Item 1. BUSINESS
General Development of Business
	Super 8 Economy Lodging IV, Ltd. (the "Partnership") is a limited partnership which was organized under the Uniform Limited Partnership Act of the State of California on February 5, 1982. 	 	The Managing General Partner of the Partnership is Grotewohl Management Services, Inc., a California corporation organized and wholly-owned by Philip B. Grotewohl. The Associate General Partner is Robert J. Dana. The Associate General Partner does not have general responsibility in connection with the management of the business and affairs of the Partnership. The Managing General Partner and the Associate General Partner are sometimes referred to collectively as the "General Partners."
	Through two public offerings of units of limited partnership interest in the Partnership ("Units"), the Partnership sold 10,000 Units at a price of $1,000 each.
	The net proceeds of the offerings were expended for the acquisition and development of properties located in Pleasanton, California and Santa Ana, California. Motel operations commenced on October 4, 1983 at the Pleasanton property and on February 19, 1985 at the Santa Ana property. The Partnership's Pleasanton motel is operated pursuant to franchises acquired from Super 8 Motels, Inc. under the name "Super 8 Motel." On April 30, 1992 the Partnership sold the Santa Ana motel.
	There is hereby incorporated by reference herein the information regarding the Partnership's motel property contained in Part I, Item 2

Item 2. PROPERTIES
	On October 4, 1982, the Partnership acquired from Hopyard Associates, a general partnership, a parcel of 2.037 acres of unimproved real property located in Pleasanton, California.
	The property is located immediately adjacent to Interstate Highway 580, on the southeast quadrant of the Hopyard Road overpass approximately one mile east of Interstate Highway 680 and approximately 40 miles east of San Francisco.
	Construction of the 102 room motel commenced on October 18, 1982 and was completed on October 4, 1983, at which point motel operations commenced.
Item 3.

Item 3. LEGAL PROCEEDINGS 	Inapplicable.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
	 Inapplicable.
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				 PART II
Item 5.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
	The Units are not freely transferable and no public market for the Units has developed or is expected to develop.
Holders
	As of December 15, 1995 a total of 2,110 investors ("Limited Partners") held Units in the Partnership.
Distributions
	Cash Available for Distribution is defined as the cash funds provided from operations without deduction for depreciation, but after deducting cash funds used to pay or provide for payment of debt service, capital improvements and replacements and the operating expenses of the property, also less adequate cash reserves for obligations of the Partnership for which there is no provision.
	Cash Available for Distribution shall be distributed quarterly in the following manner:
		(1) 90% to the Limited Partners 		(2) 9% to the General Partners as a fee for managing the 			Partnership 		(3) 1% to the General Partners on account of their 			Partnership interest.
	Notwithstanding the foregoing, the General Partners shall receive no distributions of Cash Available for Distribution until the Limited Partners have received a cumulative 10% per annum return on their "Adjusted Capital Contributions" (i.e., their original capital contributions, adjusted for previous returns of capital or sale or refinancing proceeds). Inasmuch as the Limited Partners have not received a cumulative 10% per annum return, the General Partners have not received any share of the Cash Available for Distribution since inception of the Partnership.
	The proceeds from the sale or refinancing of properties not reinvested are to be distributed first to the Limited Partners until they have received cumulative payments from all distribution sources equal to 100% of their original capital contribution and a cumulative 10% per annum return on their Adjusted Capital Contributions. When the foregoing requirement has been satisfied, any remaining funds from the sale or refinancing of properties will be distributed 15% to the General Partners and 85% to the Limited Partners.
				 - 6 -
The following distributions (all from Cash Available for Distribution) were made during the two most recent fiscal years:

			 Amount Amount 			 Distributed Distributed Date Per Unit to General Partners
11/15/93 $10.00 - 0 - 02/15/94 $12.50 - 0 - 05/15/94 $12.50 - 0 - 08/15/94 $13.65 - 0 - 11/15/94 $13.65 - 0 - 02/15/95 $13.65 - 0 - 05/15/95 $13.65 - 0 - 08/15/95 $13.65 - 0 -

				 - 7 -
Item 6.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 	 CONDITION AND RESULTS OF OPERATIONS
Liquidity - ---------
	The Partnership's current assets of $829,176 exceed its current liabilities of $111,441 by $717,735. This amount exceeds the General Partners' cash reserve target of $455,000. In the opinion of the General Partners, the Partnership's Pleasanton motel provides adequate liquidity to satisfy the Partnership's financial obligations.
	The Partnership's primary source of liquidity is its gross revenues from operations. As noted below, the Partnership has a positive cash flow from motel operations. In addition, the Partnership's equity in its Pleasanton motel, which is presently unencumbered, would provide a potential source of liquidity through financing in the event the Partnership's liquidity were impaired. There can be no assurance, however, that the Partnership could borrow against such equity on favorable terms should additional liquidity be required.
Capital Resources - ------------------ 	 	The Partnership owns and operates one motel property, a 102-room lodging facility located in Pleasanton, California.
	The Partnership currently has no material commitments for capital expenditures. Its motel property is in full operation, and no further property acquisitions or extraordinary capital improvements are contemplated. Except as described below, the General Partners are aware of no material trends or changes with respect to the mix or relative cost of the Partnership's capital resources. Working capital is expected to be generated by revenues from operations.
	During the fiscal year covered by this report, the Partnership spent $98,364 ($60,317 of which was capitalized) on the refurbishment of its motel and its furnishings. The capitalized items included $19,888 for a new roof, $13,564 for new televisions, $7,561 for a new washer, $2,559 for a new dryer and $4,099 for replacement chairs. The Managing General Partner anticipates the expenditure of an undetermined amount during the next fiscal year on further refurbishment of the Partnership's motel, such amount to be paid from operating cash flow or, if operating cash flow is inadequate, from reserves.
New Accounting Standards - -------------------------
	SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of, requires the Partnership to disclose information about potential impairment to the value of long-lived assets. The Partnership is not required to adopt and does not currently plan to adopt
				 - 9 -
SFAS No. 121 until its fiscal year ending September 30, 1997. The Partnership does not expect to make any disclosures about impairment of long-lived assets under SFAS No. 121.
Results of Operation - --------------------
Partnership's Combined Financial Results - -----------------------------------------
	The following is a comparison of combined results for the twelve-month periods ending September 30, 1993, 1994 and 1995. Comparative revenue and expense data is included in the financial statements found in Item 8.

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Notes to Financial Statements at pages through.
				 - 12 -
			 ANNUAL REPORT ON FORM 10-K
				 ITEM 8
			 FINANCIAL STATEMENTS
			SUPER 8 ECONOMY LODGING IV, LTD.
			 SACRAMENTO, CALIFORNIA
			 SEPTEMBER 30, 1995

Item 8: Financial Statements 		 			SUPER 8 ECONOMY LODGING IV, LTD. 			 			 INDEX OF FINANCIAL STATEMENTS
							 Pages 							 -----
Financial Statements: Report of Independent Certified Public Accountants
Balance Sheets, September 30, 1995 and 1994
Statements of Operations for the years ended September 30, 1995, 1994 and 1993
Statements of Partners' Equity for the years ended September 30, 1995, 1994 and 1993
Statements of Cash Flows for the years ended to September 30, 1995, 1994 and 1993
Notes to Financial Statements to
				 Note: All schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule or because the information required is included in the financial statements or notes thereto.

	 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners Super 8 Economy Lodging IV, Ltd.
We have audited the accompanying balance sheets of Super 8 Economy Lodging IV, Ltd., a California limited partnership, as of September 30, 1995 and 1994 and the related statements of operations, partners' equity and cash flows for each of the three years in the period ended September 30, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Super 8 Economy Lodging IV, Ltd. as of September 30, 1995 and 1994 and the results of its operations and its cash flows for each of the three years in the period ended September 30, 1995, in conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
November 17, 1995 San Mateo, California

			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 				 BALANCE SHEETS 			 September 30, 1995 and 1994
			 				 ASSETS 				 							1995 1994 							---- ---- Current Assets: Cash and temporary investments (Notes 1 and 3) $ 794,899 $ 763,487 Accounts receivable 22,343 25,087 Prepaid expenses 11,934 11,459 						 ---------- ---------- Total Current Assets 829,176 800,033 						 ---------- ----------
Property and Equipment (Notes 2 and 5): Land 799,311 799,311 Buildings 2,226,531 2,226,531 Furniture and equipment 548,367 504,918 						 ---------- ---------- 						 3,574,209 3,530,760 Accumulated depreciation (1,672,013) (1,577,026) 						 ---------- ---------- Property and Equipment, Net 1,902,196 1,953,734 						 ---------- ----------
Other Assets (Note 2): Deposit of federal income taxes 38,097 33,091 						 ---------- ----------
	 Total Assets $2,769,469 $2,786,858 						 ========== ==========
		 LIABILITIES AND PARTNERS' EQUITY
Current Liabilities: Accounts payable and accrued liabilities $ 109,975 $ 88,167 Due to related parties (Note 4) 1,466 8,099 						 ---------- ---------- Total Liabilities 111,441 96,266
Partners' Equity: General Partners (17,358) (22,492) Limited Partners 2,675,386 2,713,084 						 ---------- ---------- Total Partners' Equity 2,658,028 2,690,592 						 ---------- ----------
	 Total Liabilities and Partners' Equity $2,769,469 $2,786,858 						 ========== ==========
The accompanying notes are an integral part of these financial statements.

