UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 2003
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _________to _________
Commission file number 0-15758
JACQUES-MILLER INCOME FUND, L.P. - II
(Exact Name of Registrant as Specified in Its Charter)
Delaware 62-1244325
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
55 Beattie Place, PO Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices)
(864) 239-1000
(Issuer's telephone number)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JACQUES-MILLER INCOME FUND, L.P. - II
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
June 30, 2003
Assets
Cash and cash equivalents $ 124
Note receivable from affiliated party (net of
allowance of approximately $964) (Note B) --
$ 124
Liabilities and Partners' (Deficiency) Capital
Liabilities
Other liabilities $ 20
Partners' (Deficiency) Capital
General partner $ (113)
Limited partners (12,400 units issued and
outstanding) 217 104
$ 124
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except per unit data)
Three Months Ended Six Months Ended
June 30, June 30,
2003 2002 2003 2002
Revenues:
Interest income $ -- $ -- $ 13 $ --
Expenses:
General and administrative 14 35 29 51
Net loss $ (14) $ (35) $ (16) $ (51)
Net loss allocated to
general partner (1%) $ -- $ -- $ -- $ --
Net loss allocated to
limited partners (99%) (14) (35) (16) (51)
$ (14) $ (35) $ (16) $ (51)
Net loss per limited
partnership unit $(1.13) $(2.82) $(1.29) $(4.11)
Distributions per limited
partnership unit $49.35 $ -- $49.35 $ 6.69
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENT OF CHANGES IN PARTNERS' (DEFICIENCY) CAPITAL
(Unaudited)
(in thousands, except unit data)
Limited
Partnership General Limited
Units Partner Partners Total
Partners' (deficiency) capital
at December 31, 2002 12,400 $ (107) $ 845 $ 738
Distribution to partners -- (6) (612) (618)
Net loss for the six months
ended June 30, 2003 -- -- (16) (16)
Partners' (deficiency) capital
at June 30, 2003 12,400 $ (113) $ 217 $ 104
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
Six Months Ended
June 30,
2003 2002
Cash flows from operating activities:
Net loss $ (16) $ (51)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Change in accounts:
Other assets 730 21
Other liabilities 13 14
Net cash provided by (used in) operating activities 727 (16)
Cash flow used in financing activity:
Distribution to partners (618) (84)
Net increase (decrease) in cash and cash equivalents 109 (100)
Cash and cash equivalents at beginning of period 15 160
Cash and cash equivalents at end of period $ 124 $ 60
See Accompanying Notes to Financial Statements
JACQUES-MILLER INCOME FUND, L.P. - II
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements of Jacques-Miller Income Fund,
L.P. - II ("Partnership" or "Registrant") have been prepared in accordance with
generally accepted accounting principles for interim financial information and
with the instructions to Form 10-QSB and Item 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of Jacques-Miller, Inc. (the "Corporate General Partner"), all
adjustments (consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. Operating results for the three and six
months ended June 30, 2003, are not necessarily indicative of the results that
may be expected for the fiscal year ending December 31, 2003. For further
information, refer to the financial statements and footnotes thereto included in
the Partnership's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2002. The Corporate General Partner is an affiliate of Apartment
Investment and Management Company ("AIMCO"), a publicly traded real estate
investment trust.
Note B - Note Receivable from Affiliated Party
Note receivable consists of the following (in thousands):
June 30,
2003
Note receivable $ 413
Accrued interest receivable 551
964
Provision for uncollectible note
receivable (including
approximately $551 of
deferred interest revenue) (964)
$ --
The Partnership holds a note receivable (the "Catawba Club Note") at June 30,
2003, totaling approximately $413,000 with approximately $551,000 of related
accrued interest, which matured November 1, 1997, and is fully reserved. This
promissory note bears interest at 12.5%, is unsecured by the related
partnership, and is subordinated to the underlying mortgage of the related
partnership.
During 2000, the first and second mortgages encumbering Catawba Club were
replaced with a new first mortgage. However, after payment of transaction costs
and establishing a repair escrow, as required by the lender, there were no
proceeds available for a payment on the Catawba Club Note. The Partnership has
obtained a default judgment with respect to the Catawba Club Note. The Corporate
General Partner is currently evaluating its options to collect upon this
judgment.
During the six months ended June 30, 2003, the Partnership received
approximately $743,000 representing full repayment of the Quail Run note
receivable. This payment occurred as a result of the refinancing that occurred
at Quail Run in November 2002. Of the payment received, approximately $454,000
and $289,000 was attributable to the note receivable and accrued interest,
respectively. This payment satisfied in full the obligation of the related
partnership.
During the six months ended June 30, 2002, the Partnership forgave the remaining
debt of approximately $635,000 on the Highridge note. Highridge Associates sold
all of its investment properties during 2001 and was unable to fully repay its
debt to the Partnership.
