<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, 1998
( ) 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.
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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 (Section 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 19, 1999, 67,550 units were issued and outstanding. Based on the
book value of $40.24 per unit, the aggregate market value at March 19, 1999 was
$2,718,212.
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.
1998 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
PAGE
PART I
Item 1 Business.................................................... 3
Item 2 Properties.................................................. 4
Item 3 Legal Proceedings........................................... 4
Item 4 Submission of Matters to a Vote of 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......................... 7
Item 8 Financial Statements and Supplementary Data................. 11
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 entered the liquidation phase on May 1, 1998 and expects to be
dissolved by December 31, 1999. During the liquidation process, the orderly
collection of lease payments will continue. Also, early payoff of leases and
sales of equipment will be a priority. If leases can be sold for an adequate
return to the investor, the sale of lease receivables will be pursued. Proceeds
from the sale of net assets, including the sale of any portion of the lease
portfolio, will be distributed to Partners. If the General Partner believes that
complete liquidation cannot be achieved by December 31, 1999, a meeting of the
limited partners will be called. At the meeting the limited partners will be
asked to extend the term of Partnership beyond December 31, 1999, so that an
orderly liquidation can be completed and the maximum economic benefit obtained
for the limited partners.
The Partnership acquired telecommunications equipment (primarily pay telephones
and call processing equipment) leased to third parties generally under full
payout leases. The Partnership 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.
<PAGE> 4
ITEM 1. BUSINESS (CONTINUED)
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 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 acquired and approved leases on behalf of the Partnership.
The General Partner established guidelines to use in approving lessees.
Generally, before any lease was approved, there was a review of the potential
lessees' financial statements, credit references were checked, and outside
business and/or individual credit reports were 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 other equipment.
The Partnership's equipment leases are concentrated in the pay telephone
industry representing approximately 85%, 60%, and 78% of the Partnership's
direct finance lease portfolio at December 31, 1998, 1997, and 1996,
respectively. In 1998, no one customer accounted for 10% or more of the
Partnership's income from direct financing 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.
Management does not expect regulation to have any significant negative impact
upon the business of the Partnership.
The Partnership has no employees and utilizes the administrative services of the
General Partner for which it pays an administrative service fee.
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, or net realizable value now that the Partnership is in the
liquidation phase, of such equipment is represented by the Partnership's
investment in direct financing leases and operating leases that was $2,146,495
at December 31, 1998. 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
<PAGE> 5
ITEM 3. LEGAL PROCEEDINGS (CONTINUED)
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 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. The
trial court granted defendants Campbell and Welch Motion for Dismissal because
of Lack of Personal Jurisdiction and that decision has been appealed. Meanwhile,
discovery is proceeding with interrogatories being filed by each side. See Item
7 for additional information regarding the status of the North American
Communications Group, Inc. leases.
In December 1998, the Partnership, Telecommunications Income Fund X, the General
Partner, North American Communications Group ("NACG"), and others filed a suit
against Shelby County, Tennessee. The County removed that suit from Tennessee
State court to Federal Court. The suit alleges, among other things, damages for
wrongful termination of the pay phone contract between NACG and Shelby County
and racial discrimination by the county against NACG. Shelby County has filed an
answer and discovery is in the initial stages.
Telcom Management Systems filed a suit against the Partnership, the General
Partner, and others in Federal Court in Dallas, Texas during February 1998. The
plaintiffs purchased equipment from the Partnership out of a bankruptcy. They
alleged that when they attempted to sell the equipment at a later date, the
Partnership had not provided good title. The General Partner filed a Motion for
Summary Judgement, which is still pending. After filing the suit, the plaintiff
transferred assets in lieu of bankruptcy. The bankruptcy trustee is now
reviewing the transfer to determine if the transfer was done in Fraud of
Creditors. The litigation is on hold until the trustee makes a decision, then
the motion for summary judgement must be responded to. The Partnership and
General Partner believe the motion should be granted.
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 19, 1999
--------------------------------------------------------------
Limited Partner 1,175
General Partner 1
Distributions are paid to Partners on a monthly basis. Distributions of
$8,477,803, $2,035,780, $2,039,573, $2,040,208, and $2,040,210 were made to
investors in 1998, 1997, 1996, 1995, and 1994, respectively. This represented
distributions per unit of $30.00 for 1994 through 1997 and $125.23 for 1998.
