Item 1. Business
General Development of Business
ICON Cash Flow Partners L.P. Six (the "Partnership") was formed on July 8, 1993 as a Delaware limited partnership. The Partnership commenced business operations on its initial closing date, March 31, 1994, with the admission of 16,537.73 limited partnership units at $100 per unit representing $1,653,773 of capital contributions. Between April 1, 1994 and December 31, 1994, 111,166.37 additional units were admitted representing $11,116,637 of capital contributions bringing the total admission to 127,704.10 units totaling $12,770,410 in capital contributions. Between January 1, 1995 and November 8, 1995 (the final closing date), 256,153.02 additional units were admitted, bringing the final admission to 383,857.12 units totaling $38,385,712 in capital contributions. During 1995, the Partnership redeemed 265 limited partnership units and during 1996, the Partnership redeemed 728 limited partnership units leaving 382,864 limited partnership units outstanding at December 31, 1996. The sole general partner is ICON Capital Corp. (the "General Partner").
Narrative Description of Business
The Partnership is an equipment leasing fund. The principal objective of the Partnership is to obtain the maximum economic return from its investments for the benefit of its limited partners. To achieve this objective, the Partnership intends to: (1) acquire a diversified portfolio of short-term, high-yield investments; (2) make monthly cash distributions to its limited partners from cash from operations, commencing with each limited partner's admission to the Partnership, continuing through the reinvestment period, which period will end no later than the eighth anniversary of the final closing date; (3) re-invest substantially all undistributed cash from operations and cash from sales in additional equipment and financing transactions during the reinvestment period; and (4) sell the Partnership's investments and distribute the cash from sales of such investments to its limited partners within five and one-half to eight and one-half years of the final closing date. In addition to acquiring equipment and entering into leases, the Partnership will (1) acquire equipment already subject to leases originated by affiliates and non-affiliated lessors and (2) enter into financing transactions, which are (i) secured by the equipment financed and lease revenues therefrom (if any) and additional collateral as deemed necessary by the credit review committee of the General Partner, and (ii) evidenced by the irrevocable obligation of the lessees.
The equipment leasing industry is highly competitive. In initiating its leasing transactions, the Partnership competes with leasing companies, manufacturers that lease their products directly, equipment brokers and dealers and financial institutions, including commercial banks and insurance companies. Many competitors are larger than the Partnership and have access to more favorable financing. Competitive factors in the equipment leasing business primarily involve pricing and other financial arrangements, equipment remarketing capabilities and servicing of lessees.
The Partnership has no direct employees. The General Partner has full and exclusive discretion in management and control of the Partnership.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Lease and Financing Transactions
For the years ended December 31, 1996 and 1995, the Partnership purchased and leased or financed $45,524,755 and $100,227,485 of equipment, respectively, with a weighted average initial transaction term of 44 and 36 months, respectively. At December 31, 1996, the weighted average initial transaction term of the portfolio was 45 months. A summary of the portfolio equipment cost by category held at December 31, 1996 and 1995 is as follows:
The Partnership had two leases which individually represented greater than 10% of the total portfolio equipment cost at December 31, 1996. The leases are for aircraft with Airbus Industrie and Alaska Airlines, Inc., and they represented 16.3% and 16.1%, respectively, of the total portfolio equipment cost at December 31, 1996.
Item 2.
Item 2. Properties
The Partnership neither owns nor leases office space or equipment for the purpose of managing its day-to-day affairs. The General Partner has exclusive control over all aspects of the business of the Partnership, including providing any necessary office space. As such, the General Partner will be compensated for services related to the management and administration of the Partnership's business.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Item 3.
Item 3. Legal Proceedings
The Partnership is not a party to any pending legal proceedings.
Item 4.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the fourth quarter of 1996.
PART II
Item 5.
Item 5. Market for the Registrant's Securities and Related Security Holder Matters
The Partnership's limited partnership interest is not publicly traded nor is there currently a market for the Partnership's limited partnership units. It is unlikely that any such market will develop.
Number of Equity Security Holders Title of Class as of December 31,
1996 1995 ---- ----
Limited Partners 2,265 2,271 General Partner 1 1
Item 6.
Item 6. Selected Consolidated Financial and Operating Data
Year Ended December 31,
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
December 31,
No operating data is presented for 1993 since the Partnership commenced operations on March 31, 1994, the initial closing date. The data presented for 1994 does not reflect a full year's operations.
The above selected consolidated financial data should be read in conjunction with the consolidated financial statements and related notes appearing elsewhere in this report.
Item 7.
Item 7. General Partner's Discussion and Analysis of Financial Condition and Results of Operations
The Partnership's portfolio consisted of net investments in finance leases, operating leases, financings, leveraged leases and an equity investment in joint venture of 65%, 23%, 9%, 3% and less than 1% of total investments at December 31, 1996, respectively, and 71%, 20%, 9%, 0% and less than 1% of total investments at December 31, 1995, respectively.
For the years ended December 31, 1996 and 1995, the Partnership leased or financed equipment with initial costs of $45,524,755 and $100,227,485, respectively, to 242 and 1,343 lessees or equipment users, respectively. The weighted average initial transaction term for each year was 44 and 36 months, respectively.
Results of Operations for the Years Ended December 31, 1996 and 1995
Revenues for the year ended December 31, 1996 were $9,576,756, representing an increase of $2,846,843 from 1995. The increase in revenues was attributable to an increase in finance income of $2,087,116 or 49%, an increase in rental income of $402,101 or 20%, an increase in net gain on sales or remarketing of equipment of $230,941, an increase in income from leveraged leases of $139,810 and an increase in income from equity investment in joint venture of $954 or 17%. The increase in finance income, income from leveraged leases and rental income resulted from the increase in the average size of the finance and operating lease portfolios from 1995 to 1996. The net gain on sales or remarketing of equipment increased due to an increase in the number of leases maturing, and the underlying equipment being sold or remarketed, for which the proceeds received were in excess of the remaining carrying value of the equipment.
