FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002
Commission File Number: 0-15448
CENTENNIAL MORTGAGE INCOME FUND II
(Exact name of registrant as specified in its charter)
California 33-0112106
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1540 South Lewis Street, Anaheim, California 92805
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (714)502-8484
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Limited Partnership Units
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required file such reports), and (2) has been subject to such
filing requirements for the past 90 days. YES[X] NO[ ]
Indicate by check mark whether if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not 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-K or any amendment to this Form 10-K. YES[X] NO[ ]
Indicate by check mark whether the registrant is an accelerated filer(as
defined in Rule 12b-2 of the Act). YES[ ] NO[X]
The aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
were last sold was $0.
PART I
ITEM 1. BUSINESS.
(a) General Development of the Business
Centennial Mortgage Income Fund II (the "Partnership"), a California Limited
Partnership, was organized on July 12, 1985. The Partnership's registration
statement became effective January 17, 1986. The general partners are John B.
Joseph, Ronald R. White and Centennial Corporation ("CC").
Beginning in the fourth quarter of 1987, the Partnership ceased accepting
capital contributions and entered its operating stage of business. During the
fourth quarter of 1992, 60 months after the closing of its offering stage, the
Partnership ceased making new loans and entered the repayment stage. For
additional information, See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
(b) Financial Information about Industry Segments
Given that the Partnership is in the process of liquidation, the Partnership
has identified only one operating business segment which is the business of
asset liquidation.
(c) Narrative Description of Business
The Partnership was formed to invest in mortgage investments consisting of
participating first mortgage loans, other equity participation loans,
construction loans, and wrap-around and other junior loans on commercial,
industrial and residential income-producing real property.
The Partnership's objectives are to preserve the Partnership's invested
capital, provide increased cash distributions to the limited partners as the
cash flow from the properties underlying mortgage investments increases over
the life of the Partnership, provide capital growth through participation in
the increased value of the underlying properties and provide liquidating
distributions as cash from the sale of real estate owned is no longer needed
for development and operations of real estate owned.
Due to the long term recession and falling real estate market values in
California during the early 1990's, many of the Partnership's loans became
delinquent and management of the Partnership elected to foreclose, thereby
increasing real estate owned balances. As a result, the Partnership became a
direct investor in this real estate. The Partnership has managed its operating
properties and completed certain development processes on its raw land over the
last several years in an effort to make this real estate more marketable.
The improving real estate markets and development of the Partnership's assets
have enabled the Partnership to liquidate the majority of its assets. As of
December 31, 2002, the Partnership's assets consisted of $1,294,000 in cash and
cash equivalents and $4,000 in other non-cash assets. The $4,000 is an advance
to the corporate general partner to cover salary costs. It is possible that
the remaining non-cash assets could be liquidated during 2003.
Real estate owned by the Partnership reached a peak at December 31, 1993 and
has been declining since that time. The following are the balances of real
estate owned before allowance for possible losses as of December 31 for the
past ten years:
1993 24,170,000
1994 11,284,000
1995 11,314,000
1996 11,316,000
1997 10,827,000
1998 4,599,000
1999 2,843,000
2000 1,511,000
2001 1,044,000
2002 ---
The liquidation of assets during 1998 enabled the Partnership to make a
$3,496,000 cash distribution to its limited partners in October 1998.
Additional asset liquidations during 1999 and 2000 enabled the Partnership to
make another $2,127,000 cash distribution to its limited partners in October
2000.
The Partnership made another $583,000 cash distribution to its limited partners
in September 2001.
In December 2002, the Partnership made a cash distribution to its limited
partners of $1,000,000.
Cautionary Statements Regarding Forward-Looking Information
The Partnership wishes to caution readers that the forward-looking statements
contained in this Form 10-K under "Item 1. Business," "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
elsewhere in this Form 10-K involve known and unknown risks and uncertainties
which may cause the actual results, performance or achievements of the
Partnership to be materially different from any future results, performance or
achievements expressed or implied by any forward-looking statements made by or
on behalf of the Partnership. In connection with the "safe harbor" provisions
of the Private Securities Litigation Reform Act of 1995, the Partnership is
filing the following cautionary statements identifying important factors that
in some cases have affected, and in the future could cause the Partnership's
actual results to differ materially from those expressed in any such forward-
looking statements.
The factors that could cause the Partnership's results to differ materially
include, but are not limited to, general economic and business conditions,
including interest rate fluctuations; the impact of competitive products and
pricing; success of operating initiatives; adverse publicity; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; the results of financing efforts; business
abilities and judgment of personnel; availability of qualified personnel;
employee benefit costs and changes in, or the failure to comply with government
regulations.
(d) Financial Information about Foreign and Domestic Operations and Export
(e) Sales
Not applicable.
ITEM 2. DESCRIPTION OF PROPERTY.
As of December 31, 2002, no properties or facilities are owned or leased by the
Partnership.
ITEM 3. LEGAL PROCEEDINGS.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters have been submitted to a vote of security holders.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S PARTNERSHIP UNITS AND RELATED SECURITY
HOLDER MATTERS.
(a) Securities Market Information
There is no market for the Partnership's limited partnership units, nor is one
expected to develop. The Partnership units were offered by the Partnership
through selected dealers who were members of the National Association of
Securities Dealers, Inc.
(b) Approximate Number of Holders of Limited Partnership Units
As of December 31, 2002, there were approximately 2,889 holders of limited
partnership units.
(c) Partnership Distributions
The Partnership paid a $3,496,000 cash distribution to limited partners in
October 1998. This distribution equaled approximately $120.00 per limited
partnership unit.
The Partnership paid a $2,127,000 cash distribution to limited partners in
October 2000. This distribution equaled approximately $73.00 per limited
partnership unit.
The Partnership made another $583,000 cash distribution to its limited partners
in September 2001. This distribution equaled approximately $20.00 per limited
partnership unit.
The Partnership made a $1,000,000 cash distribution to its limited partners in
December 2002. This distribution equaled approximately $34.32 per limited
partnership unit.
Management's intent was to distribute cash flow available for distribution (as
defined in the Partnership Agreement), if any, on a periodic basis as
substantial cash balances were accumulated from property sales. However,
distributions have been suspended based upon advice from legal counsel until
the possibility of any unforeseen legal action against the Partnership becomes
remote. See Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
ITEM 6. SELECTED FINANCIAL DATA
Years ended
(dollars in thousands, except per unit data)
- -----------------------------------------------------------------------------
12/31/02 12/31/01 12/31/00 12/31/99 12/31/98
- ------------------------------------------------------------------------------
CONSOLIDATED STATEMENT
OF OPERATIONS DATA:
Total revenue $ 892 $ 313 $ 181 $ 277 $ 479
Net income (loss) 638 119 (71) (254) (754)
Net income (loss)
per limited
partnership unit-
basic and diluted 21.90 4.08 (2.44) (8.72) (25.87)
Cash distributions
per limited
partnership unit 34.32 20.00 73.00 --- 120.00
CONSOLIDATED BALANCE
SHEET DATA:
Total loans before
allowance for losses --- --- --- 548 598
Total real estate
owned before allowance
for losses --- 1,044 1,511 2,843 4,599
Total assets 1,298 1,609 2,073 4,325 4,820
Partners' equity 1,236 1,598 2,062 4,260 4,514
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
General
Net income (loss) and income (loss) per limited partnership unit were $638,000
and $21.90 for the year ended December 31, 2002, up from $119,000 and $4.08 for
the year ended December 31, 2001 and $(71,000) and $(2.44) in 2000. Major
changes between statements of operations components from 2001 to 2002 included:
1) a $595,000 increase in gain on sale of real estate owned; 2) a $26,000
decrease in interest on interest bearing deposits; 3) a $25,000 decrease in
expenses associated with non-operating real estate owned; and 4) a $85,000
increase in general and administrative costs. Major changes between statements
of operations components from 2000 to 2001 included: 1) a $251,000 increase in
gain on sale of real estate owned; 2) an $81,000 decrease in interest on
interest bearing deposits; 3) a $32,000 decrease in provision for possible
losses; 4) a $32,000 decrease in interest on loans to nonaffiliates; and 5) a
$26,000 decrease in general and administrative costs. A detailed discussion of
the significant changes in each component of revenue and expense for each of
the years in the three year period ended December 31, 2002 is included in the
following paragraphs.
Liquidity and Capital Resources
At December 31, 2002, the Partnership had $1,294,000 in unrestricted cash and
cash equivalents. During 2002, the Partnership's principal sources of cash
were $1,122,000 of cash proceeds from the sale of real estate and $30,000 in
interest on interest bearing deposits. The Partnership's principal uses of
cash during 2002 were: i) a $1,000,000 cash distribution to limited partners;
ii) $182,000 in general and administrative costs; iii) $6,000 in real estate
taxes paid; and iv) $14,000 in other expenses associated with non-operating
real estate owned.
During May 2002, the Partnership sold the remaining 12 acres of its land in
Sacramento. The sale generated net sales proceeds of $1,122,000. The
Partnership recorded an $846,000 gain on the sale.
As of December 31, 2002, the Partnership had no unfunded loan commitments or
notes payable commitments. The Partnership's principal capital requirements
include general and administrative costs.
Effective with the third quarter of 1991, the Partnership had suspended making
any cash distributions to partners, due to a decline in liquidity and the
uncertainty of the cash requirements for existing and potential real estate
owned. Pursuant to the Partnership Agreement, 60 months after the closing of
the offering, cash proceeds from mortgage investments were no longer available
for reinvestment by the Partnership.
Through the latter part of 1997, the general partners believed that the cash
proceeds from mortgage reductions and the sale of real estate owned should be
retained by the Partnership until such time as it was assured that it had
sufficient cash to fulfill any potential operating requirements. Due to the
substantial real estate owned balances, these potential operating costs were
considered to be very significant. As a result of the substantial decrease in
real estate owned which occurred in 1997 and 1998, the general partners
determined that the Partnership could make a $3,496,000 distribution to its
limited partners in October 1998.
Additional asset liquidations during 1999 and 2000 enabled the Partnership to
make another $2,127,000 cash distribution to its limited partners in October
2000.
The Partnership made another $583,000 cash distribution to its limited partners
in September 2001 and an additional $1,000,000 in December 2002.
The general partners have had discussions with legal counsel regarding the
amounts of cash balances that would be prudent to be retained by the
Partnership at this time. In light of the substantial amount of real estate
that the Partnership has held an interest in over the years, there is always
the potential for future litigation to arise, particularly in the area of toxic
contamination. Although the general partners are not aware of any other
threatened litigation, or litigation that is likely to arise, they have
determined that the Partnership should retain at least $1,000,000 in cash
balances to be available to defend the Partnership in any future litigation
which may arise. It is expected that these cash balances will be retained
until such time as legal counsel advises the general partners that the
potential for any future litigation is remote.
Results of Operations
The Partnership's non-cash assets declined from $2,286,000 as of December 31,
1999 to $4,000 as of December 31, 2002. The substantial reduction in non-cash
assets between 1999 and 2002 caused many changes in the Partnership's results
of operations as discussed below.
Interest income on loans to nonaffiliates was $-0-, $-0- and $32,000 in 2002,
2001 and 2000, respectively. In October 1998, the Partnership received two
loans in connection with the payoff of certain loans to Silverwood Homes, an
unconsolidated investee. These new loans were the principal source of interest
income on loans to nonaffiliates during 2000. The loans were repaid in October
2000.
The real estate owned balance before allowance for possible losses at December
31, 2002, 2001 and 2000 was $-0-, $1,044,000 and $1,511,000, respectively.
