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1
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
------------------
Commission file number 1-11060
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AMERICAN INSURED MORTGAGE INVESTORS
- -----------------------------------------------------------------
(Exact name of registrant as specified in charter)
California 13-3180848
- ------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
(301) 468-9200
- -----------------------------------------------------------------
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ----------------------------------- ---------------------------
Depositary Units of Limited American Stock Exchange
Partnership Interest
Securities registered pursuant to Section 12(g) of the Act:
None
- -----------------------------------------------------------------
(Title of class)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
2
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.[X]
As of March 16, 1995, 10,000,000 depositary units of limited partnership
interest were outstanding and the aggregate market value of such units held by
non-affiliates of the Registrant on such date was $34,957,843.
3
AMERICAN INSURED MORTGAGE INVESTORS
1994 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PART I
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Page
----
Item 1. Business . . . . . . . . . . . . . . . . . . 4
Item 2. Properties . . . . . . . . . . . . . . . . . 5
Item 3. Legal Proceedings . . . . . . . . . . . . . . 5
Item 4. Submission of Matters to a Vote of
Security Holders . . . . . . . . . . . . . 5
PART II
-------
Item 5. Market for Registrant's Securities and
Related Security Holder Matters . . . . . . 6
Item 6. Selected Financial Data . . . . . . . . . . . 8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . 9
Item 8. Financial Statements and Supplementary Data . 15
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . 15
PART III
--------
Item 10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . 15
Item 11. Executive Compensation . . . . . . . . . . . 16
Item 12. Security Ownership of Certain Beneficial
Owners and Management . . . . . . . . . . . 17
Item 13. Certain Relationships and Related Transactions 17
PART IV
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Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . 17
Signatures . . . . . . . . . . . . . . . . . . . . . . 20
4
PART I
ITEM 1. BUSINESS
Development and Description of Business
- ---------------------------------------
Information concerning the business of American Insured Mortgage Investors
(the Partnership) is contained in Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations and in Notes 1, 4, and
5 of the notes to the financial statements of the Partnership (filed in response
to Item 8 hereof), which is incorporated herein by reference. Also see Schedule
IV-Mortgage Loans on Real Estate for the table of the Insured Mortgages (as
defined below) invested in by the Partnership as of December 31, 1994.
Employees
- ---------
The Partnership has no employees. The business of the Partnership is
managed by CRIIMI, Inc. (the General Partner), while its portfolio of mortgages
is managed by AIM Acquisition Partners, L.P. (the Advisor) pursuant to an
advisory agreement (the Advisory Agreement) and CRI/AIM Management, Inc. (the
Sub-advisor) pursuant to a sub-advisory agreement (the Sub-advisory Agreement).
CRIIMI, Inc. is a wholly-owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE),
formerly CRI Insured Mortgage Association, Inc., which is managed by an adviser
whose general partner is C.R.I., Inc. (CRI). CRI and CRIIMI MAE are also
affiliates of the Sub-advisor.
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's
best interest to consider a proposed transaction in which CRIIMI MAE would
become a self-managed and self-administered real estate investment trust (REIT).
Under the terms of the proposed transaction, CRIIMI MAE and its affiliates would
acquire certain mortgage investment, servicing, origination and advisory
business from affiliates of CRI, including the Sub-advisory Agreement in place
with respect to the Partnership. This transaction will have no effect on the
Partnership's financial statements.
Competition
- -----------
In disposing of Insured Mortgages, the Partnership competes with private
investors, mortgage banking companies, mortgage brokers, state and local
government agencies, lending institutions, trust funds, pension funds, and other
entities, some with similar objectives to those of the Partnership and some of
which are or may be affiliates of the Partnership, its General Partner, the
Advisor or their respective affiliates. Some of these entities may have
substantially greater capital resources and experience in disposing of Federal
Housing Administration (FHA) insured mortgages than the Partnership.
Pursuant to the Sub-advisory Agreement, the Advisor retained the Sub-
advisor to perform the services required of the Advisor under the Advisory
Agreement. CRI also serves as a general partner of the advisers to CRIIMI MAE
and CRI Liquidating REIT, Inc., which have investment objectives similar to
those of American Insured Mortgage Investors-Series 85, L.P. (AIM 85), American
Insured Mortgage Investors L.P. - Series 86 (AIM 86) and American Insured
Mortgage Investors L.P. - Series 88 (AIM 88) as well as the Partnership
(collectively, the AIM Partnerships). CRI and its affiliates are also general
partners of a number of other real estate limited partnerships. CRI and its
affiliates also may serve as general partners, sponsors or managers of real
estate limited partnerships, REITs or other entities in the future. The
Partnership may attempt to dispose of mortgages at or about the same time that
one or more of the other AIM Partnerships and/or other entities sponsored or
managed by CRI, including CRIIMI MAE and CRI Liquidating REIT, Inc., are
attempting to dispose of mortgages. As a result of market conditions that could
limit dispositions, the Sub-advisor and its affiliates could be faced with
conflicts of interest in determining which mortgages would be disposed of. Both
CRI and CRIIMI, Inc., however, are subject to their fiduciary duties in
5
evaluating the appropriate action to be taken when faced with such conflicts.
ITEM 2. PROPERTIES
Although the Partnership does not own the underlying real estate, the
mortgages underlying the Partnership's mortgage investments are first non-
recourse liens on the respective multifamily residential developments.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Partnership is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders to be voted on during the
fourth quarter of 1994.
6
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
Principal Market and Market Price for Units and Distributions
- -------------------------------------------------------------
From November 5, 1985 through July 6, 1989, the Units were included in the
NASDAQ National Market System. From July 7, 1989 through April 7, 1992, the
Units were traded in the over-the-counter market and quoted on the NASDAQ
quotation system under the symbol "AIMAZ."
Since April 8, 1992, the Units have traded on the American Stock Exchange
(AMEX) with a trading symbol of AIA.
The high and low bid prices for the Units as reported on AMEX and the
distributions, as applicable, for each quarterly period in 1994 and 1993 were as
follows:
Amount of
1994 Distribution
Quarter Ended High Low Per Unit
- ------------------- ------- ------- ------------
March 31, $4 7/8 $3 3/4 $ 0.89(1)
June 30, 3 13/16 3 3/8 0.08
September 30, 3 11/16 3 7/16 0.08
December 31, 3 11/16 3 1/4 0.08
---------
$ 1.13
=========
Amount of
1993 Distribution
Quarter Ended High Low Per Unit
- ------------------- ------- ------- ------------
March 31, $4 7/8 $4 5/16 $ 0.095
June 30, 4 3/4 4 5/16 0.090
September 30, 4 13/16 4 7/16 0.090
December 31, 5 1/8 4 1/4 0.370(2)
---------
$ 0.645
=========
(1) This includes a special distribution of $0.81 per Unit comprised of: (i)
$0.80 per Unit return of capital and capital gain from the disposition of
the mortgage on Hidden Oaks Apartments and (ii) $.01 per Unit of previously
accrued but undistributed interest received from the mortgage on Creekside
Village.
(2) This includes a special distribution of $0.28 per Unit comprised of: (i)
$0.21 per Unit return of capital from the disposition of the mortgages on
Chapelgate Apartments and Cumberland Village and (ii) $0.07 per Unit
capital gain from these two dispositions plus additional sales proceeds
from the sale of the mortgage on Clark and Elm Apartments.
There are no material legal restrictions upon the Partnership's present or
future ability to make distributions in accordance with the provisions of the
Partnership Agreement.
The Partnership's Dividend Reinvestment Plan was amended effective April
10, 1992 to exclude the amount of any special distributions from reinvestment
under the Plan. The regular distributions will continue to be automatically
reinvested in additional Units as in the past.
Approximate Number
7
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS
- Continued
of Unitholders as of
Title of Class December 31, 1994
- --------------------------- ----------------------
Depositary Units of Limited
Partnership Interest 10,000
8
PART II
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per Unit amounts)
For the years ended December 31,
1994 1993 1992 1991 1990
------------ ------------ ------------ ------------ ------------
Income $ 3,736 $ 4,487 $ 4,747 $ 5,761 $ 11,231
Net gains (losses) from
mortgage dispositions 196 762 (21) 260 (3,323)
Net earnings 3,280 4,528 3,867 4,626 5,448
Composition of distributions
per Limited Partnership
Unit(1)(2):
Earnings $ .32 $ .440 $ .38 $ .450 $ .53
Return of capital .81 .205 1.44 .099 10.76
-------- -------- -------- -------- --------
Total $ 1.13 $ .645 $ 1.82 $ .549 $ 11.29
======== ======== ======== ======== ========
As of December 31,
------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Total assets $ 38,161 $ 47,630 $ 46,971 $ 62,029 $ 63,962
Partners' equity 37,241 43,749 45,864 60,741 61,773
(1) Calculated based upon the weighted average number of Limited Partnership
Units outstanding.
(2) Includes distributions due the Unitholders for the Partnership's fiscal
quarters ended December 31, 1994, 1993, 1992, 1991 and 1990 which were paid
subsequent to each year end. See Notes 3 and 5 of Notes to Financial
Statements contained in Item 8. "Financial Statements and Supplementary
Data."
The selected statements of operations data presented above for the years
ended December 31, 1994, 1993 and 1992 and the balance sheet data as of December
31, 1994 and 1993, are derived from and are qualified by reference to the
Partnership's financial statements which have been included elsewhere in this
Form 10-K. The statements of operations data for the years ended December 31,
1991 and 1990 and the balance sheet data as of December 31, 1992, 1991 and 1990
are derived from audited financial statements not included in this Form 10-K.
This data should be read in conjunction with the financial statements and the
notes thereto.
9
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
- -------
American Insured Mortgage Investors (the Partnership) was formed under the
Uniform Limited Partnership Act in the state of California on July 12, 1983.
During the period from March 1, 1984 (the initial closing date of the
Partnership's public offering) through December 31, 1984, the Partnership,
pursuant to its public offering of 10,000,000 depositary units of limited
partnership interest (Units), raised a total of $200,000,000 in gross proceeds.
In addition, the initial limited partner contributed $2,500 to the capital of
the Partnership and received 125 limited partnership interests in exchange
therefor.
At a special meeting of the limited partners and Unitholders of the
Partnership held on August 16, 1991, a majority of these interests approved,
among other items, the assignment of the general partner interests and the
shares of the company which acts as the assignor limited partner in the
Partnership, as described below, and the adoption of provisions which prohibit a
"Reorganization Transaction" (including transactions commonly known as "roll-
ups") for a period of five years unless approved by a super-majority.
Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded
AIM Capital Management Corp. (the former managing general partner with a
partnership interest of 2.8%) and IRI Properties Capital Corp. (the former
corporate general partner with a partnership interest of 0.1%) as the sole
general partner of the Partnership. CRIIMI, Inc. is a wholly-owned subsidiary of
CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc.,
which is managed by an adviser whose general partner is CRI. In addition, the
General Partner acquired the shares of the company which acts as the assignor
limited partner in the Partnership. The interest of the former associate
general partner (0.1%) was purchased by the Partnership on September 6, 1991,
pursuant to the terms of the Partnership Agreement. The former managing general
partner, former corporate general partner and former associate general partner
are sometimes collectively referred to as former general partners.
Also, on September 6, 1991, AIM Acquisition Partners, L.P. (the Advisor)
succeeded Integrated Funding, Inc. (Integrated Funding) as the advisor to the
Partnership. AIM Acquisition Corporation (AIM Acquisition) is the general
partner of the Advisor and the limited partners include, but are not limited to,
AIM Acquisition, The Goldman Sachs Group, L.P., Broad Inc. and a limited
partnership formed by CRI and CRIIMI MAE. Pursuant to the terms of certain
amendments to the Partnership Agreement, as discussed below, the General Partner
is required to receive the consent of the Advisor prior to taking certain
significant actions which affect the management and policies of the Partnership.
The limited partners and Unitholders of the Partnership approved the execution
of a Sub-advisory agreement (the Sub-advisory Agreement) with CRI/AIM
Management, Inc., an affiliate of CRI, pursuant to which CRI/AIM Management,
Inc. manages the Partnership's portfolio and disposes of the Partnership's
mortgage investments.
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's
best interest to consider a proposed transaction in which CRIIMI MAE would
become a self-managed and self-administered real estate investment trust (REIT).
Under the terms of the proposed transaction, CRIIMI MAE and its affiliates would
acquire certain mortgage investment, servicing, origination and advisory
business from affiliates of CRI, including the Sub-advisory Agreement in place
with respect to the Partnership. This transaction will have no effect on the
Partnership's financial statements.
Prior to the expiration of the Partnership's reinvestment period in
10
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
November 1988, the Partnership was engaged in the business of originating
mortgage loans (Originated Insured Mortgages) and acquiring mortgage loans
(Acquired Insured Mortgages and together with Originated Insured Mortgages,
referred to herein as Insured Mortgages). The Partnership purchased the Acquired
Insured Mortgages from unaffiliated third parties at a discount from the
outstanding principal balance. Through November 1988, the former managing
general partner had the right to reinvest the proceeds from any sale or
prepayment of an Insured Mortgage or any insurance proceeds received from the
assignment of an Insured Mortgage (subject to the conditions set forth in the
Partnership Agreement). After the expiration of the reinvestment period, the
Partnership is required (subject to the conditions set forth in the Partnership
Agreement) to distribute such proceeds to its Unitholders. The Partnership
Agreement states that the Partnership will terminate on December 31, 2008,
unless previously terminated under the provisions of the Partnership Agreement.
Investment in Insured Mortgages
- -------------------------------
The Partnership's investment in insured mortgages is comprised of
participation certificates evidencing a 100% undivided beneficial interest in
government insured multifamily mortgages issued or sold pursuant to programs of
the Federal Housing Administration (FHA) (FHA-Insured Certificates) and FHA-
insured mortgage loans (FHA-Insured Loans). The mortgages underlying the FHA-
Insured Certificates and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments.
In connection with the Partnership's implementation of Statement of
Financial Accounting Standards No. 115 "Accounting for Certain Investments in
Debt and Equity Securities" (SFAS 115) as of January 1, 1994 (see Note 2 to the
financial statements), the Partnership's investments in FHA-Insured Certificates
are recorded at fair value, as estimated below, as of December 31, 1994. The
difference between the amortized cost and the fair value of FHA-Insured
Certificates represents the net unrealized gains on these investments and is
reported as a separate component of partners' equity as of December 31, 1994.
The fair value of FHA-Insured Certificates is based on quoted market prices.
The Partnership's Investment in FHA-Insured Loans is recorded at amortized cost
as of December 31, 1994 and 1993.
As of December 31, 1994, the Partnership had remaining investments in nine
FHA-Insured Certificates and six FHA-Insured Loans with an aggregate amortized
cost of $35,214,547, face value of $40,966,282, and fair value of $39,420,211,
all of which were originated or acquired by the former managing general partner.
All of the Partnership's mortgage investments are insured by the United States
Department of Housing and Development (HUD) for 100% of their current face
value, less a 1% assignment fee, and are non-recourse first liens on multifamily
residential developments owned by entities unaffiliated with the Partnership,
its General Partner, or their affiliates and are insured under Section 221(d)(4)
or Section 231 of the National Housing Act. As of December 31, 1994, all of the
Partnership's mortgage investments are current with respect to the payment of
principal and interest.
The following table summarizes the Partnership's investment in Insured
Mortgages as of December 31, 1994:
Amortized Fair
Cost Value
------------ ------------
11
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Investment in FHA-Insured
Loans:
Acquired insured mortgages $ 9,118,002 $ 11,236,174
Originated insured mortgages $ 14,590,272 14,829,011
------------ ------------
$ 23,708,274 $ 26,065,185
============ ============
Investment in FHA-Insured
Certificates:
Acquired insured mortgages $ 11,506,273 $ 13,355,026
============ ============
In addition to base interest payments under Originated Insured Mortgages,
the Partnership is entitled to additional interest based on a percentage of the
net cash flow from the underlying development and of the net proceeds from the
refinancing, sale or other disposition of the underlying development (referred
to as Participations). During the year ended December 31, 1994, the Partnership
received $13,010 from the Participations. During the years ended December 31,
1993 and 1992, the Partnership did not receive any monies from the
Participations. These amounts, if any, are included in mortgage investment
income in the accompanying statements of operations.
