<PAGE> 1
UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1997
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from _____ to _____.
Commission file number - 0-21458.
--------
TELECOMMUNICATIONS INCOME FUND IX, L.P.
---------------------------------------
(Exact name of registrant as specified in its charter)
Iowa 42-1367356
---- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Second Street S.E., Cedar Rapids, Iowa 52401
------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 319-365-2506
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities pursuant to section 12 (g) of the Act:
Limited Partnership Interests (the "Units")
-------------------------------------------
(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K (X).
As of March 13, 1998, 67,762 Units were issued and outstanding. Based on the
original sales price of $250 per Unit, the aggregate market value at March 13,
1998 was $16,940,500.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the prospectus included in the Partnership's Post Effective
Amendment No. 4 to the Registration Statement on Form S-1 filed December 22,
1992 are incorporated by reference into Part IV.
<PAGE> 2
TELECOMMUNICATIONS INCOME FUND IX, L.P.
1997 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1 Business------------------------------------------------- 3
Item 2 Properties----------------------------------------------- 5
Item 3 Legal Proceedings---------------------------------------- 5
Item 4 Submission of Matters to a Vote of Unit Holders---------- 5
PART II
Item 5 Market for the Registrant's
Common Equity and Related Stockholders Matters----------- 5
Item 6 Selected Financial Data---------------------------------- 6
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations---------------------- 6
Item 8 Financial Statements and Supplementary Data-------------- 13
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure------------------- 29
PART III
Item 10 Directors and Executive Officers of the Registrant------- 29
Item 11 Executive Compensation----------------------------------- 31
Item 12 Security Ownership of Certain
Beneficial Owners and Management------------------------- 32
Item 13 Certain Relationships and Related Transactions----------- 32
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on
Form 8-K------------------------------------------------- 33
SIGNATURES----------------------------------------------- 34
EXHIBIT INDEX-------------------------------------------- 35
<PAGE> 3
PART I
ITEM 1. BUSINESS
Telecommunications Income Fund IX, L.P., an Iowa limited partnership (the
"Partnership"), was organized on April 2, 1991. The general partner is Berthel
Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa corporation that
has been in operation since 1988. The Partnership's business and the executive
offices of the General Partner are located at 100 Second Street S.E., Cedar
Rapids, Iowa 52401. Substantially all of the voting stock of the General Partner
is owned by Berthel Fisher & Company ("Berthel Fisher").
The Partnership began offering Units to the public on October 31, 1991 and
continued to offer Units to the public through April 30, 1993.
The Partnership will operate until December 31, 1999 unless dissolved sooner due
to the occurrence of any of the following events: (i) the vote by limited
partners owning a majority of the Partnership in accordance with the Partnership
Agreement; (ii) the withdrawal, bankruptcy, or dissolution and liquidation or
other cessation to exist as a legal entity of the general partner (unless any
successor general partner elected in accordance with the provisions of the
Partnership Agreement elects to continue the business of the Partnership); (iii)
the final distribution of all liquidating distributions among the limited
partners pursuant to the Partnership Agreement; or (iv) the sale or disposition
of all or substantially all of the assets of the Partnership without the
subsequent reinvestment in equipment.
The business of the Partnership is the acquisition and leasing of equipment,
primarily telecommunications equipment such as pay telephones and call
processing equipment. The Partnership began its primary business activities on
November 29, 1991.
The principle objective of the Partnership is to obtain the maximum available
economic return from its investment in equipment leases to unaffiliated third
parties with a view toward: (i) generating cash flow from operations, with the
intent to make distributions during the Operating Phase (the period which ends
when the General Partner elects to begin the liquidation of the Partnership
assets); (ii) reinvesting (during the Operating Phase) any undistributed cash
flow from operations in additional equipment to be leased to increase the
Partnership's assets; (iii) obtaining the residual values of equipment upon
sale; (iv) obtaining value from sales of the Partnership's lease portfolio upon
entering the Liquidating Phase (the period during which the General Partner will
liquidate the Partnership assets); and (v) providing cash distributions to the
partners during the liquidating phase.
The Partnership acquires telecommunications equipment (primarily pay telephones
and call processing equipment) that is leased to third parties generally under
full payout leases. The Partnership has also acquired other types of equipment
that is subject to full payout leases. Full payout leases are leases that are
expected to generate gross rental payments sufficient to recover the purchase
price of the subject equipment and any overhead and acquisition costs. During
1997, the Partnership acquired equipment with a cost of $4,628,479 that was
leased to its customers.
Equipment acquired by the Partnership is installed in various locations by the
lessees. When the lessee installs the equipment in a location, a site location
agreement gives the lessee the right to have the equipment at this site for a
specified period of time. These site location agreements generally have a three
to five year term. The Partnership, in addition to its ownership of the
equipment, takes an assignment of
<PAGE> 4
ITEM 1. BUSINESS (CONTINUED)
and a first security interest in these site location agreements. Therefore, if a
lessee defaulted, the Partnership would have the ability to re-sell or re-lease
the equipment in place. This "in place" value is generally much higher than the
residual value of the equipment. The telecommunications equipment generates
revenue primarily through long distance phone calls. The Partnership's lessee
generally receives long distance revenue from a contracted third party billing
company. The Partnership also takes an assignment of this revenue.
The General Partner acquires and approves leases on behalf of the Partnership.
The General Partner established guidelines to use in approving lessees.
Generally, before any lease is approved, there is a review of the potential
lessees' financial statements, credit references are checked, and outside
business and/or individual credit reports are obtained.
The equipment purchased by the Partnership consists of advanced technology pay
telephones and call processing systems to be used in hotels, hospitals,
colleges, universities, and correctional institutions. The Partnership has also
purchased and leased hotel satellite television equipment.
The Partnership's telecommunication equipment leases are concentrated in the pay
telephone and hotel industries representing approximately 60% and 9% of the
Partnership's direct finance lease portfolio at December 31, 1997, respectively.
During the year ended December 31, 1997, one customer, North American
Communications Group, Inc., accounted for 10% of the Partnership's income from
direct financing leases. See Item 7 with respect to the status of the North
American Communications Group, Inc. leases.
The leasing industry is very competitive and the Partnership has fewer assets
than some of its major competitors.
A significant portion of the Partnership's business is with customers who are in
the telecommunications industry. The telecommunications industry, particularly
the pay telephone and long distance facets of the industry, is heavily regulated
by the Federal Communications Commission and by various state public utility
commissions. Regulation is not directed at the ownership or leasing of
telecommunications equipment, but is focused primarily on the business of the
Partnership's customers that operate in the telecommunications industry.
Regulation affects rates that can be charged and the relationship of the
regional Bell operating companies to the rest of the pay telephone industry. The
majority of the customers of the Partnership are currently operating within the
range of rates proposed by the FCC. Some customers are below the proposed range
and will be able to increase their rates. Those customers whose rates exceed the
highest rates permitted by the FCC will reduce their rates, but management does
not expect such reductions to affect those customers' ability to make lease
payments. Management does not expect regulation to have any significant negative
impact upon the business of the Partnership.
<PAGE> 5
ITEM 2. PROPERTIES
The Partnership does not own or lease any real estate. The Partnership's
materially important properties consist entirely of equipment under lease. The
carrying value of such equipment is represented by the Partnership's investment
in direct financing leases, net of an allowance for possible losses, and
operating leases that was $10,197,960 at December 31, 1997. This was comprised
primarily of telecommunications equipment, as described in Item 1.
ITEM 3. LEGAL PROCEEDINGS
A foreclosure proceeding was filed on February 20, 1998 in the Iowa District
Court for Linn County located in Cedar Rapids, Iowa against North American
Communications Group, Inc. CWC Communications, Inc., North American
Communications Corporation (Missouri) d/b/a North American Communications of
Georgia, Inc., North American Communications of Mississippi, North American
Communications Group, Inc., d/b/a North American Communications of Louisiana,
Inc., Troy P. Campbell, Sr. And Archie W. Welch, Jr. for foreclosure of the
leased assets. The Partnership included in the foreclosure suit a claim for
damages against the guarantors of the leases North American Communications
Group, Inc., Troy P. Campbell, Sr. and Archie W. Welch, Jr. in the amount of
$2,254,521. See Item 7 for additional information regarding the status of the
North American Communications Group, Inc.
leases.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF UNIT 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 COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS:
The Registrants' Units are not publicly traded. There is no market for the
Registrant's Units and it is unlikely that any will develop. The General Partner
will resist the development of a public market for the Units.
Number of Partners
Title of Class at March 13, 1998
----------------------------------------------------------
Limited Partner 1,176
General Partner 1
Distributions of $2,035,780, $2,039,573, $2,040,208, $2,040,210, and $1,839,448
were made to investors in 1997, 1996, 1995, 1994 and 1993, respectively. This
represented distributions per unit of $30.00 for each of those years.
