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, 1997
[ ] 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 31
Page 1 of 32 Pages
<PAGE>
Item 1. Business
--------
Leastec Income Fund V, a California limited partnership (the "Partnership"), was
engaged in the business of owning and leasing equipment. CAI Partners Management
Company, a wholly-owned subsidiary of Capital Associates International, Inc.
("CAII") is the sole general partner of the Partnership (the "general partner").
CAII is the sole Class B limited partner of the Partnership. CAII 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.
During 1997, the Partnership liquidated substantially all of its assets and
distributed the related proceeds to the partners in accordance with the
Partnership Agreement. The remaining assets will be liquidated and all
liabilities settled during 1998. Excess cash, if any, will be distributed to the
partners in accordance with the Partnership Agreement.
Since its formation in 1987, the Partnership 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 1997 or 1996 and it is anticipated that
the Partnership will be liquidated and terminated in 1998.
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 leased equipment to investment grade and noninvestment grade
lessees. Since the Partnership's formation, approximately 51% of the
Partnership's equipment under lease was leased to investment grade lessees or
equivalent. 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 limits its credit risk
through selective use of non-recourse debt financing of future lease rentals, as
described above.
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 was
expected to provide additional investment income from its re-lease or ultimate
sale. Upon expiration of an initial lease, the Partnership attempted to re-lease
or sell the equipment to the existing lessee. If a re-lease or sale to the
lessee was not negotiated, the Partnership attempted to lease or sell the
equipment to a third party.
-2-
<PAGE>
Item 1. Business, continued
--------
The ultimate rate of return on leases depends, in part, on interest rates at the
time the leases were 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).
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 competed in the leasing marketplaces as a lessor 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 enable it to compete effectively in the remarketing markets.
The Partnership leased equipment to a significant number of lessees. In 1997,
two lessees accounted for 55% and 19%, respectively, of total Partnership
revenue in 1997.
The Partnership is required to dissolve and distribute all of its assets no
later than December 31, 1998.
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
1997.
-3-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
-----------------------------------------------------------------------
Matters
-------
(a) The Partnership's Class A limited partner units, Class B interest, and
general partner interest are not publicly traded. There is no
established public trading market for such units and interests, and
none is expected to develop.
(b) As of December 31, 1997 there were 3,856 Class A limited partners.
(c) Distributions
-------------
During 1997, the Partnership made five (5) quarterly and thirteen (13)
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, 1996 January 1997 $ 1.01 $ 2.42 $ 199,756
January 31, 1997 February 1997 .53 - 105,167
February 28, 1997 March 1997 .53 - 105,167
March 31, 1997 April 1997 1.21 2.27 239,666
April 30, 1997 May 1997 .17 - 35,066
May 31, 1997 June 1997 .25 - 49,092
June 30, 1997 July 1997 .64 1.06 125,842
July 31, 1997 August 1997 .26 - 52,615
August 31, 1997 September 1997 .26 - 52,615
September 30, 1997 October 1997 .73 1.26 144,771
October 31, 1997 November 1997 .27 - 52,644
November 30, 1997 December 1997 .27 - 52,598
December 31, 1997 December 1997 1.58 2.12 313,888
------ ------ -----------
$ 7.71 $ 9.13 $ 1,528,887
====== ====== ===========
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 to the general partner and the Class B limited partner
during 1997 are discussed in Item 13 of the Report, "Certain
Relationships and Related Transactions".
-4-
<PAGE>
Item 5. Market for the Partnership's Common Equity and Related Stockholder
-----------------------------------------------------------------------
Matters, continued
-------
(c) Distributions
The general partner anticipates that the Partnership will generate cash
flow from rentals and equipment sales during 1998 which, when added to
cash and cash equivalents on hand, should provide sufficient cash to
enable the Partnership to meet its current operating requirements. Any
remaining cash will be distributed to the Partners in accordance with
the Partnership Agreement.
The Class B limited partner distributions of cash from operations are
subordinated to the Class A limited partners receiving cumulative
distributions of cash from operations, as scheduled in the Partnership
Agreement (i.e., 15%). Therefore, CAII, the sole Class B limited
partner, is not receiving distributions of cash and will not receive
any future Class B distributions. As a result, the general partner
anticipates that CAII will only receive approximately $1.3 million or
54% of its original $2.5 million Class B investment.
