<PAGE> 1
As filed with the Securities and Exchange Commission on November 15, 1999
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
----------- -----------------
Commission File Number: 0-21443
PLYMOUTH COMMERCIAL MORTGAGE FUND
(Exact name of registrant as specified in its charter)
Delaware 74-6439983
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
c/o Greystone Advisers, Inc.,
13333 Blanco Road, Suite 314
San Antonio, Texas 78216-7756
(Address of principal executive offices, including zip code)
210-493-3971
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
[X] Yes [ ] No
As of November 12, 1999, 921,627 of the registrant's common shares of
beneficial interest, no par value, were outstanding.
<PAGE> 2
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statements of Assets and Liabilities
September 30, 1999 and December 31, 1998
(Unaudited)
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Assets
Investments in securities at fair value, cost of $6,393,820 and
$9,210,118 $ 5,499,225 $ 7,943,201
Investment in affiliate 1,241,509 2,362,165
Cash 160,902 86,940
Accounts Receivable - -
Organization Costs, Net - -
------------------ -----------------
Total Assets $ 6,901,636 $ 10,392,306
================== =================
Liabilities
Accounts Payable $ 176,701 $ 120,284
Investment Advisory Fee Payable - 51,030
Dividend Payable - -
Note Payable 986,634 4,448,795
Escrow Funds 7,625 10,589
------------------ -----------------
Total Liabilities 1,170,960 4,630,698
Net Assets
Common shares of beneficial interest, no par value, 1,750,000
shares authorized, 921,627 shares issued and outstanding 7,976,773 7,976,773
Accumulated undistributed net investment loss (2,436,336) (1,716,978)
Accumulated undistributed net realized gains net of
distributions of $1,610,805 and $1,610,805 1,388,207 1,502,310
Accumulated undistributed equity of subsidiary (303,373) (733,580)
Accumulated undistributed unrealized gain (loss)on investments (894,595) (1,266,917)
------------------ -----------------
Total Net Assets ($6.21 and $6.25 per share) 5,730,676 5,761,608
Total Liabilities & Net Assets $ 6,901,636 $ 10,392,306
================== =================
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE> 3
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statements of Operations
(unaudited)
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $ 151,597 $ 160,333 $ 406,896 $ 580,617
Other Investment Income - - 814 260
------------- -------------- ------------- -------------
Total Investment Income $ 151,597 160,333 407,710 580,877
EXPENSES:
Investment advisory fee 110,501 151,041 382,038 582,397
Legal and Professional 93,059 38,893 205,630 108,161
Interest expense 20,006 28,015 192,895 342,096
Operating expense 100,570 66,217 346,505 193,737
------------- -------------- ------------- -------------
Total Expenses 324,136 284,166 1,127,068 1,226,391
Net Investment Loss $ (172,539) $ (123,833) $ (719,358) $ (645,514)
------------- -------------- ------------- -------------
Realized gain on sale of investment (142,891) 359,577 (354,830) 1,426,668
Realized gain on collection of notes 42,815 132,091 240,727 611,845
Change in unrealized appreciation on
assets (702,953) (337,120) 372,322 (1,135,312)
Equity in earnings of affiliate 412,003 (90,855) 430,207 (138,660)
------------- -------------- ------------- -------------
Net increase (decrease) in net assets
resulting from operations $ (563,565) $ (60,140) $ (30,932) $ 119,027
============= ============== ============= =============
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE> 4
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statements of Changes in Net Assets
(unaudited)
<TABLE>
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations before distributions
Net investment loss (172,539) (123,833) (719,358) (645,514)
Net realized gain on sale of investments (142,891) 359,577 (354,830) 1,426,668
Net realized gain on collections 42,815 132,092 240,727 611,845
Changes in unrealized appreciation on
investments (702,953) (337,120) 372,322 (1,135,312)
Equity in earnings of affiliates 412,003 (90,855) 430,207 (138,660)
--------------- -------------- ---------------- --------------
Net increase in net assets from
operations before distributions (563,565) (60,139) (30,932) 119,027
Distribution to shareholders from:
Capital share transactions: - (967,709) - (967,709)
--------------- -------------- ---------------- --------------
Total increase in net assets (563,565) (1,027,848) (30,932) (848,682)
Net assets, beginning of period 6,294,241 8,597,326 5,761,608 8,418,160
