<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
(Mark One)
_X_ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996.
------------------
___ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
COMMISSION FILE NUMBER: 0-17680 (FORMERLY 33-20255)
---------------------------
SOUTHEAST ACQUISITIONS II, L.P.
-------------------------------
(Name of issuer in its charter)
Delaware 23-2498841
- -------------------------------- -----------------------
(State of incorporation or (IRS Employer Identification
organization) Number)
250 King of Prussia Road, Radnor, Pennsylvania 19087
- --------------------------------------- ----------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone no., including area code: (610) 964-7234
- -----------------------------------------------------------
Securities registered pursuant to Section 12(b) of the Act.
<TABLE>
<CAPTION>
Name of each exchange
Title of each Class on which registered
------------------- -------------------
<S> <C>
None Not Applicable
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units $1,000 Per Unit
-----------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
----- -----
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K
is not contained in this form, and no disclosure will 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
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<PAGE> 2
SOUTHEAST ACQUISITIONS II, L.P.
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ITEM
- ----
PART I
- ------
<S> <C> <C>
Item 1. Business
Background .........................................................................4
Material Recent Developments .......................................................4
Employees ..........................................................................5
Competition.........................................................................5
Trademarks and Patents .............................................................5
Item 2. Property....................................................................................5
Item 3. Legal Proceedings...........................................................................6
Item 4. Submission of Matters to a Vote of Security
Holders.............................................................................7
PART II
- -------
Item 5. Market for the Partnership's Units of Limited
Partnership Interest and Related Security
Holder Matters .....................................................................7
Item 6. Selected Financial Data ....................................................................7
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Background..........................................................................8
Results of Operations ..............................................................8
Liquidity and Capital Resources ....................................................9
Item 8. Financial Statements and Supplementary Data ................................................9
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure .....................................................9
</TABLE>
2
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<TABLE>
<S> <C>
PART III
- --------
Item 10 Directors and Executive Officers
of the Partnership...........................................................................10
Item 11. Executive Compensation ......................................................................11
Item 12. Security Ownership of Certain Beneficial
Owners and Management
(a) Security Ownership of Certain
Beneficial owners ...........................................................11
(b) Security Ownership of Management ............................................11
(c) Changes in Control ..........................................................11
Item 13. Certain Relationships and Related Transactions .............................................11
PART IV
- -------
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K .........................................................................12
SIGNATURES.................................................................................................14
</TABLE>
3
<PAGE> 4
PART I
ITEM 1. BUSINESS
Background
Southeast Acquisitions II, L.P. (the "Partnership") was formed
on December 14, 1987, as a Delaware limited partnership. On February 4, 1988,
Southeast Acquisitions, Inc. (the "General Partner") and F M Initial, Inc. (the
"Initial Limited Partner") contributed $1,000 and $100 respectively, to the
Partnership. The Partnership's public offering of 9,650 units of limited
partnership interest ("Units") commenced on June 8, 1988 and ended on July 18,
1988 when all 9,650 Units were sold. The Partnership is scheduled to terminate
on December 31, 1998.
The Partnership purchased the following three parcels of
unimproved land in 1988: 135 acres in Rutherford County, Tennessee; 91 acres in
Greenville, South Carolina; and 353 acres in Henry county, Georgia. The
Partnership's primary business objective is to realize appreciation in the
value of the three parcels of unimproved land (each a "Property", collectively
the "Properties"), by holding the Properties for investment and eventual sale,
although there is no assurance that this will be attained. The Partnership has
no plans to develop the Properties, except for land planning, market surveys
and other activities necessary to prepare the Properties for sale.
The Partnership is currently marketing each of the Properties.
Each of the Properties have experienced significant sales to date.
Approximately half of the acreage of the Henry County, GA and Simpsonville, SC
Properties have been sold. The Partnership closed the sale of 32.514 acres of
the Nashville, TN Property in May, 1997. The Partnership placed the
Greenville, South Carolina property on the market in the spring of 1989, and
placed the Rutherford County, Tennessee Properties on the market in the fall of
1991.
