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
For the transition period from to
Commission file number 0-17582
AMERICA FIRST PREP FUND 2 PENSION SERIES
LIMITED PARTNERSHIP
(Exact name of registrant as specified
in its Agreement of Limited Partnership)
Delaware 47-0719051
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 400, 1004 Farnam Street, Omaha, NE 68102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including
area code: (402) 444-1630
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 assigned limited partnership
interests in the Registrant ("BUCs").
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 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 Beneficial Unit Certificates representing assigned limited
partnership interests in the Registrant (the "BUCs") are not currently traded
in any market. Therefore, there is no market price or average bid and asked
price for the BUCs within the 60 days prior to the date of this filing.
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 9
Item 9. Changes in and Disagreements With Accountants on Accounting
and Financial Disclosure 9
PART III
Item 10. Directors and Executive Officers of Registrant 9
Item 11. Executive Compensation 10
Item 12. Security Ownership of Certain Beneficial Owners and Management 10
Item 13. Certain Relationships and Related Transactions 11
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 12
SIGNATURES 25
<PAGE> - ii -
PART I
Item 1. Business. America First PREP Fund 2 Pension Series Limited
Partnership (the "Registrant" or the "Partnership") was formed on February
2,1988, under the Delaware Revised Uniform Limited Partnership Act to invest
principally in federally-insured first mortgages on multifamily residential
properties, including retirement living centers, and in securities
collateralized by first mortgages on multifamily residential properties. The
Registrant also invests in Preferred Real Estate Participations ("PREPs") in
the form of limited partnership interests in the limited partnerships which
own the financed properties. The Registrant's business objectives are to
provide investors: (i) safety and preservation of capital; (ii) regular cash
distributions; and, (iii) a potential for an enhanced yield from participations
in the net cash flow and net capital appreciation from the financed properties
received under the terms of the PREPs.
A total of 905,974 BUCs were sold at $20 per BUC for total capital
contributions of $16,697,101 after the payment of certain organization and
offering costs.
Through December 31, 1996, the Registrant had acquired: (i) five
mortgage-backed securities guaranteed as to principal and interest by the
Government National Mortgage Association ("GNMA") collateralized by first
mortgage loans on multifamily housing projects located in four states (the
"GNMA Certificates"); (ii) various mortgage-backed securities collateralized
by pools of single-family mortgages and guaranteed as to principal and
interest by either GNMA or the Federal National Mortgage Association ("FNMA")
(the "Single-Family Certificates") and; (iii) PREPs in five limited
partnerships which own the multifamily housing properties financed by the GNMA
Certificates. The Partnership has been repaid by GNMA on two GNMA
Certificates. The Partnership no longer holds its PREP in one of the
properties financed by one of the repaid GNMA Certificates and has sold its
PREP in another property. Collectively, the three remaining GNMA Certificates
and the three remaining PREPs are referred to herein as the "Permanent
Investments". A description of the Permanent Investments held by the
Registrant at December 31, 1996, (and the properties financed thereby) appears
in Notes 5 and 6 to the Notes to Financial Statements filed in response to
Item 8 hereof. In addition, the Registrant held four Single-Family
Certificates at December 31, 1996. All Permanent Investments were made in
conjunction with America First PREP Fund 2 Limited Partnership, an affiliate
of the Registrant.
The GNMA Certificates and the Single-Family Certificates provide the
Registrant with monthly payments of principal and interest which are
guaranteed either by GNMA or FNMA. The PREPs are intended to provide the
Registrant with a base return plus a participation in the net cash flow and
net capital appreciation of the underlying real estate properties. Therefore,
the return to the Registrant depends, in part, on the economic performance of
the real estate financed by the PREPs.
While principal of and interest on the GNMA Certificates and
Single-Family Certificates is guaranteed by the United States government, the
amount of cash distributions received by the Registrant from the PREPs is a
function of the net rental revenues generated by the properties financed by
the Registrant. 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.
<PAGE> - 1 -
The Registrant believes that each of the properties 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.
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 does not directly own or lease any
physical properties. The Registrant has invested in the Permanent Investments
described in Item 1. By virtue of its interest in the PREPs, the Partnership
indirectly owns the properties it has financed through its Permanent
Investments. Descriptions of the multifamily housing projects collateralizing
the Permanent Investments held by the Registrant as of December 31, 1996,
are described in the following table:
<TABLE>
<CAPTION>
Average
Number Square Feet Federal
Property Name Location of Units Per Unit Tax Basis
- -------------------------- ---------------------- -------- ----------- ---------------
<S> <C> <C> <C> <C>
Broadmoor Court Colorado Springs, CO 46 391 $ 1,879,990
Laurel Park Apartments Riverdale, GA 387 855 7,692,161
Owings Chase Apartments Pikesville, MD 234 960 8,274,083
-------- ---------------
667 $ 17,846,234
======== ===============
</TABLE>
Depreciation is taken on each property on a straight-line basis over the
estimated useful lives of the components of the properties ranging from five
to 40 years.
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>
BROADMOOR COURT
Average Occupancy Rate 96% 99% 98% 96% 84%
Average Effective Annual Rental Per Unit $21,400 $21,289 $20,540 $19,373 $16,731
LAUREL PARK APARTMENTS
Average Occupancy Rate 97% 95% 85% 74% 88%
Average Effective Annual Rental Per Unit $5,293 $4,867 $4,217 $3,503 $4,358
OWINGS CHASE APARTMENTS
Average Occupancy Rate 96% 95% 91% 83% 84%
Average Effective Annual Rental Per Unit $6,792 $6,580 $6,302 $5,933 $6,188
</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 6 to the Registrant'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 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 are subject to various transfer
restrictions imposed to prevent the Registrant from being treated as a
publicly traded partnership for federal income tax purposes and,
accordingly, there is no public trading market for the BUCs.
(b) Investors. The approximate number of BUC Holders on December
31, 1996, was 799.
