<PAGE>
================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
Commission file number 0-16856
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-3368726
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Cambridge Center, 9th Floor, Cambridge Massachusetts 02142
----------------------------------------------------------
(Address of principal executive offices)
(617) 234-3000
----------------------------------------------------
(Registrant's telephone number, including area code)
411 West Putnam Avenue, Suite 270, Greenwich, CT 06830
------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark 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>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - SEPTEMBER 30, 1999
INDEX
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
BALANCE SHEETS - September 30, 1999 and December 31, 1998 .........................................1
STATEMENTS OF OPERATIONS - For the three months ended September 30, 1999 and 1998
and for the nine months ended September 30, 1999 and 1998 ....................................2
STATEMENT OF PARTNERS' EQUITY - For the nine months ended
September 30, 1999 ...........................................................................3
STATEMENTS OF CASH FLOWS - For the nine months ended
September 30, 1999 and 1998 ..................................................................4
NOTES TO FINANCIAL STATEMENTS ..................................................................5-10
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ......................................................11-12
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS ............................................................................13
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K .............................................................13
SIGNATURES.................................................................................................14
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
Investments in mortgage loans (net of allowance for loan losses of $0 and
$11,733,380) at September 30, 1999
and December 31, 1998, respectively $15,979,355 $17,016,033
Cash and cash equivalents 4,152,430 2,992,413
Other receivable 564 10,761
----------- -----------
$20,132,349 $20,019,207
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Liabilities
Accounts payable and accrued expenses $ 80,892 $ 94,992
Commitments and contingencies
Partners' equity
Limited partners' equity (187,919 units
issued and outstanding) 19,550,196 19,426,135
General partners' equity 501,261 498,080
----------- -----------
Total partners' equity 20,051,457 19,924,215
----------- -----------
$20,132,349 $20,019,207
=========== ===========
</TABLE>
See notes to financial statements.
1
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
----------------------------- -----------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues
Short term investment interest $ 47,582 $ 38,739 $ 122,473 $ 112,343
Other income 5,540 5,300 75,380 16,300
--------- --------- --------- ---------
53,122 44,039 197,853 128,643
--------- --------- --------- ---------
Costs and expenses
General and administrative expenses 29,610 21,936 70,611 71,955
Allowance for loan losses - 300,000 - 300,000
--------- --------- --------- ---------
29,610 321,936 70,611 371,955
--------- --------- --------- ---------
Net income (loss) $ 23,512 $(277,897) $ 127,242 $(243,312)
========= ========= ========= =========
Net income (loss) attributable to
Limited partners $ 22,924 $(270,950) $ 124,061 $(237,230)
General partners 588 (6,947) 3,181 (6,082)
--------- --------- --------- ---------
$ 23,512 $(277,897) $ 127,242 $(243,312)
========= ========= ========= =========
Net income (loss) per unit of limited partnership
interest (187,919 units outstanding) $ .12 $ (1.44) $ .66 $ (1.26)
========= ========= ========= =========
</TABLE>
See notes to financial statements.
2
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENT OF PARTNERS' EQUITY
<TABLE>
<CAPTION>
General Limited Total
Partners' Partners' Partners'
Equity Equity Equity
----------- ----------- -----------
<S> <C> <C> <C>
Balance, January 1, 1999 $ 498,080 $19,426,135 $19,924,215
Net income for the nine months ended
September 30, 1999 3,181 124,061 127,242
----------- ----------- -----------
Balance, September 30, 1999 $ 501,261 $19,550,196 $20,051,457
=========== =========== ===========
</TABLE>
See notes to financial statements.
3
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the nine months ended
September 30,
---------------------------------
1999 1998
---- ----
<S> <C> <C>
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating activities
Net income (loss) $ 127,242 $ (243,312)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Provision for loan losses - 300,000
Changes in assets and liabilities
Other receivable 10,197 (5,159)
Accounts payable and accrued expenses (14,100) (7,649)
----------- -----------
Net cash provided by operating activities 123,339 43,880
----------- -----------
Cash flows from investing activities
Payments received from sale of mortgage loan, net 800,000 -
Mortgage loan payments received 236,678 -
----------- -----------
Net cash provided by investing activities 1,036,678 -
----------- -----------
Net increase in cash and cash equivalents 1,160,017 43,880
Cash and cash equivalents, beginning of period 2,992,413 2,908,425
----------- -----------
Cash and cash equivalents, end of period $ 4,152,430 $ 2,952,305
=========== ===========
</TABLE>
See notes to financial statements.
