-----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, Mo3kXxYAcDvVfi5PkR9i1FQP5Zs3KQdLEHp4wNM42g2eMEz9POwu9b3ZRy5uhvIT dkflJdo2eJyzmPyF9e8vDg== 0000950146-99-000683.txt : 19990409 0000950146-99-000683.hdr.sgml : 19990409 ACCESSION NUMBER: 0000950146-99-000683 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990331 DATE AS OF CHANGE: 19990408 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE CO CENTRAL INDEX KEY: 0001043325 STANDARD INDUSTRIAL CLASSIFICATION: 6162 IRS NUMBER: 133916825 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-13237 FILM NUMBER: 99583873 BUSINESS ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 MAIL ADDRESS: STREET 1: 625 MADISON AVENUE CITY: NEW YORK STATE: NY ZIP: 10022 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) _X_ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1998 OR ___ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13237 CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY (Exact name of Registrant as specified in its Trust Agreement) Delaware 13-3949418 - - ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 625 Madison Avenue, New York, New York 10022 - - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 421-5333 Securities registered pursuant to Section 12(b) of the Act: Title of each class ------------------------------------------ Shares of Beneficial Interest Name of each exchange on which registered: ------------------------------------------ American Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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 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] The approximate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of March 9, 1999 was $262,831,309, based on a price of $13 per share, the closing sales price for the Registrant's shares of beneficial interest on the American Stock Exchange on that date. As of March 9, 1999 there were 20,580,986 outstanding shares of the Registrant's shares of beneficial interest. DOCUMENTS INCORPORATED BY REFERENCE Part III: Those portions of the Registrant's Proxy Statement for Annual Meeting of Shareholders to be held on June 16, 1999, which are incorporated into Items 10, 11, 12 and 13. Index to exhibits may be found on page 40 Page 1 of 97 CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "BELIEVES," "ANTICIPATES," "EXPECTS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. STATEMENTS LOOKING FORWARD IN TIME ARE INCLUDED IN THIS ANNUAL REPORT ON FORM 10-K PURSUANT TO THE "SAFE HARBOR" PROVISION OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES WHICH COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDING, BUT NOT LIMITED TO, THOSE SET FORTH IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS." READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE HEREOF. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT EVENTS OR CIRCUMSTANCES OCCURRING AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF UNANTICIPATED EVENTS. PART I Item 1. Business. General - - ------- Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware business trust which is engaged in the acquisition and ownership (either directly or indirectly) of tax-exempt participating and non-participating First Mortgage Bonds ("FMBs") issued by various state or local governments or other agencies or authorities and secured by participating and non-participating mortgage loans on the underlying properties ("Underlying Properties"). As of December 31, 1998, the Company owned a portfolio of 49 FMBs. The Company is organized and managed as a single business segment. The Underlying Properties securing the bonds are garden apartments located in nineteen metropolitan markets in fourteen states. The properties range in size from 70 units to 550 units with an average size of 231 units. All of the properties have an amenity package, competitive for their respective markets, with many including swimming pools, clubhouses, exercise rooms and tennis courts. There are 18 FMBs, which were acquired in 1997 and 1998, with Underlying Properties either under construction or undergoing major rehabilitation. The remaining 31 properties in the portfolio average 9-11 years in age. The portfolio reports an average occupancy of 94.3% as of February 28, 1999. Net operating income, in the aggregate, at the Underlying Properties has increased an average of approximately 3% per annum since 1992. The Company does not operate as a mortgage REIT, which generally utilize high levels of leverage and acquire subordinated interests in commercial and/or residential mortgage- backed securities. Rather, the Company utilizes low levels of leverage and generally originates and acquires long-term, fixed-rate, tax-exempt FMBs. As a result, the Company did not expect to experience the ill-effects associated with the volatile interest rate environment during 1998. Pursuant to its Trust Agreement, the Company is only able to incur leverage or other financing up to 50% of the Company's Total Market Value (as defined in the Trust Agreement) as of the date incurred (the "50% Limit"). The Company expects to seek shareholder approval at the 1999 annual meeting to amend the Trust Agreement to permit the Company to exceed the 50% Limit with respect to short term borrowings of no more than approximately 5% of Total Market Value. Mortgage REITs typically incur leverage at ratios ranging from between 3:1 to 10:1. In general, the FMBs that the Company either originates or acquires call for ten-year restrictions from prepayments, eliminating the Company's susceptibility to significant levels of repayment risk as a result of interest rate reductions. Consistent with the foregoing, the Company focuses on providing investors with a stable level of distributions, even through unstable markets. Due to the Company's low level of leverage, the Company has not been affected by the recent lack of liquidity that is currently impairing mortgage REITs and its portfolio does not contain assets that are especially vulnerable to volatility during periods of interest rate fluctuations. Organization - - ------------ The Company was formed on October 1, 1997 as the result of the consolidation (the "Consolidation") of three publicly registered limited partnerships, Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III") (the "Partnerships", and each individually a "Partnership"). One of the general partners of the Partnerships was an affiliate of Related Capital Company ("Related"). Unless otherwise indicated, the "Company", as hereinafter used, refers to Charter Municipal Mortgage Acceptance Company and its subsidiary and, for references prior to October 1, 1997, refers to Tax Exempt II. Pursuant to the Consolidation, the Company issued shares of beneficial interest (the "Shares") to all partners in each of the Partnerships in exchange for their interests in the Partnerships based upon each partner's proportionate interest in the Shares issued to their Partnership in the Consolidation. The Shares commenced trading on the American Stock Exchange on October 1, 1997 under the symbol "CHC". As of December 31, 1998, there were 20,579,448 Shares outstanding. For financial accounting and reporting purposes, the Consolidation was accounted for using the purchase method of accounting. Under this method, the Partnership with the investor group receiving the largest ownership in the Company, in this case Tax Exempt II, is deemed to be the acquirer. As the surviving entity for accounting purposes, Tax Exempt II's assets and liabilities were recorded by the Company at their historical cost, with the assets and liabilities of the other Partnerships recorded at their estimated fair values for each Partnership (an aggregate of approximately $158,129,000) as set forth in the Solicitation Statement of the Company dated June 18, 1997 (the "Solicitation Statement"). Results of operations and other operating financial data for the Company for the years ended December 31, 1998, 1997 and 1996 include information for the entire periods presented with respect to Tax Exempt II, but only include information for the period October 1, 1997 to December 31, 1998 with respect to the other Partnerships. Prior to the Consolidation, Tax Exempt II was a limited partnership which was formed under the laws of the State of Delaware on April 11, 1986. The general partners of Tax Exempt II were Related Tax Exempt Associates II, Inc., a Delaware corporation (the "Related General Partner"), and Prudential Bache Properties, Inc. ("PBP"). The general partners managed and controlled the affairs of Tax Exempt II prior to the Consolidation. The Company is governed by a board of trustees comprised of two independent managing trustees and three managing trustees who are affiliated with Related. The Company has engaged Related Charter LP (the "Manager"), an affiliate of Related, to manage its day-to-day affairs. Each independent trustee is entitled to receive annual compensation for serving as a trustee in the aggregate amount of $15,000, payable in cash (maximum of $5,000 per year) and/or Shares valued based on the fair market value at the date of issuance. On June 4, 1998, 186 shares, having an aggregate value of $2,500 as of that date, were issued to each independent trustee as compensation for their services for the quarter ended December 31, 1997. Through the Manager, Related offers the Company -3- a core group of experienced staff and executive management, who provide the Company with services on both a full and part-time basis. These services include, among other things, acquisition, financial, accounting, capital markets, asset monitoring, portfolio management, investor relations and public relations services. The Company believes that it benefits significantly from its relationship with Related, since Related provides the Company with resources that are not generally available to small-capitalized, self-managed companies. As part of the settlement of class action litigation relating to the Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had the right to petition the United States District Court for the Southern District of New York (the "Court") for additional attorneys' fees ("Counsel's Fee Shares") in an amount to be determined in the Court's sole discretion. The Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed to be 25%) of the increase in value of the Company, ("the Added Value") if any, as of October 1, 1998 based upon the difference between (i) the trading prices of the Company's shares of beneficial interest during the six month period ended October 1, 1998 and (ii) the trading prices of the limited partnership units and the asset values of the Partnerships prior to October 1, 1997. As of October 1, 1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an Order and Stipulation of Settlement by the Court on February 18, 1999, Class Counsel is entitled to receive 608,955 shares of beneficial interest in the Company. The shares will be distributed to Class Counsel quarterly in eight equal distributions commencing within ten business days after Class Counsel advises the Company in writing of the persons in whose name the shares are to be issued. One-half of such shares will be in the form of Restricted Securities (restricted only with respect to the sale, assignment, pledge or other transfer of such securities) and the remaining one-half of such shares will be unrestricted. Restrictions on the Restricted Securities expire one year from the date of issuance. Management is currently negotiating a discounted cash settlement with Class Counsel in lieu of the issuance of shares; however, any such settlement would require the approval of the Board of Trustees and there can be no assurance that such negotiations will be successful. Business Plan - - ------------- The Company has initiated a focused business/strategic plan designed to increase cash available for distribution ("CAD"), generate increased tax-exempt income and as a result enhance the value of its stock. The plan concentrates principally on the origination and acquisition of additional tax-exempt FMBs secured by multfamily properties. The Company believes that it can earn above market rates of interest on its bond acquisitions by focusing its efforts primarily on affordable housing. The Manager estimates that nearly 50% of all new multifamily development contains an affordable component which produces tax credits pursuant to Section 42 of the Internal Revenue Code. The Manager also believes that each year a growing number of these properties are financed with tax-exempt bonds. The Company has designed a Direct Purchase Program specifically designed to appeal to developers of such properties. In general, these properties are smaller than traditional multifamily housing properties, averaging 150 units. The traditional method of financing tax-exempt properties requires the involvement of credit enhancement, rating agencies and investment bankers. Therefore, the up-front cost of such financing is generally much higher than traditional multifamily financing. Through its Direct Purchase Program, the Company will originate and acquire tax-exempt bonds without the cost associated with credit enhancement, rating agencies and investment bankers. The Company believes that the up-front cost savings to the developer will translate into a higher than market interest rate on the bonds acquired by the Company. The Company is positioned to market its Direct Purchase Program as a result of the Manager's affiliation with Related. Related and its predecessor companies have specialized in offering debt and equity products to mid-market multifamily owners and developers for over 25 years. Related has provided debt and equity financing to properties valued at over $7.8 billion. In addition, since 1987 Related has been one of the nation's leading provider of equity to developers of multifamily housing which benefits from tax credits. During 1998, the Manager's affiliation with Related allowed it to become one of the dominant lenders to developers and owners of affordable housing financed with tax-exempt bonds. During 1998, the Company's growth was financed by the Private Label Tender Option Program ("TOP") or similar programs, borrowings under the Interim Credit Facility (see below), funds generated from operations in excess of distributions and placements of equity. The Company is currently negotiating an increase in its TOP from $150 million to $200 million and, before the end of 1999, the Company expects to raise funds through an equity offering; however, there can be no assurance that either of these initiatives will be successful. During the period January 1, 1998 through December 31, 1998, the Company acquired 17 FMBs (see Note 3 to the financial statements in "Item 8. Financial Statements and Supplementary Data"). Structure of Existing First Mortgage Bonds - - ------------------------------------------ The principal and interest payments on each FMB are payable only from the cash flows of the Underlying Properties, including proceeds from a sale of an Underlying Property or the refinancing of the mortgage loan securing such FMBs (the "Mortgage Loans"). None of the FMBs constitute a general obligation of any state or local government, agency or authority. The structure of each Mortgage Loan mirrors the structure of the corresponding FMB which it secures. The seasoned original 31 FMBs call for interest only debt service payments during their respective terms (which generally are 24 to 30 years from issuance or re-issuance) with repayment of principal due in a lump sum "balloon" payment at the expiration of their respective terms or upon sale or refinancing. The newly acquired bonds (bonds acquired in 1997 and 1998) call for amortization or "sinking fund" payments, generally at the completion of rehabilitation or construction, of principal based on thirty to forty year level debt service amortization schedules. On all the FMBs the Company generally has the right to require redemption approximately 12 to 15 years from issuance or re-issuance and obligors generally are locked out of prepayment for seven to ten years from issuance or re-issuance. In addition to the stated base rates of interest of the FMBs which range from 4.87% to 8.5% per annum, certain of the FMBs provide for "contingent interest" which is equal to: (i) an amount equal to 50% to 100% of net property cash flow and 50% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annual compound interest at a rate -4- ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (ii) an amount equal to 25% to 50% of the remaining net property cash flow and 25% to 50% of the remaining net sale or refinancing proceeds, until the borrower has paid interest at a simple annual rate of 16% over the term of the FMB. Both the stated and contingent interest on the FMBs are exempt from federal income taxation. During the years ended December 31, 1998, 1997 and 1996, six, five and two FMBs, paid contingent interest amounting to approximately $960,000, $353,000 and $220,000, respectively. Structure of Modified First Mortgage Bonds - - ------------------------------------------ Certain of the FMB's have been modified reflecting current market conditions. These modifications have generally encompassed an extension of the maturity (10-20 years) together with a prepayment lock-out feature and/or prepayment penalties together with an extension of the mandatory redemption feature (5-10 years from modification). Stated interest rates have also been adjusted together with a change in the participation and contingent interest features. Base interest rates, contingent interest, prepayment lock-outs, mandatory redemption and maturity features vary dependent on the facts of a particular FMB, the developer, the Underlying Property's performance and requirements of bond counsel and local issuers. During 1998, the Highland Ridge, Willow Creek, Bristol Village, Thomas Lake and Mansion FMBs were modified (see Note 3 to the financial statements in "Item 8. Financial Statements and Supplementary Data"). The Company currently anticipates that it will modify certain other FMBs to reflect generally similar terms as those modified previously and in 1998, where and as appropriate. Structure of New First Mortgage Bonds - - ------------------------------------- Newly acquired FMBs will generally bear a fixed base interest rate and, to the extent permitted by existing regulations, they may or may not also provide for contingent interest. Terms are expected to be 5 to 35 years, although the Company may have the right to cause repayment prior to maturity through a mandatory redemption feature (5 to 7 years with up to 6 month's notice). In some cases, the principal of an FMB may amortize. New FMBs are generally not expected to be subject to optional prepayment during the first 5-10 years of the Company's ownership of the bonds and may carry prepayment penalties thereafter beginning at 5% of the outstanding principal balance, declining by 1% per annum. Certain new FMBs may be purchased at a discount from their face value. Up to 15% of the Total Market Value of the Company may be invested in FMBs secured by Underlying Properties in which affiliates of the Manager have a controlling interest, equity interest or security interest. The 15% limit is not applicable to properties to which the Manager or its affiliates have taken title for the benefit of the Company and only applies to new FMBs acquired after the consolidation. In selected circumstances and only in connection with the acquisition of tax-exempt FMBs the Company may acquire a small amount of taxable bonds to fund certain costs associated with the issuance of FMBs, that under current law cannot be funded by FMBs. First Mortgage Bonds - General - - ------------------------------ In order to protect the tax exempt status of the FMBs, the owners of the Underlying Properties are required to enter into certain agreements to own, manage and operate such Underlying Properties in accordance with requirements of the Internal Revenue Code of 1986, as amended. No single FMB provided interest income which exceeded 10% of the Company's total revenue for the years ended December 31, 1998, 1997 and 1996, except for the Bristol Village and Pelican Cove FMBs which provided 14% and 11%, respectively, of total revenue in 1996. Based on the face amount of FMBs at December 31, 1998, approximately 23% of the Underlying Properties are located in California, 15% are located in Florida, 14% are located in Missouri, 10% are located in Georgia and 10% are located in Minnesota. No other states comprise more than 10% of the total face amount. From time to time the Company has advanced funds to owners of certain Underlying Properties in order to preserve the underlying asset including completion of construction and/or when Underlying Properties have experienced operating difficulties including past due real estate taxes and/or deferred maintenance items. Such advances typically are secured by promissory notes and/or second mortgages. As of December 31, 1998, the face amount of such advances was $12,845,308, and their carrying value was $7,628,920, which is net of purchase accounting adjustments, and a reserve for collectibility of $138,000. The original obligors and owners of the Underlying Properties of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs have been replaced with affiliates of the Manager who have not made equity investments. These entities have assumed the day-to-day responsibilities and obligations of the Underlying Properties. Buyers are being sought who would make equity investments in the Underlying Properties and assume the nonrecourse obligations for the FMB. These properties are generally paying as interest an amount equal to the net cash flow generated by operations, which in some cases is less than the stated rate of the FMB. The Company has no present intention of declaring a default on these FMBs. The aggregate carrying value of these ten FMBs at December 31, 1998 was approximately $105,402,000 and the income earned from them for the year ended December 31, 1998 was approximately $7,497,000. From time to time, the Company enters into forbearance agreements and/or permanent modifications with certain borrowers. The determination as to whether it is in the best interest of the Company to enter into permanent modifications or forbearance agreements on the FMBs, advance second mortgages, or alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors. These factors include, but are not limited to, Underlying Property performance, owner cooperation and projected costs of foreclosure and litigation. Payments under each of the existing forbearance agreements are current as of December 31, 1998. With respect to the FMBs which are subject to forbearance agreements with the respective obligors, the difference between the stated interest rates and the rates paid (whether deferred and payable out of available future cash flow or, ultimately, from sale or refinancing proceeds) on FMBs is not accrued for financial statement purposes. The accrual of interest at the stated interest rate -5- will resume once an Underlying Property's ability to pay the stated rate has been adequately demonstrated. Unrecorded contractual interest income was approximately $3,047,000, $2,415,000 and $1,407,000 for the years ended December 31, 1998, 1997 and 1996, respectively. -6- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY The following table lists the FMBs that the Company owns together with the occupancy and rental rates of the Underlying Properties:
Carrying Average Minimum Face Amount Interest Stated Pay Rate at Occupancy at Rental Rates No. of Closing Amount at December Rate Paid Interest December 31, February 14, at December Rental Property Date of Bond 31, 1998 (G) for 1998* Rate* 1998* 1999 31, 1998 Units - - ------------------ ------- ----------- ----------- -------- -------- ----------- ------------ ------------ ------ The Mansion, Independence, MO 5/13/86 $19,450,000 $20,084,000 7.68%(C) 7.25% 7.25% 92.3% $460-805 550 Martin's Creek, Summerville, SC 5/20/86 7,300,000 8,443,000 8.25 8.25 8.25 99.0 450-710 200 East Ridge, Mt. Pleasant, SC 5/20/86 8,700,000 10,063,000 8.25 8.25 8.25 99.0 565-820 200 Highpointe Club, Harrisburg, PA 7/29/86 8,900,000 5,888,000 6.12 8.50 (B) 90.3 530-725 240 Cypress Run, Tampa, FL 8/14/86 15,402,428 13,067,000 5.84 8.50 (B) 87.6 460-775 408 Thomas Lake, Eagan, MN 9/02/86 12,975,000 13,643,000 7.50 7.50 7.50 98.6 758-1,247 216 North Glen, Atlanta, GA 9/30/86 12,400,000 12,914,000 7.00 7.00 7.00(K) 94.3 560-875 284 Greenway Manor, St. Louis, MO 10/09/86 12,850,000 15,313,000 8.93(D) 8.50 8.50 90.6 495-595 312 Clarendon Hills, Hayward, CA 12/08/86 17,600,000 13,880,000 6.31(I) 5.52 5.52 96.4 925-1,395 285 Cedar Creek, McKinney, TX 12/29/86 8,100,000 9,653,000 8.50 8.50 8.50 89.8 525-845 250 Sunset Terrace, Lancaster, CA 2/12/87 10,350,000 7,981,000 5.23 8.00 (B) 96.2 485-740 184 Bay Club, Mt. Pleasant, SC 9/11/86 6,400,000 7,403,000 8.25 8.25 8.25 97.5 620-680 164 Loveridge, Contra Costa, CA 11/13/86 8,550,000 6,593,000 5.00 8.00 (B) 86.3 640-875 148 The Lakes, Kansas City, MO 12/30/86 13,650,000 10,024,000 5.64(E) 4.87 4.87 92.9 435-630 400 Crowne Pointe, Olympia, WA 12/31/86 5,075,000 5,692,000 8.00 8.00 8.00 95.5 495-795 160 Orchard Hills, Tacoma, WA 12/31/86 5,650,000 6,337,000 8.00 8.00 8.00 98.8 465-755 174 Highland Ridge, St. Paul, MN 2/02/87 15,000,000 15,247,000 7.30(C) 7.25 7.25 97.4 775-1,285 228 Newport Village, Tacoma, WA 2/11/87 13,000,000 14,581,000 8.77(D) 8.00 8.00 90.7 460-600 402 Sunset Downs, Lancaster, CA 2/11/87 15,000,000 11,566,000 5.07 8.00 (B) 94.7 485-740 264 Pelican Cove, St. Louis, MO 2/27/87 18,000,000 20,189,000 7.89 8.00 (B) 95.7 495-680 402 Willow Creek, Ames, IA 2/27/87 6,100,000 6,200,000 7.44(C) 7.25 7.25 100.0 525-825 138 Cedar Pointe, Nashville, TN 4/22/87 9,500,000 9,323,000 7.00 7.00 7.00 96.2 525-810 210
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Carrying Average Minimum Face Amount Interest Stated Pay Rate at Occupancy at Rental Rates No. of Closing Amount at December Rate Paid Interest December 31, February 14, at December Rental Property Date of Bond 31, 1998 (G) for 1998* Rate* 1998* 1999 31, 1998 Units - - ------------------ ------- ----------- ----------- -------- -------- ----------- ------------ ------------ ------ Shannon Lake, Atlanta, GA 6/26/87 $12,000,000 $11,536,000 6.00% (M) 6.00% 94.5% $405-810 294 Bristol Village, Bloomington, MN 7/31/87 17,000,000 17,875,000 7.50 7.50% 7.50 96.5 735-1,269 290 Suntree, Ft. Myers, FL 7/31/87 7,500,000 7,586,000 6.59 8.00 6.50(F) 97.5 465-620 240 River Run, Miami, FL 8/07/87 7,200,000 8,075,000 9.11(I) 8.00 8.00 92.6 673-890 164 Players Club, Ft. Myers, FL 8/14/87 9,700,000 8,704,000 6.22 8.00 6.25(F) 75.7 460-600 288 Lakepoint, Dekalb City, GA 11/18/87 15,100,000 12,702,000 6.00 6.00 6.00 95.3 575-825 360 Sunset Village, Lancaster, CA 3/25/88 11,375,000 8,771,000 5.45 8.50 (B) 94.4 485-740 204 Sunset Creek, Lancaster, CA 3/25/88 8,275,000 6,381,000 5.14 8.50 (B) 94.4 485-740 148 Orchard Mill, Atlanta, GA 5/1/89 10,500,000 10,252,000 6.57 7.50 5.00(J) 96.6 535-745 238 Countryside North Memphis, TN 12/11/97 5,000,000 5,100,000 7.50 7.50 7.50 86.0 431-586 152 Ocean Air Norfolk, VA 4/20/98 10,000,000 10,000,000 7.25 7.25 7.25 85.0(L) 320-395 434 Phoenix Stockton, CA 4/28/98 3,250,000 3,250,000 7.125 7.125 7.125 38.0(H) 409-562 184 Stone Creek Watsonville, CA 4/28/98 8,820,000 8,820,000 7.125 7.125 7.125 (H) (H) 120 Cedarbrook Hanford, CA 4/28/98 2,840,000 2,840,000 7.125 7.125 7.125 100 434-554 70 Marsh Landings Portsmouth, VA 5/20/98 6,050,000 6,050,000 7.25 7.25 7.25 16.8(L) 295-335 250 College Park Naples, FL 7/15/98 10,100,000 10,100,000 7.00 (N) 7.00 (H) (H) 210 Gulfstream Dania, FL 7/22/98 3,500,000 3,500,000 7.25 7.25 7.25 31.3(L) 575-650 96 Bedford Square Clovis, CA 8/25/98 3,850,000 3,850,000 7.00 (O) 7.00 55.5(L) 381-456 130 Northpointe Villag Fresno, CA 8/25/98 13,250,000 13,250,000 8.085 (P) 8.125 43.3(L) 381-456 406 Falcon Creek Indianapolis, IN 9/14/98 6,144,600 6,144,600 7.00 (Q) 7.00 (H) (H) 131 Jubilee Courtyards Florida City, FL 9/15/98 4,150,000 4,150,000 7.00 (A) 7.00 (H) (H) 98 Silvercrest Clovis, CA 9/24/98 2,275,000 2,275,000 7.125 7.125 7.125 (H) (H) 100 Carrington Pointe Los Banos, CA 9/24/98 3,375,000 3,375,000 6.375 6.375 6.375 (H) (H) 80 Madalyn Landing Palm Bay, FL 11/13/98 14,000,000 14,000,000 7.00 7.00 7.00 (H) (H) 304
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Carrying Average Minimum Face Amount Interest Stated Pay Rate at Occupancy at Rental Rates No. of Closing Amount at December Rate Paid Interest December 31, February 14, at December Rental Property Date of Bond 31, 1998 (G) for 1998* Rate* 1998* 1999 31, 1998 Units - - ------------------ ------- ----------- ----------- -------- -------- ----------- ------------ ------------ ------ Forest Hills Garner, NC 12/15/98 $ 5,930,000 $ 5,930,000 7.125% 7.125% 7.125% 83.0%(L) $540-650 136 Lake Jackson Lake Jackson, TX 12/22/98 10,934,000 10,934,000 7.00 7.00 7.00 (H) (H) 160 Mountain Ranch Austin, TX 12/23/98 9,128,000 9,128,000 7.125 7.125 7.125 (H) (H) 212 ----------- ----------- $471,199,028 $458,662,600 ============ ============
*The average interest rate paid represents the interest recorded by the Company while the stated interest rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate payable pursuant to the applicable forbearance agreement, if any. (A) The interest rates for Jubilee Courtyards are 7% through September 30, 2000 and 7.125% thereafter. (B) The minimum pay rate is the current cash flow of the property. (C) Includes contingent interest paid during 1998. (D) Includes receipt of deferred base interest relating to prior periods. (E) Includes receipt of primary and supplemental contingent interest. (F) The minimum pay rate on the FMB is scheduled to increase to the stated interest rate over the remaining term of the FMB. (G) The FMBs are carried at their estimated fair values at December 31, 1998. (H) The property is still in the construction phase. (I) Includes receipt of primary contingent interest. (J) Pursuant to a bond modification as of October 1, 1997 which lowered the base interest rate to 7.50% effective October 1, 1997, subject to a minimum pay rate of 5% through June 30, 2000. (K) Pursuant to a forbearance agreement as of October 1, 1997 which lowered the base interest rate to 7% through June 30, 2000 and 7.50% thereafter. (L) The property is still in the rehabilitation phase. (M) Pursuant to a bond modification as of October 1, 1997, the base interest rate was lowered to 6% through July 31, 2000 and 7% thereafter. (N) The interest rates for College Park are 7% during the construction period and 7.25% thereafter. (O) The interest rates for Bedford Square are 7% during the construction period and 6.375% thereafter. (P) The interest rates for Northpointe Village are 7.965% through September 23, 1998, 8.125% during the remainder of the construction period and 7.5% thereafter. (Q) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25% thereafter. -9- Private Label Tender Option Program - - ----------------------------------- On May 21, 1998, the Company closed on its Private Label Tender Option Program ("TOP") in order to raise additional capital of $150 million to acquire additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the aggregate principal amount of approximately $385,907,000 to a Delaware business trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which then contributed 27 of those FMBs with an aggregate principal amount of approximately $233,105,000, to another Delaware business trust (the "Owner Trust"). The Owner Trust issued two equity certificates: ( i) a Senior Certificate, with an outstanding face amount of $150,000,000 at December 31, 1998, which has been deposited into another Delaware business trust (the "Certificate Trust") which issued and sold Floater Certificates representing proportional interests in the Senior Certificate to new investors; and (ii) a Residual Certificate representing the remaining beneficial ownership interest in the Owner Trust, which has been issued to the Origination Trust, whose sole owner is the Company. In addition, the Owner Trust obtained a municipal bond insurance policy from MBIA to credit enhance Certificate distributions for the benefit of the holders of the Floater Certificates and has also arranged for a liquidity facility, issued by a consortium of highly rated European banks, with respect to the Floater Certificates. The end result of these transactions is that a portion of the interest received by the Owner Trust on the FMBs it holds is distributed through the Senior Certificate to the holders of the Floater Certificates in an amount determined each week by the remarketing agent, Goldman Sachs & Co., at the distribution amount that is required to enable the remarketing agent to sell the Floater Certificates at par on any weekly determination date. Currently, the maximum amount of Floater Certificates that can be issued to raise capital under the TOP is $150 million and as of December 31, 1998 such maximum has been issued. The Company is currently negotiating an increase in its TOP to $200 million; however, there can be no assurance that such negotiations will be successful. The Company's cost of funds relating to the TOP (calculated as income allocated to the minority interest plus current fees as a percentage of the weighted average amount of the outstanding Senior Certificate) was approximately 4.9% for the period May 21, 1998 (inception) through December 31, 1998. Note Payable - - ------------ During 1998, an interim credit facility with Goldman Sachs & Company (the "Interim Credit Facility") was available to the Company at prevailing rates of interest for such accounts (5.98% at December 14, 1998). At December 31, 1998 there were no borrowings outstanding. The Company is currently negotiating with Goldman Sachs & Company and various other lenders the renewal or replacement of this facility. The outstanding face amount of the Senior Certificate and indebtedness under the Interim Credit Facility, together with any other leveraging of the Company, will not exceed 50% of the Company's total Market Value (as defined in the Trust Agreement) as of the date incurred. Competition - - ----------- The Manager and/or its affiliates have formed, and may continue to form, various entities to engage in businesses which may be competitive with the Company. The Company's business is affected by competition to the extent that the Underlying Properties from which it derives interest and, ultimately, principal payments may be subject to competition relating to rental rates and relative levels of amenities from offered by comparable neighboring properties. Employees - - --------- The Company has no employees. Management and administrative services for the Company are performed by the Manager and its affiliates pursuant to the Management Agreement between the Company and the Manager dated October 1, 1997 (the "Management Agreement"). The Manager receives compensation for such services and the Company reimburses the Manager and certain of its affiliates for expenses incurred in connection with the performance by their employees of services for the Company in accordance with the Management Agreement (see Note 7 to the Company's Financial Statements included in "Item 8. Financial Statements and Supplementary Data"). Recent Legislation - - ------------------ The State of California recently adopted an administrative amendment to the allocation plan pursuant to which they award bond value capital to developers of multifamily housing. The amendment will require, in many cases, up to 15% of debt financing for such properties to be a form of taxable financing. Therefore, in certain cases, the Company may be required to offer taxable financing to California developers in order to be competitive. Item 2. Properties The Company does not own or lease any property. Item 3. Legal Proceedings The Company is not a party to any material pending legal proceedings. Item 4. Submission of Matters to a Vote of Shareholders None. -10- PART II Item 5. Market for the Company's Shares and Related Shareholder Matters. As of March 24, 1999, there were 4,044 holders of record owning 20,580,975 Shares. The Company's Shares have been listed on the American Stock Exchange since October 1, 1997 under the symbol "CHC". Prior to October 1, 1997, there was no established public trading market for the Company's Shares. The high and low prices for each quarterly period of the last two years for which the Shares were traded is as follows:
1998 1998 1997 1997 Quarter Ended Low High Low High - - ------------- ---- ---- ---- ---- March 31 12 11/16 14 1/2 June 30 12 7/8 14 7/16 September 30 12 9/16 14 1/4 December 31 11 11/16 13 11 1/8 13 5/16
The last reported sale price of Shares on the American Stock Exchange on March 26, 1999 was $12 3/8. Incentive Share Option Plan - - --------------------------- The Company has adopted an incentive Share option plan (the "Incentive Share Option Plan"), the purpose of which is to (i) attract and retain qualified persons as trustees and officers and (ii) to incentivize and more closely align the financial interests of the Manager and its employees and officers with the interests of the shareholders by providing the Manager with substantial financial interest in the Company's success. The Compensation Committee administers the Incentive Share Option Plan. Pursuant to the Incentive Share Option Plan, if the Company's distributions per Share in the immediately preceding calendar year exceed $0.9517 per Share, the Compensation Committee has the authority to issue options to purchase, in the aggregate, that number of Shares which is equal to three percent of the Shares outstanding as of December 31 of the immediately preceding calendar year (or in the initial year, as of October 1, 1997), provided that the Compensation Committee may only issue, in the aggregate, options to purchase a maximum number of Shares over the life of the Incentive Shares Option Plan equal to 10% of the Shares outstanding on October 1, 1997. Subject to the limitations described in the preceding paragraph, if the Compensation Committee does not grant the maximum number of options in any year, then the excess of the number of authorized options over the number of options granted in such year will be added to the number of authorized options in the next succeeding year and will be available for grant by the Compensation Committee in such succeeding year. All options granted by the Compensation Committee will have an exercise price equal to or greater than the fair market value of the Shares on the date of the grant. The maximum option term is ten years from the date of grant. All Share options granted pursuant to the Incentive Share Option Plan may vest immediately upon issuance or in accordance with the determination of the Compensation Committee. No options were granted for the year ended December 31, 1997. In 1998, the Company distributed $.93 per Share, thus prohibiting the Compensation Committee from issuing options. Three percent of the Shares outstanding as of the effective date of the Consolidation are equal to 617,624 Shares. Share Repurchase Plan - - --------------------- On October 9, 1998, the Board of Trustees authorized the implementation of a share repurchase plan, enabling the Company to repurchase, from time to time, up to 1,500,000 of its Shares. The repurchases will be made in the open market and the timing will be dependant on the availability of Shares and other market conditions. During the period October 9, 1998 through December 31, 1998, the Company acquired 8,400 of its Shares for an aggregate purchase price of $103,359 (including commissions and service charges). Repurchased Shares are accounted for as treasury shares of beneficial interest. -11- Distribution Information - - ------------------------ Charter Municipal Mortgage Acceptance Company (After the Consolidation) - - ----------------------------------------------------------------------- Distributions Per Share - - ----------------------- Quarterly cash distributions per share for the year ended December 31, 1998 and the quarter ended December 31, 1997 were as follows:
Cash Distribution Total Amount for Quarter Ended Date Paid Per Share Distributed - - ----------------- --------- --------- ----------- March 31, 1998 5/15/98 $ .23 $ 4,735,119 June 30, 1998 8/14/98 $ .23 4,735,205 September 30, 1998 11/14/98 $ .23 4,735,205 December 31, 1998 2/14/99 $ .24 4,939,068 ------ ----------- Total for 1998 $ .93 $19,144,597 ====== ========== December 31, 1997 2/14/98 $ .23 $ 4,735,120 ====== ===========
In addition to the distributions set forth in the table above, the Company paid the Manager a special distribution (equal to .375% of the total invested assets of the Company) which amounted to $1,477,797 and $330,580 for the year ended December 31, 1998 and the three months ended December 31, 1997, respectively. There are no material legal restrictions upon the Company's present or future ability to make distributions in accordance with the provisions of the Company's Amended and Restated Trust Agreement. Future distributions paid by the Company will be at the discretion of the Trustees and will depend on the actual cash flow of the Company, its financial condition, capital requirements and such other factors as the Trustees deem relevant. Tax Exempt II (Prior to the Consolidation) - - ------------------------------------------ Distributions per BUC - - --------------------- Cash distributions per BUC of Tax Exempt II for the nine months ended September 30, 1997 were as follows:
Cash Distribution Approximate Total Quarterly Total Amount for Quarter Ended Date Paid Distribution Per BUC of Distribution - - ----------------- --------- -------------------- --------------- March 31, 1997 5/14/97 $ .26 $2,379,421 June 30, 1997 8/14/97 .26 2,379,421 September 30, 1997 11/12/97 .26 2,379,421 ------ --------- Total for 1997 $ .78 $7,138,263 ====== =========
Approximately $2,400,000 of the $9,518,000 paid to the BUC$holders of Tax Exempt II in 1997, represented a return of capital on a generally accepted accounting principles ("GAAP") basis. The return of capital on a GAAP basis is calculated as BUC$holder distributions less net income allocated to BUC$holders. -12- Item 6. Selected Financial Data. The information set forth below presents selected financial data of the Company. Additional financial information is set forth in the audited financial statements and notes thereto contained in "Item 8. Financial Statements and Supplementary Data".
Year ended December 31, OPERATIONS ------------------------------------------------------------------------------ - - ---------- 1998* 1997* 1996* 1995* 1994* ------------- ------------- ------------- ------------- ------------- Total revenues $ 28,179,048 $ 14,414,625 $ 11,812,316 $ 12,039,287 $ 11,870,490 Loss on impairment of assets 0 (1,843,135) (4,000,000) (1,000,000) (500,000) Other expenses and minority interest (6,153,176) (2,515,682) (1,967,275) (1,851,484) (1,747,441) ------------- ------------- ------------- ------------- ------------- Net income $ 22,025,872 $ 10,055,808 $ 5,845,041 $ 9,187,803 $ 9,623,049 ============= ============= ============= ============= ============= Net income applicable to shareholders of beneficial $ 20,342,594 $ 2,437,538*** ============= ============= Net income per share (1) Basic** $ .99 $ .12*** ============= ============= Diluted** $ .98 $ .12*** ============= ============= Weighted average shares outstanding: Basic** 20,587,151 20,587,465*** ============= ============= Diluted** 20,740,641 20,587,465*** ============= =============
FINANCIAL POSITION Year ended December 31, - - ------------------ ------------------------------------------------------------------------------ 1998* 1997* 1996* 1995* 1994* ------------- ------------- ------------- ------------- -------------- Total assets $ 492,585,806 $ 362,390,563 $ 154,896,475 $ 157,019,314 $ 157,436,945 ============= ============= ============= ============= ============= Notes payable $ 0 $ 21,445,340 $ 0 $ 0 $ 0 ============= ============= ============= ============= ============= Total liabilities $ 15,091,600 $ 30,722,364 $ 573,874 $ 652,350 $ 1,088,738 ============= ============= ============= ============= ============= Minority interest $ 150,000,000 $ 0 $ 0 $ 0 $ 0 ============= ============= ============= ============= ============= Total shareholders' equity/partners' capital $ 327,494,206 $ 331,668,199 $ 154,322,601 $ 156,366,964 $ 156,348,207 ============= ============= ============= ============= ============= DISTRIBUTIONS - - ------------- Distributions to BUC$holders N/A $ 7,138,263 $ 9,517,685 $ 9,517,685 $ 9,517,685 ============= ============= ============= ============= Distributions to shareholders of beneficial interest $ 19,144,597 $ 4,735,120*** ============= ============= Distributions per share $ .93 $ .23*** ============= =============
-13- OTHER DATA - - ----------
Year Ended Three Months Ended December 31, 1998 December 31, 1997 ----------------- ----------------- Cash Available for Distribution (2) $ 22,243,193 $ 4,624,279 Less: distributions to the Manager (1,477,807) (330,582) ------------- ----------- Cash available for distribution to shareholders $ 20,765,386 $ 4,293,697 ============= =========== Distributions to shareholders $ 19,144,587 $ 4,735,117 ============= =========== Payout ratio 92.2% 110.3% ============= =========== Cash flows from: Operating activities $ 22,651,186 $ 4,465,552 ============= =========== Investing activities $(117,243,543) $(8,497,439) ============= =========== Financing activities $ 105,388,481 $ 2,144,509 ============= ===========
*Information prior to October 1, 1997 (the date of the Consolidation) is only with respect to Tax Exempt II. Information subsequent to September 30, 1997 is with respect to the Company which includes Tax Exempt II and the other Partnerships pursuant to the Consolidation. **Net income and distribution per unit information for periods prior to October 1, 1997 is not presented because it is not indicative of the Company's continuing capital structure. ***Represents amount for the three months ended December 31, 1997. (1) Net income per Share equals net income, less the special allocations to the Manager, divided by the weighted average Shares (basic and diluted) outstanding for the period. (2) See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for a definition of Cash Available for Distribution. -14- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Liquidity and Capital Resources - - ------------------------------- Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware business trust which is engaged in the acquisition and ownership (either directly or indirectly) of tax-exempt participating and non-participating First Mortgage Bonds ("FMBs") issued by various state or local governments or other agencies or authorities and secured by participating and non-participating mortgage loans on the Underlying Properties. As of December 31, 1998, the Company owned 49 FMBs and had net assets of approximately $332,102,000. The Company was formed by the consolidation (the "Consolidation"), on October 1, 1997, of Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III"), three publicly registered limited partnerships (the "Partnerships") one of the general partners of the Partnerships was an affiliate of Related Capital Company ("Related"). For a discussion of the Company's Incentive Share Option Plan and Share Repurchase Plan, see "Item 5. Market for the Company's Common stock and Related Shareholder Matters". In order to generate increased tax exempt income and as a result enhance the value of the Company's Shares, the Company intends to originate and acquire additional tax-exempt bonds secured by multifamily properties. The Company believes that it can earn above market rates of interest on its bond acquisitions by focusing its efforts primarily on affordable housing. The Manager estimates that nearly 50% of all new multifamily development contains an affordable component which produces tax credits pursuant to Section 42 of the Internal Revenue Code. The Company has designed a Direct Purchase Program specifically designed to appeal to developers of such properties. In general, these properties are smaller than traditional multifamily housing properties, averaging 150 units. The traditional method of financing tax-exempt properties requires the involvement of credit enhancement, rating agencies and investment bankers. Therefore, the up-front cost of such financing is generally much higher than traditional multifamily financing. Through its Direct Purchase Program, the Company will originate and acquire tax-exempt bonds without the cost associated with credit enhancement, rating agencies and investment bankers. The Company believes that the up-front cost savings to the developer will translate into a higher than market interest rate on the bonds acquired by the Company. The Company is positioned to market its Direct Purchase Program as a result of the Manager's affiliation with Related. Related and its predecessor companies have specialized in offering debt and equity products to mid-market multifamily owners and developers for over 25 years. Related has provided debt and equity financing to properties valued at over $7.8 billion. In addition, since 1987 Related has been one of the nation's leading provider of equity to developers of multifamily housing which benefits from tax credits. During 1998, the Manager's affiliation with Related allowed it to become one of the dominant lenders to developers and owners of affordable housing financed with tax-exempt bonds. The Company does not operate as a mortgage REIT, which generally utilize high levels of leverage and acquire subordinated interests in commercial and/or residential mortgage- backed securities. Rather, the Company utilizes low levels of leverage and generally originates and acquires long-term, fixed-rate, tax-exempt FMBs. As a result, the Company did not experience the ill-effects associated with the volatile interest rate environment during 1998. Pursuant to its Trust Agreement, the Company is only able to incur leverage or other financing up to 50% of the Company's Total Market Value (as defined in the Trust Agreement) as of the date incurred (the "50% Limit"). The Company expects to seek shareholder approval at the 1999 annual meeting to amend the Trust Agreement to permit the Company to exceed the 50% Limit with respect to short term borrowings of no more than approximately 5% of Total Market Value. Mortgage REITs typically incur leverage at ratios ranging from between 3:1 to 10:1. In general, the FMBs that the Company either originates or acquires call for ten-year restrictions from prepayments, eliminating the Company's susceptibility to significant levels of repayment risk as a result of interest rate reductions. Consistent with the foregoing, the Company focuses on providing investors with a stable level of distributions, even through unstable markets. Due to the Company's low level of leverage, the Company has not been affected by the recent lack of liquidity that is currently impairing mortgage REITs and its portfolio does not contain assets that are especially vulnerable to volatility during periods of interest rate fluctuations. On May 21, 1998, the Company closed on its Private Label Tender Option Program ("TOP") in order to raise additional capital of $150 million to acquire additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the aggregate principal amount of approximately $385,907,000 to a Delaware business trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which then contributed 27 of those FMBs, with an aggregate principal amount of approximately $233,105,000, to another Delaware business trust (the "Owner Trust"). The Owner Trust issued two equity certificates: (i) a Senior Certificate, with an outstanding face amount of $150,000,000 at December 31, 1998, which has been deposited into another Delaware business trust (the "Certificate Trust") which issued and sold Floater Certificates representing proportional interests in the Senior Certificate to new investors; and (ii) a Residual Certificate representing the remaining beneficial ownership interest in the Owner Trust, which has been issued to the Origination Trust, whose sole owner is the Company. In addition, the Owner Trust obtained a municipal bond insurance policy from MBIA to credit enhance Certificate distributions for the benefit of the holders of the Floater Certificates and has also arranged for a liquidity facility, issued by a consortium of highly rated European banks, with respect to the Floater Certificates. -15- The end result of these transactions is that a portion of the interest received by the Owner Trust on the FMBs it holds is distributed through the Senior Certificate to the holders of the Floater Certificates in an amount determined each week by the remarketing agent, Goldman Sachs & Co., at the distribution amount that is required to enable the remarketing agent to sell the Floater Certificates at par on any weekly determination date. Currently, the maximum amount of Floater Certificates that can be issued to raise capital under the TOP is $150 million and as of December 31, 1998, such maximum has been issued. The Company is currently negotiating an increase in its TOP to $200 million and, before the end of 1999, the Company expects to raise funds through an equity offering; however, there can be no assurance that either of these initiatives will be successful. If the Company is unable to access additional capital through the foregoing initiatives, the Company's ability to grow will be restricted. The Company's cost of funds relating to the TOP (calculated as income allocated to the minority interest plus current fees as a percentage of the weighted average amount of the outstanding Senior Certificate) was approximately 4.9% for the period May 21, 1998 (inception) through December 31, 1998. During 1998, an interim credit facility with Goldman Sachs & Company (the "Interim Credit Facility") was available to the Company at prevailing rates of interest for such accounts (5.98% at December 14, 1998). At December 31, 1998 there were no borrowings outstanding. The Company is currently negotiating with Goldman Sachs & Company and various other lenders the renewal or replacement of this facility. During the period January 1, 1998 through March 30, 1999 the Company acquired 18 FMBs for an aggregate purchase price of approximately $123,997,000, not including bond selection fees and expenses of approximately $2,669,000. The purchases were financed by the TOP and from borrowings under the Interim Credit Facility. During the year ended December 31, 1998, cash and cash equivalents of the Company and its consolidated subsidiary increased approximately $10,796,000. This increase was primarily due to cash provided by operating activities ($22,651,000), the net sale of temporary investments ($3,500,000), principal payments received from loans made to properties ($507,000) and an increase in minority interest ($150,000,000) which exceeded the purchase of FMBs ($117,597,000), an increase in deferred bond selection costs ($2,598,000), loans made to properties ($1,056,000), net repayments of note payable ($21,445,000), an increase in deferred costs relating to the TOP ($2,513,000) and distributions paid ($20,331,000). Included in the adjustments to reconcile the net income to cash provided by operating activities is amortization in the amount of $217,000. The Company's growth will be financed by the TOP or similar programs, borrowings under the Interim Credit Facility, funds generated from operations in excess of distributions and by placements of equity. The Company has entered into forbearance agreements on several FMBs and may be required to extend these agreements or enter into new agreements in the future. Such agreements may adversely impact liquidity; however interest payments from FMBs are anticipated to provide sufficient liquidity to fund the Company's operating expenditures, debt service and distributions in future years. Effective January 1, 1998, the Highland Ridge, Willow Creek, Bristol Village and Thomas Lake FMBs were modified to (i) reflect a change in their stated interest rates, (ii) allow for deferred base and other interest accrued and unpaid through December 1997 to be paid at maturity or upon an event of sale or refinancing and (iii) extend the mandatory call and prepayment lock-out dates. In addition, the maturities of the Highland Ridge and Willow Creek FMBs were extended to 2018 and 2022, respectively, and the maturities of the Bristol Village and Thomas Lake FMBs were extended to 2027 with mandatory call dates at January 2010. On December 23, 1998, the Mansion FMB was modified to (i) reflect a change in base interest rate, effective December 31, 1998 (from 5.23% to 7.25%), (ii) allow for certain equal quarterly payments of supplemental contingent interest ($150,000 per quarter) to be paid initially at closing and then quarterly over the second, third and fourth quarters of 1999 and (iii) extend the maturity date, the mandatory call date and the prepayment lock-out dates (to 2029, 2011 and 2006, respectively). Pursuant to the modified terms of the Mansion FMB, no additional contingent interest is to be paid from this FMB. The Company currently anticipates that it will modify certain other FMBs in generally similar terms as Mansion and those done previously and effective in 1998, where and as appropriate. As part of the settlement of class action litigation relating to the Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had the right to petition the United States District Court for the Southern District of New York (the "Court") for additional attorneys' fees ("Counsel's Fee Shares") in an amount to be determined in the Court's sole discretion. The Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed to be 25%) of the increase in value of the Company, ("the Added Value") if any, as of October 1, 1998 based upon the difference between (i) the trading prices of the Company's Shares of beneficial interest during the six month period ended October 1, 1998 and (ii) the trading prices of the limited partnership units and the asset values of the Partnerships prior to October 1, 1997. As of October 1, 1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an Order and Stipulation of Settlement by the Court on February 18, 1999, Class Counsel is entitled to receive 608,955 Shares. The Shares will be distributed to Class Counsel quarterly in eight equal distributions commencing within ten business days after Class Counsel advises the Company in writing of the persons in whose name the Shares are to be issued. One-half of such Shares will be in the form of Restricted Securities (restricted only with respect to the sale, assignment, pledge or other transfer of such securities) and the remaining one-half of such Shares will be unrestricted. Restrictions on the Restricted Securities expire one year from the date of issuance. Management is currently attempting to negotiate a discounted cash settlement with Class Counsel in lieu of the issuance of Shares; however, there can be no assurance that such negotiations will be successful. In February 1999, a distribution of $4,939,068 ($.24 per share), which was declared in December 1998, was paid to the shareholders from cash flow from operations for the quarter ended December 31, 1998. -16- Management is not aware of any trends or events, commitments or uncertainties, which have not otherwise been disclosed that will or are likely to impact liquidity in a material way. Results of Operations - - --------------------- The following is a summary of the results of operations of the Company for the years ended December 31, 1998, 1997 and 1996. The net income for the years ended December 31, 1998, 1997 and 1996 was $22,025,872, $10,055,808 and $5,845,041, respectively. 