UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _________ to _________
Commission file number 33-28988
DBSI PACIFIC INCOME & GROWTH FUND - II A Real Estate Limited Partnership
State of Organization: Idaho Employer ID #: 82-0428903
1070 N. Curtis Rd., Suite 270, Boise, Idaho 83706
Telephone number: (208) 322-5858
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
N/A N/A
Securities registered pursuant to section 12(g) of the Act:
Limited Partnership Interests
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) 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 ]
<PAGE>
CROSS REFERENCE TO
DOCUMENTS INCORPORATED BY REFERENCE
Document Incorporated Part of Form 10-K
Form S-11, Post Effective Part I, Item 1
Amendment #9, File No. 33-28988,
Pgs. 26-29, 54-56, 61-64, 118-140
Form S-11, Post Effective Part I, Item 2
Amendment #9, File No. 33-28988,
Pgs. 148a(1) - 148a(16)
Form S-11, Post Effective Part III, Items 10 (c)
Amendment #9, File No. 33-28988, and (e)
Pgs. 26-29.
Form S-11, Post Effective Part IV, Items 14 (3)
Amendment #9, File No. 33-28988, and (4)
Pgs. 118-140.
PART I
Item 1. Business.
The registrant is a Partnership which was formed for the express
purpose of investing in income-producing multi-family residential
real properties in the Northwestern United States. The Partnership
filed a Form S-11 registration statement which was declared effective
by the SEC on January 10, 1990. The primary objectives of the
Partnership are to: (1) preserve and protect the limited partners'
capital; (2) provide cash distributions to limited partners and (3)
obtain long-term appreciation through increases in the value of the
Partnership's real estate assets.
The general partners of the registrant are DBSI Housing Inc., an
Idaho corporation (incorporated in February 19 80) and DBSI Realty
Partners, an Idaho general partnership (formed in May 1989). The
registrant is a limited partnership which was formed as of May 17,
1989 under the Idaho Uniform Limited Partnership Act and will
continue until December 31, 2039, unless sooner dissolved, in
accordance with the Partnership Agreement. See documents
incorporated by reference and attached hereto. (Form S-11, Post
Effective Amendment #9, File No. 33-28988, Pgs. 26-29, 54-56, 61-64,
118-140).
Item 2. Properties.
See documents incorporated by reference. (Form S-11, Post Effective
Amendment #9, File No. 33-28988, Pgs. 148a(1) - 148a(16).
Item 3. Legal Proceedings.
There were no material pending legal proceedings against the
registrant during 1995.
Item 4. Submission of Matters to a Vote of Security Holders.
During 1995 there were no votes of security holders, through
solicitation of proxies or otherwise.
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
There is no established public trading market for the Limited
Partnership Interests of the registrant.
As of December 31, 1991 the registrant had received the proceeds from
subscriptions for 9,262 interests. The offering period ended on
December 31, 1991.
Distributions to Limited Partners during the years ended December 31,
1995, 1994 and 1993 totaled $480,435, $682,938, and $682,968.
<TABLE>
Item 6. Selected Financial Data.
<CAPTION>
Dec. 31, Dec. 31, Dec. 31, Dec. 31, Dec. 31,
1991 1992 1993 1994 1995
________ _______ ________ ________ ________
<S> <C> <C> <C> <C> <C>
Total and other rental income $ 1,755,618 $ 2,376,910 $ 2,377,701 $ 2,373,954 $ 2,349,549
Total interest income $ 43,072 $ 66,348 $ 27,244 $ 14,764 $ 3,272
Net income (loss) $ (13,426) $ 33,882 $ (7,691) $ (190,713) $ (215,148)
Cash and cash equivalents $ 2,083,209 $ 1,470,760 $ 192,207 $ 294,265 $ 41,572
Rental property $14,393,783 $14,450,373 $14,495,644 $14,893,542 $14,996,503
Total assets $16,395,236 $15,390,996 $13,784,641 $13,628,017 $12,928,418
Long term debt $ 8,750,853 $ 8,702,599 $ 7,766,202 $ 8,506,409 $ 8,435,881
Syndication costs $ 1,576,090 $ 1,576,090 $ 1,576,464 $ 1,576,464 $ 1,576,464
Partners' capital (deficit) $ 7,188,456 $ 6,529,730 $ 5,812,999 $ 4,887,928 $ 4,192,345
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Partnership generated funds primarily from the operation of rental
properties and to a lesser extent from interest on savings and certificates of
deposit.
Funds are used for rental property operating expenses, distributions to
partners, debt service, fixed asset replacements, capital improvements,
management and professional fees. In 1994 the partnership took out an $800,000
loan secured by Dakota Station Apartments to finance six additional units at
Weatherstone Apartments and other additions to assets. Through the fourth
quarter of 1995 the Partnership received an advance of $120,500 from an
affiliate of the General Partner to fund cash flow short term needs.
