by the economic
conditions in the market in which the real estate is located and,
consequently, the partnerships sought the protection of the bankruptcy laws to
protect the partnerships' assets from loss through foreclosure.
Item 11. Executive Compensation. The Registrant does not have any
directors or officers. None of the directors or officers of the General
Partners receive compensation from the Registrant and neither General Partner
receives reimbursement from the Registrant for any portion of their salaries.
Remuneration paid by the Registrant to the General Partners pursuant to the
terms of its agreement of limited partnership during the period ending
December 31, 1995, is described in Note 4 to the Notes to the Financial
Statements filed in response to Item 8 hereof.
<PAGE> -10-
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) No person is known by Registrant to own beneficially more than 5% of
the BACs.
(b) No director or officer of the America First General Partner or CSII
owns any BACs.
(c) The IME II General Partner shall assume all authority and
responsibility for the management of the Registrant in the event Mr. Yanney
ceases to be a member or the chief executive officer of the America First
General Partner. There exists no other arrangement known to the Registrant
the operation of which may at any subsequent date result in a change in
control of the Registrant.
Item 13. Certain Relationships and Related Transactions. The members of
the America First General Partner are America First Companies L.L.C and Mr.
Yanney. The general partner of the IME II General Partner is CSII, which is
an affiliate of IME II. Except as described herein, the Registrant is not a
party to any transaction or proposed transaction with either General Partner
or with any person who is (i) a member, director or executive officer of the
America First General Partner or CSII, (ii) a nominee for election as a
director of CSII, (iii) an owner of more than 5% of the BACs or (iv) a member
of the immediate family of any of the foregoing persons.
During 1995, the Registrant paid or reimbursed the General Partners
$281,606 for certain costs and expenses incurred in connection with the
operation of the Registrant, including legal and accounting fees and investor
communication costs, such as printing and mailing charges. See Note 4 to
Notes to Consolidated Financial Statements filed in response to Item 8 hereof
for a description of these costs and expenses.
The Operating Partnership's general partners provide various on-site
property development and management services. Property development and
management fees were $28,769 for 1995.
The General Partners are entitled to receive an asset management and
partnership administrative fee equal to 0.5% of invested assets per annum, the
first $50,000 of which shall be paid each year with the balance payable only
during such years that a 6.5% annual return has been paid to investors on a
noncumulative basis. An additional fee of 0.5% of invested assets will be
paid in those years that an 11.5% annual return has been paid to investors on
a cumulative basis. Any unpaid amounts will accrue and be payable only after
a 11.5% annual return to investors has been paid on a cumulative basis and the
investors have received the return of their capital contributions. During
1995, the General Partners earned, and the Registrant incurred $166,000 in
such asset management and partnership administration fees.
<PAGE> -11-
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8 K.
(a) The following documents are filed as part of this report:
1. Financial Statements. The following financial statements are included
in response to Item 8 of this report:
Independent Accountants' Reports dated March 28, 1996.
Consolidated Balance Sheets of Registrant as of December 31, 1995, and
December 31, 1994.
Consolidated Statements of Income of Registrant for the years ended
December 31, 1995, December 31, 1994, and December 31, 1993.
Consolidated Statements of Partners' Capital of Registrant for the years
ended December 31, 1995, December 31, 1994, and December 31, 1993.
Consolidated Statements of Cash Flows of Registrant for the years ended
December 31, 1995, December 31, 1994, and December 31, 1993.
Notes to Consolidated Financial Statements of Registrant.
Schedule III Real Estate and Accumulated Depreciation for the years ended
December 31, 1995, and December 31, 1994.
2. Financial Statement Schedules. The information required to be set
forth in the financial statement schedules is included in the Financial
Statements filed in response to Item 8 hereof.
3. Exhibits. The following exhibits were filed as required by Item 14(c)
of this report. Exhibit numbers refer to the paragraph numbers under Rule 601
of Regulation S-K:
4(a). Agreement of Limited Partnership of Capital Source II L.P.-A
(incorporated herein by reference from Exhibit A of the Prospectus
contained in the Registrant's Post Effective Amendment No. 4 dated
February 5, 1987, to the Registration Statement on Form S-11 (Commission
File No. 0-16862)).
4(b). Beneficial Assignment Certificate (incorporated by reference
from Exhibit 10(a) to the Registrant's Amendment No. 2 dated January 27,
1987, to the Registration Statement on Form S-11 (Commission File No. 0-
16862)).
24. Power of Attorney.
(b) The Registrant did not file any reports on Form 8-K during the last
quarter of the period covered by this report.