1998 vs. 1997 - - ------------- For the year ended December 31, 1998 as compared to 1997, total revenues, total expenses and net income increased and the results of operations are not comparable due to (i) the Consolidation of Tax Exempt II with two other Partnerships on October 1, 1997, which resulted in the formation of the Company and (ii) the acquisition of 18 FMBs after the Consolidation. The Company's results of operations for the year ended December 31, 1998 consisted primarily of the results of the Company's investment in 49 FMBs. The Company's results of operations for the year December 31, 1997 consisted primarily of the results of Tax Exempt II's investment in 16 FMBs. In addition, the results of operations are not reflective of future operations due to the anticipated continued acquisition of FMBs. Interest income from FMBs increased approximately $13,276,000 for the year ended December 31, 1998 as compared to 1997. An increase of $9,815,000 was due to the 16 FMBs (including Tax Exempt III's portion of the Players Club FMB) acquired from Tax Exempt I and Tax Exempt III in the Consolidation (the "Tax Exempt I and III Acquisitions") and an increase of $3,252,000 was due to the acquisition of 18 FMBs after the Consolidation (the "New Acquisitions"). Excluding these acquisitions, interest income from FMBs increased approximately 2% for the year ended December 31, 1998 as compared to 1997. Interest income from temporary investments increased approximately $66,000 for the year ended December 31, 1998 as compared to 1997 primarily due to higher invested cash balances in 1998. Interest income from promissory notes increased approximately $422,000 for the year ended December 31, 1998 as compared to 1997. An increase of $405,000 was due to the Tax Exempt I and III Acquisitions. Excluding these acquisitions, interest income from promissory notes increased approximately $17,000 for the year ended December 31, 1998 as compared to 1997 primarily due to loans to the owners of the Suntree and Bristol Village Underlying Properties in November 1997 and June 1998, respectively. Interest expense increased approximately $1,075,000 for the year ended December 31, 1998 as compared to 1997 primarily due to higher outstanding balances of the Interim Credit Facility during 1998. Management fees incurred to the general partners of Tax Exempt II in the amount of approximately $608,000 were recorded in 1997. Loan servicing fees increased approximately $462,000 for the year ended December 31, 1998 as compared to 1997 due to increases of $349,000 and $113,000 relating to the Tax Exempt I and III Acquisitions and the New Acquisitions, respectively. General and administrative expenses increased approximately $973,000 for the year ended December 31, 1998 as compared to 1997. This increase was primarily due to current fees relating to the TOP, an increase in printing and investor service expenses resulting from an increase in investors, an increase in insurance expense, an increase in audit/tax fees and expense reimbursements to the Manager and its affiliates due to the Tax Exempt I and III Acquisitions and the New Acquisitions and fees to the independent trustees relating to their services for 1998. Amortization increased approximately $171,000 for the year ended December 31, 1998 as compared to 1997 primarily due to amortization of deferred bond selection costs relating to the New Acquisitions and amortization of deferred costs relating to the TOP. A loss on impairment of assets in the amount of approximately $1,843,000 was recorded in 1997 to recognize other than temporary impairment of the Shannon Lake, Players Club and Lakepoint FMBs based upon operating difficulties at the properties securing the FMBs. Minority interest in income of subsidiary in the amount of approximately $1,564,000 was recorded in 1998, relating to the TOP. 1997 vs. 1996 - - ------------- For the year ended December 31, 1997 as compared to 1996, total revenues, total expenses (excluding loss on impairment of assets) and net income increased and the results of operations are not comparable due to the Consolidation of Tax Exempt II with two other Partnerships on October 1, 1997, which resulted in the formation of the Company. The Company's results of operations for the year ended December 31, 1997 consisted primarily of the results of the Company's investment in sixteen FMBs for the nine months ended September 30, 1997 and the results of the Company's investment in thirty-two FMBs for the three months ended December 31, 1997. The Company's results of operations for the year December 31, 1996 consisted primarily of the results of Tax Exempt II's investment in sixteen FMBs. In addition, the results of operations are not reflective of future operations due to the anticipated continued acquisition of FMBs. Interest income from FMBs increased approximately $2,440,000 for the year ended December 31, 1997 as compared to 1996. An increase of $2,996,000 was due to the sixteen FMBs (including Tax Exempt III's portion of the Players Club FMB) acquired from Tax Exempt I and Tax Exempt III in the Consolidation (the "Tax Exempt I and III Acquisitions"). Excluding these acquisitions, interest income from FMBs decreased approximately 5% for the year ended December 31, 1997 as compared to 1996. -17- Interest income from temporary investments increased approximately $17,000 for the year ended December 31, 1997 as compared to 1996 primarily due to higher invested cash balances in 1997. Interest income from promissory notes increased approximately $145,000 for the year ended December 31, 1997 as compared to 1996. An increase of $140,000 was due to the Tax Exempt I Acquisitions. Excluding these acquisitions, interest income from promissory notes increased approximately $5,000 for the year ended December 31, 1997 as compared to 1996. Interest expense in the amount of approximately $429,000 was recorded in 1997 relating to the Interim Credit Facility. Management fees incurred to the general partners of Tax Exempt II decreased approximately $203,000 for the year ended December 31, 1997 as compared to 1996 due to the Consolidation on October 1, 1997. Loan servicing fees increased approximately $118,000 for the year ended December 31, 1997 as compared to 1996 due to the Tax Exempt I and III Acquisitions. General and administrative expenses increased approximately $162,000 for the year ended December 31, 1997 as compared to 1996. This increase was primarily due to an increase in printing and investor service expenses resulting from an increase in investors, an increase in insurance expense and an increase in audit/tax fees and expense reimbursements to the Manager and its affiliates due to the Tax Exempt I and III Acquisitions. Amortization increased approximately $42,000 for the year ended December 31, 1997 as compared to 1996 primarily due to amortization of deferred loan costs relating to debt assumed from Tax Exempt I in the Consolidation. Losses on impairment of assets in the amounts of approximately $1,843,000 and $4,000,000 were recorded for the years ended December 31, 1997 and 1996, respectively, to recognize other than temporary impairment of the Shannon Lake, Players Club and Lakepoint FMBs and the Cedar Pointe, Sunset Downs and Loveridge FMBs, respectively, based upon operating difficulties at the properties securing the FMBs. General - - ------- The determination as to whether it is in the best interest of the Company to enter into forbearance agreements on the FMBs or, alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors including, but not limited to, Underlying Property performance, owner cooperation and projected legal costs. The difference between the stated interest rates and the rates paid by FMBs is not accrued as interest income for financial reporting purposes. The accrual of interest at the stated interest rate will resume once an Underlying Property's ability to pay the stated rate has been adequately demonstrated. Interest income of approximately $3,047,000, $2,415,000 and $1,407,000 was not recognized for the years ended December 31, 1998, 1997 and 1996, respectively. Cash Available for Distribution - - ------------------------------- The Company uses cash available for distribution ("CAD") as the primary measure of its dividend paying ability. The difference between CAD and net income results from variations between generally accepted accounting principles ("GAAP") and cash received. One difference between CAD and GAAP is the amortization of loan origination costs, the costs of the TOP and other intangible assets. These amounts have been excluded from CAD due to their noncash nature. Another difference is the noncash gain and loss associated with bond impairments and sales for GAAP purposes, which are not included in the calculation of CAD. During the year ended December 31, 1998 and the three months ended December 31, 1997, there were FMB impairments in the amounts of $0 and $1,843,135, respectively. CAD should not be considered an alternative to net income as a measure of the Company's financial performance or to cash flow from operating activities (computed in accordance with GAAP) as a measure of the Company's liquidity, nor is it necessarily indicative of sufficient cash flow to fund all of the Company's needs. -18- Cash available for distribution ("CAD") for the year ended December 31, 1998 and the three months ended December 31, 1997 is summarized in the following table:
Year Ended Three Months Ended December 31, 1998 December 31, 1997 ----------------- ----------------- Sources of Cash Interest income: First mortgage bonds $ 27,363,595 $ 5,560,321 Temporary investments 221,270 49,483 Promissory notes 594,183 140,180 Less: Accretion of amounts included in income (180,179) (99,406) ------------- ----------- Total sources of cash 27,998,869 5,650,578 ------------- ----------- Uses of Cash Total expenses and minority interest 6,153,176 2,957,244 Less: Amortization of amounts included in expenses (397,500) (87,810) Loss on impairment of assets 0 (1,843,135) ------------- ----------- Total uses of cash 5,755,676 1,026,299 ------------- ----------- Cash available for distribution $ 22,243,193 $ 4,624,279 Less: distributions to the Manager (1,477,807) (330,582) ------------- ----------- Cash available for distribution to shareholders $ 20,765,386 $ 4,293,697 ============= =========== Distributions to shareholders $ 19,144,587 $ 4,735,117 ============= =========== Payout ratio 92.2% 110.3% ============= =========== Cash flows from: Operating activities $ 22,651,186 $ 4,465,552 ============= =========== Investing activities $(117,243,543) $(8,497,439) ============= =========== Financing activities $ 105,388,481 $ 2,144,509 ============= ===========
Recently Issued Accounting Standards - - ------------------------------------ The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2000. Because the Company does not currently utilize derivatives or engage in hedging activities, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements. Forward-Looking Statements - - -------------------------- Certain statements made in this report may constitute "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward-looking statements include statements regarding the intent, belief or current expectations of the Company and its management and involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among other things, the following: general economic and business conditions, which will, among other things, affect the availability and creditworthiness of prospective tenants, lease rents and the terms and availability of financing; adverse changes in the real estate markets including, among other things, competition with other companies; risks of real estate development and acquisition; governmental actions and initiatives; and environment/safety requirements. -19- Year 2000 Compliance - - -------------------- The Company utilizes the computer services of an affiliate of the Manager. The affiliate of the Manager has upgraded its computer information systems to be year 2000 compliant and beyond. The year 2000 compliance issue concerns the inability of a computerized system to accurately record dates after 1999. The affiliate of the Manager recently underwent a conversion of its financial systems applications and upgraded all of its non-compliant, in-house software and hardware inventory. The work stations that experienced problems from the testing process were corrected with an upgrade patch. The costs incurred by the Manager are not being charged to the Company. The most likely worst case scenario that the Company faces is that computer operations will be suspended for a few days to a week at January 1, 2000. The Company's contingency plan is to have a complete backup done on December 31, 1999 and to have both electronic and printed reports generated for all critical data up to and including December 31, 1999. With regard to third parties, the Company's Manager is in the process of evaluating the potential adverse impact that could result from the failure of material service providers to be year 2000 compliant. A detailed survey and assessment was sent to material third parties in the fourth quarter of 1998. The Company has received assurances from a majority of its third parties with which it interacts that they have addressed the year 2000 issues and is evaluating these assurances for their adequacy and accuracy. In cases where the Company has not received assurances from third parties, it is initiating further mail and/or phone correspondence. The Company relies heavily on third parties and is vulnerable to the failures of third parties to address their year 2000 issues. There can be no assurance given that the third parties will adequately address their issues. Inflation - - --------- Inflation did not have a material effect on the Company's results for the periods presented. Item 7A. Quantitative and Qualitative Disclosures About Market Risk The nature of the Company's investments and the instruments used to raise capital for their acquisition expose the Company to gains and losses due to fluctuations in market interest rates. Market interest rates are highly sensitive to many factors, including governmental policies, domestic and international political considerations and other factors beyond the control of the Company. The FMBs generally bear interest at fixed rates, or pay interest according to the cash flows of the underlying property, which do not fluctuate with changes in market interest rates. In contrast, payments required under the TOP program vary based on market interest rates, primarily BMA, and are re-set weekly. Thus, an increase in market interest rates would result in increased payments under the TOP program, without a corresponding increase in cash flows from the investments in FMBs. For example, based on the $150,000,000 outstanding under the TOP program at December 31, 1998, the Company estimates that an increase of 0.5% in the BMA rate would decrease the Company's annual net income by approximately $750,000; a 1.0% increase in BMA would decrease annual net income by approximately $1,500,000. For the same reasons, a decrease in market interest rates would generally benefit the Company, as a result of decreased allocations to the minority interest without corresponding decreases in interest received on the FMBs. For example, based on the $150,000,000 outstanding under the TOP program at December 31, 1998, the Company estimates that a 0.5% decline in BMA rates would increase the Company's annual net income by approximately $750,000, and a 1.0% decline in BMA would increase net income by approximately $1,500,000. Various financial vehicles exist which would allow Company management to mitigate the impact of interest rate fluctuations on the Company's cash flows and earnings. Although management has not engaged in any of these hedging strategies in the past, it may do so in the future, depending on management's analysis of the interest rate environment and the costs and risks of such strategies. Changes in market interest rates would also impact the estimated fair value of the company's portfolio of FMBs. The Company estimates the fair value for each bond as the present value of its expected cash flows, using a discount rate for comparable tax-exempt investments. Therefore, as market interest rates for tax-exempt investments increase, the estimated fair value of the company's FMBs will generally decline, and a decline in interest rates would be expected to result in an increase in the estimated fair values. For example, the Company projects that a 1% increase in market rates for tax-exempt investments would decrease the estimated fair value of its portfolio of FMBs from its December 31, 1998 value of $458,662,600 to approximately $417,353,000. A 1% decline in interest rates would increase the value of the December 31, 1998 portfolio to approximately $513,446,000. Changes in the estimated fair value of the FMBs do not impact the Company's reported net income, earnings per share, distributions or cash flows, but are reported as components of other comprehensive income and affect reported shareholders' equity. -20- Item 8. Financial Statements and Supplementary Data. Page ---- (a) 1. Financial Statements -------------------- Independent Auditors' Report 22 Consolidated Balance Sheets as of December 31, 1998 and 1997 23 Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 24 Consolidated Statements of Changes in Shareholders' Equity/Partners' Capital (Deficit) for the years ended December 31, 1998, 1997 and 1996 25 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 27 Notes to Consolidated Financial Statements 29 -21- INDEPENDENT AUTITORS' REPORT To the Board of Trustees And Shareholders of Charter Municipal Mortgage Acceptance Company New York, New York We have audited the accompanying consolidated balance sheets of Charter Municipal Mortgage Acceptance Company and subsidiary as of December 31, 1998 and 1997, and the related consolidated statements of income, changes in shareholders' equity/partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1998. Our audits also included the financial statement schedule listed in Item 14(a)2. These financial statements and the financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and the financial statement 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, such consolidated financial statements present fairly, in all material respects, the financial position of Charter Municipal Mortgage Acceptance Company and subsidiary as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. DELOITTE & TOUCHE LLP New York, New York March 19, 1999 -22- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
December 31, -------------------------------- 1998 1997 ------------- ------------ ASSETS First mortgage bonds-at fair value $ 458,662,600 $346,300,000 Temporary investments 0 3,500,000 Cash and cash equivalents 13,093,023 2,296,899 Interest receivable, net 1,512,562 879,519 Promissory notes receivable 7,628,920 7,080,265 Deferred costs, net 7,005,965 2,292,409 Goodwill, net 4,671,236 0 Other assets 11,500 41,471 ------------- ------------ Total assets $ 492,585,806 $362,390,563 ============= ============ LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable $ 0 $ 21,445,340 Accounts payable, accrued expenses and other liabilities 8,993,174 635,691 Due to Manager and affiliates 1,159,358 674,947 Distributions payable 4,939,068 4,735,119 Excess of acquired net assets over cost, net 0 3,231,267 ------------- ------------ Total liabilities 15,091,600 30,722,364 ------------- ------------ Minority interest in subsidiary (subject to mandatory redemption) 150,000,000 0 ------------- ------------ Commitments and Contingencies Shareholders' equity: Beneficial owner's equity-manager 230,259 24,788 Beneficial owners' equity-other shareholders (50,000,000 shares authorized; 20,587,837 issued and 20,579,437 outstanding and 20,587,465 shares issued and outstanding in 1998 and 1997, respectively) 312,307,115 311,322,765 Treasury shares of beneficial interest (8,400 shares, in 1998) (103,359) 0 Accumulated other comprehensive income 15,060,191 20,320,646 ------------- ------------ Total shareholders' equity 327,494,206 331,668,199 ------------- ------------ Total liabilities and shareholders' equity $ 492,585,806 $362,390,563 ============= ============
See accompanying notes to consolidated financial statements -23- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF INCOME
Years Ended December 31, ----------------------------------------- 1998 1997 1996 ----------- ----------- ----------- Revenues: Interest income: First mortgage bonds $27,363,595 $14,087,443 $11,647,431 Temporary investments 221,270 155,460 138,088 Promissory notes 594,183 171,722 26,797 ----------- ----------- ----------- Total revenues 28,179,048 14,414,625 11,812,316 ----------- ----------- ----------- Expenses: Interest expense 1,504,334 429,012 0 Management fees 0 607,969 810,625 Loan servicing fees 985,198 523,538 405,313 General and administrative 1,702,145 728,812 566,616 Amortization 397,500 226,351 184,721 Loss on impairment of assets 0 1,843,135 4,000,000 Minority interest in income of subsidiary 1,563,999 0 0 ----------- ----------- ----------- Total expenses 6,153,176 4,358,817 5,967,275 ----------- ----------- ----------- Net income $22,025,872 $10,055,808 $ 5,845,041 =========== =========== =========== Special allocation of net income to the Manager $ 1,683,278 355,202** =========== ======= Net income applicable to shareholders $20,342,594 2,437,538** =========== ======= Net income per share: Basic* $ .99 $ .12** =========== =========== Diluted* $ .98 $ .12** =========== =========== Weighted average shares outstanding: Basic** 20,587,151 20,587,465*** =========== =========== Diluted** 20,740,641 20,587,465*** =========== ===========
*Net income per unit information for periods before October 1, 1997 is not presented because it is not indicative to the Company's continuing capital structure. **Represents amount for the three months ended December 31, 1997. See accompanying notes to consolidated financial statements -24-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL (DEFICIT) Beneficial Beneficial Owners' Owner's Equity General Equity Other BUC$holders Partners Manager Shareholders ----------- -------- ------- ------------ Balance at January 1, 1996 $ 164,412,008 $(106,923) $ 0 $ 0 Comprehensive income: Net income 5,728,140 116,901 0 0 Other comprehensive income (loss): Net unrealized gain (loss) on first mortgage bonds: Net unrealized holding loss arising during the period Add: reclassification adjustment for losses included in net income Other comprehensive income Comprehensive income Distributions (9,517,685) (194,238) 0 0 ------------- --------- ----------- ------------ Balance at December 31, 1996 160,622,463 (184,260) 0 0 Net income - January 1, 1997 to September 30, 1997 7,117,807 145,261 0 0 Distributions - January 1, 1997 to September 30, 1997 (9,517,685) (194,238) 0 0 Consolidation and issuance of shares (158,222,585) 233,237 169 316,117,946 Consolidation costs 0 0 (1) (2,497,602) Net income - October 1, 1997 to December 31, 1997 0 0 355,202 2,437,538 Comprehensive income: Net Income - January 1, 1997 to December 31, 1997 Other comprehensive income (loss): Net unrealized gain (loss) on first mortgage bonds: Net unrealized holding gain arising during the period Add: reclassification adjustment for losses included in net income Other comprehensive income Comprehensive income Distributions - October 1, 1997 to December 31, 1997 0 0 (330,582) (4,735,117) ------------- --------- ----------- ------------ Balance at December 31, 1997 0 0 24,788 311,322,765 Treasury Accumulated Shares of Other Beneficial Comprehensive Comprehensive Interest Income Income Total -------- ------ ------ ----- Balance at January 1, 1996 $ 0 $(7,938,121) $156,366,964 Comprehensive income: Net income 0 $5,845,041 0 5,845,041 ---------- Other comprehensive income (loss): Net unrealized gain (loss) on first mortgage bonds: Net unrealized holding loss arising during the period (2,177,481) Add: reclassification adjustment for losses included in net income 4,000,000 ---------- Other comprehensive income 1,822,519 1,822,519 1,822,519 ---------- Comprehensive income 7,667,560 ========== Distributions 0 0 (9,711,923) ---------- ----------- ------------ Balance at December 31, 1996 0 (6,115,602) 154,322,601 Net income - January 1, 1997 to September 30, 1997 0 7,263,068 0 7,263,068 Distributions - January 1, 1997 to September 30, 1997 0 0 (9,711,923) Consolidation and issuance of shares 0 0 158,128,767 Consolidation costs 0 0 (2,497,603) Net income - October 1, 1997 to December 31, 1997 0 2,792,740 0 2,792,740 ---------- Comprehensive income: Net Income - January 1, 1997 to December 31, 1997 10,055,808 ---------- Other comprehensive income (loss): Net unrealized gain (loss) on first mortgage bonds: Net unrealized holding gain arising during the period 24,593,113 Add: reclassification adjustment for losses included in net income 1,843,135 ---------- Other comprehensive income 26,436,248 26,436,248 26,436,248 ---------- Comprehensive income 36,492,056 ========== Distributions - October 1, 1997 to December 31, 1997 0 0 (5,065,699) ---------- ----------- ------------ Balance at December 31, 1997 0 20,320,646 331,668,199
-25-
CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY/PARTNERS' CAPITAL (DEFICIT) Beneficial Beneficial Owners' Owner's Equity General Equity Other BUC$holders Partners Manager Shareholders ----------- -------- ------- ------------ Comprehensive income: Net income 0 0 1,683,278 20,342,594 Other comprehensive income (loss): Net unrealized gain (loss) on first mortgage bonds: Net unrealized holding loss arising during the period Comprehensive income Issuance of shares of beneficial interest 0 0 0 5,000 Purchase of treasury shares of beneficial interest 0 0 0 0 Consolidation costs 0 0 0 (218,657) Distributions 0 0 (1,477,807) (19,144,587) ------------- --------- ----------- ------------ Balance at December 31, 1998 $ 0 $ 0 $ 230,259 $312,307,115 ============= ========= =========== ============ Treasury Accumulated Shares of Other Beneficial Comprehensive Comprehensive Interest Income Income Total -------- ------ ------ ----- Comprehensive income: Net income 0 22,025,872 0 22,025,872 Other comprehensive income (loss): Net unrealized gain (loss) on first mortgage bonds: Net unrealized holding loss arising during the period (5,260,455) (5,260,455) (5,260,455) ---------- Comprehensive income 16,765,417 ========== Issuance of shares of beneficial interest 0 0 5,000 Purchase of treasury shares of beneficial interest (103,359) 0 (103,359) Consolidation costs 0 0 (218,657) Distributions 0 0 (20,622,394) ---------- ----------- ------------ Balance at December 31, 1998 $ (103,359) $15,060,191 $327,494,206 ========== =========== ============
See accompanying notes to consolidated financial statements -26- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, ------------------------------------------------------- 1998 1997 1996 ------------- ------------ ------------ Cash flows from operating activities: Net income $ 22,025,872 $ 10,055,808 $ 5,845,041 ------------- ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Loss on impairment of assets 0 1,843,135 4,000,000 Amortization 397,500 226,351 184,721 Amortization of goodwill 134,592 0 0 Amortization of excess of acquired net assets over cost (248,559) (82,853) 0 Amortization of deferred income (66,212) (66,212) (66,212) Changes in assets and liabilities: (Increase) decrease in interest receivable (633,043) 449,808 163,956 Decrease in promissory notes receivable 0 0 21,620 Decrease (increase) in other assets 29,971 (5,503) (11,277) Increase (decrease) in accounts payable, accrued expenses and other liabilities 608,704 69,393 (25,232) Decrease in deferred income 0 0 (21,620) Increase (decrease) in due from affiliates 0 84,225 (84,225) Increase (decrease) in due to Manager and affiliates 402,361 (162,178) 8,133 ------------- ------------ ------------ Total adjustments 625,314 2,356,166 4,169,864 ------------- ------------ ------------ Net cash provided by operating activities 22,651,186 12,411,974 10,014,905 ------------- ------------ ------------ Cash flows from investing activities: Purchase of first mortgage bonds (117,596,600) (5,000,000) 0 Increase in deferred bond selection costs (2,598,288) (130,091) 0 Net sale (purchase) of temporary investments 3,500,000 100,000 (800,000) Loans made to properties (1,055,695) (324,000) (300,000) Principal payments received from loans made to properties 507,040 129,257 73,321 ------------- ------------ ------------ Net cash used in investing activities (117,243,543) (5,224,834) (1,026,679) ------------- ------------ ------------ Cash flows from financing activities: Proceeds from note payable 96,039,231 23,945,340 0 Repayments of note payable (117,484,571) (16,180,866) 0 Distributions paid (20,331,395) (12,164,011) (9,711,923) Increase in deferred costs relating to the Private Label Tender Option Program (2,512,768) (583,727) 0 Increase in minority interest 150,000,000 0 0 Purchase of treasury shares of beneficial interest (103,359) 0 0 Consolidation costs (218,657) (2,497,603) 0 Cash effect of Consolidation and issuance of shares 0 2,341,434 0 ------------- ------------ ------------ Net cash provided by (used in) financing activities 105,388,481 (5,139,433) (9,711,923) ------------- ------------ ------------ Net increase (decrease) in cash and cash equivalents 10,796,124 2,047,707 (723,697) Cash and cash equivalents at the beginning of the year 2,296,899 249,192 972,889 ------------- ------------ ------------ Cash and cash equivalents at the end of the year $ 13,093,023 $ 2,296,899 $ 249,192 ============= ============ ============
(continued) See accompanying notes to consolidated financial statements -27- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, ------------------------------------------------ 1998 1997 1996 ------------ ------------- ----------- Supplemental information: Interest paid $ 1,507,871 $ 400,009 $ 0 ============ ============= =========== Supplemental disclosure of noncash investing and financing activities: Issuance of shares of beneficial interest for trustee fees $ 5,000 $ 0 $ 0 ============ ============= =========== Shares of beneficial interest required to be issued to counsel for the partners in the Partnerships Increase in goodwill $ (4,805,828) $ 0 $ 0 Decrease in excess of acquired net assets over cost (2,982,708) 0 0 Increase in accounts payable, accrued expenses and other liabilities 7,788,536 0 0 ------------ ------------- ----------- $ 0 $ 0 $ 0 ============ ============= =========== Consolidation and issuance of shares: Increase in first mortgage bonds $ 0 $(168,557,007) $ 0 Increase in interest receivable 0 (593,984) 0 Increase in promissory notes receivable 0 (6,609,950) 0 Increase in other assets 0 (12,193) 0 Increase in notes payable 0 13,680,866 0 Increase in accounts payable, accrued expenses and other liabilities 0 104,376 0 Increase in due to affiliates 0 434,351 0 Increase in distributions payable 0 2,452,088 0 Increase in excess of acquired net assets over cost 0 3,314,120 0 Decrease in BUC$holders' capital 0 (158,222,585) 0 Increase in general partners' capital 0 233,237 0 Issuance of shares of beneficial interest 0 313,776,681 0 ------------ ------------- ----------- $ 0 $ 0 $ 0 ============ ============= =========== Distributions $(20,622,394) $ (14,777,622) $(9,711,923) Increase in special distribution payable to the Manager 87,050 330,580 0 Increase in distributions payable to shareholders/partners 203,949 2,283,031 0 ------------ ------------- ----------- Distributions paid $(20,331,395) $ (12,164,011) $(9,711,923) ============ ============= ===========