Expenses for the year ended December 31, 1996 were $9,943,723, representing an increase of $3,289,878 from 1995. The increase in expenses was attributable to an increase in interest expense of $1,326,911 or 44%, an increase in management fees of $637,298 or 92%, an increase in amortization of initial direct costs of $521,823 or 63%, an increase in general and administrative expense of $297,235 or 83%, an increase in administrative expense reimbursements of $260,805 or 68%, an increase in depreciation expense of $212,162 or 33% and an increase in provision for bad debts of $180,000 or 32% from 1995. Interest expense increased due to an increase in the average debt outstanding from 1995 to 1996. Amortization of initial direct costs, management fees, administrative expense reimbursements and general and administrative expense increased due to an increase in the average size of the portfolio. The increase in depreciation expense resulted from the Partnership's increased investment in operating leases. A provision for bad debts of $750,000 was required for the year ended December 31, 1996 as a result of an analysis of delinquency, an assessment of credit risk and a review of historical loss experience.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Net (loss) income for the years ended December 31, 1996 and 1995 was ($366,967) and $76,068, respectively. The net (loss) income per weighted average limited partnership unit outstanding was ($.95) and $.29 for 1996 and 1995, respectively.
Results of Operations for the Years Ended December 31, 1995 and 1994
The Partnership's portfolio consisted of a net investment in finance leases, operating leases, financings and an equity investment in joint venture of 71%, 20%, 9% and less than 1% of total investments at December 31, 1995, respectively, and 84%, 0%, 16% and less than 1% of total investments at December 31, 1994, respectively.
For the years ended December 31, 1995 and 1994, the Partnership leased or financed equipment with initial costs of $100,227,485 and $6,938,961, respectively, to 1,343 and 50 lessees or equipment users, respectively. The weighted average initial transaction term for each year was 36 and 52 months, respectively.
The Partnership commenced operations on March 31, 1994. Although a comparison of results of operations and liquidity and capital resources is presented for the years ended December 31, 1995 and 1994, the comparison is predicated on the fact that the Partnership's related 1994 activity was minimal.
Revenues for the year ended December 31, 1995 were $6,729,913, representing an increase of $6,526,055 from 1994. The increase in revenues was attributable to an increase in finance income of $4,141,392, an increase in rental income of $2,010,504, an increase in interest income and other of $262,205, an increase in net gain on sales or remarketing of equipment of $107,733 and income from equity investment in joint venture of $4,221. The increase in finance and rental income resulted from the increase in the average size of the finance and operating lease portfolios from 1994 to 1995. Interest income and other increased due to an increase in the average cash balance from 1994 to 1995. The net gain on sales or remarketing of equipment increased due to an increase in the number of leases maturing, and the underlying equipment being sold or remarketed, for which the proceeds received were in excess of the remaining carrying value of the equipment.
Expenses for the year ended December 31, 1995 were $6,653,845, representing an increase of $6,520,877 from 1994. The increase in expenses was attributable to an increase in interest expense of $3,001,491, an increase in amortization of initial direct costs of $815,406, an increase in management fees of $687,269, an increase in depreciation expense of $636,487, an increase in the provision for bad debts of $506,500, an increase in administrative expense reimbursements of $374,599, an increase in general and administrative expense of $321,356 and minority interest in joint venture of $177,769. Interest expense increased due to an increase in the average debt outstanding from 1994 to 1995. Amortization of initial direct costs, management fees, administrative expense reimbursements and general and administrative expense increased due to an increase in the average size of the portfolio. The increase in depreciation expense resulted from the Partnership's increased investment in operating leases. A provision for bad debts of $570,000 was required for the year ended December 31, 1995 as a result of an analysis of delinquency, an assessment of credit risk and a review of historical loss experience.
Net income for the years ended December 31, 1995 and 1994 was $76,068 and $70,890, respectively. The net income per weighted average limited partnership unit outstanding was $.29 and $2.21 for 1995 and 1994, respectively.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Liquidity and Capital Resources
The Partnership's primary sources of funds for the years ended December 31, 1996, 1995 and 1994 were capital contributions, net of offering expenses, of $0, $22,157,234 and $11,046,405 from limited partners, respectively, net cash provided by operations of $9,923,936, $8,776,203 and $439,913, respectively, proceeds from sales of equipment of $8,684,744 and $1,016,807 in 1996 and 1995, respectively and proceeds received from affiliated minority investors of $2,530,550 in 1995. These funds were used to purchase equipment, to fund cash distributions and to make payments on borrowings. The Partnership intends to continue to purchase additional equipment and to fund cash distributions utilizing cash provided by operations and proceeds from sales of equipment.
The Partnership had notes payable at December 31, 1996 and 1995 of $51,135,949 and $60,349,224, respectively, as a result of borrowings secured by equipment, and such amounts consisted of $38,641,653 and $44,820,178 in non-recourse notes which are being paid directly to the lenders by the lessees, respectively, $360,023 and $345,822 in non-recourse residual value notes, respectively, which will be paid to the extent proceeds are available in excess of the Partnership's estimated unguaranteed residuals, $7,975,026 and $15,183,224, respectively, in non-recourse notes related to a securitization of certain Partnership assets and $4,159,247 in notes payable non-recourse as it relates to a secured financing in 1996.
Cash distributions to limited partners for the years ended December 31, 1996 and 1995, which were paid monthly, totaled $4,119,354 and $2,543,783, respectively, of which $0 and $75,307 was investment income and $4,119,354 and $2,468,476 was a return of capital, respectively. The monthly annualized cash distribution rate to limited partners was 10.75% in 1996, of which 0% was investment income and 10.75% was a return of capital. The limited partner distribution per weighted average unit outstanding in 1996 and 1995 was $10.75 and $9.77, of which $0 and $.29 was investment income and $10.75 and $9.48 was a return of capital, respectively.