<PAGE> 6
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
(HISTORICAL COST BASIS)
---------------------------------------------------------------------------
Three
Months Ended Year Ended Year Ended Year Ended Year Ended
Mar. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Total Revenue $ 402,020 $ 2,624,821 $ 3,289,142 $ 2,956,684 $ 2,996,563
Net Income (Loss) 94,123 (220,095) 1,008,207 1,649,729 1,783,703
Provision for Possible Losses 64,711 1,801,233 577,931 94,156 270,000
Net Income (Loss) per Unit 1.39 (3.25) 14.83 24.26 26.23
Distributions per Unit 7.50 30.00 30.00 30.00 30.00
Distributions to Partners 508,064 2,035,780 2,039,573 2,040,208 2,040,210
<CAPTION>
(HISTORICAL COST BASIS)
-----------------------------------------------------------
(LIQUIDATION BASIS)
-------------------
Dec. 31, 1998 Dec. 31, 1997 Dec. 31, 1996 Dec. 31, 1995 Dec. 31, 1994
------------- ------------- ------------- ------------- -------------
Total Assets $ 3,215,954 $11,640,576 $15,642,179 $20,464,124 $18,052,458
Line of Credit -- 50,557 1,060,490 4,113,504 2,812,598
Bank term loan -- -- 845,149 1,229,431 --
</TABLE>
INFORMATION FOR LIQUIDATION PERIOD ONLY (MARCH 31, 1998 TO DECEMBER 31, 1998):
<TABLE>
<S> <C>
Change in net assets, excluding
distributions and withdrawals $ 235,258
Distributions to Partners 7,969,739
Distributions per Unit 117.73
</TABLE>
The selected financial data above was derived from the liquidation basis
financial statements of the Partnership as of December 31, 1998 and the
historical cost basis financial statements for the three-month period ending
March 31, 1998 and as of December 31, 1997 and previous years. As of March 31,
1998, the Partnership adopted the liquidation basis of accounting. Under
liquidation basis accounting, assets are presented at estimated net realizable
value and liabilities are presented at estimated settlement amounts. The change
to liquidation basis accounting may materially affect the comparability of the
selected financial data.
As a result of the adoption of liquidation basis accounting, the Partnership
will amend Forms 10-Q for the first, second and third quarters of 1998. These
Amendments on Forms 10-Q/A amend the Registrant's Quarterly Reports on Forms
10-Q, as filed by the Registrant on May 13, 1998, August 13, 1998, and November
12, 1998 for the first, second, and third quarters of 1998, respectively, and
will be filed to reflect the restatement of the Registrant's financial
statements (the "Restatements"). The Restatements reflect the financial
statements for the quarterly periods ended March 31, 1998, June 30, 1998, and
September 30, 1998, under the liquidation basis of accounting, pursuant to the
Registrant's plan of liquidation.
The above selected financial data should be read in connection with the
financial statements and related notes appearing elsewhere in this report.
<PAGE> 7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
(HISTORICAL COST BASIS)
----------------------------------------------------------------
Three Months Ended Year Ended Year Ended
March 31, 1998 December 31, 1997 December 31, 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Result of Operations
Description:
Lease Income $ 356,900 $ 1,931,886 $ 2,686,350
Gain on Lease Terminations 8,808 505,834 413,880
Management Fees 51,794 274,588 322,601
Admin. Services 21,000 84,000 81,655
Interest Expense 16,817 163,677 492,210
Other General and Administrative Expenses 77,320 145,180 170,012
Provision for Possible Losses 64,711 1,801,233 577,931
Depreciation 65,400 262,751 286,526
Impairment Loss 10,855 113,487 350,000
</TABLE>
The 1998 data above is only for the three-month period ending March 31, 1998. At
that time, the Partnership adopted the liquidation basis of accounting.
Lease income continues to decline since 1996 due to the Partnership's decreased
net investment in direct financing leases. Due to repayments of borrowings and
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. Lease income is expected to continue to decline in the
Partnership's liquidation phase as new leases will not be written and 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>
Three Months Ending 03/31/98 1997 1996
---------------------------- ---- ----
<S> <C> <C> <C>
Equipment acquisitions $1,085,333 $ 4,628,479 $ 5,970,136
</TABLE>
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. The Partnership will generally 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 that 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
normally used the cash generated from these early terminations to purchase
equipment for investments in direct financing leases with other lessees. Upon
entering the liquidation phase, this cash was used to pay off debt and for
distributions.
The Partnership's net income for the three months ending March 31, 1998, was
$94,123, but comprehensive income was $73,254. The difference of $20,869 is
attributable to an unrealized loss on securities available for sale. The
security declined in value by the $20,869 during this three-month period in
1998. The net unrealized loss is shown on the income statement as other
comprehensive income and is taken directly to partner's equity on the balance
sheet, along with carrying the asset at market value.
<PAGE> 8
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
Management fees are paid to the General Partner and represent 5% of the lease
rental payments received. Management fees were discontinued since entering the
liquidation phase on May 1, 1998. Rental payments received in 1998, 1997, and
1996 are as follows:
<TABLE>
<CAPTION>
Three Months Ending
March 31, 1998 1997 1996
-------------- ---- ----
<S> <C> <C> <C>
Rental Payments Received $1,035,880 $5,492,000 $6,452,000
</TABLE>
The General Partner receives a monthly reimbursement for administrative services
provided to the Partnership of $7,000.
The decrease in interest expense in 1998 and 1997 is a result of the Partnership
borrowing less funds to acquire equipment for investment in direct financing
leases. The Partnership had a line of credit agreement with a bank that matured
on April 30, 1998. This line of credit was not renewed as management felt this
was not needed when entering the liquidation phase.
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.
Other general and administrative expenses include payments for professional fees
such as legal expenses, independent auditing services, tax return preparation,
other accounting assistance, and other expenses. The Partnership incurred a
higher amount of professional fees in 1998 due to increased legal expenses
resulting from litigation regarding the non-payment of lease receivables.
During 1996, management provided a specific reserve of $284,000 related to a
lease with a customer. Due to the uncertainty regarding the amount and timing of
the future payments, the Partnership 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, 1998, the net investment in
this equipment was $775,597. The equipment under this lease was being
depreciated under the straight-line method over its estimated remaining life.
Depreciation expense on this equipment was $65,400 in 1998 and $236,446 in 1997.
Also, the Partnership recorded an additional decrease to the estimated net
realizable value of the equipment of $196,200 for the nine months ended December
31, 1998. 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, 1998, has not found a buyer. Management estimates the fair market
value of the equipment to be its carrying value at December 31, 1998.
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, was
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,
$113,487 in 1997, and $51,000 in 1998 ($10,855 in the first quarter and $40,145
as a decrease to the estimated net realizable value
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
for the nine months ended December 31, 1998) to reflect management's estimated
fair market value of the equipment. This equipment was held for sale by the
Partnership throughout 1998.
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. Based on the value of similar
assets and contract sites, management believed the equipment leased to NACG had
substantial value. However, 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 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 loss reserve of
$1,596,739 at December 31, 1997, which was equal to the carrying value of the
assets on the Partnership's books. These leases were charged off against the
allowance in the first quarter of 1998. The Partnership will continue to attempt
to sell and/or re-lease these assets. Any amounts received through such efforts
will be distributed to the Partners.
As of December 31, 1998 there were nine customers with payments 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, 1998 was
$147,800. The contract balance remaining on these contracts was $166,861.
Management will continue to monitor these contracts and take the necessary steps
to protect the Partnership's investment.
Through December 31, 1998, there have been distributions totaling $19,183,223.
As of December 31, 1998 the Partnership had $711,589 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, 1998, the net proceeds of
the private program, TIF X, and TIF XI have been invested in specific equipment.
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%.
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
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,
two of the more significant being the size of the transaction and the financial
strength of the lessee.
The Partnership began the orderly liquidation of Partnership assets in the
second quarter of 1998 as discussed above. As a result, on March 31, 1998 the
Partnership adopted the liquidation basis of accounting. The statement of net
assets as of December 31, 1998 (liquidation basis) and the statement of changes
in net assets for the period from March 31, 1998 to December 31, 1998
(liquidation basis) have been prepared on the liquidation basis. Accordingly,
assets have been valued at estimated net realizable value and liabilities
include estimated costs associated with carrying out the plan of liquidation.
The net adjustment as of March 31, 1998 required to convert from the going
concern (historical cost) basis to the liquidation basis of accounting was a
decrease in carrying value of $181,817, which is included in the statement of
changes in net assets for the period ended December 31, 1998. Significant
increases (decreases) in the carrying value of net assets are summarized as
follows:
<TABLE>
<S> <C>
Increase to reflect net realizable value of net investment in direct financing leases $ 391,588
Write-off of intangible assets (2,423)
Record estimated liabilities associated with carrying out the liquidation (570,982)
---------
Net decrease in carrying value $(181,817)
</TABLE>
During the period from March 31, 1998 to December 31, 1998, the Partnership
generated income from direct financing leases and interest and other income of
$653,420. This income represented an average annual return on the Partnership's
net assets of approximately 13.4%. Also, during this period the Partnership
reduced its estimate of liquidation value of net assets by $236,345, primarily
due to equipment under operating leases ($196,200) other equipment held for sale
($40,145) as discussed above.
The valuation of assets and liabilities necessarily requires many estimates and
assumptions and there are uncertainties in carrying out the liquidation of the
Partnership's net assets. The actual value of the liquidating distributions will
depend on a variety of factors, including the actual timing of distributions to
partners. The actual amounts are likely to differ from the amounts presented in
the financial statements.
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. The Partnership does not expect the cost
to address the Year 2000 issue to be material since it is scheduled to terminate
by December 31, 1999.
The Partnership has not yet determined whether the Year 2000 issue has been
addressed by all of 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 has contacted its customers regarding this issue
and will continue to contact its customers about this issue in 1999.
<PAGE> 11
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Under terms of the Partnership agreement, the Partnership is required to
establish working capital reserves of no less than 1% ($169,755 at December 31,
1998) 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, 1998, actual cash on hand was
$711,589.
The Partnership had a line of credit agreement with a bank that matured on April
30, 1998. This line of credit was paid off in full in 1998 and was not renewed
as management felt this was not needed once entering the liquidation phase.
Cash flow from operating activities has been less than the distributions to
Partners for the past three years and significantly so in 1998 since entering
the liquidation phase.
Effective May 1, 1998, the Partnership ceased reinvestment in equipment and
leases and began the orderly liquidation of Partnership assets. The Partnership
must dissolve on December 31, 1999, or earlier, upon the occurrence of certain
events.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and related information as of and
for the years ended December 31, 1998, December 31, 1997, and December 31, 1996
are included in Item 8:
Independent Auditors' Report
Statements of Net Assets as of December 31, 1998 (Liquidation
Basis) and December 31, 1997 (Going Concern Basis)
Statements of Changes in Net Assets for the period from March
31, 1998 (Initial Adoption of Liquidation Basis) to December
31, 1998
Statements of Operations and Comprehensive Income (Loss)
(Going Concern Basis) for the Three Months Ended March 31,
1998 and the Years Ended December 31, 1997 and 1996
Statements of Changes in Partners' Equity (Going Concern
Basis) for the Three Months Ended March 31, 1998 and the Years
Ended December 31, 1997 and 1996
Statements of Cash Flows for the Years Ended December 31,
1998, 1997 and 1996
Notes to Financial Statements
<PAGE> 12
INDEPENDENT AUDITORS' REPORT
To the Partners
Telecommunications Income Fund IX, L.P.
