SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM l0-Q
Quarterly Report Under Section 13 or 15(d)
of The Securities Exchange Act of 1934
For Quarter Ended June 30, 1999
Commission file number O-17248
OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership
(Exact Name of Registrant as specified In Its charter)
California 68-0023931
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2221 Olympic Boulevard
Walnut Creek, California 94595
(Address of principal executive office) (Zip Code)
(925) 935-3840
(Registrant's Telephone number,
including area code)
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_________
<PAGE>
3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
BALANCE SHEETS
June 30, 1999 and December 31, 1998
June 30 December 31
1999 1998
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,302,096 $ 8,260,599
Certificates of deposit 250,000 434,006
Commercial paper - 3,084,044
Loans secured by trust deeds 194,071,542 182,721,465
Less: Allowance for loan losses (3,500,000) (3,500,000)
------------- -------------
190,571,542 179,221,465
Real estate held for sale, net of allowance
for losses 10,279,982 9,971,202
Interest receivable 1,423,611 1,380,530
Other receivables - 59,074
------------------- ---------------
Total Assets $ 207,827,231 $ 202,410,920
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES:
Accrued distributions payable $ 537,799 $ 522,827
Due to General Partner 511,775 391,098
Accounts payable and accrued liabilities 27,525 156,193
-------------- --------------
Total Liabilities 1,077,099 1,070,118
------------ -------------
PARTNERS' CAPITAL:
General Partner 2,027,779 1,967,069
Limited partners (Units Subject to Redemption) 204,722,353 199,373,733
----------- -----------
Total Partners' Capital 206,750,132 201,340,802
----------- -----------
Total Liabilities and Partners' Capital $ 207,827,231 $ 202,410,920
=========== ===========
The accompanying notes are an integral part of these
financial statements.
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<TABLE>
<CAPTION>
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 1999 and 1998 (Unaudited)
For the Three Months Ended For the Six Months Ended
June 30 June 30 June 30 June 30
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
REVENUES:
Interest income on loans secured by trust deeds $ 4,768,312 $ 4,541,925 $ 9,457,032 $ 9,237,100
Gain on sale of real estate 18,324 83,705 18,324 1,254,018
Other income 95,255 210,578 250,197 345,856
----------- ----------- ----------- ------------
Total revenues 4,881,891 4,836,208 9,725,553 10,836,974
----------- ----------- ----------- ------------
OPERATING EXPENSES:
Management fees to General Partner 523,157 188,189 923,328 772,839
Servicing fees to General Partner 119,093 105,326 232,120 248,733
Promotional interest to General Partner 6,053 6,738 30,370 38,460
Administrative 5,000 13,752 12,500 32,591
Legal and accounting 23,684 531 110,157 56,317
Real estate operations, net (38,995) (21,694) (67,876) 19,526
Other 2,309 9,662 62,760 13,097
----------- ----------- ----------- -----------
Total operating expenses 640,301 302,504 1,303,359 1,181,563
----------- ----------- ----------- -----------
Net income $ 4,241,590 $ 4,533,704 $ 8,422,194 $ 9,655,411
=========== =========== =========== ===========
Net income allocated to General Partner $ 41,177 $ 44,888 $ 83,166 $ 95,598
=========== ============ =========== ===========
Net income allocated to limited partners $ 4,200,413 $ 4,488,816 $ 8,339,028 $ 9,559,813
=========== =========== =========== ===========
Net income allocated to limited partners
per weighted average limited partnership unit $.021 $.023 $.041 $.049
==== ==== ==== ====
Weighted average limited partnership units 203,848,000 196,095,000 203,080,000 194,387,000
=========== =========== =========== ===========
The accompanying notes are an
integral part of these financial statements.
