SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------------
FORM 10-K
Annual Report Pursuant to Section 13 or
15(d) of The Securities Exchange Act of 1934
For the fiscal year ended December 31, 1999 Commission file number
0-17248
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 (Zip Code)
offices)
Registrant's telephone number,
including area code (925) 935-3840
Securities to be registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Not applicable Not applicable
Securities to be registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of class)
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>
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Certain exhibits filed with Registrant's Registration Statement No.333-71299 are
incorporated by reference into Part IV.
Exhibit Index at page 46.
<PAGE>
Part I
Item 1. Business
The Partnership is a California limited partnership organized on June
14, 1984, which invests in first, second, third, wraparound and construction
mortgage loans and loans on leasehold interest mortgages. In June 1985, the
Partnership became the successor-in-interest to Owens Mortgage Investment Fund
I, a California limited partnership formed in June 1983 with the same policies
and objectives as the Partnership. In October 1992, the Partnership changed its
name from Owens Mortgage Investment Partnership II to Owens Mortgage Investment
Fund, a California Limited Partnership. The address of the Partnership is P.O.
Box 2400, 2221 Olympic Blvd., Walnut Creek, CA 94595. Its telephone number is
(925) 935-3840.
The General Partner makes and arranges or purchases all of the loans
invested in by the Partnership. The Partnership's mortgage loans are secured by
mortgages on unimproved, improved, income-producing and non-income-producing
real property, such as apartments, shopping centers, office buildings, and other
commercial or industrial properties. No single Partnership loan may exceed 10%
of the total Partnership assets as of the date the loan is made.
The following table shows the growth in total Partnership capital,
mortgage investments and net income as of and for the years ended December 31,
1999, 1998, 1997, 1996, 1995 and 1994.
<TABLE>
<CAPTION>
Total Partners' Mortgage Net
Capital Investments Income
<S> <C> <C> <C>
1999 ........................... $ 214,611,813 $ 200,356,517 $ 17,479,853
1998 ........................... $ 201,340,802 $ 182,721,465 $ 16,978,692
1997............................ $ 190,731,135 $ 174,714,607 $ 15,420,247
1996............................ $ 176,840,104 $ 154,148,933 $ 14,758,412
1995............................ $ 164,744,443 $ 151,350,591 $ 13,491,375
1994............................ $ 151,846,728 $ 145,050,213 $ 12,709,424
</TABLE>
As of December 31, 1999, the Partnership held investments in 142
mortgage loans, secured by liens on title and leasehold interests in real
property, and one loan secured by a collateral assignment of a limited liability
company that owns and is developing commercial real property in Arizona. 40% of
the mortgage loans are located in Northern California. The remaining 60% are
located in Southern California, Oregon, Washington, Montana, Colorado, Idaho,
Nevada, Arizona, Hawaii, Texas, Louisiana, South Carolina and Virginia.
The following table sets forth the types and maturities of mortgage investments
held by the Partnership as of December 31, 1999:
<TABLE>
<CAPTION>
TYPES AND MATURITIES OF MORTGAGE INVESTMENTS
(As of December 31, 1999)
Number of Loans Amount Percent
<S> <C> <C> <C>
1st Mortgages.................................... 116 $ 182,725,684 91.20%
2nd Mortgages.................................... 25 17,566,188 8.77%
3rd Mortgages.................................... 1 64,645 .03%
--- ------------- -------
142 $ 200,356,517 100.00%
=== ============= =======
Maturing on or before December 31, 2000 (1)...... 73 $ 113,682,211 56.74%
Maturing on or between January 1, 2001 and December 42 66,585,356 33.24%
31, 2003.......................................
Maturing on or between January 1, 2004 and September 27 20,088,950 10.02%
1, 2018 --- ------------- -------
142 $ 200,356,517 100.00%
=== ============= =======
Income Producing Properties...................... 118 $ 161,664,440 80.69%
Construction..................................... 15 22,698,154 11.33%
Unimproved Land.................................. 6 15,438,923 7.70%
Residential...................................... 3 555,000 0.28%
--- ------------- -------
142 $ 200,356,517 100.00%
=== ============= =======
<FN>
- -------- (1) $29,451,000 was past maturity as of December 31, 1999.
</FN>
</TABLE>
The average loan balance of the mortgage loan portfolio of $1,411,000
as of December 31, 1999 is considered by the General Partner to be a reasonable
diversification of investments concentrated in mortgages secured by commercial
properties. Of such investments, 14% earn a variable rate of interest and 86%
earn a fixed rate of interest. All were negotiated according to the
Partnership's investment standards.
Due to general economic conditions, certain sectors of the commercial
real estate market have recently experienced increases in both values and rental
rates and decreases in vacancy rates. When the General Partner experiences
increased competition for quality loans, it continues to use relatively low
loan-to-value ratios as a major criterion in making loans to minimize the risk
of being undersecured.
As of December 31, 1999, the Partnership was invested in construction
loans in the amount of approximately $22,698,000 and in loans partially secured
by a leasehold interest of $10,965,000.
The Partnership has other assets in addition to its mortgage
investments, comprised principally of the following:
$5,466,000 in cash, cash equivalents and marketable securities
which is held for investment, required to transact the business
of the Partnership, or in conjunction with contingency reserve
requirements;
$12,398,000 in real estate acquired through foreclosure
(including $2,222,000 in the corporate joint venture formed to
develop the property located in Los Gatos, California); and
$2,151,000 in interest receivable.
Delinquencies
The General Partner does not regularly examine the existing loan
portfolio to see if acceptable loan-to-value ratios are being maintained because
the majority of loans mature in a period of only 1-7 years. The General Partner
will perform an internal review on a property securing a loan in the following
circumstances:
payments on the loan securing the property become delinquent;
the loan is past maturity;
it learns of physical changes to the property securing the loan
or to the area in which the property is located; or
it learns of changes to the economic condition of the borrower or
of leasing activity of the property securing the loan.
A review includes a physical evaluation of the property and the area in
which the property is located, the financial stability of the borrower, and the
property's tenant mix. The General Partner may then work with the borrower to
attempt to bring the loan current.
As of December 31, 1999, the Partnership's portfolio included
$7,415,000 (compared with $8,710,000 as of December 31, 1998) of loans
delinquent more than 90 days, representing 3.7% of the Partnership's investment
in mortgage loans. Loans delinquent more than 90 days have historically
represented between 3% to 10% of the total loans outstanding at any given time.
The balance of delinquent loans at December 31, 1999 includes $850,000 (compared
with $3,657,000 as of December 31, 1998) in the process of foreclosure and $0
(compared with $4,000 as of December 31, 1998) involving loans to borrowers who
are in bankruptcy. The General Partner believes that these loans may result in a
loss of principal and interest. However, the General Partner believes that the
$4,000,000 allowance for losses on loans which is maintained in the financial
statements of the Partnership as of December 31, 1999 is sufficient to cover any
potential losses of principal. With the exception of the Sonora property on
which the Partnership recorded a loss of $712,000 in 1997, the Partnership has
not suffered material losses on defaults or foreclosures.
Of the $8,710,000 that was delinquent as of December 31, 1998,
$5,129,000 remained delinquent as of December 31, 1999, $404,000 was paid off,
$1,176,000 was brought current, and $2,001,000 became real estate acquired
through foreclosure of the Partnership.
Although not required to do so, the General Partner has at times in the
past purchased certain loans from the Partnership at the time of foreclosure for
the unpaid principal amount in order to prevent the Partnership from suffering a
loss upon foreclosure. This generally occurred where there was more than one
investor in the loan for which the property provided security and because the
General Partner wanted to avoid administrative problems associated with multiple
ownership of real property. For the most part, the General Partner will no
longer purchase defaulted loans from the Partnership and will act to cause the
Partnership to foreclose and obtain title to the real property securing the loan
when necessary to enforce the Partnership's rights to the security. Losses from
delinquencies may increase as a result.
Despite this general policy change, where payments on delinquent loans
are not made currently by the borrowers, the General Partner has chosen to
continue to purchase the Partnership's receivables for delinquent interest on a
monthly basis only on certain loans originated prior to May 1, 1993. However, as
of December 31, 1999, the General Partner was no longer purchasing the
Partnership's receivables on any delinquent loans. The amount of purchases made
during the years ended December 31, 1999 and 1998 was $65,000 and $110,000,
respectively. Such payments have been recorded by the Partnership as interest
payments as if made by the borrower, and have not been classified as
contributions by the General Partner or as loans made by the General Partner.
The Partnership has no obligation to repay such amounts to the General Partner.
Following is a table representing the Partnership's delinquency
experience (over 90 days) as of December 31, 1996, 1997, 1998 and 1999 and
foreclosures by the Partnership during the years ended December 31, 1996, 1997,
1998 and 1999:
<TABLE>
<CAPTION>
1996 1997 1998 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Delinquent Loans....................... $ 11,348,000 $ 5,236,000 $ 8,710,000 $ 7,415,000
Nonperforming Delinquent Loans......... $ 10,012,000 $ 3,751,000 $ 7,904,000 $ 7,415,000
Loans Foreclosed....................... $ 1,913,000 $ 3,279,000 $ 508,000 $ 2,001,000
Total Mortgage Investments............. $ 154,149,000 $ 174,715,000 $ 182,721,000 $ 200,357,000
Percent of Delinquent Loans to Total Loans 7.36% 3.00% 4.77% 3.70%
Percent of Nonperforming Delinquent Loans
to Total Loans....................... 6.50% 2.15% 4.33% 3.70%
</TABLE>
If the delinquency rate increases on loans held by the Partnership, the
interest income of the Partnership will be reduced by a proportionate amount.
For example, if an additional 10% of the Partnership loans become delinquent,
the mortgage interest income of the Partnership would be reduced by
approximately 10%. If a mortgage loan held by the Partnership is foreclosed on,
the Partnership will acquire ownership of real property and the inherent
benefits and detriments of such ownership.
Compensation to the General Partner
The General Partner receives various forms of compensation and
reimbursement of expenses from the Partnership and compensation from borrowers
under mortgage loans held by the Partnership.
Compensation and Reimbursement from the Partnership
Management Fees
The Partnership pays the General Partner a management fee monthly that
cannot exceed 2 3/4% annually of the average unpaid balance of the Partnership's
mortgage loans at the end of each of the 12 months in the calendar year. Since
this fee is paid monthly, it could exceed 2 3/4% in one or more months, but the
total fee in any one year is limited to a maximum of 2 3/4%, and any amount paid
above this must be repaid by the General Partner to the Partnership. The General
Partner is entitled to receive a management fee on all loans, including those
that are delinquent. The General Partner believes this is justified by the added
effort associated with such loans. The management fees may vary from month to
month and are at the discretion of the General Partner.
Servicing Fees
The General Partner has serviced all of the mortgage loans held by the
Partnership and expects to continue this policy. The Partnership Agreement
permits the General Partner to receive from the Partnership a monthly servicing
fee of 1/4 of 1% per annum of the unpaid balance of mortgage loans held by the
Partnership.
Promotional Interest
The General Partner receives a promotional interest of 1/2 of 1% of
the aggregate capital accounts of the limited partners, which is additional
compensation to the General Partner. As a result, the General Partner could
receive additional distributions of Partnership income from its promotional
interest. For example, if the Partnership generates an annual yield on capital
of the limited partners of 10%, the General Partner would receive additional
distributions on its promotional interest of approximately $150,000 per year if
$300,000,000 of Units were outstanding. If the Partnership were liquidated, the
General Partner could receive up to $1,500,000 in capital distributions without
having made equivalent cash contributions as a result of its promotional
interest. These capital distributions, however, will be made only after the
limited partners have received 100% of their capital contributions.