12
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Mortgage Dispositions
- ---------------------
A summary of dispositions that are included in the statements of operations
for the years ended December 31, 1994, 1993 and 1992 are as follows:
Financial
Statement
Year of Type of Net Carrying Net Gain/(Loss)
Complex Name Disposition Disposition Value Proceeds Recognized
- ------------------ ----------- ----------- ------------ ------------ -----------
Foxfire West Apts.(a) 1992(c) Assignment $ -- $ 158,984 $ --
Clark & Elm Apts.(b) 1992 Sale of a
defaulted
mortgage 13,673,692 13,652,589 (21,103)
Clark & Elm Apts.(b) 1993 Sale of a
defaulted
mortgage -- 108,415(d) 108,415
Chapelgate Apts.(a) 1993 Sale of a
defaulted
mortgage 682,731 901,171 218,440
Cumberland Village(a) 1993 Sale of a
defaulted
mortgage 1,520,268 1,955,663 435,395
Hidden Oaks (b) 1994 Prepayment 7,941,507 8,137,327(e) 195,820
(a) Disposition of Acquired Insured Mortgage.
(b) Disposition of Originated Insured Mortgage.
(c) Approximately 90% of the net proceeds were received and distributed in 1991. The remaining balance was received and
distributed in 1992.
(d) Represents additional proceeds received resulting from an adjustment to the 1992 sale price.
(e) Includes a prepayment penalty of approximately $260,000.
/TABLE
13
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
Results of Operations
- ---------------------
1994 versus 1993
- ----------------
Net earnings decreased for the year ended December 31, 1994 as compared to
1993 primarily due to the decrease in mortgage investment income as a result of
the reduced mortgage base from mortgage dispositions which occurred in 1993 and
1994.
Interest and other income increased for 1994 as compared to 1993 primarily
due to the short-term investment of disposition proceeds received during
February 1994 prior to the distribution to Unitholders in May 1994.
Asset management fees decreased for 1994 as compared to 1993 as a result of
the reduction in the mortgage base.
General and administrative expenses increased for 1994 as compared to 1993
primarily due to one time computer and data processing-related expenses incurred
during the year ended December 31, 1994.
Gains on mortgage dispositions decreased for 1994 from 1993. Gains or
losses on mortgage dispositions are based on the number, carrying amounts and
proceeds of mortgage investments disposed of during the period. During 1993,
the Partnership disposed of three mortgage investments and recognized an
aggregate gain of $762,250. During 1994, only one mortgage was disposed of as a
result of the prepayment of the mortgage on Hidden Oaks, which resulted in a
gain of $195,820.
1993 versus 1992
- ----------------
Net earnings for 1993 increased as compared to 1992 primarily due to the
recognition of gains of approximately $762,000 from three mortgage dispositions
in September and November 1993, as discussed above.
Mortgage investment income decreased during 1993 as compared to 1992
primarily due to the decrease in the mortgage base resulting from mortgage
dispositions during 1993 and 1992.
Interest and other income decreased during 1993 as compared to 1992 due to
the temporary investment of proceeds received during January 1992 from the sale
of the defaulted mortgage on Clark and Elm Apartments pending the distribution
to Unitholders in May 1992.
General and administrative expenses decreased for 1993 as compared to 1992.
This decrease was due primarily to the payment in 1992 of non-recurring
professional fees in connection with the transfer of the title of the
Partnership's insured mortgages necessitated by the change in general partner,
as well as the payment in 1992 of a one-time American Stock Exchange listing
fee. This decrease was also attributable to a decrease in professional fees and
reimbursable wages due to the decrease in the mortgage base.
Liquidity and Capital Resources
- -------------------------------
The Partnership's operating cash receipts, derived from payments of
principal and interest on Insured Mortgages, plus cash receipts from interest on
short-term investments, were sufficient during 1994 to meet operating
14
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
requirements.
The basis for paying distributions to Unitholders is net proceeds from
insured mortgage dispositions and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although Insured
Mortgages yield a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each year due to (1) the
fluctuating yields in the short-term money market where the monthly mortgage
payments received are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base due to monthly mortgage
payments received or mortgage dispositions, (3) variations in the cash flow
attributable to the delinquency or default of Insured Mortgages and (4) changes
in the Partnership's operating expenses.
Since the Partnership is obligated to distribute the Proceeds of Mortgage
Prepayments, Sales and Insurance of Insured Mortgages (as defined in the
Partnership Agreement) to its Unitholders, the size of the Partnership's port-
folio will continue to decrease. The magnitude of the decrease will depend upon
the size of the Insured Mortgages which are prepaid, sold or assigned for
insurance proceeds as reflected in the preceding table.
If necessary, the Partnership has the right to establish reserves either
from the Proceeds of Mortgage Prepayments, Sales and Insurance of Insured
Mortgages or from Cash Flow (as defined in the Partnership Agreement). It
should be noted, however, that to the extent reserves are not established, the
Partnership is required to distribute the Proceeds of Insured Mortgage
Prepayments, Sales and Insurance of Insured Mortgages, and generally intends to
distribute substantially all of its Cash Flow from operations. If any reserves
are deemed to be necessary by the Partnership, they will be invested in
short-term, interest-bearing investments.
The Partnership anticipates that reserves generally would only be necessary
in the event the Partnership elected to foreclose on an Originated Insured
Mortgage insured by FHA and take over the operations of the underlying
development. In such case, there may be a need for additional capital. Since
foreclosure proceedings can be expensive and time-consuming, the Partnership
expects that it will generally assign these Originated Insured Mortgages to HUD
for insurance proceeds rather than foreclose. The determination of whether to
assign the mortgage to HUD or institute foreclosure proceedings or whether to
set aside any reserves will be made on a case-by-case basis by the General
Partner, the Advisor and the Sub-advisor. As of December 31, 1994 and 1993, the
Partnership had not set aside any reserves.
Cash flow - 1994 versus 1993
- ----------------------------
Net cash provided by operating activities decreased for 1994 as compared to
1993 primarily due to a decrease in mortgage investment income, as discussed
above. Partially offsetting this decrease was the receipt in 1994 of accrued
interest related to the mortgage on Creekside Village.
Net cash provided by investing activities increased for 1994 as compared to
1993 primarily due to the receipt in February 1994 of net proceeds of
approximately $8.1 million from the prepayment of the insured mortgage on Hidden
Oaks Apartments.
Net cash used in financing activities increased for 1994 as compared to
1993 primarily due to the special distributions paid to Unitholders in 1994 of
15
PART II
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Continued
net proceeds received in 1994 from the prepayment of the insured mortgage on
Hidden Oaks Apartments and of net proceeds received in 1993 from the sale of the
defaulted insured mortgages on Chapelgate Apartments and Cumberland Village.
This compares to the distributions paid to Unitholders in 1993 of regular cash
flow from the fourth quarter of 1992 and first three quarters of 1993.
Cash flow - 1993 versus 1992
- ----------------------------
Net cash provided by operating activities decreased during 1993 as compared
to 1992 principally due to the receipt of accrued interest in 1992 on the
insured mortgage on Clark and Elm Apartments which defaulted in 1991 and was
sold in 1992. This decrease was also attributable to a decrease in interest and
other income and mortgage investment income, as previously discussed.
Net cash provided by investing activities decreased during 1993 as compared
to 1992 principally due to the receipt of proceeds of approximately $13.7
million from the January 1992 sale of the insured mortgage on Clark and Elm
Apartments compared to proceeds of approximately $3.0 million received during
September and November 1993 from an adjustment to the sale price for the 1992
sale of the insured mortgage on the Clark and Elm Apartments, as well as
proceeds from the sale of the insured mortgages on Chapelgate Apartments and
Cumberland Village.
The decrease in cash used in financing activities during 1993 as compared
to 1992 was principally due to the distribution to Unitholders in 1992 of net
proceeds received from the sale of the insured mortgage on Clark and Elm
Apartments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is contained on pages 21 through 42.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a), (b), (c) and (e)
The Partnership has no officers or directors. The affairs of the
Partnership are generally managed by the General Partner, which is wholly owned
by CRIIMI MAE, a company whose shares are listed on the New York Stock Exchange.
CRIIMI MAE is managed by an adviser whose general partner is CRI.
At a special meeting of the limited partners and Unitholders of the
Partnership held on August 16, 1991, a majority of these interests approved,
among other items, the assignment of the general partner interests and the
shares of the company which acts as the assignor limited partner in the
Partnership.
Effective September 6, 1991, the General Partner succeeded AIM Capital
Management Corp. (the former managing general partner with a partnership
interest of 2.8%) and IRI Properties Capital Corp. (the former corporate general
partner with a partnership interest of 0.1%) as the sole general partner of the
Partnership. In addition, the General Partner acquired the shares of the company
16
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT -
Continued
which acts as the assignor limited partner in the Partnership. The interest of
the former associate general partner (0.1%) was purchased by the Partnership on
September 6, 1991, pursuant to the terms of the Partnership Agreement.
Also, on September 6, 1991, the Advisor succeeded Integrated Funding as the
advisor of the Partnership. AIM Acquisition is the general partner of the
Advisor and the limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Broad Inc. and a limited partnership
formed by CRI and CRIIMI MAE. Pursuant to the terms of certain amendments to the
Partnership Agreement, the General Partner is required to receive the consent of
the Advisor prior to taking certain significant actions which affect the
management and policies of the Partnership. The limited partners and Unitholders
of the Partnership approved the execution of a Sub-advisory Agreement with
CRI/AIM Management, Inc., an affiliate of CRI, pursuant to which CRI/AIM
Management, Inc. manages the Partnership's portfolio and disposes of the
Partnership's insured mortgages.
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's
best interest to consider a proposed transaction in which CRIIMI MAE would
become a self-managed and self-administered REIT. Under the terms of the
proposed transaction, CRIIMI MAE and its affiliates would acquire certain
mortgage investment, servicing, origination and advisory business from
affiliates of CRI, including the Sub-advisory Agreement in place with respect to
the Partnership. This transaction will have no effect on the Partnership's
financial statements.
The General Partner is also the general partner of AIM 85, AIM 86 and AIM
88, limited partnerships with investment objectives similar to those of the
Partnership.
(d) There is no family relationship between any of the officers and
directors of the General Partner.
(f) Involvement in certain legal proceedings.
None.
(g) Promoters and control persons.
Not applicable.
(h) Based solely on its review of Forms 3 and 4 and amendments thereto
furnished to the Partnership, and written representations from certain
reporting persons that no Form 5s were required for those persons, the
Partnership believes that all reporting persons have filed on a timely
basis Forms 3, 4, and 5 as required in the fiscal year ended December
31, 1994.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by reference to
Note 3 of the notes to the financial statements of the Partnership.
17
PART III
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
As of December 31, 1994, no person was known by the Partnership to be the
beneficial owner of more than five percent (5%) of the outstanding Units of the
Partnership.
As of December 31, 1994, neither the officers and directors, as a group, of
the General Partner nor any individual director of the General Partner, are
known to own more than 1% of the outstanding Units of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others.
Note 3 of the notes to the Partnership's financial statements of this
report contains a discussion of the amounts, fees and other
compensation paid or accrued by the Partnership to the directors and
executive officers of the General Partner and their affiliates, and is
incorporated herein by reference.
(b) Certain business relationships.
Other than as set forth in Item 11 of this report which is
incorporated herein by reference, the Partnership has no business
relationship with entities of which the former general partners or the
current General Partner of the Partnership are officers, directors or
equity owners.
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)(1) Financial Statements:
Page
Description Number
- ----------- --------------
Balance Sheets as of December 31, 1994
and 1993 23
Statements of Operations for the years
ended December 31, 1994, 1993 and 1992 24
Statements of Changes in Partners' Equity
for the years ended December 31, 1994,
1993 and 1992 25
Statements of Cash Flows for the years
ended December 31, 1994, 1993 and 1992 27
Notes to Financial Statements 28
18
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K - Continued
(a)(2) Financial Statement Schedules:
IV - Mortgage Loans on Real Estate
All other schedules have been omitted because they are
inapplicable, not required, or the information is included in the
Financial Statements or Notes thereto.
(a)(3) Exhibits:
3. Amended and Restated Certificates of Limited Partnership are
incorporated by reference to Exhibit 4(a) to the Registration
Statement on Form S-11 (No. 33-6747) dated June 25, 1986 (such
Registration Statement, as amended, is referred to herein as the
"Registration Statement").
4. Agreement of Limited Partnership, incorporated by reference to
Exhibit 3 to the Registration Statement.
4.(b) Form of Depository Receipt, incorporated by reference to Exhibit
4(b) to the Registration Statement.
4.(c) Amendment to the Amended and Restated Agreement of Limited
Partnership of the Partnership dated February 12, 1990,
incorporated by reference to Exhibit 4(c) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1989.
10.(b) Origination and Acquisition Services Agreement, dated September
1, 1983, between the Partnership and IFI, incorporated by
reference to Exhibit 10(b) to the registration statement on Form
S-11 (No. 2-85476) dated November 30, 1983 (such registration
statement, as amended, is referred to herein as the "Initial
Registration Statement").
(c) Management Services Agreement, dated November 30, 1983, between
the Partnership and IFI, incorporated by reference to Exhibit
10(c) to the Initial Registration Statement.
(d) Disposition Services Agreement, dated November 30, 1983, between
the Partnership and IFI, incorporated by reference to Exhibit
10(d) to the Initial Registration Statement.
(e) Agreement, dated November 30, 1983, among the former managing
general partner, the former associate general partner and
Integrated, incorporated by reference to Exhibit 10(e) to the
Initial Registration Statement.
(f) Reinvestment Plan, incorporated by reference to the Prospectus
contained in the Registration Statement.
(l) Mortgage Note dated March 26, 1986 between Mastic Associates and
IFI, incorporated by reference to Exhibit 10(l) to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1986.
(m) Mortgage dated March 26, 1986 between Mastic Associates and IFI,
incorporated by reference to Exhibit 10(m) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1986.
19
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K - Continued
(n) Mortgagor/Mortgagee Agreement dated March 26, 1986 between Mastic
Associates and IFI, incorporated by reference to Exhibit 10(n) to
the Partnership's Annual Report on Form 10-K for the year ended
December 31, 1986.
(o) Lease Agreement dated as of December 10, 1984 between NHP Land
Associates, as Landlord and Mastic Associates, as Tenant,
incorporated by reference to Exhibit 10(o) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1986.
27. Financial Data Schedule (filed herewith).
28. Pages A-1 - A-4 of the Partnership Agreement of Registrant,
incorporated by reference to Exhibit 28 to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1990.
28.(a) Purchase Agreement among AIM Acquisition, the former managing
general partner, the former corporate general partner, IFI and
Integrated dated as of December 1, 1990, as amended January 9,
1991, incorporated by reference to Exhibit 28(a) to the
Partnership's Annual Report on Form 10-K for the year ended
December 31, 1990.
28.(b) Purchase Agreement among CRIIMI Inc., AIM Acquisition, the former
managing general partner, the former corporate general partner,
IFI and Integrated dated as of December 13, 1990 and executed as
of September 6, 1991, incorporated by reference to Exhibit 28(b)
to the Partnership's Annual Report on Form 10-K for the year
ended December 31, 1990.
28.(c) Amendments to Partnership Agreement dated August 16, 1991,
incorporated by reference to Exhibit 28(c) to the Partnership's
Annual Report on Form 10-K for the year ended December 31, 1991.
28.(d) Sub-Management Agreement by and between AIM Acquisition and
CRI/AIM Management, Inc. dated as of March 1, 1991, incorporated
by reference to Exhibit 28(d) to the Partnership's Annual Report
on Form 10-K for the year ended December 31, 1992.
(b) Reports on Form 8-K filed during the last quarter of the fiscal year:
None
All other items are not applicable.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN INSURED MORTGAGE
INVESTORS (Registrant)
By: CRIIMI, Inc.
General Partner
March 17, 1995 /s/ William B. Dockser
- --------------------------- ----------------------------
DATE William B. Dockser
Chairman of the Board
and Principal Executive
Officer
March 17, 1995 /s/ H. William Willoughby
- --------------------------- ----------------------------
DATE H. William Willoughby
President and Director
March 17, 1995 /s/ Cynthia O. Azzara
- --------------------------- ----------------------------
DATE Cynthia O. Azzara
Principal Financial and
Accounting Officer
March 17, 1995 /s/ Garrett G. Carlson, Sr.
- --------------------------- ----------------------------
DATE Garrett G. Carlson, Sr.
Director
March 17, 1995 /s/ G. Richard Dunnells
- --------------------------- ----------------------------
DATE G. Richard Dunnells
Director
March 17, 1995 /s/ Robert F. Tardio
- --------------------------- ----------------------------
DATE Robert F. Tardio
Director
21
AMERICAN INSURED MORTGAGE INVESTORS
Financial Statements as of December 31, 1994 and 1993
and for the Years Ended December 31, 1994, 1993 and 1992
22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
American Insured Mortgage Investors:
We have audited the accompanying balance sheets of American Insured
Mortgage Investors (the Partnership) as of December 31, 1994 and 1993, and the
related statements of operations, changes in partners' equity and cash flows for
the years ended December 31, 1994, 1993 and 1992. These financial statements and
the schedule referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements and the schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Partnership as
of December 31, 1994 and 1993, and the results of its operations and its cash
flows for the years ended December 31, 1994, 1993 and 1992, in conformity with
generally accepted accounting principles.
As explained in Note 2 of the notes to the financial statements,
effective January 1, 1994, the Partnership changed its method of accounting for
its investment in insured mortgages.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. Schedule IV-Mortgage Loans on Real
Estate as of December 31, 1994 and for the year then ended is presented for
purposes of complying with the Securities and Exchange Commission's rules and
regulations and is not a required part of the basic financial statements. The
information in this schedule has been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our opinion, is
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
Arthur Andersen LLP
Washington, D.C.
March 16, 1995
23
AMERICAN INSURED MORTGAGE INVESTORS
BALANCE SHEETS
December 31,
ASSETS 1994 1993
------------ ------------
Investment in insured mortgages, at amortized
cost:
Acquired insured mortgages $ 11,938,801 $ 26,415,525
Originated insured mortgages 14,837,200 22,810,025
------------ ------------
26,776,001 49,225,550
Less: unamortized discount (3,067,727) (5,883,351)
------------ ------------
23,708,274 43,342,199
Investment in insured mortgages, at fair value:
Acquired insured mortgages 13,355,026 --
Cash and cash equivalents 722,986 3,778,696
Receivables and other assets 374,647 509,426
------------ ------------
Total assets $ 38,160,933 $ 47,630,321
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 823,903 $ 3,810,552
Accounts payable and accrued expenses 96,483 70,812
------------ ------------
Total liabilities 920,386 3,881,364
------------ ------------
Partners' equity:
Limited partners' equity 40,306,817 48,421,623
General partner's deficit (4,915,023) (4,672,666)
Net unrealized gains on investment in
insured mortgages 1,848,753 --
------------ ------------
Total partners' equity 37,240,547 43,748,957
------------ ------------
Total liabilities and partners'
equity $ 38,160,933 $ 47,630,321
============ ============
The accompanying notes are an integral part
of these financial statements.
/TABLE
24
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF OPERATIONS
For the years ended December 31,
1994 1993 1992
------------ ------------ ------------
Income:
Mortgage investment income $ 3,639,376 $ 4,454,241 $ 4,539,068
Interest and other income 96,513 32,722 207,627
------------ ------------ ------------
3,735,889 4,486,963 4,746,695
------------ ------------ ------------
Expenses:
Asset management fee to related parties 355,880 439,158 451,813
General and administrative 295,360 282,310 407,146
------------ ------------ ------------
651,240 721,468 858,959
------------ ------------ ------------
Earnings before mortgage dispositions 3,084,649 3,765,495 3,887,736
Mortgage Dispositions:
Gains 195,820 762,250 --
Losses -- -- (21,103)
------------ ------------ ------------
Net earnings $ 3,280,469 $ 4,527,745 $ 3,866,633
============ ============ ============
Net earnings allocated to:
Limited partners - 97.1% $ 3,185,335 $ 4,396,440 $ 3,754,501
General partner - 2.9% 95,134 131,305 112,132
------------ ------------ ------------
$ 3,280,469 $ 4,527,745 $ 3,866,633
============ ============ ============
Net earnings per Unit of limited
partnership interest $ .32 $ .44 $ .38
============ ============ ============
The accompanying notes are an integral part
of these financial statements.
/TABLE
25
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the years ended December 31, 1994, 1993 and 1992
Net
Unrealized
Gains on
Investment
General Limited in Insured
Partner Partners Mortgages Total
------------ ------------- ------------ -------------
Balance, January 1, 1992 $ (4,179,893) $ 64,920,998 $ -- $ 60,741,105
Net earnings 112,132 3,754,501 -- 3,866,633
Distribution paid or accrued of
of $1.82 per Unit, including
return of capital of $1.44
per Unit (543,571) (18,200,228) -- (18,743,799)
------------ ------------- ------------ ------------
Balance, December 31, 1992 (4,611,332) 50,475,271 -- 45,863,939
Net earnings 131,305 4,396,440 -- 4,527,745
Distributions paid or accrued
of $.645 per Unit, including
return of capital of $.205
per Unit (192,639) (6,450,088) -- (6,642,727)
------------ ------------- ----------- -------------
Balance, December 31, 1993 (4,672,666) 48,421,623 -- 43,748,957
Net earnings 95,134 3,185,335 -- 3,280,469
Distributions paid or accrued of
$1.13 per Unit, including
return of capital of $.81
per Unit (337,491) (11,300,141) -- (11,637,632)
Net unrealized gains on investment
on insured mortgages -- -- 1,848,753 1,848,753
------------ ------------- ----------- -------------
Balance, December 31, 1994$ (4,915,023) $ 40,306,817 $ 1,848,753 $ 37,240,547
============ ============= =========== =============
Limited Partnership Units
outstanding - December 31,
1994, 1993 and 1992 10,000,125
=============
/TABLE
26
The accompanying notes are an integral
part of these financial statements.
27
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CASH FLOWS
For the years ended December 31,
1994 1993 1992
------------ ------------ ------------
Cash flows from operating activities:
Net earnings $ 3,280,469 $ 4,527,745 $ 3,866,633
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Loan losses -- -- 21,103
Gains on mortgage dispositions (195,820) (762,250) --
Changes in assets and liabilities:
Decrease (increase) in receivables and other assets 134,779 (22,426) 901,486
Decrease in due to related affiliates -- -- (142,920)
Increase (decrease) in accounts payable and
accrued expenses 25,671 (6,056) (100,185)
------------ ------------ ------------
Net cash provided by operating activities 3,245,099 3,737,013 4,546,117
------------ ------------ ------------
Cash flows from investing activities:
Proceeds from disposition of insured mortgages 8,137,327 2,965,249 13,652,589
Receipt of mortgage principal from scheduled payments 186,145 215,680 195,279
Payment from redemption of HUD debentures -- -- 34,948
------------ ------------ ------------
Net cash provided by investing activities 8,323,472 3,180,929 13,882,816
------------ ------------ ------------
Cash flows from financing activities:
Distributions paid to partners (14,624,281) (3,862,055) (18,682,005)
------------ ------------ ------------
Net (decrease) increase in cash and cash equivalents (3,055,710) 3,055,887 (253,072)
Cash and cash equivalents, beginning of year 3,778,696 722,809 975,881
------------ ------------ ------------
Cash and cash equivalents, end of year $ 722,986 $ 3,778,696 $ 722,809
============ ============ ============
The accompanying notes are an integral part
of these financial statements.
28
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
American Insured Mortgage Investors (the Partnership) was formed under the
Uniform Limited Partnership Act in the state of California on July 12, 1983.