</TABLE>
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<TABLE>
<CAPTION>
4
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
For the Six Months Ended June 30, 1999 and 1998 (Unaudited)
June 30 June 30
1999 1998
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 8,422,194 $ 9,655,411
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of real estate by limited partnership - (1,229,145)
Gain on sale of real estate properties (18,324) (24,873)
Changes in operating assets and liabilities:
Interest receivable (43,081) (474,360)
Other receivables 59,074 53,509
Accrued distributions payable 14,972 (13,322)
Due to General Partner 120,677 77,138
Accounts payable and accrued liabilities (128,668) -
------------ -------------------
Net cash provided by operating activities 8,426,844 8,044,358
----------- -------------
Cash flows from investing activities:
Purchases of loans secured by trust deeds (49,097,872) (34,539,107)
Principal collected 839,383 936,019
Loan payoffs 31,838,247 35,127,850
Sales of loans to third parties at face value 4,529,000 -
Investment in real estate properties (75,763) (39,172)
Net proceeds from sales of real estate properties 327,398 90,035
Investment in limited partnership - (926,487)
Distributions received from limited partnership - 5,457,464
Investment in corporate joint venture (57,067) (72,778)
Repayment received from corporate joint venture 56,141 -
Maturity of commercial paper 3,084,044 -
Maturity of certificate of deposit 184,006 -
------------ -------------------
Net cash (used in) provided by investing activities (8,372,483) 6,033,824
------------ -------------
Cash flows from financing activities:
Proceeds from sale of partnership Units 9,709,152 8,015,888
Partners' cash distributions (3,202,651) (3,162,264)
Partners' capital withdrawals (9,519,365) (7,535,893)
------------ ------------
Net cash used in financing activities (3,012,864) (2,682,269)
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(Decrease) increase in cash and cash equivalents (2,958,503) 11,395,913
Cash and cash equivalents at beginning of period 8,260,599 3,073,115
----------- -----------
Cash and cash equivalents at end of period $ 5,302,096 $ 14,469,028
========= ==========
See note 3 for supplemental disclosure of non-cash investing activities.
The accompanying notes are an
integral part of these financial statements.
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<PAGE>
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(1) Summary of Significant Accounting Policies
In the opinion of the management of the Partnership, the accompanying
unaudited financial statements contain all adjustments, consisting of
normal, recurring adjustments, necessary to present fairly the
financial information included therein. These financial statements
should be read in conjunction with the audited financial statements
included in the Partnership's Form 10-K for the fiscal year ended
December 31, 1998 filed with the Securities and Exchange Commission.
The results of operations for the three-month and six-month periods
ended June 30, 1999 are not necessarily indicative of the operating
results to be expected for the full year.
(2) Loans Secured by Trust Deeds
The Partnership's investment in loans delinquent greater than ninety
days is $10,123,000 and $8,710,000 as of June 30, 1999 and December 31,
1998, respectively. As of June 30, 1999, $8,078,000 of the delinquent
loans has a specific related allowance for credit losses totaling
$2,215,000. There is a non-specific allowance for credit losses of
$1,285,000 for the remaining delinquent balance and for other current
loans. The Partnership has discontinued the accrual of interest on all
loans that are delinquent greater than ninety days. There was no
additional allowance for credit losses during the three and six months
ended June 30, 1999.
As of June 30, 1999 and December 31, 1998, loans past maturity totaled
approximately $25,535,000 and $23,418,000, respectively. Of the past
maturity loans at June 30, 1999, $7,432,000 represent loans for which
interest payments are delinquent more than ninety days.
During the quarter ended June 30, 1999, the Partnership sold full and
partial interests in eight loans to third parties and to related
parties in the amounts of $3,804,000 and $725,000, respectively. The
sale of all the loans resulted in no gain or loss in the accompanying
financial statements.
(3) Real Estate Held for Sale
During the three months ended June 30, 1999, a 6-unit residential
building located in Oakland, California, of which the Partnership owned
a 22% interest, was sold resulting in a gain to the Partnership of
$18,324. During the six months ended June 30, 1999, the Partnership
acquired through foreclosure a 91% interest in 92 residential lots in
Lake Don Pedro, California, on which it had a trust deed investment of
$541,165.
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
(4) Transactions with Affiliates
The General Partner of the Partnership, Owens Financial Group, Inc.