Reimbursement of Other Expenses
The General Partner is reimbursed by the Partnership for the actual
cost of goods and materials used for or by the Partnership and obtained from
unaffiliated entities and the actual cost of services of non-management and
non-supervisory personnel related to the administration of the Partnership
(subject to certain limitations contained in the Partnership Agreement).
Compensation from Borrowers
In addition to compensation from the Partnership, the General Partner
also receives compensation from borrowers under the mortgage loans placed by the
General Partner with the Partnership.
Investment Evaluation Fees
Investment evaluation fees, also called mortgage placement fees or
points, are paid to the General Partner from the borrowers under loans held by
the Partnership. These fees are compensation for the evaluation, origination,
extension and refinancing of loans for the borrowers and may be paid at the
placement of the loan or at the time of final repayment of the loan. The amount
of these fees is determined by competitive conditions and the General Partner
and may have a direct effect on the interest rate borrowers are willing to pay
the Partnership.
Late Payment Charges
All late payment charges paid by borrowers of delinquent mortgage
loans, including additional interest and late payment fees, are retained by the
General Partner.
Table of Compensation and Reimbursed Expenses
The following table summarizes the compensation and reimbursed expenses
paid to the General Partner or its affiliates for the years ended December 31,
1999 and 1998, showing actual amounts and the maximum allowable amounts for
management and servicing fees. No other compensation was paid to the General
Partner during these periods. The fees were established by the General Partner
and were not determined by arms'-length negotiation.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1999 December 31, 1998
Form of Compensation Actual Maximum Actual Maximum
Allowable Allowable
<S> <C> <C> <C> <C>
Management Fees*..................... $ 2,653,000 $ 5,276,000 $ 3,250,000 $ 4,784,000
Promotional Interest................. 68,000 68,000 50,000 50,000
-------------- -------------- ----------- -------------
Subtotal $ 2,721,000 $ 5,344,000 $ 3,300,000 $ 4,834,000
-------------- -------------- ----------- -----------
Investment Evaluation Fees........... $ 6,681,000 $ 6,681,000 $ 1,724,000 $ 1,724,000
Servicing Fees....................... 480,000 480,000 472,000 472,000
Late Payment Charges................. 395,000 395,000 382,000 382,000
------------- -------------- ----------- -------------
Subtotal $ 7,556,000 $ 7,556,000 $ 2,578,000 $ 2,578,000
------------- -------------- ----------- -----------
Grand Total $ 10,277,000 $ 12,900,000 $ 5,878,000 $ 7,412,000
============= ============== =========== ===========
Reimbursement of Other Expenses $ 44,000 $ 44,000 $ 151,000 $ 151,000
============= ============== ============ ============
- -------
</TABLE>
* The management fees paid to the General Partner are determined by the General
Partner within the limits set by the Partnership Agreement. An increase or
decrease in the management fees paid directly impacts the yield paid to the
partners.
Aggregate actual compensation paid by the Partnership and by borrowers
to the General Partner during the years ended December 31, 1999 and 1998,
exclusive of expense reimbursement, was $10,277,000 and $5,878,000,
respectively, or 4.8% and 2.9%, respectively, of partners' capital. If the
maximum amounts had been paid to the General Partner during these periods, the
compensation, excluding reimbursements, would have been $12,900,000 and
$7,412,000, respectively, or 6.0% and 3.7%, respectively, of partners' capital,
which would have reduced net income allocated to limited partners by
approximately 15.0% and 9.1%, respectively.
Investment evaluation fees as a percentage of loans purchased by the
Partnership were 5.6%, 2.1% and 3.8% for the years ended December 31, 1999,
1998, and 1997, respectively. In the year ended December 31, 1999, one loan in
the amount of $12,025,000 had an investment evaluation fee of $2,900,000.
The General Partner believes that the maximum allowable compensation
payable to the General Partner is commensurate with the services provided.
However, in order to maintain a competitive yield for the Partnership, the
General Partner in the past has chosen not to take the maximum allowable
compensation. If it chooses to take the maximum allowable, the amount of net
income available for distribution to limited partners would be reduced during
each such year.
Principal Investment Objectives
The Partnership invests primarily in mortgage loans on commercial,
industrial and residential income-producing real property and land. The General
Partner negotiates the terms of and makes or purchases all loans, which are then
acquired by the Partnership, on a loan-by-loan basis.
The Partnership's two principal investment objectives are to preserve
the capital of the Partnership and provide monthly cash distributions to the
limited partners. It is not an objective of the Partnership to provide
tax-sheltered income. Under the Partnership Agreement, the General Partner would
be permitted to modify these investment objectives without the vote of limited
partners but has no authority to do anything that would make it impossible to
carry on the ordinary business as a mortgage investment limited partnership.
The General Partner locates and identifies virtually all mortgages the
Partnership invests in and makes all investment decisions on behalf of the
Partnership in its sole discretion. The limited partners are not entitled to act
on any proposed investment. In evaluating prospective investments, the General
Partner considers such factors as the following:
the ratio of the amount of the investment to the value of the
property by which it is secured;
the property's potential for capital appreciation;
expected levels of rental and occupancy rates;
current and projected cash flow of the property;
potential for rental increases;
the degree of liquidity of the investment;
geographic location of the property;
the condition and use of the property;
the property's income-producing capacity;
the quality, experience and creditworthiness of the borrower;
general economic conditions in the area where the property is
located; and
any other factors which the General Partner believes are
relevant.
Substantially all investment loans of the Partnership are originated by
the General Partner, which is licensed by the State of California as a real
estate broker and California Finance Lender. During the course of its business,
the General Partner is continuously evaluating prospective investments. The
General Partner originates loans from mortgage brokers, previous borrowers, and
by personal solicitations of new borrowers. The Partnership may purchase
existing loans that were originated by other lenders. Such a loan might be
obtained by the General Partner from a third party and sold to the Partnership
at an amount equal to or less than its face value. The General Partner evaluates
all potential mortgage loan investments to determine if the security for the
loan and the loan-to-value ratio meets the standards established for the
Partnership, and if the loan can meet the Partnership's investment criteria and
objectives. An appraisal will be ordered on the property securing the loan, and
an officer, director, agent or employee of the General Partner will inspect the
property during the loan approval process.
The Partnership requires that each borrower obtain a title insurance
policy as to the priority of the mortgage and the condition of title. The
Partnership obtains an independent, on-site appraisal from a qualified appraiser
for each property in which it invests. Appraisals will ordinarily take into
account factors such as property location, age, condition, estimated building
cost, community and site data, valuation of land, valuation by cost, valuation
by income, economic market analysis, and correlation of the foregoing valuation
methods. The General Partner additionally relies on its own independent analysis
in determining whether or not to make a particular mortgage loan.
Types of Mortgage Loans
The Partnership invests in first, second, and third mortgage loans,
wraparound mortgage loans, construction mortgage loans on real property, and
loans on leasehold interest mortgages. The Partnership does not ordinarily make
or invest in mortgage loans with a maturity of more than 15 years, and most
loans have terms of 1-7 years. All loans provide for monthly payments of
interest and some also provide for principal amortization, although many
Partnership loans provide for payments of interest only and a payment of
principal in full at the end of the loan term. The General Partner does not
originate loans with negative amortization provisions.
First Mortgage Loans
First mortgage loans are secured by first deeds of trust on real
property. Such loans are generally for terms of 1-7 years. In addition, such
loans do not usually exceed 80% of the appraised value of improved residential
real property, 50% of the appraised value of unimproved real property, and 75%
of the appraised value of commercial property.
Second and Wraparound Mortgage Loans
Second and wraparound mortgage loans are secured by second or
wraparound deeds of trust on real property which is already subject to prior
mortgage indebtedness, in an amount which, when added to the existing
indebtedness, does not generally exceed 75% of the appraised value of the
mortgaged property. A wraparound loan is one or more junior mortgage loans
having a principal amount equal to the outstanding balance under the existing
mortgage loans, plus the amount actually to be advanced under the wraparound
mortgage loan. Under a wraparound loan, the Partnership generally makes
principal and interest payments on behalf of the borrower to the holders of the
prior mortgage loans.
Third Mortgage Loans
Third mortgage loans are secured by third deeds of trust on real
property which is already subject to prior first and second mortgage
indebtedness, in an amount which, when added to the existing indebtedness, does
not generally exceed 75% of the appraised value of the mortgaged property.
Construction Loans
Construction loans are loans made for both original development and
renovation of property. Construction loans invested in by the Partnership are
generally secured by first deeds of trust on real property for terms of six
months to two years. In addition, if the mortgaged property is being developed,
the amount of such loans generally will not exceed 75% of the post-development
appraised value.
The Partnership will not usually disburse funds on a construction loan
until work in the previous phase of the project has been completed, and an
independent inspector has verified certain aspects of the construction and its
costs. In addition, the Partnership requires the submission of signed labor and
material lien releases by the borrower in connection with each completed phase
of the project prior to making any periodic disbursements of loan proceeds.
Leasehold Interest Loans
Loans on leasehold interests are secured by an assignment of the
borrower's leasehold interest in the particular real property. Such loans are
generally for terms of from six months to 15 years. Leasehold interest loans
generally do not exceed 75% of the value of the leasehold interest and require
personal guarantees of the borrowers. The leasehold interest loans are either
amortized over a period that is shorter than the lease term or have a maturity
date prior to the date the lease terminates. These loans all permit the General
Partner to cure any default under the lease.
Variable Rate Loans
Approximately 14% ($29,024,000) of the Partnership's loans as of
December 31, 1999 bear interest at a variable rate. Variable rate loans
originated by the General Partner may use as indices the one and five year
Treasury Constant Maturity Index, the Prime Rate Index and the Monthly Weighted
Average Cost of Funds Index for Eleventh District Savings Institutions (Federal
Home Loan Bank Board).
The General Partner may negotiate spreads over these indices of from
2.5% to 5.5%, depending upon market conditions at the time the loan is made.
The following is a summary of the various indices described above as of
December 31, 1999 and 1998:
1999 1998
---- ----
One-year Treasury Constant Maturity Index 5.95% 4.59%
Five-year Treasury Constant Maturity Index 6.33% 4.59%
Prime Rate Index 8.50% 7.75%
Monthly Weighted Average Cost of Funds for
Eleventh District Savings Institutions 4.77% 4.69%
It is possible that the interest rate index used in a variable rate
loan will rise (or fall) more slowly than the interest rate of other loan
investments available to the Partnership. The General Partner attempts to
minimize such interest rate differential by tying variable rate loans to indices
that are more sensitive to fluctuations in market rates. In addition, most
variable rate loans originated by the General Partner contain provisions under
which the interest rate cannot fall below the starting rate.
Interest Rate Caps
All variable rate loans acquired by the Partnership have interest rate
caps. The interest rate cap is generally a ceiling that is 2-4% above the
starting rate with a floor rate equal to the starting rate. The inherent risk in
interest rate caps occurs when general market interest rates exceed the cap
rate.
Assumability
Variable rate loans of 5 to 10 year maturities are generally not
assumable without the prior consent of the General Partner. The Partnership does
not typically make or invest in other assumable loans. To minimize risk to the
Partnership, any borrower assuming a loan is subject to the same stringent
underwriting criteria as the original borrower.
Prepayment Penalties
The Partnership's loans typically do not contain prepayment penalties.
If the Partnership's loans are at a high rate of interest in a market of falling
interest rates, the failure to have a prepayment penalty provision in the loan
allows the borrower to refinance the loan at a lower rate of interest, thus
providing a lower yield to the Partnership on the reinvestment of the prepayment
proceeds. However, as of December 31, 1999, $29,024,000 (approximately 14%) of
the mortgage loans held in the Partnership's portfolio were variable rate loans
which by their terms generally have lower interest rates in a market of falling
interest rates, thereby providing lower yields to the Partnership. However,
these loans are written with relatively high minimum interest rates, which
generally minimizes the risk of lower yields.
