SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number 0-17091
December 31, 1996
CSA Income Fund Limited Partnership II
(Exact name of registrant as specified in its charter)
Massachusetts No. 04-2932178
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22 Batterymarch St., Boston, MA 02109
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (617) 357-1700
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 78,785
Units of Limited Partnership Interest
Indicate by check whether 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 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 is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K. [ X ]
Number of shares outstanding of each registrant's classes of
securities:
Number of Units
Title of Each Class at December 31, 1996
Units of Limited Partnership 78,785
Interest: $250 per unit
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Part IV are incorporated by reference
to Post-Effective Amendment No. 1 to Form S-1,
Registration No. 33-11272
The Exhibit index is located on pages 20 and 21.
<PAGE>
Part I
Item 1. Business
CSA Income Fund Limited Partnership II (the "Partnership") is a
limited partnership organized under the provisions of The
Massachusetts Uniform Limited Partnership Act. The Partnership is
composed of CSA Income Funds, Inc., the General Partner (an
affiliate of CSA Financial Corp.), and 1,817 Limited Partners
owning 78,785 Units of Limited Partnership Interest of $250 each, the
capital contributions of which aggregated $19,689,570 at
December 31, 1996. The Partnership was formed on
September 17, 1986 and commenced operations on June 26, 1987.
The Partnership terminated its public offering on June 30, 1988.
The intended life of the Partnership contained in the original
Partnership Prospectus was seven to ten years. The Partnership
has been in operation in excess of nine years. The General Partner
informed the Limited Partners in the 1996 Third Quarter Financial Report
mailed on November 14, 1996 that the Partnership was winding up and
that the Partnership would be dissolved in 1997. The General
Partner is currently reviewing all remaining leases and equipment
for disposition and realization of maximum potential proceeds for
the Partnership.
The Partnership was organized to engage in the business of acquiring
income-producing equipment for investment. The Partnership's
principal objectives were:
1. To acquire and lease Equipment, primarily through Operating
Leases, to generate income during its entire useful life;
2. To provide quarterly distributions of cash to the Limited
Partners from leasing revenues and from the proceeds of sale
or other disposition of Partnership Equipment; and
3. To reinvest in additional Equipment a portion of lease revenues
and a substantial portion of Cash From Sales and Refinancings
during the first years of the Partnership's operations.
The Partnership was formed primarily for investment purposes and not
as a "tax shelter".
The registrant has no direct employees. The General Partner has full
and exclusive discretion in management and control of the Partnership.
Selection of the Equipment for purchase and lease was based principally
on the General Partner's evaluation of the usefulness of the Equipment
in commercial or industrial applications and its estimate of the
potential demand for the equipment at the end of the initial lease
term.
<PAGE>
The Partnership's equipment may have included:
1. New and reconditioned computer peripheral equipment, computer
terminal systems and data processing systems primarily
manufactured by International Business Machines, Inc. (IBM) and
qualified for IBM maintenance.
2. New telecommunications and telecomputer equipment consisting
primarily of private automated branch exchanges (PBXs),
advanced high-speed digital telephone switching devices,
voice/data transmission devices and telephone/computer
networks as well as telephone hand sets and facsimile
transmission products.
3. New office equipment consisting primarily of photocopying and
graphic processing equipment.
4. New highway transportation equipment and new and reconditioned
air transportation equipment consisting primarily of tractors,
trailers, trucks, intermodal equipment, railroad rolling stock,
passenger vehicles and corporate or commercial aircraft.
5. Miscellaneous other types of equipment which meet the
investment objective of the Partnership.
The equipment leasing industry is highly competitive. In initiating
its leasing transactions, the Partnership competes with leasing
companies, manufacturers that lease their products directly, equipment
brokers and dealers and financial institutions, including commercial
banks and insurance companies. Many competitors are larger than the
Partnership and have access to more favorable financing. Competitive
factors in the equipment leasing business primarily involve pricing
and other financial arrangements. Marketing capability is also a
factor.
