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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________
FORM 10-K
(Mark One)
[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, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange act of 1934 (No Fee Required). For the transition from
_________to____________
_________________
COMMISSION FILE NO. 0-19963
TMP INLAND EMPIRE II, LTD.,
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0311624
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
801 N. PARKCENTER DRIVE, SUITE 235 92705
SANTA ANA, CALIFORNIA (Zip Code)
(Address of principal executive office)
(714) 836-5503
(Registrant's telephone number, including area code)
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
_____________________________________
(Title of Class)
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
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PART I
ITEM 1(A). BUSINESS
INTRODUCTION
TMP INLAND EMPIRE II, LTD., a California Limited Partnership (the
"Partnership"), is a California limited partnership formed in August, 1988, of
which TMP Investments, Inc., a California corporation, and TMP Properties, a
California general partnership, are the General Partners (the "General
Partners"). The Partnership was formed to acquire, form nonaffiliated person,
parcels of unimproved real property (the "Properties") located primarily in San
Bernardino County, California. A total of three properties were purchased.
Two were sold and proceeds distributed. The last remaining parcel totaling 18
acres has been zoned commercial.
The remaining Property will be held for investment, appreciation, and
ultimate sale and/or improvement of all or a portion thereof either alone or in
conjunction with a joint venture partner, or it may be traded for an income
producing shopping center or apartment complex. If the Property or portions
there of is developed, the General Partners intend to hold and manage the same
for the production of income until such time that they determine a sale would
be in the best interest of the Partnership and its limited partners (the
"Limited Partners"). Upon the sale of the last Property, the payment of all
debts and the distribution of any remaining proceeds, less necessary reserves,
to those persons entitled thereto pursuant to the Partnership's Agreement of
Limited Partnership (the "Partnership Agreement"), the Partnership will be
dissolved.
TMP Inland Empire II, Ltd., a California Limited Partnership, has been
formed under the Revised Limited Partnership Act of the State of California.
The rights and obligations of the Partners in the Partnership are governed by
the Partnership's Agreement of Limited Partnership (the "Partnership
Agreement"). The following statements concerning the Partnership Agreement are
qualified in their entirety by reference to the Partnership Agreement, which is
being filed as an Exhibit to this Form 10.
DESCRIPTION OF LIMITED PARTNERSHIP UNITS. The Partnership Agreement
authorizes the issuance and sale of Limited Partnership Units for all cash in
multiples of $1,000 per Unit. A total of 7,250 Limited Partnerships Units are
outstanding and it is not anticipated that any additional Limited Partnership
Units will be issued in the future. Outstanding Units are fully paid and
nonassessable. Between August, 1988 and January, 1989, the Partnership sold an
aggregate of 7,250 Units at a price of $1,000 per Unit, or an aggregate of
$7,250,000.
THE RESPONSIBILITIES OF THE GENERAL PARTNERS. The General Partners
have the exclusive management and control of all aspects of the business of the
Partnership. In the course of their management, the General Partners may, in
their absolute discretion, acquire, mortgage, encumber, hold title to, pledge,
sell, release, or otherwise dispose of real property and interests therein when
and upon such terms as they determine to be in the best interest of the
Partnership and employ such
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persons, including, under certain circumstances, Affiliates of the General
Partners, as they deem necessary for the efficient operation of the
Partnership. It is provided, however, that the Limited Partners holding, in
aggregate, more than 50% of the then outstanding Units must consent to the sale
of substantially all of the assets of the Partnership other than a sale
occurring in the ordinary course of the Partnership's business. The General
Partners shall receive only such compensation as is provided in the Partnership
Agreement.
LIABILITIES OF LIMITED PARTNERS/NONASSESSABILITY OF INTERESTS. A
Limited Partner's capital contributed to the Partnership is subject to the
risks of the Partnership's business. Except as specifically provided in the
Partnership Agreement, he is not permitted to take any part in the management
or control of the business and he may not be assessed for additional capital
contributions. Assuming that the Partnership is operated in accordance with
the terms of the Partnership Agreement, a Limited Partner is not be liable for
the liabilities of the Partnership in excess of his capital contribution and
share of his undistributed profits. Notwithstanding the foregoing, a Limited
Partner is liable for any Distributions made to him if, after such
Distributions, the remaining assets of the Partnership are not sufficient to
pay its then outstanding liabilities, exclusive of liabilities of Limited
Partners on account of their contributions, and liabilities for which recourse
is limited to specific Partnership assets.
The Partnership Agreement provides that the Limited Partners shall not
be bound by, or be personally liable for, the expenses, liabilities, or
obligations of the Partnership.
TERM AND DISSOLUTION. The Partnership will continue for a maximum
period ending December 31, 2019, but may be dissolved at an earlier date, if
certain contingencies occur. Prior to dissolution, Limited Partners may not
withdraw from the Partnership but may, under certain circumstances, assign
their Units to others. (See "Transferability of Units," below.) The
contingencies whereby the Partnership may be dissolved are as follows:
1. The withdrawal, adjudication of bankruptcy, dissolution, or
death of a General Partner, unless the remaining General Partner
agrees to continue the business of the Partnership, or if there
is no remaining General Partner, all the Limited Partners agree
to continue the business of the Partnership and elect, by
unanimous consent, one or more new General Partners to continue
the Partnership's business;
2. A Majority Vote of the total outstanding Units in favor of
dissolution and termination of the Partnership; or
3. The removal of a General Partner, unless the remaining General
Partner agrees to continue the business of the Partnership, or
if there is no remaining General Partner, a majority of the
Limited Partners agree to continue the business of the
Partnership and elect, by a Majority Vote of the total
outstanding Units, one or more new General Partners to continue
the Partnership business.
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VOTING RIGHTS OF LIMITED PARTNERS. The voting rights of the Limited
Partners are set forth in Section 6 of the Partnership Agreement. The Limited
Partners have the right to vote upon the following matters affecting the basic
structure of the Partnership:
1. Amendment of the Partnership Agreement (except for amendments
which do not affect the rights of the Limited Partners);
2. Removal of a General Partner;
3. Admission of a General Partner;
4. The sale of all, or a substantial part, of the assets of the
Partnership other than in the ordinary course of business;
5. The election to continue the business of the Partnership and the
appointment of a successor General Partner after the withdrawal,
adjudication of bankruptcy, death, or dissolution of the sole
remaining General Partner;
6. The election to continue the business of the Partnership and
appointment of a successor General Partner after the removal of
the sole remaining General Partner; or
7. Termination and dissolution of the Partnership, other than after
sale of all of the Properties and receipt of all amounts due on
any seller carryback financing.
A majority Vote of the Limited Partnership shall be required for the
matters set forth above to pass and become effective, except for the matters
specified in Item 5, which shall require the unanimous consent of the Limited
Partners.
