FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period to Commission file number 0-16798 SECURED INVESTMENT RESOURCES FUND, L.P. II (Exact name of registrant as specified in its charter) Delaware 36-3451000 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 5453 W. 61st Place, Mission, Kansas 66205 (Address of principal executive offices) (Zip Code) (Registrant's telephone number, including area code) (913) 384-5700 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Limited Partnership Interests ("Units") 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 such shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] PART I Item 1. Business Secured Investment Resources Fund, L.P. II ("Partnership") is a Delaware limited partnership formed pursuant to the Delaware Revised Uniform Limited Partnership Act on July 1, 1986. James R. Hoyt is the Individual General Partner and Secured Investment Resources, II Inc., a Missouri corporation, is the Corporate General Partner. The Partnership has no predecessors or subsidiaries. The Partnership was formed with the intent to engage in the business of acquiring, improving, developing, operating and holding for investment, income-producing real properties with the objectives of (i) preserving and protecting the Partnership's capital; (ii) providing cash distributions from operations; (iii) providing capital growth through property appreciation; and (iv) increasing equity in property ownership by the reduction of mortgage loans on Partnership properties. On September 24, 1988, the Partnership closed its offering, having received gross proceeds of $26,830,500 from the sale of 53,661 units of limited partnership interests. The Partnership originally acquired eight properties, which included four apartment communities, three shopping centers and a health care facility. The General Partners feel that all of these properties met the Partnership's investment criteria and objectives. Since the inception of the Partnership, two properties (one apartment community and one shopping center) have been sold. As of December 31, 1996, the Partnership has made cash distributions to Limited Partners of $4,724,456 for the period April 1, 1987 through December 31, 1996. No distributions have been made since April 1990. Future distributions will only be made from excess cash flow not needed for working capital reserves. As of December 31, 1996, the Partnership had no employees. Employees of SPECS, Inc. provide services to the Partnership. The individual General Partner is a shareholder in SPECS, Inc. Item 1. Business--Cont'd. Competition The real estate business is highly competitive and the Partnership competes with numerous entities engaged in real estate activities, some of which have greater financial resources than those of the Partnership. The Partnership's management believes that success against such competition is dependent upon the geographic location of the property, the performance of property managers, the amount of new construction in the area and the maintenance and appearance of the property. With respect to residential property, competition is also based upon the design and mix of the units and the ability to provide a community atmosphere for the tenants. The Partnership's management believes that general economic circumstances and trends and new properties in the vicinity of each of the Partnership's properties will also be competitive factors. Inflation The effects of inflation on the Partnership's operations or investments are not quantifiable. Revenues from property operations fluctuate proportionately with increases and decreases in housing costs. Fluctuations in the rate of inflation also affect the sales values of properties and, correspondingly, the ultimate gains to be realized by the Partnership from property sales. (The remainder of this page intentionally left blank.) Item 2. Properties. The following table sets forth the investment portfolio of the Partnership at December 31, 1996: Average Properties at Occupancy(*) Property Description Initial Cost Date Acquired Percentage 1996 1995 Sunwood Village Apartments 252 Units $10,954,651 May 15, 1987 96% 97% Las Vegas, NV Bayberry Crossing Shopping Center 56,113 Sq.Ft. $ 4,175,012 Jun. 30, 1987 92% 91% Lee's Summit, MO Oak Terrace Active Retirement Center 129 Units $ 8,604,769 Aug. 31, 1988 96% 91% Springfield, IL Oak Terrace Healthcare Center 98 Beds $ 3,980,340 Aug. 31, 1988 100% 100% Springfield, IL Thomasbrook Apartments 196 Units $ 5,992,092 Aug. 26, 1988 89% 91% Shawnee, KS Forest Park Shopping Center 19,980 Sq.Ft. $ 2,871,199 Nov. 23, 1988 100% 100% St. Louis, MO (*) Based upon vacancy amount (in dollars) as a percent of gross possible rents. (The remainder of this page intentionally left blank.) Item 3. Legal Proceedings. None. Item 4. Submission of Matters to a Vote of Security Holders. None. PART II Item 5. Market for Registrant's Common Equity and Related Security Holder Matters. (A) There is no established public trading market for the Units of the Partnership. (B) There have been no distributions the last three years. (C) As of December 31, 1996, the Partnership had admitted 2,722 Limited Partners who purchased 53,661 units. (The remainder of this page intentionally left blank.) Item 6. Selected Financial Data. Years Ended December 31, OPERATING DATA 1996 1995 1994 1993 1992 (In Thousands) Rents $ 5,917 $ 5,583 $ 5,435 $ 5,674 $ 6,102 Maintenance Escalations and Other Income 281 314 256 287 322 Property Operating Expenses 3,101 3,021 2,878 2,960 3,308 Interest Expense (1) 2,242 2,429 2,322 2,725 3,426 Depreciation/ Amortization 1,461 1,388 1,380 1,957 2,264 Gain on sale of Investment Property --- --- --- (1,946) --- Extraordinary gain on debt restructuring 413 890 --- 913 --- Partnership Income (Loss) $ (193) $ (51) $ (889) $ 1,178 $(2,574) Partnership Income (Loss) Per Limited Partnership Unit (2) $ (3.57) $ ( .95) $(16.40) $ 21.74 $(47.48) Cash Distributions Per Limited Partnership Unit $ --- $ --- $ --- $ --- $ --- BALANCE SHEET DATA 1996 1995 1994 1993 1992 (In Thousands) Total Assets $29,702 $30,294 $30,963 $32,012 $40,550 Mortgage Debt $27,474 $27,581 $28,556 $28,677 $38,361 (1) Certain reclassifications have been made from interest expense to amortization to more accurately reflect the change in the bond discount amortization related to the Oak Terrace bond financing. There was no income effect as a result of these reclassifications. Item 6. Selected Financial Data--Cont'd. (2) Partnership income (loss) per limited partnership unit is computed by dividing the income (loss) allocated to the Limited Partners by the weighted average number of limited partnership units outstanding. Per unit information has been computed based on 53,661 weighted average limited partnership units outstanding. Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations When comparing 1996 and 1995 operations, total revenues increased $300,000 (5.1%) primarily due to increased occupancy on both residential and commercial properties. Interest expense decreased $187,000 (7.7%) to $2,242,000 for 1996. Depreciation and amortization went from $1,389,000 in 1995 to $1,461,000 in 1996, an increase of $72,000 (5.2%). Total operating expenses for 1996 increased $90,000 (3.5%) from 1995 levels. Professional services decreased $16,000 (1.7%). Management fees increased $6,000 (2.2%) while general and administrative expenses remained stable. In 1996 the loss before extraordinary item decreased from ($942,000) in 1995 to ($606,000) in 1996 (35.7%). When comparing 1995 and 1994 operations, total revenues increased $206,000 (3.6%) primarily due to increased occupancy on both residential and commercial properties. Interest expense increased $107,000 (4.6%) to $2,429,000 for 1995. Depreciation and amortization went from $1,381,000 in 1994 to $1,388,000 in 1995. Total operating expenses for 1995 increased $143,000 (5.0%) from 1994 levels. Professional services decreased $7,000 (6.9%). Management fees increased $8,000 (3.2%), while general and administrative expenses increased $7,000 (5.3%). In 1995 the loss before extraordinary items increased from ($889,000) in 1994 to ($942,000) in 1995 (5.9%). Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Cont'd Results of Operations--Cont'd. In The Pines revenues for 1993 were $682,000, while operating expenses were $315,000. Interest for 1993 was $369,000 and depreciation was $112,000. The following comparisons between the Partnership's 1994 and 1993 operations do not include these figures in order to provide a fair operational comparison for 1994 and 1993. The 1994 Partnership loss of $(889,000) is much better than the 1993 amount of $(1,681,000), prior to gains associated with debt restructuring and the sale of In The Pines. When comparing 1994 and 1993 operations, total revenues increased $413,000 (7.8%) to $5,691,000. Of this increase $308,000 was from residential property and $105,000 was from commercial property. These increases came about due to higher average rental rates, decreased rental concessions and improved occupancy levels. The higher residential rental rates, resulted in increased resident turnover and higher operating expenses. Operating expenses increased $233,000 (8.8%) to $2,878,000. These increases were primarily in the areas of repairs, supplies, payroll, and utilities. The General Partners anticipate 1997 operating results will continue to improve over 1996 and 1995 as a result of the continued planned increase in rental rates and decreased rental incentives. This planned increase in net rental income will be combined with continued efforts to reduce expenses. Liquidity and Capital Resources During 1996, the primary source of working capital was provided by net cash provided by operating activities of $1,029,000. Investing activities for new equipment and additional bond reserves consumed $378,000 and financing activities consumed an additional $612,000. This resulted in an increase of cash of $39,000 during the year. Accrued interest decreased during the year by $4,000. Thomasbrook Apartments' principal and interest is Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations--Cont'd Liquidity and Capital Resources--Cont'd. past due by $606,791 as of December 31, 1996. The cash generated from operations for that property is insufficient to service the mortgage under the current payment requirements. The General Partner has had ongoing negotiations with the lender concerning a complete restructure of the mortgage and related debt service. On May 17, 1996 the Partnership refinanced the matured first mortgage on Sunwood Village Apartments. The terms of the new mortgage are interest at 8.625% with monthly principal and interest payments of $63,000 through the loan maturity date of June 1, 2001 (5 years). The Partnership recognized a gain of $352,227 refinancing the note due in 1996. All of the deferred interest relating to the original note was forgiven by the Lender. On November 21, 1996 the Partnership refinanced the first and second mortgage on Bayberry Crossing Shopping Center. The terms of the new mortgage are 8.25% interest with monthly principal and interest payments of $21,571 through the loan maturity date of November 10, 1999 (three years). The Partnership recognized a gain of $60,571 upon refinancing of the notes due in 1996. All of the deferred interest, accrued interest and late charges relating to the original note were forgiven by the lender. During 1995, the primary source of working capital was provided by net cash form operating activities of $936,000. Investing activities for new equipment and additional bond reserves consumed $363,000 and financing activities consumed an additional $333,000. This resulted in an increase of cash of $239,000 during the year. Accrued interest increased during the year by $435,000. Thomasbrook Apartments' mortgage is past due by $540,296 as of December 31, 1995. The cash generated from operations for that property is insufficient to service the mortgage under the current payment requirements. During 1994, the primary source of working capital was provided by operating activities. Operations generated $541,000, while investing activities for new equipment and additional bond reserves consumed Item 7. Management's Discussion and Analysis of Fiancnial Condition and Results of Operations--Con't'd. Liquidity and Capital Resources--Cont'd. $229,000 and financing activities consumed an additional $236,000, resulting in an increase of cash of $76,000 during the year. The increased cash flow from improved rent receivable collections and improved operations, allowed the partnership to reduce accounts payable to $145,000. Accrued interest increased during the year by $78,000. The General Partners believe that sufficient working capital will be available during 1997 to fund known, on- going operating and capital requirements of the Partnership. In 1997, the Partnership anticipates cash flow from operations will improve because management intends to 1) improve occupancy on the commercial properties; 2) achieve rental rate increases; 3) decrease the amount