ITEM 1. BUSINESS - ------- --------
ORGANIZATION - ------------
McNeil Real Estate Fund XXIII, L.P., (the "Partnership"), formerly known as Southmark Realty Partners III, Ltd. was organized on March 4, 1985 as a limited partnership under the provisions of the California Uniform Limited Partnership Act to acquire and operate residential properties. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil ("McNeil"). The General Partner was elected at a meeting of limited partners on March 30, 1992, at which time an amended and restated partnership agreement (the "Amended Partnership Agreement") was adopted. Prior to March 30, 1992, the general partner of the Partnership was Southmark Investment Group 85, Inc. (the "Original General Partner"), a Nevada corporation and a wholly-owned subsidiary of Southmark Corporation ("Southmark"). The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
On February 25, 1986, the Partnership registered with the Securities and Exchange Commission ("SEC") under the Securities Act of 1933 (File No. 33-1620) and commenced a public offering for sale of $45,000,000 of limited partnership units. Two classes of limited partnership units were offered, designated as Current Income Units and Growth/Shelter Units (referred to collectively as "Units"). The Units represent equity interests in the Partnership and entitle the holders thereof to participate in certain allocations and distributions of the Partnership. The sale of Units closed on February 24, 1987, with 16,204,041 Units (9,461,580 Current Income Units and 6,742,461 Growth/Shelter Units) sold at $1 each, or gross proceeds of $16,204,041. The Partnership subsequently filed a Form 8-A Registration Statement with the SEC and registered its Units under the Securities Exchange Act of 1934 (File No. 0-15459). In 1991, 76,000 Units were rescinded and in 1994, 20,000 Units were relinquished leaving 16,108,041 Units (9,419,080 Current Income Units and 6,688,961 Growth/Shelter Units) outstanding at December 31, 1995. On January 1, 1996, pursuant to the Partnership's bankruptcy reorganization plan, the Partnership redeemed 4,450,311 Units for cash consideration equal to 1/1,000th of a cent per Unit redeemed.
SOUTHMARK BANKRUPTCY AND CHANGE IN GENERAL PARTNER - --------------------------------------------------
On July 14, 1989, Southmark filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Neither the Partnership, the General Partner nor the Original General Partner were included in the filing. Southmark's reorganization plan became effective August 10, 1990. Under the plan, most of Southmark's assets, which included Southmark's interests in the Original General Partner, are being sold or liquidated for the benefit of creditors.
In accordance with Southmark's reorganization plan, Southmark, McNeil and various of their affiliates entered into an asset purchase agreement on October 12, 1990, providing for, among other things, the transfer of control of 34 limited partnerships (including the Partnership) in the Southmark portfolio to McNeil or his affiliates.
On February 14, 1991, pursuant to the asset purchase agreement as amended on that date, McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of McNeil, acquired the assets relating to the property management and partnership administrative business of Southmark and its affiliates and commenced management of the Partnership's properties pursuant to an assignment of the existing property management agreements from the Southmark affiliates.
On March 30, 1992, the limited partners approved a restructuring proposal that provided for (i) the replacement of the Original General Partner with a new general partner, McNeil Partners, L.P.; (ii) the adoption of the Amended Partnership Agreement which substantially alters the provisions of the original partnership agreement relating to, among other things, compensation, reimbursement of expenses and voting rights; (iii) the approval of an amended property management agreement with McREMI, the Partnership's property manager; and (iv) the approval to change the Partnership's name to McNeil Real Estate Fund XXIII, L.P. Under the Amended Partnership Agreement, the Partnership began accruing an asset management fee, retroactive to February 14, 1991, which is payable to the new General Partner. For a discussion of the methodology for calculating the asset management fee, see Item 13 Certain Relationship and Related Transactions. The proposals approved at the March 30, 1992, meeting were implemented as of that date.
Concurrent with the approval of the restructuring, the General Partner acquired from Southmark and its affiliates, for aggregate consideration of $350,466 (i) the right to receive payment on the advances owing from the Partnership to Southmark and its affiliates in the amount of $4,375,661, and (ii) the general partner interest of the Original General Partner. The General Partner owns in the aggregate less than 1% of the Units.
CURRENT OPERATIONS - ------------------
General:
The Partnership is engaged in diversified real estate activities, including the ownership, operation and management of residential real estate. At December 31, 1995, the Partnership owned one income-producing property as described in Item 2

ITEM 2. PROPERTIES - ------- ----------
The following table sets forth the investment portfolio of the Partnership at December 31, 1995. The buildings and the land on which the property is located are owned by the Partnership in fee, subject to a first lien deed of trust as described more fully in Item 8 - Note 6 - "Mortgage Notes Payable." See also Item 8 - Note 5 - "Real Estate Investment" and Schedule III - "Real Estate Investment and Accumulated Depreciation." In the opinion of management, the property is adequately covered by insurance.
(1) Harbour Club II Apartments is owned by Beckley Associates which is 99.99% owned by the Partnership.
The following table sets forth the property's occupancy rate and rent per square foot for the last five years:
Occupancy rate represents all units leased divided by the total number of units of the property as of December 31 of the given year. Rent per square foot represents all revenue, except interest, derived from the property's operations divided by the leasable square footage of the property. No residential tenant leases 10% or more of the available rental space.
Competitive conditions - ----------------------
Harbour Club II, located in Belleville, Michigan, was built in 1971 as a part of a four-phase apartment complex. The property offers a complete package of amenities including a golf course, clubhouse, exercise room, tanning beds, tennis courts, saunas, boat docks and launch, and playgrounds. The Belleville market has significantly rebounded to an average area occupancy rate of 95% and the property's closest competitor has rental rates approximately $100 per month above Harbour Club II's rates. Harbour Club II has had difficulty increasing rents for four years due to lack of capital improvements. Security concerns are prompting demands from tenants for improved lighting, limited access gates and fencing, as offered by competitors. The property has a large amount of deferred maintenance due to high debt service and is unable to generate cash to meet its capital improvement needs. Management is currently seeking alternatives to fund the needed capital improvements. The ability of the property to compete in the market will be directly determined by the amount of capital dollars spent to upgrade the property to community standards.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS - ------- -----------------
Except for the Partnership's Chapter 11 bankruptcy proceeding, the Partnership is not party to, nor is the Partnership's property the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business, except for the following:
1) Robert and Jeanette Kotowski, et al. v. Southmark Realty Partners III, Ltd. (presently known as McNeil Real Estate Fund XXIII, L.P.) and Southmark Investment Group 85, Inc. The plaintiffs sought rescission, pursuant to the Illinois Securities Act, of principal invested in McNeil Real Estate Fund XXIII, L.P. and other relief including damages for breach of fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The defendants filed an answer denying all of the allegations set forth in the plaintiff's complaint. The defendants filed a motion to dismiss the case, and two out of the three counts were dismissed. The remaining count was limited to the plaintiffs who purchased the securities within three years of the date the suit was filed. In this regard, the Partnership agreed to rescind 76,000 Units and settled claims totaling $116,374. The claims consisted of the $76,000 original purchase price of the units plus $51,395 interest less distributions of $11,021 previously paid. The $64,979 original purchase price net of distributions paid was charged to limited partners' deficit in 1991 and accrued interest was charged to interest expense in 1993, 1992 and 1991. On September 15, 1992, the Partnership entered into an agreement with the plaintiffs whereby the Partnership agreed to pay the settled claims over 60 months at an interest rate of 8%, and pursuant to terms and conditions as outlined in the agreement. The Partnership made the first two payments due under the agreement; however, the October 1993 installment and both installments due during 1994 were not made due to the lack of funds available to the Partnership. An appeal had been filed by the plaintiffs who lost on the two dismissed counts. On November 30, 1992, the Court dismissed all but $116,374 of claims that had previously been agreed to by the Partnership. The plaintiffs presented, on February 3, 1995, their motion to file an amended consolidated class action complaint and, on February 15, 1995, their motion to certify a class. The Partnership's Reorganization Plan and Disclosure Statement were submitted February 20, 1995 to a vote of the impaired creditors, as defined. The plaintiffs filed objections to confirmation of the Partnership's First Amended Plan of Reorganization. On April 12, 1995, the Bankruptcy Court did grant the order to sell Woodbridge Apartments but denied confirmation of the Reorganization Plan. The Partnership filed an appeal of the Bankruptcy Court's ruling and, in the meantime, attempted to settle the matter with the plaintiffs, which would allow for confirmation of the Reorganization Plan. On May 10, 1995, the Reorganization Plan was amended to provide for full payment to the plaintiffs, including legal costs. The Reorganization Plan, as amended, was subsequently confirmed by the Bankruptcy Court on May 17, 1995, and on June 2, 1995, the Partnership paid $156,566 to the plaintiffs.
2) Martha Hess, et al. v. Southmark Equity Partners II, Ltd., Southmark Income Investors, Ltd., Southmark Equity Partners, Ltd., Southmark Realty Partners III, Ltd. (presently known as McNeil Real Estate Fund XXIII, L.P.), and Southmark Realty Partners II, Ltd., et al. ("Hess"); Kotowski v. Southmark Equity Partners, Ltd. and Donald Arceri v. Southmark Income Investors, Ltd. These cases were previously pending in the Illinois Appellate Court for the First District ("Appellate Court"), as consolidated Case No. 90-107. Consolidated with these cases are an additional 14 matters against unrelated partnership entities. The Hess case was filed on May 20, 1988, by Martha Hess, individually and on behalf of a putative class of those similarly situated. The original, first, second and third amended complaints in Hess sought rescission, pursuant to the Illinois Securities Act, of over $2.7 million of principal invested in five Southmark (now McNeil) partnerships, and other relief including damages for breach of fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The original, first, second and third amended complaints in Hess were dismissed against the defendant-group because the Appellate Court held that they were not the proper subject of a class action complaint. Hess was, thereafter, amended a fourth time to state causes of action against unrelated partnership entities. Hess went to judgment against that unrelated entity and the judgment, along with the prior dismissal of the class action, was appealed. The Hess appeal was decided by the Appellate Court during 1992. The Appellate Court affirmed the dismissal of the breach of fiduciary duty and consumer fraud claims. The Appellate Court did, however, reverse in part, holding that certain putative class members could file class action complaints against the defendant-group. Although leave to appeal to the Illinois Supreme Court was sought, the Illinois Supreme Court refused to hear the appeal.
Proceedings against the Partnership were stayed pursuant to the voluntary petition for reorganization filed by the Partnership on June 30, 1994. Plaintiffs have agreed that all claims against the Partnership have been fully satisfied in the bankruptcy. The Court has dismissed the Partnership as a party-defendant to the action.
ITEM 4.

