Table of Contents

 

	Table of Contents
	Introduction to Portfolio Overview	1
	Dispositions Following the Quarter	1
	Portfolio Overview	2
	Performance Analysis	5
	Transactions with Related Parties	7
	Financial Statements	9
	Forward Looking Statements	14
	Additional Information	14

 

As of December 1, 2015

 

Introduction to Portfolio Overview

Dispositions Following the Quarter

The Fund disposed of the following investments after the quarter ended June 30, 2015:

 

 

Dispositions Following the Quarter (continued)

Portfolio Overview

As of June 30, 2015, our portfolio consisted of the following investments:

* As a result of certain financial difficulties, VAS was unable to repay the balance of its loan on October 6, 2014. On July 23, 2015, we sold all of our interest in the loan to GB Loan, LLC. See section entitled Dispositions Following the Quarter.

 

Portfolio Overview (continued)

*Vessel was previously on charter to Vroon Group B.V.

 

Portfolio Overview (continued)

Portfolio Overview (continued)

Performance Analysis

* Leverage ratio is defined as total liabilities divided by total equity.

** Collections as of October 31, 2015. The uncollected receivables relate to our investment with Técnicas Maritimas Avanzadas, S.A. de C.V.

    

One of our objectives is to provide cash distributions to our members. In order to assess our ability to meet this objective, unaffiliated broker dealers, third party due diligence providers and other members of the investing community have requested that we report a financial measure that can be reconciled to our financial statements and can be used to assess our ability to support cash distributions from our business operations. We refer to this financial measure as cash available from our business operations, or CABO.

CABO is not equivalent to our net operating income or loss as determined under GAAP. Rather, it is a measure that may be a better financial measure for an equipment fund because it measures cash generated by investments, net of management fees and expenses, during a specific period of time. We define CABO as the net change in cash during the period plus distributions to members and investments made during such period, less the debt proceeds used to make such investments,

 

Performance Analysis (continued)

as well as the net proceeds from equity raised through the sale of interests during such period, if any.

We believe that CABO may be an appropriate supplemental measure of an equipment fund's performance because it is based on a measurement of cash during a specific period that excludes cash from non-business operations, such as distributions, investments and equity raised.

Presentation of this information is intended to assist unaffiliated broker dealers, third party due diligence providers and other members of the investing community in understanding the Fund's ability to support its distributions from its business operations. It should be noted, however, that no other equipment funds calculate CABO, and therefore comparisons with other equipment funds are not meaningful. CABO should not be considered as an alternative to net income (loss) as an indication of our performance or as an indication of our liquidity. CABO should be reviewed in conjunction with other measurements as an indication of our performance.

Cash Available from Business Operations, or CABO, is the cash generated by investments during a specific period of time, net of fees and expenses, excluding distributions to members, net equity raised and investments made.

Net Change in Cash per GAAP Cash Flow Statement

Business Operations Net cash flow generated by our investments, net of fees and expenses (CABO)

Non-Business Operations Net Equity Raised Cash expended to make Investments and Distributions to Members

 

As indicated above, the total net change in cash is the aggregate of the net cash flows from Business Operations and the net cash flows from Non-Business Operations.  By taking the total net change in cash and removing the cash activity related to Non-Business Operations (distributions, investments and equity raised), the amount remaining is the net cash available from Business Operations (net cash flows generated by investments, net of fees and expenses).

In summary, CABO is calculated as:

Net change in cash during the period per the GAAP cash flow statement

+ distributions to Members during the period

+ investments made during the period

- debt proceeds to be specifically used to make an investment

= CABO

 

Performance Analysis (continued)

	Cash Available From Business Operations
	for the Period January 1, 2015 through June 30, 2015
	Cash balance at January 1, 2015		$	15,410,563
	Cash balance at June 30, 2015		$	6,946,690
	Net change in cash						$	(8,463,873	)
	Add Back:
	Distributions paid to members from January 1, 2015 through June 30, 2015						$	17,701,866
	Investments made during the period
	Investment in joint ventures		$	10,513
	Investment by noncontrolling interests		$	(57,826	)
							$	(47,313	)
	Cash Available from Business Operations (CABO)						$	9,190,680	(1)
(1)	Cash available from business operations includes the collection of principal and interest from our investments in notes receivable and finance leases.

Transactions with Related Parties

We entered into certain agreements with our Manager and CĪON Securities, LLC, formerly known as ICON Securities, LLC ("CĪON Securities"), a wholly-owned subsidiary of our Manager and our dealer manager for our offering, whereby we pay or paid certain fees and reimbursements to those parties.  Our Manager was entitled to receive an organizational and offering expense allowance of 3.5% of capital raised up to $50,000,000, 2.5% of capital raised between $50,000,001 and $100,000,000, 1.5% of capital raised between $100,000,001 and $200,000,000, 1.0% of capital raised between $200,000,001 and $250,000,000 and 0.5% of capital raised over $250,000,000.  CĪON Securities was entitled to receive a 2% underwriting fee from the gross proceeds from sales of shares to additional members.

