SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC. 20549-1004
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission file number 0-21256
CYPRESS EQUIPMENT FUND II, LTD.
(Exact name of Registrant as specified in its charter)
Florida 59-3082723
(State or other jurisdiction or (I.R.S. Employer
incorporation or organization) Identification No.)
880 Carillon Parkway, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (727) 573-3800
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: 50,000
Title of Each Class
Units of Limited Partnership Interest
$1,000 per unit
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. x
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------- -------
Number of shares outstanding of each of Registrant's classes of securities:
Number of Units
Title of Each Class at December 31, 1998
- ---------------------- --------------------
Units of Limited Partnership 36,469
Interest: $1,000 per unit
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Parts III and IV - Form S-1 Registration Statement
and all amendments and Supplements thereto
File No. 33-44119
PART I
Item 1. BUSINESS
General Development of Business -
The Registrant is a Florida limited partnership (the "Partnership")
composed of Cypress Equipment Management Corporation II, a California
corporation and a wholly-owned subsidiary of Cypress Leasing Corporation,
as the Managing General Partner; RJ Leasing - 2, Inc., a Florida
corporation and a second-tier subsidiary of Raymond James Financial, Inc.,
as the Administrative General Partner; Raymond James Partners, Inc., a
Florida corporation and a wholly-owned subsidiary of Raymond James
Financial, Inc., as the other General Partner; and purchasers of
partnership units as Limited Partners.
Financial Information about Industry Segments -
The Registrant is engaged in only one industry segment, to acquire
transportation, manufacturing, industrial and other capital equipment (the
"Equipment") and lease the Equipment to third parties.
Narrative Description of Business -
The Partnership's business is to acquire and lease equipment,
primarily through full payout and operating leases expected to generate
income over the useful life of the Equipment, and to generate cash
distributions to the Limited Partners from leasing revenues and proceeds
from the sale or other disposition of the Equipment owned by the
Partnership.
The Registrant has no direct employees. The General Partners have
full and exclusive discretion in management and control of the Partnership.
The equipment leasing industry is highly competitive and offers to
users an alternative to the purchase of nearly every type of equipment. In
seeking lessees, the Partnership will compete with manufacturers of
equipment who provide leasing programs and with established leasing
companies and equipment brokers. In addition, there are numerous other
potential investors, including limited partnerships, organized and managed
similarly to the Partnership, seeking to purchase equipment subject to
leases, some of which have greater financial resources and more experience
than the Partnership or the General Partners.
Item 2. PROPERTIES
The Registrant commenced operations in June 1992, and as of December
31, 1998, the original cost of Equipment owned by the Partnership was
$27,353,708. Equipment and related information consist of the following:
FUTURE REVENUE
LEASE OF REMAINING
MATURITIES ACQUISITION LEASE TERM AT
EQUIPMENT AT 12/31/98 COST 12/31/98
- -------------------------- ------------- ---------------- ------------
Tank Barges December 1999 3,623,484 546,323
Locomotives November 1999 1,745,717 239,241
Electronic Banking October 1999
Equipment -August 2002 10,336,844 2,062,246
3 Aircraft November
2003- June 5,438,086 2,237,500
2004
Aircraft January 2000 1,047,892 252,000
Machine Tools August 1999 - 1,061,079 334,310
September
2001
Offlease:
Peak Power Generating
Units (1) 4,100,606
------------ ------------
TOTAL $ 27,353,708 $ 5,671,620
============ ============
(1) The lessee has exercised its option to purchase the equipment. See
"Legal Proceedings"
The lessees and the percentages of total equipment owned are as
follows:
Hughes Network Systems, Inc. 29%
Big Sky Airlines 20%
Dow Chemical Company 13%
Affiliated Computer Services, Inc. 9%
Union Pacific 6%
Merlin Express 4%
Alliant Technology 4%
Equipment Held for Sale 15%
----
100%
====
The Partnership owns two Options, purchased for an acquisition cost of
$2,282,246, to buy rail equipment at lease expiration dates of August 1999
and January 2000. The Partnership paid $3,118,969 for the right to obtain
title to certain equipment on December 30, 2002, at the expiration of the
lease.
The Partnership owns a Direct Financing Lease with a net investment
of $840,731. The Partnership is also a 50% partner in two other
partnerships with a current net investment of $7,495,781. The Partnership
purchased a specialty tug and barge for $3,118,969. We take title to this
equipment at its current lease expiration.
Item 3. LEGAL PROCEEDINGS
In August 1998, Varilease Corporation filed an action against Cypress
in the circuit court for the Sixth Judicial Circuit, Pinellas County,
Florida. The suit alleges that Varilease continues to have an interest in
some equipment that Cypress purchased from Varilease in 1995, and seeks
monetary damages. The management of Cypress has retained counsel and
believes the suit is completely without merit.
The Pennsylvania Power and Light Company lease expired in May 1996.
Under the lease, the lessee is entitled to purchase the equipment at fair
market value, determined by an appraisal, at the expiration of the lease if
the lessee has given 180 days prior notice to the Partnership. The lessee
provided this notification. Subsequently the lessee brought a legal action
against the Partnership seeking to have their exercise of the purchase
option revoked or to have the court define "fair market value." This
action has been dismissed by the court. The equipment is currently located
on the lessee's premises, pending resolution under the appraisal mechanism
of the price to be paid for the equipment.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders through the
solicitation of proxies or otherwise during the fourth quarter of 1998.
PART II
Item 5. MARKET FOR THE REGISTRANT'S SECURITIES AND RELATED SECURITY
HOLDER MATTERS
(a)The Registrant's limited partnership interests are not
publicly traded. There is no market for the Registrant's limited
partnership interests and it is unlikely that any will develop.
(b) Approximate number of
equity security holders:
Number of Record Holders
Title of Each Class as of December 31, 1998
Units of Limited Partnership Interest 2,005
General Partner Interests 3
Item 6. SELECTED FINANCIAL DATA
1998 1997 1996 1995 1994
Total
Revenues $ 8,736,573 $ 6,606,199 $10,605,555 $ 7,119,741 $ 8,672,375
Net Income $ 4,560,365 $ 1,479,260 $ 4,472,073 $ 1,550,265 $ 3,199,088
Total Assets $33,822,260 $47,348,906 $49,121,339 $39,309,444 $36,771,147
Notes Payable $ 6,497,730 $19,084,905 $18,628,741 $ 9,900,879 $ 4,799,168
Distributions
to Limited
Partners Per
Weighted
Average
Limited
Partnership
Unit
Outstanding $ 150.00 $ 100.00 $ 100.00 $ 109.21 $ 91.45
Earnings Per
Weighted
Average
Limited
Partnership
Unit
Outstanding $ 123.80 $ 40.16 $ 121.40 $ 42.08 $ 90.75
The selected financial data should be read in conjunction with the
financial statements and related notes appearing elsewhere in this report.
