UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________________________
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
Commission File No. 1-9029
____________________________________________________
TRUMP'S CASTLE FUNDING, INC.
(Exact Name of Registrant as Specified in its Charter)
New Jersey 11-2739203
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
One Castle Boulevard
Atlantic City, New Jersey 08401
(609) 340-5191
(Address, Including Zip Code and Telephone Number, Including
Area Code of Registrant's Principal Executive Offices)
____________________________________________________
TRUMP'S CASTLE ASSOCIATES
(Exact Name of Registrant as Specified in its Charter)
New Jersey 22-2608486
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
One Castle Boulevard
Atlantic City, New Jersey 08401
(609) 340-5191
(Address, Including Zip Code and Telephone Number, Including
Area Code of Registrant's Principal Executive Offices)
____________________________________________________
(continued on next page)
<PAGE>
(continued from previous page)
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of Each Class which Registered
___________________ _____________________
11-3/4% Mortgage Notes due 2003 American Stock Exchange, Inc.
Increasing Rate Subordinated
Pay-in-Kind Notes due 2005 American Stock Exchange, Inc.
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 Registrants' 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 ]
Indicate by check mark whether the Registrants have filed all
documents and reports required to be filed by Section 12, 13 or 15(d)
of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
Yes X No
_______ _______
Trump's Castle Funding, Inc. meets the conditions set forth in
General Instruction (J) (1) (a) and (b) of Form 10-K and is therefore
filing this Form with the reduced disclosure format.
As of March 15, 1996, there were 200 shares of Trump's Castle
Funding, Inc. Common Stock outstanding. The aggregate market value of
the voting stock of Trump's Castle Funding, Inc. and Trump's Castle
Associates held by non-affiliates of the Registrants is $0.
<PAGE>
FORM 10-K
TABLE OF CONTENTS
Item Page
PART I
Item 1 Description of Business . . . . . . . . . . . . . . . . 1
Item 2 Description of Property . . . . . . . . . . . . . . . . 21
Item 3 Legal Proceedings . . . . . . . . . . . . . . . . . . . 23
Item 4 Submission of Matters to a Vote of Security Holders . . 23
PART II
Item 5 Market for Common Equity and Related
Stockholder Matters. . . . . . . . . . . . . . . . . . 24
Item 6 Selected Consolidated Financial Information . . . . . . 25
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations. . . . . . . . . . 27
Item 8 Financial Statements and Supplementary Data . . . . . . 33
Item 9 Disagreements with Accountants on Accounting and
Financial Disclosure . . . . . . . . . . . . . . . . . 33
PART III
Item 10 Directors and Executive Officers. . . . . . . . . . . . 34
Item 11 Executive Compensation. . . . . . . . . . . . . . . . . 38
Item 12 Security Ownership of Certain Beneficial Owners
and Management . . . . . . . . . . . . . . . . . . . . 42
Item 13 Certain Relationships and Related Transactions. . . . . 43
PART IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . . . . . . 45
<PAGE>
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENTS OF BUSINESS
Trump's Castle Funding, Inc. ("Funding") was incorporated
under the laws of the State of New Jersey in May 1985 and is
wholly-owned by Trump's Castle Associates, a New Jersey general
partnership (the "Partnership"). Funding was formed to serve as a
financing corporation to raise funds for the benefit of the
Partnership. Since Funding has no business operations, its
ability to service its indebtedness is completely dependent upon
funds it receives from the Partnership. Accordingly, the
discussion in this Report relates primarily to the Partnership and
its operations.
The Partnership is owner and operator of Trump's Castle
Casino Resort ("Trump's Castle"), a luxury casino hotel located in
the Marina District of Atlantic City, New Jersey. The partners in
the Partnership are TC/GP, Inc. ("TC/GP"), which has a 37.5%
interest in the Partnership, Donald J. Trump ("Trump"), who has a
61.5% interest in the Partnership, and Trump's Castle Hotel &
Casino, Inc. ("TCHI"), which has a 1% interest in the Partnership.
Trump, by virtue of his ownership of TC/GP and TCHI, is the
beneficial owner of 100% of the common equity interest in the
Partnership, subject to the right of holders of warrants for 50%
of the common stock of TCHI (the "TCHI Warrants") to acquire an
indirect beneficial interest in 0.5% of the common equity interest
in the Partnership.
In December 1993, the Partnership, Funding, and certain
affiliated entities completed a recapitalization of their debt and
equity capitalization (the "Recapitalization"). The purpose of
the Recapitalization was (i) to improve the debt capitalization of
the Partnership and, initially, to decrease its cash charges, (ii)
to provide the holders of the Units, each Unit comprised of $1,000
principal amount of Funding's 9.5% Mortgage Bonds due 1998 (the
"Bonds") and one share of TC/GP common stock, who participated in
the Exchange Offer (as defined below) with a cash payment of $6.19
and securities having a combined principal amount of $905 for each
Unit, and (iii) to provide Trump with beneficial ownership of 100%
of the common equity interests in the Partnership (subject to the
TCHI Warrants).
The Recapitalization was also designed to take advantage of
certain provisions of the Units which were designed to provide
Trump with incentives to cause the Units to be repaid or redeemed
prior to maturity. The Units were issued in connection with a
restructuring (the "Restructuring") of the indebtedness of
Funding, the Partnership and TCHI through a prepackaged plan of
reorganization (the "Plan") under chapter 11 of title 11 of the
United States Code, as amended (the "Bankruptcy Code"), which was
consummated on May 29, 1992. The Plan was designed to alleviate a
liquidity problem which the Partnership began to experience in
1990.
<PAGE> -1-
In June of 1995, the Partnership acquired an option to
acquire at least 92% of Funding's Increasing Rate Subordinate
Pay-in-Kind Notes due 2005 (the "PIK Notes"). The option which
was initially scheduled to expire on December 12, 1995 has been
extended to March 19, 1996 and may be extended until June 21,
1996. The option is exercisable at a price equal to 60% of the
aggregate principal amount and accrued interest of the PIK Notes
delivered upon exercise of the option.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
The Partnership operates in only one industry segment (See
"SELECTED CONSOLIDATED FINANCIAL DATA" below).
(c) NARRATIVE DESCRIPTION OF THE BUSINESS
CASINO HOTEL OPERATIONS. The Partnership owns and operates
Trump's Castle, a luxury casino hotel located in the Marina
District of Atlantic City, New Jersey. Trump's Castle's 73,000
square foot casino, includes 90 table games (including six poker
tables), 2,275 slot machines and simulcast racetrack wagering.
See Item 2 Properties. Management seeks to differentiate Trump's
Castle from other Atlantic City casinos based on the high quality
amenities and services that Trump's Castle provides to its casino
patrons and hotel guests, which is reflected by its "Four Star"
Mobil Travel Guide rating in each of the last five years and by
its "Four Diamond" AAA Motor Club rating.
Over the past three years, Trump's Castle has initiated a
number of new marketing programs designed to focus on attracting
and retaining patrons who tend to wager more frequently and in
larger denominations. Such upper middle market patrons, who
generally wager from $100 to $700 per visit, tend to arrive by
automobile, and are typically more loyal to one casino hotel
property. An important element of Trump's Castle's marketing
approach is the tailoring of promotional offers to the specific
requirements and circumstances of these targeted customers.
Trump's Castle's marketing programs emphasize its easy highway
access and marina location, away from the Boardwalk area. The
Partnership believes that its focus on customer service,
promotional programs, exceptional facility, and geographical
location, make it an attractive alternative to the Atlantic City
Boardwalk casinos.
In addition to target middle and upper-middle market gaming
patrons, Trump's Castle pursues table game patrons who tend to
wager large sums of money. Trump's Castle capitalizes on its
first class facilities, particularly its luxury suite tower, its
marina, and its on-site helipad to attract high-limit table
patrons.
Trump's Castle also capitalizes on the widespread recognition
of the "Trump" name and its association with high quality
amenities and first-class service. To this end, Trump's Castle
provides a broadly diversified gaming and entertainment experience
consistent with the "Trump" name and reputation for quality.
<PAGE> -2-
Casino gaming in Atlantic City is strictly regulated under
the New Jersey Casino Control Act and the regulations promulgated
thereunder (the "Casino Control Act") and other applicable laws,
which affect virtually all aspects of the Partnership's
operations. See "Gaming and Other Laws and Regulations" below.
MARKETING STRATEGY.
GENERAL. Management of the Partnership, under the direction
of Nicholas L. Ribis, the Chief Executive Officer, and Roger P.
Wagner, the President and Chief Operating Officer, have identified
exceptional customer service, an attractive gaming environment,
complimentary services, exciting promotions, entertainment and
special events, and high class facilities, as a means of
establishing Trump's Castle as a desirable alternative to the
Atlantic City Boardwalk casinos.
SERVICE. The Partnership believes that in the past, most
casino services were directed at high rollers and middle market
patrons who wagered at table games. By providing a high level of
service to all patrons, including middle market slot patrons, the
Partnership seeks to foster loyalty among its patrons and repeat
play.
The Partnership continues to initiate new programs that
emphasize exceptional customer service and satisfaction that have
resulted in Trump's Castle receiving the AAA "Four Diamond" rating
to complement its existing "Four Star" Mobil Travel Guide rating.
GAMING ENVIRONMENT. The Partnership continuously monitors
the configuration of the casino floor and the games it offers to
patrons with a view toward making changes and improvements.
Trump's Castle's casino floor was the first in Atlantic City to
feature live poker. As new games have been approved by the New
Jersey Casino Control Commission (the "CCC"), Trump's Castle has
integrated such games into its casino operations to the extent it
deems appropriate.
In recent years, there has been an industry trend towards
fewer table games and more slot machines. For the Atlantic City
casino industry, revenue from slot machines increased from 54.6%
of the industry gaming revenue in 1988 to 68.4% of the industry
gaming revenue in 1995. Trump's Castle experienced an even
greater increase, with slot revenue increasing from 52.5% of
gaming revenue in 1988 to 70.4% of gaming revenue in 1995. In
response to this trend, Trump's Castle has devoted more of its
casino floor space to slot machines and in 1995 replaced 414 of
its slot machines with newer machines. It is anticipated that
another 500 machines with bill acceptors will be added in 1996 to
replace obsolete equipment. Under Trump's Castle's present plans,
the computerized slot tracking and marketing system will continue
to be upgraded, and a variety of improvements will be made to the
casino floor to enhance customer service.
In 1994, the Partnership completed a 3,000 square foot
expansion of its main casino floor space, bringing the total
<PAGE> -3-
casino floor space to 73,000 square feet. This expansion enabled
the Partnership to introduce simulcast racetrack wagering and at
the same time increase the number of slot machines. These changes
were designed to provide the gaming patron with a more complete
gaming experience. In addition, Trump's Castle has also
introduced a separate, non-smoking area on its casino floor.
"COMPING" STRATEGY. In order to compete effectively with
other Atlantic City casino hotels, the Partnership offers
complimentary drinks, meals, room accommodations, and/or travel
arrangements to its patrons ("complimentaries" or "comps"). The
policy at Trump's Castle is to focus promotional activities,
including complimentaries, on middle and upper middle market
"drive-in" patrons who visit Atlantic City frequently and have
proven to be the most profitable market segment.
Additionally, as a result of increased regulatory
flexibility, Trump's Castle has implemented a cash comping policy
to high-end players in order to compete with similar practices in
Las Vegas and at other Atlantic City casinos that cater to
high-end players.
ENTERTAINMENT AND SPECIAL EVENTS. The Partnership pursues a
coordinated program of headline entertainment and special events.
Trump's Castle offers headline entertainment approximately ten
times a year, which, in 1995, included performances by Tom Jones,
Dana Carvey, Steve Lawrence & Eydie Gorme, the Pointer Sisters,
Nancy Sinatra, Connie Francis, Pat Cooper, Sal Richards, the
Neville Brothers, and the Four Tops. Headliners who are scheduled
to appear at Trump's Castle in 1996 include George Carlin, Steve
Lawrence & Eydie Gorme, Jackie Mason, and Frankie Valli. During
1996, Trump's Castle plans to produce a series of revue-style
shows which will run from six to eight weeks at various dates
throughout the year.
As a part of its marketing plan, Trump's Castle offers
special events aimed at its targeted market segments. Trump's
Castle hosts special events on an invitation only basis in an
effort to attract targeted gaming patrons and build loyalty among
existing patrons. These special events include gaming
tournaments, golf tournaments, and theme parties. Headline
entertainment is scheduled so as not to overlap with any of these
special events.
PLAYER DEVELOPMENT AND CASINO HOSTS. The Partnership has
contracts with sales representatives in New Jersey, New York, and
other states to promote Trump's Castle. Trump's Castle has sought
to attract more middle market slot patrons, as well as premium
players, through its "junket" marketing operations, which involve
attracting groups of patrons by providing airfare, gifts, and room
accommodations.
Trump's Castle's casino hosts assist table game patrons, and
Trump's Castle slot sales representatives assist slot patrons on
the casino floor, make room and dinner reservations, and provide
general assistance. Slot sales representatives also solicit
<PAGE> -4-
Castle Card (the frequent player identification slot card)
sign-ups in order to increase the Partnership's marketing base.
PROMOTIONAL ACTIVITIES. The Castle Card constitutes a key
element in Trump's Castle's direct marketing program. Slot
machine players are encouraged to register for and utilize their
personalized Castle Card to earn various complimentaries based
upon their level of play. The Castle Card is inserted during play
into a card reader attached to the slot machine for use in
computerized rating systems. These computer systems record data
about the cardholder, including playing preferences, frequency and
denomination of play, and the amount of gaming revenues produced.
Slot sales and management personnel are able to monitor the
identity and location of the cardholder and the frequency and
denomination of slot play. They also use this information to
provide attentive service to the cardholder on the casino floor.
Trump's Castle designs promotional offers, conveyed via
direct mail and telemarketing, to patrons expected to provide
revenues based upon their historical gaming patterns. Such
information is gathered on slot wagering by the Castle Card and on
table wagering by the casino games supervisor. Promotional
activities include the mailing of vouchers for complimentary slot
play and table game wagers. Trump's Castle also utilizes a
special events calendar (e.g., theme parties, sweepstakes, and
special competitions) to promote its gaming operations.
As a special bonus to high-end players, Trump's Castle offers
three clubs for the exclusive use of select customers: The Trump
Club for premium table game players, the Marina Club for loyal
slot players, and the Yacht Club for preferred table games and
slot players.
CREDIT POLICY
Historically, Trump's Castle has extended credit on a
discretionary basis to certain qualified patrons. For the years
ended December 31, 1994 and 1995, credit play at Trump's Castle as
a percentage of total dollars wagered was approximately 31.4% and
30%, respectively. In recent years, Trump's Castle has imposed
stricter standards on applications for new or additional credit.
This however, has been offset by Trump's Castle's success in
attracting premium table games patrons, who in general, tend to
use a higher percentage of credit in their wagering.
BUS PROGRAM
Trump's Castle has a bus program which transports
approximately 1,200 gaming patrons per day during the week and 800
per day on the weekends. The Partnership's bus program offers
incentives and discounts to certain scheduled and chartered bus
customers. Based on historical surveys, the Partnership has
determined that gaming patrons who arrive by scheduled bus lines
as opposed to special charter or who travel distances of 60 miles
or more are more likely to create higher gaming revenue for
Trump's Castle. Accordingly, Trump's Castle's marketing efforts
are focused on such bus patrons.
<PAGE> -5-
ATLANTIC CITY MARKET
Gaming in Atlantic City started in May 1978 when the first
casino hotel opened for business. Since 1978, gaming in Atlantic
City has grown from one casino to 12 casinos at the beginning of
1995, with approximately $3.8 billion of casino industry revenue
generated in 1995. Gaming revenue for all Atlantic City casino
hotels has increased approximately 1.3%, 7.5%, 2.6%, 4.0%, and
9.5% during 1991, 1992, 1993, 1994, and 1995, respectively (in
each case as compared to the prior year).
Atlantic City is near many densely populated metropolitan
areas. The primary area served by Atlantic City casino hotels is
the corridor that extends from Washington, D.C. to Boston, and
includes New York City and Philadelphia. Within this primary
area, Atlantic City may be reached by automobile or bus.
Principal arteries lead into Atlantic City from the metropolitan
New York area and from the Baltimore/Washington, DC. area, both of
which are approximately three hours away by automobile. Atlantic
City can also be reached by air and rail transportation, although
most patrons arrive by automobile or bus.
Historically, Atlantic City has suffered from inadequate rail
and air transportation. As a result, a majority of Atlantic City
gaming patrons travel from the mid-atlantic and northeast regions
of the United States by automobile or bus. Rail service to
Atlantic City has recently been improved with the introduction of
Amtrak express service to and from Philadelphia and New York City.
An expansion of the Atlantic City International Airport (located
approximately 12 miles from Atlantic City) to handle large airline
carriers and large passenger jets was completed in 1993. Despite
the expansion of the Atlantic City International Airport, access
to Atlantic City by air is still limited by a lack of regularly
scheduled flights and by inadequate terminal facilities. The lack
of adequate transportation infrastructure has limited the
expansion of the Atlantic City gaming industry's geographic patron
base and the attractiveness of Atlantic City to major conventions.
In February of 1993, the State of New Jersey commenced
construction of a new $290 million convention center (the
"Convention Center") on a 30.5 acre site adjacent to the Atlantic
City Expressway. Targeted for completion in 1997, the new
Convention Center, which is approximately two miles from Trump's
Castle, will house approximately 500,000 square feet of exhibit
space along with 45 meeting rooms totaling nearly 110,000 square
feet. The building will include a 1,600 car underground garage
and an indoor street linking the Convention Center to the existing
Atlantic City Rail Terminal.
The new Convention Center has been designed to serve as the
centerpiece of Atlantic City's renaissance as a favorite meeting
destination for both in- and out-of-state conventions. The State
of New Jersey is also implementing a $125 million capital plan to
upgrade and expand the Atlantic City International Airport.
<PAGE> -6-
Trump's Castle management believes that recent gaming
regulatory reforms will serve to permit future reductions in
operating expenses of casinos in Atlantic City and to increase the
funds available for additional infrastructure development through
the Casino Reinvestment Development Authority (the "CRDA"). Due
primarily to an improved regulatory environment, general
improvement of economic conditions since 1993 and high occupancy
rates, significant investment in the Atlantic City market has been
initiated and/or announced. Bally recently purchased a Boardwalk
lot for $7.5 million, the Sands just completed a major renovation,
and in December of 1994, approval by the CRDA was given to
TropWorld to add 626 hotel rooms and to the Grand for 295 rooms
(both of which are under construction) and the Taj Mahal for 1,280
rooms and a 1,500 space parking garage. Overall, various casinos
in the market have applied to the CRDA for funding to construct
3,400 new hotel rooms. Trump's Castle management believes that
these increases in hotel capacity, together with infrastructure
improvements, will be instrumental in stimulating future revenue
growth in the Atlantic City market. These developments are,
however, likely to result in increased competition.
COMPETITION
Competition in the Atlantic City casino hotel market is
intense. Trump's Castle competes primarily with the other casino
hotels currently located in Atlantic City, including the two other
casino hotels operated by Trump. At present, there are 12 casino
hotels located in Atlantic City, including Trump's Castle, all of
which compete for patrons. In addition, there are several sites
on the Boardwalk and in the Atlantic City Marina District on which
casino hotels could be built in the future, and various
applications for casino licenses have been filed, and
announcements with respect thereto made from time to time. No new
casino hotels have commenced operations in Atlantic City since
1990, although nine of the twelve existing casino hotels are in
the process of expanding their operations or have announced plans
for expansion. Such expansions, if completed, would create
significant new hotel and casino space as well as other amenities.
In addition, Mirage Resorts, Inc., has submitted a proposal to
develop a resort complex, in cooperation with Circus Circus, Inc.
on the "H-Tract" which, as currently proposed, would create 4,000
new hotel rooms, an entertainment concourse, and substantial new
casino space. While Management believes that the addition of
hotel capacity would be beneficial to the Atlantic City market
generally, there can be no assurance that such expansion would not
be materially disadvantageous to Trump's Castle or to the Atlantic
City market generally. There also can be no assurance that the
Atlantic City development projects which are planned or underway
will be completed.
Trump's Castle also competes, or will compete, with
facilities in the northeastern and mid-Atlantic regions of the
United States at which casino gaming or other forms of wagering
are currently, or in the future may be, authorized. To a lesser
extent, Trump's Castle faces competition from gaming facilities
nationwide, including land-based, cruise lines, riverboats, and
dockside casinos located in Colorado, Illinois, Indiana, Iowa,
<PAGE> -7-
Louisiana, Mississippi, Missouri, Nevada, South Dakota, Ontario
(Windsor), Puerto Rico, the Bahamas, and other locations inside
and outside the United States, and from other forms of legalized
gaming in New Jersey and its surrounding states such as lotteries,
horse racing (including off-track betting), jai alai, bingo, and
dog racing, and from illegal wagering of various types. New or
expanded operations by other persons can be expected to increase
competition and could result in the saturation of certain gaming
markets. In September 1995, New York introduced a keno lottery
game, which is played on video terminals that have been set up in
approximately 1,800 bars, restaurants and bowling alleys across
the state.
In addition to competing with other casino hotels in Atlantic
City and elsewhere, Trump's Castle competes directly with the Taj
Mahal and Trump Plaza for gaming patrons, by virtue of their
proximity to each other and the common aspects of certain of their
respective marketing efforts, including use of the "Trump" name.
The profitability of Trump's Castle could be affected by its
proximity to Harrah's, which is owned and operated by a third
party not affiliated with the Partnership. Trump's Castle and
Harrah's are the only casino hotels located in the Marina District
of Atlantic City. Harrah's has recently announced an expansion of
its casino floor and hotel capacity. The profitability of Trump's
Castle could be adversely affected by its proximity to a proposed
resort complex to be developed by Mirage Resorts, Inc. Other than
Harrah's, the remaining Atlantic City casino hotels are located on
the Boardwalk. The Partnership believes that the concentration of
casino hotels on the Boardwalk has resulted in a significant
number of patrons being attracted to that area and away from the
vicinity of Trump's Castle. The Partnership further believes that
the location of Trump's Castle has adversely affected its ability
to attract walk-in patrons.
In 1988, Congress passed the Indian Gaming Regulatory Act
("IGRA"), which requires any state in which casino-style gaming is
permitted (even if only for limited charity purposes) to negotiate
gaming contracts with federally recognized Native American tribes.
Under IGRA, Native American tribes enjoy comparative freedom from
regulation and taxation of gaming operations, which provides them
with an advantage over their competitors, including Trump's
Castle.
In 1991, the Mashantucket Pequot Nation opened a facility in
Ledyard, Connecticut, located at the far eastern portion of such
state, an approximately three-hour drive from New York City and an
approximately two and one-half hour drive from Boston, which
currently offers 24-hour gaming and contains over 3,100 slot
machines. The Mashantucket Pequot Nation has announced various
expansion plans, including its intention to build another casino
in Ledyard together with hotels, restaurants, and a theme park.
In addition, the Mohegan Nation has commenced construction of a
casino resort to be located 10 miles from the Ledyard casino. The
Mohegan Nation resort will be built and managed by Sun
International, an entity headed by a South African investor, is
<PAGE> -8-
scheduled to be as large as the Ledyard casino and is scheduled to
be open in October 1996. There can be no assurance that any
commencement of gaming operations by the Mohegan Nation would not
have a materially adverse impact on Trump's Castle's operations.
A group in New Jersey calling itself the "Ramapough Indians"
has applied to the U.S. Department of the Interior to be Federally
recognized as a Native American tribe, which recognition would
permit it to require the State of New Jersey to negotiate a gaming
compact under the IGRA. In 1993, the Bureau of Indian Affairs
denied the Ramapough Indians Federal recognition. The Ramapough
Indians have appealed the decision. Similarly, a group in
Cumberland County, New Jersey, calling itself the "Nanticoke Lenni
Lenape" tribe has filed a notice of intent with the Bureau of
Indian Affairs seeking formal Federal recognition as a Native
American tribe. Also, it has been reported that a Sussex County,
New Jersey businessman has offered to donate land he owns there to
the Oklahoma-based Lenape/Delaware Indian Nation which originated
in New Jersey and already has Federal recognition but does not
have a reservation in New Jersey. The Lenape/Delaware Indian
Nation has signed an agreement with the town of Wildwood, New
Jersey to open a casino; however, the plan requires Federal and
State approval in order to proceed. In July 1993, the Oneida
Nation opened a casino featuring 24-hour table gaming and
electronic gaming systems, but without slot machines, near
Syracuse, New York, and has announced an intention to open
expanded gaming facilities. Representatives of the St. Regis
Mohawk Nation signed a gaming compact with New York State
officials for the opening of a casino, without slot machines, in
the northern portion of the state close to the Canadian border.
The St. Regis Mohawks have also announced their intent to open a
casino at the Monticello Race Track in the Catskill Mountains
region of New York, however, any Indian gaming operation in the
Catskills is subject to the approval of the Governor of New York.
The Narragansett Nation of Rhode Island, which has Federal
recognition, is negotiating a casino gaming compact with Rhode
Island. The Aquinnah Wampanogas Tribe is seeking to open a casino
in New Bedford, Massachusetts. Other Native American nations are
seeking Federal recognition, land, and negotiation of gaming
compacts in New York, Pennsylvania, Connecticut, and other states
near Atlantic City.
Legislation permitting other forms of casino gaming has been
proposed, from time to time, in various states, including those
bordering New Jersey. Plans to begin operating slot machines at
race tracks in the state of Delaware are underway, including the
slot machines currently operating at the Dover Downs and Delaware
Park race tracks. Six states have presently legalized riverboat
gambling while others are considering its approval, including New
York and Pennsylvania, and New York City is considering a plan
under which it would be the embarking point for gambling cruises
into international waters three miles offshore. Several states
are considering or have approved large scale land-based casinos.
Additionally, since 1993, the gaming space in Las Vegas has
expanded significantly, with additional capacity planned and
currently under construction. The operations of Trump's Castle
<PAGE> -9-
could be adversely affected by such competition, particularly if
casino gaming were permitted in jurisdictions near or elsewhere in
New Jersey or in other states in the Northeast.
In December 1993, the Rhode Island Lottery Commission
approved the addition of slot machine games on video terminals at
Lincoln Greyhound Park and Newport Jai Alai, where poker and
blackjack have been offered for over two years. Currently, casino
gaming, other than Native American gaming, is not allowed in other
areas of New Jersey, Connecticut, New York, or Pennsylvania. On
November 17, 1995, a proposal to allow casino gaming in
Bridgeport, Connecticut, was voted down by that state's Senate.
A New York State Assembly plan has the potential of
legalizing non-Native American gaming in portions of upstate New
York. Essential to this plan is a proposed New York State
constitutional amendment that would legalize gambling. To amend
the New York Constitution, the next elected New York State
Legislature must repass a proposal legalizing gaming and a
statewide referendum, held no sooner than November 1997, must
approve the constitutional amendment.
In addition, legislation has from time to time been
introduced in the New Jersey State Legislature relating to types
of statewide legalized gaming, such as video games with small
wagers. To date, no such legislation, which may require a state
constitutional amendment, has been enacted. The Partnership is
unable to predict whether any such legislation, in New Jersey or
elsewhere, will be enacted or whether, if passed, it would have a
material adverse impact on the Partnership. To the extent that
legalized gaming becomes more prevalent in New Jersey or other
jurisdictions near Atlantic City, competition would intensify.
SEASONALITY. The gaming industry in Atlantic City
traditionally has been seasonal, with its strongest performance
occurring from May through September, with December and January
showing substantial decreases in activity. Revenues have been
significantly higher on Fridays, Saturdays, Sundays, and holidays
than on other days. In addition, in the summer months, Trump's
Castle may be adversely affected by the desire of certain patrons
to wager at a location which is readily accessible to the
Boardwalk.
THE CONFLICTING INTERESTS OF CERTAIN OFFICERS AND DIRECTORS
OF THE PARTNERSHIP AND ITS AFFILIATES
Trump is the beneficial owner of a 40% interest in Trump
Hotels & Casino Resorts, Inc. ("THCR"), which owns Trump Plaza and
a riverboat in Gary, Indiana (the "Gary Riverboat"), and a 50%
beneficial owner of the Taj Mahal, and is the sole owner of Trump
Plaza Management Corp. ("TPM"), an entity that provides
management services to Trump Plaza. Trump and corporations
beneficially owned by Trump have entered into services agreements
with the Other Trump Casinos pursuant to which Trump has agreed to
devote a substantial amount of time to marketing, advertising, and
promotion of the Taj Mahal and Trump Plaza. Trump has a personal
<PAGE> -10-
services agreement with the partnership that owns the Taj Mahal
("TTMA") pursuant to which he receives substantial compensation
based, in part, on the financial results of the Taj Mahal. Under
certain circumstances, Trump could increase his beneficial
interest in the Taj Mahal to 80%. In addition, TPM has a personal
services agreement with the Trump Plaza ("TPA") pursuant to which
it receives an annual fee in equal monthly installments. Trump
has entered into an Executive Agreement with THCR, pursuant to
which he serves as Chairman of the Board of THCR and provides
certain other services in exchange for a salary of $1 million per
year. In addition, Trump has granted to THCR the exclusive right
to utilize his name in connection with casino and gaming
activities and products, subject only to the existing licenses in
favor of the Taj Mahal and the Partnership, and has agreed that
THCR will be the exclusive vehicle for his new gaming ventures.
THCR and the Taj Mahal have recently announced a plan pursuant to
which THCR will acquire all of the outstanding equity interest in
the Taj Mahal, and certain of the debt obligations of the Taj
Mahal and the Plaza will be refinanced. There can be no assurance
as to whether such transaction will be consummated, or if
consummated as to what its effect would be on Trump's Castle.
Trump could under certain circumstances have an incentive to
operate the Other Trump Casinos to the competitive detriment of
the Partnership. However, the Services Agreement entered into
between the Partnership and TC/GP provides that Trump and his
affiliates will not engage in any activity, transaction, or action
which would result in the Other Trump Casinos realizing a
competitive advantage over Trump's Castle. The Other Trump
Casinos compete directly with each other and with other Atlantic
City casino hotels, including Trump's Castle.
Nicholas L. Ribis, the Chief Executive Officer of the
Partnership, is also the Chief Executive Officer of the
partnerships that own the Other Trump Casinos. Robert M. Pickus
and John P. Burke, officers of the Partnership, are also executive
officers of the partnerships that own the Other Trump Casinos. In
addition, Messrs. Trump, Ribis, Pickus, and Burke serve on the
governing bodies of the partnerships that own the Other Trump
Casinos. As a result of Trump's interest in three competing
Atlantic City casinos, the common chief executive officer and
other common officers, a conflict of interest may be deemed to
exist by reason of such persons' access to information and
business opportunities possibly useful to any or all of such
casinos. Although no specific procedures have been devised for
resolving conflicts of interest confronting, or which may
confront, Trump, Ribis, Pickus, and Burke, they have informed the
Partnership that they will not engage in any activity which they
reasonably expect will harm Trump's Castle or is otherwise
inconsistent with their fiduciary obligations to the Partnership.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1995, the Partnership employed
approximately 3,300 full and part time employees for the operation
of Trump's Castle, of whom approximately 1,150 were subject to
collective bargaining agreements. The Partnership's collective
<PAGE> -11-
bargaining agreement with Local No. 54 affiliated with the Hotel
Employees and Restaurant Employees International Union AFL-CIO
expires on September 15, 1999. Such agreement extends to
approximately 1,000 employees. In addition, four other collective
bargaining agreements which expire in 1996 cover approximately 150
maintenance and entertainment employees. The Partnership believes
that its relationships with its employees are satisfactory.
Funding has no employees.
The majority of the Partnership's employees are required to be
registered with or licensed by the CCC pursuant to the Casino
Control Act. Casino employees are subject to more stringent
licensing requirements than non-casino employees, and must meet
applicable standards pertaining to such matters as financial
responsibility, good character, ability, experience, and New Jersey
residency. Such regulations have resulted in significant competition
for employees who meet these requirements.
GAMING AND OTHER LAWS AND REGULATIONS
The following is only a summary of the applicable provisions
of the New Jersey Casino Control Act (the "Casino Control Act")
and certain other laws and regulations. It does not purport to be
a full description thereof and is qualified in its entirety by a
reference to the Casino Control Act and such other laws and
regulations.
In general, the Casino Control Act contains detailed
provisions concerning, among other things: the granting of casino
licenses; the suitability of the approved hotel facility and the
amount of authorized casino space and gaming units permitted
therein; the qualification of natural persons and entities related
to the casino licensee; the licensing and registration of
employees and vendors of casino licensees; rules of the games; the
selling and redeeming of gaming chips; the granting and duration
of credit and the enforceability of gaming debts; management
control procedures, accountability, and cash control methods and
reports to gaming agencies; security standards; the manufacture
and distribution of gaming equipment; equal opportunity for
employees and casino operators, contractors of casino facilities,
and others; and advertising, entertainment, and alcoholic
beverages.
CASINO CONTROL COMMISSION
The ownership and operation of casino hotel facilities in
Atlantic City are the subject of strict state regulation under the
Casino Control Act. The New Jersey Casino Control Commission (the
"CCC") is empowered to regulate a wide spectrum of gaming and non-
gaming related activities and to approve the form of ownership and
financial structure of not only a casino licensee, but also its
entity qualifiers and intermediary and holding companies.
<PAGE> -12-
OPERATING LICENSES
The Partnership was issued its initial casino license in June
1985. During June 1995, the CCC renewed the Partnership's casino
license and approved Trump as a natural person qualifier through
May 1999. No assurance can be given that the CCC will renew the
Partnership's casino license upon its scheduled expiration or, if
it does so, as to the conditions it may impose, if any, with
respect thereto.
CASINO LICENSE
No casino hotel facility may operate unless the appropriate
license and approvals are obtained from the CCC, which has broad
discretion with regard to the issuance, renewal, revocation, and
suspension of such licenses and approvals, which are
non-transferable. The qualification criteria with respect to the
holder of a casino license include its financial stability,
integrity and responsibility; the integrity and adequacy of its
financial resources which bear any relation to the casino project;
its good character, honesty, and integrity; and the sufficiency of
its business ability and casino experience to establish the
likelihood of a successful, efficient casino operation. The
casino license held by the Partnership is renewable for periods of
up to four years. The CCC may reopen licensing hearings at any
time, and must reopen a licensing hearing at the request of the
Division of Gaming Enforcement (the "Division").
To be considered financially stable, a licensee must
demonstrate the following ability: to pay winning wagers when
due; to achieve a gross operating profit; to pay all local, state,
and federal taxes when due; to make necessary capital and
maintenance expenditures to insure that it has a superior
first-class facility, and; to pay, exchange, refinance or extend
debts which will mature and become due and payable during the
license term.
In the event a licensee fails to demonstrate financial
stability, the CCC may take such action as it deems necessary to
fulfill the purposes of the Casino Control Act and protect the
public interest, including: issuing conditional licenses,
approvals, or determinations; establishing an appropriate cure
period; imposing reporting requirements; placing restrictions on
the transfer of cash or the assumption of liability; requiring
reasonable reserves or trust accounts; denying licensure; or
appointing a conservator. See "Conservatorship" below.
The Partnership believes that it has adequate financial
resources to meet the financial stability requirements of the CCC
for the foreseeable future.
Pursuant to the Casino Control Act, CCC regulations and
precedent, no entity may hold a casino license unless each
officer, director, principal employee, person who directly or
indirectly holds any beneficial interest or ownership in the
licensee, each person who in the opinion of the CCC has the
<PAGE> -13-
ability to control or elect a majority of the board of directors
of the licensee (other than a banking or other licensed lending
institution which makes a loan or holds a mortgage or other lien
acquired in the ordinary course of business), and any lender, whom
the CCC may consider appropriate, obtains and maintains
qualification approval from the CCC. Qualification approval means
qualification requirements as a casino key employee. See
"Employees" below. Pursuant to conditions of the Partnership's
casino license, payments by the Partnership to or for the benefit
of any related entity or any partner are subject to prior CCC
approval.
CONTROL PERSONS
An entity qualifier or intermediary or holding company, such
as Funding, is required to register with the CCC and meet the same
basic standards for approval as a casino licensee; provided,
however, that the CCC, with the concurrence of the Director of the
Division, may waive compliance by a publicly-traded corporate
holding company which meets certain requirements.
FINANCIAL SOURCES
The CCC may require all financial backers, investors,
mortgagees, bond holders and holders of notes or other evidence of
indebtedness, either in effect or proposed, which bears any
relation to the casino project, publicly-traded securities of an
entity which holds a casino license or is an entity qualifier,
subsidiary, or holding company of a casino licensee (a "Regulated
Company"), to qualify as financial sources. In the past, the CCC
has waived the qualification requirement for holders of less than
15% of Funding's 11-3/4% Mortgage Notes due 2003 (the "Mortgage
Notes") and PIK Notes so long as the bonds remained widely-
distributed and freely-traded in the public market and the holder
had no ability to control the casino licensee. The CCC has, in
the past, ruled that the publicly-traded Mortgage Notes and PIK
Notes are widely-distributed and freely-traded in the public
market. The CCC may require holders of less than 15% of a series
of debt to qualify as financial sources even if not active in the
management of the issuer or the casino licensee.
INSTITUTIONAL INVESTORS
An institutional investor ("Institutional Investor") is
defined by the Casino Control Act as any retirement fund
administered by a public agency for the exclusive benefit of
federal, state, or local public employees; investment company
registered under the Investment Company Act of 1940; collective
investment trust organized by banks under Part Nine of the Rules
of the Comptroller of the Currency; closed end investment trust;
chartered or licensed life insurance company or property and
casualty insurance company; banking and other chartered or
licensed lending institution; investment advisor registered under
the Investment Advisers Act of 1940; and such other persons as the
CCC may determine for reasons consistent with the policies of the
Casino Control Act.
<PAGE> -14-
An Institutional Investor may be granted a waiver by the CCC
from financial source or other qualification requirements
applicable to a holder of publicly-traded securities, in the
absence of a prima facie showing by the Division that there is any
cause to believe that the holder may be found unqualified, on the
basis of CCC findings that: (a) its holdings were purchased for
investment purposes only, and upon request by the CCC, it files a
certified statement to the effect that it has no intention of
influencing or affecting the affairs of the issuer, the casino
licensee or its holding or intermediary companies; provided,
however, that the Institutional Investor will be permitted to vote
on matters put to the vote of the outstanding security holders;
and (b) if (i) the securities are debt securities of a casino
licensee's holding or intermediary companies or another subsidiary
company of the casino licensee's holding or intermediary companies
which is related in any way to the financial of the casino
licensee and represent either (x) 20% or less of the total
outstanding debt of the company, or (y) 50% or less of any issue
of outstanding debt of the company, (ii) the securities are equity
securities of a casino licensee's holding or intermediary
companies, or (iii) if the securities so held exceed such
percentages, upon a showing of good cause. There can be no
assurance, however, that the CCC will make such findings or grant
such waiver, and in any event, an Institutional Investor may be
required to produce for the CCC or the Division upon request, any
document or information which bears any relation to such debt or
equity securities.
Generally, the CCC requires each institutional holder seeking
waiver of qualification to execute a certification to the effect
that (i) the holder has reviewed the definition of Institutional
Investor under the Casino Control Act and believes that it meets
the definition of Institutional Investor; (ii) the holder
purchased the securities for investment purposes only and holds
them in the ordinary course of business; (iii) the holder has no
involvement in the business activities of, and no intention of
influencing or affecting the affairs of the issuer, the casino
licensee, or any affiliate; and (iv) if the holder subsequently
determines to influence or affect the affairs of the issuer, the
casino licensee or any affiliate, it shall provide not less than
30 days' prior notice of such intent and shall file with the CCC
an application for qualification before taking any such action.
If an Institutional Investor changes its investment intent, or if
the CCC finds reasonable cause to believe that it may be found
unqualified, the Institutional Investor may take no action with
respect to the security holdings, other than to divest itself of
such holdings, until it has applied for interim casino
authorization (see "Interim Casino Authorization" below) and has
executed a trust agreement pursuant to such an application.
OWNERSHIP AND TRANSFER OF SECURITIES
The Casino Control Act imposes certain restrictions upon the
issuance, ownership, and transfer of securities of a Regulated
Company, and defines the term "security" to include instruments
which evidence a direct or indirect beneficial ownership or
<PAGE> -15-
creditor interest in a Regulated Company including, but not
limited to, mortgages, debentures, security agreements, notes, and
warrants. Funding and the Partnership are each deemed to be a
Regulated Company, and instruments evidencing a beneficial
ownership or creditor interest therein, including partnership
interest, are deemed to be the securities of a Regulated Company.
If the CCC finds that a holder of such securities is not
qualified under the Casino Control Act, it has the right to take
any remedial action it may deem appropriate including the right to
force divestiture by such disqualified holder of such securities.
In the event that certain disqualified holders fail to divest
themselves of such securities, the CCC has the power to revoke or
suspend the casino license affiliated with the Regulated Company
which issued the securities. If a holder is found unqualified, it
is unlawful for the holder (i) to exercise, directly or through
any trustee or nominee, any right conferred by such securities, or
(ii) to receive any dividends or interest upon any such securities
or any remuneration, in any form, from its affiliated casino
licensee for services rendered or otherwise.
Under the terms of the indentures pursuant to which the
11-1/2% Senior Secured Notes due 2000 (the "Senior Notes"),
Mortgage Notes, and PIK Notes were issued, if a holder of such
securities does not qualify under the Casino Control Act when
required to do so, such holder must dispose of its interest in
such securities within thirty days, and the Partnership may redeem
such securities at the lesser of the Outstanding Amount or Fair
Market Value (as defined).
With respect to non-publicly-traded securities, the Casino
Control Act and CCC Regulations require that the corporate charter
or partnership agreement of a Regulated Company establish a right
in the CCC of prior approval with regard to transfers of
securities, shares and other interests and an absolute right in
the Regulated Company to repurchase at the market price or the
purchase price, whichever is the lesser, any such security, share,
or other interest in the event that the CCC disapproves a
transfer. With respect to publicly-traded securities, such
corporate charter or partnership agreement is required to
establish that any such securities of the entity are held subject
to the conditions that, if a holder thereof is found to be
disqualified by the CCC, such holder shall dispose of such
securities.
Whenever any person enters into a contract to transfer any
property which relates to an ongoing casino operation, including a
security of the casino licensee or a holding or intermediary
company or entity qualifier, under circumstances which would
require that the transferee obtain licensure or be qualified under
the Casino Control Act, and that person is not already licensed or
qualified, the transferee is required to apply for interim
authorization. Furthermore, the closing or settlement date in the
contract may not be earlier than the 12th day after the submission
of a complete application for licensure or qualification together
with a fully executed trust agreement in a form approved by the
<PAGE> -16-
CCC. If, after the report of the Division and a hearing by the
CCC, the CCC grants interim authorization, the property will be
subject to a trust. If the CCC denies interim authorization, the
contract may not close or settle until the CCC makes as
determination on the qualifications of the applicant. If the CCC
denies qualification, the contract will be terminated for all
purposes, and there will be no liability on the part of the
transferor.
If, as the result of a transfer of publicly-traded securities
of a Regulated Company or a financing entity of a Regulated
Company, any person is required to qualify under the Casino
Control Act, that person is required to file an application for
licensure or qualification within 30 days after the CCC determines
that qualification is required or declines to waive qualification.
The application must include a fully executed trust agreement in a
form approved by the CCC, or in the alternative, within 120 days
after the CCC determines that qualification is required, the
person whose qualification is required must divest such securities
as the CCC may require in order to remove the need to qualify.
The CCC may grant interim casino authorization where it finds
by clear and convincing evidence that: 1) statements of
compliance have been issued pursuant to the Casino Control Act; 2)
the casino hotel is an approved hotel in accordance with the
Casino Control Act; 3) the trustee satisfies qualification
criteria applicable to key casino employees, except for residency
and casino experience; and 4) interim operation will best serve
the interests of the public.
When the CCC finds the applicant qualified, the trust will
terminate. If the CCC denies qualification to a person who has
received interim casino authorization, the trustee is required to
endeavor, and is authorized, to sell, assign, convey, or otherwise
dispose of the property subject to the trust to such persons who
are licensed or qualified or shall themselves obtain interim
casino authorization.
Where a holder of publicly-traded securities is required, in
applying for qualification as a financial source or qualifier, to
transfer such securities to a trust in application for interim
casino authorization and the CCC thereafter orders that the trust
become operative: (a) during the time the trust is operative, the
holder may not participate in the earnings of the casino hotel or
receive any return on its investment or debt security holdings;
and (b) after disposition, if any, of the securities by the
trustee, proceeds distributed to the unqualified holder may not
exceed the lower of their actual cost to the unqualified holder or
their value calculated as if the investment had been made on the
date the trust became operative.
APPROVED HOTEL FACILITIES
The CCC may permit a licensee, such as the Partnership, to
increase its casino space if the licensee agrees to add a
prescribed number of qualifying sleeping units within two years
<PAGE> -17-
after the commencement of gaming operations in the additional
casino space. However, if the casino licensee does not fulfill
such agreement due to conditions within its control, the licensee
will be required to close the additional casino space, or any
portion thereof that the CCC determines should be closed.
LICENSE FEES
The CCC is authorized to establish annual fees for the
renewal of casino licenses. The renewal fee is based upon the
cost of maintaining control and regulatory activities prescribed
by the Casino Control Act, and may not be less than $200,000 for a
four-year casino license. Additionally, casino licenses are
subject to potential assessments to fund any annual operating
deficits incurred by the CCC or the Division. There is also an
annual license fee of $500 for each slot machine maintained for
use or in use in any casino. For the years ended December 31,
1993, 1994, and 1995, the Partnership recorded license,
investigation, and other fees totaling approximately $3.4 million,
$3.3 million, and $3.8 million, respectively.
GROSS REVENUE TAX
Each casino licensee is also required to pay an annual tax of
8% on its gross casino revenues. For the years ended December 31,
1993, 1994, and 1995, the Partnership's gross revenue tax was
approximately $19.7 million, $20.9 million, and $21.9 million,
respectively.
AGREEMENT FOR MANAGEMENT OF CASINO
Each party to an agreement for the management of a casino is
required to hold a casino license, and the party who is to manage
the casino must own at least 10% of all the outstanding equity
securities of the casino licensee. Such an agreement shall; (i)
provide for the complete management of the casino; (ii) provide
for the unrestricted power to direct the casino operations; and
(iii) provide for a term long enough to ensure the reasonable
continuity, stability and independence and management of the
casino.
INVESTMENT ALTERNATIVE TAX OBLIGATIONS
An investment alternative tax imposed on the gross casino
revenues of each licensee in the amount of 2.5% is due and payable
on the last day of April following the end of the calendar year.
A licensee is obligated to pay the investment alternative tax for
a period of 30 years. Estimated payments of the investment
alternative tax obligation must be made quarterly in an amount
equal to 1.25% of estimated gross revenues for the preceding
three-month period. Investment tax credits may be obtained by the
CRDA. CRDA bonds have terms as long as 50 years and bear interest
at below market rates, resulting in a value lower than the face
value of such CRDA bonds.
For the first 10 years of its obligation, the licensee is
<PAGE> -18-
entitled to an investment tax credit against the investment
alternative tax in an amount equal to twice the purchase price of
the bonds issued to the licensee by the CRDA. Thereafter, the
licensee is (i) entitled to an investment tax credit in an amount
equal to twice the purchase price of such bonds or twice the
amount of its investments authorized in lieu of such bond
investments made in projects designated as eligible by the CRDA,
and (ii) has the option of entering into a contract with the CRDA
to have its tax credit comprised of direct investments in approved
eligible projects which may not comprise more than 50% of its
eligible tax credit in any one year.
From the monies made available to the CRDA, the CRDA is
required to set aside $100 million for investment in hotel
development projects in Atlantic City undertaken by a licensee
which result in the construction or rehabilitation of at least 200
hotel rooms by December 31, 1996. These monies will be held to
fund up to 35% of the cost to casino licensees of expanding their
hotel facilities to provide additional hotel rooms, a portion of
which will be required to be available upon the opening of the new
Atlantic City convention center and dedicated to convention
events. The CRDA has determined at this time that eligible casino
licensees will receive up to 27% of the cost of additional hotel
rooms out of these monies set aside and may, in the future,
increase the percentage to no greater than 35%.
ATLANTIC CITY FUND
On each October 31 during the years 1996 through 2003, each
casino licensee must pay into an account established in the CRDA
and known as the Atlantic City Fund, its proportional share of an
amount related to the amount by which annual operating expenses of
the CCC and the are less than a certain fixed
sum. Additionally, a portion of the investment alternative tax
obligation of each casino license for the years 1994 through 1998
allocated for projects in Northern New Jersey is required to be
paid into and credited to the Atlantic City Fund. Amounts in the
Atlantic City Fund will be expended by the CRDA for economic
development projects of a revenue producing nature that foster the
redevelopment of Atlantic City other than the construction and
renovation of casino hotels.
MINIMUM CASINO PARKING CHARGES
As of July 1, 1993, each casino licensee was required to
impose on and collect from patrons a standard minimum parking
charge of at least $2.00 for the use of parking, space for the
purpose of parking, garaging or storing motor vehicles in a
parking facility owned or leased by a casino licensee or by any
person on behalf of a casino licensee. Of the amount collected by
the casino licensee, $1.50 is required to be paid to the New Jersey
State Treasurer and paid by the New Jersey State Treasurer into a
special fund established and held by the New Jersey State Treasurer
for the exclusive use of the CRDA.
Amounts in the special fund will be expended by the CRDA for
<PAGE> -19-
(i) eligible projects in the corridor region of Atlantic City,
which projects are related to the improvement of roads,
infrastructure, traffic regulation, and public safety, and (ii)
funding up to 35% of the cost to casino licensees of expanding
their hotel facilities to provide additional hotel rooms, which
hotel rooms are required to be available upon the opening of the
Atlantic City Convention Center and dedicated to convention
events.
CONSERVATORSHIP
If, at any time, it is determined that TC/GP, TCHI, Funding,
or the Partnership has violated the Casino Control Act, or that
any of such entities cannot meet the qualification requirements of
the Casino Control Act, such entity could be subject to fines or
the suspension or revocation of its license or qualification. If
the Partnership's license is suspended for a period in excess of
120 days or revoked, or if the CCC fails or refuses to renew such
casino license, the CCC could appoint a conservator to operate or
dispose of the Partnership's casino hotel facilities. A
conservator would be vested with title to all property of the
Partnership relating to the casino and the approved hotel subject
to valid liens and/or encumbrances. The conservator would be
required to act under the direct supervision of the CCC and would
be charged with the duty of conserving, preserving, and if
permitted, continuing the operation of the casino hotel. During
the period of the conservatorship, a former or suspended casino
licensee is entitled to a fair rate of return out of net earnings,
if any, on the property retained by the conservator. The CCC may
also discontinue any conservatorship action and direct the
conservator to take such steps as are necessary to effect an
orderly transfer of the property of a former or suspended casino
licensee. Such events could result in an event of default under
the indentures pursuant to which the Senior Notes, Mortgage Notes,
and PIK Notes were issued.
EMPLOYEES
Casino employees are subject to more stringent requirements
than non-casino employees and must meet applicable standards
pertaining to financial stability, integrity and responsibility,
good character, honesty and integrity, business ability, casino
experience, and New Jersey residency. These requirements have
resulted in significant competition among Atlantic City casino
operators for the services of qualified employees.
GAMING CREDIT
The Partnership's casino games are conducted on a credit as
well as a cash basis. Gaming debts arising in Atlantic City in
accordance with applicable regulations are enforceable in the
courts of the State of New Jersey. The extension of gaming credit
is subject to regulations that detail procedures which casinos
must follow when granting gaming credit and recording counter
checks which have been exchanged, redeemed, or consolidated.
<PAGE> -20-
CONTROL PROCEDURES
Gaming at Trump's Castle is conducted by trained and
supervised personnel. The Partnership employs extensive security
and internal controls. Security checks are made to determine,
among other matters, that job applicants for key positions have
had no criminal history or associations. Security controls
utilized by the surveillance department include closed circuit
video cameras to monitor the casino floor and money counting
areas. The count of moneys from gaming is also observed daily by
representatives of the CCC.
OTHER LAWS AND REGULATIONS
The United States Department of the Treasury has adopted
regulations pursuant to which a casino is required to file a
report of each deposit, withdrawal, exchange of currency, gambling
tokens or chips, or other payments or transfers by, through, or to
such casino which involves a transaction in currency of more than
$10,000 per patron, per gaming day. Such reports are required to
be made on forms prescribed by the Secretary of the Treasury and
are filed with the Commissioner of the Internal Revenue Service
(the "Service"). In addition, the Partnership is required to
maintain detailed records (including the names, addresses, social
security numbers, and other information with respect to its gaming
customers) dealing with, among other items, the deposit and
withdrawal of funds and the maintenance of a line of credit.
In the past, the Service had taken the position that gaming
winnings from table games by nonresident aliens were subject to a
30% withholding tax; however, the Service subsequently adopted a
practice of not collecting such tax. Recently enacted legislation
exempts from withholding tax table game winnings by nonresident
aliens, unless the Secretary of the Treasury determines by
regulation that such collections have become administratively
feasible.
The Partnership is subject to other federal, state, and local
regulations, and on a periodic basis must obtain various licenses
and permits, including those required to sell alcoholic beverages.
The Partnership believes that it has obtained all required
licenses and permits to conduct its business.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
AND EXPORT SALES
Not applicable.
ITEM 2. PROPERTIES OF THE PARTNERSHIP
THE CASINO PARCEL. Trump's Castle is located in the Marina
District of Atlantic City on an approximately 14.7 acre
triangular-shaped parcel of land, which is owned by the
Partnership in fee, located at the intersection of Huron Avenue
and Brigantine Boulevard, directly across from the Marina (see
discussion below), approximately two miles from the Boardwalk.
<PAGE> -21-
Trump's Castle has a total of 73,000 square feet of casino
space, which accommodates 90 table games (including 6 poker
tables), 2,275 slot machines, and simulcasting facilities. In
addition to the casino, Trump's Castle consists of a 27 story
hotel with 728 guest rooms, including 185 suites, of which 99 are
"Crystal Tower" luxury suites. The facility also offers eight
restaurants, a 460-seat cabaret theater, one cocktail lounge,
58,000 square feet of convention, ballroom and meeting space, a
swimming pool, tennis courts, and a sports and health club
facility. Trump's Castle has been designed so that it can be
enlarged in phases into a facility containing 2,000 rooms, a
1,600-seat cabaret theater, and additional recreational amenities.
Trump's Castle also has a nine-story garage providing on-site
parking for approximately 3,000 vehicles, and a helipad which is
located atop the parking garage, making Trump's Castle the only
Atlantic City casino with access by land, air, and sea.
During 1995, Trump's Castle replaced over 25% of the slot
machines on its casino floor with new, more popular models,
upgraded its computerized slot tracking and slot marketing system,
and began the construction of two private clubs for preferred
gaming patrons. In 1994, Trump's Castle added 153 slot machines,
completed a 3,000 square foot expansion to its casino which
enabled Trump's Castle to accommodate the addition of simulcast
race track wagering, and expended in excess of $2 million on
renovations to its hotel facility. The casino expansion also
increased casino access and casino visibility for hotel patrons.
In 1993, Trump's Castle completed the construction of a Las Vegas
style marquee and reader board, the largest of its kind on the
East Coast.
THE MARINA. Pursuant to an agreement (the "Marina
Agreement") with the New Jersey Division of Parks and Forestry,
the Partnership in 1987 began operating and renovating the Marina,
including docks containing approximately 600 slips. An elevated
pedestrian walkway connecting Trump's Castle to a two-story
building at the Marina was completed in 1989. The Partnership has
reconstructed the two-story building, which contains a 240-seat
restaurant and offices, as well as a snack bar and a large
nautically-themed retail store. Any improvements made to the
Marina (which is owned by the State of New Jersey), excluding the
elevated pedestrian walkway, automatically become the property of
the State of New Jersey upon their completion. Pursuant to the
Marina Agreement and pursuant to a certain lease between the State
of New Jersey, as landlord, and the Partnership, as tenant, dated
as of September 1, 1990, the Partnership commenced leasing the
Marina and the improvements thereon for an initial term of twenty-
five years. The lease is a net lease pursuant to which the
Partnership, in addition to the payment of annual rent equal to
the greater of (i) a certain percentage of gross revenues, and
(ii) minimum base rent of $300,000 annually (increasing every five
years to $500,000 in 2011), is responsible for all costs and
expenses related to the premises, including but not limited to,
all maintenance and repair costs, insurance premiums, real estate
taxes, assessments, and utility charges.
<PAGE> -22-
PARKING PARCEL. The Partnership also owns an employee
parking lot located on Route 30, approximately two miles from
Trump's Castle, which can accommodate approximately 1,000 cars.
ITEM 3. LEGAL PROCEEDINGS
The Partnership, its partners, certain members of the former
Executive Committee, Funding, and certain of their employees are
involved in various legal proceedings. The Partnership and
Funding have agreed to indemnify such persons and entities against
any and all losses, claims, damages, expenses (including
reasonable costs, disbursements and counsel fees) and liabilities
(including amounts paid or incurred in satisfaction of
settlements, judgments, fines and penalties) incurred by them in
said legal proceedings. Such persons and entities are vigorously
defending the allegations against them and intend to vigorously
contest any future proceedings.
Various legal proceedings are now pending against the
Partnership. The Partnership considers all such proceedings to be
ordinary litigation incident to the character of its business.
The majority of such claims are covered by liability insurance
and the Partnership believes that the resolution of these claims,
will not, individually or in the aggregate, have a material
adverse effect on the financial condition or results of operations
of the Partnership.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE> -23-
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) There is no established public trading market for
Funding's outstanding common stock or for the
Partnership's partnership interests.
(b) As of December 31, 1995, there was one holder of
record of the outstanding common stock of Funding and
three partners in the Partnership.
(c) Funding has paid no cash dividends on its common
stock, and except as set forth under "Business -- The
Recapitalization" (Item 1), the Partnership has made
no general distributions with respect to its equity
interests.
<PAGE> -24-
<TABLE>
ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION.
The following sets forth certain selected consolidated financial
information from Funding's and the Partnership's Consolidated
Statements of Operations for the years ended December 31, 1991, 1992,
1993, 1994, and 1995 respectively, and the Consolidated Balance Sheets
as of December 31, 1991, 1992, 1993, 1994, and 1995 respectively:
Year Ended December 31,
<CAPTION>
1991 1992<F1> 1993<F2> 1994 1995
(in thousands of dollars)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
Gross Revenues $247,968 $299,306 $304,826 $315,385 $340,110
Less-Promotional Allowances 27,882 30,656 31,599 31,572 34,547
--------- --------- --------- --------- ---------
Net Revenues 220,086 268,650 273,227 283,813 305,563
Total Costs and Expenses 222,446 260,623 245,361 254,989 271,202
--------- --------- --------- --------- ---------
Income (Loss) from Operations (2,360) 8,027 27,866 28,824 34,361
Interest Income 505 499 675 636 504
Interest Expense (48,344) (45,360) (56,926) (44,173) (46,017)
Extraordinary Item<F3> - 128,187 - - -
--------- --------- --------- --------- ---------
Net Income (Loss) ($50,199) $91,353 ($28,385) ($14,713) ($11,152)
========= ========= ========= ========= =========
BALANCE SHEET DATA:
Cash and Cash Equivalents $14,972 $23,610 $20,439 $19,122 $21,038
========= ======== ======== ======== ========
Total Assets $391,303 $379,641 $375,935 $368,797 $370,581
========= ======== ======== ======== ========
Current Liabilities<F4> $454,709 $39,397 $34,463 $34,084 $38,402
========= ======== ======== ======== ========
Total Long-Term Debt<F4> - $279,445 $309,794 $314,433 $323,015
========= ======== ======== ======== ========
Total Capital (Deficit) ($63,406) $60,799 $31,678 $16,965 $5,813
========= ======== ======== ======== ========
<FN>
Notes:
<F1> On May 29, 1992, Funding, the Partnership and TCHI consummated
the Plan, which materially affects the comparability of the
information set forth above.
<F2> On December 28, 1993, the Partnership and its affiliated
entities consummated the Recapitalization, which materially
affects the comparability of the information set forth above.
<F3> The extraordinary gain of $128,187,000 for year ended December
31, 1992 reflects a $96,896,000 accounting adjustment to carry
the Bonds at fair market value based on current rates of
interest at the date of issuance, $18,000,000 forgiveness of
bank borrowings, $22,805,000 discharge of accrued interest, and
net of the write-off of $9,514,000 of unamortized Bond
issuance costs.
<F4> Long-term debt of $340,553,000 as of December 31, 1991 had been
classified as a current liability.
</FN>
</TABLE>
<PAGE> -25-
<TABLE>
SELECTED QUARTERLY FINANCIAL DATA:
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
<S> <C> <C> <C> <C>
1995:
Net Revenues $65,441,000 $70,715,000 $89,158,000 $80,249,000
============ ============ =========== ============
Income from Operations $4,762,000 $7,768,000 $15,548,000 $6,283,000
============ ============ =========== ============
Net Income (Loss) ($6,251,000) ($3,584,000) $3,990,000 ($5,307,000)
============ ============ =========== ============
1994:
Net Revenues $66,329,000 $72,745,000 $80,599,000 $64,140,000
============ ============ =========== ============
Income from Operations $3,315,000 $7,045,000 $13,533,000 $4,931,000
============ ============ =========== ============
Net Income (Loss) ($7,484,000) ($3,809,000) $2,562,000 ($5,982,000)
============ ============ =========== ============
</TABLE>
<PAGE> -26-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The financial information presented below reflects the
financial condition and results of operations of the Partnership.
Funding is a wholly-owned subsidiary of the Partnership and
conducts no business other than collecting amounts due under
certain intercompany notes from the Partnership for the purpose of
paying principal of, premium, if any, and interest on its
indebtedness, which Funding issued as a nominee for the
Partnership.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1995
AND 1994. The Partnership's net revenues (gross revenues less
promotional allowances) for the years ended December 31, 1995 and
1994 were approximately $305.5 million and $283.8 million,
respectively. The Partnership believes that the $21.7 million
(7.6%) increase is the result of aggressive marketing programs and
special events introduced by Management during the current year as
well as a continuing emphasis on providing superior customer
service.
Gaming revenues provide the majority of the Partnership's
revenues and primarily consist of slot machine and table games
win.
Slot machine win was approximately $197.4 million and $177.4
million (an increase of approximately $20.0 million or 11.3%) for
the years ended December 31, 1995 and 1994, respectively. The
total dollar amount wagered by customers on slot machines
increased by approximately $322.9 million (16.4%) to $2,288.2
million for the year ended December 31, 1995 from $1,965.3 million
for the year ended December 31, 1994. This increase in slot
volume was partially offset by a decrease in the slot win
percentage (slot win as a percentage of dollars wagered on slot
machines) to 8.6% for the year ended December 31, 1995 from 9.0%
for the year ended December 31, 1994. This win percentage
decrease was primarily due to an increased volume of customer play
on lower denomination slot machines which, traditionally, payout
at a lower win percentage.
Table game win was approximately $82.7 million and $81.0
million (an increase of $1.7 million or 2.1%) for the years ended
December 31, 1995 and 1994, respectively. The total dollar amount
wagered by customers on table games increased by approximately
$10.2 million (2.1%) to $487.7 million for the year ended December
31, 1995 from $477.5 for the year ended December 31, 1994. The
table game win percentage (table game win as a percentage of
dollars wagered on table games) remained at 17% for the year ended
December 31, 1995 compared to the year ended December 31, 1994.
The table game win percentage is outside the control of the
Partnership, and although it is fairly constant over the long-
term, it can vary significantly from period to period, due in part
to the play of certain premium patrons who tend to wager
substantial dollar amounts on table games.
<PAGE> -27-
For the years ended December 31, 1995 and 1994, credit
extended to the table games customers was approximately 30.0% and
31.4% of overall table play, respectively. This relatively high
level of credit play continues a trend which started in the last
fiscal year and is the result of an increased level of play by
individuals who wager relatively large sums. These premium
patrons tend to use a higher percentage of credit when they wager.
Nongaming revenues, in the aggregate, increased by
approximately $3.1 million (5.2%) to $60.0 million for the year
ended December 31, 1995 from $56.9 million for the year ended
December 31, 1994, primarily as the result of rooms revenue (an
approximate $538,000 increase) and food and beverage revenue (an
approximate $2.4 million increase) activity. During the current
year, marketing programs designed to increase gaming revenues
caused an increase in complimentary rooms and food and beverage
revenues (an approximate $2.7 million increase) as compared to the
prior year.
Promotional Allowances increased by approximately $2.9
million (9.2%) to $34.5 million for the year ended December 31,
1995 from $31.6 million for the year ended December 31, 1994. As
discussed above, marketing programs instituted during the current
year designed to increase gaming revenues caused an increase in
complimentary rooms and food and beverage activity as compared to
the prior year.
Gaming costs and expenses increased by approximately $14.7
million (9.7%) to $165.7 million for the year ended December 31,
1995 from $151.0 million for the year ended December 31, 1994.
This increase is primarily the result of an increase in
promotional cash back coupon costs associated with the new
marketing programs and special events introduced during the
current year to stimulate gaming revenues.
Food and beverage costs and expenses for the years ended
December 31, 1995 and 1994 increased approximately $1.1 million
(9.0%). This increase corresponds to the increased food and
beverage and gaming revenue activity for the year.
Other costs and expenses increased approximately $790,000
(6.3%) to $13.4 million for the year ended December 31, 1995 from
$12.6 million for the year ended December 31, 1994. This increase
is principally the result of increased real estate taxes on the
casino property.
Interest expense increased approximately $1.8 million (4.1%)
to $46.0 million for the year ended December 31, 1995 from $44.2
million for the year ended December 31, 1994. This increase is
the result of an increase in both the outstanding principal and
the interest rate related to the PIK Notes as well as an increase
in the interest rate related to the Amended Term Loan.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1994
AND 1993. The Partnership's net revenues (gross revenues less
promotional allowances) for the years ended December 31, 1994 and
<PAGE> -28-
1993 totaled approximately $283.8 million and $273.2 million,
respectively, representing a $10.6 million (3.9%) increase.
Gaming revenues were approximately $258.5 million for the year
ended December 31, 1994 and $246.4 million for the comparable
period in 1993. Management believes the $12.1 million (4.9%)
increase in gaming revenues was attributable primarily to a
continuing emphasis on customer service and a repositioning by
Trump's Castle to expand profitable market segments.
Slot machine win was approximately $177.5 million and $173.0
million (an increase of approximately $4.5 million or 2.6%) for
the years ended December 31, 1994 and 1993, respectively. The
total dollar amount wagered by customers on slot machines
increased by approximately $113.9 million (6.2%) to $1,965.3
million for the year ended December 31, 1994 from $1,851.4 million
for the year ended December 31, 1993. This increase in slot
volume was partially offset by a decrease in the slot win
percentage (slot win as a percentage of dollars wagered on slot
machines) to 9.0% for the year ended December 31, 1994 from 9.3%
for the year ended December 31, 1993. The lower slot win
percentage was largely intentional and designed by Trump's Castle
in order to remain competitive and stimulate patron play.
Table game win was approximately $81.0 million and $73.4
million (an increase of $7.6 million or 10.4%) for the years ended
December 31, 1994 and 1993, respectively. The total dollar amount
wagered by customers on table games decreased by approximately
$14.6 million (3.0%) to $477.5 million for the year ended December
31, 1994 from $492.1 million for the year ended December 31, 1993.
This decrease in gaming volume was offset by an increase in the
table game win percentage (table game win as a percentage of
dollars wagered on table games) to 17.0% for the year ended
December 31, 1994 from 14.9% for the year ended December 31, 1993.
The table game win percentage is outside the control of the
Partnership, and although it is fairly constant over the long-
term, it can vary significantly from period to period, due in part
to the play of certain premium patrons who tend to wager
substantial dollar amounts on table games.
For the years ended December 31, 1994 and 1993, gaming credit
extended to customers was approximately 31.4% and 28.9% of overall
table play, respectively. This increase in credit play reflected,
in part, a shift in the gaming patron mix as a result of increased
play by individuals who wager relatively large sums. These
patrons tend to use a higher percentage of credit when they wager.
Nongaming revenues, in the aggregate, decreased approximately
$1.6 million (2.6%) to $56.9 million for the year ended December
31, 1994, from $58.5 million for the year ended December 31, 1993.
This decline was primarily attributable to a decrease in food and
beverage revenues of $2.2 million (7.1%), to $28.4 million for the
year ended December 31, 1994, of which approximately $15.9 million
consisted of complimentary food and beverage. This decline was
due to the discontinuance of certain unprofitable marketing
programs which resulted in fewer customers served. Such measures
were implemented to improve overall operating efficiencies.
<PAGE> -29-
Offsetting the nongaming revenues decrease was an increase in
entertainment revenue of $100,000 (1.4%) and an increase in other
income of $600,000 (8%).
Gaming costs and expenses increased by approximately $5.3
million (3.7%) to $151.0 million for the year ended December 31,
1994 from $145.7 for the year ended December 31, 1993. This
increase corresponds to the increase in gaming revenues on a year-
to-year basis.
The $2.6 million (15.1%) decrease in rooms and food and
beverage operating expenses is primarily attributable to a variety
of cost reduction measures and improvements in operational
efficiency during 1994 compared to 1993.
General and administrative expenses increased approximately
$7.4 million (13.6%) for the year ended December 31, 1994 as
compared to the prior year. This increase was primarily
attributable to:
(1) The contribution of $2.5 million to a joint project with
Harrah's for the beautification of the marina district
of Atlantic City in which both casinos operate.
(2) The contributions of approximately $3.3 million in
Casino Reinvestment Development Authority deposits to
certain public improvement projects.
(3) Increased spending in connection with new business
development and facilities maintenance.
For the year ended December 31, 1994, depreciation and
amortization decreased $2.0 million (12.1%) over the comparable
period in 1993, primarily as a result of the impact of fully
depreciated assets.
Other costs and expenses increased by $1.5 million (13.8%)
due to significantly lower real estate tax expense incurred in the
first quarter of 1993 because of a $1.8 million real estate tax
credit.
Interest expense decreased for the year ended December 31,
1994 over the comparable period in 1993 by approximately $12.8
million as a result of the Recapitalization on December 28, 1993.
INFLATION. There was no significant impact on the
Partnership's operations as a result of inflation during 1995,
1994, or 1993.
LIQUIDITY AND CAPITAL RESOURCES.
Cash flow from operating activities is the Partnership's
principal source of liquidity. For the year ended December 31,
1995, the Partnership's net cash flow provided by operating
activities before cash debt service obligations was $49.8 million
and cash debt service was $36.7 million, resulting in net cash
provided by operating activities of $13.1 million.
<PAGE> -30-
In addition to cash needs to fund the day-to-day operations
of Trump's Castle, the Partnership's principal uses of cash are
capital expenditures and debt service.
Capital expenditures for the year ended December 31, 1995
were $8.6 million and consisted of casino floor improvements,
renovation of hotel rooms, and the purchase of slot machines. For
1996 total capital expenditures are anticipated to be $9.0 million
and principally consist of (i) the purchase of slot machines, (ii)
renovations to guest rooms and the hotel tower, and (iii) the
construction of two new player clubs. Management believes that
these levels of capital expenditures are sufficient to maintain
the attractiveness of Trump's Castle and the aesthetics of its
hotel rooms and other public areas.
The Partnership's debt consists primarily of (i) a loan
with Midlantic National Bank (the "Term Loan"), (ii) the 11-1/2%
Senior Notes due 2000 (the "Senior Notes"), (iii) the 11-3/4%
Mortgage Notes due 2003 (the "Mortgage Notes"), and (iv) the
Increasing Rate Subordinated Pay-in-Kind Notes due 2005 (the "PIK
Notes").
On May 28, 1995, the Partnership exercised its option to
extend the Term Loan for an additional five year term. The Term
Loan bears interest at the prime rate plus 3%, currently 11-1/2%,
and requires amortized monthly principal payments of approximately
$158,000 which commenced May 31, 1995. The Term Loan matures on
May 28, 2000.
The Senior Notes have an outstanding principal amount of
$27 million, and bear interest at the rate of 11-1/2% per annum
(which may be reduced to 11-1/4% upon the occurrence of certain
events). The Senior Notes mature on November 15, 2000, and are
subject to a sinking fund which requires the retirement of 15% of
the Senior Notes on each November 15, 1998 and 1999.
The Mortgage Notes have an outstanding principal amount of
approximately $242 million, bear interest at the rate of 11-3/4%
per annum (which may be reduced to 11-1/2% upon the occurrence of
certain events), and mature on November 15, 2003.
The PIK Notes have an outstanding principal amount of
approximately $61.9 million and mature on November 15, 2005.
Interest is currently payable semi-annually at the rate of
13-7/8%. On or prior to November 15, 2003, interest on the PIK
Notes may be paid in cash or through the issuance of additional
PIK Notes. During 1995, the Partnership and Funding issued an
additional $7.8 million principal amount of PIK Notes in payment
of interest on the PIK Notes. The Partnership anticipates that
during 1996 interest on the PIK Notes will be paid through the
issuance of additional PIK Notes.
On June 23, 1995, the Partnership entered into an Option
Agreement with Hamilton Partners, L.P. ("Hamilton") which grants
the Partnership an option (the "Option") to acquire the PIK Notes
owned by Hamilton. Hamilton has represented to the Partnership
<PAGE> -31-
that it is the owner of at least 92% of the outstanding principal
amount of the PIK Notes. The Option was granted to the
Partnership in consideration of a $1.1 million payment to
Hamilton. The Option is exercisable at a price equal to 60% of the
aggregate principal amount and accrued interest of the PIK Notes
delivered by Hamilton. Pursuant to the terms of the Option
Agreement, upon the occurrence of certain events within 18 months
of the time the Option is exercised, the Partnership is required
to make an additional payment to Hamilton of up to 40% of the
principal amount of the PIK Notes. The option expires on March
19, 1996 and may be extended to June 21, 1996.
The Partnership's cash debt service requirement was
approximately $36.7 million in 1995 and the Partnership
anticipates that approximately $37.8 million in cash will be
required during 1996 to meet its debt service obligations.
For the years ended December 31, 1995 and 1994, the
Partnership had a working capital surplus of $600,000 and a
working capital deficit of $1.0 million, respectively. The
Partnership believes that this level of working capital is
adequate to sustain existing operations in the foreseeable future.
Management believes, based upon its current level of
operations, that although the Partnership is highly leveraged, it
will continue to have the ability to pay interest on its
indebtedness and to pay other liabilities with funds from
operations for the foreseeable future. However, there can be no
assurance to that effect, as the Partnership's operating results
are subject to numerous factors outside its control, including,
without limitation, competition from within the Atlantic City
market, from other gaming jurisdictions, and from the Other Trump
Casinos; general economic conditions; weather and its effect on
the ability of patrons to travel to Atlantic City; and, the slot
machine and table game win percentages, which can vary
significantly over a short-term time period. In the event that
circumstances change, the Partnership may seek to obtain a working
capital facility of up to $10 million, although there can be no
assurance that such financing will be available on terms
acceptable to the Partnership.
The ability of Funding and the Partnership to pay their
indebtedness when due, will depend on their ability to either
generate cash from operations sufficient for such purposes or to
refinance such indebtedness on or before the date on which it
becomes due. The Partnership does not currently anticipate being
able to generate sufficient cash flow from operations to repay a
substantial portion of the principal amounts of the Mortgage Notes
and the PIK Notes. Thus, the repayment of the principal amount of
this indebtedness will likely depend primarily upon the ability of
Funding and the Partnership to refinance this debt when due. The
future operating performance of the Partnership and the ability to
refinance this debt will be subject to the then prevailing
economic conditions, industry conditions, and numerous other
financial, business, and other factors, many of which are beyond
the control of Funding or the Partnership. There can be no
<PAGE> -32-
assurance that the future operating performance of the Partnership
will be sufficient to meet these repayment obligations or that the
general state of the economy, the status of the capital markets
generally, or the receptiveness of the capital markets to the
gaming industry will be conducive to refinancing this debt or
other attempts to raise capital.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
An index to financial statements and required financial
statement schedules is set forth at Item 14.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
<PAGE> -33-
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
All decisions affecting the business and affairs of the
Partnership, including the operation of Trump's Castle, are
decided by the general partners acting by and through a Board of
Partner Representatives, which includes a minority of
Representatives elected indirectly by the holders of the Mortgage
Notes and PIK Notes (the "Board of Partner Representatives"). As
currently constituted, the Board of Partner Representatives
consists of Donald J. Trump, Chairman, Nicholas L. Ribis, Roger P.
Wagner, Robert M. Pickus, Asher O. Pacholder, Thomas F. Leahy, and
Arthur S. Bahr. Messrs. Trump, Ribis, and Pickus also serve on
the governing boards of Trump Taj Mahal Associates ("TTMA"), and
Trump Plaza Associates ("TPA"). Messrs. Trump and Ribis also
serve as directors and officers of Trump Hotels & Casino Resorts,
Inc. ("THCR"), and Mr. Pickus serves as an officer of THCR.
The Partnership also has an Audit Committee on which Mr.
Ribis serves with Mr. Leahy and Mr. Bahr, who have been appointed
thereto in accordance with the requirements of the CCC. The Audit
Committee reviews matters of policy, purpose, responsibilities and
authority and makes recommendations with respect thereto on the
basis of reports made directly to the Audit Committee. The
Surveillance Department is responsible for the surveillance,
detection, and video-taping of unusual and illegal activities in
the casino hotel. The Internal Audit Department is responsible
for the review of, reporting instances of noncompliance with, and
recommending procedures to eliminate weakness in internal
controls.
The sole director of Funding is Trump. Trump also serves as
its Chairman of the Board, President, and Treasurer. Patricia M.
Wild serves as its Secretary, and Robert E. Schaffhauser serves as
its Assistant Treasurer.
Set forth below are the names, ages, positions, and offices
held with Funding and the Partnership, and a brief account of the
business experience during the past five years of each member of
the Board of Partner Representatives, the executive officers of
Funding and the Partnership, and the director of Funding.
DONALD J. TRUMP - Trump, 49 years old, has been the managing
general partner of the Partnership and Chairman of the Board of
Partner Representatives since May 1992 and Chairman of the Board,
President and sole director of Funding since June 1985. Trump has
been the President and sole director of TC/GP since December 1993.
Trump served as Chairman of the Executive Committee of the
Partnership from June 1985 to May 1992 and as President and sole
director of TC/GP from November 1991 to May 1992. Trump has been
a director and Treasurer of TCHI since April 17, 1985. Trump has
been Chairman of the Board of THCR and its related funding company
since their formation in 1995. Trump is the sole shareholder,
Chairman of the Board of Directors, President, and Treasurer of
TPFI, and the managing general partner of TPA. Trump was
<PAGE> -34-
President and Chairman of the Board of Directors and a 50%
shareholder of TP/GP Corp. ("TP/GP"), the former managing general
partner of TPA, from May 1992 through June 1993; and Chairman of
the Executive Committee and President of TPA from May 1986 to May
1992. Trump has been a director and President of TPHI and a
partner in Trump Plaza Holding Associates ("TPHA") since February
1993. Trump was Chairman of the Executive Committee of TTMA, from
June 1988 to October 1991; and has been Chairman of the Board of
Directors of the managing general partner of TTMA since October
1991; and President of the Trump Organization, which has been in
the business, through its affiliates and subsidiaries, of
acquiring, developing and managing real estate properties for more
than the past five years. Trump was a member of the Board of
Directors of Alexander's Inc. from 1987 to March 1992.
NICHOLAS L. RIBIS - Mr. Ribis, 51 years old, has been a
partner representative on the Board of Partner Representatives
since May 1992 and Chief Executive Officer of Partnership since
March 1991. Mr. Ribis has served as Vice President and Assistant
Secretary of TCHI since December 1993 and January 1991,
respectively. Mr. Ribis served as a member of the Executive
Committee of the Partnership from April 1991 to May 1992 and as
Secretary of TC/GP from November 1991 to May 1992. Mr. Ribis has
been President, Chief Executive Officer, Chief Financial Officer,
and a director of THCR and its related funding company since their
formation in 1995. Mr. Ribis has served as a director of TPHI
since June 1993 and of TPFI since July 1993; as a director and
Vice President of TP/GP from May 1992 to June 1993; Chief
Executive Officer of TPA since February 1991; and a member of the
Executive Committee of TTMA since March to October 1991; and a
member of the Board of Directors of the managing general partner
of TTMA since October 1991. From January 1980 to January 1991,
Mr. Ribis was Senior Partner in, and from February 1991 to
December 1995 was Counsel to, the law firm of Ribis, Graham &
Curtin, which serves as New Jersey legal counsel to all of the
above-named companies, and certain of their affiliated entities.
Mr. Ribis has been a member of the Board of Trustees of the CRDA
since October 1993.
ROGER P. WAGNER - Mr. Wagner, 48 years old, has been a
partner representative on the Board of Partner Representatives
since May 1992 and President and Chief Operating Officer of the
Partnership since January 1991. Mr. Wagner served as a member of
the Executive Committee of the Partnership from January 1991 to
May 1992. Mr. Wagner has been a director and president of TCHI
since January 1991. Prior to joining the Partnership, Mr. Wagner
served as President of the Claridge Hotel Casino from June 1985 to
January 1991 and is presently the Chairman of the Casino
Association of New Jersey.
ROBERT M. PICKUS - Mr. Pickus, 41 years old, has been a
partner representative on the Board of Partner Representatives
since October 1995, Executive Vice President of Corporate and
Legal Affairs since February 1995, and Corporate Secretary since
February 1996. He has also been the Executive Vice President of
Corporate and Legal Affairs of Plaza Associates since February 16,
<PAGE> -35-
1995. From December 1993 to February 1995, Mr. Pickus was the
Senior Vice President and General Counsel of Plaza Associates and,
since April 1994, he has been the Vice President and Assistant
Secretary of Plaza Funding and Assistant Secretary of Plaza
Holding, Inc. Mr. Pickus has been the Executive Vice President of
Corporate and Legal Affairs of Taj Associates since February 1995,
and a Class C Director of Taj Holding and TM/GP since November,
1995. He was the Senior Vice President and Secretary of Trump's
Castle Funding, Inc. from June 1988 until December 1993 and
General Counsel of Trump's Castle Associates from June 1985 to
June 1988. Mr. Pickus was also Secretary of Trump's Castle
Associates from October 1991 until December 1993. Mr. Pickus has
been Executive Vice President of Corporate and Legal Affairs of
THCR since June of 1995.
ASHER O. PACHOLDER - Dr. Pacholder, 58 years old, has been a
partner representative of the Board of Partner Representative
since May 1992. Dr. Pacholder served as a director and the
President of TC/GP from May 1992 to December 1993. Dr. Pacholder
has served as Chairman of the Board and Managing Director of
Pacholder Associates, Inc., an investment advisory firm, since
1987. In addition, Dr. Pacholder serves on the Board of Directors
of The Southland Corporation, United Gas Holding Corp., ICO,
Incorporated, an oil field services company, UF&G Pacholder Fund,
Inc., a publicly traded closed end mutual fund, U.S. Trails, Inc.
a recreational facility company, and Forum Group, Inc., a
retirement community managerial company.
THOMAS F. LEAHY - Mr. Leahy, 58 years old, has been a partner
representative on the Board of Partner Representatives since June
1993. Mr. Leahy served as a director and Treasurer of TC/GP from
May 1992 to December 1993. From 1991 to July 1992, Mr. Leahy
served as Executive Vice President of CBS Broadcast Group, a unit
of CBS, Inc. Since November 1992, Mr. Leahy has served as
President of The Theater Development Fund, a service organization
for the performing arts. From July 1992 through November 1992,
Mr. Leahy served as chairman of VT Properties, Inc., a privately-
held corporation which invests in literary, state, and film
properties.
ARTHUR S. BAHR - Mr. Bahr, 64 years old, has been a partner
representative on the Board of Partner Representatives since
June of 1995 and previously served as a director of TC/GP from
August 1993 to January of 1994. Mr. Bahr retired in February of
1994 after serving in various senior investment positions for
General Electric Investment Corporation since 1970. Mr. Bahr
serves on the Board of Directors of Renaissance Reinsurance and
the Korean International Investment Fund.
ROBERT E. SCHAFFHAUSER - Mr. Schaffhauser, 49 years old,
joined the Partnership as Senior Vice President of Finance in
January 1994 and became Executive Vice President of Finance in
January of 1995. He also became Assistant Treasurer, Chief
Financial Officer, and Chief Accounting Officer of Funding, and
Assistant Treasurer of TCHI and TC/GP in January 1994. He served
as a consultant to Trump during 1993. Mr. Schaffhauser previously
<PAGE> -36-
served as Senior Vice President of Finance and Administration for
the Sands Hotel & Casino in Atlantic City for four years. For a
period of 13 years prior thereto, he served as the Chief Financial
Officer and Secretary for Metex Corporation, a publicly held
manufacturer of engineered products. Mr. Schaffhauser also served
as a member of Metex Corporation's Board of Directors.
MARK A. BROWN - Mr. Brown, 35 years old, joined the
Partnership as Executive Vice President of Operations in July of
1995. Previously, Mr. Brown served as Senior Vice President of
Eastern Operations for Caesars World Marketing Corporation,
National and International Divisions from 1993 until 1995. Prior
to that, Mr. Brown served as Vice President of Casino Operations
at Trump Taj Mahal from 1989 until 1993. From 1979 until 1989,
Mr. Brown worked for Resorts International Hotel Casino departing
as Casino Shift Manager in December 1989.
PATRICIA M. WILD - Ms. Wild, 43 years old, has been Secretary
of Funding and Senior Vice President and General Counsel of the
Partnership and Secretary of TCHI since December 1993. Ms. Wild
served as Assistant Secretary of TPFI and Vice President, General
Counsel of TPA from February 1991 to December 1993; Vice President
and General Counsel of TPFI from July 1992 through December 1993;
and Associate General Counsel of TPA from May 1989 through January
1991. From December 1986 to April 1989, Ms. Wild served as Deputy
Attorney General on the Environmental Prosecutions Task Force of
the New Jersey Department of Law and Public Safety, Division of
Criminal Justice. From April 1983 to December 1986, Ms. Wild
served as Deputy Attorney General with the New Jersey Division of
Gaming Enforcement.
JOHN P. BURKE - Mr. Burke, 48 years old, has been the
Corporate Treasurer of the Partnership and TPA since October 1991.
Mr. Burke has been Chief Accounting Officer of TC/GP since May
1992. Mr. Burke has been a Vice President of TCHI, TC/GP, Funding
and the Partnership since December 1993. Mr. Burke has been Vice
President of the Trump Organization since September 1990. Since
June 1995, Mr. Burke has been the Corporate Treasurer of THCR.
He has also been Corporate Treasurer of Plaza Associates and Taj
Associates since October 1991. Mr. Burke has been a Class C
Director of TM/GP and Taj Holding, and Vice President of TM/GP
since October 1991. Mr. Burke was an Executive Vice President and
Chief Administrative officer of Imperial Corporation of America
from April 1989 through September 1990.
Each member of the Board of Partner Representatives, of the
Audit Committee and all of the other persons listed above have
been licensed or found qualified by the CCC.
The employees of the Partnership serve at the pleasure of the
Board of Partner Representatives subject to any contractual rights
contained in any employment agreement. The officers of Funding
serve at the pleasure of Donald J. Trump, the sole director of
Funding.
<PAGE> -37-
Donald J. Trump and Nicholas L. Ribis served as either
executive officers and/or directors of TTMA and its affiliated
entities when such parties filed their petition for reorganization
under chapter 11 of the Bankruptcy Code on July 17, 1991. The
Second Amended Joint Plan of Reorganization of such parties was
confirmed on August 28, 1991, and was declared effective on
October 4, 1991. Donald J. Trump, Nicholas L. Ribis, and John P.
Burke served as directors of TPA and its affiliated entitled, at
the time such parties filed a petition for reorganization under
chapter 11 of the Bankruptcy Code on March 9, 1992. The First
Amended Joint Plan of Reorganization of such parties was confirmed
on April 30, 1992, and declared effective on May 29, 1992. Donald
J. Trump, Nicholas L. Ribis, Roger P. Wagner, and John P. Burke
served as either executive officers and/or directors of the
Partnership and its affiliated entities when such parties filed
their petition for reorganization under chapter 11 of the
Bankruptcy Code in March 1992. The First Amended Joint Plan of
Reorganization of such parties was confirmed on May 5, 1992, and
was declared effective on May 29, 1992. Donald J. Trump was a
partner of Plaza Operating Partners Ltd. when it filed a petition
for reorganization under chapter 11 of the Bankruptcy Code on
November 2, 1992. The Plan of Reorganization was confirmed on
December 11, 1992 and declared effective in January 1993. John P.
Burke was Executive Vice President and Chief Administrative
Officer of Imperial, a thrift holding company whose major
subsidiary, Imperial Savings was seized by the Resolution Trust
Corporation in February 1990. Subsequently, in February 1990,
Imperial filed a petition for reorganization under chapter 11 of
the Bankruptcy Code.
ITEM 11. EXECUTIVE COMPENSATION
Executive officers of Funding do not receive any additional
compensation for serving in such capacity. In addition, Funding
and the Partnership do not offer their executive officers stock
option or stock appreciation right plans, long-term incentive
plans, or defined benefit pension plans.
The following table sets forth compensation paid or accrued
during the years ended December 31, 1995, 1994, and 1993 to the
Chief Executive Officer, and each of the four most highly
compensated executive officers of the Partnership whose cash
compensation, including bonuses and deferred compensation,
exceeded $100,000 for the year ended December 31, 1995.
Compensation accrued during one year and paid in another is
recorded under the year of accrual. Information relating to long-
term compensation is inapplicable and has therefore been omitted
from the table.
<PAGE> -38-
<TABLE>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
<CAPTION>
Name and Other Annual All Other
Principal Position Year Salary Bonus Compensation<F1> Compensation<F2>
<S> <C> <C> <C> <C> <C>
Nicholas L. Ribis <F3> 1995 $531,895 -- -- $647
Chief Executive Officer 1994 $568,333 -- $69,000 $770
1993 $250,000 $250,000 $226,000 $750
Roger P. Wagner 1995 $591,709 $143,660 -- $4,620
Chief Operating Officer 1994 $501,610 $114,670 $60,000 $4,620
1993 $402,070 $76,393 $65,000 $4,497
Robert E. Schaffhauser 1995 $202,172 -- -- --
Executive Vice President 1994 $173,088 $31,156 -- --
Finance 1993 -- -- -- --
Mark A. Brown <F4> 1995 $155,257 $150,000 -- $2,187
Executive Vice President 1994 -- -- -- --
of Operations 1993 -- -- -- --
Patrick R. Dennehy <F5> 1995 $132,820 $20,609 -- $2,310
Executive Vice President 1994 $205,845 $36,452 -- $2,695
of Operations 1993 $177,083 $33,646 -- $2,248
Patricia M. Wild <F6> 1995 $126,368 -- -- $3,638
Senior Vice President 1994 $115,498 $20,790 -- $2,856
General Counsel 1993 $4,423 -- -- --
<FN>
<F1> Represents the dollar value of annual compensation not properly
categorized as salary or bonus, including amounts reimbursed for
income taxes and Director's Fees. Following SEC rules, perquisites
and other personal benefits are not included in this table if the
aggregate amount of that compensation is the lesser of either
$50,000 or 10% of the total salary and bonus for that officer.
<F2> Represents vested and unvested contributions made by the Partnership
under the Trump's Castle Hotel & Casino Retirement Savings Plan.
Funds accumulated for an employee, which consist of a certain
percentage of the employee's compensation plus Partnership
contributions equalling 50% of the participant's contributions, are
retained until termination of employment, attainment of age 59-1/2
or financial hardship, at which time the employee may withdraw his or
her vested funds.
<F3> Mr. Ribis devotes approximately one-fourth of his professional time
to the affairs of the Partnership; the compensation for his positions
at other Trump Casinos has not been included.
<F4> Mr. Brown became the Executive Vice President of Operations
effective July 10, 1995.
<F5> Effective July 3, 1995, Mr. Dennehy resigned as Executive Vice
President of Operations.
<F6> Ms. Wild became the Senior Vice President/General Counsel effective
December 6, 1993.
</FN>
</TABLE>
<PAGE> -39-
EMPLOYMENT AGREEMENTS. In September 1993, the Partnership
entered into an employment agreement with Nicholas L. Ribis
pursuant to which Mr. Ribis acts as Chief Executive Officer of the
Partnership. The agreement, which expires in September 1996,
provides for an annual salary of $550,000. The salary increases
by ten percent for each of the second and third years of the
agreement. Upon execution of the employment agreement, Mr. Ribis
received a $250,000 signing bonus. In the event the Partnership,
or any entity which acquires substantially all of the equity
interests or assets of the Partnership, proposes to engage in an
offering of common shares to the public, the Partnership and Mr.
Ribis have agreed to negotiate new compensation arrangements which
shall include equity participation for Mr. Ribis. Mr. Ribis also
acts as Chief Executive Officer of TTMA and TPA, the Partnerships
that own the Other Trump Casinos, and THCR which owns TPA and
certain other gaming interests, and receives additional
compensation from such entities. Mr. Ribis devotes approximately
one-quarter of his professional time to the affairs of the
Partnership. All other executive officers of the Partnership,
except Messrs. Burke and Pickus, devote substantially all of their
time to the business of the Partnership.
The Partnership, on January 17, 1991, entered into an
employment agreement with Roger P. Wagner, with an amendment
thereto dated January 17, 1991, and a second amendment thereto
dated July 18, 1992, pursuant to which Mr. Wagner serves as the
Partnership's and TCHI's President and Chief Operating Officer.
Mr. Wagner's employment agreement, which terminates on January 16,
1997, provides for an annual salary beginning at a minimum of
$400,000 until January 16, 1994, thereafter $500,000 per year
until January 16, 1995, thereafter $600,000 per year until January
16, 1996, and thereafter $750,000 per year from January 17, 1996
until January 16, 1997 and, subject to CCC approval, 1% of the
Partnership's Income from Operations (as defined in such
agreement) in excess of $40.0 million.
The Partnership, on June 16, 1995, entered into a severance
agreement with Robert E. Schaffhauser. Pursuant to the terms of
this agreement Mr. Schaffhauser is to receive from the
Partnership, if terminated by the Partnership for any reason other
than cause as defined, an amount equal to twelve months of Mr.
Schaffhauser's then current salary.
The Partnership, on July 10, 1995, entered into an employment
agreement with Mark A. Brown pursuant to which Mr. Brown serves as
the Partnership's Executive Vice President of Operations. The
term of the agreement is three years. This employment agreement
provides for an annual base salary of $350,000, a $75,000 bonus
paid at the commencement of employment, and an annual bonus of no
less than $75,000 per year over the three year term of the
agreement.
The Partnership entered into an employment agreement with
Patricia M. Wild pursuant to which, effective December 6, 1993,
Ms. Wild serves as the Partnership's Senior Vice President/General
Counsel. The term of the agreement is one year and, in accordance
<PAGE> -40-
with the terms of the agreement, is automatically extended on a
weekly basis so that at all times the term of the agreement shall
be an unexpired period of twelve months. This employment
agreement provides for an annual base salary of $115,000 reviewed
on an annual basis.
COMPENSATION OF DIRECTORS. Each Partner Representative of
the Partnership (other than Messrs. Trump, Ribis, Wagner, and
Pickus) receives an annual fee of $50,000. In addition, each
Partner Representative of the Partnership (other than Messrs.
Trump, Ribis, Pickus, and Wagner) receives $2,500 per meeting
attended, plus reasonable out-of-pocket expenses incurred in
attending any meeting of the Board.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION.
In general, the compensation of executive officers of the
Partnership is determined by the Board of Partner Representatives,
which is composed of Donald J. Trump, Nicholas L. Ribis, Roger P.
Wagner, Asher O. Pacholder, Thomas F. Leahy, Arthur S. Bahr, and
Robert M. Pickus. The compensation of Nicholas L. Ribis and Roger
P. Wagner is set forth in their employment agreements with the
Partnership. The Partnership has delegated the responsibility
over certain matters, such as the bonus of Mr. Ribis, to Mr.
Trump. Executive officers of Funding do not receive any
additional compensation for serving in such capacity.
The SEC requires issuers to disclose the existence of any
other corporation in which both (i) an executive officer of the
registrant serves on the board of directors and/or compensation
committee, and (ii) a director of the registrant serves as an
executive officer. Messrs. Ribis, Wagner, Pickus, and Burke,
executive officers of the Partnership, serve on the Board of
Directors of other entities in which members of the Board of
Partner Representatives (namely, Messrs. Trump, Ribis, Wagner, and
Pickus) serve as executive officers. The Partnership believes
that such relationships have not affected the compensation
decisions made by the Board of Partner Representatives in the last
fiscal year.
Messrs. Trump and Wagner serve as directors of TCHI, of
which Messrs. Trump, Ribis, and Wagner serve as executive
officers.
Messrs. Trump, Ribis, Pickus, and Burke serve on the Board of
Directors of Taj Mahal Holding Corp., which holds an indirect
equity interest in TTMA, the partnership that owns the Taj Mahal,
of which Messrs. Trump, Ribis, and Pickus are executive officers.
Such persons also serve on the Board of Directors of TM/GP
Corporation (a subsidiary of Taj Mahal Holding Corp.), the
managing general partner of TTMA, of which Messrs. Trump, Ribis,
and Pickus are executive officers. Mr. Ribis is compensated by
TTMA for his services as its chief executive officer.
Mr. Ribis also serves on the Board of Directors of Trump Taj
Mahal Realty Corp. ("Taj Realty Corp."), which leases certain real
property to TTMA, of which Mr. Trump is an executive officer. Mr.
<PAGE> -41-
Trump, however, does not receive any compensation for serving as
an executive officer of Taj Realty Corp.
Messrs. Trump and Ribis serve on the Board of Directors of
TPFI, the managing general partner of TPA, of which Messrs. Trump,
Ribis, and Pickus are executive officers. Messrs. Trump and Ribis
also serve on the Board of Directors of TPHI, of which such
persons are also executive officers. Mr. Ribis is compensated by
TPA for his services as chief executive officer.
Messrs. Trump and Ribis serve on the Board of Directors of
THCR, of which Mr. Trump is Chairman of the Board. Messrs. Ribis,
Pickus and Burke are executive officers of THCR and are
compensated for their services by THCR.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth information with respect to
the amount of Funding's Common Stock owned by beneficial owners of
more than 5% of Funding's Common Stock. Funding has no other
class of equity securities outstanding.
Amount and Nature
Name and Address of of Beneficial Percent
Title or Class Beneficial Owners Ownership of Class
______________ ___________________ _________________ ________
Common Stock Trump's Castle 200 shares 100%
Associates
Huron Avenue and
Brigantine Blvd.
Atlantic City,
New Jersey 08401
Currently, Trump, TC/GP and TCHI hold 61.5%, 37.5%, and 1.0%
interests, respectively, in the Partnership and therefore are the
beneficial owners of all of the outstanding shares of Common Stock
of Funding.
<PAGE> -42-
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OTHER TRUMP CASINOS. The following table sets forth the
amounts due to the Partnership from Trump and his other affiliated
casino entities as of December 31, 1995. For a more detailed
description of these transactions, see "Other Transactions with
Affiliates" below.
Amount Due and Outstanding
to the Partnership
as of December 31, 1995
__________________________
Trump Plaza Associates. . . . . . . . . . . .$ 720,000
Trump Taj Mahal Associates. . . . . . . . . . 164,000
The Trump Organization. . . . . . . . . . . . 262,000
_________
Total Due from Affiliates
as of December 31, 1995. . . . . . . . .$1,146,000
==========
OTHER TRANSACTIONS WITH AFFILIATES. The Partnership has
engaged in transactions with TPA, TTMA, and the Trump Organization
("TO") which are affiliates of Trump. These transactions include
certain shared payroll costs, fleet maintenance and limousine
services, as well as complimentary services offered to customers,
for which the Partnership makes the initial payment and is then
reimbursed by the appropriate affiliated entity. During 1995, the
Partnership incurred expenses of approximately $1,673,000 in
corporate salaries, and $1,109,000 of other transactions on behalf
of these related entities. In addition, the Partnership received
payments totalling $1,401,000 for services rendered and had
$580,000 of deductions for similar services incurred by these
related entities on behalf of the Partnership.
SERVICES AGREEMENT. On December 28, 1993, the Partnership
terminated the existing management agreement with a corporation
wholly-owned by Trump and entered into a Services Agreement with
TC/GP (the "Services Agreement"). In general, the Services
Agreement obligates TC/GP to provide to the Partnership, from
time-to-time when reasonably requested, consulting services on a
non-exclusive basis, relating to marketing, advertising,
promotional, and other related services (the "Services") with
respect to the business and operations of the Partnership, in
exchange for certain fees to be paid only in those years in which
EBITDA (EBITDA represents income from operations before
depreciation, amortization, restructuring costs and the non-cash
write-down of CRDA investments) exceeds prescribed amounts.
In consideration for the Services to be rendered by TC/GP,
the Partnership will pay an annual fee (which is identical to the
fee which was payable under the previously existing management
agreement) to TC/GP in the amount of $1,500,000 for each year in
which EBITDA exceeds the following amounts for the years
indicated: 1993 - $40,500,000; 1994 - $45,000,000; 1995 and
<PAGE> -43-
thereafter - $50,000,000. If EBITDA in any fiscal year does not
exceed the applicable amount, no annual fee is due. In addition,
TC/GP will be entitled to an incentive fee beginning with the
fiscal year ending December 31, 1994 in an amount equal to 10% of
EBITDA in excess of $45,000,000 for such fiscal year. The
Partnership will also be required to advance to TC/GP $125,000 a
month which will be applied toward the annual fee, provided,
however, that no advances will be made during any year if and for
so long as the Managing Partner (defined in the Services Agreement
as Trump) determines, in his good faith reasonable judgment, that
the Partnership's budget and year-to-date performance indicate
that the minimum EBITDA levels (as specified above) for such year
will not be met. If for any year during which annual fee advances
have been made it is determined that the annual fee was not
earned, TC/GP will be obligated to promptly repay any amounts
previously advanced. For purposes of calculating EBITDA under the
Services Agreement, any incentive fees paid in respect of 1994 or
thereafter shall not be deducted in determining net income.
During the year ended 1995, the Partnership recorded fees of
approximately $2,087,000 under the Services Agreement.
Unless sooner terminated pursuant to its terms, the Services
Agreement will expire on December 31, 2005.
OTHER PAYMENTS TO TRUMP. During 1994, the Board of Partners
Representatives approved a $1,000,000 bonus to be paid to Trump
based upon 1994 operating results. The amount was paid in two
equal installments in June and August 1995. No such bonus was
approved for 1995.
<PAGE> -44-
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND
REPORTS ON FORM 8-K
(A) Financial Statements. See the Index immediately
following the signature page.
(B) Reports on Form 8-K. Funding did not file any
reports on Form 8-K during the last quarter of the
year ended December 31, 1995.
(C) Exhibits. All exhibits listed below are filed
with this Annual Report on Form 10-K unless
specifically stated to be incorporated by
reference to other documents previously filed with
the Securities and Exchange Commission.
EXHIBIT
3(1) -Amended and Restated Certificate of Incorporation
of Funding.
3.1(1) -Bylaws of Funding.
3.2-3.6 -Intentionally omitted.
3.7(2) -Second Amended and Restated Partnership Agreement
of the Partnership.
4.1-4.10 -Intentionally omitted.
4.11(2) -Indenture, among Funding, as issuer, the
Partnership, as guarantor, and the Mortgage Note
Trustee, as trustee.
4.12(2) -Indenture of Mortgage between the Partnership, as
Mortgagor, and Funding, as Mortgagee.
4.13(2) -Assignment Agreement between Funding and the
Mortgage Note Trustee.
4.14(2) -Partnership Note.
4.15 -Form of Mortgage Note (included in Exhibit 4.11).
4.16 -Form of Partnership Guarantee (included in Exhibit
4.11).
4.17(2) -Indenture between Funding, as issuer, the
Partnership, as guarantor, and the PIK Note
Trustee, as trustee.
4.18(2) -Pledge Agreement between Funding and the PIK Note
Trustee.
<PAGE> -45-
4.19(2) -Subordinated Partnership Note.
4.20 -Form of PIK Note (included in Exhibit 4.17).
4.21 -Form of Subordinated Partnership Guarantee
(included in exhibit 4.17).
4.22(1) -Letter Agreement between the Partnership and the
Proposed Senior Secured Note Purchasers regarding
the Senior Secured Notes.
4.23(2) -Note Purchase Agreement for 11-1/2% Series A
Senior Secured Notes of the Partnership due 1999.
4.24(2) -Indenture, among Funding, as issuer, the
Partnership, as guarantor, and the Senior Secured
Note Trustee, as trustee.
4.25(2) -Indenture of Mortgage and Security Agreement
between the Partnership, as mortgagor/debtor, and
Funding as mortgagee/secured party. (Senior Note
Mortgage).
4.26(2) -Registration Rights Agreement by and among the
Partnership and certain purchasers.
4.27 -Intentionally omitted.
4.28(2) -Guarantee Mortgage.
4.29(2) -Senior Partnership Note.
4.30(2) -Indenture of Mortgage and Security Agreement
between the Partnership as mortgagor/debtor and
the Senior Note Trustee as mortgagee/secured
party. (Senior Guarantee Mortgage).
4.31(2) -Assignment Agreement between Funding, as assignor,
and the Senior Note Trustee, as assignee.
(Senior Assignment Agreement).
4.32(2) -Amended and Restated Nominee Agreement.
10.1-10.2 -Intentionally omitted.
10.3(3) -Employment Agreement dated January 17, 1991,
between the Partnership and Roger P. Wagner.
10.4(4) -Second Amendment to Employment Agreement dated
January 17, 1991 between the Partnership, TCHI,
and Roger P. Wagner.
10.5(5) -Form of License Agreement between the Partnership
and Donald J. Trump.
10.6-10.10 -Intentionally omitted.
<PAGE> -46-
10.11(2) -Employment Agreement, between the Partnership and
Nicholas Ribis.
10.12(6) -Trump's Castle Hotel & Casino Retirement Savings
Plan, effective as of September 1, 1986.
10.13-10.18 -Intentionally omitted.
10.19(3) -Lease Agreement by and between State of New Jersey
acting through its Department of Environmental
Protection, Division of Parks and Forests, as
Landlord, and the Partnership, as tenant, dated
September 1, 1990.
10.20-10.26 -Intentionally omitted.
10.27(1) -Services Agreement.
10.28-10.31 -Intentionally omitted.
10.32(7) -Employment Agreement dated December 20, 1993,
between Patricia M. Wild and the Partnership
10.33 -Intentionally Omitted.
10.34(7) -Amended and Restated Credit Agreement, dated as of
December 28, 1993, among Midlantic, the
Partnership and Funding.
10.35(7) -Amendment No. 1 to Amended and Restated Indenture
of Mortgage, between the Partnership, as
Mortgagor and Midlantic, as Mortgagee.
10.36(7) -Amended and Restated Indenture of Mortgage,
between the Partnership, as Mortgagor and
Midlantic, as Mortgagee, dated as of May 29,
1992.
10.37(7) -Amendment No. 1 to Amended and Restated Assignment
of Leases and Rents, between the Partnership, as
assignor, and Midlantic, as assignee.
10.38(7) -Amended and Restated Assignment of Leases and
Rents, between the Partnership, as assignor, and
Midlantic, as assignee, dated as of May 29, 1992.
10.39(7) -Amendment No. 1 to Amended and Restated Assignment
of Operating Assets, between the Partnership, as
assignor and Midlantic, as assignee.
10.40(7) -Amended and Restated Assignment of Operating
Assets, between the Partnership, as assignor, and
Midlantic, as assignee, dated as of May 29, 1992.
10.41(7) -Intercreditor Agreement, by and among Midlantic,
the Senior Note Trustee, the Mortgage Note
Trustee, the PIK Note Trustee, Funding and the
Partnership.
<PAGE> -47-
10.42(8) -Option Agreement, dated as of June 23, 1995,
between Hamilton Partners, L.P. and the
Partnership.
10.43(9) -Form of Amended and Restated Term Note, dated as
of May 28, 1995, between Midlantic Bank, N.A. and
the Partnership.
10.44 -Severance Agreement dated June 16, 1995, between
Robert E. Schaffhauser and the Partnership.
10.45 -Employment Agreement dated July 10, 1995, between
Mark A. Brown and the Partnership.
_________________
(1) Incorporated herein by reference to the Exhibit to
Funding's and the Partnership's Registration Statement on
Form S-4, Registration No. 33-68038.
(2) Incorporated herein by reference to the Exhibit to
Amendment No. 5 to the Schedule 13E-3 of TC/GP and the
Partnership, File No. 5-36825, filed with the SEC on
January 11, 1994.
(3) Incorporated herein by reference to the Exhibit to
Funding's Annual Report on Form 10-K for the year ended
December 31, 1990.
(4) Incorporated herein by reference to the Exhibit to
Funding's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992.
(5) Incorporated herein by reference to the Exhibit to
Funding's Annual Report on Form 10-K for the year ended
December 31, 1991.
(6) Incorporated herein by reference to the Exhibit to
Funding's Annual Report on Form 10-K for the year ended
December 31, 1986.
(7) Incorporated herein by reference to the identically
numbered Exhibit to Funding's Registration Statement on
Form S-4, Registration Number 33-52309 filed with the SEC
on February 17, 1994.
(8) Incorporated herein by reference to the identically
numbered Exhibit to Funding's and the Partnership's
Current Report on Form 8-K dated as of June 23, 1995.
(9) Incorporated herein by reference to the identically
numbered Exhibit to Funding's and the Partnership's
Quarterly Report on Form 10-Q for the quarter ended June
30, 1995.
<PAGE> -48-
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants F-1
Consolidated Balance Sheets of Trump's Castle
Associates and Subsidiary as of December 31,
1995 and 1994 F-2
Consolidated Statements of Operations of Trump's
Castle Associates and Subsidiary for the years
ended December 31, 1995, 1994, and 1993 F-3
Consolidated Statements of Partners' Capital
of Trump's Castle Associates and Subsidiary for
the years ended December 31, 1995, 1994, and 1993 F-4
Consolidated Statements of Cash Flows of Trump's
Castle Associates and Subsidiary for the years
ended December 31, 1995, 1994, and 1993 F-5
Notes to Consolidated Financial Statements of
Trump's Castle Associates and Subsidiary F-6
Schedule
II Valuation and Qualifying Accounts for the
years ended December 31, 1995, 1994, and
1993 F-18
Other Schedules are omitted for the reason that they
are not required or are not applicable, or the required
information is included in the combined financial statements
or notes thereto.
<PAGE> -49-
Arthur Andersen LLP
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Trump's Castle Associates
and Subsidiary:
We have audited the accompanying consolidated balance sheets
of Trump's Castle Associates (a New Jersey general partnership)
and Subsidiary as of December 31, 1995 and 1994, and the related
consolidated statements of operations, partners' capital and cash
flows for each of the three years in the period ended December 31,
1995. These consolidated financial statements and the schedule
referred to below are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
consolidated financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Trump's Castle Associates and Subsidiary as of December 31,
1995 and 1994, and the results of their operations and their cash
flows for each of the three years in the period ending December
31, 1995, in conformity with generally accepted accounting
principles.
Our audits were made for the purpose of forming an opinion on
the basic financial statements taken as a whole. The schedule
listed in the index to the financial statements is presented for
the purpose of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial
statements. This schedule has been subjected to the auditing
procedures applied in our audits of the basic financial
statements, and in our opinion, fairly states in all material
respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN, LLP
Roseland, New Jersey
February 16, 1996
<PAGE> F-1
<TABLE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $21,038,000 $19,122,000
Trade receivables, less allowance for
doubtful accounts of $1,969,000 and
$3,704,000 respectively (Note 3) 9,007,000 7,395,000
Accounts receivable, other 1,252,000 1,463,000
Due from affiliates, net (Note 6) 1,146,000 434,000
Inventories (Note 3) 1,567,000 1,790,000
Prepaid expenses and
other current assets (Note 4) 4,961,000 2,880,000
------------ ------------
Total current assets 38,971,000 33,084,000
------------ ------------
PROPERTY AND EQUIPMENT (Notes 3, 4, and 5):
Land and land improvements 62,706,000 62,706,000
Buildings and building improvements 327,487,000 327,487,000
Furniture, fixtures and equipment 114,253,000 108,308,000
Construction in progress 5,436,000 3,196,000
------------ ------------
509,882,000 328,174,000
Less - Accumulated depreciation 187,767,000 173,523,000
------------ ------------
322,115,000 328,174,000
------------ ------------
OTHER ASSETS 9,495,000 7,539,000
------------ -----------
Total assets $370,581,000 $368,797,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
<PAGE> F-2A
<TABLE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994
<CAPTION>
LIABILITIES AND PARTNER'S CAPITAL 1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Current maturities-other borrowings (Note 5) $2,903,000 $1,108,000
Trade accounts payable 9,413,000 6,191,000
Accrued payroll and related expenses 7,358,000 8,625,000
Accrued interest payable (Note 2) 4,391,000 3,994,000
Gaming liabilities (Note 3) 2,988,000 3,126,000
Self insurance reserves 4,141,000 4,660,000
Other 7,208,000 6,380,000
------------ ------------
Total current liabilities 38,402,000 34,084,000
MORTGAGE NOTES, due 2003 (Notes 4 and 10) 206,569,000 204,412,000
(Net of discount of $ 35,572,000
and $ 37,729,000, respectively)
PIK NOTES, due 2005 (Notes 4 and 10) 54,110,000 46,129,000
(Net of discount of $ 7,750,000
and $ 7,965,000, respectively)
OTHER BORROWINGS (Note 5) 62,336,000 63,892,000
OTHER LONG TERM LIABILITIES 3,351,000 3,315,000
------------ ------------
Total liabilities 364,768,000 351,832,000
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 7)
PARTNERS' CAPITAL (Notes 2 and 6):
Contributed Capital 73,395,000 73,395,000
Accumulated Deficit (67,582,000) (56,430,000)
------------ ------------
Total partners' capital 5,813,000 16,965,000
------------ ------------
Total liabilities and capital $370,581,000 $368,797,000
============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated balance sheets.
<PAGE> F-2B
<TABLE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
Gaming (Note 3) $280,124,000 $258,455,000 $246,370,000
Rooms 20,052,000 19,514,000 19,647,000
Food and beverage 30,804,000 28,447,000 30,608,000
Other 9,130,000 8,969,000 8,201,000
------------ ------------ ------------
Gross Revenues 340,110,000 315,385,000 304,826,000
Less-Promotional allowances (Note 3) 34,547,000 31,572,000 31,599,000
------------ ------------ ------------
Net Revenues 305,563,000 283,813,000 273,227,000
------------ ------------ ------------
COSTS AND EXPENSES (Notes 2, 6 and 7)
Gaming 165,679,000 151,036,000 145,717,000
Rooms 2,534,000 2,533,000 2,980,000
Food and beverage 13,516,000 12,396,000 14,595,000
General and administrative 61,431,000 61,974,000 54,558,000
Depreciation and amortization 14,639,000 14,437,000 16,425,000
Other 13,403,000 12,613,000 11,086,000
------------ ------------ ------------
271,202,000 254,989,000 245,361,000
------------ ------------ ------------
Income from operations 34,361,000 28,824,000 27,866,000
INTEREST INCOME 504,000 636,000 675,000
INTEREST EXPENSE, including
approximately $9,000,000
in transaction costs related to
the Recapitalization Plan
in 1993 (Note 2). (46,017,000) (44,173,000) (56,926,000)
------------ ------------ ------------
Net Loss ($11,152,000) ($14,713,000) ($28,385,000)
============ ============ ============
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
<PAGE> F-3
<TABLE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF PARTNERS' CAPITAL
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<CAPTION>
Contributed Accumulated
Capital Deficit Total
<S> <C> <C> <C>
Balance at December 31, 1992 $73,395,000 ($12,536,000) $60,799,000
Net loss - (28,385,000) (28,385,000)
Partnership Distribution (Note 6) - (736,000) (736,000)
----------- ------------ -----------
Balance at December 31, 1993 73,395,000 (41,717,000) 31,678,000
Net loss - (14,713,000) (14,713,000)
----------- ------------ -----------
Balance at December 31, 1994 $73,395,000 (56,430,000) 16,965,000
Net loss - (11,152,000) (11,152,000)
----------- ------------ -----------
Balance at December 31, 1995 $73,395,000 ($67,582,000) $5,813,000
=========== ============ ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
<PAGE> F-4
<TABLE>
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss ($11,152,000) ($14,713,000) ($28,385,000)
Adjustments to reconcile net loss
to net cash flows provided by
(used in) operating activities-
Noncash charges-
Depreciation and amortization 14,639,000 14,437,000 16,425,000
Accretion of bond discount 2,372,000 2,148,000 10,395,000
Provision for losses on receivables 1,370,000 3,438,000 755,000
Amortization of CRDA tax credits 720,000 955,000 115,000
Valuation allowance-CRDA investments 936,000 735,000 953,000
----------- ----------- -----------
8,885,000 7,000,000 258,000
Increase in receivables (3,486,000) (2,461,000) (3,461,000)
Decrease (increase) in inventories 223,000 525,000 (155,000)
Increase in other current assets (2,800,000) (320,000) (701,000)
Increase in other assets (86,000) (881,000) (42,000)
Increase (decrease) in
current liabilities 2,527,000 2,112,000 (4,980,000)
Increase in other liabilities 7,802,000 3,315,000 -
----------- ----------- -----------
Net cash flows provided by
(used in) operating activities 13,065,000 9,290,000 (9,081,000)
----------- ----------- -----------
CASH FLOWS USED BY INVESTING ACTIVITIES:
Purchases of property and
equipment, net (8,580,000) (8,257,000) (10,396,000)
Purchase of CRDA investments (2,805,000) (2,350,000) (2,958,000)
----------- ----------- -----------
Net cash flows used in
investing activities (11,385,000) (10,607,000) (13,354,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of Senior Notes - - 27,000,000
Repayment of other borrowings (1,470,000) - (7,000,000)
Other borrowings 1,706,000 - -
Distributions to TC\GP, INC. - - (736,000)
----------- ----------- -----------
Net cash flows from
financing activities 236,000 - 19,264,000
----------- ----------- -----------
Net increase (decrease) in
cash and cash equivalents 1,916,000 (1,317,000) (3,171,000)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 19,122,000 20,439,000 23,610,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS
AT END OF YEAR $21,038,000 $19,122,000 $20,439,000
=========== =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements
are an integral part of these consolidated statements.
<PAGE> F-5
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) ORGANIZATION AND OPERATIONS:
The accompanying consolidated financial statements include
those of Trump's Castle Associates, a New Jersey general
partnership (the "Partnership") and its wholly-owned subsidiary,
Trump's Castle Funding, Inc., a New Jersey corporation
("Funding"). All significant intercompany balances and
transactions have been eliminated in the consolidated financial
statements.
The Partnership was formed as a limited partnership in 1985
for the sole purpose of acquiring and operating Trump's Castle
Casino Resort ("Trump's Castle"). The Partnership converted to a
general partnership in February 1992. Trump's Castle is a luxury
casino hotel located in the Marina District of Atlantic City, New
Jersey. A substantial portion of Trump's Castle's revenues are
derived from its gaming operations. Competition in the Atlantic
City gaming market is intense and the Partnership believes that
the competition will continue as new entrants to the gaming
industry become operational.
The partners in the Partnership are TC/GP, Inc. ("TC/GP"),
which has a 37.5% interest in the Partnership, Donald J. Trump
("Trump"), who has a 61.5% interest in the Partnership, and
Trump's Castle Hotel & Casino, Inc. ("TCHI"), which has a 1%
interest in the Partnership. Trump, by virtue of his ownership of
TC/GP and TCHI, is the beneficial owner of 100% of the common
equity interest in the Partnership, subject to the right of
holders of warrants for 50% of the common stock of TCHI (the "TCHI
Warrants") to acquire an indirect beneficial interest in 0.5% of
the common equity interest in the Partnership. Trump has pledged
his direct and indirect ownership interest in the Partnership as
collateral under various personal debt agreements.
Funding was incorporated on May 28, 1985 solely to serve as a
financing company to raise funds through the issuance of bonds to
the public (Note 4). Since Funding has no business operations,
its ability to repay the principal and interest on
the 11-1/2% Senior Secured Notes due 2000 (the "Senior Notes"),
the 11-3/4% Mortgage Notes due 2003 (the "Mortgage Notes"), and
its Increasing Rate Subordinated Pay-in-Kind Notes due 2005 (the
"PIK Notes") is completely dependent upon the operations of the
Partnership.
(2) PLAN OF RECAPITALIZATION:
On December 28, 1993, the Partnership, Funding, and TC/GP
consummated a recapitalization plan (the "Recapitalization Plan")
whereby each $1,000 of principal of the 9.5% Mortgage Bonds issued
as part of an earlier plan of reorganization was exchanged for
<PAGE> F-6
$750 principal amount of Funding's Mortgage Notes, $120 principal
amount of Funding's PIK Notes, and a cash payment of $6.19 plus
all accrued and unpaid interest. Those bondholders who did not
elect to exchange their Mortgage Bonds received a cash payment in
redemption of their Mortgage Bonds of $750 for each $1,000 of
principal amount of bonds plus accrued and unpaid interest. In
addition, each share of TC/GP common stock was exchanged for $35
principal amount of PIK Notes.
As a result of the Recapitalization Plan, approximately 96%
of the principal amount of the previously issued Mortgage Bonds
were exchanged for Mortgage Notes and PIK Notes and the TC/GP
common stock was redeemed. Those Bonds that were redeemed for
cash were purchased at an amount which approximated their net book
value at the date of purchase. The net book value of the
exchanged Bonds has been carried forward and allocated to the
Mortgage Notes and PIK Notes in proportion to the principal amount
of Mortgage Notes and PIK Notes issued. The difference between
the principal amount and net book value of these Mortgage Notes
and PIK Notes is being accreted as a charge to interest expense
over the life of the Mortgage Notes and PIK Notes using the
effective interest method.
In addition to the Mortgage Notes and PIK Notes, Funding
issued $27,000,000 of the Senior Notes. A portion of the proceeds
from the Senior Notes were used to repay $7,000,000 of outstanding
indebtedness.
Transaction costs related to the Recapitalization Plan of
approximately $9,000,000 were included in interest expense.
Included in these costs was a $1,500,000 bonus to Trump for the
services he provided in connection with the Recapitalization Plan.
(3) ACCOUNTING POLICIES:
PERVASIVENESS OF ESTIMATES
The preparation of these financial statements in conformity
with generally accepted accounting principals requires the
Partnership to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses
during the reporting period. Actual results may differ from these
estimates.
REVENUE RECOGNITION
Casino revenues consist of the net win from gaming
activities, which is the difference between gaming wins and
losses. Revenues from hotel and other services are recognized at
the time the related services are performed.
The Partnership provides an allowance for doubtful accounts
arising from casino, hotel, and other services, which is based
<PAGE> F-7
upon a specific review of certain outstanding receivables and
historical collection performance. In determining the amount of
the allowance, the Partnership is required to make certain
estimates and assumptions and actual results may differ from these
estimates and assumptions.
PROMOTIONAL ALLOWANCES
Gross revenues include the retail value of the complimentary
food, beverage, and hotel services provided to patrons. The
retail value of these promotional allowances is deducted from
gross revenues to arrive at net revenues. The cost of such
complimentaries have been included in gaming costs and expenses in
the accompanying consolidated statements of operations. The
estimated departmental costs of providing such promotional
allowances are included in gaming costs and expenses and are as
follows:
1995 1994 1993
___________ ___________ ___________
Rooms $ 6,261,000 $ 6,554,000 $ 5,834,000
Food and Beverage 18,240,000 17,342,000 17,332,000
Other 2,483,000 2,693,000 2,073,000
___________ ___________ ___________
$26,984,000 $26,589,000 $25,239,000
=========== =========== ===========
INCOME TAXES
The accompanying consolidated financial statements do not
include a provision for Federal income taxes of the Partnership,
since any income or losses allocated to the partners are
reportable for Federal income tax purposes by the Partners.
Under the Casino Control Act (the "Act") and the regulations
promulgated thereunder, the Partnership and Funding are required
to file a consolidated New Jersey corporation business tax return.
As of December 31, 1995, the Partnership had New Jersey State
net operating losses of approximately $162,000,000, which are
available to offset taxable income through the year 2002. The net
operating loss carryforwards result in a deferred tax asset of
$15,200,000, which has been offset by a valuation allowance of
$15,200,000, as utilization of such carryforwards is not
considered to be more likely than not.
INVENTORIES
Inventories of provisions and supplies are carried at the
lower of cost (first-in, first-out basis) or market.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated
<PAGE> F-8
on the straight-line method over the estimated useful lives of the
assets. Estimated useful lives for furniture, fixtures, and
equipment and buildings are from three to eight years and forty
years, respectively.
LONG LIVED ASSETS
During 1995, the Partnership adopted the provisions of
Statement of Financial Accounting Standards No. 121 "Accounting
for the Impairment of Long Lived Assets" ("SFAS 121"). SFAS 121
requires, among other things, that an entity review its long lived
assets and certain related intangibles for impairment whenever
changes in circumstances indicate that the carrying amount of an
asset may not be fully recoverable. As a result of its review,
the Partnership does not believe that any impairment exists in the
recoverability of its long lived assets.
STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, Funding and the
Partnership consider all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents.
The following supplemental disclosures are made to the
statements of cash flows:
1995 1994 1993
Cash paid during the ___________ ___________ ___________
year for interest
(net of amounts
capitalized) $35,338,000 $31,255,000 $44,857,000
=========== =========== ===========
Issuance of debt in
exchange for accrued $ 7,766,000 $ 3,559,000 $ --
interest =========== =========== ===========
RECLASSIFICATION
Certain reclassifications have been made to the 1994 and 1993
financial statements in order to conform to the classifications
used in 1995.
(4) MORTGAGE NOTES AND PIK NOTES:
As discussed in Note 2, On December 28, 1993 all of the
outstanding Mortgage Bonds and TC/GP common stock were either
redeemed or exchanged for Mortgage Notes and PIK Notes by Funding.
The Mortgage Notes bear interest, payable in cash, semi-annually,
at 11-3/4% and mature on November 15, 2003. As discussed in Note
2, the net book value of the exchanged bonds has been carried
forward and allocated to the Mortgage Notes and PIK Notes in
proportion to the principal amount of Mortgage Notes and PIK Notes
<PAGE> F-9
issued. In the event the PIK Notes are redeemed prior to November
15, 1998, the interest rate on the Mortgage Notes will be reduced
to 11-1/2%. The Mortgage Notes may be redeemed at Funding's
option at a specified percentage of the principal amount
commencing in 1998.
The PIK Notes bear interest payable, at Funding's option in
whole or in part in cash and through the issuance of additional
PIK Notes, semi-annually at the rate of 7% through September 30,
1994 and 13-7/8% through November 15, 2003. After November 15,
2003, interest on the Notes is payable in cash at the rate of
13-7/8%. The PIK Notes mature on November 15, 2005. The PIK
Notes may be redeemed at Funding's option at 100% of the principal
amount under certain conditions, as defined in the PIK Note
Indenture, and are required to be redeemed from a specified
percentage of any equity offering which includes the Partnership.
Interest has been accrued using the effective interest method. On
May 15, 1995 and November 15, 1995, the semi-annual interest
payments of $3,753,000 and $4,013,000, respectively, were paid by
the issuance of additional PIK Notes.
On June 23, 1995, the Partnership entered into an Option
Agreement with Hamilton Partners, L.P. ("Hamilton") which grants
the Partnership an option (the "Option") to acquire the PIK Notes
owned by Hamilton. Hamilton has represented to the Partnership
that it is the owner of at least 92% of the outstanding principal
amount of the PIK Notes. The Option was granted to the
Partnership in consideration of a $1,100,000 payment to Hamilton,
which is included in prepaid expenses and other current assets.
The Option is exercisable at a price equal to 60% of the
aggregate principal amount and accrued interest of the PIK Notes
delivered by Hamilton. Pursuant to the terms of the Option
Agreement, upon the occurrence of certain events within 18 months
of the time the Option is exercised, the Partnership is required
to make an additional payment to Hamilton of up to 40% of the
principal amount of the PIK Notes. The option expires on March
19, 1996 and may be extended to June 21, 1996.
The terms of both the Mortgage Notes and PIK Notes include
limitations on the amount of additional indebtedness the
Partnership may incur, distributions of Partnership capital,
investments, and other business activities.
The Mortgage Notes are secured by a promissory note of the
Partnership to Funding (the "Partnership Note") in an amount and
with payment terms necessary to service the Mortgage Notes. The
Partnership Note is secured by a mortgage on Trump's Castle and
substantially all of the other assets of the Partnership. The
Partnership Note has been assigned by Funding to the Trustee to
secure the repayment of the Mortgage Notes. In addition, the
Partnership has guaranteed (the "Guaranty") the payment of the
Mortgage Notes, which Guaranty is secured by a mortgage on Trump's
Castle. The Partnership Note and the Guaranty are expressly
subordinated to the indebtedness described in Note 5 (the "Senior
Indebtedness") and the liens of the mortgages securing the
<PAGE> F-10
Partnership Note and the Guaranty are subordinate to the liens
securing the Senior Indebtedness.
The PIK Notes are secured by a subordinated promissory note
of the Partnership to Funding (the "Subordinated Partnership
Note"), which has been assigned to the Trustee for the PIK Notes,
and the Partnership has issued a subordinated guaranty (the
"Subordinated Guaranty") of the PIK Notes. The Subordinated
Partnership Note and the Subordinated Guaranty are expressly
subordinated to the Senior Indebtedness, the Partnership Note,
and the Guaranty.
The ability of Funding and the Partnership to pay their
indebtedness when due, will depend on their ability to either
generate cash from operations sufficient for such purposes or to
refinance such indebtedness on or before the date on which it
becomes due. The Partnership does not currently anticipate being
able to generate sufficient cash flow from operations to repay a
substantial portion of the principal amounts of the Mortgage Notes
and the PIK Notes when due. Thus, the repayment of the principal
amount of this indebtedness will likely depend primarily upon the
ability of Funding and the Partnership to refinance this debt when
due. The future operating performance of the Partnership and the
ability to refinance this debt will be subject to the then
prevailing economic conditions, industry conditions, and numerous
other financial, business, and other factors, many of which are
beyond the control of Funding or the Partnership. There can be no
assurance that the future operating performance of the Partnership
will be sufficient to meet these repayment obligations or that the
general state of the economy, the status of the capital markets
generally, or the receptiveness of the capital markets to the
gaming industry will be conducive to refinancing this debt or
other attempts to raise capital.
(5) OTHER BORROWINGS:
BANK BORROWINGS
The Partnership has a term loan with Midlantic National Bank
(the "Term Loan") in the amount of $38,000,000. The Term Loan had
an initial maturity date of May 29, 1995 and under its terms, the
Partnership had the option, subject to certain conditions, to
extend the Term Loan an additional five years. The Partnership
exercised its option to extend the Term Loan on May 28, 1995. The
interest rate was revised to be a fluctuating rate of 3% above the
bank's prime rate, which was 8.5% at December 31, 1995, but in no
event less than 9% per annum. In addition, the outstanding
principal amount of the Term Loan will be amortized over the five-
year extension period on a twenty year amortization schedule
requiring principal payments of approximately $158,000 per month
over the period. At December 31, 1995, $36,892,000 was
outstanding on this Term Loan.
The Term Loan is secured by a mortgage lien on Trump's Castle
that is prior to the lien securing the Mortgage Notes (Note 4) and
the Senior Notes described below.
<PAGE> F-11
SENIOR NOTES
On December 28, 1993, Funding issued the Senior Notes.
Similar to the Mortgage Notes, the Senior Notes are secured by an
assignment of a promissory note of the Partnership (the "Senior
Partnership Note") which is in turn secured by a mortgage on
Trump's Castle and substantially all of the other assets of the
Partnership. In addition, the Partnership has guaranteed (the
"Senior Guaranty") the payment of the Senior Notes, which Senior
Guaranty is secured by a mortgage on Trump's Castle. The Senior
Partnership Note and the Senior Guaranty are subordinated to the
Term Loan described above.
Interest on the Senior Notes is payable semiannually at the
rate of 11-1/2%; however in the event that the PIK Notes are
redeemed prior to November 15, 1998, the interest rate will be
reduced to 11-1/4%. The Senior Notes are subject to a required
partial redemption, as defined, commencing on June 1, 1998 at 100%
of the principal amount of the amount redeemed.
(6) RELATED PARTY TRANSACTIONS:
TRUMP MANAGEMENT FEE
The Partnership had a management agreement (the "Management
Agreement") with Trump's Castle Management Corp. ("TCMC"), a
corporation wholly-owned by Trump. The Management Agreement
provided that the day-to-day operation of Trump's Castle and all
ancillary properties and businesses of the Partnership was to be
under the exclusive management and supervision of TCMC.
Pursuant to the Management Agreement, the Partnership was
required to pay an annual fee in the amount of $1,500,000 to TCMC
for each year in which Earnings Before Interest, Taxes,
Depreciation, and Amortization ("EBITDA"), as defined, exceeds
certain levels. In addition, TCMC, beginning with the fiscal year
ended December 31, 1994, was to receive an incentive fee equal to
10% of the excess EBITDA over $45,000,000 for such fiscal year.
During the year ended December 31, 1993, the Partnership incurred
fees and expenses of $1,647,000 under the Management Agreement.
As a result of the Recapitalization Plan described in Note 2,
on December 28, 1993, the Partnership terminated the Management
Agreement with TCMC and entered into a services agreement (the
"Services Agreement") with TC/GP. Pursuant to the terms of the
Services Agreement, TC/GP is obligated to provide the Partnership,
from time to time, when reasonably requested, consulting services
on a non-exclusive basis, relating to marketing, advertising,
promotional, and other similar and related services with respect
to the business and operations of the Partnership, including such
other services as the Managing Partner may reasonably request.
In consideration for the services to be rendered, the
Partnership will pay TC/GP an annual fee on the same basis as that
of the previous Management Agreement, discussed above. During the
<PAGE> F-12
years ended December 31, 1995 and 1994, the Partnership incurred
fees and expenses of $2,087,000 and $2,111,000, respectively,
under the Services Agreement. The Services Agreement expires on
December 31, 2005.
OTHER PAYMENTS TO TRUMP
During 1994, the Board of Partner Representatives approved
a $1,000,000 bonus to be paid to Trump, based upon 1994 operating
results. The amount was paid in two equal installments in June and
August 1995. No such bonus was approved for 1995.
DUE FROM AFFILIATES
Amounts due from affiliates were $1,146,000 and $434,000 as
of December 31, 1995 and 1994, respectively. The Partnership has
engaged in limited intercompany transactions with Trump Plaza
Associates, Trump Taj Mahal Associates, and the Trump
Organization, which are affiliates of Trump. These transactions
include certain shared payroll costs as well as complimentary
services offered to customers, for which the Partnership makes
initial payments and is then reimbursed by the affiliates.
During 1995, 1994, and 1993, the Partnership incurred
expenses of approximately $1,673,000, $1,631,000, and $1,332,000,
respectively, in corporate salaries and $1,109,000, $1,047,000,
and $952,000, respectively, of other transactions on behalf of
these related entities. In addition, the Partnership received
payments totaling $1,401,000, $2,438,000, and $2,004,000,
respectively, for services rendered and had $580,000, $441,000,
and $407,000, respectively, of charges for similar costs incurred
by these related entities on behalf of the Partnership.
PARTNERSHIP AGREEMENT
Under the terms of the Partnership Agreement, the Partnership
was required to pay all costs incurred by TC/GP. For the years
ended December 31, 1995, 1994, and 1993, the Partnership
paid $1,248,000, $1,188,000, and $736,000, respectively, of
expenses on behalf of TC/GP. For the years ended December 31,
1995 and 1994 these costs were charged to general and
administrative expense in the accompanying consolidated financial
statements. For the year ended December 31, 1993 these costs were
expenses of TC/GP and recorded as a capital contribution.
(7) COMMITMENTS AND CONTINGENCIES:
CASINO LICENSE RENEWAL
The Partnership is subject to regulation and licensing by
the CCC. The Partnership's casino license must be renewed
periodically, is not transferable, is dependent upon the
financial stability of the Partnership, and can be revoked at any
time. Due to the uncertainty of any license renewal application,
there can be no assurance that the license will be renewed. Upon
<PAGE> F-13
revocation, suspension for more than 120 days, or failure to renew
the casino license due to the Partnership's financial condition or
for any other reason, the Casino Control Act (the "Act") provides
that the CCC may appoint a conservator to take possession of and
title to the hotel and casino's business and property, subject to
all valid liens, claims, and encumbrances.
On June 22, 1995, the CCC renewed the casino license of the
Partnership through 1999 subject to certain continuing reporting
and compliance conditions.
SELF INSURANCE RESERVES
Self insurance reserves represent the estimated amounts of
uninsured claims settlements related to employee health medical
costs, workers compensation, and other legal proceedings in the
normal course of business. These reserves are established by the
Partnership based upon a specific review of open claims as of the
balance sheet date as well as historical claims settlement
experience. Actual results may differ from these reserve amounts.
EMPLOYMENT AGREEMENTS
The Partnership has entered into employment agreements with
certain key employees which expire at various dates through
July 30, 1998. Total minimum commitments on these agreements at
December 31, 1995 were approximately $4,061,000.
LEGAL PROCEEDINGS
The Partnership is involved in legal proceedings incurred in
the normal course of business. In the opinion of management and
its counsel, if adversely decided, none of these proceedings would
have a material effect on the consolidated financial position of
the Partnership.
CASINO REINVESTMENT DEVELOPMENT AUTHORITY OBLIGATIONS
Pursuant to the provisions of the Act, the Partnership,
must either obtain investment tax credits, as defined in the Act,
in an amount equivalent to 1.25% of its gross casino revenues, as
defined in the Act, or pay an alternative tax of 2.5% of its gross
casino revenues. Investment tax credits may be obtained by making
qualified investments, as defined, or by depositing funds which
may be converted to bonds by the Casino Reinvestment Development
Authority (the "CRDA"), both of which bear interest at below
market interest rates. The Partnership is required to make
quarterly deposits with the CRDA to satisfy its investment
obligations.
From time-to-time the Partnership has elected to donate funds
that it has on deposit with the CRDA in return for tax credits to
satisfy substantial portions of the Partnership's future
investment alternative tax obligations. Donations in the amount
of $375,000, $6,440,000, and $568,000 were made in 1995, 1994, and
1993, respectively. These donations, net of the tax credits
<PAGE> F-14
received, were charged against operations in the year in which
they were made and resulted in CRDA tax credits of $191,000,
$1,474,000, and $290,000 to be applied to the years ending
December 31, 1995, 1994, and 1993, respectively. For the years
ended December 31, 1995, 1994, and 1993 the Partnership charged to
operations $720,000, $955,000, and $115,000, respectively, which
represents amortization of a portion of the tax credits discussed
above.
In addition, for the years ended December 31, 1995, 1994, and
1993, the Partnership charged to operations $936,000, $735,000,
and $953,000, respectively, to give effect to the below market
interest rates associated with purchased CRDA bonds.
(8) EMPLOYEE BENEFIT PLANS:
The Partnership has a retirement savings plan for its
nonunion employees under Section 401(k) of the Internal Revenue
Code. Employees are eligible to contribute up to 15% of their
earnings to the plan up to the maximum amount permitted by law,
and the Partnership will match 50% of an eligible employee's
contributions up to a maximum of 5% of the employee's earnings.
The Partnership recorded charges of approximately $1,013,000,
$899,000, and $864,000 for matching contributions for the years
ended December 31, 1995, 1994, and 1993, respectively.
The Partnership makes payments to various trusteed pension
plans under industry-wide union agreements. The payments are based
on the hours worked by or gross wages paid to covered employees.
It is not practical to determine the amount of payments ultimately
used to fund pension benefit plans or the current financial
condition of the plans. Under the Employee Retirement Income
Security Act, the Partnership may be liable for its share of the
plans' unfunded liabilities, if any, if the plans are terminated.
Pension expense for the years ended December 31, 1995, 1994, and
1993 were $497,000, $455,000, and $407,000, respectively.
The Partnership provides no other material post employment
benefits.
<PAGE> F-15
(9) FINANCIAL INFORMATION OF FUNDING:
Financial information relating to Funding as of and for the
years ended December 31, 1995 and 1994 is as follows:
1995 1994
Total Assets (including Mortgage $287,679,000 $277,541,000
Notes Receivable of $242,141,000, ============ ============
net of unamortized discount of
$35,572,000 and $37,729,000 at
December 31, 1995 and 1994; PIK
Notes Receivable of $61,860,000,
net of unamortized discount of
$7,750,000 at December 31, 1995
and $54,094,000, net of unamortized
discount of $7,965,000 at December
31, 1994, and Senior Notes Receivable
of $27,000,000 at December 31, 1995
and 1994.)
Total Liabilities and Capital $287,679,000 $277,541,000
(including Mortgage Notes Payable ============ ============
of $242,141,000, net of unamortized
discount of $35,572,000 and
$37,729,000 at December 31, 1995
and 1994, PIK Notes Payable of
$61,860,000, net of unamortized
discount of $7,750,000 at December
31, 1995 and $54,094,000, net of
unamortized discount of $7,965,000,
at December 31, 1994 and Senior Notes
Payable of $27,000,000 at December
31, 1995 and 1994.)
Interest Income $ 41,768,000 $ 40,600,000
Interest Expense $ 41,768,000 $ 40,600,000
____________ ____________
NET INCOME $ - $ -
============ ============
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of the following financial instruments of
the Partnership and Funding approximate fair value, as follows:
(a) cash and cash equivalents and accrued interest receivables and
payables based on the short-term nature of the financial
instruments, (b) CRDA bonds and deposits based on the allowances
to give effect to the below market interest rates.
<PAGE> F-16
The fair values of the Mortgage Notes and PIK Notes are based
on quoted market prices. The fair value of the Mortgage Bonds
was based on quoted market prices obtained by the Partnership from
its investment advisor as follows:
December 31, 1995
______________________________
Carrying Amount Fair Value
_______________ _____________
11-3/4% Mortgage Notes............ $ 206,569,000 $ 212,479,000
PIK Notes......................... $ 54,110,000 $ 48,096,000
December 31, 1994
______________________________
Carrying Amount Fair Value
______________ _____________
11-3/4% Mortgage Notes............ $ 204,412,000 $ 131,967,000
PIK Notes......................... $ 46,129,000 $ 43,546,000
There are no quoted market prices for the Partnership
Term Loan and Senior Notes. A reasonable estimate of
their value could not be made without incurring excessive costs.
<PAGE> F-17
<TABLE>
SCHEDULE II
TRUMP'S CASTLE ASSOCIATES AND SUBSIDIARY
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<CAPTION>
Balance at Charged to Balance at
Beginning Costs and Other End
of Period Expenses Charges of Period
---------- --------- ------- ---------
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1995:
Allowance for doubtful accounts $3,704,000 $1,370,000 ($3,105,000)<FA> $1,969,000
========== ========== ============ ==========
Valuation allowance for interest
differential on CRDA bonds $933,000 $936,000 ($125,000)<FB> $1,744,000
========== ========== ============ ==========
YEAR ENDED DECEMBER 31, 1994:
Allowance for doubtful accounts $1,928,000 $3,438,000 ($1,662,000)<FA> $3,704,000
========== ========== ============ ==========
Valuation allowance for interest
differential on CRDA bonds $2,362,000 $735,000 ($2,164,000)<FB> $933,000
========== ========== ============ ==========
YEAR ENDED DECEMBER 31, 1993:
Allowance for doubtful accounts $2,721,000 $755,000 ($1,548,000)<FA> $1,928,000
========== ========== ============ ==========
Valuation allowance for interest
differential on CRDA bonds $1,409,000 $953,000 - $2,362,000
========== ========== ============ ==========
<FN>
<FA> Write-off of uncollectible accounts.
<FB> Write-off of allowance applicable to contribution of CRDA deposits.
</FN>
</TABLE>
<PAGE> F-18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the Registrants have duly caused this Annual Report
to be signed on their behalf by the undersigned, thereunto duly
authorized, on the 22nd day of March, 1996.
TRUMP'S CASTLE FUNDING, INC.
By: /s/Donald J. Trump
_____________________
By: Donald J. Trump
Title: President
TRUMP'S CASTLE ASSOCIATES
By: /s/Donald J. Trump
_____________________
By: Donald J. Trump
Title: Managing General Partner
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, this Annual Report has been signed below by the
following persons on behalf of the Registrants and in the capacities
and on the date indicated.
Signature Title Date
TRUMP'S CASTLE FUNDING, INC.
By:/s/Donald J. Trump Chairman of the Board, March 22, 1996
___________________ President, Chief Executive
Donald J. Trump Officer (Principal Executive Officer),
Treasurer (Principal Financial Officer),
and sole Director of the Registrant.
By:/s/Robert E. Schaffhauser Assistant Treasurer March 22, 1996
_________________________ of the Registrant
Robert E. Schaffhauser (Principal Accounting Officer)
Signature Title Date
TRUMP'S CASTLE ASSOCIATES
By:/s/Nicholas L. Ribis Board of Partner March 22, 1996
____________________ Representatives
Nicholas L. Ribis
By:/s/Roger P. Wagner Board of Partner March 22, 1996
__________________ Representatives
Roger P. Wagner
By:/s/Asher O. Pacholder Board of Partner March 22, 1996
_____________________ Representatives
Asher O. Pacholder
By:/s/Arthur S. Bahr Board of Partner March 22, 1996
____________________ Representatives
Arthur S. Bahr
By:/s/Thomas F. Leahy Board of Partner March 22, 1996
__________________ Representatives
Thomas F. Leahy
By:/s/Robert M. Pickus Board of Partner March 22, 1996
___________________ Representatives
Robert M. Pickus
By:/s/Robert E. Schaffhauser Chief Financial Officer March 22, 1996
_________________________ and Chief Accounting
Robert E. Schaffhauser Officer of the Partnership
June 16, 1995
Mr. Robert E. Schaffhauser
55 Broadway
Somers Point, NJ 08244
Re: Employment by Trump's Castle
Dear Bob:
This letter will set forth the terms of your continued
employment by Trump's Castle Associates ("TCA"), the owner
and operator of Trump's Castle Casino Resort ("Trump's
Castle"). In the event your employment is terminated by TCA
for any reason other than cause, TCA shall, upon the
execution of a release agreement, pay you an amount equal to
twelve (12) months of your then current salary and shall
reimburse you for your COBRA insurance coverage expenses for
twelve (12) months. TCA shall be deemed to have terminated
you without cause, should any of the following occur without
your consent:
1. A work assignment which requires a physical relocation
of your primary workplace to any location other than
Trump's Castle; or
2. Any diminution of your responsibilities, authority or
status within TCA's table of organization; or
3. A reduction in your salary; or
4. Any other material change in such terms of your
employment as were in effect as of the date of this
letter.
For purposes of this provision, "cause" shall be defined to
mean the following: a breach by you of any material employee
conduct rule; an act of dishonesty; the deliberate and
intentional refusal by you to perform your duties as
assigned; illegal drug use or addiction; you disability,
which is defined to be any condition prohibiting you from
performing your duties hereunder for a period in excess of
thirty (30) days; or your death.
You understand that this letter sets forth a specific term of
your employment only and is not an employment agreement. TCA
and you will always have an employment at-will relationship
which means that either you or TCA may choose to end your
employment at any time. Additionally, your employment will
be subject to the terms and conditions of Trump's Castle's
Employee Handbook.
The terms set forth herein shall be binding upon and inure to
the benefit of any successor to or assignee of the interests
of TCA.
We look forward to having you continue on the Trump's Castle
team.
Very truly yours,
By: /s/ Roger P. Wagner
_________________________
Roger P. Wagner
President/Chief Operating Office
RPW:4
June 30, 1995
Mr. Mark Brown
Dear Mr. Brown:
This letter will serve to confirm our understanding and
agreement pursuant to which Trump's Castle Associates ("TCA")
has agreed to employ you, and you have agreed to be employed
by TCA for the Term defined and set forth in Paragraph 2,
unless terminated earlier by TCA pursuant to Paragraph 13
hereof:
1. You shall be employed by TCA in the capacity of
Executive Vice President of Operations or in such other
position as determined solely by TCA to perform such
duties as are commonly attendant upon such office.
2. Your employment with TCA shall commence on July 10,
1995, and continue for a period of three (3) years
thereafter, expiring on July 9, 1998.
3. a. During the term of this Agreement, you shall be
paid an annual base salary at the rate of Three Hundred
Fifty Thousand ($350,000) Dollars payable periodically
in accordance with TCA's regular payroll practices.
b. Upon the commencement of your employment with TCA,
you shall receive a bonus in the amount of Seventy-Five
Thousand ($75,000) Dollars.
c. TCA shall reimburse you for the cost of health
insurance coverage under COBRA during your first ninety
(90) days of employment.
d. You shall be entitled to two (2) weeks vacation on
the first anniversary of your employment. Thereafter,
you will earn vacation in accordance with TCA's regular
policies therefor.
4. You shall be afforded coverage under TCA's employee
insurance programs in such form and at such levels as
TCA, in its sole and absolute discretion, may hereafter
elect to provide for similarly situated executive.
<PAGE> Two
Mr. Mark A. Brown
June 30, 1995
5. a. You shall be entitled to participate in TCA's
executive benefit programs in such form and at such
levels as TCA, in its sole and absolute discretion, may
hereafter elect to provide similarly situated
executives.
b. You shall be entitled to participate in any
management profit sharing or bonus plan established by
TCA for similarly situated executives, but in no event
shall you receive a bonus of less than Seventy-Five
Thousand ($75,000) per year in 1995, 1996 and 1997.
c. You shall, in addition to monetary compensation,
receive a car allowance of Seven Hundred Fifty ($750)
Dollars per month.
6. You agree that until the Expiration Date and/or so long
as TCA continues to pay your salary as provided herein,
you shall not accept employment, either as an employee,
consultant or independent contractor, for or on behalf
of any other casino hotel located in Atlantic City, New
Jersey. You acknowledge and agree that this restrictive
covenant is reasonable as to duration, terms and
geographical area and that the same is necessary to
protect the legitimate interests of TCA, imposes no
undue hardship on you and is not injurious to the
public.
7. You hereby agree that throughout the term of this
Agreement you shall devote your fill time, attention and
efforts to TCA's business and shall not, directly or
indirectly, work for, consult with or otherwise engage
in any other activities of a business nature for any
other person or entity, without TCA's prior written
consent. You will promptly communicate to TCA, in
writing when requested, all marketing strategies,
technical designs and concepts, and other ideas
pertaining to TCA's business which are conceived or
developed by you, alone or with others, at any time
(during or after business hours) while you are employed
by TCA. You acknowledge that all of those ideas will be
TCA's exclusive property. You agree to sign any
documents which TCA deems necessary to confirm its
ownership of those ideas, and you agree to otherwise
cooperate with TCA in order to allow TCA to take full
advantage of those ideas.
8. You acknowledge that you have access to information
which is proprietary and confidential to TCA. This
information includes, but is not limited to, (1) the
identity of customers and prospects, (2) names,
<PAGE> Three
Mr. Mark A. Brown
June 30, 1995
addresses and telephone numbers of individual contacts,
(3) pricing policies, marketing strategies, product
strategies and methods of operation, and (4) expansion
plans, management policies and other business strategies
and policies, You acknowledge and understand that this
information must be maintained in strict confidence in
order for TCA to protect its business and its
competitive position in the marketplace. Accordingly,
both during and after termination your employment, you
agree that you will not disclose any of this information
for any purpose or remove materials containing this
information from TCA's premises. Upon termination of
your employment, you will immediately return to TCA all
correspondence files, business card files, customer and
prospect lists, price books, technical data, notes and
other materials which contain any of this information,
and you will not retain copies of those materials.
Notwithstanding the foregoing, you may maintain and use
information and data as described herein of which you
are aware of prior to your employment by TCA. Nothing
in this paragraph is intended to prevent you form
utilizing information which was not developed by TCA
during the course of your employment at TCA.
9. You also agree that for a period of forty-five (45) days
after termination of your employment, you will not
solicit or contact, directly or through any other
Atlantic City casino, any customers whom you have
developed or continue to develop during your tenure with
TCA.
10. You represent to TCA that there are no restrictions or
agreements to which you are a party which would be
violated by our execution of this Agreement and your
employment hereunder.
11. You hereby agree to comply with all of the rules,
regulations, policies and/or procedures adopted by TCA
during the term of this Agreement, as well as all
applicable state, federal and local laws, regulations
and ordinances.
12. You hereby represent that you presently hold the New
Jersey Control Commission license required in connection
with your employment hereunder and will take appropriate
steps to renew said license in a timely manner.
13. You hereby understand and acknowledge that TCA may
terminate this Agreement in the event your Casino
Control Commission license is terminated and/or
suspended or revoked by the Commission or if you shall
<PAGE> Four
Mr. Mark A. Brown
June 30, 1995
commit an act constituting "Cause". which is defined to
mean the following: a material breach of any employee
conduct rules which interferes in a material way with
your ability to perform your duties; the deliberate and
intentional refusal by you to perform the duties
commonly attendant upon the position of Executive Vice
President of Operations; alcohol or drug addiction; your
disability, which is defined to be any condition
prohibiting you from performing your duties hereunder
for a period in excess of ninety (90) days; or your
death. In the event of a termination pursuant to this
paragraph, TCA shall pay to you your salary earned to
the date of termination and shall have no further
liability or obligation to you under this Agreement.
14. TCA shall indemnify, defend and hold you harmless,
including the payment of reasonable attorney fees, if
TCA does not directly provide your defense, from and
against any and all claims made by anyone, including,
but not limited to, a corporate entity, company, other
employee, agent, patron or member of the general public
with respect to any claim which asserts as a basis, any
acts, omissions or other circumstances involving the
performance of your employment duties hereunder unless
such claim is based upon your gross negligence or any
willful and/or wanton act.
15. You represent that you are a citizen of the United
States or that you possess the proper visa and/or work
permits necessary to perform your functions hereunder.
16. You acknowledge that it would be extremely difficult to
measure the damages that might result from any breach by
you of your promises in Section 6, 7, 8 and 9 of this
Agreement and that a breach may cause irreparable injury
to TCA which could not be compensated by money damages.
Accordingly, TCA will be entitled to enforce this
Agreement by obtaining a court order prohibiting you
(and any others involved) from breaching this Agreement.
If a court decides that any part of this agreement is
too broad, the court may limit that part and enforce it
as limited.
17. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey and
in any lawsuit involving this Agreement, you consent to
the jurisdiction and venue of any state or federal court
located in New Jersey. This Agreement represents the
entire agreement between the parties and may not be
modified or amended without the written agreement of
both parties. This Agreement supersedes all other
agreements between the parties.
<PAGE> Five
Mr. Mark A. Brown
June 30, 1995
If the foregoing correctly sets forth our understanding,
kindly sign and return to me the duplicate copy of this
letter enclosed herewith.
Very truly yours,
TRUMP'S CASTLE ASSOCIATES
Agreed & Consented to:
By: /s/ Roger P. Wagner /s/ Mark A. Brown
_______________________ _______________________
Roger P. Wagner Mark A. Brown
President/Chief Operating Officer
7-10-95
________________________
Date
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMRATION FROM TRUMP'S CASTLE
FUNDING, INC. AND TRUMP'S CASTLE ASSOCIATES. THIS DATA HAS BEEN EXTRACTED FROM
THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS FOR
THE TWELVE MONTH PERIOD ENDED DECEMBER 31, 1995 AND IS QUALIFIED IN ITS
INTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000770618
<NAME> TRUMP'S CASTLE FUNDING, INC. AND TRUMP'S CASTLE ASSOCIATES
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 21,038
<SECURITIES> 0
<RECEIVABLES> 11,405<F1>
<ALLOWANCES> 0
<INVENTORY> 1,567
<CURRENT-ASSETS> 4,961
<PP&E> 509,882
<DEPRECIATION> 187,767
<TOTAL-ASSETS> 370,581
<CURRENT-LIABILITIES> 38,402
<BONDS> 260,679
0
0
<COMMON> 200
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 370,581
<SALES> 0
<TOTAL-REVENUES> 305,563
<CGS> 0
<TOTAL-COSTS> 256,563
<OTHER-EXPENSES> 14,639
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (46,017)
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,152)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>ASSET VALUES REPRESENT NET AMOUNT
</FN>
</TABLE>
