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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, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 - For the Transition period from ______ to ____
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Commission File Number: 0-21604
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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
(State or other Jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
215 Main Street
Penn Yan, New York 14527
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(Address of principal executive offices) (Zip Code)
(315) 536-5985
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(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, 1997 were $214,266.
The aggregate sales price of the units of Limited Partnership Interest held by
non-affiliates of the Registrant as of March 31, 1998 was $2,113,825 (488
investors). As of March 31, 1998, 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>
<CAPTION>
TABLE OF CONTENTS
Page
<S> <C> <C> <C>
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.................................................21
Item 11. Security Ownership of Certain Beneficial Owners and Management.........21
Item 12. Certain Relationships and Related Transactions.........................21
PART IV
Item 13. Exhibits and Reports on Form 8-K.......................................23
FINANCIAL STATEMENTS........................................................................F-1
SIGNATURES
</TABLE>
(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;
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(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, 1997, 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
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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
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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
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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.
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The principal balances outstanding for mortgage loan receivables as of December
31, 1997 were as follows:
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
St. Catherine's Care Centers 754,700
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$1,205,290
==========
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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, 1997 was
$50,590. The entire principal balance is due at the maturity date of January 1,
2000.
At December 31, 1997, the loan was current as to regular interest and
annual gross revenue interest.
St. Catherine's Loans. The Partnership made and funded three mortgage
loans to affiliated entities (the "St. Catherine's 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
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$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.
On March 13, 1997 the Managing General Partner approved a loan of $425,000
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., (collectively, "St Catherine's Care Centers") affiliates of the
Managing General Partner and to be secured by mortgages on the real properties
owned by each of the foregoing, said mortgages being subordinated to senior
indebtedness in the amount of $10,650,000 held by South Trust Bank of Alabama,
N.A. and indebtedness of the Partnership in the amount of $400,000. The loan
will bear interest at the rate of 13% per annum and will mature August 31, 2000.
The Partnership funded this $425,000 loan on April 10, 1997. On November 3, 1997
the Managing General Partner approved an additional loan of $425,000 to St.
Catherine's Care Centers. As of December 31, 1997 the loan balance was $724,700.
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The following chart provides certain summary information with respect to
the Partnership's Mortgage Loans.
<TABLE>
<CAPTION>
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
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<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, 1997 $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 Property and intermediate home in Tiffin, home in ing home in home in Wash- bed nursing
Securing Loan care facility in OH Bloomville, Fostoria, OH ington Court home in
Honeybrook, PA (2) OH 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, 1997 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
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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>
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Partnership Allocation of Income and Loss and Distribution.
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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,
10
<PAGE>
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
11
<PAGE>
"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.
12
<PAGE>
Item 2. Description of Property.
The Partnership did not own any real property as of December 31, 1997.
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 1997.
13
<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, 1998, 522,116 Units were outstanding, and were held by 488
holders of record.
The Partnership made distributions to Limited Partners of $1,222,290
($750,000 as principal distribution) or $2.34 per Unit during 1997, $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, 1997, 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.
14
<PAGE>
As of December 31, 1997, 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, 1997), 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").
15
<PAGE>
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,
1997 and December 31, 1996 was $1,647,623 and $3,464,102, respectively, which
consisted of operating cash and working capital reserves. The decrease in cash
and cash equivalents from December 31, 1996 to December 31, 1997 of $1,816,479
resulted from cash provided by operating activities, $160,511, net cash used in
investing of 754,700 and net cash used in financing activities, $1,222,290. This
decrease was partially caused by the net cash distributed as dividends to the
limited partners, $1,222,290 ($2.34 per Unit), which included $750,000 ($1.44
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 $1,647,623 at December 31, 1997. 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.
16
<PAGE>
During the years ended December 31, 1997, 1996, 1995, and 1994, the
Partnership reported net income (loss) of $293,963, $181,568, $1,639,617 and
$(107,184) based on total revenues of $214,266, $268,703, $1,894,333, and
$12,670, and total expenses of $79,698, $87,135, $254,716, and $119,854,
respectively. The Partnership's net income (loss) per Limited Partner Unit was
$.41 per Unit in 1997, $.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 $2.34 per Unit in 1997,
$.92 per Unit in 1996, $.77 per Unit in 1995, and $.87 per Unit in 1994. The
1997 dividend distributions to Limited Partners included a return of capital of
$.
per Unit. 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 1997 by $7,437. There was a decrease of $436 in
professional fees and a decrease of $7,219 in management fees caused by drop in
mortgage balances being serviced. Other expenses increased by $218 from 1996 to
1997.
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 1997, 1996, 1995 and 1994, the Managing General
Partner was reimbursed by the Partnership for $34,457, $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.
Item 7. Financial Statements.
See Financial Statements.