This statement is not covered by the auditor's opinion included elsewhere
in this report.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Rental income decreased from $5,770,536 for the year ended December
31, 1997, to $4,803,888 for the year ended December 31, 1998. Equipment
which came off-lease or was sold provided $643,553 less revenue in 1998
than in 1997 and equipment purchased in 1998 provided $126,000 more revenue
in 1998 than in 1997. Additionally, there was a decrease of $449,095 in
revenues of leases that were in place. Interest income decreased during
the year ended December 31, 1998, as compared to the year ended December
31, 1997, because of lower interest rates and the Partnership had a lower
average balance of cash for investment. The equity in income in
Partnerships increased from $542,189 for the period ended December 31, 1997
to $1,242,123 for the period ended December 31, 1998.
Interest expense decreased from $1,557,497 for the year ended December
31, 1997, to $1,424,978 for the year ended December 31, 1998. This
decrease primarily resulted from an decreased average level of debt during
the period. Management fee expense increased slightly even though rental
revenues decreased due to management fees being paid on the distributions
from the partnership that the Partnership holds interest in. Depreciation
and amortization expense decreased $761,214 for the year ended December 31,
1998 versus the year ended December 31, 1997, due to an average depreciable
basis of equipment of $33,608,000 during 1997 versus an average of
$28,744,000 during 1998.
The net effect of the above revenue and expense items resulted in a
net income of $1,479,260 for the year ended December 31, 1997, compared to
a net income of $4,560,365 for the year ended December 31, 1998.
During the year ended December 31, 1998, the Partnership purchased
$345,456 of new equipment. The Partnership sold rental equipment with an
original cost of $8,847,064 for a net sale price of $10,431,101. These
sales produced a gain on sale of $2,989,664. The Partnership had a
casualty event which netted a gain of $103,033. Equipment Held for Sale
with a net book value of $432,473 was sold for $1,100,000 less disposition
expenses resulting in a gain of $639,250. During the year ended December
31, 1997, the Partnership acquired Equipment, a Direct Financing Lease, and
Investments in Partnership for $4,127,406. During 1997 Equipment Held for
Sale with a net book value of $20,042 was sold for $36,500 resulting in a
gain on sale of $16,458. During 1997 the Partnership exercised an option
and paid the strike price of $566,686. The equipment was immediately sold
and the partnership realized a net gain of $548,588.
Notes payable decreased $12,587,175 during the year ended December 31,
1998, due to deferred interest of $246,744 and $12,833,919 of principal
payments on notes.
Liquidity and Capital Resources
The primary sources of funds for the year ended December 31, 1998 were
$3,737,543 from operating activities, $10,430,101 from the sale of rental
equipment and $3,744,349 in distributions from other partnerships. These
sources were used primarily for $12,833,919 of notes payments and
$5,525,603 of distributions. As of December 31, 1998, the Partnership had
$3,702,451 of Cash and Cash Equivalents.
In the opinion of the General Partners there are no material trends,
favorable or unfavorable, in the Partnership's capital resources and the
resources will be sufficient to meet the Partnership's needs for the
foreseeable future.
Short-term liquidity requirements consist of funds needed to make
distributions, meet administrative expenses, and debt retirement. These
short-term needs will be funded by cash from 1999 operations and Cash and
Cash Equivalents at December 31, 1998.
In the opinion of the General Partners, the Partnership has sufficient
funds or sources of funds to remain liquid for the expected life of the
Partnership. The General Partners are not aware of any trends that
significantly affect the Partnership's liquidity.
The cash balance at December 31, 1998, was $3,702,451. The
Partnership had net income of $4,560,365 and after adjusting for
depreciation and amortization and the changes in operating assets and
liabilities, net cash provided by operating activities was $3,737,543.
Cash provided by investing activities totaled $13,834,771. Cash used in
financing activities was primarily to make payments of notes payable of
$12,833,920 and distributions of $5,525,603.
Actual cash distributions were $5,525,603 in 1998 and $3,683,732 in
1997.
The Partnership anticipates that funds from operations in 1999 will be
adequate to cover all 1999 operating contingencies.
INDEPENDENT AUDITOR'S REPORT
To the Partners of
Cypress Equipment Fund II, Ltd.
We have audited the accompanying balance sheets of Cypress Equipment
Fund II, Ltd. as of December 31, 1998 and 1997, and the related statements
of operations, partners' equity and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cypress
Equipment Fund II, Ltd. as of December 31, 1998 and 1997, and the results
of its operations and its cash flows for each of the three years in the
period ended December 1998, in conformity with generally accepted
accounting principles.
/s/SPENCE, MARSTON, BUNCH, MORRIS & CO.
SPENCE, MARSTON, BUNCH, MORRIS & CO.
Certified Public Accountants
Clearwater, Florida
April 30, 1999
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CYPRESS EQUIPMENT FUND II, LTD.
BALANCE SHEETS
DECEMBER 31,
1998 1997
---- ----
ASSETS
Rental Equipment, at Cost $ 23,253,102 $ 34,234,667
Less: Accumulated Depreciation (11,192,367) (12,630,987)
------------- -------------
12,060,735 21,603,680
Rental Equipment Held for Sale 3,672,601 4,105,073
Deposit on Equipment 3,118,969 3,118,969
Options 2,282,246 2,282,246
Investment In Partnerships 7,495,781 10,009,477
Net Investment in Direct Financing Lease 840,731 867,100
Deferred Debt Costs (Net of Accumulated
Amortization of $29,214 and $26,559,
Respectively) 8,366 44,238
Rent and Sales Proceeds Receivable 537,135 737,603
Accounts Receivable - General 5,508 12,000
Prepaid Expense 97,737 88,408
Cash and Cash Equivalents 3,702,451 4,480,112
------------ ------------
Total Assets $ 33,822,260 $ 47,348,906
============= =============
LIABILITIES AND PARTNERS' EQUITY
Liabilities:
Notes Payable $ 6,497,730 $ 19,084,905
Payable to: General Partners 101,308 187,943
Others 451,612 268,626
Interest Payable 48,187 141,780
Unearned Revenue 23,009 0
------------- -------------
Total Liabilities 7,121,846 19,683,254
------------- -------------
Partners' Equity:
Limited Partners (36,469 units outstanding
at December 31, 1998 and 1997) 26,752,336 27,707,925
General Partners (51,922) (42,273)
------------- -------------
Total Partners' Equity 26,700,414 27,665,652
------------- -------------
Total Liabilities and Partners' Equity $ 33,822,260 $ 47,348,906
============= =============
The accompanying notes are an integral part of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
Revenues:
Rental Income $ 4,803,888 $ 5,770,536 $ 7,491,653
Interest Income 200,738 270,617 362,482
Gain on Sale of Rental
Equipment 3,092,697 0 198,081
Gain on Sale of Rental
Equipment Held for Sale 639,250 565,046 1,640,583
Insurance Proceeds 0 0 912,756
------------ ------------ ------------
Total Revenues 8,736,573 6,606,199 10,605,555
------------ ------------ ------------
Operating Expenses:
Management Fees-General 299,802 288,328 223,432
Partners
General Administrative: 57,804 69,281 73,286
Affiliate 1,058,425 415,486 565,488
Other 1,424,978 1,557,497 1,231,062
Interest Expense 2,577,322 3,338,536 4,075,855
Depreciation and Amortization ------------ ------------ ------------
5,418,331 5,669,128 6,169,123
Total Operating Expenses ------------ ------------ ------------
Net Income Before Equity in 3,318,242 937,071 4,436,432
Income of Partnerships
1,242,123 542,189 35,641
Equity in Partnerships ------------ ------------ ------------
$ 4,560,365 $ 1,479,260 $ 4,472,073
Net Income ============ ============ ============
Allocation of Net Income: $ 4,514,761 $ 1,464,467 $ 4,427,352
Limited Partners 45,604 14,793 44,721
General Partners ------------ ------------ ------------
$ 4,560,365 $ 1,479,260 $ 4,472,073
============ ============ ============
Net Income per $1,000 Limited $ 123.80 $ 40.16 $ 121.40
Partnership Unit Outstanding ============ ============ ============
Number of Limited Partnership 36,469 36,469 36,469
Units ============ ============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF PARTNERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
Limited General Total
Partners' Partners' Partners'
Equity Deficit Equity
-------- -------- --------
Balance at December 31, 1995 $29,109,906 $ (28,123) $29,081,783
Net Income - 1996 4,427,352 44,721 4,472,073
Distributions - 1996 (3,646,900) (36,832) (3,683,732)
------------ --------- -----------
Balance at December 31, 1996 29,890,358 (20,234) 29,870,124
Net Income - 1997 1,464,467 14,793 1,479,260
Distributions - 1997 (3,646,900) (36,832) (3,683,732)
----------- --------- ------------
Balance at December 31, 1997 27,707,925 (42,273) 27,665,652
Net Income - 1998 4,514,761 45,604 4,560,365
Distributions - 1998 (5,470,350) (55,253) (5,525,603)
------------ --------- ------------
Balance at December 31, 1998 $26,752,336 $ (51,922) $26,700,414
============ =========== ============
The accompanying notes are an integral part
of these financial statements.