The timing and manner of sales will be determined by Southeast
Acquisitions, Inc., the General Partner of the Partnership. The General
Partner has the right to sell the Properties, or portions thereof without the
consent of the Limited Partners. However, the Limited Partners must consent to
the sale of all, or substantially all, of the Properties owned by the
Partnership if the net proceeds of the sale will not be sufficient to return
the Limited Partners' Adjusted Capital Contribution plus the non-compounded 10%
Cumulative Annual Return. The General Partner believes that the Partnership's
cash reserves will be sufficient to last for an additional two years, assuming
no significant increases in expenses. However, if the reserves are exhausted
and the Partnership is unable to borrow funds, the Partnership may have to sell
some or all of the Properties on unfavorable terms.
The General Partner has no plans to develop the Properties,
except for activities including rezoning, land planning, market surveys and
other activities necessary to prepare the Properties for sale. There can be no
assurance that necessary funds would be available should it be desirable for
the Partnership to improve the Properties to facilitate their sale.
Material Recent Developments
4
<PAGE> 5
None
Employees
The Partnership presently has no employees. The General
Partner manages and controls the affairs of the Partnership. (See Part III,
Item 10, Directors and Executive officers of the Partnership).
Competition
The General Partner believes that there is significant direct
competition within a five mile radius of the Properties. The Properties are
located in three distinct areas of the Southeastern United States.
Trademarks and Patents
The Partnership has no trademarks or patents.
ITEM 2. PROPERTIES
The Partnership owns 3 tracts of undeveloped land consisting
of approximately 180 acres in Henry County, Georgia, 42 acres in Greenville,
South Carolina, and 131 acres in Rutherford County, Tennessee.
The Henry County, Georgia Property, after the sale of
approximately 13 acres during 1988 and 1989, 15 acres in 1992, 47 acres in
1993, 73 acres in 1994 and an additional 25 acres in 1995 consists of
approximately 180 acres of undeveloped land, zoned RA/Residential -Agricultural
District (which does not permit construction of multi-family structures),
fronting King Mill Road, Iris Lake Road and Whitaker Road and is located 1.5
miles east of Interstate 75.
During 1996, the General Partner had discussions with two
local residential developers concerning this Property. The discussions did not
materialize into offers to purchase any portion of the Property. The marketing
program for this Property will be revisited by the General Partner during 1997.
The Greenville, South Carolina Property, after the sale of
approximately 4 acres during 1991, 28 acres in 1993, 3 acres in 1995 an
additional 14 acres in 1996 consists of approximately 42 acres of unzoned and
generally flat land located approximately 1,200 feet southwest of the I-385 and
Fairview Road interchange in Simpsonville South Carolina, eight miles Southeast
of the Greenville City limits and just outside the town of Simpsonville in
Greenville County.
5
<PAGE> 6
During 1996, the General Partner commissioned an appraisal of
this Property and the result was an appraised current value of $3,300,000.
The General Partner has reviewed the conclusions of the 1996
appraisal, conducted extensive interviews with the appraiser and real estate
marketing professionals in the Greenville market, and believes that the recent
appraisal is a reasonable approximation of the current value of the Property.
The General Partner has updated the site plan for this
Property and established list prices for the remaining land. Parcel sizes
range from 1 to 20 acres with list prices from $75,000 to $200,000 per acre.
Also, the General Partner has renewed the listing agreement for the Property
through June 30, 1997.
Other activity includes the recent execution of an agreement
to sell approximately 1 acre for $160,000. This transaction closed in May,
1997.
