1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1995 ------------------ Commission file number 1-11060 ------------------ AMERICAN INSURED MORTGAGE INVESTORS - ----------------------------------------------------------------- (Exact name of registrant as specified in charter) California 13-3180848 - ------------------------------------- ---------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 11200 Rockville Pike, Rockville, Maryland 20852 - ----------------------------------------- ---------------------- (Address of principal executive offices) (Zip Code) (301) 816-2300 - ----------------------------------------------------------------- (Registrant's telephone number, including area code) 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 - ----------------------------------------------------------------- (Title of class) Indicated 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 [ ] 2 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 March 22, 1996, 10,000,000 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 $31,836,607. 3 AMERICAN INSURED MORTGAGE INVESTORS 1995 ANNUAL REPORT ON FORM 10-K TABLE OF CONTENTS PART I ------ Page ---- Item 1. Business . . . . . . . . . . . . . . . . . . 4 Item 2. Properties . . . . . . . . . . . . . . . . . 5 Item 3. Legal Proceedings . . . . . . . . . . . . . . 5 Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 5 PART II ------- Item 5. Market for Registrant's Securities and Related Security Holder Matters . . . . . . 6 Item 6. Selected Financial Data . . . . . . . . . . . 7 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . 8 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 . . . . . . . . . . . . . . . . 12 Item 11. Executive Compensation . . . . . . . . . . . 13 Item 12. Security Ownership of Certain Beneficial Owners and Management . . . . . . . . . . . 13 Item 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . 14 PART IV ------- Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K . . . . . . . . . . . . 15 Signatures . . . . . . . . . . . . . . . . . . . . . . 18 4 PART I ITEM 1. BUSINESS 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, 4, 5 and 6 of the notes to the financial statements of the Partnership (filed in response to Item 8 hereof), which is incorporated herein by reference. Also see 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, 1995. 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). CRIIMI, Inc. 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., Broad, Inc. and CRIIMI MAE. Pursuant to the terms of certain amendments to the Partnership Agreement, the General Partner is required to obtain the consent of the Advisor prior to taking certain significant actions which affect the management and policies of the Partnership. Effective September 6, 1991 and through June 30, 1995, a sub-advisory agreement (the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc., an affiliate of CRI, Inc., managed the Partnership's portfolio. In connection with a merger transaction in which CRIIMI MAE became a self-administered real estate investment trust (REIT), on June 30, 1995, an affiliate of CRIIMI MAE acquired the Sub-advisory Agreement. As a result of this transaction, effective June 30, 1995, CRIIMI MAE Services Limited Partnership manages the Partnership's portfolio. These transactions had no effect on the Partnership's financial statements. 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 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. Pursuant to the Sub-advisory Agreement, the Advisor retained a sub-advisor to perform the services required of the Advisor under the Advisory Agreement. As discussed above, prior to June 30, 1995, CRI/AIM Management, Inc. acted as the sub-advisor. Effective June 30, 1995, CRIIMI MAE Services Limited Partnership was engaged to act as the sub-advisor to the Partnership. From September 6, 1991 through June 30, 1995, CRI/AIM Management, Inc. also performed advisory services for 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), as well as the Partnership (collectively, the AIM Partnerships). Subsequent to June 30, 1995, CRIIMI MAE Services Limited Partnership performs advisory services for the AIM Partnerships. CRI also served as a general partner of the adviser to CRIIMI MAE and CRI Liquidating REIT, Inc., which have investment objectives similar to 5 those of the AIM Partnerships. However, effective Juen 30, 1995 CRIIMI MAE became a self-administered REIT and, as a result, the adviser no longer advises CRIIMI MAE. CRIIMI MAE and its affiliates also may serve as general partners, sponsors or managers of real estate limited partnerships, REITS or other entities in the future. The Partnership may attempt to dispose of mortgage investments at or about the same time that one or more of the other AIM Partnerships and/or other entities sponsored or managed by CRIIMI MAE, including CRI Liquidating REIT Inc., is attempting to dispose of mortgages. As a result of market conditions that could limit dispositions, CRIIMI MAE Services Limited Partnership and its affiliates could be faced with conflicts of interest in determining which mortgages would be disposed of. Both CRIIMI MAE Services Limited Partnership and CRIIMI, Inc., 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 1995. 6 PART II ITEM 5. MARKET FOR REGISTRANT'S SECURITIES AND RELATED SECURITY HOLDER MATTERS Principal Market and Market Price for Units and Distributions - ------------------------------------------------------------- From November 5, 1985 through July 6, 1989, the Units were included in the NASDAQ National Market System. From July 7, 1989 through April 7, 1992, the Units were traded in the over-the-counter market and quoted on the NASDAQ quotation system under the symbol "AIMAZ." Since April 8, 1992, the Units have traded on the American Stock Exchange (AMEX) with a trading symbol of "AIA". The high and low bid prices for the Units as reported on AMEX and the distributions, as applicable, for each quarterly period in 1995 and 1994 were as follows: Amount of 1995 Distribution Quarter Ended High Low Per Unit - ------------------- ------- ------- ------------ March 31, $3 5/8 $3 1/4 $ 0.08 June 30, 3 3/4 2 11/16 0.08 September 30, 3 9/16 3 1/4 0.08 December 31, 3 5/8 3 3/16 0.08 --------- $ 0.32 ========= Amount of 1994 Distribution Quarter Ended High Low Per Unit - ------------------- ------- ------- ----------- March 31, $4 7/8 $3 3/4 $ 0.89(1) June 30, 3 13/16 3 3/8 0.08 September 30, 3 11/16 3 7/16 0.08 December 31, 3 11/16 3 1/4 0.08 -------- $ 1.13 ======== (1) This includes a special distribution of $0.81 per Unit comprised of: (i) $0.80 per Unit return of capital and capital gain from the disposition of the mortgage on Hidden Oaks Apartments and (ii) $.01 per Unit of previously accrued but undistributed interest received from the mortgage on Creekside Village. 