<PAGE>
CYPRESS EQUIPMENT FUND II, LTD.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996
---- ---- ----
Cash Flows from Operating
Activities:
Net Income $ 4,560,365 $ 1,479,260 $ 4,472,073
Adjustments to Reconcile Net
Income (Loss) to Net Cash
Provided by Operating Activities:
(Gain)Loss on Sale of Equipment (3,092,697) 0 (198,081)
Depreciation and Amortization 2,577,322 3,338,536 4,075,855
Deferred Interest on Notes
Payable 246,744 606,257 495,617
Equity in Income of Investment
In Partnerships (1,242,123) (542,189) (35,641)
Changes in Operating Assets
and Liabilities:
Decrease in Rental Equipment
Held for Sale 432,472 20,043 3,174,558
(Increase) Decrease in Rent
Receivable 200,468 (79,087) 102,200
(Increase) Decrease in
Prepaid Expenses 22,733 (17,851) (48,898)
Increase (Decrease) in
Interest Payable (93,593) 19,311 59,625
(Increase) Decrease in
Accounts Receivable:
Interest 0 0 472
Other 6,492 (8,691) 289
Increase (Decrease) in
Payable to:
General Partners (86,635) (198,424) 287,179
Affiliates 0 (11,393) 11,393
Other 182,986 166,568 40,485
Increase (Decrease) in Unearned
Revenue 23,009 (187) (109,653)
------------ ------------ ------------
Net Cash Provided by
Operating Activities 3,737,543 4,772,153 12,327,473
------------ ------------ ------------
Cash Flows from Investing
Activities:
Purchases of Rental Equipment (345,456) (1,259,580) (3,896)
Deposit on Equipment 0 (9,420) (3,109,549)
(Purchase)Decrease of Direct
Financing Lease 26,369 (867,100) 0
Investment in Partnerships (20,682) (1,541,765) (8,859,010)
Distributions Received 3,744,439 868,175 100,953
(Purchase) Sale of Options 0 748,406 0
Proceeds from Sale of Equipment 10,430,101 0 438,282
Proceeds from Casualty of
Option 0 2,966 4,496
(Increase) Decrease in Sales
Proceeds Receivable 0 1,483 109,017
----------- ----------- -----------
Net Cash Provided by (Used
In) Investing Activities 13,834,771 (2,056,835) (11,319,707)
----------- ----------- -----------
Cash Flows from Financing
Activities:
Proceeds from Notes Payable 0 8,658,151 7,899,999
Payment of Notes Payable (12,833,290) (8,808,244) (2,704,851)
(Increase) Decrease in Deferred
Debt Costs 9,548 (72,748) (34,553)
Distributions to Partners (5,525,603) (3,683,732) (3,683,732)
----------- ----------- -----------
Net Cash (Used In) Provided
by Financing Activities (18,349,975) (3,906,573) 1,476,863
----------- ----------- -----------
Increase (Decrease) in Cash and
Cash Equivalents (777,661) (1,191,255) 2,484,629
Cash and Cash Equivalents at
Beginning of Period 4,480,112 5,671,367 3,186,738
----------- ----------- -----------
Cash and Cash Equivalents at End
of Period $ 3,702,451 $ 4,480,112 $ 5,671,367
=========== =========== ===========
Supplemental Cash Flow Information:
Interest Paid $ 1,271,827 $ 931,930 $ 612,627
============ =========== ===========
Non-Cash Activities:
The 1996 transfer of ownership from equipment previously under option
resulted in increases of: Leased Equipment by $4,155,501; Notes Payable by
$3,037,097; and Interest Payable by $6,662; and decreases of: Residual
Participations by $134,396; Residual Participations Receivable by $914,066;
and Accounts Receivable - Interest by $63,280.
Notes Payable in 1996 were increased by $495,617, the amount of Deferred
Interest on Notes Payable.
In 1996, Leased Equipment with a cost of $4,136,743 and a net book value of
$3,692,643 was transferred to Equipment Held for Sale.
Notes Payable in 1997 were increased by $606,257, the amount of Deferred
Interest on Notes Payable.
Notes Payable in 1998 were increased by $246,744 the amount of Deferred
Interest on Notes Payable.
The accompanying notes are an integral part
of these financial statements.
<PAGE>
Cypress Equipment Fund II, Ltd.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
NOTE 1 - ORGANIZATION
Cypress Equipment Fund II, Ltd., (the "Partnership"), a Florida limited
partnership, was formed November 13, 1991, for the purpose of acquiring and
leasing transportation, manufacturing, industrial and other capital
equipment. The Partnership was funded with limited partner capital
contributions and commenced operations on June 22, 1992. The Partnership
will terminate on December 31, 2015, or sooner, in accordance with the
terms of the Limited Partnership Agreement.
Cypress Equipment Management Corporation II, a California corporation
and a wholly-owned subsidiary of Cypress Leasing Corporation, is the
Managing General Partner; RJ Leasing - 2, Inc., a Florida corporation and a
second-tier subsidiary of Raymond James Financial, Inc., is the
Administrative General Partner; and Raymond James Partners, Inc., a Florida
corporation and a wholly-owned subsidiary of Raymond James Financial, Inc.,
is the other General Partner.
Cash distributions, subject to payment of the equipment management fees,
and profits and losses of the Partnership shall be allocated 99% to the
Limited Partners and 1% to the General Partners. Once each Limited Partner
has received cumulative cash distributions equal to his capital
contributions, an incentive management fee equaling 4% of cash available
for distributions will be paid to the General Partners. When each Limited
Partner has received cumulative cash distributions equal to his capital
contributions plus an amount equal to 8% of adjusted capital contributions
per annum, an incentive management fee equaling 23% of cash available for
distributions will be paid to the General Partners.
As of December 31, 1998, the Partnership has received Limited and
General Partner capital contributions of $36,469,000 and $2,000,
respectively.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Partnership utilizes the accrual basis of accounting whereby
revenues are recognized when earned and expenses are recognized as
obligations are incurred.
Cash and Cash Equivalents
It is the Partnership's policy to include all money market funds in Cash
and Cash Equivalents.
Concentration of Credit Risk
Financial instruments which potentially subject the Partnership to
concentrations of credit risk consist principally of cash investments and
rents receivable. The cash investments are placed in high credit quality
financial institutions and in a money market mutual fund that is managed by
a wholly-owned subsidiary of Raymond James Financial, Inc. The Partnership
receives rental income exclusively from lessees. Management does not
believe that significant credit risk exists in relation to these accounts
at December 31, 1998.
The Partnership maintains deposits in excess of federally insured
limits. Statement of Financial Accounting Standards No. 105 requires
disclosure regardless of the degree of risk.
Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires the use of estimates that affect
certain reported amounts and disclosures. These estimates are based on
management's knowledge and experience. Accordingly, actual results could
differ from these estimates.
Offering and Commission Costs
Offering and commission costs are charged against Limited Partners'
Equity upon admission of Limited Partners.
Leases
Operating
The Partnership accounts for qualifying leases in accordance with the
operating method. Under the operating method of accounting, the leased
equipment is recorded as an asset at cost and depreciated on the declining
balance method using a ten to forty year life. Rental income is recognized
ratably over the term of the leases.
In March 1995, the Financial Accounting Standards Board (FASB) issued
statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of" (SFAS 121). In accordance with
SFAS 121, the Fund reviews the carrying value of its equipment at least
annually in relation to expected future market conditions for the purpose
of assessing the recoverability of the recorded amounts. If projected
undiscounted cash flows (future lease revenue plus residual values) are
less than the carrying value of the equipment, a loss on revaluation is
recorded. There were no write-downs required during 1998 or 1997.
Direct Financing Lease
The Partnership owns one direct financing lease. The Investment in
Direct Financing Lease is reported at the present value of the sum of the
minimum lease payments, using the interest rate implicit in the lease as
the discount factor. The difference between the sum of the minimum lease
payments and the present value of the sum of the minimum lease payments is
reported as unearned income, which is amortized over the remaining lease
term using the interest method.
Investment In Partnerships
The Partnership accounts for its investments in partnerships using the
equity method of accounting because the Partnership does not have a
majority control of the major operating and financial policies of the
partnerships in which it invests. Under the equity method, the investment
is carried at cost, adjusted for the Partnership's share of income or loss
of the partnership in which it has invested, and additional investments and
cash distributions from the partnership.
Equipment Held for Sale
The Partnership's policy is to transfer off-lease equipment that is held
for sale to Equipment Held for Sale at the lower of its net book value or
its market value.
Income Taxes
Federal and state income tax regulations provide that taxes on the
income or loss of the Partnership are reportable by the Partners in their
individual income tax returns. Accordingly, no provision for such taxes
has been made.
Per Unit Computations
Per unit computations are based on 36,469 of $1,000 limited partnership
units outstanding for 1998, 1997, and 1996, respectively.
Reclassification
For comparability, 1996 figures have been reclassified where appropriate
to conform to the financial statement presentation used in 1997 and 1998.
The following amounts on the 1996 Statement of Operations have been
reclassified to Equity in Income of Partnerships: Lease Revenue $267,922;
Interest Expense $24,627; and Depreciation $207,654. These
reclassifications had no effect on net income or partners' capital for the
year.
NOTE 3 - RELATED PARTY TRANSACTIONS
General Partners
The General Partners have contributed a total of $2,000 to the
Partnership.
In accordance with the terms of the Limited Partnership Agreement, the
Administrative and Managing General Partners were paid acquisition fees of
$0, $116,352, and $368,478 in 1998, 1997, and 1996 respectively, for
services related to locating and leasing equipment (2.85% of the purchase
price); equipment management fees of $299,802, $288,328, and $223,432, (5%
of gross rentals from rental equipment subject to operating leases, 2% of
gross rentals from rental equipment subject to full payout leases, or 1% of
gross rentals from rental equipment subject to operating leases for which
the Administrative and Managing General Partners arrange for and actively
supervise the performance of services) were paid or accrued in 1998, 1997,
and 1996, respectively. Gross rentals for purposes of calculating
equipment management fees include cash revenues received by the Partnership
subsequent to the date of purchase including cash revenues that relate to
periods prior to the date of purchase. General Partner distributions were
$55,253, $36,832, and $36,832 for 1998, 1997, and 1996, respectively.
Affiliates of the General Partner
The following amounts were paid or accrued to affiliates of the General
Partners: $57,804 in 1998, $69,281 in 1997, and $73,286 in 1996 for
reimbursement of general and administrative expenses on an accountable
basis.
NOTE 4 - LEASES
The initial lease terms of the equipment are generally 5 to 25 years.
Future minimum rentals to be received from the operating leases at December
31, 1998, are as follows:
Year Ending
December 31, Amount
------------ ------------
1999 $ 3,544,298
2000 667,815
2001 484,507
2002 450,000
2003 437,500
Thereafter 87,500
------------
$ 5,671,620
============
Direct Financing Lease
The components of the Partnership's Investment in Direct Financing
Lease at December 31, 1998 are as follows:
Total Minimum Lease
Payments to be Received $ 1,269,203
Unearned Income (428,472)
-----------
Net Investment in
Direct Financing Lease $ 840,731
===========
Future minimum rentals to be received on this lease at December 31,
1998, are as follows:
Year Ending December 31,
1999 $ 251,399
2000 251,399
2001 251,399
2002 515,006
----------
Total $1,269,203
==========
NOTE 5 - OPTIONS
In 1993, the Partnership purchased an option to acquire equipment at the
termination of the current lease. The cost of the Option was $584,736.
During 1995, the Partnership exercised the option and paid the strike price
of $2,290,270. Upon exercise, the equipment was transferred to Equipment
Held for Sale. This equipment was sold in 1996.
During 1995, the partnership purchased three options to acquire
equipment at the termination of the current leases. The Partnership
accounts for these options at costs of $748,405, $674,124, and $1,608,122.
The exercise dates are July 1997, August 1999, and January 2000 with
exercise prices of $566,684, $1,535,122, and $5,107,500, respectively. If
the options are not exercised, the option costs will be charged against
income. In July 1997 the Partnership exercised the option and paid the
strike price of $566,686. The equipment was immediately sold and the
partnership realized a net gain of $548,588.