See accompanying notes to consolidated financial statements -28- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - General Charter Municipal Mortgage Acceptance Company (the "Company") is a Delaware business trust which is engaged in the acquisition and ownership (either directly or indirectly) of tax-exempt participating and non-participating First Mortgage Bonds ("FMBs") issued by various state or local governments or other agencies or authorities and secured by participating and non-participating mortgage loans on the underlying properties ("Underlying Properties"). As of December 31, 1998 the Company owned a portfolio of 49 FMBs. The Company is organized and managed as a single business segment. The Company was formed on October 1, 1997 as the result of the Consolidation (the "Consolidation") of three publicly registered limited partnerships, Summit Tax Exempt Bond Fund, L.P. ("Tax Exempt I"), Summit Tax Exempt L.P. II ("Tax Exempt II") and Summit Tax Exempt L.P. III ("Tax Exempt III") (the "Partnerships", and each individually a "Partnership"). One of the general partners of the Partnerships was an affiliate of Related Capital Company ("Related"). Unless otherwise indicated, the "Company", as hereinafter used, refers to Charter Municipal Mortgage Acceptance Company and its subsidiary and, for references prior to October 1, 1997, refers to Tax Exempt II. Pursuant to the Consolidation, the Company issued shares of beneficial interest (the "Shares") to all partners in each of the Partnerships in exchange for their interests in the Partnerships based upon each partner's proportionate interest in the Shares issued to their Partnership in the Consolidation. The Shares commenced trading on the American Stock Exchange on October 1, 1997 under the symbol "CHC". As of December 31, 1998, there were 20,579,448 Shares outstanding. The Company is governed by a board of trustees comprised of two independent managing trustees and three managing trustees who are affiliated with Related. The Company has engaged Related Charter LP (the "Manager"), an affiliate of Related, to manage its day-to-day affairs. Each independent trustee is entitled to receive annual compensation for serving as a trustee in the aggregate amount of $15,000, payable in cash (maximum of $5,000 per year) and/or Shares valued based on the fair market value at the date of issuance. On June 4, 1998, 186 Shares, having an aggregate value of $2,500 as of that date, were issued to each independent trustee as compensation for their services for the quarter ended December 31, 1997. On February 22, 1999, 769 Shares, having an aggregate value of $10.000 as of that date, were issued to each independent trustee as compensation for their services for the year ended December 31, 1998. NOTE 2 - Summary of Significant Accounting Policies a) Basis of Accounting The books and records of the Company are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles ("GAAP"). For financial accounting and reporting purposes, the Consolidation was accounted for using the purchase method of accounting. Under this method, the Partnership with the investor group receiving the largest ownership in the Company, in this case Tax Exempt II, is deemed to be the acquirer. As the surviving entity for accounting purposes, Tax Exempt II's assets and liabilities were recorded by the Company at their historical cost, with the assets and liabilities of the other Partnerships recorded at their estimated fair values for each Partnership (an aggregate of approximately $158,129,000) as set forth in the Solicitation Statement of the Company dated June 18, 1997 (the "Solicitation Statement"). Results of operations and other operating financial data for the Company for the years ended December 31, 1998, 1997 and 1996 include information for the entire periods presented with respect to Tax Exempt II, but only include information for the period October 1, 1997 to December 31, 1998 with respect to the other Partnerships. Prior to the Consolidation, Tax Exempt II was a limited partnership which was formed under the laws of the State of Delaware on April 11, 1986. b) Basis of Consolidation The consolidated financial statements include the accounts of the Company and its majority owned subsidiary business trust (see Note 5). All intercompany accounts and transactions have been eliminated in consolidation. c) Participating FMBs and Promissory Notes Receivable The Company accounts for its investments in the FMBs as debt securities available for sale under the provisions of Statement of Financial Accounting Standards No. 115, "Accounting for Certain Investments in Debt and Equity Securities" ("SFAS 115"). In most cases the Company has a right to require redemption of the FMBs prior to their maturity, although it can and may elect to hold them up to their maturity dates unless otherwise modified. As such, SFAS 115 requires the Company to classify these investments as "available for sale." Accordingly, investments in FMBs are carried at their estimated fair values, with unrealized gains and losses reported as items of other comprehensive income and in a separate component of shareholders' equity. Unrealized gains or losses do not affect the cash flow generated from property operations, distributions to shareholders, the characterization of the tax-exempt income stream or the financial obligations under the FMBs. The Company periodically evaluates each FMB to determine whether a decline in fair value below the FMB's cost basis is other than temporary. Such a decline is considered to be other than temporary if, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the existing contractual terms of the FMBs. If the decline is judged to be other than temporary, the cost basis of the FMB is written down to its then estimated fair value, with the amount of the write-down accounted for as a realized loss. Because the FMBs are not readily marketable, the Company estimates fair value for each FMB using its expected cash flows and an interest rate for comparable tax exempt investments. This process is based upon projections of future economic events affecting the -29- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Underlying Properties, such as occupancy rates, rental rates, operating cost inflation and market capitalization rates, and upon determination of an appropriate market rate of interest, all of which are based on good faith estimates and assumptions developed by the Company's management. Changes in market conditions and circumstances may occur which would cause these estimates and assumptions to change, therefore, actual results may vary from the estimates and the variance may be material. From time to time, the Company has advanced funds to the owners of certain Underlying Properties in the form of promissory notes, generally collateralized by second mortgages on such properties. These promissory notes are carried at cost less a valuation allowance where appropriate. The Company periodically evaluates the collectibility of both interest and principal of these investments to determine whether a reserve is necessary. For both FMBs and promissory notes, interest income is recognized at the stated rate when collectibility of future amounts is reasonably assured. Interest income from FMBs with modified terms or where the collectibility of future amounts is uncertain is recognized based upon expected cash receipts. d) Temporary Investments Temporary investments at December 31, 1997 represent tax-exempt municipal preferred stock which is carried at cost. e) Cash and Cash Equivalents Cash and cash equivalents include cash in banks and investments in short-term instruments with an original maturity of three months or less. f) Deferred Bond Selection Costs Prior to the Consolidation the general partners of Tax Exempt II were paid, and after the Consolidation the Advisor is paid, bond selection fees for evaluating and selecting FMBs, negotiating the terms of mortgage loans and coordinating the development effort with property developers and government agencies. These fees have been capitalized and are being amortized over the terms of the FMBs. g) Deferred Costs Relating to the Private Label Tender Option Program Costs incurred in connection with the Company's Private Label Tender Option Program (see Note 5) have been capitalized and are being amortized over the life of the program using the effective yield method. h) Goodwill/Excess of Acquired Net Assets Over Cost The application of purchase accounting to the Consolidation resulted in the Company recording a deferred credit for the excess of the fair value of the net assets acquired from Tax Exempt I and Tax Exempt III over their cost. This deferred credit was being accreted to interest income from FMBs using the straight-line method over 10 years, which approximated the average remaining term to maturity of the FMBs. The accrual of the estimated value of the Counsel Fee Shares (see Note 9) at October 1, 1998 is considered to be a purchase price adjustment and, in accordance with the application of purchase accounting to the Consolidation, results in the reversal of the carrying value of the excess of acquired net assets over cost and the recognition of goodwill at October 1, 1998 in the amount of $4,805,828. Goodwill is being amortized to interest income from FMBs using the straight-line method over nine years, which approximates the average remaining term to maturity of the FMBs. i) Fair Value of Financial Instruments As described above, the Company's investments in FMBs are carried at estimated fair values. The Company has determined that the fair value of its remaining financial instruments, including its temporary investments, cash and cash equivalents, promissory notes receivable and notes payable approximate their carrying values at December 31, 1998 and 1997, due to their generally short-term nature. j) Consolidation Costs Costs incurred in the Consolidation including legal, accounting and registration fees, amounting to $2,716,260, were charged directly to shareholders' equity. k) Income Taxes The Company is not required to provide for, or pay, any federal income taxes. Income tax attributes that arise from its operations are passed directly to the Company's shareholders. The Company may be subject to state and local taxes in jurisdictions in which it operates. At December 31, 1998, the net tax basis of the Company's assets and liabilities exceeded the net book basis by approximately $55,699,000. -30- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1) Comprehensive Income SFAS No. 130, "Reporting Comprehensive Income," requires the Company to classify items of "other comprehensive income", such as unrealized gains and losses on its FMBs, by their nature in the financial statements and display the accumulated balance of other comprehensive income (loss) separately from beneficial owners' equity in the shareholders' equity section of the consolidated balance sheet. In accordance with SFAS No. 130, cumulative unrealized gains and losses on securities available for sale are classified as accumulated other comprehensive income in shareholders' equity and current period unrealized gains and losses are included as a component of comprehensive income. m) Use of Estimates The preparation of financial statements in conformity with GAAP requires the Manager to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. n) New Pronouncements The Financial Accounting Standards Board has issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging Activities". This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It is effective for the Company beginning with the first quarter of 2000. Because the Company does not currently utilize derivatives or engage in hedging activities, management does not anticipate that implementation of this statement will have a material effect on the Company's financial statements. o) Reclassifications Certain amounts in the 1997 and 1996 financial statements have been reclassified to conform to the 1998 presentation. NOTE 3 - Participating First Mortgage Bonds As of December 31, 1998, the Company owned 49 FMBs which are secured by mortgages on apartment complexes in fourteen states across the continental United States. The face amount of the FMBs ranges from $2,275,000 to $19,450,000 with carrying amounts from $2,275,000 to $20,189,000. The FMBs have maturity dates from December 2003 to January 2041, however, seven FMBs are callable as of December 31, 1998 and the remainder are callable from January 1999 to October 2025. The stated interest rates range from 4.87% to 8.5%. The weighted average interest rates recognized on the face amount of the portfolio of FMBs for the years ended December 31, 1998, 1997 and 1996 were 6.94%, 6.75% and 7.18%, respectively, based on weighted average face amounts of approximately $394,079,000, $208,744,000 and $162,125,000, respectively. The principal and interest payments on each FMB are payable only from the cash flows of the the Underlying Properties, including proceeds from a sale of an Underlying Property or the refinancing of the mortgage loan securing such FMBs (the "Mortgage Loans"). None of the FMBs constitute a general obligation of any state or local government, agency or authority. The structure of each Mortgage Loan mirrors the structure of the corresponding FMB which it secures. The seasoned original 31 FMBs call for interest only debt service payments during their respective terms (which generally are 24 to 30 years from issuance or re-issuance) with repayment of principal due in a lump sum "balloon" payment at the expiration of their respective terms or upon sale or refinancing. The newly acquired bonds (bonds acquired in 1997 and 1998) call for amortization or "sinking fund" payments, generally at the completion of rehabilitation or construction, of principal based on thirty to forty year level debt service amortization schedules. On all the FMBs the Company generally has the right to require redemption approximately 12 to 15 years from issuance or re-issuance and obligors generally are locked out of prepayment for seven to ten years from issuance or re-issuance. The original obligors and owners of the Underlying Properties of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs have been replaced with affiliates of the Manager who have not made equity investments. These entities have assumed the day-to-day responsibilities and obligations of the Underlying Properties. Buyers are being sought who would make equity investments in the Underlying Properties and assume the nonrecourse obligations for the FMB. These properties are generally paying as interest an amount equal to the net cash flow generated by operations, which in some cases is less than stated rate of the FMB. The Company has no present intention of declaring a default on these FMBs. . The aggregate carrying value of these ten FMBs at December 31, 1998 was approximately $105,402,000 and the income earned from them for the year ended December 31, 1998 was approximately $7,497,000. From time to time, the Company enters into forbearance agreements and/or permanent modifications with certain borrowers. The determination as to whether it is in the best interest of the Company to enter into permanent modifications or forbearance agreements on the FMBs, advance second mortgages, or alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors. These factors include, but are not limited to, Underlying Property performance, owner cooperation and projected costs of foreclosure and litigation. Payments under each of the existing forbearance agreements are current as of December 31, 1998. -31- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Effective January 1, 1998, the Highland Ridge, Willow Creek, Bristol Village and Thomas Lake FMBs were modified to (i) reflect a change in their stated interest rates, (ii) allow for deferred base and other interest accrued and unpaid through December 1997 to be paid at maturity or upon an event of sale or refinancing and (iii) extend the mandatory call and prepayment lock-out dates. In addition, the maturities of the Highland Ridge and Willow Creek FMBs were extended to 2018 and 2022, respectively, and the maturities of the Bristol Village and Thomas Lake FMBs were extended to 2027 with mandatory call dates at January 2010. On December 23, 1998, the Mansion FMB was modified to (i) reflect a change in base interest rate, effective December 31, 1998 (from 5.23% to 7.25%), (ii) allow for certain equal quarterly payments of supplemental contingent interest ($150,000 per quarter) to be paid initially at closing and then quarterly over the second, third and fourth quarters of 1999 and (iii) extend the maturity date, the mandatory call date and the prepayment lock-out dates (to 2029, 2011 and 2006, respectively). Pursuant to the modified terms of the Mansion FMB, no additional contingent interest is to be paid from this FMB. The Company currently anticipates that it will modify certain other FMBs to reflect generally similar terms as those modified previously and effective in 1998, where and as appropriate. Certain of the Company's other FMBs have been previously modified. These modifications have generally encompassed an extension of the maturity together with a prepayment lock out feature and/or prepayment penalties together with an extension of the mandatory redemption feature (5-10 years from modification). Stated interest rates have also been adjusted together with a change in the participation and contingent interest features. Base interest rates, contingent interest, prepayment lock-outs, mandatory redemption and maturity features vary dependent on the facts of a particular FMB, the developer, the Underlying Property's performance and requirements of bond counsel and local issuers. In addition to the stated base rates of interest, certain of the FMBs provide for "contingent interest" which is equal to: (i) an amount equal to 50% to 100% of net property cash flow and 50% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annual compound interest at a rate ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (ii) an amount equal to 25% to 50% of the remaining net property cash flow and 25% to 50% of the remaining net sale or refinancing proceeds, until the borrower has paid interest at a simple annual rate of 16% over the term of the FMB. Both the stated and contingent interest on the FMBs are exempt from federal income taxation. During the years ended December 31, 1998, 1997 and 1996, six, five and two FMBs, paid contingent interest amounting to approximately $960,000, $353,000 and $220,000, respectively. With respect to the FMBs which are subject to forbearance agreements with the respective obligors, the difference between the stated interest rates and the rates paid (whether deferred and payable out of available future cash flow or, ultimately, from sale or refinancing proceeds) on FMBs is not accrued for financial statement purposes. The accrual of interest at the stated interest rate will resume once an Underlying Property's ability to pay the stated rate has been adequately demonstrated. Unrecorded contractual interest income was approximately $3,047,000, $2,415,000 and $1,407,000 for the years ended December 31, 1998, 1997 and 1996, respectively. Newly acquired FMBs will generally bear a fixed base interest rate and, to the extent permitted by existing regulations, and other features, they may or may not also provide for contingent interest. Terms are expected to be 5 to 35 years, although the Company may have the right to cause repayment prior to maturity through a mandatory redemption feature (5 to 7 years with up to 6 month's notice). In some cases, the principal of an FMB may amortize. New FMBs are generally not expected to be subject to optional prepayment during the first 5-10 years of the Company's ownership of the bonds and may carry prepayment penalties thereafter beginning at 5% of the outstanding principal balance, declining by 1% per annum. Certain new FMBs may be purchased at a discount from their face value. Up to 15% of the Total Market Value of the Company may be invested in FMBs secured by Underlying Properties in which affiliates of the Manager have a controlling interest, equity interest or security interest. The 15% limit is not applicable to properties to which the Manager or its affiliates have taken title for the benefit of the Company and only applies to new FMBs acquired after the Consolidation. In selected circumstances and only in connection with the acquisition of tax-exempt FMBs the Company may acquire a small amount of taxable bonds to fund certain costs associated with the issuance of FMBs, that under current law cannot be funded by FMBs. In order to protect the tax exempt status of the FMBs, the owners of the Underlying Properties are required to enter into certain agreements to own, manage and operate such Underlying Properties in accordance with requirements of the Internal Revenue Code of 1986, as amended. From time to time the Company has advanced funds to owners of certain Underlying Properties in order to preserve the underlying asset including completion of construction and/or when Underlying Properties have experienced operating difficulties including past due real estate taxes and/or deferred maintenance items. Such advances typically are secured by promissory notes and/or second mortgages. As of December 31, 1998, the face amount of such advances was $12,845,308, and their carrying value was $7,628,920, which is net of purchase accounting adjustments, and a reserve for collectibility of $138,000. -32- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS During the period January 1, 1998 through December 31, 1998 the Company acquired 17 FMBs for an aggregate purchase price of $117,596,600, not including bond selection fees and expenses of approximately $2,541,000. Further information regarding the 17 FMBs is as follows:
Stated No. of Project Closing Call Date/ Face Interest Rental Name Date Maturity Date Amount of Bond Rate Units ---- ---- ------------- -------------- ---- ----- Ocean Air 1/1/16 Norfolk, VA 4/20/98 11/1/30 $ 10,000,000 7.250% 434 Phoenix 11/1/16 Stockton, CA 4/28/98 10/1/29 3,250,000 7.125% 184 Stone Creek 5/1/17 Watsonville, CA 4/28/98 4/1/40 8,820,000 7.125% 120 Cedarbrook 5/1/17 Hanford, CA 4/28/98 5/1/40 2,840,000 7.125% 70 Marsh Landings 7/1/17 Portsmouth, VA 5/20/98 7/1/30 6,050,000 7.250% 250 College Park 7/1/25 Naples, FL 7/15/98 7/1/40 10,100,000 (a) 210 Gulfstream 4/1/16 Dania, FL 7/22/98 7/1/38 3,500,000 7.250% 96 Bedford Square 9/1/17 Clovis, CA 8/25/98 8/1/40 3,850,000 (b) 130 Northpointe Village 9/1/17 Fresno, CA 8/25/98 8/1/40 13,250,000 (c) 406 Falcon Creek 9/1/16 Indianapolis, IN 9/14/98 8/31/38 6,144,600 (d) 131 Jubilee Courtyards 10/1/25 Florida City, FL 9/15/98 9/1/40 4,150,000 (e) 98 Silvercrest 10/1/17 Clovis, CA 9/24/98 9/1/40 2,275,000 7.125% 100 Carrington Pointe 10/1/17 Los Banos, CA 9/24/98 9/1/40 3,375,000 6.375% 80 Madalyn Landing 12/1/17 Palm Bay, FL 11/13/98 11/1/40 14,000,000 7.000% 304 Forest Hills 6/1/16 Garner, NC 12/15/98 6/1/34 5,930,000 7.125% 136 Lake Jackson 1/1/18 Lake Jackson, TX 12/22/98 1/1/41 10,934,000 7.000% 160 Mountain Ranch 1/1/18 Austin, TX 12/23/98 1/1/41 9,128,000 7.125% 212 ------------ $117,596,600 ============
(a) The interest rates for College Park are 7% during the construction period and 7.25% thereafter. (b) The interest rates for Bedford Square are 7% during the construction period and 6.375% thereafter. (c) The interest rates for Northpointe Village are 7.965% through September 23, 1998, 8.125% during the remainder of the construction period and 7.5% thereafter. -33- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (d) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25% thereafter. (e) The interest rates for Jubilee Courtyards are 7% through September 30, 2000 and 7.125% thereafter. No single FMB provided interest income which exceeded 10% of the Company's total revenue for the years ended December 31, 1998, 1997 and 1996, except for the Bristol Village and Pelican Cove FMBs which provided 14% and 11%, respectively, of total revenue in 1996. Based on the face amount of FMBs at December 31, 1998, approximately 23% of the Underlying Properties are located in California, 15% are located in Florida, 14% are located in Missouri, 10% are located in Georgia and 10% are located in Minnesota. No other states comprise more than 10% of the total face amount. The cost basis of the Company's portfolio of 49 and 32 FMBs at December 31, 1998 and 1997 was $443,602,409 and $325,979,354, respectively. The net unrealized gain on FMBs at December 31, 1998 consisted of gross unrealized gains and losses of $22,256,064 and $7,195,873, respectively. The net unrealized gain on FMBs at December 31, 1997 consisted of gross unrealized gains and losses of $28,984,175 and $8,663,529, respectively. During December of 1997, an unrelated publicly-registered partnership sold a portfolio of nine bonds similar to the Company's FMBs. Based on the information available to Company management regarding the pricing of this sale, management determined that market conditions for the Company's FMBs were much more favorable than was previously believed. Accordingly, the estimated fair values of the FMBs calculated by management at December 31, 1997 increased by a total of approximately $22,700,000 over the estimated fair values at December 31, 1996. NOTE 4 - Deferred Costs The components of deferred costs are as follows:
December 31, ------------------------- 1998 1997 ---------- ---------- Deferred bond selection costs $6,355,252 $3,756,964 Deferred costs relating to the Private Label Tender Option Program (see Note 5) 3,054,995 542,227 --------- ---------- 9,410,247 4,299,191 Less: Accumulated amortization (2,404,282) (2,006,782) ---------- ---------- $7,005,965 $2,292,409 ========== ==========
NOTE 5 - Minority Interest In Subsidiary On May 21, 1998, the Company closed on its Private Label Tender Option Program ("TOP") in order to raise additional capital of $150 million to acquire additional FMBs. During 1998, the Company contributed 39 issues of FMBs in the aggregate principal amount of approximately $385,907,000 to a Delaware business trust (the "Origination Trust"), a wholly owned subsidiary of the Company, which then contributed 27 of those FMBs, with an aggregate principal amount of approximately $233,105,000, to another Delaware business trust (the "Owner Trust"). The Owner Trust issued two equity certificates: ( i) a Senior Certificate, with an outstanding face amount of $150,000,000 at December 31, 1998, which has been deposited into another Delaware business trust (the "Certificate Trust") which issued and sold Floater Certificates representing proportional interests in the Senior Certificate to new investors; and (ii) a Residual Certificate representing the remaining beneficial ownership interest in the Owner Trust, which has been issued to the Origination Trust, whose sole owner is the Company. In addition, the Owner Trust obtained a municipal bond insurance policy from MBIA to credit enhance Certificate distributions for the benefit of the holders of the Floater Certificates and has also arranged for a liquidity facility, issued by a consortium of highly rated European banks, with respect to the Floater Certificates. The end result of these transactions is that a portion of the interest received by the Owner Trust on the FMBs it holds is distributed through the Senior Certificate to the holders of the Floater Certificates in an amount determined each week by the remarketing agent, Goldman Sachs & Co., at the distribution amount that is required to enable the remarketing agent to sell the Floater Certificates at par on any weekly determination date. For financial accounting and reporting purposes, the equity in the Owner Trust represented by the Senior Certificate is classified as "minority interest in subsidiary (subject to mandatory redemption)" in the accompanying consolidated balance sheets. Income earned by the Owner Trust is allocated to the minority interest in an amount equal to the distributions through the Senior Certificate to the holders of the Floater Certificates. Such allocation of income is classified as "minority interest in income of subsidiary" in the accompanying consolidated statements of income. Deferred costs relating to the TOP are being amortized using the straight line method over 10 years, which approximates the average remaining term to maturity of the FMBs contributed or expected to be contributed to the Owner Trust. -34- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Currently, the maximum amount of Floater Certificates that can be issued to raise capital under the TOP is $150 million and as of December 31, 1998 such maximum has been issued. The Company is currently negotiating an increase in its TOP to $200 million and, before the end of 1999, the Company expects to raise funds through an equity offering; however, there can be no assurance that either of these initiatives will be successful. The Company's cost of funds relating to the TOP (calculated as income allocated to the minority interest plus current fees as a percentage of the weighted average amount of the outstanding Senior Certificate) was approximately 4.9% for the period May 21, 1998 (inception) through December 31, 1998. NOTE 6 - Note Payable During 1998, an interim credit facility with Goldman Sachs & Company (the "Interim Credit Facility") was available to the Company at prevailing rates of interest for such accounts (5.98% at December 14, 1998). At December 31, 1998 there were no borrowings outstanding. The Company is currently negotiating with Goldman Sachs & Company and various other lenders the renewal or replacement of this facility. NOTE 7 - Related Parties Charter Municipal Mortgage Acceptance Company (After the Consolidation) - - ----------------------------------------------------------------------- Pursuant to the Management Agreement, the Manager receives (i) bond selection fees equal to 2% of the principal amount of each FMB or other tax-exempt instrument acquired or originated by the Company; (ii) special distributions equal to .375% of the total invested assets of the Company; (iii) loan servicing fees equal to .25% of the outstanding principal amount of FMBs; (iv) a liquidation fee based on the gross sales price of assets sold by the Company in connection with a liquidation of the Company's assets; and (v) reimbursement of certain administrative costs incurred by the Manager and its affiliates on behalf of the Company. In addition, the Manager receives bond placement fees from the borrower in an amount equal to 1% of the principal amount of each FMB or other tax-exempt instrument acquired or originated by the Company and affiliates of the Manager are part of a joint venture which has a development services agreement with the obligors of three FMBs. The original term of the Management Agreement will terminate on October 1, 2001. Thereafter, the Management Agreement will be renewed annually by the Company, subject to majority approval of the Company's Board of Trustees. The Management Agreement cannot be terminated by the Company prior to October 1, 2001, other than for gross negligence or willful misconduct of the Manager and by a majority vote of the Company's independent trustees. The Management Agreement may be terminated without cause by a majority vote of the Company's independent trustees following October 1, 2001 or by the Manager at any time. The costs, expenses and the special distribution incurred to the Manager and its affiliates for the year ended December 31, 1998 and the three months ended December 31, 1997 (after the Consolidation) were as follows: Year Three Months Ended Ended December 31, December 31, 1998 1997 Bond selection fees $2,351,932 $ 100,000 Expense reimbursement 374,315 36,747 Loan servicing fees 985,198 220,386 Special distribution 1,477,797 330,580 ---------- ---------- $5,189,242 $ 687,713 ========== ========== Tax Exempt II (Prior to the Consolidation) - - ------------------------------------------ Prior to the Consolidation, the