On March 11, 1997, the Partnership and two affiliates, ICON Cash Flow Partners, L.P., Series D and ICON Cash Flow Partners L.P. Seven, (collectively "the Members"), contributed and assigned $6,712,631, $8,671,773 and $6,582,150, respectively, in equipment lease and finance receivables and residuals to ICON Receivables 1997-A LLC ("1997-A"), a special purpose entity created by the Members. The Members received a 29.8%, 40.8% and 29.4% interest, respectively, in 1997-A based on the present value of their related contributions. 1997-A was formed for the purpose of originating new leases, managing existing contributed assets and, eventually, securitizing its portfolio. In order to fund the acquisition of new leases, 1997-A obtained a warehouse borrowing facility from Prudential Securities Credit Corporation (the "Facility"). Borrowings under the Facility are based on the present value of the new leases, provided that in the aggregate, the amount outstanding cannot exceed $20,000,000. Outstanding amounts under the Facility bear interest equal to Libor plus 1.5%. Collections of receivables from new leases are used to pay down the Facility, however, in the event of a default, all of 1997-A's assets are available to cure such default. The net proceeds from the expected securitization of these assets will be used to pay-off the remaining Facility balance and any remaining proceeds will be distributed to the Members in accordance with their membership interests. The Partnership will account for its investment in 1997-A under the equity method. The investment in 1997-A will be increased or decreased by its share of profit or losses and decreased by any distributions received by 1997-A.
As of December 31, 1996, except as noted above, there were no known trends or demands, commitments, events or uncertainties which are likely to have any material effect on liquidity. As cash is realized from closing of limited partnership units, operations, sales of equipment and borrowings, the Partnership will continue to invest in equipment leases and financings where it deems it to be prudent while retaining sufficient cash to meet its reserve requirements and recurring obligations as they become due.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Item 8.
Item 8. Consolidated Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page Number
Independent Auditors' Report 11
Consolidated Balance Sheets as of December 31, 1996 and 1995 12
Consolidated Statements of Operations for the Years Ended December 31, 1996, 1995 and 1994 13
Consolidated Statements of Changes in Partners' Equity for the Years Ended December 31, 1996, 1995 and 1994 14-15
Consolidated Statements of Cash Flows for the Years Ended December 31, 1996, 1995 and 1994 16-18
Notes to Consolidated Financial Statements 19-27
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Consolidated Financial Statements
December 31, 1996
(With Independent Auditors' Report Thereon)
INDEPENDENT AUDITORS' REPORT
The Partners ICON Cash Flow Partners L.P. Six:
We have audited the accompanying consolidated balance sheets of ICON Cash Flow Partners L.P. Six (a Delaware limited partnership) as of December 31, 1996 and 1995, and the related consolidated statements of operations, changes in partners' equity and cash flows for each of the years in the three-year period ended December 31, 1996. These consolidated financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ICON Cash Flow Partners L.P. Six as of December 31, 1996 and 1995, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles.
March 7, 1997 New York, New York
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Consolidated Balance Sheets
December 31,
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Consolidated Statements of Operations
For the Years Ended December 31, 1996, 1995 and 1994
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Consolidated Statements of Changes in Partners' Equity
For the Years Ended December 31, 1996, 1995 and 1994
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996, 1995 and 1994
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Consolidated Statements of Cash Flows - Continued
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Statements of Cash Flows (Continued)
Supplemental Disclosures of Cash Flow Information
For the years ended December 31, 1996, 1995 and 1994 non-cash activities included the following:
Interest expense of $4,330,544, $3,003,633 and $2,142 for the years ended December 31, 1996, 1995 and 1994 consisted of: interest expense on non-recourse financing accrued or paid directly to lenders by lessees of $3,149,069, $1,851,019 and $0, respectively, interest expense on non-recourse secured financing accrued or paid of $1,133,394, $1,112,732 and $0, respectively, and other interest of $48,081, $39,882 and $2,142, respectively.
See accompanying notes to consolidated financial statements.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements
December 31, 1996
1. Organization
ICON Cash Flow Partners L.P. Six (the "Partnership") was formed on July 8, 1993 as a Delaware limited partnership with an initial capitalization of $2,000. It was formed to acquire various types of equipment, to lease such equipment to third parties and, to a lesser degree, to enter into secured financing transactions. The Partnership commenced business operations on its initial closing date, March 31, 1994 and by its final closing in 1995, 383,857.12 units had been admitted into the Partnership with aggregate gross proceeds of $38,385,712. During 1995, the Partnership redeemed 265 limited partnership units and during 1996, the Partnership redeemed 728 limited partnership units leaving 382,864 limited partnership units outstanding at December 31, 1996.
The General Partner of the Partnership is ICON Capital Corp. (the "General Partner"), a Connecticut corporation. The General Partner manages and controls the business affairs of the Partnership's equipment leases and financing transactions under a management agreement with the Partnership.
ICON Securities Corp., an affiliate of the General Partner, received an underwriting commission on the gross proceeds of sales of all units. The total underwriting compensation paid by the Partnership, including underwriting commissions, sales commissions, incentive fees, public offering expense reimbursements and due diligence activities is limited to 13 1/2% of the gross proceeds received from the sale of the units. Such offering expenses aggregated $5,182,073 (including $2,111,214 paid to the General Partner or its affiliates), and were charged directly to limited partners' equity.