of promotional rent discounts offered on the residential properties; and 4) continue to maintain stringent controls over expenses. The General Partners intend to evaluate the property portfolio to determine if it is prudent to offer one or more properties for sale or possibly restructure the related financing packages. Any unleveraged portion of the net sales proceeds or favorable refinancing terms will generate additional working capital. The General Partners have determined it prudent to discontinue cash distributions until such time that adequate working capital reserves are available. All statements contained herein that are not historical facts including the Partnership's current business strategy, the Partnership's projected sources and uses of cash, and the Partnership's plans for future operations, are based upon current expectations. These statements are forward-looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: the availability of sufficient capital to finance the Partnership's business plans on terms satisfactory to the Partnership; competitive factors; changes in regulations affecting the Partnership's business; general businesses and economic conditions; and other factors described from time to time in the Partnership's reports filed with the Securities and Exchange Commission. The Partnership cautions readers not to place undue reliance on any such forward-looking statements, which statements are made pursuant to the Private Litigation Reform Act of 1995 and, as such, speak only as of the date made. Item 8. Financial Statements and Supplementary Data. SECURED INVESTMENT RESOURCES FUND, L.P. II Index Page Independent Auditors' Report 12 Financial Statements: Balance Sheets - December 31, 1996 and 1995 13-14 Statements of Operations - Years Ended December 31, 1996, 1995 and 1994 15 Statements of Partnership Capital - Years Ended December 31, 1996, 1995 and 1994 16 Statements of Cash Flows - Years Ended December 31, 1996, 1995 and 1994 17-18 Notes to Financial Statements 19-29 INDEPENDENT AUDITORS' REPORT The Partners Secured Investment Resources Fund, L.P. II Mission, KS We have audited the accompanying balance sheets of Secured Investment Resources Fund, L.P. II as of December 31, 1996 and 1995, and the related statements of operations, partnership capital and cash flows for each of the three years in the period ended December 31, 1996. We have also audited the schedules listed in the accompanying index. These financial statements and schedules are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and schedules based upon our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and schedules are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and schedules. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedules. We believe that our audits provide a reasonable basis for our opinion. As discussed in Note C, the Partnership has a mortgage loan that is delinquent on scheduled payments and real estate taxes. The Partnership is in current negotiations with the mortgage holder to extend or refinance this obligation. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Secured Investment Resources Fund, L.P. II 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. Also in our opinion, the schedules present fairly, in all material respects, the information set forth therein. s/ BDO Seidman, LLP St. Louis, Missouri February 7, 1997 SECURED INVESTMENT RESOURCES FUND, L.P. II BALANCE SHEETS December 31, 1996 1995 ASSETS INVESTMENT PROPERTIES (Notes B and C) Land and buildings $ 36,354,615 $ 36,217,082 Furniture, fixtures and equipment 1,983,816 1,797,522 38,338,431 38,014,604 Less accumulated depreciation and allowance for losses 11,946,482 10,725,975 26,391,949 27,288,629 RESTRICTED DEPOSITS Bond cash reserves (Note C) 1,510,000 1,510,000 Bond principal reduction reserves 455,125 429,924 Other 28,750 --- 1,993,875 1,939,924 OTHER ASSETS Cash 561,667 522,835 Rents and other receivables, less allowance of $54,600 in 1996 and $45,475 in 1995 14,431 12,069 Due from related parties (Note D) 179,423 174,423 Prepaid expenses 96,982 111,061 Debt issuance costs, net of accumulated amortization of $218,729 in 1996 and $129,854 in 1995 365,585 89,487 Commercial commissions, deposits and other 98,307 155,700 1,316,395 1,065,575 $ 29,702,219 $ 30,294,128 See notes to financial statements. SECURED INVESTMENT RESOURCES FUND, L.P. II BALANCE SHEETS--CONT'D. December 31, 1996 1995 LIABILITIES AND PARTNERSHIP CAPITAL Mortgage debt (Note C) $ 27,473,556 $ 27,581,485 Deferred interest (Note C) 737,370 1,126,213 Accrued interest 684,139 688,468 Accounts payable and accrued expenses (Note G) 471,568 398,997 Unearned revenue 36,302 14,358 Tenant security deposits 148,462 140,325 TOTAL LIABILITIES 29,551,397 29,949,846 PARTNERSHIP CAPITAL General Partners Capital contribution 1,000 1,000 Partnership deficit (187,521) (185,586) (186,521) (184,586) Limited Partners Capital contributions 18,901,831 18,901,831 Partnership deficit (18,564,488) (18,372,963) 337,343 528,868 TOTAL PARTNERSHIP CAPITAL 150,822 344,282 $ 29,702,219 $ 30,294,128 See notes to financial statements. SECURED INVESTMENT RESOURCES FUND, L.P. II STATEMENTS OF OPERATIONS Years Ended December 31, 1996 1995 1994 REVENUES Rents $ 5,916,810 $ 5,583,063 $ 5,435,088 Interest 11,722 3,601 --- Maintenance escalations 269,041 310,848 256,181 6,197,573 5,897,512 5,691,269 OPERATING AND ADMINISTRATIVE EXPENSES Property operating expenses 2,604,239 2,514,846 2,379,688 General and administrative expenses 136,698 136,511 129,607 Professional services (Note D) 80,728 96,400 103,593 Management fees (Note D) 279,374 273,304 264,876 3,101,039 3,021,061 2,877,764 NET OPERATING INCOME 3,096,534 2,876,451 2,813,505 NON-OPERATING EXPENSES Interest 2,242,210 2,429,217 2,322,166 Depreciation and amortization 1,460,582 1,388,895 1,380,517 3,702,792 3,818,112 3,702,683 Partnership income (loss) before extraordinary item (606,258) (941,661) (889,178) Extraordinary gain on debt restructuring-- (Note C) 412,798 890,366 --- PARTNERSHIP INCOME (LOSS) $ (193,460) $ (51,295) $ (889,178) Allocation of income (loss) General Partners $ (1,935) $ (513) $ (8,892) Limited Partners (191,525) (50,782) (880,286) $ (193,460) $ (51,295) $ (889,178) Per Limited Partnership Unit Income (loss) before extraordinary item $ (11.19) $ (17.37) $ (16.40) Extraordinary item 7.62 16.42 --- Total per Limited PartnershiUnit $ ( 3.57) $ (.95) $ (16.40) See notes to financial statements. SECURED INVESTMENT RESOURCES FUND, L.P. II STATEMENTS OF PARTNERSHIP CAPITAL