Form 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1995 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the transition period ____________________ to _____________________ Commission File Number 0-13130 United Mobile Homes, Inc. (Exact name of registrant as specified in its charter) New Jersey 22-1890929 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification number) 125 Wyckoff Road, Eatontown, New Jersey 07724 (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (908) 389-3890 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock $.10 par value 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 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 . Based upon the assumption that directors and executive officers of the registrant are not affiliates of the registrant, the aggregate market value of the voting stock of the registrant held by nonaffiliates of the registrant at March 14, 1996 was $70,207,572. Presuming that such directors and executive officers are affiliates of the registrant, the aggregate market value of the voting stock of the registrant held by nonaffiliates of the registrant at March 14, 1996 was $50,832,660. The number of shares outstanding of issuer's common stock as of March 14, 1996 was 5,850,631 shares. Documents Incorporated by Reference: - - Exhibits incorporated by reference are listed in Part IV, Item (a)(3). PART I ITEM I - BUSINESS General Development of Business United Mobile Homes, Inc. (the Company) owns and operates twenty-one mobile home parks containing 4,920 sites. The parks are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. In January 1996, the Company acquired an additional mobile home park, bringing its total to twenty- two mobile home parks consisting of over 5,000 sites. The Company was incorporated in the State of New Jersey in 1968. Its executive offices are located at 125 Wyckoff Road, Eatontown, New Jersey 07724. Its telephone number is (908) 389-3890. Effective January 1, 1992, the Company elected to be taxed as a real estate invest trust (REIT) under Sections 856-858 of the Internal Revenue Code. The Company received from the Internal Revenue Service a favorable revenue ruling that it qualified as a REIT. The Company will not be taxed on the portion of its income which is distributed to shareholders, provided it distributes at least 95% of its taxable income, has at least 75% of its assets in real estate investments and meets certain other requirements for qualification as a REIT. Background Monmouth Capital Corporation, a publicly-owned Small Business Investment Corporation, that had owned approximately 66% of the Company's stock, spun off to its shareholders in a registered distribution three shares of United Mobile Homes, Inc. for each share of Monmouth Capital Corporation. The Company in 1984 and 1985 issued additional shares through rights offerings. The Company has been in operation for twenty-seven years, the last eleven of which have been as a publicly-owned corporation. Narrative Description of Business The Company's primary business is the ownership and operation of mobile home parks - leasing mobile home spaces on a month-to-month basis to private mobile home owners. The Company also leases homes to tenants. A mobile home park community is designed to accommodate detached, single family manufactured housing units, which are produced off-site by manufacturers and delivered by truck to the site. Such dwellings, referred to as mobile homes (which should be distinguished from travel trailers), are manufactured in a variety of styles and sizes. Mobile homes, once located, are rarely transported to another site; typically, a mobile home remains on site and is sold by its owner to a subsequent occupant. This transaction is commonly handled through a broker in the same manner that the more traditional single-family residence is sold. Each owner of a mobile home leases the site on which the home is located from the Company. -2- Mobile homes are being accepted by the public as a viable and economically attractive alternative to common stick-built single-family housing. During the past five years, approximately one-fifth of all single- family homes built and sold in the nation have been manufactured homes. The size of a modern mobile home community is limited, as are other residential communities, by factors such as geography, topography, and funds available for development. Generally, modern mobile home park communities contain buildings for recreation, green areas, and other common area facilities, which, as distinguished from tenant owned mobile homes, are the property of the park owner. In addition to such general improvements, certain mobile home park communities include recreational improvements such as swimming pools, tennis courts and playgrounds. Municipal water and sewer services are available to some mobile home parks, while other parks supply these facilities on site. The housing provided by the mobile home park community, therefore, includes not only the manufactured dwelling unit (owned by the resident), but also the physical community framework and services provided by the mobile home park community. The park manager interviews prospective residents, ensures compliance with park regulations, maintains public areas and community facilities and is responsible for the overall appearance of the park. The mobile home park community, once fully occupied, tends to achieve a stable rate of occupancy. The cost of effort in moving a home once it is located in a park encourages the owner of the mobile home to resell his mobile home there rather than to remove it from the park. This ability to produce relatively predictable income, together with the location of the park, its condition and its appearance, are factors in the long-term appreciation of the park. The long-term industry trend may be toward condominium conversions. A change from investor park ownership to tenant ownership would enhance the value of existing manufactured home communities. All of the Company's parks are located in areas of the country that have not yet accepted this concept. Condominium conversion is a long-term possibility and has no impact on the Company's current operations. Investment and Other Policies of the Company The Company may invest in improved and unimproved real property and may develop unimproved real property. Such properties may be located throughout the United States. In the past, it has concentrated on the northeast. The Company has no restrictions on how it finances new mobile home parks. It may finance parks by purchase money mortgages or other financing, including first liens, wraparound mortgages or subordinated indebtedness. In connection with its ongoing activities, the Company may issue notes, mortgages or other senior securities. The Company intends to use both secured and unsecured lines of credit. The Company may issue securities for property, however, this has not occurred to date, and it may repurchase or reacquire its shares from time to time if in the opinion of the Board of Directors such acquisition is advantageous to the Company. -3- Property Maintenance and Improvement Policies It is the policy of the Company to properly maintain, modernize, expand, and make improvements to its properties when required. The Company anticipates that renovation expenditures with respect to its present properties over the next five years will be consistent with 1995 expenditures. It is the policy of the Company to maintain adequate insurance coverage on all of its properties; and, in the opinion of the Company, all of its properties are adequately insured where such insurance is available at a reasonable cost as determined by management. General Risks of Real Estate Ownership The Company's investments will be subject to the risks generally associated with the ownership of real property, including the uncertainty of cash flow to meet fixed obligations, adverse changes in national economic conditions, changes in the relative popularity (and thus the relative price) of the Company's real estate investments when compared to other investments, adverse local market conditions due to changes in general or local economic conditions or neighborhood values, changes in interest rates and in the availability of mortgage funds, costs and terms of mortgage funds, the financial conditions of tenants and sellers of properties, changes in real estate tax rates and other operating expenses (including corrections of potential environmental issues as well as more stringent governmental regulations regarding the environment), governmental rules and fiscal policies including possible proposals for rent controls, as well as expenses resulting from acts of God, uninsured losses and other factors which are beyond the control of the Company. The Company's investments are primarily in rental properties and are subject to the risk or inability to attract or retain tenants with a consequent decline in rental income as a result of adverse changes in local real estate markets or other factors. Competition for Mobile Home Park Investments The Company will be competing for mobile home park investments with numerous other real estate entities, such as individuals, corporations, real estate investment trusts and other enterprises engaged in real estate activities, possibly including certain affiliates of the Company. In many cases, the competing concerns may be larger and better financed than the Company, making it difficult for the Company to secure new mobile home park investments. Competition among private and institutional purchasers of mobile home park investments has increased substantially in recent years, with resulting increases in the purchase price paid for mobile home parks and consequent higher fixed costs. -4- Environmental, Regulatory and Energy Problems The availability of suitable investments and the cost of construction and operation of mobile home parks in which the Company may invest may be adversely affected by legislative, regulatory, administrative and enforcement action at the local, state and national levels in the areas, among others, of housing and environmental controls. In addition to possible increasingly restrictive zoning regulations and related land use controls, such restrictions may relate to air, ground and water quality standards, wetlands regulations, noise pollution and indirect environmental impacts such as increased motor vehicle activity. The Company owns and operates 10 mobile home park communities which either have their own waste water treatment facility, water distribution system, or both. At these locations, the Company is subject to compliance of monthly, quarterly and yearly testing for contaminants as outlined by the individual state's Department of Environmental Protection Agencies. The Company must also comply with certain Federal Environmental Protection Agency Regulations which may be more stringent than the state and local governmental regulations. The costs of such testing are included in the Company's operating expenses. As of the date of this report, there are no enforcement actions pending by any federal, state or local environmental agencies and management believes that the Company is in compliance with all such regulations. Currently, the Company is not subject to radon or asbestos monitoring requirements. Since most of the Company's mobile home parks are fully developed, the Company, in its normal course of business, does not incur costs related to local or state zoning issues. Zoning regulations often restrict expansion of the Company's parks, but allow continuing operation of existing parks. Rent control now affects only two of the Company's mobile home parks which are in New Jersey and has resulted in a slower growth of earnings from these properties. Number of Employees On March 1, 1996, the Company had approximately 70 employees, including Officers. During the year, the Company hires approximately 20 part-time and full-time temporary employees as lifeguards, grounds keepers and for emergency repairs. -5- ITEM 2 - PROPERTIES United Mobile Homes, Inc. is engaged in the ownership and operation of manufactured housing communities located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. The Company owns twenty-one manufactured housing communities. The following is a brief description of the properties owned by the Company: Number 1995 Current of Average Rent Per Name of Mobile Home Park Sites Occupancy Month Per Site Allentown Mobile Home Park 414 73% $189 4912 Raleigh-Millington Rd. Memphis, TN 38128 Brookview Village 133 95% $285 Route 9N Greenfield Center, NY 12833 Cedarcrest Mobile Home Park 283 100% $303 1976 North East Avenue Vineland, NJ 08360 Cranberry Village 201 98% $255 201 North Court Mars, PA 16046 Cross Keys Village 133 99% $207 Old Sixth Avenue Rd. RD #1 Duncansville, PA 16635 D & R Village 234 99% $307 Route 146, RD 13 Clifton Park, NY 12065 Edgewood Mobile Home Park 218 82% $175 700 Edgewood Estates Apollo, PA 15613 Fairview Manor 160 98% $315 2110 Mays Landing Rd. Millville, NJ 08360 Forest Park Village 252 96% $221 724 Slate Avenue Cranberry Twp., PA 16066 -6- Number 1995 Current of Average Rent Per Name of Mobile Home Park Sites Occupancy Month Per Site Heather Highlands 457 70% $219 Mobile Home Park 109 S. Main Street Pittston, PA 18640 Highland Estates 192 98% $286 60 Old Route 22 Kutztown, PA 19530 Kinnebrook Mobile Home Park 212 96% $302 Route 17-B Monticello, NY 12701 Lake Sherman Village 210 98% $213 7227 Beth Avenue, SW Navarre, OH 44662 Memphis Mobile City 168 83% $183 3894 N. Thomas Street Memphis, TN 38127 Oxford Village 224 99% $296 2 Dolinger Drive West Grove, PA 19390 Pine Ridge Village 137 99% $256 147 Amy Drive Carlisle, PA 17013 Port Royal Village 402 85% $198 400 Patterson Lane Belle Vernon, PA 15012 River Valley Estates 156 96% $167 2066 Victory Rd. Marion, OH 43302 Sandy Valley Estates 327 94% $191 801 First, Route #2 Magnolia, OH 44643 Southwind Village 250 98% $237 435 E. Veterans Highway Jackson, NJ 08527 Woodlawn Village 157 99% $372 Route 35 Eatontown, NJ 07724 -7- Occupancy rates are very stable with little year-to-year changes once the community is filled (generally 90% or greater occupancy). It is the Company's experience that, once a home is set up in the community, it is seldom moved. The home if sold, is sold on-site to a new owner. Residents generally rent on a month-to-month basis. Some residents have one-year leases. Southwind Village and Woodlawn Village (both in New Jersey) are the only parks subject to local rent control laws. There are 14 sites at Sandy Valley which are under a consent order with the Federal Government. This order provides that, as sites become vacant, they cannot be reused.The restrictions on use were known at the time of purchase, and the item is not material to the operation of Sandy Valley Estates. In connection with the operation of its 4,920 sites, the Company operates approximately 275 rental units. These are homes owned by the Company and rented to residents. The Company engages in the rental of mobile homes primarily in areas where the communities have existing vacancies. The rental homes produce income on both the home and for the site which might otherwise be non-income producing. The Company sells the older rental homes when the opportunity arises. During 1995, the Company commenced engineering for the construction of 800 sites. Due to the difficulties involved in the approval and construction process, it is difficult to predict the number of sites which will be completed in a given year. The Company currently has 61 sites under construction. Significant Properties The Company operates approximately $45,000,000 (at original cost) in mobile home properties. These consist of 21 separate mobile home parks and related equipment and improvements. There are 4,920 sites in the 21 parks. No one park constitutes more than 10% of the total assets of the Company. Port Royal Village with 402 sites, Sandy Valley Estates with 327 sites, Cedarcrest Mobile Home Park with 283 sites, Allentown Mobile Home Park with 414 sites and Heather Highlands with 457 sites are the larger properties. The following is a description of these properties: PORT ROYAL VILLAGE The Company acquired Port Royal Village in 1984. This is a 402-space mobile home park located in Belle Vernon, Pennsylvania. The Company believes this to be a sound acquisition for the following reasons: (a) the park is well-maintained with city water and its own sewer plant, as well as a swimming pool and community building; (b) the park has approximately 85% occupancy; and (c) the park generates substantial revenues and net operating income. Management believes that this park is a successful and valuable mobile home park. SANDY VALLEY ESTATES The Company acquired Sandy Valley Estates in 1985. This is a 327-space mobile home park located in Magnolia, Ohio. The Company believes this to be an excellent park because (a) the park is well-maintained with municipal sewer; (b) the park has its own well system; (c) the park has approximately 94% occupancy; and (d) the park generates revenues with an average monthly rental of $191 per site, which rents are competitive with the other mobile home parks in the area. The Company believes that it is an excellent investment. -8- CEDARCREST On July 15, 1986 the Company paid $760,000 to acquire 94.05% of the partnership interest in Cedarcrest Mobile Home Park Associates, Ltd., a limited partnership that owned a 283-space mobile home park located in Vineland, New Jersey. On June 30, 1988 the Company paid $40,000 to acquire an additional 4.95% of the partnership interest, bringing the Company's total ownership to 99% at November 30, 1988. During 1989 the Company acquired the remaining 1% interest. The Company believes this to be an excellent park for the following reasons: (a) the park is well-maintained, (b) the mobile home park has municipal sewer and water service; and (c) the park is 100% occupied. Rents average $303 per month per site and they are competitive with other parks in the area. ALLENTOWN MOBILE HOME PARK On September 15, 1986 the Company paid $850,000 to all of the limited partners to acquire 97% of the partnership interests in Allentown Mobile Home Park Associates, a limited partnership that owned a 414-space mobile home park located in Memphis, Tennessee. Royal Green, Inc., the General Partner of Allentown Mobile Home Park Associates, retained its 3% interest in the partnership until January, 1990 at which time the Company purchased the 3% interest for $25,500. The Company believes this to be a sound investment for the following reasons: (a) the property is well maintained; (b) the park has municipal sewer and water service; and (c) rents are competitive with other mobile home parks in the area. Current occupancy is approximately 73%. The Company has been disappointed that it has not brought occupancy to 90% or higher. Nevertheless, in the future, the Company anticipates that it will be able to increase occupancy. The park has the potential to be fully occupied in one of the nicest areas in Memphis. HEATHER HIGHLANDS On January 30, 1992, the Company acquired an 88.36% interest in Heather Highlands Mobile Home Village Associates, L.P., a limited partnership operating a 457-space mobile home park located in Pittston, Pennsylvania. The partnership has partners who are also officers, directors and/or shareholders of the Company. Mr. Eugene Landy, Chairman of the Board, retained the remaining 11.64% limited partnership interest. The purchase price included total payments to the original limited partners of $972,400, $35,000 to Burtenn Inc., General Partner and assumption of net liabilities of approximately $1,500,000 for a total purchase price of approximately $2,500,000. This purchase was based on an independent appraisal of fair market value. In January 1995, the Company purchased the remaining 11.64% partnership interest for $132,600. This price per unit was the same price previously paid to non-affiliated sellers. The Company anticipates that the park will ultimately have 415 sites since the use of double wide units reduce the total number of available sites. The Company believes this to be a sound investment for the following reasons: (a) the property is well maintained; (b) the park has municipal sewer and water service; and (c) rents are competitive with other mobile home parks in the area. -9- Mortgages on Properties The Company has mortgages on various properties. The maturity dates of these mortgages are all in the year 2000. Interest varies from fixed rates of 7.5% to 10.5%. The aggregate balances of these mortgages total $17,707,635 at December 31, 1995. (For additional information, see Part IV, Item 14(a)(1)(vi), Note 4 of the Notes to Consolidated Financial Statements - Notes and Mortgages Payable). ITEM 3 - LEGAL PROCEEDINGS Legal proceedings are incorporated herein by reference and filed as Part IV, Item 14(a)(1)(vi), Note 12 of the Notes to Consolidated Financial Statements - Legal Matters. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted during the fourth quarter of 1995 to a vote of security holders through the solicitation of proxies or otherwise. -10- PART II ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company became publicly owned on January 3, 1985. As of January 5, 1994, shares of the Company were traded on the American Stock Exchange (symbol UMH). The per share range of high and low quotes for the Company's stock for each quarterly period is as follows: 1995 1994 1993 HIGH LOW HIGH LOW HIGH LOW First Quarter 7-3/4 7-1/8 8-1/2 6-3/4 5-1/4 4-3/8 Second Quarter 8-7/16 7-1/2 8-1/4 7 6-5/8 5-1/4 Third Quarter 10-1/8 8-1/4 8 6-7/8 7-1/8 5-5/8 Fourth Quarter 10-1/2 9-5/8 7-1/2 7 8 6-3/4 On March 14, 1996 the closing price of the Company's stock was $12. As of December 31, 1995, there were approximately 900 holders of the Company's common stock based on the number of record owners. For the years ended December 31, 1995, 1994 and 1993, total dividends paid by the Company amounted to $2,954,847 or $.525 per share, $2,277,742 or $.425 per share and $1,648,643 or $.325 per share, respectively. On January 15, 1996, the Company declared a dividend of $.15 per share to be paid on March 15, 1996 to shareholders of record February 15, 1996. Future dividend policy will depend on the Company's earnings, capital requirements, financial condition, availability and cost of bank financing and other factors considered relevant by the Board of Directors. The Company elected REIT status beginning in 1992. As a REIT, the Company must pay out at least 95% of its taxable income in the form of a cash distribution to shareholders. -11- ITEM 6 - SELECTED FINANCIAL DATA December 31, 1995 1994 1993 1992 1991 Income Statement Data: Rental and Related Income $13,332,961 $12,318,467 $11,521,677 $10,895,680 $9,718,902 Income from Park Operations 7,449,168 6,864,080 6,407,937 6,069,885 5,669,172 Gains on Sales of Assets 5,758 59,941 17,022 57,259 77,591 Net Income 2,491,581 2,141,279 1,346,219 1,028,551 638,672 Net Income Per Share .44 .40 .26 .21 .14 ............................................................................... Balance Sheet Data: Total Assets 29,758,397 $25,404,015 $25,274,685 $26,024,656 $26,709,734 Mortgages Payable 17,707,635 15,637,325 17,936,230 20,072,037 20,151,405 Shareholders' Equity 10,290,487 7,721,783 6,229,453 4,612,025 3,593,630 ............................................................................... Average Number of Shares Outstanding 5,693,001 5,395,733 5,099,089 4,837,526 4,526,734 Funds from Operations * $ 4,610,319 $ 3,941,086 $3,263,788 $2,828,798 $2,277,178 Funds from Operations * Per share .81 .73 .63 .58 .50 Cash Dividends Per Share .525 .425 .325 .225 .20 * Defined as net income, excluding gains (or losses) from sales of assets, plus depreciation and amortization. -12- ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Revenue and Expense 1995 vs. 1994 Rental and related income increased from $12,318,467 for the year ended December 31, 1994 to $13,332,961 for the year ended December 31, 1995 primarily due to rental increases to tenants, increased occupancy and the acquisition of a new park in January 1995. During 1995, the Company was able to obtain rent increases of $7.00 to $16.00 per month on most of its occupied sites. Overall occupancy rates are satisfactory with only five mobile home parks experiencing vacancies over ten percent. Progress has been made to increase occupancy at these parks. The Company has purchased one park in 1995 and has negotiated for the purchase of a 161-space park, which closed in January 1996. The Company is also evaluating further expansion at selected parks in order to increase the number of available sites. Some of these parks are in various stages of expansion. Park operating expenses increased from $5,454,387 for the year ended December 31, 1994 to $5,883,793 for the year ended December 31, 1995 primarily as a result of the acquisition of an additional park. Park operating expenses remained at 44% of gross revenues. The Company's income from park operations continues to show steady growth rising from $6,864,080 in 1994 to $7,449,168 in 1995. General and administrative expenses decreased by 6% to $1,228,850 in 1995 primarily as a result of a decrease in personnel costs. Interest expense increased to $1,675,998 in 1995 from $1,519,527 in 1994. This was primarily as a result of an increase in the principal amount outstanding offset by a decrease in the interest rate. During 1995, the Company negotiated new long-term debt. Interest rates dropped from prime plus 1% to a fixed rate of 7.5%. Depreciation expense increased from $1,799,169 in 1994 to $1,872,942 in 1995 due to the addition of a new park. For the year ended December 31, 1995, the Company reported net income of $2,491,581 as compared to net income of $2,141,279 for the year ended December 31, 1994. The Company is currently experiencing modest inflation. Modest inflation is believed to have a favorable impact on the Company's financial performance. With modest inflation, the Company believes that it can increase rents sufficiently to match increases in operating expenses. High rates of inflation (more than 10%) could result in an inability to raise rents to meet rising costs and could create political problems such as the imposition of rent controls. The Company anticipates continuing profits in 1996. -13- 1994 vs. 1993 Rental and related income increased from $11,521,677 for the year ended December 31, 1993 to $12,318,467 for the year ended December 31, 1994 primarily due to rental increases to tenants. During 1994, the Company was able to obtain rent increases of $6.00 to $19.00 per month on most of its occupied sites. There were no significant trends or changes in overall occupancy during 1994. Overall occupancy rates are satisfactory with only four mobile home parks experiencing vacancies over ten percent. Park operating expenses increased from $5,113,740 for the year ended December 31, 1993 to $5,454,387 for the year ended December 31, 1994 primarily due to increased personnel and utility costs. Park operating expenses remained at 44% of gross revenues. The Company's income from park operations continue to show steady growth rising from $6,407,937 in 1993 to $6,864,080 in 1994. General and administrative expenses remained relatively stable during 1994. Interest expense decreased to $1,519,527 in 1994 from $1,757,710 in 1993. During 1994, the Company negotiated new long-term debt. Interest rates on a significant portion of the Company's debt dropped from prime plus 3% to prime plus 1%. The Company also reduced the principal amount outstanding. Depreciation expense remained relatively constant during 1994. For the year ended December 31, 1994, the Company reported net income of $2,141,279 as compared to $1,346,219 for the year ended December 31, 1993. Although interest rates have risen during 1994, the Company believes that these rates will remain relatively steady during 1995. The Company is currently experiencing modest inflation. Modest inflation is believed to have a favorable impact upon the Company's financial performance. With modest inflation, the Company believes that it can increase rents sufficiently to match increases in operating expenses. High rates of inflation (more than 10%) could result in an inability to raise rents to meet rising costs and could create political problems such as the imposition of rent controls. -14- Liquidity and Capital Resources As a real estate company, the Company uses funds for real estate acquisitions, real property improvements and amortization of debt incurred in connection with such acquisitions and improvements. The Company generates funds through cash flow from properties, mortgages on properties and increases in shareholder investments. The Company has liquidity available from a combination of short and long-term sources. The Company currently has mortgages payable totalling $17,707,635 secured by eight parks. The Company also has a $500,000 line of credit with United Jersey Bank, N.A. (UJB), all of which was available at December 31, 1995. The Company believes that its 21 mobile home parks have market values in excess of historical cost. Management believes that this provides significant additional borrowing capacity. Net cash provided by operating activities increased from $3,550,606 in 1993 to $4,343,548 in 1994 to $4,642,256 in 1995. Cash flow was primarily used for capital improvements, payment of dividends, and the purchase of an additional park in 1995. The Company meets maturing mortgage obligations by using a combination of cash flow and refinancing. The dividend payments were primarily made from cash flow from operations. In addition to normal operating expenses, the Company requires cash for additional investments in mobile home parks, capital improvements, purchase of mobile homes for rent, scheduled mortgage amortization and dividend distributions. As a REIT, the Company must distribute at least 95% of its taxable income. The Company estimates that it will purchase in 1996 approximately 50 mobile homes to be used as rentals for a total cost of $700,000. Management believes that these mobile homes will each generate approximately $300 per month in rental income in addition to lot rent. Capital improvements include amounts needed to meet environmental and regulatory requirements in connection with the mobile home parks that provide water or sewer service. Excluding expansions, the Company is budgeting approximately $1,000,000 in capital improvements for 1996. The Company has a Dividend Reinvestment and Stock Purchase Plan (Plan). Cash received from the Plan is a significant additional source of liquidity and capital resources. During 1995, the Company paid $2,954,847 in dividends. Amounts received under the Plan amounted to $3,031,970. The success of the Plan resulted in a substantial improvement in the Company's liquidity and capital resources in 1995. The Company has undeveloped land which it could develop over the next three years. During 1995, additional acreage was purchased in Vineland, New Jersey which will be used for expansion in the future. In addition, the Company plans to continue acquiring additional mobile home parks. On January 10, 1996, the Company completed the purchase of Wood Valley Mobile Home Park, a 161-space park located in Caledonia, Ohio. The total purchase price was $1,992,000. The Company believes that funds generated from operations, together with the financing and refinancing of its properties, will be adequate to meet its needs over the next several years. -15- ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements and supplementary data listed in Part IV, Item 14(a)(1) are incorporated herein by reference. The following is the Unaudited Selected Quarterly Financial Data: SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) THREE MONTHS ENDED 1995 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 Rental & Related Income $ 3,247,040 $ 3,304,765 $ 3,382,423 $ 3,398,733 Income from Park Operations 1,839,493 1,814,328 1,838,716 1,956,631 Net Income 589,940 558,878 629,741 713,022 Net Income per Share .11 .10 .11 .12 THREE MONTHS ENDED 1994 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 Rental & Related Income $ 3,001,056 $ 3,053,201 $ 3,109,779 $ 3,154,431 Income from Park Operations 1,658,699 1,684,324 1,745,954 1,775,103 Net Income 502,854 496,185 571,045 571,195 Net Income per Share .09 .09 .11 .11 THREE MONTHS ENDED 1993 MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 Rental & Related Income $ 2,834,857 $ 2,846,301 $ 2,900,283 $ 2,940,236 Income from Park Operations 1,598,102 1,613,918 1,581,309 1,614,608 Net Income 313,230 344,349 311,479 377,161 Net Income Per Share .06 .07 .06 .07 ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE MATTERS None. -16- PART III ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Name, Age & Principal Occupation Director Shares Owned Percent Office Held During Past Five Years Since Beneficially(1) of Stock Robert A. Anderson Vice President of The 1980 14,083 0.24% Age: 73 David Cronheim Company; Director past President of the Industrial Real Estate Brokers Association of New York and New Jersey. Ernest V. Bencivenga Financial Consultant; 1969 11,327 (2) 0.20% Age: 77 Treasurer and Director Secretary/Treasurer (1961 to present) and Secretary Director (1967 to present) of Monmouth Capital Corporation; Treasurer and Director (1968 to present) of Monmouth Real Estate Investment Corporation. Anna T. Chew Certified Public Accountant; 1994 4,276 (3) 0.07% Age: 37 Controller (1991 to present) of Vice President and Monmouth Real Estate Investment Chief Financial Corporation; Controller (1991 to Officer present) and Director (1994 to Director present) of Monmouth Capital Corporation; Senior Manager (1987 to 1991) of KPMG Peat Marwick LLP Charles P. Kaempffer Investor; Director (1970 1969 54,197 (4) 0.93% Age: 58 to present) of Monmouth Director Capital Corporation; Director (1975 to present) of Monmouth Real Estate Investment Corporation; and Director (1989 to present) of Colonial State Bank. -17- Name, Age & Principal Occupation Director Shares Owned Percent Office Held During Past Five Years Since Beneficially(1) of Stock Eugene W. Landy Attorney at Law for the 1969 830,124 (5) 14.19% Age: 62 firm of Landy & Landy; Chairman of the President and Director Board and (1961 to present) of Monmouth Director Capital Corporation; President and Director (1968 to present) of Monmouth Real Estate Investment Corporation. Samuel A. Landy Attorney at Law for the 1992 190,215 (6) 3.25% Age: 35 firm of Landy & Landy; President and Director (1990 to present) of Director Monmouth Real Estate Investment Corporation; Director (1994 to present) of Monmouth Capital Corporation. Richard A. Molke Vice President of Remsco 1986 300,236 (7) 5.13% Age: 69 Associates, Inc., Director a construction firm. Eugene Rothenberg Obstetrician and 1977 79,529 (8) 1.36% Age: 62 Gynecologist; President (1988 to Director 1989 of the Medical Staff of Monmouth Medical Center. Robert G. Sampson Investor; Director (1968 1969 130,589 (9) 2.23% Age: 68 to present) of Monmouth Real Director Estate Investment Corporation; Director (1963 to present) of Monmouth Capital Corporation,; Director (1972 to 1993) of United Jersey Bank; General Partner (1983 to present) of Sampco, Ltd., an investment group. TOTALS .................. 1,614,576 27.60% -18- 1.) Beneficial ownership, as defined herein, includes common stock as to which a person has or shares voting and/or investment power. 2.) Includes 8,382 shares held by Mr. Bencivenga's wife and 1,239 shares held in the United Mobile Homes, Inc. 401(k) Plan. 3.) Includes 2,818 shares held jointly with Ms. Chew's husband and 1,458 shares held in the United Mobile Homes, Inc. 401(k) Plan. 4.) Includes (a) 52,197 shares held as Trustee for Defined Benefit Pension Plan for which Mr. Kaempffer has power to vote and (b) 2,000 shares held by Mr. Kaempffer's wife. 5.) Includes (a) 49,391 shares held by Mr. Landy's wife, (b) 172,607 shares held by Landy Investments, Ltd. in which Mr. Landy has a beneficial interest, (c) 46,693 shares held in the Landy & Landy, Employee's Pension Plan, of which Mr. Landy is a Trustee with power to vote, and (d) 107,352 shares held in the Landy & Landy, Employees' Profit Sharing Plan, of which Mr. Landy is a Trustee with power to vote. Excludes 208,052 shares held by Mr. Landy's adult children in which he disclaims any beneficial interest. 6.) Includes (a) 22,590 shares held jointly with Mr. Samuel A. Landy's wife, (b) 12,835 in a custodial account for his sons, and (c) 3,195 shares held in the United Mobile Homes, Inc. 401(k) Plan. 7.) Includes 146,702 shares held by Mr. Richard Molke's wife. Excludes 3,333 shares held by Mr. Richard Molke's adult children in which he disclaims any beneficial interest. 8.) Includes (a) 55,354 shares held by Rothenberg Investment, Ltd. in which Dr. Rothenberg has a beneficial interest and (b) 20,173 shares held as Trustee for a Profit Sharing Plan of which Dr. Rothenberg has power to vote. 9.) Includes (a) 32,400 shares held by the Estate of Helen Haskell Sampson and (b) 48,492 shares held by Sampco, Ltd. in which he has a beneficial interest. -19- ITEM 11 - EXECUTIVE COMPENSATION Summary Compensation Table. The following Summary Compensation Table shows compensation paid by the Company for services rendered during 1995, 1994 and 1993 to the Chairman of the Board and President. There were no other executive officers whose aggregate cash compensation exceeded $100,000: Name and Annual Compensation Principal Position Options Year Salary Bonus All Other Eugene W. Landy 50,000 1995 $ - $ - $310,160 (1)(3) Chairman of the - 1994 $ - $ - $361,842 (1)(3) Board - 1993 $ - $ - $179,838 (1) Samuel A. Landy 25,000 1995 $150,000 $ 15,769 $ 16,674 (2) President 25,000 1994 $150,000 $ 7,769 $ 9,513 (2) 25,000 1993 $109,038 $ 10,300 $ 10,126 (2) (1) Represents base compensation of $150,000 in both 1995 and 1994, and $137,800 in 1993 as well as Directors' fees and legal fees. (2) Represents Directors' fees, fringe benefits and discretionary contributions by the Company to the Company's 401(k) Plan allocated to an account of the named executive officer. (3) Includes $130,000 for 1995 and $190,000 for 1994 accrual for pension and other benefits in accordance with Eugene W. Landy's employment contract. Stock Option Plan. The following table sets forth, for the executive officers named in the Summary Compensation Table, information regarding individual grants of stock options made during the year ended December 31, 1995: Potential Realized % of Total Price Value at Assumed Options Granted to Per Expiration Annual Rates for Name Granted Employees Share Date 5% 10% Eugene W. Landy 50,000 45% $8.25 1/05/00 $66,100 $91,450 Samuel A. Landy 25,000 22% $8.25 1/05/00 $33,050 $95,725 The following table sets forth for the executive officers named in the Summary Compensation Table, information regarding stock options outstanding at December 31, 1995: Value of Unexercised Number of Unexercised In-The-Money Shares Value Options at Year-End Options Name Exercised Realized Exercisable/Unexercisable at Year-End Eugene W. Landy -0- N/A -0- / 50,000 $ -0-/$75,000 Samuel A. Landy -0- N/A 75,000 / 25,000 $262,500/$37,500 -20- Compensation of Directors. The Directors receive a fee of $300 for each Board meeting attended. Effective January 1, 1996, this fee was increased to $1,000 for each Board meeting attended. Directors also receive a fixed annual fee of $7,600, payable $1,900 quarterly. Directors appointed to house committees receive $150 for each meeting attended. Those specific committees are Compensation Committee, Audit Committee and Stock Option Committee. Employment Contracts. On December 14, 1993, the Company and Eugene W. Landy entered into an Employment Agreement under which Mr. Eugene Landy receives an annual base compensation of $150,000 plus bonuses and customary fringe benefits, including health insurance, participation in the Company's 401(k) Plan, stock options, five weeks vacation and use of an automobile. In lieu of annual increases in compensation, there will be additional bonuses voted by the Board of Directors. On severance of employment for any reason, Mr. Eugene Landy will receive severance pay of $450,000 payable $150,000 on severance and $150,000 on the first and second anniversaries of severance. If employment is terminated following a change in control of the Company, Mr. Eugene Landy will be entitled to severance pay only if actually severed either at the time of merger or subsequently. In the event of disability, Mr. Eugene Landy's compensation shall continue for a period of three years, payable monthly. On retirement, Mr. Eugene Landy shall receive a pension of $50,000 a year for ten years, payable in monthly installments. In the event of death, Mr. Eugene Landy's designated beneficiary shall receive $450,000, $100,000 thirty days after death and the balance one year after death. The Employment Agreement terminates December 31, 1998. Thereafter, the term of the Employment Agreement shall be automatically renewed and extended for successive one-year periods. Effective January 1, 1996, the Company and Samuel A. Landy entered into a three-year Employment Agreement under which Mr. Samuel Landy receives an annual base salary of $165,000 for 1996, $181,500 for 1997 and $199,650 for 1998 plus bonuses and customary fringe benefits. Bonuses shall be at the discretion of the Board of Directors and shall be based on certain guidelines. Mr. Samuel Landy will also receive four weeks vacation, use of an automobile, and stock options for 25,000 shares in each year of the contract. The Company agrees to loan to Mr. Samuel Landy $100,000 at the Company's corporate borrowing rate with a 5-year maturity and a 15-year principal amortization. Additional amounts, secured by Company stock, may be borrowed at the same terms for the exercise of stock options. On severance and disability, Mr. Samuel Landy is entitled to one year's pay. -21- Report of Board of Directors. Overview and Philosophy The Company has a Compensation Committee consisting of three independent outside Directors. This Committee is responsible for making recommendations to the Board of Directors concerning executive compensation. The Compensation Committee takes into consideration three major factors in setting compensation. The first consideration is the overall performance of the Company. The Board believes that the financial interests of the executive officers should be aligned with the success of the Company and the financial interests of its shareholders. Increases in funds from operations, the enhancement of the Company's equity portfolio, and the success of the Dividend Reinvestment and Stock Purchase Plan all contribute to increases in stock prices thereby maximizing shareholders' return. The second consideration is the individual achievements made by each officer. The Company is a small real estate investment trust (REIT). The Board of Directors is aware of the contributions made by each officer and makes an evaluation of individual performance based on their own familiarity with the officer. The final criteria in setting compensation is comparable wages in the industry. In this regard, the REIT industry maintains excellent statistics. Evaluation The Company had an excellent year. The stock price rose from 7-3/8 at December 31, 1994 to 9-3/4 at December 31, 1995. The Committee reviewed the progress made by Mr. Eugene W. Landy, Chairman of the Board, in reducing the Company's costs of funds. Mr. Eugene Landy was successful in bringing the Company's long-term debt from a variable rate of prime plus 1% to a fixed rate of 7.5%. Mr. Eugene Landy is under an employment agreement with the Company. His base compensation under this contract is $150,000 per year. (The Summary Compensation Table shows an annual compensation to Mr. Eugene Landy of $150,000 plus $30,160 in director's and other legal fees plus $130,000 accrual for pension and other benefits for a total of $310,160 in 1995.) The Committee has decided to grant Mr. Eugene Landy a bonus of $15,000. The Committee also reviewed the progress made by Mr. Samuel A. Landy, President. Net income and funds from operations increased by approximately 16% and 17%, respectively. The Committee also noted that Mr. Samuel Landy's current compensation was less than the average salary received by Presidents of other REIT's. Therefore, the Committee decided to increase Mr. Samuel A. Landy's base compensation from $150,000 to $165,000 effective January 1, 1996 and to provide him with a five-year contract with scheduled increases in base compensation. Mr. Samuel Landy will also be granted stock options for 25,000 shares in each year of the five-year contract as well as other fringe benefits. The Committee believes that an employment agreement with Mr. Samuel Landy is in the best interest of the Company and its shareholders to retain and to ensure continuity and stability of management. -22- Other Information. The Company had mortgages payable to Royal Green, Ltd., a partnership in which Mr. Eugene W. Landy has a significant ownership interest. These mortgages were repaid during 1994. Interest expense on these mortgages amounted to $30,717 and $99,006 in 1994 and 1993, respectively. COMPARATIVE STOCK PERFORMANCE. The line graph compares the total return of the Company's common stock for the last five years to the NAREIT All REIT Total Return Index published by the National Association of Real Estate Investment Trusts (NAREIT) and to the S&P 500 Index for the same period. The total return reflects stock price appreciation and dividend reinvestment for all three comparative indices. The information herein has been obtained from sources believed to be reliable, but neither its accuracy nor its completeness is guaranteed. 