-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WAylrz+vaOgQ/lCv0Ntjjtdfr8v4t3F5A6m/pQ3ZfbXiJCDiUP1QSIrQgE7i1jie h/nFE9pSxbwJxiGFI4+f3w== 0000887499-97-000002.txt : 19970401 0000887499-97-000002.hdr.sgml : 19970401 ACCESSION NUMBER: 0000887499-97-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMMUNITY INVESTMENT PARTNERS II LP CENTRAL INDEX KEY: 0000887499 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 431609351 STATE OF INCORPORATION: MO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 814-00102 FILM NUMBER: 97569495 BUSINESS ADDRESS: STREET 1: 201 PROGRESS PKWY CITY: MARYLAND HEIGHTS STATE: MO ZIP: 63043 BUSINESS PHONE: 3148512000 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ___________________ FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 Commission file number 33-47917 COMMUNITY INVESTMENT PARTNERS II, L.P. ___________________________________________________________________ (Exact name of registrant as specified in its charter) MISSOURI 43-1609351 ___________________________________________________________________ (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 201 Progress Parkway Maryland Heights, Missouri 63043 ___________________________________________________________________ (Address and principal executive office) (Zip Code) Registrant's telephone number, including area code (314) 515-2000 ________________________ Securities registered pursuant to Section 12(g) of the Act: None. Securities registered pursuant to Section 12(b) of the Act: None. 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 ____ ____ As of March 15, 1997, 90,404 units of limited partnership interest (Units), totaling $1,592,918 were held by non-affiliates. There is no established public market for such Units. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Prospectus of the Registrant dated November 4, 1992, filed with the Securities and Exchange Commission are incorporated by reference in Part I, Part II and Part III hereof. COMMUNITY INVESTMENT PARTNERS II, L.P. TABLE OF CONTENTS PART I Page Item 1. Business................................... 4 Item 2. Properties................................. 5 Item 3. Legal Proceedings.......................... 6 Item 4. Submission of Matters to a Vote of Security Holders.......................... 6 PART II Item 5. Market for the Registrant's Common Equity and Related Stockholder Matters............... 7 Item 6. Selected Financial Data.................... 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations....... 8 Item 8. Index to Financial Statements and Supplementary Financial................... 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure... 23 PART III Item 10.Directors and Executive Officers of the Registrant......................... 24 Item 11.Executive Compensation...................... 25 Item 12.Security Ownership of Certain Beneficial Owners and Management................................. 25 Item 13. Certain Relationships and Related Transactions............................. 26 PART IV Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K........................ 27 SIGNATURES........................................... 28 INDEX TO EXHIBITS.................................... 29 PART I Item 1. BUSINESS Community Investment Partners II, L.P. (the ``Partnership'') was formed to seek long-term capital appreciation by making investments in companies and other special investment situations. The Partnership will not engage in any other business or activity. The Partnership will dissolve on December 31, 2007, subject to the right of the Individual General Partners to extend the term for up to two additional two-year periods. The Partnership has elected to be a business development company under the Investment Company Act of 1940, as amended. As a business development company, the Partnership is required to invest at least 70% of its assets in qualifying investments as specified in the Investment Company Act. The Partnership was formed on May 8, 1992, under the Revised Uniform Limited Partnership Act of Missouri. CIP Management, L.P., the Managing General Partner, is a Missouri limited partnership formed on October 10, 1989. The general partner of CIP Management, L.P., is CIP Management, Inc., an indirect subsidiary of Edward D. Jones & Co., L.P. The Partnership participated in a public offering of its limited partnership interests in 1992. The Partnership sold 111,410 Units of limited partnership interest and 1,120 units of general partnership interest for an aggregate price of $1,406,625. After offering expenses, the Partnership received approximately $1,224,000 in proceeds available for investment. The Partnership executed a call to each partner requesting the deposit of an amount equal to the initial capital contribution on August 25, 1994. The Managing General Partner is required to have invested the net proceeds of the Partnership's offering (excluding amounts held in reserve) within two