Item 1. Business ----------------
Balcor Realty Investors 85-Series II A Real Estate Limited Partnership (the "Registrant") is a limited partnership formed in 1984 under the laws of the State of Illinois. The Registrant raised $83,936,000 from sales of Limited Partnership Interests. The Registrant's operations consist exclusively of investment in and operation of real property, and all financial information included in this report relates to this industry segment.
The Registrant utilized the net offering proceeds to acquire thirteen real property investments and a minority joint venture interest in one additional property. The Registrant has since disposed of five of these properties. As of December 31, 1994, the Registrant owned the eight properties and the minority joint venture interest described under Item 2.

Item 2. Properties ------------------
As of December 31, 1994 the Registrant owns the eight properties described below:
Location Description of Property -------- -----------------------
Fort Worth, Texas Chestnut Ridge Apartments - Phase I (formerly Cottonwood Apartments - Phase I): a 192-unit apartment complex located on approximately 7 acres.
Memphis, Tennessee Country Oaks Apartments: a 200-unit apartment complex located on approximately 10 acres.
Arlington, Texas Forest Ridge Apartments - Phase II: a 328-unit apartment complex located on approximately 15 acres.
St. Louis County, Missouri Hunter's Glen Apartments: a 192-unit apartment complex located on approximately 10 acres.
Hillsborough County, Florida Marbrisa Apartments: a 224-unit apartment complex located on approximately 37 acres.
Gwinnett County, Georgia Park Crossing Apartments: a 280-unit apartment complex located on approximately 21 acres.
Lexington-Fayette, Kentucky Steeplechase Apartments: a 296-unit apartment complex located on approximately 16 acres.
East Baton Rouge Parish, Willow Bend Lake Apartments: a 360-unit Louisiana apartment complex located on approximately 22 acres.
Each of the above properties is held subject to various forms of financing.
The Registrant also holds a 38.38% minority joint venture interest in Rosehill Pointe Apartments located in Lenexa, Kansas.
In the opinion of the General Partner, the Registrant has provided for adequate insurance coverage for its real estate investment properties.
See Notes to Financial Statements for other information regarding real property investments.
Item 3.

Item 3. Legal Proceedings -------------------------
The Registrant is not subject to any material pending legal proceedings, nor were any such proceedings terminated during the fourth quarter of 1994.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders -----------------------------------------------------------
No matters were submitted to a vote of the Limited Partners of the Registrant during 1994.
PART II
Item 5.

Item 5. Market for the Registrant's Common Equity and Related Stockholder ------------------------------------------------------------------------- Matters -------
There has not been an established public market for Limited Partnership Interests and it is not anticipated that one will develop; therefore, the market value of the Limited Partnership Interests cannot reasonably be determined. The Registrant has not made distributions to date to investors. For additional information, see Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources, below.
As of December 31, 1994, the number of record holders of Limited Partnership Interests of the Registrant was 7,393.
Item 6.

