UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
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For the fiscal year ended December 31, 2001 Commission file number 1-11060
AMERICAN INSURED MORTGAGE INVESTORS
-----------------------------------
(Exact name of registrant as specified in it's charter)
California 13-3180848
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
11200 Rockville Pike
Rockville, Maryland 20852
(301) 816-2300
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
---------------------------------- ------------------------
Depositary Units of Limited American Stock Exchange
Partnership Interest
Securities registered pursuant to Section 12(g) of the Act:
None
------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
As of February 19, 2002, 10,000,125 depositary units of limited partnership
interest were outstanding and the aggregate market value of such units held by
non-affiliates of the Registrant on such date was $25,469,604.
Documents incorporated by Reference
None
2
AMERICAN INSURED MORTGAGE INVESTORS
2001 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
Page
----
PART I
Item 1. Business 3
Item 2. Properties 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for Registrant's Securities and Related Security Holder Matters 5
Item 6. Selected Financial Data 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results of
Operations 7
Item 7A. Qualitative and Quantitative Disclosures About Market Risk 12
Item 8. Financial Statements and Supplementary Data 12
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure 12
PART III
Item 10. Directors and Executive Officers of the Registrant 13
Item 11. Executive Compensation 15
Item 12. Security Ownership of Certain Beneficial Owners and Management 15
Item 13. Certain Relationships and Related Transactions 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 17
Signatures 20
3
PART I
ITEM 1. BUSINESS
FORWARD-LOOKING STATEMENTS. When used in this Annual Report on Form 10-K, the
words "believes," "anticipates," "expects," "contemplates," and similar
expressions are intended to identify forward-looking statements. Statements
looking forward in time are included in this Annual Report on Form 10-K pursuant
to the "safe harbor" provision of the Private Securities Litigation Reform Act
of 1995. Such statements are subject to certain risks and uncertainties, which
could cause actual results to differ materially. Accordingly, the following
information contains or may contain forward-looking statements: (1) information
included or incorporated by reference in this Annual Report on Form 10-K,
including, without limitation, statements made under Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations, (2)
information included or incorporated by reference in future filings by the
Partnership with the Securities and Exchange Commission including, without
limitation, statements with respect to growth, projected revenues, earnings,
returns and yields on its portfolio of mortgage assets, the impact of interest
rates, costs and business strategies and plans and (3) information contained in
written material, releases and oral statements issued by or on behalf of, the
Partnership, including, without limitation, statements with respect to growth,
projected revenues, earnings, returns and yields on its portfolio of mortgage
assets, the impact of interest rates, costs and business strategies and plans.
Factors which may cause actual results to differ materially from those contained
in the forward-looking statements identified above include, but are not limited
to (i) regulatory and litigation matters, (ii) interest rates, (iii) trends in
the economy, (iv) prepayment of mortgages and (v) defaulted mortgages. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only of the date hereof. The Partnership undertakes no obligation to
publicly revise these forward-looking statements to reflect events or
circumstances occurring after the date hereof or to reflect the occurrence of
unanticipated events.
Development and Description of Business
---------------------------------------
Information concerning the business of American Insured Mortgage Investors
(the "Partnership") is contained in Part II, Item 7, Management's Discussion and
Analysis of Financial Condition and Results of Operations and in Notes 1, 5, 6
and 7 of the Notes to Financial Statements of the Partnership (filed in response
to Item 8 hereof), all of which are incorporated by reference herein. See also
Schedule IV-Mortgage Loans on Real Estate for the table of the Insured Mortgages
(as defined below) invested in by the Partnership as of December 31, 2001, which
is hereby incorporated by reference herein.
Employees
---------
The Partnership has no employees. The business of the Partnership is
managed by CRIIMI, Inc. (the "General Partner"), while its portfolio of
mortgages is managed by AIM Acquisition Partners, L.P. (the "Advisor") pursuant
to an advisory agreement (the "Advisory Agreement"). The General Partner is a
wholly-owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE").
The general partner of the Advisor is AIM Acquisition Corporation ("AIM
Acquisition") and the limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Sun America Investments, Inc.
(successor to Broad, Inc.) and CRI/AIM Investment, L.P., an affiliate of CRIIMI
MAE. AIM Acquisition is a Delaware corporation that is primarily owned by Sun
America Investments, Inc. and The Goldman Sachs Group, L.P.
4
Under the Advisory Agreement, the Advisor will render services to the
Partnership, including but not limited to, the management of the Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages. Such
services will be subject to the review and ultimate authority of the General
Partner. However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant actions, including but not limited
to the disposition of mortgages, any transaction or agreement with the General
Partner or its affiliates, or any material change as to policies regarding
distributions or reserves of the Partnership. The Advisor is permitted to
delegate the performance of services pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"). The delegation of such services will not relieve the
Advisor of its obligation to perform such services. CRIIMI MAE Services Limited
Partnership ("CMSLP"), an affiliate of CRIIMI MAE, manages the Partnership's
portfolio, pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CMSLP Management Company, Inc., a wholly-owned subsidiary of CRIIMI MAE.
Competition
-----------
In disposing of mortgage investments, the Partnership competes with private
investors, mortgage banking companies, mortgage brokers, state and local
government agencies, lending institutions, trust funds, pension funds, and other
entities, some with similar objectives to those of the Partnership and some of
which are or may be affiliates of the Partnership, its General Partner, the
Advisor, CMSLP or their respective affiliates. Some of these entities may have
substantially greater capital resources and experience in disposing of Federal
Housing Administration ("FHA") insured mortgages than the Partnership.
CRIIMI MAE and its affiliates also may serve as general partners, sponsors
or managers of real estate limited partnerships, Real Estate Investments Trusts
("REITS") or other entities in the future. The Partnership may attempt to
dispose of mortgage investments at or about the same time that CRIIMI MAE, one
or more of the "AIM Funds" (defined as the Partnership, American Insured
Mortgage Investors - Series 85, L.P. ("AIM 85"), American Insured Mortgage
Investors L.P. - Series 86 ("AIM 86") and American Insured Mortgage Investors
L.P. - Series 88 ("AIM 88")), and/or other entities sponsored or managed by
CRIIMI MAE or its affiliates, are attempting to dispose of mortgages. As a
result of market conditions that could limit dispositions, CMSLP and its
affiliates could be faced with conflicts of interest in determining which
mortgages would be disposed of. Both CMSLP and the General Partner, however, are
subject to their fiduciary duties in evaluating the appropriate action to be
taken when faced with such conflicts.
ITEM 2. PROPERTIES
Although the Partnership does not own the underlying real estate, the
mortgages underlying the Partnership's mortgage investments are non-recourse
first liens on the respective multifamily residential developments.
ITEM 3. LEGAL PROCEEDINGS
There are no material legal proceedings to which the Partnership is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to the security holders to be voted on during the
fourth quarter of 2001.
5
PART II
ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER
MATTERS
Principal Market and Market Price for Units and Distributions
-------------------------------------------------------------
The Units are traded on the American Stock Exchange ("AMEX") under the
trading symbol of "AIA". The high and low trade prices for the Units as reported
on AMEX and the distributions, as applicable, for each quarterly period in 2001
and 2000 were as follows:
Amount of
2001 Distribution
Quarter Ended High Low Per Unit
------------- ---- --- --------
March 31 $ 2.6000 $ 2.2500 $ 0.05
June 30 2.7500 2.4000 0.05
September 30 2.7000 2.3000 0.17(1)
December 31 3.0000 2.3000 0.05
-------
$ 0.32
=======
Amount of
2000 Distribution
Quarter Ended High Low Per Unit
------------- ---- --- --------
March 31 $ 2.5625 $ 2.2500 $ 0.05
June 30 2.6250 2.1250 0.05
September 30 2.4375 2.1250 0.05
December 31 2.4375 2.1875 0.05
-------
$ 0.20
=======
(1) This amount includes approximately $0.12 per Unit representing net proceeds
from the prepayment of the mortgage on Berryhill Apartments.
There are no material legal restrictions upon the Partnership's present or
future ability to make distributions in accordance with the provisions of the
partnership agreement.
Approximate Number of Unitholders
Title of Class as of December 31, 2001
-------------- -----------------------
Depositary Units of Limited
Partnership Interest 6,600
6
ITEM 6. SELECTED FINANCIAL DATA
(Dollars in thousands, except per Unit amounts)
For the years ended December 31,
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Income $ 2,215 $ 2,279 $ 2,354 $ 3,191 $ 3,415
Net gains from
mortgage dispositions 190 188 67 1,290 --
Net earnings 1,955 2,011 1,925 3,978 2,879
Net earnings per Limited
Partnership Unit - Basic (1) $ 0.19 $ 0.20 $ 0.19 $ 0.39 $ 0.28
Distributions per Limited
Partnership Unit (1)(2) $ 0.32 $ 0.20 $ 0.36 $ 1.29 $ 0.29
As of December 31,
2001 2000 1999 1998 1997
-------- -------- -------- -------- --------
Total assets $ 24,138 $ 25,857 $ 26,416 $ 28,735 $ 38,551
Partners' equity 23,530 25,271 25,422 27,750 37,661
(1) Calculated based upon the weighted average number of Limited Partnership
Units outstanding.
(2) Includes distributions due the Unitholders for the Partnership's fiscal
years ended December 31, 2001, 2000, 1999, 1998, and 1997 which were paid
subsequent to each year end. See Notes 8 and 9 of the Notes to Financial
Statements.
The selected income statement data presented above for the years ended
December 31, 2001, 2000 and 1999, and the selected balance sheet data as of
December 31, 2001 and 2000, are derived from, and are qualified by, reference to
the Partnership's financial statements, which are included elsewhere in this
Form 10-K. The selected income statement data for the years ended December 31,
1998 and 1997, and the selected balance sheet data as of December 31, 1999, 1998
and 1997 are derived from audited financial statements not included as part of
this Annual Report on Form 10-K. This data should be read in conjunction with
the financial statements and the notes thereto.
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General
-------
The following discussion and analysis contains statements that may be
considered forward looking. These statements contain a number of risks and
uncertainties as discussed herein and in Item 1 of this Form 10-K that could
cause actual results to differ materially.
The American Insured Mortgage Investors (the "Partnership") was formed
under the Uniform Limited Partnership Act in the State of California on July 12,
1983. During the period from March 1, 1984 (the initial closing date of the
Partnership's public offering) through December 31, 1984, the Partnership,
pursuant to its public offering of 10,000,000 depositary units of limited
partnership interest ("Units"), raised a total of $200,000,000 in gross
proceeds. In addition, the initial limited partner contributed $2,500 to the
capital of the Partnership and received 125 Units of limited partnership
interest in exchange therefor.
CRIIMI, Inc. (the "General Partner") holds a partnership interest of 2.9%
and is a wholly owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE"). AIM
Acquisition Partners, L.P. (the "Advisor") serves as the advisor to the
Partnership pursuant to an advisory agreement (the "Advisory Agreement").
The general partner of the Advisor is AIM Acquisition Corporation ("AIM
Acquisition") and the limited partners include, but are not limited to, AIM
Acquisition, The Goldman Sachs Group, L.P., Sun America Investments, Inc.
(successor to Broad, Inc.) and CRI/AIM Investment, L.P., an affiliate of CRIIMI
MAE. AIM Acquisition is a Delaware corporation that is primarily owned by Sun
America Investments, Inc. and The Goldman Sachs Group, L.P.
Under the Advisory Agreement, the Advisor will render services to the
Partnership, including but not limited to, the management of the Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages. Such
services will be subject to the review and ultimate authority of the General
Partner. However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant actions, including but not limited
to the disposition of mortgages, any transaction or agreement with the General
Partner or its affiliates, or any material change as to policies regarding
distributions or reserves of the Partnership. The Advisor is permitted to
delegate the performance of services pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"). The delegation of such services will not relieve the
Advisor of its obligation to perform such services. CRIIMI MAE Services Limited
Partnership ("CMSLP"), an affiliate of CRIIMI MAE, manages the Partnership's
portfolio, pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CMSLP Management Company, a wholly-owned subsidiary of CRIIMI MAE.
Mortgage Investments
--------------------
Prior to the expiration of the Partnership's reinvestment period in
November 1988, the Partnership was engaged in the business of originating
mortgage loans ("Originated Insured Mortgages") and acquiring mortgage loans
("Acquired Insured Mortgages" and, together with Originated Insured Mortgages,
referred to herein as "Insured Mortgages"). In accordance with the terms of the
partnership agreement, the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently, its primary objective is to manage
its portfolio of mortgage investments, all of which are insured (as discussed
below) under Section 221(d)(4) or Section 231 of the National Housing Act of
1937, as amended (the "National Housing Act"). The Partnership is a liquidating
partnership and as it continues to liquidate its mortgage investments and
investors receive distributions of return of capital and taxable gains,
investors should expect a reduction in earnings and distributions due to the
decreasing mortgage base. The partnership agreement states that the Partnership
will terminate on December 31, 2008, unless previously terminated under the
provisions of the partnership agreement.
8
Most of the Insured Mortgages held by the Partnership apply to the Section
221 program of the National Housing Act of 1937, as amended (the "Section 221
program"). Under the Section 221 program, a mortgagee has the right to assign a
mortgage ("put") to FHA at the expiration of 20 years from the date of final
endorsement if the mortgage is not in default at such time. Any mortgagee
electing to assign an FHA-insured mortgage to FHA will receive, in exchange
therefor, United States Department of Housing and Urban Development ("HUD")
debentures having a total face value equal to the then outstanding principal
balance of the FHA-insured mortgage plus accrued interest to the date of
assignment. These HUD debentures will mature 10 years from the date of
assignment and will bear interest at the "going Federal rate" at such date. This
assignment procedure is applicable to an insured mortgage which had a firm or
conditional FHA commitment for insurance on or before November 30, 1983. The
Partnership anticipates that each eligible insured mortgage, for which a
prepayment has not occurred and which has not been sold, will be assigned to FHA
at the expiration of 20 years from the date of final endorsement. The
Partnership, therefore, does not anticipate holding any eligible insured
mortgage beyond the expiration of 20 years from final endorsement of that
insured mortgage. The Partnership has initiated its request to put these
mortgages to FHA as they become due. Once the servicer of a mortgage has filed
an application for insurance benefits under Section 221, the Partnership will no
longer receive the monthly principal and interest on the applicable mortgage.
The servicer of the mortgage on Fox Run Apartments filed an application for
insurance benefits under the Section 221 program of the National Housing Act of
1937 in May 2000. In December 2000, HUD issued assignment proceeds in the form
of a 7.125% debenture for this mortgage. The mortgage was owned 50% by AIM 84
and 50% by an affiliate of the Partnership, American Insured Mortgage Investors
- Series 85, L.P. ("AIM 85"). The debenture, with a face value of $2,385,233,
was issued to AIM 85 with interest payable semi-annually on January 1 and July
1. The Partnership recognized a gain of approximately $188,000 for the year
ended December 31, 2000 related to this assignment. The net proceeds and accrued
interest are included on the Balance Sheet in Due from affiliate as of December
31, 2001. In January 2002, the debenture was liquidated at par value. The
Partnership received approximately $1.2 million for its share of the debenture
proceeds, including interest of approximately $42,000. A distribution of
approximately $0.11 per Unit related to the receipt of these proceeds is
expected to be declared in March 2002.
The Partnership's investment in Insured Mortgages consists of FHA-insured
mortgage loans ("FHA-Insured Loans") and participation certificates evidencing a
100% undivided beneficial interest in government insured multifamily mortgages
issued or sold pursuant to FHA programs ("FHA-Insured Certificates"). The
mortgages underlying the FHA-Insured Certificates and FHA-Insured Loans are
non-recourse first liens on multifamily residential developments.
As of December 31, 2001, the Partnership had invested in 10 Insured
Mortgages, with an aggregate amortized cost of approximately $21 million, a face
value of approximately $24 million and a fair value of approximately $24
million, as discussed below.
9
The following is a discussion of the types of the Partnership's mortgage
investments, along with the risks related to each type of investment:
Investment in FHA-Insured Loans
-------------------------------
Listed below is the Partnership's aggregate investment in FHA-Insured Loans
as of December 31, 2001 and 2000:
December 31,
2001 2000
---- ----
Number of
Acquired Insured Mortgages 3 3
Originated Insured Mortgage 1 1
Amortized Cost $ 12,427,801 $ 12,597,098
Face Value 14,428,107 14,694,371
Fair Value 13,846,281 14,222,808
All of the FHA-Insured Loans were current with respect to the payment of
principal and interest as of March 1, 2002.
Investment in FHA-Insured Certificates
--------------------------------------
Listed below is the Partnership's aggregate investment in FHA-Insured
Certificates as of December 31, 2001 and 2000:
December 31,
2001 2000
---- ----
Number of mortgages (1) 6 7
Amortized Cost $ 8,415,866 $ 9,536,007
Face Value 10,037,064 11,433,137
Fair Value 9,727,346 11,258,675
(1) In September 2001, the mortgage on Berryhill Apartments was prepaid. The
Partnership received net proceeds of approximately $1.2 million and
recognized a gain of approximately $190,000 for the year ended December 31,
2001. A distribution of approximately $0.12 per Unit related to the
prepayment of this mortgage was declared in September 2001 and paid to
Unitholders in November 2001.
As of March 1, 2002, all of the Partnership's FHA-Insured Certificates
were current with respect to the payment of principal and interest, except for
the mortgage on Westbrook Apartments, which is delinquent with respect to the
February 2002 payment of principal and interest.
10
Results of Operations
---------------------
2001 versus 2000
----------------
Net earnings decreased slightly for 2001 as compared to 2000 primarily due
to a decrease in mortgage investment income, as discussed below.
Mortgage investment income decreased for 2001 as compared to 2000 primarily
due to a reduction in the mortgage base. The mortgage base decreased due to two
mortgage dispositions with a principal balance of approximately $2.4 million,
representing an approximate 9% decrease in the aggregate principal balance of
the total mortgage portfolio since November 2000.
Interest and other income increased for 2001 as compared to 2000. This
increase is primarily due to the timing of temporary investment of mortgage
disposition proceeds prior to distribution.
Asset management fee to related parties decreased for 2001 as compared to
2000 primarily due to a reduction in the mortgage base, as previously discussed.
In 2001, a gain of approximately $190,000 was recognized from the
prepayment of the mortgage on Berryhill Apartments, as discussed above. In 2000,
a gain of approximately $188,000 was realized on the assignment of the mortgage
on Fox Run Apartments, as previously discussed.
2000 versus 1999
----------------
Net earnings increased for 2000 as compared to 1999 primarily due to an
increase in gains on mortgage dispositions. In 2000, a gain of approximately
$188,000 was realized on the assignment of the mortgage on Fox Run Apartments.
In 1999, a gain of approximately $67,000 was recognized from the prepayment of
the mortgage on Lakeside Apartments.
Mortgage investment income decreased slightly for 2000 as compared to 1999
primarily due to the normal amortization of the mortgage base. In addition, the
mortgage base decreased due to one mortgage disposition in November 1999 with a
principal balance of approximately $382,000. This represents an approximate 1.4%
decrease in the aggregate principal balance of the total mortgage portfolio
since October 1999.
Interest and other income decreased for 2000 as compared to 1999 primarily
due to the timing of temporary investment of mortgage disposition proceeds prior
to distribution.
General and administrative expenses decreased for 2000 as compared to 1999
primarily due to a decrease in temporary employment costs.
11
Liquidity and Capital Resources
-------------------------------
On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). On November 22, 2000, the United States Bankruptcy Court for
the District of Maryland, in Greenbelt, Maryland (the "Bankruptcy Court")
confirmed CRIIMI MAE's and CRIIMI MAE Management, Inc.'s reorganization plan. On
April 17, 2001, CRIIMI MAE and CRIIMI MAE Management, Inc. emerged from
bankruptcy.
The Partnership's operating cash receipts, derived from payments of
principal and interest on Insured Mortgages plus cash receipts from interest on
short-term investments, are the Partnership's principal sources of cash flows,
and were sufficient for the years ended December 31, 2001, 2000 and 1999 to meet
operating requirements. The Partnership anticipates its cash flows to be
sufficient to meet operating expense requirements for 2002.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages after paying all
expenses of the Partnership. Although Insured Mortgages yield a fixed monthly
mortgage payment once purchased, the cash distributions paid to the Unitholders
will vary during each period due to (1) the fluctuating yields in the short-term
money market where the monthly mortgage payment receipts are temporarily
invested prior to the payment of quarterly distributions, (2) the reduction in
the asset base resulting from monthly mortgage payments received or mortgage
dispositions, (3) variations in the cash flow attributable to the delinquency or
default of Insured Mortgages and professional fees and foreclosure costs
incurred in connection with those Insured Mortgages and (4) variations in the
Partnership's operating expenses.
Since the Partnership is obligated to distribute the proceeds of mortgage
prepayments, sales and insurance of Insured Mortgages (as defined in the
partnership agreement) to its Unitholders, the size of the Partnership's
portfolio will continue to decrease. The magnitude of the decrease will depend
upon the size of the Insured Mortgages, which are prepaid, sold or assigned for
insurance proceeds.
Cash Flow - 2001 versus 2000
----------------------------
Net cash provided by operating activities in 2001 as compared to 2000 did
not change significantly.
Net cash provided by investing activities increased for 2001 as compared to
2000, due to the increase in proceeds received from the disposition of
mortgages, as previously discussed.
Net cash used in financing activities increased for 2001 as compared to
2000 due to an increase in distributions paid to partners.
Cash Flow - 2000 versus 1999
----------------------------
Net cash provided by operating activities decreased for 2000 as compared to
1999, primarily due to an increase in the change in due from affiliate,
receivables and other assets. This change is primarily due to the timing of the
receipt of interest on debentures received from affiliate.
Net cash provided by investing activities decreased for 2000 as compared to
1999, due to the decrease in proceeds from mortgage dispositions and a decrease
in debenture proceeds received from affiliate.
Net cash used in financing activities decreased for 2000 as compared to
1999 due to a decrease in distributions paid to partners as a result of
decreases discussed above.
12
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
The Partnership's principal market risk is exposure to changes in interest
rates in the U.S. Treasury market, which coupled with the related spread to
treasury investors required for the Partnership's Insured Mortgages, will cause
fluctuations in the market value of the Partnership's assets.
The table below provides information about the Partnership's Insured
Mortgages, all of which were entered into for purposes other than trading. The
table presents anticipated principal and interest cash flows based upon the
assumptions used in determining the fair value of these securities and the
related weighted average interest rates by expected maturity.
Fair
2002 2003 2004 2005 2006 Thereafter Total Value
---- ---- ---- ---- ---- ---------- ----- -----
Insured Mortgages
(in millions) $3.5 $3.3 $3.8 $4.3 $3.8 $17.2 $35.9 $23.6
Average Interest Rate 7.74% 7.74% 7.66% 7.51% 7.49% 7.53% 7.61% --
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this Item is set forth in this Annual Report on
Form 10-K commencing on page 21.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
13
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a), (b), (c) and (e)
The Partnership has no officers or directors. CRIIMI, Inc. holds a general
partnership interest of 2.9%. The affairs of the Partnership are managed by the
General Partner, which is wholly owned by CRIIMI MAE, a corporation whose shares
are listed on the New York Stock Exchange.
The general partner of the Advisor is AIM Acquisition and the limited
partners include, but are not limited to, AIM Acquisition, The Goldman Sachs
Group, L.P., Sun America Investments, Inc. (successor to Broad, Inc.) and
CRI/AIM Investment, L.P., an affiliate of CRIIMI MAE. AIM Acquisition is a
Delaware corporation that is primarily owned by Sun America Investments, Inc.
and The Goldman Sachs Group, L.P. Pursuant to the terms of certain amendments to
the partnership agreement, the General Partner is required to receive the
consent of the Advisor prior to taking certain significant actions, including
but not limited to the disposition of mortgages, any transaction or agreement
with the General Partner, or its affiliates, or any material change as to
policies regarding distributions or reserves of the Partnership. CMSLP, an
affiliate of CRIIMI MAE, manages the Partnership's portfolio, pursuant to the
Sub-Advisory Agreement. The general partner of CMSLP is CMSLP Management
Company, Inc., a wholly-owned subsidiary of CRIIMI MAE.
The General Partner is also the general partner of AIM 85, AIM 86 and AIM
88, limited partnerships with investment objectives similar to those of the
Partnership.
The following table sets forth information concerning the executive
officers and directors of CRIIMI MAE, the sole shareholder of the General
Partner, as of February 19, 2002:
Name Age Position
---- --- --------
William B. Dockser 64 Chairman of the Board
H. William Willoughby 55 President, Secretary and Director
David B. Iannarone 41 Executive Vice President
Cynthia O. Azzara 42 Senior Vice President,
Chief Financial Officer and
Treasurer
Brian L. Hanson 40 Senior Vice President
John R. Cooper 54 Director
Alan M. Jacobs 53 Director
Robert J. Merrick 56 Director
Robert E. Woods 54 Director
14
William B. Dockser has served as Chairman of the Board of the General
Partner since 1991. Mr. Dockser has been Chairman of the Board of CRIIMI MAE
since 1989. Mr. Dockser is also the founder of C.R.I., Inc. ("CRI"), serving as
its Chairman of the Board since 1974.
H. William Willoughby has served as President and Secretary of the General
Partner since 1991. Mr. Willoughby has been President of CRIIMI MAE since 1990
and a Director and Secretary of CRIIMI MAE since 1989. Mr. Willoughby has been a
director of CRI since 1974, Secretary of CRI from 1974 to 1990 and President of
CRI since 1990.
David B. Iannarone has served as Executive Vice President of the General
Partner since December 2000. Mr. Iannarone has served as Executive Vice
President of CRIIMI MAE since December 2000; as Senior Vice President and
General Counsel of CRIIMI MAE from March 1998 to December 2000; and as Vice
President and General Counsel of CRIIMI MAE from July 1996 to March 1998.
Cynthia O. Azzara has served as Chief Financial Officer of the General
Partner since 1994. Ms. Azzara has served as Chief Financial Officer of CRIIMI
MAE since 1994. She has also served as Senior Vice President of CRIIMI MAE since
1995 and Treasurer of CRIIMI MAE since 1997.
Brian L. Hanson has served as Senior Vice President of the General Partner
since March 1998. Mr. Hanson has served as Senior Vice President of CRIIMI MAE
since March 1998; and as Group Vice President of CRIIMI MAE from March 1996 to
March 1998.
John R. Cooper has served as Director of the General Partner since April
2001. Mr. Cooper has served as Director of CRIIMI MAE since April 2001. Mr.
Cooper is Senior Vice President, Finance, of PG&E National Energy Group, Inc. He
has been with PG&E National Energy Group, Inc. and its predecessor, U.S.
Generating Company, since its inception in 1989.
Alan M. Jacobs has served as Director of the General Partner since April
2001. Mr. Jacobs has served as Director of CRIIMI MAE since April 2001;
President of AMJ Advisors LLC, since September 1999; and founding member and
Senior Partner of Ernst and Young LLP's restructuring and reorganization
practice through September 1999. Mr. Jacobs is the Plan Administrator and
Litigation Trust Trustee for T&W Financial Corporation, the Chapter 11 Trustee
for Apponline.com, Inc., the Chapter 11 Trustee for Sharp International Corp.,
the Chapter 7 Trustee for Edison Brothers Stores, Inc. and was formerly the
co-chairman and co-chief executive officer of West Coast Entertainment
Corporation. Mr. Jacobs serves as a director of The Singer Sewing Company. Mr.
Jacobs was an executive officer of West Coast Entertainment Corporation at the
time such corporation filed a petition under the federal bankruptcy laws in
March 2000.
Robert J. Merrick has served as Director of the General Partner since 1997.
Mr. Merrick has served as Director of CRIIMI MAE since 1997; Chief Credit
Officer and Director of MCG Capital Corporation since February 1998; Executive
Vice President from 1985 and Chief Credit Officer of Signet Banking Corporation
through 1997, also served as Chairman of the Credit Policy Committee and member
of the Asset and Liability Committee and Management Committee.
Robert E. Woods has served as Director of the General Partner since 1998.
Mr. Woods has served as Director of CRIIMI MAE since 1998; Managing Director and
head of loan syndications for the Americas at Societe Generale, New York since
1997; Managing Director, head of Real Estate Capital Markets and Mortgage-Backed
Securities division, Citicorp from 1991 to 1997.
15
(d) There is no family relationship between any of the officers and
directors of the General Partner.
(f) Involvement in certain legal proceedings.
None.
(g) Promoters and control persons.
Not applicable.
(h) Section 16 (a) Beneficial Ownership Reporting Compliance -Based solely
on its review of Forms 3 and 4 and amendments thereto furnished to the
Partnership, and written representations from certain reporting
persons that no Form 5's were required for those persons, the
Partnership believes that all reporting persons have filed on a timely
basis Forms 3, 4, and 5 as required in the fiscal year ended December
31, 2001.
ITEM 11. EXECUTIVE COMPENSATION
The Partnership does not have any directors or officers. None of the
directors or officers of the General Partner receive compensation from the
Partnership, and the General Partner does not receive reimbursement from the
Partnership for any portion of their salaries. Other information required by
Item 11 is hereby incorporated by reference herein to Note 8 of the Notes to
Financial Statements of the Partnership.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) The following table sets forth certain information regarding the beneficial
ownership of Units as of February 19, 2002, by holders of more than five
percent (5%) of the Partnership's Units.
Number of Percent of
Name Address Units Class
---- ------- ----- -----
Financial and Investment 417 St. Joseph Street
Management Group, Ltd. P.O. Box 40 2,019,012 20.19%
Suttins Bay, MI 49682
NOTE: Financial and Investment Management Group, Ltd. is a registered investment
advisor, managing individual client accounts. All shares represented above are
held in accounts owned by the clients of Financial & Investment Management
Group, Ltd.
16
(b) The following table sets forth certain information regarding the beneficial
ownership of the Partnership's Units as of February 19, 2002 by each
director of the General Partner, each named executive officer of the
General Partner, and by affiliates of the Partnership. Unless otherwise
indicated, each Unitholder has sole voting and investment power with
respect to the Units beneficially owned.
Amount and Nature
of Units Percentage of Units
Name Beneficially Owned Outstanding
---- ------------------ -----------
William B. Dockser 5,000 *
CRIIMI MAE 12,045 *
* Less than 1%
(c) There are no arrangements known to the Partnership, the operation of which
may at any subsequent date result in a change in control of the
Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with management and others.
Note 8 of the Notes to Financial Statements of the Partnership contains a
discussion of the amounts, fees and other compensation paid or accrued by
the Partnership to the directors and executive officers of the General
Partner and their affiliates, and is hereby incorporated by reference
herein.
(b) Certain business relationships.
Other than as set forth in Item 11 of this Annual Report on Form 10-K which
is hereby incorporated by reference herein, the Partnership has no business
relationship with entities of which the current General Partner of the
Partnership are officers, directors or equity owners.
(c) Indebtedness of management.
None.
(d) Transactions with promoters.
Not applicable.
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements: Page
Description Number
----------- ------
Balance Sheets as of December 31, 2001 and 2000........................................................... 23
Statements of Income and Comprehensive Income for the years
ended December 31, 2001, 2000 and 1999............................................................... 24
Statements of Changes in Partners' Equity for the years
ended December 31, 2001, 2000 and 1999............................................................... 25
Statements of Cash Flows for the years ended December 31, 2001, 2000 and 1999............................. 26
Notes to Financial Statements............................................................................. 27
(a)(2) Financial Statement Schedules:
IV - Mortgage Loans on Real Estate............................................................... 36
All other schedules have been omitted because they are not applicable,
not required, or the information is included in the Financial
Statements or Notes thereto.
(a)(3) Exhibits:
4.0 Amended and Restated Certificates of Limited Partnership are
incorporated by reference to Exhibit 4(a) to the Registration
Statement on Form S-11 (No. 33-6747) dated June 25, 1986 (such
Registration Statement, as amended, is referred to herein as the
"Registration Statement").
4.1 Agreement of Limited Partnership, incorporated by reference to Exhibit
3 to the Registration Statement.
4.2 Form of Depository Receipt, incorporated by reference to Exhibit 4(b)
to the Registration Statement.
4.3 Amendment to the Amended and Restated Agreement of Limited Partnership
of the Partnership dated February 12, 1990, incorporated by reference
to Exhibit 4(c) to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1989.
4.4 Amendments to Partnership Agreement dated August 16, 1991,
incorporated by reference to Exhibit 28(c) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1991.
18
10.0 Origination and Acquisition Services Agreement, dated September 1,
1983, between the Partnership and IFI, incorporated by reference to
Exhibit 10(b) to the registration statement on Form S-11 (No. 2-85476)
dated November 30, 1983 (such registration statement, as amended, is
referred to herein as the "Initial Registration Statement").
10.1 Management Services Agreement, dated November 30, 1983, between the
Partnership and IFI, incorporated by reference to Exhibit 10(c) to the
Initial Registration Statement.
10.2 Disposition Services Agreement, dated November 30, 1983, between the
Partnership and IFI, incorporated by reference to Exhibit 10(d) to the
Initial Registration Statement.
10.3 Agreement, dated November 30, 1983, among the former managing general
partner, the former associate general partner and Integrated,
incorporated by reference to Exhibit 10(e) to the Initial Registration
Statement.
10.4 Reinvestment Plan, incorporated by reference to the Prospectus
contained in the Registration Statement.
10.5 Mortgage Note dated March 26, 1986 between Mastic Associates and IFI,
incorporated by reference to Exhibit 10(l) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1986.
10.6 Mortgage dated March 26, 1986 between Mastic Associates and IFI,
incorporated by reference to Exhibit 10(m) to the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1986.
10.7 Mortgagor/Mortgagee Agreement dated March 26, 1986 between Mastic
Associates and IFI, incorporated by reference to Exhibit 10(n) to the
Partnership's Annual Report on Form 10-K for the year ended December
31, 1986.
10.8 Lease Agreement dated as of December 10, 1984 between NHP Land
Associates, as Landlord and Mastic Associates, as Tenant, incorporated
by reference to Exhibit 10(o) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1986.
10.9 Purchase Agreement among AIM Acquisition, the former managing general
partner, the former corporate general partner, IFI and Integrated
dated as of December 1, 1990, as amended January 9, 1991, incorporated
by reference to Exhibit 28(a) to the Partnership's Annual Report on
Form 10-K for the year ended December 31, 1990.