ITEM 5. MARKET FOR THE REGISTRANT'S UNITS OF LIMITED PARTNERSHIP AND - ------- ------------------------------------------------------------
RELATED SECURITY HOLDER MATTERS -------------------------------
(A) There is no established public trading market for limited partnership units, nor is one expected to develop.
(B) Title of Class Number of Record Unit Holders -------------- -----------------------------
Limited partnership units 948 as of February 16, 1996
(C) No distributions were made to the partners during 1995 or 1994 and none are anticipated in 1996. See Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations and Item 8 - Note 1 - "Organization and Summary of Significant Accounting Policies - Distributions."
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA - ------- -----------------------
The following table sets forth a summary of certain financial data for the Partnership. This summary should be read in conjunction with the Partnership's financial statements and notes thereto appearing in Item 8 - Financial Statements and Supplemental Data.
See Item 7

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION - ------- ----------------------------------------------------------- AND RESULTS OF OPERATIONS -------------------------
LIQUIDITY AND CAPITAL RESOURCES - -------------------------------
The accompanying financial statements have been prepared assuming the Partnership will continue as a going concern. The Partnership has suffered recurring losses from operations and has relied on advances from affiliates to meet its debt obligations and to fund capital improvements.
The Partnership's operating activities used $26,451 in 1995, as compared with $149,667 provided by and $14,579 used by operating activities in 1994 and 1993, respectively. The decrease in cash flow from operating activities is primarily due to $248,057 of reorganization costs paid by the Partnership in connection with its Chapter 11 bankruptcy filing. No such costs were paid in 1994. Also, due to the Partnership's Reorganization Plan, the Partnership was allowed to pay pre-petition claims in October 1995. Other changes in cash flows were primarily the result of the sale of Woodbridge Apartments on May 25, 1995 including decreases in cash received from tenants, cash paid to suppliers and property taxes paid.
Cash used for capital expenditures totaled $124,698 during 1995 as compared to $105,422 during 1994. Cash provided from the sale of Woodbridge Apartments totaled $3,078,096. $2,641,421 of the proceeds from the sale of Woodbridge Apartments were used to retire the mortgage notes secured by the property.
In the past, cash deficits from operating activities were partially funded through advances from affiliates of the General Partner. The Reorganization Plan, confirmed by the Bankruptcy Court on May 17, 1995, allowed for the discharge of $459,364 of advances from the General Partner and from various affiliates of the General Partner, as well as $88,429 of accrued interest related to such advances. The Reorganization Plan also provided for the discharge of $887,231 of reimbursable costs and asset management fees due to the General Partner. The discharge of debts due to the General Partner and its affiliates resulted in an extraordinary gain of $1,435,024.
Prior to the restructuring of the Partnership, affiliates of the Original General Partner advanced funds to enable the Partnership to meet its working capital requirements. These advances (the "Purchased Advances") were purchased by, and were payable to, the General Partner. The Purchased Advances totaled $4,375,661 plus accrued interest of $704,482. Concurrent with the Partnership's Chapter 11 filing, the General Partner contributed the Purchased Advances to the Partnership.
At December 31, 1995, the Partnership held cash and cash equivalents of $233,222.
Short-term liquidity:
The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. As discussed above, the Partnership had received advances under the revolving credit facility to fund additions to the Partnership's real estate investments and costs incurred in connection with the refinancing of the Partnership's mortgage note payable. Such advances were discharged as a result of the Chapter 11 proceedings. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts will be reserved for any particular partnership. As of December 31, 1995, $2,662,819 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. This commitment expires on March 30, 1997.
Additionally, the General Partner has, at its discretion, advanced funds to the Partnership in addition to the revolving credit facility. As discussed above, the Partnership received other advances that were used to fund working capital requirements. Such advances were discharged as a result of the Chapter 11 proceedings. The General Partner is not obligated to advance funds to the Partnership and there is no assurance that the Partnership will receive additional funds.
Although the sale of Woodbridge Apartments provided some additional cash reserves for the Partnership, the Partnership still faces liquidity problems because of urgently needed capital improvements at Harbour Club II Apartments for which no financing has been secured. Operating activities at Harbour Club II Apartments for 1996 are expected to provide sufficient positive cash flow for normal operating expenses and debt service payments. However, the needed capital improvements will require the use of other sources of cash. No such sources have been identified. The Partnership has no established lines of credit from outside sources. Other possible actions to provide financing for the capital improvements may include refinancing or modifying the property's mortgage debt. Should such refinancing or modification of Harbour Club II's mortgage debt prove unfeasible, the Partnership could be forced to either sell the property or to relinquish control of the property to the mortgage note holder.
Long-term liquidity:
The Partnership has been in a distressed cash situation for several years. Although Harbour Club II is able to operate in such a manner to provide for operating expenses and debt service payments, the property has not proven the capability to produce the cash flow necessary for capital improvements nor to support Partnership operations. The inability to make necessary capital improvements has led to deteriorating conditions at the property. In the opinion of management, if capital improvements are not made to make the property more marketable, the net realizable value of the property may be further impaired.
Harbor Club II Apartments is part of a four-phase apartment complex located in Belleville, Michigan. Phases I and III of the complex are owned by partnerships in which the General Partner is the general partner; while Phase IV is owned by University Real Estate Fund 12, Ltd., ("UREF 12") whose general partner is an affiliate of Southmark. McREMI managed all four phases of the complex until December 1992, when the property management agreement between McREMI and UREF 12 was canceled. Additionally, in January 1993, Phase I defaulted on its United States Department of Housing and Urban Development ("HUD") mortgage note. Unless a refinancing agreement can be reached with the lender, the property is subject to foreclosure. If Phase I is lost to foreclosure, it would be extremely difficult to operate Phases II and III because the pool and clubhouse used by all three phases are located on Phase I. As of year end, no steps have been taken to foreclose on Phase I.
These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Distributions - -------------
To maintain adequate cash balances of the Partnership, distributions to Current Income Unit holders were suspended in 1988. There have been no distributions to Growth/Shelter Unit holders. Distributions to Unit holders will remain suspended for the foreseeable future. The General Partner will continue to monitor the cash reserves and working capital needs of the Partnership to determine when cash flows will support distributions to the Unit holders.
FINANCIAL CONDITION - -------------------
Harbour Club II Apartments was 92% occupied at the end of December 1995 as compared to 86% and 85% at the end of December 1994 and 1993, respectively. Harbour Club II was able to provide enough cash flow from operations to meet ordinary operating expenses as well as the debt service for its related mortgage during 1995; however, the property is in need of major capital repairs and improvements in order to compete in its local market. The Partnership is seeking alternatives to fund the necessary improvements, but at this time no sources have been found.
Until the Partnership is able to generate cash from operations or sales, the Partnership will be dependent on its present cash reserves, operation of its property, or financial support from affiliates. Distributions will remain suspended until cash reserves are judged adequate.
RESULTS OF OPERATIONS - ---------------------
1995 compared to 1994
Revenue:
Rental revenue decreased $303,325 in 1995 compared to 1994 due to the sale of Woodbridge Apartments on May 25, 1995. However, rental revenue increased $118,455 or 9.9% at Harbour Club II Apartments as the Partnership was able to implement modest increases in base rental rates accompanied by increased occupancy. Total revenue increased $312,283 to $2,212,756 in 1995. The increased revenue was the result of a $554,047 gain related to the sale of Woodbridge Apartments and receipt of a $53,233 refund of property taxes due to a successful appeal of the property tax assessments on Harbour Club II Apartments.
Expenses:
Total expenses decreased $1,167,721 during 1995 compared to 1994. Three one-time transactions affect the comparison. First, the 1994 expenses include a $661,921 write-down for permanent impairment of real estate related to Woodbridge Apartments. No such write-down was recorded in 1995. Second, the sale of Woodbridge Apartments on May 25, 1995 eliminated operating expenses for that property for seven months in 1995, whereas twelve months of operating expenses at Woodbridge Apartments are reported in the Partnership's 1994 Statement of Operations. Finally, the 1995 income statement includes a one-time charge of $257,303 for reorganization expenses related to the Partnership's Chapter 11 Bankruptcy filing. No such expenses were recorded in 1994. Expenses related to Harbour Club II Apartments decreased $67,911 or 5.0% in 1995 compared to 1994.
For comparability, the discussion of expenses to follow will generally exclude the consideration of expenses incurred at Woodbridge Apartments.
Property taxes assessed against Harbour Club II Apartments decreased $15,123 or 12.2% in 1995 compared to 1994. The Partnership succeeded in having the assessed value of Harbour Club II Apartments reduced for property tax purposes. Not only were current year property taxes reduced, the Partnership also received a $53,233 refund of prior year property taxes. The refund was recorded as an income item on the 1995 Statement of Operations.
Repairs and maintenance expenses at Harbour Club II Apartments decreased $19,258 or 10.8% in 1995 compared to 1994. Expenses incurred for interior painting and replacement of appliances were the significant items that led to the decrease. These decreases were partially offset by increased expenses for grounds maintenance and security on the property.
Other property operating expense incurred at Harbour Club II Apartments decreased $14,943 or 11.9% in 1995. Due to significant efforts by management, as well as an improving local economy, bad debt expenses, expenses for evictions and other legal and credit-related expenses were significantly reduced.
General and administrative - affiliates expense decreased $33,184 or 15.0% in 1995 compared to 1994. These expenses represent reimbursable expenses incurred by affiliates of the General Partner for administering the affairs of the Partnership. Such expenses are generally incurred based upon the proportion of properties owned by the Partnership to the total number of properties managed by the General Partner and its affiliates for the Partnership and other affiliated partnerships. The sale of Woodbridge Apartments reduced the costs allocated to the Partnership in 1995.
Interest - affiliates decreased $186,321 during 1995 as compared to 1994. The discharge of affiliated advances resulting from the Partnership's Reorganization Plan also effectively reduced the interest charges on such debt.
All other expense line items (after eliminating expenses pertaining to Woodbridge Apartments), both individually and as a group, changed less than 8% in 1995 compared to 1994.
1994 compared to 1993
Revenue:
Total Partnership revenues decreased by $145,728 in 1994 as compared to 1993 primarily due to recording $133,369 of property tax refunds for Harbour Club II as income during 1993. No such refunds were recorded during 1994.
Expenses:
Total expenses increased by $513,799 in 1994 as compared to 1993. The 1994 expenses include a $661,921 write-down for permanent impairment of Woodbridge Apartments.
Interest expense - affiliates decreased $129,349 in 1994 as compared to 1993 due to the contribution of the Purchased Advances by the General Partner on June 30, 1994, as discussed in Liquidity and Capital Resources above.
Property tax expense decreased by $43,784 in 1994 as compared to 1993 due to the lower appraisal value at Harbour Club II Apartments following a successful tax appeal.
Repairs and maintenance expense decreased by $34,932 in 1994 as compared to 1993. Both of the Partnership's properties had been operating in distressed financial conditions. As such, both properties had made cutbacks in service, cleaning and decorating expenses.
Property management fees decreased by $13,419 in 1994 as compared to 1993. During 1993, the Partnership received approval of HUD, the co-insurer of the mortgage on the property, to change property management fees of Harbour Club II Apartments from 4.25% to 5% retroactive to May 30, 1991. An additional $18,562 in property management fees were accrued in 1993 due to this change.
Other property operating expenses increased $61,187 in 1994 as compared to 1993. Due to the lack of funds available to maintain marketability, the Partnership's properties have had difficulty attracting higher profile tenants. As a result, bad debt expense and professional fees related to eviction of tenants have increased.
General and administrative expense decreased $20,798 in 1994 as compared to 1993 primarily due to a decrease in tax preparation fees.
All other expenses in 1994 were comparable to 1993.
ITEM 8.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ------- -------------------------------------------
All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of McNeil Real Estate Fund XXIII, L.P.:
We have audited the accompanying balance sheets of McNeil Real Estate Fund XXIII, L.P. (a California limited partnership), as of December 31, 1995 and 1994, and the related statements of operations, partners' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1995. These financial statements and the schedule referred to below are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of McNeil Real Estate Fund XXIII, L.P. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 8 to the financial statements, the Partnership has suffered recurring losses from operations and the Partnership's only property is in need of major capital improvements in order to maintain occupancy and rental rates at a level to continue to support operations and debt service. Additionally, the property is part of a four phase complex. Phase I of the complex defaulted on the mortgage loan to the United States Department of Housing and Urban Development in January 1993. Phase I is subject to foreclosure unless a refinancing agreement can be reached with the lender. If Phase I is lost to foreclosure, it would have a significant impact on the operations of Phase II, owned by the Partnership, as the pool and clubhouse are located in Phase I. As of year end, no steps have been taken towards the foreclosure of Phase I. Management's plans in regard to these matters are also described in Note 8. These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in our audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
/s/ Arthur Anderson LLP
Dallas, Texas March 13, 1996
McNEIL REAL ESTATE FUND XXIII, L.P.
BALANCE SHEETS
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND XXIII, L.P.
STATEMENTS OF OPERATIONS
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND XXIII, L.P.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
For the Years Ended December 31, 1995, 1994 and 1993
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND XXIII, L.P.
STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
See discussion of noncash investing and financing activities in Note 3 - Transactions with Affiliates.
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND XXIII, L.P.
STATEMENTS OF CASH FLOWS
Reconciliation of Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities
See accompanying notes to financial statements.
McNEIL REAL ESTATE FUND XXIII, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------------------------
Organization - ------------
McNeil Real Estate Fund XXIII, L.P. (the "Partnership"), formerly known as Southmark Realty Partners III, Ltd., was organized on March 4, 1985 as a limited partnership under the provisions of the California Revised Limited Partnership Act to acquire and operate residential properties. The general partner of the Partnership is McNeil Partners, L.P. (the "General Partner"), a Delaware limited partnership, an affiliate of Robert A. McNeil. The General Partner was elected at a meeting of limited partners on March 30, 1992, at which time an amended and restated partnership agreement (the "Amended Partnership Agreement") was adopted. Prior to March 30, 1992, the general partner of the Partnership was Southmark Investment Group 85, Inc. (the "Original General Partner"), a Nevada corporation and a wholly-owned subsidiary of Southmark Corporation. The principal place of business for the Partnership and the General Partner is 13760 Noel Road, Suite 700, LB70, Dallas, Texas 75240.
The Partnership is engaged in real estate activities, including the ownership, operation and management of residential real estate and other real estate related assets. At December 31, 1995, the Partnership owned one income-producing property as described in Note 5 - Real Estate Investment.
Chapter 11 Reorganization - -------------------------
On June 30, 1994, the Partnership filed a voluntary petition for protection under Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). The Partnership filed its First Amended Plan of Reorganization (the "Reorganization Plan") with the United States Bankruptcy Court - Northern District of Texas, Dallas Division (the "Bankruptcy Court"), on February 13, 1995. The Partnership conducted its affairs as a debtor-in-possession until the Reorganization Plan was confirmed by the Bankruptcy Court on May 17, 1995. Pursuant to the Reorganization Plan, the Partnership sold its interest in Woodbridge Apartments to an unaffiliated buyer on May 25, 1995. The Partnership used the proceeds from the sale of Woodbridge Apartments to satisfy all pre-petition liabilities of the Partnership that were not otherwise discharged by the Bankruptcy Court. See Note 2 - "Chapter 11 Reorganization."
Basis of Presentation - ---------------------
The accompanying financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
The Partnership's financial statements include the accounts of Beckley Associates ("Beckley"), a single asset limited partnership formed to accommodate the refinancing of Harbour Club II Apartments. The Partnership is the general partner of Beckley, and holds a 99.99% interest in Beckley. The Partnership exercises effective control of Beckley. The minority interest is not presented as it is both negative and immaterial.
Real Estate Investments - -----------------------
Real estate investments are generally stated at the lower of cost or net realizable value. Real estate investments are monitored on an ongoing basis to determine if the property has sustained a permanent impairment in value. At such time, a write-down is recorded to reduce the basis of the property to its net realizable value. A permanent impairment is determined to have occurred when a decline in property value is considered to be other than temporary based upon management's expectations with respect to projected cash flows and prevailing economic conditions.
Improvements and betterments are capitalized and expensed through depreciation charges. Repairs and maintenance are charged to operations as incurred.
In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This statement requires that long-lived assets and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. This statement is effective for financial statements for fiscal years beginning after December 15, 1995. The Partnership has not adopted the principles of this statement within the accompanying financial statements; however, it is not anticipated that adoption will have a material effect on the carrying value of the Partnership's long-lived assets.
Depreciation - ------------
Buildings and improvements are depreciated using the straight-line method over the estimated useful lives of the assets, ranging from 5 to 25 years.
Cash and Cash Equivalents - -------------------------
Cash and cash equivalents include cash on hand and cash on deposit in financial institutions with original maturities of three months or less. Cash and cash equivalents at December 31, 1994, also included cash balances of $79,303 which were restricted by the Bankruptcy Court. Carrying amounts for cash and cash equivalents approximate fair value.
Escrow Deposits - ---------------
The Partnership is required to maintain escrow accounts in accordance with the terms of various mortgage indebtedness agreements. These escrow accounts are controlled by the mortgagee and are used for payment of property taxes, hazard insurance, capital improvements and/or property replacements. Carrying amounts for escrow deposits approximate fair value.
Discounts on Mortgage Notes Payable - -----------------------------------
Discounts on mortgage notes payable are being amortized over the remaining terms of the related mortgage notes using the effective interest method. Amortization of discounts on mortgage notes payable is included in interest expense on the Statements of Operations.
Rental Revenue - --------------
The Partnership leases its residential property under short-term operating leases. Lease terms generally are less than one year in duration. Rental revenue is recognized as earned.
Income Taxes - ------------
No provision for Federal income taxes is necessary in the financial statements of the Partnership because, as a partnership, it is not subject to Federal income tax and the tax effect of its activities accrues to the partners.
Allocation of Net Income and Net Loss - -------------------------------------
The Amended Partnership Agreement generally provides that net income (other than net income arising from sales or refinancing) shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the limited partners equally as a group, and net loss shall be allocated one percent (1%) to the General Partner, nine percent (9%) to the limited partners owning Current Income Units and ninety percent (90%) to the limited partners owning Growth/Shelter Units.
For financial statement purposes, net income arising from sales or refinancing shall be allocated one percent (1%) to the General Partner and ninety-nine percent (99%) to the limited partners equally as a group.
For tax reporting purposes, net income arising from sales or refinancing shall be allocated as follows: (a) first, amounts of such net income shall be allocated among the General Partner and limited partners in proportion to, and to the extent of, the portion of such partner's share of the net decrease in Partnership Minimum Gain determined under Treasury Regulations, (b) second, to the General Partner and limited partners in proportion to, and to the extent of, the amount by which their respective capital account balances are negative by more than their respective remaining shares of the Partnership's Minimum Gain attributable to property still owned by the Partnership and (c) third, 1% of such net income shall be allocated to the General Partner and 99% of such net income shall be allocated to the limited partners.
Federal income tax law provides that the allocation of loss to a partner will not be recognized unless the allocation is in accordance with a partner's interest in the partnership or the allocation has substantial economic effect. Internal Revenue Code Section 704 (b) and accompanying Treasury Regulations establish criteria for allocation of Partnership deductions attributable to debt. The Partnership's tax allocations for 1995, 1994, and 1993 have been made in accordance with these provisions.
Distributions - -------------
At the discretion of the General Partner, distributable cash (other than cash from sales or refinancing) shall be distributed 100% to the limited partners, with such distributions first paying the Current Income Priority Return and then the Growth/Shelter Priority Return. Also at the discretion of the General Partner, the limited partners will receive 100% of distributable cash from sales or refinancing with such distributions first paying the Current Income Priority Return, then the Growth/Shelter Priority Return, then repayment of Original Invested Capital, and of the remainder, 5.88% to limited partners owning Current Income Units and 94.12% to limited partners owning Growth/Shelter Units. The limited partners' Current Income and Growth/Shelter Priority Returns represent a 10% and 8%, respectively, cumulative return on their Adjusted Invested Capital balance, as defined. No distributions of Current Income Priority Return have been made since 1988, and no distributions of Growth/Shelter Priority Return have been made since the Partnership began.
