SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 33-73688
AMERICAN TAX-EXEMPT BOND TRUST
(Exact name of registrant as specified in its governing instrument)
Delaware 13-7033312
- -------------------------------- ------------------------------------
(State or other jurisdiction
of incorporation or organization) (I.R.S. Employer 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
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's prospectus dated November 1, 1994, as filed with the
Commission pursuant to Rule 424(b) of the Securities Act of 1933, but only to
the extent expressly incorporated by reference in Parts I, II, III and IV.
Index to exhibits may be found on page 29
Page 1 of 64
PART I
Item 1. Business.
General
American Tax-Exempt Bond Trust (the "Trust") is a business trust which
was formed under the laws of the State of Delaware on December 23, 1993. The
Manager to the Trust is Related AMI Associates, Inc., a Delaware corporation
("Related AMI" or the "Manager"). The Manager manages the day to day affairs of
the Trust pursuant to the Second Amended and Restated Business Trust Agreement
(the "Trust Agreement"), dated as of September 27, 1994, among Related AMI, as
grantor, Related AMI, as Manager, Wilmington Trust Company, a Delaware banking
corporation, as trustee, and the other persons referred to herein to be holders
of beneficial interests in the Trust. See Item 10, Directors and Executive
Officers of the Registrant, below.
On November 1, 1994, the Trust commenced a public offering (the
"Offering") of its shares of beneficial interest, managed by Related Equities
Corporation (the "Dealer Manager"), pursuant to a prospectus dated November 1,
1994. As of December 31, 1995, a total of approximately 937,359 shares have been
sold through the Offering and approximately 1,587 through the Reinvestment Plan,
representing Gross Proceeds of $18,778,912 (before volume discounts of $1,860).
For the period January 1, 1996 to March 7, 1996, a total of approximately
117,260 additional shares were sold through the Offering and approximately 1,682
through the Reinvestment Plan representing Gross Proceeds of $2,378,848 (before
volume discounts of $1,424).
The Trust's principal investment objectives are to: (i) preserve and
protect the Trust's invested capital; (ii) provide quarterly distributions that
are exempt from Federal income taxation; and (iii) provide additional
distributions in connection with First Mortgage Bond investments from Contingent
Interest payments exempt from Federal income taxation. There can be no assurance
that such objectives will be achieved.
The Trust intends to invest the Net Proceeds primarily in First Mortgage
Bonds issued by various state or local governments or their agencies or
authorities and secured by first mortgages and related first mortgage loans
financed by such bonds (collectively, "Mortgage Loans") principally on
multifamily residential apartment projects and, secondarily, retirement
community projects owned or to be developed by third-party developers and, to a
lesser extent, by Affiliates of the Manager. The principal amount of a Mortgage
Loan at the time the loan is made or after a First Mortgage Bond is acquired and
restructured, together with all mortgage loans on the subject property, will
generally not exceed 85% of the appraised fair market value of the related
property. The First Mortgage Bonds will have maturities of 10 to 35 years,
although the Trust anticipates holding the First Mortgage Bonds for
approximately 10 to 12 years and having the right to cause repayment of the
bonds at that time. The First Mortgage Bonds will normally be structured so that
no principal payments will be due thereon until the scheduled maturity or
earlier redemption of such bonds, at which point a lump sum or "balloon" payment
of the outstanding principal will be due. In addition, the Trust may invest up
to 10% of the Gross Proceeds in Tax-Exempt Securities which are expected to
begin amortizing or to be repaid as early as during the offering period and from
time to time throughout the life of the Trust. The aggregate average life of the
Tax-Exempt Securities acquired by the Trust is expected to be six to eight
years. As of December 31, 1995, the Trust acquired one First Mortgage Bond in
the amount of $10,700,000.
As of December 31, 1995, of the total Net Proceeds available for
investment, 3.52% had been invested in Tax-Exempt Securities and 61.93% in First
Mortgage Bonds. As of December 31, 1995, 34.55% of the total net proceeds
available for investment had not yet been invested in First Mortgage Bonds or
Tax-Exempt Securities.
First Mortgage Bonds
As of December 31, 1995, the Trust has made the following investment in
First Mortgage Bonds:
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Reflections Bonds
On December 21, 1995 American Tax-Exempt Bond Trust (the "Trust")
completed the amendment of the bond indenture for the $10,700,000 tax-exempt
First Mortgage Bonds (the "Reflections Bonds") in which the Trust had previously
acquired a 100% participation on October 10, 1995. In connection with the
amendment of the Reflections Bonds, the Trust redeemed the 100% participation
interest it previously acquired and now directly owns the Reflections Bonds.
The Reflections Bonds were issued by the Orange County Florida Housing
Finance Authority (the "Issuer") and are secured by a first mortgage and
mortgage loan on Reflections Apartments (the "Project" or "Reflections"), a
development consisting of 336 apartment units in Casselberry, Florida.
Reflections is owned by Casselberry-Oxford Associates, L.P. (the "Borrower").
The Trust purchased the 100% participation in Reflections Bonds for
$10,700,000 from BRI OP Limited Partnership (the "Seller"), which is not
affiliated with the Manager or Related Capital Company (the "Sponsor").
The Reflections Bonds bear a fixed Current Interest Rate of 9.0%,
payable monthly in arrears, together with Contingent Interest. After payment of
the fixed Current Interest, Contingent Interest will be payable as follows: (i)
25% of net property cash flow after payment of Current Interest, third party
issuer and trustees fees, required reserves, and a preferred return to the
Borrower equal to 3.7% of gross revenues; and (ii) after repayment of
outstanding principal, (a) 10% of net sale or repayment proceeds (which may be
in certain circumstances when no sale proceeds are received be measured by fair
market value) up to $1,300,000, and (b) 25% thereafter until the Borrower has
paid interest at a simple annual rate of 16% over the term of the Reflections
Bonds.
The Reflections Bonds have a term of thirty years and are subject to
mandatory redemption, at the Trust's option, after ten years. The principal of
the Reflections Bonds is payable upon sale or refinancing of the Project and
prepayment, in whole or in part, is prohibited during the first five years,
except as described below.
Prepayment in whole will be permitted thereafter subject to the payment
of a premium. If prepaid during the sixth year, the premium is equal to 5% of
the principal amount of the Reflections Bonds outstanding at the time of
prepayment. Thereafter, the premium will be reduced by 1% per year through the
tenth year, when there will be no prepayment premium payable.
Potential Acquisitions
Rolling Ridge Apartments
On July 7, 1995, the Trust executed a letter of intent to purchase
tax-exempt First Mortgage Bonds (as hereinafter referred to as the "Rolling
Ridge Bonds") in an approximate aggregate principal amount of $4,875,000. The
Rolling Ridge Bonds are expected to be issued by San Bernardino County (the
"Issuer") and secured by a first mortgage and mortgage loan on Rolling Ridge
Apartments (the "Project" or "Rolling Ridge"), a development consisting of 110
apartment units in Chino Hills, California. Rolling Ridge is owned and operated
by Duane R. Raab, Ralph E. Haun and Diane E. Haun (the "Borrower").
