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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended December 31, 1996
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission file number 33-80849
Capital Preferred Yield Fund-IV, L.P.
(Exact name of registrant as specified in its charter)
Delaware 84-1331690
(State of organization) (I.R.S. Employer Identification Number)
7175 W. Jefferson Avenue, Lakewood, Colorado 80235
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 980-1000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K 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 non-affiliates of
the registrant. Not applicable.
Exhibit Index Appears on Page 31
Page 1 of 32 Pages
-1-
Item 1. Business
--------
Capital Preferred Yield Fund-IV, L.P., a Delaware limited partnership (the
"Partnership"), was organized on December 18, 1995 and is engaged in the
business of owning and leasing equipment. CAI Equipment Leasing V Corp., a
Colorado corporation and an affiliate of Capital Associates, Inc. ("CAI"), is
the general partner of the Partnership.
Capital Associates International, Inc. ("CAII"), an affiliate of the general
partner, is the sole Class B limited partner of the Partnership. In exchange for
the Class B limited partner interest, the Class B limited partner is required to
contribute cash in the amount of $10,000 for each $1,000,000 of investors'
capital contribution (i.e., cash investments in the Partnership) to the
Partnership. In addition, the Class B limited partner's interest in
Distributable Cash is subordinated to the Class A limited partners' interest.
The contributions of the Class B limited partner are made simultaneously with
the purchase of equipment by the Partnership. As of December 31, 1996, CAII
contributed $150,000 to the Partnership.
The Partnership commenced business operations on April 16, 1996. The Partnership
intends to continue offering up to a maximum of 500,000 Class A limited partner
units for sale and admitting additional Class A limited partners through April
15, 1998. A summary of the Partnership's offering activities is presented below:
Class A Sales
Limited Number Gross Commissions Net
Partner of Offering and Offering Offering
Units Sold Investors Proceeds Expenses Proceeds
---------- --------- ------------ ------------ --------
Year ended December 31, 1996 154,553 867 $ 15,455,281 $ 2,230,270 $13,225,011
======= === ============ ============ ===========
The Partnership's overall investment objectives are to (i) raise the maximum
allowable capital from investors for investment in accordance with the
Partnership's investment objectives described in the Prospectus; (ii) invest
such capital and related indebtedness in a diversified portfolio of equipment
subject to leases with terms ranging from two to seven years; (iii) if funds are
available for distribution, make monthly cash distributions to the Class A
limited partners during the reinvestment period (a period that ends
approximately June 30, 2003); (iv) re-invest all available undistributed cash
from operations and cash from sales in additional equipment during the
reinvestment period to increase the Partnership's portfolio of
revenue-generating equipment; and (v) sell or otherwise dispose of the
Partnership's equipment and other assets in an orderly manner and promptly
distribute cash from sales thereof to the Partners within one to three years of
the end of the reinvestment period.
During 1996, the Partnership acquired capital equipment of various types under
lease to third parties. All of the equipment was purchased by CAII directly from
manufacturers or from other independent third parties and sold to the
Partnership. The equipment was generally comprised of, (among others),
transportation and industrial equipment, and computer and peripheral equipment.
See Item 13 of this report, "Certain Relationships and Related Transactions" for
the detail listing of equipment purchased during 1996. The Partnership expects
that a majority of the equipment purchased during 1997 will be similar in nature
to the equipment acquired in 1996. As of December 31, 1996, the general partner
has identified approximately $2.6 million of additional equipment that satisfied
the Partnership's acquisition criteria that is expected to be acquired during
1997.
-2-
Item 1. Business, continued
--------
The Partnership may assign the rentals from leases to financial institutions, or
acquire leases subject to such assignments, at fixed interest rates on a
nonrecourse basis. This non-recourse debt financing will be utilized to finance
the purchase of equipment under lease, or to invest the proceeds therefrom in
additional equipment under lease. In the event of default by a lessee, the
financial institution has a first lien on the underlying leased equipment, with
no further recourse against the Partnership. Cash proceeds from such financings,
or the assumption of such assignments incurred in the acquisition of leases are
recorded on the balance sheet as discounted lease rentals. As lessees make
payments to financial institutions, leasing revenue and interest expense are
recorded.
During 1996, the Partnership leased equipment to investment grade lessees in
diverse industries including the material handling, telecommunications and
manufacturing industries. Approximately 88% of the Partnership's equipment under
lease was leased to investment grade lessees as of December 31, 1996. Pursuant
to the Partnership Agreement, an investment grade lessee is a company (i) with a
net worth in excess of $100,000,000 (and no debt issues that are rated), or (ii)
with a credit rating of not less than Baa as determined by Moody's Investor
Services, Inc. or comparable credit rating, as determined by another recognized
credit rating service; or a lessee, all of whose lease payments have been
unconditionally guaranteed or supported by a letter of credit issued by a
company meeting one of the above requirements. The Partnership may limit its
credit risk through selective use of non-recourse debt financing of future lease
rentals, as described above.
The Partnership only acquires equipment that is on lease at the time of
acquisition. After the initial term of its lease, each item of equipment will be
expected to provide additional investment income from its re-lease or ultimate
sale. Upon expiration of the initial lease, the Partnership attempts to re-lease
or sell the equipment to the existing lessee. If a re-lease or sale to the
lessee cannot be negotiated, the Partnership will attempt to lease or sell the
equipment to a third party.
The Partnership's business is not subject to seasonal variations.
The ultimate profitability of the Partnership's leasing transactions is
dependent in part on the general level of interest rates because leasing is an
alternative to financing equipment purchases with debt. Lease rates therefore
tend to rise and fall with interest rates although lease rate movements
generally lag behind interest rate movements. The amount of future distributions
to the partners will depend, in part, on future interest rates.
The Partnership has no employees. The officers, directors and employees of the
general partner and its affiliates perform services on behalf of the
Partnership. The general partner is entitled to receive certain fees and expense
reimbursements in connection with the performance of these services. See Item 10
of this Report, "Directors and Executive Officers of the Partnership" and Item
13 of this Report, "Certain Relationships and Related Transactions," which are
incorporated herein by reference.
The Partnership competes in the leasing marketplace as a lessor with a
significant number of other companies, including equipment manufacturers,
leasing companies and financial institutions. The Partnership competes mainly on
the basis of the expertise of its general partner in remarketing equipment,
terms offered in its transactions, pricing and service. Although the Partnership
does not account for a significant percentage of the leasing market, the general
partner believes that the Partnership's marketing strategies and financing
capabilities will enable it to continue to compete effectively in the equipment
leasing and remarketing markets.
-3-
Item 1. Business, continued
--------
The Partnership leases equipment to a significant number of lessees. However,
rental revenue from General Motors, Lucent Technologies and Staples, Inc.
accounted for approximately 48% ($453,460) of total revenue of the Partnership
during 1996. This concentration is attributable to placement of equipment with
these lessees during the first nine months of the Partnership's operations.
Rental revenue from these lessees constituted a larger percentage of the
Partnership's total revenue than it is expected to be in the future, as
additional leases are acquired by the Partnership.
The Partnership is required to dissolve and distribute all of its assets no
later than December 31, 2007. However, the general partner anticipates that all
equipment will be sold prior to that date and that the Partnership will be
liquidated earlier.
Item 2. Properties
----------
Per the Partnership Agreement, the Partnership does not own or lease any
physical properties other than the equipment discussed in Item 1 "Business," of
this Report, which is incorporated herein by reference.
