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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
FORM 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ----- ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1995 Commission File Number 0-17989
PHOENIX HIGH TECH/HIGH YIELD FUND,
- --------------------------------------------------------------------------------
A CALIFORNIA LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 68-0166383
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2401 Kerner Boulevard, San Rafael, California 94901-5527
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 485-4500
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: Units of
Limited Partnership Interest
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
-----
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of December 31, 1995, 7,526 Units of Limited Partnership interest were
outstanding. No market exists for the Units of Partnership interest and
therefore there exists no aggregate market value at December 31, 1995.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
1995 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
PART I
Item 1. Business...................................................... 3
Item 2. Properties.................................................... 4
Item 3. Legal Proceedings............................................. 4
Item 4. Submission of Matters to a Vote of Security Holders........... 4
PART II
Item 5. Market for the Registrant's Securities and Related
Security Holder Matters....................................... 5
Item 6. Selected Financial Data....................................... 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 6
Item 8. Financial Statements and Supplementary Data................... 8
Item 9. Disagreements on Accounting and Financial Disclosure Matters.. 23
PART III
Item 10. Directors and Executive Officers of the Registrant............ 23
Item 11. Executive Compensation........................................ 24
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................... 24
Item 13. Certain Relationships and Related Transactions................ 25
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K...................................................... 25
Signatures............................................................. 26
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PART I
Item 1. Business.
General Development of Business.
Phoenix High Tech/High Yield Fund, a California limited partnership
(the "Partnership"), was organized on July 26, 1988. The Partnership was
registered with the Securities and Exchange Commission with an effective date of
November 10, 1988 and shall continue to operate until its termination date
unless dissolved sooner due to the sale of substantially all of the assets of
the Partnership or a vote of the Limited Partners. The Partnership will
terminate on December 31, 1999. The General Partner is Phoenix Leasing
Incorporated, a California corporation. The General Partner or its affiliates
also is or has been a general partner in several other limited partnerships
formed to invest in capital equipment and other assets.
The initial public offering was for 25,000 units of limited partnership
interest at a price of $1,000 per unit. The Partnership had the option of
increasing the public offering up to a maximum of 50,000 units. The Partnership
sold 7,526 units for a total capitalization of $7,526,000. Of the proceeds
received through the offering, the Partnership has incurred $967,837 in
organizational and offering expenses. The initial public offering was completed
on November 10, 1990.
From the initial formation of the Partnership through December 31,
1995, the total investments in equipment leases and financing transactions
(loans) approximate $7,394,000. The average initial firm term of contractual
payments from equipment subject to lease was 45.20 months, and the average
initial net monthly payment rate as a percentage of the original purchase price
was 2.95%. The average initial firm term of contractual payments from loans was
61.96 months. These leases and loans have been concentrated primarily in the
manufacturing and telecommunications industries.
Summary of Business Activities.
The Partnership has engaged in diverse activities in which the General
Partner has had considerable experience. These areas include leasing and
financing activities for venture capital-backed emerging growth companies,
financing and leasing activities for cable television system operators and
related businesses, and other general leasing and financing activities. Set
forth below is a summary of these activities.
Emerging Growth Company Activities (Venture Financing). One of the
major purposes of the Partnership is to lease and finance various types of
capital equipment, primarily to emerging growth companies. The types of
equipment in which the Partnership has invested include various types of high
technology equipment such as semiconductor production and test equipment,
general electronic production equipment, computer terminals, data processing
systems, computer communications equipment and medical equipment, as well as
office, manufacturing and other types of capital equipment. The Partnership has
also entered into arrangements to provide secured financings, including
financings of accounts receivable and inventories, to emerging growth companies.
The emerging growth companies with which the Partnership has
entered into leases or financing transactions are located throughout the United
States and its possessions and are engaged in a variety of businesses for the
provision of products or services. Such companies are in the start-up or early
phases of operation with, in most cases, at least one round of venture capital
debt or equity financing having been concluded prior to the Partnership's
investment.
Cable Television System Leasing and Financing (Cable Financing). The
other major purpose of the Partnership is to make secured loans to operators of
cable television systems for the acquisition, refinancing, construction, upgrade
and extension of such systems in the United States, its possessions and its
military bases. In addition, the Partnership has acquired cable television and
related equipment and leases such equipment to third parties.
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Loans to cable system operators are secured by a senior or
subordinated lien on the assets of the cable television system, its franchise,
contracts and related assets, including its subscriber list. Various types of
cable television and related equipment acquired by the Partnership and leased or
financed to third parties throughout the United States, its possessions and
military bases will be leased or financed on a long-term basis.
Several of the cable television system operators the Partnership
provided financing to have experienced financial difficulties. These
difficulties are believed to have been caused by several factors. Some of these
factors are: a significant reduction in the availability of debt from banks and
other financial institutions to finance the acquisition and operations,
uncertainties related to future government regulation in the cable television
industry and the economic recession in the United States. These factors have
resulted in a significant decline in the demand for the acquisition of cable
systems and have further caused an overall decrease in the value of many cable
television systems. As a result of the above, many of the Partnership's notes
receivable from cable television system operators have gone into default. The
result is that the Partnership has not received scheduled payments, has had to
grant loan extensions, has experienced an increase in legal and collection costs
and in some cases, has had to foreclose on the cable television system. The
impact of this has been a decrease in the overall return on the Partnership's
investments in such notes.
The Partnership has obtained an ownership interest in several cable
system joint ventures that it obtained through foreclosure. These cable systems
currently generate a positive monthly cash flow and provided cash distributions
to the Partnership during 1995 and 1994. The cable systems are managed and
operated by an affiliate of the General Partner.
Item 2. Properties.
The Partnership is engaged in the equipment leasing and financing
industry and as such, does not own or operate any principal plants, mines or
real property. The primary assets held by the Partnership are its investments in
leases and loans.
As of December 31, 1995, the Partnership owns equipment and has
outstanding loans to borrowers with an aggregate original cost of $2,555,000.
The equipment and loans have been made to customers located throughout the
United States. The following table summarizes the type of equipment owned or
financed by the Partnership.
Percentage of
Asset Types Purchase Price(1) Total Assets
----------- ----------------- -------------
(Amounts in Thousands)
Financing Related to Cable
Television Systems $1,550 61%
Capital Equipment Leased to
Emerging Growth Companies 1,005 39
------ ---
TOTAL $2,555 100%
====== ===
(1) These amounts include cost of equipment on financing leases of $854,000 and
original cost of outstanding loans of $1,550,000 at December 31, 1995.
Item 3. Legal Proceedings.
The Partnership is not a party to any pending legal proceedings which
would have a material adverse impact on its financial position.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of limited partners, through the
solicitation of proxies or otherwise, during the year covered by this report.
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PART II
Item 5. Market for the Registrant's Securities and Related Security
Holder Matters.
(a) The Registrant's limited partnership interests are not publicly
traded. There is no market for the Registrant's limited
partnership interests and it is unlikely that any will develop.
(b) Approximate number of equity security investments:
Number of Unit Holders
Title of Class as of December 31, 1995
-------------- -----------------------
Limited Partners 379
Item 6. Selected Financial Data.
Amounts in Thousands Except for Per Unit Amounts
------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total Income $ 209 $ 343 $ 770 $ 775 $ 795
Net Income (Loss) (558) 163 243 91 369
Total Assets 2,017 3,271 4,440 5,090 5,652
Distributions to Partners 816 1,362 779 780 775
Net income (loss) per Limited
Partnership Unit (73.40) 19.89 31.20 11.07 47.96
Distributions per Limited
Partnership Unit 107.28 179.21 102.53 102.60 101.95
The above selected financial data should be read in conjunction with
the financial statements and related notes appearing elsewhere in this report.
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Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
Phoenix High Tech/High Yield Fund (the Partnership) reported a net loss
of $558,000 during the year ended December 31, 1995, as compared to net income
of $163,000 and $243,000 during 1994 and 1993, respectively. The net loss during
1995 is mainly attributable to a provision for losses on receivables of $563,000
recognized during 1995. The decrease in net income during 1994, as compared to
1993, is attributable to a decrease in interest income from notes receivable.
Total revenues decreased by $134,000 during 1995, as compared to 1994.
This decrease was primarily the result of a decrease in earned income from
financing leases of $43,000 and the absence of a gain on sale of marketable
securities, as compared to the gain on sale of marketable securities of $64,000
during 1994. The increase in interest income from notes receivable of $32,000
during 1995, as compared to 1994, was the result of the payoffs of two notes
receivable from cable television system operators that had been classified as
impaired. The Partnership had suspended the accrual of interest income on these
notes. Upon the payoff, the proceeds were first applied to the outstanding
principal and accrued interest, with the excess recognized as interest income.
On one of these notes, the Partnership received a settlement payoff in excess of
the net carrying value, thereby recognizing interest income for the excess.
Total revenues decreased by $427,000 during 1994, as compared to 1993,
primarily due to decreases in interest income from notes receivable and rental
income. The primary factor contributing to the decrease of interest income from
notes receivable during 1994, when compared to 1993, is the Partnership's
remaining notes receivable being classified as impaired and the Partnership
suspending the recognition of interest income on such notes.