The General Partners may at any time call a meeting of the Limited
Partners or for a vote, without a meeting, of the Limited Partners on matters
on which they are entitled to vote, and shall call for such meeting or vote
following receipt of written request therefor of Limited Partners holding 10%
or more of the total outstanding Units.
Each Limited Partnership Unit shall have equal voting rights.
TRANSFERABILITY OF UNITS. Holders of Units shall have the right to
assign one or more whole Units by written instrument the terms of which are not
in contravention of any of the provisions of the Partnership Agreement.
An assignee of record shall be entitled to receive Distributions from
the Partnership attributable to the Units acquired by reason of such assignment
from and after the effective date of the assignment of such Units to him;
however, the Partnership and the General Partners shall be entitled to treat
the assignor of such Units as the absolute owner thereof in all respects, and
shall incur no liability for allocations of Net Income, Net Loss, or
Distributions, or transmittal of reports and
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notices required to be given to Limited Partners which made in good faith to
such assignor until such time as written instrument of assignment has been
received by the Partnership and recorded on its books. The effective date of
an assignment of Units (of which assignment the Partnership has actual notice)
on which the Assignee shall be deemed an Assignee of record shall not be later
than the first day of the fiscal quarter following the date set forth on the
written instrument of assignment.
Any assignment, sale, exchange or other transfer in contravention of
any of the provisions of the Partnership Agreement shall be void and
ineffectual, and shall not bind or be recognized by the Partnership.
An Assignee may only be substituted as a Limited Partner in the place
of the assignor Limited Partner with the prior consent of the General Partners.
Any substituted Limited Partner must agree to be bound by the provisions of the
Partnership Agreement.
BOOKS AND RECORDS. At all times during the term of the Partnership,
the General Partners will keep true and accurate books of account of all the
financial activities of the Partnership. These books of account are kept open
for inspection by the Limited Partners or their representatives at any
reasonable time. The General Partners may make such elections for federal and
state income tax purposes as they deem appropriate and the fiscal year of the
Partnership is the calendar year unless changed by the General Partners with
the consent of the Commissioner of Internal Revenue.
DISTRIBUTIONS, NET INCOME AND NET LOSS
ALLOCATION OF NET INCOME AND NET LOSS FROM OPERATIONS. Until such
time that all Limited Partners have received allocations of Net income from the
Partnership equal to a 6% cumulative, but not compounded, preferred return on
adjusted Capital Contributions (the "Preferred Return"), Net Income shall be
allocated 99% to all Limited Partnership Units, which will be further allocated
among such Units on a pro rata basis, and 1% to the General Partners. Until
such time that all Limited Partners have received Distributions equal to their
Capital Contributions plus their Preferred Return, Net Losses shall be
allocated 99% to all Limited Partnership Units, allocated among them on a pro
rata basis, and 1% to the General Partners. Thereafter, Partnership Net
Income, Net Loss, and all items of Partnership deduction and credit shall be
allocated 15% to the General Partners and 85% to all Limited Partners, pro
rata, according to the number of Units owned. The foregoing allocations are
subject to certain requirements of the Internal Revenue Code of 1986, as
amended (the "Code"), as set forth in Section 4.5 of the Partnership Agreement.
ALLOCATION OF PROFITS AND LOSSES ON SALES OF PROPERTY. Profits and
Losses on Sales of Property are allocated as set forth in Section 4.5(f) and
4.5(g), respectively, of the Partnership Agreement.
DISTRIBUTIONS. Distributions of Distributable Cash from Operations,
if any, will be made annually within 90 after the end of the Partnership's
fiscal year and shall be allocated 99% to the Limited Partners and 1% to the
General Partners until the Limited Partners have received cumulative
Distributions in an amount equal to their Capital Contributions plus their
unpaid Preferred Return, after which time Distributions of Distributable Cash
from Operations shall be allocated 85% to the Limited Partners and 15% to the
General Partners. Except for Distributions on Dissolution described in Section
8.2 of the Partnership Agreement, Distributions of Cash from Sale or
Refinancing of Partnership Properties shall be distributed to the Partners at
such times as the General Partners shall determine in the same manner as
Distributions of Distributable Cash from Operations. The General Partners have
the right to use Cash from the Sale or Refinancing of Partnership Properties to
pay seller financed debt without making a Distribution to Partners; provided,
however, that sufficient funds, if available, shall be distributed to the
Limited Partners to pay any resulting state or federal income tax, assuming
that all such Limited Partners are in a 28% tax bracket.
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INVESTMENT OBJECTIVES; RISKS
In general, the investment objectives of the Partnership may be
summarized as follows:
(a) Preservation and return of the Partners' capital.
(b) Capital appreciation.
(c) Added value through pre-development activity (zoning,
subdivision, site planning, engineering).
(d) Cash flow after return of capital.
(e) Minimization of risk by maintaining minimum partnership debt.
The General Partners are, at all times, guided by a policy of
realizing profit intended to result in gain for the Limited Partners upon
ultimate disposition of the Properties. There can, however, be no assurance or
guarantee that the decisions made by the General Partners will result in the
realization of any profit.
The Partnership is subject to the risks generally incident to the
ownership of real estate, including the uncertainty of cash flow to meet fixed
or variable obligations; adverse changes in national economic conditions;
changes in the investment climate for real estate investment; lack of
geographic diversification; adverse changes in local market conditions, such as
changes in the supply of, or demand for competing properties in an area;
changes in interest rates and the availability of permanent mortgage funds,
which may render the sale or refinancing of a property difficult or
unattractive; changes in real estate tax rates and other operating expenses,
governmental rules (including, without limitations, zoning laws and fiscal
policies); known and unknown environmental conditions on the property and acts
of God that may result in uninsured losses (including, without limitation,
earthquakes and floods).
The purchase of property to be developed or constructed is subject to
more risks than is involved in the purchase of property with an operating
history. In the event the General Partners decide to develop the Properties,
the Partnership will be subject to the risk that there may be unanticipated
delays in, or increases in costs of, development and construction as a result
of factors beyond the control of the General Partners. These factors may
include, among others, strikes, adverse weather, material shortages, and
increases in the cost of labor and materials. Such factors can result in
increased cost of a project and corresponding depletion of the Partnership's
working capital and reserves, or loss of the Partnership's investment as a
result of foreclosure by a construction or other lender. Additional risks may
be incurred where the Partnership makes periodic progress payments or other
advances to the builders prior to completion of the construction. It should
also be noted that the development of unimproved real property is a
time-consuming process which often involves governmental approval of site and
development plans, environmental studies and reports, traffic studies, and
similar items.
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The Partnership may enter into joint ventures in order to accomplish
the development of the Properties. Such transactions may create risks not
otherwise present. For example, the joint venturer's investment objectives may
be inconsistent with the investment objectives of the partnership.