In accordance with the terms of our limited liability company agreement, we pay or paid our Manager (i) management fees ranging from 1% to 7% based on the type of transaction, and (ii) acquisition fees, through the end of the operating period, of 3% of the total purchase price (including indebtedness incurred or assumed and all fees and expenses incurred in connection therewith) of, or the value of the Capital Assets secured by or subject to, our investments. For a more detailed analysis of the fees payable to our Manager, please see the Fund's prospectus.

Our Manager performs certain services relating to the management of our equipment leasing and other financing activities.  Such services include, but are not limited to, the collection of lease payments from the lessees of the equipment or loan payments from borrowers, re-leasing services in connection with equipment which is off-lease, inspections of the equipment, liaising with and general supervision of lessees and borrowers to ensure that the equipment is being properly operated and maintained, monitoring performance by the lessees and borrowers of their obligations under the leases and loans, and the payment of operating expenses. Administrative expense reimbursements are costs incurred by our Manager or its affiliates that are necessary to our operations.

 

Transactions with Related Parties (continued)

Our Manager also has a 1% interest in our profits, losses, cash distributions and liquidation proceeds. We paid distributions to our Manager of $63,788 and $177,019 for the three and six months ended June 30, 2015, respectively. We paid distributions to our Manager of $63,778 and $127,552 for the three and six months ended June 30, 2014, respectively. Additionally, our Manager's interest in the net loss attributable to us was $96,042 and $82,912 for the three and six months ended June 30, 2015, respectively. Our Manager's interest in the net income attributable to us was $564,418 and $586,058 for the three and six months ended June 30, 2014, respectively.

									Three Months Ended								Six Months Ended
									June 30,								June 30,
Entity			Capacity		Description				2015			2014				2015			2014
ICON Capital, LLC			Manager		Acquisition fees		(1)		$	-		$	2,272,500			$	-		$	3,884,570
ICON Capital, LLC			Manager		Management fees		(2)			319,464			599,561				704,300			1,138,751
ICON Capital, LLC			Manager		Administrative expense
						reimbursements	(2)			312,286			668,467				751,299			1,129,099
									$	631,750		$	3,540,528			$	1,455,599		$	6,152,420
(1)	Amount capitalized and amortized to operations.
(2)	Amount charged directly to operations.

At June 30, 2015 and December 31, 2014, we had a net payable due to our Manager and affiliates of $26,401 and $2,798,414, respectively, primarily related to administrative expense reimbursements. The administrative expense reimbursements incurred during the year ended December 31, 2014 included approximately $2,100,000 of professional fees and other costs in connection with our Manager's proposed sale of our assets during our liquidation period. Our Manager may continue to incur additional professional fees and costs on our behalf as it continues to pursue the sale of our assets in one or more strategic transactions.

Your participation in the Fund is greatly appreciated.

We are committed to protecting the privacy of our investors in compliance with all applicable laws. Please be advised that, unless required by a regulatory authority such as FINRA or ordered by a court of competent jurisdiction, we will not share any of your personally identifiable information with any third party.

 

Consolidated Balance Sheets

		June 30, 2015				December 31, 2014
		(unaudited)
Assets
Current assets:
Cash and cash equivalents		$	6,946,690			$	15,410,563
Current portion of net investment in notes receivable			6,949,503				6,482,004
Current portion of net investment in finance leases			7,128,163				12,142,423
Other current assets			1,487,875				620,599
Total current assets			22,512,231				34,655,589
Non-current assets:
Net investment in notes receivable, less current portion			44,180,979				52,238,006
Net investment in finance leases, less current portion			58,205,861				62,143,299
Leased equipment at cost (less accumulated depreciation of
$21,935,409 and $18,430,584, respectively)			69,246,950				72,751,775
Vessels (less accumulated depreciation of
$2,144,246 and $1,286,547, respectively)			17,408,978				18,266,677
Investment in joint ventures			18,060,464				25,235,827
Other non-current assets			2,789,699				2,138,020
Total non-current assets			209,892,931				232,773,604
Total assets		$	232,405,162			$	267,429,193
Liabilities and Equity
Current liabilities:
Current portion of non-recourse long-term debt		$	7,500,522			$	7,332,765
Deferred revenue			127,025				167,813
Due to Manager and affiliates, net			26,401				2,798,414
Accrued expenses and other current liabilities			719,994				1,941,246
Total current liabilities			8,373,942				12,240,238
Non-current liabilities:
Non-recourse long-term debt, less current portion			48,115,352				51,863,021
Seller's credits			12,516,606				12,295,998
Other non-current liabilities			150,000				150,000
Total non-current liabilities			60,781,958				64,309,019
Total liabilities			69,155,900				76,549,257
Commitments and contingencies
Equity:
Members' equity:
Additional members			137,226,974				162,960,082
Manager			(1,725,174	)			(1,465,243	)
Total members' equity			135,501,800				161,494,839
Noncontrolling interests			27,747,462				29,385,097
Total equity			163,249,262				190,879,936
Total liabilities and equity		$	232,405,162			$	267,429,193

