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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 0-12594
PHOENIX LEASING INCOME FUND VI
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 94-2869603
- ------------------------------- ------------------------------------
(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, 297,165 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
<PAGE>
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PHOENIX LEASING INCOME FUND VI
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................................. 5
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
<PAGE>
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PART I
Item 1. Business.
Summary of Business Activities.
Phoenix Leasing Income Fund VI, a California limited partnership (the
"Partnership"), was organized on October 29, 1981. The Partnership was
registered with the Securities and Exchange Commission with an effective date of
January 1, 1983 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, 1997. 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 240,000 units of limited
partnership interest at a price of $250 per unit with an option of increasing
the public offering up to a maximum of 320,000 units. The Partnership sold
320,000 units for a total capitalization of $80,103,000. Of the proceeds
received through the offering, the Partnership has incurred $8,971,000 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 $162,669,000. The average initial firm term of
contractual payments from equipment subject to lease was 28 months, and the
average initial net monthly payment rate as a percentage of the original
purchase price was 3.37%. The average initial firm term of contractual payments
from loans was 74 months.
The Partnership's principal objective is to produce current income and
to build and maintain a balanced portfolio of assets 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 has 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 assets.
Such security interests will give the Partnership the right, upon a default, 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). Generally, the impact of these factors to the
Partnership would be the realization of increased equipment remarketing and
storage costs, as well as lower residuals received from the sale or remarketing
of such equipment.
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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.
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 $4,622,000.
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 Type Purchase Price(1) Total Assets
---------- ----------------- ------------
(Amounts in Thousands)
Financing of Solar Systems $ 1,896 41%
Reproduction Equipment 1,680 36
Small Computer Systems 1,046 23
-------- ---
TOTAL $ 4,622 100%
======== ===
(1) These amounts include the Partnership's pro rata interest in equipment
joint ventures of $1,680,000 and financing joint ventures of $1,896,000 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.
<PAGE>
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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 12,010
<TABLE>
Item 6. Selected Financial Data.
<CAPTION>
Amounts in Thousands Except for Per Unit Amounts
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total Income $ 1,121 $ 1,738 $ 909 $ 2,652 $ 3,799
Net Income (Loss) 1,007 1,351 (28) (264) (620)
Total Assets 3,287 5,792 8,679 10,452 14,401
Distributions to Partners 2,228 2,228 2,229 2,229 2,435
Net Income (Loss) per Limited Partnership Unit(1) 2.88 3.88 (.09) (1.49) (2.28)
Distributions per Limited Partnership Unit 7.50 7.50 7.50 7.50 8.19
</TABLE>
(1) Net Income (Loss) per Limited Partnership unit is not indicative of per
unit income (loss) due to reinvestments through the Capital Accumulation
Plan.
The above selected financial data should be read in conjunction with
the financial statements and related notes appearing elsewhere in this report.
<PAGE>
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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 VI (the Partnership) reported net income of
$1,007,000 for the year ended December 31, 1995, compared to net income of
$1,351,000 for the year ended December 31, 1994 and a net loss of $28,000 for
the year ended December 31, 1993. The decrease in net income during 1995,
compared to 1994, is attributable to a decrease in rental and settlement income,
offset by an increase in interest income from notes receivable. The increase in
net income during the year ended December 31, 1994 was primarily attributable to
settlement income.
Total revenues during the year ended December 31, 1995 is $1,121,000
compared to $1,738,000 and $909,000 for 1994 and 1993, respectively. The
decrease in total revenues during the year ended December 31, 1995 is primarily
attributable to a decline in rental income and the absence of settlement income.
The decrease in rental income of $121,000 for the year ended December
31, 1995, compared to 1994, is attributable to a reduction in the size of the
equipment portfolio as a result of sales. The Partnership owned equipment
subject to both operating and financing leases, excluding its pro rata interest
in equipment joint ventures, with an aggregate original cost of $1,045,000 at
December 31, 1995, compared to $4,002,000 at December 31, 1994.