Item 3. Legal Proceedings
-----------------
Neither the Partnership nor any of the Partnership's equipment is the subject of
any material pending legal proceedings.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of the limited partners of the Partnership,
through the solicitation of proxies or otherwise, during the fourth quarter
ended December 31, 1996.
Item 5. Market for the Partnership's Common Equity and Related Stockholder
-----------------------------------------------------------------------
Matters
-------
(a) The Partnership's limited partner units and general partner units are
not publicly traded. There is no established public trading market for
such units and none is expected to develop.
(b) As of December 31, 1996, the number of limited partners was 867.
-4-
Item 5. Market for the Partnership's Common Equity and Related Stockholder
-----------------------------------------------------------------------
Matters
-------
(c) Distributions
During 1996, the Partnership made seven (7) distributions (a
substantial portion of which constituted a return of capital) to Class
A limited partners as follows:
Distributions Per
$100 Investment
For the (computed on Total
Period Ended Payment weighted average) Distributions
------------ ------- ----------------- -------------
May 31, 1996 June 1996 $ 1.595* $ 5,265
June 30, 1996 July 1996 0.875 17,017
July 31, 1996 August 1996 0.875 26,767
August 31, 1996 September 1996 0.875 38,295
September 30, 1996 October 1996 0.875 60,032
October 31, 1996 November 1996 0.875 71,221
November 30, 1996 December 1996 0.875 94,441
------- ---------
$ 6.845 $ 313,038
======= =========
*For the period April 16, 1996 (commencement of operations) through
May 31, 1996.
A substantial portion of such distributions is expected to constitute a
return of capital. Distributions may be characterized for tax,
accounting and economic purposes as a return of capital, a return on
capital or a portion of both. The portion of each cash distribution by
a partnership which exceeds its net income for the fiscal period may be
deemed a return of capital for accounting purposes. However, the total
percentage of a partnership's return on capital over its life can only
be determined after all residual cash flows (which include proceeds
from the re-leasing and sale of equipment) have been realized at the
termination of the Partnership.
The distribution for the month ended December 31, 1996, totaling
$126,682, was paid to the Class A limited partners on January 3, 1997.
Distributions to the general partner and Class B limited partner during
1996 are discussed in Item 13 of this Report, "Certain Relationships
and Related Transactions."
The general partner believes that the Partnership will generate
sufficient cash flows from operations during 1997, to (1) meet current
operating requirements, (2) enable it to fund cash distributions to
both the Class A and Class B limited partners at annualized rates of
10.5% (substantial portions of which are expected to constitute returns
of capital), on their capital contributions, and (3) reinvest in
additional equipment under leases, provided that suitable equipment can
be identified and acquired.
-5-
Item 6. Selected Financial Data
-----------------------
The following selected financial data relates to 1996. The data should be read
in conjunction with Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and notes
thereto appearing elsewhere herein.
Period Ended
December 31, 1996*
------------------
Total revenue $ 940,346
Net income 102,627
Net income per weighted average Class A
limited partner unit outstanding 1.33
Total assets 16,652,457
Discounted lease rentals 2,765,239
Distributions declared to Class A limited partners 439,720
Distributions declared per weighted average
Class A limited partner unit outstanding 7.72
*For the period from April 16, 1996 (commencement of operations) to
December 31, 1996
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Results of Operations
- ---------------------
The Partnership commenced operations on April 16, 1996 and reported net income
of $102,627 for the period from April 16, 1996 to December 31, 1996. Net income
was derived principally from rentals generated from $13,991,309 of equipment
owned by the Partnership at December 31, 1996.
A comparison of current operating results to the corresponding period of the
prior year cannot be made since the Partnership did not commence operations
until April 16, 1996.
Revenue generated from equipment on lease comprised 95% of total revenue for
1996. Interest income comprised 5% of total revenue. General Motors, Lucent
Technologies and Staples, Inc. accounted for approximately 19%, 19% and 10%,
respectively, of total revenue during 1996. This concentration is attributable
to placement of equipment with the lessees during the early stages of the
Partnership's operations. Rental revenue from these lessees was, therefore,
relatively more significant in 1996 than it would be expected in the future, as
additional leases are acquired by the Partnership.
-6-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
Results of Operations, continued
- ---------------------
The ultimate profitability of the Partnership's leasing transactions is
dependent in part on the general level of interest rates because leasing is an
alternative to financing equipment purchases with debt. Lease rates therefore
tend to rise and fall with interest rates although lease rate movements
generally lag behind interest rate movements. The amount of future distributions
to the partners will depend, in part, on future interest rates.
Depreciation expense comprised 79% of total expenses for 1996.
Liquidity and Capital Resources
- -------------------------------
The Partnership was formed on December 18, 1995. On April 16, 1996, the
Partnership commenced offering 500,000 Class A limited partner units at $100 per
unit for sale to investors. On June 3, 1996, the Partnership held its initial
closing, receiving gross offering proceeds of $1,200,000 from the sale of 12,000
Class A limited partner units. The Partnership intends to continue offering up
to 500,000 Class A limited partner units for sale and admitting additional Class
A limited partners through April 15, 1998.
A summary of the Partnership's offering activities from the commencement of
operations to December 31, 1996 is presented below:
Class A limited partner units sold 154,553
============
Gross offering proceeds $ 15,455,281
Sales commissions (1,545,528)
Organization and offering expenses (618,112)
Due diligence expenses (66,630)
------------
Net offering proceeds $ 13,225,011
============
Class B limited partner (CAII) cash contribution $ 150,000
============
The Partnership funds its operating activities principally with cash from rents,
discounted lease rentals (non-recourse debt), interest income, and sales of
off-lease equipment. Available cash and cash reserves of the Partnership are
invested in short-term government securities pending the acquisition of
equipment or distribution to the partners.
During 1996, the Partnership acquired equipment subject to leases with a total
purchase price of $13,991,309 (including $849,244 of discounted lease rentals).
Also during 1996, the Partnership discounted future rental payments from certain
leases to non-recourse lenders and received proceeds of $1,923,239. Non-recourse
borrowing against unleveraged leases in the Partnership's lease portfolio may
occur in the future as well, when the general partner, in its discretion,
determines that such non-recourse financing is in the best interest of the
Partnership. As of December 31, 1996, the general partner had identified $2.6
million of additional equipment that satisfied the Partnership's acquisition
criteria that is expected to be acquired during 1997.
-7-
Item 7. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations, continued
-------------
Liquidity and Capital Resources, continued
- -------------------------------
During 1996, the Partnership declared distributions to the Class A limited
partners of $439,720 of which $126,682 was paid during January 1997. A
substantial portion of such distributions is expected to constitute a return of
capital. Distributions may be characterized for tax, accounting and economic
purposes as a return of capital, a return on capital or a portion of both. The
portion of each cash distribution by a partnership which exceeds its net income
for the fiscal period may be deemed a return of capital for accounting purposes.
However, the total percentage of a partnership's return on capital over its life
will only be determined after all residual cash flows (which include proceeds
from the re-leasing and sale of equipment) have been realized at the termination
of the Partnership. For 1996, approximately 76% of the cash distributions paid
to the partners of the Partnership constituted a return of capital for
accounting purposes. This percentage may not be reflective of the percentage of
distributions that constitutes a return of capital at any subsequent point in
time.