If the Partnership develops the Properties, either alone or in
conjunction with joint venture partners, construction arrangements will be made
at that time. As of the date of this Form 10K, no arrangements have been
entered into or negotiated with any person for the development of any of the
Properties.
If the Partnership requires a loan to finance pre-development or
development activities, or to pay off or refinance an existing loan on a given
property, the availability and cost of such a loan is uncertain due to money
market fluctuations. The General Partners are unable to predict the effects of
such fluctuations on the Partnership. Money market conditions which may exist
if and when the Partnership seeks to obtain any financing with respect to the
Partnership for development or other purposes may make such financing
difficult or costly to obtain and may have an adverse effect on the
Partnership's ability to develop the Properties. Additionally, such conditions
may also adversely affect the ability of the Partnership to sell the Properties
when a sale is determined to be in the best interests of the Partnership, and
may affect the terms of any such sale.
The Partnership's investment objectives must be considered speculative
and there is no assurance that the Partnership will fulfill them.
SELLING POLICY
The Partnership seeks to sell all Properties for all cash. However,
if the General Partners deem it to be in the best interests of the Partnership
and its Limited Partners, the Partnership will sell one or more of the
Properties in exchange for receiving part of the purchase price in cash at the
time of sale and receiving the balance of the purchase price on a deferred
basis. The deferred amount will be evidenced by an interest-bearing promissory
note secured by a deed of trust on the Property sold. However, the Partnership
does not intend to carry back any promissory notes unless it obtains a first
priority lien against the Property sold.
COMPETITION
It is anticipated that the Partnership will encounter considerable
competition in the pre-development, development, operation, and eventual sale
of the Properties. Even under the most favorable marketing conditions, there
is no guarantee that the Properties can be pre- developed, developed, operated,
or sold, and if sold, that such sale will be made upon terms favorable to the
Partnership. Similarly, there is no guarantee that the Partnership will be
able to conduct profitable operations on the Properties, if and when they are
developed.
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GOVERNMENTAL POLICIES
The Partnership's pre-development and development plans for the
Properties, as well as the value of the Properties, are dependent in large part
on governmental action. the following is a partial list of some, but not all,
of the potential problems which could arise due to governmental action or
inaction.
ZONING/PLANS/MAPS/PERMITS. The Property is zoned commercial, but no
assurances can be given that the City would not attempt to rezone or refuse to
issue a building permit. Zoning changes are dependent on, among other things,
whether or not such change would be consistent with the General and Specific
Plan for a given area. In the event that zoning is changed or if permits are
not obtained, the value of the remaining parcels to the Partnership and to
others may be reduced and the investment results of the Partnership may be
materially adversely affected.
GROWTH INITIATIVES. Many counties and cities in California have been
subject to so called "slow growth" initiatives which could seriously affect the
ability to timely develop properties located within a county or city passing
such an initiative, such initiatives normally do not affect commercially zoned
properties. Although no such initiatives are currently pending, such an
initiative could adversely affect the use or value of those Properties located
within such county or city.
PROPERTY TAX REFORM AND RENT CONTROL. Statewide property tax reform
has reduced real property taxes in California. However, subsequently enacted
statewide implementing legislation may cause real property taxes in California
to increase at a more rapid rate than previously experienced and legislation
enacted in certain municipalities in response to the statewide reform requires
owners of real property to pass through property tax savings to residential and
certain commercial tenants by various means, including rent reduction. It is
also possible that legislation at the state or local level may be enacted in
California which include some form of rent control applicable to the
Partnership. In addition, certain fees and charges associated with the
acquisition and ownership of real property in California have been increased to
offset decreases in local revenue resulting from the property tax reduction.
OTHER GOVERNMENTAL INTERVENTION. There can be no assurance that there
will be no governmental intervention with respect to the Properties that would
adversely affect the use or value of the Properties. For example, building
moratoriums, changes in general or specific plans, down-zoning of the
Properties, unanticipated environmental regulation, and special assessment
district city development fees could impair the value of the Properties owned
by the Partnership.
ENVIRONMENTAL
The Partnership may be required in certain instances to obtain
environmental impact, biological impact or other similar reports prior to
development of the Properties. Such reports may indicate conditions which make
it more expensive (or in rare cases, impossible) to develop a Property in a
manner anticipated by the Partnership, or may cause delays in the development
of a Property. If a Property is contaminated by hazardous materials, the
Partnership could incur substantial clean up costs under federal, state and
local laws which could adversely affect the investment results of the
Partnership.
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The General Partners know of no environmental conditions on the
Properties that would adversely affect the investment results of the
Partnership.
EMPLOYEES
The Partnership has no employees. Management of the Partnership is
provided by the General Partners. See Item 10 "Directors and Executive
Officers" for information about the General Partners.
ITEM 1(D). FOREIGN OPERATIONS
The Partnership has no foreign operations in foreign countries.
ITEM 2. PROPERTIES
The Partnership had acquired a total of three (3) Properties. All of
the Properties are in the area of Southern California known as the "Inland
Empire." While no fixed geographical boundary identifies the Inland Empire,
the General Partners consider the Inland Empire to include most of the western
portion of Riverside and San Bernardino counties and to be roughly bounded by
the cities of Corona on the west, the Coachella Valley (Palm Springs area) on
the east, the City of Victorville on the north and Murietta (formerly Rancho
California) on the south. The Partnerships remaining property is in the City
of Fontana, County of San Bernardino.
The Partnership owns or has owned the following properties:
<TABLE>
<CAPTION>
Date Purchase Date Sales
Property Purchased Price Sold Price
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rialto I 11-04-88 $1,505,000 01-04-89 $2,250,000
Rialto II 11-22-88 $ 827,000 09-22-89 $1,500,000
Fontana 10-28-88 $3,200,000 * *
</TABLE>
____________________________
* FONTANA. The Fontana parcel was still owned by the Partnership as of
December 31, 1996. It includes approximately 18.5 acres (gross) located on the
south side of Baseline Avenue between Hemlock and (proposed) Beech Avenue in
Fontana, California and is zoned for commercial use. This Property is
currently listed for sale at $4,600,000.
ITEM 3. LEGAL PROCEEDINGS
There are no matters requiring disclosure under Item 3.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Registrants security holders
during the fourth quarter of 1996.
PART II
ITEM5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
As of December 31, 1996, there were approximately 609 record holders of
Units of Limited Partnership Interest. There is no other class of security
outstanding or authorized. There has not been, and currently there does not
exist, any publicly established trading market for the Units. Accordingly,
there was no trading activity during the fiscal years ended December 31, 1994,
and 1995. In 1996, 45 Units traded on the secondary market at between $165 and
$180 a Unit.
CASH DISTRIBUTIONS
No cash distributions were paid to the Limited Partners during the
fiscal years ended December 31, 1996 and 1995. A summary of the provisions of
the Partnership Agreement regarding distributions of cash and allocations of
net income and losses is set forth in Item 1 under the subcaption
"Distributions, Net Income and Net Loss."
