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SECURITIES AND EXCHANGE COMMISSION
Washington DC 20549
FORM 10K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NUMBER 0-17688
TCC EQUIPMENT INCOME FUND (A CALIFORNIA LIMITED PARTNERSHIP)
(Exact name of Registrant as specified in its charter)
CALIFORNIA 94-3045888
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
650 CALIFORNIA STREET, 16TH FLOOR, SAN FRANCISCO, CA 94108
(Address of Principal Executive Offices) (ZIP Code)
(415) 434-0551
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
LIMITED PARTNERSHIP DEPOSITARY UNITS (THE "UNITS")
(TITLE OF CLASS)
LIMITED PARTNERSHIP INTERESTS (UNDERLYING 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. [X]
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. [ ]
State the aggregate market value of the voting stock held by nonaffiliates of
the Registrant. The aggregate market value shall be computed by reference to the
price at which the stock was sold, or the average bid and ask prices of such
stock, as of a specified date within 60 days prior to the date of the filing.
Not Applicable.
Documents Incorporated by Reference
The Registrant's Prospectus as contained in Post-effective Amendment No. 2 to
the Registrant's Registration Statement, as filed with the Commission on
November 30, 1988 as supplemented by Supplement No. 6 filed with the Commission
under Rule 424(b)(3) of the Securities Act of 1933 on October 16, 1989.
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
(a) General Development of Business
The Registrant is a California Limited Partnership formed as of August
3, 1987 with an initial capitalization of $100 to purchase, own,
operate, lease, and sell equipment used in the containerized cargo
shipping industry. The Registrant commenced offering units representing
limited partnership interests (Units) to the public on October 26, 1987
in accordance with its Registration Statement and ceased to offer such
Units as of October 26, 1989. The Registrant raised a total of
$29,491,080 from the offering.
See Item 10 herein for a description of the Registrant's General
Partners.
(b) Financial Information About Industry Segments
Inapplicable.
(c) Narrative Description of Business
(c)(1)(i) A container leasing company generally, and the Registrant
specifically, is an operating business comparable to a rental car
business. A customer can lease a car from a bank leasing
department for a monthly charge which represents the cost of the
car, plus interest, amortized over the term of the lease; or the
customer can rent the same car from a rental car company at a much
higher daily lease rate. The customer is willing to pay the higher
daily rate for the convenience and value-added features provided
by the rental car company, the most important of which is the
ability to pick up the car where it is most convenient, use it for
the desired period of time, and then drop it off at a location
convenient to the customer. Rental car companies compete with one
another on the basis of lease rates, availability of cars, and the
provision of additional services. They generate revenues by
maintaining the highest lease rates and the highest utilization
factors that market conditions will allow, and by augmenting this
income with proceeds from sales of insurance, drop-off fees, and
other special charges. A large percentage of lease revenues earned
by car rental companies are generated under corporate rate
agreements wherein, for a stated period of time, employees of a
participating corporation can rent cars at specific terms,
conditions and rental rates. Buying the cars at fleet prices and
selling them in the secondary market are also key elements to the
successful operation of a rental car business.
Container leasing companies and the Registrant operate in a
similar manner by owning and leasing a worldwide fleet of new and
used transportation containers to international shipping companies
hauling various types of goods among numerous trade routes. Each
container is normally subject to drop-off and other special
handling fees in addition to a daily rental rate, and all lessees
must either provide physical damage and liability insurance or
purchase a damage waiver from the Registrant, in which case the
Registrant agrees to pay the cost of repairing any physical damage
to containers caused by lessees. Container leasing companies
compete with one another on the basis of lease rates, availability
of equipment and services provided. Revenues and profits are
generated by maintaining the highest lease rates and the highest
equipment utilization factors allowed by market conditions. Rental
revenues from containers result primarily under master leases
which are comparable to the corporate rate agreements used by
rental car companies. The master leases provide that container
leasing customers, for a specified period of time, may rent
containers at specific terms, conditions and rental rates.
Although the terms of the master lease governing each container do
not vary, the number of containers in use can vary from time to
time within the term of the master lease. The terms and conditions
of the master lease are similar to a
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"triple net lease" wherein the lessee pays a daily rental rate for
the entire time the container is in his possession (whether or not
he is actively using it), is responsible for any damage, and must
insure the container against liabilities. Rental car companies
usually purchase only new cars, but since containers are
completely standardized, a used container in serviceable condition
usually rents for the same rate as a new one although the purchase
price is lower. The Registrant also sells containers in the course
of its business if opportunities arise or at the end of the
container's useful life. See "Business of the Partnership" in
Registrant's Prospectus, as supplemented.
(c)(1)(ii) Inapplicable.
(c)(1)(iii) Inapplicable.
(c)(1)(iv) Inapplicable.
(c)(1)(v) Inapplicable.
(c)(1)(vi) Inapplicable.
(c)(1)(vii) No single lessee had rental billing for the year ended December
31, 1995 which was 10% or more of the total rental billing of the
Registrant.
(c)(1)(viii) Inapplicable.
(c)(1)(ix) Inapplicable.
(c)(1)(x) There are approximately 70 container leasing companies of which
the top ten control approximately 94% of the total equipment held
by all container leasing companies. The top three container
leasing companies control approximately 59% of the total equipment
held by all container leasing companies. Genstar, which controls
approximately 28% of the equipment held by container leasing
companies, is dominant in the industry. Textainer Equipment
Management Limited, an Associate General Partner of the Registrant
and the manager of its marine container equipment, is the fourth
largest container leasing company and controls approximately 8% of
the equipment held by all container leasing companies. The
Registrant alone is not a material participant in the worldwide
container leasing market. The principal methods of competition are
price and the provision of worldwide service to the international
shipping community.
(c)(1)(xi) Inapplicable.
(c)(1)(xii) Inapplicable.
(c)(1)(xiii) The Registrant has no employees. Textainer Financial Services
Corporation (TFS), the Managing General Partner of the Registrant,
is responsible for the overall management of the Business of the
Registrant and has 24 employees. Textainer Equipment Management
Limited (TEM), an Associate General Partner, is responsible for
the management of the leasing operations of the Registrant and has
a total of 149 employees.
(d) Financial Information About Foreign and Domestic Operations and
Export Sales.
The Registrant is involved in the leasing of shipping containers
to international shipping companies for use in world trade and
approximately 14.18%, 16.63%, and 14.58%, respectively, of the
Registrant's rental revenue during years ended December 31, 1995,
1994, and 1993, respectively, was derived from operations sourced
or terminated domestically. These percentages do not reflect the
proportion of the Partnership's income from operations generated
from the domestic market. Substantially all of the Partnership's
income from operations is
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derived from assets employed in foreign operations. See "Business
of the Partnership" and "Risk Factors" in the Registrant's
Prospectus, as supplemented.
ITEM 2. PROPERTIES.
As of December 31, 1995, the Registrant owned the following types and quantities
of shipping equipment:
20 foot standard dry freight containers 3,405
20 foot refrigerated containers 122
40 foot standard dry freight containers 3,701
40 foot high cube dry freight containers 1,243
-----
8,471
=====
As of December 31, 1995, approximately 88% of these shipping and domestic
storage containers were on lease to international shipping companies and to the
varied users of its domestic storage containers, and the balance were being
stored at a large number of storage depots located worldwide.
For information about the Registrant's property, see "Business of the
Partnership" in the Registrant's Prospectus, as supplemented.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Registrant nor the managing general partner is subject to any legal
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
Inapplicable.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
(a) Market Information.
(a)(1)(i) The units of limited partnership interest in the Registrant are not
publicly traded and there is no established trading market for such
Units. The Registrant has a program whereby Limited Partners may
redeem Units for a specified redemption price.
(a)(1)(ii) Inapplicable.
(a)(1)(iii) Inapplicable.
(a)(1)(iv) Inapplicable.
(a)(1)(v) Inapplicable.
(a)(2) Inapplicable.
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(b) Holders.
(b)(1) As of January 1, 1996, there were 2,101 holders of record of limited
partnership interests in the Registrant.
(b)(2) Inapplicable.
(c) Dividends.
Inapplicable.
For details of the distributions which are made quarterly by the Registrant to
its limited partners, see Item 6, "Selected Financial Data."
ITEM 6. SELECTED FINANCIAL DATA.
Year Ended December 31,
-----------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Rental Income ........... $ 6,478,921 6,158,415 5,994,130 6,785,018 6,866,582
Net Earnings ............ $ 2,668,349 1,791,968 1,569,929 2,372,318 2,567,957
Net Earnings Per Unit
of Limited Partnership
Interest .............. $ 1.79 1.20 1.04 1.58 1.72
Distributions Per Unit of
Limited Partnership
Interest .............. $ 1.95 1.68 2.20 2.40 2.40
Distributions Per Unit of
Limited Partnership
Interest representing
a return of capital ... $ 0.16 0.48 1.16 0.82 0.68
Total Assets ............ $ 21,422,886 20,638,327 21,887,608 23,232,704 24,573,944
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Financial Statements contain information which will assist in evaluating the
financial condition of the Partnership for the years ended December 31, 1995,
1994 and 1993. Please refer to the Financial Statements and Notes thereto in
connection with the following discussion.
LIQUIDITY AND CAPITAL RESOURCES
From October 1987 until October 1989 the Partnership was involved in the
offering of limited partnership interests to the public. On October 26, 1989,
the Partnership's offering of limited partnership interests was closed at
$29,491,080.
The Partnership has set up a program whereby limited partners may redeem units
for a specified redemption value. The redemption price is set by formula and
varies depending on length of time the units are outstanding. Up to 2% of the
Partnership's outstanding units may be redeemed each year, although the 2% limit
may be exceeded at the Managing General Partner's discretion. All redemptions
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are subject to the Managing General Partner's good faith determination that
payment for the redeemed units will not (i) cause the Partnership to be taxed as
a corporation, (ii) impair the capital or operations of the Partnership, or
(iii) impair the ability of the Partnership to pay distributions in accordance
with its distribution policy. The Partnership paid $9,553 for the redemption of
1,250 units for the year ended December 31, 1995 and $13,511 for the redemption
of 1,525 units for the equivalent period in 1994. The Partnership has used cash
flow from operations to pay for the redeemed units. Although payments for
redeemed units decrease the cash available for reinvestment in equipment, the
Partnership believes that the redemption of units may have a positive effect on
the remaining limited partners because the future income and losses attributable
to the redeemed units will now be allocated to the remaining limited partners on
a pro rata basis.
Prior to its distribution or reinvestment in additional equipment, the
Partnership invests working capital and cash flow from operations in short-term,
highly liquid investments. It is the policy of the Partnership to maintain a
minimum working capital reserve in an amount which is the lesser of (i) 1% of
capital contributions or (ii) $100,000. At December 31, 1995, the Partnership's
cash of $492,266 was primarily invested in a market-rate account.
During the year ended December 31, 1995, the Partnership declared cash
distributions to limited partners pertaining to the fourth quarter of 1994 and
the first three quarters of 1995, in the amount of $2,871,656. These
distributions represent 9% of original capital (measured on an annualized basis)
on each unit pertaining to the fourth quarter of 1994 and 10% of original
capital (measured on an annualized basis) on each unit for the first through the
third quarters of 1995. On a cash basis, all of those distributions were from
operations. On a GAAP basis, $240,553 of these distributions were a return of
capital and the balance was from net earnings.
For the year ended December 31, 1995, the Partnership had net cash provided by
operating activities of $4,529,450 compared with net cash provided by operating
activities of $3,495,637 for the equivalent period in 1994. This increase was
primarily attributable to an increase in rental income of 5% and a decrease in
direct container expenses of 22%. Rental revenue increased due to higher
utilization rates and average fleet size. Direct container expenses decreased
mainly due to decreases in storage and maintenance and repair costs as a result
of higher utilization. The average collection period of accounts receivable
improved slightly from 137 days in 1994 to 133 days in 1995.
While net cash from operating activities has improved, the Partnership's
principal lessees, shipping lines, are currently anticipating over-capacity, due
to the delivery of new ships. This over-capacity may cause shipping lines to
reduce freight rates, which could affect the profitability of their business,
resulting in the possibility of delays in the remittance of rental payments,
pressure on container rental rates, and in extreme cases, bankruptcy of some
shipping lines.
Net cash used in investing activities (the purchase and sale of rental
equipment) for the year ended December 31, 1995 was $1,755,314 and was fairly
consistent with net cash used in investing activities of $1,745,117 for
equivalent period of 1994.
RESULTS OF OPERATIONS
The Partnership's operations, which consist of rental income, container
depreciation, direct container expenses, management fees, and reimbursement of
administrative expenses were directly related to the size of the container fleet
("inventory") during the years ended December 31, 1995, 1994 and 1993. The
following is a summary of the equipment (in units) available for lease during
those periods:
1995 1994 1993
---- ---- ----
Opening inventory....................... 8,245 8,140 7,682
Closing inventory....................... 8,471 8,245 8,140
Average................................. 8,358 8,193 7,911
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Rental income and direct container expenses are affected by lease utilization
percentages for the equipment which were 90%, 88% and 81% on average during the
years ended December 31, 1995, 1994 and 1993, respectively.
The following is a comparative analysis of the results of operations for the
years ended December 31, 1995, 1994 and 1993.
The Partnership's income from operations for the years ended December 31, 1995
and 1994 was $2,446,530 and $1,617,978, respectively, on rental income of
$6,478,921 and $6,158,415, respectively. The increase in rental income of
$320,506, or 5% from the year ended December 31, 1994 to 1995 was primarily
attributable to income from container rentals, the major component of total
revenue, which increased by $304,969, or 6%, from 1994 to 1995. Income from
container rentals is largely dependent upon three factors: equipment available
for lease (average inventory), average on-hire (utilization) percentage, and
average daily rental rates. Average inventory increased 2%, average on-hire
utilization increased by two percentage points and average daily rental rates
were fairly stable from the year ended December 31, 1994 to the year ended
December 31, 1995. The General Partners do not expect the increase in
utilization to continue over the short-term, because utilization began to
decrease in the last quarter of 1995 and has continued to decline for all
Equipment types owned by the Partnership in the first quarter of 1996.
Utilization and/or rental rates may also be affected by economic factors
relating to the Partnership's lessees. As noted above, the Partnership's
principal lessees, shipping lines, are currently anticipating over-capacity,
which may adversely affect rental payments and/or rates. Any growth in rental
rates has also been restrained by quantity rate discounts granted to the
Partnership's larger container lessees.
The Partnership's income from operations for the years ended December 31, 1994
and 1993 was $1,617,978 and $1,444,941, respectively, on rental income of
$6,158,415 and $5,994,130, respectively. The increase in rental income of
$164,285, or 3% from the year ended December 31, 1993 to 1994 was primarily
attributable to rental income from container rentals, the major component of
total revenue, which increased by $163,827 from 1993 to 1994. Average inventory
increased 3.6%, average daily rental rates decreased 5% and average on-hire
utilization increased 8.6%, from the year ended December 31, 1993 to the year
ended December 31, 1994.
Substantially all of the Partnership's rental income was generated from the
leasing of the Partnership's containers under short-term operating leases. There
were seven direct financing leases at December 31, 1995, 1994 and 1993.
The balance of rental income consists of other lease-related items, primarily
income from charges to the lessees for handling and returning containers less
credits granted to the lessees for leasing containers from less desirable
locations (location income), income from handling and returning marine
containers and income from charges to lessees for a damage protection plan. For
the year ended December 31, 1995, the total of these other revenue items
increased by $15,537 or 2% over the equivalent period in 1994. The primary cause
of the increase in other revenue was location income, which increased by
$107,567, tempered by decreases in handling income of $48,507 and damage
protection plan income of $39,964. The increase in location income is largely
due to higher demand, which drives drop-off charges on recovery accounts and
pickup charges on new units. The decrease in revenue from lessees under the
damage protection plan was primarily due to the cancellation of this coverage by
a large lessee. Handling income decreased primarily due to increased utilization
and a decrease in per unit charges to lessees for handling and returning
containers. For the year ended December 31, 1994, the total of these other
revenue items increased slightly over the equivalent period in 1993, primarily
due to an increase in charges to the lessees of $58,847 for pickup of containers
in prime locations.
Direct container expenses, excluding bad debt expense, decreased by $243,372, or
22% from the year ended December 31, 1994 to the same period in 1995. The
primary components of this decrease were costs incurred for storage (which
decreased by $69,415), maintenance and repair costs (which decreased by $59,760)
and expenses accrued under the damage protection plan (which decreased by
$54,921). Storage costs declined due to higher utilization rates in the year
ended December 31, 1995 compared to
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the same period in 1994. Maintenance and repair costs decreased due to fewer
units being returned which required repairs and a lower average cost to repair
units in the year ended December 31, 1995 compared to the equivalent period in
1994.
Direct container expenses, excluding bad debt expense, decreased by $260,770, a
19% decrease from the year ended December 31, 1993 to the same period in 1994.
The primary components of this decrease were lower costs incurred for storage,
repositioning and repair expenses. Storage costs decreased due to an increase in
average on-hire (utilization) percentage from 81% during the year ended December
31, 1993 to 88% during the year ended December 31, 1994. Repositioning costs
decreased by $33,532 from the year ended December 31, 1993 to the year ended
December 31, 1994 due to a reduced need to relocate equipment to more desirable
locations because of improved utilization.
Bad debt expense decreased by $200,727 from the year ended December 31, 1994 to
the equivalent period in 1995 due to lower specific reserve requirements in the
year ended December 31, 1995 (primarily for two specific lessees which did not
need significant additional reserves in 1995). Bad debt expense increased by
$319,561 from the year ended December 31, 1993 to the same period in 1994 due to
an increase in the bad debt reserve for several lessees.
Depreciation expense decreased by $105,472 or 5% from the year ended December
31, 1994 to the same period in 1995. Similarly, depreciation expense decreased
by $103,251 or 5% from the year ended December 31, 1993 to the same period in
1994. These decreases were primarily attributable to certain equipment, acquired
used, which has now been fully depreciated.
Management fees to affiliates were $17,677 higher in the year ended December 31,
1995 than in the same period of 1994, primarily due to an increase in incentive
management fees resulting from a higher distribution rate to limited partners.
Incentive management fees are based on the distributions made to general and
limited partners; these distributions ranged from 9% and 10% during 1995 as
compared to 8% to 8.75% during 1994.
Management fees to affiliates were $18,473 lower in the year ended December 31,
1994 than in the same period of 1993, primarily due to lower incentive
management fees. Distributions made to general and limited partners were reduced
from 12% to 8% effective July 1993. The distribution rate increased from 8% in
the last half of 1993 to 8.25% in the first quarter of 1994, 8.5% the second
quarter and 8.75% the third quarter.
General and administrative costs to affiliates increased by 4%, or $14,441, in
the year ended December 31, 1995 compared to the same period in 1994. The
increase was primarily the result of an increase in overhead costs allocable to
the Partnership due to its larger fleet size. General and administrative costs
to affiliates increased by 17%, or $58,103 in the year ended December 31, 1994
compared to the same period in 1993, primarily due to an increase of 14% in the
per unit rate of overhead costs allocated by TEM.
Other income (expense) includes a gain on sales of equipment of $213,088 for the
year ended December 31, 1995 compared to a gain of $169,914 for the equivalent
period ended 1994. Interest income decreased by $3,131 from the twelve-month
period ended December 31, 1994 to the comparable period in 1995. Interest
expense decreased by $7,786 from the year ended December 31, 1994 to the same
period ended 1995, due to termination of the credit facility.