In connection with a Terminating Disposition, as defined, cash from sales or refinancing and any remaining reserves shall be allocated among, and distributed to, the General Partner and limited partners in proportion to, and to the extent of, their positive capital account balances after the net income has been allocated pursuant to the above.
Net Income (Loss) Per Thousand Limited Partnership Units - --------------------------------------------------------
Net income (loss) per thousand limited partner Current Income and Growth/Shelter units ("Units") is computed by dividing net income (losses) allocated to the limited partners by the weighted average number of Units outstanding expressed in thousands. Per thousand Unit information has been computed based on 9,419 weighted average Current Income Units (in thousands) outstanding in 1995, 1994, and 1993, and 6,689, 6,689 and 6,709 weighted average Growth/Shelter Units outstanding in 1995, 1994, and 1993, respectively.
NOTE 2 - CHAPTER 11 REORGANIZATION - ----------------------------------
On June 30, 1994, the Partnership, excluding Beckley, filed a voluntary petition for Chapter 11 reorganization. The Partnership continued to conduct its affairs as a debtor-in-possession, subject to the jurisdiction and supervision of the Bankruptcy Court. Concurrent with the Chapter 11 filing, the General Partner contributed to the Partnership $4,375,661 of advances and $704,482 of accrued interest on advances that were payable by the Partnership to the General Partner. See Note 3 - Transactions with Affiliates.
Woodbridge Apartments, one of the Partnership's properties, was encumbered by two mortgage notes payable. The first lien mortgage note payable was co-insured by the Federal Housing Administration and was, therefore, regulated by the United States Department of Housing and Urban Development ("HUD"). The second lien mortgage note payable was payable in monthly installments of interest only. Such payments were limited to "surplus cash," as defined by HUD and as calculated at June 30 and December 31 of each year. No "surplus cash" was available to make the interest payments on the second lien, and therefore, the Partnership ceased making such payments in April 1994. The Partnership was unsuccessful in attempting to negotiate a restructuring of the mortgage, and the second lienholder was expected to initiate foreclosure proceedings. The Chapter 11 proceeding was filed to prevent the foreclosure actions.
The Partnership's First Amended Plan of Reorganization (the "Reorganization Plan"), which contemplated a sale of Woodbridge Apartments, was submitted to the Bankruptcy Court on February 13, 1995. The Partnership's Disclosure Statement of Debtor-in-Possession (the "Disclosure Statement") was approved by the Bankruptcy Court on February 14, 1995.
The Partnership's Reorganization Plan and Disclosure Statement were submitted February 20, 1995, to a vote of the impaired creditors, as defined. The impaired creditors included a class of creditors who had filed a judgment lien against Woodbridge Apartments in connection with the Illinois rescission suit (See Note 9 - Legal Proceedings). The judgment lien creditors filed objections to confirmation of the Reorganization Plan. On April 18, 1995, the Bankruptcy Court did grant an order to sell Woodbridge Apartments but denied confirmation of the Reorganization Plan. The Partnership filed an appeal of the Bankruptcy Court's ruling and, in the meantime, attempted to settle the matter with the judgment lien creditors, which would allow for confirmation of the Reorganization Plan. On May 10, 1995, the Reorganization Plan was amended to provide for full payment to the judgment lien creditors. The Reorganization Plan, as amended, was subsequently confirmed by the Bankruptcy Court on May 17, 1995.
Woodbridge Apartments was sold on May 25, 1995, and, in accordance with the Reorganization Plan, the first and second mortgage notes payable and the related outstanding accrued interest were paid. The Partnership also utilized $156,566 of the proceeds from the sale to pay the settlement and legal fees to the judgment lien creditors, as discussed above.
On September 11, 1995, the Bankruptcy Court entered an Order Regarding Objections to Claims that allowed the Partnership to pay outstanding pre-petition claims totaling approximately $12,000 in October 1995.
As outlined in the Reorganization Plan, any payments of advances and fees owed to affiliates of the General Partner were limited to remaining cash, after the pre-petition and reorganization related costs were paid. The Partnership had $37,228 of such cash available to distribute to affiliate creditors. The remaining amounts owed to affiliates of the General Partner as of May 17, 1995 were discharged resulting in an extraordinary gain of $1,435,024.
On August 15, 1995, the Partnership sent an election form to each limited partner which allowed them to choose whether to redeem their interest in the Partnership. The redemption price was 1/1000th of a cent per Unit. The limited partners were required to respond within 30 days, and at the close of the 30 day period, 310 limited partners had elected to redeem 4,450,311 Units. In connection with the redemption, the partnership obtained a "no-action" letter from the Securities and Exchange Commission ("SEC") that provided that (1) the redemption could be accomplished without compliance with Rule 13e-3 of the Securities Exchange Act of 1934, and (2) the SEC did not intend to pursue an enforcement action if the Reorganization Plan was consummated. Redemption of the affected Units was completed on January 1, 1996.
On November 18, 1995, the Partnership submitted to the Bankruptcy Court a request for an Application to Close Case, which was entered on December 11, 1995. The Partnership was awaiting confirmation of the Order Approving the Application to Close Case as of March 13, 1996.
Expenses incurred by the Partnership in connection with its Chapter 11 filing have been expensed as "reorganization expenses" in the accompanying Statements of Operations. Interest earned on funds restricted by the Bankruptcy Court are presented as "interest on reorganization funds" in the Statements of Operations.
The Partnership's financial statements include the accounts of Beckley, which owns Harbour Club II Apartments. Beckley was not included in the bankruptcy filing. Summarized below is a statement of assets, liabilities and partners' deficit of the portion of the Partnership included in the Chapter 11 filing as of December 31, 1994. No such statement is presented as of December 31, 1995, as the Partnership is effectively no longer subject to the Chapter 11 proceedings. The assets, liabilities and partners' equity pertaining to Beckley, which were not included in the Chapter 11 filing, are excluded.
Summarized on the next page are statements of operations for that portion of the Partnership included in the Chapter 11 filing for the period from the June 30, 1994 filing date through December 31, 1994 and for the period from January 1, 1995 through December 11, 1995, the date that the Partnership requested the Bankruptcy Court dismiss the bankruptcy filing. The revenues and expenses pertaining to Beckley, which were excluded from the bankruptcy filing, are excluded.
NOTE 3 - TRANSACTIONS WITH AFFILIATES - -------------------------------------
The Partnership pays property management fees equal to 5% of the Partnership's gross rental receipts to McNeil Real Estate Management, Inc. ("McREMI"), an affiliate of the General Partner, for providing property management and leasing services for the Partnership's residential properties. The Partnership received approval from HUD to increase the property management fees of Harbour Club II Apartments from 4.25% to 5% of the property's gross rental receipts retroactive to May 30, 1991. An additional $18,562 of property management fees were accrued in 1993 due to this change. The Bankruptcy Court required that the property management fees for Woodbridge Apartments be reduced to 3% of the property's gross rental receipts for the period from December 1, 1994 until May 25, 1995, the date the Partnership sold Woodbridge Apartments.
The Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. Reimbursable costs that were incurred prior to the Partnership's bankruptcy filing, in the amount of $520,902, were discharged under terms of the Partnership's Reorganization Plan.
Under the terms of the Amended Partnership Agreement, the Partnership incurs an asset management fee payable to the General Partner. Through 1999, the asset management fee is calculated as 1% of the Partnership's tangible asset value. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit for each property to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases subsequent to 1999. Asset management fees that were incurred but unpaid prior to the Partnership's bankruptcy filing, in the amount of $366,329, were discharged under terms of the Partnership's Reorganization Plan.
Compensation and reimbursements paid to or accrued for the benefit of the General Partner or its affiliates are as follows:
Prior to 1992, affiliates of the Original General Partner advanced funds (the "Purchased Advances") to enable the Partnership to meet its working capital requirements. The Purchased Advances were purchased by, and were payable to, the General Partner. Concurrent with the Partnership's bankruptcy filing, the General Partner contributed the Purchased Advances to the Partnership. The Purchased Advances contributed to the Partnership totaled $4,375,661 plus accrued interest of $704,482.
The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. The Partnership had received advances under the revolving credit facility to fund additions to the Partnership's real estate investments and costs incurred in connection with the refinancing of the Partnership's mortgage notes payable. There is no assurance that the Partnership will receive any additional funds under the facility because no amounts will be reserved for any particular partnership. As of December 31, 1995, $2,662,819 remained available for borrowing under the facility; however, additional funds could become available as other partnerships repay existing borrowings. The balance of the Partnership's outstanding loans under terms of the revolving credit facility, in the amount of $65,670 together with $6,696 of accrued interest thereon, were discharged under terms of the Partnership's Reorganization Plan.
Additionally, the General Partner has, at its discretion, advanced funds to the Partnership in addition to the revolving credit facility to fund working capital requirements of the Partnership. The General Partner is not obligated to advance funds to the Partnership and there is no assurance that the Partnership will receive additional funds. The Partnership's other advances from the General Partner, in the amount of $280,694 together with $49,090 of accrued interest thereon, were discharged under terms of the Partnership's Reorganization Plan.
During 1992, the Partnership received an unsecured loan of $113,000 for working capital requirements from McNeil Real Estate Fund XXV, L.P. ("Fund XXV"). Fund XXV owns Phase I of the Harbour Club Apartments (the Partnership owns Phase II of Harbour Club Apartments), and is affiliated with the General Partner. The $113,000 unsecured loan due to Fund XXV, together with $32,643 of accrued interest thereon, was discharged under terms of the Partnership's Reorganization Plan.
Advances from affiliates at December 31, 1995 and 1994, consist of the following:
The advances were unsecured, due on demand and accrued interest at the prime lending rate of Bank of America plus 1%. The prime lending rate of Bank of America was 8.5% at December 31, 1994.
Payable to affiliates - General Partner at December 31, 1995 and 1994, consists of property management fees, reimbursable costs and asset management fees that are due and payable from current operations.
NOTE 4 - TAXABLE INCOME (LOSS) - ------------------------------
McNeil Real Estate Fund XXIII, L.P. is a partnership and is not subject to Federal and state income taxes. Accordingly, no recognition has been given to income taxes in the accompanying financial statements of the Partnership since the income or loss of the Partnership is to be included in the tax returns of the individual partners. The tax returns of the Partnership are subject to examination by Federal and state taxing authorities. If such examinations result in adjustments to distributive shares of taxable income or loss, the tax liability of the partners could be adjusted accordingly.
The Partnership's net assets and liabilities for tax reporting purposes exceeded the net assets and liabilities for financial purposes by $2,256,527, $2,787,669 and $3,539,334 at December 31, 1995, 1994 and 1993, respectively.