The following section entitled "Real Estate Owned" provide a detailed analysis
of these assets.
Real Estate Owned
A description of the Partnership's principal real estate owned during the years
ended December 31, 2002, 2001 and 2000 follows:
44 Acres in Sacramento, California
The Partnership funded a loan in 1987 with a committed amount of $4,000,000
secured by a first trust deed on 43.78 acres in Sacramento, California. The
loan was provided for the development of offsite improvements. The maturity
date was February 1, 1991. The borrower was unable to obtain construction
financing and bring interest current. The Partnership accepted a grant deed on
the property on March 10, 1992. The property is zoned for multi-family and
light industrial use. A portion of the property is adjacent to Highway 99 and
has good freeway visibility.
The Partnership rezoned and subdivided a portion of the property to facilitate
one escrow on a 6.5 acre portion of the property without freeway visibility.
This transaction closed escrow during the fourth quarter of 1997.
There had been only limited industrial/commercial use development activity in
the area surrounding this property during 1996 and 1997. In light of this
limited activity and management's objective of liquidating the Partnership's
remaining assets as soon as practical, the Partnership recorded an additional
$504,000 provision for losses against the carrying value of this property
during 1998.
During the first quarter of 1999, the Partnership opened escrow on a 9.45 acre
portion of the property which also did not have freeway visibility for a
purchase price of $900,000. The escrow closed at the end of the second quarter
of 1999, generated $842,000 in net cash proceeds and was recorded at no gain or
loss. Both the parcel sold in 1997 and the parcel sold in 1999 are zoned for
residential use. The balance of the property was zoned for
industrial/commercial use.
The Partnership sold another 7.13 acres parcel of the property in February
2000. The sale generated net sales proceeds of $846,000. The Partnership
2001. recorded no gain or loss on this sale.
The Partnership sold another 2.65 acre parcel of the property in August 2000.
The sale generated net sales proceeds of $486,000. The Partnership recorded no
gain or loss on this sale.
The Partnership sold approximately 5.58 acres of the property in December 2001.
The sale generated net sales proceeds of $374,000. The Partnership recorded a
$251,000 gain on the sale.
The Partnership sold the remaining 12 acres of the property in May 2002. The
sale generated net sales proceeds of $1,122,000. The Partnership recorded a
$846,000 gain on the sale.
Interest on Interest-Bearing Deposits
Interest on interest-bearing deposits represents interest earned on Partnership
funds invested, for liquidity, in time certificate and money market deposits.
Interest on interest-bearing deposits was $30,000 in 2002, $56,000 in 2001 and
$137,000 in 2000. The decreases in interest income from 2000 to 2002 are due
to both decreases in average cash balances as well as reductions in the
interest rates earned on those balances.
Gain on Sale of Real Estate Owned
As discussed above, the Partnership recorded gains of $251,000 in 2001 and
$846,000 in 2002 on the sale of land in Sacramento.
Provision for Possible Losses
The provision for possible losses was $32,000 in 2000. There was no provision
for possible losses recorded in 2001 or 2002. The 2000 provision relates to
the discounted payoff of the remaining loans held by the Partnership.
Other Expenses
Expenses associated with non-operating real estate owned were $20,000 in 2002,
$45,000 in 2001 and $45,000 in 2000. The expenses relate principally to the 44
acres in Sacramento. These expenses include property taxes of $6,000, $23,000
and $27,000 for 2002, 2001 and 2000, respectively. The decrease for 2002 is
due to the sale of the property in May 2002.
General and administrative expenses, affiliates were $117,000, $94,000 and
$104,000 in 2002, 2001 and 2000, respectively. These expenses are primarily
salary allocation reimbursements paid to affiliates for the management of the
Partnership's assets. The increase in 2002 is partially the result of
additional rent expense allocations. The decrease in 2001 is attributable to a
layoff of the corporate partner's personnel.
General and administrative expenses, nonaffiliates was $117,000, $55,000 and
$71,000 in 2002, 2001 and 2000, respectively. The increase in 2002 was
principally due to a tax provision related to the income recorded due to the
sale of PIR. The decrease in 2001 was principally due to decreased investor
mailings and a reduction in offsite record storage costs.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since the Partnership does not invest in any derivative financial instruments
or enter into any activities involving foreign currencies, its market risk
associated with financial instruments is limited to the effect that changing
domestic interest rates might have on the fair value of its bank deposits.
As of December 31, 2002, the Partnership held fixed rate bank deposits with
carrying values totaling $809,000. The bank deposits all had maturities of less
than ninety days. The fair value of these bank deposits was estimated to be
equal to their carrying values as of December 31, 2002 due to their near term
maturities.
Given the relatively short-term maturities of these assets, management does not
believe the Partnership is exposed to any significant market risk related to
their fair value.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Consolidated Financial Statements and Schedules attached hereto.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON REPORTING AND
FINANCIAL DISCLOSURE
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Identification of General Partners
The Partnership is managed by its general partners. The individual general
partners' principal occupations and affiliations during the last five years are
described in the following table. The general partners devote to the affairs
of the Partnership such portion of their time as they consider necessary for
the effective supervision of its affairs.
Name, Age and Position
Principal Occupation and
Affiliation during Last Five Years
- ------------------------------------------------------------------------------
John B. Joseph
Age 64
General Partner
John B. Joseph is currently Vice Chairman of the Board of Directors and Vice
President of Centennial Corporation. He has held these positions since 1983.
Mr. Joseph also has served, in the following capacities during the past five
years: he was on the board of directors for West Coast Bancorp ("WCB"), a
publicly held bank holding company operating in California from its inception
in 1981 through February 1999; he was Chairman of the Board of Directors of WCB
since its inception in 1981 and CEO from April 1991 until 1998. Mr. Joseph has
also been general partner of various public and private limited partnerships
engaged in real estate development and lending activities.