As of December 31, 1995, the letter of intent remains outstanding and
the Manager is still continuing its due diligence review of the Project.
The Rolling Ridge Bonds that will be used to refinance the Project will
be restructured to meet the Trust's investment criteria and are expected to bear
a fixed Current Interest Rate of 9.0%, payable monthly in arrears, together with
Contingent Interest. The Trust expects that, after payment of the fixed Current
Interest, Contingent Interest will be payable out of (i) 25% of net property
cash flow until the Borrower has paid interest up to a still-to-be-negotiated
rate, then (ii) 25% of net sale or repayment proceeds (which may in certain
circumstances when no sale proceeds are received be measured by fair market
value) over repayment of outstanding principal, until
-3-
the Borrower has paid interest at a simple annual rate of 16% over the term of
the Rolling Ridge Bonds. The Trust has been informed that, as of December 31,
1995, the Borrower is current with respect to all payments of principal and
interest.
The Trust expects that the principal of the Rolling Ridge Bonds will be
payable upon sale or refinancing of the Project. It is expected that prepayment,
in whole or in part, will be prohibited during the first five years following
the acquisition of the Rolling Ridge Bonds, except as described below.
Prepayment in whole will be permitted thereafter subject to the payment of a
premium. If prepaid during the sixth year, the premium is expected to equal 5%
of the principal amount of the Rolling Ridge Bonds outstanding at the time of
prepayment. Thereafter, the premium will be reduced by 1% per year until the
tenth year, when there will be no prepayment premium payable.
The Trust expects that, notwithstanding the foregoing, a one-time
assumption will be permitted without prepayment penalty or contingent interest
payment otherwise due on sale or refinancing. Any such new assuming borrower may
be rejected by the Manager in its sole discretion and an assumption fee equal to
actual costs plus 1/2 of 1% of the outstanding principal amount is expected to
be due at the time of assumption.
It should be understood that the initial disclosure of any proposed
investment cannot be relied upon as an assurance that the Trust will ultimately
consummate such proposed investment or that the information provided concerning
the proposed investment will not change between the date of this report and the
actual investment.
Anticipated Terms of Future First Mortgage Bonds
The First Mortgage Bonds will bear a Current Interest Rate which is
fixed. In addition, a majority of the First Mortgage Bonds are expected to
provide for participations in net property cash flow and the residual value of
the underlying Properties in an amount equal to 25% to 50% of Net Property Cash
Flow and 25% to 50% of Net Sale or Repayment Proceeds, until the borrower has
paid interest at a simple annual rate of 16% over the term of the First Mortgage
Bonds. The First Mortgage Bonds are expected to prohibit optional prepayments
during the first five years after acquisition by the Trust and require a
redemption premium of at least 5% of the principal amount if prepaid in the
sixth year, declining 1% per year thereafter until there is no longer a premium.
The Trust expects to continue to invest in First Mortgage Bonds
primarily by acquiring outstanding First Mortgage Bonds which are simultaneously
restructured to change the principal, interest and other terms of those bonds to
conform to the Trust's investment objectives and policies. The multi-family
rental housing properties financed by the outstanding First Mortgage Bonds will
have been constructed and leased. The Trust may also acquire First Mortgage
Bonds that are, or prior to restructuring were, in default because the cash flow
from the property was insufficient to pay the debt service due on the bonds. The
restructuring of the outstanding First Mortgage Bonds will be sufficiently
extensive so that generally a restructured First Mortgage Bond held by the Trust
will be considered to be a newly issued bond for Federal income tax purposes.
The Trust will only acquire an outstanding First Mortgage Bond if: (i)
the Trust has reached a binding agreement with the owner of the underlying
property to amend the terms of the bonds in a manner that is acceptable to the
Trust and (ii) the governmental entity that is the issuer of the outstanding
bonds has agreed to ratify the change in terms and to file the necessary forms
to continue the tax-exemption of the restructured First Mortgage Bonds or the
Manager believes that there is a substantial likelihood that the issuer will
agree subsequently to take the action necessary to continue the First Mortgage
Bond's tax-exemption.
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Tax-Exempt Securities
As of and for the period ended December 31, 1995, the Trust has made the
following investments in Tax-Exempt Securities:
Principal
Balance at
Stated Final Purchase Price 12/31/95
Date Interest Payment ------------------- Including
Seller Purchased Rate Date % Amount Premium/(Disc)
- ------ --------- -------- ------- ------- -------- -------------
Smith
Barney 5/3/95 9.25% 8/1/95 101.124% $202,248 $ 0
Smith
Barney 9/19/95 4.40% 11/15/95 100.123% 200,246 0
Wheat
First 12/12/95 8.25% 2/15/96 102.796% 205,592 205,592
------- -------
$608,086 $205,592
======= =======
Competition
The Trust's business is affected by competition to the extent that in
acquiring First Mortgage Bonds, the Trust will be in competition with private
investors, mortgage banking companies, lending institutions, trust funds,
pension funds and other entities, some with similar objectives to those of the
Trust. Some of these entities can be expected to have substantially greater
resources and experience in acquiring First Mortgage Bonds than the Trust. The
Registrant's business is also 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.
Employees
The Trust does not directly employ anyone. All services are performed
for the Trust by the Manager and its Affiliates. The Manager receives
compensation in connection with such activities as set forth in Items 11 and 13.
In addition, the Trust reimburses the Manager and certain of its Affiliates for
expenses incurred in connection with the performance by their employees of
services for the Trust in accordance with the Trust Agreement.
Item 2. Properties.
The Trust does not own or lease any property.
Item 3. Legal Proceedings.
None.
Item 4. Submission of Matters to a Vote of Shareholders.
None.
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PART II
Item 5. Market for the Registrant's Common Stock and Related Shareholder
Matters.
Although the shares are freely transferable, shareholders may not be
able to liquidate their investment because the shares are not intended to be
included for listing or quotation on any established market and no public
trading market is expected to develop for the shares, although there may be an
informal market. Shares may therefore not be readily accepted as collateral for
a loan. Furthermore, even if an informal market for the sale of shares develops,
a shareholder may only be able to sell its shares at a substantial discount from
the public offering price. Consequently, the purchase of shares should be
considered only as a long-term investment. Any shareholder will have the limited
right to assign the economic attributes of his shares to an assignee. However,
the assignee of shares can become a substituted shareholder only with the
consent of the Manager, which consent the Manager may grant or withhold in its
sole and absolute discretion. Accordingly, the Trust should not be deemed to
have the corporate characteristic of free transferability of interests. The
number of shareholders as of December 31, 1995 was 876.
Reinvestment Plan
A Reinvestment Plan is available which will enable shareholders to have
their distributions from the Trust invested in shares of the Trust, or fractions
thereof. The Reinvestment Plan commenced on November 1, 1994, the date the Trust
commenced the Offering. The Trust Agreement gives to the Manager broad powers to
renew, modify, extend, consolidate or cancel the Trust's Reinvestment Plan
without the consent of shareholders. Shares received pursuant to the
Reinvestment Plan will entitle participants to the same rights and be treated in
the same manner as those issued pursuant to the Offering.
