FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from N/A to N/A
Commission File Number: 0-15448
CENTENNIAL MORTGAGE INCOME FUND II
(Exact name of registrant as specified in its charter)
California 33-0112106
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1540 South Lewis Street, Anaheim, California 92805
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714)502-8484
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
PART I
ITEM 1. FINANCIAL STATEMENTS
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
Assets (Unaudited)
---------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 2,782,000 $ 2,039,000
Real estate loans receivable, earning 549,000 543,000
Real estate loans receivable from
unconsolidated investee,
nonearning 5,000 5,000
---------------------------------------------------------------------------
Net real estate loans receivable 554,000 548,000
---------------------------------------------------------------------------
Real estate owned, held for sale (note 3) 1,997,000 2,843,000
Less allowance for possible loan
losses on real estate owned 1,112,000 1,112,000
---------------------------------------------------------------------------
Net real estate owned 885,000 1,731,000
---------------------------------------------------------------------------
Due from unconsolidated investee 2,000 2,000
Other assets, net 13,000 5,000
---------------------------------------------------------------------------
$ 4,236,000 $ 4,325,000
===========================================================================
Liabilities and Partners' Equity
---------------------------------------------------------------------------
Accounts payable and accrued liabilities $ 15,000 $ 65,000
Due to affiliates 1,000 ---
---------------------------------------------------------------------------
Total liabilities 16,000 65,000
---------------------------------------------------------------------------
Partners' equity (deficit)
-- 29,141 limited partnership
units outstanding at June 30, 2000
and December 31, 1999
General partners (56,000) (56,000)
Limited partners 4,276,000 4,316,000
---------------------------------------------------------------------------
Total partners' equity 4,220,000 4,260,000
Contingencies (note 5)
---------------------------------------------------------------------------
$ 4,236,000 $ 4,325,000
===========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
1
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Six Months Three Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue:
Interest income on loans
to nonaffiliates,
including fees $ 21,000 $ 24,000 $ 10,000 $ 12,000
Interest on interest-
bearing deposits 62,000 17,000 36,000 8,000
Income from operations of
real estate owned --- 92,000 --- 48,000
Other income 3,000 6,000 2,000 2,000
------------------------------------------------------------------------
Total revenue 86,000 139,000 48,000 70,000
------------------------------------------------------------------------
Expenses:
Operating expenses from
operations of real
estate owned --- 43,000 --- 23,000
Operating expenses from
operations of real estate
owned paid to affiliates --- 6,000 --- 3,000
Expenses associated with non-
operating real estate
owned 32,000 25,000 10,000 12,000
Depreciation and
amortization expense --- 2,000 --- 1,000
Interest expense --- 10,000 --- 5,000
General and administrative,
affiliates 58,000 137,000 24,000 26,000
General and administrative,
nonaffiliates 36,000 43,000 20,000 18,000
-------------------------------------------------------------------------
Total expenses 126,000 266,000 54,000 88,000
-------------------------------------------------------------------------
Net loss $ (40,000) $ (127,000) $ (6,000) $ (18,000)
=========================================================================
Net loss per limited
partnership unit
- basic and diluted $ (1.37) $ (4.36) $ (0.21) $ (0.62)
=========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
2
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statement of Partners' Equity
<TABLE>
<CAPTION>
For the six months ended June 30, 2000
<S> <C> <C> <C>
Total
General Limited Partners'
Partners Partners Equity
(Unaudited) (Unaudited) (Unaudited)
--------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at
December 31, 1999 $ (56,000) $ 4,316,000 $ 4,260,000
Net loss --- (40,000) (40,000)
--------------------------------------------------------------------------
Balance at
June 30, 2000 $ (56,000) $ 4,276,000 $ 4,220,000
===========================================================================
</TABLE>
See accompanying notes to consolidated financial statements
3
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the six months ended June 30, 2000 and 1999
2000 1999
(Unaudited) (Unaudited)
--------------------------------------------------------------------------