years of the date of the capital call. The information set forth under the captions ``Investment Objectives & Policies'' and ``Regulation'' in the Prospectus of the Partnership dated November 4, 1992, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933, is incorporated herein by reference. Risks of Unit Ownership The purchase and ownership of Units involve a number of significant risks and other important factors. The portfolio company investments of the Partnership involve a high degree of business and financial risk that can result in substantial losses. Among these are the risks associated with investment in companies with little operating history, companies operating at a loss or with substantial variations in operating results from period to period, companies with the need for substantial additional capital to support expansion or achieve or maintain a competitive position, companies which may be highly leveraged, companies which may be less diversified and companies in which the Partnership may be the sole or primary lender. The Partnership intends to invest in only a few companies. Therefore, a loss or other problem with a single investment would have a material adverse effect on the Partnership. Other risks include the Partnership's ability to find suitable investments for its funds because of competition from other entities having similar investment objectives. Risks may arise due to the significant period of time that may elapse before the Partnership has completed the selection of its portfolio company investments and the significant period of time (typically four to seven years or longer) which will elapse before portfolio company investments have reached a state of maturity such that disposition can be considered. It is unlikely that any significant distributions of the proceeds from the disposition of investments will be made until the later years of the term of the Partnership. Portfolio companies may require additional funds. There can be no assurance that the Partnership will have sufficient funds from reserves or borrowing to make such follow-up investments which may have a substantial negative impact on a portfolio company in need of additional funds. All decisions with respect to the management of the Partnership, including identifying and making portfolio investments, are made exclusively by the General Partners. Limited Partners must rely on the abilities of the General Partners. The key personnel of the Managing General Partner have considerable prior experience in investment banking and in structuring investments. In addition, they have prior experience in the operation of Community Investment Partners, L.P., a business development company such as the Partnership. Ownership of the Units also entails risk because Limited Partners may not be able to liquidate their investment in the event of an emergency or for any other reason due to the substantial restrictions on transfers contained in the Partnership Agreement and the lack of a market for the resale of Units. The information set forth under the captions ``Risk and Other Important Factors''(including the subsections ``Risks of Investment,'' ``Size of Partnership,'' ``Ability to Invest Funds,'' `` Time Required to Maturity of Investments; Illiquidity of Investments,'' ``Need for Follow-on Investments,'' ``Use of Leverage,'' ``Unspecified Investments,'' ``Reliance on Management,'' `` New Business,'' ``No Market for Units'' and ``Federal Income Tax Considerations'') on pages 9 through 14 of the Prospectus of Partnership dated November 4, 1992, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933 on November 4, 1992, is incorporated herein by this reference. (This information has been restated herein pursuant to section 64(b) of the Investment Company Act of 1940). Partners should refer to the Partnership Agreement for more detailed information. Employees The Partnership has no employees. The Managing General Partner performs management and administrative services for the operation of the Partnership. The Managing General Partner is paid an annual management fee of 1.5% of total assets. The Managing General Partner is reimbursed by the Partnership for out of pocket expenses in connection with finding, evaluating, structuring, approving, monitoring and liquidating the Partnership's portfolio investments. Item 2. PROPERTIES The Partnership has no physical properties. Item 3. LEGAL PROCEEDINGS The Partnership is not a party to any material pending legal proceedings. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted to a vote of security holders during the period covered by this report. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS There is no established public trading market for the Limited Partnership interests. As of March 15, 1997, the total number of holders of units is 131. The number of limited partnership units outstanding is 111,395. The number of general partnership units outstanding is 1,135 as of March 15, 1997. The information set forth under the captions ``Partnership Distributions and Allocations'' and ``Transferability of Units'' in the Prospectus of the Partnership dated November 4, 1992, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933 is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA BALANCE SHEET: As of December 31, 1996 1995 (1) 1994 1993 1992 Net Assets $1,982,725 $2,014,889 $2,645,511 $1,355,231 $1,403,625 Portfolio Investments$1,397,330 $545,013 $1,000,013 $ 500,013 $ - INCOME STATEMENT: For the Year Ended December 31, 1996 1995 (1) 1994 1993 1992 Net Loss $(32,164) $(630,622) $(86,345) $(48,394) $ (3,000) Per Unit of Partnership Interest: Net Asset Value $ 17.62 $ 17.91 $ 23.50 $ 12.04 $ 12.47 Net Loss $ (.29) $ (5.60) $ (.77) $ (.43) $ (.03) (1) See ``Fiscal Year 1995 versus 1994'' in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS (FISCAL YEAR 1996 VERSUS 1995) Net loss for the year ended December 31, 1996, was $32,164, compared to a net loss of $630,622 for 1995. Income was derived from dividend income on portfolio investments and interest income from certificates of deposit. The majority of the reduced net loss incurred during 1996 is due primarily to a 1995 worthless investment in West End Soda Brew of $600,000. In addition, the Partnership had lower interest income of $15,212, due to cash being used to purchase investments throughout 1996. Dividend income increased $18,979 due to the increased level of investments. During the year, the Partnership made several investments as outlined in the Schedule of Portfolio Investments. One such investment, FCOA Acquisition Corp., participated in an initial public stock offering on December 13, 1996. The initial public offering price was $9 per share, and the stock trades on the NASDAQ under the ticker symbol FCPY. As of December 31, 1996, an unrealized loss of $15,298 has been recorded for the FCOA Acquisition Corporation investment. Expenses decreased by $9,989, from $110,490 in 1995 to $100,501 in 1996. The decrease is primarily related to lower professional fees. The future income or loss of the Partnership is contingent upon the performance of current and future investments. (FISCAL YEAR 1995 VERSUS 1994) Net loss for the year ended December 31, 1995, was $630,622, compared to a net loss of $86,345 for 1994. Income was derived from dividend income on portfolio investments and interest income from certificates of deposit. A loss was recorded to reflect a worthless investment as West End Soda Brew closed operations in November, 1995. The company was unable to compete with large national competitors in the New Age segment of the beverage industry and faced slowing demand for its products. This loss accounts for the majority of the decrease in income. Expenses decreased by $19,411, from $129,901 in 1994 to $110,490 in 1995. As a result of lower total assets when compared to 1994, management fees decreased by $9,000. Legal fees were down $10,000. SUBSEQUENT EVENTS On January 2, 1997, the Partnership sold its investment in Houghton Acquisition Corporation (HAC). In exchange for the 2,000 shares of Class A cumulative redeemable Preferred Stock, the Partnership received $613,379 in cash and a Convertible Promissory Note in the principal amount of $77,400 due January 2, 1999 with interest payable at 8%. A Promissory Note in the principal amount of $25,800 was also received but is contingent upon the future income of HAC before interest, taxes, depreciation, amortization and corporate charges. As of December 31, 1996, the Partnership's investment in HAC was recorded at original cost of $200,013. Accordingly, the above transaction results in a gain of approximately $490,000, which will be recorded in fiscal year 1997. Due to the contingent nature of the Promissory Note in the principal amount of $25,800, a gain has not been recorded for this amount as of the transaction date. This Note has been recorded at an original cost of $0, and additional gain will be recorded if, or when, payments become due under terms of the Note. On January 6, 1997, the Partnership made a distribution of $5 per unit. On January 24, 1997, the Partnership invested $100,000 in Medical Device Alliance, Inc. and received 20,000 shares of common stock. Medical Device Alliance, Inc. specializes in the development, manufacture and marketing of devices for ultrasound- assisted lipoplasty. LIQUIDITY AND CAPITAL RESOURCES The Partnership's total capital of $1,982,725 as of December 31, 1996, consisted of $1,962,730 in Limited Partner capital and $19,995 in General Partner capital. The 1996 total net loss of $32,164 was allocated to the Limited Partners in the amount of $31,842 and to the General Partners in the amount of $322. The Partnership is actively reviewing potential portfolio investments. Until the Partnership invests in portfolio investments, it intends to invest its cash balances in a money market account. At December 31, 1996, $527,000 was invested in the money market account. Such investments provide the Partnership with the liquidity necessary for investments as opportunities arise. Item 8.INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page Report of Independent Accountants............ 