<PAGE> -12-
Independent Accountants' Report
To the Partners
Capital Source II L.P.-A:
We have audited the accompanying consolidated balance sheets of Capital Source
II L.P.-A and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of income, partners' capital and cash flows for each
of the three years in the period ended December 31, 1995. These consolidated
financial statements are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these consolidated 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall consolidated financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Capital
Source II L.P.-A and subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Omaha, Nebraska
March 28, 1996 Coopers & Lybrand L.L.P.
To the Partners
Capital Source II L.P.-A:
Our report on the consolidated financial statements of Capital Source II
L.P.-A and subsidiaries is included in this Form 10-K. In connection with our
audit of such consolidated financial statements, we have also audited the
related consolidated financial statement schedules listed in Item 14.
In our opinion, the consolidated financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as
a whole, present fairly, in all material aspects, the information required to
be included therein.
Omaha, Nebraska
March 28, 1996 Coopers & Lybrand L.L.P.
<PAGE> -13-
CAPITAL SOURCE II L.P.-A
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, 1995 Dec. 31, 1994
-------------- --------------
<S> <C> <C>
Assets
Investment in real estate:
Land $ 2,800,750 $ 2,800,750
Buildings 22,994,698 22,960,171
Personal property 1,495,374 1,394,617
-------------- --------------
27,290,822 27,155,538
Less accumulated depreciation (4,989,699) (4,285,544)
-------------- --------------
Net investment in real estate 22,301,123 22,869,994
Cash and temporary cash investments, at cost
which approximates market value (Note 5) 757,381 3,588,037
Escrow deposits and property reserves 828,470 815,583
Investment in U.S. government securities (Note 5) 2,512,500 -
Investment in mortgage-backed securities (Note 5) 1,326,114 1,899,268
Interest and other receivables 59,367 31,962
Deferred mortgage issuance costs net of accumulated
amortization of $570,002 in 1995 and $458,757 in 1994 1,811,849 1,923,094
Other assets 198,366 134,881
-------------- --------------
$ 29,795,170 $ 31,262,819
============== ==============
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable and accrued expenses $ 852,710 $ 733,089
Distribution payable (Note 3) 546,968 546,968
Due to general partners and their affiliates (Note 4) 1,084,619 1,194,915
-------------- --------------
2,484,297 2,474,972
-------------- --------------
Minority interest 207,068 209,288
-------------- --------------
Partners' Capital (Deficit)
General Partners (295,420) (280,672)
Limited Partners ($6.83 per BAC in 1995 and $7.19 in 1994) 27,399,225 28,859,231
-------------- --------------
27,103,805 28,578,559
-------------- --------------
$ 29,795,170 $ 31,262,819
============== ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> -14-
CAPITAL SOURCE II L.P.-A
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Income
Rental income $ 4,656,371 $ 4,529,975 $ 4,442,657
Interest income on temporary cash investments
and U.S. government securities 218,077 195,309 372,655
Mortgage-backed securities income 123,033 78,153 259,294
Other income 144,967 161,039 254,238
Gain on sale of mortgage-backed securities 15,670 - -
-------------- -------------- --------------
5,158,118 4,964,476 5,328,844
-------------- -------------- --------------
Expenses
Real estate operating expenses 2,134,277 2,173,229 2,247,420
Depreciation 704,155 780,143 838,420
Property development and management fees (Note 4) 28,769 35,780 67,708
General and administrative expenses (Note 4)
Investor servicing 221,174 209,689 181,109
Professional fees 40,234 32,142 41,295
Other expenses 10,119 9,181 13,677
Asset management and partnership administration fees (Note 4) 166,000 166,000 166,000
Amortization 127,296 119,865 118,878
-------------- -------------- --------------
3,432,024 3,526,029 3,674,507
-------------- -------------- --------------
Minority interest in losses of operating partnerships 2,220 3,582 6,243
-------------- -------------- --------------
Net income $ 1,728,314 $ 1,442,029 $ 1,660,580
============== ============== ==============
Net income allocated to:
General Partners $ 17,283 $ 14,420 $ 16,606
Limited Holders 1,711,031 1,427,609 1,643,974
-------------- -------------- --------------
$ 1,728,314 $ 1,442,029 $ 1,660,580
============== ============== ==============
Net income per BAC $ .43 $ .36 $ .41
============== ============== ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> -15-
CAPITAL SOURCE II L.P.-A
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL (DEFICIT)
FROM DECEMBER 31, 1992 TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------------- -------------- --------------
<S> <C> <C> <C>
Partners' Capital (Deficit) (excluding net unrealized holding gain)
Balance at December 31, 1992 $ (113,971) $ 45,362,627 $ 45,248,656
Net income 16,606 1,643,974 1,660,580