--------------- -------------- ---------------- --------------
Net assets, end of period 5,730,676 7,569,478 5,730,676 7,569,478
=============== ============== ================ ==============
Per Share Data
Investment income 0.16 0.17 0.44 0.63
Expenses (0.35) (0.31) (1.22) (1.33)
Net realized gain on sale of investments (0.15) 0.39 (0.38) 1.55
Net realized gain on collection of notes 0.04 0.14 0.26 0.66
Equity in earnings of affiliate 0.44 (0.10) 0.46 (0.15)
Change in unrealized appreciation on
assets (0.75) (0.36) 0.40 (1.23)
--------------- -------------- ---------------- --------------
Increase in net assets from operations
before distributions (0.61) (0.07) (0.04) 0.13
Capital share transactions
Distributions from realized gain on
securities 0.00 (1.05) 0.00 (1.05)
--------------- -------------- ---------------- --------------
Net Increase (decrease) in net asset value (0.61) (1.12) (0.04) (0.92)
Net asset value
Beginning of period 6.82 9.33 6.25 9.13
--------------- -------------- ---------------- --------------
End of period 6.21 8.21 6.21 8.21
=============== ============== ================ ==============
Ratio:
Expenses to Average Assets -3.70% 3.52% -13.00% 15.34%
Net Investment Income to Average Assets -1.09% -1.53% -8.03% -8.08%
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE> 5
PLYMOUTH COMMERCIAL MORTGAGE FUND
Statements of Cash Flows
(unaudited)
<TABLE>
<CAPTION>
For the nine months For the nine months
ended September 30, 1999 ended September 30, 1998
------------------------ ------------------------
<S> <C> <C>
Cash flows from operating activities
Increase (decreases) in net asserts from operations
before distributions $ (30,932) $ 119,027
------------------------- ------------------------
Adjustments to reconcile increases in net assets
from operations before distributions to net cash
provided
Amortization of organization costs (372,322) 23,400
Change in unrealized appreciation on
investments - 1,135,312
Changes in other assets (430,207) 4,707
Equity in loss of affiliates - 138,660
Changes in receivables - -
Changes in payables 5,387 (1,127)
Change in dividend s payable -
Change in escrow (2,964) (35,869)
------------------------- ------------------------
Net cash provided/used by operating activities (831,038) 1,384,110
Cash flow from investing activities
Purchase of securities and capital
expenditures (135,878) (3,633,746)
Sale of securities/principal collection on
securities 4,391,564 7,616,950
Investment in affiliate 111,474 35,997
------------------------- ------------------------
Net cash provided/used by investing activities 4,367,160 4,019,201
Cash flow from financing activities
Change in note net (3,462,161) (5,024,842)
Dividends paid - (781,896)
------------------------- ------------------------
Net cash provided by financing activities (3,462,161) (5,806,738)
Net decrease in cash and cash equivalents 73,962 (403,426)
Cash and cash equivalents at beginning of period 86,940 568,899
------------------------- ------------------------
Cash and cash equivalents at end of period 160,902 165,473
========================= ========================
</TABLE>
The accompanying notes are an integral part of these financial statements
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<PAGE> 6
1. ORGANIZATION AND BUSINESS PURPOSE
Plymouth Commercial Mortgage Fund, a Delaware business trust, (the "Fund") was
organized on August 23, 1996 and commenced operations on September 27, 1996. The
Fund seeks to achieve a high level of current income by purchasing loans where
the obligor is having trouble meeting the loan's contractual requirements. The
loans that the Fund purchases are typically secured by commercial real estate.
The Fund has elected to be regulated as a business development company under the
Investment Company Act of 1940, as amended ("1940 Act").
The foregoing facts do not reflect the Fund's plans for the future. Beginning in
August 1999, the shareholders were presented with a proposal to convert the
Fund's operations from a Delaware business trust to a Texas limited partnership.
The proposal was approved by just over 90% of the Fund's shareholders, which
exceeds the 85% minimum approval necessary for the plan to go forward. The only
remaining contingency to proceeding with the Texas limited partnership is to
close new financing with Transamerica Business Credit Corp. The Fund expects
that financing to close late in November or early in December, 1999. If the
limited partnership goes forward, it will not be a business development company,
and the partnership will not be a reporting company.