(OFG), is entitled to receive from the Partnership a management fee of
up to 2.75% per annum of the average unpaid balance of the
Partnership's mortgage loans at the end of each of the preceding twelve
months for services rendered as manager of the Partnership.
All of the Partnership's loans are serviced by OFG, in consideration
for which OFG receives up to .25% per annum of the unpaid principal balance of
the loans.
OFG, at its sole discretion may, on a monthly basis, adjust the
management and servicing fees as long as they do not exceed the
allowable limits calculated on an annual basis. In determining the
management and servicing fees and hence the yield to the Partnership,
OFG may consider a number of factors, including the then-current market
yields. Even though the fees for a month may exceed one-twelfth of the
maximum limits, at the end of the calendar year the sum of the fees
collected for each of the twelve months is equal to or less than the
stated limits. Management fees amounted to approximately $523,000 and
$188,000 for the three months ended June 30, 1999 and 1998,
respectively, and $923,000 and $773,000 for the six months ended June
30, 1999 and 1998, respectively. Service fee payments to OFG
approximated $119,000 and $105,000 for the three months ended June 30,
1999 and 1998, respectively, and $232,000 and $249,000 for the six
months ended June 30, 1999 and 1998, respectively.
.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
Three Months Ended June 30, 1999 Compared to 1998
The net income decrease of approximately $292,000 (6.4%) for the three
months ended June 30, 1999 as compared to 1998 was primarily due to an increase
in the management fees to the General Partner of $335,000. Management fees are
paid pursuant to the Partnership Agreement.
Interest income on loans secured by trust deeds increased approximately
$226,000 (5.0%) for the three months ended June 30, 1999, as compared to the
same period in 1998. This increase was a result of an increase in the average
loan portfolio of approximately 8.5% during the quarter ended June 30, 1999 as
compared to the quarter ended June 30, 1998, even though the weighted average
yield of the loan portfolio decreased from 11.03% to 10.81% for the three months
ended June 30, 1998 and 1999, respectively.
Six Months Ended June 30, 1999 Compared to 1998
The net income decrease of approximately $1,233,000 (12.8%) for the six
months ended June 30, 1999 as compared to 1998 was primarily due to the decrease
in gain on sale of real estate of approximately $1,236,000 (98%). The gain on
sale of real estate for the six months ended June 30, 1998 was from sales of
homes in the WV-OMIF Partners development limited partnership. The final homes
in this limited partnership were sold in 1998. Therefore, there were no sales
and no gain recognized in 1999.
Interest income on loans secured by trust deeds increased approximately
$220,000 (2.4%) for the six months ended June 30, 1999, as compared to the same
period in 1998. This increase was a result of an increase in the average loan
portfolio of approximately 6.5% during the six months ended June 30, 1999 as
compared to the six months ended June 30, 1998, even though the weighted average
yield of the loan portfolio decreased from 11.05% to 10.76% for the six months
ended June 30, 1998 and 1999, respectively.
Financial Condition
June 30, 1999 and December 31, 1998
Loan Portfolio
The number of Partnership mortgage investments decreased from 188 to
170 and the average loan balance increased from approximately $972,000 to
$1,142,000 as of December 31, 1998 and June 30, 1999, respectively. These
average loan increases reflect the Partnership's ability to invest in larger
mortgage loans meeting the Partnership's objectives.
Prior to May 1, 1993, the General Partner followed a policy of
purchasing all interest receivables of delinquent loans. However, on loans
originated by the General Partner on or after May 1, 1993, and effective
November 1, 1994, for certain other loans originated prior to May 1, 1993, the
General Partner adopted the policy not to purchase delinquent interest or
principal. As of June 30, 1999 and December 31, 1998, there were approximately
$9,321,000 and $7,904,000, respectively, in loans held by the Partnership on
which payments were more than 90 days delinquent and on which such delinquent
interest was not being purchased by the General Partner. The General Partner
purchased approximately $45,000 and $110,000 in delinquent interest receivables
of the Partnership during the six months ended June 30, 1999 and the year ended
December 31, 1998, respectively.