Note C - Transactions with Affiliated Parties
Other than the notes receivable previously disclosed, the Partnership had the
following transactions:
An affiliate of the Corporate General Partner received reimbursements of
accountable administrative expenses amounting to approximately $11,000 and
$32,000 for the six months ended June 30, 2003 and 2002, respectively, which is
included in general and administrative expenses.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The matters discussed in this report contain certain forward-looking statements,
including, without limitation, statements regarding future financial performance
and the effect of government regulations. Actual results may differ materially
from those described in the forward-looking statements and will be affected by a
variety of risks and factors including, without limitation: national and local
economic conditions; the terms of governmental regulations that affect the
Registrant and interpretations of those regulations; the competitive environment
in which the Registrant operates; financing risks, including the risk that cash
flows from operations may be insufficient to meet required payments of principal
and interest; real estate risks, including variations of real estate values and
the general economic climate in local markets and competition for tenants in
such markets; litigation, including costs associated with prosecuting and
defending claims and any adverse outcomes, and possible environmental
liabilities. Readers should carefully review the Registrant's financial
statements and the notes thereto, as well as the risk factors described in the
documents the Registrant files from time to time with the Securities and
Exchange Commission.
Results of Operations
The Partnership's net loss for the three and six months ended June 30, 2003 was
approximately $14,000 and $16,000 compared to a net loss of approximately
$35,000 and $51,000 for the three and six months ended June 30, 2002,
respectively. The decrease in net loss is attributable to an increase in total
revenues and a decrease in total expenses. The increase in total revenues for
the six months ended June 30, 2003 is attributable to three months of interest
income recognized on the Quail Run note receivable. The decrease in total
expenses for the three and six months ended June 30, 2003 is attributable to a
decrease in general and administrative expense. During 2002, an affiliate of the
Corporate General Partner determined that the Partnership should be charged for
reimbursements of accountable administrative expenses related to 2001.
Approximately $21,000 for 2001 expenses has been included in the operating
results for 2002. The Partnership currently holds a note from an affiliated
partnership, which requires payments from excess cash flow after payments of the
mortgage of the affiliated partnership (see discussion below).
Liquidity and Capital Resources
At June 30, 2003, the Partnership held cash and cash equivalents of
approximately $124,000 compared to approximately $60,000 at June 30, 2002. Cash
and cash equivalents increased approximately $109,000 from December 31, 2002.
The increase is due to approximately $727,000 of cash provided by operating
activities partially offset by approximately $618,000 of cash used in financing
activities. Cash used in financing activities consisted of a distribution to
partners. The Partnership invests its working capital reserves in interest
bearing accounts.
The Corporate General Partner monitors developments in the area of legal and
regulatory compliance and is studying new federal laws, including the
Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act of 2002 mandates or suggests
additional compliance measures with regard to governance, disclosure, audit and
other areas. In light of these changes, the Partnership expects that it will
incur higher expenses related to compliance, including increased legal and audit
fees.
The Partnership holds a note receivable (the "Catawba Club Note") at June 30,
2003, totaling approximately $413,000 with approximately $551,000 of related
accrued interest, which matured November 1, 1997, and is fully reserved. During
2000, the first and second mortgages encumbering Catawba Club were replaced with
a new first mortgage. However, after payment of transaction costs and
establishing a repair escrow, as required by the lender, there were no proceeds
available for a payment on the Catawba Club Note. The note was in default at
June 30, 2003. The Partnership obtained a default judgment with respect to the
note. The Corporate General Partner is currently evaluating its options to
collect upon this judgment. Payments on the note are restricted to excess cash
flow after payment on the first mortgage. No payments on the note were received
during the three and six months ended June 30, 2003 and 2002, respectively.
During the six months ended June 30, 2003, the Partnership received full
repayment of the Quail Run note receivable. This payment occurred as a result of
the refinancing that occurred at Quail Run in November 2002. Of the payment
received, approximately $454,000 and $289,000 was attributable to the note
receivable and accrued interest, respectively. This payment satisfied in full
the obligation of the related partnership.
During the six months ended June 30, 2002, the Partnership forgave the remaining
debt of approximately $635,000 on the Highridge note. Highridge Associates sold
all of its investment properties during 2001 and was unable to fully repay its
debt to the Partnership. The Partnership received a payment of approximately
$125,000 on the Highridge note in December 2001. The Partnership distributed the
following amounts during the six months ended June 30, 2003 and 2002 (in
thousands, except per unit data):
Six Months Per Six Months Per
Ended Limited Ended Limited
June 30, Partnership June 30, Partnership
2003 Unit 2002 Unit
Note
Repayments (1) $ 618 $49.35 $ 84 $ 6.69
(1) Proceeds from note repayments from Quail Run during 2003 and from note
repayments from Highridge Associates during 2001.
Future cash distributions will depend on the levels of net cash generated from
the collection of the note receivable and the availability of cash reserves. The
Partnership's cash available for distribution is reviewed on a monthly basis.
There can be no assurance, however, that the Partnership will generate
sufficient funds from collection of the note receivable to permit distributions
to its partners during the remainder of 2003 or subsequent periods.
