SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A-1
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- ------- EXCHANGE ACT OF 1934
Commission File Number 0-28340
AMERICAN TAX-EXEMPT BOND TRUST
(Exact name of registrant as specified in its charter)
Delaware 13-7033312
- ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
625 Madison Avenue, New York, New York 10022
- ------------------------------- --------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
---- ----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMERICAN TAX-EXEMPT BOND TRUST
Balance Sheets
(Unaudited)
============== ==============
March 31, December 31,
2000 1999
------------- -------------
ASSETS
Investment in First Mortgage
Bonds - at fair value (Note 2) $ 26,042,379 $ 27,191,567
Cash and cash equivalents 602,328 726,567
Accrued interest receivable 181,696 181,696
------------ ------------
Total assets $ 26,826,403 $ 28,099,830
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to affiliates (Note 3) $ 960,621 $ 893,420
Accounts payable 380,400 458,081
------------ ------------
Total liabilities 1,341,021 1,351,501
------------ ------------
Shareholders' equity:
Beneficial owner's equity-manager (30,900) (29,529)
Beneficial owners' equity-
shareholders (1,501,481
and 1,501,481 shares
issued and outstanding,
respectively) 24,547,662 24,683,336
Treasury shares of beneficial
interest (37,960 and 37,960 shares,
respectively) (721,238) (721,238)
Accumulated other comprehensive
income:
Net unrealized gain on First
Mortgage Bonds 1,689,858 2,815,760
------------ ------------
Total shareholders' equity 25,485,382 26,748,329
------------ ------------
Total liabilities and shareholders'
equity $ 26,826,403 $ 28,099,830
============ ============
See Accompanying Notes to Financial Statements.
2
AMERICAN TAX-EXEMPT BOND TRUST
Statements of Operations
(Unaudited)
========================
Three Months Ended
March 31,
------------------------
2000 1999
------------------------
Revenues
Interest income:
First Mortgage Bonds (Note 2) $ 534,706 $ 525,942
Cash equivalents and
Marketable Securities 4,764 5,168
---------- ----------
Total revenues 539,470 531,110
---------- ----------
Expenses:
General and administrative 17,731 25,724
General and administrative-
related parties (Note 3) 22,303 26,113
Loan servicing fees (Note 3) 14,778 14,656
Amortization of organization costs 0 12,500
---------- ----------
Total expenses 54,812 78,993
---------- ----------
Net income $ 484,658 $ 452,117
========== ==========
Allocation of net income:
Shareholders $ 450,390 $ 418,174
Manager 4,549 4,224
Special distributions to Manager
(Note 3) 29,719 29,719
---------- ----------
Net income $ 484,658 $ 452,117
========== ==========
Weighted average shares -
shareholders 1,463,521 1,464,969
========== ==========
Basic net income per
weighted average share-
shareholders $ .31 $. 29
========== ==========
See Accompanying Notes to Financial Statements.
3
AMERICAN TAX-EXEMPT BOND TRUST
Statement of Changes in Shareholders' Equity
(Unaudited)
Accumulated
Beneficial Beneficial Treasury Other
Owners' Owner's Shares Of Compre- Compre-
Equity- Equity- Beneficial hensive hensive
Total Shareholders Manager Interest Income Income
------------- ------------- -------------- -------------- ------------ --------------
Balance at January 1, 2000 $ 26,748,329 $ 24,683,336 $ (29,529) $ (721,238) $ 2,815,760
Comprehensive Income:
Net income 484,658 450,390 34,268 0 0 $ 484,658
Other Comprehensive Income:
Net unrealized gain (loss) on First
Mortgage Bonds (1,125,902) 0 0 0 (1,125,902) (1,125,902)
Distributions (621,703) (586,064) (35,639) 0 0
------------ ------------ ------------ ------------ ------------ ------------
Total Comprehensive Income: $ (641,244)
============
Balance at March 31, 2000 $ 25,485,382 $ 24,547,662 $ (30,900) $ (721,238) $ 1,689,858
============ ============ ============ ============ ============
See Accompanying Notes to Financial Statements.