			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 			 STATEMENTS OF OPERATIONS
					 Years Ended September 30: 				 --------------------------------------- 					 1995 1994 1993 					 ---- ---- ---- Income: Motel room $1,448,486 $1,354,227 $1,337,670 Telephone and vending 36,519 37,699 34,984 Interest 22,379 19,181 18,138 Other 3,418 4,201 4,384 				 ---------- ---------- ---------- Total Income 1,510,802 1,415,308 1,395,176 				 ---------- ---------- ----------
Expenses: Motel operations (Notes 4 and 5) 777,015 787,553 800,431 General and administrative (Note 4) 36,760 33,331 38,444 Depreciation and amortization (Note 2) 109,175 105,784 106,826 Property management fees (Note 4) 74,416 69,631 68,657 				 ---------- ---------- ---------- Total Expenses 997,366 996,299 1,014,358 				 ---------- ---------- ----------
Other Income (Expenses): Gain on sale of Pleasanton Land parcel (Note 6) - - 5,825 				 ---------- ---------- ----------
Net Income $ 513,436 $ 419,009 $ 386,643 				 ========== ========== ==========
Net Income Allocable to General Partners $ 5,134 $ 4,190 $ 3,866 				 =========== ========== ==========
Net Income Allocable to Limited Partners $ 508,302 $ 414,819 $ 382,777 				 =========== ========== ==========
Net Income Per Partnership Unit (Note 1) $ 51.34 $ 41.90 $ 38.66 				 =========== ========== ==========
Distributions to Limited Partners Per Partnership Unit (Note 1) $ 54.60 $ 48.65 $ 40.00 				 =========== ========== ==========
The accompanying notes are an integral part of these financial statements.

			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 			 STATEMENTS OF PARTNERS' EQUITY
					 Years Ended September 30: 				 --------------------------------------- 					 1995 1994 1993 					 ---- ---- ---- General Partners: Balance at beginning of year $ (22,492) $ (26,682) $ (30,548) Net income 5,134 4,190 3,866 				 ---------- ---------- ---------- Balance at End of Year (17,358) (22,492) (26,682) 				 ---------- ---------- ----------
Limited Partners: Balance at beginning of year 2,713,084 2,784,765 2,801,988 Net income 508,302 414,819 382,777 Distributions to Limited Partners (546,000) (486,500) (400,000) 				 ---------- ---------- ---------- Balance at End of Year 2,675,386 2,713,084 2,784,765 				 ---------- ---------- ----------
Total Partners' Equity $2,658,028 $2,690,592 $2,758,083 				 ========== ========== ==========
The accompanying notes are an integral part of these financial statements.

			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 			 STATEMENTS OF CASH FLOWS
					 Years Ended September 30: 				 --------------------------------------- 					 1995 1994 1993 					 ---- ---- ----
Cash Flows From Operating Activities: Received from motel operations $1,492,593 $1,407,648 $1,374,125 Expended for motel operations and general and administrative expenses (877,067) (934,917) (857,609) Interest received 20,953 18,719 18,107 				 ---------- ---------- ---------- Net Cash Provided by Operating Activities 636,479 491,450 534,623 				 ---------- ---------- ----------
Cash Flows From Investing Activities: Purchases of property and equipment (60,317) (3,311) (30,583) Proceeds from sale of equipment 1,250 - - Proceeds from sale of parcel of land - - 9,700 				 ---------- ---------- ---------- Net Cash Used by Investing Activities (59,067) (3,311) (20,883) 				 ---------- ---------- ----------
Cash Flows From Financing Activities: Distributions paid to limited partners (546,000) (486,500) (400,000) 				 ---------- ---------- ---------- Net Cash Used by Financing Activities (546,000) (486,500) (400,000) 				 ---------- ---------- ----------
Net Increase in Cash and Temporary Investments 31,412 1,639 113,740
Cash and Temporary Investments: Beginning of year 763,487 761,848 648,108 				 ---------- ---------- ----------
End of Year $ 794,899 $ 763,487 $ 761,848 				 ========== ========== ==========
The accompanying notes are an integral part of these financial statements.

			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 		 STATEMENTS OF CASH FLOWS (Continued) 				 					 Years Ended September 30: 				 --------------------------------------- 					 1995 1994 1993 					 ---- ---- ---- 				 Reconciliation of Net Income to Net Cash Provided by Operating Activities: Net income $513,436 $419,009 $386,643 					 -------- -------- -------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 109,175 105,784 106,826 (Gain) loss on disposition of property and equipment 1,430 - (5,826) (Increase) decrease in accounts receivable 2,745 11,059 (2,943) (Increase) decrease in prepaid expenses (475) (1,630) 795 (Increase) decrease in other assets (5,006) (33,091) 4,109 Increase (decrease) in accounts payable and accrued liabilities 15,174 (9,952) 45,151 Increase (decrease) in due to related parties - 271 (132) 					 -------- -------- -------- 	Total Adjustments 123,043 72,441 147,980 					 -------- -------- --------
	Net Cash Provided by 	 Operating Activities $636,479 $491,450 $534,623 					 ======== ======== ========
The accompanying notes are an integral part of these financial statements.

			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 			 NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Economy Lodging IV, Ltd., is a limited partnership organized under California law on February 5, 1982, to acquire and operate motel properties in Pleasanton and Santa Ana, California. The Pleasanton motel was opened in October, 1983, and the Santa Ana motel was opened in February, 1985. The Partnership grants credit to customers, substantially all of which are local businesses in Pleasanton. The Santa Ana property was sold in April, 1992.
The net income or net loss of the Partnership is allocated 1% to the General Partners and 99% to the Limited Partners. Net income (loss) and distributions per partnership unit are based upon 10,000 units outstanding. All partnership units are owned by the Limited Partners.
The Partnership agreement requires that the Partnership maintain reserves for normal repairs, replacements, working capital and contingencies in an amount of at least 5% of adjusted capital contributions. As of September 30, 1995, the Partnership had a combined balance in cash and temporary investments of $794,899, which was $339,899 in excess of the $455,000 required amount.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Items of Partnership income are passed through to the individual partners for income tax purposes, along with any income tax credits. Therefore, no federal or California income taxes are provided for in the financial statements of the Partnership, except for a deposit of federal income taxes which is required of partnerships with fiscal year ends other than a calendar year. The amount of the deposit is based upon the taxable income of the partnership in the prior year.
Property and equipment are recorded at cost. Depreciation and amortization are computed using the following estimated useful lives and methods:
	 Description Methods Useful Lives ----------------------- ---------------------- ------------
Buildings 150% declining balance 				 and straight-line 10-25 years
Furniture and equipment 200% and 150% declining 				balance and straight-line 3-7 years
Costs incurred in connection with maintenance and repair are charged to expense. Major renewals and betterments that materially prolong the life of assets are capitalized.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 			 NOTES TO FINANCIAL STATEMENTS
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
Cash and temporary investments as of September 30, 1995 and 1994 consist of the following: 							 1995 1994 							 ---- ---- Cash in bank, non-interest bearing $ 26,949 $ 31,742 Money market accounts 567,950 531,745 Certificates of deposit and commercial paper 200,000 200,000 						 --------- --------- Total Cash and Temporary Investments $ 794,899 $ 763,487 						 ========= ========= Temporary investments are recorded at cost, which approximates market value. The Partnership considers temporary investments and all highly liquid marketable securities with original maturities of six months or less to be cash equivalents for purposes of the statement of cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS Franchise Fees Super 8 Motels, Inc., now a wholly-owned subsidiary of Hospitality Franchise Systems, Inc., is franchisor of all Super 8 Motels. The Partnership pays to the franchisor monthly fees equal to 4% of the gross room revenues of the motel and contributes an additional 1% of the gross room revenues to an advertising fund administered by the franchisor. In return, the franchisor provides the right to use the name "Super 8," a national institutional advertising program, an advance room reservation system, and inspection services. These costs ($72,424 in 1995, $67,631 in 1994 and $66,694 in 1993) are included in motel operations expense in the accompanying statements of operations. The Partnership operates its motel property as a franchisee of Super 8 Motels, Inc. through a sub-franchise agreement with Brown & Grotewohl, a partnership of the Estate of Dennis A. Brown and Grotewohl Management Services, Inc., the general partner of Super 8 Economy Lodging IV, Ltd. Under the sub-franchise agreement, Brown & Grotewohl earned 40% of the above franchise fees, which amounted to $28,970, $27,052 and $26,678 in 1995, 1994 and 1993, respectively.
Property Management Fees Brown & Grotewohl, an affiliate of one of the General Partners, manages the motel property of the Partnership. The fee for this service is 5% of the gross revenues from Partnership operations as defined in the Partnership agreement, and amounted to $74,416, $69,631 and $68,657 in 1995, 1994 and 1993, respectively.
Subordinated Partnership Management Fees During the Partnership's operational stage, the General Partners are to receive 9% of cash available for distribution for Partnership management services, along with an additional 1% of cash available for distribution on account of their interest in the income and losses, subordinated, however, to receipt by the Limited Partners of a 10% per annum cumulative return on their adjusted capital investments. At September 30, 1995 the Limited Partners had not received the 10% cumulative return, and accordingly, no Partnership management fees are payable. Management does not anticipate payment of these fees in the immediate future; therefore, they are not reflected in these financial statements.
			SUPER 8 ECONOMY LODGING IV, LTD. 		 (A California Limited Partnership) 			 NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Subordinated Incentive Distributions Under the terms of the Partnership agreement, the General Partners are to receive 15% of distributions of net proceeds from the sale or refinancing of Partnership property remaining after distribution to the Limited Partners of any portion thereof required to cause distributions to the Limited Partners from all sources to be equal to their capital contributions plus a cumulative 10% per annum pre-tax return on their adjusted capital contributions.
Expenses Shared by the Partnership and its Affiliates There are certain expenses which are allocated between the Partnership and affiliated Super 8 partnerships. These expenses, which are allocated based on usage, are telephone, data processing, rent of the administrative office, administrative salaries and duplication expenses. The expenses allocated to the Partnership were approximately $110,000 in 1995, $104,000 in 1994 and $115,000 in 1993 and are included in motel and restaurant operations and general and administrative expenses in the accompanying statements of operations. Included in administrative salaries are allocated amounts paid to three employees who are related to Philip B. Grotewohl, the sole shareholder of Grotewohl Management Services, Inc., a general partner of the Partnership.
NOTE 5 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating expenses for the years ended September 30, 1995, 1994 and 1993:
					 1995 1994 1993 					 ---- ---- ----
Salaries and related costs $282,994 $298,050 $333,675 Utilities 70,349 70,875 69,795 Allocated costs, mainly indirect salaries 89,327 85,609 93,675 Other operating expenses 334,34 333,019 303,286 					 -------- -------- -------- Total Motel Operating Expenses $777,015 $787,553 $800,431 					 ======== ======== ========
NOTE 6 - SALE OF LAND PARCEL
On March 29, 1993 the Partnership conveyed approximately 428 square feet of the Pleasanton land adjacent to the freeway to the State of California. The proceeds of the sale consisted of $9,700. The sale resulted in a net gain of $5,825.

Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
	Inapplicable.
				 PART III
Item 10.

Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
	The original Managing General Partners of the Partnership were Dennis A. Brown and Grotewohl Management Services, Inc., whose sole shareholder is Philip B. Grotewohl. The original Associate General Partners were BWC Incorporated and Robert J. Dana.
Upon Mr. Brown's death on February 25, 1988, Mr. Grotewohl, as president of Grotewohl Management Services, Inc. and Mr. Dana elected to continue the Partnership. BWC Incorporated was dissolved in 1989.
	Mr. Grotewohl is currently age 77. Mr. Dana is age 67.
Item 11.

Item 11. EXECUTIVE COMPENSATION
	The following discussion contains certain information regarding aggregate direct or indirect compensation paid or accrued by the Partnership during the fiscal year ended September 30, 1995 to the General Partners and the Estate of Dennis A. Brown, and/or their affiliates. Although Mr. Brown ceased to be a general partner of the Partnership upon his death, his estate shares in certain compensation otherwise payable to the General Partners and their affiliates.
Property Management Fees - ------------------------
	The Manager, a California general partnership which is owned equally by the Estate of Dennis A. Brown and the Managing General Partner, is managing the Partnership's motel. The fee for this service is 5% of the gross proceeds from the operation of the motel. This compensation is in addition to the cost of compensating the Partnership's employees and the cost of goods and services acquired for the Partnership from independent contractors.
	During the fiscal year covered by this report the Partnership accrued such fees in the amount of $74,416, all of which were paid.
Franchise Fees and Advertising Fees - ------------------------------------
	The Partnership operates its motel as a franchisee of Super 8 Motels, Inc., through a sub-franchise obtained from Super 8 Management Corporation, a corporation of which the Estate of Dennis A. Brown and Philip B. Grotewohl are the sole shareholders. In March 1988 the shareholders of Super 8 Management Corporation transferred their interests in the
				 - 13 -
sub-franchise agreement to the Manager. The Partnershipo as franchisee, pays to the franchisor monthly franchise fees equal to 4% of its gross room revenue and contributes 1% pf its gross room revenue to an advertising fund administered by the franchisor to finance institutional advertising. The Manager is entitled to one-half of the 4% franchise fee.
	The total of franchise fees accrued during the fiscal year covered by this report was $57,939, of which $28,970 accrued to the Manager. All of the above sums have been paid.
General Partners' Interest in Cash Available for Distribution - --------------------------------------------------------------
At quarterly intervals, the total amount of the Partnership's Cash Available for Distribution is determined at the discretion of the General Partners. (See Item 5 above.) Distributions therefrom are made as follows: (1) 90% of such distributions are paid to the Limited Partners; (2) 9% thereof is paid to the General Partners as Partnership management fees; and (3) 1% thereof is paid to the General Partners in accordance with their interest in the income and losses of the Partnership.
	Notwithstanding the foregoing, however, distributions of Cash Available for Distribution to the General Partners which would otherwise be paid to the General Partners are deferred and paid only after payment to the Limited Partners of distributions of Cash Available for Distribution in an amount equal to 10% per annum cumulative on their Adjusted Capital Contributions. During the fiscal year covered by this report, $546,000 in distributions of Cash Available for Distribution were paid to the Limited Partners. A total of $366,104 representing the General Partners' Interest in Cash Available for Distribution has been deferred and remains unpaid since commencement of the Partnership. The Limited Partners must receive $8,681,355 (calculated through September 30, 1995) and $910,000 each year thereafter in additional distributions before any of the accrued amounts will be paid to the General Partners. Accordingly, the General Partners consider the payment of these deferred amounts to be unlikely.
General Partner's Interest in Sale or Refinancing Proceeds - -----------------------------------------------------------
	The proceeds from the sale or refinancing of properties not reinvested are to be distributed first to the Limited Partners until they have received cumulative payments from all distribution sources equal to 100% of their original capital contribution and a cumulative 10% per annum return on their Adjusted Capital Contributions. When the foregoing requirement has been satisfied, any remaining funds from the sale or refinancing of properties will be distributed 15% to the General Partners and 85% to the Limited Partners.
	No such distributions were paid or accrued for the account of the General Partners during the fiscal year covered by this report. 				 - 14 -
Allocation of General Partners' Interest - -----------------------------------------
Compensation to the General Partners and their affiliates in the form of franchise fees and property management fees is allocated 1/3 each to the Estate of Dennis A. Brown, the Managing General Partner and the Associate General Partner.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners - ------------------------------------------------
No person is known by the Partnership to be the beneficial owner of more than 5% of the Units.
Security Ownership of Management - --------------------------------
	The General Partners do not beneficially own any Units.
Changes in Control - -------------------
	With the consent of all other General Partners and Limited Partners holding more than 50% of the Units, a General Partner may designate a successor or additional general partner, in each case with such participation in such General Partner's interest as such General Partner and successor or additional general partner may agree upon, provided that the interests of the Limited Partners are not affected thereby.
A General Partner may withdraw from the Partnership at any time upon 60 days' prior written notice to the Limited Partners and any other General Partners, or may transfer his interest to an entity controlled by him; provided, however, that in either such event, if it is determined that the Partnership business is to be continued rather than dissolved and liquidated upon the happening thereof, the withdrawal or transfer will be effective only after receipt by the Partnership of an opinion of counsel to the effect that such withdrawal or transfer will not cause the Partnership to be classified as an association taxable as a corporation rather than as a partnership for federal income tax purposes.
The Limited Partners shall take no part in the management of the Partnership's business; however, a majority in interest of the Limited Partners, without the concurrence of the General Partners, shall have the right to amend the Partnership Agreement, dissolve the Partnership, remove a General Partner or any successor general partner, elect a new general partner or general partners upon the removal, retirement, death, insanity, insolvency or bankruptcy of a General Partner, and approve or disapprove the sale, exchange or pledge in a single transaction of all or substantially all of the properties acquired by the Partnership. 				 - 15 -
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative Expenses Shared by the Partnership and its Affiliates - --------------------------------------------------------------------
	There are certain administrative expenses allocated between the Partnership and affiliated Super 8 partnerships. These expenses, which are allocated based on usage, are telephone, data processing, rent of administrative offices and administrative salaries. The administrative expenses allocated to the Partnership were approximately $110,000 in the fiscal year ended September 30, 1995 and are included in general and administrative expenses and motel and restaurant operations expenses in the Partnership's financial statements. Included in administrative salaries are allocated amounts paid to three employee who are related to Philip B Grotewohl, the sole shareholder of a General Partner.
				 - 16 -
				 PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report: 1. Financial Statements Included in Part II of this Report 	 Report of Independent Certified Public Accountants 	 Balance Sheets, September 30, 1995 and 1994 	 Statement of Operations for the Years Ended September 30, 		1995, 1994 and 1993 	 Statements of Partners' Equity for the Years Ended September 30, 		1995, 1994 and 1993 	 Statements of Cash Flows for the Years Ended September 30, 		1995, 1994 and 1993 	 Notes to Financial Statements
2. Financial Statement Schedules Included in Part IV of the Report 	 None
3. Exhibits 	 3. and 4. The Partnership Agreement is incorporated herein 		 as an exhibit from the annual report on Form 10-K for the 		 fiscal year ended September 30, 1994
(b) Reports on Form 8-K: 	 Inapplicable
				 - 17 -