ITEM 6. SELECTED FINANCIAL DATA
The following table summarizes selected financial data of the
Partnership for the five fiscal years ended December 31, 1996, 1995, 1994,
1993, and 1992, and should be read in conjunction with the more detailed
financial statements contained in Item 8 below.
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(UNAUDITED)
YEARS ENDED DECEMBER 31
(Not Covered By Auditor Report)
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from Sale of Property $ $ $ $ $
Less cost of Property sold
Gross profit
Interest Income 748 1,633 3,468 2,752 7,944
Other income 50,000
----------
Total income $ 748 $ 1,633 $ 3,468 $ 2,752 $ 57,944
=========== =========== =========== =========== ==========
Net income (loss) $(2,660,344) $ (367) $ 1,468 $ 752 $ 55,944
=========== =========== =========== =========== ==========
Net income (loss) per Unit* $ (363.27) $ (0.05) $ .20 $ .10 $ 7.72
=========== =========== =========== =========== ==========
Cash distribution per Unit* $ $ $ $ $
=========== =========== =========== =========== ==========
Total assets $ 1,023,477 $ 3,683,459 $ 3,684,579 $ 3,682,358 $3,681,966
=========== =========== =========== =========== ==========
</TABLE>
*(Based on 7,250 Units outstanding at December 31, 1996, 1995, 1994, 1993, and
1992)
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
During the period from inception (August 15, 1988) through December
31, 1988, the Partnership was engaged primarily in the sale of Units of Limited
Partnership Interest and the investment of the subscription proceeds to
purchase parcels of unimproved real property. The Partnership sold two
Properties during 1989 for a gross profit, net of all acquisition, carrying and
selling costs, of $1,028,844. Other revenues received during the fiscal years
ended December 31, 1992, 1993, 1994, 1995 and 1996 consisted primarily of
interest income and income from the forfeiture by potential buyers of
non-refundable escrow deposits.
LIQUIDITY AND CAPITAL RESOURCES
The partnership raised a total of $6,564,041, net of syndication
costs, from the sale of Limited Partnership Units. During the Period from
inception through December 31, 1992, the Partnership acquired a total of nine
Properties for all cash at a total expenditure of $6,159,225, including
carrying costs (such as interest expense and property taxes). All costs
associated with the acquisition of the Properties, as well as carrying costs
and administrative expenses, are capitalized (i.e., added to the cost of the
Properties) and are deducted from the sales prices to determine gains (or
losses) when the Properties are sold.
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The Partnership does not intend to acquire any additional Properties.
The remaining Property is being held for resale. Upon sale, the Partnership
intends to distribute the sales proceeds, less any reserves needed for final
reporting to the Partners.
The General Partners intend to meet currently anticipated cash
requirements by first using cash on hand; second, funds from interest income;
third, the sale of properties; and fourth, proceeds from a loan secured by the
property. The General Partners believe that sufficient funds are available to
meet anticipated cash requirements for the next twelve months. At December 31,
1996, the remaining property was unencumbered.
The Partnership has no current plans to develop any of the parcels,
and it is expected that no such plans would be undertaken unless adequate
funding therefor could be obtained, either from the sale or refinancing of
parcels or the forming of a joint venture.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as a part of this Form 10K:
(I) For the fiscal years ended December 31, 1996 and 1995:
Page No.
Independent Auditors Report FS-1
Balance Sheets as of December 31, 1996 and 1995 FS-2
Statements of Income for the years ended
December 31, 1996, 1995, and 1994 FS-3
Statements of Partners' Capital for the years
ended December 31, 1996, 1995, 1994, and 1993 FS-4
Statements of Cash Flow for the years ended
December 31, 1996, 1995, and 1994 FS-5
Notes to Financial Statements FS-6
Financial Statement Schedules FS-8
All other schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission
of the schedule, or because the information required is included in
the Financial Statements and Notes thereto.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The accounting firm of Balser, Horowitz, Frank & Wakeling ("BHF&W),
whose report is included elsewhere herein with respect to the Partnership's
financial statements for the fiscal years ended December 31, 1996 and 1995, has
provided accounting services to this Partnership and to other limited
partnerships of which the General Partners are the general partners, for many
years.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Partnership has no employees and no directors or executives
officers. Management of the Partnership is provided by the General Partners.
TMP Properties, a California general partnership, and TMP Investments,
Inc., a California corporation, are the General Partners of the Partnership.
TMP Properties was formed on July 14, 1978. TMP Properties' principal business
has been the acquisition of undeveloped land and the coordination of activities
necessary to add value to such land, primarily through the predevelopment
process. It has syndicated numerous private real estate limited partnerships,
and eleven public real estate limited partnerships. All of the properties
purchased by such partnerships were located in the State of California except
for one (an office building) which was located in Oklahoma City, Oklahoma.
Each of such limited partnerships involved a specified real property program in
which TMP Properties was the general partner. The general partners of TMP
Properties are William O. Paso, Anthony W. Thompson and Scott E. McDaniel.
The individual partners of TMP Properties are listed below, together
with information regarding their employment experience and background.
TMP Investment Inc., a California corporation, was formed on December
12, 1984. TMP Investments Inc. has served in the capacity of a co-general
partner in all of the TMP sponsored programs since December 1984. In 1993, TMP
Investments Inc. began serving as sole general partner in all TMP sponsored
partnerships. TMP Investments Inc. has been and will continue to be engaged in
asset management, real estate accounting, budgetary services, and partnership
management on behalf of existing limited partnerships and limited partnerships
which it sponsors in the future. The shareholders of TMP Investments, Inc.
were William O. Passo, Anthony W. Thompson, and Scott E. McDaniel until
September 1993, when Mr. McDaniel sold his share of TMP Investments Inc. to Mr.
Passo and Mr. Thompson.
WILLIAM O. PASSO, 55, is a Director and the President of TMP
Investments Inc. He practiced law for 18 years, has been a licensed real
estate broker since 1974 and holds registered representative and general
principals securities licenses through the National Association of Securities
Dealers, Inc. Mr. Passo received his Juris Doctorate Degree from UCLA School
of Law in 1967. He has been a senior partner first of Passo, Yates, and Nissen
until 1975, then of Passo & Davis until March 1983 when he resigned from the
partnership to take a leading role in the management of the affairs of TMP
Properties. Mr. Passo has been involved in public and private real estate
syndication since 1970, and has acted as principal, investor, general partner,
and counsel in real estate transactions involving apartments, office buildings,
agricultural groves, and unimproved land. Mr. Passo is an officer of TMP
Capital Corp., an NASD registered broker-dealer, and an officer of TMP Realty,
a registered real estate broker.
