Public Housing Capital (“PHC”) Fund Trust Certificates

The Company owns 100% of the Residual Participation Receipts (“LIFERs”) in three tender option bond trusts (“PHC TOB Trusts”). At March 31, 2015, the PHC TOB Trusts own approximately $59.3 million of Public Housing Capital Fund Certificates (“PHC Certificates”) issued by three trusts (“PHC Trusts”) sponsored by Deutsche Bank (“DB”). The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to a number of local public housing authorities. Principal and interest on these loans are payable by the respective public housing authorities out of annual appropriations to be made to the public housing authorities by the United States Department of Housing and Urban Development (“HUD”) under HUD’s Capital Fund Program established under the Quality Housing and Work Responsibility Act of 1998 (the “Capital Fund Program”). The PHC Trusts have a first lien on these annual Capital Fund Program payments to secure the public housing authorities’ respective obligations to pay principal and interest on their loans. The loans payable by the public housing authorities are not debts of, or guaranteed by, the United States of America or HUD. Interest payable on the public housing authority debt held by the PHC Trusts is exempt from federal income taxes. The PHC Certificates issued by each of the PHC Trusts have been rated investment grade by Standard & Poor’s.

The Company determined that the three PHC TOB trusts are VIEs and that the Company was the primary beneficiary of each of the three PHC TOB trusts. As a result, the Company reports the PHC TOB Trusts on a consolidated basis and the SPEARS as debt financing. In determining the primary beneficiary of these specific VIEs, the Company considered who has the power to control the activities of the VIEs which most significantly impact their financial performance, the risks that the entity was designed to create, and how each risk affects the VIE. The indenture for the PHC TOB trusts stipulates that the Company has the sole right to cause the PHC TOB trusts to sell the PHC Certificates. If they were sold, the extent to which the VIEs will be exposed to gains or losses would result from decisions made by the Company.

The Company had the following investments in the PHC Certificates on March 31, 2015 and December 31, 2014:



Description of Public Housing Capital Fund Trust Certificates	Cost adjusted for amortization of premium and discounts		Unrealized Gain		Unrealized Loss			Estimated Fair Value at March 31, 2015
Public Housing Capital Fund Trust I	$	27,379,187	$	484,160	$	—		$	27,863,347
Public Housing Capital Fund Trust II	12,011,169		—		(40,868		)	11,970,301
Public Housing Capital Fund Trust III	20,483,912		—		(44,619		)	20,439,293
	$	59,874,268	$	484,160	$	(85,487	)	$	60,272,941



Description of Public Housing Capital Fund Trust Certificates	Cost adjusted for amortization of premium and discounts		Unrealized Gain		Unrealized Loss		Estimated Fair Value at December 31, 2014
Public Housing Capital Fund Trust Certificate I	$	27,414,100	$	933,789	$	—	$	28,347,889
Public Housing Capital Fund Trust Certificate II	11,999,721		152,293		—		12,152,014
Public Housing Capital Fund Trust Certificate III	20,474,100		289,120		—		20,763,220
	$	59,887,921	$	1,375,202	$	—	$	61,263,123

Valuation - As all of the Company’s investments in PHC Certificates are classified as available-for-sale securities, they are carried on the balance sheet at their estimated fair values. As of March 31, 2015, the weighted average base rate of the PHC Trust Certificates was approximately 5.0% per annum. Due to the limited market for the PHC Certificates, these estimates of fair value do not necessarily represent what the Company would actually receive in a sale of the PHC Certificates. The estimates of the fair values of these PHC certificates is based on a yield to maturity analysis which begins with the current market yield rate for a “AAA” rated tax-free municipal bond for a term consistent with the weighted-average life of each of the Public Housing Capital Fund trusts adjusted largely for unobservable inputs the General Partner believes would be used by market participants. Management’s fair value estimates encompass judgment. Management’s estimates are compared to external pricing services when available.

At March 31, 2015 and December 31, 2014 the range of effective yields on the PHC Certificates were 4.2% to 5.4% per annum. Additionally, the Company calculated the sensitivity of the key assumption used in calculating the fair values of these PHC Certificates. Assuming a 10% adverse change in the key assumption, the effective yields on the PHC Certificates would increase to a range of 4.9% to 6.3% per annum and would result in additional unrealized losses on the PHC Certificates of approximately $2.3 million. This sensitivity analysis is hypothetical and is as of a specific point in time. The results of the sensitivity analysis may not be indicative of actual changes in fair value and should be used with caution. If available, the general partner may also consider other information from external sources, such as pricing services. Pricing services and management’s analysis provide indicative pricing only.

The following table sets forth certain information relating to the PHC Certificates held in the PHC TOB Trusts on March 31, 2015 and December 31, 2014:



	Average Remaining Lives (Years)	Investment Rating	Weighted Average Interest Rate over Life		Principal Outstanding March 31, 2015
Public Housing Capital Fund Trust Certificate I	10.00	AA-	5.30	%	$	25,980,780
Public Housing Capital Fund Trust Certificate II	9.47	A+	4.28	%	12,429,186
Public Housing Capital Fund Trust Certificate III	10.56	BBB	5.42	%	20,898,432
Total Public Housing Capital Fund Trust Certificates					$	59,308,398



	Average Remaining Lives (Years)	Investment Rating	Weighted Average Interest Rate over Life		Principal Outstanding December 31, 2014
Public Housing Capital Fund Trust Certificate I	10.25	AA-	5.33	%	$	25,980,780
Public Housing Capital Fund Trust Certificate II	9.72	A+	4.28	%	12,429,186
Public Housing Capital Fund Trust Certificate III	10.81	BBB	5.42	%	20,898,432
Total Public Housing Capital Fund Trust Certificates					$	59,308,398