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended Year Ended Year Ended
Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994 Dec. 31, 1993
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total Revenue $ 2,624,821 $ 3,289,142 $ 2,956,684 $ 2,996,563 $ 2,853,471
Net Income (Loss) (220,095) 1,008,207 1,649,729 1,783,703 2,118,543
Total Assets 11,640,576 15,642,179 20,464,124 18,052,458 19,861,786
Line of Credit 50,557 1,060,490 4,113,504 2,812,598 3,933,841
Bank term loan --- 845,149 1,229,431 --- ---
Provision for Possible Losses 1,801,233 577,931 94,156 270,000 ---
Distributions to Partners 2,035,780 2,039,573 2, 040,208 2,040,210 1839,448
Net Income (Loss) per Unit (3.25) 14.83 24.26 26.23 33.79
Distributions per Unit 30.00 30.00 30.00 30.00 30.00
</TABLE>
The above selected financial data should be read in connection with the
financial statements and related notes appearing elsewhere in this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
- -----------------------------------------------------------------------------------------------
Result of Operations
Description:
<S> <C> <C> <C>
Lease Income $ 1,931,886 $ 2,686,350 $ 2,873,830
Gain on Lease Terminations 505,834 413,880 23,355
Management Fees 274,588 322,601 441,972
Admin. Services 84,000 81,655 82,307
Interest Expense 163,677 492,210 432,197
Professional Fees 62,799 95,564 45,814
Other Expense 82,381 74,448 59,969
Provision for Possible Losses 1,801,233 577,931 94,156
Depreciation 262,751 286,526 150,540
Impairment Loss 113,487 350,000 -0-
</TABLE>
Lease income declined in 1997 versus 1996 and 1995 due to the Partnership's
decreased net investment in direct financing leases. As the Partnership ages and
continues to make distributions to the limited partners, available funds for
reinvestment in equipment have decreased and thus, the decrease in the lease
portfolio and associated lease income. Also as further discussed later in Item
7, a lessee of the Partnership, Value-Added Communications, Inc. ("VAC"), filed
Chapter 11 bankruptcy in 1995. This lessee's bankruptcy filing did not
materially affect the lease income of the Partnership in 1995 since the
Partnership continued to receive full lease payments with the exception of one
monthly payment. However, the income recorded in 1996 for VAC was $35 compared
to $343,516 in 1995. The Partnership continues to originate leases with the
excess cash flow generated by its operations and will do so until the
Partnership's liquidation phase begins. Lease income is expected to continue to
gradually decline until the Partnership's liquidation phase begins when new
leases will cease being written and its existing leases will fully mature or
will be sold and distributions will be made to the Partners. Listed below are
the equipment acquisitions by year for investment in leases:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Equipment acquisitions $ 4,628,479 $ 5,970,136 $ 8,646,868
</TABLE>
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
At the end of a lease term, the Partnership attempts to sell the equipment under
lease to the lessee for an amount at least equal to the residual value booked.
Additionally, from time to time, the Partnership will receive a request from a
lessee for an early pay-off and the amount quoted by the General Partner will
always be at least equal to the Partnership's net investment and typically will
exceed the net investment as evidenced by the net gains recognized by the
Partnership on lease terminations.
Certain lessees have requested early termination of their lease contracts with
the Partnership. As the payphone industry matures, the capital structure of
these lessees has reached a level whereby they are able to secure financing from
other sources. When this occurs, the Partnership will normally quote a buyout to
the lessee which will consist of the entire gross contract balance remaining
plus the residual value of the assets. If this is not acceptable to the lessee,
the Partnership will discount the remaining gross contract payments at a rate of
two percent above prime plus the residual value of the assets. Under either
alternative, the Partnership will recognize a gain on the early termination. In
addition to some lessees improving capital structure, some lessees have been
acquired by other entities whose capital structure is such that they also desire
to refinance the equipment which was under lease to the Partnership. As such,
the Partnership's gain on lease terminations can and will vary from year to year
based on the number of requests received to terminate leases as well as the size
of the contract being terminated. The Partnership uses the cash generated from
these early terminations to purchase equipment for investments in direct
financing leases with other lessees.
Management fees are paid to the General Partner and represent 5% of the lease
rental payments received. Rental payments declined in 1996 due to the
Partnership's decreased net investment in direct financing leases. Rental
payments received in the three years ended December 31, 1996, 1995, and 1994 are
as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Rental Payments Received $5,492,000 $6,452,000 $8,839,440
</TABLE>
The General Partner receives a monthly reimbursement for administrative services
provided to the Partnership which has remained relatively stable in each of the
three years ended December 31, 1997, 1996 and 1995.
The decrease in interest expense in 1997 is a result of the Partnership
borrowing less funds to acquire equipment for investment in direct financing
leases. The Partnership has a line of credit agreement with a bank which bears
interest at a variable rate of 9.5%, 10.13% and 9.5% at December 31, 1997, 1996
and 1995, respectively. On September 11, 1995, the line of credit agreement was
amended to extend the maturity date to November 30, 1997 and reduce the interest
rate from 2.25% over prime to 1.0% over prime (minimum interest charge of $7,500
per month). In addition, certain loan covenants were changed. The agreement was
further amended during 1997 to extend the maturity date to April 30, 1998 and
reduce the line of credit available to the lessor of $2 million (previously
$6.25 million), or 32% of the Partnership's Qualified Accounts, as defined in
the agreement. The minimum interest charge was also reduced to $3,000 per month.
The agreement is cancellable by the lender after giving a 90-day notice and is
collateralized by substantially all assets of the Partnership. The line of
credit is guaranteed by the General Partner and certain affiliates of the
General Partner. Management believes amounts available under the line of credit
are adequate for the foreseeable future.
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
The Partnership also had an installment loan agreement which bore interest at
8.91% and was due in monthly installments through November 1998 with a
subjective acceleration clause. The agreement was collateralized by certain
direct financing leases and a second interest in all other Partnership assets.
The agreement was also guaranteed by the General Partner. Covenants under the
agreement required the Partnership, among other things, to be profitable, not
exceed a 40% debt to original equity raised ratio, and not sell a material
portion of its assets. This note was paid in full at December 31, 1997.
Professional fees included payments for independent auditing services, tax
return preparation, and other accounting assistance. In addition, legal fees
were incurred for various regulatory filing requirements of the Partnership
during 1995, 1996 and 1997. The Partnership incurred $60,160 of legal expense in
1996 associated with the bankruptcy proceedings of two lessees.
Two lessees, Value Added Communications (VAC) and Telecable/Continental,
experienced cash flow problems in 1994 resulting in past due lease payments. The
past due lease payments from Telecable/Continental were converted to notes
receivable during 1994. These notes carried an interest rate of 15% and terms
ranging from three months to one year. At December 31, 1994, a reserve of
$270,000 was recorded to cover the possibility of future losses for leases in
default and other leases.
On October 10, 1995, VAC filed a petition seeking protection under Chapter 11 of
the Bankruptcy Act. The Partnership's net investment in its leases with this
customer was $1,676,442 at December 31, 1995 representing approximately 9% of
the Partnership's net investment in direct financing leases. The bankruptcy
court's Order Approving Emergency Sale indicated that of the Partnership's total
net investment in direct financing leases with VAC, $1,053,919 of leases would
be purchased from the Partnership by other unrelated third parties. The
remaining net investment balance of $622,523, comprised of one lease, was
expected to continue to be repaid according to the terms of the original lease.
The revenues generated by the assets under such remaining lease were considered
adequate to repay the lease according to the original terms.
At June 30, 1996, the net investment was reduced to approximately $474,000. This
reduction was due to lease payments received pursuant to a court order which
expired in March 1996, and to sales to unrelated third parties of the leases and
equipment under lease, which resulted in a loss of approximately $57,000. The
remaining $474,000 investment in VAC leases was secured by a $100,000
certificate of deposit and a guaranty to the Partnership by the site owner where
certain equipment formerly under lease was located. Management estimated it
would recover approximately $350,000 and therefore, a provision for possible
losses of $124,000 was recorded in the second quarter. During the third quarter
of 1996, the Partnership received $100,000 from the certificate of deposit and a
note receivable with a net present value of $201,034 as final settlement of its
claims in the bankruptcy of VAC. An additional $48,966 was therefore charged to
the provision for possible losses with respect to VAC in the third quarter.
On May 6, 1996, a lessee of the Partnership, United Tele-Systems of Virginia,
Inc. ("UTS") filed a Voluntary Petition for Relief under Chapter 11 of the
Bankruptcy Code. This bankruptcy petition was dismissed on May 22, 1996 and, in
connection therewith, the Partnership exercised its right to manage the assets
leased to UTS. The net investment in the leases at the time the assets were
repossessed was approximately $200,000. The Partnership, the General Partner ,
an affiliated partnership and UTS were also named in a lawsuit, filed by another
creditor of UTS. The creditor was claiming $360,000 in compensatory damages and
$350,000 in punitive damages. Based on offers to purchase the pay telephone
equipment and
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
an expected settlement offer related to the lawsuit, the Partnership expected to
incur a loss upon the sale or re-lease of this equipment. Management charged
$135,000 to the provision for possible lease losses for the expected loss in
1996 and reclassified its net investment in the equipment, net of the specific
allowance, to equipment under operating leases pending the equipment's ultimate
sale or re-lease. These assets were sold during 1997 to another customer with no
additional loss to the Partnership and the lawsuit was settled pending the
outcome of an audit which is in process. Management believes any loss as a
result of the audit is adequately covered by the Partnership's general
allowance.