NOTE 5 - REAL ESTATE INVESTMENT - -------------------------------
The basis and accumulated depreciation of the Partnership's real estate investment at December 31, 1995 and 1994, are set forth in the following tables:
The Partnership's real estate investment is encumbered by a mortgage note as discussed in Note 6 - "Mortgage Notes Payable."
During 1994, the General Partner placed Woodbridge Apartments on the market for sale. Woodbridge Apartments was sold on May 25, 1995. See Note 7 - "Disposition of Real Estate." Woodbridge Apartments is classified as an asset held for sale at December 31, 1994.
NOTE 6 - MORTGAGE NOTES PAYABLE - -------------------------------
The following table sets forth the mortgage notes payable of the Partnership at December 31, 1995 and 1994. All mortgage notes payable are secured by real estate investments.
(a) The debt is non-recourse to the Partnership.
(b) The discount for Harbour Club II mortgage note is based on an effective interest rate of 9.13%.
(c) As discussed in Note 2 - "Chapter 11 Reorganization," the mortgage note payable was fully secured by Woodbridge Apartments. The cash collateral order permitted payments on the mortgage note to the extent of excess cash.
(d) Discounts for the Woodbridge mortgage notes were based on effective interest rates of 9%.
(e) The mortgage note payable was fully secured by Woodbridge Apartments. Payments on the second mortgage note were limited to surplus cash as defined by HUD. See Note 2 - "Chapter 11 Reorganization." There was no surplus cash available to make these interest payments. In 1994, the Partnership ceased making debt service payments, which constituted a default under the mortgage note agreement. In May 1994, the holder of the second mortgage note accelerated the interest rate on the second mortgage note to 12% in accordance with the mortgage note agreement.
Scheduled principal maturities of the mortgage note under the existing agreement, excluding the $603,508 discount, are as follows:
1996 .............................................. $ 46,259 1997 .............................................. 49,851 1998 .............................................. 53,721 1999 .............................................. 57,891 2000 .............................................. 62,385 Thereafter ........................................ 4,121,203 ---------
Total $4,391,310 =========
Based on borrowing rates currently available to the Partnership for a mortgage loan with similar terms and average maturities, the fair value of the mortgage note payable was approximately $4,112,000 at December 31, 1995.
NOTE 7 - DISPOSITION OF REAL ESTATE - -----------------------------------
On May 25, 1995, the Partnership sold Woodbridge Apartments to an unrelated third party for a cash purchase price of $3,200,000. Cash proceeds from the sale, as well as the gain on disposition of Woodbridge Apartments, are shown below:
NOTE 8 - FINANCIAL CONDITION AND GOING CONCERN CONSIDERATIONS - -------------------------------------------------------------
The accompanying financial statements have been prepared assuming the Partnership will continue as a going concern. The Partnership had suffered recurring losses from operations and has relied on advances from affiliates to meet its debt obligations and to fund capital improvements.
Operations at Harbour Club II, the Partnership's sole remaining property, are expected to be sufficient to provide cash for operating expenses and debt service for 1996. However, the property is in need of major capital improvements in order to maintain occupancy and rental rates at a level sufficient to fund operating expenses and debt service in future years. The Partnership's cash reserves are inadequate to fund the needed capital improvements, and it is unlikely that cash flow from operating activities will be sufficient to provide for the needed capital improvements. No outside sources of financing have been identified. Although affiliates of the Partnership have previously provided working capital for the Partnership, there can be no assurance that the Partnership will receive additional funds from the General Partner or other affiliates. Management is currently seeking additional financing to fund the needed capital improvements; however, such financing is not assured. If the property is unable to obtain additional funds and cannot maintain operations at a level to pay operating expenses and debt service, the property may ultimately be foreclosed on by the lender.
Harbour Club II is part of a four-phase apartment complex located in Belleville, Michigan. Phases I and III of the complex are owned by partnerships in which McNeil Partners, L.P. is the general partner; while Phase IV is owned by University Real Estate Fund 12, Ltd., ("UREF 12") whose general partner is an affiliate of Southmark. McREMI had been managing all four phases of the complex until December 1992, when the property management agreement between McREMI and UREF 12 was canceled. Additionally, in January 1993, Phase I defaulted on its mortgage loan to the United States Department of Housing and Urban Development ("HUD") and, unless a refinancing agreement can be reached with the lender, the property is subject to foreclosure. If Phase I is lost to foreclosure, it would be extremely difficult to operate Phases II and III because the pool and clubhouse are located in Phase I. As of year end, no steps have been taken towards the foreclosure of Phase I.
These conditions raise substantial doubt about the Partnership's ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of these uncertainties.
NOTE 9 - LEGAL PROCEEDINGS - --------------------------
Except for the Partnership's Chapter 11 bankruptcy proceeding, the Partnership is not party to, nor is the Partnership's property the subject of, any material pending legal proceedings, other than ordinary, routine litigation incidental to the Partnership's business, except for the following:
1) Robert and Jeanette Kotowski, et al. v. Southmark Realty Partners III, Ltd. (presently known as McNeil Real Estate Fund XXIII, L.P.) and Southmark Investment Group 85, Inc. The plaintiffs sought rescission, pursuant to the Illinois Securities Act, of principal invested in McNeil Real Estate Fund XXIII, L.P. and other relief including damages for breach of fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The defendants filed an answer denying all of the allegations set forth in the plaintiff's complaint. The defendants filed a motion to dismiss the case, and two out of the three counts were dismissed. The remaining count was limited to the plaintiffs who purchased the securities within three years of the date the suit was filed. In this regard, the Partnership agreed to rescind 76,000 Units and settled claims totaling $116,374. The claims consisted of the $76,000 original purchase price of the units plus $51,395 interest less distributions of $11,021 previously paid. The $64,979 original purchase price net of distributions paid was charged to limited partners' deficit in 1991 and accrued interest was charged to interest expense in 1993, 1992 and 1991. On September 15, 1992, the Partnership entered into an agreement with the plaintiffs whereby the Partnership agreed to pay the settled claims over 60 months at an interest rate of 8%, and pursuant to terms and conditions as outlined in the agreement. The Partnership made the first two payments due under the agreement; however, the October 1993 installment and both installments due during 1994 were not made due to the lack of funds available to the Partnership. An appeal had been filed by the plaintiffs who lost on the two dismissed counts. On November 30, 1992, the Court dismissed all but $116,374 of claims that had previously been agreed to by the Partnership. The plaintiffs presented, on February 3, 1995, their motion to file an amended consolidated class action complaint and, on February 15, 1995, their motion to certify a class. The Partnership's Reorganization Plan and Disclosure Statement were submitted February 20, 1995, to a vote of the impaired creditors, as defined. The plaintiffs filed objections to confirmation of the Partnership's First Amended Plan of Reorganization. On April 12, 1995, the Bankruptcy Court did grant the order to sell Woodbridge Apartments but denied confirmation of the Reorganization Plan. The Partnership filed an appeal of the Court's ruling and, in the meantime, attempted to settle the matter with the plaintiffs which would allow for confirmation of the Reorganization Plan. On May 10, 1995, the Reorganization Plan was amended to provide for full payment to the plaintiffs, including legal costs. The Reorganization Plan, as amended, was subsequently confirmed by the Bankruptcy Court on May 17, 1995, and on June 2, 1995, the Partnership paid $156,566 to the plaintiffs.
2) Martha Hess, et al. v. Southmark Equity Partners II, Ltd., Southmark Income Investors, Ltd., Southmark Equity Partners, Ltd., Southmark Realty Partners III, Ltd. (presently known as McNeil Real Estate Fund XXIII, L.P.), and Southmark Realty Partners II, Ltd., et al. ("Hess"); Kotowski v. Southmark Equity Partners, Ltd. and Donald Arceri v. Southmark Income Investors, Ltd. These cases were previously pending in the Illinois Appellate Court for the First District ("Appellate Court"), as consolidated Case No. 90-107. Consolidated with these cases are an additional 14 matters against unrelated partnership entities. The Hess case was filed on May 20, 1988, by Martha Hess, individually and on behalf of a putative class of those similarly situated. The original, first, second and third amended complaints in Hess sought rescission, pursuant to the Illinois Securities Act, of over $2.7 million of principal invested in five Southmark (now McNeil) partnerships, and other relief including damages for breach of fiduciary duty and violation of the Illinois Consumer Fraud and Deceptive Business Practices Act. The original, first, second and third amended complaints in Hess were dismissed against the defendant-group because the Appellate Court held that they were not the proper subject of a class action complaint. Hess was, thereafter, amended a fourth time to state causes of action against unrelated partnership entities. Hess went to judgment against that unrelated entity and the judgment, along with the prior dismissal of the class action, was appealed. The Hess appeal was decided by the Appellate Court during 1992. The Appellate Court affirmed the dismissal of the breach of fiduciary duty and consumer fraud claims. The Appellate Court did, however, reverse in part, holding that certain putative class members could file class action complaints against the defendant-group. Although leave to appeal to the Illinois Supreme Court was sought, the Illinois Supreme Court refused to hear the appeal.
Proceedings against the Partnership were stayed pursuant to the voluntary petition for reorganization filed by the Partnership on June 30, 1994. Plaintiffs have agreed that all claims against the Partnership have been fully satisfied in the bankruptcy. The Court has dismissed the Partnership as a party-defendant to the action.
NOTE 10 - PRO FORMA DISCLOSURE - ------------------------------
The following pro forma information for the years ended December 31, 1995 and 1994, reflects the results of operations of the Partnership as if the sale of Woodbridge Apartments had occurred as of January 1, 1994. The pro forma information is not necessarily indicative of the results of operations that actually would have occurred or those which might be expected to occur in the future.
McNEIL REAL ESTATE FUND XXIII, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION December 31, 1995
See accompanying notes to Schedule III.
McNEIL REAL ESTATE FUND XXIII, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION December 31, 1995
(a) For Federal Income tax purposes, the properties are depreciated over lives ranging from 15-25 years using ACRS or MACRS methods. The aggregate cost of real estate investments for Federal income tax purposes was approximately $8,786,061 and accumulated depreciation was $5,016,189 at December 31, 1995.
(b) The initial cost and encumbrances reflect the present value of future loan payments discounted, if appropriate, at a rate estimated to be the prevailing interest rate at the date of acquisition.
(c) The carrying value of Harbour Club II apartments was reduced by $1,783,702 in 1992 and $320,588 in 1989.
See accompanying notes to Schedule III.
McNEIL REAL ESTATE FUND XXIII, LTD. SCHEDULE III REAL ESTATE INVESTMENTS AND ACCUMULATED DEPRECIATION AND AMORTIZATION December 31, 1995
MCNEIL REAL ESTATE FUND XXIII, L.P.
Notes to Schedule III
Real Estate Investments and Accumulated Depreciation
A summary of activity for the Partnership's real estate investments and accumulated depreciation is as follows:
ITEM 9.