In December 1993, the clubhouse at Weatherstone Apartments was severely damaged
in an arson related fire. Repair work was completed and a certificate of
occupancy issued on October 14, 1994. The first six-unit building at
Weatherstone Apartments finished on December 6, 1994 cost approximately
$367,000.
The general partners believe that the Partnership has the liquidity and capital
resources to meet all of its known obligations and commitments.
The cash and cash equivalents position of the Partnership at December 31, 1995
represented approximately $41,600 available for Partnership operations.
Approximately $41,000 is in bank accounts reserved for tax, insurance and
replacements. There were no external sources of liquidity and there are no
outstanding capital commitments. The average rate of interest earned on cash
deposits was 4%.
<PAGE>
Cash Flow and Operations
For the years ended December 31, 1995, 1994 and 1993, the projects generated
$247,645, $358,429, and $537,895 of cash from operating activities per the
Statements of Cash Flows. The following adjustments should be made to the
current year amount in order to arrive at an amount which can be compared to
the first year pro forma funds from operations as found in the supplements to
the prospectus. First, mortgage debt service payments should be reduced to the
anticipated level of mortgage loans as shown on the pro forma statements.
Second, transitory changes in noncash operating assets and liabilities
following the acquisition of properties should be adjusted to increase or
decrease cash flow to the actual funds which are being generated from
operations on an ongoing basis. Cash flow should also be reduced for principal
payments and for normal operational fixed asset purchases.
During 1995, cash flows from operating activities were decreased by
approximately $51,000 of transitory changes in current assets and liabilities
on these properties. Mortgage interest payments of approximately $80,600 for
Sorrento View and $65,000 for Dakota Station were made for the year.
Additionally, principal payments of approximately $71,000 were made during the
year with Sorrento View and Dakota Station paying approximately $26,000 of the
principal amount. The properties also purchased fixed asset replacements of
approximately $65,000 with $38,000 used to make the final payment on the
six-unit building at Weatherstone Apartments. After the above adjustments the
properties' combined funds from operations for 1995 were approximately 49% of
the first year pro forma amount. Weatherstone achieved approximately -61% of
the pro forma level of funds from operations. Talisman, Sorrento View and
Dakota Station generated approximately 19%, 92% and 85% respectively of their
pro forma level of funds from operations during 1995.
Total revenue from operations for the years 1993 through 1995 have decreased
approximately 5%, with 1995 ($2,352,821) showing a decrease from 1994
($2,388,718) and 1993 ($2,404,945). Dakota Station's rental income increased
4% over 1995 and 1994, 6% between 1994 and 1993, and increased 5% from 1993 to
1992. Cash flow from operations for Dakota Station was stable when adjusted for
the debt service of $65,011 for 1995 and $44,510 for 1994. Sorrento View's
cash flow improved as rent receipts increased by 3% over 1994, 5% over 1993, and
4% over 1992. Additionally, interest expense was also reduced by 31% between
1994 and 1993 by the loan principal reduction for Sorrento View made on May 11,
1993. Talisman Apartments cash flow decreased during 1994 and 1993. In 1995
Talisman's cash flow was constant as maintenance and repair expenses were down
25% from 1994 and property tax and insurance expenses were also down 25% from
1994. Weatherstone Apartments rental income decreased 6% in 1995 from 1994 and
5% in 1994 over 1993. This decrease was most recently due to the fluctuation of
the local economy and the temporary marketing conditions created by the
clubhouse being unavailable for use during reconstruction. Operating expenses
for Weatherstone stabilized from 1995 to 1994, with a 14% increase from 1994 to
1993 and a 5% increase between 1993 and 1992. Therefore net income decreased
over the same period because of proportionately higher increases in expenses
than in rental income.
Because of the reduced 1995 cash flow, the Partnership borrowed $120,500 from an
affiliate of the General Partner to provide funds for short term operating cash
flow needs of the Seattle area projects and anticipates reducing quarterly
distributions until cash flow in the Seattle area returns to the levels of
prior periods. The Partnership distributed $480,435 in 1995, including
$247,645 from current operations and $232,790 from excess cash reserves. In
1994 the partnership distributed $734,358, including $358,429 from current
year operations and $375,929 from excess cash reserves. The partnership
distributed $708,666 in 1993 with $537,895 from current and prior year
operations and $170,771 from excess cash reserves. Per $1,000 investment
(on the basis of a $1,000 investment made at the inception of the escrow and
offering) distributions have been made in the following amounts: escrow period
- - $58; November 1990 through November 1994 - $18 per quarter; August 1995
through October 1995 - $7.50. Partnership net loss, after depreciation, for
1995, 1994 and 1993 were $215,148, $190,713, and $7,691, respectively;
therefore, cash distributions in excess of cumulative net income to date have
been a return of capital.
<PAGE>
Item 8. The following documents are filed on the pages listed below, as part
of Part II, Item 8, of this Report.