1990 1991 1992 1993 1994 1995 United Mobile Homes, Inc. 100 142 222 360 393 551 S & P 500 100 131 141 155 157 215 NAREIT 100 136 152 180 182 215 -23- ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT On December 31, 1994, no person owned of record, or was known by the Company to own beneficially more than five percent (5%) of the shares of the Company, except the following: Percent Name and Address Shares Owned of Title of Class of Beneficial Owner Beneficially Class Common Stock Beechmont Co., as Agent 394,400 6.74% 122 East 42nd St. New York, NY 10168 Common Stock Richard H. Molke 300,236 5.13% 8 Ivins Place Rumson, NJ 07760 Common Stock Eugene W. Landy 830,124 14.19% 20 Tuxedo Road Rumson, NJ 07760 ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS Certain relationships and related party transactions are incorporated herein by reference to Part IV, Item 14(a)(1)(vi), Note 7 of the Notes to Consolidated Financial Statements - Related Party Transactions. -24- PART IV ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K (a) (1) The following Financial Statements are filed as part of this report. Page(s) (i) Independent Auditors' Report 27 (ii) Consolidated Balance Sheets as of December 31, 1995 28 and 1994 (iii) Consolidated Statements of Income for the years 29 ended December 31, 1995, 1994 and 1993 (iv) Consolidated Statements of Shareholders' Equity for 30 the years ended December 31, 1995, 1994 and 1993 (v) Consolidated Statements of Cash Flows for the years 31 ended December 31, 1995, 1994 and 1993 (vi) Notes to Consolidated Financial Statements 32-42 (a) (2) The following Financial Statement Schedule for the years ended December 31, 1995, 1994 and 1993 is filed as part of this report. (i) Schedule III - Real Estate and Accumulated 43 Depreciation All other schedules are omitted for the reason that they are not required, are not applicable, or the required information is set forth in the financial statements or notes thereto. -25- PART IV (a) (3) The Exhibits set forth in the following index of Exhibits are filed as a part of this Report. Exhibit No. Description (3) Articles of Incorporation and By-Laws: Articles of Incorporation and By-Laws, Certificate of Incorporation and Amendments thereto are incorporated by reference to the Company's Registration Statement No. 2-92896-NY, and Amendments thereto, filed with the SEC on August 22, 1984. (10) Material Contracts: (a) Stock Option Plan is incorporated by reference to the Company's Proxy Statement dated April 25, 1994 filed with the SEC April 27, 1994. (b) 401(k) Plan Document and Adoption Agreement effective April 1, 1992 is incorporated by reference to that filed with the Company's 1992 Form 10- K filed with the SEC on March 9, 1993. (c) Employment contract with Mr. Eugene W. Landy dated December 14, 1993 is incorporated by reference to that filed with the Company's 1993 Form 10- K filed with the SEC on March 28, 1994. (d) Employment contract with Mr. Ernest V. Bencivenga dated November 9, 1993 is incorporated by reference to that filed with the Company's 1993 Form 10- K filed with the SEC on March 28, 1994. (e) Employment contract with Mr. Samuel A. Landy effective January 1, 1996. (22) Subsidiaries of the Registrant: The Company operates through wholly- owned, multiple subsidiaries carrying on the same line of business. The parent company is the Registrant. The line of business is the operation of mobile home parks. The Company operates through subsidiaries. A full and complete list of operating subsidiaries, listed by trade name is incorporated by reference to the Company's Registration Statement No. 33-1396-NY, and Amendments thereto, filed with the SEC on November 6, 1985. (a)(3)(b) Reports of Form 8-K None. -26- INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders United Mobile Homes, Inc.: We have audited the consolidated financial statements of United Mobile Homes, Inc. as listed in the accompanying index. In connection with our audits of the consolidated financial statements, we also have audited the financial statement schedule as listed in the accompanying index. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Mobile Homes, Inc. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 1995 in conformity with generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Short Hills, New Jersey March 6, 1996 S/KPMG Peat Marwick LLP KPMG Peat Marwick LLP -27- UNITED MOBILE HOMES, INC. CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1995 AND 1994 1995 1994 - ASSETS - INVESTMENT PROPERTY & EQUIPMENT Land $ 5,194,402 $ 4,494,382 Site and Land Improvements 32,456,359 29,777,592 Buildings and Improvements 1,755,407 1,728,447 Rental Homes and Accessories 3,912,918 3,523,332 ___________ ___________ Total Investment Property 43,319,086 39,523,753 Equipment and Vehicles 1,853,398 1,669,585 ___________ ___________ Total Investment Property and Equipment 45,172,484 41,193,338 Accumulated Depreciation (19,145,830) (17,643,762) ___________ ___________ Net Investment Property & Equipment 26,026,654 23,549,576 ___________ ___________ OTHER ASSETS Cash and Cash Equivalents 2,043,282 357,547 Notes and Other Receivables 547,779 418,304 Unamortized Financing Costs 199,103 235,663 Prepaid Expenses 272,704 286,148 Land Development Costs 668,875 556,777 ___________ ___________ Total Other Assets 3,731,743 1,854,439 ___________ ___________ TOTAL ASSETS $ 29,758,397 $ 25,404,015 =========== =========== -LIABILITIES & SHAREHOLDERS' EQUITY- LIABILITIES: MORTGAGES PAYABLE $ 17,707,635 $ 15,637,325 ___________ ___________ OTHER LIABILITIES Accounts Payable 197,357 151,548 Loans Payable -0- 500,000 Accrued Liabilities and Deposits 1,243,686 966,731 Tenant Security Deposits 319,232 294,028 ___________ ___________ Total Other Liabilities 1,760,275 1,912,307 ___________ ___________ MINORITY INTEREST -0- 132,600 ___________ ___________ Total Liabilities 19,467,910 17,682,232 ___________ ___________ SHAREHOLDERS' EQUITY: Common Stock - $.10 par value per share, 10,000,000 shares authorized, 5,850,631 and 5,496,163 issued and outstanding as of December 31, 1995 and 1994, respectively 585,063 549,616 Additional Paid-In Capital 10,373,217 7,839,960 Accumulated Deficit (667,793) (667,793) ___________ ___________ Total Shareholders' Equity 10,290,487 7,721,783 ___________ ___________ TOTAL LIABILITIES & SHAREHOLDERS' EQUITY $ 29,758,397 $ 25,404,015 =========== =========== See Accompanying Notes to Consolidated Financial Statements -28- UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF INCOME FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 Rental and Related Income $ 13,332,961 $ 12,318,467 $ 11,521,677 Park Operating Expenses 5,883,793 5,454,387 5,113,740 __________ __________ __________ Income from Park Operations 7,449,168 6,864,080 6,407,937 Other Expenses (Income): General and Administrative 1,228,850 1,308,724 1,259,572 Interest Expense 1,675,998 1,519,527 1,757,710 Interest Income ( 65,999) ( 25,474) ( 12,395) Depreciation Expense 1,872,942 1,799,169 1,816,662 Other Expenses 251,554 180,796 257,191 __________ __________ __________ Income Before Gains on Sales of Assets 2,485,823 2,081,338 1,329,197 Gains on Sales of Assets 5,758 59,941 17,022 __________ __________ __________ Net Income $ 2,491,581 $ 2,141,279 $ 1,346,219 ========== ========== ========== Net Income Per Share $ .44 $ .40 $ .26 ========== ========== ========== Weighted Average Shares Outstanding 5,693,001 5,395,733 5,099,089 ========== ========== ========== See Accompanying Notes to Consolidated Financial Statements -29- UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 Additional Common Stock Paid-In Accumulated Treasury Number Amount Capital Deficit Stock(1) Balance 12/31/92 4,965,024 $496,502 $4,868,641 $(667,793) $(85,325) Common Stock Issued with the Dividend Reinvestment and Stock Purchase Plan 282,572 28,258 1,737,019 -0- 85,325 Common Stock Issued through the Exercise of Stock Options 28,000 2,800 66,450 -0- -0- Distributions -0- -0- ( 302,424) (1,346,219) -0- Net Income -0- -0- -0- 1,346,219 -0- _________ _______ _________ _________ ______ Balance 12/31/93 5,275,596 527,560 6,369,686 ( 667,793) -0- Common Stock Issued with the Dividend Reinvestment and Stock Purchase Plan 220,567 22,056 1,606,737 -0- -0- Distributions -0- -0- ( 136,463) (2,141,279) -0- Net Income -0- -0- -0- 2,141,279 -0- _________ _______ _________ __________ ______ Balance 12/31/94 5,496,163 549,616 7,839,960 ( 667,793) -0- Common Stock Issued with the Dividend Reinvestment and Stock Purchase Plan 354,468 35,447 2,996,523 -0- -0- Distributions -0- -0- ( 463,266) (2,491,581) -0- Net Income -0- -0- -0- 2,491,581 -0- _________ _______ __________ _________ ______ Balance 12/31/95 5,850,631 $585,063 $10,373,217 $( 667,793) $ -0- ========= ======= ========== ========= ====== (1) Represented 17,065 shares of common stock. These shares were reissued during 1993. See Accompanying Notes to Consolidated Financial Statements -30- UNITED MOBILE HOMES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 1995 1994 1993 CASH FLOWS FROM OPERATING ACTIVITIES: Net Income $ 2,491,581 $ 2,141,279 $ 1,346,219 Depreciation & Amortization 2,124,496 1,859,748 1,934,591 Minority Interest -0- 12,217 ( 739) Gains on Sales of Assets ( 5,758) ( 59,941) ( 17,022) Changes in Operating Assets and Liabilities - Notes and Other Receivables ( 129,475) ( 29,320) 36,129 Prepaid Expenses 13,444 ( 4,123) 133,273 Accounts Payable 45,809 2,884 78,159 Accrued Liabilities & Deposits 76,955 411,841 61,116 Tenant Security Deposits 25,204 8,963 ( 21,120) __________ _________ _________ Net Cash Provided by Operating Activities 4,642,256 4,343,548 3,550,606 __________ _________ _________ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Edgewood Mobile Home Park ( 1,810,906) -0- -0- Acquisition of Minority Interest ( 132,600) -0- -0- Purchase of Investment Property and Equipment ( 1,778,402) (1,556,297) ( 892,522) Proceeds from Sales of Assets 288,494 305,018 127,543 Additions to Land Development Costs ( 955,546) ( 556,763) ( 275,417) __________ _________ __________ Net Cash Used by Investing Activities ( 4,388,960) (1,808,042) (1,040,396) __________ _________ __________ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from Mortgages and Loans 18,700,000 5,400,000 6,800,000 Net Proceeds from (Repayments of) Short-Term Borrowings ( 500,000) 500,000 -0- Principal Payments of Mortgages and Loans (16,629,690) (7,698,905) (9,284,815) Financing Costs on Debt ( 214,994) ( 94,577) ( 120,702) Proceeds from Dividend Reinvestment and Stock Purchase Plan 1,729,159 1,088,034 1,850,602 Proceeds from Exercise of Stock Options -0- -0- 69,250 Dividends Paid ( 1,652,036) (1,736,983) (1,648,643) __________ _________ __________ Net Cash Provided (Used) by Financing Activities 1,432,439 (2,542,431) (2,334,308) __________ _________ __________ NET INCREASE (DECREASE) IN CASH 1,685,735 ( 6,925) 175,902 CASH & CASH EQUIVALENTS - BEGINNING 357,547 364,472 188,570 __________ _________ _________ CASH & CASH EQUIVALENTS - ENDING $ 2,043,282 $ 357,547 $ 364,472 ========== ========= ========= See Accompanying Notes to Consolidated Financial Statements -31- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1 - ELECTION TO BE TAXED AS A REAL ESTATE INVESTMENT TRUST Effective January 1, 1992, United Mobile Homes, Inc. (the Company) elected to be taxed as a Real Estate Investment Trust (REIT) under Sections 856-858 of the Internal Revenue Code. The Company will not be taxed on the portion of its income which is distributed to shareholders, provided it distributes at least 95% of its taxable income, has at least 75% of its assets in real estate investments and meets certain other requirements for qualification as a REIT. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES DESCRIPTION OF THE BUSINESS - The Company owns and operates twenty-one mobile home parks containing 4,920 sites. The parks are located in New Jersey, New York, Ohio, Pennsylvania and Tennessee. These mobile home parks are listed by trade names as follows: MOBILE HOME PARK LOCATION Allentown Mobile Home Park Memphis, Tennessee Brookview Village Greenfield Center, New York Cedarcrest Mobile Home Park Vineland, New Jersey Cranberry Village Mars, Pennsylvania Cross Keys Village Duncansville, Pennsylvania D & R Village Clifton Park, New York Edgewood Mobile Home Park Apollo, Pennsylvania Fairview Manor Millville, New Jersey Forest Park Village Cranberry Township, Pennsylvania Heather Highlands Mobile Home Park Inkerman, Pennsylvania Highland Estates Kutztown, Pennsylvania Kinnebrook Mobile Home Park Monticello, New York Lake Sherman Village Navarre, Ohio Memphis Mobile City Memphis, Tennessee Oxford Village West Grove, Pennsylvania Pine Ridge Village Carlisle, Pennsylvania Port Royal Village Belle Vernon, Pennsylvania River Valley Estates Marion, Ohio Sandy Valley Estates Magnolia, Ohio Southwind Village Jackson, New Jersey Woodlawn Village Eatontown, New Jersey BASIS OF PRESENTATION - The consolidated financial statements of the Company include all of its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. In preparing the consolidated financial statements, management is required to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, as well as contingent assets and liabilities as of the dates of the consolidated balance sheets and revenue and expenses for the years then ended. Actual results could differ significantly from these estimates and assumptions. -32- NOTE 2 - Continued INVESTMENT, PROPERTY AND EQUIPMENT AND DEPRECIATION - Property and equipment are carried at cost. Depreciation for Sites and Building (15 to 27.5 years) is computed principally on the straight-line method over the estimated useful lives of the assets. Depreciation of Improvements to Sites and Buildings, Rental Homes and Equipment and Vehicles (3 to 27.5 years) is computed principally on the straight-line method. Land Development Costs are not depreciated until they are put in use, at which time they are capitalized as Sites or Site Improvements. Maintenance and repairs are charged to income as incurred and improvements are capitalized. The costs and related accumulated depreciation of property sold or otherwise disposed of are removed from the accounts and any gain or loss is reflected in the current year's results of operations. UNAMORTIZED FINANCING COSTS - Legal fees and loan processing fees for new and restructured mortgages are being amortized over the life of the related debt. Amortization expenses charged to Other Expenses for the years ended December 31, 1995, 1994 and 1993 were $251,554, $60,579 and $117,929, respectively. CASH AND CASH EQUIVALENTS - Cash and cash equivalents include certificates of deposit and bank repurchase agreements with maturities of 90 days or less. MINORITY INVESTMENTS - The Company consolidates the results of certain operations that have minority interests. On January 30, 1992, the Company acquired an 88.36% interest in a limited partnership. On February 3, 1995, the Company acquired the remaining 11.64% interest in this limited partnership. REVENUE RECOGNITION - The Company derives its income from the rental of mobile home sites. The Company also owns approximately 275 rental units which are rented to tenants. Revenue is recognized on the accrual basis. EARNINGS PER SHARE - Net income per share is computed using the weighted average number of shares outstanding, adjusted for the exercise, or potential exercise, of any dilutive outstanding stock options (See Note 5). RECENT ACCOUNTING PRONOUNCEMENTS - In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" (SFAS 121), which is effective for financial statements issued for fiscal years beginning after December 15, 1995. The implementation of SFAS 121 is not expected to have a material impact on the financial position or results of operations of the Company. RECLASSIFICATIONS - Certain amounts in the consolidated financial statements for the prior years have been reclassified to conform to the statement presentation for the current year. -33- NOTE 3 - INVESTMENT PROPERTY AND EQUIPMENT On January 26, 1995, the Company acquired Edgewood Mobile Home Park a 218-space mobile home park located in Apollo, Pennsylvania. This mobile home park was purchased from a partnership whose partners are also Officers, Directors and shareholders of the Company. The purchase price, including closing costs, totalled $1,810,906. An additional $200,000 plus interest at 8% is to be paid if the park generates, within a three year time limit, $195,000 per year or more in operating income. This purchase was based on an independent appraisal of fair market value. On February 3, 1995, the Company purchased the remaining 11.64% interest in Heather Highlands Mobile Home Village Associates, L.P. from Mr. Eugene W. Landy for $132,600. This price per unit was the same price previously paid to non-affiliated sellers, which was based on an independent appraisal of fair market value. On September 15, 1995, the Company purchased approximately ten acres of vacant land adjacent to one of its parks in Vineland, New Jersey for a purchase price of $32,500. On October 10, 1995, the Company entered into an agreement to sell 5.5 acres of vacant land for a sales price of $385,000. This sale is schedule to close in 1996. The following is a summary of accumulated depreciation by major classes of assets: December 31, 1995 December 31, 1994 Site & Land Improvements $ 16,061,667 $ 14,666,938 Buildings & Improvements 942,710 861,781 Rental Homes & Accessories 1,015,358 1,018,551 Equipment & Vehicles 1,126,095 1,096,492 __________ __________ Total Accumulated Depreciation $ 19,145,830 $ 17,643,762 ========== ========== -34- NOTE 4 - NOTES AND MORTGAGES PAYABLE The following is a summary of mortgages payable at December 31, 1995 and 1994: Interest Mortgages Due Date Rate 1995 1994 Allentown 10-01-98 7.55% $ -0- $ 424,800 D&R Village 09-01-00 9.75% 1,837,606 1,852,885 Fairview Manor 09-30-97 P + 2% -0- 665,601 Lake Sherman 03-01-98 P + 2% -0- 887,039 Oxford 03-01-99 P + 1% -0- 2,875,000 Pine Ridge 01-15-98 P + 2% -0- 749,581 Port Royal 03-01-99 P + 1% -0- 2,300,000 Sandy Valley 05-01-00 10.50% 893,993 910,388 Southwind 02-01-96 P + 1% -0- 902,506 Woodlawn 02-01-96 P + 1% -0- 319,525 Various 12-01-00 7.5% 14,976,036 -0- Various 09-21-98 P + 1% -0- 3,750,000 __________ __________ TOTAL NOTES AND MORTGAGES $17,707,635 $15,637,325 ========== ========== At December 31, 1995 and 1994, mortgages are collateralized by real property with a carrying value of $16,545,594 and $20,399,843, respectively, before accumulated depreciation and amortization. REVOLVING LINE OF CREDIT On March 4, 1994, the Company received a $10,000,000 revolving line of credit from United Jersey Bank N.A. (UJB). This line of credit expired on July 7, 1995. UNSECURED LINE OF CREDIT The Company has available a $500,000 unsecured line of credit with UJB, all of which was available at December 31, 1995. The interest rate on this line of credit is prime plus 1%. This line of credit expires on December 20, 1996 but may be extended by UJB for additional one year periods. RECENT FINANCING On March 4, 1994, the Company utilized $5,400,000 ($3,000,000 on Oxford Village and $2,400,000 on Port Royal Village) of the UJB revolving line of credit. Interest was at a rate of prime plus 1%. Proceeds from these advances were primarily used to retire existing debt. This borrowing was subsequently repaid. On January 26, 1995, the Company utilized $3,700,000 ($2,000,000 on Woodlawn Village and $1,700,000 on Southwind Village) of the UJB revolving line of credit. Proceeds from these advances were primarily used to retire existing debt and to purchase Edgewood Mobile Home Park. This borrowing was subsequently repaid. -35- On May 1, 1995, the mortgagee extended the Sandy Valley mortgage. The new maturity date is May 1, 2000. On November 29, 1995, the Company entered into a $15,000,000 mortgage payable to UJB secured by Woodlawn Village, Southwind Village, Cedarcrest Mobile Home Park, Fairview Manor Mobile Home Park, Oxford Village and Port Royal Village. The interest rate on this mortgage loan is fixed at 7.5%. This mortgage loan is due on December 1, 2000 but may be extended by the Company for an additional five years. Proceeds of this mortgage were primarily used to retire existing debt. The aggregate principal payments of all mortgages payable are scheduled as follows: 1996 - $ 356,418 1997 - 385,417 1998 - 416,775 1999 - 450,708 2000 - 484,438 Thereafter - 15,613,879 __________ Total - $ 17,707,635 ========== NOTE 5 - EMPLOYEE STOCK OPTIONS Effective January 1, 1984, the shareholders approved a Stock Option Plan for officers and key employees. This plan expired during 1994. As of December 31, 1995 and 1994, 98,000 shares of stock options previously granted remained outstanding under this plan. On May 26, 1994, the shareholders approved and ratified the Company's 1994 Stock Option Plan authorizing the grant to officers and key employees of options to purchase up to 750,000 shares of common stock. Options may be granted any time up to December 31, 2003. No option shall be available for exercise beyond ten years. All options are exercisable after one year from the date of grant. The option price shall not be below the fair market value at date of grant. Cancelled or expired options are added back to the "pool" of shares available under the plan. As of December 31, 1995, there were 160,000 shares exercisable and 576,000 shares available under these plans. The following is a summary of stock options outstanding as of December 31, 1995: Date of Number of Number of Option Expiration Grant Employees Shares Price Date 09/02/92 5 44,000 $ 4.625 09/27/97 02/16/93 1 25,000 5.00 02/16/98 07/27/93 7 14,000 5.625 07/27/98 09/27/93 2 15,000 6.50 09/27/98 05/31/94 1 25,000 9.125 05/31/99 10/18/94 9 37,000 7.125 10/18/99 01/05/95 2 75,000 8.25 01/05/2000 08/03/95 7 22,000 8.375 08/03/2000 08/17/95 2 15,000 8.375 08/17/2000 _______ 272,000 ======= -36- In October, 1995 the Financial Accounting Standards Board issued SFAS No. 123, "Accounting for Stock-Based Compensation". This Statement establishes financial accounting and reporting standards for stock-based employee compensation plans. SFAS No. 123 provides for a "fair value based method" of accounting for employees stock compensation plans. However, SFAS No. 123 allows an entity to continue following APB Opinion No. 25 and thereby measuring compensation cost under such plans using the "intrinsic value based method" provided certain pro-forma footnote disclosure be made as if the fair value based method was adopted. On January 1, 1996, the Company elected to continue following APB Opinion No. 25. The adoption of SFAS No. 123 will not have a material impact on the results of operations or financial position of the Company. NOTE 6 - 401(K) PLAN Effective April 1, 1992, the Company instituted a 401(k) Plan (Plan). All full-time employees who are over 21 years old and have completed one year of service (as defined) are eligible for the Plan. Under this Plan, an employee may elect to defer his/her compensation (up to a maximum of 18%) and have it contributed to the Plan. Employer contributions to the Plan are at the discretion of the Company. During 1995, 1994 and 1993, the Company made matching contributions to the Plan of up to 50% of the first 6% of employee salary. This amounted to $34,056, $27,543 and $23,803 for 1995, 1994 and 1993, respectively. NOTE 7 - RELATED PARTY TRANSACTIONS AND OTHER MATTERS TRANSACTIONS WITH AFFILIATED PARTNERSHIPS The Company had mortgages payable to Royal Green, Ltd., a partnership in which Mr. Eugene W. Landy has a significant ownership interest. These mortgages were repaid during 1994. Interest expense on these mortgages amounted to $30,717 and $99,006 in 1994 and 1993, respectively. In addition, Royal Green Ltd. owns 30 homes located in Allentown Mobile Home Park in Memphis, Tennessee. The Company charges Royal Green, Ltd. market rent on each occupied unit. Burtenn, Inc., a corporation in which Mr. Eugene W. Landy is the sole shareholder, was the general partner of Heather Highlands. During 1993, the Company paid $120,000 in partnership fees to Burtenn, Inc. No partnership fees were paid during 1995 and 1994. During 1995, the Company acquired the remaining 11.64% interest in Heather Highlands