7. PHC Certificates

The Partnership owns 100% of the LIFERs of three TOB Trusts (“PHC Trusts”) sponsored by DB. The TOB Trusts are VIEs and the Partnership is the primary beneficiary. As a result, the Partnership consolidates the assets of the PHC Trusts in the consolidated financial statements. The assets held by the PHC Trusts consist of custodial receipts evidencing loans made to a number of 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 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, nor 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 Partnership had the following investments in the PHC Certificates on December 31, 2016 and 2015:

	December 31, 2016
Description of PHC Certificates	Weighted Average Lives (Years)	Investment Rating	Weighted Average Interest Rate Over Life		Cost Adjusted for Paydowns		Cumulative Unrealized Gain		Cumulative Unrealized Loss			Estimated Fair Value
PHC Certificate Trust I	8.31	AA-		5.36%	$	26,077,158	$	672,097	$	-		$	26,749,255
PHC Certificate Trust II	7.65	A+		4.31%		10,600,967		84,756		-			10,685,723
PHC Certificate Trust III	8.79	BBB		5.42%		20,122,937		-		(399,847	)		19,723,090
					$	56,801,062	$	756,853	$	(399,847	)	$	57,158,068

	December 31, 2015
Description of PHC Certificates	Weighted Average Lives (Years)	Investment Rating	Weighted Average Interest Rate Over Life		Cost Adjusted for Paydowns		Cumulative Unrealized Gain		Cumulative Unrealized Loss			Estimated Fair Value
PHC Certificate Trust I	9.25	AA-		5.33%	$	27,274,451	$	1,482,376	$	-		$	28,756,827
PHC Certificate Trust II	8.67	A+		4.29%		11,081,987		365,443		-			11,447,430
PHC Certificate Trust III	9.81	BBB		5.42%		20,513,351		-		(10,318	)		20,503,033
					$	58,869,789	$	1,847,819	$	(10,318	)	$	60,707,290

See Note 25 for a description of the methodology and significant assumptions for determining the fair value of the PHC Certificates. Unrealized gains or losses on the PHC Certificates are recorded in the consolidated statements of comprehensive income (loss) to reflect changes in their estimated fair values resulting from market conditions and fluctuations in the present value of the expected cash flows from the PHC Certificates.