The third property is located in Rutherford County, Tennessee,
approximately 18 miles southeast of the Nashville central business district and
10 miles southeast of the Nashville Metropolitan Airport. Following a sale of
four acres in 1995, the Property consists of approximately 82 acres in the
northwest quadrant of the I-24/Sam Ridley interchange and 49 acres located at
the northeast quadrant of the same interchange, with frontage on the access
road. The four acres sold in 1995 were part of the Property located at the
northwest corner of the I-24 interchange. This land was located along Sam
Ridley and was the portion of the property located furthest from the
interchange itself and was sold for a price of $50,000/acre. In an effort to
make future development of the Property easier, all property has now been zoned
for commercial use and is located entirely within the Smyrna City Limits rather
than part in the City of Smyrna and part in the City of LaVergne. There is a
28 acre cemetery located in the northwest quadrant of I-24 which the General
Partner was aware of at the time of purchase and which the General Partner does
not believe will have an adverse effect on the Partnership's ability to sell
the land. The I-24/Sam Ridley Parkway interchange is one exit south of
Interchange City Industrial Park, the largest industrial park in the Nashville
area, and is currently the last I-24 interchange south of the City to which
sewer lines are available.
During 1996, the General Partner commissioned an appraisal of
the Property and the result is an appraised current value of $2,740,000. The
General Partner has reviewed the conclusions of the 1996 appraisal and believes
that based on pending sales, a higher total sale value may be realized for the
Property.
Other activity includes the execution of an agreement to sell
approximately 32.514 acres for $50,000 an acre. This transaction also closed
in May, 1997 and facilitated a distribution of $150 per Unit to the Limited
Partners.
ITEM 3. LEGAL PROCEEDINGS
6
<PAGE> 7
The Partnership is not a direct party to, nor are the
Partnership's Properties directly the subject of, any material legal
proceedings. However, on November 6, 1992, the Commonwealth Court of
Pennsylvania issued an order placing The Fidelity Mutual Life Insurance Company
("Fidelity Mutual"), the indirect parent of the General Partner of the
Partnership, into rehabilitation under the control and authority of the
Pennsylvania Insurance Commissioner pursuant to the provisions of the
Pennsylvania Insurance Department Act, 40 P.S. Section 221.1 et seq. The
Partnership is not a direct party to the order, but ownership of the stock of
(and consequently control of) the General Partner is vested in the Insurance
Commissioner pursuant to the order.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during
the fiscal year ended December 31, 1996.
PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S UNITS OF LIMITED PARTNERSHIP
INTEREST AND RELATED SECURITY HOLDER MATTERS
There is no established public trading market for the Units
and it is not anticipated that any will develop in the future. The Partnership
commenced an offering to the public on June 8, 1988 of 9,650 Units of limited
partnership interests. The offering of $9,650,000 was fully subscribed and
terminated on July 24, 1988. As of December 31, 1996, there were 518 limited
partners in the Partnership.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
For the Year For the Year For the Year For the Year For the Year
Ended Ended Ended Ended Ended
December 31 December 31 December 31 December 31 December 31
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating
Revenues $1,007,565 $ 925,101 $ 108,787 $1,527,238 $ 16,486
Net Income
(Loss) $ 947,477 $ 865,010 $ 31,186 $1,443,346 $ (47,005)
Net Income
(Loss) per
Unit of
Limited
Interest $ 98.18 $ 89.64 $ 3.23 $ 149.57 $ (4.87)
</TABLE>
7
<PAGE> 8
<TABLE>
<CAPTION>
December 31 December 31 December 31 December 31 December 31
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Assets $2,693,772 $3,050,057 $3,632,210 $3,618,476 $4,479,277
Long Term
Obligations None None None None None
Cash Distributions
Declared per Unit
of Limited
Partnership
Interest $ 134 $ 150 None $ 238 $ 30
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Background
The Partnership was formed to acquire and realize appreciation
in the Properties by holding them for investment and eventual sale. However,
there can be no assurance that the Partnership's objectives will be realized.
Results of Operations
The Partnership had no operations from the date of its
formation on December 14, 1987 until June 24, 1988 when it acquired the first
Property and had sold 3,165 Units of limited partnership interest. During 1988
the Partnership acquired three additional Properties and sold 6,485 additional
Units of limited partnership interest.
