U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934 - For the Transition period from to
Commission File Number: 0-21604
Common Goal Health Care Pension and Income Fund L.P. II
(Exact name of small business issuer as specified in its charter)
Delaware 36-3644837
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(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
215 Main Street
Penn Yan, New York 14527
------------------ -----
(Address of principal executive offices) (Zip Code)
(315) 536-5985
(Issuer's telephone number)
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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__
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this Form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements, incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. (X)
Isssuer's revenues for the fiscal year ended December 31, 1996 were $268,703.
The aggregate sales price of the units of Limited Partnership Interest held
by non-affiliates of the Registrant as of March 31, 1997 was $3,416,591 (413
investors). As of March 31, 1997, there was no market for these Units and no
market is expected to develop. The aggregate sales price is accordingly not
necessarily indicative of the price at which these Units would trade.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Prospectus of the Registrant dated February 20, 1987, and
filed pursuant to Rule 424(b) and Rule 424(c) under the Securities Act of 1933,
as amended, are incorporated by reference into Part III of this Annual Report on
Form 10-KSB.
<PAGE>
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business . . . . . . . . . . . . . . . . . .1
Item 2. Description of Property . . . . . . . . . . . . . . . . . 13
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 13
Item 4. Submission of Matters to a Vote of Security Holders . . . 13
PART II
Item 5. Market for Units of Limited Partnership Interest and
Related Security Holder Matters . . . . . . . . . . . . . 14
Item 6. Managements Discussion and Analysis or Plan of Operation. 14
Item 7. Financial Statements. . . . . . . . . . . . . . . . . . . 17
Item 8. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure . . . . . . . . . . . 17
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons
Compliance with Section 16(a) of the Exchange Act . . . . 18
Item 10. Executive Compensation . . . . . . . . . . . . . . . 20
Item 11. Security Ownership of Certain Beneficial
Owners and Management............................... 20
Item 12. Certain Relationships and Related Transactions . . . 20
PART IV
Item 13. Exhibits and Reports on Form 8-K . . . . . . . . . . 22
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .F-1
SIGNATURES
(i)
<PAGE>
PART I
Item 1. Description of Business.
General.
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Common Goal Health Care Pension and Income Fund L.P. II (the "Partnership")
was organized on May 9, 1989 as a limited partnership under the Delaware Revised
Uniform Limited Partnership Act. The Partnership's general partners are Common
Goal Capital Group, Inc. II ("Common Goal II" or the "Managing General Partner")
and Common Goal Limited Partnership II (the "Associate General Partner")
(collectively, the "General Partners"). With limited exceptions, Common Goal II
has exclusive control over the business of the Partnership, including the right
to manage the Partnership's assets. The Partnership commenced operations on July
2, 1990 after having accepted subscriptions for more than the requisite number
of 117,650 units of limited partnership interest (the "Units") in a public
offering registered with the Securities and Exchange Commission on Form S-11
(the "Public Offering"). The Partnership raised a total of $5,221,160 through
January 11, 1992 when the Public Offering terminated.
The Partnership's primary business is to invest in or make mortgage loans
which to date have been secured by junior mortgages or deeds of trust (and may,
in the future include first mortgages or deeds of trust, but not wrap-around or
other liens which are more junior than second positions) on fee or leasehold
interests in health care-related real estate, including properties owned or
acquired by affiliated borrowers, or other collateral, including interests in
borrowers satisfactory to the Managing General Partner (the "Mortgage Loans").
To a lesser extent, the Partnership may make Mortgage Loans through joint
ventures formed as general partnerships and may make Mortgage Loans secured by
interests in partnerships, corporate stock, joint ventures or leasehold
interests; provided, however, that the aggregate of such Mortgage Loans shall be
less than 45% of the aggregate value of the Partnership's assets. The
Partnership may not make Mortgage Loans in excess of $4,000,000 to any one
entity. In addition, the Partnership will not make a Mortgage Loan if the amount
of the aggregate mortgage indebtedness exceeds 90% of the appraised value of the
property underlying the Mortgage Loan. The Partnership does not intend to make
Mortgage Loans on properties with respect to which the debt service coverage
ratio is less than 1.3 to 1, unless other underwriting criteria support the
Mortgage Loan. Underwriting criteria which may be considered include whether
loan-to-value ratios are less than 85%, whether there is additional collateral
securing the Mortgage Loan, whether guarantees of repayment or other credit
enhancements have been provided and such other factors as the Managing General
Partner may deem appropriate. Additionally, the Partnership will require that
any Mortgage Loan to an Affiliate provide the following:
(a) Inclusion of a provision making the Mortgage Loan a full recourse
obligation of the Affiliate until the debt service coverage is not less
than 1.3 to 1 for at least 12 consecutive months;
1
<PAGE>
(b) Subordination of management fees payable to facility managers;
(c) Subordination of mortgage servicing fees payable to Common Goal
Mortgage Company;
(d) With respect to Mortgage Loans of which the proceeds will be used
for renovations, approval by the applicable state medical reimbursement
agency of the renovations prior to funding;
(e) Approval by a majority of the Board of Directors of the Managing
General Partner (including all Independent Directors);
(f) Receipt of a fairness opinion from the Independent Advisor;
(g) Inclusion of a yield maintenance provision for prepayments; and
(h) Delivery by independent accountants of a report to the Board of
Directors evaluating certain parameters of the proposed Mortgage Loan.
The Partnership has adhered to these requirements in making its Mortgage
Loans. Mortgage Loans which are deemed to have substantially the same risks and
potential rewards as an owner of an underlying property by virtue of
characteristics such as participation in expected residual profits or where the
lender provided all or substantially all necessary funds to acquire the property
(such that the borrower has little or no equity therein), must be treated as
investments in the underlying properties for financial accounting purposes. All
Mortgage Loans previously characterized as investments in underlying properties
were paid off in April 1995, and therefore, at December 31, 1996 and 1995, there
were no Mortgage Loans treated as investments in underlying properties. The
Partnership treats its Mortgage Loans as mortgage loans for federal income tax
purposes. See "Item 7. Financial Statements".
The existing Mortgage Loans are, and future Mortgage Loans are expected to
be, secured by nursing homes (characterized as private institutions that provide
fundamental health and rehabilitation services for the aged and the infirm).
Mortgage Loans also may be secured by intermediate care facilities
(characterized as private institutions that serve patients with lesser degrees
of disability). For further information concerning the Partnership's present
investments in Mortgage Loans, see "Existing Mortgage Loans" below.
The Partnership's objectives in making investments of the type described
above are: (i) to preserve and protect the Partnership's capital; (ii) to
provide quarterly distributions from investment income; and (iii) to provide for
potential long-term appreciation of its Mortgage Loan investments, principally
through participations payable at maturity of the Mortgage Loan or upon the sale
or refinancing of the underlying property (the "Participations"). Because
Participations in facility appreciation are paid only upon maturity of a
Mortgage Loan or a sale of the underlying facility, increased cash distributions
as a result of such Participations are not expected to commence for a period of
five years or more from the date that the related Mortgage Loan is made, if at
all. It is not an objective of the Partnership to provide tax-sheltered income.
Funds held pending investment in Mortgage Loans may be invested by the
Partnership, at the direction of the Managing General Partner, in United States
government securities, certificates of deposit of United States banks with a net
worth of at least $20,000,000, repurchase agreements covering the securities of
the United States government or governmental agencies, bankers' acceptances,
commercial paper rated A-1, Prime-1 or better by Standard and Poor's Corporation
or Moody's Investors Service, Inc., respectively, money market funds having
assets in excess of $100,000,000, interest-bearing time deposits in banks and
thrift institutions or any combination of these investments.
The Partnership is conducting and intends to continue to conduct its
operations so that it will not become subject to regulation under the Investment
Company Act of 1940. Generally, the term "investment company" might include the
Partnership if, after a one-year period, the Partnership, among other things,
were to be engaged primarily, or were to hold itself out as being engaged
primarily, or were to propose to engage primarily, in the business of investing,
reinvesting or trading in securities, or if it were to have more than 40% of its
total assets, excluding cash and government securities, invested in "investment
securities" as that term is defined in the Investment Company Act of 1940. The
Partnership does not currently meet this test.
Basic Policies for Mortgage Loan Investments.
-----------------------------------------------
In making Mortgage Loans, the Managing General Partner considers such
relevant factors as (1) the quality and experience of the management operating
the facility; (2) the geographic area and type of facility (nursing home or
intermediate care or a mix of both); (3) the location, construction, quality,
condition and design of the facility; (4) the current and anticipated cash flow
from the facility and its ability to sufficiently cover debt service (including
the Partnership's Mortgage Loan), meet operational needs and generate revenues
sufficient to provide investors with significant Additional Interest, as defined
in the Partnership's prospectus, and potential value to the Partnership's
Participation; (5) the growth, tax and regulatory environment of the community
in which a facility is located; (6) occupancy and demand for similar health care
facilities with which the facility would compete; and (7) the mix of private and
government pay patients. As a general rule, the Partnership will not make
Mortgage Loans on facilities which are located in states which do not restrict
the issuance of certificates of need, unless supported by additional factors,
such as borrower guarantees. Further, it is intended that Mortgage Loans will be
made in various geographic locations in order to achieve portfolio
diversification, thereby minimizing potential effects of changes in local
economic conditions and similar risks.
Types of Mortgage Loans.
--------------------------
The Partnership makes Mortgage Loans on fee interests (or other beneficial
interest essentially equivalent to a mortgage on real property). All real estate
underlying Mortgage Loans is used in the health care industry, particularly real
estate used as nursing home and intermediate care facilities. The Partnership
will not make construction loans except in connection with renovation or
additions to existing facilities. The Partnership may also make Mortgage Loans
to enable borrowers to acquire newly constructed properties and may commit to
invest in or make Mortgage Loans with respect to properties under construction
or prior to construction, provided any such commitment is subject to
satisfactory completion of construction (and licensure by regulatory agencies,
as applicable) by a specified date. However, in no event will such construction
loans, other than those made in connection with renovations or additions to
existing facilities, in the aggregate, exceed 20% of the gross proceeds received
from the Public Offering. As with the Mortgage Loans made to date, the
Partnership expects that any future Mortgage Loans will have terms of not less
than three nor more than ten years. Mortgage Loans of five years or less may be
subject to one or more extensions, which together with the original loan term
will not exceed ten years in duration, with all principal and deferred interest,
if any, payable upon maturity of the Mortgage Loans. The General Partners do
not, however, generally intend to structure Mortgage Loans to provide for
deferred interest except when it is payable in lieu of additional interest
and/or participations.
Federal Income Taxes.
-----------------------
The Partnership is not subject to federal income taxes as the liability for
such taxes is that of the partners rather than the Partnership.
Other Operating and Investment Policies.
-----------------------------------------
Affiliates of the General Partners (including partners, officers and
directors investing for their own account or that of others) have formed, and
may in the future form, limited partnerships or other entities with the same
investment objectives and policies as the Partnership, which may compete with
the Partnership for investments. The Partnership's amended and restated
agreement of limited partnership provides that neither the General Partners nor
their Affiliates have any obligation to present any particular investment
opportunity to the Partnership, subject to certain limitations set forth below.
The General Partners believe that conflicts of interest will arise only if
the Partnership is seeking investments at a time when an Affiliate with similar
investment objectives is seeking to make Mortgage Loans. In such an event, if
affiliated entities have similar investment objectives and policies and have
funds available at the same time as the Partnership, the Managing General
Partner will review the investment portfolio of each entity and will make the
investment on the basis of such factors, among others, as size of investment,
anticipated cash flow, yield, portfolio diversification, type and location of
the property on which the Mortgage Loan will be made, proposed loan terms, the
amount of funds available and the length of time the funds of each entity have
been available, as further described below.
The Managing General Partner will attempt to resolve any conflicts of
interest between the Partnership and others by exercising the good faith
required of fiduciaries. The Managing General Partner believes that generally it
will be able to resolve conflicts on an equitable basis and will adhere to the
following criteria in determining whether the Partnership or one of the other
entities with which it or its Affiliates have a relationship or obligation,
should seek to make a particular Mortgage Loan: (i) whether the cash required
for the particular Mortgage Loan is more or less than the amount that would be
appropriate for that entity to commit to an investment; (ii) whether the nature
of the potential cash flow to be derived from the particular Mortgage Loan will
conform with that entity's investment objectives; (iii) whether that entity
already has Mortgage Loans with the same borrower; (iv) whether the Mortgage
Loan would satisfy that entity's objective of geographic diversification; (v)
whether the Mortgage Loan can be structured to meet that entity's principal
investment objectives; (vi) whether the Mortgage Loan is being acquired in a
transaction together with other Mortgage Loans not suitable for acquisition by
that entity; (vii) the estimated income tax effects, if any, on the entity
resulting from the proposed structure of the Mortgage Loan; and (viii) the
length of time since that entity has made a Mortgage Loan investment. Such
conflicts will be resolved in the best judgment of the Managing General Partner.
If, based on the foregoing criteria, the Managing General Partner determines
that the making of a particular Mortgage Loan is equally appropriate for more
than one entity affiliated with the General Partners, then the Mortgage Loan
will be made by the entity which was formed first or which has had its funds
available for investment for the longest period as determined by the General
Partners in their discretion. The principal purpose of these provisions is to
enable the General Partners and their Affiliates, while arranging the investment
portfolios of the Partnership and any affiliated entities which might then be
seeking suitable Mortgage Loans and other investments, to select the Mortgage
Loan or other investment which they believe is most suitable for investment by
the Partnership or by any such other affiliated entity. The foregoing provisions
are not intended to relieve the General Partners of their fiduciary obligations
to the Partnership. The General Partners and their Affiliates will have the
right to make an investment after the Partnership has declined an investment,
even if the Partnership still has uncommitted funds available.
In connection therewith, Common Goal Health Care Participating Mortgage
Fund L.P. ("Common Goal I"), an affiliated, publicly-offered limited partnership
with investment objectives that are substantially identical to those of the
Partnership, has substantially completed acquisition of its initial mortgage
loan portfolio. Should Common Goal I determine to make funds available for
reinvestment in additional Mortgage Loans, Common Goal I could have priority
over the Partnership in acquiring or making the next Mortgage Loan deemed
suitable for its investment objectives, subject to the conflict resolution
policies set forth above. In the event that Common Goal I is unable to
consummate additional mortgage loans, the Partnership will have the opportunity
to make those loans.
Existing Mortgage Loans.
- ------------------------
<TABLE>
<CAPTION>
The principal balances outstanding for mortgage loan receivables as of
December 31, 1996 were as follows:
<S> <C>
Joint Venture Loan $50,590
St. Catherine's of Tiffin 51,500
St. Catherine's of Bloomville 36,000
St. Catherine's of Fostoria 102,000
St. Catherine's of Findlay 142,500
St. Catherine's of Washington Court House 68,000
------
$450,590
========
</TABLE>
Joint Venture Loan.
---------------------
In 1989, the Partnership entered into a joint venture agreement with Common
Goal Health Care Participating Mortgage Fund, L.P. ("CGI") to make a mortgage
loan (the "Joint Venture Loan") to two unaffiliated Tennessee limited
partnerships (the "Borrowers"). The Joint Venture Loan was funded on August 1,
1990, in the original principal amount of $3,430,114 ($3,400,114 at December 31,
1991) with Common Goal I contributing 100% of such amount to the joint venture
at that time. Although the Partnership had the right to, and originally expected
to, contribute up to 50% of the amount of the Joint Venture Loan ($1,715,057),
sales of Partnership Units occurred at a lower rate than originally projected.
Accordingly, through December 31, 1993, the Partnership had contributed $95,600
to the joint venture. The Joint Venture Loan requires payment of Basic Interest
at a rate of 13.7% per annum. The loan also requires payment of additional
interest at a rate of 1.95% of gross revenues from the collateral securing the
Joint Venture Loan in excess of $1,694,000 per annum. The loan also provides for
payment of a participation equal to 30% of the first $1,000,000 of increase in
the fair market value (or gross sales price) of the Facilities over aggregate
secured indebtedness (including the Joint Venture Loan) as of the date of
funding of the Joint Venture Loan and 17% of the balance of any such increase.
The participation would be payable upon sale, refinancing of a senior mortgage
loan or at maturity of the Joint Venture Loan with the fair market values to be
determined at that time. The Joint Venture Loan is secured by a second mortgage
on a 100-bed skilled and intermediate care facility owned by one of the
Borrowers as well as a collateral assignment of 100% of the general partners'
and limited partners' interest in each Borrower. The security interest was taken
in the Borrowers insofar as the retirement and assisted care facility owned by
the other Borrower is subject to a HUD regulatory agreement which prohibits
junior encumbrances. On November 3, 1993, the Borrower paid a total of
$1,746,790 in a restructuring of the Joint Venture Loan. Of the $52,314
allocated to the Partnership, $45,010 was applied to principal and $4,501 to
Prepayment Penalty. The amount allocated includes $2,250 from a negotiated
refinance fee and Gross Revenue, Basic Interest and Additional Interest which
were taken as set forth in the loan documents. The CGI balance has also been
paid down to $1,567,664. In connection with the repayment of principal, the
Partnerships agreed to release the mortgage on the skilled care and intermediate
care facility. The Partnership's principal balance as of December 31, 1996 was
$50,590. The entire principal balance is due at the maturity date of January 1,
2000.
At December 31, 1996, the loan was current as to regular interest and
annual gross revenue interest.
St. Catherine's Loan.
-----------------------
<PAGE>
The Partnership made and funded three mortgage loans to affiliated entities
(the "St. Catherine Loans"). The Partnership's affiliation with these entities
is a result of the President and Chief Executive Officer of the Managing General
Partner also serving as the President of the entities receiving the loans. As a
result of the refinancing of the senior debt secured by the St.Catherine's,
Court House and Findlay facilities, the Partnership's mortgage loans for these
same facilities were refinanced on April 13, 1995 and the outstanding principal
and Additional Interest were subsequently paid off. The refinancing of the
senior debt did not provide sufficient proceeds to allow payment in cash of the
participations owing under the St. Catherine's, Court House and Findlay Loans
(the "SC Participations") in the total amount of $840,500. The St. Catherine's
borrowers paid the SC Participations through (i) the issuance of notes in the
total amount of $400,000 bearing an interest rate of 11.00% per annum (a)
maturing on the earlier of the sale or refinancing of the Tiffin, Bloomville,
Fostoria, Washington Court House and Findlay Facilities (the "SC Facilities") or
the maturity of the refinanced senior debt (August, 2000) and (b)
cross-collateralized by second mortgage liens on the SC Facilities; and (ii) the
issuance of a contingent payment obligation by St Catherine's of Seneca, Inc. in
the amount of $202,500 and a contingent payment obligation by St Catherine's
Care Centers of Fostoria, Inc. in the amount of $238,000 (collectively, the
"CPOs").
The CPOs bear interest at an annual rate of 11.00%, which is due quarterly,
and mature on the earlier of the sale or refinancing of the SC Facilities or the
maturity of the senior debt with South Trust (August, 2000). The CPOs provide
that interest is payable on a current basis provided that the debt service
coverage ratios on each of the SC Facilities is 1.2 to 1.0. In the event these
debt service coverage ratios are not maintained, the interest shall accrue until
the debt service coverage ratio is at least 1.2 to 1.0 or maturity. The CPOs
further provide that principal is payable only to the extent that upon a resale
or refinancing of the SC Facilities, there are sufficient proceeds to repay the
senior debt and the amounts owing under the CPOs. The CPOs are being assumed by
an affiliated entity, Will Care of Ohio, Inc., and will be secured, to the
extent they become payable and are not paid, by a pledge of 30 shares of St.
Catherine's of Seneca, Inc. common stock.
In accordance with FASB Statement of Standards No. 66, "Accounting for
Sales of Real Estate", the $840,500 participation cannot be recognized as income
at this time. The Partnership has recorded $400,000 of the participation amount,
related to the mortgage loan receivable, as Deferred Revenue, and the interest
thereon will be recognized as it is earned. Due to the contingent nature of the
$440,500 in participation income due to the Partnership related to the CPO'S,
such amount has not been recorded as an asset of the Partnership and the
participation income and interest earned on the CPO's will be recognized only
when received.
<PAGE>
<TABLE>
<CAPTION>
The following chart provides certain summary information with respect to
the Partnership's Mortgage Loans.
Common Goal II Mortgage Loans
St. Catherine's
Joint Venture St. Catherine's St. Catherine's St. Catherine's of Washington St. Catherine's
Loan (1) of Tiffin of Bloomville of Fostoria Court House of Findlay
-------- --------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Date of Loan August 1, 1990 April 13, 1995 April 13, 1995 April 13, 1995 April 13, 1995 April 13, 1995
Agreement
Type of Loan Collateral Assign- Second Mort- Second Mort- Second Mort- Second Mort- Second Mort-
ment of Interest in gage on one gage on one gage on one gage on one gage on two
one Facility (2) facility facility facility facility facilities
Maximum Note
Amount $1,618,254 (1) $51,500 $36,000 $102,000 $68,000 $142,500
Current
Principal
Amount
Outstanding
as of
Dec. 31, 1996 $50,590 $51,500 $36,000 $102,000 $68,000 $142,500
Interest Rate 13.70% (3) 11.00%(4) 11.0%(4) 11.0%(4) 11.0%(4) 11.0%(4)
Maturity January 1, 2000 April 30, 2000 April 30, 2000 April 30, 2000 April 30, 2000 April 30, 2000
Type of
Property/ 100-bed skilled care 44-bed nursing 30-bed nursing 102-bed nurs- 50-bed nursing 40-bed and 60-
Location of and intermediate home in Tiffin, home in ing home in home in Wash- bed nursing
Property care facility in OH Bloomville,OH Fostoria, OH ington Court home in
Securing Loan Honeybrook, PA (2) House, OH Findlay, OH
Origination Fee
Paid to an
Affiliate
(Paid by
Borrower) $101,900 (1) None None None None None
Relationship to
Partnership Non-Affiliate Affiliate Affiliate Affiliate Affiliate Affiliate
__________________________
<FN>
(1) Pursuant to the terms of the Joint Venture, the Partnership
originally contributed $95,600 to the Joint Venture in connection with
a loan in the original principal amount of $3,430,114. The remaining
portion of the note was funded by Common Goal Health Care
Participating Mortgage Fund L.P. ("CGI"). On March 29, 1993, CGI
received a principal paydown in the amount of $70,000. On November 3,
1993, both CGI and the Partnership received principal paydowns in
conjunction with a restructuring of the Loan. The balance of the Joint
Venture Loan attributable to the Partnership as of December 31, 1996
was $50,590. .
(2) The Joint Venture Loan is also secured by collateral
assignments of 100% of the general partners and limited partners'
interest in each Borrower. The security interest was taken in the
Borrowers insofar as a retirement and assisted care facility owned by
the Borrowers is subject to a HUD regulatory agreement which prohibits
junior encumbrances on the facility.
(3) In addition to Basic Interest of 13.7%, this loan requires
payment of additional interest at a rate of 1.95% of the increase in
gross revenues from the collateral securing the Joint Venture loan
over the sum of $1,694,000 per annum payable in full within 45 days
after the end of such fiscal year. The loan also requires additional
interest in an amount equal to 30% of the first $1,000,000 of increase
in the fair market value of the collateral securing the Joint Venture
Loan over its aggregate secured indebtedness and 17% of the balance of
any such increase in the fair market value of such facilities in
excess of $1,000,000 over the aggregate secured indebtedness.
(4) Interest on the affiliated St. Catherine's Mortgage Loans is
at a rate of 11% per annum, calculated on a 365-day year for the
actual number of days lapsed, and paid quarterly.
</FN>
</TABLE>
<PAGE>
Partnership Allocation of Income and Loss and Distribution.
- -----------------------------------------------------------
Net Income and Net Loss.
--------------------------
Net income (except with respect to a "Disposition", which includes any
Partnership transaction not in the ordinary course of its business, including,
without limitation, collections of principal payments, equity participation
payments, prepayments, prepayment penalties, sales, exchanges, foreclosures or
other dispositions of Mortgage Loans held by the Partnership, recoveries of
damage awards and insurance proceeds (other than the receipt of subscriptions
for Units, all forms of interest payments when due on Mortgage Loans or business
or rental interruption insurance proceeds)) and net loss of the Partnership is
allocated 97.5% to Limited Partners and 2.5% to the General Partners. Net income
arising from a Disposition is allocated 97.5% to Limited Partners and 2.5% to
the General Partners to the extent of any negative balances in the capital
accounts of the Limited Partners, and then 100% to Limited Partners in an amount
necessary to bring the Limited Partners' capital accounts up to an amount equal
to their Original Contributions, which means the amount of $10.00 for each Unit
less the return of any amount of uninvested funds returned, as defined in the
prospectus, plus the 11.5% preferred cumulative return thereon (less previous
distributions to the Limited Partners in payment of such amounts). The remainder
of such net income is allocated 85% to the Limited Partners and 15% to the
General Partners.
Distributions of Cash From Operations.
----------------------------------------
Distributions of Adjusted Cash From Operations, defined as all receipts of
interest payments on Mortgage Loans less cash receipts used to pay operating
expenses and to repurchase any Units (Cash Flow) less any amount set aside for
the restoration or creation of working capital reserves, are distributed 97.5%
to the Limited Partners and 2.5% to the General Partners, and are apportioned
quarterly among Limited Partners of record as of the record date declared within
30 days after the end of each quarter and will be paid quarterly. No
distributions of Adjusted Cash From Operations with respect to any calendar year
are made to the General Partners until the following occurs:
First, distributions to the Limited Partners equal to the 9% annual
cumulative return on their Adjusted Contributions, defined as Original
Contributions attributable to a Unit, reduced by the total of cash
distributed from Disposition Proceeds and from working capital reserves,
for such year (plus any amounts accrued from prior years) have been made to
the Limited Partners; and
Second, payment of all previously subordinated management fees, if
any, have been made.
Thereafter, all previously subordinated amounts payable to the General
Partners with respect to their 2.5% interest are paid in full to the extent
funds are available, and if not available, are deferred and paid out of
Disposition Proceeds, defined as receipts from Dispositions net of related
expenses, amounts necessary for the payment of debts and obligations of the
Partnership and any amount set aside for working capital reserves. The
Partnership has been making distributions to the Limited Partners in excess of
the 9% annual cumulative return on Adjusted Contributions, with the exception of
the four distributions made during the period October 5, 1994 to October 5,
1995, when the annual cumulative return was reduced to 7.25% as discussed in
"Item 6. Management's Discussion and Analysis or Plan of Operation."
Distributions of Disposition Proceeds.
----------------------------------------
The Managing General Partner has the right to reinvest or distribute all
Disposition Proceeds received through the second anniversary of the final
closing date and may reinvest disposition proceeds as necessary thereafter to
avoid classification as an investment company under the Investment Company Act
of 1940. Non- liquidating distributions of Disposition Proceeds are distributed
in the following order of priority, except as otherwise required by law:
First, 100% to the Limited Partners until the Limited Partners have
received an amount which, when added to prior distributions of Disposition
Proceeds and cash from reserves attributable thereto, equals the Original
Contributions of the Limited Partners;
Second, 100% to the Limited Partners until each Limited Partner has
received an amount which, when added to all prior distributions to Limited
Partners from all sources (including prior distributions in satisfaction of
the 9% annual cumulative return but excluding distributions pursuant to
above), equals the 11.5% per annum preferred cumulative return on their
Adjusted Contributions, (calculated from the first day of the calendar
quarter succeeding the quarter in which Capital Contributions are
received);
Third, 100% to the General Partners until they have been paid 100% of
the subordinated portion, if any, of (a) the management fee, if any, and
then (b) their 2.5% interest in Adjusted Cash From Operations; and
Fourth, the remainder, 85% to the Limited Partners and 15% to the
General Partners.
Dissolution.
- ------------
Since it is the intention of the Managing General Partner to liquidate the
Partnership's assets between the tenth and fifteenth years after the final
closing date (the "Final Closing Date"), the Managing General Partner will adopt
the following procedures to provide for an orderly liquidation: the Managing
General Partner intends to confine the Partnership's investment activities to
Mortgage Loans with terms ending prior to the end of the tenth anniversary of
the Final Closing Date and will try to sell any property the Partnership has
acquired by foreclosure or otherwise in an orderly fashion. Any such sales to
affiliates of the Partnership or the General Partners ("Affiliates") would
require the approval of a majority of the independent members of the Board of
Directors of the Managing General Partner. To the extent that any Mortgage Loans
will not mature by their terms prior to the end of such tenth anniversary, it
may become necessary to sell such investments. It can be reasonably anticipated
that the Partnership may be required to sell such investments for less than
their outstanding principal balances as of the date of sale. The Partnership
intends to reinvest loan proceeds received only as and if necessary to avoid
classification as an investment company under the Investment Company Act of
1940. See "Item 6. Management's Discussion and Analysis or Plan of Operation"
regarding possible reinvestment of mortgage loan proceeds.
Proceeds from the liquidation will be applied and distributed in the
following order:
First, to the payment of creditors of the Partnership but excluding
secured creditors whose obligations will be assumed or otherwise
transferred on the liquidation of Partnership assets; and
Second, after allowance for the expenses of liquidation and the
setting up of any reserves for contingencies which the Managing General
Partner considers necessary, to the General Partners and Limited Partners
in proportion to and to the extent of the positive balances in their
capital accounts, after net income or loss arising from a Disposition has
been allocated, with any excess being distributed in accordance with the
order of priority for non-liquidating distributions.
Notwithstanding anything to the contrary, the Managing General Partner has
the right to defer liquidation if, in the opinion of the Managing General
Partner, the sale of Partnership assets in liquidation would result in a
material underrealization on the Partnership's assets.
<PAGE>
Item 2. Description of Property.
The Partnership did not own any real property as of December 31, 1996.
Item 3. Legal Proceedings.
The Partnership is not a party to any material legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the last
quarter of 1996.
<PAGE>
PART II
Item 5. Market for Units of Limited Partnership Interest and Related
Security Holder Matters.
The units of limited partnership interest (the "Units") are not readily
transferable. There is no public market for the Units and it is not currently
expected that any will develop. There are restrictions upon the transferability
of Units, including the requirement that the General Partners consent to any
transferee becoming a substituted Unit holder (which consent may be granted or
withheld at the sole discretion of the General Partners). In addition,
restrictions on transfer may be imposed under state securities laws.
The Revenue Act of 1987 contains provisions which may have an adverse
impact on investors in certain "publicly traded partnerships." If the
Partnership were to be classified as a "publicly traded partnership," income
attributable to the Units would be characterized as portfolio income and the
gross income attributable to Units acquired by tax-exempt entities after
December 17, 1987 would be unrelated business income, with the result that the
Units could be less marketable. The General Partners will, if necessary, take
appropriate steps to ensure that the Partnership will not be deemed a "publicly
traded partnership."
At March 31, 1997, 522,116 Units were outstanding, and were held by 413
holders of record.
The Partnership made distributions to Limited Partners of $482,515 or $.92
per Unit during 1996, $403,747 or $.77 per Unit during 1995, $456,637 or $.87
per Unit during 1994, $495,681 or $.95 per Unit during 1993, $482,561 or $.93
per Unit during 1992, $270,586 or $.76 per Unit during 1991, and $62,856 or $.33
per Unit during 1990.
Item 6. Management's Discussion and Analysis or Plan of Operation.
Liquidity and Capital Resources.
- --------------------------------
Common Goal Health Care Pension and Income Fund L.P. II, a Delaware limited
partnership (the "Partnership"), was formed to make mortgage loans secured by a
mix of first and junior liens on health care-related properties. The Partnership
commenced its offering of Units to the public on January 12, 1990, authorized to
sell up to 1,000,000 Units at $10 per Unit. Total gross offering proceeds raised
were $5,221,160. The Partnership commenced operations on July 2, 1990 after
having sold the Minimum Number of Units. The offering terminated on January 11,
1992. As of December 31, 1996, all available Net Offering Proceeds have been
invested in Mortgage Loans and/or short-term investments in accordance with
Partnership guidelines. The General Partner is currently evaluating the
possibilities of additional investment opportunities.
As of December 31, 1996, the Partnership had made six Mortgage Loans
directly or through a joint venture. The three Mortgage Loans previously
characterized as investments in the underlying properties for financial
accounting purposes were paid off in April 1995 and replaced by five smaller
Mortgage Loans to various St. Catherine's Facilities, which are not
characterized as investments in the underlying properties for financial
accounting purposes.
The placement of available Net Offering Proceeds in Mortgage Loan
investments should result in higher returns than are earned on temporary
investments. The Mortgage Loans pay Basic Interest which is payable at higher
rates than are being earned on temporary investments and provide for payments of
Additional Interest and Participations. The interest derived from the Mortgage
Loans and repayments of Mortgage Loans contribute to the Partnership's
liquidity. These funds are used to make cash distributions to the Limited
Partners, to pay normal operating expenses as they arise and, in the case of
repayment proceeds, may, subject to certain exceptions, be used to make
additional Mortgage Loans. The movement of funds from Mortgage Loans to
short-term investments has increased the Partnership's overall liquidity, but
has lowered expected interest income. The Partnership has structured its
Mortgage Loans to provide for payment of quarterly distributions to Limited
Partners from investment income.
The Partnership intends to maintain initial working capital reserves of
approximately 2% of gross proceeds of the offering (approximately $104,423 at
December 31, 1996), an amount which is anticipated to be sufficient to satisfy
liquidity requirements. The Managing General Partner, in its continued
monitoring of the level of working capital reserves, had reduced the rate of the
quarterly distributions to 7.25% per annum for the four quarterly distributions
beginning October 5, 1994, but returned to 9.25% beginning October 5, 1995. See
"Item 1. Business" and the Notes to the Financial Statements for further
information regarding the Partnership's Mortgage Loans.
On April 13, 1995, the St. Catherine's, Court House, and Findlay facilities
refinanced their senior debt and the Partnership's mortgage loans. The
outstanding principal and Additional Interest were subsequently paid off.
The refinancing of the senior debt did not provide sufficient proceeds to
allow repayment of the Participations owing under the St. Catherine's Washington
Court House and Findlay Loans (the "SC Participations") in the total amount of
$840,500. The SC Borrowers repaid the SC Participations through: (i) the
issuance of notes in the total amount of $400,000 bearing an interest rate of
11.00% per annum (a) maturing on the earlier of the sale of refinancing of the
Tiffin, Bloomville, Fostoria, Washington Court House and Findlay Facilities (the
"SC Facilities") or the maturity of the senior debt with South Trust (August,
2000) and (b) cross- collateralized by second mortgage liens on the SC
Facilities; and (ii) the issuance of a contingent payment obligation by St.
Catherine's of Seneca, Inc. in the amount of $202,500 and a contingent payment
obligation by St. Catherine's Care Centers of Fostoria, Inc. in the amount of
$238,000 (collectively, the "CPOs").
In accordance with FASB Statement of Standards No. 66, "Accounting for
Sales of Real Estate", the $840,500 participation cannot be recognized as income
at this time. The Partnership has recorded $400,000 of the participation amount,
related to the mortgage loan receivable, as Deferred Revenue, and the interest
thereon will be recognized as it is earned. Due to the contingent nature of the
$440,500 in participation income due to the partnership related to the CPO'S,
such amount has not been recorded as an asset of the Partnership and the
participation income and interest earned on the CPO's will be recognized only
when received.
The Partnership's balance of cash and cash equivalents at December 31, 1996
and December 31, 1995 was $3,464,102 and $3,774,001, respectively, which
consisted of operating cash and working capital reserves. The decrease in cash
and cash equivalents from December 31, 1995 to December 31, 1996 of $309,899
resulted from cash provided by operating activities, $172,616, and net cash used
in financing activities, $482,515. This decrease was partially caused by the net
cash distributed as dividends to the limited partners, $482,515 ($.92 per Unit),
which included $300,947 ($.59 per Unit) return of capital. Dividend
distributions noted as a return of capital represent those distributions which
are in excess of current year earnings. Part of the expenses for 1995 included
$116,094 paid out in mortgage placement fees authorized by the Partnership's
Partnership Agreement. The Agreement authorized payment of a 3% mortgage
placement fee to Common Goal Mortgage Company ("CGMC"), an affiliate of the
General Partners, in connection with the original placement of the Partnership
mortgage loans with the various St. Catherine's entities. CGMC elected to defer
the decision of whether to take such fees until repayment of such loans. An
aggregate of $4,248,841 of loans were funded, with their principal amounts fully
repaid in April 1995, for which CGMC was entitled to a mortgage placement fee of
up to $127,468. As consideration for immediate cash payment, CGMC agreed to a
fee of $116,094 by the Partnership at the time of such refinancing, representing
payment in full of its deferred mortgage placement fee. The decrease in Total
Assets is a direct result of net cash distributed as a dividend to the limited
partners.
The Partnership is required to maintain working capital reserves of
approximately 2% of gross proceeds of the offering (approximately $104,423), but
presently has a balance of $3,464,102 at December 31, 1996. The proceeds from
the repayments are being retained in working capital pending future investment.
These additional funds are being invested per partnership guidelines. The
General Partner is currently evaluating the possibilities of additional
investment opportunities.
Results of Operations.
- ----------------------
The Partnership commenced operations July 2, 1990, and funded its first
Mortgage Loan in November of 1990 (see "Item 1. Description of Business -
Existing Mortgage Loans"). As of June 30, 1991, the Partnership had completed
its portfolio of Mortgage Loans. Accordingly, the General Partners expect the
Partnership's earnings to remain relatively constant.