Other
In addition to its indirect ownership of the general partner interests in the
Partnership, AIMCO and its affiliates owned 4,059.01 limited partnership units
(the "Units") in the Partnership representing 32.74% of the outstanding Units at
June 30, 2003. A number of these Units were acquired pursuant to tender offers
made by AIMCO or its affiliates. It is possible that AIMCO or its affiliates
will acquire additional Units in exchange for cash or a combination of cash and
units in the operating partnership of AIMCO either through private purchases or
tender offers. Pursuant to the Partnership Agreement, unitholders holding a
majority of the Units are entitled to take action with respect to a variety of
matters that include, but not limited to, voting on certain amendments to the
Partnership Agreement and voting to remove the Corporate General Partner.
Although the Corporate General Partner owes fiduciary duties to the limited
partners of the Partnership, the Corporate General Partner also owes fiduciary
duties to AIMCO as its sole stockholder. As a result, the duties of the
Corporate General Partner, as corporate general partner, to the Partnership and
its limited partners may come into conflict with the duties of the Corporate
General Partner to AIMCO, as its sole stockholder.
ITEM 3. CONTROLS AND PROCEDURES
(a) Disclosure Controls and Procedures. The Partnership's management, with the
participation of the principal executive officer and principal financial officer
of the Corporate General Partner, who are the equivalent of the Partnership's
principal executive officer and principal financial officer, respectively, has
evaluated the effectiveness of the Partnership's disclosure controls and
procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of the end
of the period covered by this report. Based on such evaluation, the principal
executive officer and principal financial officer of the Corporate General
Partner, who are the equivalent of the Partnership's principal executive officer
and principal financial officer, respectively, have concluded that, as of the
end of such period, the Partnership's disclosure controls and procedures are
effective.
(b) Internal Control Over Financial Reporting. There have not been any changes
in the Partnership's internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
fiscal quarter to which this report relates that have materially affected, or
are reasonably likely to materially affect, the Partnership's internal control
over financial reporting.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
3.1 Partnership Agreement, incorporated herein by reference
to the Partnership's Registration Statement, dated
October 16, 1985 (2-99745), as filed pursuant to Rule
424(b)(the "Registration Statement")
4 Form of Certificate representing interests in the
Partnership, incorporated herein by reference to
Exhibit 4 to the Registration Statement on Form S-11
dated October 16, 1985, Registration Number 2-99745 is
incorporated herein by reference.
31.1 Certification of equivalent of Chief Executive Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
31.2 Certification of equivalent of Chief Financial Officer
pursuant to Securities Exchange Act Rules
13a-14(a)/15d-14(a), as Adopted Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002.
32.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
b) Reports on Form 8-K:
None filed during the quarter ended June 30, 2003.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
JACQUES-MILLER INCOME FUND, L.P. - II
By: Jacques-Miller, Inc
Corporate General Partner
By: /s/Patrick J. Foye
Patrick J. Foye
Treasurer
By: /s/Thomas C. Novosel
Thomas C. Novosel
Senior Vice President
and Chief Accounting Officer
Date: August 13, 2003
Exhibit 31.1
CERTIFICATION
I, Patrick J. Foye, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Jacques-Miller
Income Fund, L.P.-II;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 13, 2003
/s/Patrick J. Foye
Patrick J. Foye
Treasurer of Jacques-Miller, Inc., equivalent
of the chief executive officer of the
Partnership
Exhibit 31.2
CERTIFICATION
I, Paul J. McAuliffe, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Jacques-Miller
Income Fund, L.P.-II;
2. Based on my knowledge, this report does not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of
the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
(a) Designed such disclosure controls and procedures, or caused such
disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the
registrant, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the
period in which this report is being prepared;
(b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of
the end of the period covered by this report based on such
evaluation; and
(c) Disclosed in this report any change in the registrant's internal
control over financial reporting that occurred during the
registrant's most recent fiscal quarter (the registrant's fourth
fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting; and
5. The registrant's other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies and material weaknesses in the design
or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to
record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: August 13, 2003
/s/Paul J. McAuliffe
Paul J. McAuliffe
Executive Vice President and Chief Financial
Officer of Jacques-Miller, Inc., equivalent of
the chief financial officer of the Partnership
Exhibit 32.1
Certification of CEO and CFO
Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
In connection with the Quarterly Report on Form 10-QSB of Jacques Miller Income
Fund, L.P. II (the "Partnership"), for the quarterly period ended June 30, 2003
as filed with the Securities and Exchange Commission on the date hereof (the
"Report"), Patrick J. Foye, as the equivalent of the chief executive officer of
the Partnership, and Paul J. McAuliffe, as the equivalent of the chief financial
officer of the Partnership, each hereby certifies, pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
that, to the best of his knowledge:
(1) The Report fully complies with the requirements of Section 13(a) or
15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all
material respects, the financial condition and results of operations
of the Partnership.
/s/Patrick J. Foye
Name: Patrick J. Foye
Date: August 13, 2003
/s/Paul J. McAuliffe
Name: Paul J. McAuliffe
Date: August 13, 2003
This certification is furnished with this Report pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and shall not be deemed filed by the Partnership for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended.