<PAGE> 1
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, 1997
[ ] 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
incorporation or organization) Identification No.)
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:
<TABLE>
<CAPTION>
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
<S> <C>
N/A N/A
</TABLE>
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 [ ]
<PAGE> 2
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 10K.
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 Partnership business and elect, by unanimous
consent, one or more new General Partners to continue the
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 agree 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.
3
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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 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, 1997. 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 1997.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
As of December 31, 1997, there were approximately 608 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 trading market for the Units. Accordingly, there was no trading
activity during the fiscal years ended December 31, 1995, 1996, and 1997.
CASH DISTRIBUTIONS
No cash distributions were paid to the Limited Partners during the
fiscal years ended December 31, 1997 and 1996. 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 years ended December 31, 1997, 1996, 1995, 1994, and
1993, 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>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income from Sale of Property $ $ $ $ $
Less cost of Property sold
Gross profit
Interest Income 243 74 1,633 3,468 2,752
Other income
Total income $ 1,693,127 $ 74 $ 1,633 $ 3,468 $ 2,752
=========== =========== =========== =========== ===========
Net income (loss) $ 1,692,327 $(2,660,344) $ (367) $ 1,468 $ 752
=========== =========== =========== =========== ===========
Net income (loss) per Unit* $ 231.09 $ (363.27) $ (0.05) $ .20 $ .10
=========== =========== =========== =========== ===========
Cash distribution per Unit* $ $ $ $ $
=========== =========== =========== =========== ===========
Total assets $ 2,717,004 $ 1,023,477 $ 3,683,459 $ 3,684,579 $ 3,682,358
=========== =========== =========== =========== ===========
</TABLE>
*(Based on 7,250 Units outstanding at December 31, 1997, 1996, 1995, 1994, and
1993)
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,
1993, 1994, 1995, 1996 and 1997 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 will be available
to meet anticipated cash requirements for the next twelve months. At December
31, 1997, 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, 1997 and 1996:
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Independent Auditors Report FS-1
Balance Sheets as of December 31, 1997 and 1996 FS-2
Statements of Income for the years ended
December 31, 1997, 1996, and 1995 FS-3 Statements of
Partners' Capital for the years ended December 31, 1997,
1996, 1995, and 1994 FS-4
Statements of Cash Flow for the years ended
December 31, 1997, 1996, and 1995 FS-5
Notes to Financial Statements FS-6
Financial Statement Schedules FS-10
</TABLE>
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, 1997 and 1996, 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, 56, 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, 51, 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, 51, 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, 1997, the Partnership paid fees
to the General Partners for various services in the amount of $76,887 of which
$0 was paid in the year ended December 31, 1997. 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, 1997, 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, 1997 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, 1997. 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
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1997
-------------------- ---------------------- -----------------
<S> <C> <C>
Selling Commission and Due Up to a maximum of 10% of gross $725,000
Diligence Reimbursement proceeds, a minimum of which was
(TMP Capital Corp.) 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 Expenses paid to the $30,057
Organizational Expenses General Partners to reimburse them
(General Partners) (without markup or profit) for
organizational costs actually incurred
such as advertising, mailing, printing
costs, clerical expenses, legal and
accounting fees.
Reimbursement for Property The General Partners were reimbursed $147,500
Expenses (General Partners) (without markup 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 For services rendered in connection
(General Partners or an with the acquisition of the Properties
affiliate) 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 $152,450
commissions
</TABLE>
15
<PAGE> 16
OFFERING AND ORGANIZATION STAGE OF PARTNERSHIP
<TABLE>
<CAPTION>
Amount Paid from
Form of Compensation Formation through
and Recipient Description of Payment December 31, 1997
-------------------- ---------------------- -----------------
<S> <C> <C>
Partnership Management Fee A Partnership Management Fee with $76,887
(General Partners) respect to each 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 For leasing an improved Property, or a $-0-
Management Fees (General portion thereof, a commission equal to
Partners or an affiliate) 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 1% interest in all Partnership $39,787
Allocation of Each Material allocations of Net Income, Net Loss and
Item (General Partners) Distributions of Distributable Cash
from Operations and of Cash from Sale
or refinancing of the Properties.
Subordinated Participation A 15% interest in all Partnership $-0-
(General Partners) allocations of Net 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 Real estate commissions with respect to $-0-
Commission (General Partners the sale of Properties which are equal
or an Affiliate) 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>
16
<PAGE> 17
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 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 of the fiduciary duty owed to the
Limited Partners.