Mobile Home Village Associates, L.P. from Mr. Eugene W. Landy (See Note 3). MORTGAGE FUNDING LINE WITH MONMOUTH REAL ESTATE INVESTMENT CORPORATION The Company had a $10,000,000 mortgage funding line with MREIC. This line expired during 1994. There are five Directors of the Company who are also Directors and shareholders of MREIC. Interest expense on these mortgages amounted to $45,719 and $672,403 in 1994 and 1993, respectively. -37- TRANSACTIONS WITH THE MOBILE HOME STORE, INC. The Company receives rental income from The Mobile Home Store, Inc. (MHS), a wholly-owned subsidiary of Monmouth Capital Corporation. MHS sells and finances the sales of mobile homes. Six Directors of the Company are also Directors and shareholders of Monmouth Capital Corporation. MHS pays the Company market rent on sites where MHS has a home for sale. Total site rental income from MHS amounted to $40,623 and $5,572, respectively for the years ended December 31, 1995 and 1994. Effective April 1, 1995, the Company and MHS entered into an agreement whereby MHS leases space from the Company to be used as sales lots, at market rates, at most of the Company's parks. Total rental income relating to these leases amounted to $67,500 for the year ended December 31, 1995. As a REIT, the Company cannot be in the business of selling mobile homes for profit. During 1995 and 1994, the Company had approximately $180,000 and $115,000 respectively, of rental homes. The Company sold these homes to MHS at book value. During 1995, the Company purchased 10 homes totalling $196,952 to be used as rental homes from MHS at its cost. DIRECTORS', MANAGEMENT AND LEGAL FEES During the years ended December 31, 1995, 1994 and 1993, Directors', management, and legal fees to Mr. Eugene W. Landy and the law firm of Landy & Landy amounted to $180,160, $171,842 and $179,838, respectively. OTHER MATTERS During 1994, the Company entered into a three-year employment agreement and a five-year employment agreement with two of its executive officers. The agreements provide for base compensation, bonuses and fringe benefits, in addition to specified severance and retirement benefits. The Company is accruing these benefits over the terms of the agreements. Included in general and administrative expense for the years ended December 31, 1995 and 1994 were $155,650 and $197,350, respectively, relating to these agreements. NOTE 8 - DIVIDEND REINVESTMENT AND STOCK PURCHASE PLAN Effective April 17, 1989, the Company implemented a Dividend Reinvestment and Stock Purchase Plan (DRIP). Under the terms of the DRIP, shareholders who participate may reinvest all or part of their dividends in additional shares of the Company at approximately 95% of the market price. Shareholders may also purchase additional shares at approximately 95% of their market price by making optional cash payments. Generally, dividend reinvestments and purchases of shares are made quarterly on March 15, June 15, September 15 and December 15. Amounts received and shares issued in connection with the DRIP for the years ended December 31, 1995 and 1994 were as follows: 1995 1994 Amounts Received/Dividends $3,031,970 $1,628,793 Reinvested Number of Shares Issued 354,468 220,567 -38- NOTE 9 - DISTRIBUTIONS The following dividends were paid to shareholders during the years ended December 31, 1995 and 1994: 1995 1994 Date Paid Amount Per Share Date Paid Amount Per Share March 15, 1995 $687,020 $ .125 March 15, 1994 $527,560 $ .100 June 15, 1995 696,425 .125 June 15, 1994 532,110 .100 September 15, 1995 707,884 .125 September 15, 1994 538,278 .100 December 15, 1995 863,518 .150 December 15, 1994 679,794 .125 _________ _____ _________ ____ $2,954,847 $ .525 $2,277,742 $.425 ========= ===== ========= ==== Total distributions to shareholders for 1995 amounted to $2,954,847, or $.525 per share, of which $.475 was taxed as ordinary income and $.05 was a return on capital. This amount does not include the dividend resulting from the discount on shares purchased through the Company's Dividend Reinvestment and Stock Purchase Plan, which is considered a reduction in basis. On January 15, 1996, the Company declared a dividend of $.15 per share to be paid on March 15, 1996 to shareholders of record February 15, 1996. NOTE 10 - FEDERAL INCOME TAXES Effective January 1, 1992, the Company elected to be taxed as a REIT. As the Company has distributed all of its income currently, no provision has been made for Federal income or excise taxes for the years ended December 31, 1995, 1994 and 1993. NOTE 11 - ENVIRONMENTAL ISSUES In 1990, the Company converted the remaining oil heated mobile homes at Cedarcrest Mobile Home Park to gas heat. To avoid any potential leakage into the surrounding soils, the remainder of the oil tanks was removed. In order to encourage tenants' full cooperation, the Company entered into an agreement with South Jersey Gas Company to finance the tenants' purchase of new appliances and the actual cost of converting. The Company guaranteed up to $190,000 of the payments by the tenants. In addition, the Company reimbursed each tenant up to $530 for conversion costs. The $190,000 guarantee was in the form of a cash deposit remitted to the utility company. As of December 31, 1995, all of this deposit was returned to the Company. -39- NOTE 12 - LEGAL MATTERS There are no lawsuits pending against the Company that management believes will have a material effect on the financial condition or results of operations of the Company. The Company is a Defendant in various personal injury cases, all of which are being defended by our insurance company. The Company was also a Defendant in a case Jackson Township v. Southwind Village Mobile Home Park. The Township alleged that the Company is wrongfully refusing to comply with the Township ordinance requiring operation of the park as a "senior citizen" mobile home park. The Company believes that under Federal law, the Company cannot exclude families from the park. On June 15, 1995, the Company was granted a Summary Judgment Order allowing families into Southwind Village Mobile Home Park in Jackson, New Jersey. In January 1996, the Company was awarded $70,000 for legal fees and other damages. The Company was a Plaintiff in a lawsuit, United Mobile Homes, Inc., et al v. Bondy Oil, Inc., et al. The Company spent approximately $200,000 in 1990 and 1991 to remedy contamination to soil from home heating oil. United Mobile Homes, Inc. seeks to recover that money from the oil suppliers. This case was subsequently settled for $80,000 in January 1996. The Company was a Plaintiff in a lawsuit, Heather Highlands Mobile Home Village v. Jenkins Township Sanitary Authority. Jenkins Township Sanitary Authority constructed public sewers and attempted to extract connection fees from the Company of over $150,000. The Company challenged the legality of the proposed fees. The Company settled this matter and has agreed to pay Jenkins Township Sanitary Authority $104,760 plus interest for a total of $111,042. On June 7, 1995, a lawsuit was filed against the Company by Stults and Associates, Inc. seeking payment of $45,000 for engineering services pertaining to the expansion of River Valley Estates in Marion, Ohio. The Company does not believe that any monies are owed and has filed a counter- claim. On January 17, 1996, a home owned by a resident at one of the Company's parks exploded due to a gas leak in the resident's home. This explosion damaged other surrounding resident owned homes. This matter is currently under investigation. -40- NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid during the years ended December 31, 1995, 1994 and 1993 for interest is as follows: 1995 1994 1993 Interest $ 1,701,454 $ 1,509,707 $ 1,742,074 During the years ended December 31, 1995, 1994 and 1993, land development costs of $843,448, $294,283 and $63,171, respectively were transferred to investment property and equipment and placed in service. During the year ended December 31, 1995, the Company purchased Edgewood Mobile Home Park. This purchase calls for an additional $200,000 payment if certain conditions are met. This amount, which is included in accrued liabilities, has been added to investment property and equipment. During the years ended December 31, 1995, 1994 and 1993, the Company had dividend reinvestments of $1,302,811, $540,759 and $-0-, respectively which required no cash transfers. NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS The Company is required to disclose certain information about fair values of financial instruments, as defined in Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments." Limitations Estimates of fair value are made at a specific point in time, based upon, where available, relevant market prices and information about the financial instrument. Such estimates do not include any premium or discount that could result from offering for sale at one time the Company's entire holdings of a particular financial instrument. For a portion of the Company's financial instruments, no quoted market value exists. Therefore, estimates of fair value are necessarily based on a number of significant assumptions (many of which involve events outside the control of management). Such assumptions include assessments of current economic conditions, perceived risks associated with these financial instruments and their counterparties, future expected loss experience and other factors. Given the uncertainties surrounding these assumptions, the reported fair values represent estimates only and, therefore, cannot be compared to the historical accounting model. Use of different assumptions or methodologies is likely to result in significantly different fair value estimates. The fair value of cash and cash equivalents and notes receivables approximates their current carrying amounts since all such items are short- term in nature. The fair value of mortgages payable approximates their current carrying amounts since such amounts payable are at a current market rate of interest. -41- NOTE 15 - SUBSEQUENT EVENTS On January 10, 1996, the Company acquired Wood Valley Mobile Home Park from an unrelated entity. This acquisition is a 161-space mobile home park located in Caledonia, Ohio. The purchase price was $1,992,000. On January 9, 1996, the Company entered into a $1,000,000 mortgage payable (River Valley mortgage) to Bank One at an interest rate of prime. Proceeds from this mortgage were used to purchase Wood Valley Mobile Home Park. -42- UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 Column A Column B Column C Column D Year of Acquisition Site, Land Capitalization & Building Subsequent to Description Encumbrances Land Improvements Acquisition Memphis, TN $ -0- $250,000 $ 2,569,101 $ 724,186 Greenfield Center, NY -0- 37,500 232,547 1,282,067 Vineland, NJ (3) 320,000 1,866,323 548,477 Mars, PA -0- 181,930 1,922,931 137,268 Duncansville, PA -0- 60,774 378,093 243,114 Clifton Park, NY 1,837,606 391,724 704,021 284,928 Apollo, PA -0- 670,000 1,336,600 107,763 Millville, NJ (3) 216,000 1,166,517 332,412 Zelienople, PA -0- 75,000 977,225 921,318 Inkerman, PA -0- 572,500 2,151,569 557,573 Kutztown, PA -0- 145,000 1,695,041 483,195 Monticello, NY -0- 235,600 1,402,572 1,181,793 Navarre, OH -0- 290,000 1,457,673 527,420 Memphis, TN -0- 78,435 810,477 593,665 West Grove, PA (3) 175,000 990,515 837,705 Carlisle, PA -0- 37,540 198,321 625,617 Belle Vernon, PA (3) 150,000 2,491,796 912,627 Marion, OH -0- 236,000 785,293 582,533 Magnolia, OH 893,993 270,000 1,941,430 596,984 Jackson, NJ (3) 100,095 602,820 1,079,374 Eatontown, NJ (3) 157,421 280,749 128,676 __________ _________ __________ __________ 2,731,599 $4,650,519 $25,961,614 $12,688,695 Various 14,976,036 ========= ========== ========== __________ $17,707,635 ========== -43- UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 Column A Column E(1)(2) Column F(1) Gross Amount at Which Carried at 12/31/95 Site, Land & Building Accumulated Description Land Improvements Total Depreciation Memphis, TN $ 250,000 $ 3,293,287 $ 3,543,287 $ 1,464,828 Greenfield Center, NY 37,500 1,514,614 1,552,114 728,010 Vineland, NJ 405,206 2,329,594 2,734,800 1,025,324 Mars, PA 181,930 2,060,199 2,242,129 940,633 Duncansville, PA 60,774 621,207 681,981 527,138 Clifton Park, NY 391,724 988,949 1,380,673 810,825 Apollo, PA 670,000 1,444,363 2,114,363 53,904 Millville, NJ 216,000 1,498,929 1,714,929 751,159 Zelienople, PA 75,000 1,898,543 1,973,543 1,302,531 Inkerman, PA 572,500 2,709,142 3,281,642 387,408 Kutztown, PA 409,339 1,913,897 2,323,236 542,824 Monticello, NY 318,472 2,501,493 2,819,965 546,914 Navarre, OH 290,000 1,985,093 2,275,093 634,804 Memphis, TN 78,435 1,404,142 1,482,577 635,639 West Grove, PA 175,000 1,828,220 2,003,220 1,266,233 Carlisle, PA 145,473 716,005 861,478 628,950 Belle Vernon, PA 150,000 3,404,423 3,554,423 2,368,489 Marion, OH 236,000 1,367,826 1,603,826 473,016 Magnolia, OH 270,000 2,538,414 2,808,414 1,262,126 Jackson, NJ 100,095 1,682,194 1,782,289 1,292,636 Eatontown, NJ 157,421 409,425 566,846 370,450 _________ __________ __________ __________ $5,190,869 $38,109,959 $43,300,828 $18,013,841 ========= ========== ========== ========== -43a- UNITED MOBILE HOMES, INC. SCHEDULE III REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995 Column A Column G Column H Column I Date of Date Depreciable Description Construction Acquired Life Memphis, TN prior to 1980 1986 3 to 27.5 Greenfield Center, NY prior to 1970 1977 3 to 27.5 Vineland, NJ 1973 1986 3 to 27.5 Mars, PA 1974 1986 5 to 27.5 Duncansville, PA 1961 1979 3 to 27.5 Clifton Park, NY 1972 1978 3 to 27.5 Apollo, PA prior to 1980 1995 5 to 27.5 Millville, NJ prior to 1980 1985 3 to 27.5 Zelienople, PA prior to 1980 1982 3 to 27.5 Inkerman, PA 1970 1992 5 to 27.5 Kutztown, PA 1971 1979 5 to 27.5 Monticello, NY 1972 1988 5 to 27.5 Navarre, OH prior to 1980 1987 5 to 27.5 Memphis, TN 1955 1985 3 to 27.5 West Grove, PA 1971 1974 5 to 27.5 Carlisle, PA 1961 1969 3 to 27.5 Belle Vernon, PA 1973 1983 3 to 27.5 Marion, OH 1950 1986 3 to 27.5 Magnolia, OH prior to 1980 1985 5 to 27.5 Jackson, NJ 1969 1969 3 to 27.5 Eatontown, NJ 1964 1978 3 to 27.5 -43b- /------FIXED ASSETS-----/ (1) Reconciliation: 12/31/95 12/31/94 12/31/93 Balance - Beginning of Year $ 39,505,503 $ 38,362,956 $ 37,734,438 ___________ ___________ ___________ Additions: Acquisitions 2,006,600 -0- -0- Improvements 2,237,114 1,567,553 762,791 Depreciation -0- -0- -0- __________ __________ __________ Total Additions 4,243,714 1,567,553 762,791 __________ __________ __________ Deletions 448,389 425,006 134,273 __________ __________ __________ Balance - End of Year $ 43,300,828 $ 39,505,503 $ 38,362,956 ========== ========== ========== /--ACCUMULATED DEPRECIATION---/ 12/31/95 12/31/94 12/31/93 Balance - Beginning of Year $ 16,544,208 $ 15,135,095 $ 13,582,124 Additions: Acquisitions -0- -0- -0- Improvements -0- -0- -0- Depreciation 1,649,255 1,627,948 1,632,046 __________ __________ __________ Total Additions 1,649,255 1,627,948 1,632,046 __________ __________ __________ Deletions 179,622 218,835 79,075 __________ __________ __________ Balance - End of Year $ 18,013,841 $ 16,544,208 $ 15,135,095 ========== ========== ========== (2) The aggregate cost for Federal tax purposes approximates historical cost. (3) Represents one mortgage note payable secured by six properties. -43c- SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. UNITED MOBILE HOMES, INC. By: s/Eugene W. Landy EUGENE W. LANDY Chairman of the Board Dated: March 14, 1996 Pursuant to the requirements of the Securities and Exchange Act of 1934, this report has been duly signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. Title Date s/Eugene W. Landy Chairman of the Board and March 14, 1996 EUGENE W. LANDY Director s/Samuel A. Landy President and Director March 14, 1996 SAMUEL A. LANDY s/Anna T. Chew Vice President and March 14, 1996 ANNA T. CHEW Chief Financial Officer and Director s/Ernest V. Bencivenga Secretary/Treasurer and March 14, 1996 ERNEST V. BENCIVENGA Director s/Robert J. Anderson Director March 14, 1996 ROBERT J. ANDERSON s/Charles P. Kaempffer Director March 14, 1996 CHARLES P. KAEMPFFER s/Richard H. Molke Director March 14, 1996 RICHARD H. MOLKE s/Eugene Rothenberg Director March 14, 1996 EUGENE ROTHENBERG s/Robert G. Sampson Director March 14, 1996 ROBERT G. SAMPSON -44- UNITED MOBILE HOMES, INC. Employment of the President - Samuel A. Landy AGREEMENT EFFECTIVE JANUARY 1, 1996 BY AND BETWEEN: United Mobile Homes, Inc., a New Jersey Corporation ("Corporation") AND: Samuel A. Landy ("Employee") Corporation desires to employ Employee to the business of the Corporation and Employee desires to be so employed. The parties agree as follows: 1. Employment. Corporation agrees to employ Employee and Employee agrees to be employed in the capacity as President for a term of three (3) years effective January 1, 1996 and terminating December 31, 1999. 2. Time and Efforts. Employee shall diligently and conscientiously devote his time and attention and put his best efforts to the discharge of his duties as President of the Corporation. 3. Board of Directors. Employee should at all times discharge his duties and consultation with an under supervision of the Board of Directors of the Corporation. In the performance of his duties, Employee shall make his principal office in such place as the Board of Directors of the Corporation and Employee from time to time agree. 4. Compensation. A. First year. During the Corporation's fiscal year beginning January 1, 1996, Corporation shall pay to Employee as compensation for his services the sum of $165,000.00 which shall be paid in equal bi-weekly installments. B. Second year. During the Corporation's fiscal year beginning January 1, 1997, Corporation shall pay to Employee as compensation for his services the sum of $181,500.00 which shall be paid in equal bi-weekly installments. C. Third year. During the Corporation's fiscal year beginning January 1, 1998, Corporation shall pay to Employee as compensation for his services the sum of $199,650.00 which shall be paid in equal bi-weekly installments. D. Bonuses. Bonuses shall be paid at the discretion of the Board of Directors. The following guidelines are agreed to: 1. The bonus will be 20% of base salary. 2. Performance will be measured by achieving one or more of the following goals: A. Net after tax income to increase 11% per year. Income to be calculated based on ordinary after tax income. Extraordinary one time items not to be included for performance purposes. B. Board shall be in position to increase dividend due to increase in net income to $.60 in 1996, $.70 in 1997 and $.80 in 1998. C. Construction of 100 new sites per year. An additional 200 sites per year will be presented to the Board for acquisition based on their decision. The payment of any one bonus under this plan does not exclude the payment of any other bonuses including the stock option bonus referred to below. 3. Stock option bonus. On January 1st of each of the three years in this contract document provided performance was up to expectations, the Employee shall receive the Option to Purchase 25,000 shares of stock at market price or the price required by law. E. Loans. The Corporation agrees to loan the employee the money necessary for the exercise of any stock option awarded pursuant to this contract or previously awarded to the Employee, provided said loan is secured by the restricted or unrestricted stock granted under the option and provided interest is paid monthly at United's corporate borrowing rate. Each limited by option price. The loan shall be a 5-year balloon loan amortized over 15 years. In addition a loan of $100,000.00 will be granted upon signing of this contract pursuant to the above term. F. Expenses. 1. Corporation will reimburse the Employee for reasonable and necessary expenses incurred by him and carrying out his duties under this agreement. Employee shall present to the Corporation from time-to-time, an itemized account of such expenses in such forms as may be required by the Corporation. G. Automobile. In recognition of Employee's need for an automobile for business purposes, the Corporation will provide the Employee with an automobile including maintenance, repairs, insurance and all costs incident thereto, all comparable to those presently provided to Employee by the Corporation. H. Indemnity and Attorneys Fees. The Corporation agrees to indemnify the Employee from any and all lawsuits filed directly against the Employee in either his capacity as Employee or as a Director of the Corporation. The Corporation will pay all attorneys fees and costs to defend the Employee from any such lawsuits. I. Vacation. Employee shall be entitled to take four (4) paid weeks vacation per year. J. Disability or Severance. Employee shall be entitled to one year's disability. Additionally, employee is entitled to one year's severence if the severence is a result of action by the Board. Employee is not entitled to both at the same time. K. 401-k Plan. The Corporation will continue to provide a 401-k Plan which the Employee can contribute to at his option. L. Contemporaneous Business Activity. The Corporation recognizes that the Employee actively manages "The Mobile Home Store, Inc." for Monmouth Capital Corporation and serves as the Director to Monmouth Capital Corporation and Monmouth Real Estate Investment Corporation. The Corporation is directly compensated by The Mobile Home Store, Inc. for the services rendered by the Employee. The Employee will continue to devote his services to the affairs of The Mobile Home Store, Inc., Monmouth Capital Corporation and Monmouth Real Estate Investment Corporation on condition, however, that those services will not interfere with his employment pursuant to this agreement. M. Change of More Than Three Corporate Directors. In the event a change of more than three (3) Directors of the Corporation during the term of this contract, then Samuel Landy shall have the option to cancel this contract at any time after the change of more than three (3) Directors. Notice of intent to cancel the contract shall be sent by Samuel Landy to each Board member of the Corporation and shall be effective thirty (30) days after mailing. N. Notices. All notices required or permitted to be given under this agreement shall be given by certified mail, return receipt requested to the parties at the following addresses or such other addresses as either may designate in writing to the other party: Corporation: United Mobile Homes, Inc. 125 Wyckoff Road Eatontown, NJ 07724 Employee: Samuel A. Landy 124 Federal Road Englishtown, NJ 07726 O. Governing Law. This agreement shall be construed and governed in accordance with the laws of the State of New Jersey. P. Entire Contract. This agreement constitutes the entire understanding and agreement between the Corporation and Employee with regard to all matters herein. There are no other agreements, conditions or representations oral or written express or implied with regard thereto. This agreement may be amended only in writing signed by both parties hereto. IN WITNESS WHEREOF, Corporation has by its appropriate officers signed and affixed its seal and Employee has signed and sealed this agreement. UNITED MOBILE HOMES, INC. _______________________ BY: s/Ernest V. Bencivenga ERNEST V. BENCIVENGA (Seal) Secretary/Treasurer _______________________ BY: s/Samuel A. Landy SAMUEL A. LANDY