As of December 31, 1996, substantially all of the remaining equipment
in the Partnership's portfolio was leased under 20 separate leases to
11 lessees. The lessees providing at least 10% of total revenues
during 1996 are as follows:
America West Airlines 12%
Lucent Technologies, Inc. 22%
K-Mart Corporation 16%
U.S. West Communications, Inc. 10%
The Partnership's leases and equipment is described more fully in
Notes 3 and 4 to the Financial Statements included in Item 8.
<PAGE>
Item 2. Properties
The Partnership neither owns nor leases office space or equipment
for the purpose of managing its day-to-day affairs. The General
Partner, CSA Income Funds, Inc. (CIF), has exclusive control over
all aspects of the business of the Partnership, including provision
for any necessary office space. As such, CIF will be compensated
through Management fees and reimbursement of General and
Administrative costs related to managing the Partnership's business.
Excluded from the allowable reimbursement to the General Partner,
however, will be any of the following: (1) Expenditures for rent or
utilities; (2) Capital equipment and the related depreciation; and (3)
Certain other administrative items.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders, through the
solicitation of proxies or otherwise, during the fourth quarter of
1996.
PART II
Item 5. Market for the Registrant's Equity Securities and Related
Security Holder Matters
a. The Partnership's limited partnership interests are not
publicly traded. There is no market for the Partnership's
limited partnership interests and it is unlikely that one will
develop.
b. Approximate Number of Equity Security Holders:
Title of Class Number of Limited Partners
Units of Limited Partnership Interests as of 12/31/96
78,785 1,817
c. Distributions are paid at a rate determined by the General
Partner. Total Distributions paid per Limited Partnership
Unit during 1996, 1995, 1994, 1993 and 1992 were as follows:
<TABLE>
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
February $ 4.38 $ 4.38 $ 4.38 $ 6.25 $ 7.50
May 4.38 4.38 4.38 4.38 7.50
August 4.38 4.38 4.38 4.38 6.25
November 4.38 4.38 4.38 4.38 6.25
$17.52 $17.52 $17.52 $19.39 $27.50
</TABLE>
<PAGE>
Item 6. Selected Financial Data - Unaudited
The following table sets forth selected financial information
regarding the Partnership's financial position and operating results.
The information should be read in conjunction with the Financial
Statements and Notes thereto, and General Partner's Discussion and
Analysis of Financial Condition and Results of Operations, which are
included in Items 7 and 8 of this Report.
<TABLE>
<CAPTION>
Years Ended December 31,
(IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Total Revenues $1,958 $2,225 $3,543 $3,559 $4,117
Net Income 598 905 883 1,372 1,184
Net Income per
Limited
Partnership Unit 7.29 11.38 11.10 17.24 14.87
Total Assets 2,552 3,001 3,802 4,893 4,188
Notes Payable 1,127 803 752 1,452 346
Limited Recourse
Notes Payable 78 71 292
Distributions per
Limited Partnership
Unit 17.52 17.52 17.52 19.39 27.50
</TABLE>
<PAGE>
Item 7 General Partner's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
Gross rental income for the years ended December 31, 1996, 1995, and
1994 was $1,882,003, $2,014,366 and $3,343,300, respectively. The
decrease in gross rental income over time is attributable to the
expected occurrence of reduced rental rates for re-leased equipment
and to the sale of equipment from the Partnership's portfolio.
Net income for the year ended December 31, 1996 was $597,769 as
compared to net income of $905,421 and $883,070 in the
years ended December 31, 1995 and 1994, respectively. The decrease
in net income was primarily due to the decrease in gross rental income
in 1996. Lower levels of gains recorded on sale of equipment were
also part of the reason net income decreased, $58,916, $149,837, and
$151,690, for the years 1996, 1995, and 1994, respectively.
Interest income for 1996, 1995, and 1994 was $17,249, $60,417, and
$47,714, respectively. The 1996 decrease was due to lower cash
balances. Interest expense was $92,067, $67,724, and $127,712, for the
years ended December 31, 1996, 1995, and 1994, respectively. Interest
expense increased in 1996 primarily due to the additional leases
financed during the year.