During 1996, the partnership sold 14 acres of the Greenville,
South Carolina property for a gain of $995,155. Other revenues consisted of
interest income of $9,005, transfer fees of $1,250 and other income of $2,155.
Expenses for 1996 consisted of general and administrative costs of $31,249,
management fees of $9,374, real estate taxes of $19,116 and insurance costs of
$349. The increase in the general and administrative costs during 1996 is
primarily the result of the cost of the appraisals commissioned on the
Simpsonville, SC ($2,500) and Nashville, TN ($7,000) properties.
8
<PAGE> 9
During 1995, the partnership sold 6 acres of the Henry County,
Georgia property, 4 acres of the Rutherford County, Tennessee property and 3
acres of the Greenville, South Carolina property for a gain of $920,590. Also,
during 1995, the partnership sold 19 acres of the Henry County, Georgia
property for a loss of $10,389. Other revenues consisted of interest income of
$14,175 and partnership transfer fees of $725. Expenses for 1995 consisted of
general and administrative costs of $21,847, management fees of $18,753, real
estate taxes of $18,964 and insurance cost of $528.
During 1994, the Partnership sold 73 acres of the Henry
County, Georgia parcel for a gain of $99,765. Other revenues consisted of
interest income of $8,297 and partnership transfer fees of $725. Expenses for
1994 consisted of general and administrative costs of $29,603, management fees
of $18,753, real estate taxes of $22,528 and insurance costs of $6,717.
Inflation did not have any material impact on operations
during 1996 and it is not expected to materially impact future operations,
except for possible appreciation in the value of the Properties.
The General Partner continues, as in the past, to market and
sell portions of the Greenville, South Carolina property. Also, during 1996,
the General Partner executed an agreement to sell approximately 33 acres of
the Rutherford County, Tennessee property.
Liquidity and Capital Resources
The Partnership has cash reserves of $113,292 at December 31,
1996, which will be used to cover the following estimated annual costs:
$23,000 per year for auditing, accounting, tax and other administrative
services, $400 per year for insurance and $18,000 per year for real estate
taxes. In the General Partner's opinion, the Partnership's reserves will be
sufficient for an additional two years. However, if additional expenses are
incurred or if the Properties cannot be sold within two years, the reserves may
be inadequate to cover the Partnership's operating expenses. If the reserves
are exhausted, the Partnership may have to dispose of some of the Properties
or incur indebtedness on unfavorable terms.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Partnership's financial statements for the years ended
December 31, 1996 and 1995 together with the report of the Partnership's
independent auditors, Ernst & Young LLP, is included in this Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
9
<PAGE> 10
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
The Partnership does not have any directors or officers. The
General Partner manages and controls the affairs of the Partnership and has
responsibility for all aspects of the Partnership's operations. The current
executive officers and directors of the General Partner are identified and
described below. Officers and directors serve until their successors have been
elected.
Arthur W. Mullin, Age 51. Mr. Mullin was elected a Director of
the General Partner in 1993. Mr. Mullin has also served as the President and
Treasurer of the General Partner since 1993. Mr. Mullin, originally retained as
a consultant to Fidelity Mutual in 1993, was appointed Senior Vice President
and Director of Real Estate for Fidelity Mutual the same year and served in
that capacity until 1995. Mr. Mullin resumed his consulting relationship with
Fidelity Mutual in 1995. Mr. Mullin received a B.S. in Political Science and
M.S. in Education from St. Joseph's University.
William S. Taylor is Director and Vice President of the
General Partner. Mr. Taylor is also an officer and director of various other
subsidiaries of Fidelity Mutual. Mr. Taylor is the Deputy Insurance
Commissioner for Liquidations, Rehabilitations and Special Funds for the
Commonwealth of Pennsylvania. Mr. Taylor has a bachelor's degree in Economics
from Elizabethtown College and a Masters degree in Governmental Administration
from the University of Pennsylvania.