10.10 Purchase Agreement among CRIIMI, Inc., AIM Acquisition, the former
managing general partner, the former corporate general partner, IFI
and Integrated dated as of December 13, 1990 and executed as of
September 6, 1991, incorporated by reference to Exhibit 28(b) to the
Partnership's Annual Report on Form 10-K for the year ended December
31, 1990.
10.11 Sub-Management Agreement by and between AIM Acquisition and CRI/AIM
Management, Inc. dated as of March 1, 1991, incorporated by reference
to Exhibit 28(d) to the Partnership's Annual Report on Form 10-K for
the year ended December 31, 1992.
19
99.0 Letter to Securities and Exchange Commission from the Partnership
dated March 20, 2002 regarding the representations received from
Arthur Andersen LLP in performing the audit of the December 31, 2001
financial statements(filed herewith).
(b) Reports on Form 8-K filed during the last quarter of the fiscal year:
None
All other items are not applicable.
20
SIGNATURES
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints William B. Dockser and H. William
Willoughby, jointly and severally, his attorney-in-fact, each with the power of
substitution for him in any and all capacities, to sign any amendments to this
Annual Report on Form 10-K and to file the same with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each said attorney-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
AMERICAN INSURED MORTGAGE
INVESTORS (Registrant)
By: CRIIMI, Inc.
General Partner
March 12, 2002 /s/ William B. Dockser
-------------- ---------------------------
DATE William B. Dockser
Chairman of the Board
March 12, 2002 /s/ H. William Willoughby
-------------- ---------------------------
DATE H. William Willoughby
President, Secretary and
Director
March 14, 2002 /s/ Cynthia O. Azzara
-------------- ---------------------------
DATE Cynthia O. Azzara
Senior Vice President,
Chief Financial Officer and
Treasurer
March 12, 2002 /s/ John R. Cooper
-------------- ---------------------------
DATE John R. Cooper
Director
March 12, 2002 /s/ Alan M. Jacobs
-------------- ---------------------------
DATE Alan M. Jacobs
Director
March 14, 2002 /s/ Robert J. Merrick
-------------- ---------------------------
DATE Robert J. Merrick
Director
March 11, 2002 /s/ Robert E. Woods
-------------- ---------------------------
DATE Robert E. Woods
Director
21
AMERICAN INSURED MORTGAGE INVESTORS
Financial Statements
as of December 31, 2001 and 2000
and for the Years Ended
December 31, 2001, 2000, and 1999
22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of American Insured Mortgage Investors:
We have audited the accompanying balance sheets of American Insured
Mortgage Investors (the "Partnership") as of December 31, 2001 and 2000, and the
related statements of income and comprehensive income, changes in partners'
equity and cash flows for the years ended December 31, 2001, 2000 and 1999.
These financial statements and the schedule referred to below are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements and the schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Partnership as of
December 31, 2001 and 2000, and the results of its operations and its cash flows
for the years ended December 31, 2001, 2000 and 1999, in conformity with
accounting principles generally accepted in the United States.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. Schedule IV-Mortgage Loans on Real Estate
as of December 31, 2001 is presented for purposes of complying with the
Securities and Exchange Commission's rules and regulations and is not a required
part of the basic financial statements. The information in this schedule has
been subjected to the auditing procedures applied in our audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
/s/Arthur Andersen LLP
Vienna, Virginia
March 4, 2002
23
AMERICAN INSURED MORTGAGE INVESTORS
BALANCE SHEETS
December 31, December 31,
2001 2000
------------- -------------
ASSETS
Investment in FHA-Insured Loans, at amortized cost,
net of unamortized discount:
Originated insured mortgages $ 4,806,675 $ 4,874,050
Acquired insured mortgages 7,621,126 7,723,048
------------ ------------
12,427,801 12,597,098
Investment in FHA-Insured Certificates,
at fair value 9,727,346 11,258,675
Cash and cash equivalents 534,890 567,491
Receivables and other assets 212,451 203,781
Due from affiliate 1,235,104 1,230,180
------------ ------------
Total assets $ 24,137,592 $ 25,857,225
============ ============
LIABILITIES AND PARTNERS' EQUITY
Distributions payable $ 514,940 $ 514,940
Accounts payable and accrued expenses 92,319 71,763
------------ ------------
Total liabilities 607,259 586,703
------------ ------------
Partners' equity:
Limited partners' equity, 10,000,125 Units authorized,
issued and outstanding 27,515,891 28,817,932
General partner's deficit (5,297,038) (5,258,151)
Accumulated other comprehensive income 1,311,480 1,710,741
------------ ------------
Total partners' equity 23,530,333 25,270,522
------------ ------------
Total liabilities and partners' equity $ 24,137,592 $ 25,857,225
============ ============
The accompanying notes are an integral part
of these financial statements.
24
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the years ended December 31,
2001 2000 1999
---------- ---------- ----------
Income:
Mortgage investment income $2,110,712 $2,264,907 $2,325,545
Interest and other income 104,224 13,933 28,431
---------- ---------- ----------
2,214,936 2,278,840 2,353,976
---------- ---------- ----------
Expenses:
Asset management fee to related parties 224,202 237,264 240,997
General and administrative 226,255 219,282 255,145
---------- ---------- ----------
450,457 456,546 496,142
---------- ---------- ----------
Earnings before mortgage dispositions 1,764,479 1,822,294 1,857,834
Gains on mortgage dispositions 190,206 188,455 67,150
---------- ---------- ----------
Net earnings $1,954,685 $2,010,749 $1,924,984
========== ========== ==========
Other comprehensive loss (399,261) (102,162) (545,617)
---------- ---------- ----------
Comprehensive income $1,555,424 $1,908,587 $1,379,367
========== ========== ==========
Net earnings allocated to:
Limited partners - 97.1% $1,897,999 $1,952,437 $1,869,159
General partner - 2.9% 56,686 58,312 55,825
---------- ---------- ----------
$1,954,685 $2,010,749 $1,924,984
========== ========== ==========
Net earnings per Limited Partnership Unit - Basic $ 0.19 $ 0.20 $ 0.19
========== ========== ==========
The accompanying notes are an integral part
of these financial statements.
25
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
For the years ended December 31, 2001, 2000, and 1999
Accumulated
Other Total
General Limited Comprehensive Partners'
Partner Partners Income Equity
------------ ----------- ----------- -----------
Balance, January 1, 1999 $(5,205,036) $30,596,406 $ 2,358,520 $27,749,890
Net Earnings 55,825 1,869,159 - 1,924,984
Adjustment to unrealized gains on
investments in insured mortgages - - (545,617) (545,617)
Distributions paid or accrued of $0.36 per Unit,
including return of capital of $0.17 per Unit (107,519) (3,600,045) - (3,707,564)
----------- ----------- ----------- -----------
Balance, December 31, 1999 (5,256,730) 28,865,520 1,812,903 25,421,693
Net Earnings 58,312 1,952,437 - 2,010,749
Adjustment to unrealized gains on
investments in insured mortgages - - (102,162) (102,162)
Distributions paid or accrued of $0.20 per Unit,
including return of capital of $0 per Unit (59,733) (2,000,025) - (2,059,758)
----------- ----------- ----------- -----------
Balance, December 31, 2000 (5,258,151) 28,817,932 1,710,741 25,270,522
Net Earnings 56,686 1,897,999 - 1,954,685
Adjustment to unrealized gains on
investments in insured mortgages - - (399,261) (399,261)
Distributions paid or accrued of $0.32 per Unit,
including return of capital of $0.13 per Unit (95,573) (3,200,040) - (3,295,613)
----------- ----------- ----------- -----------
Balance, December 31, 2001 $(5,297,038) $27,515,891 $ 1,311,480 $23,530,333
=========== =========== =========== ===========
Limited Partnership Units outstanding - Basic, as of
December 31, 2001, 2000, and 1999 10,000,125
==========
The accompanying notes are an integral part
of these financial statements.
26
AMERICAN INSURED MORTGAGE INVESTORS
STATEMENTS OF CASH FLOWS
For the years ended December 31,
2001 2000 1999
---------- ---------- -----------
Cash flows from operating activities:
Net earnings $1,954,685 $2,010,749 $1,924,984
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Gains on mortgage dispositions (190,206) (188,455) (67,150)
Changes in assets and liabilities:
(Increase) decrease in due from affiliate, receivables and other assets (1,667) (50,797) 65,834
Increase in accounts payable and accrued expenses 20,556 4,573 9,130
---------- ---------- ----------
Net cash provided by operating activities 1,783,368 1,776,070 1,932,798
---------- ---------- ----------
Cash flows from investing activities:
Proceeds from disposition of mortgages 1,184,199 - 383,582
Debenture proceeds received from affiliate - - 1,148,049
Receipt of mortgage principal from scheduled payments 295,445 280,200 267,690
---------- ---------- ----------
Net cash provided by investing activities 1,479,644 280,200 1,799,321
---------- ---------- ----------
Cash flows from financing activities:
Distributions paid to partners (3,295,613) (2,471,709) (3,707,564)
---------- ---------- ----------
Net (decrease) increase in cash and cash equivalents (32,601) (415,439) 24,555
Cash and cash equivalents, beginning of year 567,491 982,930 958,375
---------- ---------- ----------
Cash and cash equivalents, end of year $ 534,890 $ 567,491 $ 982,930
========== ========== ==========
Non cash investing activity:
50% share of debenture received from HUD in exchange for the - 1,192,617 -
mortgage on Fox Run Apartments (Debenture is held by
an affiliate, AIM 85)
The accompanying notes are an integral part
of these financial statements.
