SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission File Number 1-9373
SUMMIT TAX EXEMPT BOND FUND, L.P.
-------------------------------------------------------
(Exact names of registrant as specified in its charter)
Delaware 13-3323104
- - ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
625 Madison Avenue, New York, New York 10022
- - ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_}
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF FINANCIAL CONDITION
(Unaudited)
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Participating first mortgage bonds-at fair value $124,766,559 $124,669,059
Temporary investments 2,125,000 1,350,000
Cash and cash equivalents 275,723 626,391
Promissory notes receivable, net 6,702,108 6,823,335
Deferred bond selection fees, net 1,595,675 1,708,218
Interest receivable, net 813,682 829,565
Deferred financing fees, net 165,113 260,985
Other assets 34,507 10,776
------------ ------------
Total assets $136,478,367 $136,278,329
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Loan payable $ 13,680,866 $ 13,680,866
Deferred income 987,227 1,143,191
Due to affiliates 328,670 49,262
Accounts payable and accrued expenses 174,236 124,850
------------ ------------
Total liabilities 15,170,999 14,998,169
============ ============
Contingencies
Partners' capital (deficit):
BUC$holders (7,906,234 BUC$
issued and outstanding) 124,582,109 124,555,445
General Partners (375,294) (375,838)
Net unrealized loss on participating
first mortgage bonds (2,899,447) (2,899,447)
------------ ------------
Total partners' capital 121,307,368 121,280,160
------------ ------------
Total liabilities and partners' capital $136,478,367 $136,278,329
============ ============
</TABLE>
See accompanying notes to financial statements
-2-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Interest income:
Participating first mortgage
bonds, net $2,348,277 $2,274,988 $7,047,628 $6,955,280
Promissory notes 137,062 130,018 433,411 437,222
Temporary investments 18,728 16,707 52,048 59,716
---------- ---------- ---------- ----------
Total revenues 2,504,067 2,421,713 7,533,087 7,452,218
========== ========== ========== ==========
Expenses:
Interest 332,396 349,075 991,145 1,045,355
Management fees 167,969 167,969 503,907 503,907
Loan servicing fees 84,225 84,456 250,844 250,613
General and administrative 105,602 94,070 274,500 278,848
Legal 84,936 66,528 194,489 323,199
Amortization of deferred bond
selection fees 37,514 37,513 112,543 112,542
Amortization of deferred
financing fees 31,958 31,957 95,872 95,871
---------- ---------- ---------- ----------
Total expenses 844,600 831,568 2,423,300 2,610,335
---------- ---------- ---------- ----------
Net Income $1,659,467 $1,590,145 $5,109,787 $4,841,883
========== ========== ========== ==========
Allocation of Net Income:
BUC$holders $1,626,277 $1,558,342 $5,007,591 $4,745,045
========== ========== ========== ==========
General Partners $ 33,190 $ 31,803 $ 102,196 $ 96,838
========== ========== ========== ==========
Net Income per BUC $ .20 $ .20 $ .63 $ .60
========== ========== ========== ==========
</TABLE>
See accompanying notes to financial statements
-3-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Net Unrealized
General Loss on Participating
Total BUC$holders Partners First Mortgage Bonds
------------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C>
Partners' capital (deficit) -
January 1, 1996 $ 121,280,160 $ 124,555,445 $ (375,838) $ (2,899,447)
Net income 5,109,787 5,007,591 102,196 0
Distributions (5,082,579) (4,980,927) (101,652) 0
------------- ------------- ------------- -------------
Partners' capital (deficit) -
September 30, 1996 $ 121,307,368 $ 124,582,109 $ (375,294) $ (2,899,447)
============= ============= ============= =============
</TABLE>
See accompanying notes to financial statements
-4-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Interest received, net $ 7,352,560 $ 8,072,366
Loan made to property affiliate 0 (721,266)
Fees and expenses paid (918,677) (1,100,747)
Interest paid (991,145) (1,045,355)
----------- -----------
Net cash provided by operating activities 5,442,738 5,204,998
----------- -----------
Cash flows from investing activities:
Net purchase of temporary investments (775,000) (115,534)
----------- -----------
Cash flows from financing activities:
Distributions paid (5,082,579) (5,082,579)
Principal payments on promissory note 64,173 33,219
----------- -----------
Net cash used in financing activities (5,018,406) (5,049,360)
----------- -----------
Net (decrease) increase in cash and cash equivalents (350,668) 40,104
Cash and cash equivalents at beginning of period 626,391 173,689
----------- -----------
Cash and cash equivalents at end of period $ 275,723 $ 213,793
=========== ===========
Schedule reconciling net income to net cash
provided by operating activities:
Net income $ 5,109,787 $ 4,841,883
----------- -----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Accretion of valuation allowance (97,500) (97,509)
Amortization of deferred income (98,910) (98,911)
Amortization of deferred bond selection fees 112,543 112,542
Amortization of deferred financing fees 95,872 95,871
Changes in:
Promissory notes receivable, net 57,054 190,299
Interest receivable, net 15,883 95,302
Other assets (23,731) (10,427)
Deferred income (57,054) (190,299)
Accounts payable and accrued expenses 49,386 (18,022)
Due to affiliates 279,408 284,269
----------- -----------
Total adjustments 332,951 363,115
----------- -----------
Net cash provided by operating activities $ 5,442,738 $ 5,204,998
=========== ===========
</TABLE>
See accompanying notes to financial statements
-5-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 1 - General
These financial statements have been prepared without audit. In the
opinion of management, the financial statements contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the financial position of Summit Tax Exempt Bond Fund, L.P. (the "Partnership")
as of September 30, 1996, the results of its operations for the three and nine
months ended September 30, 1996 and 1995 and its cash flows for the nine months
ended September 30, 1996 and 1995. However, the operating results for the
interim periods may not be indicative of the results expected for the full year.
Certain information and footnote disclosures normally included in
annual financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Partnership's Annual Report on Form 10-K/A-1 filed with
the Securities and Exchange Commission for the year ended December 31, 1995.
NOTE 2 - Participating First Mortgage Bonds ("FMB's")
The Partnership accounts for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115").
The Partnership has a right to require redemption of the FMBs
approximately twelve years after their issuance. The Partnership anticipates
holding the FMBs for approximately 12 to 15 years from the date of issuance;
however, it can elect to hold until maturity. As such, SFAS 115 requires the
Partnership to classify these investments as "available for sale." Accordingly,
investments in FMBs are carried at their estimated fair values with unrealized
gains and losses reported in a separate component of partners' capital.
Unrealized holding gains or losses do not affect the cash flow generated from
property operations, distributions to BUC$holders, the characterization of the
tax-exempt income stream or the financial obligations under the FMBs.
The Partnership periodically evaluates each FMB to determine whether a
decline in fair value below the FMB's cost basis is other than temporary. Such a
decline is considered to be other than temporary if, based on current
information and events, it is probable that the Partnership will be unable to
collect all amounts due according to the existing contractual terms of the
bonds. If the decline is judged to be other than temporary, the cost basis of
the bond is written down to its then estimated fair value, with the amount of
the write-down accounted for as a realized loss.
Because the FMBs are not readily marketable, the Partnership estimates
fair value for each bond as the present value of its expected cash flows using
an interest rate for comparable tax-exempt investments. This process is based
upon projections of future economic events affecting the real estate
collateralizing the bonds, such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates, and upon determination
of an appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Partnership's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
-6-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 2 - Participating First Mortgage Bonds ("FMB's") (continued)
With respect to the Highpointe FMB, effective as of July 12, 1996, the
Partnership has entered into a purchase agreement with Chemical Bank (now Chase
Bank) which is secured by a pledge and assignment of the Partnership's
Highpointe FMB ($8,900,000). The purpose of this transaction was to obtain an
extension, to January 1998, of a Letter of Credit (L/C) issued by Chemical Bank
on behalf of Highpointe (RHA Inv., Inc.) to credit enhance $3,250,000 in
pari-pasu first mortgage "low floater" bonds ("Chemical Bonds"), which proceeds
were used to complete construction of the project in 1989. Pursuant to the terms
of the purchase agreement, the Partnership has agreed that, should the Chemical
bonds not otherwise be refinanced or the L/C replaced as of January 1998 or the
Highpointe obligor defaults on its obligations under the Chemical bonds, the
Partnership will unconditionally purchase the bonds from Chemical Bank.
With respect to the FMBs which are subject to forbearance agreements
with the respective obligors, the difference between the stated interest rates
and the rates paid (whether deferred and payable out of available future cash
flow or, ultimately, from sale or refinancing proceeds) on FMBs is not accrued
for financial statement purposes. The accrual of interest at the stated interest
rate will resume once a property's ability to pay the stated rate has been
adequately demonstrated. Unrecorded contractual interest income was
approximately $494,000 and $1,049,000 for the nine months ended September 30,
1996 and 1995, respectively.
The cost basis of the FMBs at September 30, 1996 and December 31, 1995
was $127,666,006 and $127,568,506, respectively. The net unrealized loss on FMBs
consists of gross unrealized gains and losses of $3,150,835 and $6,050,282,
respectively, at both September 30, 1996 and December 31, 1995.
-7-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 2 - Participating First Mortgage Bonds (continued)
Descriptions of the various FMBs owned by the Partnership at September
30, 1996 are as follows:
<TABLE>
<CAPTION>
Annualized
interest rate
paid for the
nine months Minimum Carrying
ended Pay Rate at Stated Amount at
September September Interest Maturity September 30,
Property Location 30, 1996* 30, 1996* Rate* Call Date Date Face Amount 1996(E)
- - -------- -------- --------- --------- ----- --------- ---- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO 6.92%(B) 5.23% 5.23% Apr. 2006 Apr. 2008 $19,450,000 $ 18,646,804
Martin's Creek Summerville, SC 6.82 (C) 7.50 8.25 Mar. 2000 May 2010 7,300,000 6,821,915
East Ridge Mt. Pleasant, SC 7.29 (C) 7.50 8.25 Mar. 2000 May 2010 8,700,000 8,490,336
High Pointe Club Harrisburg, PA 6.76 (A) 8.50 Jun. 1998 Jun. 2006 8,900,000 7,554,651
Cypress Run Tampa, FL 5.67 (A) 8.50 Aug. 1998 Aug. 2006 15,402,428 13,902,586
Thomas Lake Eagan, MN 8.30 (D) 8.25 8.50 Aug. 1998 Aug. 2006 12,975,000 13,217,487
North Glen Atlanta, GA 6.00 6.00 8.50 Aug. 1998 Aug. 2008 12,400,000 11,113,192
Greenway Manor St. Louis, MO 9.09 (D) 8.50 8.50 Oct. 1998 Sept. 2006 12,850,000 13,744,484
Clarendon Hills Hayward, CA 5.52 5.52 5.52 Dec. 2003 Dec. 2003 17,600,000 14,934,389
Cedar Creek McKinney, TX 7.84 (A) 8.50 Dec. 1998 Dec. 2006 8,100,000 8,175,536
Sunset Terrace Lancaster, CA 5.00 (A) 8.00 Feb. 1999 May 2007 10,350,000 8,165,179
------------ ------------
$134,027,428 $124,766,559
============ ============
</TABLE>
*The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate payable pursuant to the applicable forbearance
agreement, if any.
(A) Pay rate is based on the net cash flow generated by the property.
(B) Includes contingent interest paid during the nine months ended September 30,
1996.
(C) Any deficit in the actual annual pay rate is restored as of the property's
fiscal year end based on audited financial statements to no less than the
minimum pay rate.