Approximately $10,123,000 (5.2%) and $8,710,000 (4.8%) of the loans
invested in by the Partnership were more than 90 days delinquent in payment as
of June 30, 1999 and December 31, 1998, respectively. Of these amounts,
approximately $3,111,000 (1.6%) and $3,657,000 (2.0%) were in the process of
foreclosure. Loans more than 90 days delinquent increased by $1,413,000 (16.2%)
from December 31, 1998 to June 30, 1999, primarily due to one large loan which
became delinquent during the six month period. Management believes that the
loan, with an outstanding principal balance of approximately $1,548,000, is
adequately secured and that no additional loan loss reserve for this loan is
necessary.
A loan loss allowance in the amount of $3,500,000 was recorded on the
books of the Partnership as of June 30, 1999 and December 31, 1998.
As of June 30, 1999 and December 31, 1998, approximately 49% and 48%,
respectively, of the mortgage loans made or invested in by the Partnership are
secured by real property located in Northern California.
During the quarter ended June 30, 1999, the Partnership sold full and
partial interests in eight loans to third parties and to related parties in the
amounts of $3,804,000 and $725,000, respectively. The sale of all the loans
resulted in no gain or loss in the accompanying financial statements.
Real Estate Properties Held for Sale
The Partnership currently holds title to eleven properties that were
foreclosed on from January 1, 1993 through June 30, 1999 in the amount of
$9,473,000, net of allowance for losses of $1,184,000. Since 1993, the
Partnership's investment in real estate held for sale has increased due to the
General Partner's decision to stop acquiring from the Partnership property
subject to foreclosure on which the Partnership has a trust deed investment on
property acquired by the Partnership through foreclosure. When the Partnership
acquires property by foreclosure, it typically earns less income on those
properties than could be earned on mortgage loans and may not be able to sell
the properties in a timely manner. During the six months ended June 30, 1999,
the Partnership acquired through foreclosure a 91% interest in 92 residential
lots in Lake Don Pedro, California, on which it had a trust deed investment of
$541,000. During the three months ended June 30, 1999, a 6-unit residential
building located in Oakland, California, of which the Partnership owned a 22%
interest, was sold resulting in a gain to the Partnership of $18,000.
Seven of the Partnership's eleven properties do not currently generate
revenue. Expenses from rental properties have decreased from approximately
$159,000 to $122,000 (23%) for the three months ended June 30, 1998 and 1999,
respectively, due to legal, insurance and payroll expenses incurred on the
Merced and Oakland properties in the quarter ended June 30, 1998 which were not
incurred in 1999. Revenues associated with these properties have decreased from
$181,000 to $161,000 (11%) during the three months ended June 30, 1999. The
decrease in rental revenues is due to rental income received on the Monterey
property in the quarter ended June 30, 1998 prior to a former tenant vacating
the property. This tenant paid approximately $52,000 as compared to $18,000
earned on the property during the same quarter in 1999.
Investment in Corporate Joint Venture
In 1995, the Partnership foreclosed on a $572,000 loan and obtained
title to a commercial lot in Los Gatos, California that secured the loan. In
1997, the Partnership contributed the lot to a limited liability company (the
Company) formed with an unaffiliated developer to develop and sell a commercial
office building on the lot. The Partnership is providing construction financing
to the Company at prime plus two percent.
During the six months ended June 30, 1999 and 1998, the Partnership
advanced an additional $57,000 and $73,000, respectively, to the corporate joint
venture for development. During the six months ended June 30, 1999, the
Partnership received repayment of advances in the amount of $56,000. The total
investment in the corporate joint venture was $806,000 and $806,000 as of June
30, 1999 and December 31, 1998, respectively.
The Company received all development approvals in the third quarter of
1998 and began grading of the property in July 1999.
Interest Receivable and Due to General Partner
Interest receivable increased from approximately $1,381,000 as of
December 31, 1998 to $1,424,000 as of June 30, 1999 ($43,000 or 3.1%), due
primarily to an increase in the loan portfolio of approximately 6% between
December 31, 1998 and June 30, 1999.
