<PAGE>
The registrant is filing restated 1994-1997 financial statements. These
restatements reflect changes discussed in Note 7 to the consolidated financial
statements.
<PAGE>
U S SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20529
FORM 10-KSB
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 (Fee Required) For the fiscal year
ended December 31, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _______ to________.
Commission File No. 33-39238
TMP LAND MORTGAGE FUND, LTD.
A CALIFORNIA LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
CALIFORNIA 33-0451040
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
801 North Parkcenter Drive, Suite 235
Santa Ana, California 92705
(Address of principal executive office, including Zip Code)
(714) 836-5503
(Registrant's telephone number, including Area Code)
----------------------
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be registered each class is to be registered
---------------- ------------------------------
N/A N/A
Securities to be registered pursuant to Section 12(g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
-------------------------------------
(Title of Class)
Indicate by check mark whether the registrant has (1) filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
<PAGE>
PART 1
ITEM 1 BUSINESS
TMP Land Mortgage Fund, Ltd., (the Partnership) is a California Limited
Partnership formed in November 1991, of which TMP Investments, Inc., a
California Corporation, and TMP Properties, a California General Partnership,
are the general partners. The Partnership was formed principally to make
short-term loans to unaffiliated parties secured by first trust deeds on
unimproved properties, primarily in the Inland Empire area of Southern
California, and to provide cash distributions on a current basis to the limited
partners, primarily from interest earned on the mortgage loans. The Partnership
is not a mutual fund or any other type of Investment Company within the meaning
of, and is not subject to regulations under, the Investment Company Act of 1940.
As of December 31, 1998, twelve loans had been made by the Partnership.
Beginning in November 1991, the Partnership was engaged in the offering of up to
20,000 units of limited partnership Units ("Units") at a purchase price of
$1,000 per unit pursuant to a Registration Statement on Form S-11. On April 22,
1994, the Partnership had received and accepted subscriptions of 15,715 Units,
representing total subscription proceeds in the amount of $15,715,000, and the
offering was closed. Upon the conclusion of the offering, all of the
subscription proceeds had been committed to the mortgage loan investments
described below and working capital reserves.
The Partnership was organized to originate and make loans secured by first deeds
of trust (commonly known as "mortgages") on unimproved real properties primarily
in the Inland Empire area of Southern California, which is located approximately
60 miles east of the city of Los Angeles and 40 miles north of the City of San
Diego. Twelve loans were made for terms of between 6 months and 36 months. The
Partnership does not intend to make any further loans other than those described
below. Each loan was made to an unaffiliated borrower who (i) paid a fee or
"points" to obtain the loan, (ii) established a reserve that would secure the
payment of the interest for the interim term of the loan, and (iii) was to pay
the entire principal amount of the loan in one lump sum payment, commonly
referred to as a "balloon" payment, at the end of the loan term. Each loan was
made to an unaffiliated borrower who (i) used the proceeds of the loan to
purchase or refinance a property the general partners believe has development
potential; (ii) "predevelop" the property by obtaining zoning and other
governmental approvals needed to permit construction of single or multi-family
residences or commercial buildings on the property ("predevelopment work") and
(iii) on completion of the predevelopment work, either sell the property to
developers or contractors or obtain new financing on the property.
It was intended that the Partnership's loans would be repaid from the proceeds
either of the sale or a refinancing of the property by the borrower. The
Partnership does not participate in any profit that the borrower may realize on
the sale or refinancing of the property. Instead, the Partnership would receive
from the proceeds of the sale or refinancing, the principal amount of the
Partnership's loan and any interest that had been earned, but not paid, through
the date of sale or refinancing.
As a consequence of adverse changes in market conditions and other factors, nine
of the twelve loans made by the Partnership to date have been foreclosed. In the
event of foreclosure, the property securing the loan is to be made available for
public sale approximately four to six months after initiation of foreclosure
proceedings and is to be sold to the highest bidder. The sales proceeds then are
2
<PAGE>
paid to the first mortgagee, who would be the Partnership, until the principal
amount of the loan, and earned but unpaid interest, and foreclosure costs are
repaid. Any remaining surplus is paid to the borrower. If no one offers a cash
price sufficient to enable the Partnership to recover its investment, the
Partnership, as first mortgagee, is entitled to acquire the property in exchange
for cancellation of the amounts owed by the borrower. In that event, the general
partners' strategy is to complete any predevelopment work not completed by the
borrower and to attempt to sell the property for a price that would at least
enable the Partnership to recover its investment in the property. To date, the
Partnership has acquired each of the properties on which it has foreclosed on
the related loan.
The Partnership's investment in a foreclosed property generally consists of all
amounts owing by the borrower to the Partnership that were secured by the
Partnership's mortgage at the time it acquired the property, the amounts
expended to acquire and complete predevelopment of the property and, unless paid
out of the gross proceeds of sale, any expenses incurred to sell the property.
Any cash proceeds in excess of the investment will be distributed to the
Partners.
The Partnership will be terminated as soon as practicable following liquidation
of the Partnership assets and distributions of cash to the partners. However,
the Partnership will not be terminated until mortgage loans made by it have been
repaid and all properties and other assets owned by it have been sold and
payment of the purchase price for those assets is received or converted into
cash. At this time, it is unlikely that the Partnership will be terminated
within the next twelve months.
DEVELOPMENT POTENTIAL OF UNDERLYING PROPERTIES
The Partnership made loans to borrowers seeking to acquire or refinance, develop
and then sell undeveloped properties in the Inland Empire area of Southern
California to developers and contractors. In most cases, the repayment of the
Partnership's loans depended on the ability of the borrower to sell or refinance
the property after predevelopment work is completed. Accordingly, one of the
critical factors that affect the ability of the Partnership to achieve its
investment objectives is the potential value and salability of the properties
which secure repayment of the Partnership's loans or the properties which the
Partnership has acquired through foreclosure.
Each loan made by the Partnership was secured by a first mortgage. In the event
of a foreclosure sale, if the property is sold for at least the amount owed to
the Partnership, the entire sales proceeds must be paid to the Partnership, as
first mortgagee, before any proceeds may be paid to anyone else. If there are no
other purchasers, or the other purchase offers made at the foreclosure sale are
not sufficient to pay off the amounts owed to the Partnership, as first
mortgagee, the Partnership is entitled to acquire the property in exchange for
cancellation of the amounts owed by the borrower. Under applicable laws, on any
such acquisition, any other mortgages, liens or encumbrances on the property
will be automatically terminated and the Partnership will own the property free
and clear and will have no payment obligations thereafter, other than (i) the
costs of completing any predevelopment work not completed by the borrower; and
(ii) property taxes that are assessed against the property after the
Partnership's acquisition of the property; and (iii) in some instances special
assessment district taxes which are assessed against the property.
There may be circumstances in which, despite default, the general partners will
choose not to initiate foreclosure proceedings immediately. For example, there
3
<PAGE>
may be ongoing sales negotiations or a refinancing may be in process that would
be disrupted by the initiation of foreclosure proceedings or the general
partners may conclude that the borrower-owner is better able to complete
predevelopment and to sell the property than the Partnership. There also may be
instances in which the general partners choose not to purchase a property at the
foreclosure sale, even though the Partnership might sustain a partial or even
total loss of the investment on the loan. For example, it may be preferable to
accept a cash purchase offer for the property which is less than the amount owed
on the loan, but which would enable the Partnership to recover immediately, in
cash, a substantial portion of its investment in the loan. There could also be
circumstances in which environmental problems on a property discovered after a
loan is made would make it prudent for the Partnership not to acquire a
property. However, the general partners believe such a circumstance would be a
rare occurrence.
LOANS STATUS AND FORECLOSED PROPETIES
As of December 31, 1998, the Partnership had made twelve mortgage loans of which
four were paid and eight resulted in foreclosures. The status of such loans and
related foreclosures and other relevant information are summarized below.
TMP FLOWERFIELD, LLC (previously referred to as PR Equities, Ltd.) The
Partnership made two loans ("Loan 1" and "Loan 2") to PR Equities, Ltd., a
California Limited Partnership. The loans were secured by first trust deeds on
residential property located in San Jacinto, California. Loan 1 was secured by a
first deed of trust on 304 residential lots consisting of 5 separate residential
tracts in Phase II of the Rancho San Jacinto master-planned community. Loan 2
was secured by a first deed of trust on two residential tracts containing 148
lots that also are part of Phase II of the Rancho San Jacinto master-planned
community. All of the properties are located east of Hewitt Street and north of
Washington Avenue in San Jacinto. These properties have received approval of the
tentative tract maps. See Note 4 to the consolidated financial statements.
The Partnership foreclosed on the property securing these loans during 1994 and
currently owns the property. The Partnership owes approximately $4.8 million as
a result of the Mello-Roos bond assessments and unpaid property taxes. These
debts, plus the continuing property tax accrual makes the property unsaleable in
the current real estate market. In order to make the property saleable, it will
be necessary to get the Mello-Roos bond assessments and interest reduced. The
feasibility of accomplishing this reduction is currently being evaluated. While
the general partners are pursuing these options, the City of San Jacinto has (by
the terms of the bonds) begun foreclosure proceedings.
FRAME LOAN
The Partnership made a third loan ("Loan 3") to Richard D. Frame secured by a
first trust deed for property under predevelopment in Temecula, California. The
loan matured on February 8, 1994 and was extended to April 20, 1994, at which
time the Partnership received payment in full. A portion of the proceeds of this
loan was used for funding Loans 11 and 12.
SUNSET CROSSING I LOAN
The Partnership made their fourth loan ("Loan 4") to Sunset Crossing I, a
California Limited Partnership. Loan 4 was secured by a first trust deed on 44
4
<PAGE>
acres of commercially zoned property at the southwest corner of the intersection
of Interstate 10 and Sunset Avenue in the city of Banning, California. In August
of 1994, Sunset Crossing I defaulted on this loan. The Partnership foreclosed on
the property in December of 1994. The general partners are currently pursuing
developers for this site.
FOX-OLSON LOAN #1
The Partnership's fifth loan ("Loan 5") was made to Marilyn Fox-Olson; who
defaulted on the loan. The Partnership foreclosed on this property in November,
1994. Approximately 2.14 of the acres of this property are currently in escrow
for $279,655. It is anticipated that the remainder of the property will be
listed for sale during 1999. The current zoning for the property is C-1
(commercial). It is located at the northeast corner of Newport Road and Bradley
Road in the unincorporated area of Riverside County known as Sun City/Menifee
Valley.
TMP REMINGTON, LLC
The Partnership's sixth loan ("Loan 6") was made to Environmental Development,
Ltd., (ED) a California Limited Partnership. Loan 6 was secured by a first trust
deed to property under predevelopment in San Diego, California. ED defaulted on
the loan in October of 1994. ED signed an extension agreement, wherein the
Partnership agreed to extend the term of the loan to May 1, 1995. On March 1,
1995, ED defaulted on the interest payment due at that date, and the Partnership
filed a Notice of Default. The Partnership subsequently accepted a deed in lieu
of foreclosure on the property in August 1995 and currently owns the property.
This property is approximately 52 acres of residentially zoned land at the
southeast quadrant of State Route 905 and Interstate 805 Freeways in the Otay
Mesa area of the city of San Diego. The existing zoning is A1-10 (0-5 units per
acre). The 52 acres are a portion of the 78.3-acre Remington Hills Precise Plan,
designed for low to moderate priced single-family homes. The Precise Plan and
tentative map has been processed and approved. Sewer and water is within 200
feet of the site, and natural gas and electricity are also available. The 52
acre portion of Remington Hills is designed so it can be developed first and
stand alone from the remaining portion of the Remington Hills Precise Plan. An
environmental impact report was approved in 1995. The property has an approved
tentative tract map for 184 lots. The general partners have determined that
construction of homes will achieve the highest return to the Partnership based
in part on the results of a market feasibility study. The Partnership, together
with TMP Homes, LLC, have formed a joint venture ("Remington") to construct
homes on the site. Phase I will consist of 52 homes and construction is
anticipated to begin in 1999.
TMP HOMES FLOWERFIELD-SUN CITY, LLC
On June 17, 1993, the Partnership funded its' seventh mortgage loan, ("Loan 7")
to Marilyn Fox-Olson. Marilyn Fox-Olson defaulted on this loan also and the
Partnership acquired the property on March 29, 1995. The property has an
approved tract map with 45 residential lots and a 1.84 acre commercial site
located in Sun City/MenifeeValley, California. The Partnership, together with
TMP Homes, LLC, have formed a joint venture ("Sun City") to construct homes on
this site. TMP Homes, LLC is currently ready to begin construction of Phase One
consisting of 12 homes. The 1.84 acres of this property is in escrow for
$100,000.
5
<PAGE>
SINGLETARY LOAN
On October 12, 1993, the Partnership funded it eighth loan ("Loan 8") secured by
a first deed of trust on 96 acres of industrial/commercial land located in the
unincorporated area of Riverside County known as Rubidoux. The loan was due on
April 12, 1995. The borrower sought to extend the loan, and did pay extension
fees and additional interest for several months. However, the Partnership was
forced to file a Notice of Default when the borrower ceased making payments. The
Borrower filed for personal bankruptcy in order to forestall foreclosure
proceedings. After a period of negotiation, the borrower was able to procure
additional financing and paid the loan and accrued interest in full on December
13, 1995. As a result, the Partnership distributed $2,200,000 to the limited
partners.
LAMONTE LOAN
On October 25, 1993, the Partnership funded its ninth loan ("Loan 9") secured by
a first deed of trust on 6.54 acres of commercial land located in Simi Valley,
California. This loan had an interest rate of 12.5%. The LaMontes' deposited an
amount equal to twelve months interest due on the loan in a segregated bank
account representing the last twelve months interest on the loan. The first six
months of interest were paid by Ventura Pacific Capital Group (VPCG), a
developer who had an option agreement and ground lease agreement with the
LaMontes' on the property.
The principal amount of the loan matured on April 25, 1995. At that time the
Partnership filed a Notice of Default, the LaMontes' transferred the property to
a wholly owned corporation and had the corporation file a Chapter 11 bankruptcy
proceeding to delay the foreclosure. The Partnership succeeded in having the
bankruptcy court remove the stay after a contestual law and motion proceeding.
The LaMontes' then filed a state court action asking the court for a temporary
injunction based on alleged irregularities during the foreclosure process. The
Partnership acquired the property through foreclosure in April, 1996. The
property was sold in 1997 and a gain on the sale of approximately $500,000 was
recorded by the Partnership. See Item 3.
LANSING LOAN
On March 23, 1994, the Partnership funded it tenth loan ("Loan 10") secured by a
first deed of trust on 28.42 acres of commercially zoned land located on the
Northwest corner of Murrieta Hot Springs Road and Jefferson Avenue in Murietta,
California. The loan was repaid on September 5, 1995. The proceeds were added to
cash reserves of the Partnership.
ROCKFIELD LOAN
On June 1, 1994, the Partnership funded its eleventh loan, ("Loan 11") secured
by a first deed of trust on 42 residential lots in Rancho Cucamonga, California.
Loan 11 was in participation with TMP Mortgage Income Plus, Ltd. (MIP), a
private syndication of which TMP Investments, Inc. and TMP Properties also serve
as general partners. The total loan of $250,000 was funded $100,000 by the
Partnership and $150,000 by MIP. The principal amount of Loan 11 was due on
March 1, 1995. The Rockfields' defaulted and the property was foreclosed on
January 15, 1996. The Partnership sold its' interest in the property in
6
<PAGE>
November, 1996 to MIP for the amount of its participation in the loan, as well
as monies which the Partnership had advanced to pursue development of this
property. MIP has entered into a joint venture with TMP Homes, LLC to build
homes on the 29 lots that secured this loan. The Partnership currently holds a
note receivable for this property. See Note 7 to the consolidated financial
statements.
PEPPERTREE PARK, LLC
On June 28, 1994, the Partnership funded its' twelfth loan, ("Loan 12") secured
by a first deed of trust on 193 single family residential lots and a third trust
deed on 73 single family residential lots and 15 acres office/professional use
land in Fallbrook, California.
The principal amount of Loan 12 was due on June 28, 1995. However, the loan
agreement allowed for an extension of an additional 6 months. The Partnership
received $1,500,000 during 1996 and retained a $500,000 (20%) interest in the
property as an investor from which the Partnership will receive a participation
in profits from the development of single family homes. The property has an
approved general plan amendment, specific plan, and tentative map The lots in
Phases 1 and 2 were sold in late 1997 and 1998 and the Partnership received
$50,000. The lots in Phase 3 are currently under development.
ITEM 2 PROPERTIES
The Partnership has acquired eight properties through foreclosure as disclosed
in Item 1.
ITEM 3 LEGAL PROCEEDINGS
Albert and Helen LaMonte had named the Partnership as a defendant in two
lawsuits, borrowers in Loan 9, referred to above, and by Southpointe
Corporation, a related entity utilized to take title to the property and file
bankruptcy proceedings under Chapter 11 of the Bankruptcy Court. One lawsuit
alleged conspiracy and fraud on behalf of the Partnership. The other lawsuit
attempted to set aside the foreclosure that occurred in April 1996. These suits
were settled in 1997. See Note 10 of the Consolidated Financial Statements.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of Registrants security holders during 1998.
ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
As of December 31, 1998, there were approximately 982 record holders of Units of
Limited Partnership Interest ("Units" or "the Units"), representing total
subscription of 15,715 units and subscription proceeds in the amount of
$15,715,000. As of such date, all of the subscription proceeds had been
committed to the mortgage loan investments described in Item 1 and working
7
<PAGE>
capital reserves. There is no other class of security outstanding or authorized.
There has not been, and currently there does not exist, any established public
trading market for the Units. Accordingly, to the general partners' knowledge,
there was no trading activity during the fiscal year ended December 31, 1995. In
1996, 75 Units were traded at between $315 and $400 per Unit.
CASH DISTRIBUTIONS
Total interest received on mortgage loans from inception to December 31, 1998
was $3,569,666 and other income from deposits and other sources have been
received in the amount of $1,474,375. Also during 1996, Loan 12 was repaid in
the form of $1,500,000 in cash and a 20% interest in Peppertree Park, LLC valued
at $500,000. Total distributions to investors from such income and loan
repayments were made in 1996 of $682,571. In 1997, the Partnership received net
proceeds from the sale of an apartment building for its investment in Steadfast
HSC, LLC and distributed $2,232,365 to investors. There were no distributions in
1998. Total distributions to investors since inception have been $8,013,662.
ITEM 6 SELECTED CONSOLIDATED FINANCIAL DATA
The following table summarizes selected consolidated financial data of the
Partnership for the years ended December 31, 1998, 1997, 1996, 1995, and 1994
and should be read in conjunction with the more detailed consolidated financial
statements contained in Item 8, below.