Item 7. Management's Discussion and Analysis of Financial Condition and ----------------------------------------------------------------------- Results of Operations ---------------------
Summary of Operations ---------------------
During 1993, Balcor Realty Investors 85-Series II (the "Partnership") recognized a gain in connection with the sale of the Playa Palms Apartments. This caused the Partnership to recognize net income during 1993 as compared to a net loss during 1994 and 1992. In addition, aggregate property operations for the remaining properties improved from 1992 to 1993 and 1993 to 1994.
Operations ----------
1994 Compared to 1993 ---------------------
The July 1993 sale of Playa Palms Apartments caused decreases in rental and service income, interest expense on mortgage notes payable, depreciation expense, amortization expense, property operating expense, maintenance and repairs, real estate taxes and property management fees during 1994 as compared to 1993. These decreases were offset by, or were in addition to, other activity as described below.
The Partnership was able to achieve higher occupancy levels and/or rental rates at all of the Partnership's eight remaining properties. As a result, rental and service income, as well as the related property management fees, increased at these properties during 1994, which partially offset the decreases due to the sale of Playa Palms Apartments.
During the latter half of 1993, restricted investments of $1,995,000 were released and the proceeds were used to repay the respective loans from the General Partner relating to these cash collateral pledges. As a result of these funds no longer being available for short-term investments, interest income on short-term investments decreased during 1994 as compared to 1993.
During 1993, the Partnership reached a settlement with one of the defendants in the litigation related to the Park Crossing Apartments and recognized settlement income of $113,870 in connection with this transaction. The Partnership reached a settlement with the remaining defendants during 1994 and received $300,000 in settlement of all claims due to the Partnership.
In connection with the 1994 refinancings of the properties' mortgage loans, the Partnership retired and replaced $4,215,546 of affiliated mortgage notes payable related to the Chestnut Ridge - Phase I and Forest Ridge - Phase II apartment complexes with General Partner loans. As a result, interest expense on mortgage notes payable decreased and interest expense on short-term loans from affiliates increased during 1994 as compared to 1993. Also contributing to the decrease in interest expense on mortgage notes payable were lower interest rates due to the Chestnut Ridge - Phase I refinancing in 1994 and the Hunter's Glen, Marbrisa, Park Crossing and Steeplechase refinancings in 1993.
Due to the 1994 refinancings of the Chestnut Ridge - Phase I and Forest Ridge - Phase II mortgage loans, deferred expenses related to the previous loans were fully amortized. As a result, amortization of deferred expenses increased during 1994 as compared to 1993.
Increased insurance premiums at all of the Partnership's properties during 1994 offset the decrease in property operating expense due to the sale of Playa Palms Apartments.
During 1994, the Partnership incurred significantly higher maintenance and
repairs expenses at the Marbrisa Apartments in connection with exterior painting and wood replacement as required by the 1993 mortgage refinancing. These expenses were partially offset by the Playa Palms sale and exterior painting and parking lot repairs during 1993 at the Hunter's Glen Apartments.
Real estate tax rates increased during 1994 at Park Crossing and Willow Bend Lake apartment complexes and the assessed value of Park Crossing Apartments also increased during 1994. This resulted in an increase in real estate tax expense at these properties, during 1994 as compared to 1993, which partially offset the decrease in real estate tax expense due to the Playa Palms sale.
Higher legal fees incurred due to the Park Crossing Apartments settlement along with higher accounting, data processing and portfolio management expenses during 1994 resulted in an increase in administrative expenses during 1994 as compared to 1993.
The Partnership holds a minority joint venture interest in the Rosehill Pointe Apartments, which realized a decrease in interest expense during 1994 due to a reduction of the interest rate on the property's first mortgage loan during the third quarter of 1993. This decrease was partially offset by increased expenditures for insurance, utilities, payroll and advertising during 1994 as compared to 1993. As a result of the combined effect of these events, participation in loss of joint venture with an affiliate decreased during 1994 as compared to 1993.
The Partnership recognized a gain on sale of property of $3,648,559 during 1993 in connection with the sale of Playa Palms Apartments.
1993 Compared to 1992 ---------------------
The July 1993 sale of Playa Palms Apartments caused decreases in rental and service income, interest expense on mortgage notes payable, depreciation expense, amortization expense, property operating expense, real estate taxes and property management fees during 1993 as compared to 1992. These decreases were offset by, or were in addition to, other activity as described below. The Partnership also recognized a gain on sale of property during 1993.
The Partnership was able to achieve higher occupancy levels and/or rental rates at seven of the Partnership's eight remaining properties, most significantly at the Marbrisa and Park Crossing apartment complexes. As a result, rental and service income increased at these properties for 1993 and partially offset the decreases in rental and service income discussed above.
As a result of the payoff of restricted investments described above and due to interest rates being lower in 1993 than in 1992, interest income on short-term investments decreased during 1993 as compared to 1992.
During 1992, the Partnership reached a settlement with the seller of the Forest Ridge - Phase II and Highpoint - Phase I apartment complexes and recognized settlement income of $486,000 in connection with this transaction.
Lower interest rates on short-term loans, as well as a reduction in the amount of debt outstanding during 1993 as compared to 1992, resulted in a decrease in interest expense on short-term loans from the General Partner during 1993 as compared to 1992.
As a result of the refinancing of the Hunter's Glen, Marbrisa, Park Crossing, Steeplechase and Willow Bend Lake apartment complexes mortgage loans during 1993, deferred expenses related to the previous loans were fully amortized. In addition, the Partnership recognized amortization expense during 1993 on the new mortgage loans. As a result, amortization of deferred expenses increased during 1993 as compared to 1992, fully offsetting the decrease discussed above.
The Partnership incurred increased parking lot repairs and exterior painting
costs at the Hunter's Glen Apartments and increased roof repairs and parking lot repairs at the Steeplechase Apartments. As a result, maintenance and repair expenses increased during 1993 as compared to 1992. These increases were partially offset by the sale of the Playa Palms Apartments and the absence of exterior painting costs at the Chestnut Ridge - Phase I Apartments in 1993.
During 1992, the Partnership reached a settlement with the seller of the Pleasant Lake Village and Playa Palms apartment complexes. The Partnership recognized a loss of $221,827 as a result of the write-off of the remaining portion of the receivable from the seller which was forgiven as part of the settlement.
The Partnership holds a minority joint venture interest in the Rosehill Pointe Apartments, which realized increased rental and service income at the property due to increases in rental rates and/or occupancy levels during 1993 and a decrease in interest expense due to a reduction of the interest rate on the property's first mortgage loan. Additionally, the property also incurred increased payroll expenditures during 1993. As a result of these events, the Partnership recognized a decrease in its participation in the loss from the joint venture with an affiliate during 1993 as compared to 1992.
Liquidity and Capital Resources -------------------------------
The cash position of the Partnership decreased as of December 31, 1994 when compared to December 31, 1993. The Partnership's operating activities consisted primarily of cash flow generated from property operations, which was partially offset by the payment of administrative expenses, short-term interest expense and deferred interest expense upon the refinancing of the Chestnut Ridge - Phase I and Forest Ridge - Phase II mortgage loans. The Partnership's financing activities included the refinancing of these mortgage loans. From the proceeds of the new first mortgage loans, the Partnership repaid the previous first mortgage loans and a portion of the loans payable from affiliates relating to each property. The Partnership also funded required repair escrows and paid related financing costs. Additional financing activities included payment of principal on mortgage notes payable.
The Partnership owes approximately $12,296,000 to the General Partner at December 31, 1994 in connection with the funding of operating deficits and other working capital requirements. These loans are expected to be repaid from available cash flow from future property operations, or from proceeds received from the disposition of the Partnership's real estate investments prior to any distributions to Limited Partners.
Although affiliates of the General Partner have, in certain circumstances, provided mortgage loans for certain properties of the Partnership, there can be no assurance that loans of this type will be available from either affiliates or the General Partner in the future. The General Partner may continue to provide additional short-term loans to the Partnership to fund working capital needs or property operating deficits, although there is no assurance that such loans will be available. Should such short-term loans from the General Partner not be available, the General Partner will seek alternative third party sources of financing working capital. However, the current economic environment and its impact on the real estate industry make it unlikely that the Partnership would be able to secure financing from third parties to fund working capital needs or operating deficits. Should additional borrowings be needed and not be available through the General Partner, its affiliates or third parties, the Partnership may be required to dispose of some of its properties in order to satisfy Partnership obligations.
The Partnership classifies the cash flow performance of its properties as either positive, a marginal deficit or a significant deficit, each after consideration of debt service payments unless otherwise indicated. A deficit is considered to be significant if it exceeds $250,000 annually or 20% of the
property's rental and service income. The Partnership defines cash flow generated from its properties as an amount equal to the property's revenue receipts less property related expenditures, which include debt service payments. During 1994, six of the Partnership's eight remaining properties generated positive cash flow compared to five properties for the same period in 1993. In addition, the property in which the Partnership holds a minority joint venture interest generated positive cash flow during 1994 and 1993. The Hunter's Glen and Forest Ridge - Phase II apartment complexes generated positive cash flow during 1994 as compared to a marginal deficit during 1993 due to decreased expenditures for parking lot repairs, and the absence of expenditures for exterior painting and higher rental income, respectively. The Chestnut Ridge - Phase I Apartments operated at a marginal cash flow deficit during 1994 and 1993. The Marbrisa Apartments, which generated positive cash flow during 1993, operated at a marginal deficit during 1994 primarily due to higher repairs and maintenance costs.
While the cash flow of certain of the Partnership's properties has improved, the General Partner continues to pursue a number of actions aimed at improving the cash flow of the Partnership's properties including refinancing of mortgage loans, improving property operating performance, and seeking rent increases where market conditions allow. As of December 31, 1994, the occupancy rates of the Partnership's properties ranged from 90% to 97%. Despite improvements during 1993 and 1994 in the local economies and rental markets where certain of the Partnership's properties are located, the General Partner believes that continued ownership of many of the properties is in the best interests of the Partnership in order to maximize potential returns to Limited Partners. As a result, the Partnership will continue to own these properties for longer than the holding period for the assets originally described in the prospectus.
During 1994, the Chestnut Ridge - Phase I and Forest Ridge - Phase II mortgage loans were refinanced. See Note 3 of Notes to Financial Statements for additional information.
In October 1994, the Partnership reached a settlement with the remaining defendants in litigation on the Park Crossing Apartments and received $300,000 in settlement of all claims due to the Partnership. See Note 4 of Notes to Financial Statements for additional information.
The Partnership's properties are owned through the use of third-party and affiliate mortgage loan financings and therefore, the Partnership is subject to the financial obligations required by such loans. See Note 3 of Notes to Financial Statements for information concerning outstanding balances, maturity dates, interest rates, and other terms related to each of these mortgage loans. During 1995, the Country Oaks Apartments mortgage loan of approximately $5,462,000 matures. The General Partner expects to refinance this loan prior to maturity. No mortgage loans mature during 1996. In certain instances it may be difficult for the Partnership to refinance a property in an amount sufficient to retire in full the current third-party mortgage financing with respect to the property. In the event negotiations with the existing lender for a loan modification or with new lenders for a refinancing are unsuccessful, the Partnership may sell the collateral property or other properties to satisfy an obligation or may relinquish title to the collateral property in satisfaction of the outstanding mortgage loan balance.
The General Partner has recently completed the outsourcing of the financial reporting and accounting services, transfer agent and investor records services, and computer operations and systems development functions that provided services to the Partnership. All of these functions are now being provided by independent third parties. Additionally, Allegiance Realty Group, Inc., which has provided property management services to the Partnership's property, was sold to a third party. Each of these transactions occurred after extensive due diligence and competitive bidding processes. The General Partner does not believe that the cost of providing these services to the Partnership, in the aggregate, will be materially different to the Partnership during 1995 when compared to 1994.
Although investors have received certain tax benefits, the Partnership has not commenced distributions. Future distributions to investors will depend on improved cash flow from the Partnership's remaining properties and proceeds from future property sales, as to both of which there can be no assurances. In light of results to date and current market conditions, the General Partner does not anticipate that investors will recover a substantial portion of their original investment.
Inflation has several types of potentially conflicting impacts on real estate investments. Short-term inflation can increase real estate operating costs which may or may not be recovered through increased rents and/or sales prices, depending on general or local economic conditions. In the long-term, inflation can be expected to increase operating costs and replacement costs and may lead to increased rental revenues and real estate values.
Item 8.

Item 8. Financial Statements and Supplementary Data ---------------------------------------------------
See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
The supplemental financial information specified by Item 302 of Regulation S-K is not applicable.
The net effect of the differences between the financial statements and the tax returns is summarized as follows:
December 31, 1994 December 31, 1993 ----------------------- ------------------------- Financial Tax Financial Tax Statements Returns Statements Returns ---------- --------- ---------- ---------
Total assets $52,186,795 $41,006,290 $54,690,993 $44,800,981 Partners' deficit: General Partner (906,714) (14,549,350) (886,520) (13,969,240) Limited Partners (14,763,734) (14,363,891) (12,764,565) (11,271,553) Net (loss) income: General Partner (20,194) (580,110) 13,489 535,554 Limited Partners (1,999,169) (3,092,338) 1,335,395 3,429,757 Per Limited Part- nership Interest (23.82) (36.84) 15.91 40.86
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and ----------------------------------------------------------------------- Financial Disclosure --------------------
There have been no changes in or disagreements with accountants on any matter of accounting principles, practices or financial statement disclosure.
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant -----------------------------------------------------------
(a) Neither the Registrant nor Balcor Partners-XVII, its General Partner, has a Board of Directors.
(b, c & e) The names, ages and business experiences of the executive officers and significant employees of the General Partner of the Registrant are as follows:
TITLE OFFICERS ----- --------
Chairman, President and Chief Thomas E. Meador Executive Officer Executive Vice President, Allan Wood Chief Financial Officer and Chief Accounting Officer Senior Vice President Alexander J. Darragh First Vice President Daniel A. Duhig First Vice President Josette V. Goldberg First Vice President Alan G. Lieberman First Vice President Brian D. Parker and Assistant Secretary First Vice President John K. Powell, Jr. First Vice President Reid A. Reynolds First Vice President Thomas G. Selby
Thomas E. Meador (July 1947) joined Balcor in July 1979. He is Chairman, President and Chief Executive Officer and has responsibility for all ongoing day-to-day activities at Balcor. He is a Director of The Balcor Company. Prior to joining Balcor, Mr. Meador was employed at the Harris Trust and Savings Bank in the commercial real estate division where he was involved in various lending activities. Mr. Meador received his M.B.A. degree from the Indiana University Graduate School of Business.
Allan Wood (January 1949) joined Balcor in August 1983 and, as Balcor's Chief Financial Officer and Chief Accounting Officer, is responsible for the financial and administrative functions. He is also a Director of The Balcor Company. Mr. Wood is a Certified Public Accountant. Prior to joining Balcor, he was employed by Price Waterhouse where he was involved in auditing public and private companies.
Alexander J. Darragh (February 1955) joined Balcor in September 1988 and has primary responsibility for the Portfolio Advisory Group. He is responsible for due diligence analysis and real estate advisory services in support of asset management, institutional advisory and capital markets functions. Mr. Darragh has supervisory responsibility of Balcor's Investor Services, Investment Administration, Fund Management and Land Management departments. Mr. Darragh received masters' degrees in Urban Geography from Queens's University and in Urban Planning from Northwestern University.
Daniel A. Duhig (October 1956) joined Balcor in November 1986 and is responsible for the Asset Management Department relating to real estate investments made by Balcor and its affiliated partnerships, including negotiations for modifications or refinancings of real estate mortgage investments and the disposition of real estate investments.
Josette V. Goldberg (April 1957) joined Balcor in January 1985 and has primary responsibility for all human resources matters. In addition, she has supervisory responsibility for Balcor's administrative and MIS departments. Ms. Goldberg has been designated as a Senior Human Resources Professional
(SHRP).
Alan G. Lieberman (June 1959) joined Balcor in May 1983 and is responsible for the Property Sales and Capital Markets Groups. Mr. Lieberman is a Certified Public Accountant.
Brian D. Parker (June 1951) joined Balcor in March 1986 and is responsible for Balcor's corporate and property accounting, treasury and budget activities. Mr. Parker is a Certified Public Accountant and holds an M.S. degree in Accountancy from DePaul University.
John K. Powell, Jr. (June 1950) joined Balcor in September 1985 and is responsible for the administration of the investment portfolios of Balcor's partnerships and for Balcor's risk management functions. Mr. Powell received a Master of Planning degree from the University of Virginia. He has been designated a Certified Real Estate Financier by the National Society for Real Estate Finance and is a full member of the Urban Land Institute.
Reid A. Reynolds (April 1950) joined Balcor in March 1981 and is involved with the asset management of residential properties for Balcor. Mr. Reynolds is a licensed Real Estate Broker in the State of Illinois.
Thomas G. Selby (July 1955) joined Balcor in February 1984 and has responsibility for various Asset Management functions, including oversight of the residential portfolio. From January 1986 through September 1994, Mr. Selby was Regional Vice President and then Senior Vice President of Allegiance Realty Group, Inc., an affiliate of Balcor providing property management services. Mr. Selby was responsible for supervising the management of residential properties in the western United States.
(d) There is no family relationship between any of the foregoing officers.
(f) None of the foregoing officers or employees are currently involved in any material legal proceedings nor were any such proceedings terminated during the fourth quarter of 1994.
Item 11.

