SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1995
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 0-18555
LEASTEC INCOME FUND V, A California Limited Partnership
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 68-0136036
(State of organization) (I.R.S. Employer Identification Number)
7175 W. JEFFERSON AVENUE, LAKEWOOD, COLORADO 80235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 980-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Units of Class A
Limited Partner Interest (Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in part III of this Form 10-K or any amendment to this
Form 10-K [ ].
State the aggregate market value of the voting stock held by non-affiliates of
the registrant. Not applicable.
Exhibit Index Appears on Page 34
Page 1 of 35 Pages
<PAGE>
Item 1. Business
--------
Leastec Income Fund V, a California limited partnership (the "Partnership"), is
engaged in the business of owning and leasing equipment. The Partnership's
original general partners were Leastec Corporation ("Leastec") and CAI Partners
Management Company, both of whom were affiliates of Capital Associates, Inc.
("CAI"). During 1988, CAI acquired all the outstanding stock of Leastec. In June
1990, CAI sold all of the stock of Leastec back to its original owners and,
effective December 1990, Leastec resigned as a general partner. As a result, CAI
Partners Management Company is currently the sole general partner of the
Partnership.
Capital Associates International, Inc. ("CAII"), the parent of the general
partner, is the sole Class B limited partner of the Partnership. The Class B
limited partner has contributed $2,501,890 in cash and equipment to the
Partnership, which represented 10% of the net offering proceeds from sales of
Class A limited partner units after September 1, 1988. CAII is the largest
single investor in the Partnership.
Since its formation in 1987, the Partnership has acquired equipment of various
types under lease to third parties on short-term leases (generally five years or
less). All of the equipment was purchased by CAII directly from manufacturers or
from other independent third parties and sold to the Partnership. The equipment
generally consisted of, but was not limited to, office technology and
manufacturing equipment. The Partnership entered its liquidation period, as
defined in the Partnership Agreement, during 1994. Accordingly, the Partnership
did not purchase any equipment during 1995 and it is not anticipated that the
Partnership will acquire any material amount of equipment in future periods.
The Partnership may assign the rentals from leases to financial institutions, or
acquire leases subject to such assignments, at fixed interest rates on a
non-recourse basis. The financial institution has a first lien on the assigned
rents and the underlying leased equipment, with no recourse against the
Partnership or any other Partnership assets in the event of default by a lessee.
Cash proceeds from such financings, or the assumption of such assignments
incurred in connection with the acquisition of leases, are recorded on the
balance sheet as discounted lease rentals. As lessees make payments to financial
institutions, leasing revenue and interest expense are recorded.
The Partnership leases equipment to investment grade and noninvestment grade
lessees. Pursuant to the Partnership Agreement, an investment grade lessee is a
company (1) with a credit rating of not less than Baa, as determined by Moody's
Investor Services, Inc., or (2) that has comparable credit ratings as determined
by other recognized credit rating services or (3) which, if not rated by a
recognized credit rating service, then in the opinion of the general partner, is
of comparable credit quality. The Partnership may choose to manage its credit
risk through selective use of non-recourse debt financing of future lease
rentals, as described above. Approximately 49% of the Partnership's equipment
under lease was leased to investment grade lessees or equivalent as of December
31, 1995.
The Partnership only acquired equipment that was on lease at the time of
acquisition. After the initial term of its lease, each item of equipment will be
expected to provide additional investment income from its re-lease or ultimate
sale. Upon expiration of an initial lease, the Partnership attempts to re-lease
or sell the equipment to the existing lessee. If a re-lease or sale to the
lessee cannot be negotiated, the Partnership will attempt to lease or sell the
equipment to a third party.
-2-
<PAGE>
Item 1. Business, continued
--------
Although not subject to seasonal variations, the Partnership's business is
directly affected by the national economy and the new and used equipment
markets. As discussed in the Prospectus, the Partnership initially emphasized
the acquisition of office technology equipment. Increased competition,
particularly from large leasing companies, including IBM Credit Corporation
("ICC") has resulted in decreased profit margins in this segment of the
equipment leasing industry. The IBM market segment in particular has recently
been returning significantly reduced yields on equipment leases due to increased
industry competition. IBM has encountered significant competition from Amdahl,
Hitachi and EMC in the mainframe related market. IBM has also seen their market
share erode due to the movement away from mainframes to client-server networks.
The Partnership purchased a higher volume of low technology equipment during
1993 and 1992 to offset the market conditions described.
These same factors, described above, have also created a more competitive market
for most used equipment and, as a result, the Partnership is devoting
substantial effort to remarketing the equipment in its maturing initial lease
portfolio. The IBM and other high technology secondary markets have produced a
lower return due to the more rapid technological obsolescence and resulting
shorter useful life of equipment. This has resulted in a more rapid turnover of
equipment by lessees that has made the realization of equipment residual values
extremely difficult.
The ultimate rate of return on leases depends, in part, on the general level of
interest rates at the time the leases are originated. Because leasing is an
alternative to financing equipment purchases with debt, lease rates tend to rise
and fall with interest rates (although lease rate movements generally lag
interest rate changes in the capital markets). Interest rates declined from 1990
until the early part of 1994. The lease rates on equipment purchased by the
Partnership during this period reflect this low interest rate environment. This
will result in corresponding reductions in the ultimate overall yields to
partners.
The Partnership has no employees. The officers, directors and employees of the
general partner and its affiliates perform services on behalf of the
Partnership. The general partner is entitled to receive certain fees and expense
reimbursements in connection with the performance of these services. See Item 10
of this Report, "Directors and Executive Officers of the Partnership" and Item
13 of this Report, "Certain Relationships and Related Transactions".
The Partnership competes in the leasing remarketing marketplaces as a
lessor/seller with a significant number of other companies, including equipment
manufacturers, leasing companies and financial institutions. The Partnership is
in its liquidation period. Therefore, the Partnership currently competes mainly
on the basis of the expertise of its general partner in remarketing equipment.
Although the Partnership does not account for a significant percentage of the
leasing market, the general partner believes that the Partnership's remarketing
strategies will enable it to continue to compete effectively in the remarketing
markets.
The Partnership leases equipment to a significant number of lessees. No single
lessee and its affiliates accounted for more than 10% of total rental revenue of
the Partnership during 1995.
The Partnership is required to dissolve and distribute all of its assets no
later than December 31, 1998. However, the general partner anticipates that all
equipment will be sold prior to that date and that the Partnership will be
liquidated earlier.
-3-
<PAGE>
Item 2. Properties
----------
The Partnership does not own or lease any physical properties other than the
equipment discussed in Item 1 of this Report, "Business".
Item 3. Legal Proceedings
-----------------
Neither the Partnership nor any of the Partnership's equipment is the subject of
any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of the limited partners of the Partnership,
through the solicitation of proxies or otherwise, during the fourth quarter of
1995.
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters
-------
(a) The Partnership's Class A limited partner units and Class B interest are
not publicly traded. There is no established public trading market for such
units and interest, and none is expected to develop.
(b) As of February 13, 1996 the number of Class A limited partners was 3,860.
(c) During 1995, the Partnership made four (4) quarterly and twelve (12)
monthly distributions (all of which constituted a return of capital) to
Class A limited partners (note that investors may elect to receive
distributions either monthly or quarterly), as follows:
Distributions Per
$250 Class A limited
partner unit (computed
on weighted average)
For the Payment ----------------------- Total
Month Ended Made During Monthly Quarterly Distributions
------------------ -------------- -------- --------- -------------
December 31, 1994 January 1995 $ 1.25 $ 3.75 $ 401,879
January 31, 1995 February 1995 1.25 177,054
February 28, 1995 March 1995 1.25 160,157
March 31, 1995 April 1995 1.25 3.75 397,447
April 30, 1995 May 1995 0.63 85,650
May 31, 1995 June 1995 0.63 88,505
June 30, 1995 July 1995 0.63 1.89 196,964
July 31, 1995 August 1995 0.63 88,506
August 31, 1995 September 1995 0.63 88,506
September 30, 1995 October 1995 0.63 1.89 198,187
October 31, 1995 November 1995 0.15 21,002
November 30, 1995 December 1995 0.26 35,003
------ ------- -----------
$ 9.19 $ 11.28 $ 1,938,860
====== ======= ===========
-4-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters, continued
-------
Distributions may be characterized for tax, accounting and economic
purposes as a return of capital, a return on capital or both. The
total return on capital over a leasing partnership's life can only be
determined at the termination of the Partnership after all residual
cash flows (which include proceeds from the re-leasing and sale of
equipment after initial lease terms expire) have been realized.
However, as the general partner has represented for the last several
years, all distributions to the partners are expected to be a return
of capital.
Distributions for the month and quarter ended December 31, 1995,
totaling $173,995, were paid to the Class A limited partners during
January 1996. Distributions to the general partner and the Class B
limited partner during 1995 are discussed in Item 13 of the Report,
"Certain Relationships and Related Transactions".
The general partner currently anticipates that the Partnership will
generate cash flow from rentals and equipment sales during 1996 which,
when added to cash and cash equivalents on hand, should provide
sufficient cash to enable the Partnership to meet its current
operating requirements and to fund distributions to the Class A
limited partners. The general partner currently anticipates that 1996
distributions to the Class A limited partners are expected to be in
the range of an annualized rate of 1% to 3% of their capital
contributions (all of which is expected to be a return of capital).
Because the Partnership is in liquidation, as defined in the
Partnership Agreement, cash distributions to the Class A limited
partners will be based upon cash availability and will vary in 1996.
The Class B distributions of cash from operations are subordinated to
the Class A limited partners receiving distributions of cash from
operations, as scheduled in the Partnership Agreement (i.e., 15%).
Therefore, because of the decrease in the distributions to the Class A
limited partners effective as of June 1994, CAII, the sole Class B
limited partner, ceased receiving distributions of cash from
operations as of March 1994 and the general partner currently
anticipates that CAII will not receive any future Class B
distributions as a result of this subordination.
During 1994, the Partnership made four (4) quarterly and twelve (12)
monthly distributions (all of which constituted a return of capital)
to Class A limited partners, as follows:
-5-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
----------------------------------------------------------------------
Matters, continued
-------
Distributions Per
$250 Class A limited
partner unit (computed
on weighted average)
For the Payment ----------------------- Total
Month Ended Made During Monthly Quarterly Distributions
------------------ -------------- -------- --------- -------------
December 31, 1993 January 1994 $ 3.13 $ 9.39 $ 1,006,127
January 31, 1994 February 1994 3.13 445,329
February 28, 1994 March 1994 3.13 402,597
March 31, 1994 April 1994 3.13 9.39 993,685
April 30, 1994 May 1994 3.13 430,903
May 31, 1994 June 1994 3.13 445,266
June 30, 1994 July 1994 1.25 9.39 985,415
July 31, 1994 August 1994 1.25 178,107
August 31, 1994 September 1994 1.25 178,106
September 30, 1994 October 1994 1.25 3.75 396,604
October 31, 1994 November 1994 1.25 177,444
November 30, 1994 December 1994 1.25 171,720
------- ------- -----------
$ 26.28 $ 31.92 $ 5,811,303
======= ======= ===========
Item 6. Selected Financial Data
-----------------------
The following selected financial data relates to 1995 through 1991. The data set
forth below should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the financial
statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 3,914,124 $ 6,471,208 $ 9,789,449 $ 13,378,647 $ 17,573,136
Net income (loss) 1,057,734 1,107,121 1,040,550 (1,344,759) 933,720
Net income (loss) per weighted average
Class A limited partner unit outstanding 4.70 3.99 3.05 (8.41) 0.95
Total assets at December 31 5,419,610 8,689,668 16,766,103 24,528,404 39,202,506
Discounted lease rentals 2,061,334 4,231,393 6,518,735 7,216,053 12,887,383
Distributions declared to partners
for the year ended December 31 1,801,042 5,624,247 8,152,711 7,678,485 7,163,547
Distributions declared per weighted
average Class A limited partner unit 8.64 26.17 37.48 35.00 32.49
</TABLE>
-6-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
- ---------------------
Presented below are schedules (prepared solely to facilitate the discussion of
results of operations that follows) showing condensed income statement
categories and analyses of changes in those condensed categories derived from
the Statements of Operations.
<TABLE>
<CAPTION>
Condensed Condensed
Statements of Income Statements of Income
for the years The effect on for the years The effect on
ended December 31, net income of ended December 31, net income of
--------------------------- changes ------------------------- changes
1995 1994 between years 1994 1993 between years
----------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 1,349,914 $ 1,248,885 $ 101,029 $ 1,248,885 $ 1,922,755 $ (673,870)
Equipment sales margin 183,660 644,151 (460,491) 644,151 371,262 272,889
Interest income 11,760 31,232 (19,472) 31,232 96,254 (65,022)
Provision for losses - (108,615) 108,615 (108,615) (545,070) 436,455
Management fees paid to general
partner (212,268) (325,641) 113,373 (325,641) (467,926) 142,285
Direct services from general partner
and general and administrative
expenses (275,332) (382,891) 107,559 (382,891) (336,725) (46,166)
----------- ------------ ------------ ----------- ----------- ----------
Net income $ 1,057,734 $ 1,107,121 $ (49,387) $ 1,107,121 $ 1,040,550 $ 66,571
=========== =========== =========== =========== =========== ==========
</TABLE>
The Partnership is in its liquidation period, as defined in the Partnership
Agreement, and as expected, the Partnership is not purchasing equipment, initial
leases are expiring and the equipment is being remarketed (i.e., re-leased,
renewed or sold). As a result, the size of the Partnership's leasing portfolio
and the amount of leasing revenue is declining (referred to in this discussion
as "portfolio run-off").
LEASING MARGIN
Leasing margin consists of the following:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Operating lease rentals $ 3,459,761 $ 5,427,945 $ 8,842,739
Direct finance lease income 258,943 367,880 479,194
Depreciation and amortization (2,090,097) (4,026,511) (6,778,448)
Interest expense on related discounted lease rentals (278,693) (520,429) (620,730)
----------- ----------- -----------
Leasing margin $ 1,349,914 $ 1,248,885 $ 1,922,755
=========== =========== ===========
Leasing margin ratio 36% 22% 21%
========== ========== ==========
</TABLE>
-7-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
Results of Operations, continued
- ---------------------
All components of leasing margin have declined and are expected to decline
further, due to portfolio run-off. However, leasing margin increased during 1995
compared to 1994 primarily due to remarketing activities, which include the
rental proceeds from renewing, extending or re-leasing equipment before and
after the end of the initial lease term. Leasing margin decreased during 1994
compared to 1993 primarily due to portfolio run-off.