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Interest Income $ 44,832 $ 48,916 $ 166,318 $ 717,171 $ 1,253,631
Gain on Sale of
Land and
Investments -- $ 1,026,850 -- -- --
Other Income $ 53,600 $ 4,970 $ 150,611 $ 15,262 $ 4,528
Total Income $ 98,432 $ 1,080,736 $ 316,929 $ 732,433 $ 1,258,159
Net Income (Loss) $ (397,618) $ 945,723 $ (103,399) $ 583,233 $(2,664,558)
Net Income (Loss)
per Unit $ (25) $ 60 $ (7) $ 37 $ (168)
Cash Distribution
per Unit $ 0 $ 141 $ 43 $ 160 $ 77
Total Assets $13,937,406 $12,563,395 $12,727,275 $12,278,021 $ 12,968,990
</TABLE>
- --------------------------------------------------------------------------------
Per Unit calculations based on 15,715 Units outstanding at December 31, 1994 -
1998.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSES OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis provides information that the
Partnership's management believes is relevant to an assessment and understanding
of the Partnership's consolidated results of operations and financial condition.
This discussion should be read in conjunction with the consolidated financial
statements and footnotes, which appear elsewhere in this report.
This Annual Report on Form 10-KSB contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934 and Section 27A of
the Securities Act of 1933, which are subject to the "safe harbor" created by
that section. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and similar expressions or variations of such
8
<PAGE>
words are intended to identify forward-looking statements, but are not the
exclusive means of identifying forward-looking statements in this report.
Additionally, statements concerning future matters such as the features,
benefits and advantages of the Partnership's property regarding matters that are
not historical are forward-looking statements. Such statements are subject to
certain risks and uncertainties, including without limitation those discussed in
"Risk Factors" sections of this report. The Partnership's actual future results
could differ materially from those projected in the forward-looking statements.
The Partnership assumes no obligation to update the forward-looking statements.
Readers are urged to review and consider carefully the various disclosures made
by the Partnership in this report, which attempts to advise interested parties
of the risks and factors that may affect the Partnership's business, financial
condition and results of operations.
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
consolidated financial statements and notes thereto for the fiscal year ended
December 31, 1998 and 1997.
During the period from inception (November 15, 1991) through April 22, 1994, the
Partnership was engaged in the formation of the Partnership, the sale of Units
and the investment of the subscription proceeds in mortgage loan investments. At
April 22, 1994, a total of 15,715 Units had been sold for gross proceeds of
$15,715,000 and the offering was closed. Excess proceeds from the sale of Units
were invested in interest-bearing reserve accounts.
In 1992, the Partnership made two loans totaling $3,500,000 to PR Equities,
Ltd., a California Limited Partnership. The loans were secured by first trust
deeds on residential property located in San Jacinto, California. In 1994, the
Partnership foreclosed on the properties securing these loans and continues to
own these properties. In accordance with generally accepted accounting
principles, assets acquired through foreclosure should be recorded at the lower
of cost or fair value less costs of disposal at the date of foreclosure. The
1994-1997 financial statements originally issued reported this property at the
amount of the outstanding mortgage balances due on these loans at the time of
foreclosure, which did not represent their fair value less costs of disposal.
Management has subsequently determined that a valuation allowance for these
properties should have been established for approximately $3.8 million at the
date of foreclosure in 1994. The valuation allowance should have been adjusted
each year thereafter such that the only value for these properties is the
capitalized direct carrying costs that represent the total accumulated property
taxes and Mello-Roos bond assessments. Therefore, the consolidated financial
statements for 1994 through 1997 have been restated to record the valuation
allowance and to adjust these properties to their fair value for those years.
In addition, management has determined that the amount of property taxes payable
as recorded in June, 1994, and subsequent periods through December 31, 1997,
were understated by a total of $383,000. Accordingly, the consolidated financial
statements for those periods have been restated for this understatement by
adjusting the carrying value of the land and the property taxes payable in the
appropriate fiscal years.
In accordance with generally accepted accounting principles, the financial
statements of majority-owned investments are required to be consolidated. The
1995, 1996, and 1997 financial statements originally issued did not properly
9
<PAGE>
account for the consolidation of all significant majority-owned investments.
Therefore, the financial statements of these majority owned entities have been
consolidated with the financial statements of the Partnership's and have been
restated for fiscal years 1995, 1996, and 1997 to reflect the consolidation and
related minority interests of $461,000 for Remington and Sun City as of December
31, 1998.
In November, 1996, the Partnership entered into a non-interest bearing note for
$286,000. In accordance with generally accepted accounting principles, the note
should have been discounted at the date of execution and interest accreted over
the period of the note for $127,000. The consolidated financial statements have
been restated for this discount and accretion of interest.
During 1997, the Partnership received proceeds from the sale of the LaMonte
property totaling $1,950,000 and $1,725,096 from proceeds from an investment in
Steadfast H.S.C, LLC. In addition, approximately $49,000 of interest income was
earned in 1997 and $45,000 in 1998. During 1998, the Partnership received and
recorded income of $50,000 on its 20% investment in Peppertree.
Total expenses for the year ended December 31, 1998, compared with the year
ended December 31, 1997, increased by approximately $175,000 due to an increase
in accounting and financial reporting and general and administrative costs
associated with the above restatements and the note receivable discount
discussed above.
The Partnership's management believes that inflation has not had a material
effect on the Partnership's results of operations.
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Partnership had consolidated cash on hand of
$416,098. All other proceeds from the sale of Units has been invested in the
making of loans (See Item 1), working capital reserves, or has been used in
foreclosure proceedings or maintaining the foreclosed properties for the
Partnership.
The Partnership raised a total of $8,334,000, $6,127,000, and $1,254,000 during
the calendar years ended December 31, 1992, 1993, and 1994, respectively for a
total of $15,715,000 in gross proceeds from the sale of units. The offering was
closed on April 22, 1994, and no additional subscriptions were accepted after
that date. The Partnership made a total of twelve mortgage loans for a total of
$15,015,000. Loans of $4,870,000, $7,420,000, and $2,725,000 were made during
the calendar years ended December 31, 1992, 1993, and 1994, respectively.
Three loans, in the total amount of $4,825,000 were repaid during the year ended
December 31, 1995. Nine loans totaling $10,190,000 were foreclosed. Proceeds
from loan repayments were reinvested, added to Partnership reserves, or
distributed to investors.
The Partnership does not intend to make any new land loans with existing or
future partnership cash. At December 31, 1998, the Partnership had development
agreements with TMP Homes, LLC, an affiliated company, to develop single family
homes on three of the properties the Partnership has acquired through
foreclosure. In addition, the Partnership has a $500,000 investment in a
single-family development that resulted from the Peppertree loan. The
Partnership was repaid $1,500,000 of the $2,000,000 Peppertree loan in cash. The
remaining $500,000 represents a 20% investment in the project. The Partnership
10
<PAGE>
may incur indebtedness from nonaffiliated financial institutions in order to
complete any development for projects in which the Partnership is involved.
The properties relating to the nine loans that were foreclosed upon by the
Partnership produce no income. Accordingly, the Partnership is not making
distributions to investors except from the sales proceeds of certain partnership
assets. The Partnership cash reserves are being used to fund the operating cash
needs of the Partnership. As of December 31, 1998, the Partnership had
sufficient cash reserves for the next twelve months.
The foreclosed San Jacinto properties have substantial Mello-Roos assessments
and property tax delinquencies that the Partnership does not have the cash to
pay, nor is it in the best interests of the Partnership to pay. The general
partners are attempting to have the Mello-Roos bonds restructured, however,
there is no assurance that this will be accomplished.
In March, 1998, the general partners of the Partnership entered into an
agreement (the Financing Agreement) with PacWest Inland Empire, LLC (PacWest), a
Delaware Limited Liability Company, whereby PacWest paid a total of $300,000 to
the general partners of the Partnership and ten other related partnerships (the
TMP Land Partnerships). PacWest agreed to pay up to an additional $300,000 for
any deficit capital accounts for these 11 partnerships in exchange for the
rights to distributions from the general partners; referred to as a
"distribution fee" as defined by the Financing Agreement.
In addition, PacWest agreed to loan and/or secure a loan for the TMP Land
Partnerships in the amount of $2,500,000. Loan proceeds are allocated among the
11 TMP Land Partnerships, based on partnership needs, from recommendations made
by PacWest, and under the approval and/or direction of the general partners.
Portions of these funds were loaned to the Partnership at 12% simple interest
over a 24-month period beginning April 1, 1998. The borrowings are secured by
the Partnership's properties, and the funds will be loaned, as needed, in the
opinion of the general partners. These funds are not to exceed 50% of the 1997
appraised value of the properties, and will primarily be used to pay for
on-going property maintenance, reduction of existing debt, property taxes in
arrears, appropriate entitlement costs and Partnership operations.
PacWest, can, at their option, make additional advances with the agreement of
the general partners. However, the aggregate amount of cash loaned to the TMP
Land Partnerships is limited to a maximum of $2,500,000. As of December 31, 1998
PacWest has loaned the Partnership $3,267 for ongoing operations.
In April 1998, PacWest entered into a management, administrative and consulting
agreement (the Management Agreement) with the general partners of the
Partnership to provide the Partnership with overall management, administrative
and consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations' services for the Partnership.
