FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 2000 or
Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
Commission File Number: 0-16862
CAPITAL SOURCE II L.P.-A
(Exact name of registrant as specified in its charter)
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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
<PAGE> -i-
Part I. Financial Information
Item 1. Financial Statements
CAPITAL SOURCE II L.P.-A
BALANCE SHEETS
<TABLE>
<CAPTION>
Sept. 30, 2000
(unaudited) Dec. 31, 1999
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which
approximates market value $ 175,513 $ 278,134
Investment in FHA Loan (Note 2) 6,441,165 6,470,165
Investment in GNMA Certificates (Note 2) 20,262,164 20,367,475
Investment in Operating Partnerships (Note 3) - -
Interest receivable 192,672 193,934
Other assets 7,893 39,064
-------------- --------------
$ 27,079,407 $ 27,348,772
============== ==============
Liabilities and Partners' Capital (Deficit)
Liabilities
Accounts payable (Note 4) $ 185,416 $ 295,599
Distribution payable 303,871 303,871
-------------- --------------
489,287 599,470
-------------- --------------
Partners' Capital (Deficit)
General Partner (300,557) (298,965)
Beneficial Assignment Certificate Holders
($6.70 per BAC in 2000 and $6.74 in 1999) 26,890,677 27,048,267
-------------- --------------
26,590,120 26,749,302
-------------- --------------
$ 27,079,407 $ 27,348,772
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> - 1 -
CAPITAL SOURCE II L.P.-A
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
For the For the For the Nine For the Nine
Quarter Ended Quarter Ended Months Ended Months Ended
Sept. 30, 2000 Sept. 30, 1999 Sept. 30, 2000 Sept. 30, 1999
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Income
Mortgage-backed securities income $ 575,453 $ 579,202 $ 1,729,241 $ 1,740,248
Interest income on temporary cash investments 3,842 3,534 11,238 11,025
Equity in earnings of Operating Partnerships (Note 3) - - 258,371 -
Other income - - - 400
--------------- --------------- --------------- ---------------
579,295 582,736 1,998,850 1,751,673
Expenses
Operating and administrative expenses (Note 4) 314,040 224,203 790,611 541,078
--------------- --------------- --------------- ---------------
Net income and net comprehensive income $ 265,255 $ 358,533 $ 1,208,239 $ 1,210,595
=============== =============== =============== ===============
Net income allocated to:
General Partners $ 2,652 $ 3,585 $ 12,082 $ 12,106
Limited Partners 262,603 354,948 1,196,157 1,198,489
--------------- --------------- --------------- ---------------
$ 265,255 $ 358,533 $ 1,208,239 $ 1,210,595
=============== =============== =============== ===============
Net income, basic and diluted, per BAC $ .07 $ .09 $ .30 $ .30
=============== =============== =============== ===============
Weighted average number of BACs outstanding 4,011,101 4,011,101 4,011,101 4,011,101
=============== =============== =============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
CAPITAL SOURCE II L.P.-A
STATEMENT OF PARTNERS' CAPITAL (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
General BAC
Partner Holders Total
-------------- ---------------- ---------------
<S> <C> <C> <C>
Balance at December 31, 1999 $ (298,965) $ 27,048,267 $ 26,749,302
Net income 12,082 1,196,157 1,208,239
Cash distributions paid or accrued (13,674) (1,353,747) (1,367,421)
-------------- ---------------- ---------------
Balance at September 30, 2000 $ (300,557) $ 26,890,677 $ 26,590,120
============== ================ ===============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE> - 2 -
CAPITAL SOURCE II L.P.-A
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, 2000 Sept. 30, 1999
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities
Net income $ 1,208,239 $ 1,210,595
Adjustments to reconcile net income to net cash
from operating activities
Equity in earnings of Operating Partnerships (258,371) -
Amortization of discount on mortgage-backed securities (254) (236)
Decrease in interest receivable 1,262 1,275
Decrease in other assets 31,171 80,064
Decrease in accounts payable (110,183) (112,229)
--------------- ---------------
Net cash provided by operating activities 871,864 1,179,469
--------------- ---------------
Cash flows from investing activities
FHA Loan and GNMA Certificate principal payments received 134,565 123,309
Distributions received from Operating Partnerships 258,371 -
--------------- ---------------
Net cash provided by investing activities 392,936 123,309
--------------- ---------------
Cash flow used in financing activity
Distributions paid (1,367,421) (1,365,901)
--------------- ---------------
Net decrease in cash and temporary cash investments (102,621) (63,123)
Cash and temporary cash investments at beginning of period 278,134 432,999
--------------- ---------------
Cash and temporary cash investments at end of period $ 175,513 $ 369,876
=============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> - 3 -
CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
1. Basis of Presentation
The accompanying interim unaudited financial statements have been prepared
according to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted according to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. The financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1999. In the opinion of management, all normal and recurring
adjustments necessary to present fairly the financial position at September
30, 2000, and results of operations for all periods presented have been made.
