-----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, QSa+5duYiAH+7FGLK2SJNGDfXINV6Zq1QMNVMgGKeDoyHpy6vt9gEY5l4mSsJfUN J4DoE144fbvhsWmmzxPwoA== 0000950146-96-000498.txt : 19960402 0000950146-96-000498.hdr.sgml : 19960402 ACCESSION NUMBER: 0000950146-96-000498 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960401 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUMMIT TAX EXEMPT BOND FUND LP CENTRAL INDEX KEY: 0000786156 STANDARD INDUSTRIAL CLASSIFICATION: ASSET-BACKED SECURITIES [6189] IRS NUMBER: 133323104 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09373 FILM NUMBER: 96543187 BUSINESS ADDRESS: STREET 1: 625 MADISON AVE CITY: NEW YORK STATE: NY ZIP: 10022 BUSINESS PHONE: 2124215333 10-K 1 ANNUAL REPORT UNITED STATES 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, 1995 OR ____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-9373 SUMMIT TAX EXEMPT BOND FUND, L.P. (Exact name of Registrant as specified in its charter) Delaware 13-3323104 (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: Beneficial Unit Certificates 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] Aggregate market value of BUC$ held by unaffiliated BUC$holders of the Registrant as of March 28, 1996 was $79,744,844. DOCUMENTS INCORPORATED BY REFERENCE Agreement of Limited Partnership, dated February 19, 1986, included as part of the Registration Statement filed with the Securities and Exchange Commission of December 24, 1985 pursuant to Rule 424(b) of the Securities Act of 1933, is incorporated by reference into Part IV of this Annual Report on Form 10-K. Index to exhibits may be found on page Page 1 of PART I Item 1. Business. General Summit Tax Exempt Bond Fund, L.P. (the "Registrant"), a Delaware limited partnership, was formed on December 18, 1985 and will terminate on December 31, 2020 unless terminated sooner under the provisions of the Registrant's Agreement of Limited Partnership (the "Partnership Agreement"). The Registrant was formed to invest in tax-exempt participating first mortgage revenue bonds ("First Mortgage Bonds" or "FMBs") issued by various state or local governments or their agencies or authorities. These investments were made with proceeds from the initial sale of 7,906,234 Beneficial Unit Certificates ("BUC$"). The FMBs are secured by participating first mortgage loans ("Mortgage Loans") on multi-family residential apartment properties ("Properties") developed by unaffiliated developers. The Properties are eleven garden apartment projects located in eight states. The Registrant's fiscal year for book and tax purposes ends on December 31. The Registrant is engaged solely in the business of investing in FMBs; therefore, presentation of industry segment information is not applicable. General Partners The general partners of the Registrant are Prudential-Bache Properties, Inc. ("PBP") and Related Tax Exempt Bond Associates, Inc. (the "Related General Partner") (collectively, the "General Partners"). Related BUC$ Associates, Inc. (the "Assignor Limited Partner"), which acquired and holds limited partnership interests on behalf of those persons who purchase BUC$, has assigned to those persons substantially all of its rights and interest in and under such limited partnership interests. The Related General Partner and the Assignor Limited Partner are under similar ownership. Competition The General Partners and/or their affiliates have formed, and may continue to form, various entities to engage in businesses which may be competitive with the Registrant. The Registrant'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 amenities from comparable neighboring properties. Structure of First Mortgage Bonds The principal and interest payments on each FMB are payable only from the cash flows, including proceeds in the event of a sale, from the Properties underlying the FMBs. None of these FMBs constitute a general obligation of any state or local government, agency or authority. The FMBs are secured by the Mortgage Loans on the underlying Properties and the structure of each Mortgage Loan mirrors the structure of the corresponding FMB. Unless otherwise modified, the principal of the FMBs will not be amortized during their respective terms (which range from 17 to 24 years) and will be required to be repaid in lump sum "balloon" payments at the expiration of the respective terms or at such earlier times as the Registrant may require pursuant to the terms of the bond documents. The Registrant has a right to require redemption of the FMBs approximately twelve years after their issuance. The Registrant anticipates holding the FMBs for approximately 12 to 15 years from the date of issuance; however, it can and may elect to hold until maturity. In addition to the stated base interest rates ranging from 5.23% to 8.50% per annum, each of the FMBs provides for "contingent interest" consisting of (a) an amount equal to 50% to 100% of net property cash flow and -2- 50% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annually compounded interest at a rate ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (b) an amount equal to 25% to 50% of the remaining net property cash flow and 25% to 50% of 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 are exempt from federal income taxation. In order to protect the tax exempt status of the FMBs, the owners of the Properties are required to enter into certain agreements to own, manage and operate such Properties in accordance with the requirements of the Internal Revenue Code. -3- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) The following table lists the FMBs that the Registrant owns, together with the occupancy and rental rates of the underlying properties:
Average Final Interest Stated Face Carrying Completion Rate Paid Interest Property Closing Date Amount of Bond Amount Date in 1995* Rate* - -------- ------------ -------------- ------ ---- -------- ----- The Mansion, Independence, MO 5/13/86 $ 19,450,000 $ 17,600,000 12/87 5.70%(D) 5.23% Martin's Creek, Summerville, SC 5/20/86 7,300,000 7,040,626 5/86 7.00 (C) 8.25 East Ridge, Mt. Pleasant, SC 5/20/86 8,700,000 8,406,902 5/86 6.90 (C) 8.25 High Pointe Club, Harrisburg, PA 7/29/86 8,900,000 7,545,000 4/91 6.10 8.50 Cypress Run, Tampa, FL 8/14/86 15,402,428 15,402,428 6/88 6.70 8.50 Thomas Lake, Eagan, MN 9/02/86 12,975,000 12,975,000 2/88 8.30 (E) 8.50 North Glen, Atlanta, GA 9/30/86 12,400,000 12,400,000 12/87 6.00 8.50 Greenway Manor, St. Louis, MO 10/09/86 12,850,000 12,300,000 12/87 8.60 (E) 8.50 Clarendon Hills, Hayward, CA 12/08/86 17,600,000 17,600,000 7/89 5.52 5.52 Cedar Creek, McKinney, TX 12/29/86 8,100,000 7,798,550 2/88 6.60 8.50 Sunset Terrace, Lancaster, CA 2/12/87 10,350,000 10,350,000 2/87 6.10 8.00 ------------ ------------ $134,027,428 129,418,506 ============ ============ Less: Allowance for loss on impairment of assets (1,850,000) ------------ Carrying Amount $127,568,506 ============ Minimum Pay Rate at Occupancy Rental Rates No. of December 31, February 11, at December Rental 1995* 1996 31, 1995 Units ----- ---- -------- ----- The Mansion, Independence, MO 5.52% 93.2% $ 410-685 550 Martin's Creek, Summerville, SC 7.25 (A) 96.5 425-625 197 East Ridge, Mt. Pleasant, SC 7.25 (A) 97.0 490-725 200 High Pointe Club, Harrisburg, PA (B) 98.3 520-680 240 Cypress Run, Tampa, FL (B) 86.4 420-720 408 Thomas Lake, Eagan, MN 8.25 (A) 96.7 654-1056 216 North Glen, Atlanta, GA 8.50 (A) 97.9 510-745 284 Greenway Manor, St. Louis, MO 8.50 98.1 450-550 312 Clarendon Hills, Hayward, CA 5.52 100.0 775-1,300 285 Cedar Creek, McKinney, TX (B) 97.1 475-799 250 Sunset Terrace, Lancaster, CA (B) 81.4 460-680 184
*The rate paid represents the interest recorded by the Registrant while the stated 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 minimum pay rates on the FMBs are scheduled to increase to the stated interest rate over the remaining terms of the FMBs. (B) The minimum pay rate is the current cash flow of the property. (C) The minimum pay rate on the FMB increases in increments from 6% in 1990 to 8.25% in 1997. The actual pay rate is adjusted as of the property's fiscal year end based on audited financial statements to no less than the minimum pay rate. (D) Includes contingent interest paid during 1995. (E) Includes receipt of deferred base interest relating to prior periods. Note: A provision for loss on impairment of assets of $500,000 and $1,350,000 was recorded during the years ended December 31, 1995 and 1994 to record the estimated impairment of FMBs based upon an analysis of estimated cash flows from the individual properties securing the FMBs. -4- Bond Modifications/Forbearance Agreements Effective with the May 1, 1995 payment date, the Sunset Terrace FMB has made payments based on the monthly net cash flow generated by the operations of the underlying property in accordance with the agreement outlined below. Effective as of August 1, 1995, the obligor of the Sunset Terrace FMB entered into a forbearance agreement. In accordance with the terms of this agreement, the obligor of the FMB is paying debt service on the FMB to the extent of cash flow generated by the underlying property. The difference between the pay rate and the stated rate of this FMB is deferred and payable out of available future cash flow. In addition, pursuant to the agreement, the obligor has replaced the property manager and leasing agent with a new property manager who is an affiliate of the Related General Partner. Other terms of the agreement call for the deed to be transferred to the Registrant or its designee no later than January 30, 1997 should the obligor be unable to bring the FMB fully current on all interest due and payable (including deferred base interest) on or before that date. These and other obligations are secured by a guarantee from an affiliate of the obligor. In November 1989, a $600,000 settlement was reached between the previous developer of High Pointe Club Apartments and USF&G, the construction performance bonding company for High Pointe property. Prior to this settlement, the previous developer agreed to place the settlement proceeds in escrow later to be shared with the subsequent developer ("Greenhill Project Investors, Inc.") or its successors and assigns pursuant to an arbitration proceeding. On April 23, 1993, the previous developer agreed to release the escrowed funds to RHA Inv., Inc. ("RHA"), the successor to Greenhill Project Investors, Inc. In April 1995, RHA paid to the Registrant approximately $721,0000 consisting of the settlement proceeds plus accrued interest. These funds were applied as partial payment toward accrued and unpaid interest due under the High Pointe Club FMB. During April 1995, the Registrant made a loan in the amount of approximately $721,000 to the new owner of the Cypress Run property toward payment of delinquent 1992 and 1993 property taxes. This loan is self-amortizing over three years and carries an 8.5% annual interest rate. This loan was recorded in income as a reduction of interest income from FMBs because the Cypress Run FMB is paying interest on a cash flow basis. On April 1, 1994, Mansion Apartment Project Investors, Inc. ("MAPI"), an affiliate of the Related General Partner who replaced the original developer of The Mansion property, sold the ownership interest in the property to an unrelated third party for $700,000 in cash and the assumption of the obligation under the Registrant's $19,450,000 FMB as well as a $400,000 second mortgage note payable to a lender affiliated with the Related General Partner taken by assignment from the seller. Notwithstanding the assumption of the FMB, the General Partners agreed to forbear on the Registrant's rights and remedies in declaring an interest payment default under the FMB loan documents provided the new borrower made minimum monthly interest payments to the Registrant equal to approximately $81,000 per month (5% per annum) together with payments to a replacement reserve escrow account of approximately $4,500 per month and complied with all other covenants and obligations. Effective October 18, 1994, The Mansion FMB was modified. The modification provides for a base pay rate of 5.23%. In addition, the contingent interest feature has been changed. Under the modified FMB, an additional .386% per year (primary contingent interest) is due and payable from 100% of cash flow above the base pay rate. If not paid, the difference between the minimum pay rate and the primary contingent interest rate is deferred and is payable from future cash flow and sale or refinancing proceeds. Remaining cash flow and sale or refinancing proceeds, if any, are paid to the Registrant in an amount equal to 35% of net cash flow until the borrower receives a 12.5% cumulative return on its investment together with the return of the initial investment. Then, the Registrant is entitled to 50% of remaining cash flow and net sale or refinancing proceeds until the owner has paid interest at a cumulative annual rate of 16%. Notwithstanding The Mansion owner's obligation to pay amounts due as primary contingent interest, the Registrant has agreed, until 1998, that the obligation to pay such amounts will be considered satisfied subject to those amounts being contributed by The Mansion's owner toward certain designated repairs to the property. The Mansion's owner will nevertheless be obligated to pay amounts due from remaining cash flow if available above the primary contingent interest rate. -5- The net cash proceeds from the sale of the ownership interest in The Mansion by MAPI of approximately $105,0000 (net of $400,000 escrow for certain repairs, a $50,000 second mortgage note principal payment, and closing costs), paid to the Registrant to reduce accrued and unpaid interest, was recorded by the Registrant as deferred income and is being amortized as interest income over the remaining life of The Mansion FMB. The balance of the deferred income relating to The Mansion FMB was approximately $94,000 and $101,000 at December 31, 1995 and 1994. All other accrued and unpaid interest on The Mansion FMB which had been reserved for financial statement purposes was forgiven. In June 1992, the Registrant made a $320,000 second mortgage loan to the owner of the property underlying the Cypress Run FMB for the payment of 1991 property taxes. This loan required monthly interest only payments at a rate of 8.5% per annum with the principal due on July 1, 1994. Interest payments on the loan as well as the FMB were current through June 1994; however, due to the borrower's bankruptcy, the loan remains outstanding and the borrower has been notified of the default (see below for discussion of borrower's bankruptcy filing). An allowance for possible loss was recorded for the entire loan amount in 1993. As a result of the failure to pay 1992 and 1993 real estate taxes, the Registrant initiated steps to enforce its rights and remedies under the Cypress Run FMB in July 1994. These remedies include acceleration of the loan and a $350,000 draw on an irrevocable letter of credit issued on behalf of the owner of Cypress Run as security relating to obligations under the Rental Performance Agreement. Pursuant to the terms of the bond documents, approximately $348,000 of the proceeds received from the draw on the letter of credit has been recorded as a reduction of the FMB with the balance applied as interest. In response, on July 15, 1994, the owner of the property filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code and continued to operate the property as a debtor-in-possession. The bankruptcy filing operated as a stay against the enforcement of the Registrant's remedies which include foreclosure. At the initial hearing, the court consented, among other things, to allow the Registrant to receive the monthly net cash flow generated by the property as its debt service payments for at least the initial 120 days of the proceedings. On November 10, 1994, an Order Modifying Stay together with a Settlement Stipulation was entered by the Court which granted the Registrant relief from the Automatic Stay. This order became effective on March 31, 1995 unless sale of the property, subject to the Registrant's approval, was closed beforehand. The Registrant continues to receive the monthly net cash flow generated by the property as payment toward debt service. On March 31, 1995, pursuant to the Court Order, ownership of the Cypress Run property was transferred to an affiliate of the Related General Partner. The affiliate has not made an equity investment in the underlying property; however, it has assumed the day-to-day responsibilities and obligations of operating the property. Due to the failure to pay 1990 and 1991 property taxes and interest from March to August 1992, the Registrant instituted foreclosure proceedings against Greenway Manor. On July 20, 1992, the Greenway partnership filed for bankruptcy under Chapter 11 of the United Sates Bankruptcy Code. Pursuant to a 1992 court order, the receiver paid the Registrant the cash flow remaining after paying past due taxes, property operating costs and escrowing for 1992 taxes. On June 30, 1993, the court dismissed the bankruptcy proceedings at which time the owner of the property and obligor under the FMB agreed to transfer the deed-in-lieu of foreclosure to an affiliate of the Related General Partner. For several properties collateralizing FMBs (High Pointe Club securing an $8,900,000 FMB; Greenway Manor, securing a $12,850,000 FMB and Cedar Creek, securing an $8,100,000 FMB) the original owners of the underlying properties and obligors of the FMBs were replaced by affiliates of the Related General Partner who have not made equity investments in the underlying properties. These entities have assumed the day-to-day responsibilities and obligations of operating the underlying properties. Buyers are being sought who would make equity investments in the underlying properties and assume the nonrecourse obligations for the FMB's. Although these properties are not producing sufficient cash flow to fully service the debt, the Registrant has no present intention to declare a default on these FMBs. -6- On May 31, 1992, Clarendon Hills Investors, Inc. ("CHI"), an affiliate of the Related General Partner who had replaced the developer of the Clarendon Hills property, sold its ownership interest in the property to an unrelated third party (the "Purchaser") for $26,200,000. The Purchaser paid $2,000,000 in cash, assumed the $17,600,000 obligation of the Registrant's FMB and issued to CHI a $6,600,000 promissory note which in turn, was assigned to the Registrant. The $6,600,000 promissory note bears interest at the rate of 8.0% per annum payable in equal monthly installments until December 2003 at which time the entire unpaid principal and interest will be due and payable. The $1,441,209 in net cash proceeds of the sale (net of certain closing costs), paid by the purchaser to the Registrant to reduce accrued and unpaid interest, was recorded by the Registrant as deferred income and is being amortized as interest income from FMBs over the remaining life of the Clarendon Hills FMB. The balance of the deferred income relating to the Clarendon Hills FMB was approximately $992,000 and $1,117,000 at December 31, 1995 and 1994. In connection with the sale of the Clarendon Hills property by CHI, the FMB collateralized by the property was modified to provide for, among other things: the discharge of all accrued and unpaid interest relating to a previous owner (which for financial statements purposes has been fully reserved); a reduction of the base interest rate to 5.52% per annum on the $17,600,000 FMB; and a further reduction of the base interest during the first four years from closing of an amount equal to 50% of the increase in property taxes (if any) over the fiscal 1992 property tax bill resulting solely from this sale (limited to $35,000 per annum). In addition, the contingent interest feature was modified to assign annual cash flow as follows: (1) to pay the Registrant its 5.52% base rate of the FMB and to pay the 8.0% interest owed on the promissory note; (2) to pay the Purchaser the next $220,000 representing return on its investment; and then (3) to pay the Registrant 65% of cash flow until the Registrant receives an interest rate equal to 8.25% per annum on $24,200,000 ($17,600,000 FMB and $6,600,000 promissory note) for each respective year on a non-cumulative basis. Any remaining cash flow is then shared 65% by the Purchaser and 35% by the Registrant. The FMBs for the East Ridge and Martin's Creek properties were modified in 1990 when the equity interest in the properties and the related obligations of the FMBs were sold by an affiliate of the Related General Partner to an unrelated third party. The modifications provide for the minimum pay rate increases from 6.0% per annum in 1990 to 7.5% per annum in March 1996. Beginning in March 1997, the pay rate will be 8.25% per annum. The difference between the minimum interest rate and the original stated rate is deferred and is payable out of available future cash flow. As part of this modification, the Registrant received $950,000 in 13% second mortgage notes with monthly interest and principal payments through December 1996. These notes are also partially secured by letters of credit. Deferred income equal to the amount of the promissory note was recorded in the statements of financial condition. As a result of this transaction, income is recognized only as and when the Registrant receives payment on the promissory notes. The balances of both the promissory notes and deferred income was approximately $57,000 and $251,000 at December 31, 1995 and 1994, respectively. There was no loss recorded on this transaction because the allowance previously established for these FMBs was in excess of the concessions granted. At December 31, 1995 and 1994, the valuation allowance relating to debt restructuring was approximately $296,000 and $366,000, respectively. Such allowance is accreted as interest income over the remaining term of the FMBs as long as the estimated fair value of the underlying properties is in excess of the carrying value of the related FMB. During 1991, a forbearance agreement was finalized with the owners of the North Glen property. The General Partners further modified the North Glen forbearance agreement in April 1993 to allow the owner to make debt payments at a pay rate of 6.0% per annum through December 1995 at which time the rate is scheduled to increase to the stated rate of 8.5% per annum. The pay rate for the Thomas Lake property is scheduled to increase in annual increments to the original stated rate of 8.5% per annum in December 1996. During 1992, a forbearance agreement was finalized with the owner of the Sunset Terrace property. Terms of the agreement call for a reduced pay rate of 7.0% per annum through May 1993 with scheduled annual increments to the original stated rate of 8.0% in May 1996. -7- With respect to all of these FMBs, the difference between the pay rate and the original stated rate is deferred and payable out of available future cash flow or ultimately from sales or refinancing proceeds and is not accrued for financial statement purposes. The determination as to whether it is in the best interest of the Registrant 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. These factors include, but are not limited to, property performance, owner cooperation and projected legal costs. The following FMB's interest income exceeded 15% of the Registrant's total revenue for one or more of the three years in the period ended December 31, 1995: 1995 1994 1993 ---- ---- ---- Cypress Run * 17% 17% The Mansion * 16% * *FMB's interest income was less than 15% of the Registrant's total revenue for the year. Credit Facility On January 15, 1993, the Registrant entered into a loan agreement with an unaffiliated lender for a $15,000,000 credit facility with the maturity date of January 14, 1998 and an option to extend for two years for an additional fee. The debt service requirements include monthly interest only payments with a variable interest rate equal to the 30-day commercial paper interest rate (5.85% and 5.90% at December 31, 1995 and 1994, respectively, plus 4.05% with principal due at maturity. The facility is collateralized by a pledge of the FMBs and associated collateral of East Ridge, Martin's Creek, The Mansion, Thomas Lake and Sunset Terrace. The initial proceeds from this facility were used to repay a $10,000,000 credit facility guaranteed by the Registrant, to repay a $3,000,000 noninterest-bearing working capital loan made to the Registrant from the Related General Partner and to pay associated closing costs. The $10,000,000 credit facility had been used to pay for costs incurred to complete construction of the properties securing the High Pointe Club and Clarendon Hills FMBs and to fund a loan toward the payment of property taxes on the Thomas Lake property. The $3,000,000 working capital loan was used to supplement distributions commencing with the fourth quarter 1988 distribution. The unused portion of the Registrant's $15,000,000 credit facility is to be used for future working capital requirements and other cash requirements, as necessary, subject to approval of the lender. In conjunction with the Registrant's credit facility and the repayment of the previously existing $10,000,000 credit facility, the Registrant was assigned nonrecourse notes in the amount of $6,600,000, $3,180,000 and $220,000 for the Clarendon Hills, High Pointe Club and Thomas Lake properties, respectively. The Clarendon Hills promissory note, secured by a deed of trust, requires monthly interest only payments of 8.0% per annum with the principal due on December 31, 2003. The unsecured High Pointe Club note also requires monthly interest only payments of 8.0% per annum with the principal due on December 31, 2003. Since the High Pointe Club property is paying interest on a cash flow basis, interest on the promissory note is only recorded when cash flow is received in excess of the stated rate. No interest on the High Pointe Club promissory note has been received or recorded through December 31, 1995. The assigned High Pointe Club note is subordinate to the High Pointe Club FMB and has been fully reserved. The Thomas Lake promissory note in the principal amount of $220,000, which is secured by a second mortgage on the property, matured in April 1995 and was modified and extended. The modified loan is self-amortizing over thirty months at an 8.5% interest rate. Clarendon Hills and Thomas Lake promissory notes are current on their interest payments through December 31, 1995. Employees The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partners and their affiliates pursuant to the Partnership Agreement. See Note 6 to the -8- financial statements in Item 8. Item 2. Properties The Registrant does not own or lease any property. Item 3. Legal Proceedings This information is incorporated by reference to Note 7 to the financial statements in Item 8. Item 4. Submission of Matters to a Vote of BUC$holders None PART II Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters As of March 1, 1996, there were 7,358 holders of record owning 7,906,234 BUC$. The Registrant's BUC$ are listed on the American Stock Exchange under the SUA symbol; however, the limited partner interests themselves are not listed. The high and low prices for each quarterly period of the last two years for which the BUC$ were traded are as follows:
1995 1995 1994 1994 Low High Low High --- ---- --- ---- March 31 8 1/2 9 7/8 10 1/2 11 3/8 June 30 9 3/8 10 1/4 9 7/8 10 7/8 September 30 9 3/4 10 1/4 9 1/4 10 1/8 December 31 9 1/2 10 3/8 8 1/4 9 3/8
Quarterly cash distributions per BUC paid during 1995 and 1994 were as follows: Quarter ended 1995 1994 ------------- ---- ---- March 31 $.21 $.21 June 30 $.21 $.21 September 30 $.21 $.21 December 31 $.21 $.21 There are no material restrictions upon the Registrant's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. Cash distributions paid in 1995 and 1994 were funded from current and previously undistributed cash flow from operations. Approximately $791,000 of the $6,641,000 and $1,069,000 of the $6,641,000 paid to BUC$holders in 1995 and 1994, respectively, represents a return of capital under generally accepted accounting principles (GAAP). (The return of capital on a GAAP basis is calculated as BUC$holder distributions less net income allocated to BUC$holders). The Registrant currently expects that cash distributions will be paid in the foreseeable future from adjusted cash flow from operations. For discussion of other factors that may affect the amount of future distributions, see Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7. -9- Item 6. Selected Financial Data The following table presents selected financial data of the Registrant. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto contained in Item 8.
Year ended December 31, ---------------------------------------------------------------------------------------- 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Interest income from participating first mortgage bonds $ 9,246,436 $ 9,376,790 $ 9,642,390 $ 8,363,679 $ 8,938,697 ============ ============ ============ ============ ============ Interest expense $ 1,391,496 $ 1,156,858 $ 967,361 $ 9,166 $ 30,025 ============ ============ ============ ============ ============ Provision for loss on impairment of assets $ 500,000 $ 1,350,000 $ 1,905,000 $ 0 $ 0 ============ ============ ============ ============ ============ Net income $ 5,969,215 $ 5,685,890 $ 4,135,774 $ 6,462,572 $ 7,126,669 ============ ============ ============ ============ ============ Net income per BUC $ 0.74 $ 0.71 $ 0.51 $ 0.80 $ 0.88 ============ ============ ============ ============ ============ Total assets $139,177,776 $140,304,313 $141,881,705 $134,028,372 $133,938,510 ============ ============ ============ ============ ============ Loan payable $ 13,680,866 $ 13,680,866 $ 13,680,866 $ 45,620 $ 319,940 ============ ============ ============ ============ ============ Distributions to BUC$holders $ 6,641,238 $ 6,641,238 $ 6,641,238 $ 6,641,238 $ 6,641,238 ============ ============ ============ ============ ============ Distributions per BUC $ 0.84 $ 0.84 $ 0.84 $ 0.84 $ 0.84 ============ ============ ============ ============ ============
-10- Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Capital Resources and Liquidity The Registrant has invested in eleven tax-exempt FMBs issued by various state or local governments or their agencies or authorities. The FMBs are secured by participating first mortgage loans on multi-family residential apartment projects. At the beginning of the year, the Registrant had cash and temporary investments of approximately $2,090,000. After payment of distributions and receipt of the net cash flow from operations, Registrant ended the year with approximately $1,976,000 in cash and temporary investments. The fourth quarter distribution of approximately $1,660,000 ($.21 per BUC) was paid to BUC$holders in February 1996 from current and previously undistributed cash flow from operations. The Registrant anticipates funding future cash distributions from current and previously undistributed cash flow from operations. Interest payments from FMBs are anticipated to provide sufficient liquidity to meet the operating expenditures of the Registrant in future years and to fund distributions. The Registrant's loan payable has a variable interest rate; therefore, future levels of interest expense will fluctuate in correlation to movements in the 30-day commercial paper interest rate. As discussed in more detail in Note 3 to the financial statements in Item 8, the Registrant received net proceeds of approximately $105,000 in April 1994 in connection with an affiliate's sale of its ownership interest in The Mansion to an unrelated third party. The Registrant has recorded the proceeds as deferred income. Management is not aware of any trends or events, commitments or uncertainties that will impact liquidity in a material way except as discussed here and in the financial statements in Item 8. The Registrant's investments in mortgage loans are secured by a Registrant interest in properties which are diversified by location so that if one area of the country is experiencing downturns in the economy, the remaining properties may be experiencing upswings. Result of Operations FMBs and promissory notes are carried at cost less a valuation allowance where appropriate. The Registrant periodically evaluates the collectibility of both interest and principal of these investments to determine whether they are impaired. An FMB or promissory note is considered to be impaired when, based on current information and events, it is probable that the Registrant will be unable to collect all amounts due according to the existing contractual terms. When an FMB or promissory note is considered to be impaired, the amount of the valuation allowance is determined by discounting the expected cash flows at the FMB's or promissory note's original effective interest rate, or, for practical purposes, at the estimated fair value of the collateral. The process of determining impairment and the appropriate level of the valuation allowance is based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates. The cash flows used in this process are based on good faith estimates and assumptions developed by the Registrant's management. Changes in market conditions and circumstances may occur which would cause these estimates and assumptions to change, which, in turn, could cause additional impairments. Thus, the Registrant may be required to provide for additional valuation allowances, which could be material, in subsequent years. The Registrant's accounting policy for its FMBs and promissory notes conforms to Statement of Financial Accounting Standards 114 and 118, "Accounting by Creditors for Impairment of a Loan" (the "Statements"), which the Registrant adopted in 1995. Adoption of the Statements did not have a material impact on the Registrant's financial position or results of operations. Prior to the adoption of the Statements, the Registrant -11- classified FMBs as Assets Held for Sale when the original owner of the property and obligor of the FMB was replaced by an affiliate of the Related General Partner, who had not made an equity investment in the property. Because the Registrant has not declared default on these FMBs and has no present intention to do so, they have been reclassified as FMBs for all periods presented, in accordance with the Statements. Such FMBs were written down to the estimated fair value of the underlying properties at the time the original owners were replaced. 1995 vs. 1994 Net income increased approximately $283,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to the amount of provisions for loss on impairment of assets recorded in the respective years and for the following reasons below. Interest income from FMBs decreased by approximately $130,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to reduced debt service payments received from the Sunset Terrace and Cedar Creek FMBs. Interest income from promissory notes decreased by approximately $35,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994. This decrease resulted primarily from the repayment of the Cypress Run tax loan in 1994 resulting in no interest income in 1995. Interest income from temporary investments increased approximately $29,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to higher interest rates and invested balances. Interest expense increased approximately $235,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 due to interest rate increases during 1995 on the Registrant's loan. General and administrative expenses increased approximately $66,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to the timing of certain accruals recorded in the respective years and increased costs associated with the administration of the Registrant. Provisions for loss on impairment of assets of $500,000 and $1,350,000 were recorded during the years ended December 31, 1995 and 1994, respectively, for the estimated impairment of the FMBs based upon an analysis of estimated cash flows from the individual properties securing the FMBs. Legal expenses increased approximately $131,000 for the year ended December 31, 1995 as compared to the corresponding period in 1994 primarily due to the legal costs incurred with respect to the Cypress Run bankruptcy proceedings, debt modifications and the Kinnes litigation discussed in Note 7 to the financial statements in Item 8. 1994 vs. 1993 Net income increased approximately $1,550,000 for the year ended December 31, 1994 as compared to the corresponding period in 1993 primarily due to the amount of provisions for loss on impairment of assets and uncollectible receivables recorded in the respective years and the reasons discussed below. Interest income from FMBs decreased by approximately $266,000 for the year ended December 31, 1994 as compared to the corresponding period in 1993. This decrease primarily resulted from the Cypress Run bankruptcy and a modification to the North Glen forbearance agreement in 1993. These decreases were offset, in part, by increased interest received from Sunset Terrace, Thomas Lake, High Pointe Club and Cedar Creek. Interest income from promissory notes decreased by approximately $22,000 for the year ended December 31, 1994 as compared to the corresponding period in 1993. This decrease resulted from reduced interest received on the Cypress Run tax loan in 1994 as compared to 1993. -12- Interest income from temporary investments increased by approximately $18,000 for the year ended December 31, 1994 as compared to the corresponding period in 1993 primarily due to higher interest rates and invested balances. Interest expense increased by approximately $189,000 for the year ended December 31, 1994 as compared to the corresponding period in 1993 due to interest rate increases during 1994. General and administrative expenses decreased by approximately $63,000 for the year ended December 31, 1994 as compared to the corresponding period in 1993 primarily due to the timing of certain expenses in the respective years and a general decrease in the costs associated with the administration of the Registrant. A $1,350,000 provision for loss on impairment of assets was recorded during the year ended December 31, 1994 for the estimated impairment of the FMBs based upon an analysis of estimated cash flows from the individual properties securing the FMBs. Legal expenses decreased approximately $121,000 for the year ended December 31, 1994 as compared to the corresponding period in 1993. This decrease was primarily because of non-recurring costs associated with the Greenway foreclosure in 1993 and lower legal costs related to the Levine litigation described in Note 7 to the financial statements in Item 8. -13- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) Property Information The following table lists the FMBs that the Registrant owns with occupancy rates of the underlying properties as of February 11, 1996:.
Average Stated Minimum Face Carrying Interest Rate Interest Pay Rate at Property Location Amount of Bond Amount Occupancy Paid in 1995* Rate* December 31,1995* The Mansion Independence, MO $ 19,450,000 $ 17,600,000 93.2% 5.70%(D) 5.23% 5.52% Martin's Creek Summerville, SC 7,300,000 7,040,626 96.5 7.00 (C) 8.25 7.25 (A) East Ridge Mt. Pleasant, SC 8,700,000 8,406,902 97.0 6.90 (C) 8.25 7.25 (A) High Pointe Club Harrisburg, PA 8,900,000 7,545,000 98.3 6.10 8.50 (B) Cypress Run Tampa, FL 15,402,428 15,402,428 86.4 6.70 8.50 (B) Thomas Lake Eagan, MN 12,975,000 12,975,000 96.7 8.30 (E) 8.50 8.25 (A) North Glen Atlanta, GA 12,400,000 12,400,000 97.9 6.00 8.50 8.50 (A) Greenway Manor St. Louis, MO 12,850,000 12,300,000 98.1 8.60 (E) 8.50 8.50 Clarendon Hills Hayward, CA 17,600,000 17,600,000 100.0 5.52 5.52 5.52 Cedar Creek McKinney, TX 8,100,000 7,798,550 97.1 6.60 8.50 (B) Sunset Terrace Lancaster, CA 10,350,000 10,350,000 81.4 6.10 8.00 (B) ------------ ------------ $134,027,428 129,418,506 ============ Less: Allowance for loss on impairment of assets (1,850,000) ------------ Carrying Amount $127,568,506 ============
*The rate paid represents the interest recorded by the Registrant while the stated rate represents the coupon rate of the FMB and the minimum pay rate represents the minimum rate pursuant to the payable applicable forbearance agreement, if any. (A) The minimum pay rates on the FMBs are scheduled to increase to the stated interest rate over the remaining terms of the FMBs. (B) The minimum pay rate is the current cash flow of the property. (C) The minimum pay rate on the FMB increases in increments from 6% in 1990 to 8.25% in 1997. The actual pay rate is adjusted as of the property's fiscal year end based on audited financial statements to no less than the minimum pay rate. (D) Includes contingent interest paid during 1995. (E) Includes receipt of deferred base interest relating to prior periods. -14- General The determination as to whether it is in the best interest of the Registrant 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. These factors include, but are not limited to, property performance, owner cooperation and projected legal costs. The difference between the stated interest rates and the rates paid on certain FMBs is not accrued for financial statement purposes, although it is deferred and payable from available future cash flow and sale or refinancing proceeds. Interest income relating to these FMBs of approximately $1,571,000, $1,707,000, and $1,639,000 was not recorded for the years ended December 31, 1995, 1994 and 1993, respectively. From time to time, certain property owners have elected to supplement the cash flow generated by the properties to meet the required FMB interest payments. There can be no assurance that in the future any property owner will continue to elect to supplement property cash flow to satisfy FMB interest requirements if necessary. The owner of the Sunset Terrace property supplemented the cash flow generated by the property to meet the required interest payments in 1994. No property owner made supplementary payments in 1995. -15- Item 8. Financial Statements and Supplementary Data. (a) 1. Financial Statements Page -------------------- ---- Independent Auditors' Report Statements of Financial Condition as of December 31, 1995 and 1994 Statements of Income for the years ended December 31, 1995, 1994 and 1993 Statements of Changes in Partners' Capital (Deficit) for the years ended December 31, 1995, 1994 and 1993 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 Notes to Financial Statements -16- INDEPENDENT AUDITORS' REPORT To the Partners of Summit Tax Exempt Bond Fund L.P. New York, New York We have audited the accompanying statements of financial condition of Summit Tax Exempt Bond Fund L.P. (a Delaware Limited Partnership) as of December 31, 1995 and 1994, and the related statements of income, changes in partners' capital (deficit) and cash flows for each of the three years in the period ended December 31, 1995. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and financial statement schedule are the responsibility of the General Partners. Our responsibility is to express an opinion on the financial statements and 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 the General Partners, 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 financial statements present fairly, in all material respects, the financial position of Summit Tax Exempt Bond Fund L.P. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic 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 20, 1996 -17- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) STATEMENTS OF FINANCIAL CONDITION
ASSETS December 31, ----------------------------------------- 1995 1994 ------------ ------------ Participating first mortgage bonds, net $127,568,506 $127,938,510 Temporary investments 1,350,000 1,915,874 Cash and cash equivalents 626,391 173,689 Promissory notes receivable, net 6,823,335 7,071,156 Deferred bond selection fees, net 1,708,218 1,858,273 Interest receivable, net 829,565 944,367 Deferred financing fees, net 260,985 388,816 Other assets 10,776 13,628 ------------ ------------ Total assets $139,177,776 $140,304,313 ============ ============ LIABILITIES AND PARTNERS' CAPITAL Liabilities: Loan payable $ 13,680,866 $ 13,680,866 Deferred income 1,143,191 1,469,174 Accounts payable and accrued expenses 124,850 120,685 Due to affiliates 49,262 46,422 ------------ ------------ Total liabilities 14,998,169 15,317,147 ------------ ------------ Contingencies Partner's capital (deficit): BUC$holders (7,906,234 BUC$ issued and outstanding) 124,555,445 125,346,852 General partners (375,838) (359,686) ------------ ------------ Total partners' capital 124,179,607 124,987,166 ------------ ------------ Total liabilities and partners' capital $139,177,776 $140,304,313 ============ ============
See accompanying notes to financial statements -18- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) STATEMENTS OF INCOME
Years Ended December 31, ----------------------------------------------------- 1995 1994 1993 ----------- ----------- ----------- Revenues: Interest income: Participating first mortgage bonds $ 9,246,436 $ 9,376,790 $ 9,642,390 Promissory notes 577,562 612,090 634,449 Temporary investments 74,084 45,394 27,565 ----------- ----------- ----------- Total revenues 9,898,082 10,034,274 10,304,404 ----------- ----------- ----------- Expenses: Interest expense 1,391,496 1,156,858 967,361 Management fees 671,875 671,875 671,875 General and administrative 405,528 339,975 403,230 Loan servicing fees 335,068 335,938 335,938 Legal expense 347,014 215,854 336,667 Amortization of deferred bond selection fees 150,055 150,056 150,056 Amortization of deferred financing fees 127,831 127,828 122,503 Provision for uncollectible receivables 0 0 1,276,000 Provision for loss on impairment of assets 500,000 1,350,000 1,905,000 ----------- ----------- ----------- Total expenses 3,928,867 4,348,384 6,168,630 ----------- ----------- ----------- Net income $ 5,969,215 $ 5,685,890 $ 4,135,774 =========== =========== =========== Allocation of Net Income BUC$holders $ 5,849,831 $ 5,572,171 $ 4,053,059 =========== =========== =========== General partners $ 119,384 $ 113,719 $ 82,715 =========== =========== =========== Net income per BUC $ 0.74 $ 0.71 $ 0.51 =========== =========== ===========
See accompanying notes to financial statements -19- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
Total BUC$holders General Partners ----- ----------- ---------------- Partners' capital (deficit) - December 31, 1992 $128,719,050 $129,004,098 $ (285,048) Net income 4,135,774 4,053,059 82,715 Distributions (6,776,774) (6,641,238) (135,536) ------------ ------------ ----------- Partners' capital (deficit) - December 31, 1993 126,078,050 126,415,919 (337,869) Net income 5,685,890 5,572,171 113,719 Distributions (6,776,774) (6,641,238) (135,536) ------------ ------------ ----------- Partners' capital (deficit) - December 31, 1994 124,987,166 125,346,852 (359,686) Net income 5,969,215 5,849,831 119,384 Distributions (6,776,774) (6,641,238) (135,536) ------------ ------------ ----------- Partners' capital (deficit) - December 31, 1995 $124,179,607 $124,555,445 $ (375,838) ============ ============ ===========
See accompanying notes to financial statements -20- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) STATEMENTS OF CASH FLOWS
Years Ended December 31, ------------------------------------------------ 1995 1994 1993 ------------ ----------- ------------ Cash flows from operating activities: Interest received $ 10,472,273 $ 9,720,452 $ 9,856,931 Loan made to property affiliate (721,266) 0 0 Fees and expenses paid (1,749,628) (1,766,476) (1,534,070) Interest paid (1,391,496) (1,241,679) (882,540) ------------ ----------- ------------ Net cash provided by operating activities 6,609,883 6,712,297 7,440,321 ------------ ----------- ------------ Cash flows from investing activities: Net (purchase) sale of temporary investments 565,874 (415,114) (485,040) Income deferred upon assumption of FMB obligations by new debtor 0 105,477 0 ------------ ----------- ------------ Net cash provided by (used in) investment activities 565,874 (309,637) (485,040) ------------ ----------- ------------ Cash flows from financing activities: Funds borrowed 0 0 13,680,866 Principal repayments on promissory note 53,719 0 0 Repayment of loan payable 0 0 (45,620) Financing fees paid 0 0 (639,147) Repayment of loan from affiliate 0 0 (3,000,000) Principal payment received on FMB 0 347,576 0 Distributions paid (6,776,774) (6,776,774) (6,776,774) Loans made to affiliate, net 0 0 (10,126,000) ------------ ----------- ------------ Net cash used in financing activities (6,723,055) (6,429,198) (6,906,675) ------------ ----------- ------------ Net increase (decrease) in cash and cash equivalents 452,702 (26,538) 48,606 Cash and cash equivalents at beginning of year 173,689 200,227 151,621 ------------ ----------- ------------ Cash and cash equivalents at end of year $ 626,391 $ 173,689 $ 200,227 ============ =========== ============
(continued) -21- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) STATEMENTS OF CASH FLOWS (continued)
Years Ended December 31, ----------------------------------------------- 1995 1994 1993 ------------ ----------- ----------- Schedule reconciling net income to net cash provided by operating activities Net income $ 5,969,215 $ 5,685,890 $ 4,135,774 ------------ ----------- ----------- Adjustments to reconcile net income to net cash provided by operating activities: Amortization of valuation allowance (129,996) (130,012) (130,012) Amortization of deferred income (131,881) (130,241) (125,322) Amortization of deferred bond selection fees 150,055 150,056 150,056 Amortization of deferred financing fees 127,831 127,828 122,503 Provision for loss on impairment of assets 500,000 1,350,000 1,905,000 Provision for uncollectible receivables 0 0 1,276,000 Changes in: Promissory notes receivable, net 247,821 172,411 166,177 Interest receivable 114,802 (53,569) (192,137) Other assets 2,852 1,678 147,873 Deferred income (247,821) (172,411) (166,177) Accounts payable and accrued expenses 4,165 (179,984) 116,292 Accrued interest expense 0 (84,821) 84,821 Due to affiliates 2,840 (24,528) (50,527) ------------ ----------- ----------- Total adjustments 640,668 1,026,407 3,304,547 ------------ ----------- ----------- Net cash provided by operating activities $ 6,609,883 $ 6,712,297 $ 7,440,321 ============ =========== ===========
See accompanying notes to financial statements -22- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 1 - General Summit Tax Exempt Bond Fund, L.P. (the "Partnership"), a Delaware limited partnership, was formed on December 18, 1985 and will terminate on December 31, 2020 unless terminated sooner under the provisions of the Agreement of Limited Partnership (the "Partnership Agreement"). The Partnership was formed to invest in tax-exempt participating first mortgage revenue bonds ("FMBs") issued by various state or local governments or their agencies or authorities. The FMBs are secured by participating first mortgage loans on multi-family residential apartment projects (the "Properties"). The general partners of the Partnership (the "General Partners") are Prudential-Bache Properties, Inc. ("PBP") (a wholly-owned subsidiary of Prudential Securities Group, Inc.) and Related Tax Exempt Bond Associates, Inc. (the "Related General Partner"). Related BUC$ Associates, Inc. (the "Assignor Limited Partner"), which acquired and holds limited partnership interests on behalf of those persons who purchase Beneficial Unit Certificates ("BUC$"), has assigned to those persons substantially all of its rights and interest in and under such limited partnership interests. The Related General Partner and the Assignor Limited Partner are under common ownership. As of December 31, 1995, the Partnership had invested in a total of eleven FMBs. NOTE 2 - Summary of Significant Accounting Policies a) Basis of Accounting The books and records of the Partnership are maintained on the accrual basis of accounting in accordance with generally accepted accounting principles. The preparation of financial statements in conformity with generally accepted accounting principles requires the General Partners 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. b) Participating first mortgage bonds and promissory notes receivable FMBs and promissory notes are carried at cost less a valuation allowance where appropriate. The Partnership periodically evaluates the collectibility of both interest and principal of these investments to determine whether they are impaired. An FMB or promissory note is considered to be impaired when, based on current information and events, it is probable that the Partnership will be unable to collect all amounts due according to the existing contractual terms. When an FMB or promissory note is considered to be impaired, the amount of the valuation allowance is determined by discounting the expected cash flows at the FMB's or promissory note's original effective interest rate, or, for practical purposes, at the estimated fair value of the collateral. The process of determining impairment and the appropriate level of the valuation allowance is based upon projections of future economic events such as property occupancy rates, rental rates, operating cost inflation and market capitalization rates. The cash flows used in this process are based on good faith estimates and assumptions developed by the Partnership's Management. Changes in market conditions and circumstances may occur which would cause these estimates and assumptions to change, which, in turn, could cause additional impairments. Thus, the Partnership may be required to provide for additional valuation allowances, which could be material, in subsequent years. -23- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 2 - Summary of Significant Accounting Policies (continued) The Partnership's accounting policy for its FMBs and promissory notes conforms to Statement of Financial Accounting Standards 114 and 118, "Accounting by Creditors for Impairment of a Loan" (the Statements"), which the Partnership adopted in 1995. Adoption of the Statements did not have a material impact on the Partnership's financial position or results of operations. Prior to the adoption of the Statements, the Partnership classified FMBs as Assets Held for Sale when the original owner of the property and obligor of the FMB was replaced by an affiliate of the Related General Partner, who had not made an equity investment in the property. Because the Partnership has not declared default on these FMBs and has no present intention to do so, they have been reclassified as FMBs for all periods presented, in accordance with the Statements. Such FMBs were written down to the estimated fair value of the underlying properties at the time the original owners were replaced. Interest income is recognized at the stated rate when collectibility of future amounts is reasonably assured. Interest income from FMBs with modified terms where the collectibility of future amounts is uncertain is recognized based upon expected cash receipts. c) Temporary investments Temporary investments at December 31, 1995 represent tax-exempt Municipal Preferred Stock which are carried at cost which approximates market value. Temporary investments at December 31, 1994 represent tax-exempt floating rate municipal bonds which are carried at cost plus accrued interest which approximates market value. d) Cash and cash equivalents Cash and cash equivalents include cash on hand, cash in banks, and investments in short-term instruments with an original maturity of three months or less, for which cost approximates market value. e) Income taxes The Partnership 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 BUC$holders. The Partnership may be subject to other state and local taxes in jurisdictions in which it operates. f) Profit and loss allocations and distributions Net profits or losses and distributions are allocated 98% to the BUC$holders and 2% to the General Partners in accordance with the Partnership Agreement. g) Deferred bond selection fees The General Partners were paid bond selection fees (equal to 2% of the gross proceeds from the initial offering) 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. The accumulated amortization as of December 31, 1995 and 1994 was approximately $1,383,000 and $1,233,000, respectively. -24- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 2 - Summary of Significant Accounting Policies (continued) h) Deferred financing fees Financing fees incurred in connection with the Partnership's credit facility were capitalized and are being amortized over five years (the life of the credit facility). The accumulated amortization at December 31, 1995 and 1994 was approximately $378,000 and $251,000, respectively. i) Reclassifications Certain reclassifications have been made to prior year amounts to conform to the current year's presentation. NOTE 3 - Participating First Mortgage Bonds The principal and interest payments on each FMB are payable only from the cash flows, including proceeds in the event of a sale, from the Properties underlying the FMBs. None of these FMBs constitute a general obligation of any state or local government, agency or authority. The FMBs are secured by the mortgage loans on the underlying Properties and the structure of each mortgage loan mirrors the structure of the corresponding FMB. Unless otherwise modified, the principal of the FMBs will not be amortized during their respective terms (which range from 17 to 24 years) and will be required to be repaid in lump sum "balloon" payments at the expiration of the respective terms or at such earlier times as the Partnership may require pursuant to the bond documents, The Partnership has a right to require redemption of the FMBs approximately twelve years after their issuance. The Partnership anticipates holding the FMBs for approximately 12 to 15 years from the date of issuance; however, it can and may elect to hold until maturity. In addition to the stated base interest rates ranging from 5.23% to 8.50% per annum, each of the FMBs which have not been modified provides for "contingent interest" consisting of (a) an amount equal to 50% to 100% of net property cash flow and 50% to 100% of net sale of refinancing proceeds until the borrower has paid, during the post-construction period, annually compounded interest at a rate ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (b) an amount equal to 25% to 50% of the remaining net property cash flow and 25% to 50% of 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 are exempt from federal income taxation. In order to protect the tax-exempt status of the FMBs, the owners of the Properties are required to enter into certain agreements to own, manage and operate such Properties in accordance with the requirements of the Internal Revenue Code. Effective with the May 1, 1995 payment date, the Sunset Terrace FMB has made payments based on the monthly net cash flow generated by the operations of the underlying property in accordance with the agreement outlined below. Effective as of August 1, 1995, the obligor of the Sunset Terrace FMB entered into a forbearance agreement. In accordance with the terms of this agreement, the obligor of the FMB is paying debt service on the FMB to the extent of cash flow generated by the underlying property. The difference between the pay rate and the stated rate of this FMB is deferred and payable out of available future cash flow. In addition, pursuant to the agreement, the obligor has replaced the property manager and leasing agent with a new property manager who is an affiliate of the Related General Partner. Other terms of the agreement call for the deed to be transferred to the -25- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 3 - Participating First Mortgage Bonds (continued) Partnership or its designee no later than January 30, 1997 should the obligor be unable to bring the FMB fully current on all interest due and payable (including deferred base interest) on or before that date. These and other obligations are secured by a guarantee from an affiliate of the obligor. In November 1989, a $600,000 settlement was reached between the previous developer of High Pointe Club Apartments and USF&G, the construction performance bonding company for the High Pointe property. Prior to this settlement, the previous developer agreed to place the settlement proceeds in escrow later to be shared with the subsequent developer ("Greenhill Project Investors, Inc.") or its successors and assigns pursuant to an arbitration proceeding. On April 23, 1993, the previous developer agreed to release the escrowed funds to RHA Inv., Inc. ("RHA"), the successor to Greenhill Project Investors, Inc. In April 1995, RHA paid to the Partnership approximately $721,0000 consisting of the settlement proceeds plus accrued interest. These funds were applied as partial payment toward accrued and unpaid interest due under the High Pointe Club FMB. During April 1995, the Partnership made a loan in the amount of approximately $721,000 to the new owner of the Cypress Run property toward payment of delinquent 1992 and 1993 property taxes. This loan is self-amortizing over three years and carries an 8.5% annual interest rate. This loan was recorded in income as a reduction of interest income from FMBs because the Cypress Run FMB is paying interest on a cash flow basis. On April 1, 1994, Mansion Apartment Project Investors, Inc. ("MAPI"), an affiliate of the Related General Partner who replaced the original developer of The Mansion property, sold the ownership interest in the property to an unrelated third party for $700,000 in cash and the assumption of the obligation under the Partnership's $19,450,000 FMB as well as a $400,000 second mortgage note payable to a lender affiliated with the Related General Partner taken by assignment from the seller. Notwithstanding the assumption of the FMB, the General Partners agreed to forbear on the Partnership's rights and remedies in declaring an interest payment default under the FMB loan documents provided the new borrower made minimum monthly interest payments to the Partnership equal to approximately $81,000 per month (5% per annum) together with payments to a replacement reserve escrow account of approximately $4,500 per month and complied with all other covenants and obligations. Effective October 18, 1994, The Mansion FMB was modified. The modification provides for a base pay rate of 5.23%. In addition, the contingent interest feature has been changed. Under the modified FMB, an additional .386% per year (primary contingent interest) is due and payable from 100% of cash flow above the base pay rate. If not paid, the difference between the minimum pay rate and the primary contingent interest rates is deferred and is payable from future cash flow and sale or refinancing proceeds. Remaining cash flow and sale or refinancing proceeds, if any, are paid to the Partnership in an amount equal to 35% of net cash flow until the borrower receives a 12.5% cumulative return on its investment together with the return of the initial investment. Then, the Partnership is entitled to 50% of remaining cash flow and net sale or refinancing proceeds until the owner has paid interest at a cumulative annual rate of 16%. Notwithstanding The Mansion owner's obligations to pay amounts due as primary contingent interest, the Partnership has agreed, until 1998, that the obligation to pay such amounts will be considered satisfied subject to those amounts being contributed by The Mansion's owner toward certain designated repairs to the property. The Mansion's owner will nevertheless be obligated to pay amounts due from remaining cash flow if available above the primary contingent interest rate. The net cash proceeds from the sale of the ownership interest in The Mansion by MAPI of approximately $105,000 (net of a $400,000 escrow for certain repairs, a $50,000 second mortgage note principal payment, and closing costs), paid to the Partnership to reduce accrued and unpaid interest, was recorded by the Partnership as deferred income and is being amortized as interest income over the remaining life of The Mansion -26- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 3 - Participating First Mortgage Bonds (continued) FMB. The balance of the deferred income relating to The Mansion FMB was approximately $94,000 at December 31, 1995. All other accrued and unpaid interest on The Mansion FMB which previously had been reserved for financial statement purposes was forgiven. In June 1992, the partnership made a $320,000 second mortgage loan to the owner of the property underlying the Cypress Run FMB for the payment of 1991 property taxes. This loan required monthly interest only payments at a rate of 8.5% per annum with the principal due on July 1, 1994. Interest payments on the loan as well as the FMB were current through June 1994; however, due to bankruptcy, the loan remains outstanding and the borrower has been notified of the default (see below for discussion of borrower's bankruptcy filing). An allowance for possible loss was established for this loan in 1993. As a result of the failure to pay 1992 and 1993 real estate taxes, the Partnership initiated steps to enforce its rights and remedies of the Cypress Run property in July 1994. These remedies include acceleration of the loan and a $350,000 draw on an irrevocable letter of credit issued of behalf of the owner of Cypress Run as security relating to obligations under the Rental Performance Agreement. Pursuant to the terms of the bond documents, approximately $348,000 of the proceeds received from the draw on the letter of credit has been recorded as a reduction of the FMB with the balance applied as interest. In response, on July 15, 1994, the owner of the property filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code and continued to operate the property as a debtor-in-possession. The bankruptcy filing operated as a stay against the enforcement of the Partnership's remedies which include foreclosure. At the initial hearing, the court consented, among other things, to allow the Partnership to receive monthly net cash flow generated by the property as its debt service payments for at least the initial 120 days of the proceedings. On November 10, 1994, an Order Modifying Stay together with a Settlement Stipulation was entered by the Court which granted the Partnership relief from the Automatic Stay. This order became effective on March 31, 1995 unless a sale of the property, subject to the Partnership's approval, was closed beforehand. The Partnership continues to receive the monthly net cash flow generated by the property as payment toward debt service. On March 31, 1995, pursuant to the Court Order, ownership of the Cypress Run property was transferred to an affiliate of the Related General Partner. The affiliate has not made an equity investment in the underlying property; however, it will assume the day-to-day responsibilities and obligations of operating the property. Due to the failure to pay 1990 and 1991 property taxes and interest from March to August 1992, the Partnership instituted foreclosure proceedings against Greenway Manor. On July 20, 1992, the Greenway partnership filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Pursuant to a 1992 court order, the receiver paid the Partnership the cash flow remaining after paying past due taxes, paying operating costs and escrowing for 1992 taxes. On June 30, 1993, the court dismissed the bankruptcy proceeding at which time the owner of the property and obligor under the FMB agreed to transfer the deed-in-lieu of foreclosure to an affiliate of the Related General Partner. A $550,000 provision for impairment of assets was recorded during the year ended December 31, 1993 based on an estimate of the value of the underlying property. -27- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 3 - Participating First Mortgage Bonds (continued) On May 31, 1992, Clarendon Hills Investor, Inc. ("CHI"), an affiliate of the Related General Partner who had replaced the developer of the Clarendon Hills property, sold its ownership interest in the property to an unrelated third party (the "Purchaser") for $26,200,000. The Purchaser paid $2,000,000 in cash, assumed the $17,600,000 obligation of the Partnership's FMB and issued a $6,600,000 promissory note to CHI which in turn was assigned to the Partnership. The $6,600,0000 promissory note bears interest at the rate of 8.0% per annum payable in equal monthly installments until December 2003 at which time the entire unpaid principal and interest will be due and payable. The $1,441,209 in net cash proceeds of the sale (net of certain closing costs), paid by CHI to the Partnership to reduce accrued and unpaid interest, was recorded by the Partnership as deferred income and is being amortized as interest income from FMBs over the remaining life of the Clarendon Hills FMB. The balance of the deferred income relating to the Clarendon Hills FMB was approximately $992,000 and $1,117,000 at December 31, 1995 and 1994, respectively. All other accrued and unpaid interest on the Clarendon Hills FMB was forgiven. In connection with the sale of the Clarendon Hills property by CHI, the FMB collateralized by the property was modified to provide for, among other things: the discharge of all accrued and unpaid interest relating to a previous owner (which for financial statement purposes had been fully reserved); a reduction of the base interest rate to 5.52% per annum on the $17,600,000 FMB; and a further reduction of the base interest during the first four years from closing of an amount equal to 50% of the increase in property taxes (if any) over the fiscal 1992 property tax bill resulting solely from this sale (limited to $35,000 per annum). In addition, the contingent interest feature was modified to assign annual cash flow as follows: (1) to pay the Partnership its 5.52% base rate of the FMB and to pay the 8.0% interest owed on the promissory note; (2) to assign the Purchaser the next $220,000 representing return on its investment; and then (3) to pay the Partnership 65% of cash flow until the Partnership receives an interest rate equal to 8.25% per annum on $24,200,000 ($17,600,000 FMB and $6,600,000 promissory note) for each respective year on a non-cumulative basis. Any remaining cash flow is then shared 65% by the Purchaser and 35% by the Partnership. The FMBs for the East Ridge and Martin's Creek properties were modified in 1990 when the equity interest in the properties and the related obligations of the FMBs were sold by an affiliate of the Related General Partner to an unrelated third party. The modifications provide for the minimum pay rate increases from 6.0% per annum in 1990 to 7.5% per annum in March 1996. Beginning in March 1997, the pay rate will be 8.25% per annum. The difference between the minimum interest rate and the original stated rate is deferred and is payable out of available future cash flow. As part of this modification, the Partnership received $950,000 in 13% second mortgage notes with monthly interest and principal payments through December 1996. These notes are also partially secured by letters of credit. Deferred income equal to the amount of the promissory note was recorded in the statements of financial condition. As a result of this transaction, income is realized only as and when the Partnership receives payment on the promissory notes. The balances of both the promissory notes and deferred income was approximately $57,000 and $251,000 at December 31, 1995 and 1994, respectively. There was no