				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.
(Registrant) SUPER 8 MOTELS II, LTD. 			 ----------------------- (Signature and Title) /s/ Philip B. Grotewohl 			 ---------------------------- 			 Philip B. Grotewohl, President of Grotewohl 			 Management Services, Inc. Managing General Partner
Date December 28, 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.
By (Signature and Title) /s/ Philip B. Grotewohl 				--------------------------- 			 Philip B. Grotewohl, Chief executive officer, 			 chief financial officer, chief accounting 			 officer and sole director of Grotewohl 			 Management Services, Inc., Managing General 			 Partner
Date December 28, 1995
				 - 18 -


ITEM 1. BUSINESS
a. General Development of Business.
The Company began operations in 1928 and has grown through both internal expansion and new business acquisitions. Efforts since 1984 have focused on expansion of the Lighting Segment and the Compressors and Vacuum Pumps Segment as the two core businesses. The significant recent additions to these two core segments have been ASF, Pneumotive, Brey, and WISA, all compressor and vacuum pump companies, acquired from 1987 through 1990; and the Lumec and Day-Brite Lighting additions in 1987 and 1989, respectively. These acquisitions have been strategically important as they allow the Company to offer a more complete product line and make the Company a more prominent participant in both the lighting and compressor and vacuum pump markets.
The Lighting Segment operates in a multi-faceted industry, serving the consumer, commercial, industrial, and outdoor markets. The industry is dominated by five companies in the U.S. and Canada, one of which is Thomas Industries. Although the industry is subject to the cyclicality of residential and commercial construction activity, replacement and renovation activity moderates these cycles somewhat.
Operations of the Compressors and Vacuum Pumps Segment help the Company moderate the impact of the Lighting Segment's vulnerability to construction and economic cycles. Thomas believes it is the major supplier to the original equipment manufacturer (OEM) medical market and a significant participant in its other OEM compressor and vacuum pump markets.
b. Financial Information about Industry Segments.
The information required by this item is set forth in Exhibit 13 under the heading "Notes to Consolidated Financial Statements," which information is hereby incorporated herein by reference.
c. Narrative Description of Business.
The Company's principal businesses are lighting, including consumer, commercial, industrial, and outdoor lighting fixtures; and compressors and vacuum pumps. The Company designs, manufactures, markets, and sells these products; and maintains corporate offices in Louisville, Kentucky. The Company operates numerous divisions and subsidiaries, with facilities throughout the U.S. and operations in Canada and Germany. The Company also maintains sales offices in Brazil, England, Italy, and Japan and has joint ventures in Japan and in the U.S. and Canada with a Belgian company.
Lighting Segment
The Company's consumer lighting products--its original base--are designed for a broad range of consumers. The Company stresses product development to meet changing needs and demands. The Company typically targets the more upscale, single-family homeowner but also has a line for the do-it-yourself homeowner. The Company also is strongly involved in the replacement lighting market, which is a growing component of the overall lighting industry. Under the Thomas and Do-It-Yourself brand names, the Company's consumer lighting line includes high-style chandeliers and bathroom fixtures, plus quality lighting products for foyers, dining rooms, living rooms, entertainment areas, kitchens, bedrooms, and outdoors.
The Thomas and Do-It-Yourself lines are distributed throughout the United States through a network of electrical distributors, lighting showrooms, and home centers, which, in turn, sell to electrical contractors, builders, and consumers.
Consumer lighting fixtures are manufactured and sold in the U.S. and Canada under the Thomas and Do-It-Yourself trade names; and those trade names are recognized as important to this Segment's business.
The Company believes it has established a reputation as an innovator and pioneer in track and recessed lighting technology and is one of the nation's leading manufacturers of fluorescent and high-intensity discharge ("HID") commercial and industrial products. The Company's commercial and industrial product line can be applied to virtually any application, using a variety of lamp sources, and is designed for efficiency as well as energy savings. The Company's outdoor lighting products are known for their high performance in efficiency, glare control, and uniformity of illumination. Products are manufactured and sold in the U.S. and Canada under the Day-Brite, Gardco, Capri, Electro/Connect, McPhilben, Omega, Emco, Lumec, and Thomas Lighting trade names.
The Lighting Segment accounted for 68 percent of the Company's sales in 1995, compared to 67 percent in 1994 and 66 percent in 1993.
Compressors and Vacuum Pumps Segment
This Segment includes air compressors and vacuum pumps manufactured under the Thomas name in the U.S. and ASF/Thomas in Europe for use in the finished products of other domestic or foreign manufacturers. Its products also are manufactured for private-label sale in the construction compressor industry. Thomas specializes in compressor applications below the 1.5 horsepower range. Such compressors and vacuum pumps are found in medical equipment, vending machines, photocopiers, computer tape drives, automotive and transportation equipment, liquid dispensing applications, gasoline vapor recovery, refrigerant recovery and waste disposal equipment. Thomas is the major compressor and vacuum pump participant in the medical OEM industry worldwide. The Company offers a wide selection of standard air compressors and vacuum pumps and will modify or design its products to meet exacting OEM applications.
In addition, the Company manufactures and sells compressors and related accessories for commercial and consumer use. Sales, both domestic and international, traditionally are made through hardware stores, home centers, and building supply dealers.
The U.S. operations manufacture rotary vane, piston, and diaphragm compressors and vacuum pumps, as well as air motors and vacuum ejectors. These products are distributed worldwide to original equipment manufacturers as well as through fluid power and large compressor distributors. Primary markets served include medical, environmental, instrumentation, mobile, construction, and consumer.
The European operations manufacture a complementary line of miniature rotary vane, piston, linear, and diaphragm compressors and vacuum pumps, with expertise in applications of less than 1/8 horsepower. These products are currently distributed worldwide to original equipment manufacturers. Primary applications for products manufactured in Europe include medical, air and gas sampling, photography, and dish washing equipment, as well as laboratory instruments and leak detection devices.
The Thomas, ASF/Thomas, and Sprayit trade names are recognized in the market and are important to the Segment.
The Compressors and Vacuum Pumps Segment accounted for 32 percent of the Company's sales in 1995, compared to 32 percent in 1994 and 29 percent in 1993.
---------------------
No single customer of the Company accounted for more than 10 percent of consolidated net sales or more than 10 percent of any segment's net sales in 1995, and no material part of the business is dependent upon a single customer the loss of which could have a materially adverse effect on the business of the Company.
The backlog of unshipped orders was $90 million at December 31, 1995--47 percent Lighting and 53 percent Compressors and Vacuum Pumps--and $90 million at December 31, 1994--48 percent Lighting and 52 percent Compressors and Vacuum Pumps. The Company believes substantially all of such orders are firm, although some orders are subject to cancellation. Substantially all of these orders are filled in the succeeding year.
Competition in the lighting industry is strong in all markets served by the Company. The industry has been consolidating significantly over the last few years. It is estimated that five companies control the majority of the market in the U.S. and Canada. Thomas Industries is one of these top five. The Company stresses high quality, and energy efficient lighting products, while providing value and strong customer support to compete in its markets.
The Compressors and Vacuum Pumps Segment competes worldwide in the fractional horsepower compressor and vacuum pump markets. Management believes it is the major supplier to the OEM medical market and a significant participant in its other OEM markets.
The Company believes that it has adequate sources of materials and supplies for each of its businesses.
There is no significant seasonal impact on the business of any industry segment of the Company. Many of the lighting businesses continue to be dependent on the construction markets, which are subject to the overall health of the economy.
Working capital is provided principally from operating profits. The Company maintains adequate lines of credit and financial resources to meet the anticipated cash requirements in the year ahead.
The Company has various patents and trademarks but does not consider its business to be materially dependent upon any individual patent or trademark.
During 1995, the Company spent $13.4 million on research activities relating to the development of new products and the improvement of existing products. Substantially all of this amount was Company-sponsored activity. During 1994, the Company spent $12.7 million on these activities and during 1993, $12.4 million.
Continued compliance with present and reasonably expected federal, state, and local environmental regulations is not expected to have any material effect upon capital expenditures, earnings, or the competitive position of the Company and its subsidiaries.
The Company employs approximately 3,100 people.
d. Financial Information about Foreign and Domestic Operations and Export Sales.
See Notes to Consolidated Financial Statements, as set forth in Exhibit 13, which information is incorporated herein by reference to the Company's 1995 Annual Report to Shareholders, for financial information about foreign and domestic operations. Export sales for the years 1995, 1994, and 1993, were $40,900,000, $36,600,000, and $34,500,000, respectively.
e. Executive Officers of the Registrant.
All other officers listed have been executive officers for the past five years.
ITEM 2.