Liquidity and Capital Resources
During 1996, the Partnership realized cash flow from operations of
$1,751,675 and $257,313 from the sale of equipment. The Partnership
has utilized the cash flow from operations and sale of equipment to
reduce notes payable, make distributions to its partners and
purchase equipment. Notes payable were reduced down by $781,111 in 1996
and distributions to the partners were $1,394,254. During 1996, the
Partnership acquired additional equipment in the amount of $1,409,642
using cash flow of $298,069 and notes payable of $1,111,573.
The intended life of the Partnership contained in the original
Partnership Prospectus was seven to ten years. The Partnership
has been in operation since June 26, 1987. The General Partner
informed the Limited Partners in the 1996 Third Quarter Financial
Report mailed on November 14, 1996 that the Partnership was winding
up and the Partnership would be dissolved in 1997. The General
Partner is currently reviewing all remaining leases and equipment
for disposition and realization of maximum potential proceeds for
the Partnership. The Partnership anticipates a final distribution
to be paid to the Limited Partners during May 1997.
<PAGE>
The Partnership distributed $4.38 per Limited Partnership Unit on
February 15, 1997. To date, the Partnership has made cash
distributions to the Limited Partners ranging from 82% to 91% of their
initial investment, depending on when the Limited Partner entered the
Partnership. The objective of the Partnership is to return the Limited
Partners' investment through current cash distributions and provide a
return on the investment by continued distributions as long as the
equipment continues to be leased. However, revenues generated from the
Partnership from lease renewals and remarketings after the initial
lease term have been lower than anticipated as a result of rapid
technological obsolescence in high technology equipment. Consequently,
the General Partner previously estimated that the continued cash
distributions may not fully return the entire initial investment of
all Limited Partners and/or a return thereon. Currently, it is
expected, subject to the winding up process, that total projected
returns will approximate 92% to 101% of the Limited Partner's initial
investment.
<PAGE>
Quarterly Financial Data - Unaudited
Summarized unaudited quarterly financial data for the years ended
December 31, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 Quarter Ended: 12/31 9/30 6/30 3/31
<S> <C> <C> <C> <C>
Total Revenues * $491,904 $530,488 $541,230 $394,546
Net Income 90,294 163,488 205,315 138,672
Net Income
Per Limited
Partnership Unit .92 2.05 2.58 1.74
Cash Distributions
Paid Per Limited
Partnership Unit 4.38 4.38 4.38 4.38
1995 Quarter Ended: 12/31 9/30 6/30 3/31
Total Revenues * $406,509 $615,157 $492,920 $710,034
Net Income 202,220 309,591 180,472 213,138
Net Income
Per Limited
Partnership Unit 2.54 3.89 2.27 2.68
Cash Distributions
Paid Per Limited
Partnership Unit 4.38 4.38 4.38 4.38
</TABLE>
* Total revenues include the net gains and losses from the sale of
equipment.
<PAGE>
Item 8 Financial Statements
CSA Income Fund Limited Partnership II
Index to Financial Statements
Independent Auditors' Report
Statements of Financial Position
as of December 31, 1996 and 1995
Statements for the Years Ended
December 31, 1996, 1995 and 1994:
Operations
Cash Flows
Changes in Partners' Capital (Deficit)
Notes to Financial Statements
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of CSA Income Fund Limited Partnership II
We have audited the accompanying statements of financial
position of CSA Income Fund Limited Partnership II as of
December 31, 1996 and 1995, and the related statements
of operations, cash flows, and changes in partners' capital
(deficit)for the three years then ended. These financial
statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable
basis for our opinion.
As discussed in note 1 to the financial statements, the Partnership
is in a wind up phase. The General Partner anticipates that
the Partnership will be dissolved in 1997.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of
CSA Income Fund Limited Partnership II as of December 31, 1996 and
1995, and the results of its operations and its cash flows for the
three years then ended in conformity with generally accepted
accounting principles.