<S> <C> <C>
Cash flows from
operating activities:
Net loss $ (40,000) $ (127,000)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization --- 2,000
Interest accrued to principal on
loans receivable (6,000) ---
Changes in assets and liabilities:
Increase in other assets (8,000) (7,000)
Decrease in accounts payable
and accrued liabilities (50,000) (50,000)
Increase in due to affiliates 1,000 ---
-------------------------------------------------------------------------
Net cash used in operating activities (103,000) (182,000)
-------------------------------------------------------------------------
Cash flows from investing activities:
Principal collected on loans --- 62,000
Advances on loans --- (9,000)
Cash proceeds from sale of real
estate owned, held for sale 846,000 842,000
Capital expenditures for real
estate owned, held for sale --- (25,000)
-------------------------------------------------------------------------
Net cash provided by
investing activities 846,000 870,000
-------------------------------------------------------------------------
Cash flows used in financing activities:
Principal payments on notes payable --- (1,000)
-------------------------------------------------------------------------
Net increase in cash
and cash equivalents 743,000 687,000
Beginning cash and cash equivalents 2,039,000 1,010,000
-------------------------------------------------------------------------
Ending cash and cash equivalents $ 2,782,000 $1,697,000
=========================================================================
Supplemental schedule of cash flow
information:
Cash paid during the quarter
for interest $ --- $ 10,000
See accompanying notes to consolidated financial statements
4
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 2000 and 1999
(1) BUSINESS
Centennial Mortgage Income Fund II (the "Partnership") was formed in 1985 and
initially 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, th1e 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 June 30, 2000, most of the Partnership's loans have been repaid or
charged off. However, during the early 1990's, real estate market values for
undeveloped land in California declined severely. As the loans secured by
undeveloped land became delinquent, 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.
As required by the Partnership Agreement, the Partnership is currently in the
repayment stage, and as a result, cash proceeds from mortgage investments are
no longer available for reinvestment.
(2) BASIS OF PRESENTATION
The consolidated financial statements are unaudited and reflect all
adjustments, consisting only of normal recurring accruals, which are, in the
opinion of management, necessary for a fair statement of the results of
operations for the interim periods. Results for the six and three months
ended June 30, 2000 and 1999 are not necessarily indicative of results which
may be expected for any other interim period, or for the year as a whole.
Information pertaining to the six months ended June 30, 2000 and 1999 is
unaudited and condensed inasmuch as it does not include all related footnote
disclosures.
The condensed consolidated financial statements do not include all information
and footnotes necessary for fair presentation of financial position, results
of operations and cash flows in conformity with generally accepted accounting
principles. Notes to consolidated financial statements included in Form 10-K
for the year ended December 31, 1999 on file with the Securities and Exchange
Commission, provide additional disclosures and a further description of
accounting policies.
5
Financial Information about Industry Segments
Given that the Partnership is in the process of liquidation, the Partnership
has identified only one operating business segment which is the business of
asset liquidation.
Net Loss per Limited Partnership Unit
Net loss per limited partnership unit was based on the weighted average number
of limited partnership units outstanding of 29,141 for all periods presented.
</TABLE>
<TABLE>
(3) REAL ESTATE OWNED
<CAPTION>
Real estate owned consists of the following:
(dollars in thousands)
<S> <C> <C>
June 30, December 31,
2000 1999
----------------------------------------------------------------------------
1. Land in Sacramento, CA 1,997 2,843
----------------------------------------------------------------------------
Total real estate owned $ 1,997 $ 2,843
============================================================================
</TABLE>
In February 2000, the Partnership sold approximately 7.13 acres of the
remaining 27.83 acres of land in Sacramento for a gross sales price of
$900,000. The sale generated approximately $846,000 in net cash proceeds
after deducting $54,000 in selling costs. No gain or loss was recorded in
connection with this transaction.