Years Ended December 31, 1996, 1995 and 1994 General Limited Partners Partners Total Balances at January 1, 1994 $ (175,181) $1,459,936 $1,284,755 Partnership loss ( 8,892) ( 880,286) ( 889,178) Balances at December 31, 1994 (184,073) 579,650 395,577 Partnership loss ( 513) ( 50,782) ( 51,295) Balances at December 31, 1995 (184,586) 528,868 344,282 Partnership loss (1,935) (191,525) (193,460) Balance at December 31, 1996 $ (186,521) $ 337,343 $ 150,822 See notes to financial statements. SECURED INVESTMENT RESOURCES FUND, L.P. II STATEMENTS OF CASH FLOWS Years Ended December 31, 1996 1995 1994 OPERATING ACTIVITIES Partnership loss $ ( 193,460) $ (51,295) $ (889,178) Adjustments to reconcile partnership loss to net cash provided by operating activities: Depreciation and amortization 1,460,582 1,388,895 1,380,517 Gain on debt restructuring (412,798) (890,366) --- Provision for losses on rents and other receivables 9,125 (24,638) (16,385) Changes in assets and liabilities: Rents and other receivables (11,487) 34,041 52,251 Prepaid expenses 14,079 19,611 48,381 Commercial commissions, deposits and other 40,663 5,974 42,313 Accounts payable and accrued expenses 96,526 7,009 (144,774) Accrued interest (4,329) 435,431 78,117 Unearned revenue 21,944 346 (3,520) Tenant security deposits 8,137 11,019 (6,187) NET CASH PROVIDED BY OPERATING ACTIVITIES 1,028,982 936,027 541,535 INVESTING ACTIVITIES Improvements to investment properties (323,827) (358,069) (226,809) Purchase of restricted bond cash reserves (53,951) (5,460) (2,592) NET CASH USED IN INVESTING ACTIVITIES $ (377,778) $ (363,529) $ (229,401) SECURED INVESTMENT RESOURCES FUND, L.P. II STATEMENTS OF CASH FLOWS--CONT'D. Years Ended December 31, 1996 1995 1994 FINANCING ACTIVITIES Deferral of interest payable $ --- $ 17,748 $ 38,154 Debt issuance costs (346,243) (964) (2,708) Advanced (to) from related parties (5,000) (427) 1,138 Principal payments on debt (259,129) (350,244) (273,009) NET CASH USED IN FINANCING ACTIVITIES (612,372) (333,887) (236,425) INCREASE IN CASH 38,832 238,611 75,709 CASH BEGINNING OF YEAR 522,835 284,224 208,515 CASH END OF YEAR $ 561,667 $ 522,835 $ 284,224 See notes to financial statements. SECURED INVESTMENT RESOURCES FUND, L.P. II NOTES TO FINANCIAL STATEMENTS Note A--SIGNIFICANT ACCOUNTING POLICIES Organization and Business--Secured Investment Resources Fund, L.P. II (the Partnership) is a Delaware limited partnership formed pursuant to the Delaware Revised Uniform Limited Partnership Act on July 1, 1986. The General Partners' and Limited Partners' interest in Partnership earnings or loss initially amounts to 1% and 99%, respectively. The allocation of the 1% interest between the General Partners is discretionary. At such point in time cash distributions to the Limited Partners amount to their original invested capital plus interest at a rate of the greater of 8% (10% for those investors who subscribed for units on or before December 31, 1986) or the increase in the consumer price index per annum, cumulative non-compounded on their adjusted invested capital, earnings or loss will be allocated 15% to the General Partners and 85% to the Limited Partners. Restricted Deposits--These restricted deposits are deposited into Money Market Treasury Funds and Certificates of Deposits. The Partnership expects to hold these until bond maturity. The amortized cost value approximates market value. Depreciation--Investment property is depreciated on a straight-line basis over the estimated useful life of the property (30 years for buildings and 5 years for furniture, fixtures and equipment). Improvements are capitalized and depreciated over their estimated useful lives. Maintenance and repair expenses are charged to operations as incurred. Income Taxes--Any tax liabilities or benefits arising from Partnership operations are recognized individually by the respective partners and, consequently, no provision will be made by the Partnership for income taxes or income tax benefits. Partnership Income or Loss Per Limited Partnership Unit--Partnership operations are recognized individually by the respective partners and, consequently, no provision will be made by the Partnership for income taxes or income tax benefits. Debt Issuance and Refinancing Costs--Loan costs in the amount of $346,243, $964 and $2,708 were incurred and capitalized by the Partnership in 1996, 1995 and 1994, respectively. These costs are being amortized over the term of the related loans. NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE A--SIGNIFICANT ACCOUNTING POLICIES--CONT'D Reclassifications--Certain items in the 1996, 1995 and 1994 financial statements have been reclassified. No income effect resulted from these reclassifications. Accounting 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 at the date of the financial statement and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. New Accounting Standards--In March 1995, the FASB issued its Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and For Long-Lived Assets to Be Disposed Of ("SFAS 121"). SFAS 121 requires that long-lived assets and certain intangibles to be held and used by an entity be reviewed for impairment when events or changes in circumstances indicate that the carrying amount may not be recoverable. In addition, SFAS 121 requires long-lived assets and certain intangibles to be disposed of to be reported at the lower of carrying amount or fair value less costs to sell. SFAS 121 is effective for fiscal years beginning after December 15, 1995. The application of this pronouncement did not have a material effect on the financial statements of the Partnership. (The remainder of this page intentionally left blank.) NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE B--INVESTMENT PROPERTIES Investment properties consists of the following: December 31, 1996 1995 Cost (including capital improvements subsequent to acquisition): Bayberry Crossing Shopping Center $ 4,467,610 $ 4,451,962 Forest Park Shopping Center 2,946,998 2,944,655 Thomasbrook Apartments 6,660,081 6,579,745 Sunwood Village Apartments 11,369,101 11,285,696 Oak Terrace Healthcare Center 3,980,340 3,980,340 Oak Terrace Active Retirement Center 8,905,822 8,763,727 Other equipment 8,479 8,479 38,338,431 38,014,604 Less Accumulated depreciation 11,196,482 9,975,975 Allowance for losses on investment properties 750,000 750,000 $ 26,391,949 $ 27,288,629 During 1991 and 1990, the Partnership reduced the carrying value of its commercial property portfolio to reflect real estate market conditions. This change