Balloon Payment
A majority of the loans made or invested in by the Partnership require
the borrower to make a "balloon payment" on the principal amount upon maturity
of the loan. To the extent that a borrower has an obligation to pay mortgage
loan principal in a large lump sum payment, its ability to satisfy this
obligation may be dependent upon its ability to sell the property, obtain
suitable refinancing or otherwise raise a substantial cash amount. As a result,
these loans involve a higher risk of default than fully amortizing loans.
Equity Interests and Participation in Real Property
As part of investing in or making a mortgage loan the Partnership may
acquire an equity interest in the real property securing the loan in the form of
a shared appreciation interest or other equity participation. As of December 31,
1999, the Partnership was invested in a loan in the amount of $2,000,000 that is
secured by an assignment of a 49% interest in a limited liability company (LLC)
and a direct 2% ownership in the LLC. The LLC owns a retail shopping center
located in Sedona, Arizona.
Debt Coverage Standard for Mortgage Loans
Loans on commercial property require the net annual estimated cash flow
to equal or exceed the annual payments required on the mortgage loan.
Loan Limit Amount
The Partnership limits the amount of its investment in any single
mortgage loan, and the amount of its investment in mortgage loans to any one
borrower, to 10% of the total Partnership assets as of the date the loan is
made.
Mortgage Loans to Affiliates
The Partnership will not invest in mortgage loans made to the General
Partner, affiliates of the General Partner, or any limited partnership or entity
affiliated with or organized by the General Partner. However, the Partnership
may acquire an investment in a mortgage loan payable by the General Partner when
the General Partner has assumed by foreclosure the obligations of the borrower
under that loan. As of December 31, 1999, the Partnership held no loans in which
an affiliate of the General Partner was obligated.
Purchase of Loans from Affiliates
Although it has never done so, the Partnership may purchase loans from
the General Partner or its affiliates that were originated by the General
Partner and first held for its own portfolio, as long as the loan is not in
default and otherwise satisfies all of the Partnership's lending criteria. In
addition, if the loan did not originate within the 90 days prior to its purchase
by the Partnership from the General Partner, the General Partner must retain a
minimum of a 10% interest in the loan. This requirement also applies to any loan
originated by an affiliate of the General Partner.
Borrowing
The Partnership has not incurred indebtedness for the purpose of
investing in mortgage loans. However, the Partnership may incur indebtedness in
order to prevent default under mortgage loans which are senior to the
Partnership's mortgage loans or to discharge senior mortgage loans if this
becomes necessary to protect the Partnership's investment in mortgage loans.
Such short-term indebtedness may be with recourse to the Partnership's assets.
In addition, although the Partnership has not historically done so, the
Partnership may incur indebtedness in order to operate or develop a property
that the Partnership acquires under a defaulted loan.
Repayment of Mortgages on Sales of Properties
The Partnership invests in mortgage loans and does not acquire real
estate or engage in real estate operations or development (other than when the
Partnership forecloses on a loan or takes over management of such foreclosed
property). The Partnership also does not invest in mortgage loans primarily for
sale or other disposition in the ordinary course of business.
The Partnership may require a borrower to repay a mortgage loan upon
the sale of the mortgaged property rather than allow the buyer to assume the
existing loan. This may be done if the General Partner determines that repayment
appears to be advantageous to the Partnership based upon then-current interest
rates, the length of time that the loan has been held by the Partnership, the
credit-worthiness of the buyer and the objectives of the Partnership. The net
proceeds to the Partnership from any sale or repayment are invested in new
mortgage loans, held as cash or distributed to the partners at such times and in
such intervals as the General Partner in its sole discretion determines.
No Trust or Investment Company Activities
The Partnership has not qualified as a real estate investment trust
under the Internal Revenue Code of 1986, as amended, and, therefore, is not
subject to the restrictions on its activities that are imposed on real estate
investment trusts. The Partnership conducts its business so that it is not an
"investment company" within the meaning of the Investment Company Act of 1940.
It is the intention of the Partnership to conduct its business in such manner as
not to be deemed a "dealer" in mortgage loans for federal income tax purposes.
Miscellaneous Policies and Procedures
The Partnership will not:
issue securities senior to the Units or issue any Units or other
securities for other than cash;
invest in the securities of other issuers for the purpose of
exercising control, except in connection with the exercise of its
rights as a secured lender;
underwrite securities of other issuers; or
offer securities in exchange for property.
Competition and General Economic Conditions
The Partnership's major competitors in providing mortgage loans are
banks, savings and loan associations, thrifts, conduit lenders, and other
entities both larger and smaller than the Partnership. The Partnership is
competitive in large part because the General Partner generates all of its
loans. The General Partner has been in the business of making or investing in
mortgage loans in Northern California since 1951 and has developed a quality
reputation and recognition within the field.
Many major institutional lenders have reentered the commercial mortgage
market within the past year due to a stronger economy, stabilized property
values and leasing rates, and the decrease in demand for residential loans. This
has created increased competition to the Partnership for investments in
mortgages secured by commercial properties, creating downward pressure on
interest rates. Although mortgage yields have increased over the past year,
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.
Item 2. Properties
Between 1993 and 1999, the Partnership foreclosed on $16,420,000 of delinquent
mortgage loans and acquired title to 21 properties securing the loans. As of
December 31, 1999, the Partnership still held title to 13 of these properties in
the amount of $10,176,000, net of an allowance for losses of $1,336,000. All of
the properties are either currently being marketed for sale or will be marketed
for sale in the foreseeable future. None of the properties individually has a
book value greater than 2% of total Partnership assets as of December 31, 1999.
The Partnership's title to all thirteen properties is held as fee
simple.
There are no mortgages or encumbrances on any of the
Partnership's real estate properties.
Of the thirteen properties held, six of the properties are either
partially or fully leased to various tenants. Only minor
renovations and repairs to the properties are currently being
made or planned.
Management of the General Partner believes that all properties
owned by the Partnership are adequately covered by customary
casualty insurance.
The Partnership maintains an allowance for losses on real estate
held for sale in its financial statements of $1,336,000 as of
December 31, 1999.
Real estate acquired through foreclosure is typically held for a number
of years before ultimate disposition. During the time that the real estate is
held, the Partnership may earn less income on these properties than could be
earned on mortgage loans.
Item 3. Legal Proceedings
The Partnership is not presently involved in any material pending legal
proceedings other than ordinary routine litigation incidental to the business.
Item 4. Submission of Matters to a Vote of Security Holders
None
<PAGE>
Part II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Market Information
a. There is no established public trading market for the trading of Units.
b. Holders: As of December 31, 1999, approximately 2,705 Limited Partners
held 212,702,897 Units of limited partnership interest in the
Partnership.
c. The Partnership generally distributes all net income of the Partnership
to Unit holders on a monthly basis. The Partnership made distributions
of net income to the Limited Partners of approximately $16,811,000 and
$17,308,000 (prior to reinvested distributions) during 1998 and 1999,
respectively. It is the intention of the Corporate General Partner to
continue to distribute all net income earned by the Partnership to the
Unit holders.
<PAGE>
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership
As of and for the year ended
December 31
----------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loans secured by trust $ 200,356,517 $ 182,721,465 $ 174,714,607 $ 154,148,933 $ 151,350,591
deeds.................
Less: Allowance for (4,000,000) (3,500,000) (3,500,000) (3,500,000) (3,250,000)
loan losses...........
Real estate held for 13,733,722 11,155,202 16,047,141 13,221,093 9,612,359
sale..................
Less: Allowance for (1,336,000) (1,184,000) (1,896,000) (600,000) (600,000)
losses on real estate.
Cash, cash equivalents
and other assets...... 7,617,278 13,218,253 5,959,306 14,105,992 8,288,818
----------- ----------- ----------- ------------ -----------
Total assets............ $ 216,371,517 $ 202,410,920 $ 191,325,054 $ 177,376,018 $ 165,401,768
============= ============= ============= ============= =============
Liabilities............. $ 1,759,704 $ 1,070,118 $ 593,919 $ 535,914 $ 657,325
Partners' capital
General partners...... 2,104,936 1,967,069 1,864,033 1,731,874 1,623,526
Limited partners......
212,506,877 199,373,733 188,867,102 175,108,230 163,120,917
----------- ----------- ----------- ----------- -----------
Total partners'
capital............... 214,611,813 201,340,802 190,731,135 176,840,104 164,744,443
Total liabilities/ ----------- ----------- ----------- ----------- -----------
Partners' capital. $ 216,371,517 $ 202,410,920 $ 191,325,054 $ 177,376,018 $ 165,401,768
============= ============= ============= ============= =============
Revenues................ $ 21,457,192 $ 21,041,215 $ 21,325,850 $ 16,824,479 $ 16,415,301
Operating expenses
Promotional interest.. 67,907 49,545 70,747 57,395 69,255
Management fee........ 2,652,882 3,249,824 3,879,454 866,985 1,431,616
Servicing fee......... 479,592 472,390 420,742 384,004 371,000
Net real estate
operations............ (145,343) 53,656 70,216 344,298 224,108
Provision for losses
on loans............... 500,000 -- -- 250,000 500,000
Provision for losses on
real estate held for sale 152,000 -- 1,296,000 -- 200,000
Other................. 270,301 237,108 168,444 163,385 127,947
------- ------- ------- ------- -------
Net Income $ 17,479,853 $ 16,978,692 $ 15,420,247 $ 14,758,412 $ 13,491,375
============ ============ ============ ============ ============
Net income allocated to
general partners...... $ 172,335 $ 168,106 $ 154,202 $ 146,960 $ 135,584
======= ======= ======= ======= =======
Net income allocated to
limited partners...... $ 17,307,518 $ 16,810,586 $ 15,266,045 $ 14,611,452 $ 13,355,791
============ ============ ============ ============ ============
Net income allocated to
limited partners per
limited partnership unit $ .08 $ .08 $ .08 $ .08 $ .08
============ ============ ============ ============ ============
</TABLE>
The information in this table should be read in conjunction with the
accompanying audited financial statements and notes to financial statements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
1999 Compared to 1998
The net income increase of $501,000 (3.0%) for 1999 as compared to 1998, was due
to:
an increase in interest income of $1,121,000 from $19,100,000 to
$20,221,000;
a decrease in management fees to the general partner of $597,000;
and
an increase in net income from rental operations from a loss of
$54,000 to net income of $145,000.
The net income increase in 1999 as compared to 1998, was offset by:
a decrease in the gain on sale of real estate of $431,000;
a decrease in interest income from investments of $274,000;
an increase in the provision for loan losses of $500,000; and
an increase in the provision for losses on real estate held for
sale of $152,000.
The increase in interest income on loans secured by trust deeds of
$1,121,000 or 5.9% was primarily a result of the growth in the loan portfolio of
approximately 9.7% even though its weighted average yield decreased from 10.94%
for the year ended December 31, 1998 to 10.84% for the year ended December 31,
1999.
The management fees to the general partner were paid pursuant to the
Partnership Agreement.
Real estate operations resulted in income of $145,000 during the year
ended December 31, 1999 as compared to a loss of $54,000 during 1998. This
increase in income is a result of increased occupancy on two of the
Partnership's properties and reduced operating costs due to legal, insurance and
payroll expenses incurred on the Merced and Oakland properties in the year ended
December 31, 1998 which were not incurred in 1999.
Gain on sale of real estate decreased by $431,000 (33.9%). The decrease
in gain on sale of real estate was a result of a decrease in the gain on sales
of homes from the development limited partnership between the Partnership and
Wood Valley Development, Inc. as the final homes in the development were
completed and sold during 1998. The decrease in gain on sale of homes from the
development limited partnership was partially offset by gains recognized from
the sales of two properties located in Oakland and Vallejo, California during
the year ended December 31, 1999 (see "Real Estate Properties Held for Sale"
below).