13
<PAGE> 14
SCOTT E. MCDANIEL, 50, is a Director and Vice President of TMP
Investments Inc. He is a graduate of the U.S. Naval Academy at Annapolis,
majoring in engineering. Mr. McDaniel is a California licensed general
contractor and has been a licensed California real estate broker since 1976.
He was the founder and President of Scott E. McDaniel, Inc. (dba Regal Realty).
Mr. McDaniel has developed office complexes and industrial space in Southern
California and has personally brokered over $125 million of real estate since
1982. Through an affiliated company, DeVille Construction Co. Inc., Mr.
McDaniel has directed general contracting operations in Southern California
since 1982.
ANTHONY W. "TONY" THOMPSON, 50, is Director and Vice-President of TMP
Investments Inc. A graduate of Sterling College in 1969, with a Bachelors
Degree in Science and Economics, Mr. Thompson holds the professional
designations of Charter Life Underwriter and chartered Financial Consultant
form the American College. Mr. Thompson is a registered principal with the
NASD and is a principal in TMP Capital Corp., a NASD registered Broker Dealer.
Mr. Thompson has been involved in the securities and the real estate investment
fields since 1970, and a General Partner of TMP since its formation in 1978.
Mr. Thompson's primary responsibility is marketing TMP offerings through the
broker dealer community.
ITEM 11. EXECUTIVE COMPENSATION
During the period since the formation of the Partnership (August 15,
1989) through the fiscal year ended December 31, 1996, the Partnership paid
fees to the General Partners for various services in the amount of $76,887 of
which $7,800 was paid in the year ended December 31, 1996. In addition, the
General Partners received collectively $39,787 as their share of Partnership
distributions. (See Item 13. "Certain Relationships and Related
Transaction".) The Partnership has no officers or employees and, therefore,
paid no other compensation other than that paid to the General Partners as
indicated above.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1996, the Partnership had 7,250 units of Limited
Partnership interest (the "Units") issued and outstanding. To the knowledge of
the General Partners, no person beneficially owns more the 5% of the Units.
The following table set forth the number of Units beneficially owned as of
December 31, 1996 by each officer, director and general partner of the General
Partners and by all such persons as a group.
<TABLE>
<CAPTION>
Number of Percent of
Name of Beneficial Owner Units Class
- ------------------------------------------------------------------------------
<S> <C> <C>
William O. Passo 20 0.276%
Anthony W. Thompson 58 0.800%
All officers, directors and 78 1.076%
general partners as a group
(2 persons, including the
above)
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH AFFILIATES
The following information summarizes the forms and amounts of
compensation (some of which involve cost reimbursements) paid either by the
Partnership, or others, to the General Partners and their affiliates since the
formation of the Partnership (August 15, 1988) through the fiscal year ended
14
<PAGE> 15
December 31, 1996. None of these amounts were determined by arm's-length
negotiations. Reference is also made to the Notes to the Financial Statements
included elsewhere in this Form 10K for additional information regarding
transactions with affiliates.
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
<TABLE>
<CAPTION>
Amount Paid from Formation
Form of Compensation through
and Recipient Description of Payment December 31, 1996
-------------------------- ----------------------------------------- -----------------
<S> <C> <C>
Selling Commission and Due Diligence Up to a maximum of 10% of gross proceeds, a minimum $725,000
Reim-bursement (TMP Capital Corp.) of which was reallocated to participating Soliciting
Dealers (which included TMP Capital Corp.) from
Units sold by them. Up to an additional 0.5% paid
to Soliciting Dealers (which included TMP Capital
Corp.) for due diligence activities.
Reimbursement for Organizational Organizational Expenses paid to the General Partners $30,057
Expenses (General Partners) to reimburse them (without markup or profit) for
organizational costs actually incurred such as
advertising, mailing, printing costs, clerical
expenses, legal and accounting fees.
Reimbursement for Property Expenses The General Partners were reimbursed (without markup $147,500
(General Partners) or profit) for all out of pocket expenses directly
related to the Properties, including the purchase
price of Properties acquired prior to Partnership
formation, out of pocket carrying costs of such
Properties (such as interest and property taxes)
including actual interest incurred on all funds
advanced for the benefit of the Partnership,
deposits, escrow extension payments, appraisal fees,
expenses of feasibility and other studies performed
by third parties unaffiliated with the General
Partners and similar expenses, but not including the
General Partners' overhead, salaries, travel or like
expenses.
Property Acquisition Fees (General For services rendered in connection with the
Partners or an affiliate) acquisition of the Properties acquired by the
Partnership, the General Partners, or an affiliate,
received acquisition compensation (either
denominated as such, or as a real estate brokerage
commission, or otherwise) in the following amounts:
(I) Acquisition fees: $347,500
(ii) Real estate brokerage commissions $152,450
</TABLE>
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
15
<PAGE> 16
<TABLE>
<CAPTION>
Amount Paid from Formation
Form of Compensation through
and Recipient Description of Payment December 31, 1996
-------------------------- ----------------------------------------- -----------------
<S> <C> <C>
Partnership Management Fee (General A Partnership Management Fee with respect to each $76,887
Partners) Property until a Property is sold or improvement of
the Property commences in an annual amount of 1/4 of
1% (.225%) of the cost of the property, but not to
exceed 2% of such cost in the aggregate.
Leasing and Property Management Fees For leasing an improved Property, or a portion $-0-
(General Partners or an affiliate) thereof, a commission equal to 7% for the first
year's rent (net lease) or 6% of the first year's
rent (gross lease) decreasing to 2.5% (net lease) or
2% (gross lease) of the rent for years eleven
through thirty. Upon development of the Properties,
or any of them, an amount up to 5% of the gross
revenues of the Properties for supervision for the
operation and maintenance of the Properties. Such
leasing and property management fees shall not
exceed the competitive rates that would be charged
by unaffiliated persons.
Interest in Partnership Allocation 1% interest in all Partnership allocations of Net $39,787
of Each Material Item (General Income, Net Loss and Distributions of Distributable
Partners) Cash from Operations and of Cash from Sale or
refinancing of the Properties.
Subordinated Participation (General A 15% interest in all Partnership allocations of Net $-0-
Partners) Income and Distributions of Distributable Cash from
Operations and of Cash from the Sale or Refinancing
of the Properties subordinated to a return of all
Limited Partners' Capital Contributions plus a
cumulative, non-compounded return of 6% per annum on
their Adjusted Capital Contributions.
Subordinated Real Estate Commission Real estate commissions with respect to the sale of $-0-
(General Partners or an Affiliate) Properties which are equal to the lesser of: (I) 3%
of the gross sales price of a Properties; equal to
one-half the normal and competitive rate charged by
unaffiliated parties, but payment shall be
subordinated to a return of all Limited Partners'
Capital contributions, plus a cumulative,
noncompounded return of 6% per annum on their
Adjusted Capital Contributions.
