<PAGE>
PART I
ITEM 1. BUSINESS.
(a) General Development of the Business
Centennial Mortgage Income Fund (the "Partnership"), a California
Limited Partnership, was organized on December 13, 1983. The
Partnership's registration statement became effective June 8,
1984. The general partners were John B. Joseph, Ronald R. White
and West Coast Bancorp ("WCB").
During 1992, WCB resigned as general partner of the Partnership.
Centennial Corporation ("CC"), a privately-held corporation whose
stock is owned by affiliates of Ronald R. White and John B.
Joseph, became a new general partner in 1993. CC was
incorporated in October of 1983. Upon the resignation of WCB as
general partner, the two remaining general partners appointed CC
as an interim corporate general partner to protect the
Partnership from dissolution in the unlikely event of death or
discharge of both the remaining general partners. The general
partners subsequently received a majority vote of the limited
partners approving the new corporate general partner.
Beginning in the fourth quarter of 1985, the Partnership entered
its operating stage of business. During the fourth quarter of
1990, 60 months after the closing of its offering stage, the
Partnership entered the repayment stage. For additional
information, see Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(b) Financial Information about Industry Segments
Not applicable.
(c) Narrative Description of Business
The Partnership was formed to invest in mortgage investments
consisting of participating first mortgage loans, construction
loans, and wrap-around and other junior loans on commercial,
industrial and residential income-producing real property.
The Partnership's objectives are to preserve the Partnership's
invested capital, provide increased cash distributions to the
limited partners as the cash flow from the properties underlying
mortgage investments increases over the life of the Partnership,
provide capital growth through participation in the increased
value of the underlying properties and provide liquidating
distributions as cash from the sale of real estate owned is no
longer needed for development and operations of real estate
owned.
Due to the long term recession and falling real estate market
values in California, many of the Partnership's loans became
delinquent and management of the Partnership elected to
foreclose, thereby increasing real estate owned balances. As a
result, the Partnership has become a direct investor in this real
estate and intends to manage operating properties and develop raw
land until such time as the Partnership is able to sell this real
estate owned. The real estate owned balance at December 31, 1993
was $21,394,000, decreasing to $13,820,000 at year end 1994, and
$12,349,000 at year end 1995. The decrease from 1993 to 1994 was
principally the result of $6,443,000 of real estate being
transferred to unconsolidated investees and the chargeoff or
writedown of $1,029,000 of real estate.
(d) Financial Information about Foreign and Domestic Operations
and Export Sales
Not applicable.
ITEM 2. DESCRIPTION OF PROPERTY.
No properties or facilities are owned or leased by the
Partnership other than real estate owned which was obtained
through foreclosure of real estate loans receivable, as described
in note 6 of Notes to Consolidated Financial Statements.
ITEM 3. LEGAL PROCEEDINGS.
There are no material pending legal proceedings other than
ordinary routine litigation incidental to the registrant's
business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters have been submitted to a vote of security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED
SECURITY HOLDER MATTERS.
(a) Securities Market Information
There is no market for the Partnership's limited partnership
units, nor is one expected to develop.
The Partnership units were offered by the Partnership through
selected dealers who were members of the National Association of
Securities Dealers, Inc.
(b) Approximate Number of Holders of Limited Partnership Units
As of December 31, 1995, there were approximately 5,700 holders
of limited partnership units.
(c) Partnership Distributions
No distributions were declared or paid by the Partnership during
the three year period ended December 31, 1995.
Management intends to distribute cash flow available for
distribution (as defined in the Partnership Agreement), if any,
on a quarterly basis. Distributions may vary in amount and may
be suspended at such time as the Partnership requires working
capital, or at any time that the general partners, in their sole
discretion, determine it to be in the best interest of the
Partnership. In the third quarter of 1991, management suspended
distributions. See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
<CAPTION>
(dollars in thousands, except per unit data)
Years ended
<S> <C> <C> <C> <C>
<C>
- - --------------------------------------------------------------------------------
- - ----------
12/31/95 12/31/94 12/31/93 12/31/92
12/31/91
- - --------------------------------------------------------------------------------
- - ----------
Consolidated Statement of Operations Data
Total revenue........ $ 1,159 $ 1,096 $ 1,246 $ 2,157
$ 2,439
Net loss............. (2,776) (1,286) (5,968) (3,676)
(430)
Net loss
per limited
partnership unit... (71.68) (33.21) (154.10) (90.16)
(10.53)
Consolidated Balance Sheet Data
Total loans.......... 4,793 6,641 3,489 10,182
12,569
Total real
estate owned....... 12,349 13,820 21,394 18,395
14,317
Total assets......... 14,842 17,688 20,927 24,995
28,332
Partners' equity..... 9,946 12,722 14,008 19,976
23,652
Distributions
per limited
partnership unit... --- --- --- ---
45.01
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
General
Net loss and loss per limited partnership unit were $(2,776,000)
and $(71.68) for the year ended December 31, 1995 up from
$(1,286,000) and $(33.21) in 1994 and down from $(5,968,000) and
$(154.10) in 1993. The increase in loss in 1995 is primarily the
result of an increase in share of losses in unconsolidated
investees. The decrease in loss for 1994 is primarily the result
of a decrease in the provision for possible losses. The loss for
1993 was primarily the result of a large provision for possible
losses and a decrease in interest income.
Liquidity and Capital Resources
At December 31, 1995, the Partnership had $2,947,000 in cash and
interest-bearing deposits. The Partnership had an additional
$103,000 in a certificate of deposit at December 31, 1995 with a
maturity date of June, 1996. Additional sources of funds are
future operations of real estate owned, sale of real estate owned
and payoffs of existing loans. The Partnership also had
$1,057,000 in nonperforming loans which had reached maturity as
of December 31, 1995. One loan totaling $35,000 paid off during
the first quarter of 1996, however, there are no additional
collections of principal anticipated in 1996. Although all real
estate owned is classified as held for sale, the Partnership was
currently marketing $1,550,000 in real estate owned as of
December 31, 1995. The Partnership had no unfunded loan
commitments to nonaffiliates at December 31, 1995. The
Partnership funded advances on loans to affiliates during 1995
totaling $429,000 and received payoffs and paydowns on loans to
nonaffiliates totaling $288,000. During 1995, the Partnership
funded $58,000 of capital expenditures for real estate owned and
received proceeds from the sale of real estate owned of
$1,285,000.
The Partnership's notes payable commitments for 1996 consist of
interest and all principal payments due of approximately
$3,360,000, which does not include payments on the note secured
by the 23 acres in Riverside totaling $650,000. The original
borrower on the $650,000 note payable is negotiating with the
lender to perfect a nonjudicial foreclosure on the property. The
note payable secured by the 19 acres in Sacramento totaling
$900,000 matures September 1, 1996. The note payable secured by
the Upland Shopping Center totaling $2,460,000 matures November
1, 1996. The Partnership does not presently have sufficient
capital reserves to make these balloon payments and meet
operating commitments. The Partnership believes that it will be
able to obtain extensions on these two notes. In addition to the
note payable commitments, the Partnership's principal capital
requirements include: i) real property taxes and bonds on real
estate owned of approximately $215,000 payable and delinquent in
1996, and ii) selling, general and administrative costs.
Property taxes delinquent at December 31, 1995 have been accrued
at December 31, 1995. These commitments are expected to be paid
from existing cash balances, future loan payoffs, and the sale of
real estate owned.
The Partnership is continuously evaluating various alternative
strategies for liquidating its real estate assets. These
alternative strategies include the potential joint venture and/or
build out of certain of the Partnership's properties in order to
increase their marketability and maximize the return to the
limited partners. In the event the Partnership decides to
implement some of these strategies, it may require the
reinvestment of proceeds received from the payoff of existing
loans and/or the sale of other real estate assets. The decision
to invest additional cash in existing assets will only be made
if, based on management's best judgment at the time, there is a
clear indication that such investment will generate a
significantly greater return to the limited partners than any
other strategies available to the Partnership. During 1995, the
Partnership, through its 50 percent owned corporation, LCR
Development, Inc., ("LCR"), entered into a joint venture
agreement with Home Devco, Inc. ("Home Devco"), an affiliated
entity, entitled Silverwood Homes ("Silverwood"). For further
information see note 5 of Notes to Consolidated Financial
Statements.
Effective with the third quarter of 1991, the Partnership
suspended making any cash distributions to partners due to a
decline in liquidity and the uncertainty of the cash requirements
for existing and potential real estate owned. Pursuant to the
Partnership Agreement, 60 months after the closing of the
offering, cash proceeds from mortgage investments are no longer
available for reinvestment by the Partnership. Management
believes that current and projected liquidity is sufficient to
fund operating expenses and to meet the contractual obligations
and cash flow operating requirements of the Partnership, assuming
the successful extension of the $3,360,000 of notes payable due
in 1996. However, although no new mortgage investments shall be
made, the general partners expect that the cash proceeds from
future mortgage reductions and the sale of real estate owned will
be retained by the Partnership until such time as the Partnership
has sufficient cash to fulfill the operating requirements of the
real estate owned by the Partnership.
Results of Operations
Due to the downturn in the real estate industry in California and
its impact on the Partnership's borrowers, most of the
Partnership's loans to nonaffiliates have been converted into
nonperforming loans and/or real estate owned through
foreclosures. As a result, interest income on loans to
affiliates and nonaffiliates, including fees, decreased
substantially during 1995 and 1994. Interest income on loans to
affiliates, including fees was $41,000 for 1995 related to the
Silverwood joint venture. There was no interest income on loans
to affiliates for 1994 and 1993 due to the loans to affiliates
being placed on nonaccrual and subsequently classified as
insubstance foreclosures in 1993. Interest income on loans to
nonaffiliates, including fees, decreased to $78,000 in 1995 from
$186,000 in 1994 and $311,000 in 1993. Interest income on loans
to nonaffiliates decreased in 1995 and 1994 due to payoffs of
existing loans and increases in loans on nonaccrual. Interest
income on loans to nonaffiliates decreased in 1993 due to
increases in real estate owned balances and payoffs of existing
loans.
Loans on "nonaccrual" refers to loans upon which the Partnership
is no longer accruing interest. Management's policy is to cease
accruing interest on loans when collection of interest and/or
principal payments has become doubtful. Loans to affiliates and
nonaffiliates on nonaccrual status amounted to $3,412,000,
$2,319,000 and $2,086,000 as of December 31, 1995, 1994 and 1993,
respectively.
The real estate owned balance at December 31, 1995, 1994 and 1993
was $12,349,000, $13,820,000 and $21,394,000, respectively. On
April 28, 1992, the American Institute of Certified Public
Accountants issued Statement of Position 92-3 ("SOP 92-3"),
"Accounting for Foreclosed Assets." SOP 92-3 indicates that
foreclosed assets are presumed held for sale and not for the
production of income. Accordingly, foreclosed assets held for
sale are to be carried at the lower of cost or fair value minus
estimated costs to sell. The cost of such assets at the time of
foreclosure is the fair value of the asset foreclosed.
Immediately after foreclosure, a valuation allowance is
recognized for estimated costs to sell through a charge to
operations. All of the Partnership's real estate owned is
presumed held for sale.
Had all accrued interest been recorded throughout 1995, 1994 and
1993 on the affiliated and nonaffiliated nonaccrual loans,
interest income would have increased by $646,000, $543,000 and
$225,000, respectively, for those periods.
Real estate loans receivable, earning represents three loans
totaling $714,000 which are performing but classified as
impaired. The three loans have been restructured and are reduced
by deferred liabilities and allowances of $293,000. Real estate
loans receivable, nonearning represents eight past due or
renegotiated loans totaling $1,368,000. These loans are reduced
by $1,223,000 in deferred profit and allowances. Most of the
borrowers have little or no equity in the underlying collateral
for the loans and as a result, these loans represent an
investment in real estate. Therefore, these loans are carried on
the balance sheet at the fair value of the underlying real estate
collateral or have been fully reserved.
Real estate loans receivable from unconsolidated investees,
earning and nonearning represent property taken back by the
Partnership and transferred to unconsolidated corporations 50
percent owned by the Partnership.
The following sections entitled Nonaccrual, Nonperforming Loans
and Other Loans to Affiliates and Real Estate Owned provide a
detailed analysis of these assets.