27
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION
American Insured Mortgage Investors (the "Partnership") was formed under
the Uniform Limited Partnership Act in the state of California on July 12, 1983.
CRIIMI, Inc. (the "General Partner") holds a partnership interest of 2.9%
and is a wholly owned subsidiary of CRIIMI MAE Inc. ("CRIIMI MAE"). AIM
Acquisition Partners L.P. (the "Advisor") serves as the advisor to the
Partnership. The general partner of the Advisor is AIM Acquisition Corporation
("AIM Acquisition") and the limited partners include, but are not limited to,
AIM Acquisition, The Goldman Sachs Group, L.P., Sun America Investments,
Inc.(successor to Broad, Inc.) and CRI/AIM Investment, L.P., an affiliate of
CRIIMI MAE. AIM Acquisition is a Delaware corporation that is primarily owned by
Sun America Investments, Inc. and The Goldman Sachs Group, L.P.
Under the Advisory Agreement, the Advisor will render services to the
Partnership, including but not limited to, the management of the Partnership's
portfolio of mortgages and the disposition of the Partnership's mortgages. Such
services will be subject to the review and ultimate authority of the General
Partner. However, the General Partner is required to receive the consent of the
Advisor prior to taking certain significant actions, including but not limited
to the disposition of mortgages, any transaction or agreement with the General
Partner, or its affiliates, or any material change as to policies regarding
distributions or reserves of the Partnership. The Advisor is permitted to
delegate the performance of services pursuant to a sub-advisory agreement (the
"Sub-Advisory Agreement"). The delegation of such services will not relieve the
Advisor of its obligation to perform such services. CRIIMI MAE Services Limited
Partnership ("CMSLP"), an affiliate of CRIIMI MAE, manages the Partnership's
portfolio, pursuant to the Sub-Advisory Agreement. The general partner of CMSLP
is CMSLP Management Company, Inc., a wholly-owned subsidiary of CRIIMI MAE.
Prior to the expiration of the Partnership's reinvestment period in
November 1988, the Partnership was engaged in the business of originating
mortgage loans ("Originated Insured Mortgages") and acquiring mortgage loans
("Acquired Insured Mortgages" and, together with Originated Insured Mortgages,
referred to herein as "Insured Mortgages"). In accordance with the terms of the
partnership agreement, the Partnership is no longer authorized to originate or
acquire Insured Mortgages and, consequently, its primary objective is to manage
its portfolio of mortgage investments, all of which are insured under Section
221(d)(4) or Section 231 of the National Housing Act. The partnership agreement
states that the Partnership will terminate on December 31, 2008, unless
previously terminated under the provisions of the partnership agreement.
On October 5, 1998, CRIIMI MAE, the parent of the General Partner, and
CRIIMI MAE Management, Inc., an affiliate of CRIIMI MAE and provider of
personnel and administrative services to the Partnership, filed voluntary
petitions for relief under chapter 11 of title 11 of the United States Code (the
"Bankruptcy Code"). On November 22, 2000, the United States Bankruptcy Court for
the District of Maryland, in Greenbelt, Maryland (the "Bankruptcy Court")
confirmed CRIIMI MAE's and CRIIMI MAE Management, Inc.'s reorganization plan. On
April 17, 2001, CRIIMI MAE and CRIIMI MAE Management, Inc. emerged from
bankruptcy.
28
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
2. SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
--------------------
The Partnership's financial statements are prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the
United States ("GAAP"). The preparation of financial statements in conformity
with GAAP requires management to make estimates and assumptions that affect the
reported amounts of 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.
Investment in Insured Mortgages
-------------------------------
The Partnership's investment in Insured Mortgages is comprised of
FHA-insured mortgage loans ("FHA-Insured Loans") and participation certificates
evidencing a 100% undivided beneficial interest in government insured
multifamily mortgages issued or sold pursuant to programs of the Federal Housing
Administration ("FHA") ("FHA-Insured Certificates"). The mortgages underlying
the FHA-Insured Certificates and FHA-Insured Loans are non-recourse first liens
on multifamily residential developments.
Payment of principal and interest on FHA-Insured Certificates and
FHA-Insured Loans is insured by the United States Department of Housing and
Urban Development ("HUD") pursuant to Title 2 of the National Housing Act.
As of December 31, 2001, the weighted average remaining term of the
Partnership's investments in FHA-Insured Certificates is approximately 21 years.
However, the partnership agreement states that the Partnership will terminate in
approximately 7 years, on December 31, 2008, unless previously terminated under
the provisions of the partnership agreement. As the Partnership is anticipated
to terminate prior to the weighted average remaining term of its FHA-Insured
Certificates, the Partnership does not have the ability or intent, at this time,
to hold these investments to maturity. Consequently, the General Partner
believes that the Partnership's FHA-Insured Certificates should be included in
the available for sale category. Although the Partnership's FHA-Insured
Certificates are classified as available for sale for financial statement
purposes, the General Partner does not intend to voluntarily sell these assets
other than those which may be sold as a result of a default or those which are
eligible to be put to FHA at the expiration of 20 years from the date of the
final endorsement under Section 221 program of the National Housing Act of 1937,
as discussed below.
In connection with this classification, as of December 31, 2001 and 2000,
all of the Partnership's investments in FHA-Insured Certificates are recorded at
fair value, with the net unrealized gains and losses on these investments
reported as other comprehensive income and as a separate component of partners'
equity. Subsequent increases or decreases in the fair value of FHA-Insured
Certificates classified as available for sale will be included as a separate
component of partners' equity. Realized gains and losses on FHA-Insured
Certificates classified as available for sale will continue to be reported in
earnings.
Most of the Insured Mortgages held by the Partnership apply to the Section
221 program of the National Housing Act of 1937, as amended (the "Section 221
program"). Under the Section 221 program a mortgagee has the right to assign a
mortgage ("put") to FHA at the expiration of 20 years from the date of final
endorsement if the mortgage is not in default at such time. Any mortgagee
electing to assign a FHA-insured mortgage to FHA will receive, in exchange
therefor, HUD debentures having a total face value equal to the then outstanding
principal balance of the
29
FHA-insured mortgage plus accrued interest to the date of assignment. These HUD
debentures will mature 10 years from the date of assignment and will bear
interest at the "going Federal rate" at such date. This assignment procedure is
applicable to an insured mortgage which had a firm or conditional FHA commitment
for insurance on or before November 30, 1983. The Partnership anticipates that
each eligible insured mortgage, for which a prepayment has not occurred and
which has not been sold, will be assigned to FHA at the expiration of 20 years
from the date of final endorsement. The Partnership, therefore, does not
anticipate holding any eligible insured mortgage beyond the expiration of 20
years from final endorsement of that insured mortgage. The Partnership has
initiated its request to put these mortgages to FHA as they become due. Once the
servicer of a mortgage has filed an application for insurance benefits under
Section 221, the Partnership will no longer receive the monthly principal and
interest on the applicable mortgage.
As of December 31, 2001 and 2000, Investment in FHA-Insured Loans is
recorded at amortized cost.
The amortized cost of FHA-Insured Certificates and FHA-Insured Loans is
adjusted for amortization of discounts to maturity. Such amortization is
included in mortgage investment income.
Gains from dispositions of mortgage investments are recognized upon the
receipt of cash or debentures.
Losses on dispositions of mortgage investments are recognized when it
becomes probable a mortgage will be disposed of and that the disposition will
result in a loss. In the case of Originated Insured Mortgages fully insured by
HUD, the Partnership's maximum exposure for purposes of determining the loan
losses would generally be an assignment fee charged by HUD representing
approximately 1% of the unpaid principal balance of the Originated Insured
Mortgage at the date of default, plus the unamortized balance of acquisition
fees and closing costs paid in connection with the acquisition of the Originated
Insured Mortgage and the loss of 30 days accrued interest.
Due from Affiliate
------------------
From time to time, the Partnership assigns defaulted loans to HUD in order
to collect the amount of delinquent principal and interest. In addition,
mortgages are assigned to HUD under the Section 221 program, as discussed above.