We have audited the accompanying statement of net assets (liquidation basis) of
Telecommunications Income Fund IX, L.P. as of December 31, 1998, and the related
statement of changes in net assets (liquidation basis) for the period from March
31, 1998 to December 31, 1998. In addition, we have audited the accompanying
statement of net assets (going concern basis) of Telecommunications Income Fund
IX, L.P. as of December 31, 1997, and the related statements (going concern
basis) of operations and comprehensive income (loss) and changes in partners'
equity for the period from January 1, 1998 to March 31, 1998 and the years ended
December 31, 1997 and 1996. In addition, we have audited the accompanying
statements of cash flows of Telecommunications Income Fund IX, L.P. for the
years ended December 31, 1998, 1997 and 1996. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 1 to the financial statements, the Partnership agreement
required that the orderly liquidation of the Partnership's net assets begin in
the second quarter of 1998, and the Partnership commenced liquidation shortly
thereafter. As a result, the Partnership has changed its basis of accounting
from the going concern basis to the liquidation basis effective March 31, 1998.
In our opinion, such financial statements present fairly, in all material
respects, (1) the net assets of Telecommunications Income Fund IX, L.P. at
December 31, 1998, (2) the changes in its net assets for the period from March
31, 1998 to December 31, 1998, (3) its financial position at December 31, 1997,
(4) the results of its operations for the period from January 1, 1998 to March
31, 1998 and the years ended December 31, 1997 and 1996, and (5) its cash flows
for the years ended December 31, 1998, 1997 and 1996 in conformity with
generally accepted accounting principles on the bases described in the preceding
paragraph.
DELOITTE & TOUCHE LLP
Cedar Rapids, Iowa
February 19, 1999
<PAGE> 13
TELECOMMUNICATIONS INCOME FUND IX, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF NET ASSETS AS OF DECEMBER 31, 1998 (LIQUIDATION BASIS)
AND DECEMBER 31, 1997 (GOING CONCERN BASIS)
- --------------------------------------------------------------------------------------------------------------------------
ASSETS 1998 1997
<S> <C> <C>
Cash and cash equivalents $ 711,589 $ 458,893
Available-for-sale securities 112,403 65,389
Not readily marketable equity security 191,600 --
Net investment in direct financing leases
and notes receivable (Note 2) 1,424,765 11,513,511
Allowance for possible loan and lease losses (Note 3) -- (1,922,056)
------------ ------------
Direct financing leases and notes receivable, net 1,424,765 9,591,455
Equipment leased under operating leases, less accumulated
depreciation of $261,600 in 1997 775,597 1,041,197
Equipment held for sale (Note 4) -- 51,000
Intangibles, less accumulated amortization of $9,258 in 1997 -- 48,582
Other assets -- 384,060
------------ ------------
Total assets 3,215,954 11,640,576
------------ ------------
LIABILITIES
Line-of-credit agreement (Note 5) -- 50,557
Outstanding checks in excess of bank balance 89,627 --
Trade accounts payable 4,844 17,336
Due to affiliates -- 96,472
Accrued expenses and other liabilities 34,533 202,272
Lease security deposits 65,370 365,752
Reserve for estimated costs during the period of liquidation 300,000 --
------------ ------------
Total liabilities 494,374 732,389
------------ ------------
CONTINGENCY (Note 10)
NET ASSETS $ 2,721,580 $ 10,908,187
============ ============
</TABLE>
See notes to financial statements.
- 2 -
<PAGE> 14
TELECOMMUNICATIONS INCOME FUND IX, L.P.
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS (LIQUIDATION BASIS)
PERIOD FROM MARCH 31, 1998 TO DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C>
NET ASSETS AS OF MARCH 31, 1998 (GOING CONCERN BASIS) $ 10,469,843
Adjustment to liquidation basis (Note 1) (181,817)
------------
NET ASSETS AS OF MARCH 31, 1998 (LIQUIDATION BASIS) 10,288,026
Income from direct financing leases 539,245
Interest and other income 114,175
Change in estimate of liquidation value of net assets (236,345)
Distributions to partners ($117.73 per unit) (Note 6) (7,969,739)
Withdrawals of limited partners (13,782)
------------
NET ASSETS AS OF DECEMBER 31, 1998 $ 2,721,580
============
</TABLE>
See notes to financial statements.