(4) TRANSACTIONS WITH AFFILIATES
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 capital, but are entitled to receive a 5 percent
interest in cash available for distribution in any year until this provision
has been met. Adjusted invested capital is defined as the original capital
invested less distributions from mortgage reductions. 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 during the six months ended June 30, 2000 or
1999.
(5) CONTINGENCIES
There are no material pending legal proceedings.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
References to the "Partnership" in the following discussion refers to
Centennial Mortgage Income Fund II and its wholly-owned subsidiaries.
The Partnership had net losses and losses per limited partnership unit of
$(40,000) and $(1.37) and $(6,000) and $(.21) for the six and three months
ended June 30, 2000, respectively. The Partnership had net losses and losses
per limited partnership unit of $(127,000) and $(4.36) and $(18,000) and
$(.62) for the six and three months ended June 30, 1999, respectively. The
decrease in losses is principally the result of a reduction in general and
administrative costs.
Cautionary Statements Regarding Forward-Looking Information
The Partnership wishes to caution readers that the forward-looking statements
contained in this Form 10-Q under "Item 2. Management's Discussion and
Analysis of Financial Condition and Results of Operations" and elsewhere in
this Form 10-Q involve known and unknown risks and uncertainties which may
cause the actual results, performance or achievements of the Partnership to be
materially different from any future results, performance or achievements
expressed or implied by any forward-looking statements made by or on behalf of
the Partnership. In connection with the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, the Partnership is filing
the following cautionary statements identifying important factors that in some
cases have affected, and in the future could cause the Partnership's actual
results to differ materially from those expressed in any such forward-looking
statements.
The factors that could cause the Partnership's results to differ materially
include, but are not limited to, general economic and business conditions,
including interest rate fluctuations; the impact of competitive products and
pricing; success of operating initiatives; adverse publicity; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; the results of financing efforts; business
abilities and judgment of personnel; availability of qualified personnel;
employee benefit costs and changes in, or the failure to comply with
government regulations.
Risks of the year 2000 Issue
The Partnership is in the process of liquidating its remaining assets. As of
June 30, 2000, the Partnership held only cash and cash equivalents, a single
note secured by real estate, an investment in a single undeveloped parcel of
real estate and $20,000 in other non-cash assets. In light of these
circumstances, the Partnership made only the absolutely necessary
modifications to existing software which were necessitated by the year 2000
issues. The cost of these modifications was less than $10,000.
To date, the Partnership has experienced only minor computer related problems
that are the result of the year 2000. None of these problems have caused any
significant disruption to the Partnership's operations. The Partnership
7
anticipates that it will encounter additional minor problems in the coming
months. It does not anticipate that it will be required to spend any
significant amounts to correct these problems or that these problems will
cause any disruptions of any consequence to the Partnership's operations.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000, the Partnership had $2,782,000 in unrestricted cash and
interest-bearing deposits. The Partnership had no unfunded loan commitments
at June 30, 2000. Sources of funds are expected to be from the sale of real
estate owned and the payoff or paydown of notes receivable.
During the six months ended June 30, 2000 the Partnership's cash and cash
equivalents increased by approximately $743,000. This increase was
principally due $846,000 in net cash proceeds from the sale of a portion of
the land in Sacramento. The Partnership used approximately $103,000 in cash
in operating activities during the three months ended June 30, 2000.
As of June 30, 2000, the Partnership has entered into a purchase and sale
agreement to sell a portion of the remaining land in Sacramento for a gross
sales price before selling costs of approximately $520,000. Management
currently estimates that the net sale proceeds from this transaction, if
consummated, will be approximately equal to the net book value after
allowances for losses. The buyer's contingency periods provided for in the
contract have not yet expired. This sale is subject to numerous uncertainties
and there is no assurance that the transaction will be consummated.
The Partnership's principal capital requirements for the next year consist of:
(i) real property taxes on real estate owned of approximately $26,000 payable
during the next twelve months, and (ii) selling, general and administrative
costs. These commitments are expected to be paid from existing cash balances.