ITEM 2. PROPERTIES
The Corporate offices of the Company are located in Louisville, Kentucky. Due to the large number of individual locations and the diverse nature of the operating facilities, it is neither practical nor significant to describe all of the properties owned and leased by the Company. All of the buildings are of steel, masonry, and concrete construction, are in generally good condition, provide adequate and suitable space for the operations at each location, and are of sufficient capacity for present and foreseeable future needs.
The following listing summarizes the Company's properties.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
In the normal course of business, the Company and its subsidiaries are parties to legal proceedings. Management believes that these proceedings will be resolved with no materially adverse impact on the financial condition and results of operations of the Company.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II.
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
The information required by this item is set forth in Exhibit 13 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and under the heading "Notes to Consolidated Financial Statements," which information is contained in the Company's 1995 Annual Report to Shareholders and hereby incorporated herein by reference.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The information required by this item is set forth in Exhibit 13 under the heading "Five-Year Summary of Operations and Statistics," which information is contained in the Company's 1995 Annual Report to Shareholders and hereby incorporated herein by reference.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The information required by this item is set forth in Exhibit 13 under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations," which information is contained in the Company's 1995 Annual Report to Shareholders and hereby incorporated herein by reference.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is set forth in Exhibit 13 under the headings "Consolidated Financial Statements," "Notes to Consolidated Financial Statements," and "Report of Management and Independent Auditors," which information is contained in the Company's 1995 Annual Report to Shareholders and hereby incorporated herein by reference.
The supplementary data regarding quarterly results of operations is set forth in Exhibit 13 under the heading "Notes to Consolidated Financial Statements," which information is contained in the Company's 1995 Annual Report to Shareholders and hereby incorporated herein by reference.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III.
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
a. Directors of the Company
The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 18, 1996, under the headings "Election of Directors" and "Compliance with Section 16(a)," which information is hereby incorporated herein by reference.
b. Executive Officers of the Company
Reference is made to "Executive Officers of the Registrant" in Part I, Item 1e.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 18, 1996, under the headings "Executive Compensation," "Compensation Committee Interlocks and Insider Participation," and "Board of Directors," which information is hereby incorporated herein by reference.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 18, 1996, under the heading "Securities Beneficially Owned by Principal Shareholders and Management," which information is hereby incorporated herein by reference.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this item is set forth in registrant's Proxy Statement for the Annual Meeting of Shareholders to be held on April 18, 1996, under the caption "Board of Directors," which information is hereby incorporated herein by reference.
PART IV.
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
a. (1) Financial Statements
The following consolidated financial statements of Thomas Industries Inc. and subsidiaries, included in the Company's 1995 Annual Report to Shareholders are included in Part II, Item 8:
Consolidated Balance Sheets--December 31, 1995 and 1994 Consolidated Statements of Income--Years ended December 31, 1995, 1994, and 1993 Consolidated Statements of Shareholders' Equity--Years ended December 31, 1995, 1994, and 1993 Consolidated Statements of Cash Flows--Years ended December 31, 1995, 1994, and 1993 Notes to Consolidated Financial Statements--December 31, 1995 Five-Year Summary of Operations and Statistics Independent auditors report from KPMG Peat Marwick LLP
(2) Financial Statement Schedule
Schedule II -- Valuation and Qualifying Accounts
(3) Listing of Exhibits
Exhibit No. Exhibit
3(a) Restated Certificate of Incorporation, as amended, filed as Exhibit 3(a) to registrant's report on Form 10-Q dated August 11, 1988, hereby incorporated by reference.
3(b) Bylaws, as amended December 14, 1995.
4(a) Note Agreement dated January 19, 1990, by and among the Company and its Day-Brite Lighting, Inc., subsidiary, Allstate Life Insurance Company, and other investors filed as Exhibit No. 4 to registrant's report on Form 10-K dated March 22, 1990, hereby incorporated by reference.
Copies of debt instruments for which the related debt is less than 10% of consolidated total assets will be furnished to the Commission upon request.
4(b) Rights Agreement filed as Exhibit 1 to registrant's report on Form 8-A on December 23, 1987, hereby incorporated by reference.
4(c) Amendment to Rights Agreement filed as Exhibit 1 to the registrant's report on Form 8-K on October 18, 1990, hereby incorporated by reference.
10(a) Employment Agreements with Timothy C. Brown, Gilbert R. Grady, Jr., C. Barr Schuler, and Phillip J. Stuecker filed as Exhibits 3(a), 3(f), 3(i), and 3(j), respectively, to registrant's report on Form 10-Q dated November 11, 1988, hereby incorporated by reference.
10(b) Employment Agreement with Clifford C. Moulton filed as Exhibit 10(b) to registrant's report on Form 10-K dated March 25, 1993, hereby incorporated by reference.
10(c) Employment Agreement with Richard J. Crossland filed as Exhibit 10(c) to registrant's report on Form 10-K dated March 22, 1994, hereby incorporated by reference.
10(d) Trust Agreement, filed as Exhibit 10(1) to registrant's report on Form 10-Q dated November 11, 1988, hereby incorporated by reference.
10(e) Form of Indemnity Agreement and Amendment thereto entered into by the Company and each of its Executive Officers filed as Exhibits 10 (g) and (h) to registrant's report on Form 10-K dated March 23, 1988, hereby incorporated by reference.
10(f) Severance pay policy of the Company, effective October 1, 1988, covering all Executive Officers, filed as Exhibit 10(d) to registrant's report on Form 10-K dated March 23, 1989, hereby incorporated by reference.
10(g) 1987 Incentive Stock Plan as Amended, filed as Annex A to the registrant's Proxy Statement on March 17, 1989, hereby incorporated by reference.
10(h) Non-Employee Director Stock Option Plan, filed as Exhibit A to the registrant's Proxy Statement on March 10, 1994, hereby incorporated by reference.
10(i) 1995 Incentive Stock Plan, filed as Exhibit A to the registrant's Proxy Statement on March 14, 1995, hereby incorporated by reference.
13 Certain portions of the Company's 1995 Annual Report to Shareholders as specified in Part II hereof to be incorporated by reference in this Annual Report on Form 10-K.
21 Subsidiaries of the Registrant.
23 Consent of KPMG Peat Marwick LLP.
27 Financial Data Schedule.
b. Reports on Form 8-K
There were no reports on Form 8-K for the three months ended December 31, 1995.
c. Exhibits
The exhibits filed as part of this Annual Report on Form 10-K are as specified in Item 14(a)(3) herein.
S I G N A T U R E S
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, there unto duly authorized.
THOMAS INDUSTRIES INC.
Date: March 21, 1996 By /s/ Timothy C. Brown Timothy C. Brown, Chairman of the Board
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
/s/ Timothy C. Brown Chairman of the Board; 3/21/96 Timothy C. Brown President; Chief Executive Officer; Chairman of the Executive Committee; Director (Principal Executive Officer)
/s/ Phillip J. Stuecker Vice President of Finance; 3/21/96 Phillip J. Stuecker Chief Financial Officer; Secretary (Principal Financial Officer)
/s/ Ronald D. Wiseman Controller; Assistant 3/21/96 Ronald D. Wiseman Secretary (Principal Accounting Officer)
/s/ Peter P. Donis Director 3/21/96 Peter P. Donis
/s/ Wallace H. Dunbar Director 3/21/96 Wallace H. Dunbar
/s/ Roger P. Eklund Director 3/21/96 Roger P. Eklund
/s/ H. Joseph Ferguson Director 3/21/96 H. Joseph Ferguson
/s/ Gene P. Gardner Director 3/21/96 Gene P. Gardner
/s/ Lawrence E. Gloyd Director 3/21/96 Lawrence E. Gloyd
/s/ William M. Jordan Director 3/21/96 William M. Jordan
/s/ Ralph D. Ketchum Director 3/21/96 Ralph D. Ketchum
/s/ Franklin J. Lunding, Jr. Director 3/21/96 Franklin J. Lunding, Jr.
Independent Auditors' Report
The Board of Directors and Shareholders Thomas Industries Inc.
We have audited the consolidated financial statements of Thomas Industries Inc. and subsidiaries as listed in the accompanying index. In connection with our audits of the financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Thomas Industries Inc. and subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
Louisville, Kentucky February 7, 1996
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS Thomas Industries Inc. and Subsidiaries December 31, 1995
EXHIBIT INDEX
Exhibit No. Exhibit Page
3(b). Bylaws, as amended December 14, 1995
13. Certain portions of the Company's 1995 Annual Report to Shareholders as specified in Part II hereof to be incorporated by reference in this Annual Report on Form 10-K 21. Subsidiaries of the Registrant
23. Consent of KPMG Peat Marwick
27. Financial Data Schedule


ITEM 1. BUSINESS
GENERAL
Whitehall Income Fund-86 Limited (the "Registrant" or the "Partnership") is a limited partnership formed in 1985 under the Limited Partnership Act of the State of California to acquire, improve, operate and hold for investment income producing real property. The Partnership purpose is to purchase Properties and to own and operate the Properties for a period of five to ten years. Currently, the Partnership employs approximately 8 individuals.
The Registrant has acquired two self storage facilities, a shopping center, two office buildings and a building leased to fast food restaurant operations for a total cost of $5,675,566 as further described in Item 2.