The general partner believes that the Partnership will generate sufficient cash
flows from operations during 1997, to (1) meet current operating requirements,
(2) enable it to fund cash distributions to both the Class A and Class B limited
partners at annualized rates of 10.5% (substantial portions of which are
expected to constitute returns of capital), of their capital contributions, and
(3) reinvest in additional equipment under leases, provided that suitable
equipment can be identified and acquired.
-8-
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements
Page
Number
------
Financial Statements
--------------------
Independent Auditors' Report 10
Balance Sheet at December 31, 1996 11
Statement of Income for the period from April 16, 1996
(commencement of operations) through December 31, 1996 12
Statement of Partners' Capital for the period from
April 16, 1996 (commencement of operations) through
December 31, 1996 13
Statement of Cash Flows for the period from April 16, 1996
(commencement of operations) through December 31, 1996 14
Notes to Financial Statements 15-24
-9-
Independent Auditors' Report
THE PARTNERS
CAPITAL PREFERRED YIELD FUND-IV, L.P.
We have audited the accompanying balance sheet of Capital Preferred Yield
Fund-IV, L.P. as of December 31, 1996, and the related statements of income,
partners' capital, and cash flows for the period from April 16, 1996
(commencement of operations) to December 31, 1996. These financial statements
are the responsibility of the Partnership's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides 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 Capital Preferred Yield
Fund-IV, L.P. as of December 31, 1996, and the results of its operations and its
cash flows for the period from April 16, 1996 (commencement of operations) to
December 31, 1996, in conformity with generally accepted accounting principles.
/s/KPMG Peat Marwick LLP
------------------------
KPMG Peat Marwick LLP
Denver, Colorado
January 31, 1997
-10-
Capital Preferred Yield Fund-IV, L.P.
BALANCE SHEET
ASSETS
December 31,
1996
------------
Cash and cash equivalents $ 3,286,072
Accounts receivable 76,524
Net investment in direct finance leases 182,328
Leased equipment, net 13,107,533
-----------
Total assets $16,652,457
===========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Accounts payable and accrued liabilities $ 658,229
Payable to affiliates 43,483
Rents received in advance 31,991
Distributions payable to partners 128,898
Discounted lease rentals 2,765,239
-----------
Total liabilities 3,627,840
-----------
Partners' capital:
General partner -
Limited partners:
Class A
500,000 units authorized; 154,503 units
issued and outstanding 12,878,374
Class B 146,243
-----------
Total partners' capital 13,024,617
-----------
Total liabilities and partners' capital $16,652,457
===========
See accompanying notes to financial statements.
-11-
Capital Preferred Yield Fund-IV, L.P.
STATEMENT OF INCOME
For the period from
the commencement of
operations (April 16, 1996)
to December 31, 1996
---------------------------
Revenue:
Operating lease rentals $ 881,778
Direct finance lease income 7,805
Interest income 50,763
---------
Total revenue 940,346
---------
Expenses:
Depreciation and amortization 659,574
Management fees paid to general partner 17,688
Direct services from general partner 41,376
General and administrative 92,539
Interest on discounted lease rentals 26,542
---------
Total expenses 837,719
---------
Net income $ 102,627
=========
Net income allocated:
To the general partner $ 26,271
To the Class A limited partners 75,564
To the Class B limited partner 792
---------
$ 102,627
=========
Net income per weighted average Class A limited
partner unit outstanding $ 1.33
=========
Weighted average Class A limited partner
units outstanding 56,931
=========
See accompanying notes to financial statements.
-12-
Capital Preferred Yield Fund-IV, L.P.
STATEMENT OF PARTNERS' CAPITAL
For the period from commencement of operations
(April 16, 1996)
to December 31, 1996
Class A
Limited Class A Class B
General Partners Limited Limited
Partner Units Partners Partner Total
------------ ------------ ------------ ------------ ------------
Capital contributions $ 0 154,553 $ 15,455,281 $ 150,000 $ 15,605,281
Commissions and offering costs on
sale of Class A limited partner units (22,303) - (2,207,967) - (2,230,270)
Redemptions - (50) (4,784) - (4,784)
Net income 26,271 - 75,564 792 102,627
Distributions declared to partners (3,968) - (439,720) (4,549) (448,237)
------------ ------------ ------------ ------------ ------------
Partners' capital, December 31, 1996 $ - 154,503 $ 12,878,374 $ 146,243 $ 13,024,617
============ ============ ============ ============ ============
See accompanying notes to financial statements.
-13-
Capital Preferred Yield Fund-IV, L.P.
STATEMENT OF CASH FLOWS
For the period from
the commencement of
operations (April 16, 1996)
to December 31, 1996
---------------------------
Cash flows from operating activities:
Net income $ 102,627
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 659,574
Recovery of investment in direct finance leases 20,040
Changes in assets and liabilities:
Increase in accounts receivable (76,524)
Increase in accounts payable and accrued liabilities 651,476
Increase in payable to affiliates 43,483
Increase in rents received in advance 31,991
-------------
Net cash provided by operating activities 1,432,667
-------------
Cash flows from investing activities:
Purchases of equipment on operating leases from affiliates (12,939,697)
Investment in direct financing leases, acquired from affiliates (202,368)
-------------
Net cash used in investing activities (13,142,065)
-------------
Cash flows from financing activities:
Proceeds from Class A capital contributions 15,455,281
Proceeds from Class B capital contributions 150,000
Proceeds from discounted lease rentals 1,923,239
Principal payments on discounted lease rentals (7,244)
Redemptions of Class A limited partner units (4,784)
Commissions paid to affiliate in connection with the sale of
Class A limited partner units (1,545,528)
Non-accountable organization and offering expenses reimbursement
paid to the general partner in connection with the sale of Class A
limited partner units (656,155)
Distributions to partners (319,339)
-------------
Net cash provided by financing activities 14,995,470
-------------
Net increase in cash and cash equivalents 3,286,072
Cash and cash equivalents at beginning of period -
-------------
Cash and cash equivalents at end of period $ 3,286,072
=============
Supplemental disclosure of cash flow information:
Interest paid on discounted lease rentals $ 26,542
Supplemental disclosure of noncash investing and financing activities:
Reduction in Partner's capital accounts for commissions and offering
costs payable to affiliates 28,587
Discounted lease rentals assumed in equipment acquisitions 849,244
See accompanying notes to financial statements.
-14-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
-----------------------------------------------------------
Organization
Capital Preferred Yield Fund-IV, L.P. (the "Partnership") was organized
on December 18, 1995 as a limited partnership under the laws of the
State of Delaware pursuant to an Agreement of Limited Partnership (the
"Partnership Agreement"). The Partnership was formed for the purpose of
acquiring and leasing a diversified portfolio of equipment to
unaffiliated third parties. The Partnership will continue until December
31, 2007 unless terminated earlier in accordance with the terms of the
Partnership Agreement. All Partnership equipment is expected to be sold
and the Partnership liquidated between 2003 and 2007. The general
partner of the Partnership is CAI Equipment Leasing V Corp., a wholly
owned subsidiary of Capital Associates, Inc. ("CAI").
The general partner manages the Partnership, including investment of
funds, purchase and sale of equipment, lease negotiation and other
administrative duties. The Partnership commenced business operations on
April 16, 1996, and from that date through December 31, 1996, 154,553
Class A limited partner units were sold to approximately 867 investors
at a price of $100 per Class A limited partner unit.
