FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number: 0-14314
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
(Exact name of registrant as specified in its
Agreement of Limited Partnership)
Delaware 47-0695511
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, Nebraska 68102
(Address of principal executive offices) (Zip Code)
(402) 444-1630
(Registrant's telephone number, including area code)
Securities Registered Pursuant to Section 12(b) of the Act:
None
Securities Registered Pursuant to Section 12(g) of the Act:
Beneficial Unit Certificates representing assignments of limited
partnership interests in the America First Tax Exempt Mortgage Fund Limited
Partnership (the "BUCs")
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by the 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 (229.405 of the chapter) is not contained herein,
and will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the BUCs on March 3, 1997, based upon
the final sales price per BUC as reported in The Wall Street Journal on
March 4, 1997, was $68,606,505.
DOCUMENTS INCORPORATED BY REFERENCE
None
<PAGE> -i-
TABLE OF CONTENTS
Page
PART I
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 3
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . 3
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . . . . . . . . 3
Item 6. Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . 4
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . 5
Item 8. Financial Statements and Supplementary Data . . . . . . . . . . . . 10
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. . . . . . . . . . . . . . . . . . . . . . . . 10
PART III
Item 10. Directors and Executive Officers of the Registrant . . . . . . . . 10
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . 11
Item 12. Security Ownership of Certain Beneficial Owners and Management . . 11
Item 13. Certain Relationships and Related Transactions . . . . . . . . . . 12
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . 12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
<PAGE> -ii-
PART I
Item 1. Business. America First Tax Exempt Mortgage Fund Limited
Partnership (the "Registrant" or the "Partnership") was formed as a limited
partnership on November 11, 1985, under the Delaware Revised Uniform Limited
Partnership Act to acquire a portfolio of federally tax-exempt mortgage bonds
to provide construction and/or permanent financing of multifamily residential
apartments. The Registrant's business objectives are to provide its
investors: (i) safety and preservation of capital; (ii) regular distributions
of tax-exempt interest; and, (iii) potential for an enhanced tax-exempt yield
as a result of a participation interest in the net cash flow and net capital
appreciation of the real estate financed by the Registrant.
The Registrant registered a total of 15,000,000 Beneficial Unit
Certificates (BUCs) representing assignments of limited partnership interests
with the Securities and Exchange Commission and sold a total of 9,979,128 BUCs
at $20 per BUC for a total net capital contribution of $185,511,989 after the
payment of certain organization and offering costs.
The Registrant acquired 14 tax-exempt mortgage bonds with an aggregate
principal amount equal to $177,196,000. At December 31, 1996, the Registrant
continued to hold seven of these mortgage bonds with a carrying value (at
estimated fair value) equal to $66,026,000.
The tax-exempt mortgage bonds that the Registrant had acquired were
issued by various state and local housing authorities to provide for the
construction and/or permanent financing of 14 multifamily housing properties
located in 10 states. The Registrant subsequently acquired seven of the
properties (each, an "Acquired Property") through foreclosure or deed in lieu
of foreclosure of the tax-exempt mortgage bonds collateralized thereby. The
Acquired Properties were transferred to America First REIT, Inc. (the "REIT")
on June 1, 1993. Under the terms of the remaining mortgage bonds, the
principal amounts do not amortize over their terms. The mortgage bonds
provide for the payment of base interest to the Registrant and for the payment
of contingent interest based upon net cash flow and net capital appreciation
of the underlying real estate properties. Therefore, the return to the
Registrant depends upon the economic performance of the real estate which
collateralizes its remaining mortgage bonds. For this reason, the
Registrant's investments are dependent on the economic performance of such
real estate and may be considered to be in competition with other
income-producing real estate of the same type in the same geographic areas.
A description of the seven tax-exempt mortgage bonds held by the
Registrant at December 31, 1996, (and the properties collateralizing such
bonds) appears in Note 5 of the Notes to Financial Statements filed in
response to Item 8 hereof.
The amount of cash received by the Registrant from tax-exempt mortgage
bonds is a function of the net rental revenues generated by the properties
financed by the Partnership. Net rental revenues from a multifamily apartment
complex depend on the rental and occupancy rates of the property and on the
level of operating expenses. Occupancy rates and rents are directly affected
by the supply of, and demand for, apartments in the market areas in which a
property is located. This, in turn, is affected by several factors such as
local or national economic conditions, the amount of new apartment
construction and interest rates on single-family mortgage loans. In addition,
factors such as government regulation (such as zoning laws), inflation, real
estate and other taxes, labor problems and natural disasters can affect the
economic operations of a property.
In each city in which the properties financed by the Registrant are
located, such properties compete with a substantial number of other apartment
complexes. Apartment complexes also compete with single-family housing that
is either owned or leased by potential tenants. The principal method of
competition is to offer competitive rental rates. Such properties also
compete by emphasizing regular maintenance and property amenities.
The Registrant believes that each of the properties it has financed is in
compliance in all material respects with federal, state and local regulations
regarding hazardous waste and other environmental matters and the Registrant
is not aware of any environmental contamination at any of such properties that
would require any material capital expenditure by the Registrant for the
remediation thereof.
<PAGE> -1-
The Registrant is engaged solely in the business of providing financing
for the acquisition and improvement of real estate. Accordingly, the
presentation of information about industry segments is not applicable and
would not be material to an understanding of the Registrant's business taken
as a whole.
The Registrant has no employees. Certain services are provided to the
Registrant by employees of America First Companies L.L.C. which is the general
partner of the general partner of the Registrant, and the Registrant
reimburses America First Companies L.L.C. for such services at cost. The
Registrant is not charged, and does not reimburse, for the services performed
by managers and officers of America First Companies L.L.C..
Item 2. Properties. The Registrant had invested in 14 tax-exempt
mortgage bonds collateralized by first mortgages on multifamily housing
properties. As described in Item 1 hereof, the Registrant still held seven of
the tax-exempt mortgage bonds at December 31, 1996. Properties
collateralizing the mortgage bonds are described in the following table:
<TABLE>
<CAPTION>
Average
Number Square Feet
Property Name Location of Units Per Unit
- ----------------------------------- ------------------- -------- -----------
<S> <C> <C> <C>
Woodbridge Apts. of Bloomington III Bloomington, IN 280 892
Ashley Pointe at Eagle Crest Evansville, IN 150 910
Woodbridge Apts. of Louisville II Louisville, KY 190 934
Northwoods Lake Apartments Duluth, GA 492 964
Ashley Square Des Moines, IA 144 963
Shoals Crossing Atlanta, GA 176 926
Arama Apartments Miami, FL 293 562
--------
1,725
========
</TABLE>
The average annual occupancy rate and average effective rental rate per
unit for each of the properties for each of the last five years are listed in
the following table.
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
WOODBRIDGE APTS. OF BLOOMINGTON III
Average Occupancy Rate 95% 93% 96% 96% 94%
Average Effective Annual Rental Per Unit $7,251 $6,848 $6,701 $6,416 $6,124
ASHLEY POINTE AT EAGLE CREST
Average Occupancy Rate 96% 96% 93% 94% 93%
Average Effective Annual Rental Per Unit $6,163 $6,032 $5,686 $5,662 $5,392
WOODBRIDGE APTS. OF LOUISVILLE II
Average Occupancy Rate 95% 93% 96% 96% 91%
Average Effective Annual Rental Per Unit $6,880 $6,451 $6,504 $6,131 $5,640
NORTHWOODS LAKE APARTMENTS
Average Occupancy Rate 94% 97% 98% 97% 96%
Average Effective Annual Rental Per Unit $7,188 $7,101 $6,806 $6,403 $6,178
ASHLEY SQUARE
Average Occupancy Rate 97% 98% 97% 97% 97%
Average Effective Annual Rental Per Unit $6,728 $6,764 $6,574 $6,366 $6,540
SHOALS CROSSING
Average Occupancy Rate 93% 95% 96% 96% 95%
Average Effective Annual Rental Per Unit $4,712 $4,649 $4,458 $4,428 $4,349
ARAMA APARTMENTS
Average Occupancy Rate 99% 99% 99% 99% 99%
Average Effective Annual Rental Per Unit $7,517 $7,156 $7,355 $6,975 $6,811
</TABLE>
<PAGE> -2-
In the opinion of the Partnership's management, each of the properties is
adequately covered by insurance. For additional information concerning the
properties, see "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and Note 5 to the Partnership's Financial
Statements. A discussion of general competitive conditions to which these
properties is included in Item 1 hereof.
Item 3. Legal Proceedings. There are no material pending legal
proceedings to which the Registrant is a party or to which any of its property
is subject.
Item 4. Submission of Matters to a Vote of Security Holders. No matter
was submitted during the fourth quarter of the fiscal year ended December 31,
1996, to a vote of the Registrant's security holders.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder
Matters.
(a) Market Information. The BUCs trade on The NASDAQ Stock Market under
the trading symbol "AFTXZ." The following table sets forth the high and low
final sale prices for the BUCs for each quarterly period from January 1, 1995
through December 31, 1996.
<TABLE>
<CAPTION>
1995 High Low
<S> <C> <C>
1st Quarter $ 7 $ 6-1/4
2nd Quarter $ 6-7/8 $ 5-7/8
3rd Quarter $ 7 $ 6
4th Quarter $ 7-1/8 $ 6-1/4
1996
1st Quarter $ 7 $ 6-1/4
2nd Quarter $ 6-7/8 $ 6-1/8
3rd Quarter $ 7 $ 6-1/4
4th Quarter $ 7-1/4 $ 6-3/8
</TABLE>
(b) BUC Holders. The approximate number of BUC holders on December 31,
1996, was 6,486.
(c) Distributions. Cash distributions are being made on a monthly
basis. Total cash distributions paid or accrued to BUC Holders during the
fiscal years ended December 31, 1996, and December 31, 1995, equaled
$5,388,729 and $5,388,730, respectively. The cash distributions paid per BUC
during the fiscal years ended December 31, 1996, and December 31, 1995, were
as follows:
<TABLE>
<CAPTION>
Per BUC
Year Ended Year Ended
December 31, 1996 December 31, 1995
----------------- -----------------
<S> <C> <C>
Income $ .5400 $ .5400
======== =======
</TABLE>
See Item 7, Management's Discussion and Analysis of Financial Condition
and Results of Operations, for information regarding the sources of funds used
for cash distributions and for a discussion of factors, if any, which may
adversely affect the Registrant's ability to make cash distributions at the
same level in 1997 and thereafter.
<PAGE> -3-
Item 6. Selected Financial Data. Set forth below is selected financial
data for the Partnership. The information set forth below should be read in
conjunction with the Financial Statements and Notes thereof filed in response
to Item 8 hereof.
<TABLE>
<CAPTION>
For the For the For the For the For the
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993 Dec. 31, 1992
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Mortgage bond investment income $ 6,134,812 $ 6,159,236 $ 5,973,373 $ 5,461,438 $ 5,648,743
Rental income - - - 5,148,252 11,982,940
Interest income on temporary cash investments 47,247 42,319 24,046 31,700 74,183
Contingent interest income 154,539 166,940 211,319 192,343 122,596
General and administrative expenses (648,784) (585,926) (478,438) (1,033,708) (1,188,545)
Real estate operating expenses - - - (2,457,071) (5,855,599)
Depreciation - - - (1,205,631) (2,893,516)
Interest expense - - - (400,931) (963,002)
------------- ------------- ------------- ------------- -------------
Net income $ 5,687,814 $ 5,782,569 $ 5,730,300 $ 5,736,392 $ 6,927,800
============= ============= ============= ============= =============
Net income per Beneficial Unit Certificate (BUC) $ .56 $ .57 $ .56 $ .56 $ .68
============= ============= ============= ============= =============
Total cash distributions paid or accrued per BUC $ .5400 $ .5400 $ .5400 $ .7350 $ 1.0080
============= ============= ============= ============= =============
Investment in tax-exempt mortgage bonds, net of
allowance for bond losses $ 66,026,000 $ 66,026,000 $ 66,026,000 $ 66,026,000 $ 66,026,000
============= ============= ============= ============= =============
Real estate acquired in settlement of bonds,
net of accumulated depreciation and
valuation allowance $ - $ - $ - $ - $ 75,339,785
============= ============= ============= ============= =============
Total assets $ 68,014,454 $ 67,698,916 $ 67,379,656 $ 67,137,170 $ 142,698,746
============= ============= ============= ============= =============
Bonds payable $ - $ - $ - $ - $ 10,800,000
============= ============= ============= ============= =============
</TABLE>
<PAGE> -4-
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Liquidity and Capital Resources
The Partnership originally acquired 14 tax-exempt mortgage bonds, the proceeds
of which were used to provide construction and/or permanent financing for 14
multifamily housing properties. The Partnership subsequently acquired seven
of the properties (Acquired Properties) through foreclosure or deed in lieu of
foreclosure of the tax-exempt mortgage bonds collateralized thereby. The
Acquired Properties were transferred to America First REIT, Inc. on June 1,
1993. At December 31, 1996, the Partnership continued to hold seven
tax-exempt mortgage bonds with a carrying value (at estimated fair value) of
$66,026,000.
The following table shows the various occupancy levels of the properties
financed by the Partnership at December 31, 1996.
<TABLE>
<CAPTION>
Number Percentage
Number of Units of Units
Property Name Location of Units Occupied Occupied
- ------------------------------------- ------------------ -------------- -------------- --------------
<S> <C> <C> <C> <C>
Woodbridge Apts. of Bloomington III Bloomington, IN 280 265 95%
Ashley Pointe at Eagle Crest Evansville, IN 150 146 97%
Woodbridge Apts. of Louisville II Louisville, KY 190 177 93%
Northwoods Lake Apartments Duluth, GA 492 442 90%
Ashley Square Des Moines, IA 144 141 98%
Shoals Crossing Atlanta, GA 176 164 93%
Arama Apartments Miami, FL 293 290 99%
-------------- -------------- --------------
1,725 1,625 94%
============== ============== ==============
</TABLE>
The principal amounts of the tax-exempt mortgage bonds do not amortize over
their terms. The tax-exempt mortgage bonds provide for the payment of base
interest at a fixed rate. In addition, the Partnership may earn contingent
interest based on a participation in the net cash flow and net sale or
refinancing proceeds from the real estate collateralizing the tax-exempt
mortgage bonds. Currently, the interest payments received on the tax-exempt
mortgage bonds and interest on temporary cash investments represent the
principal sources of the Partnership's income and distributable cash.
The Partnership may draw on the reserve to pay operating expenses or to
supplement cash distributions to Beneficial Unit Certificate (BUC) Holders.
Distributions
Cash distributions paid or accrued per BUC were as follows:
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Regular monthly distributions
Income $ .5400 $ .5400 $ .5400
============== ============== ==============
Distributions
Paid out of current and prior undistributed cash flow $ .5400 $ .5400 $ .5400
============== ============== ==============
</TABLE>
During the year ended December 31, 1996, a net amount of $207,189 of
undistributed income was placed in reserves. The total amount held in
reserves at December 31, 1996, was $1,280,889. Future distributions to BUC
Holders will depend upon the amount of base and contingent interest received
on the mortgage bonds, the size of the reserves established by the Partnership
and the extent to which withdrawals are made from reserves.
<PAGE> -5-
The Partnership believes that cash provided by operating activities and, if
necessary, withdrawals from the Partnership's reserves will be adequate to
meet its short-term and long-term liquidity requirements, including the
payments of distributions to BUC Holders. Under the terms of the Partnership
Agreement, the Partnership has the authority to enter into short-term and
long-term debt financing arrangements; however, the Partnership currently does
not anticipate entering into such arrangements. The Partnership is not
authorized to issue additional BUCs to meet short-term and long-term liquidity
requirements.
Asset Quality
It is the policy of the Partnership to make a periodic review of the real
estate collateralizing the Partnership's mortgage bonds in order to adjust,
when necessary, the carrying value of the mortgage bonds. Mortgage bonds are
classified as available-for-sale and are therefore carried at the estimated
fair value of the underlying collateral. The fair value of the underlying
collateral is based on management's best estimate of the net realizable value
of the properties; however the ultimate realized values may vary from these
estimates. The net realizable value of the properties is determined based on
the discounted estimated future cash flows from the properties, including
estimated sales proceeds. The calculation of discounted estimated future cash
flows includes certain variables such as the assumed inflation rates for rents
and expenses, capitalization rates and discount rates. These variables are
supplied to the Partnership by an independent real estate appraisal firm based
upon local market conditions for each property. In certain cases, additional
factors such as the replacement value of the property or comparable sales of
similar properties are also taken into consideration. The carrying value of
the mortgage bonds is periodically reviewed and adjustments are made when
there are significant changes in the estimated net realizable value of the
underlying collateral of the mortgage bonds.
Based on the foregoing methodology, valuations and reviews performed during
1996 indicated that the mortgage bonds recorded on the balance sheet at
December 31, 1996, required no adjustments to the carrying amounts.
At December 31, 1996, four of the Partnership's seven tax-exempt mortgage
bonds were classified as nonperforming. The bonds will continue to be
classified as nonperforming until such time that the properties
collateralizing the mortgage bonds generate sufficient net cash flow to bring
the mortgage bonds fully current as to interest payments. The Partnership's
management closely monitors each real estate property which serves as
collateral for the tax-exempt mortgage bonds in efforts to maximize cash flow
generated by each property, including the properties with bonds in a
nonperforming status. In addition, an affiliate of the Partnership's general
partner provides property management services for real estate properties which
serve as collateral for certain tax-exempt bonds classified as nonperforming
including Ashley Square, Northwoods Lake Apartments and Ashley Pointe at Eagle
Crest. As such, the Partnership is able to influence certain aspects of the
operations of such properties which should better position the properties to
increase long-term cash flow from operations.
<PAGE> -6-
Woodbridge Apartments of Bloomington III
Woodbridge Apartments of Bloomington III, located in Bloomington, Indiana, had
an average occupancy rate of 95% during 1996, compared to 93% during 1995.
Interest earned in 1996 was $1,090,960 compared to $1,139,764 in 1995 and was
approximately $20,000 more than the amount needed to pay the base interest in
1996. The mortgage bond, which was previously classified as non-performing,
became fully current as to interest payments during the fourth quarter of
1996. Therefore, the mortgage bond has been classified as performing at
December 31, 1996. Net operating income for the property increased by
approximately $92,000, from 1995 to 1996, primarily as the result of an
increase in cash flow generated by the property resulting from an increase in
rental income due to an increase in average occupancy and rental rate
increases.
Ashley Pointe at Eagle Crest
Ashley Pointe at Eagle Crest, located in Evansville, Indiana, had an average
occupancy rate of 96% during 1996 and 1995. Interest is recognized as income
on this mortgage bond on the modified cash basis. Interest earned in 1996 was
$468,099 compared to $417,517 in 1995 and was approximately $101,000 less than
the amount needed to pay the base interest in 1996. The increase in interest
earned from 1995 to 1996 is the result of an increase in cash flow generated
by the property resulting from an increase in rental income due primarily to
an increase in other income such as garage rentals.
Woodbridge Apartments of Louisville II
Woodbridge Apartments of Louisville II, located in Louisville, Kentucky, had
an average occupancy rate of 95% during 1996, compared to 93% during 1995.
Interest is recognized as income on this mortgage bond on the modified cash
basis. Interest earned in 1996 was $807,327 compared to $782,501 in 1995 and
was approximately $44,000 more than the amount needed to pay the base interest
in 1996. The increase in interest earned from 1995 to 1996 is the result of
an increase in cash flow generated by the property. Rental rate increases and
an increase in average occupancy resulted in an increase in rental income
which was partially offset by increases in property improvements including
landscaping, parking lot repairs and pool resurfacing.
Northwoods Lake Apartments
Northwoods Lake Apartments, located in Duluth, Georgia, had an average
occupancy rate of 94% during 1996, compared to 97% during 1995. Interest is
recognized as income on this mortgage bond on the modified cash basis.
Interest earned by the Partnership in 1996 was $1,883,824 compared to
$1,932,146 in 1995 and was approximately $262,000 less than the amount needed
to pay the base interest. The decrease in interest earned from 1995 to 1996
is due to a decrease in the net operating income generated by the property in
1996 compared to 1995. This decrease is due to an increase in overall
operating expenses which was partially offset by an increase in operating
revenue. The market in which the property is located weakened considerably
during 1996 attributable in part to the end of the Olympic Games.
Ashley Square
Ashley Square, located in Des Moines, Iowa, had an average occupancy rate of
97% during 1996, compared to 98% during 1995. Interest is recognized as
income on this mortgage bond on the modified cash basis. Interest earned in
1996 was $473,602 compared to $476,308 in 1995 and was approximately $79,000
less than the amount needed to pay the base interest in 1996. The decrease in
interest earned from 1995 to 1996 is the result of a slight decrease
(approximately .6%) in operating income generated by the property.
Shoals Crossing
Shoals Crossing, located in Atlanta, Georgia, had an average occupancy rate of
93% during 1996, compared to 95% during 1995. Interest earned on this
mortgage bond was $382,500 in 1996 and 1995. The property was current on its
interest payments throughout 1996; however, a portion of the interest was
funded by postponing the payment of trade payables. Net operating income
increased approximately $43,000 from 1995 to 1996; however, much of this
increase is due to postponing certain property improvements until such time
that cash flow generated by the property can fund them. Discussions are
taking place between the Partnership and the property owner regarding a
workout of this mortgage bond.
<PAGE> -7-
Arama Apartments
Arama Apartments, located in Miami, Florida, had an average occupancy rate of
99% during 1996 and 1995. Interest on this mortgage bond, at the base
interest rate, is current. In addition to earning base interest of $1,028,500
in 1996 and 1995, $154,539 of contingent interest was earned in 1996 compared
with $166,940 in 1995. The decrease in contingent interest is due to a
decrease in net operating income generated during the contingent interest
period resulting from higher repairs and maintenance expenses.
Results of Operations
The Partnership ended its eleventh full year of operations on December 31,
1996. The table below compares the results of operations for
each year shown.
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Mortgage bond investment income $ 6,134,812 $ 6,159,236 $ 5,973,373
Interest income on temporary cash investments 47,247 42,319 24,046
Contingent interest income 154,539 166,940 211,319
-------------- -------------- --------------
6,336,598 6,368,495 6,208,738
General and administrative expenses 648,784 585,926 478,438
-------------- -------------- --------------
Net income $ 5,687,814 $ 5,782,569 $ 5,730,300
============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
Increase Increase
(Decrease) (Decrease)
From 1995 From 1994
-------------- --------------
<S> <C> <C>
Mortgage bond investment income $ (24,424) $ 185,863
Interest income on temporary cash investments 4,928 18,273
Contingent interest income (12,401) (44,379)
-------------- --------------
(31,897) 159,757
General and administrative expenses 62,858 107,488
-------------- --------------
Net income $ (94,755) $ 52,269
============== ==============
</TABLE>
Mortgage bond investment income during 1996 was approximately $24,000 less
than 1995. This decrease is attributable to decreased cash flow from
Woodbridge Apts. of Bloomington III of $49,000, Northwoods Lake Apartments of
$48,000 and Ashley Square of $3,000 offset by increases from Ashley Pointe at
Eagle Crest of $51,000 and Woodbridge Apartments of Louisville II of $25,000.
See the discussion of each property in the Asset Quality section for
additional information.
<PAGE> -8-
Mortgage bond investment income during 1995 was approximately $186,000 greater
than 1994. This increase is attributable to increased cash flow from
Northwoods Lake Apartments of $101,000, Ashley Square of $49,000, Woodbridge
Apts. of Bloomington III of $36,000 and Ashley Pointe at Eagle Crest of
$15,000 offset by a decrease from Woodbridge Apartments of Louisville II of
$15,000. The increase in cash flow from Northwoods Lake Apartments is due to
an increase in rental revenue resulting from rental rate increases which was
partially offset by increased operating expenses consisting primarily of
increases in real estate taxes and personnel costs. The increase in cash flow
from Ashley Square is due to an increase in rental income resulting from an
increase in average occupancy and a decrease in operating expenses primarily
due to a decrease in property improvements. The increase in cash flow from
Woodbridge Apts. of Bloomington III is primarily the result of additional
interest paid out of the property's cash reserves. The increase in cash flow
from Ashley Pointe at Eagle Crest is the result of an increase in rental
income due to an increase in average occupancy which was partially offset by
higher property improvement expenses due to painting the exterior of the
property. The decrease in cash flow from Woodbridge Apartments of Louisville
II is the result of a decrease in average occupancy and an increase in
operating expenses, primarily personnel costs.
The increase in interest income on temporary cash investments of $4,928 from
1995 to 1996 and $18,273 from 1994 to 1995 are attributable to an increase in
the amount of undistributed income held in reserves and to slightly higher
interest rates.
The decrease in contingent interest income of $12,401 from 1995 to 1996 and
$44,379 from 1994 to 1995 are attributable to decreases in the net cash flow
generated by Arama Apartments during the respective year's contingent interest
period. The decrease in contingent interest income from 1995 to 1996 is a
result of higher repairs and maintenance expenses. The decrease in contingent
interest income from 1994 to 1995 is a result of a decrease in rental income
and an increase in operating expenses primarily due to an increase in repairs
and maintenance expenses.
General and administrative expenses increased $62,858 from 1995 to 1996
primarily as a result of higher salaries and related expenses and professional
fees. General and administrative expenses increased $107,488 from 1994 to
1995 primarily due to increases in salaries and related expenses and insurance
expense which were partially offset by decreases in printing and investor
servicing expenses.
<PAGE> -9-
Item 8. Financial Statements and Supplementary Data. The Financial
Statements of the Registrant are set forth in Item 14 hereof and are
incorporated herein by reference. In addition the Financial Statements of
Northwood Lake Apartments, L.P. are set forth in Item 14 hereof and are
incorporated herein by reference. The financial statements of Northwood Lake
Apartments, L.P. are included pursuant to SAB Topic 1I.
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure. There were no disagreements with the Registrant's
independent accountants on accounting principles and practices or financial
disclosure during the fiscal years ended December 31, 1996 and 1995.
PART III
Item 10. Directors and Executive Officers of the Registrant. The
Registrant has no directors or officers. Management of the Registrant
consists of the general partner of the Registrant, America First Capital
Associates Limited Partnership Two ("AFCA") and its general partner, America
First Companies L.L.C.. The following individuals are the managers and
officers of America First Companies L.L.C., and each serves for a term of one
year.
Name Position Held Position Held Since
Michael B. Yanney Chairman of the Board, 1985
President, Chief
Executive Officer and Manager
Michael Thesing Vice President, Secretary, 1985
Treasurer and Manager,
Chief Financial and
Accounting Officer
William S. Carter, M.D. Manager 1994
George Kubat Manager 1994
Martin A. Massengale Manager 1994
Alan Baer Manager 1994
Gail Walling Yanney Manager 1996
Mariann Byerwalter Manager 1997
Michael B. Yanney, 63, is the Chairman and President of America First
Companies L.L.C. From 1977 until the organization of the first such fund in
1984, Mr. Yanney was principally engaged in the ownership and management of
commercial banks. Mr. Yanney also has investments in private corporations
engaged in a variety of businesses. From 1961 to 1977, Mr. Yanney was
employed by Omaha National Bank and Omaha National Corporation (subsequently
merged into FirsTier Financial, Inc.), where he held various positions,
including the position of Executive Vice President and Treasurer of the
holding company. Mr. Yanney also serves as a member of the boards of
directors of Burlington Northern Santa Fe Corporation, Forest Oil Corporation,
MFS Communications Company, Inc., C-Tec Corporation, Mid-America Apartment
Communities, Inc. and PKS Information Services, Inc..
Michael Thesing, 42, has been Vice President and Chief Financial Officer
of affiliates of America First Companies L.L.C. since July 1984. From January
1984 until July 1984 he was employed by various companies controlled by Mr.
Yanney. He was a certified public accountant with Coopers & Lybrand from 1977
through 1983.
William S. Carter, M.D., 70, is a retired physician. Dr. Carter
practiced medicine for 30 years in Omaha, Nebraska, specializing in
otolaryngology (disorders of the ears, nose and throat).
George Kubat, 51, is the President and Chief Executive Officer of
Phillips Manufacturing Co., an Omaha, Nebraska, based manufacturer of drywall
and construction materials. Prior to assuming that position in November 1992,
Mr. Kubat was a certified public accountant with Coopers & Lybrand in Omaha,
Nebraska, from 1969. He was the tax partner in charge of the Omaha office
from 1981 to 1992. Mr. Kubat currently serves on the board of directors of
Sitel Corporation, American Business Information, Inc., and G.B. Foods
Corporation.
<PAGE> -10-
Martin A. Massengale, 63, is President Emeritus of the University of
Nebraska, Director of the Center for Grassland Studies and Foundation
Distinguished Professor. Prior to becoming President in 1991, he served as
Interim President from 1989, as Chancellor of the University of Nebraska
Lincoln from 1981 until 1990 and as Vice Chancellor for Agriculture and
Natural Resources from 1976 to 1981. Prior to that time, he was a professor
and associate dean of the College of Agriculture at the University of
Arizona. Dr. Massengale currently serves on the board of directors of Woodmen
Accident & Life Insurance Company and IBP, Inc..
Alan Baer, 74, is presently Chairman of Alan Baer & Associates, Inc., a
management company located in Omaha, Nebraska. He is also Chairman of Lancer
Hockey, Inc., Baer Travel Services, Wessan Telemarketing, Total Security
Systems, Inc. and several other businesses. Mr. Baer is the former Chairman
and Chief Executive Officer of the Brandeis Department Store chain which,
before its acquisition, was one of the larger retailers in the Midwest. Mr.
Baer has also owned and served on the board of directors of several banks in
Nebraska and Illinois.
Gail Walling Yanney, 61, is a retired physician. Dr. Walling practiced
anesthesia and was most recently the Executive Director of the Clarkson
Foundation until October of 1995. In addition, she was a director of FirsTier
Bank, N.A., Omaha prior to its merger with First Bank, N.A.. Ms. Yanney is
the wife of Michael B. Yanney.
Mariann Byerwalter, 36, is Vice President of Business Affairs and Chief
Financial Officer of Stanford University. Ms. Byerwalter was Executive Vice
President of AFEH and EurekaBank from 1988 to January 1996. Ms. Byerwalter
was Chief Financial Officer and Chief Operating Officer of AFEH, and Chief
Financial Officer of EurekaBank from 1993 to January 1996. She was an officer
of BankAmerica Corporation and its venture capital subsidiary from 1984 to
1987. She served as Vice President and Executive Assistant to the President
of Bank of America and was a Vice President in the bank's Corporate Planning
and Development Department, managing several acquisitions and divestitures.
During 1986, Ms. Byerwalter managed five divestitures, representing a total
purchase price of over $100 million with assets aggregating more than $5.0
billion.
Item 11. Executive Compensation. Neither the Registrant nor AFCA has
any managers or officers. None of the managers or executive officers of
America First Companies L.L.C. (the general partner of AFCA) receive
compensation from the Registrant and AFCA receives no reimbursement from the
Registrant for any portion of their salaries. Remuneration paid by the
Registrant to the Registrant's general partner pursuant to the terms of its
limited partnership agreement during the year ended December 31, 1996 is
described in Note 6 of the Notes to the Financial Statements filed in response
to Item 8 hereof.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) No person is known by the Registrant to own beneficially more
than 5% of the Registrant's BUCs.
(b) No manager or officer of America First Companies L.L.C. and no
partner of AFCA owns any BUCs.
(c) LB I Group, Inc. is the special limited partner of AFCA, with the
right to become the managing general partner of AFCA, or to designate another
corporation or other entity as the managing general partner, upon the
happening of any of the following events: (1) the commission of any act which,
in the opinion of LB I Group, Inc., constitutes negligence, misfeasance or
breach of fiduciary duty on the part of the managing general partner; (2) the
dissolution, insolvency or bankruptcy of the managing general partner or the
occurrence of such other events which cause the managing general partner to
cease to be a general partner under Delaware law; or, (3) the happening of an
event which results in the change in control of the managing general partner
whether by operation of law or otherwise.
There exists no other arrangement known to the Registrant the
operation of which may, at any subsequent date, result in a change in control
of the Registrant.
<PAGE> -11-
Item 13. Certain Relationships and Related Transactions. The general
partner of the Registrant is AFCA and the sole general partner of AFCA is
America First Companies L.L.C..
Except as described herein, the Registrant is not a party to any
transaction or proposed transaction with AFCA , America First Companies L.L.C.
or with any person who is: (i) a manager or executive officer of America First
Companies L.L.C. or any general partner of AFCA; (ii) a nominee for election
as a manager of America First Companies L.L.C.; (iii) an owner of more than 5%
of the BUCs; or, (iv) a member of the immediate family of any of the foregoing
persons.
During 1996, the Registrant paid or reimbursed AFCA or America First
Companies L.L.C. $641,474 for certain costs and expenses incurred in
connection with the operation of the Registrant, including legal and
accounting fees and investor communication costs, such as printing and mailing
charges. See Note 6 to Notes to Financial Statements filed in response to
Item 8 hereof for a description of these costs and expenses.
The Registrant has entered into property management agreements with
America First Properties Management Company, L.L.C. (the "Manager") with
respect to the day-to-day operation of Ashley Square, Northwoods Lake
Apartments and Ashley Pointe at Eagle Crest (beginning in July 1996). Such
property management agreements provide that the Manager is entitled to receive
a management fee equal to a stated percentage of the gross revenues generated
by the property under management. Management fees payable to the Manager
range from 4.5% to 5% of gross revenues. Because the Manager is an affiliate
of AFCA the management fees payable by the Registrant to the Manager may not
exceed the lesser of (i) the rates that the Registrant would pay an
unaffiliated manager for similar services in the same geographic location or
(ii) the Manager's actual cost for providing such services. During the year
ended December 31, 1996, the Registrant paid the Manager property management
fees of $247,960.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following documents are filed as part of this report:
1A. Financial Statements of the Registrant. The following
financial statements of the Registrant are included in response to
Item 8 of this report:
Independent Accountants' Report
Balance Sheets of the Registrant as of December 31, 1996, and
December 31, 1995.
Statements of Income of the Registrant for the years ended
December 31, 1996, December 31, 1995, and December 31, 1994.
Statements of Partners' Capital of the Registrant for the years
ended December 31, 1996, December 31, 1995, and December 31,
1994.
Statements of Cash Flows of the Registrant for the years ended
December 31, 1996, December 31, 1995, and December 31, 1994.
Notes to Financial Statements of the Registrant.
<PAGE> -12-
B. Financial Statements of Northwood Lake Apartments (the
"Property"). The following financial statements of the Property are
included in response to Item 8 of this report:
Independent Auditors' Report.
Balance Sheet of the Property as of December 31, 1996 and
December 31, 1995.
Statement of Income of the Property for the years ended
December 31, 1996 and December 31, 1995.
Statement of Changes in Partners' (Equity) Deficit of the
Property for the years ended December 31, 1996 and December 31,
1995.
Statement of Cash Flows of the Property for the years ended
December 31, 1996 and December 31, 1995.
Notes to Financial Statements of the Property.
2. Financial Statement Schedules. The information required
to be set forth in the financial statement schedules is shown in
the Notes to Financial Statements filed in response to Item 8 hereof.
3. Exhibits. The following exhibits were filed as required
by Item 14(c) of this report. Exhibit numbers refer to the
paragraph numbers under Item 601 of Regulation S-K:
3. Articles of Incorporation and Bylaws of America First
Fiduciary Corporation Number Five (incorporated herein by
reference to Form S-11 Registration Statement filed August 30,
1985, with the Securities and Exchange Commission by America
First Tax Exempt Mortgage Fund Limited Partnership (Commission
File No. 2-99997)).
4(a).Agreement of Limited Partnership dated November 11,
1985, (incorporated herein by reference to Form 10-K dated
December 31, 1986, filed pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 by America First Tax Exempt
Mortgage Fund Limited Partnership (Commission File No. 0-14314)).
4(b).Form of Certificate of Beneficial Unit Certificate
(incorporated by reference to Form S-11 Registration Statement
filed August 30, 1985 with the Securities and Exchange Commission
by America First Tax Exempt Mortgage Fund Limited Partnership
(Commission File No. 2-99997)).
24. Power of Attorney.
(b) The Registrant did not file any reports on Form 8-K during the
last quarter of the period covered by this report.
<PAGE> -13-
Independent Accountants' Report
To the Partners
America First Tax Exempt Mortgage Fund Limited Partnership:
We have audited the accompanying balance sheets of America First Tax Exempt
Mortgage Fund Limited Partnership as of December 31, 1996 and 1995, and the
related statements of income, partners' capital and cash flows for each of the
three years in the period ended December 31, 1996. These financial statements
are the responsibility of the Partnership's management. Our responsibility is
to express an opinion on these financial statements 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 America First Tax Exempt
Mortgage Fund Limited Partnership as of December 31, 1996, and 1995, and the
results of its operations and its cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
Omaha, Nebraska
March 26, 1997, /s/Coopers & Lybrand L.L.P.
<PAGE> -14-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
BALANCE SHEETS
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-------------- --------------
<S> <C> <C>
Assets
Cash and temporary cash investments, at cost which
approximates market value (Note 4) $ 1,379,560 $ 1,103,805
Investment in tax-exempt mortgage bonds, at estimated
fair value (Note 5) 66,026,000 66,026,000
Interest receivable 598,173 556,466
Other assets 10,721 12,645
-------------- --------------
$ 68,014,454 $ 67,698,916
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 6) $ 253,869 $ 145,520
Distribution payable (Note 3) 453,597 453,597
-------------- --------------
707,466 599,117
-------------- --------------
Partners' Capital
General Partner 8,515 6,443
Beneficial Unit Certificate Holders
($6.74 per BUC in 1996 and $6.72 in 1995) 67,298,473 67,093,356
-------------- --------------
67,306,988 67,099,799
-------------- --------------
$ 68,014,454 $ 67,698,916
============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Income
Mortgage bond investment income (Note 5) $ 6,134,812 $ 6,159,236 $ 5,973,373
Interest income on temporary cash investments 47,247 42,319 24,046
Contingent interest income (Note 5) 154,539 166,940 211,319
-------------- -------------- --------------
6,336,598 6,368,495 6,208,738
-------------- -------------- --------------
Expenses
General and administrative expenses (Note 6) 648,784 585,926 478,438
-------------- -------------- --------------
Net income $ 5,687,814 $ 5,782,569 $ 5,730,300
============== ============== ==============
Net income allocated to:
General Partner $ 93,968 $ 97,891 $ 108,020
BUC Holders 5,593,846 5,684,678 5,622,280
-------------- -------------- --------------
$ 5,687,814 $ 5,782,569 $ 5,730,300
============== ============== ==============
Net income per BUC $ .56 $ .57 $ .56
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> -15-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
FROM DECEMBER 31, 1993 TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
Beneficial Unit
General Certificate
Partner Holders Total
-------------- --------------- --------------
<S> <C> <C> <C>
Partners' Capital (excluding net unrealized holding losses)
Balance at December 31, 1993 $ 1,094 $ 66,563,858 $ 66,564,952
Net income 108,020 5,622,280 5,730,300
Cumulative effect of adopting FAS 115:
Unrealized losses on mortgage bonds available-for-sale (Note 2B) - 10,600,000 10,600,000
Cash distributions paid or accrued (Note 3)
Income (105,661) (5,388,730) (5,494,391)
-------------- --------------- --------------
Balance at December 31, 1994 3,453 77,397,408 77,400,861
Net income 97,891 5,684,678 5,782,569
Cash distributions paid or accrued (Note 3)
Income (94,901) (5,388,730) (5,483,631)
-------------- --------------- --------------
Balance at December 31, 1995 6,443 77,693,356 77,699,799
Net income 93,968 5,593,846 5,687,814
Cash distributions paid or accrued (Note 3)
Income (91,896) (5,388,729) (5,480,625)
-------------- --------------- --------------
Balance at December 31, 1996 8,515 77,898,473 77,906,988
-------------- --------------- --------------
Net unrealized holding losses
Cumulative effect of adopting FAS 115:
Unrealized losses on mortgage bonds available-for-sale (Note 2B) - (10,600,000) (10,600,000)
-------------- --------------- --------------
Balance at December 31, 1994, 1995 and 1996 - (10,600,000) (10,600,000)
-------------- --------------- --------------
Balance at December 31, 1996 $ 8,515 $ 67,298,473 $ 67,306,988
============== =============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 5,687,814 $ 5,782,569 $ 5,730,300
Adjustments to reconcile net income to net cash
from operating activities
Decrease (increase) in interest receivable (41,707) (59,527) 19,542
Decrease in other assets 1,924 3,618 315
Increase in accounts payable 108,349 20,322 6,577
-------------- -------------- --------------
Net cash provided by operating activities 5,756,380 5,746,982 5,756,734
-------------- -------------- --------------
Cash flow used in financing activity
Distributions paid (5,480,625) (5,483,631) (5,494,391)
-------------- -------------- --------------
Net increase in cash and temporary cash investments 275,755 263,351 262,343
Cash and temporary cash investments at beginning of year 1,103,805 840,454 578,111
-------------- -------------- --------------
Cash and temporary cash investments at end of year $ 1,379,560 $ 1,103,805 $ 840,454
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> -16-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Organization
America First Tax Exempt Mortgage Fund Limited Partnership (the Partnership)
was formed on November 11, 1985, under the Delaware Revised Uniform Limited
Partnership Act for the purpose of acquiring a portfolio of federally
tax-exempt mortgage bonds collateralized by income-producing real estate
consisting of multifamily residential apartments. The Partnership will
terminate on December 31, 2015, unless terminated earlier under the provisions
of the Partnership Agreement. The General Partner of the Partnership is
America First Capital Associates Limited Partnership Two (AFCA 2).
2. Summary of Significant Accounting Policies
A)Method of Accounting
The financial statements of the Partnership are prepared on the accrual
basis of accounting in accordance with generally accepted accounting
principles.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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 could differ from those
estimates.
B)Investment in Tax-Exempt Mortgage Bonds
The Partnership adopted Statement of Financial Accounting Standard No. 115
"Accounting for Certain Investments in Debt and Equity Securities" (FAS
115) as of January 1, 1994. FAS 115 requires that investment securities be
classified as held-to-maturity, available-for-sale, or trading. Under
FAS 115, investments classified as available-for-sale are reported at fair
value with any unrealized gains or losses excluded from earnings and
reflected as a separate component of partners' capital. Subsequent
increases and decreases in the net unrealized gain/loss on
available-for-sale securities are reflected as adjustments to the carrying
value of the portfolio and adjustments to the component of partners'
capital. The Partnership does not have investment securities classified as
held-to-maturity or trading. Unrealized losses of $10,600,000 on
tax-exempt mortgage bonds previously recognized through income were
reclassified to a separate component of partners' capital with the adoption
of FAS 115. There was no additional impact resulting from adoption since
the bonds had already been reduced to estimated fair value.
The carrying value of tax-exempt mortgage bonds is periodically reviewed
and adjusted when there are significant changes in the estimated net
realizable value of the underlying collateral (see Note 2C).
Accrual of mortgage bond investment income is excluded from income, when,
in the opinion of management, collection of related interest is doubtful.
This interest is recognized as income when it is received.
C)Fair Value of Tax-Exempt Mortgage Bond Collateral
The fair value of the collateral for the tax-exempt mortgage bonds is based
on management's best estimate of the net realizable value of the
properties; however the ultimate realized values may vary from these
estimates. The net realizable value of the properties is determined based
on the discounted estimated future cash flows from the properties,
including estimated sales proceeds. The calculation of discounted
estimated future cash flows includes certain variables such as the assumed
inflation rates for rents and expenses, capitalization rates and discount
rates. These variables are supplied to the Partnership by an independent
real estate appraisal firm based upon local market conditions for each
property. In certain cases, additional factors such as the replacement
value of the property or comparable sales of similar properties are also
taken into consideration. The carrying value of the mortgage bonds is
periodically reviewed and adjustments are made when there are significant
changes in the estimated net realizable value of the underlying collateral
for the tax-exempt mortgage bonds.
<PAGE> -17-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
D)Income Taxes
No provision has been made for income taxes since the Beneficial Unit
Certificate (BUC) Holders are required to report their share of the
Partnership's taxable income for federal and state income tax purposes.
The tax basis of the Partnership's assets and liabilities exceeded the
reported amounts by $11,053,597 at December 31, 1996, and December 31, 1995.
E)Temporary Cash Investments
Temporary cash investments are invested in federally tax-exempt securities
purchased with an original maturity of three months or less.
F)Net Income per BUC
Net income per BUC has been calculated based on the number of BUCs
outstanding (9,979,128) for all years presented.
G)New Accounting Pronouncement
The Financial Accounting Standards Board has issued Financial Accounting
Standards No. 128 "Earnings Per Share" (FAS 128). FAS 128, which is
effective for periods ending after December 15, 1997, is not expected to
have an impact on the Partnership's computation, presentation or disclosure
of earnings per BUC.
3. Partnership Income, Expenses and Cash Distributions
The Partnership Agreement contains provisions for the distribution of Net
Interest Income and Net Residual Proceeds and for the allocation of income and
expenses for tax purposes among AFCA 2 and BUC Holders. Income and expenses
will be allocated to each BUC Holder on a monthly basis based on the number of
BUCs held by each BUC Holder as of the last day of the month for which such
allocation is to be made. Distributions of Net Interest Income and Net
Residual Proceeds will be made to each BUC Holder of record on the last day of
each distribution period based on the number of BUCs held by each BUC Holder
as of such date.
Net Interest Income, as defined in the Limited Partnership Agreement, in each
distribution period will be distributed 99% to the BUC Holders and 1% to AFCA
2 until the BUC Holders have received distributions of Net Interest Income
equal to a cumulative noncompounded annual return of 11% on their Adjusted
Capital Contributions, as defined in the Limited Partnership Agreement, at
which point all remaining Net Interest Income for such distribution period
will be distributed 90% to the BUC Holders and 10% to AFCA 2.
The portion of Net Residual Proceeds, as defined in the Limited Partnership
Agreement, representing a return of principal will be distributed 100% to the
BUC Holders. The portion of Net Residual Proceeds representing contingent
interest will be distributed 100% to the BUC Holders until the BUC Holders
have received distributions from all sources which represent a return of $20
per BUC plus an amount equal to a cumulative noncompounded annual return of
11% on their Adjusted Capital Contributions. Any remaining Net Residual
Proceeds representing contingent interest will be allocated 100% to AFCA 2 to
the extent of 10% of all Net Residual Proceeds representing contingent
interest distributed to all parties exclusive of the following described
amounts. Thereafter, any remaining Net Residual Proceeds representing
contingent interest will be distributed 90% to BUC Holders and 10% to AFCA 2.
Notwithstanding the foregoing, Net Interest Income representing contingent
interest and Net Residual Proceeds representing contingent interest in an
amount equal to .9% per annum of the principal amount of the mortgage bonds on
a cumulative basis will be distributed 75% to the BUC Holders and 25% to AFCA
2.
Liquidation Proceeds, as defined in the Limited Partnership Agreement,
remaining after repayment of any debts or obligations of the Partnership
(including loans from AFCA 2) and after the establishment of any reserve AFCA
2 deems necessary, will be distributed to AFCA 2 and BUC Holders to the extent
of positive balances in their capital accounts. Any remaining Liquidation
Proceeds will be distributed in the same manner as the Net Residual Proceeds.
Cash distributions are presently made on a monthly basis, but may be made
quarterly if AFCA 2 so elects. The cash distributions included in the
financial statements represent the actual cash distributions made during each
year and the cash distributions accrued at the end of each year.
<PAGE> -18-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
4. Partnership Reserve Account
The Partnership maintains a reserve account which totaled $1,280,889 at
December 31, 1996. The reserve account was established to maintain working
capital for the Partnership and is available to supplement distributions to
BUC Holders or for any other contingencies related to the ownership of the
mortgage bonds and the operation of the Partnership.
5. Investment in Tax-Exempt Mortgage Bonds
The mortgage bonds are issued by various state and local governments, their
agencies and authorities to finance the construction or rehabilitation of
income-producing real estate properties. However, the mortgage bonds do not
constitute an obligation of any state or local government, agency or authority
and no state or local government, agency or authority is liable on them, nor
is the taxing power of any state or local government pledged to the payment of
principal or interest on the mortgage bonds. The mortgage bonds are
nonrecourse obligations of the respective owners of the properties. The sole
source of the funds to pay principal and interest on the mortgage bonds is the
net cash flow or the sale or refinancing proceeds from the properties. Each
mortgage bond, however, is collateralized by a first mortgage on all real and
personal property included in the related property and an assignment of rents.
The mortgage bonds provide for the payment of base interest and for the
payment of additional contingent interest out of a portion of the net cash
flow of the properties or out of a portion of the sale or refinancing proceeds
from the properties, subject to various priority payments. The principal of
the mortgage bonds will not be amortized during the terms of the mortgage
bonds, but will be required to be repaid in lump sum payments at the
expiration of their terms. The Partnership has the right to require
prepayment of any mortgage bond at any time after the tenth year of such
mortgage bond and each mortgage bond will be prepaid to the Partnership by its
terms on the first day of its thirteenth year. The mortgage bonds are due and
payable upon the sale of the related properties. Accordingly, the Partnership
classified all such bonds as available-for-sale. The Partnership may waive
compliance with any of the terms of the mortgage bonds.
<PAGE> -19-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Descriptions of the tax-exempt mortgage bonds owned by the Partnership at
December 31, 1996, are as follows:
<TABLE>
<CAPTION>
Base
Number Maturity Interest Carrying Income Earned
Property Name Location of Units Date Rate1 Amount in 1996
------------------------ ---------------- --------- --------- --------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Performing:
Shoals Crossing Atlanta, GA 176 12/01/09 8.5% $ 4,500,000 $ 382,500
Arama Apartments Miami, FL 293 07/01/10 8.5% 12,100,000 1,028,500
Woodbridge Apts. of
Bloomington III Bloomington, IN 280 12/01/15 8.5% 12,600,000 1,090,960
-------------- --------------
29,200,000 2,501,960
-------------- --------------
Nonperforming:2
Ashley Pointe at
Eagle Crest Evansville, IN 150 12/01/15 8.5% 6,700,000 468,099
Woodbridge Apts. of
Louisville II Louisville, KY 190 12/01/15 8.5% 8,976,000 807,327
Northwoods Lake
Apartments Duluth, GA 492 12/01/06 8.5% 25,250,000 1,883,824
Ashley Square Des Moines, IA 144 12/01/09 8.5% 6,500,000 473,602
-------------- --------------
47,426,000 3,632,852
-------------- --------------
76,626,000 $ 6,134,812
Unrealized holding losses (10,600,000) ==============
--------------
Balance at December 31, 1996 (at estimated fair value) $ 66,026,000
==============
</TABLE>
1 In addition to the base interest rates shown, the bonds bear additional
contingent interest as defined in each revenue note which, when combined with
the base interest, is limited to a cumulative, noncompounded amount not greater
than 16% per annum. The Partnership received additional contingent interest
from Arama Apartments of $154,539 in 1996, $166,940 in 1995 and $211,319 in
1994.
2 Nonperforming bonds are bonds which are not fully current as to interest
payments. The amount of foregone interest on nonperforming bonds was $442,725
in 1996, $442,279 in 1995 and $606,921 in 1994.
<TABLE>
<CAPTION>
For the For the For the
Year Ended Year Ended Year Ended
Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Reconciliation of the carrying amounts of the
mortgage bonds is as follows:
Balance at beginning and end of year $ 76,626,000 $ 76,626,000 $ 76,626,000
============== ============== ==============
The following summarizes the activity in the
unrealized holding losses:
Balance at beginning and end of year $ 10,600,000 $ 10,600,000 $ 10,600,000
============== ============== ==============
</TABLE>
<PAGE> -20-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Unaudited combined condensed financial information of the properties
collateralizing the Partnership's investment in tax-exempt mortgage bonds is
as follows:
<TABLE>
<CAPTION>
Dec. 31, 1996 Dec. 31, 1995
-------------- --------------
<S> <C> <C>
Assets
Real estate $ 46,423,305 $ 48,913,919
Restricted deposits and funded reserves 630,701 647,293
Other assets 1,315,376 1,350,477
-------------- --------------
$ 48,369,382 $ 50,911,689
============== ==============
Liabilities and Partners' Capital
Liabilities
Mortgage and notes payable $ 78,320,200 $ 78,320,200
Accrued interest payable 4,465,839 4,202,455
Other liabilities 2,385,097 2,601,085
Partners' Capital (Deficit) (36,801,754) (34,212,051)
-------------- --------------
$ 48,369,382 $ 50,911,689
============== ==============
Rental income $ 12,255,397 $ 11,808,766
============== ==============
Net loss $ (2,523,711) $ (3,330,449)
============== ==============
</TABLE>
6. Transactions with Related Parties
Substantially all of the Partnership's general and administrative expenses are
paid by AFCA 2 or an affiliate and are reimbursed by the Partnership. The
amounts of such expenses reimbursed to AFCA 2 or an affiliate are shown
below. The amounts are presented on a cash basis and do not reflect accruals
made at each year end.
<TABLE>
<CAPTION>
1996 1995 1994
-------------- -------------- --------------
<S> <C> <C> <C>
Reimbursable salaries and benefits $ 431,747 $ 363,489 $ 265,914
Investor services and custodial fees 63,864 72,216 96,249
Professional fees and expenses 36,330 29,988 28,206
Other expenses 30,980 20,602 6,722
Insurance 25,780 21,104 15,277
Report preparation and distribution 22,616 27,809 30,030
Registration fees 18,126 16,461 15,009
Telephone 8,308 8,729 7,538
Consulting and travel expenses 3,723 4,751 13,840
Stock certificates - - 872
-------------- -------------- --------------
$ 641,474 $ 565,149 $ 479,657
============== ============== ==============
</TABLE>
AFCA 2 received from property owners administrative fees of $176,125 in 1996,
$54,450 in 1995 and $54,450 in 1994. Since these fees are not Partnership
expenses, they have not been reflected in the accompanying financial
statements.
<PAGE> -21-
AMERICA FIRST TAX EXEMPT MORTGAGE FUND LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
AFCA 2 is entitled to an administrative fee from the Partnership in the event
the Partnership becomes the equity owner of a property by reason of
foreclosure. AFCA 2 was not entitled to any administrative fees from the
Partnership for the years ended December 31, 1996, 1995 or 1994. AFCA 2 was
entitled to receive approximately $359,000 in administrative fees from the
Partnership for the year ended December 31, 1989. The payment of these fees,
which has been deferred by AFCA 2, is contingent upon, and will be paid only
out of future profits realized by the Partnership from the disposition of
assets. This amount will be recorded as an expense by the Partnership when it
is probable that these fees will be paid.
An affiliate of AFCA 2 was retained to provide property management services
for Ashley Square, Northwoods Lake Apartments and Ashley Pointe at Eagle Crest
(beginning in July 1996). The fees for services provided represent the lower
of (i) costs incurred in providing management of the property, or
(ii) customary fees for such services determined on a competitive basis, and
amounted to $247,960 in 1996, $202,166 in 1995 and $164,490 in 1994.
7. Summary of Unaudited Quarterly Results of Operations
<TABLE>
<CAPTION>
First Second Third Fourth
From January 1, 1996 to December 31, 1996 Quarter Quarter Quarter Quarter
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total income $ 1,687,165 $ 1,479,404 $ 1,616,193 $ 1,553,836
Total expenses (167,165) (161,251) (160,877) (159,491)
-------------- -------------- -------------- --------------
Net income $ 1,520,000 $ 1,318,153 $ 1,455,316 $ 1,394,345
============== ============== ============== ==============
Net income per BUC $ .15 $ .13 $ .14 $ .14
============== ============== ============== ==============
Market Price per BUC
High sale 7 6-7/8 7 7-1/4
Low sale 6-1/4 6-1/8 6-1/4 6-3/8
============== ============== ============== ==============
</TABLE>
<TABLE>
<CAPTION>
First Second Third Fourth
From January 1, 1995 to December 31, 1995 Quarter Quarter Quarter Quarter
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Total income $ 1,653,868 $ 1,568,278 $ 1,589,741 $ 1,556,608
Total expenses (138,792) (135,045) (155,845) (156,244)
-------------- -------------- -------------- --------------
Net income $ 1,515,076 $ 1,433,233 $ 1,433,896 $ 1,400,364
============== ============== ============== ==============
Net income per BUC $ .15 $ .14 $ .14 $ .14
============== ============== ============== ==============
Market Price per BUC
High sale 7 6-7/8 7 7-1/8
Low sale 6-1/4 5-7/8 6 6-1/4
============== ============== ============== ==============
</TABLE>
The BUCs are quoted on the NASDAQ National Market System under the symbol
AFTXZ. The high and low quarterly prices of the BUCs shown were compiled from
the Monthly Statistical Reports provided to the Partnership by the National
Association of Securities Dealers, Inc. and represent final sale prices.
<PAGE> -22-
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
T A B L E O F C O N T E N T S
PAGE
REPORT OF CERTIFIED PUBLIC ACCOUNTANTS
ON THE FINANCIAL STATEMENTS.............................................. 1
FINANCIAL STATEMENTS
BALANCE SHEETS....................................................... 2-3
STATEMENTS OF INCOME................................................. 4-5
STATEMENTS OF CHANGES IN PARTNERS'
EQUITY (DEFICIT).................................................... 6
STATEMENTS OF CASH FLOWS............................................. 7
NOTES TO FINANCIAL STATEMENTS............................................. 8-11
To the Partners
Northwood Lake Apartments, L.P.
Omaha, Nebraska
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying balance sheets of Northwood Lake Apartments,
L.P., (a Georgia Limited Partnership), (the "Partnership"), as of December
31, 1996 and 1995, and the related statements of income, changes in partners'
equity (deficit) and cash flows for the years then ended. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit 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 audit provides 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 Northwood Lake Apartments,
L.P., as of December 31, 1996 and 1995, and the results of its operations and
the changes in partners' equity (deficit) and cash flows for the years then
ended, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in Note 8 to the
financial statements, the Partnership has experienced recurring losses from
operations and has a working and net capital deficiency that raise substantial
doubt about the Partnership's ability to continue as a going concern. The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
St. Louis, Missouri /s/Mueller, Prost, Purk & Willbrand, P.C.
January 31, 1997 Certified Public Accountants
<PAGE> 1
FINANCIAL STATEMENTS
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
ASSETS
Current Assets
Cash................................................................ $ 344,556 $ 251,888
Tenant accounts receivable.......................................... 2,129 2,603
Prepaid expenses.................................................... 30,956 30,805
Other receivables................................................... 794 1,000
-------------- --------------
Total Current Assets 378,435 286,296
-------------- --------------
Funded Deposits Held in Trust
Security deposits................................................... 100,271 107,089
-------------- --------------
Restricted Deposits and Funded Reserves
Taxes and insurance escrow........................................... 68,166 28,058
Reserve for replacements............................................. 194,060 122,726
-------------- --------------
Total Restricted Deposits and
Funded Reserves 262,226 150,784
-------------- --------------
Property and Equipment
Land................................................................. 3,787,500 3,787,500
Buildings............................................................ 19,947,500 19,947,500
Equipment............................................................ 1,515,000 1,515,000
-------------- --------------
Total Property and Equipment 25,250,000 25,250,000
Less: Accumulated depreciation....................................... (2,586,970) (1,936,408)
-------------- --------------
Net Property and Equipment 22,663,030 23,313,592
-------------- --------------
Total Assets $ 23,403,962 $ 23,857,761
============== ==============
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
<PAGE> 2
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
Current Liabilities
Accounts payable.................................................... $ 20,898 $ 8,927
Prepaid rent........................................................ 71,049 30,116
Accrued expenses.................................................... 7,843 14,342
Accrued interest payable............................................ 2,426,648 2,094,629
-------------- --------------
Total Current Liabilities 2,526,438 2,148,014
-------------- --------------
Deposit Liabilities
Security deposits.................................................... 100,043 106,799
-------------- --------------
Long-Term Liabilities
Mortgage payable..................................................... 25,250,000 25,250,000
-------------- --------------
Total Liabilities 27,876,481 27,504,813
-------------- --------------
PARTNERS' EQUITY (DEFICIT)
Partners' Equity (Deficit)............................................. (4,472,519) (3,647,052)
-------------- --------------
Total Liabilities and
Partners' Equity (Deficit) $ 23,403,962 $ 23,857,761
============== ==============
</TABLE>
<PAGE> 3
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Income
Rental income....................................................... $ 3,533,158 $ 3,540,178
Other income........................................................ 131,462 72,685
Income from forfeited security deposits............................. 22,818 21,073
Interest income..................................................... 20,488 30,802
-------------- --------------
Total Income 3,707,926 3,664,738
-------------- --------------
Expenses
Operating Expenses
Advertising and promotional fees................................... 39,172 35,244
Insurance expense.................................................. 37,317 30,771
Professional fees.................................................. 15,005 10,719
Real estate and personal property taxes............................ 352,750 355,200
Salaries and wages................................................. 309,966 284,689
Utilities.......................................................... 245,297 231,281
-------------- --------------
Total Operating Expenses 999,507 947,904
-------------- --------------
Maintenance Expenses
Cleaning expense................................................... 9,030 4,761
Repairs and maintenance expense.................................... 410,604 342,867
Security expense................................................... 547 502
Supplies expense................................................... 55,934 50,059
-------------- --------------
Total Maintenance Expenses 476,115 398,189
-------------- --------------
Management Expenses
Administrative and office.......................................... 59,854 61,223
Management fees.................................................... 166,657 162,552
-------------- --------------
Total Management Expenses 226,511 223,775
-------------- --------------
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
<PAGE> 4
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
STATEMENTS OF INCOME (CONTINUED)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Expenses (Continued)
Mortgage Interest Expense........................................... $ 2,146,250 $ 2,146,250
-------------- --------------
Other Expenses
Administrative fees................................................ 34,448 15,567
Depreciation....................................................... 650,562 677,363
-------------- --------------
Total Other Expenses 685,010 692,930
-------------- --------------
Total Expenses 4,533,393 4,409,048
-------------- --------------
Net Loss............................................................... $ (825,467) $ (744,310)
============== ==============
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
<PAGE> 5
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
Total
General Limited Partners'
Partner Partner Deficit
-------------- -------------- --------------
<S> <C> <C> <C>
Balance, December 31, 1994......................... $ (29,027) $ (2,873,715) $ (2,902,742)
Net Loss for the Year.............................. (7,443) (736,867) (744,310)
-------------- -------------- --------------
Balance, December 31, 1995......................... $ (36,470) $ (3,610,582) $ (3,647,052)
Net Loss for the Year.............................. (8,255) (817,212) (825,467)
-------------- -------------- --------------
Balance, December 31, 1996......................... $ (44,725) $ (4,427,794) $ (4,472,519)
============== ============== ==============
Partners' Percentage of Partnership Losses 1.00% 99.00% 100.00%
============== ============== ==============
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
<PAGE> 6
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
-------------- --------------
<S> <C> <C>
Cash Flows from Operating Activities
Net loss............................................................ $ (825,467) $ (744,310)
-------------- --------------
Adjustments to reconcile net loss to net cash provided
by operating activities
Depreciation..................................................... 650,562 677,363
Change in assets - (increase) decrease
Tenant accounts receivable...................................... 474 (2,603)
Prepaid expenses................................................ (151) (30,805)
Other receivables............................................... 206 (1,000)
Security deposits............................................... 62 (290)
Change in liabilities - increase (decrease)
Accounts payable................................................ 11,972 (1,069)
Prepaid rent.................................................... 40,933 30,116
Accrued expenses................................................ (6,500) (168)
Accrued interest payable........................................ 332,019 214,103
-------------- --------------
Total Adjustments 1,029,577 885,647
-------------- --------------
Net Cash Provided by Operating Activities.............................. 204,110 141,337
-------------- --------------
Cash Flows from Financing Activities
Net deposits and withdrawals in restricted deposits
and funded reserves................................................ (111,442) (125,855)
-------------- --------------
Net Cash Used by Financing Activities (111,442) (125,855)
-------------- --------------
Net Increase in Cash................................................... 92,668 15,482
Cash - Beginning of Year............................................... 251,888 236,406
-------------- --------------
Cash - End of Year..................................................... $ 344,556 $ 251,888
============== ==============
</TABLE>
The Notes to Financial Statements are an integral part of this statement.
<PAGE> 7
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 ORGANIZATION
Northwood Lake Apartments, L.P., a Georgia Limited Partnership, (the
"Partnership"), was formed on February 22, 1993, pursuant to the terms
of an Agreement of Limited Partnership (the "Agreement") for the
purpose of acquiring and operating the Northwood Lake Apartments
complex, a 492-unit apartment complex located in Duluth, Georgia (the
"Project"). The Partnership will dissolve on December 31, 2013, unless
sooner dissolved pursuant to any provision of the Partnership
agreement.
The general partner of the Partnership is First Communities Equities,
Inc., a Georgia corporation, which owns a 1% interest. As the limited
partner with a 99% interest, Robert L. Johnston's liability is limited
to his total amount of capital contributions. The net income or loss
of the Partnership is allocated among the partners in accordance with
their respective percentage interests.
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The accompanying financial statements have been prepared on the
accrual basis of accounting. The Project reports its operating
results for income tax purposes on the cash basis. No provision for
income taxes is made because any liability for income taxes is that of
the individual partners and not that of the Project.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management 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 revenue
and expenses during the reporting period. Actual results could differ
from estimated amounts.
<PAGE> 8
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Tenant Accounts Receivable
The Project provides an allowance for doubtful accounts equal to the
estimated collection loss that will be incurred in the collection of
receivables. No bad debt expense was recorded for the years ending
December 31, 1996 and 1995.
Property and Equipment
Property and equipment are recorded at cost. Major additions and
improvements are capitalized to the property accounts while
replacements, maintenance and repairs which do not improve or extend
the useful life of the respective assets are expensed currently.
Depreciation is calculated using the straight-line method over
estimated useful lives ranging from 10 to 40 years. The total
depreciation expensed for the years ending December 31, 1996 and 1995
was $650,562 and $677,363, respectively.
Concentration of Credit Risk
The Project maintains the majority of its cash balances in one
financial institution. The balances are insured by the Federal
Deposit Insurance Corporation up to $100,000. At December 31, 1996
and 1995, the Project's uninsured cash balances totaled $231,248 and
$178,125, respectively.
NOTE 3 STATEMENTS OF CASH FLOWS
For purposes of the statements of cash flows, the Project considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
1996 1995
-------------- --------------
Cash paid during the years for:
Interest...................... $ 1,814,231 $ 1,932,147
<PAGE> 9
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 RESTRICTED DEPOSITS AND FUNDED RESERVES
Taxes and insurance escrow reserves, consisting of money market funds,
are maintained under the control of the mortgage note holder for the
benefit of the Project in an interest-bearing account with a federally
insured financial institution. Disbursements from the escrow are for
real estate taxes and insurance premiums. Interest earned on the funds
is transferred to operating cash quarterly.
Reserve for Replacements are maintained under the control of the
mortgage note holder for the benefit of the Project in an interest
bearing account with a federally insured financial institution. The
mortgage requires a monthly payment of $5,260 to be used for future
major capital improvements to the Project.
NOTE 5 ACCRUED INTEREST PAYABLE
Since 1993, the Project's cash flow has been insufficient to pay the
base interest due on the mortgage payable. At December 31, 1996 and
1995, the cumulative shortfall is $2,426,648 and $2,094,629,
respectively.
NOTE 6 MORTGAGE PAYABLE
The Partnership has a $25,250,000 mortgage payable agreement with
America First Tax Exempt Mortgage Fund Limited Partnership, utilizing
proceeds of the Multi-Family Mortgage Revenue Note, Series 1985,
issued by the Housing Authority of the City of Buford, Georgia.
The note, secured by a Deed of Trust on the income producing property,
assignment of rents and a security agreement, was amended on
April 1, 1991, with a term of 10 years from the date of the amendment.
The note bears interest at 8.5% and contingent interest at 16%.
The accrued base interest will be paid according to the priority
of cash flows as set forth in the note. Any contingent interest that
is not paid will be deferred without interest and paid in arrears.
<PAGE> 10
NORTHWOOD LAKE APARTMENTS, L.P.
(A Georgia Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
NOTE 7 MANAGEMENT FEE TRANSACTIONS
On March 1, 1993, America First Properties Management Company, LLC,
took over management of the Partnership. Their fee is 4.5% of gross
receipts. Management fees for the years ending December 31, 1996 and
1995 were $166,657 and $162,552, respectively. At December 31, 1996
and 1995, the Partnership owed America First Properties Management
Company, LLC, $15,616 and $8,645, respectively, both of which are
included in accounts payable.
America First Properties Management Company, LLC, also charges an
administrative service charge of $1 per unit per month to offset the
costs of providing management and administrative services to the
Project. Administrative service charges for the years ending
December 31, 1996 and 1995 were $5,904 each year.
NOTE 8 RELATED PARTY TRANSACTIONS
The Partnership paid the limited partner an administrative fee of
$28,559 for the year ending December 31, 1996.
NOTE 9 GOING CONCERN CONSIDERATIONS
The Partnership's operations have produced a cumulative deficit of
$4,472,519 since commencement of rental operations in 1993, as well as
recurring losses. In addition, the mortgage payable is delinquent and
accrued interest is not being paid in full each year. These
considerations raise substantial doubt about the Partnership's ability
to continue as a going concern for a reasonable period of time.
Management has stated that the mortgagee has elected not to foreclose
on the mortgage due to current satisfaction of yield and a desire to
keep the bonds current. Furthermore, although there is a large
interest accrual, the mortgagee has no intention of accelerating the
debt.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
AMERICA FIRST TAX EXEMPT
MORTGAGE FUND LIMITED
PARTNERSHIP
By America First Capital
Associates Limited
Partnership Two, General
Partner of the Registrant
By America First Companies L.L.C.,
General Partner of
America First Capital
Associates Limited
Partnership Two
By /s/ Michael Thesing
Michael Thesing, Vice
President
Date: March 26, 1997
Pursuant to the requirements of the Securities and Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 26, 1997 By /s/ Michael B. Yanney*
Michael B. Yanney,
Chairman of the Board,
President, Chief Executive Officer
and Manager
Date: March 26, 1997 By /s/ Michael Thesing
Michael Thesing,
Vice President, Secretary,
Treasurer and Manager, (Chief
Financial and Accounting
Officer)
Date: March 26, 1997 By
William S. Carter, M.D.,
Manager
Date: March 26, 1997 By /s/ George Kubat*
George Kubat,
Manager
Date: March 26, 1997 By /s/ Martin A. Massengale*
Martin A. Massengale,
Manager
Date: March 26, 1997 By /s/ Alan Baer*
Alan Baer,
Manager
Date: March 26, 1997 By /s/ Gail Walling Yanney*
Gail Walling Yanney
Manager
Date: March 26, 1997 By /s/ Mariann Byerwalter*
Mariann Byerwalter
Manager
*By Michael Thesing,
Attorney-in-Fact
/s/ Michael Thesing
Michael Thesing
<PAGE> -23-
EXHIBIT 24
POWER OF ATTORNEY
<PAGE> -24-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1996, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Apartment Investors, L.P.
America First Participating/Preferred Equity Mortgage Fund and
America First Participating/Preferred Equity Mortgage Fund Limited
Partnership
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.-A
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 25th day of March, 1997.
/s/ Michael B. Yanney
Michael B. Yanney
<PAGE> -25-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1996, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Apartment Investors, L.P.
America First Participating/Preferred Equity Mortgage Fund and
America First Participating/Preferred Equity Mortgage Fund Limited
Partnership
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.-A
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 25th day of March, 1997.
/s/ Gail Walling Yanney
Gail Walling Yanney
<PAGE> -26-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1996, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Apartment Investors, L.P.
America First Participating/Preferred Equity Mortgage Fund and
America First Participating/Preferred Equity Mortgage Fund Limited
Partnership
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.-A
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 25th day of March, 1997.
/s/ George Kubat
George Kubat
<PAGE> -27-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1996, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Apartment Investors, L.P.
America First Participating/Preferred Equity Mortgage Fund and
America First Participating/Preferred Equity Mortgage Fund Limited
Partnership
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.-A
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 25th day of March, 1997.
/s/ Martin A. Massengale
Martin A. Massengale
<PAGE> -28-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1996, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Apartment Investors, L.P.
America First Participating/Preferred Equity Mortgage Fund and
America First Participating/Preferred Equity Mortgage Fund Limited
Partnership
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.-A
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 25th day of March, 1997.
/s/ Alan Baer
Alan Baer
<PAGE> -29-
POWER OF ATTORNEY
The undersigned hereby appoints Michael Thesing as his agent and
attorney-in-fact for the purpose of executing and filing all reports on Form
10-K relating to the year ending December 31, 1996, and any amendments
thereto, required to be filed with the Securities and Exchange Commission by
the following persons:
America First Tax-Exempt Mortgage Fund Limited Partnership
America First Apartment Investors, L.P.
America First Participating/Preferred Equity Mortgage Fund and
America First Participating/Preferred Equity Mortgage Fund Limited
Partnership
America First PREP Fund 2 Limited Partnership
America First PREP Fund 2 Pension Series Limited Partnership
Capital Source L.P.
Capital Source II L.P.-A
IN WITNESS WHEREOF, the undersigned has executed this Power of Attorney
on the 25th day of March, 1997.
/s/ Mariann Byerwalter
Mariann Byerwalter
<PAGE> -30-
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<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> YEAR YEAR YEAR YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995 DEC-31-1994 DEC-31-1993 DEC-31-1992
<PERIOD-END> DEC-31-1996 DEC-31-1995 DEC-31-1994 DEC-31-1993 DEC-31-1992
<CASH> 1,379,560 1,103,805 840,454 578,111 3,748,270
<SECURITIES> 0 0 0 0 0
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<TOTAL-ASSETS> 68,014,454 67,698,916 67,379,656 67,137,170 142,698,746
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0 0 0 0 0
0 0 0 0 0
<OTHER-SE> 67,306,988 67,099,799 66,800,861 66,564,952 129,548,308
<TOTAL-LIABILITY-AND-EQUITY> 68,014,454 67,698,916 67,379,656 67,137,170 142,698,746
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<TOTAL-REVENUES> 6,336,598 6,368,495 6,208,738 10,833,733 17,828,462
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 0 0 0 0 0
<OTHER-EXPENSES> 648,784 585,926 478,438 4,696,410 9,937,660
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 0 0 0 400,931 963,002
<INCOME-PRETAX> 5,687,814 5,782,569 5,730,300 5,736,392 6,927,800
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> 0 0 0 0 0
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<NET-INCOME> 5,687,814 5,782,569 5,730,300 5,736,392 6,927,800
<EPS-PRIMARY> 0 0 0 0 0
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