loss recorded on this transaction because the valuation allowance previously established for these FMBs was in excess of the concessions granted. At December 31, 1995 and 1994, the allowance relating to debt restructuring was approximately $296,000 and $366,000, respectively. Such allowance is accreted as interest income over the remaining term of the FMBs as long as the estimated fair value of the underlying properties is in excess of the carrying value of the related FMB. During 1991, a forbearance agreement was finalized with the owners of the North Glen property. The General Partners further modified the North Glen forbearance agreement on April 1993 to allow the owner to make debt payments at a pay rate of 6.0% per annum through December 1995 at which time the rate is scheduled to increase to the stated rate of 8.5% per annum. -28- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 3 - Participating First Mortgage Bonds (continued) The pay rate for the Thomas Lake property is scheduled to increase in annual increments to the original stated rate of 8.5% in December 1996. In May 1992, Summit Tax Exempt Funding Corp., an affiliate of the Partnership, made a loan in the amount of $220,000 secured by a second mortgage on the Thomas Lake Property toward the payment of past due property taxes. In January 1993, this loan was assigned to the Partnership as part of the transaction in which the Partnership obtained a new credit facility. The loan requires interest only payments at the Citibank, N.A. prime rate (8.5% at December 31, 1994) plus 2.0% per annum, payable monthly. Principal was due in full on April 15, 1995 but the loan was modified and extended. The modified loan is self-amortizing over thirty months at an 8.5% interest rate. During 1992, a forbearance agreement was finalized with the owner of the Sunset Terrace property. Terms of the agreement call for a reduced pay rate of 7.0% per annum through May 1993 with scheduled annual increments to the original stated rate of 8.0% per annum in May 1996. In 1992, the Partnership loaned approximately $220,000, in the aggregate, to the owners of The Mansion and Cedar Creek properties to enable them to pay property taxes. The loans were self-amortizing over two years with interest at 8.5% per annum beginning June 1992. These loans were recorded in operating results as a reduction in income from assets held for sale in 1992 because the FMBs were paying interest on a cash flow basis. Subsequent principal payments relating to these loans were recorded as income. These loans were fully repaid in the second quarter of 1994. For several properties collateralizing FMBs (High Pointe Club securing an $8,900,000 FMB; Greenway Manor, securing a $12,850,000 FMB and Cedar Creek, securing an $8,100,000 FMB) the original owners of the underlying properties and obligors of the FMBs were replaced by affiliates of the Related General Partner who have not made equity investments in the underlying properties. These entities have assumed the day-to-day responsibilities and obligations of operating the underlying properties. Buyers are being sought who would make equity investments in the underlying properties and assume the nonrecourse obligations for the FMB's. Although these properties are not producing sufficient cash flow to fully service the debt, the Partnership has no present intention to declare a default on these FMBs. A $1,355,000 provision for impairment was recorded during 1993 based on an estimate of the value of the underlying property of one the above FMBs. The difference between the stated interest rates and the rates paid on certain FMBs is not accrued for financial statement purposes, although it is deferred and payable from available future cash flow and sale or refinancing proceeds. Interest income relating to these FMBs of approximately $1,571,000, $1,707,000, and $1,639,000 was not recorded for the years ended December 31, 1995, 1994 and 1993, respectively. The determination as to whether it is in the best interest of the Partnership 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. These factors include, but are not limited to, property performance, owner cooperation and projected legal costs. -29- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 3 - Participating First Mortgage Bonds (continued) The following FMB's interest income exceeded 15% of the Partnership's total revenue for one or more of the three years in the period ended December 31, 1995: 1995 1994 1993 Cypress Run * 17% 17% The Mansion * 16% * *FMB's interest income was less than 15% of the Partnership's total revenue for the year. At December 31, 1995, the estimated fair value of the FMBs was $123,600,000. This estimate is based on the projected cash flows of the FMBs and a market interest rate for similar tax-exempt financing as of December 31, 1995. Fair value estimates are made at a specific point in time, based on relevant market information and information about the financial instrument. This estimate is subjective in nature and involves uncertainties and matters of significant judgment. Changes in assumptions could significantly affect estimates. Due to the property-specific nature of the FMBs and the lack of a ready market for such investments, this fair value estimate does not necessarily represent the amount which the Partnership could realize upon a current sale of its investments. As of December 31, 1995, the Partnership has classified FMBs with a recorded investment totaling $66,795,978 as impaired in accordance with the definition in Note 2.b. A valuation allowance has been provided for FMBs comprising $25,752,428 of this amount; the Partnership has determined that the remainder do not require a valuation allowance at December 31, 1995. Interest income of approximately $4,476,000 was recognized on loans classified as impaired during 1995. The total valuation allowance relating to FMBs was $1,850,000 at December 31, 1995. $1,350,000 of this amount was recorded in 1994 and $500,000 in 1995. The Partnership also maintains a valuation allowance for its promissory notes, which totals $1,276,000 at December 31, 1995 and was recorded in 1993. -30- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 3 - Participating First Mortgage Bonds (continued) Descriptions of the various FMBs owned by the Partnership at December 31, 1995 are as follows:
Average Minimum Stated Interest Rate Pay Rate at Interest Property Location Paid in 1995* December 31,1995* Rate* - -------- -------- ------------- ----------------- ----- The Mansion Independence, MO 5.70%(B) 5.52% 5.23% Martin's Creek Summerville, SC 7.00 (D) 7.25 8.25 East Ridge Mt. Pleasant, SC 6.90 (D) 7.25 8.25 High Pointe Club Harrisburg, PA 6.10 (A) 8.50 Cypress Run Tampa, FL 6.70 (A) 8.50 Thomas Lake Eagan, MN 8.30 (C) 8.25 8.50 North Glen Atlanta, GA 6.00 8.50 8.50 Greenway Manor St. Louis, MO 8.60 (C) 8.50 8.50 Clarendon Hills Hayward, CA 5.52 5.52 5.52 Cedar Creek McKinney, TX 6.60 (A) 8.50 Sunset Terrace Lancaster, CA 6.10 (A) 8.00 Property Call Date Maturity Date Face Amount Carrying Amount - -------- --------- ------------- ----------- --------------- The Mansion Dec. 2004 May 2010 $ 19,450,000 $ 17,600,000 Martin's Creek Mar. 2000 May 2010 7,300,000 7,040,626 East Ridge Mar. 2000 May 2010 8,700,000 8,406,902 High Pointe Club June 1998 June 2006 8,900,000 7,545,000 Cypress Run Aug. 1998 Aug. 2006 15,402,428 15,402,428 Thomas Lake Aug. 1998 Aug. 2006 12,975,000 12,975,000 North Glen Aug. 1998 Aug. 2008 12,400,000 12,400,000 Greenway Manor Oct. 1998 Sept. 2006 12,850,000 12,300,000 Clarendon Hills Dec. 2003 Dec. 2003 17,600,000 17,600,000 Cedar Creek Dec. 1998 Dec. 2006 8,100,000 7,798,550 Sunset Terrace Feb. 1999 Feb. 2007 10,350,000 10,350,000 ------------ ------------ $134,027,428 129,418,506 ============ Less: Allowance for loss on impairment of assets (1,850,000) ------------ Carrying Amount $127,568,506 ============
*The rate paid represents the interest recorded by the Partnership while the stated 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) Pay rate is based on the net cash flow generated by the property. (B) Includes contingent interest paid during the year ended December 31, 1995. (C) Includes receipt of deferred base interest related to prior periods. (D) The actual pay rate is adjusted as of the property's fiscal year-end based on audited financials to no less than the minimum pay rate. -31- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 4 - Loan Payable On January 15, 1993, the Partnership entered into a loan agreement with an unaffiliated lender for a $15,000,000 credit facility with a maturity date of January 14, 1998 and an option to extend for two years for an additional fee. The debt service requirements include monthly interest only payments with a variable interest rate equal to the 30-day commercial paper interest rate (5.85% and 5.90% at December 31, 1995 and 1994, respectively plus 4.05% with principal due at maturity. The facility is collateralized by a pledge of the FMBs and associated collateral of East Ridge, Martin's Creek, The Mansion, Thomas Lake and Sunset Terrace. The initial proceeds from this facility were used to repay a $10,000,000 credit facility guaranteed by the Partnership, to repay a $3,000,000 noninterest-bearing working capital loan made to the Partnership from the Related General Partner and to pay associated closing costs. The $10,000,000 credit facility had been used to pay for costs incurred to complete construction of the properties securing the High Pointe Club and Clarendon Hills FMBs and to fund a loan toward the payment of property taxes on the Thomas Lake property. The $3,000,000 working capital loan was used to supplement distributions commencing with the fourth quarter 1988 distribution. The unused portion of the Partnership's $15,000,000 credit facility is to be used for future working capital requirements and other cash requirements, as necessary, subject to the approval of the lender. In conjunction with the Partnership's credit facility and the repayment of the previously existing $10,000,000 credit facility, the Partnership was assigned nonrecourse notes in the amount of $6,600,000, $3,180,000 and $220,000 from the Clarendon Hills, High Pointe Club and Thomas Lake properties, respectively. The Clarendon Hills promissory note, secured by a deed of trust, requires monthly interest only payments of 8.0% per annum with the principal due on December 1, 2003. The unsecured High Pointe Club note also requires monthly interest only payments of 8.0% per annum with the principal due on December 31, 2003. Since the High Pointe Club property is paying interest on a cash flow basis, interest on the promissory note is only recorded when cash flow is received in excess of the stated rate. No interest on the High Pointe Club promissory note has been received or recorded through December 31, 1995. The assigned High Pointe Club note is subordinate to the High Pointe Club FMB and has been fully reserved. The Thomas Lake promissory note in the principal amount of $220,000, which is secured by a second mortgage on the property, matured in April 1995 and was modified and extended. The modified loan is self-amortizing over thirty months at an 8.5% interest rate. Clarendon Hills and Thomas Lake promissory notes are current on the interest payments through December 31, 1995. -32- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 5 - Income Taxes Following is a reconciliation of net income for financial statement purposes with net income for Federal income tax reporting purposes:
1995 1994 1993 ----------- ----------- ----------- Net income per financial statements $ 5,969,215 $ 5,685,890 $ 4,135,774 Provision for loss on impairment of assets 500,000 1,350,000 1,905,000 Provision for uncollectible receivable 0 0 830,000 Uncollected interest on FMBs 1,570,781 1,707,305 1,693,376 Property tax loan deferred for tax reporting purposes, net 0 0 325,969 Nondeductible interest expense 374,452 311,255 247,524 Uncollected interest on promissory notes 254,400 254,400 243,248 Amortization of bond selection fees 150,055 150,056 150,056 Amortization of valuation allowance on FMBs (130,001) (130,012) (130,012) Loss from debt restructure 0 (3,632,747) 0 Other, net (84,697) (196,913) (224,618) ----------- ----------- ----------- Net income for tax purposes $ 8,604,205 $ 5,499,234 $ 9,176,317 =========== =========== ===========
Net income for tax purposes is generally exempt from Federal income tax. The differences between the tax and book bases of partners' capital are primarily attributable to the cumulative effect of the book to tax income adjustments and the recording of distributions. Effective October 1, 1995 the Related General Partner has assumed from PBP, the responsibilities and duties of the Tax Matters Partner as defined in the Partnership Agreement. -33- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 6 - Related Parties The General Partners and their affiliates perform services for the Partnership which include, but are 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 receive reimbursements for costs incurred in connection with these services, the amount of which is limited by the provisions of the Partnership Agreement. The costs and expenses were:
1995 1994 1993 ---------- ---------- ---------- Prudential-Bache Properties, Inc. and affiliates General and administrative $ 93,392 $ 93,000 $ 108,729 Management fee 335,937 335,937 335,937 ---------- ---------- ---------- 429,329 428,937 444,666 ---------- ---------- ---------- Related Tax Exempt Bond Associates, Inc. and affiliates General and administrative 39,723 28,246 41,427 Management fee 335,938 335,938 335,938 Loan servicing fees 335,068 335,938 335,938 ---------- ---------- ---------- 710,729 700,122 713,303 ---------- ---------- ---------- $1,140,058 $1,129,059 $1,157,969 ========== ========== ==========