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. The Partnership's Dividend Reinvestment Plan was amended effective April 10, 1992 to exclude the amount of any special distributions from reinvestment under the Plan. The regular distributions will continue to be automatically reinvested in additional Units as in the past. Approximate Number of Unitholders as of Title of Class December 31, 1995 - --------------------------- ---------------------- Depositary Units of Limited Partnership Interest 9,000 7 PART II ITEM 6. SELECTED FINANCIAL DATA (Dollars in thousands, except per Unit amounts) For the years ended December 31, 1995 1994 1993 1992 1991 ------------ ------------ ------------ ------------ ------------ Income $ 3,626 $ 3,736 $ 4,487 $ 4,747 $ 5,761 Net gains (losses) from mortgage dispositions -- 196 762 (21) 260 Net earnings 3,041 3,280 4,528 3,867 4,626 Composition of distributions per Limited Partnership Unit(1)(2): Earnings $ 0.30 $ 0.32 $ 0.440 $ 0.38 $ 0.450 Return of capital 0.02 0.81 0.205 1.44 0.099 -------- -------- -------- -------- -------- Total $ 0.32 $ 1.13 $ .645 $ 1.82 $ 0.549 ======== ======== ======== ======== ======== As of December 31, ------------------ 1995 1994 1993 1992 1991 -------- -------- -------- -------- -------- Total assets $ 39,415 $ 38,161 $ 47,630 $ 46,971 $ 62,029 Partners' equity 38,493 37,241 43,749 45,864 60,741 (1) Calculated based upon the weighted average number of Limited Partnership Units outstanding. (2) Includes distributions due the Unitholders for the Partnership's fiscal quarters ended December 31, 1995, 1994, 1993, 1992 and 1991 which were paid subsequent to each year end. See Notes 4 and 8 of the Notes to Financial Statements contained in Item 8. "Financial Statements and Supplementary Data." The selected statements of operations data presented above for the years ended December 31, 1995, 1994 and 1993 and the balance sheet data as of December 31, 1995 and 1994, are derived from and are qualified by reference to the Partnership's financial statements which have been included elsewhere in this Form 10-K. The statements of operations data for the years ended December 31, 1992 and 1991 and the balance sheet data as of December 31, 1993, 1992 and 1991 are derived from audited financial statements not included in this Form 10-K. This data should be read in conjunction with the financial statements and the notes thereto. 8 PART II ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General - ------- 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 limited partnership interests in exchange therefor. At a special meeting of the limited partners and Unitholders of the Partnership held on August 16, 1991, a majority of these interests approved, among other items, the assignment of the general partner interests and the shares of the company which acted as the assignor limited partner in the Partnership, as described below, and the adoption of provisions which prohibit a "Reorganization Transaction" (including transactions commonly known as "roll- ups") for a period of five years unless approved by a super-majority. Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded the former general partners to become the sole general partner of the Partnership. CRIIMI, Inc. purchased the interests of the former managing general partner and the former corporate general partner pursuant to the terms of the Partnership Agreement. The interest of the former associate general partner was purchased by the Partnership on September 6, 1991, pursuant to the terms of the Partnership Agreement. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc. 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 Acquisitions, The Goldman Sachs Group, L.P., Broad, Inc. and CRIIMI MAE. Effective September 6, 1991 and through June 30, 1995, a sub-advisory agreement(the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc., an affiliate of CRI, managed the Partnership's portfolio. In connection with the transaction in which CRIIMI MAE became a self-managed and self-administered REIT, an affiliate of CRIIMI MAE acquired the Sub-advisory Agreement. As a result of this transaction, effective June 30, 1995, CRIIMI MAE Services Limited Partnership, an affiliate of CRIIMI MAE, manages the Partnership's portfolio. These transactions had no effect on the Partnership's financial statements. 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. The Partnership's investment in Insured Mortgages consists of participation certificates evidencing a 100% undivided beneficial interest in government insured multifamily mortgages issued or sold pursuant to Federal Housing Administration (FHA) programs (FHA-Insured Certificates) and FHA-insured 9 PART II ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued mortgage loans (FHA-Insured Loans). The mortgages underlying the FHA-Insured Certificates and FHA-Insured Loans are non-recourse first liens on multifamily residential developments. Investment in FHA-Insured Loans - -------------------------------- As of December 31, 1995 and 1994, the Partnership's investment in FHA- Insured Loans consisted of four Acquired Insured Mortgages and two Originated Insured Mortgages. As of December 31, 1995 and 1994, these investments had an aggregate amortized cost of $23,589,611 and $23,708,274, respectively, an aggregate face value of $26,573,553 and $26,776,001, respectively, and an aggregate fair value of $27,625,663 and $26,065,185, respectively. All of the FHA-Insured Loans were current with respect to payment of principal and interest as of March 1, 1996. In addition to base interest payments received from Originated Insured Mortgages, the Partnership is entitled to additional interest based on a percentage of the net cash flow from the underlying development and of the net proceeds from the refinancing, sale or other disposition of the underlying development (referred to as Participations). During the years ended December 31, 1995 and 1994, the Partnership received $39,465 and $13,010, respectively, from the Participations. During the year ended December 31, 1993, the Partnership did not receive any monies from the Participations. These amounts, if any, are included in mortgage investment income on the accompanying statements of operations. Investment in FHA-Insured Certificates - -------------------------------------- As of December 31, 1995 and 1994, the Partnership's investment in FHA- Insured Certificates consisted of nine Acquired Insured Mortgages with an aggregate amortized cost of $11,418,898 and $11,506,273, respectively, an aggregate face value of $14,023,399 and $14,190,281, respectively, and an aggregate fair value of $14,774,772 and $13,355,026, respectively. All of the FHA-Insured Certificates were current with respect to payment of principal and interest as of March 1, 1996. Mortgage Dispositions - --------------------- There were no dispositions for the year ended December 31, 1995. A summary of dispositions which are included in the statements of operations for the years ended December 31, 1994 and 1993 are as follows: 10 PART II ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued Financial Statement Year of Type of Net Carrying Net Gain Complex Name Disposition Disposition Value Proceeds Recognized - ------------------ ----------- ----------- ------------ ------------ ----------- Hidden Oaks (a) 1994 Prepayment $ 7,941,507 $ 8,137,327(c) $ 195,820 Clark & Elm Apts.