4
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - SEPTEMBER 30, 1999
1 INTERIM FINANCIAL INFORMATION
The summarized financial information contained herein is unaudited;
however, in the opinion of management, all adjustments (consisting only
of normal recurring accruals) necessary for a fair presentation of such
financial information have been included. The accompanying financial
statements, footnotes and discussions should be read in conjunction
with the financial statements, related footnotes and discussions
contained in the Resources Accrued Mortgage Investors 2 L.P. (the
"Partnership") annual report on Form 10-K for the year ended December
31, 1998. The results of operations for the nine months ended September
30, 1999, are not necessarily indicative of the results to be expected
for the full year.
When used in this quarterly report on Form 10-Q, the words "believes,"
"anticipates," "expects" and similar expressions are intended to
identify forward-looking statements. Statements looking forward in time
are included in this quarterly report on Form 10-Q pursuant to the
"safe harbor" provision on the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties
which could cause actual results to differ materially, including, but
not limited to, those set forth in "management's discussion and
analysis of financial condition and results of operations." Readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date hereof. The Partnership
undertakes no obligation to publicly revise these forward-looking
statements to reflect events or circumstances occurring after the date
hereof or to reflect the occurrence of unanticipated events.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Investments in mortgage loans
The Partnership principally invested in zero coupon senior and junior
mortgage loans on properties owned or acquired by limited partnerships
originally sponsored by affiliates of the General Partners. Certain of
these loans generally contain provisions whereby the Partnership may be
entitled to additional interest represented by participation in the
appreciation of the underlying property.
The Partnership accounts for its investments in mortgage loans under
the following methods:
Investment method
Mortgage loans representing transactions in which the Partnership
is considered to have substantially the same risks and potential
rewards as the borrower are accounted for as investments in real
estate rather than as loans. Although the transactions are
structured as loans, due to the terms of the zero coupon mortgage,
it is not readily determinable at inception that the borrower will
continue to maintain a minimum investment in the property. Under
this method of accounting, the Partnership will recognize as
revenue the lesser of the amount of interest as contractually
provided for in the mortgage loan, or its pro rata share of the
actual cash flow from operations of the underlying property
inclusive of depreciation and interest expense on any senior
indebtedness.
5
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - SEPTEMBER 30, 1999
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments in mortgage loans (continued)
Interest method
Under this method of accounting, the Partnership recognizes revenue
as interest income over the term of the mortgage loan so as to
produce a constant periodic rate of return. Interest income will
not be recognized as revenue during periods where there are
concerns about the ultimate realization of the interest or loan
principal.
Allowance for loan losses
An allowance for loan losses is established based upon a periodic
review of each of the mortgage loans in the Partnership's portfolio. In
performing this review, management considers the estimated fair value
of the mortgage loan or collateral as well as other factors, such as
the current occupancy, the amount and status of any senior debt, the
prospects for the property and the economic situation in the region
where the property is located. Because this determination of fair value
is based upon projections of future economic events, the amounts
ultimately realized at disposition may differ materially from the
carrying value as of September 30, 1999. The Partnership may provide
for additional losses in subsequent periods and such provisions could
be material.
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES
The Managing General Partner of the Partnership, RAM Funding, Inc. and
the Associate General Partner, Presidio AGP Corp. are wholly-owned
subsidiaries of Presidio Capital Corp. ("Presidio"). The General
Partners and certain affiliates of the General Partners, are general
partners in several other limited partnerships which are also
affiliated with Presidio, and which are engaged in businesses that are,
or may be in the future, in direct competition with the Partnership.
