FOR BROKER-DEALER
USE ONLY
AMERICAN TAX EXEMPT BOND TRUST
CONSENT PROPOSAL SUMMARY
BACKGROUND:
Shares in American Tax Exempt Bond Trust (the
"Company", or "ATEBT") were offered as a direct
investment to investors from November 1994 to
October, 1996; the total capital raised of
approximately $29.7 million was primarily from
clients of Wheat First Butcher Singer (now First
Union Securities). ATEBT is managed by an
affiliate of Related Capital Company (the
"Manager") and is currently a closed-end,
finite-life business trust that is not permitted
to raise additional funds or invest in additional
tax-exempt first mortgage bonds, except to
reinvest proceeds from repayments received
through September 2002. The Company currently
owns a portfolio of four first mortgage bonds
("FMBs") on multifamily properties. The Company
was formed to be held by investors until the
assets were liquidated, which at the earliest was
expected to be between 2004 and 2006. Through
June 30, 2000 (paid August 14, 2000), an investor
since inception would have been paid
approximately $8.33 in cumulative quarterly
distributions per original $20 share.
PROPOSAL:
To merge ATEBT with and into a subsidiary of
CharterMac, such that ATEBT will be owned by
CharterMac. CharterMac is publicly traded on the
American Stock Exchange under the symbol CHC and
has approximately 20.6 million shares
outstanding. CharterMac invests in tax-exempt
mortgage bonds which finance multifamily housing.
The businesses of both CharterMac and ATEBT are
substantially identical. The proposed business
combination provides liquidity and creates
greater potential overall value than each of the
companies separately. As consideration in the
merger, investors will have the right to receive
1.43112 CharterMac common shares for each ATEBT
share they own.
DATE OF PROXY MAILING TO
INVESTORS: August 14, 2000
DEADLINE TO VOTE: October 13, 2000
SHARES OUTSTANDING: 1,463,521
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INVESTORS ARE BEING ASKED TO VOTE ON THE FOLLOWING 5 PROPOSALS:
1. To approve the merger of ATEBT with and into CM Holding Trust, a
wholly-owned subsidiary of CharterMac;
2. To adopt an amendment to ATEBT's trust agreement to remove Section 23.2,
to be effective immediately prior to the merger, which contains a
provision which may otherwise grant ATEBT shareholders who vote "no" on
the proposed merger, the choice of (a) accepting CharterMac common shares
or (b) either (1) remaining a shareholder of ATEBT or (2) receiving cash
for their ATEBT shares equal to each ATEBT shareholder's pro rata share of
the appraised value of the net assets of ATEBT;
3. To adopt an amendment to ATEBT's trust agreement to remove Sections 23.2
(a) through (d), to be effective immediately prior to the merger, which
contain restrictions that could be construed to prohibit the consummation
of the merger;
4. To adopt an amendment to ATEBT's trust agreement to remove Section 15.4.9,
to be effective immediately prior to the merger, which contains a
provision which could be construed to otherwise prevent Related AMI or its
affiliates, including for this purpose CharterMac, from purchasing first
mortgage bonds from ATEBT in the merger.
5. To approve an extension to the solicitation period, if necessary.
ADVANTAGES OF THE PROPOSAL
o ATEBT is currently an unlevered, non-listed, closed-end finite-life trust
that owns FMBs. The proposal would convert the illiquid ownership of ATEBT
common shares into ownership of CharterMac's common shares that are listed
on the American Stock Exchange.
o If ATEBT continues to operate under its existing business plan, the
distribution payable to ATEBT shareholders would have to be reduced
because its cash available from operations can not support its current
quarterly distribution without the Manager's continued deferral of payment
of its fees. This will result in a decrease in the annualized return.
o Ability to have a distribution paid solely from interest received on bond
investments and not supported by a return of capital or accrual of fees
owed to its Manager.
o As of June 30, 1999, which is the date the exchange ratio was determined,
the merger consideration to be received by the ATEBT shareholders was
above the then current fair market value of ATEBT's net assets after
taking into account the fact that Related AMI is willing to waive deferred
and unpaid expenses, reimbursements and fees due as of June 30, 1999.
o Because Related Charter is familiar with ATEBT's assets, the transaction
costs associated with the merger should be approximately $890,000 lower
than if ATEBT were merged with a third party.
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o ATEBT shareholders would own shares in a company that has significantly
greater diversification;
o Ability to benefit from the future growth associated with an open end,
infinite life company that has the ability to acquire additional bond
investments from the proceeds of periodic equity and debt offerings.
RISK FACTORS
o The merger consideration is a fixed number and will not be adjusted.
o That shareholders may have originally invested in ATEBT because it was
structured as an entity which would sell its assets and distribute the
proceeds to them and may not want to own an interest in an ongoing
business.
o That the structure of the transaction requires the elimination of the
cash-out option and the prohibition on sales to affiliates which were
protections afforded to shareholders in the ATEBT trust agreement in the
event of a transaction such as this merger due to the structure of the
merger.
o The perceived conflict of interest of Related AMI since it is owned by the
same entities that own Related Charter.
o The transaction is a taxable event to ATEBT shareholders.
TAX CONSEQUENCES
To assist ATEBT shareholders in estimating the federal income tax consequences
of the merger, the following example has been prepared assuming that the ATEBT
shares were acquired in ATEBT's initial offering at $20 per share, and further
assuming all necessary adjustments to the shareholder's tax basis in their
shares due to distributions on their ATEBT shares. The estimated fair market
value is calculated based on the number of CharterMac shares received in the
merger, 1.43112, multiplied by the closing CharterMac common share price of
$12.8125 on June 30, 1999. However, the tax liability with respect to the gain
will be the difference between the value as of the closing of the merger of the
CharterMac common shares received over the adjusted basis in the exchanged ATEBT
shares.
Net per share adjusted tax basis $18.23
Estimated per share gain: $ 0.11
The character of the ATEBT shareholders' gain or loss, if any, should be capital
in nature. Whether any such capital gain or loss will be long term or short term
is determined by the ATEBT shareholders' holding period in the ATEBT shares
transferred to CharterMac.
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CONSENT VOTE SPECIFICS
Consent solicitation materials have been mailed to investors on August 14, 2000.
Votes must be received by October 13, 2000 in order to be counted. However, if
the Company receives a majority of shareholder votes in favor of the proposals
after September 13, 2000, the Company may close the vote. All five proposals
(except the proposal to extend the solicitation period) require the affirmative
vote of the holders of a majority of the outstanding ATEBT shares. The form of
consent allows shareholders the ability to vote once regarding all 5 proposals,
or to vote in the affirmative or negative on each individual proposal. Failing
to submit a consent form is the same as a vote against approval and adoption of
the merger. Consummation of the merger is conditioned on the approval of the
amendments to the ATEBT trust agreement.
SUMMARY:
While the proposal involves changes in the Company's investment objectives,
primarily with regard to the finite life status of the fund, the proposal allows
ATEBT shareholders the opportunity to better position themselves to maintain
their current distribution rate.
For additional information on the proposal please contact:
At First Union Securities: Leah Wehinger (804) 782-3473
At Related Capital: Brenda Abuaf (800) 600-6422, ext. 2090
Veronica Hunt (800) 600-6422, ext. 2077