From inception through September 6, 1991, AIM Capital Management Corp. served as
managing general partner (with a partnership interest of 2.8%), IRI Properties
Capital Corp. served as corporate general partner (with a partnership interest
of 0.1%) and Z Square G Partners II served as the associate general partner
(with a partnership interest of 0.1%). All of the foregoing general partners are
sometimes collectively referred to as former general partners.
At a special meeting of the limited partners and unitholders of the
Partnership held on August 16, 1991, a majority of these interests approved,
among other items, the assignment of the general partner interests and the
shares of the company which acts as the assignor limited partner in the
Partnership.
Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded
the former general partners to become the sole general partner of the
Partnership. CRIIMI, Inc. purchased the interests of the former managing
general partner and the former corporate general partner pursuant to the terms
of the Partnership Agreement. The interest of the former associate general
partner was purchased by the Partnership on September 6, 1991, pursuant to the
terms of the Partnership Agreement. CRIIMI, Inc. is a wholly-owned subsidiary
of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc.
CRIIMI MAE is managed by an adviser whose general partner is C.R.I., Inc. (CRI).
Also, on September 6, 1991, AIM Acquisition Partners, L.P. (the Advisor)
succeeded Integrated Funding, Inc. (Integrated Funding) as the advisor to the
Partnership. AIM Acquisition Corporation (AIM Acquisition) is the general
partner of the Advisor and the limited partners include, but are not limited to,
AIM Acquisition, The Goldman Sachs Group, L.P., Broad Inc. and a limited
partnership formed by CRI and CRIIMI MAE. Pursuant to the terms of certain
amendments to the Partnership Agreement, as discussed below, the General Partner
is required to receive the consent of the Advisor prior to taking certain
significant actions which affect the management and policies of the Partnership.
The limited partners and Unitholders of the Partnership approved the execution
of a Sub-advisory agreement (the Sub-advisory Agreement) with CRI/AIM
Management, Inc., an affiliate of CRI, pursuant to which CRI/AIM Management,
Inc. manages the Partnership's portfolio and disposes of the Partnership's
mortgage investments.
CRIIMI MAE's Board of Directors has determined that it is in CRIIMI MAE's
best interest to consider a proposed transaction in which CRIIMI MAE would
become a self-managed and self-administered real estate investment trust (REIT).
Under the terms of the proposed transaction, CRIIMI MAE and its affiliates would
acquire certain mortgage investment, servicing origination and advisory business
from affiliates of CRI, including the Sub-advisory Agreement in place with
respect to the Partnership. This transaction will have no effect on the
Partnership's financial statements.
Prior to the expiration of the Partnership's reinvestment period in
November 1988, the Partnership was engaged in the business of originating
mortgage loans (Originated Insured Mortgages) and acquiring mortgage loans
(Acquired Insured Mortgages and, together with Originated Insured Mortgages
referred to herein as Insured Mortgages). In accordance with the terms of the
29
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION - Continued
Partnership Agreement, the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently, its primary objective is to manage
its portfolio of mortgage investments, all of which are insured under Section
221(d)(4) or Section 231 of the National Housing Act. The Partnership Agreement
states that the Partnership will terminate on December 31, 2008, unless
previously terminated under the provisions of the Partnership Agreement.
During the first quarter of 1992, the General Partner applied to list the
Units on the American Stock Exchange (AMEX) and the application was approved by
AMEX. Trading commenced on April 8, 1992 with a trading symbol of AIA.
2. SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
--------------------
The financial statements of the Partnership are prepared on the
accrual basis of accounting in accordance with generally accepted
accounting principles.
Investment in Insured Mortgages
-------------------------------
The Partnership's investment in Insured Mortgages is comprised of
participation certificates evidencing a 100% undivided beneficial interest
in government insured multifamily mortgages issued or sold pursuant to
programs of the Federal Housing Administration (FHA) (FHA-Insured
Certificates) and FHA-insured mortgage loans (FHA-Insured Loans). The
mortgages underlying the FHA-Insured Certificates and FHA-Insured Loans are
non-recourse first liens on multifamily residential developments.
Payment of principal and interest on FHA-Insured Certificates and FHA-
Insured Loans is insured by the United States Department of Housing and
Urban Development (HUD) pursuant to Title 2 of the National Housing Act.
Prior to January 1, 1994, the Partnership accounted for its investment
in Insured Mortgages at amortized cost in accordance with Statement of
Financial Accounting Standard No. 65 "Accounting for Certain Mortgage
Banking Activities" (SFAS 65) since it had the ability and intent to hold
these assets for the foreseeable future. The difference between the cost
and the unpaid principal balance at the time of purchase is carried as a
discount or premium and amortized over the remaining contractual life of
the mortgage using the effective interest method. The effective interest
method provides a constant yield of income over the term of the mortgage.
Mortgage investment income is comprised of amortization of the discount
plus the stated mortgage interest payments received or accrued less
amortization of the premium.
In May 1993, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 115 "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). This statement
requires that investments in debt and equity securities be classified into
one of the following investment categories based upon the circumstances
under which such securities might be sold: Held to Maturity, Available for
Sale, and Trading. Generally, certain debt securities for which an
30
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
enterprise has both the ability and intent to hold to maturity, should be
accounted for using the amortized cost method and all other securities must
be recorded at their fair values.
As of December 31, 1994, the weighted average remaining term of the
Partnership's investments in FHA-Insured Certificates is approximately 27
years. However, the Partnership Agreement states that the Partnership will
terminate in approximately 14 years, on December 31, 2008, unless
previously terminated under the provisions of the Partnership Agreement.
As the Partnership is anticipated to terminate prior to the weighted
average remaining term of its FHA-Insured Certificates, the Partnership
does not have the ability, at this time, to hold these investments to
maturity. Consequently, the General Partner believes that the
Partnership's FHA-Insured Certificates should be included in the Available
for Sale category. Although the Partnership's FHA-Insured Certificates are
classified as Available for Sale for financial statement purposes, the
General Partner does not intend to voluntarily sell these assets other than
those which may be sold as a result of a default or those which are
eligible to be put to FHA at the expiration of 20 years from the date of
the final endorsement.
In connection with this classification, as of December 31, 1994, all
of the Partnership's investments in FHA-Insured Certificates are recorded
at fair value, with the net unrealized gains on these investments reported
as a separate component of partners' equity. Subsequent increases or
decreases in the fair value of FHA-Insured Certificates classified as
Available for Sale will be included as a separate component of partners'
equity. Realized gains and losses on FHA-Insured Certificates classified
as Available for Sale will continue to be reported in earnings. The
amortized cost of the investments in this category is adjusted for
amortization of discounts to maturity. Such amortization is included in
mortgage investment income.
As of January 1, 1994, and for the first three quarters of 1994, the
Partnership adopted SFAS 115 for all of its mortgage investments. Upon
further consideration and interpretation of SFAS 115, as of December 31,
1994, the Partnership has only applied this accounting pronouncement to the
FHA-Insured Certificates held in its portfolio. The Partnership continues
to account for its FHA-Insured Loans in accordance with SFAS 65, or at
amortized cost, because such loans are not securities and therefore are not
subject to SFAS 115. The impact of this change is immaterial to the
financial statements of the Partnership.
Gains from dispositions of mortgage investments are recognized upon
the receipt of cash or debentures.
Losses on dispositions of mortgage investments are recognized when it
becomes probable that a mortgage will be disposed of and that the
disposition will result in a loss. In the case of Originated Insured
Mortgages fully insured by HUD, the Partnership's maximum exposure for
purposes of determining the loan losses would generally be an assignment
fee charged by HUD representing approximately 1% of the unpaid principal
balance of the Originated Insured Mortgage at the date of default, plus the
unamortized balance of acquisition fees and closing costs paid in
31
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
connection with the acquisition of the Originated Insured Mortgage and the
loss of 30-days accrued interest.
Since Acquired Insured Mortgages were purchased at a discount from the
unpaid principal balance of the mortgage, the Partnership's investment in
the Acquired Insured Mortgages is less than the amount that would be
recovered from HUD in the event of a default. Therefore, the Partnership
would experience no loan losses on discounted Acquired Insured Mortgages in
the case of a default.
32
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES - Continued
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consist of time and demand deposits with
original maturities of three months or less.
Income Taxes
------------
No provision has been made for Federal, state or local income taxes,
in the accompanying financial statements since they are the personal
responsibility of the unitholders.
