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, 1996
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 names of registrant as specified in its governing instrument)
Delaware 13-7033312
- ---------------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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
----- -----
AMERICAN TAX-EXEMPT BOND TRUST
BALANCE SHEETS
(Unaudited)
ASSETS
March 31, December 31,
1996 1995
----------- -----------
Cash and cash equivalents $ 1,279,169 $ 3,314,564
Marketable securities 7,175,000 2,550,000
Investment in First Mortgage Bonds (Note 2) 10,937,102 10,943,182
Investment in Tax-Exempt Securities (Note 3) 0 203,958
Deferred costs 281,059 224,056
Organization costs (net of accumulated amortization
of $10,000 and $7,500, respectively) 40,000 42,500
Other assets 46,900 72,220
Accrued interest receivable 84,369 35,260
----------- -----------
Total assets $19,843,599 $17,385,740
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to affiliates $ 144,458 $ 131,917
Accounts payable 12,632 42,553
----------- -----------
Total liabilities 157,090 174,470
----------- -----------
Shareholders' equity:
Beneficial owner's equity-manager (1,118) (186)
Beneficial owners' equity-shareholders 19,687,627 17,211,456
----------- -----------
Total shareholders' equity 19,686,509 17,211,270
----------- -----------
Total liabilities and shareholders' equity $19,843,599 $17,385,740
=========== ===========
See accompanying notes to financial statements.
-2-
AMERICAN TAX-EXEMPT BOND TRUST
STATEMENT OF OPERATIONS
(Unaudited)
Three Months
Ended
March 31, 1996
--------------
Revenues:
Interest income:
First Mortgage Bonds (Note 2) $237,749
Tax-Exempt Securities (Note 3) 2,054
Marketable Securities 52,072
--------
Total revenues 291,875
--------
Expenses:
General and administrative 12,237
General and administrative-
related parties (Note 4) 20,000
Amortization 2,500
--------
Total expenses 34,737
--------
Net income $257,138
========
Allocation of Net Income:
Shareholders 241,325
Manager 2,438
Special distributions to Manager (Note 4) 13,375
--------
Net income $257,138
========
Net income per weighted
average share - shareholders $ .25
========
See accompanying notes to financial statements.
-3-
AMERICAN TAX-EXEMPT BOND TRUST
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Beneficial Beneficial
Owners' Equity- Owner's Equity-
Total Shareholders Manager
----------- ------------ -----------
Balance at
January 1, 1996 $17,211,270 $17,211,456 $ (186)
Issuance of shares of
beneficial ownership
interest 2,790,123 2,790,123 0
Offering costs (221,686) (221,686) 0
Net income 257,138 241,325 15,813
Distributions (350,336) (333,591) (16,745)
----------- ----------- --------
Balance at
March 31, 1996 $19,686,509 $19,687,627 $ (1,118)
=========== =========== ========
See accompanying notes to financial statements.
-4-
AMERICAN TAX-EXEMPT BOND TRUST
STATEMENT OF CASH FLOWS
(Unaudited)
Three Months
Ended
March 31, 1996
--------------
Cash flows from operating activities:
Net income $ 257,138
-----------
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization expense - organization costs 2,500
Amortization expense - origination costs 6,080
Amortization of REMIC premium 3,958
Changes in operating assets and liabilities:
Decrease in other assets 25,320
Increase in accrued interest receivable (49,109)
Increase in due to affiliates 36,669
Increase in deferred costs (57,003)
-----------
Total adjustments (31,585)
-----------
Net cash provided by operating activities 225,553
-----------
Cash flows used in investing activities:
Purchases of Marketable Securities (4,625,000)
Maturity of Tax-Exempt Securities 200,000
-----------
Net cash used in investing activities (4,425,000)
-----------
Cash flows provided by financing activities:
Decrease in accounts payable related to financing activities (29,921)
Decrease in due to affiliates (24,128)
Proceeds from issuance of shares of beneficial interest 2,790,123
Distribution to shareholders (350,336)
Increase in offering costs (221,686)
-----------
Net cash provided by financing activities 2,164,052
-----------
Net decrease in cash and cash equivalents (2,035,395)
Cash and cash equivalents at beginning of period 3,314,564
-----------
Cash and cash equivalents at end of period $ 1,279,169
===========
See accompanying notes to financial statements.