Capital Associates International, Inc. ("CAII"), a wholly owned
subsidiary of CAI, is the Class B limited partner. The Class B limited
partner is required to contribute cash, upon acquisition of equipment,
in an amount equal to 1% of gross offering proceeds received from the
sale of Class A limited partner units. As of December 31, 1996, CAII has
contributed $150,000 to the Partnership.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. For leasing entities, this includes the
estimate of residual values, as discussed below. Actual results could
differ from those estimates.
Partnership Allocations
Cash Distributions
------------------
During the Reinvestment Period (as defined in the Partnership
Agreement), available cash is distributed to the partners as follows:
First, 1.0% to the general partner and 99.0% to the Class A limited
partners until the class A limited partners receive annual,
non-compounded cumulative distributions equal to 10.5% of their
contributed capital.
-15-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Partnership Allocations, continued
Cash Distributions, continued
------------------
Second, 1.0% to the general partner and 99.0% to the Class B limited
partner until the Class B limited partner receives annual
non-compounded cumulative distributions equal to 10.5% of its
contributed capital.
Third, any remaining available cash will be reinvested or
distributed to the partners as specified in the Partnership
Agreement.
After the Reinvestment Period (as defined in the Partnership Agreement),
available cash will be distributed to the partners as follows:
First, in accordance with the first and second allocations during
the Reinvestment Period as described above.
Second, 99.0% to the Class A limited partners and 1.0% to the
general partner, until the Class A limited partners achieve Payout
(as defined in the Partnership Agreement).
Third, 99.0% to the Class B limited partner, 1.0% to the general
partner, until the Class B limited partner achieves Payout (as
defined in the Partnership Agreement).
Fourth, 99.0% to the Class A and Class B limited partners (as a
class) and 1.0% to the general partner, until the Class A and Class
B limited partners receive cash distributions equal to 170% of their
capital contributions.
Thereafter, 90% to the Class A and Class B limited partners (as a class)
and 10% to the general partner.
Profits and Losses
------------------
There are several special allocations that precede the general
allocations of profits and losses to the partners. The most significant
special allocations are as follows:
First, commissions and expenses paid in connection with the sale of
Class A limited partner units are allocated 1.0% to the general
partner and 99.0% to the Class A limited partners.
-16-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Partnership Allocations, continued
-----------------------
Cash Distributions, continued
------------------
Second, depreciation relating to Partnership equipment and any
losses resulting from the sale of equipment are generally allocated
1.0% to the general partner and 99.0% to the limited partners
(shared 99.0%/1.0% by the Class A and Class B limited partners,
respectively) until the cumulative amount of such depreciation and
such losses allocated to each limited partner equals such limited
partner's contributed capital reduced by commissions and other
expenses paid in connection with the sale of Class A limited partner
units allocated to such partner. Thereafter, gain on sale of
equipment, if any, will be allocated to the general partner in an
amount equal to the sum of depreciation and loss on sale of
equipment previously allocated to the general partner.
Third, notwithstanding anything in the Partnership Agreement to the
contrary, and before any other allocation is made, items of income
and gain for the current year (or period) shall be allocated, as
quickly as possible, to the general partner to the extent of any
deficit balance existing in the general partner's capital account as
of the close of the immediately preceding year, in order to restore
the balance in the general partner's capital account to zero.
After giving effect to special allocations, profits (as defined in the
Partnership Agreement) are first allocated in proportion to, and to the
extent of, any previous losses, in reverse chronological order and
priority. Any remaining profits are allocated in the same order and
priority as cash distributions.
After giving effect to special allocations, losses (as defined in the
Partnership Agreement) are allocated in proportion to, and to the extent
of, any previous profits, in reverse chronological order and priority.
Any remaining losses are allocated 1.0% to the general partner and 99.0%
to the limited partners (shared 99.0%/1.0% by the Class A and Class B
limited partners, respectively).
Financial Reporting
-------------------
For financial reporting purposes, net income is allocated to the
partners in a manner consistent with the allocation of cash
distributions.
-17-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Recently Issued Financial Accounting Standards
The Partnership adopted Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of ("SFAS No. 121"), effective January
1, 1996. SFAS No. 121 requires that long-lived assets, including
operating leases, and certain identifiable intangibles to be held and
used by an entity be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not
be recoverable. In performing the review for recoverability, the entity
should estimate the future cash flows expected to result from the use of
the asset and its eventual disposition. If the sum of the expected
future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Measurement of an
impairment loss for long-lived assets, including operating leases, and
identifiable intangibles held by the Partnership is based on the fair
value of the asset calculated by discounting the expected future cash
flows at an appropriate interest rate. The adoption of this statement
did not have a material effect on the Partnership's financial condition
or results of operations.
Lease Accounting
Statement of Financial Accounting Standards No. 13, Accounting for
Leases, requires that a lessor account for each lease by the direct
finance, sales-type or operating lease method. The Partnership currently
utilizes the direct financing and operating methods for all of the
Partnership's equipment under lease. Direct finance leases are defined
as those leases which transfer substantially all of the benefits and
risks of ownership of the equipment to the lessee. For all types of
leases, the determination of profit considers the estimated value of the
equipment at lease termination, referred to as the residual value. After
the inception of a lease, the Partnership may engage in financing of
lease receivables on a nonrecourse basis (i.e., "non-recourse debt" or
"discounted lease rentals") and/or equipment sale transactions to reduce
or recover its investment in the equipment.
The Partnership's accounting methods and their financial reporting effects
are described below.
Net Investment in Direct Financing Leases ("DFLs")
The cost of the equipment, including acquisition fees paid to the
general partner, is recorded as net investment in DFLs on the
accompanying balance sheet. Leasing revenue, which is recognized over
the term of the lease, consists of the excess of lease payments plus the
estimated residual value over the equipment's cost. Earned income is
recognized monthly to provide a constant yield and is recorded as direct
finance lease income on the accompanying income statements. Residual
values are established at lease inception equal to the estimated value
to be received from the equipment following termination of the initial
lease (which in certain circumstances includes anticipated re-lease
proceeds), as determined by the general partner. In estimating such
values, the general partner considers all relevant information regarding
the equipment and the lessee.
-18-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Equipment on Operating Leases ("OLs")
The cost of equipment, including acquisition fees paid to the general
partner, is recorded as leased equipment in the accompanying balance
sheets and is depreciated on a straight-line basis over the lease term
to an amount equal to the estimated residual value at the lease
termination date. Leasing revenue consists principally of monthly rents
and is recognized as operating lease rentals in the accompanying income
statements. Residual values are established at lease inception equal to
the estimated value to be received from the equipment following
termination of the initial lease (which in certain circumstances
includes anticipated re-lease proceeds), as determined by the general
partner. In estimating such values, the general partner considers all
relevant information and circumstances regarding the equipment and the
lessee. Because revenue, depreciation expense and the resultant profit
margin before interest expense are recorded on a straight-line basis,
and interest expense on discounted lease rentals (discussed below) is
recorded on the interest method, lower returns are realized in the early
years of the term of an OL and higher returns in later years.
Nonrecourse Discounting of Rentals
The Partnership may assign the future rentals from leases to financial
institutions, or acquire leases subject to such assignments, at fixed
interest rates on a nonrecourse basis. In return for such assigned
future rentals, the Partnership receives the discounted value of the
rentals in cash. In the event of default by a lessee, the financial
institution has a first lien on the underlying leased equipment, with no
further recourse against the Partnership. Cash proceeds from such
financings, or the assumption of such financings, are recorded on the
balance sheet as discounted lease rentals. As lessees make payments to
financial institutions, leasing revenue and interest expense are
recorded.