Interest income from investments decreased as a result of less cash
held in interest-bearing accounts pending investment in loans during 1999 as
compared to 1998 as the Partnership was able to stay fully invested in loans for
most of the year.
Results of Operations
1998 Compared to 1997
The net income increase of $1,558,000 (10.1%) for 1998 as compared to 1997, was
due to:
an increase in interest income of $858,000 from $18,241,000 to
$19,100,000;
an increase in interest income from investments of $219,000;
a decrease in management fees to the general partner of $630,000;
and
a decrease in the provision for losses on real estate acquired
through foreclosure from $1,296,000 to $0.
The net income increase in 1998 as compared to 1997, was offset by:
a decrease in the gain on sale of real estate of $1,362,000.
The increase in interest income on loans secured by trust deeds of 4.7%
was primarily a result of the growth in the loan portfolio of approximately 4.6%
even though its weighted average yield decreased from approximately 11.07% for
the year ended December 31, 1997 to 10.94% for the year ended December 31, 1998.
The increase was also due to one large loan which earned an approximate annual
yield of 21% during 1998 and was paid off in October 1998.
Interest income from investments increased as a result of increased
cash held in interest-bearing accounts pending investment in loans during 1998
as compared to 1997.
The management fees to the general partner were paid pursuant to the
Partnership Agreement.
The decrease in gain on sale of real estate was a result of a decrease
in the gain on sales of homes from the development limited partnership between
the Partnership and Wood Valley Development, Inc. (see "Investment in
Development Limited Partnership," below). This decrease was a result of
increased construction costs, smaller profit margins, and one fewer home being
sold during 1998 compared to 1997.
Financial Condition
December 31, 1999, 1998 and 1997
Loan Portfolio
At the end of 1997 and 1998 the number of Partnership mortgage
investments was 215 and 188, respectively, and decreased to 142 by the end of
1999. The average loan balance was $813,000 and $972,000 at the end of 1997 and
1998 respectively, and increased to $1,411,000 as of December 31, 1999.
Approximately $7,415,000 (3.7%) and $8,710,000 (4.8%) of the loans
invested in by the Partnership were more than 90 days delinquent in payment as
of December 31, 1999 and 1998, respectively. Of these amounts, approximately
$850,000 (0.4%) and $3,657,000 (2.0%) were in the process of foreclosure. Loans
more than 90 days delinquent decreased by $1,295,000 (14.9%) from December 31,
1998 to December 31, 1999, primarily due to one loan in the amount of $1,442,000
which was foreclosed on by the Partnership during the year ended December 31,
1999.
A loan loss reserve in the amount of $4,000,000, $3,500,000 and
$3,500,000 was recorded on the books of the Partnership as of December 31, 1999,
1998 and 1997. The General Partner believes that the loan loss reserve is
adequate.
As of December 31, 1999, 1998 and 1997, approximately 40%, 48% and 67%
of the Partnership's mortgage loans were secured by real property in Northern
California. The decrease in the percentage of loans secured by real property in
Northern California has primarily been due to the payoff of several of those
loans and the purchase of new loans secured by properties outside of Northern
California. As the real estate market in Southern California has gradually
improved, more loans secured by real estate in Southern California have been
invested in by the Partnership. In general, there has been increased competition
in the lending business in Northern California, particularly in the San
Francisco Bay Area, and the General Partner has increasingly sought loans in
areas outside of this region.
As of December 31, 1999, 1998 and 1997, approximately 80.7%, 83.8% and
90.5%, respectively, of the loan portfolio was invested in loans on
income-producing properties, 11.3%, 7.6% and 4.1%, respectively, in construction
loans, 7.7%, 7.3% and 4.2%, respectively, in land loans and 0.3%, 1.3% and 1.2%,
respectively, in residential loans. Also, as of these dates, approximately
91.2%, 89.0% and 92.3%, respectively, of the loan portfolio was invested in
first deeds of trust, 8.8%, 10.5% and 7.3%, respectively, in second deeds of
trust and 0.0%, 0.5% and 0.4%, respectively, in third and fourth deeds of trust.
The Partnership's investment in construction loans increased by 63%
since December 31, 1998. Improvement in real estate market conditions has made
development and, thus, construction loans more attractive. All but two of the
Partnership's construction loans are first trust deeds. In addition, only one of
these loans, in the amount of $56,000, is more than 90 days delinquent in
payment as of December 31, 1999.
The Partnership was invested in mortgage loans with variable interest
rates in the amount of $77,310,339 (44.2%), $66,852,000 (36.6%), and $29,024,000
(14.5%) as of December 31, 1997, 1998 and 1999, respectively. The decrease in
the volume of variable rate loans invested in by the Partnership during 1999 was
primarily a result of the market and competitive conditions surrounding the
General Partner's loan underwriting in 1999. Because competition in the lending
industry has increased substantially over the past two years, borrowers seeking
construction loans or loans to purchase properties have wanted shorter-term
loans as their ability to refinance is much stronger in this environment. Such
shorter-term loans (less than two years) are normally originated with fixed
interest rates.
Real Estate Properties Held for Sale
The Partnership currently holds title to thirteen properties that were
foreclosed on from January 1, 1993 through December 31, 1999 in the amount of
$10,176,000, net of allowance for losses of $1,336,000. 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. During the year ended
December 31, 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 and 100% interests in a commercial building located
in San Ramon, California and an apartment/retail building located in Oakland,
California, on which it had trust deed investments of $1,442,000 and $17,000,
respectively. During the year ended December 31, 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. In
addition, during the year ended December 31, 1999, a 66-acre residential parcel
located in Vallejo, California was sold for cash of $500,000 and a note of
$1,000,000 resulting in a gain to the Partnership of $822,000.
Seven of the Partnership's thirteen properties do not currently
generate revenue. Although expenses from rental properties have decreased from
approximately $699,000 to $582,000 (16.7%) for the year ended December 31, 1998
and 1999, respectively, revenues associated with these properties have increased
from $645,000 to $727,000 (12.7%), thus generating a net income from real estate
held for sale of $145,000 during the year ended December 31, 1999. The increase
in revenues is primarily a result of increased occupancy on two of the
Partnership's properties. The decrease in expenses is due to legal, insurance
and payroll expenses incurred on the Merced and Oakland properties in the year
ended December 31, 1998 which were not incurred in 1999.
As of December 31, 1998 and 1997, the Partnership owned eleven and nine
properties, respectively. Prior to foreclosure, these properties secured
Partnership loans aggregating $7,903,000 and $8,354,000 in 1998 and 1997,
respectively. During the years ended December 31, 1998 and 1997, the Partnership
acquired certain properties through foreclosure on which it had trust deed
investments totaling $508,000 and $3,879,000, respectively.
Investment in Corporate Joint Venture
In 1995, the Partnership foreclosed on a $571,853 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 year ended December 31, 1999 and 1998, the Partnership
advanced an additional $1,417,000 and $166,000, respectively, to the corporate
joint venture for development. The total investment in the corporate joint
venture was $2,222,000 and $806,000 as of December 31, 1999 and 1998,
respectively.
The Company received all development approvals and began construction
in July 1999.
Interest Receivable and Due to General Partner
Interest receivable increased from approximately $1,381,000 as of
December 31, 1998 to $2,151,000 as of December 31, 1999 ($770,000 or 55.8%), due
primarily to the growth in the loan portfolio and due to deferred interest
accrued on three loans in the total amount of approximately $460,000, the
majority of which was collected in January and February 2000.
Due to General Partner increased from approximately $391,000 as of
December 31, 1998 to $752,000 as of December 31, 1999 ($361,000 or 92.3%) due
primarily to accrued management fees for the months of November and December
1999 that 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
decreased from approximately $11,779,000 as of December 31, 1998 to $5,466,000
as of December 31, 1999, respectively ($6,313,000 or 53.6%). This decrease is
primarily attributable to loan payoffs that occurred on December 31, 1998 that
did not allow the Partnership sufficient time to reinvest in new loans. Similar
payoffs did not occur on December 31, 1999 and the Partnership was fully
invested in loans on December 31, 1999.
Cash and cash equivalents, certificates of deposit and commercial paper
increased from approximately $4,073,000 as of December 31, 1997 to $11,779,000
as of December 31, 1998, respectively ($7,706,000 or 189%). This increase is
primarily attributable to the rollover of limited partner income during the year
ended December 31, 1998 without the investment in new loans 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 is adequate to cover potential losses of
the Partnership. As of December 31, 1999, management believes that the allowance
for loan losses of $4,000,000 is adequate. As of then, loans secured by trust
deeds include $7,415,000 in loans delinquent over 90 days, of which $850,000 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%,
7.33%, and 7.99% for the years ended December 31, 1994, 1995, 1996, 1997, 1998
and 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, for Units
purchased on or after February 16, 1999, 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 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.
The Partnership has been able to purchase mortgage loans with
relatively strong yields during 1998 and 1999. Although mortgage yields have
increased over the past year, increased competition or changes in the economy
could 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 Issues
The General Partner so far has experienced no disruptions in the
operations of its internal information systems during its transition to the year
2000. The General Partner is not aware that any of its vendors experienced any
disruptions during their transition to the year 2000. The General Partner will
continue to monitor the transition to year 2000 and will act promptly to resolve
any problems that occur. If the General Partner or any third parties with which
it has business relationships experience problems related to the year 2000
transition that have not yet been discovered, it could have a material adverse
impact on the General Partner and the Partnership.
<PAGE>
Item 8. Financial Statements and Supplementary Data
See pages 24-40 and pages 47-48 of this Form 10-K.