-5-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
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 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 March 31, 1996 and December 31, 1995, a total of 1,078,523 and 938,946
shares have been sold to the public through the offering representing Gross
Proceeds of $21,570,459 and $18,778,912 (before volume discounts of $3,284 and
$1,860).
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 March 31, 1996, 43.02% of
the total Net Proceeds available for investment had not yet been invested in
First Mortgage Bonds or Tax-Exempt Securities. As of March 31, 1996, of the
total net proceeds available for investment, 3.06% had been invested in
Tax-Exempt Securities and 53.92% had been invested in 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 ninth 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
Mortgage Bonds that are, or prior to restructuring were, in default because
the cash flow from the property has been insufficient to pay the debt service
due on the bonds. The restructuring of the outstanding First Mortgage Bonds
-6-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 1 - General (continued)
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.
The unaudited financial statements have been prepared on the
same basis as the audited financial statements included in the Trust's annual
report on Form 10-K for the year ended December 31, 1995. 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, 1996 and the results of
operations and cash flows for the three months ended March 31, 1996. However,
the operating results for the three months ended March 31, 1996 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 10K/A-1 for the year ended December 31, 1995.
NOTE 2 - 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.
-7-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 2 - Investment in First Mortgage Bonds (continued)
Information relating to investments in First Mortgage Bonds as
of March 31, 1996 is as follows:
Accumulated Final
Loan Amortization Balance
Date of Investment/ Outstanding Origination at March 31, at March 31,
Property Description Final Maturity Date Loan Balance Costs 1996 1996
- -------- ----------- ------------------- ------------ ----------- ------------ ------------
Reflection Bonds
Casselbury,
Florida (A) 336 Apartment Units 12/95 - 12/25 $10,700,000 $243,182 $6,080 $10,937,102
=========== ======== ====== ===========
Final Balance Interest Earned Net
At December by the Trust Less 1996 Interest
31, 1995 for 1996 Amortization Earned
------------- --------------- ------------ --------
$10,943,182 $243,829 $6,080 $237,749
=========== ======== ====== ========
(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.
There was no unrealized gain or loss on the Investment in First Mortgage Bonds
at March 31, 1996 and December 31, 1995.
-8-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 3 - 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
had 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 and matured on February 15, 1996.
Information relating to investments in Tax-Exempt Securities for
the three months ended March 31, 1996:
Investment in Tax-Exempt Securities - January 1, 1996 $ 203,958
Sales:
Maturity of Philadelphia Penn General Obligation
Tax-Exempt Bond (200,000)
Amortization of premium (3,958)
---------
Investment in Tax-Exempt Securities - March 31, 1996 $ 0
==========
-9-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 3 - Investment in Tax-Exempt Securities (continued)
Information relating to investments in Tax-Exempt Securities as
of March 31, 1996 is as follows:
Original
Purchase
Stated Final Price Principal at Premium at
Date Interest Payment Including March 31, March 31,
Seller Purchased Rate Date Premium 1996 1996
- ------ --------- -------- ------- ------- -------- --------
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 0 0
-------- -------- --------
$608,086 $ 0 $ 0
======== ======== ========
Accumulated Final Final Interest
Amortization Balance at Balance at Earned by Net
at March 31, March 31, December the Trust Less 1996 Interest
1996 1996 31, 1995 for 1996 Amortization Earned
------------ --------- -------- -------- ------------ ------
$ 0 $ 0 $ 0 $ 0 $ 0 $ 0
0 0 0 0 0 0
0 0 203,958 6,012 3,958 2,054
-------- -------- -------- -------- -------- --------
$ 0 $ 0 $203,958 $ 6,012 $ 3,958 $ 2,054
======== ======== ======== ======== ======== ========
-10-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 4 - 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 First Mortgage Bonds; (ii) special distributions calculated as
a percentage of total assets invested by the Trust which totaled $13,375 and $0
for the three months ended March 31, 1996 and 1995; (iii) a subordinated
incentive fee based on the gain on the sale of the First Mortgage Bonds; (iv)
reimbursement of certain administrative costs incurred by the Manager or an
affiliate on behalf of the Trust which totaled approximately $20,000 and $0 for
the three months ended March 31, 1996 and 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 March 31, 1996 and
December 31, 1995 $431,409 and $375,578 of such costs have been incurred of
which $243,182 has 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 March 31, 1996 and December
31, 1995 offering costs totaled $489,262 and $419,473, respectively, 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 March 31, 1996 and December 31, 1995,
the Company paid $1,180,637 and $1,028,740 of commissions and due diligence to
unaffiliated broker-dealers.
NOTE 5 - 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 March 31, 1996, 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 March 31, 1996, the Borrower is current with respect to all payments of
principal and interest.
-11-
AMERICAN TAX-EXEMPT BOND TRUST
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
NOTE 5 - Commitments
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 6 - Subsequent Events
On May 15, 1996, distributions of $410,056 and $4,142 will be
paid to the Shareholders and the Manager, respectively, representing the 1996
first quarter distribution.
-12-
Item 2. 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 March 31, 1996, the Trust
had received $21,570,459 (before volume discounts of $3,284) in Gross Proceeds
from the sale of 1,075,254 shares pursuant to the Offering and 3,269 shares
through the Reinvestment Plan resulting in Net Proceeds available for
investment of approximately $19,844,822 after volume discounts, payments of
sales commissions and organization and offering expenses. For the period
ending April 1, 1996 to May 1, 1996, a total of approximately 46,740
additional shares were sold through the Offering representing Gross Proceeds
of $934,800 (before volume discounts of $960).
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 March 31, 1996, 43.02% of
the total Net Proceeds available for investment had not yet been invested in
First Mortgage Bonds or Tax-Exempt Securities. As of March 31, 1996, of the
total net proceeds available for investment, 3.06% had been invested in
Tax-Exempt Securities and 53.92% in First Mortgage Bonds.
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. On February 15, 1996 the Philadelphia Penn Refunding
General Obligation Tax-Exempt Bond matured.
During the three months ended March 31, 1996, cash and cash
equivalents decreased $2,035,395 primarily as a result of proceeds from the
issuance of shares of beneficial interest ($2,790,123), the Maturity of one
Tax-Exempt Security ($200,000) and an increase in cash from operating
activities of ($225,553) which was exceeded by distributions to shareholders
($350,336), an increase in offering costs ($221,686), the purchase of
marketable securities ($4,625,000) and a decrease in accounts payable and due
to affiliates of ($54,049) from financing activities and. Included in the
adjustments to reconcile the net income to cash flow from operations is
amortization in the amount of $12,538.
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 $215,705 at March 31, 1996), 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
March 31, 1996, 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 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.
-13-
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 $350,336 made for the three months
ended March 31, 1996, $93,198 ($.09 per share or 27%) 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 three months ended March 31,
1996 consisted of interest income of $291,875 earned on the First Mortgage
Bonds, the marketable securities and one Tax-Exempt Security, 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.
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities - 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).
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 Report of Form 8-K, as previously filed on
December 21, 1995).
27 Financial Data Schedule (filed herewith).
(b) No current reports on Form 8-K have been filed during the
quarter ended March 31, 1996.
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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/ Alan Hirmes
---------------
Alan Hirmes
Senior Vice President
Date: August 8, 1996 By: /s/ Lawrence J. Lipton
----------------------
Lawrence J. Lipton
Treasurer and
Principal Accounting Officer
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