is reflected in Allowance for Losses on Investment Properties. Depreciation expense was $1,220,507, $1,196,443 and $1,189,238 for the year ended December 31, 1996, 1995 and 1994, respectively. NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE C--MORTGAGE DEBT Mortgage debt consists of the following: December 31, 1996 1995 Collateralized by Investment Property: First Mortgages: Bayberry Crossing Shopping Center $ 2,618,862 $ 831,023 Forest Park Shopping Center 1,201,571 1,288,958 Thomasbrook Apartments 4,984,179 4,984,179 Sunwood Village Apartments 8,070,786 8,136,792 Oak Terrace Active Retirement Center (OTARC) and Oak Terrace Healthcare Center (OTHCC) 12,800,000 12,800,000 Less bond discount (2,201,842) (2,353,042) Second Mortgages: Bayberry Crossing Shopping Center --- 1,893,575 $27,473,556 $27,581,485 Bayberry Crossing Shopping Center (Bayberry) On November 21, 1996 the Partnership refinanced the first and second mortgage on Bayberry Crossing Shopping Center. The terms of the new mortgage are 8.25% interest with monthly principal and interest payments of $21,571 through the loan maturity date of November 10, 1999 (three years). The Partnership recognized a gain of $60,571 upon the refinancing of the notes in 1996. All of the deferred interest, accrued interest and late charges relating to the original note were forgiven by the lender. NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE C--MORTGAGE DEBT--CONT'D. Forest Park Shopping Center (Forest Park) A bond financing agreement with a current balance of $1,201,571 is collateralized by Forest Park. Principal and interest payments are due monthly. Interest is calculated at 80% of the current prime rate and adjusted annually. Monthly principal is due at an amortization rate of 17 years, which fully amortizes the loan through the maturity date of March, 2008. The bonds are callable on April 1, 1998 and 2003. The interest rates at the adjustment dates of April 1, 1996, 1995 and 1994 were 8.25%, 7.20%, and 6.25% respectively. Thomasbrook Apartments (Thomasbrook) A purchase money note with a current balance of $4,984,179 is collateralized by Thomasbrook. Principal and interest payments are due monthly in an amount necessary to amortize the principal over thirty years. The interest rate is 9.5% through the maturity date of September 1, 2000. No principal payments were made in 1996 and as of December 31, 1996, accrued interest for Thomasbrook Apartments is past due by $606,791 due to the negative cash flow status of the apartment complex. The General Partner and the lender are engaged in ongoing negotiations related to a restructure of this debt and it is anticipated that a restructure will be completed in 1997. The Partnership is currently paying debt service at $35,000 per month which represents the cash flow of the property. It is anticipated those payments will continue until a restructuring or refinancing is completed. The net book value of this property was $4,531,000 as of December 31, 1996. Sunwood Village Apartments (Sunwood) On May 17, 1996 the Partnership refinanced the matured first mortgage on Sunwood Village Apartments. The terms of the new mortgage are interest at 8.625% with monthly principal and interest payments of $63,000 through the loan maturity date of June 1, 2001 (5 years). The Partnership recognized a gain of $352,227 upon refinancing of the note in 1996. All of the deferred interest relating to the original note was forgiven by the lender. NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE C--MORTGAGE--CONT'D. Oak Terrace Active Retirement Center (OTARC) and Oak Terrace Healthcare Center (OTHCC) A bond financing agreement is collateralized by OTARC, OTHCC, and interest earned on bond cash reserves and debt service reserves invested in Money Market Mutual Funds ($1,510,000) and Certificates of Deposits ($455,125). The original principal balance of $15,100,000 consisted of variable rate demand multi-family housing revenue bonds, which mature serially from December 31, 1991 to December 2015. The effective rate was fixed on the commencement date of the bonds based on 20 Year U.S. Treasury Bonds futures contracts. The bonds contained a financing agreement providing for the financial institution to receive a fee to fix the interest rate at 6.2% on $10,700,000 of the principal balance. The bond discount paid to obtain this agreement is amortized over the life of the bonds using an effective interest rate method. The remaining $4,400,000 of the original principal balance bears interest at variable rates. This rate, which is determined weekly by the Remarketing Agent, is based upon his opinion as to the minimum rate necessary to sell the Bonds (at par) in a secondary market. At December 31, 1996 the variable rate was 6.2%. The current $12,800,000 balance of bonds consist of $4,400,000 at a variable interest rate and $8,400,000 at the fixed interest rate. The Partnership had the option to pay or defer payment on the difference in the fixed rate 6.2% on the $10,700,000 bonds and the reduced rate of 4.22%. On April 20, 1994 the fixed rate was reduced to 4.22%. The balance of deferred interest calculated at that date was the difference between the bonds floating rate and the fixed rate. The resulting balance of deferred interest was $737,370. Pursuant to the terms of the bond financing agreement, certain cash reserves are required and are designated for scheduled principal payments and replacement reserves. Interest earned on these reserves is recorded as a reduction of interest expense and is considered in the computation of the amortization of the bond discount. As of December 31, 1996 and 1995, the unamortized balance of the bond discount was $2,201,842 and $2,353,042. In 1993, the Partnership reached an agreement with the lender whereby the lender released $2,096,949 of bond cash reserves to the Partnership in exchange for a principal paydown of $1,900,000 on the variable rate portion of the bonds. The principal paydown was a prepayment of scheduled principal reductions through December 31, 1998. Therefore, no additional principal payments are required until December 1999. NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE C--MORTGAGE--CONT'D. Cash paid for interest totaled $2,636,889, $2,220,221 and $2,209,797 during 1996, 1995, and 1994, respectively. Maturities of mortgage debt are as follows: Year 1997 $ 5,169,328 1998 193,781 1999 2,705,013 2000 167,522 2001 7,875,119 Thereafter 1,180,375 29,675,398 Bond discount (2,201,842) Net debt outstanding $27,473,556 NOTE D--RELATED PARTY