<PAGE>
Independent Auditors' Report
The Partners
Owens Mortgage Investment Fund:
We have audited the accompanying balance sheets of Owens Mortgage Investment
Fund, a California limited partnership, as of December 31, 1999 and 1998, and
the related statements of income, partners' capital and cash flows for each of
the years in the three-year period ended December 31, 1999. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Owens Mortgage Investment Fund
as of December 31, 1999 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
San Francisco, California
February 11, 2000
<PAGE>
<TABLE>
<CAPTION>
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
Balance Sheets
December 31, 1999 and 1998
1999 1998
---- ----
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,216,326 $ 8,260,599
Certificates of deposit 250,000 434,006
Commercial paper - 3,084,044
Loans secured by trust deeds 200,356,517 182,721,465
Less: allowance for loan losses (4,000,000) (3,500,000)
-------------- --------------
196,356,517 179,221,465
Interest receivable 2,150,952 1,380,530
Other receivables - 59,074
Real estate held for sale, net of allowance
for losses of $1,336,000 in 1999 and
$1,184,000 in 1998 12,397,722 9,971,202
-------------- -----------
$ 216,371,517 $ 202,410,920
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accrued distributions payable $ 577,281 $ 522,827
Due to General Partner 751,759 391,098
Accounts payable and accrued liabilities 430,664 156,193
------------- -------------
Total liabilities 1,759,704 1,070,118
------------ ------------
Partners' Capital:
General partner 2,104,936 1,967,069
Limited partners (units subject to redemption):
Authorized 500,000,000 units in 1999 and
1998; 340,956,729 and 305,172,278
units issued and 212,702,897 and 199,569,753
units outstanding in 1999 and 1998, respectively 212,506,877 199,373,733
----------- -----------
Total partners' capital 214,611,813 201,340,802
----------- -----------
$ 216,371,517 $ 202,410,920
=========== ===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
Statements of Income
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
REVENUES:
<S> <C> <C> <C>
Interest income on loans secured
by trust deeds $ 20,221,120 19,099,723 18,241,427
Gain on sale of real estate 840,640 1,271,757 2,633,414
Other income 395,432 669,735 451,009
------------ ------------ ----------
Total revenues 21,457,192 21,041,215 21,325,850
------------ ------------ ----------
OPERATING EXPENSES:
Management fees to General Partner 2,652,882 3,249,824 3,879,454
Servicing fees to General Partner 479,592 472,390 420,742
Promotional interest to General Partner 67,907 49,545 70,747
Administrative 30,000 73,849 56,687
Legal and accounting 168,142 144,195 102,914
Real estate operations, net (145,343) 53,656 70,216
Other 72,159 19,064 8,843
Provision for loan losses 500,000 - -
Provision for losses on real estate
held for sale 152,000 - 1,296,000
------------ ------------ -----------
Total operating expenses 3,977,339 4,062,523 5,905,603
------------ ------------ -----------
Net income $ 17,479,853 16,978,692 15,420,247
============ ============ ============
Net income allocated to general
partner $ 172,335 168,106 154,202
============= ============ ============
Net income allocated to limited
partners $ 17,307,518 16,810,586 15,266,045
============= ============= ============
Net income allocated to limited
partners per weighted average
limited partnership unit $ .08 .09 .08
============= ============= ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
Statements of Partners' Capital
Years ended December 31, 1999, 1998 and 1997
Total
General Limited Partners Partners'
Partner Units Amount Capital
<S> <C> <C> <C> <C>
Balances, December 31, 1996 $ 1,732,726 175,303,398 $ 175,107,378 176,840,104
Net income 154,202 15,266,045 15,266,045 15,420,247
Sale of partnership units 141,493 17,064,537 17,064,537 17,206,030
Partners' withdrawals -- (12,515,336) (12,515,336) (12,515,336)
Partners' distributions (164,388) (6,055,522) (6,055,522) (6,219,910)
-------- ---------- ---------- ----------
Balances, December 31, 1997 1,864,033 189,063,122 188,867,102 190,731,135
Net income 168,106 16,810,586 16,810,586 16,978,692
Sale of partnership units 99,084 14,210,969 14,210,969 14,310,053
Partners' withdrawals -- (14,377,618) (14,377,618) (14,377,618)
Partners' distributions (164,154) ( 6,137,306) ( 6,137,306) ( 6,301,460)
--------- ------------- ------------- -------------
Balances, December 31, 1998 1,967,069 199,569,753 199,373,733 201,340,802
Net income 172,335 17,307,518 17,307,518 17,479,853
Sale of partnership units 135,814 20,537,603 20,537,603 20,673,417
Partners' withdrawals -- (18,306,472) (18,306,472) (18,306,472)
Partners' distributions (170,282) ( 6,405,505) ( 6,405,505) ( 6,575,787)
--------- ------------- ------------- -------------
Balances, December 31, 1999 $ 2,104,936 212,702,897 $ 212,506,877 214,611,813
========= =========== =========== ===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 17,479,853 16,978,692 15,420,247
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of real estate by limited partnership - (1,246,884) (2,355,075)
Gain on sale of real estate properties (840,640) (24,873) (278,339)
Provision for loan losses 500,000 - -
Provision for losses on real estate properties
held for sale 152,000 - 1,296,000
Changes in operating assets and liabilities:
Interest and other receivables (711,348) 446,587 (505,624)
Accrued distributions payable 54,454 (21,558) 32,929
Accounts payable and accrued liabilities 274,471 156,193 -
Due to General Partner 360,661 341,564 25,076
------------- ------------- -------------
Net cash provided by operating activities 17,269,451 16,629,721 13,635,214
----------- ----------- ----------
Cash flows from investing activities:
Purchases of loans secured by trust deeds (119,403,718) (83,714,828) (78,449,432)
Principal collected 1,663,685 1,793,240 2,484,071
Loan payoffs 91,288,643 74,556,044 53,449,102
Sales of loans to third and related parties at face value 7,816,294 - -
Investment in real estate properties (263,886) (350,225) (2,061,944)
Net proceeds from disposition of real estate 942,659 267,799 955,418
Investment in limited partnership - (1,409,099) (4,152,918)
Distributions received from limited partnership - 6,468,105 7,573,669
Investment in corporate joint venture (1,416,609) (166,198) (67,510)
Maturity of (investment in) commercial paper 3,084,044 (3,084,044) -
Maturities of (investments in) certificates
of deposit, net 184,006 565,994 (150,000)
------------- ------------ ------------
Net cash used in investing activities (16,104,882) (5,073,212) (20,419,544)
-------------- ------------ ------------
Cash flows from financing activities:
Proceeds from sale of partnership units 20,673,417 14,310,053 17,206,030
Partners' cash distributions (6,575,787) (6,301,460) (6,219,910)
Partners' capital withdrawals (18,306,472) (14,377,618) (12,515,336)
------------ ----------- ------------
Net cash used in financing activities (4,208,842) (6,369,025) (1,529,216)
-------------- ------------- -------------
Net (decrease) increase in cash and cash equivalents (3,044,273) 5,187,484 (8,313,546)
Cash and cash equivalents at beginning of year 8,260,599 3,073,115 11,386,661
------------- ----------- -----------
Cash and cash equivalents at end of year $ 5,216,326 8,260,599 3,073,115
============== ============= ============
See notes 3, 4 and 5 for supplemental disclosure of non-cash investing and
financing activities. See accompanying notes to financial statements.
</TABLE>
<PAGE>
OWENS MORTGAGE INVESTMENT FUND
(A California Limited Partnership)
Notes to Financial Statements
December 31, 1999, 1998 and 1997
(1) Organization
Owens Mortgage Investment Fund, a California Limited Partnership, (the
Partnership) was formed on June 14, 1984 to invest in loans secured by
first, second and third trust deeds, wraparound, participating and
construction mortgage loans and leasehold interest mortgages. The
Partnership commenced operations on the date of formation and will
continue until December 31, 2034 unless dissolved prior thereto under the
provisions of the Partnership Agreement.
The general partner of the Partnership is Owens Financial Group, Inc.
(OFG), a California corporation engaged in the origination of real estate
mortgage loans for eventual sale and the subsequent servicing of those
mortgages for the Partnership and other third-party investors.
OFG is authorized to offer and sell units in the Partnership up to an
aggregate of 500,000,000 units outstanding at $1.00 per unit,
representing $500,000,000 of limited partnership interests in the
Partnership. Limited partnership units outstanding were 212,702,897,
199,569,753 and 189,063,122 as of December 31, 1999, 1998 and 1997,
respectively.
(2) Summary of Significant Accounting Policies
(a) Management Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(b) Loans Secured by Trust Deeds
Loans secured by trust deeds are acquired from OFG and are
recorded at cost. Interest income on loans is accrued by the
simple interest method. The Partnership does not recognize
interest income on loans once they are determined to be impaired
until the interest is collected in cash. A loan is impaired when,
based on current information and events, it is probable that the
Partnership will be unable to collect all amounts due according to
the contractual terms of the loan agreement or when the payment of
principal or interest is 90 days past due. Cash receipts are
allocated to interest income, except when such payments are
specifically designated as principal reduction or when management
does not believe the Partnership's investment in the loan is fully
recoverable.
(c) Allowance for Loan Losses
The Partnership had an allowance for loan losses equal to
$4,000,000 and $3,500,000 as of December 31, 1999 and 1998,
respectively. Management of the Partnership believes that based on
historical experience and a review of the loans and their
respective collateral, the allowance for loan losses is adequate
in amount.
The outstanding balance of all loans delinquent in monthly
payments greater than 90 days is $7,415,000 and $8,710,000 as of
December 31, 1999 and 1998, respectively. The Partnership
discontinues the accrual of interest on loans when, in the opinion
of management, there is significant doubt as to the collectibility
of interest or principal from the borrower or when the payment of
principal or interest is 90 days past due, unless OFG purchases
the interest receivable from the Partnership. OFG purchased the
interest receivable on delinquent Partnership loans in the total
amount of $0 and $806,000 in the years ended December 31, 1999 and
1998, respectively. As of December 31, 1999 and 1998, loans
totaling $7,415,000 and $7,904,000, respectively, are classified
as non-accrual loans. OFG discontinued its purchases of interest
receivable and delinquent loans for all loans acquired by the
Partnership since May 1, 1993 except in very limited situations.
OFG advances certain payments to the Partnership on behalf of
borrowers, such as property taxes, insurance and mortgage interest
pursuant to senior indebtedness. Purchases of interest receivable
and payments made on loans by OFG during 1999 and 1998 but not
collected as of December 31, 1999 and 1998, respectively, totaled
approximately $230,000 and $270,000, respectively.
Cash and Cash Equivalents
For purposes of the statements of cash flows, cash and cash
equivalents include interest-bearing and noninterest-bearing bank
deposits, money market accounts and short-term certificates of
deposit with original maturities of three months or less.
(e) Marketable Securities
Marketable securities include certificates of deposit and
commercial paper with various financial institutions with original
maturities of up to one year. The Partnership classifies its debt
securities as held-to-maturity, as the Partnership has the ability
and intent to hold the securities until maturity. These securities
are recorded at amortized cost, adjusted for the amortization or
accretion of premiums or discounts. A decline in the market value
of any held-to-maturity security below cost that is deemed to be
other than temporary results in a reduction in carrying amount to
fair value. The impairment is charged to earnings and a new cost
basis for the security is established. Premiums and discounts are
amortized or accreted over the life of the related security as an
adjustment to yield using the effective interest method. Interest
income is recognized when earned. There was no significant
difference between the carrying value and the fair value of
marketable securities as of December 31, 1999 and 1998.
(f) Real Estate Held for Sale
Real estate held for sale includes real estate acquired through
foreclosure and is carried at the lower of the recorded investment
in the loan, inclusive of any senior indebtedness, or the
property's estimated fair value, less estimated costs to sell.
Certain real estate held for sale acquired by the Partnership is
held in a corporate joint venture. The Partnership accounts for
its investment in the corporate joint venture under the equity
method of accounting because the Partnership does not have control
of the joint venture. The corporate joint venture investment in
real estate is carried at the lower of cost or estimated fair
value, less estimated costs to sell. The Partnership increases its
investment by advances made to the corporate joint venture. Any
profit generated from the investment in the corporate joint
venture is recorded as a gain on sale of real estate.
In accordance with Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-lived Assets and
Long-lived Assets to Be Disposed Of, the Partnership periodically
compares the carrying value of real estate held for sale to
expected future cash flows for the purpose of assessing the
recoverability of the recorded amounts. If the carrying value
exceeds future cash flows, the assets are reduced to fair value.
The Partnership increased the allowance for losses on real estate
held for sale by $152,000 during the year ended December 31, 1999.
There were no required reductions to the carrying value of real
estate held for sale made for the year ended December 31, 1998.
(g) Income Taxes
No provision is made for income taxes since the Partnership is not
a taxable entity. Accordingly, any income or loss is included in
the tax returns of the partners.
(3) Loans Secured by Trust Deeds
Loans secured by trust deeds as of December 31, 1999 and 1998 are as
follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C>
Income-producing properties $ 161,664,440 153,171,370
Construction 22,698,154 13,923,720
Unimproved land 15,438,923 13,276,729
Residential 555,000 2,349,646
-------------------- --------------------
$ 200,356,517 182,721,465
==================== ====================
First mortgages $ 182,725,684 162,597,467
Second mortgages 17,566,188 19,223,907
Third mortgages 64,645 548,967
Fourth mortgages -- 351,124
-------------------- --------------------
$ 200,356,517 182,721,465
==================== ====================
</TABLE>
<PAGE>
Scheduled maturities of loans secured by trust deeds as of December 31,
1999 and the interest rate sensitivity of such loans is as follows:
<TABLE>
<CAPTION>
Fixed Variable Total
interest interest
rate rate
-------------------- ----------------- ------------------
<S> <C> <C> <C>
Year ending December 31:
1999 (past maturity) $ 26,202,801 3,247,940 29,450,741
2000 78,376,511 5,854,959 84,231,470
2001 34,280,552 2,156,570 36,437,122
2002 23,297,926 4,242,737 27,540,663
2003 178,724 2,428,847 2,607,571
2004 5,308,575 6,419,188 11,727,763
Thereafter (through 2018) 3,687,040 4,674,147 8,361,187
-------------------- ----------------- ------------------
$ 171,332,129 29,024,388 200,356,517
==================== ================= ==================
</TABLE>
Variable rate loans use as indices the one- and five-year Treasury
Constant Maturity Index (5.95% and 6.33%, respectively, as of December
31, 1999), the prime rate (8.50% as of December 31, 1999) and the
weighted average cost of funds index for Eleventh District savings
institutions (4.77% as of December 31, 1999). Premiums over these indices
have varied from 250-550 basis points depending upon market conditions at
the time the loan is made.