Document Page
1. Financial Statements and Accountants' Report:
Independent Auditors' Report F-1
Financial Statements:
Balance Sheets as of December 31, 1995 and December 31, 1994 F-2
Statements of Operations for the years ended December 31, 1995,
December 31, 1994 and December 31, 1993 F-3
Statements of Partners' Capital for the years ended December 31,
1995, December 31, 1994 and December 31, 1993 F-3
Statements of Cash Flows for the years ended December 31,
1995, December 31, 1994 and December 31, 1993 F-4
2. Notes to the Financial Statements (Notes 1-7) F-5 thru F-9
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) Identification of directors.
There has been no change in the general partners of the
Registrant.
The following individuals are not directors of the registrant
but are directors or partners of the general partners of the
registrant. Consequently the following information concerning
their roles as directors or partners in those other entities is
being submitted.
DBSI Housing Inc.:
Director - Douglas L. Swenson Age - 47
Term of office - February 1980 to present
Other positions - President of DBSI Housing Inc.
Founded DBSI in 1979.
Director - John D. Foster Age - 55
Term of office - March 1992 to present
Other positions - Executive Vice President, Operations
Time with firm - 1989 to present
Director - Charles E. Hassard Age - 48
Term of office - March 1992 to present
Other positions - Executive Vice President, Finance
Time with firm - 1984 to present
<PAGE>
Director - John Mayeron Age - 41
Term of office - March 1992 to present
Other positions - Executive Vice President, Marketing
Time with firm - 1990 to present
Director - Farrell Bennett Age - 57
Term of office - March 1992 to present
Other positions - Vice President, Marketing
Time with firm - 1984 to present
Director - Walt Mott Age - 46
Term of office - March 1992 to present
Other positions - Vice President, Asset Management
Time with firm - 1991 to present
DBSI Realty Partners:
Partner - Douglas L. Swenson
Age - see above
Term of office - May 1989 to present
Time with firm - May 1989 to present
(b) Identification of executive officers.
The registrant has two general partners that direct and control
the operations of the Partnership. The officers of those two
general partners perform functions and tasks for the registrant
similar to those of executives. Those individuals are Douglas
L. Swenson, John D. Foster, and Charles E. Hassard and the ages
and other information concerning them are included in Item 10(a)
above.
(c) Identification of certain significant employees
The current principal officers of the Company and the business
experience of each in the last five years are as follows:
Douglas L. Swenson, age 47, is President of the Company and also
the founder and current President of the other DBSI companies.
Prior to founding the DBSI group of companies, he practiced for
three and one-half years as a Certified Public Accountant in
Boise, Idaho, with Touche Ross & Co., an international
accounting firm, specializing in taxation. In this capacity, he
had extensive experience in the analysis of real estate
investments including their syndication into limited
partnerships. Prior to joining Touche Ross & Co., he was a
practicing Certified Public Accountant with Peat, Marwick,
Mitchell and Co. in Houston, Texas, beginning in 1972. Mr.
Swenson is a Certified Public Accountant, a real estate
licensee, and a direct placement securities principal in various
states and with the National Association of Securities Dealers.
He holds a Master of Accountancy degree from Brigham Young
University.
John D. Foster, age 55, is Executive Vice President, Operations
of the Company and DBSI Housing Inc. Prior to joining the DBSI
group of companies in 1989, he was managing partnerships and
third-party properties for Paul B. Larsen & Associates in
Boise, Idaho. He spent seven years with Boise Cascade
Corporation as Manager of the Timberland Resources Planning,
responsible for optimizing the financial return on a six-million
acre timberland base. He has management experience with other
Fortune 500 companies and while on active duty with the Navy was
responsible for management of all buildings, piers, and grounds
of the U.S. Naval Station, San Diego, California. He holds a
Bachelor of Science degree from Oklahoma State University and a
Master of Business Administration degree from the University of
Tulsa.
<PAGE>
Charles E. Hassard, age 48, is Executive Vice President, Finance
of the Company and DBSI Housing Inc. Prior to joining the DBSI
group of companies in 1984, he was a Certified Public Accountant
for seven years with Touche Ross & Co. in San Francisco,
California, and Boise, Idaho, specializing in taxation. In his
position, he had extensive experience in analyzing real estate
investments and syndications. Mr. Hassard is a Certified Public
Accountant licensed in California and Idaho. He holds a Master
of Accountancy degree from Brigham Young University.
John Mayeron, age 41, is Executive Vice President, Marketing of
the Company and DBSI Housing Inc. With over ten years of
experience in the securities industry, his most recent position
was with Kavanaugh Securities before joining DBSI in 1990. Mr.
Mayeron holds a Bachelor's degree from the University of Oregon
in Marketing, International Business and Political Science. He
is a member of Phi Beta Kappa and Beta Gamma Sigma.