(a) 1993 Sale of a defaulted mortgage -- 108,415(d) 108,415 Chapelgate Apts.(b) 1993 Sale of a defaulted mortgage 682,731 901,171 218,440 Cumberland Village(b) 1993 Sale of a defaulted mortgage 1,520,268 1,955,663 435,395 (a) Disposition of Originated Insured Mortgage. (b) Disposition of Acquired Insured Mortgage. (c) Includes a prepayment penalty of approximately $260,000. (d) Represents additional proceeds resulting from an adjustment to the 1992 sales price. Results of Operations - --------------------- 1995 versus 1994 - ---------------- Net earnings decreased for 1995 as compared to 1994 primarily due to the gain recognized on the disposition of the mortgage on Hidden Oaks Apartments during 1994. No mortgages were disposed of during 1995. Also contributing to the decrease in net earnings was the reduction in mortgage investment income as a result of this disposition. Interest and other income decreased for 1995 as compared to 1994. During 1994, interest and other income included interest income from the short-term investment of disposition proceeds received during February 1994 prior to the distribution to Unitholders in May 1994. Asset management fees decreased for 1995 as compared to 1994 as a result of the reduction in the mortgage base. General and administrative expenses decreased for 1995 as compared to 1994 due to a reduction in investor services expenses and annual and quarterly reporting expenses resulting from a reduction of the number of Unitholders. In addition, there was a decrease in non-recurring expenses incurred in 1994, as discussed below. 11 PART II ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued 1994 versus 1993 - ---------------- Net earnings decreased in 1994 as compared to 1993 primarily due to a reduction in net gains from mortgage dispositions and mortgage investment income as a result of the mortgage dispositions which occurred during 1993 and 1994. Interest and other income increased in 1994 as compared to 1993 primarily due to the short-term investment of disposition proceeds received during February 1994 prior to the distribution to Unitholders in May 1994. Asset management fees decreased in 1994 as compared to 1993 as a result of the reduction in the mortgage base. General and administrative expenses did not significantly change in 1994 as compared to 1993. Gains on mortgage dispositions decreased in 1994 as compared to 1993. During 1993, the Partnership disposed of three mortgage investments, which resulted in gains of $762,250. During 1994, only one mortgage was disposed of, resulting in a gain of $195,820. Liquidity and Capital Resources - ------------------------------- 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, were sufficient for the year ended December 31, 1995 to meet operating requirements. 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 period due to (1) the fluctuating yields in the short-term money market where the monthly mortgage payments received are temporarily invested prior to the payment of quarterly distributions, (2) the reduction in the asset base due to monthly mortgage payments received or mortgage dispositions, (3) variations in the cash flow attributable to the delinquency or default of Insured Mortgages and (4) changes 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 - 1995 versus 1994 - ---------------------------- Net cash provided by operating activities decreased for 1995 as compared to 1994 primarily due to a reduction in mortgage investment income and interest and other income, as discussed above. Also contributing to the decrease was a reduction in receivables and other assets in 1994 in connection with the receipt of accrued but unpaid interest related to the mortgage on Creekside Village. Net cash provided by investing activities decreased for 1995 as compared to 1994 as a result to the receipt in February 1994 of net proceeds of 12 PART II ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - Continued approximately $8.1 million from the prepayment of the mortgage on Hidden Oaks Apartments. Net cash used in financing activities decreased for 1995 as compared to 1994 primarily due to the first and second quarter 1994 special distributions paid to the Unitholders, resulting from the prepayment of the mortgage on Hidden Oaks Apartments and from the proceeds received in 1993 from the sale of the defaulted mortgages on Chapelgate Apartments and Cumberland Village. This compares to the distribution to Unitholders during 1995 of regular cash flow from the fourth quarter of 1994 and the first three quarters of 1995. Cash flow - 1994 versus 1993 - ---------------------------- Net cash provided by operating activities decreased for 1994 as compared to 1993 primarily due to a decrease in mortgage investment income, as previously discussed. Partially offsetting this decrease was the receipt in 1994 of accrued interest related to the mortgage on Creekside Village. Net cash provided by investing activities increased for 1994 as compared to 1993 as a result of the receipt in February 1994 of approximately $8.1 million from the prepayment of the mortgage on Hidden Oaks Apartments. Net cash used in financing activities increased for 1994 as compared to 1993 primarily due to the 1994 special distributions paid to Unitholders, as discussed above. This compares to the distributions paid to Unitholders in 1993 of regular cash flow from the fourth quarter of 1992 and first three quarters of 1993. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this item is contained on pages 22 through 40. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (a), (b), (c) and (e) The Partnership has no officers or directors. The affairs of the Partnership are generally managed by the General Partner, which is wholly owned by CRIIMI MAE, a company whose shares are listed on the New York Stock Exchange. Prior to June 30, 1995, CRIIMI MAE was managed by an adviser whose general partner was CRI. However, effective June 30, 1995, CRIIMI MAE became a self- administered REIT and, as a result, such advisor no longer advises CRIIMI MAE. At a special meeting of the limited partners and Unitholders of the Partnership held on August 16, 1991, a majority of these interests approved, among other items, the assignment of the general partner interests and the shares of the company which acted as the assignor limited partner in the Partnership. Effective September 6, 1991, the General Partner succeeded AIM Capital Management Corp. (the former managing general partner with a partnership interest of 2.8%) and IRI Properties Capital Corp. (the former corporate general partner with a partnership interest of 0.1%) as the sole general partner of the 13 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - Continued Partnership. In addition, the General Partner acquired the shares of the company which acted as the assignor limited partner in the Partnership. The interest of the former associate general partner (0.1%) was purchased by the Partnership on September 6, 1991, pursuant to the terms of the Partnership Agreement. Also, on September 6, 1991, the Advisor succeeded Integrated Funding as the advisor to the Partnership. AIM Acquisition is the general partner of the Advisor and the limited partners include, but are not limited to, AIM Acquisition, The Goldman Sachs Group, L.P., Broad, Inc. and CRIIMI MAE. 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 which affect the management and policies of the Partnership. The limited partners and Unitholders of the Partnership approved the execution of the Sub-advisory Agreement with CRI/AIM Management, Inc., an affiliate of CRI, pursuant to which CRI/AIM Management, Inc. managed the Partnership's portfolio and disposed of the Partnership's Insured Mortgages through June 30, 1995. Effective June 30, 1995, CRIIMI MAE Services Limited Partnership, an affiliate of CRIIMI MAE, manages the Partnership's portfolio and disposes of the Partnership's Insured Mortgages. 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. (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) 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 5s 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, 1995. ITEM 11. EXECUTIVE COMPENSATION The information required by Item 11 is incorporated herein by reference to Note 4 of the notes to the financial statements of the Partnership. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of December 31, 1995, no person was known by the Partnership to be the beneficial owner of more than five percent (5%) of the outstanding Units of the Partnership. As of December 31, 1995, neither the officers and directors, as a group, of the General Partner nor any individual director of the General Partner, are known to own more than 1% of the outstanding Units of the Partnership. 14 PART III ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (a) Transactions with management and others. Note 4 of the notes to the Partnership's financial statements of this report 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 incorporated herein by reference. (b) Certain business relationships. Other than as set forth in Item 11 of this report which is incorporated herein by reference, the Partnership has no business relationship with entities of which the former general partners or the current General Partner of the Partnership are officers, directors or equity owners. (c) Indebtedness of management. None. (d) Transactions with promoters. Not applicable. 15 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, 1995 and 1994 21 Statements of Operations for the years ended December 31, 1995, 1994 and 1993 22 Statements of Changes in Partners' Equity for the years ended December 31, 1995, 1994 and 1993 23 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 24 Notes to Financial Statements 25 (a)(2) Financial Statement Schedules: IV - Mortgage Loans on Real Estate All other schedules have been omitted because they are inapplicable, not required, or the information is included in the Financial Statements or Notes thereto. (a)(3) Exhibits: 3. 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. Agreement of Limited Partnership, incorporated by reference to Exhibit 3 to the Registration Statement. 4.(b) Form of Depository Receipt, incorporated by reference to Exhibit 4(b) to the Registration Statement. 4.(c) 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. 10.(b) 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"). (c) Management Services Agreement, dated November 30, 1983, between the Partnership and IFI, incorporated by reference to Exhibit 10(c) to the Initial Registration Statement. 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - Continued (d) Disposition Services Agreement, dated November 30, 1983, between the Partnership and IFI, incorporated by reference to Exhibit 10(d) to the Initial Registration Statement. (e) 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. (f) Reinvestment Plan, incorporated by reference to the Prospectus contained in the Registration Statement. (l) 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. (m) 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. (n) 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. (o) 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. 27. Financial Data Schedule (filed herewith). 28. Pages A-1 - A-4 of the Partnership Agreement of Registrant, incorporated by reference to Exhibit 28 to the Partnership's Annual Report on Form 10-K for the year ended December 31, 1990. 28.(a) 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. 28.(b) 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. 28.(c) 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. 28.(d) 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. 17 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K - Continued (b) Reports on Form 8-K filed during the last quarter of the fiscal year: None All other items are not applicable. 18 SIGNATURES 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 27, 1996 /s/ William B. Dockser - --------------------------- ---------------------------- DATE William B. Dockser Chairman of the Board and Principal Executive Officer March 27, 1996 /s/ H. William Willoughby - --------------------------- ---------------------------- DATE H. William Willoughby President and Director March 27, 1996 /s/ Cynthia O. Azzara - --------------------------- ---------------------------- DATE Cynthia O. Azzara Principal Financial and Accounting Officer March 27, 1996 /s/ Garrett G. Carlson, Sr. - --------------------------- ---------------------------- DATE Garrett G. Carlson, Sr. Director March 27, 1996 /s/ Larry H. Dale - --------------------------- ---------------------------- DATE Larry H. Dale Director March 27, 1996 /s/ G. Richard Dunnells - --------------------------- ---------------------------- DATE G. Richard Dunnells Director March 27, 1996 /s/ Robert F. Tardio - --------------------------- ---------------------------- DATE Robert F. Tardio Director 19 AMERICAN INSURED MORTGAGE INVESTORS Financial Statements as of December 31, 1995 and 1994 and for the Years Ended December 31, 1995, 1994 and 1993 20 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, 1995 and 1994, and the related statements of operations, changes in partners' equity and cash flows for the years ended December 31, 1995, 1994 and 1993. 