During 1996, 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:
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, 1995 January 1996 $ .88 $ 1.29 $ 173,995
January 31, 1996 February 1996 .53 - 105,009
February 28, 1996 March 1996 1.41 - 280,024
March 31, 1996 April 1996 1.84 3.78 364,912
April 30, 1996 May 1996 .11 - 21,049
May 31, 1996 June 1996 .11 - 20,963
June 30, 1996 July 1996 .90 1.12 178,013
July 31, 1996 August 1996 .60 - 118,976
August 31, 1996 September 1996 1.77 - 349,840
September 30, 1996 October 1996 2.03 4.40 401,214
October 31, 1996 November 1996 .71 - 140,122
November 30, 1996 December 1996 .71 - 140,122
------- ------- -----------
$ 11.60 $ 10.59 $ 2,294,239
======= ======= ===========
-5-
<PAGE>
Item 6. Selected Financial Data
-----------------------
The following selected financial data relates to the years ended December 31,
1993 through 1997. 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>
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Total revenue $ 1,951,428 $ 2,951,127 $ 3,914,124 $ 6,471,208 $ 9,789,449
Net income 846,318 1,123,494 1,057,734 1,107,121 1,040,550
Net income per weighted average
Class A limited partner unit outstanding 3.77 4.86 4.70 3.99 3.05
Total assets 1,342,724 2,832,713 5,419,610 8,689,668 16,766,103
Discounted lease rentals - 721,550 2,061,334 4,231,393 6,518,735
Distributions declared to partners 1,399,085 2,442,105 1,801,042 5,624,247 8,152,711
Distributions declared per weighted
average Class A limited partner unit 7.07 11.71 8.64 26.17 37.48
</TABLE>
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 statements of income
categories and analyses of changes in those condensed categories derived from
the Statements of Income:
<TABLE>
<CAPTION>
Condensed Condensed
Statements of Income The effect on Statements of The effect on
for the years net income Income for the years net income
ended December 31, of changes ended December 31, of changes
------------------------- between -------------------------- between
1997 1996 years 1996 1995 years
---------- ----------- ------------- -------------------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Leasing margin $ 466,478 $ 1,110,749 $ (644,271) $ 1,110,749 $ 1,349,914 $ (239,165)
Equipment sales margin 792,671 525,245 267,426 525,245 183,660 341,585
Interest income 17,543 20,203 (2,660) 20,203 11,760 8,443
Management fees paid to general
partner (90,167) (169,573) 79,406 (169,573) (212,268) 42,695
Direct services from general partner (88,044) (66,223) (21,821) (66,223) (73,966) 7,743
General and administrative expenses (252,163) (296,907) 44,744 (296,907) (201,366) (95,541)
---------- ----------- ---------- ----------- ----------- ----------
Net income $ 846,318 $ 1,123,494 $ (277,176) $ 1,123,494 $ 1,057,734 $ 65,760
========== =========== ========== =========== =========== ==========
</TABLE>
-6-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
Results of Operations, continued
- ---------------------
LEASING MARGIN
Leasing margin consists of the following:
Years Ended December 31,
-------------------------------------------
1997 1996 1995
----------- ----------- -----------
Operating lease rentals $ 1,051,376 $ 2,238,530 $ 3,459,761
Direct finance lease income 89,838 167,149 258,943
Depreciation (627,253) (1,172,100) (2,090,097)
Interest expense on related
discounted lease rentals (47,483) (122,830) (278,693)
----------- ----------- -----------
Leasing margin $ 466,478 $ 1,110,749 $ 1,349,914
=========== =========== ===========
Leasing margin ratio 41% 46% 36 %
=========== =========== ===========
Leasing margin ratio fluctuates based upon; (i) the mix of direct finance leases
and operating leases; (ii) remarketing activities; (iii) the method used to
finance leases added to the Partnership's lease portfolio, as described above;
and (iv) the relative age and types of leases in the portfolio (operating leases
have a relatively lower leasing margin early in the lease term and increasing
leasing margin as the lease term passes).
All components of leasing margin have declined for the years ended December 31,
1997 and 1996, due to portfolio run-off. These components are expected to
decline further in 1998.