4
AMERICAN TAX-EXEMPT BOND TRUST
Statements of Cash Flows
(Unaudited)
======================
Three Months Ended
March 31,
----------------------
2000 1999
----------------------
Cash flows from operating activities:
Net income $ 484,658 $ 452,117
--------- ---------
Adjustments to reconcile net
income to net cash
provided by operating activities
Amortization expense-
organization costs 0 12,500
Amortization expense-loan
origination costs 23,286 23,286
Changes in operating assets and
liabilities:
Decrease in accrued
interest receivable 0 (3,102)
Increase in due to affiliates 67,201 70,093
Decrease in accounts payable (77,681) (6,232)
--------- ---------
Total adjustments 12,806 96,545
--------- ---------
Net cash provided by operating
activities 497,464 548,662
--------- ---------
Cash flows from investing activities:
Purchase of marketable securities 0 (300,000)
--------- ---------
Net cash used in investing activities 0 (300,000)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of shares
of beneficial interest 0 58,980
Distributions to shareholders (621,703) (620,627)
Purchase of treasury shares of
beneficial interest 0 (58,976)
--------- ---------
Net cash used in
financing activities (621,703) (620,623)
--------- ---------
5
AMERICAN TAX-EXEMPT BOND TRUST
Statements of Cash Flows
(continued)
(Unaudited)
======================
Three Months Ended
March 31,
----------------------
2000 1999
----------------------
Net decrease in cash and
cash equivalents (124,239) (371,961)
Cash and cash equivalents at
beginning of period 726,567 889,126
------- -------
Cash and cash equivalents at
end of period $602,328 $517,165
======= =======
6
See Accompanying Notes to Financial Statements.
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
March 31, 2000
(Unaudited)
Note 1 - General
American Tax-Exempt Bond Trust (the "Trust") was formed on December 23, 1993 as
a finite life, closed end Delaware business trust for the purpose of investing
in tax-exempt first mortgage bonds ("First Mortgage Bonds") issued by various
state or local governments or their agencies or authorities and secured by first
mortgage loans on multifamily residential apartment and retirement community
projects. The Trust operates in one segment, Investment in First Mortgage Bonds.
Related AMI Associates, Inc. is the Manager ("Manager") of the Trust.
Pursuant to the Redemption Plan which became effective October 15, 1996, the
Trust is required to redeem eligible shares presented for redemption for cash to
the extent it has sufficient Reinvestment Proceeds from the sale of shares under
the Reinvestment Plan. The Redemption Plan has been suspended pending the vote
on the Merger, described below.
The Trust has invested the Net Proceeds in First Mortgage Bonds issued by
various state or local governments or their agencies or authorities which are
secured by first mortgages and related first mortgage loans financed by such
bonds (collectively, "Mortgage Loans") on three multifamily residential
apartment projects owned by third-party developers and one underlying property
owned by RHA Inv., Inc. (the "Borrower") an affiliate of the Manager by virtue
of the fact that Stephen Ross is on the Board of Trustees of both the Borrower
and the Manager and owns 40% and 67.2% of each entity, respectively. The Trust
is also permitted to invest in other tax-exempt securities which have shorter
maturities than First Mortgage Bonds ("Tax-Exempt Securities"). However, all
Tax-Exempt Securities owned by the Trust have matured and the Trust does not
anticipate making additional investments in Tax-Exempt Securities.
On November 2, 1999, the Trust, Charter Municipal Mortgage Acceptance Company, a
Delaware business trust ("CharterMac"), and CM Holding Trust, a Delaware
business trust, a wholly owned subsidiary of CharterMac ("CharterMac Sub"),
entered into an Agreement and Plan of Merger (the "Merger Agreement"), providing
for the merger of the Trust (the "Merger") with and into CharterMac Sub, with
CharterMac Sub as the surviving entity in the Merger. Pursuant to the Merger
Agreement and upon the terms and subject to the conditions and limita-
7
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
March 31, 2000
(Unaudited)
tions therein, each issued and outstanding share of beneficial interest in the
Trust (the "Trust Shares") will be converted into the right to receive 1.43112
shares of beneficial interest in CharterMac (the "CharterMac Shares").
CharterMac and the Trust are both managed by affiliates of Related Capital
Company.
Consummation of the Merger, which is expected in the third quarter of 2000, is
subject to various conditions, including approval of the Merger by the
shareholders of the Trust. Prior to such shareholders' meeting, CharterMac will
file a registration statement with the Securities and Exchange Commission
registering under the Securities Act of 1933, as amended, the CharterMac Shares
to be issued in exchange for the outstanding Trust Shares. Such CharterMac
Shares will be offered to the Trust shareholders only pursuant to a prospectus
that will also serve as a consent statement for the shareholders of the Trust.