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 generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Partnership as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the years ended December 31, 1995, 1994 and 1993, in conformity with generally accepted accounting principles. As explained in Note 2 of the notes to the financial statements, effective January 1, 1994, the Partnership changed its method of accounting for its investment in insured mortgages. 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, 1995 and for the year then ended 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. Arthur Andersen LLP Washington, D.C. March 22, 1996 21 AMERICAN INSURED MORTGAGE INVESTORS BALANCE SHEETS December 31, December 31, 1995 1994 ------------ ------------ ASSETS Investment in FHA-Insured Loans, at amortized cost, net of unamortized discount: Originated insured mortgages $ 14,533,066 $ 14,590,272 Acquired insured mortgages 9,056,545 9,118,002 ------------ ------------ 23,589,611 23,708,274 Investment in FHA-Insured Certificates, at fair value: Acquired insured mortgages 14,774,772 13,355,026 Cash and cash equivalents 673,733 722,986 Receivables and other assets 377,323 374,647 ------------ ------------ Total assets $ 39,415,439 $ 38,160,933 ============ ============ LIABILITIES AND PARTNERS' EQUITY Distributions payable $ 823,903 $ 823,903 Accounts payable and accrued expenses 98,292 96,483 ------------ ------------ Total liabilities 922,195 920,386 ------------ ------------ Partners' equity: Limited partners' equity 40,059,771 40,306,817 General partner's deficit (4,922,401) (4,915,023) Unrealized gains on investment in FHA-Insured Certificates 3,355,874 1,848,753 ------------ ------------ Total partners' equity 38,493,244 37,240,547 ------------ ------------ Total liabilities and partners' equity $ 39,415,439 $ 38,160,933 ============ ============ The accompanying notes are an integral part of these financial statements. 22 AMERICAN INSURED MORTGAGE INVESTORS STATEMENTS OF OPERATIONS For the years ended December 31, 1995 1994 1993 ------------ ------------ ------------ Income: Mortgage investment income $ 3,589,374 $ 3,639,376 $ 4,454,241 Interest and other income 37,115 96,513 32,722 ------------ ------------ ------------ 3,626,489 3,735,889 4,486,963 ------------ ------------ ------------ Expenses: Asset management fee to related parties 343,092 355,880 439,158 General and administrative 242,209 295,360 282,310 ------------ ------------ ------------ 585,301 651,240 721,468 ------------ ------------ ------------ Earnings before mortgage dispositions 3,041,188 3,084,649 3,765,495 Gains on mortgage dispositions -- 195,820 762,250 ------------ ------------ ------------ Net earnings $ 3,041,188 $ 3,280,469 $ 4,527,745 ============ ============ ============ Net earnings allocated to: Limited partners - 97.1% $ 2,952,994 $ 3,185,335 $ 4,396,440 General partner - 2.9% 88,194 95,134 131,305 ------------ ------------ ------------ $ 3,041,188 $ 3,280,469 $ 4,527,745 ============ ============ ============ Net earnings per Unit of limited partnership interest $ .30 $ .32 $ .44 ============ ============ ============ The accompanying notes are an integral part of these financial statements. 23 AMERICAN INSURED MORTGAGE INVESTORS STATEMENTS OF CHANGES IN PARTNERS' EQUITY For the years ended December 31, 1995, 1994 and 1993 Unrealized Gains on Investment General Limited in FHA-Insured Partner Partners Certificates Total ------------ ------------ -------------- ------------- Balance, January 1, 1993 $ (4,611,332) $ 50,475,271 $ -- $ 45,863,939 Net earnings 131,305 4,396,440 -- 4,527,745 Distributions paid or accrued of $0.645 per Unit, including return of capital of $0.205 per Unit (192,639) (6,450,088) -- (6,642,727) ------------ ------------- ----------- ------------- Balance, December 31, 1993 (4,672,666) 48,421,623 -- 43,748,957 Net earnings 95,134 3,185,335 -- 3,280,469 Distributions paid or accrued of $1.13 per Unit, including return of capital of $0.81 per Unit (337,491) (11,300,141) -- (11,637,632) Unrealized gains on investment in FHA-insured certificates -- -- 1,848,753 1,848,753 ------------ ------------- -------------- ------------- Balance, December 31, 1994 (4,915,023) 40,306,817 1,848,753 37,240,547 Net earnings 88,194 2,952,994 -- 3,041,188 Distributions paid or accrued of $0.32 per Unit, including return of capital of $0.02 per Unit (95,572) (3,200,040) -- (3,295,612) Adjustment to unrealized gains on investment in FHA-insured certificates -- -- 1,507,121 1,507,121 ------------ ------------- -------------- ------------- Balance, December 31, 1995 $ (4,922,401) $ 40,059,771 $ 3,355,874 $ 38,493,244 ============ ============= ============ ============= Limited Partnership Units outstanding - December 31, 1995, 1994 and 1993 10,000,125 ============= The accompanying notes are an integral part of these financial statements. 24 AMERICAN INSURED MORTGAGE INVESTORS STATEMENTS OF CASH FLOWS For the years ended December 31, 1995 1994 1993 ------------ ------------ ------------ Cash flows from operating activities: Net earnings $ 3,041,188 $ 3,280,469 $ 4,527,745 Adjustments to reconcile net earnings to net cash provided by operating activities: Gains on mortgage dispositions -- (195,820) (762,250) Changes in assets and liabilities: (Increase) decrease in receivables and other assets (2,676) 134,779 (22,426) Increase (decrease) in accounts payable and accrued expenses 1,809 25,671 (6,056) ------------ ------------ ------------ Net cash provided by operating activities 3,040,321 3,245,099 3,737,013 ------------ ------------ ------------ Cash flows from investing activities: Proceeds from disposition of insured mortgages -- 8,137,327 2,965,249 Receipt of mortgage principal from scheduled payments 206,038 186,145 215,680 ------------ ------------ ------------ Net cash provided by investing activities 206,038 8,323,472 3,180,929 ------------ ------------ ------------ Cash flows from financing activities: Distributions paid to partners (3,295,612) (14,624,281) (3,862,055) ------------ ------------ ------------ Net (decrease) increase in cash and cash equivalents (49,253) (3,055,710) 3,055,887 Cash and cash equivalents, beginning of year 722,986 3,778,696 722,809 ------------ ------------ ------------ Cash and cash equivalents, end of year $ 673,733 $ 722,986 $ 3,778,696 ============ ============ ============ The accompanying notes are an integral part of these financial statements. 