During 1996, management provided a specific reserve of $284,000 related to a
lease with a customer and due to the uncertainty regarding the amount and timing
of future payments reclassified its net investment in the lease at December 31,
1996 of $1,273,643, net of the specific allowance, to equipment under operating
leases. At December 31, 1997, the net investment in this equipment was
$1,037,197. The equipment under this lease is being depreciated under the
straight-line method over its estimated remaining life. Depreciation expense in
1997 amounted to $236,446. Under the operating lease, the customer was to pay
the Partnership an amount based on the percent of the customer's monthly net
cash proceeds from operating the pay phone route. The Partnership received
$104,477 in 1997 from the customer under this arrangement. The customer has not
made a payment since July 1997. Management is currently seeking to sell this
equipment, but as of December 31, 1997, has not found a buyer. Management
estimates the fair market value of the equipment to be its carrying value at
December 31, 1997.
In May 1995, the Partnership exercised its right to manage the assets leased to
Telecable/Continental due to nonpayment of lease receivables. At the time the
Partnership assumed management of these assets, its net investment in the leases
approximated $1,400,000 and the Partnership subsequently purchased approximately
$100,000 of additional equipment. During 1996, $814,000 of this net investment
was leased to an unrelated party under a direct financing lease, which was paid
off in December 1996. The remaining net equipment cost, which had been
depreciated to $514,487 and related to hotel satellite television equipment, is
expected by management to be recovered through the sale of the equipment. Such
net equipment cost has been adjusted for an impairment loss of $350,000 in 1996
and $113,487 in 1997, to reflect management's estimated fair market value of the
equipment. This equipment was held for sale by the Partnership throughout 1997.
Due to cash flow problems experienced during 1997 by a lessee of the
Partnership, North American Communications Group, Inc. ("NACG"), the
Partnership, in an attempt to protect the assets leased to NACG, advanced funds
to various entities to whom NACG owed money, subject to either the terms of the
leases or to promissory notes which were executed by NACG. The Partnership
assisted in arranging a management agreement between NACG and another entity to
provide services to customers of NACG associated with the Partnership's leases.
In spite of the funds advanced by the Partnership and the management contract,
the cash flow of NACG continued to deteriorate. During the past several months,
the General Partner actively solicited bids from parties to purchase the assets
associated with the Partnership leases to NACG. Based on the value of similar
assets and contract sites, management believed the equipment leased to NACG had
substantial value. However, the offers received were not deemed adequate by the
General Partner.
Following a refusal by NACG to voluntarily execute a Deed in Lieu of
Foreclosure, the General Partner decided to institute a foreclose action against
NACG and its affiliates. Finally, the General Partner
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
determined it was no longer economically feasible to continue to advance funds
on behalf of NACG, discontinued doing so and informed all site operators of that
decision. As a result, the Partnership has decided to provide for a specific
loss reserve of $1,596,739 at December 31, 1997 which is equal to the carrying
value of the assets on the Partnership's books. The Partnership will continue to
attempt to sell and/or re-lease these assets and any amounts received through
such efforts will be credited as a recovery of previous charges.
The allowance for possible lease losses is based upon a continuing review of
past lease loss experience, current economic conditions and the underlying lease
asset value of the portfolio. At the end of each quarter a review of the
allowance account is conducted. At a minimum it is the Partnership's desire to
maintain a loss reserve equal to 1.5 percent of the Partnership's investment in
leases and notes, exclusive of any specific reserves. The Partnership currently
has a loss reserve (exclusive of specific reserves) of $298,246 or 2.6% of the
lease and note portfolio. Management has determined to increase its general
allowance due to the loss history of the Partnership.
The Partnership has been unable to collect all of the property taxes it has paid
on behalf of customers leasing equipment from the Partnership. As a result, a
charge of $101,547 has been made to reflect what management believes to be
uncollectible. There remains approximately $81,138 of property tax receivable on
the Partnership's books as of December 31, 1997. The Partnership continues to
pursue the collection of charged-off tax receivables. Any amounts collected will
serve as a recovery against amounts previously written off.
Management has established specific and general loss allowances at December 31,
1997, as follows:
<TABLE>
<S> <C>
General Reserve $ 298,246
Specific Reserve - Inn-Touch/CCN 21,996
Specific Reserve - North American 1,596,739
Specific Reserve - UTS 5,075
-----------
$ 1,922,056
===========
</TABLE>
Specific losses or expected losses charged to the provision for loss allowances
are as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ---------
<S> <C> <C>
VAC -0- $172,966
Inn-Touch/CCN -0- 284,308
UTS -0- 135,000
North American 1,596,739 -0-
Other 102,947 (14,343)
Property Taxes 101,547 -0-
---------- ----------
$1,801,233 $ 577,931
========== ==========
</TABLE>
As of December 31, 1997 there were fourteen customers with payments which were
over 90 days past due. When payments on a customer's account is past due more
than 90 days, the Partnership discontinues recognizing income on those
customer's contracts. The Partnership's net investment in these contracts at
December 31, 1997 was $2,214,791. The contract balance remaining on these
contracts was $2,419,316. Included in this group is NACG (see the discussion
above). Management is monitoring these contracts and at the present time has
determined the Partnership's investment in these contracts is sufficiently
collateralized with the exception of NACG. Management
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
will continue to monitor these contracts and take the necessary steps to protect
the Partnership's investment.
Another customer, has 21 contracts with amounts past due over 60 days. The
contract balance remaining on these contracts was $1,726,921 at December 31,
1997. The Partnership's net investment in these contracts at December 31, 1997
was $1,646,967. The value of the equipment associated with this lease exceeds
the Partnership's remaining net investment in the equipment. In addition, the
lessee is actively seeking a buyer for the equipment. As such, due to the value
of the assets and the potential buyout of this lease, management has decided not
to provide a provision for possible losses for these contracts. There are no
assurances that the sale will materialize, and other events may occur that may
deteriorate the current value of these assets. Management is monitoring these
contracts and will take whatever steps are necessary to protect the
Partnership's investment in these contracts.
Other expense consists primarily of banking, data processing fees and postage
expense. The data processing costs represent costs incurred for the maintenance
of financial records and investor data.
Through December 31, 1997, there have been distributions totaling $10,706,053.
As of December 31, 1997 the Partnership had $458,893 of cash on hand.
The General Partner is engaged directly for its own account in the business of
acquiring and leasing equipment. The General Partner serves as the general
partner of Telecommunications Income Fund X, L.P. ("TIF X") and
Telecommunications Income Fund XI, L.P. ("TIF XI"), publicly owned limited
partnerships that are engaged in the equipment leasing business. Also, an
affiliate of the General Partner serves as a general partner of a privately
offered active limited partnership. As of December 31, 1997, the net proceeds of
the private program and TIF X have been invested in specific equipment. At
December 31, 1997, investor proceeds from TIF XI were not available for
investment by TIF XI. The activities of the General Partner, in regards to its
other leasing activities, has had no impact on the Partnership to date in
management's opinion.
The equipment that the Partnership leases is maintained by the lessee, and it is
the lessee's responsibility to keep the equipment upgraded with any improvements
that may be developed. The Partnership generally establishes the equipment's
residual as 10% of the equipment's original cost. This residual value is
generally expected to be realized by the sale of the equipment at the expiration
of the original lease term. The General Partner monitors the maintenance and
upgrades to the equipment and expects the Partnership to realize residual values
of at least 10%.
The General Partner is not aware of any regulatory issues that may have a
substantial negative impact within the telecommunications industry in which the
Partnership conducts a significant amount of its business. There are, and will
continue to be, regulatory issues within the telecommunications industry that
the General Partner will monitor.
The equipment leases acquired by the Partnership have been financed to yield
rates of return between 15% and 20%. The lease terms vary from 36 months to 60
months. The rate charged on a particular lease depends on a variety of factors,
of which two of the more significant are the size of the transaction and the
financial strength of the lessee.
<PAGE> 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Inflation affects the cost of equipment purchased and the residual values
realized when leases terminate and equipment is sold. The impact of inflation is
mitigated to the extent that any increases in lease related expenses can be
passed on to new lessees as new leases are originated.
The Partnership recognizes that the arrival of the Year 2000 poses a unique
challenge to the ability of all systems to recognize the date change from
December 31, 1999 to January 1, 2000 and, like other companies, has assessed and
is repairing its computer applications and business processes to provide for
their continued functionality. An assessment of the readiness of external
entities which it interfaces with, such as vendors, counterparties, customers,
payment systems, and others, is ongoing. The Partnership does not expect the
cost to address the Year 2000 issue will be material.
The Partnership has determined that the software it utilizes in its operations
is compatible with the Year 2000. The Partnership has not yet determined whether
the Year 2000 issue has been addressed by its customers. If the Partnership's
customers have not addressed this issue, it could lead to non-payment of amounts
owed to the Partnership. The Partnership intends to contact all of its customers
regarding this issue by the middle of 1998.
LIQUIDITY AND CAPITAL RESOURCES
<TABLE>
<CAPTION>
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1996 December 31, 1995
- -------------------------------------------------------------------------------------------------------------------
Major Cash Sources (Uses):
<S> <C> <C> <C>
Operations $ 1,548,777 $ 1,803,251 $ 1,830,610
Net Proceeds (Payments) on Line of Credit (1,009,933) (3,053,013) 1,300,906
Repayments/Terminations of
Direct Financing Leases 7,510,801 10,107,822 6,231,112
Purchase of Equipment and Leases (4,628,479) (5,970,136) (8,646,868)
Distributions to Partners (2,035,790) (2,039,573) (2,040,208)
</TABLE>
Under terms of the Partnership agreement, the Partnership is required to
establish working capital reserves of no less than 1% ($170,018 at December 31,
1997) of the gross proceeds from issuance of Units to satisfy general liquidity
requirements, operating costs of equipment, and the maintenance and
refurbishment of equipment. At December 31, 1997, actual cash on hand was
$458,893.
The Partnership has a line of credit agreement with a bank which bears interest
at a variable rate of 9.5%, 10.13% and 9.5% at December 31, 1997, 1996 and 1995,
respectively. On September 11, 1995, the line of credit agreement was amended to
extend the maturity date to November 30, 1997 and reduce the interest rate from
2.25% over prime to 1.0% over prime (minimum interest charge of $7,500 per
month). In addition, certain loan covenants were changed. The agreement was
further amended during 1997 to extend the maturity date to April 30, 1998 and
reduce the line of credit available to the lessor of $2 million (previously
$6.25 million), or 32% of the Partnership's Qualified Accounts, as defined in
the agreement. The minimum interest charge was also reduced to $3,000 per month.
The agreement is cancellable by the lender after giving a 90-day notice and is
collateralized by substantially all assets of the Partnership. The line of
credit is guaranteed by the General Partner and certain affiliates of the
General Partner. Management believes amounts available under the line of credit
are adequate for the foreseeable future. Management is currently working with
the present lender and expects to renew the existing line of credit.
<PAGE> 13
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Cash flow from operating activities has been less than the distributions to
Partners for the past three years.
At any time after October 30, 1996, but no later than April 30, 1998, the
Partnership will cease reinvestment in equipment and leases and will begin the
orderly liquidation of Partnership assets. The Partnership must dissolve on
December 31, 1999, or earlier, upon the occurrence of certain events. To date,
the General Partner has made preliminary inquiries of certain parties with
respect to a method of liquidation of all or a portion of the Partnership's
assets. No agreements, however, have been entered into and the General Partner
will continue to pursue the best possible liquidation scenario on behalf of the
Partnership.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and related information as of and for
the years ended December 31, 1997, December 31, 1996 and December 31, 1995 are
included in Item 8:
Report of Independent Auditors'
Balance Sheets
Statements of Operations
Statements of Changes in Partners' Equity
Statements of Cash Flows
Notes to Financial Statements
<PAGE> 14
INDEPENDENT AUDITORS' REPORT
To the Partners
Telecommunications Income Fund IX, L.P.
We have audited the accompanying balance sheets of Telecommunications Income
Fund IX, L.P. as of December 31, 1997 and 1996, and the related statements of
operations, changes in partners' equity and cash flows for each of the three
years in the period ended December 31, 1997. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of Telecommunications Income Fund IX, L.P. at
December 31, 1997 and 1996, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 1997, in conformity
with generally accepted accounting principles.
Deloitte & Touche LLP
Cedar Rapids, Iowa
March 5, 1998
<PAGE> 15
TELECOMMUNICATIONS INCOME FUND IX, L.P.
BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
ASSETS (Note 5) 1997 1996
<S> <C> <C>
Cash and cash equivalents $ 458,893 $ 497,144
Available-for-sale security 65,389 60,310
Net investment in direct financing leases
and notes receivable (Note 2) 11,513,511 13,575,298
Allowance for possible loan and lease losses (Note 3) (1,922,056) (244,814)
------------- -----------
Direct financing leases and notes receivable, net 9,591,455 13,330,484
Equipment leased under operating leases, less accumulated
depreciation of $261,600 in 1997 and $23,144 in 1996 1,041,197 1,307,948
Equipment held for sale 51,000 164,487
Intangibles, less accumulated amortization of
$9,258 in 1997 and $5,104 in 1996 48,582 7,615
Other assets 384,060 274,191
------------ ------------
TOTAL $ 11,640,576 $ 15,642,179
============ ============
LIABILITIES AND PARTNERS' EQUITY
LIABILITIES:
Line-of-credit agreement (Note 5) $ 50,557 $ 1,060,490
Trade accounts payable 17,336 4,059
Due to affiliates 96,472 47,719
Accrued expenses and other liabilities 202,272 61,352
Lease security deposits 365,752 439,033
Note payable (Note 5) -- 845,149
------------ -------------
Total liabilities 732,389 2,457,802
------------ -------------
PARTNERS' EQUITY, 100,000 units authorized (Notes 1,6):
General partner, 40 units issued and outstanding 10,502 11,832
Limited partners, 67,722 units in 1997 and 67,862 units
in 1996 issued and outstanding 10,912,710 13,192,649
Unrealized loss on available-for-sale security (15,025) (20,104)
------------ ------------
Total partners' equity 10,908,187 13,184,377
------------ ------------
TOTAL $ 11,640,576 $ 15,642,179
============ ============
</TABLE>
See notes to financial statements.
-2-
<PAGE> 16
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
REVENUES:
<S> <C> <C> <C>
Income from direct financing leases $ 1,931,886 $ 2,686,350 $ 2,873,830
Gain on lease terminations 505,834 413,880 23,355
Interest and other income 187,101 188,912 59,499
------------- ------------ ------------
Total revenues 2,624,821 3,289,142 2,956,684
------------- ------------ ------------
EXPENSES:
Management and administrative fees (Note 7) 358,588 404,256 524,279
Other general and administrative expenses 145,180 170,012 105,783
Interest expense 163,677 492,210 432,197
Provision for possible loan and lease losses (Note 3) 1,801,233 577,931 94,156
Depreciation expense 262,751 286,526 150,540
Impairment loss on equipment (Note 4) 113,487 350,000 -
------------- ------------ ------------
Total expenses 2,844,916 2,280,935 1,306,955
------------- ------------ ------------
NET INCOME (LOSS) $ (220,095) $ 1,008,207 $ 1,649,729
============= ============ ============
NET INCOME (LOSS) ATTRIBUTED TO:
General partner $ (130) $ 593 $ 970
Limited partners (219,965) 1,007,614 1,648,759
------------- ------------ ------------
$ (220,095) $ 1,008,207 $ 1,649,729
============= ============ ============
NET INCOME (LOSS) PER PARTNERSHIP UNIT $ (3.25) $ 14.83 $ 24.26
============= ============ ============
WEIGHTED AVERAGE PARTNERSHIP UNITS
OUTSTANDING 67,762 67,990 68,007
============= ============= ============
</TABLE>
See notes to financial statements.
-3-
<PAGE> 17
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
UNREALIZED
GENERAL LOSS ON
PARTNER LIMITED PARTNERS AVAILABLE- TOTAL
-------------------------------- FOR-SALE PARTNERS'
(40 UNITS) UNITS AMOUNT SECURITY EQUITY
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 $ 12,669 $ 67,967 $14,639,907 $ -- 14,652,576
Net income 970 -- 1,648,759 -- 1,649,729
Distributions to partners
($30.00 per unit) (Note 6) (1,200) -- (2,039,008) -- (2,040,208)
------------ ------------ ---------- ----------- -----------
BALANCE AT DECEMBER 31, 1995 12,439 67,967 14,249,658 -- 14,262,097
Net income 593 -- 1,007,614 -- 1,008,207
Distributions to partners
($30.00 per unit) (Note 6) (1,200) -- (2,038,373) -- (2,039,573)
Withdrawal of limited partners -- (105) (26,250) -- (26,250)
Change in unrealized loss on
available-for-sale security -- -- -- (20,104) (20,104)
------------ ------------ ---------- ----------- ------------
BALANCE AT DECEMBER 31, 1996 11,832 67,862 13,192,649 (20,104) 13,184,377
Net loss (130) -- (219,965) -- (220,095)
Distributions to partners
($30.00 per unit) (Note 6) (1,200) -- (2,034,580) -- (2,035,780)
Withdrawal of limited partners -- (140) (25,394) -- (25,394)
Change in unrealized loss on
available-for-sale security -- -- -- 5,079 5,079
------------ ------------ ---------- ---------- ------------
BALANCE AT DECEMBER 31, 1997 $ 10,502 $ 67,722 $10,912,710 $ (15,025) $ 10,908,187
============ ============ =========== ========== ============
</TABLE>
See notes to financial statements.