Subject to the rights of the Limited Partners under the Limited
Partnership Agreement, Presidio controls the Partnership through its
indirect ownership of the General Partners. On August 28, 1997, an
affiliate of NorthStar Capital Partners acquired all of the Class B
shares of Presidio. This acquisition, when aggregated with previous
acquisitions, caused NorthStar Capital Partners to acquire indirect
control of the General Partners. Effective July 31, 1998, Presidio is
indirectly controlled by NorthStar Capital Investment Corp.
("NorthStar"), a Maryland Corporation.
Presidio entered into a management agreement with NorthStar Presidio
Management Company LLC ("NorthStar Presidio"), an affiliate of
NorthStar. Under the terms of the management agreement, NorthStar
Presidio provides the day-to-day management of Presidio and its direct
and indirect subsidiaries and affiliates. For the nine months ended
September 30, 1999 and 1998 reimbursable expenses due to NorthStar
Presidio from the Partnership amounted to $8,181 and $1,000,
respectively.
On October 21, 1999, Presidio entered into a new Services Agreement
with AP-PCC III, L.P. (the "Agent") pursuant to which the Agent was
retained to provide asset management and investor relation services to
the Partnership and other entities affiliated with the Partnership.
6
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - SEPTEMBER 30, 1999
3 CONFLICTS OF INTEREST AND TRANSACTIONS WITH RELATED PARTIES (continued)
As a result of this agreement, the Agent has the duty to direct the day
to day affairs of the Partnership, including, without limitation,
reviewing and analyzing potential sale, financing or restructuring
proposals regarding the Partnership's assets, preparation of all
Partnership reports, maintaining Partnership records and maintaining
bank accounts of the Partnership. The Agent is not permitted, however,
without the consent of Presidio, or as otherwise required under the
terms of the Partnership's Agreement of Limited Partnership (the
"Partnership Agreement") to, among other things, cause the Partnership
to sell or acquire an asset or file for bankruptcy.
In order to facilitate the provision by the Agent of the asset
management services and the investor relation services, effective
October 25,1999, the officers and directors of the General Partner
resigned and nominees of the Agent were elected as the officers and
directors of the General Partner. The Agent is an affiliate of Winthrop
Financial Associates, a Boston based company that provides asset
management services, investor relation services and property management
services to over 150 limited partnerships which own commercial property
and other assets. The General Partner does not believe that this
transaction will have a material effect on the operations of the
Partnership.
As of September 30, 1999, an affiliate of Presidio has acquired 17,385
units of limited partnership interest of the Partnership. These units
represent 9.3% of the issued and outstanding limited partnership units.
The General Partners are allocated 2.5% of the net income or loss of
the Partnership and are entitled to 2.5% of distributions. The 2.5%
shall be apportioned 98% to the Managing General Partner and 2% to the
Associate General Partner.
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES
The Partnership invested in zero-coupon, nonrecourse senior and junior
mortgage loans. Collection of the amounts due on the Partnership's
junior mortgage loans is solely dependent upon the sale or refinancing
of the underlying properties at amounts sufficient to satisfy the
Partnership's mortgage notes after payment of the senior mortgage notes
owned by unaffiliated third parties.
The Partnership currently has one outstanding mortgage loan.
The Partnership's mortgage note contains a provision which requires the
borrowers to provide current appraisals based upon certain conditions
or in some cases upon request.
The Partnership has prepared an internal valuation for the property
owned by High Cash Partners, L.P. ("High Cash"). This loan contains a
provision which requires that if an appraisal indicates the value of
all indebtedness senior to and including the Partnership's loan, taking
into account principal plus accrued interest in excess of 5% per annum,
exceeds 85% of the then current appraisal, the borrower must repay the
indebtedness to a point where the 85% loan to value ratio is restored.
Based upon an internal valuation, management does not believe that the
loan to value ratio has been exceeded.