During the years ended December 31, 1996, 1995, and 1994, the Partnership
reported net income (loss) of $181,568, $1,639,617 and $(107,184) based on total
revenues of $268,703, $1,894,333, and $12,670, and total expenses of $87,135,
$254,716, and $119,854, respectively. The Partnership's net income (loss) per
Limited Partner Unit was $.34 per Unit in 1996, $3.06 per Unit in 1995, and
$(.20) per Unit in 1994. The increase in net income (loss) per Unit between
1994 and 1995 was primarily due to interest and gain on sale of investments in
operating properties received in April 1995 when the properties refinanced their
debt. The Partnership's distributions to Limited Partners were $.92 per Unit in
1996, $.77 per Unit in 1995, and $.87 per Unit in 1994. The 1996 dividend
distributions to Limited Partners included a return of capital of $.59 per Unit.
The 1995 dividend distributions to Limited Partners did not include a return of
capital. The entire 1994 dividend distribution to Limited Partners of $.87 per
Unit represented a return of capital. Also, all interest received on the
Mortgage Loans is currently being recognized as interest income.
Most of the cash received as interest payments in previous years was not
recognized as interest income, rather it was recorded as a reduction of the
related investments. Therefore, when the Partnership received the pay offs on
the properties, the reduction of the related investment balances, caused a
greater amount of the proceeds to be recorded as income in 1995.
Expenses decreased in 1996 by $167,581 primarily because of the $116,094
mortgage placement fee in 1995 (See Liquidity and Capital Resources.) and a
decrease of $30,528 in professional fees. In addition, there was a decrease of
$15,962 in management fees and a decrease in mortgage servicing fees of $2,894
caused by drop in mortgage balances being serviced. Other expenses decreased by
$2,103 from 1995 to 1996.
Additionally, under terms of the Partnership agreement, the Partnership is
required to reimburse the Managing General Partner for certain operating
expenses. In an effort to maintain the yield to the Limited Partners, the
Managing General Partner did not charge the Partnership for such expenses
through December 31, 1990. In 1996, 1995 and 1994, the Manageing General Partner
was reimbursed by the Partnership for $38,656, $29,615, and $31,543 of these
expenses, respectively. The Managing General Partner believes that such charges
have not adversely affected the current yield to Limited Partners.
The Partnership's success and the resultant rate of return to Limited
Partners will be dependent upon, among other things, (a) the result of the
Refinancing and the terms of the repayment of the St. Catherine's, Court House
and Findlay Loans, (b) the ability of the Managing General Partner to identify
suitable opportunities for the Partnership to reinvest its assets and (c) the
ability of the borrowers to pay the current interest, additional interest and
principal of the Mortgage Loans.
<PAGE>
Item 7. Financial Statements.
Independent Auditors' Report
The Partners
Common Goal Health Care
Pension and Income Fund L.P. II:
We have audited the accompanying balance sheets of Common Goal Health Care
Pension and Income Fund L.P. II (a limited partnership) as of December 31, 1996
and 1995, and the related statements of operations, partners' capital, and cash
flows for each of the years in the three-year period ended December 31, 1996.
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 Common Goal Health Care
Pension and Income Fund L.P. II as of December 31, 1996 and 1995, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1996, in conformity with generally accepted
accounting principles.
/s/ KPMG Peat Marwick
---------------------
Denver, Colorado KPMG Peat Marwick LLP
March 31, 1997, except as to
paragraph 3 of Note 5,
which is as of April 4, 1997
F-1
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
<TABLE>
<CAPTION>
Balance Sheets
December 31, 1996 and 1995
- --------------------------------------------------------------------------------
1996 1995
---- ----
<S> <C> <C>
Assets
Cash and cash equivalents ........................ $3,464,102 3,774,001
Accrued interest receivable ...................... 11,088 12,254
Due from affiliates .............................. 2,205 --
Mortgage loans receivable (notes 2 and 3) ....... 450,590 450,590
- - ------- -------
$3,927,985 4,236,845
========== =========
Liabilities and Partners' Capital
Accrued expenses ................................. $ -- 7,422
Due to affiliates ................................ -- 491
Deferred revenue (note 3) ........................ 400,000 400,000
- ------- -------
Total liabilities ............................ 400,000 407,913
Partners' capital (note 5):
General partners ............................... 34,838 30,299
Limited partners ............................... 3,493,147 3,798,633
--------- ---------
Total partners' capital ...................... 3,527,985 3,828,932
--------- ---------
Commitments and contingencies (note 3)
$3,927,985 4,236,845
========== =========
</TABLE>
See accompanying notes to financial statements.
F-2
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
<TABLE>
<CAPTION>
Statements of Operations
Years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Revenues:
Interest income ................................ $ 268,703 261,614 12,670
Gain on sale of investments in
operating properties ............................. -- 1,632,719 --
------- --------- -------
268,703 1,894,333 12,670
Expenses:
Professional fees .............................. 20,705 51,233 13,691
Fees to affiliates:
Management ................................... 36,250 52,212 52,212
Mortgage servicing ........................... 1,126 4,020 9,828
Mortgage placement fee ....................... -- 116,094 --
Other .......................................... 29,054 31,157 44,123
------ ------ ------
87,135 254,716 119,854
------ ------- -------
Net income (loss) ........................ $ 181,568 1,639,617 (107,184)
========== ========= ========
Net income allocated to general partners . $ 4,539 40,990 (2,680)
Net income allocated to limited partners . 177,029 1,598,627 (104,504)
------- --------- --------
$ 181,568 1,639,617 (107,184)
========== ========= ========
Net income (loss) per limited partner unit $ .34 3.06 (0.20)
========== ==== =====
Weighted average limited partner units
outstanding .......................... 522,116 522,116 522,116
======= ======= =======
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
<TABLE>
<CAPTION>
Statements of Partners' Capital
Years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
Total
General Limited Partners'
partners partners capital
-------- -------- -------
<S> <C> <C> <C>
Balance at December 31, 1993 ......... $ 1,989 3,164,894 3,166,883
Net loss ............................. (2,680) (104,504) (107,184)
Distributions to limited partners
($.87 per unit) .................... -- (456,637) (456,637)
------- -------- --------
Balance at December 31, 1994 ......... (691) 2,603,753 2,603,062
Net income ........................... 40,990 1,598,627 1,639,617
Distributions to limited partners
($.77 per unit) .................... -- (403,747) (403,747)
Distributions to general partners .... (10,000) -- (10,000)
------- -------- -------
Balance at December 31, 1995 ......... 30,299 3,798,633 3,828,932
Net income ........................... 4,539 177,029 181,568
Distributions to limited partners
($.92 per unit) .................... -- (482,515) (482,515)
--------- -------- --------
Balance at December 31, 1996 ......... $ 34,838 3,493,147 3,527,985
=== ==== ========== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
<TABLE>
<CAPTION>
Statements of Cash Flows
Years ended December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................. $ 181,568 1,639,617 (107,184)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Gain on sale of investment in operating
properties ................................ -- (1,632,719) --
Decrease (increase) in accrued
interest receivable ....................... 1,166 (8,589) (925)
Increase (decrease) in accrued expenses ...... (7,422) 2,682 (69,760)
Increase (decrease) in due to/from affiliates (2,696) -- 6,348
Decrease in deferred revenue ................. -- -- (5,334)
------- --------- ------
Net cash provided by (used in)
operating activities ................ 172,616 991 (176,855)
------- --- --------
Cash flows from investing activities:
Return of investment from operating properties .... -- -- 11,107
Distributions received from operating properties .. -- 67,646 532,684
Proceeds from sale of investment in operating
properties ...................................... -- 4,005,914 --
---------
Net cash provided by investing activities -- 4,073,560 543,791
-------- --------- -------
Cash flows from financing activities:
Distributions to partners ......................... (482,515) (413,747) (456,637)
-------- -------- --------
Net cash used in financing activities ... (482,515) (413,747) (456,637)
-------- -------- --------
Net increase (decrease) in cash and cash equivalents (309,899) 3,660,804 (89,701)
Cash and cash equivalents, beginning of year ........ 3,774,001 113,197 202,898
--------- ------- -------
Cash and cash equivalents, end of year .............. $ 3,464,102 3,774,001 113,197
=========== ========= =======
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
December 31, 1996, 1995 and 1994
- --------------------------------------------------------------------------------
(1) Organization and Summary of Significant Accounting Policies
(a) Organization
Common Goal Health Care Pension and Income Fund L.P. II (the
Partnership), a Delaware Limited Partnership, was formed on May 9, 1989 to
invest in and make mortgage loans to third-parties and affiliates involved
in health care. Having previously sold more than the specified minimum of
117,650 units ($1,176,500), the Partnership commenced operations on July 2,
1990. The Partnership's offering terminated on January 11, 1992, with the
partnership having sold 522,116 units ($5,221,160). There is no active
public trading market for the units. At December 31, 1996, there were 413
unit holders.
The General Partners are Common Goal Capital Group, Inc. II, the
Managing General Partner, and Common Goal Limited Partnership II, the
Associate General Partner. Under the terms of the Partnership agreement,
the General Partners are not required to make any additional capital
contributions except under certain limited circumstances upon termination
of the Partnership.
Under the terms of the Partnership agreement, the Partnership
reimbursed the General Partners for certain offering and organizational
expenses incurred in connection with the issuance and distribution of the
units in an amount fixed at 5% of gross offering proceeds. These offering
and organizational expenses excluded broker/dealer selling commissions and
included accountable due diligence expense reimbursements. Health Care
Securities, Inc. (HCS), an affiliate acting as managing dealer, received
selling commissions of 8% of the gross offering proceeds on all units sold
directly by HCS. Additionally, HCS received a non-accountable expense
allowance of 2% of gross proceeds for expenses incurred in connection with
the sale of Units, and also received reimbursement of up to .5% of gross
proceeds for accountable due diligence expenses. Offering and organization
expenses were recorded as a reduction of partners' capital.