For the year ended December 31, 1994, other income (expense) includes a gain on
sales of equipment of $169,914 compared to a gain of $121,884 for the equivalent
period ended 1993. Interest income decreased by $1,729 from the twelve-month
period ended December 31, 1993 to the comparable period in 1994. Interest
expense decreased by $2,701 from the year ended December 31, 1993 to the same
period ended 1994.
Net earnings per limited partnership unit increased from $1.20 to $1.79 per unit
from the year ended December 31, 1994 to the same period in 1995, reflecting the
increase in net earnings from $1,791,968
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to $2,668,349 for the respective periods. Similarly, net earnings per limited
partnership unit increased from $1.04 to $1.20 per unit from the year ended
December 31, 1993 to the year ended December 31, 1994, reflecting the increase
in net earnings from $1,569,929 in 1993 to $1,791,968 in 1994.
Although substantially all of the Partnership's income from operations is
derived from assets employed in foreign operations, virtually all of this income
is denominated in United States dollars. The Partnership is engaged in the
international marine transportation industry and its containers are generally
operated on the international high seas rather than on domestic waterways. As
described in the prospectus under the caption "Business Risks: Economic Factors
Affecting Profitability", the Partnership's Equipment is subject to the risk of
war or other political, economic or social occurrence where the Equipment is
used, which may result in the loss of Equipment which, in turn, may have a
material impact on the Partnership's results of operations and financial
condition. The General Partners are not aware of any conditions which would
result in such risk materializing.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA.
Attached pages 10 to 22.
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Independent Auditors' Report
The Partners
TCC Equipment Income Fund:
We have audited the accompanying balance sheets of TCC Equipment Income Fund (a
California limited partnership) as of December 31, 1995 and 1994, and the
related statements of earnings, partners' capital and cash flows for the years
ended December 31, 1995, 1994 and 1993. 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 audits 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 TCC Equipment Income Fund as of
December 31, 1995 and 1994, and the results of its operations, its partners'
capital, and its cash flows for the years ended December 31, 1995, 1994 and
1993, in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
San Francisco, California
March 27, 1996
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TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
BALANCE SHEETS
December 31, 1995 and 1994
1995 1994
------------ ------------
ASSETS
Container rental equipment, net of accumulated
depreciation of $ 10,681,157 (1994: $ 9,656,249) $ 17,317,426 16,810,863
Net investment in direct financing leases (note 4) 759,112 1,018,419
Cash and cash equivalents (note 1) 492,266 192,155
Accounts receivable, net of allowance
for doubtful accounts of $ 660,862 (1994: $620,537) 1,704,893 1,686,100
Due from affiliates (note 2) 1,139,152 920,047
Prepaid expenses 10,037 10,743
------------ ------------
$ 21,422,886 20,638,327
============ ============
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable $ 150,120 135,417
Accrued liabilities 400,263 273,846
Accrued damage protection plan costs (note 1) 129,304 145,061
Due to affiliates (note 2) 508,706 25,060
Equipment purchases payable 430,319 4,663
------------ ------------
Total liabilities 1,618,712 584,047
------------ ------------
Partners' capital:
General partners (36,061) (36,061)
Limited partners 19,840,235 20,090,341
------------ ------------
Total partners' capital 19,804,174 20,054,280
------------ ------------
$ 21,422,886 20,638,327
============ ============
See accompanying notes to financial statements
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TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF EARNINGS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
----------- ----------- -----------
Rental Income $ 6,478,921 6,158,415 5,994,130
----------- ----------- -----------
Costs and expenses:
Direct container expenses 882,054 1,125,426 1,386,196
Bad debt expense 213,415 414,142 94,581
Depreciation and amortization 1,856,924 1,962,396 2,080,017
Professional fees 35,088 26,469 19,369
Management fees to affiliates (note 2) 559,046 541,369 559,842
General and administrative costs to affiliates (note 2) 418,050 403,609 345,506
Other general and administrative costs 67,814 67,026 63,678
----------- ----------- -----------
4,032,391 4,540,437 4,549,189
----------- ----------- -----------
Income from operations 2,446,530 1,617,978 1,444,941
----------- ----------- -----------
Other income (expense):
Interest income 12,260 15,391 17,120
Interest expense (3,529) (11,315) (14,016)
Gain on sales of containers (note 6) 213,088 169,914 121,884
----------- ----------- -----------
221,819 173,990 124,988
----------- ----------- -----------
Net earnings $ 2,668,349 1,791,968 1,569,929
=========== =========== ===========
Allocation of net earnings (note 1):
General partners $ 37,246 24,942 32,768
Limited partners 2,631,103 1,767,026 1,537,161
----------- ----------- -----------
$ 2,668,349 1,791,968 1,569,929
=========== =========== ===========
Limited partners' per unit share
of net earnings $ 1.79 1.20 1.04
=========== =========== ===========
Limited partners' per unit share
of distributions $ 1.95 1.68 2.20
=========== =========== ===========
Weighted average number of limited
partnership units outstanding 1,472,471 1,474,143 1,474,554
=========== =========== ===========
See accompanying notes to financial statements
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TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 1995, 1994 and 1993
PARTNERS' CAPITAL
-------------------------------------------------
GENERAL LIMITED TOTAL
----------- ----------- -----------
Balances at December 31, 1992 $ (36,061) 22,512,894 22,476,833
Distributions (32,768) (3,244,019) (3,276,787)
Net earnings 32,768 1,537,161 1,569,929
----------- ----------- -----------
Balances at December 31, 1993 (36,061) 20,806,036 20,769,975
----------- ----------- -----------
Distributions (24,942) (2,469,210) (2,494,152)
Redemptions (note 1) -- (13,511) (13,511)
Net earnings 24,942 1,767,026 1,791,968
----------- ----------- -----------
Balances at December 31, 1994 (36,061) 20,090,341 20,054,280
----------- ----------- -----------
Distributions (37,246) (2,871,656) (2,908,902)
Redemptions (note 1) -- (9,553) (9,553)
Net earnings 37,246 2,631,103 2,668,349
----------- ----------- -----------
Balances at December 31, 1995 $ (36,061) 19,840,235 19,804,174
=========== =========== ===========
See accompanying notes to financial statements
13
14
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
----------- ----------- -----------
Cash flows from operating activities:
Net earnings $ 2,668,349 1,791,968 1,569,929
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 1,856,924 1,962,396 2,065,647
Increase in allowance for doubtful accounts 40,325 390,387 104,984
Gain on sale of rental equipment (213,088) (169,914) (121,884)
Amortization of organization costs -- -- 14,370
Changes in assets and liabilities:
Increase in accounts receivable (58,684) (421,913) (191,646)
(Increase) decrease in due from affiliates, net (151,582) (181,403) 136,568
Proceeds from principal payments on
direct financing leases 261,137 237,145 199,871
Decrease (increase) in prepaid expenses 706 (1,621) (241)
Increase (decrease) in accounts payable and
accrued liabilities 141,120 (95,163) (35,556)
(Decrease) increase in accrued damage
protection plan costs (15,757) (16,245) 41,310
----------- ----------- -----------
1,861,101 1,703,669 2,213,423
----------- ----------- -----------
Net cash provided by operating activities 4,529,450 3,495,637 3,783,352
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of container rental equipment 767,844 797,820 1,164,152
Container purchases (2,523,158) (2,542,937) (1,659,413)
----------- ----------- -----------
Net cash used in investing activities (1,755,314) (1,745,117) (495,261)
----------- ----------- -----------
Cash flows from financing activities:
Borrowings from affiliates 435,000 -- --
Redemptions of limited partnership units (9,553) (13,511) --
Distributions to partners (2,899,472) (2,512,285) (3,263,626)
----------- ----------- -----------
Net cash used in financing activities (2,474,025) (2,525,796) (3,263,626)
----------- ----------- -----------
Net increase (decrease) in cash 300,111 (775,276) 24,465
Cash and cash equivalents at beginning of year 192,155 967,431 942,966
----------- ----------- -----------
Cash and cash equivalents at end of year $ 492,266 192,155 967,431
=========== =========== ===========
Interest paid during the period $ 3,529 26,852 14,016
=========== =========== ===========
See accompanying notes to financial statements
14
15
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS -- CONTINUED
Years ended December 31, 1995, 1994 and 1993
SUPPLEMENTAL DISCLOSURES:
Supplemental schedule of non-cash investing and financing activities:
The following table summarizes the amounts of equipment purchases, distributions
to partners, and proceeds from sale of container rental equipment which had not
been paid or received by the Partnership as of December 31, 1995, 1994, 1993 and
1992, resulting in differences in amounts recorded and amounts of cash disbursed
or received by the Partnership, as shown in the Statements of Cash Flows.
1995 1994 1993 1992
---- ---- ---- ----
Equipment purchases included in:
Due to affiliates ........................................ $ 43,970 11,591 3,788 37,245
Equipment purchases payable .............................. 430,319 4,663 225,190 --
Distributions to partners included in:
Due to affiliates ........................................ 13,692 4,262 22,395 9,235
Proceeds from sale of container rental equipment included in:
Accounts receivable ...................................... 1,209 775 1,725 77,166
Due from affiliates ...................................... 228,965 168,279 146,862 2,821
The following table summarizes the amounts of equipment purchases, distributions
to partners, and proceeds from sale of container rental equipment recorded by
the Partnership and the amounts paid or received as shown in the Statements of
Cash Flows for the years ended December 31, 1995, 1994 and 1993.