Allowance for Losses
An allowance for losses is maintained at levels determined by the
general partner to adequately provide for any other-than-temporary
declines in asset values. In determining losses, economic conditions,
the activity in the used equipment markets, the effect of actions by
equipment manufacturers, the financial condition of lessees, the
expected courses of action by lessees with regard to leased equipment at
termination of the initial lease term, and other factors which the
general partner believes are relevant, are considered. Asset chargeoffs
are recorded upon the termination or remarketing of the underlying
assets. The lease portfolio is reviewed quarterly to determine the
adequacy of the allowance for losses.
-19-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies, continued
-----------------------------------------------------------
Transactions Subsequent to Initial Lease Termination
After the initial term of equipment under lease expires, the equipment
is either sold or re-leased to the existing lessee or another third
party. The remaining net book value of equipment sold is removed and
gain or loss recorded when equipment is sold. The accounting for
re-leased equipment is consistent with the accounting described under
"Net Investment in Direct Financing Leases" and "Equipment on Operating
Leases" above.
Income Taxes
No provision for income taxes has been made in the financial statements
since taxable income or loss is recorded in the tax return of the
individual partners.
Cash Equivalents
The Partnership considers short-term, highly liquid investments that are
readily convertible to known amounts of cash to be cash equivalents.
Cash equivalents of $2,491,000 at December 31, 1996, are comprised of an
investment in a mutual fund which invests solely in U.S. Government
treasury bills having maturities of 90 days or less.
Net Income Per Class A Limited Partner Unit
Net income per Class A limited partner unit is computed by dividing the
net income allocated to the Class A limited partners by the weighted
average number of Class A limited partner units outstanding during the
period.
2. Net Investment in Direct Finance Leases
---------------------------------------
The components of the net investment in direct finance leases as of
December 31, 1996 were:
Minimum lease payments receivable $ 196,123
Estimated residual values 19,627
Less unearned income (33,422)
---------
Total $ 182,328
=========
-20-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
3. Leased Equipment
----------------
The Partnership's investment in equipment on operating leases by major
classes as of December 31, 1996 were:
Transportation and industrial equipment $ 10,188,595
Computers and peripherals 3,569,359
Other 30,988
------------
13,788,942
Less accumulated depreciation (681,409)
------------
$ 13,107,533
============
Depreciation expense for 1996 was $681,409.
4. Future Minimum Lease Payments
-----------------------------
Future minimum lease payments receivable from noncancelable leases as of
December 31, 1996 are as follows:
Years Ending December 31 DFLs OLs
------------------------ ---- ---
1997 $ 67,260 $ 3,522,304
1998 67,260 3,477,210
1999 43,185 2,516,090
2000 11,867 1,403,995
2001 6,651 711,339
Thereafter - 68,455
----------- -----------
Total $ 196,123 $11,699,393
=========== ===========
5. Discounted Lease Rentals
------------------------
Discounted lease rentals outstanding at December 31, 1996 bear interest at
rates primarily ranging between 4.90% and 11.65%. Aggregate maturities of
such non-recourse obligations are:
Years Ending December 31
------------------------
1997 $ 790,395
1998 790,396
1999 600,933
2000 341,579
2001 202,700
Thereafter 39,236
-----------
$ 2,765,239
===========
-21-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
6. Transactions With the General Partner and Affiliates
----------------------------------------------------
Sales Commissions and Offering Costs
------------------------------------
Under the terms of the Partnership Agreement, CAI Securities Corporation,
an affiliate of the general partner, is entitled to receive sales
commissions and wholesaling fees equal to 10% of the Class A limited
partners' capital contributions, up to 9% of which is paid to
participating broker-dealers. During 1996, CAI Securities Corporation
earned commissions and fees in the amount of $1,545,528, including
$1,324,225 that was paid to participating broker-dealers.
As provided in the Partnership Agreement, the general partner earned
$618,112 as reimbursement for expenses incurred during 1996, in
connection with the organization of the Partnership and the offering of
Class A limited partner units. The general partner also received $66,630
(of which $38,043 was paid in January 1997) as reimbursement for due
diligence expenses incurred during 1996.
Capital Contributions
---------------------
Under terms of the Partnership Agreement, the Class B limited partner
made capital contributions to the Partnership of $150,000 during 1996.
Origination Fee and Evaluation Fee
----------------------------------
The general partner receives a fee equal to 3.5% of the sales price of
equipment sold to the Partnership (up to a maximum cumulative amount as
specified in the Partnership Agreement), 1.5% of which represents
compensation for selecting, negotiating and consummating the acquisition
of the equipment and 2% of which represents reimbursement for services
rendered in connection with evaluating the suitability of the equipment
and the credit worthiness of the lessees. Origination and evaluation fees
totaled $463,529 in 1996, all of which were capitalized by the
Partnership as part of the cost of equipment on operating leases and net
investment in direct financing leases.
Management Fees
---------------
The general partner receives management fees as compensation for services
performed in connection with managing the Partnership's equipment equal
to 2% of gross rentals received as permitted under terms of the
Partnership Agreement. Such fees totaled $17,688 (of which $8,510 was
paid in January 1997) for 1996.
-22-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
6. Transactions With the General Partner and Affiliates, continued
----------------------------------------------------
Direct Services
---------------
The general partner and its affiliates provide accounting, investor
relations, billing, collecting, asset management, and other
administrative services to the Partnership. The Partnership reimburses
the general partner for these services performed on its behalf as
permitted under the terms of the Partnership Agreement. Such
reimbursements totaled $41,376 ($6,386 of which were paid in January
1997) during 1996.
Equipment Purchases
-------------------
The Partnership purchased equipment from CAII, with a total purchase
price of $13,991,309 (including $849,244 of discounted lease rentals)
during 1996. The Partnership purchased the equipment at CAII's historical
cost plus reimbursement of other net acquisition costs, as provided for
in the Partnership Agreement.
Payable to Affiliates
---------------------
Payable to affiliates consists of direct services, management fees, sales
commissions, wholesaling fees and organization and offering expense
reimbursements with respect to Class A limited partner units payable to
the general partner and its affiliates.
7. Tax Information (Unaudited)
---------------------------
The following reconciles net income for financial reporting purposes to the
income for federal income tax purposes for the period ended December 31,
1996:
Net income per financial statements $ 102,627
Direct financing leases 20,040
Depreciation (567,815)
Other 87,042
---------
Partnership income for federal income tax purposes $(358,106)
=========
The following reconciles partners' capital for financial reporting purposes
to partners' capital for federal income tax purposes as of December 31,
1996:
Partners' capital per financial statements $ 13,024,617
Commissions and offering costs 2,230,270
Direct financing leases 20,040
Depreciation (567,815)
Other 81,277
------------
Partners' capital for federal income tax purposes $ 14,788,389
============
-23-
Capital Preferred Yield Fund-IV, L.P.
NOTES TO FINANCIAL STATEMENTS
8. Concentration of Credit Risk
----------------------------
Approximately 88% of the Partnership's equipment under lease was leased to
investment grade companies. Pursuant to the Partnership Agreement, an
investment grade lessee is a company (i) with a net worth in excess of
$100,000,000 (and no debt issues that are rated), or (ii) with a credit
rating of not less than Baa as determined by Moody's Investor Services,
Inc. or comparable credit rating as determined by another recognized credit
rating service; or a lessee, all of whose lease payments have been
unconditionally guaranteed or supported by a letter of credit issued by a
company meeting one of the above requirements.