At the time that the Transamerica financing closes, the shareholders who
dissented from the Fund's contiuation as a Texas limited partnership will
receive an in-kind distribution of the Fund's assets. Those shareholders have
already selected the assets they will take.
2. SIGNIFICANT ACCOUNTING POLICIES
A. Basis of Presentation- The financial statements included herein have
been prepared in accordance with generally accepted accounting
principles for interim financial information and the instructions to
Form 10-Q and Article 6 of Regulation S-X. Accordingly, certain
information and notes that are required by generally accepted
accounting principles for complete financial statements are not
included herein. The interim statements should be read in conjunction
with the financial statements and notes included in the Fund's most
recent annual report on Form 10-K. Interim statements are subject to
possible adjustments in connection with the annual audit of the Fund.
Management believes all adjustments necessary for a fair presentation
of these interim statements have been included.
B. Security Valuation -There is no publicly quoted market for the
Fund's impaired loan portfolio. As such, the fair value of the
portfolio is established by the Fund's Board of Trustees using their
best judgment. Such values are based upon what the Board believes the
Fund could reasonably expect to receive for each impaired loan in an
orderly disposition over a reasonable time period.
In establishing the fair value of a loan, the Board considers aspects
about the individual loan as well as the general economy. Such factors
include but are not limited to: the type of loan, whether the borrower
is currently meeting the contractual terms of the obligation, the
length of time that the borrower has or has not been meeting the
contractual terms, the probability that the borrower will begin or stop
making payments, the value of the collateral and the
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<PAGE> 7
guarantees securing the loans, the Fund's historical experience
selling the type of loan being valued, various standard financial
measurements, the remaining contract terms, and prevailing interest
rates.
Certain elements of the valuation procedure involve subjective
judgment. Because the majority of the Fund's impaired loans are
delinquent, no assurance can be given that the Fund will be able to
recover the fair value that the Board has established. The Fund's
impaired loans are not typically backed by any government guarantee or
private credit enhancement. In many cases, the Fund will also incur
certain costs and delays in attempting to assert its right to payment
or in foreclosing on the loan's collateral. The actual value realized
on any particular loan will vary from the values determined by the
Board and can only be determined in negotiations between the Fund and
third parties.
In asserting its rights, the Fund will often attempt to foreclose on a
loan and acquire the collateral. Pursuant to the terms of its credit
agreement, any real estate that is acquired through foreclosure is held
by Plymouth REO, a wholly owned subsidiary of the Fund. Real estate
acquired through foreclosure is recorded at its estimated fair value.
C. Federal Income Taxes - The Fund has elected the special income tax
treatment available to "regulated investment companies" under
Subchapter M of the Internal Revenue Code. If the Fund qualifies as a
regulated investment company and distributes to shareholders annually
in a timely manner at least 90% of its investment company taxable
income, as defined by the Code (i.e., net investment income, including
accrued discount, and net short-term capital gains), it will not be
subject to federal income tax on the portion of its taxable investment
income and net capital gain distributed to shareholders. In addition,
if the Fund distributes in a timely manner 98% of its net capital gain
income for each fiscal year, and distributes 98% of its investment
company taxable income for each calendar year (as well as any income
not distributed in prior years), it will not be subject to the 4%
nondeductible federal excise tax imposed with respect to certain
undistributed income of regulated investment companies.
D. Distributions to Shareholders - The Fund paid no dividends to
shareholders in respect of its operations during the third quarter of
1999, and none were declared.
E. Other - Principal and interest payments due on notes held by the
Fund are recognized on the date received. Interest income is typically
not accrued because of the impaired nature of the Fund's loan
portfolio.
3. INVESTMENT ADVISORY AGREEMENT
The Fund has an Investment Advisory Agreement (Agreement) with Greystone
Advisers, Inc., a Delaware corporation, (Adviser). Initially, the Adviser was a
federally registered investment adviser under the Investment Advisers Act of
1940. The Securities Markets Improvements Act of 1996, however, altered the
requirements for federal investment adviser registration. To maintain its
federal registration, the Adviser would have needed to have at least
$25,000,000.00 in assets under management. Accordingly, as of July 8, 1997, the
Adviser was required by law to, and did, withdraw
Page -7-
<PAGE> 8
its federal registration. Further, upon consultation with Texas securities
counsel, the Adviser determined that it was not required to have a Texas
investment adviser registration.