Farrell J. Bennett, age 57, is Vice President, Marketing of the
Company and DBSI Housing Inc. Prior to joining the DBSI group
of companies in 1984, he was owner-broker of American Realty
Corporation in Boise, Idaho, since 1967. In that position, he
analyzed and marketed numerous residential and commercial
properties. Mr. Bennett holds the CRB designation, is a
licensed real estate broker and a licensed direct placement
securities representative. His formal education was at the
University of Utah.
Walt Mott, age 46, is Vice President, Asset Management of the
Company and DBSI Housing Inc. Prior to joining the DBSI group
of companies in 1991, he was with Boise Cascade Corporation for
14 years where he served as Manager of Timberland Resources
Planning. In this capacity, Mr. Mott was responsible for the
financial analysis of nearly $400,000,000 in timberlands. He
has a background in land sales and acquisitions, as well as
experience in finance and accounting. He holds an A.A.S. degree
in Computer Science from County College of Morris, a Bachelor's
degree from the University of Idaho, a Master's degree
emphasizing finance and price theory from the University of
Idaho, and a Bachelor's degree in accounting from Boise State
University.
(d) Family relationships.
There are no family relationships between any director,
executive officer or person so nominated.
(e) Business experience.
(1) Background. The business experience of the directors and
partners of the general partners and other significant
employees are discussed in the aforementioned Form S-11
Post-Effective Amendment #9 (File No. 33-28988)
on pages 26-29 which are incorporated herein by reference.
(f) Involvement in certain legal proceedings.
There are no events listed in Regulation Section 229.401(f) that
would be material to an evaluation of the ability or integrity
of the people listed above.
(g) Promoters and control persons.
There are no items to report in Regulation Section 229.401(g)
<PAGE>
Item 11. Executive Compensation.
There was no cash, bonus or deferred compensation paid to any
executive officers by the registrant during the fiscal year of
this report.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
This item is not applicable to the registrant during the fiscal
year of this report.
Item 13. Certain Relationships and Related Transactions.
See footnote 4 to the financial statements, December 31, 1995
(page F-7).
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
There have been no reports on form 8-K which wer filed in the
last quarter of the period covered by this report.
The following documents are filed as part of this report:
Exhibits required by Item 601:
Page of
Form 10-K
(1) Financial Statements:
Independent Auditors' Report F-1
Balance Sheets as of December 31, 1995
and December 31, 1994 F-2
Statements of Operations for the years ended
December 31, 1995, December 31, 1994, and
December 31, 1993 F-3
Statements of Partners' Capital for the years
ended December 31, 1995, December 31, 1994, and
December 31, 1993 F-3
Statements of Cash Flows for the years ended
December 31, 1995, December 31, 1994, and
December 31, 1993 F-4
Notes to the Financial Statements F-5 thru F-9
(2) Schedules:
All schedules are omitted because they are not required or
because the required information is included in the financial
statements or notes thereto.
(3) Articles of Incorporation and by-laws (Partnership
Agreement) - pages 118-140 of the aforementioned Form
S-11 Post-Effective Amendment #9 (File No. 33-28988)
which is incorporated herein by reference.
<PAGE>
(4) Instruments defining the rights of security holders,
including indentures - pages 118-140 of the
aforementioned Form S-11 Post-Effective Amendment #9
(File No. 33-28988) which is incorporated herein by
reference.
(9) Voting trust agreement N/A
(10) Material contracts N/A
(11) Statement re computation of per share earnings N/A
(12) Statements re computation of ratios N/A
(13) Annual report to security holders. Form 10-Q
or quarterly report to security holders N/A
(16) Letter re change in certifying accountant N/A
(18) Letter re change in accounting principles N/A
(19) Previously unfiled documents N/A
(21) Subsidiaries of the registrant N/A
(22) Published report regarding matter submitted to
vote of security holders N/A
(23) Consents of experts and counsel N/A
(24) Power of attorney N/A
(28) Information from reports furnished to state
insurance regulatory authorities N/A
(99) Additional exhibits None
<PAGE>
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.
DBSI PACIFIC INCOME & GROWTH FUND - II
A Real Estate Limited Partnership
by ___________________ Date__________
Charles E. Hassard, Executive Vice President, Finance
of DBSI Housing Inc., general partner of
DBSI PACIFIC INCOME & GROWTH FUND - II
A Real Estate Limited Partnership
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 ____________________ Date__________
Douglas L. Swenson, President and
a Member of the Board of Directors
of DBSI Housing Inc., general partner
of DBSI PACIFIC INCOME & GROWTH FUND - II
A Real Estate Limited Partnership
by ____________________ Date__________
Charles E. Hassard, Executive Vice President, Finance
and a Member of the Board of Directors
of DBSI Housing Inc., general partner
of DBSI PACIFIC INCOME & GROWTH FUND - II
A Real Estate Limited Partnership
by ____________________ Date__________
John D. Foster, Executive Vice President, Operations
and a Member of the Board of Directors
of DBSI Housing Inc., general partner
of DBSI PACIFIC INCOME & GROWTH FUND - II
A Real Estate Limited Partnership
by ____________________ Date__________
Farrell J. Bennett, Vice President, Marketing
and a Member of the Board of Directors
of DBSI Housing Inc., general partner
of DBSI PACIFIC INCOME & GROWTH FUND - II
A Real Estate Limited Partnership
Douglas L. Swenson, John D. Foster, Charles E. Hassard and Farrell J.
