UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 For the fiscal year ended
December 31, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from to
Commission file number 0-14599
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PLM Transportation Equipment Partners VIIC 1985
Income Fund (Exact name of registrant as specified
in its charter)
California 94-2946248
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Market, Steuart Street Tower
Suite 800, San Francisco, CA 94105-1301
(Address of principal (Zip code)
executive offices)
Registrant's telephone number, including area code (415) 974-1399
-----------------------
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 ______
Aggregate Market Value of Voting Stock: N/A
An index of exhibits filed with this Form 10-K is located at page 46.
Total number of pages: 49.
<PAGE>
PART I
ITEM 1. BUSINESS
(A) Background
PLM Transportation Equipment Partners VIIB 1985 Income Fund (TEP VIIB or the
Partnership) and PLM Transportation Equipment Partners VIIC 1985 Income Fund
(TEP VIIC or the Partnership) (together, the Partnerships) are California
limited partnerships which were formed in October 1984, and began operations in
January 1985. The Partnerships operate under their respective Limited
Partnership Agreements (Partnership Agreement) for the purpose of acquiring,
owning and leasing transportation equipment. PLM Financial Services, Inc. (FSI),
a wholly-owned subsidiary of PLM International, Inc. (PLM International), serves
as the General Partner for both TEP VIIB and TEP VIIC.
The Partnerships were formed to engage in the business of owning and
managing diversified pools of transportation equipment. The primary objectives
of each Partnership are to invest in equipment which will:
(i) generate cash distributions to investors on a quarterly basis;
(ii) maintain substantial residual value for continued operation and
ultimate sale;
(iii) provide certain federal income tax benefits, including investment tax
credits, to the extent available, in 1986 and tax deductions in excess of
Partnership income during early years which investors may use to offset taxable
income from other sources.
(iv)to endeavor to reduce certain of the risks of equipment ownership by
acquiring a diversified portfolio of varying equipment types.
The 1986 Tax Reform Act (the Act) substantially altered some of the
Partnership objectives. Specifically, the ability of investors in the
Partnership to use tax deductions in excess of Partnership income to offset
taxable income from other sources was not only limited in duration by the Act
(no offsets were allowed after 1990), but also limited to a declining percentage
that could be applied against other income beginning in 1987.
The Act also eliminated the investment tax credit.
(B) Management of Partnership Equipment
The Partnerships have entered into equipment management agreements with PLM
Investment Management, Inc. (IMI), a wholly-owned subsidiary of FSI, for the
management of the equipment. IMI has agreed to perform all services necessary to
manage transportation equipment on behalf of the Partnerships and to perform or
contract for the performance of all obligations of the lessor under the
Partnerships' leases. In consideration for its services and pursuant to the
Partnership Agreements, IMI is entitled to a monthly management fee. Management
fees are calculated as 10% of cash flow available for distribution and are
payable monthly (see Financial Statements, Notes 1 and 2).
TEP VIIB
The offering of limited partnership units (the Units) of PLM Transportation
Equipment Partners VIIB 1985 Income Fund (TEP VIIB or the Partnership) closed on
August 27, 1985 having sold 22,276 Units. FSI contributed $100 for its 1%
general partnership interest in TEP VIIB.
As of December 31, 1996, TEP VIIB owned the following equipment: 27 marine
containers, five tank cars, and 189 trailers. All of the Partnership's trailer
equipment operates in rental yards owned and maintained by an affiliate of the
General Partner. Revenue collected under short-term rental agreements with the
rental yards' customers are credited to the owners of the related equipment as
received. Direct expenses associated with the equipment are charged directly to
the Partnership. An allocation of other direct expenses of the rental yard
operations are billed to the Partnership monthly. All equipment owned by TEP
VIIB was on lease as of December 31, 1996.
Lessees of the equipment in the TEP VIIB portfolio include, but are not limited
to: Transamerica Leasing, Dupont SA, and Pines Trailer, Ltd.
TEP VIIC
The offering of limited partnership units (the Units) of PLM Transportation
Equipment Partners VIIC 1985 Income Fund (TEP VIIC or the Partnership) closed on
December 6, 1985 having sold 33,727 Units. FSI contributed $100 for its 1%
general partnership interest in TEP VIIC.
As of December 31, 1996, TEP VIIC owned the following equipment: 26 marine
containers, 172 trailers, and an interest in an entity which owns one aircraft.
The aircraft is jointly owned by TEP VIIC (80%) and PLM International (20%). All
of the Partnership's trailer equipment operates in rental yards owned and
maintained by an affiliate of the General Partner. Revenue collected under
short-term rental agreements with the rental yards' customers are credited to
the owners of the related equipment as received. Direct expenses associated with
the equipment are charged directly to the Partnership. An allocation of other
direct expenses of the rental yard operations are billed to the Partnership
monthly. All of the equipment owned by TEP VIIC was either operating in the
rental facilities or on lease as of December 31, 1996.
Lessees of the equipment in the TEP VIIC portfolio include, but are not limited
to: Horizon Air Industries, Inc., and Transamerica Leasing.
(C) Competition
(1) Operating Leases vs. Full Payout Leases
Generally, the equipment owned by the Partnerships is leased out on an operating
lease basis wherein the rents owed during the initial non-cancelable term of the
lease are insufficient to recover the Partnerships purchase price of the
equipment. The short to mid-term nature of operating leases generally commands a
higher rental rate than longer term, full payout leases and offers lessees
relative flexibility in their equipment commitment. In addition, the rental
obligation under the operating lease need not be capitalized on the lessee's
balance sheet.
The Partnerships encounter considerable competition from lessors utilizing
full payout leases on new equipment, i.e., leases which have terms equal to the
expected economic life of the equipment. Full payout leases are written for
longer terms and for lower rates than the Partnerships offer. While some lessees
prefer the flexibility offered by a shorter term operating lease, other lessees
prefer the rate advantages possible with a full payout lease. Competitors of the
Partnerships may write full payout leases at considerably lower rates, or larger
competitors with a lower cost of capital may offer operating leases at lower
rates, and as a result, the Partnerships may be at a competitive disadvantage.
(2) Manufacturers and Equipment Lessors
The Partnerships also compete with equipment manufacturers who offer operating
leases and full payout leases. Manufacturers may provide ancillary services
which the Partnerships cannot offer, such as specialized maintenance services
(including possible substitution of equipment), training, warranty services and
trade-in privileges.
The Partnerships compete with many equipment lessors, including, among
others, ACF Industries, Inc. (Shippers Car Line Division), Transport
International Pool, General Electric Railcar Services Corporation, Greenbrier
Leasing Company, and other limited partnerships which lease the same types of
equipment.
(D) Government Regulations
The use, maintenance, and ownership of equipment is regulated by federal, state,
local and/or foreign governmental authorities. Such regulations which may impose
restrictions and financial burdens on the Partnerships' ownership and operation
of equipment, which may affect the Partnerships' liquidity. Changes in
government regulations, industry standards, or deregulation, may also affect the
ownership, operation and resale of the equipment. Certain of the Partnerships'
equipment is subject to extensive safety and operating regulations which may
require the removal from service or extensive modification, at considerable
cost, of such equipment to meet the regulations. Such regulations include (but
are not limited to):
(1) the U.S. Department of Transportation's Aircraft Capacity Act of
1990 (which limits or eliminates the operation of commercial
aircraft in the U.S. that do not meet certain noise, aging, and
corrosion criteria);
(2) the Montreal Protocol on Substances that Deplete the Ozone Layer
and the U.S. Clean Air Act Amendments of 1990 which call for the
control of and eventual replacement of substances that have been
found to cause or contribute significantly to harmful effects on
the stratospheric ozone layer and which are used extensively as
refrigerants in refrigerated marine cargo containers,
over-the-road trailers, etc.;
(3) the U.S. Department of Transportation's Hazardous Materials
Regulations which regulate the classification of and packaging
requirements for hazardous materials and which apply particularly
to the Partnerships' tankcars.
(E) Demand
The Partnerships invested in Transportation-related capital equipment. With the
exception of aircraft leased to passenger air carriers, the Partnerships'
equipment is used primarily for the transport of materials. The following
describes the markets for the Partnerships' equipment:
(1) Commuter Aircraft/Regional Aircraft
Independent forecasts show the regional aircraft market is growing at a rate of
5.5% per year through 2013. This is slightly higher than the comparable growth
rate in commercial aircraft of 4.7% over the same period. Currently there are
4,390 regional aircraft in service in the 15 to 70 seat class. Independent
forecasts show this will grow to over 5,000 aircraft during the next 17 years.
The highest growth markets are the 30 to 50 seat turboprops. The emphasis on the
larger aircraft in the future is a result of growing passenger numbers, airport
congestion and the extension of regional airline route networks requiring longer
range aircraft. These events will continue the current trend of the major
airlines to hand down the operations of their marginal shorthaul routes to
affiliated regional carriers.
At December 31, 1996, the Partnership had an interest in an entity which
owns a commuter aircraft that is in the 19 seat category operating in North
America. The Partnership expects to sell this investment in 1997.
(2) Marine Containers
At the end of 1995, the consensus of industry sources was that 1996 would see
both higher container utilization and strengthening of per diem lease rates.
Such was not the case, as there was no appreciable cyclical improvement in the
container market following the traditional winter slowdown. Industry utilization
continues to be under pressure, with per diem rates being impacted as well.
A substantial portion of the Partnership's containers are on long-term
utilization leases which were entered into with Trans Ocean Leasing as lessee.
The industry has seen a major consolidation, as Transamerica Leasing, late in
the fourth quarter of 1996, acquired Trans Ocean Leasing. Transamerica Leasing
is the second largest container leasing company in the world. Transamerica
Leasing is the substitute lessee for Trans Ocean Leasing. Long term, such
industry consolidation should bring more rationalization to the market and
result in higher utilization and per diem rates.
(3) Railcars
General-purpose, or nonpressurized, tank cars are used to transport a wide
variety of bulk liquid commodities, such as petroleum fuels, lubricating oils,
vegetable oils, molten sulphur, corn syrup, asphalt, and specialty chemicals.
Demand for general purpose tank cars in the Partnership fleet has remained
healthy over the last two years with utilization remaining above 98%.
Independent projections show the demand for petroleum growing during 1997 to
1999, as the developing world, former Communist countries, and the
industrialized world all increase their demand for energy. Chemical carloadings
for the first 40 weeks of 1996 were up one tenth of one percent (0.1%) as
compared to the same period in 1995.
<PAGE>
(4) Over-the-Road Dry Trailers
The over-the-road dry trailer market was weak in 1996, with utilization down
15%. The trailer industry experienced a record year in 1994 for new production
and 1995 production levels were similar to 1994's. However, in 1996 , the truck
freight recession, along with an overbuilding situation, contributed to 1996's
poor performance. The year 1996 had too little freight and too much equipment
industrywide.
(5) Over-the-Road Refrigerated Trailers
PLM experienced fairly strong demand levels in 1996 for its refrigerated
trailers. With over 15% of the fleet in refrigerated trailers, PLM and the
Partnerships are the largest supplier of short-term rental refrigerated trailers
in the U.S..