During 1996, leasing margin ratio increased primarily because 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 Partnership is in its liquidation period, as defined in the Partnership
Agreement, and as expected, the Partnership is not purchasing additional
equipment, initial leases are expiring and the equipment is being remarketed
(i.e., re-leased, renewed or sold). As a result, both the size of the
Partnership's leasing portfolio and the amount of leasing revenue are declining
(referred to in this discussion as "portfolio run-off").
The ultimate rate of return on leases depends, in part, on 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).
-7-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
Results of Operations, continued
- ---------------------
EQUIPMENT SALES MARGIN
Equipment sales margin consists of the following:
Years Ended December 31,
---------------------------------------------
1997 1996 1995
---- ---- ----
Equipment sales revenue $ 1,406,215 $ 1,228,238 $ 378,905
Cost of equipment sales (613,544) (702,993) (195,245)
----------- ----------- ----------
Equipment sales margin $ 792,671 $ 525,245 $ 183,660
=========== =========== ==========
The Partnership is in its liquidation period. Equipment sales margin increased
as the Partnership was successful in realizing amounts on equipment greater than
their net book values upon lease termination.
Cost of equipment sales for the year ended December 31, 1997 includes a reversal
of approximately $426,000 for amounts previously provided for estimated
other-than-temporary declines in asset values.
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 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 losses were recorded in 1997, 1996 or 1995 because no
other-than-temporary losses in the value of equipment were identified in the
quarterly assessments of the Partnership's asset.
MANAGEMENT FEES PAID TO GENERAL PARTNER
The general partner earns 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
(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. Management fees decreased in 1996
and 1997 due to portfolio runoff resulting in lower gross rentals received by
the Partnership.
-8-
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
Results of Operations, continued
- ---------------------
DIRECT SERVICES FROM GENERAL PARTNER
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. Direct services from general partner decreased in 1996 due to
portfolio runoff and increased in 1997 due to activities associated with
liquidating the Partnership's assets.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased in 1997 compared to 1996. The
decrease is due to 1996 insurance costs offset by increases related to
liquidation. General and administrative expenses increased in 1996 compared to
1995 primarily due to $107,928 reimbursed to the general partner during the
second quarter of 1996 for insurance costs related to prior years.
Liquidity and Capital Resources
- -------------------------------
The Partnership funded its activities principally with cash from rents, interest
income and sales of off-lease equipment. Available cash and cash reserves of the
Partnership were invested in interest bearing accounts and short-term U.S.
Government securities pending distributions to the partners.
During 1997, 1996 and 1995, the Partnership declared distributions to the
partners of $1,399,085, $2,442,105 and $1,801,042, 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 sales of equipment after initial
lease terms expire) have been realized. However, the general partner expects
that all distributions to the partners will be a return of capital.
The general partner anticipates that the Partnership will generate cash flow
from rentals and equipment sales during 1998 which, when added to cash and cash
equivalents on hand, should provide sufficient cash to enable the Partnership to
meet its current operating requirements. Any remaining cash will be distributed
to the Partners in accordance with the Partnership Agreement. The Partnership is
required to dissolve and distribute all of its assets no later than December 31,
1998.
The Class B limited partner distributions of cash from operations are
subordinated to the Class A limited partners receiving cumulative distributions
of cash from operations, as scheduled in the Partnership Agreement (i.e., 15%).
Therefore, because the Class A limited partners have not received their total
cumulative distributions, CAII, the sole Class B limited partner, is not
receiving distributions of cash from operations, and, as a result of this
subordination, the general partner currently anticipates that CAII will not
receive any future Class B distributions. As a result, the general partner
anticipates that CAII will only receive approximately $1.3 million or 54% of its
original $2.5 million Class B investment.
-9-
<PAGE>
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
Index to Financial Statements and
Financial Statement Schedule
Page
Financial Statements Number
-------------------- ------
Independent Auditors' Report 11
Balance Sheets as of December 31, 1997 and 1996 12
Statements of Income for the years ended
December 31, 1997, 1996 and 1995 13
Statements of Partners' Capital for the years
ended December 31, 1997, 1996 and 1995 14
Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995 15
Notes to Financial Statements 16-24
Financial Statement Schedule
----------------------------
Independent Auditors' Report 25
Schedule II - Valuation and Qualifying Accounts 26
-10-
<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, 1997 and 1996, and the
related statements of income, partners' capital, 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.