1995 1994 1993
---- ---- ----
Equipment purchases recorded ..... $2,981,193 2,330,213 1,851,146
Equipment purchases paid ......... 2,523,158 2,542,937 1,659,413
Distributions to partners declared 2,908,902 2,494,152 3,276,787
Distributions to partners paid ... 2,899,472 2,512,285 3,263,626
Proceeds from sale of container
rental equipment recorded ...... 828,964 818,287 1,232,752
Proceeds from sale of container
rental equipment received ...... 767,844 797,820 1,164,152
See accompanying notes to financial statements
15
16
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Years ended December 31, 1995, 1994 and 1993
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF OPERATIONS
TCC Equipment Income Fund (TEIF or the Partnership), a California
limited partnership, was formed on August 3, 1987 to engage in the
business of owning, leasing and selling both new and used equipment
related to the international containerized cargo shipping industry,
including, but not limited to, containers, marine vessels, trailers,
and other container-related equipment (the Equipment). TEIF offered
units representing limited partnership interests (Units) to the public
until October 26, 1989, the close of the offering period, when a total
of 1,474,559 Units had been purchased for a total of $29,491,180.
Textainer Financial Services Corporation (TFS) is the managing general
partner of the Partnership (prior to its name change on April 4, 1994,
TFS was known as Textainer Capital Corporation). TFS is a wholly-owned
subsidiary of Textainer Capital Corporation (TCC) (prior to its name
change on April 4, 1994, TCC was known as Textainer (Delaware), Inc.).
Textainer Equipment Management Limited (TEM) (prior to being
redomiciled on December 20, 1994, TEM was known as Textainer Equipment
Management N.V.) and Textainer Limited (TL) are associate general
partners of the Partnership. The managing general partner and the
associate general partners are collectively referred to as the General
Partners and are commonly owned by Textainer Group Holdings Limited
(TGH). The General Partners also act in this capacity for other
limited partnerships. Textainer Acquisition Services Limited (TAS) is
an affiliate of the General Partners which performs services relative
to the acquisition of Equipment outside the United States on behalf of
the Partnership. TCC Securities Corporation (TSC), a licensed broker
and dealer in securities and an affiliate of the General Partners, was
the managing sales agent for the offering of Units for sale. The
General Partners manage and control the affairs of the Partnership.
(b) BASIS OF ACCOUNTING
The Partnership utilizes the accrual method of accounting. Revenue is
recorded when earned according to the terms of the container rental
contracts. These contracts are typically for a one-year term and are
classified as operating leases, or direct financing leases if they so
qualify under Statement on Financial Accounting Standards No. 13:
"Accounting for Leases". Certain estimates and assumptions were made
by the Partnership's management that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
(c) CASH EQUIVALENTS
For purposes of the Statements of Cash Flows, the Partnership
considers all highly liquid debt instruments purchased with a maturity
of three months or less to be cash equivalents.
(d) CONTAINER RENTAL EQUIPMENT
The Equipment is carried at the lower of cost of the assets purchased,
which includes acquisition fees, or the estimated recoverable value of
such assets. Depreciation of new equipment is computed using the
straight-line method over its estimated useful life of 12 years to a
28% salvage value. Used equipment is depreciated based upon its
estimated remaining useful life at the date of acquisition (from 2 to
11 years). When assets are retired or otherwise
16
17
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
disposed of, the cost and related accumulated depreciation are removed
from the accounts and any resulting gain or loss is recognized in
income for the period.
In March 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed" (SFAS 121). The Company adopted
SFAS 121 during 1995. In accordance with SFAS 121, the Company
periodically reviews the carrying value of the Equipment to expected
future market conditions for the purpose of assessing the
recoverability of the recorded amounts. There were no reductions to
the carrying value of the Equipment made during 1995.
(e) NATURE OF INCOME FROM OPERATIONS
Although substantially all of the Partnership's income from operations
is derived from assets employed in foreign operations, virtually all
of this income is denominated in United States dollars. The
Partnership's customers are international shipping lines that
transport goods on international trade routes. Once the Equipment is
on-hire with a lessee, the partnership has no way of knowing its
location. The domicile of the lessee is not indicative of where the
lessee is transporting the Equipment. The Partnership's business risk
in its foreign operations lies with the creditworthiness of the
lessees rather than the geographic location of the Equipment or the
domicile of the lessees.
(f) ALLOCATION OF NET EARNINGS AND PARTNERSHIP DISTRIBUTIONS
In accordance with the Partnership Agreement, net earnings or losses,
syndication and offering costs and partnership distributions are
allocated 1% to the General Partners and 99% to the limited partners,
with the exception of gains on sales of containers. Such gains are
allocated to the General Partners to the extent that their capital
accounts' deficits exceed the portion of syndication and offering
costs allocated to them. On termination of the Partnership, the
General Partners shall be allocated gross income equal to their
allocations of syndication and offering costs.
Actual cash distributions to the limited partners differ from the
allocated net earnings as presented in these financial statements
because cash distributions are based on cash available for
distribution. Cash distributions are paid to the general and limited
partners on a quarterly basis in accordance with the provisions of the
Partnership Agreement.
(g) INCOME TAXES
The Partnership is not subject to income taxes. Accordingly, no
provision for income taxes has been made. The Partnership files
federal and state information returns only. Taxable income or loss is
reportable by the individual partners.
(h) ACQUISITION FEES
In accordance with the Partnership Agreement, acquisition fees are
paid to the General Partners or TAS equal to 5% of the Equipment
purchase price (see note 2). These fees are capitalized as part of the
cost of the Equipment.
(i) DAMAGE PROTECTION PLAN
The Partnership offers a Damage Protection Plan (the Plan) to lessees
of its Equipment. Under the terms of the Plan, the Partnership earns
additional revenues on a daily basis and, as a result, has agreed to
bear certain repair costs. It is the Partnership's policy to recognize
revenue when earned and to provide a reserve sufficient to cover the
Partnership's obligation
17
18
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
for estimated repair costs. At December 31, 1995 and 1994, this
reserve was equal to $129,304 and $145,061, respectively.
(j) WARRANTY CLAIM
During 1992 and 1995, the Partnership settled warranty claims against
an equipment manufacturer. The Partnership will amortize the
settlement amounts over the remaining estimated useful life of the
applicable equipment (seven years), reducing maintenance and repair
costs over that time. At December 31, 1995 and 1994, the unamortized
portion of the settlement amounts was equal to $323,707 and $172,400,
respectively, and was included in accrued liabilities.
(k) LIMITED PARTNERS' PER UNIT SHARE OF NET EARNINGS AND DISTRIBUTIONS
Limited partners' per unit share of both net earnings and
distributions were computed using the weighted average number of units
outstanding during each year of the Partnership's operations which was
1,472,471, 1,474,143 and 1,474,554 during the years ended December 31,
1995, 1994 and 1993, respectively.
(l) REDEMPTIONS
The following redemption offerings were consummated by the Partnership
during the years ended 1995 and 1994:
Average
Units Redemption
Redeemed Price Amount Paid
-------- ---------- -----------
Year ended December 31, 1994:
3rd quarter ............... 1,525 $ 8.86 $13,511
======= =======
Year ended December 31, 1995:
1st quarter ............... 500 $ 7.96 $ 3,982
4th quarter ............... 750 $ 7.43 5,571
------- -------
1,250 $ 7.64 9,553
======= =======
Fund to date ................ 2,775 $ 8.31 $23,064
======= =======
The redemption price is fixed by formula and varies depending on the
length of time the units are outstanding.
(m) FAIR VALUE OF FINANCIAL INSTRUMENTS
To meet the reporting requirements of Financial Accounting Standards
Board Statement No. 107, "Disclosures about Fair Value of Financial
Instruments," the Company calculates the fair value of financial
instruments and includes this additional information in the notes to
the financial statements when the fair value is different than the
book value of those financial instruments. At December 31, 1995, the
fair value of the Company's financial instruments approximates the
related book value of such instruments.
(n) RECLASSIFICATIONS
Certain reclassifications, not affecting net earnings, have been made
to prior year amounts in order to conform with the 1995 financial
statement presentation.
18
19
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
NOTE 2. TRANSACTIONS WITH AFFILIATES
During the offering period, the Partnership paid a managing sales
agent fee to TSC of up to 9% of the gross proceeds from the sale of
limited partnership units, from which TSC paid commissions to
independent participating broker/dealers who participated in the
offering. Additionally, the Partnership reimbursed the General
Partners and TSC for certain organizational and offering costs,
incurred in connection with the organization of the Partnership, up to
a maximum of 5% of gross proceeds raised as allowed in the Partnership
Agreement. These amounts, which totaled $3,606,105 were deducted as
syndication and offering costs in the determination of net limited
partnership contributions. Organization expenses, which resulted from
the formation of the Partnership, were capitalized as organization
costs and were fully amortized in 1993.
As part of the operation of the Partnership, the Partnership is to pay
to the General Partners (or TAS) an incentive management fee, an
acquisition fee, an equipment management fee and an equipment
liquidation fee. These fees are for various services provided in
connection with the administration and management of the Partnership.
The Partnership capitalized $121,692, $110,963 and $88,430 of
equipment acquisition fees as part of Equipment costs during the years
ended December 31, 1995, 1994 and 1993, respectively, and incurred
$124,286, $106,996, and $124,121 of incentive management fees during
the same periods. No equipment liquidation fees were paid in 1995,
1994 or 1993.
The Equipment of the Partnership is managed by TEM. Prior to selling
its storage fleet in 1995 (note 6), TEM had entered into an agreement
with its 100%-owned subsidiary, Textainer Storage Services (TSS) to
manage storage containers. In its role as manager, TEM has authority
to acquire, hold, manage, lease, sell and dispose of the Partnership's
Equipment. TEM holds, for the payment of direct operating expenses, a
reserve of cash that has been collected from leasing operations; such
cash is included in the amount due from affiliates at December 31,
1995 and 1994. Subject to certain reductions, TEM receives a monthly
equipment management fee equal to 7% of gross lease revenues
attributable to operating leases and 2% of gross lease revenues
attributable to full payout net leases. Such fee is either retained by
TEM or, prior to the sale of its storage fleet, such fees allocable to
TSS were passed through by TEM for services rendered. In 1995, 1994
and 1993, equipment management fees totaled $434,760, $434,373, and
$435,721, respectively. The Partnership's Equipment is or was leased
by TEM and TSS to third party lessees on operating master leases, spot
leases and term leases. The majority of the Partnership's leases are
operating leases with limited lives and no purchase option.
Certain indirect general and administrative costs incurred in
performing administrative services necessary to the operation of the
Partnership are borne by TEM (and, prior to the sale of the
Partnership's storage fleet in 1995, TSS), and are allocated to the
Partnership based on the ratio of the Partnership's interest in
managed Equipment to the total equipment managed by TEM or TSS for the
period. Indirect general and administrative costs allocated to the
Partnership were $351,895, $338,611 and $306,557 for the years ended
December 31, 1995, 1994 and 1993, respectively.
TFS also incurred general and administrative costs of $66,155, $64,998
and $38,949 during 1995, 1994 and 1993 respectively, which were
reimbursed by the Partnership.
The General Partners, or TAS, may acquire Equipment in their own name
and hold title on a temporary basis for the purpose of facilitating
the acquisition of such Equipment for the Partnership. The Equipment
may then be resold to the Partnership on an all-cash basis at a price
equal to the actual cost, as defined in the Partnership Agreement. In
addition, the General Partners, or TAS, are entitled to an acquisition
fee for any Equipment resold to the Partnership.
19
20
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
At December 31, due from and to affiliates are comprised of:
1995 1994
---- ----
Due from affiliates:
Due from TEM and TSS $1,139,152 920,047
---------- ----------
$1,139,152 920,047
========== ==========
Due to affiliates:
Due to TL .......... $ 1,948 1,038
Due to TCC ......... 4,610 6,928
Due to TAS ......... 37,420 --
Due to TFS ......... 464,094 17,094
Due to TGH ......... 634 --
---------- ----------
$ 508,706 25,060
========== ==========
Included in the amounts due to TFS is $435,000 in loans used to
facilitate equipment purchases. All other amounts receivable from and
payable to affiliates were incurred in the ordinary course of business
between the Partnership and its affiliates and represent timing
differences in the accrual and payment of expenses and fees described
above or in the accrual and payment of net rental revenues from TEM
and TSS.
Prior to July 1994, it was the policy of the Partnership and the
General Partners to charge interest on intercompany balances
outstanding for more than one month. Interest was charged at the prime
rate plus 2%. As of July 1994, this policy was changed so that the
Partnerships are not charged interest on intercompany balances except
for loans on equipment purchases. The Partnership incurred interest
expense of $3,529, $3,704 and $8,543, respectively, on intercompany
balances payable to TFS and TEM for the years ended December 31, 1995,
1994 and 1993.
NOTE 3. RENTALS UNDER OPERATING LEASES
The following is a schedule by year of minimum future rentals
receivable on noncancelable operating leases as of December 31, 1995:
Year ending December 31:
1996 .................................. $453,642
1997 .................................. 47,964
---------
Total minimum future rentals
receivable........................... $501,606
=========
NOTE 4. DIRECT FINANCING LEASES
During 1990, the Partnership purchased and in turn leased 100
refrigerated containers for an eight-year term. The lease agreement
provides the lessee with an option to purchase the containers for $1
at the expiration of the lease term. The total receivable over the
term of the lease from inception is $2,980,440.
During 1992, the Partnership converted 32 containers to two three-year
term direct financing leases. The total receivable over the terms of
the leases from inception is $42,270.
During 1993, the Partnership converted 15 containers to one 23-month
term, one two-year term and two three-year term direct financing
leases. The total receivable over the terms of the leases from
inception is $19,865.
20
21
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
During 1994, the Partnership converted 24 containers to four
three-year term direct financing leases and one six-month term direct
financing lease. The total receivable over the terms of the leases
from inception is $56,323.
During 1995, the Partnership converted two containers to one
three-year term direct financing lease. The total receivable over the
terms of the lease from inception is $3,395.
The components of the net investment in direct financing leases as of
December 31, 1995 and 1994 are as follows:
1995 1994
---- ----
Future minimum lease payments receivable $ 889,461 1,281,070
Residual value .......................... 5,033 5,031
Less: unearned income ................... (135,382) (267,682)
---------- ----------
Net investment in direct financing leases $ 759,112 1,018,419
========== ==========
The following is a schedule by year of minimum lease payments
receivable under the direct financing leases as of December 31, 1995:
Year ending December 31:
1996 .................................. $389,839
1997 .................................. 376,354
1998 .................................. 123,268
--------
Total minimum lease payments receivable $889,461
========
Rental income for the years ended December 31, 1995, 1994, and 1993
includes $134,609, $169,855 and $191,299, respectively, of income from
direct financing leases.
NOTE 5. INCOME TAXES
At December 31, 1995, 1994 and 1993, there were temporary differences
of $9,157,373, $10,529,060 and $8,239,633, respectively between the
financial statement carrying value of certain assets and liabilities
and the federal income tax bases of such assets and liabilities. The
reconciliation of net income for financial statement purposes to net
income (loss) for federal income tax purposes for the years ended
December 31, 1995, 1994 and 1993 is as follows:
21
22
TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS--CONTINUED
1995 1994 1993
---- ---- ----
Net income per financial statements ............. $ 2,668,349 1,791,968 1,569,929
Increase in provision for bad debt .............. 40,325 390,387 104,984
Depreciation for income tax purposes in excess of
depreciation for financial statement purposes . (1,144,318) (2,257,319) (2,120,056)
Gain on sale of fixed assets in excess of gain
recognized for financial statement purposes ... 508,732 338,265 421,523
Increase (decrease) in damage protection
plan reserve .................................. (15,757) (16,245) 41,310
Decrease in warranty claim ...................... (36,948) (36,948) (36,944)
Other ........................................... -- (2,550) (27,525)
----------- ----------- -----------
Net income (loss) for
federal income tax purposes ................... $ 2,020,383 207,555 (46,779)
=========== =========== ===========
NOTE 6. SALE OF STORAGE FLEET
In August 1995, the Partnership sold its container storage fleet,
managed by TSS, to an unrelated purchaser. The proceeds from the sale
were $19,780 compared to the Partnership's cost basis in the equipment
of $15,293. The resulting gain from the sale was $4,487. The
Partnership has invested the proceeds from the sale into marine
container rental equipment.
22
23
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been none.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Registrant has no officers or directors.
As described in the Prospectus, the Registrant's three original partners were
TCC, TEM and TI which have comprised the Textainer Group. Effective October 1,
1993, the Textainer Group streamlined its organization by forming a new holding
company, Textainer Group Holdings Limited (TGH), and the shareholders of the
underlying companies which include the General Partners have accepted shares in
TGH in exchange for their shares in the individual companies. Textainer
Financial Services Corporation (TFS) is the managing general partner of the
Partnership (prior to its name change on April 4, 1994, TFS was known as
Textainer Capital Corporation). TFS is a wholly-owned subsidiary of Textainer
Capital Corporation (TCC) (prior to its name change on April 4,1994, TCC was
known as Textainer (Delaware) Inc.). Textainer Equipment Management Limited
(TEM) is an associate general partner of the Partnership. Textainer Inc. (TI)
was an associate general partner of the Partnership through September 30, 1993
when it was replaced in that capacity by Textainer Limited (TL) pursuant to a
corporate reorganization effective October 1, 1993 which caused TFS, TEM and TL
to fall under the common ownership of Textainer Group Holdings Limited. (The
managing general partner and associate general partners are collectively
referred to as the General Partners). Pursuant to this restructuring, TI has
transferred substantially all of its assets including all of its rights and
duties as associate general partner to TL. This transfer is effective from
October 1, 1993. The end result is that TFS, TEM and TL now serve as General
Partners for the Registrant and are wholly-owned or substantially-owned
subsidiaries of TGH. The General Partners also act in this capacity for three
other limited partnerships as of December 31, 1995. Textainer Acquisition
Services Limited (TAS) is an affiliate of the General Partners which performs
services relative to the acquisition of Equipment outside the United States on
behalf of the Partnership. TCC Securities Corporation (TSC), a licensed broker
and dealer in securities and an affiliate of the General Partners, was the
managing sales agent for the offering of Units for sale.
TFS, as the Managing General Partner, is responsible for managing the
administration and operation of the Registrant, and for the formulation and
administration of investment policies.
TEM, an Associate General Partner, manages all aspects of the operation of the
Registrant's Equipment.
TL, an Associate General Partner, owns a fleet of container rental equipment
which is managed by TEM. TL provides advice to the Partnershp regarding
negotiations with financial institutions, manufacturers and equipment owners,
and regarding the terms upon which particular items of Equipment are acquired.
Compliance with Section 16(a) of the Securities Exchange Act of 1934.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Partnership's general partners, policy-making officials and persons who
own more than ten percent of the Units to file reports of ownership and
changes in ownership with the Securities and Exchange Commission. Copies
of these reports must also be furnished to the Partnership.
Based solely on a review of the copies of such forms furnished to the
Partnership or on written representations that no forms were required to
be filed, the Partnership believes that with respect to its most recent
fiscal year ended December 31, 1995, all Section 16(a) filing requirements
were complied with, except that Philip K. Brewer, Laura J. Cashion and
Ernest J. Furtado all filed their initial statement of beneficial interest
on Form 3 late. None of the foregoing failed to file or filed late any
reports of transactions in the Units.
23
24
The directors and executive officers of the General Partners are as follows:
Name Age Position
- ---- --- --------
Neil I. Jowell 62 Director and Chairman of TGH, TFS, TCC, TL and TEM
James E. Hoelter 56 President and CEO of TGH and TL, Vice President of TFS and TCC,
Director of TGH, TFS, TCC, TEM, TL and TSC
John A. Maccarone 51 President and CEO of TEM, Director of TGH, TL, TEM, TFS, TCC and
TSC
Susan L. Fiddaman 50 President and CEO of TFS, TCC and TSC, Director of TFS, TCC and
TEM
John R. Rhodes 46 Executive Vice President and CFO of TGH, TL, TEM, TFS and TCC,
Director of TEM, TFS and TCC
Alex M. Brown 57 Director of TGH, TL, TEM, TFS, TCC and TSC
Harold J. Samson 74 Director of TGH, TL and TSC
Anthony C. Sowry 43 Vice President - Operations and Acquisitions for TEM
David A. Cornelius 31 Vice President - Far East for TEM
Jens W. Palludan 45 Vice President - Americas/Africa/Australia for TEM
Robert S.A. Goodall 38 Vice President - Europe/Middle East/India for TEM
Robert D. Pedersen 37 Senior Vice President - Marketing for TEM
Stefan Mackula 43 Vice President - Equipment Resale for TEM.
Ernest J. Furtado 40 Vice President, Finance and Assistant Secretary of TGH, TEM and TL
Richard G. Murphy 43 Vice President - Financial Administration for TEM
Janet S. Ruggero 47 Vice President - Administration and Marketing Services for TEM.
Adnan Z. Abou Ayyash 51 Director of TGH and TL.
Isam K. Kabbani 61 Director of TGH and TL
S. Arthur Morris 62 Director of TGH, TL and TEM
Dudley R. Cottingham 44 Assistant Secretary and Director of TGH, TL and TEM
James S. McCaffrey 40 Vice President, Finance and Director of TFS and TCC
Laura J. Cashion 33 Controller of TFS and TCC
Jeanene K. Gomes 42 Assistant Secretary of TFS and TCC and Secretary and Compliance
Officer of TFS and TCC
Philip K. Brewer 38 Senior Vice President - Capital Markets for TGH and TL
Neil I. Jowell is Director and Chairman of TGH, TFS, TCC, TL and TEM
and a member of the Investment Advisory Committee (see "Committees" below). He
has served on the Board of Trencor Ltd. since 1966 and as Chairman since 1973.
He is also a director of Mobile Industries, Ltd. (1969 to present), an Affiliate
of Trencor, and a non-executive director of Forward Corporation Ltd. (1993 to
present). Trencor is a publicly traded diversified industrial group listed on
the Johannesburg Stock Exchange. its business is the leasing, owning, managing
and financing of marine cargo containers worldwide and the manufacture and
export of containers for international markets. In South Africa, it is engaged
in manufacturing, transport, trading and exports of general commodities. Trencor
also has an interest in Forward Corporation Ltd., a publicly traded holding
company listed on the Johannesburg Stock Exchange. It has interests in
industrial and consumer businesses operating in South Africa and abroad. Mr.
Jowell became affiliated with the General Partners and its affiliates when
Trencor became, through its beneficial ownership in two controlled companies, a
major shareholder of the Textainer Group in 1992. Mr. Jowell has over 36 years'
experience in the transportation industry. He holds an M.B.A. degree from
Columbia University and a B.Com.L.L.B. from the University of Cape Town.
James E. Hoelter is President and Chief Executive Officer of TGH and
TL, Vice President of TFS and TCC, and a director of TGH, TFS, TCC, TEM, TL and
TSC. As President and Chief Executive Officer of TGH, Mr. Hoelter is responsible
for overseeing the management of, and coordinating the activities of, TFS, TEM
and TL. He is also responsible for overseeing TEM's equipment management
operations. In addition, Mr. Hoelter is Chairman of the Credit Committee, the
Investment Advisory Committee and the Equipment Investment Committee (see
"Committees", below). Prior to joining the Textainer Group in 1987, Mr. Hoelter
was president of Intermodal Equipment Associates ("IEA") in San
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Francisco, California, from the company's inception in 1979 until 1987. Mr.
Hoelter co-founded IEA and directed its sponsorship of ten public and private
investment programs, which provided more than $100 million of equity from 10,000
investors. From 1976 to 1978, Mr. Hoelter was Vice President - North America for
Trans Ocean Ltd., San Francisco, a marine container leasing company, where he
was responsible for all leasing operations in that area. From 1971 to 1976, he
was associated with Itel Corporation, San Francisco, where he held a number of
positions, the most recent of which was director of financial leasing for Itel's
Container Division. Mr. Hoelter received his B.B.A. in business administration
from the University of Wisconsin, where he currently serves as a member of its
Business School's Dean's Advisory Board, and his M.B.A. from the Harvard
Graduate School of Business Administration.
John A. Maccarone is President and CEO of TEM and a director of TGH,
TL, TEM, TFS, TCC and TSC. In this capacity he is responsible for the
performance of TEM's worldwide fleet of marine cargo containers. Additionally,
he is a member of the Equipment Investment Committee, the Credit Committee and
the Investment Advisory Committee (see "Committees", below). Mr. Maccarone was
instrumental in cofounding IEA with Mr. Hoelter and held a variety of executive
positions with IEA from 1979 until 1987, when he joined the Textainer Group. Mr.
Maccarone was previously a Director of Marketing for Trans Ocean Leasing
Corporation in Hong Kong with responsibility for all leasing activities in
Southeast Asia. From 1969 to 1977, Mr. Maccarone was a marketing representative
for IBM Corporation. He holds a B.S. degree in Engineering Management from
Boston University and an M.B.A. from Loyola University of Chicago.
Susan L. Fiddaman is President, Chief Executive Officer of TFS, TCC
and TSC and a director of TFS, TCC and TEM. In this capacity Mrs. Fiddaman is
responsible for the organization, marketing and aftermarket support of TFS'
investment programs. She is also President and Chief Executive Officer of TFS.
Additionally, she is a member of the Equipment Investment Committee and the
Investment Advisory Committee (see "Committees", below). Prior to joining
Textainer in January 1989, Mrs. Fiddaman was a branch manager and OSJ from 1985
through 1988 for the financial planning firm Investment Management and Research,
Inc. in Palo Alto, California. Between 1983 and 1985, she was president of PLM
Securities Corp. in San Francisco, and between 1979 and 1983, she was a senior
vice president of Fox Financial Corporation in Foster City, California. Mrs.
Fiddaman holds an M.B.A. from Pepperdine University and a B.A. in English
Literature from the University of California at Berkeley.
John R. Rhodes is Executive Vice President and Chief Financial Officer
of TGH, TL, TEM, TFS and TCC and a director of TEM, TFS and TCC. In this
capacity he is responsible for all accounting, financial management, and
reporting functions for the Textainer Group. He is also a member of the Credit
Committee, the Equipment Investment Committee and Investment Advisory Committee
(see "Committees", below). Prior to joining Textainer in November 1987, Mr.
Rhodes was vice president of finance for Greenbrier Capital Corporation in San
Francisco, a trailer leasing and management company, from 1986 to 1987; from
1981 to 1985, he was employed by Gelco Rail Services, an intermodal refrigerated
trailer company in San Francisco, first in the capacity of vice president and
controller and then as senior vice president and general manager. Mr. Rhodes'
earlier business affiliations include serving as vice president and general
manager of Itel Capital Corporation and as senior accountant with Arthur
Andersen & Co., both in San Francisco. He is a Certified Public Accountant and
holds a B.A. in economics from Stanford University and an M.B.A. in accounting
from Golden Gate University.
Alex M. Brown is a director of TGH, TFS, TCC, TL, TEM and TSC.
Additionally, he is a member of the Equipment Investment Committee and the
Investment Advisory Committee (see "Committees", below). Mr. Brown became
affiliated with the Textainer Group in April 1986. From August 4, 1987 until
October 1993, he was President and Chief Executive officer of Textainer, Inc.
and the Chairman of the Textainer Group. From June 1993 to present, Mr. Brown
has been Chief Executive Officer of AAF, a company affiliated with Trencor Ltd.
AAF is a publicly listed company on the London Stock Exchange and is involved in
manufacturing and leasing modular buildings and construction scaffolding. Mr.
Brown is Chairman of WACO International Corporation, which is based in
Cleveland, Ohio. WACO manufactures, rents and erects scaffolding and other
associated construction products throughout the USA. Mr. Brown was the managing
director of Cross County Leasing in England from 1984 until it was acquired by
Textainer in 1986.
Harold J. Samson is a director of TGH, TL and TSC and is a member of
the Investment Advisory Committee (see "Committees", below). Mr. Samson served
as a consultant to various securities firms since 1981 to 1989. From 1974 to
1981 he was Executive Vice President of Foster & Marshall, Inc., a New York
Stock Exchange member firm based in Seattle. Mr. Samson was a director of
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IEA from 1979 to 1981. From 1957 to 1984 he served as Chief Financial Officer in
several New York Stock Exchange member firms. Mr. Samson holds a B.S. in
Business Administration from the University of California, Berkeley and is a
California Certified Public Accountant.
Anthony C. Sowry is Vice President - Operations and Acquisitions for
TEM. Mr. Sowry supervises all international container operations and maintenance
and technical functions for the fleets under management. In addition, he is
responsible for the acquisition of all new and used containers for the Textainer
Group. He began his affiliation with TEM in 1988 and previously served as Fleet
Quality Control Manager for Textainer Inc. from 1982 through March 1988. He is
also a member of the Credit Committee and the Equipment Investment Committee
(see "Committees", below). From 1980 to 1982, he was operations manager for
Trans Container Services in London; and from 1978 to 1982, he was a technical
representative for Trans Ocean Leasing, also in London. He received his B.A.
degree in business management from the London School of Business. Mr. Sowry is a
member of the Technical Committee of the International Institute of Container
Lessors and a certified container inspector.
David A. Cornelius is based in Singapore and is Vice President - Far
East for TEM, in which capacity he is responsible for coordinating all leasing
activities in the Pacific Rim. Mr. Cornelius has held numerous positions within
TEM over the past twelve years including South Pacific Area Manager in New
Zealand, Marketing Director -Western Americas, Canada and Mexico, Director of
Refrigerated Container marketing, Director of Capital Markets, and most recently
Marketing Director - North Europe. Mr. Cornelius is a graduate of Lynfield
College in Auckland, New Zealand.
Jens W. Palludan is based in New York and is Vice President -
Americas/Africa/Australia for TEM, responsible for coordinating all leasing
activities in North and South America, Africa and Australia/New Zealand. Mr.
Palludan spent his career from 1969 through 1992 with Maersk Line of Copenhagen,
Denmark in a variety of key management positions in both Denmark and overseas.
.His most recent post prior to joining TEM in 1993 was General Manager,
Equipment and Terminals, where he was responsible for a fleet of over 200,000
TEUs. Mr. Palludan holds an M.B.A. from the Centre European D'Education
Permanente, Fontainebleau, France.
Robert S.A. Goodall is based in London and is Vice President -
Europe/Middle East/India for TEM, in which capacity he is responsible for
coordinating all leasing activities in these three areas of operation. Mr.
Goodall joined TEM in September 1994. Previously, Mr. Goodall spent his career
from July 1990 until August 1994 with Tiphook Container Rental, during which
time he held numerous senior marketing positions within the company. He was
responsible for setting up their green field operation in North America, which
he successfully ran from inception for three years. Mr. Goodall also spearheaded
a quality program within the company which received ISO accreditation for the
Tank Container operation and associated business areas. Mr. Goodall has spent
nearly sixteen years in the container leasing and transport industry. Mr.
Goodall graduated from Bloxham College, Oxfordshire and Business Studies at West
London College.
Robert D. Pedersen is based in San Francisco and is Senior Vice
President - Marketing for TEM, responsible for worldwide sales and marketing
related activities. Mr. Pedersen is also in charge of TEM's refrigerated
container marketing program, and is a member of the Credit Committee (see
"Committees" below). He joined TEM in 1991 as Regional Vice President for the
Americas Region. Mr. Pedersen has extensive experience in the industry having
held a variety of positions with Maersk Line, a container shipping line (from
1978 to 1984), XTRA, a container lessor (1985 to 1988) and Klinge Cool, a
manufacturer of refrigerated container cooling units (1989 to 1991), where he
was worldwide sales and marketing director. Mr. Pedersen is a graduate of the
A.P. Moller shipping and transportation program and Merkonom Business School in
Copenhagen, majoring in Company Organization..
Stefan Mackula is Vice President - Equipment Resale for TEM, in which
capacity he coordinates the worldwide sale of equipment into secondary markets.
Mr. Mackula also served as Vice President - Marketing for TEM, in which capacity
he was responsible for coordinating all leasing activities in Europe, Africa,
and the Middle East. He joined TEM in 1983 as Leasing Manager for the United
Kingdom. Prior to joining TEM, Mr. Mackula held, beginning in 1972, a variety of
positions in the international container shipping industry.
Ernest J. Furtado is Vice President, Finance and Assistant Secretary
of TGH, TEM and TL, in which capacity he is responsible for all accounting,
financial management, and reporting functions for TGH, TEM and TL. Prior to
joining Textainer in May 1991, Mr. Furtado was controller for Itel Instant
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Space and manager of accounting for Itel Containers International Corporation,
both in San Francisco, from 1984 to 1991. Mr. Furtado's earlier business
affiliations include serving as audit manager for Wells Fargo Bank and as senior
accountant with John F. Forbes & Co., both in San Francisco. He is a Certified
Public Accountant and holds a B.S. in business administration from the
University of California at Berkeley and an M.B.A. in information systems from
Golden Gate University.
Richard G. Murphy is Vice President, Financial Administration for
TEM. Mr. Murphy is responsible for all credit and risk management functions for
TEM and supervises the administrative aspects of equipment acquisitions. He is a
member of and acts as secretary to the Credit and Equipment Investment
Committees (see "Committees", below). He previously served as Director of Credit
and Risk Management from 1989 to 1991 and as Controller from 1988 to 1989. Prior
to the takeover of the management of the Interocean Leasing Ltd. fleet by TEM in
1988, Mr. Murphy held various positions in the accounting and financial areas
with that company from 1980, acting as Chief Financial Officer from 1984 to
1988. Prior to 1980, he held various positions with firms of public accountants
in the U.K. Mr. Murphy is an Associate of the Institute of Chartered Accountants
in England and Wales and holds a Bachelor of Commerce degree from the National
University of Ireland.
Janet S. Ruggero is Vice President, Administration and Marketing
Services for TEM. Ms. Ruggero is responsible for the tracking and billing of
fleets under TEM management, including direct responsibility for ensuring that
all data is input in an accurate and timely fashion. She assists the marketing
and operations departments by providing statistical reports and analyses and
serves on the Credit Committee (see "Committees", below). Prior to joining
Textainer in 1986, Ms. Ruggero held various positions with Gelco CTI over the
course of 15 years, the last one as Director of Marketing and Administration for
the North American Regional office in New York City. She has a B.A. in education
from Cumberland College.
Dr. Adnan Z. Abou Ayyash is a director of TGH and TL. Since 1974 he
has been General Manager and Chief Executive Officer of one of the largest firms
of consulting engineers in Saudi Arabia, Rashid Engineering. Dr. Adnan Abou
Ayyash holds a B.S. degree in Civil Engineering from the American University of
Beirut, as well as M.S. and Ph.D. degrees in Civil Engineering from the
University of Texas.
Sheikh Isam K. Kabbani is a director of TGH and TL. He is Chairman and
principal stockholder of the IKK Group, Jeddah, Saudi Arabia, a manufacturing
and trading group which is active both in Saudi Arabia and internationally. In
1959 Sheikh Isam Kabbani joined the Saudi Arabian Ministry of Foreign Affairs,
and in 1960 moved to the Ministry of Petroleum for a period of ten years. During
this time he was seconded to the Organization of Petroleum Exporting Countries
(OPEC). After a period as Chief Economist of OPEC, in 1967 he became the Saudi
Arabian member of OPEC's Board of Governors. In 1970 he left the ministry of
Petroleum to establish his own business, the National Marketing Group, which has
been his principal business activity for the past 17 years. Sheikh Kabbani holds
a B.A. degree from Swarthmore, College, Pennsylvania, and an M.A. degree in
Economics and International Relations from Columbia University.
S. Arthur Morris is a director of TGH, TL and TEM. He is a founding
partner in the firm of Morris and Kempe, Chartered Accountants (1962-1977) and
currently functions as a correspondent member of a number of international
accounting firms through his firm Arthur Morris and Company (1978 to date). He
is also President and director of Continental Management Limited (1977 to date).
Continental management Limited is a Bermuda corporation that provides corporate
representation, administration and management services; and corporate and
individual trust administration services. Mr. Morris has over 30 years
experience in public accounting and serves on numerous business and charitable
organizations in the Cayman Islands and Turks and Caicos Islands. Mr. Morris
became a director of TL in 1993.
Dudley R. Cottingham is Assistant Secretary and a director of TGH, TL
and TEM. He is a partner with Arthur Morris and Company (1977 to date) and a
Vice President and director of Continental Management Limited (1978 to date),
both in the Cayman Islands and Turks and Caicos Islands. Continental management
Limited is a Bermuda corporation that provides corporate representation,
administration and management services; and corporate and individual trust
administration services. Mr. Cottingham has over 20 years experience in public
accounting with responsibility for a variety of international and local clients.
Mr. Cottingham became a director of TL in 1993.
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James S. McCaffrey is Vice President - Finance of TFS and TCC. In this
capacity he is responsible for all accounting, financial management, and
reporting functions for TFS. He is a member of and acts as secretary to the
Investment Advisory Committee (see "Committees" below). Prior to joining
Textainer in July 1993, Mr. McCaffrey was vice president of finance for Meridian
Point Properties, a real estate syndication and management company, from 1985 to
1993; from 1983 to 1985 he was employed by Trans-west Capital as controller and
chief financial officer. Mr. McCaffrey's earlier business affiliations include
serving as manager of financial reporting for Fox and Carskadon Financial
Corporation and as a senior accountant with Arthur Andersen & Co. Mr. McCaffrey
is a Certified Public Accountant and holds a B.S. in business administration and
mathematics from Southern Oregon State College.
Laura J. Cashion is Controller of TFS and TCC. In this capacity, she is
responsible for all accounting, financial management and reporting functions for
TFS. Prior to joining Textainer in August 1995, Ms. Cashion was employed by Ross
Systems, Inc., a software company, from 1991 to 1995, first in the capacity of
Finance Manager and then as North American Controller. From 1986 to 1991, she
was employed by Ernst and Young as an audit manager. From 1983 to 1986, Ms.
Cashion held various positions with Vesteq Financial Corporation, a real estate
syndication and management company. Ms. Cashion is a Certified Public Accountant
and holds a B.S. in business administration from California State University,
Hayward.
Jeanene K. Gomes is Assistant Secretary of TFS and TCC and Secretary
and Compliance Officer of TFS and TCC. Ms. Gomes is responsible for
administering the public partnerships sponsored by the Textainer Group. Ms.
Gomes is responsible for ensuring that all data relating to investor accounts is
input, monitored, and stored in a timely manner and in accordance with the
limited partnership agreement for each of the partnerships as well as state and
federal securities regulations. Ms. Gomes oversees all communications with the
limited partners and as such directly supervises all personnel in performing
this function. As compliance officer for TFS, Ms. Gomes is responsible for
ensuring compliance with all securities regulations. Ms. Gomes also serves on
the Investor Advisory Committee. Ms. Gomes holds five securities licenses and
was, prior to joining Textainer in 1989, the compliance officer for CIS
Investment Corporation, a broker-dealer.