Item 11. Executive Compensation -------------------------------
The Registrant has not paid and does not propose to pay any remuneration to the executive officers and directors of the General Partner. Certain of these officers receive compensation from The Balcor Company (but not from the Registrant) for services performed for various affiliated entities, which may include services performed for the Registrant. However, the General Partner believes that any such compensation attributable to services performed for the Registrant is immaterial to the Registrant. See Note 11 of Notes to Financial Statements for the information relating to transactions with affiliates.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management -----------------------------------------------------------------------
(a) No person owns of record or is known by the Registrant to own beneficially more than 5% of the outstanding Limited Partnership Interests of the Registrant.
(b) Balcor Partners-XVII and its officers and partners own as a group the following Limited Partnership Interests of the Registrant:
Amount Beneficially Title of Class Owned Percent of Class -------------- ------------- ---------------- Limited Partnership Interests 1,235 1.47%
Relatives and affiliates of the partners and officers and partners of the General Partner own 21 Interests.
(c) The Registrant is not aware of any arrangements, the operation of which may result in a change of control of the Registrant.
Item 13.

Item 13. Certain Relationships and Related Transactions -------------------------------------------------------
(a & b) See Note 11 of Notes to Financial Statements for information relating to transactions with affiliates.
See Note 2 of Notes to Financial Statements for information relating to the Partnership Agreement and the allocation of distributions and profits and losses.
(c) No management person is indebted to the Registrant.
(d) The Registrant has no outstanding agreements with any promoters.
PART IV
Item 14.

Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K ------------------------------------------------------------------------
(a) (1 & 2) See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
(3) Exhibits:
(3) The Amended and Restated Agreement and Certificate of Limited Partnership set forth as Exhibit 3 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated March 12, 1985 (Registration No. 2-95000) is incorporated herein by reference.
(4) Subscription Agreement set forth as Exhibit 4.1 to Amendment No. 1 to the Registrant's Registration Statement on Form S-11 dated March 12, 1985 (Registration No. 2-95000) and Form of Confirmation regarding Interests in the Registrant set forth as Exhibit 4.2 to the Registrant's Report on Form 10-Q for the quarter ended June 30, 1992 (Commission File No. 0-14351) are incorporated herein by reference.
(10) Agreement of Sale and attachments thereto relating to the sale of Playa Palms Apartments, previously filed as Exhibit (2) to the Registrant's Report on Form 8-K dated June 2, 1993, is incorporated herein by reference.
(27) Financial Data Schedule of the Registrant for 1994 is attached hereto.
(b) Reports on Form 8-K: No reports were filed on Form 8-K during the quarter ended December 31, 1994.
(c) Exhibits: See Item 14(a)(3) above.
(d) Financial Statement Schedule: See Index to Financial Statements and Financial Statement Schedule in this Form 10-K.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of l934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP
By: /s/Allan Wood -------------------------------- Allan Wood Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor Partners-XVII, the General Partner
Date: March 29, 1995 --------------
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.
Signature Title Date ---------------------- ------------------------------- ------------
President and Chief Executive Officer (Principal Executive Officer) of Balcor Partners-XVII, /s/Thomas E. Meador the General Partner March 29, 1995 -------------------- -------------- Thomas E. Meador
Executive Vice President, and Chief Accounting and Financial Officer (Principal Accounting and Financial Officer) of Balcor /s/Allan Wood Partners XVII, the General Partner March 29, 1995 -------------------- -------------- Allan Wood
INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE
Report of Independent Accountants
Financial Statements:
Balance Sheets, December 31, 1994 and 1993
Statements of Partners' Deficit, for the years ended December 31, 1994, 1993 and 1992
Statements of Income and Expenses, for the years ended December 31, 1994, 1993 and 1992
Statements of Cash Flows, for the years ended December 31, 1994, 1993 and 1992
Notes to Financial Statements
Financial Statement Schedule:
III - Real Estate and Accumulated Depreciation, as of December 31, 1994
Financial Statement Schedules, other than that listed, are omitted for the reason that they are inapplicable or equivalent information has been included elsewhere herein.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Partners of Balcor Realty Investors 85-Series II A Real Estate Limited Partnership:
We have audited the financial statements and the financial statement schedule of Balcor Realty Investors 85-Series II A Real Estate Limited Partnership (An Illinois Limited Partnership) as listed in the index of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Balcor Realty Investors 85-Series II A Real Estate Limited Partnership at December 31, 1994 and 1993, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois March 10, 1995
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALANCE SHEETS December 31, 1994 and 1993
ASSETS
1994 1993 ------------- ------------- Cash and cash equivalents $ 600,949 $ 1,192,138 Restricted investments 480,000 480,000 Escrow deposits 1,041,462 937,213 Accounts and accrued interest receivable 183,575 349,385 Deferred expenses, principally loan financing fees, net of accumulated amortization of $323,605 in 1994 and $283,373 in 1993 1,070,071 1,035,536 ------------- ------------- 3,376,057 3,994,272 ------------- ------------- Investment in real estate, at cost: Land 10,525,187 10,525,187 Buildings and improvements 62,537,549 62,537,549 ------------- ------------- 73,062,736 73,062,736 Less accumulated depreciation 24,251,998 22,366,015 ------------- ------------- Investment in real estate, net of accumulated depreciation 48,810,738 50,696,721 ------------- ------------- $ 52,186,795 $ 54,690,993 ============= =============
LIABILITIES AND PARTNERS' DEFICIT
Loans payable - affiliate $ 12,295,605 $ 8,752,085 Accounts payable 243,758 93,233 Due to affiliates 216,455 108,865 Accrued liabilities, principally interest and real estate taxes 423,967 919,487 Security deposits 228,573 245,973 Loss in excess of investment in joint venture with an affiliate 1,101,982 996,929 Mortgage notes payable - affiliates 1,673,215 7,481,299 Mortgage notes payable 51,673,688 49,744,207 ------------- ------------- Total liabilities 67,857,243 68,342,078
Partners' deficit (83,936 Limited Partnership Interests issued and outstanding) (15,670,448) (13,651,085) ------------- ------------- $ 52,186,795 $ 54,690,993 ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF PARTNERS' DEFICIT for the years ended December 31, 1994, 1993 and 1992
Partners' Deficit Accounts ------------------------------------------ General Limited Total Partner Partners -------------- ------------- -------------
Balance at December 31, 1991 $ (12,352,803) $ (873,537) $(11,479,266)
Net loss for the year ended December 31, 1992 (2,647,166) (26,472) (2,620,694) -------------- ------------- ------------- Balance at December 31, 1992 (14,999,969) (900,009) (14,099,960)
Net income for the year ended December 31, 1993 1,348,884 13,489 1,335,395 -------------- ------------- ------------- Balance at December 31, 1993 (13,651,085) (886,520) (12,764,565)
Net loss for the year ended December 31, 1994 (2,019,363) (20,194) (1,999,169) -------------- ------------- ------------- Balance at December 31, 1994 $ (15,670,448) $ (906,714) $(14,763,734) ============== ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF INCOME AND EXPENSES for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 -------------- ------------- ------------- Income: Rental and service $ 12,521,580 $ 12,994,337 $ 13,541,677 Interest on short-term investments 67,424 88,477 188,807 Settlement income 300,000 113,870 486,000 -------------- ------------- ------------- Total income 12,889,004 13,196,684 14,216,484 -------------- ------------- -------------
Expenses:
Interest on mortgage notes payable 5,138,352 6,142,371 6,920,675 Interest on short-term loans from affiliate 572,915 370,180 511,571 Depreciation 1,885,983 2,051,056 2,263,897 Amortization of deferred expenses 274,282 187,999 146,738 Property operating 3,203,292 3,180,653 3,185,322 Maintenance and repairs 1,513,263 1,319,906 1,250,681 Real estate taxes 1,039,756 1,061,532 1,101,842 Property management fees 626,989 657,359 675,541 Administrative 641,949 471,856 505,340 Write-off of receivables from seller 221,827 Participation in loss of joint venture with an affiliate 11,586 53,447 80,216 -------------- ------------- ------------- Total expenses 14,908,367 15,496,359 16,863,650 -------------- ------------- ------------- Loss before gain on sale of property (2,019,363) (2,299,675) (2,647,166) Gain on sale of property 3,648,559 -------------- ------------- ------------- Net (loss) income $ (2,019,363) $ 1,348,884 $ (2,647,166) ============== ============= ============= Net (loss) income allocated to General Partner $ (20,194) $ 13,489 $ (26,472) ============== ============= ============= Net (loss) income allocated to Limited Partners $ (1,999,169) $ 1,335,395 $ (2,620,694) ============== ============= ============= Net (loss) income per Limited Partnership Interest (83,936 issued and outstanding) $ (23.82) $ 15.91 $ (31.22) ============== ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
STATEMENTS OF CASH FLOWS for the years ended December 31, 1994, 1993 and 1992
1994 1993 1992 -------------- ------------- ------------- Operating activities: Net (loss) income $ (2,019,363) $ 1,348,884 $ (2,647,166) Adjustments to reconcile net (loss) income to net cash provided by or used in operating activities: Gain on sale of property (3,648,559) Participation in loss of joint venture with an affiliate 11,586 53,447 80,216 Depreciation of properties 1,885,983 2,051,056 2,263,897 Amortization of deferred expenses 274,282 187,999 146,738 Deferred interest expense 196,599 306,255 522,677 Payment of deferred interest expense (681,731) (1,392,348) Write-off of receivables from seller 221,827 Collection of proceeds from settlement 569,477 Net change in: Escrow deposits 178,438 (246,022) (160,281) Accounts and accrued interest receivable 165,810 (27,516) (217,357) Accounts payable 150,525 (76,283) (320,879) Due to affiliates 107,590 3,613 (33,974) Accrued liabilities (10,388) (83,557) (4,744) Security deposits (17,400) (61,414) 7,998 -------------- ------------- ------------- Net cash provided by or used in operating activities 241,931 (1,584,445) 428,429 -------------- ------------- -------------
Investing activities: Redemption of restricted investments 1,995,000 2,038,000 Distributions from joint venture with an affiliate 93,467 30,848 70,967 Proceeds from sale of property 13,200,000 Payment of selling costs (109,559) Additions to properties (140,468) -------------- ------------- ------------- Net cash provided by investing activities 93,467 14,975,821 2,108,967 -------------- ------------- ------------- Financing activities:
Proceeds from issuance of $ 11,664,000 $ 34,916,121 $ 3,053,400 mortgage notes payable Repayment of loans payable - affiliate (1,499,140) (4,505,372) (2,875,532) Proceeds from loans payable - affiliate 827,114 1,515,153 2,641,461 Repayment of mortgage notes
payable - affiliates (1,592,538) (1,027,935) (3,053,400) Repayment of mortgage notes payable (9,389,731) (41,842,846) Principal payments on mortgage notes payable (344,788) (255,910) (2,186,552) Funding of repair escrows (287,150) (549,045) Releases from repair escrows 4,463 348,833 Payment of deferred expenses (308,817) (981,606) (77,491) -------------- ------------- ------------- Net cash used in financing activities (926,587) (12,382,607) (2,498,114) -------------- ------------- -------------
Net change in cash and cash equivalents (591,189) 1,008,769 39,282 Cash and cash equivalents at beginning of year 1,192,138 183,369 144,087 -------------- ------------- ------------- Cash and cash equivalents at end of year $ 600,949 $ 1,192,138 $ 183,369 ============== ============= =============
The accompanying notes are an integral part of the financial statements.
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
1. Accounting Policies:
(a) Depreciation expense is computed using the straight-line method. Rates used in the determination of depreciation are based upon the following estimated useful lives:
Years -----
Buildings and improvements 30 Furniture and fixtures 5
Maintenance and repairs are charged to expense when incurred. Expenditures for improvements are charged to the related asset account.
When properties are sold, the related costs and accumulated depreciation are removed from the respective accounts. Any gain or loss on disposition will be recognized in accordance with generally accepted accounting principles.
The Partnership records its investments in real estate at cost, and periodically assesses possible impairment to the value of its properties. In the event that the General Partner determines that a permanent impairment in value has occurred, the carrying basis of the property is reduced to its estimated fair value.
(b) Deferred expenses consist principally of loan financing fees which are being amortized over the terms of the respective agreements.
(c) Investment in joint venture with an affiliate represents the recording of the Partnership's 38.38% interest, under the equity method of accounting, in a joint venture with an affiliated partnership. Under the equity method of accounting, the Partnership records its initial investment at cost and adjusts its investment account for additional capital contributions, distributions and its share of joint venture income or loss. Depreciation recognized in connection with the ownership of real estate by the joint venture has resulted in the Partnership's share of cumulative losses exceeding the net amounts invested in the joint venture. This has resulted in the classification of the investment as "Loss in excess of investment in joint venture with an affiliate" in the accompanying financial statements.
(d) Cash equivalents include all highly liquid investments with a maturity of three months or less when purchased.
(e) The Partnership is not liable for Federal income taxes, and each partner recognizes his proportionate share of the Partnership income or loss in his tax return; therefore, no provision for income taxes is made in the financial statements of the Partnership.
2. Partnership Agreement:
The Partnership was organized in October 1984. The Partnership Agreement provides for Balcor Partners-XVII to be the General Partner and for the admission of Limited Partners through the sale of up to 84,000 Limited Partnership Interests at $1,000 per Interest, 83,936 of which were sold through August 22, 1985, the termination date of the offering.
The Partnership Agreement generally provides that the General Partner will be allocated 1% and the Limited Partners will be allocated 99% of the profits and losses from operations. One hundred percent of Net Cash Receipts available for distribution shall be distributed to the holders of Interests in proportion to
their participating percentages as of the record date for such distributions. In addition, there shall be accrued for the benefit of the General Partner as its distributive share from operations, an amount equivalent to approximately 1% of the total Net Cash Receipts being distributed, which will be paid only as a part of the General Partner's share of Net Cash Proceeds. Under certain circumstances, the General Partner may participate in the Net Cash Proceeds from the sale or refinancing of Partnership properties. The General Partner's participation is equal to 15% of further Net Cash Proceeds distributed after holders of Interests have received a return of Original Capital plus any deficiency in a Cumulative Distribution of 6% on Adjusted Original Capital, as defined in the Partnership Agreement.
3. Mortgage Notes Payable:
Mortgage notes payable at December 31, 1994 and 1993 consisted of the following:
Carrying Carrying Current Final Property Amount of Amount of Inter- Matur- Current Estimated Pledged as Notes at Notes at est ity Monthly Balloon Collateral 12/31/94 12/31/93 Rate Date Payment Payment -------------- ---------- ---------- ------ ------ ------- ---------- Mortgage Notes Payable - Nonaffiliates Apartment Complexes
Chestnut Ridge I(a)$3,675,362 $3,031,806 9.02% 2001 $29,776 $3,460,000 Country Oaks(b) 5,502,374 5,551,286 10.00% 1995 50,153 5,462,000 Forest Ridge II(c) 7,948,748 6,360,000 9.188% 2001 65,209 7,479,000 Hunter's Glen(d) 4,602,507 4,634,883 9.13% 2001 37,851 4,302,000 Marbrisa(e) 5,452,288 5,496,454 8.23% 2000 41,242 5,102,000 Park Crossing(f) 7,251,725 7,309,578 8.54% 1998 56,655 7,012,000 Steeplechase(g) 7,369,371 7,421,637 9.13% 2001 60,643 6,893,000 Willow Bend Lake(h) 9,871,313 9,938,563 9.33% 2001 82,641 9,253,000 ----------- ----------- Subtotal 51,673,688 49,744,207 ----------- ----------- Mortgage Notes Payable - Affiliates Apartment Complexes
Chestnut Ridge I(a) 1,673,215 3,533,299 10.50% 2002 (a) 1,673,000 Forest Ridge II(c) 3,948,000 ----------- ----------- Subtotal 1,673,215 7,481,299 ----------- ----------- Total $53,346,903 $57,225,506 ========== ===========