The scheduled maturities for 1999 include approximately $29,451,000 of
loans which are past maturity as of December 31, 1999, of which
$5,826,000 represents loans for which interest payments are delinquent
over 90 days. During the years ended December 31, 1999 and 1998, the
Partnership refinanced loans totaling $7,436,000 and $9,941,000,
respectively, thereby extending the maturity dates of such loans.
The Partnership's investment in loans delinquent over 90 days as of
December 31, 1999 totals approximately $7,415,000, of which $5,686,000
has a specific related allowance for credit losses totaling approximately
$1,225,000. There is a specific and non-specific allowance for credit
losses of $2,775,000 for the remaining delinquent loans of $1,729,000 and
for other current loans. There was an additional allowance for credit
losses of $500,000 during the year ended December 31, 1999. There was no
net additional allowance for credit losses during the year ended December
31, 1998. Of the delinquent loans, approximately $850,000 and $3,657,000
were in the process of foreclosure as of December 31, 1999 and 1998.
The average recorded investment in impaired loans was $7,944,000 and
$7,190,000 during the years ended December 31, 1999 and 1998,
respectively. Interest income received on impaired loans during the years
ended December 31, 1999 and 1998 totaled approximately $213,000 and
$546,000, respectively, $213,000 and $466,000 of which was paid by
borrowers and $0 and $80,000 of which related to purchases of interest
receivable by OFG, respectively.
As of December 31, 1999 and 1998, the Partnership's loans secured by
deeds of trust on real property collateral located in Northern California
totaled approximately 40% ($79,542,000) and 48% ($87,013,000),
respectively, of the loan portfolio. The Northern California region
(which includes the following counties and all counties north: Monterey,
Fresno, Kings, Tulare and Inyo) is a large geographic area which has a
diversified economic base. The ability of borrowers to repay loans is
influenced by the economic strength of the region and the impact of
prevailing market conditions on the value of real estate. Such loans are
secured by deeds of trust on real estate properties and are expected to
be repaid from the cash flow of the properties or proceeds from the sale
or refinancing of the properties. The policy of the Partnership is to
require real property collateral with a value, net of senior
indebtedness, that exceeds the carrying amount of the loan balance and to
record a deed of trust on the underlying property.
During the year ended December 31, 1999, the Partnership sold for cash
full interests in ten loans to third parties and to related parties in
the amounts of $7,082,000 and $764,000, respectively. The sale of all the
loans resulted in no gain or loss in the accompanying financial
statements.
During 1998, the Partnership invested in a loan in the amount of
$2,000,000 that is secured by an assignment of a 49% interest in a
limited liability company (LLC) and a direct 2% ownership in the LLC. The
LLC owns a retail shopping center located in Sedona, Arizona.
(4) Real Estate Held for Sale
Real estate held for sale includes the following components as of
December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
<S> <C> <C>
Real estate properties held for sale $ 10,175,552 9,165,641
Investment in corporate joint venture 2,222,170 805,561
-------------------- --------------------
$ 12,397,722 9,971,202
==================== ====================
</TABLE>
Gain on sale of real estate includes the following components for the
years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
--------------- ------------------ -----------------
<S> <C> <C> <C>
Gain on sale of real estate $ 840,640 24,873 278,339
properties
Gain on sale of real estate by -- 1,246,884 2,355,075
limited partnership
--------------- ------------------ -----------------
$ 840,640 1,271,757 2,633,414
=============== ================== =================
</TABLE>
<PAGE>
(a) Real Estate Properties Held for Sale
Real estate properties held for sale as of December 31, 1999 and 1998
consists of the following properties acquired through foreclosure in 1993
through 1999:
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
<S> <C> <C>
Light industrial warehouse, Merced, California, net of $ 522,121 650,028
valuation allowance of $350,000 as of December 31,
1999 and 1998
Commercial lot/residential development, Vallejo, 361,432 1,039,116
California
Commercial lot, Sacramento, California, net of 299,828 299,828
valuation allowance of $250,000 as of December 31,
1999 and 1998
Office building and undeveloped land, Monterey, 2,053,163 1,885,731
California, net of valuation allowance of $200,000
as of December 31, 1999 and 1998
Manufactured home subdivision development, Ione, 2,366,289 2,554,079
California, net of valuation allowance of $384,000
as of December 31, 1999 and 1998
Light industrial building, Oakland, California 453,815 433,815
Undeveloped land, Reno, Nevada 215,895 215,420
Light industrial building, Paso Robles, California 1,557,502 1,558,882
Commercial building, Sacramento, California 30,000 30,000
Commercial building, Gresham, Oregon 448,444 425,557
22% interest in 6-unit residential building, Oakland, -- 53,185
California
91% interest in 92 residential lots, Lake Don Pedro, 560,184 --
California
Commercial building, San Ramon, California, net of 1,289,746 --
valuation allowance of $152,000 as of December 31,
1999
Residential/retail building, Oakland, California 17,133 --
--------------- ---------------
$ 10,175,552 9,145,641
=============== ===============
</TABLE>
The acquisition of certain of these properties resulted in
non-cash increases in real estate held for sale and non-cash
decreases in loans secured by trust deeds of $2,000,044, $508,686
and $3,279,349 for the years ended December 31, 1999, 1998 and
1997, respectively.
During 1999, a six-unit residential building located in Oakland,
California, in which the Partnership owned a 22% interest, was
sold resulting in a gain to the Partnership of $18,000. In
addition, a 66-acre residential parcel located in Vallejo,
California was sold by the Partnership for cash of $500,000 and a
note of $1,000,000 resulting in a gain to the Partnership of
$822,000.
In February 1998, OFG purchased the manufactured home subdivision
development property located in Sonora, California, from the
Partnership for $1,150,000. The Partnership carried back a loan
secured by a trust deed on the property for the full purchase
price. The note included interest at 8% per annum and was due on
demand. The loan was repaid by OFG in November 1998.
During 1997, the Partnership sold three properties for a sales
price of approximately $1,659,000. On one of the three properties,
the Partnership took back a loan secured by a trust deed in the
amount of $840,000.
During 1997, the Partnership sold two loans secured by second
deeds of trust to OFG for $600,000 (face value). The Partnership
subsequently purchased the property (located in Paso Robles,
California) securing the loans at the senior lienholders trustee
sale for $1,350,000; thus, eliminating OFG's junior deeds of
trust. OFG recorded a loss of $600,000 as a result of this
transaction.
(b) Investment in Limited Partnership
In 1993, the Partnership foreclosed on a loan in the amount of
$600,000 secured by a junior lien on 30 residential lots located
in Carmel Valley, California, and in 1994, paid off the senior
loan in the amount of $500,000. During 1995, the Partnership
entered into a limited partnership, WV-OMIF Partners, L.P.
(WV-OMIF Partners) with an unrelated developer/builder, Wood
Valley Development, Inc. (Woodvalley), for the purpose of
constructing single-family homes on the 30 lots. The Partnership
contributed the lots to WV-OMIF Partners in 1996 in exchange for a
limited partnership interest. The Partnership provided advances to
the WV-OMIF Partners to develop and construct the homes. The
Partnership received interest at a rate of prime plus 2% on the
advances to WV-OMIF Partners.
During 1998 and 1997, the Partnership advanced an additional
$1,409,099 and $4,152,918, respectively, to WV-OMIF Partners for
the continued development and construction of the homes. WV-OMIF
sold fourteen homes during the year ended December 31, 1998 for
proceeds of $6,987,101 and the net gain allocable to the
Partnership was $1,246,884, including interest income of $176,440.
WV-OMIF Partners distributed $6,468,105 (including $102,579 in
reimbursements from OFG and Woodvalley) to OMIF during the year
ended December 31, 1998. WV-OMIF Partners sold fifteen homes
during the year ended December 31, 1997 for proceeds of $8,011,960
and the net gain allocable to the Partnership was $2,355,075,
including interest income of $295,957. WV-OMIF Partners
distributed $7,573,669 (including $648,069 in reimbursements from
OFG and Woodvalley) to OMIF in 1997. The final home in WV-OMIF
Partners was completed and sold in October 1998.
(c) Investment in Corporate Joint Venture
In 1995, the Partnership foreclosed on a loan in the amount of
$571,853 secured by a senior lien on a commercial parcel of land
located in Los Gatos, California. During 1997, the Partnership
contributed the land into 720 University, LLC (the Company), a
corporate joint venture formed between the Partnership and BGC
Properties, LLC (BGC). The purpose of the Company is to develop,
construct and operate a commercial office building or R&D facility
on the land to be held for investment and eventual sale. The
Partnership is providing loans to the Company to develop and
construct the building and is entitled to receive interest at a
rate of prime plus 2% on the loans it makes to the Company. As of
December 31, 1999 and 1998, the Partnership had total assets of
$2,431,000 and $1,031,000, respectively.
During the years ended December 31, 1999 and 1998, the Partnership
advanced an additional $1,416,609 and $166,198, respectively, to
the Company for development. The total investment in the corporate
joint venture totals $2,222,170 and $805,561 as of December 31,
1999 and 1998, respectively.
The net cash flows from the operations of the Company are to be
distributed in accordance with the following priorities: (1) to
the Partnership and to BGC until the sum of all current and prior
distributions of net cash flows equals the members' priority
return on capital, if any, as of the end of the calendar quarter
immediately preceding distribution; and (2) thereafter, 70% to the
Partnership and 30% to BGC.
The distribution upon dissolution shall be made in accordance with
the following priorities: 1) to third parties to pay all debts; 2)
to the members to pay all debts; 3) to the members in accordance
with and to the extent of their respective positive capital
account balances; 4) 70% to the Partnership and 30% to BGC.
The Company is considered a corporate joint venture, and, thus,
the Partnership accounts for its investment in the Company under
the equity method of accounting.
(5) Partners' Capital
In December 1998, the limited partners voted to amend the Partnership
Agreement and there was a further amendment by OFG in February 1999. All
such changes have been incorporated into this note and elsewhere in the
financial statements where applicable.
(a) Allocations, Distributions and Withdrawals
In accordance with the Partnership Agreement, the Partnership's
profits, gains and losses are allocated to each limited partner
and OFG in proportion to their respective capital accounts.
Distributions of net income are made monthly to the limited
partners in proportion to their weighted-average capital accounts
as of the last day of the preceding calendar month. Accrued
distributions payable represent amounts to be distributed to
partners in January of the subsequent year based on their capital
accounts as of December 31.
The Partnership makes monthly net income distributions to those
limited partners who elect to receive such distributions. Those
limited partners who elect not to receive cash distributions have
their distributions reinvested in additional limited partnership
units. Such reinvested distributions totaled $10,703,230,
$10,326,334 and $10,077,144 for the years ended December 31, 1999,
1998, and 1997, respectively. Reinvested distributions are not
shown as partners' cash distributions or proceeds from sale of
partnership units in the accompanying statements of partners'
capital and cash flows.