Philip K. Brewer is Senior Vice President - Capital Markets of TL. Mr.
Brewer is responsible for optimizing the capital structure of and identifying
new sources of finance for Textainer. Prior to joining Textainer in 1996, Mr.
Brewer worked at Bankers Trust from 1990 to 1996, starting as a Vice President
in Corporate Finance and ending as Managing Director and Country Manager for
Indonesia; from 1989 to 1990, he was Vice President in Corporate Finance at
Jarding Fleming; from 1987 to 1989, he was Capital Markets Advisor to the United
States Agency for International Development; and from 1984 to 1987 he was an
Associate with Drexel Burnham Lambert in New York. Mr. Brewer holds an M.B.A. in
Finance from the Graduate School of Business at Columbia University, and a B.A.
in Economics and Political Science from Colgate University.
COMMITTEES
The Managing General Partner has established the following three
committees to facilitate decisions involving credit and organizational matters,
negotiations, documentation, management and final disposition of Equipment for
the Partnership and for future programs which may be organized by the Textainer
Group:
Equipment Investment Committee. The Equipment Investment Committee
will review the equipment leasing programs of the Partnership on a regular basis
with emphasis on matters involving equipment purchases, the equipment mix in the
Partnership's portfolio, equipment remarketing issues, and decisions regarding
ultimate disposition of assets. The members of the committee are James E.
Hoelter (Chairman), John A. Maccarone, Susan L. Fiddaman, John R. Rhodes,
Anthony C. Sowry, Richard G. Murphy (Secretary), Alex M. Brown and Neil I.
Jowell.
Credit Committee. The Credit Committee will establish credit limits
for every lessee and potential lessee of Equipment and periodically review these
limits. In setting such limits, the Credit Committee will consider such factors
as customer trade routes, country, political risk, operational history, credit
references, credit agency analyses, financial statements, and other information.
The members of the Credit Committee are James E. Hoelter (Chairman), John A.
Maccarone, Richard G. Murphy (Secretary), Janet S. Ruggero, John R. Rhodes,
Anthony C. Sowry and Robert D. Pedersen.
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Investment Advisory Committee. The Investment Advisory Committee will
review investor program operations on at least a quarterly basis, emphasizing
matters related to cash distributions to investors, cash flow management,
portfolio management, and liquidation. The Investment Advisory Committee is
organized with a view to applying an interdisciplinary approach, involving
management, financial, legal and marketing expertise, to the analysis of
investor program operations. The members of the Investment Advisory Committee
are James E. Hoelter (Chairman), John A. Maccarone, Susan L. Fiddaman, James S.
McCaffrey (Secretary), John R. Rhodes, Jeanene K. Gomes, Harold S. Samson, Alex
M. Brown and Neil I. Jowell.
The above committees are not intended to relieve the General Partners
of their fiduciary duty to the Partnership.
ITEM 11. EXECUTIVE COMPENSATION.
The Registrant has no executive officers and does not reimburse TFS, TEM or TL
for the remuneration payable to their executive officers.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership of Certain Beneficial Owners.
There is no person or "Group" who is known to the Registrant to be the
beneficial owner of more than five percent of the outstanding units of
limited partnership investment of the Registrant.
(b) Security Ownership of Management.
As of January 1, 1996:
Number
Name of Beneficial Owner Of Units % All Units
- ------------------------ -------- -----------
Susan L. Fiddaman 250 .017%
James E. Hoelter 2,500 .170%
John A. Maccarone 1,915 .130%
----- -----
Officers and Management as a Group 4,665 .317%
===== =====
(c) Changes in Control.
Inapplicable
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Management and Others.
At December 31, due from and to affiliates are comprised of:
1995 1994
---- ----
Due from affiliates:
Due from TEM and TSS $1,139,152 920,047
---------- ----------
$1,139,152 920,047
========== ==========
Due to affiliates:
Due to TL .......... $ 1,948 1,038
Due to TCC ......... 4,610 6,928
Due to TAS ......... 37,420 --
Due to TFS ......... 464,094 17,094
Due to TGH ......... 634 --
---------- ----------
$ 508,706 25,060
========== ==========
Included in the amounts due to TFS is $435,000 in loans used to facilitate
equipment purchases. All other amounts receivable from and payable to
affiliates were incurred in the ordinary course of business between the
Partnership and its affiliates and represent timing differences in the
accrual and payment of expenses and fees described above or in the accrual
and payment of net rental revenues from TEM and TSS.
In addition, the Registrant paid or will pay the following amounts to the
General Partners:
Acquisition Fees in connection with the purchase of equipment on behalf of
the Registrant:
1995 1994 1993
---- ---- ----
TFS ... $ -- -- 75,311
TEM ... -- -- 8,368
TAS ... 121,692 110,963 4,751
-------- -------- --------
Total . $121,692 110,963 88,430
======== ======== ========
Management fees in connection with the operations of the Registrant:
1995 1994 1993
-------- -------- --------
TFS ... $ 99,455 85,597 99,297
TEM ... 459,591 455,772 450,616
TI .... -- -- 9,929
-------- -------- --------
Total . $559,046 541,369 559,842
======== ======== ========
Reimbursement for administrative costs in respect of the operations of
the Registrant:
1995 1994 1993
---- ---- ----
TFS ... $ 66,155 64,998 38,949
TEM ... 351,895 338,611 306,557
-------- -------- --------
Total . $418,050 403,609 345,506
======== ======== ========
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(b) Certain Business Relationships.
Inapplicable.
(c) Indebtedness of Management
Inapplicable.
(d) Transactions with Promoters
Inapplicable.
See the "Compensation of Affiliates" section of the Registrant's Prospectus, as
supplemented, and the Notes to Financial Statements in Item 8.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Audited financial statements of the Registrant for the year ended
December 31, 1995 are contained in Item 8 of this Report.
2. Financial Statement Schedules.
(i) Independent Auditors' Report on Supplementary Schedule.
(ii) Schedule II - Valuation and Qualifying Accounts.
3. Exhibits Incorporated by reference
(i) The Registrant's Prospectus as contained in Post-effective
Amendment No. 2 to the Registrant's Registration Statement
(No. 33-16447), as filed with the Commission on November 30,
1988, as supplemented by Supplement No. 6 as filed with the
Commission under Rule 424(b)(3) of the Securities Act of 1933
on October 16, 1989.
(ii) The Registrant's limited partnership agreement, Exhibit A to
the Prospectus.
(b) During the year ended 1995, no reports on Form 8-K have been filed by
the Registrant.
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Independent Auditors' Report on Supplementary Schedule
The Partners
TCC Equipment Income Fund:
Under the date of March 27, 1996, we reported on the balance sheets of TCC
Equipment Income Fund (the Partnership) as of December 31, 1995 and 1994, and
the related statements of earnings, partners' capital and cash flows for the
years ended December 31, 1995, 1994 and 1993, which are included in the 1995
annual report on Form 10-K. In connection with our audits of the aforementioned
financial statements, we also audited the related financial statement schedule
as listed in Item 14. This financial statement schedule is the responsibility of
the Partnership's management. Our responsibility is to express an opinion on
this financial statement schedule based on our audits.
In our opinion, such schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
KPMG Peat Marwick LLP
San Francisco, California
March 27, 1996
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TCC EQUIPMENT INCOME FUND
(A CALIFORNIA LIMITED PARTNERSHIP)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
Charged Balance
Balance at to Costs Charged at End
Beginning and to Other of
of Period Expenses Accounts Deduction Period
--------- -------- -------- --------- ------
For the year ended December 31, 1995:
Allowance for
doubtful accounts $620,537 213,415 -- (173,090) 660,862
-------- -------- -------- -------- --------
Damage protection
plan reserve $145,061 125,583 -- (141,340) 129,304
-------- -------- -------- -------- --------
Warranty settlement $172,400 (36,948) 188,255 -- 323,707
-------- -------- -------- -------- --------
For the year ended December 31, 1994:
Allowance for
doubtful accounts $230,150 414,142 -- (23,755) 620,537
-------- -------- -------- -------- --------
Damage protection
plan reserve $161,306 180,504 -- (196,749) 145,061
-------- -------- -------- -------- --------
Warranty settlement $209,348 (36,948) -- -- 172,400
-------- -------- -------- -------- --------
For the year ended December 31, 1993:
Allowance for
doubtful accounts $125,166 94,581 10,403 -- 230,150
-------- -------- -------- -------- --------
Damage protection
plan reserve $119,996 202,781 -- (161,471) 161,306
-------- -------- -------- -------- --------
Warranty settlement $246,296 (36,948) -- -- 209,348
-------- -------- -------- -------- --------
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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.
TEXTAINER EQUIPMENT MANAGEMENT FUND
A California Limited Partnership
By Textainer Financial Services Corporation
The Managing General Partner
By /s/John R. Rhodes
-------------------------------
John R. Rhodes
Executive Vice President
Date: March 27, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Textainer Financial
Services Corporation, the Managing General Partner of the Registrant, in the
capacities and on the dates indicated:
Signature Title Date
/s/Susan L. Fiddaman President March 27, 1996
- ----------------------- (Principal Executive Officer)
Susan L. Fiddaman and Director
/s/John R. Rhodes Executive Vice President March 27, 1996
- ----------------------- (Principal Financial and
John R. Rhodes Accounting Officer),
Secretary and Treasurer
/s/James E. Hoelter Vice President and Director March 27, 1996
- -----------------------
/s/John A. Maccarone Director March 27, 1996
- -----------------------
John A. Maccarone
/s/James S. McCaffrey Vice President and Director March 27, 1996
- -----------------------
James S. McCaffrey
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EXHIBIT INDEX
Exhibit 27 Financial Data Schedule