UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1997
Commission File No. 0-15630
Hanover Lease Income Limited Partnership
(Exact Name of Registrant as Specified in its Charter)
Massachusetts 04-2923206
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
One Financial Center, 21st Floor, Boston, MA 02111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 482-8000
----------------------------
Securities registered pursuant to Section 12(b) of the Act None
---------------------
Securities registered pursuant to
Section 12(g) of the Act Units of Limited Partnership Interests
--------------------
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
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 26, 1998: Not applicable, since securities are
non-voting.
Documents incorporated by reference: None.
Exhibit Index on Page: 32
Page 1 of 34
<PAGE>
Corporate organization as discussed in Part I, Item 1 Business is as follows:
TLP Holding LLC ("Holding") controls TLP Leasing Programs, Inc. ("TLP"), TLP
Management Services, Inc. ("TLPMS"), and TLP Securities, Inc. TLP controls TLP
Columbia Management Corp. ("TCMC") which serves as General Partner to the
Columbia Lease Income Funds. Torchmark Corporation ("Torchmark") controls
TMK/United, Inc. which controls Waddell and Reed Financial Services, Inc.
("Waddell and Reed").
Through various dealer-manager arrangements, TLP, TLPMS, and Waddell and Reed
serve as corporate general partners to the Wellesley Leasing Partnership
("Wellesley General Partner") and the Hanover Leasing Partnership. The Wellesley
General Partner is the general partner for the Wellesley Lease Income Limited
Partnerships. Hanover Leasing Partnership serves as the General Partner for
Hanover Lease Income Limited Partnership with BOT Financial Corporation serving
as agent.
<PAGE>
Part I
Item 1. Business.
Hanover Lease Income Limited Partnership (the "Partnership") is a limited
partnership organized under the provisions of the Massachusetts Uniform Limited
Partnership Act on June 19, 1986. As set forth more fully at Item 10. Directors
and Executive Officers of the Partnership. of this Report, the General Partner
is Hanover Leasing Partnership, and the General Partner has two Corporate
General Partners (the "Corporate General Partners"): TLP Leasing Programs, Inc.
("TLP") or the "Managing General Partner", a Massachusetts corporation, and
Waddell & Reed Financial Services, Inc. ("Waddell & Reed", formerly TUP
Services, Inc., "TUPS"), a Missouri corporation. As of December 31, 1997, the
Partnership consisted of a General Partner and 3,362 Limited Partners owning
57,239 Units of Limited Partnership Interests of $500 each (the "Units"), except
that employees and securities representatives of its affiliates purchased 1,011
Units for a net price of $460 per Unit, and the Partnership incurred no
obligation to pay any sales commissions with respect to such sales. The Units
were sold commencing September 24, 1986, pursuant to a Registration Statement on
Form S-1 under the Securities Act of 1933.
The Partnership was organized to engage in the business of acquiring diversified
types of equipment and lease such equipment to others on a short-term basis
under Operating Leases. The Partnership's principal objectives are as follows:
1. To provide quarterly distributions of cash to the Limited Partners
from leasing revenues and from the proceeds of sales or other
disposition of Partnership equipment; and
2. To maintain equipment residual values for ultimate sale or other
disposition.
The Partnership was formed primarily for investment purposes and not as a "tax
shelter".
The Partnership shall terminate on December 31, 2005, unless sooner dissolved or
terminated as provided in Section 11 of the Amended Agreement of Limited
Partnership.
The Partnership has had a total of six closings. The closings occurred on
November 17, 1986, February 17, 1987, April 27, 1987, July 7, 1987, August 18,
1987, and October 7, 1987 with 8,501, 15,106, 7,992, 9,047, 5,457, and 11,136
units, respectively. Equipment purchased through December 31, 1997 was
$48,419,527. At the end of 1997, there were 5 leases in place with 2 lessees.
The acquisition of these leases and equipment is described more fully in Item 2.
Properties. of this report and notes 3 and 4 to the financial statements
included in Item 8. Financial Statements and Supplementary Data.
On January 9, 1996, TLP Holding LLC purchased all of the common stock of TLP
from CMI Holding Co. Under the new ownership, TLP will continue to operate in
the same manner of business as described below.
Under the Partnership Agreement, the General Partner, Hanover Leasing
Partnership, is solely responsible for the management of the Partnership's
business. TLP was formed in December, 1982 and is a wholly-owned subsidiary of
TLP Holding LLC ("Holding"). Waddell & Reed (formerly TUPS) was formed in May
1986, and is an affiliate of Waddell & Reed, Inc., one of the Soliciting Brokers
for this offering. Both Waddell & Reed and Waddell & Reed, Inc. are wholly-owned
subsidiaries of TMK/United, Inc., which itself is an indirect 85% owned
subsidiary of Torchmark.
The General Partnership Agreement between TLP and Waddell & Reed (the "General
Partnership Agreement"), provides that TLP as the Managing General Partner will
manage and control all of the affairs of the Partnership except for specified
services to be provided by Waddell & Reed relating primarily to the provision of
financial advisory services for the benefit of the Partnership and to the
continuing relationships among the Partnership, the General Partner and the
Partnership's Limited Partners. The General Partnership Agreement also provides
Waddell & Reed with one member on the Investment Committee.
The Managing General Partner has also entered into an agreement dated as of June
1, 1986 (the "Agency Agreement") with NEMLC Leasing Corporation ("Agent"), a
wholly-owned subsidiary of New England Merchants Leasing Corporation and a
member company of BancNewEngland Leasing Group. In 1990, the BancNewEngland
Leasing Group was acquired by the Bank of Tokyo; however, the Agency Agreement
remains unaffected. Pursuant to the Agency Agreement, the Agent will assist the
Managing General Partner in the performance of certain of its responsibilities
on behalf of the Partnership, including identification, evaluation and
negotiation of specific equipment investments suitable for the Partnership,
billing and collections, management of the equipment while it is under lease and
remarketing of equipment coming off lease.