 

 

		Three Months Ended								Six Months Ended
		June 30,								June 30,
		2015				2014				2015				2014
Revenue and other income:
Finance income		$	3,498,451			$	58,463,355			$	7,163,516			$	61,938,747
Rental income			3,532,158				2,609,028				7,064,315				6,640,999
Time charter revenue			1,593,787				1,460,867				2,965,098				1,460,867
(Loss) income from investment in joint ventures			(7,279,778	)			1,204,994				(6,682,551	)			1,844,350
Loss on lease termination			-				(18,800	)			-				(18,800	)
Total revenue and other income			1,344,618				63,719,444				10,510,378				71,866,163
Expenses:
Management fees			319,464				599,561				704,300				1,138,751
Administrative expense reimbursements			312,286				668,467				751,299				1,129,099
General and administrative			616,048				487,545				1,523,095				1,574,065
Interest			1,030,421				1,558,245				2,080,411				2,983,221
Depreciation			2,181,075				1,227,615				4,362,524				3,114,154
Credit loss, net			4,486,313				-				4,848,978				-
Vessel operating			924,100				1,369,672				2,420,756				1,369,672
Loss on derivative financial instruments			-				365,467				-				329,190
Total expenses			9,869,707				6,276,572				16,691,363				11,638,152
Net (loss) income			(8,525,089	)			57,442,872				(6,180,985	)			60,228,011
Less: net income attributable to noncontrolling interests			1,079,066				1,001,041				2,110,188				1,622,162
Net (loss) income attributable to Fund Twelve			(9,604,155	)			56,441,831				(8,291,173	)			58,605,849
Other comprehensive income:
Change in fair value of derivative financial instruments			-				-				-				282,919
Reclassification adjustment for losses on derivative
financial instruments due to early termination			-				346,668				-				346,668
Currency translation adjustment during the period			-				-				-				(7	)
Total other comprehensive income			-				346,668				-				629,580
Comprehensive (loss) income			(8,525,089	)			57,789,540				(6,180,985	)			60,857,591
Less: comprehensive income attributable to noncontrolling interests			1,079,066				1,001,041				2,110,188				1,622,162
Comprehensive (loss) income attributable to Fund Twelve		$	(9,604,155	)		$	56,788,499			$	(8,291,173	)		$	59,235,429
Net (loss) income attributable to Fund Twelve allocable to:
Additional members		$	(9,508,113	)		$	55,877,413			$	(8,208,261	)		$	58,019,791
Manager			(96,042	)			564,418				(82,912	)			586,058
		$	(9,604,155	)		$	56,441,831			$	(8,291,173	)		$	58,605,849
Weighted average number of additional shares of limited liability
company interests outstanding			348,335				348,335				348,335				348,335
Net (loss) income attributable to Fund Twelve per weighted average
additional share of limited liability company interests outstanding		$	(27.30	)		$	160.41			$	(23.56	)		$	166.56

Consolidated Statements of Changes in Equity

 

	Members' Equity
	Additional
	Shares of
	Limited Liability												Total
	Company				Additional								Members'				Noncontrolling				Total
	Interests				Members				Manager				Equity				Interests				Equity
Balance, December 31, 2014			348,335			$	162,960,082			$	(1,465,243	)		$	161,494,839			$	29,385,097			$	190,879,936
Net income			-				1,299,852				13,130				1,312,982				1,031,122				2,344,104
Distributions			-				(11,209,831	)			(113,231	)			(11,323,062	)			(2,099,276	)			(13,422,338	)
Balance, March 31, 2015 (unaudited)			348,335				153,050,103				(1,565,344	)			151,484,759				28,316,943				179,801,702
Net (loss) income			-				(9,508,113	)			(96,042	)			(9,604,155	)			1,079,066				(8,525,089	)
Distributions			-				(6,315,016	)			(63,788	)			(6,378,804	)			(1,706,373	)			(8,085,177	)
Investment by noncontrolling interests			-				-				-				-				57,826				57,826
Balance, June 30, 2015 (unaudited)			348,335			$	137,226,974			$	(1,725,174	)		$	135,501,800			$	27,747,462			$	163,249,262

