SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-28340
AMERICAN TAX-EXEMPT BOND TRUST
------------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-7033312
- - - ---------------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
625 Madison Avenue, New York, New York 10022
- - - ---------------------------------------- ---------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212)421-5333
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No ____
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Balance Sheets
(Unaudited)
===================================
September 30, December 31,
1997 1996
--------------- -----------------
ASSETS
Investment in First Mortgage
Bonds - at fair value (Note 2) $24,669,915 $16,180,828
Cash and cash equivalents 646,413 836,779
Marketable securities 700,000 9,200,000
Deferred costs 0 300,306
Organization costs (net of
accumulated amortization of
$25,000 and $17,500, respectively) 25,000 32,500
Accrued interest receivable 177,454 131,136
--------------- -----------------
Total assets $26,218,782 $26,681,549
=============== =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Due to affiliates $ 410,689 $ 291,451
Accounts payable 33,494 29,407
--------------- -----------------
Total liabilities 444,183 320,858
--------------- -----------------
Shareholders' equity:
Beneficial owner's equity-manager (12,746) (6,350)
Beneficial owners' equity-
shareholders (1,473,072
and 1,463,520 shares
issued and outstanding,
respectively) 25,805,103 26,256,842
Treasury shares of beneficial
interest (6,735 and 0 shares,
respectively) (127,957) 0
Net unrealized gain on First
Mortgage Bonds 110,199 110,199
--------------- -----------------
Total shareholders' equity 25,774,599 26,360,691
--------------- -----------------
Total liabilities and shareholders'
equity $26,218,782 $26,681,549
=============== =================
See Accompanying Notes to Financial Statements
2
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Statements of Operations
(Unaudited)
===================== ======================
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
1997 1996 1997 1996
--------------------- ----------------------
Revenues:
Interest income:
First Mortgage
Bonds
(Note 2) $471,881 $307,761 $1,216,062 $782,855
Tax-Exempt
Securities
(Note 3) 0 0 3,277 2,054
Marketable
Securities 30,530 60,613 162,244 184,341
-------- -------- ---------- ---------
Total revenues 502,411 368,374 1,381,583 969,250
-------- -------- ---------- ---------
Expenses:
General and
administrative 26,638 23,570 63,779 50,047
General and
administrative-
related parties
(Note 4) 8,207 51,612 75,015 120,282
Loan servicing
fees 13,556 28,127 34,773 28,127
Amortization of
organization
costs 2,500 2,500 7,500 7,500
-------- -------- ---------- ---------
Total expenses 50,901 105,809 181,067 205,956
-------- -------- ---------- ---------
Net income $451,510 $262,565 $1,200,516 $763,294
======== ======== ========== =========
Allocation of net
income
Shareholders 421,595 246,698 1,123,944 715,937
Manager 4,259 2,492 11,353 7,232
Special distribu-
tions to Manager
(Note 4) 25,656 13,375 65,219 40,125
-------- -------- ---------- ---------
Net income $451,510 $262,565 $1,200,516 $763,294
======== ======== ========== =========
Net income
per weighted
average share-
shareholders $ .29 $ .21 $ .77 $ .65
======== ======== ========== =========
See Accompanying Notes to Financial Statements
3
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Statements of Changes in Shareholde's Equity
(Unaudited)
<TABLE>
<CAPTION>
Beneficial Beneficial Treasury Net
Owners' Owner's Shares of Unrealized
Equity- Equity- Beneficial Gain on First
Total Shareholders Manager Interest Mortgage Bonds
----- ------------ ------- -------- --------------
<S> <C> <C> <C> <C> <C>
Balance at
January 1,
1997 $26,360,691 $26,256,842 $ (6,350) $ 0 $110,199
Issuance of
shares of
beneficial
interest 181,498 181,498 0 0 0
Net income 1,200,516 1,123,944 76,572 0 0
Distributions (1,840,149) (1,757,181) (82,968) 0 0
Purchase of
treasury shares
of beneficial
interest (127,957) 0 0 (127,957) 0
----------- ----------- --------- ---------- --------
Balance at
September
30, 1997 $25,774,599 $25,805,103 $(12,746) $(127,957) $110,199
=========== =========== ======== ========= ========
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Statements of Cash Flows
(Unaudited)
==============================
Nine Months Ended
September 30,
------------------------------
1997 1996
------------------------------
Cash flows from operating activities:
Net income $1,200,516 $ 763,294
---------- -----------
Adjustments to reconcile net
income to net cash
provided by operating activities
Amortization expense-
organization costs 7,500 7,500
Amortization expense-loan
origination costs 48,054 23,361
Amortization of REMIC premium 476 3,958
Changes in operating assets and liabilities:
Decrease in other assets 0 72,220
Increase in accrued
interest receivable (46,318) (81,360)
Increase in due to affiliates 119,238 193,678
Increase in accounts payable 4,087 0
---------- -----------
Total adjustments 133,037 219,357
---------- -----------
Net cash provided by operating
activities 1,333,553 982,651
---------- -----------
Cash flows from investing activities:
Sale (purchase) of marketable
securities 8,500,000 (4,150,000)
Maturity of Tax-Exempt Securities 1,900,000 200,000
Purchase of Tax-Exempt Securities (1,900,476) 0
Purchase of First Mortgage Bonds (8,150,000) (4,925,000)
Increase in deferred costs (86,835) (224,856)
---------- -----------
Net cash provided by (used in)
investing activities 262,689 (9,099,856)
---------- -----------
Net cash from operating and
investing activities,
carried forward 1,596,242 (8,117,205)
---------- -----------
See Accompanying Notes to Financial Statements
5
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Statements of Cash Flows
(continued)
(Unaudited)
==============================
Nine Months Ended
September 30,
------------------------------
1997 1996
------------------------------
Net cash from operating and
investing activities,
brought forward 1,596,242 (8,117,205)
----------- -----------
Cash flows from financing activities:
Decrease in accounts payable 0 (12,225)
Decrease in due to affiliates 0 (10,346)
Proceeds from issuance of shares
of beneficial interest 181,498 7,649,070
Distributions to shareholders (1,840,149) (1,244,735)
Purchase of treasury shares of
beneficial interest (127,957) 0
Increase in offering costs 0 (608,041)
----------- -----------
Net cash (used in) provided
by financing activities (1,786,608) 5,773,723
----------- -----------
Net decrease in cash and
cash equivalents (190,366) (2,343,482)
Cash and cash equivalents at
beginning of period 836,779 3,314,564
----------- -----------
Cash and cash equivalents at
end of period $ 646,413 $ 971,082
=========== ===========
Supplemental schedule of non cash
investing activities:
Decrease in deferred costs $ 387,141 $ 199,189
Increase in investment in
First Mortgage Bonds (387,141) (199,189)
----------- -----------
$ 0 $ 0
=========== ===========
See Accompanying Notes to Financial Statements
6
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(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 (the "Offering")
through Related Equities Corporation (the "Dealer Manager"), 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. The Offering terminated as of October 15, 1996. As of
October 15, 1996, a total of 1,460,979 shares had been sold to the public
through the Offering and the Trust's dividend reinvestment plan (the
"Reinvestment Plan") representing Gross Proceeds (the "Gross Proceeds") of
$29,219,586 (before volume discounts of $4,244). Pursuant to the Redemption Plan
which became effective October 15, 1996, the Trust is required to redeem
eligible shares presented for redemption for cash to the extent it has
sufficient net proceeds from the sale of shares under the Reinvestment Plan.
After October 15, 1996, 12,093 shares were sold through the Reinvestment Plan,
the proceeds of which are restricted for use in connection with the Redemption
Plan and are not included in gross proceeds. Pursuant to the Redemption Plan as
of September 30, 1997, 6,735 shares were redeemed for an aggregate price of
$127,957.
The Trust has invested the Net Proceeds primarily in First Mortgage Bonds issued
by various state or local governments or their agencies or authorities which are
secured by first mortgages and related first mortgage loans financed by such
bonds (collectively, "Mortgage Loans") on multifamily residential apartment
projects owned or to be developed by third-party developers and, to a lesser
extent, by Affiliates of the Manager. The Trust also invests
7
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
in Tax-Exempt Securities. As of September 30, 1997, of the total net proceeds
available for investment, 9.33% had been invested in Tax-Exempt Securities and
90.67% had been invested in First Mortgage Bonds.
The unaudited financial statements have been prepared on the same basis as the
audited financial statements included in the Trust's Form 10-K for the year
ended December 31, 1996. 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 September 30, 1997, the results of operations for the three
and nine months ended September 30, 1997 and 1996 and cash flows for the nine
months ended September 30, 1997 and 1996. However, the operating results for the
nine months ended September 30, 1997 may not be indicative of the results for
the year.
Certain information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been omitted. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Trust's Annual Report on Form 10-K for the year ended December 31, 1996.
Certain prior year amounts have been reclassified to conform to current year's
presentation.
Note 2 - Investment in First Mortgage Bonds
Reflections Apartments
- - - ----------------------
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 and are secured by a first mortgage and mortgage loan on Reflections
Apartments (the "Project" or
8
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
"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, which is not affiliated with the Manager or
Related Capital Company.
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.
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.
Rolling Ridge Apartments
- - - ------------------------
On August 2, 1996, the Trust purchased tax-exempt First Mortgage Bonds (as
hereinafter referred to as, the "Rolling Ridge Bonds") in an aggregate principal
amount of $4,925,000. The Rolling Ridge Bonds were issued by San Bernardino
County and secured by a deed of trust 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 Rolling Ridge L.L.C.
(the "Borrower").
9
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
The Rolling Ridge 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 is payable out of (i) 30% of net
property cash flow and (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 Rolling Ridge Bonds have a term of 30 years and are subject to mandatory
redemption, at the Trust's option, after ten years. The Borrower will be
permitted two nine-month extensions. The principal of the Rolling Ridge Bonds
will be payable upon sale or refinancing of the Project. Prepayment, in whole or
in part, is 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 equal to 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.
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 will be due at the time of assumption.
10
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
Lexington Trails Apartments
- - - ---------------------------
On May 7, 1997, the Trust purchased tax-exempt First Mortgage Bonds (as
hereinafter referred to as the "Lexington Trails Bonds") in an aggregate
principal amount of $4,900,000. The Lexington Trail Bonds were issued by The
Harris County Housing Finance Corporation and secured by a first deed of trust
and mortgage loan on Lexington Trails Apartments (the "Project" or "Lexington
Trails"), a development consisting of 200 apartment units in Houston, Texas.
Lexington Trails is owned and operated by Lexington Trails-American Housing
Foundation, Inc.
The Lexington Trails Bonds bear a fixed current rate of 9.0%, payable monthly in
arrears.
The Lexington Trails Bonds have a term of 25 years and are subject to mandatory
redemption, at the Trust's option, after 10 years. The principal of the
Lexington Trails Bonds will be payable upon sale or refinancing of the Project.
Prepayment, in whole or in part, will be prohibited during the first five years
following the acquisition of the Lexington Trails 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
4% of the principal amount of the Lexington Trails 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.
