AMERICAN ASSET ADVISERS TRUST, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON JUNE 9, 1997
To our Stockholders:
The annual meeting of stockholders of American Asset Advisers
Trust, Inc. (The "Company") will be held at Eight Greenway Plaza,
Suite 824, Houston, Texas on Monday, June 9, 1997 at 2:00 p.m.,
CDT, for the following purposes:
(1) to elect three directors each for a term of one year; and
(2) to transact such other business as may properly come
before the meeting.
Only stockholders of record at the close of business March 19,
1997, will be entitled to notice of and to vote at the meeting or
any adjournments thereof.
Dated: April 29, 1997.
By order of the Board of Directors,
/s/ H. Kerr Taylor
H. Kerr Taylor
Secretary
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING,
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
PROXY IN THE ENCLOSED ENVELOPE. IN ORDER TO AVOID
THE ADDITIONAL EXPENSE TO THE COMPANY OF FURTHER
SOLICITATION, WE ASK YOUR COOPERATION IN MAILING IN
YOUR PROXY PROMPTLY.
AMERICAN ASSET ADVISERS TRUST, INC.
PROXY STATEMENT
FOR
ANNUAL MEETING OF STOCKHOLDERS
MONDAY, JUNE 9, 1997
The accompanying Proxy is solicited by the Board of Directors
of American Asset Advisers Trust, Inc. (the "Company") for use at
the Annual Meeting of Stockholders to be held on Monday, June 9,
1997, at 2:00 p.m., CDT, at Eight Greenway Plaza, Suite 824,
Houston, Texas or at any adjournment(s) thereof (the "Annual
Meeting"). Giving the Proxy will not in any way affect the
stockholder's right to attend the Annual Meeting and to vote in
person. Any stockholder executing a Proxy has the power to revoke
the Proxy at any time before it is voted by (i) executing a
subsequently dated Proxy; (ii) filing a written request to revoke
or amend his (or her) Proxy with the Secretary of the Company at
the principal executive offices of the Company; or (iii) attending
the Annual Meeting and revoking the Proxy prior to the start of the
Annual Meeting.
A Proxy card is enclosed for your use. A Proxy which is
properly signed, dated, returned and not revoked will be voted in
accordance with the instructions contained therein. Unless
authority to vote for the election of directors (or for any one or
more nominees) is withheld, proxies will be voted FOR the slate of
three directors proposed by the Board of Directors.
Discretionary authority is provided in the Proxy as to any
matters not specifically referred to therein. Management is not
aware of any other matters which are likely to be brought before
the Annual Meeting. However, if any such matters properly come
before the Annual Meeting, it is understood that the Proxy holder
or holders are fully authorized to vote thereon in accordance with
his or their judgment and discretion.
The cost of soliciting proxies will be borne by the Company.
In addition to the solicitation of proxies by use of the mails,
certain officers and regular employees (who will receive no
compensation therefor in addition to their regular salaries) may be
used to solicit proxies personally and/or by telephone or
telegraph. In addition, banks, brokers and other custodians,
nominees and fiduciaries will be requested to forward copies of the
Proxy material to their principals and to request authority for the
execution of proxies. The Company will reimburse such persons for
their expenses in doing so.
This Proxy Statement and the accompanying Proxy, together with
a copy of the 1996 Annual Report which includes the financial
statements of the Company for the fiscal year ended December 31,
1996, are being mailed to all stockholders entitled to vote at the
Annual Meeting. The 1996 Annual Report is not to be considered part
of the proxy solicitation materials.
1
Security Ownership of Directors and Executive Officers
The following table sets forth certain information as to the
number of shares of common stock beneficially owned as of March 18,
1997, (a) by each person (including any "group" as that term is
used in Section 13(d)(3) of the Exchange Act) who is known to the
Company to own beneficially 5% or more of the common stock, (b) by
each Director and nominee for Director, and (c) by all executive
officers and Directors of the Company as a group.
As of March 18, 1997, there were 1,336,282 shares of common
stock outstanding. In addition, at December 31, 1996 there were
504,126 common stock purchase warrants ("warrants") outstanding,
each of which entitles the holder to purchase, during the period
which is between the 36th month and 48th month, inclusive, after
March 17, 1994, one share of common stock at $9.00 per share. No
exercise of the warrants has been assumed in the computation of
ownership percentages presented below.
Amount & Nature of Percentage
Directors & Nominees Beneficial Ownership of Class
H. Kerr Taylor 20,201 Shares (1) Less than 2%
George McCanse, Jr. 500 Shares Less than 1%
Robert S. Cartwright, Jr. 1,250 Shares Less than 1%
Officers & Directors As a Group 21,951 Shares Less than 2%
(1) 200 Shares are owned directly and 20,001 Shares are beneficially
owned by American Asset Advisers Realty Corporation ("AAA"). The
Common Stock of AAA is wholly owned by H. Kerr Taylor.
As of March 18, 1997, no person (or any "group" as that term
is used in Section 13(d)(3) of the Exchange Act) is known to the
Company to own beneficially 5% or more of the common stock.
2
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
Members of the Board of Directors serve until the Company's
next annual meeting or until their successors are elected and
qualify, in accordance with the Company's Articles of Incorporation
and By-Laws. The number of Directors constituting the full Board of
Directors of the Company currently is three. The By-Laws of the
Company provide that a majority of the Company's Board of Directors
shall at all times consist of Independent Directors. Each of the
present Directors has been nominated for re-election.
Unless you indicate to the contrary, the persons named in the
accompanying Proxy will vote your shares FOR the election of the
Director nominees named below, all of whom are currently Directors
of the Company. Election of the nominees requires the affirmative
vote of a majority of the votes cast by the holders of the
outstanding shares of common stock. In the event that any of the
nominees should become unable or unwilling to serve as a Director
prior to the annual meeting, the Company reserves the right to
adjourn the Annual Meeting and re-solicit proxies for a substitute
nominee. It is not anticipated that any of the nominees will be
unable or unwilling to serve as a Director.
Biographical information concerning each of the nominees and
present Directors is set forth below.