Total expenses increased by $587,000 during 1995, but decreased by
$347,000 during 1994, as compared to the same periods in the previous year. The
increase in expenses during 1995, as compared to 1994, is due to an increase in
the provision for losses on receivables. This provision was deemed necessary
pursuant to the review of the Partnership's remaining note receivable to a cable
television system operator. The decrease in total expenses during 1994, as
compared to 1993, is attributable to a decrease in depreciation expense and
provision for losses on receivables. As of December 31, 1994, a majority of the
equipment was fully depreciated.
Inflation affects the Partnership in relation to the current cost of
equipment placed on lease and the residual values realized when the equipment
comes off lease and is sold. During the last several years inflation has been
low, thereby having very little impact upon the Partnership.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from its
contractual obligations with lessees and borrowers to receive rental payments
and payments of principal and interest. As the initial lease terms of the leases
expire, the Partnership will re-lease or sell the equipment. The future
liquidity of the Partnership will depend upon the General Partner's success in
collecting scheduled contractual payments from its lessees and borrowers.
Additionally, the Partnership has investments in foreclosed cable systems joint
ventures from which it receives cash distributions of the excess cash generated
by operations. The Partnership will also receive a share of the cash when the
cable television system is sold.
The cash generated by leasing and financing activities was $699,000
during 1995, as compared to $641,000 and $1,240,000 during 1994 and 1993,
respectively. The increase in cash generated by leasing and financing activities
during 1995 was due to the increase in payments from notes receivable. During
1995, the Partnership received settlement payoffs from two defaulted notes
receivable. The decrease in cash generated by leasing and financing activities
during 1994, was due to a reduction in payments from notes receivable.
As of December 31, 1995, the Partnership owned equipment being held for
lease with an original cost of $89,000 and a net book value of $0, as compared
to $244,000 and $4,000 at December 31, 1994. The General Partner is actively
engaged, on behalf of the Partnership, in remarketing and selling the
Partnership's equipment as it becomes available.
The cash distributed to partners was $816,000, $1,362,000 and $779,000
during 1995, 1994 and 1993, respectively. In accordance with the Partnership
Agreement, the Limited Partners are entitled to 99% of the cash available for
distribution and the General Partner is entitled to 1%. As a result, the Limited
Partners received $808,000, $1,349,000 and $771,000 in distributions during
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1995, 1994 and 1993, respectively. The cumulative cash distributions to limited
partners are $5,557,000, $4,749,000 and $3,400,000 at December 31, 1995, 1994
and 1993, respectively. The General Partner received $8,000, $13,000 and $8,000
for its share of the cash distributions during 1995, 1994 and 1993,
respectively.
The Partnership made a quarterly distribution to partners on January
15, 1996 and plans to make another quarterly distribution to partners on April
15, 1996 at the same rate as the July 15, 1995 distribution. However, the
Partnership will switch to an annual distribution method thereafter, with the
first annual distribution to be made on January 15, 1997. The Partnership's
ability to distribute cash to partners is dependent upon the Partnership
receiving its contractual payments from notes receivable and financing leases.
If the cash generated by Partnership operations decrease below expectations, the
distributions to partners will be adjusted accordingly.
Cash generated from leasing and financing operations has been and is
anticipated to continue to be sufficient to meet the Partnership's continuing
operational expenses.
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Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
YEAR ENDED DECEMBER 31, 1995
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of Phoenix High Tech/High Yield Fund,
a California Limited Partnership:
We have audited the accompanying balance sheets of Phoenix High Tech/High Yield
Fund, a California Limited Partnership, as of December 31, 1995 and 1994, and
the related statements of operations, partners' capital and cash flows for each
of the three years in the period ended December 31, 1995. These financial
statements and the schedule referred to below are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Phoenix High Tech/High Yield
Fund, 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 three years in
the period ended December 31, 1995, in conformity with generally accepted
accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule listed in Item 14,
subsection (a) 2, is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, is fairly
stated in all material respects in relation to the basic financial statements
taken as a whole.
San Francisco, California, ARTHUR ANDERSEN LLP
January 19, 1996
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
BALANCE SHEETS
(Amounts in Thousands Except for Unit Amounts)
December 31,
1995 1994
---- ----
ASSETS
Cash and cash equivalents $ 655 $ 755
Accounts receivable (net of allowance for losses
on accounts receivable of $0 and $1 at
December 31, 1995 and 1994, respectively) 18 21
Notes receivable (net of allowance for losses on
notes receivable of $706 and $202 at December
31, 1995 and 1994, respectively) 581 1,685
Marketable securities, available-for-sale 149 --
Equipment on operating leases and held for lease
(net of accumulated depreciation of $56 and
$145 at December 31, 1995 and 1994, respectively) -- 4
Net investment in financing leases 311 541
Investment in joint ventures 266 181
Capitalized acquisition fees (net of accumulated
amortization of $260 and $214 at December 31,
1995 and 1994, respectively) 36 81
Other assets 1 3
------- -------
Total Assets $ 2,017 $ 3,271
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 44 $ 73
------- -------
Total Liabilities 44 73
------- -------
Partners' Capital:
General Partner (14) --
Limited Partners, 25,000 units authorized,
7,526 units issued and outstanding at
December 31, 1995 and 1994 1,838 3,198
Unrealized gains on marketable securities
available-for-sale 149 --
------- -------
Total Partners' Capital 1,973 3,198
------- -------
Total Liabilities and Partners' Capital $ 2,017 $ 3,271
======= =======
The accompanying notes are an integral
part of these statements.
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(Amounts in Thousands Except for Per Unit Amounts)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
INCOME
Rental income $ 12 $ 17 $ 161
Earned income, financing leases 75 118 188
Gain on sale of equipment 4 38 23
Interest income, notes receivable 85 53 339
Equity in earnings from joint ventures 2 10 26
Gain on sale of marketable securities -- 64 --
Other income 31 43 33
------- ------ ------
Total Income 209 343 770
------- ------ ------
EXPENSES
Depreciation and amortization 50 69 257
Lease related operating expenses -- 7 13
Management fees to General Partner 30 22 51
Reimbursed administrative costs
to General Partner 17 23 27
Provision for losses on receivables 563 (9) 88
Legal expense 81 33 51
General and administrative expenses 26 35 40
------- ------ ------
Total Expenses 767 180 527
------- ------ ------
NET INCOME (LOSS) $ (558) $ 163 $ 243
======= ====== ======
NET INCOME (LOSS) PER
LIMITED PARTNERSHIP UNIT $(73.40) $19.89 $31.20
======= ====== ======
ALLOCATION OF NET INCOME (LOSS):
General Partner $ (6) $ 13 $ 8
Limited Partners (552) 150 235
------- ------ ------
$ (558) $ 163 $ 243
======= ====== ======
The accompanying notes are an integral
part of these statements.
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands Except for Unit Amounts)
General
Partner's Limited Partners' Unrealized Total
Amount Units Amount Gains Amount
--------- ----------------- ---------- ------
Balance, December 31, 1992 $ -- 7,526 $ 4,933 $ -- $ 4,933
Distributions to partners ($102.53
per limited partnership unit) (8) -- (771) -- (779)
Net income 8 -- 235 -- 243
------- ------- ------- ------- -------
Balance, December 31, 1993 -- 7,526 4,397 -- 4,397
Distributions to partners ($179.21
per limited partnership unit) (13) -- (1,349) -- (1,362)
Net income 13 -- 150 -- 163
------- ------- ------- ------- -------
Balance, December 31, 1994 -- 7,526 3,198 -- 3,198
Distributions to partners ($107.28
per limited partnership unit) (8) -- (808) -- (816)
Unrealized gains on available-
for-sale securities -- -- -- 149 149
Net loss (6) -- (552) -- (558)
------- ------- ------- ------- -------
Balance, December 31, 1995 $ (14) 7,526 $ 1,838 $ 149 $ 1,973
======= ======= ======= ======= =======
The accompanying notes are an integral
part of these statements.
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
Operating Activities:
Net income (loss) $ (558) $ 163 $ 243
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 50 69 257
Gain on sale of equipment (4) (38) (23)
Equity in earnings from joint ventures (2) (10) (26)
Provision for losses on notes receivable 558 22 64
Provision for losses on accounts receivable 5 (31) 24
Gain on sale of marketable securities -- (64) --
Decrease (increase) in accounts receivable (2) 15 43
Increase (decrease) in accounts
payable and accrued expenses (29) 30 (114)
Decrease in other assets 2 -- 111
------- ------- -------
Net cash provided by operating activities 20 156 579
------- ------- -------
Investing Activities:
Principal payments, financing leases 227 298 344
Principal payments, notes receivable 452 187 317
Proceeds from sale of equipment 6 50 80
Proceeds from sale of marketable securities -- 64 --
Distributions from joint ventures 11 23 169
Investment in financing leases -- -- (507)
Payment of acquisition fees -- -- (19)
------- ------- -------
Net cash provided by investing activities 696 622 384
------- ------- -------
Financing Activities:
Distributions to partners (816) (1,362) (779)
------- ------- -------
Net cash used by financing activities (816) (1,362) (779)
------- ------- -------
Increase (decrease) in cash and cash equivalents (100) (584) 184
Cash and cash equivalents, beginning of period 755 1,339 1,155
------- ------- -------
Cash and cash equivalents, end of period $ 655 $ 755 $ 1,339
======= ======= =======
The accompanying notes are an integral
part of these statements.