During 1995, the Partnership purchased a residual interest to share in
the cash proceeds generated by a series of equipment leases. The portion
of the residual interest generated during the leases had a cost of
$914,066, based on the present value of the future cash stream. The
portion of the residual interest generated by subsequent leases or
equipment sales had a cost of $134,396. During 1996, the Partnership
purchased the equipment which had previously supported the residual
interest.
NOTE 6 - DEPOSIT ON EQUIPMENT
During 1996 the Partnership paid $3,109,549 for the right to obtain
title to certain equipment on December 31, 2002, at the expiration of the
lease.
NOTE 7 - INVESTMENT IN PARTNERSHIPS
During 1997 the Partnership acquired a 50% interest in a Limited
Partnership which purchased intermodal marine containers and chassis for
approximately $1.7 million. These containers and chassis are on lease to
Transamerica Leasing for a term of three years.
During 1996 the Partnership acquired a 40% interest in a partnership
which owns a recovery boiler facility used in the production of wood pulp
and on lease to International Paper. The purchase price was approximately
$10,290,000.
The following is a summary of the Investment in Partnerships:
December 31, 1998 December 31, 1997
----------------- -----------------
Investment in Federal Paper Board $ 8,859,010 $ 8,859,010
Cumulative Distributions (3,134,155) (969,128)
Cumulative Equity in Income 1,433,657 586,579
------------ ------------
Net Investment $ 7,158,512 $ 8,476,461
============ ============
Investment in Cypress Access
Container $ 1,481,879 $ 1,461,197
Acquisition Expense 48,506 80,568
Cumulative Distributions (1,579,412) 0
Cumulative Equity in Income 386,296 (8,749)
------------ ------------
Net Investment $ 337,269 $ 1,533,016
============ ============
Total Investment in Partnerships $ 7,495,781 $ 10,009,477
============= =============
SUMMARIZED BALANCE SHEET:
CYPRESS ACCESS CONTAINER PARTNERS DECEMBER 31, 1998 DECEMBER 31, 1997
- --------------------------------- ------------------ ------------------
ASSETS:
Cash $ 2,693 $ 0
Rent Receivable 150,350 283,160
Other receivable 417,044 136,412
Containers, net of accumulated
depreciation 1,134,171 2,473,525
Organization costs, net of
accumulated amortization 43,752 11,799
------------ ------------
Total Assets $ 1,748,010 $ 2,904,896
============ ============
LIABILITIES AND PARTNERS' EQUITY:
Accrued Expenses $ 11,479 $ 0
Note Payable 1,157,349 0
Partner's Equity - Access 289,591 1,452,448
Partner's Equity - Cypress 289,591 1,452,448
------------ ------------
Total Liabilities and
Partners' Equity $ 1,748,010 $ 2,904,896
============= ============
SUMMARIZED STATEMENT OF OPERATIONS:
Rental Income $ 765,145 $ 0
Gain on Sale of Containers 474,873 0
Interest Income 257 0
------------- -----------
Total Income 1,240,275 0
Expenses:
General & Administrative 7,777 0
Interest Expense 104,626 0
Depreciation & Amortization 337,782 17,497
------------ -----------
Total Expenses 450,185 17,497
Net Income $ 790,090 $ (17,497)
============ ===========
Other Partner's Share of Net
Income $ 395,045 (8,748)
Cypress' Share of Net Income 395,045 (8,749)
----------- ----------
$ 790,090 $ (17,497)
=========== ==========
SUMMARIZED BALANCE SHEET:
FEDERAL PAPER BOARD DECEMBER 31, 1998 DECEMBER 31, 1997
------------------ ----------------- -----------------
ASSETS:
Equipment, net of accumulated
depreciation $ 7,248,728 $ 8,566,678
----------- -----------
$ 7,248,728 $ 8,566,678
Total Assets ============ ============
LIABILITIES AND PARTNERS' EQUITY:
Unearned Revenue $ 225,524 $ 225,524
------------ ------------
Total Liabilities 225,524 225,524
------------ ------------
Partners' Equity - Cypress 7,158,512 8,476,462
Partners' Equity - Other (135,308) (135,308)
------------ ------------
Total Partners' Equity 7,023,204 8,341,154
------------ ------------
Total Liabilities and Partners'
Equity $ 7,248,728 $ 8,566,678
============ ============
SUMMARIZED STATEMENT OF OPERATIONS:
Rental income $ 5,412,569 $ 5,412,569
Depreciation expense 1,317,950 1,557,578
Interest expense 0 139,746
Amortization expense 0 97,895
------------ ------------
Net Income $ 4,094,619 $ 3,617,350
============ ============
Other partners' share of Net $ 3,247,541 $ 3,066,412
Income 847,078 550,938
Cypress' share of Net Income ------------ ------------
$ 4,094,619 $ 3,617,350
============ ============
NOTE 8 - NOTES PAYABLE
Notes payable consist of the following:
December 31, December 31,
1998 1997
----------- ------------
Non-recourse notes payable secured by
equipment with fixed interest rates of 5% to
16 5/8% and maturities in 1999. $ 489,844 $ 1,754,742
Non-recourse note payable secured by
equipment, original terms of 72 months each,
no payments for the first 48 months with the
accruing interest converted to additional
principal, then fully amortizing over the
remaining 24 months, with a fixed interest
rate of 7.85% and final maturity in 2000. 1,501,267 3,113,556
Recourse notes payable secured by assets of
the Partnership, original terms of 52 to 56
months, no payments due until maturity with
the accruing interest converted to
additional principal, with fixed interest
rate of 10% and final maturity in 2000.
$150,244 is expected to be converted to
principal. 1,692,683 1,539,278
Line of Credit secured by equipment with a
floating rate of LIBOR + 3.25% with maturity
in 1999. The interest rate at December 31,
1997 was 9.4375%. 0 4,234,500
Line of Credit secured by equipment with a
floating rate of LIBOR + 4% with maturity in
1998. The interest rate at December 31,
1997 was 10.1875%. 0 3,600,000
Recourse note secured by assets of the
Partnership with a floating rate of
commercial paper rate + 3.5% up to and
including 3/16/98, and thereafter a floating
rate of commercial paper rate + 4% with a
maturity in 1999. The interest rate as of
December 31, 1998 was 8.95%. 956,699 2,885,760
Recourse non-revolving line of credit
secured by equipment with a floating rate of
"Prime Rate" + .75% with maturity in 2002.
The interest rate as of December 31, 1998
was 8.5%. 455,931 649,103
Non-recourse note payable secured by
residual proceeds after lease termination in
2002 with fixed interest rate of 7%. 1,401,126 1,307,966
----------- -----------
TOTAL $ 6,497,730 $19,084,905
=========== ===========
The aggregate amounts of principal payments due in the years after December
31, 1998 are : 1999 - $3,338,149; 2000 - $1,582,878: 2001 - $140,176; 2002
- - $35,401 and 2003 - $1,401,126.