During the offering period, the price per share purchased pursuant to
the Reinvestment Plan will equal $20. From the termination of the offering
period until the third anniversary of the final closing date, the price per
share purchased pursuant to the Reinvestment Plan will equal $19. Thereafter,
the price per share purchased pursuant to the Reinvestment Plan will be the
greater of $20 (the public offering price) or 95% of the then fair market value
of such share (as determined by the Manager).
Shares received pursuant to the Reinvestment Plan will entitle
participants to the same rights and be treated in the same manner as those
issued pursuant to the Offering.
Experience under the Reinvestment Plan may indicate that changes are
desirable. The Reinvestment Plan gives the Manager broad powers to modify,
consolidate or cancel the Trust's Reinvestment Plan upon notice but without
consent of shareholders.
Redemption Plan
After the final closing date, any shareholder, including the Manager or
any of its Affiliates, who acquired or received shares directly from the Trust
or the Reinvestment Plan (such shares, for so long as owned by the original
holder, are called "Eligible Shares") may present all or a portion of such
Eligible Shares to the Trust for redemption (the "Redemption Plan"). The Trust
is required to redeem such Eligible Shares presented for redemption for cash to
the extent it has sufficient net proceeds ("Reinvestment Proceeds") from the
sale of shares under the Reinvestment Plan. There is no assurance that there
will be Reinvestment Proceeds available for redemption and, accordingly, an
investor's shares may not be redeemed. The full amount of Reinvestment Proceeds
for any quarter will be used to redeem Eligible Shares presented for redemption
for such quarter. The Manager may suspend or terminate the Redemption Plan upon
notice to, but without the consent of, the shareholders.
-6-
Distribution Information
Cash distributions for the year ended December 31, 1995 were as set
forth in the following table:
Cash Distribution Total Amount
for Quarter Ended Date Paid Minimum Maximum Distributed
June 30, 1995 8/14/95 $ .0667 $ .3333 $ 82,704
September 30, 1995 11/15/95 .0667 .4000 259,544
December 31, 1995 2/14/96 .0667 .4000 333,590
------ ------ -------
Total for 1995 $0.2001 $1.1333 $675,838
====== ====== =======
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. Amounts received by shareholders varied depending on the dates they
became shareholders.
The Trust's Offering commenced November 1, 1994, and its first closing
on the sales of shares occurred on April 27, 1995. Accordingly, there were no
distributions for the quarter ended March 31, 1995.
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.
The Trust has adopted a policy of attempting to maintain stable
distributions to shareholders during the offering and acquisition stages of the
Trust. In order to accomplish this result, it has purchased and may be required
to continue purchase Tax-Exempt Securities which mature quarterly during this
period. The effect of this policy has been the following: (a) a portion of the
distributions have constituted, and will continue to constitute, a return of
capital; (b) earlier investors' returns from an investment in the Trust will be
greater than later investors' returns; and (c) there will be a decrease in funds
remaining to be invested in Mortgage Investments.
Of the total distributions of $346,455 made for the year ended December
31, 1995, $118,569 ($.13 per share or 34%) represents a return of capital
determined in accordance with generally accepted accounting principles. The
portion of the distributions which constitutes a return of capital may be
significant during the acquisition stage in order to maintain level
distributions to shareholders.
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Item 6. Selected Financial Data.
The information set forth below presents selected financial data of the
Trust. Additional financial information is set forth in the audited financial
statements and footnotes thereto contained in Item 8 hereof.
Year Ended
Operations* December 31, 1995
----------- -----------------
Interest income:
First Mortgage Bonds $226,972
Tax-Exempt Securities 2,160
Marketable Securities 147,647
Total revenues 376,779
Total expenses 148,893
Net income $227,886
========
Net income per weighted
average share-Shareholders $0.57
========
December 31, December 31,
1995 1994
------------ ------------
Financial Position
------------------
Total assets $17,385,740 $771,890
--------- --------
Total liabilities $174,470 $770,890
--------- --------
Total shareholders' equity $17,211,270 $1,000
--------- --------
* The Trust had no operations in 1994.
-8-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
On December 23, 1993, the Trust received $1,000 from Related AMI
Associates, Inc., as grantor for the benefit of Related AMI Associates, Inc. as
the Manager (the "Manager") of the Trust. As of December 31, 1995, the Trust had
received $18,778,912 (before volume discounts of $1,860) in Gross Proceeds from
the sale of 937,359 shares pursuant to the Offering and 1,587 shares through the
Reinvestment Plan resulting in Net Proceeds available for investment of
approximately $17,276,599 after volume discounts, payments of sales commissions
and organization and offering expenses. For the period ending January 1, 1996 to
March 7, 1996, a total of approximately 117,260 additional shares were sold
through the Offering and approximately 1,682 through the Reinvestment Plan
representing Gross Proceeds of $2,378,848 (before volume discounts of $1,424).
The Trust has invested and will continue to invest the Net Proceeds
primarily in First Mortgage Bonds issued by various state or local governments
or their agencies or authorities and secured by Mortgage Loans principally on
multifamily residential apartment projects and, secondarily, retirement
community projects owned or to be developed by third-party developers and, to a
lesser extent, by Affiliates of the Manager. The principal amount of a Mortgage
Loan at the time the loan is made or after a First Mortgage Bond is acquired and
restructured, together with all mortgage loans on the subject property, will
generally not exceed 85% of the appraised fair market value of the related
Property. The First Mortgage Bonds will have maturities of 10 to 35 years,
although the Trust anticipates holding the First Mortgage Bonds for
approximately 10 to 12 years and having the right to cause repayment of the
bonds at that time. The First Mortgage Bonds will normally be structured so that
no principal payments will be due thereon until the scheduled maturity or
earlier redemption of such bonds, at which point a lump sum or "balloon" payment
of the outstanding principal will be due. In addition, the Trust may invest up
to 10% of the Gross Proceeds in Tax-Exempt Securities which are expected to
begin amortizing or to be repaid as early as during the Offering period and from
time to time throughout the life of the Trust. The aggregate average life of the
Tax-Exempt Securities acquired by the Trust is expected to be six to eight
years. As of December 31, 1995, 34.55% of the total Net Proceeds available for
investment had not yet been invested in First Mortgage Bonds or Tax-Exempt
Securities. As of December 31, 1995, of the total net proceeds available for
investment, 3.52% had been invested in Tax-Exempt Securities and 61.93% in First
Mortgage Bonds.
For the year ended December 31, 1995, the Trust had purchased three
Tax-Exempt Securities in the aggregate amount of $608,086, two of which matured
in the amount of $400,000 during 1995. On December 21, 1995, the Trust completed
the amendment of the bond indenture of the $10,700,000 in Reflections Bonds in
which the Trust had previously acquired a 100% participation on October 10,
1995. In connection with the amendment of the Reflection Bonds, the Trust
redeemed the 100% participation interest it previously acquired and now directly
owns the Reflections Bonds.
For a description of each of the Trust's investments see Item 1.
Business.