ITEM 2. PROPERTIES
The Registrant owns six income producing real properties as described below.
MCRAE SQUARE SHOPPING CENTER
On December 30, 1986, the Partnership purchased, from an unaffiliated third party, the commercial income project known as McRae Square Shopping Center (the "Shopping Center") located in the southeastern area of Georgia in McRae for a total of $793,840. The building has a cost basis of $734,611 and the land was allocated a cost of $59,229 based upon an independent appraisal dated March 1986. The Shopping Center is located directly across the street from the local Winn Dixie Shopping Center on U.S. Highway 341-Oak Street, one of the primary traffic arteries in the area. The Shopping Center is approximately two acres in size and encompasses approximately 12,630 square feet of leasable area with room for
expansion. The Shopping Center was completed in December of 1985 and commenced operation on December 31, 1985.
The Shopping Center's current tenants include Rite Aid Drug, the drugstore chain subsidiary of Rite Aid Corporation. Another major tenant is Family Dollar Stores, Inc., a discount variety store. Family Dollar Store's initial lease term expired during December 31, 1994, with six (6) five-year options; Rite Aid Drug's initial lease term expired May 25, 1995, with four (4) five-year options. Each tenant has exercised its first option for a period of five (5) years. Family Dollar's annual base rent is $26,000; Rite Aid's $48,067.50.
The Partnership, under the terms of the Shopping Center leases and options, is entitled to receive as additional rental, subject to certain offsets, percentage rental participation of two percent (2%) to two and one-half percent (2.5%) of annual gross sales, above certain sales levels.
The Shopping Center is directly across the highway from the Winn Dixie Shopping Center which contains two department stores similar to the Family Dollar and Rite Aid Drug. There are retail shopping areas in Helens, .5 miles to the west and in McRae .3 miles east, which contain two drug stores. These retail establishments compete with the establishments which are lessees of the McRae Square Shopping Center.
Rental income for the Shopping Center was $78,396, $87,568 and $67,126 for 1995, 1994, and 1993, respectively. Operating expenses for the same years were $43,177 $ 42,992 and $48,387 respectively. The rental income increase for 1994 reflected collection of $14,376 from Rite Aid for reimbursement of their share of real estate taxes and general insurance for previous years.
As of December 31, 1995 the Shopping Center is 100% occupied.
The Partnership paid to, in prior years, an affiliate of the General Partner an acquisition fee of $44,000 for its efforts in the negotiation, execution and purchase of the Shopping Center.
The property was unencumbered as of December 31, 1995.
TANQUE VERDE SELF STORAGE
On March 31, 1987, the Partnership acquired the Tanque Verde/Kolb Self Storage facility (the "Property") in Tucson, Arizona. The original purchase price of the Property was $1,945,000 plus legal, title, and recording fees of $17,140. Of the original purchase price, $194,031 was allocated to land and $1,768,109 to the building, based upon an independent appraisal. The Property is located on a parcel of land comprising approximately 60,209 square feet, which consists of approximately 43,200 square feet of self-storage facilities, approximately 950 square feet of
office/residence space, and approximately 16,059 square feet of non-rentable space. The Property was completed in December 1984, and commenced operations during that month. There are 875 self-storage units within the Property. One hundred twenty-eight (14.6%) are 4'x5'x9' units, 110 (12.6%) are 3'x4' units and 90 (10.3%) are 5'x12' units. The remainder of the units vary in size from 4'x4' to 11'x18'.
Monthly rents vary from $15.00 to $166.00 per unit. The Property is over 90% occupied.
There are four self-storage facilities in the eastern Tucson, Arizona area which are in direct competition with the Property. They currently have occupancy ranges of approximately 90% to 95%, with rents substantially similar to the those charged by the Partnership.
The Property has a $1,000,000 note payable which is collateralized by the Property's real and personal property. The note calls for interest adjusted semi-annually to 3.5% above the coupon rate with a maximum rate of 16.65% and minimum of 9.66%. Monthly principal and interest payments of $8,528 are due until the interest rate is adjusted then the monthly installment will be adjusted accordingly. The entire unpaid balance is due September 1999. The outstanding balance on this note at December 31, 1995 was $951,603.
Rental income from the Property was $374,824, $354,097 and $333,723 for 1995, 1994, and 1993, respectively. Operating expenses for the same years were $324,237, $373,034 and $373,176, respectively. Rental income increased based on rental rate increases in July of 1995; while, expenses increased due to an increase in real estate tax assessment and replacement of the cooling units at the facility.
The Partnership paid, in prior years, an affiliate of the General Partner an acquisition fee of $144,900 for its efforts in negotiations and purchase of the facility.
ATHENS SELF STORAGE
On May 23, 1988, the Partnership purchased a self-storage facility ("Athens Self Storage") in Athens, Georgia for a purchase price of $1,132,974. Of the original purchase price, $862,974 was allocated to the building and $270,000 was allocated to the land. The Athens Self Storage is comprised of a 3.4 acre parcel of land and mini storage warehouse, which is a 31,630 square foot storage facility. The property was subject to a first mortgage for $643,872 and the mortgage was paid in full in 1989.
During 1990, the Partnership signed a $575,000 note payable to obtain funds to assist in expanding the Athens facility. In connection with this note, the Partnership acquired additional land for approximately $73,000. The note requires monthly principal and
interest installments of $6,717 through November 1995, at which time the interest will adjust to prime plus 1.5% and monthly principal and interest payments will be based on a ten year amortization period. The remaining balance of the note becomes due November 2000. The note contains restrictions which, among other things, require maintenance of certain financial ratios and the subordination of distributions to the terms and conditions of the note.
Occupancy rates were over 90% and rental income from Athens Self Storage was $ 175,319, $231,611 and $213,529 for 1995, 1994 and 1993, respectively. Operating expenses for the same years were $169,036, $250,694 and $292,005 respectively.
The Athens Self Storage was exchanged for a larger storage facility in Tucson, Arizona on November 3, 1995 at a difference of $535,000. The exchange property, known as Capitol Self Storage, was acquired with a debt of $1,250,000 payable in monthly installments of principle and interest of $10,490 at nine percent (9%)annually, amortized over a twenty-five (25) year period with a ten (10) year balloon payment.
CAPITOL SELF STORAGE
On November 3, 1995, the Partnership exchanged Athens Self Storage for Capitol Self Storage, a 43,890 square foot storage facility on 1.5 acres in Tucson, Arizona. The purchase price was $1,925,000 and consists of 471 storage units and 43 parking spaces. The storage buildings are built of block with metal roofs, with perimeter fencing and electronic gates with touch pads. The driveway areas are of both asphalt and concrete. The managers are a husband and wife who reside at the apartment on site.
The facility, built in 1984 has maintained an occupancy of 85% to 95% over the past three years, as have the four area facilities which are in direct competition with Capitol. Partnership rate ranges are similar to those of the competing facilities. Located on a main east-west thoroughfare with a traffic count of 30,000 per day, the facility attracts customers from a heavy concentration of apartments in the area, winter visitors and a military base.
The property was held as collateral for a mortgage of $1,250,000 outstanding as of December 31, 1995.
PAN AMERICAN OFFICE BUILDING
On December 29, 1988, the Partnership purchased a 16,315 square foot office building on a 1.39 acre tract of land (the "Pan Am Plaza") in Edinburgh, Texas for a purchase price of $600,067. The Pan Am Plaza is fully occupied by the Department of Human Resources of the State of Texas on a five year noncancellable lease with annual increases. The lease was renewed in August of 1993 for a
five-year period and also contains options for future renewal.
Rental revenue for the Pan Am Plaza was $82,446, $81,906 and $87,452 for 1995, 1994 and 1993, respectively. Operating expenses for the same years were $65,793, $54,097 and $147,230 respectively. The increase in operating expenses in 1993 was due primarily to the allocation of accrued property taxes and insurance to the lessor and repairs and improvements made for lease renewal.
The property was held as collateral for a mortgage of $335,819 outstanding as of December 31, 1995, which the partnership assumed in 1995. The Partnership holds as collateral against said mortgage a collateral interest in a mortgage note in the amount of $346,000 against a Krogers in Atlanta, Georgia.
THE RAX/HONEY BAKED HAM IN LOUISIANA
On December 29, 1988, the Partnership purchased land and a 3,500 square foot building in Gretna, Louisiana for a purchase price of $600,000. The building's cost basis is $455,077 (including improvements totaling $5,077 made subsequent to acquisition) and the land cost is $150,000. During 1991, The Original Honey Baked Ham Co. of Georgia signed a three year lease providing for monthly payments of $3,000. On July 30, 1993 The Original Honey Baked Ham Co. of Georgia signed a First Amendment to the Lease adding an additional option period of two years commencing on January 1, 1994 and ending on December 31, 1995 for $36,000 per year. The amendment also provides the lessee with three options to extend the lease for additional five year terms, which the tenant did not exercise in for 1996. However, the tenant did extend the lease for a one-year period at the same rate commencing January 1, 1996 and ending December 31, 1996. The former tenant, Rax Restaurants, defaulted on its lease agreement in 1990.
Rental revenue for this property was $36,150 $38,112 and $36,000 for 1995, 1994 and 1993, respectively. Operating expenses for the same years were $30,897, $21,111 and $22,168, respectively.
The property was not held as collateral for any mortgages outstanding as of December 31, 1995.
WENDY'S RESTAURANT IN BUFORD, GA
On December 17, 1987, the Partnership acquired a building in Buford, Georgia for $513,749. The building was not completed until 1988. The building is occupied by a Wendy's Restaurant franchise with a twenty year lease term expiring in 2008. The lease also provides four options to extend the lease for 5 year periods each.
On September 10, 1993 the Partnership sold the land and building related to Wendy's in Buford, Georgia for $552,843 resulting in a gain on sale of $84,715.
ORACLE OFFICE PLAZA IN TUCSON, ARIZONA
On November 29, 1993 the Partnership acquired a 50% undivided preferential interest in an office building ("Oracle") in Tucson, Arizona for $300,000.
The Partnership's investment is accounted for on the equity method. The Partnership is entitled to an annual return of 10% of its original investment. If the available net cash flow from the property is insufficient to pay the preferred return, 5600 N. Oracle Group, LLC ("5600"), the holder of the remaining undivided 50% interest, must contribute additional capital to pay the remainder. In the event the net cash flow exceeds the preferred return, the excess will be distributed first to "5600" until they have received distributions equal to the Partnership's preferred return and thereafter in accordance with the ownership percentages.
Operation deficits, if any, will be funded by "5600" during the ownership of the property. A preferred return of $44,715, which is collected in a monthly payment of $2,500, was received in 1995.
The property incorporates three separate buildings, consisting of 6,800, 12,000 and 6,000 square feet, comprising approximately 2 acres located in the northwest region of Tucson, Arizona.
The Property was held as collateral for an underlying mortgage of $884,436, outstanding as of December 31, 1995.
ITEM 3.