TRANSACTIONS Through December 31, 1994, property management services were provided by The Hoyt Group, a Kansas Corporation in which the individual general Partner had a majority interest. As of January 1, 1995, SPECS, Inc., a Kansas Corporation in which the individual General Partner has an interest, receives property management fees for providing property management services. SPECS, Inc. also performs various professional services for the Partnership, primarily tax accounting, audit preparation, SEC 10Q and 10K preparation, and investor services. Amounts paid by the Partnership to The Hoyt Group and SPECS, Inc. are as follows: Years Ended December 31, 1996 1995 1994 Property management fees $279,374 $273,304 $264,876 Professional Services 48,668 48,000 --- $328,042 $321,304 $264,876 These professional services were provided by an unrelated entity previous to January 1, 1995. The General Partners are entitled to receive a Partnership Management Fee equal to 5% of Cash Flow From Operations (as defined) for managing the normal operations of the Partnership exception for Forest Park whose Management Fee is equal to 3%, Oak Terrace Health Care which pays 2% in Management Fees, and Sunwood NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE D--RELATED PARTY TRANSACTIONS Village whose Management Fee is equal to 3%. There was no management fee due for the years ended December 31, 1996, 1995 and 1994. Amounts due from related parties consist of the following: December 31, 1996 1995 Secured Investment Resources II, Inc. $ 174,423 $ 174,423 Secured Investment Resources Fund, L.P. $ 5,000 $ --- The amount due from Secured Investment Resources II, Inc. represents excess syndication costs. Because of many factors, the Partnership did not raise the level of capital anticipated during the initial offering period. As a result, syndication and acquisition costs exceeded the amount allowed per the Partnership Agreement. The General Partners are obligated to reimburse these excess costs/fees. NOTE E--CASH DISTRIBUTIONS No distributions have been made since April 1990. Future distributions will only be made from excess cash flow not needed for working capital reserves. NOTE F--PARTNERSHIP LIQUIDITY The Partnership operates within the real estate industry and is subject to its economic forces, which contributes additional liquidity risk to the Partnership's investment portfolio. These risks include, but are not limited to, changes in general or local economic conditions, changes in interest rates and the availability of permanent mortgage financing which may render the acquisition, sale or refinancing of a property difficult or unattractive, changes in real estate and zoning laws, increases in real estate taxes, federal or local economic or rent controls, floods, earthquakes and other acts of God and other factors beyond the control of the Partnership's management. The illiquidity of real estate investments generally may impair the ability of the Partnership to respond promptly to changing economic conditions. The General Partners believe that sufficient working capital will be available to fund known, ongoing operating and capital expenditure requirements of the Partnership during 1997. The primary source of working capital is expected to be cash flow from operations which is expected to improve over that of the previous year due to improved operations. NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE F--PARTNERSHIP LIQUIDITY--CONT'D Certain positive factors are expected to affect 1997 operations are improved occupancy on the commercial properties, residential rental rate increases and decreased usage of promotional rent discounts. It is also expected that stringent controls over expenditures will be maintained. The availability of the liquidity sources and accomplishment of these objectives are partially predicated on the real estate economic conditions discussed above, which are beyond the control of the Partnership, and will influence the achieved results. NOTE G--ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consists of the following: December 31, 1996 1995 Vendor accounts payable $ 60,718 $ 47,135 Real estate / property taxes 329,540 246,510 Professional fees 30,201 53,733 Utilities 25,093 23,652 Payroll reimbursement 26,016 27,967 $ 471,568 $ 398,997 As of December 31, 1996, delinquent real estate taxes and the corresponding interest on the delinquent taxes are $189,458 and consist of one-half of 1994 and all of 1995 and 1996 for Thomasbrook Apartments. (The remainder of this page intentionally left blank.) NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE H--INCOME TAXES The Partners' capital accounts differ for financial reporting purposes and federal income tax purposes. The primary differences result from: 1) depreciation and amortization; 2) losses and provision for losses on investment properties; and 3) provision for doubtful accounts. The effect of these items is summarized as follows: December 31, 1996 1995 Financial reporting basis: Total assets $ 29,702,219 $ 30,294,128 Total liabilities (29,551,397) (29,949,846) Total Partners' capital $ 150,822 $ 344,282 Tax basis: Total assets $ 37,294,801 37,895,516 Total liabilities (34,395,572) (34,718,036) Total Partners' capital $ 2,899,229 $ 3,177,480 Years Ended December 31, 1996 1995 1994 Partnership loss -- financial reporting purposes $ (193,460) $ (51,295) $ (889,178) Book versus tax differences due to: Deferred Interest --- 129,977 (129,977) Depreciation and amortization (17,931) (44,713) (46,211) Bond discount amortization (98,010) (98,010) (139,719) Unearned income 21,944 14,358 --- Provision for doubtful accounts 9,125 (1,805) (16,120) Other 2,476 1,921 1,961 (82,396) 1,728 (330,066) Partnership loss -- federal income tax purposes $ (275,856) $ (49,567) $(1,219,244) NOTES TO FINANCIAL STATEMENTS--CONT'D. NOTE I--LEASES Rental income on investment properties is reported when earned. The Partnership leases its commercial properties under non-cancelable operating lease agreements. The Partnership's residential properties are leased under short-term lease agreements. Future minimum rents to be received as of December 31, 1996 are as follows: 1997 $ 408,732 1998 317,395 1999 216,706 2000 125,017 2001 88,486 Thereafter 17,392 TOTAL $1,173,728 NOTE J--SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Non-cash activity for the year ended December 31, 1995 follows: 1995 Purchase of Thomasbrook Apartments second mortgage: Mortgage debt retired $ 775,000 Other liabilities 115,366 $ 890,366 NOTE