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PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
Note 1. Organization and Partnership Matters.
Phoenix High Tech/High Yield Fund (the "Partnership"), was formed as a
California limited partnership on July 26, 1988. The initial Limited Partner
capital contribution of $1,000 was made by Phoenix Leasing Incorporated (the
"General Partner"). The Partnership's primary business objectives are: (1)
leasing and financing various types of capital equipment, primarily to and for
emerging growth companies and, in some cases, making secured loans to such
companies; (2) making secured loans to operators of cable television systems for
acquisition, refinancing, construction, upgrade and extension of cable
television systems; and (3) engaging in other types of leasing and financing
arrangements, including entering into equipment purchase and remarketing
agreements with various manufacturers of equipment and software available for
leasing or licensing by the Partnership.
The Partnership has also made investments in joint ventures with
affiliated partnerships managed by the General Partner for the purpose of
spreading the risks of financing or acquiring certain capital equipment leased
to third parties (see Note 6).
For financial reporting purposes, Partnership income is allocated as
follows: First, to the General Partner until the cumulative income so allocated
is equal to the cumulative distributions to the General Partner. Second, 1% to
the General Partner and 99% to the Limited Partners until the cumulative income
so allocated is equal to any cumulative Partnership loss and syndication
expenses, and the balance, if any, to the Limited Partners. All Partnership
losses are allocated 1% to the General Partner and 99% to the Limited Partners.
Syndication expenses are specially allocated one percent to the General Partner
and 99% to the Limited Partners.
Distributions. The General Partner intends to make quarterly
distributions throughout the life of the Partnership. Additionally, in order to
provide funds for Partnership investments, while still providing cash
distributions for Limited Partners to pay any resulting tax liability from the
Partnership, the General Partner anticipates that for investors admitted as
Limited Partners in 1989, the distributions made in 1990 through 1992, and for
investors admitted in 1990, the distributions made in 1991 through 1993 were in
an amount at least equal to approximately 40% of the taxable income of the
Partnership allocated to such Limited Partner for the prior year (that is, the
estimated tax liability attributed to an investment in the Partnership), or 4%
of such Limited Partner's original capital contribution, prorated for any
partial year, whichever was greater. The General Partner is entitled to receive
1% of all distributions until the Limited Partners have recovered their initial
capital contributions plus a return of 16% per annum, compounded annually, on
their unrecovered capital contributions (the "Priority Return"). Thereafter,
cash available for distribution will be distributed 20% to the General Partner
and 80% to the Limited Partners.
Bonus Distribution. Pursuant to the Partnership Agreement, upon the
15th of the calendar month following the earlier of (1) the Partnership raising
$10,000,000, or (2) the date 12 months from the date of release of funds from
the impound account, the Partnership made a bonus distribution to the Limited
Partners who have purchased units prior to that time. The bonus distribution was
calculated at 12% per annum (prorated for any partial year) of each Limited
Partner's capital account. In October of 1990, the General Partner made a
$571,000 capital contribution to the Partnership in an amount equal to the bonus
distribution and has acquired 571 units as a Limited Partner in return for such
contribution. Distributions pursuant to the bonus distribution will count
towards the Priority Return.
In the event the General Partner has a deficit balance in its capital
account at the time of Partnership liquidation, it will be required to
contribute the amount of such deficit to the Partnership.
As compensation for services performed in connection with the analysis
of equipment available to the Partnership and analysis of financing
transactions, the General Partner receives an acquisition and loan placement fee
equal to 4% of (a) the purchase price of equipment acquired by the Partnership,
(b) financing provided to businesses such as emerging growth companies or cable
television system operators, or (c) the purchase price of equipment leased by
manufacturers, the financing for which is provided by the Partnership, in each
case payable upon such acquisition or loan transaction, as the case may be. In
addition, as compensation for management services, the General Partner receives
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a management fee payable quarterly equal to 3.5% of the Partnership's gross
revenues. Such revenues include loan payments, rental receipts, proceeds from
the sale of equipment and other income (other than interest income from
short-term, temporary investments). Acquisition fees are amortized over the
average expected life of the assets, principally on a straight-line basis.
Schedule of compensation paid and distributions made to the General
Partner for the years ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Management fees $30 $22 $51
Acquisition fees 0 0 20
Cash distributions 8 13 8
--- --- ---
$38 $35 $79
=== === ===
Note 2. Summary of Significant Accounting Policies.
Leasing Operations. The Partnership's leasing operations consist of
financing and operating leases. The financing method of accounting for leases
records as unearned income at the inception of the lease, the excess of net
rentals receivable and estimated residual value at the end of the lease term,
over the cost of equipment leased. Unearned income is credited to income monthly
over the term of the lease on a declining basis to provide an approximate level
rate of return on the unrecovered cost of the investment. Direct costs of
consummating new leases are capitalized and included in the cost.
Under the operating method of accounting for leases, the leased
equipment is recorded as an asset at cost and depreciated on a straight-line
basis over the estimated useful life, ranging up to seven years.
The Partnership's policy is to review periodically the expected
economic life of its rental equipment in order to determine the probability of
recovering its undepreciated cost. Such reviews address, among other things,
recent and anticipated technological developments affecting high technology
equipment and competitive factors within the high technology marketplace.
Although remarketing rental rates are expected to decline in the future with
respect to some of the Partnership's rental equipment, such rentals are expected
to exceed projected expenses, including depreciation. When subsequent reviews of
the equipment portfolio indicate that rentals plus anticipated sales proceeds
will not exceed expenses in any future period, the Partnership revises its
depreciation policy as appropriate. As a result of such periodic reviews, the
Partnership recognized additional depreciation expense of $0, $0 and $96,000
($0, $0 and $12.82 per limited partnership unit) for the years ended December
31, 1995, 1994 and 1993, respectively.
Rental income for the year is determined on the basis of rental
payments due for the period under the terms of the lease. Maintenance and
repairs of the leased equipment are charged to expense.
Portfolio Valuation Methodology. The Partnership uses the portfolio
method of accounting for the net realizable value of the Partnership's equipment
portfolio.
Investments. Investments in net assets of the foreclosed cable systems
joint ventures reflect the Partnership's equity basis in the ventures. Under the
equity method of accounting, the original investment is recorded at cost and is
adjusted periodically to recognize the Partnership's share of earnings, losses,
cash contributions and cash distributions after the date of acquisition.
Investment in Marketable Securities Available for Sale. The Partnership
has investments in stock warrants in public companies that have been determined
to be available for sale. Available-for-sale securities are stated at their fair
market value, with the unrealized gains and losses reported in a separate
component of partners' capital.
Non-Cash Investing Activity. On September 20, 1995, the Partnership
foreclosed upon a nonperforming outstanding note receivable to a cable
television system operator to whom the Partnership, along with other affiliated
partnerships managed by the General Partner, had extended credit. The
partnerships' notes receivable were exchanged for interests (their capital
contribution), on a pro rata basis, in a newly formed joint venture owned by the
partnerships and managed by the General Partner. The amount of the outstanding
note receivable that was contributed to the joint venture was $94,000.
<PAGE>
Page 16 of 27
Financial Accounting Pronouncements. In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standard No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of," which requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing the review for
recoverability, the entity would estimate the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles that an entity expects to hold and use should be based on the fair
value of the asset. Statement No. 121 is effective for financial statements for
fiscal years beginning after December 15, 1995. The Partnership does not expect
the adoption of this statement to have a material impact on its financial
position and results of operations. The Partnership plans to adopt Statement No.
121 on January 1, 1996.
On January 1, 1995, the Partnership adopted Financial Accounting
Standards Board Statement No. 114, "Accounting by Creditors for Impairment of a
Loan," and Statement No. 118, "Accounting by Creditors for Impairment of a Loan
- - Income Recognition and Disclosures." Statement No. 114 requires that certain
impaired loans be measured based on the present value of expected cash flows
discounted at the loan's effective interest rate; or, alternatively, at the
loan's observable market price or the fair value of the collateral if the loan
is collateral dependent. Prior to 1995, the allowance for losses on notes
receivable was based on the undiscounted cash flows or the fair value of the
collateral dependent loans. At January 1, 1995, the adoption of Statements 114
and 118 had no effect on the Partnership's financial position or results of
operations.
Reclassification. Certain 1994 and 1993 amounts have been reclassified
to conform to the 1995 presentation.
Cash and Cash Equivalents. This includes deposits at banks, investments
in money market funds and other highly liquid short-term investments with
original maturities of less than 90 days.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Note 3. Accounts Receivable.
Accounts receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Lease payments $ 14 $ 4
General Partner and Affiliates 3 --
Property and sales taxes 1 10
Other -- 8
---- ----
18 22
Less: allowance for losses on
accounts receivable -- (1)
---- ----
Total $ 18 $ 21
==== ====
<PAGE>
Page 17 of 27
Note 4. Notes Receivable.
Notes receivable consist of the following at December 31:
1995 1994
---- ----
(Amounts in Thousands)
Notes receivable from cable television
system operators with interest ranging
from 14% to 18% per annum, receivable in
installments ranging from 59 to 96 months
through October 1997, collateralized by a
security interest in the cable system assets.
These notes have a graduated repayment
schedule followed by a balloon payment. $ 1,287 $ 1,887
Less: allowance for losses on notes receivable (706) (202)
------- -------
Total $ 581 $ 1,685
======= =======
The Partnership's notes receivable from cable television system
operators provide for a monthly payment rate in an amount that is less than the
contractual interest rate. The difference between the payment rate and the
contractual interest rate was added to the principal and therefore deferred
until the maturity date of the note. Upon maturity of the note, the original
principal and deferred interest is due and payable in full. Although the
contractual interest rates may be higher, due to a high degree of uncertainty
relating to the collection of the entire amount of the contractually owed
interest, the Partnership limited the amount of interest being recognized on its
performing notes receivable to the amount of the payments received, thereby
deferring the recognition of a portion of the deferred interest until such time
as management believes it will be realized.
Generally, notes receivable are classified as impaired and the accrual
of interest on such notes are discontinued when the contractual payment of
principal or interest has become 90 days past due or management has serious
doubts about further collectibility of the contractual payments. Any payments
received subsequent to the placement of the note receivable on to impaired
status will generally be applied towards the reduction of the outstanding note
receivable balance, which may include previously accrued interest as well as
principal. Once the principal and accrued interest balance has been reduced to
zero, the remaining payments will be applied to interest income.
At December 31, 1995, the recorded investments in notes that are
considered to be impaired under Statement 114 was $1,287,000 for which the
related allowance for losses is $706,000. The average recorded investment in
impaired loans during the year ended December 31, 1995 was approximately
$1,564,000.
During the year ended December 31, 1995, the Partnership received a
settlement on one of its notes receivable from a cable television system
operator which was considered to be impaired under Statement No. 114. The
Partnership received a partial recovery of $40,000 as a settlement which was
applied towards the $58,000 outstanding note receivable balance. The remaining
balance of $18,000 was written-off through its related allowance for loan
losses. The related allowance for loan losses for this note receivable was
provided for in a previous year in an amount equal to the carrying value of the
note. Upon receipt of the settlement of this note receivable, the Partnership
reduced the allowance for loan losses by $37,000 during the year ended December
31, 1995. This reduction in the allowance for loan losses was recognized as a
negative provision for loan losses during the period.
The Partnership received a settlement from another impaired note
receivable and foreclosed upon the assets of another note receivable from a
cable television system operator during the year ended December 31, 1995.
The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:
1995 1994
---- ----
(Amounts in Thousands)
Beginning balance $ 202 $ 180
Provision for losses 558 22
Write downs (54) --
----- -----
Ending balance $ 706 $ 202
===== =====
<PAGE>
Page 18 of 27
Note 5. Equipment on Operating Leases and Investment in Financing Leases.
Equipment on lease consists of capital equipment leased to emerging
growth and cable television companies subject to operating and financing leases.
The Partnership's equipment on operating leases is fully depreciated.
The Partnership has also entered into direct lease arrangements with
certain lessees concentrated in the following industries: 6% communications, 3%
retail and 91% manufacturing. Generally, it is the responsibility of the lessee
to provide maintenance on leased equipment. The General Partner administers the
equipment portfolio of leases acquired through the direct leasing program.
Administration includes the collection of rents from the lessees and remarketing
of the equipment.
The net investment in financing leases consists of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
Minimum lease payments to be received $ 352 $ 654
Estimated residual value of leased equipment
(unguaranteed) -- 3
Less: unearned income (41) (116)
----- -----
Net investment in financing leases $ 311 $ 541
===== =====
Minimum rentals to be received on noncancelable financing leases for
the years ended December 31 are as follows:
Financing Operating
--------- ---------
(Amounts in Thousands)
1996 ................................... $237 $ 4
1997 ................................... 115 --
1998 ................................... -- --
1999 ................................... -- --
2000 ................................... -- --
Thereafter ............................. -- --
---- ----
Total................................... $352 $ 4
==== ====
The net book value of equipment held for lease at December 31, 1995 and
1994 amounted to $0 and $4,000, respectively.
Note 6. Investment in Joint Ventures.
Foreclosed Cable Systems Joint Ventures
The Partnership owns an interest in foreclosed cable systems joint
ventures, along with other partnerships managed by the General Partner and its
affiliates. The Partnership foreclosed upon nonperforming outstanding notes
receivable to cable television operators to whom the Partnership, along with
other affiliated partnerships managed by the General Partner, had extended
credit. The partnerships' notes receivables were exchanged for interests (their
capital contribution), on a pro rata basis, in newly formed joint ventures owned
by the partnerships and managed by the General Partner. Title to the cable
television systems is held by the joint ventures. These investments are
accounted for using the equity method of accounting.
<PAGE>
Page 19 of 27
The joint ventures owned by the Partnership, along with their
percentage ownership is as follows:
Percentage
Joint Venture Ownership
------------- ----------
Phoenix Black Rock Cable J.V 2.45%
Phoenix Pacific Northwest J.V 19.82
Phoenix Glacier J.V.(1) 3.10
Phoenix Independence Cable, LLC 17.75
(1) cable system sold and joint venture closed during 1993.
<TABLE>
An analysis of the Partnership's net investment in foreclosed cable
systems joint ventures is as follows:
<CAPTION>
Net Investment Net Investment
at Beginning Equity in Equity in at End
Date of Period Contributions Earnings Distributions of Period
- ---- -------------- ------------- --------- ------------- --------------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year Ended
December 31, 1993 $ 337 $ 0 $ 26 $ 169 $ 194
======= ===== ====== ======= =======
Year Ended
December 31, 1994 $ 194 $ 0 $ 10 $ 23 $ 181
======= ===== ====== ======= =======
Year Ended
December 31, 1995 $ 181 $ 94 $ 2 $ 11 $ 266
======= ===== ====== ======= =======
</TABLE>
The aggregate combined financial information of the foreclosed cable
systems joint ventures as of December 31 and for the years then ended is
presented as follows:
COMBINED BALANCE SHEETS
ASSETS
December 31,
1995 1994
---- ----
(Amounts in Thousands)
Cash and cash equivalents $ 337 $ 201
Accounts receivable 60 69
Property, plant and equipment 2,628 2,222
Other 3 --
------ ------
Total Assets $3,028 $2,492
====== ======
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable $ 187 $ 132
Partners' capital 2,841 2,360
------ ------
Total Liabilities and Partners' Capital $3,028 $2,492
====== ======
<PAGE>
Page 20 of 27
COMBINED STATEMENTS OF OPERATIONS
INCOME
For the Years Ended December 31,
1995 1994 1993
---- ---- ----
(Amounts in Thousands)
Subscriber revenue $ 997 $ 910 $ 910
Gain on sale of cable system -- -- 477
Other income 16 11 14
------ ------ ------
Total Income 1,013 921 1,401
------ ------ ------
EXPENSES
Depreciation and amortization 233 212 214
Program services 288 230 262
Management fee to an affiliate
of the General Partner 45 40 90
General and administrative expenses 314 229 252
Provision for losses on accounts
receivable 10 12 9
------ ------ ------
Total Expenses 890 723 827
------ ------ ------
Net income before income taxes 123 198 574
Income tax benefit 24 35 33
------ ------ ------
Net Income $ 147 $ 233 $ 607
====== ====== ======
Phoenix Cable Management Inc. (PCMI), an affiliate of the General
Partner, provides day to day management services in connection with the
operation of the foreclosed cable systems joint ventures. The foreclosed cable
systems joint ventures will pay a management fee equal to four and one-half
percent of the System's monthly gross revenue for these services. Revenues
subject to a management fee at the joint venture level will not be subject to
management fees at the Partnership level.
Note 7. Accounts Payable and Accrued Expenses.
Accounts payable and accrued expenses consist of the following at
December 31:
1995 1994
---- ----
(Amounts in Thousands)
General Partner and affiliates $ 4 $40
Security deposits 12 12
Equipment lease operations 14 9
Other 14 12
--- ---
Total $44 $73
=== ===
Note 8. Income Taxes.
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the partners in their
individual income tax returns. Accordingly, no provision for such taxes has been
made in the accompanying financial statements of the Partnership.
<PAGE>
Page 21 of 27
The net difference between the tax basis and the reported amounts of
the Partnership's assets and liabilities is as follows at December 31:
Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
(Amounts in Thousands)
1995
- ----
Assets $2,017 $2,542 $ (525)
Liabilitites 44 30 14
1994
- ----
Assets $3,271 $3,455 $ (184)
Liabilities 73 73 --
Note 9. Related Entities.
The General Partner and its affiliates also are, or have been a general
partner in other limited partnerships, most of which are generally engaged in
the equipment leasing business, but some of which provide financing to emerging
growth companies and operators of cable television systems.
Note 10. Reimbursed Costs to the General Partner.
The General Partner incurs certain administrative costs, such as data
processing, investor and lessee communications, lease administration,
accounting, equipment storage and equipment remarketing, for which it is
reimbursed by the Partnership. These expenses incurred by the General Partner
are to be reimbursed at the lower of the actual costs or an amount equal to 90%
of the fair market value for such services.
The reimbursed administrative costs to the General Partner were
$17,000, $23,000 and $27,000 for the years ended December 31, 1995, 1994 and
1993, respectively. The equipment storage, remarketing and data processing costs
reimbursed to the General Partner during the years ended December 31, 1995, 1994
and 1993 were $0, $2,000 and $9,000, respectively.
In addition, the General Partner receives a management fee and an
acquisition fee for services rendered in connection with equipment acquisitions
(see Note 1).
Note 11. Net Income (Loss) and Distributions per Limited Partnership Unit.
Net income and distributions per limited partnership unit were based on
the Limited Partners' share of net income and distributions, and the weighted
average number of units outstanding of 7,526 for the years ended December 31,
1995, 1994 and 1993. For the purposes of allocating income (loss) and
distributions to each individual Limited Partner, the Partnership allocates net
income (loss) and distributions based upon each respective Limited Partner's
ending capital account balance.
Note 12. Fair Value of Financial Instruments.
During the year ended December 31, 1995, the Partnership adopted
Statement of Financial Accounting Standard No. 107, "Disclosures about Fair
Value of Financial Instruments," which requires disclosure of the fair value of
financial instruments for which it is practicable to estimate fair value. The
following methods and assumptions were used to estimate the fair value of each
class of financial instrument for which it is practicable to estimate that
value.
<PAGE>
Page 22 of 27
Cash and Cash Equivalents
The carrying amount of cash and cash equivalents approximates fair value because
of the short maturity of these instruments.
Notes Receivable
The fair value of notes receivable is estimated based on the lesser of the
discounted expected future cash flows using the current rates at which similar
loans would be made to borrowers with similar credit ratings, or the estimated
fair value of the underlying collateral. Please refer to footnote 4 for a
description of the Partnership's accounting policies on notes receivable which
contribute to the difference between the carrying amount and the fair value.
Marketable Securities
The fair values of investments in marketable securities are estimated based on
quoted market prices.
The estimated fair values of the Partnership's financial instruments at
December 31, 1995 are as follows:
Carrying
Amount Fair Value
------- ----------
(Amounts in Thousands)
Assets
Cash and cash equivalents $655 $655
Marketable securities 149 149
Notes receivable 581 672
Note 13. Subsequent Events.
In January 1996, cash distributions of $1,000 and $141,000 were made to
the General and Limited Partners, respectively.
<PAGE>
Page 23 of 27
Item 9. Disagreements on Accounting and Financial Disclosure Matters.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The registrant is a limited partnership and, therefore, has no
executive officers or directors. The general partner of the registrant is
Phoenix Leasing Incorporated, a California corporation. The directors and
executive officers of Phoenix Leasing Incorporated (PLI) are as follows:
GUS CONSTANTIN, age 58, is President, Chief Executive Officer and a
Director of PLI. Mr. Constantin received a B.S. degree in Engineering from the
University of Michigan and a Master's Degree in Management Science from Columbia
University. From 1969 to 1972, he served as Director, Computer and Technical
Equipment of DCL Incorporated (formerly Diebold Computer Leasing Incorporated),
a corporation formerly listed on the American Stock Exchange, and as Vice
President and General Manager of DCL Capital Corporation, a wholly-owned
subsidiary of DCL Incorporated. Mr. Constantin was actively engaged in marketing
manufacturer leasing programs to computer and medical equipment manufacturers
and in directing DCL Incorporated's IBM System/370 marketing activities. Prior
to 1969, Mr. Constantin was employed by IBM as a data processing systems
engineer for four years. Mr. Constantin is an individual general partner in four
active partnerships and is an NASD registered principal. Mr. Constantin is the
founder of PLI and the beneficial owner of all of the common stock of Phoenix
American Incorporated.
PARITOSH K. CHOKSI, age 42, is Senior Vice President, Chief Financial
Officer and Treasurer of PLI. He has been associated with PLI since 1977. Mr.
Choksi oversees the finance, accounting, information services and systems
development departments of the General Partner and its Affiliates and oversees
the structuring, planning and monitoring of the partnerships sponsored by the
General Partner and its Affiliates. Mr. Choksi graduated from the Indian
Institute of Technology, Bombay, India with a degree in Engineering. He holds an
M.B.A. degree from the University of California, Berkeley.
GARY W. MARTINEZ, age 45, is Senior Vice President of PLI. He has been
associated with PLI since 1976. He manages the Asset Management Department,
which is responsible for lease and loan portfolio management. This includes
credit analysis, contract terms, documentation and funding; remittance
application, change processing and maintenance of customer accounts; customer
service, invoicing, collection, settlements and litigation; negotiating lease
renewals, extensions, sales and buyouts; and management information reporting.
From 1973 to 1976, Mr. Martinez was a Loan Officer with Crocker National Bank,
San Francisco. Prior to 1973, he was an Area Manager with Pennsylvania Life
Insurance Company. Mr. Martinez is a graduate of California State University,
Chico.
BRYANT J. TONG, age 41, is Senior Vice President, Financial Operations
of PLI. He has been with PLI since 1982. Mr. Tong is responsible for investor
services and overall company financial operations. He is also responsible for
the technical and administrative operations of the cash management, corporate
accounting, partnership accounting, accounting systems, internal controls and
tax departments, in addition to Securities and Exchange Commission and other
regulatory agency reporting. Prior to his association with PLI, Mr. Tong was
Controller-Partnership Accounting with the Robert A. McNeil Corporation for two
years and was an auditor with Ernst & Whinney (succeeded by Ernst & Young) from
1977 through 1980. Mr. Tong holds a B.S. in Accounting from the University of
California, Berkeley, and is a Certified Public Accountant.
CYNTHIA E. PARKS, age 40, is Vice President, General Counsel, Assistant
Secretary and a Director of PLI. Prior to joining PLI in 1984, she was with GATX
Leasing Corporation, and had previously been Corporate Counsel for Stone
Financial Companies, and an Assistant Vice President of the Bank of America,
Bank Amerilease Group. She has a Bachelor's degree from Santa Clara University,
and earned her J.D. from the University of San Francisco School of Law.
HOWARD SOLOVEI, age 34, is Vice President, Finance, Assistant Treasurer
and a Director of PLI. He has been associated with PLI since 1984. Mr. Solovei's
principal activities are in the areas of arranging and managing the company's
banking relationships for its various corporations, partnerships and securitized
asset pools. Mr. Solovei is also involved in corporate financial planning and
various data processing-related projects. Mr. Solovei graduated with a B.S. in
Business from the University of California at Berkeley in 1984.
<PAGE>
Page 24 of 27
Neither the General Partner nor any Executive Officer of the General
Partner has any family relationship with the others.
Phoenix Leasing Incorporated or its affiliates and the executive
officers of the General Partner serve in a similar capacity to the following
affiliated limited partnerships:
Phoenix Leasing American Business Fund, L.P.
Phoenix Leasing Cash Distribution Fund V, L.P.
Phoenix Income Fund, L.P.
Phoenix Leasing Cash Distribution Fund IV
Phoenix Leasing Cash Distribution Fund III
Phoenix Leasing Cash Distribution Fund II
Phoenix Leasing Capital Assurance Fund
Phoenix Leasing Income Fund VII
Phoenix Leasing Income Fund VI
Phoenix Leasing Growth Fund 1982
Phoenix Leasing Income Fund 1981 and
Phoenix Leasing Income Fund 1977
Item 11. Executive Compensation.
<TABLE>
Set forth is the information relating to all direct remuneration paid
or accrued by the Registrant during the last year to the General Partner.
(A) (B) (C) (D)
<CAPTION>
Cash and cash- Aggregate of
Name of Individual Capacities in equivalent forms contingent forms
or persons in group which served of remuneration of remuneration
- ------------------- ------------- ----------------------------------------------------- ----------------
(C1) (C2)
Securities or property
Salaries, fees, directors' insurance benefits or
fees, commissions, and reimbursement, personal
bonuses benefits
-------------------------- -----------------------
(Amounts in Thousands)
<S> <C> <C> <C> <C>
Phoenix Leasing
Incorporated General Partner $30(1) $0 $0
== = =
</TABLE>
(1) consists of management fees.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) As of December 31, 1995, the following investors had a beneficial
ownership of more than 5% of the outstanding Limited Partnership
units:
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
Limited Partner Independent Life & Accident 1,000 units 13.29%
Insurance Company
One Independent Drive
Jacksonville, FL 32276
<PAGE>
Page 25 of 27
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- --------
Limited Partner Phoenix Leasing Incorporated 576.7 units 7.66%
2401 Kerner Boulevard
San Rafael, CA 94901
(b) The General Partner of the Registrant owns the equity securities
of the Registrant set forth in the following table:
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
General Partner Interest Represents a 1% interest in the 100%
Registrant's profits and
distributions, until the Limited
Partners have recovered their
capital contributions plus a
cumulative return of 16% per
annum, compounded quarterly,
on the unrecovered portion
thereof. Thereafter, the General
Partner will receive 20% interest
in the Registrant's profitS and
distributions.
Limited Partner Interest 576.7 units 7.66%
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page No.
--------
(a) 1. Financial Statements:
Report of Independent Public Accountants 9
Balance Sheets as of December 31, 1995 and 1994 10
Statement of Operations for the Years Ended
December 31, 1995, 1994 and 1993 11
Statements of Partners' Capital for the Years Ended
December 31, 1995, 1994 and 1993 12
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 13
Notes to Financial Statements 14-22
2. Financial Statement Schedules:
Schedule II - Valuation and Qualifying Accounts and Reserves 27
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
(b) Reports on Form 8-K:
No reports on Form 8-K were filed for the year ended December 31, 1995.
(c) Exhibits:
21. Additional Exhibits:
Balance Sheets of Phoenix Leasing Incorporated E21 1-9
27. Financial Data Schedule.
<PAGE>
Page 26 of 27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHOENIX HIGH TECH/HIGH YIELD FUND
(Registrant)
BY: PHOENIX LEASING INCORPORATED,
A CALIFORNIA CORPORATION
GENERAL PARTNER
Date: March 28, 1996 By: /S/ GUS CONSTANTIN
-------------- -------------------------
Gus Constantin, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/S/ GUS CONSTANTIN President, Chief Executive Officer and a March 28, 1996
- ---------------------- Director of Phoenix Leasing Incorporated --------------
(Gus Constantin) General Partner
/S/ PARITOSH K. CHOKSI Chief Financial Officer, March 28, 1996
- ---------------------- Senior Vice President --------------
(Paritosh K. Choksi) and Treasurer of
Phoenix Leasing Incorporated
General Partner
/S/ BRYANT J. TONG Senior Vice President, Financial March 28, 1996
- ---------------------- Operations of --------------
(Bryant J. Tong) (Principal Accounting Officer)
Phoenix Leasing Incorporated
General Partner
/S/ GARY W. MARTINEZ Senior Vice President of March 28, 1996
- ---------------------- Phoenix Leasing Incorporated --------------
(Gary W. Martinez) General Partner
/S/ HOWARD SOLOVEI Vice President, Finance March 28, 1996
- ---------------------- Assistant Treasurer and a --------------
(Howard Solovei) Director of Phoenix Leasing Incorporated
General Partner
/S/ MICHAEL K. ULYATT Partnership Controller March 28, 1996
- ---------------------- Phoenix Leasing Incorporated --------------
(Michael K. Ulyatt) General Partner
<PAGE>
<TABLE>
Page 27 of 27
PHOENIX HIGH TECH/HIGH YIELD FUND,
A CALIFORNIA LIMITED PARTNERSHIP
SCHEDULE II
(Amounts in Thousands)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
Classification Balance at Charged to Charged to Deductions Balance at
Beginning of Expense Revenue End of
Period Period
-------------- ------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993
Allowance for losses on accounts
receivable $ 23 $ 24 $ 0 $ 0 $ 47
Allowance for losses on notes
receivable 116 64 0 0 180
------ ----- ---- ------ ------
Totals $ 139 $ 88 $ 0 $ 0 $ 227
====== ===== ==== ====== ======
Year ended December 31, 1994
Allowance for losses on accounts
receivable $ 47 $ 0 $ 31 $ 15 $ 1
Allowance for losses on notes
receivable 180 22 0 0 202
------ ----- ---- ------ ------
Totals $ 227 $ 22 $ 31 $ 15 $ 203
====== ===== ==== ====== ======
Year ended December 31, 1995
Allowance for losses on accounts
receivable $ 1 $ 5 $ 0 $ 6 $ 0
Allowance for losses on notes
receivable 202 558 0 54 706
------ ----- ---- ------ ------
Totals $ 203 $ 563 $ 0 $ 60 $ 706
====== ===== ==== ====== ======
</TABLE>
Exhibit 21 - Page 1 of 9
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Phoenix Leasing Incorporated:
We have audited the accompanying consolidated balance sheets of Phoenix Leasing
Incorporated (a California corporation) and subsidiaries as of June 30, 1995 and
1994. These financial statements are the responsibility of the Company'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 consolidated balance sheets are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the balance sheets. 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 consolidated balance sheets referred to above present
fairly, in all material respects, the financial position of Phoenix Leasing
Incorporated and subsidiaries as of June 30, 1995 and 1994, in conformity with
generally accepted accounting principles.
San Francisco, California ARTHUR ANDERSEN LLP
September 8, 1995
<PAGE>
Exhibit 21 - Page 2 of 9
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30,
1995 1994
---- ----
Cash and cash equivalents $ 4,100,325 $ 5,880,532
Investments in marketable securities, at cost 7,298,771 2,923
Trade accounts receivable, net of
allowance for doubtful accounts of $237,458
and $167,837 at June 30, 1995 and 1994, respectively 913,437 748,958
Receivables from Phoenix Leasing Partnerships
and other affiliates 3,975,262 5,806,921
Notes receivable from related party 5,574,452 5,714,493
Equipment subject to lease 17,044,686 2,118,116
Investments in Phoenix Leasing Partnerships 1,577,419 685,130
Property and equipment, net of
accumulated depreciation and amortization
of $10,457,763 and $9,698,164 at June 30,
1995 and 1994, respectively 7,669,302 7,771,869
Other assets 2,366,983 1,722,230
----------- -----------
Total Assets $50,520,637 $30,451,172
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Short-term lines of credit $ -- $ 750,000
Warehouse line of credit 17,644,012 --
Payables to affiliates 5,832,765 2,812,408
Accounts payable and accrued expenses 2,829,490 2,261,982
Deferred revenue 1,059,736 869,638
Long-term debt 229,390 421,756
Deficit in investments in Phoenix
Leasing Partnerships 1,164,445 1,806,110
----------- -----------
Total Liabilities 28,759,838 8,921,894
----------- -----------
Minority Interests in Consolidated Subsidiaries 37,639 161,072
----------- -----------
Commitments and Contingencies (Note 12)
Shareholder's Equity:
Common stock, no par value, 30,000,000 shares
authorized, 5,433,600 shares issued and
outstanding at June 30, 1995 and 1994, respectively 20,369 20,369
Additional capital 5,508,800 5,508,800
Retained earnings 16,193,991 15,839,037
----------- -----------
Total Shareholder's Equity 21,723,160 21,368,206
----------- -----------
Total Liabilities and Shareholder's Equity $50,520,637 $30,451,172
=========== ===========
The accompanying notes are an integral
part of these financial statements.
<PAGE>
Exhibit 21 - Page 3 of 9
PHOENIX LEASING INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
Note 1. Summary of Significant Accounting Policies:
a. Organization - Phoenix Leasing Incorporated and subsidiaries (the
Company), a wholly owned subsidiary of Phoenix American Incorporated (PAI), is
engaged in the organization and management of partnerships which specialize in
the purchase and lease of primarily high-technology and data processing
equipment. The partnerships purchase equipment directly from equipment vendors
for lease to financial, commercial and industrial businesses and governmental
agencies. The partnerships also finance transactions in the areas of
microcomputers and emerging growth companies. The Company has also engaged in
similar leasing activities for its own account. The Company also provides
ongoing equipment maintenance services for end-users of high-technology data
processing equipment and graphic plotters.
b. Principles of Consolidation - The consolidated financial statements
include the accounts of Phoenix Leasing Incorporated and its wholly- or
majority-owned subsidiaries and subsidiaries over which the Company exerts
control. All significant intercompany accounts and transactions have been
eliminated in consolidation.
Except as otherwise explained below, minority interests in the net assets
and net income or loss of majority-owned subsidiaries are allocated on the basis
of the proportionate ownership interests of the minority owners.
Three of the consolidated subsidiaries are California limited partnerships
(the Partnerships) which are general partners of three of the Phoenix Leasing
Partnerships. As of June 30, 1995, the Company held a 50% general partner
ownership interest in two of the Partnerships and a 62.5% interest in the third.
Under the terms of the partnership agreements, profits and losses attributable
to acquisition fees paid to the Partnerships from Phoenix Leasing Partnerships
are allocated to the limited partner (the minority owner in the Partnerships) in
proportion to the limited partner's ownership interest. All remaining profits
and losses are allocated to the Company. Distributions to the partners are made
in accordance with the terms of the partnership agreement. The limited partner
of each of the Partnerships is Lease Management Associates, Inc., a Nevada
corporation controlled by an officer of the Company, who is the owner of PAI.
c. Management, Acquisition and Incentive Fee Income - As of June 30, 1995,
the Company is the corporate general partner in 17 actively operating limited
partnerships and manager of 13 actively operating joint ventures, all of which
own and lease equipment. Nine of the partnership agreements provide for payment
of management fees based on partnership revenues and acquisition fees when the
partnerships' assets are acquired. Seven of the limited partnership agreements
provide for payment of management fees and liquidation fees (see discussion
later in this footnote). One of the partnership agreements provides for a fee to
be paid to the Company based on a percentage of the equity proceeds received by
the partnership and a percentage of net income. Most of the joint venture
agreements provide for a payment of management fees based on joint venture
revenues.
These partnerships and the joint ventures are collectively referred to as
the "Phoenix Leasing Partnerships."
d. Investments - Investments in Phoenix Leasing Partnerships reflect the
Company's equity basis in the Phoenix Leasing Partnerships. Under the equity
method of accounting the original investment is recorded at cost and is adjusted
periodically to recognize the Company's share of earnings, losses and
distributions after the date of acquisition. The Company has adopted the equity
method of accounting on the basis of its control and significant influence over
the Phoenix Leasing Partnerships.
e. Liquidation Fee Income - The Company earns liquidation fees not to
exceed 15% of the net contributed capital from seven of the partnerships in
consideration for the services and activities performed in connection with the
disposition of the partnerships' assets. Management of the Company concluded
that the total liquidation fees to be earned over the life of these partnerships
may not be fully realizable. Accordingly, the Company recognizes liquidation fee
income when the fees are paid by the partnerships.
<PAGE>
Exhibit 21 - Page 4 of 9
The Company received and recognized $3,221,000 and $3,929,000 in liquidation
fees from these partnerships during the years ended June 30, 1995 and 1994,
respectively.
In three other partnerships, cash distributions received in excess of the
allocated cumulative net profits represent a liquidation fee which cannot
exceed, in the aggregate, 7.792% of the net contributed capital.
f. Lease Accounting - The Company's leasing operations consist of both
financing and operating leases. The finance method of accounting for leases
records as unearned income, at the inception of the lease, the excess of net
rentals receivable and estimated residual value over the cost of the leased
equipment. Unearned income is amortized monthly over the term of the lease on a
declining basis to provide an approximate level rate of return on the
unrecovered cost of the investment. Initial direct costs of originating new
leases are capitalized and amortized over the initial lease term.
Under the operating method of accounting for leases, the leased equipment
is recorded as an asset, at cost, and is depreciated on a straight-line basis
over its estimated useful life, ranging up to six years. Rental income
represents the rental payments due during the period under the terms of the
lease.
The Company is the lessor in leveraged lease agreements under which
computer equipment having an estimated useful life of 5 years was leased for
periods from 4-5 years. The Company is the equity participant and equipment
owner. A portion of the purchase price was furnished by third-party financing in
the form of long-term debt that provides no recourse to the Company and is
secured by a first lien on the financed equipment.
g. Property and Equipment - Property and equipment which the Company holds
for its own use are recorded at cost and depreciated on a straight-line basis
over estimated useful lives ranging up to 45 years.
h. Income Taxes - The Company is included in consolidated and combined tax
returns filed by PAI.
i. Deferred Revenue - Deferred revenue is the result of selling maintenance
contracts which provide service over a specific period of time. Deferred revenue
is amortized on a straight-line basis over the service period not to exceed 5
years.
j. Investments in Marketable Securities - Investments in marketable
securities, which will be held to maturity, are stated at cost and consist
primarily of United States government obligations. Interest is recognized when
earned.
k. Reclassification - Certain 1994 balances have been reclassified to
conform to the 1995 presentation.
Note 2. Receivables from Phoenix Leasing Partnerships and Other Affiliates:
Receivables from Phoenix Leasing Partnerships and other affiliates consist
of the following:
June 30,
1995 1994
---- ----
Management fees ................................... $ 330,158 $ 846,027
Acquisition fees .................................. 102,994 514,685
Other receivables from Phoenix Leasing Partnerships 3,535,110 3,828,069
Receivable from PAI ............................... -- 483,800
Other receivables from corporate affiliates ....... 7,000 134,340
---------- ----------
$3,975,262 $5,806,921
========== ==========
Note 3. Investments in Phoenix Leasing Partnerships:
The Company records its investments in Phoenix Leasing Partnerships under
the equity method of accounting. The ownership interest percentages vary,
ranging from .5% up to 25%. As general partner, the Company has complete
authority in, and responsibility for, the overall management and control of each
partnership, which includes responsibility for supervising partnership
acquisition, leasing, remarketing and sale of equipment. Distributions of cash
from the partnerships are made at the discretion of the general partner;
historically, a significant portion of the partnerships' earnings has been
distributed annually.
A shareholder of PAI and officers of the Company also have general and
limited partner interests in several of the partnerships.
<PAGE>
Exhibit 21 - Page 5 of 9
The activity in the investments in Phoenix Leasing Partnerships is as
follows:
Year Ended June 30,
1995 1994
---- ----
Balance, beginning of year ................. $(1,120,980) $ (945,797)
Additional investments .................... 688,615 --
Equity in earnings ........................ 2,412,056 1,213,974
Cash distributions ........................ (1,566,717) (1,389,157)
----------- -----------
Balance, end of year ....................... $ 412,974 $(1,120,980)
=========== ===========
The Company's total investments in Phoenix Leasing Partnerships are
comprised of investments in certain partnerships which are subject to
fluctuations due to partnerships' performances and timing of cash distributions.
At times the investment in those partnerships will be a deficit.
Certain of the partnership agreements requires the Company to restore any
deficit in its capital account to zero at the dissolution of the partnership.
This deficit is a result of cash distributions received and losses allocated to
the Company. The Company has determined that in certain partnerships it will be
unlikely that the deficit investment will reverse and as a result during the
year ended June 30, 1993 the Company elected to make capital contributions prior
to partnership dissolution totaling $2,028,733. As of April 1, 1992, the Company
elected to forgo any future cash distributions from, and will not record its
share of future earnings generated from the operations of, one of these
partnerships. The Company has deferred any future cash distributions from two
other partnerships. The Company believes that it would be likely that any future
cash distributions received from these partnerships would have to be paid back
at the dissolution of the partnerships. The Company will continue to record fee
income earned from the management of, and acquisition of equipment for these
partnerships.
The aggregate positive investment and aggregate deficit investment balances
are presented separately on the balance sheets as of June 30, 1995 and 1994.
The partnerships own and lease equipment. All debt of the partnerships is
secured by the equipment and is without recourse to the general partners. The
unaudited financial statements of the partnerships reflect the following
combined, summarized financial information as of June 30, 1995 and for the
twelve months then ended:
Assets ..................................... $215,090,000
Liabilities ................................ 39,956,000
Partners' Capital .......................... 175,134,000
Revenue .................................... 62,093,000
Net Income ................................. 18,280,000
Note 4. Equipment Subject to Lease:
Equipment subject to lease includes the Company's investments in leveraged
leases, investments in financing leases and notes receivable.
Equipment subject to lease consists of the following at June 30:
1995 1994
---- ----
Leverage leases ............................ $ 1,696,703 $ 1,990,343
Investment in financing leases ............. 13,284,177 --
Notes receivable ........................... 2,063,806 127,773
----------- -----------
$17,044,686 $ 2,118,116
=========== ===========
<PAGE>
Exhibit 21 - Page 6 of 9
Leverage Leases:
The Company's net investment in leveraged leases is composed of the
following elements:
June 30, June 30,
1995 1994
---- ----
Rental receivable (net of principal and interest on the
nonrecourse debt) ....................................$ -- $ --
Estimated residual value of leased assets ............. 2,759,783 3,268,772
Less: Unearned and deferred income .................... (1,063,080) (1,278,429)
----------- -----------
Investment in leveraged leases ........................ 1,696,703 1,990,343
Less: Deferred taxes arising from leveraged leases .... (2,960,190) (2,773,840)
----------- -----------
Net investment in leveraged leases ....................$(1,263,487)$ (783,497)
=========== ===========
Investment in Financing Leases:
The Company has entered into direct lease arrangements with companies
engaged in the development of technologies and other growth industry businesses
operating in different industries located throughout the United States.
Generally, it is the responsibility of the lessee to provide maintenance on
leased equipment.
The Company's net investment in financing leases consists of the following:
June 30,
1995
----
Minimum lease payments to be received ....... $ 17,731,628
Less: unearned income ....................... (4,447,451)
------------
Net investment in financing leases .......... $ 13,284,177
============
Minimum rentals to be received on noncancellable financing leases for the
years ended June 30, are as follows:
1996 ........................................ $ 4,478,150
1997 ........................................ 4,502,090
1998 ........................................ 4,422,824
1999 ........................................ 2,829,532
2000 ........................................ 1,475,565
2001 and thereafter ......................... 23,467
-----------
Total .................................... $17,731,628
===========
Notes Receivable:
Notes receivable for the years ended June 30, are as follows:
1995 1994
---- ----
Notes receivable from emerging
growth and other companies with stated
interest ranging from 10% to 18% per annum
receivable in installments ranging from
36 to 60 months, collateralized by
the equipment financed ..................... $2,063,806 $ 127,773
========== ==========
Note 5. Property and Equipment:
Major classes of property and equipment are as follows:
<PAGE>
Exhibit 21 - Page 7 of 9
June 30,
1995 1994
---- ----
Land .................................... $ 1,077,830 $ 1,077,830
Buildings ............................... 7,345,648 7,336,424
Office furniture, fixtures and equipment 8,259,319 7,968,786
Other ................................... 766,975 534,303
------------ ------------
17,449,772 16,917,343
Less accumulated depreciation and
amortization (10,457,763) (9,698,164)
Inventory held for resale ............... 677,293 552,690
------------ ------------
Net Property and Equipment .............. $ 7,669,302 $ 7,771,869
============ ============
PAI owns its own headquarters building in San Rafael, California. The
Company paid $7,749,476 to purchase the land and construct the building. The
cost of construction was paid for with a combination of $2,749,476 in cash from
the Company's operations and a $5,000,000 advance from PAI. The $5,000,000
advance is included as a reduction in receivable from Phoenix Leasing
Partnerships and other affiliates. PAI has pledged the market value of the
building as security for a $5,000,000 Industrial Revenue Bond ("IDB") which PAI
has with the City of San Rafael, California. The principal of the IDB is payable
in a lump sum payment on October 1, 2004. The Company paid $206,798 and $156,129
in interest payments related to the IDB during the year ended June 30, 1995 and
1994, respectively.
As of June 30, 1995, a portion of the Company's headquarters has been
leased to third parties. The remaining lease term is for 2 years and the minimum
lease payments receivable are as follows:
1996 .......................................... $537,882
1997 .......................................... 362,901
--------
Total ...................................... $900,783
========
Note 6. Investments in Marketable Securities:
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 115 - Accounting for Certain
Investments in Debt and Equity Securities. The Company adopted this statement on
July 1, 1994. This pronouncement prescribes specific accounting treatment for
securities based on their classification as either held-to- maturity securities,
trading securities or available-for-sale securities, as defined in the
statement. All of the Company's investments meet the definition of
held-to-maturity securities and, accordingly, are reported at amortized costs.
The Company holds $7,000,000 face value U.S. Treasury Notes with the
contractual maturities of these debt securities as of June 30, 1995 as follows:
Amortized Estimated
Costs Fair Value
----- ----------
Due in one year or less ................... $4,202,115 $4,214,051
Due in one through five years ............. 3,096,656 3,142,908
---------- ----------
Total debt securities ..................... $7,298,771 $7,356,959
========== ==========
Note 7. Short-Term and Warehouse Lines of Credit:
To provide interim financing for equipment and working capital needs, the
Company executes lines of credit which consist of short-term notes with banks
with interest rates equal to the prime rate or the banks' index rate. All lines
of credit are renewable annually at the banks' option.
As of June 30, 1995, the Company, through PAI, had access to one short-term
line of credit totaling $2.5 million all of which was available for borrowing at
June 30, 1995. Draw downs under this credit line are secured by the Company's
receivable from Phoenix Leasing Partnerships.
<PAGE>
Exhibit 21 - Page 8 of 9
In addition, the Company has two secured short-term warehouse lines of
credit totaling $35 million, which are used to provide interim financing for the
acquisition of equipment and the financing of notes receivable. As of June 30,
1995, $17.6 million of these lines have been drawn down. The draw downs under
these lines are collateralized by investments in financing leases and notes
receivable included in equipment subject to lease. The interest rate is tied to
the IBOR (Eurodollar) rate. The initial commitment period for these lines of
credit is 18 months and may be extended to 36 months at the discretion of the
bank. Principal payments are based on the lesser of the aggregate payments
received by the Company on its leases and notes receivable or the aggregate
principal and interest amount outstanding on the payment date of the credit
line.
In connection with the Company's lines of credit, various financial ratios
and other covenants must be maintained. The Company has guaranteed its right,
title and interest in certain of its assets and the future receipts from these
assets in order to secure payment and performance of these credit lines.
Additional information relating to the Company's short-term bank lines
follows:
1995 1994
---- ----
Balance at June 30 ......................... $17,644,012 $ 750,000
Maximum amount outstanding ................. 17,644,012 2,500,000
Average amount outstanding ................. 2,522,340 1,457,413
Weighted average interest rate during
the period 7.9% 6.2%
Note 8. Long-Term Debt:
Long-term debt consists of the following:
June 30,
1995 1994
---- ----
Mortgage payable at varying interest
rates with an initial rate of 8.75%
secured by a first deed of trust on
real property with a cost of $250,000.
Note is amortized over 83 months with
monthly payments of $559 with a final
payment of $122,151 ............................. $160,944 $167,650
Note payable at 9.75% secured by
computer equipment with a cost of
$668,994. Note is amortized over 46
months with monthly payments of $16,887 ......... 68,446 254,106
-------- --------
Total long-term debt ............................. $229,390 $421,756
======== ========
The aggregate long-term debt maturities for the fiscal years ended June 30,
are as follows:
1996 ............................................. $ 74,920
1997 ............................................. 6,706
1998 ............................................. 6,706
1999 ............................................. 6,706
2000 ............................................. 6,706
2001 and thereafter .............................. 127,646
--------
Total ......................................... $229,390
========
Note 9. Profit Sharing Plan:
The Company has a profit sharing plan covering substantially all employees
who meet certain age and service requirements. Contributions to the plan by the
Company are made at the discretion of the board of directors. The profit sharing
expense was $600,000 and $500,000 for the years ended June 30, 1995 and 1994,
respectively.
<PAGE>
Exhibit 21 - Page 9 of 9
Note 10. Leased Facilities:
The Company leases office and warehouse space in various parts of the
country and had annual rental expense of approximately $402,000 and $424,000 for
the years ended June 30, 1995 and 1994, respectively.
Note 11. Transactions with Related Parties:
The Company provides an interest bearing line of credit totaling $6,000,000
to PAI's controlling shareholder which is secured by common stock of Phoenix
Precision Graphics, Inc. (an unaffiliated Nevada corporation). As of June 30,
1995 and 1994, $4,837,814 and $2,002,346 of this line of credit has been drawn
down and is included in notes receivable from related party. As of June 30, 1995
and 1994, Phoenix Precision Graphics is in a start-up mode and has cumulative
losses of $5,959,708 and $3,129,240, respectively.
The Company provided an interest bearing line of credit totaling $1,000,000
to PAI's controlling shareholder which was secured by common stock of Phoenix
Communications Incorporated and Phoenix Communications - LD, Inc. (unaffiliated
Nevada corporations). As of June 30, 1994, $858,133 of this line of credit had
been drawn down and is included in notes receivable from related party. This
note was paid in full on October 17, 1994.
The Company provided two interest bearing lines of credit each totaling
$5,000,000 to PAI's controlling shareholder which were secured by common stock
of Phoenix Fiberlink Incorporated and Phoenix Fiberlink II, Inc. (unaffiliated
Nevada corporations). As of June 30, 1994, $2,854,014 of these lines of credit
had been drawn down and are included in notes receivable from related party.
These notes were paid in full on October 17, 1994.
The Company provides an interest bearing line of credit to PAI's
controlling shareholder, which is secured by common stock of Phoenix Fiberlink
Inc. (an unaffiliated Nevada Corporation). As of June 30, 1995, $736,638 of this
line of credit has been drawn down and is included in notes receivable from
related party.
The Company earned a management fee from affiliates of $678,947 and
$325,624 for the years ended June 30, 1995 and 1994, respectively. This
management fee is included in Fees from Phoenix Leasing Partnerships and
affiliates.
The Company paid an affiliate an asset management fee of $1,026,714 and
$815,563 for the years ended June 30, 1995 and 1994, respectively. These asset
management fees are included in equipment lease operations, maintenance,
remarketing and administrative fees.
Note 12. Commitments and Contingencies:
The Company has entered into agreements which contain specific purchase
commitments. The Company may satisfy these commitments by purchasing equipment
for its own account or by assigning equipment purchases to its affiliated
partnerships. At June 30, 1995 the Company anticipates being able to satisfy its
future obligations under the agreements and intends to assign most of the
purchases under the agreements to its affiliated partnerships.
The Company enters into commitments to purchase and sell high-technology
equipment on behalf of a corporate affiliate. The Company is reimbursed for
these services.
The Company is party to legal actions which arise as part of the normal
course of its business. The Company believes, after consultation with counsel,
that it has meritorious defenses in these actions, and that the liability, if
any, will not have a material adverse effect on the financial position of the
Company.
<TABLE> <S> <C>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 655
<SECURITIES> 149
<RECEIVABLES> 1,305
<ALLOWANCES> 706
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 56
<DEPRECIATION> 56
<TOTAL-ASSETS> 2,017
<CURRENT-LIABILITIES> 0
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0
0
<COMMON> 0
<OTHER-SE> 1,973
<TOTAL-LIABILITY-AND-EQUITY> 2,017
<SALES> 0
<TOTAL-REVENUES> 209
<CGS> 0
<TOTAL-COSTS> 767
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<LOSS-PROVISION> 563
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