Pursuant to the Management Agreement, PacWest has acquired the general partners'
unsubordinated 1% interest in the Partnership and assumed responsibility for all
partnership administration while not replacing any of the general partners.
PacWest is paid a fee of $24,588 annually for its administrative services.
11
<PAGE>
Aside from the foregoing, the Partnership knows of no demands, commitments,
events, or uncertainties, which might affect its liquidity or capital resources
in any material manner.
RISK FACTORS
Many currently installed computer systems and software products are coded to
accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish 21st century dates. As a result, computer systems and/or software
used by organizations may need to be upgraded to comply with the "Y2K"
requirements. There is significant uncertainty in the software and information
services industries concerning the potential effects associated with such
compliance. While the Partnership believes that its systems are compatible with
Y2K applications, there can be no assurance that all Partnership systems will
function properly in all operating environments and on all platforms. The
failure to comply with Y2K requirements by systems not designed by the
Partnership may also have a material adverse effect on the Partnership's
business, financial condition and results of operations. The Partnership has
developed and implemented a plan to identify and address potential difficulties
associated with Y2K issues and does not expect to expend any significant funds
as a result of these issues.
The Partnership utilizes a number of computer software programs and operating
systems across its entire organization including applications used in financial
business systems and various administrative functions. The Partnership has
established an action plan for addressing Year 2000 issues. As a general matter,
the Partnership is vulnerable to failures by third parties to address their own
Year 2000 issues. The Partnership relies heavily upon third parties for
financial services. There can be no assurance that the Partnership's suppliers
and other third parties will adequately address their Year 2000 issues, and any
such issues could have a material adverse affect upon the Partnership's
financial condition and results of operation.
Partnership has not spent a material amount of financial resources to remediate
Year 2000 problems and does not anticipate that it will spend a material amount
of financial resources to remediate Year 2000 problems in the future. The costs
of such remediation will be paid out as part of the Partnership's general and
administrative expenses.
12
<PAGE>
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as part of the Form 10K:
For the fiscal years ended December 31, 1998 and 1997:
Independent Auditors' Reports 3-4
Consolidated Balance Sheet as of December 31, 1998 5
Consolidated Statements of Operations for the years ended December 31,1998
and 1997 6
Consolidated Statements of Partners' Capital for the years Ended
December 31, 1998 and 1997 7
Consolidated Statements of Cash Flow for the years ended
December 31, 1998 and 1997 8-9
Notes to Consolidated Financial Statements 10-16
Supplemental Schedules to Consolidated Financial Statements Schedules 17-19
All other schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the Consolidated Financial
Statements and Notes thereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no disagreements with the independent accounting firm. On April 14,
1999, the Registrant filed a Form 8-K in which it terminated the accounting firm
of Balser, Horowitz, Frank & Wakeling and appointed the independent accounting
firm of Swenson Advisors, LLP.
PART III
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS
The Partnership has no employees and no directors or executive officers. The
general partners provide management of the Partnership. However, on April 1,
1998, PacWest entered into the Management Agreement with the general partners of
the Partnership to provide the Partnership with overall management,
administrative and consulting services. PacWest currently contracts with third
party service providers to perform certain of the financial, accounting, and
investor relations' services for the Partnership.
TMP Properties, a California General Partnership, and TMP Investments, Inc., a
California Corporation, are the general partners of the Partnership. TMP
Properties was formed on July 14, 1978. TMP Properties' principal business has
13
<PAGE>
been the acquisition of undeveloped land and the coordination of activities
necessary to add value to such land, primarily through the predevelopment
process. It has syndicated numerous private real estate limited partnerships,
and eight public real estate limited partnerships. All of the properties
purchased by such partnerships were located in the State of California except
for one (an office building) which was located in Oklahoma City, Oklahoma. Each
of such limited partnerships involved a specified real property program in which
TMP Properties was the general partner. In addition, TMP Properties has been and
will continue to be engaged in property management, assets management, real
estate accounting, budgetary services and partnership management on behalf of
existing limited partnership and limited partnerships which it sponsors in the
future. The general partners of TMP Properties are William O. Passo, Anthony W.
Thompson and Scott E. McDaniel.
TMP Investments, Inc., a California Corporation, was formed on December 12,
1984. TMP Investments, Inc. acts as loan servicer for the Partnership,
maintaining records with respect to, and billing and collecting payments on, the
loans made by the Partnership. As compensation for such services, TMP has
received a monthly loan-servicing fee from each borrower, and not the
Partnership, in an amount up to 1/8th of 1% of the outstanding principal amount
of the borrower's loan. See "Compensation to the general partners and their
Affiliates." TMP Investments also performs administrative, bookkeeping and
clerical services for the Partnership. The principals of TMP Investments, Inc.
are William O. Passo and Anthony W. Thompson.
The individual partners of TMP Properties are listed below, together with
information regarding their employment experience and background.
WILLIAM O. PASSO, 57, is a director and the President of TMP Investments, Inc.
He practiced law for 18 years, has been a licensed real estate broker since 1974
and holds registered representative and general principals securities licenses
through the National Association of Securities Dealers, Inc. Mr. Passo received
his Juris Doctorate Degree from UCLA School of Law in 1967. He has been a senior
partner first of Passo, Yates and Nissen until 1975, then of Passo & Davis until
March 1983 when he resigned from the partnership to take a leading role in the
management of the affairs of TMP Properties. Mr. Passo has been involved in
public and private real-estate syndication since 1970, and has acted as
principal, investor, General Partner, and counsel in real estate transactions
involving apartments, office buildings, agricultural groves and unimproved land.
Mr. Passo is a director and officer of William O. Passo, Inc. d.b.a. TMP
Management, a property management company, and an officer of TMP CC., a NASD
registered broker-dealer.
SCOTT E. MCDANIEL, 52, is a General Partner of TMP Properties. He is a graduate
of the US Naval Academy at Annapolis, majoring in engineering. Mr. McDaniel is a
California licensed general contractor and has been a licensed California real
estate broker since 1976. He was the founder and president of Scott E. McDaniel,
Inc. (dba Regal Realty). Mr. McDaniel has developed office complexes and
industrial space in Southern California and has personally brokered over $125
million of real estate since 1982. Through an affiliated company, DeVille
Construction Co., Inc., Mr. McDaniel has directed general contracting operations
in Southern California since 1982.
ANTHONY W. "TONY" THOMPSON, 52, is Director and Vice President of TMP
Investments, Inc. A graduate of Sterling College in 1969, with a Bachelors
Degree in Science and Economics, Mr. Thompson holds the professional designation
14
<PAGE>
of Charter Life underwriter and chartered Financial Consultant from the American
College. Mr. Thompson is a registered principal with the NASD and is a principal
in TMP Capital Corp. (TMP CC); a NASD registered Broker Dealer. Mr. Thompson has
been involved in the securities and the real estate investment fields since
1970, and a General Partner of TMP since its formation in 1978. Mr. Thompson's
primary responsibility is marketing TMP offerings through the broker-dealer
community.
In addition to being a general partner of the Partnership, TMP Properties, and
some of its affiliates, have been and continue to be a general partner of other
limited partnerships. If any such other limited partnerships' assets should
become insufficient to meet Partnership obligations, TMP Properties, as a
general partner of such other limited partnerships, might be subject to
liabilities on behalf of such partnerships.
ITEM 11 EXECUTIVE COMPENSATION
During the period since the formation of the Partnership (November 15, 1991)
through the fiscal year ended December 31, 1998, the Partnership paid no fees to
the general partners. The general partners did receive collectively $22,323
during the fiscal year ended December 31, 1997 as their share of the Partnership
distributions. (See Item 13. "Certain Relationships and Related Transactions".)
The Partnership has no officers or employees and, therefore, paid no other
compensation other than that paid to the general partners as indicated above.
ITEM 12 SECURITY OWNERSHIP OR CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of December 31, 1998 the Partnership has 15,715 Units issued and outstanding.
To the knowledge of the general partners, no person beneficially owns more than
5% of the Units. The following table sets forth the number of the Units
beneficially owned as of December 31, 1998 by each officer, director and general
partner of the general partners and by all such persons as a group.
<TABLE>
<CAPTION>
Number of Percent of
Name of Beneficial Owner Units Class
<S> <C> <C>
William O. Passo 1 .012%
All officers, directors and general
partners as a group (1 person
including the above) 1 .012%
</TABLE>
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH AFFILIATES
TMP CC is the Managing Broker-Dealer for the offer and sale of the Units. TMP CC
is a member firm of the National Association of Securities Dealers, Inc. The
Managing Broker-Dealer was established to provide underwriting, wholesaling, and
15
<PAGE>
other securities related services to partnerships sponsored by the general
partners. The directors and executive officers of TMP CC are Anthony W.
Thompson, President and Director, and William O. Passo, secretary,
vice-president, and director. (See Item 10 "Directors and Executive Officers"
for information regarding Messrs. Thompson and Passo).
The following information summarizes the forms and amounts of compensation (some
of which involve cost reimbursements) paid by the Partnership and other third
parties, to the general partners and their affiliates. None of these fees were
determined by arm's length negotiations. Except as disclosed below, neither the
general partners nor any of their affiliates, directors, officers, employees,
agents, or counselors are participating, directly or indirectly, in any other
compensation or remuneration with respect to the offering.
16
<PAGE>
<TABLE>
<CAPTION>
OFFERING AND ORGANIZATIONAL STAGE
Amount paid from Formation thru 12/31/98
<S> <C> <C>
Form of Compensation
- --------------------
and Recipient Description of Payment Amount of Compensation
- ------------- ---------------------- ----------------------
Selling Commissions (TMP Up to a maximum of 10% gross Paid by TMP Realty,Inc.