(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
$1,238,286 and $1,297,172, 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 $ .9017 $ .7573
Return of Capital .4651 .6745
----------------- -----------------
Total $ 1.3668 $ 1.4318
================= =================
</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 levels 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 thereto 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-backed securities income $ 660,229 $ 723,177 $ 557,576 $ 655,722 $ 680,483
Equity in earnings of property partnerships 20,381 62,475 76,322 42,445 146,056
Interest income on temporary cash investments 94,739 84,722 78,415 94,691 73,249
Gain on sale of PREP 226,587 - - - -
General and administrative expenses (172,499) (171,190) (148,214) (178,832) (173,555)
Provision for losses on investment in PREPs - - - - (150,000)
------------- ------------- ------------- ------------- -------------
Net income $ 829,437 $ 699,184 $ 564,099 $ 614,026 $ 576,233
============= ============= ============= ============= =============
Net income per Beneficial Unit Certificate (BUC) $ .90 $ .76 $ .61 $ .66 $ .62
============= ============= ============= ============= =============
Cash distributions paid or accrued per BUC $ 1.3668 $ 1.4318 $ 1.4898 $ 1.5439 $ 1.6117
============= ============= ============= ============= =============
Investment in mortgage-backed securities $ 8,506,853 $ 9,361,640 $ 10,202,877 $ 10,251,266 $ 11,061,151
============= ============= ============= ============= =============
Investment in preferred real estate participations
(PREPs), net of valuation allowance $ - $ - $ - $ 99,499 $ 292,524
============= ============= ============= ============= =============
Total assets $ 10,690,796 $ 11,288,968 $ 11,879,769 $ 12,577,331 $ 13,363,547
============= ============= ============= ============= =============
</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: (i) five mortgage-backed securities
guaranteed as to principal and interest by the Government National Mortgage
Association (GNMA) collateralized by first mortgage loans on multifamily
housing properties located in four states (the GNMA Certificates); (ii)
various mortgage-backed securities collateralized by pools of single-family
mortgages and guaranteed as to principal and interest by either GNMA or the
Federal National Mortgage Association (FNMA) (the Single-Family Certificates)
and; (iii) limited partnership interests (PREPs) in five limited partnerships
which own the multifamily housing properties financed by the GNMA
Certificates. The Partnership has been repaid by GNMA on the GNMA
Certificates collateralized by the Villages at Moonraker and Laurel Park
Apartments. During the second quarter of 1995, the Partnership withdrew as a
limited partner of the operating partnership which owns the Villages at
Moonraker, but has retained its PREP in Laurel Park Apartments. During the
fourth quarter of 1996, the Partnership sold its PREP in Ashwood Apartments,
but retains its GNMA Certificate on this property. Collectively, the three
remaining GNMA Certificates and the three remaining PREPs are referred to as
the Permanent Investments. In addition, the Partnership held four
Single-Family Certificates at December 31, 1996.
The following table shows the occupancy levels of the properties financed by
the Partnership in which the Partnership continues to hold an equity interest
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>
Broadmoor Court Colorado Springs, CO 46 44 96%
Laurel Park Apartments Riverdale, GA 387 371 96%
Owings Chase Apartments Pikesville, MD 234 231 99%
--------- ---------- -----------
667 646 97%
========= ========== ===========
</TABLE>
Distributions
Cash distributions paid or accrued per Beneficial Unit Certificate (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 $ .9017 $ .7573 $ .6076
Return of capital .4651 .6745 .8822
-------------- -------------- --------------
$ 1.3668 $ 1.4318 $ 1.4898
============== ============== ==============
Distributions
Paid out of cash flow (including mortgage principal payments) $ 1.3668 $ 1.4318 $ 1.4898
============== ============== ==============
</TABLE>
<PAGE> - 5 -
Regular monthly distributions to investors consist primarily of interest and
principal received on GNMA Certificates and Single-Family Certificates.
Additional cash for distributions is received from PREPs and temporary cash
investments. The Partnership may draw on reserves to pay operating expenses
or to supplement cash distributions to BUC Holders. The Partnership is
permitted to replenish its reserves through the sale or refinancing of
assets. During 1996, a net amount of $430,010 of undistributed mortgage
principal payments was placed in reserves. The total amount held in reserves
at December 31, 1996, was $4,515,330 of which $2,536,657 was invested in
Single-Family Certificates.
The Partnership believes that cash provided by operating and investing
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
The Partnership continues to receive monthly principal and interest payments
on its GNMA Certificates and Single-Family Certificates which are fully
guaranteed either by GNMA or FNMA. The obligations of GNMA are backed by the
full faith and credit of the United States government.
PREPs, however, are not insured or guaranteed. The value of these investments
is a function of the value of the real estate underlying the PREPs. It is the
policy of the Partnership to make a periodic review of the real estate
underlying the PREPs in order to establish, when necessary, a valuation
reserve on the investment in PREPs. The allowance for losses on investment in
PREPs is based on the fair value of the properties underlying the PREPs.
The fair value of the properties underlying the PREPs is based on management's
best estimate of the net realizable value of such 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
management by an independent real estate firm and are based on 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 allowance is periodically
reviewed and adjustments are made to the allowance when there are significant
changes in the estimated net realizable value of the properties underlying the
PREPs.
Based on the foregoing methodology, valuations and reviews performed during
the year ended December 31, 1996, indicated that the investment in PREPs
recorded on the balance sheet at December 31, 1996, required no adjustments to
the current carrying amounts.