(a) In March 1994, the Partnership completed the refinancing of these mortgage loans. The original loans consisted of a $3,029,731 first mortgage loan from an unaffiliated lender and a junior mortgage loan and an unsecured loan from affiliates of the Partnership totaling $3,983,484, including deferred interest of $450,185. The proceeds from the new first mortgage loan of $3,694,000 from an unaffiliated lender were used to repay the previous first mortgage loan, the deferred interest on the affiliated loans and a portion of the outstanding loans from affiliates. The new first mortgage loan interest rate decreased from 9.75% to 9.02%, the maturity date was changed from February 2002 to April 2001 and the monthly payments increased from $25,667 to $29,776. As required by the unaffiliated lender, $1,646,000 of the remaining balance of the affiliate loans was retired and replaced with a General Partner loan and the remainder was recharacterized as a subordinate non-recourse loan of $1,473,215 and a preferred limited partnership interest of $200,000 in the subsidiary partnership which holds title to the property, both of which are included in mortgage notes payable - affiliates in the balance sheet. The contract interest rate on the subordinate non-recourse loan remains unchanged at 10.50%, which is the rate of return earned on the preferred limited partnership interest as well. The interest pay rate on the subordinate non-recourse loan is the lower of the contract rate or the net cash from the property after payment of debt service on the first mortgage. The Limited Partners' position is unaffected by this conversion of a portion of the affiliated loan to an equity position, as Limited Partners' equity is subordinate to the preferred interest just as it was subordinated to the affiliate loans prior to the recharacterization.
The affiliate loan and preferred equity interest are subordinate to the Partnership's receipt of sale or refinancing proceeds in the amount of $1,646,000.
(b) The General Partner expects to be able to refinance this loan prior to maturity.
(c) In July 1994, the Partnership completed the refinancing of these mortgage loans. The original loans consisted of a $6,360,000 first mortgage loan from an unaffiliated lender and an unsecured loan from an affiliate of the Partnership totaling $4,179,546, including deferred interest of $231,546. The proceeds from the new first mortgage loan of $7,970,000 from an unaffiliated lender were used to repay the previous first mortgage loan, the deferred interest on the affiliate loan and a portion of the outstanding affiliate loan. The interest rate on the new first mortgage loan increased from 9.025% to 9.188%, the maturity date was extended from December 1994 to August 2001 and the monthly payments increased from $47,833 to $65,209. As required by the unaffiliated lender, the remaining $2,569,546 balance of the affiliate loan was retired and replaced with a General Partner loan.
(d) In June 1993, this loan was refinanced. The interest rate decreased from 9.875% to 9.13%, the maturity date was extended from October 1993 to July 2001 and the monthly payments decreased from $37,882 to $37,851. A portion of the proceeds from the new $4,650,000 first mortgage loan were used to repay the existing first mortgage loan of $4,255,145.
(e) In November 1993, this loan was refinanced. The interest rate decreased from 9.75% to 8.23%, the maturity date was extended from October 1993 to December 2000 and the monthly payments decreased from $46,769 to $41,242. A portion of the proceeds from the new $5,500,000 first mortgage loan were used to repay the existing first mortgage loan of $5,291,523.
(f) In May 1993, this loan was refinanced. The interest rate decreased from 10.0% to 8.54%, the maturity date was extended from October 1993 to June 1998 and the monthly payments decreased from $61,977 to $56,655. A portion of the proceeds from the new $7,341,121 first mortgage loan were used to repay the existing first mortgage loan of $6,897,113.
(g) In May 1993, this loan was refinanced. The interest rate decreased from 11.0% to 9.13%, the maturity date was extended from August 1993 to June 2001 and the monthly payments increased from $60,235 to $60,643. A portion of the proceeds from the new $7,450,000 first mortgage loan were used to repay the existing first mortgage loan of $5,996,274.
(h) In May 1993, this loan was refinanced. The interest rate decreased from 10.5% to 9.33%, the maturity date was extended from November 1994 to June 2001 and the monthly payments increased from an average of $69,259 to $82,641. A portion of the proceeds from the new $9,975,000 first mortgage loan were used to repay the existing first mortgage loan of $7,807,308.
The Partnership's loans described above require current monthly payments of principal and interest except for the Chestnut Ridge - Phase I mortgage note payable-affiliate which requires payments based on the cash flow of the property.
See Note 7 of Notes to Financial Statements for additional information on cash collateral pledges and letters of credit.
Approximate principal maturities of the above mortgage notes payable during each of the next five years are as follows:
1995 $ 5,861,000 1996 382,000 1997 439,000 1998 7,433,000 1999 424,000
During the year ended December 31, 1994, 1993 and 1992, the Partnership incurred interest expense on non-affiliated mortgage notes payable of $4,680,137, $5,281,113 and $5,960,181 and paid interest expense of $4,680,137, $6,239,776 and $5,734,467, respectively.
4. Settlement Income:
(a) The Partnership had ongoing litigation with the seller and certain of its principals and affiliates on claims under terms of the original management and guarantee agreement on the Park Crossing Apartments. During July 1993, the Partnership settled with one minor defendant and received $113,870, and during 1994 the Partnership accepted $300,000 as settlement in full on all remaining amounts owed to the Partnership. In addition, $139,946 which had been held in an escrow, was released to the Partnership.
(b) In June 1992, the Partnership reached a settlement with the seller of the Forest Ridge - Phase II and Highpoint - Phase I apartment complexes. Prorations due from the seller pursuant to the original management and guarantee agreements on these properties were previously written off due to uncertain collectibility. Under the terms of the settlement, the Partnership received cash of $486,000, which was recorded as settlement income, and the Partnership and seller released all claims and causes of action against one another.
5. Write-off of Receivables from Seller:
In May 1992, the Partnership reached a settlement with the seller of the Pleasant Lake Village and Playa Palms apartment complexes for proration amounts the seller owed the Partnership pursuant to the original management and guarantee agreements. The Partnership received $130,603 from the seller during 1992 and also received a payment of $438,874 in August 1992 from the General Partner, who voluntarily agreed to reimburse the Partnership for a portion of the seller's obligations. The Partnership wrote off receivables from the seller of $221,827 in connection with this transaction.
6. Property Sale:
During 1993, the Partnership sold the Playa Palms Apartments in an all cash sale for $13,200,000. From the proceeds of the sale the Partnership paid $12,701,189 in full satisfaction of the property's first mortgage loan, which included $1,117,006 of accrued interest, and a second mortgage loan of $32,349 was repaid at a discount of $21,049. The basis of the property was $9,462,931, net of accumulated depreciation of $4,353,876. For financial statement purposes, the Partnership recognized a gain of $3,648,559 during 1993. The remaining proceeds from the sale were used to repay a portion of the loans from the General Partner.
7. Restricted Investments:
As of January 1, 1993, the Partnership had outstanding cash pledges totaling $2,475,000 as collateral for letters of credit relating to the mortgage loans on the Country Oaks and Marbrisa apartment complexes. In 1993 cash collateral pledges totaling $1,995,000 were released and used to reduce the principal balance of the Partnership's loans outstanding with the General Partner. As of December 31, 1994, a restricted investment of $480,000, partially collateralizing the Country Oaks mortgage loan, remained outstanding. This investment is recorded at cost which approximates market value. The amount pledged as collateral is invested in short-term instruments pursuant to the terms of the pledge agreement with the lending institution. Interest earned on the investment accumulates to the benefit of the Partnership and is payable upon expiration or termination of the letter of credit or earlier at the sole discretion of the lending institution.
8. Management Agreements:
As of December 31, 1994, all of the properties owned by the Partnership, including the property in which the Partnership holds a minority joint venture interest, are under management agreements with a third-party management company. These management agreements provide for annual fees of 5% of gross operating receipts.
9. Investment in Joint Venture with an Affiliate:
The Partnership owns a 38.38% joint venture interest in the Rosehill Pointe Apartments. The joint venturer is an affiliate of the General Partner. During 1994, the Partnership received distributions totaling $93,467.
10. Tax Accounting:
The Partnership keeps its books in accordance with the Internal Revenue Code, rules and regulations promulgated thereunder and existing interpretations thereof. The accompanying financial statements, which are prepared in accordance with generally accepted accounting principles, will differ from the tax returns due to the different treatment of various items as specified in the Internal Revenue Code. The net effect of these accounting differences is that the net loss for 1994 in the financial statements is $1,653,085 less than the tax loss of the Partnership for the same period.
11. Transactions with Affiliates:
Fees and expenses paid and payable by the Partnership to affiliates are:
Year Ended Year Ended Year Ended 12/31/94 12/31/93 12/31/92 -------------- -------------- -------------- Paid Payable Paid Payable Paid Payable ------ ------- ------ ------- ------ -------
Property management fees $572,620 None $663,957 $50,530 $672,841 $57,128 Reimbursement of expenses to the General Partner at cost: Accounting 70,337 25,737 66,172 5,468 64,199 4,750 Data processing 54,271 15,312 31,524 5,786 34,889 2,890 Investor communica- tions 19,725 5,681 18,544 1,532 10,559 781 Legal 14,649 8,055 11,713 968 15,900 1,177 Portfolio management 40,873 25,281 47,486 4,314 27,153 2,009 Other 17,062 4,912 14,582 1,205 18,088 1,339
Allegiance Realty Group, Inc., an affiliate of the General Partner, managed all of the Partnership's properties, including the property in which the Partnership holds a minority joint venture interest, until the affiliate was sold to a third party in November 1994.
In July 1993 and July 1994, the Partnership repaid loans to Balcor Real Estate Holding, Inc. ("BREHI"), an affiliate of the General Partner, on the Hunter's Glen and Forest Ridge - Phase II apartment complexes, respectively. In March 1994, the Partnership partially repaid and refinanced the balance of the Chestnut Ridge - Phase I Apartments affiliated mortgage loans. See Note 3 of Notes to Financial Statements for additional information on these loans.
During 1994, 1993 and 1992, the Partnership incurred interest expense on the BREHI loans of $458,215, $861,258 and $960,494 and paid interest expense of $943,347, $991,101 and $663,532, respectively. As of December 31, 1994 and 1993, interest expense of $30,498 and $515,630, respectively, was payable and is included in accrued liabilities on the balance sheet.
As of December 31, 1994, the Partnership owes $12,295,605 to the General Partner in connection with the funding of additional working capital and other Partnership obligations. This amount included $480,000 which was borrowed to pledge as collateral relating to the Country Oaks mortgage loan. During 1994, the Partnership retired and replaced $1,646,000 and $2,569,546 of BREHI loans related to the Chestnut Ridge - Phase I and Forest Ridge - Phase II apartment complexes, respectively, with General Partner loans in connection with the 1994 refinancings of the properties' mortgage loans. The Partnership also made a net paydown of $672,026 during this period on the General Partner loans. In connection with the loans from the General Partner, the Partnership incurred interest expense of $572,915, $370,180 and $511,571 and paid interest expense
of $480,500, $366,296 and $533,620 during 1994, 1993 and 1992, respectively. As of December 31, 1994 and 1993, interest expense of $131,477 and $39,062, respectively, was payable. Interest expense is computed at the American Express Company cost of funds rate plus a spread to cover administrative costs. As of December 31, 1994 this rate was 6.562%.
The General Partner may continue to make arrangements with an affiliate to provide additional short-term loans to the Partnership to fund future working capital needs or operating deficits, although there is no assurance that such loans will be available. Should such short-term loans from affiliates not be available, the General Partner will seek alternative third party sources of financing working capital. However, the current economic environment and its impact on the real estate industry make it unlikely that the Partnership would be able to secure financing from third parties to fund working capital needs or operating deficits. Should additional borrowings be needed and not be available either through affiliates of the General Partner or third parties, the Partnership may be required to dispose of some of its properties earlier than intended in order to satisfy Partnership obligations.
The Partnership participates in an insurance deductible program with other affiliated partnerships in which the program pays claims up to the amount of the deductible under the master insurance policies for its properties. The program is administered by an affiliate of the General Partner who receives no fee for administering the program. The Partnership's premiums to the deductible insurance program were $120,176, $80,248 and $73,683 for 1994, 1993 and 1992, respectively.
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
BALCOR REALTY INVESTORS 85-SERIES II A REAL ESTATE LIMITED PARTNERSHIP (An Illinois Limited Partnership)
NOTES TO SCHEDULE III
(a) Consists of legal fees, appraisal fees, title costs, other related professional fees and capitalized construction-period interest.
(b) Guaranteed income earned on properties under the terms of certain management and guarantee agreements was recorded by the Partnership as a reduction of the basis of the property to which the guaranteed income relates.
(c) The aggregate cost of land for Federal income tax purposes is $10,794,040 and the aggregate cost of buildings and improvements for Federal income tax purposes is $25,119,265. The total of the above-mentioned is $35,913,305.
(d) Reconciliation of Real Estate -----------------------------
1994 1993 1992 ---------- ---------- ----------
Balance at beginning of year $73,062,736 $86,739,075 $86,739,075
Additions during year: Improvements None 140,468 None
Cost of real estate sold None (13,816,807) None ----------- ----------- ----------- Balance at end of year $73,062,736 $73,062,736 $86,739,075 =========== =========== ===========
Reconciliation of Accumulated Depreciation ------------------------------------------
1994 1993 1992 ---------- ---------- ----------
Balance at beginning of year $22,366,015 $24,668,835 $22,404,938 Depreciation expense for the year 1,885,983 2,051,056 2,263,897 Accumulated depreciation of real estate sold None (4,353,876) None ---------- ---------- ----------
Balance at end of year $24,251,998 $22,366,015 $24,668,835 =========== =========== ===========
(e) See description of Mortgage Notes Payable in Note 3 of Notes to Financial Statements.
(f) Depreciation expense is computed based upon the following estimated useful lives:
Years -----
Buildings and improvements 30 Furniture and fixtures 5