/s/ SULLIVAN BILLE, P.C.
BOSTON, MASSACHUSETTS
March 18, 1997
<PAGE>
<TABLE>
<CAPTION>
CSA INCOME FUND LIMITED PARTNERSHIP II
Statements of Financial Position as of
December 31, 1996 and 1995
<S> <C> <C>
assets 1996 1995
Cash and cash equivalents $ 556,920 $ 1,021,366
Rentals receivable - 21,109
Accounts receivable - affiliates 69,648 133,277
Sales proceeds receivable - 46,367
Rental equipment, at cost 5,509,177 6,996,398
Less accumulated depreciation (3,613,329) (5,217,222)
Net rental equipment 1,895,848 1,779,176
Total assets $2,522,416 $ 3,001,295
Liabilities and Partners' Capital
Accrued management and
reimbursable fees $ 9,758 $ 17,710
Accounts payable 11,226 14,495
Deferred income 3,202 4,836
Notes payable 1,126,931 803,137
Limited recourse notes payable 78,049 71,382
Total liabilities 1,229,166 911,560
Partners' capital:
General Partner (deficit):
Capital contribution 1,000 1,000
Cumulative net Gain (Loss) 22,769 (613)
Cumulative cash distributions (168,052) (154,111)
(144,283) (153,724)
Limited Partners (78,785 units):
Capital contributions,
net of offering costs 17,563,265 17,563,265
Cumulative net Gain (Loss) 513,772 (60,615)
Cumulative cash distributions (16,639,504) (15,259,191)
1,437,533 2,243,459
Total partners' capital 1,293,250 2,089,735
Total liabilities and
partners' capital $ 2,522,416 $ 3,001,295
See accompanying notes to financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSA INCOME FUND LIMITED PARTNERSHIP II
Statements of Operations for the
years ended December 31, 1996, 1995 and 1994
1996 1995 1994
<S> <C> <C> <C>
Revenues:
Rental income $ 1,882,003 $ 2,014,366 $ 3,343,300
Interest income 17,249 60,417 47,714
Gain on sale of
equipment 58,916 149,837 151,690
Total revenues 1,958,168 2,224,620 3,542,704
Costs and expenses:
Depreciation 1,101,087 1,064,341 2,259,812
Interest 92,067 67,724 127,712
Storage and refurbishment 3,000 8,400 3,594
Management fee 94,100 100,718 167,165
General and administrative 70,145 78,016 101,351
Total expenses 1,360,399 1,319,199 2,659,634
Net income $ 597,769 $ 905,421 $ 883,070
Net income allocation:
General Partner $ 23,382 9,054 $ 8,830
Limited Partners 574,387 896,367 874,240
$ 597,769 $ 905,421 $ 883,070
Net income per Limited
Partnership Unit $ 7.29 $ 11.38 $ 11.10
Number of Limited
Partnership Units
Outstanding 78,785 78,785 78,785
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
CSA INCOME FUND LIMITED PARTNERSHIP II
Statements of Cash Flows for the
years ended December 31, 1996, 1995 and 1994
1996 1995 1994
<S> <C> <C> <C>
Cash flows from
operations:
Cash received from
rental of equipment $ 2,004,959 $1,871,777 $ 3,587,169
Cash paid for
operating and
management expenses (178,466) (280,280) (343,175)
Interest paid (92,067) (67,724) (127,712)
Interest received 17,249 60,417 47,714
Net cash from operations 1,751,675 1,584,190 3,163,996
Cash flows from
investments:
Purchase of equipment (1,409,642) (1,006,788) (2,486,244)
Sale of equipment 257,313 1,217,771 330,275
Net cash from or
used for
investments (1,152,329) 210,983 (2,155,969)
Cash flows from
financing:
Proceeds from
notes payable 1,111,573 601,411 1,422,657
Repayment of
notes payable (781,111) (771,207) (1,830,752)
Payment of cash
distributions (1,394,254) (1,394,256) (1,394,256)
Net cash used for
financing (1,063,792) (1,564,052) (1,802,351)
Net change in cash
and cash
equivalents (464,446) 231,121 (794,324)
Cash and cash
equivalents
at beginning
of year 1,021,366 790,245 1,584,569
Cash and cash
equivalents
at end of year $ 556,920 $ 1,021,366 $ 790,245