(b) Use of 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 revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
F-6 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(b) Continued
For entities investing in and making mortgage loans to businesses in
the health care industry, certain inherent risks may increase the
possibility of actual results differing from management's estimates. These
inherent risks include, among other things, the following:
Substantial dependence on revenues derived from reimbursement by the
Federal Medicare and state Medicaid programs;
Government regulation, government budgetary constraints and proposed
legislative and regulatory changes; and
Lawsuits alleging malpractice and related claims.
(c) Partnership Management Fees and Operating Expenses
Under the terms of the Partnership agreement, the Partnership is
required to pay a quarterly management fee to the Managing General Partner
equal to 1% per annum of adjusted contributions, as defined. Additionally,
a mortgage and investment servicing fee equal to .25% per annum of the
Partnership's outstanding mortgage loan receivable and investment amounts
are to be paid to Common Goal Mortgage Company (CGMC), an affiliate of the
General Partners.
Additionally, under the terms of the Partnership agreement, the
Partnership is required to reimburse the Managing General Partner for
certain operating expenses. In an effort to maintain the yield to the
Limited Partners, the Managing General Partner did not charge the
Partnership for such expenses through December 31, 1990. In 1996, 1995 and
1994, the Managing General Partner charged the Partnership for $38,656,
$29,615, and $31,543 of these expenses, respectively. The Managing General
Partner believes that such charges have not adversely affected the current
yield to Limited Partners.
Mortgage loans that have virtually the same risk and potential rewards
as joint ventures are accounted for and classified as investments in
operating properties. The Partnership agreement authorized the payment of a
3% mortgage placement fee to CGMC in connection with the original placement
of these mortgage loans. CGMC elected to defer the receipt of the fee until
the repayment of the mortgage loans. CGMC was entitled to a mortgage
placement fee of up to $127,468 at the time of repayment in
F-7 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(c) Continued
April 1995, however, as consideration for immediate cash payment, CGMC
agreed to a fee of $116,094, representing payment in full. Cash received
related to investments in operating properties is recognized as interest
income to the extent that such properties have earnings prior to the
recognition of the distribution of cash to the Partnership; otherwise, such
cash is recorded as a reduction of the related investments.
(d) Partnership Allocation of Income and Loss and Distribution
Net Income and Net Loss
-------------------------
Net income (except with respect to a Disposition, as defined, which
includes any Partnership transaction not in the ordinary course of its
business, including, without limitation, collections of principal payments,
equity participation payments, prepayments, prepayment penalties, sales,
exchanges, foreclosures or other dispositions of Mortgage Loans held by the
Partnership, recoveries of damage awards and insurance proceeds (other than
the receipt of subscriptions for Units, all forms of interest payments when
due on Mortgage Loans or business or rental interruption insurance
proceeds)) and net loss of the Partnership is allocated 97.5% to Limited
Partners and 2.5% to the General Partners. Net income arising from a
Disposition is allocated 97.5% to Limited Partners and 2.5% to the General
Partners to the extent of any negative balances in the capital accounts of
the Limited Partners, and then 100% to Limited Partners in an amount
necessary to bring the Limited Partners' capital accounts up to an amount
equal to their Original Contributions, as defined, which means the amount
of $10.00 for each Unit less the return of any amount of uninvested funds
returned, as defined, plus the 11.5% preferred cumulative return thereon
(less previous distributions to the Limited Partners in payment of such
amounts). Remaining net income is allocated 85% to the Limited Partners and
15% to the General Partners.
Net income (loss) per limited partner unit is computed based on the
weighted average limited partner units outstanding for the year divided
into the net income (loss) applicable to the Limited Partners.
Distributions of Cash From Operations
-------------------------------------
Distributions of Adjusted Cash From Operations, defined as all
receipts of interest payments on Mortgage Loans less cash receipts used to
pay operating expenses and to repurchase any Units (Cash Flow) less any
amount set aside for the restoration or
F-8 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
(d) Continued
creation of working capital reserves, are distributed 97.5% to the
Limited Partners and 2.5% to the General Partners, and are apportioned
quarterly among Limited Partners of record as of the record date declared
within 30 days after the end of each quarter and will be paid quarterly. No
distributions of Adjusted Cash From Operations with respect to any calendar
year are made to the General Partners until the following occurs:
First, distributions to the Limited Partners equal to the 9%
annual cumulative return on their Adjusted Contributions, defined as
Original Contributions attributable to a Unit, reduced by the total of
cash distributed from Disposition Proceeds and from working capital
reserves, for such year (plus any amounts accrued from prior years)
have been made to the Limited Partners; and
Second, payment of all previously subordinated management fees,
if any, have been made.
Thereafter, all previously subordinated amounts payable to the General
Partners with respect to their 2.5% interest are paid in full to the extent
funds are available, and if not available, are deferred and paid out of
Disposition Proceeds, defined as receipts from Dispositions net of related
expenses, amounts necessary for the payment of debts and obligations of the
Partnership and any amount set aside for working capital reserves. The
Partnership has been making distributions to the Limited Partners in excess
of the 9% annual cumulative return on Adjusted Contributions, with the
exception of the four distributions made during the period October 5, 1994
to October 5, 1995, when the annual cumulative return was reduced to 7.25%.
Distributions of Disposition Proceeds
-------------------------------------
The Managing General Partner has the right to reinvest or distribute
all Disposition Proceeds received through the second anniversary of the
final closing date and may reinvest disposition proceeds as necessary
thereafter to avoid classification as an investment company under the
Investment Company Act of 1940. Non-liquidating distributions of
Disposition Proceeds are distributed in the following order of priority,
except as otherwise required by law:
F-9 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(d) Continued
First, 100% to the Limited Partners until the Limited Partners
have received an amount which, when added to prior distributions of
Disposition Proceeds and cash from reserves attributable thereto,
equals the Original Contributions of the Limited Partners;
Second, 100% to the Limited Partners until each Limited Partner
has received an amount which, when added to all prior distributions to
Limited Partners from all sources (including prior distributions in
satisfaction of the 9% annual cumulative return but excluding
distributions pursuant to above), equals the 11.5% per annum preferred
cumulative return on their Adjusted Contributions, (calculated from
the first day of the calendar quarter succeeding the quarter in which
capital contributions are received);
Third, 100% to the General Partners until they have been paid
100% of the subordinated portion, if any, of (a) the management fee,
if any, and then (b) their 2.5% interest in Adjusted Cash From
Operations; and
Fourth, the remainder, 85% to the Limited Partners and 15% to the
General Partners.
Distribution of liquidation proceeds (defined as the Disposition of
the last one-third in principal amount of Mortgage Loans existing on the
first day of the sixteenth anniversary of the date of the Prospectus) will
be made in accordance with Partners' positive capital account balances,
with any excess being distributed in accordance with the order of priority
for non-liquidating distributions.
Dissolution
-----------
Since it is the intention of the Managing General Partner to liquidate
the Partnership's assets between the tenth and fifteenth years after the
final closing date (the "Final Closing Date"), the Managing General Partner
will adopt the following procedures to provide for an orderly liquidation:
the Managing General Partner intends to confine the Partnership's
investment activities to Mortgage Loans with terms ending prior to the end
of the tenth anniversary of the final closing date and will try to sell any
property the Partnership has acquired by foreclosure or otherwise in an
orderly fashion. Any such sales to affiliates of the Partnership or the
General Partners would require the
F-10 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(d) Continued
approval of a majority of the independent members of the Board of
Directors of the Managing General Partner. To the extent that any Mortgage
Loans will not mature by their terms prior to the end of such tenth
anniversary, it may become necessary to sell such investments. It can be
reasonably anticipated that the Partnership may be required to sell such
investments for less than their outstanding principal balances as of the
date of sale. The Partnership intends to reinvest loan proceeds received
only as and if necessary to avoid classification as an investment company
under the Investment Company Act of 1940.
Proceeds from the liquidation will be applied and distributed in the
following order:
First, to the payment of creditors of the Partnership but
excluding secured creditors whose obligations will be assumed or
otherwise transferred on the liquidation of Partnership assets; and
Second, after allowance for the expenses of liquidation and the
setting up of any reserves for contingencies which the Managing
General Partner considers necessary, to the General Partners and
Limited Partners in proportion to and to the extent of the positive
balances in their capital accounts, after net income or loss arising
from a Disposition has been allocated, with any excess being
distributed in accordance with the order of priority for
non-liquidating distributions.
Notwithstanding anything to the contrary, the Managing General Partner
has the right to defer liquidation if, in the opinion of the Managing
General Partner, the sale of Partnership assets in liquidation would result
in a material underrealization on the Partnership's assets.
(e) Allowance for Losses
An allowance for loan losses is provided, if necessary, at a level
which the Partnership's management considers adequate based upon an
evaluation of known and inherent risks in the loan portfolio. There was no
allowance for losses necessary at December 31, 1996 and 1995.
F-11 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(1) Continued
(f) Federal Income Taxes
No provision for federal income taxes has been recorded as the
liability for such taxes is that of the partners rather than the
Partnership.
(g) Cash and Cash Equivalents
The Partnership classifies all short-term investments with maturities
of three months or less at the date of purchase as cash equivalents. At
December 31, 1996 and 1995, cash equivalents primarily consist of money
market securities.
(h) Reclassifications
Certain 1995 and 1994 amounts have been reclassified to conform with
the 1996 presentation.
(2) Mortgage Loans Receivable
At December 31, 1996 and 1995, the mortgage loans receivable included
$50,590, representing the Partnership's participation in a $1,618,254 second
mortgage loan made by an affiliated limited partnership. The loan, which is
secured by two nursing home facilities in Pennsylvania, bears interest at a rate
of 13.7% per annum and provides for the payment of participation interest based
on the increase in the fair value of the properties at maturity or redemption of
the loan or pursuant to any sale of the facilities. Participation interests are
recorded as revenue when they are determinable, generally at maturity or
redemption of the loan or pursuant to any sale of the facilities. The loan also
provides for the payment of additional interest based upon the gross revenues of
the facilities. The entire principal balance is due at the maturity date of
January 1, 2000.