The Partnership's investment policy was intended for the acquisition of
diversified types of equipment and the leasing of such equipment to others on a
short-term basis under operating leases. The Partnership generally purchased
equipment for which a lease existed, or was entered into at the time of the
Partnership's acquisition of the equipment. Typically, the acquisition of the
equipment was made from the manufacturer, although in some instances,
acquisitions were made by the General Partner, or the Agent. This equipment is
recorded and depreciated at the Partnership cost (purchase price plus the
acquisition fee). If at any time the General Partner deems the equipment to be
obsolete or related maintenance and storage costs to be in excess of its value,
the equipment is scrapped or sold at the current fair market value, which ever
is most advantageous for the Partnership.
The General Partner has not purchased more than 30% of any single type of
equipment. The Partnership's investments in capital equipment are and will
continue to be subject to various risk factors. The principal business risk
associated with ownership of the equipment is the inability to keep it fully
leased at rentals which, after payment of operating expenses and debt service on
Partnership borrowings, provide, together with any anticipated sales proceeds or
salvage value, an acceptable rate of return.
Other risk factors include:
1. Technological and economic equipment obsolescence, physical
deterioration, malfunction and risks attendant upon defaultsby lessees
and credit losses.
2. Residual Values of Equipment. The Partnership's return on its
investment in equipment will depend in part upon the continuing value
of such equipment which, in turn, depends upon, among other things: (1)
the quality of the equipment; (2) the condition of the equipment; (3)
the timing of the equipment's acquisition; (4) the cost of comparable
new equipment; (5) the technological obsolescence of the equipment; (6)
the General Partner's ability to forecast technological changes which
may reduce the value of the equipment; and (7) market factors.
3. Competition from Full Payout Lessors. In connection with operating
leases, the Partnership will encounter considerable competition from
those offering full payout leases, which are written for a longer term
and a lower rate than the Partnership's operating leases.
<PAGE>
4. Competition from Manufacturers. Leases offered by the Partnership will
compete with operating leases and full payout leases offered by
equipment manufacturers in their own lease programs. In addition to
attractive financial terms, manufacturers may also provide certain
ancillary services which the Partnership cannot offer directly, such as
maintenance service (including possible equipment substitution rights),
warranty services and trade-in privileges.
5. Other Competition. There are numerous other potential investors,
including limited partnerships organized and managed similarly to the
Partnership, seeking to purchase equipment subject to either operating
leases or full payout leases, many of which will have greater financial
resources than the Partnership and more experience than the General
Partner. The Partnership will compete in the computer leasing
marketplace with many non-manufacturing firms, including other
equipment dealers, brokers and leasing companies, as well as with
financial institutions.
6. Defaults by Lessees. Default by a lessee may cause equipment to be
returned to the Partnership at a time when the General Partner may be
unable to promptly arrange for its re-leasing (at the rental rate
previously received or otherwise) or sale (with or without a loss),
thus resulting in the loss of anticipated revenues and the inability to
recover the Partnership's investment and repay related debt. Any
related debt may be secured by the returned equipment and, in some
cases, by the Partnership's other equipment. If the debt is not paid in
a timely manner, the lender may foreclose and acquire ownership of all
equipment securing the debt, resulting in economic loss and adverse tax
consequences to the Partnership's partners. Two lessees, BASF
Corporation and Federal Paper Board Company, Incorporated, lease
equipment in which the related rental payments exceed 10% of total
rental income. The related rental payments comprise 32.06% and 42.26%,
respectively, of the total rental income for the year ended December
31, 1997. BASF Corporation and Federal Paper Board Company,
Incorporated lease equipment comprising 2.13% and 4.56%, respectively,
of the total equipment portfolio at December 31, 1997.
7. Changes in Technology. The General Partner intends to establish lease
rates to the Partnership's lessees which take into account the risk of
technological advances which may reduce the value of such equipment
owned by the Partnership. However, the introduction of an entirely new
technology could lead to a radical reduction in the fair market value
of certain equipment and make such equipment difficult to re-lease.
During 1997, the Partnership leased three main types of equipment:
(1) Aircraft: Sikorsky S-76b helicopter.
(2) Construction equipment: Includes lifter loaders that perform a
variety of applications such as building residential and
commercial civil engineering projects.
(3) Trucks and Trailers: Trucks are generally used for local delivery
products, while trailers are generally used for longer shipments
and larger items.
<PAGE>
As of December 31, l997, the Partnership owned $5,032,434 of capital equipment
(including a 4.75% acquisition fee paid to the General Partner of $228,201). All
equipment is on lease and is summarized as follows:
<TABLE>
<CAPTION>
Year Initial Partnership
Acquired Equipment Lease Term Purchase Price
<S> <C> <C> <C>
l987 Helicopter Aircraft 3 years $ 4,678,826
1987-l988 Lifters and Loaders 3-5 years 277,390
1987-l988 Heavy Duty Trucks 3-5 years 76,218
and Trailers ----------------
Total $ 5,032,434
================
</TABLE>
Pursuant to its leasing policies, the General Partner performs a credit analysis
of potential lessees to determine creditworthiness. The General Partner has
leased all of its equipment to third parties by means of operating leases with
fixed base lease rates. Rents are payable monthly or quarterly. Operating leases
generally do not have terms greater than five years in duration and the
aggregate noncancelable rental payments during the term of the lease (on a net
present value basis), are not sufficient to permit the lessor to recover the
purchase price of the equipment.
At the termination of the initial lease, the General Partner arranges for the
equipment to be re-leased (either to the same lessee or a new lessee) if it
determines that re-leasing is in the Partnership's best interest. Generally,
equipment is re-leased at least once and possibly several times during the
Partnership's life, unless it is determined that the equipment is not
remarketable and therefore may be sold. The General Partner provides, or
arranges for the installation, removal, maintenance and modification of the
Partnership's equipment. Also, the General Partner will purchase and maintain,
or cause to be purchased and maintained, appropriate insurance coverage to
protect the interests of the Partnership.
Of the leases in place at December 31, 1997, the average lease term was 23
months and the average monthly lease rate as a percentage of original equipment
cost was 1%.
During the fourth quarter of 1995, the General Partner announced its intentions
of winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution to the
Partners in early 1998.
<PAGE>
Item 2. Properties.
At December 31, 1997, the Partnership owned capital equipment with a cost basis
of $5,032,434, subject to 5 existing leases with 2 different lessees. All
purchases of capital equipment are subject to a 4.75% acquisition fee paid to
the General Partner. Approximately 42% of the initial equipment portfolio was
financed.