James W. Kelican, Jr., CPM, is a Director and Vice President
of the General Partner. Mr. Kelican is also an officer and director of various
other subsidiaries of Fidelity Mutual. Mr. Kelican was appointed Vice
President - Real Estate for Fidelity Mutual in July, 1993 and Senior Vice
President and Director of Real Estate in October 1994. Mr. Kelican has a B.S.
in Business Administration from Drexel University, Philadelphia, Pennsylvania
and has the title of Certified Property Manager from the Institute of Real
Estate Management of the National Association of Realtors.
Robert Bixler is Secretary of the General Partner. Mr. Bixler
is also Secretary of various other subsidiaries of Fidelity Mutual. Mr. Bixler
is a Vice President and Associate Counsel of Fidelity Mutual. Mr. Bixler
received his A.B. degree in Economics from Temple University, and his J.D.
degree from Temple University Law School, Philadelphia, PA. He is a member of
the American Bar Association and the Philadelphia Bar Association.
10
<PAGE> 11
Margaret Tamasitis is Assistant Secretary of the General
Partner. Ms. Tamasitis is also Assistant Secretary of various other
subsidiaries. Ms. Tamasitis is a Second Vice President of Fidelity Mutual in
the Controller's Office and has been with Fidelity Mutual for 26 years. Ms.
Tamasitis received her B.S. degree in Accounting from Temple University,
Philadelphia, PA.
ITEM 11. EXECUTIVE COMPENSATION
During the fiscal year ended December 31, 1996, the
Partnership did not pay compensation to any officers of the General Partner.
Fees which have been paid or are payable to the General Partner are set forth
in Item 13 of this report, "Certain Relationships and Related Transactions".
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of December 31, 1996, no other person or "group" (as that
term is used in Section 13 (d) (3) of the Securities Exchange Act of 1934) was
known by the Partnership to beneficially own more than five percent of the
Units of the Partnership.
Security Ownership of Management
In 1988, the General Partner contributed $1,000 to the capital
of the Partnership, but it does not own any of the Partnership's outstanding
securities. The General Partner owns a general partnership interest which
entitles it to receive 30% of cash distributions after the Limited Partners
have received cumulative distributions equal to a 10% Cumulative Annual Return
on their Adjusted Capital Contributions plus a return of their Capital
Contributions as those terms are defined in the Partnership Agreement. The
General Partner will share in taxable income to reflect cash distributions, but
not less than 1%, or to the extent there are losses, 1% of such losses.
Changes in Control
There are no arrangements known to the Partnership that would
at any subsequent date result in a change in control of the Partnership.
Although it may involve a change in control, it not clear at this time how the
rehabilitation of Fidelity Mutual (described in Part I, Item 3, Legal
Proceedings) will affect the Partnership or the General Partner.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
11
<PAGE> 12
An annual administration fee of $18,753 was paid to the
General Partner for each year after 1988. This fee is computed as one quarter
of one percent of the base cost of the land. The cumulative amount of such fee
may not exceed $150,021 as provided by the Partnership Agreement, and such fees
charged since inception amount to $150,021 at December 31, 1996.
The General Partner will receive no cash distributions until
the Limited Partners have received (i) cumulative distributions equal to a 10%
Cumulative Annual Return on their Adjusted Capital Contributions plus (ii) a
return of their Capital Contributions (as those terms are defined in the
Partnership Agreement). Thereafter, the General Partner will receive 30% of
cash distributions. During 1993, 1994 and 1995, the General Partner received
no cash distributions.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
<TABLE>
<CAPTION>
(a) Index to Financial Statements Page
----------------------------- ----
<S> <C>
Report of Independent Auditors 1
Balance Sheets 2
Statements of operations 3
Statements of Partners' Equity/(Deficit) 4
Statements of Cash Flows 5
Notes to Financial Statements 6
</TABLE>
Schedules have been omitted because they are inappropriate, not required, or
the information is included elsewhere in the financial statements or notes
thereto.