Leasing margin ratio increased primarily because of (a) remarketing activities,
and (b) a portion of the Partnership's portfolio consists of operating leases
financed with non-recourse debt. Leasing margin and leasing margin ratio for an
operating lease financed with non-recourse debt increases during the term of the
lease since rents and depreciation are typically fixed while interest expense
declines as the related non-recourse debt is repaid.
The ultimate rate of return on leases depends, in part, on the general level of
interest rates at the time the leases are originated. Because leasing is an
alternative to financing equipment purchases with debt, lease rates tend to rise
and fall with interest rates (although lease rate movements generally lag
interest rate movements in the capital market). Interest rates declined from
1990 until the early part of 1994. The lease rates on equipment purchased by the
Partnership during that period reflect that low interest rate environment. This
will result in corresponding reductions in the ultimate overall yields to
partners.
EQUIPMENT SALES MARGIN
Equipment sales margin consists of the following:
Years Ended December 31,
-----------------------------------------
1995 1994 1993
----------- ----------- -----------
Equipment sales revenue $ 378,905 $ 1,747,881 $ 1,972,733
Cost of equipment sales (195,245) (1,103,730) (1,601,471)
----------- ----------- -----------
Equipment sales margin $ 183,660 $ 644,151 $ 371,262
=========== =========== ===========
The Partnership is in its liquidation. During the liquidation period, as initial
leases terminate, equipment is being remarketed (i.e., re-leased or sold to
either the original lessee or a third party) and, accordingly the timing and
amount of equipment sales are difficult to project.
INTEREST INCOME
The decline in interest income is due to decreases in cash available for
investment.
-8-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
Results of Operations, continued
- ---------------------
PROVISION FOR LOSSES
The remarketing of equipment for an amount greater than its book value is
reported as equipment sales margin (if the equipment is sold) or leasing margin
(if the equipment is re-leased). The realization of less than the carrying value
of equipment (which is typically not known until remarketing subsequent to the
initial lease termination has occurred) is recorded as provision for losses.
Residual values are established equal to the estimated value to be received from
the equipment following termination of the lease. In estimating such values, the
Partnership considers all relevant facts regarding the equipment and the lessee,
including, for example, the likelihood that the lessee will re-lease the
equipment. The nature of the Partnership's leasing activities is that it has
credit exposure and residual value exposure and, accordingly, in the ordinary
course of business, it will incur losses from those exposures. The Partnership
performs ongoing quarterly assessments of its assets to identify any
other-than-temporary losses in value.
No provision for loss was recorded in 1995 because no other-than-temporary
losses in the value of equipment were identified in the quarterly assessments of
the Partnership's asset.
The provisions for losses for 1994 and 1993 related to identified
other-than-temporary losses in value of off-lease equipment, principally
telecommunications equipment and semiconductor manufacturing equipment.
EXPENSES
Management fees paid to the general partner and direct services from the general
partner decreased primarily as a result of portfolio run-off. General and
administrative expenses decreased in 1995 as compared to 1994, due to higher
third-party professional fees incurred for remarketing the Partnership's
equipment in 1994.
Liquidity and Capital Resources
- -------------------------------
The Partnership funds its activities principally with cash from rents, interest
income and sales of off-lease equipment. Available cash and cash reserves of the
Partnership are invested in interest bearing accounts and short-term U.S.
Government securities pending distributions to the partners.
The Partnership entered its liquidation period during 1994. Accordingly, the
Partnership did not purchase any equipment during 1995.
During 1995, 1994 and 1993, the Partnership declared distributions to the
partners of $1,801,042, $5,624,247 and $8,152,711, respectively, all of which
constituted a return of capital. Distributions may be characterized for tax,
accounting and economic purposes as a return of capital, a return on capital or
both. The total return on capital over a leasing partnership's life can only be
determined at the termination of the Partnership after all residual cash flows
(which include proceeds from the re-leasing and sale of equipment after initial
lease terms expire) have been realized. However, as the general partner has
represented for the last several years, all distributions to the partners are
expected to be a return of capital.
-9-
<PAGE>
Liquidity and Capital Resources, continued
- -------------------------------
The general partner currently anticipates that the Partnership will
generate cash flow from rentals and equipment sales during 1996 which, when
added to cash and cash equivalents on hand, should provide sufficient cash
to enable the Partnership to meet its current operating requirements and to
fund distributions to the Class A limited partners. The general partner
currently anticipates that 1996 distributions to the Class A limited
partners are expected to be in the range of an annualized rate of 1% to 3%
of their capital contributions (all of which is expected to be a return of
capital). Because the Partnership is in liquidation, as defined in the
Partnership Agreement, cash distributions to the Class A limited partners
will be based upon cash availability and will vary in 1996.
The Class B distributions of cash from operations are subordinated to the
Class A limited partners receiving distributions of cash from operations,
as scheduled in the Partnership Agreement (i.e., 15%). Therefore, because
of the decrease in the distributions to the Class A limited partners
effective as of June 1994, CAII, the sole Class B limited partner, ceased
receiving distributions of cash from operations as of March 1994 and the
general partner currently anticipates that CAII will not receive any future
Class B distributions as a result of this subordination.
-10-
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Index to Financial Statements and
Financial Statement Schedules
Page
Financial Statements Number
--------------------
Independent Auditors' Report 12
Balance Sheets at December 31, 1995 and 1994 13
Statements of Income for the years ended
December 31, 1995, 1994 and 1993 14
Statements of Partners' Capital for the years
ended December 31, 1995, 1994 and 1993 15
Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 16
Notes to Financial Statements 17-27
Financial Statement Schedules
-----------------------------
Independent Auditors' Report 28
Schedule II - Valuation and Qualifying Accounts 29
-11-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
LEASTEC INCOME FUND V,
A CALIFORNIA LIMITED PARTNERSHIP:
We have audited the accompanying balance sheets of Leastec Income Fund V, a
California Limited Partnership, as of December 31, 1995 and 1994, and the
related statements of income, partners' capital, and cash flows for each of the
years in the three-year period ended December 31, 1995. 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 Leastec Income Fund V, a
California Limited Partnership, as of December 31, 1995 and 1994, and the
results of its operations and its cash flows for each of the years in the
three-year period ended December 31, 1995, in conformity with generally accepted
accounting principles.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Denver, Colorado
February 2, 1996
-12-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31,
---------------------------
1995 1994
----------- -----------
<S> <C> <C>
Cash and cash equivalents $ 446,663 $ 702,210
Accounts receivable, net of allowance for doubtful
accounts of $22,374 in 1995 and 1994 78,112 95,807
Net investment in direct finance leases 1,823,457 2,467,517
Leased equipment, net 3,071,378 5,424,134
----------- -----------
Total assets $ 5,419,610 $ 8,689,668
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 235,847 $ 271,525
Payable to affiliates 27,918 26,298
Rents received in advance 40,894 98,037
Distributions payable to partners 186,101 441,682
Discounted lease rentals 2,061,334 4,231,393
----------- -----------
Total liabilities 2,552,094 5,068,935
----------- -----------
Partners' capital:
General partner - -
Limited partners:
Class A
authorized 220,000 units; issued and outstanding,
198,475 and 198,715 units in 1995 and 1994, respectively 1,729,272 2,519,669
Class B 1,138,244 1,101,064
----------- -----------
Total partners' capital 2,867,516 3,620,733
----------- -----------
Total liabilities and partners' capital $ 5,419,610 $ 8,689,668
=========== ===========
</TABLE>
See accompanying notes to financial statements.
-13-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Years ended December 31,
-------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Revenue:
Operating lease rentals $ 3,459,761 $ 5,427,945 $ 8,842,739
Direct finance lease income 258,943 367,880 479,194
Equipment sales margin 183,660 644,151 371,262
Interest income 11,760 31,232 96,254
----------- ----------- -----------
Total revenue 3,914,124 6,471,208 9,789,449
----------- ----------- -----------
Expenses:
Depreciation and amortization 2,090,097 4,026,511 6,778,448
Provision for losses - 108,615 545,070
Management fees paid to general partner 212,268 325,641 467,926
Interest on discounted lease rentals 278,693 520,429 620,730
Direct services from general partner 73,966 91,975 102,141
General and administrative 201,366 290,916 234,584
----------- ----------- -----------
Total expenses 2,856,390 5,364,087 8,748,899
----------- ----------- -----------
Net income $ 1,057,734 $ 1,107,121 $ 1,040,550
=========== =========== ===========
Net income allocated:
To the general partner $ 90,066 $ 281,212 $ 407,636
To the Class A limited partners 930,488 794,172 608,588
To the Class B limited partner 37,180 31,737 24,326
----------- ----------- -----------
$ 1,057,734 $ 1,107,121 $ 1,040,550
=========== =========== ===========
Net income per weighted average
Class A limited partner unit outstanding $ 4.70 $ 3.99 $ 3.05
=========== =========== ===========
Weighted average Class A limited partner
units outstanding 197,993 198,984 199,311
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
-14-
<PAGE>
<TABLE>
<CAPTION>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1995, 1994 and 1993
Class A
Limited Class A Class B
General Partner Limited Limited
Partner Units Partners Partner Total
---------- ------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Partners' capital January 1, 1993 $ - 200,468 $ 13,914,068 $ 1,455,925 $ 15,369,993
Redemptions - (1,273) (100,084) - (100,084)
Net income 407,636 - 608,588 24,326 1,040,550
Distributions to partners
($37.48 per weighted
average Class A limited
partner unit outstanding) (407,636) - (7,469,867) (275,208) (8,152,711)
---------- ------- ------------ ----------- ------------
Partners' capital December 31, 1993 - 199,195 6,952,705 1,205,043 8,157,748
Redemptions - (480) (19,889) - (19,889)
Net income 281,212 - 794,172 31,737 1,107,121
Distributions to partners
($26.17 per weighted
average Class A limited
partner unit outstanding) (281,212) - (5,207,319) (135,716) (5,624,247)
---------- ------- ------------ ----------- ------------
Partners' capital December 31, 1994 - 198,715 2,519,669 1,101,064 3,620,733
Redemptions - (240) (9,909) - (9,909)
Net income 90,066 - 930,488 37,180 1,057,734
Distributions to partners
($8.64 per weighted
average Class A limited
partner unit outstanding) (90,066) - (1,710,976) - (1,801,042)
---------- ------- ------------ ----------- ------------
Partners' capital
December 31, 1995 $ - 198,475 $ 1,729,272 $ 1,138,244 $ 2,867,516
========== ======= ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
-15-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended December 31,
------------------------------------------
1995 1994 1993
<S> <C> <C> <C>
----------- ----------- ------------
Cash flows from operating activities:
Net income $ 1,057,734 $ 1,107,121 $ 1,040,550
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,090,097 4,026,511 6,778,448
Provision for losses - 108,615 545,070
Cost of equipment sales 163,835 1,112,008 1,423,844
Recovery of investment in direct finance leases 714,250 655,892 563,376
Changes in assets and liabilities:
(Increase) decrease in accounts receivable 46,330 372,105 (106,461)
Increase (decrease) in accounts payable and accrued liabilities (35,678) (204,310) 170,930
Decrease in rents received in advance (57,143) (150,373) (85,859)
Increase (decrease) in payable to affiliates 1,620 (17,727) (19,817)
----------- ----------- ------------
Net cash provided by operating activities 3,981,045 7,009,842 10,310,081
----------- ----------- ------------
Cash flows from investing activities:
Purchases from affiliate of equipment on operating leases - - (1,399,410)
Investment in direct finance leases, acquired from affiliate - - (551,417)
----------- ----------- ------------
Net cash used in investing activities - - (1,950,827)
----------- ----------- ------------
Cash flows from financing activities:
Proceeds from discounting of lease rentals - 616,512 1,732,455
Principal payments on discounted lease rentals (2,170,059) (2,903,854) (3,938,414)
Distributions to partners (2,056,624) (6,360,805) (8,081,058)
Redemptions of limited partner units (9,909) (19,889) (100,084)
----------- ----------- ------------
Net cash used in financing activities (4,236,592) (8,668,036) (10,387,101)
----------- ----------- ------------
Net decrease in cash and cash equivalents (255,547) (1,658,194) (2,027,847)
Cash and cash equivalents at beginning of year 702,210 2,360,404 4,388,251
----------- ----------- ------------
Cash and cash equivalents at end of year $ 446,663 $ 702,210 $ 2,360,404
=========== =========== ============
Supplemental disclosure of cash flow information:
Interest paid $ 278,693 $ 520,429 $ 620,730
Supplemental disclosure of noncash investing and financing activities:
Discounted lease rentals assumed in equipment acquisitions - - 1,897,325
</TABLE>
See accompanying notes to financial statements
-16-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
Organization
Leastec Income Fund V, a California Limited Partnership (the
"Partnership"), was organized on August 28, 1987 as a limited partnership
under the laws of the State of California pursuant to an Agreement of
Limited Partnership (the "Partnership Agreement"). The Partnership was
formed for the purpose of acquiring and leasing a portfolio of equipment
to unaffiliated third parties. The Partnership's lease portfolio initially
consisted principally of computer peripherals, data communication devices,
office systems, workstations and other high technology equipment. The
Partnership will continue until December 31, 1998 unless terminated
earlier in accordance with the terms of the Partnership Agreement. The
general partner began liquidating the Partnership's portfolio in 1994.
The general partner of the Partnership is CAI Partners Management Company,
a wholly owned subsidiary of Capital Associates International, Inc.
("CAII"). The general partner manages the Partnership, including
investment of funds, purchase and sale of equipment, lease negotiation and
other administrative duties.
CAII is the Class B limited partner. The Class B limited partner has
contributed $2,501,890 of cash and equipment to the Partnership, an amount
equal to 10% of net offering proceeds generated from sales of Class A
limited partner units after September 1, 1988. The Class B limited partner
has no remaining obligation to contribute cash and/or equipment to the
Partnership.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. For leasing entities, this includes the
estimate of residual values, as described below. Actual results could
differ from those estimates.
Partnership Cash Distributions and Allocations of Profit and Loss
Cash Distributions
------------------
During the Distribution Period, as defined in the Partnership Agreement,
cash distributions are to be made as follows:
-17-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Partnership Cash Distributions and Allocations of Profit and Loss, continued
Cash Distributions, continued
------------------
First, 95% to the Class A limited partners and 5% to the general
partner until such time as all Class A limited partners have received,
on a cumulative, noncompounded basis, distributions equal to (1) 12% on
their contributed capital during the first three years after the
initial closing date (November 16, 1987), (2) 13% on their contributed
capital during the fourth year after the initial closing date, (3) 14%
on their contributed capital during the fifth year after the initial
closing date and (4) 15% thereafter.
Second, 95% to the Class B limited partner and 5% to the general
partner until such time as the Class B limited partner has received
distributions equal to 11% per annum, cumulative, noncompounded, on its
subordinated capital contribution.
Third, any remaining available cash is to be reinvested or distributed
to the partners as specified in the Partnership Agreement.
During the Liquidation Phase, as defined in the Partnership Agreement,
cash distributions are to be made as follows:
First, in accordance with the first and second cash distribution
provisions during the Distribution Period as described above.
Second, 95% to the Class A limited partners and 5% to the general
partner until the Class A limited partners have received aggregate
distributions from all sources equal to their capital contributions
plus their Priority Return as defined in the Partnership Agreement.
Third, 85.5% to the Class B limited partner, 9.5% to the Class A
limited partners and 5% to the general partner until the Class B
limited partner has received aggregate distributions from all sources
equal to its subordinated capital contribution plus its Subordinated
Priority Return as defined in the Partnership Agreement.
Fourth, thereafter 90% to the Class A limited partners and the Class B
limited partner (and among them in proportion to their respective
capital contributions as of the first day of the calendar quarter for
which the amount of such distribution is being determined), and 10% to
the general partner.
-18-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Federal Income Tax Basis Profits and Losses
-------------------------------------------
Profits for any period are allocated according to the following
provisions:
First, profit is allocated to the partners in proportion to, and to the
extent of, any losses allocated to the partners as described in the
Partnership Agreement.
Second, any remaining profit is allocated 5% to the general partner and
95% to the limited partners, on a pari passu basis as described in the
Partnership Agreement.
Third, any remaining profit is allocated 90% to the limited partners
(and among them in proportion to their respective capital
contributions) and 10% to the general partner.
Notwithstanding anything in the Partnership Agreement to the contrary, and
before any other allocation is made, profits shall be allocated to the
general partner until the aggregate profits so allocated in the current
period and all prior periods are equal to the amount necessary to restore
the general partner's capital account to zero. All such allocations shall
be credited against any other allocations of profit to the general
partner.
Losses for any period are allocated according to the following priorities:
First, to the partners in proportion to, and to the extent of, any
profits allocated to them in reverse chronological order.
Second, 99% to the limited partners (and among them in proportion to
their respective capital contributions) and 1% to the general partner.
On October 21, 1988, the partners amended the Partnership Agreement to
admit CAII, as the Class B limited partner. CAII made its first required
capital contribution in 1989. The amendment provided for the distribution
of a share of available cash and liquidation proceeds to the Class B
limited partner, but did not provide for the allocation of a corresponding
share of profits or losses to the Class B limited partner. In the years
ended December 31, 1987 and 1988, the Partnership allocated profits and
losses to the general partner and the Class A limited partners in
accordance with the then applicable provisions of the Partnership
Agreement. In the years ended December 31, 1989 and 1990, the Partnership
treated the Class B limited partner as a Class A limited partner for
purposes of allocations of profits and losses. In the years ended December
31, 1991 and 1992, the Partnership allocated profits and losses among the
-19-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
partners in the manner provided for in an amendment adopted by the
Partnership in the first quarter of 1992, discussed in the following
paragraph, which allocation methodology approximates the allocation
methodology employed in 1989 and 1990.
Pursuant to Section 15.2.11(iv) of the Partnership Agreement, the general
partner amended the Partnership Agreement during the first quarter of 1992
(1) to allocate a share of profits and losses to the Class B limited
partner, and (2) to correct an ambiguity in the allocation and
distribution provisions with respect to the Class A limited partners. With
respect to the Class B limited partner, the amendment provides for the
allocation of a share of profits and losses to the Class B limited partner
commensurate with its right to receive subordinated distributions of
available cash. With respect to the Class A limited partners, the
amendment provides that profits and losses allocated, and available cash
distributed, will be shared by the individual Class A limited partners in
proportion to their capital contributions and the number of days that each
such Class A limited partner is a partner during each period. The
amendment reflects (1) the actual method of allocations and distributions
to the Class B limited partner that the Partnership has used since the
admission of the Class B limited partner to the Partnership, (2)
allocations of profits and losses among the individual Class A limited
partners, consistent with such allocations in 1990 and 1991, and (3)
distributions of available cash among the individual Class A limited
partners consistent with the Partnership's calculation and payment of such
distributions since its inception.
Reclassifications
Certain reclassifications have been made to prior years' financial
statements to conform to the current year's presentation.
Lease Accounting
Statement of Financial Accounting Standards No. 13 requires that a
lessor account for each lease by the direct finance, sales-type or
operating lease method. The Partnership currently utilizes the direct
finance and operating methods for substantially all of the
Partnership's equipment under lease. Direct finance leases are defined
as those leases which transfer substantially all of the benefits and
risks of ownership of the equipment to the lessee. For all types of
leases, the determination of profit considers the estimated value of
the equipment at lease termination, referred to as the residual value.
After the inception of a lease, the Partnership may engage in financing
of lease receivables on a non-recourse basis and/or equipment sale
transactions to reduce or recover its investment in the equipment.
-20-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
The Partnership's accounting methods and their financial reporting effects
are described below.
Net Investment in Direct Financing Leases ("DFLs")
Leasing revenue, which is recognized over the term of the lease,
consists of the excess of lease payments plus the estimated residual
value over the equipment's cost. Earned income is recognized monthly to
provide a constant yield over the term of the lease. The cost of the
equipment includes acquisition fees paid to the general partner and
carrying costs on the lease until transferred to the Partnership,
reduced by rents received prior to transferring the lease to the
Partnership. Residual values are estimated at lease inception equal to
the estimated value to be received from the equipment following
termination of the lease (which in certain circumstances includes
anticipated re-lease proceeds), as determined by the general partner.
In estimating such values, the general partner considers all relevant
information regarding the equipment and the lessee.
Equipment on Operating Leases ("OLs")
Leasing revenue consists principally of monthly rentals. The cost of
equipment includes acquisition fees paid to the general partner and
carrying costs on the equipment until transferred to the Partnership,
reduced by rents received prior to transferring the equipment to the
Partnership and is depreciated on a straight-line basis over the lease
term to an amount equal to the estimated residual value at the lease
termination date. Residual values are established at lease inception
equal to the estimated value to be received from the equipment
following termination of the initial lease (which in certain
circumstances includes anticipated re-lease proceeds), as determined by
the general partner. In estimating such values, the general partner
considers all relevant information and circumstances regarding the
equipment and the lessee. Because revenue, depreciation expense and the
resultant profit margin before interest expense are recorded on a
straight-line basis, and interest expense on discounted lease rentals
is incurred on the interest method, profit is skewed toward lower
returns in the early years of the term of an OL and higher returns in
later years.
Non-recourse Discounting of Rentals
The Partnership may assign the rentals from leases to financial
institutions, or acquire leases subject to such assignments, at fixed
interest rates on a non-recourse basis. In return for such future lease
payments, the Partnership receives the discounted value of the payments
in cash. The financial institution has a first lien on the assigned
rents and the underlying leased equipment, with no recourse against the
Partnership or any other Partnership assets in the event of default by
a lessee. Cash proceeds from such financings are recorded on the
balance sheet as discounted lease rentals. As lessees make payments to
financial institutions, leasing revenue and interest expense are
recorded.
-21-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Allowance for Losses
An allowance for losses is maintained at levels determined by the
general partner to adequately provide for any other-than-temporary
declines in asset values. In determining losses, economic conditions,
the activity in the used equipment markets, the effect of actions by
equipment manufacturers, the financial condition of lessees, the
expected courses of action by lessees with regard to leased equipment
at termination of the initial lease term, and other factors which the
general partner believes are relevant, are considered. Assets are
reviewed quarterly to determine the adequacy of the allowance for
losses.
Transactions Subsequent to Initial Lease Termination
After the initial lease term of equipment on lease expires, the
equipment is either sold or re-leased to the existing lessee or another
third party. The remaining net book value of equipment sold is removed
and gain or loss recorded when equipment is sold. The accounting for
re-leased equipment is consistent with the accounting described under
"Net Investment in Direct Finance Leases" and "Equipment on Operating
Leases" above.
Income Taxes
No provision for income taxes has been made in the financial statements
since taxable income or loss is recorded in the tax returns of the
individual partners.
Cash Equivalents
The Partnership considers short-term, highly liquid investments that
are readily convertible to known amounts of cash to be cash
equivalents.
Cash equivalents of $440,000 and $675,000 at December 31, 1995 and
1994, respectively, are comprised of an investment in a money market
fund which invests solely in U.S. Government securities having
maturities of 90 days or less.
-22-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Net Income Per Class A Limited Partner Unit
Net income per Class A limited partner unit is computed by dividing the
net income allocated to the Class A limited partners by the weighted
average number of Class A limited partner units outstanding during the
period.
2. Net Investment in Direct Finance Leases
---------------------------------------
The components of the net investment in direct finance leases as of December
31, 1995 and 1994 were:
1995 1994
----------- -----------
Minimum lease payments receivable $ 1,500,213 $ 2,412,506
Estimated residual values 609,902 567,517
Less unearned income (286,658) (512,506)
----------- -----------
$ 1,823,457 $ 2,467,517
=========== ===========
3. Leased Equipment
The Partnership's investment in equipment on operating leases by major
classes as of December 31, 1995 and 1994 were:
1995 1994
------------ ------------
Transportation and industrial equipment $ 6,282,988 $ 6,349,416
Office furniture and equipment 2,681,979 2,908,549
Computers and peripherals 1,535,014 3,231,985
Other 1,925,030 3,327,676
------------ ------------
12,425,011 15,817,626
Less:
Accumulated depreciation (8,674,997) (9,721,555)
Allowance for losses (678,636) (671,937)
------------ ------------
$ 3,071,378 $ 5,424,134
============ ============
Depreciation expense for 1995, 1994 and 1993 was $2,090,097, $4,026,511 and
$6,778,448, respectively.
-23-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
4. Future Minimum Lease Payments
-----------------------------
Future minimum lease receivable from noncancelable leases as of December 31,
1995 are as follows:
Year Ending December 31 DFLs OLs
----------------------- ----------- -----------
1996 $ 708,389 $ 1,628,306
1997 495,734 53,684
1998 296,090 -
----------- -----------
Total $ 1,500,213 $ 1,681,990
=========== ===========
5. Discounted Lease Rentals
------------------------
Discounted lease rentals outstanding at December 31, 1995 bear interest at
rates primarily ranging between 5% and 12%. Aggregate maturities of such
non-recourse obligations are as follows:
Year Ending December 31
-----------------------
1996 $ 1,346,447
1997 477,113
1998 237,774
-----------
Total $ 2,061,334
===========
6. Transactions With the General Partner and Affiliates
----------------------------------------------------
Acquisition Fees
----------------
The general partner receives a fee equal to 5.0% of the sales price of
equipment sold to the Partnership as compensation for evaluating, selecting,
negotiating and consummating the acquisition of the equipment subject to the
maximum discussed below and as permitted under terms of the Partnership
Agreement. There is no acquisition fee payable with respect to the equipment
contributed by the Class B limited partner. No acquisition fees were paid in
1995, 1994 and 1993.
-24-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
6. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
Maximum Front-end Fee
---------------------
Pursuant to the Partnership Agreement, the total of all front-end fees
(sales commissions, organization and offering costs and acquisition fees)
may not exceed an amount which would cause the Partnership's investment in
equipment (total cost of equipment excluding front-end fees) to be less than
the greater of (1) a percentage amount of total Class A and Class B limited
partners' capital contributions equal to 80% minus .0625% for each 1% of the
aggregate purchase price of equipment that is borrowed by the Partnership
(determined by dividing the principal amount of all such indebtedness
incurred by the Partnership by the aggregate purchase price of the
equipment) or (2) 75% of the total Class A and Class B limited partners
capital contributions. The total of all acquisition fees also may not exceed
17% of total Class A and Class B capital contributions. The maximum fee was
reached during 1991. Equipment purchases after the maximum front-end fee was
reached have not (and will not in the future) included any acquisition fees
to the general partner.
Management Fees
---------------
The general partner receives management fees as compensation for services
performed in connection with managing the Partnership's equipment equal to
the lesser of (a) 5% of gross rentals received (limited to 2% of gross
rentals received in the case of full payout leases) or (b) the fee which the
general partner reasonably believes to be competitive with that which would
be charged by a non-affiliate for rendering comparable services as permitted
under the Partnership Agreement. Such fees totaled $212,268, $325,641 and
$467,926 in 1995, 1994 and 1993, respectively.
Direct Services
---------------
The general partner and its affiliates provide accounting, investor
relations, billing, collecting, asset management, and other administrative
services to the Partnership. The Partnership reimburses the general partner
for these services performed on its behalf as permitted under the terms of
the Partnership Agreement. Such reimbursements totaled $73,966 in 1995,
$91,975 in 1994 and $102,141 in 1993.
Equipment Purchases
-------------------
There were no equipment purchases in 1995 or 1994. The Partnership purchased
equipment from CAII with a total purchase price of $3,848,152 (including
$1,897,325 of discounted lease rentals) during 1993.
-25-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
6. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
Payable to Affiliates
---------------------
Payable to affiliates consists primarily of direct services and management
fees payable to the general partner.
Disposition Fee
---------------
The general partner is entitled to a subordinated fee with respect to each
sale of equipment in an amount not to exceed the lesser of (a) 50% of the
fee that would be charged by an unaffiliated party or (b) 2% of the gross
equipment sales price. The disposition fee has not and will not be paid to
the general partner until the Class A limited partners have received cash
distributions in an amount equal to their capital contributions plus an 8%
annual, cumulative return compounded daily on their adjusted capital
contributions, calculated from and after the first day of the month
following the month that each Class A limited partner is admitted to the
Partnership. The Partnership has not accrued any disposition fees since
inception as it is anticipated that the limited partners will not receive
the minimum distributions described above.
7. Tax Information (Unaudited)
---------------
The following reconciles net income for financial reporting purposes to
income (loss) for federal income tax purposes for the years ended December
31,:
<TABLE>
<CAPTION>
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
Net income (loss) per financial statements $ 1,057,734 $ 1,107,121 $ 1,040,550
Differences due to:
Direct finance leases 714,250 288,012 563,376
Depreciation 302,792 (104,704) (454,762)
Provision for losses - 100,989 545,070
Gain (loss) on sale of equipment (72,043) (87,995) (389,976)
Other (64,961) (56,354) (154,857)
----------- ----------- ------------
Partnership income for
federal income tax purposes $ 1,937,772 $ 1,247,069 $ 1,149,401
=========== =========== ============
</TABLE>
As of December 31, 1995, the partners' capital accounts per the financial
statements totaled $2,867,516 compared to partners' capital accounts for
federal income tax purposes of $7,625,319 (unaudited). The difference arises
primarily from commissions reported as a reduction in partners' capital for
financial reporting purposes but not for federal income tax purposes, and
temporary differences related to direct finance leases, depreciation, and
provisions for losses.
-26-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
8. Concentration of Credit Risk
----------------------------
Approximately 49% of the Partnership's equipment under lease was leased to
investment grade lessees. Pursuant to the Partnership Agreement, an
investment grade lessee is a company (1) with a credit rating of not less
than Baa, as determined by Moody's Investor Services, Inc. or (2) that has
comparable credit ratings, as determined by other recognized credit rating
services, or (3) which, if not rated by a recognized credit rating service,
then in the opinion of the general partner, is of comparable credit quality.
The Partnership's cash balance is maintained with a high credit quality
financial institution. At times such balances may exceed the FDIC insurance
limit due to the receipt of lockbox amounts that have not cleared the
presentment bank (generally for less than two days). As funds become
available, they are invested in a money market mutual fund.
9. Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
Statement of Financial Standards No. 107 ("SFAS No. 107"), Disclosures about
Fair Value of Financial Instruments specifically excludes certain items from
its disclosure requirements such as the Company's investment in leased
assets. The carrying amounts at December 31, 1995 for cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
payable to affiliates, rents and sale proceeds received in advance and
distributions payable to partners approximate their fair values due to the
short maturity of these instruments.
As of December 31, 1995, discounted lease rentals of $2,061,334 had fair
values of $1,973,594. The fair values were estimated utilizing market rates
of comparable debt having similar maturities and credit quality as of
December 31, 1995.
-27-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
LEASTEC INCOME FUND V
A CALIFORNIA LIMITED PARTNERSHIP:
Under date of February 2, 1996, we reported on the balance sheets of Leastec
Income Fund V, a California Limited Partnership, as of December 31, 1995 and
1994, and the related statements of income, partners' capital, and cash flows
for each of the years in the three-year period ended December 31, 1995, as
contained in the Partnership's annual report on Form 10-K for the year 1995. In
connection with our audits of the aforementioned financial statements, we have
also audited the related financial statement Schedule II, as listed in the
accompanying index. This financial statement schedule is the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits.
In our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Denver, Colorado
February 2, 1996
-28-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- --------------------------- -------- ---------
Additions
Balance at Additions (Deductions) Balance
Beginning Charged to Charged to at end
Classification of Period Expenses Other Accounts Deductions of Period
- -------------- ---------- ---------- -------------- ---------- ---------
(1) (2)
1995
- ---------------------
<S> <C> <C> <C> <C> <C>
Allowance for losses:
Accounts receivable $ 22,374 $ - $ - $ - $ 22,374
Equipment on operating leases 671,937 - 6,700 - 678,636
--------- --------- ---------- --------- ---------
Totals $ 694,311 - $ 6,700 $ - $ 701,010
========= ========= ========== ========= =========
1994
- ---------------------
Allowance for losses:
Accounts receivable $ 261,148 $ - $ (238,774) $ - $ 22,374
Equipment on operating leases 393,285 108,615 170,037 - 671,937
---------- --------- ---------- --------- ---------
Totals $ 654,433 $ 108,615 $ (68,737) $ - $ 694,311
========== ========= ========== ========= =========
1993
- ---------------------
Allowance for losses:
Accounts receivable $ 247,916 $ - $ 35,377 $ (22,145) $ 261,148
Net investment in direct leases 24,388 - (24,388) - -
Equipment on operating leases 293,861 287,863 (165,859) (22,580 393,285
---------- --------- ---------- --------- ---------
Totals $ 566,165 $ 287,863 $ (154,870) $ (44,725) $ 654,433
========== ========= ========== ========= =========
<FN>
(1) Represents reclassifications to and from other reserve accounts and asset
and liability accounts.
(2) Represents allowance charge-offs.
</FN>
</TABLE>
See accompanying independent auditors' report.
-29-
<PAGE>
Item 9. Disagreements on Accounting and Financial Disclosures
-----------------------------------------------------
None
Item 10. Directors and Executive Officers of the Partnership
---------------------------------------------------
The Partnership has no officers and directors. The general partner manages and
controls the affairs of the Partnership and has general responsibility and
authority in all matters affecting its business. Information concerning the
directors and executive officers of the general partner is as follows:
CAI Partners Management Company
Name Positions Held
---- --------------
John F. Olmstead President and Director
Dennis J. Lacey Senior Vice President and Director
John E. Christensen Senior Vice President, Principal Financial and
Chief Administrative Officer and Director
Anthony M. DiPaolo Senior Vice President, Assistant Secretary and
Director
Daniel J. Waller Vice President and Director
Richard H. Abernethy Vice President and Director
John A. Reed Vice President, Assistant Secretary and Director
David J. Anderson Chief Accounting Officer and Secretary
John F. Olmstead, age 51 joined CAII as Vice President in December, 1988, is a
Senior Vice President of CAI ad CAII and is head of CAII's Public Equity
division. He has served as Chairman of the Board for Neo-kam Industries, Inc.,
Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has
over 20 years of experience holding various positions of responsibility in the
leasing industry. Mr. Olmstead holds a Bachelor of Science degree from Indiana
University and a Juris Doctorate degree from Indiana Law School.
-30-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
Dennis J. Lacey, age 42, joined CAI as Vice President, Operations, in October
1989. Mr. Lacey was appointed Treasurer on January 1, 1991, Chief Financial
Officer on April 11, 1991, a director on July 19, 1991, and President and Chief
Executive Officer on September 6, 1991. Prior to joining CAI, Mr. Lacey was an
audit partner for the public accounting firm of Coopers & Lybrand. Mr. Lacey is
also a director and senior officer of CAII, CAI Equipment Leasing I Corp., CAI
Equipment Leasing II Corp., CAI Equipment Leasing III Corp., CAI Equipment
Leasing IV Corp., CAI Leasing Canada, Ltd., CAI Partners Management Company, CAI
Securities Corporation, CAI Lease Securitization I Corp. and Capital Equipment
Corporation (collectively referred to herein as the "CAI Affiliates"), all of
which are first- or second-tier wholly-owned subsidiaries of the CAI.
John E. Christensen, age 48, joined CAII as Vice President and Treasurer in
November 1988. He now serves as Senior Vice President, Finance and Chief
Financial Officer of CAI and CAII. Mr. Christensen previously held senior
management positions at Maxicare Health Plans, Inc., Global Marine, Inc. and
Santa Fe International, Inc. Mr. Christensen obtained his MBA in Finance from
the University of Michigan and his Bachelor of Arts degree from Michigan State
University.
Anthony M. DiPaolo, age 36, joined CAII in July 1990 as an Assistant Treasurer
and is currently Senior Vice President-Business Development. He has also held
the positions of Senior Vice President-Controller and Assistant Vice
President-Credit Administration for the Company. Mr. DiPaolo has held financial
management positions as Chief Financial Officer for Mile High Kennel Club, Inc.
from 1988 to 1990 and was Vice President/Controller for VICORP Restaurants, Inc.
from 1986 through 1988. Mr. DiPaolo holds a Bachelor of Science degree in
Accounting from the University of Denver.
Daniel J. Waller, age 37, joined CAII in July 1990, as a manager of Investor
Relations. Mr. Waller assumed the responsibility for the asset management
department a short time later, and is currently Vice President, Capital Markets
Group. Prior to joining CAII, Mr. Waller was an audit manager with Coopers &
Lybrand for over three years and gained considerable experience in the leasing
industry. While at Coopers & Lybrand, Mr. Waller held positions with the
International Accounting and Auditing Committee as well as the national Auditing
Directorate. Mr. Waller holds a Bachelor of Arts degree in accounting from the
University of Northern Iowa.
Richard H. Abernethy, age 41, joined CAII in April 1992 as Equipment Valuation
Manager and currently serves as Vice President of Asset Management. Mr.
Abernethy has thirteen years experience in the leasing industry, including prior
positions with Barclays Leasing Inc., from November 1986 to February 1992, and
Budd Leasing Corporation, from January 1981 to November 1986. Mr. Abernethy
holds a Bachelor of Arts in Business Administration from the University of North
Carolina at Charlotte.
John A. Reed, age 40, joined CAII in January 1990 as the Tax Director and
Assistant Secretary. Mr. Reed is currently the Vice President of Marketing and
is responsible for all lease documentation and management of transaction
structuring and processing. Prior to joining the Marketing Department, Mr. Reed
was Vice President of Credit and Debt Administration. He spent seven and one
half years with Coopers & Lybrand in the Tax Department and served on CAII's tax
consulting engagement during that time. Mr. Reed holds a Bachelor of Arts degree
in Social Sciences and Masters of Science in Accounting, from Colorado State
University.
-31-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
David J. Anderson, age 42, joined CAII in August 1990 as Manager of Billing &
Collections and currently serves as Assistant Vice-President/Chief Accounting
Officer. Prior to joining CAII, Mr. Anderson was Vice- President/Controller for
Systems Marketing, Inc., from 1985 to 1990, and previous to that working in
several senior staff positions at the Los Alamos National Laboratory and with
Ernst & Whinney. Mr. Anderson holds a Bachelor of Business Administration degree
in Accounting from the University of Wisconsin.
Item 11. Executive Compensation
----------------------
No compensation was paid by the Partnership to the officers and directors of the
general partner. See Item 13 of this Report, "Certain Relationships and Related
Transactions", for a description of the compensation and fees paid to the
general partner and its affiliates by the Partnership during 1995.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
(a) As of the date hereof, no person is known by the Partnership to be the
beneficial owner of more than 5% of the Class A limited partner units
of the Partnership. The Partnership has no directors or officers, and
neither the general partner nor the Class B limited partner of the
Partnership owns any Class A limited partner units.
CAII, the parent of the general partner, owns 100% of the
Partnership's Class B limited partner interest.
CAI Partners Management Company owns 100% of the Partnership's general
partner interest.
The names and addresses of the general partner and the Class B limited
partner are as follows:
General Partner
---------------
CAI Partners Management Company
7175 West Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
Class B Limited Partner
-----------------------
Capital Associates International, Inc.
7175 West Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
-32-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management,
--------------------------------------------------------------
continued
(b) No directors or officers of the general partner or the Class B limited
partner owned any Class A limited partner units as of February 1,
1996.
(c) The Partnership knows of no arrangements, the operation of which may
at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The general partner and its affiliates receive certain types of compensation,
fees or other distributions in connection with the operations of the
Partnership.
Following is a summary of the amounts paid or payable to the general partner and
its affiliates during 1994.
Management Fee
- --------------
The general partner receives a monthly fee as compensation for services rendered
in connection with the management of the Partnership's equipment in an amount
equal to the lesser of (i) 5.0% of gross rentals received by the Partnership
(but limited to 2.0% of gross rentals received in the case of full payout
leases), or (ii) the fee which the general partner reasonably believes to be
competitive with that which would be charged by a non-affiliate for rendering
comparable services. The general partner earned $212,268 of management fees
during 1995.
Disposition Fee
- ---------------
The general partner earns a subordinated fee with respect to each sale of
equipment in an amount equal to the lesser of (i) 50% of the fee that would be
charged by an unaffiliated party, or (ii) 2% of the gross equipment sale price.
The disposition fee has not and will not be paid to the general partner until
the Class A Limited Partners have received cash distributions in an amount equal
to their capital contributions plus 8% annual cumulative return compounded daily
on their adjusted capital contributions, calculated from and after the first day
of the month following the month that each Class A Limited Partner is admitted
to the Partnership. The Partnership did not accrue any disposition fees in 1995
as it is anticipated that the limited partners will not recover the
aforementioned amounts.
Accountable General and Administrative Expenses
- -----------------------------------------------
The general partner is entitled to reimbursement of certain expenses paid on
behalf of the Partnership which are incurred in connection with the
Partnership's operations. The general partner received $73,966 of expense
reimbursements during 1995.
-33-
<PAGE>
Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
The general partner receives 5.0% of Partnership cash distributions and is
allocated certain Partnership income or loss relating to its general partner
interest in the Partnership. Distributions paid and income allocated to the
general partner totaled $90,066 and $90,066, respectively, for 1995.
The Class B Limited Partner did not receive any distributions during 1995 but
was allocated net income of $37,180 for 1995.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a)
and
(d) The following documents are filed as part of this Report:
1. Financial Statements
2. Financial Statement Schedule
(b) There were no reports on Form 8-K filed during the three months ended
December 31, 1995.
(c) Exhibits required to be filed.
Exhibit Exhibit
Number Name
------- -------
3* Leastec Income Fund V Limited Partnership Agreement (Filed
as Exhibit A on Form S-1 in September 1987)
4.1* Subscription Agreement and Power of Attorney (Filed as
Exhibit B on Form S-1 in September 1987)
4.2* First Amendment to Limited Partnership Agreement dated
October 14, 1987 (Filed on October 14, 1987)
4.3* Second Amendment to Limited Partnership Agreement dated
March 31, 1992 (Filed on May 15, 1992)
4.4* Third Amendment to Limited Partnership Agreement dated June
30, 1992
* Not filed herewith. In accordance with Rule 12b-32 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
reference is made to the document previously filed with the
Commission.
-34-
<PAGE>
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.
Dated: March 19, 1996 Leastec Income Fund V,
A California Limited Partnership
By: CAI Partners Management Company
By: /s/John F. Olmstead
--------------------------
John F. Olmstead
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the general partner
of the Partnership and in the capacities indicated on March 18, 1996.
Signature Title
- ---------------------- -----
/s/John F. Olmstead
- ----------------------
John F. Olmstead President and Director
/s/Dennis J. Lacey
- ----------------------
Dennis J. Lacey Senior Vice President and Director
/s/John E. Christensen
- ----------------------
John E. Christensen Senior Vice President, Principal Financial and
Chief Administrative Officer and Director
/s/Anthony M. DiPaolo
- ----------------------
Anthony M. DiPaolo Senior Vice President, Assistant Secretary and
Director
/s/Daniel J. Waller
- ----------------------
Daniel J. Waller Vice President and Director
/s/John A. Reed
- ----------------------
John A. Reed Vice President, Assistant Secretary and Director
/s/David J. Anderson
- ----------------------
David J. Anderson Chief Accounting Officer and Secretary
-35-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the balance
sheets and statements of income and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 446,663
<SECURITIES> 0
<RECEIVABLES> 78,112
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 3,071,378
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,419,610
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,867,516
<TOTAL-LIABILITY-AND-EQUITY> 5,419,610
<SALES> 183,660
<TOTAL-REVENUES> 3,914,124
<CGS> 0
<TOTAL-COSTS> 2,856,390
<OTHER-EXPENSES> 487,600
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 278,693
<INCOME-PRETAX> 1,057,734
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,057,734
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,057,734
<EPS-PRIMARY> 4.70
<EPS-DILUTED> 4.70
</TABLE>