ITEM 4. SUBMISSION OR MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant did not solicit proxies and the Directors/Officers, as previously reported to the Commission, was re-elected in its entirety.
ITEM 5.

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS
There has not been a public market and it is not anticipated that a public market for Limited Partnership Interests will develop.
As of December 31, 1995 the number of holders of record of Limited Partnership Interests of the Registrant was 741.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth selected operations data with respect to the Partnership for each of the five years in the period ended December 31, 1995:
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A real estate limited partnership passes through four phases during its life cycle. These phases are:
1. Sale of limited partnership interests (equity-raising). 2. Acquisition of income producing property and property management. 3. Management of acquired property.
4. Sale of appreciated property.
The partnership is currently in the property management phase of its life cycle.
RESULTS OF OPERATIONS
The Partnership commenced its operations January 1, 1987 with the acquisition of McRae Shopping Center in McRae, Georgia. Since that time, the Partnership has acquired five additional income producing properties. As of December 31, 1995, the Partnership has distributed $1,944,922 to the Limited Partners and $28,369 to the General Partner.
Rental revenues less rental operating expenses decreased $61,508 from fiscal 1994 to fiscal 1995. This was primarily due to rental decreases at the Athens property, as a result of competition with a newly built U-Haul facility; property tax adjustments at Honey Baked Ham; and, selling and acquisition expenses.
One rental property was sold and one rental property was purchased during 1995 resulting in an increase of $823,496 in rental property assets and an increase of $768,879 in notes payable. The remaining increase of $335,819 in notes payable is a result of assuming a mortgage on the Pan American Office Building for which a $297,138 note receivable exists.
It is anticipated the sale of Athens Self storage and the purchase of the Capitol Self Storage in a tax-free exchange will result in increased revenues for 1996.
Rental revenues less rental operating expenses increased $159,924 from fiscal 1993 to fiscal 1994. This was primarily due to rental increases at several of the properties and lower rental operating expenses at Pan Am Plaza.
Inflation has historically been a contributing factor to the increase in capital appreciation of income producing real estate and may continue to be a contributing factor in the future. The Partnership's intention is to own and operate the Properties for a period of five to ten years. At this time it is not possible to anticipate what the real estate market and capital appreciation will be in the future. Currently, the properties are generating sufficient cash flow to cover their own cash operating expenses.
LIQUIDITY AND CAPITAL RESOURCES
The cash position of the Partnership and distributions to Limited Partners should remain constant during 1996 due to the proceeds of the offering remaining invested in the income producing real properties and most of the cash flow from the properties being distributed every quarter to the Limited Partners. In 1993 a decline in cash flow was experienced due to improvement requirements for lease renewal at Pan American Plaza and continuing legal bills on the Athens dispute. In 1995 a decline in cash flow was experienced due to an increase in interest payments, property tax assessments, amortization and professional services as a result of exchanging Athens Self Storage for Capitol Self Storage, in addition to assuming the mortgage on Pan American Plaza. Payroll, general and administrative expenses also increase in 1995. It is anticipated that distributions to the Limited Partners in 1996 will be greater in comparison to those of 1995, since the exchange expenses will not be recurring; however, the time and amount of distributions is at the sole subjective discretion of the General Partner.
The liquidity of the Partnership relies almost entirely on the financial market fluctuation and availability of funds with regard to lending and investing in commercial property. Funds appear to be coming more available and therefore may provide liquidity in 1996 or 1997 which the Partnership has not experienced in previous years.
The Partnership feels that they have adequate cash reserves to meet working capital requirements as they arise.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Reports of Independent Auditors and the financial statements as set forth on pages to are hereby incorporated herein.
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
The Partnership changed accountants to HEIN + Associates LLP from BDO Seidman, with no disagreement, on January 10, 1996. The form 8-K was filed with the Securities and Exchange Commission on January 11, 1996.
PART III
ITEM 10.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)Neither the Registrant nor W & C Income Company Ltd., its General Partner, has a Board of Directors.
(b,c,d,&e)The General Partner of the Registrant is W&C Income Company, Ltd., a California Limited Partnership.
W & C INCOME COMPANY, LTD: a California Limited Partnership, does not have an operations history; however, the resources from Whitehall Capital Investment Group, Inc. have been utilized by the Partnership.
JACK C. WEST: Mr. West, age 46, a Managing Member, has been a private investor since 1988. From 1986 to 1988, Mr. West was President and Director of Whitehall Capital Corporation. Before that time Mr. West was Senior Vice President/National Marketing Director as well as director of the Whitehall Capital Corporation's Irvine, California offices, in charge of the company's marketing programs. Prior to joining Whitehall Capital Corporation in 1982, he was active from 1977 until 1982 as a Senior Account Manager-portfolio management with First National Corporation, an asset portfolio management corporation.
WHITEHALL CAPITAL INVESTMENT GROUP: The corporation has an interest in over $500 million of income producing real estate projects. Whitehall Capital Investment Group's investment portfolio includes an interest in over 100 major credit tenant commercial projects located primarily throughout the Sun Belt States.
(f)No Managing Members of the General Partner were involved with legal proceedings.
(g)There were no transactions with promoters or control persons.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
(a,b,c, & d)The Registrant has not paid and does not propose to pay any compensation or retirement benefits to members of the General Partner.
(e)There were no termination of employment or change of control arrangements with members of the General Partner.
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)W & C Income Company, Ltd. and its members own as a group or individually, 1% of the Limited Partnership Interests of the Registrant.
(c)There were no changes in control or arrangements for changes in control.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information respecting certain relationships and related transactions is incorporated herein by reference to and is set forth in Note 5 of Notes to the Financial Statements on page of this Form 10-K.
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements: (1) The index to the Financial Statements is included on of this report. (2) Financial Statement Schedules - through.
(b) Reports on Form 8-K: The Registrant did not file any Form 8-K reports during the fiscal year ended December 31, 1995.
(c) Exhibits required by Item 601 of Regulation S-K: The Registrant does not have any exhibits attached to Form 10-K.
(d) Financial Statement Schedules required by Regulation S-X: All required information is included in the financial statements or notes thereto.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant had duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.
Whitehall Income Fund - 86, A California Limited Partnership (Registrant)
By W & C Income Company, Ltd. General Partner of the Registrant
Date: 3/7/96 By: /s/ Jack C. West ----------------- _______________________ Jack C. West Managing Member
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
INDEPENDENT AUDITOR'S REPORT
The Partners Whitehall Income Fund - 86 (A California limited partnership) Tucson, Arizona
We have audited the accompanying balance sheet of Whitehall Income Fund - 86 (a California limited partnership) as of December 31, 1995 and the related statements of operations, changes in partners' capital (deficit) and cash flows for the year then ended. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit 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 audit provides 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 Whitehall Income Fund - 86 (a California limited partnership) at December 31, 1995, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles.
Our audit referred to above included an audit of the financial statement schedules listed under Item 14(a)(2). In our opinion, these financial statement schedules present fairly, in all material respects, in relation to the financial statements taken as a whole, the information required to be stated therein.
HEIN + ASSOCIATES LLP Orange, California March 7, 1996 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners Whitehall Income Fund - 86 (A California limited partnership) Tucson, Arizona
We have audited the accompanying balance sheet of Whitehall Income Fund - 86 (a California limited partnership) as of December 31, 1994 and the related statements of operations, changes in partners' capital (deficit) and cash flows for each of the two years in the period ended December 31, 1994. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Whitehall Income Fund - 86 (a California limited partnership) at December 31, 1994, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 1994 in conformity with generally accepted accounting principles.
BDO Siedman, LLP
March 3, 1995
Whitehall Income Fund - 86 (A California limited partnership)
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
See accompanying notes to these financial statements.
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF OPERATIONS
See accompanying notes to these financial statements.
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT) YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
See accompanying notes to these financial statements.
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
See accompanying notes to these financial statements.
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
1. SUMMARY OF ACCOUNTING POLICES:
Nature of Business - Whitehall Income Fund - 86 (the "Partnership") was organized in the State of California on December 15, 1985 for the purpose of investing in, holding, developing and managing income producing properties.
Allocations and Distributions - Generally, net losses are allocated 1% to W&C Income Company, Ltd. (the "General Partner") and 99% to the Limited Partners. Net income is allocated in the same proportion as net losses until all such losses have been recaptured, and then in proportion to distributions of cash from operations until the partners' capital accounts equal their original invested capital. Finally, the remaining net income is allocated 15% to the General Partner and 85% to the Limited Partners.
Distributions of cash from operations, as defined, are divided 1% to the General Partner and 99% to the Limited Partners until the Limited Partners have received their priority return. The Limited Partners are entitled to a cumulative noncompounded return on adjusted invested capital, as defined in the Partnership Agreement, of 7% in 1986, 8% in 1987, and 9% in 1988, and 10% per annum thereafter. Thereafter, distributions are divided 5% to the General Partner and 95% to the Limited Partners. As of December 31, 1994 the Limited Partners had not received their full cumulative priority return.
Fees - The General Partner provides property management and leasing services to the Partnership and is compensated at 5% of the gross receipts from the properties (see Note 7). The General Partner is also entitled to a partnership management fee of 5% of all distributions of cash from operations after the Limited Partners have received their priority return. During the years ended December 31, 1995, 1994 and 1993, the partnership management fees were waived by the General Partner.