general partners of Tax Exempt II were Related Tax Exempt Associates II, Inc., a Delaware corporation (the "Related General Partner"), and Prudential Bache Properties, Inc. ("PBP"). The general partners managed and controlled the affairs of Tax Exempt II prior to the Consolidation. The general partners and their affiliates performed services for Tax Exempt II which included, but were not limited to: accounting and financial management; registrar, transfer and assignment functions; asset management; investor communications; printing and other administrative services. The general partners and their affiliates received reimbursements for costs incurred in connection with these services, the amount of which was limited by the provisions of the partnership agreement of Tax Exempt II. The general partners were paid, in aggregate, an annual management fee equal to .5% of the total invested assets (which equaled the total original face amount of the FMBs). An affiliate of the Related General Partner received loan servicing fees in an amount of .25% per annum of the principal amount outstanding on mortgage loans serviced by the affiliate. -35- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The expenses incurred by Tax Exempt II to related parties for the nine months ended September 30, 1997 and the year ended December 31, 1996 were as follows: Nine Months Year Ended Ended September 30, December 31, 1997 1996 PBP and affiliates General and administrative $ 58,170 $ 67,483 Management fee 303,984 405,312 ---------- ---------- 362,154 472,795 ---------- ---------- Related General Partner and affiliates General and administrative 66,222 46,725 Management fee 303,984 405,313 Loan servicing fee 303,152 405,313 ---------- ---------- 673,358 857,351 ---------- ---------- $1,035,512 $1,330,146 ========== ========== General - - ------- The obligors of the Suntree, Players Club, River Run, Ocean Air, Phoenix, Stone Creek, Cedarbrook, Marsh Landings, Gulfstream, Bedford Square, Northpointe Village, Falcon Creek, Jubilee Courtyards, Silvercrest, Carrington Pointe, Madalyn Landing, Forest Hills, Lake Jackson and Mountain Ranch FMBs are local partnerships in which investment partnerships, whose general partners are affiliates of the Manager, own a controlling partnership interest. As of December 31, 1998, the original owners of the Underlying Properties and obligors of the Cedar Creek, Cypress Run, Highpointe, Greenway Manor, Sunset Terrace, Pelican Cove, Loveridge, Sunset Downs, Sunset Creek and Sunset Village FMBs had been replaced with affiliates of the Manager who have not made equity investments. These entities have assumed the day-to-day responsibilities and obligations of the Underlying Properties. Buyers are being sought who would make equity investments in the Underlying Properties and assume the nonrecourse obligations for the FMBs. NOTE 8 - Earnings Per Share, Profit and Loss Allocations and Distributions Charter Municipal Mortgage Acceptance Company (After the Consolidation) - - ----------------------------------------------------------------------- Pursuant to the Management Agreement, the Manager receives a special distribution equal to a .375% per annum of the total invested assets of the Company (which equals the face amount of the FMBs), payable quarterly, for managing the affairs of the Company. After payment of the special distribution, distributions are made to the shareholders in accordance with their percentage interests. Income is allocated first to the Manager in an amount equal to the special distribution. The net remaining profits or losses, after a special allocation of 1% to the Manager, are then allocated to shareholders in accordance with their percentage interests. Basic net income per Share in the amount of $.99 and $.12 for the year ended December 31, 1998 and the three months ended December 31, 1997, respectively, equals net income for the periods ($22,025,872 and $2,792,740, respectively), less the special allocations to the Manager ($1,683,278 and $355,202, respectively), divided by the weighted average number of Shares outstanding for the periods (20,587,151 and 20,587,465, respectively). Diluted net income per Share in the amount of $.98 and $.12 for the year ended December 31, 1998 and the three months ended December 31, 1997, respectively, equals net income for the periods, less the special allocations to the Manager, divided by the weighted average number of diluted Shares outstanding for the periods (20,740,641 and 20,587,465, respectively). The weighted average number of diluted Shares outstanding for the year ended December 31, 1998 reflects the weighted average impact of an additional 608,955 Shares presumed to be issued to counsel for the Partnerships pursuant to an Order and Stipulation of Settlement by the United States District Court for the Southern District of New York on February 18, 1999 (see Note 9). Net income per unit information for periods before the Consolidation is not presented because it is not indicative of the Company's continuing capital structure. Tax Exempt II (Prior to the Consolidation) - - ------------------------------------------ Net profits or losses and distributions were allocated 98% to the BUC$holders and 2% to the general partners of Tax Exempt II in accordance with the Agreement of Limited Partnership of Tax Exempt II. NOTE 9 - Capital Stock and Share Option Plan The Company has adopted an incentive Share option plan (the "Incentive Share Option Plan"), the purpose of which is to (i) attract and retain qualified persons as trustees and officers and (ii) to incentivize and more closely align the financial interests of the Manager and its employees and officers with the interests of the shareholders by providing the Manager with substantial financial interest in the Company's success. The Compensation Committee administers the Incentive Share Option Plan. Pursuant to the Incentive Share Option Plan, if the Company's distributions per Share in the immediately preceding calendar year exceed $0.9517 per -36- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Share, the Compensation Committee has the authority to issue options to purchase, in the aggregate, that number of Shares which is equal to three percent of the Shares outstanding as of December 31 of the immediately preceding calendar year (or in the initial year, as of October 1, 1997), provided that the Compensation Committee may only issue, in the aggregate, options to purchase a maximum number of Shares over the life of the Incentive Shares Option Plan equal to 10% of the Shares outstanding on October 1, 1997. Subject to the limitations described in the preceding paragraph, if the Compensation Committee does not grant the maximum number of options in any year, then the excess of the number of authorized options over the number of options granted in such year will be added to the number of authorized options in the next succeeding year and will be available for grant by the Compensation Committee in such succeeding year. All options granted by the Compensation Committee will have an exercise price equal to or greater than the fair market value of the Shares on the date of the grant. The maximum option term is ten years from the date of grant. All Share options granted pursuant to the Incentive Share Option Plan may vest immediately upon issuance or in accordance with the determination of the Compensation Committee. No options were granted for the year ended December 31, 1997. In 1998, the Company distributed $.93 per Share, thus prohibiting the Compensation Committee from issuing options. Three percent of the Shares outstanding as of the effective date of the Consolidation are equal to 617,624 Shares. On October 9, 1998, the Board of Trustees authorized the implementation of a Share repurchase plan, enabling the Company to repurchase, from time to time, up to 1,500,000 of its Shares. The repurchases will be made in the open market and the timing will be dependant on the availability of Shares and other market conditions. During the period October 9, 1998 through December 31, 1998, the Company acquired 8,400 of its Shares for an aggregate purchase price of $103,359 (including commissions and service charges). Repurchased Shares are accounted for as treasury Shares of beneficial interest. As part of the settlement of class action litigation relating to the Partnerships, counsel ("Class Counsel") for the partners of the Partnerships had the right to petition the United States District Court for the Southern District of New York (the "Court") for additional attorneys' fees ("Counsel's Fee Shares") in an amount to be determined in the Court's sole discretion. The Counsel's Fee Shares are based upon a percentage (which Class Counsel proposed to be 25%) of the increase in value of the Company, ("the Added Value") if any, as of October 1, 1998 based upon the difference between (i) the trading prices of the Company's shares of beneficial interest during the six month period ended October 1, 1998 and (ii) the trading prices of the limited partnership units and the asset values of the Partnerships prior to October 1, 1997. As of October 1, 1998, 25% of the Added Value amounted to $7,788,536 and, in accordance with an Order and Stipulation of Settlement by the Court on February 18, 1999, Class Counsel is entitled to receive 608,955 shares of beneficial interest in the Company. The shares will be distributed to Class Counsel quarterly in eight equal distributions commencing within ten business days after Class Counsel advises the Company in writing of the persons in whose name the shares are to be issued. One-half of such shares will be in the form of Restricted Securities (restricted only with respect to the sale, assignment, pledge or other transfer of such securities) and the remaining one-half of such shares will be unrestricted. Restrictions on the Restricted Securities expire one year from the date of issuance. Management is currently negotiating a discounted cash settlement with Class Counsel in lieu of the issuance of shares; however, any such settlement would require the approval of the Board of Trustees and there can be no assurance that such negotiations will be successful. -37- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 10 - Selected Quarterly Financial Data (unaudited)
1998 Quarter Ended 1997 ---------------------------------------------------------------- Quarter Ended March 31 June 30 September 30 December 31 December 31 ---------- ---------- ------------ ----------- ----------- Revenues: Interest income: Participating first mortgage bonds $5,890,264 $6,561,808 $7,128,239 $7,783,284 $5,560,321 Temporary investments 41,526 62,868 57,655 59,221 49,483 Promissory notes 145,799 144,631 148,551 155,202 140,180 ---------- ---------- ---------- ---------- ---------- Total revenues 6,077,589 6,769,307 7,334,445 7,997,707 5,749,984 ---------- ---------- ---------- ---------- ---------- Expenses: Interest expense 344,770 328,875 305,326 525,363 429,012 Loan servicing fees 217,974 233,604 255,200 278,420 220,387 General and administrative 220,027 347,854 610,091 524,173 376,900 Amortization 46,856 74,134 123,802 152,708 87,810 Loss on impairment of assets 0 0 0 0 1,843,135 Minority interest in income of subsidiary 0 256,757 534,442 772,800 0 ---------- ---------- ---------- ---------- ---------- Total expenses 829,627 1,241,224 1,828,861 2,253,464 2,957,244 ---------- ---------- ---------- ---------- ---------- Net income $5,247,962 $5,528,083 $5,505,584 $5,744,243 $2,792,740 ========== ========== ========== ========== ========== Special allocation of net income to the Manager $ 376,171 $ 402,183 $ 434,027 $ 470,897 $ 355,202 ========== ========== ========== ========== ========== Net income applicable to shareholders $4,871,791 $5,125,900 $5,071,557 $5,273,346 $2,437,538 ========== ========== ========== ========== ========== Net income per share: Basic $ .24 $ .25 $ .25 $ .26 $ .12 ========== ========== ========== ========== ========== Diluted $ .24 $ .25 $ .25 $ .25 $ .12 ========== ========== ========== ========== ==========
NOTE 11 - Subsequent Event (unaudited) -38- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS On March 26, 1999, the Company acquired one FMB for a purchase price of $6,400,000, not including bond selection fees and expenses of approximately $128,000. The obligor of the FMB is a local partnership in which an investment partnership, whose general partner is as affiliate of the Manager, owns a controlling partnership interest. Further information regarding the FMB is as follows: Stated No. of Project Closing Call Date/ Face Interest Rental Name Date Maturity Date Amount of Bond Rate Units ---- ---- ------------- -------------- ---- ----- Hamilton Garden 4/1/15 Hamilton, NJ 3/26/99 3/1/35 $6,400,000 (a) 174 (a) The interest rates for Hamilton Garden are 7.625% during the construction period and 7.125% thereafter. -39- Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III Item 10. Directors and Executive Officers of the Company. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Item 11. Executive Compensation. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. Item 12. Security Ownership of Certain Beneficial Owners and Management. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. Item 13. Certain Relationships and Related Transactions. Incorporated by reference to the Company's definitive proxy statement to be filed pursuant to Regulation 14A under the Exchange Act. -40- PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. Sequential (a) 1. Financial Statements Page -------------------- ---------- Independent Auditors' Report 22 Consolidated Balance Sheets as of December 31, 1998 and 1997 23 Consolidated Statements of Income for the years ended December 31, 1998, 1997 and 1996 24 Consolidated Statements of Changes in Shareholders' Equity/Partners' Capital (Deficit) for the years ended December 31, 1998, 1997 and 1996 25 Consolidated Statements of Cash Flows for the years ended December 31, 1998, 1997 and 1996 27 Notes to Consolidated Financial Statements 29 (a) 2. Financial Statement Schedules Schedule IV - Mortgage Loans on Real Estate at December 31, 1998 56 All other schedules have been omitted because they are not applicable or the required information is included in the financial statements and the notes thereto. (a) 3. Exhibits 3.1(a) Certificate of Business Trust dated as of August 12, 1996 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237) 3.1(b) Certificate of Amendment of Certificate of Business Trust dated as of April 30, 1997 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237) 3.1(c) Trust Agreement dated as of August 12, 1996 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237) 3.1(d) Amendment No. 1 to Trust Agreement dated as of April 30, 1997 (incorporated by reference to the Company's Registration Statement on Form 10, File No. 001-13237) 3.1(e) Amended and Restated Trust Agreement dated as of September 30, 1997 (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998) 3.2 Bylaws (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998) -41- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 4.1 Specimen Copy of Share Certificate for shares of beneficial interest of the Company (incorporated by reference to the Company's Amendment No. 1 on Form 10/A to the Company's Registration Statement on Form 10, File No. 001-13237) 10(a) First Mortgage Bond, dated May 13, 1986, with respect to The Mansion project, in the principal amount of $19,450,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated May 13, 1986) 10(b) First Mortgage Bond, dated May 20, 1986, with respect to the Martin's Creek project, in the principal amount of $7,300,000 (incorporated by reference to Exhibit 10(c) in Tax Exempt I's Current Report on Form 8-K dated May 20, 1986) 10(c) First Mortgage Bond, dated May 20, 1986, with respect to the East Ridge project, in the principal amount of $8,700,000 (incorporated by reference to Exhibit 10(b) in Tax Exempt I's Current Report on Form 8-K dated May 20, 1986) 10(d) First Mortgage Bond, dated July 29, 1986, with respect to the High Pointe Club project (formerly named Greenhill), in the principal amount of $8,900,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated July 29, 1986) 10(e) First Mortgage Bond, dated August 14, 1986, with respect to the Cypress Run project at Tampa Palms, in the principal amount of $15,750,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated August 14, 1986) 10(f) First Mortgage Bond, dated September 2, 1986, with respect to the Thomas Lake Place Apartments project, in the principal amount of $12,975,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated September 2, 1986) 10(g) First Mortgage Bond, dated September 30, 1986, with respect to the North Glen Apartments project (formerly named Tempo Northridge), in the principal amount of $12,400,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current report on Form 8-K dated September 30, 1986) 10(h) First Mortgage Bond, dated October 9, 1986, with respect to Greenway Manor project, in the principal amount of $12,850,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated October 9, 1986) 10(i) First Mortgage Bond, dated December 8, 1986, with respect to the Clarendon Hills Apartments project, in the principal amount of $17,600,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated December 8, 1986) -42- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(j) First Mortgage Bond, dated December 29, 1986, with respect to the Cedar Creek Village Apartments project, in the principal amount of $8,100,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated December 29, 1986) 10(k) First Mortgage Bond, dated February 12, 1987, with respect to the Sunset Terrace project, in the principal amount of $10,350,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated February 12, 1987) 10(l) Loan Agreement dated September 19, 1990 between River Bank America and the Tax Exempt I (incorporated by reference to Exhibit 10(a) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990) 10(m) Note dated September 19, 1990 from the Tax Exempt I to River Bank America (incorporated by reference to Exhibit 10(b) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990) 10(n) Pledge Agreement dated September 19, 1990 between River Bank America and the Tax Exempt I (incorporated by reference to Exhibit 10(c) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990) 10(o) Indemnity and Reimbursement Agreement dated September 19, 1990 between Stephen M. Ross and the Tax Exempt I (incorporated by reference to Exhibit 10(d) in Tax Exempt I's Current Report on Form 8-K dated September 19, 1990) 10(p) Settlement Agreement for the North Glen First Mortgage Bond dated December 3, 1990 (incorporated by reference to Exhibit 10(p) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1991) 10(q) Settlement Agreement for the Thomas Lake Mortgage Bond dated July 11, 1991 (incorporated by reference to Exhibit 10(q) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1991) 10(r) Settlement Agreement for the Sunset Terrace First Mortgage Bond dated July 10, 1992 (incorporated by reference to Exhibit 10(r) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1992) 10(s) Assignment and Assumption Agreement for the Clarendon Hills First Mortgage Bond dated May 1, 1992 (incorporated by reference to Exhibit 10 (s) in Tax Exempt I's Annual report on Form 10-K dated December 31, 1992) -43- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(t) First Supplemental Indenture between City of Hayward and Seattle-First National Bank relating to the Clarendon Hills First Mortgage Bond dated May 1, 1992 (incorporated by reference to Exhibit 10(t) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1992) 10(u) Loan Agreement dated as of January 14, 1993 between Tax Exempt I and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(u) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993) 10(v) Pledge and Security Agreement dated as of January 14, 1993 between Tax Exempt I and U.S. West Financial Service, Inc. (incorporated by reference to Exhibit 10(v) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993) 10(w) Secured Promissory Note dated January 14, 1993 between Tax Exempt I and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(w) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993) 10(x) Promissory Note dated January 15, 1993 between Tax Exempt I and RHA Inc. (incorporated be reference to Exhibit 10(x) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993) 10(y) Nonrecourse Promissory Note Secured by Deed of Trust dated January 28, 1993 between Stephen P. Diamond and Clarendon Hills Investors, Inc. assigned to Tax Exempt I (incorporated by reference to Exhibit 10(y) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993) 10(z) Assignment Agreement dated January 15, 1993 between Summit Tax Exempt Funding Corporation and Tax Exempt I (incorporated by reference to Exhibit 10(z) in Tax Exempt I's Quarterly Report on Form 10-Q dated June 30, 1993) 10(aa) Amended Settlement Agreement for the North Glen First Mortgage dated June 1, 1993 (incorporated by reference to Exhibit 10 (aa) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1993) 10(ab) Sale-Purchase Agreement between Mansion Apartment Project Investors, Inc., Seller and Independence Apartments Associates, L.P., Purchaser dated November 30,1993 (incorporated by reference to Exhibit 10 (ab) in Tax Exempt I's Quarterly Report on Form-Q dated March 31, 1994) 10(ac) Addendum to Sale-Purchase Agreement between Mansion Apartment Project Investors, Inc., Seller and Independence Apartments Associates, L.P., Purchase dated March 31, 1994 (incorporated by reference to Exhibit 10(ac) in Tax Exempt I's Quarterly Report on Form 10-Q dated March 31, 1994) -44- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(ad) First Supplemental Indenture, dated as of October 18, 1994, between The Industrial Development Authority of the City of Independence, Missouri and Boatman's First National Bank of Kansas City relating to The Mansion project (incorporated by reference to Exhibit 10(ad) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1994) 10(ae) First Mortgage Bond, dated May 13, 1986 and revised as of October 18, 1994 with respect to The Mansion project, in the principal amount of $19,450,000 (incorporated by reference to Exhibit 10(ae) in Tax Exempt I's Annual Report on Form 10-K dated December 31, 1994) 10(af) Amended Settlement Agreement for the North Glen First Mortgage dated May 1, 1996 (incorporated by reference to Exhibit 10(af) in Tax Exempt I's Annual Report on Form 10-K/A-1 dated December 31, 1995) 10(ag) First Mortgage Bond, dated September 11, 1986, with respect to the Bay Club project, in the principal amount of $6,400,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated September 11, 1986) 10(ah) First Mortgage Bond, dated November 13, 1986, with respect to the Loveridge project, in the principal amount of $8,550,000 (incorporated by reference to exhibit 10(d) in Tax Exempt II's Form 8 Amendment No. 1 to Current Report on Form 8-K, dated February 10, 1987) 10(ai) First Mortgage Bond, dated December 30, 1986 with respect to The Lakes project, in the principal amount of $13,650,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated December 30, 1986) 10(aj) First Mortgage Bond, dated December 31, 1986, with respect to the Crowne Pointe project, in the principal amount of $5,075,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated December 31, 1986) 10(ak) First Mortgage Bond, dated December 31, 1986, with respect to the Orchard Hills project, in the principal amount of $5,650,000 (incorporated by reference to exhibit 10(c) in Tax Exempt II's Current Report on Form 8-K dated December 31, 1986) 10(al) First Mortgage Bond, dated February 2, 1987, with respect to the Highland Ridge project, in the principal amount of $15,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated February 2, 1987) -45- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(am) First Mortgage Bond, dated February 11, 1987, with respect to the Newport Village project, in the principal amount of $13,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated February 11, 1987) 10(an) First Mortgage Bond, dated February 11, 1987, with respect to the Sunset Downs project, in the principal amount of $15,000,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated February 11, 1987) 10(ao) First Mortgage Bond, dated February 27, 1987, with respect to the Pelican Cove project, in the principal amount of $18,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated February 27, 1987) 10(ap) First Mortgage Bond, dated February 27, 1987, with respect to the Willow Creek project, in the principal amount of $6,100,000 (incorporated by reference to exhibit 10(c) in Tax Exempt II's Current Report on Form 8-K dated February 27, 1987) 10(aq) First Mortgage Bond, dated April 22, 1987, with respect to the Cedar Pointe project, in the principal amount of $9,500,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated April 22, 1987) 10(ar) First Mortgage Bond, dated June 26, 1987, with respect to the Shannon Lake project, in the principal amount of $12,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated June 26, 1987) 10(as) First Mortgage Bond, dated July 31, 1987, with respect to the Bristol Village project, in the principal amount of $17,000,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated July 31,1987) 10(at) First Mortgage Bond, dated July 31, 1987, with respect to the Suntree project, in the principal amount of $7,500,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated July 31, 1987) 10(au) First Mortgage Bond, dated August 7, 1987, with respect to the River Run project, in the principal amount of $6,700,000 (incorporated by reference to exhibit 10(b) in Tax Exempt II's Current Report on Form 8-K dated August 7, 1987) 10(av) First Mortgage Bond, dated August 14, 1987, with respect to the Players Club project, in the principal amount of $2,500,000 (incorporated by reference to exhibit 10(a) in Tax Exempt II's Current Report on Form 8-K dated August 14, 1987) -46- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(aw) Settlement Agreement for the Shannon Lake First Mortgage Bond dated December 3, 1990 (incorporated by reference to Exhibit 10(q) in Tax Exempt II's 1991 Annual Report on Form 10K) 10(ax) Settlement Agreement for the Newport Village First Mortgage Bond dated October 9, 1992 (incorporated by reference to Exhibit 10(r) in Tax Exempt II's 1992 Annual Report on Form 10K) 10(ay) Settlement Agreement for the Sunset Downs First Mortgage Bond dated July 10, 1992 (incorporated by reference to Exhibit 10(s) in Tax Exempt II's 1992 Annual Report on Form 10K) 10(az) Settlement Agreement for the Suntree First Mortgage Bond dated February 1, 1992 (incorporated by reference to Exhibit 10(t) in Tax Exempt II's 1992 Annual Report on Form 10K) 10(aaa) Settlement Agreement for the Players Club First Mortgage Bond dated February 1, 1992 (incorporated by reference to Exhibit 10(w) in Tax Exempt II's 1992 Annual Report on Form 10K) 10(aab) Settlement Agreement for the Bristol Village First Mortgage Bond dated March 2, 1993 (incorporated by reference to Exhibit 10(x) in Tax Exempt II's 1992 Annual Report on Form 10K) 10(aac) Amended Settlement Agreement for the Shannon Lake First Mortgage Bond dated June 1, 1993 (incorporated by reference to Exhibit 10(y) in Tax Exempt II's 1993 Annual Report on Form 10K) 10(aad) Amended Settlement Agreement for the Player's Club First Mortgage Bond dated December 1, 1993 (incorporated by reference to Exhibit 10(z) in Tax Exempt II's 1993 Annual Report on Form 10K) 10(aae) Amended Settlement Agreement for the Suntree First Mortgage Bond dated December 1, 1993 (incorporated by reference to Exhibit 10(aa) in Tax Exempt II's 1993 Annual Report on Form 10K) 10(aaf) First Supplemental Indenture between The Industrial Development Authority of the City of Kansas City, Missouri and Boatmen's First National Bank of Kansas City dated January 24, 1994 (incorporated by reference to Exhibit 10(ab) in Tax Exempt II's Quarterly Report on Form 10Q dated March 31, 1994) 10(aag) Option Agreement between The Lakes Project Investors, Inc., Seller and ZIPCO, Inc., Purchaser, dated January 27, 1994 (incorporated by reference to Exhibit 10(ac) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1994) 10(aah) Assignment and Assumption Agreements between The Lakes Apartments, Inc., Seller, and ZIPCO, Inc., Purchaser, dated August 31, 1994 (incorporated by reference to Exhibit 10(ad) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1994) -47- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(aai) Sale-Purchase Agreement between The Lakes Project Investors, Inc., Seller, and ZIPCO, Inc., Purchaser, dated August 31, 1994 (incorporated by reference to Exhibit 10(ae) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1994) 10(aaj) Amended Settlement Agreement for the Player's Club First Mortgage Bond dated December 1, 1994 (incorporated by reference to Exhibit 10(af) in Tax Exempt II's 1994 Annual Report on Form 10K) 10(aak) Amended Settlement Agreement for the Suntree First Mortgage Bond dated December 1, 1994 (incorporated by reference to Exhibit 10(ag) in Tax Exempt II's 1994 Annual Report on Form 10K) 10(aal) Amended Settlement Agreement for the Loveridge First Mortgage Bond dated July 31, 1995 (incorporated by reference to Exhibit 10(ah) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1995) 10(aam) Amended Settlement and Forbearance Agreement for the Sunset Downs First Mortgage Bond dated July 31, 1995 (incorporated by reference to Exhibit 10(ai) in Tax Exempt II's Quarterly Report on Form 10Q dated September 30, 1995) 10(aan) Amended Settlement Agreement for the Suntree First Mortgage Bond dated January 26, 1996 (incorporated by reference to Exhibit 10(aj) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1) 10(aao) Amended Settlement Agreement for the Shannon Lake First Mortgage Bond dated May 1, 1996 (incorporated by reference to Exhibit 10(ak) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1) 10(aap) Amended Settlement Agreement for the Player's Club First Mortgage Bond date January 26, 1996 (incorporated by reference to Exhibit 10(al) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1) 10(aaq) Forbearance Agreement for the Highland Ridge First Mortgage Bond dated May 14, 1996 (incorporated by reference to Exhibit 10(am) in Tax Exempt II's 1995 Annual Report on Form 10K/A-1) 10(aar) Forbearance Agreement for the Cedar Pointe First Mortgage Bond dated February 1, 1997 (incorporated by reference to Exhibit 10(an) in Tax Exempt II's 1996 Annual Report on Form 10-K) 10(aas) First Mortgage Bond, dated as of August 14, 1987, with respect to the Players Club project at Fort Myers in the principal amount of $7,200,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt III's Current Report on Form 8-K dated August 14, 