Mr. Joseph has 31 years of experience in asset management in both securities
and real estate. Mr. Joseph has worked in all areas of real estate. In the
past, Mr. Joseph has been engaged in the syndication and management of over
$100 million worth of income property, including industrial complexes, shopping
centers, business centers, office buildings, commercial properties and
residential units.
Ronald R. White
Age 56
General Partner
Ronald R. White is currently President and CEO of Centennial Corporation. He
has held these positions since 1983. He was also Executive Vice President and
Vice Chairman of the Board of Directors of WCB until 1998. Mr. White served in
these capacities since April 1987. Mr. White also serves, or has served, in
the following capacities during the past five years: general partner of various
public and private limited partnerships engaged in real estate development and
lending activities.
Mr. White's career spans the financial and management fields in both securities
and real estate. Mr. White has 29 years of experience in asset management. In
the past, Mr. White has been engaged in the syndication and management of over
$100 million worth of income property including industrial complexes, shopping
centers, business centers, office buildings, commercial properties, and
residential units.
Centennial Corporation ("CC"), a privately-held corporation, whose stock is
owned by affiliates of Ronald R. White and John B. Joseph, was voted in as new
general partner in the first quarter of 1994. CC was incorporated in 1983 to
engage in the real estate lending business and to provide consulting services.
Identification of Executive Officers
The Partnership does not have officers as such. The affairs of the Partnership
are managed by the general partners noted above.
ITEM 11. MANAGEMENT REMUNERATION AND TRANSACTIONS
The following table summarizes the types and recipients of compensation paid
and to be paid to the general partners and affiliates by the Partnership.
Amount Earned/
Type of Reimbursable for the
Compensation & Year Ended
Name of Entity Description of Payment December 31, 2002
- ------------------------------------------------------------------------------
Operating Stage:
Application and An amount up to a maximum $ ---
commitment fees of 3 percent of the gross
- - the general proceeds of the offering
partner or on any single mortgage
affiliates investment, and an aggregate
maximum of 7 percent of the
gross proceeds of the offering,
payable to the general partners
or affiliates. The application
and commitment fees are payable
solely from borrowers and
prospective borrowers and not
directly from the proceeds of
the offering.
General partners' The general partners or affiliates $ 117,000 (1)
reimbursable shall be entitled to reimbursement
expenses for certain expenses, subject to
- general the conditions of the Partnership
partner or Agreement.
affiliates
General partners' A 5 percent interest in cash $ ---
interest in cash flow available for distribution
distributions for any year until all limited
- - general partnership unit holders have
partners or received an amount equal to a 12
affiliates percent non-cumulative annual
return on their adjusted invested
capital, and 10 percent of the
balance of any cash flow available
for distribution for such year
Mortgage 1/4 of 1 percent of the $ ---
investment maximum amount funded or to
servicing fees be funded by the Partnership
on mortgage investments
serviced by CC
Repayment Stage:
General partners' One percent of mortgage $ ---
share of reductions until all limited
mortgage partners have received an
reductions amount equal to their adjusted
- - general invested capital and cumulative
partners or distributions (including cash
affiliates flow available for distribution)
equal to a 12 percent annual
return with respect to their
adjusted invested capital, and
15 percent of the balance of
any mortgage reductions.
(1) Such reimbursable expenses include salaries and related salary expenses
for services which could be performed directly for the Partnership by
independent parties such as legal, clerical, accounting, financial reporting,
governmental reporting, transfer agent, data processing and duplication
services. Such reimbursement of expenses will be made regardless of whether
any distributions are made to the limited partners.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
No persons are known by the Partnership to own beneficially more than 5
percent of the limited partnership units at December 31, 2002.
(b) Security Ownership of Management
The percent of units owned by Management is less than 1 percent.
Name and address Nature and Number of Percent of
of Beneficial Owner Units Outstanding Units Outstanding
- ------------------------------------------------------------------------------
Ronald R. White
1540 S. Lewis St.
Anaheim, CA 92805 Limited partnership units: 1 ---
(c) Change in Control
The Partnership knows of no contractual arrangements which may at a subsequent
date result in a change of control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
This disclosure is made in note 4 of Notes to the Consolidated Financial
Statements incorporated in this filing.
ITEM 14. CONTROLS AND PROCEDURES
The Partnership's general partner, by its Executive Vice President and Chief
Financial Officer, has conducted an evaluation of the effectiveness of our
design and operation of disclosure controls and procedures (as defined in Rules
13a-14 and 15d-14 under the Securities Exchange Act of 1934) as of a date
within 90 days prior to the filing date of this annual report. Based on that
evaluation, the Executive Vice President and Chief Financial Officer concluded
that the disclosure controls and procedures are effective in ensuring that all
material information required to be filed in this annual report has been made
known to them in a timely fashion. There have been no significant changes in
internal controls, or in factors that could significantly affect internal
controls, subsequent to the date the Executive Vice President and Chief
Financial Officer completed their evaluation.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) and (a)(2) - See Index to Consolidated Financial Statements and
Schedules attached hereto.
(a)(3) - Exhibits.
(a)99.1 Certification of General Partner and Chief Financial Officer
pursuant to Section 906 of Sarbanes-Oxley Act of 2002.
(3) & (4) Articles of Incorporation and Bylaws
The Amended and Restated Limited Partnership Agreement
Incorporated by reference to Exhibit A to the Partnership's
Prospectus contained in the Partnership's registration
Statement on Form S-11 (Commission File No. 0-15448)
Dated January 17, 1986, as supplemented filed under the Securities
Act of 1933
(b)(4) - Reports on Form 8-K.
None.
Exhibit 99.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Centennial Mortgage Income Fund II
and Subsidiaries, the ("Partnership") on Form 10-K for the period ending
December 31, 2002, as filed with the Securities and Exchange Commission on
March 27, 2003, (the "Report") I, Ronald R. White, General Partner and Chief
Financial Officer of Centennial Corporation (Corporate General Partner),
certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906
of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13 (a) or 15
(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Partnership.