Profits, losses, cash distributions and disposition proceeds will be allocated 99% to the limited partners and 1% to the General Partner until each limited partner has received cash distributions and disposition proceeds sufficient to reduce its adjusted capital contribution account to zero and receive, in addition, other distributions and allocations which would provide a 10% per annum cumulative return, compounded daily, on its outstanding adjusted capital contribution account. After such time, the distributions will be allocated 90% to the limited partners and 10% to the General Partner.
2. Significant Accounting Policies
Basis of Accounting and Presentation - The Partnership's records are maintained on the accrual basis. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Leases - The Partnership accounts for owned equipment leased to third parties as finance leases, leveraged leases or operating leases. For finance leases, the Partnership records, at the inception of the lease, the total minimum lease payments receivable, the estimated unguaranteed residual values, the initial direct costs related to the leases and the related unearned income. Unearned income represents the difference between the sum of the minimum lease payments receivable plus the estimated unguaranteed residual minus the cost of the leased equipment. Unearned income is recognized as finance income over the terms of the related leases using the interest method. The Partnership's net investment in leveraged leases consists of minimum lease payments receivable, the estimated unguaranteed residual values and the initial direct costs related to the leases, net of the unearned income and principal and interest on the
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
related non-recourse debt. Unearned income is recognized as income from leveraged leases over the life of the lease at a constant rate of return on the positive net investment. For operating leases, equipment is recorded at cost and is depreciated on the straight-line method over the lease terms to their estimated fair market values at lease terminations. Related lease rentals are recognized on the straight-line method over the lease terms. Billed and uncollected operating lease receivables, net of allowance for doubtful accounts, are included in other assets. Initial direct costs of finance leases and leverage leases are capitalized and are amortized over the terms of the related leases using the interest method. Initial direct costs of operating leases are capitalized and amortized on the straight-line method over the lease terms. The Partnership's leases have terms ranging from two to five years. Each lease is expected to provide aggregate contractual rents that, along with residual proceeds, return the Partnership's cost of its investments along with investment income.
Investment in Financings - Investment in financings represent the gross receivables due from the financing of equipment plus the initial direct costs related thereto less the related unearned income. The unearned income is recognized as finance income, and the initial direct costs are amortized, over the terms of the receivables using the interest method. Financing transactions are supported by a written promissory note evidencing the obligation of the user to repay the principal, together with interest, which will be sufficient to return the Partnership's full cost associated with such financing transaction, together with some investment income. Furthermore, the repayment obligation is collateralized by a security interest in the tangible or intangible personal property.
Disclosures About Fair Value of Financial Instruments - Statement of Financial Accounting Standards ("SFAS") No. 107, "Disclosures about Fair Value of Financial Instruments" requires disclosures about the fair value of financial instruments. The fair value of certain debt obligations are disclosed in Note 8 to the consolidated financial statements. Fair value information with respect to the Company's assets and certain non-recourse notes payable is not provided because (i) SFAS No. 107 does not require disclosures about the fair value of lease arrangements, (ii) the carrying value of financial assets other than lease related investments approximates market value and (iii) fair value information concerning certain non-recourse debt obligations is not practicable to estimate without incurring excessive costs to obtain all the information that would be necessary to derive a market interest rate on a lease by lease basis.
Equity Investment in Joint Venture - The Partnership accounts for its equity investment in joint venture under the equity method of accounting. Therefore, the Partnership's original investment was recorded at cost and is adjusted by its share of earnings, losses and distributions thereafter.
Redemption of Limited Partnership Units - The General Partner consented to the Partnership redeeming 265 limited partnership units during 1995 and 728 limited partnership units during 1996. The redemption amount was calculated following the specified redemption formula in accordance with the Partnership agreement. Redeemed units have no voting rights and do not share in distributions. The Partnership agreement limits the number of units which can be redeemed in any one year and redeemed units may not be reissued. Redeemed limited partnership units are accounted for as a deduction from partners equity.
Allowance for Doubtful Accounts - The Partnership records a provision for bad debts to provide for estimated credit losses in the portfolio. The allowance for doubtful accounts is based on an analysis of delinquency, an assessment of overall risk and a review of historical loss experience. The Partnership's write-off policy is based on an analysis of the aging of the Partnership's portfolio, a review of the non-performing receivables and leases, and prior collection experience. An account is fully reserved for or written off when the analysis indicates that the probability of collection of the account is remote.
Impairment of Estimated Residual Values - In March 1995, the Financial Accounting Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which is effective beginning in 1996.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership's existing policy with respect to impairment of estimated residual values is to review, on a quarterly basis, the carrying value of its residuals on an individual asset basis to determine whether events or changes in circumstances indicate that the carrying value of an asset may not be recoverable and, therefore, an impairment loss should be recognized. The events or changes in circumstances which generally indicate that the residual value of an asset has been impaired are (i) the estimated fair value of the underlying equipment is less than the Partnership's carrying value or (ii) the lessee is experiencing financial difficulties and it does not appear likely that the estimated proceeds from disposition of the asset will be sufficient to satisfy the remaining obligation to the non-recourse lender and the Partnership's residual position. Generally in the latter situation, the residual position relates to equipment subject to third party non-recourse notes payable where the lessee remits their rental payments directly to the lender and the Partnership does not recover its residual until the non-recourse note obligation is repaid in full.
The Partnership measures its impairment loss as the amount by which the carrying amount of the residual value exceeds the estimated proceeds to be received by the Partnership from release or resale of the equipment. Generally, quoted market prices are used as the basis for measuring whether an impairment loss should be recognized.
As a result, the Partnership's policy with respect to measurement and recognition of an impairment loss associated with estimated residual values is consistent with the requirements of SFAS No. 121 and, therefore, the Partnership's adoption of this Statement in the first quarter of 1996 had no material effect on the financial statements.
Consolidation - The consolidated financial statements include the accounts of the Partnership, its wholly owned subsidiary, ICON Six Corp., ICON Asset Acquisition L.L.C. I and ICON Cash Flow L.L.C. II. All intercompany accounts and transactions have been eliminated.