Under the Agreement, the Adviser manages the investments of the Fund, subject to
the supervision and control of the Fund's Board of Trustees. Specifically, the
Adviser identifies, evaluates, structures, closes and monitors the investments
made by the Fund. The Agreement was ratified by the Board of Trustees at its
February1, 1999 meeting remains in effect for a year from that time. It will
need to be renewed at least annually by the Board of Trustees, including a
majority of its members casting their votes in person who are not interested
persons of the Fund (as defined by the 1940 Act) at a meeting called for the
purpose of voting on such approval, or by a vote of a majority of the
outstanding voting securities of the Fund. The Agreement can be terminated by
the Fund at any time, without payment of any penalty, on sixty day's written
notice to the Adviser if the decision to terminate has been made by the Board of
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Agreement will terminate automatically in the event of its assignment.
The Adviser is required to pay all expenses that are incurred in rendering its
services. Generally, these expenses include the cost of office space, telephone
service, equipment and personnel required to perform its obligations under the
Agreement. The Fund will be required to pay its operating expenses and reimburse
the Adviser promptly for expenses that the Adviser may pay on the Fund's behalf,
except those specifically required to be borne by the Adviser under the
Agreement. Without limitation, the expenses to be borne by the Fund will
include: all expenses of any offering and sale by the Fund of its shares; the
fees and disbursements of the Fund's counsel, accountants, and custodian; fees
and expenses incurred in producing and effecting filings with federal and state
securities administrators; costs of the Fund's periodic reports to and other
communications with the Fund's shareholders; fees and expenses of members of the
Fund's Board of Trustees who are not directors, officers or employees of the
Adviser; premiums for the fidelity bond maintained by the Fund; all costs
related to portfolio investments, including without limitation financing costs,
legal and accounting fees, expenses related to protecting or maintaining the
value of the loan portfolio or its underlying collateral, and other professional
or technical fees and expenses (e.g., credit reports, title searches and
delivery charges, property taxes, insurance premiums, long-distance telephone
charges, costs of specialized consultants such as accountants or
industry-specific technical experts, and travel expenses) incurred in acquiring,
monitoring, negotiating, working-out, and effecting disposition of such
investments, as well as responding to any litigation arising therefrom; and all
expenses related to any borrowings by the Fund.
Under the agreement, the Fund pays to the Adviser, on the 15th day of each
month: (a) a fee calculated at an effective annual rate of 5.94% of the Fund's
invested assets as of the end of the previous month; and (b) a fee calculated at
an effective annual rate of 0.48% of the Fund's cash and short-term investments
as of the end of the previous month. For purposes of calculating the fee to be
paid on a monthly basis, "invested assets" means the asset value as determined
by the Board as of the end of the previous fiscal quarter minus cash, short-term
investments, intangible assets, and the amount of collections applied to the
carrying value of the loan portfolio since the end of the previous quarter, plus
the cost of loans purchased and capitalized advances to protect portfolio
investments or underlying collateral since the end of the previous quarter.
Page -8-
<PAGE> 9
4. INVESTMENTS
The Fund invests primarily in impaired loans of companies that qualify as
"eligible portfolio companies" as defined in Section 2(a)(46) of the 1940 Act or
in securities that otherwise qualify for investment as permitted in Section
55(a)(1) through (6). These loans are carried on the Statement of Assets and
Liabilities as of September 30,1999, at fair value, as determined in good faith
by the Fund's Board of Trustees.
These loans typically are offered at auction in packages of multiple loans.
Sellers include entities such as the Federal Deposit Insurance Corporation
(FDIC), banks, savings and loans, insurance companies and other financial
institutions. The Fund's investments in loan packages will be directed by the
Adviser. The Fund holds its real estate assets in a wholly-owned subsidiary as
required in the agreement establishing its senior credit facility.
5. INDEBTEDNESS
During the period to which this report relates, the Fund had a term loan with
Comerica Bank--Texas, N.A. that is secured by a first lien on all of the Fund's
assets. As of September 30,1999, the amount of $986,634 remained outstanding
under the loan.
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF LIQUIDITY, CAPITAL RESOURCES,
AND RESULTS OF OPERATIONS.
Liquidity and Capital Resources
As of September 30, 1999, Plymouth has $5,730,676 in net assets and owed
$986,634 on its term loan..