CC and certain proceeds, a minimumof 8%
Soliciting dealers) which was reallocated to
participating soliciting
dealers(which included TMP
CC)from Units sold by them.
Up to an additional 5% paid
to soliciting Dealers (which
included TMP CC) for due
diligence activities.
Reimbursement of Organizational Expenses Paid by TMP Realty,Inc.
Organizational Expenses reimbursed to the general
(general partners) partners for advertising,
mailing, printing costs,
clerical expenses, legal and
accounting fees.
Reimbursement of Loan The general partners were Paid by TMP Realty,Inc.
Expenses (general partners)reimbursed for all out of
pocket expenses directly
related to the loans, inclu-
ding credit evaluation ex-
penses, property evaluation
expenses, appraisal reports,
title reports, environmental
reports and remediations,
and feasibility studies,
escrow expenses, deposits
and interest, and other
similar expenses; but not
including the general
partners' overhead,
salaries, travel or like
expenses.
OPERATING AND LIQUIDATION STAGE
Form of Compensation Description of Payment Amount of Compensation
- -------------------- ---------------------- ----------------------
And Recipient
- -------------
Loan Servicing Fee For servicing the loans made $422,556
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
by the Partnership,TMP
Investments received a
monthly LoanServicing Fee
that was charged to and
paid by each borrower in an
amount up to 1/8 of 1% of
the outstanding principal
amount of this mortgage
loan.
Broker Loan Placement TMP Realty, Inc. received $1,627,475
Fee (Licensed Real Estate Broker Loan Placement Fees
Broker Affiliated from borrowers, as was
with general partners) negotiated by TMP Realty,
Inc. with suchborrowers, as
follows: TMP Realty, Inc.
retained 100% of the Broker
Loan Placement Fee received
on financing for aggregate
loans up to the Gross
Proceeds of the offering
(the "Initial Loans").
Thereafter, on any extension
of or new loans that were
made with principal
repayments from Initial
Loans, TMP Realty, Inc.
retained 75% of any Broker
Loan Placement Fee, and
the remaining 25% was
remitted to the Partnership
as loan extension or
origination fees ("Points"),
until TMP Realty, Inc. had
satisfied its obligations to
pay, out of the Broker Loan
Placement Fees retained by
it, all commissions and
other amounts payable by it
for services rendered by
securities broker/dealers
in connection with the offer
and sale of Units. On
loans made thereafter, TMP
Realty, Inc. retained 50% of
any Broker Loan Placement
Fee, and the remaining 50%
were remitted to the
Partnership as Points;
provided, however, that TMP
Realty, Inc.'s rights to
retain its 50% portion
was subordinated to the
limited partners' Priority
Return.
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Interest in Partnership 1% interest in all Partner- $81,748
Allocation of each ship allocations Net Income,
Material Item (General Net Loss, and Distributions
Partners) of Cash from Operations.
Subordinated Participation A 24% interest in allocation None Paid
(general partners) of Net Income and Distribu-
tions of Cash from Loan
Repayments or from the Sale
or Refinancing of a
property acquired through
foreclosure or otherwise,
all subordinated to a return
of all the limited partners
of 8% per annum on their
Adjusted Capital Contri-
butions.
Subordinated Real Estate Real Estate commissions with None Paid
Commission (general respect to the sale of any
partners or an affiliate) properties acquired through
foreclosure or otherwise,
which are equal to the
lessor of: (1) 3% of the
gross sales price of a
property equal to one-half
the normal and competitive
rate charged by unaffiliated
parties, but such payment
shall be subordinated to a
return of all of the
Limited partners' Capital
Contributions, plus a
non-compounded return to the
limited partners of 8% per
annum on their Adjusted
Capital Contributions.
</TABLE>
19
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8K
(a) For a listing of consolidated financial statements, reference is
made to Item 8 included in this Form 10K-SB.
(b) Exhibits:
3 & 4 Amended and Restated Agreement of limited partnership
incorporated by reference to Exhibit 4.1 filed in Form S-11,
SEC File No. 33-39238 on April 13, 1992.
10 Material contracts are incorporated by reference as follows:
Incorporated by reference to Amendment No. 1 as filed with the
SEC on September 14, 1992.
10.1.1 Loan Agreement - PR Equities Loan (Loan #1)
10.1.2 Promissory Note - PR Equities Loan (Loan #1)
10.1.3 Deed of Trust - PR Equities Loan (Loan #1)
10.2.1 Loan Commitment - PR Equities Loan (Loan #2)
10.3.1 Loan Agreement - Frame Loan (Loan #3)
10.3.2 Promissory Note - Frame Loan (Loan #3)
10.3.3 Deed of Trust - Frame Loan (Loan #3)
10.4.1 Loan Agreement - Sunset Crossing Loan (Loan #4)
10.4.2 Promissory Note - Sunset Crossing Loan (Loan #4)
10.4.3 Deed of Trust - Sunset Crossing Loan (Loan #4)
10.4.4 Personal Guaranty - Sunset Crossing Loan (Loan #4)
10.4.5 Promissory Note - Bank Loan for Bridge Financing -
Sunset Crossing Loan (Loan #4)
Incorporated by reference to Amendment No. 3 as filed with the
SEC on February 24, 1993.
10.7.1 Loan Agreement - PR Equities Loan (Loan #2)
20
<PAGE>
10.7.2 Promissory Note - PR Equities Loan (Loan #2)
10.7.3 Deed of Trust - PR Equities Loan (Loan #2)
10.10.1 Loan Agreement - Fox-Olson Loan (Loan #5)
10.10.2 Promissory Note - Fox-Olson Loan (Loan #5)
10.10.3 Deed of Trust - Fox-Olson Loan (Loan #5)
10.11.1 Loan Agreement - Environmental Development, Ltd.
(Loan #6)
10.11.2 Promissory Note - Environmental Development, Ltd.
(Loan #6)
10.11.3 Deed of Trust - Environmental Development Ltd.
(Loan #6)
Incorporated by reference to Amendment No. 6 as filed with the
SEC on September 14, 1993:
10.8.4 Modification of Promissory Note - Frame Loan (Loan #3)
10.12.1 Loan Agreement - Fox-Olson Loan 2 (Loan #7)
10.12.2 Promissory Note - Fox-Olson Loan 2 (Loan #7)
10.12.3 Deed of Trust - Fox-Olson Loan 2 (Loan #7)
Incorporated herein by reference to Exhibits A through H filed
with the Registrant's Current Report on Form 8-K, dated
October 12, 1993, SEC File No. 0-19933:
10.13.1 Loan Agreement - Singletary Loan (Loan #8)
10.13.2 Promissory Note - Singletary Loan (Loan #8)
10.13.3 Deed of Trust - Singletary Loan (Loan #8)
10.14.1 Loan Agreement - LaMonte Loan (Loan #9)
10.14.2 Promissory Note - LaMonte Loan (Loan #9)
10.14.3 Deed of Trust - LaMonte Loan (Loan #9)
10.14.4 Subordination, Non-disturbance and Attornment
Agreement - LaMonte Loan (Loan #9)
10.14.5 Consent to and Subordination of Deed of Trust -
LaMonte Loan (Loan #9)
21
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
Date: June 11, 1999
TMP Land Mortgage Fund, Ltd.
A California Limited Partnership
By: TMP Investments, Inc., a California Corporation as
Co-General Partner
By: /S/ WILLIAM O PASSO
-----------------------------------------
William O. Passo, President & CEO
By: /S/ ANTHONY W THOMPSON
-----------------------------------------
Anthony W. Thompson, Exec. VP
By: TMP Properties, a California General Partnership
as Co-General Partner
By: /S/ WILLIAM O PASSO
-----------------------------------------
William O. Passo, General Partner
By: /S/ ANTHONY W THOMPSON
-----------------------------------------
Anthony W. Thompson, General Part ner
By: /S/ SCOTT E MCDANIEL
-----------------------------------------
Scott E. McDaniel, General Partner
By: JAFCO, Inc., a California Corporation as Chief
Accounting Officer
By: /S/ JOHN FONSECA
------------------------------------------
John Fonseca, President
<PAGE>
Table of Contents
-----------------
Reports of Independent Auditors 3-4
Consolidated Balance Sheet 5
Consolidated Statements of Operations 6
Consolidated Statements of Partners' Capital 7
Consolidated Statements of Cash Flows 8-9
Notes to Consolidated Financial Statements 10-16
Supplementary Information 17-19
-2-
<PAGE>
Report of Independent Auditors
To the Partners
TMP Land Mortgage Fund, Ltd.
(A California Limited Partnership)
We have audited the accompanying consolidated balance sheet of TMP Land Mortgage
Fund, Ltd. (A California Limited Partnership) as of December 31, 1998, and the
related consolidated statements of operations, partners' capital, and cash flows
for the year then ended. 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 audit.
We conducted our audit 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 audit provides 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 TMP Land Mortgage Fund, Ltd. (A
California Limited Partnership) as of December 31, 1998, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information contained in Schedule
II is presented for purposes of additional analysis and is not a required part
of the basic financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, is stated fairly in all material respects in relation to the
basic financial statements taken as a whole.
Other auditors examined the financial statements as of December 31, 1997. As
discussed in Note 4, those auditors expressed an unqualified opinion on February
3, 1998, and on May 15, 1999 reissued their unqualified opinion for the year
ended December 31, 1997.