HUD determines if the claim will be settled in cash or by the issuance of
debentures. Debentures are obligations of the mortgage insurance funds and are
unconditionally guaranteed by the United States. The term of the debentures are
usually more than 9 years and the rate is set based upon the rate in effect at
the commitment date to provide insurance or at the final endorsement date,
whichever is greater. The Partnership classifies its portion of investment in
FHA debenture as available for sale debt securities with changes in fair value
recorded as an adjustment to equity and other comprehensive income. The
Partnership's investment in FHA debenture is included on the balance sheet in
Due from affiliate, as discussed in Note 7.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents consist of time and demand deposits with original
maturities of three months or less.
Income Taxes
------------
No provision has been made for Federal, state or local income taxes in the
accompanying statements of income and comprehensive income since they are the
responsibility of the Unitholders.
30
Statements of Cash Flows
------------------------
No cash payments were made for interest expense during the years ended
December 31, 2001, 2000 and 1999. Since the statements of cash flows are
intended to reflect only cash receipt and cash payment activity, the statements
of cash flows do not reflect operating activities that affect recognized assets
and liabilities while not resulting in cash receipts or cash payments.
3. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following estimated fair values of the Partnership's financial
instruments are presented in accordance with generally accepted accounting
principles which define fair value as the amount at which a financial instrument
could be exchanged in a current transaction between willing parties, other than
in a forced or liquidation sale. These estimated fair values, however, do not
represent the liquidation value or the market value of the Partnership.
As of December 31, 2001 As of December 31, 2000
----------------------------- ----------------------------
Amortized Cost Fair Value Amortized Cost Fair Value
-------------- ------------ -------------- -----------
Investment in FHA-Insured
Loans:
Originated Insured Mortgage $ 4,806,675 $ 4,520,916 $ 4,874,050 $ 4,551,832
Acquired Insured Mortgages 7,621,126 9,325,365 7,723,048 9,670,976
------------ ------------ ------------ -----------
$ 12,427,801 $ 13,846,281 $ 12,597,098 $14,222,808
============ ============ ============ ===========
Investment in FHA-Insured
Certificates $ 8,415,866 $ 9,727,346 $ 9,536,007 $11,258,675
============ ============ ============ ===========
FHA Debenture due from affiliate $ 1,192,617 $ 1,192,617 $ 1,192,617 $ 1,180,690
Cash and cash equivalents $ 534,890 $ 534,890 $ 567,491 $ 567,491
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument:
Investment in FHA-Insured Certificates,
FHA-Insured Loans and FHA Debenture due from affiliate
------------------------------------------------------
The fair value of the FHA-Insured Certificates and FHA-Insured Loans is
priced internally. The Partnership used a discounted cash flow methodology to
estimate the fair value; the cash flows were discounted using a discount rate
that, in the Partnership's view, was commensurate with the market's perception
of risk and value. The Partnership used a variety of sources to determine its
discount rate including: (i) institutionally-available research reports,
31
and (ii) communications with dealers and active insured mortgage security
investors regarding the valuation of comparable securities. The fair value of
the FHA Debenture is based upon the prices of other comparable securities that
trade in the market. The fair value is equal to its face value upon redemption
of the debenture.
Cash and cash equivalents
-------------------------
The carrying amount approximates fair value because of the short maturity
of these instruments.
4. COMPREHENSIVE INCOME
Comprehensive income includes net earnings as currently reported by the
Partnership adjusted for other comprehensive income. Other comprehensive income
for the Partnership consists of changes in unrealized gains and losses related
to the Partnership's mortgages and debenture accounted for as available for
sale. The table below breaks out other comprehensive income for the periods
presented into the following two categories: (1) the change to unrealized gains
and losses that relate to mortgages which were disposed of during the period
with the resulting realized gain or loss reflected in net earnings
(reclassification adjustments) and (2) the change in the unrealized gain or loss
related to those investments that were not disposed of during the period.
2001 2000 1999
---- ---- ----
Reclassification adjustment for gains
included in net income $ (177,352) $ (161,707) $ (67,656)
Unrealized holding gains (losses) arising
during the period (221,909) 59,545 (477,961)
---------- ---------- ----------
Net adjustment to unrealized losses $ (399,261) $ (102,162) $ (545,617)
========== ========== ==========
5. INVESTMENT IN FHA-INSURED LOANS
Listed below is the Partnership's aggregate investment in FHA-Insured Loans
as of December 31, 2001 and 2000:
December 31,
2001 2000
---- ----
Number of
Acquired Insured Mortgages 3 3
Originated Insured Mortgage 1 1
Amortized Cost $ 12,427,801 $ 12,597,098
Face Value 14,428,107 14,694,371
Fair Value 13,846,281 14,222,808
All of the FHA-Insured Loans were current with respect to the payment of
principal and interest as of March 1, 2002.
32
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
6. INVESTMENT IN FHA-INSURED CERTIFICATES
Listed below is the Partnership's aggregate investment in FHA-Insured
Certificates as of December 31, 2001 and 2000:
December 31,
2001 2000
---- ----
Number of mortgages (1) 6 7
Amortized Cost $ 8,415,866 $ 9,536,007
Face Value 10,037,064 11,433,137
Fair Value 9,727,346 11,258,675
(1) In September 2001, the mortgage on Berryhill Apartments was prepaid.
The Partnership received net proceeds of approximately $1.2 million
and recognized a gain of approximately $190,000 for the year ended
December 31, 2001. A distribution of approximately $0.12 per Unit
related to the prepayment of this mortgage was declared in September
2001 and paid to Unitholders in November 2001.
As of March 1, 2002, all of the Partnership's FHA-Insured Certificates
were current with respect to the payment of principal and interest, except for
the mortgage on Westbrook Apartments, which is delinquent with respect to the
February 2002 payment of principal and interest.
7. DUE FROM AFFILIATE
The servicer of the mortgage on Fox Run Apartments filed an application for
insurance benefits under the Section 221 program of the National Housing Act of
1937 in May 2000. In December 2000, HUD issued assignment proceeds in the form
of a 7.125% debenture for this mortgage. The mortgage was owned 50% by AIM 84
and 50% by an affiliate of the Partnership, American Insured Mortgage Investors
- Series 85, L.P. ("AIM 85"). The debenture, with a face value of $2,385,233,
was issued to AIM 85 with interest payable semi-annually on January 1 and July
1. The Partnership recognized a gain of approximately $188,000 for the year
ended December 31, 2000 related to this assignment. The net proceeds and accrued
interest are included on the Balance Sheet in Due from affiliate as of December
31, 2001. In January 2002, the debenture was liquidated at par value. The
Partnership received approximately $1.2 million for their share of the debenture
proceeds, including interest of approximately $42,000. A distribution of
approximately $0.11 per Unit related to the receipt of these proceeds is
expected to be declared in March 2002.
33
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO FINANCIAL STATEMENTS
8. TRANSACTIONS WITH RELATED PARTIES
The principal officers of the General Partner for the years ended December
31, 2001, 2000 and 1999 did not receive fees for serving as officers of the
General Partner, nor are any fees expected to be paid to the officers in the
future.
The General Partner, CMSLP and certain affiliated entities have, during the
years ended December 31, 2001, 2000 and 1999, earned or received compensation or
payments for services from the Partnership as follows:
COMPENSATION PAID OR ACCRUED TO RELATED PARTIES
For the year ended December 31,
Name of Recipient Capacity in Which Served/Item 2001 2000 1999
----------------- ----------------------------- ---- ---- ----
CRIIMI, Inc. (1) General Partner/Distribution $ 95,573 $ 59,733 $ 107,519
AIM Acquisition Partners, L.P.(2) Advisor/Asset Management Fee 224,202 237,264 240,997
CRIIMI MAE Management, Inc. Affiliate of General Partner/Expense 40,866 38,782 37,347
(1) The General Partner, pursuant to amendments to the partnership agreement,
effective September 6, 1991, is entitled to receive 2.9% of the
Partnership's income, loss, capital and distributions, including, without
limitation, the Partnership's adjusted cash from operations and proceeds of
mortgage prepayments, sales or insurance (both as defined in the
partnership agreement).
(2) The Advisor, pursuant to the partnership agreement, effective October 1,
1991, is entitled to an Asset Management Fee equal to 0.95% of Total
Invested Assets (as defined in the partnership agreement). CMSLP is
entitled to a fee equal to 0.28% of Total Invested Assets from the
Advisor's Asset Management Fee. Of the amounts paid to the Advisor, CMSLP
earned a fee equal to $66,078, $69,924, and $71,024 for the years ended
December 31, 2001, 2000 and 1999, respectively. The general partner and
limited partner of CMSLP are wholly owned subsidiaries of CRIIMI MAE.