Due to General Partner increased from approximately $391,000 as of
December 31, 1998 to $512,000 as of June 30, 1999 ($121,000 or 30.9%) due
primarily to an increase in the management fees owed to the General Partner for
the quarter ended June 30, 1999. Management fees are paid pursuant to the
Partnership Agreement.
Cash and Cash Equivalents, Certificates of Deposit and Commercial Paper
Cash and cash equivalents, certificates of deposit and commercial paper
have decreased from approximately $11,779,000 as of December 31, 1998 to
$5,552,000 as June 30, 1999, respectively ($6,227,000 or 52.9%). This decrease
is primarily attributable to an increase in investment in loans during the six
months ended June 30, 1999 without loan payoffs or sales of the same amount.
Asset Quality
Some losses are normal when lending money and the amounts of losses
vary as the loan portfolio is affected by changing economic conditions and
financial experiences of borrowers. There is no precise method of predicting
specific losses or amounts that ultimately may be charged off on particular
segments of the loan portfolio.
The conclusion that a Partnership loan may become uncollectible, in
whole or in part, is a matter of judgment. Although lenders such as banks and
savings and loans are subject to regulations that require them to perform
ongoing analyses of portfolio, loan to value ratios, reserves, etc., and to
obtain current information regarding its borrowers and the securing properties,
the Partnership is not subject to these regulations and has not adopted these
practices. Rather, management of the General Partner, in connection with the
quarterly closing of the accounting records of the Partnership and the
preparation of the financial statements, evaluates the Partnership's mortgage
loan portfolio. Based upon this evaluation, a determination is made as to
whether the allowance for loan losses should be increased or decreased to cover
potential losses of the Partnership. The total loan loss allowance was
$3,500,000 as of June 30, 1999. As of then, loans secured by trust deeds include
$10,123,000 in loans delinquent over 90 days, of which $3,111,000 was invested
in loans that were in the process of foreclosure. Due to the loan-to-value
criteria established by the General Partner, in its opinion, the mortgage loans
held by the Partnership appear in general to be adequately secured.
The General Partner's judgment of the adequacy of loan loss reserves
includes consideration of:
economic conditions;
borrower's financial condition;
evaluation of industry trends;
review and evaluation of loans identified as having loss potential; and
quarterly review by the Board of Directors.
Liquidity and Capital Resources
Purchases of Units and loan payoffs provide the capital for mortgage
investments. A substantial increase in general market interest rates could have
an adverse affect on the Partnership, because then the Partnership's investment
yield could be lower than other debt-related investments. In that event,
purchases of additional Units could decline, which, in turn, would reduce the
liquidity of the Partnership and its ability to make additional mortgage
investments. In contrast, a significant increase in the dollar amount of loan
payoffs and/or additional limited partner investments without the origination of
new loans of the same amount would increase the liquidity of the Partnership.
This increase in liquidity could result in a decrease in the yield paid to
limited partners as the Partnership would be required to invest the additional
funds in lower yielding, short term investments. The Partnership has not and
does not intend to borrow money for investment purposes.
There was little variation in the percentage of capital withdrawals to
total capital invested by the limited partners between 1994 and 1998, excluding
regular distributions of net income to limited partners. The annualized
withdrawal percentage increased during 1999 primarily due to an increase in the
maximum quarterly amount which could be withdrawn by limited partners from
$75,000 to $100,000 as a result of a change in the Partnership Agreement in
December 1998. Withdrawal percentages have been 7.37%, 6.11%, 7.85%, 6.63% and
7.33% for the years ended December 31, 1994, 1995, 1996, 1997 and 1998 and 9.30%
(annualized) for the six months ended June 30, 1999. These percentages are the
annual average of the limited partners capital withdrawals in each calendar
quarter divided by the total limited partner capital as of the end of each
quarter.
The limited partners may withdraw, or partially withdraw, from the
Partnership and obtain the return of their outstanding capital accounts at $1.00
per Unit (book value) within 61 to 91 days after written notices are delivered
to the General Partner, subject to the following limitations, among others:
No withdrawal of Units can be requested or made until at least one year
from the date of purchase of those Units, on or after the date of the most
recent Prospectus dated 2/16/99, other than Units received under the
Partnership's Reinvested Distribution Plan.
