ITEM 1 - BUSINESS - - ----------------- Amcast Industrial Corporation, an Ohio corporation organized in 1869, and its subsidiaries (called collectively "Amcast" or the "company") are engaged in the business of producing fabricated metal products, valves and controls, and cast and tubular metal products, in a variety of shapes, sizes, and metals for sale to end users directly and through sales representatives and distributor organizations and to original equipment manufacturers. Manufacturing facilities are located in five states, primarily in the eastern half of the United States. The company's business operations are conducted through three divisions and nine wholly-owned subsidiaries. Its subsidiaries include Amcast Industrial Ltd., an Ontario, Canada corporation; Elkhart Products Corporation (Elkhart), an Indiana corporation; WheelTek, Inc. (WheelTek), an Indiana corporation; Amcast Industrial Investment Corporation, a Delaware corporation; Amcast Automotive, Inc. (formerly Midwest Marketing Services Corporation), a Michigan corporation; Amcast Industrial Financial Services, Inc., an Ohio corporation; Amcast Industrial Sales Corporation, a U.S. Virgin Islands corporation; Amcast Casting Technologies, Inc., an Indiana Corporation and Amcast Precision Products, Inc., a California corporation. During fiscal 1992, Amcast and Izumi Industries, Ltd. of Japan, formed a joint venture, Casting Technology Corporation. Amcast owns 60% of the joint venture. In 1994, the joint venture was converted to a partnership, Casting Technology Company.
During the fourth quarter of 1993, the company elected early adoption, effective September 1, 1992, of the Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions". This statement requires companies to record a liability for employees' accumulated postretirement benefit costs and to recognize on-going expenses on an accrual basis. The company recognized a $6,159 pretax cumulative effect of the change in accounting principle, which represents the accumulated postretirement benefit obligation as of September 1, 1992. The effect on net income and shareholders' equity was $3,942, or $.47 per share. The impact on fiscal year 1993 operating results, due to the adoption of SFAS 106, was not material. See Postretirement Health Care and Life Insurance footnote of the company's Annual Report to Shareholders for the year ended August 31, 1994, Exhibit 13.1, page 52 herein.
Effective August 31, 1992, the company's Board of Directors approved a plan to divest Stanley G. Flagg & Co. (Flagg), a manufacturer of iron and brass pipe fittings, previously reported as part of the Flow Control Products segment. This action was prompted by unprofitable operations that were plagued by industry overcapacity and weak demand in the iron pipe fittings product line. The company made a pretax provision of $22 million based on the expected proceeds of this divestiture. A significant portion of the Flagg assets, relating to the iron and pole line hardware businesses, have been sold and, although operating losses, until disposition, are greater than originally estimated, the loss on the sale of assets and estimated liabilities are expected to be less than the amounts initially provided. Annual sales and results of the remaining brass business are not material to the company. At August 31, 1994, the company believes that it has provided adequately for the effect of the disposal of the remaining assets of Flagg and the operating losses through the date of disposal. See Discontinued Operation footnote of the company's Annual Report to Shareholders for the year ended August 31, 1994, Exhibit 13.1, page 42 herein.
The company operates in two business segments--1) Flow Control Products and (2) Engineered Components. Information concerning the net sales, operating profit and identifiable assets of each segment for fiscal years 1992 through 1994 appears under "Business Segments" in the Notes to Consolidated Financial Statements in the company's Annual Report to Shareholders for the year ended August 31, 1994, Exhibit 13.1, page 56 herein. Amcast has no foreign manufacturing operations and export sales to customers in foreign countries are not material.
ITEM 1 - BUSINESS (cont'd) - - ----------------- FLOW CONTROL PRODUCTS - - --------------------- The Flow Control Products segment (Flow Control) includes the business of the Superior Valve division (Superior Valve), the Elkhart subsidiary, and Amcast Industrial Ltd. Superior Valve, acquired in October 1986, manufactures valves and accessories used in air conditioning and refrigeration systems, and compressed gas cylinder valves for the welding, specialty, carbonic, and medical gas industries. Elkhart, acquired in July 1983, produces wrot copper fittings for use in residential and commercial water systems and markets bronze pipe fittings and valves. Amcast Industrial Ltd. is the common Canadian marketing arm for Amcast's Flow Control segment manufacturing units.
The company's Flow Control business is a leading supplier of pipe fittings for the industrial, commercial, and residential construction markets, valves utilized in air-conditioning and refrigeration systems, and industrial compressed gas applications. These products are sold through distributors and wholesalers. Shipments are made by truck from company locations directly to customers. The competition is comprised of a number of manufacturers of parts for air conditioning, refrigeration, and plumbing systems, gas meters, and valves and controls. The company believes that competition in this segment is based on a number of factors including product quality, service, delivery, and value.
Most of the Flow Control business is based on customer purchase orders for their current product requirements and such orders are filled from company inventory. Orders are not considered firm beyond a 90-day period.
See Properties at Item 2

ITEM 2 - PROPERTIES - - -------------------
The following table provides certain information relating to the company's principal facilities as of October 14, 1994:
ITEM 2 - PROPERTIES (cont'd) - - -------------------
The land and building in Rancho Cucamonga, California, are leased under a 5-year lease, with a requirement that Amcast purchase the property at the fair market price at the lease expiration in 1997. The land and building in Burlington, Ontario, are leased under a 5-year lease expiring in 1995, with an option to renew the lease for two successive 5-year terms. The land in Richmond and Gas City, Indiana is leased under 99 year leases, expiring in 2091. The Corporate offices are being leased for five years expiring in 1998. The Amcast Automotive offices are being leased for five years expiring in the year 2000, with an option for a five year renewal. All other properties are owned by the company. The lease at the former Miami, Florida facility was terminated during fiscal year 1994 and operations were transferred to the Rancho Cucamonga, California facility.
A portion of the land and building at Fayetteville, Arkansas is subject to a mortgage in favor of Bank One, Dayton, NA, to secure the payment of a $5,050,000 bond issue dated December 1, 1991, and maturing December 1, 2004.
The company's operating facilities are in good condition and are suitable for the company's purposes. Utilization of capacity is dependent upon customer demand. During fiscal 1994, productive capacity utilization by division ranged from 58% to 90%, and averaged 78% of the company's total capacity.
ITEM 3

ITEM 3 - LEGAL PROCEEDINGS - - -------------------------- The company is subject to a range of federal, state and local laws and regulations governing the discharge of material into the environment or otherwise relating to the protection of the environment. The company periodically makes capital expenditures to meet the requirements of these laws and regulations; however, the company believes that the anticipated expenditures for such purposes in the foreseeable future will not be material to its financial position or its competitive position.
The company, as is normal for the industry in which it operates, is subject to periodic environmental site investigations and inquiries. The company has been identified as a potentially responsible party by various state agencies and by the United States Environmental Protection Agency (U.S. EPA) under the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, for costs associated with eight U.S. EPA led multi-party "superfund" sites and three state environmental agency led remediation sites. While the company could be found jointly and severally liable at a number of these sites, the company, in each case, is contesting any responsibility or believes that its liability will not be material because of the nature of the waste involved or the limited amount of waste generated by the company which was allegedly disposed of at these sites. With respect to one such site located in Ironton, Ohio, another potentially responsible party has brought an action entitled ALLIED-SIGNAL, INC., V. AMCAST INDUSTRIAL CORPORATION, in the U.S. District Court for the Southern District of Ohio, Western Division, Case No. C-3-92-013, seeking contribution from the company for a portion of the total response and remediation costs, which the plaintiff has claimed may exceed $20 million. The company believes that its ultimate equitable share, if any, of any liability for cleanup costs at this site will not be material.
The company also is a defendant in a lawsuit entitled PUBLIC INTEREST RESEARCH GROUP, INC., ET AL. V. STANLEY G. FLAGG & CO., ET AL., in the U.S. District Court for the Eastern District of Pennsylvania, Case No. 89-2137, which alleges that the content of zinc and other minerals in the waste water discharged at the company's Stowe, Pennsylvania, facility exceeded the levels allowed under the applicable permit during the period from October 1984 through October 1988. The suit seeks the assessment of penalties; however, the company believes that penalties, if any, should not be material because the discharge currently is in compliance with the permit.
ITEM 4

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - - ------------------------------------------------------------ None
ITEM 4A - EXECUTIVE OFFICERS OF REGISTRANT - - ------------------------------------------
Leo W. Ladehoff, age 62, has been a Director since 1978, Chairman of the Board of the company since December 1980, Chief Executive Officer since May 1979, and President of the company from September 1990 to December 1993. Mr. Ladehoff was also President of the company from December 1978 until November 1986.
John H. Shuey, age 48, has been President and Chief Operating Officer since December 1993 and a Director since March 1994. He was Executive Vice President from February 1991 to December 1993. From 1986 to 1991, Mr. Shuey was Senior Vice President, Finance and Chief Financial Officer at AM International (producer of business graphics equipment used in preparation and reproduction of information).
Dennis A. Bertram, age 57, has been President and General Manager of the Automotive Products Group since May 1992. From May 1989 to May 1992 he was Vice President and General Manager of the WheelTek Division. From July 1986 to May 1989 he was Vice President of Operations for WheelTek.
J. Randall Caraway, age 43, has been President of Amcast Precision Products, Inc. since March 1991. From August 1990 to March 1991 he was Vice President/General Manager of the Ontario Division. From 1988 to 1990 Mr. Caraway was President of Coastcast in California. Prior to his role of President he was Vice President of Operations of Coastcast.
David L. Ewing, age 46, has been President of the Flow Control Products Group since January 1994 and Vice President/General Manager of Elkhart Products Corporation, Plumbing Division since April 1990. From May 1989 to April 1990 Mr. Ewing was President of Sensus Technologies. From September 1987 to May 1989 he was President of the coupling division of Rockwell International in TexarKana, Arkansas.
Michael N. Powell, age 47, has been Vice President/General Manager of Superior Valve Company since April 1994. Mr. Powell was President and Chief Operating Officer of Versa Technologies, Inc. in Racine, Wisconsin from May 1991 to December 1993. Prior to that he was a Senior Vice President for Mark Controls Corporation in Skokie, Illinois.
Douglas D. Watts, age 49, has been Vice President, Finance since August 1994. From 1987 to August 1994 Mr. Watts held various financial management positions with General Cable Corporation, of which the most recent post was Vice President and Controller. From 1985 to 1987 he was Vice President, Finance and Chief Financial Officer of LCP Chemicals and Plastics, Inc., Edison, New Jersey.
William L. Bown, age 48, has been Vice President and Controller since June 1992. From November 1983 to May 1992 Mr. Bown was Controller of Worthington Industries, Inc. in Columbus, Ohio.
Denis G. Daly, age 52, has been Vice President, Legal Affairs and Secretary, since January 1990. From January 1988 to December 1989 he worked in private practice at the law firm of Thompson, Hine, and Flory. From August 1982 to January 1988 he was Vice President, General Counsel, and Secretary at Day International (Dayco) in Dayton.
William J. Durbin, age 49, has been Vice President, Human Resources, since July 1984. Mr. Durbin was Director of Personnel and Director of Management Resources of Carrier Transicold Co., Carrier North American Operations, and Carrier International Corp. from 1978 to 1984.
Myron E. Frye, age 55, has been Vice President of Purchasing since November 1992. From March 1983 to November 1992 he was President of Purchasing / Materials Group, Inc. in Naperville, Illinois.
ITEM 4A - EXECUTIVE OFFICERS OF REGISTRANT (cont'd) - - ------------------------------------------ Robert P. Hensley, age 63, has been Assistant Vice President of Risk Management/ Assistant Secretary, since March 1989. From January 1987 to March 1989 he was Director of Risk Management/Assistant Secretary.
Michael R. Higgins, age 48, has been Treasurer since January 1987.
Yeshwant P. Telang, age 69, has been Senior Vice President, Technology and Competitive Manufacturing, since November 1991. He was Vice President, Technology from January 1985 to November 1991.
Officers of Amcast are elected at the Board of Directors' first meeting following the annual meeting of shareholders and hold office until the first meeting of the board following the next Annual Meeting of Shareholders.
PART II -------
ITEM 5

ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED - - -------------------------------------------------------------- STOCKHOLDER MATTERS -------------------
Amcast common stock is listed on the New York Stock Exchange, ticker symbol AIZ. As of August 31, 1994, there were 8,457,896 of the Company's common shares outstanding, and there were approximately 7,000 shareholders of Amcast's common stock, including shareholders of record and the company's estimate of beneficial holders.
See Long-Term Debt and Credit Arrangement footnote of the company's Annual Report to Shareholders for the year ended August 31, 1994, Exhibit 13.1, page 45 herein for other information required by this item.
ITEM 6

ITEM 6 - SELECTED FINANCIAL DATA - - -------------------------------- See "Selected Data" of the company's Annual Report to Shareholders for the year ended August 31, 1994, Exhibit 13.1, page 35 herein.
ITEM 7

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL - - ---------------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- See "Results of Continuing Operations", "Liquidity", and "Capital Resources" of the company's Annual Report to Shareholders for the year ended August 31, 1994, Exhibit 13.1, pages 30-34 herein.
ITEM 8

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - - ---------------------------------------------------- See "Financial Statements and Notes", together with the report thereon of Ernst & Young LLP and "Quarterly Financial Data (Unaudited)" of the company's Annual Report to Shareholders for the year ended August 31, 1994, Exhibit 13.1, pages 36-57 herein.
ITEM 9

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - - ------------------------------------------------------------ The information required by this item relating to directors of the company is incorporated herein by reference to that part of the information under "Election of Directors" beginning on page 2 of the company's Proxy Statement for its Annual Meeting of Shareholders to be held on December 14, 1994. Information concerning executive officers of the company appears under "Executive Officers of Registrant" at Part I, page 8, of this Report.
ITEM 11

ITEM 11 - EXECUTIVE COMPENSATION - - -------------------------------- The information required by this item is incorporated herein by reference to "Executive Compensation" on pages 6 through 12 of the company's Proxy Statement for its Annual Meeting of Shareholders to be held on December 14, 1994.
ITEM 12

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND - - ------------------------------------------------------------- MANAGEMENT ---------- The information required by this item is incorporated herein by reference to "Security Ownership of Directors, Nominees and Officers" on page 5 and "Security Ownership of Certain Beneficial Owners" on page 15 of the company's Proxy Statement for its Annual Meeting of Shareholders to be held on December 14, 1994.
ITEM 13

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - - -------------------------------------------------------- The information required by this item is contained on pages 12 and 13 in the company's Proxy Statement for its Annual Meeting of Shareholders to be held on December 14, 1994, which is incorporated herein by reference.
PART IV -------
ITEM 14

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS - - -------------------------------------------------------------- ON FORM 8-K ----------- (a) Documents filed as part of this report.
1. Financial statements:
The following financial statements of Amcast Industrial Corporation and subsidiaries, included in the Annual Report to Shareholders for the year ended August 31, 1994, are incorporated by reference at Item 8 of this report.
Consolidated Statements of Operations - Years Ended August 31, 1994, 1993, and 1992.
Consolidated Statements of Financial Condition - August 31, 1994 and 1993.
Consolidated Statements of Shareholders' Equity - Years Ended August 31, 1994, 1993 and 1992.
Consolidated Statements of Cash Flows - Years Ended August 31, 1994, 1993, and 1992.
Notes to Consolidated Financial Statements
2. Consolidated financial statement schedules:
All other financial statement schedules are omitted because they are not applicable or because the required information is shown in the financial statements and notes.
3. Exhibits - See Index to Exhibits (page 19 hereof).
4. Form 8-K - During the quarter ended August 31, 1994, the company did not file any reports on Form 8-K.
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on the 29th day of November 1994.
AMCAST INDUSTRIAL CORPORATION (Registrant)
By /s/Leo W. Ladehoff ---------------------------------- Leo W. Ladehoff Chairman of the Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated.
Signature Title Date - - ------------------- ------------------------- -----------------
/s/Leo W. Ladehoff Chairman of the Board and November 29, 1994 - - ------------------- Leo W. Ladehoff Chief Executive Officer, Director
/s/John H. Shuey President and Chief November 29, 1994 - - ------------------- John H. Shuey Operating Officer, Director
/s/Douglas D. Watts Vice President, Finance November 29, 1994 - - ------------------- Douglas D. Watts
/s/William L. Bown Vice President and Controller November 29, 1994 - - ------------------- William L. Bown
*James K. Baker Director November 29, 1994 *Walter E. Blankley Director November 29, 1994 *Peter H. Forster Director November 29, 1994 *Ivan W. Gorr Director November 29, 1994 *Earl T. O'Loughlin Director November 29, 1994 *William G. Roth Director November 29, 1994 *R. William Van Sant Director November 29, 1994
*The undersigned Leo W. Ladehoff, by signing his name hereto, does sign and execute this annual report on Form 10-K on behalf of each of the above-named directors of the registrant pursuant to powers of attorney executed by each such director and filed with the Securities and Exchange Commission as an exhibit to this report.
By /s/Leo W. Ladehoff ------------------------- Leo W. Ladehoff Attorney in Fact
SCHEDULE V and VI - PROPERTY, PLANT AND EQUIPMENT (A) (Thousands of dollars)
AMCAST INDUSTRIAL CORPORATION AND SUBSIDIARIES
Years Ended August 31
______________________________________________________________________________
Notes to Schedules V and VI:
(1) Represents normal additions. (2) Reclassification from Construction in Progress to specific asset accounts. (3) Reclassification among fixed asset accounts. (4) Reclassification between Other Assets and fixed asset accounts. (5) Reclassification to net assets of discontinued operation. (6) Write-down in carrying value of equipment and/or disposal of equipment previously written down. (7) Property not used in ongoing operations - reclassified to Other Assets. (8) Adjustment due to foreign currency translation. (9) Reclassification between inventory and fixed asset accounts.
(A) The principal lives and depreciation methods used for the above asset classifications are:


Item 1. Business
General
Summit Tax Exempt Bond Fund, L.P. (the ``Registrant''), a Delaware limited partnership, was formed on December 18, 1985 and will terminate on December 31, 2020 unless terminated sooner under the provisions of the Agreement of Limited Partnership (the ``Partnership Agreement''). The Registrant was formed to invest in tax-exempt participating first mortgage revenue bonds (``First Mortgage Bonds'' or ``FMBs'') issued by various state or local governments or their agencies or authorities. These investments were made with proceeds from the initial sale of 7,906,234 Beneficial Unit Certificates (``BUC$''). The FMBs are secured by participating first mortgage loans (``Mortgage Loans'') on multi-family residential apartment properties (``Properties'') developed by unaffiliated developers. The Properties are garden apartment projects diversified nationwide. The Registrant's fiscal year for book and tax purposes ends on December 31.
The Registrant is engaged solely in the business of investing in FMBs; therefore, presentation of industry segment information is not applicable.
General Partners
The general partners of the Registrant are Prudential-Bache Properties, Inc. (``PBP'') and Related Tax Exempt Bond Associates, Inc. (the ``Related General Partner'') (collectively, the ``General Partners''). Related BUC$ Associates, Inc. (the ``Assignor Limited Partner''), which acquired and holds limited partnership interests on behalf of those persons who purchase BUC$, has assigned to those persons substantially all of its rights and interest in and under such limited partnership interests. The Related General Partner and the Assignor Limited Partner are under similar ownership.
Competition
The General Partners and/or their affiliates have formed, and may continue to form, various entities to engage in businesses which may be competitive with the Registrant.
The Registrant's business is affected by competition to the extent that the underlying Properties from which it derives interest and, ultimately, principal payments, may be subject to competition relating to rental rates and amenities from comparable neighboring properties.
Structure of First Mortgage Bonds
The principal and interest payments on each FMB are payable only from the cash flows, including proceeds in the event of a sale, from the Properties underlying the FMBs. None of these FMBs constitute a general obligation of any state or local government, agency or authority. The FMBs are secured by the Mortgage Loans on the underlying Properties and the structure of each Mortgage Loan mirrors the structure of the corresponding FMB.
Unless otherwise modified, the principal of the FMBs will not be amortized during their respective terms (which range from 17 to 24 years) and will be required to be repaid in lump sum ``balloon'' payments at the expiration of the respective terms or at such earlier times as the Registrant may require pursuant to the terms of the bond documents. The Registrant has a right to require redemption of the FMBs approximately twelve years after their issuance. The Registrant anticipates holding the FMBs for approximately 12 to 15 years from the date of issuance; however, it can and may elect to hold until maturity.
In addition to the stated base interest rates ranging from 5.23% to 8.5% per annum, each of the FMBs which have not been modified provides for ``contingent interest'' consisting of (a) an amount equal to 50% to 100% of net property cash flow and 50% to 100% of net sale or refinancing proceeds until the borrower has paid, during the post-construction period, annually compounded interest at a rate ranging from 8.875% to 9.34% on a cumulative basis, and thereafter (b) an amount equal to 25% to 50% of the remaining net property cash flow and 25% to 50% of remaining net sale or refinancing proceeds until the borrower has paid interest at a simple annual rate of 16% over the term of the FMB. Both the stated and contingent
interest are exempt from federal income taxation. The Registrant has not received any contingent interest to date.
In order to protect the tax-exempt status of the FMBs, the owners of the Properties are required to enter into certain agreements to own, manage and operate such Properties in accordance with the requirements of the Internal Revenue Code.
Bond Modifications/Forbearance Agreements
The following table lists the FMBs that the Registrant owns, together with the occupancy and current rental rates of the underlying properties:
A provision for loss on impairment of assets of $1,350,000 was recorded during the year ended December 31, 1994 to record the estimated impairment of FMBs based upon an analysis of estimated cash flows from the individual properties securing the FMBs.
On April 1, 1994, Mansion Apartment Project Investors, Inc. (``MAPI''), an affiliate of the Related General Partner who replaced the original developer of The Mansion property, sold the ownership interest in the property to an unrelated third party for $700,000 in cash and the assumption of the obligation under the Registrant's $19,450,000 FMB as well as a $400,000 second mortgage note payable to a lender affiliated with the Related General Partner taken by assignment from the seller. Notwithstanding the assumption of the FMB, the General Partners agreed to forbear on the Registrant's rights and remedies in declaring an interest payment default under the FMB loan documents provided the new borrower made minimum monthly interest payments to the Registrant equal to approximately $81,000 per month (5% per annum) together with payments to a replacement reserve escrow account of approximately $4,500 per month and complied with all other covenants and obligations.
Effective October 18, 1994, The Mansion FMB was modified. The modification provides for a base pay rate of 5.23%. In addition, the contingent interest feature has been changed. Under the modified FMB, an additional .386% per year (primary contingent interest) is due and payable from 100% of cash flow above the base pay rate. If not paid, the difference between the minimum pay rate and the primary contingent interest rate is deferred and is payable from future cash flow and sale or refinancing proceeds. Remaining cash flow and sale or refinancing proceeds, if any, are paid to the Registrant in an amount equal to 35% of net cash flow until the borrower receives a 12.5% cumulative return on its investment together with the return of the initial investment. Then, the Registrant is entitled to 50% of remaining cash flow and net sale or refinancing proceeds until the owner has paid interest at a cumulative annual rate of 16%. Notwithstanding The Mansion owner's obligation to pay amounts due as primary contingent interest, the Registrant has agreed, until 1998, the obligation to pay such amounts will be considered satisfied subject to those amounts being contributed by The Mansion's owner toward certain designated repairs to the property. The Mansion's owner will nevertheless be obligated to pay amounts due from remaining cash flow if available above the primary contingent interest rate.
As a result of the cash equity investment, The Mansion (which had previously been classified in the financial statements as an Asset Held for Sale) was reinstated as an FMB. The net cash proceeds from the sale of approximately $105,000 (net of a $400,000 escrow for certain repairs, a $50,000 second mortgage note principal payment, and closing costs), paid to the Registrant to reduce accrued and unpaid interest, was recorded by the Registrant as deferred income and is being amortized as interest income over the remaining life of The Mansion FMB. The balance of the deferred income relating to The Mansion FMB was approximately $101,000 at December 31, 1994. All other accrued and unpaid interest on The Mansion FMB which previously had been reserved for financial statement purposes was forgiven.
In June 1992, the Registrant made a $320,000 second mortgage loan to the owner of the property underlying the Cypress Run FMB for the payment of 1991 property taxes. This loan required monthly interest only payments at a rate of 8.5% per annum with the principal due on July 1, 1994. Interest payments on the loan as well as the FMB were current through June 1994; however, due to bankruptcy, the loan remains outstanding and the borrower has been notified of the default (see below for discussion of borrower's bankruptcy filing). An allowance for possible loss was recorded for this loan in 1993.
As a result of the failure to pay 1992 and 1993 real estate taxes, the Registrant initiated steps to enforce its rights and remedies on the Cypress Run property in July 1994. These remedies include acceleration of the loan and a $350,000 draw on an irrevocable letter of credit issued on behalf of the owner of Cypress Run as security relating to obligations under the Rental Performance Agreement. Pursuant to the terms of the bond documents, approximately $348,000 of the proceeds received from the draw on the letter of credit has been recorded as a reduction of the FMB with the balance applied as interest. In response, on July 15, 1994, the owner of the property filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code and continued to operate the property as a debtor-in-possession. The bankruptcy filing operated as a stay against the enforcement of the Registrant's remedies which include foreclosure. At the initial hearing, the court consented, among other things, to allow the Registrant to receive the monthly net cash flow generated by the property as its debt service payments for at least the initial 120 days of the proceedings.
On November 10, 1994, an Order Modifying Stay together with a Settlement Stipulation was entered by the Court which granted the Registrant relief from the Automatic Stay. This order became effective on March 31, 1995 unless a sale of the property, subject to the Registrant's approval, was closed beforehand. The Registrant continues to receive the monthly net cash flow generated by the property.
On March 31, 1995, pursuant to the Court Order, ownership of the Cypress Run property was transferred to an affiliate of the Related General Partner. The affiliate has not made an equity investment in the underlying property; however, it will assume the day-to-day responsibilities and obligations of operating the property.
Due to the failure to pay 1990 and 1991 property taxes and interest from March to August 1992, the Registrant instituted foreclosure proceedings against Greenway Manor. On July 20, 1992, the Greenway partnership filed for bankruptcy under Chapter 11 of the United States Bankruptcy Code. Pursuant to a 1992 court order, the receiver paid the Registrant the cash flow remaining after paying past due taxes, property operating costs and escrowing for 1992 taxes. On June 30, 1993, the court dismissed the bankruptcy proceeding at which time the owner of the property and obligor under the FMB agreed to transfer the deed-in-lieu of foreclosure to an affiliate of the Related General Partner.
For several properties collateralizing FMBs (High Pointe Club, securing an $8,900,000 FMB; Greenway Manor, securing a $12,850,000 FMB and Cedar Creek, securing an $8,100,000 FMB) the original owners of the underlying properties and obligors of the FMBs were replaced by affiliates of the Related General Partner who have not made equity investments in the underlying properties. These entities have assumed the day-to-day responsibilities and obligations of operating the underlying properties. Buyers are being sought who would make equity investments in the underlying properties and assume the nonrecourse obligations for the FMBs. Although these properties are not producing sufficient cash flow to fully service the debt, the
Registrant has no present intention to declare a default on these FMBs. These FMBs are classified as ``Assets Held for Sale'' in the financial statements in the Registrant's Annual Report.
On May 31, 1992, Clarendon Hills Investors Inc. (``CHI''), an affiliate of the Related General Partner who had replaced the developer of the Clarendon Hills property, sold its ownership interest in the property to an unrelated third party (the ``Purchaser'') for $26,200,000. The Purchaser paid $2,000,000 in cash, assumed the $17,600,000 obligation of the Registrant's FMB and issued to CHI a $6,600,000 promissory note which in turn, was assigned to the Registrant. The $6,600,000 promissory note bears interest at the rate of 8.0% per annum payable in equal monthly installments until December 2003 at which time the entire unpaid principal and interest will be due and payable. The $1,441,209 in net cash proceeds of the sale (net of certain closing costs), paid by CHI to the Registrant to reduce accrued and unpaid interest, was recorded by the Registrant as deferred income and is being amortized as interest income from FMBs over the remaining life of the Clarendon Hills FMB. The balance of the deferred income relating to the Clarendon Hills FMB was approximately $1,117,000 at December 31, 1994.
In connection with the sale of the Clarendon Hills property by CHI, the FMB collateralized by the property was modified to provide for, among other things: the discharge of all accrued and unpaid interest relating to a previous owner (which for financial statement purposes had been fully reserved); a reduction of the base interest rate to 5.52% per annum on the $17,600,000 FMB; and a further reduction of the base interest during the first four years from closing of an amount equal to 50% of the increase in property taxes (if any) over the fiscal 1992 property tax bill resulting solely from this sale (limited to $35,000 per annum). In addition, the contingent interest feature was modified to assign annual cash flow as follows: (1) to pay the Registrant its 5.52% base rate on the FMB and to pay the 8.0% interest owed on the promissory note; (2) to assign the Purchaser the next $220,000 representing return on its investment; and then (3) to pay the Registrant 65% of cash flow until the Registrant receives an interest rate equal to 8.25% per annum on $24,200,000 ($17,600,000 FMB and $6,600,000 promissory note) for each respective year on a non-cumulative basis. Any remaining cash flow is then shared 65% by the Purchaser and 35% by the Registrant.
The FMBs for the East Ridge and Martin's Creek properties were modified in 1990 when the equity interest in the properties and the related obligations of the FMBs were sold by an affiliate of the Related General Partner to an unrelated third party. The modifications provide for minimum pay rate increases from 6.0% per annum in 1990 to 7.5% per annum in March 1996. These FMBs provide for a fluctuation in the interest rate in any one year to defray certain rehabilitation or extraordinary costs. Beginning in March 1997, the pay rate will be 8.25% per annum. The difference between the minimum interest rate and the original stated rate is payable out of available future cash flow. In addition, the contingent interest feature was changed. Under the modified terms of the FMBs, after the Registrant receives the minimum rate of interest, the borrower will receive all cash flow until it receives a 10% simple cumulative annual return on the borrower's cumulative investment. The Registrant will then be entitled to receive all previously accrued but unpaid contingent interest (0.84% per annum) and then 25% of all remaining cash flow, if any, in excess of an amount necessary to increase the borrower's return to 12% per annum on a cumulative, compounded basis.
During 1991, forbearance agreements were finalized with the owners of the North Glen and Thomas Lake properties. The General Partners further modified the North Glen forbearance agreement in April 1993 to allow the owner to make debt payments at a pay rate of 6.0% per annum through December 1995 at which time the rate is scheduled to increase to the stated rate of 8.5% per annum. The pay rate for the Thomas Lake property is scheduled to increase in annual increments to the original stated rate of 8.5% per annum in December 1996.
During 1992, a forbearance agreement was finalized with the owner of the Sunset Terrace property. Terms of the agreement call for a reduced pay rate of 7.0% per annum through May 1993 with scheduled annual increments to the original stated rate of 8.0% in May 1996. With respect to all of these FMBs, the difference between the pay rate and the original stated rate is deferred and payable out of available future cash flow or ultimately from sales or refinancing proceeds.
The determination as to whether it is in the best interest of the Registrant to enter into forbearance agreements on the FMBs or, alternatively, to pursue its remedies under the loan documents, including foreclosure, is based upon several factors. These factors include, but are not limited to, property performance, owner cooperation and projected legal costs.
The following FMB's interest income exceeded 15% of the Registrant's total revenue for one or more of the three years in the period ended December 31, 1994:
* FMB's interest income was less than 15% of the Registrant's total revenue for the year.
Credit Facility
On January 15, 1993, the Registrant entered into a loan agreement with an unaffiliated lender for a $15,000,000 credit facility with a maturity date of January 14, 1998 and an option to extend for two years for an additional fee. The debt service requirements include monthly interest only payments with a variable interest rate equal to the 30-day commercial paper interest rate (5.90% at December 31, 1994) plus 4.05% with principal due at maturity. The facility is collateralized by a pledge of the FMBs and associated collateral of East Ridge, Martin's Creek, The Mansion, Thomas Lake and Sunset Terrace. The initial proceeds from this facility were used to repay a $10,000,000 credit facility guaranteed by the Registrant, to repay a $3,000,000 noninterest-bearing working capital loan made to the Registrant from the Related General Partner and to pay associated closing costs. The $10,000,000 credit facility had been used to pay for costs incurred to complete construction of the properties securing the High Pointe Club and Clarendon Hills FMBs and to fund a loan toward the payment of property taxes on the Thomas Lake property. The $3,000,000 working capital loan was used to supplement distributions commencing with the fourth quarter 1988 distribution. The unused portion of the Registrant's $15,000,000 credit facility is to be used for future working capital requirements and contingencies of the Registrant, as necessary, subject to approval of the lender.
In conjunction with the Registrant's credit facility and the repayment of the previously existing $10,000,000 credit facility, the Registrant was assigned nonrecourse notes in the amount of $6,600,000, $3,180,000 and $220,000 from the Clarendon Hills, High Pointe Club and Thomas Lake properties, respectively. The Clarendon Hills promissory note, secured by a deed of trust, requires monthly interest only payments of 8.0% per annum with the principal due on December 1, 2003. The unsecured High Pointe Club note also requires monthly interest only payments of 8.0% per annum with the principal due on December 31, 2003. Since the High Pointe Club property is paying interest on a cash flow basis, interest on the promissory note is only recorded when cash flow is received in excess of the stated rate. No interest on the High Pointe Club promissory note has been received or recorded through December 31, 1994. The assigned High Pointe Club note is subordinate to the High Pointe Club FMB; therefore, the promissory note has been fully reserved. The Thomas Lake note, secured by a second mortgage on the property, requires monthly interest only payments based on the Citibank, N.A. prime rate (8.5% at December 31, 1994) plus 2.0% per annum with the principal due on April 5, 1995. The Registrant intends to extend Thomas Lake loan. Proposed terms call for a fixed interest rate of 8.5% with principal amortization over a 36 month period. Clarendon Hills and Thomas Lake are current on their interest payments.
Employees
The Registrant has no employees. Management and administrative services for the Registrant are performed by the General Partners and their affiliates pursuant to the Partnership Agreement. See Notes B and G to the financial statements of the Registrant's Annual Report which is filed as an exhibit hereto.
Other Information
On October 27, 1994, an affiliate of PBP, Prudential Securities Incorporated (``PSI''), entered into cooperation and deferred prosecution agreements (the ``Agreements'') with the Office of the United States Attorney
for the Southern District of New York (the ``U.S. Attorney''). The Agreements resolved a grand jury investigation that had been conducted by the U.S. Attorney into PSI's sale during the 1980's of the Prudential-Bache Energy Income Fund oil and gas limited partnerships (the ``Income Funds''). In connection with the Agreements, the U.S. Attorney filed a complaint charging PSI with a criminal violation of the securities laws. In its request for a deferred prosecution, PSI acknowledged to having made certain misstatements in connection with the sale of the Income Funds. Pursuant to the Agreements, the U.S. Attorney will defer any prosecution of the charge in the complaint for a period of three years, provided that PSI complies with certain conditions during the three-year period. These include conditions that PSI not violate any criminal laws; that PSI contribute an additional $330 million to a pre-existing settlement fund; that PSI cooperate with the government in any future inquiries; and that PSI comply with various compliance-related provisions. If, at the end of the three-year period, PSI has complied with the terms of the Agreements, the U.S. Attorney will be barred from prosecuting PSI on the charges set forth in the complaint. If, on the other hand, during the course of the three-year period, PSI violates the terms of the Agreements, the U.S. Attorney can elect to pursue such charges.
Item 2.

Item 2. Properties
The Registrant does not own or lease any property.
Item 3.

Item 3. Legal Proceedings
This information is incorporated by reference to Note H to the financial statements in the Registrant's Annual Report which is filed as an exhibit hereto.
Item 4.

Item 4. Submission of Matters to a Vote of BUC$holders
None
PART II
Item 5.

Item 5. Market for the Registrant's BUC$ and Related BUC$holder Matters
As of March 1, 1995, there were 7,358 holders of record owning 7,906,234 BUC$. The Registrant's BUC$ are listed on the American Stock Exchange under the SUA symbol; however, the limited partner interests themselves are not listed.
The high and low stock prices for each quarterly period of the last two years for which the BUC$ were traded are as follows:
Quarterly cash distributions per BUC paid during 1994 and 1993 were as follows:
There are no material restrictions upon the Registrant's present or future ability to make distributions in accordance with the provisions of the Partnership Agreement. Cash distributions paid in 1994 and 1993 were funded from adjusted cash flow from operations. In addition, the cash distributions paid in 1993 were supplemented by previously undistributed cash flow from operations. Approximately $1,069,000 of the $6,641,000 and $2,588,000 of the $6,641,000 paid to BUC$holders in 1994 and 1993, respectively, represent a return of capital on a generally accepted accounting principles (GAAP) basis (The return of
capital on a GAAP basis is calculated as BUC$holder distributions less net income allocated to BUC$holders). The Registrant currently expects that cash distributions will be paid in the foreseeable future from adjusted cash flow from operations. For discussion of other factors that may affect the amount of future distributions, see Management's Discussion and Analysis of Financial Condition and Results of Operations on pages 17 through 20 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 6.

Item 6. Selected Financial Data
The following table presents selected financial data of the Registrant. This data should be read in conjunction with the financial statements of the Registrant and the notes thereto on pages 2 through 16 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 7.

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
This information is incorporated by reference to pages 17 through 20 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 8.

Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data are incorporated by reference to pages 2 through 16 of the Registrant's Annual Report which is filed as an exhibit hereto.
Item 9.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.