<PAGE> - 6 -
Ashwood Apartments
Ashwood Apartments, located in Tulsa, Oklahoma, had an average occupancy rate
of 97% during 1996, compared to 95% during 1995. During the fourth quarter of
1996, the Partnership sold its limited partnership interest in the operating
partnership which owns Ashwood Apartments. The Partnership received proceeds
of $226,587 from the sale. Since the Partnership had previously written off
its entire equity interest in Ashwood Apartments, the Partnership realized a
gain of $226,587 on the sale. In addition to sale proceeds received from the
sale of its limited partnership interest, the Partnership received
approximately $20,000 in equity distributions from the partnership which owns
the property; however, due to the sale of its limited partnership interest,
the Partnership will no longer receive equity distributions from Ashwood
Apartments. The Partnership also received principal and interest payments on
the GNMA Certificate collateralized by this property in 1996.
In conjunction with the Partnership's sale of its limited partnership interest
discussed above, the operating partnership which owns Ashwood Apartments
refinanced its mortgage loan. As a result, in January 1997, GNMA redeemed the
GNMA Certificate related to this property by paying the Partnership the full
principal amount of $556,444 plus accrued interest through the redemption
date. As such, the Partnership will no longer receive payments on the GNMA
Certificate.
Broadmoor Court
Broadmoor Court, a senior assisted-living center located in Colorado Springs,
Colorado, had an average occupancy rate of 96% during 1996, compared to 99%
during 1995. The mortgage loan on this property is current and the
Partnership anticipates that property cash flow will be sufficient to pay debt
service in 1997. In addition to principal and interest payments received
during 1996 on the GNMA Certificate collateralized by this property, the
Partnership recorded approximately $48,000 in equity distributions from the
partnership which owns the property.
Laurel Park Apartments
Laurel Park Apartments, located in Riverdale, Georgia, had an average
occupancy rate of 97% during 1996 compared to 95% during 1995. At December
31, 1996 the Partnership's investment in this property consists only of a PREP
since the Partnership has already been repaid by GNMA on its GNMA
Certificate. As previously reported, Laurel Park Apartments had not been
current on its mortgage obligations since December 1994. The General Partner
of the Partnership and the general partner of the operating partnership which
owns Laurel Park Apartments negotiated a Loan Modification Agreement (LMA)
with HUD in August 1996. Among other things, the LMA reduced the interest
rate on the mortgage from 9.25% to 7.25% as well as satisfied all delinquent
principal and interest. The Partnership made an additional equity investment
of $47,996 to effect the LMA. Laurel Park Apartments has been current on its
mortgage obligations since the LMA was effected; however, the Partnership did
not receive any equity distributions on its PREP during 1996. The General
Partner feels the LMA will better position the property to remain current on
its mortgage obligations as well as provide the Partnership with future equity
distributions. It is anticipated that Laurel Park Apartments will continue to
generate cash flow sufficient to meet its mortgage obligations under the terms
of the LMA during 1997.
Owings Chase Apartments
Owings Chase Apartments, located in Pikesville, Maryland, had an average
occupancy rate of 96% during 1996, compared to 95% during 1995. Cash flow
from the operations of the property was sufficient to fully service debt on
the mortgage loan in 1996. The mortgage loan was current (under the modified
terms of the mortgage) at December 31, 1996, and the Partnership anticipates
that the property cash flow will continue to be sufficient to pay debt service
in 1997. The Partnership received principal and interest payments on the GNMA
Certificate collateralized by this property in 1996; however the Partnership
did not receive any equity distributions on its PREP during 1996.
<PAGE> - 7 -
RESULTS OF OPERATIONS
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-backed securities income $ 660,229 $ 723,177 $ 557,576
Equity in earnings of property partnerships 20,381 62,475 76,322
Interest income on temporary cash investments 94,739 84,722 78,415
Gain on sale of PREP 226,587 - -
--------------- --------------- ---------------
1,001,936 870,374 712,313
General and administrative expenses 172,499 171,190 148,214
--------------- --------------- ---------------
Net income $ 829,437 $ 699,184 $ 564,099
=============== =============== ===============
</TABLE>
<TABLE>
<CAPTION>
Increase Increase
(Decrease) (Decrease)
From 1995 From 1994
--------------- ---------------
<S> <C> <C>
Mortgage-backed securities income $ (62,948) $ 165,601
Equity in earnings of property partnerships (42,094) (13,847)
Interest income on temporary cash investments 10,017 6,307
Gain on sale of PREP 226,587 -
--------------- ---------------
131,562 158,061
General and administrative expenses 1,309 22,976
--------------- ---------------
Net income $ 130,253 $ 135,085
=============== ===============
</TABLE>
Mortgage-backed securities income decreased $62,948 from 1995 to 1996, due to
the continued amortization of the principal balances of the mortgage-backed
securities.
Mortgage-backed securities income increased $165,601 from 1994 to 1995. This
increase was primarily a result of an increase of approximately $201,000 in
interest received from Owings Chase Apartments due to the Partnership no
longer eliminating self-charged interest, since the Partnership's equity in
the property has been reduced to zero. This increase was partially offset by
a decrease of approximately $35,000 in mortgage investment income due to the
continued amortization of the principal balances of the Partnership's other
mortgage-backed securities.
Equity in earnings of property partnerships is a function of the cash flow
received by the Partnership from its interest in the operating partnerships
which own the properties. Prior to the write-down of each investment in PREPs
to zero, equity in earnings of property partnerships also reflects the
Partnership's allocable share of earnings generated by each of the properties.
Equity in earnings of property partnerships decreased $42,094 from 1995 to
1996 due primarily to the of recording a loss of approximately $48,000 for
Laurel Park Apartments during the third quarter of 1996. This loss resulted
from expenses incurred in conjunction with entering into a loan modification
agreement with HUD in August. The loss related to Laurel Park Apartments was
partially offset by an increase in cash flow of approximately $6,000 from
Broadmoor Court.
Equity in earnings decreased $13,847 from 1994 to 1995 due primarily to the
write-down of the investment in Owings Chase Apartments to zero in the last
quarter of 1994 and due to the Partnership no longer eliminating self-charged
interest as discussed above. A decrease of approximately $43,000 related to
Owings Chase Apartments was partially offset by increases in cash flow of
approximately $24,000 from Broadmoor Court and $5,000 from Ashwood Apartments.