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - -------- -------------------------------------------------- Neither the Partnership nor the General Partner has any directors or executive officers. The names and ages of, as well as the positions held by, the officers and directors of McNeil Investors, Inc., the general partner of the General Partner, are as follows:
Each director shall serve until his successor shall have been duly elected and qualified.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION - -------- ----------------------
No direct compensation was paid or payable by the Partnership to directors or officers (since it does not have any directors or officers) for the year ended December 31, 1995, nor was any direct compensation paid or payable by the Partnership to directors or officers of the general partner of the General Partner for the year ended December 31, 1995. The Partnership has no plans to pay any such remuneration to any directors or officers of the General Partner in the future.
See Item 13 - Certain Relationships and Related Transactions for amounts of compensation and reimbursements paid by the Partnership to the General Partner and its affiliates.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - -------- --------------------------------------------------------------
(A) Security ownership of certain beneficial owners.
No individual or group as defined by Section 13(d)(3) of the Securities Exchange Act of 1934, known to the registrant is the beneficial owner of more than 5 percent of the Partnership's Units.
(B) Security ownership of management.
The General Partner owns 5,000 limited partnership units, which represents less than 1% of the outstanding Units.
(C) Change in control.
None.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------- ----------------------------------------------
The amendments to the Partnership compensation structure included in the Amended Partnership Agreement provide for an asset management fee to replace all other forms of General Partner compensation other than property management fees and reimbursements of certain costs. Through 1999, the asset management fee is calculated as 1% of the Partnership's tangible asset value. Tangible asset value is determined by using the greater of (i) an amount calculated by applying a capitalization rate of 9% to the annualized net operating income of each property or (ii) a value of $10,000 per apartment unit to arrive at the property tangible asset value. The property tangible asset value is then added to the book value of all other assets excluding intangible items. The fee percentage decreases subsequent to 1999. For the year ended December 31, 1995, the Partnership paid or accrued $83,631 of such asset management fees. Total accrued but unpaid asset management fees of $52,316 were outstanding at December 31, 1995. Asset management fees that were incurred but unpaid prior to the Partnership's Chapter 11 filing, in the amount of $366,329, were discharged under terms of the Partnership's Reorganization Plan.
The Partnership pays property management fees equal to 5% of the gross rental receipts of its residential properties to McREMI, an affiliate of the General Partner, for providing property management services. Due to the bankruptcy proceedings, the property management fees paid by Woodbridge Apartments were reduced to 3% beginning December 1, 1994. Additionally, the Partnership reimburses McREMI for its costs, including overhead, of administering the Partnership's affairs. For the year ended December 31, 1995, the Partnership paid or accrued $177,929 of such property management fees and reimbursements. Reimbursable costs that were incurred prior to the Partnership's Chapter 11 filing, in the amount of $520,902, were discharged under terms of the Partnership's Reorganization Plan.
The General Partner has established a revolving credit facility not to exceed $5,000,000 in the aggregate which is available on a "first-come, first-served" basis to the Partnership and other affiliated partnerships if certain conditions are met. Borrowings under the facility may be used to fund deferred maintenance, refinancing obligations and working capital needs. As of December 31, 1994, the Partnership borrowed $65,670 under this revolving credit facility. In addition to the revolving credit facility, the General Partner had advanced funds to the Partnership in the amount of $280,694. In 1992, the Partnership also received an unsecured loan of $113,000 from McNeil Real Estate Funds XXV, L.P., an affiliate of the General Partner that owns a Phase I of Harbour Club Apartments. The advances from the General Partner and the Fund XXV loan (the "affiliate advances") were unsecured and due on demand, and accrued interest at a rate equal to the prime lending rate of Bank of America plus 1%. The affiliate advances, together with $88,438 of accrued interest thereon, were discharged under terms of the Partnership's Reorganization Plan. See Item 1 - Business, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations, and Item 8 - Note 3 - "Transactions with Affiliates."
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT, SCHEDULES AND REPORTS ON FORM 8-K
See accompanying Index to Financial Statements at Item 8.
(A) Exhibits --------
Exhibit Number Description ------ -----------
4. Amended and Restated Limited Partnership Agreement dated March 30, 1992. (Incorporated by reference to the Current Report of the Registrant on Form 8-K dated March 30, 1992, as filed on April 10, 1992).
10.2 Portfolio Services Agreement dated February 14, 1991, between Southmark Realty Partners III, Ltd. and McNeil Real Estate Management, Inc. (1)
10.3 Modification of Note and Mortgage dated May 1, 1984, between Knoblinks Associates II and Samuel R. Pierce, Jr., as Secretary of Housing and Urban Development relating to Harbour Club II. (1)
10.4 Property Management Agreement dated March 30, 1992, between McNeil Real Estate Fund XXIII, L.P. and McNeil Real Estate Management, Inc. (2)
10.5 Amendment of Property Management Agreement dated March 5, 1993. (2)
10.6 Revolving Credit Agreement dated August 6, 1991, between McNeil Partners, L.P. and various selected partnerships, including the Registrant. (3)
10.7 Property Management Agreement dated March 30, 1992 between Beckley Associates and McNeil Real Estate Management, Inc. (3)
10.8 Disclosure Statement of Debtor-in-Possession pursuant to Section 1125 of the Bankruptcy Code.(4)
10.9 Debtor's First Amended Plan of Reorganization (as Modified), dated February 13, 1995.
10.10 Order Confirming Plan, dated May 17, 1995.
11. Statement regarding computation of Net Loss per Limited Partnership Unit (see Note 1 to Financial Statements appearing in Item 8).
22. Following is a list of subsidiaries of the Partnership:
The Partnership has omitted certain documents pertaining to the Partnership's Chapter 11 filing and other instruments with respect to long-term debt where the total amount of the securities authorized thereunder does not exceed 10% of the total assets of the Partnership. The Partnership agrees to furnish a copy of each such instrument to the Commission upon request.
(1) Incorporated by reference to the Quarterly Report of the registrant, on Form 10-Q for the period ended March 31, 1991, as filed on May 14, 1991.
(2) Incorporated by reference to the Annual Report of the registrant, on Form 10-K for the period ended December 31, 1992, as filed on March 30, 1993.
(3) Incorporated by reference to the Annual Report of the registrant, on Form 10-K for the period ended December 31, 1993, as filed on March 30, 1994.
(4) Incorporated by reference to the Annual Report of the registrant, on Form 10-K for the period ended December 31, 1994, as filed on March 30, 1995.
(B) Reports on Form 8-K. There were no reports on Form 8-K filed by the Partnership during the quarter ended December 31, 1995.
MCNEIL REAL ESTATE FUND XXIII, L.P.
SIGNATURE PAGE
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.


