EX-99.1 2 exhibit.htm FUND 11 3RD QUARTER 2006 PORTFOLIO OVERVIEW Fund 11 3rd Quarter 2006 Portfolio Overview
 
 Exhibit 99.1
 
 

 
 
 
LEASING FUND
ELEVEN, LLC

PORTFOLIO OVERVIEW

3rd QUARTER

2006




ICON Leasing Fund Eleven, LLC

- 3rd Quarter 2006 Portfolio Overview -


Dear Member of ICON Leasing Fund Eleven, LLC:

ICON Leasing Fund Eleven, LLC (“Fund Eleven”) raised $239,926,196 from its initial offering on April 21, 2005 through September 30, 2006. In July 2006, Fund Eleven increased its original offering from $200,000,000 to $375,000,000. As of October 31, 2006, Fund Eleven had 259,737 member shares outstanding.

During the third quarter of 2006, Fund Eleven continued to operate in its Operating Period, during which time Fund Eleven will acquire equipment subject to lease. Fund Eleven’s portfolio will be comprised of two lease categories: growth leases, where the rental cash flows have been assigned or pledged to a lender; and income leases, where Fund Eleven retains the rental cash flows. While income leases produce monthly cash flows, growth leases permit Fund Eleven to retain an interest in the future value of the equipment on a leveraged equity basis. Fund Eleven’s manager, ICON Capital Corp. (the “Manager”), expects that the future value of the equipment in growth leases will be greater than Fund Eleven’s initial cash investment.

Cash generated from these investments will facilitate Fund Eleven’s distributions to its members and over time is expected to lead to acquisition of additional equipment, also referred to as “reinvestment.” Availability of cash to be used for reinvestment depends on the requirements for expenses, reserves, and distributions to members.

Fund Eleven’s Operating Period is anticipated to continue for a period of five years from the closing of the offering - unless extended. Following its Operating Period, Fund Eleven will enter its “Liquidation Period,” during which time equipment will be sold in the ordinary course of business.

News Covering the Reporting Period

·  Global Crossing Telecommunications, Inc. (“Global Crossing”), an internet protocol based telecommunications provider, announced that the number of its enterprise and carrier customers increased 64% year over year in the second quarter 2006. Overall IP traffic more than doubled in Mexico during the second quarter 2006 compared to the previous year, outpacing Global Crossing’s worldwide IP growth during the same period. (Source: Global Crossing press release, dated August 23, 2006)

·  Beginning July 3, 2006, TOP Tankers, Inc.’s (“Top Tankers”) common stock was listed on the NASDAQ Global Select Market. Prior to the change, Top Tankers’ common stock had been listed on the NASDAQ National Market. The NASDAQ Global Select Market has the highest initial listing standards of any exchange in the world based on financial and liquidity requirements. (Source: TOP Tanker press release, dated June 30, 2006)


Portfolio Overview
 
Fund Eleven has invested both directly and indirectly through joint ventures with its affiliates. Presently, Fund Eleven’s portfolio consists primarily of the following:

Income Leases

·  An equipment leasing portfolio consisting of approximately 1,100 equipment schedules originated by Clearlink Capital Corporation, a financial services provider based in Mississauga, Ontario, Canada, comprised mainly of information technology and technology-related equipment, including personal computers and client/server equipment that perform business-related functions such as database inquiries (the “Clearlink Portfolio”). Fund Eleven acquired the Clearlink Portfolio for approximately $144,591,000, which was comprised of a cash payment of approximately $49,361,000 and the assumption of non-recourse debt and other assets and liabilities related to the Clearlink Portfolio of approximately $95,230,000. During the three months ended September 30, 2006, Fund Eleven purchased approximately $17,200,000 of new equipment in connection with the Clearlink Portfolio.

·  State-of-the-art telecommunications equipment that Fund Eleven, along with two of its affiliates, acquired from various vendors. The equipment is subject to a forty-eight month lease with Global Crossing that is scheduled to expire in March 2010. Fund Eleven acquired its 61.4% ownership interest in the entity that will own the equipment for approximately $15,428,670 in cash.

·  Industrial gas meters and data gathering equipment that will be subject to a lease with EAM Assets Ltd. through 2013. EAM Assets Ltd. is a meter asset manager that is responsible for maintaining industrial gas meters in the United Kingdom (UK). Fund Eleven and one of its affiliates each purchased its 50% ownership interest in the joint venture that will own the equipment for approximately $5,620,000 in cash. At September 30, 2006, the cash contributions were held in an escrow account pending the equipment purchase.

·  Digital audio/visual entertainment systems leased to AeroTV Ltd. with lease terms expiring in 2008. AeroTV Ltd. is a UK provider of on board digital audio/visual systems for airlines, rail and coach operators. In December 2005, Fund Eleven acquired a 50% interest in this equipment, through a joint venture with one of its affiliates. The cash purchase price for Fund Eleven’s 50% ownership interest was approximately $2,776,000. In August 2006, the joint venture acquired approximately $371,000 of additional equipment. Through September 2006, the joint venture funded approximately $1,357,000 for the purchase of the equipment.
 
 
1

 
Growth Leases

·   Four 45,720 - 47,094 DWT (deadweight) product carrying vessels, the M/T Doubtless, the M/T Faithful, the M/T Spotless, and the M/T Vanguard, which are subject to bareboat charters with subsidiaries of Top Tankers that are scheduled to expire in February 2011. Fund Eleven acquired the tankers for approximately $112.7 million (exclusive of professional and management fees), which is comprised of (i) assumption of a first priority non-recourse mortgage of approximately $80 million, (ii) assumption of a second priority non-recourse mortgage of approximately $10 million, and (iii) approximately $22.7 million in cash.
 
·  Four 3,300 TEU (twenty foot equivalent units) container vessels, the M/V ZIM America, the M/V ZIM Hong Kong, the M/V ZIM Israel, and the M/V ZIM Japan, which are subject to bareboat charters with ZIM Integrated Shipping Services, Ltd. that are scheduled to expire in November 2010 and January 2011. Fund Eleven paid approximately $141.2 million (exclusive of professional and management fees) which consisted of (i) approximately $35.9 million in cash, (ii) the assumption of approximately $93.3 million of non-recourse indebtedness secured by a first priority mortgage and (iii) approximately $12 million of non-recourse indebtedness secured by a second priority mortgage.
 

10% Status Report

As of September 30, 2006, no individual asset constituted at least 10% of the aggregate purchase price of Fund Eleven’s equipment portfolio. The vessels chartered to ZIM individually constitute the largest individual assets in the portfolio but each vessel constitutes less than 9% of the aggregate purchase price of Fund Eleven’s portfolio. With the exception of the Clearlink Portfolio, which leases continue to expire each month, Fund Eleven anticipates that the other equipment in its portfolio will remain on lease during the next year.

Distribution Analysis

During the reporting period, Fund Eleven continued to make monthly distributions at a rate of 9.1% per annum. Cash available for distributions was generated substantially through cash from operations. From the inception of the offering period, Fund Eleven has made eighteen monthly distributions to its members. During the first nine months of 2006, Fund Eleven paid its members $10,829,198 in cash distributions. As of September 30, 2006, a $10,000 investment made at the initial closing, would have received $1,281 in cumulative distributions representing a return of approximately 12% of such initial investment.


Fund Summary

 
Start of Offering Period
April 21, 2005
 
Offering Period End Date
April 21, 2007
 
Size of offering
$375,000,000
 
No. of Members as of August 1, 2006
5,346

Outlook and Overview
 
Excluding leases in the Clearlink Portfolio, AeroTV Ltd. is the first lease that is scheduled to expire, which will expire in 2008.

As of September 30, 2006, Fund Eleven had $70,295,665 in cash and cash equivalents on hand. The Manager anticipates that Fund Eleven will make several acquisitions in the near future. Substantially all of Fund Eleven’s cash flows are derived from income leases. On a monthly basis, Fund Eleven deducts from such cash flows its recurring operating expenses and assesses cash flows required for known re-leasing costs and equipment management costs. The remaining cash flows are then available for monthly distribution to members.

 

2


ICON Leasing Fund Eleven, LLC
 
(A Delaware Limited Liability Company)
 
Condensed Consolidated Balance Sheets
 
   
ASSETS
 
            
   
 (Unaudited)
     
   
 September 30,
 
December 31,
 
   
 2006
 
2005
 
Cash and cash equivalents
 
$
70,295,665
  
$
71,449,920
  
               
Investments in finance leases:
             
Minimum rents receivable
   
72,509,426
   
-
 
Estimated unguaranteed residual values
   
3,987,676
   
-
 
Initial direct costs, net
   
2,551,222
   
-
 
Unearned income
   
(9,639,665
)
  
-
 
               
Net investments in finance leases
   
69,408,659
   
-
 
               
Investments in operating leases:
             
Equipment, at cost
   
373,063,373
   
-
 
Accumulated depeciation
   
(32,839,815
)
  
-
 
               
Net investments in operating leases
   
340,223,558
   
-
 
               
Investments in joint ventures
   
9,942,273
   
16,084,960
 
Equipment held for sale or lease
   
8,414,103
   
-
 
Rents receivable (net of allowance
             
for doubtful accounts of $70,015)
   
3,591,574
   
-
 
Restricted cash
   
1,986,012
   
909,185
 
Other assets, net
   
1,022,362
   
3,257,636
 
               
Total assets
 
$
504,884,206
  
$
91,701,701
  
               

 
 
3

 
ICON Leasing Fund Eleven, LLC
 
(A Delaware Limited Liability Company)
 
Condensed Consolidated Balance Sheets
 
   
LIABILITIES AND MEMBERS' EQUITY
 
           
   
(Unaudited)
     
   
September 30,
 
December 31,
 
   
2006
 
2005
 
Notes payable - non-recourse
 
$
270,922,919
  
$
-
  
Accounts payable and other liabilities
   
2,166,211
   
844,058
 
Deferred rental income
   
8,347,401
   
-
 
Leasing payables and other lease liabilities
   
19,262,905
   
-
 
Due to Manager and affiliates, net
   
402,047
   
602,377
 
Distributions payable
   
160,313
   
-
 
Minority interest
   
8,762,589
   
-
 
               
Total liabilities
   
310,024,385
   
1,446,435
 
               
Commitments and contingencies
             
               
Members' equity:
             
Manager (one share outstanding, $1,000 per share original
             
issue price)
   
(170,053
)
  
(28,876
)
Additional Members (239,926 and 107,099 shares outstanding,
             
$1,000 per share original issue price)
   
193,902,669
   
90,318,028
 
Accumulated other comprehensive loss
   
1,127,205
   
(33,886
)
               
Total members' equity
   
194,859,821
   
90,255,266
 
               
Total liabilities and members' equity
 
$
504,884,206
  
$
91,701,701
  
           

 

4


ICON Leasing Fund Eleven, LLC
 
(A Delaware Limited Liability Company)
 
Condensed Consolidated Statements of Operations
 
(Unaudited)
 
               
For the Period
 
               
from May 6, 2005
 
           
Nine Months
 
(Commencement of
 
   
Three Months Ended
 
Ended
 
Operations)
 
   
September 30,
 
September 30,
 
to September 30,
 
   
2006
 
2005
 
2006
 
2005
 
Revenue:
                 
Rental income
 
$
23,013,318
  
$
-
  
$
41,317,586
  
$
-
  
Finance income
   
1,150,699
   
-
   
2,538,701
   
-
 
Income from investments in joint ventures
   
120,643
   
-
   
501,868
   
-
 
Net gain on sales of new equipment (net of cost of
                         
sales of $2,733,138 and $7,822,580 for the three
                         
and nine months ended September 30, 2006)
   
162,349
   
-
   
442,966
   
-
 
Net (loss) gain on sales of leased equipment
   
(132,908
)
  
-
   
288,614
   
-
 
Interest and other income
   
384,782
   
186,358
   
1,555,362
   
188,654
 
                           
Total revenue
   
24,698,883
   
186,358
   
46,645,097
   
188,654
 
                           
Expenses:
                         
Depreciation and amortization
   
19,059,640
   
1,094
   
34,177,215
   
1,094
 
Impairment loss
   
446,301
   
-
   
446,301
   
-
 
Interest
   
5,269,459
   
-
   
7,051,141
   
-
 
Bad debt expense
   
-
   
-
   
70,015
   
-
 
Management fees - Manager
   
1,520,291
   
-
   
2,605,705
   
-
 
Administrative expense reimbursements -
                         
Manager and affiliate
   
1,811,745
   
407,772
   
4,335,610
   
529,976
 
General and administrative
   
262,356
   
25,188
   
527,516
   
25,348
 
Minority interest
   
264,423
   
-
   
529,451
   
-
 
                           
Total expenses
   
28,634,215
   
434,054
   
49,742,954
   
556,418
 
                           
Net loss
 
$
(3,935,332
)
$
(247,696
)
$
(3,097,857
)
$
(367,764
)
                           
Net loss allocable to:
                         
Additional Members
 
$
(3,895,979
)
$
(245,219
)
$
(3,066,878
)
$
(364,086
)
Manager
   
(39,353
)
  
(2,477
)
  
(30,979
)
  
(3,678
)
                           
   
$
(3,935,332
)
$
(247,696
)
$
(3,097,857
)
$
(367,764
)
                           
Weighted average number of additional
                         
member shares outstanding
   
218,980
   
44,120
   
174,685
   
30,247
 
                           
Net loss per weighted average
                         
additional member share outstanding
 
$
(17.79
)
$
(5.56
)
$
(17.56
)
$
(12.04
)
                           


 
5


ICON Leasing Fund Eleven, LLC
 
(A Delaware Limited Liability Company)
 
Condensed Consolidated Statement of Changes in Members' Equity
 
Nine Months Ended September 30, 2006
 
(Unaudited)
 
                       
                       
               
Accumulated
     
               
Other
     
 
  
Additional
 
Additional
 
Managing
 
Comprehensive
     
   
Member Shares
 
Members
 
Member
 
Loss
 
Total
 
Balance, January 1, 2006
   
107,099
 
$
90,318,028
  
$
(28,876
)
$
(33,886
)
$
90,255,266
  
                                 
Proceeds from issuance of additional
                               
members shares
   
132,827
   
132,827,309
   
-
   
-
   
132,827,309
 
Sales and offering expenses
   
-
   
(15,264,117
)
  
-
   
-
   
(15,264,117
)
Cash distributions paid or accrued
                               
to members
   
-
   
(10,911,673
)
  
(110,198
)
  
-
   
(11,021,871
)
Change in valuation of interest rate
                               
swap contracts
   
-
   
-
   
-
   
(1,098,720
)
  
(1,098,720
)
Change in valuation of warrants
                               
held by joint venture
   
-
   
-
   
-
   
543,803
   
543,803
 
Foreign exchange translation adjustments
                               
of joint ventures
   
-
   
-
   
-
   
1,716,008
   
1,716,008
 
Net loss
   
-
   
(3,066,878
)
  
(30,979
)
  
-
   
(3,097,857
)
                                 
Balance, September 30, 2006
   
239,926
 
$
193,902,669
  
$
(170,053
)
$
1,127,205
  
$
194,859,821
  



6

 
ICON Leasing Fund Eleven, LLC
 
(A Delaware Limited Liability Company)
 
Condensed Consolidated Statements of Cash Flows
 
(Unaudited)
 
       
For the Period
 
       
from May 6, 2005
 
       
(Commencement of
 
   
Nine Months
 
Operations)
 
   
Ended September 30,
 
to September 30,
 
   
2006
 
2005
 
Cash flows from operating activities:
         
Net loss
 
$
(3,097,857
)
$
(367,764
)
Adjustments to reconcile net loss to net cash provided by
             
operating activities:
             
Rental income paid directly to lenders by lessees
   
(2,317,981
)
  
-
 
Finance income
   
(2,538,701
)
  
-
 
Income from investments in joint ventures
   
(501,868
)
  
-
 
Net gain on sales of equipment
   
(731,580
)
  
-
 
Depreciation and amortization
   
34,177,215
   
1,094
 
Impairment loss
   
446,301
   
-
 
Interest expense paid directly to lenders by lessees
   
384,248
   
-
 
Bad debt expense
   
70,015
   
-
 
Change in fair value of interest rate swap contract
   
1,246,899
   
-
 
Minority interest
   
529,451
   
-
 
Changes in operating assets and liabilities:
             
Collection of principal - non-financed receivables
   
12,913,259
   
-
 
Rents receivable
   
1,758,241
   
-
 
Other assets, net
   
(954,172
)
  
-
 
Payables, deferred rental income and other liabilities
   
13,671,100
   
-
 
Due to Manager and affiliates, net
   
(280,306
)
  
497,669
 
               
Net cash provided by operating activities
   
54,774,264
   
130,999
 
               
Cash flows from investing activities:
             
Investments in leased assets, net of cash received
   
(169,468,315
)
  
-
 
Proceeds from sales of equipment
   
11,286,921
   
-
 
Restricted cash deposits
   
(1,076,827
)
  
-
 
Cash acquired in investment in joint venture
   
1,602
   
-
 
Investments in joint ventures
   
(4,599,984
)
  
-
 
Distributions received from joint ventures
   
135,080
   
-
 
               
Net cash used in investing activities
   
(163,721,523
)
  
-
 
               
Cash flows from financing activities:
             
Proceeds from notes payable - non-recourse
   
33,956,911
   
-
 
Repayments of notes payable - non-recourse
   
(32,418,991
)
  
-
 
Issuance of additional member shares, net of sales and offering expenses paid
   
117,563,192
   
62,463,772
 
Additional member refunds
   
-
   
(1,000
)
Other assets, net
   
-
   
(26,250
)
Increase in restricted cash
   
-
   
(2,094,209
)
Due to Manager and affiliates, net
   
(19,097
)
  
-
 
Cash distributions to members
   
(10,829,198
)
  
(830,228
)
Distributions to minority interest holders
   
(1,509,546
)
  
-
 
               
Net cash provided by financing activities
   
106,743,271
   
59,512,085
 
               
Effects of exchange rates on cash and cash equivalents
   
1,049,733
   
-
 
               
Net (decrease) increase in cash and cash equivalents
   
(1,154,255
)
  
59,643,084
 
Cash and cash equivalents, beginning of the period
   
71,449,920
   
2,000
 
               
Cash and cash equivalents, end of the period
 
$
70,295,665
  
$
59,645,084
  
 

 
7


ICON Leasing Fund Eleven, LLC
 
(A Delaware Limited Liability Company)
 
Condensed Consolidated Statements of Cash Flows
 
(Unaudited)
 
           
       
For the Period
 
       
from May 6, 2005
 
       
(Commencement of
 
   
Nine Months
 
Operations)
 
   
Ended September 30,
 
to September 30,
 
   
2006
 
2005
 
           
Supplemental disclosure of cash flow information:
         
Cash paid during the period for interest
 
$
5,419,994
  
$
-
  
               
Supplemental disclosure of non-cash investing and financing activities:
             
Non-cash portion of equipment purchased with non-recourse debt
 
$
271,698,228
  
$
-
  
               
Principal and interest on non-recourse notes payable
             
paid directly to lenders by lessees
 
$
2,697,477
  
$
-
  
               
Transfer from other assets to investments in leased assets
 
$
2,828,287
  
$
-
  
               
Transfer from investments in joint ventures to investments in leased assets
 
$
7,695,494
  
$
-
  
               



8


Transactions with Related Parties

Fund Eleven has entered into certain agreements with the Manager and ICON Securities Corp., a wholly-owned subsidiary of the Manager, whereby Fund Eleven pays certain fees and reimbursements to those parties. The Manager is entitled to receive 3.5% on capital raised up to $50,000,000, 2.5% of capital raised between $50,000,001 to $100,000,000 and 1.5% of capital raised over $100,000,000. ICON Securities Corp. is entitled to a 2% underwriting fee from the gross proceeds from capital raised.

In accordance with the terms of these agreements, Fund Eleven pays or paid the Manager (i) management fees ranging from 1% to 7% based on a percentage of the rentals recognized either directly by Fund Eleven or through its joint ventures and (ii) acquisition fees, through the end of the operating period, of 3% of the gross value of Fund Eleven’s acquisition transactions. In addition, the Manager is reimbursed for administrative expenses incurred in connection with Fund Eleven’s operations. The Manager has assigned its rights and obligations to provide Fund Eleven with administrative services and collect reimbursement for those services relating to the Clearlink Portfolio to a Canadian affiliate, ICON Funding ULC, pursuant to a management agreement between the Manager and ICON Funding ULC.

Administrative expense reimbursements are costs incurred by the Manager or its affiliates and are necessary to Fund Eleven’s operations.  These costs include the Manager’s and affiliates legal, accounting, investor relations and operations personnel, as well as, professional fees and other costs that are charged to Fund Eleven based upon the percentage of time such personnel dedicate to Fund Eleven.  Excluded are salary and related costs, travel expenses and other administrative costs incurred by individuals with a controlling interest in the Manager.

Fees and other expenses paid or accrued by Fund Eleven to the Manager or its affiliates for the three and nine month periods ended September 30, 2006 and 2005, were as follows:


                       
For the Period
  
                       
from May 6, 2005
 
           
Three Months Ended
 
Three Months Ended
 
Nine Months Ended
 
(Commencement of Operations)
 
           
September 30,
 
September 30,
 
September 30,
 
to September 30,
 
Entity
 
Capacity
 
Description
 
2006
 
2005
 
2006
 
2005
 
ICON Capital Corp.
 
Manager
 Organization and                  
 
    
offering expenses (1)
 
$
608,706
  
$
1,354,029
  
$
1,992,411
  
$
2,298,950
  
ICON Securities Corp.
 
Managing broker-dealer
Underwriting fees (1)
 
$
811,608
  
$
899,205
  
$
2,656,548
  
$
1,439,160
  
ICON Capital Corp.
   Manager Acquisition fees (2)
 
$
512,285
  
$
-
  
$
13,132,809
  
$
-
  
ICON Capital Corp.
   Manager Management fees (3)
 
$
1,520,291
  
$
-
  
$
2,605,705
  
$
-
  
ICON Capital Corp. and affiliate
  Manager Administrative fees (4)
 
$
1,811,745
  
$
407,772
  
$
4,335,610
  
$
529,976
  
                                       
(1) Amount charged directly to members' equity.
                             
(2) Amount capitalized and amortized to operations.
                             
(3) Amount charged directly to operations.
                             
(4) Amount charged directly to operations. Memeber may obtain a copy of such expenses upon request.                        


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Conclusion

Your participation in Fund Eleven is greatly appreciated and we look forward to sharing future successes.

Sincerely,

ICON Capital Corp., Manager
Beaufort J.B. Clarke
Thomas W. Martin
Chief Executive Officer and Chairman
Chief Operating Officer


ICON is committed to protecting the privacy of its investors in compliance with all applicable laws. Please be advised that, unless required by a regulatory authority such as the NASD or ordered by a court of competent jurisdiction, ICON will not share any of your personally identifiable information with any third party.

Forward-Looking Information - Certain statements within this document may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, or the PSLRA. These statements are being made pursuant to PSLRA, with the intention of obtaining the benefits of the “safe harbor” provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as “may,” “will,” “could,” “anticipate,” “believe,” “estimate,” “expects,” “intend,” “predict” or “project” and variations of these words or comparable words or phrases of similar meaning. These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside of our control that may cause actual results to differ materially from those projected.


 
Additional Required Disclosure  
 
To fulfill our promises to you we are required to make the following disclosures when applicable:
 
A detailed financial report on SEC Form 10-Q or 10-K (whichever is applicable) is available to you. It is typically filed either 45 or 90 days after the end of a quarter or year, respectively. Usually this means a filing will occur on or around March 30, May 15, August 15, and November 15 of each year. It contains financial statements and detailed sources and uses of cash plus explanatory notes. You are always entitled to these reports. Please access them by:
 
• Visiting www.iconsecurities.com
or
• Visiting www.sec.gov
or
• Writing us at: PO Box 192706, San Francisco, CA 94119-2706
 
We do not distribute these reports to you directly in order to keep Fund Eleven’s costs down as mailing this report to all investors is expensive. Nevertheless, the reports are immediately available on your request.
 
 

 
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