34
9. DISTRIBUTIONS TO UNITHOLDERS
The distributions paid or accrued to Unitholders on a per Unit basis for
the years ended December 31, 2001, 2000 and 1999 are as follows:
Quarter Ended 2001 2000 1999
------------- ---- ---- ----
March 31 $ 0.05 $ 0.05 $ 0.17(2)
June 30 0.05 0.05 0.05
September 30 0.17(1) 0.05 0.05
December 31 0.05 0.05 0.09(3)
------ ------ ------
$ 0.32 $ 0.20 $ 0.36
====== ====== ======
(1) This amount includes approximately $0.12 per Unit representing net proceeds
from the prepayment of the mortgage on Berryhill Apartments.
(2) This amount includes approximately $0.12 per Unit due to redemption of
debentures received from the assignment of the mortgage on Portervillage I
Apartments. This amount was received from an affiliate of the Partnership,
AIM 85. The debenture was issued to AIM 85, since the mortgage on
Portervillage I Apartments was owned 50% by the Partnership and 50% by AIM
85.
(3) This amount includes approximately $0.04 per Unit representing net proceeds
from prepayment of the mortgage on Lakeside Apartments.
The basis for paying distributions to Unitholders is net proceeds from
mortgage dispositions, if any, and cash flow from operations, which includes
regular interest income and principal from Insured Mortgages. Although Insured
Mortgages yield a fixed monthly mortgage payment once purchased, the cash
distributions paid to the Unitholders will vary during each year due to (1) the
fluctuating yields in the short-term money market where the monthly mortgage
payment receipts are temporarily invested prior to the payment of quarterly
distributions, (2) the reduction in the asset base resulting from monthly
mortgage payments received or mortgage dispositions, (3) variations in the cash
flow attributable to the delinquency or default of Insured Mortgages and
professional fees and foreclosure costs incurred in connection with those
Insured Mortgages and (4) variations in the Partnership's operating expenses.
10. PARTNERS' EQUITY
Depositary Units representing economic rights in limited partnership
interests ("Units") were issued at a stated value of $20. A total of 10,000,000
Units were issued for an aggregate capital contribution of $200,000,000. In
addition, the initial limited partner contributed $2,500 to the capital of the
Partnership and received 125 Units in exchange therefor.
35
11. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
The following is a summary of unaudited quarterly results of operations for
the years ended December 31, 2001, 2000 and 1999:
(In Thousands, Except Per Unit Data)
2001
Quarter ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Income $ 565 $ 562 $ 554 $ 534
Net earnings 451 444 637 423
Gain on mortgage dispositions -- -- 190 --
Net earnings per Limited Partnership Unit - Basic $ 0.04 $ 0.04 $ 0.06 $ 0.05
2000
Quarter ended
March 31 June 30 September 30 December 31
------- ------- ------------ -----------
Income $ 574 $ 571 $ 569 $ 565
Net earnings 453 452 456 650
Gain on mortgage dispositions -- -- -- 188
Net earnings per Limited Partnership Unit - Basic $ 0.04 $ 0.04 $ 0.04 $ 0.08
1999
Quarter ended
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Income $ 599 $ 591 $ 583 $ 581
Net earnings 460 479 455 531
Gain on mortgage dispositions -- -- -- 67
Net earnings per Limited Partnership Unit - Basic $ 0.04 $ 0.05 $ 0.04 $ 0.06
36
AMERICAN INSURED MORTGAGE INVESTORS
SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 2001
Interest Face Net AnnualPayment
Maturity Put Rate on Amount of Carrying Value (Principal and
Development Name/Location Date Date(1) Mortgage(5) Mortgage(3) (3)(6)(8)(9) Interest(5)(7)
------------------------- ---- ---- ----------- ----------- ----------- --------------
ORIGINATED INSURED MORTGAGES
Investment in FHA-Insured Loans (carried at amortized cost)(2)
--------------------------------------------------------------
Creekside Village, Beaverton, OR 11/25 -- 7.75% $ 4,806,674 $ 4,806,675 $ 442,754
----------- -----------
Total Investment in FHA-Insured Loans -
Originated Insured Mortgages 4,806,674 4,806,675
----------- -----------
ACQUIRED INSURED MORTGAGES
Investment in FHA-Insured Loans (carried at amortized cost)(2)
--------------------------------------------------------------
Eastdale Apts., Montgomery, AL 3/23 10/01 7.5% 6,149,980 4,849,286 592,406
North River Place, Chillecothe, OH 10/21 12/01 7.5% 2,875,579 2,273,133 279,509
Town Park Apts., Rockingham, NC 10/22 10/02 7.5% 595,874 498,707 56,755(4)
----------- -----------
Total Investment in FHA-Insured Loans -
Acquired Insured Mortgages 9,621,433 7,621,126
----------- -----------
Total Investment in FHA-Insured Loans 14,428,107 12,427,801
----------- -----------
ACQUIRED INSURED MORTGAGES
Investment in FHA-Insured Certificates (carried at fair value)
--------------------------------------------------------------
Bay Pointe Apts., Lafayette, IN 2/23 10/02 7.5% 1,930,145(4) 1,870,669 185,272(4)
Baypoint Shoreline Apts, Duluth, MN 1/22 10/01 7.5% 909,960(4) 881,970 87,967(4)
Brougham Estates II, Kansas City, KS 11/22 3/02 7.5% 2,429,785(4) 2,354,722 230,860(4)
College Green Apts., Wilmington, NC 3/23 2/02 7.5% 1,307,892(4) 1,267,423 123,455(4)
Kaynorth Apts., Lansing, MI 4/23 9/02 7.5% 1,775,422(4) 1,720,465 167,318(4)
Westbrook Apts., Kokomo, IN 11/22 9/02 7.5% 1,683,860(4) 1,632,097 163,177(4)
----------- -----------
Total Investment in FHA-Insured Certificates 10,037,064 9,727,346
----------- -----------
TOTAL INVESTMENT IN INSURED MORTGAGES $24,465,171 $22,155,147
=========== ===========
See notes to Schedule IV - Mortgage Loans on Real Estate
37
AMERICAN INSURED MORTGAGE INVESTORS
NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 2001
(1) Under the Section 221 program of the National Housing Act of 1937, as
amended, a mortgagee has the right to assign a mortgage ("put") to FHA at
the expiration of 20 years from the date of final endorsement if the
mortgage is not in default at such time. Any mortgagee electing to assign
an FHA-insured mortgage to FHA will receive, in exchange therefor, HUD
debentures having a total face value equal to the then outstanding
principal balance of the FHA-insured mortgage plus accrued interest to the
date of assignment. These HUD debentures will mature 10 years from the date
of assignment and will bear interest at the "going Federal rate" at such
date. This assignment procedure is applicable to an insured mortgage which
had a firm or conditional FHA commitment for insurance on or before
November 30, 1983. The Partnership anticipates that each eligible insured
mortgage, for which a prepayment has not occurred and which has not been
sold, will be assigned to FHA at the expiration of 20 years from the date
of final endorsement. The Partnership, therefore, does not anticipate
holding any eligible insured mortgage beyond the expiration of 20 years
from final endorsement of that insured mortgage. The Partnership has
initiated its request to put these mortgages to FHA as they become due.
(2) Inclusive of closing costs and acquisition fees.
(3) Prepayment of these insured mortgages would be based upon the unpaid
principal balance at the time of prepayment.
(4) These amounts represent the Partnership's 50% interest in these insured
mortgages. The remaining 50% interest was acquired by American Insured
Mortgage Investors - Series 85, L.P. ("AIM 85").
(5) In addition, the servicer of the insured mortgages (primarily unaffiliated
third parties) is entitled to receive compensation for certain services
rendered in an amount up to ten basis points (0.10%) of the unpaid
principal balance of the insured mortgages.
(6) The mortgages underlying the Partnership's investment in FHA-Insured
Certificates and FHA-Insured Loans are non-recourse first liens on
multifamily residential developments.
(7) Principal and interest are payable at level amounts over the life of the
Insured Mortgages.
(8) A reconciliation of the carrying value of Insured Mortgages, for the years
ended December 31, 2001 and 2000, is as follows:
2001 2000
---- ----
Beginning balance $23,855,773 $25,219,376
Gain on mortgage dispositions 190,206 188,455
Proceeds from disposition of mortgages (1,184,199) (1,181,623)(a)
Principal receipts on Insured Mortgages (295,445) (280,200)
Adjustment to unrealized gains on
investment in Insured Mortgages (411,188) (90,235)
----------- -----------
Ending balance $22,155,147 $23,855,773
=========== ===========
(a) This amount represents non-cash proceeds of $1,192,617 (as reflected
on the Statements of Cash Flows) less $10,994 of accrued interest
income.
(9) The tax basis of the Insured Mortgages was approximately $19.6 million and
$20.9 million as of December 31, 2001 and 2000, respectively.