25 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. From inception through September 6, 1991, AIM Capital Management, Corp. served as managing general partner (with a partnership interest of 2.8%), IRI Properties Capital Corp. served as corporate general partner (with a partnership interest of 0.1%) and 2 Square G Partners II served as the associate general partner (with a partnership interest of 0.1%). All of the foregoing general partners are collectively referred to as former general partners. At a special meeting of the limited partners and unitholders of the Partnership held on August 16, 1991, a majority of these interests approved, among other items, the assignment of the general partner interests and the shares of the company which acted as the assignor limited partner in the Partnership. Effective September 6, 1991, CRIIMI, Inc. (the General Partner) succeeded the former general partners to become the sole general partner of the Partnership. CRIIMI, Inc. purchased the interests of the former managing general partner and the former corporate general partner pursuant to the terms of the Partnership Agreement. The interest of the former associate general partner was purchased by the Partnership on September 6, 1991, pursuant to the terms of the Partnership Agreement. CRIIMI, Inc. is a wholly owned subsidiary of CRIIMI MAE Inc. (CRIIMI MAE), formerly CRI Insured Mortgage Association, Inc. 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., Broad, Inc. and CRIIMI MAE. Effective September 6, 1991 and through June 30, 1995, a sub-advisory agreement(the Sub-advisory Agreement) existed whereby CRI/AIM Management, Inc., an affiliate of CRI, managed the Partnership's portfolio. In connection with the transaction in which CRIIMI MAE became a self-managed and self-administered REIT, an affiliate of CRIIMI MAE acquired the Sub-advisory Agreement. As a consequence of this transaction, effective June 30, 1995, CRIIMI MAE Services Limited Partnership, an affiliate of CRIIMI MAE, manages the Partnership's portfolio. These transactions had no effect on the Partnership's financial statements. 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. 2. SIGNIFICANT ACCOUNTING POLICIES Method of Accounting -------------------- The Partnership's financial statements are prepared on the accrual basis of accounting in accordance with generally accepted accounting 26 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES - Continued 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 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 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) and FHA-insured mortgage loans (FHA-Insured Loans). 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. Prior to January 1, 1994, the Partnership accounted for its investment in Insured Mortgages at amortized cost in accordance with Statement of Financial Accounting Standards No. 65 "Accounting for Certain Mortgage Banking Activities" (SFAS 65) since it had the ability and intent to hold these assets for the foreseeable future. The difference between the cost and the unpaid principal balance at the time of purchase is carried as a discount or premium and amortized over the remaining contractual life of the mortgage using the effective interest method. The effective interest method provides a constant yield of income over the term of the mortgage. Mortgage investment income is comprised of amortization of the discount plus the stated mortgage interest payments received or accrued less amortization of the premium. In May 1993, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 115 "Accounting for Certain Investments in Debt and Equity Securities" (SFAS 115). This statement requires that investments in debt and equity securities be classified into one of the following investment categories based upon the circumstances under which such securities might be sold: Held to Maturity, Available for Sale, and Trading. Generally, certain debt securities for which an enterprise has both the ability and intent to hold to maturity, should be accounted for using the amortized cost method and all other securities must be recorded at their fair values. As of December 31, 1995, the weighted average remaining term of the Partnership's investments in FHA-Insured Certificates is approximately 26 years. However, the Partnership Agreement states that the Partnership will terminate in approximately 13 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, 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 27 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 2. SIGNIFICANT ACCOUNTING POLICIES - Continued 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. In connection with this classification, as of December 31, 1995 and 1994, all of the Partnership's investments in FHA-Insured Certificates are recorded at fair value, with the net unrealized gains on these investments reported 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. The amortized cost of the investments in this category 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 that 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. Since Acquired Insured Mortgages were purchased at a discount from the unpaid principal balance of the mortgage, the Partnership's investment in the Acquired Insured Mortgages is less than the amount that would be recovered from HUD in the event of a default. Therefore, the Partnership would experience no loan losses on discounted Acquired Insured Mortgages in the case of a default. 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 financial statements since they are the personal responsibility of the Unitholders. Reclassification ---------------- Certain amounts in the financial statements for the years ended December 31, 1994 and 1993 have been reclassified to conform with the 1995 presentation. 3. FAIR VALUE OF FINANCIAL INSTRUMENTS 28 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 3. FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued 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. 29 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 3. FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued As of December 31, 1995 As of December 31, 1994 Amortized Fair Amortized Fair Cost Value Cost Value ------------ ------------ ------------ ------------ Investment in FHA-Insured Certificates $ 11,418,898 $ 14,774,772 $ 11,506,273 $ 13,355,026 ============ ============ ============ ============ Investment in FHA-Insured Loans: Originated Insured Mortgages $ 14,533,066 $ 15,196,453 $ 14,590,272 $ 14,829,011 Acquired Insured Mortgage 9,056,545 12,429,210 9,118,002 11,236,174 ------------ ------------ ------------ ------------ $ 23,589,611 $ 27,625,663 $ 23,708,274 $ 26,065,185 ============ ============ ============ ============ Cash and cash equivalents $ 673,733 $ 673,733 $ 722,986 $ 722,986 Accrued interest receivable $ 295,018 $ 295,018 $ 296,748 $ 296,748 The following methods and assumptions were used to estimate the fair value of each class of financial instrument: Investment in FHA-Insured Certificates and FHA- Insured Loans ------------------------------------------------ The fair value of the FHA-Insured Certificates and FHA-Insured Loans is based on quoted market prices. Cash and cash equivalents and accrued interest receivable --------------------------------------------------------- The carrying amount approximates fair value because of the short maturity of these instruments. 