Present Directors Who Are Nominated for Re-election
Director's Name Age Principal Occupation Director Term to
Since Expire
H. Kerr Taylor 46 Chairman of the Board, 1993 1997
Chief Executive Officer
and President of the
Company
Robert S. Cartwright, Jr.* 47 Professor of Computer 1993 1997
Science at Rice
University
George A. McCanse, Jr.* 43 President of Value 1993 1997
OnLine, Inc. an
online computer
communications/data
access service for
the commercial real
estate valuation
industry
* Denotes Independent Directors
* H. Kerr Taylor has been the Chairman of the Board, Chief
Executive Officer and President of the Company since its
inception in August, 1993. Mr. Taylor has been an attorney
since 1979, has earned an M.B.A. at Southern Methodist
University, is a real estate broker and has over 20 years of
experience as a specialist in acquiring income-producing real
properties. He has been involved in the development, analysis,
marketing and management of private investment and public
programs, investing in property since 1975. Mr. Taylor is the
3
president, sole director, and the sole shareholder of American
Asset Advisers Realty Corp. ("AAA"), a company founded in
April, 1989, to provide real estate management services to the
Company and its affiliates. From 1995, Mr. Taylor served as
a director, and then, as a non-voting advisatory director, of
Park National Bank of Houston until February 1996, at which
time Park National Bank of Houston was purchased by Frost
Bank. He has also served on the Board of Directors of a
charitable institution. Mr. Taylor is a member of the Texas
Association of Realtors and the Texas Bar Association and a
former member of the American Bar Association.
* Robert S. Cartwright, Jr. is currently a Professor of Computer
Science at Rice University. Professor Cartwright earned a
Bachelors Degree, Magna Cum Laude, in Applied Mathematics from
Harvard College and a Doctoral Degree in Computer Science from
Stanford University in 1977. Professor Cartwright joined the
faculty of Rice University in July, 1980, as Associate
Professor of Computer Science. In July, 1986, he was promoted
to the rank of Professor. During his 16 years as a faculty
member at Rice University, he has twice served as Chairman of
the Computer Science Department during 1985-1986 and
1989-1990.
* George A. McCanse, Jr. is the President of Value OnLine, Inc.,
an online computer communications and data access service for
the commercial real estate valuation industry. Mr. McCanse is
a member of the Appraisal Institute (MAI Designation), the
Pension Real Estate Association, and the International Council
of Shopping Centers. He is also a participating member of the
Valuation Committee of the National Council of Real Estate
Investment Fiduciaries. Mr. McCanse holds a B.B.A. degree
from the University of Texas and has pursued graduate level
studies in real estate, architecture and finance. He has also
been involved in real estate investing and development,
including the acquisition and sale of over $150 million of
real estate during the 1970's and 1980's.
Management recommends you vote FOR the re-election of these
nominees and your proxy will be so voted unless you specify
otherwise.
4
OTHER BUSINESS
The Company is not aware of any business to be acted upon at
the Annual Meeting other than that which is explained in this Proxy
Statement. In the event that any other business calling for a vote
of the stockholders is properly presented at the meeting, the
holders of the proxies will vote your shares in accordance with
their best judgment.
VOTING SECURITIES AND PRINCIPAL HOLDERS
The Board of Directors has fixed the close of business on
March 19, 1997, as the record date for the determination of
stockholders entitled to notice of, and to vote at, the Annual
Meeting. As of March 19, 1997, there were issued and outstanding
1,336,282 shares of common stock of the Company, each share having
one vote.
MEETINGS AND CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year 1996, the Board of Directors held ten
meetings. No Director attended less than 75% of the meetings.
Audit Committee
The Board of Directors has established an Audit Committee
consisting solely of Robert S. Cartwright, Jr., an Independent
Director. The duties of the Audit Committee include:
(i) recommending independent auditors to the Company;
(ii) reviewing with the independent auditors of the Company the
scope of the audit, audit fees, the audit report and the management
letter, (iii) reviewing with management and the independent
auditors the financial condition of the Company for the year;
(iv) reviewing and approving nonaudit services, if any, by the
independent auditors; and (v) consulting with the independent
auditors and, if necessary, with internal financial personnel of
the Company, with regard to the adequacy of internal controls.
Compensation Committee
The Compensation Committee consists of three Directors,
H. Kerr Taylor, Robert S. Cartwright, Jr., and George A. McCanse.
The duties of the Compensation Committee include: (i) the setting
of annual compensation for officers and other key personnel; and
(ii) the establishment and supervision of bonus, deferred
compensation and similar awards and plans for officers, directors
and key personnel. The Compensation Committee met at the same time
as the entire Board met.
5
Compensation of Directors
The Company pays each non-employee Director a fee of $500 for
each meeting in which they participate. In addition, the Company
will reimburse the Directors, including those who are also
employees of the Company, for travel and other expenses incurred in
connection with their duties as Directors.
OFFICERS OF THE COMPANY
Current Officers
Officer of
the Company
Name Age Principal Occupation Since
H. Kerr Taylor 46 Chairman of the Board, Chief 1993
Executive Officer, President
and Secretary
Phil P. Moss 66 Executive Vice President 1993
L. Larry Mangum 32 Vice President and Treasurer 1996
Business Experience
Information concerning the business experience of Mr. Taylor
is provided under the section entitled "Proposal No. 1 - Election
of Directors."
Phil P. Moss has served as Executive Vice President since the
inception of the Company in August, 1993. Mr. Moss has also been
the Executive Vice President of AAA, a company owned by Mr. Taylor,
since April 1, 1993. Prior to that he served as Vice President of
AAA from April 1, 1989. Mr. Moss has been involved as a real estate
investor and owning, managing, and operating shopping centers,
office buildings, apartment projects, retail outlets and various
other properties for over twenty-five years. He received his B.B.A.
degree from the University of Texas.
L. Larry Mangum serves as Vice President and Treasurer of the
Company. Mr. Mangum is the Vice President of Finance of AAA. Mr.
Mangum is responsible for the financial accounting and reporting
relating to the AAA-sponsored partnerships and their properties.
He has over 9 years of accounting experience, including four years
with a public accounting firm. He previously worked for American
General Corporation, a national insurance company, from 1991-1996
as part of a team responsible for supervising their reporting
activities. Mr. Mangum received a B.B.A. degree in accounting from
Stephen F. Austin State University and subsequently earned the CPA
designation.