Income Taxes - No provision for income taxes has been made as the liability for such taxes is that of each of the partners rather than the Partnership.
3. Net Investment in Leveraged Lease
During the year ended December 31, 1996, the partnership acquired, subject to a leveraged lease, the residual interest in an aircraft. The aircraft is an Airbus A-300B4-203, built in 1983. It is on lease with Airbus Industrie and has a remaining lease term of six and one half years. The purchase price was $19,595,956 consisting of $1,409,839 in cash and the assumption of non-recourse senior debt of $12,495,956 and non-recourse junior debt ("junior debt") of $5,690,161.
The net investment in the leveraged lease as of December 31, 1996 consisted of the following:
Non-cancelable minimum rents receivable (net of principal and interest on non-recourse debt) $ - Estimated unguaranteed residual values 4,000,000 Initial direct costs 537,023 Unearned income (2,450,351) ---------- $2,086,672
Unearned income is recognized from the leveraged lease over the life of the lease at a constant rate of return on the positive net investment.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Non-cancelable minimum annual amounts receivable relating to the leveraged lease at December 31, 1996 are $23,274,651 and are due as follows:
1997 $ 3,395,120 1998 3,454,474 1999 3,516,692 2000 3,581,504 2001 3,649,761 Thereafter 5,677,100 ------------ $ 23,274,651
The non-cancelable rents are being paid directly to the lenders by the lessees to satisfy the principal and interest on the non-recourse debt assumed.
Prior to the acquisition, the free cash flow, the rent in excess of the senior debt payments, was financed by an affiliated partnership, ICON Cash Flow Partners, L.P., Series E, (i.e., the junior debt). On January 29, 1997, the Partnership re-financed the junior debt with a third party.
4. Investment in Joint Ventures
The Partnership Agreement allows the Partnership to invest in joint ventures with other limited partnerships sponsored by the General Partner provided that the investment objectives of the joint ventures are consistent with that of the Partnership.
ICON Asset Acquisition LLC
On February 3, 1995, the Partnership and two affiliates, ICON Cash Flow Partners, L.P., Series B ("Series B"), and ICON Cash Flow Partners, L.P., Series C ("Series C") formed ICON Asset Acquisition L.L.C. I ("ICON Asset Acquisition LLC") as a special purpose limited liability company. ICON Asset Acquisition LLC was formed for the purpose of acquiring, managing and securitizing a portfolio of leases. The Partnership, Series B and Series C contributed $8,700,000 (77.68% interest), $1,000,000 (8.93% interest) and $1,500,000 (13.39% interest), respectively, to ICON Asset Acquisition LLC. ICON Asset Acquisition LLC established a warehouse line of credit with ContiTrade Services Corp. with a maximum amount available of $20,000,000.
On February 17, 1995, ICON Asset Acquisition LLC purchased 975 finance leases from an existing portfolio from First Sierra Financial, Inc. utilizing $16,273,793 of proceeds from the warehouse line (See Consolidated Statements of Cash Flows - Proceeds from recourse debt - Financing activities), $10,857,427 in cash contributions received from the Partnership and affiliates and $723,046 in cash adjustments at closing, relating primarily to rents received by the seller from lessees prior to closing and for the benefit of ICON Asset Acquisition LLC. The purchase price of the portfolio totaled $27,854,266 (See Consolidated Statements of Cash Flows - Included in Equipment and receivables purchased - Investing activities) and the underlying equipment consists of graphic arts and printing equipment. The terms of the leases in this portfolio range from 12 to 72 months. ICON Asset Acquisition LLC acquired lease contracts which were less than 60 days delinquent, and, which met the Partnership's overall credit underwriting criteria. The purchase price of the portfolio was determined by discounting the future contractual cash flows. All such leases are net leases and are reported and accounted for as finance leases. The Partnership's consolidated financial statements include 100% of the accounts of ICON Asset Acquisition LLC with the affiliates' share reflected as "Minority interests in joint ventures."
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
On September 5, 1995, ICON Asset Acquisition LLC securitized substantially all of its portfolio. Proceeds from the securitization were used to pay down its existing line of credit and excess proceeds were returned to the Partnership based on its pro rata interest. ICON Asset Acquisition LLC became the beneficial owner of a trust and the Prudential Insurance Company of America ("Prudential") is treated as the lender to the trust. The trustee for the trust is Texas Commerce Bank ("TCB"). In conjunction with this securitization the portfolio as well as the General Partner's servicing capabilities were rated "A" by Duff & Phelps, a nationally recognized rating agency. The General Partner, as servicer, is responsible for managing, servicing, reporting on and administering the portfolio. All monies received from the portfolio are remitted to TCB. TCB is responsible for disbursing to Prudential its respective principal and interest and to ICON Asset Acquisition LLC the excess of cash collected over debt service from the portfolio. ICON Asset Acquisition LLC accounts for this investment as an investment in finance leases and financings. Prudential's investment in the trust is accounted for as non-recourse debt on ICON Asset Acquisition LLC's books and records. All monies received and remitted to TCB from the securitized portfolio are accounted for as a reduction in related finance lease and financing receivables and all amounts paid to Prudential by TCB are accounted for as a reduction of non-recourse debt.
On January 28, 1997, the Partnership borrowed $7,780,328 from ICON Cash Flow Partners L.P., Series E, an affiliate of the Partnership. This is a short term note, which bears interest at the rate of 11% and is expected to be paid in full by May 31, 1997. The Partnership used the proceeds from the note to retire the outstanding balance on its note payable non-recourse securitization with TCB.