The Partnership recognized interest income from a note receivable of
$331,000 for the year ended December 31, 1995, compared to $0 for the years
ended December 31, 1994 and 1993. During the second quarter of 1995, the
Partnership received a settlement from its one remaining note receivable which
had been classified as impaired. The amount received as the settlement was first
applied towards the outstanding note receivable balance and the remainder in
excess of the carrying amount of the note was recognized as interest income.
Due to the settlement of the Partnership's last remaining note
receivable, the balance of the general allowance for losses on notes receivable
was no longer necessary. As a result, the remaining balance of $146,000 was
recognized as income which contributed to decreasing total expenses for the year
ended December 31, 1995.
The increase in total revenues for 1994, compared to 1993, was due to
the receipt of settlement income of $754,000 and an increase in earnings from
joint ventures which will be discussed under "Joint Ventures". The settlement
income recognized during 1994 was composed of cash, common stock, receivables,
assigned rents from a pool of leased equipment, and credits for goods and
services. The settlement income consisted of settlements from several
manufacturers of equipment that the Partnership had entered into contractual
agreements for the purchase of leased equipment.
Total expenses for the year ended December 31, 1995, 1994 and 1993 were
$114,000, $387,000 and $937,000, respectively. The decrease during the year
ended December 31, 1995 is due to a $146,000 decrease in the provision for
losses on notes receivable. The Partnership experienced decreases in most other
expense categories during the year ended December 31, 1995, when compared to the
same period in 1994. The decrease in expenses for the year ended 1994 was
primarily due to the decrease in depreciation expense. The decline in
depreciation expense for both 1995 and 1994 was a result of the reduction in the
size of the equipment portfolio due to sales and an increasing portion of the
equipment portfolio being fully depreciated.
Management fees to the General Partner increased by $43,000 for the
year ended December 31, 1995, compared to 1994, due to the payoff of an
outstanding note receivable.
Because the Partnership is in its liquidation stage, it is not expected
that the Partnership will acquire any additional equipment. As a result, lease
related revenues and expenses are expected to continue to decline as the
portfolio is liquidated and the remaining equipment is re-leased at lower rental
rates. The Partnership will reach the end of it term on December 31, 1997.
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
<PAGE>
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investments are anticipated to continue to decline as the portfolios are
re-leased at lower rental rates and eventually liquidated.
The Partnership recognized earnings from joint ventures of $260,000,
$234,000 and $83,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. The increase in earnings during 1995 is due to the earnings from
an investment in a new joint venture that was formed upon the receipt of a legal
settlement during October of 1994. The improvement in earnings from joint
ventures for 1994 was attributable to the decline in 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.
Revenues and expenses are expected to continue to decline as their portfolios
are liquidated and the remaining equipment is re-leased at lower rental rates.
In addition to the sales activity factor, depreciation expense also declined as
a result of the equipment joint ventures' equipment portfolio approaching the
end of their depreciable lives. The reduction in lease related operating
expenses, mainly maintenance and remarketing and refurbishing costs, was
attributable to several joint ventures.
Additional factors contributing to the increase in earnings from
equipment joint venture for the year ended December 31, 1994 were the
recognition of settlement income in one equipment joint venture and an
investment in a new equipment joint venture being made in 1994.
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.
Liquidity and Capital Resources
During the year ended December 31, 1995, the net cash provided by
leasing and financing activities was $471,000, as compared to the net cash used
by leasing and financing activities of $1,013,000 during 1994 and net cash
provided of $1,335,000 during 1993. The increase in cash generated for the year
ended December 31, 1995 is due to the payoff of an outstanding note receivable.
This is partially offset by a decrease in accounts payable due to the payment of
liquidation fees payable to the General Partner. In contrast, the net cash used
by leasing and financing activities for 1994 was attributable to a decrease in
accounts payable and accrued expenses which was due to a payment of liquidation
fees to the General Partner.
The distributions from joint ventures continues to be one of the
primary sources of cash generated by the Partnership. Cash distributions from
joint ventures were $530,000, $279,000 and $645,000 for the years ended December
31, 1995, 1994 and 1993, respectively. The increase during the year ended 1995
is primarily attributable to a new investment made in a new joint venture during
October of 1994. In addition, one equipment joint venture experienced an
increase in cash available as a result of a decline in lease related operating
expenses. The decrease in distributions from equipment joint ventures for 1994,
compared to 1993, was due to one equipment joint venture experiencing a decline
in cash available for distributions as a result of a decrease in sales proceeds
and one financing joint venture experiencing a decline in payment received on
its note receivable.
The Partnership owned equipment held for lease with a purchase price
of $499,000, $2,702,000, and $4,965,000 and a net book value of $0, $0 and
$29,000 at December 31, 1995, 1994 and 1993, respectively. 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 their annual distributions of $2,228,000
for the years ended December 31, 1995 and 1994 and $2,229,000 for the year ended
December 31, 1993. As a result, the cumulative cash distributions to the Limited
Partners are $73,687,000, $71,459,000 and $69,231,000 at December 31, 1995,
1994, 1993, respectively. The General Partner did not receive distributions
during the year ended December 31, 1995, 1994 and 1993.
Distributions are made on an annual basis with a distribution date of
January 15. The distribution made in January of 1995 was at approximately the
same rate as January of 1994. The distribution made in January of 1996 was the
same amount as the distribution made in January of 1995.
As the Partnership's asset portfolio continues to decline as a result
of the on-going liquidation of assets, it is expected that the cash generated
from operations will also decline. Cash generated from leasing and financing
operations has been and is anticipated to continue to be sufficient to meet the
Partnership's on-going operational expenses.
<PAGE>
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHOENIX LEASING INCOME FUND VI
YEAR ENDED DECEMBER 31, 1995
<PAGE>
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Phoenix Leasing Income Fund VI:
We have audited the accompanying balance sheets of Phoenix Leasing Income Fund
VI (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 VI
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 VI
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
December 31,
1995 1994
---- ----
ASSETS
Cash and cash equivalents $ 2,708 $ 3,892
Accounts receivable (net of allowance for
losses on accounts receivable of $22 and
$35 at December 31, 1995 and 1994, respectively) 30 48
Note receivable (net of allowance for losses on
note receivable of $0 and $146 at December 31,
1995 and 1994, respectively) - 992
Equipment on operating leases and held for lease
(net of accumulated depreciation of $746 and
$3,337 at December 31, 1995 and 1994, respectively) 4 13
Investment in joint ventures 415 697
Other assets 130 150
------- -------
Total Assets $ 3,287 $ 5,792
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 1,471 $ 2,747
------- -------
Total Liabilities 1,471 2,747
------- -------
Partners' Capital:
General Partner 394 243
Limited Partners, 320,000 units authorized
and issued, 297,165 units outstanding at
December 31, 1995 and 1994 1,460 2,832
Unrealized losses on available-for-sale securities (38) (30)
------- -------
Total Partners' Capital 1,816 3,045
------- -------
Total Liabilities and Partners' Capital $ 3,287 $ 5,792
======= =======
The accompanying notes are an intregal
part of these statements.
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PHOENIX LEASING INCOME FUND VI
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
INCOME
Rental income $ 403 $ 524 $ 600
Equity in earnings from joint
ventures, net 260 234 83
Interest income, notes receivable 331 - -
Settlement - 754 -
Other income 127 226 226
------- ------- -------
Total Income 1,121 1,738 909
------- ------- -------
EXPENSES
Depreciation 9 92 475
Lease related operating expenses 2 41 83
Management fees to General Partner 116 73 80
Provision for losses on receivables (136) (58) 83
General and administrative expenses 123 239 216
------- ------- -------
Total Expenses 114 387 937
------- ------- -------
NET INCOME (LOSS) $ 1,007 $ 1,351 $ (28)
======= ======= =======
NET INCOME (LOSS) PER LIMITED
PARTNERSHIP UNIT $ 2.88 $ 3.88 $ (.09)
======= ======= =======
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 151 $ 199 $ -
Limited Partners 856 1,152 (28)
------- ------- -------
$ 1,007 $ 1,351 $ (28)
======= ======= =======
The accompanying notes are an intregal
part of these statements.
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PHOENIX LEASING INCOME FUND VI
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 $ 44 297,165 $ 6,165 $ - $ 6,209
Distributions to partners
($7.50 per limited
partnership unit) - - (2,229) - (2,229)
Net loss - - (28) - (28)
------- ------- ------- ------- -------
Balance, December 31, 1993 44 297,165 3,908 - 3,952
Distributions to partners
($7.50 per limited
partnership unit) - - (2,228) - (2,228)
Unrealized losses on available-
for-sale securities - - - (30) (30)
Net income 199 - 1,152 - 1,351
------- ------- ------- ------- -------
Balance, December 31, 1994 243 297,165 2,832 (30) 3,045
Distributions to partners
($7.50 per limited
partnership unit) - - (2,228) - (2,228)
Unrealized losses on available-
for-sale securities - - - (8) (8)
Net income 151 - 856 - 1,007
------- ------- ------- ------- -------
Balance, December 31, 1995 $ 394 297,165 $ 1,460 $ (38) $ 1,816
======= ======= ======= ======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
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PHOENIX LEASING INCOME FUND VI
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
Operating Activities:
Net income (loss) $ 1,007 $ 1,351 $ (28)
Adjustments to reconcile net income
(loss) to net cash provided(used)
by operating activities:
Depreciation 9 92 475
Gain on sale of equipment (43) (30) (1)
Equity in earnings from joint
ventures, net (260) (234) (83)
Provision for losses on accounts
receivable 10 (19) 51
Provision for early termination,
financing leases - (39) 16
Provision for losses on note receivable (146) - 16
Settlements - (437) -
Gain on sale of marketable securities - (35) -
Decrease in accounts receivable 8 80 69
Decrease in receivable from affiliate - - 449
Increase (decrease) in accounts
payable and accrued expenses (1,276) (1,980) 35
Decrease (increase) in other assets 24 - (4)
------- ------- -------
Net cash provided (used) by operating
activities (667) (1,251) 995
------- ------- -------
Investing Activities:
Principal payments, financing leases - 145 316
Principal payments, notes receivable 1,138 93 24
Proceeds from sale of equipment 43 35 229
Proceeds from sale of marketable securities - 50 -
Distributions from joint ventures 530 279 645
Purchase of equipment - (294) (4)
Investment in joint ventures - (22) (9)
Investment in marketable securities - (15) -
------- ------- -------
Net cash provided by investing activities 1,711 271 1,201
------- ------- -------
Financing Activities:
Distributions to partners (2,228) (2,228) (2,229)
------- ------- -------
Net cash used by financing activities (2,228) (2,228) (2,229)
------- ------- -------
Decrease in cash and cash equivalents (1,184) (3,208) (33)
Cash and cash equivalents, beginning of period 3,892 7,100 7,133
------- ------- -------
Cash and cash equivalents, end of period $ 2,708 $ 3,892 $ 7,100
======= ======= =======
The accompanying notes are an integral
part of these statements.
<PAGE>
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PHOENIX LEASING INCOME FUND VI
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1. Organization and Partnership Matters.
Phoenix Leasing Income Fund VI, a California limited partnership (the
"Partnership"), was formed on October 29, 1981, 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 January
6, 1983, 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).
For financial reporting purposes, as more specifically described in the
Partnership Agreement, income in any quarter will be allocated, before
liquidation and redemption fees, 15% to Phoenix Leasing Incorporated (the
"General Partner") and 85% to the Limited Partners subject to the following
limitations. To the extent that income for any quarter, when added to income for
all prior accounting periods, does not exceed losses for all prior accounting
periods, such income shall be allocated, before liquidation and redemption fees,
1% to the General Partner and 99% to the Limited Partners. Income shall be
allocated, before liquidation and redemption fees, 1% to the General Partner and
99% to the Limited Partners in any quarter subsequent to a quarter in which the
General Partner was allocated, before liquidation and redemption fees, 1% of
losses, to the extent of previously allocated Partnership losses. A loss in any
quarter shall be allocated, before liquidation and redemption fees, 1% to the
General partner and 99% to the Limited Partners.
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. During 1988, the Capital Accumulation Plan
was discontinued. Limited Partners who elected to participate in the Capital
Accumulation Plan are now receiving cash distributions. However, a few investors
remained in the plan through 1990.
In the event the General Partner has a deficit balance in its capital
account at the time of partnership liquidation, it will be required to
contribute the amount of such deficit to the Partnership. The General Partner
has acquired 508 units of Limited Partnership interest.
As compensation for management services the 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.
Note 2. Summary of Significant Accounting Policies.
Leasing Operations. The Partnership's leasing operations consisted 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 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. Any direct costs of
consummating new leases are capitalized as these costs are immaterial.
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.
<PAGE>
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. Should subsequent reviews of the equipment
portfolio indicate that rentals plus anticipated sales proceeds will not exceed
expenses in any future period, the Partnership will revise its depreciation
policy and may accelerate 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.
Investment 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 and stock warrants 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, 1994,
the Partnership contributed equipment and other investments received through a
settlement to a joint venture. The amount of such contribution was $584,000. Non
cash transactions included in Other Assets during the year ended December 31,
1994 consist of marketable securities valued at $147,000 received pursuant to a
settlement (see Note 8) and an unrealized loss on marketable securities of
$30,000. 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 $13,000 and is included in Other Assets for the year ended
December 31, 1995.
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.
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 or results of
operations.
<PAGE>
Page 16 of 30
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.
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 $ 49 $ 75
Property taxes - 6
General Partner and Affiliates 3 2
----- -----
52 83
Less: allowance for losses on
accounts receivable (22) (35)
----- -----
Total $ 30 $ 48
===== =====
Note 4. Note Receivable.
Note receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Note receivable from a cable television
system operator with interest of 14% per
annum, receivable in installments ranging
from 60 to 71 months through January 1994,
collateralized by a security interest in
the cable system's assets. This note has
a graduated repayment schedule followed by
a balloon payment. $ - $ 1,138
Less: allowance for losses on note receivable - (146)
----- --------
Total $ - $ 992
===== ========
The Partnership's note receivable from a cable television system
operator provides 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 its note
receivable to the amount of the payments received, thereby deferring the
recognition of a portion of the deferred interest until such time as management
believe it was realizable.
The average recorded investment in impaired loans during the year ended
December 31, 1995 was approximately $279,000. 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 note receivable balance, which may include
previously accured 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.
During the year ended December 31, 1995, the Partnership received a
settlement on its one remaining note receivable which was considered to be
impaired under Statement No. 114. The Partnership received $1,416,000 as
<PAGE>
Page 17 of 30
a settlement for this note receivable of which $1,108,000 was applied towards
the outstanding note receivable balance and the remaining $308,000 applied to
interest income. The remaining balance in the allowance for losses on notes
receivable of $146,000 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 $ 146 $ 146
Provision for losses (146) -
Write downs - -
----- -----
Ending balance $ - $ 146
===== =====
Note 5. Equipment on Operating Leases.
Equipment on lease consists primarily of small computer systems subject
to operating leases.
The Partnership's operating leases are for initial lease terms of
approximately 12 to 36 months. During the remaining terms of existing operating
leases the Partnership will not recover all of the undepreciated cost and
related expenses of its rental equipment, and therefore must remarket a portion
of its equipment in future years.
The Partnership has agreements with some of the manufacturers 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 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.
Minimum rentals (net of executory costs) to be received on
noncancelable operating leases for the years ended December 31 are as follows:
Operating
---------
(Amounts in Thousands)
1996..................................... $ 6
1997..................................... 1
1998..................................... -
-----
Total $ 7
=====
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.
<PAGE>
Page 18 of 30
The purpose of the equipment joint ventures is the acquisition and
leasing of various types of equipment. During the term of the Partnership,
Phoenix Leasing Income Fund VI has participated in the following equipment joint
ventures:
Weighted
Joint Venture Percentage Interest
------------- -------------------
PLI Limited Partnership Fund A(2) 30.64%
VMX Joint Venture(1) 28.37
ACRO Joint Venture, Residential 32.84
Leveraged Joint Venture 1985(1) 49.02
Leveraged Joint Venture 1986(2) 31.04
Leveraged Joint Venture 1987-1(1) 43.79
Leveraged Joint Venture 1987-2 17.91
Leveraged Joint Venture 1987-3 25.22
Leveraged Joint Venture 1990-1 11.77
Phoenix Leasing POST Joint Venture I(2) 18.83
Arroyo Joint Venture VIII(1) 40.00
Arroyo Joint Venture XV(2) 30.67
Arroyo Joint Venture XVI 32.14
Arroyo Joint Venture XVII(1) 11.26
Xerox Graphics Joint Venture(1) 16.19
Phoenix Joint Venture 1994-1 12.77
(1) Closed during 1994
(2) Closed during 1995
<TABLE>
An analysis of the Partnership's investment in equipment joint ventures
is as follows:
<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 $ 575 $ 9 $ 94 $ 583 $ 95
======== ======= ======= ======= ========
Year Ended
December 31, 1994 $ 95 $ 606 $ 227 $ 241 $ 687
======== ======= ======= ======= ========
Year Ended
December 31, 1995 $ 687 $ 0 $ 248 $ 527 $ 408
======== ======= ======= ======= ========
</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:
<PAGE>
Page 19 of 30
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 644 $ 476
Accounts receivable 1,776 2,222
Operating lease equipment 1,021 2,535
Other assets 691 919
------ ------
Total Assets $4,132 $6,152
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 973 $1,134
Partners' capital 3,159 5,018
------ ------
Total Liabilities and Partners' Capital $4,132 $6,152
====== ======
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Rental income $ 3,922 $ 3,312 $ 5,128
Gain on sale of equipment 1,769 1,312 1,639
Other income 744 309 52
------- ------- -------
Total Income 6,435 4,933 6,819
------- ------- -------
EXPENSES
Depreciation 1,188 1,257 1,874
Lease related operating expenses 2,961 2,779 4,520
Management fee to the General Partner 289 239 359
Interest expense - 1 -
Other expenses 273 43 152
------- ------- -------
Total Expenses 4,711 4,319 6,905
------- ------- -------
Net Income (Loss) $ 1,724 $ 614 $ (86)
======= ======= =======
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
$13,000 and $14,000, 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.
<PAGE>
Page 20 of 30
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 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
interest bearing and 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 29.19%
<TABLE>
An analysis of the Partnership's investment account in financing joint
ventures is as follows:
<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 $ 108 $ 0 $(11) $ 61 $ 36
======= === ==== ===== =======
Year Ended
December 31, 1994 $ 36 $ 0 $ 7 $ 38 $ 5
======= === ==== ===== =======
Year Ended
December 31, 1995 $ 5 $ 0 $ 12 $ 15 $ 2
======= === ==== ===== =======
</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
=== ===
<PAGE>
Page 21 of 30
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 8 19 31
Other expenses 19 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.
Foreclosed Cable Systems Joint Venture
The Partnership owns an interest in a foreclosed cable systems joint
venture, along with other partnerships managed by the General Partner and its
affiliates. The Partnership foreclosed upon certain assets of a cable television
operator to whom the Partnership, along with other affiliated partnerships
managed by the General Partner, had extended credit. The partnerships' notes
receivables and assets 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. These investments are 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 Percentage Interest
------------- -------------------
Phoenix Black Rock Cable J.V. .29%
<TABLE>
An analysis of the Partnership's net investment in a foreclosed cable
system joint venture is as follows:
<PAGE>
Page 22 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 $ 6 $ 0 $ 0 $ 1 $ 5
===== === ==== ==== =====
Year Ended
December 31, 1994 $ 5 $ 0 $ 0 $ 0 $ 5
===== === ==== ==== =====
Year Ended
December 31, 1995 $ 5 $ 0 $ 0 $ 0 $ 5
===== === ==== ==== =====
</TABLE>
The aggregate financial information of the foreclosed cable system
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 $ 258 $ 148
Accounts receivable 31 48
Property, plant and equipment 1,449 1,555
Other 1 -
------ ------
Total Assets $1,739 $1,751
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 90 $ 102
Partners' capital 1,649 1,649
------ ------
Total Liabilities and Partners' Capital $1,739 $1,751
====== ======
STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Subscriber revenue $676 $654 $641
Other income 12 7 7
---- ---- ----
Total Income 688 661 648
---- ---- ----
<PAGE>
Page 23 of 30
EXPENSES
Depreciation and amortization 154 150 147
Program services 181 154 166
General and administrative expenses 185 155 183
Management fees to an affiliate of
the General Partner 31 29 29
Provision for losses on accounts receivable 7 7 6
---- ---- ----
Total Expenses 558 495 531
---- ---- ----
Net Income before taxes 130 166 117
Income tax benefit 11 27 21
---- ---- ----
Net Income $141 $193 $138
==== ==== ====
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 system joint venture. The foreclosed cable
system 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)
Liquidation fees payable
to General Partner $ 1,268 $ 2,289
Equipment lease operations 36 213
General Partner and Affiliates 12 12
Other 155 233
-------- --------
Total $ 1,471 $ 2,747
======== ========
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.
The Partnership's pro rata share of the Xerox settlement was $482,000,
which consists of cash of $192,000, and assigned monthly rentals and credits for
goods and services valued at $290,000. In addition, the Partnership purchased
additional leased equipment at an aggregate cost of $294,000. 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 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.
<PAGE>
Page 24 of 30
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 $272,000. The final distribution consisted
of cash of $125,000 and common stock valued at $147,000.
Note 9. Liquidation Fees.
In consideration for the services and activities performed by the
General Partner in connection with the disposition of the Partnership's
equipment, the General Partner shall receive liquidation fees equal to 15% of
the "Net Capital Contribution" of the Limited Partners with respect to all
Partnership interests other than those interests which have been previously
redeemed and accordingly were subject to the 15% redemption fee.
For financial reporting purposes, the Partnership began to recognize
the liquidation fee in the second year of operations when the General Partner
began its activities of liquidating portions of the equipment portfolio. The
original firm terms of the initial leases (generally 24 months) began to expire
at this point in time. The present value of the liquidation fee is recognized
using the interest method and accreted to the face amount over a period of
approximately eight years in order to properly match the liquidation fee expense
with the activities of the General Partner in connection with ongoing portfolio
liquidation. The liquidation fees have been fully accrued as of December 31,
1992. The Partnership began to pay the liquidation fees to the General Partner
in 1990.
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 $ 3,287 $ 3,641 $ (354)
Liabilities 1,471 1,436 35
1994
Assets $ 5,792 $ 6,249 $ (457)
Liabilities 2,747 1,859 888
Note 11. Related Entities.
The 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 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 General Partner
remarkets certain equipment on behalf of the Partnership. These expenses
incurred by the General Partner are reimbursed at the lower of the actual costs
or an amount equal to 90% of the fair market value for such services. The
equipment remarketing costs reimbursed to the General Partner were $2,000,
$3,000 and $5,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
<PAGE>
Page 25 of 30
Note 12. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income (loss) and distributions per limited partnership unit were
based on the limited partner's share of net income (loss) and distributions, and
the weighted average number of units outstanding of 297,165 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.
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 $ 2,708 $ 2,708
Marketable securities 121 121
Note 14. Subsequent Events.
In January 1996, cash distributions of $2,228,000 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 general partner of the registrant is
Phoenix Leasing Incorporated, a California corporation. 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 Growth Fund 1982
Phoenix Leasing Income Fund 1981 and
Phoenix Leasing Income Fund 1977
<TABLE>
Item 11. Executive Compensation.
Set forth is the information relating to all direct remuneration paid
or accrued by the Registrant during the last year to the General Partner.
<CAPTION>
(A) (B) (C) (D)
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 $116(1) $0 $0
=== = =
</TABLE>
(1) consists of management 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 Partner of the Registrant owns the equity securities
of the Registrant set forth in the following table:
<PAGE>
Page 28 of 30
<TABLE>
<CAPTION>
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
<S> <C> <C> <C>
General Partner Interest Represents a 15% interest in the 100%
Registrant's profits and distributions
Limited Partner Interest 508 units .17%
</TABLE>
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 VI
(Registrant)
BY: PHOENIX LEASING INCORPORATED,
A CALIFORNIA CORPORATION
GENERAL PARTNER
Date: March 28, 1996 By: /S/ GUS CONSTANTIN
-------------- -------------------
Gus Constantin
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 Officer
/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 Solvei) Director of Phoenix Leasing Incorporated
General Partner
/S/ MICHAEL K. ULYATT Partnership Controller March 28, 1996
- ----------------------- Phoenix Leasing Incorporated --------------
(Michael K. Ulyatt) Corporate General Partner
<PAGE>
<TABLE>
Page 30 of 30
PHOENIX LEASING INCOME FUND VI
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 $ 99 $ 51 $ 0 $ 17 $ 133
Allowance for early termination
of financing leases 25 16 0 (17)(1) 58
Allowance for losses on note
receivable 130 16 0 0 146
------ ---- ----- ------ ------
Totals $ 254 $ 83 $ 0 $ 0 $ 337
====== ==== ===== ====== ======
Year ended December 31, 1994
Allowance for losses on accounts
receivable $ 133 $ 0 $ 19 $ 79 $ 35
Allowance for early termination
of financing leases 58 0 39 19(1) 0
Allowance for losses on note
receivable 146 0 0 0 146
------ ---- ----- ------ ------
Totals $ 337 $ 0 $ 58 $ 98 $ 181
====== ==== ===== ====== ======
Year ended December 31, 1995
Allowance for losses on accounts
receivable $ 35 $ 10 $ 0 $ 23 $ 22
Allowance for losses on note
receivable 146 0 146 0 0
------ ---- ----- ------ ------
Totals $ 181 $ 10 $ 146 $ 23 $ 22
====== ==== ===== ====== ======
</TABLE>
(1) This amount represents the application (reversal) of the allowance for loss
from early termination of financing leases.
<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> 2,708
<SECURITIES> 0
<RECEIVABLES> 52
<ALLOWANCES> 22
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 750
<DEPRECIATION> 746
<TOTAL-ASSETS> 3,287
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,816
<TOTAL-LIABILITY-AND-EQUITY> 3,287
<SALES> 0
<TOTAL-REVENUES> 1,121
<CGS> 0
<TOTAL-COSTS> 114
<OTHER-EXPENSES> 0
<LOSS-PROVISION> (136)
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,007
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,007
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,007
<EPS-PRIMARY> 2.88
<EPS-DILUTED> 0
</TABLE>