1987) -48- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(aat) First Mortgage Bond, dated as of November 18, 1987, with respect to the Lakepoint project, in the principal amount of $15,100,000 (incorporated by reference to Exhibit 10(a) in Tax Exempt III's Current Report on Form 8-K dated November 18, 1987) 10(aau) First Mortgage Bonds, dated March 25, 1988, with respect to the Sunset Village and Sunset Creek projects in the principal amounts of $11,375,000 and $8,275,000, respectively (incorporated by reference to Exhibits 10(a) and 10(b) in Tax Exempt III's Current Report on Form 8-K dated March 25, 1988) 10(aav) First Mortgage Bond, dated as of May 1, 1989, with respect to the Ashley Knoll project (now named Orchard Mill) in the principal amount of $10,500,000 (incorporated by reference to Exhibits 10(a), 10(b) and 10(c) in Tax Exempt III's Current Report on Form 8-K dated May 1, 1989) 10(aaw) Settlement Agreement for the Lakepoint First Mortgage Bond dated June 28, 1991 (incorporated by reference to Exhibit 10(e) in Tax Exempt III's 1991 Annual Report on Form 10-K) 10(aax) Settlement Agreement for the Players Club First Mortgage Bond dated February 1, 1992 (incorporated by reference to exhibit 10(f) in Tax Exempt III's 1992 Annual Report on Form 10-K) 10(aay) Settlement Agreement for the Sunset Village First Mortgage Bond dated July 10, 1992 (incorporated by reference to Exhibit 10(g) in Tax Exempt III's 1992 Annual Report in Form 10-K) 10(aaz) Settlement Agreement for the Sunset Creek First Mortgage Bond dated July 10,1992 (incorporated by reference to exhibit 10(h) in Tax Exempt III's 1992 Annual Report on Form 10-K) 10(aaaa) Amended Settlement Agreement for the Lakepoint First Mortgage Bond dated June 1, 1993 (incorporated by reference to Exhibit 10(i) in Tax Exempt III's 1993 Annual Report on Form 10-K) 10(aaab) Amended Settlement Agreement for the Players Club First Mortgage Bond dated December 1, 1993 (incorporated by reference to Exhibit 10(j) in Tax Exempt III's 1993 Annual Report on Form 10-K) 10(aaac) Amended Settlement Agreement for the Players Club First Mortgage Bond dated December 1, 1994 (incorporated by reference to Exhibit 10(k) in Tax Exempt III's 1994 Annual Report on Form 10-K) 10(aaad) Amended Settlement Agreement for the Lakepoint First Mortgage Bond dated May 1, 1996 (incorporated by reference to Exhibit 10(l) in Tax Exempt III's 1995 Annual Report on Form 10-K/A-1) -49- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(aaae) Settlement Agreement for Orchard Mill First Mortgage Bond dated May 1, 1995 (incorporated by reference to Exhibit 10(m) in Tax Exempt III's September 30, 1996 Quarterly Report on Form 10-Q) 10(aaaf) Management Agreement dated as of October 1, 1997, between the Company and Related Charter L.P. (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998) 10(aaag) Agreement and Plan of Merger dated as of October 1, 1997, by and among the Company, Summit Tax Exempt Bond Fund, L.P., Summit Tax Exempt L.P. II and Summit Tax Exempt L.P. III (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998) 10(aaah) Incentive Share Option Plan (incorporated by reference to the Company's Current Report on Form 8-K, filed with the Commission on March 19, 1998) 10(aaai) Restated First Mortgage Bond, dated as of September 30, 1986, with respect to the Tempo Northridge Apartments Project in the principal amount of $12,400,000 (incorporated by reference to Exhibit 10 (aaai) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997) 10(aaaj) Restated First Mortgage Bond, dated as of June 26, 1987, with respect to the Shannon Lake Project in the principal amount of $12,000,000 (incorporated by reference to Exhibit 10 (aaaj) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997) 10(aaak) Restated First Mortgage Bond, dated as of November 18, 1987, with respect to the Lakepointe Project in the principal amount of $15,100,000 (incorporated by reference to Exhibit 10 (aaak) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997) 10(aaal) Restated First Mortgage Bond, dated as of May 1, 1989, with respect to the Ashley Knoll Project in the principal amount of $10,500,000 (incorporated by reference to Exhibit 10 (aaal) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997) 10(aaam) First Mortgage Bond, dated as of December 11, 1997, with respect to the Countryside Apartments Project in the principal amount of $5,000,000 (incorporated by reference to Exhibit 10 (aaam) in the Company's Annual Report on Form 10-K for the year ended December 31, 1997) 10(aaan) Restated First Mortgage Bond, dated as of February 2, 1987, with respect to the Highland Ridge Project in the principal amount of $15,000,000 (incorporated by reference to Exhibit 10 (aaan) in the Company's March 31, 1998 Quarterly Report on Form 10-Q) -50- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(aaao) Restated First Mortgage Bond, dated as of March 2, 1987, with respect to the Mortenson I Project in the principal amount of $6,100,000 (incorporated by reference to Exhibit 10 (aaao) in the Company's March 31, 1998 Quarterly Report on Form 10-Q) 10(aaap) Restated First Mortgage Bond, dated as of September 2, 1986, with respect to the Thomas Lake Place Apartments Project in the principal amount of $12,975,000 (incorporated by reference to Exhibit 10 (aaap) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaq) Restated First Mortgage Bond, dated as of July 31, 1987, with respect to the Bristol Village Apartments Project in the principal amount of $17,000,000 (incorporated by reference to Exhibit 10 (aaaq) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaar) First Mortgage Bond, dated as of April 20, 1998, with respect to the Ocean Air Apartments Project in the principal amount of $10,000,000 (incorporated by reference to Exhibit 10 (aaar) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaas) First Mortgage Bond, dated as of April 28, 1998, with respect to the Cedarbrook Apartments Project in the principal amount of $2,840,000 (incorporated by reference to Exhibit 10 (aaas) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaat) First Mortgage Bond, dated as of April 28, 1998, with respect to the Phoenix Apartments Project in the principal amount of $3,250,000 (incorporated by reference to Exhibit 10 (aaat) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaau) First Mortgage Bond, dated as of April 28, 1998, with respect to the Stone Creek Project in the principal amount of $8,820,000 (incorporated by reference to Exhibit 10 (aaau) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaav) First Mortgage Bond, dated as of May 20, 1998, with respect to the Lee Hall Project (Marsh Landings) in the principal amount of $6,050,000 (incorporated by reference to Exhibit 10 (aaav) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaw) Contribution Agreement between CharterMac and CharterMac Origination Trust ("Origination Trust") dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaw) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaax) Contribution Agreement between Origination Trust and CharterMac Owner Trust ("Owner Trust") dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaax) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) -51- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(aaay) Insurance Agreement among MBIA, CharterMac, Origination Trust, Owner Trust, CharterMac Floater Certificate Trust ("Floater Certificate Trust"), First Tennessee Bank National Association ("First Tennessee"), Related Charter LP, and Bayerische Landesbank Girozentrale, New York Branch ("Bayerische") dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaay) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaz) Liquidity Agreement among Owner Trust, Floater Certificate Trust, First Tennessee, MBIA and Bayerische dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaz) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaaa) Liquidity Pledge and Security Agreement among Origination Trust, Owner Trust, Floater Certificate Trust, MBIA, First Tennessee and Bayerische dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaaa) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaab) Fee Agreement among Wilmington Trust Company, Floater Certificate Trust and CharterMac dated as of May 21, 1998 (incorporated by reference to Exhibit 10 (aaaab) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaac) Certificate Placement Agreement (incorporated by reference to Exhibit 10 (aaaac) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaad) Remarketing Agreement (incorporated by reference to Exhibit 10 (aaaad) in the Company's June 30, 1998 Quarterly Report on Form 10-Q) 10(aaaae) First Mortgage Bond, dated as of July 15, 1998, with respect to the College Park Apartments Project in the principal amount of $10,100,000 (incorporated by reference to Exhibit 10 (aaaae) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) 10(aaaaf) First Mortgage Bond, dated as of July 22, 1998, with respect to Gulfstream Apartments in the principal amount of $3,500,000 (incorporated by reference to Exhibit 10 (aaaaf) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) 10(aaaag) First Mortgage Bond, dated as of August 25, 1998, with respect to the Lexington Square Project (Bedford Square) in the principal amount of $3,850,000 (incorporated by reference to Exhibit 10 (aaaag) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) -52- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- 10(aaaah) First Mortgage Bond, dated as of August 25, 1998, with respect to the Northpointe Village Project in the principal amount of $13,250,000 (incorporated by reference to Exhibit 10 (aaaah) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) 10(aaaai) First Mortgage Bond, dated as of September 14, 1998, with respect to the Falcon Creek Place Apartments Project in the principal amount of $6,144,600 (incorporated by reference to Exhibit 10 (aaaai) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) 10(aaaaj) First Mortgage Bond, dated as of September 15, 1998, with respect to the Jubilee Courtyards Apartments Project in the principal amount of $4,150,000 (incorporated by reference to Exhibit 10 (aaaaj) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) 10(aaaak) First Mortgage Bond, dated as of September 24, 1998, with respect to the Silvercrest at Clovis Project in the principal amount of $2,275,000 (incorporated by reference to Exhibit 10 (aaaak) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) 10(aaaal) First Mortgage Bond, dated as of September 24, 1998, with respect to the Carrington Pointe Project in the principal amount of $3,375,000 (incorporated by reference to Exhibit 10 (aaaal) in the Company's September 30, 1998 Quarterly Report on Form 10-Q) 10(aaaam) First Mortgage Bond, dated as of November 13, 1998, with respect to Madalyn Landing Apartments in the principal amount of $14,000,000 (filed herewith) 59 10(aaaan) First Mortgage Bond, dated as of December 15, 1998, with respect to the Forest Hills Apartments Project in the principal amount of $5,930,000 (filed herewith) 71 10(aaaao) First Mortgage Bond, dated as of December 1, 1998, with respect to the Gateway at Lake Jackson Apartments Project in the principal amount of $10,934,000 (filed herewith) 77 10(aaaap) First Mortgage Bond, dated as of December 1, 1998, with respect to the Mountain Ranch Apartments Project in the principal amount of $9,128,000 (filed herewith) 83 10(aaaaq) Restated First Mortgage Bond, dated as of May 13, 1986, with respect to the Mansion Project in the principal amount of $19,450,000 (filed herewith) 89 21 Subsidiary of the Company (filed herewith) 96 27 Financial Data Schedule (filed herewith) 97 -53- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (continued) Sequential Page ---------- (b) Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the quarter. -54- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY (COMPANY) Date: March 30, 1999 By: /s/ J. Michael Fried -------------------- J. Michael Fried Managing Trustee, Chairman of the Board and Chief Executive Officer -55- Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons on behalf of the Company and in the capacities and on the dates indicated:
Signature Title Date - - ---------------------- ---------------------------------- -------------- /s/ J. Michael Fried Managing Trustee, Chairman of the - - ---------------------- Board and Chief Executive Officer March 30, 1999 J. Michael Fried /s/ Peter T. Allen - - ---------------------- Peter T. Allen Managing Trustee March 30, 1999 /s/ Arthur P. Fisch - - ---------------------- Arthur P. Fisch Managing Trustee March 30, 1999 /s/ Stuart J. Boesky Managing Trustee, President - - ---------------------- and Chief Operating Officer March 30, 1999 Stuart J. Boesky /s/ Alan P. Hirmes Managing Trustee, Executive - - ---------------------- Vice President and Secretary March 30, 1999 Alan P. Hirmes /s/ John B. Roche Chief Financial Officer and - - ---------------------- Chief Accounting Officer March 30, 1999 John B. Roche
-56- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY ITEM 14, SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1998 Participating First Mortgage Bonds Descriptions of the various FMBs owned by the Company at December 31, 1998 are as follows:
Minimum Carrying Average Pay Rate Stated Amount Interest Rate at December Interest Maturity at December Property Location Paid for 1998* 31, 1998* Rate* Call Date Date Face Amount 31, 1998 (G)(A) - - ---- ----------- -------------- ---------- ------- ---------- ---------- ------------ --------------- The Mansion Independence, MO 7.68%(C) 7.25% 7.25% April 2006 April 2025 $ 19,450,000 $ 20,084,000 Martin's Creek Summerville, SC 8.25 8.25 8.25 Mar. 2000 May 2010 7,300,000 8,443,000 East Ridge Mt. Pleasant, SC 8.25 8.25 8.25 Mar. 2000 May 2010 8,700,000 10,063,000 Highpointe Club Harrisburg, PA 6.12 (B) 8.50 June 1998 June 2006 8,900,000 5,888,000 Cypress Run Tampa, FL 5.84 (B) 8.50 Aug. 1998 Aug. 2006 15,402,428 13,067,000 Thomas Lake Eagan, MN 7.50 7.50 7.50 Jan. 2010 Dec. 2027 12,975,000 13,643,000 North Glen Atlanta, GA 7.00 7.00 (K) 7.00 Jul. 2005 Jun. 2017 12,400,000 12,914,000 Greenway Manor St. Louis, MO 8.93 (D) 8.50 8.50 Oct. 1998 Sept. 2006 12,850,000 15,313,000 Clarendon Hills Hayward, CA 6.31 (I) 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000 13,880,000 Cedar Creek McKinney, TX 8.50 8.50 8.50 Dec. 1998 Dec. 2006 8,100,000 9,653,000 Sunset Terrace Lancaster, CA 5.23 (B) 8.00 Feb. 1999 May 2007 10,350,000 7,981,000 Bay Club Mt. Pleasant, SC 8.25 8.25 8.25 Sep. 2000 Sep. 2006 6,400,000 7,403,000 Loveridge Contra Costa, CA 5.00 (B) 8.00 Nov. 1998 Nov. 2006 8,550,000 6,593,000 The Lakes Kansas City, MO 5.64 (E) 4.87 4.87 Dec. 2006 Dec. 2006 13,650,000 10,024,000 Crowne Pointe Olympia, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,075,000 5,692,000 Orchard Hills Tacoma, WA 8.00 8.00 8.00 Dec. 1998 Dec. 2006 5,650,000 6,337,000 Highland Ridge St. Paul, MN 7.30 (C) 7.25 7.25 Jan. 2010 Jun. 2018 15,000,000 15,247,000 Newport Village Tacoma, WA 8.77 (D) 8.00 8.00 Jan. 1999 Jan. 2007 13,000,000 14,581,000 Sunset Downs Lancaster, CA 5.07 (B) 8.00 May 1999 May 2007 15,000,000 11,566,000 Pelican Cove St Louis, MO 7.89 (B) 8.00 Feb. 1999 Feb. 2007 18,000,000 20,189,000 Willow Creek Ames, IA 7.44 (C) 7.25 7.25 Jan. 2010 Jun. 2022 6,100,000 6,200,000 Cedar Pointe Nashville, TN 7.00 7.00 7.00 Apr. 2006 Apr. 2017 9,500,000 9,323,000 Shannon Lake Atlanta, GA 6.00 6.00 (M) Jul. 2005 Jun. 2017 12,000,000 11,536,000 Bristol Village Bloomington, MN 7.50 7.50 7.50 Jan. 2010 Dec. 2027 17,000,000 17,875,000 Suntree Ft. Myers, FL 6.59 6.50 (F) 8.00 Jul. 1999 Jul. 2007 7,500,000 7,586,000 River Run Miami, FL 9.11 (I) 8.00 8.00 Aug. 1999 Aug. 2007 7,200,000 8,075,000 Players Club Ft. Myers, FL 6.22 6.25 (F) 8.00 Aug. 1999 Aug. 2007 9,700,000 8,704,000 Lakepoint Dekalb City, GA 6.00 6.00 6.00 Jul. 2005 Jun. 2017 15,100,000 12,702,000 Sunset Village Lancaster, CA 5.45 (B) 8.50 Mar. 2000 Mar. 2008 11,375,000 8,771,000 Sunset Creek Lancaster, CA 5.14 (B) 8.50 Mar. 2000 Mar. 2008 8,275,000 6,381,000 Orchard Mill Atlanta, GA 6.57 5.00 (J) 7.50 Jul. 2005 Jun. 2017 10,500,000 10,252,000 Countryside North Memphis, TN 7.50 7.50 7.50 Dec. 2017 Dec. 2034 5,000,000 5,100,000 Ocean Air Norfolk, VA 7.25 7.25 7.25 Jan. 2016 Nov. 2030 10,000,000 10,000,000 Phoenix Stockton, CA 7.125 7.125 7.125 Nov. 2016 Oct. 2029 3,250,000 3,250,000 Stone Creek Watsonville, CA 7.125 7.125 7.125 May 2017 Apr. 2040 8,820,000 8,820,000 Cedarbrook Hanford, CA 7.125 7.125 7.125 May 2017 May 2040 2,840,000 2,840,000 Marsh Landings Portsmouth, VA 7.25 7.25 7.25 Jul. 2017 Jul. 2030 6,050,000 6,050,000 College Park Naples, FL 7.00 7.00 (N) Jul. 2025 Jul. 2040 10,100,000 10,100,000 Gulfstream Dania, FL 7.25 7.25 7.25 Apr. 2016 Jul. 2038 3,500,000 3,500,000 Bedford Square Clovis, CA 7.00 7.00 (O) Sep. 2017 Aug. 2040 3,850,000 3,850,000
-57- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY ITEM 14, SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1998 Participating First Mortgage Bonds
Minimum Carrying Average Pay Rate Stated Amount Interest Rate at December Interest Maturity at December Property Location Paid for 1998* 31, 1998* Rate* Call Date Date Face Amount 31, 1998 (G)(A) - - ---- ----------- -------------- ---------- ------- ---------- ---------- ------------ --------------- Northpointe Village Fresno, CA 8.085% 8.125% (P) Sep. 2017 Aug. 2040 $ 13,250,000 $ 13,250,000 Falcon Creek Indianapolis, IN 7.00 7.00 (H) Sep. 2016 Aug. 2038 6,144,600 6,144,600 Jubilee Courtyards Florida City, FL 7.00 7.00 (L) Oct. 2025 Sep. 2040 4,150,000 4,150,000 Silvercrest Clovis, CA 7.125 7.125 7.125% Oct. 2017 Sep. 2040 2,275,000 2,275,000 Carrington Pointe Los Banos, CA 6.375 6.375 6.375 Oct. 2017 Sep. 2040 3,375,000 3,375,000 Madalyn Landing Palm Bay, FL 7.00 7.00 7.00 Dec. 2017 Nov. 2040 14,000,000 14,000,000 Forest Hills Garner, NC 7.125 7.125 7.125 Jun. 2016 Jun. 2034 5,930,000 5,930,000 Lake Jackson Lake Jackson, TX 7.00 7.00 7.00 Jan. 2018 Jan. 2041 10,934,000 10,934,000 Mountain Ranch Austin, TX 7.125 7.125 7.125 Jan. 2018 Jan. 2041 9,128,000 9,128,000 ------------ ------------ $471,199,028 $458,662,600 ============ ============
*The average interest rate paid represents the interest recorded by the Company while the stated interest rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate payable pursuant to the applicable forbearance agreement, if any. (A) Aggregate cost for federal income tax purposes is $174,925,192. (B) The minimum pay rate is the current cash flow of the property. (C) Includes contingent interest paid during 1998. (D) Includes receipt of deferred base interest relating to prior periods. (E) Includes receipt of primary and supplemental contingent interest. (F) The minimum pay rate on the FMB is scheduled to increase to the stated interest rate over the remaining term of the FMB. (G) The FMBs are carried at their estimated fair values at December 31, 1998. (H) The interest rates for Falcon Creek are 7% through August 31, 2000 and 7.25% thereafter. (I) Includes receipt of primary contingent interest. (J) Pursuant to a bond modification as of October 1, 1997 which lowered the base interest rate to 7.50% effective October 1, 1997, subject to a minimum pay rate of 5% through June 30, 2000. (K) Pursuant to a forbearance agreement as of October 1, 1997 which lowered the base interest rate to 7% through June 30, 2000 and 7.50% thereafter. (L) The interest rates for Jubilee Courtyards are 7% through September 30, 2000 and 7.125% thereafter. (M) Pursuant to a bond modification as of October 1, 1997, the base interest rate was lowered to 6% through July 31, 2000 and 7% thereafter. (N) The interest rates for College Park are 7% during the construction period and 7.25% thereafter. (O) The interest rates for Bedford Square are 7% during the construction period and 6.375% thereafter. (P) The interest rates for Northpointe Village are 7.965% through September 23, 1998, 8.125% during the remainder of the construction period and 7.5% thereafter. -58- CHARTER MUNICIPAL MORTGAGE ACCEPTANCE COMPANY ITEM 14, SCHEDULE IV MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1998 Participating First Mortgage Bonds Reconciliation of FMBs:
1998 1997 1996 ------------- ------------- ------------- Balance at beginning of period: $ 346,300,000 $ 148,123,426 $ 150,274,452 Acquisitions 117,596,600 173,557,007 0 Realized loss on impairment of assets 0 (1,843,135) (4,000,000) Net change in fair value of participating first mortgage bonds (5,260,455) 26,436,248 1,822,519 Accretion of deferred income 26,455 26,454 26,455 ------------- ------------- ------------- Balance at close of period: $ 458,662,600 $ 346,300,000 $ 148,123,426 ============= ============= =============
-59- EX-10.(AAAAM) 2 R- 1 $14,000,000 UNITED STATES OF AMERICA STATE OF FLORIDA FLORIDA HOUSING FINANCE CORPORATION HOUSING REVENUE BONDS 1998 Series N (MADALYN LANDING APARTMENTS) Dated Date Interest Rate Maturity Date ---------- ------------- ------------- November 13, 1998 7.00% November 1, 2040 REGISTERED OWNER: CHARTER MUNICIPAL MORTGAGE ACCEPTANCE CORPORATION PRINCIPAL AMOUNT: FOURTEEN MILLION AND NO/100 DOLLARS The FLORIDA HOUSING FINANCE CORPORATION ("Florida Housing" or the "Corporation"), a public corporation and a public body corporate and politic duly created, organized and existing under the laws of the State of Florida (the "State"), for value received, hereby promises to pay (but only out of the revenues and other assets hereinafter referred to) to the registered owner specified above or registered assigns (subject to any right of prior redemption hereinafter mentioned), on the Maturity Date specified above, the Principal Amount specified above, and to pay interest thereon, at the rate per annum specified above, payable monthly on the first Business Day of each month, commencing December 1, 1998, to the person whose name appears on the registration books as of the 15th day of the month next preceding any Bond Payment Date (a "Record Date"). Principal of, and premium, if any, on this Bond are payable in such coin or currency of the United States as at time of payment is legal tender for payment of private and public debts, at the designated corporate trust office of The Bank of New York Trust Company of Florida, N.A., a national banking association duly organized, existing and authorized under the laws of the United States of America, with trust powers, as trustee, registrar and paying agent, in Jacksonville, Florida (the "Trustee," "Registrar" and "Paying Agent"), or its successor in trust. Interest on this Bond shall be computed on the basis of a 360-day year comprised of twelve 30-day months. Payment of principal of, premium, if any, and interest on the Bonds shall be made by check or draft mailed to the address of the person entitled thereto as such address shall appear on the registration books (hereinafter defined), except in the case of the Significant Bondholder or the owners of $1,000,000 or more in aggregate principal amount of Bonds which may be payable by wire transfer upon written instruction to the Trustee prior to the Record Date preceding any Bond Payment Date. The Principal Amount hereof shall be paid at maturity or upon redemption upon presentation and surrender of this Bond. This Bond represents an issue of duly authorized Florida Housing Finance Corporation Housing Revenue Bonds, 1998 Series N (Madalyn Landing Apartments), of Florida Housing, in the aggregate principal amount of $14,000,000 (the "Bonds"), issued under and pursuant to the Constitution and laws of the State, particularly the Florida Housing Finance Corporation Act, Sections 420.501-420.517, Florida Statutes, as amended (the "Act"). The Bonds are being issued for the purpose of making a loan (the "Mortgage Loan") pursuant to a loan agreement (the "Loan Agreement") to Vestcor Fund XII, Ltd., a limited partnership organized pursuant to the laws of the State of Florida (the "Developer"), to acquire, construct and equip a multifamily residential development in Brevard County, Florida (the "Project"), This Bond is issued under and is secured by a Trust Indenture, dated as of November 1, 1998 (the "Indenture"), between Florida Housing and the Trustee, pursuant to which the Trustee will act as payee and mortgagee for the Developer's nonrecourse promissory note in the aggregate principal amount of $14,000,000 (the "Note"). Page 1 of 8 The Note will be secured by a mortgage and security agreement granting a first lien on the Project in favor of Florida Housing (the "Mortgage"). Reference is hereby made to the Indenture and to all amendments and supplements thereto for a description of the property pledged and assigned to the Trustee and of the provisions, among others, with respect to the nature and extent of the security, the rights, duties and obligations of Florida Housing and the Trustee, the terms on which the Bonds are issued and secured, the rights of the owners of the Bonds and the provisions for defeasance of such rights. FLORIDA HOUSING HAS NO TAXING POWER. THE BONDS SHALL NOT CONSTITUTE AN OBLIGATION, EITHER GENERAL OR SPECIAL, OF FLORIDA HOUSING, THE STATE OR ANY POLITICAL SUBDIVISION THEREOF; AND NEITHER FLORIDA HOUSING, THE STATE, NOR ANY POLITICAL SUBDIVISION THEREOF SHALL BE LIABLE THEREON. NEITHER THE FAITH, REVENUES, CREDIT NOR TAXING POWER OF THE STATE OR ANY POLITICAL SUBDIVISION THEREOF SHALL BE PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, PREMIUM, IF ANY, OR INTEREST ON THE BONDS. THE BONDS ARE PAYABLE, AS TO PRINCIPAL OF, PREMIUM, IF ANY, AND INTEREST, SOLELY OUT OF THE TRUST ESTATE WHICH IS THE SOLE ASSET OF FLORIDA HOUSING PLEDGED THEREFOR. The Bonds are secured under the Indenture which assigns to the Trustee for the benefit of Owners all the right, title and interest of Florida Housing in and under the Loan Agreement, the Note, the Mortgage, certain funds and accounts held by the Trustee under the Indenture, payments made pursuant to the Loan Agreement, leases and rentals of the Project and other funds and moneys initially or subsequently pledged as part of the trust estate (the "Trust Estate"), and any deed in lieu of foreclosure delivered pursuant to the Indenture. Sinking Fund Redemption - - ----------------------- The Bonds are subject to mandatory redemption in part by operation of a sinking fund. The Trustee shall redeem on each Bond Payment Date commencing on first Bond Payment Date following the Conversion Date, as defined in the Indenture, a principal amount of the Bonds in the amounts determined from the amortization table attached hereto as Schedule A; provided, however, that the amortization schedule shall be reduced pro rata across all payments by the principal amount of any Bonds which (i) had been purchased (other than pursuant to the provisions of Section 4.09 of the Indenture) or redeemed by the Developer or the Trustee and canceled by the Trustee prior to the next Bond Payment Date and (ii) had not previously formed the basis for such reduction. The redemption price for any such redemption shall be 100% of the principal amount of the Bonds or portions thereof so redeemed, plus accrued interest, if any, to the sinking fund payment date, and without premium. The particular Bonds or portions thereof to be redeemed on each particular sinking fund payment date shall be selected by the Trustee by lot or as otherwise instructed in the Indenture or by the Significant Bondholder, or in the absence thereof, by such other random means as the Trustee shall determine in its discretion. Optional Redemption - - ------------------- The Bonds are subject to optional redemption, as follows: (a) one time, after the Conversion Date, on a date and in a principal amount to be specified by the Significant Bondholder (as defined in the Indenture) in a written notice to the Trustee, in part at a redemption price of par plus accrued interest to the redemption date, and (b) prior to maturity on or after November 1, 2005, in whole, but not in part, on any date, at the direction of the Developer from amounts prepaid on the Loan pursuant to the Agreement solely to the extent of any optional prepayment by the Developer of the Note, or from proceeds of refunding bonds Page 2 of 8 or otherwise from other sources at the redemption prices (expressed as percentages of the principal amount) plus accrued interest to the date of redemption, as follows:
Period in Which Redeemed Redemption Price ------------------------ ---------------- Sixth year following Conversion Date 105% Seventh year following Conversion Date 104% Eighth year following Conversion Date 103% Ninth year following Conversion Date 102% Tenth year following Conversion Date 101% Thereafter 100%