ICON Cash Flow LLC I
On September 21, 1994, the Partnership and an affiliate, ICON Cash Flow Partners, L.P., Series E ("Series E"), formed a joint venture, ICON Cash Flow Partners L.L.C. I ("ICON Cash Flow LLC I"), for the purpose of acquiring and managing an aircraft currently on lease to Alaska Airlines, Inc. The aircraft is a 1988 McDonnell Douglas MD- 83. The Partnership and Series E contributed $37,682 (1%) and $3,730,493 (99%) of the cash required for such acquisition, respectively, to ICON Cash Flow LLC I. ICON Cash Flow LLC I acquired the aircraft, assuming $17,003,454 in non-recourse debt and the contributions received from the Partnership and Series E. The purchase price of the transaction totaled $20,771,628. The lease is an operating lease and the lease term expires in March 1997. Profits, losses, excess cash and disposition proceeds are allocated 1% to the Partnership and 99% to Series E. The Partnership's 1% investment in ICON Cash Flow LLC I, which is accounted for under the equity method, totaled $41,564 at December 31, 1996 and has been reflected as "Equity investment in joint venture." The General Partner manages and controls the business affairs of both the Partnership and Series E. As a result of this common control and the Partnership's ability to influence the activities of the joint venture, the Partnership's investment in the joint venture is accounted for under the equity method. Information as to the financial position and results of operations of ICON Cash Flow LLC I as of and for the years ended December 31, 1996 and 1995 are summarized below:
December 31, 1996 December 31, 1995
Assets $ 18,442,590 $19,683,740 ============ ===========
Liabilities $ 13,870,214 $15,272,065 ============ ===========
Equity $ 4,572,376 $ 4,411,675 ============ ===========
Year Ended Year Ended December 31, 1996 December 31, 1995
Net income $ 639,200 $ 543,781 =========== ==========
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
ICON Cash Flow LLC II
On March 31, 1995, the Partnership and an affiliate, ICON Cash Flow Partners, L.P., Series E ("Series E"), formed a joint venture, ICON Cash Flow Partners L.L.C. II ("ICON Cash Flow LLC II"), for the purpose of acquiring and managing an aircraft currently on lease to Alaska Airlines, Inc. The aircraft is a 1987 McDonnell Douglas MD-83. The Partnership and Series E contributed $3,024,450 (99%) and $30,550 (1%) (See Consolidated Statements of Cash Flows - Included in Proceeds from minority interest investors - Financing activities) of the cash required for such acquisition, respectively, to ICON Cash Flow LLC II. ICON Cash Flow LLC II acquired the aircraft, assuming $16,315,997 in non-recourse debt (See Supplemental Disclosures of Cash Flow Information Included in Non-recourse notes payable assumed in purchase price) and the contributions received from the Partnership and Series E. The purchase price of the transaction totaled $19,371,603. The cash portion of the purchase price ($3,055,000) is included in the Consolidated Statements of Cash Flows - Equipment and receivables purchased Investing activities. The lease is an operating lease and the lease term expires in March 1997. Profits, losses, excess cash and disposition proceeds are allocated 99% to the Partnership and 1% to Series E. The Partnership's consolidated financial statements include 100% of ICON Cash Flow LLC II. Series E's investment in ICON Cash Flow LLC II has been reflected as "Minority interest in joint venture."
5. Receivables Due in Installments
Non-cancelable minimum annual amounts due on finance leases, and financings are as follows:
Finance Year Leases Financings Total
1997 $ 18,680,227 $ 2,778,240 $ 21,458,467 1998 12,504,819 2,266,560 14,771,379 1999 7,787,382 1,537,970 9,325,352 2000 5,234,755 790,959 6,025,714 2001 1,158,168 363,293 1,521,461 Thereafter 280,085 - 280,085 ------------ ----------- -------------
$ 45,645,436 $ 7,737,022 $ 53,382,458 ============ =========== =============
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
6. Investment in Operating Leases
The investment in operating leases at December 31, 1996 and 1995 consisted of the following:
1996 1995 ---- ----
Equipment cost, beginning of year $ 19,371,603 $ -
Equipment purchased - 19,371,603
Equipment sold - - ----------- ------------
Equipment cost, end of year 19,371,603 19,371,603 ------------ ------------
Accumulated depreciation, beginning of year (636,487) -
Depreciation (848,649) (636,487)
Equipment sold - - ----------- ------------
Accumulated depreciation, end of year (1,485,136) (636,487) ------------ ------------
Initial direct costs, net of accumulated amortization, end of year 47,945 335,613 ------------ ------------
Investment in operating leases, end of year $ 17,934,412 $ 19,070,729 ============ ============
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
7. Allowance for Doubtful Accounts
The allowance for doubtful accounts related to the investments in finance leases and financings consisted of the following:
Finance Leases Financings Total
Balance at December 31, 1993 $ - $ - $ -
Charged to operations 41,300 22,200 63,500 ----------- ----------- ----------
Balance at December 31, 1994 41,300 22,200 63,500
Charged to operations 549,000 21,000 570,000
Accounts written-off (254,911) - (254,911)
Recoveries on accounts previously written-off 26,552 - 26,552 ----------- ----------- ----------
Balance at December 31, 1995 361,941 43,200 405,141
Accounts written-off (424,699) (275,522) (700,221)
Recoveries on accounts previously written-off 43,905 - 43,905
Provision 750,000 - 750,000
Transfer within accounts (245,520) 245,520 - ----------- ----------- ----------
Balance at December 31, 1996 $ 485,627 $ 13,198 $ 498,825 =========== =========== ==========
8. Notes Payable
On January 29, 1996, the Partnership borrowed $5,941,893 by pledging lease receivables and granting a security interest in the related collateral, or equipment, of a specific group of leases and financing transactions. The borrowing was recorded as a non-recourse note payable (securitized), bears interest at a fixed rate of 7.58%, and is payable only from receivable proceeds from the portfolio that has secured it.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
Notes payable non-recourse consists of the following: (1) notes payable non-recourse, which is being paid directly to the lenders by the lessees and (2) notes payable non-recourse securitized, which is being paid down from collections on receivables from lease transactions. These notes bear interest at rates ranging from 5.18% to 10.75% and mature as follows:
Notes Payable Non-Recourse Notes Payable Securitized Non-Recourse Total
1997 $ 5,657,341 $ 23,393,502 $ 29,050,843 1998 3,790,903 6,468,746 10,259,649 1999 1,868,374 4,078,428 5,946,802 2000 692,330 3,768,137 4,460,467 2001 125,325 750,471 875,796 Thereafter - 542,392 542,392 ------------- -------------- -------------
$ 12,134,273 $ 39,001,676 $ 51,135,949 ============= ============== =============
Included in the above are $360,023 in notes payable non-recourse due to various third parties in conjunction with the purchase and assignment of lease transactions. The notes are payable only to the extent residual values are realized which are estimated to occur as follows: $329,902, $8,803 and $21,318 in 1997, 1998 and 1999, respectively.
