<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934 [Fee Required]
For the Fiscal Year ended December 31, 1996
Commission File Number 33-19038
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(Exact name of registrant as specified in its charter)
MISSOURI 43-1507816
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6300 LAMAR P.O. BOX 29217 SHAWNEE MISSION, KANSAS 66201-9217
(Address principal executive offices)
Registrant's telephone number, including area code (913) 236-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on
which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Units of Limited Partnership Interest
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 such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
State the aggregate market value of the voting stock held by
non-affiliates of the registrant.
Not applicable, since securities are non-voting.
<PAGE>
Part I
Item 1. Business
Pershing Lease Income Limited Partnership II (the "Partnership") is a
limited partnership organized under the provisions of the Missouri
Revised Uniform Limited Partnership Act on February 24, 1989. As of
December 31, 1996, the Partnership consisted of a General Partner and
1,254 Limited Partners owning 24,137 Units of limited partnership
interest of $500 each (the "Units"), except that employees of the
General Partner and employees and securities representatives of the
affiliates purchased Units for a net price of $460 per Unit, and the
Partnership incurred no obligation to pay any sales commissions with
respect to such sales. The Units were sold commencing July 10, 1989,
pursuant to a Registration Statement on Form S-1 under the Securities
Act of 1933. As set forth more fully at Item 10 of this Report, the
General Partner is Waddell & Reed Leasing, Inc., a Missouri
corporation.
The Partnership was organized to engage in the business of acquiring
diversified types of equipment and leasing such equipment to others on
a short-term basis under operating leases. The Partnership's principal
objectives are:
1. To provide quarterly distributions of cash to the Limited
Partners from leasing revenues and from the proceeds or sale of other
disposition of Partnership Equipment; and
2. To maintain equipment residual values for ultimate sale or other
disposition.
The Partnership was formed primarily for investment purposes and not as
a "tax shelter".
The life of the Partnership shall terminate on December 31, 2007,
unless sooner dissolved or terminated as provided in Section 11 of the
Amended Agreement of Limited Partnership.
The Partnership had a total of thirteen closings. The closings
occurred on November 1, 1989, December 11, 1989, January 9, 1990,
February 9, 1990, March 9, 1990, April 10, 1990, May 9, 1990, June 11,
1990, July 11, 1990, August 9, 1990, September 12, 1990, October 10,
1990 and November 1, 1990 with subscribers purchasing 6,887, 1,987,
2,264, 1,293, 904, 1,241, 1,071, 1,461, 1,114, 1,314, 2,050, 672, and
1,879 units, respectively, being admitted on such dates.
Total equipment purchased through December 31, 1996 was $12,280,663
including acquisition fees. The Partnership has sold $7,917,580 of
equipment as of December 31, 1996 leaving $4,363,083 invested in
equipment. At the end of 1996, there was one lease in place with one
lessee. The acquisition of these leases and equipment is described
more fully in Item 2 of this Report and Notes 1 and 2 to the financial
statements included in Item 8.
<PAGE>
Under the Amended Limited Partnership Agreement, the General Partner,
Waddell & Reed Leasing, Inc., is solely responsible for the management
of the Partnership's business. Waddell & Reed Leasing, Inc. is a
wholly owned subsidiary of Waddell & Reed, Inc. and was incorporated in
Missouri in October 1987 to serve as the General Partner, and to manage
and control the business and affairs, of the Partnership.
The General Partner has also entered into an agreement dated as of
February 15, 1989 (the "Agency Agreement") with NEMLC Leasing
Corporation (the "Agent") which was acquired by BOT Service
Corporation, a wholly owned subsidiary of The Bank of Tokyo Trust
Company which is a subsidiary of The Bank of Tokyo Limited. Pursuant
to the Agency Agreement, the Agent will assist the General Partner in
performance of certain of its responsibilities on behalf of the
Partnership, including identification, evaluation and negotiation of
specific equipment investments suitable for the Partnership, management
of the Equipment while it is under lease and remarketing of equipment
coming off lease.
The Partnership's investments in capital equipment are and will
continue to be subject to various risk factors. The principal business
risk associated with ownership and operation of the equipment is the
uncertainty of keeping all of the equipment fully leased at rentals
which, after payment of operating expenses and debt service on
Partnership borrowings, provide, together with any anticipated sale
proceeds or salvage value, an acceptable rate of return. Other risk
factors include:
1. Technological and economic equipment obsolescence, physical
deterioration and malfunction, risks attendant upon defaults by
lessees and credit losses.
2. Residual values of equipment. The Partnership's return on its
investment in equipment will depend in part upon the continuing
value of such equipment, which in turn depends among other things
upon (1) the quality of the equipment; (2) the condition of the
equipment; (3) the timing of the equipment's acquisition; (4) the
demand for used equipment; (5) the cost of comparable new
equipment; (6) the technological obsolescence of the equipment;
(7) the General Partner's ability to forecast technological
changes which may reduce the value of equipment; and (8) market
factors.
3. Competition from full payout lessors. In connection with
operating leases, the Partnership will encounter considerable
competition from those offering full payout leases, which are
written for a longer term and a lower rate than the Partnership's
operating leases will offer.
<PAGE>
4. Competition from manufacturers. Leases offered by the
Partnership will compete with operating leases and full payout
leases offered by the manufacturers in their lease programs. In
addition to attractive financial terms, manufacturers may also
provide certain ancillary services which the Partnership cannot
offer directly, such as maintenance service (including possible
equipment substitution rights), warranty services and trade-in
privileges.
5. Other competition. There are numerous other potential investors,
including limited partnerships organized and managed similarly to
the Partnership, seeking to purchase equipment subject to either
operating leases or full payout leases, many of which will have
greater financial resources than the Partnership and more
experience than the General Partner. The Partnership will
compete in the leasing marketplace with many non-manufacturing
firms, including other equipment dealers, brokers and leasing
companies, as well as with financial institutions.
6. Changes in technology. The General Partner intends to establish
lease rates to the Partnership's lessees which take into account
the risk of technological advances which may reduce the value of
equipment owned by the Partnership. However, the introduction of
an entirely new technology could lead to a radical reduction in
the value of certain equipment and make such Equipment difficult to
re-lease.
The Partnership owned three primary types of equipment during 1996; (1)
aircraft; (2) mining equipment; and (3) forklifts and leased the
equipment to corporations under operating leases. Rental income
generated in 1996 from the three equipment types was $29,000, $24,619,
and $28,403, respectively.
<PAGE>
Item 2. Properties.
At December 31, 1996, the Partnership owned capital equipment, with an
original cost basis of $4,363,083. There was one lease in effect for
equipment with a cost basis of $140,365. All purchases of capital
equipment were subject to a 4.75% acquisition fee paid to the General
Partner.
Item 3. Legal Proceedings.
There are no material pending legal proceedings to which the
Partnership is a party or of which any of its equipment or leases is
the subject.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
<PAGE>
Part II
Item 5. Market for the Partnership's Securities and Related Security
Holder Matters.
(a) Market Information
The Partnership's outstanding securities consist of Units of Limited
Partnership Interest ("Units) which were sold for $500 each. As of
December 31, 1996, 24,137 Units had been sold to the public at a price
of $500 per Unit (except for 97 Units which were sold for a net price
of $460 per Unit to employees of affiliates of the General Partner and
is securities representatives of its affiliates).
There is no public market for the Units, and it is not anticipated that
such a public market will develop.
(b) Approximate Number of Security Holders
Number of Number of Units
Unit holders as of
Title of Class as of 12/31/96 12/31/96
Units of Limited
Partnership
Interest 1,257 24,137
(c) Dividend History and Restrictions
During the year ended December 31, 1990 and the eleven months ended
December 31, 1989, the Partnership had an initial closing and twelve
subsequent closing admitting partners holding a total of 24,137 units.
The final admission date to admit partners into the partnership was
November 1, 1990. Pursuant to Section 8 of the Amended Limited
Partnership Agreement, the Partnership's Distributable Cash from
Operations for each year will be determined and will be distributed to
the Partners. The Partnership distributions were:
Distributions Distributions
To The To The
Limited Partners General Partner
1990 $ 701,096 $ 36,900
1991 1,266,166 66,640
1992 1,274,433 67,076
1993 1,274,434 67,075
1994 1,593,042 83,844
1995 2,437,837 46,427
1996 1,104,268 16,574
The Partnership did not make a distribution in 1989.
<PAGE>
"Cash from Operations" means the net cash provided by the Partnership's
normal operations after the general expenses and current liabilities of
the Partnership (other than the equipment management fee) are paid, as
reduced by any reserves for working capital and contingent liabilities
to the extent deemed reasonable by the General Partner, and increased
by any portion of such reserves then deemed by the General Partner not
to be required for Partnership operations.
Each distribution of Distributable Cash from Operations of the
Partnership shall be made 95% to the Limited Partners and 5% to the
General Partner. For rendering services in connection with the normal
operations of the Partnership, the Partnership will pay to the General
Partner a partnership management fee equal to 5% of the cash received
from rents.
Any distributable cash from sales or refinancing will be distributed
99% to the Limited Partners and 1% to the General Partner until Payout.
Payout is the time when the aggregate amount of all distributions to
the Limited Partners of Distributable Cash from Operations and of
Distributable Cash from Sales or Refinancing equal the aggregate amount
of the Limited Partners' original Invested Capital plus a cumulative 8%
annual return on their aggregate unreturned Invested Capital. After
payout has occurred, any distributable cash from sales or refinancing
will be distributed 15% (plus an additional 1% for each 1% by which the
total of all Limited Partners' original capital contributions actually
paid or allocated to the Partnership's investment in equipment exceeds
the greater of (i) 80% of the gross proceeds of the Partnership's
offering of Units, reduced by .0625% for each 1% leverage encumbering
Partnership equipment, or (ii) 75% of the gross proceeds of such
offering) to the General Partner, and the remainder to the Limited
Partners.
Any Distributable Cash from Operations will be distributed within 60
days after the completion of each of the first three fiscal quarters of
each Partnership fiscal year, and within 120 days after the completion
of each fiscal year, beginning after the first full fiscal quarter
following the Partnership's first closing date. Each such distribution
will be described in a statement sent to the Limited Partners.
<PAGE>
Items 6. Selected Financial Data.
The following table sets forth selected financial information regarding
the Partnership's financial position and operating results. This
information should be read in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations, and
Financial Statements and Notes thereto, which are included in Items 7
and 8 of this report.
As of and As of and As of and
for the for the for the
Year Ended Year Ended Year Ended
12/31/96 12/31/95 12/31/94
Operating Data
Rental Income $ 82,022 $ 592,831 $ 1,844,918
Interest Income 23,559 54,233 23,634
Net Income (Loss) (628,023) (134,521) 174,881
Balance Sheet Data
Cash and Cash
Equivalents 156,932 386,282 952,851
Investment
Property,net 834,336 2,335,669 4,576,192
Total Assets 991,268 2,860,556 5,532,939
Partners' Equity 821,779 2,570,644 5,189,429
Per Unit Data 1996 1995 1994
Net Income (Loss) $(25.76) $ (5.52) $ 7.03
Distribution 45.75 101.00 66.00
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
General
On November 1, 1989, the Partnership had its first closing and received
from the escrow account $3,441,340 representing 6,887 Units of Limited
Partnership Interest. During 1990 and 1989, the Partnership had an
additional twelve closings and received from the escrow account
$8,623,280 representing 17,250 Units of Limited Partnership Interest.
Of these amounts, the Partnership received proceeds from the sale of 97
units at a price net of sales commission for sales to employees and
securities representatives of affiliates of the General Partner who
were allowed to purchase units for a net price of $460 per Unit.
Results of Operation
For the years ended December 31, 1996 and 1995 and 1994 net income
(loss) was $(628,023), $(134,521), and $174,881, respectively, and net
income (loss) per limited partnership unit was $(25.76), $(5.52), and
$7.03, respectively.
Total revenue for the year ended December 31, 1996 was $(8,143),
$726,056 less than 1995. The decrease was due to lower rental income,
gains from sales of equipment, and provision for loss on investments.
Depreciation expense for 1996 was $429,289, a decreased of $307,143 due
to declining depreciation rates and the sale of equipment. General and
administrative expenses for the period were $190,591, an increase of
$74,589 due to higher aircraft maintenance costs.
The Partnership is in the re-marketing phase of its' operations during
which equipment is re-leased or sold as initial leases expire. During
the year, the Partnership sold on a depreciable cost basis $3 million
of equipment. At the end of 1996, the Partnership had $140 thousand of
equipment on lease and $4.2 million of equipment in inventory, which is
attributable to a Fokker F-27 aircraft. The Fokker F-27 has been off
lease since October 1994 and generated $564,000 of income in 1994.
Leases will expire on the remainder of the Partnership equipment during
1997. Future cash distribution rates will depend on the results of
re-marketing the equipment.
Total revenue for the year ended December 31, 1995 was $718 thousand;
down $1.2 million from 1994 due to lower rental income. Depreciation
expense for 1995 was about $736 thousand, a decreased of $673 thousand
due to declining depreciation rates and sales of equipment. General
and administrative expenses for the period were $372 thousand, a
decrease of $255 thousand in 1995 due to lower aircraft maintenance
costs.
Liquidity and Capital Resources
The Partnership anticipates that cash generated from operations and
sales in 1997 will be sufficient to meet its' obligations and fund
distributions.
It is possible that the Partnership may sell the remainder of it's
equipment during 1997. If the Partnership does sell the equipment
during 1997, it may cease operations and distribute any cash that
remains after paying expenses by the end of the year.
<PAGE>
Item 8. Financial Statements and Supplementary Data.
INDEPENDENT AUDITORS' REPORT
To the Partners of Pershing Lease Income
Limited Partnership II:
We have audited the financial statements of Pershing Lease Income
Limited Partnership II as listed in Item 14(a)1 on page 23. These
financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Pershing
Lease Income Limited Partnership II as of December 31, 1996 and 1995
and the results of its operations and its cash flows for each of the
years in the three-year period ended December 31, 1996, in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
Kansas City, Missouri
February 7, 1997
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Balance Sheets
December 31, 1996 and 1995
Assets 1996 1995
Investment property:
Cost $ 4,363,083 $ 7,362,387
Less:
Accumulated depreciation 2,628,747 4,376,718
Allowance for loss on investment 900,000 650,000
Investment property, net 834,336 2,335,669
Cash and cash equivalents 156,932 386,282
Rents and other receivables - 138,605
Total assets $ 991,268 $ 2,860,556
========== ==========
Liabilities and Partners' Equity
Liabilities:
Due to affiliates (Note 3) $ 1,918 $ 6,527
Accounts payable 705 64,972
Deferred gain on sale of assets 166,866 218,413
Total liabilities 169,489 289,912
Partners' Equity (Deficit):
General Partner:
Capital contribution 1,000 1,000
Cumulative net income 35,286 41,566
Cumulative cash distributions (384,536) (367,962)
(348,250) (325,396)
Limited Partners (24,137 units)
Capital contributions, net of
offering costs 10,707,885 10,707,885
Cumulative net income 113,420 735,163
Cumulative cash distributions (9,651,276) (8,547,008)
1,170,029 2,896,040
Total partners' equity 821,779 2,570,644
Total liabilities and partners'
equity $ 991,268 $ 2,860,556
========== ==========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Operations
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Revenue:
Rental income (Note 2) $ 82,022 $ 592,831 $1,844,918
Interest income 23,559 54,233 23,634
Net gain on sale of equipment 136,276 720,849 87,864
Provision for loss on investment (250,000) (650,000) -
Total revenue (8,143) 717,913 1,956,416
Expenses:
Depreciation 429,289 736,432 1,409,726
General and administrative 190,591 116,002 371,809
Total expenses 619,880 852,434 1,781,535
Net income (loss) $ (628,023) $ (134,521) $ 174,881
========= ========= =========
Net income (loss) attributable
to Limited Partners $ (621,743) $ (133,176) $ 169,651
========= ========= =========
Net income (loss) per Limited
Partnership Unit $ (25.76) $ (5.52) $ 7.03
========= ========= =========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Partners' Equity
For the Years Ended December 31, 1996, 1995 and 1994
General Limited
Partner Partners Total
Partners' Equity
(Deficit) at
December 31, 1993 $(199,010) $ 6,890,444 $ 6,691,434
Net Income 5,230 169,651 174,881
Cash Distributions (83,844) (1,593,042) (1,676,886)
Partners' Equity
(Deficit) at
December 31, 1994 $(277,624) $ 5,467,053 $ 5,189,429
Net Loss (1,345) (133,176) (134,521)
Cash Distributions (46,427) (2,437,837) (2,484,264)
Partners' Equity
(Deficit) at
December 31, 1995 $(325,396) $ 2,896,040 $ 2,570,644
Net Loss (6,280) (621,743) (628,023)
Cash Distributions (16,574) (1,104,268) (1,120,842)
Partners' Equity
(Deficit) at
December 31, 1996 $(348,250) $ 1,170,029 $ 821,779
======== ========== ==========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
1996 1995 1994
Cash flows from operating activities:
Net income (loss) $ (628,023) $ (134,521) $ 174,881
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation and amortization 429,289 736,432 1,424,331
Net gain on sale of investment
property (136,276) (720,849) (87,864)
Provision for loss on investment 250,000 650,000 -
Changes in assets and liabilities:
Receivables 138,605 (135,201) 38,990
Prepaid insurance - 492 (492)
Due to affiliates (4,609) (9,240) (24,755)
Accounts payable (64,267) 5,339 58,396
Unearned rental income - (101,244) 84,060
Deferred gain on sale of assets (51,547) 51,547 166,866
Net cash provided by (used in)
operating activities (66,828) 342,755 1,834,413
Cash flows from investing activities:
Disposition of investment
property 958,320 1,574,940 496,250
Cash flows from financing activities:
Cash distributions to Partners (1,120,842) (2,484,264) (1,676,886)
Net increase (decrease) in cash and
cash equivalents (229,350) (566,569) 653,777
Cash and cash equivalents at
beginning of year 386,282 952,851 299,074
Cash and cash equivalents at end
of year $ 156,932 $ 386,282 $ 952,851
========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(A Missouri Limited Partnership)
Notes to Financial Statements
(1) Summary of Significant Accounting Policies
Organization
Pershing Lease Income Limited Partnership II (the "Partnership")
was organized under the Missouri Revised Uniform Limited Partnership
Act on February 24, 1989. The Partnership was formed to invest
primarily in equipment to be leased to third parties. The initial
capital of $1,500 represented capital contributions of $1,000 by
Waddell & Reed Leasing, Inc. (the General Partner) and $500 from the
initial Limited Partner. The Amended Agreement of Limited Partnership
authorized the issuance of up to 60,000 Limited Partnership units at a
price of $500 per unit and up to 20,000 additional units. The
Partnership had an initial closing and twelve subsequent closings.
The closings occurred on November 1, 1989, December 11, 1989, January
9, 1990, February 9, 1990, March 9, 1990, April 10, 1990, May 9, 1990,
June 11, 1990, July 11, 1990, August 9, 1990, September 12, 1990,
October 10, 1990 and November 1, 1990 with subscribers purchasing
6,887, 1,987, 2,264, 1,293, 904, 1,241, 1,071, 1,461, 1,114, 1,314,
2,050, 672, and 1,879 units, respectively.
Pursuant to the terms of the Amended Agreement of Limited
Partnership, distributable cash from operations and profits for federal
income tax purposes from normal operations, as defined, are to be
allocated 95% to the Limited Partners and 5% to the General Partner
until payout has occurred, and 85% to the Limited Partners and 15% to
the General Partner thereafter. Any distributable cash from sales shall
be distributed 99% to the Limited Partners and 1% to the General
Partner until payout has occurred, and 85% to the Limited Partners and
15% to the General Partner thereafter. "Payout" means the time when the
aggregate amount of all distributions to the Limited Partners of
distributable cash from operations and of distributable cash from sales
or refinancing equals the aggregate amount of the Limited Partners'
original invested capital plus a cumulative 8% annual return on their
aggregate unreturned invested capital (calculated from the beginning of
the first full fiscal quarter following each Limited Partner's
admission to the Partnership). Losses for federal income tax purposes
from the normal operations of the Partnership will be allocated 99% to
the Limited Partners and 1% to the General Partner.
The General Partner contributed $1,000 for its General Partnership
interest. The General Partner is not required to make any other
capital contributions except under certain limited circumstances upon
termination of the Partnership.
Basis of Presentation
The Partnership financial statements are presented on the accrual
basis of accounting.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and short-term
investments with original maturities of less than ninety days.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Notes to Financial Statements, Continued
Investment Property
Investment property consists primarily of aircraft and mining
equipment. At December 31, 1996 and 1995, the Partnership owned
investment property, with a depreciable cost basis of $4,363,083 and
$7,362,387, respectively. The depreciable cost basis as of December
31, 1996 and 1995 includes acquisition fees of $197,849 and $333,855,
respectively, which were paid to the General Partner. Depreciation on
investment property is provided using straight-line and accelerated
methods over lives ranging from 5 to 12 years.
At December 31, 1996, the Partnership had a Fokker F-27 aircraft
with a net book value of $815,690, which was not under a lease
agreement and has been for sale since October 1994. An allowance for
loss on the Fokker F-27 aircraft in the amount of $900 thousand has
been recorded as of December 31, 1996, based on the Partnership's
estimate of the investment property's fair market value.
The Partnership implemented SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of" in 1996. There was no effect of implementation.
Use of Estimates
The Partnership has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these financial
statements in conformity with generally accepted accounting principles.
Actual results could differ from those estimates.
Income Taxes
The Partnership is a pass-through entity and, accordingly, taxes on
income, if any, are the responsibility of the individual partners.
Income for financial reporting was less than that reported for income
tax purposes for the three years ended December 31, 1996, 1995 and 1994
by $198,453, $600,303, and $139,400, respectively. The difference
between income for financial reporting and income tax purposes is
principally due to depreciation, prepaid rents, and provision for loss
on investment.
Partners' equity at December 31, 1996 and 1995 as reported herein
has been reduced by sales commissions and other costs of the offering
which will not be deductible by the partners until the Partnership is
liquidated or the partners' units are otherwise disposed of. Limited
Partners' equity for income tax purposes was $4,883,710 as of December
31, 1996.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Notes to Financial Statements, Continued
(2) Leases
The Partnership leases the investment property to unrelated third
parties under operating leases. Rental income is reported when earned.
Minimum lease payments scheduled to be received in the future under
existing noncancellable operating leases follow:
Year Amount
1997 $2,202
(3) Related Party Transactions
Fees, commissions and other expenses paid or payable by the
Partnership to the General Partner or affiliates of the General Partner
for the years ended December 31, 1996, 1995 and 1994 are, as follows:
1996 1995 1994
Management fees $ 4,144 $ 29,639 $ 86,646
Reimbursable operating expenses 22,348 22,689 30,137
$ 26,492 $ 52,328 $116,783
======= ======= =======
At December 31, 1996 and 1995, the following costs were due to the
General Partner or affiliates:
1996 1995
Management fees $ 186 $ 3,404
Reimbursable operating expenses 1,732 3,123
$ 1,918 $ 6,527
====== ======
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Item 9. Changes in and Disagreements with Accountants on Accounting
And Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Partnership.
(a-b) Identification of Directors and Executive Officers
The Partnership has no Directors or Officers. As indicated in Item 1
of this report, the General Partner of the Partnership is Waddell &
Reed Leasing, Inc. Under the Partnership Agreement, the General
Partner is solely responsible for the leasing of the Partnership's
equipment, and the Limited Partners have no right to participate in the
control of such operations. The names and ages of the Directors and
Executive Officers of the General Partner at December 31, 1996 are as
follows:
Name Title Age
Robert L. Hechler President, Treasurer and Director 60
Michael D. Strohm Executive Vice President and
Assistant Treasurer 45
Sharon K. Pappas Secretary and General Counsel 38
David R. Burford Assistant Secretary and Assistant
General Counsel 39
(c) Identification of certain significant persons
See Item 10. (a-b)
(d) Family relationship
No family relationship exists between any of the foregoing Directors or
Officers.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
(e) Business experience
Robert L. Hechler is also President, Chief Executive Officer and a
Director of Waddell & Reed, Inc. and President and Director of Waddell
& Reed Services Company. He has been employed by Waddell & Reed
Services Company and affiliated companies since December 1977 and has
also been a Vice President of each Fund in the United Group of Mutual
Funds, TMK/United Funds, Inc., and Waddell & Reed Funds, Inc. since
December 1977. Mr. Hechler holds a B.S. (1958) from the University of
Illinois and an M.B.A. (1967) from the University of Chicago.
Michael D. Strohm is also Senior Vice President and Controller of
Waddell & Reed, Inc. He has been employed by Waddell & Reed, Inc. and
affiliated companies since June 1972. Mr. Strohm holds a B.S. (1973)
and an M.B.A. (1979) from Rockhurst College.
Sharon K. Pappas is also Senior Vice President, Secretary and General
Counsel of Waddell & Reed, Inc. She has been employed by Waddell &
Reed, Inc. and affiliated companies since July 1989 and has also been
Secretary of each Fund in the United Group of Mutual Funds, TMK, United
Funds, Inc., and Waddell & Reed Funds, Inc. since January 1990, and
Vice President of these Funds since December, 1992. Ms. Pappas holds a
B.S. (1981) from Kansas State University and a J.D. (1984) from the
University of Kansas School of Law.
David R. Burford is also Assistant Secretary and Associate General
Counsel of Waddell & Reed, Inc. He has been employed by Waddell &
Reed, Inc. and affiliated companies since May 1985 and has also been
Assistant Secretary of each Fund in the United Group of Mutual Funds
since February 1987. Mr. Burford holds a B.S. (1979) from the
University of Missouri and a J.D. (1982) from Duke University School of
Law.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
(f) Involvement in certain legal proceedings
The Partnership is not aware of any legal proceedings against any
Director or Executive Officer of the Corporate General Partner which
may be important for the evaluation of any such person's ability and
integrity.
Item 11. Executive Compensation
(a), (b), (c), (d), and (e): The Officers and Directors of the General
Partner receive no current or proposed direct remuneration in such
capacities, pursuant to any standard arrangements or otherwise, from
the Partnership. In addition, the Partnership has not paid and does
not propose to pay any options, warrants or rights to the Officers and
Directors of the Corporate General Partners. There exists no
remuneration plan or arrangement with any Officer or Director of the
General Partner resulting from the resignation, retirement or any other
termination. See Note 3 of the Notes to Financial Statements included
in Item 8 of this report for a description of the remuneration paid by
the Partnership to the General Partner and its affiliates during 1996,
1995 and 1994.
Item 12. Security Ownership of Certain Beneficial Owners and
Management.
By virtue of its organization as a limited partnership, the Partnership
has outstanding no securities possessing traditional voting rights.
However, as provided for in Section 13.2 of the Agreement of Limited
Partnership (subject to Section 13.3), a majority in interest of the
Limited Partners have voting rights with respect to:
1. Amendment of the Limited Partnership Agreement;
2. Termination of the Partnership;
3. Removal of the General Partner; and
4. Approval or disapproval of the sale of substantially all the
assets of the Partnership.
No person or group is known by the General Partner to own beneficially
more than 5% of the Partnership's 24,137 outstanding Limited
Partnership Units as of December 31, 1996.
By virtue of its organization as a limited partnership, the Partnership
has no Officers or Directors.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Item 13. Certain Relationships and Related Transactions.
(a), (b), and (c): The General Partner of the Partnership is Waddell &
Reed Leasing, Inc. The identification of the General Partners'
Directors and Executive Officers is indicated in Item 10 of this
report. The Partnership was not involved in any transaction involving
any of these Directors or Officers of the Corporation or any member of
the immediate family of these individuals, nor did any of these persons
provide services to the Partnership for which they received direct or
indirect remuneration. Similarly, there exists no business
relationship between the Partnership and any of the Directors or
Officers of the Corporate General partners, nor were any of the
individuals indebted to the Partnership.
Waddell & Reed, Inc. acted as dealer-manager in connection with the
offering of units by the Partnership during the year ended December 31,
1990 and the eleven months ended December 31, 1989. The dealer-manager
was entitled to receive commissions in connection therewith from the
Partnership. Amounts paid or accrued for the commissions during the
year ended December 31, 1990 and 1989 totaled $608,800 and $352,800,
respectively.
Waddell & Reed Leasing, Inc. incurred certain expenses in connection
with the organization of the Partnership, including preparing the
Partnership for qualification under the federal and state securities
laws and subsequently offering and distributing the Units to the
public. Included in these organizational and offering expenses are
legal, accounting, printing costs, filing and qualification fees and
disbursements necessary for the organization of the Partnership and the
registration and marketing of the Units of Partnership interests. The
General Partner was reimbursed an amount equal to up to 4% of the gross
proceeds of the Partnership's offering for organizational and offering
expenses. Waddell & Reed, Inc. marketed the Units and will provide all
administrative functions of the Partnership and will supply
substantially all of the General Partner's capital resources. In
consideration of the services and capital commitments provided by
Waddell & Reed, Inc., they received 2% of the 4% of the offering and
organizational expenses received by the General Partner. Waddell &
Reed, Inc. and Waddell & Reed Leasing, Inc. were reimbursed these costs
in the amount of $305,279 and $177,460 for the years ended December 31,
1990 and 1989, respectively.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
The General Partner has the responsibility for acquiring, financing,
leasing and sale of equipment for the Partnership. The General Partner
received an acquisition fee of 4.75% for acquiring equipment for the
Partnership's portfolio. It also receives a management fee of 5% of
gross lease rentals collected for managing the leasing and financing of
the Partnership's equipment. BOT Service Corporation proposes
equipment acquisitions, leases, financing and refinancing transactions,
and equipment sales for the Partnership, and will oversee the
operation, management and use of the equipment. BOT will receive 60%
of the acquisition fee amount, 40% of all equipment management fee
amounts and 100% of all subordinated remarketing fee amounts,
respectively, received by the General Partner from the Partnership, and
40% of all cash distributed by the Partnership to the General Partner
as its distributive share of such cash. During the years ended December
31, 1996, 1995 and 1994, the Partnership did not pay acquisition fees
for those years and paid management fees of $4,144, $29,639, and
$86,646, respectively, to the General Partner.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K
Table of Contents
(a) 1. Financial Statements: Page
Independent Auditors' Report 10
Balance Sheets - December 31, 1996 and 1995 11
Statements of Operations - For the Years Ended
December 31, 1996, 1995 and 1994 12
Statements of Partners' Equity - For the Years
Ended December 31, 1996, 1995 and 1994 13
Statements of Cash Flows - For the Years Ended
December 31, 1996, 1995 and 1994 14
Notes to Financial Statements: 15-17
2. Exhibit Index
All other schedules are omitted as the information is not
applicable or is included in the financial statements or related
footnotes.
Exhibit Page Number or
Numbers Description Incorporation by Reference
3. Amended Agreement of Limited Partnership *
*Included with Amendment No. 1 to Form S-1, Registration No.
33-19038, filed with the Securities and Commission on February
24, 1989.
(b) Reports on Form 8-K
None.
<PAGE>
Pershing Lease Income Limited Partnership II
(A Missouri Limited Partnership)
Pursuant to the requirements 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.
PERSHING LEASE INCOME LIMITED PARTNERSHIP II
(Registrant)
By: /s/ Michael D. Strohm
Michael D. Strohm, Executive Vice
President and Assistant Treasurer
of the General Partner
Date: March 4, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-END> DEC-31-1996 DEC-31-1995
<CASH> 156932 386282
<SECURITIES> 0 0
<RECEIVABLES> 0 138605
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 156932 524887
<PP&E> 3463083 6712387
<DEPRECIATION> 2628747 4376718
<TOTAL-ASSETS> 991268 2860556
<CURRENT-LIABILITIES> 169489 289912
<BONDS> 0 0
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 821779 2570644
<TOTAL-LIABILITY-AND-EQUITY> 991268 2860556
<SALES> 0 0
<TOTAL-REVENUES> (8143) 717913
<CGS> 0 0
<TOTAL-COSTS> 619880 852434
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (628023) (134521)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (628023) (134521)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