Nonaccrual, Nonperforming Loans and Other Loans to Affiliates
Loans on nonaccrual status during the year ended December 31,
1995 are summarized below:
During 1992, funds were provided for a workout loan secured by a
third trust deed on a mini-storage facility in Citrus Heights,
California, with a committed amount of $792,000. The loan paid
off the Partnership's existing loan secured by a second trust
deed, allowed the recordation of new debt secured by a first and
second trust deed which reduced the senior debt by $677,000, paid
a portion of the loan secured by the original first trust deed
and provided additional funds for tenant improvements to enlarge
the facility. During 1994, the borrower asked for a partial
deferral of interest payable for one year due to economic
conditions. Management agreed and placed the deferred interest
on nonaccrual. In November 1995, the Partnership accepted a
paydown of $260,000 and restructured this loan into two
performing loans. The first loan is $608,000 secured by a second
trust deed and the second is $72,000 secured by a third trust
deed on the mini-storage facility. The Partnership has recorded
a reduction of $185,000 against the $608,000 principal balance
which represents previously nonaccrued interest.
During 1988, the Partnership recorded an equity participation
note with an original committed amount of $350,000 secured by a
second trust deed on a 160-unit apartment complex in Riverside,
California. The loan is on nonaccrual due to past due interest.
The complex is 82 percent leased, and due to low rental rates and
slow payments, the first trust deed holder filed a notice of
default on April 12, 1995 and is proceeding with judicial
foreclosure. The loan is recorded with a deferred profit
liability equal to the principal balance of the loan. As a
result, the foreclosure will have no impact on the Partnership's
financial statements. The principal balance and nonaccrued
interest at December 31, 1995 are $270,000, and $71,000,
respectively.
During 1994, the Partnership renegotiated an equity participation
note with an original committed amount of $374,000 secured by a
second deed of trust on a 32,431 square foot shopping center in
Corona, California. The loan provides for interest due to be
payable at loan maturity; however, due to the amount of the
senior debt and the decrease in land values, the Partnership has
placed the loan on nonaccrual. The principal balance and
nonaccrued interest at December 31, 1995 are $374,000 and $68,000
respectively.
During 1991, the Partnership sold a pad on an existing piece of
real estate owned in Corona, California and carried back
financing in the amount of $600,000. The Partnership's share of
the loan is 77 percent. Due to the loss of the major tenant, the
borrower has been unable to make monthly interest payments.
Management has worked out a forbearance agreement with the
borrower for net cash flow monthly payments. The remaining
interest due has been placed on nonaccrual. The principal
balance, accrued and nonaccrued interest at December 31, 1995 are
$460,000, $9,000 and $64,000, respectively.
During 1989, the Partnership funded a loan with an original
committed amount of $343,000 to provide land development
financing in Perris, California. The loan matured June 1, 1993
and the borrower was unable to make interest payments or pay off
the loan. The Partnership classified the loan as an insubstance
foreclosure at December 31, 1993. Given the depressed value of
the property and the amount of the delinquent bonds and taxes,
the Partnership has been negotiating with the borrower in an
attempt to discount the note to facilitate a sale or have the
borrower deed the property to the Partnership. Should the
negotiations not be completed and the property be lost to a tax
sale, management has established an allowance for losses
sufficient to cover the Partnership's equity in the property.
The principal balance and nonaccrued interest at December 31,
1995 are $292,000 and $118,000, respectively.
During 1994, the Partnership foreclosed on a note secured by a
first trust deed on a two-story office building and third trust
deed on a residence, all located in Sacramento, California. The
two-story office building was sold in January 1995 and the
Partnership retained the note secured by the third trust deed.
The borrower prepaid interest for one year and made no further
payments. The principal and nonaccrued interest balances at
December 31, 1995 are $81,000 and $1,000, respectively. The
Partnership has recorded a reduction of $81,000 against the
principal balance which represents previously nonaccrued
interest.
During 1987, the Partnership funded a loan with an original
committed amount of $1,518,000 to build 36 condominiums in
Norden, California. The loan was secured by a first trust deed
on the condominiums and a third trust deed on Donner Ski Ranch.
The loan was paid down from the sales of the condos with a small
balance remaining. The loan was extended several times with a
final maturity date of July 1, 1995. Due to non-payment, the
Partnership placed the loan on nonaccrual and filed a notice of
default. The principal and nonaccrued interest balances at
December 31, 1995 are $35,000 and $1,000, respectively. During
February 1996, the loan was paid in full.
During 1994, the Partnership funded a $1,250,000 unsecured note
and a 50 percent participation in a $2,115,000 unsecured note,
both representing workout loans and due from LCR, an affiliate.
These two loans reflect the majority of the cost basis of lots
contributed to Silverwood. LCR's only source of repayment of
these notes are proceeds from the sale of the fully developed
lots. Management has estimated the proceeds for repayment of
these two notes to be less than the original principal balance of
the loans. As a result, the loans have been placed on
nonaccrual. The principal balance and participating principal
balance and nonaccrued interest balances at December 31, 1995 are
$1,250,000 and $225,000 and $1,055,000 and $176,000,
respectively. For further discussion see note 5 of Notes to
Consolidated Financial Statements.
During 1994 and 1995 LCR has evaluated various alternative
strategies for liquidating its investment in the 179 lots in
Lancaster ranging from the sale of the lots in their present
condition to a full-scale buildout and sale of single-family
homes at the project. During late 1993 and through 1994, LCR had
numerous discussions with several independent real estate brokers
and home-building companies to assist it in determining its best
alternatives for the project. After these discussions, LCR
determined that its best course of action appeared to be the full-
scale buildout and sale of single-family homes since the market
for finished lots had fallen so significantly. In late 1993,
discussions with one home builder advanced to the point of a
draft joint venture agreement, whereby the home builder was to
build and sell homes at the project and obtain construction
financing. Under this draft joint venture agreement, LCR was to
complete improvements to the lots, pay all developer fees at an
estimated cost of $12,619 per lot and then contribute finished
lots to the joint venture in exchange for an initial capital
contribution credit of $32,000 per lot. The home builder was to
obtain construction financing and supervise the construction and
sale of single family homes at the project. The home builder was
to be reimbursed for all onsite costs of construction and
marketing of the project and receive an overhead fee equal to 3%
of all sales revenues. After these costs had been paid, LCR was
to receive distributions from the joint venture equal its $32,000
initial capital contribution. Subsequent to the return of LCR's
initial capital contribution, the joint venture partner was to
receive distributions equal to $5,000 of the first $7,000 in
profits. Thereafter, LCR and the joint venture partner would
split profits and distributions equally. At the time LCR was
conducting it negotiations with this home builder, it did not
have the financial resources to build homes at the project
without additional funds. Thus, the ability of the independent
home builder to obtain construction financing was the principal
reason for utilizing a third party to construct the homes. The
joint venture negotiations were terminated when the home builder
insisted on managerial control of the joint venture, which would
have been in violation of paragraph 10.9 of the Partnership
Agreement of the Partnership.
Subsequent to the termination of the joint venture negotiations
discussed above, LCR has obtained construction financing
commitments from Centennial Mortgage Income Fund II ("CMIF II"),
an affiliate, and the Partnership. LCR has entered into a joint
venture agreement entitled Silverwood with Home Devco to
construct and sell single-family homes at the project. This new
joint venture agreement includes substantially the same terms as
the draft joint venture discussed above except that: i) the
contribution value per lot has been adjusted from $32,000 to
$19,381 in order to reflect the fact that the joint venture
rather than LCR will now be responsible for paying the $12,619 in
estimated costs to complete improvements to the lots and pay
developer fees; ii) Home Devco will not obtain construction
financing for the project; and iii) Home Devco will not receive
any priority interest in profits after LCR has received the
equivalent of $19,381 in distributions per lot contributed to the
joint venture but rather will receive only a 50 percent interest
in profits and distributions from the joint venture. LCR's cost
basis of lots contributed to the joint venture was approximately
$19,810. Management believes that the market value of finished
lots in Lancaster has fallen since the original joint venture was
negotiated and that the new joint venture agreement with Home
Devco is on more favorable terms to LCR than could now be
obtained with an independent home builder. The new joint venture
began constructing a model home complex at the project in June
1995. Construction commenced in September 1995 on Phase 1 at the
project. At December 31, 1995, the partnership holds a 50
percent participation in three notes due from Silverwood
consisting of a land development loan, a model home loan and a
home construction loan with a combined disbursed balance of
$667,000. The Partnership's disbursed balance of the $3,265,700
development loan at December 31, 1995 is $352,000. The
Partnership's disbursed balance of the $490,000 model loan at
December 31, 1995 is $161,000. At December 31, 1995, the
Partnership's disbursed balance of the $1,034,000 Phase 1
construction loan is $154,000.
During 1994, the Partnership funded a 50 percent participation in
a $3,894,000 note due from BKS Development, Inc., ("BKS"). The
loan is secured by 283 acres in Bakersfield, California. The
property has declined in value and is subject to delinquent bonds
and taxes. As a result, the Partnership has placed the loan on
nonaccrual. The participating principal balance and nonaccrued
interest balances at December 31, 1995 are $1,947,000 and
$414,000, respectively.
Real Estate Owned
A description of the Partnership's principal real estate owned
and loan classified as insubstance foreclosure during the year
ended December 31, 1995 follows:
Shopping Center in Upland, California
During the third quarter of 1988, the Partnership foreclosed on a
loan secured by this project. The Partnership originally
committed $5,600,000 for the rehabilitation of a 33,327 square
foot retail center and construction of an automotive service
facility in Upland, California. Cost overruns and construction
delays prevented the borrower from selling the project and
thereby performing on the loan. A pad was sold in 1989 which
resulted in a net paydown of $323,000. The property generated
net operating income before debt service of $374,000 during 1995
and its carrying value was $5,106,000, less accumulated
depreciation of $517,000, at December 31, 1995. The property is
encumbered by a note of $2,460,000, secured by a first trust deed
on the property. The Partnership oversees the management and
leasing of the property which is currently 73 percent leased.
19 Acres in Sacramento, California
During the third quarter of 1991, the Partnership took a deed in
lieu of foreclosure on a second trust deed secured by 19 acres of
undeveloped land in Sacramento, California and renegotiated the
repayment terms of an existing note secured by an existing first
trust deed held by a third party. The property is located in the
North Natomas area and is zoned for light-industrial commercial
use. The principal and nonaccrued interest balances at
foreclosure totaled $1,595,000. The Partnership paid down the
first trust deed approximately $1,080,000 and executed a
$900,000, 12 percent fixed interest rate note payable to the
original first trust deed holder, which is secured by a new first
trust deed on the property. The note requires monthly interest-
only payments, and the balance is due September 1, 1996. The
Partnership continues to finalize the entitlement processing,
flood issues and provide for utility services for the property.
Should economic conditions rebound in California, and the demand
for development land in the area returns, the Partnership intends
to list the property for sale. At December 31, 1995, the
carrying value of this asset was $2,618,000.
Auto Retail Center in Corona, California
During 1988, the Partnership funded a loan with an original
committed amount of $3,313,000 for the purpose of constructing a
39,185 square foot auto/retail center in Corona, California. The
loan matured on September 1, 1989. The borrower defaulted under
a forbearance agreement, and the Partnership filed a notice of
default on December 14, 1990. The borrower filed for bankruptcy
on February 15, 1991. A pad was sold during April 1991 resulting
in the Partnership receiving a net paydown of $249,000. The
Partnership provided financing to the purchaser. The Partnership
took a grant deed on the property through the Bankruptcy Courts
in December 1991. The subject center is 68 percent leased and
the property generated net operating income of $91,000 during
1995. The center is being marketed for sale. The carrying value
at December 31, 1995 is $2,580,000.
23 Acres in Riverside, California
The Partnership took a grant deed in consideration of its note
secured by a third trust deed on the property during the second
quarter of 1992 and paid off the second deed of trust. The
carrying value at December 31, 1995 is $1,012,000. The property
is encumbered by a 13.75 percent fixed rate note payable secured
by a first trust deed of $650,000 payable to another financial
institution which matured August 1, 1992. During 1993 and 1994,
management has attempted to negotiate with the FDIC as successor
to the financial institution to payoff or restructure the terms
of the note secured by the first trust deed and was not
successful resulting in the FDIC commencing foreclosure
proceedings on the property. Throughout the two year period, the
land values continued to decline and lot improvement costs
significantly increased. During 1995, the original borrower has
been negotiating with the FDIC to perfect a nonjudicial
foreclosure on the property. Management has obtained
indemnification against the damages and/or losses asserted by the
FDIC related to the first trust deed, and in exchange has agreed
to allow the lender to complete this foreclosure in 1996.