Item 10. Directors and Executive Officers of the Registrant
There are no directors or executive officers of the Registrant. The Registrant is managed by the General Partners.
The Registrant, the Registrant's General Partners and their directors and executive officers, and any persons holding more than ten percent of the Registrant's BUC$ are required to report their initial ownership of such BUC$ and any subsequent changes in that ownership to the Securities and Exchange Commission on Forms 3, 4 and 5. Each executive officer, director and BUC$holder who owns greater than ten percent of
the Registrant's BUC$ are required by Securities and Exchange Commission regulations to furnish the Registrant with copies of all Forms 3, 4 or 5 they file. All of these filing requirements were satisfied on a timely basis. In making these disclosures, the Registrant has relied solely on written representations of the General Partners' directors and executive officers and BUC$holders who own greater than ten percent of the Registrant's BUC$ or copies of the reports they have filed with the Securities and Exchange Commission during and with respect to its most recent fiscal year.
Prudential-Bache Properties, Inc.
The directors and executive officers of PBP and their positions with regard to managing the Registrant are as follows:
Name Position James M. Kelso President, Chief Executive Officer, Chairman of the Board of Directors and Director Barbara J. Brooks Vice President--Finance and Chief Financial Officer Robert J. Alexander Vice President and Chief Accounting Officer Chester A. Piskorowski Vice President Frank W. Giordano Director Nathalie P. Maio Director
JAMES M. KELSO, age 40, is the President, Chief Executive Officer, Chairman of the Board of Directors and a Director of PBP. He is a Senior Vice President of PSI. Mr. Kelso also serves in various capacities for other affiliated companies. Mr. Kelso joined PSI in July 1981.
BARBARA J. BROOKS, age 46, is the Vice President-Finance and Chief Financial Officer of PBP. She is a Senior Vice President of PSI. Ms. Brooks also serves in various capacities for other affiliated companies. She has held several positions within PSI since 1983. Ms. Brooks is a certified public accountant.
ROBERT J. ALEXANDER, age 33, is a Vice President of PBP. He is a First Vice President of PSI. Mr. Alexander also serves in various capacities for other affiliated companies. Prior to joining PSI in July 1992, he was with Price Waterhouse for nine years. Mr. Alexander is a certified public accountant.
CHESTER A. PISKOROWSKI, age 51, is a Vice President of PBP. He is a Senior Vice President of PSI and is the Senior Manager of the Specialty Finance Asset Management area. Mr. Piskorowski has held several positions within PSI since April 1972. Mr. Piskorowski is a member of the New York and Federal Bars.
FRANK W. GIORDANO, age 52, is a Director of PBP. He is a Senior Vice President of PSI and General Counsel of Prudential Mutual Fund Management, Inc., an affiliate of PSI. Mr. Giordano also serves in various capacities for other affiliated companies. He has been with PSI since July 1967.
NATHALIE P. MAIO, age 44, is a Director of PBP. She is a Senior Vice President and Deputy General Counsel of PSI and supervises non-litigation legal work for PSI. She joined PSI's Law Department in 1983; presently, she also serves in various capacities for other affiliated companies.
There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers have indefinite terms.
Related Tax Exempt Bond Associates, Inc.
The directors and executive officers of the Related Tax Exempt Bond Associates, Inc. are as follows:
Name Position J. Michael Fried President and Director Stuart J. Boesky Vice President Alan P. Hirmes Vice President Lawrence J. Lipton Treasurer Stephen M. Ross Director Lynn A. McMahon Secretary
J. MICHAEL FRIED, 50, is President and a Director of the Related General Partner. Mr. Fried is President, a Director and a principal shareholder of Related Capital Company (``Capital''), a real estate finance and acquisition affiliate of the Related General Partner. In that capacity, he is the chief executive officer of Capital, and is responsible for initiating and directing all of Capital's syndication, finance, acquisition and investor reporting activities. Mr. Fried practiced corporate law in New York City with the law firm of Proskauer, Rose, Goetz & Mendelsohn from 1974 until he joined Capital in 1979. Mr. Fried graduated from Brooklyn Law School with a Juris Doctor degree, magna cum laude; from Long Island University Graduate School with a Master of Science degree in Psychology; and from Michigan State University with a Bachelor of Arts degree in History.
STUART J. BOESKY, 39, is Vice President of the Related General Partner. Mr. Boesky practiced real estate and tax law in New York City with the law firm of Shipley & Rothstein from 1984 until February 1986 when he joined Capital. From 1983 to 1984 Mr. Boesky practiced law with the Boston law firm of Kaye, Fialkow, Richard & Rothstein and from 1978 to 1980 was a consultant specializing in real estate at the accounting firm of Laventhol & Horwath. Mr. Boesky graduated from Michigan State University with a Bachelor of Arts degree and from Wayne State School of Law with a Juris Doctor degree. He then received a Master of Law degree in Taxation from Boston University School of Law.
ALAN P. HIRMES, 40, is a Vice President of the Related General Partner. Mr. Hirmes has been a Certified Public Accountant in New York since 1978. Mr. Hirmes is a Vice President of Capital. Prior to joining Capital in October 1983, Mr. Hirmes was employed by Weiner & Co., certified public accountants. Mr. Hirmes graduated from Hofstra University with a Bachelor of Arts degree.
LAWRENCE J. LIPTON, 38, is a Controller of the Related General Partner. Mr. Lipton has been a Certified Public Accountant in New York since 1989. Prior to joining Capital, Mr. Lipton was employed by Deloitte & Touche from 1987 to 1991. Mr. Lipton graduated from Rutgers College with a Bachelor of Arts degree and from Baruch College with a Masters of Business Administration degree.
STEPHEN M. ROSS, 54, is a Director of the Related General Partner. Mr. Ross is President of The Related Companies, L.P. He graduated from The University of Michigan with a Bachelor of Business Administration degree and from Wayne State University School of Law. Mr. Ross then received a Master of Law degree in taxation from New York University School of Law. He joined the accounting firm of Coopers & Lybrand in Detroit as a tax specialist and later moved to New York, where he worked for two large Wall Street investment banking firms in their real estate and corporate finance departments. Mr. Ross formed The Related Companies, Inc. in 1972, to develop, manage, finance and acquire subsidized and conventional apartment developments. To date, The Related Companies, Inc. has developed multi-family properties totalling in excess of 25,000 units, all of which it manages.
LYNN A. McMAHON, 39, is Secretary of the Related General Partner. Since 1983, she has served as Assistant to the President of Capital. From 1978 to 1983 she was employed at Sony Corporation of America in the Government Relations Department.
There are no family relationships among any of the foregoing directors or executive officers. All of the foregoing directors and executive officers serve indefinite terms.
Item 11.

Item 11. Executive Compensation
The Registrant does not pay or accrue any fees, salaries or any other form of compensation to directors and officers of the General Partners for their services. Certain officers and directors of the General Partners receive compensation from affiliates of the General Partners, not from the Registrant, for services performed for various affiliated entities, which may include services performed for the Registrant; however, the General Partners believe that any compensation attributable to services performed for the Registrant is immaterial. See Item 13 Certain Relationships and Related Transactions for information regarding compensation to the General Partners.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Management
As of March 1, 1995, the directors and officers of the Related General Partner directly own 99.97% of the voting securities of the Related General Partner; however, no director or officer of either General Partner owns directly or beneficially any interest in the voting securities of PBP.
As of March 1, 1995, directors and officers of the Related General Partner own directly or beneficially BUC$ issued by the Registrant as follows:
- ------------------ * Less than 1% of the BUC$ issued by the Registrant.
As of March 1, 1995, no director or officer of PBP owns directly or beneficially any BUC$ issued by the Registrant.
As of March 1, 1995, one BUC$holder beneficially owns more than five percent (5%) of the BUC$ issued by the Registrant as follows:
Item 13.