ITEM 2. PROPERTIES
The Partnerships neither own nor lease any properties other than the equipment
they have purchased for lease to others. As of December 31, 1996, each
Partnership owned a portfolio of transportation equipment as described in Part
I, Item 1. It is not contemplated that any more equipment will be acquired.
The Partnerships maintain their principal offices at One Market, Steuart
Street Tower, Suite 800, San Francisco, California 94105-1301. All office
facilities are provided by FSI without reimbursement by the Partnerships.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Partnerships' Limited Partners during
the fourth quarter of its fiscal year ended December 31, 1996.
<PAGE>
PART II
ITEM 5. MARKET FOR THE PARTNERSHIPS' EQUITY AND RELATED UNITHOLDER MATTERS
Pursuant to the terms of the Partnership Agreements, the General Partner is
entitled to a 1% interest in the profits, losses and distributions of the
Partnerships. The General Partner also is entitled to a special allocation of
any net profit or gains from sale of each Partnership's assets during the
liquidation phase in an amount equal to the excess of the net losses previously
allocated to the General Partner over the capital contributions made by the
General Partner. FSI is the sole holder of such interests. Ownership of the
remaining 99% interest in the profits and losses and distributions of the
respective Partnerships is represented as follows:
TEP VIIB TEP VIIC
-------------------------------
Holders of Limited Partnership Units
as of December 31, 1996 835 1,226
There are several secondary exchanges which may purchase limited partnership
units. Secondary markets are characterized as having few buyers for limited
partnership interests and, therefore, generally are viewed as inefficient
vehicles for the sale of partnership units. There is no public market for these
Limited Partnership Units and none is likely to develop. Moreover, the Limited
Partnership Units are subject to substantial restrictions on transferability.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
Tables 1, below, lists selected financial data for the respective Partnerships.
TABLE 1
For the years ended December 31,
<TABLE>
<CAPTION>
TEP VIIB 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating results:
Total revenues $ 487,226 $ 732,844 $ 813,152 $ 861,606 $ 915,874
Loss on revaluation
of equipment -- -- -- (65,475 ) (35,000)
Gain (loss) on disposition
of equipment 62,907 27,563 14,663 (15,985 ) 2,562
Equity in net income of unconsolidated
special purpose entity 265,108 -- -- -- --
Net income 238,083 29,306 88,689 139,613 189,710
At year-end:
Total assets $ 523,019 $ 867,962 $ 1,269,667 $ 1,653,415 $ 2,155,868
Total liabilities 37,477 26,193 61,017 58,033 119,031
Cash distributions $ 394,310 $ 396,187 $ 475,421 $ 581,068 $ 954,181
Cash distributions and special distributions
which represent a return of capital to Limited
Partners $ 352,665 $ 363,212 $ 382,865 $ 437,040 $ 756,826
Special distributions $ 200,000 $ -- $ -- $ -- $ --
Per weighted average limited partnership unit:
Net income $ 10.58 $ 1.30 $ 3.94 $ 6.20 $ 8.43
Cash distributions $ 17.52 $ 17.61 $ 21.13 $ 25.82 $ 42.41
Cash distributions and special distributions
which represent a return of capital to Limited
Partners $ 15.83 $ 16.31 $ 17.19 $ 19.62 $ 33.97
Special distributions $ 8.89 $ -- $ -- $ -- $ --
</TABLE>
<PAGE>
For the years ended December 31,
<TABLE>
<CAPTION>
TEP VIIC 1996 1995 1994 1993 1992
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating results:
Total revenues $ 565,080 $ 1,254,597 $ 1,712,474 $ 1,682,390 $ 1,822,559
Loss on revaluation
of equipment -- -- -- (11,698 ) --
Gain (loss) on disposition
of equipment 133,840 84,289 68,223 (131,532 ) (9,970 )
Equity in net income of unconsolidated
special purpose entities 653,740 -- -- -- --
Net income 600,944 175,174 441,222 359,895 366,686
At year-end:
Total assets $ 792,790 $ 1,648,364 $ 2,526,952 $ 3,199,276 $ 4,154,778
Total liabilities 20,066 22,228 28,451 46,293 141,876
Cash distributions $ 654,356 $ 847,539 $ 995,704 $ 1,049,476 $ 1,053,534
Cash distributions and special distributions
which represent a return of capital to Limited
Partners $ 844,877 $ 863,642 $ 647,937 $ 851,320 $ 778,980
Special distributions $ 800,000 $ 200,000 $ 100,000 $ 170,338 $ 100,000
Per weighted average limited partnership unit:
Net income $ 17.64 $ 5.14 $ 12.95 $ 10.56 $ 10.76
Cash distributions $ 19.21 $ 24.88 $ 29.23 $ 30.81 $ 30.92
Cash distributions and special distribution
which represent a return of capital to Limited
Partners $ 25.05 $ 25.61 $ 19.21 $ 25.24 $ 23.10
Special distributions $ 23.48 $ 5.87 $ 2.94 $ 5.00 $ 2.94
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
(A) Sources
The Partnerships' primary source of liquidity is operating cash flow. Proceeds
realized from the sale or disposal of equipment are generally distributed to the
partners. The Partnerships' original source of capital was proceeds from its
initial public offering of limited partnership units.
(B) Asset Sales
Equipment sales and dispositions prior to the Partnerships' planned liquidation
phase generally result from either the exercise by lessees of fair market value
purchase options provided for in certain leases, or the payment of stipulated
loss values on equipment lost or disposed during the time it is subject to lease
agreements. Such disposal of equipment is unpredictable and results from the
wear, tear, and general risk of normal operations. As discussed in note 6, the
Partnerships have entered the portfolio liquidation phase as of the third
quarter of 1995. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds.
(C) Market Values
In March 1995, the Financial Accounting Standards Board (FASB) issued Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of" (SFAS 121). This standard is effective for years
beginning after December 15, 1995. The Partnership adopted SFAS 121 during 1995.
In accordance with SFAS 121, the General Partner reviews the carrying value of
its equipment portfolio at least annually in relation to expected future market
conditions for the purpose of assessing recoverability of the recorded amounts.
If projected future lease revenue plus residual values are less than the
carrying value of the equipment, a loss on revaluation is recorded. No
adjustments to reflect impairment of individual equipment carrying values were
required for the year ended December 31, 1996.
As of December 31, 1996, the General Partner estimated the fair market value of
each Partnerships' equipment portfolio, including equipment owned by
unconsolidated special purpose entities (USPE's), to be approximately:
$1.0 million and $1.8 million for TEP VIIB and TEP VIIC respectively.
(D) Government Regulations
The General Partner operates the Partnerships' equipment in accordance with
current regulations (see Item 1 (D) Government Regulations). However, the
continuing implementation of new or modified regulations by some of the
authorities mentioned previously, or others, may adversely affect the
Partnerships' ability to continue to own or operate equipment in its portfolio.
These on-going changes in the regulatory environment, both in the U.S. and
internationally, cannot be predicted with any certainty and thus preclude the
General Partner from accurately determining the impact of such changes on
Partnership operations, purchases and sales of equipment.
(E) Future outlook
Pursuant to the original operating plan, the Partnerships entered into their
liquidation phase during 1995 and the General Partner is actively pursuing the
sale of all of the Partnerships' equipment with the intention of winding up the
Partnerships and distributing all available cash to the Partners.
<PAGE>
(F) Result of operations - Year To Year Summary
Comparison of the Partnerships' Operating Results for the Years Ended
December 31, 1996 and 1995
TEP VIIB:
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased for the year
ended December 31, 1996 when compared to the same period of 1995. The following
table presents lease revenues less direct expenses by owned equipment type:
<TABLE>
<CAPTION>
For the twelve months
ended December 31,
1996 1995
---------------------------------
<S> <C> <C>
Trailers $ 241,016 $ 365,141
Railcar equipment 28,972 21,414
Marine containers 18,303 22,452
</TABLE>
Trailers: Trailer lease revenues and direct expenses were $362,500 and $121,484,
respectively, for the year ended December 31, 1996, compared to $525,408 and
$160,267, respectively, during the same period of 1995. The decrease in net
contribution was due to lower utilization of trailers in the short-term rental
facilities for the twelve months ended December 31, 1996 when compared to the
same period of 1995, and the disposition of eight trailers in 1995 and 19
trailers during 1996;
Railcar equipment: Railcar lease revenues and direct expenses were $30,000 and
$1,028, respectively, for year ended December 31, 1996, compared to $28,049 and
$6,635, respectively, during the same period of 1995. Although the railcar fleet
remained the same size for both years, the increase in railcar contribution
resulted from running repairs required on certain railcars in the fleet during
1995 which were not needed during 1996. In addition, early lease termination on
four railcars in the third quarter of 1995 resulted in a credit given back to
the lessee.
Marine containers: Marine container lease revenues and direct expenses were
$18,417 and $114, respectively, for the year ended December 31, 1996, compared
to $22,703 and $251, respectively, during the same period of 1995. The number of
marine containers owned by the Partnership has been declining over the past
twelve months due to sales and dispositions. The result of this declining fleet
has been a decrease in marine container net contribution.
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $391,625 for the year ended December 31, 1996,
decreased from $485,781 for the same period in 1995. The variances are explained
as follows:
(a) a $36,165 decrease in bad debt expense was due to the General Partner's
evaluation of the collectibility of trade receivables from trailer rental yard
lessees;
(b) a $29,847 decrease in general and administrative expenses from 1995 levels
was due to decreased accounting costs and administrative costs associated with
the short-term rental facilities;
(c) a $24,599 decrease in depreciation expenses from 1995 levels reflecting the
sale of certain assets during 1996 and 1995.
(d) a $3,545 decrease in management fee from 1995 levels due to a lower level of
operating cash flow associated with lower lease revenue on trailers and lower
utilization and rates on marine containers. Management fees are calculated
monthly as the greater of 10% of the Partnership's operating cash flow, or 1/12
of 1/2% of the Partnership's Gross Proceeds as defined in the Limited
Partnership Agreement.
<PAGE>
(C) For the year ended December 31, 1996, the Partnership realized a gain of
$62,907 on the sale or disposition of nine marine containers and 19 trailers,
compared to the same period in 1995 when the Partnership realized a gain of
$27,563 on the sale or disposition of eight trailers and 15 marine containers.
(D) Interest and other income decreased to $13,402 for the year ended December
31, 1996 from $32,119 for the same period of 1995. This decrease was primarily
due to income earned from an early lease termination penalty on four railcars in
the third quarter of 1995, and lower interest income earned due to lower cash
balances available for investments when compared to the same period of 1995.
(E) Equity in net income of the unconsolidated special purpose entity
Equity in net income of unconsolidated special purpose entity was $265,108 for
the year ended December 31, 1996, and represents the Partnership share of income
($28,408) generated from the partnership investment in an entity which owns an
aircraft, accounted for under the equity method and the gain ($236,700)
resulting from the sale by this entity of this aircraft during 1996 (see Note 4
to the financial statements).
