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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 (FEE REQUIRED)
For the fiscal year ended December 31, 1995 Commission File Number 0-11168
PHOENIX LEASING INCOME FUND 1981
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2735708
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2401 Kerner Boulevard, San Rafael, California 94901-5527
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 485-4500
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units of Limited
Partnership Interest
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.
------
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
----- -----
As of December 31, 1995, 18,762 Units of Limited Partnership interest were
outstanding. No market exists for the Units of Partnership interest and
therefore there exists no aggregate market value at December 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PHOENIX LEASING INCOME FUND 1981
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business....................................................... 3
Item 2. Properties..................................................... 4
Item 3. Legal Proceedings.............................................. 4
Item 4. Submission of Matters to a Vote of Security Holders............ 4
PART II
Item 5. Market for the Registrant's Securities and Related
Security Holder Matters......................................... 4
Item 6. Selected Financial Data......................................... 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................. 6
Item 8. Financial Statements and Supplementary Data..................... 8
Item 9. Disagreements on Accounting and Financial Disclosure Matters.... 26
PART III
Item 10. Directors and Executive Officers of the Registrant.............. 26
Item 11. Executive Compensation.......................................... 27
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 27
Item 13. Certain Relationships and Related Transactions.................. 28
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K........................................................ 28
Signatures............................................................... 29
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PART I
Item 1. Business.
Summary of Business Activities.
Phoenix Leasing Income Fund 1981, a California limited partnership (the
"Partnership"), was organized on October 7, 1980. The Partnership was registered
with the Securities and Exchange Commission with an effective date of September
1, 1981 and shall continue to operate until its termination date unless
dissolved sooner due to the sale of substantially all of the assets of the
Partnership or a vote of the Limited Partners. The Partnership will terminate on
December 31, 1996. The General Partner is Phoenix Leasing Incorporated, a
California corporation. The General Partner or its affiliates also is or has
been a general partner in several other limited partnerships formed to invest in
capital equipment and other assets.
The initial public offering was for 25,000 units of limited partnership
interest at a price of $1,000 per unit. The Partnership sold 20,883 units for a
total capitalization of $20,883,000. Of the proceeds received through the
offering, the Partnership has incurred $2,429,000 in organizational and offering
expenses.
From the initial formation of the Partnership through December 31,
1995, the total investments in equipment leases and financing transactions
(loans), including the Partnership's pro-rata interest in investments made by
joint ventures, approximate $48,585,000. The average initial firm term of
contractual payments from equipment subject to lease was 29.18 months, and the
average initial net monthly payment rate as a percentage of the original
purchase price was 3.06%. The average initial firm term of contractual payments
from loans was 75.78 months.
The Partnership's principal objective is to produce current income and
to build and maintain a balanced portfolio of leases and loans, through the
acquisition and financing of various types of assets including computer
peripherals, terminal systems, small computer systems, communications equipment,
IBM-software compatible mainframes, office systems and telecommunications
equipment and to lease such equipment and products to third parties pursuant to
either Operating Leases or Full Payout Leases.
The principal markets for the types of equipment in which the
Partnership has invested in have been (1) major corporations and other large
organizations seeking to reduce the cost of their peripheral equipment and large
computer systems, (2) major corporations with numerous operating locations
seeking to improve the timeliness and responsiveness of their data processing
systems, and (3) small organizations interested in improving the efficiency of
their overall operations by moving from manually operated to small
computer-based management systems.
In addition to acquiring equipment for lease to third parties, the
Partnership either directly or through the investment in joint ventures, has
provided limited financing to certain emerging growth companies, cable
television system operators, manufacturers and their lessees with respect to
equipment leased directly by such manufacturers to third parties. The
Partnership maintains a security interest in the equipment financed and in the
receivables due under any lease or rental agreement relating to such equipment.
Such security interests will give the Partnership the right, upon a default by
the manufacturer or lessee, to obtain possession of the assets.
The Partnership will not incur debt to finance the purchase of
equipment. However, the Partnership can enter into joint venture agreements with
certain other partnerships managed by the General Partner which would finance
the acquisition of equipment through the use of indebtedness which would be
nonrecourse to the Partnership.
Competition. The equipment leasing industry is highly competitive.
Leases are offered on a wide variety of equipment ranging from construction
equipment to entire manufacturing facilities. The equipment leasing industry
offers to users an alternative to the purchase of nearly every type of
equipment. The General Partner intends to concentrate the Partnership's
activities, however, in markets in which the General Partner has expertise. The
computer equipment industry is extremely competitive. Competitive factors
include pricing, technological innovation and methods of financing (including
use of various short-term and long-term financing plans, as well as the outright
purchase of equipment).
There is strong competition in non-computer related equipment markets
in which the Partnership will engage as well. There is, however, no single
dominant company or factor in those other markets.
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Other.
A brief description of the type of assets in which the Partnership has
invested as of December 31, 1995, together with information concerning the uses
of assets is set forth in Item 2.
Item 2. Properties.
The Partnership is engaged in the equipment leasing and financing
industry and as such, does not own or operate any principal plants, mines or
real property. The primary assets held by the Partnership are its investments in
leases and loans either directly or through its investment in joint ventures.
As of December 31, 1995, the Partnership owns equipment and has
outstanding loans to borrowers with an aggregate original cost of $1,548,000.
The equipment and loans have been made to customers located throughout the
United States. The following table summarizes the type of equipment owned or
financed by the Partnership, including its pro rata interest in joint ventures,
at December 31, 1995.
Percentage of
Asset Types Purchase Price(1) Total Assets
----------- ----------------- -------------
(Amounts in Thousands)
Small Computer Systems $ 576 37%
Financing of Solar Systems 397 26
Telecommunications 318 21
Reproduction Equipment 240 15
Financing Related to Cable TV Systems 17 1
------ ---
TOTAL $1,548 100%
====== ===
(1) These amounts include the Partnership's pro rata interest in equipment
joint ventures of $540,000, financing joint ventures of $397,000 and
original cost of outstanding loans of $17,000 at December 31, 1995.
Item 3. Legal Proceedings.
The Partnership is not a party to any pending legal proceedings which
would have a material adverse impact on its financial position.
Item 4. Submission of Matters to a Vote of Security 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 Securities and Related Security Holder
Matters.
(a) The Registrant's limited partnership interests are not publicly
traded. There is no market for the Registrant's limited
partnership interests and it is unlikely that any will develop.
(b) Approximate number of equity security investments:
Number of Unit Holders
Title of Class as of December 31, 1995
-------------- -----------------------
Limited Partners 2,439
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Item 6. Selected Financial Data.
Amounts in Thousands Except for Per Unit Amounts
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total Income $ 435 $ 761 $ 515 $ 535 $ 769
Net Income (Loss) 329 559 188 (311) (49)
Total Assets 1,354 2,312 2,298 2,381 3,854
Distributions to Partners 1,219 563 283 1,127 1,127
Net Income (Loss) per Limited
Partnership Unit 15.22 25.92 8.69 (15.30) (2.94)
Distributions per Limited
Partnership Unit 59.83 30.01 15.09 60.08 60.05
The above selected financial data should be read in conjunction with
the financial statements and related notes appearing elsewhere in this report.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Phoenix Leasing Income Fund 1981 (the Partnership) reported net income
of $329,000 during the year ended December 31, 1995, as compared to net income
of $559,000 and $188,000 during 1994 and 1993, respectively.