/s/ Ronald R. White
_______________________________ March 27, 2003
Ronald R. White
General Partner and Chief Financial Officer
of Centennial Corporation
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Ronald R. White, certify that:
1. I have reviewed this annual report on Form 10-K of Centennial Mortgage
Income Fund II and Subsidiaries, the ("Partnership");
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the periods covered by this annual
report;
3. Based on my knowledge , the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
Partnership as of, and for, the periods presented in this annual report;
4. The Partnership's other general partners and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the Partnership and we have:
a)designed such disclosure controls and procedures to ensure that material
information relating to the Partnership, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this annual report is being prepared;
b)evaluated the effectiveness of the Partnership's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
annual report (the "Evaluation Date"); and
c)presented in this annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The Partnership's management and I have disclosed, based on our most recent
evaluation, to the Partnership's auditors and the audit committee (or persons
performing the equivalent function)of the Partnership:
a)all significant deficiencies in the design or operation of internal controls
which could adversely affect the Partnership's ability to record, process,
summarize and report financial data and have identified for the Partnership's
auditors any material weaknesses in internal controls; and
b)any fraud, whether or not material, that involves management or other
employees who have a significant role in the Partnership's internal controls;
and
6. I have indicated in this annual report whether or not there were
significant changes in internal controls or in other factors that could
significantly affect internal controls subsequent to the date of our most
recent evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
Date: March 27, 2003
/s/ Ronald R. White
___________________________
Ronald R. White
General Partner and Chief Financial
Officer of Centennial Corporation
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.
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A California Limited Partnership
By:/s/John B. Joseph
_________________________________
John B. Joseph
General Partner March 27, 2003
By:/s/Ronald R. White
_________________________________
Ronald R. White
General Partner March 27, 2003
By: CENTENNIAL CORPORATION
General Partner
/s/John B. Joseph
_________________________________
John B. Joseph
Executive Vice President March 27, 2003
/s/Ronald R. White
_________________________________
Ronald R. White
President and Chief Financial Officer March 27, 2003
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
ANNUAL REPORT
Form 10-K
Consolidated Financial Statements
Items 8, 15(a)(1) and 15(a)(2)
December 31, 2002, 2001 and 2000
(With Independent Auditors' Report Thereon)
F-1
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Items 8, 15(a)(1) and 15(a)(2)
Index to Consolidated Financial Statements and Schedules
Consolidated Financial Statements Page
Independent Auditors' Report F-3
Consolidated Balance Sheets --
December 31, 2002 and 2001 F-4
Consolidated Statements of Operations --
Years ended December 31, 2002, 2001 and 2000 F-5
Consolidated Statements of Partners' Equity --
Years ended December 31, 2002, 2001 and 2000 F-6
Consolidated Statements of Cash Flows --
Years ended December 31, 2002, 2001 and 2000 F-7
Notes to Consolidated Financial
Statements F-8
Schedules
Schedule III - Consolidated Real Estate Owned F-16
All other schedules are omitted as the required information is inapplicable,
or the information is presented in the consolidated financial statements or
notes thereto.
F-2
INDEPENDENT AUDITORS' REPORT
To the General Partners
Centennial Mortgage Income Fund II:
We have audited the consolidated financial statements of Centennial Mortgage
Income Fund II, a limited partnership, and subsidiaries as listed in the
accompanying index. In connection with our audits of the consolidated
financial statements, we also have audited the financial statement schedule
as listed in the accompanying index. These consolidated financial statements
and financial statement schedule are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Centennial
Mortgage Income Fund II and subsidiaries as of December 31, 2002 and 2001, and
the results of their operations and their cash flows for each of the years in
the three-year period ended December 31, 2002, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG LLP
Orange County, California
January 21, 2003
F-3
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Balance Sheets
December 31, 2002 and 2001
ASSETS 2002 2001
- ------------------------------------------------------------------------------
Cash and cash equivalents $ 1,294,000 $ 1,333,000
Real estate owned, held
for sale (note 5) --- 1,044,000
Less allowance for possible losses on
real estate owned (note 3) --- 768,000
- ------------------------------------------------------------------------------
Net real estate owned --- 276,000
- ------------------------------------------------------------------------------
Due from affiliate (note 4) 4,000 ---
- ------------------------------------------------------------------------------
$ 1,298,000 $ 1,609,000
==============================================================================
LIABILITIES AND PARTNERS' EQUITY
- ------------------------------------------------------------------------------
Accounts payable
and accrued liabilities $ 62,000 $ 11,000
- ------------------------------------------------------------------------------
Total liabilities 62,000 11,000
- ------------------------------------------------------------------------------
Partners' equity (deficit) --
29,133 limited partnership units
outstanding in 2002 and 2001
General partners (56,000) (56,000)
Limited partners 1,292,000 1,654,000
- ------------------------------------------------------------------------------
Total partners' equity 1,236,000 1,598,000
Contingencies (note 6)
- ------------------------------------------------------------------------------
$ 1,298,000 $ 1,609,000
==============================================================================
See accompanying notes to consolidated financial statements
F-4
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Operations
Years ended December 31, 2002, 2001 and 2000
2002 2001 2000
- ------------------------------------------------------------------------------
Revenue:
Interest on loans to
nonaffiliates $ --- $ --- $ 32,000
Interest on interest-bearing
deposits 30,000 56,000 137,000
Gain on sale of real
Estate owned 846,000 251,000 ---
Other 16,000 6,000 12,000
- ------------------------------------------------------------------------------
Total revenue 892,000 313,000 181,000
- ------------------------------------------------------------------------------
Expenses:
Provision for possible losses
(note 3) --- --- 32,000
Expenses associated with
non-operating real estate owned 20,000 45,000 45,000