Cash distributions paid or accrued (Note 3) (164,909) (16,325,987) (16,490,896)
-------------- -------------- --------------
Balance at December 31, 1993 (262,274) 30,680,614 30,418,340
Net income 14,420 1,427,609 1,442,029
Cash distributions paid or accrued (Note 3) (32,818) (3,248,992) (3,281,810)
-------------- -------------- --------------
Balance at December 31, 1994 (280,672) 28,859,231 28,578,559
Net income 17,283 1,711,031 1,728,314
Cash distributions paid or accrued (Note 3) (32,818) (3,248,992) (3,281,810)
-------------- -------------- --------------
(296,207) 27,321,270 27,025,063
-------------- -------------- --------------
Net unrealized holding gain
Balance at December 31, 1994 - - -
Net change 787 77,955 78,742
-------------- -------------- --------------
787 77,955 78,742
-------------- -------------- --------------
Balance at December 31, 1995 $ (295,420) $ 27,399,225 $ 27,103,805
============== ============== ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> -16-
CAPITAL SOURCE II L.P.-A
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 1,728,314 $ 1,442,029 $ 1,660,580
Adjustments to reconcile net income to net cash
from operating activities
Depreciation and amortization 831,451 900,008 957,298
Amortization of discount on government securities (25,076) (664) -
Property development and management fees 28,769 35,780 67,708
Minority interest in losses of operating partnerships (2,220) (3,582) (6,243)
Gain on sale of mortgage-backed securities (15,670) - -
Increase in interest and other receivables (27,405) (2,012) (8,720)
Decrease (increase) in escrow deposits and property reserves (12,887) 136,576 426,624
Decrease (increase) in other assets (79,536) 19,396 46,825
Increase in accounts payable and accrued expenses 119,621 122,916 137,979
Decrease in due to operating partnerships'
general partners and their affiliates (139,065) (408,849) (832,158)
-------------- -------------- --------------
Net cash provided by operating activities 2,406,296 2,241,598 2,449,893
-------------- -------------- --------------
Cash flows from investing activities
Acquisition of U.S. government securities (2,468,945) - -
Disposition (acquisition) of mortgage-backed securities - (1,959,280) 17,787,781
Sale of mortgage-backed securities 470,667 - -
Principal payments on mortgage-backed securities 178,420 60,676 -
Acquisition of buildings and construction in progress (34,527) (15,811) -
Acquisition of personal property (100,757) (74,596) (20,739)
Increase in deferred costs - (13,559) -
-------------- -------------- --------------
Net cash provided by (used in) investing activities (1,955,142) (2,002,570) 17,767,042
-------------- -------------- --------------
Cash flow used in financing activity
Distributions (3,281,810) (3,281,810) (16,626,212)
-------------- -------------- --------------
Net increase (decrease) in cash and temporary cash investments (2,830,656) (3,042,782) 3,590,723
Cash and temporary cash investments at beginning of year 3,588,037 6,630,819 3,040,096
-------------- -------------- --------------
Cash and temporary cash investments at end of year $ 757,381 $ 3,588,037 $ 6,630,819
============== ============== ==============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE> -17-
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. Organization
Capital Source II L.P.-A (the Partnership) was formed on August 22, 1986,
under the Delaware Uniform Limited Partnership Act. The General Partners of
the Partnership are Insured Mortgage Equities II L.P. and America First
Capital Source II, L.L.C. (the General Partners).
The Partnership provided virtually 100% of the debt and equity financing for
five multifamily rental housing properties. The Partnership's investment in
the properties consisted of: (i) approximately 85% in the form of permanent
mortgages and/or loans to fund construction, and (ii) the balance to purchase
up to a 99% limited partnership interest in the Operating Partnerships which
developed, own and operate the properties. Each loan is insured or
guaranteed, in an amount substantially equal to the face amount of the
mortgage, by the Federal Housing Administration (FHA) or the Government
National Mortgage Association (GNMA). The Partnership has been repaid by GNMA
on one of its GNMA Certificates and the related property has been deeded to
GNMA in lieu of foreclosure thus eliminating the Partnership's Equity
Investment. The four remaining Operating Partnerships are geographically
located as follows: (i) two in Michigan; and, (ii) one each in Florida and
North Carolina.
CS Properties II, Inc. which is owned by affiliates of the General Partners,
serves as the Special Limited Partner for the Operating Partnerships. The
Special Limited Partner has the power, among other things, to remove the
general partners of the Operating Partnerships under certain circumstances and
to consent to the sale of the operating partnerships' assets. The General
Partners have negotiated agreements with each operating partnership's general
partner whereby the operating partnership's general partner guarantees to fund
certain operating deficits of that operating partnership.