- 3 -
<PAGE> 15
TELECOMMUNICATIONS INCOME FUND IX, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(GOING CONCERN BASIS)
- ------------------------------------------------------------------------------------------------------------------------------
THREE
MONTHS
ENDED YEARS ENDED
MARCH 31, DECEMBER 31,
----------- -----------------------------
1998 1997 1996
<S> <C> <C> <C>
REVENUES:
Income from direct financing leases $356,900 $1,931,886 $2,686,350
Gain on lease terminations 8,808 505,834 413,880
Interest and other income 36,312 187,101 188,912
-------- ---------- ----------
Total revenues 402,020 2,624,821 3,289,142
-------- ---------- ----------
EXPENSES:
Management and administrative fees (Note 7) 72,794 358,588 404,256
Other general and administrative expenses 77,320 145,180 170,012
Interest expense 16,817 163,677 492,210
Provision for possible loan and lease losses (Note 3) 64,711 1,801,233 577,931
Depreciation expense 65,400 262,751 286,526
Impairment loss on equipment (Note 4) 10,855 113,487 350,000
-------- ---------- ----------
Total expenses 307,897 2,844,916 2,280,935
-------- ---------- ----------
NET INCOME (LOSS) 94,123 (220,095) 1,008,207
OTHER COMPREHENSIVE INCOME (LOSS) -
Unrealized gain (loss) on available for sale securities (20,869) 5,079 (20,104)
-------- ---------- ----------
COMPREHENSIVE INCOME (LOSS) $ 73,254 $ (215,016) $ 988,103
======== ========== ==========
NET INCOME (LOSS) ATTRIBUTED TO:
General partner $ 90 $ (130) $ 593
Limited partners 94,033 (219,965) 1,007,614
-------- ---------- ----------
$ 94,123 $ (220,095) $1,008,207
======== ========== ==========
NET INCOME (LOSS) PER PARTNERSHIP UNIT $ 1.39 $ (3.25) $ 14.83
======== ========== ==========
WEIGHTED AVERAGE PARTNERSHIP UNITS
OUTSTANDING 67,742 67,762 67,990
======== ========== ==========
</TABLE>
See notes to financial statements.
- 4 -
<PAGE> 16
TELECOMMUNICATIONS INCOME FUND IX, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (GOING CONCERN BASIS)
THREE MONTHS ENDED MARCH 31, 1998 AND
YEARS ENDED DECEMBER 31, 1997 AND 1996
- ------------------------------------------------------------------------------------------------------------------------------------
UNREALIZED
LOSS ON
GENERAL LIMITED PARTNERS AVAILABLE- TOTAL
PARTNER ----------------------------- FOR-SALE PARTNERS'
(40 UNITS) UNITS AMOUNT SECURITY EQUITY
<S> <C> <C> <C> <C> <C>
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
Net income 90 -- 94,033 -- 94,123
Distributions to partners
($7.50 per unit) (Note 6) (300) -- (507,764) -- (508,064)
Withdrawal of limited partners -- (20) (3,534) -- (3,534)
Change in unrealized loss in
available-for-sale security -- -- -- (20,869) (20,869)
------- ------- ----------- -------- -----------
BALANCE AT MARCH 31, 1998 $10,292 67,702 $10,495,445 $(35,894) $10,469,843
======= ======= =========== ======== ===========
</TABLE>
See notes to financial statements.
- 5 -
<PAGE> 17
TELECOMMUNICATIONS INCOME FUND IX, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)/change in net assets excluding
distributions and withdrawals $ (308,512) $ (220,095) $ 1,008,207
Adjustments to reconcile to net cash
from operating activities:
Liquidation basis adjustments 778,118 -- --
Gain on lease terminations (8,808) (505,834) (413,880)
Depreciation of equipment 65,400 262,751 286,526
Amortization of intangibles 1,038 4,154 5,104
Provision for possible loan and lease losses 64,711 1,801,233 577,931
Impairment loss on equipment 10,855 113,487 350,000
Changes in operating assets and liabilities:
Other assets 384,060 (109,869) 193,752
Outstanding checks in excess of bank balance 89,627 -- --
Trade accounts payable (12,492) 13,277 (26,917)
Due to affiliates (96,472) 48,753 (159,176)
Accrued expenses and other liabilities (167,739) 140,920 (18,296)
----------- ----------- ------------
Net cash from operating activities 799,786 1,548,777 1,803,251
----------- ----------- ------------
INVESTING ACTIVITIES:
Acquisition of, and purchases of equipment for,
direct financing leases (2,827,907) (4,628,479) (5,970,136)
Repayments of direct financing leases 1,663,124 3,207,067 3,233,298
Proceeds from sale or termination of direct financing leases 9,082,927 4,303,734 6,874,524
Repayments of notes receivable 489,299 6,308 --
Issuance of notes receivable (108,475) (441,000) --
Net lease security deposits paid (300,382) (73,281) (102,540)
----------- ----------- ------------
Net cash from investing activities 7,998,586 2,374,349 4,035,146
----------- ----------- ------------
FINANCING ACTIVITIES:
Proceeds from line-of-credit borrowings 3,788,403 13,318,592 15,614,221
Repayments of line-of-credit borrowings (3,838,960) (14,328,525) (18,667,235)
Proceeds from additional borrowings -- -- --
Repayments of additional borrowings -- (845,149) (384,282)
Loan origination costs incurred -- (45,121) --
Distributions and withdrawals paid to partners (8,495,119) (2,061,174) (2,065,823)
----------- ----------- ------------
Net cash from financing activities (8,545,676) (3,961,377) (5,503,119)
----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 252,696 (38,251) 335,278
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 458,893 497,144 161,866
----------- ----------- ------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 711,589 $ 458,893 $ 497,144
=========== =========== ============
</TABLE>
(Continued)
- 6 -
<PAGE> 18
TELECOMMUNICATIONS INCOME FUND IX, L.P.