During the year ended December 31, 1995, cash and cash equivalents
increased $3,313,564 primarily as a result of proceeds from the issuance of
shares of beneficial interest ($18,777,052), net of an increase in offering
costs ($738,826), the purchase of one First Mortgage Bond ($10,700,000), the
purchase of three Tax-Exempt Securities ($608,086), two of which matured
($400,000), the purchase of marketable securities ($2,550,000) and a decrease in
accounts payable and due to affiliates of ($682,560) from financing activities
and a decrease in cash from operating activities of ($237,561). Included in the
adjustments to reconcile the net income to cash flow from operations is
amortization in the amount of $11,628.
The Trust has established a Reserve for working capital and
contingencies in an amount equal to 1% of the Gross Proceeds of the Offering
(totaling $187,789 at December 31, 1995), an amount which is anticipated to be
sufficient to satisfy liquidity requirements, and may add to such Reserves from
Cash Flow, Sale or Repayment Proceeds and uninvested Net Proceeds. As of
December 31, 1995, none of this reserve has been used. Liquidity will be
adversely affected by unanticipated costs, including operating costs in excess
of such Reserves. The Trust
-9-
may borrow funds from third parties or from the Manager or its Affiliates to
meet working capital requirements of the Trust or to take over the operation of
a Property on a short-term basis (up to 24 months) but not for the purpose of
making Distributions.
Distribution Policy
The Trust has adopted a policy of attempting to maintain stable
distributions during the offering period and acquisition stage. In order to
accomplish this result, a portion of the Net Proceeds are expected to be
invested in Tax-Exempt Securities with an aggregate average life of six to eight
years, a portion of which will amortize or be paid during such period. Proceeds
from such amortization or repayment will be distributed to Shareholders. To
date, the Trust has purchased and may be required to continue to purchase
Tax-Exempt Securities which mature quarterly during this period. The effect of
this policy has been the following: (a) a portion of the distributions have
constituted, and will continue to constitute, a return of capital; (b) earlier
investors' returns from an investment in the Trust will be greater than later
investors' returns; and (c) there will be a decrease in funds remaining to be
invested in Mortgage Investments.
Of the total distributions of $346,455 made for the year ended December
31, 1995, $118,569 ($.13 per share or 34%) represents a return of capital
determined in accordance with generally accepted accounting principles. The
portion of the distributions which constitute a return of capital may be
significant during the acquisition stage in order to maintain level
distributions to shareholders.
Management expects that cash flow from operations, combined with the
maturity of investments described above, will be sufficient to fund
distributions at the current level in the future.
Results of Operations
The results of operations for the year ended December 31, 1995 consisted
of interest income of $376,779 earned on the First Mortgage Bonds, the
marketable securities and three Tax-Exempt Securities, net of general and
administrative and amortization expenses. Results of operations are not
reflective of future operations of the Trust due to the expected utilization of
the net proceeds of the offering to invest in First Mortgage Bonds and
Tax-Exempt Securities and the continued offering of shares of beneficial
ownership interest for sale.
Inflation
Inflation has been consistently low during the periods presented in the
financial statements and, as a result, has not had a significant effect on the
operations of the Trust or its investments.
-10-
Item 8. Financial Statements and Supplementary Data.
(a) 1. Financial Statements Page
Independent Auditors' Report 12
Balance Sheets at December 31, 1995 and 1994 13
Statement of Operations - Year ended December 31, 1995 14
Statement of Changes in Shareholders' Equity -
year ended December 31, 1995 15
Statement of Cash Flows - Year ended December 31, 1995 16
Notes to Financial Statements 17
(a) 2. Financial Statement Schedules
All schedules have been omitted because they are not required or because the
required information is contained in the Financial Statements or notes thereto.
-11-
INDEPENDENT AUDITORS' REPORT
To The Manager
American Tax-Exempt Bond Trust:
We have audited the accompanying balance sheets of American Tax-Exempt Bond
Trust as of December 31, 1995 and 1994, and the related statements of
operations, changes in shareholders' equity, and cash flows for the year ended
December 31, 1995. These financial statements are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of American Tax-Exempt Bond Trust
as of December 31, 1995 and 1994, and the results of its operations and its cash
flows for the year ended December 31, 1995, in conformity with generally
accepted accounting principles.
/s/KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
New York, New York
January 30, 1996
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AMERICAN TAX-EXEMPT BOND TRUST
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
ASSETS
1995 1994
---------- --------
Cash and cash equivalents (Note 1) $ 3,314,564 $ 1,000
Marketable securities 2,550,000 0
Investment in First Mortgage Bonds (Note 3) 10,943,182 0
Investment in Tax-Exempt Securities (Note 4) 203,958 0
Offering costs 0 709,387
Deferred costs 224,056 11,503
Organization costs, net of accumulated amortization
of $7,500 in 1995 42,500 50,000
Other assets 72,220 0
Accrued interest receivable 35,260 0
----------- ---------
Total assets $17,385,740 $771,890
=========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to affiliates $ 131,917 $357,659
Accounts payable 42,553 413,231
----------- --------
Total liabilities 174,470 770,890
----------- --------
Shareholders' equity:
Beneficial owner's equity-manager (186) 1,000
Beneficial owners' equity-shareholders 17,211,456 0
----------- --------
Total shareholders' equity 17,211,270 1,000
----------- --------
Total liabilities and shareholders' equity $17,385,740 $771,890
=========== ========
See accompanying notes to financial statements.
-13-
AMERICAN TAX-EXEMPT BOND TRUST
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues:
Interest income:
First Mortgage Bonds (Note 3) $226,972
Tax-Exempt Securities (Note 4) 2,160
Marketable Securities 147,647
-------
Total revenues 376,779
-------
Expenses:
General and administrative 66,535
General and administrative-
related parties (Note 5) 74,858
Amortization 7,500
Total expenses 148,893
Net income $227,886
=======
Allocation of Net Income:
Shareholders $224,865
Manager 2,271
Special distributions to Manager (Note 5) 750
Net income $227,886
=======
Net income per weighted
average share - shareholders $ .57
=======
See accompanying notes to financial statements.
-14-
AMERICAN TAX-EXEMPT BOND TRUST
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1995
Beneficial Beneficial
Owners' Equity- Owner's Equity-
Total Shareholders Manager
----- ------------ -------
Balance at
January 1, 1995 $ 1,000 $ 0 $ 1,000
Issuance of shares of
beneficial ownership
interest 18,777,052 18,777,052 0
Offering costs (1,448,213) (1,448,213) 0
Net income 227,886 224,865 3,021
Distributions (346,455) (342,248) (4,207)
------------ ------------ -------------
Balance at
December 31, 1995 $ 17,211,270 $ 17,211,456 $ (186)
============ ============ =============
See accompanying notes to financial statements.