The Partnership will terminate subsequent to the sale of all properties but in
no event will the Partnership continue beyond December 31, 2035.
2. Summary of Significant Accounting Policies
A)Method of Accounting
The consolidated financial statements include the accounts of the
Partnership and four subsidiary Operating Partnerships. The Partnership
is a limited partner with an ownership interest in three of the subsidiary
Operating Partnerships of up to 99%. The Partnership's ownership interest
in The Ponds at Georgetown L.P. is 68.70%. The remaining limited partner
interest of 30.29% is owned by Capital Source L.P., an affiliate of the
General Partners. All significant intercompany accounts and transactions
have been eliminated in consolidation.
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.
B)Investment in Real Estate
The Partnership's investment in real estate is carried at cost less
accumulated depreciation. The carrying value of each property does not
exceed net realizable value.
<PAGE> -18-
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
C)Investments in U.S. Government Securities and Mortgage-Backed Securities
On January 1, 1994, the Partnership adopted Statement of Financial
Accounting Standard No. 115 "Accounting for Certain Investments in Debt
and Equity Securities" (FAS 115). FAS 115 requires that investment
securities be classified as held-to-maturity, available-for-sale or
trading. Under FAS 115, investments classified as held-to-maturity are
carried at amortized cost. Investments classified as available-for-sale
are reported at fair value with any unrealized gains or losses excluded
from earnings and reflected as a separate component of partners' capital.
Subsequent increases and decreases in the net unrealized gain/loss on the
available-for-sale securities are reflected as adjustments to the
carrying value of the portfolio and adjustments to the component of
partners' capital. The Partnership does not have investment securities
classified as trading. FAS 115 had no impact to partners' capital or
earnings prior to June 30, 1995, since all investments securities were
classified as held-to-maturity. As described in Note 5, on June 30, 1995,
the Company reclassified investment securities from the held-to-maturity
category to the available-for-sale category.
D)Depreciation and Amortization
Depreciation of real estate is based on the estimated useful life of the
properties using the straight-line method. Deferred mortgage issuance
costs are being amortized using the effective yield method over the
40 year term of the respective loan.
E)Revenue Recognition
The Operating Partnerships lease multifamily rental units under operating
leases with terms of one year or less. Rental revenue is recognized net
of any vacancy losses and rental concessions offered.
F)Income Taxes
No provision has been made for income taxes since BAC Holders are required
to report their share of the Partnership's income for federal and state
income tax purposes. The tax basis of the Partnership's assets and
liabilities exceeded the reported amounts by $7,549,032 and $7,996,457 at
December 31, 1995, and December 31, 1994, respectively.
G)Temporary Cash Investments
Temporary cash investments are invested in short-term debt securities
purchased with original maturities of three months or less.
H)New Accounting Pronouncement
The Financial Accounting Standards Board has issued Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of." Among
other things, this Statement requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or circumstances indicate that the carrying
value of an asset may not be recoverable. The Partnership plans to adopt
this Statement in 1996. The Partnership anticipates that the adoption of
this Statement will not have a material impact on the financial statements.
I)Net Income per Beneficial Assignment Certificate (BAC)
Net income per BAC was calculated based on the number of BACs outstanding
(4,011,101) for all periods presented.
3. Partnership Income, Expenses and Cash Distributions
Profits and losses from normal operations and cash available for distribution
will be allocated 99% to the investors and 1% to the General Partners.
Certain fees payable to the General Partners will not become due until
investors have received certain priority returns. Cash distributions included
in the consolidated financial statements represent the actual cash
distributions made during each period and the cash distributions accrued at
the end of each period.
<PAGE> -19-
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
The General Partners will receive 1% of the net proceeds from any sale of
Partnership assets. The General Partners will receive a termination fee equal
to 3% of all sales proceeds less actual costs incurred in connection with all
sales transactions, payable only after the investors have received a return of
their capital contributions and an 11.5% annual return on a cumulative basis.
The General Partners will also receive a fee equal to 9.1% of all cash
available for distribution and sales proceeds (after deducting from cash
available or sales proceeds any termination fee paid therefrom) after
investors have received a return of their capital contributions and an 11.5%
annual return on a cumulative basis.
4. Transactions with Related Parties
The General Partners, certain of their affiliates and the operating
partnerships' general partners have received or may receive fees,
compensation, income, distributions and payments from the Partnership in
connection with the offering and the investment, management and sale of the
Partnership's assets (other than disclosed elsewhere) as follows.