General and administrative,
affiliates (note 4) 117,000 94,000 104,000
General and administrative,
nonaffiliates (note 1) 117,000 55,000 71,000
- ------------------------------------------------------------------------------
Total expenses 254,000 194,000 252,000
- ------------------------------------------------------------------------------
Net income (loss) $ 638,000 $ 119,000 $ (71,000)
==============================================================================
Net income (loss) per limited
partnership unit
- basic and diluted $ 21.90 $ 4.08 $ (2.44)
==============================================================================
See accompanying notes to consolidated financial statements
F-5
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Partners' Equity
Years ended December 31, 2002, 2001 and 2000
Total
General Limited Partners'
Partners Partners Equity
- ------------------------------------------------------------------------------
Balance (deficit) at
December 31, 1999 $ (56,000) $ 4,316,000 $ 4,260,000
Net loss --- (71,000) (71,000)
Distribution to
limited partners --- (2,127,000) (2,127,000)
- ------------------------------------------------------------------------------
Balance (deficit) at
December 31, 2000 (56,000) 2,118,000 2,062,000
Net income --- 119,000 119,000
Distribution to
limited partners --- (583,000) (583,000)
- ------------------------------------------------------------------------------
Balance (deficit) at
December 31, 2001 (56,000) 1,654,000 1,598,000
Net income --- 638,000 638,000
Distribution to
limited partners --- (1,000,000) (1,000,000)
- ------------------------------------------------------------------------------
Balance (deficit) at
December 31, 2002 $ (56,000) $ 1,292,000 $ 1,236,000
==============================================================================
See accompanying notes to consolidated financial statements
F-6
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Statements of Cash Flows
Years ended December 31, 2002, 2001 and 2000
2002 2001 2000
- -----------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 638,000 $ 119,000 $ (71,000)
Adjustments to reconcile net income
(loss) to net cash used
in operating activities:
Provision for possible losses --- --- 32,000
Gain on sale of real estate
owned (846,000) (251,000) ---
Changes in assets and liabilities:
(Increase) decrease in other assets (4,000) --- 5,000
Increase (decrease) in accounts
Payable and accrued liabilities 51,000 --- (54,000)
- -----------------------------------------------------------------------------
Net cash used in operating activities (161,000) (132,000) (88,000)
- -----------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Principal collected on loans --- --- 520,000
Proceeds from sale of
real estate owned 1,122,000 374,000 1,332,000
Advances on loans receivable-earning --- --- (4,000)
Decrease in due from
unconsolidated investee --- --- 2,000
- -----------------------------------------------------------------------------
Net cash provided by
investing activities 1,122,000 374,000 1,850,000
- -----------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to limited partners (1,000,000) (583,000) (2,127,000)
- -----------------------------------------------------------------------------
Net decrease in cash and
cash equivalents (39,000) (341,000) (365,000)
Cash and cash equivalents
at beginning of year 1,333,000 1,674,000 2,039,000
- -----------------------------------------------------------------------------
Cash and cash equivalents
at end of year $1,294,000 $1,333,000 $1,674,000
=============================================================================
Supplemental schedule of noncash
investing and financing activities:
Decrease in allowance for possible
losses on real estate loans and
on real estate owned as a result
of sales and chargeoffs $ 768,000 $ 344,000 $ ---
Decrease in allowance for possible
loans receivable and loans receivable
as a result of chargeoffs --- --- 32,000
See accompanying notes to consolidated financial statements
F-7
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Notes to Consolidated Financial Statements
December 31, 2002, 2001, 2000
(1) SUMMARY OF SIGNIFICANT ACCOUNTING P0LICIES
Business
Centennial Mortgage Income Fund II (the "Partnership") was formed in 1985 and
initially invested in commercial, industrial and residential income-producing
real property through mortgage investments consisting of participating first
mortgage loans, other equity participation loans, construction loans, and wrap-
around and other junior loans. The Partnership's underwriting policy for
granting credit was to fund loans secured by first and second deeds of trust on
real property. The Partnership's area of concentration is in California. In
the normal course of business, the Partnership participated with other lenders
in extending credit to single borrowers. The Partnership did this in an effort
to decrease credit concentrations and provide a greater diversification of
credit risk.
As of December 31, 2002, all of the loans secured by operating properties have
been repaid to the Partnership. However, during the early 1990's, real estate
market values for undeveloped land in California declined severely. As the
loans secured by undeveloped land became delinquent, the Partnership elected to
foreclose on certain of these loans, thereby increasing real estate owned
balances. As a result, the Partnership became a direct investor in this real
estate. The real estate owned balance before allowance for possible losses at
December 31, 2000 was $1,511,000, decreasing to $1,044,000 at year end 2001 and
zero at year end 2002.
Beginning with the fourth quarter of 1992, the Partnership entered its
repayment stage and cash proceeds from mortgage investments are no longer
available for reinvestment in new loans by the Partnership.
Basis of Presentation
The Partnership formed several subsidiaries to own and operate certain of its
real estate assets. The corporations formed were PIR Development, Inc.
("PIR"), and CTA Development, Inc. ("CTA") and LCR Development, Inc., ("LCR").
All of these corporations are California corporations. Several of the
Partnership's assets were transferred to these corporations, at the
Partnership's cost basis, in transactions which included no cash down and the
Partnership carrying 100 percent of the financing. CTA was liquidated during
2000. The Partnership reduced the carrying value of its investment in LCR to
2001. $-0- during 2000. PIR was liquidated during 2002. With the exception
2002. of LCR, all of these corporations are wholly owned corporations and have
2003. been consolidated in the accompanying consolidated financial statements.
2004. All significant intercompany balances and transactions, including the
2005. aforementioned transfers, have been eliminated in consolidation.
F-8
Organization
The Partnership was organized on July 12, 1985 in accordance with the
provisions of the California Uniform Limited Partnership Act. The Partnership
commenced operations in June 1986. The general partners are John B. Joseph,
Ronald R. White and Centennial Corporation ("CC"), a privately-held California
corporation whose stock is owned by affiliates of Ronald R. White and John B.