Mandatory Redemption from the Project Fund - - ------------------------------------------ The Bonds are subject to mandatory redemption on the first Business Day following receipt of the Certificate of Completion (as defined in the Indenture) for which thirty (30) days' notice of redemption can be given, in whole or in part, from proceeds of the Bonds remaining on deposit in the Mortgage Loan Account and Capitalized Interest Account in the Project Fund attributable to moneys not needed to complete the acquisition, construction and equipping of the Project and pay for all Project Costs as provided in, and upon the satisfaction of the conditions set forth in, Section 6.02(a) of the Indenture. If so called for redemption, the Bonds shall be redeemed at a redemption price equal to 100% of the principal amount thereof, without premium, plus accrued interest to the date fixed for redemption. Extraordinary or Special Mandatory Redemption Upon Damage, Destruction or Condemnation and Upon Certain Prepayments of the Note and When Sufficient Moneys are Available to Redeem the Bonds in Whole. The Bonds are subject to extraordinary mandatory redemption in whole or in part, at par, in the event and to the extent the Note is prepaid after the Project or any portion of it is damaged or destroyed or is taken in a condemnation proceeding to the extent of any proceeds of insurance or condemnation award not used for the repair or restoration of the Project, as further described below. If so called for redemption in whole, the Bonds shall be redeemed on the first Business Day for which thirty (30) days' notice of redemption can be given at a redemption price equal to 100% of the principal amount thereof, without premium, plus accrued interest to the date fixed for redemption. If, as a result of fire or other casualty, the Project or any part thereof is damaged, destroyed or condemned or acquired for public use, the Developer, with the consent of the Significant Bondholder, is required to repair or restore the Project in accordance with requirements of the Mortgage and Section 5.04 of the Agreement. The Trustee, within ten (10) days of receipt of written notice of such damage, destruction or condemnation, shall provide written notice to the Developer, Florida Housing, the Significant Bondholder and the Servicer, and the Servicer shall confirm that the Developer has complied with the provisions of the Mortgage applicable to such occurrence. If the conditions for repair or restoration of the Project, as provided in Section 5.04 of the Agreement are not satisfied, or if the Significant Bondholder does not consent to such repair or restoration, the Trustee at the direction of the Significant Bondholder, will apply the net proceeds of any insurance or condemnation to the prepayment of the Note. In such event, the Trustee shall deposit such net proceeds in the Redemption Fund and apply such moneys to the redemption of Bonds in accordance with the terms described above. Page 3 of 8 Mandatory Redemption Resulting from Event of Intervention or Default - - -------------------------------------------------------------------- The Bonds shall be subject to mandatory redemption in whole at the direction of the Trustee, with the Significant Bondholder's consent, pursuant to the exercise of remedies under the Loan Documents, at the earliest time for which notice hereunder can be given upon the occurrence of an Event of Intervention as set forth in Section 8.01 of the Indenture at a redemption price equal to the principal amount of Bonds Outstanding plus accrued interest due thereon. Upon the giving of notice of redemption of the Bonds under Section 4.05 of the Indenture, the Bonds shall become payable on the date specified in such notice of redemption and in the amount specified in the preceding paragraph. Mandatory Purchase - - ------------------ Any holder of Outstanding Bonds will have the opportunity to present all or a portion of its Bonds for purchase by the Trustee from moneys provided to the Trustee by the Developer at any time after the 204th full month following the Conversion Date (the "Mandatory Purchase Date"). In order for the Bonds to be eligible for purchase, holders of Outstanding Bonds must provide notice to the Trustee, Florida Housing and the Developer, of their intent to present their Bonds for mandatory purchase not later than six months prior to the Mandatory Purchase Date. The Trustee shall notify the Developer within 5 Business Days of such demand for payment and the amount of Bonds to be presented for purchase on the Mandatory Tender Date, and pursuant to Section 4.17 of the Agreement, the Developer shall be required to provide moneys in the amount of the principal amount so designated by the Trustee plus accrued interest thereon. The Trustee shall be required to purchase Bonds presented on the Mandatory Purchase Date only to the extent there are moneys on deposit in the Purchase Fund pursuant to Section 5.08 of the Indenture for such purpose. Mandatory Redemption Upon Determination of Taxability. - - ------------------------------------------------------ The Bonds are subject to mandatory redemption in whole at a redemption price equal to the principal amount of Bonds being redeemed with accrued interest to the redemption date upon a Determination of Taxability (as defined in the Indenture) if the Owner of a Bond presents his Bond or Bonds for redemption, on any date selected by such Owner, specified in a notice in writing delivered to the Trustee, the Developer and Florida Housing at least ten Business Days prior to such date. Selection of Bonds to be Redeemed or Purchased - - ---------------------------------------------- To the extent that the Bonds are subject to partial redemption (including but not limited to mandatory sinking fund redemption) and there exists more than one (1) registered Owner of the Bonds, the Trustee shall redeem the Bonds in the following manner (unless otherwise directed in writing by the Significant Bondholder and Florida Housing): the Trustee shall determine the ratio (expressed as a fraction) that the principal amount of Bonds held by each Owner bears to the total aggregate principal amount of Bonds Outstanding. The Trustee shall multiply the amount of money available for the partial redemption by the ratio as determined above and call for redemption the principal amounts of Bonds so held by each Owner by the respective product determined above. Such partial redemptions may result in an Owner holding a principal amount of Bonds in less than an Authorized Denomination or integral multiple of $5,000. Any fractional part of one cent shall be ignored by the Trustee. Except as otherwise provided in the Indenture, notice of redemption is required to be given by first class mail, postage prepaid, not less than thirty (30) nor more than forty-five (45) days prior to the redemption date to the registered owners hereof to be redeemed at the address of such registered owners as Page 4 of 8 shown on the bond register. Receipt of such notice of redemption shall not be a condition precedent to such redemption and failure so to notify the registered owner shall not affect the validity of the proceedings for the redemption of this Bond. Such notice shall be given in the name of Florida Housing, shall be dated, shall set forth the principal amount of the Bonds Outstanding which shall be called for redemption and shall specify the redemption date and the redemption price. If less than all of the Bonds shall be called for redemption, the notice shall set forth the Bonds Outstanding to be redeemed and the portion of the principal amount thereof to be redeemed. Such notice shall further state that on the redemption date the Bonds will be payable at the Payment Office of the Trustee or Paying Agent or as otherwise provided in the Indenture and from such date interest shall cease to accrue. Notice of redemption having been given as provided in the preceding paragraph and all conditions precedent, if any, specified in such notice having been satisfied, the Bonds or the portion thereof so to be redeemed shall become due and payable on the date fixed for redemption at the redemption price specified therein plus any accrued interest to the redemption date, and upon presentation and surrender thereof at the place specified in such notice or as otherwise provided in the Indenture. On and after the redemption date (unless Florida Housing shall default in the payment of the redemption price and accrued interest payable on the redemption date), (i) such Bonds (or portion thereof) shall cease to bear interest and (ii) such Bonds (or portion thereof) shall no longer be considered as Outstanding under the Indenture. The registered owner of this Bond shall have no right to enforce the provisions of the Indenture or to institute action to enforce the covenants therein, or to take any action with respect to any event of default thereunder, or to institute, appear in or defend any suit or other proceeding with respect thereto, except as provided in the Indenture. Modifications or alterations of the Indenture or of any indenture supplemental thereto may be made only to the extent and in the circumstances permitted by the Indenture. This Bond may be exchanged, and its transfer may be effected, only by the registered owner hereof in person or by his attorney duly authorized in writing at the designated corporate trust office of the Trustee, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon exchange or registration of such transfer a new registered bond or Bonds of the same series, maturity and interest rate and of Authorized Denominations for the same aggregate principal amount will be issued in exchange therefor. Florida Housing and the Trustee shall deem and treat the person in whose name this Bond shall be registered on the bond register, as the absolute owner hereof for the purpose of receiving payment of or on account of principal hereof and interest due hereon and for all other purposes and neither Florida Housing nor the Trustee shall be affected by any notice to the contrary. All acts, conditions and things required by the Constitution and the laws of the State to exist, happen and be performed precedent to and in the execution and delivery of the Indenture (hereinafter defined) and the issuance of this Bond do exist, have happened and have been performed in due time, form and manner as required by law. No covenant or agreement contained in this Bond or the Indenture shall be deemed to be a covenant or agreement of any official, officer, agent or employee of Florida Housing in his or her individual capacity, and neither the members of Florida Housing, nor any official executing this Bond, shall be liable personally on this Bond or be subject to any personal liability or accountability by reason of the issuance or sale of this Bond. Page 5 of 8 This Bond shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose until the Registrar shall have executed the Certificate of Authentication appearing hereon. IN WITNESS WHEREOF, Florida Housing has caused this Bond to be executed in its name by the manual or facsimile signature of its Chairman or Vice Chairman and the facsimile of its seal to be hereunto affixed, impressed, imprinted or reproduced hereon and attested by the manual or facsimile signature of its Secretary all as of November 13, 1998. FLORIDA HOUSING FINANCE CORPORATION [SEAL] ATTEST: By: /s/ Clark D. Bennett /s/ Susan J. Leigh Chairman Secretary CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within-mentioned Indenture. Date of Authentication: THE BANK OF NEW YORK TRUST COMPANY OF FLORIDA, N.A., as Registrar By: /s/ Paula R. Williams --------------------- Authorized Signatory CERTIFICATE OF VALIDATION This Bond is one of a series of Bonds which were validated by Judgment of the Circuit Court of the Second Judicial Circuit in and for Leon County, Florida, rendered on November 12, 1997. /s/ Clark D. Bennett Clark D. Bennett, Chairman of the Florida Housing Finance Corporation Page 6 of 8 Assignment for Transfer FOR VALUE RECEIVED, the undersigned, hereby sells, assigns and transfers unto _________________________________(Tax Identification or Social Security No. ____________) the within bond and all rights thereunder, and hereby irrevocably constitutes and appoints _____________________ attorney to transfer the within bond on the books kept for registration thereof, with full power or substitution in the premises. Date: ------------------------------ ------------------------------------ Signature Signature Guaranteed: NOTICE: Signature(s) must be Guaranteed by a signature guarantor institution that is a participant in a nationally recognized signature guarantor program. NOTICE: The signature to this assignment must correspond with the name of the registered owner of the within bond as it appears on the face hereof in every particular, without alteration or enlargement or any change whatever, and the Social Security number or federal employer identification must be supplied. SCHEDULE A Madalyn Landing Apartments Mandatory Sinking Fund Schedule -------------------------------
Date Principal Amount Date Principal Amount ---- ---------------- ---- ---------------- 1-Dec-00 5,334 1-Mar-05 7,176 1-Jan-01 5,365 1-Apr-05 7,217 1-Feb-01 5,396 1-May-05 7,260 1-Mar-01 5,428 1-Jun-05 7,302 1-Apr-01 5,459 1-Jul-05 7,344 1-May-01 5,491 1-Aug-05 7,387 1-Jun-01 5,523 1-Sep-05 7,430 1-Jul-01 5,555 1-Oct-05 7,474 1-Aug-01 5,588 1-Nov-05 7,517 1-Sep-01 5,620 1-Dec-05 7,561 1-Oct-01 5,653 1-Jan-06 7,605 1-Nov-01 5,686 1-Feb-06 7,650 1-Dec-01 5,719 1-Mar-06 7,694 1-Jan-02 5,753 1-Apr-06 7,739 1-Feb-02 5,786 1-May-06 7,784 1-Mar-02 5,820 1-Jun-06 7,830 1-Apr-02 5,854 1-Jul-06 7,875 1-May-02 5,888 1-Aug-06 7,921 1-Jun-02 5,922 1-Sep-06 7,968 1-Jul-02 5,957 1-Oct-06 8,014 1-Aug-02 5,992 1-Nov-06 8,061 1-Sep-02 6,027 1-Dec-06 8,108 1-Oct-02 6,062 1-Jan-07 8,155 1-Nov-02 6,097 1-Feb-07 8,203 1-Dec-02 6,133 1-Mar-07 8,251 1-Jan-03 6,169 1-Apr-07 8,299 1-Feb-03 6,204 1-May-07 8,347 1-Mar-03 6,241 1-Jun-07 8,396 1-Apr-03 6,277 1-Jul-07 8,445 1-May-03 6,314 1-Aug-07 8,494 1-Jun-03 6,351 1-Sep-07 8,544 1-Jul-03 6,388 1-Oct-07 8,593 1-Aug-03 6,425 1-Nov-07 8,643 1-Sep-03 6,462 1-Dec-07 8,694 1-Oct-03 6,500 1-Jan-08 8,745 1-Nov-03 6,538 1-Feb-08 8,796 1-Dec-03 6,576 1-Mar-08 8,847 1-Jan-04 6,614 1-Apr-08 8,899 1-Feb-04 6,653 1-May-08 8,950 1-Mar-04 6,692 1-Jun-08 9,003 1-Apr-04 6,731 1-Jul-08 9,055 1-May-04 6,770 1-Aug-08 9,108 1-Jun-04 6,810 1-Sep-08 9,161 1-Jul-04 6,849 1-Oct-08 9,215 1-Aug-04 6,889 1-Nov-08 9,268 1-Sep-04 6,929 1-Dec-08 9,322 1-Oct-04 6,970 1-Jan-09 9,377 1-Nov-04 7,011 1-Feb-09 9,431 1-Dec-04 7,051 1-Mar-09 9,486 1-Jan-05 7,093 1-Apr-09 9,542 1-Feb-05 7,134 1-May-09 9,597
Madalyn Landing Apartments Mandatory Sinking Fund Schedule ------------------------------- Exhibit A ---------
Date Principal Amount Date Principal Amount ---- ---------------- ---- ---------------- 1-Jun-09 9,653 1-Sep-13 12,987 1-Jul-09 9,710 1-Oct-13 13,063 1-Aug-09 9,766 1-Nov-13 13,139 1-Sep-09 9,823 1-Dec-13 13,216 1-Oct-09 9,881 1-Jan-14 13,293 1-Nov-09 9,938 1-Feb-14 13,370 1-Dec-09 9,996 1-Mar-14 13,448 1-Jan-10 10,055 1-Apr-14 13,527 1-Feb-10 10,113 1-May-14 13,606 1-Mar-10 10,172 1-Jun-14 13,685 1-Apr-10 10,232 1-Jul-14 13,765 1-May-10 10,291 1-Aug-14 13,845 1-Jun-10 10,351 1-Sep-14 13,926 1-Jul-10 10,412 1-Oct-14 14,007 1-Aug-10 10,472 1-Nov-14 14,089 1-Sep-10 10,534 1-Dec-14 14,171 1-Oct-10 10,595 1-Jan-15 14,254 1-Nov-10 10,657 1-Feb-15 14,337 1-Dec-10 10,719 1-Mar-15 14,420 1-Jan-11 10,781 1-Apr-15 14,505 1-Feb-11 10,844 1-May-15 14,589 1-Mar-11 10,908 1-Jun-15 14,674 1-Apr-11 10,971 1-Jul-15 14,760 1-May-11 11,035 1-Aug-15 14,846 1-Jun-11 11,100 1-Sep-15 14,933 1-Jul-11 11,164 1-Oct-15 15,020 1-Aug-11 11,230 1-Nov-15 15,107 1-Sep-11 11,295 1-Dec-15 15,195 1-Oct-11 11,361 1-Jan-16 15,284 1-Nov-11 11,427 1-Feb-16 15,373 1-Dec-11 11,494 1-Mar-16 15,463 1-Jan-12 11,561 1-Apr-16 15,553 1-Feb-12 11,628 1-May-16 15,644 1-Mar-12 11,696 1-Jun-16 15,735 1-Apr-12 11,764 1-Jul-16 15,827 1-May-12 11,833 1-Aug-16 15,919 1-Jun-12 11,902 1-Sep-16 16,012 1-Jul-12 11,971 1-Oct-16 16,105 1-Aug-12 12,041 1-Nov-16 16,199 1-Sep-12 12,112 1-Dec-16 16,294 1-Oct-12 12,182 1-Jan-17 16,389 1-Nov-12 12,253 1-Feb-17 16,485 1-Dec-12 12,325 1-Mar-17 16,581 1-Jan-13 12,397 1-Apr-17 16,677 1-Feb-13 12,469 1-May-17 16,775 1-Mar-13 12,542 1-Jun-17 16,873 1-Apr-13 12,615 1-Jul-17 16,971 1-May-13 12,688 1-Aug-17 17,070 1-Jun-13 12,762 1-Sep-17 17,170 1-Jul-13 12,837 1-Oct-17 17,270 1-Aug-13 12,912 1-Nov-17 17,371
Madalyn Landing Apartments Mandatory Sinking Fund Schedule ------------------------------- Exhibit A ---------
Date Principal Amount Date Principal Amount ---- ---------------- ---- ---------------- 1-Dec-17 17,472 1-Mar-22 23,505 1-Jan-18 17,574 1-Apr-22 23,642 1-Feb-18 17,676 1-May-22 23,780 1-Mar-18 17,779 1-Jun-22 23,919 1-Apr-18 17,883 1-Jul-22 24,059 1-May-18 17,987 1-Aug-22 24,199 1-Jun-18 18,092 1-Sep-22 24,340 1-Jul-18 18,198 1-Oct-22 24,482 1-Aug-18 18,304 1-Nov-22 24,625 1-Sep-18 18,411 1-Dec-22 24,769 1-Oct-18 18,518 1-Jan-23 24,913 1-Nov-18 18,626 1-Feb-23 25,058 1-Dec-18 18,735 1-Mar-23 25,204 1-Jan-19 18,844 1-Apr-23 25,352 1-Feb-19 18,954 1-May-23 25,499 1-Mar-19 19,065 1-Jun-23 25,648 1-Apr-19 19,176 1-Jul-23 25,798 1-May-19 19,288 1-Aug-23 25,948 1-Jun-19 19,400 1-Sep-23 26,100 1-Jul-19 19,513 1-Oct-23 26,252 1-Aug-19 19,627 1-Nov-23 26,405 1-Sep-19 19,742 1-Dec-23 26,559 1-Oct-19 19,857 1-Jan-24 26,714 1-Nov-19 19,973 1-Feb-24 26,870 1-Dec-19 20,089 1-Mar-24 27,027 1-Jan-20 20,206 1-Apr-24 27,184 1-Feb-20 20,324 1-May-24 27,343 1-Mar-20 20,443 1-Jun-24 27,502 1-Apr-20 20,562 1-Jul-24 27,663 1-May-20 20,682 1-Aug-24 27,824 1-Jun-20 20,803 1-Sep-24 27,986 1-Jul-20 20,924 1-Oct-24 28,150 1-Aug-20 21,046 1-Nov-24 28,314 1-Sep-20 21,169 1-Dec-24 28,479 1-Oct-20 21,292 1-Jan-25 28,645 1-Nov-20 21,417 1-Feb-25 28,812 1-Dec-20 21,541 1-Mar-25 28,980 1-Jan-21 21,667 1-Apr-25 29,149 1-Feb-21 21,794 1-May-25 29,319 1-Mar-21 21,921 1-Jun-25 29,490 1-Apr-21 22,049 1-Jul-25 29,662 1-May-21 22,177 1-Aug-25 29,835 1-Jun-21 22,307 1-Sep-25 30,009 1-Jul-21 22,437 1-Oct-25 30,185 1-Aug-21 22,568 1-Nov-25 30,361 1-Sep-21 22,699 1-Dec-25 30,538 1-Oct-21 22,832 1-Jan-26 30,716 1-Nov-21 22,965 1-Feb-26 30,895 1-Dec-21 23,099 1-Mar-26 31,075 1-Jan-22 23,233 1-Apr-26 31,257 1-Feb-22 23,369 1-May-26 31,439
Madalyn Landing Apartments Mandatory Sinking Fund Schedule ------------------------------- Exhibit A ---------
Date Principal Amount Date Principal Amount ---- ---------------- ---- ---------------- 1-Jun-26 31,622 1-Sep-30 42,542 1-Jul-26 31,807 1-Oct-30 42,790 1-Aug-26 31,992 1-Nov-30 43,040 1-Sep-26 32,179 1-Dec-30 43,291 1-Oct-26 32,367 1-Jan-31 43,544 1-Nov-26 32,555 1-Feb-31 43,798 1-Dec-26 32,745 1-Mar-31 44,053 1-Jan-27 32,936 1-Apr-31 44,310 1-Feb-27 33,128 1-May-31 44,569 1-Mar-27 33,322 1-Jun-31 44,829 1-Apr-27 33,516 1-Jul-31 45,090 1-May-27 33,712 1-Aug-31 45,353 1-Jun-27 33,908 1-Sep-31 45,618 1-Jul-27 34,106 1-Oct-31 45,884 1-Aug-27 34,305 1-Nov-31 46,151 1-Sep-27 34,505 1-Dec-31 46,421 1-Oct-27 34,706 1-Jan-32 46,691 1-Nov-27 34,909 1-Feb-32 46,964 1-Dec-27 35,112 1-Mar-32 47,238 1-Jan-28 35,317 1-Apr-32 47,513 1-Feb-28 35,523 1-May-32 47,790 1-Mar-28 35,731 1-Jun-32 48,069 1-Apr-28 35,939 1-Jul-32 48,350 1-May-28 36,149 1-Aug-32 48,632 1-Jun-28 36,359 1-Sep-32 48,915 1-Jul-28 36,572 1-Oct-32 49,201 1-Aug-28 36,785 1-Nov-32 49,488 1-Sep-28 36,999 1-Dec-32 49,776 1-Oct-28 37,215 1-Jan-33 50,067 1-Nov-28 37,432 1-Feb-33 50,359 1-Dec-28 37,651 1-Mar-33 50,653 1-Jan-29 37,870 1-Apr-33 50,948 1-Feb-29 38,091 1-May-33 51,245 1-Mar-29 38,313 1-Jun-33 51,544 1-Apr-29 38,537 1-Jul-33 51,845 1-May-29 38,762 1-Aug-33 52,147 1-Jun-29 38,988 1-Sep-33 52,451 1-Jul-29 39,215 1-Oct-33 52,757 1-Aug-29 39,444 1-Nov-33 53,065 1-Sep-29 39,674 1-Dec-33 53,375 1-Oct-29 39,906 1-Jan-34 53,686 1-Nov-29 40,138 1-Feb-34 53,999 1-Dec-29 40,373 1-Mar-34 54,314 1-Jan-30 40,608 1-Apr-34 54,631 1-Feb-30 40,845 1-May-34 54,950 1-Mar-30 41,083 1-Jun-34 55,270 1-Apr-30 41,323 1-Jul-34 55,593 1-May-30 41,564 1-Aug-34 55,917 1-Jun-30 41,806 1-Sep-34 56,243 1-Jul-30 42,050 1-Oct-34 56,571 1-Aug-30 42,295 1-Nov-34 56,901
Madalyn Landing Apartments Mandatory Sinking Fund Schedule ------------------------------- Exhibit A ---------
Date Principal Amount Date Principal Amount ---- ---------------- ---- ---------------- 1-Dec-34 57,233 1-Mar-39 76,997 1-Jan-35 57,567 1-Apr-39 77,446 1-Feb-35 57,903 1-May-39 77,898 1-Mar-35 58,241 1-Jun-39 78,352 1-Apr-35 58,580 1-Jul-39 78,810 1-May-35 58,922 1-Aug-39 79,269 1-Jun-35 59,266 1-Sep-39 79,732 1-Jul-35 59,611 1-Oct-39 80,197 1-Aug-35 59,959 1-Nov-39 80,665 1-Sep-35 60,309 1-Dec-39 81,135 1-Oct-35 60,661 1-Jan-40 81,608 1-Nov-35 61,015 1-Feb-40 82,084 1-Dec-35 61,371 1-Mar-40 82,563 1-Jan-36 61,729 1-Apr-40 83,045 1-Feb-36 62,089 1-May-40 83,529 1-Mar-36 62,451 1-Jun-40 84,017 1-Apr-36 62,815 1-Jul-40 84,507 1-May-36 63,181 1-Aug-40 85,000 1-Jun-36 63,550 1-Sep-40 85,495 1-Jul-36 63,921 1-Oct-40 85,994 1-Aug-36 64,294 1-Nov-40 86,496 1-Sep-36 64,669 1-Oct-36 65,046 1-Nov-36 65,425 1-Dec-36 65,807 1-Jan-37 66,191 1-Feb-37 66,577 1-Mar-37 66,965 1-Apr-37 67,356 1-May-37 67,749 1-Jun-37 68,144 1-Jul-37 68,542 1-Aug-37 68,941 1-Sep-37 69,344 1-Oct-37 69,748 1-Nov-37 70,155 1-Dec-37 70,564 1-Jan-38 70,976 1-Feb-38 71,390 1-Mar-38 71,806 1-Apr-38 72,225 1-May-38 72,646 1-Jun-38 73,070 1-Jul-38 73,496 1-Aug-38 73,925 1-Sep-38 74,356 1-Oct-38 74,790 1-Nov-38 75,226 1-Dec-38 75,665 1-Jan-39 76,107 1-Feb-39 76,551
EX-10.AAAAN 3 UNITED STATES OF AMERICA STATE OF NORTH CAROLINA Housing Authority of the County of Wake Multifamily Housing Revenue Bond (Forest Hills Apartments Project) Series 1998 Number: R-1 Dated Date: December 15, 1998 Maturity Date: June 1, 2034 Registered Owner: Charter Municipal Mortgage Acceptance Company Principal Amount: $5,930,000 Interest Rate: 7.125% Housing Authority of the County of Wake (the "Issuer"), a political subdivision of the State of North Carolina (the "State"), created and existing under and by virtue of the laws of the State, hereby acknowledges itself indebted and for value received promises to pay to the registered owner hereof stated above, or registered assigns, at the maturity date stated above, but only from the sources and as hereinafter provided, upon presentation and surrender of this Bond at the principal office of Crestar Bank in Richmond, Virginia, or its successor as trustee (the "Trustee"), under the Indenture (described below), the principal amount stated above, and to pay interest on said principal amount at the interest rate set forth above, from and including the date of issuance of this Bond until the principal amount shall have been paid in accordance with the terms of this Bond and the Indenture, as and when set forth below, but only from the sources and as hereinafter provided, by wire transfer if there be one Owner of all of the Bonds or otherwise by check or draft mailed to the record Owners of Bonds as the same appear upon the books of registry to be maintained by the Trustee, as registrar. This Bond is one of a series of bonds (the "Bonds") issued pursuant to, and is subject to, the Trust Indenture dated as of December 1, 1998 between the Issuer and the Trustee (as amended and supplemented from time to time, the "Indenture"), and the Housing Authorities Law, Chapter 157 of the North Carolina General Statutes, as amended (the "Act"). Reference is made to the Indenture and the Act for a full statement of their respective terms. Capitalized terms used herein and not otherwise defined herein have the respective meanings accorded such terms in the Indenture, which are hereby incorporated herein by reference. The Bonds issued under the Indenture are expressly limited to $5,930,000 in aggregate principal amount at any time Outstanding and are all of like tenor, except as to numbers and denominations, and are issued for the purposes of providing construction and permanent financing for qualified multifamily rental housing units in the State and of paying certain expenses incidental thereto. The Bonds shall be special and limited obligations of the Issuer payable only from the sources provided in this Indenture and neither the State nor any other political subdivision thereof shall be liable on the Bonds. Neither the State of North Carolina nor any political subdivision thereof shall in any event be liable for the payment of the principal of or interest on any Bonds, or for the performance of any pledge, deed of trust, obligation or agreement of any kind whatsoever that may be undertaken by the Issuer, and none of the Bonds or any of its agreements or obligations shall be construed to constitute a debt or a pledge of the faith and credit of the State of North Carolina or any political subdivision thereof within the meaning of any constitutional or statutory provision whatsoever, and shall not directly, indirectly or contingently obligate the State of North Carolina or any of its political subdivisions to levy or to pledge any form of taxation whatsoever therefor or to make an appropriation for the payment thereof; nor shall any breach of any such pledge, deed of trust, obligation or agreement impose any pecuniary liability upon any member, commissioner, officer, employee or agent of the Issuer, or any charge upon the general credit of the Issuer, or any pecuniary liability upon the Issuer payable from any moneys, revenues, payments and proceeds other than those first above specified. NEITHER THE COMMISSIONERS NOR ANY AGENTS, EMPLOYEES OR SERVANTS OF THE ISSUER NOR ANY PERSONS EXECUTING THE BONDS SHALL BE LIABLE PERSONALLY ON THE BONDS BY REASON OF THE ISSUANCE THEREOF. THE BONDS SHALL NOT BE A DEBT OF THE COUNTY OF WAKE, THE STATE OF NORTH CAROLINA, OR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER), AND NEITHER THE COUNTY OF WAKE, THE STATE OF NORTH CAROLINA, NOR ANY POLITICAL SUBDIVISION THEREOF (OTHER THAN THE ISSUER) SHALL BE LIABLE THEREON, NOR IN ANY EVENT SHALL THE BONDS BE PAYABLE OUT OF ANY FUNDS OR PROPERTIES OTHER THAN THOSE OF THE ISSUER SPECIFICALLY PLEDGED THERETO. THE BONDS SHALL NOT CONSTITUTE AN INDEBTEDNESS WITHIN THE MEANING OF ANY CONSTITUTIONAL OR STATUTORY DEBT LIMITATION OR RESTRICTION. THE ISSUER HAS NO TAXING POWER. Interest on the Bonds. The Bonds (including this Bond) shall bear interest on the outstanding principal amount thereof from the date of issuance of the Bonds to the Maturity Date or the date of redemption or acceleration prior to maturity at a rate of seven and one-eighth percent (7.125%) per annum calculated on the basis of a 360-day year comprised of twelve 30-day months. The interest payable on the Bonds as provided above shall be payable on the first Business Day of each month, commencing January 4, 1998 and on each Bond Payment Date. Limited Recourse. Pursuant to a Loan Agreement dated as of December 1, 1998, and a Promissory Note (the "Note") dated the date of issuance of the Bonds, FHGA Limited Partnership, a North Carolina limited partnership (the "Developer"), has agreed to make payments to the Issuer in amounts equal to amounts of principal of and premium, if any, and interest on the Bonds. THE OBLIGATIONS OF THE ISSUER ON THIS BOND ARE EXPRESSLY LIMITED TO AND ARE PAYABLE SOLELY FROM (I) THE PAYMENTS 2 MADE PURSUANT TO THE LOAN AGREEMENT AND THE NOTE BY THE DEVELOPER, AND THE SECURITY THEREFOR PROVIDED BY THE DEED OF TRUST AND SECURITY AGREEMENT FROM THE DEVELOPER TO A DEED OF TRUST TRUSTEE FOR THE BENEFIT OF THE TRUSTEE, DATED AS OF DECEMBER 1, 1998, AND THE ASSIGNMENT OF LEASES, RENTS AND OTHER INCOME FROM THE DEVELOPER TO THE TRUSTEE, DATED AS OF DECEMBER 1, 1998, ALL OF WHICH HAVE BEEN ASSIGNED TO THE TRUSTEE PURSUANT TO THE INDENTURE AND (II) ANY ADDITIONAL SECURITY PROVIDED IN THE INDENTURE. Registration and Transfer. This Bond is transferable by the registered owner hereof in person or by his attorney duly authorized in writing at the office of the Trustee as registrar, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds, of any authorized denomination or denominations, of the same maturity and for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Bonds are issuable as fully registered Bonds in Authorized Denominations as provided in the Indenture. Redemption of Bonds. The Bonds are subject to optional and mandatory redemption by the Issuer and purchase in lieu of redemption by the Developer prior to maturity as a whole or in part at such time or times, under such circumstances, at such redemption prices and in such manner as is set forth in the Indenture. Enforcement. Only the Majority Owner shall have the right to enforce the provisions of this Bond or the Indenture or to institute any action to enforce the covenants herein or therein, or to take any action with respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. If an Event of Default occurs and is continuing, the principal of all Bonds then outstanding may be declared due and payable by the Majority Owner upon the conditions and in the manner and with the effect provided in the Indenture. As provided in the Indenture, and to the extent permitted by law, interest and a penalty rate of interest shall be payable on unpaid amounts due hereon. Discharge. The Indenture prescribes the manner in which it may be discharged and after which the Bonds shall be deemed to be paid and no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of registration and exchange of Bonds and of such payment. Modifications. Modifications or alterations of the Indenture, or of any supplements thereto, may be made only to the extent and in the circumstances permitted by the Indenture. This Bond shall not be valid or obligatory for any purpose until it shall have been signed on behalf of the Issuer and such signature attested, by the officer, and in the manner, provided in the Indenture, and authenticated by a duly authorized officer of the Trustee, as Authenticating Agent. 