If the Merger is completed, CharterMac and the Trust will pay their own fees and
expenses. The Trust has accrued but not paid all merger-related costs incurred
as of March 31, 2000. If the Merger Agreement is terminated because the Trust
shareholders do not approve the Merger, CharterMac will pay its own fees and
expenses and the Manager, or one of its affiliates, will pay all fees and
expenses incurred by the Trust. If the Merger Agreement is terminated for any
reason other than the failure of the Trust shareholders to approve the Merger,
CharterMac and the Trust will pay their own fees and expenses. If the Trust
shareholders do not approve the Merger it is expected the Manager would be paid
all accrued and unpaid fees and special distributions thereby reducing the cash
available for distribution.
The Trust follows the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standards ("SFAS") SFAS No. 115 ACCOUNTING FOR
CERTAIN INVESTMENTS IN DEBT AND EQUITY SECURITIES. At March 31, 2000 and
December 31, 1999, the Trust has classified its first mortgage bonds and
marketable securities as available for sale.
The books and records of the Trust are maintained on the accrual basis of
accounting in accordance with Generally Accepted Accounting Principles. In the
opinion of the Manager, the accompanying unaudited financial statements contain
all adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial position of the Trust as of March 31, 2000, the
results of operations and its cash flows for the three months ended March 31,
2000 and 1999. However,
8
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
March 31, 2000
(Unaudited)
the operating results for the three months ended March 31, 2000 may not be
indicative of the results for the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Trust's Annual Report on Form 10-K for the year ended December 31, 1999.
Note 2 - Investment in First Mortgage Bonds
GENERAL
The cost basis of the First Mortgage Bonds was $24,352,521 and $24,375,807 at
March 31, 2000 and December 31, 1999. The net unrealized gain on First Mortgage
Bonds of $1,689,858 and $2,815,760 as of March 31, 2000 and December 31, 1999,
respectively, consists of gross unrealized gains and losses of $1,763,564 and
$73,706, respectively, at March 31, 2000 and $2,834,868 and $19,108,
respectively, as of December 31, 1999.
9
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
March 31, 2000
(Unaudited)
Note 2 - Investment in First Mortgage Bonds
Information relating to investments in First Mortgage Bonds as of March 31, 2000
and December 31, 1999 are as follows:
Date of Accumu-
Invest- Outstanding lated
ment Loan Loan Amorti- Unrealized
Final Balance At Origina- zation At Gain At Balance At Balance At
Descrip- Maturity March tion March March March December
Property tion Date Prepayment 31, 2000 Costs 31, 2000 31, 2000 31, 2000 31, 1999
- -------- ------- --------- ---------- --------- --------- --------- --------- ----------- ------------
Reflections
Apartments 336 Permitted
Casselbury, Apt. 12/95 - after
Florida (A) Units 12/25 12/1/99 $10,700,000 $ 293,914 $(124,913) $ 864,649 $11,733,650 $12,881,227
Rolling Ridge
Apartments 110 Permitted
Chino Hills, Apt. 8/96- after
California(B) Units 8/26 8/1/00 4,925,000 241,725 (88,632) 607,885 5,685,978 5,739,311
Lexington Trails
Apartments 200 Permitted
Houston, Apt. 5/97- after
Texas (C) Units 5/22 5/1/02 4,900,000 123,886 (36,134) 291,030 5,278,782 5,165,665
Highpointe
Apartments
Harrisburg, 240
Pennsylvania Apt. 9/97- Not
(D) Units 6/06 Permitted 3,250,000 237,917 (70,242) (73,706) 3,343,969 3,405,364
-----------------------------------------------------------------------------
$23,775,000 $ 897,442 $(319,921) $1,689,858 $26,042,379 $27,191,567
==============================================================================
Debt
Service
Earned Less Net
By The 2000 Interest
Trust Amorti- Earned
Property For 2000 zation For 2000
- --------- -------------- ----------- --------------
Reflections
Apartments
Casselbury,
Florida (A) $ 259,600 $ (7,348) $ 252,252
Rolling Ridge
Apartments
Chino Hills,
California(B) 115,017 (6,043) 108,974
Lexington Trails
Apartments
Houston,
Texas (C) 110,250 (3,097) 107,153
Highpointe
Apartments
Harrisburg,
Pennsylvania
(D) 73,125 (6,798) 66,327
-------------------------------------------
$ 557,992 $ (23,286) $ 534,706
===========================================
(A) The interest rate for the Reflections is 9.00%. In addition to the interest
rate the Trust will be entitled to 25% of the cash flow, as defined.