Any such payments are required to be made only from Net Proceeds and
Capital Contributions (as defined) during said 91-day period.
A maximum of $100,000 per partner may be withdrawn during any calendar
quarter.
The General Partner is not required to establish a reserve fund for the
purpose of funding such payments.
No more than 10% of the outstanding limited partnership interest may be
withdrawn during any calendar year except upon dissolution of the Partnership.
Contingency Reserves
The Partnership maintains cash, cash equivalents and marketable
securities as contingency reserves in an aggregate amount of 2% of the limited
partners' capital accounts to cover expenses in excess of revenues or other
unforeseen obligations of the Partnership. Although the General Partner believes
that contingency reserves are adequate, it could become necessary for the
Partnership to sell or otherwise liquidate certain of its investments to cover
such contingencies on terms which might not be favorable to the Partnership.
Current Economic Conditions
Although the current economic climate in Northern California and the
Western United States is generally strong, many areas outside of the San
Francisco Bay Area and throughout the Western United States continue to
experience depressed values created by the real estate recession of the early
1990's. Other than the loss incurred in February 1998 on the sale to the General
Partner of the manufactured-home development in Sonora, California, acquired
through foreclosure, the Partnership has not sustained any material losses to
date. This has been due primarily to the General Partner's pre-May 1, 1993
practice of purchasing delinquent interest and loans from the Partnership prior
to foreclosure. The General Partner has ceased such practices, except as to
loans that pre-exist the change in policy and other very limited exceptions. The
General Partner expects that it will not purchase delinquent interest or
principal on delinquent loans in the future, and therefore, the Partnership
could sustain losses with respect to loans secured by properties located in
areas of declining real estate values. This could result in a reduction of the
net income of the Partnership for a year in which those losses occur. There is
no way of making a reliable estimate of these potential losses at the present
time.
Despite the Partnership's ability to purchase mortgage loans with
relatively strong yields during 1997, 1998 and the six months ended June 30,
1999, the interest rate environment and competition from a variety of lenders
has had the effect of reducing mortgage yields over the past two years. Although
mortgage yields have increased over the past three months, increased competition
or changes in the economy could again have the effect of reducing mortgage
yields in the future. Current loans with relatively high yields could be
replaced with loans with lower yields, which in turn could reduce the net yield
paid to the limited partners. In addition, if there is less demand by borrowers
for loans and, thus, fewer loans for the Partnership to invest in, it will
invest its excess cash in shorter-term alternative investments yielding
considerably less than the current investment portfolio.
Year 2000 Readiness
Many computer systems may experience difficulty processing dates beyond
the year 1999; as a consequence, some computer hardware and software at most
companies will need to be modified or replaced prior to the year 2000 in order
to remain functional. The General Partner depends on the use of computers and
related systems to provide timely, accurate information essential to the
management and operation of the Partnership. These systems include both
information technology (IT) and non-information technology (non-IT) systems. For
IT and non-IT systems developed by independent third parties
(externally-developed), the vendors and suppliers have represented that these
systems are Year 2000 compliant; however, internal testing of these systems is
still being completed. The internally-developed computer programs used to
account for mortgage loan investments are currently in the process of being
replaced with new externally-developed mortgage software which is fully Year
2000 compliant. This implementation should be completed by September 1999. The
internally-developed programs used to account for investments in Units and other
items have been reviewed by independent consultants to determine whether these
programs are able to recognize the year 2000 and all required modifications have
been completed. The consultants are currently in the process of testing all
modifications that have been made. The testing is expected to be completed by
August of 1999.
Although not anticipated by the General Partner, a failure to
adequately address the Year 2000 issue could result in the misstatement of
reported information, the inability to accurately track mortgage investments and
payments due or other operational problems. If IT systems are not operational in
the Year 2000, the General Partner has determined that they can operate manually
for several months while correcting the system problems before experiencing
material adverse effects on the Partnership's and the General Partner's business
and results of operations. However, shifting portions of daily operations to
manual processes may result in time delays and increased processing costs.