Net income decreased by $230,000 during 1995, as compared to 1994, due
to the combination of several factors. The Partnership did not report a gain on
the sale of equipment during 1995, as compared to a gain on the sale of
equipment of $278,000 during 1994. In addition, during 1994 the Partnership
recognized a one time settlement of $188,000. During 1995 the Partnership did
recognize an increase in interest income from notes receivable of $123,000,
partially offsetting the decreases previously mentioned. Net income increased by
$371,000 during 1994, as compared to 1993, due to the receipt of settlement
income of $188,000, an increase in gain on sale of equipment of $95,000 and
increased earnings from joint ventures of $94,000.
During 1995, the Partnership reported an increase in interest income
from notes receivable, as well as the recognition of the allowance for loan
losses as income. During 1995, the Partnership received a settlement payment of
$591,000 on a defaulted note receivable from a cable television system operator
with a net carrying value of $462,000. Upon recovery of this defaulted note
receivable, the Partnership reduced the allowance for loan losses related to
this note by $53,000 during 1995. This reduction in the allowance for loan
losses was recognized as income during the period.
The increased gain on sale of equipment during 1994, as compared to
1995 is attributable to increased sale activity during 1994. During 1995 the
Partnership sold equipment with an original cost of $233,000, as compared to
$1,206,000 during 1994. At December 31, 1995, the Partnership owned equipment
with an original cost of $594,000, as compared to $828,000 at December 31, 1994.
Total expenses decreased by $96,000 and $125,000 during 1995 and 1994,
respectively, as compared to the same periods in the preceding year. The
decrease during 1995 is due to a $51,000 decrease in the provision for losses on
notes receivable. The decrease in total expenses during 1994, as compared to
1993, is due to the decrease in depreciation of $104,000, a result of a majority
of the Partnership's equipment being fully depreciated.
Inflation affects the Partnership in relation to the current cost of
equipment placed on lease and the residual values realized when the equipment
comes off-lease and is sold. During the last several years inflation has been
low, thereby having very little impact upon the Partnership.
Joint Ventures
The Partnership has made investments in various equipment and financing
joint ventures along with other affiliated partnerships managed by the General
Partner for the purpose of spreading the risk of investing in certain equipment
leasing and financing transactions. These joint ventures are not currently
making any significant additional investments in new equipment leasing or
financing transactions. As a result, the earnings and cash flow from such
investments are anticipated to continue to decline as the portfolios are
re-leased at lower rental rates and eventually liquidated.
The increase in earnings from joint ventures of $7,000 and $94,000
during 1995 and 1994, respectively, as compared to the same periods in the
previous year, is primarily due to an increase in earnings in two equipment
joint ventures. The increase in earnings during 1995 from one equipment joint
venture was due to a decline in depreciation expense as a result of its
equipment portfolio having been fully depreciated. In addition, a new equipment
joint venture was formed in October of 1994. As a result, 1995 reflects a full
year of earnings from this joint venture.
The increase in earnings from joint ventures during 1994, as compared
to 1993, is due to an overall decline in expenses, primarily depreciation and
lease related operating expenses, which exceeded the decline in revenues. The
overall decline in revenues and expenses experienced by the Partnership's
equipment joint ventures is a result of a majority of the equipment joint
ventures being in the liquidation stage. Another factor contributing to the
increased earnings recognized during 1994 is the recognition of settlement
income in one equipment joint venture.
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Liquidity and Capital Resources
The Partnership reported net cash provided by equipment leasing and
financing activities of $640,000 during 1995, as compared to net cash provided
of $448,000 and $487,000 during 1994 and 1993, respectively. The increase in
cash generated during 1995 is due to a settlement payoff received on a defaulted
note receivable during the second quarter of 1995. Sales proceeds decreased
during 1995, as compared to 1994, due to a majority of the Partnership's
equipment having been sold in prior years. The Partnership reported increased
sales activity and a corresponding increase in sales proceeds during 1994, as
compared to 1993.
Distributions from joint ventures were $196,000 during 1995, compared
to $118,000 and $361,000 during 1994 and 1993, respectively. The increase during
1995 is attributable to an increase in the amount of cash available for
distributions in several of the equipment joint ventures and the Partnership
receiving cash distributions from a new joint venture that was formed in October
of 1994. The increase in cash available for one of these equipment joint
ventures is due to the receipt of a cash settlement in December of 1994 which
was not distributed to the Partnerships until January of 1995. Distributions
decreased during 1994, as compared to 1993, due to a decrease in the cash
generated by the joint ventures resulting from decreased equipment sales during
1994.
As of December 31, 1995, the Partnership owned equipment being held
for lease with a purchase price of $53,000 and a net book value of $0, compared
to $204,000 and $2,000, respectively at December 31, 1994. The General Partner
is actively engaged, on behalf of the Partnership, in remarketing and selling
the Partnership's off-lease equipment portfolio.
The Limited Partners received distributions of $1,123,000, $563,000 and
$283,000 during 1995, 1994 and 1993, respectively. As a result, the cumulative
distributions to the Limited Partners are $20,099,000, $18,976,000 and
$18,413,000 as of December 31, 1995, 1994 and 1993, respectively. The General
Partner received cash distributions of $96,000, $0 and $0 during 1995, 1994 and
1993, respectively. In addition to cash distributions, the General Partner
received liquidation fees of $44,000, $63,000 and $28,000 during 1995, 1994 and
1993, respectively.
As the Partnership's asset portfolio continues to decline as a result
of the ongoing liquidation of assets, it is expected that the cash generated
from operations will also decline. Due to the decrease in cash generated by
leasing and financing activities, the Partnership is no longer making quarterly
cash distributions to partners. Distributions are now being made annually. The
last quarterly distribution was made in January of 1993 and the first annual
distribution was made in January of 1994. The Partnership plans to make its next
annual distribution in January of 1996 at approximately the same rate as the
January 1995 distribution. The Partnership will reach the end of its term on
December 31, 1996. The Partnership is currently in the process of liquidating
its remaining assets and liabilities. Upon termination, the Partnership will
make a final distribution to partners of the remaining cash, if any.
The Partnership made a special distribution to partners on October 15,
1995, due to the increase in the Partnership's cash and cash equivalents. This
increase in cash and cash equivalents is a result of the payoff of a defaulted
note receivable from a cable television system operator during the second
quarter of 1995.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's ongoing
operational expenses.