12 Balance Sheet as of December 31, 1996 and 1995.. 13 Schedule of Portfolio Investments as of December 31, 1996 and 1995.................... 14 Income Statement for the Years Ended December 31, 1996, 1995, and 1994............. 17 Statement of Changes in Partnership Capital for the Years Ended December 31, 1996, 1995 and 1994..... 18 Statement of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994................. 19 Notes to Financial Statements...................... 20 Financial Statement Schedules: Financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Community Investment Partners II, L.P. In our opinion, the financial statements listed in the accompanying index present fairly, in all material respects, the financial position of Community Investment Partners II, L.P. (the `` Partnership'') at December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 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 of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of portfolio investments owned as of December 31, 1996 and 1995. We believe that our audits provide a reasonable basis for the opinion expressed above. As explained in Note 3, the financial statements include investments, valued at $1,397,330 (70 percent of net assets), whose values have been determined by the Managing General Partner in the absence of readily ascertainable market values. We have reviewed the procedures used by the Managing General Partner in arriving at an estimate of value and have inspected underlying documentation, and, in the circumstances, we believe the procedures are reasonable and the documentation appropriate. However, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material to the financial statements. PRICE WATERHOUSE LLP St. Louis, Missouri February 21, 1997 COMMUNITY INVESTMENT PARTNERS II, L.P. BALANCE SHEET ASSETS December 31, 1996 1995 ____________ ____________ Investments at Fair Market Value (cost $1,412,628 and $545,013, respectively) $ 1,397,330 $ 545,013 Cash and Cash Equivalents 540,528 1,399,026 Deferred Organizational Costs, net 36,683 73,366 Accrued Interest and Dividends Receivable 17,835 9,584 Prepaid Expenses 2,449 - ____________ ____________ TOTAL ASSETS $ 1,994,825 $ 2,026,989 ============ ============ LIABILITIES AND PARTNERSHIP CAPITAL December 31, 1996 1995 ____________ ____________ Liabilities Accrued Expenses $ 12,100 $ 12,100 ____________ ____________ TOTAL LIABILITIES 12,100 12,100 ____________ ____________ Partnership Capital Capital - Limited Partners 1,962,730 1,994,572 Capital - General Partners 19,995 20,317 ____________ ____________ TOTAL PARTNERSHIP CAPITAL 1,982,725 2,014,889 ____________ ____________ TOTAL LIABILITIES AND PARTNERSHIP CAPITAL $ 1,994,825 $ 2,026,989 ============ ============ The accompanying notes are an integral part of these financial statements. COMMUNITY INVESTMENT PARTNERS II, L.P. SCHEDULE OF PORTFOLIO INVESTMENTS Company Fair Market Initial Investment Nature of Business Value Date Investment Cost Dec. 31, 1996 Houghton Acquisition Organized for the purpose of Corporation acquiring Hutchinson Foundry Products, Inc. March 10, 1993 2,000 shares of Class A cumulative redeemable Preferre Stock $200,013 $200,013 Global Surgical Formed to acquire the Urban Corporation Microscope Division and the Surgical Mechanical Research subsidiary of Storz Medical January 31, 19943,000 shares of Common Stock 300,000 300,000 June 30, 1995 7% Promissory Note, due 6/29/00 45,000 45,000 January 26, 19967% Promissory Note, due 1/25/01 67,500 67,500 Computer Motion, Inc. Develops and supplies medical robotics May 3, 1996 Prime +1% Term Note, due 10/31/98 125,000 125,000 September 9, 1996 25,000 shares of Series E Preferred Stock 125,000 125,000 25,000 warrants 250 250 FCOA Acquisition A chain of greeting card/ Corporation party stores which offer (d/b/a Factory a full line of products at Card everyday value prices Outlet) July 30, 1996 26,063 Common Shares 249,865 234,567 Permalok Corporation Develops and sells steel pipe joining system to the domestic underground utility construction industry September 24, 1996 25,000 shares of Convertible Preferred Stock 200,000 200,000 The accompanying notes are an integral part of these financial statements. COMMUNITY INVESTMENT PARTNERS II, L.P. SCHEDULE OF PORTFOLIO INVESTMENTS Company Fair Market Initial Investment Nature of Business Value Date Investment Cost Dec. 31, 1996 Stereotaxis, Inc. Develops and markets a system by which surgery can be conducted remotely using computer controlled magnets December 30, 1996 138,889 shares of Preferred Stock 100,000 100,000 _________ __________ $1,412,628 $1,397,330 ========= ========== The