6
Terms of Office; Relationships
The officers of the Company are elected annually by the Board
of Directors at the annual meeting of the Board of Directors held
following each Annual Meeting of Stockholders, or as necessary and
convenient in order to fill vacancies or newly created offices.
Each officer holds office until his or her successor is duly
elected and qualified or until his or her death, resignation or
removal, if earlier. Any officer or agent elected or appointed by
the Board of Directors may be removed by the Board of Directors
whenever in its judgment the best interest of the Company will be
served thereby, but such removal shall be without prejudice to the
contractual rights, if any, of the person so removed.
There are no family relationships among the officers or between the
officers and the Directors. There are no special or undisclosed
arrangements or understandings between any officer and any other
person pursuant to which that officer or Director was selected.
COMPENSATION OF EXECUTIVE OFFICERS
During 1996, the Chief Executive Officer, H. Kerr Taylor, who
also holds the position of President and Chairman of the Board,
received no salary, bonus, stock options or any other remuneration
from the Company. Neither of the Company's executive officers
individually or in the aggregate received remuneration exceeding
$100,000 during 1996.
On August 22, 1995, the Board of Directors approved a special
compensation payment for the president in the amount of $150,000
for services provided from August 1993 through August 1995. The
president has received no other compensation from the Company for
serving as its president. In connection with the special
compensation payment, the Company executed a demand note in the
amount of $150,000, the payment of which could not be demanded
prior to the earlier of July 15, 1996 or the receipt of $10,000,000
from the Company's initial public offering. The note is payable in
cash or shares depending on the availability of cash for such
payment. No compensation arrangements were considered by the
Directors prior to August 22, 1995, because in their judgement, the
Company had not raised sufficient funds to award such compensation.
The compensation had not been accrued prior to August 22, 1995
because its payment was uncertain and the level of compensation had
not been determined until the August 1995 meeting of the Board of
Directors. As of the termination of the initial public offering in
March 1996, the Company had raised in excess of $10,000,000.
Although the president can demand payment on the note, such demand
has not been made. The decision regarding the nature of the
payment, whether in stock or cash, will be made by the Board of
Directors at the time the president demands payment. In
consideration that no payment has been demanded by the president
for the special compensation payment, the Board of Directors
approved at its August 1, 1996 meeting the payment of interest to
the president on the outstanding note at an annual rate of 8%. This
interest payment will be paid in cash or in stock.
7
No decisions as yet have been made with respect to any
additional compensation for any period after August 1995. The
Board of Directors commissioned an external study with respect to
the amount and type of compensation which could be paid in the
future to officers and/or directors, as well as the contingencies
and performance standards on which compensation will be determined.
The compensation portion of the study has been completed and will
be considered at such time as the Board determines in the future to
consider a new compensation arrangement.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as follows, there have been no transactions, or series
of similar transactions, since the beginning of the Company's last
fiscal year, nor are there any currently proposed transactions, or
series of similar transactions, to which the Company or any of its
subsidiaries was or is to be a party, in which the amount involved
exceeds $60,000, and in which any director or officer of the
Company (or any investor beneficially owning more than 5% of any
class of the Company's voting securities) had, or will have, a
direct or indirect material interest:
AAA was paid a total of $222,785 in acquisition fees related
to the purchase of properties by the Company.
On October 27, 1994, the Company entered into a joint venture
agreement with AAA Net Realty Fund X, Ltd. ("Fund X"), an
affiliated partnership for the purchase of a property at a total
cost of $1,636,157. The Company's interest in the joint venture is
54.84%. On September 12, 1995, the Company entered into a joint
venture agreement with AAA Net Realty Fund XI, Ltd. ("Fund XI"), an
affiliated partnership for the purchase of a property at a total
cost of $1,793,963. The Company's interest in the joint venture is
51%. On April 5, 1996, the Company entered into a joint venture
agreement with Fund X and Fund XI for the purchase of a property at
a total cost of $3,672,169. The property was purchased on
September 11, 1996 after construction was completed. The Company's
interest in the joint venture is 51.9%. On September 23, 1996, the
Company entered into a joint venture agreement with Fund XI for the
purchase of a property at a total cost of $531,693. The Company's
interest in the joint venture is 51%. On December 11, 1996, the
Company entered into a joint venture agreement with Fund XI for the
purchase of a property to be constructed at a total cost of
approximately $2,670,000. The Company's interest in the joint
venture is 51%. H. Kerr Taylor is the individual general partner
in Fund X and Fund XI, respectively, and owns a significant
interest in the corporations which serve as the managing general
partners of Fund X and Fund XI, respectively.
INDEPENDENT PUBLIC ACCOUNTANTS
The Company's independent public accountant is Deloitte &
Touche LLP ("Deloitte & Touche"). Deloitte & Touche has served the
Company in this capacity since the Company's inception in August,
1993. Representatives of Deloitte & Touche are not expected to be
present at the Annual Meeting of Stockholders on Monday, June 9,
1997.
8
PROPOSALS OF STOCKHOLDERS
Any proposal submitted by a stockholder intended for
presentation at the Company's 1998 Annual Meeting of Stockholders
and received at the Company's executive offices no later than
December 8, 1998, will be included in the Company's Proxy Statement
and proxy related to such Annual Meeting subject to approval by the
Board of Directors.
YOU ARE URGED TO SEND IN YOUR EXECUTED PROXY PROMPTLY.
9
_____________________________________________________
PROXY
_____________________________________________________
AMERICAN ASSET ADVISERS TRUST, INC.
Annual Meeting June 9, 1997
This proxy, when properly executed, will be voted in accordance
with the specifications made below. If no direction is made this
proxy will be voted FOR Proposal 1.
1. RE-ELECT H. KERR TAYLOR, ROBERT S. CARTWRIGHT, JR. AND GEORGE
A. McCANSE, JR. AS DIRECTORS.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
(to withhold your vote for any individual nominee, strike out his name)
2. IN THE STOCKHOLDER'S DISCRETION, ON SUCH OTHER MATTERS AS MAY
PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS
THEREOF.
THIS PROXY IS SOLICITED ON BEHALF OF THE MANAGEMENT OF THE
COMPANY.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY STATEMENT PROMPTLY
USING THE ENCLOSED ENVELOPE.
AMERICAN ASSET ADVISERS TRUST, INC.