<PAGE>
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHOENIX LEASING INCOME FUND 1981
YEAR ENDED DECEMBER 31, 1995
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Phoenix Leasing Income Fund 1981:
We have audited the accompanying balance sheets of Phoenix Leasing Income Fund
1981 (a California limited partnership) as of December 31, 1995 and 1994, and
the related statements of operations, partners' capital, and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements and the schedule referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule 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 Phoenix Leasing Income Fund
1981 as of December 31, 1995 and 1994, and the results of its operations and its
cash flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14,
subsection (a) 2 is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
San Francisco, California, ARTHUR ANDERSEN LLP
January 19, 1996
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PHOENIX LEASING INCOME FUND 1981
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
December 31,
1995 1994
---- ----
ASSETS
Cash and cash equivalents $ 1,127 $ 1,509
Accounts receivable (net of allowance for
losses on accounts receivable of $4 loss
$8 at December 31, 1995 and 1994, respectively) 6 27
Notes receivable (net of allowance for losses
on notes receivable of $0 and $53 at
December 31, 1995 and 1994, respectively) 11 434
Equipment on operating leases and held for lease
(net of accumulated depreciation and
obsolescence reserves of $360 and $498 at
December 31, 1995 and 1994, respectively) 13 37
Net investment in financing leases -- 2
Investment in joint ventures 165 261
Other assets 32 42
------- -------
Total Assets $ 1,354 $ 2,312
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 48 $ 110
------- -------
Total Liabilities 48 110
------- -------
Partners' Capital:
General Partners 2 54
Limited Partners, 25,000 units
authorized, 20,883 units issued and
18,762 units outstanding at December
31, 1995 and 1994 1,318 2,156
Unrealized losses on marketable
securities available-for-sale (14) (8)
------- -------
Total Partners' Capital 1,306 2,202
------- -------
Total Liabilities and Partners' Capital $ 1,354 $ 2,312
======= =======
The accompanying notes are an integral
part of these statements.
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PHOENIX LEASING INCOME FUND 1981
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
INCOME
Rental income $ 116 $ 98 $ 191
Earned income, financing leases -- 14 52
Gain on sale of equipment -- 278 183
Interest income, notes receivable 138 15 48
Equity in earnings from joint
ventures, net 102 95 1
Settlements -- 188 --
Other income 79 73 40
------ ------ -----
Total Income 435 761 515
------ ------ -----
EXPENSES
Depreciation 23 26 130
Lease related operating expenses -- 4 32
Management fees to General Partner 48 54 50
Liquidation fees to General Partner 44 63 28
Provision for losses on receivables (53) (2) 13
General and administrative expenses 44 57 74
------ ------ -----
Total Expenses 106 202 327
------ ------ -----
NET INCOME $ 329 $ 559 $ 188
====== ====== =====
NET INCOME PER LIMITED
PARTNERSHIP UNIT $15.22 $25.92 $8.69
====== ====== =====
ALLOCATION OF NET INCOME:
General Partners $ 44 $ 73 $ 25
Limited Partners 285 486 163
------ ------ -----
$ 329 $ 559 $ 188
====== ====== =====
The accompanying notes are an integral
part of these statements.
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PHOENIX LEASING INCOME FUND 1981
STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands Except for Unit Amounts)
General
Partner's Limited Partners' Unrealized Total
Amount Units Amount Losses Amount
--------- ----------------- ---------- ------
Balance, December 31, 1992 $ (44) 18,762 $ 2,353 $ -- $ 2,309
Distributions to partners ($15.09
per limited partnership unit) -- -- (283) -- (283)
Net income 25 -- 163 -- 188
------- ------- ------- ------- -------
Balance, December 31, 1993 (19) 18,762 2,233 -- 2,214
Distributions to partners ($30.01
per limited partnership unit) -- -- (563) -- (563)
Adjustment to unrealized losses on
available-for-sale securities -- -- -- (8) (8)
Net income 73 -- 486 -- 559
------- ------- ------- ------- -------
Balance, December 31, 1994 54 18,762 2,156 (8) 2,202
Distributions to partners ($59.83
per limited partnership unit) (96) -- (1,123) -- (1,219)
Unrealized losses on available-for-
sale securities -- -- -- (6) (6)
Net income 44 -- 285 -- 329
------- ------- ------- ------- -------
Balance, December 31, 1995 $ 2 18,762 $ 1,318 $ (14) $ 1,306
======= ======= ======= ======= =======
The accompanying notes are an integral
part of these statements.
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PHOENIX LEASING INCOME FUND 1981
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
Operating Activities:
Net income (loss) $ 329 $ 559 $ 188
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 23 26 130
Gain on sale of equipment -- (278) (183)
Equity in earnings from joint
ventures, net (102) (95) (1)
Provision for losses on
notes receivable (53) -- 12
Provision for early termination,
financing leases -- (2) 1
Decrease (increase) in accounts
receivable 21 (10) 5
Increase (decrease) in accounts
payable and accrued expenses (62) 26 12
Increase in other assets 6 -- (1)
Settlements -- (108) --
------- ------- -------
Net cash provided by operating activities 162 118 163
------- ------- -------
Investing Activities:
Principal payments, financing leases 2 163 227
Principal payments, notes receivable 476 167 97
Proceeds from sale of equipment 1 305 197
Distributions from joint ventures 196 118 361
Purchase of equipment -- (67) --
Investment in joint ventures -- (27) (2)
------- ------- -------
Net cash provided by investing activities 675 659 880
------- ------- -------
Financing Activities:
Distributions to partners (1,219) (563) (283)
------- ------- -------
Net cash used by financing activities (1,219) (563) (283)
------- ------- -------
Increase (decrease) in cash and cash equivalents (382) 214 760
Cash and cash equivalents, beginning of period 1,509 1,295 535
------- ------- -------
Cash and cash equivalents, end of period $ 1,127 $ 1,509 $ 1,295
======= ======= =======
The accompanying notes are an integral
part of these statements.
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PHOENIX LEASING INCOME FUND 1981
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1. Organization and Partnership Matters.
Phoenix Leasing Income Fund 1981, a California limited partnership (the
"Partnership"), was formed on October 7, 1980, to invest in capital equipment of
various types and to lease such equipment to third parties on either a long-term
or short-term basis. Minimum investment requirements were met September 24,
1981, at which time the Partnership commenced operations.
The Partnership has also made investments in joint ventures with
affiliated partnerships managed by the General Partner for the purpose of
spreading the risks of financing or acquiring certain capital equipment leased
to third parties (see Note 6).
On June 20, 1984, Daniel B. Murray resigned as a General Partner of the
Partnership and the Partnership repurchased his equity interest. Mr. Murray's
interest was valued pursuant to the partnership agreement at $383,197. Such
amount was paid in five equal annual installments, the first of which was made
on July 15, 1984. Interest was imputed at 10.5%. As a result of the
Partnership's repurchase of Mr. Murray's General Partner interest, future
distributions and income or loss applicable to this interest were reallocated to
the remaining General and Limited Partners on a pro rata basis. The effect of
this reallocation reduced the General Partners' combined interest from 15% to
11.688%. Phoenix Leasing Incorporated (the Corporate General Partner) and Gus
Constantin remain as the General Partners of the Partnership.