Reclassification
----------------
Certain amounts in the financial statements for the year ended
December 31, 1993 have been reclassified to conform with the 1994
presentation.
3. TRANSACTIONS WITH RELATED PARTIES
The principal officers of the General Partner for the years ended December
31, 1994, 1993 and 1992 did not receive fees for serving as officers of the
General Partner, nor are any fees expected to be paid to the officers in the
future.
The General Partner and certain affiliated entities have, during the
Partnership's years ended December 31, 1994, 1993 and 1992, earned or received
compensation or payments for services from the Partnership as follows:
33
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
3. TRANSACTIONS WITH RELATED PARTIES - Continued
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
----------------------------------------------
Capacity in Which For the year ended December 31,
Name of Recipient Served/Item 1994 1993 1992
- ----------------- ---------------------------- -------- -------- --------
CRIIMI, Inc.(1) General Partner/Distribution $ 337,491(4) $192,639(4) $543,571(4)
AIM Acquisition Advisor/Asset Management Fee 355,880 439,158 451,813
Partners, L.P.(2)
CRI(3) Affiliate of General Partner/ 79,972 67,076 127,953
Expense Reimbursement
(1) The General Partner, pursuant to amendments to the Partnership
Agreement effective September 6, 1991, is entitled to receive 2.9% of the
Partnership's income, loss, capital and distributions including, without
limitation, the Partnership's Adjusted Cash from Operations and Proceeds of
Mortgage Prepayments, Sales or Insurance (both as defined in the Partnership
Agreement).
(2) The Advisor, pursuant to the Purchase Agreement and amendments to the
Partnership Agreement, effective October 1, 1991, is entitled to an Asset
Management Fee equal to 0.95% of Total Invested Assets (as defined in the
Partnership Agreement).
Of the amounts paid to the Advisor, the Sub-advisor, CRI/AIM Management,
Inc., earned a fee equal to $104,880, $129,429 and $133,160 or 0.28% of Total
Invested Assets, for the years ended December 31, 1994, 1993 and 1992,
respectively.
(3) These amounts are paid to CRI as reimbursement for expenses incurred
on behalf of the General Partner and the Partnership. As discussed in Note 1,
the proposed transaction in which CRIIMI MAE would become a self-managed and
self-administered REIT has no impact on the payments required to be made by the
Partnership, other than that the expense reimbursement currently paid by the
Partnership to CRI in connection with the provision of services by the Sub-
advisor will be paid to an affiliate of CRIIMI MAE subsequent to the
consummation of the proposed transaction.
(4) These amounts include special distributions resulting from mortgage
dispositions, as discussed in Note 5.
4. INVESTMENT IN INSURED MORTGAGES
In connection with the Partnership's implementation of SFAS 115 as of
January 1, 1994 (see Note 2), the Partnership's investments in FHA-Insured
Certificates are recorded at fair value, as estimated below, as of December 31,
34
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT IN INSURED MORTGAGES - Continued
1994. The difference between the amortized cost and the fair value of FHA-
Insured Certificates represents the net unrealized gains on these investments
and is reported as a separate component of partners' equity as of December 31,
1994. The fair value of FHA-Insured Certificates is based on quoted market
prices. The Partnership's Investment in FHA-Insured Loans is recorded at
amortized cost as of December 31, 1994 and 1993.
As of December 31, 1994, the Partnership had remaining investments in nine
FHA-Insured Certificates and six FHA-Insured Loans with an aggregate amortized
cost of $35,214,547, face value of $40,966,282, and fair value of $39,420,211.
All of the Partnership's Insured Mortgages are insured by HUD for 100% of their
current face value, less a 1% assignment fee. The mortgages underlying the FHA-
Insured Certificates and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments owned by entities unaffiliated with the
Partnership, its General Partner, or their affiliates and are insured under
Section 221(d)(4) or Section 231 of the National Housing Act. As of December
31, 1994, all of the Partnership's Insured Mortgages are current with respect to
the payment of principal and interest.
The following table summarizes the Partnership's Investment in Insured
Mortgages as of December 31, 1994:
Amortized Fair
Cost Value
------------ ------------
Investment in FHA-Insured
Loans:
Acquired insured mortgages $ 9,118,002 $ 11,236,174
Originated insured mortgages 14,590,272 14,829,011
------------ ------------
$ 23,708,274 $ 26,065,185
============ ============
Investment in FHA-Insured
Certificates:
Acquired insured mortgages $ 11,506,273 $ 13,355,026
============ ============
In addition to base interest payments under Originated Insured Mortgages,
the Partnership is entitled to additional interest based on a percentage of the
net cash flow from the underlying development and of the net proceeds from the
refinancing, sale or other disposition of the underlying development (referred
to as Participations). During the year ended December 31, 1994, the Partnership
received $13,010 from the Participations. During the years ended December 31,
1993 and 1992, the Partnership did not receive any monies from the
Participations. These amounts, if any, are included in mortgage investment
income in the accompanying statements of operations.
Mortgage Dispositions
35
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT IN INSURED MORTGAGES - Continued
- ---------------------
A summary of dispositions that are included in the statements of operations
for the years ended December 31, 1994, 1993 and 1992 are as follows:
36
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT IN INSURED MORTGAGES - Continued
Financial
Statement
Year of Type of Net Carrying Net Gain/(Loss)
Complex Name Disposition Disposition Value Proceeds Recognized
- ------------------ ----------- ----------- ------------ ------------ -----------
Foxfire West Apts.(a) 1992(c) Assignment $ -- $ 158,984 $ --
Clark & Elm Apts.(b) 1992 Sale of a
defaulted
mortgage 13,673,692 13,652,589 (21,103)
Clark & Elm Apts.(b) 1993 Sale of a
defaulted
mortgage -- 108,415(d) 108,415
Chapelgate Apts.(a) 1993 Sale of a
defaulted
mortgage 682,731 901,171 218,440
Cumberland Village(a) 1993 Sale of a
defaulted
mortgage 1,520,268 1,955,663 435,395
Hidden Oaks (b) 1994 Prepayment 7,941,507 8,137,327(e) 195,820
(a) Disposition of Acquired Insured Mortgage.
(b) Disposition of Originated Insured Mortgage.
(c) Approximately 90% of the net proceeds were received and distributed in 1991. The remaining balance was received and
distributed in 1992.
(d) Represents additional proceeds received resulting from an adjustment to the 1992 sale price.
(e) Includes a prepayment penalty of approximately $260,000.
/TABLE
37
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
5. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the years ended December 31, 1994, 1993 and 1992 are as follows:
Quarter Ended 1994 1993 1992
- ------------- -------- -------- --------
March 31, $ 0.89(1) $ 0.095 $ 1.53(3)
June 30, 0.08 0.090 0.10
September 30, 0.08 0.090 0.09
December 31, 0.08 0.370(2) 0.10
-------- -------- --------
$ 1.13 $ 0.645 $ 1.82
======== ======== ========
(1) This includes a special distribution of $0.81 per Unit comprised of: (i)
$0.80 per Unit return of capital and capital gain from the disposition of
the insured mortgage on Hidden Oaks Apartments and (ii) $0.01 per Unit of
previously accrued but undistributed interest received from the insured
mortgage on Creekside Village.
(2) This includes a special distribution of $0.28 per Unit comprised of: (i)
$0.21 per Unit return of capital from the disposition of the insured
mortgages on Chapelgate Apartments and Cumberland Village and (ii) $0.07
per Unit capital gain from these dispositions plus additional sales
proceeds from the sale of the insured mortgage on Clark and Elm Apartments.
(3) This includes a $1.34 per Unit special distribution due to the disposition
of the insured mortgage on Clark and Elm Apartments and the receipt of the
remaining 9% of assignment proceeds from the insured mortgage on Foxfire
West Apartments.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions and cash flow from operations, which includes regular
interest income and principal from Insured Mortgages. Although Insured
Mortgages yield a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each year due to (1) the
fluctuating yields in the short-term money market where the monthly mortgage
payments received are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base due to monthly mortgage
payments received or mortgage dispositions, (3) variations in the cash flow
attributable to the delinquency or default of Insured Mortgages and (4) changes
in the Partnership's operating expenses.