7
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - SEPTEMBER 30, 1999
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Harborista Loan
A $10,000,000 second mortgage loan (`the Harborista Loan") to
Harborista Associates, L.P. was secured by an office building, commonly
known as the Harbor Plaza, located in Boston, Massachusetts (the
"Harbor Plaza"). The Harborista Loan was funded on February 13, 1989
and mature on December 1, 1998, at which time a balloon payment of
approximately $36,000,000 would have been due and payable. Harbor Plaza
was also encumbered by a first mortgage loan in the original amount of
$24,475,000 held by Northwestern Mutual Life Insurance Co.
("Northwestern"). The first mortgage was due to mature on December 1,
1995, but was extended until January 1, 1999.
During 1993 management determined that interest on the Harborista Loan
should cease to accrue and that an allowance for loan losses was
necessary for the entire carrying value of the Harborista Loan which
amounted to $10,618,380.
On February 9, 1999, 470 Atlantic Avenue Management Corp. ("470
Atlantic"), which had previously acquired Northwestern's first mortgage
loan filed a motion for foreclosure on its mortgage.
On March 30, 1999, the Partnership sold its interest in the Harborista
Loan to 470 Atlantic for gross proceeds of approximately $1,000,000,
exclusive of legal and other costs related to the transaction of
approximately $200,000. Accordingly, the Partnership recorded $800,000
of recovery of loan losses with respect to the sale of this loan as of
December 31, 1998.
Twin Oak loan
The Partnership held a $1,200,000 second mortgage on the Twin Oak
property. The first mortgage on this property, which was held by an
unaffiliated third party, was due to mature on July 1, 1993. However,
during 1993, the mortgage loan was extended for three years until July
1, 1996. For the period between July 1996 and October 1997, the Twin
Oak borrower continued to make reduced mortgage payments to the first
mortgage lender in anticipation of a loan extension or modification.
During October 1997, the Twin Oak borrower and its first mortgage
lender formally agreed to extend the maturity date of the first
mortgage until July 1, 1998. In order for the Twin Oak borrower to
consummate this loan extension, the consent of the Partnership was
required. The Partnership agreed to consent on the condition that the
Twin Oak borrower either refinance both the first mortgage and the
Partnership's mortgage on or before July 1, 1998 or give the
Partnership a deed-in-lieu of foreclosure to the Twin Oak property. It
was the intention of the general partners of Twin Oak to sell the
property prior to the July 1, 1998 extended maturity date.
The property was marketed for sale, and Twin Oak entered into a formal
contract of sale with an unaffiliated third party in May of 1998. On
July 1, the first mortgage matured and was not repaid. However, the
purchaser failed to perform on this contract in August of 1998. The
property was again marketed for sale. On October 20, 1998, a formal
agreement was executed in which the first mortgage lender again agreed
to extend the maturity of the loan to July 1, 1999 in exchange for a
modification to the interest rate and payment of an extension fee. On
October 15, 1998, a new contract for sale was executed with Emmes
Ventures ("Emmes"), an affiliate of NorthStar, also an affiliate of the
general partners of Twin Oak and the Partnership.
8
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
FORM 10-Q - SEPTEMBER 30, 1999
5 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
During the year ended 1996, a provision for loan losses of $1,515,000
was recorded on the Twin Oak loan. A $400,000 allowance for loan losses
was recorded during 1998 to reduce the carrying value of the loan to
the estimated amount anticipated to be received by the Partnership
under the terms outlined in this new contract.
On March 1, 1999, the Twin Oak property was sold to Emmes for a gross
purchase price of approximately $4,150,000 (subject to customary
adjustments at closing). The Twin Oak borrower used the proceeds from
the sale to repay the first mortgage holder and on May 5, 1999, the
Partnership received approximately $237,000 representing the carrying
value of the Twin Oak loan.
Summary of mortgage activity is as follows:
<TABLE>
<CAPTION>
Nine months ended Year ended
September 30, 1999 December 31, 1998
------------------------------------------ ---------------------------------------------
Investment Interest Investment Interest
Method Method Total Method Method Total
------ ------ ----- ------ ------ -----
<S> <C> <C> <C> <C> <C> <C>
Opening balance $ 800,000 $ 16,216,033 $ 17,016,033 $ - $ 16,616,033 $ 16,616,033
Recovery of (provision for)
loan losses - - - 800,000 (400,000) 400,000
Payments received, net (800,000) (236,678) (1,036,678) - - -
------------ ------------ ------------ ------------ ------------ ------------
Ending balance $ - $ 15,979,355 $ 15,979,355 $ 800,000 $ 16,216,033 $ 17,016,033
============ ============ ============ ============ ============ ============
</TABLE>
9
<PAGE>
RESOURCES ACCRUED MORTGAGE INVESTORS 2 L.P.