Item 13. Certain Relationships and Related Transactions
The Registrant has, and will continue to have, certain relationships with the General Partners and their affiliates. However, there have been no direct financial transactions between the Registrant and the directors or officers of the General Partners.
Reference is made to Notes B and G to the financial statements in the Registrant's Annual Report which is filed as an exhibit hereto, which identify the related parties and discuss the services provided by these parties and the amounts paid or payable for their services.
PART IV
Page in Annual Report
Item 14(a) Exhibits, Financial Statement Schedules and Reports on Form 8-K 1. Financial Statements and Independent Auditors' Report-Incorporated by reference to the Registrant's Annual Report which is filed as an exhibit hereto Independent Auditors' Report 2 Financial Statements: Statements of Financial Condition--December 31, 1994 and 1993 3 Statements of Operations--Three years ended December 31, 1994 4 Statements of Changes in Partners' Capital--Three years ended December 31, 1994 5 Statements of Cash Flows--Three years ended December 31, 1994 6 Notes to Financial Statements 7 2. Financial Statement Schedule and Independent Auditors' Report on Schedule Independent Auditors' Report on Schedule Schedule: II-Valuation and Qualifying Accounts and Reserves--Three years ended December 31, All other schedules have been omitted because they are not applicable or the required information is included in the financial statements and the notes thereto. 3. Exhibits Description:
3 Partnership Agreement, incorporated by and reference to Exhibit A to the Prospectus 4 of Registrant, dated February 19, 1986, filed pursuant to Rule 424(b) under the Securities Act of 1933, File No. 33-2421 Amended and Restated Certificate of Limited Partnership (incorporated by reference to Exhibit 4 to Registration Statement on Form S-11, File No. 33-2421)
10(a) First Mortgage Bond, dated May 13, 1986, with respect to The Mansion project, in the principal amount of $19,450,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated May 13, 1986)
10(b) First Mortgage Bond, dated May 20, 1986, with respect to the Martin's Creek project, in the principal amount of $7,300,000 (incorporated by reference to Exhibit 10(c) in Registrant's Current Report on Form 8-K dated May 20, 1986)
10(c) First Mortgage Bond, dated May 20, 1986, with respect to the East Ridge project, in the principal amount of $8,700,000 (incorporated by reference to Exhibit 10(b) in Registrant's Current Report on Form 8-K dated May 20, 1986)
10(d) First Mortgage Bond, dated July 29, 1986, with respect to the High Pointe Club project (formerly named Greenhill), in the principal amount of $8,900,000 (incorpo- rated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated July 29, 1986)
10(e) First Mortgage Bond, dated August 14, 1986, with respect to the Cypress Run project at Tampa Palms, in the principal amount of $15,750,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated August 14, 1986)
10(f) First Mortgage Bond, dated September 2, 1986, with respect to the Thomas Lake Place Apartments project, in the principal amount of $12,975,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated Sep- tember 2, 1986)
10(g) First Mortgage Bond, dated September 30, 1986, with respect to the North Glen Apartments project (formerly named Tempo Northridge), in the principal amount of $12,400,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated September 30, 1986)
10(h) First Mortgage Bond, dated October 9, 1986, with respect to the Greenway Manor project, in the principal amount of $12,850,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated October 9, 1986)
10(i) First Mortgage Bond, dated December 8, 1986, with respect to the Clarendon Hills Apartments project, in the principal amount of $17,600,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated December 8, 1986)
10(j) First Mortgage Bond, dated December 29, 1986, with respect to the Cedar Creek Village Apartments project, in the principal amount of $8,100,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated December 29, 1986)
10(k) First Mortgage Bond, dated February 12, 1987, with respect to the Sunset Terrace project, in the principal amount of $10,350,000 (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated February 12, 1987)
10(l) Loan Agreement dated September 19, 1990 between River Bank America and the Registrant (incorporated by reference to Exhibit 10(a) in Registrant's Current Report on Form 8-K dated September 19, 1990)
10(m) Note dated September 19, 1990 from the Registrant to River Bank America (incor- porated by reference to Exhibit 10(b) in Registrant's Current Report on Form 8-K dated September 19, 1990)
Pledge Agreement dated September 19, 1990 between River Bank America and the 10(n) Registrant (incorporated by reference to Exhibit 10(c) in Registrant's Current Report on Form 8-K dated September 19, 1990)
Indemnity and Reimbursement Agreement 10(o) dated September 19, 1990 between Stephen M. Ross and the Registrant (incorporated by reference to Exhibit 10(d) in Registrant's Current Report on Form 8-K dated September 19, 1990)
Settlement Agreement for the North Glen 10(p) First Mortgage Bond dated December 3, 1990 (incorporated by reference to Exhibit 10(p) in Registrant's Annual Report on Form 10-K dated December 31, 1991)
Settlement Agreement for the Thomas Lake 10(q) First Mortgage Bond dated July 11, 1991 (incorporated by reference to Exhibit 10(q) in Registrant's Annual Report on Form 10-K dated December 31, 1991)
Settlement Agreement for the Sunset 10(r) Terrace First Mortgage Bond dated July 10, 1992 (incorporated by reference to Exhibit 10(r) in the Registrant's Annual Report on Form 10-K dated December 31, 1992)
Assignment and Assumption Agreement for 10(s) the Clarendon Hills First Mortgage Bond dated May 1, 1992 (incorporated by reference to Exhibit 10(s) in the Regis- trant's Annual Report on Form 10-K dated December 31, 1992)
First Supplemental Indenture between City of Hayward and Seattle-First National Bank relating to the Clarendon Hills First 10(t) Mortgage Bond dated May 1, 1992 (incorporated by reference to Exhibit 10(t) in the Registrant's Annual Report on Form 10-K dated December 31, 1992)
Loan Agreement dated as of January 14, 10(u) 1993 between the Registrant and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(u) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993)
Pledge and Security Agreement dated as of 10(v) January 14, 1993 between the Registrant and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(v) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993)
Secured Promissory Note dated January 14, 10(w) 1993 between the Registrant and U.S. West Financial Services, Inc. (incorporated by reference to Exhibit 10(w) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993)
Promissory Note dated January 15, 1993 between the Registrant and RHA Inc. 10(x) (incorporated by reference to Exhibit 10(x) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993)
10(y) Nonrecourse Promissory Note Secured by Deed of Trust dated January 28, 1993 between Stephen P. Diamond and Clarendon Hills Investors, Inc. assigned to the Registrant (incorporated by reference to Exhibit 10(y) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993)
Assignment Agreement dated January 15, 1993 between Summit Tax Exempt Funding 10(z) Corporation and the Registrant (incorporated by reference to Exhibit 10(z) in the Registrant's Quarterly Report on Form 10-Q dated June 30, 1993)
Amended Settlement Agreement for the North 10(aa) Glen First Mortgage Bond dated June 1, 1993 (incorporated by reference to Exhibit 10(aa) in the Registrant's Annual Report on Form 10-K dated December 31, 1993)
Sale-Purchase Agreement between Mansion Apartment Project Investors, Inc., Seller and Independence Apartments Associates, 10(ab) L.P., Purchaser dated November 30, 1993 (incorporated by reference to Exhibit 10(ab) in the Registrant's Quarterly Report on Form 10-Q dated March 31, 1994)
Addendum to Sale-Purchase Agreement between Mansion Apartment Project In- vestors, Inc., Seller and Independence 10(ac) Apartments Associates, L.P., Purchaser dated March 31, 1994 (incorporated by reference to Exhibit 10(ac) in the Regis- trant's Quarterly Report dated March 31, 1994)
First Supplemental Indenture, dated as of 10(ad) October 18, 1994, between The Industrial Development Authority of the City of Independence, Missouri and Boatman's First National Bank of Kansas City relating to The Mansion project (filed herewith)
First Mortgage Bond, dated May 13, 1986 and revised as of October 18, 1994 with 10(ae) respect to The Mansion project, in the principal amount of $19,450,000 (filed herewith)
Registrant's 1994 Annual Report (with the exception of the information and data incorporated by reference in Items 3, 7 13 and 8 of this Annual Report on Form 10-K, no other information or data appearing in the Registrant's 1994 Annual Report is deemed filed as part of this report) (filed herewith)
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of the period covered by this report.
(LOGO)
Two World Financial Center Telephone: (212) 436-2000 New York, NY 10281-1424 Facsimile: (212) 436-5000
INDEPENDENT AUDITORS' REPORT
To the Partners of Summit Tax Exempt Bond Fund, L.P. New York, New York
We have audited the financial statements of Summit Tax Exempt Bond Fund, L.P. (a Delaware Limited Partnership) as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994, and have issued our report thereon dated April 12, 1995; such financial statements and report are included in your 1994 Annual Report and are incorporated herein by reference. Our audits also included the financial statement schedule of Summit Tax Exempt Bond Fund L.P., listed in Item 14(a)2. This financial statement schedule is the responsibility of the General Partners. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
/s/ Deloitte & Touche - --------------------------- April 12, 1995
(LOGO)
SUMMIT TAX EXEMPT BOND FUND, L.P. (a limited partnership) SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Valuation allowance for first mortgage bonds
Valuation allowance for uncollectible receivables
Valuation allowance for promissory notes
Valuation allowance for assets held for sale
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Summit Tax Exempt Bond Fund, L.P.
By: Prudential-Bache Properties, Inc. A Delaware corporation, General Partner By: /s/ Robert J. Alexander Date: April 17, 1995 --------------------------------------------- Robert J. Alexander Vice President and Chief Accounting Officer By: Related Tax Exempt Bond Associates, Inc. A Delaware corporation, General Partner By: /s/ Alan P. Hirmes Date: April 17, 1995 --------------------------------------------- Alan P. Hirmes Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities (with respect to the General Partners) and on the dates indicated.
By: Prudential-Bache Properties, Inc. A Delaware corporation, General Partner By: /s/ James M. Kelso Date: April 17, 1995 --------------------------------------------- James M. Kelso President, Chief Executive Officer, Chairman of the Board of Directors and Director By: /s/ Barbara J. Brooks Date: April 17, 1995 --------------------------------------------- Barbara J. Brooks Vice President - Finance and Chief Financial Officer By: /s/ Robert J. Alexander Date: April 17, 1995 --------------------------------------------- Robert J. Alexander Vice President By: /s/ Frank W. Giordano Date: April 17, 1995 --------------------------------------------- Frank W. Giordano Director By: /s/ Nathalie P. Maio Date: April 17, 1995 --------------------------------------------- Nathalie P. Maio Director
By: Related Tax Exempt Bond Associates, Inc. A Delaware corporation, General Partner
By: /s/ J. Michael Fried Date: April 17, 1995
--------------------------------------------- J. Michael Fried President and Director (Principal Executive Officer) By: /s/ Alan P. Hirmes Date: April 17, 1995 --------------------------------------------- Alan P. Hirmes Vice President (Principal Financial and Accounting Officer) By: /s/ Lawrence J. Lipton Date: April 17, 1995 --------------------------------------------- Lawrence J. Lipton Treasurer By: Stephen M. Ross Date: April 17, 1995 --------------------------------------------- Stephen M. Ross Director