The results of operations for the three and nine-month periods ended September
30, 2000 are not necessarily indicative of the results to be expected for the
full year.
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.
2. Investment in Mortgage-Backed Securities
At September 30, 2000, all of the Partnership's mortgage-backed securities were
classified as held-to-maturity. The total amortized cost, gross unrealized
holding gains and aggregate fair value of such securities were $26,703,329,
$39,460 and $26,742,789, respectively.
Descriptions of the Partnership's mortgage-backed securities at September 30,
2000, are as follows:
<TABLE>
<CAPTION>
Number Interest Maturity Carrying
Type of Security and Name Location of Units Rate Date Amount
---------------------------------- -------------------- -------- -------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
GNMA Certificates:
Crane's Landing Winter Park, FL 252 8.75% 12-15-2030 $ 10,072,796
Monticello Apartments Southfield, MI 106 8.75% 11-15-2029 5,238,086
The Ponds at Georgetown Ann Arbor, MI 134 7.50% 12-15-2029 4,951,282
---------------
20,262,164
FHA Loan:
Delta Crossing Charlotte NC 178 9.10% 10-01-2030 6,441,165
---------------
Balance at September 30, 2000 $ 26,703,329
===============
</TABLE>
<PAGE> - 4 -
CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Reconciliation of the carrying amount of the mortgage-backed securities is as
follows:
<TABLE>
<S> <C>
Balance at December 31, 1999 $ 26,837,640
Addition
Amortization of discount on mortgage-backed securities 254
Deduction
FHA Loan and GNMA Certificate principal payments received (134,565)
---------------
Balance at September 30, 2000 $ 26,703,329
===============
</TABLE>
3. Investment in Operating Partnerships
The Partnership's investment in Operating Partnerships consists of interests in
limited partnerships which own multifamily properties financed by the GNMA
Certificates and FHA Loan held by the Partnership and is accounted for using
the equity method. Currently, losses are recognized only to the extent of
additional contributions, net of distributions received, to the Operating
Partnerships by the Partnership. Any distributions received by the
Partnership from the Operating Partnerships are recorded as income.
Descriptions of the Operating Partnerships held at September 30, 2000, are as
follows:
<TABLE>
<CAPTION>
Carrying
Name Location Partnership Name Amount
------------------------ --------------------- ----------------------------------------- ------------
<S> <C> <C> <C>
Delta Crossing Charlotte, NC Delta Crossing Limited Partnership $ -
Crane's Landing Winter Park, FL Crane's Landing Partnership, Ltd. -
Monticello Apartments Southfield, MI Centrum Monticello Limited Partnership -
The Ponds at Georgetown Ann Arbor, MI Ponds at Georgetown Limited Partnership -
------------
Balance at September 30, 2000 $ -
============
</TABLE>
Reconciliation of the carrying amount of the Operating Partnerships is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Balance at December 31, 1999 $ -
Addition
Equity in earnings of Operating Partnerships 258,371
Deduction
Distributions received from Operating Partnerships (258,371)
---------------
Balance at September 30, 2000 $ -
===============
</TABLE>
<PAGE> - 5 -
CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
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 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
of $12,500 and $37,500 were incurred during the quarter and nine
months ended September 30, 2000.
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 such General Partner for the nine
months ended September 30, 2000 was $839,870 ($256,334 for the quarter ended
September 30, 2000). Such reimbursed expenses included in this footnote are
presented on a cash basis and do not reflect accruals made at quarter end
which are reflected in the accompanying financial statements.
An affiliate of the General Partners has been retained to provide property
management services for The Ponds at Georgetown. The fees for services
provided were $10,922 and $32,237 for the quarter and nine months ended
September 30, 2000 and represented the lower of costs incurred in providing
management of the property or customary fees for such services determined on a
competitive basis.