 

Consolidated Statements of Cash Flows (unaudited)

 

		Six Months Ended June 30,
		2015				2014
Cash flows from operating activities:
Net (loss) income		$	(6,180,985	)		$	60,228,011
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Finance income			(3,567,083	)			(59,567,812	)
Rental income paid directly to lenders by lessees			-				(1,088,550	)
Loss (income) from investment in joint ventures			6,682,551				(1,844,350	)
Depreciation			4,362,524				3,114,154
Interest expense on non-recourse financing paid directly to lenders by lessees			-				63,647
Interest expense from amortization of debt financing costs			90,591				509,962
Net accretion of seller's credits			220,608				610,270
Credit loss, net			4,848,978				-
Net loss on lease termination			-				18,800
Loss on derivative financial instruments			-				520,932
Changes in operating assets and liabilities:
Collection of finance leases			8,243,952				10,563,900
Other assets			(1,609,546	)			(1,225,986	)
Accrued expenses and other current liabilities			(1,221,252	)			410,264
Deferred revenue			(40,788	)			(333,729	)
Interest rate swaps			-				(698,318	)
Due to Manager and affiliates, net			(2,772,013	)			(145,875	)
Distributions from joint ventures			57,017				70,199
Net cash provided by operating activities			9,114,554				11,205,519
Cash flows from investing activities:
Purchase of equipment			-				(58,894,722	)
Proceeds from exercise of purchase options			144,521				106,964,516
Investment in joint ventures			(10,513	)			(25,756	)
Distributions received from joint ventures in excess of profits			446,308				2,221,191
Investment in notes receivable, net			-				(3,955,500	)
Principal received on notes receivable			6,870,858				22,317,284
Net cash provided by investing activities			7,451,174				68,627,013
Cash flows from financing activities:
Proceeds from non-recourse long-term debt			-				7,500,000
Repayment of non-recourse long-term debt			(3,579,912	)			(49,046,901	)
Proceeds from revolving line of credit, recourse			-				10,000,000
Payment of debt financing costs			-				(400,000	)
Repayment of seller's credits			-				(210,000	)
Investment by noncontrolling interests			57,826				16,356,266
Distributions to noncontrolling interests			(3,805,649	)			(2,577,818	)
Distributions to members			(17,701,866	)			(12,755,179	)
Net cash used in financing activities			(25,029,601	)			(31,133,632	)
Effects of exchange rates on cash and cash equivalents			-				(7	)
Net (decrease) increase in cash and cash equivalents			(8,463,873	)			48,698,893
Cash and cash equivalents, beginning of period			15,410,563				13,985,307
Cash and cash equivalents, end of period		$	6,946,690			$	62,684,200

 

Consolidated Statements of Cash Flows (unaudited) (continued)

 

		Six Months Ended June 30,
		2015				2014
Supplemental disclosure of cash flow information:
Cash paid for interest		$	1,759,616			$	1,601,006
Supplemental disclosure of non-cash investing and financing activities:
Principal and interest on non-recourse long-term debt paid directly to lenders by lessees		$	-			$	1,088,550
Funds withheld from seller on asset acquisition		$	-			$	500,000
Vessels purchased with non-recourse long-term debt paid directly to seller		$	-			$	50,800,000
Vessels purchased with subordinated non-recourse financing provided by seller		$	-			$	7,786,104
Satisfaction of seller's credits netted at sale		$	-			$	40,863,178
Reclassification of leased equipment to Vessels		$	-			$	19,190,776
Debt financing costs netted at funding		$	-			$	520,800
Investment by noncontrolling interests		$	-			$	885,593
Interest reserve net against principal repayment of note receivable		$	-			$	206,250

Forward Looking Statements

Certain statements within this document may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"). These statements are being made pursuant to the PSLRA, with the intention of obtaining the benefits of the "safe harbor" provisions of the PSLRA, and, other than as required by law, we assume no obligation to update or supplement such statements. Forward-looking statements are those that do not relate solely to historical fact. They include, but are not limited to, any statement that may predict, forecast, indicate or imply future results, performance, achievements or events. You can identify these statements by the use of words such as "may," "will," "could," "anticipate," "believe," "estimate," "expect," "continue," "further," "plan," "seek," "intend," "predict" or "project" and variations of these words or comparable words or phrases of similar meaning. These forward-looking statements reflect our current beliefs and expectations with respect to future events and are based on assumptions and are subject to risks and uncertainties and other factors outside our control that may cause actual results to differ materially from those projected. We undertake no obligation to update publicly or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Additional Information