ITEM 1 - BUSINESS
Except for a discussion of competition, information required by this item is incorporated by reference from portions of Mitchell Energy & Development Corp.'s Annual Report to Stockholders for the fiscal year ended January 31, 1994 furnished to the Commission pursuant to Rule 14a-3(b) under the Securities Exchange Act of 1934 (Annual Report to Stockholders).
Competition
The Registrant is a holding company which conducts all of its operations through its subsidiaries, collectively referred to as "the Company." The Company is one of the nation's largest independent oil and gas producers and is a leading real estate developer in the Houston-Galveston area. Its energy-related operations include the exploration for and production of natural gas and crude oil, production of natural gas liquids (NGLs) and the operation of intrastate pipelines. The Company has substantial real estate holdings, mostly within a 50-mile radius of Houston, Texas.
Within its energy businesses, the Company competes with many companies that have substantially larger financial and other resources or whose operations are more fully integrated than the Company's. The oil and gas industry is highly competitive. There is competition within the industry and also with other industries in supplying the fuel and energy needs of commerce, industry and individuals. Due to relatively higher domestic finding costs and continued unfavorable price levels for oil and gas, many energy companies have chosen in recent years to focus on international activities and to reduce or eliminate their U.S. operations. However, the Company intends to retain its domestic focus and hopes to benefit from lessened competition for prospects and the availability of opportunities for producing property acquisitions. From a competitive standpoint, those focusing on international activities have chosen to seek potentially more prolific opportunities in areas where operations generally are subject to much greater political risk and other uncertainties. Alternatively, the Company has chosen to limit these risks by continuing to operate only in the U.S. Also, the Company's operations and cash flows benefit from the fact that almost one-half of its natural gas production is sold under a long-term contract at prices well above those that are available currently for market-sensitive production.
The Company owns or has interests in over 60 natural gas processing plants located in Texas, Oklahoma and New Mexico, and it ranked 13th in daily domestic NGL production in calendar 1992. The Company also has fractionating equipment at several of its processing plants and owns a 38.75% interest in a large fractionating plant near Mont Belvieu on the upper Texas Gulf Coast. After being fractionated into ethane, propane, butanes and natural gasoline, the NGLs are used by others in the production of plastics, paints, solvents, synthetic rubber, gasoline and a wide variety of other products. Propane also is widely used as a fuel in rural areas for cooking, home heating and crop drying. The Company has entered the downstream business through its one-third interest in a partnership which is constructing a plant at Mont Belvieu, Texas, to produce MTBE, an oxygenate used in the production of environmentally cleaner gasoline. The plant, which has a design capacity of 12,500 barrels per day, is expected to begin production during the summer of 1994.
The Company owns or has interests in intrastate natural gas pipeline systems located in Texas with an aggregate length of over 4,000 miles. The Company's pipeline systems tend to be regional gathering systems which operate in highly competitive local markets. These pipelines intersect with numerous other pipelines, enabling the Company to buy, sell, transport and exchange gas with other pipeline operators. In the fall of 1992, the Company commenced limited operations of its Spindletop Gas Storage Facility, which is expected to improve the Company's competitive position in the petrochemical and industrial markets of Southeast Texas.
The Company's largest real estate development project--The Woodlands--is a 25,000-acre master-planned community with a population approaching 39,000. During each of the last four years, The Woodlands ranked first among Houston's residential communities in lot sales, new home sales and housing starts. The Woodlands Mall is under construction and is projected to open in October 1994 with four major anchor department stores. The Company believes the new mall will be a catalyst for additional commercial land sales and will enhance residential and commercial land values in The Woodlands. The number of residential communities competing for new home buyers in the Houston area is expected to increase, resulting in a reduced market share (based on the percentage of new homes sold) for the master-planned communities. However, with the related expansion in the size of the overall market, the Company anticipates that it will be able to maintain its residential unit sales volume near the level achieved in recent years. Several of the Houston area master-planned communities are owned by companies having substantially greater financial resources than the Company.
The Company's operations have been and may be in the future affected from time to time in varying degree by general economic conditions and by laws and regulations, including restrictions on production, price controls, tax increases and environmental regulations. The Company's energy price realizations are often volatile and generally are affected by world supply and demand conditions. Real estate sales, on the other hand, may be affected by available disposable income, interest rates, availability of financing and numerous other factors.
ITEM 2

ITEM 2 - PROPERTIES
Information required by this item is incorporated by reference from portions of the Annual Report to Stockholders.
OTHER OIL AND GAS RELATED DATA
The following information is required by Sections 3, 5 and 6 of the Securities Act Industry Guide 2, Disclosure of Oil and Gas Operations.
AVERAGE PRODUCTION COST IN EQUIVALENT UNITS(a)
(a) Includes equity partnership interests. (b) Expressed in equivalent units of production with barrels of oil converted to cubic feet of gas based on relative sales value.
UNDEVELOPED ACREAGE At January 31, 1994
- ---------------- (a) Expiring leases may be renewed if conditions warrant. (b) Percentage of the state's net acres located in the indicated areas of concentration. (c) Includes Alabama, Arkansas, California, Kansas, Louisiana, Mississippi, Montana, Nebraska, New York, Oklahoma, Pennsylvania and West Virginia.
DRILLING ACTIVITY (a) For the year ended January 31
___________________________ (a) Excludes service wells; includes equity partnership interests. (b) Mississippi, New York, Ohio and Pennsylvania. (c) An additional 50 wells (41.7 net wells) were in the process of being drilled or completed on January 31, 1994.
ITEM 3

ITEM 3 - LEGAL PROCEEDINGS
A settlement was reached in January 1994 for the previously reported litigation brought against two 45%-owned partnerships by a pipeline purchaser related to three contracts covering natural gas sales in Burleson County, Texas. The settlement agreement provided for new contracts and for no payment of damages by the partnership. While near-term revenues under the new contracts will likely be lower, the Company estimates that total revenues over the terms of these contracts will at least equal those which would have been received under the previous agreements.
ITEM 4

ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1994, no matter was submitted to a vote of security holders, either through the solicitation of proxies or otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following is a list of the executive officers of the Company as of April 1, 1994.
All of the executive officers, except Mr. Stevens, were elected at a Board of Directors meeting held on June 30, 1993 for a term of one year, or until their respective successors are qualified. Mr. Stevens was elected to the new position of President and Chief Operating Officer at the Board of Directors meeting held on December 10, 1993. His term of office began January 3, 1994 and will extend until the meeting of the Board following the next annual meeting of stockholders or until his successor is duly qualified.
There are no significant family relationships among the officers of the Company, either by blood, marriage or adoption.
PART II
ITEM 5

ITEM 5 - MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Except for the approximate number of holders of record of common stock securities, information required by this item is incorporated by reference from portions of the Annual Report to Stockholders.
The numbers of holders of Class A Common Stock and of Class B Common Stock at March 31, 1994 were 2,668 and 2,644, respectively. Including those whose shares are carried in street names, the Registrant estimates that there are approximately 9,000 holders of each class of its common stock.
ITEM 6

ITEM 6 - SELECTED FINANCIAL DATA
Information required by this item is incorporated by reference from pages 67 and 68 of the Annual Report to Stockholders under the caption "Historical Summary." Incorporation by reference from these pages is restricted to the information provided under the captions: Revenues, net earnings, net earnings per common share, cash dividends per common share, ratio of earnings to fixed charges, total assets and long-term debt for the fiscal years 1990 through 1994.
ITEM 7

ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information required by this item is incorporated by reference from pages 29 through 42 of the Annual Report to Stockholders.
ITEM 8

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is incorporated by reference from portions of the Annual Report to Stockholders.
ITEM 9

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
No Form 8-K's were filed by the Registrant during its fiscal years ended January 31, 1993 and 1994 or any subsequent period reporting a change of accountants or any disagreement on any matter of accounting principles, practices or financial statement disclosure.
PART III
ITEM 10

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item is incorporated by reference from portions of the Registrant's definitive Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after January 31, 1994 pursuant to Regulation 14A under the Securities Exchange Act of 1934 (Proxy Statement), under the caption "Election of Directors." See page 6 of this Form 10-K for information regarding Executive Officers of the Registrant.
ITEM 11

ITEM 11 - EXECUTIVE COMPENSATION
Information required by this item is incorporated by reference from portions of the Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after January 31, 1994, under the captions "Executive Compensation" and "Compensation Committee Interlocks and Insider Participation."
ITEM 12

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by this item is incorporated by reference from portions of the Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after January 31, 1994, under the caption "Voting Securities and Principal Holders Thereof."
ITEM 13

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item is incorporated by reference from portions of the Proxy Statement to be filed with the Securities and Exchange Commission within 120 days after January 31, 1994, under the caption "Certain Transactions."
PART IV
ITEM 14