The Operating Partnerships' general partners provide various on-site property
development and management services. Property development and management fees
for the years ended December 31, 1995, 1994 and 1993 amounted to $28,769,
$35,780 and $67,708, respectively. Unpaid fees, which are non-interest
bearing, are included in amounts due to Operating Partnerships' general
partners and their affiliates on the accompanying consolidated balance sheets
and will be paid as the Operating Partnerships reach specified performance
standards, or upon sale of the related property.
The General Partners are entitled to receive an asset management and
partnership administrative fee equal to 0.5% of invested assets per annum, the
first $50,000 of which will be paid each year with the balance payable only
during such years that a 6.5% annual return has been paid to investors on a
noncumulative basis. An additional fee equal to 0.5% of invested assets per
annum will be payable only during those years that an 11.5% annual return has
been paid to investors on a noncumulative basis. Any unpaid amounts will
accrue and be payable only after an 11.5% annual return to investors has been
paid on a cumulative basis and the investors have received the return of their
capital contributions. Asset management and partnership administration fees
for the years ended December 31, 1995, 1994 and 1993 amounted to $166,000
for each year.
Substantially all of the Partnership's general and administrative expenses are
paid by a General Partner or an affiliate and reimbursed by the Partnership.
The amount of such expenses reimbursed to the General Partner for the years
ended December 31, 1995, 1994 and 1993 amounted to $281,606, $250,222 and
$251,711, respectively. These amounts are presented on a cash basis and do
not reflect accruals made at each year end.
Amounts due to Operating Partnerships' general partners and their affiliates
on December 31, 1995 and 1994, is comprised of the following:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Unpaid property development and management fees $ 81,925 $ 280,201
Operating deficit and construction loans 874,194 786,214
Unpaid asset management and partnership administrative fees 128,500 128,500
-------------- --------------
$ 1,084,619 $ 1,194,915
============== ==============
</TABLE>
<PAGE> -20-
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
5. Partnership Reserve Account
The Partnership maintains a reserve account which consisted of the following:
<TABLE>
<CAPTION>
Dec. 31, 1995
--------------
<S> <C>
Cash and temporary cash investments $ 59,723
U.S. government securities 2,512,500
GNMA Certificates 1,326,114
--------------
Balance at end of year $ 3,898,337
==============
</TABLE>
The reserve account was established to maintain working capital for the
Partnership and is available to supplement distributions to investors or for
other contingencies related to the ownership of investments and the operation
of the Partnership. The U.S. government securities mature in 1996 and the
GNMA Certificates mature between 2008 and 2009.
During the quarter ended June 30, 1995, the Partnership reassessed the
appropriateness of the classification of securities held in the reserve
account. The Partnership concluded, given the nature of the reserve account,
it would be more appropriate to classify securities held in the reserve
account as available-for-sale rather than as held-to-maturity. Accordingly,
on June 30, 1995, the Partnership transferred all securities held in the
reserve account from the held-to-maturity classification to the
available-for-sale classification. The total amortized cost, gross unrealized
holding gains and aggregate fair value of the securities transferred were
$4,283,759, $67,199 and $4,350,958, respectively.
During the quarter ended September 30, 1995, the Partnership sold a portion of
the securities in the available-for-sale portfolio. The total amortized cost
and realized gain for sales of securities classified as available-for-sale
were $454,997 and $15,670, respectively.
At December 31, 1995, the total amortized cost, gross unrealized holding gains
and aggregate fair value of available-for-sale securities were $3,759,872,
$78,742 and $3,838,614, respectively. At December 31, 1994, the total
amortized cost, gross unrealized holding losses and aggregate fair value of
held-to-maturity securities were $1,899,268, $56,914 and $1,842,354.
6. Parent Company Financial Information Only
Generally accepted accounting principles require that the Partnership`s
financial statements consolidate the Operating Partnerships since the
Partnership holds a majority ownership interest and, through CS Properties II,
Inc., it can influence decisions of the general partners in certain
circumstances. In the consolidated financial statements, the Partnership`s
investment in FHA Loans and GNMA Certificates is eliminated against the
related mortgage payable recorded by the operating partnership. If a mortgage
loan goes into default and is foreclosed upon by FHA or GNMA, the respective
agency may, at their discretion, repay the FHA Loan or the GNMA Certificate.
If this occurs, the Partnership`s investment in the operating partnership
would be eliminated, resulting in the recognition of a gain on the
Partnership`s financial statements. This arises because consolidation
accounting does not allow the Partnership to stop recording losses from the
Operating Partnerships when the net investment is reduced to zero.