accompanying notes are an integral part of these financial statements. COMMUNITY INVESTMENT PARTNERS II, L.P. SCHEDULE OF PORTFOLIO INVESTMENTS Company Fair Market Initial Investment Nature of Business Value Date Investment Cost Dec. 31, 1995 Houghton Acquisition Organized for the purpose of Corporation acquiring Hutchinson Foundry Products, Inc. March 10, 1993 2,000 shares of Class A cumulative redeemable Preferred Stock $200,013 200,013 Global Surgical Formed to acquire the Urban Corporation Microscope Division and the Surgical Mechanical Research subsidiary of Storz Medical January 31, 19943,000 shares of Common Stock 300,000 300,000 June 30, 1995 7% Promissory Note 45,000 45,000 ___________ _________ $545,013 $545,013 =========== ========== The accompanying notes are an integral part of these financial statements. COMMUNITY INVESTMENT PARTNERS II, L.P. INCOME STATEMENT For the Year Ended December 31, 1996 1995 1994 INCOME Interest Income $ 47,169 $ 62,381 $ 27,556 Dividend Income 36,466 17,487 16,000 Loss from Liquidation of Investment - (600,000) - ________ _________ _______ TOTAL INCOME (LOSS) 83,635 (520,132) 43,556 ________ _________ _______ EXPENSES Legal Fees $ 7,236 $ 8,415 $ 19,189 Management Fees 30,496 30,918 40,363 Amortization of Deferred Organization Costs 36,684 36,683 36,683 Professional Fees 12,100 19,100 16,163 Trustee Fees 562 2,025 2,666 Independent General Partners' Fees 12,000 12,000 13,000 Miscellaneous Expenses 1,423 1,349 1,837 ___________ ________ _______ TOTAL EXPENSES 100,501 110,490 129,901 ___________ ________ _______ Net Loss before Unrealized Losses (16,866) (630,622) (86,345) Net Unrealized Losses on Investments (15,298) - - ___________ _________ _______ NET LOSS $ (32,164)$(630,622)$ (86,345) =========== ========== ======= The accompanying notes are an integral part of these financial statements. COMMUNITY INVESTMENT PARTNERS II, L.P. STATEMENT OF CHANGES IN PARTNERSHIP CAPITAL For the Years Ended December 31, 1996, 1995 and 1994 Limited General Partners Partners Totals Balance, December 31, 1993 $1,341,745 $ 13,486 $1,355,231 Capital call 1,362,625 14,000 1,376,625 Net loss (85,482) (863) (86,345) ___________ ________ _________ Balance, December 31, 1994 $2,618,888 $26,623 $2,645,511 Net loss (624,316) (6,306) (630,622) ___________ ________ ________ Balance, December 31, 1995 $1,994,572 $20,317 $2,014,889 Net loss (31,842) (322) (32,164) ___________ _________ ________ Balance, December 31, 1996 $1,962,730 $ 19,995 $1,982,725 =========== ========= ======== The accompanying notes are an integral part of these financial statements. COMMUNITY INVESTMENT PARTNERS II, L.P. STATEMENT OF CASH FLOWS For the Year Ended December 31, 1996 1995 1994 CASH FLOWS USED FOR OPERATING ACTIVITIES: Net Loss $ (32,164) $ (630,622) $(86,345) Adjustments to Reconcile Net Loss to Net Cash Provided by Operating Activities: Amortization of Deferred Organization Costs 36,683 36,683 36,683 Purchase of Portfolio Investments (867,615) (145,000) (500,000) Liquidation of Portfolio Investment - 600,000 - Unrealized Losses on Portfolio Investments 15,298 - - Increase in Accrued Interest Receivable (8,251) (2,206) (1,538) Increase in Accrued Expenses - 7,000 1,100 Increase in Prepaid Expense (2,449) - - ________________________________ Total Cash Used for Operating Activities (858,498) (134,145) (550,100) CASH FLOWS PROVIDED BY FINANCING ACTIVITIES: Capital contributions - - 1,376,625 ________________________________ Total Cash Provided by Financing Activities - - 1,376,625 ________________________________ Net (Decrease) Increase in Cash and Cash Equivalents (858,498) (134,145) 826,525 CASH AND CASH EQUIVALENTS: Beginning of year 1,399,026 1,533,171 706,646 ________________________________ End of year $ 540,528 $1,399,026 $ 1,533,171 ================================ The accompanying notes are an integral part of these financial statements. COMMUNITY INVESTMENT PARTNERS, L.P. NOTES TO FINANCIAL STATEMENTS 1. GENERAL Partnership Organization Community Investment Partners II, L.P. (the ``Partnership'') was formed on May 8, 1992, under the Revised Uniform Limited Partnership Act of Missouri. CIP Management, L.P., the Managing General Partner, is a Missouri limited partnership formed on October 10, 1989. The general partner of CIP Management, L.P. is CIP Management, Inc., an indirect subsidiary of Edward D. Jones & Co., L.P. Business The Partnership elected to be a business development company under the Investment Company Act of 1940, as amended. As a business development company, the Partnership is required to invest at least 70% of its assets in qualifying investments as specified in the Investment Company Act. The Partnership will seek long-term capital appreciation by making investments in companies and other special investment situations. The Partnership is not permitted to engage in any other business or activity. The Partnership will dissolve on December 31, 2007, subject to the right