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, 1998
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 33-80849
CAPITAL PREFERRED YIELD FUND-IV, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 84-1331690
(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: None
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 39
Page 1 of 40 Pages
<PAGE>
Item 1. Business
--------
Capital Preferred Yield Fund-IV, L.P., a Delaware limited partnership (the
"Partnership"), was organized on December 18, 1995 and is engaged in the
business of owning and leasing equipment. CAI Equipment Leasing V Corp., a
Colorado corporation and a wholly owned subsidiary of Capital Associates, Inc.
("CAI"), is the general partner of the Partnership.
The Partnership commenced business operations on April 16, 1996. On February 9,
1998, the Partnership sold the remaining planned maximum placement of 500,000
Class A limited partner units. During 1998, the Partnership entered its
reinvestment period as defined in the Partnership Agreement. A summary of the
Partnership's offering activities is presented below:
<TABLE>
<CAPTION>
Class A Sales
Limited Number Gross Commissions Net
Partner of Offering and Offering Offering
Units Sold Investors Proceeds Expenses Proceeds
---------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1996 154,553 867 $ 15,455,281 $ 2,230,270 $ 13,225,011
Year ended December 31, 1997 302,080 1,371 $ 30,207,960 $ 4,316,105 $ 25,891,855
Year ended December 31, 1998 43,367 107 4,336,754 682,777 3,653,977
-------- ------ ------------ ----------- ------------
500,000 2,345 $ 49,999,995 $ 7,229,152 $ 42,770,843
======== ====== ============ =========== ============
</TABLE>
Capital Associates International, Inc. ("CAII"), an affiliate of the general
partner, is the Class B limited partner of the Partnership. In exchange for its
Class B limited partner interest, CAII contributed cash of $10,000 for each
$1,000,000 of investors' capital contributions (i.e., cash investments in the
Partnership) to the Partnership. CAII's interest in Distributable Cash is
subordinated to the Class A limited partners' interest. The contributions of
CAII were made simultaneously with the purchase of equipment by the Partnership.
Through December 31, 1998, CAII contributed $500,000 to the Partnership.
The Partnership's overall investment objectives are to (i) raise the maximum
allowable capital from investors for investment in accordance with the
Partnership's investment objectives described in the Prospectus (which was
reached on February 9, 1998); (ii) invest such capital and related indebtedness
in a diversified portfolio of equipment subject to leases with terms ranging
from two to seven years; (iii) if funds are available for distribution, make
monthly cash distributions to the Class A and Class B limited partners during
the reinvestment period (a period that ends approximately June 30, 2003); (iv)
re-invest all available undistributed cash from operations and cash from sales
in additional equipment during the reinvestment period to increase the
Partnership's portfolio of revenue-generating equipment provided suitable
equipment can be identified and acquired; and (v) sell or otherwise dispose of
the Partnership's equipment and other assets in an orderly manner and promptly
distribute cash from sales thereof to the Partners within three years of the end
of the reinvestment period.
During 1998, the Partnership acquired equipment of various types under lease to
third parties. All of the equipment was purchased by CAII directly from
manufacturers or from other independent third parties and sold to the
Partnership. The equipment is generally comprised of transportation and
industrial equipment, office furniture and equipment, and computer and
peripheral equipment, among others (the "equipment"). See Item 13 of this
report, "Certain Relationships and Related Transactions" for the detail listing
-2-
<PAGE>
Item 1. Business, continued
--------
of equipment purchased during 1998. The Partnership expects that a majority of
the equipment purchased during 1999 will be similar in nature to the equipment
acquired in 1998. As of December 31, 1998, the general partner has identified
approximately $600,000 of additional equipment that satisfied the Partnership's
acquisition criteria that is expected to be acquired during the first quarter
1999.
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. This non-recourse debt financing, also referred to as
discounted lease rentals, will be utilized to finance the purchase of equipment
under lease, or to invest the proceeds therefrom in additional equipment under
lease. 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
assignments incurred in 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.
During 1998, the Partnership leased equipment to investment grade lessees in
diverse industries including the material handling, telecommunications and
manufacturing industries. Approximately 77% of the Partnership's equipment under
lease was leased to investment grade lessees as of December 31, 1998. Pursuant
to the Partnership Agreement, an investment grade lessee is a company (i) with a
net worth in excess of $100,000,000 (and no debt issues that are rated); or (ii)
with a credit rating of not less than Baa as determined by Moody's Investor
Services, Inc. or comparable credit rating, as determined by another recognized
credit rating service; or (iii) a lessee, all of whose lease payments have been
unconditionally guaranteed or supported by a letter of credit issued by a
company meeting one of the above requirements. The Partnership limits its credit
risk through selective use of non-recourse debt financing of future lease
rentals, as described above.
The Partnership only acquires equipment that is 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 sale. Upon
expiration of the 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.
The Partnership's business is not subject to seasonal variations.
The ultimate rate of return of the Partnership's leasing transactions is
dependent, in part, on the general level of interest rates at the time the
leases are originated, as well as future equipment values and on-going lessee
creditworthiness. 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). The amount of future distributions to the partners will
depend, in part, on future interest rates.
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," which are
incorporated herein by reference.
-3-
<PAGE>
Item 1. Business, continued
--------
The Partnership competes in the leasing marketplace as a lessor with a
significant number of other companies, including equipment manufacturers,
leasing companies and financial institutions. The Partnership competes mainly on
the basis of the expertise of its general partner in remarketing equipment,
terms offered in its transactions, pricing and service. Although the Partnership
does not account for a significant percentage of the leasing market, the general
partner believes that the Partnership's marketing strategies and financing
capabilities enable it to compete effectively in the equipment leasing and
remarketing markets.
The Partnership leases equipment to a significant number of lessees. No lessee
accounted for more than 10% of total revenue of the Partnership during 1998.
The Partnership is required to dissolve and distribute all of its assets no
later than December 31, 2007. However, the general partner anticipates that all
equipment will be sold and the Partnership will be liquidated prior to that
date.
Item 2. Properties
----------
Per the Partnership Agreement, the Partnership does not own or lease any
physical properties other than the equipment discussed in Item 1 "Business," of
this Report, which is incorporated herein by reference.
Item 3. Legal Proceedings
-----------------
Neither the Partnership nor any of the Partnership's equipment is the subject of
any material pending legal proceedings.
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
ended December 31, 1998.
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters
-------
(a) The Partnership's Class A limited partner units, Class B interest and
general partner interest are not publicly traded. There is no established
public trading market for such units and interests and none is expected to
develop.
(b) At December 31, 1998, there were 2,345 Class A limited partners.
-4-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters, continued
-------
(c) Distributions
-------------
During 1998, the Partnership made twelve (12) distributions (a portion of
which constituted a return of capital) to Class A limited partners as
follows:
Distributions Per
$100 Investment
For the Payment (computed on Total
Period Ended Made During weighted average) Distributions
------------------ -------------- ----------------- -------------
December 31, 1997 January 1998 $ 0.875 $ 425,478
January 31, 1998 February 1998 0.875 379,360
February 28, 1998 March 1998 0.875 405,854
March 31, 1998 April 1998 0.875 488,864
April 30, 1998 May 1998 0.875 408,547
May 31, 1998 June 1998 0.875 408,547
June 30, 1998 July 1998 0.875 488,330
July 31, 1998 August 1998 0.875 408,424
August 31, 1998 September 1998 0.875 408,109
September 30, 1998 October 1998 0.875 487,997
October 31, 1998 November 1998 0.875 408,109
November 30, 1998 December 1998 0.875 408,109
-------- -----------
$ 10.50 $ 5,125,728
======== ===========
Distributions may be characterized for tax, accounting and economic
purposes as a return of capital, a return on capital or a portion of both.