Bennett constitute a majority in interest of the Board of Directors of DBSI
Housing Inc. who is a general partner of the registrant.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Partners of
DBSI/Pacific Income and Growth Fund-II
A Real Estate Limited Partnership:
We have audited the accompanying balance sheets of DBSI/Pacific Income and
Growth Fund-II A Real Estate Limited Partnership as of December 31, 1995 and
1994 and the related statements of operations, partners' capital and cash flows
for each of the three years in the period ended December 31, 1995. 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, such financial statements present fairly, in all material
respects, the financial position of DBSI/Pacific Income and Growth Fund-II A
Real Estate Limited Partnership as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1995, in conformity with generally accepted accounting
principles.
DELOITTE & TOUCHE LLP
Boise, Idaho
March 18, 1996
<PAGE>
<TABLE>
DBSI PACIFIC INCOME & GROWTH FUND - II
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
BALANCE SHEETS
<CAPTION>
ASSETS December 31, 1995 December 31, 1994
_________________ _________________
<S> <C> <C>
Rental property (Note 2):
Land $1,527,400 $1,527,400
Buildings and improvements 12,461,311 12,410,992
Furniture and fixtures 1,007,792 955,150
________________ _________________
14,996,503 14,893,542
Less accumulated depreciation (2,372,813) (1,888,551)
________________ _________________
12,623,690 13,004,991
Cash and cash equivalents 41,572 294,265
Accounts receivable 7,229 9,864
Prepaid expenses 12,166 19,566
Reserves 41,010 79,067
Tenant security deposits 84,015 76,970
Intangible costs (net) (Note 5) 118,736 143,294
_______________ _________________
Total assets $12,928,418 $13,628,017
LIABILITIES AND CAPITAL
Accounts payable $43,624 $78,479
Interest payable 75,466 67,712
Property taxes payable 10,052 8,407
Security deposits payable 50,550 79,082
Notes payable affiliate (Note 4) 120,500
Mortgages payable (Note 3) 8,435,881 8,506,409
_____________ ______________
Total liabilities 8,736,073 8,740,089
_____________ ______________
Partners' capital (Note 6) 4,192,345 4,887,928
______________ ______________
Total liabilities and capital $12,928,418 $13,628,017
<FN>
The Accompanying Notes are an Integral Part of these Financial Statements
</TABLE>
<PAGE>
<TABLE>
DBSI PACIFIC INCOME & GROWTH FUND - II
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended Year Ended Year Ended
REVENUES December 31, 1995 December 31, 1994 December 31, 1993
_________________ _________________ _________________
<S> <C> <C> <C>
Tenant rent $2,244,280 $2,289,103 $2,279,512
Interest income 3,272 14,764 27,244
Other income 105,269 84,851 98,189
____________ ____________ ____________
2,352,821 2,388,718 2,404,945
EXPENSES
Interest 811,968 807,051 791,619
Depreciation 484,263 476,947 462,360
Property tax and insurance 223,938 254,219 267,188
Maintenance and repairs 281,936 316,597 262,130
Utilities 279,899 267,328 253,606
Administrative 198,457 172,016 125,537
Management fees (Note 4) 104,058 106,234 89,124
On-site manager (Note 4) 153,922 142,281 127,030
Amortization 29,528 36,758 34,042
___________ ___________ ___________
2,567,969 2,579,431 2,412,636
___________ ___________ ___________
Net loss ($215,148) ($190,713) ($7,691)
STATEMENTS OF PARTNERS' CAPITAL
Year Ended Year Ended Year Ended
December 31, 1995 December 31, 1994 December 31, 1993
_________________ _________________ _________________
Beginning capital $4,887,928 $5,812,999 $6,529,730
Syndication costs (374)
Distributions (480,435) (734,358) (708,666)
Net loss (215,148) (190,713) (7,691)
____________ ____________ ____________
Ending capital $4,192,345 $4,887,928 $5,812,999
<FN>
The Accompanying Notes are an Integral Part of these Financial Statements
</TABLE>
<PAGE>
<TABLE>
DBSI PACIFIC INCOME & GROWTH FUND - II
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
STATEMENTS OF CASH FLOWS
<CAPTION>
CASH FLOWS FROM Year Ended Year Ended Year Ended
OPERATING ACTIVITIES December 31, 1995 December 31, 1994 December 31,
1993
_________________ _________________ _________________
<S> <C> <C> <C>
Net loss ($215,148) ($190,713) ($7,691)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 513,791 513,705 496,402
Changes in operating
assets and liabilities:
Accounts receivable 2,635 (2,880) (6,984)
Prepaid expenses 7,400 (6,139) 11,104
Tenant security deposits (7,045) 16,216 (1,709)
Accounts payable (34,855) 13,689 49,402
Interest payable 7,754 17,222 (9,251)
Property taxes payable 1,645 (8,592) 4,281
