-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, D2V0VapxxCGG/KI7n/ptFal0ZBFBUQYwH3seevU87niGN/bnWJsRpbPMVsDaKd8N KvNIuF9pls6IRt0JhoqJxg== 0000841501-05-000016.txt : 20050811 0000841501-05-000016.hdr.sgml : 20050811 20050811170323 ACCESSION NUMBER: 0000841501-05-000016 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050630 FILED AS OF DATE: 20050811 DATE AS OF CHANGE: 20050811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OWENS MORTGAGE INVESTMENT FUND A CALIF LTD PARTNERSHIP CENTRAL INDEX KEY: 0000841501 STANDARD INDUSTRIAL CLASSIFICATION: MORTGAGE BANKERS & LOAN CORRESPONDENTS [6162] IRS NUMBER: 680023931 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-17248 FILM NUMBER: 051017811 BUSINESS ADDRESS: STREET 1: 2221 OLYMPIC BLVD STREET 2: P O BOX 2308 CITY: WALNUT CREEK STATE: CA ZIP: 94595 BUSINESS PHONE: 925-280-5393 MAIL ADDRESS: STREET 1: 2221 OLYMPIC BLVD STREET 2: P O BOX 2308 CITY: WALNUT CREEK STATE: CA ZIP: 94595 FORMER COMPANY: FORMER CONFORMED NAME: OWENS MORTGAGE INVESTMENT FUND DATE OF NAME CHANGE: 19940902 FORMER COMPANY: FORMER CONFORMED NAME: OWENS MORTGAGE INVESTMENT FUND II DATE OF NAME CHANGE: 19920703 10-Q 1 omif10q0605.htm OMIF 10-Q AT 6/30/05 - EXHIBIT 10

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM l0-Q

Quarterly Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, 2005

Commission file number 000-17248

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership
(Exact Name of Registrant as Specified In Its Charter)

	California (State or other jurisdiction of incorporation or organization)		68-0023931 (I.R.S. Employer Identification No.)
	2221 Olympic Boulevard Walnut Creek, California (Address of principal executive offices)		94595 (Zip Code)
	(925) 935-3840 Registrant's telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

		Page
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	23
Item 4.	Controls and Procedures	24

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	24
Item 4.	Submission of Matters to a Vote of Security Holders	24
Item 5.	Other Information	24
Item 6.	Exhibits	25

	Exhibit 10
	Exhibit 31.1
	Exhibit 31.2
	Exhibit 32

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership

Consolidated Balance Sheets

June 30, 2005 and December 31, 2004

	(UNAUDITED) June 30 2005		December 31 2004
ASSETS
Cash and cash equivalents	$	8,898,284	$	9,008,819
Loans secured by trust deeds, net of allowance for
losses of $4,450,000 in 2005 and $4,100,000 in 2004		257,153,994		254,331,902
Interest and other receivables		5,012,615		3,196,324
Due from affiliate		14,931		62,257
Real estate held for sale, net of allowance for losses
of $660,000 in 2005 and 2004		8,730,112		9,034,578
Real estate held for investment, net of accumulated depreciation
and amortization of $1,681,420 in 2005 and $1,282,430 in 2004		23,423,889		23,322,740


	$	303,233,825	$	298,956,620

LIABILITIES AND PARTNERS’ CAPITAL
LIABILITIES:
Accrued distributions payable	$	541,046	$	546,219
Due to general partner		2,630,004		672,940
Accounts payable and accrued liabilities		480,825		459,700
Note payable		10,500,000		9,728,973
Note and interest payable to general partner		1,218,443		1,102,895


Total Liabilities		15,370,318		12,510,727


Minority interest		176,744		178,597


PARTNERS’ CAPITAL (units subject to redemption):
General partner		2,833,165		2,815,190
Limited partners		284,853,598		283,452,106


Total Partners’ Capital		287,686,763		286,267,296


	$	303,233,825	$	298,956,620

The accompanying notes are an integral part of these financial statements.

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership

Consolidated Statements of Income
For the Three and Six Months Ended June 30, 2005 and 2004 (Unaudited)

	For the Three Months Ended				For the Six Months Ended
	June 30 2005		June 30 2004		June 30 2005		June 30 2004
REVENUES:
Interest income on loans secured by trust deeds	$	7,942,567	$	6,756,302	$	14,601,041	$	13,826,018
Gain on sale of real estate		548,286		325,478		644,439		433,310
Rental and other income from real estate properties		1,035,917		1,016,231		2,043,634		1,604,060
Other income		112,477		15,331		182,948		40,550

Total revenues		9,639,247		8,113,342		17,472,062		15,903,938


EXPENSES:
Management fees to general partner		3,155,903		1,496,345		4,295,321		2,332,052
Servicing fees to general partner		159,754		166,472		316,485		339,887
Carried interest to general partner		4,439		--		12,741		--
Administrative		12,000		11,100		24,000		22,200
Legal and accounting		238,331		87,941		359,405		174,732
Rental and other expenses on real estate properties		921,969		944,832		1,955,161		1,875,052
Interest expense		161,790		269,594		385,986		555,890
Minority interest		3,875		68,102		1,747		67,953
Provision for loan losses		--		--		350,000		--
Provision for losses on real estate held for sale, net		--		--		--		--
Recovery of bad debts		--		--		--		(100,000	)
Other		27,847		36,091		57,085		56,347

Total expenses		4,685,908		3,080,477		7,757,931		5,324,113

Net income	$	4,953,339	$	5,032,865	$	9,714,131	$	10,579,825


Net income allocated to general partner	$	49,023	$	49,922	$	96,136	$	104,856


Net income allocated to limited partners	$	4,904,316	$	4,982,943	$	9,617,995	$	10,474,969


Net income allocated to limited partners
per weighted average limited partnership unit	$	.02	$	.02	$	.03	$	.04


Weighted average limited partnership units		284,855,000		281,650,000		284,637,000		281,662,000

The accompanying notes are an integral part of these financial statements.

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, 2005 and 2004
(UNAUDITED)

	June 30 2005			June 30 2004
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	9,714,131		$	10,579,825
Adjustments to reconcile net income
to net cash provided by operating activities:
Gain on sale of real estate properties		(644,439	)		(433,310	)
Provision for loan losses		350,000			--
Depreciation and amortization		398,990			177,178
Changes in operating assets and liabilities:
Interest and other receivables		(1,816,291	)		945,890
Due from affiliate		47,326			39,224
Accounts payable and accrued liabilities		21,125			195,927
Due to general partner		1,957,064			(164,823	)
Interest payable to general partner		115,548			--

Net cash provided by operating activities		10,143,454			11,339,911


CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in loans secured by trust deeds		(57,576,063	)		(82,536,797	)
Principal collected on loans		170,040			303,528
Loan payoffs		45,573,931			55,137,549
Sales of loans to third parties		8,660,000			--
Investment in real estate properties		(1,292,989	)		(1,610,776	)
Net proceeds from disposition of real estate properties		1,741,755			3,057,165
Minority interest in limited liability companies		(1,853	)		67,953

Net cash used in investing activities		(2,725,179	)		(25,581,378	)


CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of partnership units		199,982			451,110
Accrued distributions payable		(5,173	)		(4,582	)
Repayments on note payable		(9,728,973	)		(101,203	)
Proceeds from origination of note payable		10,500,000			--
Net advances on line of credit		--			24,843,755
Partners’ cash distributions		(3,276,667	)		(3,453,052	)
Partners’ capital withdrawals		(5,217,979	)		(7,683,818	)

Net cash (used in) provided by financing activities		(7,528,810	)		14,052,210


Net decrease in cash and cash equivalents		(110,535	)		(189,257	)

Cash and cash equivalents at beginning of period		9,008,819			6,632,997


Cash and cash equivalents at end of period	$	8,898,284		$	6,443,740


Supplemental Disclosures of Cash Flow Information
Cash paid during the period for interest	$	269,187		$	492,334

The accompanying notes are an integral part of these financial statements.

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership

Notes to Consolidated Financial Statements

June 30, 2005

(1)

Summary of Significant Accounting Policies

In the opinion of the management of Owens Mortgage Investment Fund, a California Limited Partnership, (the “Partnership”) the accompanying unaudited financial statements contain all adjustments, consisting of normal, recurring adjustments, necessary to present fairly the financial information included therein. These financial statements should be read in conjunction with the audited financial statements included in the Partnership’s Form 10-K for the fiscal year ended December 31, 2004 filed with the Securities and Exchange Commission. The results of operations for the three and six month periods ended June 30, 2005 are not necessarily indicative of the operating results to be expected for the full year.

Basis of Presentation

The consolidated financial statements include the accounts of the Partnership and its majority-owned limited liability companies. All significant inter-company transactions and balances have been eliminated in consolidation.

(2)

Loans Secured by Trust Deeds and Allowance for Loan Losses

Loans secured by trust deeds as of June 30, 2005 and December 31, 2004 are as follows:

	2005
Income-producing properties	$	168,843,710	159,885,572
Construction		45,371,652	66,934,856
Unimproved land		47,173,632	31,396,474
Residential		215,000	215,000


	$	261,603,994	258,431,902


First mortgages	$	259,774,220	256,372,106
Second mortgages		1,829,774	2,059,796


	$	261,603,994	258,431,902

Scheduled maturities of loans secured by trust deeds as of June 30, 2005 and the interest rate sensitivity of such loans are as follows:

	Fixed Interest Rate
Year ending June 30:
2005 (past maturity)	$	57,457,557	1,600,000	59,057,557
2006		65,294,890	159,598	65,454,488
2007		85,451,881	--	85,451,881
2008		15,964,353	--	15,964,353
2009		5,401,929	784,774	6,186,703
2010		--	--	--
Thereafter (through 2014)		814,026	28,674,986	29,489,012


	$	230,384,636	31,219,358	261,603,994

The following is a schedule by geographic location of loans secured by trust deeds as of June 30, 2005 and December 31, 2004:

	June 30, 2005 Balance			December 31, 2004 Balance
Arizona	$	27,699,326	10.59%	$	27,699,326	10.72%
California		140,890,441	53.86%		157,309,967	60.87%
Colorado		7,651,355	2.92%		--	--
Hawaii		15,300,000	5.85%		15,300,000	5.92%
Idaho		1,684,972	0.64%		1,721,726	0.67%
North Carolina		18,715,000	7.15%		18,715,000	7.24%
Nevada		11,748,484	4.49%		9,087,254	3.51%
South Carolina		3,301,509	1.26%		3,301,509	1.28%
Texas		2,635,000	1.01%		2,635,000	1.02%
Utah		21,088,587	8.06%		11,620,593	4.50%
Virginia		3,185,000	1.22%		3,185,000	1.23%
Washington		7,704,320	2.95%		7,856,527	3.04%

	$	261,603,994	100.00%	$	258,431,902	100.00%

Variable rate loans use as indices the one-year, five-year and 10-year Treasury Constant Maturity Index (3.40%, 3.77% and 4.00%, respectively, as of June 30, 2005), the prime rate (6.00% as of June 30, 2005) or the weighted average cost of funds index for Eleventh or Twelfth District savings institutions (2.62% and 2.35%, respectively, as of June 30, 2005) or include terms whereby the interest rate is adjusted at a specific later date. Premiums over these indices have varied from 250–650 basis points depending upon market conditions at the time the loan is made.

A majority of the loans made or invested in by the Partnership require the borrower to make a “balloon payment” on the principal amount upon maturity of the loan. To the extent that a borrower has an obligation to pay mortgage loan principal in a large lump sum payment, its ability to satisfy this obligation may be dependent upon its ability to sell the property, obtain suitable refinancing or otherwise raise a substantial cash amount. As a result, these loans involve a higher risk of default than fully amortizing loans.

As of June 30, 2005, the Partnership has commitments to advance additional funds to borrowers of construction and other loans in the total amount of approximately $54,656,000.

As of June 30, 2005 and December 31, 2004, the Partnership held a participation interest in five and three loans, respectively, with a total principal balance of $31,434,000 and $24,237,000, respectively, with an unrelated mortgage investment group (the “Lead Lender”) that originated the loans with the borrowers. The General Partner receives the payments on these participated loans from the Lead Lender. Pursuant to Intercreditor Agreements between the Partnership and the Lead Lender on all of the participated loans as of June 30, 2005 and December 31, 2004, the Partnership is guaranteed its share of interest and principal prior to any other investors participating in such loans. The Partnership received full repayment from the Lead Lender on one of these loans with a principal balance of $14,000,000 in July 2005 (subsequent to quarter end).

During the three months ended June 30, 2005 and 2004, the Partnership refinanced loans totaling $0 and $23,465,000, respectively.

The scheduled maturities for 2005 include approximately $59,058,000 of loans that are past maturity as of June 30, 2005, of which $7,702,000 represents loans for which interest payments are delinquent over 90 days.

The Partnership’s investment in impaired loans that were delinquent in monthly payments greater than ninety days was approximately $17,329,000 and $37,319,000 as of June 30, 2005 and December 31, 2004, respectively. In addition, the Partnership’s investment in impaired loans that were past maturity (delinquent in principal) but current in monthly payments was approximately $51,356,000 and $23,583,000 as of June 30, 2005 and December 31, 2004, respectively. Of these impaired loans, approximately $1,100,000 and $4,000,000, respectively, were in the process of foreclosure and $5,182,000 involved borrowers who were in bankruptcy as of June 30, 2005 and December 31, 2004. Of the total past maturity loans, four loans with a total principal balance of approximately $27,923,000 were paid off in full in July 2005.

The Partnership’s investment in loans delinquent in monthly payments greater than ninety days consisted of six and seven loans as of June 30, 2005 and December 31, 2004, respectively. As of June 30, 2005, $10,727,000 of the delinquent loans has a specific related allowance for credit losses totaling $1,800,000. There is a non-specific allowance for credit losses of $2,650,000 for the remaining delinquent balance and for other loans. The Partnership has discontinued the accrual of interest on all loans that are delinquent in monthly payments greater than ninety days.

Changes in the allowance for loan losses for the three and six months ended June 30, 2005 and 2004 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Balance, beginning of period	$	4,450,000	$	4,100,000	$	4,100,000	$	4,100,000
Provision		--		--		350,000		(100,000	)
Recovery of bad debts		--		--		--		100,000
Charge-off		--		--		--		--

Balance, end of period	$	4,450,000	$	4,100,000	$	4,450,000	$	4,100,000

The General Partner believes that the allowance for estimated loan losses is appropriate as of June 30, 2005. The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectibility of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect the borrower’s ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Impairment is measured on a loan by loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the underlying collateral.

As of June 30, 2005 and December 31, 2004, the Partnership’s loans secured by deeds of trust on real property collateral located in Northern California totaled approximately 44% ($114,205,000) and 53% ($135,867,000), respectively, of the loan portfolio. The Northern California region (which includes the following counties and all counties north: Monterey, Fresno, Kings, Tulare and Inyo) is a large geographic area which has a diversified economic base. The ability of borrowers to repay loans is influenced by the economic strength of the region and the impact of prevailing market conditions on the value of real estate.

(3)

Real Estate Held for Sale

Real estate held for sale includes the following components as of June 30, 2005 and December 31, 2004:

	2005		2004
Real estate held for sale	$	5,546,278	$	5,964,839
Investment in limited liability companies		3,183,834		3,069,739

	$	8,730,112	$	9,034,578

During the quarter ended June 30, 2005, three lots (two including houses) located in a manufactured home subdivision development located in Ione, California (that was acquired by the Partnership through foreclosure in 1997) were sold for $415,000, resulting in a gain to the Partnership of approximately $99,000.

During the quarter ended June 30, 2005, a parcel of unimproved land located in Sacramento, California that was acquired by the Partnership through foreclosure in 1994 was sold for $1,000,000, resulting in a gain to the Partnership of approximately $449,000.

On June 10, 2005, the Partnership entered into a Purchase and Sale Agreement whereby the General Partner has agreed to sell the Partnership’s industrial land located in San Jose, California to a third party for $5,196,750, subject to certain conditions. The book value of this property was approximately $3,026,000 as of June 30, 2005. The sale is not expected to close until late 2005 or early 2006.

Changes in the allowance for real estate losses for the three and six months ended June 30, 2005 and 2004 were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Balance, beginning of period	$	660,000	$	660,000	$	660,000	$	660,000
Provision		--		--		--		--
Recovery of bad debts		--		--		--		--
Charge-off		--		--		--		--

Balance, end of period	$	660,000	$	660,000	$	660,000	$	660,000

Investment in Limited Liability Companies

Oregon Leisure Homes, LLC

Oregon Leisure Homes, LLC (OLH) was formed in 2001 between the Partnership and an unrelated developer for the purpose of improving, marketing and selling eight condominium units located in Lincoln City, Oregon, which were acquired by the Partnership via a deed in lieu of foreclosure. OLH also purchased two houses located by the ocean in Lincoln City for renovation and ultimate sale.

During the six months ended June 30, 2005, a Membership Interest Redemption Agreement was executed by the members of OLH whereby the Partnership’s joint venture partner was removed as a member of OLH for no consideration. There was no financial impact from the joint venture partner’s removal, as the joint venture partner did not have an equity balance in OLH. OLH will continue as a single member LLC and will continue to be consolidated into the Partnership’s consolidated balance sheet and statement of income.

During the quarter ended June 30, 2005, the Partnership advanced an additional $21,000 to OLH for continued operation and marketing of the condominium units that are for sale and received repayment of advances of $5,000 from collections on notes receivable. The net loss to the Partnership was approximately $10,000 and $8,000 for the quarters ended June 30, 2005 and 2004, respectively. The Partnership’s investment in OLH real property was approximately $1,122,000 as of June 30, 2005 and December 31, 2004.

Dation, LLC

Dation, LLC (Dation) was formed in 2001 between the Partnership and an unrelated developer for the purpose of developing and selling lots in a mobile home park located in Lake Charles, Louisiana, which were acquired by the Partnership via a deed in lieu of foreclosure. The Partnership has been advancing funds to Dation as needed. The Partnership is co-manager of Dation and receives 50% of the profits and losses after payment of all interest on the original loan is made to the Partnership and priority return on partner contributions is allocated at the rate of 12% per annum.

The net operating loss to the Partnership was approximately $43,000 and $30,000 during the quarters ended June 30, 2005 and 2004, respectively. The Partnership’s total investment in Dation was approximately $2,062,000 and $1,948,000 as of June 30, 2005 and December 31, 2004, respectively.

(4)

Real Estate Held for Investment

Real estate held for investment as of June 30, 2005 is comprised of a retail property located in Greeley, Colorado held within 720 University, LLC (see below), a light industrial building located in Paso Robles, California, a commercial building located in Roseville, California, and an assisted living facility located in Monterey, California held with Bayview Gardens, LLC (see below) and is comprised of the following as of June 30, 2005 and December 31, 2004:

	2005
Land	$	5,690,620		5,690,620
Buildings		14,888,991		14,699,653
Improvements		3,869,095		3,513,323
Other		656,603		701,574

		25,105,309		24,605,170

Less: Accumulated depreciation
and amortization		(1,681,420	)	(1,282,430	)

	$	23,423,889		23,322,740

Bayview Gardens, LLC

The Partnership is the sole member of a limited liability company, Bayview Gardens, LLC (Bayview), which operates an assisted living facility located in Monterey, California (which was obtained by the Partnership via a deed in lieu of foreclosure on a first mortgage loan in June 2004). Under the terms of a lease agreement between the Partnership and Bayview, the assisted living facility is leased to Bayview by the Partnership and the facility is managed by an outside property manager. The net loss to the Partnership from Bayview operations was $26,000 and $57,000 for the three months ended June 30, 2005 and 2004, respectively. The assets, liabilities, income and expenses of Bayview have been consolidated into the accompanying consolidated balance sheet and income statement of the Partnership. The Partnership’s investment in Bayview real property was approximately $6,082,000 and $6,166,000 as of June 30, 2005 and December 31, 2004, respectively.

720 University, LLC

The Partnership has an investment in a limited liability company, 720 University, LLC (720 University), which owns a commercial retail property located in Greeley, Colorado. The Partnership receives 65% of the profits and losses in 720 University after priority return on partner contributions is allocated at the rate of 10% per annum. The assets, liabilities, income and expenses of 720 University have been consolidated into the accompanying consolidated balance sheet and income statement of the Partnership. The net income to the Partnership was approximately $47,000 and $311,000 during the quarters ended June 30, 2005 and 2004, respectively. The minority interest of the joint venture partner of approximately $177,000 and $179,000 as of June 30, 2005 and December 31, 2004, respectively, is reported in the accompanying consolidated balance sheets. The Partnership’s investment in 720 University property and improvements was approximately $15,008,000 and $14,830,000 as of June 30, 2005 and December 31, 2004, respectively.

(5)

Transactions with Affiliates

In consideration of the management services rendered to the Partnership, Owens Financial Group, Inc. (“OFG”), the General Partner, is entitled to receive from the Partnership a management fee payable monthly, subject to a maximum of 2.75% per annum of the average unpaid balance of the Partnership’s mortgage loans.

All of the Partnership’s loans are serviced by OFG, in consideration for which OFG receives up to .25% per annum of the unpaid principal balance of the loans.

OFG, at its sole discretion may, on a monthly basis, adjust the management and servicing fees as long as they do not exceed the allowable limits calculated on an annual calendar year basis. Even though the fees for a particular month may exceed one-twelfth of the maximum limits, at the end of the calendar year the sum of the fees collected for each of the twelve months may not exceed the stated limits. Management fees amounted to approximately $3,156,000 and $1,496,000 for the three months ended June 30, 2005 and 2004, respectively, and $4,295,000 and $2,332,000, for the six months ended June 30, 2005 and 2004, respectively. Service fees amounted to approximately $160,000 and $166,000 for the three months ended June 30, 2005 and 2004, respectively, and $316,000 and $340,000 for the six months ended June 30, 2005 and 2004, respectively.

The maximum servicing fees were paid to the General Partner during the three and six months ended June 30, 2005 and 2004.

The maximum management fee permitted under the Partnership Agreement is 2 ¾% per year of the average unpaid balance of mortgage loans. For the years 2002, 2003 and 2004 and the six months ended June 30, 2005 (annualized), the management fees were 1.46%, 2.01%, 2.00% and 3.35% of the average unpaid balance of mortgage loans, respectively. As of June 30, 2005, the management fees to the general partner on an annualized basis exceed the 2 ¾% maximum pursuant to the Partnership Agreement. However, these fees will be adjusted during the succeeding six months so that they will not exceed 2 ¾% for 2005.

Pursuant to the Partnership Agreement, OFG receives all late payment charges from borrowers on loans owned by the Partnership, with the exception of loans participated with outside entities. The amounts paid to or collected by OFG for such charges totaled approximately $215,000 and $27,000 for the three months ended June 30, 2005 and 2004, respectively. In addition, the Partnership remits other miscellaneous fees to OFG, which are collected from loan payments, loan payoffs or advances from loan principal (i.e. funding, demand and partial release fees). Such fees remitted to OFG totaled approximately $5,000 and $20,000 for the three months ended June 30, 2005 and 2004, respectively.

OFG originates all loans the Partnership invests in and receives loan origination fees from borrowers. Such fees earned by OFG amounted to approximately $1,063,000 and $1,488,000 on loans originated of approximately $53,163,000 and $46,586,000 for the three months ended June 30, 2005 and 2004, respectively.

OFG is reimbursed by the Partnership for the actual cost of goods and materials used for or by the Partnership and obtained from unaffiliated entities and the actual cost of services of non-management and non-supervisory personnel related to the administration of the Partnership (subject to certain limitations in the Partnership Agreement). The amounts reimbursed to OFG by the Partnership during the three months ended June 30, 2005 and 2004 were $12,000 and $11,000, respectively.

(6)

Note Payable

During the six months ended June 30, 2005, 720 University obtained a new note with a financial institution in the amount of $10,500,000, which fully repaid its existing note payable with a balance of $9,729,000 as of December 31, 2004 and provided additional funds for property improvements. The note payable is secured by 720 University’s retail development in Greeley, Colorado. The note requires monthly interest payments until March 1, 2010 at a fixed rate of 5.07% per annum. Commencing April 1, 2010, monthly payments of $56,816 will be required, with the balance of unpaid principal due on March 1, 2015. Interest expense for the three months ended June 30, 2005 and 2004 was approximately $135,000 and $96,000, respectively. The note contains certain covenants, which the Company has complied with as of June 30, 2005.

(7)

Note and Interest Payable to General Partner

The Partnership has a note and interest payable to the General Partner in the total amount of approximately $1,218,000 as of June 30, 2005 as a result of the deed in lieu of foreclosure obtained on a Partnership loan in June 2004. The principal balance of the original note of $907,000 bears interest at the rate of 12.0% per annum, which is to be accrued and deferred until maturity. The Partnership recorded interest expense on this note of approximately $27,000 during the quarter ended June 30, 2005. The note was amended at the time of foreclosure in June 2004 to extend the maturity date to June 8, 2009 and specifies that upon the sale of the property the General Partner will only be paid the amounts due under the note after the Partnership recovers its basis in the property at the time of sale including any capital improvements made after foreclosure, but excluding the amounts capitalized pursuant to this note.

(8)

Line of Credit Payable

The Partnership has a line of credit agreement with a group of banks, which provides interim financing on mortgage loans invested in by the Partnership. The amount of credit available under this line of credit is $40,000,000. There was no balance outstanding on the line of credit as of June 30, 2005 and December 31, 2004. Interest expense for the quarters ended June 30, 2005 and 2004 was approximately $0 and $174,000, respectively. Borrowings under the line of credit bear interest at the bank’s prime rate, which was 6.0% as of June 30, 2005. The line of credit expired on July 31, 2005 but an extension was granted until September 30, 2005 while the line of credit agreement is being revised. The Partnership does not expect any significant changes to the terms of the existing agreement. The Partnership is required to maintain non-interest bearing accounts in the total amount of $500,000 with two of the banks. The agreement requires the Partnership to meet certain financial covenants including profitability, minimum tangible net worth and total liabilities to tangible net worth. The Partnership has complied with these covenants as of June 30, 2005.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

Some of the information in this Form 10-Q may contain forward-looking statements. Such statements can be identified by the use of forward-looking words such as “may,” “will,” “expect,” “anticipate,” “estimate,”“continue” or other similar words. These statements discuss future expectations, contain projections of results of operations or of financial conditions or state other forward-looking information. When considering such forward-looking statements you should keep in mind the risk factors and other cautionary statements in the Partnership’s Form 10-Q. Although management of the Partnership believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, there are certain factors, in addition to these risk factors and cautioning statements, such as general economic conditions, local real estate conditions, adequacy of reserves, or weather and other natural occurrences that might cause a difference between actual results and those forward-looking statements.

Results of Operations

Overview

Owens Mortgage Investment Fund (the “Partnership”) is a California Limited Partnership that invests in mortgage loans on real property located in the United States that are primarily originated by the Partnership’s general partner, Owens Financial Group, Inc. (the “General Partner”).

The Partnership’s primary objective is to generate monthly income from its investment in mortgage loans. The Partnership’s focus is on making mortgage loans to owners and developers of real property whose financing needs are often not met by traditional mortgage lenders. These include borrowers that traditional lenders may not normally consider because of perceived credit risks based on ratings or experience levels, and borrowers who require faster loan decisions. One of the Partnership’s competitive advantages is the ability to approve loan applications more quickly than traditional lenders.

The Partnership will originate loans secured by very diverse property types. In addition, the Partnership will occasionally lend to borrowers whom traditional lenders will not normally lend to because of a variety of factors including their credit ratings and/or experience. Due to these factors, the Partnership may make mortgage loans that are riskier than mortgage loans made by commercial banks and other institutional lenders. To compensate for those potential risks, the Partnership seeks to make loans at higher interest rates and with more protection from the underlying real property, such as with lower loan to value ratios.

The Partnership’s operating results are affected primarily by:

the amount of cash available to invest in mortgage loans;

the level of real estate lending activity in the markets serviced;

the ability to identify and lend to suitable borrowers;

the interest rates the Partnership is able to charge on loans;

the level of delinquencies on mortgage loans;

the level of foreclosures and related loan and real estate losses experienced; and

the income or losses from foreclosed properties prior to the time of disposal.

Economic developments in the United States have generally been favorable in 2005 and this has led to expansion and gains in employment. The strengthening demand has been a factor contributing to the rise in inflation. These and other factors led the Federal Reserve Board to increase the discount rate by a total of 2.00% between June 2004 and June 2005. The rates that the Partnership charges on its loans have not been significantly impacted by these actions. The weighted average interest rate on Partnership loans increased only slightly from 11.10% as of June 30, 2004 to 11.15% as of June 30, 2005. Presently, the General Partner does not expect a noticeable increase in the rates charged on Partnership loans, primarily because there continues to be a shortage of suitable loans for the Partnership to invest in.

This shortage is primarily due to there being fewer commercial real estate transactions suitable for Partnership lending and increased competition from other lenders. In general, the decrease in real estate transactions is partially due to real estate values having increased in relation to other investments. During the late 1990’s, investors had diverse investment opportunities, such as the stock market and fixed income investments. However, the stock market has become very volatile in the last few years, and yields on fixed income investments have dropped significantly. Owners of commercial real estate are therefore less willing to dispose of their properties, since alternative investments are not currently as attractive.

Increased competition has come both from existing lenders whose lending previously was not in competition with the Partnership, and from newly organized lenders seeking greater returns. Due to their unusually large supplies of cash available for lending, banks and other institutional lenders have become more aggressive in placing loans. Additionally, those investors seeking to maximize returns in a market with fewer acceptable investment opportunities have been willing to take increased risk to obtain ostensibly higher yields. These factors have resulted in decreased lending opportunities for the Partnership.

The Partnership has been closed to most new limited partner investments since September 2001, because there have not been enough suitable mortgage loans for the Partnership to invest in to remain fully invested for a sustained period of time. Remaining closed to new investments reduces the Partnership’s excess cash that would be invested in lower yielding investments, which could have the effect of decreasing the yield paid to existing limited partners.

If economic conditions worsen in 2005, the Partnership could experience an increase in loan defaults. This would reduce the amount of income available for distribution to partners. Recognizing this risk, the General Partner seeks to maintain a low loan-to-value ratio on its loans, which as of June 30, 2005 was 56.1% on a weighted average basis. By this means, the Partnership hopes to protect the value of loans in the event of default by providing an increased equity position in underlying real property in the event of foreclosure. Nevertheless, no assurances can be given that a marked increase in loan defaults accompanied by a rapid decline in real estate values will not have a material adverse effect on the Partnership’s financial condition and operating results.

Historically, the General Partner has focused its operations on California and certain Western states. Because the General Partner has a significant degree of knowledge with respect to the real estate markets in such states, it is likely most of the Partnership’s loans will be concentrated in such states. As of June 30, 2005, 43.7% of loans were secured by real estate in Northern California, while 10.6% and 10.2% were secured by real estate in Arizona and Southern California, respectively. Such geographical concentration creates greater risk that any downturn in such local real estate markets could have a significant adverse effect upon results of operations.

Commercial real estate markets in segmented areas of California have continued to prosper. However, there can be no assurance that the rate of growth will continue to increase in the future. A worsening economy, particularly in California and Arizona, could adversely affect the Partnership’s operating results.

Summary of Financial Results

		Three Months Ended June 30,				Six Months Ended June 30,
		2005		2004		2005	2004
Total revenues	$	9,639,247	$	8,113,342	$	17,472,062		15,903,938
Total expenses		4,685,908		3,080,477		7,757,931		5,324,113


Net income	$	4,953,339	$	5,032,865	$	9,714,131	$	10,579,825


Net income allocated to limited partners	$	4,904,316	$	4,982,943	$	9,617,995	$	10,474,969


Net income allocated to limited partners
per weighted average limited partnership
unit	$	.02	$	.02	$	.03	$	.04


Annualized rate of return to limited
partners (1)		6.9%		7.1%		6.8%		7.4%


Distribution per partnership unit (yield) (2)		7.3%		7.3%		7.3%		7.3%


Weighted average limited partnership units		284,855,000		281,650,000		284,637,000		281,662,000

(1)

The annualized rate of return to limited partners is calculated based upon the net income allocated to limited partners per weighted average limited partnership unit as of June 30, 2005 and 2004 divided by the number of months during the period and multiplied by twelve (12) months.

(2)

Distribution per partnership unit (yield) is the annualized average of the monthly yield paid to the partners for the periods indicated. The monthly yield is calculated by dividing the total monthly cash distribution to partners by the prior month’s ending partners’ capital balance.

Three and Six Months Ended June 30, 2005 Compared to Three and Six Months Ended June 30, 2004

Total Revenues

Interest income on loans secured by trust deeds increased $1,186,000 (17.6%) and $775,000 (5.6%) during the three and six months ended June 30, 2005, as compared to the same periods in 2004, primarily due to the collection of approximately $1,399,000 in delinquent interest on one loan in July 2005, which was accrued as of June 30, 2005. This increase was partially offset by a decrease in the weighted average balance of the loan portfolio of 4.0% and 6.9% during the three and six months ended June 30, 2005, respectively, as compared to 2004.

Gain on sales of real estate increased $223,000 (68.5%) and $211,000 (48.7%) during the three and six months ended June 30, 2005, respectively, as compared to the same periods in 2004, due primarily to the sale of unimproved land located in Sacramento, California in June 2005, which resulted in a gain of approximately $449,000 to the Partnership. See further discussion under “Real Estate Properties Held for Sale and Investment”below.

Rental and other income from real estate properties increased $440,000 (27.4%) during the six months ended June 30, 2005, as compared to the same period in 2004, primarily as a result of revenue earned from the assisted living facility located in Monterey, California that was obtained via foreclosure in June 2004.

Other income increased $97,000 (633.7%) and $142,000 (351.2%) during the three and six months ended June 30, 2005, respectively, as compared to the same periods in 2004, due primarily to interest earned on money market investments. The Partnership has had an increased amount of cash and equivalents available during 2005 (as compared to 2004) as a result of loan payoffs in excess of loan originations. In addition, the yields on these investments have increased in 2005.

Total Expenses

Management fees to the General Partner increased $1,660,000 (110.9%) and $1,963,269 (84.2%) during the three and six months ended June 30, 2005, respectively, as compared to the same periods in 2004, due primarily to the unexpected collection of delinquent interest of approximately $1,399,000 on one loan at the time of payoff in July 2005. See “Financial Condition – Loan Portfolio” below.

Management fees to the General Partner are paid pursuant to the Partnership Agreement and are determined at the sole discretion of the General Partner. The maximum management fee permitted under the Partnership Agreement is 2 ¾% per year of the average unpaid balance of mortgage loans. For the years 2002, 2003 and 2004 and the six months ended June 30, 2005 (annualized), the management fees were 1.46%, 2.01%, 2.00% and 3.35% of the average unpaid balance of mortgage loans, respectively. As of June 30, 2005, the management fees to the general partner on an annualized basis exceed the 2 ¾% maximum pursuant to the Partnership Agreement. However, these fees will be adjusted during the succeeding six months so that they will not exceed 2 ¾% for 2005.

In determining the management fees and hence the yield to the partners, the General Partner may consider a number of factors, including current market yields, delinquency experience, uninvested cash and real estate activities. The General Partner expects that the management fees that it receives from the Partnership will vary in amount and percentage from period to period, and it is highly likely that the General Partner will again receive less than the maximum management fees in the future. However, if the General Partner chooses to take the maximum allowable management fees in the future, the yield paid to limited partners may be reduced.

Legal and accounting expenses increased $150,000 (171.0%) and $185,000 (105.7%) during the three and six months ended June 30, 2005, respectively, as compared to the same period in 2004, due to accounting and consulting expenses incurred in the effort to ready the Partnership’s internal controls for audit pursuant to Rule 404 of the Sarbanes-Oxley Act. The Partnership will continue to incur accounting and consulting related fees that have not been incurred in the past as this project is continued into 2005 and 2006.

Rental and other expenses on real estate properties increased $80,000 (4.3%) during the six months ended June 30, 2005, as compared to the same period in 2004, primarily due to the acquisition through foreclosure of the assisted living facility located in Monterey, California in June 2004.

Interest expense decreased $108,000 (40.0%) and $170,000 (30.6%) during the three and six months ended June 30, 2005, respectively, as compared to the same periods in 2004, primarily because the Partnership did not utilize its line of credit to invest in loans secured by trust deeds during the six months ended June 30, 2005.

The increase in the provision for loan losses of $350,000 during the six months ended June 30, 2005, as compared to the same periods in 2004, was the result of an analysis performed on the loan portfolio, which resulted in an increase in the specific allowance for one delinquent loan in the amount of $500,000 and a decrease in the general allowance for loan losses in the amount of $150,000 during 2005.

Financial Condition

June 30, 2005 and December 31, 2004

Loan Portfolio

The number of Partnership mortgage investments decreased from 87 to 84, and the average loan balance increased from $2,970,000 to $3,114,000 between December 31, 2004 and June 30, 2005.

Approximately $17,329,000 (6.6%) and $37,319,000 (14.4%) of the loans invested in by the Partnership were more than ninety days delinquent in monthly payments as of June 30, 2005 and December 31, 2004, respectively. In addition, the Partnership’s investment in loans that were past maturity (delinquent in principal) but current in monthly payments was approximately $51,356,000 (19.6%) and $23,583,000 (9.3%) as of June 30, 2005 and December 31, 2004, respectively. Of the impaired loans, approximately $1,100,000 (0.4%) and $4,000,000 (1.5%), respectively, were in the process of foreclosure, and approximately $5,182,000 (2.0%) and $5,182,000 (2.0%), respectively, involved loans to borrowers who were in bankruptcy. Of the total past maturity loans as of June 30, 2005, four loans in the total amount of approximately $27,923,000 were paid off in full subsequent to quarter end.

Loans in the process of foreclosure as of December 31, 2004 consisted of two loans, of which one loan in the amount of $2,900,000 was sold to an unrelated party during the six months ended June 30, 2005 and one loan in the amount of $1,100,000 is still delinquent and in foreclosure.

One loan in the amount of $14,000,000 which had entered into foreclosure during the six months ended June 30, 2005 was paid off in full in July 2005 (subsequent to quarter end). The Partnership had participated in this loan with an unrelated mortgage investment group (the “Lead Lender”) that originated the loan with the borrower. The Partnership and the Lead Lender were subject to an Intercreditor Agreement, the terms of which stated that the Partnership was guaranteed its share of interest and principal prior to any other lenders participated in the loan. The loan had been past maturity since March 31, 2004 and, at the time of payoff, the Lead Lender paid the Partnership all of its delinquent interest on its portion of the loan of approximately $1,399,000. This interest has been accrued in the Partnership’s statement of income as of June 30, 2005.

Loans involving borrowers in bankruptcy as of December 31, 2004 consisted of two loans, which are still in bankruptcy as of June 30, 2005.

As of June 30, 2005 and December 31, 2004, the Partnership held the following types of mortgages:

	June 30, 2005		December 31, 2004
1st Mortgages	$	259,774,220		256,372,106
2nd Mortgages		1,829,774		2,059,796

Total	$	261,603,994	$	258,431,902


Income Producing Properties	$	168,843,710	$	159,885,572
Construction		45,371,652		66,934,856
Unimproved Land		47,173,632		31,396,474
Residential		215,000		215,000

Total	$	261,603,994	$	258,431,902

The Partnership’s investment in construction loans decreased by $21,563,000 (32.2%) during the six months ended June 30, 2005. This decrease was primarily due to partial payoffs received on two loans in the total amount of approximately $9,443,000, the completion of construction (and reclassification to “Income Producing”) on properties securing three loans in the total amount of approximately $24,213,000, net of the origination of two new construction loans and additional construction advances on existing loans of approximately $12,093,000 during the six month period.

The Partnership’s investment in loans on unimproved land increased by $15,777,000 (50.3%) during the six months ended June 30, 2005. This increase was primarily the result of the origination of six new loans secured by unimproved land in the total amount of approximately $19,186,000 during the six months ended June 30, 2005, net of repayments on three loans in the total amount of approximately $3,409,000. All of the loans secured by unimproved land are first trust deeds.

Changes in the allowance for loan losses for the six months ended June 30, 2005 and 2004 were as follows:

	2005		2004
Balance, beginning of period	$	4,100,000	$	4,100,000
Provision		350,000		(100,000	)
Recovery of bad debts		--		100,000
Charge-off		--		--

Balance, end of period	$	4,450,000	$	4,100,000

Real Estate Properties Held for Sale and Investment

As of June 30, 2005, the Partnership held title to nine properties that were foreclosed on or purchased by the Partnership since 1997 in the amount of $32,154,000 (including properties held in four limited liability companies), net of allowance for losses of $660,000 and accumulated depreciation and amortization of $1,681,000. As of June 30, 2005, properties held for sale total $8,730,000 and properties held for investment total $23,424,000. When the Partnership acquires property by foreclosure, it typically earns less income on those properties than could be earned on mortgage loans and may not be able to sell the properties in a timely manner. Three of the Partnership’s nine properties do not currently generate revenue.

On June 10, 2005, the Partnership entered into a Purchase and Sale Agreement whereby the General Partner agreed to sell the Partnership’s industrial land located in San Jose, California to a third party for $5,196,750, subject to certain conditions. The book value of this property was approximately $3,026,000 as of June 30, 2005. The sale is not expected to close until late 2005 or early 2006. The Purchase and Sale Agreement is included as Exhibit 10 to this Form 10-Q.

Changes in the allowance for real estate losses for the six months ended June 30, 2005 and 2004 were as follows:

	2005		2004
Balance, beginning of period	$	660,000	$	660,000
Provision		--		--
Deductions for real estate sold		--		--

Balance, end of period	$	660,000	$	660,000

Interest and Other Receivables

Interest and other receivables increased from approximately $3,196,000 as of December 31, 2004 to $5,013,000 as of June 30, 2005 ($1,817,000 or 56.8%) due primarily to the accrual of past due interest of approximately $1,399,000 on a loan which was paid off in full in July 2005 (subsequent to quarter end). See “Financial Condition – Loan Portfolio” above.

Due from Affiliate

Due from affiliate decreased from approximately $62,000 as of December 31, 2004 to $15,000 ($47,000 or 76.0%) as of June 30, 2005 due to the collection of accrued interest from Dation as a result of lot and house sales during the six month period.

Due to General Partner

Due to General Partner increased from approximately $673,000 as of December 31, 2004 to approximately $2,630,000 as of June 30, 2005 ($1,957,000 or 290.8%) due to increased management fees owed to the General Partner as of June 30, 2005. See “Results of Operations” above.

Note Payable

Note payable increased from approximately $9,728,000 as of December 31, 2004 to $10,500,000 ($772,000 or 7.9%) as of June 30, 2005 due to the refinancing of the note payable securing the Greeley, Colorado retail complex. The existing note payable was fully paid with the proceeds and the additional funds from the new loan have been used for property improvements.

Note and Interest Payable to General Partner

Note and interest payable to general partner increased from approximately $1,103,000 as of December 31, 2004 to $1,218,000 ($115,000 or 10.5%) as of June 30, 2005 due to the accrual of interest on the note payable to the general partner during the six month period.