K--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying values reflected in the balance sheets at December 31, 1996, reasonably approximate the fair values for cash and cash equivalents. The Partnership cannot estimate the fair value of its fixed rate borrowings at December 31, 1996, as there is no readily available market value for instruments with similar characteristics. Item 9. Changes in and Disagreement with Registrant's Certifying Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Registrant. The General Partners of the Partnership are James R. Hoyt and Secured Investment Resources II, Inc. Secured Investment Resources II, Inc. (the Corporate General Partner) was incorporated under the laws of the state of Missouri on June 20, 1986 for the purpose of acting as General Partner and Acquisition Agent of the Partnership. As of December 31, 1996, Mr. James R. Hoyt is the sole officer and director. James R. Hoyt (the Individual General Partner), age 59, holds a Bachelor's Degree in Business Administration and is a licensed real estate broker in two states. Mr. Hoyt has been actively involved for more than the past twenty years in various real estate endeavors including development, syndication, property management and brokerage. Mr. Hoyt is the Individual General Partner and sponsor of Secured Investment Resources Fund, L.P. and Secured Investment Resources Fund, L.P. III. Since 1983, Mr. Hoyt has also been involved as the Individual General Partner in ten specified real estate private placement offerings. As of December 31, 1996, these partnerships, including Secured Investment Resources Fund, L.P. II, have raised a total of $60,709,750. Item 11. Management Compensation During 1996, the Partnership paid $279,374 in fees to related parties for property management services. Item 12. Security Ownership of Certain Beneficial Owners and Management. (a) Security Ownership of certain beneficial owners. No individual or group as defined by Section 13(d)(3) of the Securities Exchange Act of 1934, known to the registrant is the beneficial owner of more than 5 percent of the registrant's securities. (b) Security ownership of Management. The General Partners own less than 1%. (c) Change in Control. None. Item 13. Certain Relationships and Related Transactions. See Notes to Financial Statements, Note D appearing in Item 8. (The remainder of this page intentionally left blank.) PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. (a)(1) The following Financial Statements of Secured Investment Resources Fund, L.P. II are included in Item 8: Page (i) Independent Auditors' Report 12 (ii) Balance Sheets - December 31, 1996 and 1995 13-14 (iii) Statements of Operations - Years Ended December 31, 1996, 1995 and 1994 15 (iv) Statements of Partnership Capital - Years Ended December 31, 1996, 1995 and 1994 16 (v) Statements of Cash Flows Years Ended December 31, 1996, 1995 and 1994 17-18 (vi) Notes to Financial Statements 19-29 (a)(2) The following Financial Statement Schedules are filed as part of this report: (i) Schedule II - Allowance for Doubtful Accounts 36 (ii) Schedule III - Real Estate and Accumulated Depreciation 37-40 All schedules other than those indicated in the index have been omitted as the required information is presented in the financial statements, related notes or is inapplicable. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K--Cont'd. (a)(3) The following Exhibits are Incorporated by Reference and are an integral part of this Form 10-K. Exhibit Number Description (1) (a) Amendment to Dealer Manager Agreement dated April 30, 1987. (ix) (3) (a) Amended and Restated Agreement of Limited Partnership. (iii) (b) Second Amendment to Restated Certificate and Agreement of Limited Partnership. (vii) (c) Certificate of Limited Partnership. (i) (4) (a) Form of Subscription Agreement. (iii) (b) Form of Certificate evidencing units. (i) (c) See 3(a) & 3(b) above. (iii) (d) See 3(c) above. (i) (10) (a) Property Management Agreement between the Partnership and The Hoyt Group Limited Partnership. (i) (b) Escrow Agreement between the Partnership and The Mission Bank. (ii) (c) Administrative Services Agreement between Secured Investment Resources II, Inc. and the Partnership. (i) (d) Real Estate Contract of Sale and Exhibit for Sunwood Apartments. (iv) (e) Deed of Trust, Promissory Note and Exhibits for Sunwood Apartments. (vi) (f) Real Estate Contract of Sale and Exhibits for Bayberry Crossing Shopping Center. (v) Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K--Cont'd. Exhibit Number Description (g) Deed of Trust, Promissory Note and Exhibits for Bayberry Crossing Shopping Center. (vi) (h) Real Estate Purchase Agreement and Exhibits for Country Club Place Shopping Center. (vi) (i) Deed of Trust, Promissory Note and Exhibits for Country Club Place Shopping Center. (vi) (j) Real Estate Purchase Agreement and Exhibits for In The Pines Apartments. (viii) (k) Deed of Trust, Promissory Note and Exhibits for In The Pines Apartments. (viii) (l) Asset Purchase Agreement and Exhibits for Oak Terrace Active Retirement Community. (x) (m) Asset Purchase Agreement and Exhibits for Oak Terrace Health Care Center. (x) (n) Lease for Oak Terrace Health Care Center. (x) (o) Loan Agreement for Bond Financing on Oak Terrace Active Retirement Community. (x) (p) Real Estate Contract of Sale and Exhibits for Forest Park Shopping Center. (xi) (q) Real Estate Contract of Sale and Exhibits for Thomasbrook Apartments. (xii) (r) Loan Assumption Documents for Thomasbrook Apartments. (xii) (16) (a) Letter regarding Change in Certified Accountant. (xi), (xiii) (25) (a) Power of Attorney (i) (28) (a) Guarantee of General Partners. (i) Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K--Cont'd. (i) Previously filed on July 17, 1986 as an Exhibit to the Registration Statement on Form S-11 (file no. 33-7302) such Exhibit and Registration Statement incorporated herein by reference. (ii) Previously filed on September 25, 1986 as an Exhibit to Amendment #1 to the Registration Statement of Form S-11 such Exhibit and Registration Statement incorporated herein by reference. (iii) Previously filed on September 25, 1986 in the Prospectus as part of Amendment #1 to Registration Statement and incorporated herein by reference. (iv) Previously filed as an exhibit to Form 8-K dated June 2, 1987 and incorporated herein by reference. (v) Previously filed as an exhibit to Form 8-K dated June 5, 1987 and incorporated herein by reference. (vi) Previously filed as an exhibit to Registration Statement on Form S-11 (file No. 