(D) Includes receipt of deferred base interest related to prior periods.
(E) The FMBs are carried at their estimated fair values at September 30, 1996.
-8-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 3 - Related Parties
Prudential-Bache Properties, Inc. ("PBP") and the Related General
Partner (collectively, the "General Partners") and their affiliates perform
services for the Partnership which include, but are not limited to: accounting
and financial management; registrar, transfer and assignment functions; asset
management; investor communications; printing and other administrative services.
The General Partners and their affiliates receive reimbursements for costs
incurred in connection with these services, the amount of which is limited by
the provisions of the Agreement of Limited Partnership (the "Partnership
Agreement"). The costs and expenses were:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
PBP and affiliates:
General and administrative $ 4,070 $ 32,280 $ 27,522 $ 89,073
Management fee 83,985 83,985 251,954 251,954
-------- -------- -------- --------
88,055 116,265 279,476 341,027
-------- -------- -------- --------
The Related General Partner
and affiliates:
General and administrative 10,098 11,292 42,683 35,384
Loan servicing fees 84,225 84,456 250,844 250,613
Management fee 83,984 83,984 251,953 251,953
-------- -------- -------- --------
178,307 179,732 545,480 537,950
-------- -------- -------- --------
$266,362 $295,997 $824,956 $878,977
======== ======== ======== ========
</TABLE>
An affiliate of the Related General Partner receives loan servicing
fees (see above) in an amount of .25% per annum of the principal amount
outstanding on FMBs serviced by the affiliate.
The General Partners are paid, in the aggregate, an annual management
fee equal to .5% of the original amount invested in FMBs.
A division of Prudential Securities Incorporated ("PSI"), an affiliate
of PBP, was responsible for the purchase, sale and safekeeping of the
Partnership's temporary investments in 1995. This account was maintained in
accordance with the Partnership Agreement. In addition, PSI owns 7,600 BUC$ at
September 30, 1996.
Several executive officers and directors of the Related General Partner
own less than 1% of the outstanding BUC$.
-9-
<PAGE>
SUMMIT TAX EXEMPT BOND FUND, L.P.
(a limited partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(Unaudited)
NOTE 4 - Contingencies
On or about October 18, 1993, a putative class action, captioned Kinnes
et al v. Prudential Securities Group, Inc. et al. (93 Civ. 654), was filed in
the United States District Court for the District of Arizona, purportedly on
behalf of investors in the Partnership against the Partnership, PBP, PSI and a
number of other defendants. On November 16, 1993, a putative class action
captioned Connelly et al v. Prudential-Bache Securities Inc. et al. (93 Civ.
713) , was filed in the United States District Court for the District of Arizona
, purportedly on behalf of investors in the Partnership against the Partnership,
PBP, PSI and a number of other defendants. On January 3, 1992, a putative class
action, captioned Levine v. Prudential-Bache Properties Inc. et al. (92 Civ.
52), was filed in the United States District Court for the Northern District of
Illinois purportedly on behalf of investors in the Partnership against the
General Partners, PSI and a number of other defendants. Subsequently the Related
General Partner was dismissed from the Levine litigation.
By order dated April 14, 1994, the Judicial Panel on Multidistrict
Litigation transferred the Kinnes case, by order dated May 4, 1994, the Connelly
case, and by order dated July 13, 1994, the Levine case, to a single judge of
the United States District Court for the Southern District of New York and
consolidated them for pretrial proceedings under the caption In re Prudential
Securities Incorporated Limited Partnerships Litigation (MDL Docket No. 1005).
On June 8, 1994 plaintiffs in the transferred cases filed a complaint that
consolidated the previously filed complaints and named as defendants, among
others, PSI, certain of its present and former employees and the General
Partners. The Partnership was not named a defendant in the consolidated
complaint, but the name of the Partnership was listed as being among the limited
partnerships at issue in the case.
On August 9, 1995 PBP, PSI and other Prudential defendants entered into
a Stipulation and Agreement of Partial Compromise and Settlement with legal
counsel representing plaintiffs in the consolidated actions. The court
preliminarily approved the settlement agreement by order dated August 29, 1995
and, following a hearing held November 17, 1995, found that the agreement was
fair, reasonable, adequate and in the best interests of the plaintiff class. The
court gave final approval to the settlement, certified a class of purchasers of
specific limited partnerships, including the Partnership, released all settled
claims by members of the class against the PSI settling defendants and
permanently barred and enjoined class members from instituting, commencing or
prosecuting any settled claim against the released parties. The full amount due
under the settlement agreement has been paid by PSI. The Levine and Connelly
cases were dismissed with prejudice as to the Prudential defendants by court
order dated October 25, 1996. The Levine and Connelly cases were dismissed with
prejudice as to the Prudential defendants by court order dated October 25, 1996.
The consolidated action remains pending against the Related General Partner and
certain of its affiliates.
The Related General Partner has been engaged in settlement negotiations
with counsel for the plaintiffs. In the event a settlement cannot be reached,
the Related General Partner believes it has meritorious defenses to the
consolidated complaint and intends to vigorously defend against this action.
NOTE 5 - Subsequent Event
In November 1996, distributions of approximately $1,660,000 and $34,000
were paid to the BUC$holders and General Partners, respectively, for the quarter
ended September 30, 1996.
-10-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
- - -------------------------------
Summit Tax Exempt Bond Fund, L.P. (the "Partnership") has invested in
eleven tax-exempt participating first mortgage bonds ("FMBs") issued by various
state or local governments or their agencies or authorities. The FMBs are
secured by participating first mortgage loans on multi-family residential
apartment projects.
The third quarter distribution of $1,660,000 ($.21 per BUC) was paid to
BUC$holders in November 1996 from current undistributed adjusted cash flow from
operations. Interest payments from FMBs are anticipated to provide sufficient
liquidity to meet the operating expenditures of the Partnership in future years
and to fund distributions.
The Partnership's loan payable has a variable interest rate; therefore,
future levels of interest expense will fluctuate in correlation to movements in
the 30-day commercial paper interest rate.
With respect to the Highpointe FMB, effective as of July 12, 1996, the
Partnership has entered into a purchase agreement with Chemical Bank (now Chase
Bank) which is secured by a pledge and assignment of the Partnership's
Highpointe FMB ($8,900,000). The purpose of this transaction was to obtain an
extension, to January 1998, of a Letter of Credit (L/C) issued by Chemical Bank
on behalf of Highpointe (RHA Inv., Inc.) to credit enhance $3,250,000 in
pari-pasu first mortgage "low floater" bonds ("Chemical Bonds"), which proceeds
were used to complete construction of the project in 1989. Pursuant to the terms
of the purchase agreement, the Partnership has agreed that, should the Chemical
bonds not otherwise be refinanced or the L/C replaced as of January 1998 or the
Highpointe obligor defaults on its obligations under the Chemical bonds, the
Partnership will unconditionally purchase the bonds from Chemical Bank.
Management is not aware of any trends or events, commitments or
uncertainties which have not otherwise been disclosed that will or are likely to
impact liquidity in a material way. The Partnership's investments in FMBs are
secured by a Partnership interest in properties which are diversified by
location so that if one area of the country is experiencing downturns in the
economy, the remaining properties may be experiencing upswings. However, the
geographic diversifications of the portfolio may not protect against a general
downturn in the economy.
Results of Operations
- - ---------------------
The Partnership accounts for its investments in the FMBs as debt
securities under the provisions of Statement of Financial Accounting Standards
No. 115, "Accounting for Certain Investments in Debt and Equity Securities"
("SFAS 115").