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CSA INCOME FUND LIMITED PARTNERSHIP II
Statement of Changes in Partners' Capital (Deficit)
for the years ended December 31, 1996, 1995 and 1994
Limited General
Partners Partner Total
<S> <C> <C> <C>
Balance at December 31, 1993 $ 3,233,478 $ (143,722) $ 3,089,756
Net income 874,240 8,830 883,070
Cash distributions (1,380,313) (13,943) (1,394,256)
Balance at December 31, 1994 2,727,405 (148,835) 2,578,570
Net income 896,367 9,054 905,421
Cash distributions (1,380,313) (13,943) (1,394,256)
Balance at December 31, 1995 2,243,459 (153,724) 2,089,735
Net income 574,387 23,382 597,769
Cash distributions (1,380,313) (13,941) (1,394,254)
Balance at December 31, 1996 $ 1,437,533 $ (144,283) $ 1,293,250
</TABLE>
See accompanying notes to financial statements.
<PAGE>
CSA INCOME FUND LIMITED PARTNERSHIP II
Notes to Financial Statements
(1) Organization
The Partnership was formed under the Massachusetts Uniform
Limited Partnership Act on September 17, 1986, with an initial
investment of $1,000, to invest primarily in equipment to be
leased to third parties. On June 26, 1987, the Partnership
commenced operations, admitting 397 Limited Partners who purchased
12,398 partnership units, contributing $3,098,860 in capital.
Subsequent to the initial closing, the Partnership admitted an
additional 469 Limited Partners whose capital contribution
totaled $5,404,800, representing 21,634 partnership units during
1987 and an additional 1,007 Limited Partners whose capital
contributions totaled $11,185,910 representing 44,753
partnership units during 1988. The Partnership terminated its
offering period on June 30, 1988.
CSA Income Funds Inc., an affiliate of CSA Financial Corp., is
the General Partner and manages the business and affairs of the
Partnership. The intended life of the Partnership contained in
the original Partnership Prospectus was seven to ten years. The
Partnership has been in operation in excess of nine years. The
General Partner informed the Limited Partners in the Third
Quarter Financial Report mailed on November 14, 1996 that the
Partnership was winding up and the Partnership would be dissolved in
1997. The General Partner is currently reviewing all remaining leases
and equipment for disposition and realization of maximum potential
proceeds for the Partnership.
Distributable cash from operations, sales or refinancings and
profits or losses for federal income tax purposes are allocated
99% to the Limited Partners and 1% to the General Partner until
Payout has occurred, and thereafter, 85% and 15% respectively.
As provided by the Partnership Agreement, pursuant to Section
8.3 (c), accounting profits from the sale of equipment that
results in the dissolution of the Partnership, shall be allocated to
each partner first in the amount equal to the negative balance in the
Capital Account of such partner. In connection with the wind-up of the
Partnership, certain gains on the disposition of partnership
assets were allocated during the Fourth Quarter of 1996 to the
General Partner to reduce its capital account negative balance.
In accordance with the Partnership Agreement, the Partnership is
liable to the General Partner (or its affiliates) for management
fees and reimbursable operating expenses calculated in amounts not
to exceed 5% and 2%, respectively, of gross rental revenues.
<PAGE>
CSA INCOME FUND LIMITED PARTNERSHIP II
Notes to Financial Statements
(2) Significant Accounting Policies
The Partnership records are maintained on the accrual basis of
accounting.