Plymouth's liquidity consists of its capital not invested in loans plus any
amounts it might be able to borrow. Plymouth's original capital is long since
invested so borrowings would be its only available source of liquidity. During
the last quarter, however, Plymouth no longer had a credit line, only a term
loan. Thus, borrowing offered Plymouth no source of liquidity. There are no
material, unused sources of liquidity.
As with recent previous quarters, Plymouth's credit limitations prevented it
from making any new purchases in the third quarter. As with recent previous
quarters, the inability to purchase new loans not only suppressed income in the
quarter but also will likely have adverse effects in later quarters. Lack of
purchases in prior quarters was a part of the reason for lack of income in this
quarter.
During the third quarter, the ratio required by the Comerica loan agreement
between Plymouth's net income and its interest expense was out of compliance.
Although the lender demanded that the breach be corrected, the non-compliance
was waived when a renewal is entered into as discussed below.
Plymouth entered into a term loan that extended the maturity date of the debt to
November 15, 1999. Under the terms of the loan, Plymouth receives 30% of cash
receipts for operating expense and the remainder goes to Comerica to be applied
to the debt. Management believes the debt is well secured
Page -9-
<PAGE> 10
by the available assets, but the arrangement leaves Plymouth tight on operating
cash and allows no room for growth.
Management has obtained a proposal for long term financing from Transamerica
Business Credit Corporation. The terms of the financing are more favorable than
those in Plymouth's present agreement with Comerica and management believes the
Transamerica terms will permit Plymouth to return to profitability.
Transamerica, however, will not lend to Plymouth while it retains its BDC status
because of the attendant regulatory complexity.
To try to change Plymouth's situation, management sought and obtained from the
Board of Trustees a recommendation to drop Plymouth's BDC election. To preserve
pass-through federal income tax status, Plymouth plans to convert to a limited
partnership. Management has tried to accomplish the conversion by means of an
exchange offer whereby Plymouth's shareholders would exchange their shares for
units of a newly formed limited partnership. Shareholders not wishing to
participate in the limited partnership are offered notes. Those refusing both
partnership units and notes will receive an in-kind distribution of a pro rata
portion of Plymouth's assets.
The exchange offer was presented to Plymouth's shareholders by means of a
Confidential Private Exchange Offer Memorandum that was mailed out on August 10,
1999. Just over 90% of the shareholders accepted. Thus, the offer was successful
and the plan of conversion to a limited partnership will go forward if
management is successful in closing on the financing from Transamerica Business
Credit Corp. If the financing fails, the Board of Trustees will have to decide
how best to proceed. The most likely occurrence remains a bulk-sale of
Plymouth's assets followed by a dissolution. If the financing closes, the new
entity will be Plymouth Commercial Mortgage, Ltd.
Plymouth is not able to repay the indebtedness to Comerica on the November 15,
1999 due date. Based on telephone conversations with Comerica representatives,
Plymouth believes that Comerica will give it time to close on the Transamerica
financing so that Comerica can be paid off in that way. If Comerica does not
provide Plymouth with that latitude, although the debt is well collateralized,
Plymouth will be unable to repay the debt and will have to review its options to
prevent foreclosure.
Results of Operations
Nine Months Ending 9/30/99
During the nine month period Plymouth has been trying to convert to a limited
partnership and bring on a new senior lender. Throughout the period, Plymouth
had insufficient liquidity for normal operations, so it had to sell assets
before they reached full value so as to keep the Comerica borrowing base in
compliance. Plymouth has received the shareholder vote requisite to conversion
and the only remaining contingency is the closing of the Transamerica financing.
If Plymouth does not get the financing, its ability to continue is in question.
During the nine month period ending September 30,1999, Plymouth was able to
purchase only one small asset for $59,000 due to the inability to borrow.
Plymouth's per share value decreased from $6.25 at December 31,1998 to $6.21 at
September 30,1999.
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<PAGE> 11
During the nine month period ending September 30,1999 Plymouth had gross
collections of $4,806,794. Those collections resulted in a realized loss of over
$833,000. The loss arose from slow collections and two assets having been
written off creating a loss of $476,000. The per share value did not drop
significantly, because the losses had been expected and had been previously
accounted for in Plymouth's estimates of fair market value. The assets remaining
in Plymouth's portfolio are those left over from prior purchases that Plymouth
has had the most difficulty in resolving. If Plymouth continues to be unable to
purchase new assets, it will not remain financially viable.