Swenson Advisors, LLP
SWENSON ADVISORS, LLP
Temecula, California
May 28, 1999
-3-
<PAGE>
Independent Auditor's Report
To the Partners
TMP Land Mortgage Fund, Ltd.
(A California Limited Partnership)
We have audited the accompanying consolidated balance sheets of TMP Land
Mortgage Fund, Ltd. (A California Limited Partnership) as of December 31, 1997
and 1996, and the related consolidated statements of operations, partners'
capital, and cash flows for the years ended December 31, 1997, 1996, and 1995.
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 audit.
We conducted our audit 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 audit provides a reasonable for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of TMP Land Mortgage Fund, Ltd. (A
California Limited Partnership) as of December 31, 1997 and 1996, and the
results of its operations and its cash flows for the years ended December 31,
1997, 1996 and 1995, in conformity with generally accepted accounting
principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplementary information contained in Schedule
I and II is presented for purposes of additional analysis and is not a required
part of the basic financial statements. Such information has been subjected to
the auditing procedures applied in the audit of the basic financial statements
and, in our opinion, is stated fairly in all material respects in relation to
the basic financial statements taken as a whole.
Balser, Horowitz, Frank & Wakeling
BALSER, HOROWITZ, FRANK & WAKELING
An Accountancy Corporation
Santa Ana, California
February 3, 1998, except for note 7, for which the date is May 15, 1999
-4-
<PAGE>
<TABLE>
<CAPTION>
TMP Land Mortgage Fund, LTD.
(A California Limited Partnership)
Consolidated Balance Sheet
December 31, 1998
Assets
------
<S> <C>
Cash $ 416,098
Notes Receivable from Affiliate 307,091
Prepaid Expenses 18,181
Other Receivables 32,553
Investments 608,039
Investment in Unimproved Land, Net 12,555,444
-----------------
Total Assets $ 13,937,406
=================
Liabilities and Partners' Capital
---------------------------------
Accounts Payable $ 162,624
Due to Affiliate 3,267
Property Taxes Payable 4,870,485
Note Payable 895,371
-----------------
Total Liabilities 5,931,747
Minority Interests 460,171
Partners' Capital
General Partners (81,748)
Limited Partners; 20,000 Equity Units Authorized,
15,715 Outstanding 7,627,236
-----------------
Total Partners' Capital 7,545,488
Total Liabilities and Partners' Capital $ 13,937,406
=================
</TABLE>
See Accompanying Notes of Consolidated Financial Statements
-5-
<PAGE>
<TABLE>
<CAPTION>
TMP Land Mortgage Fund, LTD.
(A California Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31, 1998 and 1997
1998 1997
---- ----
Income
- ------
<S> <C> <C>
Interest $ 44,832 $ 48,916
Gain on Sale of Land - 505,740
Gain on Sale of Investment - 521,110
Other 53,600 4,970
----------- ----------
Total Income 98,432 1,080,736
----------- ----------
Expenses
Accounting and Financial Reporting 64,017 23,535
General and Administrative 36,417 7,609
Note Receivable Discount 73,268 -
Interest Expense 227 1,082
Other 39,311 5,526
----------- ----------
Total Expenses 213,240 37,752
----------- ----------
Net Income (Loss) before Minority
Interests and Income Taxes (114,808) 1,042,984
----------- -----------
Minority Interests in Consolidated Affiliates (280,410) (94,861)
State Franchise Tax 2,400 2,400
----------- ----------
Net Income (Loss) $ (397,618) $ 945,723
=========== ==========
Allocation of Net Income (Loss)
General Partners, in the Aggregate $ (3,976) $ 9,457
=========== ==========
Limited Partners, in the Aggregate $ (393,642) $ 936,266
=========== ==========
Limited Partners, per Equity Unit $ (25) $ 60
=========== ==========
</TABLE>
See Accompanying Notes of Consolidated Financial Statements
-6-
<PAGE>
<TABLE>
<CAPTION>
TMP Land Mortgage Fund, LTD.
(A California Limited Partnership)
Consolidated Statements of Partners' Capital
For the Years Ended December 31, 1998 and 1997
General Limited
Partners Partners Total
<S> <C> <C> <C>
Partners' Capital (deficit),
January 1, 1997 $(64,906) $ 9,294,654 $ 9,229,748
Net Income for 1997 9,457 936,266 945,723
Distribution to Partners in 1997 (22,323) (2,210,042) (2,232,365)
------- ---------- ----------
Partners' Capital (deficit),
December 31, 1997 (77,772) 8,020,878 7,943,106
Net Loss for 1998 (3,976) (393,642) (397,618)
-------- ---------- ----------
Partners' Capital (deficit),
December 31, 1998 $(81,748) $ 7,627,236 $ 7,545,488
======= ========== ==========
</TABLE>
Distributions to limited partners, per equity unit, for 1997 were $141, as
determined by dividing the distribution to limited partners for the year by
number of units outstanding at the end of the year. There were no distributions
in 1998.
See Accompanying Notes of Consolidated Financial Statements
-7-
<PAGE>
<TABLE>
<CAPTION>
TMP Land Mortgage Fund, LTD.
(A California Limited Partnership)
Statements of Cash Flows
For Years Ended December 31, 1998 and 1997
1998 1997
---- ----
<S> <C> <C>
Cash Flow from Operating Activities
Net Income (Loss) $ (397,618) $ 945,723
Adjustments to Reconcile Net Income (Loss) to
Net Cash Used in Operating Activities:
Minority Interests in Consolidated Affiliates 280,410 94,861
Note Receivable Discount 73,268 ---
Accretion of Discounted Note Receivable (32,755) (20,552)
Gain on Sale of Investment --- (521,110)
Gain on Sale of Land --- (505,740)
Other 39,311 5,526
Changes in Assets and Liabilities:
(Increase) Decrease in Other Receivables 101,676 (106,830)
Increase in Notes Receivable from Affiliate (170,626) ---
Increase in Accounts Payable 87,230 69,840
Increase in Prepaid Expenses (18,181) ---
Increase (Decrease) in Due to Affiliates (29,294) 5,409
----------- ------------
Net Cash Used in Operating Activities (66,579) (32,873)
----------- -----------
Cash Flows From Investing Activities:
Proceeds from Sale of Investment --- 1,725,096
Proceeds from Sale of Land --- 1,950,000
Decrease (Increase) in Investments
and Consolidated Affiliates 381,726 (203,058)
Increase in Land Development and
Carrying Costs (1,754,899) (607,838)
----------- -----------
Net Cash Provided by (Used In) Investing
Activities (1,373,173) 2,864,202
----------- ------------
Cash Flows From Financing Activities:
Proceeds from Note Payable 895,371 ---
Distributions to Partners --- (2,232,365)
----------- ------------
Net Cash Provided by
(Used in) Financing Activities 895,371 (2,232,365)
----------- ------------
Net Increase (Decrease) in Cash (544,381) 598,964
Cash, Beginning 960,479 361,515
----------- ------------
Cash, Ending $ 416,098 $ 960,479
=========== ============
</TABLE>
See Accompanying Notes of Consolidated Financial Statements
-8-
<PAGE>
<TABLE>
<CAPTION>
TMP Land Mortgage Fund, LTD.
(A California Limited Partnership)
Consolidated Statements of Cash Flows - Continued
For Years Ended December 31, 1998 and 1997
<S> <C> <C>
Supplemental Disclosure of Cash Flow Information:
Cash Paid for Income Taxes $ 2,400 $ 2,400
======== ========
Cash paid for Interest $ 12,813 $ ---
======== =======
</TABLE>
Non-cash investing and financing activities during the years ended December 31,
1998 and 1997 consist of the following:
During the years ended December 31, 1998 and 1997, the Partnership recorded
an increase in the carrying costs of foreclosed land equal to additional
property tax liabilities incurred of $664,417 and $954,152, respectively.
See Accompanying Notes of Consolidated Financial Statements
-9-
<PAGE>
TMP Land
Mortgage Fund, LTD.
(A California Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
Note 1 - General and Summary of Significant Accounting Policies
General - TMP Land Mortgage Fund, Ltd., A California Limited Partnership (the
- -------
"Partnership"), was organized in 1991 in accordance with the provisions of the
California Uniform Limited Partnership Act. The purpose of the Partnership is to
make short-term (generally one to three-year) loans to unaffiliated parties
secured by first trust deeds (mortgages) on unimproved real property primarily
in the Inland Empire area of Southern California and to provide cash
distributions on a current basis to the limited partners, primarily from
interest earned on the mortgage loans.
Principles of Consolidation - The consolidated financial statements include the
- ---------------------------
accounts of the Partnership and its majority-owned investments, TMP Homes
Remington, LLC (Remington) and TMP Homes Flowerfield-Sun City, LLC (Sun City).
All significant intercompany accounts and transactions have been eliminated in
consolidation. (See Note 4.)
Investment in Unimproved Land - Investment in unimproved land is stated at the
- ------------------------------
balance of the foreclosed loan plus carrying and improvement costs incurred
subsequent to foreclosure, net of a valuation allowance, as necessary, to state
the properties at their fair value. All costs associated with the acquisition
and improvement of a property are capitalized including all direct carrying
costs; such as interest expense and property taxes.
Syndication Costs - Syndication costs (such as commissions, printing, and legal
- -----------------
fees) were paid by an affiliate of the Partnership, TMP Realty, Inc. (See Notes
2 and 6.)