General Motors, Lucent Technologies and Staples, Inc. accounted for
approximately 48% ($453,460) of total revenue of the Partnership during
1996. This concentration is attributable to placement of equipment with
these lessees during the first nine months of the Partnership's operations.
Rental revenue from these lessees constituted a larger percentage of the
Partnership's total 1996 revenue than expected in future fiscal periods, as
additional leases are acquired by the Partnership.
The Partnership's cash balance is maintained with a high credit quality
financial institution. At times, such balances may be in excess of the FDIC
insurance limit due to the receipt of lockbox amounts that have not cleared
the presentment bank (generally for less than two days). As the funds
become available, they are invested in a money market mutual fund.
9. Disclosures about Fair Value of Financial Instruments
-----------------------------------------------------
Statement of Financial Standards No. 107 ("SFAS No. 107"), Disclosures
about Fair Value of Financial Instruments specifically excludes certain
items from its disclosure requirements such as the Partnership's investment
in leased assets. The carrying amounts at December 31, 1996 for cash and
cash equivalents, accounts receivable, accounts payable and accrued
liabilities, payable to affiliates, rents and sale proceeds received in
advance and distributions payable to partners approximate their fair values
due to the short maturity of these instruments.
As of December 31, 1996, the carrying value of discounted lease rentals
approximates its fair value because the debt was recently acquired.
-24-
Item 9. Changes in and Disagreements with Accountants on Accounting and
----------------------------------------------------------------------
Financial Disclosure
--------------------
None.
Item 10. Directors and Executive Officers of the Partnership
---------------------------------------------------
The Partnership has no officers and directors. The general partner manages and
controls the affairs of the Partnership and has general responsibility and
authority in all matters affecting its business. Information concerning the
directors and executive officers of the general partner is as follows:
CAI Equipment Leasing V Corp.
Name Positions Held
---- --------------
John F. Olmstead President and Director
Dennis J. Lacey Senior Vice President and Director
John E. Christensen Senior Vice President, Principal Financial and Chief
Administrative Officer and Director
Anthony M. DiPaolo Senior Vice President, Assistant Secretary and Director
Daniel J. Waller Vice President and Director
Richard H. Abernethy Vice President and Director
John A. Reed Vice President, Assistant Secretary and Director
Robert A. Golden Vice President and Director
David J. Anderson Chief Accounting Officer and Secretary
John F. Olmstead, age 52, joined CAII as Vice President in December, 1988, is a
Senior Vice President of CAI and CAII and is head of CAII's Public Equity
division. He has served as Chairman of the Board for Neo-kam Industries, Inc.,
Matchless Metal Polish Company, Inc. and ACL, Inc. for more than 5 years. He has
over 20 years of experience holding various positions of responsibility in the
leasing industry. Mr. Olmstead holds a Bachelor of Science degree from Indiana
University and a Juris Doctorate degree from Indiana Law School.
Dennis J. Lacey, age 43, joined CAI as Vice President, Operations, in October
1989. Mr. Lacey was appointed Treasurer on January 1, 1991, Chief Financial
Officer on April 11, 1991, a director on July 19, 1991, and President and Chief
Executive Officer on September 6, 1991. Prior to joining CAI, Mr. Lacey was an
audit partner for the public accounting firm of Coopers & Lybrand. Mr. Lacey is
also a director and senior officer of CAII, CAI Equipment Leasing I Corp., CAI
Equipment Leasing II Corp., CAI Equipment Leasing III Corp., CAI Equipment
Leasing IV Corp., CAI Equipment Leasing V Corp., CAI Leasing Canada, Ltd., CAI
Partners Management Company, CAI Securities Corporation, CAI Lease
Securitization I Corp. and Capital Equipment Corporation (collectively referred
to herein as the "CAI Affiliates"), all of which are first- or second-tier
wholly-owned subsidiaries of CAI.
-25-
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
John E. Christensen, age 49, joined CAII as Vice President and Treasurer in
November 1988. He now serves as Senior Vice President, Finance and Chief
Financial Officer of CAI and CAII. Mr. Christensen previously held senior
management positions at Maxicare Health Plans, Inc., Global Marine, Inc. and
Santa Fe International, Inc. Mr. Christensen obtained his MBA in Finance from
the University of Michigan and his Bachelor of Arts degree from Michigan State
University.
Anthony M. DiPaolo, age 37, joined CAII in July 1990 as an Assistant Treasurer
and is currently Senior Vice President-Business Development. He has also held
the positions of Senior Vice President-Controller and Assistant Vice
President-Credit Administration for the Company. Mr. DiPaolo has held financial
management positions as Chief Financial Officer for Mile High Kennel Club, Inc.
from 1988 to 1990 and was Vice President/Controller for VICORP Restaurants, Inc.
from 1986 through 1988. Mr. DiPaolo holds a Bachelor of Science degree in
Accounting from the University of Denver.
Daniel J. Waller, age 38, joined CAII in July 1990, as a manager of Investor
Relations. Mr. Waller assumed the responsibility for the asset management
department a short time later, and is currently Vice President, Capital Markets
Group. Prior to joining CAII, Mr. Waller was an audit manager with Coopers &
Lybrand for over three years and gained considerable experience in the leasing
industry. While at Coopers & Lybrand, Mr. Waller held positions with the
International Accounting and Auditing Committee as well as the national Auditing
Directorate. Mr. Waller holds a Bachelor of Arts degree in accounting from the
University of Northern Iowa.
Richard H. Abernethy, age 42, joined CAII in April 1992 as Equipment Valuation
Manager and currently serves as Vice President of Asset Management. Mr.
Abernethy has thirteen years experience in the leasing industry, including prior
positions with Barclays Leasing Inc., from November 1986 to February 1992, and
Budd Leasing Corporation, from January 1981 to November 1986. Mr. Abernethy
holds a Bachelor of Arts in Business Administration from the University of North
Carolina at Charlotte.
John A. Reed, age 41, joined CAII in January 1990 as the Tax Director and
Assistant Secretary. Mr. Reed is currently the Vice President of Marketing and
is responsible for all lease documentation and management of transaction
structuring and processing. Prior to joining the Marketing Department, Mr. Reed
was Vice President of Credit and Debt Administration. He spent seven and one
half years with Coopers & Lybrand in the Tax Department and served on CAII's tax
consulting engagement during that time. Mr. Reed holds a Bachelor of Arts degree
in Social Sciences and Masters of Science in Accounting, from Colorado State
University.
Robert A. Golden, age 51, is Vice President and the National Sales Manager of
the Company. Mr. Golden joined the Company in 1993 as a Branch Manager. He was
promoted to his current position in September 1994. Prior to joining the
Company, he was an Executive Vice President with the U.S. Funds Group, President
of BoCon Capital Group and Vice President with Ellco/GE Capital for fifteen
years. Mr. Golden is an officer, but not a director, of CAII.
-26-
Item 10. Directors and Executive Officers of the Partnership, continued
---------------------------------------------------
David J. Anderson, age 43, joined CAII in August 1990 as Manager of Billing &
Collections and currently serves as Assistant Vice-President/Chief Accounting
Officer. Prior to joining CAII, Mr. Anderson was Vice- President/Controller for
Systems Marketing, Inc., from 1985 to 1990, and previous to that working in
several senior staff positions at the Los Alamos National Laboratory and with
Ernst & Whinney. Mr. Anderson holds a Bachelor of Business Administration degree
in Accounting from the University of Wisconsin
Item 11. Executive Compensation
----------------------
No compensation was paid by the Partnership to the officers and directors of the
general partner. See Item 13 of this Report, "Certain Relationships and Related
Transactions," which is incorporated herein by reference, for a description of
the compensation and fees paid to the general partner and its affiliates by the
Partnership during 1996.
Item 12. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
(a) As of the date hereof, no person is known by the Partnership to be the
beneficial owner of more than 5% of the Class A limited partner units
of the Partnership. The Partnership has no directors or officers, and
neither the general partner nor the Class B limited partner of the
Partnership own any Class A limited partner units.
CAII, an affiliate of the general partner, owns 100% of the
Partnership's Class B units.
CAI Partners Management Company owns 100% of the Partnership's general
partner units.
The names and addresses of the general partner and the Class B limited
partner are as follows:
General Partner
---------------
CAI Equipment Leasing V Corp.
7175 W. Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
Class B Limited Partner
-----------------------
Capital Associates International, Inc.
7175 W. Jefferson Avenue
Suite 4000
Lakewood, Colorado 80235
-27-
Item 12. Security Ownership of Certain Beneficial Owners and Management,
---------------------------------------------------------------------
continued
(b) No directors or officers of the general partner or the Class B limited
partner owned any Class A limited partner units as of February 1,
1996.
(c) The Partnership knows of no arrangements, the operation of which may
at a subsequent date result in a change in control of the Partnership.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The general partner and its affiliates receive certain types of compensation,
fees or other distributions in connection with the operations of the
Partnership.
Following is a summary of the amounts paid or payable to the general partner and
its affiliates during 1996:
ORGANIZATION AND OFFERING STAGE
Sales Commissions
- -----------------
CAI Securities Corporation (the "Dealer-Manager"), an affiliate of the general
partner, earned commissions of 10% of the sales price of Class A limited partner
units sold, up to 9% of which was paid to participating broker-dealers. During
1996, the Dealer-Manager earned commissions totaling $1,545,528 (all of which
was paid in 1996,) $1,324,225 of which was paid to broker-dealers.
Due Diligence Expense Reimbursement
- -----------------------------------
The Dealer-Manager is reimbursed for bona fide due diligence expenses which it
incurs up to a maximum of 1/2% of gross offering proceeds. The Dealer-Manager
incurred $66,630 for due diligence expenses and was reimbursed $38,043 during
1996 ($28,587 was reimbursed in January 1997).
Organization and Offering Expense Reimbursement
- -----------------------------------------------
The general partner is reimbursed for the organization and offering expenses it
incurs in organizing the Partnership and offering Class A limited partner units
for sale to the public. The general partner earned $618,112 for organization and
offering expenses during 1996, all of which was paid during 1996.
-28-
Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
ACQUISITION AND OPERATING STAGES
Acquisition Fee and Acquisition Cost Reimbursement
- --------------------------------------------------
The general partner receives a fee equal to 3.5% of the sales price of equipment
sold to the Partnership, 1.5% of which represents compensation for selecting,
negotiating and consummating the acquisition of the equipment and 2% of which
represents reimbursement for services rendered in connection with evaluating the
suitability of the equipment and the credit worthiness of the Lessee.
Origination and evaluation fees totaled $463,529 in 1996, all of which were
capitalized by the Partnership as part of the cost of equipment on operating
leases and net investment in direct financing leases.
Management Fees
- ---------------
The general partner receives management fees as compensation for services
rendered in connection with managing the Partnership's equipment equal to 2% of
gross rentals received. Such fees totaled $17,688 for 1996 of which $8,510 will
be paid during January 1997.
Accountable General and Administrative Expenses
- -----------------------------------------------
The general partner is entitled to reimbursement of certain expenses paid on
behalf of the Partnership which are incurred in connection with the
Partnership's operations. Such reimbursable expenses amounted to $41,376 during
1996, of which $6,386 were reimbursed in January 1997.
Additionally, the general partner is allocated 1% of Partnership cash
distributions and net income relating to its general partner interest in the
Partnership. Distributions and net income allocated to the general partner
totaled $3,968 and $26,271, respectively, for 1996. Distributions and net income
allocated to the Class B limited partner totaled $4,549 and $792, respectively,
during 1996.
During 1996, the Partnership acquired the equipment described below from CAII:
Cost to
Partnership
Including
Date Cost to Acquisition Debt Annual
Purchased Lessee Term Equipment Description CAII Fees* Assumed Rents
- --------- ------ ---- --------------------- ------------ ------------ --------- -----------
04/16/96 General Motors Corporation 60 Forklift $ 4,549 $ 4,706 $ 0 $ 878
04/16/96 General Motors Corporation 60 Forklift 80,638 83,432 0 15,806
04/16/96 General Motors Corporation 60 Forklift 144,568 149,577 0 28,194
04/16/96 General Motors Corporation 60 Forklift 49,904 51,633 0 9,732
04/16/96 General Motors Corporation 60 Forklift 205,011 212,115 0 39,563
04/16/96 General Motors Corporation 60 Forklift 27,795 28,758 0 5,421
04/16/96 General Motors Corporation 60 Forklift 28,764 29,761 0 5,637
04/16/96 General Motors Corporation 60 Forklift 170,982 176,906 0 33,345
04/25/96 General Motors Corporation 60 Loader 80,897 83,700 0 15,880
05/07/96 USS/Kobe Steel 36 Forklift 35,334 36,558 0 9,207
-29-
Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
Cost to
Partnership
Including
Date Cost to Acquisition Debt Annual
Purchased Lessee Term Equipment Description CAII Fees* Assumed Rents
- --------- ------ ---- --------------------- ------------ ------------ --------- -----------
05/10/96 International Paper Company 38 Networking equipment $ 122,043 $ 126,272 $ 0 $ 40,980
06/04/96 Universal Forest Products 36 Forklift 34,323 35,512 0 9,438
06/07/96 General Motors Corporation 60 Forklift 37,349 38,644 0 7,332
07/01/96 Universal Forest Products 36 Forklift 34,323 35,512 0 9,459
07/01/96 Universal Forest Products 36 Forklift 21,246 21,982 0 5,734
07/03/96 Addison Wesley Longman 36 IBM notebooks 496,392 513,592 0 162,235
07/05/96 General Motors Corporation 36 Material handling 108,935 112,710 0 36,465