Management has established an allowance for losses sufficient to
cover the loss which will be incurred as a result of the
foreclosure of this property.
6 Condominiums in Oxnard, California
During 1990, the Partnership funded a loan secured by a first
trust deed with an original committed amount of $3,000,000 for
the construction of 12 condominiums in Oxnard, California. The
Partnership has recorded an insubstance foreclosure on these 12
condominiums. The borrower signed over control to the second
trust deed holder in December 1992, the second trust deed holder,
an affiliate, abandoned the property and the Partnership now
controls the property. The condominiums are located adjacent to
the beach. The values of beach front property have been hard hit
in the local market due to the excess supply of this type of
property. The Partnership has declined to assume any of the
original builder's liabilities which would be required should the
Partnership accept a deed in lieu of foreclosure on the property.
However, the Partnership does receive 100 percent of all sales
proceeds net of selling costs. As of December 31, 1995, the
Partnership had sold six condominiums and is attempting to sell
the remaining units. One unit is in escrow at December 31, 1995
but there is no assurance that this escrow will actually close.
The carrying value at December 31, 1995 is $1,550,000. Gain on
sale of the condominiums recorded in 1995 was $98,000.
Office Building in Sacramento, California
During the third quarter of 1994, the Partnership foreclosed on
the loan secured by a first trust deed on an office building in
Sacramento. The Partnership's $700,000 loan secured by a second
trust deed on the office building was foreclosed out and charged
off. An additional 10 percent interest was purchased at a
discount by the Partnership from a participant in the fourth
quarter of 1994 increasing its interest in the building to 55
percent. Management hired a leasing agent to increase occupancy
in the building and subsequently accepted an offer on the
property. The property closed escrow in January, 1995 with a
total sales price of $1,150,000 and gain of $56,000.
Interest on Interest-Bearing Deposits
Interest earned on interest-bearing deposits was $102,000 in
1995, $63,000 in 1994 and $29,000 in 1993. The increase in
interest on interest-bearing deposits in 1995 and 1994 is
principally due to an increase in average cash balances.
Interest on interest-bearing deposits represents interest earned
on Partnership funds invested, for liquidity, in time certificate
and money market deposits.
Income from Operations of Real Estate Owned
Income from operations of real estate owned for 1995, 1994 and
1993 consists of operating revenues of $784,000, $771,000 and
$906,000, respectively, primarily from the Upland shopping
center, the auto retail center in Corona and Westminster office
building (which was sold in 1993). The income for 1995 and 1994
is from the Upland Shopping Center, the auto retail center in
Corona and excludes any income from the Westminster office
building.
Provision for Possible Losses
The provision for possible losses was $836,000 in 1995, $807,000
in 1994 and $5,432,000 in 1993. The 1995 provision relates
primarily to the auto retail center in Corona, California and the
Upland Foothill Shopping Center. The 1994 provision relates
primarily to the auto retail center in Corona, the loan secured
by a third trust deed on a mini-storage facility in Citrus
Heights and the loan secured by a pad in Corona. The 1993
provision relates primarily to the 19 acres in Sacramento, the
condominiums in Oxnard, the auto retail center in Corona, the
Upland Foothill Shopping Center, the 23 acres in Riverside, the
7.83 acres in Perris, the 179 lots in Lancaster and the 283 acres
in Bakersfield.
Given the current economic climate, it is possible that real
estate values will continue to decline, and it is possible that
there will be additional provisions in the future. However,
management believes that the allowance for possible losses at
December 31, 1995 is adequate to absorb the known risks in the
Partnership's loan and real estate owned portfolios, including
losses on pending sales and possible foreclosures.
Other Expenses
The Partnership has invested in corporations in which it has less
than a majority ownership and accounts for these investments
using the equity method. The Partnership's share of losses in
these unconsolidated investees was $1,803,000 for 1995 and
$408,000 for 1994. There was no comparable expense for 1993.
The 1995 share of losses consists primarily of provisions for
losses on real estate investments related to the 179 lots in
Lancaster owned by LCR and the 283 acres in Bakersfield owned by
BKS.
Operating expenses from operations of real estate owned were
$265,000 for 1995, $274,000 in 1994 and $437,000 in 1993. During
1995, 1994 and 1993, these expenses were associated with the
Westminster office building (sold in 1993), the auto retail
center in Corona, the auto retail center in San Bernardino (sold
in 1993), and the Upland Shopping Center. The decrease for 1994
is primarily due to the sale of the Westminster office building
and the auto retail center in San Bernardino.
Operating expenses from operations of real estate owned paid to
affiliates were $54,000 for 1995, $56,000 for 1994 and $41,000
for 1993. The expenses consist of property management fees paid
to affiliates of the general partners.
Expenses associated with non-operating real estate owned were
$254,000 in 1995, $263,000 in 1994 and $264,000 in 1993. The
expenses relate to the 19 acres in Sacramento, the 23 acres in
Riverside, the condominiums in Oxnard, the 179 lots in Lancaster
and the 283 acres in Bakersfield. The 179 lots in Lancaster and
the 283 acres in Bakersfield were transferred to nonconsolidated
corporations in 1994.
Depreciation and amortization expense for 1995, 1994 and 1993
consists of $115,000, $111,000 and $206,000, respectively, for
the Westminster office building and the Upland Shopping Center.
The decrease for 1994 is due to the sale of the Westminster
office building in late 1993.
Interest expense was $430,000 for 1995, $497,000 for 1994 and
$547,000 for 1993. The interest expense for 1995, 1994 and 1993
relates to the underlying debt on the Upland Shopping Center and
the 19 acres in Sacramento. The decrease for 1995 is due to the
increase of principal on nonaccrual on the underlying
intercompany debt secured by the 19 acres in Sacramento. The
decrease for 1994 is due to the decrease in extension fee expense
and LCR and BKS debt reduction.
General and administrative expenses, affiliates totaled $167,000
for 1995, $179,000 for 1994 and $175,000 for 1993. These
expenses are primarily salary allocation reimbursements paid to
affiliates for the management of the Partnership's assets.
General and administrative expenses, nonaffiliates totaled
$79,000 for 1995, $80,000 for 1994 and $138,000 for 1993. The
decreases for 1995 and 1994 are primarily due to decreases in
administrative expenses associated with real estate owned.
Mortgage investment servicing fees paid to affiliates decreased
to $48,000 in 1995 from $52,000 in 1994 and $73,000 in 1993.
These fees consist of amounts paid to Centennial Corporation and
CMIF, Inc., an affiliate of the general partners, for servicing
the Partnership's loan portfolio. The decreases for 1995 and
1994 are primarily due to the decreases in size of the
Partnership's loan portfolio.
Newly Issued Accounting Pronouncement
In March 1995, the FASB 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" ("SFAS 121").
SFAS 121 provides guidance for recognition and measurement of
impairment of long-lived assets, certain identifiable intangibles
and goodwill related both to assets to be held and used by an
entity and assets to be disposed of. SFAS 121 is effective for
financial statements for fiscal years beginning after December
15, 1995. Although the Partnership has not yet adopted SFAS 121,
management does not expect such adoption will have a material
impact on the Partnership's financial position or results of
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedules
attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
REPORTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of General Partners
The Partnership is managed by its general partners. The
individual general partners' principal occupations and
affiliations during the last five years are described in the
following table. The general partners devote to the affairs of
the Partnership such portion of their time as they consider
necessary for the effective supervision of its affairs.
Name, Age and Position
Principal Occupation and
Affiliation during Last Five Years
- - -----------------------------------------------------------------
John B. Joseph
Age 57
General Partner
John B. Joseph is currently Vice Chairman of the Board of
Directors and Vice President of Centennial Corporation. He is
also currently Chairman of the Board and Chief Executive Officer
of West Coast Bancorp ("WCB"), a publicly-held bank holding
company operating in California. He has been Chairman of the
Board of Directors of WCB since its inception in 1981 and CEO
since April 1991. Mr. Joseph also serves, or has served, in the
following capacities during the past five years: President of WCB
from April 1987 to April 1991; Vice Chairman of the Board of
Directors of The Centennial Group, Inc. ("CGI"), a publicly-held
real estate development corporation since February 1987; Senior
Executive Vice President of CGI from July 1987 to July 1993;
general partner of various public and private limited
partnerships engaged in real estate development and lending
activities. Mr. Joseph presently holds and has held, over the
past five years, various positions in the subsidiaries of WCB and
CGI.
Name, Age and Position
Principal Occupation and
Affiliation during Last Five Years
- - -----------------------------------------------------------------
Ronald R. White
Age 49
General Partner
Ronald R. White is currently President and CEO of Centennial
Corporation. He is also currently Executive Vice President and
Vice Chairman of the Board of Directors of WCB. Mr. White has
served in these capacities since April 1987. Mr. White also
serves, or has served, in the following capacities during the
past five years: President of WCB from 1981 to April 1987;
Chairman of the Board of Directors, President and Chief Executive
Officer of CGI since February 1987; general partner of various
public and private limited partnerships engaged in real estate
development and lending activities. Mr. White presently holds
and has held, over the past five years, various positions in the
subsidiaries of WCB and CGI.
Mr. Joseph has 27 years of experience in asset management in both
securities and real estate. Mr. Joseph has worked in all areas
of real estate. In the past, Mr. Joseph has been engaged in the
syndication and management of over $100 million worth of income
property, including industrial complexes, shopping centers,
business centers, office buildings, commercial properties and
residential units.
Mr. White's career spans the financial and management fields in
both securities and real estate. Mr. White has 25 years of
experience in asset management. In the past, Mr. White has been
engaged in the syndication and management of over $100 million
worth of income property including industrial complexes, shopping
centers, business centers, office buildings, commercial
properties, and residential units.
Centennial Corporation ("CC"), a privately-held corporation,
whose stock is owned by affiliates of Ronald R. White and John B.
Joseph, was voted in as new general partner in 1993. CC was
incorporated in 1983 to engage in the real estate lending
business and to provide consulting services.
Identification of Executive Officers
The Partnership does not have officers as such. The affairs of
the Partnership are managed by the general partners noted above.
Involvement in Certain Legal Proceedings
On December 13, 1991, The Centennial Group Inc., ("CGI") filed a
voluntary petition for relief under Chapter XI of the federal
bankruptcy laws in the United States Bankruptcy Court for the
Central District of California. Messrs. Joseph and White were
directors, executive officers and principal stockholders of CGI.
On March 4, 1994, CGI's plan of reorganization was confirmed and
the company emerged from bankruptcy proceedings.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
The following table summarizes the types and recipients of
compensation paid and to be paid to the general partners and
affiliates by the Partnership.
Amount Earned/
Type of Reimbursable for the
Compensation & Year Ended
Name of Entity Description of Payment December 31, 1995
- - -----------------------------------------------------------------
Operating Stage:
Application and An amount up to a maximum $ ---
commitment fees of 3 percent of the gross
- - - the general proceeds of the offering
partner or on any single mortgage
affiliates investment, and an aggregate
maximum of 7 percent of the
gross proceeds of the offering,
payable to the general partners
or affiliates. The application
and commitment fees are payable
solely from borrowers and
prospective borrowers and not
directly from the proceeds of
the offering.
General partners' The general partners or $ 221,000 (1)
reimbursable affiliates shall be entitled
expenses to reimbursement for certain
- general expenses, subject to the
partner or conditions of the Partnership
affiliates Agreement.
General partners' A 5 percent interest in $ ---
interest in cash cash flow available for
distributions distribution for any year
- - - general until all limited
partners or partnership unit holders
affiliates have received an amount
equal to a 12 percent
non-cumulative annual return
on their adjusted invested
capital, and 10 percent of
the balance of any cash flow
available for distribution
for such year.
Mortgage 1/4 of 1 percent of the $ 48,000 (2)
investment maximum amount funded or to
servicing fees be funded by the Partnership
on mortgage investments
serviced by CC and CMIF, Inc.,
an indirect subsidiary of CGI.
Repayment Stage:
General partners' One percent of mortgage $ ---
share of reductions until all limited
mortgage partners have received an
reductions amount equal to their adjusted
- - - general invested capital and cumulative
partners or distributions (including cash
affiliates flow available for distribution)
equal to a 12 percent annual
return with respect to their
adjusted invested capital, and
15 percent of the balance of
any mortgage reductions.