Highpointe Apartments
- - - ---------------------
On September 2, 1997, the Trust purchased Redevelopment Authority of the County
of Dauphin, Multifamily Housing Revenue Bonds (Highpointe Club Apartments
Project) Series 1989 (as hereinafter referred to as the "Highpointe Bonds") in
an aggregate principal amount of $3,250,000. The Highpointe Bonds are secured by
a first Mortgage and mortgage loan on Highpointe Apartments (the "Project" or
"Highpointe ") a development consisting of 240 apartment units in Harrisburg,
Pennsylvania, pari passu with $8,900,000 Redevelopment Authority of the County
of Dauphin, Multifamily Housing Revenue Bonds (Green Hill Project), Series 1986
(the "1986 Bonds"). The 1986 Bonds are owned by Summit Tax Exempt Bond Fund,
L.P. whose general partner is an affiliate of the Manager. Highpointe is owned
and operated by RHA INV., Inc. (the "Borrower") an affiliate of the Manager.
11
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
The Highpointe Bonds bear a fixed current interest of 9.0%, payable monthly in
arrears. The Highpointe Bonds enjoy payment priority over the 1986 Bonds. The
Trust has been informed that, as of the date hereof, the Borrower is current
with respect to all payments of principal and interest on the Highpointe Bonds.
The Highpointe Bonds mature on June 1, 2006. The principal of the Highpointe
Bonds will be payable upon maturity, sale or refinancing of the Project. The
Highpointe Bonds will receive a $750,000 priority payment of principal prior to
any payment of principal on the 1986 Bonds. Remaining principal on the
Highpointe Bonds and principal and accrued interest on the 1986 Bonds will be
paid pari passu, that is by an equal progression of payments after the payment
of interest, other than interest accrued and unpaid on the 1986 Bonds on June 6,
1989 and the $750,000 priorty amount.
12
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
Information relating to investments in First Mortgage Bonds for the nine months
ended September 30, 1997 and the year ended December 31, 1996 are as follows:
Investment in First Mortgage Bonds - at
fair value - January 1, 1996 $10,943,182
Additions:
Rolling Ridge Bonds 4,925,000
Rolling Ridge Bonds-loan origination costs 207,600
Reflections Bonds-loan origination costs 30,906
Deductions:
Amortization of loan origination costs (36,059)
-----------
Amortized cost at December 31, 1996 16,070,629
Net unrealized gain on First Mortgage Bonds 110,199
-----------
Investment in First Mortgage Bonds-
at fair value - December 31, 1996 16,180,828
Additions:
Lexington Trails Bonds 4,900,000
Lexington Trails Bonds-loan origination costs 123,886
Highpointe Bonds 3,250,000
Highpointe Bonds-loan origination costs 234,304
Reflections Bonds - loan origination costs 19,826
Rolling Ridge - loan origination costs 9,125
Deductions:
Amortization of loan origination costs (48,054)
-----------
Investment in First Mortgage Bonds-
at fair value - September 30, 1997 $24,669,915
===========
The cost basis of the First Mortgage Bonds was $24,559,716 and $16,070,629 at
September 30, 1997 and December 31, 1996. The net unrealized gain on First
Mortgage Bonds consists of gross unrealized gains and losses of $269,849 and
$159,650, respectively, at both September 30, 1997 and December 31, 1996.
13
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
Note 2 - Investment in First Mortgage Bonds (continued)
Information relating to investments in First Mortgage Bonds as of September 30,
1997 and December 31, 1996 are as follows:
<TABLE>
<CAPTION>
Outstanding
Date of Loan Accumulated Unrealized
Investment/ Balance Loan Amortization Gain (Loss)
Final at Sept. Origination at Sept. at Sept.
Property Description Maturity Date 30, 1997 Costs 30, 1997 30, 1997
- - - -------- ----------- ------------- -------- ----- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Reflections
Apartments
Casselbury,
Florida (A) 336 Apartment Units 12/95/ $10,700,000 $293,914 $51,435 $269,849
12/25
Rolling Ridge
Apartments
Chino Hills,
California(B) 110 Apartment Units 8/96/ 4,925,000 216,725 25,285 (159,650)
8/26
Lexington Trails
Apartments
Houston,
Texas (C) 200 Apartment Units 5/97/ 4,900,000 123,886 5,162 0
5/22
Highpointe
Apartments
Harrisburg,
Pennsylvania
(D) 240 Apartment Units 9/97/ 3,250,000 234,304 2,231 0
6/06 ----------- ----------- ----------- -----------
$23,775,000 $868,829 $84,113 $110,199
=========== =========== =========== ===========
<CAPTION>
Final Final
Balance Balance Interest Earned Net Interest
at Sept. at December by the Trust Less 1997 Earned
Property 30, 1997 31, 1996 for 1997 Amortization for 1997
- - - -------- -------- -------- -------- ------------ --------
<S> <C> <C> <C> <C> <C>
Reflections
Apartments
Casselbury,
Florida (A) $11,212,328 $11,216,528 $732,950 $24,026 $708,924
Rolling Ridge
Apartments
Chino Hills,
California(B) 4,956,790 4,964,300 331,527 16,635 314,892
Lexington Trails
Apartments
Houston,
Texas (C) 5,018,724 0 176,400 5,162 171,238
Highpointe
Apartments
Harrisburg,
Pennsylvania
(D) 3,482,073 0 23,239 2,231 21,008
----------- ----------- ---------- ------- ----------
$24,669,915 $16,180,828 $1,264,116 $48,054 $1,216,062
=========== =========== ========== ======= ==========
</TABLE>
(A) The interest rate for the Reflections is 9.00%. In addition to the interest
rate the Trust will be entitled to 25% of the cash flow, as defined.
(B) The interest rate for the Rolling Ridge is 9.00%. In addition to the
interest rate the Trust will be entitled to 30% of the cash flow, as
defined.
(C) The interest rate for the Lexington Trails is 9.00%.
(D) The interest rate for the Highpointe is 9.00%.
14
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(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.
On January 6, 1997, the Trust used a portion of the net proceeds of its offering
to purchase a New York NY Tax Antic NTS-SER Tax-Exempt Bond from Smith Barney.
The bond, which has a principal face value of $400,000 and interest rate of
4.5%, was purchased as a permanent investment at the premium price of 100.119%
or $400,476 and matured on February 12, 1997.
On May 1, 1997, the Trust used a portion of the net proceeds of its offering to
purchase Harris County Texas General Obligation Tax-Exempt Commercial Paper from
Goldman Sachs. The commercial paper, which has a principal face value of
$1,500,000 and interest rate of 3.75%, was purchased as a permanent investment
and matured on May 14, 1997.
15
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
Information relating to investments in Tax-Exempt Securities for the nine months
ended September 30, 1997 and the year ended December 31, 1996:
Investment in Tax-Exempt Securities -
January 1, 1996 $ 203,958
Sales:
Maturity of Philadelphia Penn Refunding
General Obligation Tax-Exempt Bond (200,000)
Amortization of premium (3,958)
----------
Investment in Tax-Exempt Securities -
December 31, 1996 0
Purchases:
New York NY Tax Antic NTS-SER
Tax-Exempt Bond 400,476
Harris Country Texas General Obligation
Tax-Exempt Commercial Paper 1,500,000
Sales:
Maturity of New York NY Tax Antic
NTS-SER Tax-Exempt Bond (400,000)
Maturity of Harris Country Texas General
Obligation Tax-Exempt Commercial Paper (1,500,000)
Amortization of Premium (476)
----------
Investment in Tax-Exempt Securities -
September 30, 1997 $ 0
==========
16
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
Note 3 - Investment in Tax-Exempt Securities (continued)
Information relating to investments in Tax-Exempt Securities as of September 30,
1997 and December 31, 1996 is as follows:
<TABLE>
<CAPTION>
Date Original
Purchased/ Purchase Final
Final Stated Price Balance at
Payment Interest Including September
Seller Description Date Rate Premium 30, 1997
- - - ------ ----------- ---- ---- ------- --------
<C> <S> <C> <C> <C> <C>
Smith Barney Topeka KS General
Obligation Tax- 5/3/95
Exempt Bond 8/1/95 9.25% $202,248 $ 0
Smith Barney NYS Environmental
Facilities Corp. State
Water Pollution Control
Revolving Fund Series D 9/19/95
Tax-Exempt Bond 11/15/95 4.40% 200,246 0
Wheat First Philadelphia Penn
Refunding General
Obligation Tax-Exempt 12/12/95
Bond 2/15/96 8.25% 205,592 0
Smith Barney NY NY Tax Antic
NTS-SER Tax-Exempt 1/6/97
Bond 2/12/97 4.50% 400,476 0
Goldman Sachs Harris County TX
General Obligation
Tax-Exempt Com- 5/1/97
mercial Paper 5/14/97 3.75% 1,500,000 0
---------- ------
$2,508,562 $ 0
========== ======
<CAPTION>
Final Interest Net
Balance at Earned by Interest
December the Trust 1997 Earned
Seller Description 31, 1996 for 1997 Amortization for 1997
- - - ------ ----------- -------- -------- ------------ --------
<C> <S> <C> <C> <C> <C>
Smith Barney Topeka KS General
Obligation Tax-
Exempt Bond $ 0 $ 0 $ 0 $ 0
Smith Barney NYS Environmental
Facilities Corp. State
Water Pollution Control
Revolving Fund Series D
Tax-Exempt Bond 0 0 0 0
Wheat First Philadelphia Penn
Refunding General
Obligation Tax-Exempt
Bond 0 0 0 0
Smith Barney NY NY Tax Antic
NTS-SER Tax-Exempt
Bond 0 1,750 476 1,274
Goldman Sachs Harris County TX
General Obligation
Tax-Exempt Com-
mercial Paper 0 2,003 0 2,003
----- ------ ---- ------
$ 0 $3,753 $476 $3,277
===== ====== ==== ======
</TABLE>
17
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(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 tax-exempt First Mortgage Bonds; (ii) special distributions calculated as a
percentage of total assets invested by the Trust which totaled $25,656 and
$13,375 for the three months ended September 30, 1997 and 1996 and $65,219 and
$40,125 for the nine months ended September 30, 1997 and 1996, respectively; the
total amount accrued and unpaid as of September 30, 1997 and December 31, 1996
amounted to $75,016 and $39,594, respectively; (iii) a subordinated incentive
fee based on the gain on the sale of the tax-exempt First Mortgage Bonds; (iv)
reimbursement of certain administrative costs incurred by the Manager or an
affiliate on behalf of the Trust which totaled $8,207 and $51,612 for the three
months ended September 30, 1997 and 1996 and $75,015 and $120,282 for the nine
months ended September 30, 1997 and 1996, respectively; the total amount accrued
and unpaid as of September 30, 1997 and December 31, 1996 amounted to $288,881
and $213,866, respectively; (v) bond selection fees calculated on a percentage
of the Gross Proceeds applicable to the First Mortgage Bonds; as of September
30, 1997 and December 31, 1996 $584,392 and $584,392 respectively of such costs
have been incurred of which $584,392 and $355,114 have been capitalized and
included in Investment in First Mortgage Bonds; and (vi) certain other fees.
The Trust has agreed to pay the Manager a nonaccountable allowance ("Expense
Allowance") equal to 2.5% of the Gross Proceeds of the Offering. The Manager, to
the extent not paid by an affiliate, has agreed to be responsible for all
expenses of the Offering, except for the payment of the Expense Allowance, and
certain selling commissions (not to exceed 5.0% of gross proceeds) and a due
diligence expense allowance (not to exceed 0.5% of gross proceeds) on certain
sales of shares. As of September 30, 1997 and December 31, 1996 offering costs
totaled $680,489, and along with selling commissions (see below) were charged
directly to Beneficial Owners' Equity-Shareholders.
The Trust paid commissions of up to 5% of the aggregate purchase price of shares
sold, subject to quantity discounts, as well as a non-
18
<PAGE>
AMERICAN TAX-EXEMPT BOND TRUST
Notes to Financial Statements
September 30, 1997
(Unaudited)
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 September 30, 1997 and December 31, 1996, the Company paid
$1,598,651 of commissions and due diligence to unaffiliated broker-dealers.
Note 5 - Subsequent Event
In November 1997, it is anticipated that distributions of approximately $586,000
and $16,000 will be paid to the Shareholders and the Manager, respectively,
representing the 1997 third quarter distribution.
19
<PAGE>
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 October 15, 1996 (the termination date of
the Offering), the Trust had received $29,219,586 (before volume discounts of
$4,244) in Gross Proceeds from the sale of 1,453,386 shares pursuant to the
Offering and 7,593 shares through the Reinvestment Plan resulting in Net
Proceeds available for investment of approximately $26,882,019 after volume
discounts, payments of sales commissions and organization and offering expenses.
Pursuant to the Redemption Plan which became effective October 15, 1996, the
Trust is required to redeem eligible shares presented for redemption for cash to
the extent it has sufficient net proceeds from the sale of shares under the
Reinvestment Plan. After October 15, 1996, 12,093 shares were sold through the
Reinvestment Plan, the proceeds of which are restricted for use in connection
with the Redemption Plan and are not included in gross proceeds. Pursuant to the
Redemption Plan as of September 30, 1997, 6,735 shares were redeemed for an
aggregate price of $127,957.
The Trust has invested the Net Proceeds primarily in First Mortgage Bonds issued
by various state or local governments or their agencies or authorities which are
secured by first mortgages and related first mortgage loans financed by such
bonds (collectively, "Mortgage Loans") on multifamily residential apartment
projects owned or to be developed by third-party developers and, to a lesser
extent, by Affiliates of the Manager. The Trust also invest in Tax-Exempt
Securities. As of September 30, 1997, of the total net proceeds available for
investment, 9.33% had been invested in Tax-Exempt Securities and 90.67% had been
invested in First Mortgage Bonds.
For a description of the Trust's investments in First Mortgage Bonds and
Tax-Exempt Securities see Notes 2 and 3 of Notes to the Financial Statements.
During the nine months ended September 30, 1997, cash and cash equivalents
decreased approximately $190,000 primarily due to the purchase of first mortgage
bonds ($8,150,000), an increase in deferred costs ($87,000) and distributions to
shareholders ($1,840,000) which exceeded cash provided by operating activities
($1,334,000), proceeds from the issuance of shares of beneficial interest in
excess of purchase of treasury shares of beneficial interest ($54,000) and the
sale of marketable securities ($8,500,000).
20
<PAGE>
Included in the adjustments to reconcile the net income to cash provided by
operating activities is amortization in the amount of approximately $54,000.
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 $292,196 at
September 30, 1997), an amount which is anticipated to be sufficient to satisfy
liquidity requirements, and may add to such reserves from Cash Flow and Sale or
Repayment Proceeds. As of September 30, 1997, 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.
The Trust expects that cash generated from its investments will be sufficient to
pay all of the Trust's expenses in the foreseeable future. However, certain
expense reimbursements totaling $289,000 and $214,000 at September 30, 1997 and
December 31, 1996, respectively, and the payment of a portion of the special
distribution totaling $75,000 and $40,000 at September 30, 1997 and December 31,
1996, respectively, to the Manager have been accrued but are unpaid.
The Trust anticipates that cash generated from the operations of the properties
underlying its investment in First Mortgage Bonds (taking into account its
preferred position relative to other creditors) will be sufficient to meet the
required debt service payments to the Trust with respect to the First Mortgage
Bonds for the foreseeable future.
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 were invested in Tax-Exempt Securities
which matured during this period. A portion of the proceeds from such repayments
were distributed to the shareholders. The effect of this policy has been the
following: (a) a portion of the distributions have constituted, and may 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 was a decrease in funds available to be invested in Mortgage Investments.
21
<PAGE>
Of the total distributions of $1,840,149 and $1,244,735 made for the nine months
ended September 30, 1997 and 1996, $639,633 ($.43 per share or 35%) and $481,441
($.36 per share or 39%) represents a return of capital determined in accordance
with generally accepted accounting principles. As of September 30, 1997, the
aggregate amount of the distributions made since the commencement of the
Offering representing a return of capital, in accordance with generally accepted
accounting principles, totaled $1,374,629. 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 the Trust's operating
expenses and to make distributions.
Results of Operations
The results of operations for the three and nine months ended September 30, 1997
and 1996 consisted primarily of interest income earned on First Mortgage Bonds
and marketable securities, net of general and administrative, general and
administrative-related parties and loan servicing fees.
Interest income from First Mortgage Bonds increased approximately $164,000 and
$433,000 for the three and nine months ended September 30, 1997 as compared to
the corresponding periods in 1996 primarily due to the investment in the Rolling
Ridge First Mortgage Bond in August 1996, the Lexington Trails First Mortgage
Bond in May 1997 and the Highpointe First Mortgage Bond in September 1997.
Interest income from marketable securities decreased approximately $30,000 and
$22,000 for the three and nine months ended September 30, 1997 as compared to
the corresponding periods in 1996 primarily due to the use of proceeds from the
Offering to purchase the Lexington Trails First Mortgage Bond in May 1997 and
the Highpointe First Mortgage Bond in September 1997.
General and administrative expenses increased approximately $14,000 for the nine
months ended September 30, 1997 as compared to the corresponding period in 1996
primarily due to an increase in costs associated with SEC filing and an increase
in accounting expenses.
General and administrative-related parties decreased approximately $43,000 and
$45,000 for the three and nine months ended September 30, 1997 as compared to
the corresponding periods in
22
<PAGE>
1996 primarily due to an underaccrual of expense reimbursements to affiliates of
the Manager at June 30, 1996 which was adjusted in the third quarter of 1996 and
a decrease in such expense reimbursements in 1997.
Loan servicing fees decreased approximately $15,000 and increased approximately
$7,000 for the three and nine months ended September 30, 1997 as compared to the
corresponding periods in 1996. The decrease for the three months is primarily
due to an underaccrual of such fees at June 30, 1996 which was adjusted in the
third quarter of 1996. The increase during the nine months is primarily due to
the investment in the Rolling Ridge First Mortgage Bond in August 1996 and the
Lexington Trails First Mortgage Bond in May 1997.
23
<PAGE>
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).
27 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K
Current report on Form 8-K/A dated May 21, 1997 was filed on July 18, 1997
relating to the purchase of the Lexington Trails Bonds.
Current report on Form 8-K dated September 2, 1997 was filed on September
10, 1997 relating to the purchase of the Highpointe Bonds.
Current report on Form 8-K/A dated September 2, 1997 was filed on November
10, 1997 relating to the purchase of the Highpointe Bonds.
24
<PAGE>
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: November 13, 1997
By: /s/ Alan P. Hirmes
------------------
Alan P. Hirmes
Senior Vice President and
Principal Financial Officer
Date: November 13, 1997
By: /s/ Richard A. Palermo
----------------------
Richard A. Palermo
Treasurer and
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The Schedule contains summary financial
information extracted from the financial
statements for American Tax-Exempt Bond Trust and
is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<CIK> 0000916824
<NAME> American Tax-Exempt Bond Trust
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Sep-30-1997
<CASH> 646,413
<SECURITIES> 25,369,915
<RECEIVABLES> 177,454
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 26,218,782
<CURRENT-LIABILITIES> 444,183
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 25,774,599
<TOTAL-LIABILITY-AND-EQUITY> 26,218,782
<SALES> 0
<TOTAL-REVENUES> 1,381,583
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 181,067
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,200,516
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,200,516
<EPS-PRIMARY> .77
<EPS-DILUTED> 0
</TABLE>