07/08/96 Staples, Inc 28 Copiers 246,081 254,608 0 102,492
07/08/96 General Motors Corporation 36 Material handling 113,319 117,246 0 37,933
07/08/96 Staples, Inc 29 Copiers 229,777 237,739 0 93,276
07/24/96 Xerox 44 Forklift 14,015 14,501 0 3,384
08/09/96 GM Powertrain 36 Scrubber 6,208 6,423 0 2,078
08/15/96 General Motors Corporation 36 Material handling 108,164 111,912 0 31,397
08/20/96 General Motors Corporation 36 Material handling 21,327 22,066 0 6,191
08/22/96 General Motors Corporation 36 Material handling 12,986 13,437 0 3,770
08/29/96 International Paper 58 Forklift 862,897 892,796 0 168,888
08/30/96 USS/Kobe Steel 84 Forklifts 83,000 85,876 0 41,332
09/05/96 Home Depot 46 Forklifts 647,037 669,457 460,286 169,022
09/09/96 Ball Foster Glass 60 Wrapper 230,958 238,961 0 47,702
09/18/96 Ball Foster Glass 36 Lift Trucks 58,072 61,354 0 15,229
09/20/96 General Motors 60 Trailer 37,182 38,470 0 7,299
09/26/96 Ball Foster Glass 60 Wrapping equipment 99,023 102,454 0 20,477
09/30/96 Alliant Techsystems 24 Phone System 11,943 12,356 0 4,934
10/01/96 ITT Automotive Electric 60 Material handling 120,720 124,903 0 23,975
10/10/96 Georgetown Steel Corporation 36 Material handling 72,722 75,242 0 21,221
10/10/96 Consolidated Diesel 60 Material handling 6,368 6,589 0 1,418
10/11/96 General Motors Corporation 36 Material handling 77,148 79,821 0 22,394
10/15/96 Xerox 36 Video imaging 21,695 22,447 0 6,840
10/16/96 Xerox 36 Video imaging 73,002 75,531 0 23,004
10/17/96 Thomson Industries 60 Machine tool 139,226 144,050 0 26,487
10/23/96 USS/Kobe Steel 84 Material handling 71,400 73,874 0 35,333
10/23/96 Ball Foster Glass 60 Stretch wrapper 118,551 122,517 0 24,485
10/23/96 Ball Foster Glass 36 Material handling 49,056 50,538 0 12,589
10/24/96 Ball Foster Glass 36 Forklifts 178,928 184,995 0 45,919
10/25/96 Ball Foster Glass 60 Material handling 28,583 29,522 0 5,903
11/04/96 Basic Vegetable 60 Material handling 146,306 151,375 0 27,827
11/05/96 Ball Foster Glass 60 Loader 109,226 112,952 0 20,422
11/05/96 Xerox 44 Material handling 34,248 35,435 0 8,328
11/05/96 Ball Foster Glass 60 Loader 83,471 86,318 0 15,606
11/07/96 Consolidated Diesel 36 Copier 7,948 8,223 0 2,827
11/20/96 Lucent Technologies 36 Modular building 2,250,000 2,323,805 0 719,940
11/25/96 Ball Foster Glass 36 Forklifts 60,655 62,397 0 15,566
11/26/96 Consolidated Diesel 60 Burden carriers 5,679 5,876 0 1,261
11/27/96 General Motors 36 Material handling 39,932 41,315 0 11,557
11/27/96 Harsco Corporation 25 Manufacturing equipment 893,000 923,942 0 264,688
11/27/96 Harsco Corporation 6 Manufacturing equipment 95,000 98,292 0 44,904
12/09/96 Xerox 24 Emulator 4,590 4,749 0 1,776
12/13/96 Total System Service 46 Mailing system 1,885,160 1,950,481 0 466,109
12/13/96 Thomson Industries, Inc. 60 Grinders 44,130 45,659 0 8,592
12/13/96 GM Powertrain 36 Material handling 42,664 44,143 0 12,384
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Item 13. Certain Relationships and Related Transactions, continued
----------------------------------------------
Cost to
Partnership
Including
Date Cost to Acquisition Debt Annual
Purchased Lessee Term Equipment Description CAII Fees* Assumed Rents
- --------- ------ ---- --------------------- ------------ ------------ --------- -----------
12/18/96 Precision Castparts 60 Forklifts $ 360,034 $ 372,509 $ 0 $ 76,765
12/20/96 Owens-corning Fiberglass 30 PC's 450,478 466,087 388,958 169,742
12/20/96 Thomson Industries, Inc. 56 Grinders 1,336,722 1,383,039 0 273,554
12/20/96 General Motors Corporation 60 Material handling 19,217 19,883 0 3,772
12/27/96 Xerox 36 Logic analyzer 10,069 10,418 0 2,880
12/27/96 Xerox 36 Analysis system 29,950 30,988 0 9,612
------------ ------------ --------- -----------
Total equipment on operating leases sold to Partnership 13,330,920 13,788,941 849,244 3,598,390
------------ ------------ --------- -----------
07/01/96 Louisiana Workers Comp. 36 Computer equipment 116,055 120,076 0 43,926
08/22/96 Medtronic 36 Copier 14,140 14,630 0 5,072
10/03/96 Consolidated Diesel 60 Material handling 36,506 37,771 0 8,690
10/18/96 Consolidated Diesel 42 Copier 28,890 29,891 0 9,579
------------ ------------ --------- -----------
Total direct finance leases sold to Partnership 195,591 202,368 0 67,267
------------ ------------ --------- -----------
Total sold to Partnership $ 13,526,511 $ 13,991,309 $ 849,244 $ 3,665,657
============ ============ ========= ===========
* The lower of (a) the price for the equipment plus all costs incurred in
maintaining the equipment (including, without limitation, the reasonable,
necessary and actual expenses, as determined in accordance with generally
accepted accounting principles, of storage, carrying, warehousing, repair,
marketing, financing and taxes) from the date of acquisition thereof,
provided that any proceeds accrued from the first basic rent date thereof
and retained by the general partner or an affiliate thereof from leasing
the equipment or any other arrangement with respect to the equipment shall
be deemed a credit towards the purchase price paid by the Partnership, or
(b) the fair market value of such equipment, as determined by an
independent nationally recognized appraiser selected by the general
partner.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
---------------------------------------------------------------
(a)
and
(d) The following documents are filed as part of this Report:
1. Financial Statements: (Incorporated by reference to Item 8 of
this Report, "Financial Statements and Supplementary Data").
(b) The Partnership did not file any reports on Form 8-K during the
quarter ended December 31, 1996.
(c) Exhibits required to be filed.
Exhibit Number Exhibit Name
-------------- ------------
4.1* Capital Preferred Yield Fund-IV Limited Partnership
Agreement
4.2* First Amendment to Limited Partnership Agreement
dated November 23, 1996
4.3* Amended and Restated Agreement of Limited
Partnership of Capital Preferred Yield Fund-IV, L.P.
* Not filed herewith. In accordance with Rule 12b-32
of the General Rules and Regulations under the
Securities Exchange Act of 1934, reference is made
to the document previously filed with the Commission.
-31-
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Partnership has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 4, 1997 Capital Preferred Yield Fund-IV, L.P.
By: CAI Equipment Leasing IV Corporation
By: /s/John F. Olmstead
------------------------------------
John F. Olmstead
President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the general partner
of the Partnership and in the capacities indicated on March 3, 1997.
Signature Title
- --------- ------
/s/John F. Olmstead
- -------------------
John F. Olmstead President and Director
/s/Dennis J. Lacey
- ------------------
Dennis J. Lacey Senior Vice President and Director
/s/John E. Christensen
- ----------------------
John E. Christensen Senior Vice President, Principal Financial and
Chief Administrative Officer and Director
/s/Anthony M. DiPaolo
- ---------------------
Anthony M. DiPaolo Senior Vice President, Assistant Secretary and
Director
/s/Daniel J. Waller
- -------------------
Daniel J. Waller Vice President and Director
/s/Richard H. Abernethy
- -----------------------
Richard H. Abernethy Vice President and Director
/s/John A. Reed
- ---------------
John A. Reed Vice President, Assistant Secretary and Director
/s/Robert A. Golden
- -------------------
Robert A. Golden Vice President and Director
/s/David J. Anderson
- --------------------
David J. Anderson Chief Accounting Officer and Secretary
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