Item 1. Business. --------- General Development of Business ----------------------------------- The Procter & Gamble Company is primarily a manufacturer and distributor of household products. Its products are sold throughout the United States and abroad. The Company was incorporated in Ohio in 1905 and was the outgrowth of a business founded in 1837 by William Procter and James Gamble.
Unless the context indicates otherwise, the term the "Company" as used herein refers to The Procter & Gamble Company (the registrant) and its subsidiaries.
Additional information required by this item is incorporated by reference to the letter to shareholders which appears on pages 1-5 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Financial Information About Industry Segments ------------------------------------------------- The information required by this item is incorporated by reference to Note 10. Segment Information which appears on pages 30 and 31 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Narrative Description of Business ------------------------------------- The products of Laundry and Cleaning, Personal Care and Food and Beverage segments are distributed primarily through grocery stores and other retail outlets. The products of the Pulp and Chemicals segment are sold direct and through jobbers. In March 1992 the Company established a plan to divest its commercial pulp business. The sale of the timberlands in July 1994 completed this plan. The class of products information required by this item is incorporated by reference to Note 10. Segment Information which appears on pages 30 and 31 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Among the well-known names under which the Company's products are sold are: Ace, Always, Ariel, Attends, Bold, Bounce, Bounty, Camay, Cascade, Charmin, Cheer, Cover Girl, Crest, Crisco, Dash, Dawn, Downy, Duncan Hines, Era, Fairy, Flash, Folgers, Gain, Hawaiian Punch, Head and Shoulders, Ivory, Jif, Lenor, Luvs, Max Factor, Mr. Proper, Olay, Old Spice, Pampers, Pantene, Pert, Pringles, Punica, Rejoice, Safeguard, Scope, Secret, Sunny Delight, Tide, Vicks, Vidal Sassoon, Whisper, and Zest.
The Company's business, represented by the aggregate of the four segments, is essentially homogeneous. For the most part, the factors necessary for an understanding of these four segments are essentially identical. The markets in which the Company's products are sold are highly competitive. The products of the Company's business segments compete with many large and small companies and there is no dominant competitor or competitors. Advertising is used in conjunction with an extensive sales force because the Company believes this combination provides the most efficient method of marketing these types of products. Product quality, performance, value and packaging are also important competitive factors.
The creation of new products and the development of new performance benefits for consumers on the Company's existing products are vital ingredients in its continuing progress in the highly competitive markets in which it does business. Basic research and product development activities continued to carry a high priority during the past fiscal year. The Company spent $1,059 million in fiscal year 1994, $956 million in 1993 and $861 million in 1992 on such activities. While many of the benefits from these efforts will not be realized until future years, the Company believes these activities demonstrate its commitment to future growth.
The Company has registered trademarks and owns or has licenses under patents which are used in connection with its business in all segments. Some of these patents or licenses cover significant product formulation and processing of the Company's products. The trade names of all major products in each segment are registered trademarks. In part, the Company's success can be attributed to the existence of these trademarks, patents and licenses.
Most of the raw materials used by the Company are purchased from others. The Company purchases a substantial variety of raw materials, no one of which is material to the Company's business taken as a whole. The price volatility of agricultural commodities is, at particular periods, of importance to the products manufactured and sold in the Food and Beverage products segment.
Expenditures in fiscal year 1994 for compliance with Federal, State and local environmental laws and regulations were not materially different from such expenditures in the prior year, and no material increase is expected in fiscal year 1995.
International operations are generally characterized by the same conditions discussed in the description of the business above and may also be affected by additional elements including changing currency values and different rates of inflation and rates of economic growth. The effect of these additional elements is more significant in the Laundry and Cleaning and Personal Care products segments which comprise most of the Company's international business.
The Company has approximately 96,500 employees.
The Company provides an Employee Stock Ownership Plan ("ESOP") which is part of The Procter & Gamble Profit Sharing Trust and Employee Stock Ownership Plan. Convertible preferred stock of the Company and other assets owned by the ESOP are held through a trust (the "ESOP Trust"). The ESOP Trust has issued certain debt securities to the public. The Company has fully, unconditionally and irrevocably guaranteed payment of principal and interest on these debt securities. Holders of these debt securities have no recourse against the assets of the ESOP Trust except with respect to cash contributions made by the Company to the ESOP Trust, and earnings attributable to such contributions. Such cash contributions are made by the Company only to the extent that dividends on the convertible preferred stock are inadequate to fund repayment of the debt securities. Any such contributions and subsequent payments to holders are made on a same-day basis and such contributions would therefore not be held by the ESOP Trust unless there was a default in payment on the debt securities by the ESOP Trust after having received such contributions
from the Company. Such a default is not likely to occur and there is therefore little likelihood that there would be assets available to satisfy the claims of any holders of the debt securities. A summary description of the liabilities of the ESOP Trust and of the dividends paid by the Company on the convertible preferred stock and cash payments from the Company to the ESOP Trust for the three years ended June 30, 1994 are incorporated by reference to Note 8 of "Notes to Consolidated Financial Statements" on pages 26-28 of the 1994 Annual Report to Shareholders.
Additional information required by this item is incorporated by reference to the letter to shareholders which appears on pages 1-5 and Financial Condition which appears on page 35 and 36 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Financial Information About Foreign and Domestic Operations ------------------------------------------------------------ The information required by this item is incorporated by reference to Note 10. Segment Information which appears on pages 30 and 31 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Item 2.