(B) The interest rate for the Rolling Ridge is 9.00%. In addition to the
interest rate the Trust will be entitled to 30% of the cash flow, as
defined.
(C) The interest rate for the Lexington Trails is 9.00%.
(D) The interest rate for the Highpointe is 9.00%.
10
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
March 31, 2000
(Unaudited)
Note 3 - Related Party Transactions
The costs incurred to related parties for the three months ended March 31, 2000
and 1999 were as follows:
Three Months Ended
March 31,
-------------------------
2000 1999
-------------------------
Special distributions (i) $29,719 $29,719
Expense reimbursements (ii) 22,303 26,113
Loan servicing fees (iii) 14,778 14,656
--------- ----------
$66,800 $70,488
========= ==========
In accordance with the Trust Agreement, the Manager received or is entitled to
receive (i) special distributions calculated as a percentage of total assets
invested by the Trust in its capacity as a general partner of the Trust; the
total amount accrued and unpaid as of March 31, 2000 and December 31, 1999
amounted to $344,516 and $314,797, respectively; (ii) reimbursement of certain
administrative costs incurred by the Manager or an affiliate on behalf of the
Trust; the total amount accrued and unpaid as of March 31, 2000 and December 31,
1999 amounted to $481,671 and $459,368, respectively; (iii) loan servicing fees
calculated as a percentage of total assets invested by the Trust, the total
amounts accrued and unpaid as of March 31, 2000 and December 31, 2000 and
December 31, 1999 amounted to $133,164 and $118,386, respectively; (iv) a
subordinated incentive fee based on the gain on the sale of the tax-exempt First
Mortgage Bonds.
If the merger is consummated, the Manager will waive the payment of all deferred
and unpaid fees, reimbursements and expenses due the Manager through June 30,
1999. The deferred fees, reimbursements and expenses due to the Manager totaled
$755,747 at June 30, 1999.
Note 4 - Subsequent Event
In May 2000, distributions of approximately $586,000 and $6,000 will be paid to
the Shareholders and the Manager, respectively, representing the 2000 first
quarter distribution.
11
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
LIQUIDITY AND CAPITAL RESOURCES
The Trust has invested the Net Proceeds in First Mortgage Bonds issued by
various state or local governments or their agencies or authorities which are
secured by first mortgages and related first mortgage loans financed by such
bonds (collectively, "Mortgage Loans") on three multifamily residential
apartment projects owned by third-party developers and one underlying property
owned by RHA Inv., Inc. (the "Borrower") an affiliate of the Manager by virtue
of the fact that Stephen Ross is on the Board of Trustees of both the Borrower
and the Manager and owns 40% and 67.2% of each entity, respectively. The First
Mortgage Bonds have maturities ranging from June 2006 to August 2026, although
the Trust anticipates holding the First Mortgage Bonds for approximately 10 to
12 years and has the right to cause repayment of the bonds at that time, unless
the First Mortgage Bonds are repaid prior to maturity (in which event the Trust
may seek to reinvest the repayment proceeds through September 2002). The Trust
is also permitted to invest in Tax-Exempt Securities. However, all Tax-Exempt
Securities owned by the Trust have matured and the Trust does not anticipate
making additional investments in Tax-Exempt Securities.
During the three months ended March 31, 2000, cash and cash equivalents
decreased approximately $124,000 due to distributions to shareholders ($622,000)
which exceeded cash provided by operating activities ($497,000). Included in the
adjustments to reconcile the net income to cash provided by operating activities
is amortization in the amount of approximately $23,000.
Pursuant to the Redemption Plan which became effective October 15, 1996, the
Trust is required to redeem eligible shares presented for redemption for cash to
the extent it has sufficient net proceeds from the sale of shares under the
Reinvestment Plan. The Redemption Plan has been suspended pending the vote on
the Merger, described herein.