5. Legal Proceedings
The Partnership has been named as a defendant in a purported class action
lawsuit filed in the Delaware Court of Chancery on February 3, 1999, by two
BAC holders, Alvin M. Panzer and Sandra G. Panzer, against the Partnership,
its General Partners, America First and various of their affiliates (including
Capital Source L.P., a similar partnership with general partners that are
affiliates of America First) and Lehman Brothers, Inc. The plaintiffs seek to
have the lawsuit certified as a class action on behalf of all BAC holders of
the Partnership and Capital Source L.P. The lawsuit alleges, among other
things, that a proposed merger transaction involving the Partnership and
Capital Source L.P. is deficient and coercive, that the defendants have
breached the terms of the Partnership's partnership agreement and that the
defendants have acted in manners which violate their fiduciary duties to the
BAC holders. In this complaint, the plaintiffs sought to enjoin the proposed
merger transaction and seek to appoint an independent BAC holder
representative to investigate alternative transactions. The lawsuit also
requests a judicial dissolution of the Partnership, an accounting, and
unspecified damages and costs.
The General Partners determined not to pursue the merger transaction which
was the subject of the initial lawsuit and proposed an alternative transaction
to BAC holders. A prospectus/consent solicitation statement outlining this
alternative transaction was sent to BAC holders on or about November 16,
1999. The plaintiffs amended their complaint on December 8, 1999, and again
on February 22, 2000. The second amended complaint challenges this current
prospectus/consent solicitation statement on grounds similar to those alleged
in the original complaint, as well as on other procedural grounds. The second
amended complaint does not seek to enjoin the proposed merger transaction.
<PAGE> - 6 -
CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
On July 12, 1999, Alvin M. Panzer, one of the named plaintiffs in the action
described above, filed an additional complaint against the Partnership, its
General Partners and America First in the Delaware Court of Chancery (the
Books and Records Action). The complaint seeks to compel the General
Partners to supply the plaintiff with a list of all BAC holders of the
Partnership and copies of the limited partnership agreements of the Operating
Partnerships.
To resolve these lawsuits, the Partnership and affiliates, on April 24, 2000,
entered into a settlement agreement (the Settlement) with the plaintiffs. The
Settlement remains subject to approval by the Court. The complete terms of
the Settlement, along with the updated consent solicitation material
describing the revised merger transaction, was filed with the Securities and
Exchange Commission (the SEC) on or about June 15, 2000. In connection with
the Settlement, which, if approved, will also result in the dismissal of the
Books and Records Action, the Partnership submitted a revised transaction to
BAC holders for approval on or about June 30, 2000. On October 2, 2000, the
BAC holders of both the Partnership and Capital Source L.P. approved the
revised transaction. In accordance with the Settlement, the parties to this
litigation sent a court-approved settlement notice to the class members on or
about November 10, 2000. This notice described the terms of the Settlement
and also notified the class that the Court will hold a hearing on December 19,
2000 to consider whether to approve the Settlement.
<PAGE> - 7 -
CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion should be read in conjunction with all of the
financial statements and notes included in Item 1 of this report as well as
the Partnership's Annual Report on Form 10-K for the year ended December 31,
1999.
Liquidity and Capital Resources
At September 30, 2000, the Partnership owned: (i) three 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 two 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 four Operating Partnerships which own the multifamily
properties financed by the GNMA Certificates and the FHA Loan. The GNMA
Certificates, the FHA Loan and the Partnership Equity Investments are referred
to as the "Permanent Investments". The obligations of GNMA and FHA are backed
by the full faith and credit of the United States government. The overall
status of the Partnership's investments has remained relatively constant since
December 31, 1999.
The following table shows the occupancy levels of the properties financed by
the Partnership as of September 30, 2000:
<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 252 249 99%
Delta Crossing Charlotte, NC 178 159 89%
Monticello Apartments Southfield, MI 106 100 94%
The Ponds at Georgetown Ann Arbor, MI 134 133 99%
--------- ---------- ----------
670 641 96%
========= ========== ==========
</TABLE>
<PAGE> - 8 -
CAPITAL SOURCE II L.P.-A
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2000
(UNAUDITED)
Distributions
Cash distributions paid or accrued per BAC for the periods shown were as
follows:
<TABLE>
<CAPTION>
For the Nine For the Nine
Months Ended Months Ended
Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
<S> <C> <C>
Regular monthly distributions
Income $ .2982 $ .2988
Return of capital .0393 .0387
-------------- --------------
$ .3375 $ .3375
============== ==============
Distributions
Paid out of cash flow $ .2766 $ .3375
Paid out of reserves .0609 -
-------------- --------------
$ .3375 $ .3375
============== ==============
</TABLE>
Regular monthly distributions to BAC Holders consist primarily of interest
received on the FHA Loan and GNMA Certificates. Additional cash for
distributions is received from other investments. The Partnership is
permitted to replenish its reserves with cash flows in excess of distributions
paid. For the nine months ended September 30, 2000, a net amount of $246,914
was withdrawn from reserves ($139,828 was withdrawn from reserves for the
quarter ended September 30, 2000).