Effective with the third quarter of 1991, the Partnership had 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.
Through the latter part of 1997, the general partners believed that the cash
proceeds from mortgage reductions and the sale of real estate owned should be
retained by the Partnership until such time as it was assured that it had
sufficient cash to fulfill any potential operating requirements. Due to the
substantial real estate owned balances, these potential operating costs were
considered to be very significant. As a result of the substantial decrease in
real estate owned which occurred during 1998, the general partners determined
that the Partnership could make a $3,496,000 distribution to its limited
partners in October 1998.
The general partners have had discussions with legal counsel regarding the
amounts of cash balances that would be prudent to be retained by the
Partnership at this time. In light of the substantial amount of real estate
that the Partnership has held an interest in over the years, there is always
the potential for future litigation to arise, particularly in the area of
toxic contamination. Although the general partners are not aware of any
8
threatened litigation, or litigation that is likely to arise, they have
determined that the Partnership should retain at least $1,000,000 in cash
balances to be available to defend the Partnership in any future litigation
which may arise. It is expected that these cash balances will be retained
until such time as legal counsel advises the general partners that the
potential for any future litigation is remote.
In light of the $2,782,000 balance of cash and cash equivalents held by the
Partnership at June 30, 2000 and the pending sale discussed above, it is
likely that the Partnership will make a cash distribution to limited partners
prior to the end of calendar 2000. If a distribution is made, it is likely
that it will be somewhere in the range of $1,500,000 to $2,200,000, or
approximately $50.00 to $75.00 per limited partnership unit.
RESULTS OF OPERATIONS
INTEREST ON LOANS
Interest income on loans to nonaffiliates, including fees was $10,000 and
$12,000 for the three months ended June 30, 2000 and 1999, respectively.
Interest income on loans to nonaffiliates, including fees was $21,000 and
$24,000 for the six months ended June 30, 2000 and 1999, respectively. The
decreases can be attributed to a decrease in the average balances of these
loans in the early part of 1999.
Interest income on loans to nonaffiliates for the six months ended June 30,
2000 was earned from a single note secured by real estate. The principal
balance of this note was due in April 2000, however, as of June 30, 2000, the
borrower had failed to make any principal or interest payments on the note
since it matured. The Partnership owns a 50% interest in the note with the
remaining interest in the note being owned by Centennial Mortgage Income Fund,
an affiliate. The Partnership commenced foreclosure proceedings under the
trust deed securing the note in July 2000. Subsequently, the Partnership
entered into a modification agreement with the borrower which required the
borrower to make an immediate $50,000 principal payment, bring interest
current and pay for all foreclosure proceeding costs. In addition, the
modification agreement requires the borrower to make monthly interest
payments, make future $50,000 principal payments in September 2000 and
November 2000, and to repay the remaining balance of the note by December 28,
2000. The Partnership believes that the value of the real estate securing the
note is sufficient to prevent the Partnership from suffering any material loss
related to this note.
Interest income on loans to nonaffiliates for the six months ended June 30,
2000 was earned from a single note secured by real estate. The principal
balance of this note was due in April 2000, however, the borrower has failed
to make any principal or interest payments on the note since it matured. The
Partnership has commenced foreclosure proceedings on the note and believes
that the value of the real estate securing the note is sufficient to prevent
the Partnership from suffering any material loss related to this note.