Income Taxes - No provision for federal income taxes has been made in the
- -------------
accompanying consolidated financial statements as all profits and losses flow
through to the respective partners and are recognized on their individual income
tax returns. However, the minimum California franchise tax paid by the
Partnership and it's consolidated entities at December 31, 1998 and 1997 was
$2,400 per year.
Cash and Cash Equivalents - For purposes of the Consolidated Statements of Cash
- -------------------------
Flows, the Partnership considers all highly liquid investments with a maturity
of three months or less to be cash equivalents. During the normal course of its
business, the Partnership accumulates cash and maintains deposits at various
banks. Occasionally, the cash deposit at a particular bank may exceed the
federally insured limit. Any accounting loss or cash requirement resulting from
the failure of a bank would be limited to such excess amounts.
Use of Estimates - In the preparation of financial statements in conformity with
- ----------------
generally accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities as of the
date of the financial statements and revenues and expenses during the reporting
period. Actual results could differ from these estimates.
-10-
<PAGE>
Land Mortgage Fund, LTD.
(A California Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
Note 1 - General and Summary of Significant Accounting Policies, continued:
Concentration - All unimproved land parcels held for sale are located in the
- -------------
Inland Empire area of Southern California. The eventual sales price of all
parcels is highly dependent on the real estate market conditions. The
Partnership attempts to mitigate any potential risk by monitoring the market
condition and holding the land parcels until the real estate market recovers.
New Accounting Standards - In June 1998 the Financial Accounting Standards Board
- ------------------------
issued Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and hedging Activities". The new statement requires all
derivatives to be recorded on the balance sheet at fair value and establishes
new accounting rules for hedging instruments. This statement will have no effect
on the consolidated financial statements of the Partnership.
Note 2 - Organization of the Partnership
TMP Properties (A California General Partnership) and TMP Investments, Inc. (A
California Corporation) originally formed the Partnership on November 15, 1991
as the general partners. The partners of TMP Properties are William O. Passo,
Anthony W. Thompson and Scott E. McDaniel. William O. Passo and Anthony W.
Thompson were the shareholders of TMP Investments, Inc. until October 1, 1995,
when they sold their shares to TMP Group, Inc. and then became the shareholders
of TMP Group, Inc.
The general partners manage and control the affairs of the Partnership,
including final approval of all loans and investments, and have ultimate
authority for matters affecting the interests of the Partnership. All
organization and offering expenses of the Partnership were paid by TMP Realty,
an affiliate of the general partners, in exchange for loan fees (or points) on
each mortgage loan.
The partnership agreement provides for two types of investments: Individual
Retirement Accounts (IRA) and others. The IRA minimum purchase requirement was
$2,000 and all others were a minimum purchase requirement of $5,000. The maximum
liability of the limited partners is the amount of their capital contribution.
Note 3 - Partners' Contributions
The Partnership raised capital through a public offering of units at $1,000 per
unit. The minimum offering size was 1,000 units or $1,000,000. The maximum
offering size was 20,000 units or $20,000,000. As of April 21, 1994, 15,715
units were sold for total capital contributions of $15,715,000 and the offering
was closed.
-11-
<PAGE>
Land Mortgage Fund, LTD.
(A California Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
Note 4 - Restatements and reissuances of 1994 - 1997 Financial Statements
In 1992, the Partnership made two loans totaling $3,500,000 to PR Equities,
Ltd., a California Limited Partnership. The loans were secured by first trust
deeds on residential property located in San Jacinto, California. In 1994, the
Partnership foreclosed on the properties securing these loans and continues to
own these properties. In accordance with generally accepted accounting
principles, assets acquired through foreclosure should be recorded at the lower
of cost or fair value less costs of disposal at the date of foreclosure. The
1994-1997 financial statements originally issued reported this property at the
amount of the outstanding mortgage balances due on these loans at the time of
foreclosure, which did not represent their fair value less costs of disposal.
Management has subsequently determined that a valuation allowance for these
properties should have been established for approximately $3.8 million at the
date of foreclosure in 1994. The valuation allowance should have been adjusted
each year thereafter such that the only value for these properties is the
capitalized direct carrying costs that represent the total accumulated property
taxes and Mello-Roos bond assessments. Therefore, the consolidated financial
statements for 1994 through 1997 have been restated to record the valuation
allowance and to adjust these properties to their fair value for those years.
In addition, management has determined that the amount of property taxes payable
as recorded in June, 1994, and subsequent periods through December 31, 1997,
were understated by a total of $368,000. Accordingly, the consolidated financial
statements for those periods have been restated for this understatement by
adjusting the carrying value of the land and the property taxes payable in the
appropriate fiscal years.
In accordance with generally accepted accounting principles, the financial
statements of majority-owned investments are required to be consolidated. The
1995, 1996, and 1997 financial statements originally issued did not properly
account for the consolidation of all significant majority-owned investments.
Therefore, the financial statements of these material majority owned entities
have been consolidated with the financial statements of the Partnership's and
have been restated for fiscal years 1995, 1996, and 1997 to reflect the
consolidation and related minority interests of $461,000 for Remington and Sun
City as of December 31, 1998.
In November, 1996, the Partnership entered into a non-interest bearing note for
$286,000. In accordance with generally accepted accounting principles, the note
should have been discounted at the date of execution and interest accreted over
the period of the note for $127,000. The consolidated financial statements have
been restated for this discount and accretion of interest.
Note 5 - Allocation of Profits and Losses and Cash Distributions
Profit, losses, and cash distributions are allocated ninety-nine percent to the
limited partners and one percent to the general partners until the limited
partners have received an amount equal to their capital contributions plus a
cumulative, non-compounded return of eight percent per annum based on their
adjusted capital account balances, at which time, remaining profits, losses and
-12-
<PAGE>
Land Mortgage Fund, LTD.
(A California Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
Note 5 - Allocation of Profits and Losses and Cash Distributions, continued:
cash distributions are allocated seventy-six percent to the limited partners and
twenty-four percent to the general partners. Distributions of cash from
operations, if any, are made monthly within 30 days after the end of the month.
No distributions were made during 1998. Distributions made during 1997 are shown
on the accompanying consolidated statements of partners' capital.
Note 6 - Related Party Transactions
Units were offered to the public through TMP Capital Corp. ("TMP Capital"), an
affiliate of the general partners, as the managing broker-dealer. As the
managing broker-dealer, TMP Capital received a sales commission of up to 10% of
the gross proceeds, 8% of which was reallocated to soliciting dealers on units
sold by them. TMP Realty, Inc paid these sales commissions.
Under the terms of the Partnership agreement, if the general partners or their
affiliates provide a substantial amount of services in connection with the sale
of a property, or a portion of it, acquired through foreclosure or otherwise,
they are paid a commission not to exceed the lesser of 1) one-half of the normal
and competitive percentage of gross sales price charged for similar services by
an unaffiliated partner; or 2) 3% of the gross sales price of the property. The
payment shall be subordinate to a return of all of the limited partners' capital
contributions and the payment to the limited partners of their cumulative unpaid
priority returns. During 1997, the Partnership paid $42,693 to TMP Investments,
Inc, for loan servicing fees on the La Monte loan and paid $216,250 to TMP
Realty, Inc. for brokers fees for the sale of the Steadfast investment. The
Partnership was charged $15,152 by TMP Investments, Inc. for certain general and
administrative (office and secretarial) expenses during 1997. See also Note 14.
Note 7 - Notes Receivable from Affiliate
In November, 1996, the Partnership sold a parcel of land (including the
capitalized interest costs and the related property taxes payable) to an
affiliated partnership, TMP Mortgage Income Plus, LTD (MIP) for $286,000 and
recorded a note receivable for a five year period without interest with a 12%
discount (imputed interest). The total sales price represented the Partnerships'
original interest of $100,000, as well as $186,000 of other advances and
capitalized costs for the development of the land. The Partnership recognized a
$127,000 discount on the note as a charge to operations for the difference
between the total value of the land and the face value of the note. In 1998, the
Partnership loaned an additional $165,000 to this affiliate for a five year
period without interest (and discounted the note at 12%) and recognized a
$73,000 charge to operations due to the non-interest bearing terms of the note.
As of December 31, 1998, the two notes receivable balances totaled $307,091 (net
of the unamortized discount of $143,648). The Partnership accreted interest
income on these notes during 1998 and 1997 of $32,755 and $20,552, respectively
which is included as interest income on the Consolidated Statements of
Operations. (See Note 4.)
-13-
<PAGE>
Land Mortgage Fund, LTD.
(A California Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
Note 8 - Agreements with PacWest
In March 1998, the general partners of the Partnership entered into an agreement
(the Financing Agreement) with PacWest Inland Empire, LLC (PacWest), a Delaware
Limited Liability company, whereby PacWest paid the general partners of the
Partnership and ten other related partnerships a total of $300,000 and agreed to
pay up to an additional $300,000 for any deficit capital accounts for these 11
partnerships in exchange for the rights to distributions from the general
partners; referred to as a "distribution fee" as defined by the Financing
Agreement.
In addition, PacWest agreed to loan and/or secure a loan for the Partnership and
ten other related partnerships (the TMP Land Partnerships) in the amount of
$2,500,000. Loan proceeds will be allocated among the 11 TMP Land Partnerships,
based on partnership needs, from recommendations made by PacWest, and under the
approval and/or direction of the general partners. A portion of these funds will
be loaned to the Partnership at 12% simple interest over a 24-month period
beginning April 1, 1998. The borrowings are secured by the Partnership's
properties, and funds will be loaned, as needed, in the opinion of the general
partners. These funds are not to exceed 50% of the 1997 appraised value of the
properties, and will primarily be used to pay for on-going property maintenance,
pay down existing debt, accrued property taxes and appropriate entitlement
costs.