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS (CONCLUDED)
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
- -------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996
<S> <C> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 17,457 $172,586 $ 498,431
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
Equipment reclassified from operating leases to held for sale -- -- 164,487
Equipment reclassified from operating leases to direct financing leases -- -- 552,098
Charge-off of other assets to allowance for possible loan
and lease losses -- -- --
Change in unrealized loss on available-for-sale security -- (5,079) (20,104)
Direct financing lease converted to investment in not readily
marketable equity security 191,600 -- --
</TABLE>
See notes to financial statements.
- 7 -
<PAGE> 19
TELECOMMUNICATIONS INCOME FUND IX, L.P.
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
- --------------------------------------------------------------------------------
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, 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 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). The Partnership ceased reinvestment
in equipment and leases and began the orderly liquidation of Partnership
assets on May 1, 1998 as required by the Partnership agreement. The
Partnership must dissolve on December 31, 1999, or earlier, upon the
occurrence of certain events (see Note 6).
BASIS OF PRESENTATION - The Partnership began the orderly liquidation of
Partnership assets in the second quarter of 1998 as discussed above. As a
result, on March 31, 1998 the Partnership adopted the liquidation basis of
accounting. The statement of net assets as of December 31, 1998
(liquidation basis) and the statement of changes in net assets for the
period from March 31, 1998 to December 31, 1998 (liquidation basis) have
been prepared on the liquidation basis. Accordingly, assets have been
valued at estimated net realizable value and liabilities include estimated
costs associated with carrying out the plan of liquidation.
The net adjustment as of March 31, 1998 required to convert from the going
concern (historical cost) basis to the liquidation basis of accounting was
a decrease in carrying value of $181,817, which is included in the
statement of changes in net assets for the period ended December 31, 1998.
Significant increases (decreases) in the carrying value of net assets are
summarized as follows:
<TABLE>
<S> <C>
Increase to reflect net realizable value of net investment
in direct financing leases $ 391,588
Write-off of intangible assets (2,423)
Record estimated liabilities associated with carrying
out the liquidation (570,982)
---------
Net decrease in carrying value $(181,817)
=========
</TABLE>
The valuation of assets and liabilities necessarily requires many
estimates and assumptions and there are uncertainties in carrying out the
liquidation of the Partnership's net assets. The actual value of the
liquidating distributions will depend on a variety of factors, including
the actual timing of distributions to partners. The actual amounts are
likely to differ from the amounts presented in the financial statements.
- 8 -
<PAGE> 20
The statement of net assets as of December 31, 1997 (going concern basis)
and the related statements (going concern basis) of operations and
comprehensive income (loss), changes in partners' equity and cash flows
for the three months ended March 31, 1998 and the years ended December 31,
1997 and 1996 have been prepared using the historical cost (going concern)
basis of accounting on which the Partnership had previously reported its
financial condition, results of operations and cash flows.
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 net realizable values of the Partnership's
assets.
Most of the Partnership's leases 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 could have a material
near-term impact on the net realizable value of leases.
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 net realizable value of leases and equipment.
CERTAIN RISK CONCENTRATIONS - The Partnership's equipment leases are
concentrated in pay telephones representing approximately 85% and 60% of
the Partnership's direct finance lease portfolio at December 31, 1998 and
1997, respectively.
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 SECURITIES - The Partnership has an investment in
marketable equity securities 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, 1998, the securities had a cost of $138,914 and an estimated
fair value of $112,403, resulting in an unrealized loss of $26,511. Fair
value is determined using published market prices.
- 9 -
<PAGE> 21
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.
EQUIPMENT - Equipment leased under operating leases was stated at cost
less accumulated depreciation. The equipment was 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 consisted of organization costs incurred with
the formation of the Partnership and financing costs incurred in
connection with borrowing agreements. Deferred organization expenses were
amortized over a five-year period. Deferred financing costs were amortized
over the life of the related debt, which was approximately three years.
SALE OF DIRECT FINANCE LEASES - The Partnership at times sells direct
financing leases, on a limited recourse basis, to lenders in return for a
cash payment. In the case of default by the lessee, the lender has a first
lien on the underlying leased equipment. In the event the sale or re-lease
proceeds
- 10 -
<PAGE> 22
from the underlying equipment do not satisfy the remaining lessee's
obligation to the lender, the Partnership is responsible for a
predetermined amount of that obligation. When the sale of direct finance
leases occurs, proceeds from the sale, less the net book value of direct
finance leases sold and an estimated loss allowance, are recorded as a
component of gain on early termination.
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 the Partnership's year ended December 31, 1998.
Financial statements for earlier periods provided for comparative purposes
have been reclassified to conform with the current year presentation as
required by SFAS No. 130.
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. It also establishes
standards for related disclosures about products and services, geographic
areas, and major customers. SFAS No. 131 is effective for the
Partnership's year ended December 31, 1998. The Partnership operates in
one segment.