Asset Quality

There is no precise method of predicting specific losses or amounts that ultimately may be charged off on specific loans or on segments of the loan portfolio. The conclusion that a Partnership loan may become uncollectible, in whole or in part, is a matter of judgment. Although lenders such as banks and savings and loans are subject to regulations that require them to perform ongoing analyses of their loan portfolios (including analyses of loan to value ratios, reserves, etc.), and to obtain current information regarding its borrowers and the securing properties, the Partnership is not subject to these regulations and has not adopted these practices. Rather, management of the General Partner, in connection with the quarterly closing of the accounting records of the Partnership and the preparation of the financial statements, evaluates the Partnership’s mortgage loan portfolio. The allowance for loan losses is established through a provision for loan losses based on the General Partner’s evaluation of the risk inherent in the Partnership’s loan portfolio and current economic conditions. Such evaluation, which includes a review of all loans on which full collectibility may not be reasonably assured, considers among other matters:

prevailing economic conditions;

the Partnership’s historical loss experience;

the types and dollar amounts of loans in the portfolio;

borrowers’ financial condition and adverse situations that may affect the borrowers’ ability to pay;

evaluation of industry trends;

review and evaluation of loans identified as having loss potential; and

estimated net realizable value or fair value of the underlying collateral.

Based upon this evaluation, a determination is made as to whether the allowance for loan losses is adequate to cover potential losses of the Partnership. Additions to the allowance for loan losses are made by charges to the provision for loan losses. Loan losses deemed to be uncollectible are charged against the allowance for loan losses. Recoveries of previously charged off amounts are credited to the allowance for loan losses. During the six months ended June 30, 2005, the Partnership increased the allowance for loan losses in the amount of $350,000. As of June 30, 2005, management believes that the allowance for loan losses of $4,450,000 and the allowance for real estate losses in the amount of $660,000 are adequate.

Liquidity and Capital Resources

Sales of Units to investors, portfolio loan payoffs, and advances on the Partnership’s line of credit provide the capital for new mortgage investments. If general market interest rates were to rise substantially, investors might turn to interest-yielding investments other than Partnership Units, which would reduce the liquidity of the Partnership and its ability to make additional mortgage investments to take advantage of the generally higher interest rates. In contrast, a significant increase in the dollar amount of loan payoffs and additional limited partner investments without the origination of new loans of the same amount would increase the liquidity of the Partnership. This increase in liquidity could result in a decrease in the yield paid to limited partners as the Partnership would be required to invest the additional funds in lower yielding, short term investments. With the exception of the reinvestment of distributions, the Partnership has been closed to most new limited partner investments since September 2001, because there have not been enough suitable mortgage investments to allow the Partnership to remain fully invested in loans for a sustained period of time.

Withdrawal percentages have been 6.64%, 5.45%, 3.32%, 4.42%, 4.47% and 3.67% (annualized) for the years ended December 31, 2000, 2001, 2002, 2003, 2004 and the six months ended June 30, 2005, respectively. These percentages are the annual average of the limited partners’ capital withdrawals in each calendar quarter divided by the total limited partner capital as of the end of each quarter.

The limited partners may withdraw, or partially withdraw, from the Partnership and obtain the return of their outstanding capital accounts at $1.00 per Unit within 61 to 91 days after written notices are delivered to the General Partner, subject to the following limitations, among others:

No withdrawal of Units can be requested or made until at least one year from the date of purchase of those Units, other than Units received under the Partnership’s Reinvested Distribution Plan.

Any such payments are required to be made only from net proceeds and capital contributions (as defined) during said 91-day period.

A maximum of $100,000 per partner may be withdrawn during any calendar quarter.

The General Partner is not required to establish a reserve fund for the purpose of funding such payments.

No more than 10% of the total outstanding limited partnership interests may be withdrawn during any calendar year except upon a plan of dissolution of the Partnership.

The Partnership may incur indebtedness for the purpose of investing in mortgage loans, among other things. The total amount of indebtedness incurred by the Partnership cannot exceed the sum of 50% of the aggregate fair market value of all Partnership loans. The Partnership has executed a line of credit agreement with a bank, which provides interim financing on mortgage loans invested in by the Partnership. The amount of credit available under this line of credit is $40,000,000. There was no balance outstanding on the line of credit as of June 30, 2005. The Partnership also has a note payable with a bank through its investment in 720 University, LLC with a balance of $10,500,000 as of June 30, 2005.

Contingency Reserves

The Partnership maintains cash, cash equivalents and marketable securities as contingency reserves in an aggregate amount of 2% of the limited partners’ capital accounts to cover expenses in excess of revenues or other unforeseen obligations of the Partnership. Although the General Partner believes that contingency reserves are adequate, it could become necessary for the Partnership to sell or otherwise liquidate certain of its investments to cover such contingencies on terms which might not be favorable to the Partnership.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The following table contains information about the Partnership’s interest earning assets and interest bearing liabilities as of June 30, 2005. The presentation for each category aggregates the assets and liabilities by their maturity dates for maturities occurring in each of the years 2006 through 2010 and aggregates the information for all maturities arising after 2010. The carrying values of the assets and liabilities approximate their fair values as of June 30, 2005.

Interest Earning Assets and Interest Bearing Liabilities,
Aggregated by Maturity Date
Twelve Months Ended June 30,

	2006		2007		2008		2009		2010		Thereafter		Total
Interest earning
assets:
Money market
accounts	$	8,255,332		--		--		--		--		--	$	8,255,332
Average interest rate		2.7%		--		--		--		--		--		2.7%
Loans secured by
trust deeds	$	124,512,045	$	85,451,881	$	15,964,353	$	6,186,703	$	--	$	29,489,012	$	261,603,994
Average interest rate		11.7%		11.2%		10.7%		9.1%		--		9.8%		11.2%

Interest bearing
liabilities:
Note payable to bank		--		--		--		--	$	37,360	$	10,462,640	$	10,500,000
Average interest rate		--		--		--		--		5.1%		5.1%		5.1%
Note payable to
general partner		--		--		--	$	1,218,443		--		--	$	1,218,443
Average interest rate		--		--		--		12.0%		--		--		12.0%

Market Risk

Market risk is the exposure to loss resulting from changes in interest rates, equity prices and real estate values. The Partnership does not have any assets or liabilities denominated in foreign currencies. The Partnership does not hedge or otherwise seek to manage interest rate risk. The Partnership does not enter into risk sensitive instruments for trading purposes.

The majority of the Partnership’s mortgage loans (88.1% as of June 30, 2005) earn interest at fixed rates. All of the mortgage loans are held for investment purposes and are held until maturity. None of the mortgage loans have prepayment penalties. Changes in interest rates may affect the value of the Partnership’s investment in mortgage loans and the rates at which the Partnership reinvests funds obtained from loan repayments and new capital contributions from limited partners. As interest rates increase, although the interest rates the Partnership obtains from reinvested funds will generally increase, the value of the Partnership’s existing loans at fixed rates will generally tend to decrease. As interest rates decrease, the amounts becoming available to the Partnership for investment due to repayment of Partnership loans may be invested at lower rates than the Partnership had been able to obtain in prior investments, or than the rates on the repaid loans.

The Partnership’s note payable bears interest at a fixed rate of 5.07%. The Partnership’s line of credit payable (currently no balance outstanding) bears interest at a variable rate, tied to the bank’s prime rate. As a result, the Partnership’s primary market risk exposure is to changes in interest rates, which will affect the interest cost of outstanding amounts on the note and line of credit payable.

Item 4. Controls and Procedures

Within the 90 days prior to the date of this report, the General Partner of the Partnership carried out an evaluation, under the supervision and with the participation of the General Partner’s management, including the General Partner’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Partnership’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer of the General Partner concluded that the Partnership’s disclosure controls and procedures are effective. There were no significant changes in the Partnership’s internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

The Partnership is not presently involved in any material legal proceedings.

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

(a)

Information responsive to Item 1.01 of Form 8-K (Entry into a Material Definitive Agreement):

On June 10, 2005, as amended on August 9, 2005, the Partnership entered into a Purchase and Sale Agreement and Escrow Instructions (Agreement), as Seller of a property owned by it in San Jose, California (the Property), with Venture Development Corporation, an unrelated California corporation, as Buyer. The Agreement is filed as Exhibit 10 to this Form 10-Q.

The following is a brief description of the terms and conditions of the Agreement that are material to the Partnership.

The buyer has deposited $50,000 with the escrow holder, First American Title Guaranty Company, which is applicable to the purchase price of $5,196,750, subject to specific conditions to the completion of Buyer’s purchase and close of escrow on the sale on the Property.

The first of such conditions is the acceptance by Buyer of the preliminary title report, which has been delivered to the Buyer by the escrow holder in accordance with the Agreement. It contains exceptions to which the Buyer has made specific objections or are pending Buyer’s satisfaction as part of its feasibility study. As of August 11, 2005, the Partnership has elected to cure or delete certain of the exceptions in the preliminary title report at its expense. By the expiration of the feasibility period (see below), the Buyer may elect in writing to either waive the other objections to the preliminary title report and proceed with its purchase or terminate the Agreement, in which case it will be entitled to return of its deposit with the escrow holder.

The second condition to the Buyer’s purchase is that the Agreement, as amended on August 9, 2005, gives the Buyer until September 8, 2005 (the feasibility period) to conduct specified studies and investigations of the Property and the complete discretionary right to approve or disapprove of the economic feasibility of the Property within the feasibility period. Written disapproval of the Property by the Buyer within that period terminates the Agreement, and under the Agreement the deposit would be refunded to the Buyer. Acceptance in writing by the Buyer or the failure of the Buyer to give written notice of disapproval, within the feasibility period, would satisfy the condition, and the Buyer in order to proceed with its purchase would then be required to make an additional deposit of $50,000 to the escrow holder, within the feasibility period. If such deposit is not made, the second condition is not satisfied, and the Agreement would automatically terminate, with the buyer entitled to return of its initial deposit.

The purchase by the Buyer is also conditioned upon the furnishing of an acceptable title insurance policy at or before the close of escrow and upon the Partnership having complied with its obligations under the Agreement. The Partnership expects those conditions to be satisfied and the escrow to close. Prior to the close of escrow, the Buyer is required to deliver the balance of the purchase price in cash to the escrow holder.

Close of escrow will occur upon five days prior written notice from the Buyer, but must occur not later than ninety days following the satisfaction, or waiver in writing by the Buyer, of the feasibility period condition described above. The close of escrow is also subject to the satisfaction or waiver of the other conditions to Buyer’s purchase summarized above, and to the material performance, or written waiver by the Partnership, of all obligations of the Buyer required by the Agreement.

The Agreement contains other material provisions, such as representations and warranties of the Partnership, including with respect to its lack of knowledge of any hazardous materials on the Property, that are customary in similar types of real property purchase and sale agreements. The Agreement provides that the representations and warranties of the Partnership extend to the date that is six months following the close of escrow.

(b)

None

Item 6. Exhibits

(a)

Exhibits

Sixth Amended and Restated Agreement of Limited Partnership, incorporated by reference to Exhibit A to Post-Effective Amendment No. 5 to the Form S-11 Registration Statement No. 333-69272 filed April 17, 2005 and declared effective on April 28, 2005.

3.1

Certificate of Limited Partnership – Form LP-1: Filed July 1, 1984*

3.2

Amendment to Certificate of Limited Partnership – Form LP-2: Filed March 20, 1987*

3.3

Amendment to Certificate of Limited Partnership – Form LP-2: Filed August 29, 1989*

3.4

Amendment to Certificate of Limited Partnership – Form LP-2: Filed October 22, 1992*

3.5

Amendment to Certificate of Limited Partnership – Form LP-2: Filed January 24, 1994*

3.6

Amendment to Certificate of Limited Partnership – Form LP-2: Filed December 30, 1994*

4.1

Sixth Amended and Restated Limited Partnership Agreement, incorporated by reference to Exhibit A to Post-Effective Amendment No. 5 to the Form S-11 Registration Statement No. 333-69272 filed April 17, 2005 and declared effective on April 28, 2005.

4.2

Subscription Agreement and Power of Attorney, incorporated by reference to Exhibit B to Post-Effective Amendment No. 5 to the Form S-11 Registration Statement No. 333-69272 filed April 17, 2005 and declared effective on April 28, 2005.

Purchase and Sale Agreement and Escrow Instructions

31.1

Section 302 Certification of William C. Owens

31.2

Section 302 Certification of Bryan H. Draper

Certifications Pursuant to U.S.C. 18 Section 1350

*Previously filed under Amendment No. 3 to Registration Statement No. 333-69272 and incorporated herein by this reference.

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.

	Dated: August 11, 2005		OWENS MORTGAGE INVESTMENT FUND, a California Limited Partnership By: Owens Financial Group, Inc., General Partner
	Dated: August 11, 2005		By: /s/ William C. Owens William C. Owens, President
	Dated: August 11, 2005		By: /s/ Bryan H. Draper Bryan H. Draper, Chief Financial Officer
	Dated: August 11, 2005		By: /s/ Melina A. Platt Melina A. Platt, Controller

EX-10 2 omif10q0605ex10.htm OMIF 10-Q AT 6/30/05

EXHIBIT 10

PURCHASE AND SALE AGREEMENT
AND
ESCROW INSTRUCTIONS

To:

First American Title Guaranty Company
1737 North First Street
San Jose, CA 95112
Attn: Jessica Avila

Dated: June 10, 2005
(“Effective Date”)
Escrow No. NCS-170827-SC

OWENS MORTGAGE INVESTMENT FUND, a California limited partnership (“Seller”) is the owner of that certain real property, consisting of approximately fourteen and two tenths (14.2) acres of land, located at 455 Piercy Road in the City of San Jose, County of Santa Clara, State of California, more particularly described in Exhibit A attached hereto (APN 678-93-030), together with all easements and appurtenances thereto, including, without limitation, all rights owned by Seller to any mineral rights, water and water rights, wells, well rights and well permits, sanitary and/or storm sewer capacity or reservations and rights under utility agreements with any applicable governmental or quasi-governmental entities or agencies with respect to the providing of utility services to such land referred to above (collectively, the “Property”). This Purchase and Sale Agreement and Escrow Instructions (“Agreement”) nominates First American Title Guaranty Company as escrow holder (“Escrow Holder”) and constitutes an agreement by which Seller agrees to sell and VENTURE DEVELOPMENT CORPORATION, a California corporation, dba Venture Corporation (“Buyer’) agrees to buy, the Property on the terms and conditions set forth herein.

ARTICLE 1
RECITALS

The Recitals described above are true and correct and are incorporated into the body of this Agreement as though fully set forth herein.