</TABLE>
SUMMARY OF COMPENSATION. In summary, the Partnership paid securities
brokerage commissions for services performed by TMP Capital Corp. in the sale
of the Units in the amount of $725,000 (including due diligence fees) and
reimbursed the General Partners for expenses incurred in
16
<PAGE> 17
organizing the Partnership and documenting the offering in the amount of
$30,057. The General Partners also received Property Acquisition Fees and real
estate brokerage commissions in the amounts set forth above, and were
reimbursed for out of pocket expenditures made in connection with the
acquisition and carrying costs for the Properties or studies related thereto.
During the operating stage, the partnership will pay the General Partners an
annual Partnership Management Fee for managing the Partnership equal to 1/4 of
1% of the cost of the Properties, payable annually in advance with respect to
each Property until such time as the Properties are sold or improvement of the
land commences; provided such fee, in the aggregate, shall not exceed 2% of the
cost of the Properties. At such time, if at all, that the Properties, or any
of them, are developed, the General Partners will receive leasing commissions
as described above, and a property management fee in an amount up to 5% of the
gross property revenues, but not to exceed the competitive rate charged by
nonaffiliated persons providing similar services. The General Partners have a
1% interest in all allocations of Partnership Net Income until the limited
Partners have received allocations of Net Income equal to a cumulative,
noncompounded return of 6% on their Adjusted Capital Contributions (the
"Preferred Return"); and thereafter, the General Partners will have a 15%
interest in all Partnership allocations of Net Income, Distributions of
Distributable Cash from Operations, and Cash from Sale or Refinancing of
Partnership Property and the Limited partners will have an 85% interest
therein. Net Losses will be allocated to the Partners with positive Capital
Accounts, in accordance with the ratio of their positive Capital Account
balances until no Partner has a positive Capital Account; and thereafter, Net
Losses will be allocated 100% to the General Partners. If the General Partners
or an Affiliate provide a substantial amount of services with respect to the
sale of a Partnership Property, the General Partners or an Affiliate may
receive a real estate commission in an amount up to one-half of the amount of
competitive real estate commissions, not to exceed 3% of the sales price of
such Property. Both the 15% General Partners' participation and the Partners'
real estate commission are subordinated to a return of all Limited Partners'
Capital Contribution plus a cumulative, non-compounded return of 6% per annum
on their Adjusted Capital contributions.
Thus, only after the Limited Partners have recovered their Capital
Contributions plus the cumulative 6% return discussed above, will the General
Partners' allocation of Distributions of Distributable Cash from Operations and
Cash from Sale or Refinancing of Partnership Property exceed a nominal 1%
ownership interest therein. Such allocation provides built-in incentive for
the General Partners to seek the optimum performance from the Partnership's
assets.
CONFLICTS OF INTEREST
The Partnership is subject to various conflicts of interest from its
relationship with the General Partners. These conflicts include, but are not
limited to:
CONFLICTS IN GENERAL. The interests for the Limited Partners may be
inconsistent with those of the General Partners or their Affiliates when the
General Partners must make policy decisions on behalf of the Partnership. The
General Partners, for instance, might not desire to sell a Property when a sale
would be advantageous to the Limited Partners because of the General Partner's
interest in Distributions of Distributable Cash from Operations and Net
Proceeds from the Sale or Refinancing of the Property. Subject, in certain
circumstances, to the approval of the holders of a majority or other specified
voting percentage of the Units, the General Partners will have the discretion
as to when to sell a Property or portion thereof. The timing of the sale of a
Property or any portion thereof and the terms on which such sale will be made
may result in a conflict of interest. Furthermore, the sale of a Property may
result in the recognition of substantial taxable gain to the General or Limited
Partners in different ratios depending upon the timing of such sale.
Accordingly, the decisions as to when to sell a Property may be advantageous to
the General Partners and disadvantageous to the Limited Partners, or vice
versa. The General Partners in any event will be compelled to make any
decisions with respect to the sale or retention of a Property based upon the
best interests of the a Partnership and its Limited Partners because
17
<PAGE> 18
of the fiduciary duty owed to the Limited Partners.
AVAILABILITY OF MANAGEMENT SERVICE. The Partnership will not have
independent management, as it will rely on the General Partners and affiliates
for all its management decisions. Other investment projects in which the
General Partners and affiliates participate, either individually or as a
general partner, real estate broker, or investment adviser, may compete with
the Partnership for the time and resources of the General Partners and their
affiliates. The General Partners will, therefore, have conflicts of interest
in allocating management time, services, and functions among the Partnership
and other existing partnerships and businesses, as well as any partnerships or
business entitles which may be organized in the future. Under the Partnership
Agreement, the General Partners are obligated to devote as much time as they,
in their sole discretion, deem to be reasonably required for the proper
management of the Partnership and its assets. The General Partners believe
that they have the capacity to discharge their responsibilities to the
Partnership notwithstanding participation in other investment programs and
projects.
INTERESTS IN OTHER ACTIVITIES. The General Partners, or any of their
affiliates, may engage for their own account, or for the account of others, in
other business ventures, whether real estate or otherwise, and neither the
Partnership nor any Limited Partner shall be entitled to any interest therein
solely by reason of any relationship with or to each other arising from the
Partnership.
RECEIPT OF COMPENSATION BY THE GENERAL PARTNERS. The payments to the
General Partners set forth above have not been determined by arm's-length
negotiations.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8K
(a) For a listing of financial statements, reference is made to Item 8
included in this Form 10K
(b) The Registrant filed no reports on Form 8K during the fourth quarter of
the fiscal year ended December 31, 1996
(c) Exhibits- Those Exhibits required by Item 601 of Regulation S-K which
are applicable to the Registrant are as follows:
(3),(4) and (10.1) Agreement of Limited Partnership and other
material agreements are incorporated by
reference to Exhibits (3),(4) and (10.1) to
the Form 10 Registration Statement, SEC File
No. 0-19963 filed on March 19, 1992.
18
<PAGE> 19
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.
Dated: March 20, 1997
TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
By: TMP INVESTMENTS INC., a California corporation
as co-General Partner
By:_______________________________________
William O. Passo, President
By:_______________________________________
Anthony W. Thompson, Executive
Vice President
By:_______________________________________
Michael C. Sun, Chief Financial Officer
and by TMP Properties, a California
General Partnership, as co-General Partner
By:_______________________________________
William O. Passo, General Partner
By:_______________________________________
Scott E. McDaniel, General Partner
By:_______________________________________
Anthony W. Thompson, General Partner
19
<PAGE> 20
TMP INLAND EMPIRE II, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
<PAGE> 21
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Financial Statements
December 31, 1996 and 1995
Table of Contents
Independent Auditor's Report...................................... 1
Balance Sheets.................................................... 2
Statements of Income.............................................. 3
Statements of Partners' Capital................................... 4
Statements of Cash Flows.......................................... 5
Notes to Financial Statements .................................... 6-9
Supplementary Information......................................... 10
<PAGE> 22
[BALSER, HOROWITZ, FRANK & WAKELING LETTERHEAD]
Independent Auditor's Report
To the Partners
TMP Inland Empire II, Ltd.