<PAGE> - 8 -
The increase in interest on temporary cash investments of $10,017 from 1995 to
1996 and $6,307 from 1994 to 1995 was primarily attributable to the increase
in cash reserves as undistributed principal was placed in reserves throughout
1995 and 1996.
The Partnership recorded a gain of $226,587 in 1996 due to the sale of the
Partnership's limited partnership interest in the operating partnership which
owns Ashwood Apartments. Due to this sale, the Partnership will no longer
receive equity distributions from Ashwood Apartments.
General and administrative expenses increased $1,309 from 1995 to 1996, due
primarily to an increase in travel expenses and professional fees. General
and administrative expenses increased $22,976 from 1994 to 1995. These
increases were primarily due to increases in salaries and related expenses and
professional fees.
Item 8. Financial Statements and Supplementary Data. The Financial
Statements and supporting schedules of the Registrant are set forth in Item 14
hereof and are incorporated herein by reference.
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 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 Six ("AFCA"), and its general partner, America First Companies
L.L.C. The following individuals are managers and officers of America First
Companies L.L.C., and each serves for a term of one year:
<TABLE>
<CAPTION>
Name Position Held Position Held Since
- ----------------------- -------------------------- -----------------------
<S> <C> <C>
Michael B. Yanney Chairman of the Board, 1987
President, Chief Executive
Officer and Manager
Michael Thesing Vice President, Secretary, 1987
Treasurer and Manager
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
</TABLE>
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).
<PAGE> - 9 -
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.
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 directors 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 AFCA pursuant to the terms of its limited partnership agreement
during the year ended December 31, 1996, is described in Note 7 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) National Bank of Detroit as trustee for the K-Mart Corporation
Employee Welfare Benefit Plan, 611 Woodward Avenue, Detroit, Michigan 48232
owns 386,598 Units representing approximately 42.67% of the outstanding BUCs.
No other person is known by the Registrant to own beneficially more than 5% of
the BUCs.
(b) No manager or officer of America First Companies L.L.C. and no
partner of AFCA owns any BUCs.
<PAGE> - 10 -
(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.
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. $137,492 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 7 to Notes to Financial Statements filed in response to
Item 8 hereof for a description of these costs and expenses.
AFCA is entitled to an annual administrative fee equal to .35% of the
Partnership's outstanding investments which is paid by the Partnership to the
extent such amounts are not paid by property owners. AFCA earned $27,621 in
such administrative fees during 1996, and of such amount, the Partnership paid
$25,303.
The general partner of the property partnership which owns Owings Chase
Apartments is principally owned by an employee of America First Companies
L.L.C.. Such employee has a nominal interest in America First Companies
L.L.C.. Affiliates of AFCA also own small interests in the general partner.
The general partner has a nominal interest in the property partnership's
profits, losses and cash flow which is subordinate to the interest of the
Partnership. The general partner did not receive cash distributions from the
property partnership in 1996.
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 Laurel Park Apartments and Owings Chase
Apartments. 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 3.5% 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 $40,261.
<PAGE> - 11 -
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:
1. Financial Statements. The following financial statements 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.
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 Sixteen (incorporated herein by
reference to Form S-11 Registration Statement filed April 13, 1987,
with the Securities and Exchange Commission by America First
Investment Funds (Commission File No. 33-13407)).
4(a). Agreement of Limited Partnership dated May 25, 1988
(incorporated herein by reference to Form 10-K dated December 31,
1988, filed pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 by America First PREP Fund 2 Pension Series
Limited Partnership (Commission File No. 0-17582)).
4(b). Form of Certificate of Exchangeable Unit (incorporated
by reference to Form S-11 Registration Statement filed April 13,
1987, with the Securities and Exchange Commission by America First
Investment Funds (Commission File No. 33-13407)).
10(a). Securities Purchase Agreement, dated September 14,
1988, between America First PREP Fund 2 Pension Series Limited
Partnership and American Mortgages, Inc. (incorporated herein by
reference to Form 10-K dated December 31, 1988, filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 by
America First PREP Fund 2 Pension Series Limited Partnership
(Commission File No. 0-17582)).
10(b). Securities Purchase Agreement, dated November 29,
1988, between America First PREP Fund 2 Pension Series Limited
Partnership and TRI Financial Corp. (incorporated herein by
reference to Form 10-K dated December 31, 1988, filed pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 by
America First PREP Fund 2 Pension Series Limited Partnership
(Commission File No. 0-17582)).