ARTICLE 2
DEPOSITS

2.1 Deposits. The total amount of Deposits to be paid by Buyer under this Agreement is equal to One Hundred Thousand Dollars ($100,000.00) and such Deposits shall be paid in the following manner:

2.1.1 First Deposit. Within three (3) business days following the date this Agreement is fully executed by Buyer and Seller, Buyer shall deliver to Escrow Holder, the sum of Fifty Thousand Dollars ($50,000) (the “First Deposit”) as a deposit on account of the Purchase Price. Escrow Holder shall place the First Deposit in an interest-bearing account, with interest accruing for the benefit of and payable to Buyer. The interest accrued on the First Deposit while in escrow shall be deemed part of the First Deposit for purposes of this Agreement. If the conditions set forth in Sections 4.1.1 and 4.1.2 are satisfied (or waived in writing by Buyer) on or before the expiration of the Feasibility Period referred to in Section 4.1.2 below, then the First Deposit shall be released by Escrow Holder to Seller and shall become non-refundable to Buyer (except as otherwise provided in this Agreement). In the event any of the conditions set forth in Section 4.1.1 or Section 4.1.2 are not satisfied (or waived in writing by Buyer) within the time periods prescribed by such Sections, then this Agreement shall be deemed terminated and the First Deposit shall be promptly returned to Buyer.

2.1.2 Second Deposit. Upon satisfaction (or waiver in writing by Buyer in its sole discretion) of the conditions set forth in Sections 4.1.1 and 4.1.2 below, Buyer shall deliver to Escrow Holder for immediate release to Seller, an additional sum of Fifty Thousand Dollars ($50,000) (the “Second Deposit”) as a deposit on account of the Purchase Price. Upon delivery of such Second Deposit with Escrow Holder (and immediate release of the same to Seller), such Second Deposit (and First Deposit referred to above) shall become non-refundable to Buyer (except as otherwise provided in this Agreement). If Buyer does not deposit the Second Deposit with Escrow Holder on or before the expiration of the Feasibility Period, then the condition set forth in Section 4.1.2 shall be deemed unsatisfied, this Agreement shall automatically terminate, all rights and obligations of the parties hereunder (except for those that expressly survive the termination of this Agreement) shall cease, and Buyer shall be entitled to the prompt return of its First Deposit.

For purposes of this Agreement, the First Deposit and the Second Deposit, or so much thereof as have been released to Seller and/or deposited into escrow pursuant to the terms of this Agreement, are sometimes referred to herein as the “Deposits.”

2.2 Liquidated Damages. IF, AFTER SATISFACTION OF THE CONDITIONS IN SECTION 4.1.1 AND SECTION 4.1.2 BELOW, BUYER BREACHES ITS OBLIGATION TO PURCHASE THE PROPERTY UNDER THIS AGREEMENT (AND SUCH BREACH IS NOT CURED OR REMEDIED BY BUYER WITHIN THE APPLICABLE CURE OR GRACE PERIOD SET FORTH IN SECTION 10.2 BELOW), THEN SELLER SHALL BE RELEASED FROM THE OBLIGATION TO SELL THE PROPERTY TO BUYER AND SELLER SHALL BE ENTITLED TO RECEIVE AND RETAIN THE DEPOSITS AS LIQUIDATED DAMAGES PURSUANT TO SECTIONS 1671, 1676 AND 1677 OF THE CALIFORNIA CIVIL CODE. THE PARTIES AGREE THAT IT WOULD BE IMPRACTICAL OR EXTREMELY DIFFICULT TO FIX ACTUAL DAMAGES IF BUYER MATERIALLY BREACHES ITS OBLIGATION TO PURCHASE THE PROPERTY HEREUNDER, THAT THE FOREGOING AMOUNT IS A REASONABLE ESTIMATE OF THESE DAMAGES, AND THAT SELLER SHALL RECEIVE AND RETAIN THE DEPOSITS AS SELLER’S SOLE AND EXCLUSIVE REMEDY IN THE EVENT OF SUCH MATERIAL BREACH OF BUYER’S OBLIGATION TO PURCHASE THE PROPERTY HEREUNDER. SELLER HEREBY WAIVES THE REMEDY OF SPECIFIC PERFORMANCE WITH RESPECT TO ANY DEFAULT OR BREACH BY BUYER OF ITS OBLIGATION TO PURCHASE THE PROPERTY. THE PARTIES WITNESS THEIR AGREEMENT TO THESE LIQUIDATED DAMAGES AND WAIVER OF SPECIFIC PERFORMANCE PROVISION BY INITIALING THIS SECTION 2.2 BELOW.

BUYER’S INITIALS: MH SELLER’S INITIALS:WCO

ARTICLE 3
PURCHASE PRICE

3.1 Purchase Price. The purchase price for the Property (“Purchase Price”), subject to adjustment as provided in Section 3.1.1 below, shall be Five Million One Hundred Ninety-six Thousand Seven Hundred Fifty Dollars ($5,196,750). The entire purchase price less the First Deposit and the Second Deposit shall be paid in cash or its equivalent to the Escrow Holder at least one (1) business days prior to the Close of Escrow. At close of escrow hereunder, Buyer agrees to take title the Property subject to non-delinquent assessments encumbering the Property in the approximate amount of Two and 94/100 Dollars ($2.94) per square foot of land included within the Property.

3.1.1 Adjustment to Purchase Price. In the event Buyer is ready, willing and able to close escrow hereunder prior to the Outside Closing Date (as defined in Section 7.1 below), then the Purchase Price referred to in Section 3.1 above shall be reduced by One Thousand Dollars ($1,000.00) per day for each day prior to the Outside Closing Date that escrow actually closes hereunder.

3.2 Payment. The Purchase Price referred to in Section 3.1, as the same may be adjusted pursuant to Section 3.1.1 above, shall be payable in cash by Buyer to Seller at the close of escrow. The Deposits referred to above shall be credited against the Purchase Price at the close of escrow.

ARTICLE 4
CONDITIONS OF ESCROW

4.1 Buyer’s Condition to Closing. The close of escrow on the Property and Buyer’s obligation under this Agreement to purchase the Property shall be subject to the satisfaction, at or prior to the times stated herein, of the following conditions, with Buyer to retain the right to waive in writing, in whole or in part, any of the following conditions at or prior to the time stated herein for satisfaction of such conditions or for approval or disapproval by Buyer, as provided in Section 4.2, below:

4.1.1 Preliminary Title Report Seller shall deliver, or cause Escrow Holder to deliver, to Buyer a current preliminary title report (“Title Report”) showing the state of the title of the Property, and the underlying title exceptions referenced in the Title Report. Buyer shall have until forty-five (45) days following the Effective Date of this Agreement to notify Seller, in writing, of Buyer’s objection to any exceptions contained in the Title Report (hereinafter referred to as “Title Defects”). If Buyer does not approve or disapprove such Title Report in writing within such forty-five (45) day period referred to in the immediately preceding sentence, then Buyer shall be deemed to have approved all of the title exceptions set forth in the Title Report. Upon receipt of notification of any Title Defects by Buyer within the forty-five (45) day period referred to above, Seller shall have ten (10) days within which to elect, by written notice to Buyer, to remove or delete from the title to be conveyed to Buyer any Title Defects objected to by Buyer. If Seller so elects to cure such Title Defects, Seller shall remove the same from record title at Seller’s expense at or prior to the close of escrow and such Title Defects shall not constitute Approved Exceptions (defined below). If Seller does not elect to cure such Title Defects, Seller shall notify Buyer thereof in writing within said ten (10) day period, and Buyer may elect by giving written notice to Seller on or before the expiration of the Feasibility Period referred to below to either waive its objections and proceed with the purchase of the Property pursuant to the terms of this Agreement or terminate this Agreement and all of its obligations, in which event Buyer shall be entitled to the immediate return of Buyer’s Deposits and all interest accrued thereon while in escrow. If Buyer fails to make such election prior to the expiration of the Feasibility Period, then Buyer shall be deemed to have elected not to terminate this Agreement as provided in the immediately preceding sentence. The preceding to the contrary notwithstanding, Seller hereby agrees that on or before the Closing under this Agreement, Seller shall remove, or cause to be removed, from the condition of title to the Property, at no cost to Buyer, all deeds of trust and other monetary liens (other than non-delinquent real property taxes and assessments) affecting the Property, or any portion thereof. Without having to object in writing to the same during the forty-five (45) day title objection period set forth above, Seller acknowledges that Buyer objects to any and all deeds of trust or mortgages affecting the Property, and Seller agrees to cause the same to be removed from title to the Property on or prior to the close of escrow hereunder and the same shall not be Approved Exceptions. For purposes of this Agreement, the term “Approved Exceptions” shall mean those title exceptions applicable to the Property which are accepted by Buyer in accordance with the terms of this Section 4.1.1.

4.1.2 Feasibility Study. Buyer shall have until the date which is sixty (60) days following the Effective Date (the “Feasibility Period”) (i) to conduct such studies or investigations of the Property (including, without limitation, Phase I and Phase II environmental assessments and geotech studies, subject to Section 6.1 hereof) or matters pertaining thereto as Buyer may deem appropriate to ascertain whether the Property is suited to Buyer’s intended purposes, including any studies or investigations necessary to ascertain the likelihood of obtaining governmental approval of Buyer’s entitlement applications and such other governmental approvals or permits as may be necessary to enable Buyer to develop the Property for Buyer’s intended purposes; (ii) to determine in Buyer’s sole discretion whether the development of the Property is economically feasible, and (iii) to deliver to Seller its written notice of approval or disapproval of the feasibility of the Property. If Buyer gives Seller written notice of disapproval on or before the expiration of the Feasibility Period, then this condition shall be deemed unsatisfied this Agreement and all rights and obligations of Seller and Buyer under this Agreement (except for those rights or obligations that expressly survive termination of this Agreement) shall terminate and the Deposits made by Buyer hereunder, together with all interest accrued thereon while held in escrow, shall be promptly refunded to Buyer. If Buyer does not give Seller written notice of disapproval (or gives Seller written notice of approval) on or before the expiration of the Feasibility Period, then the condition set forth in this Section 4.1.2 shall be satisfied.

4.1.3 Title Policy. At the close of escrow on the Property, Escrow Holder shall be willing and prepared to issue to Buyer a CLTA standard form owner’s policy of title insurance (or, if Buyer so elects and Buyer has obtained a survey or updated survey, if necessary, an ALTA owner’s extended coverage policy of title insurance (Form 1970)) in the amount of the Purchase Price insuring Buyer’s fee title to the Property, subject only to current, non-delinquent real property taxes and assessments, the Approved Exceptions applicable to the Property, and the standard printed exclusions to title in a CLTA standard form or ALTA extended coverage, as the case may be, owner’s policy of title insurance.

4.1.4 Performance by Seller. Seller shall have performed, observed and complied with all of the covenants and agreements required by this Agreement to be performed, observed and complied with by it within the applicable time period set forth herein for performance of such covenants and agreements (or if Seller breaches or defaults in the performance of any such obligation required to be performed by Seller (other than its obligation to deliver title to the Property to Buyer at the close of escrow in the condition required by this Agreement), then Seller shall have cured the same within the five (5) day cure or grace period set forth in Section 10.1 below). The representations and warranties of Seller set forth in Section 8.1 shall be true and correct as of the date escrow is to close hereunder.

4.2 Failure of Buyer’s Conditions to Closing. If any of the conditions in Sections 4.1.1 or 4.1.2 are not satisfied (or waived in writing by Buyer) at or prior to the time prescribed herein, then this Agreement shall terminate, all rights, obligations and liabilities of Seller and Buyer under this Agreement (except those that expressly survive termination of this Agreement) shall cease and the Deposits made by Buyer hereunder, together with all interest accrued thereon while held in escrow, shall be promptly refunded to Buyer. If the condition set forth in Section 4.1.3 above is not satisfied on or before the close of escrow hereunder (or waived in writing by Buyer), then Buyer shall have the right to terminate this Agreement upon written notice to Seller and, in the event of such termination, all rights, obligations and liabilities of Seller and Buyer under this Agreement (except those that expressly survive termination of this Agreement) shall cease and Seller shall cause the entire Deposits made by Buyer under this Agreement, together with all interest accrued thereon while in escrow, to be promptly refunded to Buyer; provided, however, if such condition in Section 4.1.3 above fails as a result of a breach or default by Seller hereunder, then the provisions of Section 10.1 shall apply). If any of the conditions described in Section 4.1.4 are not satisfied or waived in writing by Buyer on or prior to the time prescribed herein, then, in addition to its rights and remedies described in Section 10.1 below, Buyer shall have the right to terminate this Agreement upon written notice to Seller and, in the event of such termination, Seller shall cause the entire Deposits made by Buyer under this Agreement and all interest accrued thereon while in escrow, to be promptly refunded to Buyer.

4.3 Seller’s Conditions to Closing The close of escrow on the Property and Seller’s obligation under this Agreement to sell the Property shall be subject to the satisfaction, at or prior to the time stated herein, of the following condition, with Seller to retain the right to waive in writing, in whole or in part, the condition set forth in Section 4.3.1 at or prior to the time stated herein for satisfaction of such condition:

4.3.1 Performance by Buyer. Buyer shall have performed, observed and complied in all material respects with all of the covenants and agreements required by this Agreement to be performed, observed and complied with by it within the applicable time period set forth herein for performance of such covenants and agreements (or if Buyer breaches or defaults in the performance of any such obligation required to be performed by Buyer, then Buyer shall have cured the same within the applicable cure or grace period set forth in Section 10.2 below).

4.4 Failure of Seller’s Conditions to Closing. If the condition in Section 4.3.1 is not satisfied or waived in writing by Seller at or prior to the time prescribed herein, and Seller is not in default or breach of any of its obligations hereunder, then Seller may terminate this Agreement by written notice to Buyer and, in such event, all rights, obligations and liabilities of Seller and Buyer under this Agreement (except those that expressly survive termination or expiration of the term of this Agreement) shall cease and the Deposits shall be released to Seller as liquidated damages.

ARTICLE 5
GOVERNMENT ENTITLEMENTS AND APPROVALS

5.1 Development Approvals. In the event Buyer acquires fee title to the Property, Buyer intends to construct, or cause to be constructed, a commercial or industrial condominium development project thereon (“Proposed Development”). Prior to the close of escrow hereunder, Buyer may pursue the following in connection with the Proposed Development (collectively, “Development Approvals”): (i) the approval by the City of San Jose of site and architectural approval, and (ii) such other permits or approvals as may be required in order to undertake the Proposed Development. Buyer makes no representations or warranties that it will be able to obtain any or all of the Development Approvals. Upon expiration of the Feasibility Period, any Development Approvals shall not be a condition of Buyer’s obligations to complete the purchase of the Property which is the subject of this Agreement.