<PAGE> -21-
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
The parent company only financial information below represents the condensed
financial information of the Partnership using the equity method of accounting
for the investment in Operating Partnerships, rather than the consolidation of
those partnerships. Under the equity method of accounting, the Partnership`s
capital contributions are adjusted to reflect its share of operating
partnership profits or losses and distributions. The investment in operating
partnerships represents the Partnership`s limited partnership interest in the
accumulated deficits of those Operating Partnerships. The parent company only
information is provided to more clearly present the Partnership`s investment
in the Operating Partnerships. Since the Partnership is not a general
partner, it is not obligated to fund the negative balances. If the
investments in all Operating Partnerships were eliminated at December 31,
1995, Partnership capital would increase by $4,674,357 ($1.15 per BAC).
The FHA Loans and the GNMA Certificates are collateralized by first mortgage
loans on the properties owned by the Operating Partnerships and are guaranteed
or insured as to principal and interest by FHA or GNMA. The FHA insured
mortgage loans are subject to a 1% assignment fee. The obligations of FHA and
GNMA are backed by the full faith and credit of the United States government.
Parent Company Only
Condensed Balance Sheets
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments $ 757,381 $ 3,588,037
Investment in U.S. government securities 2,512,500 -
Investment in FHA Loan 6,595,251 6,619,989
Investment in GNMA Certificate 22,142,421 22,799,369
Investment in operating partnerships (4,674,357) (4,229,575)
Interest receivable 246,315 231,156
Other assets 287,899 350,770
-------------- --------------
$ 27,867,410 $ 29,359,746
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable $ 216,637 $ 234,219
Distribution payable 546,968 546,968
-------------- --------------
763,605 781,187
-------------- --------------
Partners' Capital 27,103,805 28,578,559
-------------- --------------
$ 27,867,410 $ 29,359,746
============== ==============
</TABLE>
Parent Company Only
Condensed Statements of Income
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Income
Mortgage and mortgage-backed securities interest $ 2,561,901 $ 2,526,266
Interest income on temporary cash investments
and U.S. government securities 200,678 181,315
Equity in losses of operating partnerships (554,682) (789,064)
Other income 4,650 2,900
Gain on sale of mortgage-backed securities 15,670 -
--------------- ---------------
2,228,217 1,921,417
Expenses
Operating and administrative 499,903 479,388
--------------- ---------------
Net income $ 1,728,314 $ 1,442,029
=============== ===============
</TABLE>
<PAGE> -22-
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
Parent Company Only
Condensed Statements of Cash Flows
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,728,314 $ 1,442,029
Adjustments to reconcile net income to net cash
from operating activities
Equity in losses of operating partnerships 554,682 789,064
Amortization 62,376 62,376
Gain on sale of mortgage-backed securities (15,670) -
Other non-cash adjustments (57,322) (45,164)
-------------- --------------
Net cash provided by operating activities 2,272,380 2,248,305
-------------- --------------
Cash flows from investing activities
FHA Loan and GNMA Certificate principal payments 286,952 159,808
Acquisition of U.S. government securities (2,468,945) -
Acquisition of mortgage-backed securities - (1,959,280)
Sale of mortgage-backed securities 470,667 -
Investment in operating partnerships (109,900) (209,805)
-------------- --------------
Net cash used in investing activities (1,821,226) (2,009,277)
-------------- --------------
Cash flow used in financing activity
Distributions (3,281,810) (3,281,810)
-------------- --------------
Net decrease in cash and temporary cash investments (2,830,656) (3,042,782)
Cash and temporary cash investments at beginning of year 3,588,037 6,630,819
-------------- --------------
Cash and temporary cash investments at end of year $ 757,381 $ 3,588,037
============== ==============
</TABLE>
7. Disposition of Brookridge at Newgate
The Brookridge at Newgate property was not able to generate sufficient cash
flows to service its mortgage loan. The property defaulted on its debt and on
October 22, 1992, the Partnership deeded the property to the co-insurer,
thereby eliminating the Partnership's equity in the property. The Partnership
continued to hold the GNMA Certificate related to the property until March
1993, at which time the Partnership's investment in the GNMA Certificate was
paid in full. The GNMA Certificate generated interest income of $259,294 for
the Partnership in 1993.
<PAGE> -23-
CAPITAL SOURCE II L.P.-A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
8. Fair Value of Financial Instruments
The following methods and assumptions were used by the Partnership in
estimating the fair value of its financial instruments:
Cash and temporary cash investments: Fair value approximates the carrying
value of such assets.
Investment in U.S. government securities and mortgage-backed securities:
Fair values are based on amounts obtained from an independent pricing source.