17
<PAGE>
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
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, 1998:
Name Age Position
---- --- --------
Albert E. Jenkins III 51 Chairman of the Board, Chief Executive
Officer, President and Director
Richard R. Wood 75 Secretary and Treasurer
William E. Jasper 82 Director
Rev. Terry A. Steinhauer Sr. 41 Director
Linda R. Robison 51 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
18
<PAGE>
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 R. 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
19
<PAGE>
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.
20
<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, 1997.
Capacities in
Which Compensation
Name of Affiliate was Received Remuneration
- ----------------- ------------ ------------
Managing General Partner Management fee $29,031
Common Goal Mortgage Mortgage loan $ 1,126
Company servicing fees
________________________
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, 1998.
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
21
<PAGE>
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.
22
<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, 1997.
(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.
23
<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: March 31, 1998
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 March 31, 1998
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 March 31, 1998
- --------------------------
William E. Jasper, Jr. General Partner
/s/ Richard R. Wood
- ------------------- Director of Managing March 31, 1998
Richard R. Wood General Partner
/s/ Terry Steinhauer Director of Managing March 31, 1998
- --------------------
Terry Steinhauer General Partner
/s/ Linda Robison Director of Managing March 31, 1998
- -----------------
Linda Robison General Partner
(A Majority of the Board of Directors of the Managing General
Partner)
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a Delaware limited partnership)
<TABLE>
<CAPTION>
Balance Sheets
December 31, 1997 and 1996
- --------------------------------------------------------------------------------
1997 1996
---- ----
Assets (Unaudited)
- ------
<S> <C> <C>
Cash and cash equivalents $1,647,623 3,464,102
Accrued interest receivable 76,864 11,088
Due from affiliates 3,517 2,205
Mortgage loans receivable 1,205,290 450,590
---------- -----------
$2,933,294 3,927,985
========== ==========
Liabilities and Partners' Capital
- ---------------------------------
Accrued expenses $ - -
Due to affiliates 13,334 -
Deferred revenue 400,000 400,000
----------- -----------
Total liabilities 413,334 400,000
Partners' capital
General partners 39,123 34,838
Limited partners 2,480,837 3,493,147
----------- -----------
Total partners' capital 2,519,960 3,527,985
----------- -----------
Commitments and contingencies (note 3)
$2,933,294 3,927,985
========== ==========
</TABLE>
F-2
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a Delaware limited partnership)
<TABLE>
<CAPTION>
Statements of Operations
Years ended December 31, 1997, 1996 and 1995
- --------------------------------------------------------------------------------
1997 1996 1995
---- ---- ----
(Unaudited)
<S> <C> <C> <C>
Revenues:
Interest income $ 293,963 268,703 261,614
Gain on sale of investments in operating properties - - 1,632,719
------------ ----------- ----------
293,963 268,703 1,894,333
Expenses:
Professional fees 20,269 20,705 51,233
Fees to affiliates:
Management 29,031 36,250 52,212
Mortgage servicing 1,126 1,126 4,020
Mortgage placement fee - - 116,094
Other 29,272 29,054 31,157
---------- ----------- ----------
79,698 87,135 254,716
---------- ----------- ----------
Net income (loss) 214,265 181,568 1,639,617
========== ========== ==========
Net income allocated to general partners $ 4,285 4,539 40,990
Net income allocated to limited partners 209,980 177,029 1,598,627
--------- ----------- ----------
214,265 181,568 1,639,617
========= =========== ==========
Net income (loss) per limited partner unit $.41 .34 3.06
========== ============ ============
Weighted average limited partner units
outstanding 522,116 522,116 522,116
========== =========== ==========
</TABLE>
F-3
<PAGE>
COMMON GOAL HEALTH CARE
PENSION AND INCOME FUND L.P. II
(a Delaware limited partnership)
<TABLE>
<CAPTION>
Statements of Partners' Capital
Years ended December 31, 1997, 1996 and 1995
- --------------------------------------------------------------------------------
Total
General Limited Partners'
partners partners capital
<S> <C> <C> <C>
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 $34,838 3,493,147 3,527,985
Net income
Principal distributions to limited partners 4,285 209,980 214,265
Principal distributions to limited partners - (750,000) (750,000)
Distributions to limited partners ($.90 per unit) - (472,290) (472,290)
---------- ---------- ----------
Balance at December 31, 1997 (Unaudited) $39,123 2,480,837 2,519,960
</TABLE>
F-4
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,647,623
<SECURITIES> 0
<RECEIVABLES> 1,285,671
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,933,294
<CURRENT-LIABILITIES> 413,334
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,519,960
<TOTAL-LIABILITY-AND-EQUITY> 2,933,294
<SALES> 0
<TOTAL-REVENUES> 293,963
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 79,698
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 214,265
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 214,265
<EPS-PRIMARY> .41
<EPS-DILUTED> .00
</TABLE>