-15-
AMERICAN TAX-EXEMPT BOND TRUST
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
Cash flows from operating activities:
Net income $ 227,886
------------
Adjustments to reconcile net income to
net cash used in operating activities:
Amortization expense-organization costs 7,500
Amortization of REMIC premium 4,128
Changes in operating assets and liabilities:
Increase in other assets (72,220)
Increase in accrued interest receivable (35,260)
Increase in due to affiliates 86,140
Increase in deferred costs (455,735)
------------
Total adjustments (465,447)
------------
Net cash used in operating activities (237,561)
------------
Cash flows used in investing activities:
Purchase of First Mortgage Bonds (10,700,000)
Purchases of Marketable Securities (2,550,000)
Maturity of Tax-Exempt Securities 400,000
Purchase of Tax-Exempt Securities (608,086)
------------
Net cash used in investing activities (13,458,086)
------------
Cash flows provided by financing activities:
Decrease in accounts payable related to
financing activities (370,678)
Decrease in due to affiliates (311,882)
Proceeds from issuance of shares of
beneficial interest 18,777,052
Distribution to shareholders (346,455)
Increase in offering costs (738,826)
------------
Net cash provided by financing activities 17,009,211
------------
Net increase in cash and cash equivalents 3,313,564
Cash and cash equivalents at beginning of period 1,000
------------
Cash and cash equivalents at end of period $ 3,314,564
============
Supplemental schedule of non cash financial activities:
Increase in offering costs $ (709,387)
Decrease in deferred costs 952,569
Increase in investment in first mortgage bonds (243,182)
------------
$ 0
============
See accompanying notes to financial statements.
-16-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE 1 - General
American Tax-Exempt Bond Trust (the "Trust") was formed on December 23,
1993 as a Delaware business trust for the primary 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.
On December 23, 1993, the Trust received $1,000 from Related AMI
Associates, Inc., as grantor for the benefit of Related AMI Associates, Inc. as
the only present beneficiary and the manager (the "Manager") of the Trust.
On November 1, 1994, the Trust commenced a public offering through
Related Equities Corporation, an affiliate of the Manager, and other
broker-dealers on a "best efforts" basis, for up to 10,000,000 shares of its
shares of beneficial interest at an initial offering price of $20 per share. As
of December 31, 1995, a total of 938,946 shares have been sold to the public
through the offering and the Reinvestment Plan representing Gross Proceeds of
$18,778,912 (before volume discounts of $1,860).
The Trust intends to invest the Net Proceeds primarily in First Mortgage
Bonds issued by various state or local governments or their agencies or
authorities and secured by first mortgages and related first mortgage loans
financed by such bonds (collectively, "Mortgage Loans") principally on
multifamily residential apartment projects and, secondarily, retirement
community projects owned or to be developed by third-party developers and, to a
lesser extent, by Affiliates of the Manager. The principal amount of a Mortgage
Loan at the time the loan is made or after a First Mortgage Bond is acquired and
restructured, together with all mortgage loans on the subject property, will
generally not exceed 85% of the appraised fair market value of the related
Property. The First Mortgage Bonds will have maturities of 10 to 35 years,
although the Trust anticipates holding the First Mortgage Bonds for
approximately 10 to 12 years and having the right to cause repayment of the
bonds at that time. The First Mortgage Bonds will normally be structured so that
no principal payments will be due thereon until the scheduled maturity or
earlier redemption of such bonds, at which point a lump sum or "balloon" payment
of the outstanding principal will be due. In addition, the Trust may invest up
to 10% of the Gross Proceeds in Tax-Exempt Securities which are expected to
begin amortizing or to be repaid as early as during the offering period and from
time to time throughout the life of the Trust. The aggregate average life of the
Tax-Exempt Securities acquired by the Trust is expected to be six to eight
years. As of December 31, 1995, of the total net proceeds for investment, 3.52%
had been invested in Tax-Exempt Securities and 61.93% had been invested in First
Mortgage Bonds. As of December 31, 1995, 34.55% of the total net proceeds
available for investment had not yet been invested in First Mortgage Bonds or
Tax-Exempt Securities.
The First Mortgage Bonds will bear a Current Interest Rate which is
fixed. In addition, a majority of the First Mortgage Bonds are expected to
provide for participations in net property cash flow and the residual value of
the underlying Properties in an amount equal to 25% to 50% of Net Property Cash
Flow and 25% to 50% of Net Sale or Repayment Proceeds, until the borrower has
paid interest at a simple annual rate of 16% over the term of the First Mortgage
Bonds. The First Mortgage Bonds are expected to prohibit optional prepayments
during the first five years after acquisition by the Trust and require a
redemption premium of at least 5% of the principal amount if prepaid in the
sixth year, declining 1% per year thereafter until there is no longer a premium.
The Trust expects to invest in First Mortgage Bonds primarily by
acquiring outstanding First Mortgage Bonds which are simultaneously restructured
to change the principal, interest and other terms of those bonds to conform to
the Trust's investment objectives and policies. The multi-family rental housing
properties financed by the outstanding First Mortgage Bonds will have been
constructed and leased. The Trust may also acquire First
-17-
Mortgage Bonds that are, or prior to restructuring were, in default because the
cash flow from the property will be insufficient to pay the debt service due on
the bonds. The restructuring of the outstanding First Mortgage Bonds will be
sufficiently extensive so that generally a restructured First Mortgage Bond held
by the Trust will be considered to be a newly issued bond for federal income tax
purposes.
The Trust will only acquire an outstanding First Mortgage Bond if: (i)
the Trust has reached a binding agreement with the owner of the underlying
property to amend the terms of the bonds in a manner that is acceptable to the
Trust and (ii) the governmental entity that is the issuer of the outstanding
bonds has agreed to ratify the change in terms and to file the necessary forms
to continue the tax-exemption of the restructured First Mortgage Bonds or the
Manager believes that there is a substantial likelihood that the issuer will
agree subsequently to take the action necessary to continue the First Mortgage
Bond's tax-exemption.
Included in cash and cash equivalents is restricted cash of $187,789 of
working capital reserves.
NOTE 2 - Accounting Policies
a) Basis of Accounting
The books and records of the Trust are maintained on the accrual
basis of accounting in accordance with generally accepted accounting principles.
b) Cash and Cash Equivalents
Cash and cash equivalents include temporary investments with original
maturity dates equal to or less than three months and are carried at cost plus
accrued interest, which approximates market.
c) Loan Origination Costs
Bond Selection fees and expenses incurred for the investment of
mortgage loans have been capitalized and are included in investment in First
Mortgage Bonds. Loan origination costs are being amortized on the effective
yield method over the lives of the respective mortgages.
d) Organization Costs
Costs incurred to organize the Trust including, but not limited to,
legal and accounting fees are considered organization costs. These costs have
been capitalized and are being amortized on a straight-line basis over a
60-month period.
e) Offering Costs
Costs incurred to sell shares including brokerage and nonaccountable
expense allowance are considered offering costs. These costs have been charged
directly to shareholders' equity with the sale of shares of beneficial interest
to the public.
-18-
f) Income Taxes
The Trust is not required to provide for, or pay, any Federal income
taxes. Income tax attributes that arise from its operation are passed directly
to the individual partners. The Trust may be subject to state and local taxes in
jurisdictions in which it operates.
g) Net Income Per Weighted Average Share
Net income per weighted average share is computed based in the net
income for the period, divided by the weighted average number of shares
outstanding for the period. The weighted average number of shares outstanding
for the years ended December 31, 1995 was 399,265 shares.
h) Investments in Marketable, Equity and Other Securities
Effective January 1, 1995, the Trust has adopted the provisions of
the Financial Accounting Standards Board's Statement of Financial Accounting
Standards ("SFAS") No. 115 Accounting for Certain Investments in Debt and Equity
Securities. At December 31, 1995, the Trust has classified its securities as
available for sale.