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, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Minimum lease payments receivable $ 1,758,160 $ 12,427,455
Estimated unguaranteed residual values 232,568 1,192,611
Unearned income (320,868) (2,571,275)
Unamortized initial direct costs 1,628 30,028
Notes receivable 53,867 434,692
Adjustment to estimated net realizable value (300,590) --
------------ ------------
Net Investment in Direct Financing Leases
and Notes Receivable $ 1,424,765 $ 11,513,511
============ ============
</TABLE>
At December 31, 1998 the Partnership's contingent liability under recourse
provisions totals $168,498.
- 11 -
<PAGE> 23
At December 31, 1998, 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> <C>
1999 $ 952,901 $ 58,130
2000 538,584 148,847
2001 146,007 15,308
2002 106,358 10,283
2003 14,310 --
---------- ----------
Total $1,758,160 $ 232,568
========== ==========
</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
5% 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 $342,195 and $4,189,197 at December 31,
1998 and 1997, respectively.
Three customers each account for 10% or more of the amount of income from
direct financing leases for the years ended December 31, 1998, 1997 and
1996, as follows:
1998 1997 1996
Customer A -- % 9% 10%
Customer B -- -- 12
Customer C -- 10 10
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, 1998, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Balance at beginning of year $ 1,922,056 $ 244,814 $ 364,156
Provision 64,711 1,801,233 577,931
Charge-offs (1,844,485) (123,991) (697,273)
----------- ----------- -----------
Balance at end of year $ 142,282 $ 1,922,056 $ 244,814
=========== =========== ===========
</TABLE>
The allowance for possible loan and lease losses consisted of specific
allowances of $5,075, $1,623,810 and $22,000 for certain leases and
general unallocated allowances of $137,207,
- 12 -
<PAGE> 24
$298,246, and $222,814 at December 31, 1998, 1997 and 1996, respectively.
The allowance at December 31, 1998 is included in the estimated net
realizable value adjustment discussed in Note 2.
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. 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.
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 in 1998 with no further loss to
the Partnership.
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 was being
depreciated under the straight-line method over its estimated remaining
life. Depreciation expense in 1997 amounted to $236,446 and $65,400 in the
first quarter of 1998. Also, the Partnership recorded an additional
decrease to the estimated net realizable value of the equipment of
$196,200 for the period from March 31, 1998 to December 31, 1998. 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
and $3,475 in 1998 from the customer under this arrangement. Management is
currently seeking to sell this equipment.
- 13 -
<PAGE> 25
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. 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. Such
leases were charged-off against the allowance in the first quarter of
1998.
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 distributed to the partners.
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, was 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 and $51,000 in 1998 ($10,855 in the first
quarter and $40,145 as a decrease to the estimated net realizable value
for the period from March 31, 1998 to December 31, 1998) to reflect
management's estimated fair market value of the equipment.
5. BORROWING AGREEMENTS
The Partnership had a line-of-credit agreement with a bank which bore
interest at a variable rate of 9.5% and 10.13% at December 31, 1997 and
1996, respectively. The line-of-credit was paid in full and discontinued
during 1998.
The Partnership also had an installment loan agreement which bore interest
at 8.91% and was due in monthly installments through November 1998. This
note was paid in full during 1997.
- 14 -
<PAGE> 26
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.
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).
- 15 -
<PAGE> 27
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 during its
operational phase. The Partnership entered its liquidation phase on May 1,
1998 and at that time discontinued the fee. During the years ended
December 31, 1998, 1997 and 1996, the management fees aggregated $63,606,
$274,588 and $329,481, 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, $84,000 and
$74,775 for the years ended December 31, 1998, 1997 and 1996,
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.
8. RECONCILIATION OF FINANCIAL AND INCOME TAX REPORTING BASIS
A reconciliation of the change in net assets (excluding distributions)/net
income (loss) for financial reporting purposes with the related amount
reported for income tax purposes for the years ended December 31, 1998,
1997, and 1996 is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
------------------------------ ------------------------------ ------------------------------
Per Per Per
Amount Unit Amount Unit Amount Unit
<S> <C> <C> <C> <C> <C> <C>
Change in net assets
(excluding
distributions)/net
income (loss) for
financial reporting
purposes $ 308,512 $ 4.56 $(220,095) $ (3.25) $ 1,008,207 $ 14.83
Adjustment to
convert direct
financing leases to
operating leases
for income tax
purposes 1,965,813 29.05 (228,053) (3.36) 179,482 2.64
Net change in
allowance for
possible loan and
lease losses (1,779,774) (26.29) 1,677,242 24.75 (119,342) (1.76)
Gain (loss) on
lease terminations 303,782 4.49 291,099 4.30 1,618,985 23.81
Net realizable
value adjustments (439,031) (6.49) -- -- -- --
Net income for ---------- ------ ----------- ------- ----------- -------
income tax
reporting purposes $ 359,302 $ 5.32 $ 1,520,193 $ 22.44 $ 2,687,332 $ 39.52
========== ====== =========== ======= =========== =======
</TABLE>
- 16 -
<PAGE> 28
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:
<TABLE>
<CAPTION>
1997
--------------------------------
Carrying Fair
Amount Value
<S> <C> <C>
Notes receivable $ 434,692 $ 434,692
</TABLE>
10. CONTINGENCY
Telcom Management Systems filed a suit against the Partnership, the
General Partner, and others in Federal Court in Dallas, Texas during
February 1998. The plaintiffs purchased equipment from the Partnership out
of a bankruptcy. They alleged that when they attempted to sell the
equipment at a later date, the Partnership had not provided good title.