Joseph.
Partners' Capital Accounts
Cash Available for Distribution, as defined in the Partnership Agreement, is to
be allocated 95 percent to the limited partners and 5 percent to the general
partners until each limited partner has received an amount equal to a 12
percent non-cumulative annual return on his adjusted invested capital (as
defined in the Partnership Agreement). Thereafter, Cash Available for
Distribution is to be allocated 90 percent to the limited partners and 10
percent to the general partners. All distributions of Mortgage Reductions (as
defined in the Partnership Agreement) after the first sixty months following
the closing date of the Partnership, shall be distributed 99 percent to the
limited partners and 1 percent to the general partners, until each limited
partner has received a 12 percent cumulative annual return on his adjusted
invested capital, after which such amounts are to be distributed 85 percent to
the limited partners and 15 percent to the general partners. In order to
properly reflect the economic effect of the allocations discussed above, the
Partnership has allocated financial statement net earnings (losses) 95 percent
to the limited partners and 5 percent to the general partners through 1992.
The Partnership had no Cash Available for Distribution during the three years
ended December 31, 2002.
Based upon these and various other terms of the Partnership Agreement, it is
improbable that the general partners would be required to make any capital
contributions to the Partnership in excess of their negative capital account as
of December 31, 1992. Accordingly, since January 1, 1993, the Partnership has
allocated 100 percent of the losses to the limited partners. As a result of
the liquidation of the majority of the Partnership's investments in 1998, it
became clear that the amount of the required deficit restoration of the General
Partners would not exceed $56,000 and the capital accounts of the General
Partners and limited partners were adjusted in 1998 to reflect such maximum
deficit restoration.
Real Estate Owned
Long-lived assets to be disposed of are reported at the lower of carrying
amount or fair value less costs to sell. Estimated fair values are determined
by using appraisals, discounted cash flows and/or other valuation techniques.
The actual market price of real estate can only be determined by negotiation
between independent third parties in a sales transaction and sales proceeds
could differ substantially from estimated fair values. An impairment loss
shall be measured as the amount by which the carrying amount of the asset
exceeds the fair value of the assets less costs to sell. Assets to be disposed
of are not depreciated while they are held for disposal. The Partnership
considered all real estate owned as held for sale during 2002 and 2001.
F-9
Income Taxes
Under provisions of the Internal Revenue Code and the California Revenue and
Taxation Code, partnerships are generally not subject to income taxes. For tax
purposes, any income or losses realized are those of the individual partners,
not the Partnership. The Partnership reports certain transactions differently
for tax and financial statement purposes. The following is a recap of current
and cumulative temporary differences between earnings for generally accepted
accounting principles ("GAAP") and taxable earnings.
Current Temporary
Differences Partnership Corporations Total
(Unaudited) (Unaudited) (Unaudited)
- ------------------------------------------------------------------------------
GAAP earnings (loss) for
the year ended
December 31, 2002 $ (3,188,000) $ 3,887,000 $ 699,000
Loss provision deducted --- (768,000) (768,000)
Accrued expenses 1,000 (1,840,000) (1,839,000)
Carrying costs expensed
for books and capitalized for
tax purposes --- (605,000) (605,000)
Net operating loss utilized --- (674,000) (674,000)
- ------------------------------------------------------------------------------
Taxable loss for the year
ended December 31, 2002 $ (3,187,000) $ --- $ (3,187,000)
==============================================================================
Taxable loss allocable to
General Partner ---
==============================================================================
Taxable loss per limited
partner unit $ (109.39)
==============================================================================
Cumulative Temporary Differences as of December 31, 2002
Partnership Corporations
(Unaudited) (Unaudited)
- ------------------------------------------------------------------------------
Net operating loss carry forwards $ --- $ 3,000
- ------------------------------------------------------------------------------
Total cumulative
temporary differences $ --- $ 3,000
==============================================================================
The subsidiary corporations are subject to taxation and account for income
taxes under an asset and liability approach for establishing deferred tax
assets and liabilities for the temporary differences between the financial
reporting basis and the tax basis of the corporation's assets and liabilities.
None of the subsidiary corporations have paid any income taxes since their
F-10
respective formations and all of them have had net deferred tax assets which
have been fully offset by valuation allowances as of December 31, 2002, 2001
and 2000. Because of a change in state tax laws, PIR was not able to utilize
a portion of its net operating loss carryforward for the year ended
December 31, 2002. A $62,000 provision for taxes was recorded by the
Partnership related to the taxable profits recorded by PIR as of December 31,
2002 that is included in general and administrative expenses. No deferred tax
asset related to the corporations cumulative temporary differences shown above
has been recorded in the consolidated financial statements due to the
improbability of realization. Future consolidated financial statements could
reflect income tax expense in the event that these corporations generate
taxable profits in excess of operating loss carryforwards available. Some of
the subsidiary corporations are cash basis taxpayers.
Statements of Cash Flows
For purposes of reporting cash flows, cash and cash equivalents include cash
and interest-bearing deposits with original maturities of three months or less.
Net Loss Per Limited Partnership Unit
Net loss per limited partnership unit for financial statement purposes was
based on 29,133 weighted average limited partnership units outstanding in 2002,
2001 and 2000.
Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amount of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.
Revenue Recognition
Revenue from rental income on real estate owned was recognized on a straight-
line basis over the life of the lease when payments become due under operating
leases. The Partnership has recognized gains or losses on the sale of real
estate owned as the gains or losses are determinable and the earnings process
is complete.
Credit Risk
As of December 31, 2002, the Partnership had bank deposits at four different
banks whose deposits are federally insured. Approximately $993,000 of the
Partnership's cash and cash equivalent balance as of that same date was in
excess of maximum balances covered by such insurance.