4. TRANSACTIONS WITH RELATED PARTIES The principal officers of the General Partner for the years ended December 31, 1995, 1994 and 1993 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 and certain affiliated entities have, during the years ended December 31, 1995, 1994 and 1993, earned or received compensation or payments for services from the Partnership as follows: 30 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 4. TRANSACTIONS WITH RELATED PARTIES - Continued COMPENSATION PAID OR ACCRUED TO RELATED PARTIES ---------------------------------------------- Capacity in Which For the year ended December 31, Name of Recipient Served/Item 1995 1994 1993 - ----------------- ---------------------------- -------- -------- -------- CRIIMI, Inc. General Partner/Distribution $ 95,572 $ 337,491(3) $192,639(3) AIM Acquisition Advisor/Asset Management Fee 343,092 355,880 439,158 Partners, L.P.(1) CRI(3) Affiliate of General Partner/ 37,365 79,972 67,076 Expense Reimbursement CRIIMI MAE Affliate of General Partner/ 16,862 -- -- Management, Inc. (2) Expense Reimbursement (1) 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). The sub-advisor to the Partnership (the Sub-advisor) is entitled to a fee equal to 0.28% of Total Invested Assets. CRI/AIM Management, Inc., which acted as the Sub-advisor through June 30, 1995, earned a fee equal to $50,556, $104,880 and $129,429 for the six months ended June 30, 1995 and for the years ended December 31, 1994 and 1993, respectively. As discussed in Note 1 above, effective June 30, 1995, CRIIMI MAE Services Limited Partnership now serves as the Sub-advisor. Of the amounts paid to the Advisor, CRIIMI MAE Services Limited Partnership earned a fee equal to $50,566 for the six months ended December 31, 1995. No fees were earned by CRIIMI MAE Services Limited Partnership during the years ended December 31, 1994 and 1993. (2) Prior to CRIIMI MAE becoming a self-administered REIT, amounts were paid to CRI as reimbursement for expenses incurred prior to June 30, 1995 on behalf of the General Partner and the Partnership. As discussed in Note 1, the transaction in which CRIIMI MAE became a self-administered REIT has no impact on the payments required to be made by the Partnership, other than that the expense reimbursement previously paid by the Partnership to CRI in connection with the provision of services by the Sub-advisor are, effective June 30, 1995, paid to a wholly-owned subsidiary of CRIIMI MAE, CRIIMI MAE Management, Inc. The amounts paid to CRI during the year ended December 31, 1995 represent reimbursement of expenses incurred prior to June 30, 1995. (3) This amount includes a special distribution as discussed in Note 8. 5. INVESTMENT IN FHA-INSURED LOANS As of December 31, 1995 and 1994, the Partnership's investment in FHA- Insured Loans consisted of four Acquired Insured Mortgages and two Originated Insured Mortgages. As of December 31, 1995 and 1994, these investments had an aggregate amortized cost of $23,589,611 and $23,708,274, respectively, an aggregate face value of $26,573,553 and $26,776,001, respectively, and an aggregate fair value of $27,625,663 and $26,065,185, respectively. All of the 31 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 5. INVESTMENT IN FHA-INSURED LOANS - Continued FHA-Insured Loans were current with respect to payment of principal and interest as of March 1, 1996. In addition to base interest payments under Originated Insured Mortgages, the Partnership is entitled to additional interest based on a percentage of the net cash flow from the underlying development and of the net proceeds from the refinancing, sale or other disposition of the underlying development (referred to as Participations). During the years ended December 31, 1995 and 1994, the Partnership received $39,465 and $13,010, respectively, from the Participations. During the year ended December 31, 1993, the Partnership did not receive any monies from the Participations. These amounts, if any, are included in mortgage investment income on the accompanying statements of operations. 6. INVESTMENT IN FHA-INSURED CERTIFICATES As of December 31, 1995 and 1994, the Partnership's investment in FHA- Insured Certificates consisted of nine Acquired Insured Mortgages with an aggregate amortized cost of $11,418,898 and $11,506,273, respectively, an aggregate face value of $14,023,399 and $14,190,281, respectively, and an aggregate fair value of $14,774,772 and $13,355,026, respectively. All of the FHA-Insured Certificates were current with respect to payment of principal and interest as of March 1, 1996. 7. MORTGAGE DISPOSITIONS There were no mortgage dispositions during the year ended December 31, 1995. A summary of dispositions which are included in the statements of operations for the years ended December 31, 1994 and 1993 are as follows: 32 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 7. MORTGAGE DISPOSITIONS Financial Statement Year of Type of Net Carrying Net Gain Complex Name Disposition Disposition Value Proceeds Recognized - ------------------ ----------- ----------- ------------ ------------ ----------- Hidden Oaks (a) 1994 Prepayment $ 7,941,507 $ 8,137,327(c) $ 195,820 Clark & Elm Apts.(a) 1993 Sale of a defaulted mortgage -- 108,415(d) 108,415 Chapelgate Apts.(b) 1993 Sale of a defaulted mortgage 682,731 901,171 218,440 Cumberland Village(b) 1993 Sale of a defaulted mortgage 1,520,268 1,955,663 435,395 (a) Disposition of Originated Insured Mortgage. (b) Disposition of Acquired Insured Mortgage. (c) Includes a prepayment penalty of approximately $260,000. (d) Represents additional proceeds resulting from an adjustment to the 1992 sales price. 33 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 8. DISTRIBUTIONS TO UNITHOLDERS The distributions paid or accrued to Unitholders on a per Unit basis for the years ended December 31, 1995, 1994 and 1993 are as follows: Quarter Ended 1995 1994 1993 - ------------- -------- -------- -------- March 31, $ 0.08 $ 0.89(1) $ 0.095 June 30, 0.08 0.08 0.090 September 30, 0.08 0.08 0.090 December 31, 0.08 0.08 0.370(2) -------- -------- -------- $ 0.32 $ 1.13 $ 0.645 ======== ======== ======== (1) This includes a special distribution of $0.81 per Unit comprised of: (i) $0.80 per Unit return of capital and capital gain from the disposition of the insured mortgage on Hidden Oaks Apartments and (ii) $0.01 per Unit of previously accrued but undistributed interest received from the insured mortgage on Creekside Village. (2) This includes a special distribution of $0.28 per Unit comprised of: (i) $0.21 per Unit return of capital from the disposition of the insured mortgages on Chapelgate Apartments and Cumberland Village and (ii) $0.07 per Unit capital gain from these dispositions plus additional sales proceeds from the sale of the insured mortgage on Clark and Elm Apartments. The basis for paying distributions to Unitholders is net proceeds from mortgage dispositions 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 payments received are temporarily invested prior to the payment of quarterly distributions, (2) the reduction in the asset base due to monthly mortgage payments received or mortgage dispositions, (3) variations in the cash flow attributable to the delinquency or default of Insured Mortgages and (4) changes in the Partnership's operating expenses. 9. 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, and the former general partners contributed a total of $1,000 to the Partnership. 34 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO FINANCIAL STATEMENTS 10. SUMMARY OF QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of unaudited quarterly results of operations for the years ended December 31, 1995, 1994 and 1993: (In Thousands, Except Per Unit Data) 1995 Quarter ended March 31 June 30 September 30 December 31 ---------- ---------- ------------ ----------- Income $ 927 $ 900 $ 895 $ 904 Net earnings 758 767 749 767 Net earnings per Limited Partnership Unit 0.07 0.08 0.07 0.08 1994 Quarter ended March 31 June 30 September 30 December 31 ---------- ---------- ------------ ----------- Income $ 996 $ 937 $ 901 $ 902 Gain (loss) on mortgage dispositions 236 -- -- (40) Net earnings 1,054 779 733 714 Net earnings per Limited Partnership Unit 0.10 0.08 0.07 0.07 1993 Quarter ended March 31 June 30 September 30 December 31 ---------- ---------- ------------ ----------- Income $ 1,129 $ 1,126 $ 1,124 $ 1,108 Gain on mortgage dispositions -- -- 108 654 Net earnings 920 934 1,052 1,622 Net earnings per Limited Partnership Unit 0.09 0.09 0.10 0.16 35 AMERICAN INSURED MORTGAGE INVESTORS SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1995 Interest Face Net Annual Payment Maturity Put Rate on Amount of Carrying Value (Principal and Development Name/Location Date Date(1) Mortgage(5) Mortgage (3)(7)(9)(10) Interest)(5)(8) - ------------------------- -------- ------- ------------ ------------ ----------------- --------------- Acquired Insured Mortgages - -------------------------- Investment in FHA-Insured Loans (carried at amortized cost)(2) Eastdale Apts. Montgomery, AL 3/23 10/01 7.5% $ 6,782,120 $ 5,145,750 $ 592,406 North River Place Chillecothe, OH 10/21 12/01 7.5% 3,183,271 2,419,139 279,509 Portervillage I Apts. Porterville, CA 8/21 5/01 7.5% 1,177,589(3) 959,745 103,733(4) Town Park Apts. Rockingham, NC 10/22 10/02 7.5% 654,020(3) 531,911 56,755(4) ------------ ------------ Total Investment in FHA-Insured Loans - Acquired Insured Mortgages 11,797,000 9,056,545 ------------ ------------ Originated Insured Mortgages - ---------------------------- Investment in FHA-Insured Loans (carried at amortized cost)(2) Creekside Village Beaverton, OR 11/25 1/01 11.50%(5) 5,135,424 5,318,588 612,632(6) Waters Edge Apts. Columbus, OH 1/31 5/03 8.75%(5) 9,641,129 9,214,478 885,419(6) ------------ ------------ Total Investment in FHA-Insured Loans - Originated Insured Mortgages 14,776,553 14,533,066 ------------ ------------ Total Investment in FHA-Insured Loans 26,573,553 23,589,611 ------------ ------------ See notes to Schedule IV - Mortgage Loans on Real Estate. 36 AMERICAN INSURED MORTGAGE INVESTORS SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE DECEMBER 31, 1995 Interest Face Net Annual Payment Maturity Put Rate on Amount of Carrying Value (Principal and Development Name/Location Date Date(1) Mortgage(5) Mortgage (3)(7)(9)(10) Interest)(5)(8) - ------------------------- -------- ------- ------------ ------------ ---------------- --------------- Acquired Insured Mortgages - -------------------------- Investment in FHA-Insured Certificates (carried at fair value) Bay Pointe Apts. Lafayette, IN 2/23 10/02 7.5% 2,125,397(4) 2,239,235 185,272(4) Baypoint Shoreline Apts. Duluth, MN 1/22 10/01 7.5% 1,005,004(4) 1,058,865 87,967(4) Berryhill Apts. Grass Valley, CA 1/21 11/02 7.5% 1,306,956(4) 1,377,129 115,899(4) Brougham Estates II Kansas City, KS 11/22 3/02 7.5% 2,664,150(4) 2,806,724 230,860(4) College Green Apts. Wilmington, NC 3/23 2/02 7.5% 1,430,136(4) 1,506,630 123,455(4) Fox Run Apts. Dothan, AL 10/19 11/99 7.5% 1,286,045(4) 1,355,287 116,242(4) Kaynorth Apts. Lansing, MI 4/23 9/02 7.5% 1,940,072(4) 2,043,827 167,318(4) Lakeside Apts. Bennettsville, SC 1/22 2/02 7.5% 403,328(4) 424,944 35,303(4) Westbrook Apts. Kokomo, IN 11/22 9/02 7.5% 1,862,311(4) 1,962,131 163,177(4) ------------ ------------ Total Investment in FHA-Insured Certificates 14,023,399 14,774,772 ------------ ------------ TOTAL INVESTMENT IN INSURED MORTGAGES $ 40,596,952 $ 38,364,383 ============ ============ See notes to Schedule IV - Mortgage Loans on Real Estate 37 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE (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. (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 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 (.10%) of the unpaid principal balance of the insured mortgages. (6) This represents the base interest rate during the permanent phase of these insured mortgage loans. Additional interest, (referred to as Participations) measured as a percentage of surplus cash and a percentage of the proceeds from sale or refinancing of the development (as defined in the Participation Agreements), will also be due. The Partnership received $39,465 and $13,010 from the Participations for the years ended December 31, 1995 and 1994, respectively. No payments were received for the year ended December 31, 1993 as a result of the Participations. (7) The mortgages underlying the Partnership's investment in FHA-Insured Certificates and FHA-Insured Loans are non-recourse first liens on multifamily residential developments. (8) Principal and interest are payable at level amounts over the life of the insured mortgages. (9) A reconciliation of the carrying value of Insured Mortgages, for the years ended December 31, 1995 and 1994, is as follows: 1995 1994 ------------ ------------ Beginning balance $ 37,063,300 $ 43,342,199 Gain on mortgage disposition -- 195,820 Disposition of Insured Mortgage -- (8,137,327) Principal receipts on Insured Mortgages (206,038) (186,145) 38 AMERICAN INSURED MORTGAGE INVESTORS NOTES TO SCHEDULE IV - MORTGAGE LOANS ON REAL ESTATE - Continued Urealized gains on investment in FHA- Insured Certificates 1,507,121 1,848,753 ------------ ------------ Ending balance $ 38,364,383 $ 37,063,300 ============ ============ (10) The tax basis of the Insured Mortgages was approximately $34.6 million and $34.9 million as of December 31, 1995 and 1994, respectively.