The Partnership has a right to require redemption of the FMBs
approximately twelve years after their issuance. The Partnership anticipates
holding the FMBs for approximately 12 to 15 years from the date of issuance;
however, it can elect to hold until maturity. As such, SFAS 115 requires the
Partnership to classify these investments as "available for sale." Accordingly,
investments in FMBs are carried at their estimated fair values with unrealized
gains and losses reported in a separate component of partners' capital.
Unrealized holding gains or losses do not affect the cash flow generated from
property operations, distributions to BUC$holders, the characterization of the
tax-exempt income stream or the financial obligations under the FMBs.
The Partnership periodically evaluates each FMB to determine whether a
decline in fair value below the FMB's cost basis is other than temporary. Such a
decline is considered to be other than temporary if, based on current
information and events, it is probable that the Partnership will be unable to
collect all amounts due according to the existing contractual terms of the
bonds. If the decline is judged to be other than temporary, the cost basis of
the bond is written down to its then estimated fair value, with the amount of
the write-down accounted for as realized loss.
-11-
<PAGE>
Because the FMBs are not readily marketable, the Partnership estimates
fair value for each bond as the present value of its expected cash flows using
an interest rate for comparable tax-exempt investments. This process is based
upon projections of future economic events affecting the real estate
collateralizing the bonds, such as property occupancy rates, rental rates,
operating cost inflation and market capitalization rates, and upon determination
of an appropriate market rate of interest, all of which are based on good faith
estimates and assumptions developed by the Partnership's management. Changes in
market conditions and circumstances may occur which would cause these estimates
and assumptions to change, therefore, actual results may vary from the estimates
and the variance may be material.
Net income increased approximately $69,000 and $268,000 for the three
and nine months ended September 30, 1996 as compared to the corresponding
periods in 1995 for the reasons discussed below.
Interest income from FMBs remained fairly consistent with increases of
approximately 3% and 1% for the three and nine months ended September 30, 1996
as compared to the corresponding periods in 1995.
Interest income from temporary investments increased approximately
$2,000 and decreased approximately $8,000 for the three and nine months ended
September 30, 1996 as compared to the corresponding periods in 1995. The
increase during the three months was primarily due to higher cash balances. The
decrease during the nine months was primarily due to lower interest rates, the
effect of which offset the increase during the three months.
General and administrative expenses increased approximately $12,000 for
the three months ended September 30, 1996 as compared to the corresponding
period in 1995 primarily due to increased accounting expenses in connection with
the filing of an amended March 31, 1996 Form 10-Q and a December 31, 1995 Form
10-K which was required due to a change in the Partnership's accounting for its
investments in FMBs pursuant to requirements under SFAS 115 as discussed above.
Legal expenses increased approximately $18,000 and decreased
approximately $129,000 for the three and nine months ended September 30, 1996 as
compared to the corresponding periods in 1995. The increase during the three
months was primarily due to increased legal expenses incurred with respect to
the extension of the Highpointe Letter of Credit. The decrease during the nine
months was primarily due to certain nonrecurring legal costs incurred with
respect to the Cypress Run bankruptcy proceedings in 1995 which exceeded the
increase during the third quarter of 1996.
-12-
<PAGE>
Property Information
- - --------------------
The following table lists the FMBs the Partnership owns together with
occupancy rates of the underlying properties as of September 30, 1996:
<TABLE>
<CAPTION>
Annualized
Interest
Rate Paid
for the nine Minimum
Stated months ended Pay Rate at
Interest September September
Property Location Face Amount Occupancy Rate* 30, 1996* 30, 1996*
- - -------- -------- ----------- --------- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
The Mansion Independence, MO $19,450,000 99.3% 5.23% 6.92%(B) 5.23%
Martin's Creek Summerville, SC 7,300,000 96.5 8.25 6.82 (C) 7.50
East Ridge Mt. Pleasant, SC 8,700,000 98.5 8.25 7.29 (C) 7.50
High Pointe
Club Harrisburg, PA 8,900,000 100.0 8.50 6.76 (A)
Cypress Run Tampa, FL 15,402,428 89.0 8.50 5.67 (A)
Thomas Lake Eagan, MN 12,975,000 100.0 8.50 8.30 (D) 8.25
North Glen Atlanta, GA 12,400,000 95.1 8.50 6.00 6.00
Greenway
Manor St. Louis, MO 12,850,000 96.0 8.50 9.09 (D) 8.50
Clarendon Hills Hayward, CA 17,600,000 100.0 5.52 5.52 5.52
Cedar Creek McKinney, TX 8,100,000 96.0 8.50 7.84 (A)
Sunset Terrace Lancaster, CA 10,350,000 90.0 8.00 5.00 (A)
------------
$134,027,428
============
</TABLE>
*The rate paid represents the interest recorded by the Partnership while the
stated rate represents the coupon rate of the FMB and the minimum pay rate
represents the minimum rate payable pursuant to the applicable forbearance
agreement, if any.