NOTES TO FINANCIAL STATEMENTS
4 INVESTMENTS IN MORTGAGE LOANS AND ALLOWANCE FOR LOAN LOSSES (continued)
Information with respect to the Partnership's mortgage loans is as
follows:
<TABLE>
<CAPTION>
Original Mortgage Mortgage
Interest Compound Loan Maturity Amount Purchased
Description Rate % Period Type Date Date Advanced Interest
- ----------- ------ ------ ---- ---- ---- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Building
Harbor Plaza 13.307 Monthly 2nd 13-Feb-89 1-Dec-98 $10,000,000 $ 23,513
Boston, Mass (a) (e)
Shopping Centers
Sierra Marketplace (b) (c) 11.220 Monthly 1st 10-Feb-89 28-Feb-01 6,500,000 -
Reno, Nevada
Twin Oak (b) (f) 12.280 Annually 2nd 3-Apr-90 1-May-02 1,200,000 -
----------- --------
Ft. Lauderdale, Florida
$17,700,000 $ 23,513
=========== ========
<CAPTION>
Interest recognized Carrying value
Mortgage --------------------------- ------------------------------
Placement September 30, 1998 and Reserves/ September 30, December 31,
Description Fees 1999 Prior Write-offs 1999 1998
- ----------- ---- ---- ----- ---------- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Office Building
Harbor Plaza $ 594,867 $ - $ - $ - $ - $ 800,000
Boston, Mass (a) (e)
Shopping Centers
Sierra Marketplace (b) (c) 385,757 - 9,093,598 - 15,979,355 15,979,355
Reno, Nevada
Twin Oak (b) (f) 71,218 - 880,460 - - 236,678
----------- ---------- ----------- ----------- ----------- -----------
Ft. Lauderdale, Florida
$ 1,051,842 $ - $ 9,974,058 $ - $15,979,355 $17,016,033
=========== ========== =========== =========== =========== ===========
</TABLE>
Contractual balance (d)
------------------------------
September 30, December 31,
Description 1999 1998
- ------------- ---- ----
Office Building
Harbor Plaza $ - $36,985,751
Boston, Mass (a) (e)
Shopping Centers
Sierra Marketplace (b) (c) 21,313,263 19,600,802
Reno, Nevada
Twin Oak (b) (f) - 3,293,255
----------- ---------
Ft. Lauderdale, Florida
$21,313,263 $59,879,808
=========== ===========
(a) This loan was accounted for under the investment method.
(b) These loans are accounted for under the interest method.
(c) The Partnership may be entitled to additional interest in the appreciation
of the property which is subordinated to a specified return to the
borrower. It is unlikely that the Partnership will realize any additional
interest from this loan.
(d) Contractual balance represents the amount that would be paid by the
borrower if the loan was liquidated (principal plus accrued interest earned
to date).
(e) This mortgage loan was sold during the quarter ended March 31, 1999.
(f) This loan was repaid on May 5, 1999.
See notes to financial statements.
10
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSIONS AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership initially invested the net proceeds of its public
offering in four zero coupon first and junior mortgage loans
aggregating $23,300,000. These loans are secured by properties owned
principally by privately and publicly syndicated limited partnerships
originally sponsored by affiliates of the general partners. The
Partnership currently has an investment in one of these four mortgage
loans with an outstanding balance of approximately $6,500,000 in
principal.
As of September 30, 1999, the Partnership had working capital reserves
of approximately $4,072,000. Working capital reserves are invested in
short-term instruments and are expected to be sufficient to pay
administrative expenses during the term of the Partnership.