-4-
<PAGE> 18
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
OPERATING ACTIVITIES:
<S> <C> <C> <C>
Net income (loss) $ (220,095) $1,008,207 $1,649,729
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Gain on lease terminations (505,834) (413,880) (23,355)
Depreciation of equipment 262,751 286,526 150,540
Amortization of intangibles 4,154 5,104 9,593
Provision for possible loan and lease losses 1,801,233 577,931 94,156
Impairment loss on equipment 113,487 350,000 --
Changes in operating assets and liabilities:
Other assets (109,869) 193,752 (251,184)
Trade accounts payable 13,277 (26,917) 30,976
Due to affiliates 48,753 (159,176) 177,929
Accrued expenses and other liabilities 140,920 (18,296) (7,774)
----------- ---------- ----------
Net cash from operating activities 1,548,777 1,803,251 1,830,610
----------- ---------- ----------
INVESTING ACTIVITIES:
Acquisition of, and purchases of equipment for,
direct financing leases (4,628,479) (5,970,136) (8,646,868)
Repayments of direct financing leases 3,207,067 3,233,298 5,814,344
Proceeds from termination of direct financing leases 4,303,734 6,874,524 416,768
Repayments of notes receivable 6,308 -- 29,113
Issuance of notes receivable (441,000) -- (5,074)
Net lease security deposits collected (paid) (73,281) (102,540) 70,677
----------- ---------- ----------
Net cash from investing activities 2,374,349 4,035,146 (2,321,040)
----------- ---------- ----------
FINANCING ACTIVITIES:
Proceeds from line-of-credit borrowings 13,318,592 15,614,221 13,275,220
Repayments of line-of-credit borrowings (14,328,525) (18,667,235) (11,974,314)
Proceeds from additional borrowings -- -- 1,350,000
Repayments of additional borrowings (845,149) (384,282) (120,569)
Loan origination costs incurred (45,121) -- (13,500)
Distributions and withdrawals paid to partners (2,061,174) (2,065,823) (2,040,208)
------------ ---------- ----------
Net cash from financing activities (3,961,377) (5,503,119) 476,629
------------ ----------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (38,251) 335,278 (13,801)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR 497,144 161,866 175,667
------------ ---------- ----------
CASH AND CASH EQUIVALENTS AT
END OF YEAR $ 458,893 $ 497,144 $ 161,866
============ ========== ==========
</TABLE>
(Continued)
-5-
<PAGE> 19
TELECOMMUNICATIONS INCOME FUND IX, L.P.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995 (CONCLUDED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996 1995
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
<S> <C> <C> <C>
Interest paid $172,586 $ 498,431 $ 417,132
Noncash investing and financing activities:
Available-for-sale security exchanged for payment on lease -- 80,414 --
Equipment reclassified from direct financing leases to operating leases -- 1,331,092 1,372,956
Equipment reclassified from note receivable to operating leases -- -- 107,551
Equipment reclassified from operating leases to held for sale -- 164,487 --
Equipment reclassified from operating leases to direct financing leases -- 552,098 --
Change in unrealized loss on available-for-sale security
(5,079) (20,104) --
</TABLE>
See notes to financial statements.
-6-
<PAGE> 20
TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- --------------------------------------------------------------------------------
1. SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND NATURE OF OPERATIONS- Telecommunications Income Fund IX,
L.P. (the "Partnership") was formed on April 2, 1991 under the Iowa
Limited Partnership Act. The general partner of the Partnership is Berthel
Fisher & Company Leasing, Inc. (the "General Partner"), an Iowa
corporation. During its offering period, which ended April 30, 1993, the
Partnership sold 68,007 units of partnership interests at a price per unit
of $250.
The Partnership's operations are conducted throughout the United States.
The Partnership primarily acquires telecommunications equipment for lease
to third parties. The lease agreements with individual customers are
generally in excess of $500,000 and certain agreements exceed 10% of the
Partnership's direct finance lease portfolio (see Note 2). At any time
after October 30, 1996, but no later than April 30, 1998, the Partnership
will cease reinvestment in equipment and leases and will begin the orderly
liquidation of Partnership assets. The Partnership must dissolve on
December 31, 1999, or earlier, upon the occurrence of certain events (see
Note 6).
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
significantly from those estimated. Material estimates that are
particularly susceptible to significant change in the near-term relate to
the determination of the allowance for possible loan and lease losses and
the estimated unguaranteed residual values of the Partnership's leased
equipment.
Most of the Partnership's leases and notes receivable are with customers
that are in the entrepreneurial stage and, therefore, are highly leveraged
and require financing in place of or to supplement financing from banks.
Although the Partnership attempts to mitigate its credit risk through the
use of a variety of commercial credit reporting agencies when processing
the applications of its customers, failure of the Partnership's customers
to make scheduled payments under their equipment leases and notes
receivable could have a material near-term impact on the allowance for
possible loan and lease losses.
Realization of residual values depends on many factors, several of which
are not within the Partnership's control, including general market
conditions at the time of the original contract's expiration, whether
there has been unusual wear and tear on, or use of, the equipment, the
cost of comparable new equipment, the extent, if any, to which the
equipment has become technologically or economically obsolete during the
contract term and the effects of any additional or amended government
regulations. These factors, among others, could have a material near-term
impact on the estimated unguaranteed residual values.
CERTAIN RISK CONCENTRATIONS - The Partnership's telecommunication
equipment leases are concentrated in the pay telephone and hotel
industries representing approximately 60% and 9%, and 78% and 7% of the
Partnership's direct finance lease portfolio at December 31, 1997 and
1996, respectively.
-7-
<PAGE> 21
RELATED PARTY TRANSACTIONS - In fulfilling its role as general partner,
Berthel Fisher & Company Leasing, Inc. enters into transactions with the
Partnership in the normal course of business. Further, the Partnership
also enters into transactions with affiliates of Berthel Fisher & Company
Leasing, Inc. These transactions are set forth in the notes that follow.
Management is of the opinion that these transactions are in accordance
with the terms of the Agreement of Limited Partnership.
CASH AND CASH EQUIVALENTS - The Partnership considers all highly liquid
investments with a maturity of three months or less when purchased to be
cash equivalents.
AVAILABLE-FOR-SALE SECURITY - The Partnership has an investment in a
marketable equity security classified as available-for-sale.
Available-for-sale securities are carried at fair value, with unrealized
gains and losses reported as a separate component of partners' equity. At
December 31, 1997, the security had a cost of $80,414 and an estimated
fair value of $65,389, resulting in an unrealized loss of $15,025. Fair
value is determined using published market prices.
NET INVESTMENT IN DIRECT FINANCING LEASES - The Partnership's primary
activity consists of leasing telecommunications equipment under direct
financing leases generally over a period of three to five years. At the
time of closing a direct financing lease, the Partnership records the
gross lease contract receivable, the estimated unguaranteed residual value
and unearned lease income. The unearned lease income represents the excess
of the gross lease receivable plus the estimated unguaranteed residual
value over the cost of the equipment leased. In addition, the Partnership
capitalizes all initial direct costs associated with originating the
direct financing lease. The unearned income and initial direct costs are
amortized to income over the lease term so as to produce a constant
periodic rate-of-return on the net investment in the lease. Lessees are
responsible for all taxes, insurance and maintenance costs.
The realization of the estimated unguaranteed residual value of leased
equipment depends on the value of the leased equipment at the end of the
lease term and is not a part of the contractual agreement with the lessee.
Estimated residual values are based on estimates of amounts historically
realized by the Partnership for similar equipment and are periodically
reviewed by management for possible impairment.
Direct financing leases are accounted for as operating leases for income
tax purposes.
NOTES RECEIVABLE - Notes receivable are carried at the principal balance
outstanding. Interest income on notes receivable is accrued based on the
principal amount outstanding.
ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES - The Partnership performs
credit evaluations prior to approval of a loan and lease. Subsequently,
the creditworthiness of the customer and the value of the underlying
assets are monitored on an ongoing basis. Under its lease agreements, the
Partnership retains legal ownership of the leased asset. The Partnership
maintains an allowance for possible loan and lease losses which could
arise should customers become unable to discharge their obligations under
the loan and lease agreements. The allowance for possible loan and lease
losses is maintained at a level deemed appropriate by management to
provide for known and inherent risks in the loan and lease portfolio. The
allowance is based upon a continuing review of past loss experience,
current economic conditions, delinquent loans and leases, an estimate of
potential loss exposure on significant customers in adverse situations,
and the underlying asset value. The consideration of such future potential
losses also includes an evaluation for other than temporary declines in
value of the underlying assets. Loans and leases which are deemed
uncollectible are charged off and deducted from the allowance. The
provision for possible loan and lease losses and recoveries are added to
the allowance.