Security deposits payable (28,532) 5,921 2,341
_________ _________ _________
Net cash provided by operating activities 247,645 358,429 537,895
CASH FLOWS FROM
INVESTING ACTIVITIES
Rental property purchases (102,961) (397,898) (45,271)
Decrease (increase) in reserves 38,057 124,316 (70,972)
_________ _________ _________
Net cash used in investing activities (64,904) (273,582) (116,243)
CASH FLOWS FROM
FINANCING ACTIVITIES
Increase in syndication costs (374)
Decrease (increase) in intangible costs (4,971) 11,362 (54,768)
Advances from affiliate 120,500
Proceeds from financing 800,000
Principal payments on loans (70,528) (59,793) (936,397)
Distributions to partners (480,435) (734,358) (708,666)
___________ _________ ____________
Net cash provided by (used in)
financing activities (435,434) 17,211 (1,700,205)
___________ __________ ____________
Net increase (decrease) in
cash and cash equivalents (252,693) 102,058 (1,278,553)
Cash and cash equivalents at
beginning of period 294,265 192,207 1,470,760
__________ __________ ____________
Cash and cash equivalents at end of period $41,572 $294,265 $192,207
<FN>
The Accompanying Notes are an Integral Part of these Financial Statements
</TABLE>
<PAGE>
DBSI PACIFIC INCOME & GROWTH FUND - II
A REAL ESTATE LIMITED PARTNERSHIP
(an Idaho limited partnership)
NOTES TO FINANCIAL STATEMENTS
For the Years Ended December 31, 1995, 1994, and 1993
NOTE 1. SUMMARY OF PARTNERSHIP ORGANIZATION AND SIGNIFICANT ACCOUNTING
POLICIES
Partnership Organization.
DBSI Pacific Income & Growth Fund - II A Real Estate Limited Partnership, was
formed on May 17, 1989 with general partners DBSI Housing Inc., an Idaho
corporation, and DBSI Realty Partners, an Idaho general partnership. The
Partnership was in the development stage through January 9, 1990 and in the
offering stage through December 31, 1991. The business purpose of the
Partnership is to acquire and operate leveraged multi-family housing projects
in the Western United States. The partnership agreement provides that the
Partnership will be dissolved no later than December 31, 2039, unless sooner
terminated as provided in the agreement.
The Partnership acquired three properties during 1990: Weatherstone
Apartments, an existing 138-unit project located in Silverdale, (Kitsap County)
Washington; Sorrento View Apartments, an existing 80-unit project, and Dakota
Station Apartments, an existing 40-unit project, both located in the
Beaverton/Tigard (Portland), Oregon metropolitan area. In October 1991 the
Partnership purchased a fourth property, Talisman Apartments, an existing
96-unit project located in Olympia, Washington.
Operating profits and losses exclusive of losses from the sale or disposition
of Partnership properties, and cash distributions, are allocated 98% to limited
partners and 2% to general partners. After the limited partners have received
distributions equal to a 7% annual return on their capital contributions the
general partners receive additional distributions equal to 5% of total
distributions. Proceeds from sale or refinancing are to be distributed,
generally, 100% to the limited partners until they have received cumulative
distributions equal to their capital contributions, then 85% to the limited
partners and 15% to the general partners. However, the limited partners must
receive cumulative distributions from operations and sale or refinancing
proceeds equal to their capital contributions plus a 10% per annum return
thereon before the general partners receive any sale or refinancing proceeds.
Significant Accounting Policies.
The balance sheets include only those assets, liabilities, and partners'
capital which relate to the business of the Partnership and do not include
any assets, liabilities, revenues or expenses attributable to the partners'
activities. No partners receive salaries from the Partnership for services.
No provision has been made for federal and state income taxes since these taxes
are the personal responsibility of the partners.
Rental property is recorded at cost. Depreciation is computed for all assets
over their estimated useful lives as follows: buildings and structural
improvements, 15 to 32 years; furniture and fixtures, 5 to 12 years.
Expenditures for maintenance and repairs are charged to operating expenses as
incurred. Mortgage loan fees are amortized over the estimated life of the
mortgage notes.
<PAGE>
Cash and cash equivalents include cash in banks (except for security deposits
and reserve bank accounts). Reserves consist of bank deposits for repairs and
replacements, property taxes, insurance, and Partnership reserves.