ANNUAL MEETING JUNE 9, 1997
The undersigned having received the notice an accompanying Proxy
Statement for said meeting hereby appoints, H. Kerr Taylor, with
the power to appoint his substitute, and hereby authorizes him to
represent and to vote all of the undersigned's shares of Common
Stock of the Company, held of record on March 19, 1997, at the
Annual Meeting of Stockholders to be held on June 9, 1997, or at
any adjournments thereof. The above Proxy is hereby instructed to
vote as shown on the reverse side of this page.
Date ____________________, 1997
______________________________
______________________________
Signature of Stockholder(s)
(Joint owners must each sign. Please sign exactly
as your name(s) appear(s) on this Proxy.
When signing as an attorney, trustee, executor,
administrator or guardian, please give your full
title. If signer is a corporation, please sign the full
corporation name and full title of signing officer.)
Annual Report
December 31, 1996
American Asset Advisers Trust, Inc.
DIRECTORS' REPORT
The Company's Directors, including the Independent Directors, after
reviewing the Company's By-Laws and its Prospectus, have determined
that the written policies and investment objectives in the By-Laws
and Prospectus adequately represent and constitute the Company's
written policies and investments and borrowing as required to be
established by Section 3.13 of the Company's By-Laws. The
Company's Directors, including the Independent Directors, regularly
monitor the activities, administrative procedures, investment
operations and performance of the Company and its adviser, American
Asset Advisers Realty Corporation, to assure and determine that
such policies are being carried out in the best interests of the
Stockholders.
We have determined that the policies being followed by the Company
are in the best interest of its Stockholders and the bases for this
determination are the following:
(1) The foregoing written policies are believed to be in
conformance with regulatory requirements and guidelines;
(2) The Directors, including the Independent Directors,
believe that the foregoing policies are fair and
reasonable; and
(3) That property acquisitions made or which have been
contracted for by the Company to date are believed to be
in the best interests of the Company and its
Stockholders.
/s/H. Kerr Taylor April 29, 1997
H. Kerr Taylor
/s/Robert S. Cartwright, Jr. April 29, 1997
Robert S. Cartwright, Jr.
/s/George A. McCanse, Jr. April 29, 1997
George A. McCanse, Jr.
AMERICAN ASSET ADVISERS TRUST, INC.
SUPPLEMENTAL FINANCIAL INFORMATION
FOR THE YEAR ENDED DECEMBER 31, 1996
(Unaudited)
(1) Ratio of Cost of Raising Capital to Capital Raised 12.28%
(2) Ratio of Total Operating Expenses (before depreciation,
amortization and interest) to Average Invested Assets 1.90%
(3) Ratio of Total Operating Expenses (before depreciation,
amortization and interest) to Net Income 22.54%
The operating expenses (exclusive of interest and non-cash items
such as depreciation and amortization) are monitored by the Board
of Directors to limit the total operating expenses to the greater
of two percent (2%) of the average invested assets or twenty-five
percent (25%) of net income. For the twelve month period ended
March 31, 1996, the operating expenses were approximately 2.08% of
the average invested assets and 42.40% of net income. Though
slightly above the two percent (2%) of average invested assets
limitation, the excess was less than $4,000. For the twelve month
periods ended June 30, 1996, September 30, 1996 and December 31,
1996, the Company's operating expenses were within the limitations
specified above.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995
AND 1994
AND FINANCIAL STATEMENT SCHEDULE
FOR THE YEAR ENDED DECEMBER 31, 1996
AMERICAN ASSET ADVISERS TRUST, INC.
F-1
AMERICAN ASSET ADVISERS TRUST, INC.
INDEX TO FINANCIAL STATEMENTS
Page
FINANCIAL STATEMENTS:
Independent Auditors' Report F-3
Consolidated Balance Sheets, December 31, 1996 and 1995 F-4
Consolidated Statements of Operations for the Years Ended F-5
December 31, 1996, 1995 and 1994
Consolidated Statements of Shareholders' Equity F-6
for the Years Ended December 31, 1996, 1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended F-7 to F-8
December 31, 1996, 1995 and 1994
Notes to Consolidated Financial Statements for the Years Ended F-9 to F-14
December 31, 1996, 1995 and 1994
FINANCIAL STATEMENT SCHEDULE:
Schedule III Consolidated Real Estate Owned and Accumulated F-15
Depreciation for the Year Ended December 31, 1996
All other financial statement schedules are omitted as the
required information is either inapplicable or is included in the
financial statements or relates notes.
F-2
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
American Asset Advisers Trust, Inc.
We have audited the accompanying consolidated balance sheets of
American Asset Advisers Trust, Inc. (the "Company") as of
December 31, 1996 and 1995 and the related consolidated
statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1996.
Our audits also included the financial statement schedule listed
in the Index. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement
schedule 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, such consolidated financial statements present
fairly, in all material respects, the financial position of the
Company as of December 31, 1996 and 1995 and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1996 in conformity with generally
accepted accounting principles. Also, in our opinion, such
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Houston, Texas
February 14, 1997
F-3
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1996 AND 1995
ASSETS 1996 1995
CASH AND CASH EQUIVALENTS $ 1,616,311 $ 1,564,961
ACCOUNTS RECEIVABLE 5,119 -
PROPERTY:
Escrow deposits 75,000 -
Land 4,634,941 2,152,103
Buildings 4,435,713 4,436,074
9,145,654 6,588,177
Accumulated depreciation (195,256) ( 81,512)
TOTAL PROPERTY 8,950,398 6,506,665
NET INVESTMENT IN DIRECT FINANCING LEASES 3,151,797 582,753
OTHER ASSETS:
Prepaid acquisition costs 74,336 77,761
Prepaid issuance costs 101,399 -
Accrued rental income 74,625 23,845
Organization costs, net of accumulated
amortization of $160,919 and $99,130,
respectively 152,849 214,638
TOTAL OTHER ASSETS 403,209 316,244
TOTAL ASSETS $ 14,126,834 $ 8,970,623
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts payable $ 36,235 $ 67,481
Compensation payable 150,000 150,000
Security deposit 15,050 15,050
TOTAL LIABILITIES 201,285 232,531
MINORITY INTEREST 3,631,847 1,596,169
SHAREHOLDERS' EQUITY
Common stock, $.01 par value,
25,000,000 shares authorized,
1,204,925 and 827,876 shares
issued and outstanding, respectively 12,049 8,279
Additional paid-in capital 10,780,847 7,438,368
Accumulated distributions in excess of
earnings (499,194) (304,724)
TOTAL SHAREHOLDERS' EQUITY 10,293,702 7,141,923
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 14,126,834 $ 8,970,623
See Notes to Consolidated Financial Statements
F-4
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
REVENUES
RENTAL INCOME FROM OPERATING LEASES $ 780,768 $ 434,563 $ 93,552
EARNED INCOME FROM DIRECT FINANCING
LEASES 144,020 60,574 28,090
INTEREST INCOME 137,528 127,947 37,564
TOTAL REVENUES 1,062,316 623,084 159,206
EXPENSES
ADMINISTRATIVE 37,910 - 2,954
AMORTIZATION 61,789 61,470 35,265
COMPENSATION - 150,000 -
DEPRECIATION 113,744 66,966 14,546
DIRECTORS' FEES 15,000 16,500 10,500
INTEREST 5,000 - -
LEGAL AND PROFESSIONAL FEES 41,060 49,863 5,531
PRINTING 4,089 7,835 -
OTHER 24,265 14,626 2,498
TOTAL EXPENSES 302,857 367,260 71,294
INCOME BEFORE MINORITY
INTEREST IN NET INCOME OF
CONSOLIDATED JOINT VENTURES 759,459 255,824 87,912
MINORITY INTEREST IN NET INCOME
OF CONSOLIDATED JOINT VENTURES (216,652) (92,378) (8,367)
NET INCOME $ 542,807 $ 163,446 $ 79,545
NET INCOME PER SHARE:
PRIMARY $ .51 $ .24 $ .32
FULLY DILUTED $ .50
WEIGHTED AVERAGE COMMON &
COMMON EQUIVALENT SHARES:
PRIMARY 1,066,353 672,794 251,768
FULLY DILUTED 1,329,494
See Notes to Consolidated Financial Statements
F-5
<TABLE>
<CAPTION>
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
Accumulated
Distributions
Common Additional In Excess of
Stock Paid-In-Capital Earnings Total
<S> <C> <C> <C> <C>
Balance at December 31, 1993 $ 200 $ 199,810 $ (2,395) $ 197,615
Issuance of common stock 4,709 4,704,495 - 4,709,204
Issuance costs - (485,300) - (485,300)
Distributions ($.35 per share) - - (126,235) (126,235)
Net income - - 79,545 79,545
Balance at December 31, 1994 4,909 4,419,005 (49,085) 4,374,829
Issuance of common stock 3,370 3,366,175 - 3,369,545
Issuance costs - (346,812) - (346,812)
Distributions ($.64 per share) - - (419,085) (419,085)
Net income - - 163,446 163,446
Balance at December 31, 1995 8,279 7,438,368 (304,724) 7,141,923
Issuance of common stock 3,770 3,810,883 - 3,814,653
Issuance costs - (468,404) - (468,404)
Distributions ($.71 per share) - - (737,277) (737,277)
Net income - - 542,807 542,807
Balance at December 31, 1996 $ 12,049 $ 10,780,847 $ (499,194) $ 10,293,702
See Notes to Consolidated Financial Statements
</TABLE>
F-6
<TABLE>
<CAPTION>
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 542,807 $ 163,446 $ 79,545
Adjustments to reconcile net income to
net cash flows from operating activities:
Amortization 61,789 61,470 35,265
Depreciation 113,744 66,966 14,546
Increase in minority interest 216,652 92,378 8,367
Decrease (increase) in accounts receivable (5,119) 69 (69)
Increase (decrease) in accounts payable (31,246) 66,058 1,423
Increase in compensation payable - 150,000 -
Increase in security deposits - 15,050 -
Cash receipts from direct financing lease
in excess of income recognized 1,017 2,980 100
Increase in escrow deposits (38,250) - -
Increase in accrued rental income (50,780) (23,845) -
Increase in organization costs - (20,355) (234,595)
NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES 810,614 574,217 (95,418)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisitions of real estate:
Accounted for under the operating
lease method (1,695,146) (2,715,431) (2,262,667)
Accounted for under the direct financing
lease method (1,342,805) (1,337) (584,496)
Change in prepaid acquisition costs 3,425 (77,084) (677)
NET CASH FLOWS USED IN INVESTING ACTIVITIES (3,034,526) (2,793,852) (2,847,840)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock, net 3,346,249 3,022,733 4,223,904
Prepaid issuance costs (101,399) - -
Distributions paid to shareholders (737,277) (419,085) (126,235)
Distributions to minority interest partners (232,311) (104,639) (10,016)
NET CASH FLOWS PROVIDED BY FINANCING ACTIVITIES 2,275,262 2,499,009 4,087,653
NET INCREASE IN CASH & CASH EQUIVALENTS 51,350 279,374 1,144,395
CASH & CASH EQUIVALENTS, beginning of period 1,564,961 1,285,587 141,192
CASH & CASH EQUIVALENTS, end of period $ 1,616,311 $ 1,564,961 $ 1,285,587
See Notes to Consolidated Financial Statements
</TABLE>
F-7
AMERICAN ASSET ADVISERS TRUST, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1996 1995 1994
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING ACTIVITIES:
Escrow deposit contributed by
partner of the consolidated
joint ventures $ 36,750 $ - $ -
Minority owners share of real
estate acquired:
Accounted for under the operating
lease method $ 787,331 $ 874,943 $ 735,136
Accounted for under the direct
financing lease method 1,227,256 - -
Total minority owners share
of real estate acquired $2,014,587 $ 874,943 $ 735,136
See notes to Consolidated Financial Statements.
F-8
AMERICAN ASSET ADVISERS TRUST, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS AND NATURE OF OPERATIONS
American Asset Advisers Trust, Inc. ("the Company") was incorporated on
August 17, 1993 as a Maryland corporation. The initial issuance of 20,001
shares of stock for $200,010 was to American Asset Advisers Realty
Corporation ("AAA"). Commencing March 17, 1994, the Company offered up
to 2,000,000 additional shares of common stock together with 1,000,000
warrants. The Company is in the process of registering shares of common
stock for issuance upon the exercise of the outstanding warrants. The
warrants are exercisable at $9 per share between March 17, 1997 and March
16, 1998. As of December 31, 1996, 504,126 warrants were outstanding.
The offering period of the initial public offering terminated on March
15, 1996 with 1,008,252 shares being issued. On June 18, 1996, the
Company commenced a follow-on offering of up to 2,853,659 additional
shares of its common stock. The offering will terminate June 17, 1998,
unless terminated earlier. As of December 31, 1996, 176,672 shares in
this second offering were issued, bringing the total shares issued and
outstanding to 1,204,925 shares.
The Company was formed to acquire commercial and industrial real estate
properties using invested and borrowed funds. The selection, acquisition
and supervision of the operation of the properties is managed by AAA, a
related party.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of American
Asset Advisers Trust, Inc. and its four controlled joint ventures with
related parties.
BASIS OF ACCOUNTING
The financial records of the Company are maintained on the accrual basis
of accounting whereby revenues are recognized when earned and expenses
are recorded when incurred.
CASH AND CASH EQUIVALENTS
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of
three months or less to be cash equivalents. Cash and cash equivalents
consist of demand deposits at commercial banks and money market funds.
REAL ESTATE
Real estate is leased to others on a net lease basis whereby all
operating expenses related to the properties, including property taxes,
insurance and common area maintenance are the responsibility of the
tenant. The leases are accounted for under the operating lease method or
the direct financing lease method.
Under the operating lease method, the properties are recorded at cost.
Rental income is recognized ratably over the life of the lease and
depreciation is charged based upon the estimated useful life of the
property. Under the direct financing lease method, properties are
recorded at their net investment (see Note 3). Unearned income is
deferred and amortized to income over the life of the lease so as to
produce a constant periodic rate of return.
The Company's lease agreements do not provide for contingent rentals.
F-9
The Company obtains an appraisal on each property prior to a property's
acquisition and also performs an annual valuation update to evaluate
potential impairment for each property for which an appraisal is older
than twelve months. This valuation is based on capitalization of income
for each property, a review of current market conditions and any
significant events or factors which would indicate a potential impairment
to the value of a property.
DEPRECIATION
Buildings are depreciated using the straight-line method over an
estimated useful life of 39 years.
ORGANIZATION COSTS
Organization costs incurred in the formation of the Company are amortized
on a straight-line basis over five years.
STATEMENT OF CASH FLOWS - SUPPLEMENTAL INFORMATION
No cash was paid for interest during 1996, 1995 or 1994.
FEDERAL INCOME TAXES
The Company is qualified as a real estate investment trust ("REIT") under
the Internal Revenue Code of 1986, and is, therefore, not subject to
Federal income taxes provided it meets all conditions specified by the
Internal Revenue Code for retaining its REIT status, including the
requirement that at least 95% of its real estate investment trust taxable
income is distributed by March 15 of the following year.
NET INCOME PER SHARE
The number of shares used in primary net income per share calculations
are based on the weighted average number of shares of common stock
outstanding. The number of shares used in the fully diluted net income
per share calculations are based on the weighted average number of shares
of common stock outstanding and the assumption that the warrants were
exercised using the treasury stock method.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company believes the carrying value of financial instruments
consisting of cash, cash equivalents, accounts receivable and liabilities
approximates their fair value.
F-10
2. OPERATING LEASES
A summary of minimum future rentals, exclusive of any renewals, under
noncancellable operating leases in existence at December 31, 1996 is as
follows:
1997 $ 932,543
1998 $ 936,961
1999 $ 963,178
2000 $ 988,006
2001 $ 997,043
2002-2016 $ 6,469,568
3. NET INVESTMENT IN DIRECT FINANCING LEASES
The Company's net investment in its direct financing leases at December
31, 1996 and 1995 included:
1996 1995
Minimum lease payments receivable $ 7,441,043 $ 1,383,086
Unguaranteed residual value 1,557,904 289,209
Less: Unearned income 5,847,150 1,089,542
$ 3,151,797 $ 582,753
A summary of minimum future rentals, exclusive of any renewals, under the
noncancellable direct financing leases are summarized as follows:
1997 $ 330,229
1998 $ 330,229
1999 $ 333,165
2000 $ 336,590
2001 $ 343,251
2002-2016 $ 5,767,559
4. MINORITY INTEREST
On September 23, 1996, the Company formed a joint venture, AAA Joint
Venture 96-2, with AAA Net Realty Fund XI, Ltd., an affiliated
partnership. The joint venture was formed for the purpose of acquiring
a parcel of land in The Woodlands, Texas upon which the tenant, Bank
United, will construct a branch bank building at its cost. At the
termination of the lease the improvements will be owned by the joint
venture. The Company's interest in the joint venture is 51%. The
minority interest is 49%.
On April 5, 1996, the Company formed a joint venture, AAA Joint Venture
96-1, with AAA Net Realty Fund XI, Ltd. and AAA Net Realty Fund X, Ltd.,
affiliated partnerships, for the purpose of acquiring a property which
is being operated as a Just For Feet retail store in Tucson, Arizona.
The property was purchased on September 11, 1996 after construction was
completed. The Company's interest in the joint venture is 51.9%. The
minority interest is 48.1%.
On September 12, 1995, the Company formed a joint venture, AAA Joint
Venture 95-2, with AAA Net Realty Fund XI, Ltd., an affiliated
partnership, for the purpose of acquiring a property in Wichita, Kansas
on lease to Blockbuster Music Retail, Inc. The Company's interest in the
joint venture is 51%. The minority interest is 49%.
F-11
On October 27, 1994, the Company formed a joint venture, AAA Joint
Venture 94-1, with AAA Net Realty Fund X, Ltd., an affiliated
partnership, for the purpose of acquiring a property in Independence,
Missouri on lease to Blockbuster Music Retail, Inc. The Company's
interest in the joint venture is 54.84%. The minority interest is
45.16%.
5. MAJOR TENANTS
The Company's operations are all related to the acquisition and leasing
of commercial real estate properties. The following schedule summarizes
rental income by lessee for 1996, 1995 and 1994 under both operating
lease and direct financing lease methods of accounting:
1996 1995 1994
Tandy Corporation (Mesquite, Texas) $108,900 $108,903 $ 59,290
America's Favorite Chicken Company
(Smyrna, Georgia) $ 91,875* $ 94,118 $ 40,173
Blockbuster Music Retail, Inc.
(Independence, Missouri
and Wichita, Kansas) $377,901 $238,906 $ 22,179
OneCare Health Industries, Inc.
(Houston, Texas) $201,638 $ 53,210 $ -
Just For Feet, Inc. (Tucson, Arizona) $123,244 $ - $ -
Bank United (The Woodlands, Texas
and Houston, Texas) $ 21,230 $ - $ -
Total $924,788 $495,137 $121,642
* Decrease resulted from recognition of earned income under the
direct financing lease method of accounting. Rental payments
received remained unchanged from 1995.
6. FEDERAL INCOME TAXES
The differences between net income for financial reporting purposes and
taxable income before distribution deductions relate primarily to
temporary differences and to certain organization costs which are
amortized for financial reporting purposes only.
For income tax purposes, distributions paid to shareholders consist of
ordinary income, capital gains and return of capital as follows:
1996 1995 1994
Ordinary Income $ 545,967 $ 342,210 $ 105,456
Capital gains - - -
Return of capital 191,310 76,875 20,779
$ 737,277 $ 419,085 $ 126,235
7. RELATED PARTY TRANSACTIONS
20,001 Shares of the Company's stock are owned by AAA. The common stock
of AAA is wholly owned by the president and director of the Company. In
addition, the Company has entered into an Omnibus Services Agreement with
AAA whereby AAA provides property acquisition, leasing, administrative
and management services for the Company. $37,910 and $2,954 were incurred
and paid to AAA during 1996 and 1994, respectively, for such services.
F-12
Certain costs have been incurred by AAA in connection with the
organization and syndication of the Company. Reimbursement of these
costs become obligations of the Company in accordance with the terms of
the offering. The costs to organize the Company have been capitalized
as Organization Costs. For the year ended December 31, 1994, $58,110 in
reimbursements had been incurred and paid to AAA. In addition, $98,494
and $64,848 of costs were incurred by AAA in 1996 and 1995, respectively,
in connection with the issuance and marketing of the Company's stock.
These costs are reflected as issuance costs. $9,256 of these costs were
owed to AAA at December 31, 1995.
Acquisition fees, including real estate commissions, finders fees,
consulting fees and any other non-recurring fees incurred in connection
with locating, evaluating and selecting properties and structuring and
negotiating the acquisition of properties are included in the basis of
the properties. Acquisition fees of $222,785, $232,378 and $131,077 were
incurred and paid to AAA during 1996, 1995 and 1994, respectively.
On August 22, 1995, the Board of Directors approved a special
compensation payment for the president in the amount of $150,000 for
services provided from August 1993 through August 1995. In connection
therewith, the Company executed a demand note payable at the earlier of
July 15, 1996 or the receipt of $10,000,000 from the Company's stock
offering. The note shall be payable in cash or stock depending on the
availability of cash for such payment. No compensation arrangements were
considered by the Board prior to this time because the Company had not
raised sufficient funds through its stock offering, as determined by the
judgment of the Board, considered necessary for any compensation to be
granted. The compensation had not been accrued prior to August 22, 1995
because its payment was uncertain and the level of compensation had not
been determined until the August 1995 Board meeting. As of the
termination of the initial public offering in March 1996, the Company had
sold in excess of $10,000,000. Although the president can demand payment
on the note, such demand has not been made. The decision regarding the
nature of the payment, whether in stock or cash, will be made by the
Board of Directors at the time the president demands payment. In
consideration that no payment has been demanded by the president for the
special compensation payment, the Board of Directors approved at its
August 1, 1996 meeting the payment of interest to the president at an
annual rate of 8%. This interest payment will be paid in cash or in
stock. As of December 31, 1996, $5,000 of interest has been accrued
related to this note.
No decisions as yet have been made with respect to any additional
compensation for any period after August 1995. The Board of Directors
commissioned an external study with respect to the amount and type of
compensation which could be paid in the future to officers and/or
directors, as well as the contingencies and performance standards on
which compensation will be determined. The compensation portion of the
study has been completed and will be considered at such time as the Board
determines in the future to consider a new compensation arrangement.
Accordingly, the financial statements do not include any accruals for
compensation subsequent to August 1995.
In accordance with the terms of the Company's public offering, up to 15%
of the gross offering proceeds will be used to pay aggregate selling
commissions and other issuance costs incurred by the Company. Any excess
costs incurred by the Company are the obligation of AAA. At December 31,
1996, $101,399 of such costs had been incurred by the Company in excess
of the amount allowed from the offering proceeds. AAA's obligation to
fund such costs is dependent upon future proceeds from the public
offering.
See Note 4 for joint venture agreements with related parties.
F-13
8. PROPERTY ACQUISITIONS IN 1996
On December 11, 1996, the Company purchased real estate located in
Houston, Texas for $849,462. The property is a tract of undeveloped land
on which the tenant, Bank United, intends to construct a branch bank.
The lease agreement is for fifteen years, however the tenant has the
option to renew the lease for one additional term of five years. The
lease has provisions for an escalation in the rent after the fifth and
tenth years of the lease. The Company recorded $5,119 of rental income
from Bank United for 1996.
On December 11, 1996, the Company entered into an agreement with SCC
Baton Rouge JFF, Ltd. for the purchase of a property to be constructed
in Baton Rouge, Louisiana. The property will be acquired subject to a
lease with Just For Feet, Inc. The purchase price for the property will
total approximately $2,670,000 and will be paid with funds raised from
the Company's stock offering (See Note 1) and through a joint venture
with a related party.
On September 23, 1996, the Company purchased a 51% interest in real
estate located in The Woodlands, Texas through a joint venture with a
related party for the purchase price of $270,300. The property is a
tract of undeveloped land on which the tenant, Bank United, will
construct a branch bank. The lease agreement extends for fifteen years,
however the tenant has the option to renew the lease for one additional
term of five years. The lease has provisions for an escalation in the
rent after the fifth and tenth years of the lease. The Company recorded
$16,111 of rental income from Bank United for 1996.
On September 11, 1996, the Company acquired a 51.9% interest in a newly
constructed property on lease to Just For Feet, Inc. through a joint
venture with two related parties for the purchase price of $1,918,189.
The lease agreement extends for twenty years, however the tenant has the
option to renew the lease for two additional terms of five years each.
The lease has provisions for an escalation in the rent after the fifth,
tenth, and fifteenth years of the lease. The Company recorded $123,244
of income from Just For Feet for 1996.
As no buildings had previously been constructed on any of the properties
acquired by the Company during 1996, the rental income received by the
Company from these properties represents the initial results of
operations. Consequently, no pro-forma information is presented.
F-14
<TABLE>
<CAPTION>
AMERICAN ASSET ADVISERS TRUST, INC.
SCHEDULE III - CONSOLIDATED REAL ESTATE OWNED AND ACCUMULATED DEPRECIATION
FOR THE YEAR ENDED DECEMBER 31, 1996
LIFE ON WHICH
DEPRECIATION
COST AT IN LATEST
PROPERTY ENCUM- IMPROVE- CLOSE OF YEAR ACCUMULATED DATE OF DATE INCOME STMT.
DESCRIPTION BRANCES BUILDING LAND MENTS BUILDING LAND DEPRECIATION CONSTR. ACQUIRED IS COMPUTED
PROPERTIES INVESTED IN
UNDER OPERATING LEASES
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Radio Shack
Retail Store, Texas $0 $788,330 $337,856 $0 $788,330 $337,856 $51,324 N/A 06-15-94 39 Years
Church's Chicken
Restaurant, Georgia $0 $0 $251,071 $0 $0 $251,071 N/A N/A 07-22-94 N/A
Blockbuster Music
Store, Missouri $0 $490,747 $1,145,410 $0 $490,747 $1,145,410 $62,388 N/A 11-14-94 39 Years
OneCare Health
Industries, Inc., Texas $0 $1,246,560 $534,240 $0 $1,246,560 $534,240 $39,954 N/A 09-26-95 39 Years
Blockbuster Music
Store, Kansas $0 $1,255,774 $538,189 $0 $1,255,774 $538,189 $41,590 N/A 09-12-95 39 Years
Just For Feet
Store, Arizona $0 $0 $1,100,910 $0 $0 $1,100,910 N/A N/A 09-11-96 N/A
Bank United,
Woodlands, Texas $0 $0 $531,693 $0 $0 $531,693 N/A N/A 09-23-96 N/A
Bank United,
Houston, Texas $0 $0 $849,874 $0 $0 $849,874 N/A N/A 12-11-96 N/A
Total $0 $3,781,411 $5,289,243 $0 $3,781,411 $5,289,243 $195,256
PROPERTY INVESTED IN UNDER
DIRECT FINANCING LEASE
Church's Chicken
Restaurant, Georgia $0 $585,833 $0 $0 $585,833 $0 (2) N/A 07-22-94 N/A
Just For Feet
Store, Arizona $0 $2,571,259 $0 $0 $2,571,259 $0 (2) N/A 09-11-96 N/A
Total $0 $3,157,092 $0 $0 $3,157,092 $0 (2)
DIRECT
OPERATING FINANCING
(1)Balance at LEASES LEASE
December 31, 1995 $6,588,177 $585,833
Additions during 1996:
Acquisitions through
foreclosure $0 $0
Other acquisitions $2,482,477 $2,571,259
Improvements $0 $0
Deductions during 1996:
Cost of real estate sold $0 $0
Other $0 $0
Balance at
December 31, 1996 $9,070,654 $3,157,092
<FN>
<F1>
(2) The portion of the lease relating to the building of this property has
been recorded as a direct financing lease for financial reporting
purposes. Consequently, depreciation is not applicable.
<F2>
(3) The aggregate cost of all properties for Federal Income Tax purposes is
$12,227,746 at December 31, 1996.
</FN>
</TABLE>
F-15
AMERICAN ASSET ADVISERS TRUST, INC.
Date: April 29, 1997
To: Shareholders of American Asset Advisers Trust, Inc. (the "Company")
From: H. Kerr Taylor, President
We are pleased to report that the Company continues to build a
solid, conservative portfolio of well located net leased real
estate on long-term lease to some of America's finest companies.
From our inception, our primary focus has been "to provide the
highest quality corporate retail locations for America's premier
companies through net leases, producing a steadily rising income
stream for our shareholders". We believe the steps your Company
has taken in 1996 will help realize this goal.
We want to thank you for your support during 1996. We are
pleased to report that your Company now has purchased interest in
eight properties and has entered into an agreement to purchase a
ninth property. Management is actively planning the Company's
next stages of growth and believes that 1997 will be an exciting
and fruitful year.
From the inception, the distributions paid to our shareholders
have increased each quarter. Our strategy has remained constant
from the beginning; to increase our equity base and invest in
income producing retail facilities on long-term leases to
corporations with a net worth in excess of $40 million. We
believe our strong tenant foundation will lay the groundwork for
a bright financial future for our shareholders.
Attached, you will find a notice of our upcoming annual
stockholders meeting. With it is your proxy statement. Please
complete your proxy statement and return it to us in the enclosed
stamped envelope as soon as possible. We have also included the
Company's 1996 Annual Report for your records.
We would, once again, like to thank you for the confidence you
have placed in American Asset Advisers Trust, Inc., and look
forward to continued success throughout the years.
If you have any questions, or if we may be of any help, please do
not hesitate to call.
AMERICAN ASSET ADVISERS TRUST, INC.
Date: April 29, 1997
To: Registered Representatives
From: H. Kerr Taylor, President
Enclosed please find copies of correspondence sent to your
clients which includes the Annual Report for American Asset
Advisers Trust, Inc. (the "Company") for 1996 and the Proxy
Statement for the annual stockholder's meeting. A copy of the
proxy card is also enclosed for your review.
We want to thank you for your support during 1996. We are
pleased to report that the Company now has purchased interest in
eight properties and has entered into an agreement to purchase a
ninth property. Management is actively planning the Company's
next stages of growth and believes that 1997 will be an exciting
and fruitful year.
Our success is directly related to you and the support and
confidence you have placed in us. With your continued support,
the Company will have a bright and prosperous 1997.
If you have any questions, or if we may be of any help, please do
not hesitate to call.