REAL ESTATE OWNED
The real estate owned balances at June 30, 2000 and December 31, 1999 were
$1,997,000 and $2,843,000, respectively. A description of the principal real
9
estate assets owned by the Partnership during the periods covered in the
accompanying financial statements follows:
Office Building in San Bernardino, California
The Partnership funded a loan during January 1988 with an original committed
amount of $921,000 which was secured by a second trust deed on an office
building comprised of 15,984 square feet of rentable space located in San
Bernardino, California. The loan was provided as gap financing behind a first
deed of trust in the amount of $350,000 to another financial institution. The
borrower was unable to payoff the loan at maturity and the Partnership
foreclosed on April 20, 1993. The project was 92 percent leased as of March
31, 1999, however, a number of leases expired in 1999 and occupancy levels
declined as a result. The property generated net operating income of $21,000
during the three months ended March 31, 1999. As of March 31, 1999, the
property was encumbered by a note secured by a first trust deed of $234,000
which was repaid when the property was sold. The property was sold in December
1999 and the secured note was repaid from the sales proceeds.
28 Acres in Sacramento, California
The Partnership funded a loan in 1987 with a committed amount of $4,000,000
secured by a first trust deed on 44.52 acres in Sacramento, California. The
loan was provided for the development of offsite improvements. The maturity
date was February 1, 1991. The borrower was unable to obtain construction
financing and bring interest current. The Partnership accepted a grant deed
on the property on March 10, 1992. The property is zoned for multi-family and
light industrial use. A portion of the property is adjacent to Highway 99 and
has good freeway visibility. The Partnership rezoned and subdivided a portion
of the property to facilitate one escrow on a 6.5 acre portion of the property
without freeway visibility. This transaction closed escrow during the fourth
quarter of 1997. During the first quarter of 1999, the Partnership opened
escrow on a 9.45 acre portion of the property which also did not have freeway
visibility. for a purchase price of $900,000. The escrow closed at the end of
the second quarter of 1999, generated $842,000 in net cash proceeds and was
recorded at no gain or loss. Both parcels sold are zoned for residential use.
The balance of the property is zoned for industrial/commercial use. During the
first quarter of 2000, the Partnership opened escrow on a 7.13 acre portion of
the property which did have freeway visibility. for a purchase price of
$900,000. The escrow closed in February 2000, generated $846,000 in net cash
proceeds and was recorded at no gain or loss. As of March 31, 2000, the
Partnership has entered into a purchase and sale agreement to sell a portion
of the remaining land in Sacramento for a gross sales price before selling
costs of approximately $520,000. Management currently estimates that the net
sale proceeds from this transaction, if consummated, will be approximately
equal to the net book value after allowances for losses. The buyer's
contingency periods provided for in the contract have not yet expired. This
sale is subject to numerous uncertainties and there is no assurance that the
transaction will be consummated.
At June 30, 2000, the carrying value before allowance for possible losses was
$1,997,000. The Partnership has recorded a $1,112,000 allowance for losses
related to this property as of June 30, 2000.
10
INTEREST ON INTEREST-BEARING DEPOSITS
Interest on interest-bearing deposits totaled $36,000 and $8,000 for the three
months ended June 30, 2000 and 1999, respectively. Interest on interest-
bearing deposits totaled $62,000 and $17,000 for the six months ended June 30,
2000 and 1999, respectively. Interest on interest-bearing deposits represents
interest earned on Partnership funds invested, for liquidity, in time
certificate and money market deposits. The increase in 2000 is primarily
attributable to an increase in the average balance of cash and cash
equivalents and to a lesser extent, an increase in the average yield earned on
bank deposits in 2000.
INCOME FROM OPERATIONS OF REAL ESTATE OWNED
Income from operations of real estate owned consists of operating revenues of
$92,000 for the six months ended June 30, 1999. The 1999 revenues are from
the office building in San Bernardino. There was no rental income from this
property during the six months ended June 30, 2000 due to the sale of the
building in December 1999.
PROVISION FOR POSSIBLE LOSSES
There was no provision for possible losses for the six months ended June 30,
2000 or 1999. The provision for possible losses results from the change in
the allowance for possible losses on real estate owned net of chargeoffs, if
any. Management believes that the allowance for possible losses at June 30,
2000 is adequate to absorb the known and inherent risk in the Partnership's
loan and real estate owned portfolio.