The estimated fair value of cash and cash equivalents, accounts payable and
long-term debt approximates their carrying amounts.
The preparation of the Partnership's financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The Financial Accounting Standards Board's Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of, requires management to review long-lived
assets for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets may not be recoverable. This statement will
be effective for the Partnership's fiscal year end December 31, 1996. The
Partnership's existing accounting policies are such that this pronouncement is
not expected to have a material effect on the Company's financial position or
results of operations.
<TABLE>
NOTE 2. RENTAL PROPERTY
The following schedules detail the activity in rental property assets and
accumulated depreciation.
<CAPTION>
Beginning Ending
Rental Property Balance Additions Balance
________________________________________________________________________
<S> <C> <C> <C>
Land $ 1,527,400 $ 1,527,400
Buildings and improvements 12,071,378 $339,614 12,410,992
Furniture and fixtures 896,866 58,284 955,150
___________________________________
Total year ended December 31, 1994 $14,495,644 $397,898 $14,893,542
Land $ 1,527,400 $ 1,527,400
Buildings and improvements 12,410,992 $50,319 12,461,311
Furniture and fixtures 955,150 52,642 1,007,792
___________________________________
Total year ended December 31, 1995 $14,893,542 $102,961 $14,996,503
Beginning Ending
Accumulated Depreciation Balance Additions Balance
________________________________________________________________________
Buildings and improvements $1,152,701 $383,080 $1,535,781
Furniture and fixtures 258,904 93,866 352,770
___________________________________
Total year ended December 31, 1994 $1,411,605 $476,946 $1,888,551
Buildings and improvements $1,535,781 $386,123 $1,921,904
Furniture and fixtures 352,770 98,139 450,909
___________________________________
Total year ended December 31, 1995 $1,888,551 $484,262 $2,372,813
</TABLE>
<PAGE>
NOTE 3. MORTGAGES PAYABLE
A mortgage payable of $3,875,000 to Pacific First Federal Savings Bank was used
in the purchase of Weatherstone Apartments in March, 1990. The balance of
$3,779,455 as of December31, 1995 and $3,800,401 as of December 31, 1994 bears
interest at 9.875% and requires monthly payments of $32,942 through April 1,
2000 when the remaining balance of approximately $3,660,621 is due.
In October, 1991, the Partnership purchased Talisman Apartments by executing a
mortgage loan in the amount of $3,000,000. The mortgage note in the current
amount of $2,918,151 and a balance of $2,941,330 as of December 31, 1994 is
held by the State of Washington, State Investment Board, and requires payments
of $26,050 monthly with interest charged at 9.875%. The entire balance of the
loan is due in ten years (November, 2001) when the approximate balance will be
$2,722,795. The loan may not be prepaid during the first five years of the loan
period. During the second five years of the loan period it may be prepaid
subject to the greater of a yield maintenance prepayment penalty or a minimum
2% prepayment penalty.
A first deed of trust loan of approximately $998,000 to Canada Life Assurance
Company was renegotiated for Sorrento Apartments after a reduction of $886,000
to the principal was made from operating capital on May 11, 1993. The loan
requires monthly payments of $7,996 with interest charged at 8.375%, current
amount due as of December 31, 1995 is $955,200 with a balance of $970,449 as of
December 31, 1994. The loan is due on June 1, 1998 and it is anticipated
that the remaining balance will be refinanced. A prepayment penalty is
required if the note is paid more than 30 days before its due date.
An 8.25% $800,000 loan from Canada Life Assurance Co. secured by the Dakota
Station Apartments was obtained on April 28, 1994 to finance six to eighteen
additional units at Weatherstone Apartments. The loan is for five years with a
25 year amortization. The loan requires monthly payments of $6,308 and has a
current amount due of $783,075 as of December 31, 1995 and a balance of $794,229
as of December 31, 1994.
<TABLE>
The following schedule details principal payments on outstanding mortgages as
of December 31, 1995:
<CAPTION>
Project 1996 1997 1998 1999 2000 Thereafter Total
______________________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C> <C>
Weatherstone $23,111 $25,500 $ 28,135 $ 31,042 $3,671,667 $3,779,455
Talisman 25,575 28,218 31,134 34,352 37,593 $2,761,279 2,918,151
Sorrento 16,576 18,019 920,605 955,200
Dakota 11,517 12,504 13,575 745,479 783,075
_______________________________________________________________________________
$76,779 $84,241 $993,449 $810,873 $3,709,250 $2,761,279 $8,435,881
</TABLE>
Interest paid on all debts for cash flow purposes during 1995, 1994, and 1993
was $809,570, $788,218, and $800,870.
NOTE 4. RELATED PARTY TRANSACTIONS
The Partnership borrowed $120,500 through fourth quarter of 1995 from an
affiliate of the General Partner. This loan bears interest at the General
Partner's bank borrowing rate of prime plus 1.5% (10% as of December 31, 1995).