(F) Net income
The Partnership's net income of $238,083 for the year ended December 31, 1996,
increased from $29,306 for the year ended December 31, 1995. The Partnership's
ability to operate or liquidate assets, secure leases, and re-lease those assets
whose leases expire during the duration of the Partnership is subject to many
factors, and the Partnership's performance in 1996 is not necessarily indicative
of future periods. For the year ended December 31, 1996, the Partnership
distributed $588,367 to the Limited Partners, or $26.41 per weighted average
Limited Partnership Unit which included a special distribution from asset sales
of $8.89 per unit.
All of the equipment owned by TEP VIIB was either operating in the trailer
rental facilities or on lease as of December 31, 1996. The Partnership's
performance during 1996 is not necessarily indicative of future periods.
TEP VIIC:
(A) Owned equipment operations
Lease revenues less direct expenses (defined as repairs and maintenance and
asset specific insurance expenses) on owned equipment decreased during 1996 when
compared to the same period of 1995. The following table presents lease revenues
less direct expenses by owned equipment type:
<TABLE>
<CAPTION>
For the twelve months
ended December 31,
1996 1995
---------------------------------
<S> <C> <C>
Trailers $ 284,335 $ 484,019
Marine containers 14,125 29,350
</TABLE>
Trailers: Trailer lease revenues and direct expenses were $392,542 and $108,207,
respectively, for the year ended December 31, 1996, compared to $707,321 and
$223,302, respectively during the same period during 1995. The decrease in net
contribution was due to lower utilization of trailers in the short-term rental
facilities in 1996 when compared to 1995, and the disposition of 14 trailers in
1995 and 40 trailers during 1996;
Marine containers: Marine container lease revenues and direct expenses were
$14,332 and $207, respectively, for the twelve months ended 1996, compared to
$29,819 and $469, respectively during the same period during 1995. The number of
marine containers owned by the Partnership has been declining over the past
twelve months due to sales and dispositions. The result of this declining fleet
has been a decrease in marine container net contribution.
<PAGE>
(B) Indirect expenses related to owned equipment operations
Total indirect expenses of $509,462 for the year ended December 31, 1996,
decreased from $643,725 for the same period in 1995. The variances are explained
as follows:
(a) a $63,135 decrease in the general and administrative expenses from 1995
levels due to decreased accounting costs and administrative costs associated
with the short-term rental facilities due to decreased volume of trailers
operating in these facilities;
(b) a $47,340 decrease in depreciation expenses from 1995 levels reflecting the
sale of certain assets during 1996 and 1995;
(c) a $33,259 decrease in bad debt expense due to the General Partner's
evaluation of the collectibility of trade receivables from trailer rental yard
lessees;
(d) a $9,471 increase in management fees due to higher levels of operating cash
flow during the comparable periods. Monthly management fees are calculated as
the greater of 10% of the Partnership's Operating Cash Flow, or 1/12 of 1/2% of
the Partnership's Capital Contributions as defined in the Limited Partnership
Agreement.
(C) For the year ended December 31, 1996, the Partnership realized a gain of
$133,840 on the sale or disposition of 40 trailers and 10 marine containers,
compared to the same period in 1995, when the Partnership realized a gain of
$84,289 on the sale or disposition of 14 trailers and 17 marine containers.
(D) Equity in net income of unconsolidated special purpose entities
Equity in net income of unconsolidated special purpose entities of $653,740 for
the year ended December 31, 1996, represents the Partnership share of income
($117,919) generated from the partnership investment in entities which own
aircraft, accounted for under the equity method and the gain ($535,821)
resulting from the sale by this entity of the aircraft during 1996 (see Note 4
to the financial statements).
(E) Interest and other income decreased to $24,366 for the year ended December
31, 1996, from $35,376 compared to the same period of 1995. This decrease was
primarily due to lower interest rate earned on cash investments in 1996.
(F) Net income
The Partnership's net income increased to $600,944 for the year ended December
31, 1996, from $175,174 in the same period in 1995. The Partnership's ability to
operate or liquidate assets, secure leases, and re-lease those assets whose
leases expire during the duration of the Partnership is subject to many factors,
and the Partnership's performance in 1996 is not necessarily indicative of
future periods. For the year ended December 31, 1996, the Partnership
distributed $1,439,812 to the Limited Partners, or $42.69 per weighted average
Limited Partnership Unit which included a special distribution from asset sales
of $23.48 per unit.
All of the equipment owned by TEP VIIC was either operating in the trailer
rental facilities or on lease as of December 31, 1996. The Partnership's
performance during 1996 is not necessarily indicative of future periods.
<PAGE>
Comparison of the Partnerships' Operating Results for the Years Ended
December 31, 1995 and 1994
TEP VIIB:
(A) Revenues
Total revenues for the years ended December 31, 1995 and 1994, were $732,844 and
$813,152, respectively. The decrease in 1995 revenue was attributable primarily
to lower lease revenues, and lower interest and other income.
(1) Lease revenue decreased to $673,162 in 1995 from $786,981 in 1994.
The following table lists lease revenues earned by equipment type:
For the year ended December 31,
1995 1994
---------------------------------
Trailers $ 525,408 $ 631,161
Aircraft 97,002 99,081
Rail equipment 28,049 32,660
Marine containers 22,703 24,079
================================
$ 673,162 $ 786,981
================================
Significant revenue component changes resulted primarily from:
(a) Trailer revenues decreased due to off lease time on trailers previously
operating on fixed-term leases transitioning to the PLM-affiliated short-term
rental facilities during 1995, and the disposition of eight trailers during
1995;
(b) Railcar revenues decreased due to the re-lease of some railcars at
lower rates than currently available in the market for the types of cars owned
by the Partnership.
(2) Interest and other income increased to $32,119 in 1995 from $11,508 in 1994.
The increase in 1995 was primarily attributable to income earned from an early
lease termination penalty on four railcars in the second quarter of 1995, and
higher average interest rates during 1995.
(B) Expenses
The Partnership's total expenses for the years ended December 31, 1995 and 1994
were $703,538 and $724,463, respectively. The decrease was attributable
primarily to decreases in depreciation expense, repairs and maintenance, and
general and administrative expenses, partially offset by an increase in bad debt
expense.
(1) Direct operating expenses (defined as repairs and maintenance and insurance
expense) decreased to $167,475 in 1995 from $183,155 in 1994. The decrease in
repairs and maintenance is primarily attributed to a decrease in the number of
trailers coming off term leases and requiring refurbishment prior to
transitioning into the short-term rental facilities operated by an affiliate of
the General Partner, and the disposition of trailers during 1995.
(2) Indirect Operating Expenses (defined as depreciation expense, management
fees to affiliate, bad debt expense, and general and administrative expenses)
decreased to $536,063 in 1995 from $541,308 in 1994. The decrease is due
primarily to:
(a) a decrease of $15,462 in depreciation expense resulting from
disposition of trailers and marine containers during 1995;
(b) a decrease of $5,692 in general and administrative expenses primarily
due to the decreased overall fleet size and decreased indirect costs associated
with trailers in the PLM-affiliated short-term rental facilities;
(c) an increase of $17,328 in bad debt expense due to the General Partner's
evaluation of the collectability of certain of the Partnership's trade accounts
receivable;
(3) Gain from disposition of equipment of $27,563 was realized from the sale or
disposition of eight trailers and 15 marine containers in 1995. In 1994, the
Partnership realized a gain of $14,663 from the sale or disposition of eight
trailer and 24 marine containers.
(C) Net Income
As a result of all of the foregoing, net income for the year ended December 31,
1995, decreased to $29,306 from $88,689 for the year ended December 31, 1994.
The Partnership's ability to operate or liquidate assets, secure leases, and
re-lease those assets whose leases expire during the duration of the Partnership
is subject to many factors, and the Partnership's performance in 1995 is not
necessarily indicative of future periods. In 1995, TEP VIIB distributed $392,225
to the Limited Partners, or $17.61 per Unit.
TEP VIIC:
(A) Revenues
Total revenues for the years ended December 31, 1995 and 1994, were $1,254,597
and $1,712,474, respectively. The decrease in 1995 revenue was attributable
primarily to a decrease in lease revenues partially offset by an increase in
interest and other income, and an increase in gain on disposition of equipment.
(1) Lease revenue decreased in 1995 to $1,134,932 as compared to $1,616,995
in 1994.
The following table lists lease revenues earned by equipment type:
<TABLE>
<CAPTION>
For the year ended
December 31,
1995 1994
-------------------------------------
<S> <C> <C>
Trailers $ 707,321 $ 1,073,039
Aircraft 397,791 514,617
Marine containers 29,820 29,339
===================================
$ 1,134,932 $ 1,616,995
===================================
</TABLE>
Significant revenue component changes resulted primarily from:
(a) Trailer revenues decreased $365,718 due to off lease time on trailers
previously operating on fixed-term leases transitioning to the PLM-affiliated
short-term rental facilities during 1995, a decline in utilization in the
PLM-affiliated short-term rental facilities during 1995 and the disposition of
14 trailers in 1995;
(b) Aircraft revenue decreased $116,826 due to a reduced release rate for
one lease.
(2) Interest and other income increased to $35,376 in 1995 from $27,256 in 1994.
The increase in 1995 was primarily attributable to higher interest income in
1995 due to higher cash balance invested and higher average interest rates in
1995.
(B) Expenses
The Partnership's total expenses for the years ended December 31, 1995 and 1994
were $1,079,423 and $1,271,252, respectively. The decrease was attributable
primarily to decreases in general and administrative expenses, depreciation
expense, repairs and maintenance expense, bad debt expense, and management fees.
<PAGE>
(1) Direct operating expenses (defined as repairs and maintenance expenses and
insurance expense) decreased to $228,281 in 1995 from $265,498 in 1994. The
decrease is primarily attributed to a decrease in the number of trailers coming
off term leases and requiring refurbishment prior to transitioning into the
PLM-affiliated short-term rental facilities.
(2) Indirect Operating Expenses (defined as depreciation expense, management
fees to affiliate, bad debt expense, and general and administrative expenses)
decreased to $851,142 in 1995 from $1,005,754 in 1994. The decrease is due
primarily to:
(a) a decrease of $57,537 in general and administrative expenses primarily
due to the decreased overall fleet size and decreased indirect costs associated
with trailers in the PLM-affiliated short-term rental facilities.
(b) a decrease of $46,198 in depreciation expense due to the disposition of
trailers and marine containers during 1995;
(c) a decrease of $25,830 in bad debt expense due to improved
collectability of trade accounts receivable;
(d) a decrease of $25,047 in management fees to affiliate due to a lower
level of operating cash flow associated with lower lease revenue on trailers and
lower utilization and rates on marine containers. Management fees are calculated
monthly as the greater of 10% of the Partnership's operating cash flow, or 1/12
of 1/2% of the Partnership's Gross Proceeds as defined in the Limited
Partnership Agreement;
(3) Gain from disposition of equipment of $84,289 was realized from the sale or
disposition of 17 marine containers and 14 trailers during 1995. In 1994, the
Partnership realized a gain of $68,223 on the sale or disposition of 18 trailers
and 21 marine containers.
(C) Net Income
As a result of all the foregoing, net income for the year ended December 31,
1995, decreased to $175,174 from $441,222 for the year ended December 31, 1994.
The Partnership's ability to operate or liquidate assets, secure leases, and
re-lease those assets whose leases expired during the duration of the
Partnership is subject to many factors, and the Partnership's performance in
1995 is not necessarily indicative of future periods. In 1995, TEP VIIC
distributed $1,037,064 to the Limited Partners, or $30.75 per Unit.
All of the equipment owned by TEP VIIC was either operating in the trailer
rental facilities or on lease as of December 31, 1995. The Partnership's
performance during 1995 is not necessarily indicative of future periods.
Inflation
Inflation and changing prices did not materially impact the Partnerships'
revenues or net income during the reported periods.
Forward Looking Information
Except for historical information contained herein, the discussion in this Form
10-K contains forward-looking statements that involve risks and uncertainties,
such as statements of the Partnership's plans, objectives, expectations and
intentions. The cautionary statements made in this Form 10-K should be read as
being applicable to all related forward-looking statements wherever they appear
in this Form 10-K. The Partnership's actual results could differ materially from
those discussed here.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and financial statement schedules for the
Partnerships are listed on the Index to Financial Statements included in Item
14(a) of this Annual Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
(This space intentionally left blank)
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP
As of the date of this Annual Report, the directors and executive officers
of PLM International (and key executive officers of its subsidiaries) are as
follows:
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------------- ------------------- -------------------------------------------------------
<S> <C> <C>
J. Alec Merriam 61 Director, Chairman of the Board, PLM International,
Inc.; Director, PLM Financial Services, Inc.
Douglas P. Goodrich 50 Director and Senior Vice President, PLM
International; Director and President, PLM Financial
Services, Inc.; Senior Vice President PLM
Transportation Equipment Corporation; President, PLM
Railcar Management Services, Inc.
Walter E. Hoadley 80 Director, PLM International, Inc.
Robert L. Pagel 60 Director, Chairman of the Executive Committee, PLM
International, Inc.; Director, PLM Financial
Services, Inc.
Harold R. Somerset 62 Director, PLM International, Inc.
Robert N. Tidball 58 Director, President and Chief Executive Officer, PLM
International, Inc.
J. Michael Allgood 48 Vice President and Chief Financial Officer, PLM
International, Inc. and PLM Financial Services, Inc.
Stephen M. Bess 50 President, PLM Investment Management, Inc. and PLM
Securities, Corp.; Vice President, PLM Financial
Services, Inc.
David J. Davis 40 Vice President and Corporate Controller, PLM
International and PLM Financial Services, Inc.
Frank Diodati 42 President, PLM Railcar Management Services Canada
Limited.
Steven O. Layne 42 Vice President, PLM Transportation Equipment
Corporation; Vice President and Director, PLM
Worldwide Management Services, Ltd.
Stephen Peary 48 Senior Vice President, General Counsel and Secretary,
PLM International, Inc.; Vice President, General
Counsel and Secretary, PLM Financial Services, Inc.,
PLM Investment Management, Inc., PLM Transportation
Equipment Corporation; Vice President, PLM
Securities, Corp.
Thomas L. Wilmore 54 Vice President, PLM Transportation Equipment
Corporation; Vice President, PLM Railcar Management
Services, Inc.
</TABLE>
J. Alec Merriam was appointed Chairman of the Board of Directors of PLM
International in September 1990, having served as a director since February
1988. In October 1988 he became a member of the Executive Committee of the Board
of Directors of PLM International. From 1972 to 1988 Mr. Merriam was Executive
Vice President and Chief Financial Officer of Crowley Maritime Corporation, a
San Francisco area-based company engaged in maritime shipping and transportation
services. Previously, he was Chairman of the Board and Treasurer of LOA
Corporation of Omaha, Nebraska and served in various financial positions with
Northern Natural Gas Company, also of Omaha.
Douglas P. Goodrich was elected to the Board of Directors in July 1996,
appointed Director and President of PLM Financial Services, Inc. in June, 1996,
and appointed Senior Vice President of PLM International in March 1994. Mr.
Goodrich has also served as Senior Vice President of PLM Transportation
Equipment Corporation since July 1989, and as President of PLM Railcar
Management Services, Inc. since September 1992 having been a Senior Vice
President since June 1987. Mr. Goodrich was an Executive Vice President of
G.I.C. Financial Services Corporation, a subsidiary of Guardian Industries Corp.
of Chicago, Illinois from December 1980 to September 1985.
Dr. Hoadley joined PLM International's Board of Directors and its Executive
Committee in September, 1989. He served as a Director of PLM, Inc. from November
1982 to June 1984 and PLM Companies, Inc. from October 1985 to February 1988.
Dr. Hoadley has been a Senior Research Fellow at the Hoover Institute since
1981. He was Executive Vice President and Chief Economist for the Bank of
America from 1968 to 1981 and Chairman of the Federal Reserve Bank of
Philadelphia from 1962 to 1966. Dr. Hoadley has served as a Director of
Transcisco Industries, Inc. from February 1988 through August 1995.
Robert L. Pagel was appointed Chairman of the Executive Committee of the
Board of Directors of PLM International in September 1990, having served as a
director since February 1988. In October 1988 he became a member of the
Executive Committee of the Board of Directors of PLM International. From June
1990 to April 1991 Mr. Pagel was President and Co-Chief Executive Officer of The
Diana Corporation, a holding company traded on the New York Stock Exchange. He
is the former President and Chief Executive Officer of FanFair Corporation which
specializes in sports fans' gift shops. He previously served as President and
Chief Executive Officer of Super Sky International, Inc., a publicly traded
company, located in Mequon, Wisconsin, engaged in the manufacture of skylight
systems. He was formerly Chairman and Chief Executive Officer of Blunt, Ellis &
Loewi, Inc., a Milwaukee-based investment firm. Mr. Pagel retired from Blunt,
Ellis & Loewi in 1985 after a career spanning 20 years in all phases of the
brokerage and financial industries. Mr. Pagel has also served on the Board of
Governors of the Midwest Stock Exchange.
Harold R. Somerset was elected to the Board of Directors of PLM
International in 1994. From February 1988 to December 1993, Mr. Somerset was
President and Chief Executive Officer of California & Hawaiian Sugar
Corporation, (C&H) a recently-acquired subsidiary of Alexander & Baldwin, Inc.
Mr. Somerset joined C&H in 1984 as Executive Vice President and Chief Operating
Officer, having served on its Board of Directors since 1978, a position in which
he continues to serve. Between 1972 and 1984, Mr. Somerset served in various
capacities with Alexander & Baldwin, Inc., a publicly-held land and agriculture
company headquartered in Honolulu, Hawaii, including Executive Vice President -
Agricultures, Vice President, General Counsel and Secretary. In addition to a
law degree from Harvard Law School, Mr. Somerset also holds degrees in civil
engineering from the Rensselaer Polytechnic Institute and in marine engineering
from the U.S. Naval Academy. Mr. Somerset also serves on the Boards of Directors
for various other companies and organizations, including Longs Drug Stores,
Inc., a publicly-held company.
Robert N. Tidball was appointed President and Chief Executive Officer of
PLM International in March 1989. At the time of his appointment, he was
Executive Vice President of PLM International. Mr. Tidball became a director of
PLM International in April, 1989 and a member of the Executive Committee of the
Board of Directors of PLM International in September 1990. Mr. Tidball was
elected President of PLM Railcar Management Services, Inc. in January 1986. Mr.
Tidball was Executive Vice President of Hunter Keith, Inc., a Minneapolis-based
investment banking firm, from March 1984 to January 1986. Prior to Hunter Keith,
Inc., he was Vice President, a General Manager and a Director of North American
Car Corporation, and a Director of the American Railcar Institute and the
Railway Supply Association.
J. Michael Allgood was appointed Vice President and Chief Financial Officer
of PLM International in October 1992. Between July 1991 and October 1992, Mr.
Allgood was a consultant to various private and public sector companies and
institutions specializing in financial operational systems development. In
October 1987, Mr. Allgood co-founded Electra Aviation Limited and its holding
company, Aviation Holdings Plc of London where he served as Chief Financial
Officer until July 1991. Between June 1981 and October 1987, Mr. Allgood served
as a First Vice President with American Express Bank, Ltd. In February 1978, Mr.
Allgood founded and until June 1981, served as a director of Trade Projects
International/Philadelphia Overseas Finance Company, a joint venture with
Philadelphia National Bank. From March 1975 to February 1978, Mr. Allgood served
in various capacities with Citibank, N.A.
Stephen M. Bess was appointed President of PLM Securities, Corp. in June,
1996 and President of PLM Investment Management, Inc. in August 1989, having
served as Senior Vice President of PLM Investment Management, Inc. beginning in
February 1984 and as Corporate Controller of PLM Financial Services, Inc.
beginning in October 1983. Mr. Bess served as Corporate Controller of PLM, Inc.,
beginning in December 1982. Mr. Bess was Vice President-Controller of Trans
Ocean Leasing Corporation, a container leasing company, from November 1978 to
November 1982, and Group Finance Manager with the Field Operations Group of
Memorex Corp., a manufacturer of computer peripheral equipment, from October
1975 to November 1978.
David J. Davis was appointed Vice President and Controller of PLM
International in January 1994. From March 1993 through January 1994, Mr. Davis
was engaged as a consultant for various firms, including PLM. Prior to that Mr.
Davis was Chief Financial Officer of LB Credit Corporation in San Francisco from
July 1991 to March 1993. From April 1989 to May 1991, Mr. Davis was Vice
President and Controller for ITEL Containers International Corporation which was
located in San Francisco. Between May 1978 and April 1989, Mr. Davis held
various positions with Transamerica Leasing Inc., in New York, including that of
Assistant Controller for their rail leasing division.
Frank Diodati was appointed President of PLM Railcar Management Services
Canada Limited in 1986. Previously, Mr. Diodati was Manager of Marketing and
Sales for G.E. Railcar Services Canada Limited.
Steven O. Layne was appointed Vice President, PLM Transportation Equipment
Corporation's Air Group in November 1992, was appointed Vice President and
Director of PLM Worldwide Management Services, Ltd. in September, 1995. Mr.
Layne was its Vice President, Commuter and Corporate Aircraft beginning in July
1990. Prior to joining PLM, Mr. Layne was the Director, Commercial Marketing for
Bromon Aircraft Corporation, a joint venture of General Electric Corporation and
the Government Development Bank of Puerto Rico. Mr. Layne is a major in the
United States Air Force Reserves and senior pilot with 13 years of accumulated
service.
Stephen Peary became Vice President, Secretary, and General Counsel of PLM
International in February 1988 and Senior Vice President in March 1994. Mr.
Peary was Assistant General Counsel of PLM Financial Services, Inc. from August
1987 through January 1988. Previously, Mr. Peary was engaged in the private
practice of law in San Francisco. Mr. Peary is a graduate of the University of
Illinois, Georgetown University Law Center, and Boston University (Masters of
Taxation Program).
Thomas L. Wilmore was appointed Vice President - Rail, PLM Transportation
Equipment Corporation, in March 1994 and has served as Vice President, Marketing
for PLM Railcar Management Services, Inc. since May 1988. Prior to joining PLM,
Mr. Wilmore was Assistant Vice President Regional Manager for MNC Leasing Corp.
in Towson, Maryland from February 1987 to April 1988. From July 1985 to February
1987, he was President and Co-Owner of Guardian Industries Corp., Chicago, July
Illinois and between December 1980 and July 1985, Mr. Wilmore was an Executive
Vice President for its subsidiary, G.I.C. Financial Services Corporation. Mr.
Wilmore also served as Vice President of Sales for Gould Financial Services
located in Rolling Meadows, Illinois from June 1978 to December 1980.
The directors of the General Partner are elected for a one-year term or
until their successors are elected and qualified. There are no family
relationships between any director or any executive officer of the General
Partner.
ITEM 11. EXECUTIVE COMPENSATION
The Partnerships have no directors, officers, or employees. The Partnerships
have no pension, profit sharing, retirement, or similar benefit plan in effect
as of December 31, 1996.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners
At December 31, 1996, no investor is known by the General Partner to
beneficially own more than 5% of the Units of either TEP VIIB or TEP VIIC.
(b) Security Ownership of Management
Neither the General Partner and its affiliates nor any officer or director
of the General Partner and its affiliates beneficially own any Units of
either TEP VIIB or TEP VIIC.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
(a) Transactions with Management and Others.
During 1996, management fees to IMI were incurred in the amounts of $52,145
and $97,439 for TEP VIIB and TEP VIIC, respectively. During 1996,
administrative services performed on behalf of the Partnerships were
reimbursed to FSI and its affiliates in the amounts of $77,237 and $112,550
by TEP VIIB and TEP VIIC, respectively.
During 1996, the unconsolidated special purpose entities (USPE's) paid or
accrued (based on the Partnership's proportional share of ownership):
management fees to IMI in the amounts of $3,056 and $15,596 for TEP VIIB
and TEP VIIC, respectively; administrative services in the amounts of $594
for TEP VIIC.
(b) Certain Business Relationships
None.
(c) Indebtedness of Management
None.
(d) Transactions with Promoters
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements
The financial statements listed in the accompanying Index to Financial
Statements are filed as part of this Annual Report.
(b) Reports on Form 8-K
None.
(c) Exhibits
4.Limited Partnership Agreement of each Partnership. Incorporated by
reference to the Partnership's Registration Statement on Form S-1 (Reg.
No. 2-93640) which became effective with the Securities and Exchange
Commission on January 7, 1985.
10. Equipment Management Agreement between each Partnership and PLM
Investment Management, Inc. Incorporated by reference to the
Registration Statement on Form S-1 (Reg. No. 2-93640) which became
effective with the Securities and Exchange Commission on January 7,
1985.
25. Powers of Attorney.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
The Partnership has no directors or officers. The General Partner has
signed on behalf of the Partnership by duly authorized officers.
Dated: March 14, 1997 PLM Transportation Equipment Partners VIIB
1985 Income Fund
Partnership
By: PLM Financial Services, Inc.
General Partner
By: /s/ Douglas P. Goodrich
-------------------------------
Douglas P. Goodrich
President & Director
By: /s/ David J. Davis
-------------------------------
David J. Davis
Vice President and
Corporate Controller
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Partnership has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
The Partnership has no directors or officers. The General Partner has
signed on behalf of the Partnership by duly authorized officers.
Dated: March 14, 1997 PLM Transportation Equipment Partners VIIC
1985 Income Fund
Partnership
By: PLM Financial Services, Inc.
General Partner
By: /s/ Douglas P. Goodrich
-----------------------------
Douglas P. Goodrich
President and Director
By: /s/ David J. Davis
-----------------------------
David J. Davis
Vice President and
Corporate Controller
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following directors of the Partnerships' Managing
General Partner on the dates indicated.
Name Capacity Date
*_____________________________
J. Alec Merriam Director-FSI March 14, 1997
*_____________________________
Robert L. Pagel Director-FSI March 14, 1997
* Stephen Peary, by signing his name hereto, does sign this document on behalf
of the persons indicated above pursuant to powers of attorney duly executed by
such persons and filed with the Securities and Exchange Commission.
/s/ Stephen Peary
- -----------------------
Stephen Peary
Attorney-in-Fact
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
TEP VIIB Page
Report of Independent Auditors 26
Balance sheets at December 31, 1996 and 1995 27
Statements of income for the years ended December 31, 1996,
1995, and 1994 28
Statements of changes in partners' capital for the years
ended December 31, 1996, 1995, and 1994 29
Statements of cash flows for the years ended December 31, 1996,
1995, and 1994 30
Notes to financial statements 31-35
All other financial statement schedules have been omitted as the required
information is not pertinent to the Registrant or is not material, or because
the information required is included in the financial statements and notes
thereto.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
INDEX TO FINANCIAL STATEMENTS
(Item 14(a))
TEP VIIC Page
Report of Independent Auditors 36
Balance sheets at December 31, 1996 and 1995 37
Statements of income for the years ended December 31, 1996,
1995, and 1994 38
Statements of changes in partners' capital for the years
ended December 31, 1996, 1995, and 1994 39
Statements of cash flows for the years ended December 31, 1996,
1995, and 1994 40
Notes to financial statements 41-45
All other financial statement schedules have been omitted as the required
information is not pertinent to the Registrant or is not material, or because
the information required is included in the financial statements and notes
thereto.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
PLM Transportation Equipment Partners VIIB 1985 Income Fund:
We have audited the financial statements of PLM Transportation Equipment
Partners VIIB 1985 Income Fund as listed in the accompanying index. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Partnership completed its tenth year of operations during 1995, and entered
the liquidation phase of the Partnership. The General Partner is actively
pursuing the sale of all of the Partnership's equipment with the intention of
winding up the Partnership and distributing all available cash to the Partners.
Management's plans in regard to this matter are more fully described in note 6.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PLM Transportation Equipment
Partners VIIB 1985 Income Fund as of December 31, 1996, and 1995 and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 1996, in conformity with generally accepted accounting
principles.
/S/ KPMG PEAT MARWICK LLP
- -----------------------------------
SAN FRANCISCO, CALIFORNIA
March 14, 1997
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS
<TABLE>
<CAPTION>
1996 1995
--------------------------------------
<S> <C> <C>
Transportation equipment on operating leases held for sale, at cost $ 3,550,990 $ 3,972,722
Less accumulated depreciation (3,427,418 ) (3,616,132 )
--------------------------------------
Net equipment 123,572 356,590
Cash and cash equivalents 269,628 293,808
Investment in unconsolidated special purpose entity -- 79,116
Accounts receivable, net of allowance for doubtful accounts of
$5,082 in 1996 and $26,718 in 1995 127,105 135,320
Prepaid insurance 2,714 3,128
--------------------------------------
Total assets $ 523,019 $ 867,962
======================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 4,641 $ 4,641
Accounts payable 32,221 21,292
Lessee deposits and engine reserves 615 260
--------------------------------------
Total liabilities 37,477 26,193
Partners' capital (deficit):
Limited Partners (22,276 units) 578,736 931,401
General Partner (93,194 ) (89,632 )
--------------------------------------
Total partners' capital 485,542 841,769
--------------------------------------
Total liabilities and partners' capital $ 523,019 $ 867,962
======================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF INCOME
For the years ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
-----------------------------------------------
<S> <C> <C> <C>
Revenues:
Lease revenue $ 410,917 $ 673,162 $ 786,981
Interest and other income 13,402 32,119 11,508
Gain from disposition of equipment 62,907 27,563 14,663
----------------------------------------------
Total revenues 487,226 732,844 813,152
Expenses:
Depreciation 204,118 278,129 293,591
Management fees to affiliate 52,145 55,690 57,109
Insurance expense 4,566 8,406 7,735
(Recovery of ) provision for bad debts (1,083) 35,082 17,754
Repairs and maintenance 120,060 159,069 175,420
General and administrative expenses
to affiliates 77,237 130,286 127,227
Other general and administrative expenses 57,208 36,876 45,627
----------------------------------------------
Total expenses 514,251 703,538 724,463
----------------------------------------------
Equity in net income of unconsolidated
special purpose entity 265,108 -- --
----------------------------------------------
Net income $ 238,083 $ 29,306 $ 88,689
==============================================
Partners' share of net income:
Limited Partners - 99% $ 235,702 $ 29,013 $ 87,802
General Partner - 1% 2,381 293 887
----------------
==============================
Total $ 238,083 $ 29,306 $ 88,689
==============================================
Net income per Limited Partnership
Unit (22,276 units) $ 10.58 $ 1.30 $ 3.94
==============================================
Cash distributions $ 394,310 $ 396,187 $ 475,421
==============================================
Cash distributions per Limited
Partnership Unit $ 17.52 $ 17.61 $ 21.13
==============================================
Special cash distributions $ 200,000 $ -- $ --
==============================================
Special cash distributions per
Limited Partnership Unit $ 8.89 $ -- $ --
==============================================
Total cash distributions per
Limited Partnership Unit $ 26.41 $ 17.61 $ 21.13
==============================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Limited General
Partners Partner Total
-----------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit)
at December 31, 1993 $ 1,677,478 $ (82,096 ) $ 1,595,382
Net income 87,802 887 88,689
Cash distributions (470,667 ) (4,754 ) (475,421 )
-----------------------------------------------------
Partners' capital (deficit)
at December 31, 1994 1,294,613 (85,963 ) 1,208,650
Net income 29,013 293 29,306
Cash distributions (392,225 ) (3,962 ) (396,187 )
-----------------------------------------------------
Partners' capital (deficit)
at December 31, 1995 931,401 (89,632 ) 841,769
Net income 235,702 2,381 238,083
Quarterly cash distributions (390,367 ) (3,943 ) (394,310 )
Special distributions (198,000 ) (2,000 ) (200,000 )
-----------------------------------------------------
Partners' capital (deficit)
at December 31, 1996 $ 578,736 $ (93,194 ) $ 485,542
=====================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 238,083 $ 29,306 $ 88,689
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain from disposition of equipment (62,907 ) (27,563 ) (14,663 )
Depreciation 204,118 278,129 293,591
Equity in net income of unconsolidated
special purpose entity (265,108 ) -- --
Changes in operating assets
and liabilities:
Restricted cash -- (526 ) (93 )
Accounts receivable, net 8,215 (13,616 ) 7,178
Prepaid insurance 414 158 2,183
Due to affiliates -- 654 (8,502 )
Accounts payable 10,929 (11,186 ) 11,264
Prepaid deposits and engine
reserves 355 (576 ) 222
------------------------------------------------
-------------------------------
Net cash provided by operating
activities 134,099 254,780 379,869
------------------------------------------------
Investing activities:
Capitalized equipment repairs -- (45 ) (877 )
Proceeds from disposition of
equipment 91,807 76,396 69,114
Liquidation distributions from unconsolidated
special purpose entity 303,144 -- --
Distributions from unconsolidated
special purpose entity 41,080 -- --
------------------------------------------------
Cash flows provided by investing
activities 436,031 76,351 68,237
------------------------------------------------
Cash flows used in financing activities:
Cash distributions paid to Limited Partners (588,367 ) (392,225 ) (470,667 )
Cash distributions paid to General Partner (5,943 ) (3,962 ) (4,754 )
------------------------------------------------
Cash used in financing activities (594,310 ) (396,187 ) (475,421 )
------------------------------------------------
Net decrease in cash
and cash equivalents (24,180 ) (65,056 ) (27,315 )
Cash and cash equivalents at
beginning of year 293,808 358,864 386,179
------------------------------------------------
Cash and cash equivalents at
end of year $ 269,628 $ 293,808 $ 358,864
================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation
Organization
PLM Transportation Equipment Partners VIIB 1985 Income Fund, a California
limited partnership (the Partnership) was formed on October 19, 1984. The
Partnership engages in the business of owning and leasing transportation
equipment. The Partnership commenced significant operations in August,
1985. PLM Financial Services, Inc. (FSI) is the General Partner. FSI is a
wholly-owned subsidiary of PLM International, Inc.
(PLM International) and manages the affairs of the Partnership.
The net income (loss) and distributions of the Partnership are
allocated 99% to the Limited Partners and 1% to the General Partner. The
General Partner is entitled to an incentive fee equal to 15% of "Surplus
Distributions" as defined in the Partnership Agreement remaining after the
Limited Partners have received a certain minimum rate of return.
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
This requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Operations
The equipment of the Partnership is managed, under a continuing Equipment
Management Agreement, by PLM Investment Management, Inc. (IMI), a
wholly-owned subsidiary of FSI. IMI receives an annual management fee
payable monthly from the Partnership for managing the equipment (see Note
2). FSI, in conjunction with its subsidiaries, sells transportation
equipment to investor programs and third parties, manages pools of
transportation equipment under agreements with the investor programs, and
is a general partner of other affiliated limited partnerships.
Accounting for Leases
The Partnership's leasing operations generally consist of operating leases.
Under the operating lease method of accounting, the leased asset is
recorded at cost and depreciated over its estimated useful life. Rental
payments are recorded as revenue over the lease term. Lease origination
costs are capitalized and amortized over the term of the lease.
Depreciation
Depreciation is computed on the 200% declining balance method based upon
estimated useful lives of 15 years for rail equipment, 12 years for
aircraft, trailers, and marine containers, and 8 years for tractors. The
depreciation method changes to straight line when annual depreciation
expense using the straight line method exceeds that calculated by the 200%
declining balance method. Major expenditures which are expected to extend
the useful lives or reduce future operating expenses of equipment are
capitalized.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation (continued):
Transportation Equipment
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of" (SFAS 121). This standard is effective
for years beginning after December 15, 1995. In accordance with SFAS 121,
the General Partner reviews the carrying value of its equipment portfolio
at least annually in relation to expected future market conditions for the
purpose of assessing recoverability of the recorded amounts. If projected
future lease revenue plus residual values are less than the carrying value
of the equipment, a loss on revaluation is recorded. No adjustments to
reflect impairment of individual equipment carrying values were required
for the year ended December 31, 1996.
Investments in Unconsolidated Special Purpose Entities
Until the third quarter of 1996, the Partnership had an interest in a
special purpose entity which owned transportation equipment. This interest
was accounted for using the equity method.
The Partnership's investment in unconsolidated special purpose entity
included acquisition and lease negotiation fees paid by the Partnership to
TEC. The Partnership's equity interest in net income of unconsolidated
special purpose entity is reflected net of management fees paid or payable
to IMI and the amortization of acquisition and lease negotiation fees paid
to TEC.
Repairs and Maintenance
Maintenance costs are usually the obligation of the lessee. If they are not
covered by the lessee they are charged against operations as incurred.
Net Income (Loss) and Distributions per Limited Partnership Unit
Net income (loss) per Limited Partnership Unit is computed based on the
number of Limited Partnership Units outstanding during the period (22,276
for 1996, 1995, and 1994). The General Partner is allocated a 1% share of
the net income (loss) and the Limited Partners are allocated a 99% share of
the net income (loss).
Cash distributions are recorded when paid. Cash distributions to
investors in excess of net income are considered to represent a return of
capital. Cash distributions to Limited Partners of $352,665, $363,212, and
$382,865 in 1996, 1995, and 1994, respectively, were deemed to be a return
of capital.
Cash and Cash Equivalents
The Partnership considers highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents for the purposes of this presentation.
2. Transactions with General Partner and Affiliates
An officer of FSI contributed $100 of the Partnership's initial capital.
Under the Equipment Management Agreement, IMI receives an annual management
fee monthly attributable to either owned equipment or interests in
equipment owned by the USPE's equal to the greater of 10% of the
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. Transactions with General Partner and Affiliates (continued)
Partnership's "operating cash flow", or 1/12 of 1/2% of the Partnership's
"gross proceeds" as defined in the Partnership Agreement. Management fees
of $4,641 were payable to IMI as of December 31, 1996 and 1995. The
Partnership's proportional share of USPE's management fees expense during
1996 was $3,056.
As of December 31, 1996, all of the Partnership's trailer equipment has
been transferred into rental facilities operated by an affiliate of the
General Partner. Revenues are earned by billing the rental facilities'
customers monthly or quarterly under short-term rental agreements and are
distributed as collected to the owners of the related equipment. Direct
expenses associated with the equipment and an allocation of indirect
expenses of rental facility operations are charged to the Partnership.
The Partnership reimbursed FSI and its affiliates $77,237, $130,286,
and $127,227 for administrative and other services performed on behalf of
the Partnership in 1996, 1995, and 1994, respectively. At December 31, 1996
and 1995, $4,641 was due to FSI and its affiliates.
3. Equipment
The components of owned equipment are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------
<S> <C> <C>
Trailers $ 3,146,140 $ 3,543,334
Marine containers 86,201 110,739
Rail equipment 318,649 318,649
--------------------------------------
3,550,990 3,972,722
Less accumulated depreciation (3,427,418 ) (3,616,132 )
--------------------------------------
======================================
Net equipment $ 123,572 $ 356,590
======================================
</TABLE>
At December 31, 1996, the Partnership owned 27 marine containers, 189
trailers, and five tank cars.
Revenues are earned by placing the equipment under operating leases and
are billed monthly or quarterly.
Rents for all equipment are based on a fixed operating lease amount
with the exception of marine containers and certain trailers, which earn
revenue based on utilization. The Partnership's marine containers are
leased to an operator of utilization-type pools which include equipment
owned by unaffiliated parties. In such instances revenues received by the
Partnership consist of a specified percentage of lease revenues generated
by leasing the pooled equipment to sub-lessees, after deducting certain
direct operating expenses of the pooled equipment.
During 1996, the Partnership sold 19 trailers and disposed of 9 marine
containers. During 1995, the Partnership sold eight trailers and disposed
of 15 marine containers.
All of the equipment owned by the Partnership is either operating in
PLM-affiliated short-term rental facilities or on lease as of December 31,
1996. With the exception of one trailer, all of the equipment owned by the
Partnership was either operating in PLM-affiliated short-term rental
facilities or on lease as of December 31, 1995. The carrying value of
equipment off lease was $6,500 at December 31, 1995.
All leases are being accounted for as operating leases. Future minimum
rentals receivable under non-cancelable leases at December 31, 1996 during
each of the next five years are approximately $30,000 -1997; $30,000 -
1998; $10,000 - 1999; and $-0- thereafter. Contingent
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. Equipment (continued)
rentals based upon utilization amounted to $18,417 in 1996, $22,703 in
1995, and $24,079 in 1994. The lessees accounting for 10% or more of the
total revenues during 1996, 1995, and 1994 were Kanakakee, Beaverville and
Southern Railroad (40% in 1996, 18% in 1995, and 22% in 1994), and British
Aerospace, Inc.
(13% in 1996, 14% in 1995, and 13% in 1994).
4. Investment in Unconsolidated Special Purpose Entity
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of rental equipment as undivided interests,
including its proportionate share of each asset with similar wholly-owned
assets in its financial statements. Under generally accepted accounting
principles, the effects of such activities, if material, should be reported
using the equity method of accounting. Therefore, effective January 1,
1996, the Partnership adopted the equity method to account for its
investment in such jointly-held assets.
The principle differences between the previous accounting method and
the equity method relate to the presentation of activities relating to
these assets in the income statement. Whereas, under the equity method of
accounting the Partnership's proportionate share is presented as a single
net amount, "equity in net income (loss) of unconsolidated special purpose
entity", under the previous method, the Partnership's income statement
reflected its proportionate share of each individual item of revenue and
expense. Accordingly, the effect of adopting the equity method of
accounting has no cumulative effect on previously reported partner's
capital or on the Partnership's net income (loss) for the period of
adoption. Because the effects on previously issued financial statements of
applying the equity method of accounting to investments in jointly-owned
assets are not considered to be material to such financial statements taken
as a whole, previously issued financial statements have not been restated.
However, certain items have been reclassified in the previously issued
balance sheet to conform to the current period presentation.
The following summarizes the financial information for the special
purpose entities and the Partnership's interest therein as of and for the
year ended December 31, 1996:
Net
Total USPE Interest of
Partnership
------------------------------
Net Investments $ -- $ --
Revenues 199,477 61,120
Net Income 865,235 265,108
The "Investment in unconsolidated special purpose entity" includes a
31% interest in an entity which owns one commuter aircraft at December 31,
1995. The entity sold the aircraft in 1996.
5. Income Taxes
The Partnership is not subject to income taxes as any income or loss is
included in the tax returns of the individual Partners. Accordingly, no
provision for income taxes has been made in the accounts of the
Partnership.
As of December 31, 1996, there were temporary differences of
approximately $1,409,857 between the financial statement carrying values of
assets and liabilities and the federal income tax bases of such assets and
liabilities, principally due to differences in depreciation methods.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIB 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
6. Liquidation and special distributions
During the first quarter of 1995, the Partnership completed its 10th year
of operations. As originally anticipated by the General Partner, the
Partnership will be liquidated in an orderly manner in its 11th and 12th
years of operation. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds. As sale
proceeds are received the General Partner intends to periodically declare
special distributions to distribute the sale proceeds to the partners.
During the liquidation phase of the Partnership the equipment will continue
to be leased under operating leases until sold. Operating cash flows, to
the extent they exceed Partnership expenses, will continue to be
distributed on a quarterly basis to partners. The amounts reflected for
assets and liabilities of the Partnership have not been adjusted to reflect
liquidation values. The equipment portfolio continues to be carried at the
lower of depreciated cost or fair value less cost to dispose. Although the
General Partner assets and liabilities, the amounts cannot be accurately
determined prior to actual liquidation of the equipment. Any excess
proceeds over expected Partnership obligations will be distributed to the
Partners throughout the liquidation period. Upon final liquidation, the
Partnership will be dissolved.
In 1996, the General Partner paid special distributions of $8.89 per
weighted average Limited Partnership Unit. No special distributions were
paid in 1995 and 1994. The Partnership is not permitted to reinvest
proceeds from sales or liquidations of equipment. These proceeds, in excess
of operational cash requirements, are periodically paid out to limited
partners in the form of special distributions. The sales and liquidations
occur because of equipment destructions, the determination by the General
Partner that it is the appropriate time to maximize the return on an asset
through sale of that asset, and, in some leases, the ability of the lessee
to exercise purchase options.
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Partners
PLM Transportation Equipment Partners VIIC 1985 Income Fund:
We have audited the financial statements of PLM Transportation Equipment
Partners VIIC 1985 Income Fund as listed in the accompanying index. These
financial statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
The Partnership completed its tenth year of operations during 1995, and entered
the liquidation phase of the Partnership. The General Partner is actively
pursuing the sale of all of the Partnership's equipment with the intention of
winding up the Partnership and distributing all available cash to the Partners.
Management's plans in regard to this matter are more fully described in note 6.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of PLM Transportation Equipment
Partners VIIC 1985 Income Fund as of December 31, 1996, and 1995 and the results
of its operations and its cash flows for each of the years in the three year
period ended December 31, 1996 in conformity with generally accepted accounting
principles.
/S/ KPMG PEAT MARWICK LLP
- ------------------------------
SAN FRANCISCO, CALIFORNIA
March 14, 1997
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
BALANCE SHEETS
December 31,
ASSETS
<TABLE>
<CAPTION>
1996 1995
--------------------------------------
<S> <C> <C>
Transportation equipment on operating leases held for sale, at cost $ 4,069,971 $ 5,059,215
Less accumulated depreciation (3,861,489 ) (4,536,562 )
-------------------------------------
Net equipment 208,482 522,653
Cash and cash equivalents 416,360 551,094
Investments in unconsolidated special purpose entities 99,974 425,957
Accounts receivable less allowance for doubtful accounts of
$633 in 1996 and $6,649 in 1995 64,261 143,225
Prepaid insurance 3,713 5,435
-------------------------------------
Total assets $ 792,790 $ 1,648,364
=====================================
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Due to affiliates $ 7,026 $ 7,026
Accounts payable and accrued expenses 13,040 15,202
-------------------------------------
Total liabilities 20,066 22,228
Partners' capital (deficit):
Limited Partners (33,727 units) 913,500 1,758,377
General Partner (140,776 ) (132,241 )
-------------------------------------
Total partners' capital 772,724 1,626,136
-------------------------------------
Total liabilities and partners' capital $ 792,790 $ 1,648,364
=====================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF INCOME
For the years ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
----------------------------------------------------
<S> <C> <C> <C>
Revenues:
Lease revenue $ 406,874 $ 1,134,932 $ 1,616,995
Interest and other income 24,366 35,376 27,256
Gain from disposition of equipment 133,840 84,289 68,223
---------------------------------------------------
Total revenues 565,080 1,254,597 1,712,474
Expenses:
Depreciation 241,688 511,267 557,465
Management fees to affiliate 97,439 87,968 113,015
Insurance expense 7,511 11,783 13,143
Bad debt expense 122 17,200 43,030
Repairs and maintenance 104,666 216,498 252,355
General and administrative expenses
to affiliates 112,550 187,498 231,353
Other general and administrative expenses 53,900 47,209 60,891
---------------------------------------------------
Total expenses 617,876 1,079,423 1,271,252
Equity in net income of unconsolidated
special purpose entities 653,740 -- --
---------------------------------------------------
Net income $ 600,944 $ 175,174 $ 441,222
===================================================
Partners' share of net income:
Limited Partners - 99% $ 594,935 $ 173,422 $ 436,810
General Partner - 1% 6,009 1,752 4,412
===================================================
Total $ 600,944 $ 175,174 $ 441,222
===================================================
Net income per Limited Partnership
Unit (33,727 units) $ 17.64 $ 5.14 $ 12.95
===================================================
Cash distributions $ 654,356 $ 847,539 $ 995,704
===================================================
Cash distributions per Limited
Partnership Unit $ 19.21 $ 24.88 $ 29.23
===================================================
Special cash distributions $ 800,000 $ 200,000 $ 100,000
===================================================
Special cash distributions per
Limited Partnership Unit $ 23.48 $ 5.87 $ 2.94
===================================================
Total cash distributions per
Limited Partnership Unit $ 42.69 $ 30.75 $ 32.17
===================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CHANGES IN PARTNERS' CAPITAL
For the years ended December 31, 1996, 1995, and 1994
<TABLE>
<CAPTION>
Limited General
Partners Partners Total
--------------------------------------------------------
<S> <C> <C> <C>
Partners' capital (deficit)
at December 31, 1993 $ 3,269,956 $ (116,973 ) $ 3,152,983
Net income 436,810 4,412 441,222
Quarterly cash distributions (985,747 ) (9,957 ) (995,704 )
Special distributions (99,000 ) (1,000 ) (100,000 )
--------------------------------------------------------
Partners' capital (deficit)
at December 31, 1994 2,622,019 (123,518 ) 2,498,501
Net income 173,422 1,752 175,174
Quarterly cash distributions (839,064 ) (8,475 ) (847,539 )
Special distributions (198,000 ) (2,000 ) (200,000 )
--------------------------------------------------------
Partners' capital (deficit)
at December 31, 1995 1,758,377 (132,241 ) 1,626,136
Net income 594,935 6,009 600,944
Quarterly cash distributions (647,812 ) (6,544 ) (654,356 )
Special distributions (792,000 ) (8,000 ) (800,000 )
--------------------------------------------------------
Partners' capital (deficit)
at December 31, 1996 $ 913,500 $ (140,776 ) $ 772,724
========================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
STATEMENTS OF CASH FLOWS
for the years ended December 31,
<TABLE>
<CAPTION>
1996 1995 1994
-------------------------------------------------------
<S> <C> <C> <C>
Operating activities:
Net income $ 600,944 $ 175,174 $ 441,222
Adjustments to reconcile net
income to net cash provided by
operating activities:
Gain from disposition of
equipment (133,840 ) (84,289 ) (68,223 )
Depreciation 241,688 511,267 557,465
Equity in net income of unconsolidated
special purpose entity (653,740 ) -- --
Changes in operating assets
and liabilities:
Restricted cash -- (728 ) (710 )
Accounts receivable, net 78,964 9,115 66,762
Prepaid insurance 1,722 (516 ) 4,076
Due from affiliates -- 12,085 (5,092 )
Due to affiliates -- 7,026 --
Accounts payable (2,162 ) 4,041 (17,315 )
Prepaid deposits and engine
reserves -- 797 (527 )
-------------------------------------------------------
-----------------------------------
Net cash provided by operating
activities 133,576 633,972 977,658
-------------------------------------------------------
Investing activities:
Capitalized equipment repairs -- (191 ) --
Proceeds from disposition of
equipment 206,323 165,784 156,817
Liquidation distributions from unconsolidated
special purpose entity 686,229 -- --
Distributions from unconsolidated special
special purpose entities 293,494 -- --
-------------------------------------------------------
Cash flows provided by investing
activities 1,186,046 165,593 156,817
-------------------------------------------------------
Financing activities:
Cash distributions paid to Limited Partners (1,439,812 ) (1,037,064 ) (1,084,747 )
Cash distributions paid to General partner (14,544 ) (10,475 ) (10,957 )
-------------------------------------------------------
Cash used in financing activities (1,454,356 ) (1,047,539 ) (1,095,704 )
-------------------------------------------------------
Net (decrease) increase in cash
and cash equivalents (134,734 ) (247,974 ) 38,771
Cash and cash equivalents at
beginning of year 551,094 799,068 760,297
-------------------------------------------------------
Cash and cash equivalents at
end of year $ 416,360 $ 551,094 $ 799,068
=======================================================
</TABLE>
See accompanying notes to financial
statements.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation
Organization
PLM Transportation Equipment Partners VIIC 1985 Income Fund, a California
limited partnership (the Partnership) was formed on October 19, 1984 to
engage in the business of owning and leasing transportation equipment. The
Partnership commenced significant operations in May, 1985. PLM Financial
Services, Inc. (FSI) is the General Partner. FSI is a wholly-owned
subsidiary of PLM International, Inc. (PLM International) and manages the
affairs of the Partnership.
The net income (loss) and distributions of the Partnership are
allocated 99% to the Limited Partners and 1% to the General Partner. The
General Partner is entitled to an incentive fee equal to 15% of "Surplus
Distributions" as defined in the Partnership Agreement remaining after the
Limited Partners have received a certain minimum rate of return.
These financial statements have been prepared on the accrual basis of
accounting in accordance with generally accepted accounting principles.
This requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Operations
The equipment of the Partnership is managed, under a continuing Equipment
Management Agreement, by PLM Investment Management, Inc. (IMI), a
wholly-owned subsidiary of FSI. IMI receives an annual management fee
payable monthly from the Partnership for managing the equipment (see Note
2). FSI, in conjunction with its subsidiaries, sells transportation
equipment to investor programs and third parties, manages pools of
transportation equipment under agreements with the investor programs, and
is a general partner of other affiliated limited partnerships.
Accounting for Leases
The Partnership's leasing operations generally consist of operating leases.
Under the operating lease method of accounting, the leased asset is
recorded at cost and depreciated over its estimated useful life. Rental
payments are recorded as revenue over the lease term. Lease origination
costs are capitalized and amortized over the term of the lease.
Depreciation
Depreciation is computed on the 200% declining balance method, converting
to the straight-line method during the second half of the equipments'
estimated useful lives, based upon estimated useful lives of 12 years for
aircraft, trailers, and marine containers, and 8 years for tractors. The
depreciation method changes to straight line when annual depreciation
expense using the straight line method exceeds that calculated by the 200%
declining balance method. Major expenditures which are expected to extend
the useful lives or reduce future operating expenses of equipment are
capitalized.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
1. Basis of Presentation (continued)
Transportation Equipment
In March 1995, the Financial Accounting Standards Board (FASB) issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of" (SFAS 121). This standard is effective
for years beginning after December 15, 1995. In accordance with SFAS 121,
the General Partner reviews the carrying value of its equipment portfolio
at least annually in relation to expected future market conditions for the
purpose of assessing recoverability of the recorded amounts. If projected
future lease revenue plus residual values are less than the carrying value
of the equipment, a loss on revaluation is recorded. No adjustments to
reflect impairment of individual equipment carrying values were required
for the year ended December 31, 1996.
Investments in Unconsolidated Special Purpose Entities
The Partnership has interests in special purpose entities which own
transportation equipment. These interests are accounted for using the
equity method.
The Partnership's investment in unconsolidated special purpose entities
includes acquisition and lease negotiation fees paid by the Partnership to
TEC. The Partnership's equity interest in net income of unconsolidated
special purpose entities is reflected net of management fees paid or
payable to IMI and the amortization of acquisition and lease negotiation
fees paid to TEC.
Repairs and Maintenance
Maintenance costs are usually the obligation of the lessee. If they are not
covered by the lessee they are charged against operations as incurred.
Net Income (Loss) and Distributions per Limited Partnership Unit
Net income (loss) per Limited Partnership Unit is computed based on the
number of Limited Partnership Units outstanding during the period (33,727
for 1996, 1995, and 1994). The General Partner is allocated a 1% share of
the net income (loss).
Cash distributions are recorded when paid. Cash distributions to
investors in excess of net income are considered to represent a return of
capital. Cash distributions to Limited Partners of $844,877, $863,642 and
$647,937 in 1996, 1995, and 1994, respectively, were deemed to be a return
of capital.
Cash and Cash Equivalents
The Partnership considers highly liquid investments that are readily
convertible to known amounts of cash with original maturities of three
months or less as cash equivalents for the purposes of this presentation.
Lessee security deposits and required reserves held by the Partnership are
considered restricted cash.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
2. General Partner and Transactions with Affiliates
An officer of FSI contributed $100 of the Partnership's initial net
capital. Under the Equipment Management Agreement, IMI receives an annual
management fee monthly attributable to either owned equipment or interests
in equipment owned by the USPE's equal to the greater of 10% of the
Partnership's "operating cash flow", or 1/12 of 1/2% the Partnership's
"gross proceeds" as defined in the Partnership Agreement. Management fees
of $7,026 were payable to IMI as of December 31, 1996 and 1995. The
Partnership's proportional share of USPE's management fees expense during
1996 was $15,596.
As of December 31, 1996, all of the Partnership's trailer equipment has
been transferred into rental facilities operated by an affiliate of the
General Partner. Revenues collected under short-term rental agreements with
the rental facilities' customers are distributed monthly to the owners of
the related equipment. Direct expenses associated with the equipment and an
allocation of indirect expenses of rental facility operations are billed to
the Partnership.
The Partnership reimbursed FSI and its affiliates $112,550, $187,498,
and $231,353 for administrative and other services performed on behalf of
the Partnership in 1996, 1995, and 1994, respectively. The Partnership's
proportional share of USPE's administrative and other services was $594
during 1996.
3. Equipment
The components of owned equipment are as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------------------
<S> <C> <C>
Trailers $ 3,870,247 $ 4,833,449
Marine containers 199,724 225,766
--------------------------------------
4,069,971 5,059,215
Less accumulated depreciation (3,861,489 ) (4,536,562 )
--------------------------------------
======================================
Net equipment $ 208,482 $ 522,653
======================================
</TABLE>
At December 31, 1996 the Partnership owned 172 trailers, and 26 marine
containers. Revenues are earned by placing the equipment under operating
leases and are billed monthly or quarterly. Rents for all equipment are
based on a fixed operating lease amount with the exception of marine
containers. The Partnership's marine containers are leased to the operator
of utilization-type pools which include equipment owned by unaffiliated
parties. In such instances, revenues received by the Partnership consist of
a specified percentage of lease revenues generated by leasing the pooled
equipment to sub-lessees, after deducting certain direct operating expenses
of the pooled equipment.
All of the equipment owned by the Partnership was either operating in
the PLM-affiliated short-term rental facilities or on lease as of December
31, 1996.
During 1996, the Partnership sold 40 trailers and disposed of 10 marine
containers. During 1995, the Partnership sold 14 trailers and disposed of
17 marine containers.
All leases are being accounted for as operating leases. Future minimum
rentals of owned and partially owned equipment (USPE's) under
non-cancelable leases at December 31, 1996 during each of the next five
years are approximately $174,000 - 1997; $29,000 - 1998; $-0- -1999 and
thereafter. Contingent rentals based upon utilization amounted to $14,332
in 1996, $29,819 in 1995, and $29,339 in 1994.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
3. Equipment (continued)
The lessees accounting for 10% or more of the total revenues during
1996, 1995, and 1994 were Horizon Air Industries, Inc. (24% in 1996, 15% in
1995, and 18% in 1994), and British Aerospace, Inc. (19% in 1996, 20% in
1995, and 14% in 1994).
4. Investments in Unconsolidated Special Purpose Entities
Prior to 1996, the Partnership accounted for operating activities
associated with joint ownership of rental equipment as undivided interests,
including its proportionate share of each asset with similar wholly-owned
assets in its financial statements. Under generally accepted accounting
principles, the effects of such activities, if material, should be reported
using the equity method of accounting. Therefore, effective January 1,
1996, the Partnership adopted the equity method to account for its
investment in such jointly-held assets.
The principle differences between the previous accounting method and
the equity method relate to the presentation of activities relating to
these assets in the income statement. Whereas, under the equity method of
accounting the Partnership's proportionate share is presented as a single
net amount, "equity in net income (loss) of unconsolidated special purpose
entities", under the previous method, the Partnership's income statement
reflected its proportionate share of each individual item of revenue and
expense. Accordingly, the effect of adopting the equity method of
accounting has no cumulative effect on previously reported partner's
capital or on the Partnership's net income (loss) for the period of
adoption. Because the effects on previously issued financial statements of
applying the equity method of accounting to investments in jointly-owned
assets are not considered to be material to such financial statements taken
as a whole, previously issued financial statements have not been restated.
However, certain items have been reclassified in the previously issued
balance sheet to conform to the current period presentation.
The following summarizes the financial information for the special
purpose entities and the Partnership's interest therein as of and for the
year ended December 31, 1996:
Net
Total USPE Interest of
Partnership
------------------------------
Net Investments $ 124,423 $ 99,974
Revenues 415,477 311,913
Net Income 931,963 653,740
The "Investments in unconsolidated special purpose entities" included a
69% interest in an entity which owns a commuter aircraft and a 80% interest
in an entity which owns another commuter aircraft. The entity sold the
commuter aircraft for which the Partnership had a 69% interest in 1996.
5. Income Taxes
The Partnership is not subject to income taxes as any income or loss is
included in the tax returns of the individual Partners. Accordingly, no
provision for income taxes has been made in the financial statements of the
Partnership.
At December 31, 1996, there were temporary differences of approximately
$1,997,333 between the financial statement carrying values of assets and
liabilities and the federal income tax bases of such assets and
liabilities.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VIIC 1985 INCOME FUND
(A Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
6. Liquidation and special distributions
During the first quarter of 1995, the Partnership completed its 10th year
of operations. As originally anticipated by the General Partner, the
Partnership will be liquidated in an orderly manner in its 11th and 12th
years of operation. The General Partner is actively marketing the remaining
equipment portfolio with the intent of maximizing sale proceeds. As sale
proceeds are received the General Partner intends to periodically declare
special distributions to distribute the sale proceeds to the partners.
During the liquidation phase of the Partnership the equipment will continue
to be leased under operating leases until sold. Operating cash flows, to
the extent they exceed Partnership expenses, will continue to be
distributed on a quarterly basis to partners. The amounts reflected for
assets and liabilities of the Partnership have not been adjusted to reflect
liquidation values. The equipment portfolio continues to be carried at the
lower of depreciated cost or fair value less cost to dispose. Although the
General Partner estimates that there will be distributions after
liquidation of assets and liabilities, the amounts cannot be accurately
determined prior to actual liquidation of the equipment. Any excess
proceeds over expected Partnership obligations will be distributed to the
Partners throughout the liquidation period. Upon final liquidation, the
Partnership will be dissolved.
In 1996, 1995, and 1994, the General Partner paid special distributions
of $23.48, $5.87, and $2.94 per weighted average Limited Partnership Unit.
The Partnership is not permitted to reinvest proceeds from sales or
liquidations of equipment. These proceeds, in excess of operational cash
requirements, are periodically paid out to limited partners in the form of
special distributions. The sales and liquidations occur because of
equipment destructions, the determination by the General Partner that it is
the appropriate time to maximize the return on an asset through sale of
that asset, and, in some leases, the ability of the lessee to exercise
purchase options.
<PAGE>
PLM TRANSPORTATION EQUIPMENT PARTNERS VII 1985 INCOME FUND
(A Limited Partnership)
INDEX OF EXHIBITS
Exhibit Page
4. Limited Partnership Agreement of each Partnership. *
10. Management Agreement between each Partnership and *
PLM Investment Management, Inc.
25. Powers of Attorney 47-49
* Incorporated by reference. See page 20 of this report.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
General Partner of PLM Transportation Equipment Partners VIIC 1985 Income Fund,
to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and
any rules and regulations thereunder, in connection with the preparation and
filing with the Securities and Exchange Commission of annual reports on Form
10-K on behalf of PLM Transportation Equipment Partners VIIC 1985 Income Fund,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in any and all
capacities, to such annual reports, to any and all amendments thereto, and to
any and all documents or instruments filed as a part of or in connection
therewith; and the undersigned hereby ratifies and confirms all that each of the
said attorneys, or his substitute or substitutes, shall do or cause to be done
by virtue hereof. This Power of Attorney is limited in duration until May 1,
1997 and shall apply only to the annual reports and any amendments thereto filed
with respect to the fiscal year ended December 31, 1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
28th day of February, 1997.
/s/ Robert L. Pagel
- ---------------------------------
Robert L. Pagel
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
General Partner of PLM Transportation Equipment Partners VIIC 1985 Income Fund,
to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and
any rules and regulations thereunder, in connection with the preparation and
filing with the Securities and Exchange Commission of annual reports on Form
10-K on behalf of PLM Transportation Equipment Partners VIIC 1985 Income Fund,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in any and all
capacities, to such annual reports, to any and all amendments thereto, and to
any and all documents or instruments filed as a part of or in connection
therewith; and the undersigned hereby ratifies and confirms all that each of the
said attorneys, or his substitute or substitutes, shall do or cause to be done
by virtue hereof. This Power of Attorney is limited in duration until May 1,
1997 and shall apply only to the annual reports and any amendments thereto filed
with respect to the fiscal year ended December 31, 1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
28th day of February, 1997.
/s/ Douglas P. Goodrich
- ----------------------------------
Douglas P. Goodrich
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned does hereby constitute and appoint Robert N.
Tidball, Stephen Peary, J. Michael Allgood and David J. Davis, jointly and
severally, his true and lawful attorneys-in-fact, each with power of
substitution, for him in any and all capacities, to do any and all acts and
things and to execute any and all instruments which said attorneys, or any of
them, may deem necessary or advisable to enable PLM Financial Services, Inc., as
General Partner of PLM Transportation Equipment Partners VIIC 1985 Income Fund,
to comply with the Securities Exchange Act of 1934, as amended (the "Act"), and
any rules and regulations thereunder, in connection with the preparation and
filing with the Securities and Exchange Commission of annual reports on Form
10-K on behalf of PLM Transportation Equipment Partners VIIC 1985 Income Fund,
including specifically, but without limiting the generality of the foregoing,
the power and authority to sign the name of the undersigned, in any and all
capacities, to such annual reports, to any and all amendments thereto, and to
any and all documents or instruments filed as a part of or in connection
therewith; and the undersigned hereby ratifies and confirms all that each of the
said attorneys, or his substitute or substitutes, shall do or cause to be done
by virtue hereof. This Power of Attorney is limited in duration until May 1,
1997 and shall apply only to the annual reports and any amendments thereto filed
with respect to the fiscal year ended December 31, 1996.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
28th day of February, 1997.
/s/ J. Alec Merriam
- -----------------------------------
J. Alec Merriam
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 416,360
<SECURITIES> 0
<RECEIVABLES> 64,894
<ALLOWANCES> 633
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 4,069,971
<DEPRECIATION> (3,861,489)
<TOTAL-ASSETS> 792,790
<CURRENT-LIABILITIES> 0
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 772,724
<TOTAL-LIABILITY-AND-EQUITY> 792,790
<SALES> 0
<TOTAL-REVENUES> 565,080
<CGS> 0
<TOTAL-COSTS> 617,876
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 600,944
<INCOME-TAX> 0
<INCOME-CONTINUING> 600,944
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 600,944
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