NOTE 9 - TAXABLE INCOME
The Partnership's taxable income/(loss) differs from financial income
primarily due to depreciation which is recorded under the Modified
Accelerated Cost Recovery System (MACRS). The following is a
reconciliation between net income as reported and Partnership income (loss)
for tax purposes:
1998 1997 1996
---- ---- ----
Net income per financial
statements $ 4,560,365 $ 1,479,260 $ 4,472,073
Tax gain in excess of (less
than) financial gain on sale of
equipment 1,338,921 (3,774) (71,918)
Additional tax depreciation (672,679) (960,164) (1,286,344)
Adjustment to Direct Financing
Lease from tax to financial
statements 245,901 42,541 0
Other Adjustments 6,864 (6,496) 0
Additional taxable losses from
Investment in Partnerships (360,349) (830,585) (434,304)
------------ ------------ ------------
Partnership income (loss) for
tax purposes $ 5,119,023 $ (279,218) $ 2,679,507
============ ============ ============
NOTE 10 - MAJOR LESSEE INFORMATION
Four leases accounted for $1,879,121, $940,749, $634,395 and $609,444
of rental income for the year ended December 31, 1998. Four leases
accounted for $2,012,983, $1,075,911, $988,251 and $609,534 for the year
ended December 31, 1997. Four leases accounted for $2,611,723, $1,078,034,
$1,076,876 and $988,251 for the year ended December 31, 1996.
NOTE 11 - COMMITMENTS AND CONTINGENCIES
The Partnership shall pay the General Partners an equipment resale fee
for arranging for the sale of equipment which will equal the lessor of (a)
3% of the sales price for each Item of Equipment sold, or (b) one-half of
the brokerage fee which would be paid for services that are reasonable,
customary and competitive. Payment of this fee shall be deferred until all
Limited Partners have received cumulative Cash Distributions in an amount
equal to the sum of Capital Contributions and the annual Priority Returns
attributable to all units of the Partnership.
Note 12 - YEAR 2000 ISSUES
Like all entities, the Partnership is exposed to risks associated with the
Year 2000 Issue, which affects computer software and hardware; transactions
with customers, vendors and other entities; and equipment dependent on
microchips. The Partnership has begun but not yet completed the process of
identifying and remedying potential Year 2000 problems. It is not possible
for any entity to guarantee the results of its own remedies or to
accurately predict the impact of the Year 2000 Issue on third parties with
which the Partnership does business. If the remedies of the Partnership or
third parties with which it does business are not successful, the Year 200
problem could have negative effects on the Partnership's financial
condition and results of operations in the near term.
NOTE 13 - SUBSEQUENT EVENTS
On January 31, 1999, the Partnership paid distributions of $911,725 to
the Limited Partners and $9,208 to the General Partners.
On February 25, 1999, part of the option that was to become available
in January 2000 was exercised. The lessee, General Chemical Corporation,
was granted an early lease termination and General Chemical (Soda Ash)
Partners purchased the railroad cars for a net sales price of $8,212,215.
The option had a total cost of $6,347,227 and this sale produced a gain of
$1,864,988.
On March 16, 1999, the Partnership sold equipment with an original
cost of $1,745,717 for $1,010,638.
On April 14, 1999, the Partnership made an early pay off of the loan
associated with the direct financing lease.
On April 30, 1999, the Partnership paid distributions of $$3,646,900
to the Limited Partners and $36,838 to the General Partners.
On May 13, 1999, the Partnership sold Rental Equipment Held for Sale
with a book cost of $3,672,601 for $7,950,000.
Item 9. Disagreements on Accounting and Financial Disclosures
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Partnership has no directors or officers. The Partnership's
affairs are managed and controlled by the General Partners. The General
Partners make all decisions regarding acquisitions, financing and
refinancing, leases and sales of equipment.
Information regarding the officers and directors of the General
Partner is listed within the section captioned "Management" consisting of
pages 29 through 32 of the Prospectus which are incorporated herein by
reference.
Item 11. Executive Compensation
The Partnership has no directors or officers. See Item 13 for
compensation to the General Partners and affiliates.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The General Partners of Cypress Equipment Fund II, Ltd., as purchasers
of Partnership units, own 0 units of the outstanding securities of the
Partnership as of December 31, 1998. Directors and officers of the General
Partners of Cypress Equipment Fund II, Ltd. own 0 units of the outstanding
securities of the Partnership as of December 31, 1998.
The Registrant is a Limited Partnership and therefore does not have
voting securities. To the knowledge of the Partnership, no person owns of
record, or beneficially, more than 5% of the Partnership's outstanding
units.
Item 13. Certain Relationships and Related Transactions
The Partnership has no officers or directors. However, under the
terms of the public offering, various kinds of compensation and fees are
payable to the General Partners and their affiliates during the
organization and operations of the Partnership. The amounts and kinds of
compensation and fees are described on pages 19 through 23 of the
Prospectus under the caption "Management Compensation", which is
incorporated herein by reference. See Note 3 of Notes to Financial
Statements in Item 8 of this Annual Report on Form 10-K for amounts accrued
or paid to the General Partners and their affiliates during the years ended
December 31, 1998, 1997, and 1996.
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
a. (1) Financial Statements - see accompanying index to
financial statements, Item 8.
All other schedules are omitted because they
are not applicable or not required, or because the
required information is shown in the financial
statements or in the notes thereto.
(2) Exhibit Index -
Table
Number Page
2 Plan of liquidation, organization,
arrangement, liquidation, or
succession ***
3 Articles of incorporation and by-laws *
4 Instruments defining the rights of
security holders, including
debentures *
9 Voting Trust Agreement ***
10 Material Contracts ***
11 Computation of per share earnings ***
12 Computation of ratios ***
13 Annual report to security holders ***
18 Letter re: change in accounting
principles ***
19 Previously unfiled documents ***
22 Subsidiaries of the Registrant ***
23 Published report regarding matters
submitted to vote of security holders ***
24 Consents of experts and counsel ***
25 Power of Attorney *
28 Additional Exhibits
28.01 OPTION AGREEMENT dated as of February 1,
1993 between BLC Corporation "Optionor")
and Cypress Equipment Fund II, Ltd.
("Optionee") **
28.02 TRUST AGREEMENT dated as of February
1, 1993 between First Security Bank
of Utah, National Association
("Owner-Trustee") and BLC Corporation
("Trustor") **
28.03 SECURITY AGREEMENT-TRUST DEED dated
as of February 1, 1993 between First
Security Bank of Utah, National
Association as Owner-Trustee under
BLC Trust No. 92-1 and State Street
Bank and Trust Company of
Connecticut, National Association **
28.04 SECURITY AGREEMENT-TRUST DEED
SUPPLEMENT NO. 1 dated February,
1993, between First Security Bank of
Utah, National Association ("Owner-
Trustee") under BLC Trust No. 92-1
and State Street Bank and Trust
Company of Connecticut, National
Association ("Security Trustee") **
28.05 NOTE PURCHASE AGREEMENT dated as of
February 1, 1993 re: BLC Trust No.