The loan proceeds provided funds for short term operating cash flow needs of
the Seattle area projects and to enable the Partnership to maintain the first
quarter 1995 distribution rate following the lower operating cash flow from
these properties. The General Partner anticipates the loan will be repaid over
approximately a twelve month period.
<PAGE>
NOTE 4. RELATED PARTY TRANSACTIONS (continued)
As described in the partnership agreement, affiliates of the general partner
receive compensation and fees in connection with the management of the
Projects. Such fees totaled $104,058 for 1995, $106,234 for 1994, and $89,124
for 1993 and were paid to affiliates of general partner DBSI Housing Inc. DBSI
Housing Inc. was reimbursed for $153,922, $142,281, and $127,030 of payroll
costs for on-site managers in 1995, 1994, and 1993. The following amounts due
to related parties were included in Accounts Payable at December 31:
Related Party Description 1995 1994 1993
____________________________________________________________________________
DBSI Realty Corp., Management Fees $1,790
(affiliate of DBSI Admin./Office Supplies $1,547 $111
Housing Inc.)
NOTE 5. INTANGIBLE COSTS
Intangible assets and accumulated amortization at December 31, 1995 consist of
the following:
Accumulated
Description Cost Amortization Net
______________________________________________________
Loan Fees $248,301 ($129,565) $118,736
<TABLE>
NOTE 6. PARTNERS' CAPITAL
The following schedule details the capital activity and allocations between the
limited and general partners during the periods reported:
<CAPTION>
Syndication and
Limited General Total Unallocated
Partners Partners Allocated Capital Total
_________________________________________________________________
<S> <C> <C> <C> <C> <C>
Balance December 31, 1992 $8,251,732 ($145,912) $8,105,820 ($1,576,090) $6,529,730
Net Loss (7,537) (154) (7,691) (7,691)
Syndication Costs (374) (374)
Distributions to Partners (682,968) (25,698) (708,666) (708,666)
_________________________________________________________________
Balance December 31, 1993 7,561,227 (171,764) 7,389,463 (1,576,464) 5,812,999
Net Loss (186,879) (3,834) (190,713) (190,713)
Distributions to Partners (682,938) (51,420) (734,358) (734,358)
_________________________________________________________________
Balance December 31, 1994 6,691,410 (227,018) 6,464,392 (1,576,464) 4,887,928
Net Loss (210,739) (4,409) (215,148) (215,148)
Distributions to Partners (480,435) (480,435) (480,435)
_________________________________________________________________
Balance December 31, 1995 6,000,236 (231,427) 5,768,809 (1,576,464) (4,192,345)
</TABLE>
<PAGE>
<TABLE>
7. NET INCOME (LOSS) FROM RENTAL PROPERTIES
The following schedule details separate rental property and partnership operations for the year ended
December 31, 1995.
<CAPTION>
___________________________________________________________________________________
Weatherstone Talisman Sorrento View Dakota Station
Revenues Apartments Apartments Apartments Apartments Partnership Total
___________________________________________________________________________________
<S> <C> <C> <C> <C> <C> <C>
enant rent $764,714 $613,523 $571,603 $294,440 $2,244,280
Interest income 1,837 250 234 120 $831 3,272
Other income 46,328 18,327 25,686 14,928 105,269
___________________________________________________________________________________
812,879 632,100 597,523 309,488 831 2,352,821
Expenses
Interest 369,003 289,235 80,592 65,011 8,127 811,968
Depreciation 179,563 130,295 116,655 57,750 484,263
Property tax and insuran 75,550 56,899 61,790 29,699 223,938
Maintenance and repairs 107,884 69,726 69,570 34,756 281,936
Utilities 107,117 71,022 69,698 32,062 279,899
Administration 77,608 44,185 32,320 15,046 29,298 198,457
Management fees 39,651 28,407 24,000 12,000 104,058
On-site manager 56,827 44,263 34,233 18,599 153,922
Amortization 29,528 29,528
___________________________________________________________________________________
1,013,203 734,032 488,858 264,923 66,953 2,567,969
____________________________________________________________________________________
Net income (loss) ($200,324) ($101,932) $108,665 $44,565 ($66,122) ($215,148)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 41572
<SECURITIES> 0
<RECEIVABLES> 7229
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 255927
<PP&E> 14996503
<DEPRECIATION> 2372813
<TOTAL-ASSETS> 12928418
<CURRENT-LIABILITIES> 300192
<BONDS> 8435881
0
0
<COMMON> 0
<OTHER-SE> 4192345
<TOTAL-LIABILITY-AND-EQUITY> 12928418
<SALES> 0
<TOTAL-REVENUES> 2352821
<CGS> 0
<TOTAL-COSTS> 1756001
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 811968
<INCOME-PRETAX> (215148)
<INCOME-TAX> 0
<INCOME-CONTINUING> (215148)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (215148)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