The General Partners are allocated 11.688% (15% prior to repurchase of
Mr. Murray's interest, as discussed above) of all profits, losses, and cash
distributions. Cash distributions in excess of allocated cumulative net profits
represent a liquidation fee which cannot exceed, in the aggregate, 11.688% (15%
of profits prior to the repurchase of Mr. Murray's interest) of net contributed
capital. The cumulative liquidation fee paid or accrued to date is $1,797,000.
The fee represents an expense of the Partnership and is specifically allocated
to the Limited Partners.
Neither the General Partners nor the Limited Partners are required to
make additional capital contributions, nor are they otherwise liable for deficit
balances in their adjusted capital accounts, if any, as defined in the
Partnership agreement.
As compensation for management services, the Corporate General Partner
receives a fee, payable quarterly in an amount equal to 6% of the Partnership's
gross revenues for the quarter from which such payment is being made, which
revenues shall include rental and note receipts, maintenance fees, proceeds from
the sale of equipment and other income.
As an alternative to receiving cash distributions, Limited Partners may
have participated in the Capital Accumulation Plan, whereby the Limited
Partners' cash distributions were reinvested and accumulated in the respective
Limited Partner's capital account. Effective January 1, 1988, the Capital
Accumulation Plan was discontinued. Limited Partners who elected to participate
in the Capital Accumulation Plan are now receiving cash distributions.
Note 2. Summary of Significant Accounting Policies.
Leasing Operations. The Partnership's leasing operations consist of
both financing and operating leases. The financing method of accounting for
leases records as unearned income at the inception of the lease, the excess of
net rentals receivable and estimated residual value at the end of the lease
term, over the cost of equipment leased. Unearned income is credited to income
monthly over the term of the lease on a declining basis to provide an
approximate level rate of return on the unrecovered cost of the investment.
Initial direct costs of consummating new leases are capitalized and included in
the cost of the equipment.
Under the operating method of accounting for leases, the leased
equipment is recorded as an asset at cost and depreciated on a straight-line
basis over the estimated useful life, ranging up to seven years.
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Page 15 of 30
The Partnership's policy is to review periodically the expected
economic life of its rental equipment in order to determine the probability of
recovering its undepreciated cost. Such reviews address, among other things,
recent and anticipated technological developments affecting computer equipment
and competitive factors within the computer marketplace. Although remarketing
rental rates are expected to decline in the future with respect to some of the
Partnership's rental equipment, such rentals are expected to exceed projected
expenses, including depreciation. When subsequent reviews of the equipment
portfolio indicate that rentals plus anticipated sales proceeds will not exceed
expenses in any future period, the Partnership revises its depreciation policy
and accelerates depreciation as appropriate.
Rental income for the year is determined on the basis of rental
payments due for the period under the terms of the lease. Maintenance, repairs
and minor renewals of the leased equipment are charged to expense.
Portfolio Valuation Methodology. The Partnership uses the portfolio
method of accounting for the net realizable value of the Partnership's equipment
portfolio.
Investments in Joint Ventures. Investments in net assets of the
equipment, financing and foreclosed cable systems joint ventures reflect the
Partnership's equity basis in the ventures. Under the equity method of
accounting, the original investment is recorded at cost and is adjusted
periodically to recognize the Partnership's share of earnings, losses, cash
contributions and cash distributions after the date of acquisition.
Investment in Marketable Securities Available for Sale. The Partnership
has investments in stock in public companies that have been determined to be
available for sale that are included in Other Assets in the accompanying balance
sheets. Available-for-sale securities are stated at their fair market value,
with the unrealized gains and losses reported in a separate component of
partners' capital.
Cash and Cash Equivalents. Cash and cash equivalents includes deposits
at banks, investments in money market funds and other highly liquid short-term
investments with original maturities of less than 90 days.
Non Cash Investing Activities. During the year ended December 31, 1995,
the Partnership received a final distribution of marketable securities from one
of its investments in equipment joint ventures. The market value of the
marketable securities at the distribution date was $2,000 and is included in
Other Assets for the year ended December 31, 1995. During the year ended
December 31, 1994, the Partnership contributed equipment and other investments
received through a settlement to a joint venture. The amount of such
contribution was $134,000. Non cash transactions included in Other Assets during
the year ended December 31, 1994 consist of common stock valued at $41,000
received pursuant to a settlement (see Note 8) and an unrealized loss on
marketable securities of $8,000.
During the year ended December 31, 1994, the Partnership obtained title
to a cable television company that had been pledged as collateral for a
non-performing note. As a result, the Partnership reclassified $67,000 to
Investment in Joint Ventures on the balance sheet.
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 amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Financial Accounting Pronouncements. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires that long-lived assets 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 would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership does not expect
the adoption of this statement to have a material impact on its financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.
<PAGE>
Page 16 of 30
On January 1, 1995, the Partnership adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan," and Statement No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures." Statement No. 114 requires that certain
impaired loans be measured based on the present value of expected cash flows
discounted at the loan's effective interest rate; or, alternatively, at the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. Prior to 1995, the allowance for losses on notes
receivable was based on the undiscounted cash flows or the fair value of the
collateral dependent loans. At January 1, 1995, the adoption of Statements 114
and 118 had no effect on the Partnership's financial position and results of
operations.
Reclassification. Certain 1994 and 1993 amounts have been reclassified
to conform to the 1995 presentation.
Note 3. Accounts Receivable.
Accounts receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Lease payments $ 8 $ 28
General Partners and Affiliates 1 2
Property and sales taxes 1 5
---- ----
10 35
Less: allowance for losses on
accounts receivable (4) (8)
---- ----
Total $ 6 $ 27
==== ====
Note 4. Notes Receivable.
Notes receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Notes receivable from cable television
system operators with interest ranging
from 17% to 20% per annum, receivable in
installments of 39 months through January
1994, collateralized by a security interest
in the cable system assets. $ 11 $ 487
Less: allowance for losses on notes
receivable -- (53)
----- -----
Total $ 11 $ 434
===== =====
The Partnership's notes receivable from cable television system
operators provide for a monthly payment rate in an amount that is less than the
contractual interest rate. The difference between the payment rate and the
contractual interest rate was added to the principal and therefore deferred
until the maturity date of the note. Upon maturity of the note, the original
principal and deferred interest is due and payable in full. Although the
contractual interest rates may be higher, due to a high degree of uncertainty
relating to the collection of the entire amount of contractually owed interest,
the Partnership limited the amount of interest being recognized on the
Partnership's performing notes receivable to cable television system operators
to the amount of the payments received, thereby deferring the recognition of a
portion of the deferred interest until such time as management believes it will
be realized.
Generally, notes receivable are classified as impaired and the accrual
of interest on such notes are discontinued when the contractual payment of
principal or interest has become 90 days past due or management has serious
doubts about further collectibility of the contractual payments. Any payments
received subsequent to the placement of the note receivable on to impaired
status will generally be applied towards the reduction of the outstanding
<PAGE>
Page 17 of 30
note receivable balance, which may include previously accrued interest as well
as principal. Once the principal and accrued interest balance has been reduced
to zero, the remaining payments will be applied to interest income.
At December 31, 1995, the recorded investment in notes that are
considered to be impaired under Statement 114 was $11,000, for which there is no
allowance. The average recorded investment in impaired loans during the year
ended December 31, 1995 was approximately $128,000.
During the year ended December 31, 1995, the Partnership received a
settlement on one note receivable which was considered to be impaired under
Statement No. 114. The Partnership received $591,000 as a settlement for this
note receivable of which $462,000 was applied towards the outstanding note
receivable balance and the remaining $129,000 applied to interest income. There
was no related allowance for this note receivable. The remaining general
allowance for losses on notes receivable balance of $53,000 was no longer
necessary due to the payment of this note receivable. As a result, the remaining
allowance for loan losses was reduced to zero through the recognition of income.
The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:
1995 1994
---- ----
(Amounts in Thousands)
Beginning balance $ 53 $ 53
Provision for (recovery of) losses (53) --
Write downs -- --
---- ----
Ending balance $-- $ 53
==== ====
Note 5. Equipment on Operating Leases and Investment in Financing Leases.
Equipment on lease consists primarily of small computer systems and
reproduction equipment subject to operating and financing leases.
The Partnership has agreements with some of the manufacturers of
certain of its equipment, whereby such manufacturers undertake to remarket
off-lease equipment on a best efforts basis. These agreements permit the
Partnership to assume the remarketing function directly if certain conditions
contained in the agreements are not met. For their remarketing services, the
manufacturers are paid a percentage of net monthly rentals. Certain
manufacturers are entitled to additional fees after the Partnership has
recovered certain amounts. Generally, these manufacturers provide maintenance of
the leased equipment for a fee based on net monthly rentals.
The Partnership has also entered into direct lease arrangements with
certain lessees. Generally, it is the responsibility of the lessee to provide
maintenance on leased equipment. The General Partner administers the equipment
portfolio of leases acquired through the direct leasing program. Administration
includes the collection of rents from the lessees and remarketing of the
equipment.
The net investment in financing leases consists of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Minimum lease payments to be received $ -- $ 2
Estimated residual value of leased equipment
(unguaranteed) -- --
Less: unearned income -- --
allowance for loss from early terminations -- --
---- ----
Net investment in financing leases $ -- $ 2
==== ====
<PAGE>
Page 18 of 30
Minimum rentals to be received on noncancelable operating leases for
the years ended December 31 are as follows:
(Amounts in Thousands)
1996 ........................................ $ 60
1997 ........................................ --
1998 ........................................ --
1999 ........................................ --
2000 ........................................ --
Thereafter .................................. --
----
Total .................................. $ 60
====
The net book value of equipment held for lease at December 31, 1995 and
1994 amounted to $0 and $2,000, respectively.
Note 6. Investment in Joint Ventures.
Equipment Joint Ventures
The Partnership owns a limited or general partnership interest in
equipment joint ventures. These investments are accounted for using the equity
method of accounting. The other partners of the ventures are entities organized
and managed by the General Partner.
The purpose of the joint ventures is the acquisition and leasing of
various types of equipment. During the term of the Partnership, Phoenix Leasing
Income Fund 1981 has participated in the following equipment joint ventures:
Weighted
Joint Venture Percentage Interest
------------- -------------------
PLI Limited Partnership Fund A(2) 5.58%
Leveraged Joint Venture 1985(1) 14.11
Leveraged Joint Venture 1986(2) 7.66
Arroyo Joint Venture VII(1) 34.39
Arroyo Joint Venture IX(1) 20.28
Arroyo Joint Venture XV(2) 18.55
Arroyo Joint Venture XVII(1) 17.69
Xerox Graphics Joint Venture(1) 12.59
Leveraged Joint Venture 1987-1(1) 10.25
Leveraged Joint Venture 1987-2 14.33
Leveraged Joint Venture 1987-3 5.31
Leveraged Joint Venture 1990-1 8.82
Phoenix Micro Joint Venture 32.17
Phoenix Joint Venture 1994-1 2.93
(1) Closed during 1994
(2) Closed during 1995
<TABLE>
An analysis of the Partnership's investment in equipment joint ventures
is as follows:
<PAGE>
Page 19 of 30
<CAPTION>
Net Investment Net Investment
at Beginning Equity in at End
Date of Period Contributions Earnings Distributions of Period
- ---- -------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $ 387 $ 2 $ 4 $ 347 $ 46
======== ====== ====== ======== ========
Year Ended
December 31, 1994 $ 46 $ 151 $ 93 $ 109 $ 181
======== ====== ====== ======== ========
Year Ended
December 31, 1995 $ 181 $ - $ 98 $ 189 $ 90
======== ====== ====== ======== ========
</TABLE>
The aggregate combined financial information of the equipment joint
ventures as of December 31 and for the years then ended is presented as follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 611 $ 456
Accounts receivable 1,780 2,227
Operating lease equipment 1,021 2,538
Other assets 690 919
------ ------
Total Assets $4,102 $6,140
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 973 $1,077
Partners' capital 3,129 5,063
------ ------
Total Liabilities and Partners' Capital $4,102 $6,140
====== ======
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Rental income $3,875 $3,401 $5,150
Gain on sale of equipment 1,766 1,315 1,642
Other income 724 263 49
------ ------ ------
Total Income 6,365 4,979 6,841
------ ------ ------
<PAGE>
Page 20 of 30
EXPENSES
Depreciation 1,188 1,252 1,870
Lease related operating expenses 2,964 2,797 4,522
Management fee to the General Partner 285 242 359
Interest expense 1 1 --
Other expenses 276 37 157
------- ------- -------
Total Expenses 4,714 4,329 6,908
------- ------- -------
Net Income (Loss) $ 1,651 $ 650 $ (67)
======= ======= =======
As of December 31, 1995 and 1994, the Partnership's pro rata interest
in the equipment joint ventures' net book value of off-lease equipment was
$3,000 and $10,000, respectively.
The General Partner earns a management fee of 6% of the Partnership's
respective interest in gross revenues of each equipment joint venture. Revenues
subject to management fees at the joint venture level are not subject to
management fees at the Partnership level.
Financing Joint Ventures
The Partnership has invested in financing joint ventures which are
combined for reporting purposes into Phoenix Funding Partnership (PFP). The
Partnership's current investment in PFP as of December 31, 1995 consists of two
financing joint ventures. The purpose of the financing joint ventures is to
provide, on a limited basis, financing to manufacturers and their lessees for
equipment leased directly by manufacturers to third parties. All loans to
manufacturers are secured by equipment. The Partnership uses the equity method
of accounting to account for its investment in the PFP.
PFP periodically reviews the probability of recovering the outstanding
note balances. Such reviews address, among other things, current cash receipts,
costs of collection efforts, the current economic situation and potential
uncollectible receivables. If the review indicates that future cash receipts,
net of anticipated future expenses, does not exceed the outstanding note
balances, PFP provides a reserve for any anticipated loan loss as appropriate.
Due to a high degree of uncertainty relating to the collection of the
entire amount of contractually owed principal and interest over the lives of the
notes receivable, the remaining PFP loan portfolios apply all cash receipts
(principal and interest) to the outstanding note balances. Under this method,
interest income will not be recognized until the outstanding note balances are
recovered.
The following information summarizes the Partnership's respective
interest in the original loan proceeds of the funding partnership.
Weighted
Joint Venture Percentage Interest
------------- -------------------
Phoenix Funding Partnership 2.67%
<TABLE>
An analysis of the Partnership's investment account in financing joint
ventures is as follows:
<PAGE>
Page 21 of 30
<CAPTION>
Net Investment Equity in Net Investment
at Beginning Earnings at End
Date of Period Contributions (Losses) Distributions of Period
- ---- -------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $ 27 $ - $ (3) $ 14 $ 10
====== ==== ===== ===== =====
Year Ended
December 31, 1994 $ 10 $ - $ 1 $ 9 $ 2
====== ==== ===== ===== =====
Year Ended
December 31, 1995 $ 2 $ - $ 4 $ 5 $ 1
====== ==== ===== ===== =====
</TABLE>
The aggregate combined financial information of the financing joint
ventures as of December 31 and for the years then ended is presented as follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $28 $34
Notes receivable, net -- 25
--- ---
Total Assets $28 $59
=== ===
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 5 $ 1
Partners' capital 23 58
--- ---
Total Liabilities and Partners' Capital $28 $59
=== ===
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Interest income $ 73 $ 86 $ 1
Other income 77 18 19
----- ----- -----
Total Income 150 104 20
----- ----- -----
EXPENSES
Management fee to the General Partner 7 19 31
Other expenses 20 44 72
----- ----- -----
Total Expenses 27 63 103
----- ----- -----
Net Income (Loss) $ 123 $ 41 $ (83)
===== ===== =====
The General Partner earns a management fee of 6% of the Partnership's
respective interest in gross payments received for each financing joint venture.
Revenues subject to a management fee at the joint venture level are not subject
to management fees at the Partnership level.
<PAGE>
Page 22 of 30
Foreclosed Cable Systems Joint Venture
The Partnership owns an interest in a foreclosed cable system joint
venture, along with other partnerships managed by the General Partner and its
affiliates. The Partnership foreclosed upon the nonperforming outstanding note
receivable from a cable television operator to whom the Partnership, along with
other affiliated partnerships managed by the General Partner, had extended
credit. The partnerships' notes receivable were exchanged for interests (their
capital contribution), on a pro rata basis, in a newly formed joint venture
owned by the partnerships and managed by the General Partner. Title to the cable
television system is held by the joint venture. This investment is accounted for
using the equity method of accounting.
The joint venture owned by the Partnership, along with its percentage
ownership is as follows:
Weighted
Joint Venture Partnership Interest
------------- --------------------
Phoenix Concept Cablevision, Inc. 5.80%
<TABLE>
<CAPTION>
Net Investment Net Investment
at Beginning Equity in at End
Date of Period Contributions Earnings Distributions of Period
- ---- -------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1994 $ - $ 77 $ 1 $ - $ 78
====== ======= ===== ===== ======
Year Ended
December 31, 1995 $ 78 $ - $ - $ 4 $ 74
====== ======= ===== ===== ======
</TABLE>
The financial information of the foreclosed cable systems joint venture
as of December 31 and for the years then ended is presented as follows:
BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 194 $ 111
Accounts receivable 59 62
Property, cable system and equipment 997 1,085
Cable subscriber list and franchise rights 116 145
Deferred income taxes 118 142
Other assets 19 18
------ ------
Total Assets $1,503 $1,563
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 225 $ 208
Notes payable -- 11
Partners' capital 1,278 1,344
------ ------
Total Liabilities and Partners' Capital $1,503 $1,563
====== ======
<PAGE>
Page 23 of 30
STATEMENTS OF OPERATIONS
INCOME
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Subscriber revenue $ 589 $ 198
Other income 5 1
----- -----
Total Income 594 199
----- -----
EXPENSES
Depreciation and amortization 200 50
Program services 180 72
Management fees to an affiliate
of the General Partner 27 9
General and administrative expenses 135 36
Provision for losses on accounts receivable 6 2
----- -----
Total Expenses 548 169
----- -----
Net Income before Income Taxes 46 30
Income tax expense (39) (19)
----- -----
Net Income $ 7 $ 11
===== =====
Phoenix Cable Management Inc. (PCMI), an affiliate of the General
Partner, provides day to day management services in connection with the
operation of the Foreclosed Cable Systems Joint Venture. The Foreclosed Cable
Systems Joint Venture will pay a management fee equal to four and one-half
percent of the System's monthly gross revenue for these services. Revenues
subject to a management fee at the joint venture level will not be subject to
management fees at the Partnership level.
Note 7. Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses consist of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Equipment lease operations $ 4 $ 38
General Partners and Affiliates 2 5
Other 42 67
---- ----
Total $ 48 $110
==== ====
Note 8. Settlements.
On July 1, 1991, Phoenix Leasing Incorporated, as General Partner to
the Partnership and sixteen other affiliated partnerships, filed suit in the
Superior Court for the County of Marin, Case No. 150016, against Xerox
Corporation, a corporation with which the General Partner had entered into
contractual agreements for the acquisition and administration of leased
equipment. The lawsuit was settled out of court, effective as of October 28,
1994, pursuant to the terms of a Confidential Settlement Agreement and Mutual
Release. The settlement agreement generally provides for compensation payable to
the Partnership and its affiliates in cash and kind, including the assignment by
Xerox of certain goods and services. The agreement further provides for the sale
by Xerox to the Partnership and its affiliates of equipment subject to lease.
The suit has been dismissed with prejudice on the merits.
<PAGE>
Page 24 of 30
The Partnership's pro rata share of the Xerox settlement was $111,000,
which consists of cash of $44,000, and assigned monthly rentals and credits for
goods and services valued at $67,000. In addition, the Partnership purchased
additional leased equipment at an aggregate cost of $67,000. The Partnership,
along with sixteen other affiliated partnerships managed by the General Partner,
contributed its share of the assigned monthly rentals, credits for goods and
services and purchased equipment leases totaling $134,000 to a joint venture, in
exchange for an interest in the joint venture.
Storage Technology Corporation (STC), a major manufacturer of equipment
purchased by the Partnership, filed for protection from creditors under Chapter
11 of the Federal Bankruptcy Code on October 14, 1984. On June 18, 1987 STC's
plan of reorganization was approved and the Partnership received a settlement.
On August 31, 1994, the United States Bankruptcy Court for the District
of Colorado ordered a final distribution from the Disputed Claims Reserve which
was provided for in the Debtors' Joint Plan of Reorganization. On December 23,
1994, the Partnership received its pro rata share of the final distribution from
the Disputed Claims Reserve valued at $77,000. The final distribution consisted
of cash of $36,000 and common stock valued at $41,000.
Note 9. Liquidation Fees.
The General Partners are entitled to 11.688% of all cash distributions.
Distributions in excess of the General Partners' capital account are
characterized as liquidation fees. If the Partnership were to dissolve, the
General Partners would not be liable to the Partnership for the negative capital
account to the extent of the liability. The fee represents an expense of the
Partnership and is specifically allocated to the Limited Partners.
Note 10. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements.
The net difference between the tax basis and the reported amounts of
the Partnership's assets and liabilities is as follows at December 31:
Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
(Amounts in Thousands)
1995
- ----
Assets $1,354 $1,397 $ (43)
Liabilities 48 44 4
1994
- ----
Assets $2,312 $2,396 $ (84)
Liabilities 110 110 0
Note 11. Related Entities.
The Corporate General Partner serves in the capacity of general partner
in other partnerships, all of which are engaged in the equipment leasing and
financing business.
The Corporate General Partner incurs certain expenses, such as data
processing, equipment storage and equipment remarketing costs, for which it is
reimbursed by the Partnership. Equipment remarketing costs are incurred as the
Corporate General Partner remarkets certain equipment on behalf of the
Partnership. These expenses incurred by the Corporate General Partner are
reimbursed at the lower of the actual costs or an amount equal to 90% of the
<PAGE>
Page 25 of 30
fair market value for such services. The equipment remarketing costs reimbursed
to the Corporate General Partner were $0, $0 and $5,000 for the years ended
December 31, 1995, 1994 and 1993, respectively.
Note 12. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income and distributions per limited partnership unit were based on
the limited partner's share of net income and distributions, and the weighted
average number of units outstanding of 18,762 for the years ended December 31,
1995, 1994 and 1993. For purposes of allocating income (loss) and distributions
to each individual limited partner, the Partnership allocates net income (loss)
and distributions based upon each respective limited partner's ending capital
account balance. The use of this method accurately reflects each limited
partner's participation in the Partnership including reinvestment through the
Capital Accumulation Plan. As a result, the calculation of net income (loss) and
distributions per limited partnership unit is not indicative of per unit income
(loss) and distributions due to reinvestments through the Capital Accumulation
Plan.
Note 13. Fair Value of Financial Instruments.
During the year ended December 31, 1995, the Partnership adopted
Statement of Financial Accounting Standard No. 107, "Disclosures about Fair
Value of Financial Instruments," which requires disclosure of the fair value of
financial instruments for which it is practicable to estimate fair value. The
following methods and assumptions were used to estimate the fair value of each
class of financial instrument which it is practicable to estimate that value.
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Notes Receivable
The fair value of notes receivable is estimated based on the lesser of the
discounted expected future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings, or the estimated
fair value of the underlying collateral. Please refer to footnote 4 for a
description of the Partnership's accounting policies on notes receivable which
contribute to the difference between the carrying amount and the fair value.
Marketable Securities
The fair values of investments in marketable securities are estimated based on
quoted market prices.
The estimated fair values of the Partnership's financial instruments at
December 31, 1995 are as follows:
Carrying
Amount Fair Value
-------- ----------
(Amounts in Thousands)
Assets
Cash and cash equivalents $1,127 $1,127
Marketable securities 30 30
Notes receivable 11 13
Note 14. Subsequent Events.
In January 1996, cash distributions of $563,000 were made to the
Limited Partners.
<PAGE>
Page 26 of 30
Item 9. Disagreements on Accounting and Financial Disclosure Matters.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The registrant is a limited partnership and, therefore, has no
executive officers or directors. The corporate general partner of the registrant
is Phoenix Leasing Incorporated, a California corporation. Gus Constantin serves
as an individual general partner. The directors and executive officers of
Phoenix Leasing Incorporated (PLI) are as follows:
GUS CONSTANTIN, age 58, is President, Chief Executive Officer and a
Director of PLI. Mr. Constantin received a B.S. degree in Engineering from the
University of Michigan and a Master's Degree in Management Science from Columbia
University. From 1969 to 1972, he served as Director, Computer and Technical
Equipment of DCL Incorporated (formerly Diebold Computer Leasing Incorporated),
a corporation formerly listed on the American Stock Exchange, and as Vice
President and General Manager of DCL Capital Corporation, a wholly-owned
subsidiary of DCL Incorporated. Mr. Constantin was actively engaged in marketing
manufacturer leasing programs to computer and medical equipment manufacturers
and in directing DCL Incorporated's IBM System/370 marketing activities. Prior
to 1969, Mr. Constantin was employed by IBM as a data processing systems
engineer for four years. Mr. Constantin is an individual general partner in four
active partnerships and is an NASD registered principal. Mr. Constantin is the
founder of PLI and the beneficial owner of all of the common stock of Phoenix
American Incorporated.
PARITOSH K. CHOKSI, age 42, is Senior Vice President, Chief Financial
Officer and Treasurer of PLI. He has been associated with PLI since 1977. Mr.
Choksi oversees the finance, accounting, information services and systems
development departments of the General Partner and its Affiliates and oversees
the structuring, planning and monitoring of the partnerships sponsored by the
General Partner and its Affiliates. Mr. Choksi graduated from the Indian
Institute of Technology, Bombay, India with a degree in Engineering. He holds an
M.B.A. degree from the University of California, Berkeley.
GARY W. MARTINEZ, age 45, is Senior Vice President of PLI. He has
been associated with PLI since 1976. He manages the Asset Management Department,
which is responsible for lease and loan portfolio management. This includes
credit analysis, contract terms, documentation and funding; remittance
application, change processing and maintenance of customer accounts; customer
service, invoicing, collection, settlements and litigation; negotiating lease
renewals, extensions, sales and buyouts; and management information reporting.
From 1973 to 1976, Mr. Martinez was a Loan Officer with Crocker National Bank,
San Francisco. Prior to 1973, he was an Area Manager with Pennsylvania Life
Insurance Company. Mr. Martinez is a graduate of California State University,
Chico.
BRYANT J. TONG, age 41, is Senior Vice President, Financial
Operations of PLI. He has been with PLI since 1982. Mr. Tong is responsible for
investor services and overall company financial operations. He is also
responsible for the technical and administrative operations of the cash
management, corporate accounting, partnership accounting, accounting systems,
internal controls and tax departments, in addition to Securities and Exchange
Commission and other regulatory agency reporting. Prior to his association with
PLI, Mr. Tong was Controller-Partnership Accounting with the Robert A. McNeil
Corporation for two years and was an auditor with Ernst & Whinney (succeeded by
Ernst & Young) from 1977 through 1980. Mr. Tong holds a B.S. in Accounting from
the University of California, Berkeley, and is a Certified Public Accountant.
CYNTHIA E. PARKS, age 40, is Vice President, General Counsel,
Assistant Secretary and a Director of PLI. Prior to joining PLI in 1984, she was
with GATX Leasing Corporation, and had previously been Corporate Counsel for
Stone Financial Companies, and an Assistant Vice President of the Bank of
America, Bank Amerilease Group. She has a Bachelor's degree from Santa Clara
University, and earned her J.D. from the University of San Francisco School of
Law.
HOWARD SOLOVEI, age 34, is Vice President, Finance, Assistant Treasurer
and a Director of PLI. He has been associated with PLI since 1984. Mr. Solovei's
principal activities are in the areas of arranging and managing the company's
banking relationships for its various corporations, partnerships and securitized
asset pools. Mr. Solovei is also involved in corporate financial planning and
<PAGE>
Page 27 of 30
various data processing-related projects. Mr. Solovei graduated with a B.S. in
Business from the University of California at Berkeley in 1984.
Neither the General Partner nor any Executive Officer of the General
Partner has any family relationship with the others.
Phoenix Leasing Incorporated or its affiliates and the executive
officers of the General Partner serve in a similar capacity to the following
affiliated limited partnerships:
Phoenix Leasing American Business Fund, L.P.
Phoenix Leasing Cash Distribution Fund V, L.P.
Phoenix Income Fund, L.P.
Phoenix High Tech/High Yield Fund
Phoenix Leasing Cash Distribution Fund IV
Phoenix Leasing Cash Distribution Fund III
Phoenix Leasing Cash Distribution Fund II
Phoenix Leasing Capital Assurance Fund
Phoenix Leasing Income Fund VII
Phoenix Leasing Income Fund VI
Phoenix Leasing Growth Fund 1982 and
Phoenix Leasing Income Fund 1977
Item 11. Executive Compensation.
<TABLE>
Set forth is the information relating to all direct remuneration paid
or accrued by the Registrant during the last year to the General Partner.
(A) (B) (C) (D)
<CAPTION>
Cash and cash- Aggregate of
Name of individual Capacities in equivalent forms contingent forms
or persons in group which served of remuneration of remuneration
- ------------------- ------------- ----------------------------------------------------- -----------------
(C1) (C2)
Securities or property
Salaries, fees, directors' insurance benefits or
fees, commissions, and reimbursement, personal
bonuses benefits
-------------------------- -----------------------
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Phoenix Leasing
Incorporated General Partner $ 77(1) $0 $0
Gus Constantin General Partner 14(2) 0 0
--- - -
All General Partners $91 $0 $0
== = =
</TABLE>
(1) consists of management and liquidation fees.
(2) consists of liquidation fees.
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 any class of voting
securities of the Registrant.
(b) The General Partners of the Registrant own the equity securities
of the Registrant set forth in the following table:
<PAGE>
Page 28 of 30
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
General Partner Interest:
Mr. Gus Constantin, Represents a 3.896% interest 33.3%
Individual General Partner in the Registrant's profits,
losses and distributions.
General Partner Interest:
Phoenix Leasing Incorporated, Represents a 7.792% interest 66.7%
Corporate General Partner in the Registrant's profits,
losses and distributions.
Limited Partner Interest:
Phoenix Leasing Incorporated, 222 units 1.18%
Corporate General Partner
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page No.
--------
(a) 1. Financial Statements:
Report of Independent Public Accountants 9
Balance Sheets as of December 31, 1995 and 1994. 10
Statements of Operations for the Years Ended
December 31, 1995, 1994 and 1993 11
Statements of Partners' Capital for the Years
Ended December 31, 1995, 1994 and 1993 12
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 13
Notes to the Financial Statements 14-25
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts and Reserves 30
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the year ended December 31, 1995.
(c) Exhibits:
27. Financial Data Schedule.
<PAGE>
Page 29 of 30
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.
PHOENIX LEASING INCOME FUND 1981
(Registrant)
BY: PHOENIX LEASING INCORPORATED,
A CALIFORNIA CORPORATION
GENERAL PARTNER
Date: March 28, 1996 By: /S/ GUS CONSTANTIN
-------------- -------------------------
Gus Constantin, President
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.
Signature Title Date
--------- ----- ----
/S/ GUS CONSTANTIN President, Chief Executive Officer and a March 28, 1996
- ----------------------- Director of Phoenix Leasing Incorporated --------------
(Gus Constantin) General Partner
/S/ PARITOSH K. CHOKSI Chief Financial Officer, March 28, 1996
- ----------------------- Senior Vice President --------------
(Paritosh K. Choksi) and Treasurer of
Phoenix Leasing Incorporated
General Partner
/S/ BRYANT J. TONG Senior Vice President, Financial March 28, 1996
- ----------------------- Operations of --------------
(Bryant J. Tong) (Principal Accounting Officer)
Phoenix Leasing Incorporated
General Partner
/S/ GARY W. MARTINEZ Senior Vice President of March 28, 1996
- ----------------------- Phoenix Leasing Incorporated --------------
(Gary W. Martinez) General Partner
/S/ HOWARD SOLOVEI Vice President, Finance March 28, 1996
- ----------------------- Assistant Treasurer and a --------------
(Howard Solovei) Director of Phoenix Leasing Incorporated
General Partner
/S/ MICHAEL K. ULYATT Partnership Controller March 28, 1996
- ----------------------- Phoenix Leasing Incorporated --------------
(Michael K. Ulyatt) General Partner
<PAGE>
Page 30 of 30
<TABLE>
PHOENIX LEASING INCOME FUND 1981
SCHEDULE II
(Amounts in Thousands)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Classification Balance at Charged to Charged to Deductions Balance at
Beginning of Expense Revenue End of
Period Period
-------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for losses on accounts
receivable $27 $ 0 $ 0 $ 0 $27
Allowance for early termination
of financing leases 1 1 0 0 2
Allowance for losses on notes
receivable 41 12 0 0 53
--- --- --- --- ---
Totals $69 $13 $ 0 $ 0 $82
=== === === === ===
Year ended December 31, 1994
Allowance for losses on accounts
receivable $27 $ 0 $ 0 $19 $ 8
Allowance for early termination
of financing leases 2 0 2 0 0
Allowance for losses on notes
receivable 53 0 0 0 53
--- --- --- --- ---
Totals $82 $ 0 $ 2 $19 $61
=== === === === ===
Year ended December 31, 1995
Allowance for losses on accounts
receivable $ 8 $ 0 $ 0 $ 4 $ 4
Allowance for losses on notes
receivable 53 0 0 53 0
--- --- --- --- ---
Totals $61 $ 0 $ 0 $57 $ 4
=== === === === ===
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,127
<SECURITIES> 0
<RECEIVABLES> 21
<ALLOWANCES> 4
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 373
<DEPRECIATION> 360
<TOTAL-ASSETS> 1,354
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,306
<TOTAL-LIABILITY-AND-EQUITY> 1,354
<SALES> 0
<TOTAL-REVENUES> 435
<CGS> 0
<TOTAL-COSTS> 106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (53)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 329
<INCOME-TAX> 0
<INCOME-CONTINUING> 329
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 329
<EPS-PRIMARY> 15.22
<EPS-DILUTED> 0
</TABLE>