The Trust expects that cash generated from its investments will no longer be
sufficient to pay all of the Trust's operating expenses, including the special
distribution, in both the short term and long term in the foreseeable future if
the Trust were to continue to pay distributions to all shareholders at the
current rate. Certain expense reimbursements totaling approximately $482,000 and
$459,000 at March 31, 2000 and December 31, 1999, respectively, and the payment
of a portion of the special distribution totaling approximately $345,000 and
$315,000 at March 31, 2000 and December 31, 1999, respectively, to the Manager
12
have been accrued and are unpaid. The Manager has continued allowing the accrual
without payment of these amounts but is under no obligation to continue to do
so. If the Merger is completed, CharterMac and the Trust will pay their own fees
and expenses. The Trust has accrued but not paid all merger-related costs
incurred as of March 31, 2000. If the Merger Agreement is terminated because the
Trust shareholders do not approve the Merger, CharterMac will pay its own fees
and expenses and the Manager, or one of its affiliates, will pay all fees and
expenses incurred by the Trust. If the Merger Agreement is terminated for any
reason other than the failure of the Trust shareholders to approve the Merger,
CharterMac and the Trust will pay their own fees and expenses. If the Trust
shareholders do not approve the Merger it is expected the Manager would be paid
all accrued and unpaid fees and special distributions thereby reducing the cash
available for distribution.
The Trust anticipates that cash generated from the operations of the underlying
properties (taking into account its preferred position relative to other
creditors) will be sufficient to meet the required debt service payments to the
Trust with respect to the First Mortgage Bonds for both the short term and long
term foreseeable future.
DISTRIBUTION POLICY
Quarterly distributions were made 45 days following the close of the calendar
quarter and were funded from cash provided from earnings through approximately
the distribution dates and proceeds from the maturity of investments, together
with the deferral by the Manager of amounts owed to it.
There are no material legal restrictions on the Trust's present or future
ability to make distributions in accordance with the provisions of the Trust
Agreement. Distributions to the Trust shareholders are at the sole discretion of
the Manager based on numerous factors. Throughout its offering and acquisition
period, the Trust had established and maintained a distribution rate that the
Trust expected to be able to pay after it had fully invested the proceeds of its
initial offering, which required that distributions be supplemented by a return
of capital until earnings from bonds acquired by the Trust stabilized.
When the Trust's acquisition stage was completed at the end of 1997, the Trust
realized that the actual performance of its investment portfolio would not
support the initial distribution rate that it had set based on its original
internal assumptions. As a result, the Manager met and amended the distribution
policy pursuant to the Trust Agreement. The Trust's new distribution policy,
adopted in the first quarter of 1998, calls for quarterly distributions that
more closely reflect the actual, rather than the originally expected,
collections of interest payments on
13
its portfolio. However, rather than implement this new policy immediately, the
Trust sought alternative ways to maintain the current distribution rate. During
this time, the Trust continued to pay distributions at the current rate by
supplementing its interest receipts with the proceeds from repayment of its
short-term investments in 1998 and 1997.
In addition, although under no obligation to do so, over the last eight
quarters, including the quarter ended March 31, 2000, the Manager has deferred
payment of expenses, reimbursements and fees payable to it in order to further
supplement the cash available to maintain the current distribution rate. The
Trust will soon deplete the remaining repayment proceeds from its short-term
investments. In addition, the Manager has indicated that it is no longer willing
to continue to defer receipt of expenses, reimbursements and fees it is owed.
As a result under this new distribution policy, the Manager believes that the
Trust's future annual distributions to its shareholders will be between $0.96
and $0.80 per share, which is a decrease of between 40% and 50% from the current
level of $1.60 per share and a decrease in the annualized return from 8% to
between 4% and 4.8%, based on the original per share purchase price of the
Trust's shares. It is anticipated that, if approved and completed, the proposed
merger would enable the Trust shareholders to receive annual per share
distributions from CharterMac which are expected to be only slightly less than
the current level of distributions Trust shareholders receive, based upon the
number of CharterMac common shares they will receive and the current
distribution being said on CharterMac common shares and greater than the
distributions which would be paid to shareholders under the Trust's distribution
policy going forward.
Of the total distributions of $621,703 and $620,627 paid during the three months
ended March 31, 2000 and 1999, $137,045 ($.09 per share or 22%) and $168,510
($.11 per share or 27%) represents a return of capital determined in accordance
with generally accepted accounting principles. As of March 31, 2000, the
aggregate amount of the distributions made since the commencement of the
Offering representing a return of capital, in accordance with generally accepted
accounting principles, totaled $2,821,217. The portion of the distributions
which constitute a return of capital was significant during the acquisition
stage in order to maintain level distributions to shareholders.
14
RESULTS OF OPERATIONS
The results of operations for the three months ended March 31, 2000 and 1999
consisted primarily of interest income earned on First Mortgage Bonds and
marketable securities, net of general and administrative, general and
administrative-related parties and loan servicing fees.
General and administrative expenses decreased approximately $8,000 for the three
months ended March 31, 2000 as compared to the corresponding period in 1999
primarily due to a decrease in legal and computer consulting fees.
General and administrative-related parties decreased approximately $4,000 for
the three months ended March 31, 2000 as compared to the corresponding period in
1999 primarily due to lower expense reimbursements to affiliates of the Manager.
Amortization of organization costs decreased approximately $13,000 for the three
months ended March 31, 2000 as compared to the corresponding period in 1999 due
to the adoption of Statement of Position 98-5 REPORTING ON COSTS OF START-UP
ACTIVITY, pursuant to which the Trust expensed all unamortized organization
costs as of January 1, 1999.
During the quarter ended March 31, 2000, the Trust recognized a reduction in the
fair market value of the First Mortgage Bonds in the amount of $1,125,902 to
reflect the effects of revisions to the cash flow projection of the underlying
properties as well as the Trust's assumptions relating to the timing of
prepayment of the First Mortgage Bonds. For a description of the Trust's
investments in First Mortgage Bonds see Note 2 of Notes to the Financial
Statements.
In the first quarter of 2000, the Trust received audited financial information
form the owners of the underlying properties. On an aggregate basis, the net
operating income of the underlying properties based on these reports was lower
than the unaudited net operating income previously reported by the property
owners. Accordingly, in the first quarter 2000, the Trust adjusted the
underlining cash flow projections of the properties and the level of
participation interest expected to be collected. In addition, the Trust
evaluated the sale/refinance scenarios and adjusted the assumptions regarding
the timing of the prepayment of certain of the bonds. As a result of these
adjustments in the assumptions with regard to the timing of prepayments of
certain of the bonds, together with the property level cash flow adjustments
noted above, the Trust adjusted the fair market value of the bonds by
approximately $1.1 million. Approximately 75% of this adjustment is attributable
to a decrease in anticipated cash flows of the underlying properties and the
level of participation interest expected to be collected and 25% of the
adjustment to
15
fair market value of bonds is attributable to adjustments in the assumptions
with regard to the timing of prepayments.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Trust is exposed to interest rate risk as it relates to its investments in
First Mortgage Bonds. At March 31, 2000, 97% of the Trusts assets are invested
in four First Mortgage Bonds, all of which have a fixed interest rate of 9% and
maturities ranging from 10 to 30 years. The First Mortgage Bonds are classified
as available for sale and are carried at fair value with a net unrealized gain
of $1,689,858 reported as a separate component of accumulated other
comprehensive income. Two First Mortgage Bonds, representing 67% of the total
investment in First Mortgage Bonds, are also entitled to participation in the
cash flow from operations of the underlying property.
The fair value of the First Mortgage Bonds is estimated by the Manager based on
the current interest rate environment for similar securities, cash flow
projections for the underlying properties, a reversion estimate, prepayment
assumptions and an estimate of cash flow participation, if and when applicable.
A 1% increase in the current interest rate environment assumption at March 31,
2000 would result in a decrease of approximately $470,000 in the net unrealized
gain on First Mortgage Bonds.
The Trust's ultimate realized gain or loss as it relates to interest rate
fluctuations is dependent on when, and if, the Trust disposes of the First
Mortgage Bonds prior to maturity. The Trust has the right to call for mandatory
redemption of the First Mortgage Bonds after a period of 10 to 12 years from the
date of issuance or acquisition, generally, the First Mortgage Bonds are
locked-out from prepayment during the first five years, and are subject to
annually declining prepayment premiums in years six through ten.
16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) 3. EXHIBITS
3(a) Certificate of Trust and Certificate of Amendment of Certificate of
Trust (incorporated by reference to Exhibit 3(a) to the Registration Statement
on Form S-11, File No. 33-73688).
3(b),4 Second Amended and Restated Business Trust (incorporated by
reference to Exhibit 3(b), 4 to the Registration Statement on Form S-11, File
No. 33-73688)
10(a) Escrow Agreement (incorporated by reference to Exhibit 10(a) to the
Registration Statement on Form S-11, File No. 33-73688).
10(b) Fee Agreement (incorporated by reference to Exhibit 10 (b) to the
Registration Statement on Form S-11, File No. 33-73688).
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended March 31,
2000.
17
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.
AMERICAN TAX-EXEMPT BOND TRUST
(Registrant)
By: RELATED AMI ASSOCIATES, INC.,
as Manager
Date: July 31, 2000
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Senior Vice President, Principal
Financial Officer, Treasurer and
Principal Accounting Officer