(1) Such reimbursable expenses include salaries and related
salary expenses for services which could be performed directly
for the Partnership by independent parties such as legal,
clerical, accounting, financial reporting, governmental
reporting, transfer agent, data processing and duplication
services. Such reimbursement of expenses will be made regardless
of whether any distributions are made to the limited partners.
(2) Mortgage Investment Servicing Fees are payable on the
maximum amount to be funded on a Mortgage Investment from the
date the Partnership first signs a letter of commitment for such
Mortgage Investment. Fees shown in the table represent amounts
earned by CC for servicing these mortgage investments and/or
related real estate owned.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
No persons are known by the Partnership to own beneficially more
than 5 percent of the limited partnership units at December 31,
1995.
(b) Security Ownership of Management
The percent of units, owned by Management, outstanding is less
than 1 percent.
Name and address Nature and Number of Percent of
of Beneficial Owner Units Outstanding Units Outstanding
- - -----------------------------------------------------------------
Ronald R. White
1540 S. Lewis St.
Anaheim, CA 92805 Limited partnership units: 1 ---
(c) Change in Control
The Partnership knows of no contractual arrangements which may at
a subsequent date result in a change of control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This disclosure is made in note 5 of the Notes to the
Consolidated Financial Statements which is incorporated in this
filing.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) and (a)(2) - See Index to Consolidated Financial
Statements and Schedules attached hereto.
(a)(3) - Exhibits.
None.
(b)(4) - Reports on Form 8-K.
None.
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A California Limited Partnership
By:/s/John B. Joseph
_________________________________
John B. Joseph
General Partner March 29, 1996
By:/s/Ronald R. White
_________________________________
Ronald R. White
General Partner March 29, 1996
By: CENTENNIAL CORPORATION
General Partner
/s/John B. Joseph
_________________________________
John B. Joseph
Executive Vice President March 29, 1996
/s/Ronald R. White
_________________________________
Ronald R. White
President March 29, 1996
/s/Joel H. Miner
_________________________________
Joel H. Miner
Chief Financial Officer March 29, 1996
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
ANNUAL REPORT
Form 10-K
Consolidated Financial Statements
Items 8, 14(a)(1) and 14(a)(2)
December 31, 1995, 1994 and 1993
(With Independent Auditors' Report Thereon)
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Items 8, 14(a)(1) and 14(a)(2)
Index to Consolidated Financial Statements
Consolidated Financial Statements Page
Independent Auditors' Report ............................. F-2
Consolidated Balance Sheets --
December 31, 1995 and 1994............................... F-3
Consolidated Statements of Operations --
Years ended December 31, 1995, 1994 and 1993........... F-6
Consolidated Statements of Partners' Equity --
Years ended December 31, 1995, 1994 and 1993........... F-8
Consolidated Statements of Cash Flows --
Years ended December 31, 1995, 1994 and 1993........... F-9
Notes to Consolidated Financial Statements ............... F-15
Schedules
Schedule III - Consolidated Real Estate Owned and
Accumulated Depreciation and Amortization. ............. F-40
Schedule IV - Mortgage Loans on Real Estate............... F-45
All other schedules are omitted as the required information is
inapplicable, or the information is presented in the consolidated
financial statements or notes thereto.
F-1
INDEPENDENT AUDITORS' REPORT
To the General Partners
Centennial Mortgage Income Fund:
We have audited the consolidated financial statements of
Centennial Mortgage Income Fund, a limited partnership, and
subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we also
have audited the financial statement schedules as listed in the
accompanying index. These consolidated financial statements and
financial statement schedules are the responsibility of the
Partnership's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial
statement schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Centennial Mortgage Income Fund and subsidiaries as
of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with
generally accepted accounting principles. Also, in our opinion,
the related financial statement schedules, when considered in
relation to the basic consolidated financial statements taken as
a whole, present fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
Orange County, California
March 22, 1996
F-2
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31, 1995 and 1994
<S> <C> <C>
Assets 1995 1994
- - -----------------------------------------------------------------
Cash and cash
equivalents (note 5) $ 2,947,000 $ 2,267,000
Short-term investments 103,000 ---
Real estate loans
receivable, earning 714,000 282,000
Real estate loans
receivable, nonearning 1,368,000 2,319,000
Real estate loans receivable
from unconsolidated investees,
earning (note 5) 667,000 194,000
Real estate loans receivable
from unconsolidated investees,
nonearning (note 5) 2,044,000 3,846,000
- - -----------------------------------------------------------------
4,793,000 6,641,000
Less allowance for possible
loan losses (note 3) 957,000 1,157,000
- - -----------------------------------------------------------------
Net real estate loans receivable 3,836,000 5,484,000
Real estate owned, held
for sale, less accumulated
depreciation of $517,000 in
1995 and $412,000 in 1994
(notes 6 and 7) 10,799,000 11,435,000
Real estate owned, insubstance
foreclosed (note 6) 1,550,000 2,385,000
- - -----------------------------------------------------------------
12,349,000 13,820,000
See accompanying notes to consolidated financial statements
F-3
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Balance Sheets
(Continued)
<CAPTION>
December 31, 1995 and 1994
<S> <C> <C>
Assets 1995 1994
- - -----------------------------------------------------------------
Less allowance for possible
losses on real estate
owned (note 4) 4,523,000 4,013,000
- - -----------------------------------------------------------------
Net real estate owned 7,826,000 9,807,000
Accrued interest receivable 18,000 42,000
Other assets 112,000 88,000
- - -----------------------------------------------------------------
$ 14,842,000 $ 17,688,000
=================================================================
See accompanying notes to consolidated financial statements
F-4
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Balance Sheets
(Continued)
<CAPTION>
December 31, 1995 and 1994
<S> <C> <C>
Liabilities and Partners' Equity 1995 1994
- - -----------------------------------------------------------------
Notes payable (note 7) $ 4,010,000 $ 4,019,000
Notes payable to affiliates (note 5) 90,000 144,000
Accounts payable and
accrued liabilities 51,000 55,000
Interest and property taxes
payable on real estate owned 11,000 8,000
Interest payable to affiliates on
notes secured by real estate 171,000 172,000
Payable to affiliates (note 5) 4,000 9,000
Deferred profit on equity participation 559,000 559,000
- - -----------------------------------------------------------------
Total liabilities 4,896,000 4,966,000
Partners' equity (deficit)
-- 38,729 limited partnership
units outstanding in 1995 and 1994
General partners (525,000) (525,000)
Limited partners 10,471,000 13,247,000
- - -----------------------------------------------------------------
Total partners' equity 9,946,000 12,722,000
Contingencies (note 8)
- - -----------------------------------------------------------------
$ 14,842,000 $ 17,688,000
=================================================================
</TABLE>
See accompanying notes to consolidated financial statements
F-5
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Revenue:
Interest on loans
to affiliates,
including fees
(note 5) $ 41,000 $ --- $ ---
Interest on loans to
nonaffiliates,
including fees 78,000 186,000 311,000
Interest on
interest-bearing
deposits (note 5) 102,000 63,000 29,000
Gain on sale of property 154,000 76,000 ---
Income from operations
of real estate owned 784,000 771,000 906,000
- - -----------------------------------------------------------------
Total revenue 1,159,000 1,096,000 1,246,000
- - -----------------------------------------------------------------
Expenses:
Provision for
possible losses
(notes 3 and 4) 836,000 807,000 5,432,000
Share of losses
in unconsolidated
investees (note 5) 1,803,000 408,000 ---
Operating expenses
from operations
of real estate owned 265,000 274,000 437,000
Operating expenses
from operations of
real estate owned
paid to affiliates
(note 5) 54,000 56,000 41,000
Expenses associated
with non-operating
real estate owned 254,000 263,000 264,000
See accompanying notes to consolidated financial statements
F-6
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Operations
(Continued)
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Depreciation and
amortization expense 115,000 111,000 206,000
Interest expense 430,000 497,000 547,000
Loss on sale
of property --- --- 37,000
General and
administrative,
affiliates (note 5) 167,000 179,000 175,000
General and
administrative,
nonaffiliates 79,000 80,000 138,000
Mortgage investment
servicing fees paid
to affiliates (note 5) 48,000 52,000 73,000
- - -----------------------------------------------------------------
Total expenses 4,051,000 2,727,000 7,350,000
- - -----------------------------------------------------------------
Net loss before
minority interest $(2,892,000) $(1,631,000) $(6,104,000)
Minority
interest (note 5) 116,000 345,000 136,000
- - -----------------------------------------------------------------
Net loss $(2,776,000) $(1,286,000) $(5,968,000)
=================================================================
Net loss per limited
partnership unit $ (71.68) $ (33.21) $ (154.10)
=================================================================
</TABLE>
See accompanying notes to consolidated financial statements
F-7
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Partners' Equity
<TABLE>
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
Total
General Limited Partners'
Partners Partners Equity
- - -----------------------------------------------------------------
Balance at
December 31, 1992 $ (525,000) $ 20,501,000 $ 19,976,000
Net loss --- (5,968,000) (5,968,000)
- - -----------------------------------------------------------------
Balance at
December 31, 1993 (525,000) 14,533,000 14,008,000
Net loss --- (1,286,000) (1,286,000)
- - -----------------------------------------------------------------
Balance at
December 31, 1994 (525,000) 13,247,000 12,722,000
Net loss --- (2,776,000) (2,776,000)
- - -----------------------------------------------------------------
Balance at
December 31, 1995 $ (525,000) $ 10,471,000 $ 9,946,000
=================================================================
</TABLE>
See accompanying notes to consolidated financial statements
F-8
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Cash flow from
operating activities:
Net loss $ (2,776,000) $ (1,286,000) $ (5,968,000)
Adjustments to
reconcile net
loss to net cash
used in operating
activities:
Amortization
of unearned
loan fees --- (1,000) (5,000)
Depreciation
and amortization 115,000 111,000 206,000
Provision for
possible losses 836,000 807,000 5,432,000
Interest accrued to
principal on loans
to affiliates (47,000) --- ---
Minority interest (116,000) (345,000) (136,000)
(Gain) loss on
sale of real
estate owned (154,000) (76,000) 37,000
Equity in losses
of unconsolidated
investees 1,803,000 408,000 ---
Changes in assets
and liabilities:
(Increase) decrease
in accrued interest
receivable 24,000 (15,000) 36,000
(Increase) decrease
in other assets (34,000) 37,000 105,000
Increase (decrease) in
accounts payable and
accrued liabilities (4,000) (34,000) 28,000
See accompanying notes to consolidated financial statements
F-9
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
(Continued)
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Increase in interest
and property taxes
payable on real
estate owned 3,000 19,000 109,000
Increase (decrease) in
payable to affiliates (5,000) 4,000 (2,000)
Decrease in
interest payable
to affiliates on
notes secured by
real estate (1,000) --- ---
Deferred profit
recognized --- (75,000) (15,000)
- - -----------------------------------------------------------------
Net cash used in
operating
activities (356,000) (446,000) (173,000)
- - -----------------------------------------------------------------
Cash flows from
investing activities:
Principal collected
on loans 288,000 515,000 281,000
Advances on loans
made to customers --- (161,000) (76,000)
Advances on loans
made to affiliates (429,000) (1,442,000) ---
Proceeds from
sale of real
estate owned 1,285,000 681,000 2,488,000
Capital
expenditures for
real estate owned (58,000) (187,000) (160,000)
Increase in short-term
investments (103,000) --- ---
- - -----------------------------------------------------------------
See accompanying notes to consolidated financial statements
F-10
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
(Continued)
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Net cash provided
by (used in)
investing
activities 983,000 (594,000) 2,533,000
- - -----------------------------------------------------------------
Cash flows from
financing activities:
Proceeds from
notes payable
to affiliates 62,000 36,000 21,000
Repayment of
notes payable
to nonaffiliates (9,000) (8,000) (11,000)
- - -----------------------------------------------------------------
Net cash
provided by
financing
activities $ 53,000 $ 28,000 $ 10,000
- - -----------------------------------------------------------------
Net increase
(decrease) in
cash and cash
equivalents 680,000 (1,012,000) 2,370,000
Cash and cash
equivalents at
beginning of year 2,267,000 3,279,000 909,000
- - -----------------------------------------------------------------
Cash and cash
equivalents
at end of year $ 2,947,000 $ 2,267,000 $ 3,279,000
=================================================================
See accompanying notes to consolidated financial statements
F-11
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
(Continued)
<CAPTION>
Years ended December 31, 1995, 1994 and 1993
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Supplemental
schedule of
cash flow
information:
Cash paid during
the year for:
Interest $ 401,000 $ 393,000 $ 390,000
- - -----------------------------------------------------------------
Supplemental
schedule of
noncash investing
and financing
activities:
Increase in real
real estate
owned through
foreclosure of
real estate
loans receivable $ --- $ 540,000 $ 5,403,000
New notes
receivable from
sale of real
estate owned --- --- 119,000
Increase in real
estate owned through
assumption of
note payable --- --- 1,227,000
Increase in real
estate owned and
note payable to
affiliates
resulting from
the consolidation
of a new subsidiary --- --- 352,000
See accompanying notes to consolidated financial statements
F-12
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
(Continued)
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Increase in
interest and
property taxes
payable on real
estate owned
through insubstance
foreclosure of
real estate
loans receivable --- --- 327,000
Decrease in real
estate owned and
related allowance
for losses resulting
from partial
writedown or chargeoff
of property 293,000 1,029,000 1,627,000
Increase in notes
payable resulting
from the consolidation
of a new subsidiary --- --- 123,000
Decrease in real
estate owned through
transfer of
ownership (note 5) --- 6,443,000 ---
Decrease in
allowance for losses
resulting from
partial chargeoff of
loans receivable
and real estate
owned upon
transfer of
ownership (note 5) --- 2,009,000 ---
See accompanying notes to consolidated financial statements
F-13
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
(Continued)
Years ended December 31, 1995, 1994 and 1993
<CAPTION>
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Decrease in notes
payable through
transfer of
ownership (note 5) --- 1,104,000 ---
Decrease in
interest and
property taxes
payable on real
estate owned
through transfer
of ownership (note 5) --- 326,000 ---
Increase in real
estate loans from
affiliates through
transfer of
ownership (note 5) --- 3,004,000 ---
Decrease in
real estate
owned and notes
payable to
affiliates due
to retroactive
reduction in
note balance --- 120,000 ---
Decrease in
accrued interest
receivable through
renegotiation of loan --- 20,000 ---
Decrease in real
estate loans and
related allowance for
losses resulting from
partial writedown
or chargeoff 233,000 15,000 1,210,000
</TABLE>
See accompanying notes to consolidated financial statements
F-14
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Notes to Consolidated Financial Statements
December 31, 1995, 1994, 1993
(1) Summary of Significant Accounting Policies
Business
Centennial Mortgage Income Fund (the "Partnership") has
historically invested in commercial, industrial and residential
income-producing real property through mortgage investments
consisting of participating first mortgage loans, other equity
participation loans, construction loans, and wrap-around and
other junior loans. The Partnership's underwriting policy for
granting credit was to fund loans secured by first and second
deeds of trust on real property. The Partnership's area of
concentration is in California. In the normal course of
business, the Partnership participated with other lenders in
extending credit to single borrowers; the Partnership did this in
an effort to decrease credit concentrations and provide a greater
diversification of credit risk.