-8-
<PAGE> 22
EQUIPMENT - Equipment leased under operating leases is stated at cost less
accumulated depreciation. The equipment is depreciated using the
straight-line method over the estimated useful lives of the assets (five
years) to the estimated residual value of the equipment at the end of the
lease term. Estimated residual values are based on estimates of amounts
historically realized by the Partnership for similar equipment and are
periodically reviewed by management for possible impairment.
Equipment held for sale is stated at lower of cost or estimated fair
market value.
INTANGIBLES - Intangibles consist of organization costs incurred with the
formation of the Partnership and financing costs incurred in connection
with borrowing agreements. Deferred organization expenses are being
amortized over a five-year period. Deferred financing costs are being
amortized over the life of the related debt, which is approximately three
years.
TAX STATUS - Under present income tax laws, the Partnership is not liable
for income taxes, as each partner recognizes a proportionate share of the
Partnership income or loss in their income tax return. Accordingly, no
provision for income taxes is made in the financial statements of the
Partnership.
NET INCOME (LOSS) PER PARTNERSHIP UNIT - Net income (loss) per partnership
unit is based on the weighted average number of units outstanding
(including both general and limited partners' units).
IMPACT OF NEW ACCOUNTING PRONOUNCEMENTS - In June 1997, the Financial
Accounting Standards Board ("FASB") issued Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income".
SFAS No. 130 establishes standards for reporting and display of
comprehensive income and its components in the financial statements. SFAS
No. 130 is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods provided for
comparative purposes is required. The Partnership is in the process of
determining its preferred format. The adoption of SFAS No. 130 will have
no impact on the Partnership's results of operations, financial position
or cash flows.
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information". SFAS No. 131 establishes standards
for the way that public business enterprises report information about
operating segments in annual financial statements and requires that those
enterprises report selected information about operating segments in
interim financial reports issued to shareholders. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. SFAS No. 131 is effective for financial
statements for fiscal years beginning after December 15,1997. Financial
statement disclosures for prior periods are required to be restated. The
Partnership is in the process of evaluating the disclosure requirements.
The adoption of SFAS No. 131 will have no impact on the Partnership's
consolidated results of operations, financial position or cash flows.
-9-
<PAGE> 23
2. NET INVESTMENT IN DIRECT FINANCING LEASES AND NOTES RECEIVABLE
The Partnership's net investment in direct financing leases and notes
receivable consists of the following at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
<S> <C> <C>
Minimum lease payments receivable $ 12,427,455 $ 15,905,074
Estimated unguaranteed residual values 1,192,611 1,740,217
Unearned income (2,571,275) (4,077,214)
Unamortized initial direct costs 30,028 7,221
Notes receivable 434,692 -
------------- -------------
Net investment in direct financing leases and notes receivable $ 11,513,511 $ 13,575,298
============= =============
</TABLE>
At December 31, 1997, future minimum payments to be received under the
direct financing leases and the estimated unguaranteed residuals to be
realized at the expiration of the direct financing leases are as follows:
<TABLE>
<CAPTION>
MINIMUM ESTIMATED
LEASE UNGUARANTEED
PAYMENTS RESIDUAL
RECEIVABLE VALUES
Years ending December 31:
<S> <C> <C>
1998 $ 5,735,198 $ 268,006
1999 3,366,751 134,932
2000 2,264,123 456,652
2001 874,775 191,865
2002 185,312 141,156
Thereafter 1,296 -
----------- ----------
Total $12,427,455 $1,192,611
=========== ==========
</TABLE>
The Partnership, General Partner and certain affiliates of the General
Partner purchase directly and indirectly a substantial portion of
telecommunications equipment under lease from Intellicall, Inc., a
publicly-held company. The General Partner's parent and certain limited
partners are investors in a limited partnership which owns approximately
7% of the outstanding common stock of Intellicall, Inc. In addition, a
principal stockholder of the General Partner's parent is also an investor
in this limited partnership.
Additionally, the Partnership leases equipment to certain companies for
which the General Partner or its affiliates have an ownership interest in,
provide financing to, or provide investment advisory services for such
companies. The Partnership's net investment in direct financing leases
with these companies approximated $4,189,197 and $447,000 at December 31,
1997 and 1996, respectively.
-10-
<PAGE> 24
Four customers each account for 10% or more of the amount of income from
direct financing leases for the years ended December 31, 1997, 1996 and
1995, as follows:
1997 1996 1995
Customer A 9 % 10 % 13 %
Customer B - - 12
Customer C - 12 17
Customer D 10 10 4
3. ALLOWANCE FOR POSSIBLE LOAN AND LEASE LOSSES
The changes in the allowance for possible loan and lease losses for the
years ended December 31, 1997, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
Balance at beginning of year $ 244,814 $ 364,156 $ 270,000
Provision 1,801,233 577,931 94,156
Charge-offs (123,991) (697,273) -
------------- ---------- ----------
Balance at end of year $ 1,922,056 $ 244,814 $ 364,156
============= ========== ==========
</TABLE>
The allowance for possible loan and lease losses consisted of specific
allowances of $1,623,810, $22,000 and $0 for certain leases and general
unallocated allowances of $298,246, $222,814, and $364,156 at December 31,
1997, 1996 and 1995, respectively.
On October 10, 1995, a lessee of the Partnership, Value-Added
Communications, Inc. ("VAC") filed a petition seeking protection under
Chapter 11 of the Bankruptcy Act. The Partnership's net investment in its
leases with this customer was $1,676,442 at December 31, 1995 representing
approximately 9% of the Partnership's net investment in direct financing
leases. The bankruptcy court's Order Approving Emergency Sale indicated
that of the Partnership's total net investment in direct financing leases
with VAC, $1,053,919 of leases would be purchased from the Partnership by
other unrelated third parties at no loss to the Partnership. The remaining
net investment balance of $622,523, comprised of one lease, was expected
to continue to be repaid according to the terms of the original lease. The
revenues generated by the assets under such remaining lease were
considered adequate to repay the lease according to the original terms.
During 1996, pursuant to the court order, $1,202,442 of leases were sold
to unrelated third parties which resulted in a loss of approximately
$57,000 and was charged to the allowance for possible loan and lease
losses. The remaining $474,000 investment in VAC leases was collateralized
by a $100,000 certificate of deposit and a guaranty to the Partnership by
the site owner where certain equipment formerly under lease was located.
During the third quarter of 1996, the Partnership received $100,000 from
the certificate of deposit and a note receivable with a net present value
of $201,034 as final settlement of its claims in the bankruptcy of VAC.
Therefore, $172,966 was charged to the provision for possible loan and
lease losses with respect to VAC.
-11-
<PAGE> 25
On May 6, 1996, a lessee of the Partnership, United Tele-Systems of
Virginia, Inc. ("UTS") filed a Voluntary Petition for Relief under Chapter
11 of the Bankruptcy Code. The bankruptcy petition was dismissed on May
22, 1996 and, in connection therewith, the Partnership exercised its right
to manage the assets leased to UTS. The net investment in the leases at
the time the assets were repossessed was approximately $200,000. The
Partnership, the General Partner, an affiliated partnership and UTS were
named in a lawsuit, filed by another creditor of UTS. The creditor was
claiming $360,000 in compensatory damages and $350,000 in punitive
damages. Based on offers to purchase the pay telephone equipment and an
expected settlement offer related to the lawsuit, the Partnership expected
to incur a loss upon the sale or re-lease of this equipment. Management
charged $135,000 to the provision for possible loan and lease losses for
the expected loss in 1996 and reclassified its net investment in the
equipment, net of the specific allowance, to equipment under operating
leases pending the equipment's ultimate sale or re-lease. These assets
were sold during 1997 to another customer with no additional loss to the
Partnership. Also, the lawsuit was settled pending the outcome of an audit
which is in process. Management believes any loss as a result of the audit
is adequately covered by the Partnership's general allowance.
During 1996, management provided a specific reserve of $284,000 related to
a lease with a customer and due to the uncertainty regarding the amount
and timing of future payments reclassified its net investment in the lease
at December 31, 1996 of $1,273,643, net of the specific allowance, to
equipment under operating leases. At December 31, 1997, the net investment
in this equipment was $1,037,197. The equipment under this lease is being
depreciated under the straight-line method over its estimated remaining
life. Depreciation expense in 1997 amounted to $236,446. Under the
operating lease, the customer is to pay the Partnership an amount based on
a percent of the customer's monthly net cash proceeds from operating the
pay phone route. The Partnership received $104,477 in 1997 from the
customer under this arrangement. Management is currently seeking to sell
this equipment, but as of December 31, 1997, has not found a buyer.
Management estimates the fair market value of the equipment to be its
carrying value at December 31, 1997.