Additionally, the Partnership and General Partner may not be able to provide
borrowers and investors with timely and pertinent information, which may
negatively affect customer relations and lead to the potential loss of new loans
and limited partner investments.
The General Partner is in the process of assessing Year 2000 issues
with third parties, comprised primarily of certain financial institutions and
other vendors, with whom the Partnership has a material business relationship
(Third Parties). Currently, the Partnership believes that if a significant
portion of these financial institutions is non-compliant for a substantial
length of time, the Partnership's operations and financial condition would be
materially adversely affected. Non-compliance by other Third Parties including
borrowers is not expected to have a material effect on the Partnership's results
of operations and financial condition unless a substantial number of borrowers
experience difficulties. The General Partner has sent letters to these and other
Third Parties requesting representations of their Year 2000 readiness and is
currently awaiting replies from the Third Parties.
The total costs to remedy Year 2000 issues will be paid by the General
Partner. None of such costs will be reimbursed by the Partnership.
The worst case scenario from the impact of Year 2000 cannot presently
be predicted.
Forward Looking Statements and Other Year 2000 Risk Factors
The foregoing analysis of Year 2000 issues includes forward-looking
statements and predictions about possible or future events, results of
operations and financial condition. As such, this analysis may prove to be
inaccurate because of the assumptions made by the General Partner or the actual
development of future events. No assurance can be given that any of these
forward-looking statements and predictions will ultimately prove to be correct
or even substantially correct.
Various other risks and uncertainties could also affect the Year 2000
analysis causing the effect on the Partnership to be more severe than discussed
above. The General Partner's Year 2000 compliance testing cannot guarantee that
all computer systems will function without error beyond the Year 2000. Risks
also exist with respect to Year 2000 compliance by Third Parties, such as the
risk that an external party, who may have no relationship to the Partnership or
the General Partner, but who also has a significant relationship with one or
more Third Parties, may have a system failure that adversely affects the
Partnership's ability to conduct business. While the General Partner is
attempting to identify such external parties, no assurance can be given that it
will be able to do so. Furthermore, Third Parties with direct relationships with
the Partnership, whose systems have been identified as likely to be Year 2000
compliant, may suffer a breakdown due to unforeseen circumstances. It is also
possible that the information collected by the General Partner for these Third
Parties regarding their compliance with Year 2000 issues may be incorrect.
Finally, it should be noted that the foregoing discussion of Year 2000 issues
assumes that to the extent the General Partner's systems fail, whether because
of unforeseen complications or because of Third Parties' failure, switching to
manual operations will allow the Partnership to continue to conduct its
business. While the General Partner believes this assumption to be reasonable,
if it is incorrect, the Partnership's results of operations would likely be
adversely affected.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Partnership is not presently involved in any material legal proceedings.
Item 6(b). Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter for which this report
is filed.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Dated: August 13, 1999 OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership
By: Owens Financial Group, Inc., General Partner
Dated: _______________ By: _________________________________
William C. Owens, President
Dated: _______________ By: _________________________________
Bryan H. Draper, Chief Financial Officer
Dated: _______________ By: _________________________________
Melina A. Platt, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 841501
<NAME> Owens Mortgage Investment Fund
<MULTIPLIER> 1
<CURRENCY> U.S.Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 5,302,096
<SECURITIES> 250,000
<RECEIVABLES> 1,423,611
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,975,707
<PP&E> 10,279,982
<DEPRECIATION> 0
<TOTAL-ASSETS> 207,827,231
<CURRENT-LIABILITIES> 1,077,099
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 206,750,132
<TOTAL-LIABILITY-AND-EQUITY> 207,827,231
<SALES> 0
<TOTAL-REVENUES> 4,881,891
<CGS> 0
<TOTAL-COSTS> 640,301
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 4,241,590
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,241,590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,241,590
<EPS-BASIC> .021
<EPS-DILUTED> .021
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