The fair value of the notes payable non-recourse securitized approximates the carrying value recorded in the consolidated financial statements.
9. Related Party Transactions
Fees and other expenses paid or accrued by the Partnership to the General Partner or its affiliates for the years ended December 31, 1996, 1995 and 1994 are as follows:
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
The Partnership has investments in three joint ventures with other Partnerships sponsored by the General Partner (See Note 2 for additional information relating to the joint ventures).
Prior to the Partnership acquiring its investment in leveraged leases (see Note 3), the related free cash flow, or the rent in excess of the senior debt payments (i.e., the junior debt), was financed by ICON Cash Flow Partners, L.P., Series E, an affiliate of the Partnership. On January 29, 1997, the Partnership re-financed the junior debt with an unrelated third party.
10. Subsidiary
On December 27, 1994, the Partnership formed a wholly owned subsidiary, ICON Six Corp. , a Massachusetts corporation, formed for the purpose of managing equipment under lease located in the state of Massachusetts. Massachusetts partnerships are taxed on personal property at a higher rate than corporations, and therefore, to mitigate such excess property tax, certain leases are being managed by ICON Six Corp, a corporation. The Partnership's consolidated financial statements include 100% of the accounts of ICON Six Corp. As of December 31, 1996, there was no federal tax liability for ICON Six Corp.
11. Commitments and Contingencies
On March 11, 1997, the Partnership and two affiliates, ICON Cash Flow Partners, L.P., Series D and ICON Cash Flow Partners L.P. Seven, (collectively "the Members"), contributed and assigned $6,712,631, $8,671,773 and $6,582,150, respectively, in equipment lease and finance receivables and residuals to ICON Receivables 1997-A LLC ("1997-A"), a special purpose entity created by the Members. The Members received a 29.8%, 40.8% and 29.4% interest, respectively, in 1997-A based on the present value of their related contributions. 1997-A was formed for the purpose of originating new leases, managing existing contributed assets and, eventually, securitizing its portfolio. In order to fund the acquisition of new leases, 1997-A obtained a warehouse borrowing facility from Prudential Securities Credit Corporation (the "Facility"). Borrowings under the Facility are based on the present value of the new leases, provided that in the aggregate, the amount outstanding cannot exceed $20,000,000. Outstanding amounts under the Facility bear interest equal to Libor plus 1.5%. Collections of receivables from new leases are used to pay down the Facility, however, in the event of a default, all of 1997-A's assets are available to cure such default. The net proceeds from the expected securitization of these assets will be used to pay-off the remaining Facility balance and the remaining proceeds will be distributed to the Members in accordance with their membership interests. The Partnership will account for its investment in 1997-A under the equity method. The investment in 1997-A will be increased or decreased by its share of profit or losses and decreased by any distributions received by 1997-A.
The Partnership has entered into remarketing and residual sharing agreements with third parties. In connection therewith, remarketing or residual proceeds received in excess of specified amounts will be shared with these third parties based on specified formulas. As of December 31, 1996 and 1995, respectively, the Partnership has not made any payments pursuant to such agreements.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
Notes to Consolidated Financial Statements - Continued
12. Tax Information (Unaudited)
The following table reconciles net income for financial reporting purposes to income for federal income tax purposes for the years ended December 31:
As of December 31, 1996, the partners' capital accounts included in the financial statements totaled $25,864,652 compared to the partners' capital accounts for federal income tax purposes of $33,013,774 (unaudited). The difference arises primarily from commissions reported as a reduction in the partners' capital accounts for financial reporting purposes but not for federal income tax purposes, and temporary differences related to direct finance leases, depreciation and provision for losses.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant's General Partner
The General Partner, a Connecticut corporation, was formed in 1985. The General Partner's principal offices are located at 600 Mamaroneck Avenue, Harrison, New York 10528-1632, and its telephone number is (914) 698-0600. The officers of the General Partner have extensive experience with transactions involving the acquisition, leasing, financing and disposition of equipment, including acquiring and disposing of equipment subject to operating leases and full payout leases.
The manager of the Partnership's business is the General Partner. The General Partner is engaged in a broad range of equipment leasing and financing activities. Through its sales representatives and through various broker relationships throughout the United States, the General Partner offers a broad range of equipment leasing services, including tax-oriented leasing and financing. In addition, the General Partner offers financial consulting and placement services for which fees are earned as a result of successful placements of various secured financings and mortgages.
The General Partner will perform certain functions relating to the management of the equipment of the Partnership. Such services include the collection of lease payments from the lessees of the equipment, releasing services in connection with equipment which is off-lease, inspections of the equipment, liaison with and general supervision of lessees to assure that the equipment is being properly operated and maintained, supervision of maintenance being performed by third parties, monitoring performance by the lessees of their obligations under the leases and the payment of operating expenses.