<PAGE>
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the Partnership is a
party or of which any of its equipment or leases is the subject.
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
Part II
Item 5. Market for the Partnership's Securities and Related Security Holder
Matters.
(a) Market Information
The Partnership's outstanding securities consist of Limited Partnership
Interests in Units of $500 each. As of December 31, 1997, 57,239 Units had been
sold to the public at a price of $500 per Unit (except for 1,011 Units which
were sold for a net price of $460 per Unit to employees of the General Partners
of the General Partner and employees and securities representatives of its
affiliates).
There is no public market for the Units, and it is not anticipated that such a
public market will develop.
(b) Approximate Number of Security Holders
<TABLE>
<CAPTION>
Number of Number of Units
Unit Holders on Record as of
Title of Class as of 12/31/97 12/31/97
<S> <C> <C>
Units of
Limited
Partnership
Interests 3,362 57,239
</TABLE>
(c) Dividend History and Restrictions
During the year ended December 31, 1987 and the period ended December 31, 1986,
the Partnership had six closings with 57,239 Units. Pursuant to Section 8 of the
Limited Partnership Agreement, the Partnership's "Distributable Cash from
Operations" for each year will be determined and then distributed to the
Partners. Upon reaching the end of its reinvestment period (the second
anniversary of the Partnership's final closing date), the Partnership will also
distribute to the Partners "Distributable Cash From Sales or Refinancings", if
any. The Partnership distributed $214,646 to the Limited Partners in 1997,
$643,939 in 1996 and $858,586 in 1995, and distributed $11,297 to the General
Partner in 1997, $27,976 in 1996 and $35,431 in 1995. The cumulative cash
distributions to the Limited Partners through December 31, 1997 is $29,000,099
as compared with the Limited Partners' net contributed capital of $25,569,053.
"Cash From Operations" and "Cash From Sales or Refinancing" means the net cash
provided by the Partnership's normal operations or as a result of any sales,
refinancings or other dispositions of equipment, respectively, after the general
expenses and current liabilities of the Partnership (other than the equipment
management fee) are paid, as reduced by any reserves for working capital and
contingent liabilities to the extent deemed reasonable by the General Partner
and as increased by any portion of such reserves then deemed by the General
Partner not to be required for Partnership operations. "Distributable Cash From
Operations" and "Distributable Cash From Sales or Refinancings" means Cash from
Operations or Cash From Sales or Refinancings, respectively, reduced by amounts
which the General Partner determines shall be reinvested (through the second
anniversary of the Partnership's closing date) in additional Equipment and by
payments of all accrued but unpaid equipment management fees.
For rendering services in connection with the normal operations of the
Partnership, the Partnership will pay to the General Partner a Partnership
management fee equal to 5% of the monthly rental billings.
Each distribution of Distributable Cash From Operations of the Partnership shall
be allocated 95% to the Limited Partners and 5% to the General Partner. Any
Distributable Cash From Sales or Refinancings from gains and losses shall be
allocated 99% to the Limited Partners and 1% to the General Partner until
"Payout" has occurred. "Payout" means the time when the aggregate amount of all
distributions to the Limited Partners of Distributable Cash From Operations and
of Distributable Cash From Sales or Refinancings equals the aggregate amount of
the Limited Partners' original invested capital plus a cumulative 8% annual
return (compounded daily) on their aggregate unreturned invested capital
(calculated from the beginning of the first full fiscal quarter following the
Partnership's closing date). The cumulative distribution to date is $505.41 per
Unit. This cumulative distribution per Unit amount represents 47.96% of
"Payout". After Payout has occurred, any Distributable Cash from Sales or
Refinancings will be distributed 15% (plus an additional 1% for each 1% by which
the total of all Limited Partners' original Capital Contributions actually paid
or allocated to the Partnership's investment in equipment exceeds the greater of
(i) 80% if the gross proceeds of the Partnership's offering of Units, reduced by
0.0625% for each 1% of leverage encumbering Partnership equipment, or (ii) 75%
of the gross proceeds of such offering) to the General Partner, and the
remainder to the Limited Partners. It is not anticipated that Payout will occur
as of the liquidation of this Partnership.
Any Distributable Cash will be distributed within 60 days after the completion
of each of the first three fiscal quarters of each Partnership fiscal year, and
within 120 days after the completion of each fiscal year, beginning after the
first full fiscal quarter following the Partnership's first closing date. Each
such distribution will be described in a statement sent to the Limited Partners.
<PAGE>
Item 6. Selected Financial Data.
The following table sets forth selected financial information regarding the
Partnership's financial position and operating results. This information should
be read in conjunction with the financial statements and notes thereto, and
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which are included in Items 8. and 7. of this Report.
<TABLE>
<CAPTION>
For the Years Ended December 31,
1997 1996 1995 1994 1993
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Data
Rental Income $ 71,565 $ 709,278 $ 804,478 $ 1,022,506 $ 1,533,319
Interest Income 2,438 7,238 7,252 7,700 26,249
Net Income 122,098 649,566 853,698 1,170,524 994,075
Per Limited Partnership Unit:
Net Income Per Limited
Partnership Unit 2.06 10.88 14.31 19.69 15.13
Balance Sheet Data
Cash and Cash Equivalents 7,139 199,970 98,385 213,715 94,835
Capital Equipment at Cost 5,032,434 5,447,101 6,453,248 8,768,519 11,443,550
Total Assets 25,194 262,011 146,572 232,475 277,961
Long-term Debt - - - - -
Distributions to Partners 225,943 671,915 894,017 1,178,033 3,562,609
Distributions Per Limited
Partnership Unit 3.75 11.25 15.00 20.00 60.00
Partners' (Deficit) Equity (105,632) (1,787) 20,562 60,881 68,390
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
As of October 7, 1987 the Partnership has received and accepted subscriptions
for 57,239 Units, which were offered under its public offering. Total proceeds
from the offering, adjusted to reflect selling commissions and organization and
offering costs, were $25,569,053.
Results of Operations
The following discussion relates to the Partnership's operations for the year
ended December 31, 1997, in comparison to the years ended December 31, 1996 and
1995.