The repayment terms of the mortgage loans accounted for as investments in
affiliated operating properties (note 3) resulted in new second mortgage loans
on the St. Catherine's Facilities totaling $400,000 at December 31, 1996 and
1995. These new second mortgage loans are appropriately classified as mortgage
loan receivables as they do not contain virtually the same risk and potential
rewards as joint ventures.
F-12 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(2) Continued
<TABLE>
<CAPTION>
A summary of mortgage loan receivable activity for the years ended December 31, 1996,
1995 and 1994 is as follows:
<S> <C>
Balance at December 31, 1993 $ 50,590
Repayments during 1994 -
------
Balance at December 31, 1994 50,590
Mortgage loans made during 1995 400,000
---- -------
Balance at December 31, 1995 and 1996 $450,590
========
</TABLE>
There were no mortgage loans made or repayments received during the year ended
December 31, 1996.
The fair value of the Partnership's mortgage loans receivable differed
from the carrying value of the mortgage loans receivable as follows:
<TABLE>
<CAPTION>
Carrying Fair
Value Value
----- -----
<S> <C> <C>
December 31, 1996 $ 450,590 454,859
December 31, 1995 450,590 456,010
</TABLE>
The Partnership estimates the fair value of its mortgage loans
receivable by discounting future cash flows using an appropriate interest
rate.
The carrying amounts at December 31, 1996 and 1995 for cash and cash
equivalents, accrued interest receivable, due from and to affiliates, and
accrued expenses approximated their fair values due to the short maturity
of these instruments.
(3) Investments in Operating Properties
The Partnership made and funded three mortgage loans to affiliated
entities (the "St. Catherines Loans"). The Partnership's affiliation with
these entities is a result of the President and Chief Executive Officer of
the Managing General Partner also serving as the President of the entities
receiving the loans. The Partnership's mortgage loans to the affiliated
entities were related to the operating facilities and were accounted for as
investments in operating properties. These mortgage loans were repaid on
April 13, 1995 upon refinancing by the owners of their senior debt with an
unrelated lender. In connection with the repayment of these mortgage loans
the Partnership recognized a gain on sale of investment in operating
properties of $1,632,719 in the accompanying statement of operations for
1995. The refinancing of the senior debt did not provide sufficient
proceeds to allow repayment of the participations owing under the St.
Catherine's Washington Court House and Findlay Loans (the "SCC
Participations") in the total amount of $840,500. The St. Catherine's
Washington Court Borrowers repaid the SCC Participations through:
(i) the issuance of notes in the total amount of $400,000
(a) bearing an interest rate of 11.00% per annum, which is due
quarterly
(b) maturing on the earlier of the sale or refinancing of the Tiffin,
Bloomville, Fostoria, Court House and Findlay Facilities (the "SC
Facilities") or the maturity of the senior debt with South Trust (August,
2000) and
F-13 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(3) Continued
(c) cross-collateralized by second mortgage liens on the SC
Facilities; and
(ii) the issuance of a contingent payment obligation by St.
Catherine's of Seneca, Inc. in the amount of $202,500 and a contingent
payment obligation by St.Catherine's Care Centers of Fostoria, Inc. in the
amount of $238,000 (collectively, the "CPOs")
(a) bearing an interest rate of 11% per annum, which is due
quarterly
(b) maturing on the earlier of the sale or refinancing of the SC
Facilities or the maturity of the senior debt with South Trust
(August, 2000).
The CPOs provide that interest is payable on a current basis provided that
the debt service coverage ratios on each of the SC Facilities is 1.2 to 1.0. In
the event these debt service coverage ratios are not maintained, the interest
shall accrue until the debt service coverage ratio is at least 1.2 to 1.0 or
maturity. The CPOs further provide that principal is payable only to the extent
that upon a resale or refinancing of the SC Facilities, there are sufficient
proceeds to repay the senior debt and the amounts owing under the CPOs. The CPOs
are being assumed by an affiliated entity, Will Care of Ohio, Inc., and will be
secured, to the extent they become payable and are not paid, by a pledge of 30
shares of St. Catherine's of Seneca, Inc. common stock.
In accordance with FASB Statement of Standards No. 66, "Accounting for
Sales of Real Estate," the $840,500 participation was not recognized as income
during 1995. The Partnership has recorded $400,000 of the participation amount,
related to the mortgage loan receivable, as deferred revenue, and the interest
thereon will be recognized as it is earned. Due to the contingent nature of the
$440,500 due to the Partnership related to the CPOs, such amount has not been
recorded as an asset of the Partnership and the participation income and
interest earned on the CPOs will be recognized only when received. Interest
received by the Partnership relating to the CPOs amounted to $48,455 and $22,609
for the years ended December 31, 1996 and 1995.
F-14 (Continued)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(3) Continued
<TABLE>
<CAPTION>
A summary of activity in investments in operating properties for the years
ended December 31, 1996, 1995 and 1994 is as follows:
<S> <C>
Balance at December 31, 1993 $ 2,984,632
Additional investments in operating properties (11,107)
Distributions from operating properties (532,684)
--------
Balance at December 31, 1994 2,440,841
Distributions from operating properties (2,440,841)
----------
Balance at December 31, 1995 and 1996 $ -
==========
</TABLE>
There were no additional investments in or distributions from operating
properties during the year ended December 31, 1996 and 1995.
(4) Federal Income Tax Information (Unaudited)
<TABLE>
<CAPTION>
The following reconciles net income (loss) for financial reporting purposes
to net income (loss) for federal income tax purposes for the years ended
December 31,:
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Net income (loss) per financial statements ....... $ 181,568 1,639,617 (107,184)
Differences due to income (expense) recognized for
federal income tax purposes but not for
financial statement purposes ................... -- (681,212) 935,150
-------- --------- --------
Net income (loss) for
federal income tax purposes .................... $ 181,568 958,405 827,966
========== ======= =========
</TABLE>
F-15
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a limited partnership)
Notes to Financial Statements
- --------------------------------------------------------------------------------
(5) Subsequent Events
On January 8, 1997, the Partnership declared and paid a distribution of
$121,399 ($.23 per unit) to Limited Partner unitholders of record at December
15, 1996.
On March 13, 1997 the Managing General Partner approved a loan of
approximately $400,000 to St. Catherine's Care Center of Tiffin, Inc., St.
Catherine's Care Center of Bloomville, Inc., St. Catherine's Care Center of
Washington Court House, Inc., St. Catherine's Care Center of Fostoria, Inc. and
St. Catherine's Care Center of Findlay, Inc., affiliates of the Managing General
Partner. It is estimated that the loan will bear interest at the rate of 13% per
annum and will mature five years after the date of the loan. The Partnership has
not yet funded this loan.
On April 4, 1997, the Partnership declared and paid a distribution of
$119,085 ($.23 per unit) to Limited Partner unitholders of record at March 15,
1997. Additionally, a return of principal to the Limited Partners of $250,000
($.48 per unit) was also declared and paid by the Partnership on April 4, 1997.
F-16
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. None.
<PAGE>
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons,
Compliance with Section 16(a) of the Exchange Act.
The Partnership does not have directors or officers. The following is a
list of the officers and directors of the Managing General Partner as of March
31, 1997:
Name Age Position
Albert E. Jenkins III 50 Chairman of the Board, Chief Exec-
utive Officer, President and
Director
Richard R. Wood 74 Secretary and Treasurer
William E. Jasper 81 Director
Rev. Terry A. Steinhauer Sr. 40 Director
Linda Robison 50 Director
Albert E. Jenkins III is the President and Chief Executive Officer of the
Managing General Partner and Common Goal Mortgage Company. Mr. Jenkins also
serves on the boards of directors of the above-referenced corporations. Mr.
Jenkins is a co-general partner of Common Goal Limited Partnership II, the
Associate General Partner, and Common Goal Management Company. In 1986, Mr.
Jenkins formed Common Goal Capital Group, Inc. to act as the corporate general
partner of Common Goal I. That partnership successfully raised $19,129,110 from
1,533 investors and placed seven mortgages in six states secured by 13
facilities. Mr. Jenkins is also President, Chief Executive Officer and a
director of St Catherine's of Seneca, Inc., St Catherine's Care Center of
Tiffin, Inc., St Catherine's Care Center of Bloomville, Inc. and St. Catherine's
Care Centers of Fostoria, Inc. In addition, Mr. Jenkins is President and a
director of St. Catherine's Health Care Management, Inc., St. Catherine's Care
Center of Washington Court House, Inc. and St Catherine's Care Center of
Findlay, Inc. He is also president and sole director and shareholder of
HealthCare Securities, Inc. which served as the Managing Dealer for the
distribution of limited partner interests. Mr. Jenkins has been a licensed
securities salesman since 1971 and an investment advisor registered under the
Investment Advisers Act of 1940 since 1978.
William E. Jasper, Jr. is a director of Common Goal Capital Group, Inc. II
and has been a member of the Board of Directors of Madison Square Federal
Savings Bank since 1964. Prior to 1980, when Mr. Jasper retired, he had served
as president of a multi-line insurance agency and brokerage. Mr. Jasper is a
Deputy Regional Director for a fraternal organization that is dedicated to the
Maryland Special Olympics which provides health-care training and specialized
sports for the mentally handicapped. Mr. Jasper attended Baltimore City College
and has taken numerous extended courses at Loyola College and Johns Hopkins
University in real estate, appraisals, inspections, financial planning,
mortgages and management.
