<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
Act of 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
( )Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission file number - 000-25593
TELECOMMUNICATIONS INCOME FUND XI, L.P.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Iowa 39-1904041
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
701 Tama Street, Marion, Iowa 52302
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 319-447-5700
------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities pursuant to section 12 (g) of the Act:
Limited Partnership Interests (the "Units")
-------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) 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 (X).
As of March 8, 2000, 12,593 units were issued and outstanding. Based on the book
value of $845.13 per unit at December 31, 1999, the aggregate market value at
March 8, 2000 was $10,642,722.
DOCUMENTS INCORPORATED BY REFERENCE. Portions of the Registration Statement on
Form S-1, dated November 26, 1997, are incorporated by reference into Part IV.
<PAGE> 2
TELECOMMUNICATIONS INCOME FUND XI, L.P.
1999 FORM 10K ANNUAL REPORT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
PART I
<S> <C> <C>
Item 1. Business ............................................................... 3
Item 2. Properties ............................................................. 5
Item 3. Legal Proceedings ...................................................... 5
Item 4. Submission of Matters to a Vote of Unit Holders ........................ 5
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters .................................... 5
Item 6. Selected Financial Data ................................................ 5
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations .......................................... 6
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ............. 9
Item 8. Financial Statements and Supplementary Data ............................ 10
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ............................. 23
PART III
Item 10. Directors and Executive Officers of the Registrant ..................... 23
Item 11. Executive Compensation ................................................. 24
Item 12. Security Ownership of Certain
Beneficial Owners and Management ................................... 25
Item 13. Certain Relationships and Related Transactions ......................... 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8K. ........ 26
SIGNATURES ............................................................................... 27
EXHIBIT INDEX ............................................................................ 28
</TABLE>
2
<PAGE> 3
PART I
ITEM 1. BUSINESS
Telecommunications Income Fund XI, L.P., an Iowa limited partnership (the
"Partnership"), was organized on August 26, 1997. The general partner is Berthel
Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa corporation that
has been in operation since 1988. The Partnership's business and the executive
offices of the General Partner are located at 701 Tama Street, Marion, Iowa
52302. Substantially all of the voting stock of the General Partner is owned by
Berthel Fisher & Company ("Berthel Fisher").
The Partnership began offering Units to the public on December 23, 1997. The
General Partner elected to extend the offering period and the closing date to
December 23, 1999. The business of the Partnership is the acquisition and
leasing of equipment, primarily telecommunications equipment such as pay
telephones and call processing equipment. The Partnership began its primary
business activities in February of 1998.
The Partnership will operate until December 31, 2012 unless dissolved sooner due
to the occurrence of any of the following events: (i) the vote by limited
partners owning a majority of the Partnership in accordance with the Partnership
Agreement; (ii) the withdrawal, bankruptcy, or dissolution and liquidation or
other cessation to exist as a legal entity of the General Partner (unless any
successor general partner elected in accordance with the provisions of the
Partnership Agreement elects to continue the business of the Partnership); (iii)
the final distribution of all liquidating distributions among the limited
partners pursuant to the Partnership Agreement; or (iv) the sale or disposition
of all or substantially all of the assets of the Partnership without the
subsequent reinvestment in equipment.
A significant portion of the Partnership's business is and is intended to be
with customers who are in the telecommunications and automated teller machine
("ATM") industries. The telecommunications industry, particularly the pay
telephone and long distance facets of the industry, is heavily regulated by the
Federal Communications Commission ("FCC") and by various state public utility
commissions. Regulation is not directed at the ownership or leasing of
telecommunications equipment, but is focused primarily on the business of the
Partnership's customers that operate in the telecommunications industry.
Generally, regulation affects rates that can be charged and the relationship of
the regional Bell operating companies to the rest of the pay telephone industry.
Management does not expect regulation to have any significant negative impact
upon the business of the Partnership.
The Partnership also has a significant portion of its business in the ATM
industry, where major industry growth has occurred in installing ATM machines
"off premises", such as at supermarkets, hotels, airports, and convenience
stores. Since the major ATM networks have allowed ATM owners to assess
surcharges on transactions, the operation of ATM's has become more lucrative.
Now, in addition to receiving a portion of the interchange fee from the
cardholders' financial institutions, the ATM owner can now receive surcharges on
each transaction.
The principle investment objective of the Partnership is to obtain the maximum
available economic return from its investment in equipment leases to
unaffiliated third parties with a view toward: (i) generating cash flow from
operations, with the intent to make distributions during the Operating Phase
(the period which ends when the General Partner elects to begin the liquidation
of the Partnership assets); (ii) reinvesting (during the Operating Phase) any
undistributed cash flow from
3
<PAGE> 4
operations in additional equipment to be leased to increase the Partnership's
assets; (iii) obtaining the residual values of equipment upon sale; (iv)
obtaining value from sales of the Partnership's lease portfolio upon entering
the Liquidating Phase (the period during which the General Partner will
liquidate the Partnership assets); and (v) providing cash distributions to the
partners during the liquidating phase.
The Partnership intends to acquire primarily telecommunications and ATM
equipment (specifically pay telephones, call processing equipment, and ATM
machines), that is leased to third parties. The Partnership has also acquired
and will acquire other types of equipment that is generally subject to leases.
During 1999 the Partnership acquired equipment with a cost of $7,066,480. All of
this equipment has been leased.
Equipment acquired by the Partnership is installed in various locations by the
lessees. When the lessee installs the equipment in a location, a site location
agreement gives the lessee the right to have the equipment at this site for a
specified period of time. These site location agreements generally have a three
to five year term. The Partnership, in addition to its ownership of the
equipment, takes an assignment of and a first security interest in these site
location agreements. Therefore, if a lessee defaulted, the Partnership could
have the ability to re-sell or re-lease the equipment in place. This "in place"
value is generally much higher than the residual value of the equipment.
Telecommunications equipment generates revenue primarily through long distance
phone calls. The Partnership's lessee generally receives long distance revenue
from a contracted third party billing company. The Partnership also takes an
assignment of this revenue.
The General Partner acquires and approves leases on behalf of the Partnership.
The General Partner established guidelines to use in approving lessees.
Generally, before any lease is approved, there is a review of the potential
lessees' financial statements, credit references are checked, and outside
business and/or individual credit reports are obtained.
The equipment purchased by the Partnership consists of advanced technology pay
telephones, call processing systems, and ATM machines to be used in hotels,
hospitals, colleges, universities, correctional institutions, and other
locations. Although the Partnership will concentrate its equipment acquisitions
in telecommunications equipment and ATM machines, it will also acquire other
types of equipment that meet the investment objectives of the Partnership.