17
<PAGE> 18
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, 1997
(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.
27 Financial Data Schedule
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 19, 1998
TMP INLAND EMPIRE II, LTD.
A California Limited Partnership
By: TMP INVESTMENTS INC., a California corporation
as co-General Partner
By: /s/ WILLIAM O. PASSO
----------------------------------------
William O. Passo, President
By: /s/ ANTHONY W. THOMPSON
----------------------------------------
Anthony W. Thompson,
Executive Vice President
By: /s/ RICHARD T. HUTTON, JR.
----------------------------------------
Richard T. Hutton, Jr., Controller
and by TMP Properties, a California General
Partnership, as co-General Partner
By: /s/ WILLIAM O. PASSO
----------------------------------------
William O. Passo, General Partner
By: /s/ SCOTT E. MCDANIEL
----------------------------------------
Scott E. McDaniel, General Partner
By: /s/ ANTHONY W. THOMPSON
----------------------------------------
Anthony W. Thompson, General Partner
19
<PAGE> 20
TMP INLAND EMPIRE II, LTD.
(A CALIFORNIA LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS
DECEMBER 31, 1997 AND 1996
<PAGE> 21
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Financial Statements
December 31, 1997 and 1996
Table of Contents
-----------------
<TABLE>
<S> <C>
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
</TABLE>
<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, 1997 and 1996, and the
related statements of income, partners' capital, and cash flows for the years
ended December 31, 1997, 1996, and 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 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, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996, and 1995, 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.
Balser, Horowitz, Frank & Wakeling
BALSER, HOROWITZ, FRANK & WAKELING
An Accountancy Corporation
Santa Ana, California
January 26, 1998
<PAGE> 23
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Balance Sheets
December 31, 1997 and 1996
Assets
------
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Cash $ 2,004 $ 23,477
Investment in unimproved land,
at lower of cost or fair value 2,715,000 1,000,000
----------- -----------
Total assets $ 2,717,004 $ 1,023,477
=========== ===========
Liabilities and Partners' Capital
---------------------------------
Due to affiliates $ 1,562 $ 362
Commission payable 90,000 90,000
Franchise tax payable 800 800
----------- -----------
Total liabilities 92,362 91,162
----------- -----------
Partners' capital (deficit)
General partners (38,336) (55,259)
Limited partners; 7,250 equity
units authorized and outstanding 2,662,978 987,574
----------- -----------
Total partners' capital 2,624,642 932,315
----------- -----------
Total liabilities and partners' capital $ 2,717,004 $ 1,023,477
=========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
FS-2
<PAGE> 24
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Statements of Income
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Income
Appreciation in fair value of
unimproved land $ 1,692,884 $ 0 $ 0
Interest income 243 748 1,633
----------- ----------- -----------
Total income 1,693,127 748 1,633
----------- ----------- -----------
Expenses
Decline in fair value of
unimproved land 0 2,659,615 0
Amortization 0 677 1,200
----------- ----------- -----------
Total expenses 0 2,660,292 1,200
----------- ----------- -----------
Income before income taxes 1,693,127 (2,659,544) 433
State Franchise tax 800 800 800
----------- ----------- -----------
Net income or (loss) $ 1,692,327 $(2,660,344) $ (367)
=========== =========== ===========
Allocation of net income or (loss)
General partners, in the aggregate $ 16,923 $ (26,603) $ (4)
=========== =========== ===========
Limited partners, in the aggregate $ 1,675,404 $(2,633,741) $ (363)
=========== =========== ===========
Limited partners, per equity unit $ 231.09 $ (363.27) $ (.05)
=========== =========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
FS-3
<PAGE> 25
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Statements of Partners' Capital
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
-------- -------- -----
<S> <C> <C> <C>
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
Net income for 1997 16,923 1,675,404 1,692,327
----------- ----------- -----------
Partners' capital (deficit),
December 31, 1997 $ (38,336) $ 2,662,978 $ 2,624,642
=========== =========== ===========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
FS-4
<PAGE> 26
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flow from operating activities
Net income or (loss) $ 1,692,327 $(2,660,344) $ (367)
Adjustments to reconcile net income
or (loss) to net cash (used in)
operating activities:
Amortization of organization costs 0 677 1,200
Increase or (decrease) in accounts
payable 1,200 362 (753)
Increase in carrying costs (22,116) (28,592) (26,992)
Change in fair value of unimproved
land (1,692,884) 2,659,615 0
----------- ----------- -----------
Net cash (used in) operating activities (21,473) (28,282) (26,912)
----------- ----------- -----------
Net (decrease) in cash (21,473) (28,282) (26,912)
Cash, beginning of year 23,477 51,759 78,671
----------- ----------- -----------
Cash, end of year $ 2,004 $ 23,477 $ 51,759
=========== =========== ===========
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, 1997, 1996 or 1995.