<TABLE>
<CAPTION>
At December 31, 1995
----------------------------------
Carrying Estimated
Amount Fair Value
-------------- --------------
<S> <C> <C>
Cash and temporary cash investments $ 757,381 $ 757,381
Investment in U.S. government securities 2,512,500 2,512,500
Investment in mortgage-backed securities 1,326,114 1,326,114
</TABLE>
9. Summary of Unaudited Quarterly Results of Operations
<TABLE>
<CAPTION>
First Second Third Fourth
From January 1, 1995, to December 31, 1995 Quarter Quarter Quarter Quarter
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total income $ 1,202,464 $ 1,242,623 $ 1,300,739 $ 1,412,292
Total expenses (809,277) (796,965) (858,907) (966,875)
Minority interest in losses of
operating partnerships 750 842 908 (280)
-------------- -------------- -------------- --------------
Net income $ 393,937 $ 446,500 $ 442,740 $ 445,137
============== ============== ============== ==============
Net income per BAC $ .10 .11 $ .11 $ .11
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
From January 1, 1994, to December 31, 1994 Quarter Quarter Quarter Quarter
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total income $ 1,155,845 $ 1,186,046 $ 1,250,709 $ 1,371,876
Total expenses (839,391) (795,913) (814,317) (1,076,408)
Minority interest in losses of
operating partnerships 853 1,305 1,386 38
-------------- -------------- -------------- --------------
Net income $ 317,307 $ 391,438 $ 437,778 $ 295,506
============== ============== ============== ==============
Net income per BAC $ .08 $ .10 $ .11 $ .07
============== ============== ============== ==============
</TABLE>
<PAGE> -24-
SCHEDULE III
CAPITAL SOURCE II L.P.-A
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Life on
Which
Number Date of Date Depreciation
Property Location of Units Encumbrances Construction Acquired is Computed
- -------------------- ---------------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ponds at Georgetown Ann Arbor, MI 134 (a) 1989 N/A 5 - 40 years
Monticello Southfield, MI 106 (a) 1989 N/A 5 - 40 years
Delta Crossing Charlotte, NC 178 (a) 1989 N/A 5 - 40 years
Crane's Landing Winter Park, FL 252 (a) 1990 N/A 5 - 40 years
</TABLE>
<TABLE>
<CAPTION>
Costs Capitalized
Intial Cost Subsequent Gross Amount at December 31, 1994
to Partnership to Acquisition
-------------------------- ----------------------- ----------------------------------------
Buildings,
Improvements
Carrying and Personal Accumulated
Costs Land Property Total Depreciation
Property Land Property Improvements (b) (c) (d) (c) and (d) (e)
- ------------------- ------------ ------------ ------------ --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ponds at Georgetown $ 261,440 $ 269,094 $ 4,246,230 $ 55,523 $ 396,621 $ 4,435,666 $ 4,832,287 $ (861,154)
Monticello 402,933 363,117 4,683,322 88,306 411,566 5,126,112 5,537,678 (1,164,536)
Delta Crossing 700,000 461,011 5,491,589 69,565 960,861 5,761,304 6,722,165 (1,014,757)
Crane's Landing 978,902 206,060 8,805,506 72,940 1,031,702 9,031,706 10,063,408 (1,245,097)
------------ ------------ ------------ --------- ------------ ------------ ------------ ------------
$ 2,343,275 $ 1,299,282 $ 23,226,647 $ 286,334 $ 2,800,750 $ 24,354,788 $ 27,155,538 $(4,285,544)
============ ============ ============ ========= ============ ============ ============ ============
</TABLE>
<PAGE> -25-
CAPITAL SOURCE II L.P.-A
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Life on
Which
Number Date of Date Depreciation
Property Location of Units Encumbrances Construction Acquired is Computed
- -------------------- ---------------- -------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ponds at Georgetown Ann Arbor, MI 134 (a) 1989 N/A 5 - 40 years
Monticello Southfield, MI 106 (a) 1989 N/A 5 - 40 years
Delta Crossing Charlotte, NC 178 (a) 1989 N/A 5 - 40 years
Crane's Landing Winter Park, FL 252 (a) 1990 N/A 5 - 40 years
</TABLE>
<TABLE>
<CAPTION>
Costs Capitalized
Intial Cost Subsequent Gross Amount at December 31, 1995
to Partnership to Acquisition
-------------------------- ----------------------- ----------------------------------------
Buildings,
Improvements
Carrying and Personal Accumulated
Costs Land Property Total Depreciation
Property Land Property Improvements (b) (c) (d) (c) and (d) (e)
- ------------------- ------------ ------------ ------------ --------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ponds at Georgetown $ 261,440 $ 269,094 $ 4,246,230 $ 55,523 $ 396,621 $ 4,435,666 $ 4,832,287 $ (965,318)
Monticello 402,933 363,117 4,683,322 88,306 411,566 5,126,112 5,537,678 (1,308,186)
Delta Crossing 700,000 461,011 5,580,985 69,565 960,861 5,850,700 6,811,561 (1,222,608)
Crane's Landing 978,902 206,060 8,851,394 72,940 1,031,702 9,077,594 10,109,296 (1,493,587)
------------ ------------ ------------ --------- ------------ ------------ ------------ ------------
$ 2,343,275 $ 1,299,282 $ 23,361,931 $ 286,334 $ 2,800,750 $ 24,490,072 $ 27,290,822 $(4,989,699)
============ ============ ============ ========= ============ ============ ============ ============
</TABLE>
<PAGE> -26-
SCHEDULE III
CAPITAL SOURCE II L.P.-A
REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995, 1994 and 1993
(a) The Partnership has no encumbrances against this property. Encumbrances
recorded by the Operating Partnerships are eliminated in the consolidated
financial statements of the Partnership.