The Partnership accounts for equipment leases as operating
leases; therefore, rental income is reported when earned and
the cost of the equipment is depreciated on a straight-line basis
over the shorter of the initial term of the lease or five years, to
estimated realizable value at the end of such period. On a periodic
basis, the Partnership conducts a review of the net book values
of its equipment as compared to the estimated net realizable values
for such equipment. The Partnership records additional charges to
depreciation expense when net book values exceed estimated net
realizable values. Based on this analysis, the Partnership recorded
no additional charges to depreciation expense in 1994, 1995 or 1996.
No provision for income taxes has been made as the liability
for such taxes is that of the partners rather than the Partnership.
The Partnership's federal tax return is prepared solely to arrive at
the Partner's individual taxable income or loss as reported on
form K-1. Partnership federal taxable income exceeded book income
by approximately $40,000 for 1996. The Partnership's book income
exceeded federal taxable income by approximately $271,000 for 1995.
In 1994, the Partnership's federal taxable income exceeded book
income by approximately $238,000. The differences are primarily
due to differences in the depreciation methods for book and
income tax purposes.
The Partnership considers short-term investments with original
maturities of three months or less to be cash equivalents.
The preparation of financial statements in conformity with generally
accepted accounting principles requires the General Partner to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities as
of the date of the financial statements and the reported amounts of
revenue and expenses during the reporting year. Actual results could
differ from those estimates.
(3) Rental Equipment
The Partnership purchases equipment subject to existing leases
either directly from CSA Financial Corp. or the manufacturer.
The purchase price to the Partnership is equal to the lesser of
fair market value or cost as adjusted, if necessary, for rents
received and carrying costs, plus an acquisition fee of 4% of cost.
During 1994, CSA Financial Corp. acquired TIC Leasing Corp. (TIC)
from Turner Broadcasting System Inc. TIC's only asset was an interest
in partnerships which owned a portfolio of equipment subject to leases
consisting primarily of computer equipment. CSA Financial Corp. has
assigned the beneficial interest in certain of the underlying
equipment and the related leases to the Partnership.
Accordingly, the Partnership is accounting for its interest
as a purchase from CSA Financial Corp. of equipment and related
debt, subject to the leases.
<PAGE>
CSA INCOME FUND LIMITED PARTNERSHIP II
Notes to Financial Statements
A summary of changes in rental equipment owned and accumulated
depreciation on rental equipment is as follows:
<TABLE>
<CAPTION>
Beginning Sales/ Ending
Balance Additions Retirements Balance
<S> <C> <C> <C> <C>
Cost for the
years ended:
December 31, 1994 $13,798,426 $ 2,486,244 $ 4,217,283 $ 12,067,387
December 31, 1995 $12,067,387 $ 1,006,788 $ 6,077,777 $ 6,996,398
December 31, 1996 $ 6,996,398 $ 1,409,642 $ 2,896,863 $ 5,509,177
Accumulated
depreciation
for the years
ended:
December 31, 1994 $10,965,811 $ 2,259,812 $ 4,038,699 $ 9,186,924
December 31, 1995 $ 9,186,924 $ 1,064,341 $ 5,034,043 $ 5,217,222
December 31, 1996 $ 5,217,222 $ 1,101,087 $ 2,704,980 $ 3,613,329
</TABLE>
(4) Leases
As of December 31, 1996, substantially all of the Partnership's
equipment was leased under 20 separate leases to 11 lessees. Four
lessees provided approximately 60% (22%, 16%, 12% and 10%,
respectively) of the Partnership's rental income in 1996 as
compared with two lessees providing 28% (14% and 14%, respectively)
and two lessees providing approximately 30% (17% and 13%,
respectively) in 1995 and 1994, respectively.
Minimum annual lease rentals scheduled to be received under existing
noncancellable operating leases are as follows:
<TABLE>
Year Amount
<S> <C> <C>
1997 $ 993,855
1998 283,670
$ 1,277,525
</TABLE>
(5) Notes Payable
Notes payable consist of notes due in monthly installments, with
interest rates that range from 7.00% to 9.11% per annum. Such notes
are collateralized by equipment with a cost of $3,639,318.