Due to cash flow problems experienced during 1997 by a lessee of the
Partnership, North American Communications Group, Inc. ("NACG"), the
Partnership, in an attempt to protect the assets leased to NACG, advanced
funds to various entities to whom NACG owed money related to the operation
of such leased assets. In addition, the Partnership assisted in arranging
a management agreement between NACG and another entity to attempt to
improve NACG's cash flow generated by the leased assets. In spite of the
funds advanced by the Partnership and the management agreement, the cash
flow of NACG continued to deteriorate. During the past several months, the
General Partner actively solicited bids from parties to purchase the
assets associated with the Partnership leases to NACG. Based on the value
of similar assets and contract sites, management believed the equipment
leased to NACG had substantial value. However, the offers received were
not adequate to cover additional funds which were required to be advanced
to keep the equipment sites operating. The General Partner, therefore,
determined it was no longer economically feasible to continue to advance
funds on behalf of NACG, discontinued doing so and informed all site
operators of that decision. As a result, the Partnership decided to
provide for a specific allowance of $1,596,739 at December 31, 1997 which
is equal to the carrying value of the leases and advances associated with
NACG.
The Partnership and an affiliated partnership, Telecommunications Income
Fund X, have initiated a foreclosure action against NACG and the
guarantors under the leases and advances seeking the sale of the assets
and a judgment against NACG and the guarantors for any deficiency. Amounts
received, if any, will be credited to the allowance for possible loan and
lease losses.
-12-
<PAGE> 26
4. EQUIPMENT HELD FOR SALE
In May 1995, the Partnership exercised its right to manage the assets
leased to Telecable/Continental due to nonpayment of lease receivables. At
the time the Partnership assumed management of these assets, its net
investment in the leases approximated $1,400,000 and the Partnership
subsequently purchased approximately $100,000 of additional equipment.
During 1996, $814,000 of this net investment was leased to an unrelated
party under a direct financing lease, which was paid off in December 1996.
The remaining net equipment cost, which had been depreciated to $514,487
and relates to hotel satellite television equipment, is expected by
management to be recovered through the sale of the equipment. Such net
equipment cost has been adjusted for an impairment loss of $350,000 in
1996 and $113,487 in 1997, to reflect management's estimated fair market
value of the equipment. This equipment was held for sale by the
Partnership throughout 1997.
5. BORROWING AGREEMENTS
The Partnership has a line-of-credit agreement with a bank which bears
interest at a variable rate of 9.5%, 10.13% and 9.5% at December 31, 1997,
1996 and 1995, respectively. On September 11, 1995, the line-of-credit
agreement was amended to extend the maturity date to November 30, 1997 and
reduce the interest rate from 2.25% over prime to 1.0% over prime (minimum
interest charge of $7,500 per month). In addition, certain loan covenants
were changed. The agreement was further amended during 1997 to extend the
maturity date to April 30, 1998 and reduce the line-of-credit available to
the lesser of $2 million (previously $6.25 million), or 32% of the
Partnership's Qualified Accounts, as defined in the agreement. The minimum
interest charge was also reduced to $3,000 per month. The agreement is
cancellable by the lender after giving a 90-day notice and is
collateralized by substantially all assets of the Partnership. The
line-of-credit is guaranteed by the General Partner and certain affiliates
of the General Partner. Management is currently working with the existing
lender to renew the line-of-credit. Management believes amounts available
under the line of credit are adequate for the foreseeable future.
The Partnership also had an installment loan agreement which bore interest
at 8.91% and was due in monthly installments through November 1998 with a
subjective acceleration clause. The agreement was collateralized by
certain direct financing leases and a second interest in all other
Partnership assets. The agreement was also guaranteed by the General
Partner. Covenants under the agreement required the Partnership, among
other things, to be profitable, not exceed a 40% debt to original equity
raised ratio, and not sell a material portion of its assets. This note was
paid in full at December 31, 1997.
6. LIMITED PARTNERSHIP AGREEMENT
The Partnership was formed pursuant to an Agreement of Limited Partnership
dated as of April 2, 1991 and amended August 12, 1991 (the "Agreement").
The Agreement outlines capital contributions to be made by the partners
and the allocation of cash distributions, net income and net loss to the
partners. Capital contributions by the partners to the Partnership consist
of the $10,000 contributed by the General Partner and the amounts
contributed by limited partners for the purchase of their units.
-13-
<PAGE> 27
Net income or net loss allocated to the limited partners will be
apportioned among them based on the number of limited partnership units
held and on the number of months within the respective year that such
units were held. Any share of Partnership net loss will first be allocated
to the limited partners to the extent of their positive capital account
balances. Any share of additional net loss will be allocated to the
General Partner. Any Partnership net income will first be allocated to
partners with negative capital accounts in proportion to, and to the
extent of, such negative capital accounts. Except as provided below, any
additional net income will then be allocated to the General Partner and
limited partners based on number of units held. During liquidation of the
Partnership, when cash distributions are to be made 80% to the limited
partners and 20% to the General Partner (see below), net income will be
allocated 80% to the limited partners and 20% to the General Partner.
During the Partnership's operating phase, to the extent there is cash
available for distribution, cash distributions will be made on a monthly
or quarterly basis in the following order of priority: first, to reimburse
the General Partner for administrative services it provides to the
Partnership, as further described in the Agreement (see Note 7); second,
to the limited partners up to amounts representing a 12% annual return on
their adjusted capital contribution (as defined), of which 8% annually
will be cumulative; and third, to the General Partner, representing a
monthly equipment management fee of 5% of the gross rental payments
received by the Partnership (see Note 7). To the extent that cash is not
available to pay all or a portion of the equipment management fee pursuant
to the above priority distributions, such fee will accrue and accumulate.
Any remaining cash distributions after payment of the above (including
arrearages) will be paid, at the discretion of the General Partner, to the
limited partners.
During the Partnership's liquidation phase, cash available for
distribution will be distributed in the following order of priority:
first, for payment of the General Partner's administrative services
expense described above; second, to the limited partners for any arrearage
in their 8% cumulative priority return; third, to the limited partners for
100% of their adjusted capital contributions; fourth, to the limited
partners, distributions totaling 12% annually, noncompounded, on their
adjusted capital contributions; fifth, to the General Partner for any
arrearage in its equipment management fee; and, sixth, 80% to the limited
partners and 20% to the General Partner (provided, however, that the
General Partner will not receive such amounts unless the limited partners
have received total distributions equal to their capital contribution plus
a 12% annualized return).
7. MANAGEMENT AND SERVICE AGREEMENTS
The Partnership pays an equipment management fee equal to 5% of the amount
of gross rental payments received, to the General Partner. The General
Partner, in turn, pays 50% of those fees to its parent. During the years
ended December 31, 1997, 1996 and 1995, the management fees aggregated
$274,588, $329,481 and $441,972, respectively.
In addition, the General Partner is reimbursed for certain other costs
under an administrative services agreement. Amounts incurred by the
Partnership pursuant to this agreement amounted to $84,000, $74,775 and
$82,307 for the years ended December 31, 1997, 1996 and 1995,
respectively.
As a part of the issuance of partnership units, the Partnership paid
commissions of 10% to Berthel Fisher & Company Financial Services, Inc., a
broker-dealer affiliated with the General Partner, and reimbursed other
offering expenses of up to 4% of the gross proceeds to the General
Partner. These fees have been treated as syndication costs and charged
directly to partners' equity.
-14-
<PAGE> 28
8. RECONCILIATION OF FINANCIAL AND INCOME TAX REPORTING BASIS
A reconciliation of net income (loss) for financial reporting purposes
with the related amount reported for income tax purposes is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------------------------ ------------------------------ ------------------------------
PER PER PER
AMOUNT UNIT AMOUNT UNIT AMOUNT UNIT
<S> <C> <C> <C> <C> <C> <C>
Net income (loss) for
financial reporting
purposes $ (220,095) $(3.25) $1,008,207 $14.83 $1,649,729 $24.26
Adjustment to
convert direct
financing leases to
operating leases
for income tax
purposes (228,053) (3.36) 179,482 2.64 182,729 2.69
Net change in
allowance for
possible loan and
lease losses 1,677,242 24.75 (119,342) (1.76) 94,156 1.38
Gain (loss) on
lease terminations
291,099 4.30 1,618,985 23.81 (659,300) (9.69)
-------- ----- ---------- ------ ---------- ------
Net income for
income tax
reporting purposes
$1,520,193 $22.44 $2,687,332 $39.52 $1,267,314 $18.64
========== ====== ========== ====== ========== ======
</TABLE>
9. DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value amounts disclosed below are based on estimates prepared by
management of the Partnership based on valuation methods appropriate in
the circumstances. Generally accepted accounting principles do not require
disclosure for lease contracts. The carrying amount for financial
instruments included among cash and cash equivalents, line-of-credit
agreement, and other short-term payables approximates their fair value
because of the short maturity of those instruments or the variable
interest rate feature of the instrument. Also, the Partnership's
available-for-sale security is reported at market value. The estimated
fair value of other significant financial instruments are based
principally on discounted future cash flows at rates commensurate with the
credit and interest rate risk involved.