Available for sale securities are carried at fair value with net
unrealized gain (loss) reported as a separate component of shareholders' equity
until realized. A decline in the market value of any available for sale security
below cost that is deemed other than temporary is charged to earnings resulting
in the establishment of a new cost basis for the security.
Premiums and discounts are amortized or accreted over the life of the
related security as an adjustment to yield using the effective interest method.
Dividend and interest income are recognized when earned. Realized gains and
losses for securities are included in earnings and are derived using the
specific identification method for determining the cost of the securities sold.
Investments in marketable, equity and other securities, represent
marketable securities (consisting of tax-exempt municipal preferred stock),
investment in First Mortgage Bonds and investments in Tax-Exempt Securities
which are carried at cost which approximates market.
i) Use of Estimates
Management of the Trust has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosures of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
j) Financial Instruments
The Financial Accounting Standards Board's Statement of Financial
Accounting Standards No. 107, Disclosures about Fair Value of Financial
Instruments, defines fair value of a financial instrument as the amount at which
the instrument could be exchanged in a current transaction between willing
parties. Financial instruments held by the Company include cash and cash
equivalents, marketable securities, investments in First Mortgage Bonds and
Tax-Exempt Securities, interest receivable and accounts payable and accrued
expenses.
-19-
For cash and cash equivalents, marketable securities, interest
receivable and accounts payable and accrued expenses the carrying amounts is a
reasonable estimate of fair value.
NOTE 3 - Investment in First Mortgage Bonds
On December 21, 1995, the Trust completed the amendment of the bond
indenture for the $10,700,000 in tax-exempt First Mortgage Bonds (the
"Reflections Bonds") in which the Trust had previously acquired a 100%
participation. In connection with the amendment of the Reflections Bonds, the
Trust redeemed the 100% participation interest it previously acquired and now
directly owns the Reflections Bonds.
The Reflections Bonds were issued by the Orange County Florida Housing
Finance Authority (the "Issuer") and are secured by a first mortgage and
mortgage loan on Reflections Apartments (the "Project" or "Reflections"), a
development consisting of 336 apartment units in Casselberry, Florida.
Reflections is owned by Casselberry-Oxford Associates, L.P. (the "Borrower").
The Trust purchased the 100% participation in Reflections Bonds for
$10,700,000 from BRI OP Limited Partnership (the "Seller"), which is not
affiliated with the Manager or Related Capital Company (the "Sponsor").
The Reflections Bonds bear a fixed Current Interest Rate of 9.0%,
payable monthly in arrears, together with Contingent Interest. After payment of
the fixed Current Interest, Contingent Interest will be payable as follows: (i)
25% of net property cash flow after payment of Current Interest, third party
issuer and trustees fees, required reserves, and a preferred return to the
Borrower equal to 3.7% of gross revenues; and (ii) after repayment of
outstanding principal, (a) 10% of net sale or repayment proceeds (which may be
in certain circumstances when no sale proceeds are received be measured by fair
market value) up to $1,300,000, and (b) 25% thereafter until the Borrower has
paid interest at a simple annual rate of 16% over the term of the Reflections
Bonds.
The Reflections Bonds have a term of thirty years and are subject to
mandatory redemption, at the Trust's option, after ten years. The Principal of
the Reflections Bonds is payable upon sale or refinancing of the Project and
prepayment, in whole or in part, is prohibited during the first five years,
except as described below.
Prepayment in whole will be permitted thereafter subject to the payment
of a premium. If prepaid during the sixth year, the premium is equal to 5% of
the principal amount of the Reflections Bonds outstanding at the time of
prepayment. Thereafter, the premium will be reduced by 1% per year through the
tenth year, when there will be no prepayment premium payable.
-20-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - Investment in First Mortgage Bonds
Information relating to investments in First Mortgage Bonds as of
December 31, 1995 is as follows:
Date of
Investment/ Loan Final Balance Interest Paid to
Final Outstanding Origination At December the Company
Property Description Maturity Date Loan Balance Costs 31, 1995 in 1995
Reflection Bonds
Casselbury,
Florida (A) 336 Apartment
Units 12/95 - 12/25 $10,700,000 $243,182 $10,943,182 $226,972
(A) The interest rates for the Reflections are 9.00%. In addition to the
interest rate the trust will be entitled to 25% of the cash flow,
as defined.
-21-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - Investment in Tax-Exempt Securities
On May 3, 1995, the Trust used a portion of the net proceeds of its
offering to purchase a Topeka Kansas General Obligation Tax-Exempt Bond from
Smith Barney (the "Kansas Bond"). The Kansas Bond, which had a principal face
value of $200,000 and interest rate of 9.25%, was purchased as a Tax-Exempt
Security investment at the premium price of 101.124% or $202,248 and matured on
August 1, 1995.
On September 19, 1995, the Trust used a portion of the proceeds of the
Kansas Bond to purchase a New York State Environmental Facilities Corp. State
Water Pollution Control Revolving Fund Series D Tax-Exempt Bond from Smith
Barney. The bond, which had a principal face value of $200,000 and interest rate
of 4.4%, was purchased as a Tax-Exempt Security investment at the premium price
of 100.123% or $200,246 and matured on November 15, 1995.
On December 12, 1995, the Trust used a portion of the net proceeds of
its offering to purchase a Philadelphia Penn Refunding General Obligation
Tax-Exempt Bond from Wheat First Butcher Singer. The bond, which has a principal
face value of $200,000 and interest rate of 8.25%, was purchased as a Tax-
Exempt Security investment at the premium price of 102.796% or $205,592 with a
maturity date of February 15, 1996.
Information relating to investments in Tax-Exempt Securities for the
year ended December 31, 1995:
Purchases:
Topeka Kansas General Obligation Tax-Exempt Bond $202,248
New York State Environmental Tax-Exempt Bond 200,246
Philadelphia Penn General Obligation Tax-Exempt Bond 205,592
Sales:
Maturity of Topeka Kansas General Obligation
Tax-Exempt Bond (200,000)
Maturity of New York State Environmental
Tax-Exempt Bond (200,000)
Amortization of premium (4,128)
---------
Amortized cost at December 31, 1995 $203,958
=========
-22-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - Investment in Tax-Exempt Securities (continued)
Information relating to investments in Tax-Exempt Securities
as of December 31, 1995 is as follows:
Original
Purchase Principal Premium
Stated Final Price at at
Date Interest Payment Including December December
Seller Purchased Rate Date Premium 31, 1995 31, 1995
Smith Barney 5/3/95 9.25% 8/1/95 $202,248 $ 0 $ 0
Smith Barney 9/19/95 4.40% 11/15/95 200,246 0 0
Wheat First 12/12/95 8.25% 2/15/96 205,592 200,000 5,592
$608,086 $200,000 $5,592
Accumulated Interest
Amortization Balance at Earned by Net
at December December the Trust Less 1995 Interest
31, 1995 31, 1995 for 1995 Amortization Earned
Seller $ 0 $ 0 $4,162 $2,248 $1,914
Smith Barney 0 0 1,296 246 1,050
Smith Barney (1,634) 203,958 830 1,634 (804)
Wheat First $(1,634) $203,958 $6,288 $4,128 $2,160
-23-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 5 - Related Party Transactions
The Trust Agreement provides for the Manager, an affiliate of Related
Capital Company, to act as the Manager of the Trust. In accordance with the
Trust Agreement, the Manager is entitled to receive (i) compensation in
connection with the organization and start-up of the Trust and the Trust's
investment in the tax-exempt First Mortgage Bonds; (ii) special distributions
calculated as a percentage of total assets invested by the Trust which totaled
$750 for the year ended December 31, 1995; (iii) a subordinated incentive fee
based on the gain on the sale of the tax-exempt First Mortgage Bonds; (iv)
reimbursement of certain administrative costs incurred by the Manager or an
affiliate on behalf of the Trust which totaled $74,8580 for the year ended
December 31, 1995; (v) acquisition expense allowance and bond selection fees
calculated on a percentage of the Gross Proceeds applicable to the First
Mortgage Bonds; as of December 31, 1995, $375,578 of such costs $214,000 have
been capitalized and included in Investment in First Mortgage Bonds; and (vi)
certain other fees.
The Trust has agreed to pay the Manager a nonaccountable allowance
("Expense Allowance") equal to 2.5% of the Gross Proceeds of the Offering. The
Manager, to the extent not paid by an affiliate, has agreed to be responsible
for all expenses of the Offering, except for the payment of the Expense
Allowance, and certain selling commissions (not to exceed 5.0% of gross
proceeds) and a due diligence expense allowance (not to exceed 0.5% of gross
proceeds) on certain sales of shares. As of December 31, 1995, offering costs
totaled $419,473, and along with selling commissions (see below) are charged
directly to Beneficial Owners' Equity-Shareholders.
The Trust has agreed to pay commissions of up to 5% of the aggregate
purchase price of shares sold, subject to quantity discounts, as well as a
non-accountable due diligence expense reimbursement in an amount up to .5% of
Gross Proceeds to certain broker-dealers selected by the Dealer Manager and
approved by the Manager. At December 31, 1995, the Trust paid $1,028,740 of
commissions and due diligence to unaffiliated broker-dealers.
NOTE 6 - Commitments
Rolling Ridge Apartments
On July 7, 1995, the Trust executed a letter of intent to purchase
tax-exempt First Mortgage Bonds (as hereinafter referred to as the "Rolling
Ridge Bonds") in an approximate aggregate principal amount of $4,875,000. The
Rolling Ridge Bonds are expected to be issued by San Bernardino County (the
"Issuer") and secured by a first mortgage and mortgage loan on Rolling Ridge
Apartments (the "Project" or "Rolling Ridge"), a development consisting of 110
apartment units in Chino Hills, California. Rolling Ridge is owned and operated
by Duane R. Raab, Ralph E. Haun and Diane E. Haun (the "Borrower").
As of December 31, 1995, the letter of intent remains outstanding and
the Manager is still continuing its due diligence review of the Project.
The Rolling Ridge Bonds that will be used to refinance the Project will
be restructured to meet the Trust's investment criteria and are expected to bear
a fixed Current Interest Rate of 9.0%, payable monthly in arrears, together with
Contingent Interest. The Trust expects that, after payment of the fixed Current
Interest, Contingent Interest will be payable out of (i) 25% of net property
cash flow until the Borrower has paid interest up to a still-to-be-negotiated
rate, then (ii) 25% of net sale or repayment proceeds (which may in certain
circumstances when no sale proceeds are received be measured by fair market
value) over repayment of outstanding principal, until the Borrower has paid
interest at a simple annual rate of 16% over the term of the Rolling Ridge
Bonds. The Trust has been informed that, as of December 31, 1995, the Borrower
is current with respect to all payments of principal and interest.
-24-
The Trust expects that the principal of the Rolling Ridge Bonds will be
payable upon sale or refinancing of the Project. It is expected that prepayment,
in whole or in part, will be prohibited during the first five years following
the acquisition of the Rolling Ridge Bonds, except as described below.
Prepayment in whole will be permitted thereafter subject to the payment of a
premium. If prepaid during the sixth year, the premium is expected to equal 5%
of the principal amount of the Rolling Ridge Bonds outstanding at the time of
prepayment. Thereafter, the premium will be reduced by 1% per year until the
tenth year, when there will be no prepayment premium payable.
The Trust expects that, notwithstanding the foregoing, a one-time
assumption will be permitted without prepayment penalty or contingent interest
payment otherwise due on sale or refinancing. Any such new assuming borrower may
be rejected by the Manager in its sole discretion and an assumption fee equal to
actual costs plus 1/2 of 1% of the outstanding principal amount is expected to
be due at the time of assumption.
NOTE 7 - Subsequent Events
The Trust has received an additional $2,378,848 (before volume discounts
of $1,424) of Gross Proceeds representing 118,942 shares for the period January
1, 1996 to March 7, 1996.
On February 14, 1996, a distribution of $333,590 and $3,370 was paid to
the shareholders and the Manager, respectively, representing the 1995 fourth
quarter distribution. The distribution has been funded from cash collections of
debt service payments and interest income through approximately the distribution
date, February 14, 1996, and proceeds from the maturity of investments.
On February 15, 1996, the Philadelphia Penn Refunding General Obligation
Tax-Exempt Bond which was purchased from Wheat First Butcher Singer on December
12, 1995, matured at 102.00% or $204,000.
-25-
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.
None
PART III
Item 10. Directors and Executive Officers of the Registrant.
The Manager of the Trust is Related AMI Associates, Inc., a Delaware
corporation. The Trustee of the Trust is Wilmington Trust Company, a Delaware
banking corporation. The Manager is affiliated with Related Capital Company
("Related"), a New York general partnership, in which Stephen M. Ross, through
his interests in other entities, owns a significant interest. The shares of the
Manger are owned 67.2% by Stephen M. Ross and 32.8% by three officers of the
Manager. The Manager will manage and control the affairs of the Trust directly
and by engaging others, including Affiliates. The Trustee has been appointed as
a trustee solely in order to satisfy the requirements of Section 3807 of the
Delaware Business Trust Act, and its duties and responsibilities are limited.
The Registrant, the Registrant's Manager and their directors and
executive officers, and any persons holding more than ten percent of the
Registrant's shares are required to report their initial ownership of such
shares and any subsequent changes in that ownership to the Securities and
Exchange Commission on Forms 3, 4 and 5. Such executive officers, directors are
required by Securities and Exchange Commission regulators to furnish the
Partnership with copies of all Forms 3, 4 or 5 they file. All of these filing
requirements were satisfied on a timely basis for the current year. In making
these disclosures, the Registrant has relied solely on written representations
of the Manager's directors and executive officers and persons who own greater
than ten percent of the Registrant's shares of copies of the reports they have
filed with the Securities and Exchange Commission during and with respect to its
most recent fiscal year.
These officers of the Manager may also provide services to the Trust on
behalf of the Manager. The executive officers and directors of the Manager and
their positions with the Manager are set forth below.
Year First Became
Officer/Director
Name Age Positions Held of Manager
J. Michael Fried 51 Director and President 1991
Stuart J. Boesky 39 Director and
Senior Vice President 1991
Alan P. Hirmes 41 Senior Vice President 1991
Ryne A. Nishimi 38 Senior Vice President 1994
Arthur G. Hatzopoulos 42 Vice President 1995
Lawrence J. Lipton 39 Treasurer 1993
Lynn A. McMahon 40 Secretary 1991
-26-
J. MICHAEL FRIED, age 51, is the sole shareholder of one of the general
partners of Related, the real estate finance affiliate of The Related Companies,
L.P. In that capacity, he is generally responsible for all of the syndication,
finance, acquisition and investor reporting activities of Related and its
Affiliates. Mr. Fried practiced corporate law in New York City with the law firm
of Proskauer Rose Goetz & Mendelsohn from 1974 until he joined Related 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, age 39, is the sole shareholder of one of the general
partners of Related. 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 Related. From 1983 to 1984 Mr. Boesky practiced law with the Boston
law firm of Kaye, Fialkow, Richmond & 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 Laws degree in Taxation from Boston University School
of Law.
ALAN P. HIRMES, age 41, is the sole shareholder of one of the general
partners of Related. Mr. Hirmes has been a Certified Public Accountant in New
York since 1978. Prior to joining Related 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.
RYNE A. NISHIMI, age, 38, is the President of, and serves as the
Director of Marketing for, Related Equities Corporation and has held other
positions in marketing since joining Related in 1983. From 1981 to 1983, Mr.
Nishimi worked for Fox & Carskadon Financial Corporation as a Marketing Manager
in their real estate syndication operation. Mr. Nishimi graduated from Santa
Clara University School of Business Administration with a Bachelor of Science
Degree.
ARTHUR G. HATZOPOULOS, age 42, is a Vice President of Related Capital
Company where he is responsible for a tax-exempt multifamily bond fund and
acquisitions of low-income housing tax credit projects. Prior to joining
Related, Mr. Hatzopoulos was a First Vice President and Portfolio Manager for
First Nationwide Bank, a Federal Savings Bank, where he was responsible for debt
restructuring, special lending relationships and asset sales. He has also been
associated with an investment banking firm where he was responsible for
monitoring a national portfolio of multifamily revenue bond projects. From 1981
to 1985 he served as Deputy Director of the Jersey City Department of Housing
and Economic development. Mr. Hatzopoulos graduated for Columbia University with
a Bachelor of Arts degree. He also holds a Masters in City and Regional Planning
from Harvard University, Kennedy School of Government.
LAWRENCE J. LIPTON, age 39, is a Vice President and controller of the
Related Companies, L.P. Mr. Lipton has been a Certified Public Accountant in New
York since 1989. Prior to joining Related, Mr. Lipton was employed by Deloitte &
Touche from 1987-1991. Mr. Lipton graduated from Rutgers College with a Bachelor
of Arts degree and from Baruch College with a Masters of Business Administration
degree.
LYNN A. McMAHON, age 40, has served since 1983 as assistant to J.
Michael Fried. From 1978 to 1983, she was employed at Sony Corporation of
America in the Government Relations Department.
-27-
Item 11. Executive Compensation.
The Trust does not pay or accrue any fees, salaries or other forms of
compensation to directors and officers of the Manager for their services. The
Manager and its Affiliates receive substantial fees and compensation in
connection with the organization of the Trust, the offering, investment of the
proceeds and the management of the investments. Certain directors and officers
of the Manager and certain officers of the Trust receive compensation from the
Manager and its Affiliates (and not from the Trust) for services performed for
various affiliated entities which may include services performed for the Trust.
Such compensation may be based in part on the performance of the Trust; however,
the Manager believes that any compensation attributable to services performed
for the Trust is immaterial. See also Note 5 to the Financial Statements in Item
8 above, which is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
As of December 31, 1995, no person was known by the Trust to be the
beneficial owner of more than five percent of the outstanding shares of the
Trust. No directors and officers of the Manager own any shares of the Trust.
Item 13. Certain Relationships and Related Transactions.
The Trust has and will continue to have certain relationships with the
Manager and its affiliates, as discussed in Item 11 and Item 8, Note 5. However,
there have been no direct financial transactions between the Trust and the
directors and officers of the Manager.
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PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Sequential
(a)1. Financial Statements Page
Independent Auditors' Report 12
Balance Sheets at December 31, 1995 and 1994 13
Statement of Operations - year ended December 31, 1995 14
Statement of Changes in Shareholders' Equity -
year ended December 31, 1995 15
Statement of Cash Flows - year ended December 31, 1995 16
Notes to Financial Statements 17
(a)2. Financial Statement Schedules
All schedules have been omitted because they are not required or because
the required information is contained in the Financial Statements or
notes thereto.
(a)3. Exhibits
3(a) Certificate of Trust and Certificate of Amendment from
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 Agreement
(incorporated by reference from Exhibit 3(b), 4 to the
Registration Statement on Form S-11, File No. 33-73688).
10(a) Escrow Agreement (incorporated by reference from Exhibit 10(a) to
the Registration Statement on Form S-11, File No. 33-73688).
10(b) Fee Agreement (incorporated by reference from Exhibit 10 (b) to
the Registration Statement on Form S-11, File No. 33-73688).
10(c) Orange County Housing Finance Authority Multifamily Revenue
Refunding Bonds 1995 Series (Casselberry-Oxford Associates
Project) in the principal amount of $10,700,000 dated December 1,
1995 (incorporated by reference to Current Report on Form 8-K, as
previously filed on December 21, 1995).
27 Financial Data Schedule (filed herewith). 32
99. Additional Exhibits
99(a) The financial statements of Casselberry-Oxford Associates
Limited Partnership for years ended December 31,
1995(audited), 1994 (unaudited) and 1993 (unaudited) which
owns and operates a 336 unit rental housing community known as
Reflections Apartments located in Casselberry, Florida, as
required by Staff Accounting Bulletin No. 71 (filed herewith). 33
(b) One report on Form 8-K had been filed during the quarter ended
December 31, 1995 related to the acquisition of the Reflections
Bonds.
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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: August 8, 1996 By: /s/ J. Michael Fried
J. Michael Fried
Director and President
Date: August 8, 1996 By: /s/ Stuart J. Boesky
Stuart J. Boesky
Director and Senior
Vice President
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Pursuant to the requirements of the Securities 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 dates indicated:
Signature Title Date
/s/ J. Michael Fried Director and President
J. Michael Fried (Principal Executive Officer)
of the Manager August 8, 1996
/s/ Stuart J. Boesky Director and
Stuart J. Boesky Senior Vice President
of the Manager August 8, 1996
/s/ Alan P. Hirmes Senior Vice President
Alan P. Hirmes (Principal Financial Officer)
of the Manager August 8, 1996
/s/ Lawrence J. Lipton Treasurer
Lawrence J. Lipton (Principal Accounting Officer)
of the Manager August 8, 1996
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