Annual maturities of notes payable at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
Year Amount
<S> <C> <C>
1997 $ 861,823
1998 265,108
$ 1,126,931
</TABLE>
(6) Limited Recource Notes Payable
Limited recourse notes payable of $78,049, maturing in 1997, consist
of notes due with interest (9.2% to 10.3%) at maturity which coincides
with the expiration of the initial lease term of the related equipment
with a cost of $218,693 and the lenders' recourse is limited to proceeds
obtained through disposition of the equipment after its initial lease
term. All of the Partnership's limited recourse notes payable were
incurred as part of the acquisition of equipment subject to lease
interests, obtained in connection with CSA Financial Corp.'s
acquisition of TIC Leasing Corp. (See note 3).
<PAGE>
CSA INCOME FUND LIMITED PARTNERSHIP II
Notes to Financial Statements
(7) Fair Values of Financial Instruments
The following methods and assumptions were used to estimate
the fair value of financial instruments:
Cash and Cash Equivalents:
The carrying amount of cash and cash equivalents approximates its
fair value due to their short maturity.
Notes Payable:
The fair value of the Partnership's notes payable is based on the
market price for the same or similar debt issues or on the current
rates offered to the Partnership for debt with the same remaining
maturity. The carrying amount of notes payable approximates
fair value.
Limited Recourse Notes Payable
The carrying amount of the limited recourse notes payable approximates
its fair value due to their short maturities.
(8) Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the years
1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Equipment acquisition fees $ 54,217 $ 36,542 $ 94,948
Management fee 94,100 100,718 167,165
Reimbursable operating
expenses 37,640 40,287 66,866
Storage and
Refurbishment fees 3,000 8,400 3,594
</TABLE>
(9) Net Cash Provided from Operations
The reconciliation of net income to net cash from operations for the
years 1996, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net income $ 597,769 $ 905,421 $ 883,070
Depreciation 1,101,087 1,064,341 2,259,812
Gain on sale
of equipment (58,916) (149,837) (151,690)
(Increase) decrease
in receivable 124,590 (93,630) 344,091
Decrease in payables
and deferred income (12,855) (142,105) (171,287)
Net cash from operations $1,751,675 $ 1,584,190 $ 3,163,996
</TABLE>
<PAGE>
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures
The information required by this item is incorporated by reference
to reports on Form 8-K filed on October 26, 1994 and January 6, 1995
regarding a change in Registrant's certifying accountant.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or officers. All management
functions are performed by CSA Income Funds, Inc., the corporate
General Partner. The current directors and officers of the corporate
General Partner are:
<TABLE>
<CAPTION>
Name Age Title(s) Elected
<S> <C> <C> <C>
J. Frank Keohane 60 Director & President 04/01/88
Richard P. Timmons 42 Controller 03/01/95
Trevor A. Keohane 30 Director 05/28/93
Claudine A. Aquillon 31 Clerk 08/30/95
</TABLE>
Term of Office: Until a successor is elected.
Item 11. Executive Compensation
(a), (b), (c), (d) and (e): The Officers and Directors of the
General Partner receive no current or proposed direct remuneration
in such capacities, pursuant to any standard arrangements or
otherwise, from the Partnership. In addition, the Partnership has
not paid and does not propose to pay any options, warrants or rights
to the Officers and Directors of the General Partner. There exists
no remuneration plan or arrangement with any Officer or Director of
the General Partner resulting from resignation, retirement or any
other termination. See Note 8 of the Notes to Financial Statements
included in Item 8 of this report for a description of the
remuneration paid by the Partnership to the General Partner and its
affiliates.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and
Management
By virtue of its organization as a limited partnership, the
Partnership has outstanding no securities possessing traditional
voting rights. However, as provided for in Section 13.2 of the
Agreement of Limited Partnership (subject to Section 13.3), a
majority in interest of the Limited Partners have voting rights
with respect to:
1. Amendment of the Limited Partnership Agreement.
2. Termination of the Partnership.
3. Removal of the General Partner.
4. Approval or disapproval of the sale of substantially
all the assets of the Partnership, if such sale occurs
prior to June 30, 1995.