Item 1. Business
REGISTRANT
LSB Bancshares, Inc. ("Bancshares'") is a bank holding company headquartered in Lexington, North Carolina and registered under the Bank Holding Company Act of 1956, as amended. Bancshares' principal business is providing banking and other financial services through its banking subsidiary. It was incorporated on July 1, 1983. Bancshares is the parent holding company of Lexington State Bank ("LSB"), a North Carolina-chartered commercial bank. The principal assets of Bancshares are all of the outstanding shares of common stock of LSB. At December 31, 1995, Bancshares and its subsidiary had consolidated assets of $375 million and 250 employees.
SUBSIDIARY BANK
LSB is chartered under the laws of the state of North Carolina to engage in general banking business. Founded in 1949, LSB offers a complete array of services in the commercial banking, savings and trust fields through 14 offices in six communities located in Davidson County, North Carolina. LSB provides a full range of financial services including the acceptance of deposits, corporate cash management, discount brokerage, IRA plans, secured and unsecured loans and trust functions. LSB operates the only independent trust department in Davidson County, providing estate planning, estate and trust administration, IRA trusts, personal investment accounts and pension and profit-sharing trusts.
NON-BANK SUBSIDIARIES
LSB has two wholly-owned non-bank subsidiaries: Peoples Finance Company of Lexington, Inc. ("Peoples Finance") and LSB Financial Services, Inc. ("LSB Financial Services"). Peoples Finance was acquired by LSB on January 1, 1984 and operates as a finance company licensed under the laws of the State of North Carolina. Peoples Finance operates from one office located in Lexington, North Carolina with four employees. As a finance company, Peoples Finance offers secured and unsecured loans to individuals up to a maximum of $10,000, as well as dealer originated loans.
LSB Financial Services is incorporated under the laws of the State of North Carolina and offers a full range of uninsured, nondeposit investment products, including mutual funds, annuities, stocks and bonds. LSB Financial Services operates from offices located within LSB's main office with two employees. LSB Financial Services offers products through Liberty Securities Corporation, an independent broker-dealer, which is a member of the National Association of Securities Dealers and the Securities Investor Protection Corporation. Investments are neither deposits nor obligations of Lexington State Bank, nor are they guaranteed or insured by any depository institution, the FDIC, or any other government agency. LSB Financial Services began operation on December 1, 1994 and during 1995 lost approximately $78,000.
COMPETITION
Commercial banking in LSB's service area of Davidson County, North Carolina is highly competitive. LSB competes not only with major commercial banks but also with thrift institutions, credit unions, investment brokers, mortgage and finance companies. North Carolina permits state-
wide branching, which is widely practiced. In recent years, competition between large major banks and smaller independent banks has intensified significantly as a result of deregulation of the financial industry. In addition to in-state competition, banks such as LSB have a high degree of competition from out-of-state financial service companies offering mutual funds.
After several years of exceptional employment growth in North Carolina, the North Carolina Employment Security Commission projects the State's economy to remain sound in 1996, with low unemployment and low inflation. North Carolina's unemployment rate has remained at or near the lowest of the 11 large states surveyed by the Federal Government. Davidson County, with a labor force of approximately 75,000, had an unemployment rate in the 3.5% range for 1995.
REGULATION
As a bank holding company, Bancshares is subject to supervision, examination and regulation by the Board of Governors of the Federal Reserve System. LSB is chartered by the Sate of North Carolina and as such is subject to supervision, examination and regulation by the North Carolina State Banking Commission. LSB is also a member of the Federal Deposit Insurance Corporation and is therefore subject to supervision and examination by that agency.
Item 2.