The General Partner filed a Motion for Summary Judgement, which is still
pending. After filing the suit, the plaintiff transferred assets in lieu
of bankruptcy. The bankruptcy trustee is now reviewing the transfer to
determine if the transfer was done in Fraud of Creditors. The litigation
is on hold until the trustee makes a decision, then the motion for summary
judgement must be responded to. The Partnership and General Partner
believe the motion should be granted. No loss, if any, has been recorded
in the financial statements with respect to this matter.
* * * * *
- 17 -
<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 47) - 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 44) - Mr. Brendengen is the
Treasurer, Chief Operating Officer, Chief Financial Officer, and a Director
(1988 to present) of the General Partner. He was elected to his current offices
in January 1998. He had previously served as Secretary (1994 - March, 1995),
Treasurer (August 1995 - 1988) 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 40), has been elected
Executive Vice President and General Manager of the General Partner beginning
January 1998. She also previously served as Vice President and Chief Operating
Officer during 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 and Year equivalent forms personal or forms of
capacities which served ended of remuneration Fees benefits remuneration
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berthel Fisher & Co. 1998 $0 $147,606 $0 $0
Leasing, Inc. 1997 $0 $358,588 $0 $0
General Partner 1996 $0 $404,256 $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
(a)1. Financial Statements.
<TABLE>
<CAPTION>
Page
No.
---
<S> <C>
Statements of Net Assets at December 31, 1998
(Liquidation Basis) and 1997 (Going Concern Basis) 13
Statement of Changes in Net Assets for the Nine Months
Ended December 31, 1998 (Liquidation Basis) 14
Statements of Operations and Comprehensive Income (Loss)
(Going Concern Basis) for the Three Months Ended March
31, 1998 And Years Ended December 31, 1997 and December
31, 1996 15
Statements of Changes in Partners' Equity (Going Concern
Basis) for the Three Months Ended March 31, 1998 and
Years Ended December 31, 1997 and December 31, 1996 16
Statements of Cash Flows for the Years Ended December
31, 1998, 1997 and 1996 17
Notes to Financial Statements 19
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)
6. Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of 1998.
- ---------------------------
</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)
<TABLE>
<S> <C>
By Berthel Fisher & Company Leasing, Inc.
By: Thomas J. Berthel/s/ Date: March 25, 1999
-----------------------------------------
Thomas J. Berthel
President, Chief Executive Officer
By Berthel Fisher & Company Leasing, Inc.
By: Ronald O. Brendengen/s/ Date: March 25, 1999
-----------------------------------------
Ronald O. Brendengen
Chief Operating Officer, Chief Financial Officer, Treasurer
</TABLE>
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.
<TABLE>
<S> <C>
Thomas J. Berthel/s/ Date: March 25, 1999
- ----------------------------------------------------
Thomas J. Berthel
Chief Executive Officer
President, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
Nancy L, Lowenberg/s/ Date: March 25, 1999
- ----------------------------------------------------
Nancy L. Lowenberg
Executive Vice President, General Mgr., Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
Ronald O. Brendengen/s/ Date: March 25, 1999
- ----------------------------------------------------
Ronald O. Brendengen
Chief Operating Officer, Chief Financial Officer, Treasurer, Director
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
Daniel P. Wegmann/s/ Date: March 25, 1999
- ----------------------------------------------------
Daniel P. Wegmann
Controller
Berthel Fisher & Company Leasing, Inc.
Corporate General Partner
</TABLE>
<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 schedule contains summary financial information extracted from the audited
financial statements of Telecommunications Income Fund IX, L.P. as of December
31, 1998, the year ended December 31, 1998, and the three months ended March 31,
1998, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 711,589
<SECURITIES> 304,003
<RECEIVABLES> 1,424,765
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,037,197
<DEPRECIATION> (261,600)
<TOTAL-ASSETS> 3,215,954
<CURRENT-LIABILITIES> 494,374
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 2,721,580<F1>
<TOTAL-LIABILITY-AND-EQUITY> 2,721,580<F1>
<SALES> 402,020<F2>
<TOTAL-REVENUES> 402,020<F2>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 226,369<F2>
<LOSS-PROVISION> 64,711<F2>
<INTEREST-EXPENSE> 16,817<F2>
<INCOME-PRETAX> 94,123<F2>
<INCOME-TAX> 0
<INCOME-CONTINUING> 94,123<F2>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,123<F2>
<EPS-PRIMARY> 1.39<F3>
<EPS-DILUTED> 1.39<F3>
<FN>
<F1>Net Assets
<F2>For three months ending March 31, 1998; after that time, the Partnership began
liquidation basis accounting (see audited financial statements).
<F3>Net Income (Loss) per Partnership Unit
</FN>
</TABLE>