As of December 31, 1995, a majority of the loans secured by
operating properties have been repaid to the Partnership.
However, during recent years, real estate market values for
undeveloped land in California have declined severely. As the
loans secured by undeveloped land and certain operating
properties became delinquent, management of the Partnership
elected to foreclose on certain of these loans, thereby
increasing real estate owned balances. As a result, the
Partnership has become a direct investor in this real estate and
intends to manage operating properties and develop raw land until
such time as the Partnership is able to sell this real estate
owned. The real estate owned balance at December 31, 1993 was
$21,394,000 decreasing to $13,820,000 at year end 1994 and
decreasing to $12,349,000 at year end 1995. The decrease from
1993 to 1994 was principally the result of $6,443,000 of real
estate being transferred to unconsolidated investees and the
chargeoff of or writedown of $1,029,000 of real estate.
F-15
Basis of Presentation
The Partnership formed several subsidiaries to own and operate
certain of its real estate assets. The corporations formed were
BNN Development, Inc., ("BNN"), Upland Foothill Retail, Inc.,
("Upland"), CPI Development, Inc., ("CPI"), DKPM Development,
Inc., ("DKPM"), Grand Plaza Auto Retail, Inc., ("Grand Plaza"),
LCR Development, Inc., ("LCR"), BKS Development, Inc., ("BKS")
and KJC Development, Inc., ("KJC").
The Partnership owns a 100 percent interest in Upland, CPI and
DKPM, 86.25 percent interest in BNN, 86.7 percent interest in
Grand Plaza, 33.33 percent interest in KJC and 50 percent
interest in LCR and BKS. Several of the Partnership's assets
have been transferred to these new corporations, at the
Partnership's cost basis, in transactions which included no cash
down with the Partnership carrying a substantial portion of the
financing. These corporations have been consolidated in the
accompanying consolidated financial statements, and all
significant intercompany balances and transactions have been
eliminated in consolidation.
As the Partnership's ownership interest in LCR and BKS is more
than 20 percent but does not exceed 50 percent, the Partnership
accounts for its ownership interest using the equity method.
Under the equity method of accounting, these loans are a
component of the Partnership's investment in LCR and BKS, and
therefore the Partnership has recorded losses by LCR and BKS as a
reduction of the carrying value of these loans receivable (see
note 5).
Organization
The Partnership was organized on December 13, 1983 in accordance
with the provisions of the California Limited Partnership Act.
The Partnership commenced operations in 1984. The general
partners are John B. Joseph, Ronald R. White and Centennial
Corporation ("CC"), a privately-held California corporation whose
stock is owned by affiliates of Messrs. Joseph and White. During
1992, West Coast Bancorp (WCB) resigned as general partner of the
Partnership.
Cash available for distribution, as defined in the Partnership
Agreement, is to be allocated 95 percent to the limited partners
and 5 percent to the general partners until each limited partner
has received an amount equal to a 12 percent non-cumulative
annual return on their adjusted invested capital (as defined in
F-16
the Partnership Agreement). Thereafter, cash available for
distribution is to be allocated 90 percent to the limited
partners and 10 percent to the general partners. All
distributions of mortgage reductions (as defined in the
Partnership Agreement) shall be distributed 99 percent to the
limited partners and 1 percent to the general partners, until
each limited partner has received a 12 percent cumulative annual
return on his adjusted invested capital, after which such amounts
are to be distributed 85 percent to the limited partners and 15
percent to the general partners. These amounts may be adjusted
subject to the provisions of the Partnership Agreement. In order
to properly reflect the economic effect of the allocations
discussed above, the Partnership has allocated financial
statement net earnings (losses) 95 percent to the limited
partners and 5 percent to the general partners through 1992.
Based upon the various terms of the Partnership Agreement, it is
improbable that the general partners would be required to make
any capital contributions to the Partnership in excess of their
negative capital account as of December 31, 1992. Accordingly,
the Partnership has allocated 100 percent of the 1995, 1994 and
1993 losses to the limited partners.
Real Estate Loans and Allowance for Possible Loan Losses
Loans are reported at the principal amount outstanding, net of
unearned income and the allowance for possible loan losses.
Interest accrual is discontinued when, in the opinion of
management, its collection is deemed doubtful.
The allowance for possible loan losses is established through a
provision for possible losses charged to expense. Loans are
charged against the allowance for possible loan losses when
management believes that the collectibility of principal is
unlikely.
Management believes that the allowance for possible loan losses
is adequate. While management uses available information to
recognize losses on loans, future additions to the allowance may
be necessary based on changes in economic conditions.
Impaired Loans
Effective January 1, 1995, the Partnership adopted Statement of
Financial Accounting Standards No. 114, "Accounting by Creditors
for Impairment of a Loan" ("SFAS 114"), as amended by Statement
of Financial Accounting Standards No. 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and
F-17
Disclosures" ("SFAS 118"). Under SFAS 114, a loan is impaired
when it is "probable" that a creditor will be unable to collect
all amounts due (i.e. both principal and interest) according to
the original contractual terms of the loan agreement. The
measurement of impairment may be based on (i) the present value
of the expected future cash flows of the impaired loan discounted
at the loan's original effective interest rate, (ii) the
observable market price of the impaired loan, or (iii) the fair
value of the collateral of a collateral-dependent loan. SFAS 114
does not apply to large groups of smaller balance homogeneous
loans that are collectively evaluated for impairment. Although
the adoption of SFAS 114, as amended by SFAS 118, had no material
impact on the Partnership's consolidated financial statements,
pursuant to the provisions of SFAS 118, the Partnership
reclassified a loan totaling $291,000 which was formerly
classified as insubstance foreclosure net of related notes
payable, accrued interest and property taxes at December 31, 1994
and 1993, to impaired loans receivable at December 31, 1995.
This reclassification was also reflected in the December 31, 1994
consolidated balance sheet. The Partnership's previously
existing policy of measuring loan impairment was consistent with
methods prescribed in these standards.
The Partnership considers a loan to be impaired when based upon
current information and events, it believes it is probable that
the Partnership will be unable to collect all amounts due
according to the contractual terms of the loan agreement. In
determining impairment, the Partnership considers large non-
homogeneous loans including nonaccrual loans, troubled debt
restructuring and performing loans which exhibit, among other
characteristics, high loan-to-value ratios, low debt-coverage
ratios, or other indications that the borrowers are experiencing
increased levels of financial difficulty. The Partnership bases
the measurement of collateral-dependent impaired loans on the
fair value of the loan's collateral. The amount by which the
recorded investment of the loan exceeds the measure of the
impaired loan's value is recognized by recording a valuation
allowance.
Real Estate Owned
The Partnership accounts for foreclosed assets using the American
Institute of Certified Public Accountants Statement of Position
92-3 ("SOP 92-3"), "Accounting for Foreclosed Assets." SOP 92-3
indicates that foreclosed assets are presumed held for sale and
not for the production of income. Accordingly, foreclosed assets
F-18
held for sale are to be carried at the lower of cost or fair
value minus estimated costs to sell. The cost of such assets at
the time of foreclosure is the fair value of the asset
foreclosed. Immediately after foreclosure, a valuation allowance
is recognized for estimated costs to sell through a charge to
income. All of the Partnership's real estate owned, including
insubstance foreclosures, is presumed held for sale.
The Partnership considers collateral for a loan "insubstance"
foreclosed only when the borrower actually surrenders the
collateral to the creditor and the creditor receives physical
possession of the borrower's assets.
Loan Fees
Origination fees and direct costs associated with lending are
netted and amortized to interest income as an adjustment to yield
over the respective lives of the loans using the interest method.
Deferred Profit on Equity Participation
Deferred profit on equity participation represents the
Partnership's portion of equity from real estate
loans/investments that was earned, but has not yet been paid by
the borrower. Generally, revenue is recognized when collection
of the deferred profit becomes assured. During 1994 and 1993,
$75,000 and $15,000, respectively, was recognized as revenue to
the extent cash was received. No deferred profit was recognized
during 1995.
Income Taxes
Under provisions of the Internal Revenue Code and the California
Revenue and Taxation Code, partnerships are generally not subject
to income taxes. For tax purposes, any income or losses realized
are those of the individual partners, not the Partnership. The
Partnership reports certain transactions differently for tax and
financial statement purposes. The following is a recap of
current and cumulative temporary differences between earnings
using generally accepted accounting principles (GAAP) and taxable
earnings:
F-19
<TABLE>
<S> <C> <C> <C>
Current Temporary Differences Partnership Corporations
Total
- - --------------------------------------------------------------------------------
- - ----------
GAAP loss for the year
ended December 31, 1995 $(1,990,000) $ (786,000)
$(2,776,000)
Provision for losses (313,000) 635,000
322,000
Chargeoffs deductible
for tax purposes (391,000) ---
(391,000)
Accrued expenses deducted
using the cash method --- (13,000)
(13,000)
Rental income capitalized for GAAP
but taxed in prior periods 68,000 ---
68,000
Carrying costs expensed
for books and capitalized
for tax purposes --- 249,000
249,000
Depreciation --- (38,000)
(38,000)
Minority interest share of
losses not taxable --- (116,000)
(116,000)
Share of losses in unconsolidated
investees not deductible 1,803,000 ---
1,803,000
Interest income accrued
for tax, not for GAAP 162,000 ---
162,000
- - --------------------------------------------------------------------------------
- - ----------
Taxable loss for the year
ended December 31, 1995 $ (661,000) $ (69,000) $
(730,000)
================================================================================
==========
Taxable earnings allocable to
General Partners $ ---
================================================================================
==========
Taxable loss per
limited partner unit $ (17.07)
================================================================================
==========
</TABLE>
F-20
<TABLE>
December 31, 1995
- - -----------------------------------------------------------------
<S> <C> <C>
Cumulative Temporary Differences Partnership Corporations
- - -----------------------------------------------------------------
Provision for losses $ 2,946,000 $ 2,534,000
Chargeoffs on foreclosures not
deductible for tax purposes 3,535,000 ---
Deferred profit previously taxable 559,000 ---
Accrued expenses not deducted for tax
purposes using the cash basis --- 1,354,000
Carrying costs expensed for books
and capitalized for tax purposes --- 836,000
Depreciation --- (122,000)
Net operating loss carryforwards --- 223,000
Interest income accrued for
tax, not for GAAP 338,000 ---
Minority interest
in losses not taxable --- (629,000)
Share of losses in
unconsolidated investees
not deductible 2,211,000 ---
- - -----------------------------------------------------------------
Total cumulative
temporary differences $ 9,589,000 $ 4,196,000
=================================================================
</TABLE>
The cumulative temporary partnership differences shown above,
which total approximately $248.00 per limited partnership unit,
should reverse when the Partnership liquidates its investments.