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> - 12 -
INDEPENDENT ACCOUNTANTS' REPORT
To the Partners
America First PREP Fund 2 Pension Series Limited Partnership:
We have audited the accompanying balance sheets of America First Prep Fund 2
Pension Series 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 misstatements. 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 Prep Fund 2
Pension Series 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> - 13 -
AMERICA FIRST PREP FUND 2 PENSION SERIES 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 $ 2,072,577 $ 1,813,499
Investment in mortgage-backed securities (Note 5) 8,506,853 9,361,640
Investment in preferred real estate participations (PREPs),
net of valuation allowance (Note 6) - -
Interest receivable 60,561 64,454
Other assets 50,805 49,375
-------------- --------------
$ 10,690,796 $ 11,288,968
============== ==============
Liabilities and Partners' Capital
Liabilities
Accounts payable (Note 7) $ 54,401 $ 58,676
Distribution payable (Note 4) 101,945 213,157
-------------- --------------
156,346 271,833
-------------- --------------
Partners' Capital
General Partner 100 100
Beneficial Unit Certificate Holders
($11.63 per BUC in 1996 and $12.16 in 1995) 10,534,350 11,017,035
-------------- --------------
10,534,450 11,017,135
-------------- --------------
$ 10,690,796 $ 11,288,968
============== ==============
</TABLE>
AMERICA FIRST PREP FUND 2 PENSION SERIES 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-backed securities income (Note 5) $ 660,229 $ 723,177 $ 557,576
Equity in earnings of property partnerships (Note 6) 20,381 62,475 76,322
Interest income on temporary cash investments 94,739 84,722 78,415
Gain on sale of PREP 226,587 - -
-------------- -------------- --------------
1,001,936 870,374 712,313
Expenses
General and administrative expenses (Note 7) 172,499 171,190 148,214
-------------- -------------- --------------
Net income $ 829,437 $ 699,184 $ 564,099
============== ============== ==============
Net income allocated to:
General Partner $ 12,508 $ 13,103 $ 13,634
BUC Holders 816,929 686,081 550,465
-------------- -------------- --------------
$ 829,437 $ 699,184 $ 564,099
============== ============== ==============
Net income per BUC $ .90 $ .76 $ .61
============== ============== ==============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> - 14 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
STATEMENT OF PARTNERS' CAPITAL
FROM DECEMBER 31, 1993, TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
Beneficial Unit
General Certificate
Partner Holders Total
-------------- ---------------- ---------------
<S> <C> <C> <C>
Partner's Capital (excluding net unrealized holding gains (losses))
Balance at December 31, 1993 $ 100 $ 12,404,777 $ 12,404,877
Net income 13,634 550,465 564,099
Cash distributions paid or accrued (Note 4) (13,634) (1,349,720) (1,363,354)
-------------- ---------------- ---------------
Balance at December 31, 1994 100 11,605,522 11,605,622
Net income 13,103 686,081 699,184
Cash distributions paid or accrued (Note 4) (13,103) (1,297,172) (1,310,275)
-------------- ---------------- ---------------
Balance at December 31, 1995 100 10,994,431 10,994,531
Net income 12,508 816,929 829,437
Cash distributions paid or accrued (Note 4) (12,508) (1,238,286) (1,250,794)
-------------- ---------------- ---------------
100 10,573,074 10,573,174
-------------- ---------------- ---------------
Net unrealized holding gains (losses)
Balance at December 31, 1994 - - -
Net change - 22,604 22,604
-------------- ---------------- ---------------
Balance at December 31, 1995 - 22,604 22,604
Net change - (61,328) (61,328)
-------------- ---------------- ---------------
- (38,724) (38,724)
-------------- ---------------- ---------------
Balance at December 31, 1996 $ 100 $ 10,534,350 $ 10,534,450
============== ================ ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> - 15 -
AMERICA FIRST PREP FUND 2 PENSION SERIES 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 $ 829,437 $ 699,184 $ 564,099
Adjustments to reconcile net income to net cash
provided by operating activities
Equity in earnings of property partnerships (20,381) (62,475) (76,322)
Gain on sale of PREP (226,587) - -
Amortization of discount on mortgage-backed securities (9,912) (11,061) (20,757)
Decrease in interest receivable 3,893 3,434 10,415
(Increase) decrease in other assets (1,430) 8,249 8,698
Increase (decrease) in accounts payable (4,275) 7,612 (7,091)
--------------- --------------- ---------------
Net cash provided by operating activities 570,745 644,943 479,042
--------------- --------------- ---------------
Cash flows from investing activities
Mortgage principal payments received 803,371 874,902 1,115,351
Sale of PREP 226,587 - -
Distributions received from PREPs 68,377 62,475 201,532
Investment in PREP (47,996) - (25,711)
Mortgage-backed securities prepayments - - 3,219,593
Acquisition of mortgage-backed securities - - (4,265,798)
--------------- --------------- ---------------
Net cash provided by investing activities 1,050,339 937,377 244,967
--------------- --------------- ---------------
Cash flow used in financing activity
Distributions paid (1,362,006) (1,320,201) (1,254,570)
--------------- --------------- ---------------
Net increase (decrease) in cash and temporary cash investments 259,078 262,119 (530,561)
Cash and temporary cash investments at beginning of year 1,813,499 1,551,380 2,081,941
--------------- --------------- ---------------
Cash and temporary cash investments at end of year $ 2,072,577 $ 1,813,499 $ 1,551,380
=============== =============== ===============
The accompanying notes are an integral part of the financial statements.
</TABLE>
<PAGE> - 16 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
1. Organization
America First PREP Fund 2 Pension Series Limited Partnership (the Partnership)
was formed on February 2, 1988, under the Delaware Revised Uniform Limited
Partnership Act for the purpose of acquiring a portfolio of federally-insured
multifamily mortgages and other investments including preferred real estate
participations (PREPs). PREPs consist of equity interests which are intended
to provide the Partnership with a participation in the net cash flow and net
sale or refinancing proceeds of the properties collateralizing the mortgage
loans. The Partnership began operations with the first escrow closing on May
25, 1988, and will continue in existence until December 31, 2017, unless
terminated earlier under the provisions of the Partnership Agreement. The
General Partner of the Partnership is America First Capital Associates Limited
Partnership Six (AFCA 6).
2. Summary of Significant Accounting Policies
A) Financial Statement Presentation
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 Mortgage-Backed Securities
Investment securities are classified as held-to-maturity,
available-for-sale, or trading. Investments classified as
held-to-maturity are carried at amortized cost. 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 the 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 trading.
C) Investment in PREPs
The investment in PREPs consists of interests in limited partnerships
which own properties underlying the mortgage-backed securities and are
accounted for using the equity method. When an investment in a PREP has
been reduced to zero, earnings are recorded to the extent that
distributions are received. PREPs are not insured or guaranteed. The
value of these investments is a function of the value of the real estate
underlying the PREPs.
D) Allowance for Losses on Investments in PREPs
The allowance for losses on investments in PREPs is a valuation reserve
which has been established at a level that management feels is adequate to
absorb potential losses on investments in PREPs. The allowance is based
on management's best estimate of the net realizable value of such
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 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 management by an independent real estate firm and
are based on 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 allowance is periodically reviewed and adjustments are made to the
allowance when there are significant changes in the estimated net
realizable value of the properties underlying the PREPs.