92.1 among BLC Corporation Trustor"),
First Security Bank of Utah, National
Association ("Owner-Trustee"),
Hitachi Credit America Corporation
("Note Purchaser") and State Street
Bank and Trust Company of
Connecticut, National Association
("Security Trustee") **
28.06 ACKNOWLEDGEMENT OF ASSIGNMENT AND
AGREEMENT dated as of February 25,
1993 among Southern Pacific
Transportation Company, BLC
Corporation, First Security Bank of
Utah, National Association and State
Street Bank and Trust Company of
Connecticut, National Association **
28.07 BILL OF SALE executed as of February
24, 1993 between BLC Corporation and
First Security Bank of Utah, National
Association **
28.08 PURCHASE AND SALE AGREEMENT dated as
of June 22, 1993 by and between BLC
Corporation and Cypress Equipment
Fund II, Ltd. re: BLC Trust No. 92-1. **
28.09 ASSIGNMENT AND ASSUMPTION AGREEMENT
made and entered into as of June 22,
1993 by BLC Corporation, a Utah
corporation ("Assignor") and Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Assignee") **
28.10 TRANSFER AND ASSUMPTION AGREEMENT
("Agreement"), entered into as of
June 19, 1993 by and between Twenty-
Sixth HFC Leasing Inc., a Delaware
Corporation ("Assignor") and Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Assignee") **
28.11 EQUIPMENT LEASE dated as of June 1,
1980 between The Connecticut Bank and
Trust Company, As Trustee under
I.C.G. Trust No. 80-4 ("Lessor") and
Illinois Central Gulf Railroad
Company ("Lessee") **
28.12 SECURITY AGREEMENT-TRUST DEED dated
as of June 1, 1980 from The
Connecticut Bank and Trust Company,
As Trustee under I.C.G. Trust No. 80-
4 ("Debtor") to Mercantile-Safe
Deposit and Trust Company ("Secured
Party") **
28.13 TRUST AGREEMENT dated as of June 1,
1980 between The Connecticut Bank and
Trust Company ("Trustee") and Twenty-
Sixth HFC Leasing Corporation
("Trustor") **
28.14 ESCROW AGREEMENT 902 dated December
31, 1994 by and among Continental
Bank, N.A. (the "Transferor"),
Cypress Equipment Fund II, Ltd. (the
"Transferee") and Continental Bank,
National Association, Corporate Trust
Services (the "Escrow Agent"). **
28.15 TRANSFER AGREEMENT 902 dated as of
December 31, 1994 between Continental
Bank, N.A. (the "Transferor"), and
Cypress Equipment Fund II, Ltd. (the
"Transferee"). **
28.16 TRANSFEROR'S INTERESTS ASSIGNMENT AND
ASSUMPTION AGREEMENT 902 dated
December 31, 1994 between Continental
Bank, N.A. (the "Transferor"), and
Cypress Equipment Fund II, Ltd. (the
"Transferee"). **
28.17 ASSIGNMENT AND ASSUMPTION AGREEMENT
902 dated December 31, 1994 between
The Kinsman Marine Transit Company
(the "Assignor") and Pringle Transit
Company (the "Assignee"). **
28.18 KINSMAN AGREEMENT dated as of
December 31, 1994 by The Kinsman
Marine Transit Company. **
28.19 REVOLVING CREDIT AGREEMENT dated
December 31, 1994 by and between
Cypress Equipment Fund II, Ltd.
("Borrower") and First Union National
Bank of Florida ("Lender"). **
28.20 SECURITY AGREEMENT dated December 31,
1994 by and between Cypress Equipment
Fund II, Ltd. ("Debtor") and First
Union National Bank of Florida
("Secured Party"). **
28.21 COLLATERAL ASSIGNMENT OF RIGHTS UNDER
TRUST AGREEMENT dated December 31,
1994 by and between Cypress Equipment
Fund II, Ltd. ("Assignor") and First
Union National Bank of Florida
("Assignee"). **
28.22 LEASE AGREEMENT dated as of March 30,
1988 between Capital Associates
International, Inc. ("Lessor") and
Comair, Inc. ("Lessee"). **
28.23 PURCHASE AGREEMENT ("Agreement")
dated as of August 31, 1994, by and
between Capital Associates
International, Inc. ("Seller") and
First Security Bank of Utah, National
Association not in its individual
capacity but as owner trustee
pursuant to that certain Trust dated
August 31, 1994 between itself and
Cypress Equipment Fund II ("Buyer"). **
28.24 BILL OF SALE dated August 31, 1994
between Capital Associates
International, Inc. ("Seller") and
First Security Bank of Utah, National
Association not in its individual
capacity but as owner trustee
pursuant to that certain Trust dated
August 31, 1994 between itself and
Cypress Equipment Fund II, Ltd.
("Buyer"). **
28.25 TRUST AGREEMENT dated as of August
31, 1994 between Cypress Equipment
Fund II, Ltd. ("Owner Participant")
and First Security Bank of Utah,
National Association ("Owner
Trustee"). **
28.26 ASSIGNMENT OF LEASE dated August 31,
1994, between Capital Associates
International, Inc. ("Assignor") and
First Security Bank of Utah not in
its individual capacity but as owner
trustee pursuant to that certain
Trust dated August 31, 1994 between
itself and Cypress Equipment Fund II
("Assignee"). **
28.27 SECURITY AGREEMENT dated as of August
31, 1994 between First Security Bank
of Utah, National Association, solely
as Owner Trustee under Trust
Agreement dated as of August 31, 1994
and not in its individual capacity
("Trustee") and First Union National
Bank of Florida, a national banking
association ("Secured Party"). **
28.28 TRUST AGREEMENT dated as of April 1,
1970 among Union Bank ("Trustor") and
W. H. Ruskaup and Ben Maushardt
("Trustees") and United States
Leasing International, Inc. ("Agent
for Trustees"). **
28.29 LEASE OF RAILROAD EQUIPMENT dated as
of April 1, 1970 among W. H. Ruskaup
and Ben Maushardt ("Trustees") and
United States Leasing International,
Inc. ("Agent for Trustees") and Union
Carbide Corporation ("Lessee"). **
28.30 ASSIGNMENT AGREEMENT (Residual
Interest) dated as of September 30,
1994 by and between United States
Leasing International, Inc., a
Delaware corporation ("Assignor") and
Cypress Equipment Fund II, Ltd.
("Assignee"). **
28.31 TRANSFER AND ASSUMPTION AGREEMENT
dated as of September 30, 1994, by
and between Union Bank, a California
state chartered bank ("Assignor") and
Cypress Equipment Fund II, Ltd.
("Assignee). **
28.32 AGREEMENT TO ACQUIRE AND LEASE dated
as of April 1, 1970 among W. H.
Ruskaup and Ben Maushardt
("Trustees") and United States
Leasing International, Inc. ("Agent")
and Union Carbide Corporation
("Lessee"). **
28.33 SECURITY AGREEMENT - TRUST DEED dated
as of June 1, 1970 from W. H. Ruskaup
and Ben Maushardt ("Debtor") to Wells
Fargo Bank, N.A. ("Secured Party"). **
28.34 PURCHASE AGREEMENT made as of July
25, 1994, by and among Trust Company
for USL, Inc., an Illinois trust
company as successor trustee to W.H.