The Partnership believes that cash provided by operating and investing
activities and, if necessary, withdrawals from the Partnership's reserves, to
the extent available, will be adequate to meet short-term liquidity
requirements, including the payments of distributions to BAC Holders. The
Partnership has no other internal or external sources of liquidity. Under the
terms of its Partnership Agreement, the Partnership has the authority to enter
into short- and long-term debt financing arrangements; however, the
Partnership currently does not anticipate entering into such arrangements.
The Partnership is not authorized to issue additional BACs to meet short-term
and long-term liquidity requirements.
<PAGE> - 9 -
Results of Operations
Comparison of the Quarters Ended September 30, 2000 and September 30, 1999
Mortgage-backed securities income decreased slightly for the quarter ended
September 30, 2000, compared to the same period in 1999. This decrease is due
to the continued amortization of the principal balances of the Partnership's
mortgage-backed securities.
Interest income on temporary cash investments increased for the quarter ended
September 30, 2000, compared to the same period in 1999, due to an increase in
the average interest rate earned on reserve investments.
Operating and administrative costs for the quarter ended September 30, 2000,
increased approximately $90,000 compared to the same period in 1999. This
increase was primarily due to an increase in legal fees resulting from the
defense of a purported class action lawsuit filed against the Partnership as
more fully described in Note 5 to the financial statements and an increase in
transactions costs incurred in conjunction with the proposed merger. Also
contributing to the increase in operating and administrative expenses was an
increase in salaries and related expenses.
Comparison of the Nine Months Ended September 30, 2000 and September 30, 1999
Mortgage-backed securities income decreased approximately $11,000 for the nine
months ended September 30, 2000, compared to the same period in 1999. This
decrease is due to the continued amortization of the principal balances of the
Partnership's mortgage-backed securities.
Interest income on temporary cash investments for the nine months
ended September 30, 2000, was comparable to the same period in 1999.
During the nine months ended September 30, 2000, the Partnership received
distributions totaling $258,371 from The Ponds at Georgetown and Crane's
Landing whereas no such distributions were received from any of the Operating
Partnerships during the comparable period of 1999. As such, equity in
earnings of Operating Partnerships of $258,371 was recorded for the nine
months ended September 30, 2000 and no equity in earnings of Operating
Partnerships was recorded for the comparable period of 1999.
Operating and administrative costs for the nine months ended September 30,
2000, increased approximately $250,000 compared to the same period in 1999.
This increase was primarily due to an increase in legal fees resulting from
the defense of a purported class action lawsuit filed against the Partnership
as more fully described in Note 5 to the financial statements and an increase
in transaction costs incurred in conjunction with the proposed merger. Also
contributing to the increase in operating and administrative expenses was an
increase in salaries and related expenses.
New Accounting Pronouncement
The Partnership plans to adopt Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS 133)
effective January 1, 2001. Management is currently evaluating the effects of
adopting this statement and does not anticipate that such adoption will have a
material impact on the financial statements of the Partnership.
Forward Looking Statements
This report contains forward looking statements that reflect management's
current beliefs and estimates of future economic circumstances, industry
conditions, the Partnership's performance and financial results. All
statements, trend analysis and other information concerning possible or
assumed future results of operations of the Partnership and the real estate
investments it has made (including, but not limited to, the information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations"), constitute forward-looking statements. BAC Holders
and others should understand that these forward looking statements are subject
to numerous risks and uncertainties and a number of factors could affect the
future results of the Partnership and could cause those results to differ
materially from those expressed in the forward looking statements contained
herein.
<PAGE> - 10 -
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes in the Partnership's market risk since
December 31, 1999.
<PAGE> - 11 -
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership has been named as a defendant in a purported
class action lawsuit filed in the Delaware Court of Chancery on
February 3, 1999, by two BAC holders, Alvin M. Panzer and
Sandra G. Panzer, against the Partnership, its General Partners,
America First and various of their affiliates (including Capital
Source L.P., a similar partnership with general partners that
are affiliates of America First) and Lehman Brothers, Inc.
The plaintiffs seek to have the lawsuit certified as a class
action on behalf of all BAC holders of the Partnership and
Capital Source L.P. The lawsuit alleges, among other things,
that a proposed merger transaction involving the Partnership
and Capital Source L.P. is deficient and coercive, that the
defendants have breached the terms of the Partnership's
partnership agreement and that the defendants have acted in
manners which violate their fiduciary duties to the BAC holders.
In this complaint, the plaintiffs sought to enjoin the proposed
merger transaction and seek to appoint an independent BAC holder
representative to investigate alternative transactions. The
lawsuit also requests a judicial dissolution of the Partnership,
an accounting, and unspecified damages and costs.