There can be no assurance that these will be realized as future
operations of the Partnership could result in greater or lesser
amounts of allocable tax losses to the limited partners. In
addition, the deductibility of taxable losses is dependent upon
each limited partners' individual tax position. The reversal of
these differences will result in future taxable income or loss
per limited partnership unit which is less than the Partnership
will report for financial statement purposes. Management
believes that the share of losses in unconsolidated investees is
a temporary difference since the Partnership holds approximately
$4,900,000 in notes receivable from these investees, a portion of
which could be charged to bad debt expense should these investees
liquidate their single property holdings at current carrying
values.
F-21
In addition, as of December 31, 1995, the Partnership held
approximately $6,100,000 in loans receivable from the
consolidated corporations. These loans have been eliminated in
the Partnership's consolidated financial statements. It is
anticipated that the temporary differences should reverse on the
corporations' returns when the corporations liquidate their
investments. If these investments are liquidated at current
carrying values, the Partnership should be able to deduct bad
debt expense on its tax returns in the approximate amount of the
temporary differences shown above which is approximately $108.00
per limited partnership unit.
The subsidiary corporations are subject to taxation and account
for income taxes under Statement of Financial Accounting
Standards No. 109 "Accounting for Income Taxes" ("SFAS 109").
SFAS 109 requires an asset and liability approach to establishing
deferred tax assets and liabilities for the temporary differences
between the financial reporting basis and the tax basis of the
corporations' assets and liabilities. No benefit for cumulative
differences related to the corporations has been recorded in the
consolidated financial statements due to the improbability of
realization. Future consolidated financial statements could
reflect income tax expense in the event that these newly formed
corporations generate profits in excess of operating loss
carryforwards available. Some of the subsidiary corporations are
cash basis taxpayers.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents
includes cash and interest-bearing deposits with original
maturities of three months or less.
Short-term Investments
Short-term investments include certificates of deposits with
original maturities greater than 90 days but less than one year.
Net Loss Per Limited Partnership Unit
Net loss per limited partnership unit for financial statement
purposes was based on the weighted average number of limited
partnership units outstanding of 38,729 in 1995, 1994 and 1993.
F-22
Depreciation and Amortization
Depreciation and amortization of real estate assets is charged to
expense on a straight-line basis over the estimated useful lives
of the assets; 31.5 years for buildings, or, in the case of
tenant improvements, over the terms of the leases from 6 months
to 14 years if shorter than the estimated useful lives.
Revenue Recognition
Revenue from rental income on real estate owned is recognized on
a straight-line basis over the life of the lease when payments
become due under operating leases. The Partnership has
recognized gains on the sale of real estate owned in full as the
gains are determinable and the earnings process is complete.
Reclassifications
Certain amounts in the 1994 and 1993 consolidated financial
statements have been reclassified to conform to the 1995
presentation.
(2) Fair Value of Financial Instruments
Statement of Financial Accounting Standard No. 107 "Disclosures
About Fair Value of Financial Instruments" ("SFAS 107"), requires
that the Partnership disclose estimated fair values for its
financial instruments as well as the methods and significant
assumptions used to estimate fair values. The following
information does not purport to represent the aggregate net fair
value of the Partnership.
The following methods and assumptions were used by the
Partnership in estimating the fair value of each class of
financial instrument.
Cash and Cash Equivalents
The carrying amount, which is cost, is assumed to be the fair
value because of the liquidity of these instruments.
Short-Term Investments
The carrying amount is estimated to be fair value because the
funds were invested at current market rates on December 26, 1995.
F-23
Accrued Interest Receivable, Accounts Payable and Accrued
Liabilities and Interest and Property Taxes Payable
Carrying amounts approximate fair value because of the short-term
maturity of these instruments, or they are due on demand.
Real Estate Loans Receivable, Earning and Nonearning
The net carrying value of the real estate loans receivable,
earning and nonearning, is estimated to be fair value.
Management believes these loans are impaired, and in accordance
with SFAS 114 and SFAS 118, as discussed in note 1, the loans are
carried at the fair value of the underlying real estate
collateral.
Real Estate Loans Receivable from Unconsolidated Investees,
Earning
The carrying value of real estate loans receivable from
unconsolidated investees, earning is estimated to be fair value.
These loans reprice at market rate each time the reference rate
is adjusted.
Notes Payable
The carrying value of notes payable to nonaffiliates approximate
fair value due to the short-term maturities of these instruments.
Notes Payable to Affiliates
As discussed in note 5, the notes payable to affiliates are
reduced by the cumulative minority interest losses to reflect the
net outstanding payable to the affiliate. Therefore, the
carrying value of these instruments is estimated to be fair
value.
F-24
(3) Allowance for Possible Loan Losses
Changes in the allowance for possible loan losses are as follows:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Balance at
beginning of year $1,157,000 $ 999,000 $ 2,360,000
Transfer to allowance
for possible losses
on real estate owned --- (116,000) (1,156,000)
Loans charged-off (233,000) (15,000) (1,210,000)
Provision for
possible loan losses 33,000 289,000 1,005,000
- - -----------------------------------------------------------------
Balance at end of year $ 957,000 $1,157,000 $ 999,000
=================================================================
</TABLE>
At December 31, 1995, the carrying value of loans that are
considered to be impaired under SFAS 114 totaled $4,126,000 (of
which $3,412,000 were on nonaccrual status). At December 31
1995, the allowance for possible loan losses determined in
accordance with the provisions of SFAS 114, related to loans
considered to be impaired under SFAS 114 totaled $957,000. There
were three loans to unconsolidated investees considered impaired
under SFAS 114 for which there is no related allowance for
possible loan losses at December 31, 1995. However, as discussed
in note 5, the unconsolidated investees have recorded an
allowance for losses of $3,480,000 and the Partnership's
proportionate share of the losses in unconsolidated investees
reflects this allowance. Two of the loans receivable are
recorded with a corresponding deferred profit liability of
$559,000. There was a $1,000 investment in impaired loans during
the year ended December 31, 1995. For the year ended December
31, 1995, the Partnership recognized interest income on these
impaired loans of $13,000. There was no interest income
recognized using the cash basis method of income during the year
ended December 31, 1995. If these loans had been current
throughout their terms, interest income would have increased
approximately $646,000, $543,000 and $225,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
F-25
(4) Allowance for Possible Losses on Real Estate Owned
Changes in the allowance for possible losses on real estate owned
are as follows:
<TABLE>
<S> <C> <C> <C>
1995 1994 1993
- - -----------------------------------------------------------------
Balance at
beginning of year $ 4,013,000 $ 6,417,000 $ 2,461,000
Transfer from
allowance for
possible loan losses --- 116,000 1,156,000
Provision for losses 803,000 518,000 4,427,000
Real estate owned
charged-off (293,000) (3,038,000) (1,627,000)
- - -----------------------------------------------------------------
Balance at
end of year $ 4,523,000 $ 4,013,000 $ 6,417,000
=================================================================
</TABLE>
(5) Transactions with Affiliates
Under the provisions of the Partnership Agreement, CC and CMIF,
Inc., an affiliate of the general partners, are entitled to
receive from the Partnership mortgage investment servicing fees
for loans serviced equal to an annual rate of 1/4 of 1 percent of
the committed amounts to be funded by the Partnership. The
Partnership accrued $9,000 and $73,000 of mortgage investment
servicing fees payable to CMIF, Inc. in 1994 and 1993,
respectively, of which $11,000 and $69,000 were paid in 1994 and
1993 respectively. The Partnership incurred $48,000 and $43,000
of mortgage investment servicing fees payable to CC in 1995 and
1994 of which $53,000 and $34,000 were paid in 1995 and 1994.
Under the provisions of the Partnership Agreement, the general
partners are to receive compensation for their services in
supervising the affairs of the Partnership. This partnership
management compensation shall be equal to 10 percent of the cash
available for distribution, as defined in the Partnership
Agreement. The general partners will not receive this
compensation until the limited partners have received a 12
percent per annum cumulative return on their adjusted invested
F-26
capital; however, the general partners are entitled to receive a
minimum 5 percent interest in cash available for distribution in
any year until the provision has been met. Adjusted invested
capital is defined as the original capital invested less
distributions from mortgage reductions. Under this provision,
payments to the general partners have been limited to 5 percent
of cash available for distribution as the limited partners have
not received their 12 percent per annum cumulative return. Under
this provision of the Partnership Agreement, no distributions
were paid to the general partners in 1995, 1994 or 1993.
As discussed in note 1, the Partnership owns 50 percent of the
stock of two corporations which have not been consolidated in the
accompanying financial statements, LCR and BKS. The balance of
stock in these corporations is owned by Centennial Mortgage
Income Fund II ("CMIF II"), an affiliate. LCR has invested in a
joint venture, Silverwood Homes ("Silverwood") which is
constructing homes. The Partnership has participated in making
several loans to these corporations and this joint venture.
Under the equity method of accounting, these loans are a
component of the Partnership's investment in LCR and BKS, and
therefore the Partnership has recorded losses by LCR and BKS as a
reduction of the carrying value of these loans receivable.
F-27
A summary of these real estate loans receivable from
unconsolidated investees as of December 31, 1995 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net
Principal Losses Carrying
Balance Offset Value
- - -----------------------------------------------------------------
Unsecured note
receivable from LCR $ 1,250,000 $ --- $ 1,250,000
50 percent interest
in unsecured note
receivable from LCR 1,055,000 595,000 460,000
50 percent interest
in note receivable
secured by a first
trust deed from BKS 1,947,000 1,613,000 334,000
50 percent interest
in development loan
secured by a first
trust deed from
Silverwood 352,000 --- 352,000
50 percent interest
in construction loan
secured by a first
trust deed from
Silverwood 161,000 --- 161,000
50 percent interest
in construction loan
secured by a first
trust deed from
Silverwood 154,000 --- 154,000
- - -----------------------------------------------------------------
Totals $ 4,919,000 $ 2,208,000 $ 2,711,000
</TABLE>
F-28
A summary of these real estate loans receivable from
unconsolidated investees as of December 31, 1994 is as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Net
Principal Losses Carrying
Balance Offset Value
- - -----------------------------------------------------------------
Unsecured note
receivable from LCR $ 1,250,000 $ --- $ 1,250,000
50 percent interest
in unsecured note
receivable from LCR 1,056,000 157,000 899,000
50 percent interest in
development loan
secured by first
trust deeds from LCR 194,000 --- 194,000
50 percent interest
in note receivable
secured by first
trust deed from BKS 1,946,000 249,000 1,697,000
- - -----------------------------------------------------------------
Totals $ 4,446,000 $ 406,000 $ 4,040,000
In February 1994, the Partnership assigned its 50 percent
interest in a construction loan secured by a second trust deed,
which was participated with CMIF II, to LCR in order to
facilitate LCR's foreclosure of 179 lots in Lancaster,
California. In anticipation of this foreclosure, LCR purchased
the underlying note secured by a first trust deed on the property
with funds provided by a $1,250,000 unsecured note payable to the
Partnership by LCR. CMIF II also assigned its 50 percent
interest in the construction loan secured by a second trust deed
to LCR. In exchange for the assignments of their notes secured
by a second trust deed, the Partnership and CMIF II each received
a 50 percent interest in an unsecured note due from LCR with a
principal balance of $2,115,000 and $2,522,000 as of December 31,
1995 and 1994, respectively. The Partnership has not accrued its
share of interest on these unsecured notes which was
approximately $401,000 and $218,000 as of December 31, 1995 and
1994, respectively.