33-7302) dated August 13, 1987 and incorporated herein by reference. (vii) Previously filed as an Exhibit to the Supplement Prospectus dated August 13, 1987 as part of Post-effective Amendment No. 4 to the Registration Statement on Form S-11 (file No. 33-7302) and incorporated herein by reference. (viii) Previously filed as an Exhibit to Form 8-K dated January 13, 1988 and incorporated herein by reference. (ix) Previously filed as an Exhibit to Form 8, Amendment to Form 8-K dated February 29, 1988 and incorporated herein by reference. (x) Previously filed as an Exhibit to Form 8-K dated September 14, 1988 and incorporated herein by reference. (xi) Previously filed as an Exhibit to Form 8-K dated December 7, 1988 and incorporated herein by reference. (xii ) Previously filed as an Exhibit to Form 10-K dated March 30, 1989 and incorporated herein by reference. (xiii) Previously filed as an Exhibit to Form 8-K dated December 4, 1989 and incorporated herein by reference. (b) Report of Form 8-K filed during the fourth quarter None. Secured Investment Resources Fund L.P. II Schedule II - Allowance for Doubtful Accounts December 31, 1996 Balance at Additions Bad Debt Write Balance at Beginning of Charged to Offs Deducted End Period Operations From Allowance of Period For Years Ended December 31, 1994 $ 63,400 $(16,385) $ 267 $ 47,282 1995 $ 47,282 $(24,638) $ 22,831 45,475 1996 $ 45,475 $ 65,590 $ 56,465 $ 54,600 Secured Investment Resources Fund, L.P. II Schedule III - Real Estate & Accumulated Depreciation December 31, 1996 Initial Cost to Partnership (A) Subsequent to Acquisition Buildings & Furniture Reduction Encumbrances Land Improvements Equipment Improvements of Basis (B) Other Equipment $ --- $ --- $ --- $ --- $ 8,479 $ --- Garden Apartments: Sunwood Apartments 8,070,786 1,375,448 9,706,178 123,000 434,365 (269,890) Las Vegas, NV Thomasbrook Apartments 4,984,179 655,327 5,305,193 --- 927,983 (228,422) Shawnee, KS Strip Shopping Centers Bayberry Crossings 2,618,862 607,184 3,729,847 --- 371,474 (240,895) Lee's Summit, MO Forest Park 1,201,571 504,761 2,372,378 --- 113,070 (43,211) St. Louis, MO Retirement Center: Oak Terrace Active Retirement Center Springfield, IL 11,744,225 258,269 8,174,500 172,000 301,053 --- Nursing Home: Oak Terrace Health Care Center 1,055,775 273,834 3,412,956 293,550 --- --- Springfield, IL Less Bond Discount on Oak Terrace Active Retirement Center and (2,201,842) --- --- --- --- --- Health Care Center $27,473,556 $3,674,823 $32,701,052 $ 588,550 $2,156,424 $(782,418) Gross Amount at Which Carried at Close of Period Buildings & Furniture Accumulated Date Depreciation Land Improvements Equipment Total Depreciation(3) Acquired Life Other Equipment $ --- $ --- $ 8,479 $ 8,479 $ 8,479 5 Yrs <F2> Garden Apartments: Sunwood Apartments 1,340,364 9,552,542 476,195 11,369,101 3,354,809 15-May-87 30 Yrs <F1> Las Vegas, NV 5 Yrs <F2> Thomasbrook Apartments 451,058 5,714,861 494,162 6,660,081 2,129,345 26-Aug-88 30 Yrs <F1> Shawnee, KS 5 Yrs <F1> Strip Shopping Centers Bayberry Crossings 574,761 3,615,679 277,170 4,467,610 1,275,091 30-Jun-87 30 Yrs <F1> Lee's Summit, MO 5 Yrs <F2> Forest Park Shopping Center 492,694 2,359,159 95,145 2,946,998 1,400,784 23-Nov-88 30 Yrs <F1> St. Louis, MO 5 Yrs <F2> Retirement Center: Oak Terrace Active Retirement Center Springfield, IL 366,834 8,199,873 339,115 8,905,822 2,536,381 31-Aug-88 30 Yrs <F1> 5 Yrs <F2> Nursing Home: Oak Terrace Health Care Center 273,834 3,412,956 293,550 3,980,340 1,241,593 31-Aug-88 30 Yrs <F1> Springfield, IL 5 Yrs <F2> $3,499,545 $32,855,070 $1,983,816 $38,338,431 $11,946,482 <FN> <F1> Estimated useful life of buildings. <F2> Estimated useful life of furniture and fixtures. <F3> Includes allowance for losses of $750,000. NOTES: (A) The initial cost to the Partnership represents the original purchase price of the properties, including $205,582 and $145,578 of improvements incurred in 1988 and 1987, respectively, which were contemplated at the time the property was acquired. (B) Receipts received under the terms of certain guarantee agreements are recorded by the Partnership as a reduction of the basis of the property to which the guaranteed income relates. Secured Investment Resources Fund, L.P. II Schedule III - Real Estate & Accumulated Depreciation -- Continued December 31, 1996 Buildings & Furniture & Total Land Improvements Equipment (C) Reconciliation of Real Estate owned: Balance at January 1, 1994 $37,429,726 $3,390,979 $32,742,546 $1,296,201 Additions during year: Improvements 226,809 --- 34,117 192,692 Balance at December 31, 1994 37,656,535 3,390,979 32,776,663 1,488,893 Additions during year: Improvements 358,069 --- 49,439 308,630 Balance at December 31, 1995 38,014,604 3,390,979 32,826,102 1,797,523 Additions during year: Improvements 323,827 108,566 28,968 186,293 Balance at December 31, 1996 $38,338,431 $3,499,545 $32,855,070 $1,983,816 (D) Reconciliation of Accumulated Depreciation Balance at January 1, 1994 8,340,293 --- 7,035,013 1,305,280 Additions during year: Depreciation Expense 1,189,239 --- 1,100,507 88,732 Balance at December 31, 1994 9,529,532 --- 8,135,520 1,394,012 Additions during year: Depreciation Expense 1,196,443 --- 877,397 319,046 Balance at December 31, 1995 10,725,975 --- 9,012,917 1,713,058 Additions during year: Depreciation Expense 1,220,507 --- 1,090,203 130,304 Balance at December 31, 1996 $11,946,482 $ --- $10,103,120 $1,843,362 (E) The total gross amount of real estate at December 31, 1996 includes $3,085,450 of acquisition fees paid to affiliates. 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. SECURED INVESTMENT RESOURCES FUND, L.P. II A Delaware Limited Partnership (Registrant) By: James R. Hoyt as Individual General Partner Date: Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: Secured Investment Resources II, Inc. as Corporate General Partner By: James R. Hoyt, President Date: Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. No annual report or proxy material has been sent to security holders. 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. SECURED INVESTMENT RESOURCES FUND, L.P. II A Delaware Limited Partnership (Registrant) By: /s/ James R. Hoyt James R. Hoyt as Individual General Partner Date: April 14, 1997 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: Secured Investment Resources II, Inc. as Corporate General Partner By: /s/ James R. Hoyt James R. Hoyt, President Date: April 14, 1997 Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. No annual report or proxy material has been sent to security holders.