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 OFG, subject to the following
limitations, among others:
o No withdrawal of units can be requested or made until at
least one year from the date of purchase of those units, for
units purchased on or after February 16, 1999, other than
units received under the Partnership's Reinvested
Distribution Plan.
o Any such payments are required to be made only from net
proceeds and capital contributions (as defined) during said
91-day period.
o A maximum of $100,000 per partner may be withdrawn during
any calendar quarter.
o The general partner is not required to establish a reserve
fund for the purpose of funding such payments.
o No more than 10% of the outstanding limited partnership
interest may be withdrawn during any calendar year except
upon dissolution of the Partnership.
(b) Promotional Interest of General Partner
OFG has contributed capital to the Partnership in the amount of
0.5% of the limited partners' aggregate capital accounts and,
together with its promotional interest, OFG has an interest equal
to 1% of the limited partners' capital accounts. This promotional
interest of OFG of up to 1/2 of 1% is recorded as an expense of
the Partnership and credited as a contribution to OFG's capital
account as additional compensation. As of December 31, 1999, OFG
had made cash capital contributions of $1,074,612 to the
Partnership. OFG is required to continue cash capital
contributions to the Partnership in order to maintain its required
capital balance.
The promotional interest expense charged to the Partnership was
$67,907, $49,545 and $70,747 for the years ended December 31,
1999, 1998 and 1997, respectively.
(6) Contingency Reserves
In accordance with the Partnership Agreement and to satisfy the
Partnership's liquidity requirements, the Partnership is required to
maintain contingency reserves in an aggregate amount of at least 1-1/2%
of the capital accounts of the limited partners. The cash capital
contribution of OFG (amounting to $1,074,612 as of December 31, 1999), up
to a maximum of 1/2 of 1% of the limited partners' capital accounts will
be available as an additional contingency reserve, if necessary.
The contingency reserves required as of December 31, 1999 and 1998 were
approximately $4,320,000 and $4,063,000, respectively. Certificates of
deposit, commercial paper and certain cash equivalents as of the same
dates were accordingly maintained as reserves.
(7) Income Taxes
The net difference between partners' capital per the Partnership's
federal income tax return and these financial statements is comprised of
the following components:
<TABLE>
<CAPTION>
1999 1998
------------------- --------------------
<S> <C> <C>
Partners' capital per financial statements $ 214,611,813 201,340,802
Accrued interest income (2,150,952) (1,380,530)
Allowance for loan losses 4,000,000 3,500,000
Allowance for real estate held for sale 1,336,000 1,184,000
Accrued distributions 577,281 522,827
Other (208,121) 8,979
------------------- --------------------
Partners' capital per federal income tax return $ 218,166,021 205,176,078
=================== ====================
</TABLE>
(8) Transactions with Affiliates
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 the twelve months in the calendar year 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 1/12 of the maximum limits, at the end of
the calendar year the sum of the fees collected for each of the 12 months
is equal to or less than the stated limits. Management fees amounted to
approximately $2,653,000, $3,250,000 and $3,879,000 for the years ended
December 31, 1999, 1998 and 1997, respectively, and are included in the
accompanying statements of income. Service fees amounted to approximately
$480,000, $472,000 and $421,000 for the years ended December 31, 1999,
1998 and 1997, respectively, and are included in the accompanying
statements of income.
As of December 31, 1999 and 1998, the Partnership owed management and
servicing fees to OFG in the amounts of $751,759 and $391,098,
respectively.
OFG receives late payment charges from borrowers who make delinquent
payments. Such charges are in addition to the normal monthly loan
payments and totaled approximately $395,000, $382,000, and $409,000 for
the years ended December 31, 1999, 1998 and 1997, respectively.
OFG originates all loans the Partnership invests in and receives an
investment evaluation fee from borrowers. Such fees earned by OFG
amounted to approximately $6,681,000, $1,724,000 and $2,994,000 on loans
originated of $119,404,000, $83,715,000 and $78,449,000 for the years
ended December 31, 1999, 1998 and 1997, respectively. Such fees as a
percentage of loans purchased by the Partnership were 5.6%, 2.1% and 3.8%
for the years ended December 31, 1999, 1998 and 1997, respectively. In
the year ended December 31, 1999, one loan in the amount of $12,025,000
had an investment evaluation fee of $2,900,000.
During the year ended December 31, 1998, OFG purchased the manufactured
home subdivision development in Sonora, California from the Partnership
at a loss of approximately $2,000. An allowance for loss on this property
in the amount of $712,000 had been recorded in 1997, therefore, the loss
for the year ended December 31, 1998 was an additional $2,000. The
Partnership carried back a loan from OFG for the entire purchase price of
$1,150,000 which was paid off in November 1998.
During the year ended December 31, 1997, OFG purchased three loans
secured by trust deeds from OMIF at face values in the total amount of
$613,000 for cash of $340,000 and assumption of a loan in the amount of
$273,000. OFG then foreclosed on the loans and sold one of the properties
during 1997 for a gain of approximately $42,000. An additional property
was sold by OFG during 1998 for a gain of approximately $58,000.
OFG has purchased the Partnership's receivables for delinquent interest
of $65,000 and $110,000, related to delinquent loans for the years ended
December 31, 1999 and 1998, respectively.
Included in loans secured by trust deeds as of December 31, 1998 was a
note in the amount of $180,000, which was secured by a property owned by
an affiliate of OFG. The loan earned interest at 8% per annum and was
repaid during 1999. The Partnership earned interest income of
approximately $4,000, $143,000 and $188,000 during the years ended
December 31, 1999, 1998 and 1997, respectively, from OFG and affiliates
under loans secured by trust deeds.
(9) Net Income per Limited Partner Unit
Net income per limited partnership unit is computed using the weighted
average of limited partnership units outstanding during the year. These
amounts were 206,607,637, 195,482,129 and 186,954,376 for the years ended
December 31, 1999, 1998 and 1997, respectively.
<PAGE>
(10) Fair Value of Financial Instruments
The Financial Accounting Standards Board's Statement No. 107, Disclosures
about Fair Value of Financial Instruments, requires the determination of
fair value for certain of the Partnership's assets. The following methods
and assumptions were used to estimate the value of the financial
instruments included in the following categories:
(a) Cash and Cash Equivalents and Commercial Paper
The carrying amount approximates fair value because of the
relatively short maturity of these instruments.
0
(b) Loans Secured by Trust Deeds
The carrying value of these instruments of $200,356,517
approximates the fair value as of December 31, 1999. The fair
value is estimated based upon projected cash flows discounted at
the estimated current interest rates at which similar loans would
be made. The allowance for loan losses of $4,000,000 as of
December 31, 1999 should also be considered in evaluating the fair
value of loans secured by trust deeds.
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
There were no changes in or disagreements on any items dealing with
accounting and financial disclosure with the accountants during the fiscal year.
Part III
Item 10. Directors and Executive Officers of the Registrant
The General Partner is Owens Financial Group, Inc., a California
corporation, 2221 Olympic Blvd., Walnut Creek, CA 94595. Its telephone number is
(925) 935-3840.
The General Partner manages and controls the affairs of the Partnership
and has general responsibility and final authority in all matters affecting the
Partnership's business. These duties include dealings with limited partners,
accounting, tax and legal matters, communications and filings with regulatory
agencies and all other needed management duties. The General Partner may also,
at its sole discretion and subject to change at any time,
purchase from the Partnership the interest receivable or principal
on delinquent mortgage loans held by the Partnership;
purchase from a senior lienholder the interest receivable or
principal on mortgage loans senior to mortgage loans held by the
Partnership;
use its own funds to cover any other costs associated with
mortgage loans held by the Partnership such as property taxes,
insurance and legal expenses; and
purchase from the Partnership real estate acquired through
foreclosure.
In order to assure that the limited partners will not have personal
liability as a General Partner, limited partners have no right to participate in
the management or control of the Partnership's business or affairs other than to
exercise the limited voting rights provided for in the Partnership Agreement.
The General Partner has primary responsibility for the initial selection,
evaluation and negotiation of mortgage investments for the Partnership. The
General Partner provides all executive, supervisory and certain administrative
services for the Partnership's operations, including servicing the mortgage
loans held by the Partnership. The Partnership's books and records are
maintained by the General Partner, subject to audit by independent certified
public accountants.
The General Partner had a net worth of approximately $15,811,000 on
December 31, 1999. The following persons comprise the board of directors and
management employees of the General Partner actively involved in the
administration and investment activity of the Partnership.
Milton N. Owens - Mr. Owens, Chairman of the Board of Directors of
the General Partner, age 88, is a licensed real estate broker and
has been Chairman since October 1981. Mr. Owens is a lifetime
member of the American Institute of Real Estate Appraisers (MAI)
and holds other professional designations. Mr. Owens has conducted
real estate appraisal courses at the University of California,
Berkeley. From 1936 to 1951, prior to his formation of Owens
Mortgage Company, Mr. Owens was employed with the mortgage loan
division of the Travelers Insurance Company. Mr. Owens is the
father of William C. Owens, also a member of the Board of
Directors and President of the General Partner.
William C. Owens - Mr. Owens, age 49, has been President of the
General Partner since April 1996 and is also a member of the Board
of Directors and the Loan Committee of the General Partner. From
1989 until April 1996, he served as a Senior Vice President of the
General Partner. Mr. Owens has been active in real estate
construction, development, and mortgage financing since 1973.
Prior to joining Owens Mortgage Company in 1979, Mr. Owens was
involved in mortgage banking, property management and real estate
development. As President of the General Partner, Mr. Owens is
responsible for the overall activities and operations of the
General Partner, including corporate investment, operating policy
and planning. In addition, he is responsible for loan production,
including the underwriting and review of potential loan
investments. Mr. Owens is also the President of Owens Securities
Corporation, a subsidiary of the General Partner. Mr. Owens is a
licensed real estate broker and the son of Milton Owens, Chairman
of the Board of Directors of the General Partner.
Bryan H. Draper - Mr. Draper, age 42, has been Chief Financial
Officer and corporate secretary of the General Partner since
December 1987 and is also a member of the board of directors of
the General Partner. Mr. Draper is a Certified Public Accountant
and is responsible for all accounting, finance, and tax matters
for the General Partner and Owens Securities Corporation. Mr.
Draper received a Masters of Business Administration degree from
the University of Southern California in 1981.
William E. Dutra - Mr. Dutra, age 37, is a Senior Vice President
and member of the Board of Directors and the Loan Committee of the
General Partner and has been its employee since February 1986. In
charge of loan production, Mr. Dutra has responsibility for loan
committee review, loan underwriting and loan production.
Andrew J. Navone - Mr. Navone, age 43, is a Vice President and
member of the Board of Directors and the Loan Committee of the
General Partner and has been its employee since August 1985. Mr.
Navone has responsibilities for loan committee review, loan
underwriting and loan production.
Melina A. Platt - Ms. Platt, age 33, has been Controller of the
General Partner since May 1998. Ms. Platt is a Certified Public
Accountant and is responsible for all accounting, finance, and
regulatory agency filings of the Partnership. Ms. Platt was
previously a Senior Manager with KPMG LLP.
Research and Acquisition
The General Partner considers prospective investments for the
Partnership. In that regard, the General Partner evaluates the credit of
prospective borrowers, analyzes the return to the Partnership of potential
mortgage loan transactions, reviews property appraisals, and determines which
types of transactions appear to be most favorable to the Partnership. For these
services, the General Partner generally receives mortgage placement fees
(points) paid by borrowers when loans are originally funded or when the
Partnership extends or refinances mortgage loans. These fees may reduce the
yield obtained by the Partnership from its mortgage loans.
Partnership Management
The General Partner is responsible for the Partnership's investment portfolio.