(A California Limited Partnership)
We have audited the accompanying balance sheets of TMP Inland Empire II, Ltd. (A
California Limited Partnership) as of December 31, 1996 and 1995, and the
related statements of income, partners' capital, and cash flows for the years
ended December 31, 1996, 1995, and 1994. 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 audits 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 TMP Inland Empire II, Ltd. (A
California Limited Partnership) as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for the years ended December 31,
1996, 1995, and 1994, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplementary information contained
in Schedule I is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is stated fairly in all material
respects in relation to the basic financial statements taken as a whole.
/s/ Balser, Horowitz, Frank & Wakeling
- --------------------------------------
BALSER, HOROWITZ, FRANK & WAKELING
An Accountancy Corporation
Santa Ana, California
January 15, 1997
<PAGE> 23
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
Assets
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash $ 23,477 $ 51,759
Investment in unimproved land, at lower of cost
or fair value 1,000,000 3,631,023
Organization costs (net of accumulated amortization
of $6,002 in 1996 and $5,325 in 1995) 0 677
----------- -----------
Total assets $ 1,023,477 $ 3,683,459
=========== ===========
Liabilities and Partners' Capital
Due to affiliates $ 362 $ 0
Commission payable 90,000 90,000
Franchise tax payable 800 800
----------- -----------
Total liabilities 91,162 90,800
----------- -----------
Partners' capital (deficit)
General partners (55,259) (28,656)
Limited partners; 7,250 equity
units authorized and outstanding 987,574 3,621,315
----------- -----------
Total partners' capital 932,315 3,592,659
----------- -----------
Total liabilities and partners' capital $ 1,023,477 $ 3,683,459
=========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
-2-
<PAGE> 24
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Statements of Income
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- ------- ------
<S> <C> <C> <C>
Income
Interest income $ 748 $ 1,633 $3,468
----------- ------- ------
Total income 748 1,633 3,468
----------- ------- ------
Expenses
Decline in fair value of
unimproved land 2,659,615 0 0
Amortization 677 1,200 1,200
----------- ------- ------
Total expenses 2,660,292 1,200 1,200
----------- ------- ------
Income before income taxes (2,659,544) 433 2,268
State Franchise tax 800 800 800
----------- ------- ------
Net income or (loss) $(2,660,344) $ (367) $1,468
=========== ======= ======
Allocation of net income or (loss)
General partners, in the aggregate $ (26,603) $ (4) $ 15
=========== ======= ======
Limited partners, in the aggregate $(2,633,741) $ (363) $1,453
=========== ======= ======
Limited partners, per equity unit $ (363.27) $ (.05) $ .20
=========== ======= ======
</TABLE>
See Accompanying Notes and Independent Auditor's Report
-3-
<PAGE> 25
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Statements of Partners' Capital
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- ----------- -----------
<S> <C> <C> <C>
Partners' capital (deficit),
December 31, 1993 $(28,667) $ 3,620,225 $ 3,591,558
Net income for 1994 15 1,453 1,468
-------- ----------- -----------
Partners' capital (deficit),
December 31, 1994 (28,652) 3,621,678 3,593,026
Net (loss) for 1995 (4) (363) (367)
-------- ----------- -----------
Partners' capital (deficit),
December 31, 1995 (28,656) 3,621,315 3,592,659
Net (loss) for 1996 (26,603) (2,633,741) (2,660,344)
-------- ----------- -----------
Partners' capital (deficit),
December 31, 1996 $(55,259) $ 987,574 $ 932,315
======== =========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
-4-
<PAGE> 26
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
1996 1995 1994
----------- -------- ---------
<S> <C> <C> <C>
Cash flow from operating activities
Net income or (loss) $(2,660,344) $ (367) $ 1,468
Adjustments to reconcile net income or (loss) to net
cash (used in) operating activities:
Amortization of organization costs 677 1,200 1,200
Increase or (decrease) in accounts payable 362 (753) 753
Increase in carrying costs (28,592) (26,992) (34,198)
Decline in fair value of unimproved land 2,659,615 0 0
----------- -------- ---------
Net cash (used in) operating activities (28,282) (26,912) (30,777)
----------- -------- ---------
Net (decrease) in cash (28,282) (26,912) (30,777)
Cash, beginning of year 51,759 78,671 109,448
----------- -------- ---------
Cash, end of year $ 23,477 $ 51,759 $ 78,671
=========== ======== =========
Supplemental disclosures of cash flow information:
Income taxes paid $ 800 $ 800 $ 800
Interest paid $ 0 $ 0 $ 0
</TABLE>
Other disclosures
The Partnership did not enter into non-cash investing or financing activities
during the years ended December 31, 1996, 1995 or 1994.
The Partnership had no short-term highly liquid investments during the years
ended December 31, 1996, 1995 or 1994.
See Accompanying Notes and Independent Auditor's Report
-5-
<PAGE> 27
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 1 - Summary Of Significant Accounting Policies
Accounting Method - The Partnership's policy is to prepare its
financial statements on the accrual basis of accounting.
Organization Costs - Organization costs include expenses incurred in
the formation of the Partnership that have been capitalized and that
are being amortized over a period of 40 years prior to 1992 and 5 years
beginning in 1992.
Investment in Unimproved Land - Investment in unimproved land is stated
at the lower of cost or fair value (see Note 6). All costs associated
with the acquisition of a property are capitalized. Additionally, the
Partnership capitalizes all carrying costs which includes interest
expense and property taxes. Such costs are added to the cost of the
properties and are deducted from the sales prices to determine gains
when properties are sold.
Syndication Costs - Syndication costs (such as commissions, printing,
and legal fees) totaling $791,514 represent costs incurred to raise
capital and, accordingly, are recorded as a reduction in partners'
capital (see Note 3).
Income Taxes - The entity is treated as a partnership for income tax
purposes and any income or loss is passed through and taxable to the
individual partners. Accordingly, there is no provision for federal
income taxes in the accompanying financial statements. However, the
minimum California Franchise tax due by the Partnership at December 31,
1996 and 1995 is $800.
Cash and Cash Equivalents - For purposes of the statements of cash
flows, the Partnership considers all cash in banks and all highly
liquid investments with a maturity of three months or less to be cash
equivalents.
Estimates - In preparing financial statements in conformity with
generally accepted accounting principles, management is required to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements and revenues and
expenses during the reporting period. Actual results could differ from
these estimates.
See Independent Auditor's Report
-6-
<PAGE> 28
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 1 - Summary Of Significant Accounting Policies (Continued)
Concentration - All unimproved land parcels held for investment are
located in the Inland Empire area of Southern California. The eventual
sales price of all parcels is highly dependent on the real estate
market condition. The Partnership attempts to mitigate any potential
risk by monitoring the market condition and holding the land parcels
until the real estate market recovers.