F-29
LCR has entered into a joint venture agreement entitled
Silverwood with Home Devco, ("Home Devco"), an affiliate of the
general partners of the Partnership, to construct and sell single-
family homes at the project. LCR has contributed the 179 lots to
the joint venture as its initial capital contribution. As LCR
has a 99.99 percent ownership interest in the joint venture,
Silverwood has been consolidated with LCR and the contribution of
these lots to the joint venture has no effect on the financial
position of LCR.
The consolidated balance sheets and statements of operations of
LCR have not been consolidated in the Partnership's financial
statements. The Partnership accounts for its investment in this
corporation using the equity method. The following represents
condensed financial information for LCR at December 31, 1995 and
1994 and for the years ended December 31, 1995 and 1994:
F-30
</TABLE>
<TABLE>
LCR Development, Inc.
Consolidated Balance Sheets
<CAPTION>
<S> <C> <C>
December 31, December 31,
Assets 1995 1994
- - -----------------------------------------------------------------
Cash $ --- $ 2,000
Real estate owned 4,973,000 3,766,000
Less allowance for losses on
real estate investments 787,000 ---
- - -----------------------------------------------------------------
Net real estate owned 4,186,000 3,766,000
Organization costs 2,000 2,000
- - -----------------------------------------------------------------
$ 4,188,000 $ 3,770,000
=================================================================
Liabilities and Stockholders' Deficit
- - -----------------------------------------------------------------
Notes payable to affiliates 5,065,000 3,772,000
Accounts payable
and accrued liabilities 1,000 ---
Interest and property taxes
payable on real property 312,000 312,000
Payable to affiliates 1,000 ---
- - -----------------------------------------------------------------
Total liabilities 5,379,000 4,084,000
Stockholders' deficit (1,191,000) (314,000)
- - -----------------------------------------------------------------
$ 4,188,000 $ 3,770,000
=================================================================
</TABLE>
F-31
<TABLE>
LCR Development, Inc.
Consolidated Statements of Operations
<CAPTION>
Year ended Year ended
December 31, 1995 December 31, 1994
<S> <C> <C>
- - -----------------------------------------------------------------
Interest expense $ 93,000 $ 313,000
Provision for losses on
real estate investments 787,000 ---
General and administrative (3,000) 3,000
- - -----------------------------------------------------------------
Net loss $ 877,000 $ 316,000
=================================================================
</TABLE>
LCR has not accrued interest on the notes payable to the
Partnership that the Partnership has classified as nonearning.
Because the Partnership accounts for these loans as a component
of its equity investment in LCR, any effect on the Partnership
would be eliminated in consolidation.
As discussed above, the Partnership holds 50 percent of the stock
of BKS with CMIF II. In 1994, the Partnership and CMIF II
assigned to BKS their 50 percent interests in a note receivable
secured by a first trust deed on a 283 acre residential tract in
Bakersfield, California. BKS foreclosed on this property on
August 8, 1994. In exchange for their assignments, the
Partnership and CMIF II each received a 50 percent interest in a
new note from BKS secured by a first trust deed on the property.
The Partnership ceased accruing interest on this new note on
January 1, 1995. The nonaccrued interest was approximately
$414,000 as of December 31, 1995.
The balance sheets and statements of operations of BKS have not
been consolidated in the Partnership's financial statements. The
Partnership accounts for its investment in this corporation using
the equity method. The following represents condensed financial
information for BKS at December 31, 1995 and 1994 and for the
years ended December 31, 1995 and 1994:
F-32
<TABLE>
BKS Development, Inc.
Balance Sheets
<CAPTION>
<S> <C> <C>
December 31, December 31,
Assets 1995 1994
- - -----------------------------------------------------------------
Cash $ 1,000 $ 1,000
Real property 5,200,000 5,199,000
Less allowance for losses
on real estate investments 2,693,000 ---
- - -----------------------------------------------------------------
Net real estate owned 2,507,000 5,199,000
- - -----------------------------------------------------------------
$ 2,508,000 $ 5,200,000
=================================================================
Liabilities and Stockholders' Deficit
- - -----------------------------------------------------------------
Bonds payable 899,000 898,000
Notes payable to affiliates 3,893,000 3,893,000
Interest and property taxes
payable on real property 943,000 908,000
- - -----------------------------------------------------------------
Total liabilities 5,735,000 5,699,000
Stockholders' deficit (3,227,000) (499,000)
- - -----------------------------------------------------------------
$ 2,508,000 $ 5,200,000
=================================================================
</TABLE>
F-33
<TABLE>
BKS Development, Inc.
Statements of Operations
<CAPTION>
<S> <C> <C>
Year ended Year ended
December 31, 1995 December 31, 1994
- - -----------------------------------------------------------------
Interest and property
tax expense $ 35,000 $ 499,000
Provision for losses 2,693,000 ---
General and administrative --- 2,000
- - -----------------------------------------------------------------
Net loss $ 2,728,000 $ 501,000
=================================================================
</TABLE>
BKS has not accrued interest on the note payable to the
Partnership that the Partnership has classified as nonearning.
Because the Partnership accounts for this loan as a component of
its equity investment in BKS, any effect on the Partnership would
be eliminated in consolidation.
At the time of the foreclosure by LCR and BKS discussed above,
the Partnership had accounted for its interests in the notes
secured by a second trust deed and first trust deed as having
been insubstance foreclosed. A summary of the effects of the
foreclosures on the Partnership's balance sheet during 1994 is as
follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
LCR BKS TOTAL
- - -----------------------------------------------------------------
Decrease in real
estate owned $ 2,543,000 $ 3,900,000 $ 6,443,000
Increase in
real estate loans 1,057,000 1,947,000 3,004,000
Decrease in allowance
for possible losses
on real estate owned 709,000 1,300,000 2,009,000
Decrease in notes payable 655,000 449,000 1,104,000
Decrease in interest
and property
taxes payable 122,000 204,000 326,000
</TABLE>
F-34
The Partnership reimburses the general partner and its affiliates
for expenses incurred on behalf of the Partnership for services
such as salaries, legal, accounting, property management and
other such services. The general partners and affiliates of the
general partners charged $221,000, $235,000 and $216,000 for such
services in 1995, 1994 and 1993, respectively.
During 1995, 1994 and 1993, the Partnership maintained interest-
bearing deposits with Sunwest Bank, an affiliate of the general
partners. The balances at December 31, 1995, 1994 and 1993 were
$280,000, $8,000 and $54,000, respectively. Interest earned on
such deposits for 1995, 1994 and 1993 was $5,000, $16,000 and
$30,000, respectively.
The Partnership owns an interest in Grand Plaza, the corporation
which owns the auto retail center in Corona, California jointly
with an affiliated entity, Centennial Mortgage Income Fund III
("CMIF III"). At December 31, 1995, the ownership percentages
are 86.7 for the Partnership and 13.3 for CMIF III. The assets
and liabilities of this corporation have been consolidated in the
accompanying consolidated financial statements. Notes payable
and interest payable to affiliates includes $508,000 and $457,000
at December 31, 1995 and 1994, respectively, and the Partnership
had recorded $370,000 and $247,000, respectively, of minority
interest in cumulative losses from this corporate joint venture
against the note payable to affiliates balance as of the same
dates. The notes payable to affiliates balance reflects CMIF
III's share of a note payable by the corporation to the
Partnership and CMIF III. The note bears interest at 14 percent
fixed and matured October 1, 1995. The Partnership extended this
note in January 1996 with a new maturity date of October 1, 1996.
The Partnership owns an interest in BNN, the corporation which
owns the 19 acres in Sacramento, California jointly with an
affiliated entity CMIF III. At December 31, 1995, the ownership
percentages are 86.25 for the Partnership and 13.75 for CMIF III.
The assets and liabilities of this corporation have been
consolidated in the accompanying consolidated financial
statements. Notes payable and interest payable to affiliates at
December 31, 1995 and 1994 includes $383,000 and $373,000,
respectively, and the Partnership had recorded $260,000 and
$267,000, respectively, of minority interest in cumulative losses
from this corporate joint venture against the note payable to
affiliates balance as of the same dates. The notes payable to
affiliates balance reflects CMIF III's share of a note payable by
the corporation to the Partnership and CMIF III. The note bears
interest at 15 percent fixed and matured November 1, 1995. The
Partnership extended this note in January 1996 with a new
maturity date of August 1, 1997.
F-35
During 1993, the Partnership invested in KJC Development, Inc.
("KJC"). During 1994, KJC was used to form a mortgage lending
corporation which was subsequently closed in February of 1995.
KJC is jointly owned by the Partnership, CMIF II and CMIF III.
The Partnership owns 33.33 percent of the corporation and has
recorded $1,000 in losses from this joint venture as of December
31, 1995. The mortgage lending corporation funded short-term
mortgage loans utilizing working capital funds advanced from the
joint owners of KJC. No such loans were outstanding at December
31, 1995 or 1994. The balance sheet and statement of operations
of KJC have not been consolidated in the Partnership's financial
statements and are not presented here as they are immaterial to
the Partnership. The Partnership accounts for its investment in
this corporation using the equity method.
<TABLE>
(6) Real Estate Owned
<CAPTION>
Real estate owned consists of the following:
(dollars in thousands)
<S> <C> <C>
December 31, December 31,
1995 1994
- - -----------------------------------------------------------------
1. Shopping Center in Upland, CA $ 5,106 $ 5,096
2. 19 acres in Sacramento, CA 2,618 2,571
3. Auto retail center in Corona, CA 2,580 2,579
4. 23 acres in Riverside, CA 1,012 1,012
5. 6 condominiums in Oxnard, CA 1,550 2,385
6. 55 percent interest in an office
building in Sacramento, CA --- 589
- - -----------------------------------------------------------------
Subtotal 12,866 14,232
Less accumulated depreciation 517 412
- - -----------------------------------------------------------------
Total real estate owned $ 12,349 $ 13,820
=================================================================
</TABLE>
At December 31, 1995, property number 5 is accounted for as
insubstance foreclosure under SFAS 118 as the Partnership does
not currently hold legal title to this property, but the borrower
has surrendered the collateral to the control of the Partnership.
F-36
The Partnership leases its operating properties under several non-
cancelable operating lease agreements. Future minimum rents to
be received as of December 31, 1995, are as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
<S> <C>
Years ending December 31,
- - -----------------------------------------------------------------
1996 $ 597
1997 577
1998 552
1999 540
2000 469
Thereafter 3,355
- - -----------------------------------------------------------------
$ 6,090
=================================================================
</TABLE>
F-37
<TABLE>
(7) Notes Payable
<CAPTION>
Notes payable consist of the following:
(dollars in thousands)
<S> <C> <C>
December 31, December 31,
1995 1994
- - -----------------------------------------------------------------
Note payable secured by
shopping center in
Upland, CA with interest
and principal payments due
monthly of $24,000; interest
rate of 11.25 percent fixed,
maturing November 1, 1996 $ 2,460 $ 2,469
Note payable secured by
19 acres in Sacramento, CA
with interest only payments
due monthly; interest rate of
12 percent fixed, maturing
September 1, 1996 900 900
Note payable secured by 23
acres in Riverside, CA;
interest rate of 13.75
percent fixed,
matured August 1, 1992 650 650
- - -----------------------------------------------------------------
Total notes payable $ 4,010 $ 4,019
=================================================================
</TABLE>
The note payable secured by 19 acres in Sacramento totaling
$900,000 and the note payable secured by the Upland Shopping
Center totaling $2,460,000 both become due in 1996. The
Partnership believes that it will be able to obtain extensions on
these two notes.
F-38
The Partnership acquired the 23 acres in Riverside by deed in
lieu of foreclosure, subject to the note payable discussed above.
In the third quarter of 1993, the lender filed a notice of
default and commenced judicial foreclosure proceedings on the
property. The original borrower on the note payable is
negotiating with the lender to perfect a nonjudicial foreclosure
on the property. Management has obtained indemnification against
the damages and/or losses asserted by the FDIC related to the
first trust deed, and in exchange has agreed to allow the lender
to complete this foreclosure in 1996. Management has established
an allowance for losses sufficient to cover the loss which will
be incurred as a result of the foreclosure of this property.