The Partnership's equipment leases are concentrated in the pay telephone and ATM
machine industries representing approximately 45% and 22% of the Partnership's
direct finance lease and notes receivable portfolio at December 31, 1999,
respectively. For the year ended December 31, 1999, three customers accounted
for 56.8% of the income from direct financing leases. ATI, Inc., Avenew, and ATM
Network Services, Inc. accounted for 16.9%, 12.3%, and 27.6%, respectively.
The leasing industry is highly competitive and the Partnership has fewer assets
than some of its major competitors. The principal methods of competition include
service and price (interest rate). The Partnership operates in one segment.
The Partnership has no employees and utilizes the administrative services of the
General Partner for which it pays an administrative service fee.
4
<PAGE> 5
ITEM 2. PROPERTIES
The Partnership does not own or lease any real estate. The Partnership's
materially important assets consist entirely of equipment under lease, primarily
ATM machines and telecommunications equipment, as described in Item 1.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT HOLDERS
No matters were submitted to a vote of limited partners, through the
solicitation of proxies or otherwise during the year covered by this report.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Registrant's units are not publicly traded. There is no market for the
Registrant's units and it is unlikely that any will develop. The General Partner
will resist the development of a public market for the units.
Number of Partners
Title of Class at March 8, 2000
-------------------------------------------------------
Limited Partner 683
General Partner 1
Distributions are paid to Partners on a monthly basis. Through December 31, 1999
distributions paid or payable to Partners over the life of the Partnership have
been $1,211,104. As of December 31, 1999 the Partnership had accrued
distributions to Partners of $97,527.
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Period from
August 26, 1997
Year Ended Year Ended (Date of Inception) to
December 31, 1999 December 31, 1998 December 31, 1997
----------------- ----------------- ----------------------
<S> <C> <C> <C>
Total Revenue $ 1,172,549 $ 377,483 $ 77
Net Income (Loss) 676,665 157,464 (407)
Total Assets 13,196,905 5,053,409 10,593
Provision for Possible Losses 154,410 87,818 -0-
Distributions to Partners 886,545 324,559 -0-
Earnings (Loss) per Unit 72.99 46.18 (40.70)
Distributions per Unit 95.63 95.18 -0-
</TABLE>
The above selected financial data should be read in connection with the
financial statements and related notes appearing elsewhere in this report.
5
<PAGE> 6
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
<TABLE>
Aug. 26, 1997
Year Ended Year Ended (Date of Inception)
Dec. 31, 1999 Dec. 31, 1998 to Dec. 31, 1997
------------- ------------- ----------------
<S> <C> <C> <C>
Lease and notes receivable income $ 1,110,646 $ 286,551 $ 0
Gain (loss) on lease terminations (99) 38,471 0
Interest and other income 62,002 52,461 77
Management fees 53,677 12,599 0
Administrative service fees 84,000 77,000 0
Other general & administrative expenses 107,662 33,596 484
Interest expense 96,135 9,006 0
Provision for possible losses 154,410 87,818 0
</TABLE>
1998 was the first year of actual leasing operations. Lease and notes receivable
income increased in 1999 due to the acquisition of equipment for direct
financing leases and the issuance of notes receivable. The Partnership's net
investment in direct financing leases and notes receivable increased from
$4,640,514 at December 31, 1998 to $13,423,757 at December 31, 1999. During
1999, the Partnership acquired equipment for direct financing leases of
$7,066,480 and issued notes receivable in the amount of $3,293,410. Interest and
other income of $62,002 is primarily interest income on a money market account
and other investments, late charges on lease payments, and loan origination
fees.
Certain lessees have requested early termination of their lease contracts with
the Partnership. As the payphone industry matures, the capital structure of
these lessees has reached a level whereby they are able to secure financing from
other sources. When this occurs, the Partnership will always quote an amount at
least equal to the Partnership's net investment and typically an amount
exceeding the net investment. In addition to some lessees improving capital
structure, some lessees have been acquired by other entities whose capital
structure is such that they also desire to refinance the equipment which was
under lease to the Partnership. As such, the Partnership's gain on lease
terminations can and will vary from year to year based on the number of requests
received to terminate leases as well as the size of the contract being
terminated. The Partnership uses the cash generated from these early
terminations to purchase equipment for investments in direct financing leases
with other lessees or issue notes receivable to other customers. For 1999, the
proceeds from lease terminations were $11,731.
Management fees are paid to the General Partner and represent 2% of the rental
and note payments received. Payments received in the years ended December 31 are
as follows:
1999 1998 1997
---------- --------- -------
Rental and note payments received $2,683,850 $629,950 $ -0-
The General Partner receives a monthly reimbursement of $7,000 for
administrative services provided to the Partnership. This administrative fee
started in February 1998 and resulted in expense to the Partnership of $77,000
for 1998 and $84,000 for 1999.
Interest expense in 1999 was $96,135 and is the result of borrowings on the line
of credit agreement and from the General Partner on a short-term basis. The
balance outstanding on the line of credit at December 31, 1999 was $1,973,142.
The Partnership also borrowed and repaid $600,000 from the General Partner in
1999, and incurred interest expense of $4,466 on these short-term borrowings.
6
<PAGE> 7
The allowance for possible lease losses is based upon a continuing review of
past lease loss experience, current economic conditions and the underlying lease
asset value of the portfolio. At the end of each quarter a review of the
allowance account is conducted. At a minimum it is the Partnership's desire to
maintain a loss reserve equal to 1.5 percent of the Partnership's investment in
leases and notes, exclusive of any specific reserves. The Partnership currently
has a loss reserve of $239,857 or 1.8% of the lease and note portfolio.
As of December 31, 1999 there were no customers with payments owed to the
Partnership which were over 90 days past due. When payments are past due more
than 90 days, the Partnership discontinues recognizing income on those customer
contracts.
Other general and administrative expenses totalled $107,662 for 1999 and consist
of legal and accounting expenses, data processing expense, amortization, office
supplies, and other miscellaneous expenses. The Partnership outsources its lease
servicing and data processing to unrelated third parties. Data processing
expense was $56,611 in 1999 compared to $26,410 in 1998. The increase in general
and administrative expenses is due to the increased lease and note portfolio.
The General Partner is engaged directly for its own account in the business of
acquiring and leasing equipment. The General Partner also serves as the general
partner of Telecommunications Income Fund IX, L.P. ("TIF IX") and
Telecommunications Income Fund X, L.P. ("TIF X"), publicly owned limited
partnerships that are engaged in the equipment leasing business. Also, an
affiliate of the General Partner is the general partner of a privately offered
active limited partnership. As of December 31, 1999, the net proceeds of the
private program, TIF IX, and TIF X have been invested in specific equipment. TIF
IX is in its liquidation phase and must be dissolved by December 31, 2005. TIF X
entered its liquidation phase on December 31, 1999 and must be dissolved by
December 31, 2002. The activities of the General Partner, in regards to its
other leasing activities, has had no impact on the Partnership to date in
management's opinion.