PacWest, at their option, can make additional advances with the agreement of the
general partners; however, the aggregate amount of cash loaned to the TMP Land
Partnerships is limited to a maximum of $2,500,000.
In April 1998, PacWest entered into a management, administrative and consulting
agreement (the Management Agreement) with the general partners of the
Partnership to provide the Partnership with overall management, administrative
and consulting services. PacWest currently contracts with third party service
providers to perform certain of the financial, accounting, and investor
relations' services for the Partnership.
Pursuant to the Management Agreement, PacWest has acquired the general partners'
unsubordinated 1% interest in the Partnership and assumed responsibility for all
partnership administration while not replacing any of the general partners.
PacWest will charge a fee for its administrative services equal to an amount not
to exceed the average reimbursements to the general partners for such services
over the past five years. As of December 31, 1998, the Partnership has a payable
of $3,267 to PacWest related to the aforementioned agreements.
-14-
<PAGE>
<TABLE>
<CAPTION>
Land Mortgage Fund, LTD.
(A California Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
Note 9 - Investments
The following is a summary of the investments of the Partnership as of December
31:
1998
<S> <C>
TMP Flowerfield, LLC (Flowerfield) $ 108,039
Peppertree Park, LLC (Peppertree) 500,000
-----------
$ 608,039
</TABLE>
The Partnership has a 75% membership interest in Flowerfield, which was
organized for the purpose of acquiring, owning and developing certain parcels of
land into single family home developments in San Jacinto, California. The equity
method is used to account for the Partnership's share of Flowerfield's earnings
or losses which is not materially different than the consolidation of this
majority owned investment.
The Partnership has a 20% interest in Peppertree, which was formed to acquire
and develop certain property in San Diego, California. The Partnership's 20%
interest is stated at its cost of $500,000. During 1998, Peppertree sold a
parcel of land for a total sales price of $5,455,000. The Partnership recorded
$50,000 for their portion of the gain on the sale of this property which is
included in other income on the consolidated statements of operations.
Note 10 - Gain on Sale of La Monte Property
During 1997, property acquired through foreclosure of the La Monte loan was sold
for $1,950,000 less costs of the property and related carrying and closing costs
for a net gain of $505,740.
Note 11 - Gain on Sale of Investments
During 1995 the Partnership invested approximately $855,000 in Steadfast H.S.C.,
LLC (Steadfast) which was formed to acquire and operate an apartment building.
In 1997, this investment was sold for a $521,110 gain to the Partnership; of
which all but $13,661 was distributed. This amount is included in other
receivables at December 31, 1998.
Note 12 - Property Taxes Payable
As of December 31, 1998, approximately $4,870,000 of total property taxes
payable is owed on the San Jacinto property (Note 4) representing the cumulative
unpaid property taxes and Mello-Roos tax assessments at that date.
-15-
<PAGE>
Land Mortgage Fund, LTD.
(A California Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1998 and 1997
Note 13 - Note Payable
On March 10, 1998, Sun City entered into a promissory note agreement for a
construction loan with a bank. The maximum loan amount is $2,275,000 and accrues
interest at 1.5% per annum in excess of the prime rate. Interest is payable
monthly. As of December 31, 1998, Sun City has a principal balance due on the
note of $895,371.
Note 14 - Minority Interests
In 1995, the Partnership entered into a joint venture agreement referred to as
"TMP Remington, LLC" with TMP Homes, LLC (TMP Homes) whereby the Partnership
contributed land for a 75% interest in TMP Remington, LLC.
TMP Homes contributed $100 for its 25% interest. As a result of this transaction
and subsequent capital contributions whereby the Partnership has contributed
assets for a 75% interest, the Partnership has recognized a loss equal to the
fair value of 25% of the assets contributed to the joint venture which value was
credited to TMP Homes, as the minority interest owner, who will develop the
property.
In April, 1996, the Partnership entered into a joint venture agreement referred
to as "TMP Flowerfield - Sun City, LLC" with TMP Homes whereby subsequently the
Partnership contributed land which had a book value of $511,000 and an
agreed-upon value of $420,000 for 75% interest in the venture. The Partnership
recognized a $91,000 loss on the write down of the land and a loss for 25% of
the other contributed assets which value was credited to TMP Homes the minority
interest member, who will develop the property. The Partnership accounts for
these two joint ventures on a consolidated basis and has recorded minority
interest gain/loss accordingly.
Note 15 - Year 2000 Compliance (unaudited)
Like other organizations and individuals around the world, the Partnership could
be adversely affected if the computer systems it uses and those used by the
Partnership's major customers and vendors do not properly process and calculate
date-related information and data from and after January 1, 2000. This is
commonly known as the "Year 2000 Issue." Management is assessing its computer
systems and the systems compliance issues of its major service providers. Based
on information available to management, the Partnership's major customers and
vendors are taking steps that they believe are reasonably designed to address
the Year 2000 Issue with respect to computer systems that they use. At this
time, however, there can be no assurance that these steps will be sufficient,
and the failure of a timely completion of all necessary procedures could have a
material adverse effect on the Partnership's operations. Management will
continue to monitor the status of, and its exposure to, this issue.
-16-
<PAGE>
SUPPLEMENTARY INFORMATION
-17-
<PAGE>
<TABLE>
<CAPTION>
TMP LAND MORTGAGE FUND, LTD
(A California Limited Partnership)
Schedule II - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, for SEC Reporting Purposes
For the Year Ended December 31, 1998
COLUMN A B C D E F G H I
- -----------------------------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT Gross
TO ACQUISITION amount at Estimated
Initial Carrying which Carried Accumulated Date of Date Depreciable
Description of Assets Encumbrances Cost Improvement Cost at Year-End Depreciation Construction Acquired Life
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unimproved land -
San Jacinto $4,870,485 $3,550,000 $ 63,737 $5,279,858 $ 8,893,595 -0- N/A 06/02/94&
08/11/94 N/A
Unimproved land -
Sun City -0- 1,320,000 638 30,686 1,351,324 -0- N/A 11/02/94 N/A
Unimproved land -
Banning -0- 1,875,000 1,500 23,447 1,899,947 -0- N/A 12/21/94 N/A
Unimproved land -
Sun City -0- 420,000 1,268,188 -0- 1,688,188 -0- N/A 03/29/95 N/A
Unimproved land -
San Diego -0- 1,658,000 1,062,680 24,819 2,745,499 -0- N/A 08/23/95 N/A
$4,870,485 $8,823,000 $2,396,743 $5,358,810 $16,578,553 -0-
========== ========= ========= =========== ========== ===
Less valuation allowance: $ 4,023,109
----------
Net carrying value $12,555,444
==========
Reconciliation of carrying amount
Beginning balance $10,687,386
Additions
Initial Costs 420,000
Carrying Costs/Improv. $2,272,263
----------
Total Additions 2,692,263
Deductions:
Initial Costs 500,000
Improvements 4,780
Carrying costs 280,114
Increase in valua-
tion allowance 39,311
Total Deductions 824,205
-------
Ending balance $12,555,444
==========
</TABLE>
-18-
<PAGE>
<TABLE>
<CAPTION>
TMP LAND MORTGAGE FUND, LTD
(A California Limited Partnership)
Schedule II - Real Estate and Accumulated Depreciation
(Schedule XI, Rule 12-28, for SEC Reporting Purposes
For the Year Ended December 31, 1997
COLUMN A B C D E F G H I
- -----------------------------------------------------------------------------------------------------------------------------------
COSTS CAPITALIZED
SUBSEQUENT Gross
TO ACQUISITION amount at Estimated
Initial Carrying which Carried Accumulated Date of Date Depreciable
Description of Assets Encumbrances Cost Improvement Cost at Year-End Depreciation Construction Acquired Life
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Unimproved land -
San Jacinto $3,941,330 $ 3,550,000$ 63,737 $4,311,391 $7,925,128 -0- N/A 06/02/94&
08/11/94 N/A
Unimproved land -
Sun City -0- 1,320,000 638 75,465 1,396,103 -0- N/A 11/02/94 N/A
Unimproved land -
Banning -0- 1,875,000 1,500 121,355 1,997,855 -0- N/A 12/21/94 N/A
Unimproved land -
Sun City -0- 159,871 4,780 6,291 666,162 -0- N/A 03/29/95 N/A
Unimproved land -
San Diego -0- 1,658,000 888,804 139,132 2,685,936 -0- N/A 08/23/95 N/A
--------- ------- ------- ---------
Combined encum. -
other properties 264,738
-------
$4,206,068 $ 8,903,000$1,114,550 $4,653,634 $14,671,184 -0-
========= ========= ========= ========= ========== ===
Less valuation allowance: $ 3,983,798
-----------
Net carrying value $10,687,386
===========
Reconciliation of carrying amount
- ---------------------------------
Beginning balance $10,575,184
Additions
Improvements $ 407,660
Carrying Costs/Improv. 1,152,390
---------
Total Additions 1,560,050
Deductions:
Initial Costs 1,220,000
Improvements 72,794
Carrying costs 149,528
Increase in valua-
tion allowance 5,526
Total Deductions 1,447,848
----------
Ending balance $10,687,386
==========
</TABLE>
-19-