5.2 Cooperation by Seller. Following the date of this Agreement, Buyer shall have the right to make application for the Development Approvals referred to above and Seller agrees to reasonably cooperate with Buyer, at no cost to Seller, in Buyer’s efforts to obtain such Development Approvals. Such cooperation of Seller shall include, without limitation, the prompt execution, acknowledgment and delivery of any applications, permits, maps and other documents pertinent thereto as may be necessary for Buyer to obtain the Development Approvals, provided Buyer shall pay all costs and expenses related thereto. Seller agrees that it will not take any action adverse to, or in opposition of, the Proposed Development and/or Buyer’s efforts to obtain the Development Approvals referred to above.

ARTICLE 6
RIGHT OF ENTRY; DELIVERY OF DOCUMENTS

6.1 Right of Entry. From the Effective Date and throughout the escrow period, Buyer and its designated agents, employees, consultants and other representatives shall be granted a right of entry on the Property to perform, at no cost to Seller, such soil, groundwater, engineering and geological tests, environmental and other physical inspections and to make such other reports as Buyer shall deem appropriate and for any other purpose related to Buyer’s investigation or proposed development of the Property; provided, however, that Buyer shall repair any damage to the Property caused by Buyer’s entry and activities thereon. Any such entry shall be at reasonable times.

Prior to any entry onto the Property by Buyer of its designated agents, employees, consultants, or other representatives at any time prior to the close of escrow hereunder, Buyer shall procure and maintain in effect during the executory period of this Agreement, commercial general liability insurance. Seller shall be named as an additional insured on such liability insurance policy, and such liability insurance shall provide for liability limits in the minimum amount of One Million Dollars ($1,000,000) combined single limit. Seller agrees that Buyer may carry the above-described liability insurance policy under a blanket policy of insurance. Promptly following written request made by Seller to Buyer, Buyer shall present to Seller a certificate of insurance evidencing the aforementioned insurance maintained by Buyer in accordance with the terms hereof.

Buyer shall defend, indemnify and hold Seller harmless from and against any bodily injuries property damage, costs and expenses (including, without limitation, reasonable attorney’s fees) suffered or incurred by Seller arising out of Buyer’s and/or its agents’ activities on the Property; provided, however, that Buyer shall have no liability to Seller for any lien, loss, claim, damage, injury, liability or expense arising as a result of, or related to, any pre-existing dangerous or defective condition existing in, on or under the Property or Buyer’s discovery of any hazardous or toxic materials on or about the Property in connection with its investigation of the Property.

6.2 Delivery of Due Diligence Documents. Seller does not have in its possession or control any documents, records, maps, reports or agreements described below. Seller shall deliver to Buyer any additional documents or information described in this Section 6.2 that come into Seller’s possession after the Effective Date and during the escrow period:

6.2.1 All surveys, grading plans, geologic, soils, groundwater and environmental reports and engineers’ and consultants’ plans, reports and studies which Seller may have prepared or caused to be prepared (or received) relating to the Property;

6.2.2 All drawings, plans and specifications with respect to any site or other improvements located on the Property; and grading permits and building permits, including any amendments thereto, if any, related to the improvements on the Property;

6.2.3 All tentative, parcel and/or final maps, variances, conditional use permits, entitlements and any other governmental approved or processed documents relative to the subdivision, development, land use and/or occupancy of the Property, if any;

6.2.4 Copies of real property tax bills for fiscal years 2004 and 2005;

6.2.5 Letter from the declarant or any architectural control committee, as applicable, under any covenants, conditions and restrictions stating that the Property is in full compliance with the covenants, conditions and restrictions; and

6.2.6 All development agreements, design guidelines, permits, approvals, commitments or memoranda of understanding, including any amendments thereto, issued to or entered into by Seller with any governmental entity relating to the development of the Property, the submissions or applications of Seller to any governmental entity with respect to such approvals and all correspondence, letters, notices and other documents or writings from any governmental or quasi-governmental entities related to the Property.

6.3 In the event that Buyer terminates this Agreement pursuant to the terms and conditions hereof for any reason (other than as a result of a breach or default by Seller hereunder), then, in such event, Buyer shall, within three (3) business days following the cancellation of the Agreement, deliver to Seller, at no cost to Seller and without representation or warranty by Seller, a copy of all documents generated by Buyer or its agents which are referenced in Paragraph 6.2, above (“Buyer’s Work Product”) and Seller shall have the right to use said Buyer’s Work Product. The preceding to the contrary notwithstanding, Buyer shall no obligation to deliver to Seller any financial projections, marketing studies, architectural plans or other proprietary documents or documents protected by the attorney-client privilege. Seller hereby agrees to indemnify, defend and hold harmless Buyer from and against any and all damages, losses, liabilities, claims, actions, causes of action, costs and expenses (including, without limitation, attorneys’ fees) arising out of Seller’s or its successors or assigns use of any of Buyer’s Work Product. The obligations of Seller and Buyer under this Section 6.3 shall survive the termination of this Agreement.

ARTICLE 7
ESCROW AND ESCROW CLOSING; PRORATIONS; COSTS

7.1 Close of Escrow. Within three (3) days following the date this Agreement is fully executed by Buyer and Seller, an escrow shall be opened by Seller at First American Title Guaranty Company, 1737 North First Street, San Jose, CA 95112. Escrow shall close on the Property upon five (5) days prior written notice from Buyer to Seller; provided, however, in no event shall escrow close later than the date ninety (90) days following the satisfaction (or waiver in writing by Buyer) of the conditions set forth in Section 4.1.2 above (the “Outside Closing Date”). The close of escrow is subject to satisfaction (or waiver in writing by the applicable party for whose benefit the condition exists) of the conditions set forth in Sections 4.1 and 4.3. The close of escrow on the Property (or closing of escrow or Closing) shall mean the recordation of the grant deed for the Property, as described in Section 7.4. The date of closing of escrow on the Property (“Closing Date”) shall be the date on which the Grant Deed describing the Property (defined in Section 7.2) is recorded.

7.2 Deed and Payment. Seller shall deposit with Escrow Holder prior to the Closing Date, a grant deed (“Grant Deed”) in the form of Exhibit B attached hereto, incorporating the legal description of the Property and properly executed and acknowledged by Seller. At the close of escrow, fee title to the Property shall be vested in Buyer or its designee or assignee subject only to the Approved Exceptions. Seller shall also deposit with Escrow Holder prior to the Closing Date, for delivery to Buyer at closing, an Assignment (“Assignment”) in the form of Exhibit C attached hereto. The parties hereto shall instruct Escrow Holder to deliver to Seller the Purchase Price (less Seller’s share of closing costs and prorations) when (1) the conditions of Buyer’s obligation to close escrow on the Property, as specified in Section 4.1, have been either satisfied (or waived by Buyer in writing), (2) Escrow Holder has recorded the Grant Deed describing the Property and Escrow Holder is able and willing to deliver the Assignment to Buyer; and (3) Escrow Holder is prepared and willing to issue to Buyer a policy of title insurance, as described in Section 7.3.

7.3 Title Insurance. The parties hereto shall instruct Escrow Holder to provide to Buyer, at the close of escrow on the Property, a CLTA standard form owner’s policy of title insurance (or at Buyer’s election, an ALTA extended coverage owner’s policy (Form 1970)) in the amount of the Purchase Price, showing fee title to the Property, vested in Buyer subject only to the following exceptions: (1) non-delinquent real property taxes; (2) the Approved Exceptions; and (3) the standard printed exclusions from coverage in a CLTA standard form owner’s, or an ALTA extended coverage owner’s, policy of title insurance. The Property shall be free of all leases and other third party occupancy agreements as of the Closing Date. Seller shall cause any and all leases affecting the Property to be terminated or expire prior to the Closing hereunder.

7.4 Recordation and Delivery. At the close of escrow, the parties hereto shall instruct Escrow Holder to forward the Grant Deed describing the Property to the Santa Clara County Recorder for recordation and to deliver the policy of title insurance and all tax statements to Buyer at the address set forth in Article 11. Escrow Holder shall be instructed to request the Santa Clara County Recorder not to affix the amount of documentary transfer taxes on the Grant Deed but on a separate statement to be attached to the Grant Deed after recording.

7.5 Prorations The parties hereto shall instruct Escrow Holder to prorate between Buyer and Seller at close of escrow non-delinquent installments of real property taxes and assessments covering the Property for the applicable fiscal year as of such close of escrow, and City utilities (i.e. water service, sewer service and refuse collection).

7.6 Costs. County transfer taxes incurred in connection with the conveyance of the Property to Buyer shall be paid by Seller. City conveyance taxes incurred in connection with the conveyance of the Property to Buyer shall be shared equally by Seller and Buyer. The escrow fees incurred in connection with the consummation of the transaction described herein shall be borne by Seller. Seller shall pay that portion of the title insurance premium allocable to a CLTA standard form owner’s policy of title insurance and Buyer shall pay the excess premium, if applicable, associated with an ALTA extended owners’ policy of title insurance and the cost of any title insurance endorsements requested by Buyer. Recording charges and all other closing costs customarily incurred in connection with the closing of the purchase and sale transaction described herein shall be borne by the parties in accordance with the custom in Santa Clara County. Except as otherwise provided in Article XIII and Section 15.3 below, each party shall bear its own attorneys’ fees incurred in connection with the subject transaction.

7.7 Seller’s Affidavit. At or prior to the close of escrow, Seller shall execute and deposit in escrow for delivery to Escrow Holder and Buyer a Seller’s affidavit meeting the requirements of Internal Revenue Code Section 1445(b)(2), certifying that Seller is not a “foreign person” within the meaning of Internal Revenue Code Section 1445(f)(3). At or prior to the close of escrow, Seller shall also execute a California Withholding Exemption Certificate (Form 593-C or its equivalent) indicating Buyer is not required to withhold any portion of the Purchase Price at close of escrow.

ARTICLE 8
SELLER’S REPRESENTATIONS AND WARRANTIES; AS IS SALE

8.7 Seller’s Representations and Warranties. Seller makes the following representations and warranties, which are true as of the date hereof and shall be true as of the close of escrow:

8.1.1 Authority. Seller is the sole owner of the Property and the person(s) executing this Agreement on behalf of Seller are authorized to bind Seller and Seller is authorized and empowered to execute and deliver this Agreement and perform its obligations hereunder.

8.1.2 Obligations Imposed on Buyer. Seller is not aware of any representation or commitment ~~has been~~ made by Seller to any governmental authority, utility company, or school district relating to any portion of the Property, which would impose an obligation upon Buyer (i) to make any contributions or dedications of money or land, (ii) to construct, install, or maintain any improvements of a public or private nature on or off the Property, or (iii) to limit or restrict the construction of improvements on the Property to specific plans. To the best of Seller’s knowledge, there are no proposals for governmental or quasi-governmental changes to the Property or any adjacent real property.

8.1.3 Notice of Interest in Property. No written notice has been given to Seller of any threatened or pending action to establish an ownership, possessory or beneficial interest in the Property or of any proceedings which may result in the issuance of such notice, and Seller is aware of no such notice or proceedings.

8.1.4 Legal Actions Affecting the Property. There are no claims, suits, actions, or legal proceedings pending or, to the best of Seller’s knowledge, threatened which affect the Property, or any portion thereof, or Seller’s ability to perform its obligations hereunder.

8.1.5 Toxic or Hazardous Materials. To the best of Seller’s knowledge, except as otherwise set forth in any environmental reports or studies to be provided to Buyer pursuant to the provisions of the first sentence of Section 6.2 above, Seller is not aware of any Hazardous Materials on, in or under the Property. Except as otherwise set forth in any environmental reports or studies to be provided to Buyer pursuant to the provisions of the first sentence of Section 6.2 above, Seller did not cause any Hazardous Materials to be placed or released on the Property, or any portion thereof, in violation of applicable environmental laws. For purposes of this Agreement, “Hazardous Materials” shall mean any chemical, substance, waste or material which is deemed hazardous, toxic, a pollutant or a contaminant, under any federal, state or local statute, law, ordinance, rule, regulation or judicial or administrative order or decisions, now or hereafter in effect, or which has been shown to have significant adverse effects on human health or the environment. Hazardous Materials shall include, without limitation, substances defined as “hazardous substances,” “hazardous materials,” or “toxic substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. § 9601, et seq.; the Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901, et seq.; and those substances defined as “hazardous wastes” in Section 25117 of the California Health & Safety Code or as “hazardous substances” in Section 25316 of the California Health &Safety Code; in the regulations adopted and publications promulgated pursuant to such laws including Sections 66680 through 66685 of Title 22 of the California Administrative Code, Division 4, Chapter 30; and in the Hazardous Materials storage, use or discharge ordinances of Santa Clara County, if any.

8.1.6 Delivery of Documents. Seller does not have in its possession or control any documents, records, maps, reports or agreements described in Section 6.2.

8.1.7 Notice of Violations. Seller has not received any written notice that the Property is in violation of any laws, statutes, ordinances, rules, codes, or regulations regulating, affecting or governing the Property, and Seller is not aware of any such violation(s).

8.1.8 Soils. To the best of Seller’s knowledge, there are no soils or archaeological conditions on the Property adverse to its development.

8.1.9 No Defaults. Seller is not in default under any agreement affecting the Property.

8.1.10 Possessory Rights. There are no possessory rights of third parties in the Property.

8.8 Survival of Warranties. Seller shall promptly advise Buyer if Seller acquires any information which would affect the continued validity of the representations and warranties set forth in Section 8.1. If any of said representations and warranties of Seller set forth in Section 8.1 shall not be true and correct at the time the same is made or as of the close of escrow hereunder, and upon written notice of termination from Buyer to Seller on or prior to such close of escrow, this Agreement shall terminate and, in the event of such termination, the Deposits made by Buyer under this Agreement (and all interest accrued thereon while held in escrow) shall be immediately returned to Buyer. The representations and warranties of Seller set forth in Section 8.1 shall survive the close of escrow for a period of six (6) months following the closing.