As discussed in Note 1, the Partnership is in the liquidation stage, whereby all
assets are expected to be liquidated during 1998 and all cash distributed to the
Partners, after satisfaction of liabilities.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Leastec Income Fund V, 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.
/s/KPMG Peat Marwick LLP
------------------------
KPMG PEAT MARWICK LLP
Denver, Colorado
February 6, 1998
-11-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
BALANCE SHEETS
December 31, 1997 and 1996
ASSETS
1997 1996
---- ----
Cash and cash equivalents $ 270,564 $ 465,217
Accounts receivable, net of allowance for
doubtful accounts of $30,000 and $22,374
in 1997 and 1996, respectively 720,438 122,357
Equipment held for sale or re-lease 50,000 128,696
Net investment in direct finance leases - 1,105,111
Leased equipment, net 301,722 1,011,332
----------- -----------
Total assets $ 1,342,724 $ 2,832,713
=========== ===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 317,417 $ 283,321
Payable to affiliates 40,854 31,361
Rents received in advance - 34,242
Distributions payable to partners - 225,019
Discounted lease rentals - 721,550
------------ -----------
Total liabilities 358,271 1,295,493
------------ -----------
Partners' capital:
General partner - -
Limited partners:
Class A authorized 220,000 units; issued and
outstanding, 198,025 units in 1997 and 1996 984,453 360,500
Class B - 1,176,720
------------ -----------
Total partners' capital 984,453 1,537,220
------------ -----------
Total liabilities and partners' capital $ 1,342,724 $ 2,832,713
============ ===========
See accompanying notes to financial statements.
-12-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF INCOME
Years ended December 31, 1997, 1996 and 1995
1997 1996 1995
---- ---- ----
REVENUE:
Operating lease rentals $ 1,051,376 $ 2,238,530 $ 3,459,761
Direct finance lease income 89,838 167,149 258,943
Equipment sales margin 792,671 525,245 183,660
Interest income 17,543 20,203 11,760
----------- ----------- -----------
Total revenue 1,951,428 2,951,127 3,914,124
----------- ----------- -----------
EXPENSES:
Depreciation 627,253 1,172,100 2,090,097
Management fees paid to general partner 90,167 169,573 212,268
Interest on discounted lease rentals 47,483 122,830 278,693
Direct services from general partner 88,044 66,223 73,966
General and administrative 252,163 296,907 201,366
----------- ----------- -----------
Total expenses 1,105,110 1,827,633 2,856,390
----------- ----------- -----------
NET INCOME $ 846,318 $ 1,123,494 $ 1,057,734
=========== =========== ===========
NET INCOME ALLOCATED:
To the general partner $ 69,954 $ 122,105 $ 90,066
To the Class A limited partners 746,536 962,913 930,488
To the Class B limited partner 29,828 38,476 37,180
----------- ----------- -----------
$ 846,318 $ 1,123,494 $ 1,057,734
=========== =========== ===========
Net income per weighted average Class A
limited partner unit outstanding $ 3.77 $ 4.86 $ 4.70
=========== =========== ===========
Weighted average Class A limited
partner units outstanding 198,025 198,166 197,993
=========== =========== ===========
See accompanying notes to financial statements.
-13-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
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, 1995 $ - 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 declared to partners (90,066) - (1,710,976) - (1,801,042)
----------- ------- ------------ ----------- ------------
Partners' capital, December 31, 1995 - 198,475 1,729,272 1,138,244 2,867,516
Redemptions - (450) (11,685) - (11,685)
Net income 122,105 - 962,913 38,476 1,123,494
Distributions declared to partners (122,105) - (2,320,000) - (2,442,105)
----------- ------- ------------ ----------- ------------
Partners' capital, December 31, 1996 - 198,025 360,500 1,176,720 1,537,220
Net income 69,954 - 746,536 29,828 846,318
Adjustments - - 1,206,548 (1,206,548) -
Distributions declared to partners (69,954) - (1,329,131) - (1,399,085)
----------- ------- ------------ ----------- ------------
Partners' capital, December 31, 1997 $ - 198,025 $ 984,453 $ - $ 984,453
=========== ======= ============ =========== ============
</TABLE>
See accompanying notes to financial statements.
-14-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
STATEMENTS OF CASH FLOWS
Years ended December 31, 1997, 1996 and 1995
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 846,318 $ 1,123,494 $ 1,057,734
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 627,253 1,172,100 2,090,097
Cost of equipment sales 613,544 702,993 163,835
Recovery of investment in direct finance leases 675,370 640,280 714,250
Changes in assets and liabilities:
Decrease (increase) in accounts receivable (620,830) 90,078 46,330
Increase (decrease) in accounts payable
and accrued liabilities 34,096 47,474 (35,678)
Increase in payable to affiliates 9,493 3,443 1,620
Decrease in rents received in advance (34,242) (6,652) (57,143)
------------ ------------ ------------
Net cash provided by operating activities 2,151,002 3,773,210 3,981,045
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on discounted lease rentals (721,550) (1,339,784) (2,170,059)
Distributions to partners (1,624,105) (2,403,187) (2,056,624)
Redemptions of Class A limited partner units - (11,685) (9,909)
------------ ------------ ------------
Net cash used in financing activities (2,345,655) (3,754,656) (4,236,592)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (194,653) 18,554 (255,547)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 465,217 446,663 702,210
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 270,564 $ 465,217 $ 446,663
============ ============ ============
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 47,483 $ 122,830 $ 278,693
</TABLE>
See accompanying notes to financial statements.
-15-
<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 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 Partnership was formed for the
purpose of acquiring and leasing a portfolio of equipment to unaffiliated
third parties.
During 1997, the Partnership liquidated substantially all of its assets
and distributed the related proceeds to the partners in accordance with
the Partnership Agreement. The remaining assets will be liquidated and all
liabilities settled during 1998. Any remaining cash will be distributed to
the partners in accordance with the liquidation provisions in the
Partnership Agreement.
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 were made as follows:
First, 95% to the Class A limited partners and 5% to the general
partner until such time as all Class A limited partners received, on a
cumulative, non-compounded 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.
-16-
<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
------------------
Second, 95% to the Class B limited partner and 5% to the general
partner until such time as the Class B limited partner received
distributions equal to 11% per annum, cumulative, non-compounded, on
its subordinated capital contribution.
Third, any remaining available cash was 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.
The Class B limited partner distributions of cash from operations are
subordinated to the Class A limited partners receiving cumulative
distributions of cash from operations, as scheduled in the Partnership
Agreement (i.e., 15%). Therefore, because the Class A limited partners
have not received their total cumulative distributions, CAII, the sole
Class B limited partner, is not receiving distributions of cash from
operations, and, as a result of this subordination, the general partner
currently anticipates that CAII will not receive any future Class B
distributions. As such, at December 31, 1997, the balance in the Class B
limited partner capital account was transferred to the Class A limited
partner capital accounts.
-17-
<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.
The Partnership Agreement, as amended, 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 Partnership Agreement,
as amended, 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 Partnership Agreement, as amended, reflects (1) the actual
method of allocations and distributions to the Class B limited partner
that the Partner ship 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.
-18-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Recently Issued Financial Accounting Standards
During 1997, the Partnership adopted SFAS No. 125, Accounting for
Transfer and Servicing of Financial Assets and Extinguishments of
Liabilities ("SFAS No. 125"). SFAS No. 125 provides consistent
standards for distinguishing transfers of financial assets that are
sales from transfers that are secured borrowings. The adoption of SFAS
No. 125 did not have a material impact on the Partnership's financial
position or results of operations.
Long-lived Assets
The Partnership accounts for long-lived assets under the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-lived Assets and for Long- lived Assets to be
Disposed Of ("SFAS No. 121"). SFAS No. 121 requires that long-lived
assets, including operating leases, and certain identifiable
intangibles to be held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. In performing the review for
recoverability, the entity should estimate the future cash flows
expected to result from the use of the asset and its eventual
disposition. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the
asset, an impairment loss is recognized. Measurement of an impairment
loss for long-lived assets, including operating leases, and
identifiable intangibles held by the Partnership is based on the fair
value of the asset calculated by discounting the expected future cash
flows at an appropriate interest rate.
Lease Accounting
Statement of Financial Accounting Standards No. 13, Accounting for
Leases, requires that a lessor account for each lease by the direct
finance, sales-type or operating lease method. The Partnership
currently utilizes the direct financing and operating methods for 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 (i.e.,
"non-recourse debt" or "discounted lease rentals") and/or equipment
sale transactions to reduce or recover its investment in the equipment.
The Partnership's accounting methods and their financial reporting
effects are described below.
-19-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Net Investment in Direct Financing Leases ("DFLs")
The cost of the equipment, including acquisition fees paid to the
general partner, is recorded as net investment in DFLs on the
accompanying balance sheet. 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 and is recorded as
direct finance lease income on the accompanying income statements.
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 regarding the equipment and the lessee.
Equipment on Operating Leases ("OLs")
The cost of equipment, including acquisition fees paid to the general
partner, is recorded as leased equipment in the accompanying balance
sheets 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. Leasing revenue consists principally of monthly rents
and is recognized as operating lease rentals in the accompanying income
statements. 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 and depreciation expense are recorded on a
straight-line basis, and interest expense on discounted lease rentals
(discussed below) is recorded using the interest method, lower margins
are realized in the early years of the term of an OL and higher margins
in later years.
Non-recourse Discounting of Rentals
The Partnership may assign the future 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 assigned
future rentals, the Partnership receives the discounted value of the
rentals in cash. In the event of default by a lessee, the financial
institution has a first lien on the underlying leased equipment, with
no further recourse against the Partnership. Cash proceeds from such
financings, or the assumption of 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.
-20-
<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. Asset chargeoffs
are recorded upon the termination or remarketing of the underlying
assets. Cost of equipment sales for the year ended December 31, 1997
includes a reversal of approximately $426,000 for amounts previously
provided for estimated other-than-temporary declines in asset values.
The lease portfolio is 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 $269,052 and $428,000 at December 31, 1997 and
1996, respectively, are comprised of investments in a money market fund
which invests solely in U.S. Government securities having maturities of
90 days or less.
Equipment Held for Sale or Re-lease
Equipment held for sale or re-lease, recorded at the lower of cost or
market value expected to be realized, consists of equipment previously
leased to end users which has been returned to the Partnership
following lease expiration.
-21-
<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, 1996 were:
1996
-----------
Minimum lease payments receivable $ 772,923
Estimated residual values 451,697
Less unearned income (119,509)
-----------
Total $ 1,105,111
===========
3. Leased Equipment
----------------
The Partnership's investment in equipment on operating leases by major
classes as of December 31, 1997 and 1996 were:
1997 1996
---- ----
Office furniture and equipment $ 2,681,979 $ 2,844,991
Transportation and industrial equipment - 1,267,779
Computers and peripherals - 1,054,671
Other - 985,359
------------ ------------
2,681,979 6,152,800
Less:
Accumulated depreciation (2,380,257) (4,510,576)
Allowance for losses - (630,892)
------------ ------------
$ 301,722 $ 1,011,332
============ ============
Depreciation expense for 1997, 1996 and 1995 was $627,253, $1,172,100 and
$2,090,097, respectively.
-22-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
4. Transactions With the General Partner and Affiliates
----------------------------------------------------
Management Fees
---------------
The general partner earns 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 $90,167, $169,573 and
$212,268 in 1997, 1996 and 1995, 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 $88,044, $66,223 and
$73,966 in 1997, 1996 and 1995, respectively.
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.
5. 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,:
-23-
<PAGE>
LEASTEC INCOME FUND V
A California Limited Partnership
NOTES TO FINANCIAL STATEMENTS, continued
5. Tax Information (Unaudited), continued
---------------------------
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Net income per financial statements $ 846,318 $ 1,123,496 $ 1,057,734
Differences due to:
Direct finance leases 424,796 560,141 714,250
Depreciation 145,063 (17,966) 302,792
Gain (loss) on sale of equipment (34,290) 296,780 (72,043)
Other (232,236) 74,033 (64,961)
----------- ----------- -----------
Partnership income for federal income
tax purposes $ 1,149,651 $ 2,036,484 $ 1,937,772
=========== =========== ===========
</TABLE>
As of December 31, 1997, the partners' capital accounts per the financial
statements totaled $984,453 compared to partners' capital accounts for
federal income tax purposes of $6,946,500 (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.
6. Concentration of Credit Risk
----------------------------
Approximately 51% 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.
7. Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
Statement of Financial Standards No. 107, Disclosures about Fair Value of
Financial Instruments specifically excludes certain items from its
disclosure requirements such as the Partnership's investment in leased
assets. The carrying amounts at December 31, 1997 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.
-24-
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
THE PARTNERS
LEASTEC INCOME FUND V
A CALIFORNIA LIMITED PARTNERSHIP:
Under date of February 6, 1998, we reported on the balance sheets of Leastec
Income Fund V, a California limited partnership, as of December 31, 1997 and
1996, and the related statements of income, partners' capital, and cash flows
for each of the years in the three-year period ended December 31, 1997, as
contained in the Partnership's annual report on Form 10-K for the year 1997. In
connection with our audits of the aforementioned financial statements, we 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 6, 1998
-25-
<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 (Deductions) Balance
Beginning Equipment Charged to at end
Classification of Period sales Other Accounts Deductions of Period
- -------------- ---------- --------- -------------- ------------ ---------
(1) (2) (3)
1997
- ---------------------
<S> <C> <C> <C> <C> <C>
Allowance for losses:
Accounts receivable $ 22,374 $ - $ 27,491 $ (19,865) $ 30,000
Equipment on leases 630,892 (425,754) (27,491) (177,647) -
--------- ---------- --------- ---------- ---------
Totals $ 653,266 $ (425,754) $ - $ (197,512) $ 30,000
========= ========== ========= ========== =========
1996
- ---------------------
Allowance for losses:
Accounts receivable $ 22,374 $ - $ - $ - $ 22,374
Equipment on leases 678,636 - (47,744) - 630,892
--------- ---------- --------- ---------- ---------
Totals $ 701,010 $ - $ (47,744) $ - $ 653,266
========= ========== ========= ========== =========
1995
- ---------------------
Allowance for losses:
Accounts receivable $ 22,374 $ - $ - $ - $ 22,374
Equipment on leases 671,936 - 6,700 - 678,636
--------- ---------- ---------- ----------- ----------
Totals $ 694,310 $ - $ 6,700 $ - $ 701,010
========= ========== ========== =========== ==========
</TABLE>
(1) Equipment sales in excess of prior established provision for losses.
(2) Represents reclassifications to and from other reserve accounts and asset
and liability accounts.
(3) Represents allowance charge-offs.
See accompanying independent auditors' report.
-26-
<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
Anthony M. DiPaolo Senior Vice President, Principle Financial and Chief
Administrative Officer and Director
Richard H. Abernethy Vice President and Director
John A. Reed Vice President, Assistant Secretary and Director
Joseph F. Bukofski Vice President, Assistant Secretary and Director
Robert A. Golden Director
Mick Myers Director
Ann Danielson Assistant Vice President
David J. Anderson Chief Accounting Officer and Secretary
JOHN F. OLMSTEAD, age 53, joined CAII as Vice President in December, 1988, is a
Senior Vice President of CAI and 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.
DENNIS J. LACEY, age 44, 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 Equipment Leasing V 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 CAI.
-27-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
ANTHONY M. DIPAOLO, age 39, joined CAII in July 1990 as Assistant Treasurer and
is currently Senior Vice President-Chief Financial Officer. He also held the
positions of Senior Vice President-Controller and Assistant Vice
President-Credit Administration for the Company. Mr. DiPaolo has held similar
senior financial management positions with two public companies between 1986 and
June 1990, and prior to then was an audit manager for the public accounting firm
of Coopers & Lybrand. Mr. DiPaolo holds a Bachelor of Science degree in
Accounting from the University of Denver.
RICHARD H. ABERNETHY, age 43, 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 42, joined CAII in January 1990 as the Tax Director and
Assistant Secretary. Mr. Reed is currently the Vice President-Manager, Capital
Markets Group 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.
JOSEPH F. BUKOFSKI, age 43, joined CAII in June 1990 as a Financial Analyst. Mr.
Bukofski 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. Bukofski was Assistant Vice
President and Controller. Prior to joining the Company, he was a geologist with
Barringer Geoservices, Inc. for eleven years. Mr. Bukofski holds a Bachelor of
Science degree in Secondary Education - Earth Science from Bloomsburg University
and a Masters of Science in Accounting from the University of Colorado.
ROBERT A. GOLDEN, age 52, is Vice President and the National Sales Manager of
the Company. Mr. Golden joined the Company in 1993 as a Branch Manager. He was
promoted to his current position in September 1994. Prior to joining the
Company, he was an Executive Vice President with the U.S. Funds Group, President
of BoCon Capital Group and Vice President with Ellco/GE Capital for fifteen
years. Mr. Golden is an officer, but not a director, of CAII.
MICK MYERS, age 40, joined CAI in February 1992 as a Senior Portfolio Manager.
Currently he is Assistant Vice President of Asset Management. Mr. Myers has nine
years experience in the leasing industry. Previously, he has held the position
of Senior End of Lease Negotiator with ELLCO/GE Capital. Mr. Myers holds a
Bachelor of Science degree from the University of Wyoming.
-28-
<PAGE>
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
ANN E. DANIELSON, age 34, joined CAII in February 1990 and is currently
Assistant Vice President, Assistant Treasurer and is responsible for the
Company's cash management and collections functions. Prior to joining the
Company, she was with U.S. West financial Services and Coopers & Lybrand. Ms.
Danielson holds a Bachelor of Arts Degree from the University of Northern Iowa.
DAVID J. ANDERSON, age 45, 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 worked 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 1997.
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, is the sole Class B limited
partner.
CAI Partners Management Company is the sole general partner.
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
-29-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management,
-----------------------------------------------------------------------
continued
Class B Limited Partner
-----------------------
Capital Associates International, Inc.
7175 West Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
(b) No directors or officers of the general partner or the Class B limited
partner owned any Class A limited partner units as of December 31,
1997.
(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 1997:
Management Fee
- --------------
The general partner earns 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 $90,167 of management fees during 1997.
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 1997
as it is anticipated that the limited partners will not recover the
aforementioned amounts.
-30-
<PAGE>
Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
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 $88,044 of expense
reimbursements during 1997.
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 $69,954 and $69,954, respectively, for 1997.
Distributions paid and income allocated to the Class B limited partner were $0
and $29,828, respectively, for 1997.
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, 1997.
(c) Exhibits required to be filed.
Exhibit
Number Exhibit 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.
-31-
<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 30, 1998 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 30, 1998.
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/Anthony M. DiPaolo
- ----------------------- Senior Vice President, Principle Financial and Chief
Anthony M. DiPaolo Administrative Officer and Director
/s/Richard H. Abernethy
- -----------------------
Richard H. Abernethy Vice President and Director
/s/John A. Reed
- -----------------------
John A. Reed Vice President, Assistant Secretary and Director
/s/Joseph F. Bukofski
- -----------------------
Joseph F. Bukofski Vice President, Assistant Secretary and Director
/s/Robert A. Golden
- -----------------------
Robert A. Golden Director
/s/Mick Myers
- -----------------------
Mick Myers Director
/s/Ann Danielson
- -----------------------
Ann Danielson Assistant Vice President
/s/David J. Anderson
- -----------------------
David J. Anderson Chief Accounting Officer and Secretary
-32-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated 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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 270,564
<SECURITIES> 0
<RECEIVABLES> 720,438
<ALLOWANCES> 0
<INVENTORY> 50,000
<CURRENT-ASSETS> 0
<PP&E> 301,722
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,342,724
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 984,453
<TOTAL-LIABILITY-AND-EQUITY> 1,342,724
<SALES> 792,671
<TOTAL-REVENUES> 1,951,428
<CGS> 0
<TOTAL-COSTS> 1,105,110
<OTHER-EXPENSES> 178,211
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47,483
<INCOME-PRETAX> 846,318
<INCOME-TAX> 0
<INCOME-CONTINUING> 846,318
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 846,318
<EPS-PRIMARY> 3.77
<EPS-DILUTED> 3.77
</TABLE>