The Partnership had no short-term highly liquid investments during the years
ended December 31, 1997, 1996 or 1995.
See Accompanying Notes and Independent Auditor's Report
FS-5
<PAGE> 27
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
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. These costs were capitalized and amortized
over a period of 40 years prior to 1992 and were changed to a 5-year
amortization schedule in 1992. Organization costs were fully amortized
in 1996.
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,
1997 and 1996 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.
FS-6
<PAGE> 28
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
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.
FS-7
<PAGE> 29
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
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 1997, 1996 or 1995.
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 $0 and $7,800 in partnership management fees to the
general partners during the years ended December 31, 1997, and December
31, 1996 and 1995, respectively. The Partnership was also charged
$9,790, $9,090 and $7,297 during the years ended December 31, 1997, 1996
and 1995, respectively, by the general partner and an affiliated company
of the general partner for office, secretarial and advertising expenses.
At December 31, 1997 and 1996 the Partnership had a payable of $1,562
and $362, respectively, to the general partner and the affiliated
company.
FS-8
<PAGE> 30
TMP INLAND EMPIRE II, LTD.
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
Note 5 - Related Party Transactions (Continued)
At December 31, 1997, 1996 and 1995, $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 - Changes 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
apparent slow recovery.
As of December 31, 1997, the total carrying amount of the investment in
unimproved land was increased by $1,692,884. This increase is due to
various favorable market conditions within the Southern California real
estate market during 1997. The general partners have thus reevaluated
the prior years valuation of unimproved land and determined the
corresponding recovery in value is appropriate.
FS-9
<PAGE> 31
SUPPLEMENTARY INFORMATION
FS-10
<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, 1997, 1996 and 1995
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F COLUMN G COLUMN H COLUMN I
- ----------------------------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT Gross
TO ACQUISITION amount
---------------------- at which Estimated
Description of Initial Carrying Carried at Accumulated Date of Date Depreciable
Assets Encumbrances Costs Improvements Costs Year-End Depreciation Construction Acquired Life
------ ------------ ----- ------------ ----- -------- ------------ ------------ -------- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995
----
Unimproved land -
Fontana, CA -0- $3,427,133 -0- $203,890 $ 3,631,023 -0- n/a 10/25/88 n/a
1996
----
Unimproved land -
Fontana, CA -0- $3,427,133 -0- $232,482 $ 3,659,615 -0- n/a 10/25/88 n/a
1997
----
Unimproved land -
Fontana, CA -0- $3,427,133 -0- $241,777 $ 3,668,910 -0- n/a 10/25/88 n/a
Reconciliation of carrying amount
- ---------------------------------
1995 1996 1997
---- ---- ----
Beginning balance 3,604,031 $ 3,631,023 $3,659,615
Additions
Improvements 0 0 0
Carrying costs $26,992 28,592 22,115
------- -------- ------
Total additions 26,992 28,592 22,115
---------- ----------- ----------
$3,631,023 $ 3,659,615 3,681,730
Allowance for decline
in fair value of
unimproved land (2,659,615) (966,730)
----------- --------
Ending balance $ 1,000,000 $2,715,000
=========== ==========
</TABLE>
See Accompanying Notes and Independent Auditor's Report
FS-11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,004
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 2,715,000
<CURRENT-ASSETS> 2,717,004
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,717,004
<CURRENT-LIABILITIES> 92,362
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,624,642
<TOTAL-LIABILITY-AND-EQUITY> 2,717,004
<SALES> 0
<TOTAL-REVENUES> 1,693,127
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,693,127
<INCOME-TAX> 800
<INCOME-CONTINUING> 1,692,327
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,692,327
<EPS-PRIMARY> 231.09
<EPS-DILUTED> 231.09
</TABLE>