of the Individual General Partners to extend the term for up to two additional two-year periods. The Managing General Partner was required to have invested the net proceeds of the Partnership's offering (including amounts held in reserve) within two years of the date of the capital call. Risk of Ownership The purchase and ownership of Units involve a number of significant risks and other important factors. The portfolio company investments of the Partnership involve a high degree of business and financial risk that can result in substantial losses. Among these are the risks associated with investment in companies with little operating history, companies operating at a loss or with substantial variations in operating results from period to period, companies with the need for substantial additional capital to support expansion or achieve or maintain a competitive position, companies which may be highly leveraged, companies which may be less diversified and companies in which the Partnership may be the sole or primary lender. The Partnership intends to invest in only a few companies; therefore, a loss or other problem with a single investment would have a material adverse effect on the Partnership. 2. ALLOCATION OF PARTNERSHIP PROFITS AND LOSSES The Partnership Agreement generally provides for the pro rata allocation of profits, losses and distributions between the limited and general partners. Partners should refer to the Partnership Agreement for more detailed information. 3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents All short-term investments with original maturities of three months or less are considered to be cash equivalents. Investment Transactions All portfolio investments are carried at cost until significant developments affecting an investment provide a basis for revaluation. Thereafter, portfolio investments are carried at fair value as obtained from outside sources or at a value determined quarterly by the Managing General Partner under the supervision of the Independent General Partners. Due to the inherent uncertainty of valuation, those estimated values for portfolio investments carried at cost may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material to the financial statements. Investment in securities traded on a national securities exchange are valued at the latest reported sales price on the last business day of the period. If no sale has taken place, the securities are valued at the last bid price. If no bid price has been reported, or if no exchange quotation is available, the securities are valued at the quotation obtained from an outside broker. Investment transactions are recorded on a trade date basis. Income is recorded on an accrual basis. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Organizational Costs Organizational costs are being amortized over a sixty-month period. Income Taxes Income taxes have not been provided for as the Partnership is a limited partnership and each partner is liable for its own tax payments. Allocation of Partnership profits and losses for tax purposes is based upon taxable income which may differ from net income for financial reporting primarily due to differences between book and tax accounting for portfolio investments. 4. PER UNIT INFORMATION There is no market for the Limited Partnership interests. Per Unit Information is as follows: For the Year Ended December 31, 1996 1995 1994 Number of unit holders 131 131 132 Limited partnership units 111,395 111,395 111,395 General partnership units 1,135 1,135 1,135 ______________________________ Total units outstanding 112,530 112,530 112,530 ============================== Net asset value per unit $ 17.62 $ 17.91 $ 23.50 ============================== Net (loss) per unit $ (.29)$ (5.60) $ (.77) ============================== 5. RELATED PARTY TRANSACTIONS The Partnership is furnished with certain non-reimbursed management and accounting services by affiliates, whose value is not reflected in the accompanying financial statements. The Managing General Partner performs management and administrative services for the operation of the Partnership. The Managing General Partner is paid an annual management fee of 1.5% of total assets. This fee for 1996 was $30,496. The Partnership may place its General Partners on Boards of Directors of portfolio companies. The Managing General Partner and the Independent General Partners of the Partnership are also the managing general partner and independent general partners, respectively, of Community Investment Partners, L.P., a business development company. Item 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT There are two Independent General Partners and one Managing General Partner of the Partnership. These Independent General Partners and the Managing General Partner are responsible for the management and administration of the Partnership. The General Partners are ``interested persons'' of the Partnership as defined