6. PARTNERS' EQUITY
Depositary Units representing economic rights in limited partnership
interests (Units) were issued at a stated value of $20. A total of 10,000,000
Units were issued for an aggregate capital contribution of $200,000,000. In
addition, the initial limited partner contributed $2,500 to the capital of the
Partnership and received 125 Units in exchange therefor, and the former general
partners contributed a total of $1,000 to the Partnership.
38
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
7. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations
for the years ended December 31, 1994, 1993 and 1992:
(In Thousands, Except Per Unit Data)
1994
Quarter ended
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------
Income $ 996 $ 937 $ 901 $ 902
Gain (loss) on mortgage
dispositions 236 -- -- (40)
Net earnings 1,054 779 733 714
Net earnings per Limited
Partnership Unit .10 .08 .07 .07
1993
Quarter ended
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------
Income $ 1,129 $ 1,126 $ 1,124 $ 1,108
Gain on mortgage dispositions -- -- 108 654
Net earnings 920 934 1,052 1,622
Net earnings per Limited .09 .09 .10 .16
Partnership Unit
1992
Quarter ended
March 31 June 30 September 30 December 31
---------- ---------- ------------ -----------
Income $ 1,304 $ 1,182 $ 1,131 $ 1,129
Loss on mortgage disposition (21) -- -- --
Net earnings 1,027 927 919 994
Net earnings per Limited
Partnership Unit .10 .09 .09 .10
/TABLE
39
AMERICAN INSURED MORTGAGE INVESTORS
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1994
Interest Face Net Annual Payment
Maturity Put Rate on Amount of Carrying Value (Principal and
Development Name/Location Date Date(1) Mortgage(5) Mortgage (3)(7)(9)(10) Interest)(5)(8)
- ------------------------- -------- ------------------- ------------ ---------------- ---------------
Acquired Insured Mortgages
- --------------------------
Investment in FHA-Insured Loans
(carried at amortized cost)(2)
Eastdale Apts.
Montgomery, AL 3/23 10/01 7.5% $ 6,862,561 $ 5,179,068 592,406
North River Place
Chillecothe, OH 10/21 12/01 7.5% 3,222,426 2,435,541 279,509
Portervillage I Apts.
Porterville, CA 8/21 5/01 7.5% 1,192,395(4) 967,618 103,733(4)
Town Park Apts.
Rockingham, NC 10/22 10/02 7.5% 661,419(4) 535,775 56,755(4)
------------ ------------
Total Investment in FHA-Insured
Loans - Acquired Insured Mortgages 11,938,801 9,118,002
------------ ------------
Originated Insured Mortgages
- ----------------------------
Investment in FHA-Insured Loans
(carried at amortized cost)(2)
Creekside Village
Beaverton, OR 11/25 1/01 11.50%(6) 5,156,167 5,342,046 612,632(6)
Waters Edge Apts.
Columbus, OH 1/31 5/03 8.75%(6) 9,681,033 9,248,226 885,419(6)
------------ ------------
Total Investment in FHA-Insured Loans -
Originated Insured Mortgages 14,837,200 14,590,272
------------ ------------
Total Investment in FHA-Insured Loans $ 26,776,001 $ 23,708,274
------------ ------------
See notes to Schedule IV - Mortgage Loans on Real Estate.
/TABLE
40
AMERICAN INSURED MORTGAGE INVESTORS
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1994
Interest Face Net Annual Payment
Maturity Put Rate on Amount of Carrying Value (Principal and
Development Name/Location Date Date(1) Mortgage(5) Mortgage (3)(7)(9)(10) Interest)(5)(8)
- ------------------------- -------- ------------------- ------------ ---------------- ---------------
Acquired Insured Mortgages
- --------------------------
Investment in FHA-Insured
Certificates
(carried at fair value)
Bay Pointe Apts.
Lafayette, IN 2/23 10/02 7.5% $ 2,150,243(4) $ 2,023,644 $ 185,272(4)
Baypoint Shoreline Apts.
Duluth, MN 1/22 10/01 7.5% 1,017,099(4) 957,242 87,967(4)
Berryhill Apts.
Grass Valley, CA 1/21 11/02 7.5% 1,324,128(4) 1,246,309 115,899(4)
Brougham Estates II
Kansas City, KS 11/22 3/02 7.5% 2,693,974(4) 2,535,264 230,860(4)
College Green Apts.
Wilmington, NC 3/23 2/02 7.5% 1,445,692(4) 1,360,488 123,455(4)
Fox Run Apts.
Dothan, AL 10/19 11/99 7.5% 1,305,052(4) 1,228,511 116,242(4)
Kaynorth Apts.
Lansing, MI 4/23 9/02 7.5% 1,961,024(4) 1,845,437 167,318(4)
Lakeside Apts.
Bennettsville, SC 1/22 2/02 7.5% 408,182(4) 384,160 35,303(4)
Westbrook Apts.
Kokomo, IN 11/22 9/02 7.5% 1,884,887(4) 1,773,971 163,177(4)
------------ ------------
Total Investment in FHA-Insured Certificates 14,190,281 13,355,026
------------ ------------
TOTAL INVESTMENT IN INSURED MORTGAGES $ 40,966,282 $ 37,063,300
============ ============
See notes to Schedule IV - Mortgage Loans on Real Estate
/TABLE
41
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
(1) Under the Section 221 program of the National Housing Act of 1937, as
amended, a mortgagee has the right to assign a mortgage ("put") to FHA at
the expiration of 20 years from the date of final endorsement if the
mortgage is not in default at such time. Any mortgagee electing to assign
an FHA-insured mortgage to FHA will receive in exchange therefore HUD
debentures having a total face value equal to the then outstanding
principal balance of the FHA-insured mortgage plus accrued interest to the
date of assignment. These HUD debentures will mature 10 years from the date
of assignment and will bear interest at the "going Federal rate" at such
date. This assignment procedure is applicable to an insured mortgage which
had a firm or conditional FHA commitment for insurance on or before
November 30, 1983. The Partnership anticipates that each eligible insured
mortgage, for which a prepayment has not occurred and which has not been
sold, will be assigned to FHA at the expiration of 20 years from the date
of final endorsement. The Partnership, therefore, does not anticipate
holding any eligible insured mortgage beyond the expiration of 20 years
from final endorsement of that insured mortgage.
(2) Inclusive of closing costs and acquisition fees.
(3) Prepayment of these insured mortgages would be based upon the unpaid
principal balance at the time of prepayment.
(4) These amounts represent the Partnership's 50% interest in these insured
mortgages. The remaining 50% interest was acquired by AIM 85.
(5) In addition, the servicer of the insured mortgages, an unaffiliated third
party, is entitled to receive compensation for certain services rendered in
an amount up to ten basis points (.10%) of the unpaid principal balance of
the insured mortgages.
(6) This represents the base interest rate during the permanent phase of these
insured mortgage loans. Additional interest, (referred to as
Participations) measured as a percentage of surplus cash and a percentage
of the proceeds from sale or refinancing of the development (as defined in
the Participation Agreements), will also be due. The Partnership received
$13,010 from the Participations for the year ended December 31, 1994. No
payments were received for the years ended December 31, 1993 or 1992 as a
result of the Participations.
(7) The mortgages underlying the Partnership's investment in FHA-Insured
Certificates and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments.
(8) Principal and interest are payable at level amounts over the life of the
insured mortgages.
(9) A reconciliation of the carrying value of Insured Mortgages, for the years
ended December 31, 1994 and 1993, is as follows:
1994 1993
------------ ------------
Beginning balance $ 43,342,199 $ 45,760,878
Net gain on mortgage
dispositions 195,820 762,250
42
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE - Continued
Disposition of Insured
Mortgages (8,137,327) (2,965,249)
Principal receipts on
Insured Mortgages (186,145) (215,680)
Net unrealized gains on
investment in
Insured Mortgages 1,848,753 --
------------ ------------
Ending balance $ 37,063,300 $ 43,342,199
============ ============
(10) The tax basis of the Insured Mortgages was approximately $34.9 million and
$43.1 million as of December 31, 1994 and 1993, respectively.