Expenses for the period were consistent with the level of assets under
management. However, legal expense has been higher due to the fact the assets
remaining in the portfolio are tougher to resolve. All potential losses
management foresees are reflected in the financial statements in the unrealized
and undistributed accounts on the balance sheet.
Comparable Period Nine Months Ending 09/30/98
During the nine month period ending September 30,1998, Plymouth purchased 24
additional loans with a cost of $3,551,543 and a total outstanding principal
balance of $5,378,285. Plymouth's per share value decreased to $8.21 from $9.13
at December 31, 1997. The decrease was principally due to a $1.05 per share
dividend declared year to date for 1998. The aggregate dividends declared year
to date from realized income is $967,709. The per share value has also been
reduced by undistributed unrealized losses.
During the nine month period ending September 30,1998, Plymouth had gross
collections of $10,236,782. Plymouth's collections resulted in a net increase in
net assets from operations, before changes in unrealized appreciation on
investments and equity in earnings of affiliates, of $1,393,000 for the nine
month period ending September 30, 1998. The GAAP net increase in assets for the
nine month period was $119,027 after a change in unrealized appreciation of
($1,273,972). The number is negative because gain was moved from unrealized to
realized as a result of settlements and sales of loans.
Three Month period ending September 30,1999 and Comparable Period
Ending September 30,1998.
During the three month period ending September 30,1999, Plymouth had gross
collections of $2,526,707. Those collections resulted in a realized loss of
$272,615. Once again this was a result of the assets being resolved having lower
income margins and operating expenses too high for the assets under management.
Page -11-
<PAGE> 12
YEAR 2000 ANALYSIS
The Year 2000 problem ("Y2K") relates back to a formerly common practice among
writers of computer code. To reduce the length of the code, writers often used
only the last two digits to represent a year, building into the system that all
two-digit years are preceded by "19." That assumption will, of course, prove to
be erroneous at the end of this year.
The problem is most often thought of as relating to software. If a program's
code abbreviates references to years to two digits, when presented with a year
2000 or later number, the program may produce erratic results or cease to
function altogether, depending on how crucial dates are to its operation. The
problem can also arise, however, with what we think of as hardware. Much
hardware contains chips with embedded code. If the writers of that code
abbreviated references to years to two digits, then, when presented with a year
2000 or later number, the hardware too may present the same problems described
for software.
As to hardware, Plymouth relies upon Greystone's computer system. Both the file
server and the work stations are Pentium class machines. Greystone obtained a
software program that tested
Page -12-
<PAGE> 13
machines for Y2K compliance. Several of Greystone's personal computers did not
pass the test, and they have been replaced.
As to software, Greystone's server is a personal computer running a Windows NT
based network. Each work station is an independent personal computer using
Windows 95 as an operating system. Depending on the versions, neither Windows NT
nor Windows 95 can be relied upon to be Y2K compliant. Greystone has updated its
operating system and principal application programs to versions that are Y2K
compliant.
Neither Plymouth nor Greystone have any online connections with third parties
that are material to its operations.
Failure to correct a material Y2K problem could result in an interruption in, or
a failure of certain normal business activities or operations. Such failures
could materially and adversely affect the Plymouth's operations, liquidity and
financial condition. Due to the general uncertainty inherent in the Y2K,
Plymouth is unable to determine at this time whether the consequences of Y2K
failures will have a material impact on the its operations, liquidity or
financial condition.
PART II - OTHER INFORMATION
Item 1: LEGAL PROCEEDINGS
None.
Item 2: CHANGES IN SECURITIES
None.
Item 3: DEFAULTS UPON SENIOR SECURITIES
Plymouth's current line of credit is was extended until November 15,
1999. As of that date, there is no immediate substitute and Plymouth is
not in a position to repay. Plymouth expects to close o new financing
with Transamerica Business Credit Corp. in the next few weeks.
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Item 5: OTHER INFORMATION
The requisite number of Plymouth's shareholders accepted the offer
represented by the Confidential Private Exchange Offer Memorandum for
the offer to become effective. Just under 10% in interest rejected the
offer and, if the conversion into a limited partnership proceeds, will
receive an in-kind distribution of assets. The conversion to a limited
partnership is still contingent on the closing of the financing from
Transamerica Business Credit Corporation, which management expects to
happen later in November.