3 It is hereby certified and recited that all conditions, acts and things required by the statutes of the State or by the Act or the Indenture to exist, to have happened or to have been performed precedent to or in the issuance of this Bond exist, have happened and have been performed and that the issue of the Bonds, together with all other indebtedness of the Issuer, is within every debt and other limit prescribed by said statutes. IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of the Dated Date stated above. HOUSING AUTHORITY OF THE COUNTY OF WAKE By: /s/ Thomas A. Mitchell -------------------------- Name: Thomas A. Mitchell Title: Chairman (SEAL) Attest: /s/ Dallas J. Sasser - - ---------------------------- Name: Dallas J. Sasser Title: Secretary 4 CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within mentioned Indenture and is one of the Multifamily Housing Revenue Bonds (Forest Hills Apartments Project) Series 1998 of the Housing Authority of the County of Wake. CRESTAR BANK, as Trustee and Authenticating Agent By: Leo B. Bedell ----------------------------------- Authorized Signatory Date of Authentication: December 15, 1998 - - ----------------------- 5 ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto _______________ the within Bond and hereby authorizes the transfer of this Bond on the registration books of the Trustee. Dated: ------------------------------- ------------------------------- Authorized Signature ------------------------------- Name of Transferee - - ------------------------------- Signature Guaranteed by - - ------------------------------- Name of Bank By: ---------------------------- Title: ------------------------- 6 EX-10.AAAAO 4 UNITED STATES OF AMERICA STATE OF TEXAS The Southeast Texas Housing Finance Corporation Multifamily Housing Revenue Bond (The Gateway at Lake Jackson Apartments Project) Series 1998 Number: R- 1 Dated Date: December 1, 1998 Maturity Date: January 1, 2041 Issuance Date: December 22, 1998 Registered Owner: Charter Municipal Mortgage Acceptance Company Principal Amount: $10,934,000 Interest Rate: 7% The Southeast Texas Housing Finance Corporation (the "Issuer"), a public nonprofit housing finance corporation of the State of Texas (the "State"), created and existing under and by virtue of the laws of the State, hereby acknowledges itself indebted and for value received promises to pay to the registered owner hereof stated above, or registered assigns, at the maturity date stated above, but only from the sources and as hereinafter provided, upon presentation and surrender of this Bond at the office of Bank One, Texas, N.A. in Westerville, Ohio or its successor as trustee (the "Trustee"), under the Indenture (described below), the principal amount stated above, and to pay interest on said principal amount at the interest rate set forth above, from and including the dated date hereof until the principal amount shall have been paid in accordance with the terms of this Bond and the Indenture, as and when set forth below, but only from the sources and as hereinafter provided, by wire transfer if there be one Owner of all of the Bonds or otherwise by check or draft mailed to the record Owners of Bonds as the same appear upon the books of registry to be maintained by the Trustee, as registrar. This Bond is one of a series of bonds (the "Bonds") issued pursuant to, and is subject to, the Trust Indenture dated as of December 1, 1998, between the Issuer and the Trustee (as amended and supplemented from time to time, the "Indenture"), and Chapter 394, Texas Local Government Code, as amended (the "Act"). Reference is made to the Indenture and the Act for a full statement of their respective terms. Capitalized terms used herein and not otherwise defined herein have the respective meanings accorded such terms in the Indenture, which are hereby incorporated herein by reference. The Bonds issued under the Indenture are expressly limited to $10,934,000 in aggregate principal amount at any time Outstanding and are all of like tenor, except as to numbers and denominations, and are issued for the purposes of providing construction and permanent financing for qualified multifamily rental housing units in the State and of paying certain expenses incidental thereto. Pursuant to a Loan Agreement dated as of even date with the Indenture, and a Promissory Note (the "Note") dated the date of issuance of the Bonds, Windcrest/Lake Jackson, Ltd., a Texas limited partnership (the "Developer"), has agreed to make payments to the Issuer in amounts equal to amounts of principal of and premium, if any, and interest on the Bonds. The Bonds shall be special and limited obligations of the Issuer payable only from the sources provided in this Indenture and neither the State nor any other political subdivision thereof shall be liable on the Bonds. THE OBLIGATIONS OF THE ISSUER ON THIS BOND ARE EXPRESSLY LIMITED TO AND ARE PAYABLE SOLELY FROM (I) THE PAYMENTS MADE PURSUANT TO THE LOAN AGREEMENT AND THE NOTE BY THE DEVELOPER, AND THE SECURITY THEREFOR PROVIDED BY THE DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS, AND FINANCING STATEMENT FROM THE DEVELOPER FOR THE BENEFIT OF THE TRUSTEE, DATED AS OF EVEN DATE WITH THE INDENTURE, AND THE ASSIGNMENT OF LEASES, RENTS AND OTHER INCOME FROM THE DEVELOPER TO THE TRUSTEE, DATED AS OF EVEN DATE WITH THE INDENTURE, ALL OF WHICH HAVE BEEN ASSIGNED TO THE TRUSTEE PURSUANT TO THE INDENTURE, AND (II) ANY ADDITIONAL SECURITY PROVIDED IN THE INDENTURE. The Bonds and the interest thereon are limited obligations of the Issuer payable solely from revenues and receipts under the Loan Agreement. The Bonds do not constitute, within the meaning of any statutes or constitutional provisions, an indebtedness, an obligation, or a loan of credit of the State, the Governmental Units or any other county, municipality, or other municipal or political subdivision of the State. The Bonds are special and limited obligations of the Issuer payable only from the sources provided in this Indenture but not otherwise. The Issuer has no taxing power. No recourse shall be had for the payment of the principal of or premium or interest on this Bond against any past, present, or future officer, director, member, employee, or agent of the Issuer, or of any successor to the Issuer, as such, either directly or through the Issuer or any successor to the Issuer, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, members, employees, or agents, as such, is hereby expressly waived and released as a condition of, and consideration for, the execution and issuance of this Bond. Interest on the Bonds. The Bonds (including this Bond) shall bear interest on the outstanding principal amount thereof from and including the Issuance Date to the date of maturity or redemption or acceleration prior to maturity at a rate of seven percent (7%) comprised of twelve 30-day months. The interest payable on the Bonds as provided above shall be payable on the first business day of each month commencing January 4, 1999, and on each Bond Payment Date. Registration and Transfer. This Bond is transferable by the registered owner hereof in person or by his attorney duly authorized in writing at the office of the Trustee as registrar, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds, of any authorized denomination or denominations, of the same maturity and for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Bonds are issuable as fully registered Bonds in Authorized Denominations as provided in the Indenture. The Issuer, the Trustee, and any other person may treat the person in whose name this Bond is registered on the books of registry as the Owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond be overdue, and no person shall be affected by notice to the contrary. Redemption of Bonds. The Bonds are subject to optional and mandatory redemption by the Issuer and purchase in lieu of redemption by the Developer prior to maturity as a whole or in part at such time or times, under such circumstances, at such redemption prices and in such manner as is set forth in the Indenture. A-2 Enforcement. Only the Majority Owner shall have the right to enforce the provisions of this Bond or the Indenture or to institute any action to enforce the covenants herein or therein, or to take any action with respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. If an Event of Default occurs and is continuing, the principal of all Bonds then outstanding may be declared due and payable by the Majority Owner upon the conditions and in the manner and with the effect provided in the Indenture. As provided in the Indenture, and to the extent permitted by law, interest and a penalty rate of interest shall be payable on unpaid amounts due hereon. Discharge. The Indenture prescribes the manner in which it may be discharged and after which the Bonds shall be deemed to be paid and no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of registration and exchange of Bonds and of such payment. Modifications. Modifications or alterations of the Indenture, or of any supplements thereto, may be made only to the extent and in the circumstances permitted by the Indenture. This Bond shall not be valid or obligatory for any purpose until it shall have been signed on behalf of the Issuer and such signature attested, by the officer, and in the manner, provided in the Indenture, and authenticated by a duly authorized officer of the Trustee, as Authenticating Agent. It is hereby certified and recited that all conditions, acts and things required by the statutes of the State or by the Act or the Indenture to exist, to have happened or to have been performed precedent to or in the issuance of this Bond exist, have happened and have been performed and that the issue of the Bonds, together with all other indebtedness of the Issuer, is within every debt and other limit prescribed by said statutes. A-3 IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of the Dated Date stated above. THE SOUTHEAST TEXAS HOUSING FINANCE CORPORATION By: /s/ John Towner -------------------------------- Name: John Towner Title: President (SEAL) Attest: By: /s/ D. Gary Longaker ------------------------- Name: D. Gary Longaker Title: Executive Director A-4 CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within mentioned Indenture and is one of the Multifamily Housing Revenue Bonds (The Gateway at Lake Jackson Apartments Project) Series 1998 of The Southeast Texas Housing Finance Corporation. BANK ONE, TEXAS, N.A. as Trustee and Authenticating Agent By: /s/ Susan Bren ------------------------------- Authorized Signatory Date of Authentication: December 22, 1998 - - ----------------------- A-5 FORM OF ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto __________________________ the within and hereby authorizes the transfer of this Bond on the registration books of the Trustee. Dated:___________________ Authorized Signature ----------------------------------- Name of Transferee - - -------------------------------- Signature Guaranteed by - - -------------------------------- Name of Bank By: ----------------------------- Title: -------------------------- EX-10.AAAAP 5 UNITED STATES OF AMERICA STATE OF TEXAS Travis County Housing Finance Corporation Multifamily Housing Revenue Bond (The Mountain Ranch Apartments Project) Series 1998 Number: R- 1 Dated Date: December 1, 1998 Issuance Date: December 23, 1998 Maturity Date: January 1, 2041 Registered Owner: Charter Municipal Mortgage Acceptance Company Principal Amount: $9,128,000 Interest Rate: 7.125% Travis County Housing Finance Corporation (the "Issuer"), a public nonprofit housing finance corporation of the State of Texas (the "State"), created and existing under and by virtue of the laws of the State, hereby acknowledges itself indebted and for value received promises to pay to the registered owner hereof stated above, or registered assigns, at the maturity date stated above, but only from the sources and as hereinafter provided, upon presentation and surrender of this Bond at the office of Bank One, Texas, N.A. in Westerville, Ohio or its successor as trustee (the "Trustee"), under the Indenture (described below), the principal amount stated above, and to pay interest on said principal amount at the interest rate set forth above, from and including the dated date hereof until the principal amount shall have been paid in accordance with the terms of this Bond and the Indenture, as and when set forth below, but only from the sources and as hereinafter provided, by wire transfer if there be one Owner of all of the Bonds or otherwise by check or draft mailed to the record Owners of Bonds as the same appear upon the books of registry to be maintained by the Trustee, as registrar. This Bond is one of a series of bonds (the "Bonds") issued pursuant to, and is subject to, the Trust Indenture dated as of December 1, 1998, between the Issuer and the Trustee (as amended and supplemented from time to time, the "Indenture"), and Chapter 394, Local Government Code, as amended (the "Act"). Reference is made to the Indenture and the Act for a full statement of their respective terms. Capitalized terms used herein and not otherwise defined herein have the respective meanings accorded such terms in the Indenture, which are hereby incorporated herein by reference. The Bonds issued under the Indenture are expressly limited to $9,128,000 in aggregate principal amount at any time Outstanding and are all of like tenor, except as to numbers and denominations, and are issued for the purposes of providing construction and permanent financing for qualified multifamily rental housing units in the State and of paying certain expenses incidental thereto. Pursuant to a Loan Agreement dated as of even date with the Indenture, and a Promissory Note (the "Note") dated the date of issuance of the Bonds, Collier Ranch Limited Partnership, a Texas limited partnership (the "Developer"), has agreed to make payments to the Issuer in amounts equal to amounts of principal of and premium, if any, and interest on the Bonds. The Bonds shall be special and limited obligations of the Issuer payable only from the sources provided in this Indenture and neither the State nor any other political subdivision thereof shall be liable on the Bonds. THE OBLIGATIONS OF THE ISSUER ON THIS BOND ARE EXPRESSLY LIMITED TO AND ARE PAYABLE SOLELY FROM (I) THE PAYMENTS MADE PURSUANT TO THE LOAN AGREEMENT AND THE NOTE BY THE DEVELOPER, AND THE SECURITY THEREFOR PROVIDED BY THE DEED OF TRUST, SECURITY AGREEMENT, ASSIGNMENT OF RENTS, AND FINANCING STATEMENT FROM THE DEVELOPER FOR THE BENEFIT OF THE TRUSTEE, DATED AS OF EVEN DATE WITH THE INDENTURE, AND THE ASSIGNMENT OF LEASES, RENTS AND OTHER INCOME FROM THE DEVELOPER TO THE TRUSTEE, DATED AS OF EVEN DATE WITH THE INDENTURE, ALL OF WHICH HAVE BEEN ASSIGNED TO THE TRUSTEE PURSUANT TO THE INDENTURE, AND (II) ANY ADDITIONAL SECURITY PROVIDED IN THE INDENTURE. The Bonds and the interest thereon are limited obligations of the Issuer payable solely from revenues and receipts under the Loan Agreement. The Bonds do not constitute, within the meaning of any statutes or constitutional provisions, an indebtedness, an obligation, or a loan of credit of the State, the Governmental Units or any other county, municipality, or other municipal or political subdivision. The Bonds are special and limited obligations of the Issuer payable only from the sources provided in this Indenture but not otherwise. The Issuer has no taxing power. No recourse shall be had for the payment of the principal of or premium or interest on this Bond against any past, present, or future officer, director, member, employee, or agent of the Issuer, or of any successor to the Issuer, as such, either directly or through the Issuer or any successor to the Issuer, under any rule of law or equity, statute or constitution or by the enforcement of any assessment or penalty or otherwise, and all such liability of any such officers, directors, members, employees, or agents, as such, is hereby expressly waived and released as a condition of, and consideration for, the execution and issuance of this Bond. Interest on the Bonds. The Bonds (including this Bond) shall bear interest on the outstanding principal amount thereof from and including the Issuance Date to the date of maturity or redemption or acceleration prior to maturity at a rate of 7.125% comprised of twelve 30-day months. The interest payable on the Bonds as provided above shall be payable on the first business day of each month commencing January 4, 1999, and on each Bond Payment Date. Registration and Transfer. This Bond is transferable by the registered owner hereof in person or by his attorney duly authorized in writing at the office of the Trustee as registrar, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds, of any authorized denomination or denominations, of the same maturity and for the same aggregate principal amount will be issued to the transferee in exchange herefor. The Bonds are issuable as fully registered Bonds in Authorized Denominations as provided in the Indenture. The Issuer, the Trustee, and any other person may treat the person in whose name this Bond is registered on the books of registry as the Owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond be overdue, and no person shall be affected by notice to the contrary. Redemption of Bonds. The Bonds are subject to optional and mandatory redemption by the Issuer and purchase in lieu of redemption by the Developer prior to maturity as a whole or in part A-2 at such time or times, under such circumstances, at such redemption prices and in such manner as is set forth in the Indenture. Enforcement. Only the Majority Owner shall have the right to enforce the provisions of this Bond or the Indenture or to institute any action to enforce the covenants herein or therein, or to take any action with respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. If an Event of Default occurs and is continuing, the principal of all Bonds then outstanding may be declared due and payable by the Majority Owner upon the conditions and in the manner and with the effect provided in the Indenture. As provided in the Indenture, and to the extent permitted by law, interest and a penalty rate of interest shall be payable on unpaid amounts due hereon. Discharge. The Indenture prescribes the manner in which it may be discharged and after which the Bonds shall be deemed to be paid and no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of registration and exchange of Bonds and of such payment. Modifications. Modifications or alterations of the Indenture, or of any supplements thereto, may be made only to the extent and in the circumstances permitted by the Indenture. This Bond shall not be valid or obligatory for any purpose until it shall have been signed on behalf of the Issuer and such signature attested, by the officer, and in the manner, provided in the Indenture, and authenticated by a duly authorized officer of the Trustee, as Authenticating Agent. It is hereby certified and recited that all conditions, acts and things required by the statutes of the State or by the Act or the Indenture to exist, to have happened or to have been performed precedent to or in the issuance of this Bond exist, have happened and have been performed and that the issue of the Bonds, together with all other indebtedness of the Issuer, is within every debt and other limit prescribed by said statutes. A-3 IN WITNESS WHEREOF, the Issuer has caused this Bond to be executed as of the Dated Date stated above. TRAVIS COUNTY HOUSING FINANCE CORPORATION By: /s/ Samuel T. Biscoe ----------------------------------------- Name: Samuel T. Biscoe Title: President (SEAL) Attest: By: /s/ Margaret Gomez ---------------------------------- Name: Margaret Gomez Title: Secretary A-4 CERTIFICATE OF AUTHENTICATION This Bond is one of the Bonds described in the within mentioned Indenture and is one of the Multifamily Housing Revenue Bonds (The Mountain Ranch Apartments Project) Series 1998 of Travis County Housing Finance Corporation. BANK ONE, TEXAS, N.A. as Trustee and Authenticating Agent By: /s/ Susan Bren ------------------------------------ Authorized Signatory Date of Authentication: December 23, 1998 - - ----------------------- A-5 ASSIGNMENT FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________________________ the within Bond and hereby authorizes the transfer of this Bond on the registration books of the Trustee. Dated:_____________________ Authorized Signature: ----------------------------------- Name of Transferee: ----------------------------------- - - ------------------------------------- Signature Guaranteed by Name of Bank By: ---------------------------------- Name: -------------------------------- Title: ------------------------------- A-6 EX-10.AAAAQ 6 UNITED STATES OF AMERICA STATE OF MISSOURI The Industrial Development Authority of the City of Independence, Missouri Multi-Family Housing Revenue Bond, Series of 1986 (The Mansion Project) Number: R-6 Dated Date: May 13,1986 Maturity Date: April 1, 2025 Registered Owner: CHARTER MAC ORIGINATION TRUST I Principal Amount: $19,450,000 The Industrial Development Authority of the City of Independence, Missouri (the "Authority"), an industrial development corporation of the State of Missouri (the "State"), created and existing under and by virtue of the laws of the State, hereby acknowledges itself indebted and for value received promises to pay to the registered owner hereof stated above, or registered assigns, at the maturity date stated above, but only from the sources and as hereinafter provided, upon presentation and surrender of this Bond at the principal office of BNY Trust Company of Missouri, as Trustee, under the Indenture (described below), the principal amount stated above, and to pay interest on said principal amount, from and including the dated date hereof (provided that any accrued interest or deferred or contingent interest through October 17, 1994 has been abrogated and discharged) until the principal amount shall have been paid in accordance with the terms of this Bond, as and when set forth below, but only from the sources and as hereinafter provided, by wire transfer if there be one Owner of all of the Bonds or otherwise by check or draft mailed to the record Owners of Bonds as the same appear upon the books of registry to be maintained by BNY Trust Company of Missouri, as registrar. This Bond is issued pursuant to the Bond Resolution of the Authority adopted March 27, 1986 and the Indenture of Trust dated as of May 1, 1986 between the Authority and The Merchants Bank, as Trustee (as amended and supplemented from time to time, the "Indenture") and Chapter 349, R.S.Mo. 1978, as amended (the "Act"). BNY Trust Company of Missouri, as successor in trust to Boatmen's First National Bank of Kansas City, is now the Trustee and Registrar. Reference is made to the Resolution, the Indenture and the Act for a full statement of their respective terms. Capitalized terms used herein and not otherwise defined have the respective meanings accorded such terms in the Indenture. The Bonds issued under the Indenture are expressly limited to $19,450,000 principal amount at any time Outstanding and are all of like tenor, except as to numbers and denominations, and are issued for the purposes of providing construction and permanent financing for qualified multi-family rental housing units in the State and certain expenses incidental thereto. THE BONDS ARE SPECIAL LIMITED OBLIGATIONS OF THE AUTHORITY. NEITHER THE STATE OF MISSOURI NOR ANY POLITICAL SUBDIVISION THEREOF SHALL BE LIABLE ON THE BONDS, AND THE BONDS DO NOT AND SHALL NOT CONSTITUTE A DEBT OF THE STATE OF MISSOURI. 1 This Bond is a Restated Bond which reflects amendments to the original Indenture effected by the First Supplemental Trust Indenture, dated as of November , 1994 and effective on October 18, 1994 and the Second Supplemental Indenture, dated and effective as of December 31, 1998. This Bond is issued in exchange for and replacement of the form of Bond originally issued in the name of the registered owner hereof. Interest on the Bonds. (a) General. Subject to Section 3.13 of the Indenture, the Bonds shall bear interest as provided in paragraphs (b) through (e) until the Conversion Date and as provided in Section 3.06(h) of the Indenture after such date. (b) Base Interest. Until and through the Conversion date, the bonds shall bear base interest ("Base Interest") calculated and payable as follows: (1) During the Second Period, commencing January 1, 1999 and continuing to and including December 31, 2005, the Bonds shall bear Base Interest at a rate equal to 7.25% per annum. (2) During the Second period, from and after January 1, 2006, the Bonds shall bear Base Interest at a rate equal to 7.5% per annum. Base Interest shall be calculated on the basis of a year of 365 days, actual number of days elapsed. Payments of Base Interest shall be payable on each payment date specified in subsection (e)(1) hereof. (c) Supplemental Contingent Interest on the Basis of Net Cash Flow. As of the Amendment Date, Supplemental Deferred Interest (as defined in the First Supplemental Indenture) in the total agreed aggregate amount of $600,000 (the "Supplemental Deferred Interest Amount") remains accrued and unpaid, and shall be paid as follows: On the Amendment Date $150,000 On June 15, 1999 $150,000 On September 15, 1999 $150,000 On December 15, 1999 $150,000 From and after the Amendment Date, no Supplemental Contingent Interest (as defined in the First Supplemental Indenture) other than the Supplemental Deferred Interest Amount shall accrue or be due or payable. (d) Reserved. (e) Payment Dates for Interest. The interest payable on the Bonds to and including the Conversion Date as provided above shall be payable in arrears on the following dates: 2 (1) Base Interest shall be payable (i) on each Interest Payment Date for Base Interest (ii) on the Conversion Date and (iii) on each redemption date before the Conversion Date (but only with respect to the Bonds redeemed). (2) The Supplemental Deferred Interest Amount shall be payable as provided in paragraph (c) above. (f) Audited Financial Statements. No later than March 15 of each calendar year (up to and, unless the Conversion Date falls before delivery of the audit, including the calendar year in which the Conversion Date occurs), the Borrower shall provide to the Issuer, the Trustee and the Servicer an audit of the operations of the Project for the preceding calendar year prepared and certified by an Accountant acceptable to the Trustee and the Servicer in accordance with generally accepted auditing standards. Notwithstanding anything else herein contained, the interest rate on this Bond shall not exceed 16% per annum simple and noncompounded from the date of issuance hereof to any date of calculation. If the interest rate on this Bond would at any time exceed the maximum interest rate permitted by law, or would be computed by a method not in conformity with law, then this Bond shall instead bear interest at the maximum interest rate, or in conformity with the methods permitted by law. The foregoing interest provisions are a summary of those contained in the Indenture, and reference is hereby made to the Indenture for a full statement of their terms. Limited Recourse. Pursuant to a Loan Agreement dated as of May 1, 1986, and a Note dated May 13, 1986 (the "Note"), The Mansion Apartments Limited, an Oklahoma limited partnership, together with its successors and assigns (the "Borrower") agreed to make payments to the Authority in amounts equal to amounts of principal of, premium, if any, and interest on the Bonds. THE OBLIGATIONS OF THE AUTHORITY ON THIS BOND ARE EXPRESSLY LIMITED TO AND ARE PAYABLE SOLELY FROM THE PAYMENTS RECEIVED BY THE AUTHORITY PURSUANT TO THE LOAN AGREEMENT AND THE NOTE AND ANY SECURITY THEREFOR PROVIDED IN THE INDENTURE, WHICH INCLUDES AN ASSIGNMENT OF THE LOAN AGREEMENT, THE NOTE AND THE DEED OF TRUST AND SECURITY AGREEMENT WITH COLLATERAL ASSIGNMENT OF RENTS AND LEASES DATED AS OF MAY 1, 1986 FROM THE BORROWER TO BNY TRUST COMPANY OF MISSOURI, AS TRUSTEE (THE "DEED OF TRUST"). THE OBLIGATIONS OF THE BORROWER UNDER THE LOAN AGREEMENT AND THE NOTE AND DEED OF TRUST MADE THEREUNDER ARE NON-RECOURSE TO THE BORROWER, AND ARE ENFORCEABLE SOLELY AGAINST THE PROJECT, EXCEPT AS OTHERWISE PROVIDED THEREIN. Transfer. This Bond is transferable by the registered owner hereof in person or by his attorney duly authorized in writing at the office of the registrar, BNY Trust Company of Missouri, but only in the manner, subject to the limitations and upon payment of the charges provided in the Indenture, and upon surrender and cancellation of this Bond. Upon such transfer a new registered Bond or Bonds, in any authorized denomination or denominations, of the same maturity and for the same aggregate principal amount will be issued to the transferee in exchange herefor. 3 Prior to the Conversion Date, a Bond may only be transferred (i) to any subsidiary of the Original Purchaser, an affiliate with the same or substantially the same general partner as the Original Purchaser, to any entity arising out of any merger or consolidation of the Original Purchaser, by operation of law, or to a trustee in bankruptcy of the Original Purchaser; (ii) by an assignment to a bank or other financial institution issuing a letter of credit or like instrument in connection with the Mortgage Loan; or (iii) in connection with a sale to an Institutional Investor if, in each instance, the Authority and the registrar receive from the transferee its agreement to the transfer restrictions set forth in this paragraph in connection with subsequent transfers of the Bond. The Bonds are issuable as fully registered Bonds in Authorized Denominations as provided in the Indenture. Redemption of Bonds. The Bonds are subject to redemption by the Authority prior to maturity as a whole or in part at such time or times, under such circumstances, at such redemption prices and in such manner as is set forth in the Indenture. Enforcement. Only the Trustee shall have the right to enforce the provisions of this Bond or the Indenture or to institute any action to enforce the covenants herein or therein, or to take any action with respect to any Event of Default under the Indenture, or to institute, appear in or defend any suit or other proceedings with respect thereto, except as provided in the Indenture. If an Event of Default occurs and is continuing, the principal of all Bonds then outstanding may be declared due and payable by the Trustee upon the conditions and in the manner and with the effect provided in the Indenture. The Authority, the Trustee, and any other person may treat the person in whose name this Bond is registered on the books of registry as the Owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Bond be overdue, and no person shall be affected by notice to the contrary. Discharge. The Indenture prescribes the manner in which it may be discharged and after which the Bonds shall be deemed to be paid and no longer be secured by or entitled to the benefits of the Indenture, except for the purposes of registration and exchange of Bonds and of such payment. Modification. Modifications or alterations of the Indenture, or of any supplements thereto, may be made only to the extent and in the circumstances permitted by the Indenture. By its acceptance of this Bond, the Owner hereof agrees that it will be bound by and accepts the provisions of the Indenture, accepts the assignment by the Authority to the Trustee of the Authority's rights in and to the Mortgage Loan and the documents evidencing and securing the same. This Bond shall not be valid or obligatory for any purpose until it shall have been signed on behalf of the Authority and such signature attested, by the officer, and in the manner, 4 provided in the Indenture, and authenticated by a duly authorized officer of the Trustee, as Authenticating Agent. IN WITNESS WHEREOF, the Authority has caused this Bond to be executed as of the Dated Date stated above. THE INDUSTRIAL DEVELOPMENT AUTHORITY OF THE CITY OF INDEPENDENCE, MISSOURI By: /s/ Cecil A. Vaughan --------------------------------- Title: Chairman Attest: /s/ Kathleen E. Douglas - - ----------------------- 5 CERTIFICATE OF AUTHENTICATION This Bond is one the Bonds described in the within mentioned Indenture and is one of the Multi-Family Housing revenue bonds, Series of 1986 (The Mansion Project) of The Industrial Development Authority of the City of Independence, Missouri. BNY TRUST COMPANY OF MISSOURI, as Trustee By: /s/ John Shock ------------------------------------ Date of Authentication: February 18, 1999 - - ----------------------- 6 (FORM OF ASSIGNMENT) For Value Received, the undersigned sells, assigns and transfers unto ____________________, the within Multi-Family Housing Revenue Bond, Series of 1986 (The Mansion Project), of The Industrial Development Authority of the City of Independence, Missouri, and hereby authorizes the transfer of this Bond on the registration books of the Registrar. Date: -------------------------------------- -------------------------------------- Authorized Signature -------------------------------------- Name of Transferee Signature Guaranteed by: -------------------------------------- -------------------------------------- Name of Bank By: ----------------------------------- Title: -------------------------------- 7 EX-21 7 SUBSIDIARY OF THE COMPANY Exhibit 21 Subsidiary of the Company ------------------------- CharterMac Origination Trust I, a Delaware business trust Subsidiary of CharterMac Origination Trust I, a Delaware business trust ----------------------------------------------------------------------- CharterMac Owner Trust I, a Delaware business trust EX-27 8 ART. 5 FDS FOR 1998 10-K
5 The Schedule contains summary financial information extracted from the financial statements for Charter Municipal Mortgage Acceptance Company and is qualified in its entirety by reference to such financial statements 0001043325 Charter Municipal Mortgage Acceptance Company 1 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 13,093,023 458,662,600 9,279,482 138,000 0 11,500 0 0 492,585,806 15,091,600 0 0 0 0 327,494,206 492,585,806 0 28,179,048 0 0 4,648,842 0 1,504,334 22,025,872 0 0 0 0 0 22,025,872 .99 .98
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