8.3 As Is Sale. Prior to the close of escrow hereunder, Buyer shall have inspected and examined all aspects of the Property and its condition which Buyer believes are relevant to Buyer’s decision to purchase the Property and satisfied itself as to all matters relating to the Property. Except as specifically warranted by Seller in this Agreement, in purchasing the Property pursuant to this Agreement, Buyer is relying solely on its own investigation and inspection of the Property, and that, as between Seller and Buyer, the Property will be conveyed to and accepted by Buyer at close of escrow in its AS IS, WHERE IS condition. Buyer acknowledges and agrees that: (i) except as specifically set forth in Section 8.1, Seller has not made any representation or warranty, express or is implied, written or oral, concerning the Property or any use to which the Property may or may not be put. Buyer specifically acknowledges and agrees that Buyer is not relying on any representations or warranties of any kind whatsoever, express (other than as otherwise expressly provided in this Agreement) or implied, from Seller, its agents, employees, representatives or brokers as to any matters concerning the Property, including without limitation: (i) the quality, nature, adequacy, and physical condition of the Property and the improvements thereon, (ii) the quality, nature, adequacy, and physical condition of soils, geology and any groundwater, (iii) the existence, quality, nature, adequacy and physical condition of utilities, infrastructure and site improvements, if any, and public improvements serving the Property, (iv) the development potential of the Property, and the Property’s merchantability, fitness, suitability, or adequacy of the Property for any particular purpose, (v) the zoning or other legal status of the Property, (vi) the status of entitlements, permits and approvals with respect to the Property, (vii) the size of the Property, (viii) the value of the Property, or (ix) the Property’s compliance with any environmental laws, or any other federal, state or local laws, statutes, regulations, codes, ordinances, rules, administrative orders, or any other requirements applicable to the Property. Buyer agrees that, from and after Close of Escrow, as between Buyer and Seller, Buyer shall conclusively be deemed to have accepted the Property in its then existing condition, “AS IS,” without warranty of any kind, except as set forth in Section 8.1.

Seller has informed Buyer and Buyer acknowledges that Seller acquired ownership of the subject Property through a foreclosure, has not occupied nor conducted any investigation or studies on subject Property. Seller is not a developer or builder of the subject Property. Buyer is strongly advised and urged to investigate the condition and suitability of all aspects of the subject Property and all matters affecting the value or desirability of the subject Property and purchasing the subject Property is relying on Buyer’s own investigation and that of professionals retained or hired by Buyer.

As of the close of escrow, Buyer hereby expressly waives and releases any and all claims, whether know or unknown, that Buyer may now have or hereafter acquire against Seller arising from or connected with the Property, whether related to the valuation of the Property, to any defect in any Property, or to any other condition (including, without limitation, any environmental condition) affecting the Property, or otherwise; provided, however, that such waiver and release (and the general release under California Civil Code Section 1542 below) shall not apply to matters covered by the specific representations and warranties contained in Sections 8.1.1 through 8.1.10 above or to any other matter expressly represented and warranted elsewhere by Seller herein. The foregoing release specifically includes any claim under any environmental laws but does not include any claim based on a breach of Seller’s representation or warranty under Section 8.1.5 above.

As of the close of escrow hereunder, Buyer hereby releases and forever discharges Seller, its partners, officers, directors, shareholders, employees, agents, representatives, affiliates, insurers, and their successors and assigns (collectively “Seller Related Parties”) from any and all claims and causes of action of any kind, whether known or unknown, suspected or unsuspected, actual or potential, existing now or in the future, arising out of or around the Property, or of the air, soil, groundwater or surface water at or beneath the Property, and whether or not caused by Seller or predecessor in interest of Seller or any other person or entity; provided, however, that such waiver and discharge shall not apply to matters covered by the specific representations and warranties contained in Sections 8.1.1 through 8.1.10 above or to any other matter expressly represented and warranted elsewhere by Seller herein..

Without limiting the foregoing, as of the close of escrow hereunder, Buyer releases and forever discharges Seller from any and all claims and causes of action under or with respect to the Carpenter-Presley-Tanner Hazardous Substance Account Act (California Health and Safety Code Section 25300 et seq.) (including section 25359.7, Title 42 U.S.C. section 9601 et seq. (“CERCLA”), and or Title 42 U.S.C. Section 6901 et seq. (“RCRA”), as these laws may be amended in the future; provided, however, that such release and discharge shall not apply to matters covered by the specific representations and warranties contained in Sections 8.1.1 through 8.1.10 above or to any other matter expressly represented and warranted elsewhere by Seller herein...

Buyer, on behalf of itself, its officers, directors, employees, agents and their respective successors and assigns hereby expressly waives, as of the close of escrow, all rights and benefits afforded by the provisions of Section 1542 of the California Civil Code which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

The provisions of this Section 8.3 shall survive Close of Escrow in perpetuity.

ARTICLE 9
COVENANTS OF SELLER

9.1 Seller’s Covenants. Seller hereby covenants and agrees as follows:

9.1.1 Seller covenants and agrees to pay off and discharge in full and/or remove from the condition of title of the Property at or prior to the close of escrow hereunder, as the case may be, all deeds of trust, mortgages and other monetary liens (other than non-delinquent real property taxes and assessments) affecting the Property, and the same shall not constitute Approved Exceptions.

9.1.2 Prior to the close of escrow hereunder (or earlier termination of this Agreement in accordance with the terms of this Agreement), Seller shall not, without the prior written consent of Buyer (which may be given or withheld in Buyer’s sole discretion), create any encumbrance or lien upon the Property, or originate or cause any assessments to be charged against the Property.

9.1.3 Seller shall not enter into any service contracts, maintenance agreements, property management contracts, leases or other agreements, or any amendments, modifications, extensions or renewals to or of the same, with respect to the Property, or any portion thereof which would survive the close of escrow, without the prior written consent of Buyer (which consent shall not be unreasonably withheld). Seller shall terminate, as of the close of escrow hereunder, all service contracts, maintenance agreements and property management contracts applicable to all or any portion of the Property and/or the improvements thereon.

9.1.4 Prior to the close of escrow hereunder, Seller shall continue to manage, operate and maintain the Property employing the same management, operation and maintenance standards as were employed by Seller prior to the execution of this Agreement.

ARTICLE 10
DEFAULTS

10.1 Seller Default. In the event Seller fails or refuses to perform any of its obligations under this Agreement when due and such failure or refusal continues for a period of at least five (5) days following receipt of written notice by Seller from Buyer (except that such five (5) day cure period shall not be applicable to any breach by Seller of its obligation to deliver title to the Property to Buyer at closing in the condition required by this Agreement), then Seller shall be in breach or default of such obligation(s) under this Agreement. In the event of such breach or default, Buyer shall be entitled to (a) to terminate this Agreement, in which event, Seller shall promptly refund, or cause Escrow Holder to refund, to Buyer the Deposits and all interest accrued thereon while in escrow, and Buyer may bring an action to recover all damages suffered or incurred by Buyer as a result of Seller’s breach, or (b) to exercise any and all other rights and remedies available to Buyer at law or in equity, including, without limitation, filing an action for specific performance.

10.2 Buyer Default. In the event Buyer fails or refuses to perform any of its obligations under this Agreement when due and such failure or refusal continues for a period of at least five (5) days following receipt of written notice by Buyer from Seller, (except that such five (5) day period shall not be applicable to any breach of Buyer of its obligations to timely deposit the entire purchase price with the Escrow Holder prior to Close of Escrow.) then Buyer shall be in breach or default of such obligation(s) under this Agreement. In the event of such breach or default, Seller shall be entitled, as its sole and exclusive remedy, to receive and retain the Deposits as liquidated damages; except that if Buyer breaches its indemnification obligation under Section 6.1 above, then Seller shall not be so limited in its remedies and may pursue an action against Buyer for breach of such indemnification obligation.

ARTICLE 11
NOTICES

All notices called for pursuant to these instructions shall be given in writing by personal delivery, or by facsimile (with copy of such notice sent not later than the next day by mail or overnight private courtier in accordance with the provisions herein) or by overnight mail or overnight private courier. Facsimile notices shall be deemed received on the day sent if sent prior to 6:00 p.m. Pacific Time or if sent after 6:00 p.m. Pacific Time, then deemed received on the next day. Overnight mail or couriered notices shall be deemed received the next business day following deposit into the U.S. mail or delivery to the private courier. Mailed or couriered notices shall be addressed as set forth below, but either party may change its address by giving written notice thereof to the other in accordance with the provisions of this Article.

	To Seller:	Owens Mortgage Investment Fund a California Limited Partnership 2221 Olympic Boulevard Walnut Creek, CA 94595 Attn: William C. Owens, President Facsimile No.: ( 925) 935-1486
	With copy to:	The Law Offices of A. Nick Shamiyeh 2221 Olympic Boulevard, Suite 100 Walnut Creek, CA 94595 Attn: A. Nick Shamiyeh Facsimile No. : (925) 935-9407
	To Buyer:	Venture Development Corporation 600 Miller Avenue Mill Valley, CA 94941 Attn: Mark Heavey Facsimile No.: (415) 381-8285
	With copy to:	Berliner Cohen 10 Almaden Blvd., 11th Floor San Jose, CA 95113 Attn: Samuel L. Farb, Esq. Facsimile No.: (408) 998-5388
	To Escrow Holder:	First American Title Guaranty Company 1737 North First Street San Jose, CA 95112 Attn: Jessica Avila Facsimile No.: (408) 451-7818

ARTICLE 12
BROKER’S COMMISSIONS

Buyer and Seller each represents and warrants to the other that it has not dealt with any real estate broker, agent or salesperson in connection with this transaction to whom a commission may be owed other than CPS Commercial Property Services (“CPS”). Buyer covenants and agrees to pay CPS a commission in connection with the transaction described herein at the close of escrow pursuant to a separate written agreement. Such commission shall be payable to CPS if, and only if, escrow closes under this Agreement, as the same may be amended by Seller and Buyer. Buyer shall indemnify, defend and hold Seller harmless from and against any and all claims, demands, actions, causes of action, liabilities, judgments or costs (including, without limitation, attorneys’ fees and court costs) respecting payment of any sales commission, brokerage commission or finder’s fee to CPS pursuant to the terms of the separate written agreement between Buyer and CPS. In addition, each party shall indemnify, defend and hold harmless the other on account of any claims, demands, causes of action, or judgments respecting payment of any sales commission, brokerage commission or finder’s fee, including attorneys’ fees and court costs, arising from or brought by any third party (other than the CPS) who has dealt or claims to have dealt with such indemnifying party pertaining to the Property. The obligations under this Article 12 shall survive the close of escrow.

ARTICLE 13
TRADE OR EXCHANGE

Buyer agrees to reasonably cooperate with Seller in the event Seller attempts to effectuate a Section 1031 exchange with respect to the Property. Such cooperation shall include payment at closing hereunder of all or part of the sales price to a qualified intermediary, in lieu of Seller, under a deferred type exchange, provided that Buyer shall not be required to obtain title to any exchange or target property, execute any promissory note or other document or instrument which would or could impose personal liability upon Buyer, enter into any contract with a third party or make any payment to a third party (other than as provided above), or incur any additional expense, cost or liability whatsoever (including, but not limited to, liabilities or warranties of title, or assumption of indebtedness) with regard to the Section 1031 exchange or exchanges. Buyer shall not be obligated to incur any additional fees, costs or expenses and shall not be obligated to execute documents without Buyer’s attorneys’ approval of all such documents reasonably required by Seller in connection with such exchange or exchanges. Seller hereby agrees to indemnify and hold harmless Buyer from any claim, damage, liability, demand, cause of action, loss, cost, or expense (including, without limitation, reasonable attorney’s fees) Buyer may suffer or incur as a result of Buyer’s participation in the aforesaid exchange or exchanges. Notwithstanding the foregoing, Buyer’s agreement hereunder to participate in a tax-deferred exchange or exchanges shall not extend the closing date hereunder. Buyer shall not, by this Agreement or acquiescence to the exchange contemplated by this Article 13, (a) have its rights under this Agreement affected or diminished in any manner or (b) be responsible for compliance with or be deemed to have warranted to Seller that any exchange in fact complies with Section 1031 of the Internal Revenue Code of 1986, as amended. The obligations of Seller under this Article 13 shall survive the close of escrow.

ARTICLE 14
GENERAL ESCROW INSTRUCTIONS

Except as otherwise expressly provided herein and in lieu of the general provisions of Escrow Holder’s standard form instructions, the following shall apply:

14.1 Deposit of Funds. All funds received in this escrow shall be deposited with other escrow funds in a general escrow account or accounts of Escrow Holder, with any state or national bank, and may be transferred to any other general escrow account or accounts. All disbursements shall be made by check of Escrow Holder.

14.2 Prorations and Adjustments. All prorations and/or adjustments called for in this escrow are to be made on the basis of a thirty (30) day month.

14.3 Transaction Reporting. Escrow Holder is instructed to report this transaction on Form 1099 pursuant to Section 6045 of the Internal Revenue Code as amended by the Tax Reform Act of 1986.

ARTICLE 15
GENERAL PROVISIONS

Buyer and Seller further agree as follows:

15.1 Possession. Buyer shall be entitled to possession of the Property on the Closing Date, free and clear of all tenancies and other third party occupancy rights.

15.2 Merger. All negotiations and agreements, oral or written, heretofore had by and between the parties and their agents with respect to this transaction are merged into this Agreement, which completely sets forth the obligations of the parties.

15.3 Attorneys’ Fees. In the event either party brings an action at law or in equity to enforce, interpret or redress the breach of this Agreement, the prevailing party in such action shall be entitled to its litigation expenses and reasonable attorneys’ fees incurred in addition to all other relief as may be allowed by law. “Prevailing party” within the meaning of this Section shall include, without limitation, a party who brings an action, which action is dismissed after the other party’s payment of the sum allegedly due or performance of the covenant allegedly breached or if the party obtains substantially the relief sought by it in the action.

15.4 Amendment. This Agreement may be amended only by a writing signed by each of the parties hereto.

15.5 Assignment. Buyer shall have the right to assign this Agreement or its rights or obligations hereunder subject to obtaining the prior written approval of Seller (which approval shall not be unreasonably withheld, conditioned or delayed). The preceding notwithstanding, Buyer shall have the right, without having to obtain Seller’s consent but upon written notice to Seller, to assign this Agreement or Buyer’s rights and obligations hereunder, to an entity in which an affiliate of Buyer or Robert J. Eves holds a direct or indirect interest. At the Close of Escrow hereunder, title to the Property shall vest in such entity designated by Buyer. In the event of any assignment by Buyer hereunder, Buyer shall not be released of any of its obligations under this Agreement.

15.6 Successors. Subject to the provisions of Section 15.5 above, All terms and provisions of this Agreement shall be binding upon and shall inure to the benefit of, and be enforceable by, the respective assigns and successors of Seller and Buyer.

15.7 Captions. The captions and headings in this Agreement are for reference and convenience only and shall not limit or expand the meaning of the provisions of this Agreement.

15.8 Governing Law. This Agreement shall be governed by the laws of the State of California.

15.9 Exhibits. All exhibits attached hereto are incorporated herein by reference.

15.10 Interpretation of Agreement. The parties hereto acknowledge and agree that, although this Agreement has been drafted by Buyer’s legal counsel, Seller or its legal counsel have negotiated, or had an opportunity to negotiate, the terms of such Agreement. Consequently, the doctrine that ambiguities in an agreement should be resolved against the drafting party shall not be employed in connection with this Agreement and this Agreement shall be interpreted in accordance with its fair meaning.