No person or group is known by the General Partner to own
beneficially more than 5% of the Partnership's outstanding Limited
Partnership Units as of December 31, 1996.
Item 13. Certain Relationships and Related Transactions
The General Partner is affiliated with the General Partner for
CSA Income Fund Limited Partnerships III and CSA Income
Fund IV Limited Partnership and may act in that capacity for
other income fund limited partnerships in the future.
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K
(a) (1) Financial Statements - See accompanying Index
to Financial Statements - Item 8.
(2) Financial Statement Schedules - All schedules have been
omitted as not required, not applicable or the information
required to be shown therein is included in the Financial
Statements and related notes.
(3) Exhibits Index
Except as set forth below, all exhibits to Form 10-K, as
set forth in item 601 of Regulation S-K are not applicable.
<PAGE>
<TABLE>
<CAPTION>
Page Number or
Exhibit Incorporated by
Number Description Reference
<S> <C> <C>
4.1 Agreement of Limited Partnership *
4.2 Subscription Agreement **
4.3 Certificate of Limited Partnership and ***
Agreement of Limited Partnership dated
September 17, 1986
4.4 First Amended and Restated Certificate ***
of Limited Partnership and Agreement
of Limited Partnership dated January 9,
1987
4.5 Second Amended and Restated Certificate ****
of Limited Partnership and Agreement
of Limited Partnership
dated March 10, 1987
10. Material Contracts ***
10.1 Escrow Agreement ****
11.0 Information regarding a change
in the Registrant's
Certifying Accountant *****
</TABLE>
* Included as Exhibit A to Amendment No. 1 to Form S-1,
Registration Statement No. 33-11272 filed with the
Securities and Exchange Commission on March 11, 1987.
** Included as Exhibit C to Amendment No. 1 to Form S-1 to
Registration Statement No. 33-11272 filed with the Securities
and Exchange Commission on March 11, 1987.
*** Included with the Exhibit Volume to Form S-1, Registration
Statement No. 33-11272 filed with the Securities and Exchange
Commission on January 12, 1987.
**** Included with the Exhibit Volume to Amendment No. 1 to
Form S-1, Registration Statement No. 33-11272 filed with
the Securities and Exchange Commission on March 11, 1987.
***** Included in reports on Form 8-K filed on October 26, 1994
and January 6, 1995.
(b) Reports on Form 8-K: There were no reports filed during
the fourth quarter of 1996.
<PAGE>
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.
CSA Income Fund Limited
Partnership II (Registrant)
By its General Partner,
CSA Income Funds, Inc.
Date: /S/ J. Frank Keohane, President
Pursuant to the requirements of the Securities 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.
By its General Partner,
CSA Income Funds, Inc.
Date: /S/ J. Frank Keohane
President & Director
Principal Executive Officer
Date: /S/ Richard P. Timmons
Controller
Principal Accounting
and Finance officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from CSA Income
Fund Limited Partnership II's Statement of Financial Position as of December 31,
1996 and Statement of Operations for the twelve months then ended and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 556,920
<SECURITIES> 0
<RECEIVABLES> 69,648
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 5,509,177
<DEPRECIATION> 3,613,329
<TOTAL-ASSETS> 2,522,416
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,293,250
<TOTAL-LIABILITY-AND-EQUITY> 2,522,416
<SALES> 0
<TOTAL-REVENUES> 1,958,168
<CGS> 1,195,187
<TOTAL-COSTS> 1,360,399
<OTHER-EXPENSES> 70,145
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 92,067
<INCOME-PRETAX> 597,769
<INCOME-TAX> 0
<INCOME-CONTINUING> 597,769
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 597,769
<EPS-PRIMARY> 7.29
<EPS-DILUTED> 7.29
<FN>
<F1>The Registrant maintains an unclassified Statement of Financial Position.
</FN>
</TABLE>