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
FINANCIAL STATEMENT SCHEDULES
Schedules not listed above are omitted as the information required to be set forth therein is included in the consolidated financial statements or the footnotes thereto, or the schedules are not applicable.
EXHIBITS
The following exhibits 10(b) through 10(n) filed under paragraph 10 of Item 601 of Regulation S-K are the Company's management contracts and compensation plans or arrangements.
REPORTS FILED ON FORM 8-K
On January 18, 1994, Mitchell Energy & Development Corp. filed a Form 8-K reporting its intention to (1) issue $250 million of 6 3/4% Senior Notes Due 2004 pursuant to the terms of a Senior Debt Indenture dated January 1, 1993, as supplemented by a First Supplemental Indenture dated January 15, 1994, between Mitchell Energy & Development Corp. and NationsBank of Texas, National Association, as trustee and (2) redeem, with the proceeds from such issuance, its $200 million 11 1/4% Senior Notes Due 1999 at 103.21% of their principal amount.
On January 20, 1994, Mitchell Energy & Development Corp. filed a Form 8-K reporting its intention to (1) issue $100 million of 5.10% Senior Notes Due 2004 pursuant to the terms of the Senior Debt Indenture identified in the preceding paragraph and (2) repay floating-rate borrowings under revolving credit agreements of its primary energy and real estate subsidiaries.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Mitchell Energy & Development Corp.
/s/ GEORGE P. MITCHELL April 18, 1994 _________________________________________ George P. Mitchell, Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated.
/s/ GEORGE P. MITCHELL April 18, 1994 _________________________________________ George P. Mitchell, Chairman and Chief Executive Officer
/s/ BERNARD F. CLARK April 18, 1994 _________________________________________ Bernard F. Clark, Vice Chairman
/s/ W. D. STEVENS April 18, 1994 _________________________________________ W. D. Stevens, Director, President and Chief Operating Officer
/s/ PHILIP S. SMITH April 18, 1994 _________________________________________ Philip S. Smith, Senior Vice President - Administration, Chief Financial Officer and Principal Accounting Officer
/s/ ROBERT W. BALDWIN April 18, 1994 _________________________________________ Robert W. Baldwin, Director
/s/ WILLIAM D. EBERLE April 18, 1994 _________________________________________ William D. Eberle, Director
SIGNATURES (continued)
/s/ SHAKER A. KHAYATT April 18, 1994 _________________________________________ Shaker A. Khayatt, Director
/s/ BEN F. LOVE April 18, 1994 _________________________________________ Ben F. Love, Director
/s/ WALTER A. LUBANKO April 18, 1994 _________________________________________ Walter A. Lubanko, Director
/s/ J. TODD MITCHELL April 18, 1994 _________________________________________ J. Todd Mitchell, Director
/s/ M. KENT MITCHELL April 18, 1994 _________________________________________ M. Kent Mitchell, Director
/s/ MICHAEL B. MORRIS April 18, 1994 _________________________________________ Michael B. Morris, Director
_________________________________________ Raymond L. Watson, Director
/s/ BENJAMIN N. WOODSON April 18, 1994 _________________________________________ Benjamin N. Woodson, Director
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Mitchell Energy & Development Corp.:
We have audited, in accordance with generally accepted auditing standards, the consolidated financial statements included in Mitchell Energy & Development Corp.'s Annual Report to Stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated April 18, 1994. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The financial statement schedules listed in Item 14 on page 9 are the responsibility of the Company's management and are presented for purposes of complying with rules of the Securities and Exchange Commission, and are not part of the basic financial statements. These financial statement schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
Houston, Texas April 18, 1994
S-1 Mitchell Energy & Development Corp. and Subsidiaries SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDER- WRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEARS ENDED JANUARY 31, 1994, 1993 AND 1992 (in thousands)
___________________________ This receivable, which arose in conjunction with the acquisition of a pipeline company of which Mr. Wilshusen was formerly an owner, bears interest at prime and is secured by a second lien on certain real estate. This loan has been fully reserved.
S-2 Mitchell Energy & Development Corp. and Subsidiaries SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT -- PAGE 1 OF 4
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Mitchell Energy & Development Corp. CONDENSED BALANCE SHEETS January 31, 1994 and 1993 (in thousands)
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Mitchell Energy & Development Corp. CONDENSED STATEMENTS OF EARNINGS For the Years Ended January 31, 1994, 1993 and 1992 (in thousands except per share amounts)
___________________________ The accompanying notes are an integral part of these condensed financial statements.
S-3 Mitchell Energy & Development Corp. and Subsidiaries SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT -- PAGE 2 OF 4
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Mitchell Energy & Development Corp. CONDENSED STATEMENTS OF CASH FLOWS For the Years Ended January 31, 1994, 1993 and 1992
(in thousands)
___________________________ The accompanying notes are an integral part of these condensed financial statements.
S-4 Mitchell Energy & Development Corp. and Subsidiaries SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT -- PAGE 3 OF 4
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Mitchell Energy & Development Corp. NOTES TO CONDENSED FINANCIAL STATEMENTS JANUARY 31, 1994, 1993 AND 1992
(A) General. The accompanying condensed financial statements of Mitchell Energy & Development Corp. (MEDC) should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report to Stockholders of Mitchell Energy & Development Corp. and subsidiaries (the Company) for fiscal 1994, which is filed as an exhibit to this annual report on Form 10-K. For information regarding the components of and an analysis of the activity in stockholders' equity, refer to the Consolidated Statements of Stockholders' Equity included in the Company's Annual Report to Stockholders. For information regarding the issuance of Class B shares in fiscal 1994, the reclassification of MEDC's common stock in fiscal 1993 and the Company's stock option and bonus unit plans, see Notes 7 and 10 of Notes to Consolidated Financial Statements included in the Company's Annual Report to Stockholders. Also, see Note 4 for information regarding extraordinary losses from early debt retirements recorded in fiscal 1994 and fiscal 1993 and Note 11 for the cumulative effect of a change in accounting methods for postretirement benefits recorded in fiscal 1993. These charges reduced the reported equity in net earnings of subsidiaries for fiscal 1994 by $5,426,000 and for fiscal 1993 by $7,251,000 and $10,551,000, respectively.
(B) Income Taxes. MEDC is included in the consolidated tax return of the Company. As the parent company, MEDC allocates to its subsidiaries amounts equal to the income taxes that the subsidiaries would pay or receive as a refund if separate returns were filed. MEDC's income tax benefit in fiscal 1992 arose when certain tax carryforwards were estimated to be utilizable that previously had been expected to expire.
(C) Long-term Debt. A summary of outstanding long-term debt at January 31, 1994 and 1993 follows (in thousands):
During January 1994, MEDC called for redemption on February 25, 1994 its $200,000,000 of 11 1/4% Senior Notes Due 1999. This early redemption was completed at a price of 103.21% of principal, and the expensing of this premium and related unamortized debt issuance costs resulted in an extraordinary charge of $5,426,000 (after tax benefit of $2,921,000). This charge was recorded in fiscal 1994 since the loss was incurred when the debt was called in January 1994. Because all proceeds of senior note borrowings are advanced to the operating subsidiaries and all the costs of such indebtedness are rebilled to the subsidiaries, the extraordinary charge was allocated to MEDC's subsidiaries.
During January 1994, MEDC issued $250,000,000 of 6 3/4% Senior Notes Due 2004 and $100,000,000 of 5.10% Senior Notes Due 1997. Initially, the loan proceeds were advanced to MEDC's subsidiaries, which used them to pay down borrowings under their commercial paper and bank revolving credit agreements. In February 1994, the subsidiaries reborrowed a portion of the amounts temporarily paid down and advanced such funds to MEDC to fund the debt redemption mentioned in the preceding paragraph.
S-5 Mitchell Energy & Development Corp. and Subsidiaries SCHEDULE III - CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT -- PAGE 4 OF 4 ================================================================================
On April 13, 1992, MEDC redeemed its $250,000,000 of 11 1/4% Senior Notes Due 1997 using the proceeds of a March 1992 offering of $250,000,000 of 9 1/4% Senior Notes Due 2002. This early redemption was completed at a price of 103.21% of principal, and the expensing of this premium and related unamortized debt issuance costs resulted in an extraordinary charge of $7,251,000 (after tax benefit of $3,736,000), which was allocated to MEDC's subsidiaries as previously discussed.
During July 1992, MEDC issued $100,000,000 of 8% Senior Notes Due 1999. The proceeds of this financing were advanced to MEDC's subsidiaries, which used them to pay down borrowings under their bank revolving credit agreements.
Except for the notes which were redeemed in February 1994, the Company's senior notes have no sinking fund requirements and are not redeemable prior to their respective maturity dates. The senior note indentures contain certain restrictions which, among other things, limit cash dividend payments and additional borrowings, restrict the sale or lease of certain assets and limit MEDC's right to consolidate or merge with other companies. Retained earnings available for the payment of cash dividends totaled $351,954,000 at January 31, 1994.
Certain loan agreements of MEDC's subsidiaries limit the amount of cash advances and dividends that can be paid to MEDC. At January 31, 1994, transfers to MEDC of approximately $1,240,000,000 were available under these agreements.
(D) Debt Guarantees. At January 31, 1994, MEDC was contingently liable for the repayment of approximately $80,000,000 in outstanding debt of subsidiaries and certain of their equity investees. Also, MEDC had contingent liabilities at that date totaling approximately $6,000,000, consisting principally of debt guarantees for nonprofit institutions located in The Woodlands.
(E) General and Administrative Expense Allocation. General and administrative expense in the Condensed Statements of Earnings is net of amounts charged to subsidiaries of $43,222,000; $41,398,000 and $38,184,000 in fiscal 1994, 1993 and 1992. Such costs are allocated based on estimates of time spent and benefits derived by the subsidiaries from the services provided.
(F) Statements of Cash Flows. Short-term investments with a maturity of three months or less are considered to be cash equivalents. Bank revolving credit agreement borrowings with terms of three months or less are excluded from the amounts reported as debt proceeds and repayments. Interest paid totaled $53,625,000; $52,754,000 and $52,032,000 during the years ended January 31, 1994, 1993 and 1992. Income taxes of $12,240,000; $5,935,000 and $11,233,000 were paid during these same periods. There were no significant non-cash investing or financing activities during the three-year period ended January 31, 1994.
(G) Fair Value of Financial Instruments. The following table summarizes the carrying amounts and estimated fair values of MEDC's financial instruments for which it is practicable to estimate that value at January 31, 1994 (in thousands):
The estimated fair values for cash and cash equivalents are assumed to equal their carrying values because of the short maturities of these instruments. Estimated fair values of long-term debt are based on quoted market prices for these instruments. Estimated fair values of financial guarantees and commitments are based on the estimated costs of obtaining letters of credit to relieve MEDC of its obligations under such agreements.
S-6 Mitchell Energy & Development Corp. and Subsidiaries SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED JANUARY 31, 1994, 1993 AND 1992 (in thousands)
___________________________ * "Other changes" include transfers between asset categories and differences between the Company's equity in earnings (losses) of and distributions from equity investees, the investments in which are included in property, plant and equipment.
S-7 Mitchell Energy & Development Corp. and Subsidiaries SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE YEARS ENDED JANUARY 31, 1994, 1993 AND 1992 (in thousands)
- ------------------------- * "Other changes" for gas gathering and transmission for fiscal 1992 consist primarily of reductions related to assets that were contributed to a 45% owned partnership.
S-8 MITCHELL ENERGY & DEVELOPMENT CORP. AND SUBSIDIARIES INDEX TO EXHIBITS
INDEX TO EXHIBITS (Continued)
INDEX TO EXHIBITS (Continued)