(b) Reports on Form 8-K
1. None.
(c) Exhibits (numbered in accordance with Item 601 of Regulation S-K
<TABLE>
<CAPTION>
Exhibit Numbers Description Page Number
- --------------- ----------- -----------
<S> <C> <C>
3.1(a) Certificate of Limited
Partnership *
3.1(b) & (4) Restated Limited Partnership
Agreement **
9 not applicable
11 not applicable
12 not applicable
13 not applicable
</TABLE>
12
<PAGE> 13
<TABLE>
<S> <C>
16 not applicable
18 not applicable
19 not applicable
22 not applicable
23 not applicable
24 not applicable
25 not applicable
28 not applicable
29 not applicable
</TABLE>
- ----------------------------------------------------------------------------
* Incorporated by reference to Exhibit 3.1 filed as part of the Exhibits
to the Partnership's Registration Statement on Form S-18, Registration
No. 33-20255.
** Incorporated by reference to Exhibit 3.2 filed as part of the
Partnership's Registration Statement on Form S-18, Registration No.
33-20255.
13
<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.
SOUTHEAST ACQUISITIONS II, L.P.
a Delaware limited partnership
By: SOUTHEAST ACQUISITIONS, INC.,
General Partner
Dated: July 14, 1997 By: /s/ Arthur W. Mullin
----------------------------
Arthur W. Mullin
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 date indicated.
<TABLE>
<CAPTION>
Signature Title Date
----- ----
<S> <C> <C>
/s/ Arthur W. Mullin President, July 14, 1997
- -------------------------- Treasurer,
Arthur W. Mullin Director of
Southeast
Acquisitions, Inc.
/s/ William S. Taylor Vice President, July 14, 1997
- -------------------------- Director of
William S. Taylor Southeast
Acquisitions, Inc.
</TABLE>
14
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<TABLE>
<S> <C> <C>
/s/ James W. Kelican, Jr. Vice President, July 14, 1997
- -------------------------- Director of
James W. Kelican, Jr. Southeast
Acquisitions, Inc.
</TABLE>
15
<PAGE> 16
Financial Statements
Southeast Acquisitions II, L.P.
Years ended December 31, 1996 and 1995
with Report of Independent Auditors
<PAGE> 17
Southeast Acquisitions II, L.P.
Financial Statements
Years ended December 31, 1996 and 1995
CONTENTS
<TABLE>
<S> <C>
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Audited Financial Statements
Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Partners' Equity (Deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
</TABLE>
<PAGE> 18
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
To the Partners of
Southeast Acquisitions II, L.P.
We have audited the balance sheets of Southeast Acquisitions II, L.P. (a
Delaware limited partnership) as of December 31, 1996 and 1995, and the related
statements of operations, partners' equity (deficit), and cash flows for each
of the three years in the period ended December 31, 1996. 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.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Southeast Acquisitions II,
L.P. as of December 31, 1996 and 1995, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1996, in conformity with generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
March 7, 1997
1
<PAGE> 19
Southeast Acquisitions II, L.P.
Balance Sheets
<TABLE>
<CAPTION>
DECEMBER 31
1996 1995
-----------------------------------------
<S> <C> <C>
ASSETS
Land, net $ 2,580,480 $ 2,963,920
Cash and cash equivalents 113,292 86,137
-----------------------------------------
$ 2,693,772 $ 3,050,057
=========================================
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Accrued expenses $ 10,903 $ 16,877
Due to affiliate - 4,688
Partners' equity (deficit):
General (2,394) (11,869)
Limited (9,650 units authorized, issued and outstanding) 2,685,263 3,040,361
-----------------------------------------
$ 2,693,772 $ 3,050,057
=========================================
</TABLE>
See accompanying notes.
2
<PAGE> 20
Southeast Acquisitions II, L.P.