(A) Pay rate is based on net cash flow generated by the property.
(B) Includes contingent interest paid during the nine months ended September 30,
1996.
(C) The actual annual pay rate is adjusted as of the property's fiscal year end
based on audited financial statements to no less than the minimum pay rate.
(D) Includes receipt of accrued and unpaid base interest related to prior
periods.
General
- - -------
The determination as to whether it is the best interest of the
Partnership to enter into forbearance agreements on the FMBs or, alternatively,
to pursue its remedies under the loan documents, including foreclosure, is based
upon several factors including, but not limited to, property performance, owner
cooperation and projected legal costs.
Certain property owners have, at times, supplemented the cash flow
generated by the properties to meet the required FMB interest payments. There
can be no assurance that in the future any property owner will elect to
supplement property cash flow to satisfy bond interest requirements, if
necessary. The owner of the Sunset Terrace property supplemented the cash flow
generated by the property to meet the interest payments made during the first
five months of 1995. No property owner made supplementary payments during the
nine months ended September 30, 1996.
-13-
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - Incorporated by reference to Note 4 to the
financial statements filed herewith in Item 1 of Part 1 of the
Registrant's Quarterly Report.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other information - None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
4(a) Partnership Agreement, incorporated by reference to Exhibit A
to the Prospectus of Registrant, dated February 19, 1986,
filed pursuant to Rule 424(b) under the Securities Act of
1933, File No. 33-2421.
4(b) Amended and Restated Certificate of Limited Partnership,
incorporated by reference to Exhibit 4 to the Registration
Statement on Form S-11, File No. 33-2421.
27 Financial Data Schedule (filed herewith).
(b) Reports on Form 8-K - No reports on Form 8-K were filed during
the quarter.
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
SUMMIT TAX EXEMPT BOND FUND, L.P.
By: Related Tax Exempt Bond Associates, Inc.
A Delaware corporation, General Partner
Date: November 13, 1996 By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Vice President
(Principal Financial Officer)
Date: November 13, 1996 By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo
Treasurer
(Principal Accounting Officer)
By: Prudential-Bache Properties, Inc.
A Delaware corporation, General Partner
Date: November 13, 1996 By: /s/ Eugene D. Burak
-------------------
Eugene D. Burak
Vice President
-16-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for Summit Tax Exempt Bond Fund L.P.
and is qualified in its entirety by reference to
such financial statements
</LEGEND>
<CIK> 0000786156
<NAME> Summit Tax Exempt Bond Fund L.P.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 275,723
<SECURITIES> 126,891,559
<RECEIVABLES> 9,311,085
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 134,478,367
<CURRENT-LIABILITIES> 1,490,133
<BONDS> 13,680,866
0
0
<COMMON> 0
<OTHER-SE> 121,307,368
<TOTAL-LIABILITY-AND-EQUITY> 136,478,367
<SALES> 0
<TOTAL-REVENUES> 7,533,087
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,432,155
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 991,145
<INCOME-PRETAX> 5,109,787
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,109,787
<EPS-PRIMARY> .63
<EPS-DILUTED> 0
</TABLE>