Ruskaup and Ben Maushardt, and United
States Leasing International, Inc. as
agent for successor trustee
("Seller") and Cypress Equipment Fund
II, L.P., a Florida limited
partnership, with its principal place
of business at 880 Carillon Parkway,
St. Petersburg, Florida 33716 as the
beneficial owner of the Trust Estate
("Beneficial Owner") and Union
Carbide Corporation, a New York
corporation ("Purchaser"), with its
principal place of business at 39 Old
Ridgebury Rd., E-1, Danbury,
Connecticut 06817 **
28.35 PURCHASE AGREEMENT dated as of
February 1, 1995, between Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Seller"), and
Helm-Atlantic Associates Limited
Partnership, a Delaware limited
partnership ("Purchaser"). (This
Purchase Agreement pertains to
seventeen (17) of the nineteen (19)
sold locomotives.) **
28.36 ASSIGNMENT AND ASSUMPTION AGREEMENT
dated as of June 1, 1995, by and
between Cypress Equipment Fund II,
Ltd., a Florida limited partnership
("Seller"), and Helm-Atlantic
Associates Limited Partnership, a
Delaware limited partnership
("Purchaser"). **
28.37 ASSIGNMENT OF LEASE dated as of June
1, 1995, by and between Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Seller"), and
Helm-Atlantic Associates Limited
Partnership, a Delaware limited
partnership ("Purchaser"). **
28.38 PURCHASE AGREEMENT dated as of
February 1, 1995, between Cypress
Equipment Fund II, Ltd., a Florida
limited partnership ("Seller"), and
Helm-Atlantic Associates Limited
Partnership, a Delaware limited
partnership ("Purchaser"). (This
Purchase Agreement pertains to two
(2) of the nineteen (19) sold
locomotives.) **
28.39 Purchase Agreement dated as of April
17, 1995, between Varilease
Corporation, a Michigan corporation
("Seller"), and Cypress Equipment
Fund II, Ltd., a Florida limited
partnership ("Buyer"). **
28.40 Bill of Sale and Assignment dated
April 28, 1995, between Varilease
Corporation, a Michigan corporation
"Seller"), and Cypress Equipment Fund
II, Ltd., a Florida limited
partnership ("Buyer"). **
28.41 Consent and Agreement dated April 28,
1995, between IBJ Schroder Leasing
Corporation, a New York corporation
("Schroder"), and Cypress Equipment
Fund II, Ltd. ("Cypress"). **
28.42 Escrow Agreement dated April 17,
1995, between Varilease Corporation,
a Michigan corporation ("Seller"),
Cypress Equipment Fund II, Ltd., a
Florida limited partnership
("Buyer"), and Griffinger, Freed,
Heinemann, Cook & Foreman ("Escrow
Agent"). **
28.43 Bill of Sale and Assignment
(Remaining Interest) dated January 1,
1996, between Varilease Corporation,
a Michigan corporation ("Seller"),
and Cypress Equipment Fund II, Ltd.,
a Florida limited partnership
("Buyer"). **
28.44 Assignment and Assumption Agreement,
dated as of December 30, 1996 (this
"Agreement"), between NTFC Capital
Corporation, a Delaware corporation
(the "Seller"), and Cypress
Equipment Fund, II, Ltd., a Florida
limited partnership (the "Buyer"). **
28.45 Amended and Restated Purchase
Agreement No. 2 dated as of March
13, 1996, between NTFC Capital
Corporation (formerly named Northern
Telecom Acceptance Corporation), the
Seller, and Cypress Equipment Fund
II, Ltd, the Buyer. **
28.46 Promissory Note for Value Received
dated as of December 30, 1996,
between Cypress Equipment Fund II,
Ltd., a Florida limited partnership
("Maker") promises and agrees to pay
to the order of NTFC Capital
Corporation, its successors, assigns
or any subsequent holder of this
Note (the "Holder") at its offices
located at 220 Athens Way,
Nashville, Tennessee, 37228-1314, or
at such other place as may be
designated in writing by Holder, in
lawful money of the United States of
America in immediately available
funds, the principal amount of Two
Million Six Hundred Eight Three
Thousand Four Hundred Thirty Five
($2,683,435) together with interest
thereon and other amounts due as
provided below. **
28.47 Amended and Restated Security
Agreement ("Security Agreement"),
dated as of March 13, 1996, and made
by Cypress Equipment Fund II, Ltd.,
a Florida limited partnership, with
offices located at One Sansome
Street, Suite 1900, San Francisco,
California, 94104, 415-951-4605
(facsimile) (the "Debtor"), in favor
of NTFC Capital Corporation, a
Delaware corporation, with offices
located at 220 Athens Way,
Nashville, Tennessee 37228 ("Secured
Party"). **
28.48 Participation Agreement dated as of
July 15, 1982 among Federal Paper
Board Company, Inc., Lessee,
Riegelwood, Inc., Secured Note
Issuer, The Bank of New York,
individually and as Owner Trustee,
North Carolina National Bank, as
Indenture Trustee, Teachers
Insurance and Annuity Association of
America, Sun Life Assurance Company
of Canada, Sun Life Assurance
Company of Canada (U.S.), The North
Atlantic Life Insurance Company of
America, and Northern Life Insurance
Company, Loan Participants, and EFH
Leasing Corporation, BNY Leasing,
Inc., and Northern Telecom
Acceptance Corporation, as Owner
Participants. **
29 Information from reports furnished to
state insurance regulatory
authorities ***
* Included with Form S-1, Registration No. 33-
27741 previously filed with the Securities and
Exchange Commission.
** Included with Form 8-K, as amended,
previously filed with the Securities and
Exchange Commission.
*** Exhibits were omitted as not required, not
applicable, or the information required to
be shown therein is included elsewhere in
this report.
b. Reports filed on Form 8-K - None.
c. Exhibits filed with this report - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Cypress Equipment Fund II, Ltd.
RJ Leasing - 2, Inc.
A General Partner
Date: June 15, 1999 By: /s/J. Davenport Mosby, III
-----------------------------------
J. Davenport Mosby, III
President
Date: June 15, 1999 By: /s/John M. McDonald
---------------------------------
John M. McDonald
Vice President
Date: June 15, 1999 By: /s/Christa Kleinrichert
---------------------------------
Christa Kleinrichert
Secretary and Treasurer
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.
Cypress Equipment Fund II, Ltd.
RJ Leasing - 2, Inc.
A General Partner
ATTEST:
/s/Christa Kleinrichert By: /s/J. Davenport Mosby, III
- -------------------------------- -----------------------------------
Christa Kleinrichert J. Davenport Mosby, III
Secretary and Treasurer President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 1998.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 3,702,451
<SECURITIES> 0
<RECEIVABLES> 542,643
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 23,253,102
<DEPRECIATION> 11,192,367
<TOTAL-ASSETS> 33,822,260
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 26,700,414
<TOTAL-LIABILITY-AND-EQUITY> 33,822,260
<SALES> 0
<TOTAL-REVENUES> 8,736,573
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,993,353
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,424,978
<INCOME-PRETAX> 4,560,365
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,560,365
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,560,365
<EPS-BASIC> 123.80<F2>
<EPS-DILUTED> 123.80<F2>
<FN>
<F1>REGISTRANT HAS AN UNCLASSIFIED BALANCE SHEET
<F2>EOS IS NET INCOME PER $1,000 LIMITED PARTNERSHIP UNIT.
</FN>
</TABLE>