The General Partners are paid, in aggregate, an annual management fee equal to .5% of the total invested assets (which equals the original face amount of the total FMBs). An affiliate of the Related General Partner receives loan servicing fees in the amount of .25% per annum of the principal amount outstanding on mortgage loans serviced by the affiliate. A division of Prudential Securities Incorporated ("PSI"), an affiliate of PBP, is responsible for the purchase, sale, and safekeeping of the Partnership's temporary investments. This account is maintained in accordance with the Partnership Agreement. In addition, PSI owns 2,600 BUC$ at December 31, 1995. Several executive officers and directors of the Related General Partner own less than 1% of the outstanding BUC$. -34- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 1995, 1994 AND 1993 NOTE 7 - Contingencies On or about October 18, 1993, a putative class action, captioned Kinnes et al. v. Prudential Securities Group, Inc. et al. (93 Civ. 654), was filed in the United States District Court for the District of Arizona, purportedly on behalf of investors in the Partnership against the Partnership, PBP, PSI and a number of other defendants. On November 16, 1993, a putative class action captioned Connelly et al. v. Prudential-Bache Securities Inc. et al. (93 Civ. 713), was filed in the United States District Court for the District of Arizona, purportedly on behalf of investors in the Partnership against the Partnership, PBP, Prudential Securities Incorporated and a number of other defendants. On January 3, 1992, a putative class action, captioned Levine v. Prudential-Bache Properties Inc. et al. (92 Civ. 52), was filed in the United States District Court for the Northern District of Illinois purportedly on behalf of investors in the Partnership against the General Partners, PSI and a number of other defendants. Subsequently the Related General Partner exited the Levine litigation by way of settlement. By order dated April 14, 1994, the Judicial Panel on Multidistrict Litigation transferred the Kinnes case, by order dated May 4, 1994, the Connelly case, and by order dated July 13, 1994, the Levine case, to a single judge of the United States District Court for the Southern District of New York and consolidated for pretrial proceedings under the caption In re Prudential Securities Incorporated Limited Partnerships Litigation (MDL Docket No. 1005). On June 8, 1994 plaintiffs in the transferred cases filed a complaint that consolidated the previously filed complaints and named as defendants, among others, PSI, certain of its present and former employees and the General Partners. The Partnership was not named a defendant in the consolidated complaint, but the name of the Partnership was listed as being among the limited partnerships at issue in the case. On August 9, 1995 PBP, PSI and other Prudential defendants entered into a Stipulation and Agreement of Partial Compromise and Settlement with legal counsel representing plaintiffs in the consolidated actions. The court preliminarily approved the settlement agreement by order dated August 29, 1995 and, following a hearing held November 17, 1995, found that the agreement was fair, reasonable, adequate and in the best interests of the plaintiff class. The court gave final approval to the settlement, certified a class of purchasers of specific limited partnerships, including the Partnership, released all settled claims by members of the class against the PSI settling defendants and permanently barred and enjoined class members from instituting, commencing or prosecuting any settled claim against the released parties. The full amount due under the settlement agreement has been paid by PSI. The consolidated action remains pending against the Related General Partner and certain of its affiliates. The Related General Partner believes it has meritorious defenses to the consolidated complaint and intended to vigorously defend against this action. -35- NOTE 8 - Selected Quarterly Financial Data (unaudited)
1995 Quarter ended ------------------------------------------------- March 31 June 30 September 30 December 31 ---------- ---------- ---------- ---------- Interest income from participating first mortgage bonds $2,359,498 $2,320,794 $2,274,988 $2,291,156 ========== ========== ========== ========== Provision for loss on impairment of assets $ 0 $ 0 $ 0 $ 500,000 ========== ========== ========== ========== Net income $1,689,483 $1,562,255 $1,590,145 $1,127,332 ========== ========== ========== ========== Net income per BUC $ 0.21 $ 0.19 $ 0.20 $ 0.14 ========== ========== ========== ========== 1994 Quarter ended ------------------------------------------------- March 31 June 30 September 30 December 31 ---------- ---------- ---------- ---------- Interest income from participating first mortgage bonds $2,413,662 $2,399,131 $2,148,302 $2,415,695 ========== ========== ========== ========== Provision for loss on impairment of assets $ 0 $ 0 $ 0 $1,350,000 ========== ========== ========== ========== Net income $1,914,411 $1,870,368 $1,594,240 $ 306,871 ========== ========== ========== ========== Net income per BUC $ 0.24 $ 0.23 $ 0.20 $ 0.04 ========== ========== ========== ==========
NOTE 9 - Subsequent Events In February 1996, distributions of approximately $1,660,000 and $34,000 were paid to the BUC$holders and General Partners, respectively, for the quarter ended December 31, 1995. -36- Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. PART III Item 10. Directors and Executive Officers of the Registrant. The Registrant has no directors or executive officers. The Registrant's affairs are managed and controlled by the General Partners. Certain information concerning the directors and officers of the General Partners are set forth below. The Related General Partner assumed the responsibility of the Tax Matters Partner as of October 1, 1995. Prudential-Bache Properties, Inc. PBP and its directors and executive officers, and any persons holding more than ten percent of the Registrant's BUC$ are required to report their initial ownership of such BUC$ and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4 and 5. Such executive officers, directors and persons who own greater than ten percent of the Registrant's BUC$ are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. All of these filing requirements were satisfied on a timely basis for the current year. In making these disclosures, the Registrant has relied solely on written representations of PBP's directors and executive officers and persons who own greater than ten percent of the Registrant's BUC$ or copies of the reports they have filed with the Securities and Exchange Commission during and with respect to its most recent fiscal year. The directors and executive officers of PBP with regard to managing the Registrant are as follows:
Name Position ---- -------- Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the Board of Directors and Director Barbara J. Brooks Vice President-Finance and Chief Financial Officer Eugene D. Burak Vice President Chester A. Piskorowski Vice President Frank W. Giordano Director Nathalie P. Maio Director
THOMAS F. LYNCH, III, age 37, is the President, Chief Executive Officer, Chairman of the Board of Director, and a Director of PBP. He is a Senior Vice President of Prudential Securities Incorporated ("PSI"), an affiliate of PBP. Mr. Lynch also serves in various capacities for other affiliated companies. Mr. Lynch joined PSI in November 1989. BARBARA J. BROOKS, age 47, is the Vice President-Finance and Chief Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in various capacities for other affiliated companies. She has held several positions within PSI since 1983. Ms. Brooks is a certified public accountant. -37- EUGENE D. BURAK, age 50, is a Vice President of PBP. He is a First Vice President of PSI. Prior to joining PSI in September 1995, he was a management consultant for three years and was with Equitable Capital Management Corporation from March 1990 to May 1992. Mr. Burak is a certified public accountant. CHESTER A. PISKOROWSKI, age 52, is a Vice President of PBP. He is a Senior Vice President of PSI and is the Senior Manager of the Specialty Finance Asset Management area. Mr. Piskorowski has held several positions within PSI since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars. FRANK W. GIORDANO, age 53, is a Director of PBP. He is a Senior Vice President of PSI and an Executive Vice President and General Counsel of Prudential Mutual Fund Management, Inc., an affiliate of PSI. Mr. Giordano also serves in various capacities for other affiliated companies. He has been with PSI since July 1967. NATHALIE P. MAIO, age 45, is a Director of PBP. Ms. Maio is a Senior Vice President and Deputy General Counsel of PSI and supervises non-litigative legal work for PSI. She joined the Law Department of PSI in 1983, presently, she also serves in various capacities for other affiliated companies. James M. Kelso ceased to serve as President, Chief Executive Officer, Chairman of the Board of Directors and Director effective June 30, 1995. Effective June 30, 1995, Thomas F. Lynch, III was elected President, Chief Executive Officer, Chairman of the Board of Directors and Director. Robert J. Alexander ceased to serve as Vice President effective August 25, 1995. Eugene D. Burak was elected Vice President effective October 9, 1995. There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers have indefinite terms. The Related General Partner Based on a review of Forms 3 and 4 and amendments thereto furnished to the Registrant pursuant to Rule 16a-3(e) during its most recent fiscal year and Form 5 and amendments thereto furnished to the Registrant with respect to its most recent fiscal year and written representations pursuant to Item 405(b)(2)(i) of Regulation S-K, neither the Related General Partner nor its directors or officers or beneficial owners of more than 10% of the Units, failed to file, on a timely basis, reports required by Section 16(a) of the Exchange Act during the most recent fiscal year. The directors and executive officers of the Related General Partner with respect to the Partnership and their positions with the Related General Partner are as follows: Name Position ---- -------- J. Michael Fried President and Director Stuart J. Boesky Vice President Alan P. Hirmes Vice President Lawrence J. Lipton Treasurer Stephen M. Ross Director Lynn A. McMahon Secretary -38- J. MICHAEL FRIED, 51, is President and a Director of the Related General Partner. Mr. Fried is President, a Director and a principal shareholder of Related Capital Company ("Capital"), a real estate finance and acquisition affiliate of the Related General Partner. In that capacity, he is the chief executive officer of Capital, and is responsible for initiating and directing all of Capital's syndication, finance, acquisition and investor reporting activities. Mr. Fried practiced corporate law in New York City with the law firm of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Capital in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna cum laude; from Long Island University Graduate School with a Master of Science degree in Psychology; and from Michigan State University with a Bachelor of Arts degree in History. STUART J. BOESKY, 39, is a Vice President of the Related General Partner. Mr. Boesky practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined Capital where he presently serves as Managing Director. From 1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow, Richard & Rothstein and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State University School of Law with a Juris Doctor degree. He then received a Master of Law degree in Taxation from Boston University School of Law. ALAN P. HIRMES, 41, is a Vice President of the Related General Partner. Mr. Hirmes has been a Certified Public Accountant in New York since 1978. Prior to joining Capital in October 1983, Mr. Hirmes was employed by Weiner & Co., certified public accountants. Mr. Hirmes is also a Managing Director of Capital. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree. LAWRENCE J. LIPTON, 39, is Treasurer of the Related General Partner. Mr. Lipton has been a Certified Public Accountant in New York since 1989. Mr. Lipton is also Controller of The Related Companies, L.P. ("Related"), an affiliate of Capital. Prior to joining Related in 1991, Mr. Lipton was employed by Deloitte & Touche LLP from 1987-1991. Mr.. Lipton graduated from Rutgers College with a Bachelor of Arts degree and from Baruch College with a Masters of Business Administration degree. STEPHEN M. ROSS, 55, is a Director of the Related General Partner. Mr. Ross is President of The Related Companies, L.P. He graduated from The University of Michigan with a Bachelor of Business Administration degree and from Wayne State University School of Law. Mr. Ross then received a Master of Law degree in taxation from New York University School of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York, where he worked for two large Wall Street investment banking firms in their real estate and corporate finance departments. Mr. Ross formed The Related Companies, Inc. in 1972, to develop, manage, finance and acquire subsidized and conventional apartment developments. To date, The Related Companies, Inc. has developed multi-family properties totaling in excess of 25,000 units, all of which it manages. LYNN A. McMAHON, 40, is Secretary of the Related General Partner. Since 1983, she has served as Assistant to the President of Capital. From 1978 to 1983 she was employed at Sony Corporation of America in the Government Relations Department. There are no family relationships among any of the foregoing directors or officers. All of the foregoing officers and/or directors have indefinite terms. -39- Item 11. Executive Compensation. The Registrant does not pay or accrue any fees, salaries or any other form of compensation to directors and officers of the General Partners for their services. Certain officers and directors of the General Partners receive compensation from affiliates of the General Partners, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the General Partners believe that any compensation attributable to services performed for the Registrant is immaterial. See Item 13 Certain Relationships and Related Transactions for information regarding compensation to the General Partners. Item 12. Security Ownership of Certain Beneficial Owners and Management. As of March 1, 1996, the directors and officers of the Related General Partner directly or indirectly own 99.97% of the voting securities of the Related General Partner; however, no director or officer of either General Partner owns directly or beneficially any interest in the voting securities of PBP. As of March 1, 1996, directors