<PAGE> - 17 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
E) Income Taxes
No provision has been made for income taxes since Beneficial Unit
Certificate (BUC) Holders are required to report their share of the
Partnership's income for federal and state income tax purposes. The tax
basis of the Partnership's assets and liabilities exceeded the reported
amounts by $1,758,888 and $1,863,187 at December 31, 1996, and December 31,
1995, respectively.
F) Temporary Cash Investments
Temporary cash investments are invested in short-term debt securities
purchased with an original maturity of three months or less.
G) Net Income Per BUC
Net income per BUC has been calculated based on the number of BUCs
outstanding (905,974) for all years presented.
H) 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 Reserve Account
The Partnership maintains a reserve account which consisted of the following
at December 31, 1996:
<TABLE>
<S> <C>
Cash and temporary cash investments $ 1,978,673
GNMA Certificates 1,490,176
FNMA Certificates 1,046,481
---------------
$ 4,515,330
===============
</TABLE>
The reserve account was established to maintain working capital for the
Partnership and is available for distribution to BUC Holders and for any
contingencies related to Permanent Investments and the operation of the
Partnership. See Note 5 regarding the investment in mortgage-backed
securities.
4. Partnership Income, Expenses and Cash Distributions
The Partnership Agreement contains provisions for distributing the cash
available for distribution and for the allocation of income and expenses for
tax purposes among AFCA 6 and BUC Holders. Income and expenses are allocated
to each BUC Holder on a monthly basis based on the number of BUCs held by each
Holder as of the last day of the month for which such allocation is to be
made.
Net Operating Income during each distribution period will be distributed 99%
to the BUC Holders and 1% to AFCA 6 until the BUC Holders, as a class, receive
distributions of Net Operating Income equal to a cumulative noncompounded
annual return of 9% on their Adjusted Capital Contributions. Thereafter,
remaining Net Operating Income during such distribution period will be
distributed 90% to the BUC Holders and 10% to AFCA 6 until BUC Holders, as a
class, receive distributions of Net Operating Income equal to a cumulative
noncompounded annual return of 11% on their Adjusted Capital Contributions.
Thereafter, remaining Net Operating Income during such distribution period
will be distributed 95% to BUC Holders and 5% to AFCA 6.
<PAGE> - 18 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Net Capital Transaction Proceeds will be distributed 100% to the BUC Holders
until the BUC Holders, as a class, have received distributions from all
sources in an amount equal to $20 per BUC. Thereafter, Net Capital
Transaction Proceeds will be distributed 99% to the BUC Holders and 1% to
AFCA 6 until BUC Holders, as a class, have received distributions from all
sources in an amount equal to $20 per BUC plus an amount equal to a cumulative
noncompounded annual return of 9% on their Adjusted Capital Contributions.
Thereafter, any remaining Net Capital Transaction Proceeds will be distributed
90% to BUC Holders and 10% to AFCA 6 until BUC Holders, as a class, have
received distributions from all sources in an amount equal to $20 per BUC plus
an amount equal to a cumulative noncompounded annual return of 11% on their
Adjusted Capital Contributions. Thereafter any remaining Net Capital
Transactions Proceeds will be distributed 95% to BUC Holders and 5% to AFCA 6.
Proceeds from a Capital Transaction which result in the liquidation of the
Partnership for federal income tax purposes will be distributed in the same
manner as distributions from nonliquidating Capital Transactions, subject to
the requirement that the distributions be initially made to the BUC Holders
and AFCA 6 in accordance with their positive capital account balances.
Cash distributions are presently made on a monthly basis but may be made
quarterly or semiannually if AFCA 6 so elects. 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.
5. Investment in Mortgage-Backed Securities
The mortgage-backed securities held by the Partnership represent Government
National Mortgage Association (GNMA) Certificates and Federal National
Mortgage Association (FNMA) Certificates. The GNMA Certificates are backed by
first mortgage loans on multifamily housing properties and pools of
single-family properties. The FNMA Certificates are backed by pools of
single-family properties. The GNMA Certificates are debt securities issued by
a private mortgage lender and are guaranteed by GNMA as to the full and timely
payment of principal and interest on the underlying loans. The FNMA
Certificates are debt securities issued by FNMA and are guaranteed as to the
full and timely payment of principal and interest on the underlying loans.
At December 31, 1996, the total amortized cost, gross unrealized holding
gains, gross unrealized holding losses, and aggregate fair value of
available-for-sale securities are $2,575,381, $22,868, $61,592 and $2,536,657,
respectively. The total amortized cost, gross unrealized holding gains, gross
unrealized holding losses, and aggregate fair value of held-to-maturity
securities are $5,970,196, $174,257, $287,449 and $5,857,004, respectively.
At December 31, 1995, the total amortized cost, gross unrealized holding
gains, gross unrealized holding losses, and aggregate fair value of
available-for-sale securities are $3,071,819, $37,616, $15,012 and $3,094,423,
respectively. The total amortized cost, gross unrealized holding gains, gross
unrealized holding losses, and aggregate fair value of held-to-maturity
securities are $6,267,217, $175,318, $290,919 and $6,151,616, respectively.
Prior to June 30, 1995, the Partnership classified all investments in
mortgage-backed securities as held-to-maturity. However, during the quarter
ended June 30, 1995, the Partnership reassessed the appropriateness of the
classification of securities held in the reserve account (see Note 3). The
Partnership concluded, given the nature of the reserve account, it would be
more appropriate to classify securities held in the reserve account as
available-for-sale rather than as held-to-maturity. Accordingly, on June 30,
1995, the Partnership transferred all securities held in the reserve account
from the held-to-maturity classification to the available-for-sale
classification. The total amortized cost, gross unrealized holding gains,
gross unrealized holding losses and aggregate fair value of the securities
transferred were $3,378,771, $25,982, $56,198 and $3,348,555, respectively.