Its services include:
the creation and implementation of Partnership investment
policies;
preparation and review of budgets, economic surveys, cash flow and
taxable income or loss projections and working capital
requirements;
preparation and review of Partnership reports;
communications with limited partners;
supervision and review of Partnership bookkeeping, accounting and
audits;
supervision and review of Partnership state and federal tax
returns; and
supervision of professionals employed by the Partnership in
connection with any of the foregoing, including attorneys,
accountants and appraisers.
For these and certain other services the General Partner is entitled to
receive a management fee of up to 2-3/4% per annum of the unpaid balance of the
Partnership's mortgage loans. The management fee is payable on all loans,
including nonperforming or delinquent loans. The General Partner believes that a
fee payable on delinquent loans is justified because of the expense involved in
the administration of such loans. See "Compensation of the General
Partner--Management Fees," at page 6.
Item 11. Executive Compensation
The Partnership does not pay any compensation to any persons other than
the General Partner. The Partnership has not issued, awarded or otherwise paid
to any General Partner, any options, SAR's, securities, or any other direct or
indirect form of compensation other than the management and promotional fees
permitted under the Partnership Agreement.
The following table summarizes the forms and amounts of compensation
paid to the General Partner for the year ended December 31, 1999. Such fees were
established by the General Partner and were not determined by arms-length
negotiation.
Year Ended
December 31, 1999
Form of Compensation Maximum
Actual Allowable
Management Fees...................... $ 2,653,000 $ 5,276,000
Promotional Interest................. 68,000 68,000
------------- --------------
Subtotal............................. $ 2,721,000 $ 5,344,000
------------- --------------
Investment Evaluation Fees........... $ 6,681,000 $ 6,681,000
Servicing Fees....................... 480,000 480,000
Late Payment Charges................. 395,000 395,000
------------- ---------------
Subtotal. $ 7,556,000 $ 7,556,000
------------- ---------------
Grand Total $ 10,277,000 $ 12,900,000
============ ============
Reimbursement of Other Expenses $ 44,000 $ 44,000
============= =============
Item 12. Security Ownership of Certain Beneficial Owners and Management
No person or entity owns beneficially more than 5% of the ownership
interests in the Partnership. The General Partner owns approximately 2,548,000
units (1.2%) of the Partnership as of December 31, 1999. The ownership (common
stock) of the General Partner is owned as follows: 43.01% by Milton N. Owens,
26.88% by William C. Owens, 10.75% by Bryan H. Draper and 9.68% each by William
E. Dutra and Andrew J. Navone.
Item 13. Certain Relationships and Related Transactions
Transactions with Management and Others
Management Fee
The General Partner 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. The amount of management
fees to the General Partner for the year ended December 31, 1999 was
approximately $2,653,000.
Servicing Fee
All of the Partnership's loans are serviced by the General Partner, in
consideration for which the General Partner receives up to .25% per annum of the
unpaid principal balance of the loans on a monthly basis. The amount of
servicing fees to the General Partner for the year ended December 31, 1999 was
approximately $480,000.
Promotional Interest
The General Partner is required to continue cash capital
contributions to the Partnership in order to maintain its required capital
balance equal to 1% of the limited partners' capital accounts. The General
Partner has contributed capital to the Partnership in the amount of 0.5% of the
limited partners' aggregate capital accounts and, together with its promotional
interest, the General Partner has an interest equal to 1% of the limited
partners' capital accounts. This promotional interest of up to 1/2 of 1% is
recorded as an expense of the Partnership and credited as a contribution to the
General Partner's capital account as additional compensation. As of December 31,
1999, the General Partner had made cash capital contributions of $1,075,000 to
the Partnership. During 1999, the Partnership incurred promotional interest
expense of $68,000.
Reimbursement of Other Expenses
The General Partner is reimbursed by the Partnership for the actual
cost of goods and materials used for or by the Partnership and obtained from
unaffiliated entities and the actual cost of services of non-management and
non-supervisory personnel related to the administration of the Partnership
(subject to certain limitations contained in the Partnership Agreement). During
1999, the Partnership reimbursed the General Partner for expenses in the amount
of $44,000.
Compensation from Others
In addition to compensation from the Partnership, the General Partner
also receives compensation from borrowers under the mortgage loans placed by the
General Partner with the Partnership.
Investment Evaluation Fees
Investment evaluation fees, also called mortgage placement fees or
points, are paid to the General Partner from the borrowers under loans held by
the Partnership. These fees are compensation for the evaluation, origination,
extension and refinancing of loans for the borrowers and may be paid at the
placement of the loan or at the time of final repayment of the loan. The amount
of these fees is determined by competitive conditions and the General Partner
and may have a direct effect on the interest rate borrowers are willing to pay
the Partnership. During 1999, the General Partner earned investment evaluation
fees on Partnership loans in the amount of $6,681,000.
Late Payment Charges
All late payment charges paid by borrowers of delinquent mortgage
loans, including additional interest and late payment fees, are retained by the
General Partner. During 1999, the General Partner received late payment charges
from borrowers in the amount of $395,000.
<PAGE>
Part IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
Form 10-K Pg.
(a)(1) List of Financial Statements:
Report of Independent Auditors p. 24
Balance Sheets - December 31, 1999 and
1998 p. 25
Statements of Income for the years ended
December 31, 1999, 1998 and 1997 p. 26
Statements of Partners Capital for the
years ended December 31, 1999, 1998 and 1997 p. 27
Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997 p. 28
Notes to Financial Statements pp.29-40
(2) Schedule IV- Mortgage Loans on Real Estate pp. 47-48
(3) Exhibits:
3. Amended and Restated Limited Partnership Agreement, incorporated by
reference to Exhibit A to Prospectus filed with Registration Statement 333-71299
filed January 27, 1999.
10(a). Subscription Agreement and Power of Attorney, incorporated by
reference to Exhibit B to Prospectus filed with Registration Statement 333-71299
filed January 27, 1999.
(b) Reports on Form 8-K - None
(c) Exhibits:
3. Amended and Restated Limited Partnership Agreement, incorporated by
reference to Exhibit A to Prospectus filed with Registration Statement 333-71299
filed January 27 1999.
10(a). Subscription Agreement and Power of Attorney, incorporated by
reference to Exhibit B to Prospectus filed with Registration Statement 333-71299
filed January 27, 1999.
(d) Schedules:
Schedule IV - Mortgage Loans on Real Estate
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE IV
OWENS MORTGAGE INVESTMENT FUND
MORTGAGE LOANS ON REAL ESTATE -- DECEMBER 31, 1999
Principal Amount
of Loans Subject
to Delinquent
Description Final Carrying Amount Principal or
Interest Rate Maturity date of Mortgages Interest
TYPE OF LOAN
<S> <C> <C> <C> <C>
Income Producing................ 6.875-14.50% Current to Sept., 2018 $161,664,440 $ 7,359,283
Construction.................... 10.00-14.00% Current to April, 2004 22,698,154 56,062
Land .......................... 10.00-13.00% Current to Aug., 2002 15,438,923 0
Residential..................... 10.50-13.00% Current to Sept., 2002 555,000 0
------------ -----------
TOTAL $200,356,517 $ 7,415,345
============ ===========
AMOUNT OF LOAN
$0-250,000...................... 6.875-14.50% Current to Sept., 2014 $4,515,050 $ 196,347
$250,001-500,000................ 7.50-13.50% Current to Sept., 2018 10,287,424 0
$500,001-1,000,000.............. 9.00-14.00% Current to Jan., 2014 15,996,375 1,535,000
Over $1,000,000................. 8.00-14.00% Current to May, 2015 169,557,668 5,683,998
------------ ----------
TOTAL $200,356,517 $7,415,345
============ ==========
POSITION OF LOAN
First .......................... 6.875-14.50% Current to Sept., 2018 $182,725,684 $ 7,350,700
Second ......................... 10.00-14.50% Current to Aug., 2010 17,566,188 0
Third .......................... 10.00% Current 64,645 64,645
------------ ----------
TOTAL $200,356,517 $ 7,415,345
============ ==========
</TABLE>
- ---------------
NOTE 1: All loans are acquired from an affiliate of the Partnership,
namely Owens Financial Group, Inc., the General Partner.
NOTE 2:
Balance at beginning of period (1/1/97)............................$154,148,934
Additions during period:
New mortgage loans.............................................78,449,432
Loan carried back on sale of real estate......................... 840,000
Subtotal......................................................233,438,366
Deductions during period:
Collection of principal........................................55,444,410
Foreclosures....................................................3,279,349
Balance at end of period (12/31/97)..........................$174,714,607
Balance at beginning of period (1/1/98)............................$174,714,607
Additions during period:
New mortgage loans.............................................83,714,828
Loan carried back on sale of real estate to general partner.....1,150,000
Subtotal......................................................259,579,435
Deductions during period:
Collection of principal........................................76,349,284
Foreclosures......................................................508,686
Balance at end of period (12/31/98)..........................$182,721,465
Balance at beginning of period (1/1/99)............................$182,721,465
Additions during period:
New mortgage loans............................................119,403,718
Loan carried back on sale of real estate........................1,000,000
Subtotal......................................................303,125,183
Deductions during period:
Collection of principal........................................92,952,328
Sales of loans secured by trust deeds at face value.............7,816,294
Foreclosures....................................................2,000,044
Balance at end of period (12/31/99)..........................$200,356,517
During the years ended December 31, 1999, 1998 and 1997, the Partnership
refinanced loans totaling $7,436,000, $9,941,000 and $6,562,000, respectively,
thereby extending the maturity date.
During 1998, the Partnership sold a property located in Sonora, California to
the General Partner for $1,150,000. The Partnership carried back a loan secured
by a trust deed on the property for the full purchase price.
During 1997, the Partnership sold five loans to the General Partner at face
values in the total amount of $1,213,000 comprised of cash of $940,000 and an
assumption of a loan in the amount of $273,000.
- --------------
NOTE 3: Included in the above loans are the following loans which exceed
3% of the total loans as of December 31, 1999. There are no other
loans that exceed 3% of the total loans as of December 31, 1999:
<TABLE>
<CAPTION>
Principal
Amount of
Loans Subject
Final Face Carrying to Delinquent
Interest Maturity Periodic Payment Prior Amount of Amount of Principal or
Description Rate Date Terms Liens Mortgages Mortgages Interest
----------- -------- -------- --------------- ----- --------- --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Office Building,
Tualatin, OR........... 10.00% 6/1/02 Interest only, None $7,500,000 $7,500,000 $0
balance due at
maturity
Unimproved Land 13.00% 8/31/00 Interest only, None $12,025,000 $12,025,000 $0
Las Vegas, NV.......... balance due at
maturity
Office Building 12.50% 11/1/00 Interest only, None $6,678,000 $6,678,000 $0
San Francisco, CA...... balance due at
maturity
Commercial Retail Centers, 10.00% 5/8/00 Interest only, None $10,600,000 $10,600,000 $0
Great Falls, MT and balance due at
Puyallup, WA........... maturity
</TABLE>
- ---------------
NOTE 4: All amounts reported in this Schedule IV represent the aggregate cost
for Federal income tax purposes.
NOTE 5: There are no write-downs or reserves on any of the individual loans
listed under Note 3 above.
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: March 30, 2000 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> Year
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 5,216,326
<SECURITIES> 250,000
<RECEIVABLES> 2,150,952
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,617,278
<PP&E> 12,397,722
<DEPRECIATION> 0
<TOTAL-ASSETS> 216,371,517
<CURRENT-LIABILITIES> 1,759,704
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 214,611,813
<TOTAL-LIABILITY-AND-EQUITY> 216,371,517
<SALES> 0
<TOTAL-REVENUES> 21,457,192
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,325,339
<LOSS-PROVISION> 652,000
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 17,479,853
<INCOME-TAX> 0
<INCOME-CONTINUING> 17,479,853
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,479,853
<EPS-BASIC> .08
<EPS-DILUTED> .08
</TABLE>