The portion of each cash distribution by a partnership which exceeds its
net income for the fiscal period may be deemed a return of capital for
accounting purposes. However, the total percentage of a partnership's
return on capital over its life can only be determined after all residual
cash flows (which include proceeds from the re-leasing and sale of
equipment) have been realized at the termination of the Partnership.
The distribution for the month ended December 31, 1998, totaling $487,997,
was paid to the Class A limited partners on January 4, 1999. Distributions
to the general partner and Class B limited partner during 1998 are
discussed in Item 13 of this Report, "Certain Relationships and Related
Transactions."
The general partner believes the Partnership will generate sufficient cash
flows from operations during 1998, to (1) meet current operating
requirements, (2) enable it to fund cash distributions to both the Class A
and Class B limited partners at annualized rates of 10.5% of their capital
contributions, (portions of which are expected to constitute returns of
capital) and (3) reinvest in additional equipment under leases, provided
that suitable equipment can be identified and acquired.
-5-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters, continued
-------
(c) Distributions, continued
-------------
During 1997, the Partnership made twelve (12) distributions (a portion of
which constituted a return of capital) to Class A limited partners as
follows:
Distributions Per
$100 Investment
For the Payment (computed on Total
Period Ended Made During weighted average) Distributions
------------------ -------------- ----------------- -------------
December 31, 1996 January 1997 $ 0.875 $ 126,682
January 31, 1997 February 1997 0.875 148,000
February 28, 1997 March 1997 0.875 165,833
March 31, 1997 April 1997 0.875 209,988
April 30, 1997 May 1997 0.875 206,805
May 31, 1997 June 1997 0.875 225,213
June 30, 1997 July 1997 0.875 282,582
July 31, 1997 August 1997 0.875 267,496
August 31, 1997 September 1997 0.875 290,656
September 30, 1997 October 1997 0.875 355,921
October 31, 1997 November 1997 0.875 326,231
November 30, 1997 December 1997 0.875 342,134
------- -----------
$ 10.50 $ 2,947,541
======= ===========
The following represents annual and cumulative distributions per Class A
limited partner unit, as described in note 1 to Notes to Consolidated
Financial Statements.
Distribution Amount Distribution %
per $100 Class A per $100 Class A
Limited Partner Unit Limited Partner Unit
Payment (computed on (computed on
Made During weighted average) weighted average) (1)
----------- -------------------- ---------------------
1996 $ 7.72 11.0%
1997 10.50 10.5%
1998 10.50 10.5%
-------
$ 28.72
=======
(1) Cumulative distributions, as described in note 1 to Notes to
Consolidated Financial Statements, began May 1996.
-6-
<PAGE>
Item 6. Selected Financial Data
-----------------------
The following selected financial data relates to the years ended December 31,
1998, 1997 and 1996. The data should be read in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements and notes thereto appearing with Item 8
herein.
<TABLE>
<CAPTION>
1998 1997 1996*
------------ ------------ ------------
<S> <C> <C> <C>
Total revenue $ 19,560,413 $ 11,907,740 $ 940,346
Net income 2,031,561 955,418 102,627
Net income per weighted average Class A
limited partner unit outstanding 3.95 2.82 1.33
Total assets 54,877,835 56,161,440 16,652,457
Discounted lease rentals 15,708,835 17,633,047 2,765,239
Distributions declared to partners 5,293,514 3,310,427 448,237
Distributions declared per monthly weighted average
Class A limited partner unit outstanding 10.50 10.50 7.72
</TABLE>
* For the period from April 16, 1996 (commencement of operations) to
December 31, 1996.
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations
---------------------
I. 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:
<TABLE>
<CAPTION>
Years Ended December 31, Years Ended December 31,
------------------------- --------------------------
1998 1997 Change 1997 1996 Change
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 2,598,528 $ 1,185,661 $ 1,412,867 $ 1,185,661 $ 203,467 $ 982,194
Equipment sales margin 196,434 - 196,434 - - -
Interest income 122,325 253,514 (131,189) 253,514 50,763 202,751
Management fees paid to general partner (422,321) (250,233) (172,088) (250,233) (17,688) (232,545)
Direct services from general partner (167,569) (78,767) (88,802) (78,767) (41,376) (37,391)
General and administrative (190,836) (154,757) (36,079) (154,757) (92,539) (62,218)
Provision for losses (105,000) - (105,000) - - -
----------- ----------- ----------- ----------- ----------- -----------
Net income $ 2,031,561 $ 955,418 $ 1,076,143 $ 955,418 $ 102,627 $ 852,791
=========== =========== =========== =========== =========== ===========
</TABLE>
* For the period from April 16, 1996 (commencement of operations) to
December 31, 1996.
-7-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
I. Results of Operations, continued
---------------------
LEASING MARGIN
Leasing margin consists of the following:
Years Ended December 31,
-----------------------------------------
1998 1997 1996*
---- ---- ----
Operating lease rentals $ 18,926,287 $ 11,394,668 $ 881,778
Direct finance lease income 315,367 259,558 7,805
Depreciation (15,287,524) (9,213,581) (659,574)
Interest on discounted lease rentals (1,355,602) (1,254,984) (26,542)
------------ ------------ ----------
Leasing margin $ 2,598,528 $ 1,185,661 $ 203,467
============ ============ ==========
Leasing margin ratio 14% 10% 23%
============ ============ ==========
* For the period from April 16, 1996 (commencement of operations) to
December 31, 1996.
All components of leasing margin increased due to growth in the Partnership's
lease portfolio. Leasing margin ratio fluctuates primarily due to non-recourse
interest expense. Interest on discounted lease rentals did not increase in 1998
at the same rate as the other components of leasing margin. As a result, leasing
margin ratio increased for the year ended December 31, 1998 compared to the year
ended December 31, 1997. As of December 31, 1997, approximately 40% of the
Partnership's portfolio consisted of operating leases financed with non-recourse
debt while for the comparable period in 1996, the portfolio was minimally
financed with non-recourse debt and therefore, leasing margin was not materially
impacted by interest expense. Leasing margin and the related 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 interest rates at the
time the leases are originated, as well as, future equipment values and on-going
lessee creditworthiness. 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).
EQUIPMENT SALES MARGIN
Equipment sales margin from remarketing consists of the following:
1998
----
Equipment sales revenue $ 1,095,706
Cost of equipment sales (899,272)
-----------
Equipment sales margin $ 196,434
===========
-8-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
I. Results of Operations, continued
---------------------
EQUIPMENT SALES MARGIN, continued
Equipment sales margin is affected by the number and dollar amount of equipment
leases that mature in a particular period. Currently, a portion of the
Partnership's initial leases have expired and the equipment is either being
re-leased or sold to the lessee or third parties.
INTEREST INCOME
Interest income decreased in 1998 compared to 1997 due to an increase in
equipment purchases and a corresponding decrease in invested cash. Throughout
1997, the Partnership was in its offering period and as such, invested cash was
generally higher pending purchases of additional equipment. Interest income
increased in 1997 compared to 1996 because the Partnership was in the offering
period for only part of 1996.
EXPENSES
Management fees paid to the general partner, direct services from general
partner and general and administrative expenses increased in 1998 and 1997
compared to 1996 due to growth in the Partnership's lease portfolio.
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 and residual value exposure and, accordingly, in the ordinary course of
business, it will incur losses from those exposures. The Partnership performs
on-going quarterly assessments of its assets to identify any
other-than-temporary losses in value.
The Partnership recorded a provision for loss of $105,000 for 1998. Of that
amount, $75,000 related primarily to lessees returning equipment to the
Partnership and $30,000 was recorded as a reserve for estimated uncollectible
accounts receivable.
There was no provision for losses recorded during 1997 or 1996.
-9-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
II. Liquidity and Capital Resources
-------------------------------
The Partnership was formed on December 18, 1995. On April 16, 1996, the
Partnership commenced offering 500,000 Class A limited partner units at $100 per
unit for sale to investors. As of February 9, 1998, all 500,000 Class A limited
partner units were sold.
A summary of the Partnership's offering activities for 1998 and from the
commencement of operations to December 31, 1998 is presented below:
1998 Cumulative
---- ----------
Class A limited partner units sold 43,367 500,000
=========== ============
Gross offering proceeds $ 4,336,754 $ 49,999,995
Sales commissions (433,676) (5,000,000)
Organization and offering expenses (173,470) (2,000,000)
Due diligence expenses (75,631) (229,152)
----------- ------------
Net offering proceeds $ 3,653,977 $ 42,770,843
=========== ============
Class B limited partner (CAII) cash contribution $ 40,000 $ 500,000
=========== ============
The Partnership funds its operating activities principally with cash from rents,
discounted lease rentals (non-recourse debt), interest income, and sales of
off-lease equipment. Available cash and cash reserves of the Partnership are
invested in short-term government securities pending the acquisition of
equipment or distribution to the partners.
During 1998, the Partnership acquired equipment subject to leases with a total
purchase price of $18,542,605 (including $3,223,219 of equipment acquired
subject to existing non-recourse debt). Also during 1998, the Partnership
discounted future rental payments from certain leases to non-recourse lenders
and received proceeds of $3,994,817. Non-recourse borrowing against unleveraged
leases in the Partnership's lease portfolio may occur in the future as well,
when the general partner, in its discretion, determines that such non-recourse
financing is in the best interest of the Partnership. As of December 31, 1998,
the general partner had identified $600,000 of additional equipment that
satisfied the Partnership's acquisition criteria and is expected to be acquired
during 1999.
During 1998 and 1997, the Partnership declared distributions to the Class A
limited partners of $5,188,246 and $3,246,338, respectively, of which $487,997
was paid during January 1999. A portion of such distributions is expected to
constitute a return of capital. Distributions may be characterized for tax,
accounting and economic purposes as a return of capital, a return on capital or
a portion of both. The portion of each cash distribution by a partnership which
exceeds its net income for the fiscal period may be deemed a return of capital
for accounting purposes. However, the total percentage of a partnership's return
on capital over its life can only be determined after all residual cash flows
(which include proceeds from the re-leasing and sales of equipment) have been
realized at the termination of the Partnership.
-10-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
II. Liquidity and Capital Resources, continued
-------------------------------
The general partner believes that the Partnership will generate sufficient cash
flows from operations during 1998, to (1) meet current operating requirements,
(2) enable it to fund cash distributions to both the Class A and Class B limited
partners at annualized rates of 10.5% of their capital contributions (portions
of which are expected to constitute returns of capital), and (3) reinvest in
additional equipment under leases, provided that suitable equipment can be
identified and acquired.
YEAR 2000 ISSUES
An affiliate provides accounting and other administrative services, including
data processing services to the Partnership. The affiliate has conducted a
comprehensive review of its computer systems to identify systems that could be
affected by the Year 2000 issue. The Year 2000 issue results from computer
programs being written using two digits rather than four to define the
applicable year. Certain computer programs which have time-sensitive software
could recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in major system failures or miscalculations. Certain of the
affiliate's software has already been updated to correctly account for the Year
2000 issue. In addition, the affiliate is engaged in a system conversion,
whereby the affiliate's primary lease tracking and accounting software is being
replaced with new systems which will account for the Year 2000 correctly. The
affiliate expects that the new system will be fully operational by December 31,
1999, and therefore will be fully Year 2000 compliant. The affiliate does not
expect any other changes required for the Year 2000 to have a material effect on
its financial position or results of operations. As such, the affiliate has not
developed any specific contingency plans in the event it fails to complete the
conversion to a new system by December 31, 1999. In addition, the affiliate does
not expect any Year 2000 issues relating to its customers and vendors to have a
material effect on its financial position or results of operations.
III. New Accounting Pronouncements
-----------------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
("Statement 130"), which requires comprehensive income to be displayed
prominently within the financial statements. Comprehensive income is defined as
all recognized changes in equity during a period from transactions and other
events and circumstances except those resulting from investments by owners and
distributions to owners. Net income and items that previously have been recorded
directly in equity are included in comprehensive income. Statement 130 affects
only the reporting and disclosure of comprehensive income but does not affect
recognition or measurement of income. Statement 130 is effective for fiscal
years beginning after December 15, 1997, with earlier application permitted. The
Partnership adopted Statement 130 in the first quarter of 1998. The adoption did
not have an impact on its financial reporting.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("Statement 131"). Statement 131 provides
guidance for reporting information about operating segments in annual financial
-11-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------------
Results of Operations, continued
---------------------
III. New Accounting Pronouncements, continued
-----------------------------
statements and requires reporting of selected information about operating
segments in interim financial reports of public companies. An operating segment
is defined as a component of a business that engages in business activities from
which it may earn revenue and incur expenses, a component whose operating
results are regularly reviewed by the company's chief operating decision maker,
and a component for which discrete financial information is available. Statement
131 establishes quantitative thresholds for determining operating segments of a
company. Statement 131 is effective for fiscal years beginning after December
15, 1997, with earlier application permitted. The Partnership adopted Statement
131 in the first quarter of 1998. Since the Partnership operates in a single
business segment, the adoption did not have an impact on its financial
reporting.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("Statement 133").
Statement 133 establishes accounting and reporting standards for derivative
instruments and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. Statement 133 is effective
for fiscal years beginning after June 15, 1999, with earlier application
permitted. The Partnership will adopt Statement 133 in the first quarter of
1999. The General Partner does not expect the adoption to have an impact on its
financial reporting.
IV. "Safe Harbor" Statement Under the Private Securities Litigation Reform Act
--------------------------------------------------------------------------
of 1995
-------
The statements contained in this report which are not historical facts may be
deemed to contain forward-looking statements with respect to events, the
occurrence of which involve risks and uncertainties, and are subject to factors
that could cause actual future results to differ both adversely and materially
from currently anticipated results, including, without limitation; the level of
lease acquisitions; realization of residual values; customer credit risk;
competition from other lessors, specialty finance lenders or banks; and the
availability and cost of financing sources. Certain specific risks associated
with particular aspects of the Partnership's business are discussed in detail
throughout Parts I and II when and where applicable.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
The partnership's leases with equipment users are non-cancelable and have lease
rates which are fixed at lease inception. The partnership finances its leases,
in part, with discounted lease rentals. Discounted lease rentals are a fixed
rate debt. The partnerships other assets and liabilities are also at fixed
rates. Consequently the partnership has no interest rate risk or other market
risk exposure.
-12-
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Index to Financial Statements
Page
Number
Financial Statements ------
--------------------
Independent Auditors' Report 14
Balance Sheets as of December 31, 1998 and 1997 15
Statements of Income for the years ended
December 31, 1998 and 1997 and for the period
from April 16, 1996 (commencement of operations)
to December 31, 1996 16
Statements of Partners' Capital for the years ended
December 31, 1998 and 1997 and for the period from
April 16, 1996 (commencement of operations) to
December 31, 1996 17
Statements of Cash Flows for the years ended
December 31, 1998 and 1997 and for the period
from April 16, 1996 (commencement of operations)
to December 31, 1996 18-19
Notes to Financial Statements 20-30
Financial Statement Schedule
----------------------------
Independent Auditors' Report 31
Schedule II - Valuation and Qualifying Accounts 32
-13-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
CAPITAL PREFERRED YIELD FUND-IV, L.P.
We have audited the accompanying balance sheets of Capital Preferred Yield
Fund-IV, L.P. as of December 31, 1998 and 1997, and the related statements of
income, partners' capital, and cash flows for the years ended December 31, 1998
and 1997 and the period from April 16, 1996 (commencement of operations) to
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 Capital Preferred Yield
Fund-IV, L.P. as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for the years ended December 31, 1998 and 1997 and
the period from April 16, 1996 (commencement of operations) to December 31,
1996, in conformity with generally accepted accounting principles.
/s/KPMG LLP
------------------------
KPMG LLP
Denver, Colorado
February 22, 1999
-14-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
BALANCE SHEETS
December 31, 1998 and 1997
ASSETS
1998 1997
----------- -----------
Cash and cash equivalents $ 2,634,551 $ 4,676,747
Accounts receivable, net 465,374 383,407
Receivable from related party 216,074 10,000
Equipment held for sale or re-lease 410,599 -
Net investment in direct finance leases 3,810,382 4,602,977
Leased equipment, net 47,340,855 46,488,309
------------ ------------
Total assets $ 54,877,835 $ 56,161,440
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 1,080,333 $ 411,814
Payables to affiliates 46,652 58,722
Rents received in advance 597,415 817,900
Distributions payable to partners 497,346 433,396
Discounted lease rentals 15,708,835 17,633,047
------------ ------------
Total liabilities 17,930,581 19,354,879
------------ ------------
Partners' capital:
General partner - -
Limited partners:
Class A 500,000 units authorized; 496,844 and
455,953 units issued and outstanding in 1998
and 1997, respectively 36,507,167 36,374,010
Class B 440,087 432,551
------------ ------------
Total partners' capital 36,947,254 36,806,561
------------ ------------
Total liabilities and partners' capital $ 54,877,835 $ 56,161,440
============ ============
See accompanying notes to financial statements.
-15-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Period from
Years Ended April 16, 1996
December 31, (Commencement
----------------------------- of Operations) to
1998 1997 December 31, 1996
------------ ------------ -----------------
<S> <C> <C> <C>
REVENUE:
Operating lease rentals $ 18,926,287 $ 11,394,668 $ 881,778
Direct finance lease income 315,367 259,558 7,805
Equipment sales margin 196,434 - -
Interest income 122,325 253,514 50,763
------------ ------------ ---------
Total revenue 19,560,413 11,907,740 940,346
------------ ------------ ---------
EXPENSES:
Depreciation 15,287,524 9,213,581 659,574
Management fees paid to general partner 422,321 250,233 17,688
Direct services from general partner 167,569 78,767 41,376
General and administrative 190,836 154,757 92,539
Provision for losses 105,000 - -
Interest on discounted lease rentals 1,355,602 1,254,984 26,542
------------ ------------ ---------
Total expenses 17,528,852 10,952,322 837,719
------------ ------------ ---------
NET INCOME $ 2,031,561 $ 955,418 $ 102,627
============ ============ =========
NET INCOME ALLOCATED:
To the general partner $ 60,459 $ 74,673 $ 26,271
To the Class A limited partners 1,951,241 871,799 75,564
To the Class B limited partner 19,861 8,946 792
------------ ------------ ---------
$ 2,031,561 $ 955,418 $ 102,627
============ ============ =========
Net income per weighted average Class A
limited partner unit outstanding $ 3.95 2.82 $ 1.33
============ ============ =========
Weighted average Class A limited partner
units outstanding 494,222 309,586 56,931
============ ============ =========
</TABLE>
See accompanying notes to financial statements.
-16-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
STATEMENTS OF PARTNERS' CAPITAL
For the Years Ended December 31, 1998 and 1997
and the Period from April 16, 1996
(Commencement of Operations)
to December 31, 1996
<TABLE>
<CAPTION>
Class A
Limited Class A Class B
General Partners Limited Limited
Partner Units Partners Partner Total
--------- --------- ----------- --------- ------------
<S> <C> <C> <C> <C> <C>
Capital contributions $ - 154,553 $ 15,455,281 $ 150,000 $ 15,605,281
Commissions and offering costs on
sales of Class A limited partner units (22,303) - (2,207,967) - (2,230,270)
Redemptions - (50) (4,784) - (4,784)
Net income 26,271 - 75,564 792 102,627
Distributions declared to partners (3,968) - (439,720) (4,549) (448,237)
--------- --------- ------------ --------- ------------
Partners' capital, December 31, 1996 - 154,503 12,878,374 146,243 13,024,617
Capital contributions - 302,080 30,207,960 310,000 30,517,960
Volume discount - - (6,000) - (6,000)
Commissions and offering costs on
sales of Class A limited partner units (43,222) - (4,272,883) - (4,316,105)
Redemptions - (630) (58,902) - (58,902)
Net income 74,673 - 871,799 8,946 955,418
Distributions declared to partners (31,451) - (3,246,338) (32,638) (3,310,427)
--------- --------- ------------ --------- ------------
Partners' capital, December 31, 1997 - 455,953 36,374,010 432,551 36,806,561
Capital contributions - 43,367 4,336,754 40,000 4,376,754
Volume discount - - (68,895) - (68,895)
Commissions and offering costs on
sales of Class A limited partner units (7,516) - (675,261) - (682,777)
Redemptions - (2,476) (222,436) - (222,436)
Net income 60,459 - 1,951,241 19,861 2,031,561
Distributions declared to partners (52,943) - (5,188,246) (52,325) (5,293,514)
--------- --------- ------------ --------- ------------
Partners' capital, December 31, 1998 $ - 496,844 $ 36,507,167 $ 440,087 $ 36,947,254
========= ========= ============ ========= ============
</TABLE>
See accompanying notes to financial statements.
-17-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period from
Years Ended April 16, 1996
December 31, (Commencement
----------------------------- of Operations) to
1998 1997 December 31, 1996
------------ ------------ -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,031,561 $ 955,418 $ 102,627
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 15,287,524 9,213,581 659,574
Provision for losses 105,000 - -
Cost of equipment sales 899,272 - -
Recovery of investment in direct finance leases 1,745,557 1,057,640 20,040
Changes in assets and liabilities:
Increase in accounts receivable (47,265) (319,755) (76,524)
Increase in receivable from related party (206,074) - -
Increase in accounts payable and accrued liabilities 668,519 122,980 651,476
(Decrease) increase in payables to affiliates (12,070) 15,239 43,483
(Decrease) increase in rents received in advance (220,485) 416,514 31,991
------------ ------------ -------------
Net cash provided by operating activities 20,251,539 11,461,617 1,432,667
------------ ------------ -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of equipment on operating leases from affiliates (14,699,101) (28,986,004) (12,939,697)
Investment in direct financing leases, acquired from affiliates (620,284) (2,123,638) (202,368)
------------ ------------ -------------
Net cash used in investing activities (15,319,385) (31,109,642) (13,142,065)
------------ ------------ -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Class A capital contributions 4,336,754 30,207,960 15,455,281
Proceeds from Class B capital contributions 40,000 300,000 150,000
Proceeds from discounted lease rentals 3,994,817 3,687,846 1,923,239
Principal payments on discounted lease rentals (9,142,248) (5,766,722) (7,244)
Redemptions of Class A limited partner units (222,436) (58,902) (4,784)
Commissions paid to affiliate in connection with
the sale of Class A limited partner units (434,326) (3,020,146) (1,545,528)
Non-accountable organization and offering expense
reimbursement paid to the general partner in connection
with the sale of Class A limited partner units (317,347) (1,301,960) (656,155)
Distributions to partners (5,229,564) (3,009,376) (319,339)
------------ ------------ -------------
Net cash (used in) provided by financing activities (6,974,350) 21,038,700 14,995,470
------------ ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,042,196) 1,390,675 3,286,072
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,676,747 3,286,072 -
------------ ------------ -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,634,551 $ 4,676,747 $ 3,286,072
============ ============ =============
-18-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
STATEMENTS OF CASH FLOWS
Period from
Years Ended April 16, 1996
December 31, (Commencement
----------------------------- of Operations) to
1998 1997 December 31, 1996
------------ ------------ -----------------
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 1,343,176 $ 1,238,980 $ 26,542
Supplemental disclosure of noncash investing and
financing activities:
Reduction in Partners' capital accounts for
commissions and offering costs payable to affiliates - 18,879 28,587
Discounted lease rentals assumed in equipment acquisitions 3,223,219 16,946,684 849,244
</TABLE>
See accompanying notes to financial statements.
-19-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
ORGANIZATION
Capital Preferred Yield Fund-IV, L.P. (the "Partnership") was organized on
December 18, 1995 as a limited partnership under the laws of the State of
Delaware pursuant to an Agreement of Limited Partnership (the "Partnership
Agreement"). The Partnership was formed for the purpose of acquiring and
leasing a diversified portfolio of equipment to unaffiliated third parties.
The Partnership will continue until December 31, 2007 unless terminated
earlier in accordance with the terms of the Partnership Agreement. All
Partnership equipment is expected to be sold and the Partnership liquidated
between 2003 and 2007. The general partner of the Partnership is CAI
Equipment Leasing V Corp., a wholly owned subsidiary of Capital Associates,
Inc. ("CAI").
The general partner manages the Partnership, including investment of funds,
purchase and sale of equipment, lease negotiation and other administrative
duties. The Partnership commenced business operations on April 16, 1996, and
from that date through December 31, 1998, 500,000 Class A limited partner
units were sold to approximately 2,345 investors at a price of $100 per
Class A limited partner unit.
Capital Associates International, Inc. ("CAII"), a wholly owned subsidiary
of CAI, is the Class B limited partner. The Class B limited partner is
required to contribute cash, upon acquisition of equipment, in an amount
equal to 1% of gross offering proceeds received from the sale of Class A
limited partner units.
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 discussed below. Actual results could differ from those
estimates.
PARTNERSHIP ALLOCATIONS
Cash Distributions
------------------
During the Reinvestment Period (as defined in the Partnership Agreement),
available cash is distributed to the partners as follows:
First, 1.0% to the general partner and 99.0% to the Class A limited
partners until the class A limited partners receive annual,
non-compounded cumulative distributions equal to 10.5% of their
contributed capital.
Second, 1.0% to the general partner and 99.0% to the Class B limited
partner until the Class B limited partner receives annual non-compounded
cumulative distributions equal to 10.5% of its contributed capital.
-20-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
PARTNERSHIP ALLOCATIONS, continued
Cash Distributions, continued
------------------
Third, any remaining available cash will be reinvested or distributed to
the partners as specified in the Partnership Agreement.
After the Reinvestment Period (as defined in the Partnership Agreement),
available cash will be distributed to the partners as follows:
First, in accordance with the first and second allocations during the
Reinvestment Period as described above.
Second, 99.0% to the Class A limited partners and 1.0% to the general
partner, until the Class A limited partners achieve Payout (as defined
in the Partnership Agreement).
Third, 99.0% to the Class B limited partner, 1.0% to the general
partner, until the Class B limited partner achieves Payout (as defined
in the Partnership Agreement).
Fourth, 99.0% to the Class A and Class B limited partners (as a class)
and 1.0% to the general partner, until the Class A and Class B limited
partners receive cash distributions equal to 170% of their capital
contributions.
Thereafter, 90% to the Class A and Class B limited partners (as a class)
and 10% to the general partner.
Federal Income Tax Basis Profits and Losses
-------------------------------------------
There are several special allocations that precede the general allocations
of profits and losses to the partners. The most significant special
allocations are as follows:
First, commissions and expenses paid in connection with the sale of
Class A limited partner units are allocated 1.0% to the general partner
and 99.0% to the Class A limited partners.
Second, depreciation relating to Partnership equipment and any losses
resulting from the sale of equipment are generally allocated 1.0% to the
general partner and 99.0% to the limited partners (shared 99.0%/1.0% by
the Class A and Class B limited partners, respectively) until the
cumulative amount of such depreciation and such losses allocated to each
limited partner equals such limited partner's contributed capital
reduced by commissions and other expenses paid in connection with the
sale of Class A limited partner units allocated to such partner.
Thereafter, gain on sale of equipment, if any, will be allocated to the
general partner in an amount equal to the sum of depreciation and loss
on sale of equipment previously allocated to the general partner.
-21-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
PARTNERSHIP ALLOCATIONS, continued
Federal Income Tax Basis Profits and Losses, continued
-------------------------------------------
Third, notwithstanding anything in the Partnership Agreement to the
contrary, and before any other allocation is made, items of income and
gain for the current year (or period) shall be allocated, as quickly as
possible, to the general partner to the extent of any deficit balance
existing in the general partner's capital account as of the close of the
immediately preceding year, in order to restore the balance in the
general partner's capital account to zero.
After giving effect to special allocations, profits (as defined in the
Partnership Agreement) are first allocated in proportion to, and to the
extent of, any previous losses, in reverse chronological order and
priority. Any remaining profits are allocated in the same order and
priority as cash distributions.
After giving effect to special allocations, losses (as defined in the
Partnership Agreement) are allocated in proportion to, and to the extent
of, any previous profits, in reverse chronological order and priority.
Any remaining losses are allocated 1.0% to the general partner and 99.0%
to the limited partners (shared 99.0%/1.0% by the Class A and Class B
limited partners, respectively).
Financial Reporting - Profits and Losses
----------------------------------------
For financial reporting purposes, net income is allocated to the partners in
a manner consistent with the allocation of cash distributions.
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, Reporting Comprehensive Income
("Statement 130"), which requires comprehensive income to be displayed
prominently within the financial statements. Comprehensive income is defined
as all recognized changes in equity during a period from transactions and
other events and circumstances except those resulting from investments by
owners and distributions to owners. Net income and items that previously
have been recorded directly in equity are included in comprehensive income.
Statement 130 affects only the reporting and disclosure of comprehensive
income but does not affect recognition or measurement of income. Statement
130 is effective for fiscal years beginning after December 15, 1997, with
earlier application permitted. The Partnership adopted Statement 130 in the
first quarter of 1998. The adoption did not have an impact on its financial
reporting.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information ("Statement 131"). Statement 131 provides
guidance for reporting information about operating segments in annual
-22-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS, continued
financial statements and requires reporting of selected information about
operating segments in interim financial reports of public companies. An
operating segment is defined as a component of a business that engages in
business activities from which it may earn revenue and incur expenses, a
component whose operating results are regularly reviewed by the company's
chief operating decision maker, and a component for which discrete financial
information is available. Statement 131 establishes quantitative thresholds
for determining operating segments of a company. Statement 131 is effective
for fiscal years beginning after December 15, 1997, with earlier application
permitted. The Partnership adopted Statement 131 in the first quarter of
1998. Since the Partnership operates in a single business segment, the
adoption did not have an impact on its financial reporting.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities ("Statement
133"). Statement 133 establishes accounting and reporting standards for
derivative instruments and for hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
Statement 133 is effective for fiscal years beginning after June 15, 1999,
with earlier application permitted. The Partnership will adopt Statement 133
in the first quarter of 1999. The General Partner does not expect the
adoption to have an impact on its financial reporting.
LONG-LIVED ASSETS
The Partnership accounts for long-lived assets under the provisions of
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"). SFAS No. 121 requires that long-lived assets, including
equipment subject to 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 net cash flows expected to result from the
use of the asset and its eventual disposition. If the sum of the expected
future net cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets, including equipment
subject to operating leases and identifiable intangibles held by the
Partnership, is based on the fair value of the asset. The fair value of the
asset may be calculated by discounting the expected future net cash flows at
an appropriate interest rate.
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
-23-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
LEASE ACCOUNTING, continued
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 equip
ment.
The Partnership's accounting methods and their financial reporting effects
are described below.
NET INVESTMENT IN DIRECT FINANCE 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. 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 non-recourse basis. In return for such assigned future
rentals, the Partnership receives the discounted value of the rentals in
-24-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
NON-RECOURSE DISCOUNTING OF RENTALS, continued
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. The Partnership considers, 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 in
determining losses. 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 term of equipment under 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
Financing Leases" and "Equipment on Operating Leases" above.
INCOME TAXES
No provision for income taxes has been made in the financial statements
since taxable income or loss is recorded in the tax return 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 approximately $2,634,000 and $4,676,000 at December 31, 1998
and 1997, respectively, are comprised of investments in a mutual fund which
invests solely in U.S. Government treasury bills having maturities of 90
days or less.
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.
-25-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
2. Net Investment in Direct Finance Leases
---------------------------------------
The components of the net investment in direct finance leases as of December
31, 1998 and 1997 were:
1998 1997
----------- -----------
Minimum lease payments receivable $ 3,428,760 $ 4,420,096
Estimated residual values 805,340 781,773
Less unearned income (423,718) (598,892)
----------- -----------
Total $ 3,810,382 $ 4,602,977
=========== ===========
3. Leased Equipment, net
---------------------
The Partnership's investment in equipment on operating leases by major
classes as of December 31, 1998 and 1997 were:
1998 1997
------------ ------------
Transportation and industrial equipment $ 32,877,921 $ 26,164,592
Computers and peripherals 18,389,166 14,774,631
Office furniture and equipment 17,214,503 13,168,649
Other 2,278,628 2,228,605
------------ ------------
70,760,218 56,336,477
Less:
Accumulated depreciation (23,344,363) (9,848,168)
Allowance for losses (75,000) -
------------ ------------
$ 47,340,855 $ 46,488,309
============ ============
Depreciation expense for 1998, 1997 and 1996 was $15,287,524, $9,213,581 and
$659,574, respectively.
4. Future Minimum Lease Payments
-----------------------------
Future minimum lease payments receivable from noncancelable leases as of
December 31, 1998 are as follows:
Years Ending December 31, DFLs OLs
------------------------- ---- ---
1999 $ 1,797,586 $ 16,623,450
2000 811,458 10,507,362
2001 416,245 5,980,934
2002 286,812 2,404,272
Thereafter 116,659 689,370
----------- ------------
Total $ 3,428,760 $ 36,205,388
=========== ============
-26-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
5. Discounted Lease Rentals
------------------------
Discounted lease rentals outstanding at December 31, 1998 bear interest at
rates primarily ranging between 6% and 10%. Aggregate maturities of such
non-recourse obligations are:
Years Ending December 31,
-------------------------
1999 $ 8,255,175
2000 4,459,942
2001 2,607,625
2002 344,540
Thereafter 41,553
------------
$ 15,708,835
============
6. Transactions With the General Partner and Affiliates
----------------------------------------------------
Sales Commissions and Offering Costs
------------------------------------
Under the terms of the Partnership Agreement, an affiliate of the general
partner is entitled to receive sales commissions and wholesaling fees equal
to 10% of the Class A limited partners' capital contributions, up to 9% of
which is paid to participating broker-dealers. During 1998 and 1997,
respectively, the Partnership incurred sales commissions of approximately
$434,000 and $3,021,000, including $363,000 and $2,562,000 that were paid to
participating broker-dealers.
As provided in the Partnership Agreement, the general partner earned
approximately $174,000 and $1,208,000 as reimbursement for offering costs
incurred during 1998 and 1997, respectively, in connection with the
organization of the Partnership and the offering of Class A limited partner
units. The general partner also received approximately $75,000 and $88,000
as reimbursement for due diligence expenses incurred during 1998 and 1997,
respectively.
Capital Contributions
---------------------
Under terms of the Partnership Agreement, the Class B limited partner made
capital contributions to the Partnership of $40,000 and $310,000 during 1998
and 1997, respectively.
Origination Fee and Evaluation Fee
----------------------------------
The general partner earns a fee equal to 3.5% of the sales price of
equipment sold to the Partnership (up to a maximum cumulative amount as
specified in the Partnership Agreement), 1.5%, of which, represents
compensation for selecting, negotiating and consummating the acquisition of
the equipment and 2%, of which, represents reimbursement for services
rendered in connection with evaluating the suitability of the equipment and
the creditworthiness of the lessees. Origination and evaluation fees totaled
approximately $606,000 and $1,586,000 in 1998 and 1997, respectively, all of
which were capitalized by the Partnership as part of the cost of equipment
on operating leases and net investment in direct financing leases.
-27-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
6. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
Management Fees Paid to General Partner
---------------------------------------
The general partner earns management fees for services performed in
connection with managing the Partnership's equipment equal to 2% of gross
rentals received as permitted under terms of the Partnership Agreement. The
general partner earned approximately $422,000, $250,000 and $18,000 of
management fees during 1998, 1997, and 1996, respectively.
Direct Services from General Partner
------------------------------------
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. The partnership recorded approximately $168,000,
$79,000 and $41,000 of direct services from general partner during 1998,
1997 and 1996, respectively.
Equipment Purchases
-------------------
The Partnership purchased equipment from CAII, with a total purchase price
of approximately $18,542,605 (including approximately $3,223,219 of
discounted lease rentals) during 1998. The Partnership purchased the
equipment at CAII's historical cost plus reimbursement of other net
acquisition costs, as provided for in the Partnership Agreement.
Payables to Affiliates
----------------------
Payables to affiliates of approximately $47,000 and $59,000 in 1998 and
1997, respectively, consists of $8,000 for direct services from general
partner, $35,000 for management fees paid to general partner, and $4,000 for
reimbursable general and administrative expenses in 1998, and $8,000 for
direct services from general partner, $32,000 for management fees paid to
general partner, and $19,000 for due diligence expenses in 1997.
Receivable From Related Party
-----------------------------
The General Partner collects and applies rental payments to the lessee's
account with the Partnership, for those lessees who remit directly to the
General Partner. The rental payments are then transferred to the
Partnership, eliminating the receivable from related party balance. At the
end of December 1998, $216,074 in rents were applied by the General Partner
that were transferred to the Partnership in January 1999.
-28-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
7. Tax Information (Unaudited)
---------------------------
The following reconciles net income for financial reporting purposes to the
income for federal income tax purposes for the periods ended December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements $ 2,031,561 $ 955,418 $ 102,627
Direct finance leases 1,745,558 1,057,640 20,040
Depreciation (4,962,903) (4,245,112) (567,815)
Provision for losses 105,000 - -
Loss on sale of equipment (494,248) - -
Other 245,990 400,382 87,042
------------ ------------ ----------
Partnership income for federal income tax purposes $ (1,329,042) $ (1,831,672) $ (358,106)
============ ============ ==========
</TABLE>
The following reconciles partners' capital for financial reporting purposes
to partners' capital for federal income tax purposes as of December 31:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Partners' capital per financial statements $ 36,947,254 $ 36,806,561 $ 13,024,617
Commissions and offering costs 7,304,048 6,552,375 2,230,270
Direct finance leases 2,823,238 1,077,680 20,040
Depreciation (9,775,830) (4,812,927) (567,815)
Provision for losses 105,000 - -
Loss on sale of equipment (494,248) - -
Other 751,712 476,622 81,277
------------ ------------ ------------
Partners' capital for federal income tax purposes $ 37,661,174 $ 40,100,311 $ 14,788,389
============ ============ ============
</TABLE>
8. Concentration of Credit Risk
----------------------------
Approximately 77% of the Partnership's equipment under lease was leased to
investment grade companies. Pursuant to the Partnership Agreement, an
investment grade lessee is a company (i) with a net worth in excess of
$100,000,000 (and no debt issues that are rated), or (ii) with a credit
rating of not less than Baa as determined by Moody's Investor Services, Inc.
or comparable credit rating as determined by another recognized credit
rating service; or (iii) a lessee, all of whose lease payments have been
unconditionally guaranteed or supported by a letter of credit issued by a
company meeting one of the above requirements.
No single lessee accounted for more than 10% of total revenue of the
Partnership during 1998.
One lessee accounted for approximately 12% ($1,387,000) of total revenue of
the Partnership during 1997.
-29-
<PAGE>
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS, continued
8. Concentration of Credit Risk, continued
----------------------------
The Partnership's cash balance is maintained with a high credit quality
financial institution. At times, such balances may be in excess of 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 the funds become
available, they are invested in a money market mutual fund.
9. Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
Statement of Financial Standards 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, 1998 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.
As of December 31, 1998, discounted lease rentals of approximately
$15,709,000 had fair values of $14,844,000. The fair values were estimated
utilizing market rates of comparable debt having similar maturities and
credit quality as of December 31, 1998.
-30-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
CAPITAL PREFERRED YIELD FUND-IV, L.P.:
Under date of February 22, 1999, we reported on the balance sheets of Capital
Preferred Yield Fund-IV, L.P. as of December 31, 1998 and 1997, and the related
statements of income, partners' capital, and cash flows for the years ended
December 31, 1998 and 1997, and the period from April 16, 1996 (commencement of
operations) to December 31, 1996, as contained in the Partnership's annual
report on Form 10-K for the year 1998. In connection with our audits of the
aforementioned financial statements, we 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, such 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 LLP
------------------------
KPMG LLP
Denver, Colorado
February 22, 1999
-31-
<PAGE>
CAPITAL PREFERRED YIELD FUND-IV, L.P.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
for the year ended December 31, 1998
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- ---------- ---------- ---------- --------
Balance at Additions Balance
Beginning Charged to at End
Classification of Year Expenses Deductions of Year
- -------------- ---------- ---------- ---------- --------
1998
- -------------------------------
Allowance for losses:
Accounts receivable $ - $ 30,000 $ - $ 30,000
Equipment on operating leases - 75,000 - 75,000
------- --------- ------ ---------
$ - $ 105,000 $ - $ 105,000
======= ========= ====== =========
See accompanying independent auditors' report
-32-
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
----------------------------------------------------------------------
Financial Disclosure
--------------------
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 Equipment Leasing V Corp.
Name Positions Held
---- --------------
John F. Olmstead President and Director
Anthony M. DiPaolo Senior Vice President, Principal Financial and
Chief Administrative Officer and Director
Richard H. Abernethy Vice President and Director
Joseph F. Bukofski Vice President, Assistant Secretary and Director
Robert A. Golden Director
Mick Myers Director
Ann Danielson Assistant Vice President
David J. Anderson Chief Accounting Officer and Secretary
JOHN F. OLMSTEAD, age 54, 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.
ANTHONY M. DIPAOLO, age 40, joined CAII in July 1990 as Assistant Treasurer and
is currently Senior Vice President-Chief Financial Officer. He also held the
positions of Senior Vice President-Controller and Assistant Vice
President-Credit Administration for the Company. Mr. DiPaolo has held similar
senior financial management positions with two public companies between 1986 and
June 1990, and prior to then was an audit manager for the public accounting firm
of Coopers & Lybrand. Mr. DiPaolo holds a Bachelor of Science degree in
Accounting from the University of Denver.
-33-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
RICHARD H. ABERNETHY, age 45, joined CAII in April 1992 as Equipment Valuation
Manager and currently serves as Vice President of Portfolio 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.
JOSEPH F. BUKOFSKI, age 43, joined CAII in June 1990 as a Financial Analyst. Mr.
Bukofski is currently the Vice President-Pricing. Prior to joining the Marketing
Department, Mr. Bukofski was Assistant Vice President and Controller. Prior to
joining the Company, he was a geologist with Barringer Geoservices, Inc. for
eleven years. Mr. Bukofski holds a Bachelor of Science degree in Secondary
Education - Earth Science from Bloomsburg University and a Masters of Science in
Accounting from the University of Colorado.
ROBERT A. GOLDEN, age 53, 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.
MICK MYERS, age 41, joined CAI in February 1992 as a Senior Portfolio Manager.
Currently he is Assistant Vice President of Asset Management. Mr. Myers has nine
years experience in the leasing industry. Previously, he has held the position
of Senior End of Lease Negotiator with ELLCO/GE Capital. Mr. Myers holds a
Bachelor of Science degree from the University of Wyoming.
ANN DANIELSON, age 35, joined CAII in February 1990 and is currently Assistant
Vice President, Assistant Treasurer and is responsible for the Company's cash
management and collections functions. Prior to joining the Company, she was with
U.S. West financial Services and Coopers & Lybrand. Ms. Danielson holds a
Bachelor of Arts Degree from the University of Northern Iowa.
DAVID J. ANDERSON, age 46, joined CAII in August 1990 as Manager of Billing &
Collections and currently serves as Assistant Vice-President/Assistant
Controller. Prior to joining CAII, Mr. Anderson was Vice- President/Controller
for Systems Marketing, Inc., from 1985 to 1990, and previous to that worked 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," which is incorporated herein by reference, for a description of
the compensation and fees paid to the general partner and its affiliates by the
Partnership during 1998.
-34-
<PAGE>
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 own any Class A limited partner units.
CAII, an affiliate of the general partner is the Class B limited
partner.
CAI Equipment Leasing V Corp. is the general partner.
The names and addresses of the general partner and the Class B limited
partner are as follows:
General Partner
---------------
CAI Equipment Leasing V Corp.
7175 W. Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
Class B Limited Partner
-----------------------
Capital Associates International, Inc.
7175 W. 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 March 18, 1999.
(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 1998:
-35-
<PAGE>
Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
ORGANIZATION AND OFFERING STAGE
Sales Commissions
- -----------------
CAI Securities Corporation (the "Dealer-Manager"), an affiliate of the general
partner, earned commissions of 10% of the sales price of Class A limited partner
units sold, up to 9% of which was paid to participating broker-dealers. During
1998, the Dealer-Manager earned commissions totaling $433,676 (362,775 of which
was paid to broker-dealers)
Due Diligence Expense Reimbursement
- -----------------------------------
The Dealer-Manager is reimbursed for bona fide due diligence expenses which it
incurs up to a maximum of 1/2% of gross offering proceeds. The Dealer-Manager
incurred $74,621 for due diligence expenses during 1998.
Organization and Offering Expense Reimbursement
- -----------------------------------------------
The general partner is reimbursed for the organization and offering expenses it
incurs in organizing the Partnership and offering Class A limited partner units
for sale to the public. The general partner earned $173,830 for organization and
offering expenses during 1998.
ACQUISITION AND OPERATING STAGES
Acquisition Fee and Acquisition Cost Reimbursement
- --------------------------------------------------
The general partner receives a fee equal to 3.5% of the sales price of equipment
sold to the Partnership, 1.5% of which represents compensation for selecting,
negotiating and consummating the acquisition of the equipment and 2% of which
represents reimbursement for services rendered in connection with evaluating the
suitability of the equipment and the credit worthiness of the Lessee.
Origination and evaluation fees totaled $605,565 in 1998, all of which were
capitalized by the Partnership as part of the cost of equipment on operating
leases and net investment in direct financing leases.
Management Fees
- ---------------
The general partner receives management fees as compensation for services
rendered in connection with managing the Partnership's equipment equal to 2% of
gross rentals received. Such fees totaled $422,321 for 1998.
-36-
<PAGE>
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. Such reimbursable expenses amounted to $167,569 during
1998.
Additionally, the general partner is allocated 1% of Partnership cash
distributions and net income relating to its general partner interest in the
Partnership. Distributions and net income allocated to the general partner
totaled $52,943 and $60,459, respectively, for 1998. Distributions and net
income allocated to the Class B limited partner totaled $52,325 and $19,929,
respectively, during 1998.
During 1998, the Partnership acquired the equipment described below from CAII:
<TABLE>
<CAPTION>
Cost to
Partnership
Including
Acquisition Debt Annual
Lessee Equipment Description Cost to CAII Fees* Assumed Rents
- ------ --------------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Advanced Micro Wafer Fabrication $ 2,048,294 $ 2,119,267 $ - $ 523,296
Alliant Techsystems, Inc. Lathes 143,867 148,852 - 26,812
Alliant Techsystems, Inc. PBX system 711,132 735,773 - 9,218
Alliant Techsystems, Inc. Sweeper/Scrubber 20,818 21,539 - 4,891
Alliant Techsystems, Inc. Wedge bonder 95,713 99,029 - 29,531
Ball Corporation Can inspection system 113,570 117,505 - 23,534
Brown-Strauss Steel Div. Forklift 95,526 98,836 - 24,788
Busy Beaver Building Ctrs. Retail furniture, fixtures & equipment 236,536 244,815 - 51,036
CH2M Hill, Inc. Office furniture, fixtures & equipment 115,119 119,108 101,630 24,744
CMC Industries Solder machine 1,100,000 1,138,115 - 272,923
Conair Crown lifts 47,282 48,920 - 9,904
Consolidated Diesel Electric PU 5,611 5,805 - 1,757
Consolidated Diesel Forklift 127,851 132,281 - 26,223
Consolidated Diesel Boom lift 33,750 34,919 - 6,882
Consolidated Diesel Copier 53,388 55,238 - 19,208
Consolidated Diesel Lift truck 19,235 19,901 - 4,340
Consolidated Diesel Projector 6,649 6,879 - 2,402
Consolidated Diesel Reach trucks 12,570 13,006 - 4,068
Darigold, Inc. Hyster forklift 3,486 3,607 - 1,154
Darigold, Inc. Rider pallet truck 8,543 8,839 - 2,827
Dupont Yard tractor 63,756 65,965 - 12,004
E Trade Furniture, fixtures & equipment 1,830,347 1,893,769 1,572,599 607,901
Fingerhut Corp. Proofing system 40,000 41,386 - 11,358
Furr's SuperMarkets Restaurant furniture, fixtures & equipment 406,623 420,855 332,679 134,952
GEICO PC's 1,480,185 1,531,474 1,216,311 484,455
General Motors Corp. Hyster - walkie 19,864 20,552 - 6,322
General Motors Corp. Lawn mower 16,085 16,642 - 3,270
General Motors Corp. Material handler 83,063 85,941 - 17,400
General Motors Corp. Scrubber 228,127 236,032 - 47,788
General Motors Corp. Sweeper 99,203 102,640 - 20,766
General Motors Corp. Sweeper/Scrubber 231,872 239,906 - 51,989
General Motors Corp. Tractor 57,844 59,848 - 10,985
-37-
<PAGE>
Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
Accountable General and Administrative Expenses, continued
- -----------------------------------------------
Cost to
Partnership
Including
Acquisition Debt Annual
Lessee Equipment Description Cost to CAII Fees* Assumed Rents
- ------ --------------------- ------------ ------------ ----------- -----------
Georgetown Steel Hyster forklift $ 48,867 $ 50,560 $ - $ 17,892
Glassmaster Company Machine tools 566,785 586,623 - 134,049
ICI Americas Inc. Boom lift 72,266 74,770 - 15,326
ICI Americas Inc. Material handler 76,750 79,409 - 14,814
ICI Americas Inc. Personal computers 17,300 17,899 - 0
ICI Americas Inc. Scissor lift 8,300 8,588 - 5,189
ICI Americas Inc. Scrubber 29,640 30,667 - 6,691
International Paper Co. Boom lift 35,934 37,179 - 7,204
International Paper Co. Forklift 38,783 40,127 - 7,779
International Paper Co. Lift truck 48,577 50,261 - 9,282
New York State Electric PC's/Networking 292,311 302,542 - 147,795
Owens Corning Fiberglass PC's/Networking 2,255,722 2,334,672 - 966,522
Pharmacia Iovision Inc. Microscopic equipment 159,650 165,182 - 50,780
Polo Ralph Lauren Personal computers 367,426 380,286 - 203,454
Prairie International Tractor 443,220 458,577 - 103,726
Red Mountain Mining Inc. Forklifts 422,968 437,772 - 98,652
Rohr Hyster - forklift 23,886 24,714 - 6,316
Tasc, Inc. Computer equipment 389,166 401,549 - 127,153
Teleflex Inc. PC's/Networking 166,992 172,836 - 76,116
Things Remembered Point-of-sale equipment 809,665 838,003 - 412,907
Thomson Industries, Inc. Drilling machine 324,066 335,295 - 64,772
Thomson Industries, Inc. Machine tools 955,105 971,258 - 273,532
Thomson Industries, Inc. Thread grinder 251,060 259,759 - 48,923
Universal Forest Products Forklift 47,580 49,229 - 13,019
Versar Personal computers 84,712 87,647 - 29,241
WPM Inc. Construction equipment 444,398 459,952 - 93,012
------------ ------------ ----------- -----------
$ 17,937,040 $ 18,542,605 $ 3,223,219 $ 5,412,872
============ ============ =========== ===========
</TABLE>
* The lower of (a) the price for the equipment plus all costs incurred in
maintaining the equipment (including, without limitation, the reasonable,
necessary and actual expenses, as determined in accordance with generally
accepted accounting principles, of storage, carrying, warehousing, repair,
marketing, financing and taxes) from the date of acquisition thereof,
provided that any proceeds accrued from the first basic rent date thereof
and retained by the general partner or an affiliate thereof from leasing the
equipment or any other arrangement with respect to the equipment shall be
deemed a credit towards the purchase price paid by the Partnership, or (b)
the fair market value of such equipment, as determined by an independent
nationally recognized appraiser selected by the general partner.
-38-
<PAGE>
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: (Incorporated by reference to Item 8
of this Report, "Financial Statements and Supplementary
Data").
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended December 31, 1998.
(c) Exhibits required to be filed.
Exhibit
Number Exhibit Name
------- ------------
4.1* Capital Preferred Yield Fund-IV Limited Partnership
Agreement
4.2* First Amendment to Limited Partnership Agreement dated
November 23, 1996
4.3* Amended and Restated Agreement of Limited Partnership
of Capital Preferred Yield Fund-IV, L.P.
* 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.
-39-
<PAGE>
SIGNATURES
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 30, 1999 Capital Preferred Yield Fund-IV, L.P.
By: CAI Equipment Leasing V Corporation
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 30, 1999.
Signature Title
- --------- -----
/s/John F. Olmstead
- --------------------------
John F. Olmstead President and Director
/s/Anthony M. DiPaolo
- -------------------------- Senior Vice President, Principal Financial and
Anthony M. DiPaolo Chief Administrative Officer and Director
/s/Richard H. Abernethy
- --------------------------
Richard H. Abernethy Vice President and Director
/s/Joseph F. Bukofski
- --------------------------
Joseph F. Bukofski Vice President, Assistant Secretary and Director
/s/Robert A. Golden
- --------------------------
Robert A. Golden Director
/s/Mick Myers
- --------------------------
Mick Myers Director
/s/Ann Danielson
- --------------------------
Ann Danielson Assistant Vice President
/s/David J. Anderson
- --------------------------
David J. Anderson Chief Accounting Officer and Secretary
-40-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,634,551
<SECURITIES> 0
<RECEIVABLES> 681,448
<ALLOWANCES> 0
<INVENTORY> 410,599
<CURRENT-ASSETS> 0
<PP&E> 51,151,237
<DEPRECIATION> 0
<TOTAL-ASSETS> 54,877,835
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 36,947,254
<TOTAL-LIABILITY-AND-EQUITY> 54,877,835
<SALES> 196,434
<TOTAL-REVENUES> 19,560,413
<CGS> 0
<TOTAL-COSTS> 17,528,852
<OTHER-EXPENSES> 589,890
<LOSS-PROVISION> 105,000
<INTEREST-EXPENSE> 1,355,602
<INCOME-PRETAX> 2,031,561
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,031,561
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,031,561
<EPS-PRIMARY> 3.95
<EPS-DILUTED> 3.95
</TABLE>