The equipment that the Partnership leases is maintained by the lessee, and the
lessee is responsible for keeping the equipment upgraded with any improvements
that may be developed. The Partnership generally establishes the equipment's
residual value at 10% of the equipment's original cost. The Partnership
generally expects to realize the residual value by the sale of the equipment at
the expiration of the original lease term. The General Partner monitors the
maintenance and upgrades to the equipment and expects the Partnership to realize
residual values of at least 10%.
The General Partner is not aware of any regulatory issues that may have a
substantial negative impact on the telecommunications businesses to whom the
Partnership leases equipment. There are and will continue to be regulatory
issues in the telecommunications industry that the General Partner will monitor.
The equipment leases or notes acquired by the Partnership have been financed to
yield rates of return between 10% and 17%. The lease terms vary from 36 months
to 60 months. The rate charged on a particular lease or note depends on the size
of the transaction and the financial strength of the lessee. Generally, before
any lease or note is approved, there is a review of the potential lessees'
financial statements, credit references are checked, and outside business and/or
individual credit reports are obtained.
7
<PAGE> 8
Inflation affects the cost of equipment purchased and the residual values
realized when leases terminate and equipment is sold. The impact of inflation is
mitigated as any increases in lease related expenses are passed on to the
lessees through corresponding increases in rental rates as new leases are
entered into.
The Partnership has not yet achieved an earnings level that equals or exceeds
its operating distributions being paid to the Partners.
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS
In June, 1998, the Financial Accounting Standard Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes standards for
derivative instruments, including certain derivative instruments embedded in
other contracts, (collectively referred to as derivatives) 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. The recognition of gains or losses resulting from
changes in the values of derivatives is based on the use of each derivative
instrument and whether it qualifies for hedge accounting. In June 1999, the FASB
issued SFAS No. 137, which deferred the effective date of adoption of SFAS No.
133 for one year. The Partnership will adopt SFAS No. 133 in the first quarter
of calendar year 2001. The adoption of this standard is not expected to have any
material impact on the Partnership's results of operations, financial position
or cash flows.
YEAR 2000 ISSUE
As of the date of this filing, the Partnership and its General Partner have
encountered no problems relating to the year 2000 issue. The Partnership and its
General Partner are not aware of any Y2K problems or situations encountered by
its customers, vendors, affiliates, or others.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
Aug. 26, 1997
Year Ended Year Ended (Inception Date) to
Major Cash Sources (Uses): Dec. 31, 1999 Dec. 31, 1998 Dec. 31, 1997
------------- ------------- -------------------
<S> <C> <C> <C>
Operations $ 1,092,606 $ 222,122 $ (407)
Contribution and sale of partnership units 6,799,000 5,784,000 11,000
Proceeds from line of credit borrowings 3,263,945 810,000 0
Repayments/Terminations of Leases & Notes 1,572,948 994,543 0
Acquisitions of Equip for Direct Finance Leases (7,066,480) (4,477,922) 0
Issuance of Notes Receivable (3,293,410) (1,119,912) 0
Repayments of line of credit borrowings (1,290,803) (810,000) 0
Distributions & Withdrawals Paid to Partners (834,056) (280,521) 0
Payment of Syndication Costs (849,875) (723,000) 0
</TABLE>
The Partnership is required to establish working capital reserves of no less
than 1% of the total capital raised to satisfy general liquidity requirements,
operating costs of equipment, and the maintenance and refurbishment of
equipment. At December 31, 1999, that working capital reserve, as defined, would
be $125,930, and the Partnership had this amount available to it under its line
of credit agreement at December 31, 1999.
The Partnership obtained a line of credit agreement with a bank in January 1999
that allowed the Partnership to borrow the lesser of $2.0 million, or 32% of the
Partnership's qualified accounts as defined in the agreement, primarily leases
and notes receivable. On October 26, 1999, the agreement was amended to increase
the limit from $2.0 million to $4.4 million (limited by 32% of qualified
accounts) and extend the maturity date from June 30, 2000, to June 30, 2002. The
8
<PAGE> 9
line of credit agreement bears interest at 1% above the prime rate, with a
minimum monthly interest charge beginning in July 1999, and is collateralized by
substantially all assets of the Partnership. The line of credit is guaranteed by
the General Partner and certain affiliates of the General Partner. The agreement
is cancelable by the lender after giving a 90-day notice. The General Partner
believes amounts available under the line of credit are adequate for the
foreseeable future. The balance outstanding on the line of credit at December
31, 1999 was $1,973,142.
Cash flow from operating activities was $1,092,606 for 1999 and is derived from
the leasing operations of the Partnership, resulting from the income from direct
financing leases and notes received less operating expenses. During 1999, the
Partnership acquired equipment for direct financing leases of $7,066,480 and
issued notes receivable of $3,293,410, funded from the sale of partnership
units, borrowings from the line of credit, and the proceeds from the repayment
and termination of leases and notes. The proceeds relating to repayments of
these leases and notes, including early terminations totalled $1,572,948 in
1999.
Syndication fees are reductions of the proceeds of units sold that were paid to
the General Partner and an affiliate of the General Partner ("Financial
Services"). Nine percent (9%) of the gross proceeds was paid to Financial
Services during the organization and offering phase. Three and one-half percent
(3.5%) was paid to the General Partner for offering and promotional expenses
incurred on their behalf. For 1999, syndication fees were $849,875 ($6,799,000
proceeds from the sales of units to limited partners multiplied by 12.5%), and
are a reduction of capital. The offering phase of the Partnership ended on
December 23, 1999. Therefore, no syndication fees will be paid to affiliated
companies in the future.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
INTEREST RATE SENSITIVITY
The table below provides information about the Partnership's notes receivable
and line of credit agreement that are sensitive to changes in interest rates.
The table presents the principal amounts due and related weighted average
interest rates by expected maturity dates as of December 31, 1999.
<TABLE>
<CAPTION>
Assets Liabilities
---------------------------------- ---------------------------
Expected Fixed Rate Average Variable Rate Interest
Maturity Date Notes Receivable Interest Rate Line of Credit Rate
------------- ---------------- ------------- --------------- ---------
<S> <C> <C> <C> <C>
2000 $ 987,744 15.86% $ -0- -
2001 815,500 15.94% -0- -
2002 882,858 16.11% 1,973,142 9.50%
2003 810,971 16.34% -0- -
2004 and thereafter 323,602 16.50% -0- -
------------- -------------
Total $ 3,820,675 $ 1,973,142
============= =============
Fair Value $ 3,820,675 $ 1,973,142
============= =============
</TABLE>
The Partnership manages interest rate risk, its primary market risk exposure, by
limiting the terms of notes receivable to no more than five years and generally
requiring full repayment ratably over the term of the note.