Financial Information about Industry Segments
Given that the Partnership is in the process of liquidation, the Partnership
has identified only one operating business segment which is the business of
asset liquidation. At December 31, 2002, the Partnership does not believe that
there would be a material difference if it had adopted the liquidation basis of
accounting.
F-11
(2) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107 "Disclosures About Fair
Value of Financial Instruments" ("SFAS 107"), requires that the Partnership
disclose estimated fair values for its financial instruments as well as the
methods and significant assumptions used to estimate fair values. The
following information does not purport to represent the aggregate net fair
value of the Partnership. The following methods and assumptions were used by
the Partnership in estimating the fair value of each class of financial
instrument.
Cash and Cash Equivalents
The carrying amount, which is cost, is assumed to be the fair value because of
the liquidity of these instruments.
Accounts Payable and Accrued Liabilities
Carrying value is considered to be equal to the fair value of these liabilities
as they are due on demand.
(3) ALLOWANCE FOR POSSIBLE LOSSES ON REAL ESTATE OWNED
Changes in the allowance for possible losses on real estate owned are as
follows:
2002 2001 2000
- ------------------------------------------------------------------------------
Balance at beginning of year $ 768,000 $ 1,112,000 $ 1,112,000
Real estate owned charged-off --- --- ---
Sale of real estate (768,000) (344,000) ---
- ------------------------------------------------------------------------------
Balance at end of year $ --- $ 768,000 $ 1,112,000
==============================================================================
(4) TRANSACTIONS WITH AFFILIATES
The Partnership reimburses the general partner for salaries and related
expenses incurred on behalf of the Partnership for services such as legal,
clerical, accounting, property management and other administrative functions.
The general partners and affiliates charged $117,000 $94,000 and $104,000 for
such services in 2002, 2001 and 2001, respectively.
At December 31, 2002, the Partnership had advanced $4,000 to the corporate
general partner to cover salary costs.
F-12
(5) REAL ESTATE OWNED
Real estate owned consists of the following:
December 31, December 31,
2002 2001
- ------------------------------------------------------------------------------
1. Land in Sacramento, CA $ --- $ 1,044,000
- ------------------------------------------------------------------------------
Total real estate owned $ --- $ 1,044,000
==============================================================================
The Partnership sold approximately 7.13 acres of land in Sacramento in February
2000. The sale generated net sales proceeds of $846,000. The Partnership
recorded no gain or loss on this sale.
In August 2000, the Partnership sold approximately 2.65 acres of its land in
Sacramento. The sale generated net sales proceeds of $486,000. The
Partnership recorded no gain or loss on this sale.
The Partnership sold approximately 5.58 acres of its land in Sacramento in
December 2001. The sale generated net sales proceeds of $374,000. The
Partnership recorded a $251,000 gain on the sale.
The Partnership sold the remaining 12 acres of its land in Sacramento in May
2002. The sale generated net sales proceeds of $1,122,000. The Partnership
2003. recorded an $846,000 gain on the sale.
(6) Contingencies
There are no pending legal proceedings.
F-13
(7) QUARTERLY FINANCIAL RESULTS (UNAUDITED)
Quarter Ended
December 31, September 30, June 30, March 31,
2002 2002 2002 2002
- ------------------------------------------------------------------------------------------
REVENUE:
Interest on interest-bearing deposits $ 8,000 $ 9,000 $ 8,000 $ 5,000
Gain on sale of real estate --- --- 846,000 ---
Other 2,000 1,000 6,000 7,000
- ------------------------------------------------------------------------------------------
Total revenue 10,000 10,000 860,000 12,000
- ------------------------------------------------------------------------------------------
EXPENSES:
Expenses associated with non-operating
real estate owned --- --- 4,000 16,000
General and administrative 93,000 42,000 58,000 43,000
- ------------------------------------------------------------------------------------------
Total expenses 93,000 42,000 62,000 59,000
- ------------------------------------------------------------------------------------------
Net income (loss) $ (81,000) $ (32,000) $ 798,000 $ (47,000)
==========================================================================================
Net income (loss) per limited
partnership unit-basic and diluted $ (2.78) $ (1.10) $ 27.38 $ (1.61)
==========================================================================================
F-14
(7) QUARTERLY FINANCIAL RESULTS (UNAUDITED)(CONTINUED)
Quarter Ended
December 31, September 30, June 30, March 31,
2001 2001 2001 2001
- ------------------------------------------------------------------------------------------
REVENUE:
Interest on interest-bearing deposits $ 6,000 $ 12,000 $ 17,000 $ 21,000
Gain on sale of real estate 251,000 --- --- ---
Other 1,000 1,000 2,000 2,000
- ------------------------------------------------------------------------------------------
Total revenue 258,000 13,000 19,000 23,000
- ------------------------------------------------------------------------------------------
EXPENSES:
Expenses associated with non-operating
real estate owned 8,000 12,000 9,000 16,000
General and administrative 36,000 31,000 40,000 42,000
- ------------------------------------------------------------------------------------------
Total expenses 44,000 43,000 49,000 58,000
- ------------------------------------------------------------------------------------------
Net income (loss) $ 214,000 $ (30,000) $ (30,000) $ (35,000)
==========================================================================================
Net loss per limited partnership
unit-basic and diluted $ 7.34 $ (1.03) $ (1.03) $ (1.20)
==========================================================================================
F-15
CENTENNIAL MORTGAGE INCOME FUND II AND SUBSIDIARIES
A Limited Partnership
Consolidated Real Estate Owned
December 31, 2002
Schedule III
The following is a summary of consolidated real estate owned for the three years ended December 31, 2002.
2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
Balance at beginning of year $ 1,044,000 $ 1,511,000 $ 2,843,000
Additions during period:
Improvements --- --- ---
Deductions during period:
Real estate sold (1,044,000) (467,000) (1,332,000)
- -------------------------------------------------------------------------------------------------------------
Balance at year end $ --- $ 1,044,000 $ 1,511,000
=============================================================================================================
See accompanying independent auditors report
F-16