Richard R. Wood, is a general partner of Common Goal Limited Partnership II
and a former director and officer of the Managing General Partner. Mr. Wood is
also a director of Common Goal Capital Group, Inc. and a general partner of
Common Goal Limited Partnership I, which is a general partner of Common Goal I,
a publicly-held limited partnership with investment objectives substantially
identical to those of the Partnership, each of which was formed in 1986. Mr.
Wood is president, a director and owner, along with his brother R. Norman Wood,
of Renwood Properties, Inc. Mr. Wood has, either individually or together with
or through Renwood, sponsored thirty-one prior private limited partnerships
which have acquired real estate. These partnerships have raised approximately
$30,762,525, with approximately 81% of the properties acquired being
government-subsidized low income housing projects for families and the elderly
and handicapped. In addition, Mr. Wood is also a controlling shareholder of
Renwood, Inc. and several of the Renwood companies, which act as co-general
partners of certain of the above-referenced syndications. Mr. Wood received a
B.A. from Harvard University in 1943 and attended Massachusetts Institute of
Technology from 1947-1948.
Rev. Terry A. Steinhauer Sr. is a director of Common Goal Capital Group,
Inc. II. He is the founder and Senior Pastor of Fostoria New Covenant Church
Inc. an independent congregation established in 1984. He is a duly ordained and
licensed minister with the State of Ohio. Rev. Steinhauer is also the president
of the board of directors for the Fostoria Bureau of Concern, a referral agency
affiliated with the Red Cross, United Way, Senior Citizens Center, Meals on
Wheels, Sharing Kitchen and Habitat for Humanity. He is also a board member for
Bettsville Local School District where he serves as the Legislative Liaison for
the Ohio School Boards Association, in addition to the Technology and Strategy
Planning Committees. Rev. Steinhauer is also a member and former editor of the
Northwest Ohio Christian Writer's Group. He is also presently a member of the
Advisory Board of St. Catherine's of Fostoria where is has consistently
ministered for the last 19 years. He is a member of the Fostoria Chamber of
Commerce and has been actively involved with the Gideons, the Fostoria
Ministerial Association, Habitat for Humanity, and the Fostoria Framework for
Progress Committee.
Linda Robison, is a director of Common Goal Capital Group, Inc. II. Ms.
Robison is an attorney and practices primarily in the areas of corporate
transactions, corporate finance, tax, estate planning and real estate. She
represents such industries as manufacturing, health care, construction, retail,
distribution, and computer software. Ms. Robison has been admitted to the Bar in
Massachusetts, Illinois, and Florida. She is a member of the American Bar
Association, and the U.S. Tax Court, and past chair of the ABA Small Business
Committee's subcommittee on corporate tax. She has published articles in the
Practical Tax Lawyer, Securities & Commodities Regulation, Smith's
Review-Federal, Estate and Gift Taxation, Taxation for Lawyers, and a Matthew
Bender treatise on real estate transactions. She earned her undergraduate degree
from the University of Georgia where she attained a B.S. in psychology and
graduated cum laude and Phi Beta Kappa. Ms. Robison has a L.L.M. in taxation
from Boston University. She is a co-founder and director of a wholesaler of
sportswear, and a co-founder and director of a firm which finishes plastic parts
for the computer and automotive industries. From 1983 to 1990 she was a Partner
and Board Member of the Chicago based firm of Sachnoff & Weaver. She is the
immediate Past-President and Chairman of U.S. Committee for UNICEF/Chicago; a
past President and Board Member of the Chicago Finance Exchange; and the
Treasurer and Board Member of Chicago Midwest Women's Center. In addition she
has served on the Advisory Board of YMCA; Board Member of Women in Management
and a member of Business and Professional Women's Board.
<PAGE>
Item 10. Executive Compensation.
The Partnership has no executive officers or directors. The Partnership is
not required to pay the officers and directors of the General Partners any
current nor any proposed compensation in such capacities. However, the
Partnership is required to pay certain fees, make distributions and allocate a
share of the profits or losses of the Partnership to the General Partners as
described under the caption "Management Compensation" on pages 8 through 11 of
the Partnership's Prospectus, which description is incorporated herein by
reference. Set forth below are the fees, compensation and other reimbursements
paid or accrued to the Managing General Partner and its Affiliates for the year
ended December 31, 1996.
<TABLE>
<CAPTION>
Capacities in
Which Compensation
Name of Affiliate was Received Remuneration
- ----------------- ------------ ------------
<S> <C> <C>
Managing General Partner Management fee $36,250
Common Goal Mortgage Mortgage loan $ 1,126
Company servicing fees
</TABLE>
No form of non-cash remuneration was paid by the Partnership.
For further information on compensation paid to Common Goal and its
Affiliates, see "Management Compensation" on pages 8-11 of the Prospectus.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
The Partnership, as an entity, does not have any directors or officers. The
following is information concerning Unit ownership as of March 31, 1997.
To the best knowledge of the Partnership, no person owns more than 5% of
the outstanding Units. Messrs. Jenkins and Wood each own less than 1% of the
total outstanding Units and all officers and directors of the Managing General
Partner, as a group, own less than 1% of the total outstanding Units. No other
officer or director of the Managing General Partner owns any Units.
Item 12. Certain Relationships and Related Transactions.
The Partnership made and funded three Mortgage Loans (the St. Catherine's
Loan, the Court House Loan and the Findlay Loan) to affiliated entities. In
connection with these Mortgage Loans, the Partnership obtained the opinion of an
independent third party that the terms and conditions of the respective loans
were fair and at least as favorable to the Partnership as a loan to an
unaffiliated party in similar circumstances. See "Management's Discussion and
Analysis or Plan of Operation" for further information regarding the repayment
and refinancing of these Mortgage Loans. The Partnership has made an additional
loan to an unaffiliated party through a joint venture with Common Goal I, an
affiliated, publicly-offered limited partnership with similar investment
objectives (the Joint Venture Loan). For further information concerning those
Mortgage Loans, see "Item 1. Description of Business."
The Partnership engages the services of Common Goal Mortgage Company, an
affiliate of the General Partners, in connection with servicing Mortgage Loans
for which Common Goal Mortgage Company generally is paid a fee by the borrower.
See "Item 10. Executive Compensation," for the information concerning such fees.
<PAGE>
PART IV
Item 13. Exhibits and Reports on Form 8-K.
(a) (1) Financial Statements
The response to this portion of Item 13 is submitted as a separate
section of this report, commencing on page F-1.
(2) Financial Statement Schedules
Not applicable.
(3) Exhibits
See response to Item (c), below.
(b) Reports on Form 8-K
The Partnership did not file any reports on Form 8-K during the
quarter ended December 31, 1996.
(c) Exhibits
The following exhibits are included herein or incorporated by reference:
Number
------
3 (a) Amended and Restated Limited Partnership Agreement of
Registrant dated as of December 6, 1989 (incorporated by reference
from Exhibit 3.1, included in Registrant's Form S-11 Registration
Statement S.E.C. File No. 33-31358).
3 (b) Pages 8-11 of the Registrant's final Prospectus dated January
12, 1990, as filed with the Securities and Exchange Commission
pursuant to Rule 424(b) under the Securities Act of 1933, as amended.
(d) Financial Statement Schedules
Not applicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMMON GOAL HEALTH CARE PENSION AND
INCOME FUND L.P. II
By: Common Goal Capital Group, Inc., II,
General Partner
By: /s/ Albert E. Jenkins
--------------------------
Albert E. Jenkins III
Chairman and Chief Executive Officer
Date: April 14, 1997
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.
Name Position Date
/s/ Albert E. Jenkins Chairman (Principal April 14, 1997
Albert E. Jenkins III Executive Officer),
President, Principal
Financial and
Accounting Officer
and Director of
Managing General
Partner
/s/ William E. Jasper, Jr. Director of Managing April 14, 1997
- ---------------------------
William E. Jasper, Jr. General Partner
/s/ Richard R. Wood Director of Managing April 14, 1997
- --------------------------
Richard R. Wood General Partner
/s/ Terry Steinhauer Director of Managing April 14, 1997
- --------------------------
Terry Steinhauer General Partner
/s/ Linda Robison Director of Managing April 14, 1997
- --------------------------
Linda Robison General Partner
(A Majority of the Board of Directors of the Managing General Partner)
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
COMMON GOAL HEALTH CARE PENSION AND
INCOME FUND L.P. II
By: Common Goal Capital Group, Inc., II,
General Partner
By:
--------------------------
Albert E. Jenkins III
Chairman and Chief Executive Officer
Date: April 14, 1997
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.
Name Position Date
_____________________ Chairman (Principal April 14, 1997
Albert E. Jenkins III Executive Officer),
President, Principal
Financial and
Accounting Officer
and Director of
Managing General
Partner
Director of Managing April 14, 1997
- ---------------------------
William E. Jasper, Jr. General Partner
Director of Managing April 14, 1997
- --------------------------
Richard R. Wood General Partner
Director of Managing April 14, 1997
- --------------------------
Terry Steinhauer General Partner
Director of Managing April 14, 1997
- --------------------------
Linda Robison General Partner
(A Majority of the Board of Directors of the Managing General Partner)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 3,464,102
<SECURITIES> 0
<RECEIVABLES> 463,883
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,927,985
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 3,927,985
<CURRENT-LIABILITIES> 400,000
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,527,985
<TOTAL-LIABILITY-AND-EQUITY> 3,927,985
<SALES> 0
<TOTAL-REVENUES> 268,703
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 87,135
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 181,568
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 181,568
<EPS-PRIMARY> 0
<EPS-DILUTED> .34
</TABLE>