The General Partners determined not to pursue the merger
transaction which was the subject of the initial lawsuit and
proposed an alternative transaction to BAC holders. A
prospectus/consent solicitation statement outlining this
alternative transaction was sent to BAC holders on or about
November 16, 1999. The plaintiffs amended their complaint on
December 8, 1999, and again on February 22, 2000. The second
amended complaint challenges this current prospectus/consent
solicitation statement on grounds similar to those alleged in
the original complaint, as well as on other procedural grounds.
The second amended complaint does not seek to enjoin the
proposed merger transaction.
On July 12, 1999, Alvin M. Panzer, one of the named plaintiffs
in the action described above, filed an additional complaint
against the Partnership, its General Partners and America First
in the Delaware Court of Chancery (the Books and Records
Action). The complaint seeks to compel the General Partners
to supply the plaintiff with a list of all BAC holders of the
Partnership and copies of the limited partnership agreements of
the Operating Partnerships.
To resolve these lawsuits, the Partnership and affiliates, on
April 24, 2000, entered into a settlement agreement (the
Settlement) with the plaintiffs. The Settlement remains subject
to approval by the Court. The complete terms of the Settlement,
along with the updated consent solicitation material describing
the revised merger transaction, was filed with the Securities and
Exchange Commission (the SEC) on or about June 15, 2000. In
connection with the Settlement, which, if approved, will also
result in the dismissal of the Books and Records Action, the
Partnership submitted a revised transaction to BAC holders for
approval on or about June 30, 2000. On October 2, 2000, the
BAC holders of both the Partnership and Capital Source L.P.
approved the revised transaction. In accordance with the
Settlement, the parties to this litigation sent a court-approved
settlement notice to the class members on or about November 10,
2000. This notice described the terms of the Settlement and
also notified the class that the Court will hold a hearing on
December 19, 2000 to consider whether to approve the Settlement.
There are no other material pending legal proceedings to which
the Partnership is a party or to which any of its property is
subject.
<PAGE> - 12 -
Item 4. Submission of Matters to a Vote of Security Holders.
A Prospectus/Consent Solicitation Statement dated June 30, 2000,
was sent to the BAC holders during the third quarter asking for
their consent to a proposed merger of the Partnership. No
meeting was held in connection with the consent solicitation.
The following table sets forth the item that the BAC holders
were asked to vote upon and the results of the vote as of
October 2, 2000, the date on which the consent solicitation was
terminated:
Proposal Results
A proposal to approve of the For: 2,015,787
Partnership's participation
in the proposed consolidation Against: 475,704
by merger with Capital Source L.P.
and America First Real Estate Abstain: 83,246
Investment Partners, L.P.
Accordingly, the merger has been approved by the BAC holders of
the Partnership. The merger was also approved by the BAC
holders of Capital Source L.P. The merger remains subject to a
number of conditions, including the approval by the Delaware
Court of Chancery of a settlement agreement relating to the
legal proceeding described in Item 1.
<PAGE> - 13 -
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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) Amendment to the Capital Source II L.P.-A Limited
Partnership Agreement (incorporated by reference to Exhibit
3.09 to Post-Effective Amendment No. 1 to the Registration
Statement on Form S-4 dated June 15, 2000 filed by America
First Real Estate Investment Partners, L.P. (Commission
File No. 333-52117)).
4(c) 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)).
10(a) Stipulation of Settlement
IN THE CASE OF
ALVIN M. PANZER and
SANDRA G. PANZER
Plaintiffs,
v.
INSURED MORTGAGE EQUITIES, INC.,
INSURED MORTGAGE EQUITIES II
LP., AMERICA FIRST CAPITAL
SOURCE I, LLC., AMERICA FIRST
CAPITAL SOURCE II, LLC, AMERICA
FIRST COMPANIES, LLC, AMERICA
FIRST REAL ESTATE INVESTMENT
PARTNERS, L.P., LEHMAN
BROTHERS, INC., CAPITAL SOURCE
L.P., PAUL L. ABBOTT, and CAPITAL
SOURCE II, L.P.,
Defendants.
(incorporated herein by reference to Form 10-Q dated March
31, 2000 filed pursuant to Section 13 of 15(d) of the
Securities Exchange Act of 1934 by Capital Source II L.P.
- A (Commission File No. 0-16862))
27. Financial Data Schedule
(b) Reports on Form 8-K
The Registrant did not file a report on Form 8-K during the
quarter for which this report is filed.
<PAGE> - 14 -
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 of the Registrant
By /s/ Michael Thesing
Michael Thesing,
Vice President and
Principal Financial Officer
Dated: November 10, 2000
<PAGE> - 15 -