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<PAGE> 14
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS-
(2) Plan of acquisition, reorganization, arrangement,
liquidation or succession: (None)
(3)(i) (A)Certificate of Trust of the registrant, as filed
August 23, 1996(1)
(B)Declaration of Trust of the registrant, dated
August 23, 1996(1)
(3)(ii) Bylaws of the registrant, dated September 3, 1996(1)
(4) (A)Loan Agreement between Comerica Bank-Texas and the
registrant, dated September 27, 1996(1)
(B)Agreement to furnish to the Commission upon
request a copy of Subordinated Note Agreement between
the registrant and SouthWest Holding Company, Inc.,
dated September 27, 1996(2)
(10) (A)Investment Advisory Agreement by and between the
registrant and Greystone Advisers, Inc.(3)
(B)Custodial Agreement by and between Broadway
National Bank, Comerica Bank-Texas and the
registrant, dated September 27, 1996(4)
(15) Letter re unaudited interim financial information:
(None)
(18) Letter re change in accounting principles: (None)
(19) Report furnished to security holders: (None)
(22) Published report regarding matters submitted to
vote of security holders:
(None)
(23) Consents of experts and counsel: (None)
(24) Power of attorney: (None)
(27) Financial Data Schedule(1)
- -----------
1(1) Incorporated herein by reference from the registrant's initial registration
statement on Form 10 (File No. 0-21443), as filed with the commission on January
15, 1997.
(2) Incorporated herein by reference from amendment #1 to the registrant's
initial registration statement on Form 10 (File no. 0-21443), as filed with
the commission on January 15, 1997.
(3) Incorporated herein by reference from the registrant's Form 10-Q filed with
the Commission for the period ending March 31, 1998 on or about May 14, 1998.
(4) Incorporated herein by reference from the registrant's Form 10-Q filed with
the Commission for the period ending June 30, 1997 on or about August 14, 1997.
REPORTS ON FORM 8-K- None.
Page -14-
<PAGE> 15
SIGNATURES
Pursuant to the requirements 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.
PLYMOUTH COMMERCIAL MORTGAGE FUND
/s/ Robert R. Swendson
November 15, 1999
---------------------------------------
Robert R. Swendson, President and Chief
Executive Officer
/s/ Patrick J. Panzarella
November 15, 1999
----------------------------------------------
Patrick J. Panzarella, Chief Financial Officer
(Principal Financial Officer)
- ----------------
Commission for the period ending June 30, 1997 on or about August 14, 1997.
Page -15-
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains Summary Financial Information extracted from the
registrant's Statement of Assets and Liabilities as of September 30, 1999
(unaudited), and Statement of Operations, Statement of Changes in Net Assets,
and Statement of Cash Flows for the period ended September 30, 1999 (unaudited),
and is qualified in its entirety by reference to such Statement of Assets and
Liabilities, Statement of Operations, Statement of Changes in Net Assets, and
Statement of Cash Flows.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1999
<INVESTMENTS-AT-COST> 6,393,820
<INVESTMENTS-AT-VALUE> 5,999,225
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 1,402,411
<TOTAL-ASSETS> 6,901,636
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 986,639
<OTHER-ITEMS-LIABILITIES> 189,326
<TOTAL-LIABILITIES> 1,170,960
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,976,773
<SHARES-COMMON-STOCK> 921,627
<SHARES-COMMON-PRIOR> 921,627
<ACCUMULATED-NII-CURRENT> (2,436,336)
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,388,207
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (1,197,968)
<NET-ASSETS> 5,730,676
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 406,896
<OTHER-INCOME> 814
<EXPENSES-NET> 1,127,068
<NET-INVESTMENT-INCOME> (719,358)
<REALIZED-GAINS-CURRENT> (114,103)
<APPREC-INCREASE-CURRENT> 802,529
<NET-CHANGE-FROM-OPS> (30,932)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> (30,932)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 382,035
<INTEREST-EXPENSE> 192,895
<GROSS-EXPENSE> 1,127,068
<AVERAGE-NET-ASSETS> 5,746,142
<PER-SHARE-NAV-BEGIN> 6.25
<PER-SHARE-NII> (.78)
<PER-SHARE-GAIN-APPREC> .74
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 6.21
<EXPENSE-RATIO> 13
</TABLE>
