-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ons9eAR6buQFymTRKONZOam5BMoAlSM9rUyFv0ggEZYCRdUTLLmpZg6njltwszHA NcTYItiTtbf6odzTCEoWBA== 0000821218-97-000002.txt : 19970310 0000821218-97-000002.hdr.sgml : 19970310 ACCESSION NUMBER: 0000821218-97-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970307 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEASTEC INCOME FUND V CENTRAL INDEX KEY: 0000821218 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER RENTAL & LEASING [7377] IRS NUMBER: 680136036 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-18555 FILM NUMBER: 97552114 BUSINESS ADDRESS: STREET 1: 7175 W JEFFERSON AVE STE 3000 CITY: LAKEWOOD STATE: CO ZIP: 80235 BUSINESS PHONE: 3039801000 10-K 1 LIFV96K.001 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended December 31, 1996 [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 0-18555 LEASTEC INCOME FUND V, A CALIFORNIA LIMITED PARTNERSHIP (Exact name of registrant as specified in its charter) CALIFORNIA 68-0136036 (State of organization) (I.R.S. Employer Identification Number) 7175 W. JEFFERSON AVENUE, LAKEWOOD, COLORADO 80235 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (303) 980-1000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Units of Class A Limited Partner Interest (Title of Class) 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in part III of this Form 10-K or any amendment to this Form 10-K [ ]. State the aggregate market value of the voting stock held by non-affiliates of the registrant. Not applicable. Exhibit Index Appears on Page 33 Page 1 of 34 Pages Item 1. Business -------- Leastec Income Fund V, a California limited partnership (the "Partnership"), is engaged in the business of owning and leasing equipment. The Partnership's original general partners were Leastec Corporation ("Leastec") and CAI Partners Management Company, both of whom were affiliates of Capital Associates, Inc. ("CAI"). During 1988, CAI acquired all the outstanding stock of Leastec. In June 1990, CAI sold all of the stock of Leastec back to its original owners and, effective December 1990, Leastec resigned as a general partner. As a result, CAI Partners Management Company became the sole general partner of the Partnership. Capital Associates International, Inc. ("CAII"), the parent of the general partner, is the sole Class B limited partner of the Partnership. The Class B limited partner has contributed $2,501,890 in cash and equipment to the Partnership, which represented 10% of the net offering proceeds from sales of Class A limited partner units after September 1, 1988. CAII is the largest single investor in the Partnership. Since its formation in 1987, the Partnership has acquired equipment of various types under lease to third parties on short-term leases (generally five years or less). All of the equipment was purchased by CAII directly from manufacturers or from other independent third parties and sold to the Partnership. The equipment generally consisted of, but was not limited to, office technology and manufacturing equipment. The Partnership entered its liquidation period, as defined in the Partnership Agreement, during 1994. Accordingly, the Partnership did not purchase any equipment during 1996 or 1995 and it is not anticipated that the Partnership will acquire any material amount of equipment in future periods. The Partnership may assign the rentals from leases to financial institutions, or acquire leases subject to such assignments, at fixed interest rates on a non-recourse basis. The financial institution has a first lien on the assigned rents and the underlying leased equipment, with no recourse against the Partnership or any other Partnership assets in the event of default by a lessee. Cash proceeds from such financings, or the assumption of such assignments incurred in connection with the acquisition of leases, are recorded on the balance sheet as discounted lease rentals. As lessees make payments to financial institutions, leasing revenue and interest expense are recorded. The Partnership leases equipment to investment grade and noninvestment grade lessees. Since the Partnership's formation, approximately 49% of the Partnership's equipment under lease was leased to investment grade lessees or equivalent. Pursuant to the Partnership Agreement, an investment grade lessee is a company (1) with a credit rating of not less than Baa, as determined by Moody's Investor Services, Inc., or (2) that has comparable credit ratings as determined by other recognized credit rating services or (3) which, if not rated by a recognized credit rating service, then in the opinion of the general partner, is of comparable credit quality. The Partnership may choose to manage its credit risk through selective use of non-recourse debt financing of future lease rentals, as described above. The Partnership only acquired equipment that was on lease at the time of acquisition. After the initial term of its lease, each item of equipment will be expected to provide additional investment income from its re-lease or ultimate sale. Upon expiration of an initial lease, the Partnership attempts to re-lease or sell the equipment to the existing lessee. If a re-lease or sale to the lessee cannot be negotiated, the Partnership will attempt to lease or sell the equipment to a third party. -2- Item 1. Business, continued -------- The ultimate rate of return on leases depends, in part, on the general level of interest rates at the time the leases are originated. Because leasing is an alternative to financing equipment purchases with debt, lease rates tend to rise and fall with interest rates (although lease rate movements generally lag interest rate changes in the capital markets). Interest rates declined from 1990 until the early part of 1994. The lease rates on equipment purchased by the Partnership during this period reflect this low interest rate environment. This will result in corresponding reductions in the ultimate overall yields to partners. The Partnership has no employees. The officers, directors and employees of the general partner and its affiliates perform services on behalf of the Partnership. The general partner is entitled to receive certain fees and expense reimbursements in connection with the performance of these services. See Item 10 of this Report, "Directors and Executive Officers of the Partnership" and Item 13 of this Report, "Certain Relationships and Related Transactions". The Partnership competes in the leasing remarketing marketplaces as a lessor/seller with a significant number of other companies, including equipment manufacturers, leasing companies and financial institutions. The Partnership is in its liquidation period. Therefore, the Partnership currently competes mainly on the basis of the expertise of its general partner in remarketing equipment. Although the Partnership does not account for a significant percentage of the leasing market, the general partner believes that the Partnership's remarketing strategies will enable it to continue to compete effectively in the remarketing markets. The Partnership leased equipment to a significant number of lessees. In 1996, Ralph's Grocery and Hughes Aircraft accounted for 33.71% and 18.56%, respectively, of total Partnership revenue in 1996. The Partnership is in its liquidation period. Therefore, as the portfolio runs off, the remaining lessees will make up an increasingly larger percentage of the total portfolio. The Partnership is required to dissolve and distribute all of its assets no later than December 31, 1998. However, the general partner anticipates that all equipment will be sold prior to that date and that the Partnership will be liquidated earlier. Item 2. Properties ---------- The Partnership does not own or lease any physical properties other than the equipment discussed in Item 1 of this Report, "Business". Item 3. Legal Proceedings ----------------- Neither the Partnership nor any of the Partnership's equipment is the subject of any material pending legal proceedings. -3- Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- No matters were submitted to a vote of the limited partners of the Partnership, through the solicitation of proxies or otherwise, during the fourth quarter of 1996. Item 5. Market for the Partnership's Common Equity and Related Stockholder ----------------------------------------------------------------------- Matters ------- (a) The Partnership's Class A limited partner units and Class B interest are not publicly traded. There is no established public trading market for such units and interest, and none is expected to develop. (b) As of December 31, 1996 the number of Class A limited partners was 4,447. (c) During 1996, the Partnership made four (4) quarterly and twelve (12) monthly distributions (all of which constituted a return of capital) to Class A limited partners (note that investors may elect to receive distributions either monthly or quarterly), as follows:
Distributions Per $250 Class A limited partner unit (computed on weighted average) For the Payment ---------------------- Total Month Ended Made During Monthly Quarterly Distributions ----------- ----------- ------- --------- ------------- December 31, 1995 January 1996 $ .88 $ 1.29 $ 173,995 January 31, 1996 February 1996 .53 - 105,009 February 28, 1996 March 1996 1.41 - 280,024 March 31, 1996 April 1996 1.84 3.78 364,912 April 30, 1996 May 1996 .11 - 21,049 May 31, 1996 June 1996 .11 - 20,963 June 30, 1996 July 1996 .90 1.12 178,013 July 31, 1996 August 1996 .60 - 118,976 August 31, 1996 September 1996 1.77 - 349,840 September 30, 1996 October 1996 2.03 4.40 401,214 October 31, 1996 November 1996 .71 - 140,122 November 30, 1996 December 1996 .71 - 140,122 --------- --------- ---------- $ 11.60 $ 10.59 $2,294,239 ========= ========= ==========
Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital or both. The total return on capital over a leasing partnership's life can only be determined at the termination of the Partnership after all residual cash flows (which include proceeds from the re-leasing and sale of equipment after initial lease terms expire) have been realized. However, as the general partner has represented for the last several years, all distributions to the partners are expected to be a return of capital. -4- Item 5. Market for the Partnership's Common Equity and Related Stockholder ----------------------------------------------------------------------- Matters, continued ------- Distributions for the month and quarter ended December 31, 1996, totaling $199,756, were paid to the Class A limited partners during January 1997. Distributions to the general partner and the Class B limited partner during 1996 are discussed in Item 13 of the Report, "Certain Relationships and Related Transactions". The general partner currently anticipates that the Partnership will generate cash flow from rentals and equipment sales during 1997 which, when added to cash and cash equivalents on hand, should provide sufficient cash to enable the Partnership to meet its current operating requirements and to fund distributions to the Class A limited partners. Because the Partnership is in liquidation, as defined in the Partnership Agreement, cash distributions to the Class A limited partners will be based upon cash availability and will vary in 1997 (all of which is expected to be a return of capital). The Class B distributions of cash from operations are subordinated to the Class A limited partners receiving distributions of cash from operations, as scheduled in the Partnership Agreement (i.e., 15%). Therefore, because of the decrease in the distributions to the Class A limited partners effective as of June 1994, CAII, the sole Class B limited partner, ceased receiving distributions of cash from operations as of March 1994 and, as a result of this subordination, the general partner currently anticipates that CAII will not receive any future Class B distributions related to the $1.2 million of Class B limited partner's capital shown on the accompanying Balance Sheets. During 1995, the Partnership made four (4) quarterly and twelve (12) monthly distributions (all of which constituted a return of capital) to Class A limited partners, as follows:
Distributions Per $250 Class A limited partner unit (computed on weighted average) For the Payment ---------------------- Total Month Ended Made During Monthly Quarterly Distributions ----------- ----------- ------- --------- ------------- December 31, 1994 January 1995 $ 1.25 $ 3.75 $ 401,879 January 31, 1995 February 1995 1.25 - 177,054 February 28, 1995 March 1995 1.25 - 160,157 March 31, 1995 April 1995 1.25 3.75 397,447 April 30, 1995 May 1995 0.63 - 85,650 May 31, 1995 June 1995 0.63 - 88,505 June 30, 1995 July 1995 0.63 1.89 196,964 July 31, 1995 August 1995 0.63 - 88,506 August 31, 1995 September 1995 0.63 - 88,506 September 30, 1995 October 1995 0.63 1.89 198,187 October 31, 1995 November 1995 0.15 - 21,002 November 30, 1995 December 1995 0.26 - 35,003 --------- --------- ----------- $ 9.19 $ 11.28 $ 1,938,860 ========= ========= ===========
-5- Item 6. Selected Financial Data ----------------------- The following selected financial data relates to 1996 through 1992. The data set forth below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and notes thereto appearing elsewhere herein.
Years Ended December 31, ----------------------------------------------------------------------------- 1996 1995 1994 1993 1992 ---- ---- ---- ---- ---- Total revenue $ 2,951,127 $ 3,914,124 $ 6,471,208 $ 9,789,449 $ 13,378,647 Net income (loss) 1,123,494 1,057,734 1,107,121 1,040,550 (1,344,759) Net income (loss) per weighted average Class A limited partner unit outstanding 4.86 4.70 3.99 3.05 (8.41) Total assets 2,832,713 5,419,610 8,689,668 16,766,103 24,528,404 Discounted lease rentals 721,550 2,061,334 4,231,393 6,518,735 7,216,053 Distributions declared to partners 2,442,105 1,801,042 5,624,247 8,152,711 7,678,485 Distributions declared per weighted average Class A limited partner unit 11.71 8.64 26.17 37.48 35.00
Item 7. Management's Discussion and Analysis of Financial Condition and ---------------------------------------------------------------------- Results of Operations --------------------- Results of Operations - --------------------- Presented below are schedules (prepared solely to facilitate the discussion of results of operations that follows) showing condensed statements of income categories and analyses of changes in those condensed categories derived from the Statements of Income:
Condensed Condensed Statements of Income Statements of Income for the years The effect on for the years The effect on ended December 31, net income of ended December 31, net income of -------------------------- changes ------------------------- changes 1996 1995 between years 1995 1994 between years ----------- ----------- ------------- ----------- ----------- -------------- Leasing margin $ 1,110,749 $ 1,349,914 $ (239,165) $ 1,349,914 $ 1,248,885 $ 101,029 Equipment sales margin 525,245 183,660 341,585 183,660 644,151 (460,491) Interest income 20,203 11,760 8,443 11,760 31,232 (19,472) Provision for losses - - - - (108,615) 108,615 Management fees paid to general partner (169,573) (212,268) 42,695 (212,268) (325,641) 113,373 Direct services from general partner (66,223) (73,966) 7,743 (73,966) (91,975) 18,009 General and administrative expenses (296,907) (201,366) (95,541) (201,366) (290,916) 89,550 ------------ ------------ ---------- ------------ ------------ ----------- Net income $ 1,123,494 $ 1,057,734 $ 65,760 $ 1,057,734 $ 1,107,121 $ (49,387) ============ =========== ========== =========== =========== ===========
-6- Item7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations, continued ------------- Results of Operations, continued - --------------------- The Partnership is in its liquidation period, as defined in the Partnership Agreement, and as expected, the Partnership is not purchasing additional equipment, initial leases are expiring and the equipment is being remarketed (i.e., re-leased, renewed or sold). As a result, both the size of the Partnership's leasing portfolio and the amount of leasing revenue are declining (referred to in this discussion as "portfolio run-off"). LEASING MARGIN Leasing margin consists of the following:
Years Ended December 31, ------------------------------------------ 1996 1995 1994 ---- ---- ---- Operating lease rentals $ 2,238,530 $ 3,459,761 $ 5,427,945 Direct finance lease income 167,149 258,943 367,880 Depreciation and amortization (1,172,100) (2,090,097) (4,026,511) Interest expense on related discounted lease rentals (122,830) (278,693) (520,429) ----------- ----------- ----------- Leasing margin $ 1,110,749 $ 1,349,914 $ 1,248,885 =========== =========== =========== Leasing margin ratio 46% 36% 22% == == ==
All components of leasing margin have declined and are expected to decline further, due to portfolio run-off. Leasing margin ratio increased primarily because of (a) remarketing activities, and (b) a portion of the Partnership's portfolio consists of operating leases financed with non-recourse debt. Leasing margin and leasing margin ratio for an operating lease financed with non-recourse debt increases during the term of the lease since rents and depreciation are typically fixed while interest expense declines as the related non-recourse debt is repaid. The ultimate rate of return on leases depends, in part, on the general level of interest rates at the time the leases are originated. Because leasing is an alternative to financing equipment purchases with debt, lease rates tend to rise and fall with interest rates (although lease rate movements generally lag interest rate movements in the capital market). Interest rates declined from 1990 until the early part of 1994. The lease rates on equipment purchased by the Partnership during that period reflect that low interest rate environment. This will result in corresponding reductions in the ultimate overall yields to partners. -7- Item 7. Management's Discussion and Analysis of Financial Condition and Results ----------------------------------------------------------------------- of Operations, continued ------------- EQUIPMENT SALES MARGIN Equipment sales margin consists of the following: Years Ended December 31, --------------------------------------------- 1996 1995 1994 ---- ---- ---- Equipment sales revenue $ 1,228,238 $ 378,905 $ 1,747,881 Cost of equipment sales (702,993) (195,245) (1,103,730) ----------- ----------- ----------- Equipment sales margin $ 525,245 $ 183,660 $ 644,151 =========== =========== =========== The Partnership is in its liquidation period. During the liquidation period, as initial leases terminate, equipment is being remarketed (i.e., re-leased or sold to either the original lessee or a third party) and, accordingly the timing and amount of equipment sales cannot be projected accurately. PROVISION FOR LOSSES The remarketing of equipment for an amount greater than its book value is reported as equipment sales margin (if the equipment is sold) or leasing margin (if the equipment is re-leased). The realization of less than the carrying value of equipment (which is typically not known until remarketing subsequent to the initial lease termination has occurred) is recorded as provision for losses. Residual values are established equal to the estimated value to be received from the equipment following termination of the lease. In estimating such values, the Partnership considers all relevant facts regarding the equipment and the lessee, including, for example, the likelihood that the lessee will re-lease the equipment. The nature of the Partnership's leasing activities is that it has credit exposure and residual value exposure and, accordingly, in the ordinary course of business, it will incur losses from those exposures. The Partnership performs ongoing quarterly assessments of its assets to identify any other-than-temporary losses in value. No provision for losses were recorded in 1996 or 1995 because no other-than-temporary losses in the value of equipment were identified in the quarterly assessments of the Partnership's asset. The provisions for losses for 1994 related to identified other-than-temporary losses in value of off-lease equipment, principally telecommunications equipment and semiconductor manufacturing equipment. EXPENSES Management fees paid to the general partner and direct services from the general partner decreased primarily as a result of portfolio run-off. General and administrative expenses increased primarily due to $107,928 reimbursed to the general partner during the second quarter of 1996 for insurance costs related to prior years. -8- Liquidity and Capital Resources - ------------------------------- The Partnership funds its activities principally with cash from rents, interest income and sales of off-lease equipment. Available cash and cash reserves of the Partnership are invested in interest bearing accounts and short-term U.S. Government securities pending distributions to the partners. During 1996, 1995 and 1994, the Partnership declared distributions to the partners of $2,442,105, $1,801,042 and $5,624,247, respectively, all of which constituted a return of capital. Distributions may be characterized for tax, accounting and economic purposes as a return of capital, a return on capital or both. The total return on capital over a leasing partnership's life can only be determined at the termination of the Partnership after all residual cash flows (which include proceeds from the re-leasing and sale of equipment after initial lease terms expire) have been realized. However, as the general partner has represented for the last several years, all distributions to the partners are expected to be a return of capital. The general partner currently anticipates that the Partnership will generate cash flow from rentals and equipment sales during 1997 which, when added to cash and cash equivalents on hand, should provide sufficient cash to enable the Partnership to meet its current operating requirements and to fund distributions to the Class A limited partners. Because the Partnership is in liquidation, as defined in the Partnership Agreement, cash distributions to the Class A limited partners will be based upon cash availability and will vary in 1997 (all of which is expected to be a return of capital). The Class B distributions of cash from operations are subordinated to the Class A limited partners receiving distributions of cash from operations, as scheduled in the Partnership Agreement (i.e., 15%). Therefore, because of the decrease in the distributions to the Class A limited partners effective as of June 1994, CAII, the sole Class B limited partner, ceased receiving distributions of cash from operations as of March 1994 and, as a result of this subordination, the general partner currently anticipates that CAII will not receive any future Class B distributions related to the $1.2 million of Class B limited partner's capital shown on the accompanying Balance Sheets. -9- Item 8. Financial Statements and Supplementary Data ------------------------------------------- Index to Financial Statements and Financial Statement Schedule Page Financial Statements Number -------------------- ------ Independent Auditors' Report 11 Balance Sheets at December 31, 1996 and 1995 12 Statements of Income for the years ended December 31, 1996, 1995 and 1994 13 Statements of Partners' Capital for the years ended December 31, 1996, 1995 and 1994 14 Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994 15 Notes to Financial Statements 16-26 Financial Statement Schedule ---------------------------- Independent Auditors' Report 27 Schedule II - Valuation and Qualifying Accounts 28 -10- INDEPENDENT AUDITORS' REPORT ---------------------------- THE PARTNERS LEASTEC INCOME FUND V, A CALIFORNIA LIMITED PARTNERSHIP: We have audited the accompanying balance sheets of Leastec Income Fund V, a California Limited Partnership, as of December 31, 1996 and 1995, and the related statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1996. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements 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, the financial statements referred to above present fairly, in all material respects, the financial position of Leastec Income Fund V, a California Limited Partnership, as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. /s/KPMG Peat Marwick LLP ------------------------ KPMG PEAT MARWICK LLP Denver, Colorado January 31, 1997 -11- LEASTEC INCOME FUND V A California Limited Partnership BALANCE SHEETS ASSETS December 31, ----------------------- 1996 1995 ---- ---- Cash and cash equivalents $ 465,217 $ 446,663 Accounts receivable, net of allowance for doubtful accounts of $22,374 in 1996 and 1995 122,357 120,375 Equipment held for sale or re-lease 128,696 59,534 Net investment in direct finance leases 1,105,111 1,803,274 Leased equipment, net 1,011,332 2,989,764 ---------- ---------- Total assets $2,832,713 $5,419,610 ========== ========== LIABILITIES AND PARTNERS' CAPITAL LIABILITIES: Accounts payable and accrued liabilities $ 283,321 $ 235,847 Payable to affiliates 31,361 27,918 Rents received in advance 34,242 40,894 Distributions payable to partners 225,019 186,101 Discounted lease rentals 721,550 2,061,334 ---------- ---------- Total liabilities 1,295,493 2,552,094 ---------- ---------- PARTNERS' CAPITAL: General partner - - Limited partners: Class A authorized 220,000 units; issued and outstanding, 198,025 and 198,475 units in 1996 and 1995, respectively 360,500 1,729,272 Class B 1,176,720 1,138,244 ---------- ---------- Total partners' capital 1,537,220 2,867,516 ---------- ---------- Total liabilities and partners' capital $2,832,713 $5,419,610 ========== ========== See accompanying notes to financial statements. -12- LEASTEC INCOME FUND V A California Limited Partnership STATEMENTS OF INCOME
Years ended December 31, ------------------------------------ 1996 1995 1994 ---- ---- ---- REVENUE: Operating lease rentals $2,238,530 $3,459,761 $5,427,945 Direct finance lease income 167,149 258,943 367,880 Equipment sales margin 525,245 183,660 644,151 Interest income 20,203 11,760 31,232 ---------- ---------- ---------- Total revenue 2,951,127 3,914,124 6,471,208 ---------- ---------- ---------- EXPENSES: Depreciation and amortization 1,172,100 2,090,097 4,026,511 Provision for losses - - 108,615 Management fees paid to general partner 169,573 212,268 325,641 Interest on discounted lease rentals 122,830 278,693 520,429 Direct services from general partner 66,223 73,966 91,975 General and administrative 296,907 201,366 290,916 ---------- ---------- ---------- Total expenses 1,827,633 2,856,390 5,364,087 ---------- ---------- ---------- NET INCOME $1,123,494 $1,057,734 $1,107,121 ========== ========== ========== NET INCOME ALLOCATED: To the general partner $ 122,105 $ 90,066 $ 281,212 To the Class A limited partners 962,913 930,488 794,172 To the Class B limited partner 38,476 37,180 31,737 ---------- ---------- ---------- $1,123,494 $1,057,734 $1,107,121 ========== ========== ========== Net income per weighted average Class A limited partner unit outstanding $ 4.86 $ 4.70 $ 3.99 ========== ========== ========== Weighted average Class A limited partner units outstanding 198,166 197,993 198,984 ========== ========== ==========
See accompanying notes to financial statements. -13- LEASTEC INCOME FUND V A California Limited Partnership STATEMENTS OF PARTNERS' CAPITAL Years ended December 31, 1996, 1995 and 1994
Class A Limited Class A Class B General Partner Limited Limited Partner Units Partners Partner Total ------- ------- -------- ------- ----- Partners' capital January 1, 1994 $ - 199,195 $ 6,952,705 $ 1,205,043 $ 8,157,748 Redemptions - (480) (19,889) - (19,889) Net income 281,212 - 794,172 31,737 1,107,121 Distributions declared to partners (281,212) - (5,207,319) (135,716) (5,624,247) ----------- ----------- ----------- ----------- ----------- Partners' capital December 31, 1994 - 198,715 2,519,669 1,101,064 3,620,733 Redemptions - (240) (9,909) - (9,909) Net income 90,066 - 930,488 37,180 1,057,734 Distributions declared to partners (90,066) - (1,710,976) - (1,801,042) ----------- ----------- ----------- ----------- ----------- Partners' capital December 31, 1995 - 198,475 1,729,272 1,138,244 2,867,516 Redemptions - (450) (11,685) - (11,685) Net income 122,105 - 962,913 38,476 1,123,494 Distributions declared to partners (122,105) - (2,320,000) - (2,442,105) ----------- ----------- ----------- ----------- ----------- Partners' capital, December 31, 1996 $ - 198,025 $ 360,500 $ 1,176,720 $ 1,537,220 =========== =========== =========== =========== ===========
See accompanying notes to financial statements. -14- LEASTEC INCOME FUND V A California Limited Partnership STATEMENTS OF CASH FLOWS
Years ended December 31, --------------------------------------------- 1996 1995 1994 ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 1,123,494 $ 1,057,734 $ 1,107,121 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,172,100 2,090,097 4,026,511 Provision for losses - - 108,615 Cost of equipment sales 702,993 163,835 1,112,008 Recovery of investment in direct finance leases 640,280 714,250 655,892 Changes in assets and liabilities: Decrease in accounts receivable 90,078 46,330 372,105 Increase (decrease) in accounts payable and accrued liabilities 47,474 (35,678) (204,310) Decrease in rents received in advance (6,652) (57,143) (150,373) Increase (decrease) in payable to affiliates 3,443 1,620 (17,727) ----------- ----------- ----------- Net cash provided by operating activities 3,773,210 3,981,045 7,009,842 ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from discounting of lease rentals - - 616,512 Principal payments on discounted lease rentals (1,339,784) (2,170,059) (2,903,854) Distributions to partners (2,403,187) (2,056,624) (6,360,805) Redemptions of limited partner units (11,685) (9,909) (19,889) ----------- ----------- ----------- Net cash used in financing activities (3,754,656) (4,236,592) (8,668,036) ----------- ----------- ----------- NET DECREASE IN CASH AND CASH EQUIVALENTS 18,554 (255,547) (1,658,194) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 446,663 702,210 2,360,404 ----------- ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF YEAR $ 465,217 $ 446,663 $ 702,210 =========== =========== =========== Supplemental disclosure of cash flow information: Interest paid on discounted lease rentals $ 122,830 $ 278,693 $ 520,429
See accompanying notes to financial statements. -15- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS 1. Organization and Summary of Significant Accounting Policies ----------------------------------------------------------- Organization Leastec Income Fund V, a California Limited Partnership (the "Partnership"), was organized on August 28, 1987 as a limited partnership under the laws of the State of California pursuant to an Agreement of Limited Partnership (the "Partnership Agreement"). The Partnership was formed for the purpose of acquiring and leasing a portfolio of equipment to unaffiliated third parties. The Partnership's lease portfolio initially consisted principally of computer peripherals, data communication devices, office systems, workstations and other high technology equipment. The Partnership will continue until December 31, 1998 unless terminated earlier in accordance with the terms of the Partnership Agreement. The general partner began liquidating the Partnership's portfolio in 1994. The general partner of the Partnership is CAI Partners Management Company, a wholly owned subsidiary of Capital Associates International, Inc. ("CAII"). The general partner manages the Partnership, including investment of funds, purchase and sale of equipment, lease negotiation and other administrative duties. CAII is the Class B limited partner. The Class B limited partner has contributed $2,501,890 of cash and equipment to the Partnership, an amount equal to 10% of net offering proceeds generated from sales of Class A limited partner units after September 1, 1988. The Class B limited partner has no remaining obligation to contribute cash and/or equipment to the Partnership. 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 revenue and expenses during the reporting period. For leasing entities, this includes the estimate of residual values, as described below. Actual results could differ from those estimates. Partnership Cash Distributions and Allocations of Profit and Loss Cash Distributions ------------------ During the Distribution Period, as defined in the Partnership Agreement, cash distributions are to be made as follows: -16- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Partnership Cash Distributions and Allocations of Profit and Loss, ----------------------------------------------------------------- continued Cash Distributions, continued ------------------ First, 95% to the Class A limited partners and 5% to the general partner until such time as all Class A limited partners have received, on a cumulative, noncompounded basis, distributions equal to (1) 12% on their contributed capital during the first three years after the initial closing date (November 16, 1987), (2) 13% on their contributed capital during the fourth year after the initial closing date, (3) 14% on their contributed capital during the fifth year after the initial closing date and (4) 15% thereafter. Second, 95% to the Class B limited partner and 5% to the general partner until such time as the Class B limited partner has received distributions equal to 11% per annum, cumulative, noncompounded, on its subordinated capital contribution. Third, any remaining available cash is to be reinvested or distributed to the partners as specified in the Partnership Agreement. During the Liquidation Phase, as defined in the Partnership Agreement, cash distributions are to be made as follows: First, in accordance with the first and second cash distribution provisions during the Distribution Period as described above. Second, 95% to the Class A limited partners and 5% to the general partner until the Class A limited partners have received aggregate distributions from all sources equal to their capital contributions plus their Priority Return as defined in the Partnership Agreement. Third, 85.5% to the Class B limited partner, 9.5% to the Class A limited partners and 5% to the general partner until the Class B limited partner has received aggregate distributions from all sources equal to its subordinated capital contribution plus its Subordinated Priority Return as defined in the Partnership Agreement. Fourth, thereafter 90% to the Class A limited partners and the Class B limited partner (and among them in proportion to their respective capital contributions as of the first day of the calendar quarter for which the amount of such distribution is being determined), and 10% to the general partner. -17- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Federal Income Tax Basis Profits and Losses ------------------------------------------- Profits for any period are allocated according to the following provisions: First, profit is allocated to the partners in proportion to, and to the extent of, any losses allocated to the partners as described in the Partnership Agreement. Second, any remaining profit is allocated 5% to the general partner and 95% to the limited partners, on a pari passu basis as described in the Partnership Agreement. Third, any remaining profit is allocated 90% to the limited partners (and among them in proportion to their respective capital contributions) and 10% to the general partner. Notwithstanding anything in the Partnership Agreement to the contrary, and before any other allocation is made, profits shall be allocated to the general partner until the aggregate profits so allocated in the current period and all prior periods are equal to the amount necessary to restore the general partner's capital account to zero. All such allocations shall be credited against any other allocations of profit to the general partner. Losses for any period are allocated according to the following priorities: First, to the partners in proportion to, and to the extent of, any profits allocated to them in reverse chronological order. Second, 99% to the limited partners (and among them in proportion to their respective capital contributions) and 1% to the general partner. On October 21, 1988, the partners amended the Partnership Agreement to admit CAII, as the Class B limited partner. CAII made its first required capital contribution in 1989. The amendment provided for the distribution of a share of available cash and liquidation proceeds to the Class B limited partner, but did not provide for the allocation of a corresponding share of profits or losses to the Class B limited partner. In the years ended December 31, 1987 and 1988, the Partnership allocated profits and losses to the general partner and the Class A limited partners in accordance with the then applicable provisions of the Partnership Agreement. In the years ended December 31, 1989 and 1990, the Partnership treated the Class B limited partner as a Class A limited partner for purposes of allocations of profits and losses. In the years ended December 31, 1991 and 1992, the Partnership allocated profits and losses among the partners in the manner provided for in an amendment adopted by the Partnership in the first quarter of 1992, discussed in the following paragraph, which allocation methodology approximates the allocation methodology employed in 1989 and 1990. -18- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Federal Income Tax Basis Profits and Losses, continued ------------------------------------------- Pursuant to Section 15.2.11(iv) of the Partnership Agreement, the general partner amended the Partnership Agreement during the first quarter of 1992 (1) to allocate a share of profits and losses to the Class B limited partner, and (2) to correct an ambiguity in the allocation and distribution provisions with respect to the Class A limited partners. With respect to the Class B limited partner, the amendment provides for the allocation of a share of profits and losses to the Class B limited partner commensurate with its right to receive subordinated distributions of available cash. With respect to the Class A limited partners, the amendment provides that profits and losses allocated, and available cash distributed, will be shared by the individual Class A limited partners in proportion to their capital contributions and the number of days that each such Class A limited partner is a partner during each period. The amendment reflects (1) the actual method of allocations and distributions to the Class B limited partner that the Partnership has used since the admission of the Class B limited partner to the Partnership, (2) allocations of profits and losses among the individual Class A limited partners, consistent with such allocations in 1990 and 1991, and (3) distributions of available cash among the individual Class A limited partners consistent with the Partnership's calculation and payment of such distributions since its inception. Reclassifications Certain reclassifications have been made to prior years' financial statements to conform to the current year's presentation. Recently Issued Financial Accounting Standards The Partnership adopted Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of ("SFAS No. 121"), effective January 1, 1996. SFAS No. 121 requires that long-lived assets, including operating leases, and certain identifiable intangibles to be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, the entity should estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Otherwise, an impairment loss is not recognized. Measurement of an impairment loss for long-lived assets, including operating leases, and identifiable intangibles held by the Partnership is based on the fair value of the asset calculated by discounting the expected future cash flows at an appropriate interest rate. The adoption of this statement did not have a material effect on the Partnership's financial condition or results of operations. -19- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Lease Accounting Statement of Financial Accounting Standards No. 13, Accounting for Leases, requires that a lessor account for each lease by the direct finance, sales-type or operating lease method. The Partnership currently utilizes the direct financing and operating methods for all of the Partnership's equipment under lease. Direct finance leases are defined as those leases which transfer substantially all of the benefits and risks of ownership of the equipment to the lessee. For all types of leases, the determination of profit considers the estimated value of the equipment at lease termination, referred to as the residual value. After the inception of a lease, the Partnership may engage in financing of lease receivables on a nonrecourse basis (i.e., "non-recourse debt" or "discounted lease rentals") and/or equipment sale transactions to reduce or recover its investment in the equipment. The Partnership's accounting methods and their financial reporting effects are described below. Net Investment in Direct Financing Leases ("DFLs") The cost of the equipment, including acquisition fees paid to the general partner, is recorded as net investment in DFLs on the accompanying balance sheet. Leasing revenue, which is recognized over the term of the lease, consists of the excess of lease payments plus the estimated residual value over the equipment's cost. Earned income is recognized monthly to provide a constant yield and is recorded as direct finance lease income on the accompanying income statements. Residual values are established at lease inception equal to the estimated value to be received from the equipment following termination of the initial lease (which in certain circumstances includes anticipated re-lease proceeds), as determined by the general partner. In estimating such values, the general partner considers all relevant information regarding the equipment and the lessee. Equipment on Operating Leases ("OLs") The cost of equipment, including acquisition fees paid to the general partner, is recorded as leased equipment in the accompanying balance sheets and is depreciated on a straight-line basis over the lease term to an amount equal to the estimated residual value at the lease termination date. Leasing revenue consists principally of monthly rents and is recognized as operating lease rentals in the accompanying income statements. Residual values are established at lease inception equal to the estimated value to be received from the equipment following termination of the initial lease (which in certain circumstances includes anticipated re-lease proceeds), as determined by the general partner. -20- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Equipment on Operating Leases ("OLs"), continued In estimating such values, the general partner considers all relevant information and circumstances regarding the equipment and the lessee. Because revenue, depreciation expense and the resultant profit margin before interest expense are recorded on a straight-line basis, and interest expense on discounted lease rentals (discussed below) is recorded on the interest method, lower returns are realized in the early years of the term of an OL and higher returns in later years. Non-recourse Discounting of Rentals The Partnership may assign the future rentals from leases to financial institutions, or acquire leases subject to such assignments, at fixed interest rates on a nonrecourse basis. In return for such assigned future rentals, the Partnership receives the discounted value of the rentals in cash. In the event of default by a lessee, the financial institution has a first lien on the underlying leased equipment, with no further recourse against the Partnership. Cash proceeds from such financings, or the assumption of such financings, are recorded on the balance sheet as discounted lease rentals. As lessees make payments to financial institutions, leasing revenue and interest expense are recorded. Allowance for Losses An allowance for losses is maintained at levels determined by the general partner to adequately provide for any other-than-temporary declines in asset values. In determining losses, economic conditions, the activity in the used equipment markets, the effect of actions by equipment manufacturers, the financial condition of lessees, the expected courses of action by lessees with regard to leased equipment at termination of the initial lease term, and other factors which the general partner believes are relevant, are considered. Asset chargeoffs are recorded upon the termination or remarketing of the underlying assets. The lease portfolio is reviewed quarterly to determine the adequacy of the allowance for losses. Transactions Subsequent to Initial Lease Termination After the initial lease term of equipment on lease expires, the equipment is either sold or re-leased to the existing lessee or another third party. The remaining net book value of equipment sold is removed and gain or loss recorded when equipment is sold. The accounting for re-leased equipment is consistent with the accounting described under "Net Investment in Direct Finance Leases" and "Equipment on Operating Leases" above. -21- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 1. Organization and Summary of Significant Accounting Policies, continued ----------------------------------------------------------- Income Taxes No provision for income taxes has been made in the financial statements since taxable income or loss is recorded in the tax returns of the individual partners. Cash Equivalents The Partnership considers short-term, highly liquid investments that are readily convertible to known amounts of cash to be cash equivalents. Cash equivalents of $428,000 and $440,000 at December 31, 1996 and 1995, respectively, are comprised of an investment in a money market fund which invests solely in U.S. Government securities having maturities of 90 days or less. Equipment Held for Sale or Re-lease Equipment held for sale or re-lease, recorded at the lower of cost or market value expected to be realized, consists of equipment previously leased to end users which has been returned to the Partnership following lease expiration. Net Income Per Class A Limited Partner Unit Net income per Class A limited partner unit is computed by dividing the net income allocated to the Class A limited partners by the weighted average number of Class A limited partner units outstanding during the period. 2. Net Investment in Direct Finance Leases --------------------------------------- The components of the net investment in direct finance leases as of December 31, 1996 and 1995 were: 1996 1995 ---- ---- Minimum lease payments receivable $ 772,923 $ 1,500,213 Estimated residual values 451,697 589,719 Less unearned income (119,509) (286,658) ----------- ----------- Total $ 1,105,111 $ 1,803,274 =========== =========== -22- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 3. Leased Equipment ---------------- The Partnership's investment in equipment on operating leases by major classes as of December 31, 1996 and 1995 were: 1996 1995 ---- ---- Transportation and industrial equipment $ 1,267,779 $ 6,282,988 Office furniture and equipment 2,844,991 2,681,979 Compuers and peripherals 1,054,671 1,535,014 Other 985,359 1,843,416 ------------ ------------ 6,152,800 12,343,397 Less: Accumulated depreciation (4,510,576) (8,674,997) Allowance for losses (630,892) (678,636) ------------ ------------ $ 1,011,332 $ 2,989,764 ============ ============ Depreciation expense for 1996, 1995 and 1994 was $1,172,100, $2,090,097 and $4,026,511, respectively. 4. Future Minimum Lease Payments ----------------------------- Future minimum lease receivable from noncancelable leases as of December 31, 1996 are as follows: Year Ending December 31 DFLs OLs ----------------------- --------- --------- 1997 $ 514,634 $ 403,407 1998 258,289 450,972 --------- --------- Total $ 772,923 $ 854,379 ========= ========= 5. Discounted Lease Rentals ------------------------ Discounted lease rentals outstanding at December 31, 1996 bear interest at rates primarily ranging between 5% and 12%. Aggregate maturities of such non-recourse obligations are as follows: Year Ending December 31 ----------------------- 1997 $ 482,394 1998 239,156 --------- Total $ 721,550 ========= -23- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 6. Transactions With the General Partner and Affiliates ---------------------------------------------------- Management Fees --------------- The general partner receives management fees as compensation for services performed in connection with managing the Partnership's equipment equal to the lesser of (a) 5% of gross rentals received (limited to 2% of gross rentals received in the case of full payout leases) or (b) the fee which the general partner reasonably believes to be competitive with that which would be charged by a non-affiliate for rendering comparable services as permitted under the Partnership Agreement. Such fees totaled $169,573, $212,268 and $325,641 in 1996, 1995 and 1994, respectively. Direct Services --------------- The general partner and its affiliates provide accounting, investor relations, billing, collecting, asset management, and other administrative services to the Partnership. The Partnership reimburses the general partner for these services performed on its behalf as permitted under the terms of the Partnership Agreement. Such reimbursements totaled $66,223, $73,966 and $91,975 in 1996, 1995 and 1994, respectively. Payable to Affiliates --------------------- Payable to affiliates consists primarily of direct services and management fees payable to the general partner. Disposition Fee --------------- The general partner is entitled to a subordinated fee with respect to each sale of equipment in an amount not to exceed the lesser of (a) 50% of the fee that would be charged by an unaffiliated party or (b) 2% of the gross equipment sales price. The disposition fee has not and will not be paid to the general partner until the Class A limited partners have received cash distributions in an amount equal to their capital contributions plus an 8% annual, cumulative return compounded daily on their adjusted capital contributions, calculated from and after the first day of the month following the month that each Class A limited partner is admitted to the Partnership. The Partnership has not accrued any disposition fees since inception as it is anticipated that the limited partners will not receive the minimum distributions described above. -24- LEASTEC INCOME FUND V A California Limited Partnership NOTES TO FINANCIAL STATEMENTS, continued 7. Tax Information (Unaudited) -------------- The following reconciles net income for financial reporting purposes to income (loss) for federal income tax purposes for the years ended December 31,:
1996 1995 1994 ---- ---- ---- Net income (loss) per financial statements $ 1,123,496 $ 1,057,734 $ 1,107,121 Differences due to: Direct finance leases 560,141 714,250 288,012 Depreciation (17,966) 302,792 (104,704) Provision for losses - - 100,989 Gain (loss) on sale of equipment 296,780 (72,043) (87,995) Other 74,033 (64,961) (56,354) ----------- ----------- ----------- Partnership income for federal income tax purposes $ 2,036,484 $ 1,937,772 $ 1,247,069 =========== =========== ===========
As of December 31, 1996, the partners' capital accounts per the financial statements totaled $1,537,220 compared to partners' capital accounts for federal income tax purposes of $5,184,715 (unaudited). The difference arises primarily from commissions reported as a reduction in partners' capital for financial reporting purposes but not for federal income tax purposes, and temporary differences related to direct finance leases, depreciation, and provisions for losses. 8. Concentration of Credit Risk ---------------------------- Approximately 49% of the Partnership's equipment under lease was leased to investment grade lessees. Pursuant to the Partnership Agreement, an investment grade lessee is a company (1) with a credit rating of not less than Baa, as determined by Moody's Investor Services, Inc. or (2) that has comparable credit ratings, as determined by other recognized credit rating services, or (3) which, if not rated by a recognized credit rating service, then in the opinion of the general partner, is of comparable credit quality. The Partnership's cash balance is maintained with a high credit quality financial institution. At times such balances may exceed the FDIC insurance limit due to the receipt of lockbox amounts that have not cleared the presentment bank (generally for less than two days). As funds become available, they are invested in a money market mutual fund. -25- 9. Disclosures about Fair Value of Financial Instruments ----------------------------------------------------- Statement of Financial Standards No. 107 ("SFAS No. 107"), Disclosures about Fair Value of Financial Instruments specifically excludes certain items from its disclosure requirements such as the Partnership's investment in leased assets. The carrying amounts at December 31, 1996 for cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, payable to affiliates, rents and sale proceeds received in advance and distributions payable to partners approximate their fair values due to the short maturity of these instruments. -26- INDEPENDENT AUDITORS' REPORT ---------------------------- THE PARTNERS LEASTEC INCOME FUND V A CALIFORNIA LIMITED PARTNERSHIP: Under date of January 31, 1997, we reported on the balance sheets of Leastec Income Fund V, a California Limited Partnership, as of December 31, 1996 and 1995, and the related statements of income, partners' capital, and cash flows for each of the years in the three-year period ended December 31, 1996, as contained in the Partnership's annual report on Form 10-K for the year 1996. In connection with our audits of the aforementioned financial statements, we have also audited the related financial statement Schedule II, as listed in the accompanying index. This financial statement schedule is the responsibility of the Partnership's management. Our responsibility is to express an opinion on this financial statement schedule based on our audits. In our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. /s/KPMG Peat Marwick LLP ------------------------ KPMG PEAT MARWICK LLP Denver, Colorado January 31, 1997 -27- LEASTEC INCOME FUND V A California Limited Partnership SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E - -------- -------- ------------------------------- -------- -------- Additions Balance at Additions (Deductions) Balance Beginning Charged to Charged to at end Classification of Period Expenses Other Accounts Deductions of Period - -------------- --------------- ------------ ---------------- -------------- ------------ (1) (2) 1996 - --------------------- Allowance for losses: Accounts receivable $ 22,374 $ - $ - $ - $ 22,374 Equipment on operating leases 678,636 - (47,744) - 630,892 ---------- -------------- -------------- ----------------- ----------- Totals $ 701,010 $ - $ (47,744) $ - $ 653,266 ========== ============== ============= ================ =========== 1995 - --------------------- Allowance for losses: Accounts receivable $ 22,374 $ - $ - $ - $ 22,374 Equipment on operating leases 671,937 - 6,700 - 678,636 ---------- -------------- --------------- --------------- ----------- Totals $ 694,311 $ - $ 6,700 $ - $ 701,010 ========== ============== ============== =============== =========== 1994 - --------------------- Allowance for losses: Accounts receivable $ 261,148 $ - $ (238,774) $ - $ 22,374 Equipment on operating leases 393,285 108,615 170,037 - 671,937 ---------- -------------- -------------- ---------------- ----------- Totals $ 654,433 $ 108,615 $ (68,737) $ - $ 694,311 ========== ============== ============= ================ ===========
(1) Represents reclassifications to and from other reserve accounts and asset and liability accounts. (2) Represents allowance charge-offs. See accompanying independent auditors' report. -28- Item 9. Disagreements on Accounting and Financial Disclosures ----------------------------------------------------- None Item 10. Directors and Executive Officers of the Partnership --------------------------------------------------- The Partnership has no officers and directors. The general partner manages and controls the affairs of the Partnership and has general responsibility and authority in all matters affecting its business. Information concerning the directors and executive officers of the general partner is as follows: CAI Partners Management Company Name Positions Held ---- -------------- John F. Olmstead President and Director Dennis J. Lacey Senior Vice President and Director John E. Christensen Senior Vice President, Principal Financial and Chief Administrative Officer and Director Anthony M. DiPaolo Senior Vice President, Assistant Secretary and Director Daniel J. Waller Vice President and Director Richard H. Abernethy Vice President and Director John A. Reed Vice President, Assistant Secretary and Director Robert A. Golden Vice President and Director David J. Anderson Chief Accounting Officer and Secretary JOHN F. OLMSTEAD, age 52, joined CAII as Vice President in December, 1988, is a Senior Vice President of CAI and CAII and is head of CAII's Public Equity division. He has served as Chairman of the Board for Neo-kam Industries, Inc., Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has over 20 years of experience holding various positions of responsibility in the leasing industry. Mr. Olmstead holds a Bachelor of Science degree from Indiana University and a Juris Doctorate degree from Indiana Law School. -29- Item 10. Directors and Executive Officers of the Partnership, continued --------------------------------------------------- DENNIS J. LACEY, age 43, joined CAI as Vice President, Operations, in October 1989. Mr. Lacey was appointed Treasurer on January 1, 1991, Chief Financial Officer on April 11, 1991, a director on July 19, 1991, and President and Chief Executive Officer on September 6, 1991. Prior to joining CAI, Mr. Lacey was an audit partner for the public accounting firm of Coopers & Lybrand. Mr. Lacey is also a director and senior officer of CAII, CAI Equipment Leasing I Corp., CAI Equipment Leasing II Corp., CAI Equipment Leasing III Corp., CAI Equipment Leasing IV Corp., CAI Equipment Leasing V Corp., CAI Leasing Canada, Ltd., CAI Partners Management Company, CAI Securities Corporation, CAI Lease Securitization I Corp. and Capital Equipment Corporation (collectively referred to herein as the "CAI Affiliates"), all of which are first- or second-tier wholly-owned subsidiaries of CAI. JOHN E. CHRISTENSEN, age 49, joined CAII as Vice President and Treasurer in November 1988. He now serves as Senior Vice President, Finance and Chief Financial Officer of CAI and CAII. Mr. Christensen previously held senior management positions at Maxicare Health Plans, Inc., Global Marine, Inc. and Santa Fe International, Inc. Mr. Christensen obtained his MBA in Finance from the University of Michigan and his Bachelor of Arts degree from Michigan State University. ANTHONY M. DIPAOLO, age 37, joined CAII in July 1990 as an Assistant Treasurer and is currently Senior Vice President-Business Development. He has also held the positions of Senior Vice President-Controller and Assistant Vice President-Credit Administration for the Company. Mr. DiPaolo has held financial management positions as Chief Financial Officer for Mile High Kennel Club, Inc. from 1988 to 1990 and was Vice President/Controller for VICORP Restaurants, Inc. from 1986 through 1988. Mr. DiPaolo holds a Bachelor of Science degree in Accounting from the University of Denver. DANIEL J. WALLER, age 38, joined CAII in July 1990, as a manager of Investor Relations. Mr. Waller assumed the responsibility for the asset management department a short time later, and is currently Vice President, Capital Markets Group. Prior to joining CAII, Mr. Waller was an audit manager with Coopers & Lybrand for over three years and gained considerable experience in the leasing industry. While at Coopers & Lybrand, Mr. Waller held positions with the International Accounting and Auditing Committee as well as the national Auditing Directorate. Mr. Waller holds a Bachelor of Arts degree in accounting from the University of Northern Iowa. RICHARD H. ABERNETHY, age 42, joined CAII in April 1992 as Equipment Valuation Manager and currently serves as Vice President of Asset Management. Mr. Abernethy has thirteen years experience in the leasing industry, including prior positions with Barclays Leasing Inc., from November 1986 to February 1992, and Budd Leasing Corporation, from January 1981 to November 1986. Mr. Abernethy holds a Bachelor of Arts in Business Administration from the University of North Carolina at Charlotte. JOHN A. REED, age 41, joined CAII in January 1990 as the Tax Director and Assistant Secretary. Mr. Reed is currently the Vice President of Marketing and is responsible for all lease documentation and management of transaction structuring and processing. Prior to joining the Marketing Department, Mr. Reed was Vice President of Credit and Debt Administration. He spent seven and one half years with Coopers & Lybrand in the Tax Department and served on CAII's tax consulting engagement during that time. Mr. Reed holds a Bachelor of Arts degree in Social Sciences and Masters of Science in Accounting, from Colorado State University. -30- Item 10. Directors and Executive Officers of the Partnership, continued --------------------------------------------------- ROBERT A. GOLDEN, age 51, is Vice President and the National Sales Manager of the Company. Mr. Golden joined the Company in 1993 as a Branch Manager. He was promoted to his current position in September 1994. Prior to joining the Company, he was an Executive Vice President with the U.S. Funds Group, President of BoCon Capital Group and Vice President with Ellco/GE Capital for fifteen years. Mr. Golden is an officer, but not a director, of CAII. DAVID J. ANDERSON, age 43, joined CAII in August 1990 as Manager of Billing & Collections and currently serves as Assistant Vice-President/Chief Accounting Officer. Prior to joining CAII, Mr. Anderson was Vice- President/Controller for Systems Marketing, Inc., from 1985 to 1990, and previous to that working in several senior staff positions at the Los Alamos National Laboratory and with Ernst & Whinney. Mr. Anderson holds a Bachelor of Business Administration degree in Accounting from the University of Wisconsin. Item 11. Executive Compensation ---------------------- No compensation was paid by the Partnership to the officers and directors of the general partner. See Item 13 of this Report, "Certain Relationships and Related Transactions", for a description of the compensation and fees paid to the general partner and its affiliates by the Partnership during 1996. Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- (a) As of the date hereof, no person is known by the Partnership to be the beneficial owner of more than 5% of the Class A limited partner units of the Partnership. The Partnership has no directors or officers, and neither the general partner nor the Class B limited partner of the Partnership owns any Class A limited partner units. CAII, the parent of the general partner, owns 100% of the Partnership's Class B limited partner interest. CAI Partners Management Company owns 100% of the Partnership's general partner interest. The names and addresses of the general partner and the Class B limited partner are as follows: General Partner --------------- CAI Partners Management Company 7175 West Jefferson Avenue Suite 4000 Lakewood, Colorado 80235 -31- Item 12. Security Ownership of Certain Beneficial Owners and Management -------------------------------------------------------------- Class B Limited Partner ----------------------- Capital Associates International, Inc. 7175 West Jefferson Avenue Suite 4000 Lakewood, Colorado 80235 (b) No directors or officers of the general partner or the Class B limited partner owned any Class A limited partner units as of December 31, 1996. (c) The Partnership knows of no arrangements, the operation of which may at a subsequent date result in a change in control of the Partnership. Item 13. Certain Relationships and Related Transactions ---------------------------------------------- The general partner and its affiliates receive certain types of compensation, fees or other distributions in connection with the operations of the Partnership. Following is a summary of the amounts paid or payable to the general partner and its affiliates during 1996. Management Fee - -------------- The general partner receives a monthly fee as compensation for services rendered in connection with the management of the Partnership's equipment in an amount equal to the lesser of (i) 5.0% of gross rentals received by the Partnership (but limited to 2.0% of gross rentals received in the case of full payout leases), or (ii) the fee which the general partner reasonably believes to be competitive with that which would be charged by a non-affiliate for rendering comparable services. The general partner earned $169,573 of management fees during 1996. Disposition Fee - --------------- The general partner earns a subordinated fee with respect to each sale of equipment in an amount equal to the lesser of (i) 50% of the fee that would be charged by an unaffiliated party, or (ii) 2% of the gross equipment sale price. The disposition fee has not and will not be paid to the general partner until the Class A Limited Partners have received cash distributions in an amount equal to their capital contributions plus 8% annual cumulative return compounded daily on their adjusted capital contributions, calculated from and after the first day of the month following the month that each Class A Limited Partner is admitted to the Partnership. The Partnership did not accrue any disposition fees in 1996 as it is anticipated that the limited partners will not recover the aforementioned amounts. -32- Item 13. Certain Relationships and Related Transactions, continued ---------------------------------------------- Accountable General and Administrative Expenses - ----------------------------------------------- The general partner is entitled to reimbursement of certain expenses paid on behalf of the Partnership which are incurred in connection with the Partnership's operations. The general partner received $66,223 of expense reimbursements during 1996. The general partner receives 5.0% of Partnership cash distributions and is allocated certain Partnership income or loss relating to its general partner interest in the Partnership. Distributions paid and income allocated to the general partner totaled $108,947 and $122,105, respectively, for 1996. Distributions paid and income allocated to the Class B limited partner were $0 and $38,476, respectively, for 1996. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K --------------------------------------------------------------- (a) and (d) The following documents are filed as part of this Report: 1. Financial Statements 2. Financial Statement Schedule (b) There were no reports on Form 8-K filed during the three months ended December 31, 1996. (c) Exhibits required to be filed. Exhibit Number Exhibit Name -------------- ------------ 3* Leastec Income Fund V Limited Partnership Agreement (Filed as Exhibit A on Form S-1 in September 1987) 4.1* Subscription Agreement and Power of Attorney (Filed as Exhibit B on Form S-1 in September 1987) 4.2* First Amendment to Limited Partnership Agreement dated October 14, 1987 (Filed on October 14, 1987) 4.3* Second Amendment to Limited Partnership Agreement dated March 31, 1992 (Filed on May 15, 1992) 4.4* Third Amendment to Limited Partnership Agreement dated June 30, 1992 * Not filed herewith. In accordance with Rule 12b-32 of the General Rules and Regulations under the Securities Exchange Act of 1934, reference is made to the document previously filed with the Commission. -33- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Partnership has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: March 7, 1997 Leastec Income Fund V, A California Limited Partnership By: CAI Partners Management Company By: /s/John F. Olmstead ---------------------- John F. Olmstead President and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the general partner of the Partnership and in the capacities indicated on March 7, 1997. Signature Title /s/John F. Olmstead - ------------------------ John F. Olmstead President and Director /s/Dennis J. Lacey - ------------------------ Dennis J. Lacey Senior Vice President and Director /s/John E. Christensen - ------------------------ John E. Christensen Senior Vice President, Principal Financial and Chief Administrative Officer and Director /s/Anthony M. DiPaolo - ------------------------ Anthony M. DiPaolo Senior Vice President, Assistant Secretary and Director /s/Daniel J. Waller - ------------------------ Daniel J. Waller Vice President and Director /s/Richard H. Abernethy - ------------------------ Richard H. Abernethy Vice President and Director /s/John A. Reed - ------------------------ John A. Reed Vice President, Assistant Secretary and Director /s/Robert A. Golden - ------------------------ Robert A. Golden Vice President and Director /s/David J. Anderson - ------------------------ David J. Anderson Chief Accounting Officer and Secretary -34- EX-27 2 LIFV96K.001
5 The schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of income and is qualified in its entirety by reference to such financial statements. 12-MOS DEC-31-1996 DEC-31-1996 465,217 0 122,357 0 128,696 0 1,011,332 0 2,832,713 0 0 0 0 0 1,537,220 2,832,713 525,245 2,951,127 0 1,827,633 235,796 0 122,830 1,123,494 0 1,123,494 0 0 0 1,123,494 4.86 4.86
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