by the Investment Company Act, but the Partnership has obtained an exemptive order from the Securities and Exchange Commission permitting them to be considered disinterested persons. The Independent General Partners provide overall guidance and supervision with respect to the operation of the Partnership and perform the various duties imposed on the directors of a business development company by the Investment Company Act. In addition to general fiduciary duties, the Independent General Partners supervise the management and underwriting arrangement of the Partnership, the custody arrangement with respect to portfolio securities, the selection of accountants, fidelity bonding and transactions with affiliates. Specific Information regarding the Independent General Partners: Tommy L. Gleason, Jr., 51, has been an Independent General Partner of the Partnership since May 1992. He is also an independent general partner of Community Investment Partners, L.P., a business development company. Mr. Gleason is the Chairman and Chief Executive Officer of Galaxy Systems Management, Inc., the general Partner of Galaxy Telecom, L.P., which is involved in management of cable television systems located in sixteen states and serving approximately 175,000 subscribers. Mr. Gleason owns 2,026 Units. E. Stanley Kroenke, 49, has served as an Independent General Partner of the Partnership since May 1992. He is also an independent general partner of Community Investment Partners, L.P., a business development company. Mr. Kroenke leads a company that is a national investor, developer, and owner of commercial real estate. The company is a developer and owner of numerous shopping centers as well as apartment projects around the country. Mr. Kroenke is co-owner and vice chairman of the St. Louis Rams National Football League franchise. He also serves as a member of the board of directors of Wal-Mart Stores, Inc., Bentonville, Arkansas; Central Bancompany, Jefferson City, Missouri; Boone County National Bank, Columbia, Missouri; and the Strategic Development Board of the University of Missouri School of Business, Columbia, Missouri. He serves as a trustee of the College of the Ozarks in Point Lookout, Missouri, as well as chairman of their real estate committee. Mr. Kroenke owns 5,633 Units. CIP Management, L.P. (the ``Managing General Partner'') is the Managing General Partner of Community Investment Partners II, L.P. The Managing General Partner is also managing general partner of Community Investment Partners, L.P., a business development company. The General Partners of the Managing General Partner are CIP Management, Inc., a Missouri corporation and a wholly-owned subsidiary of Edward D. Jones & Co., L.P., and Daniel A. Burkhardt. The Directors and Officers of CIP Management, Inc. are as follows: Daniel A. Burkhardt, 49, President, Treasurer and Director of CIP Management, Inc. since October 1989 and general partner of CIP Management, L.P. since February 1990. He is a general partner of The Jones Financial Companies, L.P., LLP, the parent company of Edward D. Jones & Co., L.P., where he has specialized in investment banking and structuring investments since 1980. He is also a director of Essex County Gas Company, St. Joseph Light & Power Co., Southeastern Michigan Gas Enterprises and Mid-America Realty Investment, Inc. Mr. Burkhardt is the beneficial owner of 4,052 Units. Ray A. Robbins, Jr., 52, Vice President and Director of CIP Management, Inc. since October 1989. He is a general partner of The Jones Financial Companies, L.P., LLP, the parent company of Edward D. Jones & Co., L.P., where he has specialized in securities analysis since 1984, and where he was responsible for municipal bond transactions from 1975 to 1983. Mr. Robbins is a beneficial owner of 3,242 Units. Marilyn A. Gaffney, 38, Secretary of CIP Management, Inc. since October 1989. She is a Limited Partner of The Jones Financial Companies, L.P., LLP, the parent company of Edward D. Jones & Co., L.P., where she has been a senior investment advisor in investment banking since 1980. Ms. Gaffney is the beneficial owner of 405 Units. Item 11. EXECUTIVE COMPENSATION Each Independent General Partner receives an annual fee of $6,000 from the Partnership, a fee of $1,000 for each meeting attended, and all out-of-pocket expenses relating to attendance at meetings of the Individual General Partners. The information set forth under the caption ``Partnership Distributions and Allocations'' in the Prospectus of the Partnership dated November 4, 1992, filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933, is incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information concerning the security ownership of the Independent General Partners and the Officers and Directors of CIP Managements, Inc., described in Item 10, is herein incorporated by reference. As of March 15, 1997, the following parties are known by the Partnership to be the beneficial owners of more than 5% of the Units. Amount of Beneficial % of Limited Name Ownership of Units Partnership Capital Richard P. Kiphart 10,131 9.09% EDJ Ventures Ltd. 5,633 5.06% E. Stanley Kroenke 5,633 5.06% The Partnership is not aware of any arrangement which may, at a subsequent date, result in a change of control of the Partnership. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Certain relationships and related transactions, described in Item 10, are herein incorporated by reference. PART IV Item14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K a. The following documents are filed as part of this report: 1. Financial Statements: See Index to Financial Statements and Supplementary Data contained in Item 8 of this Form 10-K. 2. Financial Statement Schedules: All financial statement schedules are omitted because they are not applicable, or the required information is included in the balance sheet or notes thereto. 3. Exhibits: (3)Amended and Restated Certificate and Agreement of Limited Partnership dated as of November 4, 1992. (4)Form of Unit Certificate. * (10) Management Agreement dated November 4, 1992, between the Partnership and CIP Management, L.P. ** (28) Prospectus of the Partnership dated November 4, 1992, filed with the Securities and Exchange Commission in connection with Registration Statement No. 33-47917 on Form N-2 under the Securities Act of 1933. ** * Incorporated by reference to Exhibit A of the Prospectus of the Partnership dated November 4, 1992 filed with the Securities and Exchange Commission pursuant to Rule 497(b) under the Securities Act of 1933. ** Incorporated by reference to the Partnership's Registration Statement No. 33-47917 on Form N-2 under the Securities Act of 1933. b. No reports on Form 8-K were filed during the quarter ended December 31, 1996. c. Exhibits filed as part of this report are included in Item (14) (a)(3) above. d. Financial Statement Schedules required by Regulations S-X are included as described in Part II Item 8 above. 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, on this 27th day of March, 1997. Community Investment Partners II, L.P. By: CIP Management, L.P., its Managing General Partner By: CIP Management, Inc., its Managing General Partner ___________________________________ By: Daniel A. Burkhardt, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. ______________________________ General Partner of CIP Management Daniel A. Burkhardt L.P., President, Treasurer and Director of CIP Management, Inc. ______________________________ Vice President and Director of CIP Ray L. Robbins Management, Inc. ______________________________ Individual General Partner, Tommy L. Gleason, Jr. Community Investment Partners II, L.P. ______________________________ Individual General Partner, E. Stanley Kroenke Community Investment Partners II, L.P. INDEX TO EXHIBITS Exhibit Number Description of Exhibit Page (3) Amended and Restated Certificate and Agreement of Limited Partnership dated as of November 4, 1992 * (4) Form of Unit Certificate * (10) Management Agreement dated November 4, 1992, between the Partnership and CIP Management, L.P. * (28) Prospectus of the Partnership dated November 4, 1992, filed with the Securities and Exchange Commission in connection with Registration Statement No. 33-47917 on Form N-2 under the Securities Act of 1933 * ______________________ *Incorporated by reference 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, on this 27th day of March, 1997. Community Investment Partners, L.P. By: CIP Management, L.P., its Managing General Partner By: CIP Management, Inc., its Managing General Partner /s/ Daniel A. Burkhardt, President ___________________________________ By: Daniel A. Burkhardt, President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. /s/ Daniel A. Burkhardt ______________________________ General Partner of CIP Management Daniel A. Burkhardt L.P., President, Treasurer and Director of CIP Management, Inc. /s/ Ray L. Robbins ______________________________ Vice President and Director of CIP Ray L. Robbins Management, Inc. /s/ Tommy L. Gleason, Jr. ______________________________ Individual General Partner, Tommy L. Gleason, Jr. Community Investment Partners II L.P. /s/ E. Stanley Kroenke ______________________________ Individual General Partner, E. Stanley Kroenke Community Investment Partners II, L.P. EX-27 2
6 This schedule contains summary financial information extracted from the financial statements for Community Investment Partners II, L.P. for the year ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 0000887499 COMMUNITY INVESTMENT PARTNERS II, L.P. 1 U.S. DOLLARS 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1 1,412,628 1,397,330 17,835 0 0 1,994,825 0 0 0 12,100 0 0 112,530 112,530 0 0 0 0 0 1,982,725 36,466 47,169 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 100,501 1,998,807 17.91 (.29) 0 0 0 0 17.62 0 0 0
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