Accordingly, the Partnership has not accrued interest expense on
this note during 1995, 1994 or 1993.
(8) Contingencies
There are no material pending legal proceedings other than
ordinary routine litigation incidental to the Partnership's
business. Based on part of advice of legal counsel, management
does not believe that the results of any of these matters will
have a material impact on the Partnership's financial position or
results of operations.
F-39
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule III
<TABLE>
Consolidated Real Estate Owned and
Accumulated Depreciation and Amortization
December 31, 1995
<CAPTION>
Initial Costs
Capitalized
Cost to
Subsequent
Partnership to
Acquisition
<S> <C> <C> <C>
Real Estate
Property Encumbrances Owned
Improvements
- - --------------------------------------------------------------------------------
- - ----------
Shopping Center in Upland $ 2,460,000 $ 4,903,000 $
203,000
19 acres in Sacramento 900,000 2,567,000
51,000
Auto Retail Center in Corona --- 2,533,000
47,000
23 Acres in Riverside 650,000 887,000
125,000
6 Condominiums in Oxnard --- 1,394,000
156,000
- - --------------------------------------------------------------------------------
- - ----------
$ 4,010,000 $ 12,284,000 $
582,000
================================================================================
==========
See accompanying independent auditors' report.
F-40
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule III
Consolidated Real Estate Owned and
Accumulated Depreciation and Amortization
(Continued)
December 31, 1995
<CAPTION>
Gross Amount at Which
Carried on Books (F3)
<S> <C> <C> <C> <C> <C>
Accumulated
Life On Which
Real Estate Depreciation & Date
Depreciation
Property Owned Total Amortization Acquired
Is Computed
- - --------------------------------------------------------------------------------
- - ----------
Shopping Center
in Upland $ 5,106,000 $ 5,106,000 $ 517,000 August 1988
(F1)
19 acres in
Sacramento 2,618,000 2,618,000 --- August 1991
None
Auto Retail Center
in Corona 2,580,000 2,580,000 --- December 1991
None
23 Acres in Riverside 1,012,000 1,012,000 --- April 1992
None
6 Condominiums
in Oxnard 1,550,000 1,550,000 --- December 1992
(F2) None
- - -----------------------------------------------------------------
$12,866,000 $12,866,000 $ 517,000
=================================================================
See accompanying independent auditors' report.
F-41
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule III
Consolidated Real Estate Owned and
Accumulated Depreciation and Amortization
(Continued)
December 31, 1995
<CAPTION>
<FN>
<F1> Tenant improvements depreciated over life of leases; buildings depreciated
over 31.5 years;
<F2> Insubstance foreclosure;
<F3> Aggregate cost for Federal Income Tax purposes is $13,452,000 at December
31, 1995;
</FN>
</TABLE>
See accompanying independent auditors' report.
F-42
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule III
<TABLE>
Consolidated Real Estate Owned and
Accumulated Depreciation and Amortization
(Continued)
December 31, 1995
<CAPTION>
The following is a summary of consolidated real estate owned for the years ended
December 31, 1995, 1994, and 1993.
<S> <C> <C> <C>
1995 1994
1993
- - --------------------------------------------------------------------------------
- - ----------
Balance at beginning of year $ 14,232,000 $ 21,701,000 $
18,782,000
Additions during period:
Acquisitions through foreclosures --- 540,000
6,765,000
Improvements 58,000 187,000
160,000
Carrying costs capitalized --- ---
547,000
Deductions during period:
Real estate sold (1,131,000) (605,000)
(2,926,000)
Real estate foreclosed --- (4,553,000)
- - ---
Chargeoffs (293,000) (3,038,000)
(1,627,000)
- - --------------------------------------------------------------------------------
- - ----------
Balance at year end $ 12,866,000 $ 14,232,000 $
21,701,000
================================================================================
=========
See accompanying independent auditors' report.
F-43
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule III
Consolidated Real Estate Owned and
Accumulated Depreciation and Amortization
(Continued)
December 31, 1995
<CAPTION>
The following is a summary of accumulated depreciation and amortization of
consolidated real estate owned for the years ended December 31, 1995, 1994, and
1993.
<S> <C> <C> <C>
1995 1994
1993
- - --------------------------------------------------------------------------------
- - ----------
Balance at beginning of year $ 412,000 $ 307,000 $
387,000
Additions during period:
Acquisitions through foreclosures --- ---
- - ---
Additions 105,000 105,000
202,000
Deductions during period:
Real estate sold --- ---
(282,000)
Other --- ---
- - ---
- - --------------------------------------------------------------------------------
- - ----------
Balance at year end $ 517,000 $ 412,000 $
307,000
================================================================================
==========
</TABLE>
See accompanying independent auditors' report.
F-44
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<TABLE>
<CAPTION>
Mortgage Loans on Real Estate
December 31, 1995
<S> <C> <C> <C>
Interest Final
Periodic
Description Rate Maturity Date
Payment Terms
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
First Trust Deed
Interest only
on Two-Unit Pad
balloon payment
in Corona, CA 11% fixed April 1, 1994 of
$460,000
Second Trust Deed
on Mini-Storage
Interest only
Facility in
balloon payment
Citrus Heights, CA 7% fixed November 1, 2000 of
$608,000
Third Trust Deed
on Mini-Storage
Facility in
Citrus Heights, CA 12% fixed May 1, 1997 P + I
monthly
First Trust Deed
$2,500 P + I
on 17,789 s.f.
monthly balloon
Auto Care Center in
payment of
San Bernardino, CA Prime + 3% August 1, 1998
$290,000
F-45
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<S> <C> <C> <C>
Interest Final
Periodic
Description Rate Maturity Date Payment
Terms
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
$3,000
P + I
Second Trust Deed monthly
balloon
on Ski Resort
payment of
in Norden, CA Prime + 2.5% July 1, 1995
$35,000
Second Trust Deed
Interest only
on 160-Unit
balloon
Apartment Complex Prime + 2.5%
payment of
in Riverside, CA Floor of 12% September 1, 1993
$270,000
Second Trust Deed
Interest only
on 32,341 s.f.
balloon
Retail Center
payment of
in Corona, CA 10% fixed June 30, 1996
$374,000
55 percent
interest in $805 P
+ I
Second Trust Deed
monthly
on single-family
balloon
residence in
payment of
Sacramento, CA 5% fixed May 1, 1998
$141,000
F-46
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<S> <C> <C> <C>
Interest Final
Periodic
Description Rate Maturity Date Payment
Terms
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
Unsecured Note related
to 179 lots in P + I
due at
Lancaster, CA 7.75% fixed December 1, 1997
maturity
50 percent interest
in unsecured
note related to
179 lots in P + I
due at
Lancaster, CA 7.75% fixed December 1, 1997
maturity
50 percent
interest in
First Trust
Deed on 283 acres P + I
due at
in Bakersfield, CA 15% fixed August 1, 1997
maturity
First Trust Deed
Interest only
on 7.83 acres
balloon
of vacant land
payment of
in Perris, CA 15% fixed June 1, 1993
$292,000
F-47
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<S> <C> <C> <C>
Interest Final
Periodic
Description Rate Maturity Date Payment
Terms
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
50 percent interest
in First Trust
Deed on 179 lots P + I
due at
in Lancaster, CA Prime + 1% August 1, 1997
maturity
50 percent interest
in First Trust
Deed on four
single family homes P + I
due at
in Lancaster, CA Prime + 1% July 1, 1998
maturity
50 percent interest
in First Trust
Deed on nine
single family homes P + I
due at
in Lancaster, CA Prime + 1% July 1, 1996
maturity
F-48
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<S> <C> <C> <C> <C>
Principal
Amount
Face Carrying of Loan
Subject
Amount of Amount of to
Delinquent
Description Prior Liens Mortgages Mortgages (F1) Principal
or Interest
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
First Trust Deed
on Two-Unit Pad
in Corona, CA None $ 460,000 $ 460,000 $
460,000
Second Trust Deed
on Mini-Storage 1st T.D.
Facility in of
Citrus Heights, CA $2,950,000 608,000 608,000
None
Third Trust Deed 1st T.D. of
on Mini-Storage $2,950,000
Facility in 2nd T.D of
Citrus Heights, CA $608,000 72,000 72,000
None
First Trust Deed
on 17,780 s.f
Auto Care Center in 544,000
San Bernardino, CA None (54% - 294,000) 294,000
None
F-49
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<S> <C> <C> <C> <C>
Principal
Amount
Face Carrying of Loan
Subject
Amount of Amount of to
Delinquent
Description Prior Liens Mortgages Mortgages (F1) Principal
or Interest
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
Second Trust Deed 1st T.D.
on Ski Resort of
in Norden, CA $ 650,000 164,000 35,000
35,000
Second Trust Deed
on 160-Unit 1st T.D.
Apartment Complex of
in Riverside, CA $6,100,000 350,000 270,000
270,000
Second Trust Deed
on 32,341 s.f. 1st T.D.
Retail Center of
in Corona, CA $6,100,000 374,000 374,000
374,000
55 percent
interest in
Second Trust Deed
on Single-Family 1st T.D.
Residence in of 150,000
Sacramento, CA $278,000 (55% - 83,000) 81,000
81,000
F-50
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<S> <C> <C> <C> <C>
Principal
Amount
Face Carrying of Loan
Subject
Amount of Amount of to
Delinquent
Description Prior Liens Mortgages Mortgages (F1) Principal
or Interest
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
Unsecured Note related
to 179 lots in
Lancaster, CA $3,266,000 1,250,000 1,250,000
1,250,000
50 percent interest
in unsecured
note related to 1st T.D.
179 lots in of 2,115,000
Lancaster, CA $3,266,000 (50% - 1,057,000) 1,055,000
1,055,000
50 percent interest
in First Trust
Deed on 283 acres 3,893,000
in Bakersfield, CA None (50% - 1,947,000) 1,947,000
1,947,000
First Trust Deed
on 7.83 acres
of vacant land
in Perris, CA None 343,000 292,000
292,000
F-51
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<S> <C> <C> <C> <C>
Principal
Amount
Face Carrying of Loan
Subject
Amount of Amount of to
Delinquent
Description Prior Liens Mortgages Mortgages (F1) Principal
or Interest
- - --------------------------------------------------------------------------------
- - ----------
Note secured by:
50 percent interest
in First Trust
Deed on 179 lots 3,266,000
in Lancaster, CA None (50% - 1,636,000) 352,000
None
50 percent interest
in First Trust Deed
on four single
family homes in 490,000
Lancaster, CA None (50% - 245,000) 161,000
None
50 percent interest
in First Trust Deed
on nine single
family homes in 1,034,000
Lancaster, CA None (50% - 518,000) 154,000
None
Loss from unconsolidated investees (2,208,000)
(2,208,000)
Unearned interest and discounts (404,000)
(144,000)
- - --------------------------------------------------------------------------------
- - ----------
$ 9,401,000 $ 4,793,000 $
3,412,000
================================================================================
==========
F-52
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
<CAPTION>
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<FN>
<F1> Aggregate cost for Federal Income Tax purpose is $10,147,000 at December
31, 1995.
</FN>
F-53
CENTENNIAL MORTGAGE INCOME FUND AND SUBSIDIARIES
A Limited Partnership
Schedule IV
Mortgage Loans on Real Estate
(Continued)
December 31, 1995
<CAPTION>
The following is a summary of activity for the years ended December 1995, 1994,
and 1993.
<S> <C> <C> <C>
1995 1994
1993
- - --------------------------------------------------------------------------------
- - ----------
Balance at beginning of year $ 6,641,000 $ 3,489,000 $
10,182,000
Additions during period:
New mortgage loans/disbursements 429,000 1,603,000
76,000
Other - Interest reserve, amortization
and transfer from accrued interest 47,000 23,000
5,000
New notes receivable from
sale of real estate owned --- ---
119,000
Loans transferred from real estate owned --- 3,004,000
- - ---
Deductions during period:
Collections of principal (288,000) (515,000)
(281,000)
Foreclosures --- (540,000)
(5,402,000)
Chargeoffs (233,000) (15,000)
(1,210,000)
Losses from unconsolidated investees (1,803,000) (408,000)
- - ---
- - --------------------------------------------------------------------------------
- - ----------
Balance at year end $ 4,793,000 $ 6,641,000 $
3,489,000
================================================================================
=========
</TABLE>
See accompanying independent auditors' report.
F-54