Item 2. Properties. ----------- In the United States, the Company owns and operates manufacturing facilities at 45 locations in 22 states. In addition, it owns and operates 89 manufacturing facilities in 39 other countries. Laundry and Cleaning products are produced at 39 of these locations; Personal Care products at 90; and Food and Beverage products at 20. Pulp and Chemicals are produced at 18 locations. The management considers that the Company's production facilities are adequate to support the business efficiently, and that the properties and equipment have been well maintained.
Item 3.

Item 3. Legal Proceedings. ------------------ The Company is involved in clean-up efforts at off-site Superfund locations, many of which are in the preliminary stages of investigation. The amount accrued at June 30, 1994 representing the Company's probable future costs that can be reasonably estimated was $8 million.
The Company is also involved in certain other environmental proceedings. No such proceeding is expected to result in material monetary or other sanctions being imposed by any governmental entity, or in other material liabilities. However, the Company has agreed to participate in the Toxic Substances Control Act ("TSCA") Section 8(e) Compliance Audit Program of the United States Environmental Protection Agency ("EPA"). As a participant, the Company has agreed to audit its files for materials which under current EPA guidelines would be subject to notification under Section 8(e) of TSCA and to pay stipulated penalties for each report submitted under this program. It is anticipated that the Company's liability under the Program will be $1,000,000. No administrative proceeding is pending; however the Company anticipates being required to enter an Administrative Order on Consent pursuant to this Program in late 1995. In addition, the EPA issued to a subsidiary of the Company a Finding and Notice of Violation (NOV") dated June 16, 1994, based on Section 113(a) of the Clean Air Act (as amended), for alleged violations of the California State Implementation Plan by the subsidiary's manufacturing plant in Sacramento, California. The violations relate to 1) a plant expansion project that was implemented on the basis of calculated emission data that later proved to be
inaccurate, with the result that the project allegedly failed to observe the federal construction ban and certain "new source review" provisions; and 2) the subsequent installation of a material recovery unit that is now alleged to be pollution control equipment for which a permit was required. The NOV does not specify the relief that will be sought by EPA, but any penalties are not expected to be material to the Company.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders. ---------------------------------------------------- Not applicable.
Executive Officers of the Registrant --------------------------------------
The names, ages and positions held by the executive officers of the Company on August 12, 1994 are:
Elected to Present Name Position Age Position - - ------------- -------------------- --- ----------- Edwin L. Artzt Chairman of the Board and 64 1989 Chief Executive. Director from 1972-75 and since October 14, 1980.
John E. Pepper President. 56 1986 Director since June 12, 1984.
Durk I. Jager Executive Vice President. 51 1989 Director since December 12, 1989.
Michael J. Allen Group Vice President. 56 1991
Wolfgang C. Berndt Group Vice President. 51 1986
Benjamin L. Bethell Senior Vice President. 54 1991
Robert T. Blanchard Group Vice President. 49 1991
Gordon F. Brunner Senior Vice President. 55 1987 Director since March 1, 1991.
Bruce L. Byrnes Group Vice President. 46 1991
Larry G. Dare Group Vice President. 54 1989
Elected to Present Name Position Age Position - - ------------- -------------------- --- --------- Stephen P. Donovan, Jr. Group Vice President. 53 1986
Harald Einsmann Group Vice President. 60 1984 Director since June 10, 1991.
Robert J. Herbold Senior Vice President. 52 1990
James J. Johnson Senior Vice President 47 1992 and General Counsel.
Jeffrey D. Jones Group Vice President. 41 1992
Alan G. Lafley Group Vice President. 47 1992
Gary T. Martin Senior Vice President. 49 1991
Lawrence D. Milligan Senior Vice President. 58 1990
Jorge P. Montoya Group Vice President. 48 1991
Thomas A. Moore Group Vice President. 43 1992
Erik G. Nelson Senior Vice President. 54 1993
Robert L. Wehling Senior Vice President. 55 1994
Edwin H. Eaton, Jr. Vice President and 56 1987 Comptroller.
Todd A. Garrett Vice President, Procter 52 1992 & Gamble Worldwide.
All of the above Executive officers are members of the Executive Committee of The Procter & Gamble Company and have been employed by the Company over five years.
PART II ----------
Item 5.

Item 5. Market for the Common Stock and Related Stockholder Matters -----------------------------------------------------------
The stock exchanges on which the common stock is listed, the quarterly price range and dividends for the past two years and the number of common shareholders are incorporated by reference to page 42 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Item 6.

Item 6. Selected Financial Data -----------------------
In 1993 the Company adopted Statement of Financial Accounting Standards No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions" and Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". The effect of these accounting changes was to reduce net earnings by $988 million ($1.45 per share).
During 1993 the Company announced one-time charges of $2,402 million for manufacturing consolidations and organizational restructuring and $303 million related to the divestiture of the 100% juice business. The after- tax effect of these provisions is $1,746 million or $2.57 per share.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------------
This information is incorporated by reference to the Analysis and Discussion and Financial Condition shown on pages 32-36 and the letter to shareholders on pages 1-5 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Item 8.

Item 8. Financial Statements and Supplemental Data ------------------------------------------
The financial statements and supplemental data are incorporated by reference to pages 16-31 of the Annual Report to Shareholders for the fiscal year ended June 30, 1994.
Item 9.

Item 9. Disagreements on Accounting and Financial Disclosure ----------------------------------------------------
Not applicable.
PART III ----------
Item 10.

Item 10. Directors and Executive Officers -------------------------------- The information required by this item is incorporated by reference to pages 3-5 and 17-18 of the proxy statement filed since the close of the fiscal year ended June 30, 1994, pursuant to Regulation 14A which involved the election of directors. Pursuant to Item 401(b) of Regulation S-K, Executive Officers of the Registrant are reported in Part I of this report.
Item 11.

Item 11. Executive Compensation ---------------------- The information required by this item is incorporated by reference to pages 7-14 of the proxy statement filed since the close of the fiscal year ended June 30, 1994, pursuant to Regulation 14A which involved the election of directors.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- The information required by this item is incorporated by reference to pages 15-17 of the proxy statement filed since the close of the fiscal year ended June 30, 1994, pursuant to Regulation 14A which involved the election of directors.
Item 13.

Item 13. Certain Relationships and Related Transactions ---------------------------------------------- The information required by this item is incorporated by reference to page 18 of the proxy statement filed since the close of the fiscal year ended June 30, 1994, pursuant to Regulation 14A which involved the election of directors.
PART IV --------- Item 14.

Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K -----------------------------------------------------------------
A. 1. Financial Statements:
The following consolidated financial statements of The Procter & Gamble Company and subsidiaries and the report of independent accountants are incorporated by reference in Part II, Item 8.
- Report of independent accountants
- Consolidated statement of earnings -- for years ended June 30, 1994, 1993 and 1992
- Consolidated balance sheet -- as of June 30, 1994 and
- Consolidated statement of retained earnings -- for years ended June 30, 1994, 1993 and 1992 - Consolidated statement of cash flows -- for years ended June 30, 1994, 1993 and 1992
- Notes to consolidated financial statements
2. Financial Statement Schedules:
Schedule V -- Property, plant, and equipment - page 15
Schedule VI -- Accumulated depreciation - page 16
Schedule IX -- Short-term borrowings - page 17
Schedule X -- Supplementary income statement information - page 18
The schedules other than those listed above are omitted because of the absence of the conditions under which they are required, or because the information is set forth in the financial statements or notes thereto.
3. Exhibits:
Exhibit (3-1) -- Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(3-2) -- Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
Exhibit (4) -- Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended December 14, 1993) which was adopted by the shareholders at the annual meeting on October 13, 1992.
(10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May 11, 1993) which was adopted by the shareholders at the annual meeting on October 11, 1983 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-3) -- The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
Exhibit (10-6) -- The Procter & Gamble Retirement Plan for Directors which was adopted by the Board of Directors on December 12, 1989 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-7) -- The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by Reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-8) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan which was on November 9, 1993, approved by the Board of Directors for submission to the Shareholders on October 11, 1994 (Incorporated by reference to Appendix A of the proxy statement filed since the close of the fiscal year ended June 30, 1994).
(10-9) -- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan which was authorized by the Board of Directors of The Procter & Gamble Company and adopted by the Board of Directors of Richardson-Vicks Inc. on December 31, 1985.
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to fixed charges.
Exhibit (13) -- Annual Report to shareholders. (Pages 1-5, 16-36, and 42)
Exhibit (21) -- Subsidiaries of the registrant.
Exhibit (23) -- Consent of Deloitte & Touche LLP.
Exhibit (27) -- Financial Data Schedule.
Exhibit (99-1) -- Directors and Officers Liability Policy (the "Policy Period" has been extended to 6/30/97).
(99-2) -- Directors and Officers (First) Excess Liability Policy (the "Policy Period" has been extended to 6/30/95).
(99-3) -- Directors and Officers (Second) Excess Liability Policy (the "Policy Period" has been extended to 6/30/95).
(99-4) -- Fiduciary Responsibility Insurance Policy (the "Policy Period" has been extended to 6/30/95).
The exhibits listed are filed with the Securities and Exchange Commission but are not included in this booklet. Copies of these exhibits may be obtained by sending a request to: Linda D. Rohrer, Assistant Secretary, The Procter & Gamble Company, P. O. Box 599, Cincinnati, Ohio 45201
B. Reports on Form 8-K:
An 8-K Report containing an exhibit under Item 7 entitled "Press Release Issued by Registrant on April 12, 1994" was filed on April 13, 1994.
SIGNATURES --------------
Pursuant to the requirements of Section 13 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 in the city of Cincinnati, State of Ohio.
THE PROCTER & GAMBLE COMPANY
By /s/EDWIN L. ARTZT --------------------------- Edwin L. Artzt Chairman of the Board and Chief Executive
September 13, 1994
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons in the capacities and on the dates indicated.
Signature Title Date - - --------- ----- ----- _______ /s/EDWIN L. ARTZT Chairman of the Board and | - - -------------------- Chief Executive and Director | (Edwin L. Artzt) (Principal Executive Officer) | | /s/ERIK G. NELSON Senior Vice President | - - -------------------- (Principal Financial Officer) | (Erik G. Nelson) September 13, 1994 | /s/EDWIN H. EATON, JR. Vice President and Comptroller | - - -------------------- (Principal Accounting Officer) | (Edwin H. Eaton, Jr.) | | /s/DAVID M. ABSHIRE | - - -------------------- Director | (David M. Abshire) | | /s/NORMAN R. AUGUSTINE | - - -------------------- Director | (Norman R. Augustine) ___________|
Signature Title Date - - --------- ------ ---- __________ | /s/DONALD R. BEALL | - - -------------------- Director | (Donald R. Beall) | | /s/GORDON F. BRUNNER | - - -------------------- Director | Gordon F. Brunner) | | /s/RICHARD B. CHENEY | - - -------------------- Director | (Richard B. Cheney) | | /s/HARALD EINSMANN | - - -------------------- Director | (Harald Einsmann) | | | - - -------------------- Director | (Richard J. Ferris) | | /s/JOSEPH T. GORMAN | - - -------------------- Director September 13, 1994 (Joseph T. Gorman) | | /s/ROBERT A. HANSON | - - -------------------- Director | /s/(Robert A. Hanson) | | /s/DURK I. JAGER | - - -------------------- Director | (Durk I. Jager) | | /s/JERRY R. JUNKINS | - - -------------------- Director | (Jerry R. Junkins) | | /s/JOSHUA LEDERBERG | - - -------------------- Director | (Joshua Lederberg) | | /s/CHARLES R. LEE | - - -------------------- Director | (Charles R. Lee) | __________
Signature Title Date - - --------- ------ ----- _________ /s/JOHN E. PEPPER | - - ------------------- Director | (John E. Pepper) | | /s/JOHN G. SMALE | - - ------------------- Director | (John G. Smale) September 13, 1994 | /s/ROBERT D. STOREY | - - ------------------- Director | (Robert D. Storey) | | /s/MARINA v.N. WHITMAN | - - ------------------- Director | (Marina v.N. Whitman) _______|
DELOITTE & TOUCHE LLP
250 East Fifth Street Post Office Box 5340 Cincinnati, Ohio 45201 (513) 784-7100
REPORT OF INDEPENDENT ACCOUNTANTS - - --------------------------------------------------------------
The Procter & Gamble Company:
We have audited the consolidated financial statements of The Procter & Gamble Company and subsidiaries as of June 30, 1994 and 1993, and for each of the three years in the period ended June 30, 1994, and have issued our report thereon dated August 10, 1994 (expressing an unqualified opinion and including an explanatory paragraph regarding the changes in accounting for other post retirement benefits and income taxes effective July 1, 1992); such financial statements and report are included in your 1994 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedules of The Procter & Gamble Company and subsidiaries, listed in Item 14. These financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP August 10, 1994
Rates for Depreciation of Properties for financial accounting purposes are generally as follows:
Buildings 1.5% to 10% Machinery & Equipment 3% to 33.3%
EXHIBIT INDEX --------------
Exhibit (3-1) -- Amended Articles of Incorporation (Incorporated by reference to Exhibit (3-1) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(3-2) -- Regulations (Incorporated by reference to Exhibit (3-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
Exhibit (4) -- Registrant agrees to file a copy of documents defining the rights of holders of long-term debt upon request of the Commission.
Exhibit (10-1) -- The Procter & Gamble 1992 Stock Plan (as amended December 14, 1993) which was adopted by the shareholders at the annual meeting on October 13, 1992.
(10-2) -- The Procter & Gamble 1983 Stock Plan (as amended May 11, 1993) which was adopted by the shareholders at the annual meeting on October 11, 1983 (Incorporated by reference to Exhibit (10-2) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-3) -- The Procter & Gamble Executive Group Life Insurance Policy (each executive officer is covered for an amount equal to annual salary plus bonus) (Incorporated by reference to Exhibit (10-3) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-4) -- Additional Remuneration Plan (as amended June 12, 1990) which was adopted by the Board of Directors on April 12, 1949 (Incorporated by reference to Exhibit (10-4) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-5) -- The Procter & Gamble Deferred Compensation Plan for Directors which was adopted by the Board of Directors on September 9, 1980 (Incorporated by reference to Exhibit (10-5) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-6) -- The Procter & Gamble Retirement Plan for Directors which was adopted by the Board of Directors on December 12, 1989 (Incorporated by reference to Exhibit (10-6) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
Exhibit (10-7) -- The Procter & Gamble Board of Directors Charitable Gifts Program which was adopted by the Board of Directors on November 12, 1991 (Incorporated by Reference to Exhibit (10-7) of the Company's Annual Report on Form 10-K for the year ended June 30, 1993).
(10-8) -- The Procter & Gamble 1993 Non-Employee Directors' Stock Plan which was on November 9, 1993, approved by the Board of Directors for submission to the Shareholders on October 11, 1994 (Incorporated by reference to Appendix A of the proxy statement filed since the close of the fiscal year ended June 30, 1994).
(10-9) -- Richardson-Vicks Inc. Special Stock Equivalent Incentive Plan which was authorized by the Board of Directors of the Procter & Gamble Company and adopted by the Board of Directors of Richardson-Vicks Inc. on December 31, 1985.
Exhibit (11) -- Computation of earnings per share.
Exhibit (12) -- Computation of ratio of earnings to fixed charges.
Exhibit (13) -- Annual Report to shareholders. (Pages 1-5, 16-36, and 42)
Exhibit (21) -- Subsidiaries of the registrant.
Exhibit (23) -- Consent of Deloitte & Touche LLP.
Exhibit (27) -- Financial Data Schedule.
Exhibit (99-1) -- Directors and Officers Liability Policy (the "Policy Period" has been extended to 6/30/97).
(99-2) -- Directors and Officers (First) Excess Liability Policy (the "Policy Period" has been extended to 6/30/95).
(99-3) -- Directors and Officers (Second) Excess Liability Policy (the "Policy Period" has been extended to 6/30/95).
(99-4) -- Fiduciary Responsibility Insurance Policy (the "Policy Period" has been extended to 6/30/95).