<PAGE> - 19 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Descriptions of the Partnership's mortgage-backed securities at December 31,
1996, are as follows:
<TABLE>
<CAPTION>
Income
Number Interest Maturity Carrying Earned
Type of Security and Name Location of Units Rate Date Amount in 1996
- ---------------------------------- -------------------- -------- -------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Held-to-Maturity
GNMA Certificates:
Ashwood Apartments Tulsa, OK 144 9.25% 07/15/23 $ 556,444 $ 51,662
Broadmoor Court Colorado Springs, CO 46 9.25% 10/15/29 581,351 53,881
Owings Chase Apartments Pikesville, MD 234 6.75% 12/15/23 3,193,872 216,795
Pools of single-family mortgages 8.74%(1) 2016 to 2018 1,638,529 160,059
------------- -------------
5,970,196 482,397
------------- -------------
Available-for-Sale
GNMA Certificates:
Pools of single-family mortgages 6.03%(1) 2008 757,554(2) 49,990
Pools of single-family mortgages 7.58%(1) 2008 732,622(2) 58,757
FNMA Certificates:
Pools of single-family mortgages 5.52%(1) 2000 1,046,481(2) 69,085
------------- -------------
2,536,657 177,832
------------- -------------
Balance at December 31, 1996 $ 8,506,853 $ 660,229
============= =============
</TABLE>
(1) Represents yield to the Partnership.
(2) Reserve account asset - see Note 3.
Reconciliation of the carrying amount of the mortgage-backed securities is 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>
Balance at beginning of year $ 9,361,640 $ 10,202,877 $ 10,251,266
Additions
Amortization of discount on mortgage-backed securities 9,912 11,061 20,757
Acquisition of mortgage-backed securities - - 4,265,798
Change in net unrealized holding gains on
available-for-sale securities - 22,604 -
Deductions
Mortgage principal payments received (803,371) (874,902) (1,115,351)
Mortgage-backed securities prepayments - - (3,219,593)
Change in net unrealized holding losses on
available-for-sale securities (61,328) - -
--------------- --------------- ---------------
Balance at end of year $ 8,506,853 $ 9,361,640 $ 10,202,877
=============== =============== ===============
</TABLE>
6. Investment in PREPs
The Partnership's PREPs consist of interests in limited partnerships which own
multifamily properties financed by the Partnership. The limited partnership
agreements originally provided for the payment of a base return on the equity
provided to the limited partnerships and for the payment of additional amounts
out of a portion of the net cash flow or net sale or refinancing proceeds of
the properties subject to various priority payments. Certain of the
agreements have been amended to defer payment of the base return.
<PAGE> - 20 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Descriptions of the PREPs held during the year ended December 31, 1996, are as
follows:
<TABLE>
<CAPTION>
Equity in
Earnings
(Losses)
Carrying of Property
Name Location Partnership Name Amount Partnerships
- ----------------------- -------------------- ----------------------------------------- ------------- ------------
<S> <C> <C> <C> <C>
Broadmoor Court Colorado Springs, CO Stazier Associates Colorado Springs, Ltd. $ 53,547 $ 48,476
Owings Chase Apartments Pikesville, MD Owings Chase Limited Partnership 150,000 -
Ashwood Apartments Tulsa, OK 129th Street Limited Partnership - (1) 19,901
Laurel Park Apartments Riverdale, GA Gold Key Venture - (47,996)
------------- ------------
203,547 $ 20,381
Less valuation allowance (203,547) ============
-------------
Balance at December 31, 1996 $ -
=============
</TABLE>
(1) During the fourth quarter of 1996, the Partnership sold its limited
partnership interest in 129th Street Limited Partnership. Therefore, the
Partnership no longer has an equity interest in this property.
Reconciliation of the carrying amount of the PREPs is 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>
Balance at beginning of year $ 203,547 $ 328,067 $ 427,566
Additions
Investment in PREPs 47,996 - 25,711
Equity in earnings of property partnerships 20,381 62,475 76,322
Deductions
Distributions received from PREPs (68,377) (62,475) (201,532)
Write-off(1) - (124,520) -
--------------- --------------- ---------------
Balance at end of year $ 203,547 $ 203,547 $ 328,067
=============== =============== ===============
</TABLE>
The following summarizes the activity in the valuation allowance:
<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>
Balance at beginning of year $ 203,547 $ 328,067 $ 328,067
Write-off(1) - (124,520) -
--------------- --------------- ---------------
Balance at end of year $ 203,547 $ 203,547 $ 328,067
=============== =============== ===============
</TABLE>
(1) During the second quarter of 1995, the Partnership withdrew as a limited
partner of the operating partnership which owns the Villages at Moonraker.
Therefore, the valuation allowance which had previously been established for
the full amount of this equity investment was written off.