Item 2. Properties
PROPERTIES
Bancshares' principal executive offices are located at One LSB Plaza, Lexington, North Carolina. This five-story office building totals 74,800 square feet and also serves as the home office of LSB. A majority of the major staff functions are located within this office complex.
In addition, LSB operates thirteen branch offices and four off-premise automated teller locations. Six of LSB's branch offices are located within Lexington. The remaining branch offices are located in the communities of Thomasville, Welcome, Midway, Arcadia and Wallburg, all of which are located within Davidson County, North Carolina.
Bancshares' principal office and seven branches are owned by LSB, while six branches and the off-premise ATM locations are leased. LSB's leased properties are subject to leases which expire on various dates from January 31, 1996 to June 30, 2004. Peoples Finance operates from an 1,800 square foot, one-story building located at 203 Center Street in Lexington, which it owns. LSB Financial Services leases 800 square feet within the principal office building of LSB. Except as described herein, Bancshares, LSB, Peoples Finance and LSB Financial Services own all properties free and clear of encumbrances.
Item 3.

Item 3. Legal Proceedings
The information required under this item is contained in Note 9 to the Notes to Consolidated Financial Statements on page 30 of the 1995 Annual Report and is incorporated by reference herein.
Item 4.

Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
Robert F. Lowe (53) Chairman, President and Chief Executive Officer and a Director of Bancshares and the Bank. Prior to becoming President on January 1, 1984, Mr. Lowe had served as Executive Vice President of Bancshares and of the Bank. Mr. Lowe joined the Bank in 1970 and was elected Vice President in 1973. He was elected Senior Vice President in 1980 and Executive Vice President in 1982. In 1983, he was elected a Director. Mr. Lowe is also President of Peoples Finance Company of Lexington, Inc., which is a subsidiary of the Bank and President and a director of LSB Financial Services, Inc., a subsidiary of the Bank.
H. Franklin Sherron, Jr. (40) Vice President and Assistant Secretary of Bancshares joined the Bank in 1990 as Senior Vice President. Prior to this, he served as President of J. J. Barnes, Inc., a mechanical contracting firm, from 1981 to 1990. From 1997 to 1981, he served as Assistant Cashier with Peoples Bank & Trust Company.
Ronald J. Meadley (62) Vice President and Assistant Secretary of Bancshares joined the Bank as Vice President in 1979, with 24 years of banking experience. He was elected Senior Vice President in 1986.
Monty J. Oliver (54) Secretary and Treasurer of Bancshares joined the Bank as Vice President in 1978, with 13 years of banking experience. He was elected Cashier of the Bank in 1980 and Vice President and Treasurer of Bancshares in 1983. In 1986, he was elected Senior Vice President of the Bank.
PART II.
Item 5.

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The information regarding the market price of the Company's Common Stock and related stockholder matters is set forth in the 1995 Annual Report under the heading "Stock and Dividend Information" on page 35 and is incorporated by reference herein.
Item 6.

Item 6. Selected Financial Data
The information required under this item is contained in the 1995 Annual Report under the heading "Summary of Selected Financial Data" on page 11 and is incorporated by reference herein.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation
The information required under this item is contained in the 1995 Annual Report under the heading "Management's Discussion and Analysis of Results of Operations and Financial Condition" on pages 13 through 21 and is incorporated by reference herein.
Item 8.

Item 8. Financial Statements and Supplementary Data
The consolidated financial statements and notes as of December 31, 1995 and 1994 and for each of the years in the three-year period ended December 31, 1995, together with the independent auditors' report of Turlington and Company, L.L.P. dated January 31, 1996, appearing on pages 22 through 32 of the 1995 Annual Report are incorporated by reference herein.
Item 9.

Item 9. Changes in the Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in or disagreements with accountants on accounting and financial disclosures during the two-year period ended December 31, 1995.
PART III.
Item 10.

Item 10. Directors and Executive Officers of the Registrant
The information required for this item is contained in Part I of this Form 10-K and in the 1996 Proxy Statement under the heading "Election of Directors" and is incorporated by reference herein.
Item 11.

Item 11. Executive Compensation
The information required under this item is contained in the 1996 Proxy Statement under the heading "Executive Compensation" and is incorporated by reference herein.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required under this item is contained in the 1996 Proxy Statement under the heading "Management's Ownership of Common Stock" and is incorporated by reference herein.
Item 13.

Item 13. Certain Relationship and Related Transactions
None
PART IV.
Item 14.

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
* Incorporated by reference from the indicated pages of the 1995 Annual Report.
2. Financial Statement Schedules:
All schedules are omitted because the related information is included in the Consolidated Financial Statements or notes thereto or because they are not applicable.
3. Exhibits
3.1 Articles of Incorporation of LSB Bancshares, Inc., as amended, which are incorporated by reference to Exhibit 4.2 of the Registrant's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on November 17, 1992 (file No. 33-54610).
3.2 Bylaws of LSB Bancshares, Inc. as amended.
4 Specimen certificate of common stock, $5.00 par value, which is incorporated by reference to Exhibit 4 of the registrant's Registration Statement on Form S-1 (File No. 2-99312).
10.1 1986 Employee Incentive Stock Option Plan of LSB Bancshares, Inc., as amended, which is incorporated by reference to the registrant's Registration Statement on Form S-8 filed with the Securities and Exchange Commission on November 17, 1992 (File No. 33-54610).
10.2 1996 Omnibus Stock Incentive Plan.
10.3 1996 Management Plan.
Exhibits 10.1, 10.2 and 10.3 set forth above are management contracts or compensatory plans and arrangements and are required to be filed as an exhibit to this form pursuant to Item 601 of regulation S-K.
13 Annual Report to Shareholders for the Year Ended December 31, 1995.
21 List of Subsidiaries at December 31, 1995.
23 Consent of Turlington and Company, L.L.P.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
There were no reports filed on Form 8-K during the fourth quarter of 1995.
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, thereto duly authorized.
LSB BANCSHARES, INC.
Date: February 13, 1996 By /s/ Robert F. Lowe --------------------------- Robert F. Lowe, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
EXHIBIT INDEX
3.2 Bylaws of the Registrant, as amended
10.2 1996 Omnibus Stock Incentive Plan
10.3 Management Incentive Plan
13 Annual Report to Shareholders for the Year Ended December 31, 1995
21 List of Subsidiaries of Registrant at December 31, 1995
23 Consent of Turlington and Company, L.L.P.
27 Financial Data Schedule (for SEC use only)