The estimated fair values of the Partnership's other significant financial
instruments are as follows at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
--------------------------------- ----------------------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
<S> <C> <C> <C> <C>
Note payable $ - $ - $ 845,149 $ 845,149
Notes receivable 434,692 434,692 - -
</TABLE>
* * * * *
-15-
<PAGE> 29
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10. DIRECTORS & EXECUTIVE OFFICERS OF THE REGISTRANT
A. The General Partner of the registrant:
Berthel Fisher & Company Leasing, Inc., an Iowa corporation.
B. Executive officers of the General Partner of the Registrant:
Thomas J. Berthel (age 46) - Mr. Berthel is the Chief
Executive Officer and Director of the General Partner, a position he has held
since the General Partner's inception in 1988. Mr. Berthel is also President and
a Director of the General Partner's parent, Berthel Fisher & Company, Inc.
("Berthel Fisher"), which he founded in 1985, and Berthel Fisher's other
subsidiaries, Berthel Fisher & Company Financial Services, Inc.; Berthel Fisher
& Company Management Corp.; Berthel Fisher & Company Planning, Inc.; and one
other corporation which acts as general partner of a separate private program.
He also serves as the Chairman of the Board and Director of Amana Colonies Golf
Course, Inc. Mr. Berthel holds a bachelor's degree from St. Ambrose College in
Davenport, Iowa (1974). From 1974 to 1982, Mr. Berthel was President and
majority shareholder of Insurance Planning Services Corporation in Maquoketa,
Iowa, which was engaged in the operation of a securities and insurance business.
Mr. Berthel holds a Financial and Operation Principal license issued by the
National Association of Securities Dealers, Inc. Mr. Berthel is also a Certified
Life Underwriter. Mr. Berthel also serves as an individual general partner of
the limited partnership referred to above. Mr. Berthel received a MBA degree
from the University of Iowa in 1993.
Ronald O. Brendengen (age 42) - Mr. Brendengen is the
Treasurer, Chief Financial Officer, and a Director (1988 to present) of the
General Partner. He was elected to his current offices in October, 1996. He has
served as Secretary (1994 - March, 1995), Treasurer (1988 - August 1995) and
Chief Financial Officer (1994 - August 1995) of the General Partner. He served
as Controller (1985-1993), Treasurer (1987-present), Chief Financial Officer,
Secretary and a Director (1987-present), and was also elected Chief Operating
Officer in January 1998, of Berthel Fisher & Company, the parent company of the
General Partner. Mr. Brendengen serves as the Treasurer, Chief Financial Officer
and a Director of Berthel Fisher & Company Planning, Inc., the trust advisor of
Berthel Growth & Income Trust I, a company required to file reports pursuant to
the Securities Exchange Act of 1934. He also serves in various offices and as a
Director of each subsidiary of Berthel Fisher & Company. Mr. Brendengen holds a
certified public accounting certificate and worked in public accounting during
1984 and 1985. From 1979 to 1984, Mr. Brendengen worked in various capacities
for Morris Plan and MorAmerica Financial Corp., Cedar Rapids, Iowa. Mr.
Brendengen attended the University of Iowa before receiving a bachelor's degree
in Accounting and Business Administration with a minor in Economics from Mt.
Mercy College, Cedar Rapids, Iowa, in 1978.
<PAGE> 30
Nancy L. Lowenberg (age 39), has been elected Vice President
and Chief Operating Officer of the General Partner beginning January 2, 1997.
From September 1986 to December 1996, Ms. Lowenberg was employed by Firstar Bank
Iowa, N.A., in Cedar Rapids. Since 1986 Ms. Lowenberg was Vice President
Commercial Loans. As Vice President Commercial Loans, she was relationship
manager of 62 accounts with approximately $70,000,000 of committed credit. She
had responsibility for credit quality, annual review and maintenance of existing
accounts and business development. From 1981 to 1986 Ms. Lowenberg was employed
by First Bank Systems. Ms. Lowenberg received her Bachelor of Science
Agricultural Business with a minor in Finance in 1981 from Iowa State
University, Ames, Iowa.
<PAGE> 31
ITEM 11. EXECUTIVE COMPENSATION
Set forth is the information relating to all direct
remuneration paid or accrued by the Registrant during the last
three years to the General Partner:
<TABLE>
<CAPTION>
(A) (B) (C) (C1) (C2) (D)
Securities of
property
insurance Aggregate
benefits or of
Cash and Cash reimbursement contingent
Name of Individual Yes equivalent forms personal or forms of
capacities which served ended of remuneration Fees benefits remuneration
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berthel Fisher & Co. 1997 $0 $358,588 $0 $0
Leasing, Inc. 1996 $0 $404,256 $0 $0
General Partner 1995 $0 $524,279 $0 $0
</TABLE>
<PAGE> 32
ITEM 12. 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 the Partnership Units.
(b) The General Partner of the Registrant owns Units of
the Registrant set forth in the following table.
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name and Address of Amount and Nature of
Title of Class Beneficial Ownership Beneficial Ownership Percent of Class
- -------------- -------------------- -------------------- ----------------
<S> <C> <C> <C>
Units Berthel Fisher & Co. Forty (40) Units; 0.06%
Leasing, Inc.
100 2nd Street S.E.
Cedar Rapids, IA 52401
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Related party transactions are described in Notes 2 and 7 of Notes
to Financial Statements.
<PAGE> 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
<TABLE>
<S> <C> <C>
(a)1. Financial Statements.
Page
No.
---
Balance Sheets at December 31, 1997 and 1996 15
Statements of Operations for the Years Ended December 31,
1997, December 31, 1996 and December 31, 1995 16
Statements of Changes in Partners' Equity for the Years
Ended December 31, 1997, December 31, 1996 and
December 31, 1995 17
Statements of Cash Flows for the Years Ended
December 31, 1997, December 31, 1996 and
December 31, 1995 18
Notes to Financial Statements 20
2. Financial Statements Schedules
Information pursuant to Rule 12-09 (Schedule II) is
included in the financial statements and notes
thereto.
3. Exhibits
3,4 Amended and Restated Agreement of
Telecommunications Income Fund IX, L.P. currently in
effect dated as of August 12, 1991 (1)
</TABLE>
- -------------------------
(1) Incorporated herein by reference to
Partnership Exhibit A to the prospectus
included in the Partnership's post effective
amendment No. 4 to Form S-1 registration
statement filed on December 22, 1992.
<PAGE> 34
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.
TELECOMMUNICATIONS INCOME FUND IX, L.P.
---------------------------------------
(REGISTRANT)
By Berthel Fisher & Company Leasing, Inc.
By: Thomas J. Berthel/s/ Date: March 13, 1998
----------------------------------------- -----------------
Thomas J. Berthel
President
By Berthel Fisher & Company Leasing, Inc.
By: Ronald O. Brendengen/s/ Date: March 13, 1998
----------------------------------------- ------------------
Ronald O. Brendengen
Chief Financial Officer, Treasurer
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.
Thomas J. Berthel/s/ Date: March 13, 1998
- -------------------------------------- ------------------
Thomas J. Berthel
Chief Executive Officer
President, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
Nancy L, Lowenberg/s/ Date: March 13, 1998
- -------------------------------------- ------------------
Nancy L. Lowenberg
Chief Operating Officer, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
Ronald O. Brendengen/s/ Date: March 13, 1998
- -------------------------------------- ------------------
Ronald O. Brendengen
Treasurer, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
Daniel P. Wegmann/s/ Date: March 13, 1998
- -------------------------------------- ------------------
Daniel P. Wegmann
Controller
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
<PAGE> 35
EXHIBIT INDEX
3,4 Amended and Restated Agreement of
Telecommunications Income Fund IX, L.P. currently in
effect dated as of August 12, 1991 (1)
- ---------------------------------------------
(1) Incorporated herein by reference to Partnership Exhibit A to the prospectus
included in the Partnership's post effective amendment No. 4 to Form S-1
registration statement filed on
December 22, 1992.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEUDLE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
BALANCE SHEET OF TELECOMMUICATIONS INCOME FUND IX, L.P. AS OF DECEMBER 31, 1997
AND THE AUDITED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1997, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 458,893
<SECURITIES> 65,389
<RECEIVABLES> 11,513,511
<ALLOWANCES> (1,922,056)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,795,697
<DEPRECIATION> (270,858)
<TOTAL-ASSETS> 11,640,576
<CURRENT-LIABILITIES> 681,832
<BONDS> 50,557
0
0
<COMMON> 0
<OTHER-SE> 10,908,187
<TOTAL-LIABILITY-AND-EQUITY> 11,640,576
<SALES> 2,624,821
<TOTAL-REVENUES> 2,624,821
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 880,006
<LOSS-PROVISION> 1,801,233
<INTEREST-EXPENSE> 163,677
<INCOME-PRETAX> (220,095)
<INCOME-TAX> 0
<INCOME-CONTINUING> (220,095)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (220,095)
<EPS-PRIMARY> (3.25)<F1>
<EPS-DILUTED> (3.25)
<FN> NET INCOME PER PARTNERSHIP UNIT
</TABLE>