<PAGE> - 21 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Combined condensed financial information for the PREPs is as follows:
Assets
Real estate $ 17,830,781 $ 20,381,335 $ 32,725,035
Restricted deposits and funded reserves 977,821 484,879 384,196
Other assets 1,191,345 1,378,718 1,901,395
--------------- --------------- ---------------
$ 19,999,947 $ 22,244,932 $ 35,010,626
=============== =============== ===============
Liabilities and Partners' Capital
Liabilities
Mortgage notes payable $ 20,459,706 $ 22,313,737 $ 34,181,180
Other liabilities 1,653,940 1,846,124 7,286,837
Partners' Capital (Deficit)
General Partners (2,545,305) (2,346,535) (7,379,538)
Limited Partners
America First PREP Fund 2 Limited Partnership 341,523 341,523 707,544
America First PREP Fund 2 Pension Series Limited Partnership 203,547 203,547 328,067
Other (113,464) (113,464) (113,464)
--------------- --------------- ---------------
$ 19,999,947 $ 22,244,932 $ 35,010,626
=============== =============== ===============
Rental income $ 5,550,385 $ 6,423,813 $ 7,019,554
=============== =============== ===============
Combined results of operations $ (469,952) $ (1,163,422) $ (2,344,145)
=============== =============== ===============
Equity in earnings of property partnerships
(as calculated pursuant to the Limited Partnership Agreements) $ 20,381 $ 62,475 $ 76,322
=============== =============== ===============
</TABLE>
7. Transactions with Related Parties
Substantially all the Partnership's general and administrative expenses are
paid by AFCA 6 or an affiliate and reimbursed by the Partnership. The amount
of such expenses reimbursed to AFCA 6 or an affiliate are shown below. The
reimbursed expenses 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 $ 83,883 $ 83,922 $ 68,450
Professional fees and expenses 16,755 18,828 19,749
Investor services and custodial fees 10,038 10,296 11,343
Report preparation and distribution 8,319 7,777 8,923
Other expenses 5,782 3,194 2,446
Consulting and travel expense 5,648 628 693
Insurance 4,434 3,867 2,891
Telephone 1,395 1,453 1,255
Registration fees 1,238 1,049 705
--------------- --------------- ---------------
$ 137,492 $ 131,014 $ 116,455
=============== =============== ===============
</TABLE>
AFCA 6 is entitled to an administrative fee of .35% per annum of the
outstanding principal amounts invested in mortgage-backed securities, PREPs,
and temporary cash investments to be paid by the Partnership to the extent
such amount is not paid by property owners. The administrative fee earned by
AFCA 6 was $27,621 in 1996, $28,841 in 1995, and $30,252 in 1994. Of these
amounts, $25,303 in 1996, $26,508 in 1995, and $27,456 in 1994 was paid by
the Partnership and the remainder was paid by property owners.
<PAGE> - 22 -
AMERICA FIRST PREP FUND 2 PENSION SERIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
The general partner of the property partnership which owns Owings Chase
Apartments is principally owned by an employee of an affiliate of AFCA 6.
Such employee has a nominal interest in the affiliate. Affiliates of AFCA 6
also own small interests in the general partner. The general partner has a
nominal interest in the property partnership's profits, losses and cash flow
which is subordinate to the interest of the Partnership. The general partner
did not receive cash distributions from the property partnership in 1996, 1995
or 1994.
An affiliate of AFCA 6 has been retained to provide property management
services for Laurel Park Apartments and Owings Chase Apartments. 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 $40,261, $36,740 and $26,995
in 1996, 1995 and 1994, respectively.
8. Fair Value of Financial Instruments
The following methods and assumptions were used by the Partnership in
estimating the fair value of its financial instruments:
Cash and temporary cash investments: Fair value approximates the carrying
value of such assets.
Investment in mortgage-backed securities: Fair values are based on amounts
obtained from an independent pricing source.
<TABLE>
<CAPTION>
At December 31, 1996 At December 31, 1995
----------------------------------- -----------------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Cash and temporary cash investments $ 2,072,577 $ 2,072,577 $ 1,813,499 $ 1,813,499
Investment in mortgage-backed securities $ 8,506,853 $ 8,393,661 $ 9,361,640 $ 9,246,039
</TABLE>
9. 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 $ 233,336 $ 193,445 $ 162,616 $ 412,539(1)
Total expenses (44,955) (46,850) (45,278) (35,416)
--------------- --------------- --------------- ---------------
Net income $ 188,381 $ 146,595 $ 117,338 $ 377,123
=============== =============== =============== ===============
Net income per BUC $ .20 $ .16 $ .13 $ .41
=============== =============== =============== ===============
</TABLE>
(1) During the fourth quarter of 1996, the Partnership recorded a gain of
$226,587 on the sale of its limited partnership interest in the operating
partnership which owns Ashwood Apartments.
<PAGE> - 23 -
<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 $ 241,690 $ 205,721 $ 221,614 $ 201,349
Total expenses (44,616) (44,468) (41,644) (40,462)
--------------- --------------- --------------- ---------------
Net income $ 197,074 $ 161,253 $ 179,970 $ 160,887
=============== =============== =============== ===============
Net income per BUC $ .21 $ .18 $ .20 $ .17
=============== =============== =============== ===============
</TABLE>
10. Subsequent Event
During the fourth quarter of 1996, the operating partnership which owns
Ashwood Apartments refinanced its mortgage loan. As a result, in January
1997, GNMA redeemed the GNMA Certificate related to Ashwood Apartments by
paying the Partnership the full principal amount of $556,444 plus accrued
interest through the redemption date.
<PAGE> - 24 -
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 PREP FUND 2 PENSION
SERIES LIMITED PARTNERSHIP
By America First Capital
Associates Limited
Partnership Six, General
Partner of the Registrant
By America First Companies L.L.C.,
General Partner of America First
Capital Associates Limited
Partnership Six
By /s/ Michael Thesing
Michael Thesing,
Vice President
Date: March 26, 1997
<PAGE> - 25 -
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
(Principal Executive Officer)
Date: March 26, 1997 By /s/ Michael Thesing
Michael Thesing
Vice President, Secretary, Treasurer and
Manager (Principal Financial 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> - 26 -
EXHIBIT 24
POWER OF ATTORNEY
<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/ Michael B. Yanney
Michael B. Yanney
<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/ Gail Walling Yanney
Gail Walling Yanney
<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/ George Kubat
George Kubat
<PAGE> - 30 -
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> - 31 -
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> - 32 -
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> - 33 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 2,072,577
<SECURITIES> 8,506,853
<RECEIVABLES> 60,561
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,133,138
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,690,796
<CURRENT-LIABILITIES> 156,346
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 10,534,450
<TOTAL-LIABILITY-AND-EQUITY> 10,690,796
<SALES> 0
<TOTAL-REVENUES> 1,001,936
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 172,499
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 829,437
<INCOME-TAX> 0
<INCOME-CONTINUING> 829,437
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 829,437
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