and officers of the Related General Partner own directly or beneficially BUC$ issued by the Registrant as follows: Title of Name of Amount and Nature of Class Directors and Officers Beneficial Ownership Percent of Class - ----- ---------------------- -------------------- ---------------- BUC$ Alan P. Hirmes 1,200 BUC$ * BUC$ J. Michael Fried 25,000 BUC$ * BUC$ Stuart J. Boesky 4,000 BUC$ * ----------- 30,200 BUC$ =========== * Less than 1% of the BUC$ issued by the Registrant As of March 1, 1996, no director or officer of PBP owns directly or beneficially any BUC$ issued by the Registrant. As of March 1, 1996, one BUC$holder beneficially owns more than five percent (5%) of the BUC$ issued by the Registrant. Title of Name and address of Amount and Nature of Class Beneficial Owner Beneficial Ownership Percent of Class - ----- ---------------- -------------------- ---------------- BUC$ Virginia First Savings Bank 510,204 BUC$ 6.45% P.O. Box 2009 Petersburg, VA 23804 Item 13. Certain Relationships and Related Transactions. The Registrant has, and will continue to have, certain relationships with the General Partners and their affiliates. However, there have been no direct financial transactions between the Registrant and the directors or officers of the General Partners. Reference is made to Note 6 to the financial statements in Item 8, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services. -40- PART IV Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K. Sequential Page ---- (a) 1. Financial Statements Independent Auditors' Report Statements of Financial Condition as of December 31, 1995 and 1994 Statements of Income for the years ended December 31, 1995, 1994 and 1993 Statements of Changes in Partners' Capital (Deficit) for the years ended December 31, 1995, 1994 and 1993 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 Notes to Financial Statements (a) 2. Financial Statement Schedules Schedule II-Valuation and Qualifying Accounts and Reserves for the three years ended December 31, 1995 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(a) and 4(a) Partnership Agreement, incorporated by reference to Exhibit A to the Prospectus of Registrant, dated February 19, 1986, filed pursuant to Rule 424(b) under the Securities Act of 1933, File No. 33-2421 3(b) and 4(b) Amended and Restated Certificate of Limited Partnership (incorporated by reference to Exhibit 4 and Registration Statement on Form S-11, File No. 33-2421) 3(c) and 4(c) Amendment No. 1 to the Partnership Agreement, dated October 1, 1995 (filed herewith) 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 Registrants' 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 Registrant's Current Report on Form 8-K dated May 20, 1986) -41- Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K. (continued) Sequential Page ---- 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 Registrant'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 Registrant'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 Registrant'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 Registrant'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 Registrant'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 Registrant'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 Registrant's Current Report on Form 8-K dated December 8, 1986) 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 Registrant'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 Registrant'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 Registrant (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated September 19, 1990) -42- Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K. (continued) Sequential Page ---- 10(m) Note dated September 19, 1990 from the Registrant to River Bank America (incorporated by reference to Exhibit 10(b) in Registrant'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 Registrant (incorporated by reference to Exhibit 10(c) in Registrant'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 Registrant (incorporated by reference to Exhibit 10(d) in Registrant'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 Registrant'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 the Registrant'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 the Registrant'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 the Registrant's Annual report on Form 10-K dated December 31, 1992) 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 the Registrant's Annual Report on Form 10-K dated December 31, 1992) 10(u) Loan Agreement dated as of January 14, 1993 between the Registrant and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(u) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993) 10(v) Pledge and Security Agreement dated as of January 14, 1993 between the Registrant and U.S. West Financial Service, Inc. (incorporated by reference to Exhibit 10(v) in the Registrants's Quarterly Report on Form 10-Q dated June 30, 1993) 10(w) Secured Promissory Note dated January 14, 1993 between the Registrant and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(w) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993) -43- Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K. (continued) Sequential Page ---- 10(x) Promissory Note dated January 15, 1993 between the Registrant and RHA Inc. (incorporated be reference to Exhibit 10(x) in the Registrant'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 the Registrant (incorporated by reference to Exhibit 10(y) in the Registrant'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 the Registrant (incorporated by reference to Exhibit 10(z) in the Registrant'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 the Registrant'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 the Registrant'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 the Registrant's Quarterly Report on Form 10-Q dated March 31, 1994) 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 the Registrant'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 the Registrant's Annual Report on Form 10-K dated December 31, 1994) 27 Financial Data Schedule (filed herewith) (b) Reports on Form 8-K No reports on Form 8-K were filed during the last quarter of the period covered by this report. -44- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Summit Tax Exempt Bond Fund, L.P. By: Prudential-Bache Properties, Inc. A Delaware corporation, General Partner By: Eugene D. Burak Date: March 29, 1996 ------------------------------------ Eugene D. Burak Vice President By: Related Tax Exempt Bond Associates, Inc. A Delaware corporation, General Partner By: Alan P. Hirmes Date: March 29, 1996 ------------------------------------ Alan P. Hirmes Vice President Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with respect to the General Partners) and on the dates indicated. By: Prudential-Bache Properties, Inc. A Delaware corporation, General Partner By: Thomas F. Lynch, III Date: March 29, 1996 ------------------------------------ Thomas F. Lynch, III President, Chief Executive Officer, Chairman of the Board of Directors and Director By: Barbara J. Brooks Date: March 29, 1996 ------------------------------------ Barbara J. Brooks Vice President-Finance and Chief Financial Officer By: Eugene D. Burak Date: March 29, 1996 ------------------------------------ Eugene D. Burak Vice President By: ____________________________________ Date: Frank W. Giordano Director By: Nathalie P. Maio Date: March 29, 1996 ------------------------------------ Nathalie P. Maio Director -45- By: Related Tax Exempt Bond Associates, Inc. A Delaware corporation, General Partner By: J. Michael Fried Date: March 29, 1996 ------------------------------------ J. Michael Fried President and Director By: Alan P. Hirmes Date: March 29, 1996 ------------------------------------ Alan P. Hirmes Vice President By: Lawrence J. Lipton Date: March 29, 1996 ------------------------------------ Lawrence J. Lipton Treasurer By: Stephen M. Ross Date: March 29, 1996 ------------------------------------ Stephen M. Ross Director -46- SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) Schedule II - Valuation and Qualifying Accounts and Reserves Valuation allowance for first mortgage bonds
Additions Additions Deductions (Deductions) Balance at Amounts Amounts Amounts Year ended beginning reserved recovered reclassified Balance at December 31, of year during year during year during year end of year - ------------ ------- ----------- ----------- ----------- ----------- 1995 $1,350,000 $ 500,000 $ 0 $ 0 $1,850,000 1994 0 1,350,000 0 0 1,350,000 1993 0 0 0 0 0 Valuation allowance for uncollectible receivables Additions Additions Deductions (Deductions) Balance at Amounts Amounts Amounts Year ended beginning reserved recovered reclassified Balance at December 31, of year during year during year during year end of year - ------------ ------- ----------- ----------- ----------- ----------- 1995 $ 57,276 $ 0 $ 0 $ 0 $ 57,276 1994 57,276 0 0 0 57,276 1993 57,276 0 0 0 57,276 Valuation allowance for promissory notes Additions Additions Deductions (Deductions) Balance at Amounts Amounts Amounts Year ended beginning reserved recovered reclassified Balance at December 31, of year during year during year during year end of year - ------------ ------- ----------- ----------- ----------- ----------- 1995 $ 1,276,000 $ 0 $ 0 $ 0 $ 1,276,000 1994 1,276,000 0 0 0 1,276,000 1993 0 1,276,000 0 0 1,276,000
EX-99.3(C)&4(C) 2 AMEND. NO. 1 TO AGREEMENT OF LIMITED PARTNERSHIP AMENDMENT NUMBER ONE TO AGREEMENT OF LIMITED PARTNERSHIP OF SUMMIT TAX EXEMPT BOMD FUND, L.P. AMENDMENT NUMBER ONE (this "Amendment"), is made as of October 1, 1995 (the "Effective Date") to the Agreement of Limited Partnership entered into as of the 18th day of December, 1985, and amended as of January 31, 1986 (the "Partnership Agreement") of Summit Tax Exempt Bond Fund, L.P. (the "Partnership"). All capitalized terms used herein shall have the meanings specified in Article One of this Amendment. RECITALS A. The purpose of this amendment is to amend the Partnership Agreement to permit the subsistution of the Related General Partner for Pru-Bache Properties as the "Tax Matters partner." B. The General Partners have agreed that the Related General Partner will assume the responsibilities and duties of the Tax Matters Partner (as defined in Section 2.1 hereof) as of the Effective Date. C. Pursuant to Section 15.2.19(i) of the Partnership Agreement, the General Partners, without consent of the Limited Partners or BUC$ holders, may amend the Partnership Agreement to add to their duties or surrender any right or power granted to them, for the benefit if the Limited Partners and BUC$ holders. D. The General Pertners have determined that the duties of the Tax Matters Partner from Pru-Bache Properties to the Related General Partner is in the best interests of the Limited Partners and BUC$ holders and that the Partnership Agreement be amended to reflect that the Related General Partner is the Tax Matters Partner as of the Effective Date. E. Pursuant to Article 20 of the Partnership Agreement, each Limited Partner has granted to the General Partners a special power of attorney irrevocably making, constituting and appointing and appointing eah of the General Partners as the attorney-in-fact for such Limited Partner, with power and authority to act in his name and on his behalf to execute, acknowledge and swear to the execution, acknowledgement and filing of certain amendments to the Partnership Agreement. Accordingly, the Partnership Agreement is hereby amended as follows: ARTICLE ONE DEFINITIONS 1.1 Definitions. For all purposes of this Amendment, except as otherwise expressly provided or unless the context requires, (i) the terms defined in this Amendment have the meanings assigned to them in this Amendment and include the plural as well as the singular and (ii) all acpitalized terms used in this Amendment but not defined herein have the meanings ascribed to them in the Partnership Agreement. ARTICLE TWO AMENDMENTS 2.1 Amendment. Section 15.9 of the Partnership Agreement is hereby amended as of the Effective Date to reflect that the General Realted Partner is the "Tax Matters Partner." As of the Effective Date, all other references in the Partnership Agreement to the Tax Matters Partner shall mean the Related General Partner. ARTICLE THREE NOTICE 3.1 Counterparts. This Amendment may be executed in counterparts, each of which shall be deemed an original and all of which, when taken together, shall constitute one and the same instrument. 3.2 Effectiveness. The provisions of this Amendment shall be effective as of the Effective Date. 3.3 Conflict. in the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Partnership Agreement, the terms of this Amendment shall govern. in all other respects, the Partnership Agreement, as amended, modified and supplemented hereby, shall remain unchanged and infull force and effect. 3.4 Governing Law. This Amendment shall be governed by and contrued in accordance with the laws of the State of Delaware. -2- IN WITNESS WHEREOF, the undersigned have caused this Amendment to be duly executed as of the date and year first above written. Related Tax Exempt Bond Associates, Inc. By: /S/ ALAN P. HIRMES -------------------------- Name: Alan P. Hirmes Title: Prudential-Bache Properties, Inc. By: /S/ THOMAS F. LYNCH, III -------------------------- Name: Thomas F. Lynch, III Title: President Limited Partners By: Related Tax Exempt Bond Associates, Inc. By: /S/ ALAN P. HIRMES -------------------------- Name: Alan P. Hirmes Title: By: Prudential-Bache Properties, Inc. By: /S/ THOMAS F. LYNCH, III -------------------------- Name: Thomas F. Lynch, III Title: President As attorneys-in-fact for all Limited Partners pursuant to Article 20 of the Partnerhip Agreement -3- EX-27 3 ART. 5 FDS FOR 4TH QUARTER 10-K
5 The Schedule contains summary financial information extracted from the financial statements for Summit Tax Exempt Bond Fund L.P. and is qualified in its entirety by reference to such financial statements 0000786156 Summit Tax Exempt Bond Fund L.P. 1 DEC-31-1995 JAN-01-1995 DEC-31-1995 YEAR 626,391 128,918,506 9,632,879 0 0 0 0 0 139,177,776 1,317,303 13,680,866 0 0 0 124,179,607 139,177,776 0 9,898,082 0 0 2,537,371 0 1,391,496 5,969,215 0 0 0 0 0 5,969,215 .74 0
-----END PRIVACY-ENHANCED MESSAGE-----