Statements of Operations
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
-------------------------------------------------------------
<S> <C> <C> <C>
Revenue:
Interest and other income $ 12,410 $ 14,900 $ 9,022
Net gain on sales of land 995,155 910,201 99,765
-------------------------------------------------------------
1,007,565 925,101 108,787
Expenses:
General and administrative 31,249 21,847 29,603
Management fee 9,374 18,753 18,753
Real estate taxes 19,116 18,964 22,528
Insurance 349 528 6,717
-------------------------------------------------------------
60,088 60,092 77,601
-------------------------------------------------------------
Net Income:
Allocated to General Partner 9,475 8,650 312
Allocated to Limited Partners 938,002 856,359 30,874
-------------------------------------------------------------
$ 947,477 $ 865,009 $ 31,186
=============================================================
Net income per limited
partnership unit $ 98.18 $ 89.64 $ 3.23
=============================================================
</TABLE>
See accompanying notes.
3
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Southeast Acquisitions II, L.P.
Statements of Partners' Equity (Deficit)
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNER PARTNERS TOTAL
----------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1994 $ (20,831) $3,600,628 $3,579,797
Net income 312 30,874 31,186
---------------------------------------------------------
Balance, December 31, 1994 (20,519) 3,631,502 3,610,983
Capital distribution - (1,447,500) (1,447,500)
Net income 8,650 856,359 865,009
---------------------------------------------------------
Balance, December 31, 1995 (11,869) 3,040,361 3,028,492
Capital distributions - (1,293,100) (1,293,100)
Net income 9,475 938,002 947,477
---------------------------------------------------------
Balance, December 31, 1996 $ (2,394) $2,685,263 $2,682,869
=========================================================
</TABLE>
See accompanying notes.
4
<PAGE> 22
Southeast Acquisitions II, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
1996 1995 1994
------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 947,477 $ 865,009 $ 31,186
Adjustments to reconcile net income to
net cash provided by operating activities:
Gain on sales of land (995,155) (910,201) (99,765)
Proceeds from sales of land parcels 1,378,595 1,111,473 302,902
Changes in operating assets and
liabilities:
Accrued expenses (5,974) 338 (17,452)
Due to affiliate (4,688) - -
------------------------------------------------------
Net cash provided by operating activities 1,320,255 1,066,619 216,871
FINANCING ACTIVITIES
Distribution to limited partners (1,293,100) (1,447,500) -
------------------------------------------------------
Net cash used in financing activities (1,293,100) (1,447,500) -
------------------------------------------------------
Net increase (decrease) in cash
and cash equivalents 27,155 (380,881) 216,871
Cash and cash equivalents, beginning of year 86,137 467,018 250,147
------------------------------------------------------
Cash and cash equivalents, end of year $ 113,292 $ 86,137 $ 467,018
======================================================
</TABLE>
See accompanying notes.
5
<PAGE> 23
Southeast Acquisitions II, L.P.
Notes to Financial Statements
December 31, 1996
1. DESCRIPTION OF BUSINESS
Southeast Acquisitions II, L.P. is a Delaware limited partnership. The General
Partner (Southeast Acquisitions, Inc.) is an indirect wholly-owned subsidiary
of The Fidelity Mutual Life Insurance Company (in Rehabilitation). Per the
Partnership Agreement, the Partnership shall exist for a term ending December
31, 1998, at which time it shall be dissolved.
Fidelity Mutual Life Insurance Company (the Company) was placed into
Rehabilitation, as defined, by the Commonwealth Court of Pennsylvania on
November 6, 1992 and it remains in Rehabilitation as of the report date. The
General Partner does not at this time expect that the Rehabilitation of the
Company will negatively impact the operation of either the General Partner or
the Partnership. The Company's Rehabilitation Plan, originally filed in June
1994, was amended in January 1995 and again in June 1996.
The Partnership purchased approximately 86 acres of unimproved land near
Nashville, Tennessee on June 24, 1988 from Southeastern Land Fund, Inc. (SELF),
an affiliate of the General Partner. An additional 49 acres of unimproved land
adjacent to the first 86 acres was purchased from SELF on June 29, 1988. On
July 6, 1988, the Partnership purchased approximately 91 acres of unimproved
land in Greenville, South Carolina, and on July 18, 1988, purchased
approximately 353 acres of unimproved land near Atlanta, Georgia from SELF. The
four tracts of unimproved land are being marketed for sale and will be sold as
conditions warrant.