The Partnership realized net income of $122,098, $649,566 and $853,698 for the
years ended December 31, 1997, 1996 and 1995, respectively. Rental income
decreased $637,713 or 90% between 1996 and 1997 and $95,200 or 12% between 1995
and 1996. The decrease is primarily due to lower rental rates obtained on
equipment lease extensions and remarketings resulting after the initial lease
term expires and due to a decrease in the overall size of the equipment
portfolio. Interest income decreased in the current year as a result of lower
average short-term investment balances held during 1997. Other income in the
current year is the result of helicopter inspection fees, maintenance fees and
flight time charges. The decrease in net gain on sale of equipment each year can
be attributed to a reduction in equipment sales.
Total costs and expenses decreased 7% in 1997 and increased 24% in 1996. The
decrease in costs and expenses in 1997 is primarily a result of lower management
fees expense. Management fees expenses have decreased in relation to the decline
in rental income for the years ended December 31, 1997, 1996 and 1995,
respectively. General and administrative expenses increased $16,674 or 10%
mainly due to an increase in the allocable salaries of the partnership
accounting and reporting personnel of the General Partner during the current
year.
The Partnership recorded net income per Limited Partnership Unit of $2.06,
$10.88 and $14.31 for the years ended December 31, 1997, 1996 and 1995,
respectively. The allocation for the year ended December 31, 1997 includes a
cost recovery allocation of profit and loss among the General and Limited
Partners. This cost recovery allocation is required to maintain capital accounts
consistent with the distribution provisions of the Partnership Agreement. In
certain periods, the cost recovery of profit and loss may result in an
allocation of net loss to the Limited Partners in instances when the
Partnership's operations were profitable for the period.
Liquidity and Capital Resources
For the year ended December 31, 1997, rental revenue generated from the
operating leases and sales proceeds from equipment sales were the primary
sources of funds for the Partnership. As the equipment leases terminate, the
General Partner determines if the equipment will be extended to the same lessee,
remarketed to another lessee, or sold. This decision is made upon analyzing
which option generates the most favorable results.
<PAGE>
Consistent with prior periods, the Partnership's operating activities resulted
in a decrease in rental revenue due to lease expirations and resulting equipment
sales, and due to lower rental rates obtained on remarketed equipment. The
helicopter lease with Sikorsky Aircraft Corporation expired in January, 1997. In
February of 1998, the Partnership sold the helicopter formerly associated with
the Sikorsky lease for net proceeds of $2,165,873. The helicopter had a
depreciated cost basis of $0, and accordingly, the Partnership will record a
gain of $2,165,873 in 1998.
The Partnership's investing activities for the year ended December 31, 1997
resulted in sales of fully depreciated equipment, generating $43,000 in sales
proceeds. The Partnership has no material capital commitments and will not have
any in the future due to the Partnership having fulfilled its capital
expenditure commitments in prior years.
The Partnership's financing activities for the year ended December 31, 1997
resulted in $13,000 of cash proceeds received from the borrowing of one note
payable - affiliate. The new debt was incurred during the fourth quarter of 1997
and bears interest at 9.50% with installments to be paid monthly, maturing in
1998.
During the fourth quarter of 1995, the General Partner announced its intentions
of winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution to the
Partners in early 1998.
Cash distributions are currently halted in an effort to minimize costs and
accumulate cash in anticipation of a final distribution to the Partners once the
Partnership has been liquidated. The effects of inflation have not been
significant to the Partnership and are not expected to have any material impact
in future periods.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
To the Partners of Hanover Lease Income Limited Partnership:
We have audited the accompanying balance sheets of Hanover Lease Income Limited
Partnership (a Massachusetts Limited Partnership) as of December 31, 1997 and
1996, and the related statements of operations, partners' equity (deficit) and
cash flows for each of the years in the three-year period ended December 31,
1997. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Hanover Lease Income Limited
Partnership as of December 31, 1997 and 1996, and the results of its operations
and its cash flows for each of the years in the three-year period ended December
31, 1997, in conformity with generally accepted accounting principles.
As discussed in note 1, in 1995 the General Partner announced its intentions of
winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution to the
Partners in early 1998.
KPMG Peat Marwick LLP
Boston, Massachusetts
March 20, 1998
<PAGE>
<TABLE>
<CAPTION>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Balance Sheets
December 31, 1997 and 1996
Assets
1997 1996
---------------- ----------------
<S> <C> <C>
Investment property, at cost (notes 3 and 4):
Capital equipment $ 5,032,434 $ 5,447,101
Less accumulated depreciation 5,032,434 5,447,101
---------------- ----------------
Investment property, net - -
Cash and cash equivalents 7,139 199,970
Rents receivable (note 4) 18,055 62,041
---------------- ----------------
Total assets $ 25,194 $ 262,011
================ ================
Liabilities and Partners' Deficit
Liabilities:
Note payable - affiliate (note 6) $ 13,000 $ -
Accounts payable and accrued
expenses - affiliates (note 5) 44,574 10,747
Accounts payable and accrued expenses 71,787 230,551
Unearned rental income 1,465 22,500
---------------- ----------------
Total liabilities 130,826 263,798
---------------- ----------------
Partners' deficit:
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 1,136,394 1,132,009
Cumulative cash distributions (1,135,837) (1,124,540)
---------------- ----------------
1,557 8,469
---------------- ----------------
Limited Partners (57,239 units):
Capital contribution, net of
offering costs 25,569,053 25,569,053
Cumulative net income 3,323,857 3,206,144
Cumulative cash distributions (29,000,099) (28,785,453)
---------------- ----------------
(107,189) (10,256)
---------------- ----------------
Total partners' deficit (105,632) (1,787)
---------------- ----------------
Total liabilities and partners' deficit $ 25,194 $ 262,011
================ ================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Statements of Operations
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
---------------- --------------- ---------------
<S> <C> <C> <C>
Revenue:
Rental income (note 4) $ 71,565 $ 709,278 $ 804,478
Interest income 2,438 7,238 7,252
Other income 193,654 750 -
Net gain on sale of equipment 43,000 136,000 206,727
---------------- --------------- ---------------
Total revenue 310,657 853,266 1,018,457
---------------- --------------- ---------------
Costs and expenses:
Interest 72 - -
Depreciation - - 927
Related party expenses (note 5):
Management fees 3,578 35,465 37,807
General and administrative 184,909 168,235 126,025
---------------- --------------- ---------------
Total costs and expenses 188,559 203,700 164,759
---------------- --------------- ---------------
Net income $ 122,098 $ 649,566 $ 853,698
================ =============== ===============
Net income per
Limited Partnership Unit $ 2.06 $ 10.88 $ 14.31
================ =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Statements of Partners' Equity (Deficit)
Years Ended December 31, 1997, 1996 and 1995
General Limited
Partner Partners Total
<S> <C> <C> <C>
Equity at
December 31, 1994 $ 10,422 $ 50,459 $ 60,881
Net income 34,416 819,282 853,698
Cash distributions (35,431) (858,586) (894,017)
------------- ----------------- -----------------
Equity at
December 31, 1995 9,407 11,155 20,562
Net income 27,038 622,528 649,566
Cash distributions (27,976) (643,939) (671,915)
------------- ----------------- -----------------
Equity (deficit) at
December 31, 1996 8,469 (10,256) (1,787)
Net income 4,385 117,713 122,098
Cash distributions (11,297) (214,646) (225,943)
------------- ----------------- -----------------
Equity (deficit) at
December 31, 1997 $ 1,557 $ (107,189) $ (105,632)
============= ================= =================
</TABLE>
See accompanying notes to financial statements.
<PAGE>
<TABLE>
<CAPTION>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 122,098 $ 649,566 $ 853,698
--------------- --------------- ---------------
Adjustments to reconcile net income to net cash (used in)
provided by operating activities:
Depreciation - - 927
Net gain on sale of equipment (43,000) (136,000) (206,727)
Net decrease (increase) in current assets 43,986 (13,854) (30,354)
Net (decrease) increase in current liabilities (145,972) 137,788 (45,584)
--------------- --------------- ---------------
Total adjustments (144,986) (12,066) (281,738)
--------------- --------------- ---------------
Net cash (used in) provided by
operating activities (22,888) 637,500 571,960
--------------- --------------- ---------------
Cash flows from investing activities:
Proceeds from sales of investment property 43,000 136,000 206,727
--------------- --------------- ---------------
Net cash provided by investing activities 43,000 136,000 206,727
--------------- --------------- ---------------
Cash flows from financing activities:
Proceeds from borrowings on note payable - affiliate 13,000 - -
Cash distributions to partners (225,943) (671,915) (894,017)
--------------- --------------- ---------------
Net cash used in financing activities (212,943) (671,915) (894,017)
--------------- --------------- ---------------
Net (decrease) increase in cash and cash equivalents (192,831) 101,585 (115,330)
Cash and cash equivalents at beginning of year 199,970 98,385 213,715
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ 7,139 $ 199,970 $ 98,385
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Financial Statements
December 31, 1997, 1996 and 1995
(1) Organization and Partnership Matters
The Partnership was organized under the Massachusetts Uniform Limited
Partnership Act on June 19, 1986. The Amended Agreement of Limited Partnership
authorized the issuance of up to 60,000 Limited Partnership Units at a per unit
gross price of $500 and up to 20,000 additional units to affiliates. The
Partnership has had in total six closings. The closings occurred on November 17,
1986, February 17, 1987, April 27, 1987, July 7, 1987, August 18, 1987 and
October 7, 1987 with 8,501, 15,106, 7,992, 9,047, 5,457 and 11,136 units,
respectively. The General Partner has contributed $1,000 in respect of its
General Partnership interest.
Pursuant to the terms of the Amended Agreement of Limited Partnership, each
distribution of Distributable Cash From Operations and profits for federal
income tax and financial reporting purposes from normal operations of the
Partnership shall be allocated 95% to the Limited Partners and 5% to the General
Partner. Losses for federal income tax and financial reporting purposes from
normal operations and any Distributable Cash From Sales or Refinancing from
gains and losses shall be allocated 99% to the Limited Partners and 1% to the
General Partner until "Payout" has occurred, and 85% to the Limited Partners and
15% to the General Partner thereafter. In addition, special income allocations
may be required to reflect the differing initial capital contributions of the
General Partner and the Limited Partners. Payout means the time when the
aggregate amount of all distributions to the Limited Partners of Distributable
Cash From Operations and of Distributable Cash From Sales or Refinancing equals
the aggregate amount of the Limited Partners' original invested capital plus a
cumulative 8% annual return on their aggregate unreturned invested capital
(calculated from the beginning of the first full fiscal quarter following each
Limited Partner's admission to the Partnership). The cumulative distribution to
date is $505.41 per Unit. This cumulative distribution per Unit amount
represents 47.96% of Payout. It is not anticipated that Payout will occur as of
the liquidation of this Partnership.
During the fourth quarter of 1995, the General Partner announced its intentions
of winding down the operations of the Partnership. It is anticipated that
substantially all of the assets will be liquidated and the proceeds will be used
to settle all outstanding liabilities and make a final distribution to the
Partners in early 1998.
<PAGE>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(2) Significant Accounting Policies
The Partnership's records are maintained on the accrual basis of accounting so
that revenues are recognized as earned and expenses are recognized as incurred.
Assets and liabilities are those of the Partnership and do not include any
assets and liabilities of the individual partners. The preparation of financial
statements in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Effective January 1, 1990, depreciation on capital equipment is provided on a
double-declining balance method over the economic useful lives of the equipment.
No salvage value is assumed. The Partnership's policy is to periodically review
the estimated fair market value of its equipment to assess the recoverability of
its undepreciated cost. In accordance with this policy, the Partnership records
a charge to depreciation expense in instances when the net book value of
equipment exceeds its net realizable value. Routine maintenance and repairs are
expensed as incurred. Major betterments and enhancements are capitalized and
depreciated in accordance with the Partnership's depreciation policy.
Income Taxes
No provision for federal income taxes has been made as the liability for such
taxes is that of the Partners rather than that of the Partnership. Taxable
income, as reported in Schedule K-1, Form 1065 "Partner's Share of Income,
Credits, Deductions, etc.", was $122,098, $649,566 and $854,625 in 1997, 1996
and 1995, respectively (see note 7).
Cash and Cash Equivalents
The Partnership considers cash and short-term investments with maturities of
less than three months to be cash and cash equivalents.
(3) Investment Property
At December 31, 1997, the Partnership owned capital equipment with a cost basis
of $5,032,434. All purchases of capital equipment are subject to a 4.75%
acquisition fee paid to the General Partner.
<PAGE>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(4) Leases
Operations consist primarily of leasing computer equipment. All equipment leases
are classified as operating leases and expire over the next year. Minimum lease
payments scheduled to be received in the first three months of 1998 under
existing noncancelable operating leases amount to $13,298.
The following schedule provides an analysis of the cost of capital equipment by
major classes as of December 31, 1997:
Helicopter aircraft $ 4,678,826
Heavy duty equipment 328,500
Other 25,108
---------------
Total $ 5,032,434
===============
Two lessees, BASF Corporation and Federal Paper Board Company, Incorporated,
lease equipment in which the related rental payments exceed 10% of total rental
income. The related rental payments comprise 32.06% and 42.26%, respectively, of
the total rental income for the year ended December 31, 1997. BASF Corporation
and Federal Paper Board Company, Incorporated lease equipment comprising 2.13%
and 4.56%, respectively, of the total equipment portfolio at December 31, 1997.
In February of 1998, the Partnership sold the helicopter formerly associated
with the Sikorsky lease for net proceeds of $2,165,873. The helicopter had a
depreciated cost basis of $0, and accordingly, the Partnership will record a
gain of $2,165,873 in 1998.
(5) Related Party Transactions
Fees, commissions and other expenses paid or accrued by the Partnership to the
General Partner or affiliates of the General Partner for the years ended
December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Management fees $ 3,578 $ 35,465 $ 37,807
Reimbursable expenses paid 137,465 114,851 84,444
------------- ------------ ------------
$ 141,043 $ 150,316 $ 122,251
============= ============ ============
</TABLE>
Under the terms of the Partnership Agreement, the General Partner is entitled to
an Equipment Acquisition Fee of 4.75% of the purchase price paid by the
Partnership for the equipment. The General Partner is also entitled to a
management fee equal to 5% of the monthly rental billings. Also, the Partnership
reimburses the General Partner and their affiliates for certain expenses
incurred by them in connection with the operation of the Partnership.
<PAGE>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Notes to Financial Statements
(6) Note Payable - Affiliate
Note payable - affiliate at December 31, 1997, consist of one non-recourse
promissory note payable to TLP Leasing Programs, Inc. in the amount of $13,000,
bearing interest at the rate of 9.50%. The note payable matures in 1998.
(7) Reconciliation of Financial Statement Net Income to Taxable Income
to Partners
A reconciliation of financial statement net income to taxable income to partners
is as follows for the years ended December 31, 1997, 1996 and 1995:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements $ 122,098 $ 649,566 $ 853,698
Depreciation expense for financial statement purposes
in excess of depreciation expense for tax purposes - - 927
-------------- ------------- -------------
Taxable income to partners $ 122,098 $ 649,566 $ 854,625
============== ============= =============
</TABLE>
Losses for federal tax purposes from normal operations are allocated 99% to the
Limited Partners and 1% to the General Partner. Profits for federal tax purposes
from normal operations are allocated 95% to the Limited Partners and 5% to the
General Partner. In addition, special cost recovery allocations may be required
to reflect the differing initial capital contribution of the General Partner and
the Limited Partners.
<PAGE>
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(A Massachusetts Limited Partnership)
Equipment Portfolio (Unaudited)
December 31, 1997
Lessee
BASF Corporation
Federal Paper Board Company, Incorporated
Equipment Description Acquisition Price
Helicopter aircraft $ 4,678,826
Heavy duty equipment 328,500
Other 25,108
----------------
$ 5,032,434
================
<PAGE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Statement Disclosures.
None.
<PAGE>
Part III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1. of this
report, the General Partner of the Partnership is Hanover Leasing Partnership.
Under the Partnership Agreement, the General Partner is solely responsible for
the operation of the Partnership's properties, and the Limited Partners have no
right to participate in the control of such operations. The General Partner has
two Corporate General Partners (the "Corporate General Partners"): TLP, a
Massachusetts corporation and Waddell & Reed (formerly TUPS), a Missouri
corporation. The names and ages of the Directors and Executive Officers of the
General Partner are as follows:
<TABLE>
<CAPTION>
TLP
Name Title Age
<S> <C> <C>
Nicholas C. Bogard Director 52
Arthur P. Beecher Director, President, and Clerk 60
Nancy E. Malone Vice President, Lease Financing 39
Irene V. King Vice President, Satellite Operations 50
Joseph P. Colonna Vice President, Marketing 39
Waddell & Reed
Name Title Age
Keith A. Tucker President, Chief Executive Officer 53
and Director
Robert L. Hechler Vice President, Chief Operations Officer, 61
Treasurer and Director
Henry J. Herrmann Vice President, Chief Investment Officer 55
and Director
Robert J. Williams, Jr. Vice President and National Sales Manager 53
Sharon K. Pappas Vice President, Secretary 39
and General Counsel
</TABLE>
(c) Identification of certain significant persons
See Item 10. (a-b)
(d) Family relationship
No family relationship exists between any of the foregoing Directors or
Officers.
(e) Business experience
<PAGE>
Nicholas C. Bogard is Director of TLP. Mr. Bogard served as President and
Director of TLP from 1982 - 1992, and served as Director of CS First Boston from
1992 - 1994. He has been working as an independent consultant since 1994. Mr.
Bogard holds a B.A. from Princeton University and an M.B.A. from Harvard
University.
Arthur P. Beecher is President, Director and Clerk of TLP. Prior to joining TLP,
he was an officer of CSA Financial Corp. of Boston, Massachusetts, most recently
as Vice President, Finance and Administration since 1975. Mr. Beecher holds a
B.S. from Boston University and is a Certified Public Accountant.
Nancy E. Malone is Vice President, Lease Financing of TLP. Prior to joining TLP,
she was Manager, Lease Financing for 11 years at CSA Financial Corp. of Boston,
Massachusetts. Ms. Malone holds a B.A. from The College of the Holy Cross.
Irene V. King is Vice President, Satellite Operations for TLP. Prior to joining
TLP in April 1994, she was Director of Public Income Funds at CSA Financial
Corp. of Boston, Massachusetts and was previously Vice President of Finance at
First Alliance Corp. of Wellesley, Massachusetts. Ms. King holds a B.A. from
Barat College of the Sacred Heart, Lake Forest, Illinois.
Joseph P. Colonna is Vice President, Marketing of TLP. Prior to joining TLP, he
was Associate Counsel at CSA Financial Corp. of Boston, Massachusetts in charge
of Domestic and International Leasing Transactions. He received his B.A. from
Rutgers University, J.D. from Suffolk University Law School and M.S.L. from
Vermont Law School.
Keith A. Tucker is President, Chief Executive Officer and Director of Waddell &
Reed; Chairman of the Board of Directors of WRIMCO, Waddell & Reed, Inc.,
Waddell & Reed Services Company, Waddell & Reed Asset Management Company and
Torchmark Distributors, Inc., an affiliate of Waddell & Reed, Inc.; Vice
Chairman of the Board of Directors, Chief Executive Officer and President of
United Investors Management Company; Vice Chairman of the Board of Directors of
Torchmark Corporation; and President of each of the funds in the United, Waddell
& Reed and TMK/United mutual fund groups. He is also Director of Southwestern
Life Corporation. Prior to joining Torchmark Corporation in 1991, Mr. Tucker was
with Trivest, Inc. and Trivest Securities Corporation in Miami, Florida since
1987, most recently as the Senior Vice President and President, respectively.
Prior to Trivest, Inc., he was Director of Atlantis Group, Inc., a diversified
company. Mr. Tucker holds a B.B.A. and a J. D. both from the University of
Texas.
Robert L. Hechler is Vice President, Chief Operations Officer, Director and
Treasurer of Waddell & Reed; Executive Vice President, Principal Financial
Officer, Director and Treasurer of WRIMCO; President, Chief Executive Officer,
Principal Financial Officer, Director and Treasurer of Waddell & Reed, Inc.;
Director and Treasurer of Waddell & Reed Services Company; Vice President,
Treasurer and Director of Torchmark Distributors, Inc.; and Vice President and
Principal Financial Officer of each of the funds in the United, Waddell & Reed
and TMK/United mutual fund groups. He has been employed by Waddell & Reed and
its affiliates since 1977. Mr. Hechler holds a B.S. from the University of
Illinois and an M.B.A. from the University of Chicago.
<PAGE>
Henry J. Herrmann is Vice President, Chief Investment Officer and Director of
Waddell & Reed; Director of Waddell & Reed, Inc.; President, Chief Executive
Officer, Chief Investment Officer and Director of WRIMCO and Waddell & Reed
Asset Management Company; Senior Vice President and Chief Investment Officer of
United Investors Management Company; and Vice President of each of the funds in
the United, Waddell & Reed and TMK/United mutual fund groups. He has been
employed by Waddell & Reed and its affiliates since 1971. Mr. Herrmann holds a
B.S. from New York University.
Robert J. Williams, Jr. is Vice President and National Sales Manager of Waddell
& Reed and Executive Vice President and National Sales Manager of Waddell &
Reed, Inc. He has been employed by Waddell & Reed, Inc. since July 1996. He was
employed with Charles Schwab & Company from November 1991 to July 1995. From
August 1984 to October 1991, he was employed by American Express Financial
Advisors or its affiliates. Mr. Williams holds a B.S. from the University of
Utah and an M.B.A. from California State-Humbolt.
Sharon K. Pappas is Vice President, Secretary and General Counsel of Waddell &
Reed; Senior Vice President, Secretary and General Counsel of WRIMCO and Waddell
& Reed, Inc.; Director, Senior Vice President, Secretary and General Counsel of
Waddell & Reed Services Company; Director, Secretary and General Counsel of
Waddell & Reed Asset Management Company; Vice President, Secretary and General
Counsel of Torchmark Distributors, Inc.; formerly, Assistant General Counsel of
WRIMCO, Waddell & Reed Financial Services, Inc., Waddell & Reed, Inc., Waddell &
Reed Asset Management Company and Waddell & Reed Services Company. She is Vice
President, Secretary and General Counsel of each of the funds in the United,
Waddell & Reed and TMK/United mutual fund groups. Prior to joining Waddell &
Reed and its affiliates in 1989, Ms. Pappas was employed with Stinson, Mag &
Fizzell in Kansas City, Missouri. Ms. Pappas holds a B.S. from Kansas State
University and a J.D. from the University of Kansas.
(f) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings against any Director or
Executive Officer of the Corporate General Partners which may be important for
the evaluation of any such person's ability and integrity.
<PAGE>
Item 11. Management Remuneration and Transactions.
(a), (b), (c), (d), and (e): The Officers and Directors of the Corporate General
Partners receive no current or proposed direct remuneration in such capacities,
pursuant to any standard arrangements or otherwise, from the Partnership. In
addition, the Partnership has not paid and does not propose to pay any options,
warrants or rights to the Officers and Directors of the Corporate General
Partners. There exists no remuneration plan or arrangement with any Officer or
Director of the Corporate General Partners resulting from the resignation,
retirement or any other termination. See note 5 to the financial statements
included in Item 8. of this report for a description of the remuneration paid by
the Partnership to the General Partner and its affiliates during 1997, 1996 and
1995.
<PAGE>
Item 12. Security Ownership of Certain Owners and Management.
By virtue of its organization as a limited partnership, the Partnership has
outstanding no securities possessing traditional voting rights. However, as
provided for in Section 13.2 of the Amended Agreement of Limited Partnership
(subject to Section 13.3), a majority interest of the Limited Partners have
voting rights with respect to:
1. Amendment of the Limited Partnership Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of substantially all the assets
of the Partnership.
No person or group is known by the General Partner to own beneficially more than
5% of the Partnership's 57,239 outstanding Limited Partnership Units as of
December 31, 1997.
By virtue of its organization as a limited partnership, the Partnership has no
Officers or Directors. See also note 1 to the financial statements included in
Item 8. and Item 10. of this report.
<PAGE>
Item 13. Certain Relationships and Related Transactions.
(a), (b), and (c): The General Partner of the Partnership is Hanover Leasing
Partnership, having two Corporate General Partners: TLP, a Massachusetts
corporation and Waddell & Reed (formerly TUPS), a Missouri corporation. The
identification of the Corporate General Partners' Directors and Executive
Officers is indicated in Item 10. of this report. The Partnership was not
involved in any transaction involving any of these Directors or Officers of the
Corporation or any member of the immediate family of these individuals, nor did
any of these persons provide services to the Partnership for which they received
direct or indirect remuneration. Similarly, there exists no business
relationship between the Partnership and any of the Directors or Officers of the
Corporate General Partners, nor were any of the individuals indebted to the
Partnership.
The General Partnership Agreement between TLP and Waddell & Reed (the "General
Partnership Agreement") provides that TLP as the Managing General Partner will
manage and control all of the affairs of the Partnership except for specified
services to be provided by Waddell & Reed relating primarily to the provision of
financial advisory services for the benefit of the Partnership and to the
continuing relationships among the Partnership, the General Partner and the
Partnership's Limited Partners. The General Partnership agreement also provides
Waddell & Reed with one member of the Investment Committee.
The Managing General Partner has also entered into an agreement dated as of June
1, 1986 (the "Agency Agreement") with NEMLC Leasing Corporation ("Agent"), a
wholly-owned subsidiary of New England Merchants Leasing Corporation and a
member company of BancNewEngland Leasing Group. In 1990, the BancNewEngland
Leasing Corporation was acquired by the Bank of Tokyo ("BOT"), however, the
Agency Agreement remains unaffected. Pursuant to the Agency Agreement, the Agent
will assist the Managing General Partner in the performance of certain of its
responsibilities on behalf of the Partnership, including identification,
evaluation and negotiation of specific equipment investments suitable for the
Partnership, billing and collections, management of the equipment while it is
under lease and remarketing of equipment coming off lease.
In consideration of such services and capital commitments, TLP will receive 30%,
Waddell & Reed will receive 3.33% and BOT will receive 66.67% of all
compensation received by the General Partner in connection with the formation
and operation of the Partnership (including Equipment Management and Acquisition
Fees, Subordinated Remarketing Fees and the General Partner's share of
Distributable Cash from Sales or Refinancing). The General Partner will also be
reimbursed an amount equal to up to 3% of the total gross proceeds of the
Partnership's offerings for organizational and offering expenses in excess of
that amount will be borne by TLP.
<PAGE>
<TABLE>
<CAPTION>
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K: None.
<S> <C> <C> <C>
(a) 1. Financial Statements Page No.
Independent Auditors' Report - KPMG Peat Marwick LLP 15
Balance Sheets at December 31, 1997 and 1996 16
Statements of Operations
Years Ended December 31, 1997, 1996 and 1995 17
Statements of Partners' Equity (Deficit)
Years Ended December 31, 1997, 1996 and 1995 18
Statements of Cash Flows
Years Ended December 31, 1997, 1996 and 1995 19
Notes to Financial Statements 20 -23
2. Financial Statement Schedules
All financial statement schedules are omitted because they are not
applicable, the data is not significant, or the required
information is shown elsewhere in this report.
Equipment Portfolio (Unaudited) 24
(b) Reports on Form 8-K
None
</TABLE>
<PAGE>
(c) Exhibit Index
Exhibits
4. (a) Agreement of Limited Partnership is incorporated by
reference to Amendment No. 1 to Form S-1,
Registration No. 33-7004, filed with the Securities and
Exchange Commission on September 24, 1986.
(b) Amendment to Agreement of the Limited Partnership and
Schedule A dated March 8, 1991, is incorporated by reference
to the exhibits on Form 10-K for the fiscal year ended
December 31, 1990 ("1990 Form 10-K").
(c) New Assignment and Amendment Agreement with Bank of Tokyo
dated May 31, 1990, is incorporated by reference to the
exhibits on the 1990 Form 10-K.
(d) Amendment to Agreement of the Limited Partnership, dated
March 10, 1992 is incorporated by reference to the exhibits
on Form 10-K for the fiscal year ended December 31, 1991
("1991 Form 10-K").
10. (a) Material Lease Agreement with Central Ohio Coal dated
July 1, 1988, is incorporated by reference to the
exhibits on the 1990 Form 10-K. *
(b) Rental Schedule A-1 and Certificate of Inspection and
Acceptance with United Technologies, dated May 29, 1987, is
incorporated by reference to the exhibits on the 1990 Form
10-K.
(c) Rental Schedule A-1 and Certificate of Inspection and
Acceptance with Storage Technology Corporation, dated
November 11, 1991, is incorporated by reference to the
exhibits on the 1991 Form 10-K.
(d) Lease Supplement with Northwest Aircraft, Inc. dated
December 30, 1988, is incorporated by reference to the
exhibits on Form 10-K for the fiscal year ended December 31,
1992 ("1992 Form 10-K"). **
(e) Lease Schedule with Federal Paper Board Company, Inc., dated
January 22, 1987, is incorporated by reference to the
exhibits on the 1992 Form 10-K.
18. (a) KPMG Peat Marwick Letter Regarding Changes in Accounting
Principles, dated February 15, 1991 is incorporated by
reference to the exhibits on the 1990 Form 10-K.
28. (a) Form of Standard Lease Agreement is incorporated by
reference to the exhibits on the 1990 Form 10-K.
* Lease terminated during 1992.
** Lease terminated during 1993.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
HANOVER LEASE INCOME LIMITED PARTNERSHIP
(Registrant)
By: Hanover Leasing Partnership,
its General Partner
By: TLP Leasing Programs, Inc.,
one of its Corporate General Partners
Date: March 27, 1998
By: Arthur P. Beecher,
President
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000796529
<NAME> HANOVER 12/31/97
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 7,139
<SECURITIES> 0
<RECEIVABLES> 18,055
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 25,194
<PP&E> 5,032,434
<DEPRECIATION> 5,032,434
<TOTAL-ASSETS> 25,194
<CURRENT-LIABILITIES> 117,826
<BONDS> 13,000
25,570,053
0
<COMMON> 0
<OTHER-SE> (25,675,685)
<TOTAL-LIABILITY-AND-EQUITY> 25,194
<SALES> 71,565
<TOTAL-REVENUES> 310,657
<CGS> 0
<TOTAL-COSTS> 3,578
<OTHER-EXPENSES> 184,909
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72
<INCOME-PRETAX> 122,098
<INCOME-TAX> 0
<INCOME-CONTINUING> 122,098
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 122,098
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 0
</TABLE>