On March 1, 1999, the Twin Oak Property was sold to Emmes Ventures, an
affiliate of NorthStar for a gross purchase price of approximately
$4,150,000 (subject to customary adjustments at closing). The Twin Oak
Borrower used the proceeds from the sale to repay the first mortgage to
Southern Life Mortgage and on May 5, 1999, the Partnership received
approximately $237,000 representing the carrying value of the Twin Oak
loan.
On March 30, 1999, the Partnership sold its interest in the Harborista
Loan to the holder of the first mortgage on Harbor Plaza for gross
proceeds of approximately $1,000,000, exclusive of legal and other
costs related to the transaction of approximately $200,000. As of
December 31, 1998, the Partnership recorded $800,000 of recovery of
loan losses with respect to this sale.
Results of operations
Net income increased for the three and nine month periods ended
September 30, 1999 as compared to the same periods in 1998 principally
due to no provision for loan losses required in the 1999 period
compared with a provision for loan losses recorded on the Twin Oak loan
in the 1998 period. Revenues increased for the three and nine month
periods ended September 30, 1999 as compared to the same periods in
1998 principally due an increase in short term investment interest
resulting from larger cash balances available for short term investment
and an increase in other income resulting from an increase in transfer
fee income.
Costs and expenses decreased for the three and nine month periods ended
September 30, 1999, as compared to the same periods in 1998 principally
due to no provision for loan losses required in the 1999 period
compared with a provision for loan losses recorded on the Twin Oak loan
in the 1998 period. General and administrative expenses increased for
the three month period ended September 30, 1999 as compared to the same
period in 1998 due to increased investor relations and payroll expenses
partially offset by a decrease in accounting expenses.
Inflation has not had a material effect on the Partnership's recent
operations or financial condition and is not expected to have a
material effect in the future.
Year 2000 compliance
The Year 2000 compliance issue concerns the inability of computerized
information systems and programs to accurately calculate, store or use
a date after December 31, 1999, as a result of the year being stored as
a two digit number. The Partnership is dependent upon the General
Partner and its affiliates for management and administrative services.
This could result in system failure or miscalculations causing
disruptions of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar
normal business activities.
11
<PAGE>
Year 2000 compliance (continued)
During the third quarter of 1999, the General Partner and its
affiliates completed their assessment of computer systems used in
connection with the management of the Partnership. The General Partner
and its affiliates have completed upgrading those systems where
required. The Partnership has to date not borne, nor is it expected
that the Partnership will bear, any significant costs in connection
with the upgrade of those systems requiring remediation.
To date, the General Partner is not aware of any external agent or
service provider with a Year 2000 issue that would materially impact
the Partnership's results of operations, liquidity or capital
resources. However, the General Partner has no means of ensuring that
external agents and service providers will be Year 2000 compliant. The
General Partner does not believe that the inability of external agents
or service providers to complete their Year 2000 resolution process in
a timely manner will have a material impact on the financial position
or results of operations of the Partnership. However, the effect of
non-compliance by external agents is not readily determinable.
12
<PAGE>
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
(a) None.
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: None.
(b) Reports on Form 8-K: None.
13
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
RESOURCES ACCRUED MORTGAGE
INVESTORS 2 L.P.
By: RAM Funding, Inc.
Managing General Partner
By: /s/ Allan Rothschild
------------------------------------------
Allan Rothschild
Duly Authorized Signer
By: /s/ Lawrence Schachter
------------------------------------------
Lawrence Schachter
Principal Financial and Accounting Officer
Dated: November 11, 1999
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary information extracted from the Financial
Statements of the September 30, 1999 Form 10-Q of Resources Accrued Mortgage
Investors 2 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 4,152,430
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 4,152,994
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 20,132,349
<CURRENT-LIABILITIES> 80,892
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,051,457
<TOTAL-LIABILITY-AND-EQUITY> 20,132,349
<SALES> 0
<TOTAL-REVENUES> 197,853
<CGS> 0
<TOTAL-COSTS> 70,611
<OTHER-EXPENSES> 0
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<INCOME-TAX> 0
<INCOME-CONTINUING> 127,242
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<NET-INCOME> 127,242
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</TABLE>