The Partnership reimburses the General Partner for a portion of payroll, relating to an in-house legal counsel and a managing agent, and certain general and administrative expenses (see Note 7).
Impact of Recently Issued Accounting Standards - In March 1995, the Financial Accounting Standards Board issued a new statement titled "Accounting for Impairment of Long-Lived Assets." This new standard is effective for years beginning after December 15, 1995 and would change the Company's method of determining impairment of long-lived assets. Although the Company has not performed a detailed analysis of the impact of this new standard on the Company's financial statements, the Company does not believe that adoption of the new standard will have a material effect on the financial statements.
Rental Properties - Rental properties and improvements are recorded at cost. The Partnership capitalizes and depreciates all buildings used for investment income over thirty-one to thirty-nine years, the estimated useful life of the property, using an accelerated method for financial reporting purposes. Depreciation of improvements is calculated using the same accelerated method over the estimated useful lives (ranging from 5 to 10 years) of the respective assets. The cost of normal maintenance and repairs is charged to operating expenses as incurred. Material expenditures which increase the life of an asset are capitalized and depreciated over the estimated remaining useful life of the asset. The cost of properties sold, or otherwise disposed of, and the related accumulated depreciation or amortization are removed from the accounts, and
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
any gains or losses are reflected in current operations.
Investment in Office Building - The Partnership owns a fifty percent undivided preferential interest in an office building in Tucson, Arizona. The Partnership's investment is accounted for on the equity method. Accordingly, the Partnership's share of earnings or losses are included in the accompanying financial statements.
Net Loss Per Limited Partner Unit - Net loss per limited partner unit has been computed for each fiscal year on the basis of the weighted average number of limited partner units outstanding.
Amortization - Organization costs of the Partnership are capitalized and amortized over five years using the straight line method. Loan closing costs are amortized over the lives of the loans using the straight line method.
Income Taxes and Other - The activity of the Partnership is included in the respective tax returns of the partners and no income taxes are provided or imposed at the Partnership level. This report does not give effect to any assets that the partners may have outside their interests in the Partnership, nor to any obligations, including income taxes, of the partners.
Use of Estimates - The preparation of the Partnership's consolidated financial statements in conformity with generally accepted accounting principles requires the Partnership's management to make estimates and assumptions that affect the amounts reported in these financial statements and accompanying notes. Actual results could differ from those estimates.
Statement of Cash Flows - For purposes of the statement of cash flows, the Partnership considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents consist of certificates of deposit.
Reclassifications - Certain reclassifications were made to the 1994 and 1993 financial statements in order to conform to the 1995 presentation. Such reclassifications had no effect on the net loss previously reported.
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
2. RENTAL PROPERTIES:
The Partnership currently owns five rental properties. During 1995, the Partnership exchanged Athens Self Storage for Capitol Self Storage in a tax-free transaction. Capitol Self Storage and its related note payable (Note 5) were recorded at the net carrying value of Athens Self Storage at the time of transfer. No gain or loss was recognized. One rental property was sold in 1993.
Below is a summary of the properties' cost and related depreciation as of December 31, 1995, 1994 and 1993, and revenue and related expenses, consisting of rental, depreciation and interest, for the years ended December 31, 1995, 1994, and 1993:
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
During 1995, one tenant accounted for approximately 11% of rental revenue. During 1994 and 1993, one tenant accounted for approximately 10% of rental revenue.
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT IN OFFICE BUILDING:
On November 29, 1993 the Partnership acquired a 50% undivided preferential interest in an office building ("Oracle") in Tucson, Arizona for $300,000.
The Partnership is entitled to an annual preferred return of 10% of its original investment. If the available net cash flow from the property is insufficient to pay the preferred return, 5600 N. Oracle Group, L. L. C. ("5600"), the holder of the remaining undivided 50% interest, must contribute additional capital to fund any remaining unpaid preferred return. In the event the Property's net cash flow exceeds the preferred return, the excess will be distributed first to 5600 until they have received distributions equal to the Partnership's preferred return and thereafter in accordance with ownership percentages.
5600 acquired the building with a non-interest bearing note due to the seller, totaling $1,000,000 and cash of $300,000. The present value of the note was approximately $752,000 at an interest rate of 9.59%. The basis of the building, including land, and the note were originally recorded at $1,052,000 and $752,000, respectively. The note is collateralized by the building.
5600 is responsible for funding any debt service payments or operating deficits if the cash flow from the operations of the office building is not sufficient. The Partnership may elect to pay debt service payments or operating deficits if 5600 fails to provide the funding. As compensation for any payments, the Partnership can either attempt to recover any payments from 5600 or apply the amount of payments as additional preferential contributions which will bear interest at 20% per annum.
The Partnership received $44,715 and $30,000 in preferred and excess distributions during 1995 and 1994, respectively. The Partnership did not pay any debt service payments or operating deficits for 1995 and 1994 because these amounts were disbursed from the building's cash flow.
The investment in Oracle as of December 31, 1995, accounted for under the equity method, is summarized as follows:
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
The condensed statement of operations of Oracle for 1995, 1994 and 1993 are presented below:
A condensed balance sheet of the Oracle has not been provided due to the inmateriality of the Company's 50% undivided interest in the office building.
4. NOTE RECEIVABLE:
Prior to 1995, one of the properties of the Partnership was held as collateral for a note payable of the original owner. During 1995, the Partnership assumed this note payable in exchange for a note receivable from the original note holder with a December 31, 1995 balance of $297,138. Interest payments of 5.871% are due monthly with the entire principal amount to be received July 1997.
5. NOTES PAYABLE:
Notes payable consisted of:
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Future maturities of notes payable are as follows:
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
6. LEASES:
Future minimum lease payments to be received on non-cancelable leases for each of the next five years and thereafter are as follows:
7. RELATED PARTY TRANSACTIONS:
At December 31, 1995 and 1994, the General Partner was owed $17,767 and $17,347, respectively, for distributions of cash from operations, as defined in the partnership agreement.
During 1995, one of the general partners sold its interest in the Partnership. At both December 31, 1995 and 1994, the Partnership owed $13,318 for various general and administrative expenses paid by this former General Partner. In 1995, 1994 and 1993 the Partnership was charged property management and leasing fees of $42,230, $40,069 and $40,539 by an affiliate of the former General Partner. In 1995, 1994 and 1993, the Partnership incurred payroll expenses relating to certain of the former General Partner's employees and other administrative expenses totaling $275,125, $216,612, and $215,130, respectively. Additionally during 1995, costs related to the exchange of Capitol Self Storage for Athens Self Storage of $46,152 were paid to the former General Partner and capitalized by the Partnership as organization costs. In years prior to 1992, the former General Partner did not allocate or charge all of these expenses to the Partnership. Payroll expenses for the year ended December 31, 1993 includes the salaries of certain employees incurred by the former General Partner during 1991, 1990 and 1989 and reimbursed during 1993, to the former General Partner. The former General Partner believes that all of the expenses allocable, under the Partnership Agreement, had not been charged to the Partnership for 1991, 1990 and 1989 and has exercised its right to charge these expenses to the Partnership in 1993. Certain amounts of the administrative expenses paid by the former General Partner are allocated to the Partnership based upon the former General Partner's estimates.
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
8. FINANCIAL INSTRUMENTS
Concentrations of Credit Risk
Credit risk represents the accounting loss that would be recognized at the reporting date if counterparties failed completely to perform as contracted. Concentrations of credit risk (whether on or off balance sheet) that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly effected by changes in economic or other conditions. In accordance with FASB Statement No. 105, Disclosure of Information about Financial Instruments with Off-Balance-Sheet Risk and Financial Instruments with Concentrations of Credit Risk, the credit risk amounts shown do not take into account the value of any collateral or security.
Financial instruments that subject the Partnership to credit risk consist principally of accounts receivable, cash on deposit and lease receivables.
At December 31, 1995, accounts receivable totaled $12,252 and the Partnership has not provided an allowance for doubtful accounts. Bad debts were immaterial for 1995, 1994, and 1993. The Partnership performs periodic credit evaluations on its customers' financial condition and believes that the allowance for doubtful accounts is adequate.
The Partnership periodically maintains cash balances in excess of FDIC insurance limits.
Notes and lease receivables are described in Notes 2 and 6.
The Partnership's properties are located in the states of Texas, Arizona, Georgia and Louisiana. A downturn in the economies in any of these states could have an adverse impact on the Partnership.
Fair Value of Financial Instruments
The estimated fair values on the Partnership financial instruments were determined by management using available market information and appropriate valuation methodologies. The estimates are not necessarily indicative of the amount the Partnership could realize in a current market exchange.
At December 31, 1995, cash, accounts receivable and accounts payable have fair values that approximate book values based on their short term or demand maturity.
The fair value of notes receivable and notes payable are based on estimated discounted cash flows. The fair value of these instruments approximates book value at December 31, 1995.
Whitehall INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1995
(continued)
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1995 (continued)
The following shows the changes in the total amounts at which real estate was carried during the periods:
WHITEHALL INCOME FUND - 86 (A CALIFORNIA LIMITED PARTNERSHIP)
SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE December 31, 1995
The following shows the changes in the carrying amounts of mortgage loans during the periods: