UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
- ------ ACT OF 1934
For the fiscal year ended December 31, 1999 Commission File Number 0-20133
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
California 68-0222136
- ------------------------------- ------------------------------------
(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-B 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-KSB or any amendment to
this Form 10-KSB.
______________
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
----- -----
The Registrant's revenue for its most recent fiscal year was $4,392,000.
As of December 31, 1999, 1,882,582 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, 1999.
DOCUMENTS INCORPORATED BY REFERENCE: NONE
Transitional Small Business Disclosure Format:
Yes No X
----- -----
Page 1 of 26
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
1999 FORM 10-KSB 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............ 5
PART II
Item 5. Market for the Registrant's Securities and Related
Security Holder Matters...................................... 5
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 6
Item 7. Financial Statements........................................... 9
Item 8. Disagreements on Accounting and Financial Disclosure Matters...23
PART III
Item 9 . Directors and Executive Officers of the Registrant.............23
Item 10. Executive Compensation.........................................24
Item 11. Security Ownership of Certain Beneficial Owners and
Management...................................................24
Item 12. Certain Relationships and Related Transactions.................25
PART IV
Item 13. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.....................................................25
Signatures...................................................................26
2
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PART I
Item 1. Business.
--------
General Development of Business.
Phoenix Leasing Cash Distribution Fund V, L.P., a California limited
partnership (the "Partnership"), was organized on July 9, 1990. The Partnership
was registered with the Securities and Exchange Commission with an effective
date of November 4, 1991 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, 2003. The General Partner is a California limited
partnership, Phoenix Leasing Associates II L.P., the general partner of which is
Phoenix Leasing Associates II, Inc., a Nevada corporation and a wholly-owned
subsidiary of 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 registration was for 5,000,000 units of limited partnership
interest at a price of $20 per unit. The Partnership completed its public
offering on October 28, 1993. As of December 31, 1993, the Partnership sold
2,045,838 units for a total capitalization of $40,916,760. Of the proceeds
received through the offering, the Partnership has incurred $6,131,000 in
organizational and offering expenses for a net capitalization of $34.8 million.
From the initial formation of the Partnership through December 31,
1999, the total investments in equipment leases, investments in joint ventures
and financing transactions (loans) approximate $119,232,735. The average initial
firm term of contractual payments from equipment subject to lease was 46.79
months, and the average initial net monthly payment rate as a percentage of the
original purchase price was 2.75%. The average initial firm term of contractual
payments from loans was 51.53 months.
The Partnership's principal objective is to produce cash flow to the
investors on a continuing basis over the life of the Partnership. To achieve
this objective, the Partnership will invest in various types of capital
equipment and other assets to provide leasing or financing of the same to third
parties, including Fortune 1000 companies and their subsidiaries, middle-market
companies, emerging growth companies, franchised businesses, pay television
system operators and others, on either a long-term or short-term basis. The
types of equipment that the Partnership will invest in will include, but is not
limited to, computer peripherals, small computer systems, communications
equipment, IBM mainframes, IBM-software compatible mainframes, office systems,
CAE/CAD/CAM equipment, telecommunications equipment, cable television equipment,
medical equipment, production and manufacturing equipment and software products.
At least 75% of the net offering proceeds has been allocated for the acquisition
of computer peripherals.
The Partnership has acquired significant amounts of equipment or assets
with the net offering proceeds. In addition, the Partnership has acquired
equipment through the use of debt financing, however, the ratio of the
outstanding debt to net capital contributions less any investment in Leveraged
Joint Ventures at the end of the Partnership's offering period will not exceed
one-to-one. The cash flow generated by such investments in equipment leases or
financing transactions will be used to provide for debt service, to provide cash
distributions to the Partners and the remainder will be reinvested in capital
equipment or other assets.
Narrative Description of Business.
The Partnership has acquired and intends to acquire and lease equipment
pursuant to either "Operating" leases or "Financing" leases. At December 31,
1999, approximately 99% of the leased assets owned by the Partnership were
classified as Financing leases. The Partnership has also provided and intends to
provide financing secured by assets in the form of notes receivable. Operating
leases are generally short-term leases under which the lessor will receive
aggregate rental payments in an amount that is less than the purchase price of
the equipment. Financing leases are generally for a longer term under which the
noncancellable rental payments due during the initial term of the lease are at
least sufficient to recover the purchase price of the equipment.
Operating leases represent a greater risk along with a greater
potential return to the Partnership than do Financing leases. In order to
recover its investment in equipment leased pursuant to an Operating lease, the
Partnership will, upon termination of such lease, either have to obtain a
renewal from the original lessee, find a new lessee or sell the equipment. The
terms for Operating leases are for a shorter duration than Financing leases.
3
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Consequently, the revenues derived from the initial term of Operating leases are
generally greater than those of Financing leases. Due to technological,
competitive, market and economic factors, it is anticipated that renewals or
remarkets of leases will be at a lower rental rate than that of the initial
lease terms.
In addition to acquiring equipment for lease to third parties, the
Partnership, either directly or through the investment in joint ventures, has
provided financing to certain emerging growth companies, cable television
operators, manufacturers and their lessees with respect to assets leased
directly by such manufacturers to third parties. The Partnership maintains a
security interest in the assets financed and in the receivables due under any
lease or rental agreement relating to such assets. Such security interests
constitute a lien on the equipment and will give the Partnership the right, upon
default, to obtain possession of the assets.
Competition. The General Partner intends to concentrate the
Partnership's activities in the equipment leasing and financing industry, an
area in which the General Partner has developed an expertise. The computer
equipment leasing industry is extremely competitive. The Partnership competes
with many well established companies having substantially greater financial
resources. Competitive factors include pricing, technological innovation and
methods of financing (including use of various short-term and long-term
financing plans, as well as the outright purchase of equipment). Generally, the
impact of these factors to the Partnership would be the realization of increased
equipment remarketing and storage costs, as well as lower residuals received
from the sale or remarketing of such equipment.
Other.
A brief description of the type of assets in which the Partnership has
invested through December 31, 1999, together with information concerning the
uses of assets is set forth in Item 2.
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, either directly or through its investment in joint ventures,
to businesses located throughout the United States.
As of December 31, 1999, the Partnership owns equipment and has
outstanding loans to borrowers with an aggregate original cost of $30,195,000.
The following table summarizes the type of equipment owned or financed by the
Partnership at December 31, 1999.
Percentage of
Asset Types Purchase Price(1) Total Assets
- -------------------------------- ----------------- -------------
(Amounts in Thousands)
Financing of Emerging Growth Companies $ 7,815 26%
Financing of Other Businesses 7,247 24
Capital Equipment Leased to Emerging
Growth Companies 5,373 18
Furniture and Fixtures 3,910 13
Small Computer Systems 2,495 8
Computer Peripherals 1,452 5
Miscellaneous 1,143 4
Telecommunications 760 2
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TOTAL $30,195 100%
======= ===
(1) These amounts include the cost of equipment on financing leases of
$11,768,000 and original cost of outstanding loans of $15,062,000 at
December 31, 1999.
Item 3. Legal Proceedings.
-----------------
The Registrant is not a party to any pending legal proceedings which would
have a material impact on its financial position.
4
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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.
PART II
Item 5. Market for the Registrant's Securities and Related Security Holder
------------------------------------------------------------------
Matters.
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(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, 1999
---------------------------- -----------------------
Limited Partners 2,258
General Partner 1
5
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
---------------------
Results of Operations
Phoenix Leasing Cash Distribution Fund V, L.P. (the Partnership)
reported net income of $2,032,000 and $3,234,000 during the years ended December
31, 1999 and 1998, respectively. The decrease in net income for the year ended
December 31, 1999, compared to 1998, is attributable to declines in rental
income and earned income from financing leases. This decrease was offset by an
increase in interest income from notes receivables and gain on sale of
securities.
Total revenues decreased by $961,000 for the year ended December 31,
1999, compared to the prior year. The decrease in rental income of $1,087,000
for the year ended December 31, 1999, compared to the prior year, is reflective
of a reduction in the size of the equipment portfolio. As of December 31, 1999,
the Partnership owned equipment with an aggregate original cost of $15 million
compared to $23 million at December 31, 1998. Another factor contributing to the
decrease in rental income is the equipment being held for lease. Until new
lessees or buyers of equipment can be found, the equipment will continue to
generate depreciation expense without any corresponding rental income. The
effect of this will be a reduction of the Partnership earnings during this
remarketing period. As of December 31, 1999, the Partnership owned equipment
being held for lease with an original purchase price of $1,827,000 and a net
book value of $61,000, compared to $3,976,000 and $51,000, respectively, at
December 31, 1998. The General Partner is actively engaged, on behalf of the
Partnership, in remarketing and selling the Partnership's equipment as it
becomes available.
The decrease in earned income from financing leases of $483,000 for
the year ended December 31, 1999, compared to the prior year, is a result of a
decline in the Partnership's investment in financing leases. At December 31,
1999, the Partnership had a net investment in financing leases of $6.2 million,
compared to $7.7 million at December 31, 1998. The investment in financing
leases, as well as earned income from financing leases, will decrease over the
lease term as the Partnership amortizes income over the life of the lease using
the interest method. This decrease will be offset in part by a continuous
investment of the excess cash flows of the Partnership in new leasing
transactions over the life of the Partnership. During 1999, the Partnership made
new investments in financing leases of $2.4 million, compared to $3.7 million
during 1998.
The above decreases in revenue were partially offset by the increase in
interest income from notes receivable of $519,000 for the year ended December
31, 1999, compared to 1998, which is attributable to new investments made in
notes receivable during 1999 and 1998. The Partnership made new investments in
notes receivable of $3.6 million and $5.4 million for the years ended December
31, 1999 and 1998, respectively.
The Partnership reported a gain on sale of securities of $297,000 for
the year ended December 31, 1999, compared to $1,000 in 1998. The securities
sold for both 1999 and 1998 consisted of common stock received through the
exercise of stock warrants granted to the Partnership as part of financing
agreements with emerging growth companies that are publicly traded. The
Partnership received proceeds of $297,000 and $1,000 from the sale of these
securities during the year ended December 31, 1999 and 1998, respectively. In
addition, at December 31, 1999, the Partnership owns shares of stock and stock
warrants in emerging growth companies that are publicly traded with an
unrealized gain of approximately $1,729,000. These stock warrants contain
certain restrictions, but are generally exercisable within one year.
Total expenses increased by $241,000 for the year ended December 31,
1999, compared to the prior year. The increase is due to an increase of $655,000
in the provision for losses on receivables. This increase was offset by
decreases in most other expenses. These decreases correspond directly to the
reduction in the amount of equipment owned by the Partnership.
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 investments of the Partnership.
Liquidity and Capital Resources
The Partnership's primary source of liquidity comes from contractual
obligations with lessees and borrowers for fixed terms at fixed payment amounts.
The future liquidity of the Partnership is dependent upon the payment of the
Partnership's contractual obligations from its lessees and borrowers. As the
initial lease terms of the Partnership's short term operating leases expire, the
Partnership will re-lease or sell the equipment as it becomes available. The
future liquidity of the Partnership will depend upon the General Partner's
6
<PAGE>
success in collecting the contractual amounts owed, as well as re-leasing and
selling the Partnership's equipment when the lease terms expire.
The Partnership reported net cash generated by equipment leasing and
financing activities of $9,834,000 during 1999, as compared to $12,398,000
during 1998. The decrease in the net cash generated during 1999 is due to a
decrease in payments on financing leases and rental income, offset by an
increase in principal payments from notes receivable, as previously discussed in
the Results of Operations.
As of December 31, 1999, the Partnership owned equipment being held for
lease with an original cost of $1,827,000 and a net book value of $61,000,
compared to $3,976,000 and $51,000, respectively, at December 31, 1998. The
General Partner is actively engaged, on behalf of the Partnership, in
remarketing and selling the Partnership's equipment as it becomes available.
The Partnership received proceeds from the sale of equipment of
$299,000 for the year ended December 31, 1999, compared to $514,000 for 1998.
The decrease in proceeds for the year ended December 31, 1999, compared to 1998,
is a result of decreased sales activity during 1999 compared to 1998. The
Partnership sold equipment with an aggregate original cost of $10.6 million
during 1999, compared to $15.7 million during 1998.
Distributions from joint ventures for the year ended December 31, 1999
were $206,000 compared to $479,000 for 1998. The decrease in distributions from
joint ventures for the year ended December 31, 1999, compared to the prior year,
is attributable to a decline in the amount of cash available for distributions
from one equipment joint venture as a result of a decrease in rental income and
proceeds from sale of equipment.
The cash distributed to partners for the year ended December 31, 1999
was $4,587,000, as compared to $3,953,000 during the year ended December 31,
1998. In accordance with the Partnership Agreement, the Limited Partners are
entitled to 97% of the cash available for distribution and the General Partner
is entitled to 3%. As a result, the limited partners received $4,452,000 and
$3,834,000 in distributions during the year ended December 31, 1999 and 1998,
respectively. The cumulative distributions to the Limited Partners were
$28,512,000 and $24,060,000 as of December 31, 1999 and 1998, respectively. The
General Partner received $135,000 and $119,000 in cash distributions for the
year ended December 31, 1999 and 1998, respectively. The Partnership anticipates
making distributions to partners during 2000 at the same rate as in 1999.
As stated in the Partnership's prospectus, redemptions were at the
discretion of the General Partner. It has become necessary to discontinue
redemptions to assure that the Partnership does not have to change its
distribution schedules due to unexpected redemptions and also to assure that it
is able to reinvest lease proceeds to maximize returns for those investors who
continue in the Partnership. Redemptions were $212,000 and $259,000 for the
years ended December 31, 1999 and 1998, respectively.
The cash to be generated from leasing and financing operations is
anticipated to be sufficient to meet the Partnership's continuing operational
expenses and distributions.
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Actual results could differ from those anticipated by some of the statements
made above. Limited Partners are cautioned that such forward-looking statements
involve risks and uncertainties including without limitation the following: (i)
the Partnership's plans are subject to change at any time at the discretion of
the General Partner of the Partnership, (ii) future technological developments
in the industry in which the Partnership operates, (iii) competitive pressure on
pricing or services, (iv) substantial customer defaults or cancellations, (v)
changes in business conditions and the general economy, (vi) changes in
government regulations affecting the Partnership's core businesses and (vii) the
ability of the Partnership to sell its remaining assets .
Impact of the Year 2000 Issue
The General Partner has appointed ResourcePhoenix.com. (RPC), an
affiliate of the General Partner, to manage its Year 2000 project.
RPC has a Year 2000 project plan in place and a "Y2K Project Team" has
been appointed. The team has identified risks, and has implemented remediation
procedures for its Year 2000 issues. RPC has budgeted for the necessary changes,
built contingency plans, and has progressed along the scheduled timeline.
Installation of all remediation changes to critical software and hardware was
completed on November 5, 1999. As of January 31, 2000 RPC has not encountered
7
<PAGE>
any material year 2000 problems with the hardware and software systems used in
our operations. In addition, none of RPC's critical vendors have reported any
material year 2000 problems nor have they experienced any decline in service
levels from such vendors.
RPC will continue to monitor internal and external issues related to
year 2000.
Costs incurred by the Partnership will be expenses as incurred and are
not currently anticipated to be material to the Partnership's financial position
or results of operations.
The Partnership's customers consist of lessees and borrowers. The
Partnership does not have exposure to any individual customer that would
materially impact the Partnership should the customer experience a significant
Year 2000 problem.
8
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Item 7. FINANCIAL STATEMENTS
--------------------
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
----------------------------------------------
YEAR ENDED DECEMBER 31, 1999
----------------------------
9
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Partners of Phoenix Leasing Cash Distribution Fund V, L.P.:
We have audited the accompanying balance sheet of Phoenix Leasing Cash
Distribution Fund V, L.P. (a California limited partnership) as of December 31,
1999 and the related statements of operations and comprehensive income,
partners' capital and cash flows for the years ended December 31, 1999 and 1998.
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 Phoenix Leasing Cash
Distribution Fund V, L.P. as of December 31, 1999, and the results of its
operations and its cash flows for the years ended December 31, 1999 and 1998, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
San Francisco, California,
January 26, 2000
10
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
BALANCE SHEET
(Amounts in Thousands Except for Unit Amounts)
December 31, 1999
-----------------
ASSETS
Cash and cash equivalents $ 4,521
Accounts receivable (net of allowance for losses on accounts
receivable of $131) 167
Notes receivable (net of allowance for losses on notes receivable
of $88) 8,943
Equipment on operating leases and held for lease (net of
accumulated depreciation of $2,459) 61
Net investment in financing leases (net of allowance for early
terminations of $55) 6,161
Investment in joint ventures 46
Capitalized acquisition fees (net of accumulated amortization
of $2,866) 464
Marketable securities 1,729
Other assets 61
-------
Total Assets $22,153
=======
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 980
-------
Total Liabilities 980
-------
Partners' Capital:
General Partner 12
Limited Partners, 5,000,000 units authorized, 2,045,838
units issued and 1,882,582 units outstanding 19,432
Accumulated other comprehensive income 1,729
-------
Total Partners' Capital 21,173
-------
Total Liabilities and Partners' Capital $22,153
=======
The accompanying notes are an integral part of these statements.
11
<PAGE>
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Amounts in Thousands Except for Per Unit Amounts)
For the Years Ended December 31,
1999 1998
---- ----
INCOME
Rental income $ 803 $ 1,890
Earned income, financing leases 1,058 1,541
Interest income, notes receivable 1,851 1,332
Equity in earnings from joint ventures, net 130 248
Gain on sale of securities 297 1
Other income 253 341
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Total Income 4,392 5,353
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EXPENSES
Depreciation 151 419
Amortization of acquisition fees 254 285
Lease related operating expenses 62 49
Management fees to General Partner 326 407
Reimbursed administrative costs to General
Partner 308 276
Provision for losses on receivables 1,023 368
Legal expense 133 181
General and administrative expenses 103 134
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Total Expenses 2,360 2,119
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NET INCOME 2,032 3,234
Other comprehensive income:
Unrealized gains on securities:
Unrealized holding gains arising during
period 1,903 120
Less: reclassification adjustment for
gains included in net income (297) (1)
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Other comprehensive income 1,606 119
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COMPREHENSIVE INCOME $ 3,638 $ 3,353
======= =======
NET INCOME PER LIMITED PARTNERSHIP UNIT $ .99 $ 1.61
======= =======
ALLOCATION OF NET INCOME:
General Partner $ 154 $ 150
Limited Partners 1,878 3,084
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$ 2,032 $ 3,234
======= =======
The accompanying notes are an integral part of these statements.
12
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PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF PARTNERS' CAPITAL
(Amounts in Thousands Except for Unit Amounts)
<TABLE>
<CAPTION>
Accumulated
General Other
Partner's Limited Partners' Comprehensive Total
Amount Units Amount Income Amount
--------- -------------------- ------------- ------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1997 $ (38) 1,925,475 $ 23,227 $ 4 $ 23,193
Net income 150 -- 3,084 -- 3,234
Distributions to partners ($2.00 per limited
partnership unit) (119) -- (3,834) -- (3,953)
Redemptions of capital -- (22,767) (259) -- (259)
Other comprehensive income -- -- -- 119 119
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1998 (7) 1,902,708 22,218 123 22,334
Net income 154 -- 1,878 -- 2,032
Distributions to partners ($2.35 per limited
partnership unit) (135) -- (4,452) -- (4,587)
Redemptions of capital -- (20,126) (212) -- (212)
Other comprehensive income -- -- -- 1,606 1,606
---------- ---------- ---------- ---------- ----------
Balance, December 31, 1999 $ 12 1,882,582 $ 19,432 $ 1,729 $ 21,173
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
13
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PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
For the Years Ended December 31,
1999 1998
---- ----
Operating Activities:
- --------------------
Net income $ 2,032 $ 3,234
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 151 419
Amortization of acquisition fees 254 285
Gain on sale of equipment (144) (274)
Gain on sale of securities (297) (1)
Equity in earnings from joint ventures, net (130) (248)
Provision for early termination,
financing leases 79 141
Provision for losses on notes receivable 944 227
Decrease in accounts receivable 11 86
Increase in accounts payable and accrued
expenses 63 21
Increase (decrease) in other assets 10 (33)
------- -------
Net cash provided by operating activities 2,973 3,857
------- -------
Investing Activities:
- --------------------
Principal payments, financing leases 3,496 6,460
Principal payments, notes receivable 3,365 2,081
Proceeds from sale of equipment 299 514
Proceeds from sale of securities 297 1
Distributions from joint ventures 206 479
Investment in financing leases (2,398) (3,698)
Investment in notes receivable (3,606) (5,440)
Payment of acquisition fees (146) (295)
------- -------
Net cash provided by investing activities 1,513 102
------- -------
Financing Activities:
- --------------------
Redemptions of capital (212) (259)
Distributions to partners (4,587) (3,953)
------- -------
Net cash used in financing activities (4,799) (4,212)
------- -------
Decrease in cash and cash equivalents (313) (253)
Cash and cash equivalents, beginning of period 4,834 5,087
------- -------
Cash and cash equivalents, end of period $ 4,521 $ 4,834
======= =======
The accompanying notes are an integral part of these statements.
14
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PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 1. Organization and Partnership Matters.
------------------------------------
Phoenix Leasing Cash Distribution Fund V, L.P., a California limited
partnership (the "Partnership"), was formed on July 9, 1990, to invest in
capital equipment of various types and to lease such equipment to third parties
on either a long-term or short-term basis, and to provide financing to emerging
growth companies and cable television system operators. The Partnership met
minimum investment requirements on January 7, 1992. The Partnership's
termination date is December 31, 2003.
The Partnership has also made investments in joint ventures with
affiliated partnerships managed by the General Partner for the purpose of
reducing the risks of financing or acquiring certain capital equipment leased to
third parties (see Note 6).
For financial reporting purposes, Partnership net income and net losses
will be allocated 99% to the Limited Partners and 1% to the General Partner. In
addition, the General Partner will be allocated gross rental and interest income
in amounts equal to the distributions that it receives from the Partnership.
Syndication costs will be allocated 1% to the General Partner and 99% to the
Limited Partners.
The General Partner is entitled to receive 3% of all distributions
until the Limited Partners have recovered their initial capital contributions
plus a cumulative return of 10% per annum. Thereafter, the General Partner will
receive 15% of all cash distributions. From inception of the Partnership until
December 31, 1999, the General Partner's interest in Cash Available for
Distribution was subordinated in any calendar quarter until the Limited Partners
received quarterly distributions equal to 2.50% of their capital contributions
(i.e., 10% per annum), prorated for any partial period.
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 management services, the General Partner receives a
fee, payable quarterly, subject to certain limitations, in an amount equal to 3%
of the Partnership's gross revenues for the quarter from which such payment is
being made, which revenues shall include, but are not limited to, rental
receipts, maintenance fees, proceeds from the sale of equipment and interest
income.
The General Partner will be compensated for services performed in
connection with the analysis of assets available to the Partnership, the
selection of such assets and the acquisition thereof, including obtaining
lessees for the equipment, negotiating and concluding master lease agreements
with certain lessees. As compensation for such acquisition services, the General
Partner will receive a fee equal to 3%, subject to certain limitations, of (a)
the purchase price of equipment acquired by the Partnership or equipment leased
to customers by manufacturers, the financing for which is provided by the
Partnership, or (b) financing provided to businesses such as cable operators,
emerging growth companies, or security monitoring system companies, payable upon
such acquisition or financing, as the case may be. Acquisition fees are
amortized over the life of the assets principally on a straight-line basis.
A schedule of compensation due and distributions made to the General
Partner for the years ended December 31, follows:
1999 1998
---- ----
(Amounts in Thousands)
Management fees $326 $407
Acquisition fees 180 274
Cash distributions 135 119
---- ----
Total $641 $800
==== ====
Redemptions of Limited Partner units will only be made to the extent
permitted by applicable laws and regulations, the Partnership Agreement and if,
in the opinion of the General Partner, it is in the best interest of the
15
<PAGE>
Partnership. In addition, redemptions will not be made if such redemptions would
cause the Partnership to be categorized as a publicly traded partnership for
federal income tax purposes.
The Partnership will acquire such limited partnership units for an
amount equal to 85% of the "accrual basis capital account" relating to the
redeemed units. The Partnership will retain the remaining 15% of the "accrual
basis capital account" relating to the redeemed units. Redemptions retained by
the Partnership were $32,000 and $39,000 during the years ended December 31,
1999 and 1998, respectively. "Accrual basis capital account" is computed in
accordance with the books and records regularly maintained by the Partnership
for financial reporting purposes, utilizing the accrual method of accounting.
Note 2. Summary of Significant Accounting Policies.
------------------------------------------
Cash and Cash Equivalents. Cash and cash equivalents include deposits
at banks, investments in money market funds and other highly liquid short-term
investments with original maturities of less than 90 days.
Credit and Collateral. The Partnership's activities have been
concentrated in the equipment leasing and financing industry. A credit
evaluation is performed by the General Partner for all leases and loans made,
with the collateral requirements determined on a case-by-case basis. The
Partnership's loans are generally secured by the equipment or assets financed
and, in some cases, other collateral of the borrower. In the event of default,
the Partnership has the right to foreclose upon the collateral used to secure
such loans.
Notes Receivable. Notes receivable generally are stated at their
outstanding unpaid principal balances, which includes accrued interest. Interest
income is accrued on the unpaid principal balance.
Impaired Notes Receivable. Generally, notes receivable are classified
as impaired and the accrual of interest on such notes is 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, even though the loan may currently be performing. When a note
receivable is classified as impaired, income recognition is discontinued. 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. Generally, notes receivable are restored to accrual status when the
obligation is brought current, has performed in accordance with the contractual
terms for a reasonable period of time and the ultimate collectibility of the
total contractual principal and interest is no longer in doubt.
Allowance for Losses. An allowance for losses is established through
provisions for losses charged against income. Notes receivable deemed to be
uncollectible are charged against the allowance for losses, and subsequent
recoveries, if any, are credited to the allowance.
Leasing Operations. The Partnership's leasing operations consist of
both 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.
Initial direct costs of consummating new leases are capitalized and included in
the cost of equipment. The Partnership reviews its estimates of residual value
at least annually. If a decline in value has occurred which is other than
temporary, a reduction in the investment is recognized currently.
Under the operating method of accounting for leases, the leased
equipment is recorded as an asset at cost and depreciated. The Partnership's
leased equipment is depreciated primarily using an accelerated depreciation
method over the estimated useful life of six years.
The Partnership's policy is to review periodically the remaining
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
computer equipment and competitive factors within the computer marketplace.
Where 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 and will provide additional depreciation as
appropriate. As a result of such periodic reviews, the Partnership provided
16
<PAGE>
additional depreciation expense of $0 and $8,000 for the years ended December
31, 1999 and 1998, respectively.
Rental income for the year is determined on a straight-line basis of
rental payments due for the period under the terms of the lease. Maintenance,
repairs and minor renewals 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 in Joint Ventures. Minority investments in net assets of
the equipment and financing 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 Available-for-Sale Securities. The Partnership has
investments in stock and 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 other
comprehensive income.
Reclassification. Certain 1998 amounts have been reclassified to
conform to the 1999 presentation.
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.
Comprehensive Income. As of January 1, 1998, the Partnership adopted
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" (SFAS 130). This statement establishes standards for the reporting and
display of comprehensive income and its components in the financial statements.
For the Partnership, comprehensive income includes net income reported on the
statement of operations and changes in the fair value of its available-for-sale
investments reported as a component of partners' capital.
Note 3. Accounts Receivable.
Accounts receivable consist of the following at December 31:
1999
----
(Amounts in Thousands)
Lease payments $ 236
Property taxes 52
Interest 10
-----
298
Less: allowance for losses on accounts receivable (131)
-----
Total $ 167
=====
Note 4. Notes Receivable:
----------------
Notes receivable consist of the following at December 31:
1999
----
(Amounts in Thousands)
Notes receivable from emerging growth companies,
with stated interest ranging from 14% to 21% per
annum, receivable in installments ranging from
37 to 54 months, collateralized by a security
interest in the equipment financed. $ 4,859
17
<PAGE>
Notes receivable from other businesses, with stated
interest ranging from 11% to 18% per annum,
receivable in installments ranging from
35 to 85 months, collateralized by the equipment
financed. 4,172
-------
9,031
Less: allowance for losses on notes receivable (88)
-------
Total $ 8,943
=======
Minimum payments to be received on non-cancelable notes receivable for
the years ended December 31, are as follows:
(Amounts in Thousands)
2000.................................................. $ 4,315
2001.................................................. 3,386
2002.................................................. 2,097
2003.................................................. 748
2004 and thereafter................................... 273
--------
Total minimum payments to be received................. 10,819
Impaired notes receivable............................. 278
Less: unearned interest.............................. (2,066)
Less: allowance for losses........................... (88)
--------
Net investment in notes receivable.................... $ 8,943
========
At December 31, 1999, the recorded investment in notes that are
considered to be impaired was $278,000, net of specific write-downs. The average
recorded investment in impaired loans during the year ended December 31, 1999
and 1998 was $678,000 and $412,000, respectively. The Partnership recognized
$234,000 and $75,000 of interest income on impaired notes receivable during the
years ended December 31, 1999 and 1998, respectively.
The activity in the allowance for losses on notes receivable during the
years ended December 31, is as follows:
1999 1998
---- ----
(Amounts in Thousands)
Beginning balance $ 595 $ 368
Provision for losses 944 227
Write downs (1,451) --
------- -------
Ending balance $ 88 $ 595
======= =======
Note 5. Equipment on Operating Leases and Investment in Financing Leases.
----------------------------------------------------------------
Equipment on lease consists primarily of computer peripheral equipment
and other capital equipment.
The Partnership's operating leases are for initial lease terms of
approximately 19 to 36 months. During the remaining terms of existing operating
leases, the Partnership will not recover all of the undepreciated cost and
related expenses of its rental equipment, and therefore must remarket a portion
of its equipment in future years.
The Partnership has also entered into direct financing lease
arrangements with businesses in different industries located throughout the
United States. 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.
18
<PAGE>
The net investment in financing leases consists of the following at
December 31:
1999
----
(Amounts in Thousands)
Minimum lease payments to be received $ 7,403
Less: unearned income (1,187)
allowance for early termination (55)
-------
Net investment in financing leases $ 6,161
=======
Minimum rentals to be received on noncancellable operating and
financing leases for the years ended December 31 are as follows:
Operating Financing
--------- ---------
(Amounts in Thousands)
2000......................................... $ 133 $3,361
2001......................................... 29 2,402
2002......................................... - 1,193
2003......................................... - 415
2004......................................... - 32
------ ------
Total $ 162 $7,403
====== ======
The net book value of equipment held for lease at December 31, 1999
amounted to $61,000.
Note 6. Investment in Joint Ventures.
----------------------------
Equipment Joint Venture.
- -----------------------
On August 1, 1994, the Partnership entered into an agreement along with
two other affiliated partnerships to contribute certain leased assets and notes
receivable (the "Assets") to Phoenix Acceptance Limited Liability Company, a
Delaware limited liability company (the "Joint Venture") in exchange for a
32.48% equity interest in the Joint Venture. The interest received in the Joint
Venture was accounted for at the historical cost basis of the Assets
transferred. The Partnership has accounted for its net investment in this Joint
Venture using the equity method of accounting. The Joint Venture was organized
to hold title to the assets and subsequently transfer such assets to a trust for
the purpose of the trust issuing two classes of lease backed certificates to
third parties in exchange for cash proceeds. The transaction between the Joint
Venture and the trust has been accounted for as a financing. The Joint Venture
retains a residual interest in the assets transferred through the ownership of a
third class of subordinated trust certificates. The lease backed certificates
are recourse only to the assets used to collateralize the obligation.
The net carrying value of such assets contributed by the Partnership to
the Joint Venture was approximately $7.9 million and the total carrying value of
all of the assets contributed by all three partnerships approximated $24.7
million. The net proceeds from the issuance of the lease backed certificates
were distributed back to the partnerships who contributed to the Joint Venture.
On August 5, 1994, the Joint Venture received proceeds from the issuance of the
7.1% Class A lease backed certificates in the principal amount of $18.5 million.
On August 12, 1994, the Joint Venture received proceeds from the issuance of the
8.25% Class B lease backed certificates in the principal amount of $5.3 million.
In November 1996, the lease backed certificates were paid in full.
The Manager of the Joint Venture is Phoenix Leasing Incorporated. The
manager is responsible for the daily management of the operations of the Joint
Venture. Phoenix Leasing Incorporated also acts as Servicer and Administrator to
the trust. As Servicer, Phoenix Leasing Incorporated is responsible for
servicing, managing and administering the Assets, as well as enforcing and
making collections on the Assets.
19
<PAGE>
An analysis of the Partnership's investment in the equipment joint
venture is as follows:
Net
Net Investment Investment
at Beginning Equity in at End
Date of Period Contributions Earnings Distributions of Period
- ---- -------------- ------------- --------- ------------- ----------
(Amounts in Thousands)
Year Ended
December 31, 1998 $ 185 $ - $ 231 $ 395 $ 21
===== ===== ===== ===== =====
Year Ended
December 31, 1999 $ 21 $ - $ 168 $ 143 $ 46
===== ===== ===== ===== =====
The aggregate financial information of the equipment joint venture is
presented as follows:
December 31, 1999
-----------------
(Amounts in Thousands)
Assets $177
Liabilities 35
Partners' Capital 142
For the Years Ended December 31,
1999 1998
---- ----
(Amounts in Thousands)
Revenue $586 $766
Expenses 72 59
Net Income 514 707
The General Partner earns a management fee of 3% of the Partnership's
respective interest in gross revenues of the Joint Venture. Cash proceeds
subject to a management fee at the joint venture level are not subject to
management fees at the Partnership level.
Financing Joint Venture.
- -----------------------
The Partnership owned a 25% interest in Phoenix Joint Venture 1994-2, a
Financing Joint Venture. This joint venture was closed during 1999. This
investment was accounted for using the equity method of accounting. The other
partners of the venture were entities organized and managed by the General
Partner.
An analysis of the Partnership's investment account in the Financing
Joint Venture is as follows:
Net
Net Investment Equity in Investment
at Beginning Earnings at End
Date of Period Contributions (Losses) Distributions of Period
- ---- -------------- ------------- --------- ------------- ----------
(Amounts in Thousands)
Year Ended
December 31, 1998 $ 168 $ - $ 17 $ 84 $ 101
===== ===== ===== ===== =====
Year Ended
December 31, 1999 $ 101 $ - $ (38) $ 63 $ -
===== ===== ===== ===== =====
20
<PAGE>
The aggregate financial information of the Financing Joint Venture is
presented as follows:
For the Years Ended December 31,
1999 1998
---- ----
(Amounts in Thousands)
Revenue $ 2 $ 85
Expenses 155 17
Net Income (Loss) (153) 68
The General Partner earned a management fee of 3% of the Partnership's
respective interest in gross receipts of the Financing Joint Venture. Revenues
subject to a management fee at the joint venture level were not 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:
1999
----
(Amounts in Thousands)
Equipment Lease Operations $396
Security Deposits 352
General Partner and Affiliates 158
Other 74
----
Total $980
====
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.
The net differences between the tax basis and the reported amounts of
the Partnership's assets and liabilities are as follows at December 31, 1999:
Reported Amounts Tax Basis Net Difference
---------------- --------- --------------
(Amounts in Thousands)
Assets $22,153 $18,781 $ 3,372
Liabilities 980 733 247
Note 9. Related Entities.
----------------
Affiliates of the General Partner serve in the capacity of general
partners in other partnerships, all of which are engaged in the equipment
leasing and financing business.
Note 10. Net Income (Loss) and Distributions per Limited Partnership Unit.
----------------------------------------------------------------
Net income and distributions per limited partnership unit were based on
the Limited Partner's share of net income and distributions, and the weighted
average number of units outstanding of 1,893,715 and 1,914,643 for the years
ended December 31, 1999 and 1998, respectively. 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 net capital contributions.
21
<PAGE>
Note 11. Reimbursed Costs to the General Partner and Affiliates.
------------------------------------------------------
The General Partner and affiliates incur 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 and affiliates 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
$308,000 and $276,000 for the years ended December 31, 1999 and 1998,
respectively. The equipment storage, remarketing and data processing costs
reimbursed to the General Partner during the years ended December 31, 1999 and
1998 were $58,000 and $62,000, respectively.
In addition, the General Partner receives a management fee and an
acquisition fee (see Note 1).
Note 12. Fair Value of Financial Instruments.
-----------------------------------
The carrying amounts reported on the balance sheet for cash and cash
equivalents, available-for-sale securities and notes receivable approximate
their fair values.
Note 13. Legal Proceedings.
-----------------
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Marin Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Sacramento Action").
Plaintiffs have amended the Marin Action twice. Defendants have not yet
answered the Complaint and may file a demurrer to dismiss the claims. Discovery
has not commenced. The Companies intend to vigorously defend the Complaint.
In February 1999, plaintiffs requested a transfer of the Sacramento
Action to Marin County. The Court granted that request, and the case is
currently in transit. Defendants have not yet responded to the Complaint.
Discovery has not commenced. The Companies intend to vigorously defend the
Complaint.
During the year ended December 31, 1999 and 1998, the Partnership
recorded legal expenses of approximately $6,000 and $41,000, respectively, in
connection with the above litigation as indemnification to the General Partner.
The Partnership is not a party to any pending legal proceedings which
would have a material adverse impact on its financial position.
Note 14. Subsequent Events.
-----------------
In January 2000, cash distributions of $35,000 and $575,000 were made
to the General and Limited Partners, respectively.
22
<PAGE>
Item 8. Disagreements on Accounting and Financial Disclosure Matters.
------------------------------------------------------------
None.
PART III
Item 9. 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 Associates II L.P., a California limited partnership, the
Corporate General Partner of which is Phoenix Leasing Associates II, Inc., a
Nevada corporation and a wholly-owned subsidiary of Phoenix Leasing Incorporated
(PLI), a California corporation.
The directors and executive officers of Phoenix Leasing Associates II,
Inc. (PLAII) are as follows:
GUS CONSTANTIN, age 62, is President, and a Director of PLAII. 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.
GARY W. MARTINEZ, age 49, is Senior Vice President and a Director of
PLAII. 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.
HOWARD SOLOVEI, age 38, is the Chief Financial Officer, Treasurer and a
Director of PLA II. He has been associated with PLI since 1984. Mr. Solovei
oversees the Finance Department. He is responsible for the structuring,
planning, and monitoring of the partnerships sponsored by the General Partner
and its affiliates, as well as maintaining the banking relationships. Mr.
Solovei graduated with a B.S. in Business Administration from the University of
California, Berkeley.
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 Income Fund, L.P. and
Phoenix Leasing Cash Distribution Fund IV
Disclosure Pursuant to Section 16, Item 405 of Regulation S-K:
The General Partner (and any corporate general partner of the General
Partner) of the Registrant, and the executive officers of the General Partner
(or any corporate general partner of the General Partner) of the Registrant,
file reports pursuant to Section 16(a) of the Securities Exchange Act of 1934,
as amended. Based solely on the Registrant's review of the copies of such forms
received by the Registrant, the Registrant believes that, during 1998, all such
required reports were filed on a timely basis.
23
<PAGE>
Certain Legal Proceedings.
On October 28, 1997, a Class Action Complaint (the "Complaint") was
filed against Phoenix Leasing Inc., Phoenix Leasing Associates, II and III L.P.,
Phoenix Securities Inc. and Phoenix American Inc. (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Marin Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and re-filed them in a separate lawsuit
making similar allegations (the "Sacramento Action").
Plaintiffs have amended the Marin Action twice. Defendants have not yet
answered the Complaint and may file a demurrer to dismiss the claims. Discovery
has not commenced. The Companies intend to vigorously defend the Complaint.
In February 1999, plaintiffs requested a transfer of the Sacramento
Action to Marin County. The Court granted that request, and the case is
currently in transit. Defendants have not yet responded to the Complaint.
Discovery has not commenced. The Companies intend to vigorously defend the
Complaint.
Item 10. Executive Compensation.
----------------------
Set forth is the information relating to all direct remuneration paid
or accrued by the Registrant during the last year to the General Partner.
<TABLE>
(A) (B) (C) (D)
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
Associates II L.P. General Partner $ 506(1) $ 0 $ 0
====== ===== =====
<FN>
(1) consists of management and acquisition fees.
</FN>
</TABLE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
--------------------------------------------------------------
(a) No person owns of record, or is known by the Registrant to own
beneficially, more than five percent of any class of voting
securities of the Registrant.
(b) The General Partner or its affiliates of the Registrant owns the
equity securities of the Registrant set forth in the following
table:
24
<PAGE>
(1) (2) (3)
Title of Class Amount Beneficially Owned Percent of Class
-------------- ------------------------- ----------------
General Partner Interest Represents a 3% interest in the 100%
Registrant's profits and
distributions, until the Limited
Partners have recovered their
capital contributions plus a
cumulative return of 10% per annum,
compounded quarterly, on the
unrecovered portion thereof.
Thereafter, the General Partner
will receive 15% interest in the
Registrant's profits and distributions.
Limited Partner Interest 1,550 units -
Item 12. Certain Relationships and Related Transactions.
----------------------------------------------
None.
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
Page No.
--------
(a) 1. Financial Statements:
Balance Sheet as of December 31, 1999 11
Statements of Operations and Comprehensive Income
for the Years Ended December 31, 1999 and 1998 12
Statements of Partners' Capital for the Years
Ended December 31, 1999 and 1998 13
Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 14
Notes to Financial Statements 15 - 22
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 quarter ended December 31,
1999.
(c) Exhibits
21. Additional Exhibits:
a) Balance Sheet of Phoenix Leasing Associates II, Inc. E21 1-5
Balance Sheet of Phoenix Leasing Associates II L.P. E21 6-9
27. Financial Data Schedule
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
PHOENIX LEASING CASH DISTRIBUTION FUND V, L.P.,
a California limited partnership
(Registrant)
By: PHOENIX LEASING ASSOCIATES II L.P.,
a California limited partnership,
General Partner
By: PHOENIX LEASING ASSOCIATES II, INC.,
a Nevada corporation,
General Partner
Date: March 17, 2000 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 and a Director of March 17, 2000
- ---------------------- Phoenix Leasing Associates II, Inc. --------------
(Gus Constantin) General Partner
/S/ GARY W. MARTINEZ Senior Vice President and a Director of March 17, 2000
- ---------------------- Phoenix Leasing Associates II, Inc. --------------
(Gary W. Martinez) General Partner
/S/ HOWARD SOLOVEI Chief Financial Officer, March 17, 2000
- ---------------------- Treasurer and a Director of --------------
(Howard Solovei) Phoenix Leasing Associates II, Inc.
General Partner
26
Exhibit 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Phoenix Leasing Associates II, Inc.:
We have audited the accompanying consolidated balance sheets of Phoenix
Leasing Associates II, Inc. (a Nevada corporation) and subsidiary as of
September 30, 1999 and June 30, 1998. 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 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 balance sheets referred to above present fairly, in
all material respects, the financial position of Phoenix Leasing Associates II,
Inc. and subsidiary as of September 30, 1999 and June 30, 1998, in conformity
with generally accepted accounting principles.
San Francisco, California, ARTHUR ANDERSEN LLP
December 28, 1999
Page 1 of 9
<PAGE>
PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
September 30, June 30,
1999 1998
---- ----
Cash and cash equivalents $ 1,128 $ 367
Due from Phoenix Leasing Incorporated 2,083,737 1,569,493
Due from Phoenix Leasing Cash Distribution
Fund V, L.P 146,168 268,759
Investment in Phoenix Leasing Cash Distribution
Fund V, L.P. 40,766 --
----------- -----------
Total Assets $ 2,271,799 $ 1,838,619
=========== ===========
LIABILITIES AND SHAREHOLDER'S EQUITY
Liabilities:
Accounts payable and accrued expenses $ 4,269 $ 729
Deficit investment in Phoenix Leasing Cash
Distribution Fund V, L.P. -- 20,766
----------- -----------
Total Liabilities 4,269 21,495
----------- -----------
Minority Interest in Consolidated Subsidiary 82,962 89,649
----------- -----------
Shareholder's Equity:
Common Stock, without par value, 100 shares
authorized and outstanding 4,000,100 4,000,100
Retained earnings 2,184,468 1,727,375
Less:
Note receivable from affiliate (4,000,000) (4,000,000)
----------- -----------
Total Shareholder's Equity 2,184,568 1,727,475
----------- -----------
Total Liabilities and Shareholder's Equity $ 2,271,799 $ 1,838,619
=========== ===========
The accompanying notes are an integral part of these balance sheets.
2
<PAGE>
PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED BALANCE SHEETS
September 30, 1999
Note 1. Organization:
Phoenix Leasing Associates II, Inc., (the Company), was formed under
the laws of Nevada on June 14, 1990. The Company is a wholly-owned subsidiary of
Phoenix Leasing Incorporated (PLI), a California corporation, and was originally
formed to serve as the general partner of Phoenix Leasing Cash Distribution Fund
V, L.P. (CDF V), a California limited partnership.
Effective July 1, 1998, the Company and all its subsidiaries changed
its fiscal year end from June 30 to September 30.
On August 17, 1990, the Company organized Phoenix Leasing Associates II
L.P., a California limited partnership (PLAIILP), to replace the Company as the
general partner in CDF V. The limited partner of PLAIILP is Lease Management
Associates, Inc., a Nevada corporation controlled by an officer of the Company,
who also owns the parent company of PLI. As the general partner of CDF V,
PLAIILP earns acquisition and management fees and receives the profits, losses
and distributions which are to be allocated to the Company (Note 6). The Company
is the general partner of PLAIILP and, as of September 30, 1999 and June 30,
1998 has a 50% ownership interest. This ownership interest is subject to change
in accordance with the PLAIILP Partnership Agreement. Profits, losses and
distributions attributable to acquisition fees paid to PLAIILP by CDF V are
allocated in proportion to the partners' ownership interests. All other profits,
losses and distributions are allocated to the Company.
Note 2. Principles of Consolidation:
The consolidated balance sheets as of September 30, 1999 and June 30,
1998, include the accounts of the Company and its subsidiary, PLAIILP, over
which the Company exerts significant control and influence. All significant
intercompany accounts and transactions have been eliminated in consolidation.
The minority interest represents the limited partner's interest in PLAIILP.
The Company records its investment in CDF V under the equity method of
accounting. As general partner, the Company has complete authority in, and
responsibility for, the overall management of CDF V, which includes
responsibility for supervising CDF V's acquisition, leasing, remarketing
activities and its sale of equipment.
Note 3. Use of Estimates:
The preparation of consolidated financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements. Actual results could differ from those estimates.
Note 4. Notes Receivable from Affiliate:
PLI, the sole shareholder of the Company, as of September 30, 1999 and
June 30, 1998, has issued demand promissory notes to the Company totaling
$4,000,000. There are no restrictions or covenants associated with this note
which would preclude the Company from receiving the principal or interest
amounts under the terms of the notes. The notes bear interest at a rate equal to
3
<PAGE>
PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED BALANCE SHEETS
September 30, 1999
Note 4. Notes Receivable from Affiliate (continued):
the lesser of 10% or prime rate plus 1%, as determined by Citibank, N.A., New
York, New York. Interest is payable by PLI on the first business day of each
calendar quarter. The principal amount is due and payable upon demand by the
Company.
Note 5. Income Taxes:
During the year ended June 30, 1998, the Company's income or loss for
tax reporting purposes is included in the consolidated and combined tax returns
filed by Phoenix American Incorporated (PAI), an affiliated Nevada corporation.
These returns are prepared on the accrual basis of accounting. Under "Statement
of Financial Accounting Standards No. 109 - Accounting for Income Taxes", the
Company computes taxes as if it was a stand alone company. The resulting tax
liability of $165,356 as of June 30, 1998 was transferred to PAI in accordance
with the Tax Sharing Agreement between the Company and PAI.
Effective July 1, 1998, the Company and all its subsidiaries adopted
treatment as an "S" Corporation pursuant to the Federal Income Tax Regulations
for tax reporting purposes. Federal and state income tax regulations provide
that taxes on the income or loss of the Company are reportable on the
shareholder's individual return.
Note 6. Compensation and Fees:
PLAIILP receives acquisition fees equal to three percent of the
purchase price of assets acquired or financed by CDF V in connection with the
analysis, selection and acquisition or financing of assets, and the continuing
analysis of the overall portfolio of the CDF V's assets, and management fees
equal to three percent of CDF V's gross revenues in connection with managing the
operations of CDF V. In addition, PLAIILP receives an interest in CDF V's
profits, losses and distributions. Management fees of $55,771 and $91,441 and
acquisition fees of $90,397 and $177,318 as of September 30, 1999 and June 30,
1998, respectively, are included in Due from Phoenix Leasing Cash Distribution
Fund V, L.P. on the Balance Sheet.
Note 7. Related Parties:
Phoenix Securities, Inc., an affiliate of the Company, received a fee
for wholesaling activities performed in connection with the offering of the
limited partnership units of CDF V.
The Company has entered into an agreement with PLI, whereby PLI will
provide management services to PLAIILP in connection with the operations and
administration of CDF V. In consideration for the services and activities to be
performed by PLI pursuant to this agreement, the Company pays PLI fees in an
amount equal to: Three percent of CDF V's cumulative gross revenues plus the
lesser of three percent of the purchase price of equipment acquired by and
financing provided to businesses by CDF V or 100% of the net cash attributable
to the acquisition fee which has been distributed to the Company plus 100% of
all other net cash from operations of PLAIILP. Management fees paid to PLI equal
$606,367, and $753,849 for the twelve months ended September 30, 1999 and June
30, 1998, respectively, and $207,319 for the three months ended September 30,
1998.
4
<PAGE>
PHOENIX LEASING ASSOCIATES II, INC. AND SUBSIDIARY
NOTES TO THE CONSOLIDATED BALANCE SHEETS
September 30, 1999
Note 8. Commitments and Contingencies:
On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing Incorporated, Phoenix Leasing Associates, II and III LP., Phoenix
Securities Inc. and Phoenix American Incorporated (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of a constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and refiled them in a separate lawsuit
making similar allegations (the "Ash Action"). That complaint was subsequently
transferred to Marin County as well.
Plaintiffs have amended the Berger Action twice. Defendants recently
answered the complaint. Discovery has recently commenced. The Companies intend
to vigorously defend the Complaint.
Defendants have filed a demurrer to the Ash Complaint, which plaintiffs
amended three times. Discovery has not yet commenced. The Companies intend to
vigorously defend the complaint.
5
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Partners of
Phoenix Leasing Associates II L.P.:
We have audited the accompanying balance sheets of Phoenix Leasing
Associates II L.P. (a California limited partnership) as of September 30, 1999
and June 30, 1998. 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 balance sheets referred to above present fairly, in
all material respects, the financial position of Phoenix Leasing Associates II
L.P. as of September 30, 1999 and June 30, 1998, in conformity with generally
accepted accounting principles.
San Francisco, California, ARTHUR ANDERSEN LLP
December 28, 1999
6
<PAGE>
PHOENIX LEASING ASSOCIATES II L.P.
BALANCE SHEETS
ASSETS
September 30, June 30,
1999 1998
---- ----
Cash and cash equivalents $ 580 $ 343
Due from Phoenix Leasing Cash Distribution
Fund V, L.P 146,168 268,759
Investment in Phoenix Leasing Cash Distribution
Fund V, L.P. 40,766 --
-------- --------
Total Assets $187,514 $269,102
======== ========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued expenses $ 2,135 $ 365
Due to General Partner 101,427 157,332
Deficit investment in Phoenix Leasing Cash
Distribution Fund V, L.P. -- 20,766
-------- --------
Total Liabilities 103,562 178,463
-------- --------
Partners' Capital:
General Partner (99 partnership units) 990 990
Limited Partner (99 partnership units) 82,962 89,649
-------- --------
Total Partners' Capital 83,952 90,639
-------- --------
Total Liabilities and Partners' Capital $187,514 $269,102
======== ========
The accompanying notes are an integral part of these balance sheets.
7
<PAGE>
PHOENIX LEASING ASSOCIATES II L.P.
NOTES TO THE BALANCE SHEETS
September 30, 1999
Note 1. Organization:
Phoenix Leasing Associates II L.P., a California limited partnership
(the Partnership), was formed under the laws of the State of California on
August 17, 1990, to act as the general partner of Phoenix Leasing Cash
Distribution Fund V, L.P.(CDF V), a California limited partnership. The general
partner of the Partnership is Phoenix Leasing Associates II, Inc. (PLAII), a
Nevada corporation and wholly-owned subsidiary of Phoenix Leasing Incorporated
(PLI), a California corporation. The limited partner of the partnership is Lease
Management Associates, Inc., a Nevada corporation controlled by an officer of
PLAII, who owns the ultimate parent of PLAII.
Effective July 1, 1998, the Partnership changed its fiscal year from
June 30 to September 30.
The Partnership records its investment in CDF V under the equity method
of accounting. As general partner, the Partnership has complete authority in,
and responsibility for, the overall management of CDF V, which includes
responsibility for supervising CDF V's acquisition, leasing, remarketing and
sale of equipment.
Note 2. Income Taxes:
The Partnership is not subject to federal and state income taxes on its
income. Federal and state income tax regulations provide that items of income,
gain, loss and deductions, credits and tax preference items of limited
partnerships are reportable by the individual partners in their respective
income tax returns. Accordingly, no liability for such taxes has been recorded
on the Partnership's balance sheets.
Note 3. Use of Estimates:
The preparation of balance sheets in conformity with generally accepted
accounting principles requires management to makes estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the balance sheets. Actual
results could differ from those estimates.
Note 4. Compensation and Fees:
The Partnership receives acquisition fees equal to three percent of the
purchase price of assets acquired or financed by CDF V in connection with the
analysis, selection and acquisition or financing of assets, and the continuing
analysis of the overall portfolio of CDF V's assets, and management fees equal
to three percent of CDF V's gross revenues in connection with managing the
operations of CDF V. In addition, the Partnership receives an interest in CDF
V's profits, losses and distributions. Management fees of $55,771 and $91,441
and acquisition fees of $90,397 and $177,318 as of September 30, 1999 and June
30, 1998, respectively, are included in Due from Phoenix Leasing Cash
Distribution Fund V, L.P. on the Balance Sheet.
Note 5. Allocation of Profits, Losses and Distributions:
Profits and losses attributable to acquisition fees paid to the
Partnership by CDF V are allocated to the partners in proportion to their
ownership interests. All other profits and losses are allocated to PLAII.
Distributions are made in accordance with the terms of the partnership
agreement.
8
<PAGE>
PHOENIX LEASING ASSOCIATES II L.P.
NOTES TO THE BALANCE SHEETS
September 30, 1999
Note 6. Related Parties:
Phoenix Securities, Inc., an affiliate of the Partnership, received a
fee for wholesaling activities performed in connection with the offering of the
limited partnership units of CDF V.
PLAII has entered into an agreement with PLI whereby PLI will provide
management services to the Partnership in connection with the operations and
administration of CDF V. In consideration for the services and activities to be
performed by PLI pursuant to this agreement, PLAII pays PLI fees in an amount
equal to: Three percent of CDF V's cumulative gross revenues plus the lesser of
three percent of the purchase price of equipment acquired by and financing
provided to businesses by CDF V or 100% of the net cash attributed to the
acquisition fee which has been distributed to PLAII plus 100% of all other net
cash from operations of the Partnership. Management fees paid to PLI equal
$606,367 and $753,849 for the twelve months ended September 30, 1999 and June
30, 1998, respectively, and $207,319 for the three months ended September 30,
1998.
Note 7. Commitments and Contingencies:
On October 28, 1997, a Class Action Complaint was filed against Phoenix
Leasing Incorporated, Phoenix Leasing Associates, II and III LP., Phoenix
Securities Inc. and Phoenix American Incorporated (the "Companies") in
California Superior Court for the County of Sacramento by eleven individuals on
behalf of investors in Phoenix Leasing Cash Distribution Funds I through V (the
"Partnerships"). The Companies were served with the Complaint on December 9,
1997. The Complaint sought declaratory and other relief including accounting,
receivership, imposition of a constructive trust and judicial dissolution and
winding up of the Partnerships, and damages based on fraud, breach of fiduciary
duty and breach of contract by the Companies as general partners of the
Partnerships.
Plaintiffs severed one cause of action from the Complaint, a claim
related to the marketing and sale of CDF V, and transferred it to Marin County
Superior Court (the "Berger Action"). Plaintiffs then dismissed the remaining
claims in Sacramento Superior Court and refiled them in a separate lawsuit
making similar allegations (the"Ash Action"). That complaint was subsequently
transferred to Marin County as well.
Plaintiffs have amended the Berger Action twice. Defendants recently
answered the complaint. Discovery has recently commenced. The Companies intend
to vigorously defend the Complaint.
Defendants have filed a demurrer to the Ash Complaint, which plaintiffs
amended three times. Discovery has not yet commenced. The Companies intend to
vigorously defend the complaint.
9
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<MULTIPLIER>1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 4,521
<SECURITIES> 1,729
<RECEIVABLES> 9,329
<ALLOWANCES> 219
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,520
<DEPRECIATION> 2,459
<TOTAL-ASSETS> 22,153
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0
0
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<OTHER-SE> 21,173
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