Note 2 - Organization Of The Partnership
On July 26, 1988, the Partnership was formed with TMP Properties (A
California General Partnership) and TMP Investments, Inc. (A California
Corporation) as the general partners. The partners of TMP Properties
are William O. Passo, Anthony W. Thompson and Scott E. McDaniel.
William O. Passo and Anthony W. Thompson were the shareholders of TMP
Investments, Inc. until October 1, 1995, when they sold their shares to
TMP Group, Inc., and then they became the shareholders of TMP Group,
Inc.
The Partnership originally acquired three separate parcels of
commercially zoned real property in San Bernardino County, California.
The properties were to be held for investment, appreciation, and
ultimate sale and/or improvement of all or a portion thereof, either
alone or in conjunction with a joint venture partner. Two of the three
properties were sold in 1989.
The partnership agreement provides for two types of investments:
Individual Retirement Accounts (IRA) and others. The IRA minimum
purchase requirement of $2,000 and all others were a minimum purchase
requirement of $5,000. The maximum liability of the limited partners is
the amount of their capital contribution.
Note 3 - Partners' Contributions
The Partnership offered for sale 7,250 units at $1,000 each to
qualified investors. As of December 31, 1989, all 7,250 units had been
sold for total limited partner contributions of $7,250,000. There have
been no contributions made by the general partners. As described in
Note 1, syndication costs have been recorded as a reduction in
partners' capital.
See Independent Auditor's Report
-7-
<PAGE> 29
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 4 - Allocation Of Profits, Losses And Cash Distributions
Profits, losses and cash distributions are allocated 99% to the limited
partners and 1% to the general partners until the limited partners have
received an amount equal to their capital contributions plus a
cumulative, non-compounded return of 6% per annum on their adjusted
capital contributions. At that point, the limited partners are
allocated 85% and the general partners 15% of profits, losses and cash
distributions. There were no distributions in 1996, 1995 or 1994.
Note 5 - Related Party Transactions
Syndication costs (see Note 1) netted against partners' capital
contributions include $725,000 in selling commissions paid in prior
years to TMP Capital Corp. for the sale of partnership units of which a
portion was then paid to unrelated registered representatives. William
O. Passo and Anthony W. Thompson were the shareholders of TMP Capital
Corp. until October 1, 1995, when they sold their shares to TMP Group,
Inc.
Investment in unimproved land includes acquisition fees of $198,874
paid in prior years to TMP Properties and TMP Investments, Inc., the
general partners, for services rendered in connection with the
acquisition of the properties.
The Partnership paid $7,800 in partnership management fees to the
general partners during each of the years ended December 31, 1996, 1995
and 1994. The Partnership was also charged $9,090, $7,297 and $9,547
during the years ended December 31, 1996, 1995 and 1994, respectively,
by the general partner and an affiliated company of the general partner
for office, secretarial and advertising expenses. At December 31, 1996
and 1995 the Partnership had a payable of $362 and $0, respectively, to
the general partner and the affiliated company.
See Independent Auditor's Report
-8-
<PAGE> 30
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
Note 5 - Related Party Transactions (Continued)
At December 31, 1996, 1995 and 1994, $90,000 in sales commission was
payable to Regal Realty, a company wholly owned by Scott E. McDaniel,
for services rendered relating to sales of properties prior to 1990.
Mr. McDaniel is a partner of TMP Properties and he was a shareholder of
TMP Investments, Inc. until September 1993 when he sold his shares to
Mr. Passo and Mr. Thompson. Ultimate payment of such sales commission
is contingent on the limited partners receiving an amount equal to
their capital contributions plus a cumulative, non-compounded return of
6% per annum on their adjusted capital contribution.
Note 6 - Decline In The Fair Value Of Investment In Unimproved Land
As of December 31, 1996, the total carrying amount of the investment in
unimproved land was reduced by $2,659,615. This reduction represents
the decline in fair value, as determined by the general partners, and
is due mainly to the downturn in Southern California's real estate
market and slow recovery.
See Independent Auditor's Report
-9-
<PAGE> 31
Supplementary Information
<PAGE> 32
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Schedule I - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, For SEC Reporting Purposes)
For the Years Ended December 31, 1996, 1995 and 1994
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
COSTS CAPITALIZED
SUBSEQUENT GROSS
TO ACQUISITION AMOUNT
------------------------ AT WHICH
INITIAL CARRYING CARRIED AT
DESCRIPTION OF ASSETS ENCUMBRANCES COSTS IMPROVEMENTS COSTS YEAR-END
--------------------- ------------ -------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C>
1994
Unimproved land - Fontana, CA -0- $3,427,133 -0- $176,898 $3,604,031
=== ========== === ======== ==========
1995
Unimproved land - Fontana, CA -0- $3,427,133 -0- $203,890 $3,631,023
=== ========== === ======== ==========
1996
Unimproved land - Fontana, CA -0- $3,427,133 -0- $232,482 $3,659,615
=== ========== === ======== ==========
Reconciliation of carrying amount
1994 1995
---- ----
Beginning balance $3,569,833 $3,604,031
Additions
Improvements 0 0
Carrying costs $34,198 26,992
------- --------
Total additions 34,198 26,992
---------- ----------
$3,604,031 $3,631,023
========== ==========
Allowance for decline in fair
value of unimproved land
Ending balance
<CAPTION>
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
ESTIMATED
ACCUMULATED DATE OF DATE DEPRECIABLE
DESCRIPTION OF ASSETS DEPRECIATION CONSTRUCTION ACQUIRED LIFE
--------------------- ------------ ------------ -------- -----------
<S> <C> <C> <C> <C>
Unimproved land - Fontana, CA -0- n/a 10/25/88 n/a
===
Unimproved land - Fontana, CA -0- n/a 10/25/88 n/a
===
Unimproved land - Fontana, CA -0- n/a 10/25/88 n/a
===
Reconciliation of carrying amount
1996
----
Beginning balance $ 3,631,023
Additions
Improvements 0
Carrying costs 28,592
------
Total additions 28,592
-----------
3,659,615
Allowance for decline in fair
value of unimproved land (2,659,615)
Ending balance $ 1,000,000
</TABLE>
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000885394
<NAME> TMP INLAND EMPIRE II, LTD.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 23,477
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 1,000,000
<CURRENT-ASSETS> 1,023,477
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,023,477
<CURRENT-LIABILITIES> 91,162
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 932,315
<TOTAL-LIABILITY-AND-EQUITY> 1,023,477
<SALES> 163
<TOTAL-REVENUES> 163
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 800
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (637)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 2,659,615
<CHANGES> 0
<NET-INCOME> (2,660,252)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