The officers and directors of the General Partner are as follows:
Beaufort J.B. Clarke President, Chief Executive Officer and Director
Thomas W. Martin Executive Vice President and Director
Paul B. Weiss Executive Vice President
Gary N. Silverhardt Vice President and Chief Financial Officer
Neil A. Roberts Director
Tim Spring Director
Beaufort J. B. Clarke, age 50, is President, Chief Executive Officer and Director of both the General Partner and ICON Securities Corp. (the "Dealer-Manager"). Prior to his present position, Mr. Clarke was founder and the President and Chief Executive Officer of Griffin Equity Partners, Inc. Mr. Clarke formerly was an attorney with Shearman and Sterling and has over 20 years of senior management experience in the United States leasing industry.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Thomas W. Martin, age 42, is Executive Vice President of both the General Partner and the Dealer-Manager. Prior to his present position, Mr. Martin was the Executive Vice President and Chief Financial Officer of Griffin Equity Partners, Inc. Mr. Martin has over 12 years of senior management experience in the leasing business, particularly in the area of syndication.
Paul B. Weiss, age 36, is Executive Vice President of the General Partner. Mr. Weiss has been exclusively engaged in lease portfolio acquisitions since 1988 from his affiliations with Griffin Equity Partners (as Executive Vice President and co-founder in 1993); Gemini Financial Holdings (as Senior Vice President-Portfolio Acquisitions and a member of the executive committee from 1991-1993) and Pegasus Capital Corporation (as Vice President-Portfolio Acquisitions).
Gary N. Silverhardt, age 36, is Vice President and Chief Financial Officer of the General Partner. He joined the General Partner in 1989. Prior to joining the General Partner, Mr. Silverhardt was previously employed by Coopers & Lybrand from 1985 to 1989, most recently as an Audit Supervisor. Prior to 1985, Mr. Silverhardt was employed by Katz, Schneeberg & Co. from 1983 to 1985. Mr. Silverhardt received a B.S. degree from the State University of New York at New Paltz in 1983 and is a Certified Public Accountant.
Neil A. Roberts, age 47, has been the Managing Director of Summit Asset Management Limited, a subsidiary of The Summit Group PLC, since 1991. Mr. Roberts has over 25 years of experience in the leasing and finance business, including positions with Kleinwort Benson Group, the United Kingdom subsidiary of Hongkong and Shanghai Banking Corporation and Chemical Bank.
Timothy R. Spring, age 39, Commercial Director of Summit Asset Management Limited, a subsidiary of The Summit Group PLC, since 1991. Mr. Spring has over 13 years of leasing experience in the United Kingdom. He was formerly Lease Commercial Director at Kleinwort Benson Group, the United Kingdom subsidiary of Hongkong and Shanghai Banking Corporation and Chemical Bank.
Item 11.
Item 11. Executive Compensation
The Partnership has no directors or officers. The General Partner and its affiliates were paid or accrued the following compensation and reimbursement for costs and expenses for the years ended December, 31, 1996, 1995 and 1994.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management
(a) The Partnership is a limited partnership and therefore does not have voting shares of stock. No person of record owns, or is known by the Partnership to own beneficially, more than 5% of any class of securities of the Partnership.
(b) As of March 7, 1997, Directors and Officers of the General Partner do not own any equity securities of the Partnership.
(c) The General Partner owns the equity securities of the Partnership set forth in the following table:
Title Amount Beneficially Percent of Class Owned of Class
General Partner Represents initially a 1% and potentially a 100% Interest 10% interest in the Partnership's income, gain and loss deductions.
Item 13.
Item 13. Certain Relationships and Related Transactions
None other than those disclosed in Item 11 herein.
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements - See Part II, Item 8 hereof.
2. Financial Statement Schedule - None.
Schedules not listed above have been omitted because they are not applicable or are not required or the information required to be set forth therein is included in the Financial Statements or Notes thereto.
3. Exhibits - The following exhibits are incorporated herein by reference:
(i) Amended and Restated Agreement of Limited Partnership (Incorporated by reference to Exhibit A to Amendment No. 2 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on December 12, 1986).
(ii) Certificate of Limited Partnership of the Partnership (Incorporated herein by reference to Exhibit 3.01 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on August 23, 1985 and to Exhibit 3.01 to Amendment No. 1 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on August 27, 1986).
(iii)Form of Management Agreement between the Partnership and Crossgate Leasing, Inc. (Incorporated herein by reference to Exhibit 10.01 to Amendment No. 1 to Form S-1 Registration Statement No. 2-99858 filed with the Securities and Exchange Commission on August 27, 1986).
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Partnership during the quarter ended December 31, 1996.
ICON Cash Flow Partners L.P. Six (A Delaware Limited Partnership)
December 31, 1996
SIGNATURES
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.
ICON CASH FLOW PARTNERS L.P. Six File No. 33-36376 (Registrant) By its General Partner, ICON Capital Corp.
Date: March 28, 1997 Beaufort J.B. Clarke --------------------------------------------- Beaufort J.B. Clarke President, Chief Executive Officer 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 Registrant and in the capacity and on the dates indicated.
ICON Capital Corp. sole General Partner of the Registrant
Date: March 28, 1997 Beaufort J.B. Clarke --------------------------------------------- Beaufort J.B. Clarke President, Chief Executive Officer and Director
Date: March 28, 1997 Thomas W. Martin --------------------------------------------- Thomas W. Martin Executive Vice President and Director
Date: March 28, 1997 Gary N. Silverhardt --------------------------------------------- Gary N. Silverhardt Vice President and Chief Financial Officer
Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrant Which have not Registered Securities Pursuant to Section 12 of the Act
No annual report or proxy material has been sent to security holders. An annual report will be sent to the limited partners and a copy will be forwarded to the Commission.