2. SIGNIFICANT ACCOUNTING POLICIES
BASIS OF ACCOUNTING
The Partnership maintains its accounting records on the accrual basis of
accounting.
LAND
Land is carried at the lower of cost or fair value less estimated cost to sell.
The carrying value of land, as disclosed on the balance sheet, is net of a
$3,467,829 write-down in 1991.
CASH EQUIVALENTS
For purposes of reporting cash flows, short-term investments which have an
original maturity of three months or less are considered cash equivalents.
6
<PAGE> 24
Southeast Acquisitions II, L.P.
Notes to Financial Statements (continued)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INCOME TAXES
In conformity with the Internal Revenue Code and applicable state and local tax
statutes, taxable income or loss of the Partnership is required to be reported
in the tax returns of the partners in accordance with the term of the
Partnership Agreement. Accordingly, no provision has been made in the
accompanying financial statements for any federal, state, or local income tax.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect various amounts reported in the financial statements
and accompanying notes. Actual results could differ from those estimates.
3. RELATED-PARTY TRANSACTIONS
Management fees were paid to the General Partner totaling $9,374, $18,753, and
$18,753 in 1996, 1995, and 1994, respectively. The annual management fee is
computed as one-quarter of one percent of the original cost of the land. The
cumulative amount of such fees may not exceed $150,021 as provided by the
Partnership Agreement, and such fees charged since inception amount to
$150,021.
4. PARTNERS' EQUITY
The Partnership received equity contributions totaling $9,650,000 through the
sale of 9,650 limited partnership units in 1988.
During 1995, the Partnership made distributions to the limited partners in the
amount of $150 per unit, or $1,447,500. The distribution represented a payment
of earnings in the amount of $88.74 per unit, or $856,000 and a return of basis
in the amount of $61.26 per unit, or $591,000.
During 1996, the Partnership made distributions to the limited partners in the
amount of $134 per unit, or $1,293,100. The distribution represented a payment
of earnings in the amount of $97.20 per unit or $938,000 and a return of basis
in the amount of $36.80 per unit, or $355,000.
Cumulative distributions through December 31, 1996, in the amount of $584 per
unit, or $5,635,000 represented a payment of earnings in the amount of $218 per
unit, or $2,104,000 and a return of basis in the amount of $366 per unit, or
$3,531,600.
7
<PAGE> 25
Southeast Acquisitions II, L.P.
Notes to Financial Statements (continued)
4. PARTNERS' EQUITY (CONTINUED)
In accordance with the Partnership Agreement, cash distributions and profits or
losses for each year of the Partnership shall be allocated as follows:
(a) Cash Distributions--Except for distributions in connection with the
liquidation of the Partnership, cash distributions, if any, will be made
100% to the limited partners until the limited partners have received (i)
cumulative distributions equal to their 10% noncompounded cumulative
annual return on their adjusted capital contributions, as defined
($2,567,700 at December 31, 1996) plus (ii) a return of their capital
contributions ($9,650,000 at December 31, 1996); thereafter,
distributions will be made 70% to the limited partners and 30% to the
General Partner. Distributions in connection with the Partnership's
liquidation will be made in accordance with the partners' capital
accounts as maintained for federal income tax purposes.
(b) Profits and Losses--Profits generally will be allocated to the partners
to reflect cash distributions, but at least 1% of profits will be
allocated to the General Partner. Losses, if any, generally will be
allocated 99% to the limited partners and 1% to the General Partner. In
no event will the General Partner be allocated less than 1% of profits or
losses for any year.
The Partnership Agreement also provides that upon Partnership dissolution or
termination, the General Partner shall contribute to the capital of the
Partnership the lesser of any negative amount of its capital account, as
defined, or 1.01% of the capital contributions made by the limited partners.
Any amount so contributed shall be distributed to the limited partners in
proportion to their positive capital account balances.
8