15.11 No Waiver. No failure of either party hereto to exercise any right hereunder or to insist upon strict compliance with any obligations specified herein, shall constitute a waiver of either party’s right to demand exact compliance with the terms hereof.

15.12 Back-Up Offers. Seller shall continue to market the subject Property for sale and may accept back-up offers to sell the Property.

15.13. No Representation as to Size. Seller has not made and is not herein making any representations of the size of the subject Property. The selling price shall not be adjusted to reflect actual size of the subject Property.

15.14 Condemnation. If, prior to the close of escrow, all or any portion of the Property is taken by condemnation or eminent domain (or is the subject of a pending or contemplated taking which has not been consummated), Seller shall immediately notify Buyer of such fact. In such event or upon Buyer acquiring knowledge of such condemnation or pending or contemplated taking, Buyer shall have the option to terminate this Agreement upon written notice to Seller given not later than thirty (30) days after receipt of such notice from Seller or after Buyer acquires knowledge of such condemnation or pending or contemplated taking. Upon such termination, Escrow Holder or Seller, as the case may be, shall return the Deposits (and all interest accrued thereon while in escrow) to Buyer, and neither party shall have any further rights or obligations hereunder, other than pursuant to any provision hereof which expressly survives the termination of this Agreement. If Buyer does not elect to terminate this Agreement and closes escrow in accordance with this Agreement, Seller shall assign and turn over to Buyer at closing, and Buyer shall be entitled to receive and keep, all awards (received or to be received) for the taking by condemnation and Buyer shall be deemed to have accepted the Property subject to the taking without reduction in the Purchase Price.

15.15 Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall constitute one instrument.

15.16 ARBITRATION OF DISPUTES: (If initialed by all parties) Buyer and Seller agree, subject to the exclusions set forth below, that any dispute or claim between Buyer and Seller with respect to, or arising out of, this Agreement shall be decided by neutral, binding arbitration in accordance with the California Arbitration Act, Code of Civil Procedure 1280 et seq. and not by court action except as provided by California law for judicial review of arbitration proceedings. The parties to an arbitration may agree in writing to use different rules and/or arbitrator(s). In all other respects, the arbitration shall be conducted in accordance with Part III, Title 9 of the California Code of Civil Procedure. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The parties shall have the right to discovery in accordance with the Code of Civil Procedure § 1283.05.

Anything herein to the contrary notwithstanding, the parties agree that the following procedure shall govern the making of the award by the arbitrator(s):

(a) a Tentative Award shall be made by the arbitrator(s) within thirty (30) days following submission of the matter to the arbitrator(s); (b) the Tentative Award shall explain the factual and legal basis for the arbitrator’s (or arbitrators’) decision as to each of the principal controverted issues; (c) the Tentative Award shall be in writing unless the parties agree otherwise; provided, however, that if the hearing is concluded within one day, the Tentative Award may be made orally at the hearing in the presence of the parties; (d) within fifteen (15) days after the Tentative Award has been served or announced, any party may serve objections to the Tentative Award. Upon objections being timely served, the arbitrator(s) may call for additional evidence, oral or written argument, or both. If no objections are filed, the Tentative Award shall become final without further action by the parties or arbitrator(s), and (e) within thirty (30) days after the filing of objections, the arbitrator(s) shall either make the Tentative Award final or modify or correct the Tentative Award, which shall then become final as modified or corrected.

The following matters are excluded from arbitration hereunder (a) a judicial or non-judicial foreclosure or other action or proceeding to enforce a deed of trust, mortgage or real property sales contract as defined in Section 2985; (b) an unlawful detainer action; (c) the filing or enforcement of a mechanic’s lien; (d) any matter which is within the jurisdiction of a probate court or small claims court; or (e) an action for bodily injury or wrongful death, or for latent or patent defects to Code of Civil Procedure 337.1 or 337.15 applies. The filing of a judicial action to enable the recording of a notice of pending action, for order of attachment, receivership, injunction, or other provisional remedies, shall not constitute a waiver of the right to arbitrate under this provision.

NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.

WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE ARBITRATION OF DISPUTES PROVISION TO NEUTRAL ARBITRATION.

Buyer’s Initials: MH Seller’s Initials: WCO

(balance of page intentionally left blank; signature page follows on next page)

IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

BUYER:

VENTURE DEVELOPMENT CORPORATION,
a California corporation

By:         /s/ Mark Heavey
Name:    Mark Heavey
Its:          C.O.O.

SELLER:

OWENS MORTGAGE INVESTMENT FUND,
a California limited partnership

By           Owens Financial Group, Inc.,
                a California corporation,
                 its General Partner

                 By:        /s/ William C. Owens
                 Name:   William C. Owens
                 Its:         President

Instructions accepted this 9th day of June, 2005.

FIRST AMERICAN TITLE GUARANTY COMPANY

By: _________________________________
Name: _________________________________
Its: _________________________________

EXHIBIT A

LEGAL DESCRIPTION OF THE PROPERTY

Real property in the City of San Jose, County of Santa Clara, State of California, described as follows:

[to be attached]

EXHIBIT B

Order No. _______________
Escrow or Loan No. _______________

RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:

Venture Development Corporation
600 Miller Avenue
Mill Valley, CA 94941
Attn: Mark Heavey

SPACE ABOVE THIS LINE FOR RECORDER’S USE

	Mail Tax Statements to:		The undersigned grantor declares:

	___________________________________ c/o Venture Development Corporation 600 Miller Avenue Mill Valley, CA 94941 Attn: Mark Heavey		Documentary Transfer Tax is shown on a separate sheet attached to this deed and is not a part of the public record.

A.P.N. 678-93-030

GRANT DEED

FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged,

Owens Mortgage Investment Fund, a California limited partnership

hereby GRANT(S) to

__________________________________________

that certain real property in the City of San Jose, County of Santa Clara, State of California, more particularly described as follows:

See legal description attached hereto as Exhibit A and made a part hereof.

Dated: _________________________________

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership

By:   Owens Financial Group, Inc.,
         a California corporation,
         its General Partner

         By: ___________________________
         Its: ___________________________

Mail tax statements to: Same as above address.

DO NOT RECORD

FILOR REQUESTS
DO NOT RECORD STAMP VALUE

DECLARATION OF TAX DUE: SEPARATE PAPER:
(Revenue and Taxation Code 11932-11933)
NOTE: This Declaration is not a public record

DOCUMENT #

Property located in:

[ ] Unincorporated

[ X ] City of San Jose

APN: 678-93-030

DOCUMENTARY TRANSFER TAX $___________________________________

[ X ] Computed on full value

[ ] Computed on full value less liens or encumbrances remaining at the time of conveyance

CITY CONVEYANCE TAX $___________________________________

I declare under penalty of perjury under the laws of the State of California that the foregoing is true and correct.

___________________
Date

Signature

__________________________________
Print Name

__________________________________
For (Firm Name)

DO NOT RECORD

}
STATE OF CALIFORNIA
ss.
COUNTY OF __________

On ________________, before me, _________________, personally appeared __________________,

[ ] personally known to me -OR- [ ] proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

WITNESS my hand and official seal.

_______________________________
SIGNATURE OF NOTARY

CAPACITY CLAIMED BY SIGNER

Though statute does not require the Notary to fill in the data below, doing so may prove invaluable to persons relying on the document.

[ ] INDIVIDUAL

[ ] CORPORATE OFFICERS(S)
_____________________________
Title(s)

[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL

[ ] ATTORNEY-IN-FACT

[ ] TRUSTEE(S)

[ ] GUARDIAN/CONSERVATOR

[ ] OTHER: _____________________
_____________________

SIGNER IS REPRESENTING:
Name of Person(s) or Entity(ies)

_________________________________
___________________________

EXHIBIT C

ASSIGNMENT

Reference is hereby made to (a) that certain real property, consisting of approximately 14.2 acres of land, located at 455 Piercy Road, in the City of San Jose, County of Santa Clara, State of California (APN 678-93-030), and referred to in that certain Purchase and Sale Agreement and Escrow Instructions dated May ___, 2005, by and between Owens Mortgage Investment Fund, a California limited liability company (“Seller”), and _____________________________, a _______________________ (as successor to Venture Development Corporation) (“Buyer”), (b) to the improvements, if any, located on the above-described real property, and (c) to the easements, rights, privileges and entitlements incident thereto (collectively, the “Property”).

For good and valuable consideration, receipt of which is hereby acknowledged, Seller without recourse does hereby, give, grant, bargain, sell, transfer, assign, convey and deliver to Buyer, all of Seller's right, title and interest, if any, in the following: (i) all development rights, entitlements, permits, licenses and approvals relating to the development of, or benefiting, the Property; (ii) all intangible rights benefiting the Property, including, without limitation, all guarantees and warranties applicable to the Property; (iii) all rights, claims, causes of action, actions or awards benefiting the Property; and (iv) all surveys, grading plans, geologic, soils, groundwater and environmental reports and engineers’ and consultants’ plans, reports and studies which Seller may have prepared or caused to be prepared (or received) relating to the Property.

Seller hereby covenants that it will, at any time and from time to time upon reasonable written request therefor, execute and deliver to Buyer, its nominees, successor and/or assigns, any new or confirmatory instruments which Buyer, its nominees, successors and/or assigns, may reasonably request in order to fully transfer possession and control of, all the assets, rights or interests of Seller intended to be transferred and assigned hereby.

SELLER:

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership

By:   Owens Financial Group, Inc.,
         a California corporation,
         its General Partner

         By: ___________________________
         Name: ___________________________
         Its: ___________________________

August 9, 2005

VIA FACSIMILE
AND FEDERAL EXPRESS

Owens Mortgage Investment Fund
2221 Olympic Boulevard
Walnut Creek, CA 94595
Attn: William C. Owens Financial Group, Inc.

Re: 455 Piercy Road, San Jose, CA (APN 678-93-030) (the “Property”)
Our File No.:12784-050

Dear Mr. Owens:

This firm represents Venture Development Corporation (“Buyer”) in connection with the Purchase and Sale Agreement and Escrow Instructions, dated as of June 10, 2005, by and between Buyer and Owens Mortgage Investment Fund (“Seller”) with respect to the above-referenced Property (“Agreement”).

Buyer desires a thirty (30) day extension of the Feasibility Period so that Buyer can meet with representatives of the City of San Jose concerning certain zoning issues affecting the Property and to confirm whether the Property’s existing zoning will allow the uses of the Property contemplated by Buyer and its prospective commercial condominium purchasers. We understand that, to date, Seller has not agreed in writing to such thirty day extension. If such extension is not agreed to in writing by Seller today, then this letter shall serve as Buyer’s notice to Seller of its disapproval of the feasibility of the Property pursuant to Section 4.1.2 of the Agreement.

We are transmitting this letter solely to protect Buyer’s right to the return of its deposit (in accordance with the Agreement) if the extension is not granted. If Seller desires to extend the Feasibility Period for the thirty (30) additional days beyond today, then please execute this letter below today and return it to me no later than tomorrow. Your cooperation in this matter would be greatly appreciated.

Please feel free to call if you have any questions concerning this matter.

Very truly yours,
BERLINER COHEN
/s/ Samuel L. Farb
Samuel L. Farb
E-Mail: slf@berliner.com

The undersigned hereby grants Venture Development Corporation a thirty (30) day extension of the Feasibility Period as provided above.

OWENS MORTGAGE INVESTMENT FUND,
a California Limited Partnership

By:   Owens Financial Group, Inc.,
         a California corporation,
         its General Partner

         By: /s/ William C. Owens
         Name: William C. Owens
         Its: President

Dated:     August 9, 2005

EX-31 3 omif10q0605ex31-1.htm OMIF 10-Q AT 6/30/05 - EXHIBIT 31.1

EXHIBIT 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, William C. Owens, as the Chief Executive Officer and President of Owens Financial Group, Inc., General Partner of Owens Mortgage Investment Fund, a California Limited Partnership, certify that:

I have reviewed this quarterly report on Form 10-Q of Owens Mortgage Investment Fund, a California Limited Partnership (the “Registrant”);

Based on my knowledge, this quarterly 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 period covered by this quarterly report;

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the Registrant as of, and for, the periods presented in this quarterly report;

The Registrant’s other certifying officers 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 Registrant and we have:

(a)

designed such disclosure controls and procedures to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

(b)

evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

The Registrant’s other certifying officers and I have disclosed, based on our most recent evaluation, to the Registrant’s auditors and the audit committee of Registrant’s board of directors (or persons performing the equivalent function):

(a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the Registrant’s ability to record, process, summarize and report financial data and have identified for the Registrant’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 Registrant’s internal controls.

The Registrant’s other certifying officers and I have indicated in this quarterly 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.

Dated: August 11, 2005

/s/ William C. Owens
William C. Owens
Chief Executive Officer and President
Owens Financial Group, Inc., General Partner

EX-31 4 omif10q0605ex31-2.htm OMIF 10-Q AT 6/30/05 - EXHIBIT 31.2

EXHIBIT 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Bryan H. Draper, Chief Financial Officer and Secretary of Owens Financial Group, Inc., General Partner of Owens Mortgage Investment Fund, a California Limited Partnership, certify that:

I have reviewed this quarterly report on Form 10-Q of Owens Mortgage Investment Fund, a California Limited Partnership (the “Registrant”);

(a)

(b)

evaluated the effectiveness of the Registrant’s disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the “Evaluation Date”); and

(c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.

(a)

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the Registrant’s internal controls.

Dated: August 11, 2005

/s/ Bryan H. Draper
Bryan H. Draper
Chief Financial Officer and Secretary
Owens Financial Group, Inc., General Partner

EX-32 5 omif10q0605ex32.htm OMIF 10-Q AT 6/30/05 - EXHIBIT 32

EXHIBIT 32

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350

William C. Owens as Chief Executive Officer and President of Owens Financial Group, Inc., the General Partner of Owens Mortgage Investment Fund, a California Limited Partnership (the “Registrant”), and Bryan H. Draper, as Chief Financial Officer and Secretary of Owens Financial Group, Inc., hereby certify, pursuant to 18 U.S.C. § 1350, that:

(1) the Registrant’s Report on Form 10-Q for the period ended June 30, 2005, as filed with the Securities and Exchange Commission on the date hereof (the “Report”) fully complies with the applicable 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 result of operations of the Registrant.

/s/ William C. Owens
William C. Owens
Chief Executive Officer and President of Owens Financial Group, Inc., General Partner
August 11, 2005

/s/ Bryan H. Draper
Bryan H. Draper
Chief Financial Officer and Secretary of Owens Financial Group, Inc., General Partner
August 11, 2005

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