9
<PAGE> 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and related information as of and for the
periods ended December 31, 1999, 1998, and 1997 are included in Item 8:
Independent Auditors' Report
Balance Sheets
Statements of Operations
Statements of Changes in Partners' Equity
Statements of Cash Flows
Notes to Financial Statements
10
<PAGE> 11
INDEPENDENT AUDITORS' REPORT
To the Partners
Telecommunications Income Fund XI, L.P.
We have audited the accompanying balance sheets of Telecommunications Income
Fund XI, L.P. as of December 31, 1999 and 1998, and the related statements of
operations, changes in partners' equity and cash flows for the years ended
December 31, 1999 and 1998 and the period from August 26, 1997 (date of
formation) through December 31, 1997. 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, such financial statements present fairly, in all material
respects, the financial position of Telecommunications Income Fund XI, L.P. at
December 31, 1999 and 1998, and the results of its operations and its cash flows
for the years ended December 31, 1999 and 1998 and the period from August 26,
1997 (date of formation) through December 31, 1997, in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
Cedar Rapids, Iowa
February 18, 2000
11
<PAGE> 12
TELECOMMUNICATIONS INCOME FUND XI, L.P.
<TABLE>
<CAPTION>
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
- ---------------------------------------------------------------------------------------
ASSETS (Note 5) 1999 1998
<S> <C> <C>
Cash and cash equivalents $ 1,926 $ 500,713
Net investment in direct financing leases
and notes receivable (Note 2) 13,423,757 4,640,514
Allowance for possible loan and lease losses (Note 3) (239,857) (87,818)
------------ ------------
Direct financing leases and notes receivable, net 13,183,900 4,552,696
Other receivables 11,079 --
------------ ------------
TOTAL $ 13,196,905 $ 5,053,409
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Line-of-credit agreement (Note 5) $ 1,973,142 $ --
Outstanding checks in excess of bank balance 196,859 --
Due to affiliates 41,913 4,372
Distributions payable to partners 97,527 45,038
Accrued expenses and other liabilities 46,573 9,691
Lease security deposits 198,148 90,810
------------ ------------
Total liabilities 2,554,162 149,911
------------ ------------
PARTNERS' EQUITY, 25,000 units authorized (Note 4):
General partner, 10 units issued and outstanding 9,024 9,254
Limited partners, 12,583 units in 1999 and 5,784 units
in 1998 issued and outstanding 10,633,719 4,894,244
------------ ------------
Total partners' equity 10,642,743 4,903,498
------------ ------------
TOTAL $ 13,196,905 $ 5,053,409
============ ============
</TABLE>
See notes to financial statements.
12
<PAGE> 13
TELECOMMUNICATIONS INCOME FUND XI, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
PERIOD FROM AUGUST 26, 1997 (DATE OF FORMATION)
THROUGH DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
REVENUES:
Income from direct financing leases
and notes receivable $ 1,110,646 $ 286,551 $ --
Gain (loss) on lease terminations (99) 38,471 --
Interest and other income 62,002 52,461 77
----------- ----------- -----------
Total revenues 1,172,549 377,483 77
----------- ----------- -----------
EXPENSES:
Management and administrative fees (Note 6) 137,677 89,599 --
Other general and administrative expenses 107,662 33,596 484
Interest expense 96,135 9,006 --
Provision for possible loan and lease losses (Note 3) 154,410 87,818 --
----------- ----------- -----------
Total expenses 495,884 220,019 484
----------- ----------- -----------
NET INCOME (LOSS) $ 676,665 $ 157,464 $ (407)
=========== =========== ===========
NET INCOME (LOSS) ALLOCATED TO:
General partner $ 730 $ 578 $ (407)
Limited partners 675,935 156,886 --
----------- ----------- -----------
$ 676,665 $ 157,464 $ (407)
=========== =========== ===========
NET INCOME (LOSS) PER PARTNERSHIP UNIT $ 72.99 $ 46.18 $ (40.70)
=========== =========== ===========
WEIGHTED AVERAGE PARTNERSHIP UNITS
OUTSTANDING 9,271 3,410 10
=========== =========== ===========
</TABLE>
See notes to financial statements.
13
<PAGE> 14
TELECOMMUNICATIONS INCOME FUND XI, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
PERIOD FROM AUGUST 26, 1997 (DATE OF FORMATION)
THROUGH DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
GENERAL LIMITED PARTNERS TOTAL
PARTNER ---------------------------- PARTNERS'
(10 UNITS) UNITS AMOUNT EQUITY
<S> <C> <C> <C>
BALANCE AT FORMATION - General partner contribution $ 10,000 -- $ -- $ 10,000
Proceeds from sale of limited partnership interests -- 1 1,000 1,000
Net loss (407) -- -- (407)
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1997 9,593 1 1,000 10,593
Proceeds from sale of limited partnership interests -- 5,784 5,784,000 5,784,000
Syndication costs incurred (Note 6) -- -- (723,000) (723,000)
Distributions to partners ($95.18 per unit) (Note 4) (917) -- (323,642) (324,559)
Withdrawal of limited partner -- (1) (1,000) (1,000)
Net income 578 -- 156,886 157,464
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1998 9,254 5,784 4,894,244 4,903,498
Proceeds from sale of limited partnership interests -- 6,799 6,799,000 6,799,000
Syndication costs incurred (Note 6) -- -- (849,875) (849,875)
Distributions to partner ($95.63 per unit) (Note 4) (960) -- (885,585) (886,545)
Net income 730 -- 675,935 676,665
------------ ------------ ------------ ------------
BALANCE AT DECEMBER 31, 1999 $ 9,024 12,583 $ 10,633,719 $ 10,642,743
============ ============ ============ ============
</TABLE>
See notes to financial statements.
14
<PAGE> 15
TELECOMMUNICATIONS INCOME FUND XI, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
PERIOD FROM AUGUST 26, 1997 (DATE OF FORMATION)
THROUGH DECEMBER 31, 1997
- ---------------------------------------------------------------------------------------------------
1999 1998 1997
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ 676,665 $ 157,464 $ (407)
Adjustments to reconcile net income (loss) to net cash
from operating activities:
(Gain) loss on lease terminations 99 (38,471) --
Amortization of intangibles 1,229 1,248 --
Provision for possible loan and lease losses 154,410 87,818 --
Changes in operating assets and liabilities:
Other receivables (11,079) -- --
Outstanding checks in excess of bank balance 196,859 -- --
Due to affiliates 37,541 4,372 --
Accrued expenses and other liabilities 36,882 9,691 --
----------- ----------- -----------
Net cash from operating activities 1,092,606 222,122 (407)
----------- ----------- -----------
INVESTING ACTIVITIES:
Acquisitions of, and purchases of equipment for,
direct financing leases (7,066,480) (4,477,922) --
Repayments of direct financing leases 1,280,730 248,382 --
Proceeds from termination of direct financing leases 11,731 434,001 --
Repayments of notes receivable 280,487 312,160 --
Issuance of notes receivable (3,293,410) (1,119,912) --
Net lease security deposits collected 107,338 90,810 --
----------- ----------- -----------
Net cash from investing activities (8,679,604) (4,512,481) --
----------- ----------- -----------
FINANCING ACTIVITIES:
Contribution and sale of partnership units 6,799,000 5,784,000 11,000
Proceeds from borrowings 3,263,945 810,000 --
Repayment of borrowings (1,290,803) (810,000) --
Proceeds from related party borrowing 600,000 -- --
Repayment of related party borrowing (600,000) -- --
Distributions and withdrawals paid to partners (834,056) (280,521) --
Payment of syndication costs (849,875) (723,000) --
----------- -----------
Net cash from financing activities 7,088,211 4,780,479 11,000
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (498,787) 490,120 10,593
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 500,713 10,593 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 1,926 $ 500,713 $ 10,593
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION - Interest paid $ 79,320 $ 9,006 $ --
</TABLE>
See notes to financial statements.
15
<PAGE> 16
TELECOMMUNICATIONS INCOME FUND XI, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998 AND
PERIOD FROM AUGUST 26, 1997 (DATE OF FORMATION)
THROUGH DECEMBER 31, 1997
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS- Telecommunications Income Fund XI,
L.P. (the "Partnership") was formed on August 26, 1997 under the Iowa
Limited Partnership Act. The general partner of the Partnership is Berthel
Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa
corporation. During its offering period, the Partnership sold 12,583
limited partnership units at a price per unit of $1,000.
The Partnership operates in one segment. The Partnership's operations are
conducted throughout the United States. The Partnership primarily acquires
equipment for lease to third parties under a direct finance arrangement.
The Partnership will also provide financing to customers under a note
agreement. On December 23, 2004 (or earlier if the General Partner
determines it to be in the Partnership's best interest), the Partnership
will cease reinvestment in equipment and leases and will begin the orderly
liquidation of Partnership assets. The Partnership must dissolve on
December 31, 2012, or earlier, upon the occurrence of certain events (see
Note 4).
The Partnership commenced leasing operations in February of 1998.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
significantly from those estimated. Material estimates that are
particularly susceptible to significant change in the near-term relate to
the determination of the allowance for possible loan and lease losses and
the estimated unguaranteed residual values of the Partnership's leased
equipment.
Most of the Partnership's leases and notes receivable are with customers
that are in the entrepreneurial stage and, therefore, are highly leveraged
and require financing in place of or to supplement financing from banks.
Although the Partnership attempts to mitigate its credit risk through the
use of a variety of commercial credit reporting agencies when processing
the applications of its customers, failure of the Partnership's customers
to make scheduled payments under their equipment leases and notes
receivable could have a material near-term impact on the allowance for
possible loan and lease losses.
Realization of residual values depends on many factors, several of which
are not within the Partnership's control, including general market
conditions at the time of the original contract's expiration, whether
there has been unusual wear and tear on, or use of, the equipment, the
cost of comparable new equipment, the extent, if any, to which the
equipment has become technologically or economically obsolete during the
contract term and the effects of any additional or amended government
regulations. These factors, among others, could have a material near-term
impact on the estimated unguaranteed residual values.
16
<PAGE> 17
CERTAIN RISK CONCENTRATIONS - The Partnership's portfolio of leases and
notes receivable are concentrated in pay telephones, ATM machines and
office and computer equipment representing approximately 45%, 22% and 10%
of the portfolio at December 31, 1999 and 25%, 68% and 1% of the portfolio
at December 31, 1998, respectively.
Three customers represent approximately 57% of the income from direct
financing leases and notes receivable during the year ended December 31,
1999 (see Note 2).
RELATED PARTY TRANSACTIONS - In fulfilling its role as general partner,
Berthel Fisher & Company Leasing, Inc. enters into transactions with the
Partnership in the normal course of business. Further, the Partnership
also enters into transactions with affiliates of Berthel Fisher & Company
Leasing, Inc. These transactions are set forth in the notes that follow.
Management is of the opinion that these transactions are in accordance
with the terms of the Agreement of Limited Partnership.
CASH AND CASH EQUIVALENTS - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
NET INVESTMENT IN DIRECT FINANCING LEASES - The Partnership's primary
activity consists of leasing equipment under direct financing leases
generally over a period of three to five years. At the time of closing a
direct financing lease, the Partnership records the gross lease contract
receivable, the estimated unguaranteed residual value and unearned lease
income. The unearned lease income represents the excess of the gross lease
receivable plus the estimated unguaranteed residual value over the cost of
the equipment leased. In addition, the Partnership capitalizes all initial
direct costs associated with originating the direct financing lease. The
unearned income and initial direct costs are amortized to income over the
lease term so as to produce a constant periodic rate-of-return on the net
investment in the lease. Lessees are responsible for all taxes, insurance
and maintenance costs.
The realization of the estimated unguaranteed residual value of leased
equipment depends on the value of the leased equipment at the end of the
lease term and is not a part of the contractual agreement with the lessee.
Estimated residual values are based on estimates of amounts historically
realized by the Partnership for similar equipment and are periodically
reviewed by management for possible impairment.
Direct financing leases are accounted for as operating leases for income
tax purposes.
NOTES RECEIVABLE - Notes receivable are carried at the principle balance
outstanding. Interest income on notes receivable is accrued based on the
principle amount outstanding.
ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES - The Partnership performs
credit evaluations prior to approval of a loan and lease. Subsequently,
the creditworthiness of the customer and the value of the underlying
assets are monitored on an ongoing basis. Under its lease agreements, the
Partnership retains legal ownership of the leased asset. The Partnership
maintains an allowance for possible loan and lease losses which could
arise should customers become unable to discharge their obligations under
the loan and lease agreements. The allowance for possible loan and lease
losses is maintained at a level deemed appropriate by management to
provide for known and inherent risks in the loan and lease portfolio. The
allowance is based upon a continuing review of past loss experience,
current economic conditions, delinquent loans and leases, an estimate of
potential loss exposure on significant customers in adverse situations,
and the underlying asset value. The consideration of such future potential
losses also includes an evaluation for other than temporary declines in
value of the underlying assets. Loans and leases which are deemed
uncollectible are charged off and deducted from the allowance. The
provision for possible loan and lease losses and recoveries are added to
the allowance.
17
<PAGE> 18
TAX STATUS - Under present income tax laws, the Partnership is not liable
for income taxes, as each partner recognizes a proportionate share of the
Partnership income or loss in their income tax return. Accordingly, no
provision for income taxes is made in the financial statements of the
Partnership.
NET INCOME (LOSS) PER PARTNERSHIP UNIT - Net income (loss) per partnership
unit is based on the weighted average number of units outstanding
(including both general and limited partners' units).
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS - In June 1998, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities". SFAS No. 133 establishes standards
for derivative instruments, including certain derivative instruments
embedded in other contracts, (collectively referred to as derivatives) 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. The recognition of
gains or losses resulting from changes in the values of derivatives is
based on the use of each derivative instrument and whether it qualifies
for hedge accounting. In June 1999, the FASB issued SFAS No. 137, which
deferred the effective date of adoption of SFAS No. 133 for one year. The
Partnership will adopt SFAS No. 133 in the first quarter of calendar year
2001. The Partnership has not yet determined the effect of SFAS No. 133 on
the financial statements.
RECLASSIFICATIONS - Certain amounts in the 1998 financial statements have
been reclassified to conform with the 1999 financial statement
presentation.
2. NET INVESTMENT IN DIRECT FINANCING LEASES AND NOTES RECEIVABLE
The Partnership's net investment in direct financing leases and notes
receivable consists of the following at December 31, 1999 and 1998:
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Minimum lease payments receivable $11,272,568 $4,560,446
Estimated unguaranteed residual values 876,936 348,889
Unamortized initial direct costs 738 1,891
Unearned income (2,547,160) (1,078,464)
Notes receivable, collateralized primarily by pay telephone
equipment and related site agreements, 9.5% to 17.6%,
maturing through 2004 3,820,675 807,752
----------- ----------
Net investment in direct financing leases and notes receivable $13,423,757 $4,640,514
=========== ==========
</TABLE>
18
<PAGE> 19
At December 31, 1999, contractual principal maturities of notes
receivable, future minimum payments to be received under direct financing
leases and the estimated unguaranteed residuals to be realized at the
expiration of direct financing leases are as follows:
<TABLE>
<CAPTION>
Minimum Estimated
Contractual Lease Unguaranteed
Principal Payments Residual
Maturities Receivable Values
---------- ----------- ------------
<S> <C> <C> <C>
Years ending December 31:
2000 $ 987,744 $ 3,609,259 $ 12,372
2001 815,500 2,958,639 140,877
2002 882,858 2,305,655 64,035
2003 810,971 1,814,563 240,101
2004 323,602 584,452 419,551
---------- ----------- --------
Total $3,820,675 $11,272,568 $876,936
========== =========== ========
</TABLE>
The Partnership leases equipment to certain companies for which the
General Partner or its affiliates have an ownership interest in, provide
financing to, or provide investment advisory services for such companies.
The Partnership's net investment in direct financing leases with these
companies approximated $4,187 and $32,887 at December 31, 1999 and 1998,
respectively.
Three customers accounted for 10% or more of the amount of income from
direct financing leases and notes receivable during one or more of the
periods presented, as follows:
1999 1998 1997
Customer A 17% 7% --%
Customer B 12 -- --
Customer C 28 2 --
3. ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES
The changes in the allowance for possible loan and lease losses for the
years ended December 31, 1999 and 1998 is as follows:
1999 1998
Balance at beginning of year $ 87,818 $ --
Provision 154,410 87,818
Charge-offs (2,371) --
--------- ---------
Balance at end of year $ 239,857 $ 87,818
========= =========
The allowance for possible loan and lease losses consisted entirely of a
general unallocated reserve at December 31, 1999 and 1998.
At December 31, 1999, no customers were past due over 90 days. If a lease
or note receivable is past due more than 90 days, the Partnership
discontinues recognizing income on the contract.
19
<PAGE> 20
4. LIMITED PARTNERSHIP AGREEMENT
The Partnership was formed pursuant to an Agreement of Limited Partnership
dated as of August 26, 1997 (the "Agreement"). The Agreement outlines
capital contributions to be made by the partners and the allocation of
cash distributions, net income and net loss to the partners. Capital
contributions by the partners to the partnership will consist of the
$10,000 contributed by the General Partner and the amounts contributed by
limited partners for the purchase of their units ($1,000 per unit).
Net income or net loss allocated to the limited partners (and to the
General Partner) is apportioned among them based on the number of units
held and on the number of days within the fiscal year that they were
limited partners. Any Partnership net loss will first be allocated to the
partners to the extent of their positive capital accounts. Any additional
Partnership net loss will be allocated to the General Partner. Any
Partnership net income will first be allocated to partners with negative
capital accounts in proportion to, and to the extent of, such negative
capital accounts. Except as provided below, any Partnership net income
will then be allocated to the partners. During the liquidating phase of
the Partnership, net income earned that results in Partnership assets to
be distributed 80% to the limited partners and 20% to the General Partner
will be allocated 80% to the limited partners and 20% to the General
Partner.
A partner's share of profits, losses and operating distributions to
partners (distributions of up to 9.6% annually made during the operating
phase) is based upon the amount of each partner's adjusted capital
contribution (a partner's capital contribution, reduced by all payments to
the partner that qualify as a liquidating distribution or return of
capital) and each limited partner's admission date (the date a limited
partner is admitted to the Partnership).
During the Partnership's operating phase, to the extent there is cash
available for distribution, cash distributions will be made on a monthly
basis in the following order of priority: first, to reimburse the General
Partner for administrative services it provides to the Partnership, as
further described in the Agreement (see Note 6); second, to the limited
partners up to amounts representing a 9.6% cumulative annual return on
their adjusted capital contribution (as defined); and, third, to the
General Partner, representing a monthly equipment management fee of 2% of
the gross rental payments received by the Partnership (see Note 6). To the
extent that cash is not available to pay all or a portion of the equipment
management fee pursuant to the above priority distributions, such fee will
accrue and accumulate. Any remaining cash distributions after payment of
the above (including arrearages) will be paid, at the discretion of the
General Partner, to the limited partners.
The Partnership will cease reinvesting in assets and will not enter into
additional leases during the liquidating phase. The liquidating phase
shall begin at any time after June 23, 2003 (or earlier if the General
Partner determines it to be in the Partnership's best interest), but no
later than December 23, 2004. During the liquidating phase, the
Partnership will proceed with all due and deliberate speed and care to
wind up the Partnership's affairs and to convert all of the Partnership's
assets into cash. Operating distributions will not be paid during the
liquidating phase.
During the liquidating phase, amounts available to be distributed among
the partners after satisfaction of all Partnership liabilities and
obligations and/or the provision of reserves for future or contingent
Partnership liabilities will be distributed in order of priority as
follows:
- First, payment of the General Partner's expense reimbursement;
- Second, payment to the partners, to the extent necessary to pay to the
partners during the term of their investment in the Partnership,
operating distributions of 8% annually (on a cumulative, compounded
daily basis) on their adjusted capital contributions;
- Third, payment to the partners of 100% of their adjusted capital
contributions to the Partnership;
20
<PAGE> 21
- Fourth, payment to the partners to the extent they have not received,
during the term of their investment in the Partnership, distributions
totaling 9.6% annually (calculated only through the end of the
operating phase), noncompounded, on their adjusted capital
contributions;
- Fifth, payment to the General Partner of any unpaid arrearages in its
management fee; and
- Sixth, payment of any remaining amounts will be made 80% to the
limited partners and 20% to the General Partner; provided, however,
the General Partner will not receive its share of these remaining
amounts until such time as the limited partners have received
operating distributions and liquidating distributions equal to their
capital contributions plus 9.6% annually (calculated only through the
end of the operating phase) noncompounded, on their adjusted capital
contributions.
5. BORROWING AGREEMENTS
In January 1999, the Partnership obtained financing under a line of credit
agreement with a bank. The amount available to borrow under the line of
credit was limited to $2,000,000 or 32% of qualified accounts, primarily
leases and notes receivable. On October 26, 1999, the agreement was
amended to increase the available amount from $2,000,000 to $4,400,000
(limited by 32% of qualified accounts) and extend the maturity from June
30, 2000 to June 30, 2002. The line of credit agreement bears interest at
1% over the prime rate (combined rate of 9.5% at December 31, 1999), with
a $4,000 minimum monthly interest charge beginning in July 1999, and is
collateralized by substantially all assets of the Partnership. The line of
credit is guaranteed by the General Partner and certain affiliates of the
General Partner. This agreement is cancelable by the lender after giving a
90-day notice. The General Partner believes amounts available under the
line of credit are adequate for the foreseeable future. The amount
outstanding under this line-of-credit at December 31, 1999 was $1,973,142.
6. MANAGEMENT AND SERVICE AGREEMENTS
The Partnership paid the General Partner acquisition fees of 5% of the
cost of equipment financing provided by the Partnership, which was
$490,123 and $265,760 for the years ended December 31, 1999 and 1998,
respectively.
The Partnership also pays an equipment management fee equal to 2% of the
amount of gross rental payments received, to the General Partner. During
the years ended December 31, 1999 and 1998, those management fees
aggregated $53,677 and $12,599, respectively.
In addition, the General Partner is reimbursed for certain other costs
under an administrative services agreement. Amounts incurred by the
Partnership pursuant to this agreement amounted to $84,000 and $77,000 for
the years ended December 31, 1999 and 1998, respectively.
As a part of the issuance of partnership units, the Partnership paid
commissions of 9% to Berthel Fisher & Company Financial Services, Inc., a
broker-dealer affiliated with the General Partner, and reimbursed other
offering expenses of up to 3.5% of the gross proceeds to the General
Partner. These fees, which amounted to $849,875 and $723,000 for the years
ended December 31, 1999 and 1998, respectively, have been treated as
syndication costs and charged directly to partners' equity.
21
<PAGE> 22
7. RECONCILIATION OF FINANCIAL AND INCOME TAX REPORTING BASIS
A reconciliation of net income (loss) for financial reporting purposes
with the related amount reported for income tax purposes for the periods
ended December 31, 1999, 1998 and 1997 is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---------------------- ---------------------- -----------------------
Per Per Per
Amount Unit Amount Unit Amount Unit
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) for financial reporting
purposes $ 676,665 $ 72.99 $ 157,464 $ 46.18 $ (407) $(40.70)
Adjustment to convert direct financing
leases to operating leases for income
tax purposes (1,328,591) (143.31) (427,982) (125.51) -- --
Net change in allowance for
possible loan and lease losses 152,039 16.40 87,818 25.75 -- --
Gain on lease terminations -- -- 3,809 1.12 -- --
----------- ------- ----------- ------- ----------- -------
Net income (loss) for
income tax reporting purposes $ (499,887) $(53.92) $ (178,891) $(52.46) $ (407) $(40.70)
=========== ======= =========== ======= =========== =======
</TABLE>
8. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value amounts disclosed below are based on estimates prepared by
management based on valuation methods appropriate in the circumstances.
Generally accepted accounting principles do not require disclosure for
lease contracts. The carrying amount for financial instruments included
among cash and cash equivalents and other short-term payables approximates
their fair value because of the short maturity of those instruments. The
carrying value of the Partnership's line of credit agreement approximates
its fair value due to the variable rate on the debt. The estimated fair
value of other significant financial instruments are based principally on
discounted future cash flows at rates commensurate with the credit and
interest rate risk involved.
The estimated fair values of the Partnership's other significant financial
instruments are as follows at December 31, 1999 and 1998:
1999 1998
--------------------------- ----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
Notes receivable $3,820,675 $3,820,675 $807,752 $807,752
* * * * *
22
<PAGE> 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. The General Partner of the registrant:
Berthel Fisher & Company Leasing, Inc., an Iowa corporation.
B. Executive officers of the General Partner of the Registrant:
Thomas J. Berthel (age 48) - Mr. Berthel is the Chief Executive Officer and
Director of the General Partner, a position he has held since the General
Partner's inception in 1988. Mr. Berthel is also President and a Director of the
General Partner's parent, Berthel Fisher & Company, Inc. ("Berthel Fisher"),
which he founded in 1985, and Berthel Fisher's other subsidiaries, Berthel
Fisher & Company Financial Services, Inc.; Berthel Fisher & Company Management
Corp.; Berthel Fisher & Company Planning, Inc.; and one other corporation which
acts as general partner of a separate private program. He also serves as the
Chairman of the Board and Director of Amana Colonies Golf Course, Inc. Mr.
Berthel holds a bachelor's degree from St. Ambrose College in Davenport, Iowa
(1974). From 1974 to 1982, Mr. Berthel was President and majority shareholder of
Insurance Planning Services Corporation in Maquoketa, Iowa, which was engaged in
the operation of a securities and insurance business. Mr. Berthel holds a
Financial and Operation Principal license issued by the National Association of
Securities Dealers, Inc. Mr. Berthel is also a Certified Life Underwriter. Mr.
Berthel also serves as an individual general partner of the limited partnership
referred to above. Mr. Berthel received a MBA degree from the University of Iowa
in 1993.
Ronald O. Brendengen (age 45) - Mr. Brendengen is the Treasurer, Chief Operating
Officer, Chief Financial Officer, and a Director (1988 to present) of the
General Partner. He was elected to his current offices in October 1996. He
served as Treasurer and Chief Financial Officer since October 1996. He has also
served as Secretary (1994 - March, 1995), Treasurer (1988-August 1995) and Chief
Financial Officer (1994 - August 1995) of the General Partner. He served as
Controller (1985-1993), Treasurer (1987-present), Chief Financial Officer,
Secretary and a Director (1987-present), and was also elected Chief Operating
Officer in January 1998, of Berthel Fisher & Company, the parent company of the
General Partner. Mr. Brendengen serves as the Treasurer, Chief Financial Officer
and a Director of Berthel Fisher & Company Planning, Inc., the trust advisor of
Berthel Growth & Income Trust I, a company required to file reports pursuant to
the Securities Exchange Act of 1934. He also serves in various offices and as a
Director of each subsidiary of Berthel Fisher & Company. Mr. Brendengen holds a
certified public accounting certificate and worked in public accounting during
1984 and 1985. From 1979 to 1984, Mr. Brendengen worked in various capacities
for Morris Plan and MorAmerica Financial Corp., Cedar Rapids, Iowa. Mr.
Brendengen attended the University of Iowa before receiving a bachelor's degree
in Accounting and Business Administration with a minor in Economics from Mt.
Mercy College, Cedar Rapids, Iowa, in 1978.
Nancy L. Lowenberg (age 41) - Ms. Lowenberg was Executive Vice President and
General Manager of the General Partner beginning January 2, 1997. From September
1986 to December 1996, Ms. Lowenberg was employed by Firstar Bank Iowa, N.A., in
Cedar Rapids. Since 1989, Ms. Lowenberg was Vice President Commercial Loans. As
Vice President Commercial Loans, she was relationship manager for 62 accounts
with approximately $70,000,000 of committed credit. She had responsibility for
credit quality, annual review and maintenance of existing accounts and business
development. From 1981-1986, Ms. Lowenberg was employed by Firstar Bank Systems.
Ms. Lowenberg received her Bachelor of Science Agricultural Business with a
minor in Finance in 1981 from Iowa State University, Ames, Iowa. Ms. Lowenberg
resigned from the General Partner effective February 9, 2000.
23
<PAGE> 24
ITEM 11. EXECUTIVE COMPENSATION
Set forth is the information relating to all direct remuneration paid or accrued
by the Registrant during the last three years to the General Partner:
<TABLE>
<CAPTION>
(A) (B) (C) (C1) (C2) (D)
Securities of
property
insurance Aggregate
benefits or of
Cash and cash reimbursement contingent
Name of individual Year equivalent forms personal or forms of
and capacities served Ended of remuneration Fees benefits remuneration
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berthel Fisher & Co. Leasing, Inc. 1999 $ -0- $137,677 $ -0- $ -0-
(General Partner) 1998 $ -0- $ 89,599 $ -0- $ -0-
1997 $ -0- $ -0- $ -0- $ -0-
</TABLE>
24
<PAGE> 25
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) No person owns of record, or is known by the Registrant to own
beneficially, more than five percent of the Partnership Units.
(b) The General Partner of the Registrant owns Units of the Registrant set
forth in the following table.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name and Address of Amount and Nature of
Title of Class Beneficial Ownership Beneficial Ownership Percent of Class
- -------------- -------------------- -------------------- ----------------
<S> <C> <C> <C>
Units Berthel Fisher & Co. Leasing, Inc. Ten (10) Units; .11%
701 Tama Street sole owner.
Marion, IA 52302
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related party transactions are described in Notes 2 and 6 of the notes to the
financial statements.
25
<PAGE> 26
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) 1. Financial Statements
Page No.
<S> <C>
Balance Sheets as of December 31, 1999 and 1998 12
Statements of Operations for the years ended December 31, 1999
and 1998, and period from August 26, 1997 (date of formation)
through December 31, 1997 13
Statements of Changes in Partners' Equity for the years ended
December 31, 1999 and 1998, and period from August 26, 1997
(date of formation) through December 31, 1997 14
Statements of Cash Flows for the years ended December 31, 1999
and 1998, and period from August 26, 1997 (date of formation)
through December 31, 1997 15
Notes to Financial Statements 16
2. Financial Statements Schedules
Information pursuant to Rule 12-09 (Schedule II) is included
in the financial statements and notes thereto.
3. Exhibits
3,4 Amended and Restated Agreement of Telecommunications
Income Fund XI, L.P. currently in effect dated as of
November 26, 1997 (1)
10.3 Revolving Loan and Security Agreement incorporated
herein by reference to the Partnership's Form 10-Q filed
on May 13, 1999.
27 Financial Data Schedule -- filed electronically
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of
1999.
</TABLE>
- ----------
(1) Incorporated herein by reference to Exhibit A in the Partnership's
registration statement on Form S-1, effective November 26, 1997
26
<PAGE> 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
TELECOMMUNICATIONS INCOME FUND XI, L.P.
(REGISTRANT)
<TABLE>
<S> <C>
By Berthel Fisher & Company Leasing, Inc.
By: /s/ Thomas J. Berthel Date: March 24, 2000
----------------------------------------------------------
Thomas J. Berthel
President, Chief Executive Officer
By Berthel Fisher & Company Leasing, Inc.
By: /s/ Ronald O. Brendengen Date: March 24, 2000
----------------------------------------------------------
Ronald O. Brendengen
Chief Operating Officer, Chief Financial Officer, Treasurer
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 Registrant and
in the capacities and on the dates indicated.
/s/ Thomas J. Berthel Date: March 24, 2000
- -----------------------------------------------------
Thomas J. Berthel
Chief Executive Officer
President, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
/s/ Ronald O. Brendengen Date: March 24, 2000
- -----------------------------------------------------
Ronald O. Brendengen
Chief Operating Officer, Chief Financial Officer,
Treasurer, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
/s/ Daniel P. Wegmann Date: March 24, 2000
- -----------------------------------------------------
Daniel P. Wegmann
Controller
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
</TABLE>
27
<PAGE> 28
EXHIBIT INDEX
3,4 Amended and Restated Agreement of Telecommunications Income Fund XI,
L.P. currently in effect dated as of November 26, 1997 (1)
10.3 Revolving Loan and Security Agreement incorporated herein by reference
to the Partnership's Form 10-Q filed on May 13, 1999.
- ----------------
(1) Incorporated herein by reference to Partnership Exhibit A to the
prospectus included in the Partnership's post effective amendment
No. 1 to Form S-1 registration statement filed on November 26,
1997.
28
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the audited
Balance Sheet of Telecommunications Income Fund XI, L.P., as of December 31,
1999, and the audited Statement of Operations for the year ended December 31,
1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,926
<SECURITIES> 0
<RECEIVABLES> 13,423,757
<ALLOWANCES> (239,857)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 13,196,905
<CURRENT-LIABILITIES> 2,554,162
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,642,743
<TOTAL-LIABILITY-AND-EQUITY> 13,196,905
<SALES> 0
<TOTAL-REVENUES> 1,172,549
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 245,339
<LOSS-PROVISION> 154,410
<INTEREST-EXPENSE> 96,135
<INCOME-PRETAX> 676,665
<INCOME-TAX> 0
<INCOME-CONTINUING> 676,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 676,665
<EPS-BASIC> 72.99<F1>
<EPS-DILUTED> 72.99<F1>
<FN>
<F1>Net Income (Loss) per Partnership Unit
</FN>
</TABLE>