(b) Carrying costs include legal fees, appraisal fees, title costs and other
related professional fees.
(c) The aggregate cost for Federal income tax purposes is the same as for
financial reporting purposes.
(d) Reconciliation of Real Estate:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Balance - beginning of year $ 27,155,538 $ 27,065,131 $ 27,044,392
Acquisitions 135,284 90,407 20,739
-------------- -------------- --------------
Balance - end of year $ 27,290,822 $ 27,155,538 $ 27,065,131
============== ============== ==============
</TABLE>
(e) Reconciliation of Accumulated Depreciation:
<TABLE>
<CAPTION>
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Balance - beginning of year $ 4,285,544 $ 3,505,401 $ 2,666,981
Depreciation expense 704,155 780,143 838,420
-------------- -------------- --------------
Balance - end of year $ 4,989,699 $ 4,285,544 $ 3,505,401
============== ============== ==============
</TABLE>
<PAGE> -27-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
CAPITAL SOURCE II L.P. A
By America First Capital
Source II, L.L.C., General
Partner
By /s/ Michael Thesing
Michael Thesing,
Vice President
Date: March 29, 1996
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 29, 1996 By /s/ Michael B. Yanney*
Michael B. Yanney,
Chairman and Chief
Executive Officer (Principal Executive Officer)
Date: March 29, 1996 By /s/ Michael Thesing
Michael Thesing, Vice
President, Secretary and
Treasurer (Principal Financial Officer)
*By Michael Thesing,
Attorney in Fact
/s/ Michael Thesing
Michael Thesing
<PAGE> -28-
EXHIBIT 24
POWER OF ATTORNEY
<PAGE> -29-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1995, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Tax-Exempt Mortgage Fund 2 Limited Partnership
America First Participating/Preferred Equity Mortgage Fund
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 10th day of March, 1996.
/s/ Michael B. Yanney
Michael B. Yanney
<PAGE> -30-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1994 DEC-31-1993 DEC-31-1992 DEC-31-1991
<PERIOD-END> DEC-31-1995 DEC-31-1994 DEC-31-1993 DEC-31-1992 DEC-31-1991
<CASH> 757,381 3,588,037 6,630,819 3,040,096 3,531,703
<SECURITIES> 3,838,614 1,899,268 0 17,787,781 0
<RECEIVABLES> 59,367 31,962 29,950 21,230 32,408
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 4,157,718 4,435,582 7,614,428 4,440,109 5,089,361
<PP&E> 27,290,822 27,155,538 27,065,131 27,044,392 45,241,807
<DEPRECIATION> (4,989,699) (4,285,544) (3,505,401) (2,666,981) (3,284,163)
<TOTAL-ASSETS> 29,795,170 31,262,819 33,356,335 48,954,681 50,402,282
<CURRENT-LIABILITIES> 1,399,678 1,280,057 1,157,141 1,154,478 1,798,842
<BONDS> 0 0 0 0 0
<COMMON> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<OTHER-SE> 27,103,805 28,578,559 30,418,340 45,248,656 43,843,944
<TOTAL-LIABILITY-AND-EQUITY> 29,795,170 31,262,819 33,356,335 48,954,681 50,402,282
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 5,158,118 4,964,476 5,328,844 6,350,842 6,453,220
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 0 0 0 0 0
<OTHER-EXPENSES> 3,432,024 3,526,029 3,674,507 4,687,491 5,771,083
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 0 0
<INCOME-PRETAX> 1,728,314 1,442,029 1,660,580 1,676,657 701,177
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0 0
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 3,953,659 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 1,728,314 1,442,029 1,660,580 5,630,316 701,177
<EPS-PRIMARY> 0 0 0 0 0
<EPS-DILUTED> 0 0 0 0 0
</TABLE>