OTHER EXPENSES
Operating expenses from operations of real estate owned were $43,000 for the
six months ended June 30, 1999. These expenses were associated with the
office building in San Bernardino which was sold in December 1999.
Operating expenses from operations of real estate owned paid to affiliates
were $6,000 for six months ended June 30, 1999. The operating expenses
consist of property management fees paid to an affiliate for the management of
the office building in San Bernardino.
Expenses associated with non-operating real estate owned were $10,000 and
$12,000 for the three months ended June 30, 2000 and 1999, respectively.
Expenses associated with non-operating real estate owned were $32,000 and
$25,000 for the six months ended June 30, 2000 and 1999, respectively. The
expenses relate to the 45 acres in Sacramento. The increase for the six
months ended June 30, 2000 is primarily due to legal costs associated with the
sales transactions discussed above.
Interest expense was $10,000 for the six months ended June 30, 1999. The
interest expense relates to the note secured by the office building in San
Bernardino which was repaid in December 1999.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses, affiliates totaled $24,000 and $26,000,
11
respectively, for the three months ended June 30, 2000 and 1999. General and
administrative expenses, affiliates totaled $58,000 and $137,000,
respectively, for the six months ended June 30, 2000 and 1999. These expenses
are primarily salary allocation reimbursements paid to affiliates. The
decrease from 1999 to 2000 is due to the termination of five employment
contracts effective March 31, 1999.
General and administrative expenses, nonaffiliates totaled $20,000 and $18,000
for the three months ended June 30, 2000 and 1999, respectively. General and
administrative expenses, nonaffiliates totaled $36,000 and $43,000 for the six
months ended June 30, 2000 and 1999, respectively. These expenses consist of
other costs associated with the administration of the Partnership and real
estate owned. The decrease in 2000 is principally due to a decrease in
accountant's fees.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership does not invest in any derivative financial instruments
or enter into any activities involving foreign currencies, its market risk
ssociated with financial instruments is limited to the effect that changing
domestic interest rates might have on the fair value of its bank deposits and
notes receivable.
As of June 30, 2000, the Partnership held bank deposits with carrying values
totaling $2,782,000 and fixed rate mortgage notes receivable with carrying
values totaling $554,000. The bank deposits and fixed rate mortgage notes all
had maturities of ninety days or less. The estimated fair value of all of
these assets was estimated to be equal to their carrying values as of June 30,
2000. Increasing interest rates could have an adverse effect on the fair value
of the Partnership's fixed rate notes receivable and/or the value of the
underlying real estate collateral which secure the Partnership's notes
receivable.
Management currently intends to hold the remaining fixed rate assets until
their respective maturities. Accordingly, the Partnership is not exposed to
any material cash flow or earnings risk associated with these assets. Given
the relatively short-term maturities of these assets, management does not
believe the Partnership is exposed to any significant market risk related to
the fair value of these assets.
The Partnership had no interest bearing indebtedness outstanding as of June
30, 2000. Accordingly, the Partnership is not exposed to any market risk
associated with its liabilities.
12
PART II -OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits (3) & (4) Articles of Incorporation and Bylaws
The Amended and Restated Limited Partnership Agreement
Incorporated by reference to Exhibit A to the Partnership's
Prospectus contained in the Partnership's registration
Statement on Form Form S-11 (Commission File No. 0-15448)
Dated January 17, 1986, as supplemented filed under the Securities
Act of 1933
Exhibit 27. Financial Data Schedule
(b) Reports on Form 8-K
None
13
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 II AND SUBSIDIARIES
A California Limited Partnership
/s/ John B. Joseph
_________________________________
John B. Joseph
General Partner August 11, 2000
/s/ Ronald R. White
_________________________________
Ronald R. White
General Partner August 11, 2000
By: CENTENNIAL CORPORATION
General Partner
/s/ Joel H. Miner
_________________________________
Joel H. Miner
Chief Financial Officer August 11, 2000
